<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: 0-16063
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NORTHLAND CABLE PROPERTIES SIX LIMITED PARTNERSHIP
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(Exact Name of Registrant as Specified in Charter)
Washington 91-1318471
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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
----- -----
________________________
This filing contains __ pages. Exhibits index appears on page __.
<PAGE> 2
PART 1 - FINANCIAL INFORMATION
ITEM 1. Financial Statements
NORTHLAND CABLE PROPERTIES SIX LIMITED PARTNERSHIP
BALANCE SHEETS - (Unaudited)
(Prepared by the Managing General Partner)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
----------- ------------
<S> <C> <C>
ASSETS
Cash $ 332,212 $ 377,075
Accounts receivable 222,863 220,434
Prepaid expenses 71,094 104,183
Property and equipment, net of accumulated
depreciation of $10,570,476 and $9,782,163,
respectively 5,943,500 6,344,168
Intangible assets, net of accumulated
amortization of $10,158,776 and $9,654,241,
respectively 7,477,177 7,977,559
----------- -----------
Total assets $14,046,846 $15,023,419
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses $ 486,654 $ 482,881
Due to managing general partner and affiliates 151,710 87,702
Converter deposits 136,414 138,780
Subscriber prepayments 278,860 412,913
Notes payable 13,439,185 14,224,201
----------- -----------
Total liabilities 14,492,823 15,346,477
----------- -----------
Partners' equity:
General Partners:
Contributed capital, net (35,306) (33,800)
Accumulated deficit (96,329) (96,606)
----------- -----------
(131,635) (130,406)
----------- -----------
Limited Partners:
Contributed capital, net 9,222,065 9,371,145
Accumulated deficit (9,536,406) (9,563,797)
----------- -----------
(314,341) (192,652)
----------- -----------
Total partners' equity (445,977) (323,058)
----------- -----------
Total liabilities and partners' equity $14,046,846 $15,023,419
=========== ===========
</TABLE>
The accompanying note to unaudited financial statements is an integral part of
these statements.
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<PAGE> 3
NORTHLAND CABLE PROPERTIES SIX LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS - (Unaudited)
(Prepared by the Managing General Partner)
<TABLE>
<CAPTION>
For the six months ended June 30,
---------------------------------
1995 1994
---------- ----------
<S> <C> <C>
Service revenues $4,168,467 $3,815,376
Expenses:
Operating 419,664 418,243
General and administrative (including
$653,740 and $499,235 to affiliates
in 1995 and 1994, respectively) 1,001,866 954,456
Programming 915,199 699,714
Depreciation and amortization 1,292,848 1,256,471
---------- ----------
3,629,577 3,328,884
---------- ----------
Income from operations 538,890 486,492
Other income (expense):
Interest expense (518,271) (490,429)
Interest income 7.048 5,203
---------- ----------
(511,223) (485,226)
---------- ----------
Net income $ 27,667 $ 1,266
========== ==========
Allocation of net income:
General Partners $ 277 $ 13
========== ==========
Limited Partners $ 27,390 $ 1,253
========== ==========
Net income per limited partnership
unit: (29,816 units) $ 1 $ 0
========== ==========
Net income per $1,000 investment $ 2 $ 0
========== ==========
</TABLE>
The accompanying note to unaudited financial statements is an integral part of
these statements.
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<PAGE> 4
NORTHLAND CABLE PROPERTIES SIX LIMITED PARTNERSHIP
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 $2,110,080 $1,936,298
Expenses:
Operating 205,187 216,696
General and administrative (including
$327,375 and $254,630 to affiliates
in 1995 and 1994, respectively) 507,545 480,451
Programming 463,545 365,305
Depreciation and amortization 647,863 630,693
---------- ----------
1,824,140 1,693,145
---------- ----------
Income from operations 285,940 243,153
Other income (expense):
Interest expense (256,320) (235,776)
Interest income 4,406 3,050
---------- ----------
(251,914) (232,726)
---------- ----------
Net income $ 34,026 $ 10,427
========== ==========
Allocation of net income:
General Partners $ 340 $ 104
========== ==========
Limited Partners $ 33,686 $ 10,323
========== ==========
Net income per limited partnership
unit: (29,816 units) $ 1 $ 0
========== ==========
Net income per $1,000 investment $ 2 $ 1
========== ==========
</TABLE>
The accompanying note to unaudited financial statements is an integral part of
these statements.
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<PAGE> 5
NORTHLAND CABLE PROPERTIES SIX LIMITED PARTNERSHIP
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 $ 27,667 $ 1,266
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 1,292,848 1,256,471
(Increase) decrease in operating assets:
Accounts receivable (2,429) 7,971
Prepaid expenses 33,089 31,822
Increase (decrease) in operating liabilities:
Account payable and accrued expenses 3,773 (215,009)
Due to managing general partner and affiliates 64,008 57,782
Converter deposits (2,366) 2,371
Subscriber prepayments (134,053) (116,084)
---------- ----------
Net cash from operating activities 1,282,537 1,026,590
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (387,645) (261,881)
---------- ----------
Net cash used in investing activities (387,645) (261,881)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on borrowings (785,016) (777,919)
Distributions to partners (150,586) (150,802)
Loan fees and other costs incurred (4,153) (234)
Repurchase of limited partner interest - (25,975)
---------- ----------
Net cash used in financing activities (939,755) (954,930)
---------- ----------
DECREASE IN CASH (44,863) (190,221)
CASH, beginning of period 377,075 561,067
---------- ----------
CASH, end of period $ 332,212 $ 370,846
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 592,459 $ 533,972
========== ==========
</TABLE>
The accompanying note to unaudited financial statements is an
integral part of these statements.
