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 September 30, 2002

[ ]		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.

(Exact name of registrant as specified in its charter)


STATE OF WASHINGTON		91-1311836

(State or other jurisdiction of incorporation)		(I.R.S. Employer Identification No.)

AND SUBSIDIARY GUARANTOR:

NORTHLAND CABLE NEWS, INC.

(Exact name of registrant as specified in its charter)


STATE OF WASHINGTON		91-1638891

(State or other jurisdiction of incorporation)		(I.R.S. Employer Identification No.)

1201 THIRD AVENUE, SUITE 3600 SEATTLE, 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 [X] No [ ]

This filing contains 22 pages. Exhibits index appears on page 17.

TABLE OF CONTENTS


PART 1 — FINANCIAL INFORMATION
	ITEM 1. Financial Statements
		CONDENSED CONSOLIDATED BALANCE SHEETS — (UNAUDITED)
		CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) — (UNAUDITED)
		CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — (UNAUDITED)
		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
	ITEM 4. CONTROLS AND PROCEDURES
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
EX-99.(A)
EX-99.(B)

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)


			September 30,			December 31,
			2002			2001

ASSETS
Current Assets:
	Cash		$	3,977,243		$	2,724,099
	Due from affiliates			995,797			295,650
	Accounts receivable			2,339,130			3,437,560
	Prepaid expenses			691,297			547,480

		Total current assets		8,003,467			7,004,789
Investment in Cable Television Properties:
Property and equipment, net of accumulated depreciation of $60,938,128 and $54,580,070, respectively				55,259,839			57,237,151
Franchise agreements, net of accumulated amortization of $48,279,931				53,393,281			53,384,986
Goodwill, net of accumulated amortization of $2,407,104				3,937,329			3,937,329
Other intangible assets, net of accumulated amortization of $6,157,012 and $5,372,238, respectively				3,583,588			4,361,939

		Total investment in cable television properties		116,174,037			118,921,405

		Total assets	$	124,177,504		$	125,926,194

LIABILITIES AND SHAREHOLDER’S DEFICIT
Current Liabilities:
	Accounts payable		$	268,784		$	1,103,869
	Accrued expenses			8,658,779			6,395,484
	Converter deposits			127,231			157,534
	Subscriber prepayments			1,745,470			1,898,112
	Due to affiliates			162,428			242,741
	Current portion of notes payable			1,387,959			—
	Interest rate swap agreements			206,177			1,919,587

		Total current liabilities		12,556,828			11,717,327
Notes payable				167,643,223			171,031,182

		Total liabilities		180,200,051			182,748,509

Shareholder’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			12,359,377
	Accumulated other comprehensive income			—			268,000
	Accumulated deficit			(68,381,924	)		(69,449,692	)

		Total shareholder’s deficit		(56,022,547	)		(56,822,315	)

Total liabilities and shareholder’s deficit			$	124,177,504		$	125,926,194

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

NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A wholly owned subsidiary of Northland Telecommunications Corporation)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS) — (UNAUDITED)


				For the nine months ended September 30,

				2002			2001

Service revenues				$	45,998,690		$	46,384,483
Expenses:
	Cable system operations (including $248,345 and $206,193, net paid to affiliates in 2002 and 2001, respectively), exclusive of depreciation and amortization shown below				17,429,116			16,333,213
	General and administrative (including $100,574 and $616,500 net paid to affiliates in 2002 and 2001, respectively)				6,670,094			7,426,397
	Management fees paid to parent				2,299,934			2,319,224
	Depreciation and amortization				7,973,371			15,370,850

			Total operating expenses		34,372,515			41,449,684

Income from operations					11,626,175			4,934,799
Other income (expense):
	Interest expense				(12,318,498	)		(13,790,081	)
	Interest income and other, net				37,977			95,578
	Unrealized gain (loss) on interest rate swap agreements				1,981,411			(2,470,568	)
	(Loss) gain on disposal of assets				(259,297	)		28,320

					(10,558,407	)		(16,136,751	)

Net income (loss)					1,067,768			(11,201,952	)

Other comprehensive income (loss):
		Cumulative effect of change in accounting principle			—			689,000
		Reclassification of accumulated other comprehensive income to unrealized gain (loss) on interest rate swaps			(268,000	)		(315,000	)

			Other comprehensive (loss) income		(268,000	)		374,000

Total comprehensive income (loss)				$	799,768		$	(10,827,952	)

The accompanying notes are an integral part of these consolidated statements.


