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, 2015                                           

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)

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 [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X ]               No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).            

Yes [ ]               No [X]

TABLE OF CONTENTS 

PART 1 - FINANCIAL INFORMATION

ITEM 1. Financial Statements

NORTHLAND CABLE PROPERTIES EIGHT LIMITED PARTNERSHIP

CONDENSED BALANCE SHEETS - (UNAUDITED)

(Prepared by the Managing General Partner)

The accompanying notes are an integral part of these statements.

NORTHLAND CABLE PROPERTIES EIGHT LIMITED PARTNERSHIP

CONDENSED STATEMENTS OF OPERATIONS - (UNAUDITED)

(Prepared by the Managing General Partner)

The accompanying notes are an integral part of these statements.

NORTHLAND CABLE PROPERTIES EIGHT LIMITED PARTNERSHIP

CONDENSED STATEMENTS OF CASH FLOWS - (UNAUDITED)

(Prepared by the Managing General Partner)

The accompanying notes are an integral part of these statements.

     NORTHLAND CABLE PROPERTIES EIGHT LIMITED PARTNERSHIP

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Results of Operations - Three months ended March 31, 2015 and 2014

Total video basic subscribers decreased from 3,407 as of March 31, 2014, to 2,863 as of March 31, 2015. The loss in subscribers is a result of several factors including competition from Direct Broadcast Satellite (DBS) and other competitive providers, availability of off-air signals in the Partnership’s markets and regional and local economic conditions. The Swainsboro system is 85% overbuilt by Pineland Telephone Cooperative (“Pineland”). Over the last two years competition from Pineland has reduced the Swainsboro system’s revenues and cash flows. In its efforts to address this customer trend, the Partnership is increasing its customer retention efforts and its emphasis on bundling its video, data and phone products.

Revenue totaled $1,092,518 for the three months ended March 31, 2015, a decrease of 5% from $1,147,210 for the three months ended March 31, 2014. Revenues for the three months ended March 31, 2015 were comprised of the following sources:

Average monthly revenue per subscriber increased $15.26 or approximately 14% from $112.22 for three months ended March 31, 2014 to $127.48 for the three months ended March 31, 2015. This increase is attributable to rate increases implemented throughout the Partnership’s systems during the first quarter of 2015, increased penetration of new products to existing customers, specifically high-speed Internet and telephony services, and product bundling to new customers. This increase in average monthly revenue per subscriber was offset by the aforementioned decrease in basic subscribers. 

Operating expenses, excluding general and administrative, programming and depreciation expense totaled $129,575 for the three months ended March 31, 2015, an increase of approximately 10% from the same period in 2014. This increase is primarily attributable to a decrease in capitalized operating salaries as a result of reduced capital spending offset by decreases in system maintenance and vehicle maintenance expenses.

General and administrative expenses totaled $336,437 for the three months ended March 31, 2015, a decrease of approximately 3% from the same period in 2014. This decrease is primarily attributed to a decrease in administrative salary expenses, administrative services, and public filing and reporting expenses offset by higher call center fees, marketing expense, and other administrative expenses.

Programming expenses totaled $537,629 for the three months ended March 31, 2015, an increase of approximately 10% over the same period in 2014. The increase is primarily attributable to higher costs charged by various program suppliers and higher costs associated with the increase in high-speed Internet and telephone subscribers, offset by the decrease in video subscribers. Rate increases from program suppliers, as well as new fees due to the launch of additional channels, high-speed Internet and telephone services, will contribute to the trend of increased programming costs in the future.

Depreciation expense totaled $144,642 for the three months ended March 31, 2015, an increase of approximately 2% over the same period in 2014. The increase is primarily attributable to depreciation of recent purchases related to the upgrade of plant and equipment partially offset by certain assets becoming fully depreciated.

Interest expense totaled $1,980 for the three months ended March 31, 2015, as compared to $0 for the same period in 2014. The increase is primarily attributable to interest expense on obligations outstanding from the aforementioned legal settlement. 

Liquidity and Capital Resources

The Partnership's primary source of liquidity is cash flow provided by operations. The Partnership generates cash through the monthly billing of subscribers for video, Internet, telephone and other services. As a result of the aforementioned legal settlement, the Partnership will actively reduce its capital expenditures and defer payment of management fees for 2015 to satisfy these obligations and to cover future operating costs and working capital needs over the next twelve-month period.

Net cash provided by operating activities totaled $187,818 for the three months ended March 31, 2015. Adjustments to the ($57,845) net loss for the period to reconcile to net cash provided by operating activities consisted of depreciation of $144,642, and changes in other operating assets and liabilities of $101,021.

Net cash used in investing activities totaled $132,182 for the three months ended March 31, 2015 and consisted of purchases of property and equipment.

