<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, 1999
---------------------------------
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 (I.R.S. Employer Identification Number)
of incorporation or organization)
10900 Wilshire Boulevard - 15th Floor
Los Angeles, California 90024
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(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
====================================================
<TABLE>
<CAPTION>
December 31, September 30,
1998* 1999
----------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS:
Cash $1,036,000 $1,602,400
Accounts receivable, less allowance of $5,500 and
$3,800 for possible losses 27,800 73,900
Prepaid expenses and other assets 150,000 259,600
Property, plant and equipment, less accumulated
depreciation and amortization of $11,094,500 and $11,673,300 4,048,700 3,975,000
Franchise cost, net of accumulated
amortization of $114,500 and $124,200 66,000 56,200
Deferred loan costs and other deferred charges, net 88,900 60,500
----------------- -----------------
$5,417,400 $6,027,600
================= =================
LIABILITIES AND PARTNERSHIP CAPITAL
-----------------------------------
LIABILITIES:
Accounts payable $ 420,800 $ 330,500
Due to affiliates 894,900 855,400
----------------- -----------------
TOTAL LIABILITIES 1,315,700 1,185,900
----------------- -----------------
COMMITMENTS AND CONTINGENCIES
PARTNERSHIP CAPITAL (DEFICIT):
General partner (31,700) (24,300)
Limited partners 4,133,400 4,866,000
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TOTAL PARTNERSHIP CAPITAL 4,101,700 4,841,700
----------------- -----------------
$5,417,400 $6,027,600
================= =================
</TABLE>
*As presented in the audited financial statements.
See accompanying notes to condensed financial statements.
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<PAGE>
ENSTAR INCOME PROGRAM 1984-1, L.P.
CONDENSED STATEMENTS OF OPERATIONS
====================================================
<TABLE>
<CAPTION>
Unaudited
-------------------------------------
Three months ended
September 30,
-------------------------------------
1998 1999
---------------- -----------------
<S> <C> <C>
REVENUES $1,295,500 $1,285,500
---------------- -----------------
OPERATING EXPENSES:
Service costs 456,200 504,500
General and administrative expenses 150,400 174,500
General Partner management fees
and reimbursed expenses 164,000 155,500
Depreciation and amortization 181,900 201,700
---------------- -----------------
952,500 1,036,200
---------------- -----------------
OPERATING INCOME 343,000 249,300
---------------- -----------------
OTHER INCOME (EXPENSE):
Interest income 6,900 18,600
Interest expense (23,600) (22,600)
Casualty loss (26,500) -
Cost of potential sale of cable television system - (2,100)
---------------- -----------------
(43,200) (6,100)
---------------- -----------------
NET INCOME $ 299,800 $ 243,200
================ =================
Net income allocated to General Partner $ 3,000 $ 2,400
================ =================
Net income allocated to Limited Partners $ 296,800 $ 240,800
================ =================
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 9.91 $ 8.04
================ =================
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,
-------------------------------------
1998 1999
---------------- -----------------
<S> <C> <C>
REVENUES $3,942,800 $3,835,600
---------------- -----------------
OPERATING EXPENSES:
Service costs 1,402,700 1,438,100
General and administrative expenses 508,700 530,000
General Partner management fees
and reimbursed expenses 501,000 454,800
Depreciation and amortization 542,700 643,300
---------------- -----------------
2,955,100 3,066,200
---------------- -----------------
OPERATING INCOME 987,700 769,400
---------------- -----------------
OTHER INCOME (EXPENSE):
Interest income 18,700 42,500
Interest expense (79,200) (69,800)
Casualty loss (26,500) -
Costs of potential sale of cable television system - (2,100)
---------------- -----------------
(87,000) (29,400)
---------------- -----------------
NET INCOME $ 900,700 $ 740,000
================ =================
Net income allocated to General Partner $ 9,000 $ 7,400
================ =================
Net income allocated to Limited Partners $ 891,700 $ 732,600
================ =================
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 29.78 $ 24.47
================ =================
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,
-------------------------------------
1998 1999
---------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 900,700 $ 740,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 542,700 643,300
Amortization of deferred loan costs 22,000 22,300
Casualty loss 26,500 -
Decrease from changes in:
Receivables, prepaid expenses and other assets (11,800) (155,700)
Accounts payable (39,400) (90,300)
---------------- -----------------
Net cash provided by operating activities 1,440,700 1,159,600
---------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,032,200) (553,700)
Increase in intangible assets (3,000) -
---------------- -----------------
Net cash used in investing activities (1,035,200) (553,700)
---------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Due to affiliates (58,800) (39,500)
Repayment of borrowings from affiliate (250,000) -
Deferred loan costs (4,000) -
---------------- -----------------
Net cash used in financing activities (312,800) (39,500)
---------------- -----------------
INCREASE IN CASH 92,700 566,400
CASH AT BEGINNING OF PERIOD 462,900 1,036,000
---------------- -----------------
CASH AT END OF PERIOD $ 555,600 $1,602,400
================ =================
</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, 1999 and 1998 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, 1999 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 $64,200 and $191,700
for the three and nine months ended September 30, 1999.
