ITEM 1 - BUSINESS
Some of the statements that follow are forward-looking statements. These statements include, without limitation, statements relating to the Company's future business plans, financial results, performance and events. The words "anticipates," "believes," "considers," "expects," "intends," "plans," or "strategy" and similar expressions identify forward-looking statements. For a list of some of the important factors (but not necessarily all of the important factors) that could cause actual results to differ from such forward-looking statements see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Special Note Regarding Forward-Looking Statements."
General
Rifkin Acquisition Partners, L.L.L.P., a Colorado limited liability limited partnership (the "Partnership"), through the Partnership and its subsidiaries other than Rifkin Acquisition Capital Corp., a Colorado corporation and a wholly-owned subsidiary of the Partnership ("RACC" and together with the Partnership, the "Company"), owns, operates and develops cable television systems in Georgia, Tennessee and Illinois (the "Systems"). RACC does not have any operations, operating history, assets, revenues, properties or employees, and was formed in January 1996 solely for the purpose as serving as a corporate co-issuer of 11 1/8% Senior Subordinated Notes due 2006 issued by the Partnership and RACC in January 1996 (the "Old Notes"). The Partnership is the successor to Rifkin Acquisition Partners, L. P. a Colorado limited partnership ("RAP, L.P.") that was formed in 1988 and reorganized as a Colorado limited liability limited partnership in August 1995.
At December 31, 1998, the Systems of the Company passed approximately 261,200 homes and served approximately 191,100 basic customers, at a basic penetration level of 73.1%. The Company is one of the largest multiple system operators ("MSO") in Tennessee based on information provided by the Tennessee Cable Television Association as of December 31, 1998. All of the Systems have capacities of 30 or more channels.
The Partnership pays a fee to R & A Management, LLC ("RML") of 3.5% of the Company's revenues to manage the systems. Originally, Rifkin & Associates, Inc. ("R & A") managed the Company's cable systems pursuant to a Management Agreement (the "Management Agreement") among the Company, Cable Equities of Colorado and R & A. R & A conveyed the Management Agreement to RML in September 1998, and R & A is now the manging member of RML. Monroe M. Rifkin is the sole director and shareholder of R & A.
For the year ended December 31, 1998, the Company had revenue of approximately $89.9 million, and Adjusted EBITDA (see footnote (b) on page 20) of approximately $42.8 million.
In August 1995, the Partnership effected a recapitalization in which a group led by VS&A Communications Partners I, L.P., IEP Holdings I LLC and Paine Webber Capital, Inc. acquired the interests of certain limited partners in Rifkin Acquisition Partners, L.P. ("RAP, L.P."). Concurrently, all of RAP, L.P.'s debt was repaid and the Company entered into a new credit agreement (the "Credit Agreement") with a syndicate of banks. In addition, in January 1996, the Company completed the issuance of $125 million of 11 1/8% Senior Subordinated Notes due in 2006 (the "Old Notes"), which were subsequently exchanged for publicly registered notes (the "New Notes" and collectively with the Old Notes, the "Notes"), and amended its Credit Agreement to provide ongoing borrowing availability, including availability to finance acquisitions.
Recent Developments
In February 1999, the Partnership announced the planned acquisition by Charter Communications, Inc. ("Charter") of all outstanding partnership interests in the Partnership and InterLink Communications Partners, LLLP ("InterLink") and the assumption of the outstanding debt of InterLink and the Partnership. The parties expect to finalize definitive agreements of the transactions in early April 1999 and expect to close the transactions during the third quarter of 1999.
1998 Acquisitions
Tennessee Systems
On December 31, 1998, the Company acquired certain operating assets comprising six cable television systems from InterMedia Partners and certain of their affiliated companies (the "InterMedia Systems" or the "trade acquisition"). These cable systems are located in Crossville, Monterey, Lewisburg, Hohenwald, Loretto and West Point, Tennessee. The purchase price included the trade of certain existing cable systems of the Company located in Tennessee, a payment of approxiately $719,000 and the assumption of approximately $51,000 of working capital. Upon acquisition the InterMedia Systems passed approximately 24,400 homes with approximately 700 miles of plant, and served approximately 16,100 basic service customers. Since the InterMedia Systems acquisition took place on December 31, 1998, there are no revenues related to the acquisition included in the year ended December 31, 1998 results.
Other Systems
During 1998, the Company also completed two separate transactions to acquire certain cable television operating assets located in Georgia. The aggregate purchase price for these systems was approximately $2.0 million. The revenues related to these other systems included in the year ended December 31, 1998 were approximately $180,000.
1997 Acquisitions
Manchester Systems
On April 1, 1997, the Company acquired certain operating assets comprising two cable television systems of American Cable TV Investors 5, Ltd. located in Manchester and Shelbyville, Tennessee (the "Manchester Systems"). The purchase price for the Manchester Systems was approximately $19.7 million including approximately $21,000 of net working capital assumed. Upon acquisition (the "Manchester Acquisition"), the Manchester Systems passed approximately 14,600 homes with approximately 360 miles of plant, and served approximately 11,700 basic service customers. The revenues related to the Manchester Systems acquisition included in the year ended December 31, 1998 and 1997 results were approximately $4.9 million and $3.3 million, respectively.
1996 Acquisitions
Mid-Tennessee Systems
On March 1, 1996, the company acquired certain operating assets comprising eleven cable television systems located in Tennessee (the "Mid-Tennessee Systems"). The purchase price for the Mid-Tennessee Systems was approximately $61.9 million including approximately $32,000 of net working capital assumed. Upon acquisition (the "Mid-Tennessee Acquisition"), the Mid-Tennessee Systems passed approximately 42,700 homes with approximately 1,260 miles of plant, and served approximately 33,500 basic service customers. The revenues related to the Mid- Tennessee Systems acquisition included in the year ended December 31, 1996 results were approximately $10.8 million.
RCT Systems
On April 1, 1996, the Company acquired all of the operating assets comprising three cable television systems located in Tennessee (the "RCT Systems"). The purchase price for the RCT Systems was approximately $10.2 million, including approximately $377,000 of assumed liabilities. Upon acquisition (the "RCT Acquisition"), the RCT Systems passed approximately 14,300 homes with approximately 272 miles of plant, and served approximately 12,200 basic service customers. The revenues related to the RCT Systems acquisition included in the year ended December 31, 1996 results were approximately $3.2 million.
Other Systems
During 1996, the Company also acquired the operating assets of three other cable television systems all located in Tennessee, and purchased from three separate cable companies. The aggregate purchase price for these systems was approximately $2.0 million. The revenues related to these other systems included in the year ended December 31, 1996 were approximately $200,000.
Property Sales
Tennessee Systems
As indicated above, on December 31, 1998, the Company completed a trade with InterMedia Partners (the "trade sale" together with the trade acquisition heretofore the "InterMedia Swap"), resulting in the sale of certain Tennessee cable systems located primarily in Paris and Piney Flats, Tennessee (the "Rifkin systems"). The consideration was the receipt of certain Tennessee cable systems from InterMedia and the assumption of approximately $17,000 of working capital. At December 31, 1998, the Rifkin systems passed approximately 23,700 homes with 535 miles of plant and served approximately 15,600 basic service customers.
Michigan Systems
On February 4, 1998, with an effective date of January 31, 1998, the Company completed the sale of all operating assets comprising the Company's properties within Michigan (the "Michigan Systems") to Bresnan Communications Company ("Bresnan"). The sales price was $17.1 million including the assumption of working capital and closing adjustments. At December 31, 1997, the Michigan Systems passed approximately 14,300 homes with 370 miles of plant and served approximately 11,200 customers.
Business Strategy
The Company's business strategy focuses on enhancing operational and financial performance by: (i) consolidating operations of existing clustered systems through strategic acquisitions; (ii) applying aggressive and innovative customer acquisition and retention marketing techniques; (iii) upgrading systems with state-of-the-art technology to enhance existing service and to develop, on a cost-effective basis, new ancillary revenue streams; and (iv) enhancing customer value by providing exceptional customer service.
Consolidating Operations & Strategic Acquisitions. The Company believes that consolidating operations will increase Adjusted EBITDA (as defined herein) by allowing for operating efficiencies in such areas as administration, marketing, customer service and advertising sales. The Company continues to explore opportunities to consolidate headends in order to reduce maintenance costs, as well as the cost of adding new channels and implementing new technologies and services. The Company has consolidated certain of the operations of the acquired Shelbyville and Manchester Systems with certain of the operations of the Company's existing systems in Tennessee. In addition, the Company plans in 1999 to interconnect clusters of four systems in Tennessee, serving over 80,000 customers, to allow for the efficient implementation of new technologies.
Innovative Marketing. The Company markets and promotes its cable television systems with the objective of increasing penetration and average revenue per customer. The Company actively markets its basic and premium program packages through innovative marketing tactics that include direct mail and telemarketing efforts targeted to specific customer and non-customer demographic profiles, newspaper and television advertising and door-to-door sales. In selected markets, the Company is also expanding its sources of revenue from services such as pay-per-view, new product tiers, high speed data access and digitally delivered programming.
System specific marketing plans and marketing budgets are developed jointly between R & A Management, LLC and the Company's regional marketing staff. In addition, the Company incorporates into marketing plans retention marketing strategies such as customer value-building, employee training and growth-related employee incentives to ensure that marketing investments are maximized. Additional customers are also gained by cable plant extensions built to new housing developments once adequate density is available.
System Enhancements. The Company is committed to maintaining and enhancing the technical integrity and channel capacity of its cable systems as demonstrated by the fact that all of the Systems have capacities of 30 or more channels. Within the next three years, the Company intends to rebuild nearly all of the Systems to a bandwidth between 450 MHz and 750 MHz. Additionally, the Company also is committed to extending its distribution systems to keep pace with the growth in the communities it serves as well as making continuous investments that improve picture quality and plant reliability.
The Company is utilizing advances in technology to upgrade its cable plant. The utilization of fiber optics and addressable technology (the computerized authorization of individual converters or receivers to descramble and receive specifically authorized video, audio or data signals that have been scrambled for security purposes) in these rebuilds will improve technical reliability, enhance picture quality and increase channel capacity to offer new products and services, all of which is expected to increase customer satisfaction and position the Company for a competitive future.
Customer Value. The Company believes it has a high quality, well-trained staff of customer service and sales representatives and local field technicians to provide valuable customer service. To this end, the Company continues to invest resources in training its customer service representatives and field technicians. In addition, the Company regularly evaluates the programming offered by its systems in order to offer its customers innovative packages of basic and premium services, including locally originated programming.
Systems
The Systems consist of three geographic clusters: Georgia, Tennessee and Illinois. The following describes each of these geographic clusters and illustrate the Company's growth over the past five years:
Georgia System. The table below sets forth certain information with respect to the Georgia System.
Year Ended December 31, 1998 1997 1996 1995 1994
Homes Passed		82,116	77,272	71,152	66,307	60,898 Basic Customers		60,526	57,173	53,386	48,925	44,290 Basic Penetration 73.7% 74.0% 75.0% 73.8% 72.7% Average Monthly Revenue 	 per Customer	$42.26	$39.56	$37.35	$35.44	$33.61
The Georgia System is managed by R & A Management, LLC. On a combined basis, this system consisted of approximately 1,690 miles of distribution plant. The Georgia System serves unincorporated areas in northeast Gwinnett County and certain incorporated communities therein, including the cities of Lawrenceville, Duluth, Suwanee, Buford, Sugar Hill, Dacula and Resthaven, as well as the Cities of Roswell and Mountain Park in Fulton County. All of the communities served by the Georgia System are suburbs of Atlanta.
Tennessee Systems. The table below sets forth certain information with respect to the Tennessee Systems.
Year Ended December 31, 1998 1997 1996 1995 1994
Homes Passed 143,016 138,913 120,285 115,057 110,441 Basic Customers 107,908 107,558 96,768 93,765 89,205 Basic Penetration 75.5% 77.4% 80.4% 81.5% 80.8% Average Monthly Revenue per Customer(1) $37.90 $35.36(2)$32.38 $30.05 $28.73
(1) The calculation does not reflect the customers from the InterMedia Swap. (2) Refer to Footnote (c) on Page 20.
The Tennessee Systems are managed by R & A Management, LLC. On a combined basis, these systems consisted of approximately 4,090 miles of distribution plant.
The Tennessee Systems serve the communities of Columbia, Cookeville, Tullahoma, Lebanon, McMinnville, Pulaski, Lawrenceburg, Fayetteville, Crossville, Lewisburg, Monterey, Hohenwald, Shelbyville and Manchester. The communities served are primarily in central and south central Tennessee.
The Illinois Systems. The table below sets forth certain information with respect to the Illinois Systems.
Year Ended December 31, 1998 1997 1996 1995 1994
Homes Passed		36,114	35,924	35,739	35,469	 35,320 Basic Customers		22,657	23,542	23,887	24,269	 23,987 Basic Penetration 62.7% 65.5% 66.8% 68.4% 67.9% Average Monthly Revenue per Customer $38.36 $35.49 $32.70 $30.63 $29.57
The Illinois Systems are managed by R & A Management, LLC. On a combined basis, these systems consisted of approximately 600 miles of distribution plant.
The Illinois Systems serve the communities of Mt. Vernon, Centralia, Sparta, Sesser, Steelville, Cairo and Nashville all located in southern Illinois. These communities generally receive poor off-air reception from St. Louis and require cable service to receive high quality broadcast signals. Nearly 60% of the customers are in the Mt. Vernon and Centralia systems.
The Cable Television Industry
A cable television system receives television, radio and data signals at its headend facility that are transmitted by broadcasting stations, microwave relay systems and communications satellites. These signals are then electronically processed and distributed, primarily through coaxial and, in some instances, fiber optic cable, to customers who pay a fee to receive some or all of these signals.
Cable television systems generally consist of four principal operating components. The first component, known as the headend facility, receives television and radio signals and other programming and information by means of special antennae, microwave relays and satellite earth stations. The second component, the distribution network, which originates at the headend and extends throughout the system's service area, typically consists of coaxial or fiber optic cables placed on utility poles or buried underground, and associated electronic equipment. The third component of the system is a drop cable, which extends from the distribution network into each customer's home and connects the distribution system to the customer's television set. The fourth component, a converter, is the home terminal device that converts the services available on the cable system to channels which can be displayed by the customer's television set if the television set is not cable compatible. In addition, this component may serve as a descrambler to permit reception of limited-distribution services by authorized viewers.
Cable systems may also originate their own television programming and other information services for distribution throughout the system. Cable television systems generally are constructed and operated pursuant to nonexclusive franchises or similar licenses granted by local governmental authorities for a specified term of years.
Cable television systems offer customers various levels or "tiers" of basic cable services consisting of off-air television signals of network, independent and educational programming from local broadcasters, a limited number of television signals from so-called superstations originating from distant cities, various satellite delivered, non- broadcast channels (such as Cable-News Network ("CNN"), the USA Network ("USA"), Entertainment and Sports Programming Network ("ESPN"), The Discovery Channel and Turner Network Television ("TNT")), certain programming originated locally by the cable system such as public, governmental and educational access programs and informational displays featuring news, weather, stock market and financial reports and public service announcements. For an extra monthly charge, cable systems also typically offer premium television services to their customers. These services, such as Home Box Office ("HBO"), Showtime, Cinemax and The Movie Channel, are satellite-delivered channels consisting principally of feature films, live sporting events, concerts and other special entertainment features, usually presented without commercial interruption for which a separate per channel charge may be levied by the cable system.
Generally, a customer pays an initial installation charge and fixed monthly fees for basic and premium television services and for other services, including the rental of converters and remote control devices. Monthly service fees constitute the primary source of revenues for cable television systems. Cable systems also generate revenues from additional fees paid by customers for pay-per-view programming of movies and special events and from the sale of available advertising spots on advertiser- supported cable programming. Cable systems also offer to their customers home shopping services which pay the systems a share of revenues from sales of products in the systems' service areas.
Programming and Service Offerings
Programming. R & A Management, LLC has various contracts to obtain basic and premium programming for the Systems from program suppliers whose compensation is typically based on a fixed fee per customer. The Systems select basic, tier and premium programming based on the demographics in the market, national research on the perceived value of the programming, requests from customers, the available channel capacity in each system, the cost of the networks and the availability of local advertising spots.
Some program suppliers provide volume discount pricing structures or offer marketing and launch support to the Systems. In particular, R & A Management, LLC has negotiated programming agreements for the Systems with premium service suppliers that offer cost incentives under which premium service unit prices decline as certain premium service growth thresholds are met. The Systems' successful marketing of multiple premium service packages emphasizing customer value has enabled the Systems to take advantage of such cost incentives.
The Systems have 200 retransmission consents with 46 commercial broadcast stations. None of these consents require direct payment of fees for carriage; however, in some cases the Systems have entered into agreements with certain stations to carry satellite-delivered cable programming which is affiliated with the network carried by such stations. These agreements have been renewed and will not expire until May 31, 1999 at the earliest. There can be no assurance that such agreements can or will be renewed under similar terms after their current term expiration. See "Legislation and Regulation in the Cable Television Industry."
R & A Management, LLC is a member of a programming consortium consisting of small to mid-size independent cable television operators serving, in the aggregate, approximately 5.3 million cable customers. The consortium was formed to help create efficiencies in the areas of securing and administering programming contracts, as well as to establish more favorable programming rates and contract terms for small to mid-size operators. Currently, approximately 40% of the Systems' programming contracts are negotiated directly with the networks by R & A Management, LLC; the remaining 60% are negotiated through the consortium. The Systems' programming contracts are generally for a fixed period of time (three to ten years) and are subject to negotiated renewal. As existing contracts expire, R & A Management, LLC intends to negotiate the renewals through the programming consortium.
The Systems' cable programming costs have increased in recent years and are expected to continue to increase due to carriage of additional networks, increased costs to produce or purchase cable programming, inflationary increases and other factors. However, the Company is committed to minimizing these increases. Aside from renewing expired programming contracts through the programming consortium, in certain target markets the Company will launch new and more expensive networks on new product tiers. In these markets, the Company will pay the programming suppliers for only those customers who are willing to bear an additional cost for the service rather than paying for the entire customer base who may or may not find value in the programming. In addition, in 1997, the Company began replacing more expensive networks with lower priced product of similar content and quality. The Company plans to continue cost-reducing product switchouts. Although there can be no assurances, the Company believes it will continue to have access to cable programming services at competitive prices.
Service Offerings. The Systems typically offer a choice of two tiers of basic cable television programming service: a broadcast programming tier (consisting generally of broadcast network and public television programming available "over-the-air" in the franchise community and "superstation" signals such as WTBS) and a satellite programming tier (consisting primarily of satellite delivered services such as CNN, USA, ESPN, The Discovery Channel and TNT). Approximately 92.4% of the customers in the Systems subscribed to both tiers of service as of December 31, 1998.
