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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 8 - K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): March 11, 2003
Commission file number0-16718
NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP
| STATE OF WASHINGTON | 91-1366564 | |
| (State or other jurisdiction of incorporation) | (I.R.S. Employer Identification No.) |
| 101 STEWART STREET, SUITE 700 | ||
| SEATTLEWASHINGTON | 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.
Yes [X] No [ ]
This filing contains 10 pages. Exhibits index appears on page 10.
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NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP
| Item 2. | Disposition of Assets |
| On March 11, 2003, Northland Cable Properties Seven Limited Partnership (the “Partnership”) sold the operating assets and franchise rights of its cable systems in and around the communities of Sequim and Camano Island, Washington (the “Washington Systems”). The Washington Systems were sold at a price of approximately $20,340,000 of which the Partnership received approximately $19,280,000 at closing. The sales price was adjusted at closing for the proration of certain revenues and expenses and approximately $1,060,000 will be held in escrow and released to the Partnership one year from the closing of the transaction. Substantially all of the proceeds were used to pay down amounts outstanding under the Partnership’s credit agreement. | |
| The Washington Systems represent approximately 10,300 basic subscribers or approximately 30% of the Partnership’s total basic subscribers served. For the nine months ended September 30, 2002, the Washington Systems represented approximately 25% of the Partnership’s total revenues and approximately 30% of the Partnership’s income from operations. | |
| The sale was made pursuant to an offer by Wave Division Networks, LLC, which was formalized in a Purchase and Sale Agreement dated October 28, 2002. Based on the offer made by Wave Division Networks, LLC, management determined that acceptance would be in the best economic interest of the Partnership. The sale was not a result of declining or deteriorating operations nor was it necessary to create liquidity or reduce outstanding debt. It is the opinion of management that the Partnership could have continued existing operations and met all obligations as they became due. |
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| Sequentially | ||||||
| Item 7. | Financial Statements, Pro Forma Financial Statements and Exhibits | Numbered Page | ||||
| (a) | Financial Statements | |||||
| None | ||||||
| (b) | Pro Forma Financial Statements | |||||
| Introduction | 4 | |||||
| Unaudited Balance Sheet as of September 30, 2002 | 5 | |||||
| Unaudited Pro Forma Statement of Operations for the Nine Months Ended September 30, 2002 | 6 | |||||
| Unaudited Pro Forma Statement of Operations for the Year Ended December 31, 2001 | 7 | |||||
| Notes to Unaudited Financial Statements | 8 | |||||
| (c) | Exhibits | |||||
| Purchase and Sale Agreement between Northland Cable Properties Seven Limited Partnership and Wave Division Networks, LLC dated October 28, 2002 | ||||||
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NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP
PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
The accompanying unaudited pro forma financial statements for the year ended December 31, 2001 and nine months ended September 30, 2002, have been prepared to present the effect of the sale by Northland Cable Properties Seven Limited Partnership of substantially all of the Washington Systems operating assets and franchises to Wave Division Networks, LLC.
The pro forma statements reflect the disposition as of September 30, 2002 for balance sheet purposes and as if such disposition had occurred on January 1, 2001 for income statement purposes.
The pro forma financial statements have been prepared by Management and are based upon the historical financial statements of the Partnership. Pro forma adjustments are described in the accompanying notes. The pro forma statements of operations may not be indicative of the results of operations that actually would have occurred if the transactions had been in effect as of the beginning of the respective periods nor do they purport to indicate the results of future operations of the Partnership. The pro forma financial statements should be read in conjunction with the audited and unaudited financial statements and notes thereto of Northland Cable Properties Seven Limited Partnership, as previously reported in the Partnership’s Form 10-K for the year ended December 31, 2001 and Form 10-Q for the nine months and three months ended September 30, 2002.
