<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[X] Soliciting Material Pursuant to Section 240.14a-12
ENSTAR INCOME PROGRAM II-1, L.P.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
ENSTAR INCOME PROGRAM II-1, L.P.
C/O ENSTAR COMMUNICATIONS CORPORATION
12444 POWERSCOURT DRIVE, SUITE 100
ST. LOUIS, MISSOURI 63131
September 14, 2000
To the Limited Partners of Enstar Income Program II-1, L.P.:
The attached report (the "Report") is being provided to you pursuant to
Rule 14a-12 under the Securities Exchange Act of 1934 as "build-up material"
relative to a consent solicitation presently contemplated by Enstar
Communications Corporation ("Enstar Communications"), the general partner of
Enstar Income Program II-1, L.P. ("Enstar II-1").
THE REPORT IS NOT A PROXY STATEMENT OR A CONSENT STATEMENT. ENSTAR
COMMUNICATIONS EXPECTS THAT IT WILL FILE A CONSENT STATEMENT WITH THE SECURITIES
AND EXCHANGE COMMISSION IN THE NEAR FUTURE. WHEN YOU RECEIVE IT, PLEASE READ THE
CONSENT STATEMENT CAREFULLY, BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION ABOUT
ENSTAR COMMUNICATIONS AND THE PROPOSAL IT WILL BE ASKING THE LIMITED PARTNERS TO
APPROVE. THE CONSENT STATEMENT WILL BE MAILED TO THE LIMITED PARTNERS AFTER IT
HAS BEEN FILED IN DEFINITIVE FORM WITH THE SECURITIES AND EXCHANGE COMMISSION.
YOU MAY OBTAIN A FREE COPY OF THE CONSENT STATEMENT, WHEN IT BECOMES
AVAILABLE, AT THE SEC'S WEB SITE AT http://www.sec.gov. A FREE COPY OF THE
ATTACHED REPORT IS ALSO AVAILABLE AT THE SEC'S WEB SITE. YOU MAY ALSO OBTAIN A
FREE COPY OF THE CONSENT STATEMENT (WHEN IT IS AVAILABLE) AND OF THE ATTACHED
REPORT FROM ENSTAR COMMUNICATIONS CORPORATION, 12444 POWERSCOURT DRIVE, SUITE
100, ST. LOUIS, MISSOURI, 63131, ATTENTION: MS. CAROL WOLF, MANAGER OF
PARTNERSHIP RELATIONS; OR CALL MS. WOLF AT (314) 543-2389 OR RALPH KELLY AT
(314) 543-2388.
The participants in the solicitation and their equity interests in
Enstar II-1 are:
<TABLE>
<CAPTION>
NAME AND ADDRESS CAPACITY OF AMOUNT AND NATURE OF
OF PARTICIPANT PARTICIPANT BENEFICIAL OWNERSHIP
-------------- ----------- --------------------
<S> <C> <C>
1. Enstar Income Program II-1, L.P. Registrant Not applicable
c/o Enstar Communications
Corporation
12444 Powerscourt Drive
Suite 100
St. Louis, Missouri 63131
2. Enstar Communications Corporation General Partner 0.5% partnership interest
12444 Powerscourt Drive
Suite 100
St. Louis, Missouri 63131
</TABLE>
<PAGE> 3
ENSTAR INCOME PROGRAM II-1, L.P.
C/O ENSTAR COMMUNICATIONS CORPORATION
12444 POWERSCOURT DRIVE, SUITE 100
ST. LOUIS, MISSOURI 63131
---------
QUARTERLY REPORT
---------
Dear Limited Partner:
As the general partner of Enstar Income Program II-1, L.P., ("Enstar
II-1" or the "Partnership"), we are pleased to enclose the Partnership's
Quarterly Report on Form 10-Q for the three months ended June 30, 2000.
We are further pleased to announce that as of August 8, 2000, the
Partnership (together with eight other Enstar-affiliated partnerships) entered
into a comprehensive Asset Purchase Agreement with Multimedia Acquisition Corp.