The Systems also offer premium programming services (e.g., HBO, Cinemax, Showtime) on both an a la carte basis and as part of discounted premium service packages. Premium packages are designed to generate incremental premium cash flow as well as enhance the perceived value of the Systems' cable service. The Systems have successfully promoted innovative premium service packages. Overall premium service penetration has increased significantly in the Systems where such packages have been introduced. Currently, the systems in Georgia; Centralia, Illinois; and Cookeville, Fayetteville, Columbia, Lebanon and Tullahoma, Tennessee offer movie and event pay-per-view. The other Systems offer pay-per-view on an event only basis.
Expanded Service Offerings. New product tiers, which include programming options that are not available on the basic or satellite tier, have been implemented and continue to be developed by the Company. A new product tier will typically contain four to nine programming services offered on either an a la carte ($1 to $4 per channel) or a package basis ($5.95 including equipment rental). Signals are secured by addressable technology. The Columbia, Tennessee system launched a new product tier in 1996. The Georgia system launched a new product tier in June 1997, and the Lebanon, Tennessee system launched a new product tier in November 1997.
The Company has launched digital cable service in Cookeville and Tullahoma, Tennessee, and Centralia, Illinois. The service consists of a New Product Tier, additional screens of multiplexed premium services such as HBO and Showtime, and from 8 to 27 channels of Pay-Per-View. An on-screen interactive program guide also is included in the digital service.
Cable modem service is offered in the Georgia system and the Cookeville, Lebanon and Columbia, Tennessee, systems. The service allows users access to the internet at substantially higher speeds than are available from other internet access providers. The family of services consists of residential connections, commercial connections, and virtual private network services. The Company also will undertake custom data network solutions for various commercial and institutional clients.
To further enhance revenue, additional programs and products under development include the launch of internet access services.
Systems Operations
The Company acquires, operates and develops cable television systems based on the principle of increasing operating cash flow while maintaining a high standard of technical and customer service.
The Company has a decentralized and locally responsive management structure which provides significant management experience and stability to every region. Annual operating budget preparation, strategic planning and capital expenditure allocation decisions are made jointly between R & A Management, LLC and the Company's system managers to ensure that local needs are properly weighted with maximizing investor returns. Day to day operating decisions are made by experienced local area/system managers who are knowledgeable about local markets and responsive to the specific needs of the Company's customers. The Company believes that this management structure enhances the effectiveness of customer service efforts and assists in the maintenance of good relations with franchise authorities. Local area/system managers are rewarded for attaining operating goals through incentive and bonus plans based on predefined qualitative and quantitative measures of system-specific performance.
The Company believes that providing excellent customer and technical service is essential in an increasingly competitive environment. To accomplish service-related objectives, the Company places a special emphasis on exceeding the Federal Communication Commission ("FCC") and National Cable Television Association ("NCTA") customer service standards. In addition to adhering to federally-mandated customer service standards the Company has implemented additional programs, including an on-time guarantee for installation and repair appointments, designed to enhance customer satisfaction.
As part of the focus on service-related initiatives, the Company is committed to fostering the personal and professional growth of its employees, which includes a commitment to and investment in training. The Company's employees receive training in customer service, sales and customer retention skills from outside professionals and qualified internal management personnel. Technical employees are encouraged to enroll in courses available from the National Cable Television Institute and attend regularly scheduled on-site seminars conducted by equipment manufacturers to keep pace with the latest technological developments in the cable television industry. The Company believes that training programs, coupled with growth-oriented bonus and incentive plans for front line and managerial staff: (i) enhance the overall level of customer satisfaction; (ii) improve the quality of workmanship in the field which results in fewer service calls from customers; (iii) lowers service-related expenses; and (iv) strengthens the effectiveness of marketing programs.
Marketing
The Company markets and promotes its cable television systems with the objective of increasing penetration and average revenue per customer. The Company actively markets its basic and premium program packages through marketing tactics that include direct mail and telemarketing efforts targeted to specific customer and non-customer demographic profiles, newspaper and television advertising and door-to-door sales. Each of the Company's customer service centers is supported by a Marketing Director who coordinates marketing and door-to-door campaigns throughout the geographic region. The Marketing Director is responsible for maintaining quality in the Company's sales and service by supervising and training direct sales representatives and assessing picture and service quality within the Company's cable systems. In general, customer service and sales representatives will follow up by telephone contact with the customer following a new installation to assess the quality of the installation and the overall service the customer is receiving and to assure customer satisfaction. Customer service representatives are also trained to market upgrades in service to customers and are informed of current rates, programming packages and promotions.
The Systems utilize a contract third-party service for monthly customer billing based on modern computer technology and utilizing software developed specifically for the cable television industry. Billing statements are printed and mailed directly to customers, who have approximately 15 days after receipt of the statement to remit payment to the central payment processing center. If after 30 days a customer has not made a payment, the customer is charged a late payment fee. After 35 days, if the customer has not made a payment, a "Past Due Invoice" is generated. In general, the Systems pursue collection of past due amounts by telephoning the customer at 40 days past due and attempting to collect payments through field technicians at 45 days past due. If this final attempt to collect payment fails, the customer is then disconnected. A final statement is sent within a week after disconnection, and, approximately 15 days thereafter, the account is referred to a collection agency. This approach to accounts receivable and collections has resulted in bad debt expense for the Systems consistently averaging less than 1% of its revenue.
Technology and Engineering
At December 31, 1998, the Systems maintained approximately 6,400 miles of cable distribution plant that passed approximately 261,200 homes. The following table sets forth certain information with regard to the channel capacities of the Systems as of December 31, 1998.
54 or 33 to 53 More Channels Channels Total Number of Systems 19 21 40 Percent of Systems 47.5% 52.5% 100.0% Miles of plant 1,561 4,799 6,360 Customers 42,246 148,845 191,091
The Company continually monitors and evaluates new technological developments to optimize existing assets and to anticipate the introduction of new services and program delivery capabilities. The use of fiber optic cable as a transportation medium is playing a major role in enhancing channel capacity and improving the performance and reliability of cable television systems. Fiber optic cable is capable of carrying hundreds of video, data and voice channels. The Company has implemented and intends to continue to use fiber optic technology in conjunction with its system rebuilds and upgrades. In the future, by interconnecting headends of adjacent systems with one master facility, the Company can reduce the number of headends, lower maintenance costs and add new channels more cost effectively. The Company generally plans to reduce the number of headends through consolidation to take advantage of these efficiencies.
The Company intends to use digital compression technology to enhance the current channel capacities of its cable systems. This technology is expected to allow five to ten channels or more to be carried in the space of one analog channel. Digital signals not only offer the potential for allowing cable television systems to carry more programming but also for improving the quality of the television signals carried. The Company believes that the use of digital technology in the future offers the potential for the Company to increase channel capacity in a more cost efficient manner than completely rebuilding systems with higher capacity distribution plant in certain small systems and to augment the analog capacity of those systems that have been upgraded in recent years.
Customer and Community Relations
In order to succeed in a competitive environment, the Company recognizes the need to meet and exceed the increasing demands and expectations of its customers and communities. Through customer newsletters, surveys and focus groups, the Company is able to identify and respond to the needs of current and prospective customers in a system-specific fashion. These means of communication, as well as cross-channel spots and billing messages, permit the Company to position itself as a leading provider of advanced information and entertainment services. This continuous interaction and two-way communication is critical to instilling the level of loyalty needed to obtain and retain customers in today's marketplace.
The Company is dedicated to developing strong community relations in the locations served by its cable television systems and believes that good relations with its local franchise authorities are primarily a result of effective communications by the Company's local management with local authorities. The Company also believes that consistent, high quality performance of its local staff is important to maintain good community relations. To improve the effectiveness of staff interaction with the Company's customers, the Company has ongoing training programs for its field and customer service staff.
The Company also places a high priority on using its facilities and position in the community to the benefit of the towns and cities served by its cable television systems. This commitment is especially apparent in the area of education, as each of the Systems assists area schools by supplementing their classroom curricula with cable-delivered educational services and related equipment. In addition, the Systems contribute to the communities they serve through production and carriage of locally- originated programming, covering issues and events important to area residents and otherwise underserved by local media. Ongoing support and interest in the community is continuously demonstrated through the involvement of the Systems' personnel in local causes, including promotions designed to raise money and supplies for persons in need.
Franchises
Cable television systems are generally constructed and operated under nonexclusive franchises granted by local governmental authorities. These franchises typically contain many requirements, including time limitations on commencement and completion of construction, conditions of service, system channel capacity, nature of programming, the provision of free cable service to schools and certain other public institutions and the maintenance of insurance and indemnity bonds. The provisions of local franchises are subject to federal regulation under the Cable Acts. See "Legislation and Regulation in the Cable Television Industry."
The Systems' franchises provide for the payment of fees to the issuing authority. Annual franchise fees imposed on the Systems range up to 5% of gross revenues generated by a system. In substantially all of the Systems, franchise fees are passed through to the customers as an addition to the rates for cable television service. The Cable Communications Policy Act of 1984 ("1984 Cable Act") prohibits franchising authorities from imposing franchise fees in excess of 5% of gross revenues and also permits the cable system operator to seek renegotiation and modification of franchise requirements if warranted by changed circumstances.
The table below categorizes the Systems' franchises by date of expiration and presents the approximate number and percentage of basic service customers for each category of franchises as of December 31, 1998.
Year of Percentage Franchise Number of Percentage of Number of of Total Expiration Franchises Total Franchises Customers Customers
1999-2001 17 15.0% 30,929 16.2% 2002-2004 19 16.8% 19,831 10.4% After 2004 77 68.2% 140,331 73.4% Total 113 100.0% 191,091 100.0%
No single franchise represents more than 12.4% of total customers of the Systems, and the largest five franchises represent less than 29.2% of total customers of the Systems.
The 1984 Cable Act provides, among other things, for an orderly franchise renewal process where franchise renewal will not be unreasonably withheld or, if renewal is withheld, the franchise authority must pay the operator the "fair market value" for the system covered by such franchise but no value will be allocated to the franchise itself. In addition, the 1984 Cable Act establishes comprehensive renewal procedures that require that an incumbent franchisee's renewal application be assessed on its own merit and not as part of a comparative process with competing applications.
The Company believes that it generally has good relationships with its franchising authorities. The Company has never had a franchise revoked or failed to have a franchise renewed. In addition, all of the franchises of the Company and such other entities eligible for renewal have been renewed or extended at or prior to their stated expirations, and no material franchise community has refused to consent to a franchise transfer to the Company or any such predecessor.
Competition
General. Cable television systems face competition from alternative methods of receiving and distributing television signals and from other sources of news, information and entertainment, such as off-air television broadcast programming, newspapers, movie theaters, live sporting events, interactive computer programs, Internet services and home video products, including videotape cassette recorders/players. The extent to which cable service is competitive depends, in part, upon the cable system's ability to provide a greater variety of programming at a reasonable price to consumers than is available off-air or through other alternative delivery sources. See "Legislation and Regulation in the Cable Television Industry."
Direct Broadcast Satellite. During 1998, the Company continued to experience a competitive impact from medium power and higher power direct broadcast satellites ("DBS") that use higher frequencies to transmit signals that can be received by dish antennas much smaller in size than traditional home satellite dishes ("HSDs"). The DBS industry has grown rapidly over the last several years and now serves more than 9 million customers nationwide. Recently announced mergers could strengthen the surviving DBS companies.
DBS has advantages as an alternative means of distributing video signals to the home. Among the advantages are that the capital investment (although initially high) for the satellite and uplinking segment of a DBS system is fixed and does not increase with the number of customers receiving satellite transmissions; that DBS is not currently subject to local regulation of service and prices or required to pay franchise fees; and that the capital costs for the ground segment of a DBS system (the reception equipment) are directly related to and limited by the number of service customers.
The primary disadvantage of DBS is its inability to provide local broadcast television stations to customers in their local markets. However, EchoStar and other potential DBS providers have announced their intention to retransmit local broadcast television stations back into a customer's local market. Both Congress and the U. S. Copyright Office are currently reviewing proposals to allow such transmission and it is possible that in the near future, DBS systems will be retransmitting local television broadcast signals back into local television markets. Additional DBS disadvantages presently include a limited ability to tailor the programming package to the interests of different geographic markets; signal reception being subject to line of sight angles; and technology which requires a customer to rent or own one set-top box (which is significantly more expensive than a cable converter) for each television on which they want to view DBS programming.
Although the effect of competition from these DBS services cannot be specifically measured or predicted, it is clear there has been significant growth in DBS customers and the Company assumes that such DBS competition will be substantial in the future as developments in technology continue to increase satellite transmitter power, and decrease the cost and size of equipment needed to receive these transmissions. Further, the extensive national advertising of DBS programming packages, including certain sports packages not available on cable television systems, will likely continue the rapid growth in DBS customers. Finally, if DBS develops the technology and gains the legal right to rebroadcast local broadcast signals, it could increase the growth in DBS customers.
Telephone Companies. The Telecommunications Act of 1996 (the "1996 Telecom Act") allows local telephone companies to provide a wide variety of video services competitive with services provided by cable systems and to provide cable services directly to customers. See "Legislation and Regulation in the Cable Television Industry." Cable systems could be placed at a competitive disadvantage if the delivery of video programming services by local telephone companies becomes widespread because cable systems are required to obtain local franchises to provide cable service and must comply with a variety of obligations under such franchises. Issues of cross-subsidization by local telephone companies pose strategic disadvantages for cable operators seeking to compete with local telephone companies providing video services. Additionally, the Cable Television Consumer Protection and Competition Act of 1992 ("1992 Cable Act") ensures that telephone company providers of video services will have access to acquire all significant cable programming services. Although the Company cannot predict the likelihood of success of any video programming ventures by local telephone companies or the impact on the Company of such competitive ventures, it is possible such ventures will result in significant new competition.
Other Cable Companies. Cable systems generally operate pursuant to franchises granted on a nonexclusive basis. The 1992 Cable Act gives local franchise authorities control over basic cable service rates, prohibits franchise authorities from unreasonably denying requests for additional franchises, and permits franchise authorities to operate cable systems. See "Legislation and Regulation in the Cable Television Industry." It is possible that a franchising authority might grant a second franchise to another cable company containing terms and conditions more favorable than those afforded the Systems. Well-financed businesses from outside the cable industry (such as the public utilities which own the poles on which cable is attached) may become competitors for franchises or providers of competing services. The 1996 Telecom Act eliminates certain federal restrictions on utility holding companies and thus frees all utility companies to now provide cable services. See "Legislation and Regulation in the Cable Television Industry." Also, during 1997 and 1998, there has been a significant increase in the number of cities that have constructed their own cable television systems in a manner similar to city-provided utility services. These systems typically will compete directly with the existing cable operator without the burdens of franchise fees or other local regulation. Although the total number of municipal overbuild cable systems remains small, the development in 1997 and 1998 would indicate an increasing trend in cities authorizing such direct municipal competition with cable operators. In general, a cable system's financial performance will be adversely impacted where a competing cable service exists (referred to in the cable industry as an "overbuild").
Although the Systems' franchises are non-exclusive, and in certain of its service areas there are multiple franchisees, currently there is only one instance where a competing franchisee has actually overbuilt the Systems. In one small section in Gwinnett County, another franchised cable operator with duplicate cable plant can provide cable service to approximately 1,000 of the Northeast Gwinnett system's homes passed. In October 1996, Bell Intermedia Services, Inc. ("BIMS"), a subsidiary of Bell South, Inc., was granted a franchise by Gwinnett County and Roswell, Georgia, to construct and operate a cable television system. Subsequently, BIMS was granted a franchise in August 1997 by the City of Duluth, Georgia. At this time, BIMS has activated approximately 30 residential housing subdivisions, primarily in Gwinnett County, with hardwire cable. These activated subdivisions encompass approximately 900 occupied passings, of which approximately 650 are customers of the Company and 140 are BIMS customers.
Additionally, in February 1996, Metro Cable, Inc., ("Metro Cable"), a start up company, was granted by Gwinnett County a franchise to build and operate a cable television system in Gwinnett County. The principals of Metro Cable are local to Gwinnett County and the northeastern Georgia area and have experience in the construction and operation of cable television systems. Management believes that Metro Cable does not have any active business operations at this time and cannot predict the timing of Metro Cable's starting construction of its cable system.
The Company is not aware of any company or person that is actively seeking a cable franchise from local franchise authorities for areas presently served by the Systems other than those already granted to BIMS and Metro Cable in Gwinnett County, Duluth and Roswell, Georgia.
Private Satellite Master Antenna Television. Cable operators face additional competition from private satellite master antenna television ("SMATV") systems that serve condominiums, apartment complexes and other private residential developments. The operators of these SMATV systems often enter into exclusive agreements with apartment building owners or homeowners' associations. Due to the widespread availability of reasonably priced earth stations, SMATV systems now offer both improved reception of local television stations and many of the same satellite- delivered program services offered by franchised cable systems. Various states have enacted laws to assure franchised cable systems access to private residential complexes. These laws have been challenged in the courts with varying results. Additionally, the 1984 Cable Act gives a franchised cable operator the right to use existing compatible easements within its franchise area; however, there have been conflicting judicial decisions interpreting the scope of this right, particularly with respect to easements located entirely on private property. Further, the FCC in 1997, adopted new rules that restrict the ability of cable operators to maintain ownership of cable wiring inside multi-unit buildings, thereby making it less expensive for SMATV competitors to reach those customers. See Legislation and Regulation below. Finally, the FCC in 1998 ruled that private cable operators can lease video distribution capacity from local telephone companies and, thereby, distribute cable programming services over the public rights-of-way without obtaining a franchise. This could provide a significant regulatory advantage for private cable operators in the future. The ability of the Company to compete for customers in communities served by SMATV operators is uncertain.
Multichannel and Local Multipoint Distribution Service. Cable television systems also compete with wireless program distribution services such as multichannel, multipoint distribution service ("MMDS") which use low- power microwave frequencies to transmit video programming over-the-air to customers. The 1992 Cable Act ensures that MMDS operators have access to acquire all significant cable television programming services. Although there are MMDS operators who are authorized to provide or are providing broadcast and satellite programming to customers in areas served by the Company's cable systems, such competition is not yet significant. Recent investments in, or acquisitions of, MMDS companies by local phone companies, including BIMS acquiring a MMDS operation in the Atlanta, Georgia market, are likely to substantially increase the competitive impact of MMDS services in selected markets throughout the country. BIMS activated a digital MMDS operation in mid-1998 which affects portions of Roswell and Gwinnett County, Georgia. Due to "line- of-sight" issues, the impact has been minimal. Additionally, the FCC has proposed to allocate frequencies in the 28 GHz band for a new multichannel wireless video service similar to MMDS. The Company is unable to predict whether wireless video distribution services, such as DBS and MMDS, will have a material impact on its future operations. Finally, an emerging technology, local multipoint distribution services ("LMDS"), could also pose a significant threat to the cable television industry, if and when it becomes established. LMDS, sometimes referred to as cellular television, could have the capability of delivering more than 100 channels of video programming to a customer's home. The potential impact, however, of LMDS is difficult to assess due to the newness of the technology and the absence of any current, fully- operational LMDS systems.