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<PAGE> 6
NORTHLAND CABLE PROPERTIES SIX 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
Revenues totalled $2,110,080 for the three months ended June 30, 1995,
representing an increase of approximately 9% over the same period in 1994. Of
these revenues, $1,509,479 (71%) was derived from basic service charges,
$217,033 (10%) from premium services, $78,119 (4%) from tier services, $79,381
(4%) from installation charges, $77,622 (4%) from service maintenance contracts
and $148,446 (7%) from other sources. The revenue increase is due to rate
increases placed into effect during the second quarter 1995 and a 162% increase
in advertising revenue.
As of June 30, 1995, the Partnership's systems served approximately 23,200
basic subscribers, 8,100 premium subscribers and 4,700 tier subscribers.
Operating expenses totalled $205,187 for the three months ended June 30, 1995,
representing a decrease of approximately 5% over the same period in 1994. This
is mainly the result of a decrease in system maintenance expense and one less
operating employee offset by an increase in salary and benefit costs.
General and administrative expenses totalled $507,545 for the three months
ended June 30, 1995, representing an increase of 6% over the same period in
1994. This is due to increased management fees which coincide with revenue
increases noted above and an increase in certain wage and benefit costs, offset
by decreases in copyright fees and marketing costs.
Programming expenses totalled $463,545 for the three months ended June 30,
1995, representing a 27% increase over the same period in 1994. This is due to
increases in costs charged by various program suppliers, additional fees
associated with the launch of new channels in various systems, and higher
advertising expenses related to the increased advertising revenue.
Depreciation and amortization expense increased 3% as compared to the same
period in 1994. This is mainly due to depreciation on new assets placed into
service during the last two quarters of 1994 and the first two quarters of
1995.
Interest expense for the three months ended June 30, 1995 increased
approximately 9% as compared to the same period in 1994. The average bank debt
decreased from $15,010,000 during the second quarter of 1994 to $13,604,000
during the second quarter of 1995, however, the Partnership's effective
interest rate increased from 6.29% in 1994 to 7.14% in 1995.
Liquidity and Capital Resources
The Partnership's primary sources of liquidity are cash flow provided from
operations and a $750,000 revolving credit line, of which none was outstanding
as of June 30, 1995. Based on
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<PAGE> 8
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
4.00 to 1 and a minimum ratio of annualized operating cash flow to pro forma
debt service of 1.15 to 1. As of June 30, 1995 the Partnership was in
compliance with its required financial covenants.
As of the date of this filing, the balance under the credit facility is
$13,410,000. Certain fixed rate agreements in effect as of March 31, 1995
expired during the second quarter of 1995 and the Partnership entered into new
agreements. As of the date of this filing, interest rates on the credit
facility were as follows: $5,500,000 fixed at 7.92%, expiring October 31,
1995; $2,875,000 fixed at 6.18% under the terms of a self-amortizing interest
rate swap agreement with its lender, expiring September 30, 1995; and
$5,000,000 fixed at 6.81% under the terms of an interest rate swap agreement
with its lender expiring December 29, 1995. The balance of $35,000 bears
interest at the prime rate plus 1/2% (currently 9.25%). The above rates
include a margin paid to the lender based on overall leverage, and may increase
or decrease as the Partnership's leverage fluctuates.
Capital Expenditures
During the second quarter of 1995, the Partnership incurred approximately
$215,000 in capital expenditures. These expenditures included the continuation
of distribution plant rebuilds in the Highlands, NC and Starkville, MS systems
and the purchase of a vehicle and ad production equipment in the Forest, MS
system. Planned expenditures for the balance of 1995 include continued
rebuilding of the Highlands, NC, Kosciusko, MS and Starkville, MS distribution
plant and a line extension to pass an additional 70 homes in the Starkville, MS
system. Additionally, the partnership has renewed an exclusive bulk service
agreement with Mississippi State University (MSU) for a period of ten years
with a five year renewal option. As a condition to the agreement, the
partnership will make certain capital improvements to the plant serving MSU at
an approximate cost of $250,000. It is expected that these improvements will
be completed during 1995.
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 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
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<PAGE> 9
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, the Partnership has received notification that
local franchising authorities with jurisdiction over approximately 37% of the
Partnership's subscribers have elected to certify and one subscriber complaint
has been filed in a system representing 8% of the Partnership's total
subscribers. Based on management's analysis, the rates charged by these
systems are within the maximum rates allowed under FCC rate regulations.
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<PAGE> 10
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 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 SIX 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)
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<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> 332,212
<SECURITIES> 0
<RECEIVABLES> 222,863
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 626,169
<PP&E> 16,513,976
<DEPRECIATION> 10,570,476
<TOTAL-ASSETS> 14,046,846
<CURRENT-LIABILITIES> 1,053,638
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> (445,977)
<TOTAL-LIABILITY-AND-EQUITY> 14,046,846
<SALES> 0
<TOTAL-REVENUES> 2,110,080
<CGS> 0
<TOTAL-COSTS> 205,187
<OTHER-EXPENSES> 1,618,953
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 256,320
<INCOME-PRETAX> 34,026
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34,026
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
