<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, 1997
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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
___________
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) 674-3900
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(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>
June 30, December 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Cash $ 567,927 $ 844,700
Accounts receivable 93,940 105,377
Prepaid expenses 35,779 62,591
Property and equipment, net of accumulated
depreciation of $3,044,699 and $2,544,227,
respectively 7,202,293 7,542,842
Intangible assets, net of accumulated
amortization of $1,956,696 and $1,624,116,
respectively 6,205,823 6,538,403
------------ ------------
Total assets $ 14,105,762 $ 15,093,913
============ ============
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses $ 516,782 $ 579,822
Due to managing general partner and affiliates 33,049 265,478
Converter deposits 15,450 17,800
Subscriber prepayments 80,614 100,911
Notes payable 11,025,000 11,375,000
------------ ------------
Total liabilities 11,670,895 12,339,011
------------ ------------
Partners' equity:
General Partners:
Contributed capital, net 1,000 1,000
Accumulated deficit (56,870) (53,669)
------------ ------------
(55,870) (52,669)
------------ ------------
Limited Partners:
Contributed capital, net 8,120,820 8,120,820
Accumulated deficit (5,630,083) (5,313,249)
------------ ------------
2,490,737 2,807,571
------------ ------------
Total partners' equity 2,434,867 2,754,902
------------ ------------
Total liabilities and partners' equity $ 14,105,762 $ 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 six months ended June 30,
-------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Service revenues $ 2,310,763 $ 2,214,199
Expenses:
Operating 240,203 238,264
General and administrative (including
$291,290 and $280,495 to affiliates
in 1997 and 1996, respectively) 527,908 533,129
Programming 544,771 498,582
Depreciation and amortization 833,051 784,071
----------- -----------
2,145,933 2,054,046
----------- -----------
Income from operations 164,830 160,153
Other income (expense):
Interest expense (490,344) (522,304)
Interest income 5,481 3,236
Gain on disposal of assets -- (88)
----------- -----------
(484,863) (519,156)
----------- -----------
Net income (loss) $ (320,033) $ (359,003)
=========== ===========
Allocation of net income (loss):
General Partners $ (3,200) $ (3,590)
=========== ===========
Limited Partners $ (316,833) $ (355,413)
=========== ===========
Net income (loss) per limited partnership unit:
(19,087 units for both time periods) $ (17) $ (19)
=========== ===========
Net income (loss) per $1,000 investment $ (34) $ (37)
=========== ===========
</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,
-----------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Service revenues $ 1,169,824 $ 1,126,757
Expenses:
Operating 119,138 122,686
General and administrative (including
$144,556 and $143,966 to affiliates
in 1997 and 1996, respectively) 268,884 271,777
Programming 278,907 258,771
Depreciation and amortization 416,167 392,035
----------- -----------
1,083,096 1,045,269
----------- -----------
Income from operations 86,728 81,488
Other income (expense):
Interest expense (238,117) (250,665)
Interest income 5,481 1,527
Gain (loss) on disposal of assets -- --
----------- -----------
(232,636) (249,138)
----------- -----------
Net income (loss) $ (145,908) (167,650)
=========== ===========
Allocation of net income (loss):
General Partners $ (1,459) $ (1,677)
=========== ===========
Limited Partners $ (144,449) $ (165,974)
=========== ===========
Net income (loss) per limited partnership unit:
(19,087 units for both time periods) $ (8) $ (9)
=========== ===========
Net income (loss) per $1,000 investment $ (16) $ (18)
=========== ===========
</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,
---------------------------------
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (320,033) $ (359,003)
Adjustments to reconcile net income (loss) to
cash provided by operating activities:
Depreciation and amortization 833,051 784,071
Gain on sale of assets -- 88
(Increase) decrease in operating assets:
Accounts receivable 11,437 (11,104)
Prepaid expenses 26,812 13,894
Increase (decrease) in operating liabilities
Accounts payable and accrued expenses (63,041) 181,435
Due to managing general partner and affiliates (232,429) 69,694
Converter deposits (2,350) (710)
Subscriber prepayments (20,297) (34,898)
----------- -----------
Net cash from operating activities 233,150 643,467
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (159,923) (216,103)
Proceeds from sale of cable television system -- (6,017,355)
----------- -----------
Net cash used in investing activities (159,923) (6,233,458)
----------- -----------
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 -- (126,475)
----------- -----------
Net cash (used in) from financing activities (350,000) 5,930,525
----------- -----------
(DECREASE) INCREASE IN CASH (276,773) 340,534
CASH, beginning of period 844,700 380,717
----------- -----------
CASH, end of period $ 567,927 $ 721,251
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 492,356 $ 310,707
=========== ===========
</TABLE>
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, 1997 and December 31, 1996, its Statements of
Operations for the six and three months ended June 30, 1997 and 1996, and its
Statements of Cash Flows for the six months ended June 30, 1997 and 1996.
