<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 quarterly period ended June 30, 1998
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>
June 30, December 31,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Cash $ 874,174 $ 173,034
Accounts receivable 988,855 400,963
Prepaid expenses 150,598 262,758
Property and equipment, net of accumulated
depreciation of $14,252,603 and $13,328,036,
respectively 13,776,136 6,539,222
Intangible assets, net of accumulated
amortization of $10,249,849 and $12,692,683,
respectively 18,908,608 6,233,409
------------ ------------
Total assets $ 34,698,371 $ 13,609,386
============ ============
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses $ 1,781,677 $ 957,085
Due to managing general partner and affiliates 208,271 154,836
Converter deposits 94,724 92,093
Subscriber prepayments 462,649 409,952
Notes payable 31,372,848 10,899,421
------------ ------------
Total liabilities 33,920,169 12,513,387
------------ ------------
Partners' equity:
General Partners:
Contributed capital, net (37,565) (37,565)
Accumulated deficit (81,708) (78,570)
------------ ------------
(119,273) (116,135)
------------ ------------
Limited Partners:
Contributed capital, net 8,986,444 8,990,444
Accumulated deficit (8,088,969) (7,778,310)
------------ ------------
897,475 1,212,134
------------ ------------
Total partners' equity 778,202 1,095,999
------------ ------------
Total liabilities and partners' equity $ 34,698,371 $ 13,609,386
============ ============
</TABLE>
The accompanying notes to unaudited financial statements
are 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,
-----------------------------
1998 1997
----------- -----------
<S> <C> <C>
Service revenues $ 7,287,515 $ 4,739,021
Expenses:
Operating 609,386 437,915
General and administrative (including
$973,617 and $721,796 to affiliates
in 1997 and 1996, respectively) 1,787,400 1,173,562
Programming 1,938,934 1,128,542
Depreciation and amortization 1,884,687 1,032,507
----------- -----------
6,220,407 3,772,526
----------- -----------
Income from operations 1,067,108 966,495
Other income (expense):
Interest expense (1,295,584) (424,039)
Interest income 7,009 5,241
Other income (92,330) 180
----------- -----------
(1,380,905) (418,618)
----------- -----------
Net income (loss) $ (313,797) 547,877
=========== ===========
Allocation of net income (loss):
General Partners $ (3,138) $ 5,479
=========== ===========
Limited Partners $ (310,659) $ 542,398
=========== ===========
Net income (loss) per limited partnership unit:
(29,792 units and 29,812 units, respectively) $ (10) $ 18
=========== ===========
Net income (loss) per $1,000 investment $ (20) $ 36
=========== ===========
</TABLE>
The accompanying notes to unaudited financial statements
are 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,
-----------------------------
1998 1997
----------- -----------
<S> <C> <C>
Service revenues $ 3,715,515 $ 2,400,161
Expenses:
Operating 331,801 233,673
General and administrative (including
$477,325 and $344,907 to affiliates
in 1998 and 1997, respectively) 947,291 605,170
Programming 954,781 566,735
Depreciation and amortization 1,135,454 365,552
----------- -----------
3,369,327 1,771,130
----------- -----------
Income from operations 346,188 629,031
Other income (expense):
Interest expense (674,620) (212,065)
Interest income 5,675 3,023
Other income -- --
Gain/loss on sale of assets (92,330) --
----------- -----------
(761,275) (209,042)
----------- -----------
Net income (loss) $ (415,087) $ 419,989
=========== ===========
Allocation of net income (loss)
General Partners $ (4,151) $ 4,200
=========== ===========
Limited Partners $ (410,936) $ 415,789
=========== ===========
Net income (loss) per limited partnership unit:
(29,792 units and 29,812 units, respectively) $ (14) $ 14
=========== ===========
Net income (loss) per $1,000 investment $ (28) $ 28
=========== ===========
</TABLE>
The accompanying notes to unaudited financial statements
are 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,
-------------------------------
1998 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ (313,797) $ 547,877
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 1,884,687 1,032,507
(Increase) decrease in operating assets:
Loss on sale of assets 92,330 --
Accounts receivable (587,892) 24,853
Insurance receivable -- --
Prepaid expenses 112,160 15,035
Increase (decrease) in operating liabilities
Accounts payable and accrued expenses 824,592 239,686
Due to managing general partner and affiliates 53,435 (58,645)
Converter deposits 2,631 (8,631)
Subscriber prepayments 52,697 (156,823)
------------ ------------
Net cash from operating activities 2,120,843 1,635,859
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (1,338,001) (532,082)
Acquisition of cable systems (20,500,000) --
Increase in intangibles (25,529)
------------ ------------
Net cash used in investing activities (21,863,530) (532,082)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on borrowings -- (1,219,100)
Proceeds from borrowings 20,473,427 --
Loan fees and other costs incurred (25,600) (11,172)
Repurchase of limited partner interest (4,000) (2,000)
------------ ------------
Net cash used in financing activities 20,443,827 (1,232,272)
------------ ------------
INCREASE (DECREASE) IN CASH 701,140 (128,495)
CASH, beginning of period 173,034 414,975
------------ ------------
CASH, end of period $ 874,174 $ 286,480
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 596,002 $ 222,094
============ ============
</TABLE>
The accompanying notes to unaudited financial statements
are 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, 1998 and December 31, 1997, its Statements of
Operations for the six and three months ended June 30, 1998 and 1997, and its
Statements of Cash Flows for the six months ended June 30, 1998 and 1997.
