<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, 1998
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
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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 (Zip Code)
Executive Offices)
(206) 623-1351
---------------------------------------------------
(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>
June 30, December 31,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Cash $ 696,979 $ 463,021
Accounts receivable 98,146 101,772
Prepaid expenses 47,447 62,453
Property and equipment, net of accumulated
depreciation of $4,087,014 and $3,552,644,
respectively 6,943,926 7,272,468
Intangible assets, net of accumulated
amortization of $2,484,556 and $2,182,025,
respectively 5,707,745 5,926,868
------------ ------------
Total assets $ 13,494,243 $ 13,826,582
============ ============
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses $ 755,345 $ 625,573
Due to managing general partner and affiliates 77,028 34,201
Converter deposits 10,960 12,200
Subscriber prepayments 76,527 157,636
Notes payable 10,825,000 10,925,000
------------ ------------
Total liabilities 11,744,860 11,754,610
------------ ------------
Partners' equity:
General Partners:
Contributed capital, net 1,000 1,000
Accumulated deficit (63,724) (60,498)
------------ ------------
(62,724) (59,498)
------------ ------------
Limited Partners:
Contributed capital, net 8,120,820 8,120,820
Accumulated deficit (6,308,713) (5,989,350)
------------ ------------
1,812,107 2,131,470
------------ ------------
Total partners' equity 1,749,383 2,071,972
------------ ------------
Total liabilities and partners' equity $ 13,494,243 $ 13,826,582
============ ============
</TABLE>
The accompanying notes to unaudited financial statements are 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,
-------------------------------
1998 1997
----------- -----------
<S> <C> <C>
Service revenues $ 2,408,269 $ 2,310,763
Expenses:
Operating 235,904 240,203
General and administrative (including
$313,279 and $305,750 to affiliates
in 1998 and 1997, respectively) 554,235 527,908
Programming 592,085 544,771
Depreciation and amortization 836,900 833,051
----------- -----------
2,219,124 2,145,933
----------- -----------
Income from operations 189,145 164,830
Other income (expense):
Interest expense (464,970) (490,344)
Interest income 2,499 5,480
Loss on disposal of assets (49,263) --
----------- -----------
(511,734) (484,864)
----------- -----------
Net income (loss) $ (322,589) $ (320,034)
=========== ===========
Allocation of net income (loss):
General Partners $ (3,226) $ (3,200)
=========== ===========
Limited Partners $ (319,363) $ (316,834)
=========== ===========
Net income (loss) per limited partnership unit:
(19,087 units for both time periods) $ (17) $ (17)
=========== ===========
Net income (loss) per $1,000 investment $ (34) $ (33)
=========== ===========
</TABLE>
The accompanying notes to unaudited financial statements are 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,
-------------------------------
1998 1997
----------- -----------
<S> <C> <C>
Service revenues $ 1,199,337 $ 1,169,824
Expenses:
Operating 117,723 119,138
General and administrative (including
$152,048 and $164,220 to affiliates
in 1998 and 1997, respectively) 290,299 268,884
Programming 286,887 278,907
Depreciation and amortization 419,757 416,167
----------- -----------
1,114,666 1,083,096
----------- -----------
Income from operations 84,671 86,728
Other income (expense):
Interest expense (233,613) (238,117)
Interest income 1,882 5,480
Gain (loss) on disposal of assets -- --
----------- -----------
(231,731) (232,637)
----------- -----------
Net income (loss) $ (147,060) (145,909)
=========== ===========
Allocation of net income (loss):
General Partners $ (1,471) $ (1,459)
=========== ===========
Limited Partners $ (145,589) $ (144,450)
=========== ===========
Net income (loss) per limited partnership unit:
(19,087 units for both time periods) $ (8) $ (8)
=========== ===========
Net income (loss) per $1,000 investment $ (16) $ (16)
=========== ===========
</TABLE>
The accompanying notes to unaudited financial statements are 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,
-----------------------------
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(322,589) $(320,034)
Adjustments to reconcile net income (loss) to
cash provided by operating activities:
Depreciation and amortization 836,900 833,051
Gain on sale of assets 49,263 --
(Increase) decrease in operating assets:
Accounts receivable 3,626 11,437
Prepaid expenses 15,006 26,812
Increase (decrease) in operating liabilities
Accounts payable and accrued expenses 129,772 (63,040)
Due to managing general partner and affiliates 42,827 (232,429)
Converter deposits (1,240) (2,350)
Subscriber prepayments (81,109) (20,297)
--------- ---------
Net cash from operating activities 672,456 233,150
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (255,090) (159,923)
Proceeds from sale of cable television system -- --
--------- ---------
Net cash from (used in) investing activities (255,090) (159,923)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on borrowings (100,000) (350,000)
Loan fees and other costs incurred (83,408) --
--------- ---------
Net cash used in financing activities (183,408) (350,000)
--------- ---------
INCREASE IN CASH 233,958 (276,773)
CASH, beginning of period 463,021 844,700
--------- ---------
CASH, end of period $ 696,979 $ 567,927
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 438,496 $ 492,356
========= =========
</TABLE>
The accompanying notes to unaudited financial statements are an integral part of
these statements
5
<PAGE> 6
NORTHLAND CABLE PROPERTIES EIGHT LIMITED PARTNERSHIP
NOTES 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, 1998 and December 31, 1997,
its Statements of Operations for the six and three months months ended June
30, 1998 and 1997, and its Statements of Cash Flows for the six months ended
June 30, 1998 and 1997. Results of operations for these periods are not
necessarily indicative of results to be expected for the full year.