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NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP
PRO FORMA CONDENSED BALANCE SHEET - (UNAUDITED)
AS OF SEPTEMBER 30, 2002
| As Reported | After Sale | |||||||||||||||
| Northland Cable | Pro Forma | Pro Forma | ||||||||||||||
| Properties Seven | Adjustments | Combined | ||||||||||||||
ASSETS | ||||||||||||||||
| Cash | $ | 813,323 | $ | (56,761 | ) | a | $ | 756,562 | ||||||||
| Accounts receivable | 655,870 | (235,217 | ) | a | 420,653 | |||||||||||
| Due from affiliates | 36,941 | — | 36,941 | |||||||||||||
| Prepaid expenses | 156,857 | (22,040 | ) | a | 134,817 | |||||||||||
| Property and equipment, net of accumulated depreciation | 18,069,618 | (4,807,559 | ) | a | 13,262,059 | |||||||||||
| Franchise agreements and acquisition costs, net of accumulated amortization | 10,562,737 | (961,053 | ) | a | 9,601,684 | |||||||||||
| Goodwill, net of accumulated amortization | 152,799 | (152,799 | ) | a | — | |||||||||||
| Loan fees and other intangibles, net of accumulated amortization | 629,851 | — | 629,851 | |||||||||||||
| Total assets | $ | 31,077,996 | $ | (6,235,429 | ) | $ | 24,842,567 | |||||||||
LIABILITIES AND PARTNERS’ DEFICIT | ||||||||||||||||
| Accounts payable and accrued expenses | $ | 2,389,745 | $ | (281,570 | ) | a | $ | 2,108,175 | ||||||||
| Due to managing general partner and affiliates | 1,016,865 | (246,803 | ) | a | 770,062 | |||||||||||
| Converter deposits | 18,325 | (820 | ) | a | 17,505 | |||||||||||
| Subscriber prepayments | 577,561 | (122,692 | ) | a | 454,869 | |||||||||||
| Notes payable | 40,362,530 | (18,713,241 | ) | a | 21,649,289 | |||||||||||
| Interest rate swap agreements | — | — | — | |||||||||||||
| Total liabilities | 44,365,026 | (19,365,126 | ) | 24,999,900 | ||||||||||||
| Partners’ deficit: | ||||||||||||||||
| General Partners: | ||||||||||||||||
| Contributed capital, net | (25,367 | ) | — | (25,367 | ) | |||||||||||
| Accumulated deficit | (319,971 | ) | 131,297 | a | (188,674 | ) | ||||||||||
| (345,338 | ) | 131,297 | (214,041 | ) | ||||||||||||
| Limited Partners: | ||||||||||||||||
| Contributed capital, net | 18,735,576 | — | 18,735,576 | |||||||||||||
| Accumulated deficit | (31,677,268 | ) | 12,998,400 | a | (18,678,868 | ) | ||||||||||
| (12,941,692 | ) | 12,998,400 | 56,708 | |||||||||||||
| Total partners’ deficit | (13,287,030 | ) | 13,129,697 | (157,333 | ) | |||||||||||
| Total liabilities and partners’ deficit | $ | 31,077,996 | $ | (6,235,429 | ) | $ | 24,842,567 | |||||||||
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NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP
PRO FORMA CONDENSED STATEMENT OF OPERATIONS - (UNAUDITED)
| As Reported | After Sale | |||||||||||||||
| Northland Cable | Pro Forma | Pro Forma | ||||||||||||||
| Properties Seven | Adjustments | Combined | ||||||||||||||
| Service revenues | $ | 14,477,921 | $ | (4,346,182 | ) | b | $ | 10,131,739 | ||||||||
| Expenses: | ||||||||||||||||
| Cable system operations (excluding depreciation and amortization recorded below) | 1,109,227 | (414,766 | ) | b | 694,461 | |||||||||||
| General and administrative | 3,562,807 | (1,051,008 | ) | b | 2,511,799 | |||||||||||
| Programming | 4,659,178 | (1,362,861 | ) | b | 3,296,317 | |||||||||||
| Depreciation and amortization | 2,548,884 | (871,795 | ) | c | 1,677,089 | |||||||||||
| 11,880,096 | (3,700,430 | ) | 8,179,666 | |||||||||||||
| Income from operations | 2,597,825 | (645,752 | ) | 1,952,073 | ||||||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | (2,137,953 | ) | 978,220 | d | (1,159,733 | ) | ||||||||||
| Loan fees | (815,486 | ) | — | (815,486 | ) | |||||||||||
| Interest income and other, net | 2,004 | — | 2,004 | |||||||||||||
| Unrealized gain on interest rate swap agreements | 277,449 | — | 277,449 | |||||||||||||