(an affiliate of Gans Multimedia Partnership), pursuant to which Multimedia
would purchase substantially all of the cable television systems and other
operating assets of each of those selling partnerships, including Enstar II-1,
for a combined aggregate purchase price of $94,929,400, of which $13,846,000
would be paid to Enstar II-1, subject to closing adjustments. Neither Multimedia
nor Gans is affiliated with the Partnership or any affiliate of the Partnership.
The Multimedia agreement is the result of an extensive process we began
in 1999 to engage a respected industry broker, identify prospective purchasers
of the selling partnerships' cable systems and to negotiate a definitive
purchase agreement covering all or substantially all of those assets. Of the
bids we received, Multimedia offered the most favorable price and other terms.
Multimedia's obligation to purchase the selling partnerships' cable
system assets, including Enstar II-1's, is contingent on (i) each and every
selling partnership obtaining the approval of its respective limited partners;
and (ii) the grantors of the franchises covering 90% of the selling
partnerships' aggregate number of subscribers consenting to the assignment of
those franchises to Multimedia. We anticipate that this process will require
several months.
Following the sale to Multimedia, we would repay the Partnership's
debts, fund required reserves, and terminate the Partnership by making
liquidating cash distributions to its partners in accordance with the
liquidation provisions of the partnership agreement. We presently expect that
the liquidating distributions to the limited partners would approximate $440 per
Unit (subject to closing adjustments and federal and state taxes).
We presently expect that the sale to Multimedia would close in the
first quarter of 2001 and anticipate making the initial liquidating distribution
approximately 60 days after the closing. We also expect that after required
closing adjustments are completed (which we expect to occur
<PAGE> 4
approximately 6 months after the closing), final liquidating distributions would
be made of any remaining funds.
As you are aware, on June 5, 2000, Millenium Management, LLC, an
affiliate of a limited partner, filed a definitive consent solicitation
statement with the Securities and Exchange Commission seeking to terminate and
dissolve the Partnership and to appoint Millenium as liquidating trustee to
oversee the sale of the Partnership's assets and to wind up the Partnership's
business. Millenium failed to obtain the required number of consents and
terminated the consent solicitation on August 9, 2000.
The liquidating distributions and time-frames contemplated above are
estimates, only. There is no assurance that the sale of the Partnership's assets
will close within the time period indicated, if at all, or that the liquidating
distributions will not differ substantially from those set forth above.
As noted in the cover letter to this Report, at this time we are not
soliciting your consent to or approval of the Multimedia sale and subsequent
liquidation. We will seek your consent only through a formal Consent
Solicitation Statement that we must file with the Securities and Exchange
Commission before we send it to you. We are now in the process of preparing the
Consent Solicitation Statement and at this time expect to send it (together with
appropriate consent cards) to you within the next several weeks. When you
receive our Consent Solicitation Statement, please read it carefully before you
vote, because it will contain important information pertinent to the General
Partner, the Partnership, the Multimedia sale, the reasons for it, the
liquidation and distribution process and voting procedures.
ENSTAR COMMUNICATIONS CORPORATION
General Partner
<PAGE> 5
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM 10-Q
(MARK ONE)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
-------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------- -------------------
Commission File Number 0-14508
-------
Enstar Income Program II-1, L.P.
-------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Georgia 58-1628877
-------------------------------- ---------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
12444 Powerscourt Dr., Suite 100
St. Louis, Missouri 63131
--------------------------------------- ---------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including (314) 965-0555
area code: -------------------
-------------------------------------------------------------------------------
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
--- ---
Exhibit Index located at Page E-1.
<PAGE> 6
PART I - FINANCIAL INFORMATION
ENSTAR INCOME PROGRAM II-1, L.P.
