<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, 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>
June 30, December 31,
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
Cash $ 611,477 $ 241,713
Accounts receivable 537,102 411,862
Prepaid expenses 79,973 81,309
Property and equipment, net of accumulated
depreciation of $12,418,650 and $11,562,201,
respectively 10,222,309 10,663,580
Intangible assets, net of accumulated
amortization of $1,927,989 and $1,575,121,
respectively 6,226,271 6,552,786
----------- -----------
Total assets $17,677,132 $17,951,250
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses $ 1,155,386 $ 574,311
Due to managing general partner and affiliates 18,318 190,853
Converter deposits 24,661 26,761
Subscriber prepayments 252,659 178,238
Notes payable 21,204,261 21,660,989
----------- -----------
Total liabilities 22,655,285 22,631,152
------------ -----------
Partners' equity:
General Partners:
Contributed capital,net (55,703) (55,331)
Accumulated deficit (96,006) (93,396)
----------- -----------
(151,709) (148,727)
----------- -----------
Limited Partners:
Contributed capital, net 630,173 667,021
Accumulated deficit (5,456,617) (5,198,196)
----------- -----------
(4,826,444) (4,531,175)
----------- -----------
Total partners' equity (4,978,153) (4,679,902)
----------- -----------
Total liabilities and partners' equity $17,677,132 $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 six months ended June 30,
----------------------------------------
1996 1995
---------- ----------
<S> <C> <C>
CABLE TELEVISION OPERATIONS:
Service revenues $4,350,075 $3,677,778
Expenses:
Operating 379,285 333,325
General and administrative (including
$629,329 and $523,354 to affiliates
in 1996 and 1995, respectively) 1,077,646 915,429
Programming 1,111,281 923,025
Depreciation and amortization 1,181,075 872,989
---------- ----------
Income from cable television operations 600,788 633,010
---------- ----------
RADIO STATION OPERATIONS:
Broadcast revenues 164,757 144,274
Operating expenses 2,985 9,890
Administrative expenses 50,840 36,860
Programming expenses 78,571 89,960
Depreciation and amortization 28,242 23,994
---------- ----------
Income (loss) from radio station operations 4,119 (16,430)
---------- ----------
Income from operations 604,907 616,580
Other income (expense):
Interest expense (869,104) (719,670)
Interest income 1,071 5,714
Loss on disposal of assets - (14,795)
Other income 2,095 7,149
---------- ----------
(865,938) (721,602)
---------- ----------
Loss before income taxes (261,031) (105,022)
---------- ----------
Income tax expense (benefit) - 1,389
---------- ----------
Net loss ($261,031) (106,411)
========== ==========
Allocation of net loss:
General Partners ($2,610) ($1,064)
========== ==========
Limited Partners ($258,421) ($105,347)
========== ==========
Net loss per limited partnership unit:
(14,739 units) ($18) ($7)
========== ==========
Net loss per $1,000 investment ($35) ($14)
========== ==========
</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 OPERATIONS - (Unaudited)
(Prepared by the Managing General Partner)
<TABLE>
<CAPTION>
For the three months ended June 30,
----------------------------------------
1996 1995
---------- ----------
<S> <C> <C>
CABLE TELEVISION OPERATIONS:
Service revenues $2,177,114 $1,887,180
Expenses:
Operating 178,313 178,503
General and administrative (including
$317,725 and $262,754 to affiliates
in 1996 and 1995, respectively) 541,711 466,761
Programming 559,653 473,753
Depreciation and amortization 610,993 457,540
---------- ----------
Income from cable television operations 286,444 310,623
---------- ----------
RADIO STATION OPERATIONS:
Broadcast Revenues 89,853 83,051
Operating expenses 1,511 6,055
Administrative expenses 24,629 20,480
Programming expenses 34,604 47,344
Depreciation and amortization 15,467 13,358
---------- ----------
Income from radio station operations 13,642 (4,186)
---------- ----------
Income from operations 300,086 306,437
Other income (expense):
Interest expense (435,080) (361,927)
Interest income - 3,459
Loss on disposal of assets - (14,795)
---------- ----------
(435,080) (373,263)
---------- ----------
Loss before income taxes (134,994) (66,826)
---------- ----------
Income tax expense (benefit) - 1,389
---------- ----------
Net loss ($134,994) ($68,215)
========== ==========
Allocation of net loss:
General Partners ($1,350) ($682)
========== ==========
Limited Partners ($133,644) ($67,533)
