<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 JUNE 30, 1997
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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
- ----------------------- ---------------------------------
(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 ___.
<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,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Cash $ 286,480 $ 414,975
Accounts receivable 301,421 326,275
Prepaid expenses 65,905 80,941
Property and equipment, net of accumulated
depreciation of $13,316,920 and $12,797,004,
respectively 5,957,074 5,944,908
Intangible assets, net of accumulated
amortization of $12,246,123 and $11,733,534,
respectively 5,985,094 6,486,511
------------ ------------
Total assets $ 12,595,974 $ 13,253,610
============ ============
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses $ 942,008 $ 702,322
Due to managing general partner and affiliates 122,354 180,998
Converter deposits 105,568 114,199
Subscriber prepayments 258,847 415,670
Notes payable 10,733,221 11,952,321
------------ ------------
Total liabilities 12,161,998 13,365,510
------------ ------------
Partners' equity:
General Partners:
Contributed capital, net (37,565) (37,565)
Accumulated deficit (85,251) (90,729)
------------ ------------
(122,816) (128,294)
------------ ------------
Limited Partners:
Contributed capital, net 8,996,444 8,998,444
Accumulated deficit (8,439,652) (8,982,050)
------------ ------------
556,792 16,394
------------ ------------
Total partners' equity 433,976 (111,900)
------------ ------------
Total liabilities and partners' equity $ 12,595,974 $ 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 six months ended June 30,
---------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Service revenues $ 4,739,021 $ 4,550,096
Expenses:
Operating 437,915 428,198
General and administrative (including
$719,053 and $714,534 to affiliates
in 1997 and 1996, respectively) 1,173,562 1,066,501
Programming 1,128,542 1,011,127
Depreciation and amortization 1,032,507 1,315,901
----------- -----------
3,772,526 3,821,727
----------- -----------
Income from operations 966,495 728,370
Other income (expense):
Interest expense (424,039) (581,467)
Interest income 5,241 5,897
Gain on disposal of assets 180
----------- -----------
(418,618) (575,570)
----------- -----------
Net income $ 547,877 $ 152,799
=========== ===========
Allocation of net income:
General Partners $ 5,479 $ 1,528
=========== ===========
Limited Partners $ 542,398 $ 151,271
=========== ===========
Net income per limited partnership unit:
(29,812 units) $ 18 $ 5
=========== ===========
Net income per $1,000 investment $ 36 $ 10
=========== ===========
</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,
-----------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Service revenues $ 2,400,161 $ 2,294,826
Expenses:
Operating 233,673 217,406
General and administrative (including
$341,953 and $354,110 to affiliates
in 1997 and 1996, respectively) 605,170 545,826
Programming 566,735 510,541
Depreciation and amortization 365,552 657,950
----------- -----------
1,771,130 1,931,723
----------- -----------
Income from operations 629,031 363,103
Other income (expense):
Interest expense (212,065) (256,985)
Interest income 3,023 3,748
Gain on disposal of assets --
----------- -----------
(209,042) (253,237)
----------- -----------
Net income $ 419,989 $ 109,866
=========== ===========
Allocation of net income
General Partners $ 4,200 $ 1,099
=========== ===========
Limited Partners $ 415,789 $ 108,767
=========== ===========
Net income per limited partnership unit:
(29,812 units) $ 14 $ 4
=========== ===========
Net income per $1,000 investment $ 28 $ 9
=========== ===========
</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,
---------------------------------
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 547,877 $ 152,799
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 1,032,505 1,315,901
(Increase) decrease in operating assets:
Accounts receivable 24,854 (30,550)
Prepaid expenses 15,036 11,402
Increase (decrease) in operating liabilities
Accounts payable and accrued expenses 239,686 132,255
Due to managing general partner and affiliates (58,645) (3,352)
Converter deposits (8,631) (8,018)
Subscriber prepayments (156,823) (137,197)
----------- -----------
Net cash from operating activities 1,635,859 1,433,240
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (532,082) (366,868)
----------- -----------
Net cash used in investing activities (532,082) (366,868)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on borrowings (1,219,100) (984,899)