CONDENSED BALANCE SHEETS
================================
<TABLE>
<CAPTION>
December 31, June 30,
1999* 2000
------------ -----------
(Unaudited)
<S> <C> <C>
ASSETS:
Cash $ 2,309,000 $ 2,426,500
Accounts receivable, net of allowance for doubtful accounts of $2,000
and $6,000, respectively 57,600 157,200
Prepaid expenses and other assets 77,800 50,100
Property, plant and equipment, net of accumulated
depreciation of $3,343,900 and $3,610,700, respectively 4,585,500 4,458,800
Franchise cost, net of accumulated
amortization of $47,900 and $53,800, respectively 65,900 60,000
Deferred charges, net 700 300
----------- -----------
$ 7,096,500 $ 7,152,900
=========== ===========
LIABILITIES AND PARTNERSHIP CAPITAL
LIABILITIES:
Accounts payable $ 267,200 $ 164,300
Due to affiliates 244,800 2,100
----------- -----------
512,000 166,400
----------- -----------
PARTNERSHIP CAPITAL (DEFICIT):
General Partner (8,100) (3,600)
Limited Partners 6,592,600 6,990,100
----------- -----------
TOTAL PARTNERSHIP CAPITAL 6,584,500 6,986,500
----------- -----------
$ 7,096,500 $ 7,152,900
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed
financial statements.
-------
* Agrees with audited balance sheet included in the Partnership's Annual Report
on Form 10-K
-2-
<PAGE> 7
ENSTAR INCOME PROGRAM II-1, L.P.
CONDENSED STATEMENTS OF OPERATIONS
==================================
<TABLE>
<CAPTION>
Unaudited
----------------------
Three months ended
June 30,
----------------------
1999 2000
--------- ---------
<S> <C> <C>
REVENUES $ 802,300 $ 815,200
--------- ---------
OPERATING EXPENSES:
Service costs 233,100 202,700
General and administrative expenses 110,100 82,500
General partner management fees
and reimbursed expenses 120,300 126,500
Depreciation and amortization 116,100 143,200
--------- ---------
579,600 554,900
--------- ---------
OPERATING INCOME 222,700 260,300
--------- ---------
OTHER INCOME (EXPENSE):
Interest income 21,600 34,500
Interest expense (4,600) (2,600)
--------- ---------
17,000 31,900
--------- ---------
NET INCOME $ 239,700 $ 292,200
========= =========
Net income allocated to General Partner $ 2,400 $ 2,900
========= =========
Net income allocated to Limited Partners $ 237,300 $ 289,300
========= =========
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 7.93 $ 9.66
========= =========
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 29,936 29,936
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed
financial statements.
-3-
<PAGE> 8
ENSTAR INCOME PROGRAM II-1, L.P.
CONDENSED STATEMENTS OF OPERATIONS
==================================
<TABLE>
<CAPTION>
Unaudited
--------------------------
Six months ended
June 30,
--------------------------
1999 2000
----------- -----------
<S> <C> <C>
REVENUES $ 1,578,900 $ 1,617,200
----------- -----------
OPERATING EXPENSES:
Service costs 495,700 416,800
General and administrative expenses 199,400 140,600
General partner management fees
and reimbursed expenses 236,400 243,900
Depreciation and amortization 238,300 283,200
----------- -----------
1,169,800 1,084,500
----------- -----------
OPERATING INCOME 409,100 532,700
----------- -----------
OTHER INCOME (EXPENSE):
Interest income 43,300 63,100
Interest expense (8,900) (5,300)
----------- -----------
34,400 57,800
----------- -----------
NET INCOME $ 443,500 $ 590,500
=========== ===========
Net income allocated to General Partner $ 4,400 $ 5,900
=========== ===========
Net income allocated to Limited Partners $ 439,100 $ 584,600
=========== ===========
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 14.67 $ 19.53
=========== ===========
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 29,936 29,936
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed
financial statements.
-4-
<PAGE> 9
ENSTAR INCOME PROGRAM II-1, L.P.
CONDENSED STATEMENTS OF CASH FLOWS
==================================
<TABLE>
<CAPTION>
Unaudited
-------------------------
Six months ended
June 30,
-------------------------
1999 2000
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 443,500 $ 590,500
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization 238,300 283,200
Changes in:
Accounts receivable, prepaid expenses and other assets (74,300) (71,900)
Accounts payable and due to affiliates 45,500 (345,600)
----------- -----------
Net cash from operating activities 653,000 456,200
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (145,200) (150,200)
Increase in intangible assets (3,500) --
----------- -----------
Net cash from investing activities (148,700) (150,200)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (189,000) (188,500)
----------- -----------
INCREASE IN CASH 315,300 117,500
CASH AT BEGINNING OF PERIOD 1,990,700 2,309,000
----------- -----------
CASH AT END OF PERIOD $ 2,306,000 $ 2,426,500
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed
financial statements.
