<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, 1997
--------------------
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from to
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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) 674-3900
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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 .
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PART 1 - FINANCIAL INFORMATION
ITEM 1. Financial Statements
NORTHLAND CABLE PROPERTIES FIVE LIMITED PARTNERSHIP
BALANCE SHEETS - (Unaudited)
(Prepared by the Managing General Partner)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Cash $ 803,470 $ 414,811
Accounts receivable 497,004 483,208
Insurance receivable 0 126,000
Prepaid expenses 65,622 61,985
Property and equipment, net of accumulated
depreciation of $13,770,722 and $13,074,555,
respectively 9,588,662 9,847,499
Intangible assets, net of accumulated
amortization of $2,831,925 and $2,417,270,
respectively 5,344,767 5,749,774
------------ ------------
Total assets $ 16,299,525 $ 16,683,277
============ ============
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses $ 1,109,913 $ 816,707
Due to managing general partner and affiliates 329,349 276,161
Converter deposits 19,138 21,602
Subscriber prepayments 151,940 231,419
Notes payable 20,292,673 20,819,461
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Total liabilities 21,903,013 22,165,350
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Partners' equity:
General Partners:
Contributed capital, net (56,075) (56,075)
Accumulated deficit (101,867) (100,673)
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(157,942) (156,748)
------------ ------------
Limited Partners:
Contributed capital, net 591,327 593,327
Accumulated deficit (6,036,873) (5,918,652)
------------ ------------
(5,445,546) (5,325,325)
------------ ------------
Total partners' equity (5,603,488) (5,482,073)
------------ ------------
Total liabilities and partners' equity $ 16,299,525 $ 16,683,277
============ ============
</TABLE>
The accompanying note to unaudited financial
statements is an integral part of these statements
2
<PAGE> 3
NORTHLAND CABLE PROPERTIES FIVE LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS - (Unaudited)
(Prepared by the Managing General Partner)
<TABLE>
<CAPTION>
For the six months ended June 30,
------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Service revenues $ 4,674,618 $ 4,514,831
Expenses:
Operating 414,883 382,270
General and administrative (including
$767,224 and $629,329 to affiliates
in 1997 and 1996, respectively) 1,154,177 1,128,485
Programming 1,284,200 1,189,852
Depreciation and amortization 1,105,189 1,209,317
----------- -----------
3,958,449 3,909,924
----------- -----------
Income from operations 716,169 604,907
Other income (expense):
Interest expense (840,267) (869,104)
Interest income 4,633 1,071
Other income 50 2,095
----------- -----------
(835,584) (865,938)
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Net income $ (119,415) (261,031)
=========== ===========
Allocation of net income:
General Partners $ (1,194) $ ( 2,610)
=========== ===========
Limited Partners $ (118,221) $ (258,421)
=========== ===========
Net income per limited partnership unit:
(14,735 units and 14,739 units, respectively) $ (8) $ ( 18)
=========== ===========
Net income per $1,000 investment $ (16) $ (35)
=========== ===========
</TABLE>
The accompanying note to unaudited financial
statements is an integral part of these statements
3
<PAGE> 4
NORTHLAND CABLE PROPERTIES FIVE LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS - (Unaudited)
(Prepared by the Managing General Partner)
<TABLE>
<CAPTION>
For the three months ended June 30,
------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Service revenues $ 2,359,069 $ 2,266,966
Expenses:
Operating 218,995 179,824
General and administrative (including
$413,846 and $317,724 to affiliates
in 1997 and 1996, respectively) 613,562 566,340
Programming 641,654 594,258
Depreciation and amortization 513,945 626,460
----------- -----------
1,988,156 1,966,882
----------- -----------
Income from operations 370,913 300,084
Other income (expense):
Interest expense (420,673) (435,079)
Interest income 3,473 0
Other income 0 0
----------- -----------
(417,200) (435,079)
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Net income $ (46,287) $ (134,995)
=========== ===========
Allocation of net income
General Partners $ (463) $ (1,350)
=========== ===========
Limited Partners $ (45,824) $ (133,645)
=========== ===========
Net income per limited partnership unit:
(14,735 units and 14,739 units, respectively) $ (3) $ (9)
=========== ===========
Net income per $1,000 investment $ (6) $ (18)
=========== ===========
</TABLE>
The accompanying note to unaudited financial
statements is an integral part of these statements
4
<PAGE> 5
NORTHLAND CABLE PROPERTIES FIVE LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS - (Unaudited)
(Prepared by the Managing General Partner)
<TABLE>
<CAPTION>
For the six months ended June 30,
----------- -----------
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ (119,415) $ (261,031)
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 1,105,189 1,209,317
(Increase) decrease in operating assets:
Accounts receivable (13,796) (125,240)
Insurance receivable 126,000 0
Prepaid expenses (3,637) 1,336
Increase (decrease) in operating liabilities
Accounts payable and accrued expenses 293,206 581,075
Due to managing general partner and affiliates 53,188 (172,535)
Converter deposits (2,464) (2,100)
Subscriber prepayments (79,479) 74,421
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Net cash from operating activities 1,358,792 1,305,243
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (431,697) (415,178)
----------- -----------
Net cash used in investing activities (431,697) (415,178)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on borrowings (526,788) (456,728)
Distributions to partners 0 (37,220)
Loan fees and other costs incurred (9,648) (26,353)
Repurchase of limited partner interest (2,000) 0
----------- -----------
Net cash used in financing activities (538,436) (520,301)
----------- -----------
DECREASE IN CASH 388,659 369,764
CASH, beginning of period 414,811 241,713
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CASH, end of period $ 803,470 $ 611,477
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 515,791 $ 371,107
=========== ===========
</TABLE>
The accompanying note to unaudited financial
statements is an integral part of these statements
5
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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, 1997 and December 31, 1996, its Statements of
Operations for the six and three months ended June 30, 1997 and 1996, and its
Statements of Cash Flows for the six months ended June 30, 1997 and 1996.
