<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 SEPTEMBER 30, 1999
------------------
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
----------------------------------------------------
(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
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(Address of Principal Executive Offices) (Zip Code)
(206) 623-1351
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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 X No
----- -----
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>
September 30, December 31,
1999 1998
------------- ------------
<S> <C> <C>
ASSETS
Cash $ 406,304 $ 800,110
Accounts receivable 105,516 108,011
Due from affiliates 2,552 26,295
Prepaid expenses 88,162 60,971
Property and equipment, net of accumulated
depreciation of $5,465,556 and $4,641,375,
respectively 6,522,364 6,813,077
Intangible assets, net of accumulated
amortization of $3,099,698 and $2,687,869,
respectively 4,976,899 5,388,729
----------- -----------
Total assets $12,101,797 $13,197,193
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses $ 421,726 $ 778,917
Due to managing general partner and affiliates 26,851 107,977
Converter deposits 8,732 10,002
Subscriber prepayments 224,455 237,475
Notes payable 10,271,182 10,625,000
----------- -----------
Total liabilities 10,952,946 11,759,371
----------- -----------
Partners' equity:
General Partners:
Contributed capital, net 1,000 1,000
Accumulated deficit (69,730) (66,840)
----------- -----------
(68,730) (65,840)
----------- -----------
Limited Partners:
Contributed capital, net 8,120,820 8,120,820
Accumulated deficit (6,903,239) (6,617,158)
----------- -----------
1,217,581 1,503,662
----------- -----------
Total partners' equity 1,148,851 1,437,822
----------- -----------
Total liabilities and partners' equity $12,101,797 $13,197,193
=========== ===========
</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,
---------------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Service revenues $ 3,721,442 $ 3,635,599
Expenses:
Operating 353,476 366,126
General and administrative (including
$492,791 and $471,612 to affiliates
in 1999 and 1998, respectively) 868,767 835,146
Programming 937,536 893,123
Depreciation and amortization 1,195,076 1,216,941
----------- -----------
3,354,855 3,311,336
----------- -----------
Income from operations 366,587 324,263
Other income (expense):
Interest expense (626,019) (693,834)
Amortization of loan fees (40,934) (37,860)
Interest income 11,395 2,499
Loss on disposal of assets -- (50,067)
----------- -----------
(655,558) (779,262)
----------- -----------
Net loss $ (288,971) $ (454,999)
=========== ===========
Allocation of net loss:
General Partners $ (2,890) $ (4,550)
=========== ===========
Limited Partners $ (286,081) $ (450,449)
=========== ===========
Net loss per limited partnership unit:
(19,087 units for both time periods) $ (15) $ (24)
=========== ===========
Net loss per $1,000 investment $ (30) $ (47)
=========== ===========
</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,
----------------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Service revenues $ 1,247,110 $ 1,227,330
Expenses:
Operating 129,588 130,221
General and administrative (including
$158,383 and $158,333 to affiliates
in 1999 and 1998, respectively) 300,805 280,910
Programming 300,435 301,039
Depreciation and amortization 378,569 404,256
----------- -----------
1,109,397 1,116,426
----------- -----------
Income from operations 137,713 110,904
Other income (expense):
Interest expense (201,565) (228,864)
Amortization of loan fees (13,644) (13,645)
Interest income 3,196 --
Gain (loss) on disposal of assets -- (805)
----------- -----------
(212,013) (243,314)
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Net loss $ (74,300) (132,410)
=========== ===========
Allocation of net loss:
General Partners $ (743) $ (1,324)
=========== ===========
Limited Partners $ (73,557) $ (131,086)
=========== ===========
Net loss per limited partnership unit:
(19,087 units for both time periods) $ (4) $ (7)
=========== ===========
Net loss per $1,000 investment $ (8) $ (14)
=========== ===========
</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,
---------------------------------------
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (288,971) $ (454,999)
Adjustments to reconcile net loss to
cash provided by operating activities:
Depreciation and amortization 1,195,076 1,216,941
Amortization of loan costs 40,934 37,860
Loss on sale of assets -- 50,067
(Increase) decrease in operating assets:
Accounts receivable 2,495 9,503
Due from affiliates 23,743 (18,540)
Prepaid expenses (27,191) 32,498
