<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 MARCH 31, 1996
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
NORTHLAND CABLE PROPERTIES FIVE LIMITED PARTNERSHIP
(Exact Name of Registrant as Specified in Charter)
Washington 91-1302403
(State of Organization) (I.R.S. 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 .
<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>
March 31, December 31,
1996 1995
------------ ------------
ASSETS
<S> <C> <C>
Cash $ 697,020 $ 241,713
Accounts receivable 493,847 411,862
Prepaid expenses 156,340 81,309
Property and equipment, net of accumulated
depreciation of $11,968,624 and $11,562,201,
respectively 10,381,812 10,663,580
Intangible assets, net of accumulated
amortization of $1,751,555 and $1,575,121,
respectively 6,397,367 6,552,786
------------ ------------
Total assets $ 18,126,386 $ 17,951,250
============ ============
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses $ 1,149,293 $ 574,311
Due to managing general partner and affiliates 77,623 190,853
Converter deposits 25,657 26,761
Subscriber prepayments 243,058 178,238
Notes payable 21,473,914 21,660,989
------------ ------------
Total liabilities 22,969,545 22,631,152
------------ ------------
Partners' equity:
General Partners:
Contributed capital, net (55,703) (55,331)
Accumulated deficit (94,656) (93,396)
------------ ------------
(150,359) (148,727)
------------ ------------
Limited Partners:
Contributed capital, net 630,173 667,021
Accumulated deficit (5,322,973) (5,198,196)
------------ ------------
(4,692,800) (4,531,175)
------------ ------------
Total partners' equity (4,843,159) (4,679,902)
------------ ------------
Total liabilities and partners' equity $ 18,126,386 $ 17,951,250
============ ============
</TABLE>
The accompanying note to unaudited financial statements is an
integral part of these statements
2
<PAGE> 3
NORTHLAND CABLE PROPERTIES FIVE LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS - (Unaudited)
(Prepared by the Managing General Partner)
<TABLE>
<CAPTION>
For the three months ended March 31,
------------------------------------
1996 1995
----------- -----------
<S> <C> <C>
CABLE TELEVISION OPERATIONS:
Service revenues $ 2,172,961 $ 1,790,598
Expenses:
Operating 200,972 154,822
General and administrative (including
$311,605 and $250,600 to affiliates
in 1996 and 1995, respectively) 535,935 448,667
Programming 551,628 449,273
Depreciation and amortization 570,082 415,448
----------- -----------
Income from cable television operations 314,344 322,388
----------- -----------
RADIO STATION OPERATIONS:
Broadcast revenues 74,903 61,223
Operating expenses 1,473 3,835
Administrative expenses 26,210 16,381
Programming expenses 43,967 42,616
Depreciation and amortization 12,775 10,637
----------- -----------
Loss from radio station operations (9,522) (12,246)
----------- -----------
Income from operations 304,822 310,142
Other income (expense):
Interest expense (434,025) (357,742)
Interest income 1,071 2,255
Other income 2,095 7,149
----------- -----------
(430,859) (348,338)
----------- -----------
Loss before income taxes (126,037) (38,196)
----------- -----------
Income tax expense (benefit) - -
----------- -----------
Net loss $ (126,037) (38,196)
=========== ===========
Allocation of net loss:
General Partners $ (1,260) $ (382)
=========== ===========
Limited Partners $ (124,777) $ (37,814)
=========== ===========
Net loss per limited partnership unit:
(14,739 units) $ (8) $ (3)
=========== ===========
Net loss per $1,000 investment $ (17) $ (5)
=========== ===========
</TABLE>
The accompanying note to unaudited financial statements is an
integral part of these statements
3
<PAGE> 4
NORTHLAND CABLE PROPERTIES FIVE LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Unaudited)
(Prepared by the Managing General Partner)
<TABLE>
<CAPTION>
For the three months ended March 31,
------------------------------------
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (126,037) $ (38,196)
Adjustments to reconcile net loss to
cash provided by operating activities:
Depreciation and amortization 582,857 426,085
(Increase) decrease in operating assets:
Accounts receivable (81,985) (48,160)
Prepaid expenses (75,031) (42,973)
Increase (decrease) in operating liabilities