In August 1995, Heartland Wireless Communications ("HWC") launched an MMDS wireless television system in southeast Illinois near the community of McLeansboro. The signal pattern of the MMDS operation covers a radius of approximately 35 miles. The Illinois systems that could be affected by this signal pattern are McLeansboro, Mt. Vernon, Wayne City, Woodlawn, Grayville and Sesser/Valier. Collectively, these systems have approximately 9,300 basic customers. Depending on the headend serving a particular community, these systems offer between 31 and 60 basic channels for between $28.95 and $31.95 per month. HWC's basic package currently consists of 26 basic channels, including three local broadcast channels and 23 cable satellite channels for $27.95 per month. HBO and Cinemax can be added for an additional $9.95 per month. The company has partnered with The Dish Network to provide 70 additional channels for an additional $19.95 per month on a separate billing. HWC filed "Chapter 11" bankruptcy on December 4, 1998. The Company believes that HWC has had no material effect on the Illinois systems.
Wireless One, Inc. operates MMDS wireless television systems near Manchester, Tennessee near the Company's Manchester, Tullahoma, McMinnville and Lawrenceburg systems. Depending on the headend serving each community, these systems offer between 33 and 60 basic channels for between $26.90 and $32.40 per month. Wireless One, Inc. currently offers a basic service package consisting of 30 channels, including local broadcast channels and cable satellite channels, for $25.95 per month and two premium channels, HBO and Showtime, for $11.95 and $9.95 per month, respectively. Due to the hilly and wooded topography in the area, the Manchester, Tullahoma, McMinnville and Lawrenceburg systems are minimally affected by the signal pattern of the MMDS operation near Manchester. To date, these MMDS operations have had no material impact on any of the Company's Tennessee systems.
VHF/UHF Broadcasters. Most areas of the United States are covered by traditional terrestrial VHF/UHF television broadcasts that typically include three to ten channels. These broadcasters are often low to medium power operators with a limited coverage area and provide local, network and syndicated programming. The local content nature of the programming may be important to the consumer, and VHF/UHF programming is typically free of charge. The FCC has allocated additional digital spectrum to licensed broadcasters. At least during the transition period, each existing television station will be able to retain its present analog frequencies and also transmit programming on a digital channel that may permit multiple programming services per channel.
Other Potential Competition. Other new technologies may become competitive with non-entertainment services that cable television systems can offer. The FCC has authorized television broadcast stations to transmit textual and graphic information useful both to consumers and to businesses. The FCC also permits commercial and non-commercial FM stations to use their subcarrier frequencies to provide non-broadcast services including data transmissions. The FCC established an over-the- air Interactive Video and Data Service that will permit two-way interaction with commercial and educational programming along with informational and data services. The expansion of fiber optic systems by telephone companies and other common carriers will provide facilities for the transmission and distribution of video programming, data and other non-video services. The FCC has held spectrum auctions for licenses to provide personal communications services ("PCS"). PCS could enable license holders, including cable operators, to provide voice and data services.
Advances in communications technology as well as changes in the marketplace and the regulatory and legislative environment are constantly occurring. Thus, it is not possible to predict the effect that ongoing or future developments might have on the cable industry.
Employees
At December 31, 1998, the Systems had 339 full-time employees and 2 part- time employees, none of whom are subject to a collective bargaining agreement. The Company considers its relations with its employees to be good. In addition, R & A Management, LLC, which is responsible for providing management services to the Company, employs 73 persons. See Item 13 - "Certain Relationships and Related Transactions."
Legislation and Regulation in the Cable Television Industry
The operation of cable television systems is extensively regulated by the FCC, some state governments and most local governments. The 1996 Telecom Act altered the regulatory structure governing the nation's telecommunications providers. It removes barriers to competition in both the cable television market and the local telephone market. Among other things, it also reduces the scope of cable rate regulation.
The 1996 Telecom Act required the FCC to undertake a host of implementing rulemakings, the final outcome of which cannot yet be determined. Moreover, Congress and the FCC have frequently revisited the subject of cable regulation. Future legislative and regulatory changes could adversely affect the Company's operations. This section briefly summarizes key laws and regulations affecting the operation of the Company's cable systems and does not purport to describe all present, proposed, or possible laws and regulations affecting the Company.
Cable Rate Regulation. The 1992 Cable Act imposed an extensive rate regulation regime on the cable television industry. Under that regime, all cable systems are subject to rate regulation, unless they face "effective competition" in their local franchise area. Federal law now defines "effective competition" on a community-specific basis as requiring either low penetration (less than 30%) by the incumbent cable operator, appreciable penetration (more than 15%) by competing multichannel video providers ("MVPs"), or the presence of a competing MVP affiliated with a local telephone company.
Although the FCC rules control, local government units (commonly referred to as local franchising authorities or "LFAs") are primarily responsible for administering the regulation of the lowest level of cable -- the basic service tier ("BST"), which typically contains local broadcast stations and public, educational, and government ("PEG") access channels. Before an LFA begins BST rate regulation, it must certify to the FCC that it will follow applicable federal rules, and many LFAs have voluntarily declined to exercise this authority. LFAs also have primary responsibility for regulating cable equipment rates. Under federal law, charges for various types of cable equipment must be unbundled from each other and from monthly charges for programming services. The 1996 Telecom Act allows operators to aggregate costs for broad categories of equipment across geographic and functional lines. This change should facilitate the introduction of new technology.
The FCC itself directly administers rate regulation of any cable programming service tiers ("CPST"), which typically contain satellite- delivered programming. Under the 1996 Telecom Act, the FCC can regulate CPST rates only if an LFA first receives at least two rate complaints from local customers and then files a formal complaint with the FCC. When new CPST rate complaints are filed, the FCC now considers only whether the incremental increase is justified and will not reduce the previously established CPST rate.
Under the FCC's rate regulations, most cable systems were required to reduce their BST and CPST rates in 1993 and 1994, and have since had their rate increases governed by a complicated price cap scheme that allows for the recovery of inflation and certain increased costs, as well as providing some incentive for expanding channel carriage. The FCC has modified its rate adjustment regulations to allow for annual rate increases and to minimize previous problems associated with regulatory lag. Operators also have the opportunity of bypassing this "benchmark" regulatory scheme in favor of traditional "cost-of-service" regulation in cases where the latter methodology appears favorable. Premium cable services offered on a per-channel or per-program basis remain unregulated, as do affirmatively marketed packages consisting entirely of new programming product. Federal law requires that the BST be offered to all cable customers, but limits the ability of operators to require purchase of any CPST before purchasing premium services offered on a per- channel or per-program basis.
In an effort to ease the regulatory burden on small cable systems, the FCC has created special rate rules applicable for systems with fewer than 15,000 customers owned by an operator with fewer than 400,000 customers. The special rate rules allow for a vastly simplified cost-of-service showing. The 1996 Telecom Act provides additional relief for small cable operators. For franchising units with less than 50,000 customers and owned by an operator with less than one percent of the nation's cable customers (i.e., approximately 600,000 customers), CPST rate regulation is automatically eliminated. The Company believes that the majority of its systems qualify for one or both of these forms of small system rate relief.
The 1996 Telecom Act sunsets FCC regulation of CPST rates for all systems (regardless of size) on March 31, 1999. However, certain members of Congress and FCC officials have called for the delay of this regulatory sunset and further have urged more rigorous rate regulation (including limits on programming cost pass-thourghs to cable customers) until a greater degree of competition to incumbent cable operators has developed. The 1996 Telecom Act relaxes existing uniform rate requirements by specifying that uniform rate requirements do not apply where the operator faces "effective competition," and by exempting bulk discounts to multiple dwelling units, although complaints about predatory pricing still may be made to the FCC.
Cable Entry Into Telecommunications. The 1996 Telecom Act provides that no state or local laws or regulations may prohibit or have the effect of prohibiting any entity from providing any interstate or intrastate telecommunications service. States are authorized, however, to impose "competitively neutral" requirements regarding universal service, public safety and welfare, service quality, and consumer protection. State and local governments also retain their authority to manage the public rights-of-way and may require reasonable, competitively neutral compensation for management of the public rights-of-way when cable operators provide telecommunications service. The favorable pole attachment rates afforded cable operators under federal law can be gradually increased by utility companies owning the poles (beginning in 2001) if the operator provides telecommunications service, as well as cable service, over its plant.
Cable entry into telecommunications will be affected by the regulatory landscape now being fashioned by the FCC and state regulators. One critical component of the 1996 Telecom Act to facilitate the entry of new telecommunications providers (including cable operators) is the interconnection obligation imposed on all telecommunications carriers. This requires, for example, that the incumbent local telephone company must allow new competing telecommunications providers to connect to the local telephone distribution facilities. In a January 1999 decision, the Supreme Court upheld the FCC's fundamental interconnection requirements. However the court ordered the FCC to reconsider to what extent the local telephone company must make available for resale separate components of its local telephone system.
Telephone Company Entry Into Cable Television. The 1996 Telecom Act allows telephone companies to compete directly with cable operators by repealing the historic telephone company/cable cross-ownership ban. Local exchange carriers ("LECs"), including the Bell Operating Companies, can now compete with cable operators both inside and outside their telephone service areas. Because of their resources, LECs could be formidable competitors to traditional cable operators, and certain LECs have begun offering cable service. See "Competition."
Under the 1996 Telecom Act, a LEC providing video programming to customers will be regulated as a traditional cable operator (subject to local franchising and federal regulatory requirements), unless the LEC elects to provide its programming via an "open video system" ("OVS"). To qualify for OVS status, the LEC must reserve two-thirds of the system's activated channels for unaffiliated entities. Additionally, a January 1999 federal court of appeals decision held that OVS providers can be required by local franchising authorities to obtain a franchise prior to providing OVS services.
Although LECs and cable operators can now expand their offerings across traditional service boundaries, the general prohibition remains on LEC buyouts (i.e., any ownership interest exceeding 10%) of co-located cable systems, cable operator buyouts of co-located LEC systems, and joint ventures between cable operators and LECs in the same market. The 1996 Telecom Act provides a few limited exceptions to this buyout prohibition, including a carefully circumscribed "rural exemption." The 1996 Telecom Act also provides the FCC with the limited authority to grant waivers of the buyout prohibition (subject to LFA approval).
Electric Utility Entry Into Telecommunications/Cable Television. The 1996 Telecom Act provides that registered utility holding companies and subsidiaries may provide telecommunications services (including cable television) notwithstanding the Public Utilities Holding Company Act. Electric utilities must establish separate subsidiaries, known as "exempt telecommunications companies" and must apply to the FCC for operating authority. Again, because of their resources, electric utilities could be formidable competitors to traditional cable systems.
Additional Ownership Restrictions. The 1996 Telecom Act eliminates statutory restrictions on broadcast/cable cross-ownership (including broadcast network/cable restrictions), but leaves in place existing FCC regulations prohibiting local cross-ownership between co-located television stations and cable systems. The 1996 Telecom Act also eliminates the three year holding period required under the 1992 Cable Act's "anti-trafficking" provision. The 1996 Telecom Act leaves in place existing restrictions on cable cross-ownership with SMATV and MMDS facilities, but lifts those restrictions where the cable operator is subject to effective competition. In January 1995, however, the FCC adopted regulations which permit cable operators to own and operate SMATV systems within their franchise area, provided that such operation is consistent with local cable franchise requirements.
Pursuant to the 1992 Cable Act, the FCC adopted rules precluding a cable system from devoting more than 40% of its activated channel capacity to the carriage of affiliated national program services. A companion rule establishing a nationwide ownership cap on any cable operator equal to 30% of all domestic cable customers has been stayed pending further judicial review. The FCC is currently conducting a reconsideration of its national customer ownership rules, and it is possible the Commission will revise both the national customer cable operator ownership limitation and the manner in which it attributes ownership to a cable operator.
Must Carry/Retransmission Consent. The 1992 Cable Act contains broadcast signal carriage requirements that allow local commercial television broadcast stations to elect once every three years between requiring a cable system to carry the station ("must carry") or negotiating for payments for granting permission to the cable operator to carry the station ("retransmission consent"). Less popular stations typically elect "must carry" and more popular stations typically elect "retransmission consent." Must carry requests can dilute the appeal of a cable system's programming offerings, and retransmission consent demands may require substantial payments or other concessions. Either option has a potentially adverse affect on the Company's business. The burden associated with must-carry obligations could dramatically increase if television broadcast stations proceed with planned conversions to digital transmissions and if the FCC determines that cable systems must carry all analog and digital signals transmitted by the television stations.
Access Channels. LFAs can include franchise provisions requiring cable operators to set aside certain channels for public, educational and governmental access programming. Federal law also requires cable systems to designate a portion of their channel capacity (up to 15% in some cases) for commercial leased access by unaffiliated third parties. The FCC has adopted rules regulating the terms, conditions and maximum rates a cable operator may charge for use of this designated channel capacity, but use of commercial leased access channels has been relatively limited. In February of 1997, the FCC released revised rules which mandated a modest rate reduction which has made commercial leased access a more attractive option for third party programmers, particularly for part-time leased access carriage.
Access to Programming. To spur the development of independent cable programmers and competition to incumbent cable operators, the 1992 Cable Act imposed restrictions on the dealings between cable operators and cable programmers. Of special significance from a competitive business posture, the Act precludes video programmers affiliated with cable companies from favoring cable operators over competitors and requires such programmers to sell their programming to other multichannel video distributors. This provision limits the ability of vertically integrated cable programmers to offer exclusive programming arrangements to cable companies. Recently, both Congress and the FCC have considered proposals that would expand the program access rights of cable's competitors, including the possibility of subjecting video programmers who are not affiliated with cable operators to all program access requirements.
Inside Wiring. In a 1997 Order, the FCC established rules that require an incumbent cable operator upon expiration or termination of a multiple dwelling unit ("MDU") service contract to sell, abandon, or remove "home run" wiring that was installed by the cable operator in an MDU building. These inside wiring rules will encourage and facilitate building owners in their attempts to replace existing cable operators with new video programming providers who are willing to pay the building owner a higher fee. Additionally, the FCC has proposed abrogating all exclusive MDU contracts held by cable operators, but at the same time allowing competitors to cable to enter into exclusive MDU service contracts.
Other FCC Regulations. In addition to the FCC regulations noted above, there are other FCC regulations covering such areas as equal employment opportunity, customer privacy, programming practices (including, among other things, syndicated program exclusivity, network program nonduplication, local sports blackouts, indecent programming, lottery programming, political programming, sponsorship identification, and children's programming advertisements), registration of cable systems and facilities licensing, maintenance of various records and public inspection files, frequency usage, lockbox availability, antenna structure notification, tower marking and lighting, consumer protection and customer service standards, technical standards, and consumer electronics equipment compatibility. FCC requirements imposed in 1997 for Emergency Alert Systems and for providing hearing impaired Closed Captioning on programming will result in new and potentially significant costs for the Company. The FCC has the authority to enforce its regulations through the imposition of substantial fines, the issuance of cease and desist orders and/or the imposition of other administrative sanctions, such as the revocation of FCC licenses needed to operate certain transmission facilities used in connection with cable operations.
The FCC recently completed a rulemaking designed to encourage and facilitate third-party sale of cable converters to cable customers. Specifically, the FCC requires cable operators to segregate security functions of set top boxes from all other functions by July 1, 2000. Additionally, as of January 1, 2005, cable operators can no longer lease or sell converter set top boxes that have integrated security and navigation functions. The result of this rulemaking is that cable customers will not necessarily obtain their set top boxes from the cable operator, but instead, may purchase such set top boxes from third-party vendors. Such third-party sales of previously unmodified cable set top boxes could make it more difficult for cable operators to combat theft of service.
Internet Service Regulation. The Company began offering high-speed internet service to customers in 1997. Although there is no significant federal regulation of cable system delivery of internet services at the current time, and the FCC recently issued a report to Congress finding no immediate need to impose such regulation, this situation may change as cable systems expand their broadband delivery of internet services. In particular, proposals have been advanced at the FCC that would require cable operators to provide access to unaffiliated internet service providers and online service providers. Certain internet service providers also are attempting to use existing commercial leased access provisions of the Communications Act to gain access to cable system delivery. Finally, some local franchising authorities are considering the imposition of mandatory internet access requirements as part of cable franchise renewals or transfer approvals.
However, as the cable industry's delivery of internet services develops, it is possible that greater federal and/or local regulation could be imposed.
Copyright. Cable television systems are subject to federal copyright licensing covering carriage of television and radio broadcast signals. In exchange for filing certain reports and contributing a percentage of their revenues to a federal copyright royalty pool (that varies depending on the size of the system and the number of distant broadcast television signals carried), cable operators can obtain blanket permission to retransmit copyrighted material on broadcast signals. The possible modification or elimination of this compulsory copyright license is the subject of continuing legislative review and could adversely affect the Company's ability to obtain desired broadcast programming. In addition, the cable industry pays music licensing fees to BMI and is negotiating a similar arrangement with the American Society of Composers, Authors and Publishers ("ASCAP"). Copyright clearances for nonbroadcast programming services are arranged through private negotiations.
State and Local Regulation. Cable television systems generally are operated pursuant to nonexclusive franchises granted by a municipality or other state or local government entity in order to cross public rights-of-way. Federal law now prohibits franchise authorities from granting exclusive franchises or from unreasonably refusing to award additional franchises. Cable franchises generally are granted for fixed terms and in many cases include monetary penalties for non-compliance and may be terminable if the franchisee fails to comply with material provisions.
The terms and conditions of franchises vary materially from jurisdiction to jurisdiction. Each franchise generally contains provisions governing cable operations, service rates, franchise fees, system construction and maintenance obligations, system channel capacity, design and technical performance, customer service standards, and indemnification protections. A number of states subject cable television systems to the jurisdiction of centralized state governmental agencies, some of which impose regulation of a character similar to that of a public utility. Although LFAs have considerable discretion in establishing franchise terms, there are certain federal limitations. For example, LFAs cannot insist on franchise fees exceeding 5% of the system's gross revenues, cannot dictate the particular technology used by the system, and cannot specify video programming other than identifying broad categories of programming.
