UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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, 2002 |
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
| 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
N/A
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 15 pages. Exhibits index appears on page 14.
PART 1 — FINANCIAL INFORMATION
ITEM 1. Financial Statements
NORTHLAND CABLE PROPERTIES EIGHT LIMITED PARTNERSHIP
BALANCE SHEETS — (Unaudited)
(Prepared by the Managing General Partner)
| June 30, | December 31, | ||||||||||
| 2002 | 2001 | ||||||||||
| (unaudited) | |||||||||||
ASSETS |
|||||||||||
Cash |
$ | 460,964 | $ | 272,876 | |||||||
Accounts receivable |
154,235 | 151,517 | |||||||||
Due from affiliates |
16,790 | 7,848 | |||||||||
Prepaid expenses |
31,468 | 56,107 | |||||||||
Property and equipment, net of accumulated
depreciation of $8,255,640 and $7,657,591,
respectively |
5,327,570 | 5,723,026 | |||||||||
Intangible assets, net of accumulated
amortization of $2,815,848 and $2,815,225,
respectively |
4,013,430 | 4,014,736 | |||||||||
Total assets |
$ | 10,004,457 | $ | 10,226,110 | |||||||
LIABILITIES AND PARTNERS’ CAPITAL (DEFICIT) |
|||||||||||
Accounts payable and accrued expenses |
$ | 443,778 | $ | 534,135 | |||||||
Due to Managing General Partner and affiliates |
27,807 | 39,168 | |||||||||
Converter deposits |
4,662 | 4,722 | |||||||||
Subscriber prepayments |
240,127 | 215,503 | |||||||||
Notes payable |
8,591,382 | 8,828,957 | |||||||||
Interest rate swap agreements |
— | 49,964 | |||||||||
Total liabilities |
9,307,756 | 9,672,449 | |||||||||
Partners’ capital (deficit): |
|||||||||||
General Partner: |
|||||||||||
Contributed capital, net |
1,000 | 1,000 | |||||||||
Accumulated deficit |
(74,252 | ) | (75,682 | ) | |||||||
| (73,252 | ) | (74,682 | ) | ||||||||
Limited Partners: |
|||||||||||
Contributed capital, net |
8,120,820 | 8,120,820 | |||||||||
Accumulated deficit |
(7,350,867 | ) | (7,492,477 | ) | |||||||
| 769,953 | 628,343 | ||||||||||
Total partners’ capital |
696,701 | 553,661 | |||||||||
Total liabilities and partners’ capital |
$ | 10,004,457 | $ | 10,226,110 | |||||||
The accompanying notes are an integral part of these balance sheets.
NORTHLAND CABLE PROPERTIES EIGHT LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS — (Unaudited)
(Prepared by the Managing General Partner)
| For the six months ended June 30, | |||||||||||
| 2002 | 2001 | ||||||||||
| (unaudited) | |||||||||||
Service revenues |
$ | 2,578,565 | $ | 2,583,104 | |||||||
Expenses: |
|||||||||||
Operating (including $57,617
and $56,243 to affiliates in 2002
and 2001, respectively), excluding
depreciation and amortization shown below |
235,876 | 241,399 | |||||||||
General and administrative (including
$307,557 and $312,581 to affiliates
in 2002 and 2001, respectively) |
661,754 | 627,589 | |||||||||
Programming (including $48,124
and $54,029 to affiliates in 2002
and 2001, respectively) |
743,117 | 694,433 | |||||||||
Depreciation and amortization |
602,712 | 764,634 | |||||||||
| 2,243,459 | 2,328,055 | ||||||||||
Income from operations |
335,106 | 255,049 | |||||||||
Other income (expense): |
|||||||||||
Interest expense |
(233,310 | ) | (372,369 | ) | |||||||
Interest income and other, net |
(5,718 | ) | 4,262 | ||||||||
Unrealized gain (loss) on interest rate swap agreements |
49,964 | (65,523 | ) | ||||||||
Loss on disposal of assets |
(3,002 | ) | — | ||||||||
| (192,066 | ) | (433,630 | ) | ||||||||
Net income (loss) |
$ | 143,040 | (178,581 | ) | |||||||
Allocation of net income (loss): |
|||||||||||
General Partner |
$ | 1,430 | $ | (1,786 | ) | ||||||
Limited Partners |
$ | 141,610 | $ | (176,795 | ) | ||||||
Net income (loss) per limited partnership unit: |
|||||||||||
(19,087 units) |
$ | 7 | $ | (9 | ) | ||||||
Net income (loss) per $1,000 investment |
$ | 14 | $ | (18 | ) | ||||||
The accompanying notes are an integral part of these statements.
