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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, 2000
Or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from
Commission File Number: 0-16063
NORTHLAND CABLE PROPERTIES SIX LIMITED PARTNERSHIP
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(Exact Name of Registrant as Specified in Charter)
<TABLE>
<S> <C>
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)
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(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 ____.
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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,
2000 1999
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<S> <C> <C>
ASSETS
Cash $ 1,002,411 $ 556,962
Accounts receivable 790,376 806,712
Prepaid expenses 123,436 78,012
Property and equipment, net of accumulated
depreciation of $15,127,424 and $14,639,656,
respectively 13,944,342 14,273,156
Intangible assets, net of accumulated
amortization of $14,977,593 and $14,329,374,
respectively 14,252,926 14,888,691
------------ ------------
Total assets $ 30,113,491 $ 30,603,533
============ ============
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses $ 807,634 $ 1,326,560
Due to managing general partner and affiliates 75,330 46,388
Converter deposits 33,943 35,422
Subscriber prepayments 598,146 412,628
Notes payable 28,965,281 28,965,281
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Total liabilities 30,480,334 30,786,279
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Partners' equity:
General Partners:
Contributed capital, net (37,565) (37,565)
Accumulated deficit (93,118) (91,277)
------------ ------------
(130,683) (128,842)
------------ ------------
Limited Partners:
Contributed capital, net 8,982,444 8,982,444
Accumulated deficit (9,218,604) (9,036,348)
------------ ------------
(236,160) (53,904)
------------ ------------
Total partners' equity (366,843) (182,746)
------------ ------------
Total liabilities and partners' equity $ 30,113,491 $ 30,603,533
============ ============
</TABLE>
The accompanying notes 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,
----------------------------------
2000 1999
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<S> <C> <C>
Service revenues $ 3,753,415 $ 3,732,791
Expenses:
Operating (including $78,210
and $60,430 to affiliates, respectively) 304,646 339,387
General and administrative (including
$393,404 and $366,067 to affiliates,
respectively) 891,032 904,103
Programming (including $63,012
and $28,308 to affiliates, respectively) 985,622 982,635
Depreciation and amortization 1,116,401 1,158,647
----------- -----------
3,297,701 3,384,772
----------- -----------
Income from operations 455,714 348,019
Other income (expense):
Interest expense (601,440) (619,203)
Amortization of loan fees (50,655) (45,715)
Interest income 7,580 5,740
Gain on sale of assets 4,708 --
----------- -----------
(639,807) (659,178)
----------- -----------
Net loss $ (184,093) (311,159)
=========== ===========
Allocation of net loss:
General Partners $ (1,841) $ (3,112)
=========== ===========
Limited Partners $ (182,252) $ (308,047)
=========== ===========
Net loss per limited partnership unit:
(29,784 units) $ (6) $ (10)
=========== ===========
Net loss per $1,000 investment $ (12) $ (21)
=========== ===========
</TABLE>
The accompanying notes to unaudited financial statements
is an integral part of these statements
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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,
---------------------------------
2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (184,093) $ (311,159)
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 1,116,401 1,158,647
Amortization of loan fees 50,655 45,715
Gain on sale of assets (4,708) --
(Increase) decrease in operating assets:
Accounts receivable 16,336 203,752
Prepaid expenses (45,424) (17,774)
Increase (decrease) in operating liabilities
Accounts payable and accrued expenses (518,926) (410,679)
Due to managing general partner and affiliates 28,942 26,296
Converter deposits (1,479) (7,069)
Subscriber prepayments 185,518 53,411
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Net cash from operating activities 643,222 741,140
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (192,319) (355,341)
Proceeds from sale of property 7,000 --
Increase in intangibles (12,454) --
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Net cash used in investing activities (197,773) (355,341)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on borrowings -- (312,500)
Repurchase of limited partner interest -- (4,000)
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Net cash used in financing activities -- (316,500)
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INCREASE IN CASH 445,449 69,299
CASH, beginning of period 556,962 706,907
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CASH, end of period $ 1,002,411 $ 776,206
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 608,025 $ 608,579
=========== ===========
</TABLE>
The accompanying notes to unaudited financial statements
is an integral part of these statements
4
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NORTHLAND CABLE PROPERTIES SIX LIMITED PARTNERSHIP
NOTES 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, 2000, its statements of operations and cash flows for the three
months ended March 31, 2000 and 1999. Results of operations for
these periods are not necessarily indicative of results to be expected for
the full year. These financial statements and notes should be read in
conjunction with the Partnership's Annual Report on Form 10-K for the year
ended December 31, 1999.
