<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, 1996
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 0-15706
Enstar Income Program IV-2, L.P.
-----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-1648318
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
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-2, L.P.
CONDENSED BALANCE SHEETS
================================
<TABLE>
<CAPTION>
December 31, September 30,
1995* 1996
------------ -------------
<S> <C> <C>
ASSETS: (unaudited)
Cash and cash equivalents $ 238,200 $ 766,100
---------- ----------
Equity in net assets of Joint Ventures:
Enstar IV/PBD Systems Venture 1,772,100 1,516,800
Enstar Cable of Macoupin County 828,100 549,500
---------- ----------
2,600,200 2,066,300
Deferred loan costs, net 43,400 30,700
---------- ----------
$2,881,800 $2,863,100
========== ==========
LIABILITIES AND PARTNERSHIP CAPITAL
LIABILITIES:
Note payable $1,000,000 $1,000,000
Accounts payable 13,600 15,900
Due to affiliates 5,400 7,300
---------- ----------
TOTAL LIABILITIES 1,019,000 1,023,200
---------- ----------
PARTNERSHIP CAPITAL (DEFICIT):
General partners (64,500) (64,800)
Limited partners 1,927,300 1,904,700
---------- ----------
TOTAL PARTNERSHIP CAPITAL 1,862,800 1,839,900
---------- ----------
$2,881,800 $2,863,100
========== ==========
</TABLE>
*As presented in the audited financial statements.
See accompanying notes to condensed financial statements.
-2-
<PAGE> 3
ENSTAR INCOME PROGRAM IV-2, L.P.
CONDENSED STATEMENTS OF OPERATIONS
==================================
<TABLE>
<CAPTION>
Unaudited
----------------------
Three months ended
September 30,
----------------------
1995 1996
----------------------
<S> <C> <C>
OPERATING EXPENSES:
General and administrative expenses $ (6,800) $ (8,700)
-------- --------
OTHER INCOME (EXPENSE):
Interest income 2,200 8,400
Interest expense (31,300) (28,900)
-------- --------
(29,100) (20,500)
-------- --------
LOSS BEFORE EQUITY IN NET INCOME
OF JOINT VENTURES (35,900) (29,200)
-------- --------
EQUITY IN NET INCOME
OF JOINT VENTURES:
Enstar IV/PBD Systems Venture 85,100 201,000
Enstar Cable of Macoupin County 17,200 33,900
-------- --------
102,300 234,900
-------- --------
NET INCOME $ 66,400 $205,700
======== ========
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 1.65 $ 5.11
======== ========
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 39,848 39,848
======== ========
</TABLE>
See accompanying notes to condensed financial statements.
-3-
<PAGE> 4
ENSTAR INCOME PROGRAM IV-2, L.P.
CONDENSED STATEMENTS OF OPERATIONS
==================================
<TABLE>
<CAPTION>
Unaudited
--------------------
Nine months ended
September 30,
--------------------
1995 1996
---- ----
<S> <C> <C>
OPERATING EXPENSES:
General and administrative expenses $ (21,400) $(25,800)
--------- --------
OTHER INCOME (EXPENSE):
Interest income 10,300 22,100
Interest expense (94,000) (88,000)
--------- --------
(83,700) (65,900)
--------- --------
LOSS BEFORE EQUITY IN NET INCOME
OF JOINT VENTURES (105,100) (91,700)
--------- --------
EQUITY IN NET INCOME
OF JOINT VENTURES:
Enstar IV/PBD Systems Venture 160,800 374,800
Enstar Cable of Macoupin County 42,300 71,300
--------- --------
203,100 446,100
========= ========
NET INCOME $ 98,000 $354,400
========= ========
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 2.43 $ 8.80
========= ========
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 39,848 39,848
========= ========
</TABLE>
See accompanying notes to condensed financial statements.