-5-
<PAGE> 10
ENSTAR INCOME PROGRAM II-1, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
=======================================
1. INTERIM FINANCIAL STATEMENTS
The accompanying condensed interim financial statements for Enstar Income
Program II-1, L.P. (the "Partnership") as of June 30, 2000 and for the three and
six months ended June 30, 2000 and 1999 are unaudited. These condensed interim
financial statements should be read in conjunction with the audited financial
statements and notes thereto included in our latest Annual Report on Form 10-K.
In the opinion of management, the condensed interim financial 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, 2000 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 (the "Management
Agreement") with Enstar Cable Corporation (the "Manager"), a wholly owned
subsidiary of Enstar Communications Corporation (ECC), the corporate General
Partner, for a monthly management fee of 5% of revenues to the Manager,
excluding revenues from the sale of cable television systems or franchises.
Management fee expense approximated $40,800 and $80,900 for the three and six
months ended June 30, 2000, respectively. For the three and six months ended
June 30, 1999, management fee expense approximated $40,100 and $78,900,
respectively. Management fees are non-interest bearing.
In addition to the monthly management fee, the Management Agreement also
provides that the Partnership reimburse 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.
Additionally, Charter Communications Holding Company, LLC and its affiliates
(collectively, "Charter") provide other management and operational services for
the Partnership that were provided by Falcon Communications, L.P. and its
affiliates (collectively, "Falcon") prior to November 12, 1999. These expenses
are charged to the properties served based primarily on the Partnership's
allocable share of operational costs associated with the services provided. The
total amount charged to the Partnership for these services was $85,700 and
$163,000 for the three and six months ended June 30, 2000, respectively. For the
three and six months ended June 30, 1999, the total amount charged to the
Partnership for these services was $80,200 and $157,500, respectively.
Substantially all programming services have been purchased through Charter
since November 12, 1999. Before that time, substantially all programming
services were purchased through Falcon. Falcon charged the Partnership for these
costs based on an estimate of what ECC could negotiate for such programming
services for the 15 partnerships managed as a group. Charter charges the
Partnership for these costs based on its costs. The Partnership recorded
programming fee expense of $149,000 and $314,800 for the three and six months
ended June 30, 2000, respectively. For the three and six months ended June 30,
1999, programming fee expense was $194,600 and
-6-
<PAGE> 11
ENSTAR INCOME PROGRAM II-1, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
=====================================================
$379,000, respectively. Programming fees are included in service costs in the
statements of operations.
The Partnership provides cable television signals to certain cable systems
in neighboring communities that are owned by other partnerships managed by ECC.
Such services are provided without fee.
3. NET INCOME PER UNIT OF LIMITED PARTNERSHIP INTEREST
Net income per unit of limited partnership interest is based on the average
number of units outstanding during the periods presented. For this purpose, net
income has 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.
4. SUBSEQUENT EVENT
On August 8, 2000, the Partnership, together with certain affiliates,
(collectively, the "Sellers") entered into a purchase and sale agreement (the
"Agreement") with Multimedia Acquisition Corp., an affiliate of Gans Multimedia
Partnership, (the "Purchaser"). The Agreement provides for the Purchaser to
acquire the assets comprising the Partnership's cable system serving
Taylorville, Illinois, as well as certain assets of other affiliates.
The aggregate purchase price payable to the Sellers pursuant to the
Agreement is $94,929,400 in cash (subject to normal closing adjustments). Of
that amount, $13,846,000 (subject to closing adjustments) is payable to the
Partnership. The allocation of the purchase price among each of the Sellers was
assigned by the Purchaser for each of the systems.