Federal law contains renewal procedures designed to protect incumbent franchisees against arbitrary denials of renewal. Even if a franchise is renewed, the franchise authority may seek to impose new and more onerous requirements such as significant upgrades in facilities and services or increased franchise fees as a condition of renewal. Similarly, if a franchise authority's consent is required for the purchase or sale of a cable system or franchise, such authority may attempt to impose more burdensome or onerous franchise requirements in connection with a request for consent. Historically, franchises have been renewed for cable operators that have provided satisfactory services and have complied with the terms of their franchises.
ITEM 2
ITEM 2 - PROPERTIES
In connection with its operation of cable television systems, the Company owns or leases real property for signal reception sites (antenna towers and headends), microwave facilities and business offices. The Company believes that its properties, both owned and leased, are in good condition and are suitable and adequate for the Company's business operations.
The Systems' distribution plant generally is attached to utility poles under pole rental agreements with local public utilities, although in some areas the plant is buried in underground ducts or trenches. The physical components of the Systems require maintenance and periodic upgrading to keep pace with technological advances.
ITEM 3
ITEM 3 - LEGAL PROCEEDINGS
Other than customary administrative proceedings incidental to the conduct of its business, the Company is not involved in any other pending legal proceedings. The Company does not believe that any of these administrative proceedings will have a material adverse effect on its financial condition or results of operations or cash flows.
ITEM 4
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the the fiscal year covered by this report to a vote of security holders.
PART II
ITEM 5
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
There is no established public trading market for any of the registrants' equity securities. All 1,000 outstanding shares of common stock of RACC are owned by the Partnership. RACC has not declared any cash dividends on such common stock in the last two fiscal years and has no present intention to pay cash dividends in the foreseeable future. The Partnership interests of the Partnership are held by sixteen holders.
Within the past year, the Registrants have not issued any securities without registration under the Securities Act.
ITEM 6
ITEM 6 - SELECTED FINANCIAL DATA
The selected consolidated financial data set forth on the following pages as of December 31, 1998 and 1997 and, for the years ended December 31, 1998, 1997 and 1996, have been derived from, and are qualified by reference to, the audited financial statements of the Company included herein. The selected consolidated financial data set forth on the following page as of December 31, 1995 and 1994, and for the four months ended December 31, 1995 and the eight months ended August 31, 1995, and for the year ended December 31, 1994 have been derived from the Company's audited financial statements not included herein. Because of the Recapitalization, the Company's results of operations for the four month period from September 1, 1995 to December 31, 1995 and for the year ended December 31, 1996, 1997 and 1998 are not comparable to results for prior periods. The Company's acquisitions of cable television systems during the year ended December 31, 1996 included in the selected consolidated financial data presented below, materially affect the comparability with data from previous periods. Recent federal legislation and related existing and pending FCC regulation applicable to cable television companies could have a material adverse impact on the Company's business in the future. The selected consolidated financial data set forth below should be read in conjunction with, and is qualified by reference to, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements of the Company (including accompanying notes) included thereto (amounts in thousands except Operating Data).
ITEM 7
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Special Note Regarding Forward-Looking Statements
Certain statements in this Form 10-K, including the sections entitled "Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). The words "believes," "expects," "intends," "strategy," "considers" or "anticipates" and similar expressions identify forward-looking statements.
Forward-looking statements include, but are not limited to, statements under the following headings: (i) "Business - Business Strategy" about the effect of consolidation of operations on Adjusted EBITDA, the intention to rebuild the bandwidth of the Company's Systems and the commitment to extend the Company's distribution systems; (ii) "Business - - Programming and Service Offerings" about the Company's plans to continue cost-reducing product switchouts and belief regarding continued access to cable programming at reasonable prices; (iii) "Business - Systems Operations" regarding the Company's belief that its management structure enhances the effectiveness of customer service efforts and assists in the maintenance of good relations among franchise authorities; (iv) "Business - Technology and Engineering" about the Company's plans to reduce the number of headends to lower costs and promote efficiency and the Company's intention to use digital compression technology; (v) "Business - Competition" about the materiality of the effect of certain competitors; (vi) "Business - Legislation and Regulation in the Cable Television Industry; about the Company's belief that the majority of its systems qualify for small system rate relief; (vii) "Management's Discussion and Analysis of Financial Conditions and Results of Operations - - Liquidity and Capital Resources" about the sufficiency of the expected cash flow of the Company; and (viii) "Management's Discussion and Analysis of Financial Conditions and Results of Operations - Year 2000" about the expected financial impact of the Year 2000 problem on the Company.
The Company does not undertake to update, revise or correct any of the forward-looking information. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following:
* Competition in the television programming industry, including competition from other companies providing programming via cable, DBS, telephone lines, SMATV, MMDS or LMDS. See "Business - Competition"; * The Company's substantial leverage and the risk that the Company may be unable to service or repurchase the Partnership's and RACC's debt. See "Management's Discussion and Analysis of Financial Conditions and Results of Operations - Liquidity and Capital Resources"; * Certain restrictions imposed by the terms of the Company's indebtedness, including the ability to incur additional indebtedness, incur liens, pay distributions or make other restricted payments, consummate asset sales, enter into certain transactions with affiliates, merge or consolidate with other persons or sell, assign, transfer, lease, convey or dispose of all or substantially al of the assets of the Company. see "Management's Discussion and Analysis of Financial Conditions and Results of Operations - Liquidity and Capital Resources;" * Increases in the costs of cable programming the Company provides to consumers in its Systems and the inability to have access to sufficient cable programming. See "Business - Programming and Service Offerings - Programming"; * The ongoing need for significant capital expenditures to expand the Company's cable Systems, conduct routine replacement of cable television plant and increase channel capacity of certain Systems. See "Business - Business Strategy - System Enhancement" and "Management's Discussion and Analysis of Financial Conditions and Results of Operations - Liquidity and Capital Resources." The inability of the Company to fund such capital expenditures could have a materially adverse impact on the Company; * The potential for the termination of franchises by local franchise authorities or renewal of such franchises on less favorable terms, either of which could have a materially adverse impact on the Company's results of operations; * The non-exclusivity of franchises which could permit other cable programming providers the opportunity to compete directly with the Company's Systems. See "Business - Competition - Other Cable Companies"; * Changes in or the inability to comply with government regulation in the cable television industry. See "Business - Legislation and Regulation in the Cable Television Industry"; * The Company's dependence on key personnel in executing the Company's plans, including Monroe M. Rifkin, Chairman of R & A, Kevin B. Allen, Vice Chairman and Chief Executive Officer of R & A and Jeffrey D. Bennis, President and Chief Operating Officer of R & A, the loss of any of whom could have a materially adverse impact on the Company; * Uncertainties regarding Year 2000 issues which could materially adversely impact the Company, including the failure to identify and correct all computer codes and embedded chips or otherwise obtain Year 2000 readiness or the failure of third parties with which the company transacts business to achieve Year 2000 readiness. See "Management's Discussion and Analysis of Financial Conditions and Results of Operations - Year 2000"; * The dependence upon distributions to the Partnership from the Partnership's subsidiaries. The Company derives a substantial portion of operating income from its subsidiaries which funds are necessary for the Company to meet its obligations; and * Potential conflicts of interest arising out of the relationship between the Company, RACC, and affiliates. R & A Management, LLC ("RML"), which is controlled by Monroe M. Rifkin through Mr. Rifkin's ownership of RML's managing member R & A, manages all aspects of the business and operations for he Company for a management fee. Certain decisions concerning the management of the Company may present conflicts of interest between the Company and RML. See "Certain Relationships and Related Transactions."
Where any such forward-looking statement includes a statement of the assumptions or bases underlying such forward-looking statement, the Company cautions that, while it believes such assumptions or bases to be reasonable and makes them in good faith, assumed facts or bases almost always vary from actual results, and the differences between assumed facts or bases and actual results can be material, depending upon the circumstances. Where, in any forward-looking statement, the Company, or its management expresses an expectation or belief as to the future results, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will result or be achieved or accomplished.
Results of Operations
1998 compared to 1997
Revenue increased 6.7%, or approximately $5.6 million, to $89.9 million for the year ended December 31, 1998 from $84.3 million for the year ended December 31, 1997. This increase resulted from approximately $8.6 million in growth in basic customers and increases in basic and tier rates, and approximately $1.2 million in total revenue as a result of the systems acquired in Manchester and Shelbyville, Tennessee (the "ACT V Acquisition") in April 1997 offset by approximately $4.2 million in total revenue decreases due to the January 31, 1998 sale of systems serving Bridgeport and Bad Axe, Michigan (the "Michigan Sale"). Basic customers decreased 4.3% to approximately 191,000 at December 31, 1998 from approximately 199,500 at December 31, 1997. This decrease was attributable to the approximate 11,200 customers related to the Michigan Sale, offset by an approximate 400 customer increase related to the December 31, 1998 swap of systems in Paris and Piney Flats, Tennessee for systems in Crossville and Lewisburg, Tennessee(the "Tennessee Swap") as well as growth in Georgia (3,400 or 5.9%). Average monthly revenue per customer increased 5.1% from $36.54 for the twelve months ended December 31, 1997 to $38.39 for 1998 primarily a result of acquisition timing and rate increases. Premium service units increased 7.8% to approximately 117,300 as of December 31, 1998, from approximately 108,700 as of December 31, 1997, as a result of the Michigan Sale (5,800) offset by increases in Georgia (7,700), Tennessee (3,400) and Illinois (3,300). The Company's premium penetration increased to 61.4% from 54.5% between 1998 and 1997.
Operating expense, which includes costs related to technical personnel, franchise fees and repairs and maintenance, decreased 6.0%, or approximately $800,000 to approximately $13.3 million for the twelve months ended December 31, 1998, and decreased as a percentage of revenue to 14.8% from 16.8%. Approximately $600,000 of the decrease related to the Michigan Sale along with small decreases in numerous expense categories due to tighter expense controls offset by an approximate $200,000 increase related to the operating expense of the acquired systems in the ACT V Acquisition.
Programming expense, which includes costs related to basic, tier and premium services, increased 14.9%, or approximately $2.3 million to approximately $18.0 million for the twelve months ended December 31, 1998 from approximately $15.7 million for the twelve months ended December 31, 1997, and increased as a percentage of revenue to 20.0% from 18.6%. Approximately $300,000 of the increase relates to the programming expenses of the acquired systems in the ACT V Acquisition, along with lower programmer co-op credits offset by an approximate $1.0 million decrease related to the Michigan Sale. The remainder of the increase is due to program vendor rate increases and the addition of programming in certain systems.
Selling, general and administrative expense, which includes expenses related to on-site office and customer-service personnel, customer billing and postage and marketing, increased 8.4%, or approximately $1.1 million to approximately $13.8 million for the twelve months ended December 31, 1998 from $12.7 million for the same period in 1997. As a percentage of revenue, selling, general and administrative expense increased to 15.3% for the twelve months ended December 31, 1998 from 15.1% in 1997. Approximately $200,000 of the increase related to the selling, general and administrative expense of the acquired systems in the ACT V Acquisition, offset by an approximate $500,000 decrease related to the Michigan Sale. The remainder of the increase related primarily to increased wages and benefits.
Depreciation and amortization expense of approximately $37.2 million for the twelve months ended December 31, 1998 increased approximately $1.4 million from the twelve months ended December 31, 1997. The increase in depreciation resulted primarily from increases of approximately $26.4 million in 1998 and approximately $28.0 million in 1997 in property, plant and equipment. The decreases in amortization expense resulted primarily from the amortization of franchise cost related to the ACT V Acquisition offset by the reduction in franchise cost related to the Michigan Sale. As a percentage of revenue, depreciation and amortization expenses decreased to 41.4% in 1998 from 45.8% in 1997.
Management fees, equal to 3.5% of gross revenue, of approximately $3.1 million in 1998 increased approximately $200,000 from the twelve months ended December 31, 1997 due to the increase in the Company's revenue as a result of rate increases and increased customers as well as the ACT V Acquisition.
The gain from the sale of assets of approximately $42.9 million is a result of the Michigan Sale ($6.0) and the Tennessee Swap ($36.9).
The loss on disposal of assets, primarily the write-off of replaced house drops and rebuilt trunk and distribution equipment decreased to approximately $3.4 million in 1998 from an approximate $7.8 million loss in 1997.
Interest expense during 1998 decreased approximately $100,000 from the twelve months ended December 31, 1997 and decreased as a percentage of revenue from 28.2% to 26.3%. Interest expense was based on an average debt balance of $227.0 million with an average interest rate of 10.6% and an average debt balance of $214.0 million with an average interest rate of 10.8% for 1998 and 1997, respectively. The debt decrease was primarily a result of the increased borrowings related to the ACT V Acquisition offset by the debt retirement related to the Michigan Sale as well as increased cash provided by operating activities.
The Partnership is a "pass-through" entity for income tax purposes. All income or loss flows through to the partners of the Partnership in accordance with the Partnership Agreement. The income tax benefit relates to deferred income taxes recorded as a result of the non-cash tax liability of the Company's corporate subsidiaries in conjunction with the application of Financial Accounting Standard No. 109 (FAS 109), "Accounting for Income Taxes." An income tax benefit of approximately $4.2 million was recorded in 1998 compared to an income tax benefit of approximately $5.3 million from the twelve months ended December 31, 1997.
As a result of the factors discussed above, the Company experienced Net Income of approximately $24.4 million in 1998, compared with an approximate $26.0 million loss in 1997.
Adjusted EBITDA, defined as income (loss) before interest expense, income taxes, depreciation and amortization, loss on disposal of assets, gain from the sale of assets and the non-cash provision for the management incentive plan, increased 7.8%, or approximately $3.1 million to $42.8 million in 1998 from $39.7 million for 1997. As a percent of revenue, Adjusted EBITDA increased to 47.6% in 1998 from 47.1% for 1997. Industry analysts generally consider Adjusted EBITDA to be an appropriate measure of the performance of multi-channel television operations. Adjusted EBITDA is not presented in accordance with generally accepted accounting principles and should not be considered an alternative to, or more meaningful than, operating income or operating cash flow as an indication of the Company's operating performance.
1997 compared to 1996
Revenue increased 18.2%, or $13.0 million, to $84.3 million for the year ended December 31, 1997 from $71.3 million for the year ended December 31, 1996. This increase resulted from the following: (a) approximately $5.8 million from growth in basic customers and increases in basic and tier rates, (b) approximately $2.3 million in total revenue as a result of the March 1, 1996 acquisition of cable systems serving Hickory Hill, Lebanon and McMinnville, Tennessee (the "Mid-Tennessee Acquisition"), (c) approximately $1.1 million in total revenue as a result of the April 1, 1996 acquisition of cable systems serving Fayetteville, Lawrenceburg and Pulaski, Tennessee (the "RCT Acquisition"), and (d) approximately $3.3 million in total revenue as a result of the April 1, 1997 acquisition of cable systems serving Manchester and Shelbyville, Tennessee (the "ACT V Acquisition"). Basic customers increased 7.7% to approximately 199,500 at December 31, 1997 from approximately 185,200 at December 31, 1996. This increase was attributable to the approximate 11,600 customers acquired in the ACT V Acquisition, as well as continued growth in Georgia (4,100 or 7.8%) offset by losses in Tennessee (800 or .8%) systems. Average monthly revenue per customer increased 7.1% from $34.13 for the year ended December 31, 1996 to $36.54 for 1997. Premium service units increased .6% to approximately 108,700 as of December 31, 1997, from approximately 108,100 as of December 31, 1996, as a result of the ACT V Acquisition ( 7,400) offset by decreases in all markets due to moving the Disney Channel from premium to tier. The Company's premium penetration decreased to 54.5% from 58.4% between 1997 and 1996 due to moving the Disney Channel from premium to tier in nearly all systems.
Operating expense, which includes costs related to technical personnel, franchise fees and repairs and maintenance, increased 36.5%, or approximately $3.8 million to approximately $14.1 million for the year ended December 31, 1997 from approximately $10.4 million in 1996, and increased as a percentage of revenue to 16.8% from 14.5%. Approximately $500,000, $200,000 and $600,000 of the increase relates to the operating expense of the acquired systems in the Mid-Tennessee Acquisition, RCT Acquisition, and ACT V Acquisition, respectively. Approximately $900,000 of the increase relates to higher salaries and benefits as a result of added technical personnel and annual wage increases and approximately $400,000 of the increase relates to higher franchise fees as a result of increased revenue.
Programming expense, which includes costs related to basic, tier and premium services, increased 25.1%, or approximately $3.7 million, to approximately $18.4 million for the year ended December 31, 1997 from approximately $14.7 million for the year ended December 31, 1996, and increased as a percentage of revenue to 21.9% from 20.7%. Approximately $500,000, $300,000 and $800,000 of the increase relates to the programming expenses of the acquired systems in the Mid-Tennessee Acquisition, RCT Acquisition, and ACT V Acquisition, respectively. The remainder of the increase is due to program vendor rate increases and the addition of programming in certain systems.
Selling, general and administrative expense, which includes expenses related to on-site office and customer-service personnel, customer billing and postage and marketing, decreased 7.3%, or approximately $800,000 to approximately $9.9 million for the year ended December 31, 1997 from $10.7 million for the same period in 1996. As a percentage of revenue, selling, general and administrative expense decreased to 11.8% for the year ended December 31, 1997 from 15.1% in 1996. The expense decrease was due to an approximate $1.9 million increase in programmer cooperative and marketing launch cost reimbursements, partially offset by an approximate $200,000 increase resulting from the increase in the provision for the management incentive plan which became effective January 1, 1996, an approximate $100,000 increase from increases in personnel and related benefits costs, an approximate $100,000 increase from higher customer billing costs, and approximately $300,000, $200,000 and $400,000 related to the selling, general and administrative expense of the acquired systems in the Mid-Tennessee Acquisition, RCT Acquisition and ACT V Acquisition, respectively.
Depreciation and amortization expense of approximately $38.6 million for the year ended December 31, 1997 increased approximately $3.3 million from the year ended December 31, 1996 . The increases in depreciation resulted primarily from increases of approximately $16.9 million in 1996 and approximately $28.0 million in 1997 in property, plant and equipment. The increases in amortization expense resulted primarily from the amortization of franchise cost related to the Mid-Tennessee Acquisition, RCT Acquisition and ACT V Acquisition, respectively. As a percentage of revenue, depreciation and amortization expenses decreased to 45.8% in 1997 from 49.5% in 1996.
Management fees, equal to 3.5% of gross revenue, of approximately $2.9 million in 1997 increased approximately $500,000 from the year ended December 31, 1996 due to the increase in the Company's revenue as a result of rate increases and increased customers as well as the Mid- Tennessee Acquisition, RCT Acquisition and ACT V Acquisition.