-4-
<PAGE> 5
ENSTAR INCOME PROGRAM IV-2, L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Unaudited
--------------------------------
Nine months ended
September 30,
--------------------------------
1995 1996
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 98,000 $ 354,400
Adjustments to reconcile net income
to net cash provided by operating activities:
Equity in net income of Joint Ventures (203,100) (446,100)
Amortization of deferred loan costs 12,500 12,700
Increase from changes in:
Accounts payable and due to affiliates 5,100 4,200
---------- ----------
Net cash used in operating activities (87,500) (74,800)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from Joint Ventures 102,000 980,000
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (377,300) (377,300)
---------- ----------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (362,800) 527,900
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 525,600 238,200
---------- ----------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 162,800 $ 766,100
========== ==========
</TABLE>
See accompanying notes to condensed financial statements.
-5-
<PAGE> 6
ENSTAR INCOME PROGRAM IV-2, 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, 1996 and 1995 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,
1996 are not necessarily indicative of results for the entire year.
2. TRANSACTIONS WITH THE CORPORATE 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) 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, 1996. 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 $85,700 and $249,700 and
reimbursement of expenses of approximately $122,800 and $348,400 under the
management agreements for the three and nine months ended September 30, 1996.
In addition, the Macoupin Joint Venture paid the Corporate General Partner
approximately $4,600 and $13,300 in respect of its 1% special interest during
the three and nine months ended September 30, 1996. Management fees and
reimbursed expenses due the Corporate General Partner are non-interest bearing.
The Joint Ventures also receive certain systems operating management
services from an affiliate of the Corporate General Partner in addition to the
Manager, due to the fact that there are no such employees directly employed by
one of the Joint Ventures' cable systems. The Joint Ventures reimburse the
affiliate for their allocable share of the affiliates' operational costs. The
total amount charged to the Joint Ventures for these costs approximated $1,600
and $55,700 in the three and nine months ended September 30, 1996. No
management fee is payable to the affiliate by the Joint Venture and there is no
duplication of reimbursed expenses and costs paid to the Manager.
-6-
<PAGE> 7
ENSTAR INCOME PROGRAM IV-2, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(CONTINUED)
=======================================
1. TRANSACTIONS WITH THE CORPORATE GENERAL PARTNER 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 Joint Ventures could negotiate for
such programming services on a stand-alone basis. The Joint Ventures paid the
affiliate $416,200 and $1,231,100 for these programming services for the three
and nine months ended September 30, 1996. Programming fees are included in
service costs in the statements of operations for the three and nine months
ended September 30, 1996 and 1995.
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 1995 amounts have been reclassified to conform to the 1996
presentation.
-7-
<PAGE> 8
ENSTAR INCOME PROGRAM IV-2, 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-1, 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, 1996 and December 31, 1995, and the results of its
operations for the three and nine months ended September 30, 1996 and 1995,
have been included. The results of operations for the three and nine months
ended September 30, 1996 are not necessarily indicative of results for the
entire year.
<TABLE>
<CAPTION>
December 31, September 30,
1995* 1996
------------- -------------
(unaudited)
<S> <C> <C>
Current assets $ 1,525,900 $ 1,908,900
Investment in cable television
properties, net 2,587,100 1,892,300
Other assets 75,300 75,500
------------- -------------
$ 4,188,300 $ 3,876,700
============= =============
Current liabilities $ 644,300 $ 843,000
Venturers' capital 3,544,000 3,033,700
------------- -------------
$ 4,188,300 $ 3,876,700
============= =============
</TABLE>
*As presented in the audited financial statements.
