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 March 31, 2000
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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 0-15705
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Enstar Income Program IV-1, L.P.
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(Exact name of Registrant as specified in its charter)
Georgia 58-1648322
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(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
12444 Powerscourt Dr., Suite 100
St. Louis, Missouri 63131
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area (314) 965-0555
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
--- ---
Exhibit Index located at Page E-1.
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<CAPTION>
PART I - FINANCIAL INFORMATION
ENSTAR INCOME PROGRAM IV-1, L.P.
CONDENSED BALANCE SHEETS
======================================
December 31, March 31,
1999* 2000
----------------- -----------------
(Unaudited)
ASSETS:
<S> <C> <C>
Cash $ 1,700 $ 500
Prepaid expenses 2,900 1,900
----------------- -----------------
Equity in net assets of Joint Ventures:
Enstar IV/PBD Systems Venture 2,394,600 2,561,500
Enstar Cable of Macoupin County 1,105,400 1,088,600
----------------- -----------------
3,500,000 3,650,100
----------------- -----------------
Deferred loan costs, net 23,100 23,500
----------------- -----------------
$ 3,527,700 $ 3,676,000
================= =================
LIABILITIES AND PARTNERSHIP CAPITAL
-----------------------------------
LIABILITIES:
Accounts payable $ 3,600 $ 3,100
Due to affiliates 21,200 38,000
----------------- -----------------
TOTAL LIABILITIES 24,800 41,100
----------------- -----------------
PARTNERSHIP CAPITAL (DEFICIT):
General partners (48,100) (46,800)
Limited partners 3,551,000 3,681,700
----------------- -----------------
TOTAL PARTNERSHIP CAPITAL 3,502,900 3,634,900
----------------- -----------------
$ 3,527,700 $ 3,676,000
================= =================
</TABLE>
*As presented in the audited financial statements.
See accompanying notes to condensed financial statements.
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<PAGE>
<TABLE>
<CAPTION>
ENSTAR INCOME PROGRAM IV-1, L.P.
CONDENSED STATEMENTS OF OPERATIONS
======================================
Unaudited
-------------------------------------
Three months ended
March 31,
-------------------------------------
1999 2000
---------------- -----------------
OPERATING EXPENSES:
<S> <C> <C>
General and administrative expenses $ (13,500) $ (24,600)
---------------- -----------------
OTHER INCOME (EXPENSE):
Interest income 100 -
Interest expense (9,100) (5,300)
---------------- -----------------
(9,000) (5,300)
---------------- -----------------
LOSS BEFORE EQUITY IN NET INCOME
OF JOINT VENTURES (22,500) (29,900)
---------------- -----------------
EQUITY IN NET INCOME
OF JOINT VENTURES:
Enstar IV/PBD Systems Venture 239,500 241,900
Enstar Cable of Macoupin County 53,000 46,200
---------------- -----------------
292,500 288,100
---------------- -----------------
NET INCOME $ 270,000 $ 258,200
================ =================
Net income allocated to General Partners $ 2,700 $ 2,600
================ =================
Net income allocated to Limited Partners $ 267,300 $ 255,600
================ =================
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 6.69 $ 6.39
================ =================
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 39,982 39,982
================ =================
</TABLE>
See accompanying notes to condensed financial statements.
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<PAGE>
<TABLE>
<CAPTION>
ENSTAR INCOME PROGRAM IV-1, L.P.
STATEMENTS OF CASH FLOWS
======================================
Unaudited
-------------------------------------
Three months ended
March 31,
-------------------------------------
1999 2000
---------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 270,000 $ 258,200
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in net income of Joint Ventures (292,500) (288,100)
Amortization of deferred loan costs 3,100 3,200
Increase from changes in:
Prepaid expenses 1,100 1,000
Accounts payable and due to affiliates 127,800 16,300
---------------- -----------------
Net cash provided by (used in) operating activities 109,500 (9,400)
---------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from Joint Ventures 14,000 138,000
---------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (126,200) (126,200)
Deferred loan costs - (3,600)
---------------- -----------------
Net cash used in financing activities (126,200) (129,800)
---------------- -----------------
DECREASE IN CASH (2,700) (1,200)
CASH AT BEGINNING OF PERIOD 4,100 1,700
---------------- -----------------
CASH AT END OF PERIOD $ 1,400 $ 500
================ =================
</TABLE>
See accompanying notes to condensed financial statements.
