<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 September 30, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-13333
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Enstar Income Program 1984-1, L.P.
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(Exact name of Registrant as specified in its charter)
Georgia 58-1581136
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
10900 Wilshire Boulevard - 15th Floor
Los Angeles, California 90024
- ---------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including
area code: (310) 824-9990
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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
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<PAGE>
PART I - FINANCIAL INFORMATION
ENSTAR INCOME PROGRAM 1984-1, L.P.
CONDENSED BALANCE SHEETS
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----------------------
<TABLE>
<CAPTION>
December 31, September 30,
1997* 1998
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 462,900 $ 555,600
Accounts receivable, less allowance of $28,000 and
$9,900 for possible losses 107,500 92,900
Insurance claim receivable 399,700 392,400
Prepaid expenses and other assets 135,800 169,500
Property, plant and equipment, less accumulated
depreciation and amortization of $10,477,900 and $10,961,700 3,387,200 3,874,400
Franchise cost, net of accumulated
amortization of $235,400 and $111,300 74,600 64,200
Deferred loan costs and other deferred charges, net 128,400 99,600
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$ 4,696,100 $5,248,600
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-------------- -----------
LIABILITIES AND PARTNERSHIP CAPITAL
LIABILITIES:
Accounts payable $ 529,800 $ 490,400
Due to affiliates 754,200 695,400
Note payable - affiliate 250,000 -
-------------- -----------
TOTAL LIABILITIES 1,534,000 1,185,800
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COMMITMENTS AND CONTINGENCIES
PARTNERSHIP CAPITAL (DEFICIT):
General partner (41,100) (32,100)
Limited partners 3,203,200 4,094,900
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TOTAL PARTNERSHIP CAPITAL 3,162,100 4,062,800
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$ 4,696,100 $5,248,600
-------------- -----------
-------------- -----------
</TABLE>
*As presented in the audited financial statements.
See accompanying notes to condensed financial statements.
2
<PAGE>
ENSTAR INCOME PROGRAM 1984-1, L.P.
CONDENSED STATEMENTS OF OPERATIONS
----------------------
----------------------
<TABLE>
<CAPTION>
Unaudited
--------------------------------------
Three months ended
September 30,
--------------------------------------
1997 1998
----------------- -----------------
<S> <C> <C>
REVENUES $ 1,339,500 $ 1,295,500
----------------- -----------------
OPERATING EXPENSES:
Service costs 519,800 456,200
General and administrative expenses 230,400 150,400
General Partner management fees
and reimbursed expenses 139,000 164,000
Depreciation and amortization 144,900 181,900
----------------- -----------------
1,034,100 952,500
----------------- -----------------
OPERATING INCOME 305,400 343,000
----------------- -----------------
OTHER INCOME (EXPENSE):
Interest income 9,700 6,900
Interest expense (4,900) (23,600)
Loss from involuntary conversion of cable
system assets - (26,500)
----------------- -----------------
4,800 (43,200)
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NET INCOME $ 310,200 $ 299,800
----------------- -----------------
----------------- -----------------
Net income allocated to General Partner $ 3,100 $ 3,000
----------------- -----------------
----------------- -----------------
Net income allocated to Limited Partners $ 307,100 $ 296,800
----------------- -----------------
----------------- -----------------
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 10.26 $ 9.91
----------------- -----------------
----------------- -----------------
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 29,940 29,940
----------------- -----------------
----------------- -----------------
</TABLE>
See accompanying notes to condensed financial statements.
3
<PAGE>
ENSTAR INCOME PROGRAM 1984-1, L.P.
CONDENSED STATEMENTS OF OPERATIONS
----------------------
----------------------
<TABLE>
<CAPTION>
Unaudited
--------------------------------------
Nine months ended
September 30,
--------------------------------------
1997 1998
----------------- -----------------
<S> <C> <C>
REVENUES $ 4,040,100 $ 3,942,800
----------------- -----------------
OPERATING EXPENSES:
Service costs 1,499,200 1,402,700
General and administrative expenses 692,900 508,700
General Partner management fees
and reimbursed expenses 419,800 501,000
Depreciation and amortization 421,200 542,700
----------------- -----------------
3,033,100 2,955,100
----------------- -----------------
OPERATING INCOME 1,007,000 987,700
----------------- -----------------
OTHER INCOME (EXPENSE):
Interest income 28,800 18,700
Interest expense (79,800) (79,200)
Loss from involuntary conversion of cable
system assets - (26,500)
----------------- -----------------
(51,000) (87,000)
----------------- -----------------
NET INCOME $ 956,000 $ 900,700
----------------- -----------------
----------------- -----------------
Net income allocated to General Partner $ 9,600 $ 9,000
----------------- -----------------
----------------- -----------------
Net income allocated to Limited Partners $ 946,400 $ 891,700
----------------- -----------------
----------------- -----------------
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 31.61 $ 29.78
----------------- -----------------
----------------- -----------------
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 29,940 29,940
----------------- -----------------
----------------- -----------------
</TABLE>
See accompanying notes to condensed financial statements.
