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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended SEPTEMBER 30, 2000
Or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from________________________
Commission File Number: 0-16063
NORTHLAND CABLE PROPERTIES SIX LIMITED PARTNERSHIP
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Washington 91-1318471
- --------------------------------- ----------------------------------
(State of Organization) (IRS Employer Identification No.)
1201 Third Avenue, Suite 3600, Seattle, Washington 98101
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(Address of Principal Executive Offices) (Zip Code)
(206) 621-1351
----------------------------------------------------
(Registrant's telephone number, including area code)
N/A
----------------------------------------------
(Former name, former address and former fiscal
year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
This filing contains __ pages. Exhibits index appears on page___.
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PART 1 - FINANCIAL INFORMATION
ITEM 1. Financial Statements
NORTHLAND CABLE PROPERTIES SIX LIMITED PARTNERSHIP
BALANCE SHEETS - (Unaudited)
(Prepared by the Managing General Partner)
September 30, December 31,
2000 1999
------------ ------------
ASSETS
Cash $ 1,917,554 $ 556,962
Due from affiliates 11,330 24,885
Accounts receivable 664,162 781,827
Prepaid expenses 207,957 78,012
Property and equipment, net of accumulated
depreciation of $16,071,239 and $14,639,656,
respectively 14,052,176 14,273,156
Intangible assets, net of accumulated
amortization of $16,273,428 and $14,329,374,
respectively 12,957,091 14,888,691
------------ ------------
Total assets $ 29,810,270 $ 30,603,533
============ ============
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses $ 1,201,586 $ 1,326,560
Due to managing general partner and affiliates 81,643 46,388
Converter deposits 31,408 35,422
Subscriber prepayments 402,932 412,628
Notes payable 28,965,281 28,965,281
------------ ------------
Total liabilities 30,682,850 30,786,279
------------ ------------
Partners' equity:
General Partners:
Contributed capital, net (37,565) (37,565)
Accumulated deficit (98,175) (91,277)
------------ ------------
(135,740) (128,842)
------------ ------------
Limited Partners:
Contributed capital, net 8,982,444 8,982,444
Accumulated deficit (9,719,284) (9,036,348)
------------ ------------
(736,840) (53,904)
------------ ------------
Total partners' equity (872,580) (182,746)
------------ ------------
Total liabilities and partners' equity $ 29,810,270 $ 30,603,533
============ ============
The accompanying notes to unaudited financial
statements is an integral part of these statements
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NORTHLAND CABLE PROPERTIES SIX LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS - (Unaudited)
(Prepared by the Managing General Partner)
For the nine months ended September 30,
-----------------------------------
2000 1999
------------ ------------
Service revenues $ 11,369,454 $ 11,207,212
Expenses:
Operating (including $224,777
and $225,107 to affiliates, respectively) 872,353 995,578
General and administrative (including
$1,120,142 and $1,170,594 to affiliates,
respectively) 2,804,169 2,767,836
Programming (including $72,274
and $186,236 to affiliates, respectively) 2,956,457 2,933,546
Depreciation and amortization 3,337,310 3,291,708
------------ ------------
9,970,289 9,988,668
------------ ------------
Income from operations 1,399,165 1,218,544
Other income (expense):
Interest expense (1,867,435) (1,805,262)
Amortization of loan fees (151,388) (140,269)
Interest income 34,017 17,515
(Loss) gain on sale of assets (104,190) 1,604,222
------------ ------------
(2,088,996) (323,794)
------------ ------------
Net (loss) income $ (689,831) 894,750
============ ============
Allocation of net (loss) income:
General Partners $ (6,898) $ 8,948
============ ============
Limited Partners $ (682,933) $ 885,803
============ ============
Net (loss) income per limited partnership unit:
(29,784 units) $ (23) $ 30
============ ============
Net (loss) income per $1,000 investment $ (46) $ 59
============ ============
The accompanying notes to unaudited financial
statements is an integral part of these statements
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NORTHLAND CABLE PROPERTIES SIX LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS - (Unaudited)
(Prepared by the Managing General Partner)
For the three months ended September 30,
-------------------------------------
2000 1999
----------- -----------
Service revenues $ 3,812,503 $ 3,709,213
Expenses:
Operating (including $53,184