NORTHLAND CABLE PROPERTIES EIGHT LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS — (Unaudited)
(Prepared by the Managing General Partner)
| For the three months ended June 30, | |||||||||||
| 2002 | 2001 | ||||||||||
| (unaudited) | |||||||||||
Service revenues |
$ | 1,295,717 | $ | 1,298,734 | |||||||
Expenses: |
|||||||||||
Operating (including $29,717
and $36,824 to affiliates in 2002
and 2001, respectively), excluding
depreciation and amortization shown below |
116,221 | 116,897 | |||||||||
General and administrative (including
$154,101 and $156,496 to affiliates
in 2002 and 2001, respectively) |
333,509 | 311,240 | |||||||||
Programming (including $24,609
and $25,617 to affiliates in 2002
and 2001, respectively) |
371,447 | 343,409 | |||||||||
Depreciation and amortization |
303,353 | 384,233 | |||||||||
| 1,124,530 | 1,155,779 | ||||||||||
Income from operations |
171,187 | 142,955 | |||||||||
Other income (expense): |
|||||||||||
Interest expense |
(86,986 | ) | (170,023 | ) | |||||||
Interest income and other, net |
(3,199 | ) | 662 | ||||||||
Unrealized loss on interest rate swap agreements |
— | (49,331 | ) | ||||||||
| (90,185 | ) | (218,692 | ) | ||||||||
Net income (loss) |
$ | 81,002 | (75,737 | ) | |||||||
Allocation of net income (loss): |
|||||||||||
General Partner |
$ | 810 | $ | (757 | ) | ||||||
Limited Partners |
$ | 80,192 | $ | (74,980 | ) | ||||||
Net income (loss) per limited partnership unit: |
|||||||||||
(19,087 units) |
$ | 4 | $ | (4 | ) | ||||||
Net income (loss) per $1,000 investment |
$ | 8 | $ | (8 | ) | ||||||
The accompanying notes are an integral part of these statements.
NORTHLAND CABLE PROPERTIES EIGHT LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS — (Unaudited)
(Prepared by the Managing General Partner)
| For the six months ended June 30, | ||||||||||
| 2002 | 2001 | |||||||||
| (unaudited) | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||||
Net income (loss) |
$ | 143,040 | $ | (178,581 | ) | |||||
Adjustments to reconcile net loss to
cash provided by operating activities: |
||||||||||
Depreciation and amortization |
602,712 | 764,634 | ||||||||
Amortization of loan costs |
6,293 | 6,029 | ||||||||
Loss on sale of property |
3,002 | — | ||||||||
Unrealized gain (loss) on interest rate swap agreements |
(49,964 | ) | 65,523 | |||||||
(Increase) decrease in operating assets: |
||||||||||
Accounts receivable |
(2,718 | ) | 26,174 | |||||||
Due from affiliates |
(8,942 | ) | 3,393 | |||||||
Prepaid expenses |
24,639 | 39,927 | ||||||||
Increase (decrease) in operating liabilities |
||||||||||
Accounts payable and accrued expenses |
(90,357 | ) | (19,176 | ) | ||||||
Due to managing general partner and affiliates |
(11,361 | ) | 28,317 | |||||||
Converter deposits |
(60 | ) | (270 | ) | ||||||
Subscriber prepayments |
24,624 | 20,889 | ||||||||
Net cash provided by operating activities |
640,908 | 756,859 | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||||
Purchase of property and equipment, net |
(210,258 | ) | (304,557 | ) | ||||||
Net cash used in investing activities |
(210,258 | ) | (304,557 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||||
Principal payments on borrowings |
(237,575 | ) | (431,981 | ) | ||||||
Loan fees |
(4,987 | ) | — | |||||||
Net cash used in financing activities |
(242,562 | ) | (431,981 | ) | ||||||
INCREASE IN CASH |
188,088 | 20,321 | ||||||||
CASH, beginning of period |
272,876 | 602,716 | ||||||||
CASH, end of period |
$ | 460,964 | $ | 623,037 | ||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
||||||||||
Cash paid during the period for interest |
$ | 250,637 | $ | 371,907 | ||||||
The accompanying notes are an integral part of these statements.