				For the three months ended September 30,

				2002			2001

Service revenues				$	15,301,621		$	15,454,301
Expenses:
	Cable system operations (including $87,224 and $29,488, net paid to affiliates in 2002 and 2001, respectively), exclusive of depreciation and amortization shown below				5,896,448			5,489,892
	General and administrative (including $111,394, net received from affiliates in 2002, and $150,947, net paid to affiliates 2001)				2,150,732			2,517,549
	Management fees paid to parent				765,080			772,715
	Depreciation and amortization				2,674,976			5,171,732

			Total operating expenses		11,487,236			13,951,888

Income from operations					3,814,385			1,502,413
Other income (expense):
	Interest expense				(3,876,532	)		(4,508,795	)
	Interest income and other, net				13,733			30,741
	Unrealized gain (loss) on interest rate swap agreements				600,754			(307,039	)
	(Loss) gain on disposal of assets				(243,421	)		43,704

					(3,505,466	)		(4,741,389	)

Net income (loss)					308,919			(3,238,976	)

Other comprehensive loss:
		Reclassification of accumulated other comprehensive income to unrealized gain (loss) on interest rate swaps			(59,000	)		(106,000	)

			Other comprehensive loss		(59,000	)		(106,000	)

Total comprehensive income (loss)				$	249,919		$	(3,344,976	)

The accompanying notes are an integral part of these consolidated statements.

NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A wholly owned subsidiary of Northland Telecommunications Corporation)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — (UNAUDITED)


			For the nine months ended September 30,

			2002			2001

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)			$	1,067,768		$	(11,201,952	)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
	Depreciation and amortization			7,973,371			15,370,850
	Unrealized (gain) loss on interest rate swap agreements			(1,981,411	)		2,470,568
	Amortization of loan costs			503,987			503,987
	Loss (gain) on disposal of assets			259,297			(28,320	)
	(Increase) decrease in operating assets:
		Accounts receivable		(127,658	)		18,994
		Prepaid expenses		(143,817	)		(193,119	)
		Due from affiliates		(700,147	)		(127,300	)
	Increase (decrease) in operating liabilities
		Accounts payable and accrued expenses		1,428,210			1,943,563
		Due to affiliates		(80,313	)		720,859
		Converter deposits		(30,303	)		23,987
		Subscriber prepayments		(152,642	)		63,666

Net cash provided by operating activities				8,016,342			9,565,783

CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in cable television properties				(5,753,630	)		(9,604,380	)
Proceeds from December 2001 disposition of cable system				999,562			—
Proceeds from disposal of assets				5,588			210,888
Franchises and other intangibles				(14,718	)		(96,494	)

Net cash used in investing activities				(4,763,198	)		(9,489,986	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable				—			3,000,000
Principal payments on borrowings				(2,000,000	)		—
Loan fees and other costs incurred				—			(44,021	)

Net cash (used in) provided by financing activities				(2,000,000	)		2,955,979
INCREASE IN CASH				1,253,144			3,031,776
CASH, beginning of period				2,724,099			2,551,425

CASH, end of period			$	3,977,243		$	5,583,201

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
	Cash paid during the period for interest		$	9,700,616		$	10,716,151

	Cash paid during the period for state income taxes		$	9,363		$	13,051

The accompanying notes are an integral part of these consolidated statements.

NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A wholly owned subsidiary of Northland Telecommunications Corporation)

NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(Unaudited)

(1) BASIS OF PRESENTATION:

Interim Financial Reporting

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 comprehensive income (loss) 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 Company’s consolidated financial position at September 30, 2002, its consolidated statements of operations and comprehensive income (loss) for the nine and three months ended September 30, 2002 and 2001 and its consolidated statements of cash flows for the nine months ended September 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 Company’s Annual Report on Form 10-K/A for the year ended December 31, 2001 filed on November 8, 2002.

(2) ACQUISITION OF SYSTEMS AND DISPOSITION OF ASSETS

On September 30, 2001 the Company acquired a cable system serving the areas in and around Highlands, North Carolina, serving approximately 3,200 basic subscribers, from an affiliated Limited Partnership. The system was acquired at a price of approximately $4,600,000 and was financed with approximately $3,800,000 of cash on hand and an in-kind equity contribution from the Company’s parent of $798,850.

On December 21, 2001, the Company sold its cable system serving the areas of Bainbridge Island, Kingston and Hansville, Washington, which represented approximately 6,450 basic subscribers, to TCI Cable Partners’ of St. Louis, L.P. The systems were sold at a price of approximately $19,800,000. The Company recognized a gain of approximately $12,700,000 related to the transaction.

Pro forma operating results of the Company for 2001, assuming the acquisition and dispositions described above had occurred at the beginning of 2001, follow:


	Nine Months Ended			Three Months Ended
	September 30, 2001			September 30, 2001

	(unaudited)
Service Revenues	$	44,700,000		$	15,000,000

Net Loss	$	(10,500,000	)	$	(3,000,000	)

(3) INTANGIBLE ASSETS — SFAS NO. 142

Effective January 1, 2002, the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 142 requires that the Company cease amortization of goodwill and 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 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 Company determined that its franchises met the definition of indefinite lived assets. Accordingly, amortization of these assets also ceased on December 31, 2001. The Company 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 Company 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 Company’s intangible assets is presented in the following table:


		September 30, 2002							December 31, 2001

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

Indefinite-lived intangible assets:
	Franchises	$	101,673,212	$	(48,279,931	)	$	53,393,281	$	101,664,917	$	(48,279,931	)	$	53,384,986
	Goodwill		6,344,433		(2,407,104	)		3,937,329		6,344,433		(2,407,104	)		3,937,329

			108,017,645		(50,687,035	)		57,330,610		108,009,350		(50,687,035	)		57,322,315
Definite-lived intangible assets:
	Other intangible assets		9,740,600		(6,157,012	)		3,583,588		9,734,177		(5,372,238	)		4,361,939

		$	117,758,245	$	(56,844,047	)	$	60,914,198	$	117,743,527	$	(56,059,273	)	$	61,684,254

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


							Twelve Months Ended December 31,
	Nine Months Ended			Three Months Ended
	September 30, 2001			September 30, 2001			2001			2000			1999

	(unaudited)						(unaudited)
NET LOSS:
Reported net loss	$	(11,201,952	)	$	(3,238,976	)	$	(1,864,718	)	$	(14,268,443	)	$	(11,776,281	)
Add back: amortization of indefinite-lived franchises		7,711,858			2,570,611			10,343,687			10,351,363			10,137,025
Add back: amortization of goodwill		129,833			43,278			171,903			173,111			173,111

Adjusted net (loss) income	$	(3,360,261	)	$	(625,087	)	$	8,650,872		$	(3,743,969	)	$	(1,466,145	)

Amortization expense including amortization of loan fees for each of the next five years is expected to be approximately as follows:


