NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP - 10-Q Quarterly Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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 June 30, 2002

		or

	[ ]	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
		For the transition period from ___________________ to ___________________

		Commission File Number: 0-16718

Northland Cable Properties Seven Limited Partnership

(Exact Name of Registrant as Specified in Charter)


Washington		91-1366564

(State of Organization)		(I.R.S. Employer Identification No.)

1201 Third Avenue, Suite 3600, Seattle, Washington		98101

(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 subject to such filing requirements for the past 90 days.

Yes [X] No [ ]

This filing contains 15 pages. Exhibits index appears on page 14.

TABLE OF CONTENTS


PART 1 — FINANCIAL INFORMATION
	ITEM 1. Financial Statements
		BALANCE SHEETS
		STATEMENTS OF OPERATIONS
		STATEMENTS OF OPERATIONS
		STATEMENTS OF CASH FLOWS
		NOTES TO UNAUDITED FINANCIAL STATEMENTS
	ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
PART II — OTHER INFORMATION
	ITEM 1 Legal proceedings
	ITEM 2 Changes in securities
	ITEM 3 Defaults upon senior securities
	ITEM 4 Submission of matters to a vote of security holders
	ITEM 5 Other information
	ITEM 6 Exhibits and Reports on Form 8-K
SIGNATURES
EXHIBIT 10.36
EXHIBIT 99.(A)
EXHIBIT 99.(B)

PART 1 — FINANCIAL INFORMATION

ITEM 1. Financial Statements

NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP
BALANCE SHEETS


				June 30,			December 31,
				2002			2001

				(unaudited)
ASSETS

Cash				$	480,895		$	125,060
Accounts receivable					729,998			592,772
Due from affiliates					6,048			17,225
Prepaid expenses					99,325			89,299
Property and equipment, net of accumulated depreciation of $22,622,085 and $20,956,786, respectively					18,379,304			19,074,621
Intangible assets, net of accumulated amortization of $12,420,264 and $12,279,043, respectively					11,456,999			11,198,220

Total assets				$	31,152,569		$	31,097,197


LIABILITIES AND PARTNERS’ DEFICIT

Accounts payable and accrued expenses				$	2,103,985		$	1,820,883
Due to managing general partner and affiliates					732,220			285,125
Converter deposits					90,935			71,730
Subscriber prepayments					575,192			595,357
Notes payable					40,670,703			41,236,547
Interest rate swap agreements					—			277,449

			Total liabilities		44,173,035			44,287,091

Partners’ deficit:
	General Partners:
		Contributed capital, net			(25,367	)		(25,367	)
		Accumulated deficit			(317,306	)		(319,000	)

					(342,673	)		(344,367	)

	Limited Partners:
		Contributed capital, net			18,735,576			18,735,576
		Accumulated deficit			(31,413,369	)		(31,581,103	)

					(12,677,793	)		(12,845,527	)

			Total partners’ deficit		(13,020,466	)		(13,189,894	)

Total liabilities and partners’ deficit				$	31,152,569		$	31,097,197

The accompanying notes are an integral part of these balance sheets.

NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS


			For the six months ended June 30,

			2002			2001

			(unaudited)
Service revenues			$	9,582,879		$	9,279,104
Expenses:
	Cable system operations (including $102,942 and $117,865 to affiliates in 2002 and 2001, respectively), excluding depreciation and amortization shown below			726,939			769,587
	General and administrative (including $882,787 and $876,286 to affiliates in 2002 and 2001, respectively)			2,319,209			2,229,923
	Programming (including $92,882 and $58,248 to affiliates in 2002 and 2001, respectively)			3,075,975			2,631,069
	Depreciation and amortization			1,694,995			2,514,768

				7,817,118			8,145,347

Income from operations				1,765,761			1,133,757
Other income (expense):
		Interest expense		(1,462,028	)		(1,662,615	)
		Loan fees		(411,892	)		(58,957	)
		Interest income and other, net		671			10,495
		Unrealized gain (loss) on interest rate swap agreements		277,449			(258,484	)
		Loss on disposal of assets		(533	)		(54,506	)

				(1,596,333	)		(2,024,067	)

Net income (loss)			$	169,428		$	(890,310	)

Allocation of net income (loss):
		General Partners	$	1,694		$	(8,903	)

		Limited Partners	$	167,734		$	(881,407	)

Net income (loss) per limited partnership unit: (49,656 units)			$	3		$	(18	)

Net income (loss) per $1,000 investment			$	7		$	(36	)

The accompanying notes are an integral part of these statements.

NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS


		For the three months ended June 30,

		2002			2001

		(unaudited)
Service revenues		$	4,878,580		$	4,725,047
Expenses:
	Cable system operations (including $49,314 and $57,493 to affiliates in 2002 and 2001, respectively), excluding depreciation and amortization shown below		371,107			389,741
	General and administrative (including $447,267 and $428,207 to affiliates in 2002 and 2001, respectively)		1,185,065			1,145,519
	Programming (including $52,417 and $29,924 to affiliates in 2002 and 2001, respectively)		1,565,641			1,321,560
	Depreciation and amortization		847,206			1,280,102

			3,969,019			4,136,922

Income from operations			909,561			588,125
Other income (expense):
	Interest expense		(724,123	)		(774,692	)
	Loan fees		(379,411	)		(27,900	)
	Interest income and other, net		(510	)		4,894
	Unrealized loss on interest rate swap agreements		—			(142,672	)
	Loss on disposal of assets		—			(54,506	)

			(1,104,044	)		(994,876	)

Net loss		$	(194,483	)	$	(406,751	)

Allocation of net loss:
	General Partners	$	(1,945	)	$	(4,068	)

	Limited Partners	$	(192,538	)	$	(402,683	)

Net loss per limited partnership unit: (49,656 units)		$	(4	)	$	(8	)

Net loss per $1,000 investment		$	(8	)	$	(16	)

The accompanying notes are an integral part of these statements.

NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS (Prepared by the Managing General Partner)


			For the six months ended June 30,

			2002			2001

			(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)			$	169,428		$	(890,310	)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
	Depreciation and amortization			1,694,995			2,514,768
	Unrealized gain (loss) on interest rate swap agreements			(277,449	)		274,249
	Non-cash interest expense			100,956			—
	Loan fees			111,892			58,957
	Loss on sale of assets			533			54,506
	(Increase) decrease in operating assets:
		Accounts receivable		(137,226	)		31,939
		Due from affiliates		11,177			(38,706	)
		Prepaid expenses		(10,026	)		(37,178	)
	Increase (decrease) in operating liabilities
		Accounts payable and accrued expenses		182,146			(874,085	)
		Due to Managing General Partner and affiliates		447,095			(38,993	)
		Converter deposits		19,205			8,015
		Subscriber prepayments		(20,165	)		(3,880	)

Net cash provided by operating activities				2,292,561			1,059,282

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net				(970,882	)		(2,968,937	)
Increase in intangibles				—			(124,577	)

Net cash used in investing activities				(970,882	)		(3,093,514	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on borrowings				(565,844	)		(1,639,579	)
Proceeds from borrowings				—			3,750,000
Loan fees				(400,000	)		—

Net cash (used in) provided by financing activities				(965,844	)		2,110,421

INCREASE IN CASH				355,835			76,189
CASH, beginning of period				125,060			492,858

CASH, end of period			$	480,895		$	569,047

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
	Cash paid during the period for interest		$	1,445,938		$	1,690,224

The accompanying notes are an integral part of these statements.

NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP
NOTES TO UNAUDITED FINANCIAL STATEMENTS

(1) Basis of Presentation

These unaudited financial statements are being filed in conformity with Rule 10-01 of Regulation S-X regarding interim financial statements 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 accounting principles generally accepted in the United States of America. 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 June 30, 2002, its statements of operations for the six and three months ended June 30, 2002 and 2001, and its statement of cash flows for the six months ended June 30, 2002 and 2001. 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, 2001.

(2) Intangible Assets – Adoption of Statement of Financial Accounting Standards (SFAS) No. 142

Effective January 1, 2002, the Partnership adopted SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 142 requires that the Partnership cease amortization of goodwill and any other intangible assets determined to have indefinite lives, and establishes a new method of testing these assets for impairment on an annual basis or on an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value or if the fair values of intangible assets with indefinite lives falls below their carrying value on an annual basis. The amortization of existing goodwill ceased on December 31, 2001. The Partnership determined that its franchises met the definition of indefinite lived assets. Accordingly, amortization on these assets also ceased on December 31, 2001. The Partnership tested these intangibles for impairment upon adoption of the new standard and determined that the fair value of the assets exceeded their carrying value. The Partnership will continue to test these assets for impairment annually, or more frequently as warranted by events or changes in circumstances. The book value of the Partnership’s intangible assets is presented in the following table:


		June 30, 2002							December 31, 2001

				(unaudited)							(unaudited)

		Gross					Net		Gross					Net
		Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying
		Amount		Amortization			Amount		Amount		Amortization			Amount

Indefinite-lived intangible assets:
	Franchises	$	21,409,702	$	(10,849,665	)	$	10,560,037	$	21,409,702	$	(10,849,665	)	$	10,560,037
	Goodwill		222,929		(70,130	)		152,799		222,929		(70,130	)		152,799

			21,632,631		(10,919,795	)		10,712,836		21,632,631		(10,919,795	)		10,712,836
Definite-lived intangible assets:
	Loan fees and other intangible assets		2,244,632		(1,500,469	)		744,163		1,844,632		(1,359,248	)		485,384

		$	23,877,263	$	(12,420,264	)	$	11,456,999	$	23,477,263	$	(12,279,043	)	$	11,198,220

As required by SFAS No. 142, the statement has not been retroactively applied to the results for periods prior to January 1, 2002. A reconciliation of net loss for the six and three months ended June 30, 2002 and 2001,and the twelve months ended December 31, 2001, 2000 and 1999, as if amortization of goodwill and franchises had not been recorded is presented below:

Six Months

Three Months

Twelve Months Ended December 31,

Ended

June 30, 2001

2001

2000

1999

NET LOSS:

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents