<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended SEPTEMBER 30, 1999
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
-----------------------------------------------------------
(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 I (continued)
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
Revenues totaled $11,207,212 for the nine months ended September 30, 1999,
representing an increase of approximately 2% over the same period in 1998. Of
these revenues, $8,062,936 (72%) was derived from basic service charges,
$1,140,673 (10%) from premium services, $619,864 (6%) from tier services,
$299,579 (3%) from installation charges, $288,624 (2%) from service maintenance
contracts, $340,732 (3%) from advertising, and $454,804 (4%) from other sources.
The April 1999 disposition of approximately 1,400 subscribers in and around
Sandersville, Mississippi (the "Sandersville System") decreased revenues
approximately $200,000 or 2%. Assuming the Sandersville System was disposed of
at the beginning of each of the respective periods, revenues would have
increased approximately 4%. The increase in revenue is attributable primarily to
rate increases placed into effect in August of 1999 and 1998 as well as new
product services introduced in 1999.
As of September 30, 1999, the Partnership's systems served approximately 33,000
basic subscribers, 15,300 premium subscribers and 8,300 tier subscribers.
Operating expenses totaled $995,578 for the nine months ended September 30,
1999, representing an increase of approximately 6% over the same period in 1998.
Excluding the impact of the Sandersville System disposition, operating expenses
would have increased approximately 10% for the nine months ended September 30,
1999. This is primarily due to increased operating salaries and pole rental
expense offset by decreased system maintenance expenses and drop materials.
General and administrative expenses totaled $2,767,836 for the nine months ended
September 30, 1999, representing an increase of approximately 1% over the same
period in 1998. Excluding the impact of the Sandersville System disposition,
general and administrative expenses would have increased approximately 4% for
the nine months ended September 30, 1999 compared to the same period in 1998.
This is due to higher revenue based expenses such as management fees and
franchise fees as well as increased utilities, property taxes and bad debt
expense offset by reduced billing expenses and legal expenses.
Programming expenses totaled $2,933,546 for the nine months ended September 30,
1999, representing an increase of approximately 1% over the same period in 1998.
Adjusting for the Sandersville System disposition, programming expenses would
have increased approximately 3% for the nine months ended September 30, 1999
compared
7
<PAGE> 3
to the same period in 1998. This is mainly due to higher costs charged by
various program suppliers as well as increased advertising expenses and
production expense.
Depreciation and amortization expenses totaled $3,291,708 for the nine months
ended September 30, 1999, representing an increase of approximately 9% over the
same period in 1998. Such increase is due to depreciation and amortization on
1999 purchases of plant and equipment offset by assets becoming fully
depreciated.
Interest expense for the nine months ended September 30, 1999 decreased
approximately 6% over the same period in 1998. The average bank debt decreased
from $31,372,848 during the first nine months of 1998 to $30,169,065 during the
first nine months of 1999, and the Partnership's effective interest rate
decreased from 8.82% in 1998 to 8.6% in 1999.
Gain (loss) on sale of assets changed from a loss of $92,330 for the nine months
ended September 30, 1998 to a gain of $1,604,222 for the same period in 1999 as
a result of the gain recognized on the sale of the Sandersville System in April
1999.
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
Revenues totaled $3,709,213 for the three months ended September 30, 1999,
representing a decrease of approximately 1% over the same period in 1998. Of
these revenues, $2,667,788 (72%) was derived from basic service charges,
$371,638 (10%) from premium services, $206,991 (6%) from tier services, $103,493
(3%) from installation charges, $94,545 (2%) from service maintenance contracts,
$123,641 (3%) from advertising, and $141,117 (4%) from other sources. The April
1999 disposition of the Sandersville System decreased revenues approximately
$140,000 or 4%. 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 $325,640 for the three months ended September 30,
1999, representing a decrease of approximately 1% over the same period in 1998.
Excluding the impact of the Sandersville System disposition, operating expenses
would have increased approximately 1% for the three months ended September 30,
1999. This is primarily due to increased operating salaries offset by decreased
system maintenance expenses.
