<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, 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
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
(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 [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>
June 30, December 31,
1999 1998
------------ ------------
ASSETS
<S> <C> <C>
Cash $ 551,935 $ 800,110
Accounts receivable 105,775 108,011
Due from affiliates 3,086 26,295
Prepaid expenses 36,691 60,971
Property and equipment, net of accumulated
depreciation of $5,204,082 and $4,641,375,
respectively 6,482,547 6,813,077
Intangible assets, net of accumulated
amortization of $2,968,959 and $2,687,869,
respectively 5,107,638 5,388,729
------------ ------------
Total assets $ 12,287,672 $ 13,197,193
============ ============
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses $ 426,760 $ 778,917
Due to managing general partner and affiliates 39,309 107,977
Converter deposits 9,422 10,002
Subscriber prepayments 248,847 237,475
Notes payable 10,340,182 10,625,000
------------ ------------
Total liabilities 11,064,520 11,759,371
------------ ------------
Partners' equity:
General Partners:
Contributed capital, net 1,000 1,000
Accumulated deficit (68,987) (66,840)
------------ ------------
(67,987) (65,840)
------------ ------------
Limited Partners:
Contributed capital, net 8,120,820 8,120,820
Accumulated deficit (6,829,681) (6,617,158)
------------ ------------
1,291,139 1,503,662
------------ ------------
Total partners' equity 1,223,152 1,437,822
------------ ------------
Total liabilities and partners' equity $ 12,287,672 $ 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 six months ended June 30,
----------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Service revenues $ 2,474,332 $ 2,408,269
Expenses:
Operating 223,887 235,904
General and administrative (including
$334,408 and $313,279 to affiliates
in 1999 and 1998, respectively) 567,963 554,235
Programming 637,101 592,085
Depreciation and amortization 843,796 836,900
----------- -----------
2,272,747 2,219,124
----------- -----------
Income from operations 201,585 189,145
Other income (expense):
Interest expense (424,454) (464,970)
Interest income 8,199 2,499
Loss on disposal of assets -- (49,263)
----------- -----------
(416,255) (511,734)
----------- -----------
Net loss $ (214,670) $ (322,589)
=========== ===========
Allocation of net loss:
General Partners $ (2,147) $ (3,226)
=========== ===========
Limited Partners $ (212,523) $ (319,363)
=========== ===========
Net loss per limited partnership unit:
(19,087 units for both time periods) $ (11) $ (17)
=========== ===========
Net loss per $1,000 investment $ (22) $ (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,
----------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Service revenues $ 1,244,539 $ 1,199,337
Expenses:
Operating 110,786 117,723
General and administrative (including
$175,991 and $152,048 to affiliates
in 1999 and 1998, respectively) 290,539 290,299
Programming 321,705 286,887
Depreciation and amortization 413,181 419,757
----------- -----------
1,136,211 1,114,666
----------- -----------
Income from operations 108,328 84,671
Other income (expense):
Interest expense (206,610) (233,613)
Interest income 5,016 1,882
----------- -----------
(201,594) (231,731)
----------- -----------
Net loss $ (93,266) (147,060)
=========== ===========
Allocation of net loss:
General Partners $ (933) $ (1,471)
=========== ===========
Limited Partners $ (92,333) $ (145,589)
=========== ===========
Net loss per limited partnership unit:
(19,087 units for both time periods) $ (5) $ (8)
=========== ===========
Net loss per $1,000 investment $ (10) $ (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,
---------------------------------
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(214,670) $(322,589)
Adjustments to reconcile net loss to
cash provided by operating activities:
Depreciation and amortization 843,796 836,900
Loss on disposal of assets -- 49,263
(Increase) decrease in operating assets:
Accounts receivable 2,236 3,626
Due to affiliates 23,209 --
Prepaid expenses 24,280 15,006
Increase (decrease) in operating liabilities
Accounts payable and accrued expenses (352,157) 129,772
Due to managing general partner and affiliates (68,668) 42,827
Converter deposits (580) (1,240)
Subscriber prepayments 11,372 (81,109)
--------- ---------
Net cash from operating activities 268,818 672,456
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (232,176) (255,090)
--------- ---------
Net cash used in investing activities (232,176) (255,090)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on borrowings (284,818) (100,000)
Loan fees and other costs incurred -- (83,408)
