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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, 2000
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)
<TABLE>
<S> <C>
Washington 91-1423516
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(State of Organization) (I.R.S. Employer Identification No.)
</TABLE>
<TABLE>
<S> <C>
1201 Third Avenue, Suite 3600, Seattle, Washington 98101
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(Address of Principal Executive Offices) (Zip Code)
</TABLE>
(206) 621-1351
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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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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,
2000 1999
------------ ------------
<S> <C> <C>
ASSETS
Cash $ 303,426 $ 316,123
Accounts receivable 102,815 111,341
Due from affiliates 13,693 2,445
Prepaid expenses 53,753 71,698
Property and equipment, net of accumulated
depreciation of $6,518,464 and $5,682,821,
respectively 6,279,233 6,683,636
Intangible assets, net of accumulated
amortization of $3,514,171 and $3,176,493,
respectively 4,532,300 4,859,583
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Total assets $ 11,285,220 $ 12,044,826
============ ============
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses $ 421,793 $ 514,549
Due to managing general partner and affiliates 29,732 8,037
Converter deposits 4,572 7,952
Subscriber prepayments 197,812 207,590
Notes payable 9,858,818 10,272,182
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Total liabilities 10,512,727 11,010,310
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Partners' equity:
General Partners:
Contributed capital, net 1,000 1,000
Accumulated deficit (73,493) (70,873)
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(72,493) (69,873)
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Limited Partners:
Contributed capital, net 8,120,820 8,120,820
Accumulated deficit (7,275,834) (7,016,431)
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844,986 1,104,389
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Total partners' equity 772,493 1,034,516
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Total liabilities and partners' equity $ 11,285,220 $ 12,044,826
============ ============
</TABLE>
The accompanying notes to unaudited financial statements are
an integral part of these statements
2
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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,
-------------------------------
2000 1999
----------- -----------
<S> <C> <C>
Service revenues $ 3,835,150 $ 3,721,442
Expenses:
Operating (including $53,464
and $45,162 to affiliates in 2000
and 1999, respectively) 378,594 353,475
General and administrative (including
$477,561 and $375,340 to affiliates
in 2000 and 1999, respectively) 929,240 868,768
Programming (including $60,568
and $58,923 to affiliates in 2000
and 1999, respectively) 1,004,860 937,536
Depreciation and amortization 1,156,895 1,195,076
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3,469,589 3,354,855
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Income from operations 365,561 366,587
Other income (expense):
Interest expense (626,324) (626,019)
Amortization of loan fees (22,275) (40,934)
Interest income and other 8,164 11,395
Gain on disposal of assets 12,850 --
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(627,585) (655,558)
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Net loss $ (262,024) $ (288,971)
=========== ===========
Allocation of net loss:
General Partners $ (2,620) $ (2,890)
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Limited Partners $ (259,404) $ (286,081)
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Net loss per limited partnership unit:
(19,087 units for both time periods) $ (14) $ (15)
=========== ===========
Net loss per $1,000 investment $ (28) $ (30)
=========== ===========
</TABLE>
The accompanying notes to unaudited financial statements are
an integral part of these statements
3
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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,
-------------------------------
2000 1999
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<S> <C> <C>
Service revenues $ 1,284,226 $ 1,247,110
Expenses:
Operating (including $16,472
and $12,428 to affiliates in 2000
and 1999, respectively) 111,957 129,588
General and administrative (including
$154,213 and $90,761 to affiliates
in 2000 and 1999, respectively) 317,491 300,804
Programming (including $23,631
and $17,506 to affiliates in 2000
and 1999, respectively) 340,385 300,435
Depreciation and amortization 388,708 378,569
----------- -----------
1,158,541 1,109,396
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Income from operations 125,685 137,714
Other income (expense):
Interest expense (193,824) (201,566)
Amortization of loan fees (7,385) (13,645)
Interest income and other 2,688 3,196
Gain on disposal of assets 350 --
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(198,171) (212,015)
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Net loss $ (72,486) (74,301)
=========== ===========
Allocation of net loss:
General Partners $ (725) $ (743)
=========== ===========
Limited Partners $ (71,761) $ (73,558)
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Net loss per limited partnership unit:
(19,087 units for both time periods) $ (4) $ (4)
=========== ===========
Net loss per $1,000 investment $ (8) $ (8)
=========== ===========
</TABLE>
The accompanying notes to unaudited financial statements are
an integral part of these statements
4
