1
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) NOVEMBER 1, 1995
NORTHLAND CABLE PROPERTIES FOUR LIMITED PARTNERSHIP
(Exact name of registrant as specified in charter)
STATE OF WASHINGTON 0-16064 75-1998317
(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
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (206) 621-7244
N.A.
(Former name or former address, if changed since last report)
This filing contains 64 pages. Exhibits Index appears on page 17.
2
NORTHLAND CABLE PROPERTIES FOUR LIMITED PARTNERSHIP
ITEM 2. ACQUISITION OF ASSETS
On September 13, 1995, 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 Huffman, Prairie View, Waller, Cut and
Shoot, Brookshire, Tarkenton, Ace, Simonton and Fulshear, all in the State of
Texas (the "Brookridge system"). The cable television systems represent
approximately 3,500 basic subscribers and were owned by Brookridge Cable Special
Purpose Partnership, Brookridge Cable Special Purpose Partnership-II, Brookshire
Cable TV, Limited Partnership, Carthage Cable TV, L.P., and Hillsboro Cable TV,
Limited Partnership (the "Seller"). The assets were acquired on November 1, 1995
for a total purchase price of $5,585,900 of which $5,306,510 was paid at the
closing date and the balance of $279,390 will be paid April 29, 1996, net of any
purchase price adjustments, under the terms of a subordinated, non-interest
bearing hold-back note. The purchase price is based on the Seller's
representations as to monthly revenues and the number of basic subscribers as of
the closing date. There is no material relationship between the Registrant and
the Seller or any of their affiliates, directors, officers or associates.
As of the date of this filing, the City of Houston had not granted its
consent to the assignment of the franchise to the Registrant. The Registrant has
deposited $225,000 of the purchase price in escrow and if the City of Houston
has not granted its consent to the assignment of the franchise by January 29,
1996, the $225,000 plus accrued interest will be released to the Registrant. In
the event the City of Houston does not approve the assignment of the franchise
to the Registrant, cable television service to approximately 200 subscribers in
the franchise area may be terminated. The refund of the escrow proceeds would
reimburse the Registrant for the loss of these subscribers. Management
anticipates the transfer of the franchise before January 29, 1996.
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 purchase was financed by borrowings under the Registrant's
revolving credit and term loan facility. At the time of this filing, the balance
outstanding under the credit facility is $14,026,896. The interest rates on the
credit facility were as follows: $9,800,000 fixed at 8.95% under the terms of an
interest rate swap agreement with the Registrant's lender expiring September 29,
1997; $4,200,000 fixed at 8.99% under the terms of a self-amortizing interest
rate swap expiring September 30, 1997. The balance of $26,896 bears interest at
the prime rate plus 1.75% (currently at 10.50%). The above rates include a
margin paid to the lender based on overall leverage, and may increase or
decrease as the Registrant's leverage fluctuates.
2
3
PROFILE OF THE BROOKRIDGE SYSTEM
The Brookridge system serves the communities of Huffman, Prairie View,
Waller, Cut and Shoot, Brookshire, Tarkenton, Ace, Simonton and Fulshear located
in southeast Texas.
Huffman is approximately 20 miles north of Houston, located near Lake
Houston, one of the largest lakes in the state. Major industries in the area
include rubber, steel, aerospace, and plastics. Prairie View and Waller, Texas
are located northwest of Houston and Prairie View is a branch location of Texas
A&M University, one of the largest universities in southeast Texas. Brookshire
is located approximately 25 miles west of Houston. Major industries in the area
include manufacturing and agriculture. Cut and Shoot, Tarkenton, and Ace are
located northeast of Houston; the major industry in the area is agriculture.
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 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
3
4
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. Maximum permitted rates under
these revised rules is dependent on several factors including the number of
regulated channels offered, net asset basis of plant and equipment used to
deliver regulated services, the number of subscribers served and a reasonable
rate of return.
As of the date of this filing, the Registrant has received notification
that local franchising authorities with jurisdiction over approximately 3% 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 possible changes to the existing rules regarding rate increases
associated with the launch of new services on regulated tiers. Because of the
uncertainties associated with these factors the future impact of rate regulation
on the Registrant's results of operations cannot be determined at this time.
Management feels it is reasonably possible under the price cap mechanism that
operating margins will stabilize and perhaps increase in future periods as
inflation and external cost increases are allowed to be passed through to
subscribers through rate adjustment.
