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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the period ended SEPTEMBER 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
- ---------- ----------
(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) 623-1351
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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 __.
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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>
September 30, December 31,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Cash $ 764,674 $ 463,021
Accounts receivable 92,269 101,772
Prepaid expenses 29,955 62,453
Property and equipment, net of accumulated
depreciation of $4,360,202 and $3,552,644,
respectively 6,735,943 7,272,468
Intangible assets, net of accumulated
amortization of $2,629,269 and $2,182,025,
respectively 5,563,032 5,926,868
------------ ------------
Total assets $ 13,185,873 $ 13,826,582
============ ============
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses $ 620,751 $ 625,573
Due to managing general partner and affiliates 42,275 34,201
Converter deposits 10,370 12,200
Subscriber prepayments 170,504 157,636
Notes payable 10,725,000 10,925,000
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Total liabilities 11,568,900 11,754,610
------------ ------------
Partners' equity:
General Partners:
Contributed capital, net 1,000 1,000
Accumulated deficit (65,048) (60,498)
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(64,048) (59,498)
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Limited Partners:
Contributed capital, net 8,120,820 8,120,820
Accumulated deficit (6,439,799) (5,989,350)
------------ ------------
1,681,021 2,131,470
------------ ------------
Total partners' equity 1,616,973 2,071,972
------------ ------------
Total liabilities and partners' equity $ 13,185,873 $ 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 nine months ended September 30,
---------------------------------------
1998 1997
----------- -----------
<S> <C> <C>
Service revenues $ 3,635,599 $ 3,488,191
Expenses:
Operating 366,058 366,972
General and administrative (including
$471,612 and $452,409 to affiliates
in 1998 and 1997, respectively) 835,213 822,648
Programming 893,124 824,585
Depreciation and amortization 1,254,801 1,252,222
----------- -----------
3,349,196 3,266,427
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Income from operations 286,403 221,764
Other income (expense):
Interest expense (693,834) (726,379)
Interest income 2,499 5,481
Loss on disposal of assets (50,067) --
----------- -----------
(741,402) (720,898)
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Net income (loss) $ (454,999) $ (499,134)
=========== ===========
Allocation of net income (loss):
General Partners $ (4,550) $ (4,991)
=========== ===========
Limited Partners $ (450,449) $ (494,143)
=========== ===========
Net income (loss) per limited partnership unit:
(19,087 units for both time periods) $ (24) $ (26)
=========== ===========
Net income (loss) per $1,000 investment $ (48) $ (51)
=========== ===========
</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 September 30,
----------------------------------------
1998 1997
----------- -----------
<S> <C> <C>
Service revenues $ 1,227,330 $ 1,177,428
Expenses:
Operating 130,154 126,769
General and administrative (including
$158,333 and $146,659 to affiliates
in 1998 and 1997, respectively) 280,978 294,740
Programming 301,039 279,814
Depreciation and amortization 417,901 419,170
----------- -----------
1,130,072 1,120,493
----------- -----------
Income from operations 97,258 56,935
Other income (expense):
Interest expense (228,864) (236,035)
Interest income -- --
Gain (loss) on disposal of assets (804) --
----------- -----------
(229,668) (236,035)
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Net income (loss) $ (132,410) (179,100)
=========== ===========
Allocation of net income (loss):
General Partners $ (1,324) $ (1,791)
=========== ===========
Limited Partners $ (131,086) $ (177,309)
=========== ===========
Net income (loss) per limited partnership unit:
(19,087 units for both time periods) $ (7) $ (9)
=========== ===========
Net income (loss) per $1,000 investment $ (14) $ (18)
=========== ===========
</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 nine months ended September 30,
---------------------------------------
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (454,999) $ (499,134)
Adjustments to reconcile net income (loss) to
cash provided by operating activities:
Depreciation and amortization 1,254,801 1,252,222
Loss on sale of assets 50,067 --
(Increase) decrease in operating assets:
Accounts receivable 9,503 (15,230)
Prepaid expenses 32,498 (26,196)
Increase (decrease) in operating liabilities
Accounts payable and accrued expenses (4,822) (58,592)
Due to managing general partner and affiliates 8,074 (220,133)
Converter deposits (1,830) (3,700)
Subscriber prepayments 12,868 (30,556)
----------- -----------
Net cash from operating activities 906,160 398,681
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (321,099) (543,551)
Proceeds from sale of cable television system -- --
----------- -----------
Net cash from (used in) investing activities (321,099) (543,551)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings under long term debt, net --
Principal payments on borrowings (200,000) (350,000)
Loan fees and other costs incurred (83,408)
----------- -----------
Net cash used in financing activities (283,408) (350,000)
----------- -----------
INCREASE IN CASH 301,653 (494,870)
CASH, beginning of period 463,021 844,700
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CASH, end of period $ 764,674 $ 349,830
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 664,861 $ 751,817
=========== ===========
</TABLE>
The accompanying notes to unaudited financial statements are an integral part of
these statements
5
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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 September 30, 1998 and December 31, 1997, its Statements of Operations
for the nine and three months months ended September 30, 1998 and 1997, and
its Statements of Cash Flows for the nine months ended September 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
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PART I (continued)
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Revenues totaled $1,227,330 for the three months ended September 30, 1998,
representing an increase of approximately 4% as compared to the same period in
1997. Of these revenues, $930,669 (76%) was derived from basic service charges,
$110,957 (9%) from premium services, $44,093 (4%) from tier services, 26,556
(2%) from installation charges, $11,856 (1%) from service maintenance contracts
and $103,199 (8%) from other sources. The net increase in revenues is primarily
attributable to increases in basic service rates effective August 1, 1998 and a
19% increase in the number of tier subscribers served.