Accounts payable and accrued expenses 574,982 362,368
Due to managing general partner and affiliates (113,230) (18,715)
Converter deposits (1,104) (7,248)
Subscriber prepayments 64,820 (53,407)
----------- -----------
Net cash from operating activities 825,272 579,754
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (124,655) (84,050)
Purchase of radio station - (450,000)
----------- -----------
Net cash used in investing activities (124,655) (534,050)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on borrowings (187,075) (267,654)
Distributions to partners (37,220) (37,220)
Loan fees and other costs incurred (21,015) (60,324)
----------- -----------
Net cash used in financing activities (245,310) (365,198)
----------- -----------
INCREASE (DECREASE) IN CASH 455,307 (319,494)
CASH, beginning of period 241,713 1,152,286
----------- -----------
CASH, end of period $ 697,020 $ 832,792
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 385 $ 175,087
=========== ===========
</TABLE>
The accompanying note to unaudited financial statements is an
integral part of these statements
4
<PAGE> 5
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 March 31, 1996 and December 31, 1995, its Statements of
Operations for the three months ended March 31, 1996 and 1995, and its
Statements of Cash Flows for the three months ended March 31, 1996 and 1995.
Results of operations for these periods are not necessarily indicative of
results to be expected for the full year.
5
<PAGE> 6
PART I (continued)
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Cable television revenues totaled $2,172,961 for the three months ended March
31, 1996, representing an increase of approximately 21% over the same period in
1995. Of these revenues, $1,533,570 (71%) was derived from basic service
charges, $239,931 (11%) from premium services, $177,082 (8%) from tier services,
$44,130 (2%) from installation charges, $44,543 (2%) from service maintenance
contracts and $133,755 (6%) from other sources. The growth in revenue is mainly
attributable to the acquisition of the Ellenboro, NC and Gilkey/Harris, NC
systems.
As of March 31, 1996, the Partnership's systems served approximately 23,300
basic subscribers, 7,800 premium subscribers and 8,900 tier subscribers.
Cable television operating expenses totaled $202,446 for the three months ended
March 31, 1996, representing an increase of approximately 31% over the same
period in 1995. This is mainly due to the acquisition of the Ellenboro, NC and
Gilkey/Harris, NC systems.
Cable television general and administrative expenses totaled $562,145 for the
three months ended March 31, 1996, representing an increase of approximately 25%
over the same period in 1995. This is due to the acquisition of the Ellenboro,
NC and Gilkey/Harris, NC systems and increases in revenue based expenses (i.e.,
franchise fees, management fees, copyright fees) which coincide with revenue
growth noted above.
Cable television programming expenses totaled $595,595 for the three months
ended March 31, 1996, reflecting an increase of approximately 33% over the same
period in 1995. This is mainly due to the additional subscribers in the
Ellenboro, NC and Gilkey/Harris, NC systems, 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 $74,903 derived primarily from
advertising sales. Radio operation expenses are primarily comprised of
programming and salary and benefit costs.
Depreciation and amortization expense increased approximately 40% as compared to
the same period in 1995. This is mainly due to depreciation and amortization on
plant, equipment and intangible assets acquired with the purchase of the
Ellenboro, NC and Gilkey/Harris, NC systems and the radio station, offset by
assets becoming fully depreciated during the first quarter of 1996.
Interest expense for the three months ended March 31, 1996 increased
approximately 21% as compared to the same period in 1995. The average bank debt
outstanding increased from $17,289,000 during the first quarter of 1995 to
$21,463,000 during the first quarter of 1996 due to increased borrowings to
finance the acquisition of the Ellenboro, NC and Gilkey/Harris, NC systems. In
addition, the Partnership's effective interest rate decreased from approximately
8.3% during the first quarter of 1995 to 8.1% during the first quarter of 1996.