-8-
<PAGE> 9
ENSTAR INCOME PROGRAM IV-2, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(CONTINUED)
=======================================
ENSTAR IV/PBD SYSTEMS VENTURE (CONCLUDED)
<TABLE>
<CAPTION>
Unaudited
----------------------------
Three months ended
September 30,
----------------------------
1995 1996
----------------------------
<S> <C> <C>
REVENUES $ 1,279,000 $ 1,340,900
----------- -----------
OPERATING EXPENSES:
Service costs 435,900 467,900
General and administrative expenses 144,100 147,500
General Partner management fees and reimbursed expenses 155,600 149,100
Depreciation and amortization 385,800 183,600
----------- -----------
1,121,400 948,100
----------- -----------
OPERATING INCOME 157,600 392,800
OTHER INCOME (EXPENSE):
Interest income 16,300 12,900
Interest expense (3,800) (3,800)
----------- -----------
NET INCOME $ 170,100 $ 401,900
=========== ===========
Unaudited
----------------------------
Nine months ended
September 30,
----------------------------
1995 1996
----------------------------
REVENUES $ 3,778,900 $ 3,925,300
----------- -----------
OPERATING EXPENSES:
Service costs 1,319,100 1,393,000
General and administrative expenses 414,700 529,400
General Partner management fees and reimbursed expenses 461,700 432,600
Depreciation and amortization 1,291,200 843,400
----------- -----------
3,486,700 3,198,400
----------- -----------
OPERATING INCOME 292,200 726,900
OTHER INCOME (EXPENSE):
Interest income 39,400 34,700
Interest expense (10,000) (10,600)
Loss on sale of assets - (1,500)
----------- -----------
NET INCOME $ 321,600 $ 749,500
=========== ===========
</TABLE>
-9-
<PAGE> 10
ENSTAR INCOME PROGRAM IV-2, 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-1, 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, 1996 and December 31, 1995 and the
results of its operations for the three and nine months ended September 30,
1996 and 1995 have been included. The results of operations for the three and
nine months ended September 30, 1996 are not necessarily indicative of results
for the entire year.
<TABLE>
<CAPTION>
December 31, September 30,
1995* 1996
------------- -------------
(unaudited)
<S> <C> <C>
Current assets $ 1,110,000 $ 429,700
Investment in cable television
properties, net 1,722,800 1,539,900
Other assets 7,300 6,500
------------- -------------
$ 2,840,100 $ 1,976,100
============= =============
Current liabilities $ 355,500 $ 327,700
Venturers' capital 2,484,600 1,648,400
------------- -------------
$ 2,840,100 $ 1,976,100
============= =============
</TABLE>
*As presented in the audited financial statements.
-10-
<PAGE> 11
ENSTAR INCOME PROGRAM IV-2, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(CONCLUDED)
========================================
ENSTAR CABLE OF MACOUPIN COUNTY
<TABLE>
<CAPTION>
Unaudited
--------------------------------
Three months ended
September 30,
--------------------------------
1995 1996
---------- ----------
<S> <C> <C>
REVENUES $ 422,100 $ 463,900
OPERATING EXPENSES:
Service costs 135,500 130,300
General and administrative expenses 32,200 15,500
General Partner management fees and reimbursed expenses 56,100 64,000
Depreciation and amortization 155,800 152,700
---------- ----------
379,600 362,500
---------- ----------
OPERATING INCOME 42,500 101,400
OTHER INCOME (EXPENSE):
Interest income 10,600 3,200
Interest expense (1,500) (2,700)
---------- ----------
NET INCOME $ 51,600 $ 101,900
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Unaudited
--------------------------------
Nine months ended
September 30,
--------------------------------
1995 1996
------------ ------------
<S> <C> <C>
REVENUES $ 1,227,400 $ 1,333,900
------------ ------------
OPERATING EXPENSES:
Service costs 375,100 402,000
General and administrative expenses 103,100 91,800
General Partner management fees and reimbursed expenses 167,300 178,800
Depreciation and amortization 477,500 457,700
------------ ------------
1,123,000 1,130,300
------------ ------------
OPERATING INCOME 104,400 203,600
OTHER INCOME (EXPENSE):
Interest income 26,500 16,300
Interest expense (4,000) (6,500)
Gain on sale of assets - 600
------------ ------------
NET INCOME $ 126,900 $ 214,000
============ ============
</TABLE>
-11-
<PAGE> 12
ENSTAR INCOME PROGRAM IV-2, 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. However, in accordance
with policy decisions by the Federal Communications Commission (the "FCC"), the
Partnership will increase regulated service rates in the future in response to
specified historical and anticipated future 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 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 FCC rulemaking and
enforcement activity in respect of the 1992 Cable Act and the completion of a
significant number of FCC rulemakings under the 1996 Telecom Act. There can 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. Accordingly, the Partnership's historic interim
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 for the year ended December 31,
1995. 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, 1995
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 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-1, L.P). The Macoupin Joint Venture is owned equally by the Partnership and
two affiliated Partnerships (Enstar Income Program IV-1, 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-2, L.P.