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"), 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
$91,300 and $263,100 for the three and nine months ended September 30, 1999.
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 a commitment fee 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 $12,200 and $30,400 in the three and
nine months ended September 30, 1999. 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.
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<PAGE>
ENSTAR INCOME PROGRAM 1984-1, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
=====================================================
2. TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES (CONTINUED)
Substantially all programming services have been purchased through
FCLP. FCLP, in the normal course of business, purchases cable programming
services from certain affiliated program suppliers. Such purchases of
programming services are made on behalf of the Partnership and the other
partnerships managed by the General Partner as well as for FCLP's own cable
television operations. FCLP charges 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 $314,000 and $906,800 for the
three and nine months ended September 30, 1999. Programming fees are included in
service costs in the statements of operations.
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
ended the regulation of cable programming service tier rates on March 31, 1999.
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, 1998 for additional information regarding
such matters and the effect thereof on the Partnership's business.
RESULTS OF OPERATIONS
The Partnership's revenues decreased from $1,295,500 to $1,285,500, or
by less than 1.0%, and from $3,942,800 to $3,835,600, or by 2.7%, for the three
and nine months ended September 30, 1999 as compared to the corresponding
periods in 1998. Of the $10,000 decrease in revenues for the three months ended
September 30, 1999, $33,800 was due to decreases in the number of subscriptions
for basic, premium, tier and equipment rental services. The decrease was
partially offset by a $22,900 increase due to increases in regulated service
rates that were implemented by the Partnership in June 1999 and a $900 increase
in other revenue producing items. Of the $107,200 decrease in revenues for the
nine months ended September 30, 1999, $106,100 was due to decreases in the
number of subscriptions for basic, premium, tier and equipment rental services
and $29,100 was due to decreases in other revenue producing items. The decrease
was partially offset by a $28,000 increase due to the impact of rate increases
as discussed above. As of September 30, 1999, the Partnership had approximately
10,800 basic subscribers and 4,400 premium service units.
Service costs increased from $456,200 to $504,500, or by 10.6%, and
from $1,402,700 to $1,438,100, or by 2.5%, for the three and nine months ended
September 30, 1999 as compared to the corresponding periods in 1998. Service
costs represent costs directly attributable to providing cable services to
customers. The increases were primarily due to increases in programming fees
resulting from higher rates charged by program suppliers. The three months'
increase was also due to higher copyright fee expense. The nine months' increase
was also due to higher franchise fees related to certain non-recurring
adjustments in the 1998 period.
-8-
<PAGE>
ENSTAR INCOME PROGRAM 1984-1, L.P.
RESULTS OF OPERATIONS (CONTINUED)
General and administrative expenses increased from $150,400 to
$174,500, or by 16.0%, and from $508,700 to $530,000, or by 4.2%, for the three
and nine months ended September 30, 1999, respectively, as compared to the
corresponding periods in 1998. The increases were primarily due to higher
insurance premiums and personnel costs. The nine months' increase was partially
offset by decreases in bad debt expense.
