<PAGE>
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, 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 0-14505
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Enstar Income Program II-2, L.P.
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(Exact name of Registrant as specified in its charter)
Georgia 58-1628872
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
10900 Wilshire Boulevard - 15th Floor
Los Angeles, California 90024
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including (310) 824-9990
area code:
---------------------------------
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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 ___
<PAGE>
PART I - FINANCIAL INFORMATION
ENSTAR INCOME PROGRAM II-2, L.P.
CONDENSED BALANCE SHEETS
================================
<TABLE>
<CAPTION>
December 31, June 30,
1998* 1999
----------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS:
Cash $ 4,468,300 $ 5,230,300
Accounts receivable, less allowance of $3,400 and
$3,000 for possible losses 87,900 52,900
Prepaid expenses and other assets 306,100 432,400
Property, plant and equipment, less accumulated
depreciation and amortization of $7,490,400 and $7,708,700 2,758,600 2,598,600
Franchise cost, net of accumulated
amortization of $1,225,900 and $1,277,500 169,000 119,300
Deferred charges, net 7,400 3,200
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$ 7,797,300 $ 8,436,700
================= =================
LIABILITIES AND PARTNERSHIP CAPITAL
LIABILITIES:
Accounts payable $ 273,100 $ 251,200
Due to affiliates 332,300 390,700
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TOTAL LIABILITIES 605,400 641,900
----------------- -----------------
COMMITMENTS AND CONTINGENCIES
PARTNERSHIP CAPITAL (DEFICIT):
General partners (1,800) 4,200
Limited partners 7,193,700 7,790,600
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TOTAL PARTNERSHIP CAPITAL 7,191,900 7,794,800
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$ 7,797,300 $ 8,436,700
================= =================
</TABLE>
*As presented in the audited financial statements.
See accompanying notes to condensed financial statements.
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<PAGE>
ENSTAR INCOME PROGRAM II-2, L.P.
CONDENSED STATEMENTS OF OPERATIONS
==================================
<TABLE>
<CAPTION>
Unaudited
-------------------------------------
Three months ended
June 30,
-------------------------------------
1998 1999
---------------- -----------------
<S> <C> <C>
REVENUES $ 1,008,500 $ 990,300
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OPERATING EXPENSES:
Service costs 315,100 290,600
General and administrative expenses 109,900 133,700
General Partner management fees
and reimbursed expenses 141,600 133,800
Depreciation and amortization 183,900 156,800
---------------- -----------------
750,500 714,900
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OPERATING INCOME 258,000 275,400
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OTHER INCOME (EXPENSE):
Interest income 42,800 51,000
Interest expense (3,200) (4,700)
Gain on sale of cable assets 6,400 -
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46,000 46,300
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NET INCOME $ 304,000 $ 321,700
================ =================
Net income allocated to General Partners $ 3,000 $ 3,000
================ =================
Net income allocated to Limited Partners $ 301,000 $ 318,700
================ =================
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 10.07 $ 10.67
================ =================
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 29,880 29,880
================ =================
</TABLE>
See accompanying notes to condensed financial statements.
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<PAGE>
ENSTAR INCOME PROGRAM II-2, L.P.
CONDENSED STATEMENTS OF OPERATIONS
==================================
<TABLE>
<CAPTION>
Unaudited
-------------------------------------
Six months ended
June 30,
-------------------------------------
1998 1999
---------------- -----------------
<S> <C> <C>
REVENUES $ 2,004,700 $ 1,959,300
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OPERATING EXPENSES:
Service costs 626,100 621,300
General and administrative expenses 229,900 250,300
General Partner management fees
and reimbursed expenses 280,100 263,900
Depreciation and amortization 349,000 312,600
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1,485,100 1,448,100
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OPERATING INCOME 519,600 511,200
---------------- -----------------
OTHER INCOME (EXPENSE):
Interest income 80,600 100,000
Interest expense (6,400) (8,300)
Gain on sale of cable assets 6,400 -
---------------- -----------------
80,600 91,700
---------------- -----------------
NET INCOME $ 600,200 $ 602,900
================ =================
Net income allocated to General Partners $ 6,000 $ 6,000
================ =================
Net income allocated to Limited Partners $ 594,200 $ 596,900
================ =================
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 19.89 $ 19.98
================ =================
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 29,880 29,880
================ =================
</TABLE>
See accompanying notes to condensed financial statements.
-4-
<PAGE>
ENSTAR INCOME PROGRAM II-2, 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 $ 600,200 $ 602,900
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 349,000 312,600
Amortization of deferred loan costs -
Increase (decrease) from changes in:
Accounts receivable, prepaid expenses and other assets (157,300) (91,300)
Accounts payable and due to affiliates (177,200) 36,500
---------------- -----------------
Net cash provided by operating activities 614,700 860,700
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (96,100) (96,800)
Increase in intangible assets (4,900) (1,900)
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Net cash used in investing activities (101,000) (98,700)
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INCREASE IN CASH 513,700 762,000
CASH AT BEGINNING OF PERIOD 3,078,800 4,468,300
---------------- -----------------
CASH AT END OF PERIOD $ 3,592,500 $ 5,230,300
================ =================
</TABLE>
See accompanying notes to condensed financial statements.
