<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 June 30, 1997
--------------------------------
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 (I.R.S. Employer
incorporation or organization) Identification Number)
10900 Wilshire Boulevard - 15th Floor
Los Angeles, California 90024
- ---------------------------------------- -----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 824-9990
-----------------
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
<PAGE> 2
PART I - FINANCIAL INFORMATION
ENSTAR INCOME PROGRAM IV-1, L.P.
CONDENSED BALANCE SHEETS
========================================
<TABLE>
<CAPTION>
December 31, June 30,
1996* 1997
----------- -----------
<S> <C> <C>
(Unaudited)
ASSETS:
Cash and cash equivalents $ 406,700 $ 172,300
Prepaid expenses -- 200
----------- -----------
406,700 172,500
----------- -----------
Equity in net assets of Joint Ventures:
Enstar IV/PBD Systems Venture 1,769,400 2,028,500
Enstar Cable of Macoupin County 601,700 645,400
----------- -----------
2,371,100 2,673,900
----------- -----------
Deferred loan costs, net 34,200 26,000
----------- -----------
$ 2,812,000 $ 2,872,400
=========== ===========
LIABILITIES AND PARTNERSHIP CAPITAL
-----------------------------------
LIABILITIES:
Accounts payable $ 15,900 $ 17,000
Due to affiliates 8,800 16,100
Note payable 1,008,900 808,900
----------- -----------
TOTAL LIABILITIES 1,033,600 842,000
----------- -----------
PARTNERSHIP CAPITAL (DEFICIT):
General partners (65,500) (63,000)
Limited partners 1,843,900 2,093,400
----------- -----------
TOTAL PARTNERSHIP CAPITAL 1,778,400 2,030,400
----------- -----------
$ 2,812,000 $ 2,872,400
=========== ===========
</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
June 30,
---------------------------
1996 1997
--------- ---------
<S> <C> <C>
OPERATING EXPENSES:
General and administrative expenses $ (12,900) $ (12,400)
--------- ---------
OTHER INCOME (EXPENSE):
Interest income 7,400 1,800
Interest expense (29,900) (27,800)
--------- ---------
(22,500) (26,000)
--------- ---------
LOSS BEFORE EQUITY IN NET INCOME
OF JOINT VENTURES (35,400) (38,400)
--------- ---------
EQUITY IN NET INCOME
OF JOINT VENTURES:
Enstar IV/PBD Systems Venture 114,900 279,400
Enstar Cable of Macoupin County 18,600 20,400
--------- ---------
133,500 299,800
--------- ---------
NET INCOME $ 98,100 $ 261,400
========= =========
Net income allocated to General Partners $ 1,000 $ 2,600
========= =========
Net income allocated to Limited Partners $ 97,100 $ 258,800
========= =========
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 2.43 $ 6.47
========= =========
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
---------------------------
Six months ended
June 30,
---------------------------
1996 1997
--------- ---------
<S> <C> <C>
OPERATING EXPENSES:
General and administrative expenses $ (20,800) $ (19,100)
--------- ---------
OTHER INCOME (EXPENSE):
Interest income 9,200 5,700
Interest expense (59,900) (55,000)
--------- ---------
(50,700) (49,300)
--------- ---------
LOSS BEFORE EQUITY IN NET INCOME
OF JOINT VENTURES (71,500) (68,400)
--------- ---------
EQUITY IN NET INCOME
OF JOINT VENTURES:
Enstar IV/PBD Systems Venture 173,800 514,100
Enstar Cable of Macoupin County 37,400 58,700
--------- ---------
211,200 572,800
--------- ---------
NET INCOME $ 139,700 $ 504,400
========= =========
Net income allocated to General Partners $ 1,400 $ 5,000
========= =========
Net income allocated to Limited Partners $ 138,300 $ 499,400
========= =========
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 3.46 $ 12.49
========= =========
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
---------------------------
Six months ended
June 30,
---------------------------
1996 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 139,700 $ 504,400
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in net income of Joint Ventures (211,200) (572,800)
Amortization of deferred loan costs 8,300 8,200
Increase (decrease) from changes in:
Prepaid expenses -- (200)
Due from affiliates 35,700 --
Accounts payable and due to affiliates 8,700 8,400
--------- ---------
Net cash used in operating activities (18,800) (52,000)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from Joint Ventures 980,000 270,000
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (252,400) (252,400)
Repayment of debt -- (200,000)
--------- ---------
Net cash used in financing activities (252,400) (452,400)
--------- ---------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 708,800 (234,400)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 3,200 406,700
--------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 712,000 $ 172,300
========= =========
</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 six months ended June 30, 1997 and 1996 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, 1997 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 (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 six months ended June 30, 1997. 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 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 $89,300 and
$177,800 and reimbursement of expenses of approximately $129,800 and $255,600
under the management agreements for the three and six months ended June 30,
1997. In addition, the Macoupin Joint Venture paid the Corporate General Partner
approximately $4,900 and $9,700 in respect of its 1% special interest during the
three and six months ended June 30, 1997. Management fees and reimbursed
expenses due the Corporate General Partner are non-interest bearing.
