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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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) SEPTEMBER 15, 1995
NORTHLAND CABLE PROPERTIES FOUR LIMITED PARTNERSHIP
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(Exact name of registrant as specified in charter)
STATE OF WASHINGTON 0-16064 75-1998317
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
NORTHLAND COMMUNICATIONS CORPORATION
3600 WASHINGTON MUTUAL TOWER
1201 THIRD AVENUE, SEATTLE, WASHINGTON 98101
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(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (206) 621-7244
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N.A.
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(Former name or former address, if changed since last report)
This filing contains pages. Exhibits Index appears on page .
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NORTHLAND CABLE PROPERTIES FOUR LIMITED PARTNERSHIP
ITEM 2. ACQUISITION OF ASSETS
On April 10, 1995, Northland Telecommunications Corporation ("NTC"), an
affiliate of Northland Cable Properties Four Limited Partnership (the
"Registrant") entered into an agreement to acquire substantially all operating
assets and franchise rights of the cable television systems in or around the
communities of Kaufman, Oak Grove, Hillsboro, Mt. Calm, Rice, Mildred/Eureka,
Wortham, Mexia, Lake Mexia, Tehuacana, Coolidge, Groesbeck, Jewett, New Waverly
and Waterwood, all in the State of Texas. The cable television systems are owned
and operated by SLT TV Cable, Inc. (the "Seller"). NTC assigned to the
Registrant its right to acquire approximately 3,400 subscribers in or around
the communities of Kaufman, Oak Grove, Hillsboro, New Waverly and Waterwood,
Texas (the "SLT System"). The remaining cable television systems will be
acquired by other affiliates of the Registrant. The assets were acquired by the
Registrant on September 15, 1995 for a total purchase price of $4,492,255. There
is no material relationship between the Registrant and the Seller or any of
their affiliates, directors, officers or associates.
The cable television system assets acquired were used by the Seller to
provide cable television service to the subscribers of the communities described
below. The Registrant intends to continue such use.
FINANCING
The Registrant has refinanced its existing credit facility with The
First National Bank of Chicago (the"Agreement") increasing the total facility to
$23,000,000. The Registrant borrowed $9,800,000 on August 31, 1995 to repay the
Registrant's previous credit facility and borrowed $4,226,896 on September 15,
1995 to finance the acquisition of the SLT System.
The Agreement provides for a $20,000,000 revolving credit facility through
September 27, 1996 with the outstanding balance at that date converting to a
term loan payable in graduating quarterly installments of principal through
December 31, 2003. The remaining $3,000,000 under the Agreement is a revolving
credit facility through December 31, 1998 at that date converting to a term loan
payable in graduated quarterly installments of principal through December 31,
2003. At the option of the Registrant, the outstanding debt bears interest at a
rate based on the bank's prime rate, quoted LIBO rate or rates associated with
certain hedging instruments provided by the bank, with a margin payable based on
certain financial covenants. As of the date of this filing, the Registrant has
fixed the rate on approximately 98% of the outstanding loan balance for a two
year period under the terms of an interest rate swap agreement with its lender.
Currently, the weighted average interest rate is 9.0%.
The Agreement requires the maintenance of certain financial ratios, among other
restrictions, including a maximum ratio of senior debt to annualized cash flow
of 5.75 to 1, a minimum ratio
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of annualized cash flow to debt service of 1.15 to 1, a minimum ratio of
annualized cash flow to fixed charges of 1.1 to 1, and a minimum ratio of
annualized cash flow to interest expense of 1.75 to 1. As of the date of the
acquisition of the SLT System, the Registrant was in compliance with these
ratios.
PROFILE OF THE SLT SYSTEM
The SLT System serves the communities of Kaufman, Oak Grove and
Hillsboro located in north central Texas and the communities of New Waverly and
Waterwood located in southeast Texas.
