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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-Q þ
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act
of 1934 For the quarterly period ended March 31, 2005 or o
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 333-43157 NORTHLAND CABLE TELEVISION, INC. 
  STATE OF WASHINGTON
    
    91-1311836(State or other jurisdiction of incorporation)
    
    (I.R.S. Employer Identification No.)
 AND SUBSIDIARY GUARANTOR: NORTHLAND CABLE NEWS, INC. 
  STATE OF WASHINGTON
    
    91-1638891(State or other jurisdiction of incorporation)
    
    (I.R.S. Employer Identification No.)
 101 STEWART STREET, SUITE 700SEATTLE, WASHINGTON
    
    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 þ No o Indicate by checkmark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act.) Yes þ No o




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TABLE OF CONTENTS  PART 1  FINANCIAL INFORMATIONITEM 1. Financial StatementsITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 4. CONTROLS AND PROCEDURESPART II  OTHER INFORMATIONITEM 1 Legal proceedingsITEM 2 Changes in securitiesITEM 3 Defaults upon senior securitiesITEM 4 Submission of matters to a vote of security holdersITEM 5 Other informationITEM 6 Exhibits and Reports on Form 8-KSIGNATURESEXHIBIT 31.(A)EXHIBIT 31.(B)EXHIBIT 32.(A)EXHIBIT 32.(B)    Table of Contents  
 PART 1  FINANCIAL INFORMATION 
 ITEM 1. Financial Statements NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A wholly owned subsidiary of Northland Telecommunications Corporation)
CONDENSED CONSOLIDATED BALANCE SHEETS  (UNAUDITED) March 31,
    
    
    December 31,2005
    
    
    2004ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    1,947,539
    
    
    $
    913,878Due from Parent and affiliates
    
    
    1,075,144
    
    
    
    819,553Accounts receivable, net
    
    
    935,904
    
    
    
    1,098,644Prepaid expenses
    
    
    646,698
    
    
    
    483,351Total current assets
    
    
    4,605,285
    
    
    
    3,315,426Investment in Cable Television Properties:Property and equipment, net of accumulated
depreciation of $69,438,596 and $67,373,869,
respectively
    
    
    40,265,921
    
    
    
    41,293,290Franchise agreements, net of accumulated amortization
of $38,923,291
    
    
    39,504,437
    
    
    
    39,504,437Goodwill, net of accumulated amortization
of $2,407,104
    
    
    3,937,329
    
    
    
    3,937,329Other intangible assets, net of accumulated amortization
$3,236,956 and $3,231,686, respectively
    
    
    38,829
    
    
    
    45,302Total investment in cable television properties
    
    
    83,746,516
    
    
    
    84,780,358System sale receivable
    
    
    433,200
    
    
    
    433,200Loan fees, net of accumulated amortization of $2,905,277
and $2,782,038, respectively
    
    
    1,211,078
    
    
    
    1,298,814Total assets
    
    $
    89,996,079
    
    
    $
    89,827,798LIABILITIES AND SHAREHOLDERS DEFICITCurrent Liabilities:Accounts payable
    
    $
    45,671
    
    
    $
    747,973Subscriber prepayments
    
    
    1,423,409
    
    
    
    1,343,651Accrued expenses
    
    
    6,851,027
    
    
    
    4,732,046Converter deposits
    
    
    81,621
    
    
    
    93,604Due to affiliates
    
    
    37,267
    
    
    
    36,203Current portion of notes payable
    
    
    4,965,000
    
    
    
    3,400,000Total current liabilities
    
    
    13,403,995
    
    
    
    10,353,477Notes payable, net of current portion
    
    
    107,245,000
    
    
    
    109,660,000Deferred tax liabilities
    
    
    1,341,272
    
    
    
    1,006,408Total liabilities
    
    
    121,990,267
    
    
    
    121,019,885Shareholders Deficit:Common stock (par value $1.00 per share, authorized
50,000 shares; 10,000 shares issued and outstanding)
and additional paid-in capital
    
    
    12,359,377
    
    
    
    12,359,377Accumulated deficit
    
    
    (44,353,565
    )
    
    
    (43,551,464
    )Total shareholders deficit
    
    
    (31,994,188
    )
    
    
    (31,192,087
    )Total liabilities and shareholders deficit
    
    $
    89,996,079
    
    
    $
    89,827,798
 The accompanying notes are an integral part of these condensed consolidated financial statements.