Increase (decrease) in operating liabilities
Accounts payable and accrued expenses (357,191) (4,822)
Due to managing general partner and affiliates (81,126) 26,614
Converter deposits (1,270) (1,830)
Subscriber prepayments (13,020) 12,868
----------- -----------
Net cash from operating activities 493,479 906,160
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (533,468) (321,099)
----------- -----------
Net cash used in investing activities (533,468) (321,099)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings under long term debt, net 56,000 --
Principal payments on borrowings (409,818) (200,000)
Loan fees and other costs incurred -- (83,408)
----------- -----------
Net cash used in financing activities (353,818) (283,408)
----------- -----------
(DECREASE) INCREASE IN CASH (393,807) 301,653
CASH, beginning of period 800,111 463,021
----------- -----------
CASH, end of period $ 406,304 $ 764,674
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 631,648 $ 664,861
=========== ===========
</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 September 30 1999 and December 31, 1998, its Statements of Operations
for the nine and three months ended September 30, 1999 and 1998, and its
Statements of Cash Flows for the nine months ended September 30, 1999 and
1998. 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).
The Partnership has 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
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
Revenues totaled $3,721,442 for the nine months ended September 30, 1999,
representing an increase of approximately 2% as compared to the same period in
1998. Of these revenues, $2,835,291 (76%) was derived from basic service
charges, $327,220 (9%) from premium services, $142,050 (4%) from tier services,
96,316 (2%) from installation charges, $37,623 (1%) from service maintenance
contracts and $282,942 (8%) from other sources. The net increase in revenues is
primarily attributable to increases in basic service rates effective August 1,
1998 and 1999.
As of September 30, 1999, the Partnership's systems served approximately 12,100
basic subscribers, 4,800 premium subscribers and 2,100 tier subscribers.
Operating expenses totaled $353,475 for the nine months ended September 30,
1999, representing a decrease of approximately 3% from the same period in 1998.
This decrease is mainly attributable to lower operating salaries and system
maintenance as well as reduced vehicle operating expense.
General and administrative expenses totaled $868,767 for the nine months ended
September 30, 1999, representing an increase of approximately 4% over the same
period in 1998. This is due to higher revenue based expenses such as management
fees and franchise fees as well as increased administrative salaries, copyright
fees and bad debt expense offset by reduced insurance, office supplies and
administrative services.
Programming expenses totaled $937,536 for the nine months ended September 30,
1999, representing an increase of approximately 5% over the same period in 1998.
This is mainly due to higher costs charged by various program suppliers.
Depreciation and amortization expense for the nine months ended September 30,
1999 decreased approximately 2% over the same period in 1998. This is mainly due
to assets becoming fully depreciated offset by depreciation on plant and
equipment acquired during the last year.
Interest expense for the nine months ended September 30, 1999 decreased
approximately 9% as compared to the same period in 1998. The average bank debt
outstanding decreased from $10,875,000 during the first nine months of 1998 to
$10,510,591 during the first nine months of 1999. The Partnership's effective
interest rate decreased from 8.97% during the third quarter of 1998 to 8.46%
during the third quarter of 1999.
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
Revenues totaled $1,247,110 for the three months ended September 30, 1999,
representing an increase of approximately 2% as compared to the same period in
1998. Of these revenues, $949,642 (76%) was derived from basic service charges,
$106,949 (9%) from premium services, $49,521 (4%) from tier services, 29,381
(2%) from installation charges, $12,229 (1%) from service
7
<PAGE> 8
maintenance contracts and $99,388 (8%) from other sources. The net increase in
revenues is primarily attributable to increases in basic service rates effective
August 1, 1999.
Operating expenses totaled $129,588 for the three months ended September 30,
1999, remaining consistent with the same period in 1998. This is mainly
attributable to lower operating salaries and system maintenance offset by higher
vehicle operating expense and pole rental expense.
