<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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
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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) (IRS 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
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- ------------------------
This filing contains pages. Exhibits index appears on page .
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<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,
1996 1995
----------- ------------
<S> <C> <C>
ASSETS
Cash $ 267,535 $ 348,690
Accounts receivable 318,640 288,090
Prepaid expenses 75,369 86,771
Property and equipment, net of accumulated
depreciation of $11,979,040 and $11,168,699,
respectively 6,086,045 6,529,519
Intangible assets, net of accumulated
amortization of $11,169,285 and $10,663,726,
respectively 7,107,377 7,525,601
----------- -----------
Total assets $13,854,966 $14,778,671
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses $ 759,465 $ 627,210
Due to managing general partner and affiliates 104,992 108,344
Converter deposits 123,678 131,696
subscriber prepayments 277,593 414,790
Notes payable 12,929,790 13,914,689
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Total liabilities 14,195,518 15,196,729
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Partners' equity:
General Partners:
Contributed capital, net (37,565) (36,812)
Accumulated deficit (93,016) (94,544)
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(130,581) (131,356)
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Limited Partners:
Contributed capital, net 8,998,444 9,072,984
Accumulated deficit (9,208,415) (9,359,686)
----------- -----------
(209,971) (286,702)
----------- -----------
Total partners' equity (340,552) (418,058)
----------- -----------
Total liabilities and partners' equity $13,854,966 $14,778,671
=========== ===========
</TABLE>
The accompanying note to unaudited financial statements is an integral part of
these statements
2
<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,
--------------------------------------
1996 1995
---------- ----------
<S> <C> <C>
Service revenues $4,550,096 $4,168,467
Expenses:
Operating 428,198 419,664
General and administrative (including
$714,534 and $653,740 to affiliates
in 1996 and 1995, respectively) 1,066,501 1,001,866
Programming 1,011,127 915,199
Depreciation and amortization 1,315,901 1,292,848
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3,821,727 3,629,577
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Income from operations 728,369 538,890
Other income (expense):
Interest expense (581,467) (518,271)
Interest income 5,897 7,048
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(575,570) (511,223)
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Net income $ 152,799 27,667
========== ==========
Allocation of net income:
General Partners $ 1,528 $ 277
========== ==========
Limited Partners $ 151,271 $ 27,390
========== ==========
Net income per limited partnership unit:
(29,816 units) $ 5 $ 1
========== ==========
Net income per $1,000 investment $ 10 $ 2
========== ==========
</TABLE>
The accompanying note to unaudited financial statements is an integral part of
these statements
3
<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,
--------------------------------------
1996 1995
---------- ----------
<S> <C> <C>
Service revenues $2,294,826 $2,110,080
Expenses:
Operating 217,406 205,187
General and administrative (including
$354,110 and $327,375 to affiliates
in 1996 and 1995, respectively) 545,826 507,545
Programming 510,541 463,545
Depreciation and amortization 657,950 647,863
---------- ----------
1,931,723 1,824,140
---------- ----------
Income from operations 363,103 285,940
Other income (expense):
Interest expense (256,985) (256,320)
Interest income 3,748 4,406
---------- ----------
(253,237) (251,914)
---------- ----------
Net income $ 109,866 $ 34,026
========== ==========
Allocation of net income
General Partners $ 1,099 $ 340
========== ==========
Limited Partners $ 108,767 $ 33,686
========== ==========
Net income per limited partnership unit:
(29,816 units) $ 4 $ 1
========== ==========
Net income per $1,000 investment $ 8 $ 2
========== ==========
</TABLE>
The accompanying note to unaudited financial statements is an integral part of
these statements
4
<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,
---------------------------------------
1996 1995
----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 152,799 $ 27,667
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 1,315,901 1,292,848
(Increase) decrease in operating assets:
Accounts receivable (30,550) (2,429)
Prepaid expenses 11,402 33,089
Increase (decrease) in operating liabilities
Accounts payable and accrued expenses 132,255 3,773
Due to managing general partner and affiliates (3,352) 64,008
Converter deposits (8,018) (2,366)
Subscriber prepayments (137,197) (134,053)
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Net cash from operating activities 1,433,240 1,282,537
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (366,868) (387,645)
----------- ----------
Net cash used in investing activities (366,868) (387,645)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on borrowings (984,899) (785,016)
Distributions to partners (75,293) (150,586)
Loan fees and other costs incurred (87,335) (4,153)
Repurchase of limited partner interest - -
----------- ----------
Net cash used in financing activities (1,147,527) (939,755)
----------- ----------
DECREASE IN CASH (81,155) (44,863)
CASH, beginning of period 348,690 377,075
----------- ----------
CASH, end of period $ 267,535 $ 332,212
=========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 567,512 $ 592,459
=========== ==========
</TABLE>
The accompanying note to unaudited financial statements is an integral part of
these statements
5
<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, 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 three 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
Revenues totaled $2,294,826 for the three months ended June 30, 1996,
representing an increase of approximately 9% over the same period in 1995. Of
these revenues, $1,651,644 (72%) was derived from basic service charges,
$223,743 (10%) from premium services, $98,334 (4%) from tier services, $87,763
(4%) from installation charges, $81,719 (3%) from service maintenance contracts
and $151,623 (7%) from other sources. The revenue growth is due to rate
increases placed into effect during the fourth quarter 1995, and the
acquisition of 700 subscribers in the Highlands, NC area in December 1995.
