<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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, 1998
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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 to ___________
Commission File Number: 0-16718
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NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP
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(Exact Name of Registrant as Specified in Charter)
Washington 91-1366564
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(State of Organization) (I.R.S. 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
----------------------------------------------------
(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 subject to such filing requirements
for the past 90 days.
Yes X No
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- ------------------------
This filing contains __ pages. Exhibits index appears on page __.
<PAGE> 2
PART 1 - FINANCIAL INFORMATION
ITEM 1. Financial Statements
NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP
BALANCE SHEETS - (Unaudited)
(Prepared by the Managing General Partner)
<TABLE>
<CAPTION>
September 30 December 31,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Cash $ 2,015,844 $ 586,000
Accounts receivable 369,401 794,000
Prepaid expenses 121,232 83,906
Property and equipment, net of accumulated
depreciation of $14,966,728 and $13,322,455,
respectively 13,428,502 13,877,059
Intangible assets, net of accumulated
amortization of $5,900,677 and $26,703,631,
respectively 18,726,638 20,961,739
------------ ------------
Total assets $ 34,661,617 $ 36,302,704
============ ============
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses $ 1,734,267 $ 1,419,226
Due to managing general partner and affiliates 44,692 58,553
Converter deposits 33,407 30,241
Subscriber prepayments 354,215 650,182
Notes payable 41,349,913 41,543,600
------------ ------------
Total liabilities 43,516,494 43,701,802
------------ ------------
Partners' equity:
General Partners:
Contributed capital, net (25,367) (25,367)
Accumulated deficit (275,651) (261,093)
------------ ------------
(301,018) (286,460)
------------ ------------
Limited Partners:
Contributed capital, net 18,735,576 18,735,576
Accumulated deficit (27,289,435) (25,848,214)
------------ ------------
(8,553,859) (7,112,638)
------------ ------------
Total partners' equity (8,854,877) (7,399,098)
------------ ------------
Total liabilities and partners' equity $ 34,661,617 $ 36,302,704
============ ============
</TABLE>
The accompanying notes to unaudited financial statements
are an integral part of these statements
2
<PAGE> 3
NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS - (Unaudited)
(Prepared by the Managing General Partner)
<TABLE>
<CAPTION>
For the nine months ended September 30,
---------------------------------------
1998 1997
------------ -----------
<S> <C> <C>
Service revenues $ 12,543,646 $ 9,912,298
Expenses:
Operating 1,093,338 914,917
General and administrative (including
$1,422,096 and $1,233,615 to affiliates
in 1998 and 1997, respectively) 2,918,270 2,353,926
Programming 3,322,807 2,492,873
Depreciation and amortization 3,922,235 3,843,155
------------ -----------
11,256,650 9,604,871
------------ -----------
Income from operations 1,286,996 307,427
Other income (expense):
Interest expense (2,691,087) (1,897,867)
Interest income 21,293 3,319
Other income (expense) (2,240) 11,877
Loss on disposal of assets (70,741) (11,076)
------------ -----------
(2,742,775) (1,893,747)
------------ -----------
Net loss $ (1,455,779) (1,586,320)
============ ===========
Allocation of net loss:
General Partners $ (14,558) $ (15,863)
============ ===========
Limited Partners $ (1,441,221) $(1,570,457)
============ ===========
Net loss per limited partnership unit:
(49,656 units) $ (29) $ (32)
============ ===========
Net loss per $1,000 investment $ (58) $ (63)
============ ===========
</TABLE>
The accompanying notes to unaudited financial statements
are an integral part of these statements
3
<PAGE> 4
NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS - (Unaudited)
(Prepared by the Managing General Partner)
<TABLE>
<CAPTION>
For the three months ended September 30,
----------------------------------------
1998 1997
----------- -----------
<S> <C> <C>
Service revenues $ 4,308,231 $ 3,398,358
Expenses:
Operating 379,844 313,407
General and administrative (including
$511,597 and $456,545 to affiliates
in 1998 and 1997, respectively) 1,030,973 807,709
Programming 1,157,063 838,176
Depreciation and amortization 1,309,636 1,277,278
----------- -----------
3,877,516 3,236,570
----------- -----------
Income from operations 430,715 161,788
Other income (expense):
Interest expense (905,135) (621,417)
Interest income 13,104 3,068
Other income (expense) (2,240) --
Gain/loss on sale of assets -- --
----------- -----------
(894,271) (618,349)
----------- -----------
Net loss $ (463,556) $ (456,561)
=========== ===========
Allocation of net loss:
General Partners $ (4,636) $ (4,566)
=========== ===========
Limited Partners $ (458,920) $ (451,995)
=========== ===========
Net loss per limited partnership unit:
(49,656 units) $ (9) $ (9)
=========== ===========
Net loss per $1,000 investment $ (18) $ (18)
=========== ===========
</TABLE>
The accompanying notes to unaudited financial statements