(2) In June 1998, the Financial Accounting Standards Board issued SFAS 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 statement of operations, and requires that
a company must formally document, designate, and assess the effectiveness of
transactions that are subject to hedge accounting.
Pursuant to SFAS No. 137, "Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB No. 133 - an
Amendment to FASB Statement No. 133" the effective date of SFAS No. 133
has been deferred until fiscal years beginning after January 15, 2000.
SFAS No. 133 cannot be applied retroactively. SFAS No. 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, 1998 (and, at the company's election, before
January 1, 1999).
The Partnership has not yet quantified the impacts of adopting SFAS No.
133 on the financial statements and has not determined the timing or
method of adoption of SFAS No. 133. However, the statement could increase
volatility in earnings and other comprehensive income.
(3) In November of 1999, the SEC released SAB No. 101 "Revenue Recognition
in Financial Statements." This bulletin will become effective for the
quarter ended June 30, 2000. This bulletin establishes more clearly
defined revenue recognition criteria, than previously existing accounting
pronouncements, and specifically addresses revenue recognition requirements
for nonrefundable fees, such as installation fees, collected by a company
upon entering into an arrangement with a customer. The Partnership believes
that the effects of this bulletin will not have a material impact on the
Partnership's financial position or results of operations.
(4) Certain reclassifications have been made to conform prior years'
financial statements with the current year presentation.
(5) Under the terms of the Partnership's revolving credit and term loan
agreement, all amounts outstanding under the note payable become due and
payable on December 31, 2000. The Partnership's continuing operations will
not provide sufficient liquidity to satisfy this obligation at its stated
maturity. Alternatives available to the Partnership include a sale of a
portion or all of its assets to generate proceeds sufficient to repay the
outstanding debt or to
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renegotiate the terms of the credit agreement with its lenders to extend
the maturity date. Management believes agreement by the lenders to extend
the maturity date would be contingent upon the approval of the limited
partners to extend the expiration of the Partnership's life, which
currently expires on December 31, 2001.
The general partners are currently in the process of formulating a proposal
to liquidate the assets of the partnership, which, in the opinion of the
General Partner, would provide sufficient proceeds to retire all the
Partnership's obligations. Such a proposal would require approval by a
majority in interest of limited partners. It is anticipated this liquidation
would occur in the first quarter of 2001. Based on preliminary discussions
with the lenders, management and the lenders believe it is not unreasonable
that the Partnership could arrange financing to continue its operations if
necessary, assuming no deterioration in its operations and the bank credit
markets remain open.
6
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PART I (continued)
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
Revenues totaled $3,753,415 for the three months ended March 31, 2000,
representing an increase of approximately 1% over the same period in 1999.
Of these revenues, $2,720,354 (72%) was derived from basic service charges,
$338,676 (9%) from premium services, $234,663 (6%) from tier services,
$90,154 (2%) from installation charges, $97,967 (3%) from service
maintenance contracts, $132,131 (4%) from advertising, and $139,470 (4%)
from other sources. The April 1999 disposition of the Sandersville System
decreased revenues approximately $142,000 or 4%. Assuming the Sandersville
System was disposed of at the beginning of each of the respective periods,
revenues would have increased approximately 5%. The increase in revenue is
attributable primarily to rate increases placed into effect in August of
1999.
Operating expenses totaled $304,646 for the three months ended March 31,
2000, representing a decrease of approximately 10% over the same period in
1999. Excluding the impact of the Sandersville System disposition, operating
expenses would have decreased approximately 4% for the three months ended
March 31, 2000. This is primarily due to decreased system maintenance and
drop material costs offset by increased vehicle operating expenses.
General and administrative expenses totaled $891,032 for the three months
ended March 31, 2000, representing a decrease of approximately 1% over the
same period in 1999. Excluding the impact of the Sandersville System
disposition, general and administrative expenses for the three months ended
March 31, 2000 would have increased approximately 2% for the three months
ended March 31, 2000. This is due to higher revenue based expenses such as
management fees and franchise fees as well as increased property taxes,
utilities and accounting services offset by reduced bad debt expense and
travel expense.
Programming expenses totaled $985,622 for the three months ended March 31,
2000, remaining essentially unchanged from the same period in 1999.
Adjusting for the Sandersville System disposition, programming expenses
would have increased approximately 5% for the three months ended March 31,
2000 compared to the same period in 1999. This is mainly due to higher costs
charged by various program suppliers.
Depreciation and amortization expenses totaled $1,116,401 for the three
months ended March 31, 2000, representing a decrease of approximately 4%
over the same period in 1999. This is mainly due to assets becoming fully
depreciated offset by depreciation on plant and equipment acquired during
the last year.