RESULTS OF OPERATIONS (CONTINUED)
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 did not make any distributions during the three
months and made distributions totaling $980,000 to the Partnership during the
nine months ended September 30, 1996. The Partnership distributed $125,800 and
$377,300 to its partners during the three and nine months ended September 30,
1996.
THE PBD JOINT VENTURE
The Joint Venture's revenues increased from $1,279,000 to $1,340,900,
or by 4.8%, and from $3,778,900 to $3,925,300, or by 3.9%, for the three and
nine months ended September 30, 1996 as compared to the corresponding periods
in 1995. Of the $61,900 increase in revenues for the three months ended
September 30, 1996 as compared to the corresponding period in 1995, $62,900 was
due to increases in regulated service rates that were implemented by the
Partnership in the second quarter of 1996 and $20,000 resulted from increases
in other revenue producing items consisting primarily of advertising sales.
These increases were partially offset by a decrease of $21,000 due to decreases
in the number of subscriptions for service. Of the $146,400 increase in
revenues for the nine months ended September 30, 1996 as compared to the
corresponding period in 1995, $163,400 was due to increases in regulated
service rates that were implemented by the Partnership in the second quarter in
each of 1995 and 1996 and $35,300 resulted from increases in other revenue
producing items including advertising sales. These increases were partially
offset by a decrease of $52,300 due to decreases in the number of subscriptions
for service. As of September 30, 1996, the Joint Venture had approximately
13,500 homes subscribing to cable service and 4,800 premium service units.
Service costs increased from $435,900 to $467,900, or by 7.3%, and
from $1,319,100 to $1,393,000, or by 5.6%, for the three and nine months ended
September 30, 1996 as compared to the corresponding periods in 1995. Service
costs represent costs directly attributable to providing cable services to
customers. Of the $32,000 increase in service costs for the three months ended
September 30, 1996 as compared to the corresponding period in 1995, $19,700 was
due to an increase in copyright fees, $16,000 was due to an increase in
personnel costs and $5,100 was due to an increase in repair and maintenance
expense. These increases were partially offset by a $7,000 increase in
capitalization of labor and overhead expense due to a greater number of capital
projects during the three month period. Of the $73,900 increase in service
costs for the nine months ended September 30, 1996 as compared to the
corresponding period in 1995, $36,100 was due to an increase in personnel
costs, $31,200 was due to an increase in copyright fees, $8,200 was due to an
increase in programming fees and $5,800 was due to a decrease in capitalization
of labor and overhead expense resulting from fewer capital projects during the
1996 period. These increases were partially offset by a $7,400 decrease in
repair and maintenance expense.
General and administrative expenses increased from $144,100 to
$147,500, or by 2.4%, and from $414,700 to $529,400, or by 27.7%, for the three
and nine months ended September 30, 1996 as compared to the corresponding
periods in 1995. Of the $3,400 increase for the three months ended September
30, 1996 as compared to the corresponding period in 1995, $9,000 was due to an
increase in marketing expense and $6,900 was due to an increase in personnel
costs. These increases were partially offset by a $7,000 decrease
-13-
<PAGE> 14
ENSTAR INCOME PROGRAM IV-2, L.P.
RESULTS OF OPERATIONS (CONTINUED)
in bad debt expense, $2,800 due to lower insurance premiums and $1,700 due to a
decrease in professional fees. Of the $114,700 increase for the nine months
ended September 30, 1996 as compared to the corresponding period in 1995,
$42,700 was due to expenses allocated by an affiliate of the General Partner
(for operational management services), $25,700 was due to an increase in
personnel costs, $20,700 was due to an increase in marketing expense, $12,200
was due to an increase in telephone expense and $11,800 was due to higher
insurance premiums. These increases were partially offset by an increase of
$4,400 in capitalization of labor and overhead expense.
Management fees and reimbursed expenses decreased from $155,600 to
$149,100, or by 4.2%, and from $461,700 to $432,600, or by 6.3%, for the three
and nine months ended September 30, 1996 as compared to the corresponding
periods in 1995. Reimbursable expenses decreased by $9,600 and $36,400 for the
three and nine months ended September 30, 1996 from the corresponding 1995
periods, primarily due to lower allocated personnel costs, marketing expense
and office rent. Management fees increased by $3,100 and $7,300 for the three
and nine months ended September 30, 1996 from the corresponding 1995 periods in
direct relation to increased revenues as described above.