Management fees and reimbursed expenses decreased from $164,000 to
$155,500, or by 5.2%, and from $501,000 to $454,800, or by 9.2%, for the three
and nine months ended September 30, 1999 as compared to the corresponding
periods in 1998. Management fees decreased in direct relation to decreased
revenues as described above. Reimbursed expenses decreased primarily as a result
of lower allocated personnel costs due to staff reductions.
Depreciation and amortization expense increased from $181,900 to
$201,700, or by 10.9%, and from $542,700 to $643,300, or by 18.5%, for the three
and nine months ended September 30, 1999 as compared to the corresponding
periods in 1998. The increases were primarily due to plant asset additions.
Operating income decreased from $343,000 to $249,300, or by 27.3%, and
from $987,700 to $769,400, or by 22.1%, for the three and nine months ended
September 30, 1999 as compared to the corresponding periods in 1998. The
decreases were primarily due to increases in depreciation and amortization,
programming fees and insurance premiums as described above.
Interest income increased from $6,900 to $18,600 and from $18,700 to
$42,500 for the three and nine months ended September 30, 1999 as compared to
the corresponding periods in 1998. The increases were due to higher average cash
balances available for investment.
Interest expense decreased from $23,600 to $22,600, or by 4.2%, and
from $79,200 to $69,800, or by 11.9%, for the three and nine months ended
September 30, 1999 as compared to the corresponding periods in 1998. The
decreases were primarily due to lower outstanding borrowings resulting from the
repayment of the Partnership's note payable in June 1998. The Partnership pays
interest in the form of a commitment fee on the unused portion of its loan
commitment.
The Partnership recognized a $26,500 casualty loss during the third
quarter of 1998 related to storm damage sustained by its North Carolina system.
The Partnership incurred expenses of $2,100 in the three and nine
months ended September 30, 1999 in connection with the possible sale of its
Kershaw, South Carolina cable television system assets.
Due to the factors described above, the Partnership's net income
decreased from $299,800 to $243,200, or by 18.9%, and from $900,700 to $740,000,
or by 17.8%, for the three and nine months ended September 30, 1999 as compared
to the corresponding periods in 1998.
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
-9-
<PAGE>
ENSTAR INCOME PROGRAM 1984-1, L.P.
RESULTS OF OPERATIONS (CONTINUED)
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 decreased from 40.5% to 35.1% and from 38.8% to 36.8% during the three
and nine months ended September 30, 1999 as compared to the corresponding
periods in 1998. The decrease was primarily due to increases in programming fees
and insurance premiums as described above. EBITDA decreased from $524,900 to
$451,000, or by 14.1%, and from $1,530,400 to $1,412,700, or by 7.7%, during the
three and nine months ended September 30, 1999 as compared to the corresponding
periods in 1998.
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.
Based on its belief that the market for cable systems has generally
improved, the General Partner had been evaluating strategies for liquidating the
Partnership. These strategies included the potential sale of substantially all
of the Partnership's assets to third parties and/or affiliates of the General
Partner, and the subsequent liquidation of the Partnership. On May 26, 1999,
Charter Communications ("Charter") signed an agreement to acquire all of the
cable television assets of FCLP and Enstar Communications Corporation, the
Partnership's General Partner. The General Partner and Charter have decided to
implement a strategy for liquidating the Partnership that involves selling its
systems to third parties. Accordingly, the General Partner has entered into an
agreement with a cable broker regarding the sale of the systems, although no
assurance can be given regarding the likelihood, if any, of receiving
appropriate offers to purchase the systems. Any such sale and corresponding
liquidation will not close before the sale of the General Partner to Charter. In
connection with the liquidation strategy, on May 27, 1999, the General Partner
signed a non-binding letter of intent to sell the cable television assets of its
system in Kershaw, South Carolina to Catawba Services, Inc.
Following the close of all pending transactions, Charter will serve
approximately 6.2 million customers and will be the nation's fourth largest
cable operator. Headquartered in St. Louis, Missouri, Charter was acquired by
Paul G. Allen in 1998. More information about Charter can be accessed on the
Internet at www.chartercom.com.
