<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 MARCH 31, 1999
--------------
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
(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 ___.
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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,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Cash $ 776,206 $ 706,907
Accounts receivable 269,909 722,919
Prepaid expenses 127,161 109,387
Property and equipment, net of accumulated
depreciation of $15,316,956 and $14,744,674,
respectively 13,873,736 14,090,676
Intangible assets, net of accumulated
amortization of $12,482,000 and $11,849,919,
respectively 16,710,000 17,342,080
------------ ------------
Total assets $ 31,757,012 $ 32,971,969
============ ============
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses $ 771,064 $ 1,181,743
Due to managing general partner and affiliates 169,042 142,746
Converter deposits 49,989 57,057
Subscriber prepayments 299,330 495,177
Notes payable 31,060,348 31,372,848
------------ ------------
Total liabilities 32,349,773 33,249,571
------------ ------------
Partners' equity:
General Partners:
Contributed capital, net (37,565) (37,565)
Accumulated deficit (95,378) (92,266)
------------ ------------
(132,943) (129,831)
------------ ------------
Limited Partners:
Contributed capital, net 8,982,444 8,986,444
Accumulated deficit (9,442,262) (9,134,215)
------------ ------------
(459,818) (147,771)
------------ ------------
Total partners' equity (592,761) (277,602)
------------ ------------
Total liabilities and partners' equity $ 31,757,012 $ 32,971,969
============ ============
</TABLE>
The accompanying note to unaudited financial statements is an integral part of
these statements
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<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,
------------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Service revenues $ 3,732,791 $ 3,572,000
Expenses:
Operating 339,387 277,584
General and administrative (including
$537,774 and $496,292 to affiliates
in 1999 and 1998, respectively) 904,103 840,108
Programming 982,635 984,155
Depreciation and amortization 1,204,362 749,232
----------- -----------
3,430,487 2,851,079
----------- -----------
Income from operations 302,304 720,921
Other income (expense):
Interest expense (619,203) (620,964)
Interest income 5,740 1,334
Other income -- --
Gain/loss on sale of assets -- --
----------- -----------
(613,463) (619,630)
----------- -----------
Net (loss) income $ (311,159) $ 101,291
=========== ===========
Allocation of net (loss) income
General Partners $ (3,112) $ 1,013
=========== ===========
Limited Partners $ (308,047) $ 100,278
=========== ===========
Net (loss) income per limited partnership unit:
(29,784 units and 29,792 units, respectively) $ (10) $ 3
=========== ===========
Net (loss) income per $1,000 investment $ (20) $ 6
=========== ===========
</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,
-----------------------------------
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (311,159) $ 101,291
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 1,204,362 749,232
(Increase) decrease in operating assets:
(Gain)Loss on sale of assets -- --
Accounts receivable 453,010 (546,581)
Prepaid expenses (17,774) 134,174
Increase (decrease) in operating liabilities
Accounts payable and accrued expenses (410,679) 704,305
Due to managing general partner and affiliates 26,296 47,861
Converter deposits (7,069) 11,077
Subscriber prepayments (195,847) 53,216
------------ ------------
Net cash from operating activities 741,140 1,254,575
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (355,341) (308,454)
Acquisition of cable systems -- (20,500,000)
Increase in intangibles -- --
------------ ------------
Net cash used in investing activities (355,341) (20,808,454)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on borrowings (312,500) --
Proceeds from borrowings -- 20,456,513
Loan fees and other costs incurred -- (25,600)
Repurchase of limited partner interest (4,000) (4,000)
------------ ------------
Net cash used in financing activities (316,500) 20,426,913
------------ ------------
INCREASE IN CASH 69,299 873,034
CASH, beginning of period 706,907 173,034
------------ ------------
CASH, end of period $ 776,206 $ 1,046,068
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 608,579 $ 594,367
============ ============
</TABLE>
4
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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, 1999 and December 31, 1998, its Statements of
Operations for the three months ended March 31, 1999 and 1998, and its
Statements of Cash Flows for the three months ended March 31, 1999 and 1998.
Results of operations for these periods are not necessarily indicative of
results to be expected for the full year.
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.
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 $3,732,791 for the three months ended March 31, 1999,
representing an increase of approximately 5% over the same period in 1998. Of
these revenues, $2,715,098 (73%) was derived from basic service charges,
$382,584 (10%) from premium services, $203,538 (5%) from tier services, $96,406
(3%) from installation charges, $97,206 (3%) from service maintenance contracts,
$96,018 (2%) from advertising, and $141,941 (4%) from other sources. The
increase in revenue is attributable primarily to rate increases placed into
effect in August of 1998.
As of March 31, 1999, the Partnership's systems served approximately 34,400
basic subscribers, 16,700 premium subscribers and 8,500 tier subscribers.
Operating expenses totaled $339,387 for the three months ended March 31, 1999,
representing an increase of approximately 22% over the same period in 1998. This
is primarily due to the addition of technical and regional personnel, a one time
adjustment to pole rental costs as well as increased system maintenance.
General and administrative expenses totaled $904,103 for the three months ended
March 31, 1999, representing an increase of approximately 8% over the same
period in 1998. This is due to higher revenue based expenses such as management
fees and franchise fees as well as higher bad debt expense.
