<PAGE> 1
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 period ended SEPTEMBER 30, 1995
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Transition Period from ___________ to ____________
Commission File Number: 0-18307
NORTHLAND CABLE PROPERTIES EIGHT LIMITED PARTNERSHIP
(Exact Name of Registrant as Specified in Charter)
Washington 91-1423516
(State of Organization) (I.R.S. Employer Identification No.)
1201 Third Avenue, Suite 3600, Seattle, Washington 98101
(Address of Principal Executive Offices) (Zip Code)
(206) 621-1351
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
- ------------------------
This filing contains __ pages. Exhibits index appears on page __.
<PAGE> 2
PART 1 - FINANCIAL INFORMATION
ITEM 1. Financial Statements
NORTHLAND CABLE PROPERTIES EIGHT LIMITED PARTNERSHIP
BALANCE SHEETS - (Unaudited)
(Prepared by the Managing General Partner)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
Cash $ 370,591 $ 335,551
Accounts receivable 50,100 58,011
Prepaid Expenses 69,069 29,779
Property and equipment, net of accumulated
depreciation of $1,394,045 and $2,281,040,
respectively 6,555,650 8,576,828
Intangible assets, net of accumulated
amortization of $2,256,101 and $5,144,923,
respectively 2,664,181 3,532,181
----------- -----------
Total assets $ 9,709,591 $12,532,350
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses $ 246,844 $ 330,020
Due to managing general partner and affiliates 31,063 53,536
Converter deposits 22,440 27,732
Subscriber prepayments 61,634 107,380
Notes payable 5,686,000 11,209,977
----------- -----------
Total liabilities 6,047,981 11,728,645
----------- -----------
Partners' equity:
General Partners:
Contributed capital, net 1,000 1,000
Accumulated deficit (44,727) (73,306)
----------- -----------
(43,727) (72,306)
----------- -----------
Limited Partners:
Contributed capital, net 8,133,320 8,133,320
Accumulated deficit (4,427,983) (7,257,309)
----------- -----------
3,705,337 876,011
----------- -----------
Total partners' equity 3,661,610 803,705
----------- -----------
Total liabilities and partners' equity $ 9,709,591 $12,532,350
=========== ===========
</TABLE>
The accompanying note to unaudited financial statements is an integral part of
these statements
2
<PAGE> 3
NORTHLAND CABLE PROPERTIES EIGHT LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS - (Unaudited)
(Prepared by the Managing General Partner)
<TABLE>
<CAPTION>
For the nine months ended September 30,
---------------------------------------
1995 1994
------------ -------------
<S> <C> <C>
Service revenues $ 2,745,076 $ 1,304,328
Expenses:
Operating 324,742 134,627
General and administrative (including
$356,712 and $98,261 to affiliates
in 1995 and 1994, respectively) 721,430 367,043
Programming 605,500 257,713
Depreciation and amortization 1,028,968 774,773
----------- ------------
2,680,640 1,534,156
----------- ------------
Income (loss) from operations 64,436 (229,828)
Other income (expense):
Interest expense (649,643) (198,122)
Interest income 4,728 1,752
Gain on disposal of assets 3,438,384 101
----------- ------------
2,793,469 (196,269)
----------- ------------
Net income (loss) $ 2,857,905 $ (426,097)
=========== ============
Allocation of net income (loss):
General Partners $ 28,579 $ (4,261)
=========== ============
Limited Partners $ 2,829,326 $ (421,836)
=========== ============
Net income (loss) per limited partnership unit:
(19,137 units) $ 148 $ (22)
=========== ============
Net income (loss) per $1,000 investment $ 296 $ (44)
=========== ============
</TABLE>
The accompanying note to unaudited financial statements is an integral part of
these statements
3
<PAGE> 4
NORTHLAND CABLE PROPERTIES EIGHT LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS - (Unaudited)
(Prepared by the Managing General Partner)
<TABLE>
<CAPTION>
For the three months ended September 30,
----------------------------------------
1995 1994
------------- -------------
<S> <C> <C>
Service revenues $ 750,780 $ 442,400
Expenses:
Operating 95,111 43,283
General and administrative (including
$105,397 and $57,749 to affiliates
in 1995 and 1994, respectively) 206,207 120,343
Programming 160,987 92,036
Depreciation and amortization 243,480 261,419
------------- -------------
705,785 517,081
------------- -------------
Income (loss) from operations 44,995 (74,681)
Other income (expense):