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NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A wholly owned subsidiary of Northland Telecommunications Corporation)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  (UNAUDITED) For the three months ended March 31,2005
    
    
    2004Service revenues
    
    $
    12,518,834
    
    
    $
    12,523,682Expenses:Cable system operations (including
$8,555 and $8,055, net paid to affiliates
in 2005 and 2004, respectively), exclusive of
depreciation and amortization shown below
    
    
    5,379,312
    
    
    
    5,186,153General and administrative (including
$602,961 and $625,825, net paid to affiliates in
2005 and 2004, respectively)
    
    
    2,200,290
    
    
    
    2,288,034Management fees paid to Parent
    
    
    625,943
    
    
    
    626,184Depreciation and amortization
    
    
    2,128,618
    
    
    
    2,302,168(Gain) loss on disposal of assets
    
    
    (274,085
    )
    
    
    99,05710,060,078
    
    
    
    10,501,596Income from operations
    
    
    2,458,756
    
    
    
    2,022,086Other income (expense):Interest expense and amortization of loan fees
    
    
    (2,928,274
    )
    
    
    (2,897,809
    )Other, net
    
    
    9,166
    
    
    
    24,905(2,919,108
    )
    
    
    (2,872,904
    )Loss from operations before income tax expense
    
    
    (460,352
    )
    
    
    (850,818
    )Income tax expense
    
    
    (341,749
    )
    
    
    (309,410
    )Net loss
    
    $
    (802,101
    )
    
    $
    (1,160,228
    )
 The accompanying notes are an integral part of these condensed consolidated financial statements.




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NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A wholly owned subsidiary of Northland Telecommunications Corporation)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  (UNAUDITED) For the three months ended March 31,2005
    
    
    2004CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (802,101
    )
    
    $
    (1,160,228
    )Adjustments
to reconcile net loss to cash provided by operating activities:Depreciation and amortization
    
    
    2,128,618
    
    
    
    2,302,168Amortization of loan fees
    
    
    123,236
    
    
    
    135,071(Gain) loss on disposal of assets
    
    
    (274,085
    )
    
    
    99,057Deferred income taxes
    
    
    334,864
    
    
    
    307,000Other
    
    
    26,759
    
    
    
    14,705(Increase) decrease in operating assets:Accounts receivable
    
    
    191,774
    
    
    
    332,506Prepaid expenses
    
    
    (183,347
    )
    
    
    (34,018
    )Due from Parent and affiliates
    
    
    (255,591
    )
    
    
    (458,902
    )Increase (decrease) in operating liabilitiesAccounts payable and accrued expenses
    
    
    1,416,679
    
    
    
    1,219,329Due to affiliates
    
    
    1,064
    
    
    
    (35,937
    )Converter deposits
    
    
    (11,983
    )
    
    
    (1,551
    )Subscriber prepayments
    
    
    79,758
    
    
    
    157,324Net cash provided by operating activities
    
    
    2,775,645
    
    
    
    2,876,524CASH FLOWS FROM INVESTING ACTIVITIES:Investment in cable television properties
    
    
    (1,136,211
    )
    
    
    (1,877,582
    )Proceeds from sale of cable system, net
    
    
    
    
    
    
    3,846,768Proceeds from insurance
    
    
    276,577
    
    
    
    Proceeds from sales of assets
    
    
    3,150
    
    
    
    Net cash (used in) provided by investing activities
    
    
    (856,484
    )
    
    
    1,969,186CASH FLOWS FROM FINANCING ACTIVITIES:Principal payments on borrowings
    
    
    (850,000
    )
    
    
    (700,000
    )Loan fees
    
    
    (35,500
    )
    
    
    (74,404
    )Net cash used in financing activities
    
    
    (885,500
    )
    
    
    (774,404
    )INCREASE IN CASH
    
    
    1,033,661
    
    
    
    4,071,306CASH, beginning of period
    
    
    913,878
    
    
    
    2,134,254CASH, end of period
    
    $
    1,947,539
    
    
    $
    6,205,560SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid during the period for interest
    
    $
    218,012
    
    
    $
    206,189Cash paid during the period for state income taxes
    
    $
    6,885
    
    
    $
    2,410
 The accompanying notes are an integral part of these condensed consolidated financial statements.