General and administrative expenses totaled $300,804 for the three months ended
September 30, 1999, representing an increase of approximately 7% over the same
period in 1998. This is due to higher revenue based expenses such as management
fees and franchise fees as well as increased administrative salaries, copyright
fees and bad debt expense offset by reduced postage, office supplies and
administrative services.
Programming expenses totaled $300,435 for the three months ended September 30,
1999, remaining consistent with the same period in 1998. This is mainly due to
higher costs charged by various program suppliers offset by reductions to local
programming expense.
Depreciation and amortization expense for the three months ended September 30,
1999 decreased approximately 6% over the same period in 1998. This is mainly due
to assets becoming fully depreciated offset by depreciation on plant and
equipment acquired during the last year.
Interest expense for the three months ended September 30, 1999 decreased
approximately 11% as compared to the same period in 1998. The average bank debt
outstanding decreased from $10,825,000 during the third quarter of 1998 to
$10,368,182 during the third quarter of 1999. The Partnership's effective
interest rate decreased from 8.96% during the third quarter of 1998 to 8.3%
during the third quarter of 1999.
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 and amounts available for borrowing under the Partnership's debt
agreements are 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 5.50 to 1 and a cash flow to debt service ratio of 1.25 to 1. At September
30, 1999, the Partnership was in compliance with its required financial
covenants.
As of the date of this filing, the balance under the credit facility is
$10,271,182. Certain fixed rate agreements in place as of June 30, 1999 expired
during the third quarter of 1999, 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: $7,400,000 fixed at 7.74% under the terms of an
interest rate swap agreement with its lender expiring December 31, 2000,
$2,475,000 fixed at 7.51125%, expiring December 13, 1999, $300,000 fixed at
7.50875% expiring December 30, 1999, $56,000 fixed at 8.25% and $40,182 at prime
(currently 8.5%). 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.
8
<PAGE> 9
Capital Expenditures
During the third quarter of 1999, the Partnership incurred approximately
$301,000 in capital expenditures including the construction of a new office
building and a continued system upgrade in the LaConner, WA system; the start of
a series of quality assurance projects in the Aliceville, AL system; and the
initial phase of a fiber backbone project in the Swainsboro, GA system. Planned
expenditures for the balance of 1999 include an ongoing system upgrade to 400
MHz and the continued construction of a new office building in the LaConner, WA
system and a vehicle replacement and continuing quality assurance projects in
the Aliceville, AL area. The LaConner office building is being financed by a
revolving note with maximum borrowings of up to $310,000 converting to a fixed
rate note upon completion of construction. All other capital expenditures for
1999 are being financed through cash provided by operations.
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 collections has been
modified to address year 2000 compliance issues. These modifications were
substantially complete at 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.
Management is currently focusing its efforts on the impact of the year 2000
compliance issue on service delivery and has established an internal team to
address this issue. The internal team is identifying and testing all date
sensitive equipment involved in delivering service to its customers. In
addition, management will assess its options regarding repair or replacement of
affected equipment during this testing. The aggregate cost to the Partnership to
resolve year 2000 compliance issues is not expected to be material to its
results of operations, liquidity and capital resources.
9
<PAGE> 10
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. The
Partnership 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.
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 September
30, 1999.
10
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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)
11
<PAGE> 12
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:
-------------------------------
Richard I. Clark
(Vice President/Treasurer)
Dated: ________________ BY:
-------------------------------
Gary S. Jones
(Vice President)
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 406,304
<SECURITIES> 0
<RECEIVABLES> 105,516
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 11,987,920
<DEPRECIATION> 5,465,556
<TOTAL-ASSETS> 12,101,797
<CURRENT-LIABILITIES> 10,952,946
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,148,851
<TOTAL-LIABILITY-AND-EQUITY> 12,101,797
<SALES> 3,721,442
<TOTAL-REVENUES> 3,721,442
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,354,855
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 626,019
<INCOME-PRETAX> (288,971)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (288,971)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
