<PAGE> 1
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 September 30, 1995
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 0-15705
Enstar Income Program IV-1, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Georgia 58-1648322
(STATE OR OTHER JURISDICTION OF INCORPORATION (I.R.S. EMPLOYER
OR ORGANIZATION) IDENTIFICATION NO.)
10900 Wilshire Boulevard, 15th Floor, Los Angeles, CA 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 X 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> 2
PART I - FINANCIAL INFORMATION
ENSTAR INCOME PROGRAM IV-1, L.P.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30,
1994* 1995
------------ -------------
ASSETS: (unaudited)
<S> <C> <C>
Equity in net assets of Joint Ventures:
Enstar IV/PBD Systems Venture $ 1,888,900 $ 1,947,700
Enstar Cable of Macoupin County 800,100 842,400
----------- -----------
2,689,000 2,790,100
Cash and cash equivalents 354,100 1,000
Deferred loan costs, net 67,200 54,900
----------- -----------
$ 3,110,300 $ 2,846,000
=========== ===========
LIABILITIES AND PARTNERSHIP CAPITAL
LIABILITIES:
Note payable $ 1,008,900 $ 1,008,900
Accounts payable 10,200 39,200
Due to affiliates 10,200 7,100
----------- -----------
TOTAL LIABILITIES 1,029,300 1,055,200
----------- -----------
PARTNERSHIP CAPITAL (DEFICIT):
General partners (62,600) (65,500)
Limited partners 2,143,600 1,856,300
----------- -----------
TOTAL PARTNERSHIP CAPITAL 2,081,000 1,790,800
----------- -----------
$ 3,110,300 $ 2,846,000
=========== ===========
</TABLE>
*As presented in the audited financial statements.
See accompanying notes to condensed financial statements.
-2-
<PAGE> 3
ENSTAR INCOME PROGRAM IV-1, L.P.
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Unaudited
-------------------------
Three months ended
September 30,
-------------------------
1994 1995
--------- ---------
<S> <C> <C>
OPERATING EXPENSES:
General and administrative expenses $ 5,800 $ 6,900
General Partner management fees
and reimbursed expenses 6,800 -
--------- ---------
(12,600) (6,900)
--------- ---------
OTHER INCOME (EXPENSE):
Interest expense (29,000) (31,600)
Interest income 300 -
--------- ---------
(28,700) (31,600)
--------- ---------
LOSS BEFORE EQUITY IN NET INCOME (LOSS)
OF JOINT VENTURES (41,300) (38,500)
--------- ---------
EQUITY IN NET INCOME (LOSS)
OF JOINT VENTURES:
Enstar IV/PBD Systems Venture (8,600) 85,100
Enstar Cable of Macoupin County 7,100 17,200
--------- ---------
(1,500) 102,300
--------- ---------
NET INCOME (LOSS) $ (42,800) $ 63,800
========= =========
NET INCOME (LOSS) PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ (1.06) $ 1.58
========= =========
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 39,982 39,982
========= =========
</TABLE>
See accompanying notes to condensed financial statements.
-3-
<PAGE> 4
ENSTAR INCOME PROGRAM IV-1, L.P.
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Unaudited
-------------------------
Nine months ended
September 30,
-------------------------
1994 1995
--------- ---------
<S> <C> <C>
OPERATING EXPENSES:
General and administrative expenses $ 19,500 $ 23,300
General Partner management fees
and reimbursed expenses 17,400 -
--------- ---------
(36,900) (23,300)
--------- ---------
OTHER INCOME (EXPENSE):
Interest expense (81,700) (95,100)
Interest income 300 3,700
--------- ---------
(81,400) (91,400)
--------- ---------
LOSS BEFORE EQUITY IN NET INCOME
OF JOINT VENTURES (118,300) (114,700)
--------- ---------
EQUITY IN NET INCOME
OF JOINT VENTURES:
Enstar IV/PBD Systems Venture 29,100 160,800
Enstar Cable of Macoupin County 8,200 42,300
--------- ---------
37,300 203,100
--------- ---------
NET INCOME (LOSS) $ (81,000) $ 88,400
========= =========
NET INCOME (LOSS) PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ (2.01) $ 2.19
========= =========
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 39,982 39,982
========= =========
</TABLE>
See accompanying notes to condensed financial statements.