The Partnership relies upon the availability of cash generated from
operations and possible borrowings to fund its ongoing expenses, debt service
and capital requirements. The Partnership's capital expenditures were $553,700
in the nine months ended September 30, 1999. 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 $8,300,000 and covers 12 franchise areas.
These upgrades are currently required in six existing franchise agreements
covering eight franchise areas. The upgrades required by the six existing
franchise agreements are estimated to cost approximately $4,900,000 and must be
completed by June 2000, December 2001 and February 2002. Capital expenditures
budgeted for
-10-
<PAGE>
ENSTAR INCOME PROGRAM 1984-1, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
1999 include approximately $48,000 to begin three of the upgrades, none of which
had been incurred as of September 30, 1999, and $624,800 for the replacement of
other assets. The Partnership believes that possible borrowings under its credit
agreement together with cash flow from operations will be adequate to fund
capital expenditures and other liquidity requirements.
The Partnership is party to a loan agreement with EFC. The loan
agreement provides for a revolving loan facility of $7,481,700 (the "Facility").
The Partnership repaid its outstanding borrowings in 1998, although the
Partnership may reborrow under the Facility in the future for the upgrade of the
Partnership's systems.
The Partnership's Facility matures on August 31, 2001, at which time
all amounts then outstanding are due in full. Borrowings bear interest at the
lender's base rate (8.25% at September 30, 1999) 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 Partnership's 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 General Partner elected to self-insure
the Partnership's 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.
In October 1998, FCLP reinstated third party insurance coverage for all
of the cable television properties owned or managed by FCLP to cover damage to
cable distribution plant and subscriber connections and against business
interruptions resulting from such damage. This coverage is subject to a
significant annual deductible which applies to all of the cable television
properties owned or managed by FCLP.
Approximately 64% 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.
YEAR 2000
During the third quarter of 1999, FCLP, on behalf of the General
Partner, continued its identification, evaluation and remediation of the
Partnership's Year 2000 business risks associated with operations directly under
the control of the Partnership and those risks that are dependent on third
parties related to 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, assessment and
remediation of
-11-
<PAGE>
ENSTAR INCOME PROGRAM 1984-1, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
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. Most of the Partnership's exposure
to Year 2000 issues is dependent in large part on third parties. Failure to
identify and remediate a critical Year 2000 issue could result in an
interruption of services to customers or in the interruption of critical
business functions, either of which could result in a material adverse impact on
the Partnership's financial results.
FCLP concluded that certain of the Partnership's internal 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. FCLP installed the new systems in the first quarter of 1999. The cost
of the implementation, including replacement software and hardware, has been
borne by FCLP. FCLP is continuing to utilize internal and external resources to
extend the functionality of the new systems. The Partnership does not believe
that any other significant information technology projects affecting the
Partnership have been delayed due to efforts to identify or address Year 2000
issues.
Additionally, FCLP has continued to inventory the Partnership's
internal 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, while ongoing, are substantially
completed and a plan has been developed to remediate or replace non-compliant
equipment. Of the total number of potentially non-compliant items identified in
the inventory, all were evaluated during the assessment stage, approximately
8.5% are in the remediation planning phase and 91.5% are in the implementation
stage. FCLP conducted limited testing of systems, software and equipment in the
third quarter of 1999 and placed significant reliance on test results provided
by AT&T Broadband & Internet Services, an affiliate of FCLP. The cost of such
replacement or remediation to the Partnership is currently estimated to be
$8,100, all of which had been incurred as of September 30, 1999. FCLP has also
substantially completed the assessment and replacement or remediation of the
majority of the Partnership's internal equipment containing embedded computer
chips.
