<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the period ended JUNE 30, 1995
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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: 0-16065
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NORTHLAND CABLE PROPERTIES FIVE LIMITED PARTNERSHIP
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(Exact Name of Registrant as Specified in Charter)
Washington 91-1302403
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(State of Organization) (I.R.S. Employer Identification No.)
1201 Third Avenue, Suite 3600, Seattle, Washington 98101
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(Address of Principal Executive Offices) (Zip Code)
(206) 621-1351
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(Registrant's telephone number, including area code)
N/A
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(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
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This filing contains __ pages. Exhibits index appears on page __.
<PAGE> 2
PART 1 - FINANCIAL INFORMATION
ITEM 1. Financial Statements
NORTHLAND CABLE PROPERTIES FIVE LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS - (Unaudited)
(Prepared by the Managing General Partner)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
Cash $ 706,913 $ 1,152,286
Accounts receivable 261,242 174,822
Prepaid expenses 87,410 68,280
Property and equipment, net of accumulated
depreciation of $10,701,310 and $9,850,804,
respectively 7,288,305 7,645,214
Intangible assets, net of accumulated
amortization of $921,976 and $885,950,
respectively 6,333,672 6,058,786
----------- -----------
Total assets $14,677,542 $15,099,388
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses $ 855,722 $ 606,604
Due to managing general partner and affiliates 74,406 96,579
Converter deposits 15,663 23,105
Subscriber prepayments 112,908 169,102
Notes payable 17,341,337 17,745,642
----------- -----------
Total liabilities 18,400,036 18,641,032
----------- -----------
Partners' equity:
General Partners:
Contributed capital, net (54,587) (53,843)
Accumulated deficit (84,567) (83,503)
----------- -----------
(139,154) (137,346)
----------- -----------
Limited Partners:
Contributed capital, net 740,716 814,411
Accumulated deficit (4,324,056) (4,218,709)
----------- -----------
(3,583,340) (3,404,298)
----------- -----------
Total partners' equity (3,722,494) (3,541,644)
----------- -----------
Total liabilities and partners' equity $14,677,542 $15,099,388
=========== ===========
</TABLE>
The accompanying note to unaudited financial statements is an integral
part of these statements.
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<PAGE> 3
NORTHLAND CABLE PROPERTIES FIVE LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS - (Unaudited)
(Prepared by the Managing General Partner)
<TABLE>
<CAPTION>
For the six months ended June 30,
---------------------------------
1995 1994
---------- ----------
<S> <C> <C>
CABLE TELEVISION OPERATIONS:
Service revenues $3,677,778 $2,488,347
Expenses:
Operating 333,325 255,221
General and administrative (including
$523,354 and $294,722 to affiliates
in 1995 and 1994, respectively) 915,429 648,983
Programming 923,025 480,766
---------- ----------
Income from cable television operations 1,505,999 1,103,377
---------- ----------
RADIO STATION OPERATIONS:
Broadcast Revenues 144,274 -
Operating expenses 9,890 -
Administrative expenses 36,860 -
Programming expenses 89,960 -
---------- ----------
Income from radio station operations 7,564 -
---------- ----------
Depreciation and amortization expense 896,983 695,157
---------- ----------
Income from operations 616,580 408,220
Other income (expense):
Interest expense (719,670) (273,267)
Interest income 5,714 3,889
Gain (loss) on disposal of assets (14,795) 1,500
Other income 7,149 -
---------- ----------
(721,602) (267,878)
---------- ----------
Income (loss) before income taxes (105,022) 140,342
---------- ----------
Income tax expense (benefit) 1,389 -
---------- ----------
Net income (loss) ($106,411) $140,342
========== ==========
Allocation of net income (loss):
General Partners ($1,064) $1,403
========== ==========
Limited Partners ($105,347) $138,939
========== ==========
Net income (loss) per limited partnership
unit: (14,739 units) ($7) $9
========== ==========
Net income (loss) per $1,000 investment ($14) $19
========== ==========
</TABLE>
The accompanying note to unaudited financial statements is an integral
part of these statements.
