NORTHLAND CABLE PROPERTIES SIX LTD PARTNERSHIP
10-Q, 1997-11-10
CABLE & OTHER PAY TELEVISION SERVICES
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<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 rates 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:             0-16063
                       --------------------------------------------------------

               NORTHLAND CABLE PROPERTIES SIX LIMITED PARTNERSHIP
- --------------------------------------------------------------------------------
               (Exact Name of Registrant as Specified in Charter)

            Washington                                  91-1318471
- --------------------------------------------------------------------------------
     (State of Organization)                 (IRS 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 SIX LIMITED PARTNERSHIP
BALANCE SHEETS - (Unaudited)
(Prepared by the Managing General Partner)



<TABLE>
<CAPTION>
                                                           September 30,   December 31,
                                                               1997            1996
                                                           ------------    ------------
<S>                                                       <C>             <C>    
                                     ASSETS

Cash                                                       $    129,963    $    414,975
Accounts receivable                                             192,007         326,275
Prepaid expenses                                                 70,545          80,941
Property and equipment, net of accumulated
  depreciation of $13,576,879 and $12,797,004,
  respectively                                                6,075,321       5,944,908
Intangible assets, net of accumulated
  amortization of $12,502,418 and $11,733,534,
  respectively                                                5,728,799       6,486,511

                                                           ------------    ------------
Total assets                                               $ 12,196,635    $ 13,253,610
                                                           ============    ============


                        LIABILITIES AND PARTNERS' EQUITY

Accounts payable and accrued expenses                      $    760,078    $    702,322
Due to managing general partner and affiliates                  134,798         180,998
Converter deposits                                               97,889         114,199
Subscriber prepayments                                          283,252         415,670
Notes payable                                                10,139,421      11,952,321

                                                           ------------    ------------
                  Total liabilities                          11,415,438      13,365,510
                                                           ------------    ------------

Partners' equity:
 General Partners:
   Contributed capital, net                                     (37,565)        (37,565)
   Accumulated deficit                                          (81,778)        (90,729)

                                                           ------------    ------------
                                                               (119,343)       (128,294)
                                                           ------------    ------------

 Limited Partners:
   Contributed capital, net                                   8,996,444       8,998,444
   Accumulated deficit                                       (8,095,904)     (8,982,050)

                                                           ------------    ------------
                                                                900,540          16,394
                                                           ------------    ------------


                  Total partners' equity                        781,197        (111,900)
                                                           ------------    ------------


Total liabilities and partners' equity                     $ 12,196,635    $ 13,253,610
                                                           ============    ============
</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 nine months ended September 30,
                                                            ---------------------------------------

                                                                1997                        1996
                                                            -----------                 -----------
<S>                                                        <C>                         <C>        
Service revenues                                            $ 7,205,089                 $ 6,898,503

Expenses:
  Operating                                                     665,074                     643,262
  General and administrative (including
     $1,128,723 and $1,077,407 to affiliates
     in 1997 and 1996, respectively)                          1,764,033                   1,638,825
  Programming                                                 1,708,906                   1,518,172
  Depreciation and amortization                               1,548,761                   2,041,757
                                                            -----------                 -----------
                                                              5,686,774                   5,842,016
                                                            -----------                 -----------

Income from operations                                        1,518,315                   1,056,487

Other income (expense):
   Interest expense                                            (631,582)                   (829,786)
   Interest income                                                8,184                       9,757
   Gain on disposal of assets                                       180

                                                            -----------                 -----------
                                                               (623,218)                   (820,029)
                                                            -----------                 -----------


Net income                                                  $   895,097                     236,458
                                                            ===========                 ===========


Allocation of net income:

   General Partners                                         $     8,951                 $     2,365
                                                            ===========                 ===========


   Limited Partners                                         $   886,146                 $   234,093
                                                            ===========                 ===========


Net income per limited partnership unit:
 (29,812 units)                                             $        30                 $         8
                                                            ===========                 ===========


Net income per $1,000 investment                            $        59                 $        16
                                                            ===========                 ===========
</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 September 30,
                                                        ---------------------------------------

                                                            1997                        1996
                                                        -----------                 -----------
<S>                                                    <C>                         <C>    
Service revenues                                        $ 2,466,068                 $ 2,348,406

Expenses:
  Operating                                                 227,160                     215,063
  General and administrative (including
     $409,670 and $362,783 to affiliates
     in 1997 and 1996, respectively)                        590,470                     572,324
  Programming                                               580,365                     507,045
  Depreciation and amortization                             516,254                     725,856

                                                        -----------                 -----------
                                                          1,914,249                   2,020,288
                                                        -----------                 -----------