and $74,459 to affiliates, respectively) 289,230 325,640
General and administrative (including
$404,073 and $382,100 from affiliates,
respectively) 956,831 923,074
Programming (including $24,549
and $59,595 to affiliates, respectively) 984,345 972,592
Depreciation and amortization 1,104,290 1,058,842
----------- -----------
3,334,696 3,280,148
----------- -----------
Income from operations 477,807 429,065
Other income (expense):
Interest expense (643,604) (588,475)
Amortization of loan fees (50,079) (48,840)
Interest income 14,927 4,948
Loss on sale of assets (108,898) (58,045)
----------- -----------
(787,654) (690,412)
----------- -----------
Net loss $ (309,847) $ (261,347)
=========== ===========
Allocation of net loss
General Partners $ (3,098) $ (2,613)
=========== ===========
Limited Partners $ (306,749) $ (258,734)
=========== ===========
Net loss per limited partnership unit:
(29,784 units) $ (10) $ (9)
=========== ===========
Net loss per $1,000 investment $ (20) $ (18)
=========== ===========
The accompanying notes to unaudited financial
statements is an integral part of these statements
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NORTHLAND CABLE PROPERTIES SIX LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS - (Unaudited)
(Prepared by the Managing General Partner)
For the nine months ended September 30,
--------------------------------------
2000 1999
------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (689,831) $ 894,750
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 3,337,310 3,291,708
Amortization of loan fees 151,388 140,269
Loss (gain) on sale of assets 104,190 (1,604,222)
(Increase) decrease in operating assets:
Due from managing general partner and affiliates 13,555 36,771
Accounts receivable 117,665 160,192
Prepaid expenses (129,945) (152,809)
Increase (decrease) in operating liabilities
Accounts payable and accrued expenses (124,974) (180,755)
Due to managing general partner and affiliates 35,255 (38,484)
Converter deposits (4,014) (19,980)
Subscriber prepayments (9,696) (191,757)
----------- -----------
Net cash from operating activities 2,800,903 2,335,683
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (1,435,558) (2,029,503)
Proceeds from sale of property/disposition of cable system 7,700 1,718,279
Increase in intangibles (12,453) (29,062)
----------- -----------
Net cash used in investing activities (1,440,311) (340,286)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on borrowings -- (2,407,567)
Repurchase of limited partner interest -- (4,000)
----------- -----------
Net cash used in financing activities -- (2,411,567)
----------- -----------
INCREASE (DECREASE) IN CASH 1,360,592 (416,170)
CASH, beginning of period 556,962 706,907
----------- -----------
CASH, end of period $ 1,917,554 $ 290,737
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 1,855,582 $ 1,805,719
=========== ===========
The accompanying notes to unaudited financial
statements is an integral part of these statements
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NORTHLAND CABLE PROPERTIES SIX LIMITED PARTNERSHIP
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(1) These unaudited financial statements are being filed in conformity with Rule
10-01 of Regulation S-X regarding interim financial statement disclosure and do
not contain all of the necessary footnote disclosures required for a fair
presentation of the balance sheets, statements of operations and statements of
cash flows in conformity with generally accepted accounting principles. However,
in the opinion of management, this data includes all adjustments, consisting
only of normal recurring accruals, necessary to present fairly the Partnership's
financial position at September 30, 2000, its statements of operations for the
nine and three months ended September 30, 2000 and 1999 and its statements of
cash flows for the nine months ended September 30, 2000 and 1999. Results of
operations for these periods are not necessarily indicative of results to be
expected for the full year. These financial statements and notes should be read
in conjunction with the Partnership's Annual Report on Form 10-K for the year
ended December 31, 1999.
(2) In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The statement
establishes accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in other
contracts) be recorded in the balance sheet as either an asset or liability
measured at its fair value. The statement requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the statement of operations, and requires that a company must formally
document, designate, and assess the effectiveness of transactions that are
subject to hedge accounting.