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<PAGE> 4
NORTHLAND CABLE PROPERTIES FIVE LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS - (Unaudited)
(Prepared by the Managing General Partner)
<TABLE>
<CAPTION>
For the three months ended June 30,
-----------------------------------
1995 1994
---------- ----------
<S> <C> <C>
Service revenues $1,887,180 $1,259,294
Expenses:
Operating 178,503 130,337
General and administrative (including
$262,754 and $147,433 to affiliates
in 1995 and 1994, respectively) 466,761 325,078
Programming 473,753 257,384
---------- ----------
Income from cable television operations 768,163 546,495
---------- ----------
RADIO STATION OPERATIONS:
Broadcast Revenues 83,051 -
Operating expenses 6,055 -
Administrative expenses 20,480 -
Programming expenses 47,344 -
---------- ----------
Income from radio station operations 9,172 0
---------- ----------
Depreciation and amortization expense 470,898 350,742
---------- ----------
Income from operations 306,437 195,753
Other income (expense):
Interest expense (361,927) (140,237)
Interest income 3,459 2,177
Gain (loss) on disposal of assets (14,795) -
Other income - -
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(373,263) (138,060)
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Income (loss) before income taxes (66,826) 57,693
---------- ----------
Income tax expense (benefit) 1,389 -
---------- ----------
Net income (loss) ($68,215) $57,693
========== ==========
Allocation of net income (loss):
General Partners ($682) $577
========== ==========
Limited Partners ($67,533) $57,116
========== ==========
Net income (loss) per limited partnership
unit: (14,739 units) ($5) $4
========== ==========
Net income (loss) per $1,000 investment ($9) $8
========== ==========
</TABLE>
The accompanying note to unaudited financial statements is an integral
part of these statements.
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<PAGE> 5
NORTHLAND CABLE PROPERTIES FIVE LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Unaudited)
(Prepared by the Managing General Partner)
<TABLE>
<CAPTION>
For the six months ended June 30,
---------------------------------
1995 1994
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($106,411) $140,342
Adjustments to reconcile net income (loss) to
cash provided by operating activities:
Depreciation and amortization 896,983 695,157
Loss on disposal of assets 6,044
(Increase) decrease in operating assets:
Accounts receivable (86,420) (20,606)
Prepaid expenses (19,130) 3,095
Increase (decrease) in operating liabilities:
Account payable and accrued expenses 249,118 (43,083)
Due to managing general partner and affiliates (22,173) 18,095
Converter deposits (7,442) (1,049)
Subscriber prepayments (56,194) (51,040)
--------- --------
Net cash from operating activities 854,375 740,911
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (260,092) (313,120)
Purchase of radio station (450,000) -
--------- --------
Net cash used in investing activities (710,092) (313,120)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on borrowings (454,305) (502,095)
Distributions to partners (74,439) (74,702)
Loan fees and expenses incurred (60,912) (14,708)
Repurchase of limited partner interest - (19,000)
--------- --------
Net cash used in financing activities (589,656) (610,505)
--------- --------
DECREASE IN CASH (445,373) (182,714)
CASH, beginning of period 1,152,286 460,562
--------- --------
CASH, end of period $706,913 $277,848
========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $722,926 $253,138
========= ========
</TABLE>
The accompanying note to unaudited financial statements is an integral
part of these statements.
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<PAGE> 6
NORTHLAND CABLE PROPERTIES FIVE 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 June 30, 1995 and December 31,
1994, its Statements of Operations for the six and three months ended June 30,
1995 and 1994, and its Statements of Cash Flows for the six months ended June
30, 1995 and 1994. Results of operations for these periods are not necessarily
indicative of results to be expected for the full year.
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<PAGE> 7
PART I (continued)
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Cable television revenues totalled $1,887,180 for the three months ended June
30, 1995, representing an increase of approximately 50% over the same period in
1994. Of these revenues, $1,309,868 (69%) was derived from basic service
charges, $219,712 (12%) from premium services, $154,396 (8%) from tier
services, $43,234 (2%) from installation charges, $38,872 (2%) from service
maintenance contracts and $121,098 (7%) from other sources. The increase in
revenue is attributable to the acquisition of the Corsicana, TX system, and a
significant increase in advertising revenue.