The loss on disposal of assets, primarily the write-off of replaced house drops and rebuilt trunk and distribution equipment, increased to approximately $7.8 million in 1997 from approximately $1.4 million in 1996.
Interest expense during 1997 increased approximately $2.2 million from the year ended December 31, 1996 and decreased as a percentage of revenue from 30.3% to 28.2%. Interest expense was based on an average debt balance of $220.5 million with an average interest rate of 10.8% and an average debt balance of $202.9 million with an average interest rate of 10.6% for 1997 and 1996, respectively. This increase was primarily a result of the increased borrowings related to the ACT V Acquisition.
The Partnership is a "pass-through" entity for income tax purposes. All income or loss flows through to the partners of the Partnership in accordance with the Partnership Agreement. An income tax benefit of approximately $5.3 million was recorded in 1997 compared to an income tax benefit of approximately $3.7 million from the year ended December 31, 1996. The income tax benefit relates to deferred income taxes recorded as a result of the non-cash tax liability of the Company's corporate subsidiaries in conjunction with the application of Financial Accounting Standard No. 109 (FAS 109), "Accounting for Income Taxes."
As a result of the factors discussed above, net loss increased 20.4%, or approximately $4.4 million in 1997 compared with 1996.
Adjusted EBITDA, defined as income (loss) before interest expense, income taxes, depreciation and amortization, loss on disposal of assets, non- recurring interest income (related to the escrowed notes proceeds) and the non-cash provision for the management incentive plan, increased 20%, or approximately $6.6 million to $39.7 million in 1997 from $33.1 million for 1996. As a percent of revenue, Adjusted EBITDA increased to 47.1% in 1997 from 46.4% for 1996. Industry analysts generally consider Adjusted EBITDA to be an appropriate measure of the performance of multi- channel television operations. Adjusted EBITDA is not presented in accordance with generally accepted accounting principles and should not be considered an alternative to, or more meaningful than, operating income or operating cash flow as an indication of the Company's operating performance.
Liquidity and Capital Resources
The Company has relied upon cash generated by operations, borrowings and equity contributions to fund capital expenditures and acquisitions, service its indebtedness and finance its working capital needs. During the comparable twelve month periods ended December 31, 1998 and 1997, net cash provided by operations (including changes in working capital) of the Company was approximately $17.3 million and $16.5 million, respectively.
From December 31, 1997 to December 31, 1998, the Company's available cash and cash equivalents increased from approximately $1.9 million to approximately $2.3 million. Customer accounts receivable increased approximately $300,000 while other receivables increased approximately $500,000, both primarily a result of the timing of receipts. Customer deposits and prepayments increased approximately $100,000 to approximately $1.7 million from year to year primarily a result of the timing of customer payments. Interest payable decreased approximately $100,000 to approximately $7.2 million for the same comparable periods due primarily to the effect of the timing of payments. Also, for the same comparable periods, deferred taxes payable decreased approximately $4.2 million to approximately $7.9 million as a result of differences in book and tax depreciation and amortization lives and methods. Notes payable decreased by $4.9 million from December 31, 1997 to December 31, 1998 due primarily to the borrowings related to the ACT V Acquisition offset by the debt retirement related to the proceeds from the Michigan Sale.
The Company has decreased its total consolidated debt to $224.6 million as of December 31, 1998 from $229.5 million at December 31, 1997. The Company has unused commitments under the Amended and Restated Credit Agreement of $30.0 million, all of which is available for general corporate and/or acquisition purposes. Access to the remaining commitments under the Credit Agreement for general corporate purposes or Permitted Acquisitions (as defined in the Amended and Restated Credit Agreement) is subject to the Company's compliance with all covenants in such facility and the Company's Total Funded Debt Ratio (defined as the ratio of funded indebtedness of the Company to annualized Adjusted EBITDA based on the most recent quarter) being below 5.50. As of December 31, 1998, the Company's Total Funded Debt Ratio was 4.65. Interest payments on the Notes and interest and principal payments under the Amended and Restated Credit Agreement represent significant liquidity requirements for the Company. The Amended and Restated Credit Agreement provides for two term loan facilities in a total amount of $65 million. Term Loan A in the original amount of $25 million was paid down to $21.6 million based upon a portion of the proceeds from the Michigan Sale, matures on March 31, 2003 and begins amortizing on March 31, 2000. Term Loan B in the amount of $40 million, matures March 31, 2004 and begins amortizing March 31, 2002. The Amended and Restated Credit Agreement also provides for an $80 million reducing revolving facility with a final maturity date of March 31, 2003. The revolving facility was subject to permanent annual commitment reductions commencing in 1997 with a remaining commitment as of December 31, 1998 of $65.0 million. Borrowings under the Amended and Restated Credit Agreement will bear interest at floating rates and will require interest payments on various dates depending upon the interest rate options selected by the Company.
In addition to its debt service obligations, the Company will require liquidity for capital expenditures and working capital needs. The cable television business requires substantial capital for construction, expansion and maintenance of plant and the Company has committed substantial capital resources to (i) expand its cable systems; (ii) conduct routine replacement of cable television plant; and (iii) increase the channel capacity of certain systems.
The Company expects that cash flow from operating activities and available borrowings will be sufficient to meet its debt service obligations, anticipated capital expenditure requirements and working capital needs for the next twelve months, as well as through the maturity date of the Notes.
The Amended and Restated Credit Agreement and the Indenture restrict, among other things, the Company's and the Subsidiary Guarantors' ability to incur additional indebtedness, incur liens, pay distributions or make certain other restricted payments, consummate certain asset sales, enter into certain transactions with affiliates, merge or consolidate with any other person or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the assets of the Company. The Amended and Restated Credit Agreement also requires the Company to maintain specified financial ratios and satisfy certain financial condition tests. The obligations under the Amended and Restated Credit Agreement are secured by (i) a pledge of all of the equity interest of the Company's subsidiaries and (ii) subject to certain exceptions, a perfected first priority security interest in all tangible and intangible assets.
Year 2000
As many computer software, hardware, and other equipment with embedded chips or processors (collectively, the Abusiness systems@) use only two digits to represent the year, they may be unable to process accurately certain data before, during or after the year 2000. As a result, business and governmental entities are at risk for possible miscalculations or systems failures causing disruptions in their business operations. This is commonly known as the Year 2000 issue.
During 1998, the Company began an enterprise-wide, comprehensive effort to assess and remediate Year 2000 issues in the following areas: (a) the Company's technology systems, including software and computer and peripheral hardware used in the Company's operations, (b) electronic data interchange systems, (c) non-information technology systems (embedded technology), including PBX and voice messaging systems, heating and air conditioning systems, alarm systems, predictive dialers, radio communication systems and other support role systems, and (d) Year 2000 compliance of entities or persons from which the Company retrieves or receives data or products (including states, counties and other vendors) and third parties which the Company has a material relationship. The Company undertook this action to ensure their computer systems and related software, facilities, and equipment, process and store information in the Year 2000 and thereafter. The Company's Year 2000 remediation efforts include an assessment of its critical systems, including customer service and billing systems, information systems, and product reception and distribution systems.
The Company has a Year 2000 Task Force (ATask Force@) and includes representatives from all business divisions. The Task Force is responsible for overseeing the remediation efforts and ensures that all- necessary action and resources are in place. The Task Force has implemented a six phase plan to identify and repair Year 2000 affected systems: (i) inventory systems to identify potentially date-sensitive systems, including third party-products; (ii) assess the systems for Year 2000 compliance and evaluate the actions necessary to bring it into compliance; (iii) remediation of the system by modifying, upgrading or replacing the system; (iv) testing the corrected systems; (v) deploy the corrected system; and (vi) monitor the corrected system.
Inventory assessment and remediation of the information systems is substantially complete. Significant progress has been made to complete the testing and deployment, which is scheduled for completion by June 30, 1999.
Inventory and assessment of the cable system facilities, which includes the customer service, and product reception and distribution systems, are substantially complete. Remediation, testing and deployment are collectively approximately 50% complete and are scheduled to be completed by September 30, 1999.
The Company is continuing its survey of the significant third-party vendors and suppliers whose systems, services or products that are important to the Company's operations. The Company has received information that critical systems, services and products supplied to the Company by third parties are Year 2000 compliant or are expected to be Year 2000 compliant before the year 2000. Third-party vendors and suppliers whose systems will not be compliant before the year 2000 have been replaced, will be scheduled to be replaced or a contingency plan will be developed to accommodate the vendor or supplier. Although the Company believes that its own internal systems will be Year 2000 compliant, no assurance can be given that the systems of the external sources of the Company's data, telephone and utility providers, customers and other third parties which the Company has a materiel relationship will be Year 2000 compliant. The Company will be continuing to contact these entities during 1999 to assess their state of Year 2000 readiness and to plan changes that may be necessary to prevent any Year 2000 impact on the Company's systems. Depending on the length of time the contingency plans remain in effect, they could have an adverse effect on the Company's business, operations and financial condition.
The Task Force will coordinate the development of contingency plans in the event the Company's plan to identify and repair Year 2000 affected systems is not completed by their scheduled completion dates. The Company expects to have solidified its contingency plans by no later than June 30, 1999.
The remediation and testing of the Company's business systems will cost an estimated $200,000. These costs are to be expensed in the period incurred and funded through cash flows from operations. Expenses to date have approximated $50,000. The financial impact is not expected to be material to the Company's financial position or results of operations.
The scheduled completion dates and costs associated with the various components of the Year 2000 compliance plan described above are estimated and are subject to change.
The Company believes that it has and will continue to devote the resources necessary to achieve Year 2000 readiness in a timely manner. However, there can be no assurance that the Company's internal systems, the systems of others on which the Company relies, or the systems of the Company's customers will be Year 2000 ready in a timely and appropriate manner or that the Company's contingency plans or the contingency plans of others on which the Company relies will mitigate the effects of the Year 2000 problem. Currently, the Company believes that the most reasonable likely worst case scenario would be its inability to receive and/or retransmit product to their customers and the failure of customer service and billing systems. While the Company does not expect this scenario to occur, if it did occur, it could result in the reduction of the Company's operations, despite the successful execution of the Company's business continuity and contingency plans, and accordingly, have an adverse effect on the Company's business, operations and financial condition.
The forgoing discussion under the heading "Year 2000" constitutes and is denominated as "year 2000 readiness disclosure" within the meaning of the Year 2000 Information and Readiness Disclosure Act.
ITEM 7A
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Page Rifkin Acquisition Partners, L.L.L.P. Rifkin Acquisition Partners, L.P. Report of Independent Accountants Consolidated Balance Sheet Consolidated Statement of Operations Consolidated Statement of Cash Flows Consolidated Statement of Partners' Capital (Deficit) Notes to Consolidated Financial Statements
Rifkin Acquisition Capital Corp. Report of Independent Accountants Balance Sheet Notes to Balance Sheet
	REPORT OF INDEPENDENT ACCOUNTANTS
March 19, 1999
To the Partners of Rifkin Acquisition Partners, L.L.L.P.
In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations, partners' capital (deficit) and cash flows present fairly, in all material respects, the financial position of Rifkin Acquisition Partners, L.L.L.P. and its subsidiaries (the "Company") at December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998 in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.
RIFKIN ACQUISITION PARTNERS, L.L.L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.	General Information and Summary of Significant Accounting Policies
General Information
Rifkin Acquisition Partners, L.L.L.P. ("the Partnership") was formed pursuant to the laws of the State of Colorado. The Partnership and its subsidiaries are hereinafter referred to on a consolidated basis as the "Company." The Company owns, operates, and develops cable television systems in Georgia, Tennessee, and Illinois. Rifkin Acquisition Management, L.P., an affiliate of Rifkin & Associates, Inc. (Note 7), is the general partner of the Partnership ("General Partner").
The Partnership operates under a limited liability limited partnership agreement (the "Partnership Agreement") which establishes contribution requirements, enumerates the rights and responsibilities of the partners and advisory committee, provides for allocations of income, losses and distributions, and defines certain items relating thereto. The Partnership Agreement provides that net income or loss, certain defined capital events, and cash distributions, all as defined in the Partnership Agreement, are generally allocated 99% to the limited partners and 1% to the general partner.
Basis of Presentation
The consolidated financial statements include the accounts of the following entities:
#	Rifkin Acquisition Partners, L.L.L.P. # Cable Equities of Colorado, Ltd. (CEC) # Cable Equities of Colorado Management Corp. (CEM) # Cable Equities, Inc. (CEI) # Rifkin Acquisition Capital Corp. (RACC)
The financial statements for 1997 and 1996 also included the following entities:
#	Rifkin/Tennessee, Ltd. (RTL) # FNI Management Corp. (FNI)
Effective January 1, 1998, both the RTL and FNI entities were dissolved and the assets were transferred to the Partnership.
All significant intercompany accounts and transactions have been eliminated.
Revenue and Programming
Customer fees are recorded as revenue in the period the service is provided. The cost to acquire the rights to the programming generally is recorded when the product is initially available to be viewed by the customer.
Advertising and Promotion Expenses
Advertising and promotion expenses are charged to income during the year in which they are incurred and were not significant for the periods shown.
Property, Plant and Equipment
Additions to property, plant and equipment are recorded at cost, which in the case of assets constructed, includes amounts for material, labor, overhead and interest, if applicable. Upon sale or retirement of an asset, the related costs and accumulated depreciation are removed from the accounts and any gain or loss is recognized. Capitalized interest was not significant for the periods shown.
1.	General Information and Summary of Significant Accounting Policies-- (continued)
Property, Plant and Equipment--(continued)
Depreciation expense is calculated using the straight-line method over the estimated useful lives of the assets as follows:
Buildings						27 - 30 years Cable television transmission and distribution systems and related equipment 3 - 15 years Vehicles and furniture and fixtures 3 - 5 years
Expenditures for maintenance and repairs are expensed as incurred.
Franchise Costs
Franchise costs are amortized using the straight-line method over the remaining lives of the franchises as of the date they were acquired, ranging from one to twenty years. The carrying value of franchise costs is assessed for recoverability by management based on an analysis of undiscounted future expected cash flows from the underlying operations of the Company. Management believes that there has been no impairment thereof as of December 31, 1998.
Other Intangible Assets
Certain loan costs have been deferred and are amortized to interest expense utilizing the straight-line method over the remaining term of the related debt. Use of the straight-line method approximates the results of the application of the interest method. The net amounts remaining at December 31, 1998 and 1997 were $6,176,690 and $7,166,450, respectively.
Cash and Cash Equivalents
All highly liquid debt instruments purchased with an original maturity of three months or less are considered to be cash equivalents.
Redeemable Partners' Interests
The Partnership Agreement provides that if a certain partner dies or becomes disabled, that partner (or his personal representative) shall have the option, exercisable by notice given to the partners at any time within 270 days after his death or disability (except that if that partner dies or becomes disabled prior to August 31, 2000, the option may not be exercised until August 31, 2000 and then by notice by that partner or his personal representative given to the partners within 270 days after August 31, 2000) to sell, and require the General Partner and certain trusts controlled by that partner to sell, and the Partnership to purchase, up to 50% of the partnership interests owned by any of such partners and certain current and former members of management of Rifkin & Associates, Inc. that requests to sell their interest, for a purchase price equal to the fair market value of those interests determined by appraisal in accordance with the Partnership Agreement. Accordingly, the current fair value of such partnership interests have been reclassified outside of partners' capital.
Use of Estimates
The preparation of the financial statements in conformity with generally accepted accounting principles 	requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
1.	General Information and Summary of Significant Accounting Policies-- (continued)
New accounting pronouncement
In April 1998, the Accounting Standards Executive Committee issued Statement of Position (SOP) 98-5 "Reporting on the Costs of Start-Up Activities," which requires the Partnership to expense all start up costs related to organizing a new business. This new standard also includes one-time activities related to opening a new facility, introduction of a new product or service, or conducting business with a new class of customer or in a new territory. This standard is effective for the Partnership's 1999 fiscal year. Management believes that SOP 98-5 will have no material effect on its financial position or the results of operations.
Reclassification of financial statement presentation
Certain reclassifications have been made to the 1997 and 1996 financial statements to conform with the 1998 financial statement presentation. Such reclassification had no effect on the net loss as previously stated.
2.	Subsequent Event
On February 12, 1999, the Company signed a letter of intent for the partners to sell all of their partnership interests to Charter Communications ("Charter"). The Company and Charter are expected to sign a purchase agreement and complete the sale during the third quarter of 1999. 	
3.	Acquisition of Cable Properties
1998 Acquisitions
At various times during the second half of 1998, the Company completed three separate acquisitions of cable operating assets. Two of the acquisitions serve communities in Gwinnett County, Georgia (the "Georgia Systems"). These acquisitions were accounted for using the purchase method of accounting. The third acquisition resulted from a trade of the Company's systems serving the communities of Paris and Piney Flats, Tennessee for the operating assets of another cable operator serving primarily the communities of Lewisburg and Crossville, Tennessee (the "Tennessee Trade"). The trade was for cable systems that are similar in size and was accounted for based on fair market value. Fair market value was established at $3,000 per customer relinquished, which was based on recent sales transactions of similar cable systems. The transaction included the payment of approximately $719,000, net, of additional cash (Note 4).
The combined purchase price was allocated based on estimated fair values from an independent appraisal to property, plant and equipment and franchise cost as follows (dollars in thousands):
3.	Acquisition of Cable Properties--(continued)
1998 Acquisitions--(continued)
The fair value of assets relinquished from the Tennessee Trade was treated as a noncash transaction on the Consolidated Statement of Cash Flows. The cash acquisition costs were funded by proceeds from the Company's reducing revolving loan with a financial institution.
The following combined pro forma information presents a summary of consolidated results of operations for the Company as if the Tennessee Trade acquisitions had occurred at the beginning of 1997, with pro forma adjustments to show the effect on depreciation and amortization for the acquired assets, management fees on additional revenues and interest expense on additional debt (dollars in thousands): Years Ended 		 (Unaudited)
12/31/98 12/31/97 Total revenues $89,921 $84,325 Net income (loss)	 19,447 	(29,631)
The pro forma financial information is not necessarily indicative of the operating results that would have occurred had the Tennessee Trade actually been acquired on January 1, 1997.
1997 Acquisitions
On April 1, 1997, the Company acquired the cable operating assets of two cable systems serving the Tennessee communities of Shelbyville and Manchester (the "Manchester Systems"), for an aggregate purchase price of approximately $19.7 million of which $495,000 was paid as escrow in 1996. The acquisition was accounted for using the purchase method of accounting, and was funded by proceeds from the Company's reducing revolving loan with a financial institution. No pro forma information giving the effect of the acquisitions is shown due to the results being immaterial.