are an integral part of these statements
4
<PAGE> 5
NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS - (Unaudited)
(Prepared by the Managing General Partner)
<TABLE>
<CAPTION>
For the nine months ended September 30,
---------------------------------------
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,455,779) $(1,586,320)
Adjustments to reconcile net loss to
cash provided by operating activities:
Depreciation and amortization 3,922,234 3,840,620
Loss on disposal of assets 70,742 11,076
(Increase) decrease in operating assets:
Accounts receivable 424,599 (45,810)
Prepaid expenses (37,326) (21,130)
Increase (decrease) in operating liabilities
Accounts payable and accrued expenses 315,041 407,442
Due to managing general partner and affiliates (13,861) 19,351
Converter deposits 3,166 (4,334)
Subscriber prepayments (295,967) (221,527)
----------- -----------
Net cash from operating activities 2,932,849 2,399,368
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (1,301,187) (870,561)
Proceeds from sale of assets 1,000
Increase in intangibles (9,131)
----------- -----------
Net cash used in investing activities (1,309,318) (870,561)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings under long term debt, net 190,000 --
Principal payments on borrowings (383,687) (1,720,000)
Distributions to partners -- --
Loan fees and other costs incurred -- (280,835)
Repurchase of limited partner interest -- --
----------- -----------
Net cash used in financing activities (193,687) (2,000,835)
----------- -----------
INCREASE (DECREASE) IN CASH 1,429,844 (472,028)
CASH, beginning of period 586,000 648,440
----------- -----------
CASH, end of period $ 2,015,844 $ 176,412
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 2,262,277 $ 1,641,955
=========== ===========
</TABLE>
The accompanying notes to unaudited financial statements
are an integral part of these statements
5
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NORTHLAND CABLE PROPERTIES SEVEN 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 September 30, 1998 and December 31, 1997, its Statements
of Operations for the nine and three months ended September 30, 1998 and 1997,
and its Statements of Cash Flows for the nine months ended September 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.
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<PAGE> 7
(3) The Partnership has adopted Statement of Financial Accounting Standards No.
130 - "Reporting Comprehensive Income" (SFAS 130), which was effective for
fiscal years beginning after December 15, 1997. SFAS 130 establishes standards
for reporting and display of comprehensive income and its components in a full
set of general-purpose financial statements. Comprehensive income is the change
in the equity of a business enterprise during a period from transactions and the
events and circumstances from non-owner sources.
For the periods presented in the accompanying statement of operations,
comprehensive income equals the amounts reported on the accompanying statement
of operations.
7
<PAGE> 8
PART I (continued)
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Revenues totaled $4,308,231 for the three months ended September 30, 1998
representing an increase of approximately 27% over the same period in 1997. Of
these revenues, $3,039,905 (71%) was derived from basic service charges,
$364,317 (9%) from premium services, $317,991 (7%) from tier services, $101,240
(2%) from installation charges, $96,167 (2%) from service maintenance contracts,
$248,463 (6%) from advertising and $140,148 (3%) from other sources. The
December 1997 addition of approximately 7,400 subscribers acquired in the
purchase of cable systems serving the communities of Toccoa, Royston and certain
unincorporated areas of Stephens, Franklin and Hart counties, all in the state
of Georgia increased revenues 22%. The remaining 5% of the revenue growth is
attributable to rate increases placed into effect in August of 1998 and a 9%
increase in the number of tier subscribers.
As of September 30, 1998, the Partnership's systems served approximately 39,700
basic subscribers, 16,600 premium subscribers and 12,800 tier subscribers.
Operating expenses totaled $379,844 for the three months ended September 30,
1998, representing an increase of approximately 21% over the same period in
1997. The increase in operating expenses was primarily attributable to the
acquisition of the Toccoa and Royston, GA systems.
General and administrative expenses totaled $1,030,974 for the three months
ended September 30, 1998, representing an increase of approximately 28% over the
same period in 1997. The increase is due to the acquisition of the Toccoa and
Royston, GA systems, with general and administrative expenses for other systems
remaining relatively unchanged.
Programming expenses totaled $1,157,063 for the three months ended September 30,
1998, representing an increase of approximately 38% over the same period in
1997. The addition of the Toccoa and Royston, GA systems increased programming
expenses 29%. Programming expenses for the three months ended September 30, 1997
were decreased 5% by certain launch incentive fees received from programmers.
The remaining 4% increase is due to higher programming costs resulting from rate
increases charged by various program suppliers and a one-time adjustment to
advertising agency fee expenses.