The Purchaser's obligation to acquire the cable systems is subject to
numerous closing conditions, including without limitation: (a) receipt of the
necessary governmental consents to transfer franchises covering an aggregate of
90% of the subscribers of all of the Sellers; (b) receipt of certain other
material consents and approvals required for the consummation of the sale; (c)
receipt of the necessary approvals of the Limited Partners of each Seller; and
(d) other standard closing conditions. With respect to clause (c) above,
completion of the transaction is contingent on the Limited Partners of the
Partnership and the other selling affiliates voting to approve the sale.
-7-
<PAGE> 12
ENSTAR INCOME PROGRAM II-1, L.P.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
This report includes certain forward-looking statements regarding, among
other things, our 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 our Annual Report on Form 10-K for the
year ended December 31, 1999 for additional information regarding such matters
and the effect thereof on the Partnership's business.
RESULTS OF OPERATIONS
Our revenues increased from $802,300 to $815,200, or by 1.6%, and from
$1,578,900 to $1,617,200, or by 2.4%, for the three and six months ended June
30, 2000, as compared to the corresponding periods in 1999. Of the $12,900
increase in revenues for the three months ended June 30, 2000, $34,600 was due
to increases in regulated service rates that we implemented in 2000 and $1,000
was due to increases in other revenue producing items. The increase was
partially offset by a $22,700 decrease due to decreases in the number of
subscribers for basic, premium and equipment rental services. Of the $38,300
increase in revenues for the six months ended June 30, 2000, $66,500 was due to
increases in regulated service rates that we implemented in 2000. The increases
were partially offset by a $27,800 decrease in the number of subscribers for
basic, premium and equipment rental services and a $400 decrease in other
revenue producing items. As of June 30, 2000, we had approximately 6,700 basic
subscribers and 1,000 premium service units.
Effective with the acquisition of Falcon Communications, L.P. (Falcon) by
Charter Communications Holdings Company, LLC on November 12, 1999, certain
activities previously incurred at the Partnership and expensed through service
cost and general and administrative expense have been either eliminated by
Charter, or have been reimbursed by the Partnership based on Charter's costs
incurred. These reimbursed costs are included in general partner management fees
and reimbursed expenses on the Partnership's statements of operations. The total
of service costs, general and administrative expenses and general partner
management fees and reimbursed expenses decreased from $463,500 to $411,700, or
by 11.2%, and from $931,500 to $801,300, or by 14.0%, for the three and six
months ended June 30, 2000, as compared to the corresponding periods in 1999.
Our service costs decreased from $233,100 to $202,700, or by 13.0%, and
from $495,700 to $416,800, or by 15.9%, for the three and six months ended June
30, 2000, as compared to the corresponding periods in 1999. Service costs
represent costs directly attributable to providing cable services to customers.
The decrease was primarily due to decreases in programming fees, personnel costs
and certain costs incurred by the Partnership prior to the Charter acquisition
that are now incurred by Charter and reimbursed by the Partnership, as discussed
above. Programming fees decreased as a result of lower rates that Charter has
extended to us and a decrease in subscribers.
-8-
<PAGE> 13
ENSTAR INCOME PROGRAM II-1, L.P.
General and administrative expenses decreased from $110,100 to $82,500, or
by 25.1%, and from $199,400 to $140,600, or by 29.5%, for the three and six
months ended June 30, 2000, as compared to the corresponding periods in 1999,
primarily due to decreases in marketing expenses and certain costs incurred by
the Partnership prior to the Charter acquisition that are now incurred by
Charter and reimbursed by the Partnership, as discussed above.
General partner management fees and reimbursed expenses increased from
$120,300 to $126,500, or by 5.2%, and from $236,400 to $243,900, or by 3.2%, for
the three and six months ended June 30, 2000, as compared to the corresponding
periods in 1999. Management fees increased in direct relation to increased
revenues as described above. As discussed above, Charter now performs certain
management and operational functions formerly performed by the Partnership, as
discussed above. This has resulted in us having more reimbursable costs and
lower service costs and general and administrative expenses.