The Joint Ventures also receive 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
the Joint Ventures' cable systems. The Joint Ventures reimburse the affiliate
for their allocable share of the affiliate's operational costs. The total amount
charged to the Joint Ventures for these costs approximated $38,700 and $74,000
in the three and six months ended June 30, 1997. No management fee is payable to
the affiliate by the Joint Ventures and there is no duplication of reimbursed
expenses and costs paid to the Manager.
-6-
<PAGE> 7
ENSTAR INCOME PROGRAM IV-1, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(CONTINUED)
========================================
2. TRANSACTIONS WITH THE GENERAL PARTNERS AND AFFILIATES (CONCLUDED)
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 Corporate General Partner could
negotiate for such programming services for the 15 partnerships managed by the
Corporate General Partner as a group. The Joint Ventures recorded programming
fee expense of $424,500 and $844,800 for the three and six months ended June 30,
1997. 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.
-7-
<PAGE> 8
ENSTAR INCOME PROGRAM IV-1, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(CONTINUED)
=======================================
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
June 30, 1997 and December 31, 1996, and the results of its operations for the
three and six months ended June 30, 1997 and 1996, have been included. The
results of operations for the three and six months ended June 30, 1997 are not
necessarily indicative of results for the entire year.
<TABLE>
<CAPTION>
December 31, June 30,
1996* 1997
----------- -----------
<S> <C> <C>
(Unaudited)
Current assets $ 2,310,800 $ 3,162,900
Investment in cable television
properties, net 1,841,900 1,722,900
Other assets 71,600 56,100
----------- -----------
$ 4,224,300 $ 4,941,900
=========== ===========
Current liabilities $ 685,500 $ 885,000
Venturers' capital 3,538,800 4,056,900
----------- -----------
$ 4,224,300 $ 4,941,900
=========== ===========
</TABLE>
*As presented in the audited financial statements.
-8-
<PAGE> 9
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
June 30,
-------------------------------
1996 1997
----------- -----------
<S> <C> <C>
REVENUES $ 1,312,700 $ 1,391,700
----------- -----------
OPERATING EXPENSES:
Service costs 457,900 483,300
General and administrative expenses 182,700 157,100
General Partner management fees and reimbursed expenses 146,600 150,700
Depreciation and amortization 300,700 73,200
----------- -----------
1,087,900 864,300
----------- -----------
OPERATING INCOME 224,800 527,400
OTHER INCOME (EXPENSE):
Interest income 10,200 34,700
Interest expense (3,800) (3,500)
Loss on sale of assets (1,500) -
----------- -----------
NET INCOME $ 229,700 $ 558,600
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Unaudited
-------------------------------
Six months ended
June 30,
-------------------------------
1996 1997
----------- -----------
<S> <C> <C>
REVENUES $ 2,584,400 $ 2,775,100
----------- -----------
OPERATING EXPENSES:
Service costs 925,100 948,300
General and administrative expenses 381,900 323,600
General Partner management fees and reimbursed expenses 283,500 298,600
Depreciation and amortization 659,800 236,100
----------- -----------
2,250,300 1,806,600
----------- -----------
OPERATING INCOME 334,100 968,500
OTHER INCOME (EXPENSE):
Interest income 21,800 63,100
Interest expense (6,800) (3,500)
Loss on sale of assets (1,500) -
----------- -----------
NET INCOME $ 347,600 $ 1,028,100
=========== ===========
</TABLE>
-9-
<PAGE> 10
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
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 June 30, 1997 and December 31,
1996, and the results of its operations for the three and six months ended June
30, 1997 and 1996, have been included. The results of operations for the three
and six months ended June 30, 1997 are not necessarily indicative of results for
the entire year.
