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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 JUNE 30, 2000
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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
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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
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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 ____.
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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>
June 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
ASSETS
Cash $ 1,629,957 $ 556,962
Due from affiliates 18,002 24,885
Accounts receivable 646,955 781,827
Prepaid expenses 112,329 78,012
Property and equipment, net of accumulated
depreciation of $15,646,492 and $14,639,656,
respectively 13,842,189 14,273,156
Intangible assets, net of accumulated
amortization of $15,625,798 and $14,329,374,
respectively 13,604,721 14,888,691
------------ ------------
Total assets $ 29,854,153 $ 30,603,533
============ ============
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses $ 886,262 $ 1,326,560
Due to managing general partner and affiliates 57,822 46,388
Converter deposits 32,783 35,422
Subscriber prepayments 474,738 412,628
Notes payable 28,965,281 28,965,281
------------ ------------
Total liabilities 30,416,886 30,786,279
------------ ------------
Partners' equity:
General Partners:
Contributed capital, net (37,565) (37,565)
Accumulated deficit (95,077) (91,277)
------------ ------------
(132,642) (128,842)
------------ ------------
Limited Partners:
Contributed capital, net 8,982,444 8,982,444
Accumulated deficit (9,412,535) (9,036,348)
------------ ------------
(430,091) (53,904)
------------ ------------
Total partners' equity (562,733) (182,746)
------------ ------------
Total liabilities and partners' equity $ 29,854,153 $ 30,603,533
============ ============
</TABLE>
The accompanying notes to unaudited financial statements is an
integral part of these statements
2
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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,
---------------------------------
2000 1999
----------- -----------
<S> <C> <C>
Service revenues $ 7,556,951 $ 7,497,999
Expenses:
Operating (including $171,573
and $150,648 to affiliates, respectively) 583,121 669,938
General and administrative (including
$287,694 and $338,326 to affiliates,
respectively) 1,847,340 1,844,762
Programming (including $47,725
and $126,641 to affiliates, respectively) 1,972,111 1,960,954
Depreciation and amortization 2,233,020 2,232,866
----------- -----------
6,635,592 6,708,520
----------- -----------
Income from operations 921,359 789,479
Other income (expense):
Interest expense (1,223,831) (1,216,787)
Amortization of loan fees (101,310) (91,429)
Interest income 19,090 12,567
Gain on sale of assets 4,708 1,662,267
----------- -----------
(1,301,343) 366,618
----------- -----------
Net (loss) income $ (379,984) 1,156,097
=========== ===========
Allocation of net (loss) income:
General Partners $ (3,800) $ 11,561
=========== ===========
Limited Partners $ (376,184) $ 1,144,536
=========== ===========
Net (loss) income per limited partnership unit:
(29,784 units) $ (13) $ 38
=========== ===========
Net (loss) income per $1,000 investment $ (25) $ 77
=========== ===========
</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 OPERATIONS - (Unaudited)
(Prepared by the Managing General Partner)
<TABLE>
<CAPTION>
For the three months ended June 30,
-----------------------------------
2000 1999
----------- -----------
<S> <C> <C>
Service revenues $ 3,803,536 $ 3,765,209
Expenses:
Operating (including $111,163
and $72,438 to affiliates, respectively) 278,475 330,551
General and administrative (including
$78,103 and $55,078 from affiliates,
respectively) 956,308 940,659
Programming (including $19,417
and $63,629 to affiliates, respectively) 986,489 978,319
Depreciation and amortization 1,116,619 1,074,219
----------- -----------
3,337,891 3,323,748
----------- -----------
Income from operations 465,645 441,461
Other income (expense):
Interest expense (622,391) (597,584)
Amortization of loan fees (50,655) (45,714)
Interest income 11,510 6,826
Gain on sale of assets -- 1,662,267
----------- -----------
(661,536) 1,025,795
----------- -----------
Net (loss) income $ (195,891) $ 1,467,256
=========== ===========
Allocation of net (loss) income
General Partners $ (1,959) $ 14,673
=========== ===========
Limited Partners $ (193,932) $ 1,452,583
=========== ===========
Net (loss) income per limited partnership unit:
(29,784 units) $ (7) $ 49
=========== ===========
Net (loss) income per $1,000 investment $ (14) $ 98
=========== ===========
</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 six months ended June 30,
---------------------------------
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (379,984) $ 1,156,097
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 2,233,020 2,232,866
Amortization of loan fees 101,310 91,429
Gain on sale of assets (4,708) (1,662,267)
(Increase) decrease in operating assets:
Due to affiliates 6,883 (3,637)
Accounts receivable 134,872 41,196
Prepaid expenses (34,317) (69,695)
Increase (decrease) in operating liabilities
Accounts payable and accrued expenses (440,298) (269,170)
Due to managing general partner and affiliates 11,434 31,689
Converter deposits (2,639) (17,279)
Subscriber prepayments 62,110 (209,874)
----------- -----------
Net cash from operating activities 1,687,683 1,321,355
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (609,234) (1,197,831)
Proceeds from sale of property 7,000 1,900,000
Increase in intangibles (12,454) (4,062)
----------- -----------
Net cash (used in) from investing activities (614,688) 698,107
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on borrowings -- (2,407,589)
Repurchase of limited partner interest -- (4,000)
----------- -----------
Net cash used in financing activities -- (2,411,589)
----------- -----------
INCREASE (DECREASE) IN CASH 1,072,995 (392,127)
CASH, beginning of period 556,962 706,907
----------- -----------
CASH, end of period $ 1,629,957 $ 314,780
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 1,218,941 $ 1,217,243
=========== ===========
</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
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 June 30, 2000, its statements of operations for the six
and three months ended June 30, 2000 and 1999 and its statements of cash flows
for the six months ended June 30, 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 become effective for the quarter ended
December 31, 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
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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 Managing
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.
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PART I (continued)
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
Revenues totaled $7,556,951 for the six months ended June 30, 2000, representing
an increase of approximately 1% over the same period in 1999. Of these revenues,
$5,469,439 (72%) was derived from basic service charges, $692,389 (9%) from
premium services, $470,566 (6%) from tier services, $184,741 (2%) from
installation charges, $198,048 (3%) from service maintenance contracts, $274,812
(4%) from advertising, and $266,956 (4%) from other sources. The April 1999
disposition of the Sandersville System decreased revenues approximately $189,000
or 2%. Assuming the Sandersville System was disposed of at the beginning of each
of the respective periods, revenues would have increased approximately 3%. The
increase in revenue is attributable primarily to rate increases placed into
effect in August of 1999.
Operating expenses totaled $583,121 for the six months ended June 30, 2000,
representing a decrease of approximately 13% over the same period in 1999.
Excluding the impact of the Sandersville System disposition, operating expenses
would have decreased approximately 9% for the six months ended June 30, 2000.
This is primarily due to decreased operating salaries, regional management
expense, system maintenance and drop material costs offset by increased pole
rental expense.
General and administrative expenses totaled $1,847,340 for the six months ended
June 30, 2000, remaining consistent with the same period in 1999. Excluding the
impact of the Sandersville System disposition, general and administrative
expenses for the six months ended June 30, 2000 would have increased
approximately 2% for the six months ended June 30, 2000. This is due to higher
revenue based expenses such as management fees and franchise fees as well as
increased property taxes, bill processing expense and administrative services
offset by reduced bad debt expense and telephone expense.
Programming expenses totaled $1,972,111 for the six months ended June 30, 2000,
representing a 1% increase over the same period in 1999. Adjusting for the
Sandersville System disposition, programming expenses would have increased
approximately 3% for the six months ended June 30, 2000 compared to the same
period in 1999. This is mainly due to higher costs charged by various program
suppliers offset by reduced local programming expense.