-4-
<PAGE> 5
ENSTAR INCOME PROGRAM IV-1, L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Unaudited
----------------------
Nine months ended
September 30,
----------------------
1994 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (81,000) $ 88,400
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Equity in net income of Joint Ventures (37,300) (203,100)
Amortization of deferred loan costs 12,400 12,300
Increase (decrease) from changes in:
Deferred loan costs (12,700) -
Accounts payable and due to affiliates 4,800 25,900
--------- ---------
Net cash used in operating activities (113,800) (76,500)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from Joint Ventures 444,500 102,000
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (378,600) (378,600)
--------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS (47,900) (353,100)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 49,300 354,100
--------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 1,400 $ 1,000
========= =========
</TABLE>
See accompanying notes to condensed financial statements.
-5-
<PAGE> 6
ENSTAR INCOME PROGRAM IV-1, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
=======================================
1. INTERIM FINANCIAL STATEMENTS
The accompanying condensed interim financial statements for the three
and nine months ended September 30, 1995 and 1994 are unaudited. These condensed
interim financial statements should be read in conjunction with the audited
financial statements and notes thereto included in the Partnership's latest
Annual Report on Form 10-K. In the opinion of management, such statements
reflect all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the results of such periods. The results of
operations for the three and nine months ended September 30, 1995 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
"Agreement") with a wholly-owned subsidiary of the Corporate General Partner
(the "Manager") pursuant to which it pays a monthly management fee of 5% of
gross revenues. The Agreement also provides that the Partnership will reimburse
the Manager for (i) direct expenses incurred on behalf of the Partnership and
(ii) for the Partnership's allocable share of the Manager's operational costs.
No such costs and expenses were incurred or charged to the Partnership for these
services during the three and nine months ended September 30, 1995. The Manager
has entered into identical agreements with Enstar IV/PBD Systems Venture and
Enstar Cable of Macoupin County (both Georgia general partnerships, of which the
Partnership is a co-general partner - herein referred to as the "Joint
Ventures"), except that Enstar Cable of Macoupin County (the "Macoupin Joint
Venture") pays the Manager only a 4% management fee. However, the Macoupin Joint
Venture is required to distribute to Enstar Communications Corporation (which is
the Corporate General Partner of the Macoupin County Joint Venture as well as of
the Partnership) an amount equal to 1% of the Joint Venture's gross revenues in
respect of Enstar Communications Corporation's interest as the Corporate General
Partner of the Joint Venture. No management fee is payable by the Partnership in
respect of any amounts received by the Partnership from the Joint Ventures, and
there is no duplication of reimbursed expenses or costs of the Manager. The
Joint Ventures paid the Manager management fees of approximately $80,900 and
$238,100 and reimbursement of expenses of approximately $126,600 and $378,600
under the management agreements for the three and nine months ended September
30, 1995. In addition, the Macoupin Joint Venture paid the Corporate General
Partner approximately $4,200 and $12,300 in respect of its 1% special interest
during the three and nine months ended September 30, 1995. Management fees and
reimbursed expenses due the Corporate General Partner are non-interest bearing.
Certain programming services have been purchased through an affiliate
of the Joint Ventures. In turn, the affiliate charges the Joint Ventures for
these costs based on an estimate of what the Joint Ventures could negotiate for
such programming services on a stand-alone basis. The Joint Ventures paid the
affiliate $405,400 and $1,205,500 for these programming services for the three
and nine months ended September 30, 1995. Programming fees are included in
service costs in the statements of operations for the three and nine months
ended September 30, 1995 and 1994.
-6-
<PAGE> 7
ENSTAR INCOME PROGRAM IV-1, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(CONTINUED)
=======================================
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 are allocated 99% to the limited partners and
1% to the general partners.