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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,
-------------------------------
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (262,024) $ (288,971)
Adjustments to reconcile net loss to
cash provided by operating activities:
Depreciation and amortization 1,156,895 1,195,076
Amortization of loan costs 22,275 40,934
Gain on sale of assets (12,850) --
(Increase) decrease in operating assets:
Accounts receivable 8,526 2,495
Due from affiliates (11,248) 23,743
Prepaid expenses 17,945 (27,191)
Increase (decrease) in operating liabilities
Accounts payable and accrued expenses (92,756) (357,191)
Due to managing general partner and affiliates 21,695 (81,126)
Converter deposits (3,380) (1,270)
Subscriber prepayments (9,778) (13,020)
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Net cash from operating activities 835,300 493,479
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (437,739) (533,468)
Proceeds from sale of property 13,500 --
Franchise fees and other intangibles (10,394) --
----------- -----------
Net cash used in investing activities (434,633) (533,468)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings under long term debt 97,400 56,000
Principal payments on borrowings (510,764) (409,818)
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Net cash used in financing activities (413,364) (353,818)
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(DECREASE) INCREASE IN CASH (12,697) (393,807)
CASH, beginning of period 316,123 800,111
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CASH, end of period $ 303,426 $ 406,304
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 624,514 $ 631,648
=========== ===========
</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, 2000, its statements of operations for the
nine and three months ended September 30, 2000 and 1999 and its
statements of cash flows for the nine months ended September 30, 2000
and 1999. Results of operations for these periods are not necessarily
indicative of results to be expected for the full year. These financial
statements and notes should be read in conjunction with the
Partnership's Annual Report on Form 10-K for the year ended December 31,
1999.
(2) In June 1998, the Financial Accounting Standards Board issued SFAS 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 statement of
operations, and requires that a company must formally document,
designate, and assess the effectiveness of transactions that are subject
to hedge accounting.
Pursuant to SFAS No. 137, "Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB No. 133 - an
Amendment to FASB Statement No. 133" the effective date of SFAS No. 133
has been deferred until fiscal years beginning after January 15, 2000.
SFAS No. 133 cannot be applied retroactively. SFAS No. 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, 1998 (and, at the company's
election, before January 1, 1999).
The Partnership has not yet quantified the impacts of adopting SFAS No.
133 on the financial statements and has not determined the timing or
method of adoption of SFAS No. 133. However, the statement could
increase volatility in earnings and other comprehensive income.
(3) In November of 1999, the SEC released SAB No. 101 "Revenue Recognition
in Financial Statements." This bulletin becomes effective for the
quarter ended December 31, 2000. This bulletin establishes more clearly
defined revenue recognition criteria, than previously existing
accounting pronouncements, and specifically addresses revenue
recognition requirements for
6
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nonrefundable fees, such as installation fees, collected by a company
upon entering into an arrangement with a customer. The Partnership
believes that the effects of this bulletin will not have a material
impact on the Partnership's financial position or results of operations.
(4) Certain reclassifications have been made to conform prior years'
financial statements with the current year presentation.
7
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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, 2000 AND 1999
Revenues totaled $3,835,150 for the nine months ended September 30, 2000,
representing an increase of approximately 3% as compared to the same period in
1999. Of these revenues, $2,926,098 (76%) was derived from basic service
charges, $303,727 (8%) from premium services, $155,269 (4%) from tier services,
$82,537 (2%) from installation charges, $43,106 (1%) from service maintenance
contracts, $125,293 (3%) from advertising and $199,120 (6%) from other sources.
The growth in revenue is attributable to rate increases implemented in the
Partnership's systems during the last year.
Operating expenses totaled $378,594 for the nine months ended September 30,
2000, representing an increase of approximately 7% as compared to the same
period in 1999. This is mainly attributable to increases in pole rental expense.
General and administrative expenses totaled $929,240 for the nine months ended
September 30, 2000, representing an increase of approximately 7% over the same
period in 1999. This increase is primarily attributable to: (i) increases in
salary and benefit costs due to cost of living adjustments; (ii) increases in
revenue based expenses such as management fees and franchise fees as well as
increased property taxes.
Programming expenses totaled $1,004,860 for the nine months ended September 30,
2000, representing an increase of approximately 7% over the same period in 1999.
This is mainly due to higher costs charged by various program suppliers and
increases in advertising expenses offset by reductions to local programming
expense.