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NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A wholly owned subsidiary of Northland Telecommunications Corporation) NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2005
(Unaudited) (1) Basis of Presentation These unaudited condensed consolidated financial statements are being filed in conformity
with Rule 10-01 of Regulation S-X regarding interim financial statement disclosures and do
not contain all of the necessary footnote disclosures required for a fair presentation of the
consolidated 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, these statements include all adjustments, consisting
only of normal recurring accruals, necessary to present fairly the Companys consolidated
financial position at March 31, 2005, its consolidated statements of operations for the three
months ended March 31, 2005 and 2004 and its consolidated statements of cash flows for the
three months ended March 31, 2005 and 2004. 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 Companys Annual Report on Form
10-K for the year ended December 31, 2004. (2) Intangible Assets In accordance with the provisions of SFAS No. 142, Goodwill and Other Intangible Assets,
the Company does not amortize goodwill or any other intangible assets determined to have
indefinite lives. The Company has determined that its franchises meet the definition of
indefinite lived assets. The Company tests these assets for impairment on an annual basis
during the fourth quarter, or on an interim basis if an event occurs or circumstances change
that would reduce the fair value of a reporting unit below its carrying value. Loan fees are being amortized using the straight-line method, which approximates the
effective interest rate method. Future amortization of loan fees is expected to be as
follows: 2005 (9 months)
    
    
    386,4982006
    
    
    515,3312007
    
    
    309,249$
    1,211,078
 Other intangibles are being amortized using the straight-line method. Future amortization
of these other intangibles is expected to be as follows: 2005 (9 months)
    
    
    19,4152006
    
    
    19,414$
    38,829
 (3) Amended and Restated Senior Credit Facility On November 13, 2003, the Company amended and restated its existing senior credit facility
(the Amended and Restated Senior Credit Facility). The amendment and restatement resulted
in the elimination of the lending syndicate and assumption of the credit facility by one of
the syndicate members. The Amended and Restated Senior Credit Facility establishes a term
loan in the amount of $15,000,000 and a $2,000,000 revolving credit loan, under which the
Company borrowed $1,000,000 upon amendment and restatement. The proceeds from the Amended and
Restated Senior Credit Facility were used to repay the Companys existing senior credit
facility, to provide working capital and for other general purposes. The Amended and Restated
Senior Credit Facility matures on December 31, 2006 and requires the Company to make
quarterly principal payments beginning March 31, 2004. The current portion of notes payable
included in the accompanying balance sheets reflect the principal payment requirements of the
Amended and Restated Senior Credit Facility. Annual maturities of the Amended and Restated
Senior Credit Facility are as follows:




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PrincipalPayments2005 (9 months)
    
    $
    2,550,0002006
    
    
    9,660,000Total
    
    $
    12,210,000
 The interest rate per annum applicable to the Amended and Restated Senior Credit Facility is
a fluctuating rate of interest measured by reference to either: (i) the Index Rate, as
defined, plus a borrowing margin of 2.50%; or (ii) the London interbank offered rate (LIBOR),
plus a borrowing margin of 3.75%. The Amended and Restated Senior Credit Facility contains a number of covenants, which among
other things, require the Company to comply with specified financial ratios, including
maintenance, as tested on a quarterly basis, of: (A) a Maximum Total Leverage Ratio (the
ratio of Total Debt to Annualized Operating Cash Flow (as defined)) of not more than 6.50 to
1.00; (B) a Maximum Senior Leverage Ratio (the ratio of Senior Debt to Annualized Operating
Cash Flow (as defined)) of not more than 1.00 to 1.00 (C) an Interest Coverage Ratio (the
ratio of Operating Cash Flow (as defined) to Total Cash Interest Expense of not less than
1.50 to 1.00 initially; and (D) a Minimum Fixed Charge Coverage Ratio (the ratio of
Annualized Operating Cash Flow (as defined) to the Companys Fixed Charges (as defined) of
not less than 1.00 to 1.00. In March of 2005, the Company further amended the Amended and Restated Senior Credit Facility
such that the Company will be allowed to retain the net proceeds from the sale of the
Navasota system (discussed below), which are expected to be approximately $1.2 million. In
addition, the amendment establishes a limitation on the maximum amount of annual capital
expenditures to be incurred during 2005 of $5.7 million and modifies the Minimum Fixed Charge
Coverage Ratio requirement during 2005 as follows: March 31, 2005
    