4. RECLASSIFICATIONS
Certain 1994 amounts have been reclassified to conform to the 1995
presentation.
5. EQUITY IN NET ASSETS OF JOINT VENTURES
ENSTAR IV/PBD SYSTEMS VENTURE
Each of the Partnership and an affiliated partnership (Enstar Income
Program IV-2, L.P.) owns 50% of Enstar IV/PBD Systems Venture (the "PBD Joint
Venture"). Each partnership shares equally in the profits and losses of the PBD
Joint Venture. The investment in the PBD Joint Venture is accounted for on the
equity method. Summarized financial information for the PBD Joint Venture as of
September 30, 1995 and December 31, 1994, and the results of its operations for
the three and nine months ended September 30, 1995 and 1994, have been included.
The results of operations for the three and nine months ended September 30, 1995
are not necessarily indicative of results for the entire year.
<TABLE>
<CAPTION>
December 31, September 30,
1994* 1995
------------ -------------
(unaudited)
<S> <C> <C>
Current assets $1,116,700 $1,917,000
Investment in cable television
properties, net 3,417,500 2,634,700
Other assets 59,300 78,600
---------- ----------
$4,593,500 $4,630,300
========== ==========
Current liabilities $ 815,900 $ 735,100
Venturers' capital 3,777,600 3,895,200
---------- ----------
$4,593,500 $4,630,300
========== ==========
</TABLE>
*As presented in the audited financial statements.
-7-
<PAGE> 8
ENSTAR INCOME PROGRAM IV-1, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(CONTINUED)
=======================================
ENSTAR IV/PBD SYSTEMS VENTURE (CONCLUDED)
<TABLE>
<CAPTION>
Unaudited
-----------------------------
Three months ended
September 30,
----------------------------
1994 1995
----------------------------
<S> <C> <C>
REVENUES $ 1,215,100 $ 1,279,000
----------- -----------
OPERATING EXPENSES:
Service costs 440,200 435,900
General and administrative expenses 164,300 144,100
General Partner management fees and
reimbursed expenses 146,800 155,600
Depreciation and amortization 484,500 385,800
----------- -----------
1,235,800 1,121,400
----------- -----------
OPERATING INCOME (LOSS) (20,700) 157,600
OTHER INCOME (EXPENSE):
Interest income 6,500 16,300
Interest expense (2,800) (3,800)
----------- -----------
NET INCOME (LOSS) $ (17,000) $ 170,100
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Unaudited
-----------------------------
Nine months ended
September 30,
----------------------------
1994 1995
----------------------------
<S> <C> <C>
REVENUES $ 3,638,000 $ 3,778,900
----------- -----------
OPERATING EXPENSES:
Service costs 1,270,500 1,319,100
General and administrative expenses 459,800 414,700
General Partner management fees and
reimbursed expenses 478,600 461,700
Depreciation and amortization 1,374,700 1,291,200
----------- -----------
3,583,600 3,486,700
----------- -----------
OPERATING INCOME 54,400 292,200
OTHER INCOME (EXPENSE):
Interest income 11,700 39,400
Interest expense (8,600) (10,000)
Gain on sale of assets 800 -
----------- -----------
NET INCOME $ 58,300 $ 321,600
=========== ===========
</TABLE>
-8-
<PAGE> 9
ENSTAR INCOME PROGRAM IV-1, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(CONTINUED)
=======================================
ENSTAR CABLE OF MACOUPIN COUNTY
Each of the Partnership and two affiliated partnerships (Enstar Income
Program IV-2, L.P. and Enstar Income Program IV-3, L.P.) owns one third (1/3) of
Enstar Cable of Macoupin County (the "Macoupin Joint Venture"). Each of the
co-partners shares equally in the profits and losses of the Macoupin Joint
Venture. The investment in the Macoupin Joint Venture is accounted for on the
equity method. Summarized financial information for the Macoupin Joint Venture
as of September 30, 1995 and December 31, 1994 and the results of its operations
for the three and nine months ended September 30, 1995 and 1994 have been
included. The results of operations for the three and nine months ended
September 30, 1995 are not necessarily indicative of results for the entire
year.