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<PAGE>
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
months ended March 31, 2000 and 1999 are unaudited. These condensed interim
financial statements should be read in conjunction with the audited financial
statements and notes thereto included in our latest Annual Report on Form 10-K.
In the opinion of management, 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 months ended March 31, 2000 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 our corporate general partner pursuant to which we
pay a monthly management fee of 5% of gross revenues. The agreement also
provides that we reimburse the manager for direct expenses incurred on behalf of
the partnership and the partnership's allocable share of the manager's
operational costs. Charter Communications Holding Company, LLC and its
affiliates provide other corporate management services for the partnership as
well as 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"). Such services were provided by
Falcon Communications, L.P. and its affiliates prior to November 12, 1999.
Corporate office allocations and district office expenses are charged to the
properties served based primarily on the respective percentage of basic
subscribers within the designated service areas. No such costs and expenses were
incurred or charged to the partnership for these services during the three
months ended March 31, 2000. The manager has entered into identical agreements
with the Joint Ventures, except that Enstar Cable of Macoupin County 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 its gross revenues in respect of Enstar
Communications Corporation's interest as the corporate general partner of the
Macoupin 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 $86,300 and
reimbursement of expenses of approximately $111,000 under the management
agreements for the three months ended March 31, 2000. In addition, the Macoupin
Joint Venture paid the corporate general partner approximately $5,000 in respect
of its 1% special interest during the three months ended March 31, 2000.
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 Charter and other affiliates 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 affiliates for their allocable share of the affiliates'
operational costs. The total amount charged to the Joint Ventures for these
costs approximated $104,300 in the three months ended March 31, 2000. No
management fee is payable to the affiliates by the Joint Ventures and there is
no duplication of reimbursed expenses and costs paid to the manager.
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<PAGE>
ENSTAR INCOME PROGRAM IV-1, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
======================================
2. TRANSACTIONS WITH THE GENERAL PARTNERS AND AFFILIATES (Continued)
Substantially all programming services have been purchased through
Charter since November 12, 1999. Before that time, substantially all programming
services were purchased through Falcon Communications. Falcon Communications
charged 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. Charter
charges the Joint Ventures for these costs based on its costs. The Joint
Ventures recorded programming fee expense of $389,000 for the three months ended
March 31, 2000. Programming fees are included in service costs in the statements
of operations.
In the normal course of business, the partnership pays a commitment
fee to Enstar Finance Company, LLC, our primary lender and a subsidiary of the
corporate general partner.
3. EARNINGS PER UNIT OF LIMITED PARTNERSHIP INTEREST
Earnings and losses have been allocated 99% to the limited partners
and 1% to the general partners. Earnings and losses per unit of limited
partnership interest are based on the weighted average number of units
outstanding during the year. 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.
4. SUBSEQUENT EVENT
On April 20, 2000, the corporate general partner signed a non-binding
letter of intent to sell all of the Joint Ventures' cable television systems.
The sale of the Joint Ventures' assets is subject to approval by a majority of
the partnership's limited partners and other standard closing conditions, such
as obtaining regulatory approvals. The prospective buyer seeks to purchase a
large group of cable television systems, which includes all of the Joint
Ventures' systems as well as certain systems owned by other partnerships under
the common control of the partnership's corporate general partner. There is no
assurance that a definitive sale agreement will be executed, and if so, whether
the proposed sale will be consummated. Even if the limited partners do approve
the sale, consummation of the sale is subject to certain factors beyond the
partnership's control, including receipt of regulatory approvals and approval of
the sale by other selling partnerships.