FCLP has continued to survey the Partnership's 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. The Partnership
is heavily dependent on third parties and these parties are themselves
heavily dependent on technology. For example, if a television broadcaster or
cable programmer encounters Year 2000 problems that impede its ability to
deliver its programming, the Partnership will be unable to provide that
programming to its cable customers, which would result in a loss of revenues,
although the Partnership would attempt to provide its customers with
alternative program services. Virtually all of the Partnership's most
critical equipment vendors have responded to the surveys regarding the Year
2000 compliance of their products and indicated that they are already
compliant or have indicated their intent to be compliant. Additional
compliance information has been obtained for specific products from vendor
Web sites, interviews, on-site visits, system interface testing and industry
group participation. Among the most significant third party service providers
upon which the Partnership relies are programming suppliers, power and
telephone companies, various banking institutions and the Partnership's
customer billing service. The Partnership has taken steps to attempt to
satisfy itself that the third parties on which it is heavily reliant are Year
2000 compliant and have developed satisfactory contingency plans, or that
alternative means of meeting the Partnership's business requirements are
available. However, the Partnership can predict neither the likelihood of
successful compliance nor the direct or indirect costs to the Partnership of
non-compliance by those third parties or of securing such services from
alternate compliant third parties.
-12-
<PAGE>
ENSTAR INCOME PROGRAM 1984-1, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
FCLP believes that it has established an effective program to resolve
all significant Year 2000 issues in its control in a timely manner. As noted
above, however, while FCLP has substantially completed all phases of the
Partnership's remediation program, it is dependent on third parties whose
progress is not within its control. Disruptions experienced by third parties
with which the Partnership does business as well as by the economy generally
could also materially adversely affect the Partnership. The amount of potential
liability and lost revenue cannot be reasonably estimated at this time.
FCLP has focused its efforts on identification and remediation of the
Partnership's Year 2000 exposures and has developed specific contingency plans
in the event it does not successfully complete its remaining remediation as
anticipated or experiences unforeseen problems. Considerable effort has been
directed toward distinguishing between those contingencies with a greater
probability of occurring from those whose occurrence is considered remote, and
on those systems whose failure poses a material risk to the Partnership's
results of operations and financial condition. FCLP has also examined the
Partnership's business interruption strategies to evaluate whether they would
satisfactorily meet the demands of failures arising from Year 2000 related
problems. FCLP intends to examine the Partnership's status periodically to
determine the necessity of establishing and implementing such contingency plans
or additional strategies, which could involve, among other things, manual
workarounds, adjusting staffing strategies and sharing resources.
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
Operating activities provided $281,600 less cash in the nine months
ended September 30, 1999 than in the corresponding period in 1998. Changes in
accounts receivable, prepaid expenses and other assets used $143,900 more cash
in the first nine months of 1999 due to differences in the timing of receivable
collections and in the payment of prepaid expenses. The Partnership used $50,900
more cash for accounts payable due to differences in the timing of payments.
The Partnership used $481,500 less cash in investing activities in the
nine months ended September 30, 1999 than in the corresponding period of 1998,
due to a $478,500 decrease in expenditures for tangible assets and a $3,100
decrease in spending for intangible assets. Financing activities used $273,300
less cash in the nine months ended September 30, 1999 than in the comparable
1998 period. The Partnership also used $250,000 less cash for the repayment of
debt and $4,000 less cash to pay deferred loan costs related to its Facility.
The Partnership used $19,300 less cash for the payment of liabilities owed to
the General Partner and other affiliates due to differences in the timing of
payments.
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) Exhibit 27.1 Financial Data Schedule
(b) No reports on Form 8-K were filed during the
quarter for which this report is filed.
-14-
<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 11, 1999 By: /s/ MICHAEL K. MENEREY
-------------------------
Michael K. Menerey,
Executive Vice President,
Chief Financial Officer and
Secretary
-15-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT SEPTEMBER 30, 1999, AND THE STATEMENTS OF OPERATIONS FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,602,400
<SECURITIES> 0
<RECEIVABLES> 77,700
<ALLOWANCES> 3,800
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 15,648,300
<DEPRECIATION> 11,673,300
<TOTAL-ASSETS> 6,027,600
<CURRENT-LIABILITIES> 1,185,900
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 6,027,600
<SALES> 0
<TOTAL-REVENUES> 3,835,600
<CGS> 0
<TOTAL-COSTS> 3,066,200
<OTHER-EXPENSES> (40,400)
<LOSS-PROVISION> 17,900
<INTEREST-EXPENSE> 69,800
<INCOME-PRETAX> 740,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 740,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 740,000
<EPS-BASIC> 24.47
<EPS-DILUTED> 0
</TABLE>