<TABLE>
<CAPTION>
December 31, September 30,
1994* 1995
---------- ----------
(unaudited)
<S> <C> <C>
Current assets $ 622,800 $1,061,100
Investment in cable television
properties, net 2,018,800 1,808,200
Other assets 6,000 8,700
---------- ----------
$2,647,600 $2,878,000
========== ==========
Current liabilities $ 247,200 $ 350,700
Venturers' capital 2,400,400 2,527,300
---------- ----------
$2,647,600 $2,878,000
========== ==========
</TABLE>
*As presented in the audited financial statements.
-9-
<PAGE> 10
ENSTAR INCOME PROGRAM IV-1, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(CONCLUDED)
=======================================
ENSTAR CABLE OF MACOUPIN COUNTY
<TABLE>
<CAPTION>
Unaudited
-------------------------
Three months ended
September 30,
-------------------------
1994 1995
-------------------------
<S> <C> <C>
REVENUES $ 404,600 $ 422,100
--------- ---------
OPERATING EXPENSES:
Service costs 123,100 135,500
General and administrative expenses 42,100 32,200
General Partner management fees and
reimbursed expenses 54,300 56,100
Depreciation and amortization 171,700 155,800
--------- ---------
391,200 379,600
--------- ---------
OPERATING INCOME 13,400 42,500
OTHER INCOME (EXPENSE):
Interest income 8,800 10,600
Interest expense (800) (1,500)
--------- ---------
NET INCOME $ 21,400 $ 51,600
========= =========
</TABLE>
<TABLE>
<CAPTION>
Unaudited
----------------------------
Nine months ended
September 30,
----------------------------
1994 1995
----------------------------
<S> <C> <C>
REVENUES $ 1,197,500 $ 1,227,400
----------- -----------
OPERATING EXPENSES:
Service costs 373,200 375,100
General and administrative expenses 119,800 103,100
General Partner management fees and
reimbursed expenses 169,700 167,300
Depreciation and amortization 530,300 477,500
----------- -----------
1,193,000 1,123,000
----------- -----------
OPERATING INCOME 4,500 104,400
OTHER INCOME (EXPENSE):
Interest income 23,400 26,500
Interest expense (3,200) (4,000)
----------- -----------
NET INCOME $ 24,700 $ 126,900
=========== ===========
</TABLE>
-10-
<PAGE> 11
ENSTAR INCOME PROGRAM IV-1, L.P.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INTRODUCTION
Compliance with the rules adopted by the Federal Communications
Commission (the "FCC") to implement the rate regulation provisions of the 1992
Cable Act has had a significant negative impact on the Partnership's revenues
and cash flow. Based on certain FCC decisions that have been released, however,
the Partnership's management presently believes that revenues for the first nine
months of 1995 reflect the impact of the 1992 Cable Act in all material
respects. Moreover, recent policy decisions by the FCC make it more likely that
in the future the Partnership will be permitted to increase regulated service
rates in response to specified cost increases, although certain costs may
continue to rise at a rate in excess of that which the Partnership will be
permitted to pass on to its customers. The FCC has recently adopted a procedure
under which cable operators may file abbreviated cost of service showings for
system rebuilds and upgrades, the result of which would be a permitted increase
in regulated rates to allow recovery of a portion of those costs. The FCC has
also proposed a new procedure for the pass-through of increases in inflation and
certain external costs, such as programming costs, under which cable operators
could increase rates based on actual and anticipated cost increases for the
coming year. In addition to these FCC actions, Congress is presently considering
legislation that could significantly revise, among other things, the rate
regulation provisions of the 1992 Cable Act, although there can be no certainty
as to the final provisions of such legislation, or whether it will become law.
Similarly, given events since the enactment of the 1992 Cable Act, there can
also be no assurance as to what, if any, future action may be taken by the FCC,
Congress or any other regulatory authority or court, or the effect thereof on
the Partnership's business.