Depreciation and amortization expense decreased from $385,800 to
$183,600, or by 52.4%, and from $1,291,200 to $843,400, or by 34.7%, for the
three and nine months ended September 30, 1996 as compared to the corresponding
periods in 1995 due to the effect of certain tangible assets becoming fully
depreciated and certain intangible assets becoming fully amortized.
Operating income increased from $157,600 to $392,800, or by 150%, and
from $292,200 to $726,900, or by 149% for the three and nine months ended
September 30, 1996 as compared to the corresponding periods in 1995 principally
due to decreased depreciation and amortization and increased revenues as
described above.
Interest income, net of interest expense, decreased from $12,500 to
$9,100, or by 27.2%, and from $29,400 to $24,100, or by 18.0%, for the three
and nine months ended September 30, 1996 as compared to the corresponding
periods in 1995 due to lower average cash balances available for investment.
Operating income before depreciation and amortization (EBITDA) as a
percentage of revenues increased from 42.5% to 43.0% for the quarter ended
September 30, 1996 and decreased from 41.9% to 40.0% for the nine months ended
September 30, 1996 as compared to the corresponding periods in 1995. The
decrease during the nine month period was primarily due to increases in general
and administrative expenses as described above. EBITDA increased from $543,400
to $576,400, or by 6.1%, and decreased from $1,583,400 to $1,570,300 (less than
one-percent) for the three and nine months ended September 30, 1996 as compared
to the corresponding periods in 1995.
THE MACOUPIN JOINT VENTURE
The Joint Venture's revenues increased from $422,100 to $463,900, or
by 9.9%, and from $1,227,400 to $1,333,900, or by 8.7%, for the three and nine
months ended September 30, 1996 as compared to the corresponding periods in
1995. Of the $41,800 increase in revenues for the three months
-14-
<PAGE> 15
ENSTAR INCOME PROGRAM IV-2, L.P.
RESULTS OF OPERATIONS (CONTINUED)
ended September 30, 1996 as compared to the corresponding period in 1995,
$31,200 was due to increases in regulated service rates that were implemented
by the Partnership in April 1996, an increase of $13,600 was due to the
restructuring of The Disney Channel from a premium channel to a tier channel
effective July 1, 1996 and $7,900 resulted from increases in advertising sales
and other revenue producing items. These increases were partially offset by a
$10,900 decrease as a result of a reduction in the number of subscriptions for
premium and tier services. Of the $106,500 increase in revenues for the nine
months ended September 30, 1996 as compared to the corresponding period in
1995, $88,600 was due to increases in regulated service rates that were
implemented by the Partnership in each of April 1995 and 1996, $18,100 resulted
from increases in advertising sales and other revenue producing items and an
increase of $13,600 resulted from the restructuring of The Disney Channel
discussed above. These increases were partially offset by a $13,800 decrease
as a result of a reduction in the number of subscriptions for premium and tier
services. As of September 30, 1996, the Joint Venture had approximately 4,500
homes subscribing to cable service and 1,800 premium service units. The
decrease of 240 premium units from June 30, 1996 was primarily due to
approximately 220 premium units that became tier subscriptions under the
restructuring discussed above.
Service costs decreased from $135,500 to $130,300, or by 3.9%, for the
quarter ended September 30, 1996 and increased from $375,100 to $402,000, or by
7.2%, for the nine months ended September 30, 1996 as compared to the
corresponding periods in 1995. Service costs represent costs directly
attributable to providing cable services to customers. Of the $5,200 decrease
in service costs for the three months ended September 30, 1996 as compared to
the corresponding period in 1995, $12,600 was due to a decrease in copyright
fees and $10,700 was due to an increase in capitalization of labor and overhead
expense due to a greater number of capital projects during the quarter ended
September 30, 1996. These decreases were partially offset by an increase of
$10,100 in programming fees charged by program suppliers (including primary
satellite fees) and a $3,700 increase in personnel costs. Of the $26,900
increase in service costs for the nine months ended September 30, 1996 as
compared to the corresponding period in 1995, $18,000 was due to an increase in
personnel costs, $17,400 was due to an increase in programming fees and $16,200
was due to an increase in copyright fees. These increases were partially
offset by an increase of $31,700 in capitalization of labor and overhead
expense due to a greater number of capital projects during the nine month
period. The increases in programming fees during the three and nine months
ended September 30, 1996 included a $3,600 increase due to the restructuring of
The Disney Channel discussed above.