2003	$	746,000
2004		706,000
2005		706,000
2006		700,000
2007		466,000

	$	3,324,000

(4) NOTES PAYABLE

In August of 2000, the Company refinanced its existing senior bank indebtedness. The original indebtedness was repaid with borrowings under the Revised Senior Credit Facility. The Revised Senior Credit Facility established a $35 million 364-day revolving credit loan. In August of 2001, the revolver converted to a term loan due on September 30, 2007. The other two components consisted originally of a seven-year revolving term loan in the aggregate principal amount of $40 million and a seven-year term loan in the aggregate principal amount of $35 million. The allowable borrowings on the $40 million revolver were reduced by approximately $17.3 million during 2001. Amounts outstanding under the Revised Senior Credit Facility mature on September 30, 2007. The Revised Senior Credit Facility is collateralized by a first lien position on all present and future assets and stock of the Company. Interest rates vary based on certain financial covenants; currently 8.032% (weighted average). Graduated principal and interest payments are due quarterly, beginning September 30, 2003, until maturity on September 30, 2007. The estimated fair value of the revolving credit and term loan facility is equal to its carrying value because of its variable interest rate nature. As of September 30, 2002, approximately $5,695,000 was available to borrow by the Company under the revolving credit facility.

Under the revolving credit and term loan agreement, the Company has agreed to restrictive covenants which require the maintenance of certain ratios, including a Pro Forma Debt Service ratio not less than 1.25 to 1.0 and a Leverage Ratio of no greater than 6.50 to 1.0, among other restrictions. The Company submits quarterly debt compliance reports to its creditor under this arrangement. As of September 30, 2002, the Company was in compliance with the terms of the loan agreements.

As of September 30, 2002, the outstanding balance under the Revised Senior Credit Facility was approximately $69 million. As of the date of this filing, interest rates on the Revised Senior Credit Facility were as follows: $20 million fixed at a LIBOR based rate of 4.25% expiring February 20, 2003; $27 million fixed at 5.668% under the terms of an interest rate swap agreement with the Company’s lender expiring February 20, 2003; $5.5 million fixed at a LIBOR based rate of 4.19% expiring February 18, 2003; $16 million fixed at LIBOR based rate of 4.33% expiring November 19, 2002; $600,000 fixed at a LIBOR based rate of 4.33% expiring November 19, 2002. The above rates include a margin paid to the lender based on overall leverage and may increase or decrease as the Company’s overall leverage fluctuates.

(5) SUBSEQUENT EVENT

On October 28, 2002 the Company entered into an agreement to sell certain cable operations representing approximately 5% of its subscriber base to an unaffiliated third party. The sales price of the system is $11,716,000, which will result in the recognition of a gain. The closing of the sale is contingent upon the buyer obtaining financing, approval by the Board of Directors and the transfer of franchise operating agreements. Upon closing, substantially all of the proceeds from the sale will be utilized to reduce amounts outstanding under the Senior Credit Facility. The sale is not expected to close until 2003.

PART I (continued)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

As of September 30, 2002, the Company’s systems served approximately 109,727 basic subscribers, 51,081 premium subscribers, 11,174 digital subscribers, and passed an estimated 192,000 homes.

Revenues totaled $46.0 million for the nine months ended September 30, 2002. Of these revenues, $30.9 million (67%) was derived from basic services, $3.4 million (7%) from premium services, $6.2 million (14%) from expanded basic services, $900,000 (2%) from digital services, $400,000 (1%) from service maintenance contracts, $2.3 million (5%) from advertising and $1.9 million (4%) from other sources.

Average monthly revenue per subscriber increased $3.18 or 7.5% from $42.58 to $45.76 for the nine months ended September 30, 2002. The December 2001 disposition of cable television systems serving approximately 6,450 basic subscribers in and around Bainbridge Island, Washington (the “Bainbridge Systems”) decreased revenues approximately $2.7 million or 5.8%. The September 2001 acquisition of a cable system serving approximately 3,200 basic subscribers in and around Highlands, North Carolina (the “Highlands System”) increased revenues approximately $1.0 million or 2.2%. On a pro forma basis, effecting for the sale of the Bainbridge Systems and the Highlands System acquisition: (i) revenues would have increased approximately $1.3 million or 2.9%; and (ii) average monthly revenue per average basic subscriber would have increased $3.40 or 8.0%, from $42.36 to $45.76 for the nine months ended September 30, 2002. This increase is primarily attributable to rate increases implemented during the first quarter of 2002, increased revenue from higher penetration of new product tiers and a 26% increase in advertising revenue per basic subscriber.