In addition to the information set forth in this report, reference is
made to the Partnership's Annual Report on Form 10-K for the year ended December
31, 1994 for additional information regarding regulatory matters and the effect
thereof on the Partnership's business.
All of the Partnership's cable television business operations are
conducted through its participation as a general partner in both Enstar IV/PBD
Systems Venture and Enstar Cable of Macoupin County (collectively, the "Joint
Ventures"). The Partnership has a 50% interest in Enstar IV/PBD Systems Venture
(the "PBD Joint Venture") and a one-third (1/3) interest in Enstar Cable of
Macoupin County (the "Macoupin Joint Venture"). The PBD Joint Venture is owned
equally by the Partnership and an affiliated partnership (Enstar Income Program
IV-2, L.P). The Macoupin Joint Venture is owned equally by the Partnership and
two affiliated Partnerships (Enstar Income Program IV-2, L.P. and Enstar Income
Program IV-3, L.P.) The Partnership participates in the Joint Ventures equally
with its co-partners, based on its proportionate interest, with respect to
capital contributions, obligations and commitments, and results of operations.
Accordingly, in considering the financial condition and results of operations of
the Partnership, consideration must also be made of those matters as they relate
to the Joint Ventures. The following discussion reflects such consideration, and
with respect to Results of Operations, a separate discussion is provided for
each entity.
-11-
<PAGE> 12
ENSTAR INCOME PROGRAM IV-1, L.P.
RESULTS OF OPERATIONS
THE PARTNERSHIP
As discussed above, all of the Partnership's cable television business
operations are conducted through its participation as a partner in the Joint
Ventures. The Joint Ventures distributed $102,000 to the Partnership during the
three and nine months ended September 30, 1995. The Partnership distributed
$126,200 and $378,600 to its partners during the three and nine months ended
September 30, 1995.
THE PBD JOINT VENTURE
The Joint Venture's revenues increased by $63,900, or by 5.3%, and by
$140,900, or by 3.9%, for the three and nine months ended September 30, 1995 as
compared to the corresponding periods in 1994. Of the three months' increase,
$59,000 was due to increases in regulated service rates permitted under the 1992
Cable Act that were implemented by the Partnership in April 1995, $34,200 was
due to an increase in the number of subscriptions for cable service and $17,200
was due to increases in unregulated rates charged for premium services
implemented during the fourth quarter of 1994. These increases were partially
offset by rate decreases implemented in September 1994 to comply with the 1992
Cable Act, estimated by the Joint Venture to be approximately $38,800, and by a
$7,700 decrease in other revenue producing items. Of the nine months' increase,
$128,400 was due to an increase in the number of subscriptions for cable
service, $82,700 was due to increases in regulated service rates permitted under
the 1992 Cable Act that were implemented by the Partnership in April 1995,
$26,400 was related to increases in advertising sales and other revenue
producing items and $19,800 was due to increases in unregulated rates charged
for premium services implemented during the fourth quarter of 1994. These
increases were partially offset by rate decreases implemented in September 1994
to comply with the 1992 Cable Act, estimated by the Joint Venture to be
approximately $116,400.
Service costs decreased by $4,300, or by 1.0%, and increased by
$48,600, or by 3.8%, for the three and nine months ended September 30, 1995 as
compared to the corresponding periods in 1994. Service costs represent costs
directly attributable to providing cable services to customers. Of the three
months' decrease, $18,300 was due to a decrease in repair and maintenance
expense, $10,000 was due to an increase in capitalization of labor and overhead
costs and $7,900 was due to a decrease in personnel costs. These decreases were
offset by a $37,200 increase in programming fees charged by program suppliers
(including primary satellite fees). Of the nine months' increase, $117,300 was
due to increases in programming fees charged by program suppliers, partially
offset by a $28,800 increase in capitalization of labor and overhead costs, by a
$21,200 decrease in repair and maintenance expense, by a $13,400 reduction in
pole rent expense and by an $8,300 decrease in copyright fees.
