<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, 1996
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 No X
------ ------
________________________
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,
1996 1995
------------- ------------
<S> <C> <C>
ASSETS
Cash $ 664,582 $ 380,717
Accounts receivable 92,091 65,537
Prepaid expenses 83,330 48,976
Property and equipment, net of accumulated
depreciation of $2,296,193 and $1,571,951,
respectively 7,830,941 6,652,864
Intangible assets, net of accumulated
amortization of $1,467,240 and $1,012,543,
respectively 6,681,910 2,534,884
----------- ----------
Total assets $15,352,854 $9,682,978
=========== ==========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses $ 615,535 $ 408,090
Due to managing general partner and affiliates 194,400 69,933
Converter deposits 19,430 21,750
Subscriber prepayments 62,538 104,801
Notes payable 11,525,000 5,618,000
----------- ----------
Total liabilities 12,416,903 6,222,574
----------- ----------
Partners' equity:
General Partners:
Contributed capital, net 1,000 1,000
Accumulated deficit (51,859) (46,614)
----------- ----------
(50,859) (45,614)
----------- ----------
Limited Partners:
Contributed capital, net 8,120,820 8,120,820
Accumulated deficit (5,134,010) (4,614,802)
----------- ----------
2,986,810 3,506,018
----------- ----------
Total partners' equity 2,935,951 3,460,404
----------- ----------
Total liabilities and partners' equity $15,352,854 $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 nine months ended September 30,
-----------------------------------------------
1996 1995
----------------- -----------------
<S> <C> <C>
Service revenues $ 3,343,751 $ 2,745,076
Expenses:
Operating 353,837 324,742
General and administrative (including
$446,813 and $356,712 to affiliates
in 1996 and 1995, respectively) 810,995 721,430
Programming 743,415 605,500
Depreciation and amortization 1,178,940 1,028,968
----------------- -----------------
3,087,186 2,680,640
----------------- -----------------
Income from operations 256,564 64,436
Other income (expense):
Interest expense (787,208) (649,644)
Interest income 6,279 4,728
Gain (loss) on disposal of assets (88) 3,438,384
----------------- -----------------
(781,017) 2,793,469
----------------- -----------------
Net income (loss) $ (524,452) 2,857,905
================= =================
Allocation of net income (loss):
General Partners $ (5,245) $ 28,579
================= =================
Limited Partners $ (519,208) $ 2,829,326
================= =================
Net income (loss) per limited partnership unit:
(19,087 units and 19,137 units, respectively) $ (27) $ 148
================= =================
Net income (loss) per $1,000 investment $ (54) $ 295
================= =================
</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,
-----------------------------------------------
1996 1995
----------------- -----------------
<S> <C> <C>
Service revenues $ 1,129,552 $ 750,780
Expenses:
Operating 115,572 95,111
General and administrative (including
$166,318 and $105,397 to affiliates
in 1996 and 1995, respectively) 277,865 206,207
Programming 244,833 160,987
Depreciation and amortization 394,870 243,480
----------------- -----------------
1,033,140 705,785
----------------- -----------------
Income from operations 96,412 44,995
Other income (expense):
Interest expense (264,904) (126,013)
Interest income 3,044 2,788
Gain on disposal of assets - 43,902
----------------- -----------------
(261,860) (79,323)
----------------- -----------------
Net income (loss) $ (165,449) $ (34,328)
================= =================
Allocation of net income (loss):
General Partners $ (1,654) $ (343)
================= =================
Limited Partners $ (163,794) $ (33,985)
================= =================
Net income (loss) per limited partnership unit:
(19,087 units and 19,137 units, respectively) $ (9) $ (2)
================= =================
Net income (loss) per $1,000 investment $ (18) $ (3)
================= =================
</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,
----------------------------------------------
1996 1995
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (524,452) $ 2,857,905
Adjustments to reconcile net income (loss) to
cash provided by operating activities:
Depreciation and amortization 1,178,940 1,028,968
(Gain) loss on sale of assets 88 (3,417,649)
(Increase) decrease in operating assets:
Accounts receivable (26,554) 7,911
Prepaid expenses (34,354) (39,290)
Increase (decrease) in operating liabilities
Accounts payable and accrued expenses 207,445 (83,176)
Due to managing general partner and affiliates 124,467 (22,473)
Converter deposits (2,320) (5,292)
Subscriber prepayments (42,263) (45,746)
---------------- ----------------
Net cash from operating activities 880,997 281,158
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (360,097) (272,813)
Purchase of cable television systems (6,017,355) -
Proceeds from sale of cable television system - 5,765,769
---------------- ----------------
Net cash from (used in) investing activities (6,377,452) 5,492,956
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings under long term debt, net 6,057,000 -
Principal payments on borrowings (150,000) (5,523,977)
Loan fees and other costs incurred (126,680) (215,097)
---------------- ----------------
Net cash from (used in) financing activities 5,780,320 (5,739,074)
---------------- ----------------
INCREASE IN CASH 283,865 35,040
CASH, beginning of period 380,717 335,551
---------------- ----------------
CASH, end of period $ 664,582 $ 370,591
================ ================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 570,494 $ 638,573
================ ================
</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, 1996 and December 31, 1995, its Statements of Operations for the nine and
three months ended September 30, 1996 and 1995, and its Statements of Cash
Flows for the nine months ended September 30, 1996 and 1995. 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 $1,129,552 for the three months ended September 30, 1996,
representing an increase of approximately 51% as compared to the same period in
1995. Of these revenues, $865,092 (77%) was derived from basic service
charges, $106,130 (10%) from premium services, $25,049 (2%) from tier services,
$29,153 (3%) from installation charges, $7,590 (1%) from service maintenance
contracts and $96,539 (6%) from other sources. The net increase in revenues is
primarily attributable to the acquisition of the Swainsboro, GA system in
December, 1995. Additionally, revenues in other systems were higher as a
result of increases in basic service rates effective October 1, 1995 and August
1, 1996.