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Interest expense for the three months ended March 31, 2000 decreased
approximately 3% over the same period in 1999. The average bank debt
decreased from $31,372,848 during the first quarter of 1999 to $28,965,281
during the first quarter of 2000, and the Partnership's effective interest
rate increased from 7.89% in 1999 to 8.31% in 2000.
Liquidity and Capital Resources
The Partnership's primary sources of liquidity are cash flow provided from
operations and availability under an $8,000,000 revolving credit line, of
which approximately $6,200,000 was outstanding as of March 31, 2000. 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 operating costs, debt service and planned capital
expenditures up to December 31, 2000. Under the terms of the Partnership's
revolving credit and term loan agreement, all amounts outstanding under the
note payable become due and payable on December 31, 2000. The Partnership's
continuing operations will not provide sufficient liquidity to satisfy this
obligation at its stated maturity. Alternatives available to the Partnership
include a sale of a portion or all of its assets to generate proceeds
sufficient to repay the outstanding debt or to renegotiate the terms of the
credit agreement with its lenders to extend the maturity date. Management
believes agreement by the lenders to extend the maturity date would be
contingent upon the approval of the limited partners to extend the
expiration of the Partnership's life, which currently expires on December
31, 2001.
The general partners are currently in the process of formulating a proposal
to liquidate the assets of the partnership, which, in the opinion of the
General Partner, would provide sufficient proceeds to retire all the
Partnership's obligations. Such a proposal would require approval by a
majority in interest of limited partners. It is anticipated this liquidation
would occur in the first quarter of 2001. Based on preliminary discussions
with the lenders, management and the lenders believe it is not unreasonable
that the Partnership could arrange financing to continue its operations if
necessary, assuming no deterioration in its operations and the bank credit
markets remain open.
During the three months ended March 31, 2000, the Partnership's primary
sources of liquidity were cash provided from operations and credit available
under its revolving credit and term loan agreement. The Partnership
generates cash on a monthly basis through the monthly billing of subscribers
for cable services. Losses from uncollectible accounts have not been
material. During the three months ended March 31, 2000, cash generated from
monthly billings was sufficient to meet the Partnership's needs for working
capital, capital expenditures and scheduled debt service.
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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, and an annual operating cash flow to interest expense ratio of
not less than 2.25 to 1. As of March 31, 2000, the Partnership was in
compliance with its required financial covenants.
As of the date of this filing, the balance under the credit facility is
$28,965,281. Certain fixed rate agreements expired during the first quarter
of 2000. As of the date of this filing, interest rates on the credit
facility were as follows: $28,965,281 fixed at Libor based rate of 8.1825%
expiring May 30, 2000. 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 2000, the Partnership incurred approximately
$192,000 in capital expenditures. These expenditures included the ongoing
system upgrade to 550 MHz in the Starkville, MS system, the initial phase of
a 550 MHz system upgrade in the Forest, MS system, a continued system
upgrade to 450 MHz in the Barnwell, SC system and channel additions in the
Bennettsville, SC system.
Planned expenditures for the balance of 2000 include specific digital
service launches, continuation of construction on the fiber optic backbone
and ongoing system upgrade to 550 MHz in the Starkville, MS system, a
continued system upgrade to 550 MHz in the Forest, MS system, the continued
deployment of fiber and system upgrade construction in the Highlands, NC
system, a continued upgrade to 450 MHz in the Barnwell, SC system, and
various line extensions in all of the systems.
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 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.
Cautionary statement for purposes of the "Safe Harbor" provisions of the
Private Litigation Reform Act of 1995. Statements contained or incorporated
by reference in this document that are not based on historical fact are
"forward-looking statements" within the meaning of the Private Securities
Reform Act of 1995. Forward-looking statements may be identified by use of
forward-looking terminology such as "believe", "intends", "may", "will",
"expect", "estimate", "anticipate", "continue", or similar terms,
variations of those terms or the negative of those terms.
9
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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, 2000.
10
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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
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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:
---------------
Richard I. Clark
(Vice President/Treasurer)
Dated: BY:
---------------
Gary S. Jones
(Vice President)
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,002,411
<SECURITIES> 0
<RECEIVABLES> 790,376
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 29,071,766
<DEPRECIATION> 15,127,424
<TOTAL-ASSETS> 30,113,491
<CURRENT-LIABILITIES> 30,480,334
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (366,843)
<TOTAL-LIABILITY-AND-EQUITY> 30,113,491
<SALES> 3,753,415
<TOTAL-REVENUES> 3,753,415
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,297,701
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 601,440
<INCOME-PRETAX> (184,093)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (184,093)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