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 $1,169,824 for the three months ended June 30, 1997,
representing an increase of approximately 4% as compared to the same period in
1996. Of these revenues, $879,097 (75%) was derived from basic service charges,
$110,193 (9%) from premium services, $34,544 (3%) from tier services, 30,614
(3%) from installation charges, $8,538 (1%) from service maintenance contracts
and $106,838 (9%) from other sources. The net increase in revenues is primarily
attributable to increases in basic service rates effective August 1, 1996.
As of June 30, 1997 the Partnership's systems served approximately 12,400 basic
subscribers, 5,200 premium subscribers and 1,600 tier subscribers.
Operating expenses totaled $119,138 for the three months ended June 30, 1997,
representing a decrease of approximately 3% from the same period in 1996. This
decrease is mainly attributable to decreased vehicle operating expenses and
lower amounts of overtime.
General and administrative expenses totaled $268,884 for the three months ended
June 30, 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 utilities and administrative services.
Programming expenses totaled $278,907 for the three months ended June 30, 1997,
representing an increase of approximately 8% over the same period in 1996. This
is mainly due to increased salary and commission expense resulting from
additional advertising employees in the Swainsboro, GA system. Programming
expenses also increased as a result of higher costs charged by various program
suppliers.
Depreciation and amortization expense for the three months ended June 30, 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 1997 and the last half of 1996.
Interest expense for the three months ended June 30, 1997 decreased
approximately 5% as compared to the same period in 1996. The average bank debt
outstanding decreased from $11,675,000 during the second quarter of 1996 to
$11,025,000 during the second quarter of 1997. The Partnership's effective
interest rate increased from 8.59% during the second quarter of 1996 to 8.64%
during the second quarter of 1997.
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 5.00 to 1 and a cash
flow to debt service ratio of 1.25 to 1. At June 30, 1997, the Partnership was
in compliance with its required financial covenants.
7
<PAGE> 8
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 March 31, 1997 expired
during the second 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 8.8125%, expiring September 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 second quarter of 1997, the Partnership incurred approximately
$109,000 in capital expenditures including cable extensions and the launch of a
premium channel in the LaConner, WA system; tap audits and a fiber interconnect
in the Aliceville, AL system; and cable extensions in the Swainsboro, GA system.
Planned expenditures for the balance of 1997 include the completion of a 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 operation cannot
be determined at this time. A summary of certain provisions affecting the
Partnership's operations follows:
Regulation of rates other than 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 regulations 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 served by the local exchange carrier. No penetration criteria
exists that triggers the presence of effective competition under these
circumstances.
8
<PAGE> 9
The 1996 Act allows telephone companies to offer video programming services
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
select 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 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 theses 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,
1997.
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
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 567,927
<SECURITIES> 0
<RECEIVABLES> 93,940
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 10,246,992
<DEPRECIATION> 3,044,699
<TOTAL-ASSETS> 14,105,762
<CURRENT-LIABILITIES> 645,895
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,434,867
<TOTAL-LIABILITY-AND-EQUITY> 14,105,762
<SALES> 2,310,763
<TOTAL-REVENUES> 2,310,763
<CGS> 0
<TOTAL-COSTS> 2,145,933
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 490,344
<INCOME-PRETAX> (320,033)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (320,033)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