Depreciation and amortization expense for the nine months ended September 30,
2000 decreased approximately 3% over the same period in 1999. 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, 2000 remained
consistent with the same period in 1999. The average bank debt outstanding
decreased from $10,510,591 during the first nine months of 1999 to $10,184,706
during the same period in 2000. The Partnership's effective interest rate
increased from 7.97% during the first nine months of 1999 to 8.20% during the
same period in 2000.
THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
Revenues totaled $1,284,227 for the three months ended September 30, 2000,
representing an increase of approximately 3% as compared to the same period in
1999. Of these revenues, $977,963 (76%) was derived from basic service charges,
$98,237 (8%) from premium services, $51,605 (4%) from tier services, 25,954 (2%)
from installation charges, $15,028 (1%) from service maintenance contracts,
$50,076 (4%) from advertising and $65,364 (5%) from other sources. The
8
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growth in revenue is attributable to rate increases implemented in the
Partnership's systems during the last year and increases in advertising sales.
Operating expenses totaled $111,957 for the three months ended September 30,
2000, representing a decrease of approximately 14% as compared to the same
period in 1999. This is mainly attributable to decreases in system maintenance,
drop materials and vehicle operating expenses.
General and administrative expenses totaled $317,491 for the three months ended
September 30, 2000, representing an increase of approximately 6% over the same
period in 1999. This increase is mainly due to higher administrative salaries.
Programming expenses totaled $340,385 for the three months ended September 30,
2000, representing an increase of approximately 13% over the same period in
1999. This is mainly due to higher costs charged by various program suppliers as
well as increases in advertising expenses.
Depreciation and amortization expense for the three months ended September 30,
2000 increased approximately 3% over the same period in 1999. This is mainly due
to depreciation on plant and equipment acquired during the last year offset by
assets becoming fully depreciated.
Interest expense for the three months ended September 30, 2000 decreased 4% over
the same period in 1999. The average bank debt outstanding decreased from
$10,368,182 during the third quarter of 1999 to $10,023,503 during the third
quarter of 2000. The Partnership's effective interest rate decreased from 7.79%
during the third quarter of 1999 to 7.73% during the third quarter of 2000.
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 5.00 to 1 and a cash flow to debt service ratio of 1.25 to 1. At September
30, 2000, the Partnership was in compliance with its required financial
covenants.
As of the date of this filing, the balance under the credit facility is
$9,858,818. Certain fixed rate agreements in place as of June 30, 2000 expired
during the third quarter of 2000, 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: $7,000,000 fixed at 7.74% under the terms of an
interest rate swap agreement with its lender expiring December 31, 2000,
$2,575,000 fixed at 8.62%, expiring November 13, 2000, $276,179 fixed at 8.25%
and $7,639 at prime (currently 9.75%). 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.
9
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Capital Expenditures
During the third quarter of 2000, the Partnership incurred approximately
$160,000 in capital expenditures including the final phases of construction of a
new office building in the LaConner, WA system; the start of a series of quality
assurance projects and the repair of fire damage to the office in the
Aliceville, AL system; and the initial phase of a system upgrade to 550 MHz in
the Swainsboro, GA system.
Planned expenditures for the balance of 2000 include an ongoing system upgrade
to a minimum of 400 MHz in the LaConner, WA system; continuing quality assurance
projects in the Aliceville, AL system; and the continuation of a system upgrade
to 550 MHz in the Swainsboro, GA system.
Cautionary statement for purposes of the "Safe Harbor" provisions of the Private
Litigation Reform Act of 1995. Statements contained or incorporated by reference
in this document that are not based on historical fact are "forward-looking
statements" within the meaning of the Private Securities Reform Act of 1995.
Forward-looking statements may be identified by use of forward-looking
terminology such as "believe", "intends", "may", "will", "expect", "estimate",
"anticipate", "continue", or similar terms, variations of those terms or the
negative of those terms.
10
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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
(b) No reports on Form 8-K have been filed during the quarter ended September
30, 2000.
11
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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
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Richard I. Clark
(Vice President/Treasurer)
Dated: BY: /s/ GARY S. JONES
--------- ----------------------------------
Gary S. Jones
(Vice President)
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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:
--------- ----------------------------------
Richard I. Clark
(Vice President/Treasurer)
Dated: BY:
--------- ----------------------------------
Gary S. Jones
(Vice President)
13