4
<PAGE>
ENSTAR INCOME PROGRAM 1984-1, L.P.
STATEMENTS OF CASH FLOWS
----------------------
----------------------
<TABLE>
<CAPTION>
Unaudited
--------------------------------------
Nine months ended
September 30,
--------------------------------------
1997 1998
----------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 956,000 $ 900,700
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 421,200 542,700
Amortization of deferred loan costs 43,500 22,000
Loss from involuntary conversion of cable system assets - 26,500
Increase (decrease) from changes in:
Receivables, prepaid expenses and other assets 70,800 (11,800)
Accounts payable (3,600) (39,400)
----------------- -----------------
Net cash provided by operating activities 1,487,900 1,440,700
----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (553,800) (1,032,200)
Increase in intangible assets (29,600) (3,000)
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Net cash used in investing activities (583,400) (1,035,200)
----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Due to affiliates (530,100) (58,800)
Repayment of debt (1,042,800) -
Borrowings from affiliate 250,000 (250,000)
Deferred loan costs (103,300) (4,000)
----------------- -----------------
Net cash used in financing activities (1,426,200) (312,800)
----------------- -----------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (521,700) 92,700
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 1,004,400 462,900
----------------- -----------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 482,700 $ 555,600
----------------- -----------------
----------------- -----------------
</TABLE>
See accompanying notes to condensed financial statements.
5
<PAGE>
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
and nine months ended September 30, 1998 and 1997 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 and nine months ended
September 30, 1998 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 fee expense approximated $64,700
and $197,100 for the three and nine months ended September 30, 1998.
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. The General Partner has contracted
with Falcon Communications, L.P. ("FCLP"), successor to Falcon Holding Group,
L.P. ("FHGLP"), an affiliated partnership, to provide corporate management
services for the Partnership. 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 $99,300 and
$303,900 for the three and nine months ended September 30, 1998. Management
fees and reimbursed expenses due the General Partner are non-interest bearing.
Payments of management fees and reimbursed expenses were deferred in
prior years pursuant to restrictions in the Partnership's note payable
agreement. The cumulative amount deferred was approximately $1,081,300. On
September 30, 1997, the Partnership obtained new financing and subsequently
used such borrowings and other available cash to pay $619,000 of previously
deferred management fees and reimbursed expenses. The remainder of these
deferred amounts, $462,300, was contributed as an equity contribution by the
General Partner to Enstar Finance Company, LLC ("EFC"), a subsidiary of the
General Partner, and remains an outstanding obligation of the Partnership. In
the normal course of business, the Partnership pays interest and principal to
EFC, its primary lender.
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 $2,000
6
<PAGE>
ENSTAR INCOME PROGRAM 1984-1, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
----------------------
----------------------
2. TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES (CONTINUED)
and $19,700 in the three and nine months ended September 30, 1998. 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 charged the Partnership for these
costs based on an estimate of what the General Partner could negotiate for
such programming services for the 15 partnerships managed by the General
Partner as a group. The Partnership recorded programming fee expense of
$291,600 and $869,300 for the three and nine months ended September 30, 1998.
Programming fees are included in service costs in the statements of
operations. In the future, programming services will be purchased through
another source, which may include FHGLP or an affiliate of FHGLP. Programming
rates may vary in the near term as a result of the change.
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 have been allocated 99% to the Limited
Partners and 1% to the General Partner. The General Partner does not own
units of partnership interest in the Partnership, but rather holds a
participation interest in the income, losses and distributions of the
Partnership.