4
5
SUBSCRIBER SUMMARY
(As of November 1, 1995)
Estimated Homes Passed: 7,800
Basic Subscribers:
Basic 3,115
Bulk Equivalent 403
-----
Total 3,518
=====
% of Homes Passed 45%
=====
Pay Subscribers:
HBO 527
Cinemax 63
Disney 113
Showtime 351
----
Total 1,054
=====
% of Basic 30%
=====
CURRENT RATES
(excluding franchise fees, including sales tax)
Basic 25.09
HBO 10.52
Cinemax 8.45
Disney 7.95
Showtime 5.95
Installation 40.00
Reconnect fee 24.95
Transfer fee 15.00
Install extra outlet 19.95
5
6
CHANNEL LINE-UP - ACE, TEXAS
NETWORK
CABLE OFF-AIR -------
CHANNEL CHANNEL STATION (LOCATION)
------- ------- ------- ----------
2 2 KPRC NBC (Houston, TX)
3 The Family Channel
4 26 KRIV IND (Houston, TX)
5 USA Network
6 39 KHTV IND (Houston, TX)
7 17 WTBS IND (Atlanta, GA)
8 8 KUHT PBS (Houston, TX)
9 The Nashville Network
10 20 KTXH IND (Houston, TX)
11 11 KHOU CBS (Houston, TX)
12 ESPN
13 13 KTRK ABC (Houston, TX)
14
15
16
17 Home Box Office
18 Showtime
19 The Disney Channel
20 Country Music Television
21
22 CNN
23 Nickelodeon
24 The Discovery Channel
6
7
CHANNEL LINE-UP - CUT AND SHOOT, TEXAS
NETWORK
CABLE OFF-AIR -------
CHANNEL CHANNEL STATION (LOCATION)
------- ------- ------- ----------
2 2 KPRC NBC (Houston, TX)
3 3 KBTX CBS (Bryan, TX)
4 26 KRIV IND (Houston, TX)
5 USA Network NBC (Fort Worth, TX)
6 39 KHTV IND (Houston, TX)
7 17 WTBS IND (Atlanta, GA)
8 8 KUHT PBS (Houston, TX)
9 9 WGN IND (Chicago, IL)
10 20 KTXH IND (Houston, TX)
11 11 KHOU CBS (Houston, TX)
12 ESPN
13 13 KTRK ABC (Houston, TX)
14 14 KETH PBS (Houston, TX)
15 The Nashville Network
16 Country Music Television
17 Home Box Office
18 Showtime
19 The Disney Channel
20
21 The Family Channel
22
23 The Weather Channel
24 CNN
25 CNN Headline News
26 The Discovery Channel
27
28 Arts and Entertainment
29 MOR Music
30 Nickelodeon
31 Home Shopping Network
32 QVC
7
8
CHANNEL LINE-UP - PRAIRIE VIEW/WALLER, TEXAS
NETWORK
CABLE OFF-AIR -------
CHANNEL CHANNEL STATION (LOCATION)
------- ------- ------- ----------
2 2 KPRC NBC (Houston, TX)
3 Home Shopping Network
4 Home Box Office
5 Cinemax
6 Showtime
7 17 WTBS IND (Atlanta, GA)
8 8 KUHT PBS (Houston, TX)
9 39 KHTV IND (Houston, TX)
10 26 KRIV IND (Houston, TX)
11 11 KHOU CBS (Houston, TX)
12 ESPN
13 13 KTRK ABC (Houston, TX)
14 The Discovery Channel
15 CNN Headline News
16
17 CNN
18 Nickelodeon
19 9 WGN IND (Chicago, IL)
20 20 KTXH IND (Houston, TX)
21 USA Network
22 The Family Channel
23 WOR IND
24 Black Entertainment Television
25 MTV
26 Country Music Television
27 The Nashville Network
28 C-SPAN
29 C-SPAN II
30
31 ESPN II
32
33
34 Turner Network Television
8
9
CHANNEL LINE-UP - HUFFMAN, TEXAS
NETWORK
CABLE OFF-AIR -------
CHANNEL CHANNEL STATION (LOCATION)
------- ------- ------- ----------
2 2 KPRC NBC (Houston, TX)
3
4 26 KRIV IND (Houston, TX)
5 USA Network
6 39 KHTV IND (Houston, TX)
7 17 WTBS IND (Atlanta, GA)
8 8 KUHT PBS (Houston, TX)
9 9 WGN IND (Chicago, IL)
10 20 KTXH IND (Houston, TX)
11 11 KHOU CBS (Houston, TX)
12 ESPN
13 13 KTRK ABC (Houston, TX)
14 14 KETH PBS (Houston, TX)
15 The Nashville Network
16 Turner Network Television
17 Home Box Office
18 Showtime
19 The Disney Channel
20 ESPN II
21 The Family Channel IND
22 KTMD
23 The Weather Channel
24 CNN
25 CNN Headline News
26 The Discovery Channel
27
28 Arts and Entertainment
29 MOR Music
30 Nickelodeon
31 Country Music Television
32 The Health Channel
33
34 QVC
35
36 Home Shopping Network
9
10
CHANNEL LINE-UP - BROOKSHIRE, TEXAS
NETWORK
CABLE OFF-AIR -------
CHANNEL CHANNEL STATION (LOCATION)
------- ------- ------- ----------
