<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 JUNE 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
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Commission File Number: 0-18307
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>
June 30, December 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Cash $ 721,252 $ 380,717
Accounts receivable 76,641 65,537
Prepaid expenses 35,082 48,976
Property and equipment, net of accumulated
depreciation of $2,052,890 and $1,571,951,
respectively 7,930,250 6,652,864
Intangible assets, net of accumulated
amortization of $1,315,674 and $1,012,543,
respectively 6,833,271 2,534,884
------------ ------------
Total assets $ 15,596,496 $ 9,682,978
============ ============
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses $ 589,525 $ 408,090
Due to managing general partner and affiliates 139,627 69,933
Converter deposits 21,040 21,750
Subscriber prepayments 69,903 104,801
Notes payable 11,675,000 5,618,000
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Total liabilities 12,495,095 6,222,574
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Partners' equity:
General Partners:
Contributed capital, net 1,000 1,000
Accumulated deficit (50,204) (46,614)
------------ ------------
(49,204) (45,614)
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Limited Partners:
Contributed capital, net 8,120,820 8,120,820
Accumulated deficit (4,970,215) (4,614,802)
------------ ------------
3,150,605 3,506,018
------------ ------------
Total partners' equity 3,101,401 3,460,404
------------ ------------
Total liabilities and partners' equity $ 15,596,496 $ 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 six months ended June 30,
---------------------------------
1996 1995
----------- -----------
<S> <C> <C>
Service revenues $ 2,214,199 $ 1,994,296
Expenses:
Operating 238,264 229,632
General and administrative (including
$280,495 and $251,315 to affiliates
in 1996 and 1995, respectively) 533,129 515,222
Programming 498,582 444,512
Depreciation and amortization 784,071 785,488
----------- -----------
2,054,046 1,974,854
----------- -----------
Income from operations 160,153 19,442
Other income (expense):
Interest expense (522,304) (523,631)
Interest income 3,236 1,940
Gain (loss) on disposal of assets (88) 3,394,482
----------- -----------
(519,156) 2,872,791
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Net income (loss) $ (359,003) 2,892,233
=========== ===========
Allocation of net income (loss):
General Partners $ (3,590) $ 28,922
=========== ===========
Limited Partners $ (355,413) $ 2,863,311
=========== ===========
Net income (loss) per limited partnership unit:
(19,087 units and 19,137 units, respectively) $ (19) $ 150
=========== ===========
Net income (loss) per $1,000 investment $ (38) $ 299
=========== ===========
</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 June 30,
-----------------------------------
1996 1995
----------- -----------
<S> <C> <C>
Service revenues $ 1,126,757 $ 1,030,076
Expenses:
Operating 122,686 125,812
General and administrative (including
$143,966 and $128,036 to affiliates
in 1996 and 1995, respectively) 271,777 265,768
Programming 258,771 220,410
Depreciation and amortization 392,035 393,673
----------- -----------
1,045,269 1,005,663
----------- -----------
Income from operations 81,488 24,413
Other income (expense):
Interest expense (250,665) (261,963)
Interest income 1,527 1,484
Gain on disposal of assets -- 3,394,482
----------- -----------
(249,138) 3,134,003
----------- -----------
Net income (loss) $ (167,650) $ 3,158,416
=========== ===========
Allocation of net income (loss):
General Partners $ (1,677) $ 31,584
=========== ===========
Limited Partners $ (165,974) $ 3,126,832
=========== ===========
Net income (loss) per limited partnership unit:
(19,087 units and 19,137 units, respectively) $ (9) $ 163
=========== ===========
Net income (loss) per $1,000 investment $ (18) $ 327
=========== ===========
</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 six months ended June 30,
---------------------------------
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (359,003) $ 2,892,233
Adjustments to reconcile net income (loss) to
cash provided by operating activities:
Depreciation and amortization 784,071 785,488
(Gain) loss on sale of assets 88 (3,417,649)
(Increase) decrease in operating assets:
Accounts receivable (11,104) 20,352
Prepaid expenses 13,894 5,414
Increase (decrease) in operating liabilities
Accounts payable and accrued expenses 181,435 29,350
Due to managing general partner and affiliates 69,694 156,049
Converter deposits (710) (4,382)
Subscriber prepayments (34,898) (40,960)
----------- -----------
Net cash from operating activities 643,467 425,895
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (216,103) (437,331)
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 (6,233,458) 5,328,438
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings under long term debt, net 6,057,000 --
Principal payments on borrowings -- (5,455,977)
Loan fees and other costs incurred (126,475) --
----------- -----------
Net cash from (used in) financing activities 5,930,525 (5,455,977)
----------- -----------
INCREASE IN CASH 340,534 298,356
CASH, beginning of period 380,717 335,551
----------- -----------
CASH, end of period $ 721,251 $ 633,907
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 310,707 $ 477,515
=========== ===========
</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 June 30, 1996 and December 31, 1995, its Statements of
Operations for the six and three months ended June 30, 1996 and 1995, and its
Statements of Cash Flows for the six months ended June 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 $1,126,757 for the three months ended June 30, 1996,
representing an increase of approximately 9% as compared to the same period in
1995. Of these revenues, $850,057 (75%) was derived from basic service charges,
$116,027 (10%) from premium services, $18,207 (2%) from tier services, $36,064
(3%) from installation charges, $7,946 (1%) from service maintenance contracts
and $98,456 (9%) from other sources. The net increase in revenues is
attributable to rate increases implemented during the fourth quarter 1995 and
stronger advertising revenues. The increase is 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 325 fewer
subscribers than the previously owned Santiam system.