Pursuant to SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB No. 133 - an Amendment to
FASB Statement No. 133" the effective date of SFAS No. 133 has been deferred
until fiscal years beginning after January 15, 2000. SFAS No. 133 cannot be
applied retroactively. SFAS No. 133 must be applied to (a) derivative
instruments and (b) certain derivative instruments embedded in hybrid contracts
that were issued, acquired, or substantively modified after December 31, 1998
(and, at the company's election, before January 1, 1999).
The Partnership has not yet quantified the impacts of adopting SFAS No. 133 on
the financial statements and has not determined the timing or method of adoption
of SFAS No. 133. However, the statement could increase volatility in earnings
and other comprehensive income.
(3) In November of 1999, the SEC released SAB No. 101 "Revenue Recognition in
Financial Statements." This bulletin becomes effective for the quarter ended
December 31, 2000. This bulletin establishes more clearly defined revenue
recognition criteria, than previously existing accounting pronouncements, and
specifically addresses revenue recognition requirements for nonrefundable fees,
such as installation fees, collected by a company upon entering into an
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arrangement with a customer. The Partnership believes that the effects of this
bulletin will not have a material impact on the Partnership's financial position
or results of operations.
(4) Certain reclassifications have been made to conform prior years' financial
statements with the current year presentation.
(5) Under the terms of the Partnership's revolving credit and term loan
agreement, all amounts outstanding under the note payable become due and payable
on December 31, 2000. The Partnership's continuing operations will not provide
sufficient liquidity to satisfy this obligation at its stated maturity.
Alternatives available to the Partnership include a sale of a portion or all of
its assets to generate proceeds sufficient to repay the outstanding debt or to
renegotiate the terms of the credit agreement with its lenders to extend the
maturity date. Management believes agreement by the lenders to extend the
maturity date would be contingent upon the approval of the limited partners to
extend the expiration of the Partnership's life, which currently expires on
December 31, 2001.
The general partners are currently in the process of formulating a proposal to
liquidate the assets of the partnership, which, in the opinion of the Managing
General Partner, would provide sufficient proceeds to retire all the
Partnership's obligations. Such a proposal would require approval by a majority
in interest of limited partners. It is anticipated this liquidation would occur
in 2001. Based on preliminary discussions with the lenders, management and the
lenders believe it is not unreasonable that the Partnership could arrange
financing to continue its operations if necessary, assuming no deterioration in
its operations and the bank credit markets remain open.
(6) On April 30, 1999, the Partnership sold cable television systems serving
approximately 1,400 subscribers in and around the communities of Sandersville,
Heidelberg and Laurel, Mississippi. The sales price of these systems was
$1,900,000. The Partnership used net proceeds of $1,540,000 to pay down
existing bank debt.
Pro forma operating results of the Partnership for the nine months ended
September 30, 1999, assuming the disposition described above had been made as of
the beginning of the period, are as follows:
NINE MONTH PERIOD ENDED SEPT. 30,
1999
---------------------------------
Service revenues $11,018,044
===========
Net Loss $ (644,344)
===========
Net loss per limited
partnership unit $ (22)
===========
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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, 2000 AND 1999
Revenues totaled $11,369,454 for the nine months ended September 30, 2000,
representing an increase of approximately 1% over the same period in 1999. Of
these revenues, $8,224,685 (72%) was derived from basic service charges,
$1,032,478 (9%) from premium services, $704,615 (6%) from tier services,
$285,062 (2%) from installation charges, $297,294 (3%) from service maintenance
contracts, $422,180 (4%) from advertising, and $403,140 (4%) from other sources.
The April 1999 disposition of the Sandersville System decreased revenues
approximately $189,000 or 2%. Assuming the Sandersville System was disposed of
at the beginning of each of the respective periods, revenues would have
increased approximately 3%. The growth in revenue is attributable to rate
increases implemented in the Partnership's systems and a 9% increase in the
number of tier subscribers.
Operating expenses totaled $872,353 for the nine months ended September 30,
2000, representing a decrease of approximately 12% over the same period in 1999.
Excluding the impact of the Sandersville System disposition, operating expenses
would have decreased approximately 10% for the nine months ended September 30,
2000. This is primarily due to decreased operating salaries, regional management
expense, system maintenance costs offset by increased vehicle operating
expenses.