7
<PAGE>
ENSTAR INCOME PROGRAM 1984-1, L.P.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
The Cable Television Consumer Protection and Competition Act of 1992
(the "1992 Cable Act") required the Federal Communications Commission ("FCC")
to, among other things, implement extensive regulation of the rates charged
by cable television systems for basic and programming service tiers,
installation, and customer premises equipment leasing. Compliance with those
rate regulations has had a negative impact on the Partnership's revenues and
cash flow. The Telecommunications Act of 1996 (the "1996 Telecom Act")
substantially changed the competitive and regulatory environment for cable
television and telecommunications service providers. Among other changes, the
1996 Telecom Act provides that the regulation of cable programming service
tier ("CPST") rates will be terminated on March 31, 1999. Because cable
service rate increases have continued to outpace inflation under the FCC's
existing regulations, it is possible that Congress and the FCC will consider
additional methods of regulating cable service rate increases, including
deferral or repeal of the March 31, 1999 termination of CPST rate regulation.
There can be no assurance as to what, if any, further 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
historical financial results as described below are not necessarily
indicative of future performance.
This Report includes certain forward looking statements regarding, among
other things, future results of operations, regulatory requirements,
competition, capital needs and general business conditions applicable to the
Partnership. Such forward looking statements involve risks and uncertainties
including, without limitation, the uncertainty of legislative and regulatory
changes and the rapid developments in the competitive environment facing
cable television operators such as the Partnership. In addition to the
information provided herein, reference is made to the Partnership's Annual
Report on Form 10-K for the year ended December 31, 1997 for additional
information regarding such matters and the effect thereof on the
Partnership's business.
RESULTS OF OPERATIONS
The Partnership's revenues decreased from $1,339,500 to $1,295,500, or
by 3.3%, and from $4,040,100 to $3,942,800, or by 2.4% for the three and nine
months ended September 30, 1998 as compared to the corresponding periods in
1997. Of the $44,000 decrease in revenues for the three months ended
September 30, 1998 as compared to the corresponding period in 1997, $74,300
was due to decreases in the number of subscriptions for basic, premium, tier
and equipment rental services and $9,900 was due to other revenue producing
items. The decrease was partially offset by a $40,200 increase due to
increases in regulated service rates that were implemented by the Partnership
in 1997. Of the $97,300 decrease in revenues for the nine months ended
September 30, 1998 as compared to the corresponding period in 1997, $237,200
was due to decreases in the number of subscriptions for basic, premium, tier
and equipment rental services. The decrease was partially offset by a
$135,200 increase due to increases in regulated service rates that were
implemented by the Partnership in 1997 and a $4,700 increase in other revenue
producing items. As of September 30, 1998, the Partnership had approximately
11,100 basic subscribers and 4,500 premium service units.
8
<PAGE>
ENSTAR INCOME PROGRAM 1984-1, L.P.
RESULTS OF OPERATIONS (CONTINUED)
Service costs decreased from $519,800 to $456,200, or by 12.2%, and from
$1,499,200 to $1,402,700, or by 6.4%, for the three and nine months ended
September 30, 1998 as compared to the corresponding periods in 1997. Service
costs represent costs directly attributable to providing cable services to
customers. The decreases were principally due to lower copyright and
programming fees. Copyright fees decreased due to decreases in revenues and
to the industry-wide change in status of one satellite service that resulted
in lower fees. Programming fees decreased as a result of decreases in the
number of subscribers to certain premium channels.
General and administrative expenses decreased from $230,400 to $150,400,
or by 34.7%, and from $692,900 to $508,700, or by 26.6%, for the three and
nine months ended September 30, 1998 as compared to the corresponding periods
in 1997. The decreases were primarily due to reductions in bad debt expense,
personnel costs and system operating management expenses allocated by an
affiliate of the General Partner that discontinued management of the
Partnership's Tennessee operations in the fourth quarter of 1997. Such
services are now being provided by the General Partner.
Management fees and reimbursed expenses increased from $139,000 to
$164,000, or by 18.0%, and from $419,800 to $501,000, or by 19.3%, for the
three and nine months ended September 30, 1998 as compared to the
corresponding periods in 1997. Management fees decreased by $2,300 and $4,900
for the three and nine months ended September 30, 1998 as compared to the
corresponding periods in 1997, in direct relation to decreased revenues as
described above. Reimbursed expenses allocated by the General Partner
increased by $27,300 and $86,100 for the three and nine months ended
September 30, 1998 as compared to the corresponding periods in 1997 as a
result of transferring system operating management of the Partnership's
Tennessee systems from an affiliate to the General Partner.