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<PAGE>
ENSTAR INCOME PROGRAM IV-1, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
======================================
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. 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 March 31, 2000
and December 31, 1999, and the results of its operations for the three months
ended March 31, 2000 and 1999, have been included. The results of operations for
the three months ended March 31, 2000 are not necessarily indicative of results
for the entire year.
<TABLE>
<CAPTION>
December 31, March 31,
1999* 2000
------------------ -----------------
(Unaudited)
<S> <C> <C>
Current assets $ 3,440,700 $ 3,758,500
Investment in cable television properties, net 1,772,800 1,750,000
Other assets 2,400 1,600
------------------ -----------------
$ 5,215,900 $ 5,510,100
================== =================
Current liabilities $ 426,700 $ 387,000
Venturers' capital 4,789,200 5,123,100
------------------ -----------------
$ 5,215,900 $ 5,510,100
================== =================
</TABLE>
*As presented in the audited financial statements.
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<PAGE>
ENSTAR INCOME PROGRAM IV-1, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
======================================
<TABLE>
<CAPTION>
ENSTAR IV/PBD SYSTEMS VENTURE (Continued)
Unaudited
---------------------------------------
Three months ended
March 31,
---------------------------------------
1999 2000
------------------ -----------------
<S> <C> <C>
REVENUES $ 1,360,200 $ 1,327,300
------------------ -----------------
OPERATING EXPENSES:
Service costs 425,400 447,400
General and administrative expenses 224,500 210,800
General Partner management fees and reimbursed expenses 139,300 136,400
Depreciation and amortization 113,900 85,400
------------------ -----------------
903,100 880,000
------------------ -----------------
OPERATING INCOME 457,100 447,300
OTHER INCOME (EXPENSE):
Interest income 31,000 40,400
Interest expense (5,300) (3,800)
------------------ -----------------
NET INCOME $ 482,800 $ 483,900
================== =================
</TABLE>
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<PAGE>
ENSTAR INCOME PROGRAM IV-1, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
======================================
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 March 31, 2000 and December 31,
1999, and the results of its operations for the three months ended March 31,
2000 and 1999, have been included. The results of operations for the three
months ended March 31, 2000 are not necessarily indicative of results for the
entire year.
<TABLE>
<CAPTION>
December 31, March 31,
1999* 2000
------------------ -----------------
(Unaudited)
<S> <C> <C>
Current assets $ 1,807,500 $ 1,792,500
Investment in cable television properties, net 1,730,200 1,680,400
Other assets 1,200 900
------------------ -----------------
$ 3,538,900 $ 3,473,800
================== =================
Current liabilities $ 222,700 $ 208,100
Venturers' capital 3,316,200 3,265,700
------------------ -----------------
$ 3,538,900 $ 3,473,800
================== =================
</TABLE>
*As presented in the audited financial statements.
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<PAGE>
ENSTAR INCOME PROGRAM IV-1, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
======================================
<TABLE>
<CAPTION>
ENSTAR CABLE OF MACOUPIN COUNTY (Continued)
Unaudited
---------------------------------------
Three months ended
March 31,
---------------------------------------
1999 2000
------------------ -----------------
<S> <C> <C>
REVENUES $ 490,500 $ 498,500
------------------ -----------------
OPERATING EXPENSES:
Service costs 164,800 179,900
General and administrative expenses 53,300 75,400
General Partner management fees and reimbursed expenses 70,300 65,900
Depreciation and amortization 54,400 56,200
------------------ -----------------
342,800 377,400
------------------ -----------------
OPERATING INCOME 147,700 121,100
OTHER INCOME (EXPENSE):
Interest income 14,000 19,900
Interest expense (2,600) (2,500)
------------------ -----------------
NET INCOME $ 159,100 $ 138,500
================== =================
</TABLE>
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<PAGE>
ENSTAR INCOME PROGRAM IV-1, L.P.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
The 1992 Cable Act required the Federal Communications Commission 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 our revenues and cash flow. The 1996 Telecommunications
Act substantially changed the competitive and regulatory environment for cable
television and telecommunications service providers. Among other changes, the
1996 Telecommunications 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 their effect on our business. Accordingly, our historical
financial results as described below are not necessarily indicative of future
performance.