Obligations and Commitments

In addition to working capital needs for ongoing operations, the Partnership has capital requirements for annual required minimum operating lease payments. The following table summarizes the Partnership’s contractual obligations as of March 31, 2015:

Capital Expenditures

During the first three months of 2015, the Partnership paid $132,182 for capital expenditures. These expenditures included continued upgrades to both systems to expand and maintain the high speed data service capabilities, and customer premise equipment to provide services.

Management has estimated that the Partnership will spend approximately $268,000 on capital expenditures during the remainder of 2015. Planned expenditures include quality assurance work to maintain reliable video signals and broadband speeds in both systems and customer premise equipment to provide services.

Critical Accounting Policies

This discussion and analysis of financial condition and results of operations is based on the Partnership’s financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following critical accounting policies require a more significant amount of management judgment than other accounting policies the Partnership employs.

Revenue Recognition

Cable television service revenue, including service and maintenance, is recognized in the month service is provided to customers. Advance payments on cable services to be rendered are recorded as subscriber prepayments and deferred. Revenues resulting from the sale of local spot advertising are recognized when the related advertisements or commercials appear before the public.

Property and Equipment

Property and equipment are recorded at cost. Costs of additions and substantial improvements, which include materials, labor, and other indirect costs associated with the construction of cable transmission and distribution facilities, are capitalized. Indirect costs include employee salaries and benefits, travel and other costs. These costs are estimated based on historical information and analysis. The Partnership performs evaluations of these estimates as warranted by events or changes in circumstances.

The Partnership capitalizes costs associated with initial customer installations. The costs of disconnecting service or reconnecting service to previously installed locations is expensed in the period incurred. Costs for repairs and maintenance are also charged to operating expense, while equipment replacements, including the replacement of drops, are capitalized.

Intangible Assets

The Partnership does not amortize intangible assets determined to have indefinite lives. The Partnership has determined that its franchises meet the definition of indefinite lived assets. The Partnership tests these assets for impairment on an annual basis during the fourth quarter using financial information as of September 30th, or on an interim basis if an event occurs or circumstances change that would indicate the assets might be impaired.

The Partnership’s test for impairment performed during the fourth quarter of 2014 indicated that the carrying value of the franchise agreements associated with its Swainsboro, Georgia system exceeded such assets fair value as of September 30, 2014.   The Partnership recognized an impairment loss of $1,898,393 as of September 30, 2014, which resulted in a total impairment of the franchises.

Management believes the franchises have indefinite lives because the franchises are expected to be used by the Partnership for the foreseeable future as determined based on an analysis of all pertinent factors, including changes in legal, regulatory or contractual provisions and effects of obsolescence, demand and competition. In addition, the level of maintenance expenditures required to obtain the future cash flows expected from the franchises is not material in relation to the carrying value of the franchises. While the franchises have defined lives based on the franchising authority, renewals are routinely granted, and management expects them to continue to be granted. This expectation is supported by management’s experience with the Partnership’s franchising authorities and the franchising authorities of the Partnership’s affiliates.

The Partnership is not subject to market risks arising from changes in interest rates as its cash balance is comprised of deposits at financial institutions.

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.

The Partnership maintains disclosure controls and procedures designed to ensure that information required to be disclosed in our filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. The Chief Executive Officer and Vice President and Controller (Chief Accounting Officer) of the Managing General Partner have evaluated these disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q and have determined that such disclosure controls and procedures are effective.

There has been no change during the most recent quarter in the Partnership’s internal controls over financial reporting that has materially affected, or is reasonably likely to materially affect, the internal control over financial reporting.

PART II - OTHER INFORMATION

In September 2014, the Partnership settled a legal claim made by a former employee. Under the terms of the settlement, the Partnership will pay $150,000 in damages, fees and costs. Pursuant to the settlement agreement, the Partnership entered into a security agreement to grant a security interest in all of the assets of the Partnership to secure the obligations. In addition, the Partnership incurred approximately $216,848 in legal fees associated with the defense of this claim, of which approximately $5,948 was incurred for the three months ended March 31, 2014. The Partnership recognized both the settlement and the associated legal fees as general and administrative expenses for the year ended December 31, 2014.

The Partnership is party to other ordinary and routine litigation proceedings that are incidental to the Partnership’s business. Management believes that the outcome of all pending legal proceedings will not, individually or in the aggregate, have a material adverse effect on the Partnership, its financial statements or prospects.

There have been no material changes from the Partnership’s risk factors as disclosed in the 2014 Form 10-K.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

NORTHLAND CABLE PROPERTIES EIGHT LIMITED PARTNERSHIP

BY: Northland Communications Corporation,

General Partner

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