Interest expense (126,013) (72,631)
Interest income 2,788 473
Gain on disposal of assets 43,902 -
------------- -------------
(79,323) (72,158)
------------- -------------
Net loss $ (34,328) $ (146,839)
============= =============
Allocation of net loss:
General Partners $ (343) $ (1,468)
============= =============
Limited Partners $ (33,985) $ (145,371)
============= =============
Net loss per limited partnership unit:
(19,137 units) $ (2) $ (8)
============= =============
Net loss per $1,000 investment $ (4) $ (16)
============= =============
</TABLE>
The accompanying note to unaudited financial statements is an integral part of
these statements
4
<PAGE> 5
NORTHLAND CABLE PROPERTIES EIGHT LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS - (Unaudited)
(Prepared by the Managing General Partner)
<TABLE>
<CAPTION>
For the nine months ended September 30,
---------------------------------------
1995 1994
------------ -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 2,857,905 $ (426,097)
Adjustments to reconcile net income (loss) to
cash provided by operating activities:
Depreciation and amortization 1,028,968 774,773
Gain on sale of assets (3,417,649) -
(Increase) decrease in operating assets:
Accounts receivable 7,911 4,736
Prepaid expenses (39,290) 2,701
Increase (decrease) in operating liabilities
Accounts payable and accrued expenses (83,176) (104,176)
Due to managing general partner and affiliates (22,473) 46,135
Converter deposits (5,292) (997)
Subscriber prepayments (45,746) (34,456)
------------ -------------
Net cash from operating activities 281,158 262,619
------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (272,813) (223,527)
Proceeds from sale of cable television system 5,765,769 -
------------ -------------
Net cash from (used in) investing activities 5,492,956 (223,527)
------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on borrowings (5,523,977) (198,000)
Loan fees and other costs incurred (215,097) -
------------ -------------
Net cash used in financing activities (5,739,074) (198,000)
------------ -------------
INCREASE (DECREASE) IN CASH 35,040 (158,908)
CASH, beginning of period 335,551 255,686
------------ -------------
CASH, end of period $ 370,591 $ 96,778
============ =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 638,573 $ 217,217
============ =============
</TABLE>
The accompanying note to unaudited financial statements is an integral part of
these statements
5
<PAGE> 6
NORTHLAND CABLE PROPERTIES EIGHT LIMITED PARTNERSHIP
NOTE TO UNAUDITED FINANCIAL STATEMENTS
(1) These unaudited financial statements are being filed in conformity with Rule
10-01 of Regulation S-X regarding interim financial statement disclosure and do
not contain all of the necessary footnote disclosures required for a fair
presentation of the Balance Sheets, Statements of Operations and Statements of
Cash Flows in conformity with generally accepted accounting principles. However,
in the opinion of management, this data includes all adjustments, consisting
only of normal recurring accruals, necessary to present fairly the Partnership's
financial position at September 30, 1995 and December 31, 1994, its Statements
of Operations for the nine and three months ended September 30, 1995 and 1994,
and its Statements of Cash Flows for the nine months ended September 30, 1995
and 1994. Results of operations for these periods are not necessarily indicative
of results to be expected for the full year.
6
<PAGE> 7
PART I (continued)
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Revenues totaled $750,780 for the three months ended September 30, 1995,
representing an increase of approximately 70% as compared to the same period in
1994. Of these revenues, $585,115 (78%) was derived from basic service charges,
$67,028 (9%) from premium services, $15,611 (2%) from tier services, $21,978
(3%) from installation charges, $7,433 (1%) from service maintenance contracts
and $53,615 (7%) from other sources. The net increase in revenues is
attributable to the acquisition of the Aliceville, AL system offset by the sale
of the Santiam, OR system. The Aliceville, AL system has approximately 3,500
more subscribers than the previously owned Santiam, OR system.
As of September 30, 1995 the Partnership's systems served approximately 9,400
basic subscribers, 2,900 premium subscribers and 1,100 tier subscribers.
