-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, N2tNFqVV4MC9tfQ3hCYkHA3vK3XJt7PSe0juNGu9IfrETadbTOGdJpLcBGatklkG thP5uITd3a7sOQfs2Y3Llg== 0000891020-99-000803.txt : 19990513 0000891020-99-000803.hdr.sgml : 19990513 ACCESSION NUMBER: 0000891020-99-000803 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHLAND CABLE PROPERTIES SIX LTD PARTNERSHIP CENTRAL INDEX KEY: 0000788736 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 911318471 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-16063 FILM NUMBER: 99617576 BUSINESS ADDRESS: STREET 1: 1201 THIRD AVE STE 3600 CITY: SEATTLE STATE: WA ZIP: 98101 BUSINESS PHONE: 2066211351 MAIL ADDRESS: STREET 1: 1201 THIRD AVE STE 3600 CITY: SEATTLE STATE: WA ZIP: 98103 10-Q 1 FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended MARCH 31, 1999 -------------- Or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _______________ to ______________ Commission File Number: 0-16063 ----------------- NORTHLAND CABLE PROPERTIES SIX LIMITED PARTNERSHIP (Exact Name of Registrant as Specified in Charter) Washington 91-1318471 (State of Organization) (IRS Employer Identification No.) 1201 Third Avenue, Suite 3600, Seattle, Washington 98101 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) (206) 621-1351 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) N/A - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] This filing contains ___ pages. Exhibits index appears on page ___. 2 PART 1 - FINANCIAL INFORMATION ITEM 1. Financial Statements NORTHLAND CABLE PROPERTIES SIX LIMITED PARTNERSHIP BALANCE SHEETS - (Unaudited) (Prepared by the Managing General Partner)
March 31, December 31, 1999 1998 ------------ ------------ ASSETS Cash $ 776,206 $ 706,907 Accounts receivable 269,909 722,919 Prepaid expenses 127,161 109,387 Property and equipment, net of accumulated depreciation of $15,316,956 and $14,744,674, respectively 13,873,736 14,090,676 Intangible assets, net of accumulated amortization of $12,482,000 and $11,849,919, respectively 16,710,000 17,342,080 ------------ ------------ Total assets $ 31,757,012 $ 32,971,969 ============ ============ LIABILITIES AND PARTNERS' EQUITY Accounts payable and accrued expenses $ 771,064 $ 1,181,743 Due to managing general partner and affiliates 169,042 142,746 Converter deposits 49,989 57,057 Subscriber prepayments 299,330 495,177 Notes payable 31,060,348 31,372,848 ------------ ------------ Total liabilities 32,349,773 33,249,571 ------------ ------------ Partners' equity: General Partners: Contributed capital, net (37,565) (37,565) Accumulated deficit (95,378) (92,266) ------------ ------------ (132,943) (129,831) ------------ ------------ Limited Partners: Contributed capital, net 8,982,444 8,986,444 Accumulated deficit (9,442,262) (9,134,215) ------------ ------------ (459,818) (147,771) ------------ ------------ Total partners' equity (592,761) (277,602) ------------ ------------ Total liabilities and partners' equity $ 31,757,012 $ 32,971,969 ============ ============
The accompanying note to unaudited financial statements is an integral part of these statements 2 3 NORTHLAND CABLE PROPERTIES SIX LIMITED PARTNERSHIP STATEMENTS OF OPERATIONS - (Unaudited) (Prepared by the Managing General Partner)
For the three months ended March 31, ------------------------------------ 1999 1998 ----------- ----------- Service revenues $ 3,732,791 $ 3,572,000 Expenses: Operating 339,387 277,584 General and administrative (including $537,774 and $496,292 to affiliates in 1999 and 1998, respectively) 904,103 840,108 Programming 982,635 984,155 Depreciation and amortization 1,204,362 749,232 ----------- ----------- 3,430,487 2,851,079 ----------- ----------- Income from operations 302,304 720,921 Other income (expense): Interest expense (619,203) (620,964) Interest income 5,740 1,334 Other income -- -- Gain/loss on sale of assets -- -- ----------- ----------- (613,463) (619,630) ----------- ----------- Net (loss) income $ (311,159) $ 101,291 =========== =========== Allocation of net (loss) income General Partners $ (3,112) $ 1,013 =========== =========== Limited Partners $ (308,047) $ 100,278 =========== =========== Net (loss) income per limited partnership unit: (29,784 units and 29,792 units, respectively) $ (10) $ 3 =========== =========== Net (loss) income per $1,000 investment $ (20) $ 6 =========== ===========
The accompanying note to unaudited financial statements is an integral part of these statements 3 4 NORTHLAND CABLE PROPERTIES SIX LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS - (Unaudited) (Prepared by the Managing General Partner)
For the three months ended March 31, ----------------------------------- 1999 1998 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income $ (311,159) $ 101,291 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 1,204,362 749,232 (Increase) decrease in operating assets: (Gain)Loss on sale of assets -- -- Accounts receivable 453,010 (546,581) Prepaid expenses (17,774) 134,174 Increase (decrease) in operating liabilities Accounts payable and accrued expenses (410,679) 704,305 Due to managing general partner and affiliates 26,296 47,861 Converter deposits (7,069) 11,077 Subscriber prepayments (195,847) 53,216 ------------ ------------ Net cash from operating activities 741,140 1,254,575 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment, net (355,341) (308,454) Acquisition of cable systems -- (20,500,000) Increase in intangibles -- -- ------------ ------------ Net cash used in investing activities (355,341) (20,808,454) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on borrowings (312,500) -- Proceeds from borrowings -- 20,456,513 Loan fees and other costs incurred -- (25,600) Repurchase of limited partner interest (4,000) (4,000) ------------ ------------ Net cash used in financing activities (316,500) 20,426,913 ------------ ------------ INCREASE IN CASH 69,299 873,034 CASH, beginning of period 706,907 173,034 ------------ ------------ CASH, end of period $ 776,206 $ 1,046,068 ============ ============ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for interest $ 608,579 $ 594,367 ============ ============