Depreciation and amortization expense for the three months ended September 30,
1998 increased approximately 3% over the same period in 1997. The addition of
assets acquired in the purchase of the Toccoa and Royston, GA systems increased
depreciation and amortization expense 30%. Excluding the effects of the
acquisition of the Toccoa and Royston, GA systems, depreciation and
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amortization decreased by 27% as a result of assets becoming fully depreciated
and amortized in 1997, offset by depreciation and amortization on current year
purchases of plant and equipment.
Interest expense for the three months ended September 30, 1998 increased
approximately 46% compared to the same period in 1997. The Partnership's average
bank debt outstanding increased from $30,040,000 in the third quarter of 1997 to
$41,100,000 in the third quarter of 1998, and the Partnership's effective
interest rate increased from 8.27% during the third quarter of 1997 to 8.81%
during the third quarter of 1998.
Liquidity and Capital Resources
The Partnership's primary sources of liquidity are cash flow provided from
operations and borrowing capacity under the Partnership's existing revolving
credit facility. 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 maximum ratio of senior debt to annualized operating cash flow of
5.75 to 1.00 and a minimum ratio of annualized operating cash flow to pro forma
debt service of 1.20 to 1.00. As of September 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
$40,975,000. Certain fixed rate agreements in place as of June 30, 1998 expired
during the third quarter of 1998, and the Partnership entered into new fixed
rate agreements. As of the date of this filing, interest rates on the credit
facility were as follows: $20,625,000 fixed at 8.635% under the terms of a self
amortizing interest rate swap agreement with the Partnership's lender expiring
December 29, 2000; $9,000,000 fixed at 8.315% under the terms of an interest
rate swap agreement with the Partnership's lender expiring June 15, 2000;
$6,000,000 fixed at 8.335% under the terms of an interest rate swap agreement
with the Partnership's lender expiring March 12, 2001; $4,100,000 fixed at
8.335% under the terms of an interest rate swap agreement with the Partnership's
lender expiring March 12, 2001; and $1,000,000 at a Libor based rate of 8.125%
expiring December 15, 1998. The balance of $250,000 bears interest at prime plus
1.25% (currently 9.25%). The above rates include 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 1998, the Partnership incurred approximately
$508,000 in capital expenditures, including the construction of a fiber optic
backbone in the Camano, WA system; the second phase of an upgrade of a portion
of the distribution plant to 450 MHz and the purchase of headend equipment to
launch new channels in the Bay City, TX system; the initial phase of an upgrade
of the distribution plant to 550 MHz in the Toccoa, GA system; and various line
extensions in all of the systems.
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<PAGE> 10
Planned expenditures for the balance of 1998 include the completion of a fiber
backbone in the Camano, WA system; continuation of an upgrade of the
distribution plant to 450 MHz in the Bay City, TX system; continuation of the
upgrade of the Toccoa, GA system to 550 MHz; and various line extensions in all
of the systems.
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 collection has been
modified to address year 2000 compliance issues. These modifications are
currently in the process of being installed in the Partnership's various billing
sites. The Partnership expects this implementation to be completed by 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.
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.
Acquisition
On December 5, 1997, the Partnership acquired substantially all operating assets
and franchise rights of the cable television systems serving approximately 7,400
subscribers in and around the communities of Toccoa and Royston and certain
unincorporated areas of Stephens, Franklin and Hart counties, all in the state
of Georgia. The systems were acquired at a purchase price of $11,360,000.
Pro forma operating results of the Partnership for the nine and three months
ending Sept 30, 1997, assuming the acquisition of the Toccoa and Royston, GA
systems had been completed as of the beginning of the period, are as follows:
<TABLE>
<CAPTION>
Nine months ending Three months ending
Sept 30, 1997 Sept 30, 1997
------------------ -------------------
<S> <C> <C>
Revenue $12,042,340 $4,154,569
=========== ==========
Net income $(2,443,737) $ (760,664)
=========== ==========
Net loss per limited
partnership unit $ (49) $ (15)
=========== ==========
</TABLE>
10
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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 (previously filed)
(b) No reports on Form 8-K have been filed during the quarter ended September
30, 1998.
11
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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 SEVEN LIMITED PARTNERSHIP
BY: Northland Communications Corporation,
Managing General Partner
Dated: 1/12/99 BY: /s/ RICHARD I. CLARK
------------- ----------------------------------
Richard I. Clark
(Vice President/Treasurer)
Dated: 1/12/99 BY: /s/ GARY S. JONES
------------- ----------------------------------
Gary S. Jones
(Vice President)
12
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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 SEVEN LIMITED PARTNERSHIP
BY: Northland Communications Corporation,
Managing General Partner
Dated: BY:
------------- --------------------------------------
Richard I. Clark
(Vice President/Treasurer)
Dated: BY:
------------- --------------------------------------
Gary S. Jones
(Vice President)
13
