<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 SEPTEMBER 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___________
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) 674-3900
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(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
BALANCE SHEETS - (Unaudited)
(Prepared by the Managing General Partner)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- -------------
<S> <C> <C>
ASSETS
Cash $ 604,944 $ 414,811
Accounts receivable 430,554 483,208
Insurance receivable -- 126,000
Prepaid expenses 148,920 61,985
Property and equipment, net of accumulated
depreciation of $14,109,895 and $13,074,555,
respectively 9,585,262 9,847,499
Intangible assets, net of accumulated
amortization of $3,038,571 and $2,417,270,
respectively 5,163,732 5,749,774
------------- -------------
Total assets $ 15,933,412 $ 16,683,277
============= =============
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses $ 962,961 $ 816,707
Due to managing general partner and affiliates 361,523 276,161
Converter deposits 18,479 21,602
Subscriber prepayments 156,733 231,419
Notes payable 20,030,173 20,819,461
------------- -------------
Total liabilities 21,529,869 22,165,350
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Partners' equity:
General Partners:
Contributed capital, net (56,075) (56,075)
Accumulated deficit (101,797) (100,673)
------------- -------------
(157,872) (156,748)
------------- -------------
Limited Partners:
Contributed capital, net 591,327 593,327
Accumulated deficit (6,029,912) (5,918,652)
------------- -------------
(5,438,585) (5,325,325)
------------- -------------
Total partners' equity (5,596,457) (5,482,073)
------------- -------------
Total liabilities and partners' equity $ 15,933,412 $ 16,683,277
============= =============
The accompanying note to unaudited financial statements is an integral part of these statements
</TABLE>
2
<PAGE> 3
NORTHLAND CABLE PROPERTIES FIVE LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS - (Unaudited)
(Prepared by the Managing General Partner)
<TABLE>
<CAPTION>
For the nine months ended September 30,
---------------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Service revenues $ 7,073,105 $ 6,858,141
Expenses:
Operating 629,259 592,436
General and administrative (including
$1,070,675 and $936,818 to affiliates
in 1997 and 1996, respectively) 1,760,874 1,732,729
Programming 1,930,194 1,803,030
Depreciation and amortization 1,651,381 1,725,277
----------- -----------
5,971,708 5,853,472
----------- -----------
Income from operations 1,101,397 1,004,669
Other income (expense):
Interest expense (1,265,244) (1,302,565)
Interest income 23,196 1,284
Other income 28,268 2,095
----------- -----------
(1,213,780) (1,299,186)
----------- -----------
Net income (loss) $ (112,383) (294,517)
=========== ===========
Allocation of net income (loss):
General Partners $ (1,124) $ (2,945)
=========== ===========
Limited Partners $ (111,259) $ (291,572)
=========== ===========
Net income (loss) per limited partnership unit:
(14,735 units and 14,739 units, respectively) $ (8) $ (20)
=========== ===========
Net income (loss) per $1,000 investment $ (15) $ (40)
=========== ===========
The accompanying note to unaudited financial statements is an integral part of these statements
</TABLE>
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 September 30,
-------------------------------------------
1997 1996
---------------- ----------------
<S> <C> <C>
Service revenues $ 2,398,487 $ 2,343,307
Expenses:
Operating 214,377 210,166
General and administrative (including
$303,451 and $307,489 to affiliates
in 1997 and 1996, respectively) 606,697 604,244
Programming 645,994 613,177
Depreciation and amortization 546,192 515,960
---------------- ----------------
2,013,260 1,943,547
---------------- ----------------
Income from operations 385,227 399,760
Other income (expense):
Interest expense (424,977) (433,461)
Interest income 18,563 213
Other income 28,218 --
---------------- ----------------
(378,196) (433,248)
---------------- ----------------
Net income (loss) $ 7,031 $ (33,488)
================ ================
Allocation of net income (loss)
General Partners $ 70 $ (335)
================ ================
Limited Partners $ 6,961 $ (33,153)
================ ================
Net income (loss) per limited partnership unit:
(14,735 units and 14,739 units, respectively) $ -- $ (2)
================ ================
Net income (loss) per $1,000 investment $ -- $ (4)
================ ================
The accompanying note to unaudited financial statements is an integral part of these statements
</TABLE>
4
<PAGE> 5
NORTHLAND CABLE PROPERTIES FIVE LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS - (Unaudited)
(Prepared by the Managing General Partner)
<TABLE>
<CAPTION>
For the nine months ended September 30,
-----------------------------------------
1997 1996
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ (112,383) $ (294,517)
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 1,651,381 1,725,277
(Increase) decrease in operating assets:
Accounts receivable 52,654 (104,162)
Insurance receivable 126,000 --
Prepaid expenses (86,935) 5,688
Increase (decrease) in operating liabilities
Accounts payable and accrued expenses 146,254 540,096
Due to managing general partner and affiliates 85,362 80,029
Converter deposits (3,123) (3,296)
Subscriber prepayments (74,686) (25,935)
--------------- ---------------
Net cash from operating activities 1,784,524 1,923,180
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (803,103) (813,489)
