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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
þ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period endedSeptember 30, 2005
or
o | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to
Commission file number333-43157
NORTHLAND CABLE TELEVISION, INC.
(Exact name of registrant as specified in its charter)
STATE OF WASHINGTON | 91-1311836 | |
(State or other jurisdiction of incorporation) | (I.R.S. Employer Identification No.) |
AND SUBSIDIARY GUARANTOR:
NORTHLAND CABLE NEWS, INC.
(Exact name of registrant as specified in its charter)
STATE OF WASHINGTON | 91-1638891 | |
(State or other jurisdiction of incorporation) | (I.R.S. Employer Identification No.) | |
101 STEWART STREET, SUITE 700 | ||
SEATTLE, WASHINGTON | 98101 | |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (206) 621-1351
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.
Yesþ Noo
Indicate by checkmark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.)
Yeso Noþ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yeso Noþ
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PART 1 — FINANCIAL INFORMATION
ITEM 1. Financial Statements
NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A wholly owned subsidiary of Northland Telecommunications Corporation)
CONDENSED CONSOLIDATED BALANCE SHEETS — (UNAUDITED)
(A wholly owned subsidiary of Northland Telecommunications Corporation)
CONDENSED CONSOLIDATED BALANCE SHEETS — (UNAUDITED)
September 30, | December 31, | |||||||
2005 | 2004 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 4,505,095 | $ | 913,878 | ||||
Due from Parent and affiliates | 688,020 | 819,553 | ||||||
Accounts receivable, net | 1,095,373 | 1,098,644 | ||||||
Prepaid expenses | 669,386 | 483,351 | ||||||
Total current assets | 6,957,874 | 3,315,426 | ||||||
Investment in Cable Television Properties: | ||||||||
Property and equipment, net of accumulated depreciation of $72,211,838 and $67,373,869 respectively | 38,518,084 | 41,293,290 | ||||||
Franchise agreements, net of accumulated amortization of $38,923,291 | 39,509,437 | 39,504,437 | ||||||
Goodwill, net of accumulated amortization of $2,407,104 | 3,937,329 | 3,937,329 | ||||||
Other intangible assets, net of accumulated amortization $3,251,103 and $3,231,686, respectively | 25,885 | 45,302 | ||||||
Total investment in cable television properties | 81,990,735 | 84,780,358 | ||||||
System sale receivable | 128,392 | 433,200 | ||||||
Loan fees, net of accumulated amortization of $3,164,913 and $2,782,038, respectively | 961,439 | 1,298,814 | ||||||
Total assets | $ | 90,038,440 | $ | 89,827,798 | ||||
LIABILITIES AND SHAREHOLDER’S DEFICIT | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 211,641 | $ | 747,973 | ||||
Subscriber prepayments | 1,542,260 | 1,343,651 | ||||||
Accrued expenses | 8,232,503 | 4,732,046 | ||||||
Converter deposits | 84,407 | 93,604 | ||||||
Due to affiliates | 108,287 | 36,203 | ||||||
Current portion of notes payable | 8,300,000 | 3,400,000 | ||||||
Total current liabilities | 18,479,098 | 10,353,477 | ||||||
Notes payable, net of current portion | 103,060,000 | 109,660,000 | ||||||
Deferred tax liabilities | 2,298,341 | 1,006,408 | ||||||
Total liabilities | 123,837,439 | 121,019,885 | ||||||
Shareholder’s Deficit: | ||||||||
Common stock (par value $1.00 per share, authorized 50,000 shares; 10,000 shares issued and outstanding) and additional paid-in capital | 12,359,377 | 12,359,377 | ||||||
Accumulated deficit | (46,158,376 | ) | (43,551,464 | ) | ||||
Total shareholder’s deficit | (33,798,999 | ) | (31,192,087 | ) | ||||
Total liabilities and shareholder’s deficit | $ | 90,038,440 | $ | 89,827,798 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A wholly owned subsidiary of Northland Telecommunications Corporation)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS — (UNAUDITED)
(A wholly owned subsidiary of Northland Telecommunications Corporation)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS — (UNAUDITED)
For the nine months ended September 30, | ||||||||
2005 | 2004 | |||||||
Service revenues | $ | 37,918,807 | $ | 37,340,197 | ||||
Expenses: | ||||||||
Cable system operations (including $9,404, net received from and $93,014, net paid to affiliates in 2005 and 2004, respectively), exclusive of depreciation and amortization shown below | 16,241,847 | 15,364,051 | ||||||
General and administrative (including $1,914,049 and $1,781,830, net paid to affiliates in 2005 and 2004, respectively) | 6,962,354 | 6,846,636 | ||||||
Other operating loss | 38,000 | — | ||||||
Management fees paid to Parent | 1,895,940 | 1,867,010 | ||||||
Depreciation and amortization | 6,215,936 | 6,892,725 | ||||||
(Gain) loss on disposal of assets | (264,352 | ) | 302,354 | |||||
31,089,725 | 31,272,776 | |||||||
Income from operations | 6,829,082 | 6,067,421 | ||||||
Other income (expense): | ||||||||
Interest expense and amortization of loan fees | (8,758,885 | ) | (8,699,563 | ) | ||||
Other, net | 46,111 | 39,072 | ||||||
(8,712,774 | ) | (8,660,491 | ) | |||||
Loss from continuing operations before income tax expense | (1,883,692 | ) | (2,593,070 | ) | ||||
Income tax expense | (1,298,818 | ) | (695,803 | ) | ||||
Loss from continuing operations | (3,182,510 | ) | (3,288,873 | ) | ||||
Discontinued operations (note 4) | ||||||||
Income from operations of Navasota system (including gain on sale of systems of $665,448 in 2005) | 719,905 | 46,004 | ||||||
Loss from sale of Port Angeles System | (144,307 | ) | — | |||||
Net loss | $ | (2,606,912 | ) | $ | (3,242,869 | ) | ||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A wholly owned subsidiary of Northland Telecommunications Corporation)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS — (UNAUDITED)
(A wholly owned subsidiary of Northland Telecommunications Corporation)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS — (UNAUDITED)
For the three months ended September 30, | ||||||||
2005 | 2004 | |||||||
Service revenues | $ | 12,888,804 | $ | 12,534,211 | ||||
Expenses: | ||||||||