Programming expenses totaled $982,635 for the three months ended March 31, 1999,
remaining relatively unchanged from the same period in 1998.
Depreciation and amortization expenses totaled $1,204,362 for the three months
ended March 31, 1999, representing an increase of approximately 61% over the
same period in 1998. Excluding the effects of the January 2, 1998 acquisition of
the Bennettsville, Barnwell, Bamberg and Allendale, South Carolina systems,
depreciation and amortization increased by 31%. Such increase is due to
depreciation and amortization on recent purchases of plant and equipment offset
by assets becoming fully depreciated.
Interest expense for the three months ended March 31, 1999 remained relatively
unchanged from the same period in 1998. The average bank debt of $31,372,848
remained the same from the first quarter of 1998 to the first quarter of 1999,
and the Partnership's effective interest rate decreased from 7.92% in 1998 to
7.89% in 1999.
6
<PAGE> 7
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
$6,372,848 was outstanding as of March 31, 1999. Based on management's analysis,
the Partnership's cash flow from operations and amounts available for borrowing
under the Partnership's loan agreement are 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 5.25 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 March 31, 1999, the Partnership was
in compliance with its required financial covenants.
As of the date of this filing, the balance under the credit facility is
$29,277,781. Certain fixed rate agreements expired during the first quarter of
1999. As of the date of this filing, interest rates on the credit facility were
as follows: $22,687,500 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 7.40813%, expiring June 30, 1999; and $390,281 fixed at 7.2%, expiring
June 30, 1999. 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 first quarter of 1999, the Partnership incurred approximately
$355,000 in capital expenditures. These expenditures included a vehicle
replacement in the Starkville, MS system, completion of the system upgrade to
450 MHz in the Kosciusko, MS system, the initial design of an upgrade to 450
MHz in the Forest, MS system, line extensions and a continued system upgrade
to 450 MHz in the Philadelphia, MS system, line extensions and a vehicle
replacement in the Barnwell, SC system and a vehicle replacement in the
Bennettsville, SC system.
Planned expenditures for the balance of 1999 include the continuation of the
fiber network for data transmission and ongoing system upgrade construction to
450 MHz in the Starkville System, a continued system upgrade and a vehicle
purchase in the Philadelphia System, the continued deployment of fiber in the
Highlands System, a continued system upgrade to 450 MHz in the Barnwell System
and certain line extensions and channel additions in various systems.
7
<PAGE> 8
Year 2000 Issues
The efficient operation of the Partnership's business is dependent in part on
its computer software programs and operating systems (collectively, Programs and
Systems). These Programs and Systems are used in several key areas of the
Partnership's business, including subscriber billing and collections and
financial reporting. Management has evaluated the Programs and Systems utilized
in the conduct of the Partnership's business for the purpose of identifying year
2000 compliance problems. Failure to remedy these issues could impact the
ability of the Partnership to timely bill its subscribers for service provided
and properly report its financial condition and results of operations which
could have a material impact on its liquidity and capital resources.
The Programs and Systems utilized in subscriber billing and collections have
been modified to address year 2000 compliance issues. These modifications were
substantially complete at the end of 1998. Management has completed the
process of replacing Programs and Systems related to financial reporting which
resolve year 2000 compliance issues. The aggregate cost to the Partnership to
address year 2000 compliance issues is not expected to be material to its
results of operations, liquidity and capital resources.
Management is currently focusing its efforts on the impact of the year 2000
compliance issue on service delivery and has established an internal team to
address this issue. The internal team is identifying and testing all date
sensitive equipment involved in delivering service to its customers. In
addition, management will assess its options regarding repair or replacement of
affected equipment during this testing. The aggregate cost to the Partnership to
address year 2000 compliance issues is not expected to be material to its
results of operations, liquidity and capital resources.
The provision of cable television services is significantly dependent on the
Partnership's ability to adequately receive programming signals via satellite
distribution or off air reception from various programmers and broadcasters.
Management has inquired of certain significant programming vendors with respect
to their year 2000 issues and how they might impact the operations of the
Partnership. As of the date of this filing no significant programming vendor has
communicated a year 2000 issue that would affect materially the operations of
the Partnership. However, if significant programming vendors identify year 2000
issues in the future and are unable to resolve such issues in a timely manner,
it could result in a material financial risk.
Disposition
On April 30, 1999, the Partnership sold cable television systems serving
approximately 1,400 subscribers in and around the communities of Sandersville,
Heidelberg and
8
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Laurel, Mississippi. The sales price of these systems was $1,900,000. The
Partnership used net proceeds of $1,540,000 to pay down existing bank debt.
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 March 31,
1999.
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
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 776,206
<SECURITIES> 0
<RECEIVABLES> 269,909
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 29,190,692
<DEPRECIATION> 15,316,956
<TOTAL-ASSETS> 31,757,012
<CURRENT-LIABILITIES> 1,289,425
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (592,761)
<TOTAL-LIABILITY-AND-EQUITY> 31,757,012
<SALES> 3,732,791
<TOTAL-REVENUES> 3,732,791
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,430,487
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 619,203
<INCOME-PRETAX> (311,159)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (311,159)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
