<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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 0-13333
Enstar Income Program 1984-1, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Georgia 58-1581136
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER
IDENTIFICATION NO.)
10900 Wilshire Boulevard, 15th Floor, Los Angeles, CA 90024
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (310)824-9990
________________________________________________________________________________
FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT.
Indicate by check x 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___
<PAGE> 2
PART I - FINANCIAL INFORMATION
ENSTAR INCOME PROGRAM 1984-1, L.P.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1995* 1996
----------- -----------
(unaudited)
ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 935,300 $ 1,496,500
Receivables, less allowance of $21,200
and $19,800 for possible losses 123,200 98,700
Prepaid expenses and other 55,900 69,700
Cable materials, equipment and supplies 70,600 70,600
Property, plant and equipment, less accumulated depreciation
and amortization of $9,631,600 and $9,776,900 2,549,300 2,454,600
Franchise cost, net of accumulated
amortization of $194,100 and $198,700 76,300 81,900
Deferred loan costs and deferred charges, net 42,800 38,700
----------- -----------
$ 3,853,400 $ 4,310,700
=========== ===========
LIABILITIES AND PARTNERSHIP CAPITAL
LIABILITIES:
Note payable $ 1,942,800 $ 1,942,800
Accounts payable 515,500 423,100
Due to affiliates 1,028,800 1,282,800
----------- -----------
TOTAL LIABILITIES 3,487,100 3,648,700
----------- -----------
COMMITMENTS AND CONTINGENCIES
PARTNERSHIP CAPITAL (DEFICIT):
General partner (69,000) (66,000)
Limited partners 435,300 728,000
----------- -----------
TOTAL PARTNERSHIP CAPITAL 366,300 662,000
----------- -----------
$ 3,853,400 $ 4,310,700
=========== ===========
</TABLE>
*As presented in the audited financial statements.
See accompanying notes to condensed financial statements
-2-
<PAGE> 3
ENSTAR INCOME PROGRAM 1984-1, L.P.
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Unaudited
------------------------------
Three months ended
March 31,
------------------------------
1995 1996
----------- -----------
<S> <C> <C>
REVENUES $ 1,181,800 $ 1,263,500
----------- -----------
OPERATING EXPENSES:
Service costs 438,300 464,400
General and administrative expenses 121,600 165,400
General Partner management fees
and reimbursed expenses 137,200 129,800
Depreciation and amortization 305,700 166,700
----------- -----------
1,002,800 926,300
----------- -----------
OPERATING INCOME 179,000 337,200
----------- -----------
OTHER INCOME (EXPENSE):
Interest income 11,400 10,500
Interest expense (68,600) (52,000)
----------- -----------
(57,200) (41,500)
----------- -----------
NET INCOME $ 121,800 $ 295,700
=========== ===========
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 4.03 $ 9.78
=========== ===========
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 29,940 29,940
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
-3-
<PAGE> 4
ENSTAR INCOME PROGRAM 1984-1, L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Unaudited
------------------------------
Three months ended
March 31,
------------------------------
1995 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 121,800 $ 295,700
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 305,700 166,700
Amortization of deferred loan costs 200 1,000
Increase (decrease) from changes in:
Accounts receivable, prepaid expenses
and other assets (86,800) 10,700
Accounts payable and due to affiliates 20,100 161,600
----------- -----------
Net cash provided by operating activities 361,000 635,700
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (45,700) (63,000)
Increase in intangible assets -- (11,500)
----------- -----------
Net cash used in investing activities (45,700) (74,500)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt (175,000) --
Deferred loan costs (6,400) --
----------- -----------
Net cash used in financing activities (181,400) --
----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS 133,900 561,200
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 1,169,700 935,300
----------- -----------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 1,303,600 $ 1,496,500
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
-4-
<PAGE> 5
ENSTAR INCOME PROGRAM 1984-1, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL STATEMENTS
The accompanying condensed interim financial statements for the three
months ended March 31, 1996 and 1995 are unaudited. These condensed interim
financial statements should be read in conjunction with the audited financial
statements and notes thereto included in the Partnership's latest Annual Report
on Form 10-K. In the opinion of management, such statements reflect all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the results of such periods. The results of operations for
the three months ended March 31, 1996 are not necessarily indicative of results
for the entire year.
2. TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES
The Partnership has a management and service agreement with a wholly
owned subsidiary of the General Partner (the "Manager") for a monthly management
fee of 5% of revenues, excluding revenues from the sale of cable television
systems or franchises. Management fees approximated $63,200 for the three months
ended March 31, 1996.