    
    0.80 to 1.00June 30, 2005
    
    
    0.80 to 1.00September 30, 2005
    
    
    0.85 to 1.00December 31, 2005
    
    
    0.90 to 1.00
 The Minimum Fixed Charge Coverage Ratio requirements revert back to the original requirements
of 1.00 to 1.00 in 2006. As of March 31, 2005, the Company was in compliance with the terms of the Amended and
Restated Senior Credit Facility. As of March 31, 2005, the balance under the Senior credit facility was approximately $12.2
million and applicable interest rates were as follows: $10.2 million at a LIBOR based
interest rate of 6.75%, $1.1 million at a LIBOR based interest rate of 6.55% and $0.9 million
at a LIBOR based interest rate of 6.85%. These rates expire during the second quarter of 2005
at which time new rates will be established.




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(4) System Sales On March 11, 2003, the Company sold the operating assets and franchise rights of its cable
system in and around the community of Port Angeles, Washington (the Port Angeles System).
In association with this transaction, approximately $575,000 was to be held in escrow and
released to the Company one year from the closing of the transaction, subject to general
representations and warranties. In March of 2004, the Company received notice from the
buyer of the Port Angeles system of certain claims, which were made under the hold back
agreement provisions of the purchase and sale agreement. Management believes that such
claims are unsubstantiated and intends to vigorously contest such claims. However,
approximately $433,000 of the original escrow proceeds will remain in escrow until such
claims are resolved. The escrow proceeds in excess of the claims were released to the
Company in March of 2004. The Company has filed a lawsuit against the buyer of the Port
Angeles System for recovery of the remaining escrow proceeds and unspecified damages with a
trial date set for September of 2005. In February 2005, the Company executed a purchase and sale agreement to sell its system
serving the community of Navasota, Texas, which serves approximately 1,080 subscribers. The
system will be sold for approximately $1,316,100. Under the terms of an amendment to the
Amended and Restated Senior Credit Facility, which was executed in March of 2005, the
Company will be allowed to retain these net proceeds, which are expected to be approximately
$1.2 million.




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PART I (continued) 
 ITEM 2.Managements Discussion
and Analysis of Financial Condition and Results of Operations Results of Operations  Three Months Ended March 31, 2005 and 2004 Basic subscribers decreased 5,472 or approximately 6%, from 84,371 as of March 31, 2004 to
78,899 as of March 31, 2005. The loss in subscribers is a result of several factors
including competition from DBS providers, availability of off-air signals in the Companys
markets and regional and local economic conditions. To reverse this customer trend, the
Company is increasing its customer retention efforts and its emphasis on bundling its video
and data products. Revenues totaled $12.5 million for the three months ended March 31, 2005, remaining
relatively constant with the same period in 2004. Of the 2005 revenues, $8.1 million (65%)
was derived from basic services, $700,000 (6%) from premium services, $1.5 million (12%)
from expanded basic services, $200,000 (1%) from digital services, $1.0 million (8%) from
high-speed Internet services, $500,000 (4%) from advertising, and $500,000 (4%) from other
sources. Average monthly revenue per subscriber increased $3.46 or approximately 7% from $49.47 for
the three months ended March 31, 2004 to $52.93 for the three months ended March 31, 2005.
This increase is attributable to rate increases implemented in a majority of the Companys
systems during 2004 and increased penetration of new product tiers, specifically, high-speed
Internet services, and increased advertising revenue. Cable system operation expenses increased approximately $200,000, or 4% from $5.2 million to
$5.4 million for the three months ended March 31, 2005. This increase is primarily
attributable to increased costs associated with the Companys high speed Internet product,
increased advertising expenses and an increase in system utility and pole rental expenses,
offset by a decrease in programming costs, which is attributable to the aforementioned
decrease in total subscribers. General and administrative expenses decreased approximately $100,000, or 4% from $2.3
million to $2.2 million for the three months ended March 31, 2005. This decrease is
primarily attributable to decreased property tax expenses, decreased bad debt expenses,
decreased printing costs, and decreases in corporate overhead allocations by the Companys
Parent. These corporate overhead allocations have been reduced to the extent that
allocation of these costs would have resulted in non-compliance with the Companys debt
covenants. Corporate overhead expenses represent actual costs incurred by the Companys
Parent for the period that are attributable to the operations of the Company. The Company
has no obligation or liability to its Parent for reductions in corporate overhead charges. Management fees for the three months ended March 31, 2005 remained relatively constant with
the same period in 2004. Management fees are calculated at 5.0% of gross revenues. Depreciation and amortization expense for the three months ended March 31, 2005 decreased
approximately $200,000, or 9% from $2.3 million to $2.1 million for the three months ended
March 31, 2005. The decrease is attributable to certain assets becoming fully depreciated
or amortized, offset by depreciation of recent purchases related to the upgrade of plant and
equipment. Interest expense and amortization of loan fees for the three months ended March 31, 2005
remained relatively constant with the same period in 2004. The effect of routine principal
payments was offset by an increase in interest rates. EBITDA decreased approximately $100,000 or 2%, from $4.4 million to $4.3 million for the
three months ended March 31, 2005, and EBITDA margin decreased from 35.32% to 34.45% for the
quarter ended March 31, 2005. This decrease is primarily attributable to the aforementioned
decrease in total subscribers and an increase in certain costs associated with the Companys
high speed Internet product, offset by a decrease in general and administrative expenses,
discussed above.