Depreciation and amortization expenses totaled $2,233,020 for the six months
ended June 30, 2000, remaining consistent with the same period in 1999. This is
mainly due to assets
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becoming fully depreciated offset by depreciation on plant and equipment
acquired during the last year.
Interest expense for the six months ended June 30, 2000 increased approximately
1% over the same period in 1999. The average bank debt decreased from
$30,652,990 during the first half of 1999 to $28,965,281 during the first half
of 2000, and the Partnership's effective interest rate increased from 7.94% in
1999 to 8.45% in 2000.
THREE MONTHS ENDED JUNE 30, 2000 AND 1999
Revenues totaled $3,803,536 for the three months ended June 30, 2000,
representing an increase of approximately 1% over the same period in 1999. Of
these revenues, $2,749,085 (72%) was derived from basic service charges,
$353,713 (9%) from premium services, $235,903 (6%) from tier services, $94,587
(2%) from installation charges, $100,081 (3%) from service maintenance
contracts, $142,681 (4%) from advertising, and $127,486 (4%) from other sources.
The April 1999 disposition of the Sandersville System decreased revenues
approximately $47,000 or 1%. Assuming the Sandersville System was disposed of at
the beginning of each of the respective periods, revenues would have increased
approximately 2%. The increase in revenue is attributable primarily to rate
increases placed into effect in August of 1999.
Operating expenses totaled $278,475 for the three months ended June 30, 2000,
representing a decrease of approximately 16% over the same period in 1999.
Excluding the impact of the Sandersville System disposition, operating expenses
would have decreased approximately 14% for the three months ended June 30, 2000.
This is primarily due to decreased operating salaries, regional management
expense, system maintenance and drop material costs offset by increased pole
rental expense.
General and administrative expenses totaled $956,308 for the three months ended
June 30, 2000, representing an increase of approximately 2% over the same period
in 1999. Excluding the impact of the Sandersville System disposition, general
and administrative expenses for the three months ended June 30, 2000 would have
increased approximately 3% for the three months ended June 30, 2000. This is due
to higher revenue based expenses such as management fees and franchise fees as
well as increased property taxes, bill processing expense and administrative
services offset by reduced bad debt expense and telephone expense.
Programming expenses totaled $986,489 for the three months ended June 30, 2000,
remaining essentially unchanged from the same period in 1999. Adjusting for the
Sandersville System disposition, programming expenses would have increased
approximately 2% for the three months ended June 30, 2000 compared to the same
period in 1999. This is mainly due to higher costs charged by various program
suppliers offset by reduced local programming expense.
Depreciation and amortization expenses totaled $1,116,619 for the three months
ended June 30, 2000, representing an increase of approximately 4% over the same
period in 1999. This is
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mainly due to depreciation on plant and equipment acquired during the last year
offset by assets becoming fully depreciated during the year.
Interest expense for the three months ended June 30, 2000 increased
approximately 4% over the same period in 1999. The average bank debt decreased
from $29,933,133 during the second quarter of 1999 to $28,965,281 during the
second quarter of 2000, and the Partnership's effective interest rate increased
from 7.99% in 1999 to 8.6% 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 June 30, 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 Managing
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 June 30, 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 June 30, 2000, cash generated from monthly billings was sufficient
to meet the Partnership's needs for working capital, capital expenditures and
scheduled debt service.
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
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ratio of not less than 2.25 to 1. As of June 30, 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 8.684% expiring July 31,
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
$609,000 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 small line extensions in various systems.
Planned expenditures for the balance of 2000 include continuation of
construction on the system upgrade to 550 MHz in the Starkville, MS system, a
continued system upgrade to 550 MHz in the Forest, MS system, the design for a
system upgrade to 450 MHz in the city of Highlands, NC, 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.
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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 June 30,
2000.
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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: 8/11/00 BY: /s/ RICHARD I. CLARK
---------------------------------
Richard I. Clark
(Vice President/Treasurer)
Dated: 8/11/00 BY: /s/ GARY S. JONES
---------------------------------
Gary S. Jones
(Vice President)
13