Results of operations for these periods are not necessarily indicative of
results to be expected for the full year.
(2) In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. The Statement establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. The Statement
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Special accounting
for qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires that a company
must formally document, designate, and assess the effectiveness of transactions
that receive hedge accounting.
Statement 133 is effective for fiscal years beginning after June 15, 1999. A
company may also implement the Statement as of the beginning of any fiscal
quarter after issuance (that is, fiscal quarters beginning June 16, 1998 and
thereafter). Statement 133 cannot be applied retroactively. Statement 133 must
be applied to (a) derivative instruments and (b) certain derivative instruments
embedded in hybrid contracts that were issued, acquired, or substantively
modified after December 31, 1997 (and, at the company's election, before January
1, 1998).
The Partnership has not yet quantified the impacts of adopting Statement 133 on
its financial statements and has not determined the timing of or method of
adoption of Statement 133. However, the Statement could increase volatility in
earnings and other comprehensive income.
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 $3,715,515 for the three months ended June 30, 1998,
representing an increase of approximately 55% over the same period in 1997. Of
these revenues, $2,693,770 (72%) was derived from basic service charges,
$404,401 (11%) from premium services, $158,938 (4%) from tier services, $98,433
(3%) from installation charges, $101,192 (3%) from service maintenance
contracts, $120,402 (3%) from advertising, and $138,379 (4%) from other sources.
The January 1998 addition of approximately 11,300 subscribers acquired in the
purchase of cable systems serving the communities of Bennettsville, Barnwell,
Bamberg and Allendale, South Carolina increased revenues 50%. The remaining 5%
of the revenue growth is attributable to an increase in the number of basic and
tier subscribers of .5% and 29%, respectively, as well as rate increases placed
into effect in August of 1997.
As of June 30, 1998, the Partnership's systems served approximately 34,800 basic
subscribers, 17,900 premium subscribers and 7,400 tier subscribers.
Operating expenses totaled $331,801 for the three months ended June 30, 1998,
representing an increase of approximately 42% over the same period in 1997. The
acquisition of the Bennettsville, Barnwell, Bamberg and Allendale, South
Carolina systems increased expenses 52%. The expenses for the other systems
decreased by approximately 10% primarily related to a reduction in regional
management costs.
General and administrative expenses totaled $947,291 for the three months ended
June 30, 1998, representing an increase of approximately 57% over the same
period in 1997. The acquisition of the Bennettsville, Barnwell, Bamberg and
Allendale, South Carolina systems increased expenses 59%. The expenses for the
remaining systems decreased approximately 2% due to a one time correction to
copyright fees and reduced legal fees.
Programming expenses totaled $954,781 for the three months ended June 30, 1998,
representing an increase of approximately 68% over the same period in 1997.
Approximately 11% of the increase is due to increased costs charged by various
program suppliers, with the acquisition of the Bennettsville, Barnwell, Bamberg
and Allendale, South Carolina systems resulting in the remaining 57% increase.