Income from operations                                      551,819                     328,118

Other income (expense):
   Interest expense                                        (207,543)                   (248,319)
   Interest income                                            2,944                       3,860
   Gain on disposal of assets                                  --

                                                        -----------                 -----------
                                                           (204,599)                   (244,459)
                                                        -----------                 -----------


Net income                                              $   347,220                 $    83,659
                                                        ===========                 ===========


Allocation of net income

   General Partners                                     $     3,472                 $       837
                                                        ===========                 ===========


   Limited Partners                                     $   343,748                 $    82,822
                                                        ===========                 ===========


Net income per limited partnership unit:
     (29,812 units)                                     $        12                 $         3
                                                        ===========                 ===========


Net income per $1,000 investment                        $        24                 $         6
                                                        ===========                 ===========
</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 nine months ended September 30,
                                                                   ---------------------------------------

                                                                       1997                        1996
                                                                   -----------                 -----------
<S>                                                               <C>                         <C>        
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                         $   895,097                 $   236,458
Adjustments to reconcile net income to
   cash provided by operating activities:
   Depreciation and amortization                                     1,548,759                   2,041,757
   (Increase) decrease in operating assets:
     Accounts receivable                                               134,268                     (10,654)
     Prepaid expenses                                                   10,396                     (20,187)
   Increase (decrease) in operating liabilities
     Accounts payable and accrued expenses                              57,756                     524,049
     Due to managing general partner and affiliates                    (46,201)                    (15,927)
     Converter deposits                                                (16,310)                    (13,879)
     Subscriber prepayments                                           (132,417)                   (131,561)

                                                                   -----------                 -----------
Net cash from operating activities                                   2,451,348                   2,610,056
                                                                   -----------                 -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net                               (910,288)                   (964,401)

                                                                   -----------                 -----------
Net cash used in investing activities                                 (910,288)                   (964,401)
                                                                   -----------                 -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on borrowings                                    (1,812,900)                 (1,474,868)
Distributions to partners                                                 --                       (75,293)
Loan fees and other costs incurred                                     (11,172)                   (145,385)
Repurchase of limited partner interest                                    --                          --

                                                                   -----------                 -----------
Net cash used in financing activities                               (1,824,072)                 (1,695,546)
                                                                   -----------                 -----------

DECREASE IN CASH                                                      (283,012)                    (49,891)

CASH, beginning of period                                              414,975                     348,690


                                                                   -----------                 -----------
CASH, end of period                                                $   131,963                 $   298,799
                                                                   ===========                 ===========


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

   Cash paid during the period for interest                        $   641,386                 $   818,544
                                                                   ===========                 ===========
</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 September 30, 1997 and December 31, 1996, its Statements
of Operations for the three and nine 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

Revenues totaled $2,466,068 for the three months ended September 30, 1997,
representing an increase of approximately 5% over the same period in 1996. Of
these revenues, $1,738,059 (71%) was derived from basic service charges,
$234,062 (10%) from premium services, $131,163 (5%) from tier services, $83,475
(3%) from installation charges, $80,818 (3%) from service maintenance contracts,
$121,537 (5%) from advertising, and $76,954 (3%) from other sources. The revenue
growth is primarily due to rate increases placed into effect during August 1997.

As of September 30, 1997, the Partnership's systems served approximately 24,100
basic subscribers, 9,750 premium subscribers and 6,400 tier subscribers.

Operating expenses totaled $227,160 for the three months ended September 30,
1997, representing an increase of approximately 5% over the same period in 1996.
This is primarily due to increased salary and benefit costs as a result of cost
of living adjustments.

General and administrative expenses totaled $590,470 for the three months ended
September 30, 1997, representing an increase of approximately 3% over the same
period in 1996. This is the result of increases in copyright fees due to changes
in the channel lineup in the Philadelphia, MS system.

Programming expenses totaled $580,365 for the three months ended September 30,
1997, representing an increase of approximately 14% over the same period in
1996. This is mainly due to increases in programming costs and fees associated
with new channel additions in various systems.

Depreciation and amortization expenses totaled $516,254 for the three months
ended September 30, 1997, representing a decrease of approximately 29% over the
same period in 1996. This is mainly due to assets becoming fully depreciated
during the first quarter of 1997.

Interest expense for the three months ended September 30, 1997 decreased 20%
from the same period in 1996. The average bank debt decreased from $12,895,821
during the third quarter of 1996 to $10,733,221 during the third quarter of
1997, and the Partnership's effective interest rate increased from 7.70% in 1996
to 7.73% in 1997.







                                       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 September 30, 1997. 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
2.75 to 1. As of September 30, 1997 the Partnership was in compliance with its
required financial covenants.