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EBITDA represents a non-GAAP measure and is one of the primary measures used by our
management to evaluate performance and to forecast future results. EBITDA margin represents
EBITDA as a percentage of revenue. We believe EBITDA is useful to assess performance in a
manner similar to the method used by management, and provides a measure that can be used to
analyze, value and compare the companies in the cable television industry, which may have
different depreciation and amortization policies. A limitation of this measure is that it
excludes depreciation and amortization, which represents the period costs of certain
capitalized tangible and intangible assets, and gains and losses recognized on the disposal
of assets. It is also not intended to be a performance measure that should be regarded as an
alternative either to operating income (loss) or net income (loss) as an indicator of
operating performance or to the statement of cash flows as a measure of liquidity and should
not be considered in isolation or as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles. Our definitions of EBITDA may not
be identical to similarly titled measures reported by other companies. The following
represents a reconciliation of EBITDA to operating income, which is the most directly
comparable GAAP measure: Three Months Ended March 31,2005
    
    
    2004EBITDA:EBITDA
    
    $
    4,313,289
    
    
    $
    4,423,311Depreciation and amortization expense
    
    
    (2,128,618
    )
    
    
    (2,302,168
    )Gain (loss) on disposal of assets
    
    
    274,085
    
    
    
    (99,057
    )Operating income
    
    
    2,458,756
    
    
    
    2,022,086Interest expense and amortization of loan fees
    
    
    (2,928,274
    )
    
    
    (2,897,809
    )Other, net
    
    
    9,166
    
    
    
    24,905Loss from operations before income tax expense
    
    
    (460,352
    )
    
    
    (850,818
    )Income tax expense
    
    
    (341,749
    )
    
    
    (309,410
    )Net loss
    
    $
    (802,101
    )
    
    $
    (1,160,228
    )EBITDA MARGIN:EBITDA
    
    $
    4,313,289
    
    
    $
    4,423,311Service revenues
    
    $
    12,518,834
    
    
    $
    12,523,682EBITDA margin
    
    
    34.45
    %
    
    
    35.32
    %
 Liquidity and Capital Resources The cable television business generally requires substantial capital for the construction,
expansion and maintenance of the signal distribution system. In addition, the Company has
pursued a business strategy, which includes selective acquisitions. The Company has
financed these expenditures through a combination of cash flow from operations, borrowings
under its senior credit facility and the issuance of senior subordinated notes. The
Company anticipates that cash flow from operations will be adequate to meet its long term
liquidity requirements, prior to the maturity of its senior subordinated notes, although
no assurances can be given in this regard. Net cash provided by operating activities was $2.8 million for the three months ended
March 31, 2005. Adjustments to the $800,000 net loss for the period to reconcile to net
cash provided by operating activities consisted primarily of $2.1 million of depreciation
and amortization expense, $300,000 of deferred tax expense, $100,000 of amortization of
loan fees and changes in other operating assets and liabilities of $1.2 million, offset by
a gain on disposal of assets of approximately $300,000 Net cash used in investing activities was $900,000 for the three months ended March 31,
2005, and consisted primarily of $1.1 million in capital expenditures, offset by
approximately $300,000 in insurance proceeds.