========== ==========
Net loss per limited partnership unit:
(14,739 units) ($9) ($5)
========== ==========
Net loss per $1,000 investment ($18) ($10)
========== ==========
</TABLE>
The accompanying note to unaudited financial statements is an integral part of
these statements
4
<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,
---------------------------------------
1996 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($261,031) ($106,411)
Adjustments to reconcile net loss to
cash provided by operating activities:
Depreciation and amortization 1,209,317 896,983
Loss on disposal of assets - 6,044
(Increase) decrease in operating assets:
Accounts receivable (125,240) (86,420)
Prepaid expenses 1,336 (19,130)
Increase (decrease) in operating liabilities
Accounts payable and accrued expenses 581,075 249,118
Due to managing general partner and affiliates (172,535) (22,173)
Converter deposits (2,100) (7,442)
Subscriber prepayments 74,421 (56,194)
--------- ---------
Net cash from operating activities 1,305,243 854,375
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (415,178) (260,092)
Purchase of radio station - (450,000)
--------- ---------
Net cash used in investing activities (415,178) (710,092)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on borrowings (456,728) (454,305)
Distributions to partners (37,220) (74,439)
Loan fees and other costs incurred (26,353) (60,912)
Repurchase of limited partner interest - -
--------- ---------
Net cash from (used in) financing activities (520,301) (589,656)
--------- ---------
DECREASE IN CASH 369,764 (445,373)
CASH, beginning of period 241,713 1,152,286
--------- ---------
CASH, end of period $611,477 $706,913
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $371,107 $722,926
========= =========
</TABLE>
The accompanying note to unaudited financial statements is an integral part of
these statements
5
<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, 1996 and December 31,
1995, its Statements of Operations for the six and three months ended June 30,
1996 and 1995, and its Statements of Cash Flows for the six months ended June
30, 1996 and 1995. Results of operations for these periods are not necessarily
indicative of results to be expected for the full year.
6
<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 totaled $2,177,114 for the three months ended June
30, 1996, representing an increase of approximately 15% over the same period in
1995. Of these revenues, $1,532,270 (70%) was derived from basic service
charges, $238,362 (11%) from premium services, $177,565 (8%) from tier
services, $44,398 (2%) from installation charges, $45,138 (2%) from service
maintenance contracts and $139,381 (7%) from other sources. The growth in
revenue is mainly attributable to the acquisition of the Ellenboro, NC and
Gilkey/Harris, NC systems and rate increases placed into effect the latter part
of 1995.
As of June 30, 1996, the Partnership's systems served approximately 23,400
basic subscribers, 8,300 premium subscribers and 8,800 tier subscribers.
Cable television operating expenses totaled $178,313 for the three months ended
June 30, 1996, remaining consistent with the same period in 1995. This is
mainly due to the acquisition of the Ellenboro, NC and Gilkey/Harris, NC
systems offset by a portion of the operating expenses charged to an affiliated
entity as a result of shared operating personnel and expenses.
Cable television general and administrative expenses totaled $541,711 for the
three months ended June 30, 1996, representing an increase of approximately 16%
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 is consistent with the
revenue growth noted above.
Cable television programming expenses totaled $559,653 for the three months
ended June 30, 1996, reflecting an increase of approximately 18% over the same
period in 1995. This is mainly due to the increased subscribers as a result of
the purchase of 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 $89,853 derived primarily
from advertising sales. Radio operation expenses are primarily comprised of
programming and salary and benefit costs.
Cable television depreciation and amortization expense increased approximately
34% as compared to the same period in 1995. This is mainly due to depreciation
and amortization on plant, equipment and intangible assets acquired from the
purchase of the Ellenboro, NC and Gilkey/Harris, NC systems offset by assets
becoming fully depreciated during the second quarter of 1996.