Cable system operations (including $2,731 and $4,227, net received from affiliates in 2005 and 2004, respectively), exclusive of depreciation and amortization shown below | 5,544,914 | 5,195,792 | ||||||
General and administrative (including $686,139 and $634,484, net paid to affiliates in 2005 and 2004, respectively) | 2,435,469 | 2,387,953 | ||||||
Other operating loss | 38,000 | — | ||||||
Management fees paid to Parent | 644,440 | 626,711 | ||||||
Depreciation and amortization | 1,992,556 | 2,333,001 | ||||||
Gain on disposal of assets | (651 | ) | (49,379 | ) | ||||
10,654,728 | 10,494,078 | |||||||
Income from operations | 2,234,076 | 2,040,133 | ||||||
Other income (expense): | ||||||||
Interest expense and amortization of loan fees | (2,912,695 | ) | (2,927,824 | ) | ||||
Other, net | 24,423 | 7,756 | ||||||
(2,888,272 | ) | (2,920,068 | ) | |||||
�� | ||||||||
Loss from continuing operations before income tax expense | (654,196 | ) | (879,935 | ) | ||||
Income tax expense | (450,224 | ) | (163,481 | ) | ||||
Loss from continuing operations | (1,104,420 | ) | (1,043,416 | ) | ||||
Discontinued operations (note 4) | ||||||||
Income from operations of Navasota system (including gain on sale of systems of $665,448 in 2005) | 669,005 | 9,872 | ||||||
Loss from sale of Port Angeles System | (144,307 | ) | — | |||||
Net loss | $ | (579,722 | ) | $ | (1,033,544 | ) | ||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A wholly owned subsidiary of Northland Telecommunications Corporation)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — (UNAUDITED)
(A wholly owned subsidiary of Northland Telecommunications Corporation)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — (UNAUDITED)
For the nine months ended September 30, | ||||||||
2005 | 2004 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (2,606,912 | ) | $ | (3,242,869 | ) | ||
Adjustments to reconcile net loss to cash provided by operating activities: | ||||||||
Depreciation and amortization | 6,259,835 | 7,009,574 | ||||||
Amortization of loan fees | 382,875 | 417,708 | ||||||
(Gain) loss on disposal of assets | (822,969 | ) | 302,354 | |||||
Deferred income taxes | 1,291,933 | 690,000 | ||||||
Other | 93,296 | 89,886 | ||||||
(Increase) decrease in operating assets, net of systems sold: | ||||||||
Accounts receivable | 28,037 | 259,942 | ||||||
Prepaid expenses | (209,441 | ) | (328,658 | ) | ||||
Due from Parent and affiliates | 131,533 | (106,523 | ) | |||||
Increase (decrease) in operating liabilities, net of systmes sold: | ||||||||
Accounts payable and accrued expenses | 2,924,505 | 1,882,496 | ||||||
Due to affiliates | 72,084 | (46,490 | ) | |||||
Converter deposits | (8,537 | ) | (16,493 | ) | ||||
Subscriber prepayments | 200,549 | (79,547 | ) | |||||
Net cash provided by operating activities | 7,736,788 | 6,831,380 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Investment in cable television properties | (3,971,601 | ) | (6,776,825 | ) | ||||
Proceeds from sale of cable system, net | 1,283,687 | 3,990,778 | ||||||
Proceeds from related party insurance fund | 285,543 | — | ||||||
Proceeds from disposal of assets | 7,300 | 6,900 | ||||||
Franchises and other intangibles | (5,000 | ) | (10,768 | ) | ||||
Net cash used in investing activities | (2,400,071 | ) | (2,789,915 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Principal payments on borrowings | (1,700,000 | ) | (2,240,000 | ) | ||||
Loan fees | (45,500 | ) | (121,399 | ) | ||||
Net cash used in financing activities | (1,745,500 | ) | (2,361,399 | ) | ||||
INCREASE IN CASH | 3,591,217 | 1,680,066 | ||||||
CASH, beginning of period | 913,878 | 2,134,254 | ||||||
CASH, end of period | $ | 4,505,095 | $ | 3,814,320 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
Cash paid during the period for interest | $ | 5,757,456 | $ | 5,737,872 | ||||
Cash paid during the period for state income taxes | $ | 6,885 | $ | 5,803 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A wholly owned subsidiary of Northland Telecommunications Corporation)
(A wholly owned subsidiary of Northland Telecommunications Corporation)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2005
(Unaudited)
September 30, 2005
(Unaudited)
(1) Basis of Presentation
These unaudited condensed consolidated financial statements are being filed in conformity with Rule 10-01 of Regulation S-X regarding interim financial statement disclosures and do not contain all of the necessary footnote disclosures required for a complete presentation of the condensed consolidated balance sheets, statements of operations and statements of cash flows in conformity with accounting principles generally accepted in the United States of America. However, in the opinion of management, these statements include all adjustments, consisting only of normal recurring accruals, necessary to present fairly the Company’s condensed consolidated financial position at September 30, 2005, its condensed consolidated statements of operations for the nine and three months ended September 30, 2005 and 2004 and its condensed consolidated statements of cash flows for the nine months ended September 30, 2005 and 2004. 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 Company’s Annual Report on Form 10-K for the year ended December 31, 2004.
On August 1, 2005, the Partnership completed sales of the operating assets and franchise rights of its cable system serving the community of Navasota, Texas. The Navasota system served approximately 1,025 subscribers. This filing and the accompanying financial statements present the results of operations and sale of the Navasota system as discontinued operations.
(2) Intangible Assets
In accordance with the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets,” the Company does not amortize goodwill or any other intangible assets determined to have indefinite lives. The Company has determined that its franchise agreements meet the definition of indefinite lived assets. The Company tests these assets for impairment on an annual basis during the fourth quarter, or on an interim basis if an event occurs or circumstances change that would reduce the fair value of a reporting unit below its carrying value.