Depreciation and amortization expense increased from $144,900 to
$181,900, or by 25.5%, and from $421,200 to $542,700, or by 28.8%, for the
three and nine months ended September 30, 1998 as compared to the
corresponding periods in 1997. The increases were primarily due to asset
additions including expenditures in the second half of 1997 to replace
segments of the Partnership's North Carolina cable plant and subscriber
connections that were damaged by a storm.
Operating income increased from $305,400 to $343,000, or by 12.3%, and
decreased from $1,007,000 to $987,700, or by 1.9%, for the three and nine
months ended September 30, 1998, respectively, as compared to the
corresponding periods in 1997. The three months' increase was primarily due
to lower bad debt expense and copyright fees. The nine months' decrease was
principally the result of decreases in revenues and increases in depreciation
and amortization expense and reimbursed expenses as described above.
Interest income decreased from $9,700 to $6,900, or by 28.9%, and from
$28,800 to $18,700, or by 35.1%, for the three and nine months ended
September 30, 1998 as compared to the corresponding periods in 1997. The
decreases were due to lower average cash balances available for investment.
Interest expense increased from $4,900 to $23,600 and remained
relatively unchanged, decreasing from $79,800 to $79,200 for the three and
nine months ended September 30, 1998 as compared to the corresponding periods
in 1997. The increase for the three months was primarily due to commitment
fees paid by the
9
<PAGE>
ENSTAR INCOME PROGRAM 1984-1, L.P.
RESULTS OF OPERATIONS (CONTINUED)
Partnership to EFC under its Facility. The Partnership terminated its
previous credit agreement in the second quarter of 1997 and consequently did
not incur such fees in the three months ended September 30, 1997.
The Partnership recognized a $26,500 loss on involuntary conversion of
cable system assets during the third quarter of 1998 related to storm damage
sustained by its North Carolina system.
Due to the factors described above, the Partnership's net income
decreased from $310,200 to $299,800, or by 3.4%, and from $956,000 to
$900,700, or by 5.8%, for the three and nine months ended September 30, 1998
as compared to the corresponding periods in 1997.
Based on its experience in the cable television industry, the
Partnership believes that operating income before depreciation and
amortization ("EBITDA") and related measures of cash flow serve as important
financial analysis tools for measuring and comparing cable television
companies in several areas, such as liquidity, operating performance and
leverage. EBITDA is not a measurement determined under generally accepted
accounting principles ("GAAP") and does not represent cash generated from
operating activities in accordance with GAAP. EBITDA should not be considered
by the reader as an alternative to net income as an indicator of financial
performance or as an alternative to cash flows as a measure of liquidity. In
addition, the definition of EBITDA may not be identical to similarly titled
measures used by other companies. EBITDA as a percentage of revenues
increased from 33.6% to 40.5% and from 35.4% to 38.8% during the three and
nine months ended September 30, 1998 as compared to the corresponding periods
in 1997. The increases were primarily due to decreases in copyright fees and
bad debt expense as described above. EBITDA increased from $450,300 to
$524,900, or by 16.6%, and from $1,428,200 to $1,530,400, or by 7.2%, during
the three and nine months ended September 30, 1998 as compared to the
corresponding periods in 1997.
LIQUIDITY AND CAPITAL RESOURCES
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 requirements. In
general, these capital requirements involve expansion, improvement and
upgrade of the Partnership's existing cable systems and were $1,032,200 in
the first nine months of 1998. As of the date of this Report, substantially
all of the available channel capacity in the Partnership's cable television
systems is being utilized and each of such systems requires an upgrade. The
entire upgrade program is presently estimated to require aggregate capital
expenditures of approximately $8,000,000 and covers 12 franchise areas. These
upgrades are currently required in five existing franchise agreements. The
upgrades required by the five existing franchise agreements are estimated to
cost approximately $3,400,000 and must be completed by December 2001 and
February 2002.
The Partnership is party to a loan agreement with EFC which provides for
a revolving loan facility of $7,481,700 (the "Facility"). The Partnership
prepaid its outstanding borrowings of $250,000 on June 22, 1998, although the
Partnership's management expects to reborrow under the Facility in the future
for the upgrade of the Partnership's systems.