In addition to the monthly management fee described above, the
Partnership reimburses the Manager for direct expenses incurred on behalf of the
Partnership and for the Partnership's allocable share of operational costs
associated with services provided by the Manager. All cable television
properties managed by the General Partner and its subsidiary are charged a
proportionate share of these expenses. Corporate office allocations and district
office expenses are charged to the properties served based primarily on the
respective percentage of basic subscribers or homes passed (dwelling units
within a system) within the designated service areas. The total amount charged
to the Partnership for these services approximated $66,600 for the three months
ended March 31, 1996. Management fees and reimbursed expenses due the General
Partner are non-interest bearing.
The Partnership also receives certain system operating management
services from affiliates of the General Partner in addition to the Manager, due
to the fact that there are no such employees directly employed by the
Partnership. The Partnership reimburses the affiliates for its allocable share
of the affiliates' operational costs. The total amount charged to the
Partnership for these costs approximated $40,400 in the three months ended March
31, 1996. No management fee is payable to the affiliates by the Partnership and
there is no duplication of reimbursed expenses and costs paid to the Manager.
Certain programming services have been purchased through an affiliate
of the Partnership. In turn, the affiliate charges the Partnership for these
costs based on an estimate of what the Partnership could negotiate for such
programming services on a stand-alone basis. The Partnership paid the affiliate
$283,900 for programming services for the three months ended March 31, 1996.
Programming fees are included in service costs in the statements of operations
for the three months ended March 1, 1996 and 1995.
-5-
<PAGE> 6
ENSTAR INCOME PROGRAM 1984-1, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(CONCLUDED)
3. EARNINGS PER UNIT OF LIMITED PARTNERSHIP INTEREST
Earnings and losses per unit of limited partnership interest is based
on the average number of units outstanding during the periods presented. For
this purpose, earnings and losses are allocated 99% to the limited partners and
1% to the general partner.
4. RECLASSIFICATIONS
Certain 1995 amounts have been reclassified to conform to the 1996
presentation.
-6-
<PAGE> 7
ENSTAR INCOME PROGRAM 1984-1, L.P.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
On February 8, 1996, President Clinton signed into law the
Telecommunications Act of 1996 (the "1996 Telecom Act"). This statute
substantially changed the competitive and regulatory environment for
telecommunications providers by significantly amending the Communications Act of
1934, including certain of the rate regulation provisions previously imposed by
the Cable Television Consumer Protection and Competition Act of 1992 (the "1992
Cable Act"). Compliance with those rate regulations has had a negative impact on
the Partnership's revenues and cash flow. However, the Partnership believes that
recent policy decisions by the Federal Communications Commission (the "FCC")
will permit it to increase regulated service rates in the future in response to
specified historical and anticipated future cost increases, although certain
costs may continue to rise at a rate in excess of that which the Partnership
will be permitted to pass on to its customers. The 1996 Telecom Act provides
that certain of the rate regulations will be phased-out altogether in 1999.
Further, the regulatory environment will continue to change pending, among other
things, the outcome of legal challenges and FCC rulemaking and enforcement
activity in respect of the 1992 Cable Act and the completion of a significant
number of FCC rulemakings under the 1996 Telecom Act. There can be no assurance
as to what, if any, future action may be taken by the FCC, Congress or any other
regulatory authority or court, or the effect thereof on the Partnership's
business. Accordingly, the Partnership's historic interim financial results as
described below are not necessarily indicative of future performance.
In addition to the information set forth in this report, reference is
made to the Partnership's Annual Report on Form 10-K for the year ended December
31, 1995 for additional information regarding regulatory matters and the effect
thereof on the Partnership's business.
RESULTS OF OPERATIONS
The Partnership's revenues increased from $1,181,800 to $1,263,500, or
by 6.9%, for the quarter ended March 31, 1996 as compared to the corresponding
period in 1995. Of the $81,700 increase in revenues, $43,600 was due to
increases in the number of subscriptions for service, $19,600 was due to
increases in regulated service rates permitted under the 1992 Cable Act that
were implemented by the Partnership in April 1995 and $18,500 resulted from
increases in advertising sales and other revenue producing items.
Service costs increased from $438,300 to $464,400, or by 6.0%, for the
quarter ended March 31, 1996 as compared to the corresponding period in 1995.