Loan fees are being amortized using the straight-line method, which approximates the effective interest rate method. Future amortization of loan fees is expected to be as follows:
2005 (3 months) | 130,438 | |||
2006 | 521,752 | |||
2007 | 309,249 | |||
$ | 961,439 | |||
Other intangibles are being amortized using the straight-line method. Future amortization of these other intangibles is expected to be as follows:
2005 (3 months) | 6,471 | |||
2006 | 19,414 | |||
$ | 25,885 | |||
(3) Amended and Restated Senior Credit Facility
On November 13, 2003, the Company amended and restated its existing senior credit facility (the “Amended and Restated Senior Credit Facility”). The amendment and restatement resulted in the elimination of the lending syndicate and assumption of the credit facility by one of the syndicate members. The Amended and Restated Senior Credit Facility establishes a term loan in the amount of $15,000,000 and a $2,000,000 revolving credit loan, under which the Company borrowed $1,000,000 upon amendment and restatement. The proceeds from the Amended and Restated Senior Credit Facility were used to repay the Company’s
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existing senior credit facility, to provide working capital and for other general purposes. The Amended and Restated Senior Credit Facility matures on December 31, 2006 and requires the Company to make quarterly principal payments beginning March 31, 2004.
The interest rate per annum applicable to the Amended and Restated Senior Credit Facility is a fluctuating rate of interest measured by reference to either: (i) the Index Rate, as defined, plus a borrowing margin of 2.50%; or (ii) the London interbank offered rate (LIBOR), plus a borrowing margin of 3.75%.
The Amended and Restated Senior Credit Facility contains a number of covenants, which among other things, require the Company to comply with specified financial ratios, including maintenance, as tested on a quarterly basis, of: (A) a Maximum Total Leverage Ratio (the ratio of Total Debt to Annualized Operating Cash Flow (as defined)) of not more than 6.50 to 1.00; (B) a Maximum Senior Leverage Ratio (the ratio of Senior Debt to Annualized Operating Cash Flow (as defined)) of not more than 1.00 to 1.00; (C) an Interest Coverage Ratio (the ratio of Operating Cash Flow (as defined) to Total Cash Interest Expense of not less than 1.50 to 1.00 initially; and (D) a Minimum Fixed Charge Coverage Ratio (the ratio of Annualized Operating Cash Flow (as defined) to the Company’s Fixed Charges (as defined) of not less than 1.00 to 1.00.
In March of 2005, the Company further amended the Amended and Restated Senior Credit Facility such that the Company was allowed to retain the net proceeds from the sale of the Navasota system. In addition, the amendment establishes a limitation on the maximum amount of annual capital expenditures to be incurred during 2005 of $5.7 million and modifies the Minimum Fixed Charge Coverage Ratio requirement during 2005 as follows:
March 31, 2005 | 0.80 to 1.00 | |||
June 30, 2005 | 0.80 to 1.00 | |||
September 30, 2005 | 0.80 to 1.00 | |||
December 31, 2005 | 0.90 to 1.00 |
The Minimum Fixed Charge Coverage Ratio requirements revert back to the original requirements of 1.00 to 1.00 in 2006.
In August of 2005, the Company further amended the credit facility such that the $850,000 principal payment that was scheduled to be made on September 30, 2005 was postponed until September 30, 2006. In association with this amendment, the Company paid an amendment fee of $10,000.
In November of 2005, the Company further amended its credit facility such that the Company was able to retain the escrow proceeds that were released to the Company as a result of the settlement of the litigation with the buyer of the Port Angeles System (note 4) and allows the Company to exclude the legal fees associated with the settlement of this litigation from the calculation of Operating Cash Flow. In addition, the amendment also allows the Company to exclude any deductibles and coinsurance costs incurred as a result of insurance claims related to hurricane damages from the calculation of Operating Cash Flow (up to a maximum of $38,000).
As of September 30, 2005, the Company was in compliance with the terms of the Amended and Restated Senior Credit Facility.
The current portion of notes payable included in the accompanying balance sheets reflect the principal payment requirements of the Amended and Restated Senior Credit Facility, as amended in August of 2005. Annual maturities of the Amended and Restated Senior Credit Facility are as follows:
Principal | ||||
Payments | ||||
2005 (3 months) | $ | 850,000 | ||
2006 | 10,510,000 | |||
Total | $ | 11,360,000 | ||
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As of September 30, 2005, the balance under the Senior credit facility was approximately $11.4 million and applicable interest rates were as follows: $9.4 million at a LIBOR based interest rate of 7.61%, $1.1 million at a LIBOR based interest rate of 7.61% and $0.9 million at a LIBOR based interest rate of 7.77%. These rates expire during the fourth quarter of 2005 at which time new rates will be established.
On November 11, 2005, the Company executed a commitment letter received from a recognized financial institution to lead the syndication of a significant credit facility for the Company. It is anticipated that funds from the new credit facility, if secured by the Company, will be used to refinance existing senior bank debt, to redeem in their entirety all of the Company’s senior subordinated notes pursuant to the optional redemption provisions of those notes, and to provide funds for future capital expenditures and working capital. The commitment is subject to various conditions including no material adverse change in the operations of the Company, no material adverse changes in financial, banking or capital market conditions, satisfactory results of due diligence review by the lender, mutually satisfactory negotiation of definitive documentation of the credit facility, among others. If the credit facility is secured, it is currently contemplated that closing of the new credit facility will take place sometime during the fourth quarter of 2005 although no assurances can be given as to this timing. It is important to note that final consummation of the proposed credit facility remains subject to various conditions outside of the Company’s control, and no assurances can be given at this time that these conditions will be satisfied or that the credit facility will actually be secured.