Cable system operation expenses, which include costs related to programming, technical personnel, repairs and maintenance and advertising sales, increased approximately $1.1 million or 6.7% from $16.3 million to $17.4 million for the nine months ended September 30, 2002. On a pro forma basis, excluding the impact of the sale of the Bainbridge Systems and the Highlands System acquisition, operating expenses would have increased approximately $1.7 million or 10.8%. Programming costs increased approximately $1.6 million or 14% on a pro forma basis resulting from rate increases by certain programming vendors, the launch of new programming services in various systems and the launch of digital programming services.

General and administrative expenses, which include on-site office and customer service personnel costs, corporate overhead, customer billing, postage, marketing expenses and franchise fees, decreased approximately $700,000 or 9.5% from $7.4 million to $6.7 million for the nine months ended September 30, 2002. On a pro forma basis, excluding the impact of the sale of the Bainbridge Systems and the Highlands System acquisition, general and administrative expenses

would have decreased approximately $500,000 or 6.9%. The decrease is primarily attributable to reductions in corporate overhead and property taxes, offset by a 55% increase in marketing expense.

Management fees for the nine months ended September 30, 2002 were consistent with the same period in the previous year. Management fees are calculated at 5.0% of gross revenues.

Depreciation and amortization expenses decreased approximately $7.4 million or 48.0% from $15.4 million to $8.0 million for the nine months ended September 31, 2002. Such decrease is primarily attributable to the Company’s implementation of SFAS No. 142. As of December 31, 2001, the Company discontinued amortizing its franchises and goodwill in accordance with SFAS No. 142 resulting in a decrease of approximately $7.8 million in amortization expense for the nine months ended September 30, 2002.

Interest expense decreased approximately $1.5 million or 10.9%, from $13.8 million to $12.3 million for the nine months ended September 30, 2002. Average outstanding indebtedness decreased $13.6 million from $184.2 million to $170.6 million for the nine months ended September 30, 2001 and 2002, respectively. This is primarily attributable to the fact that approximately $19.3 million of the proceeds from the sale of the Bainbridge Systems were used to pay down amounts outstanding under the Company’s revised Senior Credit Facility offset by approximately $6.8 million in borrowings during 2001 to replenish working capital.

The Company has elected not to designate its interest rate swap agreements as hedges under SFAS No. 133. Accordingly, the Company has recorded a liability equal to the fair market value to settle the agreements and a corresponding charge in its statement of operations. Each quarter, the change in the market value of the Company’s swap agreements is recorded as other income or expense. The market value adjustment for the nine months ended September 30, 2002 was a credit of approximately $1.7 million. In addition, the Company recorded $268,000 of income for the nine months ended September 30, 2002 resulting from the reclassification to earnings of accumulated other comprehensive income recorded upon implementation of SFAS No. 133 on January 1, 2001.

THREE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

Revenues totaled $15.3 million for the three months ended September 30, 2002 remaining constant with the same period in 2001. Of these revenues, $10.3 million (67%) was derived from basic services, $1.1 million (8%) from premium services, $2.0 million (13%) from expanded basic services, $300,000 (2%) from digital services, $100,000 (1%) from service maintenance contracts, $800,000 (5%) from advertising and $700,000 (4%) from other sources.

Average monthly revenue per subscriber increased $2.83 or 6.5% from $43.45 to $46.28 for the three months ended September 30, 2002. The December 2001 disposition of the Bainbridge Systems serving approximately 6,450 basic subscribers decreased revenues approximately $900,000 or 5.9%. The September 2001 acquisition of the Highlands System serving approximately 3,200 basic subscribers increased revenues approximately $400,000 or 2.6%. On a pro forma basis, effecting for the sale of the Bainbridge Systems and the Highlands System acquisition: (i) revenues would have increased approximately $600,000 or 11.3%; and (ii) average monthly revenue per average basic subscriber would have increased $3.06 or 7.1%, from $43.22 to $46.28 for the three months ended September 30, 2002. This increase is primarily attributable to rate increases implemented during the first quarter of 2002, increased revenue

from higher penetration of new product tiers and a 30% increase in advertising revenue per basic subscriber.