<TABLE>
<CAPTION>
December 31, June 30,
1996* 1997
----------- -----------
<S> <C> <C>
(Unaudited)
Current assets $ 528,400 $ 860,500
Investment in cable television
properties, net 1,550,400 1,425,000
Other assets 5,600 4,300
----------- -----------
$ 2,084,400 $ 2,289,800
=========== ===========
Current liabilities $ 279,300 $ 353,600
Venturers' capital 1,805,100 1,936,200
----------- -----------
$ 2,084,400 $ 2,289,800
=========== ===========
</TABLE>
*As presented in the audited financial statements.
-10-
<PAGE> 11
ENSTAR INCOME PROGRAM IV-1, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(CONCLUDED)
========================================
ENSTAR CABLE OF MACOUPIN COUNTY (CONCLUDED)
<TABLE>
<CAPTION>
Unaudited
---------------------------
Three months ended
June 30,
---------------------------
1996 1997
--------- ---------
<S> <C> <C>
REVENUES $ 444,800 $ 492,700
--------- ---------
OPERATING EXPENSES:
Service costs 142,100 139,400
General and administrative expenses 35,000 45,100
General Partner management fees and reimbursed expenses 60,500 73,300
Depreciation and amortization 153,200 179,200
--------- ---------
390,800 437,000
--------- ---------
OPERATING INCOME 54,000 55,700
OTHER INCOME (EXPENSE):
Interest income 3,700 8,400
Interest expense (2,700) (3,000)
Gain on sale of assets 600 -
--------- ---------
NET INCOME $ 55,600 $ 61,100
========= =========
</TABLE>
<TABLE>
<CAPTION>
Unaudited
---------------------------
Six months ended
June 30,
---------------------------
1996 1997
--------- ---------
<S> <C> <C>
REVENUES $ 870,000 $ 974,300
--------- ---------
OPERATING EXPENSES:
Service costs 271,700 269,400
General and administrative expenses 76,300 59,200
General Partner management fees and reimbursed expenses 114,800 144,500
Depreciation and amortization 305,000 333,800
--------- ---------
767,800 806,900
--------- ---------
OPERATING INCOME 102,200 167,400
OTHER INCOME (EXPENSE):
Interest income 13,100 14,100
Interest expense (3,800) (5,400)
Gain on sale of assets 600 -
--------- ---------
NET INCOME $ 112,100 $ 176,100
========= =========
</TABLE>
-11-
<PAGE> 12
ENSTAR INCOME PROGRAM IV-1, L.P.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INTRODUCTION
On February 8, 1996, President Clinton signed into law the
Telecommunications Act of 1996 (the "1996 Telecom Act"). This statute
substantially changed the competitive and regulatory environment for
telecommunications providers by significantly amending the Communications Act of
1934, including certain of the rate regulation provisions previously imposed by
the Cable Television Consumer Protection and Competition Act of 1992 (the "1992
Cable Act"). Compliance with those rate regulations has had a negative impact on
the Partnership's revenues and cash flow. The 1996 Telecom Act provides that
certain of the rate regulations will be phased out altogether in 1999. Further,
the regulatory environment will continue to change pending, among other things,
the outcome of legal challenges and Federal Communications Commission (the
"FCC") rulemaking and enforcement activity in respect of the 1992 Cable Act and
the 1996 Telecom Act. 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, 1996 for additional information regarding
such 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 the PBD Joint
Venture and the Macoupin Joint Venture. The Partnership has a 50% interest in
the PBD Joint Venture and a one-third (1/3) interest in 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.