(4) System Sales
On March 11, 2003, the Company sold the operating assets and franchise rights of its cable system in and around the community of Port Angeles, Washington (the “Port Angeles System”). In association with this transaction, approximately $575,000 was to be held in escrow and released to the Company one year from the closing of the transaction, subject to general representations and warranties. In March of 2004, the Company received notice from the buyer of the Port Angeles System of certain claims, which were made under the hold back agreement provisions of the purchase and sale agreement. Approximately $433,000 of the original escrow proceeds remained in escrow until such claims were resolved. The escrow proceeds in excess of the claims were released to the Company in March of 2004.
On August 26, 2005, the Company settled its ongoing litigation with the buyer of the Port Angeles System. As a result of the settlement reached, the Company received approximately $326,000 of the escrow funds. Under an amendment to the Company’s credit facility, executed in November of 2005, the Company was allowed to retain these proceeds. The remaining escrow proceeds, approximately $107,000, were remitted to the buyer of the Port Angeles System, and were allocated to discontinued operations as a loss from the sale of the Port Angeles System in the Company’s statement of operations for the three and nine months ended September 30, 2005. The Company also recorded $37,000 in legal fees in connection with the settlement of this litigation
The Company does not expect that the settlement of these claims, or the write off the amounts remitted to the buyer of the Port Angeles System, will have any further implication on the Company’s financial statements.
In September 2004, the Company sold its systems serving the areas of Buffalo and Jewett, Texas. These systems served approximately 415 basic subscribers and were sold for approximately $130,000. The net proceeds from this sale were used to repay amounts outstanding under the Company’s Amended and Restated Senior Credit Facility. The effect of this transaction did not have a material impact on the Company’s financial statements.
On August 1, 2005, the Company completed the sale of the operating assets and franchise rights of its cable system in and around the community of Navasota, Texas, which served approximately 1,025 subscribers, to Cequel III Communications I, LLC, an unaffiliated third party. The Navasota system was sold at a price of approximately $1,316,000 of which the Company received approximately $960,000 at closing. The sales price was adjusted at closing for the proration of certain revenues and expenses and approximately $130,000 will be held in escrow and released to the Partnership eighteen months from the closing of the transaction subject to indemnification claims made, if any, by the buyer pursuant to the terms of the purchase and sale agreement. Under the terms of an amendment to the Company’s Senior Credit Facility, executed in March of 2005, the Company was allowed to retain all of these proceeds. The Company recorded a gain from the sale of the Navasota system of approximately $665,000.
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The assets and liabilities attributable to the Navasota system as of December 31, 2004 consisted of the following:
As of | ||||
December 31, | ||||
2004 | ||||
Cash | $ | 3,530 | ||
Accounts receivable | 33,723 | |||
Prepaid expenses | 3,745 | |||
Property and equipment (net of accumulated depreciation of $1,156,138) | 415,988 | |||
Total assets | $ | 456,986 | ||
Accounts payable and accrued expenses | $ | 63,877 | ||
Deposits | 632 | |||
Subscriber prepayments | 12,770 | |||
Total liabilities | $ | 77,279 | ||
In addition, the revenue, expenses and other items attributable to the operations of the Navasota system during the periods presented in this filing have been reported as discontinued operations in the accompanying statements of operations, and include the following:
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For the nine months ended September 30, | ||||||||
2005 | 2004 | |||||||
Service revenues | $ | 389,533 | $ | 565,870 | ||||
Expenses: | ||||||||
Cable systems operations (including $30,240 and $40,815, net paid to affiliates in 2005 and 2004, respectively), exclusive of depreciation and amortization shown below | 184,241 | 250,690 | ||||||
General and administrative (including $64,061 and $91,616, net paid to affiliates in 2005 and 2004, respectively) | 87,459 | 124,034 | ||||||
Management fees paid to Parent | 19,477 | 28,293 | ||||||
Depreciation and amortization | 43,899 | 116,849 | ||||||
Gain on disposal of assets | (665,448 | ) | — | |||||
(330,372 | ) | 519,866 | ||||||
Income from operations of Navasota system, net | $ | 719,905 | $ | 46,004 | ||||
For the three months ended September 30, | ||||||||
2005 | 2004 | |||||||
Service revenues | $ | 52,761 | $ | 180,269 | ||||
Expenses: | ||||||||
Cable systems operations (including $6,882 and $13,958, net paid to affiliates in 2005 and 2004, respectively), exclusive of depreciation and amortization shown below | 28,473 | 81,204 | ||||||
General and administrative (including $9,887 and $29,554 paid to affiliates in 2005 and 2004, respectively) | 11,897 | 41,258 | ||||||
Management fees paid to Parent | 2,638 | 9,013 | ||||||
Depreciation and amortization | 6,196 | 38,922 | ||||||
Gain on disposal of assets | (665,448 | ) | — | |||||
(616,244 | ) | 170,397 | ||||||
Income from operations of Navasota system, net | $ | 669,005 | $ | 9,872 | ||||
Under the terms of an amendment to the Company’s Amended and Restated Senior Credit Facility in March of 2005, the Company was allowed to retain the net proceeds from the sale of the Navasota system. Due to the fact that the Company did not repay its credit facilities with the proceeds from the sale of the Navasota system, there has been no allocation of interest expense and amortization of loan fees to discontinued operations.
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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, 2005 and 2004
Basic subscribers from continuing operations decreased 1,806 or approximately 2%, from 78,225 as of December 31, 2004 to 76,419 as of September 30, 2005. The loss in subscribers is a result of several factors including competition from Direct Broadcast Satellite (DBS) providers, availability of off-air signals in the Company’s markets and regional and local economic conditions. In its efforts to reverse this customer trend, the Company is increasing its customer retention efforts and its emphasis on bundling its video and data products.