As of June 30, 1996 the Partnership's systems served approximately 12,600 basic
subscribers, 5,200 premium subscribers and 1,100 tier subscribers.
Operating expenses totaled $122,686 for the three months ended June 30, 1996,
representing a decrease of approximately 2% from the same period in 1995. This
is mainly due to lower operating salaries as a result of fewer operating
employees in the Swainsboro, GA system than the Santiam, OR system. This
decrease was offset by higher pole rental expense for the Swainsboro, GA system.
General and administrative expenses totaled $271,777 for the three months ended
June 30, 1996, representing an increase of approximately 2% over the same period
in 1995. The net increase is attributable to higher revenue based expenses, such
as, management and franchise fees offset by lower administrative salaries as a
result of fewer administrative employees in the Swainsboro, GA than the Santiam,
OR system.
Programming expenses totaled $258,771 for the three months ended June 30, 1996,
representing an increase of approximately 17% over the same period in 1995. This
is mainly due to increased costs charged by various program suppliers and higher
advertising costs associated with the increased advertising revenues.
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 June 30, 1996 decreased
approximately 3% as compared to the same period in 1995. The average bank debt
outstanding increased from $10,600,000 during the second quarter of 1995 to
$11,675,000 during the second quarter of 1996. The Partnership's effective
interest rate decreased from 12.81% during the second quarter of 1995 to 8.59%
during the second 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 5.50 to 1 and a cash
flow to debt service ratio of 1.25 to 1. At June 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
$11,675,000. Certain fixed rate agreements in place as of March 31, 1996 expired
during the second 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 9.06%, expiring September 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 second quarter of 1996, the Partnership incurred approximately
$127,000 in capital expenditures including purchases of advertising equipment in
the LaConner, WA and Swainsboro, GA systems; a vehicle replacement and the
purchase of property for a headend site in the Aliceville, AL system. Planned
expenditures for the balance of 1996 include a fiber interconnect of two systems
in the Aliceville, AL area; the addition of channels in the Aliceville, AL and
Swainsboro, GA systems; and the launch of a tier in the Swainsboro, GA system.
8
<PAGE> 9
Effects of Regulation
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 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 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 the provisions impacting the cable television industry,
more specifically those impacting the Partnership's operations, follows:
Cable Programming Service Tier Rate Regulation. FCC regulation of rates for
cable programming service tiers has been eliminated for small cable systems 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). All of the Partnership's cable systems
qualify as small cable systems. Basic 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.
Telephone Companies. 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 any provisions of 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.
Although Management's opinion is that the probability of competition from telcos
in rural areas is unlikely in the near future, there are no assurances such
competition will not materialize.
The 1996 Act encompasses 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 PEG 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 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.
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 June 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: 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 721,252
<SECURITIES> 0
<RECEIVABLES> 76,641
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 832,975
<PP&E> 9,983,140
<DEPRECIATION> 2,052,890
<TOTAL-ASSETS> 15,596,496
<CURRENT-LIABILITIES> 820,095
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,101,401
<TOTAL-LIABILITY-AND-EQUITY> 15,596,496
<SALES> 0
<TOTAL-REVENUES> 2,214,199
<CGS> 0
<TOTAL-COSTS> 238,264
<OTHER-EXPENSES> 1,815,782
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 522,304
<INCOME-PRETAX> (359,003)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (359,003)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
