<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 June 30, 1999
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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
- ------------------------------ --------------------------------
(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
----------------------------
- -------------------------------------------------------------------------------
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, June 30,
1998* 1999
----------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS:
Cash $ 1,036,000 $ 1,733,000
Accounts receivable, less allowance of $5,500 and
$3,400 for possible losses 27,800 36,700
Prepaid expenses and other assets 150,000 271,300
Property, plant and equipment, less accumulated
depreciation and amortization of $11,094,500 and $11,488,400 4,048,700 3,960,700
Franchise cost, net of accumulated
amortization of $114,500 and $121,000 66,000 59,500
Deferred loan costs and other deferred charges, net 88,900 68,600
----------------- -----------------
$ 5,417,400 $ 6,129,800
================= =================
LIABILITIES AND PARTNERSHIP CAPITAL
LIABILITIES:
Accounts payable $ 420,800 $ 335,200
Due to affiliates 894,900 1,196,100
----------------- -----------------
TOTAL LIABILITIES 1,315,700 1,531,300
----------------- -----------------
COMMITMENTS AND CONTINGENCIES
PARTNERSHIP CAPITAL (DEFICIT):
General partner (31,700) (26,700)
Limited partners 4,133,400 4,625,200
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TOTAL PARTNERSHIP CAPITAL 4,101,700 4,598,500
----------------- -----------------
$ 5,417,400 $ 6,129,800
================= =================
</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
June 30,
-------------------------------------
1998 1999
---------------- -----------------
<S> <C> <C>
REVENUES $ 1,317,300 $ 1,284,400
---------------- -----------------
OPERATING EXPENSES:
Service costs 466,500 487,100
General and administrative expenses 177,400 191,500
General Partner management fees
and reimbursed expenses 169,500 151,400
Depreciation and amortization 182,400 230,400
---------------- -----------------
995,800 1,060,400
---------------- -----------------
OPERATING INCOME 321,500 224,000
---------------- -----------------
OTHER INCOME (EXPENSE):
Interest income 7,300 13,000
Interest expense (28,000) (23,500)
---------------- -----------------
(20,700) (10,500)
---------------- -----------------
NET INCOME $ 300,800 $ 213,500
================ =================
Net income allocated to General Partner $ 3,000 $ 2,100
================ =================
Net income allocated to Limited Partners $ 297,800 $ 211,400
================ =================
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 9.95 $ 7.06
================ =================
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
-------------------------------------
Six months ended
June 30,
-------------------------------------
1998 1999
---------------- -----------------
<S> <C> <C>
REVENUES $ 2,647,300 $ 2,550,100
---------------- -----------------
OPERATING EXPENSES:
Service costs 946,500 933,600
General and administrative expenses 358,300 355,500
General Partner management fees
and reimbursed expenses 337,000 299,300
Depreciation and amortization 360,800 441,600
---------------- -----------------
2,002,600 2,030,000
---------------- -----------------
OPERATING INCOME 644,700 520,100
---------------- -----------------
OTHER INCOME (EXPENSE):
Interest income 11,800 23,900
Interest expense (55,600) (47,200)
---------------- -----------------
(43,800) (23,300)
---------------- -----------------
NET INCOME $ 600,900 $ 496,800
================ =================
Net income allocated to General Partner $ 6,000 $ 5,000
================ =================
Net income allocated to Limited Partners $ 594,900 $ 491,800
================ =================
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 19.87 $ 16.43
================ =================
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 29,940 29,940
================ =================
</TABLE>
-4-
<PAGE>
ENSTAR INCOME PROGRAM 1984-1, L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Unaudited
-------------------------------------
Six months ended
June 30,
-------------------------------------
1998 1999
---------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 600,900 $ 496,800
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 360,800 441,600
Amortization of deferred loan costs 14,600 14,800
Increase (decrease) from changes in:
Receivables, prepaid expenses and other assets 10,100 (130,200)
Accounts payable (87,700) (85,600)
---------------- -----------------
Net cash provided by operating activities 898,700 737,400
---------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (478,600) (341,600)
Increase in intangible assets (2,200) -
---------------- -----------------
Net cash used in investing activities (480,800) (341,600)
---------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Due to affiliates (1,400) 301,200
Repayment of debt (250,000) -
Deferred loan costs (4,000) -
---------------- -----------------
Net cash provided by (used in) financing activities (255,400) 301,200
---------------- -----------------
INCREASE IN CASH 162,500 697,000
CASH AT BEGINNING OF PERIOD 462,900 1,036,000
---------------- -----------------
CASH AT END OF PERIOD $ 625,400 $ 1,733,000
================ =================
</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 six months ended June 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 six months ended June
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 $64,700
and $127,500 for the three and six months ended June 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"), 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 $86,700 and
$171,800 for the three and six months ended June 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 $10,600 and $18,200 in the three and
six months ended June 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.
