<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 MARCH 31, 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
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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) 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 __.
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ITEM 1. Financial Statements
NORTHLAND CABLE PROPERTIES EIGHT LIMITED PARTNERSHIP BALANCE SHEETS -
(Unaudited) (Prepared by the Managing General Partner)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Cash $ 521,200 $ 800,110
Accounts receivable 83,011 108,011
Due from affiliates 3,225 26,295
Prepaid expenses 52,315 60,971
Property and equipment, net of accumulated
depreciation of $4,926,542 and $4,641,375,
respectively 6,651,679 6,813,077
Intangible assets, net of accumulated
amortization of $2,833,317 and $2,687,869,
respectively 5,243,280 5,388,729
------------ ------------
Total assets $ 12,554,710 $ 13,197,193
============ ============
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses $ 437,428 $ 778,917
Due to managing general partner and affiliates 61,223 107,977
Converter deposits 9,542 10,002
Subscriber prepayments 264,917 237,475
Notes payable 10,465,182 10,625,000
------------ ------------
Total liabilities 11,238,292 11,759,371
------------ ------------
Partners' equity:
General Partners:
Contributed capital, net 1,000 1,000
Accumulated deficit (68,054) (66,840)
------------ ------------
(67,054) (65,840)
------------ ------------
Limited Partners:
Contributed capital, net 8,120,820 8,120,820
Accumulated deficit (6,737,348) (6,617,158)
------------ ------------
1,383,472 1,503,662
------------ ------------
Total partners' equity 1,316,418 1,437,822
------------ ------------
Total liabilities and partners' equity $ 12,554,710 $ 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 three months ended March 31,
------------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Service revenues $ 1,229,793 $ 1,208,934
Expenses:
Operating 113,101 118,181
General and administrative (including
$158,417 and $161,231 to affiliates
in 1999 and 1998, respectively) 277,424 263,936
Programming 315,396 305,198
Depreciation and amortization 430,615 417,143
----------- -----------
1,136,536 1,104,458
----------- -----------
Income from operations 93,257 104,476
Other income (expense):
Interest expense (217,844) (231,358)
Interest income 3,183 617
Loss on disposal of assets -- (49,263)
----------- -----------
(214,661) (280,004)
----------- -----------
Net income (loss) $ (121,404) $ (175,528)
=========== ===========
Allocation of net income (loss):
General Partners $ (1,214) $ (1,755)
=========== ===========
Limited Partners $ (120,190) $ (173,773)
=========== ===========
Net income (loss) per limited partnership unit:
(19,087 units for both time periods) $ (6) $ (9)
=========== ===========
Net income (loss) per $1,000 investment $ (12) $ (17)
=========== ===========
</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 CASH FLOWS - (Unaudited)
(Prepared by the Managing General Partner)
<TABLE>
<CAPTION>
For the three months ended March 31,
------------------------------------
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(121,404) $(175,528)
Adjustments to reconcile net income (loss) to
cash provided by operating activities:
Depreciation and amortization 430,615 417,143
Gain on sale of assets -- 49,263
(Increase) decrease in operating assets:
Accounts receivable 25,000 15,852
Due to affiliates 23,070 --
Prepaid expenses 8,656 (12,888)
Increase (decrease) in operating liabilities
Accounts payable and accrued expenses (341,489) 94,695
Due to managing general partner and affiliates (46,754) 23,332
Converter deposits (460) (660)
Subscriber prepayments 27,442 (74,402)
--------- ---------
Net cash from operating activities 4,676 336,807
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (123,769) (123,725)
Proceeds from sale of cable television system -- --
--------- ---------
Net cash from (used in) investing activities (123,769) (123,725)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings under long term debt, net -- --
Principal payments on borrowings (159,818) --
Loan fees and other costs incurred -- --
--------- ---------
Net cash used in financing activities (159,818) --
--------- ---------
INCREASE IN CASH (278,911) 213,082
CASH, beginning of period 800,111 463,021
--------- ---------
CASH, end of period $ 521,200 $ 676,103
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 219,563 $ 226,693
========= =========
</TABLE>
The accompanying notes to unaudited financial statements
are an integral part of these statements
4
<PAGE> 5
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 March 31, 1999 and December 31, 1998, its Statements of
Operations for the three months ended March 31, 1999 and 1998, and its
Statements of Cash Flows for the three months ended March 31, 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.
5
<PAGE> 6
PART I (continued)
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Revenues totaled $1,229,793 for the three months ended March 31, 1999,
representing an increase of approximately 2% as compared to the same period in
1998. Of these revenues, $934,779 (76%) was derived from basic service charges,
$109,853 (9%) from premium services, $44,771 (4%) from tier services, 37,707
(3%) from installation charges, $12,715 (1%) from service maintenance contracts
and $89,968 (7%) from other sources. The net increase in revenues is primarily
attributable to increases in basic service rates effective August 1, 1998.
As of March 31, 1999, the Partnership's systems served approximately 12,300
basic subscribers, 5,100 premium subscribers and 2,000 tier subscribers.
Operating expenses totaled $113,101 for the three months ended March 31, 1999,
representing a decrease of approximately 4% from the same period in 1998. This
decrease is mainly attributable to lower system maintenance and pole rental
expense as well as reduced vehicle operating expense.
General and administrative expenses totaled $277,424 for the three months ended
March 31, 1999, representing an increase of 5% as compared to the same period in
1998. This is mainly attributable to increased administrative salaries and
higher revenue based expenses such as management fees and franchise fees.
Programming expenses totaled $315,396 for the three months ended March 31, 1999,
representing an increase of approximately 3% over the same period in 1998. 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 March 31, 1999
increased approximately 3% over the same period in 1998. 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 March 31, 1999 decreased
approximately 6% as compared to the same period in 1998. The average bank debt
outstanding decreased from $10,925,000 during the first quarter of 1998 to
$10,595,091 during the first quarter of 1999. The Partnership's effective
interest rate decreased from 8.47% during the first quarter of 1998 to 8.22%
during the first 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
6
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service ratio of 1.25 to 1. At March 31, 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
$10,465,182. Certain fixed rate agreements in place as of December 31, 1998
expired during the first 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: $7,600,000 fixed at 8.24% under the terms of an
interest rate swap agreement with its lender expiring December 31, 2000,
$2,475,000 fixed at 7.58%, expiring July 13, 1999 and $390,182 fixed at 7.56%
expiring June 30, 1999. 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 first quarter of 1999, the Partnership incurred approximately
$124,000 in capital expenditures including the 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 in the LaConner, WA system; a vehicle replacement, the
extension of the fiber backbone to eliminate a headend and continuing quality
assurance projects in the Aliceville, AL area, and the construction 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
7
<PAGE> 8
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. 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.
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 March
31, 1999.
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
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 521,200
<SECURITIES> 0
<RECEIVABLES> 83,011
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 11,578,221
<DEPRECIATION> 4,926,542
<TOTAL-ASSETS> 12,554,710
<CURRENT-LIABILITIES> 773,110
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,316,418
<TOTAL-LIABILITY-AND-EQUITY> 12,554,710
<SALES> 1,229,793
<TOTAL-REVENUES> 1,229,793
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,136,536
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 217,844
<INCOME-PRETAX> (121,404)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (121,404)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