Service costs represent costs directly attributable to providing cable services
to customers. Of the $26,100 increase, $16,600 was due to an increase in
personnel costs, $12,200 related to increased programming fees charged by
program suppliers (including primary satellite fees) and $9,000 was due to
increases in copyright fees. These increases were partially offset by an $11,700
increase in capitalization of labor and overhead expense due to more capital
projects during the 1996 period. The increase in programming expense was also
due to expanded programming usage relating to channel line-up restructuring and
to retransmission consent arrangements implemented to comply with the 1992 Cable
Act.
-7-
<PAGE> 8
ENSTAR INCOME PROGRAM 1984-1, L.P.
RESULTS OF OPERATIONS (CONCLUDED)
General and administrative expenses increased from $121,600 to
$165,400, or by 36.0%, for the quarter ended March 31, 1996 as compared to the
corresponding period in 1995. Of the $43,800 increase, $16,100 was due to a
benefit recorded by the Partnership in the first three months of 1995 resulting
from adjustments to business tax expense, $14,200 was due to an increase in bad
debt expense, $12,800 was due to expenses allocated by affiliates of the General
Partner that provide system operating management services to the Partnership and
$6,800 was due to an increase in marketing expense.
Management fees and reimbursed expenses decreased from $137,200 to
$129,800, or by 5.4%, for the quarter ended March 31, 1996 as compared to the
corresponding period in 1995. Of the $7,400 decrease, $11,500 was due to
decreased reimbursable expenses allocated by the General Partner, including
lower personnel costs resulting from staff reductions and lower marketing
expenses. As described above, affiliates of the General Partner now provide
certain system operating management services to the Partnership that were
provided by the General Partner prior to 1996. The decrease in reimbursed
expenses to the General Partner was partially offset by a $4,100 increase in
management fees directly related to increases in revenues.
Depreciation and amortization expense decreased from $305,700 to
$166,700, or by 45.5%, for the quarter ended March 31, 1996 as compared to the
corresponding period in 1995 due to the effect of certain tangible assets
becoming fully depreciated and certain intangible assets becoming fully
amortized.
Operating income increased from $179,000 to $337,200, or by 88.4%, for
the quarter ended March 31, 1996 as compared to the corresponding period in 1995
primarily due to increases in revenues and decreases in depreciation and
amortization expense as described above.
Interest expense decreased from $68,600 to $52,000, or by 24.2%, for
the quarter ended March 31, 1996 as compared to the corresponding period in
1995. The $16,600 decrease was due to lower average borrowings of $1,942,800
during the 1996 period compared with $2,779,600 during the corresponding 1995
quarter.
Interest income decreased from $11,400 to $10,500, or by 7.9%, for the
quarter ended March 31, 1996 as compared to the corresponding period in 1995 due
to lower cash balances available for investment and lower interest rates earned
on invested funds.
Due to the factors described above, the Partnership's net income
increased from $121,800 to $295,700 for the quarter ended March 31, 1996 as
compared to the corresponding period in 1995.
LIQUIDITY AND CAPITAL RESOURCES
The FCC's amended rate regulation rules were implemented during the
quarter ended September 30, 1994. Compliance with these rules has had a negative
impact on the Partnership's revenues and cash flow.
-8-
<PAGE> 9
ENSTAR INCOME PROGRAM 1984-1, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Partnership's primary objective, having invested its net
offering proceeds in cable systems, is to distribute to its partners all
available cash flow from operations and proceeds from the sale of cable systems,
if any, after providing for expenses, debt service and capital expenditure
requirements relating to the expansion, improvement and upgrade of its cable
systems. The Partnership currently relies exclusively on the availability of
cash generated from operations to fund its ongoing expenses, debt service and
capital requirements. In general, these requirements involve expansion,
improvement and upgrade of the Partnership's existing cable systems, and are
projected to be $528,000 for 1996, excluding any rebuilds. As of the date of
this Report, substantially all of the available channel capacity in the
Partnership's systems is being utilized and each of such systems requires
rebuilding. The rebuild program is presently estimated to require aggregate
capital expenditures of approximately $7.5 million, although the majority of the
total is not planned to be spent until 1997 and 1998. Due to the fact that the
Partnership is currently not able to incur additional borrowings under its note
payable, there can be no assurance that the Partnership's cash flow will be
adequate to meet its liquidity requirements, including necessary capital
expenditures. As a result, the Partnership is seeking additional sources of
borrowed funds in the future, if such borrowings are available on terms
acceptable to the Partnership, of which there can be no assurance.