General and administrative expenses totaled $2,804,169 for the nine months ended
September 30, 2000, representing an increase of approximately 1% over the same
period in 1999. Excluding the impact of the Sandersville System disposition,
general and administrative expenses would have increased approximately 3% for
the nine months ended September 30, 2000. This increase is primarily
attributable to: (i) increases in salary and benefit costs due to cost of living
adjustments; (ii) increases in revenue based expenses such as management fees
and franchise fees as well as increased property taxes.
Programming expenses totaled $2,956,457 for the nine months ended September 30,
2000, representing a 1% increase over the same period in 1999. Adjusting for the
Sandersville System disposition, programming expenses would have increased
approximately 3% for the nine months ended September 30, 2000 compared to the
same period in 1999. This is mainly due to higher costs charged by various
program suppliers offset by reduced local programming expense.
Depreciation and amortization expenses totaled $3,337,310 for the nine months
ended September 30, 2000, representing a 1% increase over the same period in
1999. This is mainly
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due to depreciation on plant and equipment acquired during the last year offset
by assets becoming fully depreciated during the year.
Interest expense for the nine months ended September 30, 2000 increased
approximately 4% over the same period in 1999. The average bank debt decreased
from $30,090,421 during the first nine months of 1999 to $28,965,281 during the
same period in 2000, and the Partnership's effective interest rate increased
from 8.00% in 1999 to 8.60% in 2000.
THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
Revenues totaled $3,812,503 for the three months ended September 30, 2000,
representing an increase of approximately 3% over the same period in 1999. Of
these revenues, $2,755,246 (72%) was derived from basic service charges,
$340,089 (9%) from premium services, $234,049 (6%) from tier services, $100,321
(3%) from installation charges, $99,246 (3%) from service maintenance contracts,
$147,368 (4%) from advertising, and $136,184 (3%) from other sources. The growth
in revenue is attributable to rate increases implemented in the Partnership's
systems.
Operating expenses totaled $289,230 for the three months ended September 30,
2000, representing a decrease of approximately 11% over the same period in 1999.
This is primarily due to decreased operating salaries, regional management
expense, system maintenance offset by increased pole rental and vehicle
operating expenses.
General and administrative expenses totaled $956,831 for the three months ended
September 30, 2000, representing an increase of approximately 4% over the same
period in 1999. This increase is due to higher revenue based expenses such as
management fees, franchise fees and copyright fees as well as increased property
taxes and administrative services offset by reduced bad debt expense.
Programming expenses totaled $984,345 for the three months ended September 30,
2000, representing an increase of approximately 1% over the same period in 1999.
This is mainly due to higher costs charged by various program suppliers offset
by reduced local programming expense.
Depreciation and amortization expenses totaled $1,104,290 for the three months
ended September 30, 2000, representing an increase of approximately 4% over the
same period in 1999. This is mainly due to depreciation on plant and equipment
acquired during the last year offset by assets becoming fully depreciated during
the year.
Interest expense for the three months ended September 30, 2000 increased
approximately 9% over the same period in 1999. The average bank debt was
$28,965,281 during the third quarter of 2000, remaining consistent with the same
period in 1999, and the Partnership's effective interest rate increased from
8.13% in 1999 to 8.89% in 2000.
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Liquidity and Capital Resources
The Partnership's primary sources of liquidity are cash flow provided from
operations and availability under an $8,000,000 revolving credit line, of which
approximately $6,200,000 was outstanding as of September 30, 2000. Based on
management's analysis, the Partnership's cash flow from operations and amounts
available for borrowing under the Partnership's loan agreement are sufficient to
cover operating costs and planned capital expenditures up to December 31, 2000.
Under the terms of the Partnership's revolving credit and term loan agreement,
all amounts outstanding under the note payable become due and payable on
December 31, 2000. The Partnership's continuing operations will not provide
sufficient liquidity to satisfy this obligation at its stated maturity.
Alternatives available to the Partnership include a sale of a portion or all of
its assets to generate proceeds sufficient to repay the outstanding debt or to
renegotiate the terms of the credit agreement with its lenders to extend the
maturity date. Management believes agreement by the lenders to extend the
maturity date would be contingent upon the approval of the limited partners to
extend the expiration of the Partnership's life, which currently expires on
December 31, 2001.