Revenues from continuing operations totaled $37.9 million for the nine months ended September 30, 2005, an increase of $600,000 or approximately 2%, from $37.3 million for the same period in 2004. Revenues from continuing operations for the nine months ended September 30, 2005 were comprised of the following sources:
• | $24.5 million (64%) from basic services | ||
• | $3.9 million (11%) from expanded basic services | ||
• | $3.7 million (10%) from high-speed Internet services | ||
• | $2.0 million (5%) from premium services | ||
• | $1.5 million (4%) from advertising | ||
• | $600,000 (2%) from digital services | ||
• | $1.7 million (4%) from other sources |
Average monthly revenue from continuing operations per subscriber increased $4.05 or approximately 8% from $50.67 for the nine months ended September 30, 2004 to $54.72 for the nine months ended September 30, 2005. This increase is attributable to rate increases implemented in a majority of the Company’s systems during the second quarter of 2005 and increased penetration of new product tiers, specifically, high-speed Internet services, and increased advertising revenue. This increase was partially offset by the aforementioned decrease in subscribers.
Cable system operation expenses from continuing operations increased approximately $800,000, or 6% from $15.4 million to $16.2 million for the nine months ended September 30, 2005. This increase is primarily attributable to increased costs associated with the Company’s high speed Internet product, increased advertising expenses and an increase in system vehicle expenses, offset by a decrease in programming costs, which is attributable to the aforementioned decrease in total subscribers.
During the nine months ended September 30, 2005, the Company recorded deductibles and coinsurance costs related to certain insurance claims that were made as a result of hurricanes Katrina and Rita. This amount totaled $38,000 and was recorded as other operating loss from continuing operations.
General and administrative expenses from continuing operations increased approximately $200,000, or 3% from $6.8 million to $7.0 million for the nine months ended September 30, 2005. The Company had a decrease in franchise fees, copying and printing charges and travel expenses, offset by an increase in administrative salary costs, legal expenses and corporate overhead allocations by the Company’s Parent. These corporate overhead allocations have been reduced in prior periods to the extent that allocation of these costs would have resulted in non-compliance with the Company’s debt covenants. Corporate overhead expenses represent actual costs incurred by the Company’s Parent for the period that are attributable to the operations of the Company. The Company has no obligation or liability to its Parent for reductions in corporate overhead charges.
Management fees from continuing operations for the nine months ended September 30, 2005 remained relatively constant with the same period in 2004. Management fees are calculated at 5.0% of gross revenues.
Depreciation and amortization expense from continuing operations for the nine months ended September 30, 2005 decreased approximately $700,000, or 10% from $6.9 million to $6.2 million for the nine months
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ended September 30, 2005. The decrease is attributable to certain assets becoming fully depreciated or amortized, offset by depreciation of recent purchases related to the upgrade of plant and equipment.
Interest expense and amortization of loan fees for the nine months ended September 30, 2005 remained relatively constant with the same period in 2004. The effect of routine principal payments was offset by an increase in interest rates.
EBITDA from continuing operations decreased approximately $500,000 or 4%, from $13.3 million to $12.8 million for the nine months ended September 30, 2005, and EBITDA margin from continuing operations decreased from 35.5% to 33.7% for the nine months ended September 30, 2005. This decrease is primarily attributable to the aforementioned decrease in total subscribers, and increased corporate overhead charges, discussed above.
EBITDA represents a non-GAAP measure and is one of the primary measures used by management to evaluate performance and to forecast future results. EBITDA margin represents EBITDA as a percentage of revenue. We believe EBITDA is useful to assess performance in a manner similar to the method used by management, and provides a measure that can be used to analyze, value and compare the companies in the cable television industry, which may have different depreciation and amortization policies. A limitation of this measure is that it excludes depreciation and amortization, which represents the period costs of certain capitalized tangible and intangible assets, and gains and losses recognized on the disposal of assets. It is also not intended to be a performance measure that should be regarded as an alternative either to operating income (loss) or net income (loss) as an indicator of operating performance or to the statement of cash flows as a measure of liquidity and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. Our definitions of EBITDA may not be identical to similarly titled measures reported by other companies. The following represents a reconciliation of EBITDA from continuing operations to loss from continuing operations, which is the most directly comparable GAAP measure:
Nine Months Ended September 30, | ||||||||
2005 | 2004 | |||||||
EBITDA: | ||||||||
EBITDA | $ | 12,780,666 | $ | 13,262,500 | ||||
Depreciation and amortization expense | (6,215,936 | ) | (6,892,725 | ) | ||||
Gain (loss) on disposal of assets | 264,352 | (302,354 | ) | |||||
Income from operations | 6,829,082 | 6,067,421 | ||||||
Interest expense and amortization of loan fees | (8,758,885 | ) | (8,699,563 | ) | ||||
Other, net | 46,111 | 39,072 | ||||||
Loss from continuing operations before income tax expense | (1,883,692 | ) | (2,593,070 | ) | ||||
Income tax expense | (1,298,818 | ) | (695,803 | ) | ||||
Loss from continuing operations | $ | (3,182,510 | ) | $ | (3,288,873 | ) | ||
EBITDA MARGIN: | ||||||||
EBITDA | $ | 12,780,666 | $ | 13,262,500 | ||||
Service Revenues | $ | 37,918,807 | $ | 37,340,197 | ||||
EBITDA Margin | 33.7 | % | 35.5 | % | ||||
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Results of Operations — Three Months Ended September 30, 2005 and 2004
Basic subscribers from continuing operations decreased 65 or less than 1%, from 76,484 as of June 30, 2005 to 76,419 as of September 30, 2005. An increase due to the seasonality in college communities was offset by competition from DBS providers, availability of off-air signals in the Company’s markets and regional and local economic conditions. In its efforts to reverse this customer trend, the Company is increasing its customer retention efforts and its emphasis on bundling its video and data products.
Revenues from continuing operations totaled $12.9 million for the three months ended September 30, 2005, an increase of $400,000 or 3% over the same period in 2004. Revenues from continuing operations for the three months ended September 30, 2005 were comprised of the following sources:
• | $8.2 million (64%) from basic services | ||
• | $1.5 million (12%) from high-speed Internet services | ||
• | $1.2 million (9%) from expanded basic services | ||
• | $700,000 (5%) from premium services | ||
• | $500,000 (4%) from advertising | ||
• | $200,000 (2%) from digital services | ||
• | $600,000 (4%) from other sources |
Average monthly revenue from continuing operations per subscriber increased $4.54 or approximately 9% from $51.88 for the three months ended September 30, 2004 to $56.42 for the three months ended September 30, 2005. This increase is attributable to rate increases implemented in a majority of the Company’s systems during the second quarter of 2005 and increased penetration of new product tiers, specifically, high-speed Internet services, and increased advertising revenue.