This report includes certain forward-looking statements regarding,
among other things, our future results of operations, regulatory requirements,
competition, capital needs and general business conditions applicable to the
partnership. Such forward-looking statements involve risks and uncertainties
including, without limitation, the uncertainty of legislative and regulatory
changes and the rapid developments in the competitive environment facing cable
television operators such as the partnership, as discussed more fully elsewhere
in this report.
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.
RESULTS OF OPERATIONS
The Partnership
---------------
As discussed above, all of our cable television business operations
are conducted through our participation as a partner in the Joint Ventures. The
Joint Ventures distributed $138,000 to us, representing our pro rata share of
the cash flow distributed from the Joint Ventures' respective operations, and we
distributed $126,200 to the partners during the three months ended March 31,
2000.
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<PAGE>
ENSTAR INCOME PROGRAM IV-1, L.P.
RESULTS OF OPERATIONS (Continued)
The PBD Joint Venture
---------------------
The joint venture's revenues decreased from $1,360,200 to $1,327,300,
or by 2.4%, for the three months ended March 31, 2000 as compared to first three
months of 1999. Of the $32,900 decrease, $74,300 was due to decreases in the
number of subscriptions for basic, premium, tier and equipment rental services
and $2,700 was due to decreases in other revenue producing items. These
decreases were partially offset by a $44,100 increase due to increases in
regulated service rates that the joint venture implemented in 1999. As of March
31, 2000, the joint venture had approximately 12,700 basic subscribers and 3,100
premium service units.
Service costs increased from $425,400 to $447,400, or by 5.2%, for the
three months ended March 31, 2000 as compared to the equivalent period in 1999.
Service costs represent costs directly attributable to providing cable services
to customers. The increase was primarily due to decreases in capitalization of
labor and overhead costs resulting from fewer capital projects in the first
three months of 2000.
General and administrative expenses decreased from $224,500 to
$210,800, or by 6.1%, for the three months ended March 31, 2000 as compared to
the first quarter of 1999. The decrease was attributable to decreases in
marketing expenses.
Management fees and reimbursed expenses decreased from $139,300 to
$136,400, or by 2.1%, for the three months ended March 31, 2000 as compared to
the prior year quarter. Management fees decreased in direct relation to
decreased revenues as discussed above. Reimbursed expenses decreased due to
lower allocated corporate office expenses and lower allocated telephone expense.
Depreciation and amortization expense decreased from $113,900 to
$85,400, or by 25.0%, for the three months ended March 31, 2000 as compared to
the corresponding three months of 1999, due to the impact of certain tangible
assets becoming fully depreciated.
Operating income decreased from $457,100 to $447,300, or by 2.1%, for
the three months ended March 31, 2000 as compared to the first three months of
1999, primarily due to decreased revenues and capitalization of labor and
overhead costs as discussed above.
Interest income, net of interest expense, increased from $25,700 to
$36,600, or by 42.4%, for the three months ended March 31, 2000 as compared to
the first quarter of 1999. The increase was primarily due to higher average cash
balances available for investment and due to higher average interest rates
earned on invested funds during the current year.
Due to the factors described above, the joint venture's net income
increased from $482,800 to $483,900, or by less than 1.0%, for the three months
ended March 31, 2000 as compared to the three months ended March 31, 1999.
Based on its experience in the cable television industry, the joint
venture believes that operating income before depreciation and amortization, or
EBITDA, and related measures of cash flow serve as important financial analysis
tools for measuring and comparing cable television companies in several areas,
such as liquidity, operating performance and leverage. EBITDA is not a
measurement
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<PAGE>
ENSTAR INCOME PROGRAM IV-1, L.P.
RESULTS OF OPERATIONS (Continued)
determined under generally accepted accounting principles, or 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 42.0% to 40.1% during the three months ended March 31,
2000 as compared to the corresponding period in 1999. The decrease was primarily
due to lower revenues and capitalization of labor and overhead costs as
described above. EBITDA decreased from $571,000 to $532,700, or by 6.7%, for the
three months ended March 31, 2000 as compared to the corresponding period in
1999.