General and administrative expenses totaled $923,074 for the three months ended
September 30, 1999, representing a decrease of approximately 2% over the same
period in 1998. Excluding the impact of the Sandersville System disposition,
general and administrative expenses for the three months ended September 30,
1999 would have remained constant with the same period in 1998. This is due to
higher revenue based expenses such as management fees and franchise fees as well
as increased bad debt expense and property taxes offset by reduced billing
expenses, postage and legal expenses.
8
<PAGE> 4
Programming expenses totaled $972,592 for the three months ended September 30,
1999, remaining essentially unchanged from the same period in 1998. Adjusting
for the Sandersville System disposition, programming expenses would have
increased approximately 4% for the three months ended September 30, 1999
compared to the same period in 1998. This is mainly due to higher costs charged
by various program suppliers.
Depreciation and amortization expenses totaled $1,058,842 for the three months
ended September 30, 1999, representing a decrease of approximately 14% over the
same period in 1998. This is primarily due to an understatement of expense in
the first quarter of 1998 in the amount of $164,000 that was recognized in the
third quarter of 1998. This adjustment had the impact of increasing the loss
attributable to the limited partners and general partners for the quarter ended
September 30, 1998 by $162,360 and $1,640 respectively. Excluding the impact of
the amortization adjustment in 1998, depreciation and amortization expense for
the three months ended September 30, 1999 would have remained constant with the
same period in 1998.
Interest expense for the three months ended September 30, 1999 decreased
approximately 7% over the same period in 1998. The average bank debt decreased
from $31,372,848 during the third quarter of 1998 to $28,965,281 during the
third quarter of 1999, and the Partnership's effective interest rate increased
from 8.77% in 1998 to 8.8% in 1999.
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 September 30, 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 operating costs, debt service and planned capital expenditures up to
December 31, 2000, at which time all amounts outstanding under the revolving
credit and term loan agreement become due. Total amounts outstanding at December
31, 2000 are expected to be approximately $28,965,000. This obligation can be
satisfied by a sale of all or a significant portion of the Partnership's assets
or through an amendment to the loan agreement to extend the maturity of these
amounts. Based on discussions with the lenders it is unlikely that any
significant extension of maturity would be approved unless the Partnership
agreement was amended to extend the life of the Partnership which currently
expires on December 31, 2001. If the Partnership is unable to sell a sufficient
amount of assets or renegotiate the terms of its debt it could materially affect
the Partnership's ability to continue as a going concern.
During the nine months ended September 30, 1999, the Partnership's primary
sources of liquidity were cash provided from operations, credit available under
its revolving credit and term loan agreement and proceeds received from the sale
of the Sandersville
9
<PAGE> 5
System. 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 nine months ended September 30, 1999, cash
generated from monthly billings was sufficient to meet the Partnership's needs
for working capital, capital expenditures and scheduled debt service.
On December 31, 1997, the Partnership amended and restated its credit agreement
with its current lender to finance the acquisition of the Barnwell, Bamberg,
Allendale and Bennettsville, South Carolina systems. This credit facility
provides for borrowings up to $33 million, including a $25 million term loan and
an $8 million revolving credit facility which mature December 31, 2000. In July,
1999 the Partnership further amended its credit agreement to modify the
amortization of its term loan and certain financial covenants.
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 2.0
to 1 increasing to 2.25 to 1 beginning October 1, 1999. As of September 30,
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
$28,965,281. Certain fixed rate agreements expired during the third quarter of
1999. As of the date of this filing, interest rates on the credit facility were
as follows: $22,062,500 fixed at 7.77% under the terms of an interest rate swap
agreement with the Partnership's lender expiring December 31, 1999; and
$6,902,781 fixed at 7.50875%, expiring December 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 third quarter of 1999, the Partnership incurred approximately
$830,000 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
upgrade in the Forest, MS system, a vehicle replacement and the continued system
upgrade to 450 MHz in the Philadelphia, MS system, channel additions and a
continued system upgrade to 450 MHz in the Barnwell, SC system and a headend
standby generator in the Bennettsville, SC system.
The Partnership plans to invest approximately $400,000 in capital expenditures
for the remainder of 1999. This represents anticipated expenditures for the
expansion of the fiber network and continuation of the system upgrade
construction to 550 MHz in the Starkville 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.
10
<PAGE> 6
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 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.
11
<PAGE> 7
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)
12