-6-
<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 $302,800 and $592,800 for
the three and six months ended June 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 $1,317,300 to $1,284,400,
or by 2.5%, and from $2,647,300 to $2,550,100, or by 3.7%, for the three and
six months ended June 30, 1999 as compared to the corresponding periods in
1998. Of the $32,900 decrease in revenues for the three months ended June 30,
1999, $33,800 was due to decreases in the number of subscriptions for basic,
premium, tier and equipment rental services and $5,400 was due to decreases
in other revenue producing items. The decrease was partially offset by a
$6,300 increase due to increases in regulated service rates that were
implemented by the Partnership in June 1999, partially offset by decreases in
certain regulated rates in late January 1999. Of the $97,200 decrease in
revenues for the six months ended June 30, 1999, $72,200 was due to decreases
in the number of subscriptions for basic, premium, tier and equipment rental
services and $30,000 was due to decreases in other revenue producing items.
The decrease was partially offset by a $5,000 increase due to the impact of
rate increases and decreases in 1999. As of June 30, 1999, the Partnership
had approximately 10,800 basic subscribers and 4,500 premium service units.
Service costs increased from $466,500 to $487,100, or by 4.4%, and
decreased from $946,500 to $933,600, or by 1.4%, for the three and six months
ended June 30, 1999 as compared to the corresponding periods in 1998. Service
costs represent costs directly attributable to providing cable services to
customers. The increase for the three months was primarily due to increases
in franchise fees related to certain non-recurring adjustments in the 1998
periods and also due to increases in programming fees resulting from higher
rates charged by program suppliers. The decrease for the six months was
primarily due to reductions in copyright fees, which resulted when previous
estimates were reduced in the first quarter of 1999.
-8-
<PAGE>
ENSTAR INCOME PROGRAM 1984-1, L.P.
RESULTS OF OPERATIONS (CONTINUED)
General and administrative expenses increased from $177,400 to
$191,500, or by 7.9%, and decreased from $358,300 to $355,500, or by less
than 1.0 %, for the three and six months ended June 30, 1999, respectively,
as compared to the corresponding periods in 1998. The increase for the
quarterly period was principally due to higher insurance premiums. The
decrease for the six months period was attributable to lower bad debt expense.
Management fees and reimbursed expenses decreased from $169,500 to
$151,400, or by 10.7%, and from $337,000 to $299,300, or by 11.2%, for the
three and six months ended June 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 $182,400 to
$230,400, or by 26.3%, and from $360,800 to $441,600, or by 22.4%, for the
three and six months ended June 30, 1999 as compared to the corresponding
periods in 1998. The increases were primarily due to plant asset additions.
Operating income decreased from $321,500 to $224,000, or by 30.3%,
and from $644,700 to $520,100, or by 19.3%, for the three and six months
ended June 30, 1999 as compared to the corresponding periods in 1998. The
decreases were primarily due to decreases in revenues and increases in
depreciation and amortization.
Interest income increased from $7,300 to $13,000 and from $11,800 to
$23,900 for the three and six months ended June 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 $28,000 to $23,500, or by 16.1%, and
from $55,600 to $47,200, or by 15.1%, for the three and six months ended June
30, 1999 as compared to the corresponding periods in 1998. The decreases were
primarily due to lower average 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.
Due to the factors described above, the Partnership's net income
decreased from $300,800 to $213,500, or by 29.0%, and from $600,900 to
$496,800, or by 17.3%, for the three and six months ended June 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 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 38.3% to 35.4% and 38.0% to 37.7% during the three and six
months ended June 30, 1999 as compared to the corresponding periods in 1998.