Operating expenses totaled $95,111 for the three months ended September 30,
1995, representing an increase of approximately 120% over the same period in
1994. This is mainly due to the acquisition of the Aliceville, AL system and the
sale of the Santiam, OR system.
General and administrative expenses totaled $206,207 for the three months ended
September 30, 1995, representing an increase of approximately 71% over the same
period in 1994. The net increase is mainly due to the acquisition of the
Aliceville, AL system, the sale of the Santiam, OR system and higher revenue
based expenses, such as franchise fees and management fees.
Programming expenses totaled $160,987 for the three months ended September 30,
1995, representing an increase of approximately 75% as compared to the same
period in 1994. This is mainly due to the acquisition of the Aliceville, AL
system, the sale of the Santiam, OR system, increased costs charged by various
program suppliers and additional costs associated with the launch of new
channels.
Depreciation and amortization expense increased approximately 7% as compared to
the same period in 1994. This is mainly due to depreciation and amortization on
plant, equipment and intangible assets acquired from the purchase of the
Aliceville, AL system offset by the retirement of assets related to the sale of
the Santiam, OR system.
Interest expense for the three months ended September 30, 1995 increased
approximately 73% as compared to the same period in 1994, mainly due to
increased borrowings to finance the acquisition of the Aliceville, AL system
offset by the repayment of debt with proceeds from the sale of the Santiam, OR
system. The average bank debt outstanding increased from $4,092,000 during the
third quarter of 1994 to $8,143,000 during the third quarter of 1995. As of the
date of this filing, the Partnership's effective interest rate was approximately
8.39%.
7
<PAGE> 8
Liquidity and Capital Resources
The Partnership's primary source of liquidity is cash flow provided from
operations. Based on management's analysis, the Partnership's cash flow from
operations is sufficient to cover future operating costs, debt service and
planned capital expenditures.
Under the terms of the Partnership's loan agreement, the Partnership has agreed
to restrictive covenants which require the maintenance of certain ratios
including a funded debt to annualized cash flow ratio of 5.75 To 1 and a cash
flow to debt service ratio of 1.25 To 1. At September 30, 1995, the Partnership
was in compliance with its required financial covenants.
As of the date of this filing, the balance under the credit facility is
$5,686,000. Certain fixed rate agreements in place as of June 30, 1995 expired
during the third quarter of 1995, and the Partnership entered into new fixed
rate agreements. As of the date of this filing, interest rates on the credit
facility were as follows: $5,600,000 at Libor based rate of 8.38% expiring
December 1, 1995. The balance of $86,000 bears interest at prime plus 1/2%
(currently 9.25%). The above rates include a margin paid to the lender based on
overall leverage, and may increase or decrease as the Partnership's leverage
fluctuates.
Capital Expenditures
During the third quarter of 1995, the Partnership incurred approximately $74,000
in capital expenditures including a line extension in the LaConner, WA system as
well as the purchase of headend equipment in the Aliceville, AL system. Planned
capital expenditures for the balance of 1995 include the initial phases of a
system upgrade to 450 mhz in the LaConner, WA system and a fiber interconnect
and mapping of two systems in the Aliceville, AL area.
Effects of Regulation
On October 5, 1992, congress enacted the Cable Television Consumer Protection
and Competition Act of 1992 (the "1992 Act"). The 1992 Act substantially
reregulated the cable television industry and imposed numerous requirements,
including provisions subjecting rates for certain services and equipment to
regulation by the applicable local franchising authority and by the Federal
Communications Commission ("FCC"), exclusive programming arrangements, the
carriage of broadcast signals, customer service standards, leased access
channels, customer premises equipment compatibility and various other matters.
On April 1, 1993, the FCC announced the adoption of rate regulations which
became effective September 1, 1993. Under those initial regulations, rates were
evaluated against "competitive benchmarks" and were generally subject to
rollbacks if they exceeded the benchmark levels. On February 22, 1994, the FCC
substantially revised the rate regulation rules to effect further rate
reductions effective May 15, 1994, or later in certain circumstances, based on
complex formulas and revised benchmarks.
All of the Partnership's cable systems are potentially subject to rate
regulation. The 1992 Act (i) requires the FCC to establish rate standards for
basic cable service rates which may be regulated by the applicable local
franchising authority, (ii) requires the FCC, upon receipt of a complaint, to
8
<PAGE> 9
review rates for additional tiers of cable service, (iii) regulates rates for
mandatorily offered commercial leased access channels and (iv) eliminates the
automatic five percent annual increase for basic rates allowed under prior law.