Distributions to partners -- (75,293)
Loan fees and other costs incurred (11,172) (87,335)
Repurchase of limited partner interest (2,000) --
----------- -----------
Net cash used in financing activities (1,232,272) (1,147,527)
----------- -----------
DECREASE IN CASH (128,495) (81,155)
CASH, beginning of period 414,975 348,690
----------- -----------
CASH, end of period $ 286,480 $ 267,535
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 222,094 $ 567,512
=========== ===========
</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, 1997 and December 31, 1996, its Statements of
Operations for the three and six months ended June 30, 1997 and 1996, and its
Statements of Cash Flows for the six months ended June 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 $2,400,161 for the three months ended June 30, 1997,
representing an increase of approximately 5% over the same period in 1996. Of
these revenues, $1,707,031 (71%) was derived from basic service charges,
$219,992 (10%) from premium services, $118,993 (5%) from tier services, $78,352
(3%) from installation charges, $80,604 (4%) from service maintenance contracts,
$103,736 (4%) from advertising, and $76,309 (3%) from other sources. The revenue
growth is primarily due to rate increases placed into effect during late 1996.
As of June 30, 1997, the Partnership's systems served approximately 23,600 basic
subscribers, 9,900 premium subscribers and 6,000 tier subscribers.
Operating expenses totaled $233,673 for the three months ended June 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 $605,170 for the three months ended
June 30, 1997, representing an increase of approximately 11% 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 $566,735 for the three months ended June 30, 1997,
representing an increase of approximately 11% 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 expenses totaled $365,552 for the three months
ended June 30, 1997, representing a decrease of approximately 44% 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 June 30, 1997 decreased 17% from the
same period in 1996. The average bank debt decreased from $13,175,914 during the
second quarter of 1996 to $11,030,121 during the second quarter of 1997, and the
Partnership's effective interest rate decreased from 7.82% in 1996 to 7.69% 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 June 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 June 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
$10,733,221. Certain fixed rate agreements expired during the second quarter of
1997. As of the date of this filing, the interest rate on the credit facility is
a Libor rate of 7.53% expiring September 30, 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 second quarter of 1997, the Partnership incurred approximately
$350,000 in capital expenditures. These expenditures included the purchase of a
vehicle in the Forest, MS system, the purchase of an office building and
continuation of a system upgrade to 330 MHz in the Kosciusko, MS system, and
various line extensions in all of the systems.
Planned expenditures for the balance of 1997 include line extensions in various
systems, the purchase of an office building and continuation of a system upgrade
to 450 MHz in the Philadelphia, MS system, and deployment of fiber in the
Highlands, NC system.
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. of the
regulatory framework that impact the Partnership's operations are summarized
below.
8
<PAGE> 9
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.
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,
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 SIX LIMITED PARTNERSHIP
BY: Northland Communications Corporation,
Managing General Partner
Dated: 8/11/97 BY: /s/ RICHARD I. CLARK
----------------- ---------------------------------
Richard I. Clark
(Vice President/Treasurer)
Dated: 8/11/97 BY: /s/ GARY S. JONES
----------------- ---------------------------------
Gary S. Jones
(Vice President)
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 286,480
<SECURITIES> 0
<RECEIVABLES> 301,421
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 19,273,994
<DEPRECIATION> 13,316,920
<TOTAL-ASSETS> 12,595,974
<CURRENT-LIABILITIES> 1,428,777
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 433,976
<TOTAL-LIABILITY-AND-EQUITY> 12,595,974
<SALES> 4,739,021
<TOTAL-REVENUES> 4,739,021
<CGS> 0
<TOTAL-COSTS> 3,772,526
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 424,039
<INCOME-PRETAX> 547,877
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 547,877
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