10
<PAGE>
ENSTAR INCOME PROGRAM 1984-1, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Partnership's Facility will mature on August 31, 2001, at which time
all funds previously advanced will be due in full. Borrowings bear interest
at the lender's base rate (8.25% at September 30, 1998) plus 0.625%, or at an
offshore rate plus 1.875%. Under certain circumstances, the Partnership is
required to make mandatory prepayments, which permanently reduce the maximum
commitment under the Facility. The Facility contains certain financial tests
and other covenants including, among others, restrictions on incurrence of
indebtedness, investments, sales of assets, acquisitions and other covenants,
defaults and conditions. The Facility does not restrict the payment of
distributions to partners unless an event of default exists thereunder or the
ratio of debt to cash flow is greater than 4 to 1. However, due to the
upgrade program discussed above, the General Partner believes it is critical
to conserve cash and borrowing capacity and, consequently, has concluded that
it would not be prudent for the Partnership to resume paying distributions at
this time.
Beginning in August 1997, the Partnership elected to self-insure its
cable distribution plant and subscriber connections against property damage
as well as possible business interruptions caused by such damage. The
decision to self-insure was made due to significant increases in the cost of
insurance coverage and decreases in the amount of insurance coverage
available.
While the Partnership made the election to self-insure for these risks
based upon a comparison of historical damage sustained over the previous five
years with the cost and amount of insurance currently available, there can be
no assurance that future self-insured losses will not exceed prior costs of
maintaining insurance for these risks. Approximately 65% of the Partnership's
subscribers are served by its system in Brownsville, Tennessee and
neighboring communities. Significant damage to the system due to seasonal
weather conditions or other events could have a material adverse effect on
the Partnership's liquidity and cash flows. The Partnership continues to
purchase insurance coverage in amounts its management views as appropriate
for all other property, liability, automobile, workers' compensation and
other types of insurable risks.
In October 1998, the Partnership reinstated third party insurance
coverage against damage to its cable distribution plant and subscriber
connections and against business interruptions resulting from such damage.
Although this coverage is subject to a significant annual deductible, the
policy is intended to insure the Partnership against catastrophic losses, if
any, in future periods.
During the third quarter, the Corporate General Partner continued its
identification and evaluation of the Partnership's Year 2000 business risks
and its exposure to computer systems, to operating equipment which is date
sensitive and to the interface systems of its vendors and service providers.
The evaluation has focused on identification and assessment of systems and
equipment that may fail to distinguish between the year 1900 and the year
2000 and, as a result, may cease to operate or may operate improperly when
dates after December 31, 1999 are introduced.
Based on a study conducted in 1997, the Corporate General Partner
concluded that certain of the Partnership's information systems were not Year
2000 compliant and elected to replace such software and hardware with
applications and equipment certified by the vendors as Year 2000 compliant.
The Corporate General Partner expects to install substantially all of the new
systems in the fourth quarter of 1998, with the
11
<PAGE>
ENSTAR INCOME PROGRAM 1984-1, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
remaining systems to be installed in the first half of 1999. The total
anticipated cost, including replacement software and hardware, will be borne
by FCLP. FCLP is utilizing internal and external resources to install the new
systems. The Partnership does not believe that any other significant
information technology ("IT") projects affecting the Partnership have been
delayed due to efforts to identify and address Year 2000 issues.
Additionally, the Partnership has inventoried its operating and revenue
generating equipment to identify items that need to be upgraded or replaced
and has surveyed cable equipment manufacturers to determine which of their
models require upgrade or replacement to become Year 2000 compliant.
Identification and evaluation are essentially completed and a plan is being
developed to remediate non-compliant equipment prior to January 1, 2000. The
Partnership expects to complete its planning process by the end of 1998.
Upgrade or replacement, testing and implementation will be performed in 1999.
The cost of such replacement or remediation, currently estimated at $2,000,
is not expected to have a material effect on the Partnership's financial
position or results of operations. The Partnership has not incurred any costs
related to the Year 2000 project as of September 30, 1998. The Partnership
plans to inventory, assess, replace and test equipment with embedded computer
chips in a separate segment of its project, presently scheduled for 1999.