Macoupin Joint Venture
----------------------
The joint venture's revenues increased from $490,500 to $498,500, or
by 1.6%, for the three months ended March 31, 2000 as compared to the first
three months of 1999. Of the $8,000 increase, $12,000 was due to increases in
regulated service rates that the Joint Venture implemented in 1999 and $4,600
was due to other revenue producing items. These increases were partially offset
by an $8,600 decrease due to decreases in the number of subscriptions for basic,
premium, tier and equipment rental services. As of March 31, 2000, the joint
venture had approximately 4,500 basic subscribers and 1,100 premium service
units.
Service costs increased from $164,800 to $179,900, or by 9.2%, for the
three months ended March 31, 2000 as compared to the equivalent period in 1999.
Service costs represent costs directly attributable to providing cable services
to customers. The increase was primarily due to higher personnel costs resulting
from staff additions and due to increases in allocated wages from affiliates of
the corporate general partner.
General and administrative expenses increased from $53,300 to $75,400,
or by 41.5%, for the three months ended March 31, 2000 as compared to the first
quarter of 1999. The increase was primarily due to higher professional fees,
primarily audit fees, and greater allocated personnel costs from affiliates of
the corporate general partner.
Management fees and reimbursed expenses decreased from $70,300 to
$65,900, or by 6.3%, for the three months ended March 31, 2000 as compared to
1999. Management fees increased in direct relation to increased revenues as
discussed above. Reimbursed expenses decreased due to lower allocated personnel
costs, telephone expenses and corporate office expenses.
Depreciation and amortization expense increased from $54,400 to
$56,200, or by 3.3%, for the three months ended March 31, 2000 as compared to
the corresponding quarter of 1999, due to the depreciation of plant asset
additions.
Operating income decreased from $147,700 to $121,100, or by 18.0%, for
the three months ended March 31, 2000 as compared to the three months ended
March 31, 1999. The decrease was primarily due to increases in personnel costs
as discussed above.
Interest income, net of interest expense, increased from $11,400 to
$17,400, or by 52.6%, for the three months ended March 31, 2000 as compared to
the first three months of 1999. The
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<PAGE>
ENSTAR INCOME PROGRAM IV-1, L.P.
RESULTS OF OPERATIONS (Continued)
increase was primarily due to higher average cash balances available for
investment and due to higher average interest rates earned on invested funds
during the current year period.
Due to the factors described above, the joint venture's net income
decreased from $159,100 to $138,500, or by 12.9%, for the three months ended
March 31, 2000 as compared to the first three months of 1999.
Based on its experience in the cable television industry, the joint
venture believes that operating income before depreciation and amortization, or
EBITDA, and related measures of cash flow serve as important financial analysis
tools for measuring and comparing cable television companies in several areas,
such as liquidity, operating performance and leverage. EBITDA is not a
measurement determined under generally accepted accounting principles, or 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 41.2% to 35.6% during the three months
ended March 31, 2000, as compared to the corresponding period in 1999. The
decrease was primarily due to higher personnel costs as described above. EBITDA
decreased from $202,100 to $177,300, or by 12.3%, for the three months ended
March 31, 2000 as compared to the corresponding period in 1999.
LIQUIDITY AND CAPITAL RESOURCES
Our primary objective, having invested our net offering proceeds in
the Joint Ventures, is to distribute to our partners distributions of cash flow
received from the Joint Ventures' operations and proceeds from the sale of the
Joint Ventures' cable television systems, if any, after providing for expenses,
debt service and capital requirements relating to the expansion, improvement and
upgrade of such cable television systems.
In accordance with the partnership agreement, the corporate general
partner has implemented a plan for liquidating the partnership. In connection
with that strategy, the corporate general partner has entered into an agreement
with a cable broker to market the Joint Ventures' cable systems to third
parties. Should the Joint Ventures receive offers from third parties for such
assets and should the corporate general partner enter into an agreement to sell
such assets, the corporate general partner will prepare a proxy or written
consent solicitation for submission to the limited partners for the purpose of
approving or disapproving such sale. If all of the partnership's assets are
sold, the corporate general partner will proceed to liquidate the partnership
and Joint Ventures following the settlement of their final liabilities. We can
give no assurance, however, that we will be able to generate a sale of the Joint
Ventures' cable assets.