Kaufman and Oak Grove, Texas are located approximately 32 miles
southeast of Dallas, Texas. Major industries in the area include manufacturing
and health care. Trinity Valley College is located in the area. Hillsboro,
Texas is located approximately 65 miles south of Dallas, Texas. Major
industries in the area include retail, manufacturing and health care. Hill
College is also located in the area.
EFFECTS OF REGULATION
On October 5, 1992, Congress enacted the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Act"). The 1992 Act
substantially reregulated the cable television industry and imposed numerous
requirements, including provisions subjecting rates for certain services and
equipment to regulation by the applicable local franchising authority and by the
Federal Communications Commission ("FCC"), exclusive programming arrangements,
the carriage of broadcast signals, customer service standards, leased access
channels, customer premises equipment compatibility and various other matters.
On April 1, 1993, the FCC announced the adoption of rate regulations which
became effective September 1, 1993. Under those initial regulations, rates were
evaluated against "competitive benchmarks" and were generally subject to
rollbacks if they exceeded the benchmark levels. On February 22, 1994, the FCC
substantially revised the rate regulation rules to effect further rate
reductions effective May 15, 1994, or later in certain circumstances, based on
complex formulas and revised benchmarks.
All of the Registrant's cable systems are potentially subject to rate
regulation. The 1992 Act (i) requires the FCC to establish rate standards for
basic cable service rates which may be regulated by the applicable local
franchising authority, (ii) requires the FCC, upon receipt of a complaint, to
review rates for additional tiers of cable service, (iii) regulates rates for
mandatorily offered commercial leased access channels and (iv) eliminates the
automatic five percent annual increase for basic rates allowed under prior law.
Rates for channels offered on a per-channel basis as individual purchase options
and pay-per-view events are excluded from rate regulation.
Basic service rates, including the equipment used to receive basic service, may
be regulated by a local franchising authority once it has been "certified" by
the FCC. When the certification becomes effective, the local franchise authority
may request the cable operator to justify its existing rates charged for basic
service and related equipment ("request for justification" or "RFJ"). Rates
charged in excess of the maximum allowable rates determined under FCC
regulations are subject to refund for the period in which the excess rates were
charged or one
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year, whichever is shorter. Additional tiers of service are subject to
regulation only upon an appropriately filed complaint to the FCC by any
subscriber, franchising authority or other person ("subscriber complaints"). If
no subscriber complaints are filed within 45 days of a change in the FCC
regulated rates, such rates are not subject to challenge unless and until the
cable operator seeks to modify them. Refund liability, if any, generally would
be limited to any incremental increase in rates. In late 1994, the FCC revised
its rules to permit cable operators to offer New Product Tiers at rates which
they elect so long as, among other conditions, other channels that are subject
to rate regulation are priced in conformity with applicable regulations and
cable operators do not remove programming services from existing service tiers
and offer them on the New Product Tier.
On May 5, 1995, the FCC announced the adoption of a simplified set of
alternative rate regulation rules that will apply to "small" cable systems,
defined as a system serving 15,000 or fewer subscribers, that are owned by
"small" companies, defined as a company serving 400,000 or fewer subscribers.
Under the FCC's definition, the Registrant is a "small" company and each of the
Registrant's cable systems are "small" systems. These rules become effective
August 24, 1995. "Small" cable systems now have the option of establishing rates
for regulated services through a more simplified process. Regulated rates
calculated pursuant to these new rules are presumptively reasonable if they are
below $1.24 per regulated channel. These rules, as well as any other previously
issued rate regulation rules, are effective only upon the certification by the
local franchising authority or the filing of a valid complaint by a subscriber
to the FCC.
As of the date of this filing, the Registrant has received notification that
local franchising authorities with jurisdiction over approximately 4% of the
Registrant's subscribers have elected to certify and subscriber complaints have
been filed in systems representing 2% of the Registrant's total subscribers.
Based on management's analysis, the rates charged by these systems are within
the maximum rates allowed under FCC rate regulations.