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Net cash used in financing activities consisted of $900,000 in scheduled principal
prepayments and loan fees related to the Amended and Restated Senior Credit Facility. Amended and Restated Senior Credit Facility On November 13, 2003, the Company amended and restated its existing senior credit facility
(the Amended and Restated Senior Credit Facility). The amendment and restatement resulted
in the elimination of the lending syndicate and assumption of the credit facility by one of
the syndicate members. The Amended and Restated Senior Credit Facility establishes a term
loan in the amount of $15,000,000 and a $2,000,000 revolving credit loan, under which the
Company borrowed $1,000,000 upon amendment and restatement. The proceeds from the Amended
and Restated Senior Credit Facility were used to repay the Companys existing senior credit
facility, to provide working capital and for other general purposes. The Amended and
Restated Senior Credit Facility matures on December 31, 2006 and requires the Company to
make quarterly principal payments beginning March 31, 2004. The current portion of notes
payable included in the accompanying balance sheets reflects the principal payment
requirements of the Amended and Restated Senior Credit Facility. Annual maturities of the
Amended and Restated Senior Credit Facility are as follows: PrincipalPayments2005 (9 months)
    
    $
    2,550,0002006
    
    
    9,660,000Total
    
    $
    12,210,000
 The interest rate per annum applicable to the Amended and Restated Senior Credit Facility is
a fluctuating rate of interest measured by reference to either: (i) the Index Rate, as
defined, plus a borrowing margin of 2.50%; or (ii) the London interbank offered rate
(LIBOR), plus a borrowing margin of 3.75%. The Amended and Restated Senior Credit Facility contains a number of covenants, which among
other things, require the Company to comply with specified financial ratios, including
maintenance, as tested on a quarterly basis, of: (A) a Maximum Total Leverage Ratio (the
ratio of Total Debt to Annualized Operating Cash Flow (as defined)) of not more than 6.50 to
1.00; (B) a Maximum Senior Leverage Ratio (the ratio of Senior Debt to Annualized Operating
Cash Flow (as defined)) of not more than 1.00 to 1.00 (C) an Interest Coverage Ratio (the
ratio of Operating Cash Flow (as defined) to Total Cash Interest Expense of not less than
1.50 to 1.00 initially; and (D) a Minimum Fixed Charge Coverage Ratio (the ratio of
Annualized Operating Cash Flow (as defined) to the Companys Fixed Charges (as defined) of
not less than 1.00 to 1.00. In March of 2005, the Company further amended the Amended and Restated Senior Credit
Facility such that the Company will be allowed to retain the net proceeds from the sale of
the Navasota system, which are expected to be approximately $1.2 million. In addition, the
amendment establishes a limitation on the maximum amount of annual capital expenditures to
be incurred during 2005 of $5.7 million and modifies the Minimum Fixed Charge Coverage Ratio
requirement during 2005 as follows: March 31, 2005
    
    
    0.80 to 1.00June 30, 2005
    
    
    0.80 to 1.00September 30, 2005
    
    
    0.85 to 1.00December 31, 2005
    
    
    0.90 to 1.00
 The Minimum Fixed Charge Coverage Ratio requirements revert back to the original
requirements of 1.00 to 1.00 in 2006. As of March 31, 2005, the Company was in compliance with the terms of the Amended and
Restated Senior Credit Facility.




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As of March 31, 2005, the Company was in compliance with the terms of the Amended and
Restated Senior Credit Facility. As of March 31, 2005, the balance under the Senior credit facility was approximately $12.2
million and applicable interest rates were as follows: $10.2 million at a LIBOR based
interest rate of 6.75%, $1.1 million at a LIBOR based interest rate of 6.55% and $0.9 million
at a LIBOR based interest rate of 6.85%. These rates expire during the second quarter of 2005
at which time new rates will be established. System Sales On March 11, 2003, the Company sold the operating assets and franchise rights of its cable
system in and around the community of Port Angeles, Washington (the Port Angeles System).
In association with this transaction, approximately $575,000 was to be held in escrow and
released to the Company one year from the closing of the transaction, subject to general
representations and warranties. In March of 2004, the Company received notice from the
buyer of the Port Angeles system of certain claims, which were made under the hold back
agreement provisions of the purchase and sale agreement. Management believes that such
claims are unsubstantiated and intends to vigorously contest such claims. However,
approximately $435,000 of the original escrow proceeds will remain in escrow until such
claims are resolved. The Company has filed a lawsuit against the buyer of the Port Angeles
System for recovery of the remaining escrow proceeds and unspecified damages. The escrow
proceeds in excess of the claims were released to the Company in March of 2004. In September 2004, the Company sold its systems serving the areas of Buffalo and Jewett,
Texas. These systems served approximately 415 basic subscribers and were sold for
approximately $130,000. The net proceeds from this sale were used to repay amounts
outstanding under the Companys Amended and Restated Senior Credit Facility. The pro forma
effect of this transaction did not have a material impact on the Companys financial
statements. In February 2005, the Company executed a purchase and sale agreement to sell its system
serving the community of Navasota, Texas, which serves approximately 1,080 subscribers. The
system will be sold for approximately $1,316,100. Under the terms of an amendment to the
Amended and Restated Senior Credit Facility, which was executed in March of 2005, the
Company will be allowed to retain these net proceeds, which are expected to be approximately
$1.2 million. Obligations and Commitments In addition to working capital needs for ongoing operations, the Company has capital
requirements for annual maturities related to the Companys credit facilities and required
minimum operating lease payments. The following table summarizes the Companys contractual
obligations as of March 31, 2005: Payments Due By PeriodLess than
    
