<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 MARCH 31, 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
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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
--- ---
- ----------
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>
March 31, December 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Cash $ 401,836 $ 414,975
Accounts receivable 285,492 326,275
Prepaid expenses 89,943 80,941
Property and equipment, net of accumulated
depreciation of $13,207,664 and $12,797,004,
respectively 5,715,632 5,944,908
Intangible assets, net of accumulated
amortization of $11,989,827 and $10,663,726,
respectively 6,239,888 6,486,511
------------ ------------
Total assets $ 12,732,791 $ 13,253,610
============ ============
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses $ 717,552 $ 702,322
Due to managing general partner and affiliates 274,037 180,998
Converter deposits 110,159 114,199
Subscriber prepayments 288,034 415,670
Notes payable 11,327,021 11,952,321
------------ ------------
Total liabilities 12,716,803 13,365,510
------------ ------------
Partners' equity:
General Partners:
Contributed capital, net (37,565) (37,565)
Accumulated deficit (89,450) (90,729)
------------ ------------
(127,015) (128,294)
------------ ------------
Limited Partners:
Contributed capital, net 8,998,444 8,998,444
Accumulated deficit (8,855,441) (8,982,050)
------------ ------------
143,003 16,394
------------ ------------
Total partners' equity 15,988 (111,900)
------------ ------------
Total liabilities and partners' equity $ 12,732,791 $ 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 three months ended March 31,
------------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Service revenues $ 2,338,860 $ 2,255,270
Expenses:
Operating 204,241 210,793
General and administrative (including
$377,100 and $360,424 to affiliates
in 1997 and 1996, respectively) 568,392 520,675
Programming 561,807 500,587
Depreciation and amortization 666,955 657,950
----------- -----------
2,001,395 1,890,005
----------- -----------
Income from operations 337,465 365,265
Other income (expense):
Interest expense (211,974) (324,482)
Interest income 2,217 2,149
Gain on disposal of assets 180
----------- -----------
(209,577) (322,333)
----------- -----------
Net income $ 127,888 $ 42,932
=========== ===========
Allocation of net income
General Partners $ 1,279 $ 429
=========== ===========
Limited Partners $ 126,609 $ 42,503
=========== ===========
Net income per limited partnership unit:
(29,816 units) $ 4 $ 1
=========== ===========
Net income per $1,000 investment $ 8 $ 3
=========== ===========
</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 CASH FLOWS - (Unaudited)
(Prepared by the Managing General Partner)
<TABLE>
<CAPTION>
For the three months ended March 31,
------------------------------------
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 127,888 $ 42,933
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 666,955 657,950
(Increase) decrease in operating assets:
Accounts receivable 40,783 15,706
Prepaid expenses (9,002) (14,410)
Increase (decrease) in operating liabilities
Accounts payable and accrued expenses 15,230 15,183
Due to managing general partner and affiliates 93,039 74,144
Converter deposits (4,040) (1,743)
Subscriber prepayments (127,636) (114,311)
--------- ---------
Net cash from operating activities 803,217 675,452
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (181,386) (149,803)
--------- ---------
Net cash used in investing activities (181,386) (149,803)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on borrowings (625,300) (492,652)
Distributions to partners -- (75,293)
Loan fees and other costs incurred (9,670) (57,367)
Repurchase of limited partner interest -- --
--------- ---------
Net cash used in financing activities (634,970) (625,312)
--------- ---------
DECREASE IN CASH (13,139) (99,663)
CASH, beginning of period 414,975 348,690
--------- ---------
CASH, end of period $ 401,836 $ 249,027
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 222,094 $ 308,381
========= =========
</TABLE>
The accompanying note to unaudited financial statements is an integral
part of these statements
4
<PAGE> 5
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 March 31, 1997 and December 31, 1996, its Statements of
Operations for the three months ended March 31, 1997 and 1996, and its
Statements of Cash Flows for the three months ended March 31, 1997 and 1996.
Results of operations for these periods are not necessarily indicative of
results to be expected for the full year.