Depreciation and amortization expenses totaled $1,135,454 for the three months
ended June 30, 1998, representing an increase of approximately 211% over the
same period in 1997. Excluding the effects of the acquisition of the
Bennettsville, Barnwell, Bamberg and Allendale, South Carolina systems,
depreciation and amortization increased by 66%. Such increase is due to
depreciation and amortization on current year purchases of plant and equipment,
and a one time
7
<PAGE> 8
adjustment which reduced depreciation expense in 1997. The addition of assets
acquired in the purchase of the Bennettsville, Barnwell, Bamberg and Allendale,
South Carolina systems increased depreciation and amortization expense 145%.
Interest expense for the three months ended June 30, 1998 increased 218% from
the same period in 1997. The average bank debt increased from $11,327,021 during
the second quarter of 1997 to $31,372,848 during the second quarter of 1998, and
the Partnership's effective interest rate increased from 7.49% in 1997 to 8.60%
in 1998.
Liquidity and Capital Resources
The Partnership's primary sources of liquidity are cash flow provided from
operations and an $8,000,000 revolving credit line, of which approximately
$6,200,000 was outstanding as of June 30, 1998. 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 senior debt to annualized operating cash flow ratio of 5.5 to 1, a
fixed charge ratio of 1.1 to 1, and an annual operating cash flow to interest
expense ratio of less than 2.0 to 1. As of June 30, 1998, the Partnership was in
compliance with its required financial covenants.
As of the date of this filing, the balance under the credit facility is
$31,372,848. Certain fixed rate agreements expired during the first quarter of
1998. As of the date of this filing, interest rates on the credit facility were
as follows: $23,000,000 fixed at 8.02% under the terms of an interest rate swap
agreement with the Partnership's lender expiring December 31, 1999; $6,200,000
fixed at 7.94%, expiring September 30, 1998; $2,000,000 fixed at 7.94%, expiring
September 30, 1998. The balance of $172,848 bears interest at prime plus 1.00%
(currently 9.50%). 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 1998, the Partnership incurred approximately
$1,049,000 in capital expenditures. These expenditures included the installation
of a fiber optic backbone in the Starkville, MS system, the continuation of a
system upgrade to 450 MHz and a tap audit in the Kosciusko, MS system, the
purchase of a bucket truck in the Forest, MS system, drop replacements in the
Philadelphia, MS system, the purchase of a new office building and the initial
phase of a 450 MHz upgrade in the Barnwell, SC system.
Planned expenditures for the balance of 1998 include line extensions in various
systems, the continuation of system upgrades to 450 MHz in the Kosciusko, MS and
Barnwell, SC systems, and the deployment of additional fiber in the Highlands,
NC and Philadelphia, MS systems.
8
<PAGE> 9
Acquisition
On January 2, 1998, the Partnership purchased cable television systems serving
approximately 11,400 subscribers in and around the communities of Allendale,
Bamberg, Barnwell and Bennettsville, all in the state of South Carolina. The
purchase price of these systems was $20,500,000.
The Partnership borrowed $31,372,848 under an amended and restated revolving
credit and term loan agreement with its lender. The Partnership used the
proceeds to refinance existing bank debt and finance the acquisition of the
South Carolina cable systems.
Pro forma operating results of the Partnership for the six and three months
ending June 30, 1997, assuming the acquisition of the Allendale, Bamberg,
Barnwell and Bennettsville, South Carolina systems had been completed as of the
beginning of the period, are as follows:
<TABLE>
<CAPTION>
Six months ending Three months ending
June 30, 1997 June 30, 1997
----------------- -------------------
<S> <C> <C>
Revenue $ 3,598,174 $ 7,087,612
=========== ===========
Net income $ (857,974) $(1,204,419)
=========== ===========
Net loss per limited
partnership unit $ (29) $ (34)
=========== ===========
</TABLE>
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, 1998.
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: August 13, 1998 BY: /s/ RICHARD I. CLARK
------------------ -----------------------------------
Richard I. Clark
(Vice President/Treasurer)
Dated: August 13, 1998 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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 874,174
<SECURITIES> 0
<RECEIVABLES> 988,855
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 28,028,739
<DEPRECIATION> 14,252,603
<TOTAL-ASSETS> 34,698,371
<CURRENT-LIABILITIES> 2,547,321
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 778,202
<TOTAL-LIABILITY-AND-EQUITY> 34,698,371
<SALES> 7,287,515
<TOTAL-REVENUES> 7,287,515
<CGS> 0
<TOTAL-COSTS> 6,220,407
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,295,584
<INCOME-PRETAX> (313,797)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (313,797)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