-12-
<PAGE> 13
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 made distributions totaling $260,000 and $270,000
to the Partnership during the three and six months ended June 30, 1997. The
Partnership distributed $126,200 and $252,400 to its partners during the three
and six months ended June 30, 1997.
THE PBD JOINT VENTURE
The PBD Joint Venture's revenues increased from $1,312,700 to
$1,391,700, or by 6.0%, and from $2,584,400 to $2,775,100, or by 7.4%, for the
three and six months ended June 30, 1997 as compared to the corresponding
periods in 1996. Of the $79,000 increase in revenues for the three months ended
June 30, 1997 as compared to the corresponding period in 1996, $100,200 was due
to increases in regulated service rates that were implemented by the Joint
Venture in the second and fourth quarters of 1996, $17,600 was due to increases
in other revenue producing items including advertising sales revenue and $7,600
was due to the restructuring of The Disney Channel from a premium channel to a
tier channel effective July 1, 1996. These increases were partially offset by a
$46,400 decrease in revenues due to decreases in the number of subscriptions for
basic and premium services. Of the $190,700 increase in revenues for the six
months ended June 30, 1997 as compared to the corresponding period in 1996,
$193,300 was due to increases in regulated service rates, $30,500 was due to
increases in other revenue producing items including advertising sales revenue
and $14,800 was due to the restructuring of The Disney Channel. These increases
were partially offset by a $47,900 decrease in revenues due to decreases in the
number of subscriptions for basic and tier services. As of June 30, 1997, the
Joint Venture had approximately 13,300 homes subscribing to cable service and
4,200 premium service units.
Service costs increased from $457,900 to $483,300, or by 5.5%, and from
$925,100 to $948,300, or by 2.5%, for the three and six months ended June 30,
1997 as compared to the corresponding periods in 1996. Service costs represent
costs directly attributable to providing cable services to customers. The
increase in both periods was principally due to decreases in the capitalization
of costs related to reduced customer installations and to increases in franchise
and copyright fees. The increase for the six months was also due to increases in
programming fees as a result of higher rates charged by program suppliers.
General and administrative expenses decreased from $182,700 to
$157,100, or by 14.0%, and from $381,900 to $323,600, or by 15.3%, for the three
and six months ended June 30, 1997 as compared to the corresponding periods in
1996. The decreases were primarily due to the partial reversal of an insurance
expense estimate which was larger than the actual premiums when paid in 1997.
The decreases were also due to a decrease in expenses allocated by an affiliate
of the Corporate General Partner that provides system operating management
services to the PBD Joint Venture.
-13-
<PAGE> 14
ENSTAR INCOME PROGRAM IV-1, L.P.
RESULTS OF OPERATIONS (CONTINUED)
Management fees and reimbursed expenses increased from $146,600 to
$150,700, or by 2.8%, and from $283,500 to $298,600, or by 5.3%, for the three
and six months ended June 30, 1997 as compared to the corresponding periods in
1996. Management fees increased in direct relation to increased revenues as
described above. Reimbursed expenses increased primarily due to higher allocated
personnel costs.
Operating income before income taxes, depreciation and amortization
(EBITDA) is a commonly used financial analysis tool for measuring and comparing
cable television companies in several areas, such as liquidity, operating
performance and leverage. EBITDA as a percentage of revenues increased from
40.0% to 43.2% and from 38.5% to 43.4% for the three and six months ended June
30, 1997 as compared to the corresponding periods in 1996. The change was
primarily due to increases in revenues. EBITDA increased from $525,500 to
$600,600, or by 14.3%, and from $993,900 to $1,204,600, or by 21.2%, for the
three and six months ended June 30, 1997 as compared to the corresponding
periods in 1996. EBITDA should be considered in addition to and not as a
substitute for net income and cash flows determined in accordance with generally
accepted accounting principles as an indicator of financial performance and
liquidity.