As of June 30, 1995, the Partnership's systems served approximately 21,100
basic subscribers, 7,800 premium subscribers and 9,100 tier subscribers.
Cable television operating expenses totalled $178,503 for the three months
ended June 30, 1995, representing an increase of approximately 37% over the
same period in 1994. This is mainly due to the acquisition of the Corsicana,
TX system.
Cable television general and administrative expenses totalled $466,761 for the
three months ended June 30, 1995, representing an increase of approximately 44%
over the same period in 1994. This is due to the acquisition of the Corsicana,
TX system and increases in revenue based expenses (i.e., franchise fees,
management fees, copyright fees) which coincide with revenue increases noted
above.
Cable television programming expenses totalled $473,753 for the three months
ended June 30, 1995, reflecting an increase of approximately 84% over the same
period in 1994. This is mainly due to the additional subscribers in the
Corsicana, TX system, higher costs charged by program suppliers and additional
salary and benefit costs related to local programming and advertising support.
The radio station operations included revenues of $83,051 derived primarily
from advertising sales. Radio operation expenses are primarily comprised of
programming and salary and benefit costs.
Depreciation and amortization expense increased approximately 34% as compared
to the same period in 1994. This is mainly due to depreciation and
amortization on plant, equipment and intangible assets acquired with the
purchase of the Corsicana, TX system and the radio station.
Interest expense for the three months ended June 30, 1995 increased
approximately 158% as compared to the same period in 1994. The average bank
debt outstanding increased from
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<PAGE> 8
$8,887,000 during the second quarter of 1994 to $17,068,000 during the second
quarter of 1995 due to increased borrowings to finance the acquisition of the
Corsicana, TX system and radio station. In addition, the Partnership's
effective interest rate increased from 5.52% in 1994 to 8.31% in 1995.
Liquidity and Capital Resources
The Partnership's primary sources of liquidity are cash flow provided from
operations. Based on management's analysis, the Partnership's cash flow from
operations is 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 maximum ratio of senior debt to annualized operating cash flow of
5.50 to 1 and minimum ratios of annualized operating cash flow to debt service
of 1.20 to 1 and annualized operating cash flow to fixed charges of 1.05 to 1.
As of June 30, 1995 the Partnership was in compliance with its required
financial covenants.
The balance outstanding under the credit facility is $16,958,125. As of the
date of this filing, interest rates on the credit facility were as follows:
$7,584,000 fixed at 8.44% under the terms of an amortizing interest rate swap
agreement expiring September 30, 1996; and $9,300,000 fixed at 7.88% expiring
September 1, 1995. The balance of $74,125 bears interest at the prime rate
plus 7/8% (currently 9.63%). The above rates include a margin paid to the
lender based on overall leverage, and may decrease if the Partnership's
leverage decreases.
Capital Expenditures
During the second quarter of 1995, the Partnership incurred approximately
$176,000 in capital expenditures including channel additions in the Cedar
Creek, TX system, purchase of ad insertion equipment for the Cedar Creek, TX
and Forest City, NC systems and the initial phase of the development of local
programming in the Corsicana, TX system.
Planned capital expenditures for the balance of 1995 include line extensions in
the various systems, initial phases of a system upgrade to 330 MHz in the Cedar
Creek, TX system, channel additions in the Cedar Creek, TX and Corsicana, TX
systems, purchase of a new vehicle and line extensions in the Forest City, NC
system and the continued development of local programming in the Corsicana, TX
system.
Effects of Regulation
On October 5, 1992, Congress enacted the Cable Television Consumer Protection
and Competition Act of 1992 (the "1992 Act"). The 1992 Act substantially
reregulated the cable television industry and imposed numerous requirements,
including provisions subjecting rates for certain services and equipment to
regulation by the applicable local franchising authority and
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<PAGE> 9
by the Federal Communications Commission ("FCC"), exclusive programming
arrangements, the carriage of broadcast signals, customer service standards,
leased access channels, customer premises equipment compatibility and various
other matters. On April 1, 1993, the FCC announced the adoption of rate
regulations which became effective September 1, 1993. Under those initial
regulations, rates were evaluated against "competitive benchmarks" and were
generally subject to rollbacks if they exceeded the benchmark levels. On
February 22, 1994, the FCC substantially revised the rate regulation rules to
effect further rate reductions effective May 15, 1994, or later in certain
circumstances, based on complex formulas and revised benchmarks.