Cable system operation expenses from continuing operations increased approximately $300,000, or 6% from $5.2 million to $5.5 million for the three months ended September 30, 2005. This increase is primarily attributable to increased costs associated with the Company’s high speed Internet product, increased advertising expenses and an increase in operating salary costs and system vehicle expenses, offset by a decrease in programming costs, which is attributable to a decrease in subscribers for some of the Company’s service levels.
During the three months ended September 30, 2005, the Company recorded deductibles and coinsurance costs related to certain insurance claims that were made as a result of hurricanes Katrina and Rita. This amount totaled approximately $38,000 and was recorded as other operating loss from continuing operations.
General and administrative expenses from continuing operations totaled $2.4 million for the three months ended September 30, 2005, remaining relatively constant with the same period in 2004. The Company had an increase in administrative salary costs, marketing expenses, and legal expenses offset by a decrease in franchise fees, billing service fees and travel expenses.
Management fees from continuing operations for the three months ended September 30, 2005 remained relatively constant with the same period in 2004. Management fees are calculated at 5.0% of gross revenues.
Depreciation and amortization expense from continuing operations for the three months ended September 30, 2005, decreased approximately $300,000 or 13% from $2.3 million to $2.0 million for the three months ended September 30, 2005. The decrease is attributable to certain assets becoming fully depreciated or amortized, offset by depreciation of recent purchases related to the upgrade of plant and equipment.
Interest expense and amortization of loan fees for the three months ended September 30, 2005 remained relatively constant with the same period in 2004. The effect of routine principal payments was offset by an increase in interest rates.
Liquidity and Capital Resources
The cable television business generally requires substantial capital for the construction, expansion and maintenance of the signal distribution system. In addition, the Company has pursued a business strategy which includes selective acquisitions. The Company has financed these expenditures through a
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combination of cash flow from operations, borrowings under its senior credit facility and the issuance of senior subordinated notes. The Company anticipates that cash flow from operations will be adequate to meet its long term liquidity requirements, prior to the maturity of its senior subordinated notes, although no assurances can be given in this regard.
Net cash provided by operating activities was $7.7 million for the nine months ended September 30, 2005. Adjustments to the $2.6 million net loss for the period to reconcile to net cash provided by operating activities consisted primarily of $6.3 million of depreciation and amortization expense, $1.3 million of deferred income tax expense, $400,000 of amortization of loan fees and changes in other operating assets and liabilities of $3.1 million, offset by a gain on disposal of assets of approximately $800,000.
Net cash used in investing activities was $2.4 million for the nine months ended September 30, 2005, and consisted primarily of $4.0 million in capital expenditures, offset by approximately $1.2 million in proceeds from the sale of cable systems and approximately $300,000 in insurance proceeds.
Net cash used in financing activities consisted of $1.7 million in scheduled principal prepayments and $45,500 in loan fees.
Amended and Restated Senior Credit Facility
On November 13, 2003, the Company amended and restated its existing senior credit facility (the “Amended and Restated Senior Credit Facility”). The amendment and restatement resulted in the elimination of the lending syndicate and assumption of the credit facility by one of the syndicate members. The Amended and Restated Senior Credit Facility establishes a term loan in the amount of $15,000,000 and a $2,000,000 revolving credit loan, under which the Company borrowed $1,000,000 upon amendment and restatement. The proceeds from the Amended and Restated Senior Credit Facility were used to repay the Company’s existing senior credit facility, to provide working capital and for other general purposes. The Amended and Restated Senior Credit Facility matures on December 31, 2006 and requires the Company to make quarterly principal payments beginning March 31, 2004.
The interest rate per annum applicable to the Amended and Restated Senior Credit Facility is a fluctuating rate of interest measured by reference to either: (i) the Index Rate, as defined, plus a borrowing margin of 2.50%; or (ii) the London interbank offered rate (LIBOR), plus a borrowing margin of 3.75%.
The Amended and Restated Senior Credit Facility contains a number of covenants, which among other things, require the Company to comply with specified financial ratios, including maintenance, as tested on a quarterly basis, of: (A) a Maximum Total Leverage Ratio (the ratio of Total Debt to Annualized Operating Cash Flow (as defined)) of not more than 6.50 to 1.00; (B) a Maximum Senior Leverage Ratio (the ratio of Senior Debt to Annualized Operating Cash Flow (as defined)) of not more than 1.00 to 1.00; (C) an Interest Coverage Ratio (the ratio of Operating Cash Flow (as defined) to Total Cash Interest Expense of not less than 1.50 to 1.00 initially; and (D) a Minimum Fixed Charge Coverage Ratio (the ratio of Annualized Operating Cash Flow (as defined) to the Company’s Fixed Charges (as defined) of not less than 1.00 to 1.00.
In March of 2005, the Company further amended the Amended and Restated Senior Credit Facility such that the Company was allowed to retain the net proceeds from the sale of the Navasota system. In addition, the amendment establishes a limitation on the maximum amount of annual capital expenditures to be incurred during 2005 of $5.7 million and modifies the Minimum Fixed Charge Coverage Ratio requirement during 2005 as follows:
March 31, 2005 | 0.80 to 1.00 | |||
June 30, 2005 | 0.80 to 1.00 | |||
September 30, 2005 | 0.80 to 1.00 | |||
December 31, 2005 | 0.90 to 1.00 |
The Minimum Fixed Charge Coverage Ratio requirements revert back to the original requirements of 1.00 to 1.00 in 2006.
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In August of 2005, the Company further amended the credit facility such that the $850,000 principal payment that was scheduled to be made on September 30, 2005 was postponed until September 30, 2006. In association with this amendment, the Company paid an amendment fee of $10,000.