Rates for channels offered on a per-channel basis as individual purchase options
and pay-per-view events are excluded from rate regulation.
Basic service rates, including the equipment used to receive basic service, may
be regulated by a local franchising authority once it has been "certified" by
the FCC. When the certification becomes effective, the local franchise authority
may request the cable operator to justify its existing rates charged for basic
service and related equipment ("request for justification" or "RFJ"). Rates
charged in excess of the maximum allowable rates determined under FCC
regulations are subject to refund for the period in which the excess rates were
charged or one year, whichever is shorter. Additional tiers of service are
subject to regulation only upon an appropriately filed complaint to the FCC by
any subscriber, franchising authority or other person ("subscriber complaints").
If no subscriber complaints are filed within 45 days of a change in the FCC
regulated rates, such rates are not subject to challenge unless and until the
cable operator seeks to modify them. Refund liability, if any, generally would
be limited to any incremental increase in rates. In late 1994, the FCC revised
its rules to permit cable operators to offer New Product Tiers at rates which
they elect so long as, among other conditions, other channels that are subject
to rate regulation are priced in conformity with applicable regulations and
cable operators do not remove programming services from existing service tiers
and offer them on the New Product Tier.
On May 5, 1995, the FCC announced the adoption of a simplified set of rate
regulation rules that will apply to "small" cable systems, defined as a system
serving 15,000 or fewer subscribers, that are owned by "small" companies,
defined as a company serving 400,000 or fewer subscribers. Under the FCC's
definition, the Partnership is a "small" company and each of the Partnership's
cable systems are "small" systems. Maximum permitted rates under these revised
rules are dependent on several factors including the number of regulated
channels offered, net asset basis of plant and equipment used to deliver
regulated services, the number of subscribers served and a reasonable rate of
return.
As of the date of this filing, the Partnership has received notification that
local franchising authorities with jurisdiction over approximately 12% of the
Partnership's subscribers have elected to certify and no RFJ's have been
received from franchise authorities, and no subscriber complaints have been
filed. Based on management's analysis, the rates charged by these systems are
within the maximum rates allowed under FCC rate regulations.
Future rate increases under this regulatory environment will be dependent on
several factors including the level of inflation as measured by the annual
change in the GNP-PI index, increases in "external costs" as defined by the FCC
and possible changes to the existing rules regarding rate increases associated
with the launch of new services on regulated tiers. Because of the uncertainties
associated with these factors the future impact of rate regulation on the
Partnership's results of operations cannot be determined at this time.
Management feels it is reasonably possible under the price cap mechanism that
operating margins will stabilize and perhaps increase in future periods as
inflation and external cost increases are allowed to be passed through to
subscribers through rate adjustments.
9
<PAGE> 10
PART II - OTHER INFORMATION
ITEM 1 Legal proceedings
None
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
27.0 Financial Data Schedule
(b) Form 8-K , dated June 30, 1995 was filed July 14, 1995 reporting the sale of
the Santiam, OR system which occurred on June 30, 1995.
10
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NORTHLAND CABLE PROPERTIES EIGHT LIMITED PARTNERSHIP
BY: Northland Communications Corporation,
Managing General Partner
Dated: BY: /S/ RICHARD I.CLARK
------------ ----------------------------------------
Richard I. Clark
(Vice President/Treasurer)
Dated: BY: /S/ GARY S. JONES
------------ ----------------------------------------
Gary S. Jones
(Vice President)
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 370,591
<SECURITIES> 0
<RECEIVABLES> 50,100
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 489,760
<PP&E> 7,949,695
<DEPRECIATION> 1,394,045
<TOTAL-ASSETS> 9,709,591
<CURRENT-LIABILITIES> 361,981
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 3,661,610
<TOTAL-LIABILITY-AND-EQUITY> 9,709,591
<SALES> 0
<TOTAL-REVENUES> 2,745,076
<CGS> 0
<TOTAL-COSTS> 324,742
<OTHER-EXPENSES> 2,355,898
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 649,643
<INCOME-PRETAX> 2,857,905
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,857,905
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