General and administrative expenses decreased by $20,200, or by 12.3%,
and by $45,100, or by 9.8%, for the three and nine months ended September 30,
1995 as compared to the corresponding periods in 1994. Of the three months'
decrease, $5,900 was due to lower insurance premiums, $5,500 was due to a
decrease in marketing expense and $3,900 was due to a decrease in customer
billing expense. Of the nine months' decrease, $23,400 was due to a decrease in
marketing expense, $5,600 was due to a decrease in customer billing expense and
$3,700 was due to a decrease in ad sales expense. Other decreases during the
three and nine month periods occurred in postage and messenger, telephone and
bad debt expenses.
-12-
<PAGE> 13
ENSTAR INCOME PROGRAM IV-1, L.P.
RESULTS OF OPERATIONS (CONTINUED)
Management fees and reimbursed expenses increased by $8,800, or by
6.0%, and decreased by $16,900, or by 3.5%, for the three and nine months ended
September 30, 1995 as compared to the corresponding periods in 1994. The three
months' increase was primarily due to increased reimbursed expenses payable to
the Corporate General Partner resulting from higher allocated marketing
expenses. The nine months' decrease was primarily due to decreased reimbursed
expenses including lower allocated personnel costs. Management fees increased by
$3,300, or by 5.4%, and by $7,100, or by 3.9%, for the three and nine month
periods in direct relation to increased revenues as described above.
Depreciation and amortization expense decreased by $98,700, or by
20.4%, and by $83,500, or by 6.0%, for the three and nine months ended September
30, 1995 as compared to the corresponding periods in 1994, due to the effect of
certain tangible assets becoming fully depreciated and intangible assets
becoming fully amortized.
Operating income increased by $178,300 and $237,800 for the three and
nine months ended September 30, 1995 as compared to the corresponding periods in
1994, principally due to increases in revenues and decreases in depreciation and
amortization as described above.
Interest income, net of interest expense, increased by $8,800 and
$26,300 for the three and nine months ended September 30, 1995 as compared to
the corresponding periods in 1994, due to higher average investment balances and
higher interest rates earned during the three and nine months ended September
30, 1995.
Operating income before depreciation and amortization (EBITDA) as a
percentage of revenues increased from 38.2% to 42.5% during the three months
ended September 30, 1995 and from 39.3% to 41.9% during the nine months ended
September 30, 1995 as compared to the corresponding 1994 periods. These
increases were primarily caused by increases in revenues and capitalization of
labor and overhead costs, and decreases in repair and maintenance expense as
described above. EBITDA also increased during the nine months due to lower
reimbursed expenses allocated by the Corporate General Partner. EBITDA increased
by $79,600, or by 17.2%, and by $154,300, or by 10.8%, for the three and nine
months ended September 30, 1995 as compared to the corresponding periods in
1994.
THE MACOUPIN JOINT VENTURE
The Joint Venture's revenues increased by $17,500, or by 4.3%, and by
$29,900, or by 2.5%, for the three and nine months ended September 30, 1995 as
compared to the corresponding periods in 1994. Of the three months' increase,
$14,200 was due to increases in regulated service rates permitted under the 1992
Cable Act that were implemented by the Partnership in April 1995, $9,400 was due
to increases in the number of subscriptions for services and $3,700 was due to
increases in unregulated rates charged to customers for premium services
implemented during the fourth quarter of 1994. These increases were partially
offset by rate decreases implemented in September 1994 to comply with the 1992
Cable Act,
-13-
<PAGE> 14
ENSTAR INCOME PROGRAM IV-1, L.P.
RESULTS OF OPERATIONS (CONTINUED)
estimated by the Joint Venture to be approximately $9,800. Of the nine months'
increase, $31,300 was due to increases in the number of subscriptions for
services, $20,100 was due to increases in regulated service rates permitted
under the 1992 Cable Act that were implemented by the Partnership in April 1995
$8,100 was due to other revenue producing items. These increases were partially
offset by rate decreases implemented in September 1994 to comply with the 1992
Cable Act, estimated by the Joint Venture to be approximately $29,600.