On April 20, 2000, the corporate general partner signed a non-binding
letter of intent to sell all of the Joint Ventures' cable television systems.
The sale of the Joint Ventures' assets is subject to approval by a majority of
the partnership's limited partners and other standard closing conditions, such
as obtaining regulatory approvals. The prospective buyer seeks to purchase a
large group of cable television systems, which includes all of the Joint
Ventures' systems as well as certain systems owned by other partnerships under
the common control of the partnership's corporate general partner. There
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<PAGE>
ENSTAR INCOME PROGRAM IV-1, L.P.
LIQUIDITY AND CAPITAL RESOURCES (Continued)
is no assurance that a definitive sale agreement will be executed, and if so,
whether the proposed sale will be consummated. Even if the limited partners do
approve the sale, consummation of the sale is subject to certain factors beyond
the partnership's control, including receipt of regulatory approvals and
approval of the sale by other selling partnerships.
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 by a provision of its franchise agreement with the city of Carlinville,
Illinois to upgrade its cable system in the community by December 2001 at an
estimated cost of $1.1 million and plans to upgrade its cable plant in Girard,
Illinois at an estimated cost of approximately $1.0 million provided the
franchise agreement is renewed. The franchise agreement under negotiation with
Girard is expected to require completion of a plant upgrade in the franchise
area within two years. The Macoupin Joint Venture is budgeted to spend
approximately $158,500 in 2000 for the upgrade of other assets. The PBD Joint
Venture intends to upgrade its Mt. Carmel, Illinois and Poplar Bluff, Missouri
cable systems, at an estimated cost of approximately $1.3 million and $6.2
million, respectively, provided franchise renewals are obtained and adequate
funds are available. At this time, the franchise authority in Poplar Bluff has
terminated negotiations to renew the franchise agreement with the city. Although
the Mt. Carmel, Illinois franchise agreement is still under negotiation, the PBD
Joint Venture anticipates that the franchise agreement will require completion
of an upgrade within 24 months. The PBD Joint Venture has budgeted capital
expenditures of $819,700 in 2000 to upgrade other assets. In the first three
months of 2000, capital expenditures by the Macoupin Joint Venture and PBD Joint
Venture were approximately $4,600 and $51,800, respectively.
The franchise agreement with the city of Poplar Bluff expired in 1997
and the PBD Joint Venture has been negotiating renewal of the agreement with the
city since that time. On February 8, 2000, voters in the city of Poplar Bluff
approved the use of funds to finance construction of a municipally-owned and
operated cable system. The system is intended to compete directly with the PBD
Joint Venture's cable system both in the city and in Butler County, Missouri.
The city-owned cable system may be built to a higher technical standard than the
system owned by the PBD Joint Venture and may offer a greater number of channels
at a lower monthly subscriber rate. The city estimates that its new system will
be operational within two years. The PBD Joint Venture believes that the
competing system, if built, will have a material adverse impact on its
subscriber numbers, financial condition and results of operations. As it has for
three years, the PBD Joint Venture intends to continue operating its cable
system in Poplar Bluff under the terms of its expired franchise agreement and
continue paying franchise fees to the city until the system can be sold. As of
March 31, 2000, there were approximately 4,800 and 1,200 basic subscribers in
the city of Poplar Bluff and Butler County, respectively.
As discussed in prior reports, the Joint Ventures postponed a number
of rebuild and upgrade projects 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 have not been rebuilt. As a result, these
systems are significantly less
-15-
<PAGE>
ENSTAR INCOME PROGRAM IV-1, L.P.
LIQUIDITY AND CAPITAL RESOURCES (Continued)
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 have had an adverse effect on the value of those systems compared
to systems that have been rebuilt to a higher technical standard.