In November of 2005, the Company further amended its credit facility such that the Company was able to retain the escrow proceeds that were released to the Company as a result of the settlement of the litigation with the buyer of the Port Angeles System (note 4) and allows the Company to exclude the legal fees associated with the settlement of this litigation from the calculation of Operating Cash Flow. In addition, the amendment also allows the Company to exclude any deductibles and coinsurance costs incurred as a result of insurance claims related to hurricane damages from the calculation of Operating Cash Flow (up to a maximum of $38,000).
As of September 30, 2005, the Company was in compliance with the terms of the Amended and Restated Senior Credit Facility
The current portion of notes payable included in the accompanying balance sheets reflect the principal payment requirements of the Amended and Restated Senior Credit Facility, as amended in August of 2005. Annual maturities of the Amended and Restated Senior Credit Facility are as follows:
Principal | ||||
Payments | ||||
2005 (3 months) | $ | 850,000 | ||
2006 | 10,510,000 | |||
Total | $ | 11,360,000 | ||
As of September 30, 2005, the balance under the Senior credit facility was approximately $11.4 million and applicable interest rates were as follows: $9.4 million at a LIBOR based interest rate of 7.61%, $1.1 million at a LIBOR based interest rate of 7.61% and $0.9 million at a LIBOR based interest rate of 7.77%. These rates expire during the fourth quarter of 2005 at which time new rates will be established.
On November 11, 2005, the Company executed a commitment letter received from a recognized financial institution to lead the syndication of a significant credit facility for the Company. It is anticipated that funds from the new credit facility, if secured by the Company, will be used to refinance existing senior bank debt, to redeem in their entirety all of the Company’s senior subordinated notes pursuant to the optional redemption provisions of those notes, and to provide funds for future capital expenditures and working capital. The commitment is subject to various conditions including no material adverse change in the operations of the Company, no material adverse changes in financial, banking or capital market conditions, satisfactory results of due diligence review by the lender, mutually satisfactory negotiation of definitive documentation of the credit facility, among others. If the credit facility is secured, it is currently contemplated that closing of the new credit facility will take place sometime during the fourth quarter of 2005 although no assurances can be given as to this timing. It is important to note that final consummation of the proposed credit facility remains subject to various conditions outside of the Company’s control, and no assurances can be given at this time that these conditions will be satisfied or that the credit facility will actually be secured.
System Sales
On March 11, 2003, the Company sold the operating assets and franchise rights of its cable system in and around the community of Port Angeles, Washington (the “Port Angeles System”). In association with this transaction, approximately $575,000 was to be held in escrow and released to the Company one year from the closing of the transaction, subject to general representations and warranties. In March of 2004, the Company received notice from the buyer of the Port Angeles System of certain claims, which were made under the hold back agreement provisions of the purchase and sale agreement. Approximately $433,000 of the original escrow proceeds remained in escrow until such claims were resolved. The escrow proceeds in excess of the claims were released to the Company in March of 2004.
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On August 26, 2005, the Company settled its ongoing litigation with the buyer of the Port Angeles System. As a result of the settlement reached, the Company received approximately $326,000 of the escrow funds. Under an amendment to the Company’s credit facility, executed in November of 2005, the Company was allowed to retain these proceeds. The remaining escrow proceeds, approximately $107,000, were remitted to the buyer of the Port Angeles System, and were allocated to discontinued operations as a loss from the sale of the Port Angeles System in the Company’s statement of operations for the three and nine months ended September 30, 2005. The Company also recorded $37,000 in legal fees in connection with the settlement of this litigation
The Company does not expect that the settlement of these claims, or the write off of the amounts remitted to the buyer of the Port Angeles System, will have any further implication on the Company’s financial statements.
In September 2004, the Company sold its systems serving the areas of Buffalo and Jewett, Texas. These systems served approximately 415 basic subscribers and were sold for approximately $130,000. The net proceeds from this sale were used to repay amounts outstanding under the Company’s Amended and Restated Senior Credit Facility. The effect of this transaction did not have a material impact on the Company’s financial statements.
On August 1, 2005, the Company completed the sale of the operating assets and franchise rights of its cable system in and around the community of Navasota, Texas, which served approximately 1,025 subscribers, to Cequel III Communications I, LLC, an unaffiliated third party. The Navasota system was sold at a price of approximately $1,316,000 of which the Company received approximately $960,000 at closing. The sales price was adjusted at closing for the proration of certain revenues and expenses and approximately $130,000 will be held in escrow and released to the Partnership eighteen months from the closing of the transaction subject to indemnification claims made, if any, by the buyer pursuant to the terms of the purchase and sale agreement. Under the terms of an amendment to the Company’s Senior Credit Facility, executed in March of 2005, the Company was allowed to retain all of these proceeds. The Company recorded a gain from the sale of the Navasota system of approximately $665,000.
Obligations and Commitments
In addition to working capital needs for ongoing operations, the Company has capital requirements for annual maturities related to the Company’s credit facilities and required minimum operating lease payments. The following table summarizes the Company’s contractual obligations as of September 30, 2005:
Payments Due By Period | ||||||||||||||||||||
Less than | 1 – 3 | 3 – 5 | More than | |||||||||||||||||
Total | 1 year | years | years | 5 years | ||||||||||||||||
Notes payable | $ | 111,360,000 | $ | 8,300,000 | $ | 103,060,000 | $ | — | $ | — | ||||||||||
Minimum operating lease payments | 239,613 | 82,218 | 124,904 | 31,291 | 1,200 | |||||||||||||||
Total | $ | 111,599,613 | $ | 8,382,218 | $ | 103,184,904 | $ | 31,291 | $ | 1,200 | ||||||||||
(a) | These contractual obligations do not include accounts payable and accrued liabilities, which are expected to be paid in 2005. | |
(b) | The Company also rents utility poles in its operations. Amounts due under these agreements are not included in the above minimum operating lease payments as, generally, pole rentals are cancelable on short notice. The Company does, however, anticipate that such rentals will recur. | |
(c) | Note that obligations related to the Company‘s credit facilities exclude interest expense. |
Capital Expenditures
For the nine months ended September 30, 2005, the Company had capital expenditures of approximately $4.0 million. Capital expenditures included: (i) expansion and improvements of cable properties including the launch of high-speed Internet services; (ii) additions to plant and equipment; (iii) maintenance of
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existing equipment; (iv) cable line drops and extensions and installations of cable plant facilities; and (v) vehicle replacements.