NORTHLAND CABLE PROPERTIES EIGHT LIMITED PARTNERSHIP
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(1) Basis of Presentation
These unaudited financial statements are being filed in conformity with Rule 10-01 of Regulation S-X regarding interim financial statements 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 accounting principles generally accepted in the United States of America. 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, 2002, its statements of operations for the six and three months ended June 30, 2002 and 2001, and its statement of cash flows for the six months ended June 30, 2002 and 2001. 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, 2001.
(2) Intangible Assets — Adoption of Statement of Financial Accounting Standards (SFAS) No. 142
Effective January 1, 2002, the Partnership adopted SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 142 requires that the Partnership cease amortization of goodwill and any other intangible assets determined to have indefinite lives, and establishes a new method of testing these assets for impairment on an annual basis or on an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value or if the fair values of intangible assets with indefinite lives falls below their carrying value on an annual basis. The amortization of existing goodwill ceased on December 31, 2001. The Partnership determined that its franchises met the definition of indefinite lived assets. Accordingly, amortization on these assets also ceased on December 31, 2001. The Partnership tested these intangibles for impairment upon adoption of the new standard and determined that the fair value of the assets exceeded their carrying value. The Partnership will continue to test these assets for impairment annually, or more frequently as warranted by events or changes in circumstances. The book value of the Partnership’s intangible assets is presented in the following table:
| June 30, 2002 | December 31, 2001 | ||||||||||||||||||||||||
| (unaudited) | (unaudited) | ||||||||||||||||||||||||
| Gross | Net | Gross | Net | ||||||||||||||||||||||
| Carrying | Accumulated | Carrying | Carrying | Accumulated | Carrying | ||||||||||||||||||||
| Amount | Amortization | Amount | Amount | Amortization | Amount | ||||||||||||||||||||
Indefinite-lived intangible assets: |
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Franchises |
$ | 6,609,626 | $ | (2,714,553 | ) | $ | 3,895,073 | $ | 6,609,626 | $ | (2,714,553 | ) | $ | 3,895,073 | |||||||||||
Goodwill |
158,409 | (49,832 | ) | 108,577 | 158,409 | (49,832 | ) | 108,577 | |||||||||||||||||
| 6,768,035 | (2,764,385 | ) | 4,003,650 | 6,768,035 | (2,764,385 | ) | 4,003,650 | ||||||||||||||||||
Definite-lived intangible assets: |
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Loan fees and other intangible assets |
61,243 | (51,463 | ) | 9,780 | 61,926 | (50,840 | ) | 11,086 | |||||||||||||||||
| $ | 6,829,278 | $ | (2,815,848 | ) | $ | 4,013,430 | $ | 6,829,961 | $ | (2,815,225 | ) | $ | 4,014,736 | ||||||||||||
As required by SFAS No. 142, the statement has not been retroactively applied to the results for the period prior to January 1, 2002. A reconciliation of net loss for the six and three months ended June 30, 2001, and the twelve months ended December 31, 2001, 2000 and 1999, as if amortization of goodwill and franchises had not been recorded is presented below:
| Six Months Ended | Three Months Ended | Twelve Months Ended December 31, | ||||||||||||||||||
| June 30, 2001 | June 30, 2001 | 2001 | 2000 | 1999 | ||||||||||||||||
NET LOSS: |
||||||||||||||||||||
Reported Net Income (Loss) |
$ | (178,581 | ) | $ | (75,737 | ) | $ | (319,969 | ) | $ | (160,886 | ) | $ | (403,306 | ) | |||||
Add back: amortization of
indefinite-lived franchises |
191,824 | 95,912 | 383,648 | 383,648 | 394,211 | |||||||||||||||
Add back: amortization of goodwill |
1,980 | 990 | 3,960 | 3,960 | 3,960 | |||||||||||||||
Adjusted net loss |
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