The Partnership has continued to survey its significant third party
vendors and service suppliers to determine the extent to which the
Partnership's interface systems are vulnerable should those third parties
fail to solve their own Year 2000 problems on a timely basis. Among the most
significant service providers upon which the Partnership relies are
programming suppliers, power and telephone companies, various banking
institutions and the Partnership's customer billing service. A majority of
these service suppliers either have not responded to the Partnership's
inquiries regarding their Year 2000 compliance programs or have responded
that they are unsure if they will become compliant on a timely basis.
Consequently, there can be no assurance that the systems of other companies
on which the Partnership must rely will be Year 2000 compliant on a timely
basis.
The Partnership expects to develop a contingency plan in 1999 to address
possible situations in which various systems of the Partnership, or of third
parties with which the Partnership does business, are not compliant prior to
January 1, 2000. Considerable effort will be directed toward distinguishing
between those contingencies with a greater probability of occurring from
those whose occurrence is considered remote. Moreover, such a plan will
necessarily focus on systems whose failure poses a material risk to the
Partnership's results of operations and financial condition.
The Partnership's most significant Year 2000 risk is an interruption of
service to subscribers, resulting in a potentially material loss of revenues.
Other risks include impairment of the Partnership's ability to bill and/or
collect payment from its customers, which could negatively impact its
liquidity and cash flows. Such risks exist primarily due to technological
operations dependent upon third parties and to a much lesser extent to those
under the control of the Partnership. Failure to achieve Year 2000 readiness
in either area could have a material adverse impact on the Partnership. The
Partnership is unable to estimate the possible effect on its results of
operations, liquidity and financial condition should its significant service
suppliers fail to complete their readiness programs prior to the Year 2000.
Depending on the supplier, equipment malfunction or type of service provided,
as well as the location and duration of the problem, the
12
<PAGE>
ENSTAR INCOME PROGRAM 1984-1, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
effect could be material. For example, if a cable programming supplier
encounters an interruption of its signal due to a Year 2000 satellite
malfunction, the Partnership will be unable to provide the signal to its
cable subscribers, which could result in a loss of revenues. Due to the
number of individually owned and operated channels the Partnership carries
for its subscribers, and the packaging of those channels, the Partnership is
unable to estimate any reasonable dollar impact of such interruption.
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
Operating activities provided $47,200 less cash in the nine months ended
September 30, 1998 than in the corresponding period in 1997. The Partnership
used $35,800 more cash for accounts payable due to differences in timing of
payments. Changes in accounts receivable, prepaid expenses and other assets
used $82,600 more cash in the first nine months of 1998 due to differences in
the timing of receivable collections and in the payment of prepaid expenses.
The Partnership used $451,800 more cash in investing activities in the
nine months ended September 30, 1998 than in the corresponding period of
1997, due to a $478,400 increase in expenditures for tangible assets,
partially offset by a $26,600 decrease in spending for intangible assets.
Financing activities used $1,113,400 less cash in the nine months ended
September 30, 1998 than in the comparable 1997 period. The Partnership used
$1,042,800 more cash for the repayment of debt and $99,300 more cash for the
payment of deferred loan costs in the 1997 period. The Partnership also used
$471,300 more cash to pay liabilities owed to the General Partner and other
affiliates in the first nine months of 1997 than in the comparable 1998
period.
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 the Partnership is able to
increase its service rates periodically, of which there can be no assurance.
13
<PAGE>
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 is filed.
<PAGE>
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: November 13, 1998 By: /s/ Michael K. Menerey
------------------------------
Michael K. Menerey,
Executive Vice President,
Chief Financial Officer and
Secretary
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT SEPTEMBER 30, 1998, AND THE STATEMENTS OF OPERATIONS FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 555,600
<SECURITIES> 0
<RECEIVABLES> 102,800
<ALLOWANCES> 9,900
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 14,836,100
<DEPRECIATION> 10,961,700
<TOTAL-ASSETS> 5,248,600
<CURRENT-LIABILITIES> 1,185,800
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,248,600
<SALES> 0
<TOTAL-REVENUES> 3,942,800
<CGS> 0
<TOTAL-COSTS> 2,955,100
<OTHER-EXPENSES> 7,800
<LOSS-PROVISION> 101,800
<INTEREST-EXPENSE> 79,200
<INCOME-PRETAX> 900,700
<INCOME-TAX> 0
<INCOME-CONTINUING> 900,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 900,700
<EPS-PRIMARY> 29.78
<EPS-DILUTED> 0
</TABLE>