The partnership is party to a loan agreement with Enstar Finance
Company. The loan agreement provides for a revolving loan facility of
$2,000,000. The partnership and its co-partners expect to use borrowings under
their respective facilities along with cash flow from operations of the Joint
Ventures for the rebuild and upgrade of the Joint Ventures' systems. No advances
had been made under the partnership's loan facility as of the date of this
report.
The partnership's loan facility matures on August 31, 2001, at which
time all amounts then outstanding are due in full. Borrowings bear interest at
the lender's base rate (9.0% at March 31, 1999) plus 0.625%, or at an offshore
rate plus 1.875%. Under certain circumstances, the partnership is required to
make mandatory prepayments, which permanently reduce the maximum commitment
under the facility. The facility contains certain financial tests and other
covenants including, among others, restrictions on incurrence of indebtedness,
investments, sales of assets, acquisitions and other covenants, defaults and
conditions. The facility does not restrict the payment of distributions to
partners unless an event of default exists thereunder or the partnership's ratio
of debt to cash flow is greater than 4 to 1.
The partnership paid distributions totaling $126,200 during the three
months ended March 31, 2000. However, there can be no assurance regarding the
level, timing or continuation of future distributions.
Falcon Communications purchased insurance coverage for all of the
cable television properties owned or managed by it to cover damage to cable
distribution plant and subscriber connections and against business interruptions
resulting from such damage. This coverage is subject to a significant annual
deductible which applies to all of the cable television properties formerly
owned or managed by Falcon Communications through November 12, 1999, and
currently managed by Charter, including those of the Joint Ventures.
Approximately 85% of the Joint Ventures' subscribers are served by
their systems in Poplar Bluff, Missouri and Carlinville, Illinois and
neighboring communities. Significant damage to these systems due to seasonal
weather conditions or other events could have a material adverse effect on the
Joint Ventures' liquidity and cash flows. The Joint Ventures continue to
purchase insurance coverage in amounts their management views as appropriate for
all other property, liability, automobile, workers' compensation and other types
of insurable risks.
We have not experienced any system failures or other disruptions
caused by Year 2000 problems since January 1, 2000 through the date of this
report, and do not anticipate that we will encounter any Year 2000 problems
going forward. We did not incur expense in the first three months of 2000
related to the Year 2000 date change.
-16-
<PAGE>
ENSTAR INCOME PROGRAM IV-1, L.P.
LIQUIDITY AND CAPITAL RESOURCES (Continued)
Three months ended March 31, 2000 and 1999
------------------------------------------
Operating activities used $118,900 more cash during the three months
ended March 31, 2000 than in the corresponding period in 1999. The partnership
provided $111,500 less cash in the three months ended March 31, 2000 than in the
corresponding period in 1999 to pay amounts owed to the corporate general
partner and third party creditors due to differences in the timing of payments.
Investing activities provided $124,000 more cash in the first three
months of 2000 than in the corresponding prior year period due to an increase in
distributions from the Joint Ventures. Financing activities used $3,600 more
cash in the first three months of 2000 than in the first quarter of 1999 due to
an increase in deferred loan costs related to the amended loan facility.
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, we do not believe that our financial results
have been, or will be, adversely affected by inflation in a material way,
provided that the Joint Venture is able to increase our service rates
periodically, of which there can be no assurance. See "Legislation and
Regulation."
-17-
<PAGE>
ENSTAR INCOME PROGRAM IV-1, L.P.
PART II. OTHER INFORMATION
ITEMS 1-4. Not applicable.
ITEM 5. Other Information.