As of the date of this filing, the balance under the credit facility is
$10,139,421. Certain fixed rate agreements expired during the third quarter of
1997. As of the date of this filing, the interest rate on the credit facility is
a Libor rate of 7.41% expiring October 31, 1997. The above includes 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 third quarter of 1997, the Partnership incurred approximately
$378,000 in capital expenditures. These expenditures included a vehicle purchase
in the Starkville, MS system, the purchase of an office building and
continuation of a system upgrade to 330 MHz in the Kosciusko, MS system, and a
system upgrade to 450 MHz in the Philadelphia, MS system.

Planned expenditures for the balance of 1997 include line extensions in various
systems, the construction of an office building and continuation of a system
upgrade to 450 MHz in the Philadelphia, MS system, deployment of fiber in the
Highlands, NC system, and the replacement of two vehicles in the Starkville, MS
system.

Acquisition

The Partnership has entered into a purchase agreement to acquire cable
television systems serving approximately 11,450 subscribers in and around the
communities of Allendale, Bamberg, Barnwell and Bennettsville, all in the state
of South Carolina. The estimated purchase price of these systems is $20,500,000.

The Partnership has received terms from a bank to refinance its existing debt,
increasing the total facility to $33,000,000. The Partnership will use the
proceeds to repay the previous credit facility, finance the acquisition of the
South Carolina cable systems and provide working capital.

Regulation Overview

The Partnership's business is subject to intensive regulation at the federal and
local levels, and to a lesser degree, at the state level. The FCC, the principal
federal regulatory agency with jurisdiction





                                       8

<PAGE>   9

over cable television, is responsible for implementing federal policies such as
rate regulation, cable system relations with other communications media,
cross-ownership, signal carriage, equal employment opportunity and technical
performance. of the regulatory framework that impact the Partnership's
operations are summarized below.

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 Federal Communications Commission (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
affecting the cable television industry, more specifically those affecting the
Partnership's operations, follows.

Cable Programming Service Tier Regulation. FCC regulation of rates for cable
programming service tiers has been eliminated for small cable systems owned by
small companies. Small cable systems are those having 50,000 or fewer
subscribers which are owned by companies with fewer than 1% of national cable
subscribers (approximately 600,000). The Partnership qualifies as a small cable
company and all of the Partnership's cable systems qualify as small cable
systems. Basic tier rates remain subject to regulations 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 served
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 services directly to customers in their service areas immediately
upon enactment. They may provide video programming as a cable operator fully
subject to any provision of the 1996 Act, or a radio-based multichannel
programming distributor not subject to any provisions of the 1996 Act, or
through nonfranchised "open video systems" offering nondiscriminatory capacity
to unaffiliated programmers, subject to select provisions of the 1996 Act.
Although management's opinion is that the probability of competition from
telephone companies in rural areas is unlikely in the near future, there are no
assurances that such competition will not materialize.

The 1996 Act encompasses many other aspects of providing cable television
service including prices for equipment, discounting 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 and leased
access channels.










                                       9

<PAGE>   10


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.





























                                       10
<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

            27.0 Financial Data Schedule

(b) No reports on Form 8-K have been filed during the quarter ended September
30, 1997.













                                       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: November 7, 1997    BY:  /s/ RICHARD I. CLARK
       ----------------       --------------------------------
                                    Richard I. Clark
                                    (Vice President/Treasurer)



Dated: November 7, 1997    BY:  /s/  GARY S. JONES
       ----------------       --------------------------------
                                     Gary S. Jones
                                     (Vice President)















                                       12
<PAGE>   13


                                 EXHIBIT INDEX
                                 -------------



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>                                         129,963
<SECURITIES>                                         0
<RECEIVABLES>                                  192,007
<ALLOWANCES>                                         0
<INVENTORY>                                          0
<CURRENT-ASSETS>                                     0
<PP&E>                                      19,652,200
<DEPRECIATION>                              13,576,879
<TOTAL-ASSETS>                              12,196,635
<CURRENT-LIABILITIES>                        1,276,017
<BONDS>                                              0
                                0
                                          0
<COMMON>                                             0
<OTHER-SE>                                     781,197
<TOTAL-LIABILITY-AND-EQUITY>                12,196,635
<SALES>                                      7,205,089
<TOTAL-REVENUES>                             7,205,089
<CGS>                                                0
<TOTAL-COSTS>                                5,686,774
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                             631,582
<INCOME-PRETAX>                                895,097
<INCOME-TAX>                                         0
<INCOME-CONTINUING>                                  0
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                   895,097
<EPS-PRIMARY>                                        0
<EPS-DILUTED>                                        0
        

</TABLE>


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