All of the Partnership's cable systems are potentially subject to rate
regulation. The 1992 Act (i) requires the FCC to establish rate standards for
basic cable service rates which may be regulated by the applicable local
franchising authority, (ii) requires the FCC, upon receipt of a complaint, to
review rates for additional tiers of cable service, (iii) regulates rates for
mandatorily offered commercial leased access channels and (iv) eliminates the
automatic five percent annual increase for basic rates allowed under prior law.
Rates for channels offered on a per-channel basis as individual purchase
options and pay-per-view events are excluded from rate regulation.
Basic service rates, including the equipment used to receive basic service, may
be regulated by a local franchising authority once it has been "certified" by
the FCC. When the certification becomes effective, the local franchise
authority may request the cable operator to justify its existing rates charged
for basic service and related equipment ("request for justification" or "RFJ").
Rates charged in excess of the maximum allowable rates determined under FCC
regulations are subject to refund for the period in which the excess rates were
charged or one year, whichever is shorter. Additional tiers of service are
subject to regulation only upon an appropriately filed complaint to the FCC by
any subscriber, franchising authority or other person ("subscriber
complaints"). If no subscriber complaints are filed within 45 days of a change
in the FCC regulated rates, such rates are not subject to challenge unless and
until the cable operator seeks to modify them. Refund liability, if any,
generally would be limited to any incremental increase in rates. In late 1994,
the FCC revised its rules to permit cable operators to offer New Product Tiers
at rates which they elect so long as, among other conditions, other channels
that are subject to rate regulation are priced in conformity with applicable
regulations and cable operators do not remove programming services from
existing service tiers and offer them on the New Product Tier.
On May 5, 1995, the FCC announced the adoption of a simplified set of rate
regulation rules that will apply to "small" cable systems, defined as a system
serving 15,000 or fewer subscribers, that are owned by "small" companies,
defined as a company serving 400,000 or fewer subscribers. Under the FCC's
definition, the Partnership is a "small" company and each of the Partnership's
cable systems are "small" systems. As of the date of this filing, the FCC has
not released the text of its new rules so the Partnership is unable to
determine the ultimate effects of the regulatory change. Based on the FCC's
public comments, however, the new rules are anticipated to provide a
significant degree of relief from rate regulation for the Partnership's
systems.
As of the date of this filing, no local franchising authorities have elected to
certify, no RFJ's
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<PAGE> 10
have been received from franchise authorities, and no subscriber complaints
have been filed.
Future rate increases under this regulatory environment will be dependent on
several factors including the level of inflation as measured by the annual
change in the GNP-PI index, increases in "external costs" as defined by the FCC
and possible changes to the existing rules regarding rate increases associated
with the launch of new services on regulated tiers. Because of the
uncertainties associated with these factors the future impact of rate
regulation on the Partnership's results of operations cannot be determined at
this time. Management feels it is reasonably possible under the price cap
mechanism that operating margins will stabilize and perhaps increase in future
periods as inflation and external cost increases are allowed to be passed
through to subscribers through rate adjustments.
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<PAGE> 11
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 June 30,
1995.
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<PAGE> 12
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 FIVE 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)
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 706,913
<SECURITIES> 0
<RECEIVABLES> 261,242
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,055,565
<PP&E> 17,989,615
<DEPRECIATION> 10,701,310
<TOTAL-ASSETS> 14,677,542
<CURRENT-LIABILITIES> 1,058,699
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> (3,722,494)
<TOTAL-LIABILITY-AND-EQUITY> 14,677,542
<SALES> 0
<TOTAL-REVENUES> 1,970,231
<CGS> 0
<TOTAL-COSTS> 184,558
<OTHER-EXPENSES> 1,479,236
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 361,927
<INCOME-PRETAX> (66,826)
<INCOME-TAX> 1,389
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (68,215)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