5
<PAGE> 6
PART I (continued)
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Revenues totaled $2,338,860 for the three months ended March 31, 1997,
representing an increase of approximately 4% over the same period in 1996. Of
these revenues, $1,711,727 (73%) was derived from basic service charges,
$227,497 (10%) from premium services, $111,312 (5%) from tier services, $44,655
(2%) from installation charges, $78,428 (3%) from service maintenance contracts,
$87,538 (4%) from advertising, and $77,703 (3%) from other sources. The revenue
growth is primarily due to rate increases placed into effect during 1996.
As of March 31, 1997, the Partnership's systems served approximately 24,900
basic subscribers, 9,300 premium subscribers and 5,900 tier subscribers.
Operating expenses totaled $204,241 for the three months ended March 31, 1997,
representing a decrease of approximately 3% over the same period in 1996. This
is primarily due to a reduction of vehicle expenses.
General and administrative expenses totaled $568,392 for the three months ended
March 31, 1997, representing an increase of approximately 9% over the same
period in 1996. This is the result of additional legal costs associated with the
purchase of the Sapphire Valley system and increases in copyright fees due to
changes in the channel lineup in the Philadelphia, MS system.
Programming expenses totaled $561,806 for the three months ended March 31, 1997,
representing an increase of approximately 12% over the same period in 1996. This
is mainly due to increases in programmer costs and fees associated with new
channel additions in various systems.
Depreciation and amortization expense remained consistent with the same period
in 1996. This is mainly due to current year purchases of plant and equipment,
offset by assets becoming fully depreciated during the first quarter of 1997.
Interest expense for the three months ended March 31, 1997 decreased 35% from
the same period in 1996. The average bank debt decreased from $13,383,000 during
the first quarter of 1996 to $11,327,000 during the first quarter of 1997, and
the Partnership's effective interest rate decreased from 7.55% in 1996 to 7.11%
in 1997.
6
<PAGE> 7
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 March 31, 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 March 31, 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
$11,327,021. Certain fixed rate agreements in effect as of December 31, 1996
expired during the first quarter of 1997. As of the date of this filing,
interest rates on the credit facility were as follows: $11,000,000 fixed at a
Libor rate of 7.32% expiring June 30, 1997. The balance of $327,021 bears
interest at the prime rate plus 1/4% (currently 8.75%). 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 first quarter of 1997, the Partnership incurred approximately
$181,000 in capital expenditures. These expenditures included line extensions in
the Starkville, MS system; an upgrade of a portion of the distribution plant in
the Philadelphia, MS system; channel additions in the Kosciusko, MS system and
the purchase of advertising equipment and the installation of fiber in the
Highlands, NC system.
Planned expenditures for the balance of 1997 include a vehicle replacement in
the Starkville, MS system, continuation of the upgrade of a portion of the
system to 450 MHz in the Philadelphia, MS system, purchase of an office building
and upgrade of a portion of the system to 330 MHz in the Kosciusko, MS system,
purchase of a vehicle in the Forest, MS system, continued deployment of fiber in
the Highlands, NC system, and various line extensions in all of the systems.
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 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. Portions of
the regulatory framework that impact the Partnership's operations are summarized
below.
7
<PAGE> 8
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.
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.
8
<PAGE> 9
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 March 31,
1997.
9
<PAGE> 10
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)
10
<PAGE> 11
EXHIBIT INDEX
Exhibits
27.0 - Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 401,836
<SECURITIES> 0
<RECEIVABLES> 285,492
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 777,271
<PP&E> 18,923,296
<DEPRECIATION> 13,207,664
<TOTAL-ASSETS> 12,732,791
<CURRENT-LIABILITIES> 1,389,782
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 15,988
<TOTAL-LIABILITY-AND-EQUITY> 12,732,791
<SALES> 0
<TOTAL-REVENUES> 2,338,860
<CGS> 0
<TOTAL-COSTS> 204,241
<OTHER-EXPENSES> 1,797,154
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 211,974
<INCOME-PRETAX> 127,888
<INCOME-TAX> 0
<INCOME-CONTINUING> 127,888
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 127,888
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