| Loss on disposal of assets | (20,975 | ) | — | (20,975 | ) | |||||||||||
| (2,694,961 | ) | 978,220 | (1,716,741 | ) | ||||||||||||
| Net (loss) income | $ | (97,136 | ) | $ | 332,468 | $ | 235,332 | |||||||||
| Allocation of net (loss) income: | ||||||||||||||||
| General Partners | $ | (971 | ) | $ | 3,325 | $ | 2,353 | |||||||||
| Limited Partners | $ | (96,165 | ) | $ | 329,143 | $ | 232,979 | |||||||||
| Net (loss) income per limited partnership unit: | ||||||||||||||||
| (49,656 units) | $ | (2 | ) | $ | 7 | $ | 5 | |||||||||
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NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP
PRO FORMA CONDENSED STATEMENT OF OPERATIONS - (UNAUDITED)
| As Reported | After Sale | |||||||||||||||
| Northland Cable | Pro Forma | Pro Forma | ||||||||||||||
| Properties Seven | Adjustments | Combined | ||||||||||||||
| Service revenues | $ | 18,593,728 | $ | (5,895,023 | ) | b | $ | 12,698,705 | ||||||||
| Expenses: | ||||||||||||||||
| Cable system operations (excluding depreciation and amortization recorded below) | 1,559,476 | (610,077 | ) | b | 949,399 | |||||||||||
| General and administrative | 4,603,500 | (1,409,542 | ) | b | 3,193,958 | |||||||||||
| Programming | 5,273,703 | (1,572,560 | ) | b | 3,701,143 | |||||||||||
| Depreciation and amortization | 5,109,710 | (1,061,565 | ) | c | 4,048,145 | |||||||||||
| 16,546,389 | (4,653,744 | ) | 11,892,645 | |||||||||||||
| Income from operations | 2,047,339 | (1,241,279 | ) | 806,060 | ||||||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | (3,222,016 | ) | 1,442,745 | d | (1,779,271 | ) | ||||||||||
| Loan fees | (128,590 | ) | — | (128,590 | ) | |||||||||||
| Interest income and other, net | (37,951 | ) | — | (37,951 | ) | |||||||||||
| Unrealized loss on interest rate swap agreements | (277,449 | ) | — | (277,449 | ) | |||||||||||
| Loss on disposal of assets | (259,413 | ) | — | (259,413 | ) | |||||||||||
| (3,925,419 | ) | 1,442,745 | (2,482,674 | ) | ||||||||||||
| Net loss | $ | (1,878,080 | ) | $ | 201,466 | $ | (1,676,614 | ) | ||||||||
| Allocation of net loss: | ||||||||||||||||
| General Partners | $ | (18,781 | ) | $ | 2,015 | $ | (16,766 | ) | ||||||||
| Limited Partners | $ | (1,859,299 | ) | $ | 199,451 | $ | (1,659,848 | ) | ||||||||
| Net loss per limited partnership unit: | ||||||||||||||||
| (49,656 units) | $ | (37 | ) | $ | 4 | $ | (33 | ) | ||||||||
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NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP
NOTES TO PRO FORMA FINANCIAL STATEMENTS
| 1. The pro forma financial statements show the adjustments for the disposition of certain operating assets and franchises to Wave Division Networks, LLC. The adjustments reflect the sale as if such disposition had occurred on September 30, 2002 for balance sheet purposes and January 1, 2001 for income statement purposes. The pro forma adjustments for the transaction are as follows: | |||
| (a) The balance sheet as of September 30, 2002 reflects the sale of assets and reduction of the Partnership’s credit agreement. | |||
| (b) To eliminate revenues and operating expenses for the Washington Systems. | |||
| (c) To eliminate depreciation and amortization for the Washington Systems. | |||
| (d) To eliminate interest expense for the reduction in indebtedness. |
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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) | |||
| Date: 3-25-03 | By: | /s/ GARY S. JONES | ||
| Gary S. Jones (President) |
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INDEX TO EXHIBITS
| Sequentially | ||||||
| Numbered | ||||||
| Exhibit Number | Description | Page | ||||
| 10.37 | Purchase and Sale Agreement between Northland Cable Properties Seven Limited Partnership and Wave Division Networks, LLC | 1 - 66 | ||||
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