-5-
<PAGE>
ENSTAR INCOME PROGRAM II-2, 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 PARTNERS AND AFFILIATES
The Partnership has a management and service agreement with a wholly
owned subsidiary of the Corporate 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 $49,500
and $98,000 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 Corporate General Partner and its subsidiary are
charged a proportionate share of these expenses. The Corporate 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 $84,300 and $165,900 for the
three and six months ended June 30, 1999. Management fees and reimbursed
expenses due the Corporate General Partner are non-interest bearing.
The Partnership also receives certain system operating management
services from an affiliate of the Corporate General Partner in addition to the
Manager due to the fact that there are no such employees directly employed by
one of the Partnership's cable systems. The Partnership reimburses the affiliate
for its allocable share of the affiliate's operational costs. The total amount
charged to the Partnership for these costs approximated $16,100 and $29,700 for
the three and six months ended June 30, 1999. No management fee is payable to
the affiliate by the Partnership and there is no duplication of reimbursed
expenses and costs paid to the Manager.
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 Corporate General Partner as well as for FCLP's own
cable television operations. FCLP charges the Partnership for these services
based on an estimate of what the Corporate General Partner could negotiate for
such programming services for the 15 partnerships
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<PAGE>
ENSTAR INCOME PROGRAM II-2, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
=======================================
2. TRANSACTIONS WITH THE GENERAL PARTNERS AND AFFILIATES (CONTINUED)
managed by the Corporate General Partner as a group. The Partnership recorded
programming fee expense of $233,700 and $459,400 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 Partners. The General Partners do not own units
of partnership interest in the Partnership, but rather hold a participation
interest in the income, losses and distributions of the Partnership.
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<PAGE>
ENSTAR INCOME PROGRAM II-2, 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 $1,008,500 to $990,300, or by
1.8%, and from $2,004,700 to $1,959,300, or by 2.3%, for the three and six
months ended June 30, 1999 as compared to the corresponding periods in 1998. Of
the $18,200 decrease in revenues for the three months ended June 30, 1999,
$39,700 was due to decreases in the number of subscriptions for basic, premium,
tier and equipment rental services. The decrease was partially offset by an
$11,300 increase due to increases in regulated service rates that were
implemented by the Partnership in June 1999 and a $10,200 increase in other
revenue producing items. Of the $45,400 decrease in revenues for the six months
ended June 30, 1999, $61,200 was due to decreases in the number of subscriptions
for basic, premium, tier and equipment rental services. The decrease was
partially offset by an $8,300 increase in other revenue producing items and a
$7,500 increase due to the effect of increases in regulated service rates
implemented in June 1999, partially offset by decreases in certain regulated
rates during March 1998. As of June 30, 1999, the Partnership had approximately
8,800 basic subscribers and 1,800 premium service units.
Service costs decreased from $315,100 to $290,600, or by 7.8%, and from
$626,100 to $621,300, or by less than 1.0%, 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 decreases were primarily due to increased capitalization of labor and
overhead costs resulting from a greater number of capital projects in 1999. The
decrease was also
-8-
<PAGE>
ENSTAR INCOME PROGRAM II-2, L.P.
RESULTS OF OPERATIONS (CONTINUED)
attributable to lower copyright fees, which decreased due to a non-recurring
adjustment in the quarter ended June 30, 1999.
General and administrative expenses increased from $109,900 to
$133,700, or by 21.7%, and from $229,900 to $250,300, or by 8.9%, for the three
and six months ended June 30, 1999 as compared to the corresponding periods in
1998. The increases were primarily due to higher insurance premiums and
personnel costs.
Management fees and reimbursed expenses decreased from $141,600 to
$133,800, or by 5.5%, and from $280,100 to $263,900, or by 5.8%, 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 due to lower personnel
costs allocated by the Corporate General Partner resulting from staff
reductions.
Depreciation and amortization expense decreased from $183,900 to
$156,800, or by 14.7%, and from $349,000 to $312,600, or by 10.4%, for the three
and six months ended June 30, 1999 as compared to the corresponding periods in
1998. The decrease was primarily due to the impact of certain plant assets
becoming fully depreciated.
Operating income increased from $258,000 to $275,400, or by 6.7%, and
decreased from $519,600 to $511,200, or by 1.6%, for the three and six months
ended June 30, 1999 as compared to the equivalent periods in 1998. The increase
for the three months ended June 30, 1999 was primarily due to decreases in
depreciation and amortization expense as described above. The decrease for the
six months ended June 30, 1999 was primarily due to increases in insurance
premiums as described above.
Interest income, net of interest expense, increased from $39,600 to
$46,300, or by 16.9% and from $74,200 to $91,700, or by 23.6%, for the three and
six months ended June 30, 1999 as compared to the corresponding periods in 1998.