Future rate increases under this regulatory environment will be dependent on
several factors including the level of inflation as measured by the annual
change in the GNP-PI index, increases in "external costs" as defined by the FCC
and the number of channels added to regulated services. In management's opinion,
the "small" cable system regulations will not have a material adverse impact on
the Registrant's results of operations.
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SUBSCRIBER SUMMARY
(As of September 15, 1995)
Estimated Homes Passed: 6,100
Basic Subscribers:
Basic 3,431
Bulk Equivalent 0
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Total 3,431
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% of Homes Passed 56%
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Pay Subscribers:
HBO 505
Cinemax 438
Disney 139
Showtime 415
The Movie Channel 125
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Total 1,622
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% of Basic 47%
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CURRENT RATES
(including franchise fees, excluding sales tax)
Basic 17.16
HBO 11.28
Cinemax 9.81
Disney 9.66
Showtime 11.03
The Movie Channel 8.83
Installation 40.00
Reconnect fee 25.00
Transfer fee 14.00
Install extra outlet 35.00
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CHANNEL LINE-UP - KAUFMAN/OAK GROVE, TEXAS
CABLE OFF-AIR NETWORK
CHANNEL CHANNEL STATION (LOCATION)
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2
3 KUVN IND (Dallas, TX)
4 4 KDFW CBS (Dallas, TX)
5 5 KXAS NBC (Dallas, TX)
6 21 KTXA IND (Dallas, TX)
7 27 KDFI IND (Dallas, TX)
8 8 WFAA ABC (Dallas, TX)
9 33 KDAF FOX (Dallas, TX)
10 39 KXTX IND (Dallas, TX)
11 11 KTVT IND (Dallas, TX)
12 52 KFWD IND
13 13 KERA PBS (Dallas, TX)
14 Nickelodeon
15 CNN
16 QVC
17 29 KMPX IND (Dallas, TX)
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19 Country Music Television
20 The Nashville Network
21 KDTX-Trinity Broadcast Network IND (Dallas, TX)
22 The Disney Channel
23 Showtime
24 Home Box Office
25 Cinemax
26 VH1
27 MTV
28 ESPN
29 Galavision
30 The Discovery Channel
31 HSE
32 USA Network
33 Turner Network Television
34 The Family Channel
35 9 WGN IND (Chicago, IL)
36 17 WTBS IND (Atlanta, GA)
37 Arts and Entertainment
38 The Weather Channel
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CHANNEL LINE-UP - HILLSBORO, TEXAS
CABLE OFF-AIR NETWORK
CHANNEL CHANNEL STATION (LOCATION)
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2 Showtime
3 17 WTBS IND (Atlanta, GA)
4 4 KDFW CBS (Dallas, TX)
5 5 KXAS NBC (Fort Worth, TX)
6 ESPN
7 Cinemax
8 8 WFAA ABC (Dallas, TX)
9 33 KDAF FOX (Dallas, TX)
10 39 KXTX IND (Dallas, TX)
11 11 KTVT IND (Fort Worth, TX)
12 The Discovery Channel
13 13 KERA PBS (Dallas, TX)
14 C-SPAN
15 USA Network
16 Home Shopping Network
17 The Disney Channel
18 27 KDFI IND (Dallas, TX)
19 6 KCEN NBC (Waco, TX)
20 The Movie Channel
21 10 KWTX CBS (Waco, TX)
22 21 KTXA IND (Dallas, TX)
23 25 KXXV ABC (Waco, TX)
24 Country Music Television
25 The Nashville Network
26 Lifetime
27 Arts and Entertainment
28 9 WGN IND (Chicago, IL)
29 29 KMPX IND (Dallas, TX)
30 CNN
31 CNN Headline News
32 The Weather Channel
33 Nickelodeon
34 Galavision
35 The Family Channel
36 HSE
37 MEU
38 58 KDTX IND (Dallas, TX)
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CHANNEL LINE-UP - NEW WAVERLY, TEXAS
CABLE OFF-AIR NETWORK
CHANNEL CHANNEL STATION (LOCATION)
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2 KPRC NBC (Houston, TX)
3 The Nashville Network