1996 Acquisitions
On March 1, 1996, the Company acquired certain cable operating assets ("Mid-Tennessee Systems") from Mid-Tennessee CATV, L.P., and on April 1, 1996 acquired the cable operating assets ("RCT Systems") from Rifkin Cablevision of Tennessee, Ltd. Both Mid-Tennessee CATV, L.P. and Rifkin Cablevision of Tennessee, Ltd. were affiliates of the General Partner. The acquisition costs were funded by $15 million of additional partner contributions and the remainder from a portion of the proceeds received from the issuance of $125 million of 11 1/8% Senior Subordinated Notes due 2006 (see Note 6).
The acquisitions were recorded using the purchase method of accounting. The results of operations of the Mid-Tennessee Systems have been included in the consolidated financial statements since March 1, 1996, and the results of the RCT Systems have been included in the consolidated financial statements since April 1, 1996. The combined purchase price was allocated based on estimated fair values from an independent appraisal to property, plant and equipment and franchise cost as follows (dollars in thousands):			 		 Cash paid, net of acquired cash $71,582 Acquisition costs (appraisal, transfer fees, and direct costs) 215 Total acquisition cost $71,797
Allocation: Current assets $ 624 Current liabilities (969)
Property, plant and equipment 24,033 Franchise cost and other intangible assets 48,109 Total cost allocated $71,797
3.	Acquisition of Cable Properties--(continued)
1996 Acquisitions--(continued)
The following combined pro forma information presents a summary of consolidated results of operations for the Company as if the Mid- Tennessee Systems and the RCT Systems acquisitions had occurred at the beginning of 1996, with pro forma adjustments to show the effect on depreciation and amortization for the acquired assets, management fees on additional revenues and interest expense on additional debt (dollars in thousands):	 		 	Year Ended
(Unaudited) 12/31/96 Total revenues	 	$74,346 	 Net loss		(22,558)	
The pro forma financial information is not necessarily indicative of the operating results that would have occurred had the Mid-Tennessee Systems and the RCT Systems actually been acquired on January 1, 1996.
4.	Sale of Assets
On February 4, 1998, the Company sold all of its operating assets in the state of Michigan (the "Michigan Sale") to another cable operator for cash. In addition, on December 31, 1998, the Company traded certain cable systems in Tennessee (the "Tennessee Trade") for similar-sized cable systems (Note 3). Both sales resulted in a gain recognized by the Company as follows (dollars in thousands):
Michigan Tennessee Sale Trade Total Fair value of assets relinquished $ - $ 46,668 $ 46,668 Original cash proceeds 16,931 - 16,931 Adjustments for value of assets and liabilities assumed 120 (17) 103
Net proceeds 17,051 46,651 63,702 Net book value of assets sold 11,061 9,778 20,839
Net gain from sale $ 5,990 $ 36,873 $ 42,863
The Michigan Sale proceeds amount includes $500,000 that is currently being held in escrow. This amount and the fair value of assets relinquished, related to the Tennessee Trade, were both treated as noncash transactions on the Consolidated Statement of Cash Flows.
The cash proceeds from the Michigan Sale were used by the Company to reduce its revolving and term loans with a financial institution.
5.	Income Taxes
Although the Partnership is not a taxable entity, two corporations (the "subsidiaries") are included in the consolidated financial statements. These subsidiaries are required to pay taxes on their taxable income, if any.
The following represents a reconciliation of pre-tax losses as reported in accordance with generally accepted accounting principles and the losses attributable to the partners and included in their individual income tax returns:
5.	Income Taxes--(continued)
The Company accounts for income taxes under the liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. 		 As a result of a change in control in 1995 (Note 1), the book value of the Company's net assets was increased to reflect their fair market value. In connection with this revaluation, a deferred income tax liability in the amount of $22,801,000 was established to provide for future taxes payable on the revised valuation of the net assets. A deferred tax benefit of $4,196,000, $5,335,000 and $3,654,000 was recognized for the years ended December 31, 1998, 1997 and 1996, respectively, reducing the liability to $7,942,000.
Deferred tax assets (liabilities) were comprised of the following at December 31, 1998 and 1997: 									 12/31/98 12/31/97 Deferred tax assets resulting 	 from loss carryforwards	$ 11,458,000 	$ 9,499,000 	
Deferred tax liabilities resulting from depreciation and amortization (19,400,000) (21,637,000)
Net deferred tax liability $ (7,942,000) $(12,138,000)
As of December 31, 1998 and 1997, the subsidiaries have net operating loss carryforwards ("NOLs") for income tax purposes of $30,317,000 and $25,264,000, respectively, substantially all of which are limited. The NOLs will expire at various times between the years 2000 and 2013.
In 1998, one of the corporate entities was dissolved. The existing NOL's were used to offset taxable income down to $87,751, resulting in a current tax for 1998 of $18,075.
Under the Internal Revenue Code of 1986, as amended (the ACode@), the subsidiaries generally would be entitled to reduce their future federal income tax liabilities by carrying the unused NOLs forward for a period of 15 years to offset their future income taxes. The subsidiaries= ability to utilize any NOLs in future years may be restricted, however, in the event the subsidiaries undergo an Aownership change@ as defined in Section 382 of the Code. In the event of an ownership change, the amount of NOLs attributable to the period prior to the ownership change that may be used to offset taxable income in any year thereafter generally may not exceed the fair market value of the subsidiary immediately before the ownership change (subject to certain adjustments) multiplied by the applicable long-term, tax exempt rate published by the Internal Revenue Service for the date of the ownership change. Two of the subsidiaries underwent an ownership change on September 1, 1995 pursuant to Section 382 of the Code. As such, the NOLs of the subsidiaries are subject to limitation from that date forward. It is the opinion of management that the NOLs will be released from this limitation prior to their expiration dates and, as such, have not been limited in their calculation of deferred taxes.
The provision for income tax expense (benefit) differs from the amount which would be computed by applying the statutory federal income tax rate of 35% to pre-tax income before extraordinary loss as a result of the following: 	
6.	Notes Payable
Debt consisted of the following:	 December 31, December 31, 1998 1997
Senior Subordinated Notes		$ 125,000,000	$ 125,000,000 Tranche A Term Loan 21,575,000 25,000,000 Tranche B Term Loan 40,000,000 40,000,000 Reducing Revolving Loan 35,000,000 36,500,000 Senior Subordinated Debt 3,000,000 3,000,000
$ 224,575,000 $ 229,500,000
	 The Notes and loans are collateralized by substantially all of the assets of the Company.
On January 26, 1996, the Company and its wholly-owned subsidiary, RACC (the "Issuers"), co-issued $125,000,000 of 11 1/8% Senior Subordinated Notes (the "Notes") to institutional investors. These notes were subsequently exchanged on June 18, 1996 for publicly registered notes with identical terms. Interest on the Notes is payable semi-annually on January 15 and July 15 of each year. The Notes, which mature on January 15, 2006, can be redeemed in whole or in part, at the Issuers' option, at any time on or after January 15, 2001, at redeemable prices contained in the Notes plus accrued interest. In addition, at any time on or prior to January 15, 1999, the Issuers, at their option, may redeem up to 25% of the principle amount of the Notes issued to institutional investors of not less than $25,000,000. At December 31, 1998 and 1997, all of the Notes were outstanding (see also Note 10).
The Company has a $25,000,000 Tranche A term loan with a financial institution. This loan requires quarterly payments of $1,875,000 plus interest commencing on March 31, 2000. Any unpaid balance is due March 31, 2003. The agreement requires that what it defines as excess proceeds from the sale of a cable system be used to retire Tranche A term debt. As a result of the Michigan sale (Note 4), there was $3,425,000 of excess proceeds used to pay principal in 1998. The interest rate on the Tranche A term loan is either the bank's prime rate plus .25% to 1.75% or LIBOR plus 1.5% to 2.75%.
The specific rate is dependent upon the senior funded debt ratio which is recalculated quarterly. The weighted average effective interest rate at December 31, 1998 and 1997 was 7.59% and 8.24%, respectively.
In addition, the Company has a $40,000,000 Tranche B term loan, which requires principal payments of $2,000,000 on March 31, 2002, $18,000,000 on March 31, 2003, and $20,000,000 on March 31, 2004. The Tranche B term loan bears an interest rate of 9.75% and is payable quarterly.
The Company also has a reducing revolving loan providing for borrowing up to $20,000,000 at the Company's discretion, subject to certain restrictions, and an additional $60,000,000 available to finance acquisitions subject to certain restrictions. On March 4, 1998, the reducing revolving loan agreement was amended to revise the scheduled reduction in revolving commitments. The additional financing amounts available at December 31, 1998 and 1997 were $45,000,000 and $52,500,000, respectively. At December 31, 1998, the full $20,000,000 available had been borrowed, and $15,000,000 had been drawn against the $45,000,000 commitment. At December 31, 1997, the full $20,000,000 available had been borrowed, and $16,500,000 had been drawn against the $52,500,000 commitment. The amount available for borrowing will decrease annually during its term with changes over the four years following December 31, 1998 as follows: 1999 - $2,500,000 reduction per quarter, and 2000 through 2002 - $3,625,000 per quarter. Any unpaid balance is due on March 31, 2003. The revolving loan bears an interest rate of either the bank's prime rate plus .25% to 1.75% or LIBOR plus 1.5% to 2.75%. The specific rate is dependent upon the senior funded debt ratio which is recalculated quarterly. The weighted average effective interest rates at December 31, 1998 and 1997 was 8.08% and 8.29%, respectively. The reducing revolving loan includes a commitment fee of 1/2% per annum on the unborrowed balance. 		
Certain mandatory prepayments may also be required, commencing in fiscal 1997, on the Tranche A term loan, the Tranche B term loan, and the reducing revolving credit based on the Company's cash flow calculations, proceeds from the sale of a cable system or equity contributions. Based on the 1998 calculation and the Michigan sale, $3,425,000 of prepayments were required. Optional prepayments are allowed, subject to certain restrictions. The related loan agreement contains covenants limiting additional indebtedness, dispositions of assets, investments in securities, distribution to partners, management fees and capital expenditures. In addition, the Company must maintain certain financial levels and ratios. At December 31, 1998, the Company was in compliance with these covenants.
The Company also has $3,000,000 of senior subordinated debt payable to a Rifkin Partner. The debt has a scheduled maturity, interest rate and interest payment schedule identical to that of the Notes, as discussed above.
Based on the outstanding debt as of December 31, 1998, the minimum aggregate maturities for the five years following 1998 are none in 1999, $7,500,000 in 2000, $16,500,000 in 2001, $23,075,000 in 2002 and $29,500,000 in 2003.
7.	Related Party Transactions
The Company entered into a management agreement with Rifkin & Associates, Inc. (Rifkin). The management agreement provides that Rifkin will act as manager of the Company's CATV systems and be entitled to annual compensation of 3.5% of the Company's revenue. Effective September 1, 1998, Rifkin conveyed its CATV management business to R & A Management, LLC (RML). The result of this transaction included the conveyance of the Rifkin management agreement (Rifkin Agreement) to RML (RML Agreement). Expenses incurred pursuant to the Rifkin Agreement and the RML Agreement are disclosed in total on the Consolidated Statement of Operations.
The Company is associated with a company to purchase certain cable television programming at a discount. Rifkin acted as the agent and held the deposit funds required for the Company to participate.
7.	Related Party Transactions--(continued)
Effective September 1, 1998, Rifkin conveyed this contract and deposit amount to RML. The deposit amount recorded at December 31, 1998 and 1997 was $2,139,274 and $1,225,274, respectively. The Company subsequently received $1,225,274 of the December 31, 1998 balance.
The Company paid approximately $550,000 to a law firm in connection with the public offering in 1996. A partner of this law firm is a relative of one of the Company's partners.
8.	Commitments and Rental Expense
The Company leases certain real and personal property under noncancelable operating leases expiring through the year 2007. Future minimum lease payments under such noncancelable leases as of December 31, 1998 are: $316,091 in 1999; $249,179 in 2000; $225,768 in 2001; $222,669 in 2002; and $139,910 in 2003; and $344,153 thereafter, totaling $1,497,770.
Total rental expense and the amount included therein which pertains to cancelable pole rental agreements were as follows for the periods indicated: Total Cancelable Rental Pole Rental Period Expense Expense
Year Ended December 31, 1998	$1,592,080	$1,109,544 Year Ended December 31, 1997	$1,577,743	$1,061,722	 Year Ended December 31, 1996	$1,294,084	$874,778
9.	Compensation Plans and Retirement Plans
Equity Incentive Plan
In 1996, the Company implemented an Equity Incentive Plan (the "Plan") in which certain Rifkin & Associates' executive officers and key employees, and certain key employees of the Company are eligible to participate. Plan participants in the aggregate, have the right to receive (i) cash payments of up to 2.0% of the aggregate value of all partnership interests of the Company (the "Maximum Incentive Percentage"), based upon the achievement of certain annual Operating Cash Flow (as defined in the Plan) targets for the Company for each of the calendar years 1996 through 2000, and (ii) an additional cash payment equal to up to 0.5% of the aggregate value of all partnership interests of the Company (the "Additional Incentive Percentage"), based upon the achievement of certain cumulative Operating Cash Flow targets for the Company for the five-year period ended December 31, 2000. Subject to the achievement of such annual targets and the satisfaction of certain other criteria based on the Company's operating performance, up to 20% of the Maximum Incentive Percentage will vest in each such year; provided, that in certain events vesting may accelerate. Payments under the Plan are subject to certain restrictive covenants contained in the Notes.
No amounts are payable under the Plan except upon (i) the sale of substantially all of the assets or partnership interests of the Company or (ii) termination of a Plan participant's employment with Rifkin & Associates or the Company, as applicable, due to (a) the decision of the Advisory Committee to terminate such participant's employment due to disability, (b) the retirement of such participant with the Advisory Committee's approval or (c) the death of such Participant. The value of amounts payable pursuant to clause (i) above will be based upon the aggregate net proceeds received by the holders of all of the partnership interests in the Company, as determined by the Advisory Committee, and the amounts payable pursuant to clause (ii) above will be based upon the Enterprise Value determined at the time of such payment. For purposes of the Plan, Enterprise Value generally is defined as Operating Cash Flow for the immediately preceding calendar year times a specified multiple and adjusted based on the Company's working capital.
The amount expensed for the years ended December 31, 1998, 1997 and 1996 relating to this plan were $1,119,996, $859,992 and $660,000, respectively.
9.	Compensation Plans and Retirement Plans--(continued)
Retirement Benefits
The Company has a 401(k) plan for employees that have been employed by the Company for at least one year. Employees of the Company can contribute up to 15% of their salary, on a before-tax basis, with a maximum 1998 contribution of $10,000 (as set by the Internal Revenue Service). The Company matches participant contributions up to a maximum of 50% of the first 3% of a participant's salary contributed. All participant contributions and earnings are fully vested upon contribution and Company contributions and earnings vest 20% per year of employment with the Company, becoming fully vested after five years. The Company's matching contributions for the years ended December 31, 1998, 1997 and 1996 were $50,335, $72,707 and $42,636, respectively.
10.	Fair Value of Financial Instruments
The Company has a number of financial instruments, none of which are held for trading purposes. The following method and assumptions were used by the Company to estimate the fair values of financial instruments as disclosed herein:
Cash and Cash Equivalents, Customer Accounts Receivable, Other Receivables, Accounts Payable and Accrued Liabilities and Customer Deposits and Prepayments: The carrying value amount approximates fair value because of the short period to maturity.
Debt: The fair value of bank debt is estimated based on interest rates for the same or similar debt offered to the Company having the same or similar remaining maturities and collateral requirements. The fair value of public Senior Subordinated Notes is based on the market quoted trading value. The fair value of the Company's debt is estimated at $236,137,500 and is carried on the balance sheet at $224,575,000.
11.	Cable Reregulation
Congress enacted the Cable Television Consumer Protection and Competition Act of 1992 (the Cable Act) and has amended it at various times since.
The total effects of the present law are, at this time, still unknown. However, one provision of the present law further redefines a small cable system, and exempts these systems from rate regulation on the upper tiers of cable service. The Partnership is awaiting an FCC rulemaking implementing the present law to determine whether its systems qualify as small cable systems.
12.	Summarized Financial Information
CEM, CEI and CEC (collectively, the "Guarantors") are all wholly- owned subsidiaries of the Company and, together with RACC, constitute all of the Partnership's direct and indirect subsidiaries. As discussed in Note 1, RTL and FNI were dissolved on January 1, 1998 and the assets were transferred to the Company; however, prior thereto, RTL and FNI, as wholly-owned subsidiaries of the Company, were Guarantors. Each of the Guarantors provides a full, unconditional, joint and several guaranty of the obligations under the Notes discussed in Note 6. Separate financial statements of the Guarantors are not presented because management has determined that they would not be material to investors. The following tables present summarized financial information of the Guarantors on a combined basis as of December 31, 1998 and 1997 and for the years ended December 31, 1998, 1997 and 1996.
12.	Summarized Financial Information--(continued)
Balance Sheet 12/31/98 12/31/97
Cash $ 373,543 $ 780,368 Accounts and other receivables, net 3,125,830 3,012,571 Prepaid expenses 791,492 970,154 Property, plant and equipment net 48,614,536 66,509,120 Franchise costs and other intangible assets, net 56,965,148 103,293,631 Accounts payable and accrued liabilities 22,843,354 18,040,588 Other liabilities 980,536 1,122,404 Deferred taxes payable 7,942,000 12,138,000 Notes payable 140,050,373 167,200,500 Equity (deficit) (61,945,714) (23,935,648)
Statements of Operations Year ended Year ended Year ended 12/31/98 12/31/97 12/31/96
Total revenue		$ 29,845,826 	$ 47,523,592 	$ 42,845,044 	 Total costs and expenses (31,190,388) (53,049,962) (43,578,178) Interest expense (14,398,939) (17,868,497) (16,238,221) Income tax benefit 4,177,925 5,335,000 3,645,719
Net loss $(11,565,576) $ (18,059,867) $ (13,325,636)
13.	Quarterly Information (Unaudited)
The following interim financial information of the Company presents the 1998 and 1997 consolidated results of operations on a quarterly basis (in thousands):
Quarters Ended 1998 March 31(a) June 30 Sept. 30 Dec. 31(b) Revenue $22,006 $22,296 $22,335 $23,284 Operating income (loss) 6,285 511 (1,522) 38,630 Net income (loss) 1,437 (4,458) (5,907) 33,347
(a) First quarter includes a $5,900 gain from the sale of Michigan assets (Note 4). (b) Fourth quarter includes a $36,873 gain from the trade sale of certain Tennessee assets (Note 4).