The decrease was primarily due to decreases in revenues and increases in
insurance premiums, franchise fees and
-9-
<PAGE>
ENSTAR INCOME PROGRAM 1984-1, L.P.
RESULTS OF OPERATIONS (CONTINUED)
programming expense as described above. EBITDA decreased from $503,900 to
$454,400, or by 9.8%, and from $1,005,500 to $961,700, or by 4.4%, during the
three and six months ended June 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 has 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. The General Partner expected to complete its evaluation within
the next several months and intended to advise unitholders promptly if it
believed that commencing a liquidating transaction would be in the best
interests of unitholders.
On May 26, 1999, Charter Communications ("Charter") signed an
agreement to acquire all of the cable television assets of Falcon and Enstar
Communications Corporation, the Partnership's General Partner. 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. The General Partner and Charter have decided to implement a
strategy for liquidating the Partnership that involves selling its remaining
systems to third parties. Accordingly, the General Partner will commence
discussions with cable brokers 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 is unlikely to close before the sale of the General Partner to
Charter.
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
$341,600 in the six months ended June 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 1999 include
approximately $48,000 to begin three of the upgrades and $530,000 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.
-10-
<PAGE>
ENSTAR INCOME PROGRAM 1984-1, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
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 (7.75% at June 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 second quarter of 1999, FCLP, on behalf of the Corporate
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 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
-11-
<PAGE>
ENSTAR INCOME PROGRAM 1984-1, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
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, approximately
1.5% are in the assessment stage. Approximately 14.4% of non-compliant items
are in the remediation planning phase and 85.6% are in the implementation
stage. FCLP plans to conduct limited testing of systems, software and
equipment in the third quarter of 1999 and place 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 $8,500, all of which had been incurred as of June 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 is taking steps to attempt to
satisfy itself that the third parties on which it is heavily reliant are Year
2000 compliant and are developing satisfactory contingency plans, or that
alternative means of meeting the Partnership's business requirements are
available, but cannot predict the likelihood of such 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.
In areas in which the Partnership is uncertain about the anticipated Year
2000 readiness of a significant third party, FCLP is investigating available
alternatives, if any.
-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, FCLP has not yet completed all phases of the
Partnership's remediation program and is dependent on third parties whose
progress is not within its control. In the event that FCLP does not complete
the Partnership's currently planned additional remediation prior to the year
2000, management believes that the Partnership could experience significant
difficulty in producing and delivering its products and services and
conducting its business in the year 2000. In addition, 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 is beginning to develop 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 is also examining 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.
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
Operating activities provided $161,300 less cash in the six months
ended June 30, 1999 than in the corresponding period in 1998. Changes in
accounts receivable, prepaid expenses and other assets used $140,300 more
cash in the first six months of 1999 due to differences in the timing of
receivable collections and in the payment of prepaid expenses. The
Partnership used $2,100 less cash for accounts payable due to differences in
the timing of payments.
The Partnership used $139,200 less cash in investing activities in
the six months ended June 30, 1999 than in the corresponding period of 1998,
due to a $137,000 decrease in expenditures for tangible assets and a $2,200
decrease in spending for intangible assets. Financing activities provided
$556,600 more cash in the six months ended June 30, 1999 than in the
comparable 1998 period. The Partnership used $302,600 less cash for the
payment of liabilities owed to the General Partner and other affiliates due
to differences in the timing of payments. 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.
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.
<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: August 13, 1999 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 JUNE 30, 1999, AND THE STATEMENTS OF OPERATIONS FOR THE SIX MONTHS
ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,733,000
<SECURITIES> 0
<RECEIVABLES> 40,100
<ALLOWANCES> 3,400
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 15,449,100
<DEPRECIATION> 11,488,400
<TOTAL-ASSETS> 6,129,800
<CURRENT-LIABILITIES> 1,531,300
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 6,129,800
<SALES> 0
<TOTAL-REVENUES> 2,550,100
<CGS> 0
<TOTAL-COSTS> 2,030,000
<OTHER-EXPENSES> (23,900)
<LOSS-PROVISION> 16,500
<INTEREST-EXPENSE> 47,200
<INCOME-PRETAX> 496,800
<INCOME-TAX> 0
<INCOME-CONTINUING> 496,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 496,800
<EPS-BASIC> 16.43
<EPS-DILUTED> 0
</TABLE>