Depreciation and amortization expense increased from $116,100 to $143,200
or by 23.3%, and from $238,300 to $283,200 or by 18.8% for the three and six
months ended June 30, 2000, as compared to the corresponding periods in 1999.
The increases were primarily due to asset additions from the upgrade of our
cable systems.
Operating income increased from $222,700 to $260,300, or by 16.9%, and from
$409,100 to $532,700, or by 30.2%, for the three and six months ended June 30,
2000, as compared to the equivalent periods in 1999, primarily due to increases
in revenues and decreases in programming fees as described above.
Our interest income, net of interest expense, increased from $17,000 to
$31,900, or by 87.6%, and from $34,400 to $57,800, or by 68.0%, for the three
and six months ended June 30, 2000, as compared to the corresponding periods in
1999, primarily due to higher average cash balances available for investment and
due to higher average interest rates earned in 2000.
Due to the factors described above, our net income increased from $239,700
to $292,200, or by 21.9%, and from $443,500 to $590,500, or by 33.1%, for the
three and six months ended June 30, 2000, as compared to the corresponding
periods in 1999.
Based on our experience in the cable television industry, we believe that
operating income before depreciation and amortization, or 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 42.2% to 49.5% and 41.0% to 50.5% during the three and
six months ended June 30, 2000, as compared to the corresponding period in 1999.
The increase was primarily related to increases in revenues and decreases in
programming fees as described above. EBITDA increased from $338,800
-9-
<PAGE> 14
ENSTAR INCOME PROGRAM II-1, L.P.
to $403,500, or by 19.1%, and from $647,400 to $815,900, or by 26.0%, during the
three and six months ended June 30, 2000, as compared to the corresponding
period in 1999.
LIQUIDITY AND CAPITAL RESOURCES
Our primary objective is to distribute to our partners all available cash
flow from operations and proceeds from the sale of cable systems, if any, after
providing for expenses and capital requirements relating to the expansion,
improvement and upgrade of such cable television systems.
In accordance with the partnership agreement, Enstar Communications
Corporation, our corporate general partner, has implemented a plan for
liquidating the Partnership. On August 8, 2000, the Partnership, together with
certain affiliates, (collectively, the "Sellers") entered into a purchase and
sale agreement (the "Agreement") with Multimedia Acquisition Corp., an affiliate
of Gans Multimedia Partnership, (the "Purchaser"). The Agreement provides for
the Purchaser to acquire the assets comprising the Partnership's cable system
serving Taylorville, Illinois, as well as certain assets of other affiliates.
The aggregate purchase price payable to the Sellers pursuant to the
Agreement is $94,929,400 in cash (subject to normal closing adjustments). Of
that amount, $13,846,000 (subject to closing adjustments) is payable to the
Partnership. The allocation of the purchase price among each of the Sellers was
assigned by the Purchaser for each of the systems.
The Purchaser's obligation to acquire the cable systems is subject to
numerous closing conditions, including without limitation: (a) receipt of the
necessary governmental consents to transfer franchises covering an aggregate of
90% of the subscribers of all of the Sellers; (b) receipt of certain other
material consents and approvals required for the consummation of the sale; (c)
receipt of the necessary approvals of the Limited Partners of each Seller; and
(d) other standard closing conditions. With respect to clause (c) above,
completion of the transaction is contingent on the Limited Partners of the
Partnership and the other selling affiliates voting to approve the sale.
Enstar Communications Corporation is currently preparing a proxy for
submission to the Partnership's Limited Partners for the purpose of approving or
disapproving the sale. If all of the Partnership's assets are sold, Enstar
Communications Corporation will proceed to liquidate the Partnership following
the settlement of their final liabilities.
At June 30, 2000, the Partnership had no debt outstanding. The Partnership
relies upon cash flow from operations to meet operating requirements and fund
necessary capital expenditures. Although the Partnership currently has a
significant cash balance, there can be no assurance that the Partnership's cash
flow will be adequate to meet its future liquidity requirements. The Partnership
intends to upgrade its cable system in Litchfield, Illinois in 2000 at an
estimated cost of approximately $1.0 million, which is required to be completed
by January 2001 under a provision of the franchise agreement. Other capital
expenditures budgeted for 2000 total approximately $552,100 for the improvement
and upgrade of other assets. Such expenditures approximated
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ENSTAR INCOME PROGRAM II-1, L.P.
