<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, 1997
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
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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 __.
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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,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Cash $ 644,430 $ 844,700
Accounts receivable 87,059 105,377
Prepaid expenses 43,955 62,591
Property and equipment, net of accumulated
depreciation of $2,794,821 and $2,544,227,
respectively 7,343,242 7,542,842
Intangible assets, net of accumulated
amortization of $1,790,406 and $1,624,116,
respectively 6,372,113 6,538,403
------------ ------------
Total assets $ 14,490,799 $ 15,093,913
============ ============
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses $ 474,013 $ 579,822
Due to managing general partner and affiliates 311,031 265,478
Converter deposits 16,270 17,800
Subscriber prepayments 83,708 100,911
Notes payable 11,025,000 11,375,000
------------ ------------
Total liabilities 11,910,022 12,339,011
------------ ------------
Partners' equity:
General Partners:
Contributed capital, net 1,000 1,000
Accumulated deficit (55,410) (53,669)
------------ ------------
(54,410) (52,669)
------------ ------------
Limited Partners:
Contributed capital, net 8,120,820 8,120,820
Accumulated deficit (5,485,633) (5,313,249)
------------ ------------
2,635,187 2,807,571
------------ ------------
Total partners' equity 2,580,777 2,754,902
------------ ------------
Total liabilities and partners' equity $ 14,490,799 $ 15,093,913
============ ============
</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,
------------------------------------
1997 1996
-------------- ---------------
<S> <C> <C>
Service revenues $ 1,140,939 $ 1,087,442
Expenses:
Operating 121,065 115,578
General and administrative (including
$146,734 and $136,526 to affiliates
in 1997 and 1996, respectively) 259,024 261,354
Programming 265,864 239,810
Depreciation and amortization 416,884 392,035
----------- -----------
1,062,837 1,008,777
----------- -----------
Income from operations 78,102 78,665
Other income (expense):
Interest expense (252,227) (271,639)
Interest income -- 1,709
Gain (loss) on disposal of assets -- (88)
----------- -----------
(252,227) (270,018)
----------- -----------
Net income (loss) $ (174,125) (191,353)
=========== ===========
Allocation of net income (loss):
General Partners $ (1,741) $ (1,914)
=========== ===========
Limited Partners $ (172,384) $ (189,439)
=========== ===========
Net income (loss) per limited partnership unit:
(19,087 units for both time periods) $ (9) $ (10)
=========== ===========
Net income (loss) per $1,000 investment $ (18) $ (20)
=========== ===========
</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,
------------------------------------
1997 1996
-------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (174,125) $ (191,353)
Adjustments to reconcile net income (loss) to
cash provided by operating activities:
Depreciation and amortization 416,884 392,035
(Gain) loss on sale of assets -- 88
(Increase) decrease in operating assets:
Accounts receivable 18,318 (45,791)
Prepaid expenses 18,636 2,750
Increase (decrease) in operating liabilities
Accounts payable and accrued expenses (105,809) 189,057
Due to managing general partner and affiliates 45,553 17,171
Converter deposits (1,530) 75
Subscriber prepayments (17,203) (24,049)
----------- -----------
Net cash from operating activities 200,724 339,983
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (50,994) (89,477)
Purchase of cable television systems -- (6,017,355)
----------- -----------
Net cash used in investing activities (50,994) (6,106,832)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings under long term debt, net -- 6,057,000
Principal payments on borrowings (350,000) --
Loan fees and other costs incurred -- (121,028)
----------- -----------
Net cash (used in) from financing activities (350,000) 5,935,972
----------- -----------
INCREASE (DECREASE) IN CASH (200,270) 169,123
CASH, beginning of period 844,700 380,717
----------- -----------
CASH, end of period $ 644,430 $ 549,840
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 267,108 $ 54,943
=========== ===========
</TABLE>
The accompanying note to unaudited financial statements
is an integral part of these statements
4
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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, 1997 and December 31, 1996, its
Statements of Operations for the three months ended March 31, 1997 and 1996, and
its Statements of Cash Flows for the three months ended March 31, 1997 and 1996.
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 $1,140,939 for the three months ended March 31, 1997,
representing an increase of approximately 5% as compared to the same period in
1996. Of these revenues, $864,783 (76%) was derived from basic service charges,
$106,823 (9%) from premium services, $32,377 (3%) from tier services, 33,247
(3%) from installation charges, $7,564 (1%) from service maintenance contracts
and $96,145 (8%) from other sources. The net increase in revenues is primarily
attributable to increases in basic service rates effective August 1, 1996.
As of March 31, 1997 the Partnership's systems served approximately 12,300 basic
subscribers, 5,300 premium subscribers and 1,500 tier subscribers.
Operating expenses totaled $121,065 for the three months ended March 31, 1997,
representing an increase of approximately 5% from the same period in 1996. This
increase is mainly attributable to salary increases and increased pole rental
costs.
General and administrative expenses totaled $259,024 for the three months ended
March 31, 1997, representing a decrease of 1% as compared to the same period in
1996. Higher revenue based expenses, such as management fees and franchise fees,
were offset by a reduction to accrued property taxes.
Programming expenses totaled $265,864 for the three months ended March 31, 1997,
representing an increase of approximately 11% over the same period in 1996. This
is mainly due to increased salary and commission expense resulting from added
advertising employees in the Swainsboro, GA system. Programming expenses also
increased as a result of increased costs charged by various program suppliers.
Depreciation and amortization expense for the three months ended March 31, 1997
increased 6% as compared to the same period in 1996. This is mainly due to
depreciation and amortization on plant, equipment and intangible assets acquired
during 1996.
Interest expense for the three months ended March 31, 1997 decreased
approximately 7% as compared to the same period in 1996. The average bank debt
outstanding decreased from $11,675,000 during the first quarter of 1996 to
$11,375,000 during the first quarter of 1997. The Partnership's effective
interest rate also decreased from 9.31% during the first quarter of 1996 to
8.87% during the first quarter of 1997.
6
<PAGE> 7
Liquidity and Capital
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 5.00 to 1 and a cash
flow to debt service ratio of 1.25 to 1. At March 31, 1997, the Partnership was
in compliance with its required financial covenants.
As of the date of this filing, the balance under the credit facility is
$11,025,000. Certain fixed rate agreements in place as of December 31, 1996
expired during the first quarter of 1997, 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 8.36% under the terms of
an interest rate swap agreement with its lender expiring January 11, 1998;
$425,000 fixed at 8.75%, expiring June 30, 1997. 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 1997, the Partnership incurred approximately $51,000
in capital expenditures including cable extensions in the LaConner, WA system; a
vehicle upgrade, tap audits and a fiber interconnect in the Aliceville, AL
system; and the launch of a tier service in the Swainsboro, GA system. Planned
expenditures for the balance of 1997 include the continued fiber interconnect 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 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:
7
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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. Although management's opinion is that the
probability of competition from telephone companies in rural areas is unlikely
in the near future, there are no assurances that such competition will not
materialize.
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.
8
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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 March 31,
1997.
9
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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)
10
<PAGE> 11
EXHIBIT INDEX
Exhibits
27.0 - Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 644,430
<SECURITIES> 87,059
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 10,138,063
<DEPRECIATION> 2,794,821
<TOTAL-ASSETS> 14,490,799
<CURRENT-LIABILITIES> 885,022
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,580,777
<TOTAL-LIABILITY-AND-EQUITY> 14,490,799
<SALES> 1,140,939
<TOTAL-REVENUES> 1,140,939
<CGS> 0
<TOTAL-COSTS> 1,062,837
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 252,227
<INCOME-PRETAX> (174,125)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (174,125)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