Depreciation and amortization expense decreased from $300,700 to
$73,200, or by 75.7%, and from $659,800 to $236,100, or by 64.2%, for the three
and six months ended June 30, 1997 as compared to the corresponding periods in
1996, due to the effect of certain tangible assets becoming fully depreciated
and certain intangible assets becoming fully amortized.
Operating income increased from $224,800 to $527,400 and from $334,100
to $968,500 for the three and six months ended June 30, 1997 as compared to the
corresponding periods in 1996, primarily due to decreased depreciation and
amortization expense and increased revenues.
Interest income, net of interest expense, increased from $6,400 to
$31,200 and from $15,000 to $59,600 for the three and six months ended June 30,
1997 as compared to the corresponding periods in 1996. The increases for the
three and six months were primarily due to higher cash balances available for
investment and due to a change in investment policy that yielded a higher return
on invested cash.
Due to the factors described above, the PBD Joint Venture's net income
increased from $229,700 to $558,600 and from $347,600 to $1,028,100 for the
three and six months ended June 30, 1997 as compared to the corresponding
periods in 1996.
THE MACOUPIN JOINT VENTURE
The Macoupin Joint Venture's revenues increased from $444,800 to
$492,700, or by 10.8%, and from $870,000 to $974,300, or by 12.0%, for the three
and six months ended June 30, 1997 as compared to the corresponding periods in
1996. Of the $47,900 increase in revenues for the three months ended June
30,1997 as compared to the corresponding period in 1996, $40,800 was due to
increases in regulated service rates that were implemented by the Joint Venture
in the second and fourth quarters of 1996, $13,000 was due to the restructuring
of The Disney Channel from a premium channel to a tier channel effective July 1,
1996 and $1,600 was due to increases in other revenue producing items. These
increases were partially offset by a $7,500 decrease in revenues due to
decreases in the number of subscriptions for premium services. Of the $104,300
-14-
<PAGE> 15
ENSTAR INCOME PROGRAM IV-1, L.P.
RESULTS OF OPERATIONS (CONTINUED)
increase in revenues for the six months ended June 30,1997 as compared to the
corresponding period in 1996, $85,700 was due to increases in regulated service
rates, $25,500 was due to the restructuring of The Disney Channel and $5,900 was
due to increases in other revenue producing items. These increases were
partially offset by a $12,800 decrease in revenues due to decreases in the
number of subscriptions for premium services. As of June 30, 1997, the Macoupin
Joint Venture had approximately 4,500 homes subscribing to cable service and
1,600 premium service units.
Service costs decreased from $142,100 to $139,400, or by 1.9%, for the
three months and remained relatively unchanged, decreasing from $271,700 to
$269,400 (less than one percent), for the six months ended June 30, 1997 as
compared to the corresponding periods in 1996. Service costs represent costs
directly attributable to providing cable services to customers. The decrease was
primarily due to lower personnel costs.
General and administrative expenses increased from $35,000 to $45,100,
or by 28.9%, for the quarter ended June 30, 1997 and decreased from $76,300 to
$59,200, or by 22.4%, for the six months ended June 30, 1997 as compared to the
corresponding periods in 1996. The increase in the quarter was primarily due to
an insurance premium adjustment and an increase in bad debt expense. The
decrease in the six months was primarily due to lower personnel costs.
Management fees and reimbursed expenses increased from $60,500 to
$73,300, or by 21.2%, and from $114,800 to $144,500, or by 25.9%, for the three
and six months ended June 30, 1997 as compared to the corresponding periods in
1996. Management fees increased in direct relation to increased revenues as
described above. Reimbursed expenses increased primarily due to higher allocated
personnel costs resulting from staff additions and wage increases.