    
    1  3
    
    
    3  5
    
    
    More thanTotal
    
    
    1 year
    
    
    years
    
    
    years
    
    
    5 yearsNotes payable
    
    $
    112,210,000
    
    
    $
    4,965,000
    
    
    $
    107,245,000
    
    
    $
    
    
    
    $
    Minimum operating
lease payments
    
    
    294,821
    
    
    
    98,688
    
    
    
    132,206
    
    
    
    62,427
    
    
    
    1,500Total
    
    $
    112,504,821
    
    
    $
    5,063,688
    
    
    $
    107,377,206
    
    
    $
    62,427
    
    
    $
    1,500
   (a)
    
    These contractual obligations do not include accounts payable and accrued
liabilities, which are expected to be paid in 2005.(b)
    
    The Company also rents utility poles in its operations. Amounts due under these
agreements are not included in the above minimum operating lease payments as, generally,
pole rentals are cancelable on short notice. The Company does, however, anticipate that
such rentals will recur.(c)
    
    Note that obligations related to the Companys credit facilities exclude interest
expense.




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##### Table of Contents



Capital Expenditures For the three months ended March 31, 2005, the Company had capital expenditures of
approximately $1.1 million. Capital expenditures included: (i) expansion and improvements of
cable properties including the launch of high-speed Internet services; (ii) additions to
plant and equipment; (iii) maintenance of existing equipment; (iv) cable line drops and
extensions and installations of cable plant facilities; and (v) vehicle replacements. The Company plans to invest
approximately $3.9 million in capital expenditures for 2005.
Anticipated expenditures for 2005 include costs to be incurred for upgrading and rebuilding
certain distribution facilities, continued deployment of high-speed Internet services,
extensions of distribution facilities to add new subscribers and vehicle replacements. It is
expected that cash flow from operations will be sufficient to fund planned capital
expenditures. Recently Issued Accounting Pronouncements In November 2004, the EITF ratified its consensus on Issue No. 03-13, Applying the
Conditions in paragraph 42 of FASB Statement No. 144 in Determining Whether to Report
Discontinued Operations (EITF 03-13). EITF 03-13 relates to components of an enterprise
that are either disposed of or classified as held for sale. EITF 03-13 allows significant
events or circumstances that occur after the balance sheet date but before the issuance of
financials statements to be taken into consideration in the evaluation of whether a
component should be presented as discontinued or continuing operations, and modifies
assessment period guidance to allow for an assessment period of greater than one year. The
implementation of EITF 03-13 does not have a material impact on the Companys financial
statements. Critical Accounting Policies This discussion and analysis of our financial condition and results of operations is based
on the Companys financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States of America. The preparation
of these financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amount of revenues
and expenses during the reporting period. Actual results could differ from those estimates.
The following critical accounting policies, which have been chosen among alternatives,
require a more significant amount of management judgment than other accounting policies the
Company employs. Revenue Recognition  Cable television service revenue, including service and maintenance,
is recognized in the month service is provided to customers. Advance payments on cable
services to be rendered are recorded as subscriber prepayments. Revenues resulting from the
sale of local spot advertising are recognized when the related advertisements or commercials
appear before the public. Property and Equipment  Property and equipment are recorded at cost. Costs of additions
and substantial improvements, which include materials, labor, and other indirect costs
associated with the construction of cable transmission and distribution facilities, are
capitalized. Indirect costs include employee salaries and benefits, travel and other costs.
These costs are estimated based on historical information and analysis. The Company
periodically performs evaluations of these estimates as warranted by events or changes in
circumstances. In accordance with SFAS No. 51, Financial Reporting by Cable Television Companies, the
Company also capitalizes costs associated with initial customer installations. The costs of
disconnecting service or reconnecting service to previously installed locations is expensed
in the period incurred. Costs for repairs and maintenance are also charged to operating
expense, while equipment replacements, including the replacement of drops, are capitalized.