4 5 NORTHLAND CABLE PROPERTIES SIX LIMITED PARTNERSHIP NOTE TO UNAUDITED FINANCIAL STATEMENTS (1) These unaudited financial statements are being filed in conformity with Rule 10-01 of Regulation S-X regarding interim financial statement disclosure and do not contain all of the necessary footnote disclosures required for a fair presentation of the Balance Sheets, Statements of Operations and Statements of Cash Flows in conformity with generally accepted accounting principles. However, in the opinion of management, this data includes all adjustments, consisting only of normal recurring accruals, necessary to present fairly the Partnership's financial position at March 31, 1999 and December 31, 1998, its Statements of Operations for the three months ended March 31, 1999 and 1998, and its Statements of Cash Flows for the three months ended March 31, 1999 and 1998. Results of operations for these periods are not necessarily indicative of results to be expected for the full year. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities. The Statement establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. The Statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. Statement 133 is effective for fiscal years beginning after June 15, 1999. A company may also implement the Statement as of the beginning of any fiscal quarter after issuance (that is, fiscal quarters beginning June 16, 1998 and thereafter). Statement 133 cannot be applied retroactively. Statement 133 must be applied to (a) derivative instruments and (b) certain derivative instruments embedded in hybrid contracts that were issued, acquired, or substantively modified after December 31, 1997 (and, at the company's election, before January 1, 1998). The Partnership has not yet quantified the impacts of adopting Statement 133 on its financial statements and has not determined the timing of or method of adoption of Statement 133. However, the Statement could increase volatility in earnings and other comprehensive income. 5 6 PART I (continued) ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Revenues totaled $3,732,791 for the three months ended March 31, 1999, representing an increase of approximately 5% over the same period in 1998. Of these revenues, $2,715,098 (73%) was derived from basic service charges, $382,584 (10%) from premium services, $203,538 (5%) from tier services, $96,406 (3%) from installation charges, $97,206 (3%) from service maintenance contracts, $96,018 (2%) from advertising, and $141,941 (4%) from other sources. The increase in revenue is attributable primarily to rate increases placed into effect in August of 1998. As of March 31, 1999, the Partnership's systems served approximately 34,400 basic subscribers, 16,700 premium subscribers and 8,500 tier subscribers. Operating expenses totaled $339,387 for the three months ended March 31, 1999, representing an increase of approximately 22% over the same period in 1998. This is primarily due to the addition of technical and regional personnel, a one time adjustment to pole rental costs as well as increased system maintenance. General and administrative expenses totaled $904,103 for the three months ended March 31, 1999, representing an increase of approximately 8% over the same period in 1998. This is due to higher revenue based expenses such as management fees and franchise fees as well as higher bad debt expense. Programming expenses totaled $982,635 for the three months ended March 31, 1999, remaining relatively unchanged from the same period in 1998. Depreciation and amortization expenses totaled $1,204,362 for the three months ended March 31, 1999, representing an increase of approximately 61% over the same period in 1998. Excluding the effects of the January 2, 1998 acquisition of the Bennettsville, Barnwell, Bamberg and Allendale, South Carolina systems, depreciation and amortization increased by 31%. Such increase is due to depreciation and amortization on recent purchases of plant and equipment offset by assets becoming fully depreciated. Interest expense for the three months ended March 31, 1999 remained relatively unchanged from the same period in 1998. The average bank debt of $31,372,848 remained the same from the first quarter of 1998 to the first quarter of 1999, and the Partnership's effective interest rate decreased from 7.92% in 1998 to 7.89% in 1999. 6 7 Liquidity and Capital Resources The Partnership's primary sources of liquidity are cash flow provided from operations and an $8,000,000 revolving credit line, of which approximately $6,372,848 was outstanding as of March 31, 1999. Based on management's analysis, the Partnership's cash flow from operations and amounts available for borrowing under the Partnership's loan agreement are sufficient to cover future operating costs, debt service and planned capital expenditures. Under the terms of the Partnership's loan agreement, the Partnership has agreed to restrictive covenants which require the maintenance of certain ratios including a senior debt to annualized operating cash flow ratio of 5.25 to 1, a fixed charge ratio of 1.1 to 1, and an annual operating cash flow to interest expense ratio of less than 2.0 to 1. As of March 31, 1999, the Partnership was in compliance with its required financial covenants. As of the date of this filing, the balance under the credit facility is $29,277,781. Certain fixed rate agreements expired during the first quarter of 1999. As of the date of this filing, interest rates on the credit facility were as follows: $22,687,500 fixed at 8.02% under the terms of an interest rate swap agreement with the Partnership's lender expiring December 31, 1999; $6,200,000 fixed at 7.40813%, expiring June 30, 1999; and $390,281 fixed at 7.2%, expiring June 30, 1999. The above includes a margin paid to the lender based on overall leverage, and may increase or decrease as the Partnership's leverage fluctuates. Capital Expenditures During the first quarter of 1999, the Partnership incurred approximately $355,000 in capital expenditures. These expenditures included a vehicle replacement in the Starkville, MS system, completion of the system upgrade to 450 MHz in the Kosciusko, MS system, the initial design of an upgrade to 450 MHz in the Forest, MS system, line extensions and a continued system upgrade to 450 MHz in the Philadelphia, MS system, line extensions and a vehicle replacement in the Barnwell, SC system and a vehicle replacement in the Bennettsville, SC system. Planned expenditures for the balance of 1999 include the continuation of the fiber network for data transmission and ongoing system upgrade construction to 450 MHz in the Starkville System, a continued system upgrade and a vehicle purchase in the Philadelphia System, the continued deployment of fiber in the Highlands System, a continued system upgrade to 450 MHz in the Barnwell System and certain line extensions and channel additions in various systems. 7 8 Year 2000 Issues The efficient operation of the Partnership's business is dependent in part on its computer software programs and operating systems (collectively, Programs and Systems). These Programs and Systems are used in several key areas of the Partnership's business, including subscriber billing and collections and financial reporting. Management has evaluated the Programs and Systems utilized in the conduct of the Partnership's business for the purpose of identifying year 2000 compliance problems. Failure to remedy these issues could impact the ability of the Partnership to timely bill its subscribers for service provided and properly report its financial condition and results of operations which could have a material impact on its liquidity and capital resources. The Programs and Systems utilized in subscriber billing and collections have been modified to address year 2000 compliance issues. These modifications were substantially complete at the end of 1998. Management has completed the process of replacing Programs and Systems related to financial reporting which resolve year 2000 compliance issues. The aggregate cost to the Partnership to address year 2000 compliance issues is not expected to be material to its results of operations, liquidity and capital resources. Management is currently focusing its efforts on the impact of the year 2000 compliance issue on service delivery and has established an internal team to address this issue. The internal team is identifying and testing all date sensitive equipment involved in delivering service to its customers. In addition, management will assess its options regarding repair or replacement of affected equipment during this testing. The aggregate cost to the Partnership to address year 2000 compliance issues is not expected to be material to its results of operations, liquidity and capital resources. The provision of cable television services is significantly dependent on the Partnership's ability to adequately receive programming signals via satellite distribution or off air reception from various programmers and broadcasters. Management has inquired of certain significant programming vendors with respect to their year 2000 issues and how they might impact the operations of the Partnership. As of the date of this filing no significant programming vendor has communicated a year 2000 issue that would affect materially the operations of the Partnership. However, if significant programming vendors identify year 2000 issues in the future and are unable to resolve such issues in a timely manner, it could result in a material financial risk. Disposition On April 30, 1999, the Partnership sold cable television systems serving approximately 1,400 subscribers in and around the communities of Sandersville, Heidelberg and 8 9 Laurel, Mississippi. The sales price of these systems was $1,900,000. The Partnership used net proceeds of $1,540,000 to pay down existing bank debt. 9 10 PART II - OTHER INFORMATION ITEM 1 Legal proceedings None ITEM 2 Changes in securities None ITEM 3 Defaults upon senior securities None ITEM 4 Submission of matters to a vote of security holders None ITEM 5 Other information None ITEM 6 Exhibits and Reports on Form 8-K (a) Exhibit index 27.0 Financial Data Schedule (b) No reports on Form 8-K have been filed during the quarter ended March 31, 1999. 10 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NORTHLAND CABLE PROPERTIES SIX LIMITED PARTNERSHIP BY: Northland Communications Corporation, Managing General Partner Dated: ________ BY: /s/ RICHARD I. CLARK ------------------------------------ Richard I. Clark (Vice President/Treasurer) Dated: ________ BY: /s/ GARY S. JONES ------------------------------------ Gary S. Jones (Vice President) 11 EX-27.0 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 776,206 0 269,909 0 0 0 29,190,692 15,316,956 31,757,012 1,289,425 0 0 0 0 (592,761) 31,757,012 3,732,791 3,732,791 0 0 3,430,487 0 619,203 (311,159) 0 0 0 0 0 (311,159) 0 0
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