Operating income before income taxes, depreciation and amortization
(EBITDA) is a commonly used financial analysis tool for measuring and comparing
cable television companies in several areas, such as liquidity, operating
performance and leverage. EBITDA as a percentage of revenues increased from
46.6% to 47.7% and from 46.8% to 51.4% for the three and six months ended June
30, 1997 as compared to the corresponding periods in 1996. The change was
primarily due to increased revenues. EBITDA increased from $207,200 to $234,900,
or by 13.4%, and from $407,200 to $501,200, or by 23.1%, for the three and six
months ended June 30, 1997 as compared to the corresponding periods in 1996.
EBITDA should be considered in addition to and not as a substitute for net
income and cash flows determined in accordance with generally accepted
accounting principles as an indicator of financial performance and liquidity.
Depreciation and amortization expense increased from $153,200 to
$179,200, or by 17.0%, and from $305,000 to $333,800, or by 9.4%, for the three
and six months ended June 30, 1997 as compared to the corresponding periods in
1996, due to asset additions related to the upgrade of the Joint Venture's
plant.
Operating income increased from $54,000 to $55,700, or by 3.1%, and
from $102,200 to $167,400, or by 63.8%, for the three and six months ended June
30, 1997 as compared to the corresponding periods in 1996, primarily due to
increased revenues as described above.
-15-
<PAGE> 16
ENSTAR INCOME PROGRAM IV-1, L.P.
RESULTS OF OPERATIONS (CONCLUDED)
Interest income, net of interest expense, increased from $1,000 to
$5,400 for the quarter ended June 30, 1997 and decreased from $9,300 to $8,700
for the six months ended June 30, 1997 as compared to the corresponding periods
in 1996. The increase for the quarter was due to higher average cash balances
available for investment in 1997 while additional interest expense incurred in
the six months ended June 30, 1997 offset increases in interest income for the
period.
Due to the factors described above, the Joint Venture's net income
increased from $55,600 to $61,100, or by 9.9%, and from $112,100 to $176,100, or
by 57.1%, for the three and six months ended June 30, 1997 as compared to the
corresponding periods in 1996.
LIQUIDITY AND CAPITAL RESOURCES
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 Macoupin Joint Venture is
required to rebuild its Auburn, Illinois cable system at an estimated total cost
of $379,000 as a condition of its franchise agreement. Capital expenditures
related to the rebuild totaled approximately $226,000 in 1996, and the Joint
Venture has budgeted additional expenditures of $153,000 in 1997 to complete the
rebuild. The Macoupin Joint Venture is also rebuilding portions of its cable
systems in surrounding communities at an estimated additional cost of
approximately $770,000. Capital expenditures in the surrounding communities
approximated $460,000 in 1996 and additional construction expenditures of
$310,000 are budgeted for 1997. Total rebuild construction costs approximated
$184,000 during the first half of 1997. The PBD Joint Venture has budgeted
capital expenditures of approximately $1,509,200 in 1997, which include
$1,248,800 for the rebuild of its Mt. Carmel, Illinois cable system. Management
believes that cash generated by the Joint Ventures' operations in 1997, together
with available borrowings, will be adequate to fund capital expenditures and
allow for continued distributions to partners. To incur this level of capital
expenditures, the Partnership obtained a waiver from its lender on June 25, 1997
that permits the Joint Ventures to exceed the limitation on such capital
expenditures imposed by the loan covenants in the Partnership's bank credit
agreement.
As discussed in prior reports, the Joint Ventures postponed a number of
rebuild and upgrade projects that were planned for 1994 and 1995 because of the
uncertainty related to implementation of the 1992 Cable Act and the negative
impact thereof on the Joint Ventures' businesses and access to capital. Although
the Joint Ventures are presently rebuilding a number of their cable systems, a
majority of their customers are served by systems that will not be rebuilt by
the end of 1997. As a result, these systems will be significantly less
technically advanced than had been expected prior to the implementation of
reregulation. The Joint Ventures believe that the delays in upgrading many of
their systems will, under present market conditions, most likely have an adverse
effect on the value of those systems compared to systems that have been rebuilt
to a higher technical standard.
-16-
<PAGE> 17
ENSTAR INCOME PROGRAM IV-1, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
In December 1993, the Partnership obtained from a lender a $2,100,000
revolving bank credit agreement (the "Facility") maturing on December 31, 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 0.5%.