The increases were primarily due to higher average cash balances available for
investment.
Due to the factors described above, the Partnership's net income
increased from $304,000 to $321,700, or by 5.8%, and from $600,200 to $602,900,
or by less than 1.0%, 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 43.8% to 43.6% and 43.3% to 42.0% during
the three and six months ended June 30, 1999 as compared to the corresponding
periods in 1998. The decrease was primarily due to higher insurance premiums as
described above. EBITDA decreased from $441,900 to $432,200, or by 2.2%, and
from
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<PAGE>
ENSTAR INCOME PROGRAM II-2, L.P.
RESULTS OF OPERATIONS (CONTINUED)
$868,600 to $823,800, or by 5.2%, 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 relating to the
expansion, improvement and upgrade of its cable systems.
Based on its belief that the market for cable systems has generally
improved, the Corporate 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 Corporate General Partner, and the subsequent liquidation of the
Partnership. The Corporate 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, however, Charter Communications
("Charter") signed an agreement to acquire all of the cable television assets of
FCLP and to acquire Enstar Communications Corporation, the Partnership's
Corporate General Partner. The Corporate General Partner and Charter have
decided to implement a strategy for liquidating the Partnership that involves
selling its systems to third parties. Accordingly, the Corporate 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 Corporate
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.
At June 30, 1999, the Partnership had no debt outstanding. The
Partnership relies upon the availability of cash generated from operations to
fund its ongoing expenses and capital requirements. The Partnership is required
to rebuild its Jerseyville, Illinois cable system at an estimated total cost of
approximately $94,800 under a provision of its franchise agreement. The
Partnership is also rebuilding portions of its cable systems in surrounding
communities at an estimated additional cost of approximately $1,968,900. Project
costs related to the required rebuild in Jerseyville approximated $90,200 from
inception through June 30, 1999 and rebuild costs in the surrounding communities
amounted to $1,876,900 from inception through June 30, 1999. Construction is
substantially complete; however, the Partnership is budgeted to spend
approximately $100,000 for equipment to launch new channels in the Jerseyville
system in the fourth quarter of 1999. The Partnership had incurred $3,400 as of
June 30, 1999. Other capital expenditures budgeted for 1999 include $486,800 for
replacement and upgrade of other assets. Such expenditures approximated $93,400
in the first six months of 1999. Additionally, the Partnership is required to
upgrade its cable plant in Malden, Missouri at an estimated cost of
approximately $1,800,000, the start of which is dependent upon obtaining a
renewal of the franchise agreement for that community. The Partnership also has
tentative
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<PAGE>
ENSTAR INCOME PROGRAM II-2, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
plans for a project in 2001 to upgrade its Pana, Illinois cable system at an
estimated cost of approximately $1.1 million.
The Corporate General Partner believes that cash flow from operations
will be adequate to meet the Partnership's current liquidity requirements,
including the funding for capital expenditures discussed above. However, as a
result of such liquidity requirements, the Corporate General Partner has
concluded that it is not prudent for the Partnership to resume paying
distributions at this time.
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 72% of the Partnership's subscribers are served by its
system in Hillsboro, Illinois 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 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.
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<PAGE>
ENSTAR INCOME PROGRAM II-2, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
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 $40,600, of which $39,600 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.
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
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<PAGE>
ENSTAR INCOME PROGRAM II-2, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
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 $246,000 more cash in the six months
ended June 30, 1999 than in the corresponding period of 1998. The Partnership
used $213,700 less cash for the payment of amounts owed to affiliates and
third-party creditors in the 1999 period due to differences in the timing of
payments. Changes in accounts receivable and prepaid expenses used $66,000 less
cash in the first six months of 1999 due to differences in the timing of
receivable collections and in the payment of prepaid expenses.
Investing activities used $2,300 less cash in the six months ended June
30, 1999 than in the corresponding six months of 1998, due to a $3,000 decrease
in spending for intangible assets and a $700 increase in expenditures for
tangible assets.
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 Partnership is able to increase its service rates
periodically, of which there can be no assurance.
-13-
<PAGE>
ENSTAR INCOME PROGRAM II-2, 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 II-2, 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> 5,230,300
<SECURITIES> 0
<RECEIVABLES> 55,900
<ALLOWANCES> 3,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 10,307,300
<DEPRECIATION> 7,708,700
<TOTAL-ASSETS> 8,436,700
<CURRENT-LIABILITIES> 641,900
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8,436,700
<SALES> 0
<TOTAL-REVENUES> 1,959,300
<CGS> 0
<TOTAL-COSTS> 1,448,100
<OTHER-EXPENSES> (100,000)
<LOSS-PROVISION> 17,600
<INTEREST-EXPENSE> 8,300
<INCOME-PRETAX> 602,900
<INCOME-TAX> 0
<INCOME-CONTINUING> 602,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 602,900
<EPS-BASIC> 19.98
<EPS-DILUTED> 0
</TABLE>