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##### Table of Contents



Intangible Assets  In accordance with the provisions of SFAS No. 142, Goodwill and Other
Intangible Assets, the Company does not amortize goodwill or any other intangible assets
determined to have indefinite lives. The Company has determined that its franchises meet
the definition of indefinite lived assets. The Company tests these assets for impairment on
an annual basis during the fourth quarter, or on an interim basis if an event occurs or
circumstances change that would reduce the fair value of a reporting unit below its carrying
value. Management believes the franchises have indefinite lives because the franchises are expected
to be used by the Company for the foreseeable future and effects of obsolescence,
competition and other factors are minimal. In addition, the level of maintenance
expenditures required to obtain the future cash flows expected from the franchises are not
material in relation to the carrying value of the franchises. While the franchises have
defined lives based on the franchising authority, renewals are routinely granted, and
management expects them to continue to be granted. This expectation is supported by
managements experience with the Companys franchising authorities and the franchising
authorities of the Companys affiliates.




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##### Table of Contents



ITEM 3.Quantitative and Qualitative Disclosures About Market Risk The Company is subject to market risks arising from changes in interest rates. The
Companys primary interest rate exposure results from changes in LIBOR or the prime rate,
which are used to determine the interest rate applicable to the Companys Revised Senior
Credit Facility. The potential loss over one year that would result from a hypothetical,
instantaneous and unfavorable change of 100 basis points in the interest rate of all the
Companys variable rate obligations would be approximately $112,000. The Company does not use financial instruments for trading or other speculative purposes. 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. 
 ITEM 4.Controls and Procedures The Company maintains disclosure controls and procedures designed to ensure that
information required to be disclosed in our filings under the Securities Exchange Act of
1934 is recorded, processed, summarized and reported within the time periods specified in
the Securities and Exchange Commissions rules and forms. The Chief Executive Officer and
President (Principal Financial and Accounting Officer) have evaluated these disclosure
controls and procedures as of the end of the period covered by this quarterly report on
Form 10-Q and have determined that such disclosure controls and procedures are effective. There has been no change in the Companys internal controls over financial reporting that
has materially affected, or is reasonably likely to materially affect, the internal
control over financial reporting.




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##### Table of Contents



PART II  OTHER INFORMATION 
 ITEM 1Legal proceedings The Company has filed a lawsuit against the buyer of the Port Angeles System for
recovery of the remaining escrow proceeds and unspecified damages with a trial date set for
September of 2005. The Company is a party to ordinary and routine litigation proceedings that are incidental
to the Companys business. Management believes that the outcome of all pending legal
proceedings will not, individually or in the aggregate, have a material adverse effect on
the Company, its financial condition, prospects and debt service ability. 
 ITEM 2Changes in securities None 
 ITEM 3Defaults upon senior securities None 
 ITEM 4Submission of matters to a vote of security holders None 
 ITEM 5Other information None 
 ITEM 6Exhibits and Reports on Form 8-K (a) Exhibit Index 31 (a).
    
    Certification of Chief Executive Officer dated May 12, 2005
pursuant to section 302 of the Sarbanes-Oxley Act31 (b).
    
    Certification of President (Principal Financial and
Accounting Officer) dated May 12, 2005 pursuant to section 302 of the
Sarbanes-Oxley Act32 (a).
    
    Certification of Chief Executive Officer dated May 12, 2005
pursuant to section 906 of the Sarbanes-Oxley Act32 (b).
    
    Certification of President (Principal Financial and
Accounting Officer) dated May 12, 2005 pursuant to section 906 of the
Sarbanes-Oxley Act
 (b) Reports on Form 8-K None




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##### Table of Contents



SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated. NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY SIGNATURES
    
    CAPACITIES
    
    DATE/s/
    
    RICHARD I. CLARK
    
    Executive Vice President, Treasurer and
    
    5-16-05Richard I. Clark
    
    Assistant Secretary/s/
    
    GARY S. JONES
    
    President
    
    5-16-05Gary S. Jones