##### Table of Contents



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 June 30, 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.)
  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 700
SEATTLE, WASHINGTON
    
    98101(Address of principal executive offices)
    
    (Zip Code)
   þ o
  o þ




---



TABLE OF CONTENTS  PART 1  FINANCIAL INFORMATIONITEM 1. Financial StatementsPART I (continued)ITEM 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-K(a) Exhibit IndexSIGNATURESEXHIBIT 31(A)EXHIBIT 31(B)EXHIBIT 32(A)EXHIBIT 32(B)    Table of Contents  
  
     June 30,
    
    December 31,2005
    
    2004ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    492,757
    
    
    $
    913,878Due from Parent and affiliates
    
    
    573,696
    
    
    
    819,553Accounts receivable, net
    
    
    1,097,568
    
    
    
    1,098,644Prepaid expenses
    
    
    429,917
    
    
    
    483,351Total current assets
    
    
    2,593,938
    
    
    
    3,315,426Investment in Cable Television Properties:Property and equipment, net of accumulated
depreciation of $71,431,793 and $67,373,869,
respectively
    
    
    39,231,932
    
    
    
    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
$3,244,630 and $3,231,686, respectively
    
    
    32,357
    
    
    
    45,302Total investment in cable
television properties
    
    
    82,706,055
    
    
    
    84,780,358System sale receivable
    
    
    433,200
    
    
    
    433,200Loan fees, net of accumulated amortization of $3,035,273
and $2,782,038, respectively
    
    
    1,081,080
    
    
    
    1,298,814Total assets
    
    $
    86,814,273
    
    
    $
    89,827,798LIABILITIES AND SHAREHOLDERS DEFICITCurrent Liabilities:Accounts payable
    
    $
    161,410
    
    
    $
    747,973Subscriber prepayments
    
    
    1,566,188
    
    
    
    1,343,651Accrued expenses
    
    
    4,908,729
    
    
    
    4,732,046Converter deposits
    
    
    75,741
    
    
    
    93,604Due to affiliates
    
    
    113,365
    
    
    
    36,203Current portion of notes payable
    

    
    5,250,000
    
    
    
    3,400,000Total current liabilities
    
    
    12,075,433
    
    
    
    10,353,477Notes payable, net of current portion
    
    
    106,110,000
    
    
    
    109,660,000Deferred tax liabilities
    
    
    1,848,117
    
    
    
    1,006,408Total liabilities
    
    
    120,033,550
    
    
    
    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
    
    
    (45,578,654
    )
    
    
    (43,551,464
    )Total shareholders deficit
    
    
    (33,219,277
    )
    
    
    (31,192,087
    )Total liabilities and shareholders deficit
    
    $
    86,814,273
    
    
    $
    89,827,798




---



##### Table of Contents



For the six months ended June 30,2005
    
    2004Service revenues
    
    $
    25,366,773
    
    
    $
    25,191,587Expenses:Cable system operations (including
$16,685 and $124,097, net paid to affiliates
in 2005 and 2004, respectively), exclusive of
depreciation and amortization shown below
    
    
    10,852,703
    
    
    
    10,337,745General and administrative (including
$1,282,085 and $1,209,408, net paid to affiliates in
2005 and 2004, respectively)
    
    
    4,602,447
    
    
    
    4,541,460Management fees paid to Parent
    
    
    1,268,339
    
    
    
    1,259,579Depreciation and amortization
    
    
    4,261,082
    
    
    
    4,637,650(Gain) loss on disposal of assets
    
    
    (263,701
    )
    
    
    351,73320,720,870
    
    
    
    21,128,167Income from operations
    
    
    4,645,903
    
    
    
    4,063,420Other income (expense):Interest expense and amortization of loan fees
    
    
    (5,846,190
    )
    
    
    (5,771,741
    )Other, net
    
    
    21,691
    
    
    
    31,318(5,824,499
    )
    
    
    (5,740,423
    )Loss from operations before income tax expense
    
    
    (1,178,596
    )
    
    
    (1,677,003
    )Income tax expense
    
    
    (848,594
    )
    
    
    (532,322
    )Net loss
    
    $
    (2,027,190
    )
    
    $
    (2,209,325
    )