Cable system operation expenses increased approximately $400,000 or 7.3% from $5.5 million to $5.9 million for the three months ended September 30, 2002. On a pro forma basis, excluding the impact of the sale of the Bainbridge Systems and the Highlands System acquisition, operating expenses would have increased approximately $600,000 or 11.4%. Programming costs increased $500,000 or 13.8% on a pro forma basis resulting from rate increases by certain programming vendors as well as the launch of new analog programming services and the launch of digital programming services.

General and administrative expenses decreased approximately $400,000 or 16.0% from $2.5 million to $2.1 million for the three months ended September 30, 2002. On a pro forma basis, excluding the impact of the sale of the Bainbridge Systems and the Highlands System acquisition, general and administrative expenses would have decreased approximately $300,000 or 12.5%. The decrease is attributable to reductions in corporate overhead and property taxes, offset by a 63% increase in marketing expense.

Management fees for the three months ended September 30, 2002 were consistent with the same period in the previous year. Management fees are calculated at 5.0% of gross revenues.

Depreciation and amortization expenses decreased approximately $2.5 million or 48.1% from $5.2 million to $2.7 million for the three months ended September 30, 2002. Such decrease is primarily attributable to the Company’s implementation of SFAS No. 142. As of December 31, 2001, the Company discontinued amortizing its franchises and goodwill accordance with SFAS No. 142 resulting in a decrease of approximately $2.6 million in amortization expense for the three months ended September 30, 2002.

Interest expense decreased approximately $600,000 or 13.3%, from $4.5 million to $3.9 million for the three months ended September 30, 2002. Average outstanding indebtedness decreased $14 million from $185.5 million to $169.7 million for the three months ended September 30, 2001 and 2002, respectively. This is primarily attributable to the fact that approximately $19.3 million in proceeds from the sale of the Bainbridge Systems were used to pay down amounts outstanding under the Company’s revised Senior Credit Facility offset by approximately $6.8 million in borrowings to replenish working capital.

The Company has elected not to designate its interest rate swap agreements as hedges under SFAS No. 133. Accordingly, the Company has recorded a liability equal to the fair market value to settle the agreements and a corresponding charge in its statement of operations. Each quarter, the change in the market value of the Company’s swap agreements is recorded as other income or expense. The market value adjustment for the three months ended September 30, 2002 was a credit of approximately $550,000. In addition, the Company recorded $59,000 of income for the three months ended September 30, 2002 resulting from the reclassification to earnings of accumulated other comprehensive income recorded upon implementation of SFAS No. 133 on January 1, 2001.

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 the revolving credit and term loan facility provided by a variety of banks and the issuance of senior subordinated notes. The Company’s debt service obligations for the remainder of 2002 are expected to be approximately $3.4 million. The Company anticipates that cash flow from operations will be sufficient to service its debt through December 31, 2003. The Company believes that cash flow from operations will be adequate to meet the Company’s long-term liquidity requirements prior to the maturity of its long-term indebtedness, although no assurance can be given in this regard.

Net cash provided by operating activities was $8.0 million for the nine months ended September 30, 2002. Adjustments to the $1.1 net income for the period to reconcile to net cash provided by operating activities consisted primarily of $8.5 million of depreciation and amortization and increases in operating liabilities of approximately 1.2 million, offset by $2.0 relating to interest rate swap agreements and increases in operating assets of approximately $1.0 million.

Net cash used in investing activities was $4.8 million for the nine months ended September 30, 2002, and substantially consisted of $5.8 million in capital expenditures offset by the receipt of $1.0 million from a hold back note related to the sale of the Bainbridge Systems.

Net cash used in financing activities consisted of $2.0 million in principal prepayments on the Senior Credit Facility.

Net cash provided by operating activities was $9.6 million for the nine months ended September 30, 2001. Adjustments to the $11.2 million net loss for the period to reconcile to net cash provided by operating activities consisted primarily of $15.9 million of depreciation and amortization, $2.5 million related to interest rate swap agreements and increases in operating liabilities of approximately $2.7 million.