On April 20, 2000, the corporate general partner signed a
non-binding letter of intent to sell all of the Joint
Ventures' cable television systems. The sale of the Joint
Ventures' assets is subject to approval by a majority of the
partnership's limited partners and other standard closing
conditions, such as obtaining regulatory approvals. The
prospective buyer seeks to purchase a large group of cable
television systems, which includes all of the Joint Ventures'
systems as well as certain systems owned by other partnerships
under the common control of the partnership's corporate
general partner. There is no assurance that a definitive sale
agreement will be executed, and if so, whether the proposed
sale will be consummated. Even if the limited partners do
approve the sale, consummation of the sale is subject to
certain factors beyond the partnership's control, including
receipt of regulatory approvals and approval of the sale by
other selling partnerships.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibit 10.26 - Amendment No. 2 to Loan Agreement between
Enstar Income Program IV-1,L.P.and Enstar Finance Company,
LLC.
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 IV-1, L.P.
a GEORGIA LIMITED PARTNERSHIP
-----------------------------
(Registrant)
By: ENSTAR COMMUNICATIONS CORPORATION
General Partner
Date: May 12, 2000 By: /s/ Kent D. Kalkwarf
---------------------
Kent D. Kalkwarf
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer
and Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
10.26 Amendment No. 2 to Loan Agreement between Enstar Income Program IV-1,
L.P. and Enstar Finance Company, LLC.
27.1 Financial Data Schedule.
E-1
Exhibit 10.26
ENSTAR INCOME PROGRAM IV-1, L.P.
--------------------------------
AMENDMENT NO. 2 TO LOAN AGREEMENT
---------------------------------
Reference is hereby made to that certain Enstar Income Program IV-1, L.P.
Loan Agreement dated as of September 30, 1997, between the parties hereto,
("Loan Agreement"). Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings ascribed thereto in the Loan
Agreement.
The parties hereto desire to amend Section 2.1.1 of the Loan Agreement to
change the "Maximum Amount of Credit" under and as defined thereunder.
Accordingly, the parties agree as follows:
1. Section 2.1.1 of the Loan Agreement is hereby amended by changing the
amount therein set forth as the Maximum Amount of Credit to $2,000,000.
2. General. The Loan Agreement as amended hereby is hereby confirmed as
-------
being in full force and effect.
IN WITNESS WHEREOF, each of the undersigned has caused this Amendment No. 2
to Loan Agreement to be signed by its duly authorized officer and/or partner as
of this 10th day of April, 2000.
ENSTAR INCOME PROGRAM IV-1, L.P.,
a Georgia limited partnership
By: ENSTAR COMMUNICATIONS
CORPORATION,
its general partner
By:/s/ Eloise A. Engman
---------------------
Eloise A. Engman
Title: Vice President
----------------
The foregoing is hereby accepted:
ENSTAR FINANCE COMPANY, LLC
By: ENSTAR COMMUNICATIONS CORPORATION,
its Manager
By:/s/ Eloise A. Engman
------------------------
Eloise A. Engman
Title: Vice President
--------------
<PAGE>
Consent
In accordance with the provisions of Section 7.18 of that certain Credit
Agreement dated as of September 30, 1997, as amended by the First Amendment to
Credit Agreement dated as of November 12, 1999, the undersigned hereby consents
to Amendment No. 2 to Loan Agreement dated as of April 10, 2000 between Enstar
Finance Company, LLC and Enstar Income Program IV-1, L.P.. Said Amendment No. 2
is attached hereto as Exhibit A.
PARIBAS
By:/s/ Darlynn Ernst Kitcher /s/ Thomas G. Brandt
--------------------------------------------------------
Darlynn Ernst Kitcher Thomas G. Brandt
Title: Vice President Managing Director
---------------------------------------------------
-2-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT MARCH 31, 2000, AND THE STATEMENTS OF OPERATIONS FOR THE THREE MONTHS
ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000783763
<NAME> Enstar IV-1
<MULTIPLIER> 1
<CURRENCY> US$
<S> <C>
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-TYPE> 3-MOS
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 500
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
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<TOTAL-ASSETS> 3,676,000
<CURRENT-LIABILITIES> 41,100
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<TOTAL-LIABILITY-AND-EQUITY> 3,676,000
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<CGS> 0
<TOTAL-COSTS> 24,600
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 5,300
<INCOME-PRETAX> 258,200
<INCOME-TAX> 0
<INCOME-CONTINUING> 258,200
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<NET-INCOME> 258,200
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