---



##### Table of Contents



For the three months ended June 30,2005
    
    2004Service revenues
    
    $
    12,847,940
    
    
    $
    12,667,905Expenses:Cable system operations (including
$8,130 and $116,043, net paid to affiliates
in 2005 and 2004, respectively), exclusive of
depreciation and amortization shown below
    
    
    5,473,389
    
    
    
    5,151,591General and administrative (including
$679,123 and $583,583, net paid to affiliates in
2005 and 2004, respectively)
    
    
    2,402,159
    
    
    
    2,253,426Management fees paid to Parent
    
    
    642,397
    
    
    
    633,395Depreciation and amortization
    
    
    2,132,463
    
    
    
    2,335,483Loss on disposal of assets
    
    
    10,383
    
    
    
    252,67610,660,791
    
    
    
    10,626,571Income from operations
    
    
    2,187,149
    
    
    
    2,041,334Other income (expense):Interest expense and amortization of loan fees
    
    
    (2,917,916
    )
    
    
    (2,873,932
    )Other, net
    
    
    12,524
    
    
    
    6,413(2,905,392
    )
    
    
    (2,867,519
    )Loss from operations before income tax expense
    
    
    (718,243
    )
    
    
    (826,185
    )Income tax expense
    
    
    (506,845
    )
    
    
    (222,912
    )Net loss
    
    $
    (1,225,088
    )
    
    $
    (1,049,097
    )




---



##### Table of Contents



For the six months ended June 30,2005
    
    2004CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (2,027,190
    )
    
    $
    (2,209,325
    )Adjustments to reconcile net loss to
cash provided by operating activities:Depreciation and amortization
    
    
    4,261,082
    
    
    
    4,637,652Amortization of loan fees
    
    
    253,234
    
    
    
    252,274(Gain) loss on disposal of assets
    
    
    (263,701
    )
    
    
    351,733Deferred income taxes
    
    
    841,709
    
    
    
    527,000Other
    
    
    52,749
    
    
    
    34,999(Increase) decrease in operating assets:Accounts receivable
    
    
    30,110
    
    
    
    309,618Prepaid expenses
    
    
    33,434
    
    
    
    25,453Due from Parent and affiliates
    
    
    245,857
    
    
    
    (2,552
    )Increase (decrease) in operating liabilitiesAccounts payable and accrued expenses
    
    
    (410,154
    )
    
    
    (1,160,963
    )Due to affiliates
    
    
    77,162
    
    
    
    109,138Converter deposits
    
    
    (17,863
    )
    
    
    (11,813
    )Subscriber prepayments
    
    
    222,537
    
    
    
    (175,454
    )Net cash provided by operating activities
    
    
    3,298,966
    
    
    
    2,687,760CASH FLOWS FROM INVESTING ACTIVITIES:Investment in cable television properties
    
    
    (2,276,780
    )
    
    
    (4,384,425
    )Proceeds from sale of cable system, net
    
    
    
    
    
    
    3,846,768Proceeds from related party insurance fund
    
    
    285,543
    
    
    
    Proceeds from sales of assets
    
    
    6,650
    
    
    
    5,900Net cash used in investing activities
    
    
    (1,984,587
    )
    
    
    (531,757
    )CASH FLOWS FROM FINANCING ACTIVITIES:Principal payments on borrowings
    

    
    (1,700,000
    )
    
    
    (1,400,000
    )Loan fees
    
    
    (35,500
    )
    
    
    (112,650
    )Net cash used in financing activities
    
    
    (1,735,500
    )
    
    
    (1,512,650
    )(DECREASE) INCREASE IN CASH
    
    
    (421,121
    )
    
    
    643,353CASH, beginning of period
    
    
    913,878
    
    
    
    2,134,254CASH, end of period
    
    $
    492,757
    
    
    $
    2,777,607SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid during the period for interest
    
    $
    5,540,482
    
    
    $
    5,598,446Cash paid during the period for state income taxes
    
    $
    6,885
    
    
    $
    5,322




---



##### Table of Contents



(1) Basis of Presentation
  (2) Intangible Assets
   2005 (6 months)
    
    
    257,2762006
    
    
    514,5552007
    
    
    309,249$
    1,081,080
  2005 (6 months)
    
    
    12,9442006
    
    
    19,414$
    32,358
 (3) Amended and Restated Senior Credit Facility




---



##### Table of Contents



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
    PrincipalPayments2005 (6 months)
    