The general partners are currently in the process of formulating a proposal to
liquidate the assets of the partnership, which, in the opinion of the Managing
General Partner, would provide sufficient proceeds to retire all the
Partnership's obligations. Such a proposal would require approval by a majority
in interest of limited partners. It is anticipated this liquidation would occur
in 2001. Based on preliminary discussions with the lenders, management and the
lenders believe it is not unreasonable that the Partnership could arrange
financing to continue its operations if necessary, assuming no deterioration in
its operations and the bank credit markets remain open.
During the three months ended September 30, 2000, the Partnership's primary
sources of liquidity were cash provided from operations and credit available
under its revolving credit and term loan agreement. The Partnership generates
cash on a monthly basis through the monthly billing of subscribers for cable
services. Losses from uncollectible accounts have not been material. During the
three months ended September 30, 2000, cash generated from monthly billings was
sufficient to meet the Partnership's needs for working capital, capital
expenditures and scheduled debt service.
Under the terms of the Partnership's loan agreement, the Partnership has agreed
to restrictive covenants which require the maintenance of certain ratios
including a senior debt to annualized operating cash flow ratio of 5.25 to 1.00,
and an annual operating cash flow to interest expense ratio of not less than
2.25 to 1.00. As of September 30, 2000, the Partnership was in compliance with
its required financial covenants.
As of the date of this filing, the balance under the credit facility is
$28,965,281. Certain fixed rate agreements expired during the third quarter of
2000. As of the date of this filing, interest rates on the credit facility were
as follows: $28,965,281 fixed at Libor based rate of 8.6206% expiring October
30, 2000. The above includes a margin paid to the lender based on overall
leverage, and may increase or decrease as the Partnership's leverage fluctuates.
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Capital Expenditures
During the third quarter of 2000, the Partnership incurred approximately
$826,000 in capital expenditures. These expenditures included the ongoing system
upgrade to 550 MHz in the Starkville, MS system as well as equipment to launch
new digital services to subscribers, the continuation of a 550 MHz system
upgrade in the Forest, MS system, a continued system upgrade to 450 MHz in the
Barnwell, SC system and small line extensions in various systems.
Planned expenditures for the balance of 2000 include continuation of
construction on the system upgrade to 550 MHz in the Starkville, MS system, a
continued system upgrade to 550 MHz in the Forest, MS system, the design for a
system upgrade to 450 MHz in the city of Highlands, NC, a continued upgrade to
450 MHz in the Barnwell, SC system, and various line extensions in all of the
systems.
Disposition
On April 30, 1999, the Partnership sold cable television systems serving
approximately 1,400 subscribers in and around the communities of Sandersville,
Heidelberg and Laurel, Mississippi. The sales price of these systems was
$1,900,000. The Partnership used net proceeds of $1,540,000 to pay down existing
bank debt.
Cautionary statement for purposes of the "Safe Harbor" provisions of the Private
Litigation Reform Act of 1995. Statements contained or incorporated by reference
in this document that are not based on historical fact are "forward-looking
statements" within the meaning of the Private Securities Reform Act of 1995.
Forward-looking statements may be identified by use of forward-looking
terminology such as "believe", "intends", "may", "will", "expect", "estimate",
"anticipate", "continue", or similar terms, variations of those terms or the
negative of those terms.
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PART II - OTHER INFORMATION
ITEM 1 Legal proceedings
None
ITEM 2 Changes in securities
None
ITEM 3 Defaults upon senior securities
None
ITEM 4 Submission of matters to a vote of security holders
None
ITEM 5 Other information
None
ITEM 6 Exhibits and Reports on Form 8-K
(a) Exhibit index
27.0 Financial Data Schedule
(b) No reports on Form 8-K have been filed during the quarter ended
September 30, 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NORTHLAND CABLE PROPERTIES SIX LIMITED PARTNERSHIP
BY: Northland Communications Corporation,
Managing General Partner
Dated: BY: /s/ RICHARD I. CLARK
-------- ------------------------------------
Richard I. Clark
(Vice President/Treasurer)
Dated: BY: /s/ GARY S. JONES
-------- ------------------------------------
Gary S. Jones
(Vice President)
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