--------- ---------
Net cash used in financing activities (284,818) (183,408)
--------- ---------
(DECREASE) INCREASE IN CASH (248,176) 233,958
CASH, beginning of period 800,111 463,021
--------- ---------
CASH, end of period $ 551,935 $ 696,979
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 432,332 $ 438,496
========= =========
</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 1999 and December 31, 1998, its Statements of Operations for
the six and three months ended June 30, 1999 and 1998, and its Statements
of Cash Flows for the six months ended June 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
Revenues totaled $1,244,539 for the three months ended June 30, 1999,
representing an increase of approximately 4% as compared to the same period in
1998. Of these revenues, $950,870 (76%) was derived from basic service charges,
$110,418 (9%) from premium services, $47,758 (4%) from tier services, 29,228
(2%) from installation charges, $12,679 (1%) from service maintenance contracts
and $93,586 (8%) from other sources. The net increase in revenues is primarily
attributable to increases in basic service rates effective August 1, 1998.
As of June 30, 1999, the Partnership's systems served approximately 12,200 basic
subscribers, 5,000 premium subscribers and 2,000 tier subscribers.
Operating expenses totaled $110,786 for the three months ended June 30, 1999,
representing a decrease of approximately 6% 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 $290,539 for the three months ended
June 30, 1999, remaining consistent with the same period in 1998.
Programming expenses totaled $321,705 for the three months ended June 30, 1999,
representing an increase of approximately 12% over the same period in 1998. This
is mainly due to higher costs charged by various program suppliers.
Depreciation and amortization expense for the three months ended June 30, 1999
decreased approximately 2% over the same period in 1998. This is mainly due to
assets becoming fully depreciated offset by depreciation and amortization on
plant, equipment and intangible assets acquired during the last year.
Interest expense for the three months ended June 30, 1999 decreased
approximately 12% as compared to the same period in 1998. The average bank debt
outstanding decreased from $10,925,000 during the second quarter of 1998 to
$10,402,682 during the second quarter of 1999. The Partnership's effective
interest rate decreased from 8.55% during the second quarter of 1998 to 7.94%
during the second 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 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 5.50 to 1 and a cash flow to debt service ratio of 1.25 to 1. At June 30,
1999, 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
$10,340,182. Certain fixed rate agreements in place as of March 31, 1999 expired
during the second 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: $7,500,000 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 7.31%, expiring October 13, 1999, $300,000 fixed at 7.33%
expiring September 30, 1999 and $65,182 at prime (currently 8.25%). 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 1999, the Partnership incurred approximately
$108,000 in capital expenditures including a continued system upgrade in the
LaConner, WA system; the start of quality assurance projects in the Aliceville,
AL system; and the start 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 construction of a new office building in the LaConner, WA
system; a vehicle replacement and continuing quality assurance projects in the
Aliceville, AL area, and the completion of 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 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.
8
<PAGE> 9
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.
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,
1999.
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: August 12, 1999 BY: /s/ RICHARD I. CLARK
-------------------------------------------
Richard I. Clark
(Vice President/Treasurer)
Dated: August 12, 1999 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 551,935
<SECURITIES> 0
<RECEIVABLES> 105,775
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 11,686,629
<DEPRECIATION> 5,204,082
<TOTAL-ASSETS> 12,287,672
<CURRENT-LIABILITIES> 11,064,520
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,223,152
<TOTAL-LIABILITY-AND-EQUITY> 12,287,672
<SALES> 2,474,332
<TOTAL-REVENUES> 2,474,332
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,272,747
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 424,454
<INCOME-PRETAX> (214,670)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (214,670)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