As of September 30, 1998, the Partnership's systems served approximately 12,200
basic subscribers, 5,100 premium subscribers and 2,000 tier subscribers.
Operating expenses totaled $130,154 for the three months ended September 30,
1998, representing an increase of approximately 3% from the same period in 1997.
This increase is mainly attributable to increased operating salaries and higher
system maintenance and drop materials expense, offset by lower pole rental
expense.
General and administrative expenses totaled $280,978 for the three months ended
September 30, 1998, representing a decrease of 5% as compared to the same period
in 1997. This is mainly attributable to lower administrative salaries and lower
copyright fees being offset by higher revenue based expenses such as management
fees, as well as higher telephone expense.
Programming expenses totaled $301,039 for the three months ended September 30,
1998, representing an increase of approximately 8% over the same period in 1997.
This is mainly due to higher costs charged by various program suppliers and an
increase in the number of tier subscribers served.
Depreciation and amortization expense for the three months ended September 30,
1998 remained consistent with 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 September 30, 1998 decreased
approximately 3% as compared to the same period in 1997. The average bank debt
outstanding decreased from $11,025,000 during the third quarter of 1997 to
$10,825,000 during the third quarter of 1998. The Partnership's effective
interest rate decreased from 8.56% during the third quarter of 1997 to 8.46%
during the third 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.
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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 service ratio of 1.25 to 1. At September
30, 1998, the Partnership was in compliance with its required financial
covenants.
As of the date of this filing, the balance under the credit facility is
$10,725,000. Certain fixed rate agreements in place as of June 30, 1998 expired
during the third 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: $7,800,000 fixed at 8.24% under the terms of an
interest rate swap agreement with its lender expiring December 31, 2000,
$2,500,000 fixed at 8.25%, expiring January 13, 1999 and $400,000 fixed at
7.8125%, expiring December 31, 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 third quarter of 1998, the Partnership incurred approximately $70,000
in capital expenditures including cable line extensions and a new printer in the
LaConner, WA system; cable line extensions in the Aliceville, AL system; and
system mapping, a channel addition and a billing software upgrade 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, and
the initial phases of installing a fiber optic backbone for the future upgrade
of the Swainsboro, GA system to 450 MHz.
YEAR 2000 ISSUES
The efficient operation of the Partnership's business is dependent in part on
its computer software programs and operating systems (collectively, Programs and
Systems). These Programs and Systems are used in several key areas of the
Partnership's business, including subscriber billing and collections and
financial reporting. Management has evaluated the Programs and Systems utilized
in the conduct of the Partnership's business for the purpose of identifying year
2000 compliance problems. Failure to remedy these issues could impact the
ability of the Partnership to timely bill its subscribers for service provided
and properly report its financial condition and results of operations which
could have a material impact on its liquidity and capital resources.
The Programs and Systems utilized in subscriber billing and collection has been
modified to address year 2000 compliance issues. These modifications are
currently in the process of being installed in the Partnership's various billing
sites. The Partnership expects this implementation to be completed by the end of
1998. Management has completed the process of replacing Programs and Systems
related to financial reporting which resolve year 2000 compliance issues. The
aggregate cost to the Partnership to address year 2000 compliance issues is not
expected to be material to its results of operations, liquidity and capital
resources.
The provision of cable television services is significantly dependent on the
Partnership's ability to adequately receive programming signals via satellite
distribution or off air reception from various programmers and broadcasters.
Management has inquired of certain significant programming vendors with respect
to their year 2000 issues and how they might impact the operations of the
Partnership. As of the date of this filing no significant programming vendor has
communicated a year 2000 issue that would affect materially the operations of
the Partnership. However, if significant programming vendors identify year 2000
issues in the future and are unable to resolve such issues in a timely manner,
it could result in a material financial risk.
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 (previously filed)
(b) No reports on Form 8-K have been filed during the quarter ended September
30, 1998.
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: 1/12/99 BY: /s/ RICHARD I. CLARK
--------------- --------------------------
Richard I. Clark
(Vice President/Treasurer)
Dated: 1/12/99 BY: /s/ GARY S. JONES
--------------- --------------------------
Gary S. Jones
(Vice President)
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