Results of operations for these periods are not necessarily indicative of
results to be expected for the full year.
6
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PART I (continued)
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Cable television revenues totaled $2,288,174 for the three months ended June 30,
1997, representing an increase of approximately 5% over the same period in 1996.
Of these revenues, $1,598,585 (70%) was derived from basic service charges,
$229,181 (10%) from premium services, $231,606 (10%) from tier services, $42,551
(2%) from installation charges, $41,952 (2%) from service maintenance contracts
and $144,299 (6%) from other sources. The growth in revenue is mainly
attributable to the rate increases placed into effect the latter part of 1996.
As of June 30, 1997, the Partnership's systems served approximately 22,800 basic
subscribers, 9,100 premium subscribers and 10,300 tier subscribers.
Cable television operating expenses totaled $217,538 for the three months ended
June 30, 1997, an increase of approximately 22% over the same period in 1996.
This is mainly due to the increased personnel costs as well as increased pole
rental costs.
Cable television general and administrative expenses totaled $582,418 for the
three months ended June 30, 1997, representing an increase of approximately 8%
over the same period in 1996. This is mainly due to increased expenses related
to personnel as well as higher revenue based expenses such as management fees
and franchise fees.
Cable television programming expenses totaled $603,744 for the three months
ended June 30, 1997, reflecting an increase of approximately 8% over the same
period in 1996. This is mainly due to higher costs charged by program suppliers
and additional salary and benefit costs related to local programming and
advertising support.
The radio station operations for the three months ended June 30, 1997 included
revenues of $70,895 derived primarily from advertising sales. Radio operation
expenses are primarily comprised of programming and salary and benefit costs.
Depreciation and amortization expense decreased approximately 18% as compared to
the same period in 1996. This is mainly due to assets becoming fully depreciated
in 1997.
Interest expense for the three months ended June 30, 1997 decreased
approximately 3% as compared to the same period in 1996. The average bank debt
outstanding decreased from $21,339,088 during the second quarter of 1996 to
$20,424,817 during the second quarter of 1997 due to required principal payments
being made. The Partnership's effective interest rate increased from
approximately 8.16% during the second quarter of 1996 to 8.24% during the second
quarter of 1997.
7
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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
5.50 to 1 (Leverage Ratio) and a minimum ratio of annualized operating cash flow
to fixed charges of 1.00 to 1 (Fixed Charge Ratio). As of March 31, 1997 the
Partnership was not in compliance with its Fixed Charge Ratio. The Partnership's
lender waived this requirement for the first quarter of 1997. Additionally, the
Partnership's lender has agreed to amend certain financial covenants through
June 30, 1998 including the Leverage and Fixed Charge Ratios. At June 30, 1997,
the Partnership was in compliance with its required financial covenants as
amended.
The balance outstanding under the credit facility is $20,279,766. As of the date
of this filing, interest rates on the credit facility were as follows:
$15,350,000 fixed at 7.995% under the terms of an amortizing interest rate swap
agreement expiring December 8, 1997; and $4,700,000 fixed at 8.285% under the
terms of an interest rate swap agreement expiring July 10, 1997. The balance of
$231,554 bears interest at the prime rate plus 1 3/8% (currently 9.875%). 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 1997, the Partnership incurred approximately
$229,580 in capital expenditures including a vehicle replacement and new office
construction in the Corsicana, TX system; a trunk replacement in the Cedar
Creek, TX system; and line extensions and system upgrades in the Lamesa, TX and
Forest City, NC systems.
Planned expenditures for the balance of 1997 include construction of a fiber
optic backbone in Cedar Creek, TX; channel additions in Lamesa, TX; trunk
upgrade to 400 MHz and tap audit in the Ellenboro, NC portion of the Forest
City, NC system; continued construction of a new office building in Corsicana,
TX and line extensions in various systems.
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 telecommunications 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 o the Partnership's operations cannot
be determined at this time. A summary of certain provisions affecting the
Partnership's operations follows:
Cable Programming Service Tier Regulation. FCC regulation of rates other than
the basic service tier has been eliminated for small cable systems served 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). The Partnership qualifies as a small
company and 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
8
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expands the definition of effective competition to include the offering of video
programming services directly to subscribers in a franchised area by a local
telephone exchange carrier, its affiliates, or any multichannel video
programming distributor which uses the facilities of the local exchange carrier.
The FCC has not yet determined the penetration criteria that will trigger 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 requests for rate justifications 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,
1997.
10
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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
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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:
------------- --------------------------------
Richard I. Clark
(Vice President/Treasurer)
Dated: BY:
------------- --------------------------------
Gary S. Jones
(Vice President)
12
<PAGE> 13
EXHIBIT INDEX
EXHIBIT
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27.0 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 803,470
<SECURITIES> 0
<RECEIVABLES> 497,004
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 23,359,384
<DEPRECIATION> 13,770,722
<TOTAL-ASSETS> 16,299,525
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (5,603,488)
<TOTAL-LIABILITY-AND-EQUITY> 16,299,525
<SALES> 4,674,618
<TOTAL-REVENUES> 4,674,618
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,958,449
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 840,267
<INCOME-PRETAX> (119,415)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (119,415)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