150,200 as of June 30, 2000. As a result of these planned capital expenditures,
the Partnership intends, if possible, to maintain cash reserves.
We paid distributions totaling $188,500 during the six months ended June
30, 2000 and expect to continue to pay distributions at this level during 2000.
There can, however, be no assurances regarding the level, timing or continuation
of future distributions.
Falcon purchased insurance coverage for all of the cable television
properties owned or managed by it 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 formerly managed by
Falcon through November 12, 1999, and currently managed by Charter, including
those of the Partnership.
All of our subscribers are served by our system in Taylorville, Illinois
and neighboring communities. Significant damage to the system due to seasonal
weather conditions or other events could have a material adverse effect on our
liquidity and cash flows. We continue to purchase insurance coverage in amounts
our management views as appropriate for all other property, liability,
automobile, workers' compensation and other types of insurable risks.
Our operating activities provided $196,800 less cash in the six months
ended June 30, 2000 than in the corresponding period of 1999. Changes in
receivables, prepaid expenses and other assets used $2,400 less cash during the
six months ended June 30, 2000 due to differences in the timing of receivable
collections and the payment of prepaid expenses. We used $391,100 more cash to
pay liabilities owed to affiliates and third party creditors during the six
months ended June 30, 2000 due to differences in the timing of payments.
We used $1,500 more cash in investing activities during the six months
ended June 30, 2000 than in the corresponding six months of 1999 due to an
increase in expenditures for tangible assets.
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ENSTAR INCOME PROGRAM II-1, L.P.
INFLATION
Certain of our expenses, such as those for wages and benefits, equipment
repair and replacement, and billing and marketing generally increase with
inflation. However, we do not believe that our financial results have been, or
will be, adversely affected by inflation in a material way, provided that we are
able to increase our service rates periodically, of which there can be no
assurance.
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ENSTAR INCOME PROGRAM II-1, L.P.
PART II. OTHER INFORMATION
ITEMS 1-3. Not applicable.
ITEM 4. Submission of Matters to a Vote of Security Holders
Millenium Management, LLC, an affiliate of a limited
partner, filed with the Securities and Exchange
Commission a definitive consent solicitation
statement seeking the approval by written consent of
the Partnership's Limited Partners to terminate and
dissolve the Partnership and to appoint Millenium
Management, LLC as liquidating trustee to oversee the
sale of the Partnership's assets and to wind up the
Partnership's business. On August 10, 2000, the
Partnership was informed by Millenium Management, LLC
that the consent solicitation terminated on August 9,
2000, and resulted in a vote 33.18% in favor and
2.54% against.
ITEM 5. Not applicable.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Asset Purchase Agreement, dated
August 8, 2000, by and among
Multimedia Acquisition Corp., as
Buyer, and Enstar Income Program
II-1, L.P., Enstar Income Program
II-2, L.P., Enstar Income Program
IV-3, L.P., Enstar Income/Growth
Program Six-A, L.P., Enstar IX, Ltd.,
Enstar XI, Ltd., Enstar IV/PBD
Systems Venture, Enstar Cable of
Cumberland Valley and Enstar Cable of
Macoupin County, as Sellers. *
27.1 Financial Data Schedule. *
(b) Reports on Form 8-K
- On July 18, 2000, an 8-K dated July
14, 2000, was filed to announce a
change in the Partnership's principal
independent accountants (Item 4).
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* Filed herewith.
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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 II-1, L.P.
a GEORGIA LIMITED PARTNERSHIP
-----------------------------
(Registrant)
By: ENSTAR COMMUNICATIONS CORPORATION
General Partner
Date: August 14, 2000 By: /s/ Kent D. Kalkwarf
-------------------------------------
Kent D. Kalkwarf
Executive Vice President and Chief
Financial Officer (Principal Financial
Officer and Principal Accounting
Officer)
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