Quarters Ended 1997 March 31 June 30 Sept. 30 Dec. 31 Revenue $19,337 $21,331 $21,458 $22,199 Operating loss (1,220) (2,818) (2,777) (798) Net loss (5,998) (6,890) (8,127) (5,029)
14.	Litigation
The Company could possibly be named as defendant in various actions and proceedings arising from the normal course of business. In all such cases, the Company will vigorously defend itself against the litigation and, where appropriate, will file counterclaims. Although the eventual outcome of potential lawsuits cannot be predicted, it is management's opinion that any such lawsuit will not result in liabilities that would have a material affect on the Company's financial position or results of operations.
	REPORT OF INDEPENDENT ACCOUNTANTS
March 19, 1999
To the Stockholder of Rifkin Acquisition Capital Corp.
In our opinion, the accompanying balance sheet presents fairly, in all material respects, the financial position of Rifkin Acquisition Capital Corp. ("RACC") at December 31, 1998 and 1997 in conformity with generally accepted accounting principles. This balance sheet is the responsibility of RACC's management; our responsibility is to express an opinion on this balance sheet based on our audit. We conducted our audit of this balance sheet in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the balance sheet is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the balance sheet, assessing the accounting principles used and significant estimates made by management, and evaluating the overall balance sheet presentation. We believe that our audit provides a reasonable basis for the opinion expressed above.
	RIFKIN ACQUISITION CAPITAL CORP. 	 	BALANCE SHEET
	 	 12/31/98 12/31/97 Assets Cash $ 1,000 $ 1,000 Total assets $ 1,000 $ 1,000
Stockholder's Equity Stockholder's Equity						 Common Stock; $1.00 par value; 10,000 shares authorized, 1000 shares issued and outstanding $ 1,000 $ 1,000 Total stockholder's equity		$ 1,000 	$ 1,000
The accompanying notes are an integral part of the balance sheet.
RIFKIN ACQUISITION CAPITAL CORP. NOTES TO BALANCE SHEET
1.	Organization and Summary of Significant Accounting Policies
Organization
Rifkin Acquisition Capital Corp. ("RACC"), a Colorado Corporation, was formed on January 24, 1996, as a wholly-owned subsidiary of Rifkin Acquisition Partners, L.L.L.P. (the "Partnership") for the purpose of co-issuing, with the Partnership, $125.0 million in Senior Subordinated Notes (the "Notes") which were used to repay advances under the Partnership's term debt and to fund the Partnership's acquisitions of certain cable television systems. Upon closing of the Notes issuance on January 26, 1996, none of the Notes were issued by RACC; accordingly, no debt is reflected on its balance sheet. In addition, RACC does not, and is not expected to have, any other operations; as such, no statements of operations, stockholder's equity or cash flows are presented.
ITEM 9
ITEM 9 - CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no changes and there were no disagreements with the Accountants.
PART III
ITEM 10
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
MANAGEMENT
General Partner
The General Partner of the Partnership is Rifkin Acquisition Management, L.P., a Colorado limited partnership that is controlled by Monroe M. Rifkin. As General Partner, it has responsibility for the overall management of the business and operations of the Company. The Company entered into a Management Agreement with Rifkin & Associates and subsequently assigned to R & A Management, LLC ("RML"). R & A is the managing member of RML. With RML's structure as a Limited Liability Company, RML has no executive officers. See "Certain Relationships and Related Transactions."
R & A Management, LLC
The Company has a Management Agreement with RML with respect to the day- today management and operation of the Company's cable television systems. The principal offices of RML are located at 360 South Monroe Street, Suite 600, Denver, Colorado, 80209, and the telephone number is (303) 333-1215.
Advisory Committee
The Advisory Committee of the Partnership consults with and advises the General Partner with respect to the business and affairs of the Company and any subsidiary thereof. Without the prior approval of the Advisory Committee, the General Partner cannot amend the Company's budget in any material respect, materially increase capital expenditures in any fiscal year, amend or waive any provision of the Management Agreement, or adopt or amend the management incentive plan provided for by the Partnership Agreement. The Advisory Committee consists of designees of the General Partner and the Partnership's Limited Partners, including one designee of the General Partner, three designees of VS&A Communications Partners II, L.P., two designees of Greenwich Street (RAP) Partners I, L.P., one designee of IEP Holdings I LLC and one designee of PaineWebber Capital, Inc. Members of the Advisory Committee are not compensated for their services, but are reimbursed for all reasonable out-of-pocket expenses incurred by them in performing services relating to the Company. The members of the Advisory Committee are Monroe M. Rifkin, Jeffrey T. Stevenson, S. Gerard Benford, John S. Suhler, Avy Stein, Greg Flynn, David H. Morse, Dhananjay Pai and Daniel Gill. The Advisory Committee has adopted a policy of having Mr. Rifkin abstain from any Advisory Committee votes that may present a conflict of interest between Mr. Rifkin and the Company. In addition, the Partnership Agreement requires that Mr. Rifkin first present to the Partnership any acquisition opportunities of cable television systems that are similar and reasonably contiguous to the Company's Systems.
RACC
RACC does not have any operations, and accordingly does not have any management personnel other than its corporate officers.
Director and Executive Officers of Rifkin & Associates ; Director and Executive Officers of RACC:
Advisory Committee of the Partnership
Monroe M. Rifkin is the sole director of Rifkin & Associates and RACC. The executive officers of Rifkin & Associates and RACC and the members of the Advisory Committee are listed on the following page.
Rifkin & Associates
Name Age Position Monroe M. Rifkin	68	Chairman Kevin B. Allen 37 Vice Chairman and Chief Executive Officer Jeffrey D. Bennis	40	President and Chief Operating Officer Stephen E. Hattrup	46	Senior Vice President - Operations Dale D. Wagner 49 Senior Vice President - Finance and Administration Paul A. Bambei 44 Vice President - Operations Lee A. Clayton 41 Vice President - Marketing Suzanne M. Cyman	39	Vice President - Programming/ Strategic Planning Bruce A. Rifkin 41 Vice President -Operations and Advertising Sales Irene D. McPhail	44	Vice President - Operations Peter N. Smith 49 Senior Vice President -Engineering and Advanced Technologies
RACC Name Age Position Monroe M. Rifkin	68	Director, President and Treasurer Jeffrey D. Bennis	40	Vice President Stephen E. Hattrup 46 Vice President Dale D. Wagner		49	Vice President, Secretary, 				and Assistant Treasurer
Advisory Committee Name Age S. Gerard Benford	60 Avy H. Stein 44 David H. Morse 37 Dhananjay M. Pai	36 Monroe M. Rifkin	68 Gregory P. Flynn	42 Jeffrey T. Stevenson	38 John S. Suhler 53 Daniel M. Gill 34
Executive Officers
Monroe M. Rifkin is a cable television industry executive with over thirty years of experience. He founded Rifkin & Associates ("R & A") in 1982 and has served as its Director and Chairman since May 1998. Prior to that, Mr. Rifkin served as R & A's Chairman and Chief Executive Officer from 1982 to May 1998. He was formerly with American Television and Communications Corporation ("ATC"), serving as its Chief Executive Officer from 1968 to 1982 and as its Chairman from 1974 to 1982. Mr. Rifkin served as a board member of the National Cable Television Association from 1968 to 1984 and as its Chairman from 1983 to 1984. He holds a B.A. in Finance from New York University.
Kevin B. Allen has been Vice Chairman and Chief Executive Officer of R & A since May 1998 where he is responsible for overseeing all business activities of R & A while continung to have direct responsibility for all corporate development and acquisition activities. Mr. Allen served as President of R&A Enterprises, the development arm of R & A, from August 1996 to May 1998 when he was charged with the duty of acquiring new systems for R&A and its affiliated companies. Previously, Mr. Allen served as Vice President of BT Securities Corporation since 1992 where he was responsible for developing and maintaining a range of corporate finance relationships with clients around the world. He holds a B.S. in Aerospace Engineering from the University of Colorado, a Master's degree in Mechanical Engineering from the Massachusetts Institute of Technology and an M.B.A. from the Wharton School of Business at the University of Pennsylvania.
Jeffrey D. Bennis has been President and Chief Operating Officer of R & A since April 1994. He is responsible for overall management of R & A's operating cable television systems and is involved in the development of policy and strategic direction. Mr. Bennis served as Vice President - Marketing/Programming of R & A from July 1991 to March 1994. Mr. Bennis was elected to the boards of directors of the National Cable Television Association and C-SPAN in May 1995. Mr. Bennis executed marketing plans with Clairol, Inc., a subsidiary of Bristol-Myers Squibb Company from June 1980 to June 1991, where he most recently served as Director of Marketing for the Hair Care and Skin Care Divisions. He holds an undergraduate degree from the Pennsylvania State University and an M.B.A. from the University of Connecticut. Jeffrey D. Bennis is the son-in-law of Monroe M. Rifkin.
Stephen E. Hattrup has been the Senior Vice President - Operations for R & A since April 1994. He is responsible for overseeing all operations of R & A systems. Additionally, he is responsible for evaluating the integrity of potential system acquisitions. Mr. Hattrup served as Vice President - Operations from September 1988 to March 1994. Previously, he served as Vice President and Treasurer of ATC. Mr. Hattrup holds an undergraduate degree from Wichita State University and a M.S. in Finance from the University of Kansas.
Dale D. Wagner, Senior Vice President - Finance and Administration of R & A since April 1994, has over twenty-five years of experience in arranging and maintaining financing for cable systems. He is responsible for R & A's overall financial and accounting activities. Mr. Wagner served as Vice President - Finance from January 1986 to March 1994. Prior to joining R & A, Mr. Wagner was employed at ATC from 1981 to 1986 in various positions including Vice President - Finance and Administration for ATC's National Division. Prior to joining ATC, Mr. Wagner was employed by Cable Com-General, Inc. in various capacities, including Vice President - Finance for that company's cable television division. Mr. Wagner holds a degree in Accounting from Wichita State University.
Paul A. Bambei has served as Vice President - Operations of R & A since January 1987. He is responsible for system operations for all R & A properties in Georgia, Tennessee, Michigan, Illinois, Indiana, Missouri and New Mexico. He also has served as Vice President - Marketing of R & A from March 1984 until December 1986. Prior to joining R & A, Mr. Bambei was employed by ATC from 1974 to 1984 in various capacities in marketing and operations. He holds a degree in communications from Southeast Missouri State University.
Lee A. Clayton has served as Vice President of Marketing since October 1997. Her responsibilities include evaluating product offerings and prices, as well as overseeing acquisition, retention and communication efforts. Previously, Ms. Clayton was a partner at Bortz & Company, where she was employed from mid-1988 and where she founded Competitive Strategies Group which designed competitive plans for major cable MSO's. Ms. Clayton holds a degree in Economics from Trinity College.
Suzanne M. Cyman has served as R&A's Vice President of Programming/Strategic Development since July 1997. She is responsible for negotiating all programming contracts for R & A systems, as well as serving on special assignments as needed in domestic and international cable systems. She served as the Vice President of Marketing from July 1994 to July 1997. Previously, she was Vice President at Vista Communications and Fanch Communications beginning in 1988. She holds an undergraduate degree in Public Affairs Management with an emphasis in Economics from Michigan State University.
Bruce A. Rifkin is Vice President-Operations and Advertising Sales, a position he has held since January 1994. Mr. Rifkin joined R & A in 1988 as Director-Advertising Sales. Prior to joining R & A, Mr. Rifkin was employed in commercial real estate management and development. Bruce A. Rifkin is a son of Monroe M. Rifkin.
Peter N. Smith has served as Vice President - Engineering/New Business Development of R & A since March 1984. Mr. Smith is responsible for the construction of several of the largest cable television systems in the United States. Mr. Smith was employed by ATC from 1973 to 1984 in various engineering capacities including Vice President - Engineering of the National Division. He holds a degree in Electrical Engineering from Franklin University.
Irene D. McPhail has served as Vice President - Operations since April 1998, overseeing R & A's Miami Beach system, and has nearly twenty years of cable television management experience. Prior to joining R & A, from 1997 to 1998, Ms. McPhail was the owner and principal of Re-Source, LLC, a management consulting firm specializing in the cable television and telecommunications industry. Ms. McPhail was employed by Nynex Video Service Operations Company from 1995 to 1998, where she led the development of business, organizational and marketing strategies for cable television systems in two major metropolitan cities. Prior to that she was employed by Cablevision Systems from 1979 to 1995. Some of the positions she held while at Cablevision Systems include General Manager of some of Cablevision's largest systems, including those in New York City, Connecticut and Chicago. Ms. McPhail holds a degree in Communication Arts from the New York Institute of Technology.
Advisory Committee
S. Gerard Benford has served as Executive Vice President of VS&A Communications Partners, L.P. since 1990. Since November 1994, Mr. Benford has also been Executive Vice President of VS&A Communications Partners II, L.P. and General Partner of VS&A Equities II, L.P. Mr. Benford has been Vice President of VS&A RAP, Inc. since August 1995.
Avy H. Stein has been employed by Willis Stein & Partners, L.L.C. as a Managing Director since 1995. Prior to joining Willis Stein & Partners, L.L.C., Mr. Stein was, from 1989 to 1995 employed by Continental Illinois Venture Corporation as its Managing Director.
David H. Morse has been employed by Equity Partners, L.P., I, the parent organization of IEP Holdings I LLC, or its predecessors and their affiliates since 1993 and currently serves as Partner responsible for originating, structuring and managing equity and debt investments. From August 1989 to February 1993, Mr. Morse worked in the Corporate Finance Group of General Electric Capital Corporation most recently as a Vice President. From 1984 through 1987, Mr. Morse worked at Chemical Bank in New York City most recently as Assistant Treasurer. Mr. Morse also serves as a director of Reid Plastics, Inc.
Dhananjay M. Pai is President of PaineWebber Capital Inc., which is a principal investment affiliate of PaineWebber Incorporated. Mr. Pai is also a First Vice President of PaineWebber Incorporated. Before joining PaineWebber in April 1990, Mr. Pai was a Vice President in the Mergers and Acquisitions Department at Drexel Burnham Lambert, Inc.
Gregory P. Flynn has been employed by Lexington Equity Partners II LLC since January 1997 as its Managing Partner. Prior to joining Lexington Equity Partners II LLC, Mr. Flynn was a Managing Director for Internationale Nederlanden (U.S.) Management Co., Inc. from 1994 through 1996. In addition, Mr. Flynn served as a Managing Director, from 1989 to 1994, for Internationale Nederlanden (U.S) Capital Corporation.
Jeffrey T. Stevenson has been the President of VS&A Communications Partners, L.P. since 1989. Since November 1994 he has served as President of VS&A Communications Partners II, L.P. and General Partner of VS&A Equities II, L.P. Mr. Stevenson has been President of VS&A RAP, Inc. since August 1995.
John S. Suhler has been the President and Co-Chief Executive Officer of Veronis, Suhler & Associates Inc. since October 1981. He has served as a General Partner of VS&A Equities, L.P. since March 1987. VS&A Equities, L.P. is the general partner of VS&A Communications, L.P. Mr. Suhler is also a founding General Partner of VS&A Equities II, L.P., a position he has held since November 1994. VS&A Equities II, L.P. is the general partner of VS&A Communications Partners II, L.P.
Daniel M. Gill has been employed by Willis Stein & Partners, L.L.C. as a Managing Director since 1995. Prior to joining Willis Stein & Partners, L.L.C., Mr. Stein was, from 1990 to 1995 employed by Continental Illinois Venture Corporation as its Managing Director.
ITEM 11
ITEM 11 - EXECUTIVE COMPENSATION
General. No employee of the Partnership is an executive officer of the Company. The executive officers of RACC, in their capacity as such, do not serve as executive officers of the Partnership or any of the Guarantors. Services of the executive officers and other employees of R & A and RML are provided to the Company, and the Company pays R & A a fee pursuant to the Management Agreement for such services. The executive officers and other employees of R & A and RML and/or RACC who provide services to the Company are compensated solely in their capacity as executive officers of R & A and therefore receive no compensation from the Company except as provided by the Equity Incentive Plan described below. R & A engages in certain management services for other affiliates of Monroe M. Rifkin. No portion of the management fee paid by the Company is allocated to specific employees for the services performed by R & A for the Company. The General Partner of the Partnership receives no compensation for its services to the Company in such capacity. See "Certain Relationships and Related Transactions--Management Agreement with R & A and R & A Management , LLC."
Equity Incentive Plan. In 1996, the Company implemented an Equity Incentive Plan (the "Plan") in which certain R & A executive officers and key employees, and certain key employees of the Company, are eligible to participate. Plan participants in the aggregate, have the right to receive (i) cash payments of up to 2.0% of the aggregate value of all partnership interests of the Company (the "Maximum Incentive Percentage"), based upon the achievement of certain annual Operating Cash Flow (as defined in the Plan) targets for the Company for each of the calendar years 1996 through 2000, and (ii) an additional cash payment equal to up to 0.5% of the aggregate value of all partnership interests of the Company (the "Additional Incentive Percentage"), based upon the achievement of certain cumulative Operating Cash Flow targets for the Company for the five-year period ended December 31, 2000. Subject to the achievement of such annual targets and the satisfaction of certain other criteria based on the Company's operating performance, up to 20% of the Maximum Incentive Percentage will vest in each such year, provided, that in certain events vesting may accelerate. Payments under the Plan are subject to certain restrictive covenants contained in the Notes.
No amounts are payable under the Plan except upon (i) the sale of substantially all of the assets or partnership interests of the Company or (ii) termination of a Plan participant's employment with R & A or the Company, as applicable, due to (a) the decision of the Advisory Committee to terminate such participant's employment due to disability, (b) the retirement of such participant with the Advisory Committee's approval or (c) the death of such Participant. The value of amounts payable pursuant to clause (i) above will be based upon the aggregate net proceeds received by the holders of all of the partnership interests in the Company, as determined by the Advisory Committee, and the amounts payable pursuant to clause (ii) above will be based upon the Enterprise Value determined at the time of such payment. For purposes of the Plan, Enterprise Value generally is defined as Operating Cash Flow for the immediately preceding calendar year times a specified multiple and adjusted based on the Company's working capital.
The provision relating to the Plan for the years ended December 31, 1998 and 1997 was $1,119,996 and $859,992, respectively.
Retirement Benefits. During 1996, a Company-sponsored 401(k) plan was implemented for its employees that have been employed by the Company for at least one year. Employees of the Company can contribute up to 15% of their salary, on a before-tax basis, with a maximum 1998 contribution of $10,000 (as set by the Internal Revenue Service). The Company matches participant contributions up to a maximum of 50% of the first 3% of a participant's salary contributed. All participant contributions and earnings are fully vested upon contribution and Company contributions and earnings vest 20% per year of employment with the Company, becoming fully vested after five years. The Company's matching contributions for the years ended December 31, 1998 and 1997 were $50,335 and $72,707, respectively.