As of June 30, 1996, the Partnership's systems served approximately 24,000
basic subscribers, 8,200 premium subscribers and 5,200 tier subscribers.
Operating expenses totaled $217,406 for the three months ended June 30, 1996,
representing an increase of approximately 6% over the same period in 1995.
This is mainly due to increased salary and benefit costs as a result of cost of
living adjustments and higher system maintenance expenses related to the new
subscribers.
General and administrative expenses totaled $545,826 for the three months ended
June 30, 1996, representing an increase of approximately 8% over the same
period in 1995. This is attributable to higher salary and benefit costs as a
result of cost of living adjustments and increases in revenue-based expenses,
such as, management and franchise fees.
Programming expenses totaled $510,541 for the three months ended June 30, 1996,
representing an increase of approximately 10% over the same period in 1995.
This is mainly due to higher costs charged by various programmers, the
additional subscribers in the Highlands, NC area and fees associated with new
channel additions in various systems.
Depreciation and amortization expense increased 2% 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 acquisition of new
subscribers in the Highlands, NC area, offset by assets becoming fully
depreciated during the second quarter of 1996.
Interest expense for the three months ended June 30, 1996 remained consistent
with the same period in 1995. The average bank debt decreased from $13,604,000
during the second quarter of 1995 to $13,140,000 during the second quarter of
1996, however, the Partnership's effective interest rate increased from 7.54%
in 1995 to 7.82% in 1996.
7
<PAGE> 8
Liquidity and Capital Resources
The Partnership's primary sources of liquidity are cash flow provided from
operations and a $2,000,000 revolving credit line, of which approximately
$1,200,000 was outstanding as of June 30, 1996. 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
3.25 to 1. As of June 30, 1996 the Partnership was in compliance with its
required financial covenants.
As of the date of this filing, the balance under the credit facility is
$12,895,821. Certain fixed rate agreements in effect as of March 31, 1996
expired during the second quarter of 1996 and the Partnership entered into new
agreements. As of the date of this filing, interest rates on the credit
facility were as follows: $1,400,000 fixed at 7.20%, expiring August 30, 1996;
$11,432,000 fixed at 7.36% under the terms of an interest rate swap agreement
with its lender expiring March 28, 1997. The balance of $63,321 bears interest
at the prime rate plus 1/4% (currently 8.50%). 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 1996, the Partnership incurred approximately
$217,000 in capital expenditures. These expenditures included a vehicle
replacement and purchase of computer equipment in the Starkville, MS system;
additional costs associated with a tier launch in the Forest, MS system; and
line extensions in the Philadelphia, MS, Kosciusko, MS and Highlands, NC
systems.
Planned expenditures for the balance of 1996 include the continued deployment
of fiber in the Starkville, MS system; the completion of a 330MHz upgrade of
the distribution plant in the Forest, MS system; 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 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:
8
<PAGE> 9
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, the Partnership has received notification that
local franchising authorities with jurisdiction over approximately 36% of the
Partnership's subscribers have elected to certify. Based on management's
analysis, the rates charged by these systems are within the maximum rates
allowed under FCC rate regulations.
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 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)
11
<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:
-------------- --------------------------------
Richard I. Clark
(Vice President/Treasurer)
Dated: BY:
--------------- -------------------------------
Gary S. Jones
(Vice President)
<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> 267,535
<SECURITIES> 0
<RECEIVABLES> 318,640
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 661,544
<PP&E> 18,065,085
<DEPRECIATION> 11,979,040
<TOTAL-ASSETS> 13,854,966
<CURRENT-LIABILITIES> 1,265,728
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (340,552)
<TOTAL-LIABILITY-AND-EQUITY> 13,854,966
<SALES> 0
<TOTAL-REVENUES> 4,550,096
<CGS> 0
<TOTAL-COSTS> 428,198
<OTHER-EXPENSES> 3,393,529
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 581,467
<INCOME-PRETAX> 152,799
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 152,799
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