Interest expense for the three months ended June 30, 1996 increased
approximately 20% as compared to the same period in 1995. The average bank
debt outstanding increased from $17,068,000 during the second quarter of 1995
to $21,275,000 during the second 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 8.48% during the second quarter of 1995 to 8.18% during the
second quarter of 1996.
7
<PAGE> 8
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
5.75 to 1 and a minimum ratio of annualized operating cash flow to fixed
charges of 1.00 to 1. As of June 30, 1996 the Partnership was in compliance
with its required financial covenants.
The balance outstanding under the credit facility is $21,181,554. As of the
date of this filing, interest rates on the credit facility were as follows:
$16,250,000 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
9.625%). 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 second quarter of 1996, the Partnership incurred approximately
$291,000 in capital expenditures including the rebuilding of the distribution
plant damaged in a winter ice storm and the purchase of a vehicle in the Forest
City, NC system.
Planned expenditures for the balance of 1996 include system upgrades in the
Cedar Creek, TX system; completion of the rebuild of storm-damaged distribution
plant and a fiber interconnect of two systems in the Forest City, NC area; and
vehicle replacements and line extensions in various systems.
8
<PAGE> 9
Effects of Regulation
On February 8, 1996, the Telecommunications Act of 1996 (the "1996 Act") was
enacted which dramatically changed federal telecommunications laws and the
future competitiveness of the industry. Many of the changes called for by the
1996 Act will not take effect until the FCC issues new regulations which, in
some cases, may not be completed for a few years. Because of this, the full
impact of the 1996 Act on the Partnership's operations cannot be determined at
this time. A summary of the provisions impacting the cable television
industry, more specifically those impacting the Partnership's operations,
follows:
Cable Programming Service Tier Rate Regulation. FCC regulation of rates for
cable programming service tiers has been eliminated for small cable systems by
small companies. Small cable systems are those having 50,000 or fewer
subscribers served by companies with fewer than one percent of national cable
subscribers (approximately 600,000). All of the Partnership's cable systems
qualify as small cable systems. Basic tier rates remain subject to regulation
by the local franchising authority under most circumstances until effective
competition exists. The 1996 Act expands the definition of effective
competition to include the offering of video programming services directly to
subscribers in a franchised area by the local exchange carrier, its affiliates,
or any multichannel video programming distributor which uses the facilities of
the local exchange carrier. No penetration criteria exists that triggers the
presence of effective competition under these circumstances.
Telephone Companies. The 1996 Act allows telephone companies to offer video
programming directly to customers in their service areas immediately upon
enactment. They may provide video programming as a cable operator fully
subject to any provisions of the 1996 Act, or a radio-based multichannel
programming distributor not subject to any provisions of the 1996 Act or
through non-franchised "open video systems" offering non-discriminatory
capacity to unaffiliated programmers, subject to selected provisions of the
1996 Act. Although Management's opinion is that the probability of competition
from telcos in rural areas is unlikely in the near future, there are no
assurances such competition will not materialize.
The 1996 Act encompasses various other aspects of providing cable television
service including prices for equipment, discounting of rates to multiple
dwelling units, lifting of anti-trafficking restrictions, cable-telephone cross
ownership provisions, pole attachment rate formulas, rate uniformity, program
access, scrambling and censoring of PEG and leased access channels.
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.
9
<PAGE> 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 June 30,
1996.
10
<PAGE> 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 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)
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 611,477
<SECURITIES> 0
<RECEIVABLES> 537,102
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,228,552
<PP&E> 22,640,959
<DEPRECIATION> 12,418,650
<TOTAL-ASSETS> 17,677,132
<CURRENT-LIABILITIES> 1,451,024
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (4,978,153)
<TOTAL-LIABILITY-AND-EQUITY> 17,677,132
<SALES> 0
<TOTAL-REVENUES> 4,514,832
<CGS> 0
<TOTAL-COSTS> 382,270
<OTHER-EXPENSES> 3,527,655
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 869,104
<INCOME-PRETAX> (261,031)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (261,031)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