2 2 KPRC NBC (Houston, TX)
3 Home Shopping Network
4 Home Box Office FOX (Houston, TX)
5 Cinemax
6 Showtime
7 17 WTBS IND (Atlanta, GA)
8 8 KUHT PBS (Houston, TX)
9 39 KHTV IND (Houston, TX)
10 26 KRIV IND (Houston, TX)
11 11 KHOU CBS (Houston, TX)
12 CNN
13 13 KTRK ABC (Houston, TX)
14 The Discovery Channel
15 CNN Headline News
16
17 CNN
18 Nickelodeon IND (Chicago, IL)
19 9 WGN IND (Houston, TX)
20 20 KTXH
21 USA Network
22 The Family Channel IND
23 WOR
24 Galavision
25 MTV
26 Country Music Television
27 The Weather Channel
28 Turner Network Television
29 ESPN II
30 QVC
10
11
CHANNEL LINE-UP - NEW WAVERLY, TEXAS
NETWORK
CABLE OFF-AIR -------
CHANNEL CHANNEL STATION (LOCATION)
------- ------- ------- ----------
2 2 KPRC NBC (Houston, TX)
3 The Family Channel
4 USA Network
5 26 KRIV IND (Houston, TX)
6 39 KHTV IND (Houston, TX)
7 17 WTBS IND (Atlanta, GA)
8 8 KUHT PBS (Houston, TX)
9 The Nashville Network
10 20 KTXH IND (Houston, TX)
11 11 KHOU CBS (Houston, TX)
12 ESPN
13 13 KTRK ABC (Houston, TX)
14 ESPN II
15 Turner Network Television
16
17 Home Box Office
18 Showtime
19 The Disney Channel
20 Country Music Television
21
22 CNN
23 Nickelodeon
24 The Discovery Channel
25 QVC
11
12
CHANNEL LINE-UP - HILLSBORO, TEXAS
NETWORK
CABLE OFF-AIR -------
CHANNEL CHANNEL STATION (LOCATION)
------- ------- ------- ----------
2 2 KPRC NBC (Houston, TX)
3 Showtime
4 26 KRIV IND (Houston, TX)
5 The Disney Channel
6 39 KHTV IND (Houston, TX)
7 20 KTXH IND (Atlanta, GA)
8 8 KUHT PBS (Houston, TX)
9
10 The Family Channel
11 11 KHOU CBS (Houston, TX)
12
13 13 KTRK ABC (Houston, TX)
14 ESPN
15 USA Network
16 Arts and Entertainment
17 Home Box Office
18 The Travel Channel
19 Turner Network Television
20 IND (Atlanta, GA)
21 17 WTBS IND (Chicago, IL)
22 9 WGN
23 C-SPAN PBS (Houston, TX)
24 14 KETH
25 Nickelodeon
26 The Nashville Network
27 Country Music Television
28 The Discovery Channel
29
30 Local Access
31 The Weather Channel
32 CNBC
33
34 CNN Headline News
35 MTV
36 VH-1
12
13
FRANCHISE AGREEMENTS
The Systems operate under the terms of following franchise agreements:
FRANCHISE EXPIRATION DATE FRANCHISE FEE
City of Prairie View 10/29/2010 5%
City of Waller 04/12/2012 3%
City of Cut and Shoot 05/09/2002 4%
City of Brookshire 10/23/2005 3%
City of Simonton 10/19/2002 3%
City of Fulshear 10/27/2005 3%
City of Pattison 09/19/2004 3%
13
14
Sequentially
Numbered
Page
-----------
Item 7. Financial Statements and Exhibits
Financial Statements, Pro Forma
(a)(4) The financial statements required to be filed were not available as of
the date of this filing.
(b)(2)(c) Exhibits
Asset Purchase Agreement between Northland Cable Properties
Four Limited Partnership and Brookridge Cable Special Purpose
Partnership; Brookridge Cable Special Purpose Partnership II;
Brookshire Cable TV, Limited Partnership; Carthage Cable TV,
Limited Partnership; and Hillsboro Cable TV, Limited
Partnership dated September 13, 1995
14
15
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
--------- -----------------------------
Gary S. Jones
(Vice President)
15
16
INDEX TO EXHIBITS
Exhibit Sequentially
Number Description Numbered Page
- -----------------------------------------------------------------------------------
10.41 Asset Purchase Agreement between
Northland Cable Properties Four
Limited Partnership and Brookridge
Cable Special Purpose Partnership;
Brookridge Cable Special Purpose
Partnership II; Brookshire Cable TV,
Limited Partnership; Carthage Cable
TV, Limited Partnership; and Hillsboro
Cable TV, Limited Partnership dated
September 13, 1995 17
15