<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 MARCH 31, 1996
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or
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
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Commission File Number: 0-18307
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NORTHLAND CABLE PROPERTIES EIGHT LIMITED PARTNERSHIP
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(Exact Name of Registrant as Specified in Charter)
Washington 91-1423516
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(State of Organization) (I.R.S. Employer Identification No.)
1201 Third Avenue, Suite 3600, Seattle, Washington 98101
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(Address of Principal Executive Offices) (Zip Code)
(206) 621-1351
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(Registrant's telephone number, including area code)
N/A
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(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 No X
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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>
March 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Cash $ 549,840 $ 380,717
Accounts receivable 111,328 65,537
Prepaid expenses 46,226 48,976
Property and equipment, net of accumulated
depreciation of $1,812,420 and $1,571,951,
respectively 8,044,095 6,652,864
Intangible assets, net of accumulated
amortization of $1,164,108 and $1,012,543,
respectively 6,979,390 2,534,884
------------ ------------
Total assets $ 15,730,879 $ 9,682,978
============ ============
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses $ 597,147 $ 408,090
Due to managing general partner and affiliates 87,104 69,933
Converter deposits 21,825 21,750
Subscriber prepayments 80,752 104,801
Notes payable 11,675,000 5,618,000
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Total liabilities 12,461,828 6,222,574
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Partners' equity:
General Partners:
Contributed capital, net 1,000 1,000
Accumulated deficit (48,528) (46,614)
------------ ------------
(47,528) (45,614)
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Limited Partners:
Contributed capital, net 8,120,820 8,120,820
Accumulated deficit (4,804,241) (4,614,802)
------------ ------------
3,316,579 3,506,018
------------ ------------
Total partners' equity 3,269,051 3,460,404
------------ ------------
Total liabilities and partners' equity $ 15,730,879 $ 9,682,978
============ ============
</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 three months ended March 31,
------------------------------------
1996 1995
----------- -----------
<S> <C> <C>
Service revenues $ 1,087,442 $ 964,221
Expenses:
Operating 115,578 103,820
General and administrative (including
$136,526 and $123,279 to affiliates
in 1996 and 1995, respectively) 261,354 249,454
Programming 239,810 224,103
Depreciation and amortization 392,035 391,815
----------- -----------
1,008,777 969,192
----------- -----------
Income (loss) from operations 78,665 (4,971)
Other income (expense):
Interest expense (271,639) (261,668)
Interest income 1,709 456
Loss on disposal of assets (88) --
----------- -----------
(270,018) (261,212)
----------- -----------
Net loss $ (191,353) (266,183)
=========== ===========
Allocation of net loss:
General Partners $ (1,914) $ (2,662)
=========== ===========
Limited Partners $ (189,439) $ (263,521)
=========== ===========
Net loss per limited partnership unit:
(19,087 units and 19,137 units, respectively) $ (10) $ (14)
=========== ===========
Net loss per $1,000 investment $ (20) $ (28)
=========== ===========
</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 CASH FLOWS - (Unaudited)
(Prepared by the Managing General Partner)
<TABLE>
<CAPTION>
For the three months ended March 31,
------------------------------------
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (191,353) $ (266,183)
Adjustments to reconcile net loss to
cash provided by operating activities:
Depreciation and amortization 392,035 391,815
Gain on sale of assets 88 --
(Increase) decrease in operating assets:
Accounts receivable (45,791) (1,807)
Prepaid expenses 2,750 (17,002)
Increase (decrease) in operating liabilities
Accounts payable and accrued expenses 189,057 (48,455)
Due to managing general partner and affiliates 17,171 104,430
Converter deposits 75 50
Subscriber prepayments (24,049) (28,605)
----------- -----------
Net cash from operating activities 339,983 134,243
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (89,477) (153,224)
Purchase of cable television systems (6,017,355) --
----------- -----------
Net cash used in investing activities (6,106,832) (153,224)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings under long term debt, net 6,057,000 --
Principal payments on borrowings -- (3,594)
Loan fees and other costs incurred (121,028) --
----------- -----------
Net cash from (used in) financing activities 5,935,972 (3,594)
----------- -----------
INCREASE (DECREASE) IN CASH 169,123 (22,575)
CASH, beginning of period 380,717 335,551
----------- -----------
CASH, end of period $ 549,840 $ 312,976
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 54,943 $ 258,393
=========== ===========
</TABLE>
The accompanying note to unaudited financial statements is an
integral part of these statements
4
<PAGE> 5
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 March 31, 1996 and December 31, 1995, its Statements of
Operations for the three months ended March 31, 1996 and 1995, and its
Statements of Cash Flows for the three months ended March 31, 1996 and 1995.
Results of operations for these periods are not necessarily indicative of
results to be expected for the full year.
5
<PAGE> 6
PART I (continued)
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Revenues totaled $1,087,442 for the three months ended March 31, 1996,
representing an increase of approximately 13% as compared to the same period in
1995. Of these revenues, $815,050 (75%) was derived from basic service charges,
$117,949 (11%) from premium services, $17,889 (2%) from tier services, $33,525
(3%) from installation charges, $7,632 (1%) from service maintenance contracts
and $95,397 (8%) from other sources. The net increase in revenues is
attributable to rate increases implemented during fourth quarter 1995 and
stronger advertising revenues. The increase in partially offset by the net
effect of the acquisition of the Swainsboro, GA system and the sale of the
Santiam, OR system. The Swainsboro system has approximately 250 fewer
subscribers than the previously owned Santiam system.