The Partnership paid a facility fee of $31,500 to the lender prior to funding
the Facility. The Facility provides for quarterly reductions of the maximum
commitment, which began September 30, 1995, payable at the end of each fiscal
quarter. The Partnership is 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 0.5% per year 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's management believes that it was in compliance with
the loan covenants at June 30, 1997. The maximum commitment under the credit
facility will decrease by $750,000 in 1997 to $850,000. On May 14, 1997, the
Partnership elected to prepay $200,000 of its note payable balance which reduced
its outstanding borrowings from $1,008,900 to $808,900.
The Corporate General Partner has engaged in discussions with a number
of possible financing sources regarding the availability and terms of a
replacement bank facility for the Partnership. These discussions have to date
not been successful. The Corporate General Partner has generally been advised
that an individual facility of the size needed by the Partnership is too small
to interest most banks which lend to the cable television industry. Accordingly,
on June 6, 1997, the Corporate General Partner and an affiliated partnership
formed Enstar Finance Company, LLC ("EFC"). The Corporate General Partner's
objective is to have EFC obtain a secured bank facility of up to $35 million in
order to provide funds that would in turn be advanced to the Partnership and
certain of the other related partnerships managed by the Corporate General
Partner. Such funds would be used to repay existing bank obligations of such
partnerships and to provide capital to fund future rebuild and upgrade
requirements of the Joint Ventures. Based on discussions with prospective
lenders, the Corporate General Partner believes that this structure, if
implemented, will provide capital to the Partnership on terms more favorable
than could be obtained on a "stand-alone" basis. Any advances by EFC will be
independently collateralized by the individual partnership borrowers so that no
partnership will be required to accept responsibility for borrowings made to
other partnerships. The Corporate General Partner has received a commitment
letter from two agent banks regarding the terms of a bank facility for EFC,
although a definitive credit agreement has not been executed as of the date of
this Report. The Corporate General Partner presently expects the EFC facility to
be completed in the third quarter and, accordingly, contemplates that a loan
will be made by EFC to the Partnership that will repay the existing Facility.
The Partnership paid distributions totaling $126,200 and $252,400
during the three and six months ended June 30, 1997. However, there can be no
assurance regarding the level, timing or continuation of future distributions.
-17-
<PAGE> 18
ENSTAR INCOME PROGRAM IV-1, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONCLUDED)
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
Operating activities used $33,200 more cash during the six months ended
June 30, 1997 than in the corresponding prior year period. The change was
primarily due to the collection of $35,700 in receivables from affiliates during
the first half of 1996. Changes in prepaid expenses and liabilities owed to
third party creditors and the Corporate General Partner provided $500 less cash
in the first six months of 1997 due to differences in the timing of payments.
Partnership expenses used $3,000 less cash in the six months ended June 30, 1997
after adding back non-cash items consisting of amortization of deferred loan
costs and equity in net income of Joint Ventures.
Investing activities provided $710,000 less cash in the six months
ended June 30, 1997 as compared with the corresponding prior year period due to
a reduction in distributions from the Joint Ventures. The Partnership used
$200,000 more cash in financing activities during the six months ended June 30,
1997 as compared with the corresponding prior year period for the repayment of
debt.
INFLATION
Certain of the Joint Ventures' 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.
-18-
<PAGE> 19
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.
<PAGE> 20
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: August 12, 1997 By: /s/ Michael K. Menerey
-------------------------
Michael K. Menerey,
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT JUNE 30, 1997, AND THE STATEMENTS OF OPERATIONS FOR THE SIX MONTHS
ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 172,300
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,872,400
<CURRENT-LIABILITIES> 33,100
<BONDS> 808,900
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,872,400
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 19,100
<OTHER-EXPENSES> (5,700)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 55,000
<INCOME-PRETAX> 504,400
<INCOME-TAX> 0
<INCOME-CONTINUING> 504,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 504,400
<EPS-PRIMARY> 12.49
<EPS-DILUTED> 0
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