In March 1996, the Partnership reached an agreement with its lender to
extend the maturity of its existing note payable to December 31, 1997. The terms
and conditions of the new note agreement are substantially the same as the
previous agreement. The Partnership is required to continue to make quarterly
payments of interest together with principal payments of $225,000 through
December 31, 1996, and quarterly installments of $250,000 through September 30,
1997, with a final installment of $292,814 due on December 31, 1997. In
addition, the amended note no longer limits the amount the Partnership can pay
in cash to the General Partner for current management fees and reimbursed
expenses, but continues to prohibit the payment of any previously deferred fees
and reimbursed expenses. Any payment of previously deferred fees, which as of
March 31, 1996, totaled an aggregate of $1,151,300, will continue to be deferred
until the note payable is repaid and this restriction is removed. A fee of
$25,000 was paid to the bank in conjunction with this extension. The Partnership
made its scheduled first quarter principal repayment of $225,000 on April 1,
1996.
The General Partner may continue to seek a buyer for the Snow Hill,
North Carolina system as well as for the Kershaw, South Carolina system. The
sale of these systems would allow the Partnership to reduce its bank debt or
accelerate the rebuilding of its remaining systems. Upon the sale of either or
both of these systems, the General Partner would evaluate the feasibility at
that time of resuming the payment of distributions. There can be no assurance
that these systems can be sold at an acceptable price.
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
Operating activities provided $274,700 more cash in the three months
ended March 31, 1996 than in the prior year period. Changes in accounts payable
and due to affiliates provided $141,500 more cash due to a decrease in the
payment of amounts owed to the General Partner and third party creditors.
Decreases in accounts receivable, prepaid expenses and other assets provided
$97,500 more cash. Partnership operations generated $35,700 more cash after
adding back non-cash depreciation and amortization charges.
-9-
<PAGE> 10
ENSTAR INCOME PROGRAM 1984-1, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONCLUDED)
The Partnership used $28,800 more cash in investing activities in the
three months ended March 31, 1996 than during the corresponding three months in
1995 due to a $17,300 increase in capital expenditures and an $11,500 increase
in expenditures for intangible assets. Financing activities used $181,400 less
cash in 1996 due to a decrease in the repayment of outstanding debt and a
reduction in the payment of deferred loan costs related to the Partnership's
note payable.
Operating income before depreciation and amortization (EBITDA) as a
percentage of revenues decreased from 41.0% during the first three months of
1995 to 39.9% during the corresponding 1996 quarter. The decrease was primarily
due to higher personnel costs, bad debt expense and programming expense as
described above in results of operations. EBITDA increased to $503,900 from
$484,700, or by 4.0%, for the three months ended March 31, 1996 compared to the
first three months of 1995.
INFLATION
Certain of the Partnership's expenses, such as those for wages and
benefits, equipment repair and replacement, and billing and marketing generally
increase with inflation. However, the Partnership does not believe that its
financial results have been, or will be, adversely affected by inflation in a
material way, provided that it is able to increase its service rates
periodically, of which there can be no assurance.
-10-
<PAGE> 11
ENSTAR INCOME PROGRAM 1984-1, L.P.
PART II. OTHER INFORMATION
ITEMS 1-5. Not applicable.
ITEM 6. Exhibits and Reports on Form 8-K
(a) None
(b) No reports on Form 8-K were filed during the
quarter for which this report was filed.
-11-
<PAGE> 12
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.
ENSTAR INCOME PROGRAM 1984-1, L.P.
a GEORGIA LIMITED PARTNERSHIP
(Registrant)
By: ENSTAR COMMUNICATIONS CORPORATION
General Partner
Date: May 9, 1996 By: /s/ Michael K. Menerey
------------------------
Michael K. Menerey,
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT MARCH 31, 1996, AND THE STATEMENTS OF OPERATIONS FOR THE THREE MONTHS
ENDED MARCH 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,496,500
<SECURITIES> 0
<RECEIVABLES> 118,500
<ALLOWANCES> 19,800
<INVENTORY> 70,600
<CURRENT-ASSETS> 0
<PP&E> 12,231,500
<DEPRECIATION> 9,776,900
<TOTAL-ASSETS> 4,310,700
<CURRENT-LIABILITIES> 1,705,900
<BONDS> 1,942,800
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,310,700
<SALES> 0
<TOTAL-REVENUES> 1,263,500
<CGS> 0
<TOTAL-COSTS> 926,300
<OTHER-EXPENSES> (10,500)
<LOSS-PROVISION> 15,900
<INTEREST-EXPENSE> 52,000
<INCOME-PRETAX> 295,700
<INCOME-TAX> 0
<INCOME-CONTINUING> 295,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 295,700
<EPS-PRIMARY> 9.78
<EPS-DILUTED> 0
</TABLE>