ITEM 12
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Partnership
In February 1999, the Partnership announced the planned acquisition by Charter Communictions ("Charter") of all outstanding partnership interests in the Partnership and InterLink Communications Partners, LLLP ("InterLink") and the assumption of the outstanding debt of InterLink and the Partnership. The parties expect to finalize definitive agreements for the transactions by April 7, 1999 and expect to close the transactions during the third quarter of 1999.
The following table sets forth certain information, as of December 31, 1998, concerning the beneficial ownership of partnership interests in the Partnership owned by each person known by the Company to own beneficially more than a five percent interest and by the executive officers of R & A as a group.
Name and Addressof Beneficial Owners	Percentage (1)
VS&A Communications Partners II, L.P	28.7(2) 350 Park Avenue New York, NY 10022
Greenwich Street (RAP) Partners I, L.P	27.5(3) 388 Greenwich Street New York, NY 10003
ING Equity Partners II, L.P. 27.5(4) 520 Madison Avenue, 33rd Floor New York, NY 10022
Willis Stein & Partners 27.5(5) 227 West Monroe Street, Suite 4300 Chicago, IL 60606
ING Equity Partners, L.P. I. 22.0(6) 520 Madison Avenue, 33rd Floor New York, NY 10022
PaineWebber Capital, Inc 5.5(7) 1285 Avenue of the Americas New York, NY 10019
PW Partners 1995, L.P. 5.5(8) 1285 Avenue of the Americas New York, NY 10019
Monroe M. Rifkin 35.5(9) 360 S. Monroe Street Denver, CO 80209
Other executive officers of R & A as a group (5 persons) 2.4
(1)	Pursuant to Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended, a person or entity is deemed to have beneficial ownership of securities if such person or entity has, directly or indirectly, through any contract or other arrangement, the power to vote such securities or investment power including the power to dispose or direct the disposition of such securities. The percentage interests set forth in this table include the percentage ownership each person or entity is deemed to beneficially own as determined under Rule 13d-3, including the percentage interest over which voting or dispositive power is shared with another person or entity. The disclosure requirements of Rule 13d-3, in certain instances, will result in disclosure that indicates that more than one person or entity beneficially owns such percentage interest because either voting or dispositive power is shared.
(2)	Includes a 0.4% interest held by VS&A RAP, Inc., a wholly-owned subsidiary of VS&A Communications Partners II, L.P.
(3)	Greenwich Street (RAP) Partners I, L.P. ("Greenwich") beneficially owns such partnership interest directly. In 1998, InterLink Communications Partners, LLLP ("InterLink") acquired ownership of all of the limited partnership interests of Greenwich (and indirect ownership of the general partnership interest in Greewich, through a wholly-owned limited liability company) and Greenwich is no longer an affiliate of Greenwich Street Capital Partners, Inc.
(4)	Represents a 27.5% limited partnership interest directly held by Greenwich (the "Greenwich Interest"). ING Equity Partners II, L.P. ("ING Equity"), through ING Media Partners II, L.P. and ING Media C Corp., two entities controlled by ING Equity, is deemed to beneficially own the Greenwich Interest by virtue of its ownership interest and voting power in InterLink , which directly holds all of the limited partnership interests in Greenwich and through a wholly- owned limited liability company, indirectly holds the general partnership interest in Greenwich. The consent of the Advisory Committee of Interlink is needed in order to dispose of the Greenwich interest and ING Equity has the power to appoint two of the five members of the Advisory Committee. See footnote 1 for an explanation of the definition of beneficial ownership under Rule 13d-3. ING Equity Partners II, L.P. is an affiliate of ING Equity Partners L.P. I.
(5)	Represents the 27.5% Greenwich Interest. Willis Stein & Partners ("WS"), through WS InterLink Corp., an entity controlled by WS, is deemed to beneficially own the Greenwich Interest by virtue of its ownership interest and voting power in InterLink, which directly holds all of the limited partnership interests in Greenwich and, through a wholly-owned limited liability company, indirectly holds the general partnership interest in Greenwich. The consent of the Advisory Committee of Interlink is needed in order to dispose of the Greenwich Interest and WS has the power to appoint two of the five members of the Advisory Committee. See footnote 1 for an explanation of the definition of beneficial ownership under Rule 13d-3.
(6)	Such limited partnership interest is held directly by IEP Holdings I LLC, which is controlled by ING Equity Partners L.P. I. ING Equity Partners L.P. I is an affiliate of ING Equity Partners II, L.P.
(7)	Paine Webber Capital, Inc. is an affiliate of PW Partners 1995 L.P.
(8)	PW Partners 1995 is an affiliate of Paine Webber Capital, Inc.
(9)	Includes a 7.0% limited partnership interest held by entities controlled by Mr. Rifkin and the Rifkin Trusts. Mr. Rifkin is a co- trustee of such trusts and exercises shared voting power with respect to the interest held therein. Also includes a 1.0% general partnership interest held by the General Partner. The beneficial ownership of such interest is attributed to Mr. Rifkin by virtue of his ownership of 80% of the voting stock of the general partner of the General Partner. Finally, includes the 27.5% Greenwich Interest. Mr. Rifkin is deemed to beneficially own the Greenwich Interest by virtue of his ownership interest and voting power in InterLink, which directly holds all of the limited partnership interests in Greenwich and , through a wholly-owned limited liability company, indirectly holds the general partnership interest in Greenwich. See footnote 1 for an explanation of the definition of beneficial ownership under Rule 13d-3.
RACC
All issued and outstanding shares of RACC's Common Stock, par value $1.00 per share, are directly owned by the Partnership. Consequently, none of the executive officers of RACC own any equity interests therein.
ITEM 13
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Management Agreement With R & A and R & A Management, LLC
R & A managed the Company's cable systems pursuant to the Management Agreement among the Company and Cable Equities of Colorado, Ltd. (collectively, the "Owners") and R & A, as manager. R & A conveyed the management agreement to RML in September 1998, and is the managing member of RML. Monroe M. Rifkin, a beneficial owner of more than 5% of the partnership interests in the Partnership and a member of the Partnership's Advisory Committee, controls RML as the sole director and shareholder of R & A, RML's managing member. RML serves as the central manager for the Owners and provides, among other services, operational management direction; accounting; monthly revenue collection and bill payment; programming negotiation and related services; marketing and public relations assistance; engineering assistance; and strategic planning. Under the terms of the Management Agreement, the Company pays an annual management fee to RML equal to 3.5% of the Company's gross revenues and reimburses certain costs. The Company has established a $1 million escrow account for the payment of any management fees to RML in the event that payment of management fees would otherwise be prohibited by the Amended and Restated Credit Agreement or any other loan agreement of the Company or any subsidiary. The aggregate management fees paid by the Company to R & A and RML for the years ended December 31, 1998 and 1997 were $3.1 million and $3.0 million, respectively. Neither RML nor any of its affiliated entities may compete with the Company in offering cable television or competing services in any geographic area in which the Company holds a cable television franchise or operates a cable television system.
The Management Agreement will continue in effect with respect to each cable television system owned by the Company for the duration of the Company's cable television franchise for that system and any extension or renewal of such franchise, unless earlier terminated. The Management Agreement may be terminated by the Owners if the General Partner is removed pursuant to the Partnership Agreement as a result of Mr. Rifkin's death or disability or his failure to serve as Chairman or exercise active control over day-to-day operations of the General Partner or the Company, provided, however, that the Management Agreement may not be terminated prior to September 1, 2000 if such removal is the result of Mr. Rifkin's death or disability. If the Management Agreement is terminated other than as a result of the removal of the General Partner as described above (other than as a result of Mr. Rifkin's death or disability), or for cause (if RML takes action which causes substantial detriment to the cable systems), then the Company is obligated to make a severance payment of $500,000 to RML.
Services to be Rendered by VS&A
Pursuant to the Partnership Agreement and subject to the approval of the Advisory Committee, VS&A will provide management and media industry advisory services to the Company from time to time with respect to debt and equity funding and the evaluation of potential acquisitions. VS&A will be paid reasonable compensation not to exceed $50,000 in any year in consideration for such services and is reimbursed for all reasonable out-of-pocket expenses incurred by it in connection therewith. No amounts were paid pursuant to this provision during 1998.
Senior Subordinated Debt Held by Monroe M. Rifkin
Until January 1996, the Company had outstanding senior subordinated debt (the "Old Rifkin Note") of $3 million payable to Monroe M. Rifkin, Chairman and Chief Executive Officer of R & A. Aggregate interest payments made by the Company in respect of the Old Rifkin Note were $200,000 and $364,000 in 1994 and 1995, respectively. On January 26, 1996, in connection with the Notes offering, the Company amended and restated the Old Rifkin Note and issued a new Note to Mr. Rifkin (the "New Rifkin Note"). The New Rifkin Note bears a rate of interest and has a scheduled maturity identical to that of the Exchange Notes and ranks pari passu with the Notes.
The New Rifkin Note contains no covenants other than the obligation to pay principal and interest thereon. Aggregate interest payments made by the Company related to the New Rifkin Note in 1998 and 1997 were $333,750 and $336,104, respectively. Events of default under the New Rifkin Note are limited to the failure to pay principal and interest thereunder, and a right to accelerate the Rifkin Note upon an acceleration of the Notes. Any rescission of acceleration by the Trustee or the holders of the Notes operates to rescind acceleration of the New Rifkin Note provided that there is no then existing payment default under the Rifkin Note. In the event of any redemption, defeasance or other retirement for value of the Notes or any portion thereof prior to their scheduled maturity, Mr. Rifkin shall have the right to require the Company to redeem, defease or retire the New Rifkin Note to the same extent as the Notes, subject to the limitations in the Indenture regarding restricted payments. See "Description of Exchange Notes-Covenants."
Except for any redemption, repurchase or retirement of the New Rifkin Note by the Company as described above, Mr. Rifkin has agreed for as long as any Notes are outstanding not to sell, transfer, pledge, hypothecate, encumber, or otherwise dispose of the New Rifkin Note, provided that Mr. Rifkin may transfer the New Rifkin Note to any trust controlled by him or any corporation wholly and directly owned by him.
Certain Relationships with Legal Counsel
Baker & Hostetler LLP, Denver, Colorado, has acted as legal counsel to the Company in connection with the offering of the Old Notes and has acted as legal counsel to the Company in connection with the Company's exchange of New Notes for Old Notes and may from time to time be engaged by the Company with respect to other matters. A partner of Baker & Hostetler LLP is a son of Monroe M. Rifkin. The company paid approximately $64,000 in 1998 to Baker & Hostetler LLP in connection with general matters.
PART IV
ITEM 14
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Exhibits:
The following exhibits are filed pursuant to Item 601 of Regulation S-K. Exhibit Number	Description
2.1	Asset Sale Agreement dated as of January 2, 1996, between Mid- Tennessee Cable Limited Partnership and Rifkin/MT Management, L.P. (1)
2.2	Assignment and Assumption Agreement dated January 2, 1996 between Rifkin Acquisition Partners, L.L.L.P. and Rifkin/MT Management, L.P. (1)
2.3	Amended and Restated Purchase and Sale Agreement dated March 29, 1996 by and between Rifkin Cablevision of Tennessee, Ltd. and Rifkin Acquisition Partners, L.L.L.P. (1)
2.4	Purchase Agreement dated January 31, 1996 among BT Securities Corporation, Smith Barney Inc., First Union Capital Markets Corp., PaineWebber Incorporated, Rifkin Acquisition Partners, L.L.L.P., Rifkin Acquisition Capital Corp., Cable Equities of Colorado, Ltd., Rifkin/Tennessee, Ltd., Cable Equities of Colorado Management Corp., Cable Equities, Inc., and FNI Management Corp. (1)
3.1	Certificate of Limited Partnership and Registration Statement of Rifkin Acquisition Partners, L.L.L.P. (1)
3.2	Second Amended and Restated Limited Partnership Agreement of Rifkin Acquisition Partners, L.L.L.P. dated August 31, 1995 as amended. (1)
3.3	Amendment No. 1 to the Second Amended and Restated Limited Partnership Agreement of Rifkin Acquisition Partners, L.L.L.P. dated January 31, 1996. (3)
3.4	Articles of Incorporation of Rifkin Acquisition Capital Corp. (1)
3.5	Bylaws of Rifkin Acquisition Capital Corp. (1)
3.6	Articles of Incorporation of RT Investments Corp. (1)
3.7	Bylaws of RT Investments Corp. (1)
3.8	Amended and Restated Agreement of Limited Partnership of Rifkin Acquisition Management, L.P. dated May 12 1989, as amended. (1)
3.9	Certificate of Limited Partnership of Rifkin Acquisition Management, L.P. (1)
4.1	Indenture dated January 15, 1996 among Rifkin Acquisition Partners, L.L.L.P., Rifkin Acquisition Capital Corp., as Issuers, Cable Equities of Colorado Mangement Corp., FNI Management Corp., Cable Equities of Colorado, Ltd., Cable Equities, Inc. and Rifkin/Tennessee, Ltd., as Subsidiary Guarantors, and Marine Midland Bank as Trustee related to the 11 1/8% Senior Subordinated Notes due 2006 (including form of certificate to be delivered in connection with transfers to the institutional accredited investors). (1)
4.2	Registration Rights Agreement dated as of January 31, 1996 among Rifkin Acquisition Partners, L.L.L.P., Rifkin Acquisition Capital Corp., Cable Equities of Colorado Management Corp., FNI Management Corp., Cable Equities of Colorado., Ltd., Cable Equities, Inc., Rifkin/Tennessee, Ltd., BT Securities Corporation, Smith Barney Inc., First Union Capital Markets Corp. and PaineWebber Incorporated. (1)
Exhibit Number	Description 4.3	Pledge Agreement dated as of January 31, 1996 made by Rifkin Acquisition Partners, L.L.L.P. and Rifkin Acquisition Capital Corp. to Marine Midland Bank. (1)
4.4	Amended and Restated Promissory Note dated January 31, 1996 in the principal amount of $3,000,000 payable by Rifkin Acquisition Partners to Monroe M. Rifkin. (1)
4.5	Amended and restated Credit Agreement dated as of March 1, 1996 among Rifkin Acquisition Partners, L.L.L.P., as Borrower, the several banks and other financial institutions from time to time parties thereto, First Union National Bank of North Carolina, as administrative agent and Bankers Trust Company, as syndication agent. (1)
4.6	11 1/8% Senior Subordinated Note due 2006 in the principal sum of $118,750,000 payable by Rifkin Acquisition Partners, L.L.L.P. and Rifkin Acquisition Capital Corp. to Cede & Co. or registered assigns. (1)
4.7	11 1/8% Senior Subordinated Note due 2006 in the principal sum of $4,250,000 payable by Rifkin Acquisition Partners, L.L.L.P. and Rifkin Acquisition Capital Corp. to Cede & Co. or registered assigns. (1)
4.8	11 1/8% Senior Subordinated Note due 2006 in the principal sum of $2,000,000 payable to Rifkin Children Trust III or registered assigns. (1)
10.1	Amended and Restated Management Agreement dated August 31, 1995 among Rifkin Acquisition Partners, L.P., Rifkin/Tennessee, Ltd., Cable Equities of Colorado, Ltd. and R & A, Inc., as amended by the Amendment of Management Agreement dated as of January 26, 1996 among Rifkin Acquisition Partners, L.L.L.P., Rifkin/Tennessee, Ltd., Cable Equities of Colorado, Ltd. and R & A Management, LLC, (1)
10.2	Franchise Agreement to Provide Cable and Noncable Services between County of Gwinnett, Georgia and Cable Equities of Colorado, Ltd. dated December 5, 1995. (1)
10.3	Franchise Agreement to Provide Cable and Noncable Services between City of Roswell, Georgia and Cable Equities of Colorado, Ltd. dated February 5, 1996. (1)
10.4.	Ordinance of City of Columbia, Tennessee granting Rifkin/Tennessee, Ltd the right to erect, maintain and operate a cable television system in the City of Columbia, Tennessee passed and adopted January 3, 1991. (1)
10.5	Cable Television Franchise Ordinance between Rifkin/Tennessee, Ltd. and City of Cookeville, Tennessee, passed January 19, 1995. (1)
10.6	Form of Exchange Agreement by and between Bankers Trust Company, Rifkin Acquisition Partners, L.L.L.P. and Rifkin Acquisition Capital Corp. (1)
10.7	Asset Purchase Agreement by and between American Cable Investors 5, Ltd. and Rifkin Acquisition Partners, L.L.L.P. dated as of November 29, 1996. (2)
10.8	Asset Purchase Agreement by and between Bresnan Communications Company and Rifkin Acquisition Partners, L.L.L.P. dated as of October 16, 1997. (3)
21.1	Subsidiaries of the Registrants. (1)
(1)	Incorporated by reference from Registration Statement on Form S-1, as amended, Registration No. 333-3084. (2)	Incorporated by reference from Form 10-K, dated December 31, 1996, Registration No. 333-3084. (3)	Incorporated by reference from Form 10-K, dated December 31, 1997, Registration No. 333-3084.
(b) Financial Statement Schedules:
None.
(c) Reports on Form 8-K
No reports on Form 8-K were filed during the period covered by this report.
Supplemental Information to be Furnished with Reports Filed Pursuant to Section 15(d) of the Act by Registrants Which Have Not Been Registered Securities Pursuant to Section 12 of the Act
No annual report to security holders covering the Registrants' last fiscal year or proxy statement, form of proxy or other proxy solicitation material has been sent to holders of Notes.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
By: Rifkin Acquisition Management, L.P. a Colorado limited partnership, its general partner
By: RT Investments Corp., a Colorado corporation, its general partner
By: /s/Monroe M. Rifkin
Monroe M. Rifkin Its: President/Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Name and Title Date
By: /s/Monroe M. Rifkin 	 March 31, 1999 Monroe M. Rifkin President, Treasurer & Director of RT Investments Corp. (Principal Executive Officer)
			 By: /s/Dale D. Wagner 	March 31, 1999 Dale D. Wagner Vice President & Assistant Treasurer of RT Investments Corp. (Principal Financial and Accounting Officer)
By: /s/Jeffrey D. Bennis 	March 31, 1999 	 Jeffrey D. Bennis Vice President & Director of RT Investments Corp.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
RIFKIN ACQUISITION CAPITAL CORP.
By: /s/Monroe M. Rifkin Monroe M. Rifkin Its: President/Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Name and Title 	 Date
By: /s/Monroe M. Rifkin March 31, 1999 Monroe M. Rifkin Its: President/Treasurer and Director (Principal Executive Officer)
By: /s/Dale D. Wagner March 31, 1999 Dale D. Wagner Its: Vice President, Secretary & Assistant Treasurer (Principal Financial and Accounting Officer)