(2) In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities. The Statement establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in
the balance sheet as either an asset or liability measured at its fair
value. The Statement requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria
are met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the income
statement, and requires that a company must formally document, designate,
and assess the effectiveness of transactions that receive hedge accounting.
Statement 133 is effective for fiscal years beginning after June 15, 1999. A
company may also implement the Statement as of the beginning of any fiscal
quarter after issuance (that is, fiscal quarters beginning June 16, 1998 and
thereafter). Statement 133 cannot be applied retroactively. Statement 133
must be applied to (a) derivative instruments and (b) certain derivative
instruments embedded in hybrid contracts that were issued, acquired, or
substantively modified after December 31, 1997 (and, at the company's
election, before January 1, 1998).
We have not yet quantified the impacts of adopting Statement 133 on our
financial statements and have not determined the timing of or method of our
adoption of Statement 133. However, the Statement could increase volatility
in earnings and other comprehensive income.
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 $1,199,337 for the three months ended June 30, 1998,
representing an increase of approximately 3% as compared to the same period in
1997. Of these revenues, $919,176 (77%) was derived from basic service charges,
$110,546 (9%) from premium services, $41,825 (3%) from tier services, 28,483
(3%) from installation charges, $11,934 (1%) from service maintenance contracts
and $87,373 (7%) from other sources. The net increase in revenues is primarily
attributable to increases in basic service rates effective August 1, 1997.
As of June 30, 1998, the Partnership's systems served approximately 12,400 basic
subscribers, 5,300 premium subscribers and 2,000 tier subscribers.
Operating expenses totaled $117,723 for the three months ended June 30, 1998,
representing a decrease of approximately 1% from the same period in 1997. This
decrease is mainly attributable to lower system maintenance, drop materials
expense and pole rental expense, offset by higher vehicle operating expenses and
increased operating salaries.
General and administrative expenses totaled $290,299 for the three months ended
June 30, 1998, representing an increase of 8% as compared to the same period in
1997. Copyright fees increased due to a fiber interconnect project in Alabama.
Revenue based expenses such as management fees also increased, as well as
telephone and utilities expense.
Programming expenses totaled $286,887 for the three months ended June 30, 1998,
representing an increase of approximately 3% over the same period in 1997. This
is mainly due to higher costs charged by various program suppliers.
Depreciation and amortization expense for the three months ended June 30, 1998
increased approximately 1% over the same period in 1997. This is mainly due to
depreciation and amortization on plant, equipment and intangible assets acquired
during the last year offset by assets becoming fully depreciated.
Interest expense for the three months ended June 30, 1998 decreased
approximately 2% as compared to the same period in 1997. The average bank debt
outstanding decreased from $11,025,000 during the second quarter of 1997 to
$10,925,000 during the second quarter of 1998. The Partnership's effective
interest rate decreased from 8.64% during the second quarter of 1997 to 8.55%
during the second quarter of 1998.
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 including a funded debt to annualized cash flow ratio
of 6.00 to 1 and a cash flow to debt
7
<PAGE> 8
service ratio of 1.25 to 1. At June 30, 1998, the Partnership was in compliance
with its required financial covenants as amended.
As of the date of this filing, the balance under the credit facility is
$10,825,000. Certain fixed rate agreements in place as of March 31, 1998 expired
during the second quarter of 1998, 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: $8,100,000 fixed at 8.24% under the terms of an
interest rate swap agreement with its lender expiring December 31, 2000,
$2,300,000 fixed at 8.25%, expiring January 12, 1999 and $300,000 fixed at
8.1875%, expiring September 30, 1998. 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 1998, the Partnership incurred approximately
$130,000 in capital expenditures including cable line extensions in the
LaConner, WA system; a vehicle purchase and fiber interconnect in the
Aliceville, AL system; and cable line extensions in the Swainsboro, GA system.
Planned expenditures for the balance of 1998 include an ongoing system upgrade
to 400 MHz in the LaConner, WA system and the initial planning phases of a
system upgrade to 450 MHz in the Aliceville, AL area.
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) No reports on Form 8-K have been filed during the quarter ended June 30,
1998.
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:
---------------- 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
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)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 696,979
<SECURITIES> 0
<RECEIVABLES> 98,146
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 11,030,940
<DEPRECIATION> 4,087,014
<TOTAL-ASSETS> 13,494,243
<CURRENT-LIABILITIES> 11,744,860
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,749,383
<TOTAL-LIABILITY-AND-EQUITY> 13,494,243
<SALES> 2,408,269
<TOTAL-REVENUES> 2,408,269
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,219,124
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 464,970
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (322,589)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