Service costs increased by $12,400, or by 10.1%, and by $1,900 (less
than one percent) for the three and nine months ended September 30, 1995 as
compared to the corresponding periods in 1994. Service costs represents costs
directly attributable to providing cable services to customers. Of the three
months' increase, $19,000 was due to an increase in copyright fees, $1,300 was
due to an increase in personnel expenses and $1,100 was due to an increase in
pole rent expense. These increases were partially offset by an $8,200 increase
in capitalization of labor and overhead costs and by a $2,600 decrease in repair
and maintenance expense.
General and administrative expenses decreased by $9,900, or by 23.5%,
and by $16,700, or by 13.9%, for the three and nine months ended September 30,
1995 as compared to the corresponding periods in 1994. Of the three months'
decrease, $6,800 was due to lower insurance premiums, $2,400 was due to a
decrease in marketing expense and $2,300 was due to a decrease in personnel
costs. Of the nine months' decrease, $6,900 was due to a decrease in bad debt
expense, $5,600 was due to a decrease in marketing expense, $3,300 was due to
lower insurance premiums and $2,200 was due to an increase in capitalization of
labor and overhead expense. These decreases were partially offset by a $1,700
increase in repair and maintenance expense.
Management fees and reimbursed expenses increased by $1,800, or by
3.3%, and decreased by $2,400, or by 1.4%, for the three and nine months ended
September 30, 1995 as compared to the corresponding periods in 1994. The three
months' increase was partially due to increased reimbursed expenses payable to
the Corporate General Partner resulting from higher allocated marketing
expenses. The nine months' decrease was primarily due to decreased reimbursed
expenses including lower allocated personnel costs, property taxes and
telephone, postage and messenger expenses. Management fees for the three and
nine month periods increased in direct relation to increased revenues as
described above.
Depreciation and amortization expense decreased by $15,900, or by 9.3%,
and by $52,800, or by 10.0%, for the three and nine months ended September 30,
1995 as compared to the corresponding periods in 1994, primarily due to the
effect of certain tangible assets becoming fully depreciated and intangible
assets becoming fully amortized.
Operating income increased by $29,100 and by $99,900 for the three and
nine months ended September 30, 1995 as compared to the corresponding periods in
1994, principally due to increased revenues and decreased depreciation and
amortization expense as described above.
-14-
<PAGE> 15
ENSTAR INCOME PROGRAM IV-1, L.P.
RESULTS OF OPERATIONS (CONCLUDED)
Interest income increased by $1,800, or by 20.5%, and by $3,100, or by
13.3%, for the three and nine months ended September 30, 1995 as compared to the
corresponding periods in 1994, due to higher average interest rates earned on
invested cash balances during the three and nine months ended September 30,
1995.
Operating income before depreciation and amortization (EBITDA) as a
percentage of revenues increased from 45.8% to 47.0% for the three months ended
September 30, 1995 and from 44.7% to 47.4% for the nine months ended September
30, 1995 as compared to the corresponding periods in 1994. These increases were
primarily caused by increased revenues and capitalization of labor and overhead
costs as described above. EBITDA increased by $13,200, or by 7.1%, and by
$47,100, or by 8.8%, for the three and nine months ended September 30, 1995 as
compared to the corresponding periods in 1994.
LIQUIDITY AND CAPITAL RESOURCES
The FCC's amended rate regulation rules were implemented during the
quarter ended September 30, 1994. Compliance with these rules has had a negative
impact on the Partnership's revenues and cash flow. However, as discussed above,
recent policy decisions of the FCC and pending legislation may make it more
likely that the Partnership will be permitted to increase regulated service
rates in response to certain cost increases.