The Company plans to invest approximately $1.9 million in capital expenditures during the remaining three months of 2005. Anticipated expenditures include costs for upgrading and two-way activating certain distribution facilities, continued deployment of high-speed Internet services, extensions of distribution facilities to add new subscribers and vehicle replacements. It is expected that cash flow from operations will be sufficient to fund planned capital expenditures.
Recently Issued Accounting Pronouncements
In November 2004, the EITF ratified its consensus on Issue No. 03-13, “Applying the Conditions in paragraph 42 of FASB Statement No. 144 in Determining Whether to Report Discontinued Operations” (“EITF 03-13”). EITF 03-13 relates to components of an enterprise that are either disposed of or classified as held for sale. EITF 03-13 allows significant events or circumstances that occur after the balance sheet date but before the issuance of financial statements to be taken into consideration in the evaluation of whether a component should be presented as discontinued or continuing operations, and modifies the assessment period guidance to allow for an assessment period of greater than one year. The implementation of EITF 03-13 did not have a material impact on the Company’s financial statements.
Critical Accounting Policies
This discussion and analysis of our financial condition and results of operations is based on the Company’s financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following critical accounting policies, which have been chosen among alternatives, require a more significant amount of management judgment than other accounting policies the Company employs.
Revenue Recognition — Cable television service revenue, including service and maintenance, is recognized in the month service is provided to customers. Advance payments on cable services to be rendered are recorded as subscriber prepayments. Revenues resulting from the sale of local spot advertising are recognized when the related advertisements or commercials appear before the public.
Property and Equipment — Property and equipment are recorded at cost. Costs of additions and substantial improvements, which include materials, labor, and other indirect costs associated with the construction of cable transmission and distribution facilities, are capitalized. Indirect costs include employee salaries and benefits, travel and other costs. These costs are estimated based on historical information and analysis. The Company periodically performs evaluations of these estimates as warranted by events or changes in circumstances.
In accordance with SFAS No. 51, “Financial Reporting by Cable Television Companies,” the Company also capitalizes costs associated with initial customer installations. The costs of disconnecting service or reconnecting service to previously installed locations are expensed in the period incurred. Costs for repairs and maintenance are also charged to operating expense, while equipment replacements, including the replacement of drops, are capitalized.
Intangible Assets — In accordance with the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets,” the Company does not amortize goodwill or any other intangible assets determined to have indefinite lives. The Company has determined that its franchises meet the definition of indefinite lived assets. The Company tests these assets for impairment on an annual basis during the fourth quarter, or on an interim basis if an event occurs or circumstances change that would reduce the fair value of a reporting unit below its carrying value.
Management believes the franchises have indefinite lives because the franchises are expected to be used by the Company for the foreseeable future and effects of obsolescence, competition and other factors are minimal. In addition, the level of maintenance expenditures required to obtain the future cash flows expected from the franchises are not material in relation to the carrying value of the franchises. While the
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franchises have defined lives based on the franchising authority, renewals are routinely granted, and management expects them to continue to be granted. This expectation is supported by management’s experience with the Company’s franchising authorities and the franchising authorities of the Company’s affiliates.
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ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to market risks arising from changes in interest rates. The Company’s primary interest rate exposure results from changes in LIBOR or the prime rate, which are used to determine the interest rate applicable to the Company’s Amended and Restated Senior Credit Facility. The potential loss over one year that would result from a hypothetical, instantaneous and unfavorable change of 100 basis points in the interest rate of all the Company’s variable rate obligations would be approximately $114,000.
The Company does not use financial instruments for trading or other speculative purposes.
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.
ITEM 4.CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in our filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. The Chief Executive Officer and President (Principal Financial and Accounting Officer) have evaluated these disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q and have determined that such disclosure controls and procedures are effective.
There has been no change in the Company’s internal controls over financial reporting during the quarter ended September 30, 2005 that has materially affected, or is reasonably likely to materially affect, the internal control over financial reporting.
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PART II — OTHER INFORMATION
ITEM 1Legal proceedings
The Company is a party to ordinary and routine litigation proceedings that are incidental to the Company’s business. Management believes that the outcome of all pending legal proceedings will not, individually or in the aggregate, have a material adverse effect on the Company, its financial condition, prospects and debt service ability.
ITEM 2Changes in securities
None
ITEM 3Defaults upon senior securities
None
ITEM 4Submission of matters to a vote of security holders
None
ITEM 5Other information
None
ITEM 6Exhibits and Reports on Form 8-K
(a) Exhibit Index
31 | (a). Certification of Chief Executive Officer dated November 14, 2005 pursuant to section 302 of the Sarbanes-Oxley Act | ||
31 | (b). Certification of President (Principal Financial and Accounting Officer) dated November 14, 2005 pursuant to section 302 of the Sarbanes-Oxley Act | ||
32 | (a). Certification of Chief Executive Officer dated November 14, 2005 pursuant to section 906 of the Sarbanes-Oxley Act | ||
32 | (b). Certification of President (Principal Financial and Accounting Officer) dated November 14, 2005 pursuant to section 906 of the Sarbanes-Oxley Act |
(b) Reports on Form 8-K
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
SIGNATURES | CAPACITIES | DATE | ||
/s/ RICHARD I. CLARK | Executive Vice President, Treasurer and Assistant Secretary | 11-14-05 | ||
Richard I. Clark | ||||
/s/ GARY S. JONES | President | 11-14-05 | ||
Gary S. Jones |