Net cash used in investing activities was $9.5 million for the nine months ended September 30, 2001 and consisted primarily of $9.6 million in capital expenditures and additions of intangible assets.

Net cash provided by financing activities was $3.0 million for the nine months ended September 30, 2001. The Company had $3.0 million in borrowings of long term debt to finance planned capital expenditures.

Operating income before charges for interest, taxes, depreciation and amortization (“EBITDA”) decreased approximately $700,000 or 3.5%, from $20.3 million to $19.6 million for the nine months ended September 30, 2002. EBITDA as a percentage of revenues (“EBITDA Margin”) decreased from 43.8% to 42.6% for the nine months ended September 30, 2002. On a pro forma basis, excluding the impact of the sale of the Bainbridge Systems and the Highlands System acquisition, EBITDA would have remained relatively constant. The aforementioned increases in pro forma revenues were offset by higher programming costs resulting from rate increases by certain programming vendors as well as the launch of new programming services in various systems. Industry analysts generally consider EBITDA to be an appropriate measure of the performance of multi-channel television operations. EBITDA is not presented in accordance with accounting principles generally accepted in the United States of America and

should not be considered an alternative to, or more meaningful than, operating income or operating cash flow as an indication of the Company’s operating performance.

CAPITAL EXPENDITURES

For the nine months ended September 30, 2002, the Company incurred capital expenditures of approximately $5.8 million. Capital expenditures included: (i) continued deployment of new product digital services, (ii) expansion and improvement of cable properties; (iii) additions to plant and equipment and (iv) line drops, extensions and installations of cable plant facilities.

The Company plans to invest approximately $3.5 million in capital expenditures for the remainder of 2002. This represents anticipated expenditures for upgrading and rebuilding certain distribution facilities, which will allow for the continued deployment of new products, such as digital and Internet services in selected markets. Furthermore, capital expenditures will involve extensions of distribution facilities to add new subscribers.

RECENTLY ISSUED ACCOUNTING STANDARDS

Statement of Financial Accounting Standards No. 143 — In September 2001, the FASB issued SFAS No. 143 “Accounting for Asset Retirement Obligations.” SFAS No. 143 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. Statement No. 143 will be effective for the Company beginning January 1, 2003. The Company has not yet estimated the impact of implementation on its financial position or results of operations.

Statement of Financial Accounting Standards No. 145 — In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” SFAS No. 145 provides for the rescission of several previously issued accounting standards, new accounting guidance for the accounting for certain lease modifications and various technical corrections that are not substantive in nature to existing pronouncements. SFAS No. 145 will be effective beginning January 1, 2003, except for the provisions relating to the amendment of SFAS No.13, which will be effective for transactions occurring subsequent to May 15, 2002. Adoption of SFAS No. 145 will not have a material impact on the Company’s financial statements.

Statement of Financial Accounting Standards No. 146 - In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities”. SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity is recognized at fair value when the liability is incurred and is effective for exit or disposal activities that are initiated after December 31, 2002. The Partnership has not yet estimated the impact of implementation on its financial position or results of operations.

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 is recognized in the month service is provided to the customer. 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.

Long-lived Assets — Property and equipment are stated at cost less accumulated depreciation. Costs of additions and substantial improvements to property and equipment are capitalized. Expenditures for maintenance and repairs are charged to operating expense as incurred. Depreciation is computed using the straight-line method over the equipment’s estimated useful lives. The Company evaluates the depreciation periods of property and equipment to determine whether events or circumstances warrant revised estimates of useful lives.

The costs associated with the construction of cable transmission and distribution facilities and new cable service installations are capitalized. Costs include direct labor and materials as well as certain indirect costs. The amount of indirect costs that are capitalized, which include employee benefits, travel and other costs, are estimated based on historical construction costs. The Company periodically performs evaluations of these estimates to determine whether they are reflective of current construction costs. At the time of retirements, sales or other dispositions of property, the original cost and related accumulated depreciation are removed from the respective accounts, and the gains and losses are presented in the statement of operations and comprehensive income (loss).