--------------- ---------------
Net cash used in investing activities (803,103) (813,489)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on borrowings (789,288) (643,843)
Distributions to partners -- (74,439)
Loan fees and other costs incurred -- (26,353)
Repurchase of limited partner interest (2,000) --
--------------- ---------------
Net cash used in financing activities (791,288) (744,635)
--------------- ---------------
INCREASE IN CASH 190,133 365,056
CASH, beginning of period 414,811 241,713
--------------- ---------------
CASH, end of period $ 604,944 $ 606,769
=============== ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 1,020,241 $ 885,896
=============== ===============
The accompanying note to unaudited financial statements is an integral part of these statements
</TABLE>
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 September 30, 1997 and December 31, 1996, its Statements
of Operations for the nine and three months ended September 30, 1997 and 1996,
and its Statements of Cash Flows for the nine months ended September 30, 1997
and 1996. 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 $2,341,403 for the three months ended
September 30, 1997, representing no substantial increase over the same period in
1996. Of these revenues, $1,637,519 (70%) was derived from basic service
charges, $230,208 (10%) from premium services, $246,194 (11%) from tier
services, $42,362 (2%) from installation charges, $42,102 (2%) from service
maintenance contracts and $143,018 (5%) from other sources.
As of September 30, 1997, the Partnership's systems served approximately 22,700
basic subscribers, 9,200 premium subscribers and 10,500 tier subscribers.
Cable television operating expenses totaled $212,375 for the three months ended
September 30, 1997, an increase of approximately 2% over the same period in
1996. This is mainly due to increased personnel costs.
Cable television general and administrative expenses totaled $576,344 for the
three months ended September 30, 1997, representing no substantial increase over
the same period in 1996. This is mainly due to increased expenses related to
personnel offset by an adjustment to franchise fees.
Cable television programming expenses totaled $611,677 for the three months
ended September 30, 1997, reflecting an increase of approximately 6% 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 September 30, 1997
included revenues of $57,084 derived primarily from advertising sales. Radio
operation expenses are primarily comprised of programming and salary and benefit
costs.
Depreciation and amortization expense increased approximately 6% as compared to
the same period in 1996. This is mainly due to assets acquired in 1997 and
fourth quarter 1996.
Interest expense for the three months ended September 30, 1997 decreased
approximately 2% as compared to the same period in 1996. The average bank debt
outstanding decreased from $21,181,554 during the third quarter of 1996 to
$20,279,766 during the third quarter of 1997 due to required principal payments
being made. The Partnership's effective interest rate increased from
approximately 8.19% during the third quarter of 1996 to 8.38% during the third
quarter of 1997.
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.
7
<PAGE> 8
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 September 30,
1997, the Partnership was in compliance with its required financial covenants as
amended.
The balance outstanding under the credit facility is $20,017,266. 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 $4,732,000 fixed at 8.34375% under the
terms of an interest rate swap agreement expiring December 8, 1997. The balance
of $200,000 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 third quarter of 1997, the Partnership incurred approximately
$362,000 in capital expenditures including a vehicle upgrade and new office
construction in the Corsicana, TX system; a trunk replacement in the Cedar
Creek, TX system; a telephone system replacement in the Forest City, NC system;
and line extensions in the Lamesa, TX system.
Planned expenditures for the balance of 1997 include construction of a fiber
optic backbone and new vehicle purchase in Cedar Creek, TX; channel additions
and vehicle replacement in Lamesa, TX; a continuing trunk upgrade to 400 MHz in
the Ellenboro, NC portion of the Forest City, NC system; computer equipment
upgrade in Corsicana, TX and small 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 on 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 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.
8
<PAGE> 9
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 Public, Educational and Governmental access
channels 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 September
30, 1997.
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
<PAGE> 12
EXHIBIT INDEX
Exhibit Number Description
- -------------- ------------------------
27.0 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 604,944
<SECURITIES> 0
<RECEIVABLES> 430,554
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 23,695,157
<DEPRECIATION> 14,109,895
<TOTAL-ASSETS> 15,933,412
<CURRENT-LIABILITIES> 1,499,696
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (5,596,457)
<TOTAL-LIABILITY-AND-EQUITY> 15,933,412
<SALES> 7,073,105
<TOTAL-REVENUES> 7,073,105
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,971,708
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,265,244
<INCOME-PRETAX> (112,383)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (112,383)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