6
<PAGE> 7
Liquidity and Capital Resources
The Partnership's primary source of liquidity is 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
6.25 to 1 and a minimum ratio of annualized operating cash flow to fixed charges
of 1.00 to 1. As of March 31, 1996 the Partnership was in compliance with its
required financial covenants.
The balance outstanding under the credit facility is $21,369,054. As of the date
of this filing, interest rates on the credit facility were as follows:
$16,437,500 fixed at 7.995% under the terms of an amortizing interest rate swap
agreement expiring December 8, 1997; and $4,700,000 fixed at 7.945% under the
terms of an interest rate swap agreement expiring January 13, 1997. The balance
of $231,554 bears interest at the prime rate plus 1 3/8% (currently 8.625%). 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 first quarter of 1996, the Partnership incurred approximately
$125,000 in capital expenditures including construction of a new tower in
Lamesa, TX, and several line extensions in Corsicana, TX. Planned expenditures
for the balance of 1996 include system upgrades in the Cedar Creek, TX system, a
fiber interconnect of 2 systems in the Forest City, NC area, vehicle
replacements and line extensions in various systems.
7
<PAGE> 8
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 and subsequent
revisions and rulemakings substantially re-regulated the cable television
industry. The regulatory aspects of the 1992 Act included giving the local
franchising authorities and the FCC the ability to regulate rates for basic
services, equipment charges and additional CPST's when certain conditions were
met. All of the Partnership's cable systems were potentially subject to rate
regulation. The most significant impact of rate regulation was the inability to
raise rates for regulated services as costs of operation rose during an FCC
imposed rate freeze from April 5, 1993 to May 15, 1994. This has contributed to
operating margins before depreciation and amortization declining from 48% for
the twelve months ended December 31, 1993 to 46% for the same period in 1994.
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. Maximum permitted rates under these revised
rules is dependent on several factors including the number of regulated channels
offered, net asset basis of plant and equipment used to deliver regulated
services, the number of subscribers served and a reasonable rate of return.
On February 8, 1996, the Telecommunications Act of 1996 (the 1996 Act) became
law. The 1996 Act will eliminate all rate controls on CPST's of small cable
systems, defined by the 1996 Act as systems serving fewer than 50,000
subscribers owned by operators serving fewer than 1% of all subscribers in the
United States (approximately 600,000 subscribers). All of the Partnership's
cable systems qualify as small cable systems. Many of the changes called for by
the 1996 Act will not take effect until the FCC issues new regulations, a
process that could take from several months to a few years depending on the
complexity of the required changes and the statutory time limits. Because of
this the full impact of the 1996 Act on the Partnership's operations cannot be
determined at this time.
As of the date of this filing, no local franchising authorities have elected to
certify and no RFJ's have been received from franchise authorities.
8
<PAGE> 9
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) Form 8-K, dated December 20, 1995 was filed January 5, 1996 reporting the
acquisition of the Ellenboro, NC and Gilkey/Harris, NC systems which occurred on
December 20, 1995..
9
<PAGE> 10
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: 5/14/96 BY: /s/ RICHARD I. CLARK
---------------- ---------------------------------
Richard I. Clark
(Vice President/Treasurer)
Dated: 5/14/96 BY: /s/ GARY S. JONES
---------------- ---------------------------------
Gary S. Jones
(Vice President)
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 697,020
<SECURITIES> 0
<RECEIVABLES> 493,847
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,347,207
<PP&E> 22,350,436
<DEPRECIATION> 11,968,624
<TOTAL-ASSETS> 18,126,386
<CURRENT-LIABILITIES> 1,492,631
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (4,843,159)
<TOTAL-LIABILITY-AND-EQUITY> 18,126,386
<SALES> 0
<TOTAL-REVENUES> 2,247,864
<CGS> 0
<TOTAL-COSTS> 202,445
<OTHER-EXPENSES> 1,740,597
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 434,025
<INCOME-PRETAX> (126,037)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (126,037)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