As of September 30, 1996 the Partnership's systems served approximately 12,400
basic subscribers, 3,700 premium subscribers and 1,400 tier subscribers.
Operating expenses totaled $115,572 for the three months ended September 30,
1996, representing an increase of approximately 22% from the same period in
1995. This increase is mainly attributable to the acquisition of the
Swainsboro, GA system.
General and administrative expenses totaled $277,865 for the three months ended
September 30, 1996, representing an increase of approximately 35% over the same
period in 1995. The net increase is primarily attributable to the Swainsboro,
GA acquisition. Higher revenue based expenses, such as management and franchise
fees, stemming from revenue increases in other systems also contributed.
Programming expenses totaled $244,833 for the three months ended September 30,
1996, representing an increase of approximately 52% over the same period in
1995. This is mainly due to an increase in subscriber related expenses
stemming from the acquisition of the Swainsboro, GA system and increased costs
charged by various program suppliers.
Depreciation and amortization expense for the three months ended September 30,
1996 increased 62% 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.
Interest expense for the three months ended September 30, 1996 increased
approximately 110% as compared to the same period in 1995, mainly due to
increased borrowings to finance the acquisition of the Swainsboro, GA system.
The average bank debt outstanding increased from $5,720,000 during the third
quarter of 1995 to $11,600,000 during the third quarter of 1996. The
Partnership's effective interest rate increased from 8.39% during the third
quarter of 1995 to 8.96% during the third quarter of 1996.
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 5.25 to 1 and a cash
flow to debt service ratio of 1.25 to 1. At September 30, 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
$11,525,000. Certain fixed rate agreements in place as of June 30, 1996
expired during the third 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;
$925,000 fixed at 9.00%, expiring December 31, 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 third quarter of 1996, the Partnership incurred approximately
$144,000 in capital expenditures including replacement of a vehicle in the
LaConner, WA system; the launch of a tier in the Swainsboro, GA system; and
system mapping in the Aliceville, AL system. Planned expenditures for the
balance of 1996 include the continued fiber interconnect plans of two systems
in the Aliceville, AL area.
Regulation Overview
The Partnership's business is subject to intensive regulation at the federal
and local levels, and to a lesser degree, at the state level. The FCC, the
principal federal regulatory agency with jurisdiction over cable television, is
responsible for implementing federal policies such as rate regulation, cable
system relations with other communications media, cross-ownership, signal
carriage, equal employment opportunity and technical performance. Portions of
the regulatory framework that impact the Partnership's operations are
summarized below.
The 1996 Act
On February 8, 1996, the Telecommunications Act of 1996 (the "1996 Act") was
enacted which dramatically changed federal telecommunications laws and the
future competitiveness of the telecommunications industry. Many of the changes
called for by the 1996 Act will not take effect until the FCC issues new
regulations which, in some cases, may not be completed for a few
8
<PAGE> 9
years. Because of this, the full impact of the 1996 Act on the Partnership's
operations cannot be determined at this time. A summary of certain provisions
affecting the Partnership's operations follows:
Regulation of rates other than the basic service tier has been eliminated for
small cable systems served by small companies. Small cable systems are those
having 50,000 or fewer subscribers served by companies with fewer than one
percent of national cable subscribers (approximately 600,000). The Partnership
qualifies as a small company and all of the Partnership's cable systems qualify
as small cable systems. Basic service tier rates remain subject to regulation
by the local franchising authority under most circumstances until effective
competition exists. The 1996 Act expands the definition of effective
competition to include the offering of video programming services directly to
subscribers in a franchised area by the local exchange carrier, its affiliates,
or any multichannel video programming distributor which uses the facilities of
the local exchange carrier. No penetration criteria exists that triggers the
presence of effective competition under these circumstances.
The 1996 Act allows telephone companies to offer video programming directly to
customers in their service areas immediately upon enactment. They may provide
video programming as a cable operator fully subject to the 1996 Act, or a
radio-based multichannel programming distributor not subject to any provisions
of the 1996 Act, or through non-franchised "open video systems" offering
non-discriminatory capacity to unaffiliated programmers, subject to selected
provisions of the 1996 Act.
The 1996 Act also addresses various other aspects of providing cable television
service including prices for equipment, discounting of rates to multiple
dwelling units, lifting of anti-trafficking restrictions, cable-telephone cross
ownership provisions, pole attachment rate formulas, rate uniformity, program
access, scrambling and censoring of public, educational and governmental access
channels and leased access channels.
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 but no requests for rate
justifications 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.
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) No reports on Form 8-K have been filed during the quarter ended September
30, 1996.
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: 11/6/96 BY: /s/ RICHARD I. CLARK
---------------- -----------------------------
Richard I. Clark
(Vice President/Treasurer)
Dated: 11/6/96 BY: /s/ GARY S. JONES
---------------- -----------------------------
Gary S. Jones
(Vice President)
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 664,582
<SECURITIES> 0
<RECEIVABLES> 92,091
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 840,003
<PP&E> 10,127,134
<DEPRECIATION> 2,296,193
<TOTAL-ASSETS> 15,352,854
<CURRENT-LIABILITIES> 891,903
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,935,951
<TOTAL-LIABILITY-AND-EQUITY> 15,352,854
<SALES> 0
<TOTAL-REVENUES> 3,343,751
<CGS> 0
<TOTAL-COSTS> 353,837
<OTHER-EXPENSES> 2,733,350
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 787,208
<INCOME-PRETAX> (524,452)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (524,452)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