4 14 KETH PBS (Houston, TX)
5 20 KTXH IND (Houston, TX)
6 45 KXLN IND (Houston, TX)
7 39 KHTV IND (Houston, TX)
8 8 KUHT PBS (Houston, TX)
9 9 KTRE ABC (Lufkin, TX)
10 26 KRIV IND (Houston, TX)
11 11 KHOU CBS (Houston, TX)
12 3 KBTX CBS (Bryan, TX)
13 13 KTRK ABC (Houston, TX)
14 67 KHSH IND (Alvin, TX)
15 9 WGN IND (Chicago, IL)
16 The Family Channel
17 17 WTBS IND (Atlanta, GA)
18 CNN
19 ESPN
20 Cinemax
21 Home Box Office
22 HSE
23 The Discovery Channel
24 Country Music Television
25 22 KTFH - Galavision
26 Arts and Entertainment
27 Turner Network Television
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CHANNEL LINE-UP - WATERWOOD, TEXAS
CABLE OFF-AIR NETWORK
CHANNEL CHANNEL STATION (LOCATION)
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2 2 KPRC NBC (Houston, TX)
3 3 KBTX CBS (Bryan, TX)
4 26 KRIV FOX (Houston, TX)
5 The Movie Channel
6 20 KTXH IND (Houston, TX)
7 Home Box Office
8 8 KUHT PBS (Houston, TX)
9 9 KTRE ABC (Lufkin, TX)
10 CNN
11 ESPN
12 17 WTBS IND (Atlanta, GA)
13 13 KTRK ABC (Houston, TX)
14 The Nashville Network
15 The Discovery Channel
16 9 WGN IND (Chicago, IL)
17 Arts and Entertainment
18 Country Music Television
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20 HSE
21 Lifetime
22 USA Network
23 The Family Channel
24 The Weather Channel
25 KTFH - Galavision
26 Turner Network Television
27 American Movie Classics
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FRANCHISE AGREEMENTS
The Systems operate under the terms of following franchise agreements:
FRANCHISE EXPIRATION DATE FRANCHISE FEE
City of Hillsboro 12/19/2003 3%
City of Kaufman 09/08/98 3%
City of Oak Grove 09/18/09 4%
City of New Waverly 09/12/08 3%
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Sequentially
Numbered
Page
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Item 7. Financial Statements and Exhibits
Financial Statements, Pro Forma
(c) Exhibits
Credit Agreement between Northland Cable
Properties Four Limited Partnership and
The First National Bank of Chicago dated
August 31, 1995
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Franchise Agreement with City of Hillsboro, TX - Assignment
and Assumption Agreement dated August 15, 1995.
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Franchise Agreement with City of Kaufman, TX - Assignment and
Assumption Agreement dated September 15, 1995.
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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 FOUR LIMITED PARTNERSHIP
BY: Northland Communications Corporation,
Managing General Partner
Dated: BY: /s/ GARY S. JONES
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Gary S. Jones
(Vice President)
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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 FOUR LIMITED PARTNERSHIP
BY: Northland Communications Corporation,
Managing General Partner
Dated: BY:
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INDEX TO EXHIBITS
Exhibit Sequentially
Number Description Numbered Page
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10.38 Credit Agreement between
Northland Cable Properties Four
Limited Partnership and The First
National Bank of Chicago dated
August 31, 1995
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10.39 Franchise Agreement with City of
Hillsboro, TX - Assignment and
Assumption dated August 15, 1995.
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10.40 Franchise Agreement with City of
Kaufman, TX - Assignment and
Assumption dated September 15, 1995.
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