As of March 31, 1996 the Partnership's systems served approximately 12,600 basic
subscribers, 4,300 premium subscribers and 1,100 tier subscribers.
Operating expenses totaled $115,578 for the three months ended March 31, 1996,
representing an increase of approximately 11% over the same period in 1995. This
is mainly due to higher than anticipated regional management costs in the
Swainsboro, GA system as well as higher wage and benefit costs.
General and administrative expenses totaled $261,354 for the three months ended
March 31, 1996, representing an increase of approximately 5% over the same
period in 1995. The net increase is mainly due to higher revenue based expenses,
such as franchise fees and management fees.
Programming expenses totaled $239,810 for the three months ended March 31, 1996,
representing an increase of approximately 7% as compared to the same period in
1995. This is mainly due to increased costs charged by various program suppliers
and additional costs associated with the launch of new channels.
Depreciation and amortization expense remained constant as compared to the same
period in 1995. This is mainly due to depreciation and amortization on plant,
equipment and intangible assets acquired from the purchase of the Swainsboro, GA
system offset by the retirement of assets related to the sale of the Santiam, OR
system.
Interest expense for the three months ended March 31, 1996 increased
approximately 4% as compared to the same period in 1995 The average bank debt
outstanding increased from $10,600,000 during the first quarter of 1995 to
$11,675,000 during the first quarter of 1996. The Partnership's effective
interest rate decreased from 9.87% during the first quarter of 1995 to 9.31%
during the first quarter of 1996.
6
<PAGE> 7
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 5.50 to 1 and a cash
flow to debt service ratio of 1.25 to 1. At March 31, 1996, the Partnership was
in compliance with its required financial covenants.
As of the date of this filing, the balance under the credit facility is
$11,675,000. Certain fixed rate agreements in place as of December 31, 1995
expired during the first quarter of 1996, 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: $10,600,000 fixed at 8.86% under the terms of
an interest rate swap agreement with its lender expiring January 11, 1998;
$1,075,000 fixed at 9.0%, expiring June 30, 1996. 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 first quarter of 1996, the Partnership incurred approximately $90,000
in capital expenditures including advertising insertion equipment and a billing
system conversion in the Swainsboro, GA system and line extensions in the
LaConner, WA and Aliceville, AL systems. Planned capital expenditures for the
balance of 1996 include a fiber interconnect of two systems in the Aliceville,
AL area and various line extensions.
7
<PAGE> 8
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 and subsequent
revisions and rulemakings substantially re-regulated the cable television
industry. The regulatory aspects of the 1992 Act included giving the local
franchising authorities and the FCC the ability to regulate rates for basic
services, equipment charges and additional CPST's when certain conditions were
met. All of the Partnership's cable systems were potentially subject to rate
regulation. The most significant impact of rate regulation was the inability to
raise rates for regulated services as costs of operation rose during an FCC
imposed rate freeze from April 5, 1993 to May 15, 1994. This has contributed to
operating margins before depreciation and amortization declining from 48% for
the twelve months ended December 31, 1993 to 46% for the same period in 1994.
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 is 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.
On February 8, 1996, the Telecommunications Act of 1996 (the 1996 Act) became
law. The 1996 Act will eliminate all rate controls on CPST's of small cable
systems, defined by the 1996 Act as systems serving fewer than 50,000
subscribers owned by operators serving fewer than 1% of all subscribers in the
United States (approximately 600,000 subscribers). All of the Partnership's
cable systems qualify as small cable systems. Many of the changes called for by
the 1996 Act will not take effect until the FCC issues new regulations, a
process that could take from several months to a few years depending on the
complexity of the required changes and the statutory time limits. Because of
this the full impact of the 1996 Act on the Partnership's operations cannot be
determined at this time.
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. Based on management's analysis, the rates
charged by these systems are within the maximum rates allowed under FCC rate
regulations.
8
<PAGE> 9
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 January 5, 1996 was filed January 17, 1996 reporting the
acquisition of the Swainsboro, GA system which occurred on January 5, 1996.
9
<PAGE> 10
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: 5-14-96 BY: /s/ RICHARD I. CLARK
-------------- ------------------------------------
Richard I. Clark
(Vice President/Treasurer)
Dated: 5-14-96 BY: /s/ GARY S. JONES
-------------- ------------------------------------
Gary S. Jones
(Vice President)
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 549,840
<SECURITIES> 0
<RECEIVABLES> 111,328
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 707,394
<PP&E> 9,856,515
<DEPRECIATION> 1,812,420
<TOTAL-ASSETS> 15,730,879
<CURRENT-LIABILITIES> 786,828
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,269,051
<TOTAL-LIABILITY-AND-EQUITY> 15,730,879
<SALES> 0
<TOTAL-REVENUES> 1,087,442
<CGS> 0
<TOTAL-COSTS> 115,578
<OTHER-EXPENSES> 893,199
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 271,639
<INCOME-PRETAX> (191,353)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (191,353)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