The Partnership's primary objective, having invested its net offering
proceeds in the Joint Ventures, is to distribute to its partners all available
cash flow from operations and proceeds from the sale of cable systems, after
providing for expenses, debt service and capital requirements relating to the
expansion, improvement and upgrade of the Joint Ventures' cable systems. The
Joint Ventures rely upon the availability of cash generated from operations and
possible borrowings to fund their ongoing capital requirements. In general,
these requirements involve expansion, improvement and upgrade of the Joint
Ventures' existing cable television systems. The Joint Ventures have budgeted
capital expenditures of approximately $1,100,000 in 1995 of which the
Partnership's pro-rata share will approximate $500,000 for line extensions and
upgrades of existing cable plant. Management believes that cash generated by the
Joint Ventures' operations in 1995, together with available borrowings, will be
adequate to fund capital expenditures and allow for continued distributions to
partners. Management also believes, however, that it is essential to preserve
liquidity by reserving cash for future rebuild requirements, including a planned
rebuild in the community of Auburn, Illinois which is expected to cost
approximately $1,500,000.
The Partnership paid distributions totaling $126,200 and $378,600
during the three and nine months ended September 30, 1995, respectively.
However, there can be no assurance regarding the level, timing or continuation
of future distributions beyond 1995.
-15-
<PAGE> 16
ENSTAR INCOME PROGRAM IV-1, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONCLUDED)
In December 1993 the Partnership obtained a $2,100,000 revolving bank
credit agreement (the "Facility") maturing on September 30, 1998. Loans under
the Facility are secured by substantially all of the Partnership's assets.
Interest is payable at the Base Rate plus 1.5%. "Base Rate" means the higher of
the lender's prime rate or the Federal Funds Effective Rate plus 1/2%. The
Facility provides for quarterly reductions of the maximum commitment beginning
September 30, 1995, payable at the end of each fiscal quarter. The Partnership
will be permitted to prepay amounts outstanding under the Facility at any time
without penalty, and is able to re-borrow throughout the term of the Facility up
to the maximum commitment then available so long as no event of default exists.
The Partnership is also required to pay a commitment fee of 1/2% per annum on
the unused portion of the Facility. The Facility contains certain financial
tests and other covenants including, among others, restrictions on capital
expenditures, incurrence of indebtedness, distributions and investments, sale of
assets, acquisitions, and other covenants, defaults and conditions. The
Partnership believes that it was in compliance with the loan covenants at
September 30, 1995. The aggregate commitment under the Facility will decrease by
$100,000 in 1995 to $2,000,000 and by $400,00 in 1996 to $1,600,000. Repayment
of principal will be required to the extent the loan balance then outstanding
exceeds the reduced maximum commitment. The outstanding loan balance at
September 30, 1995 was $1,008,900.
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
Operating activities used $37,300 less cash during the nine months
ended September 30, 1995 than in the comparable 1994 period. The decrease was
primarily due to a $21,100 decrease in the payment of liabilities owed to the
General Partner and third party creditors. The Partnership used $12,700 less
cash during the first nine months of 1995 for the payment of deferred loan costs
related to the loan obtained in December 1993. Partnership expenses used $3,500
less cash after adding back non-cash items consisting of amortization of
deferred loan costs and equity in net income of Joint Ventures.
Cash provided by investing activities decreased by $342,500 during the
nine months ended September 30, 1995 as compared to the equivalent nine months
in 1994 due to a reduction in distributions from the Joint Ventures.
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. The Partnership does not believe that its financial
results have been, or will be, adversely affected by inflation, provided that it
is able to increase its service rates periodically, of which there can be no
assurance due to the re-regulation of rates charged for certain cable services.
-16-
<PAGE> 17
ENSTAR INCOME PROGRAM IV-1, L.P.
PART II. OTHER INFORMATION
ITEMS 1-5. Not applicable.
ITEM 6. Exhibits and Reports on Form 8-K
(a) None
(b) No Reports on Form 8-K were filed during the
quarter for which this report is filed.
-17-
<PAGE> 18
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 IV-1, L.P.
a GEORGIA LIMITED PARTNERSHIP
(Registrant)
By: ENSTAR COMMUNICATIONS CORPORATION
General Partner
Date: November 6, 1995 By: /s/ Michael K. Menerey
----------------------------------
Michael K. Menerey,
Chief Financial Officer
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT SEPTEMBER 30, 1995, AND THE STATEMENTS OF OPERATIONS FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
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