    $
    850,0002006
    
    
    10,510,000Total
    
    $
    11,360,000




---



##### Table of Contents



(4) System Sales




---



##### Table of Contents



PART I
 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 Results of Operations  Six Months Ended June 30, 2005 and 2004
   
    
    $16.5 million (65%) from basic services
    
    $2.8 million (11%) from expanded basic services
    
    $2.2 million (9%) from high-speed Internet services
    
    $1.4 million (5%) from premium services
    
    $1.1 million (4%) from advertising
    
    $400,000 (2%) from digital services
    
    $1.0 million (4%) from other sources




---



##### Table of Contents



Six Months Ended June 30,2005
    
    2004EBITDA:EBITDA
    
    $
    8,643,284
    
    
    $
    9,052,803Depreciation and amortization expense
    
    
    (4,261,082
    )
    
    
    (4,637,650
    )Gain (loss) on disposal of assets
    
    
    263,701
    
    
    
    (351,733
    )Operating income
    
    
    4,645,903
    
    
    
    4,063,420Interest expense and amortization of loan fees
    
    
    (5,846,190
    )
    
    
    (5,771,741
    )Other, net
    
    
    21,691
    
    
    
    31,318Loss from operations before income tax expense
    
    
    (1,178,596
    )
    
    
    (1,677,003
    )Income tax expense
    
    
    (848,594
    )
    
    
    (532,322
    )Net loss
    
    $
    (2,027,190
    )
    
    $
    (2,209,325
    )EBITDA MARGIN:EBITDA
    
    $
    8,643,284
    
    
    $
    9,052,803Service revenues
    
    $
    25,366,773
    
    
    $
    25,191,587EBITDA margin
    
    
    34.1
    %
    
    
    35.9
    %
 Results of Operations  Three Months Ended June 30, 2005 and 2004




---



##### Table of Contents




    
    $8.4 million (66%) from basic services
    
    $1.3 million (10%) from expanded basic services
    
    $1.2 million (9%) from high-speed Internet services
    
    $700,000 (5%) from premium services
    
    $500,000 (4%) from advertising
    
    $200,000 (2%) from digital services
    
    $500,000 (4%) from other sources
       Liquidity and Capital Resources




---



##### Table of Contents



Amended and Restated Senior Credit Facility
    PrincipalPayments2005 (6 months)
    
    $
    850,0002006
    
    
    10,510,000Total
    
    $
    11,360,000




---



##### Table of Contents



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
    System Sales




---



##### Table of Contents



Obligations and Commitments
  Payments Due By PeriodTotal
    
    Less than
    
    1  3
    
    3  5
    
    More than1 year
    
    years
    
    years
    
    5 yearsNotes payable
    
    $
    111,360,000
    
    
    $
    5,250,000
    
    
    $
    106,110,000
    
    
    $
    
    
    
    $
    Minimum operating
lease payments
    
    
    270,614
    
    
    
    95,445
    
    
    
    129,161
    
    
    
    44,808
    
    
    
    1,200Total
    
    $
    111,630,614
    
    
    $
    5,345,445
    
    
    $
    106,239,161
    
    
    $
    44,808
    
    
    $
    1,200
 (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.
 Capital Expenditures
   Recently Issued Accounting Pronouncements
  Critical Accounting Policies




---



##### Table of Contents








---



##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
 ITEM 4. CONTROLS AND PROCEDURES




---



##### Table of Contents



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
 
  31 (a).
    
    Certification of Chief Executive Officer dated August 15,
2005 pursuant to section 302 of the Sarbanes-Oxley Act31 (b).
    
    Certification of President (Principal Financial and
Accounting Officer) dated August 15, 2005 pursuant to section 302 of the
Sarbanes-Oxley Act32 (a).
    
    Certification of Chief Executive Officer dated August 15,
2005 pursuant to section 906 of the Sarbanes-Oxley Act32 (b).
    
    Certification of President (Principal Financial and
Accounting Officer) dated August 15, 2005 pursuant to section 906 of the
Sarbanes-Oxley Act




---



##### Table of Contents



SIGNATURES
  NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
 SIGNATURES
    
    CAPACITIES
    
    DATE/s/
    
    RICHARD I. CLARK
    
    Executive Vice President, Treasurer and
    
    8-15-05Richard I. Clark
    
    Assistant Secretary/s/
    
    GARY S. JONES
    
    President
    
    8-15-05Gary S. Jones