The Company periodically reviews the carrying value of its long-lived assets, including property and equipment and intangible assets, whenever events or changes in circumstances indicate that the carrying value may not be recoverable. As of March 31, 2002, there has been no indication of such impairment.

On January 1, 2002, the Company adopted SFAS No. 142 “Goodwill and Other Intangibles.” Under this statement, goodwill and franchises are no longer being amortized, but are tested for impairment annually, or more frequently as warranted by events or changes in circumstances. As of September 30, 2002, there was no indication of such impairment.

SUBSEQUENT EVENT

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 debt facilities. As of the date of this filing, the Company had entered into one interest rate swap agreement for $27,000,000 to partially hedge interest rate exposure. Interest rate swaps have the effect of converting the applicable variable rate obligations to fixed or other variable rate obligations. Had the Company not entered into this fixed rate agreements, 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 of the Company’s variable rate obligations would be approximately $690,000 of which, $270,000 is mitigated by interest rate swap agreements currently in place.

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

Within 90 days prior to the date of filing this report, an evaluation was performed under the supervision and with the participation of the Partnership’s management, including the Chief Executive Officer and President (Principal Financial and Accounting Officer), of the effectiveness of the design and operation of the Partnership’s disclosure controls and procedures (as defined in Rule 13a-14(c) of the Exchange Act). Based on and as of the time of such evaluation, the Partnership’s management, including the Chief Executive Officer and President (Principal Financial and Accounting Officer), concluded that the Partnership’s disclosure controls and procedures were effective in timely alerting them to material information relating to the Partnership required to be included in the Partnership’s reports filed or submitted by it under the Exchange Act. There have been no significant changes in the Partnership’s internal controls or in other factors that could significantly affect internal controls subsequent to the time of such evaluation.

PART II — OTHER INFORMATION

ITEM 1 Legal proceedings

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 2 Changes in securities

None

ITEM 3 Defaults upon senior securities

None

ITEM 4 Submission of matters to a vote of security holders

None

ITEM 5 Other information

None

ITEM 6 Exhibits and Reports on Form 8-K

(a) Exhibit Index

	99 (a).		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

	99 (b).		Certification of the President Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b) Reports on Form 8-K

	(i)		Form 8-K originally filed on July 15, 2002, and amended on July 19, 2002, announcing the dismissal of Arthur Andersen LLP as the Company’s independent auditors, and the appointment of KPMG LLP to serve as the Company’s independent auditors.

	(ii)		Form 8-K filed July 18, 2002 reporting the misclassification in the financial statements as of, and for the year ended December 31, 2001, and for the quarter ended March 31, 2002, and management’s intentions to reissue the financial statements and audit report for those periods affected.

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	11-12-02
		and Assistant Secretary
	Richard I. Clark

/s/	GARY S. JONES	President	11-12-02

	Gary S. Jones

CERTIFICATIONS

I, Gary Jones certify that:

1.		I have reviewed this quarterly report on Form 10-Q of Northland Cable Television, Inc., and Subsidiary;

2.		Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.		Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

	a)		Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

	b)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

	c)		Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and board of directors:

	a)		All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weakness in internal controls; and

	b)		Any fraud, whether or not material that involves management or other employees who have a significant role in the registrant’s internal controls; and

The registrant’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November 12, 2002

	/s/	GARY S. JONES
		Gary S. Jones President (Principal Financial and Accounting Officer)

I, John Whetzell certify that:

1.		I have reviewed this quarterly report on Form 10-Q of Northland Cable Television, Inc., and Subsidiary;

2.		Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.		Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

	a)		Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

	b)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

	c)		Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and board of directors:

	a)		All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weakness in internal controls; and

	b)		Any fraud, whether or not material that involves management or other employees who have a significant role in the registrant’s internal controls; and

Date: November 12, 2002

	/s/	JOHN S. WHETZELL
		John S. Whetzell Chief Executive Officer

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NORTHLAND CABLE TELEVISION INC 10-Q