General and administrative expenses decreased from $32,200 to $15,500,
or by 51.9%, and from $103,100 to $91,800, or by 11.0%, for the three and nine
months ended September 30, 1996 as compared to the corresponding periods in
1995. Of the $16,700 decrease for the three months ended September 30, 1996 as
compared to the corresponding period in 1995, $12,300 was due to lower
insurance premiums, $10,400 was due to an increase in capitalization of labor
and overhead expense and $3,200 was due to a decrease in personnel costs. These
decreases were partially offset by a $9,400 increase in marketing expense. Of
the $11,300 decrease for the nine months ended September 30, 1996 as compared
to the corresponding period in 1995, $15,800 was due to an increase in
capitalization of labor and overhead expense, $13,200 was due to lower
insurance premiums and $3,400 was due to a decrease in postage and messenger
expense. These decreases were partially offset by a $14,900 increase in
marketing expense, a $2,500 increase in re-regulation costs and a $2,300
increase in advertising sales expense.
-15-
<PAGE> 16
ENSTAR INCOME PROGRAM IV-2, L.P.
RESULTS OF OPERATIONS (CONCLUDED)
Management fees and reimbursed expenses increased from $56,100 to
$64,000, or by 14.1%, and from $167,300 to $178,800, or by 6.9%, for the three
and nine months ended September 30, 1996 as compared to the corresponding
periods in 1995. Reimbursable expenses increased by $5,800 and by $6,200 for the
three and nine months ended September 30, 1996 from the corresponding 1995
periods, primarily due to higher allocated personnel costs, professional fees
and computer service expense. Management fees increased by $2,100 and $5,300 for
the three and nine months ended September 30, 1996 from the corresponding 1995
periods in direct relation to increased revenues as described above.
Depreciation and amortization expense decreased from $155,800 to
$152,700, or by 2.0%, and from $477,500 to $457,700, or by 4.2%, for the three
and nine months ended September 30, 1996 as compared to the corresponding
periods in 1995 due to the effect of certain tangible assets becoming fully
depreciated and certain intangible assets becoming fully amortized.
Operating income increased from $42,500 to $101,400, or by 138% and from
$104,400 to $203,600, or by 95%, for the three and nine months ended September
30, 1996 as compared to the corresponding periods in 1995 principally due to
decreased depreciation and amortization and increased revenues as described
above.
Interest income, net of interest expense, decreased from $9,100 to
$500, or by 94.5%, and from $22,500 to $9,800, or by 56.4%, for the three and
nine months ended September 30, 1996 as compared to the corresponding periods in
1995 due to lower average cash balances available for investment.
Operating income before depreciation and amortization (EBITDA) as a
percentage of revenues increased from 47.0% to 54.8% and from 47.4% to 49.6% for
the three and nine months ended September 30, 1996 as compared to the
corresponding periods in 1995. EBITDA increased from $198,300 to $254,100, or by
28.1%, and from $581,900 to $661,300, or by 13.6%, for the three and nine months
ended September 30, 1996 as compared to the corresponding period in 1995
primarily due to increased revenues and decreased general and administrative
expense as described above.
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.
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 $1,242,000 in 1996 of which the
Partnership's pro-rata share will approximate $446,000 for line extensions,
rebuild and upgrades of existing cable plant. Management believes that cash
generated by the
-16-
<PAGE> 17
ENSTAR INCOME PROGRAM IV-2, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONCLUDED)
Joint Ventures' operations in 1996, together with available borrowings, will be
adequate to fund capital expenditures and allow for continued distributions to
partners for the balance of the year.
The Partnership paid distributions totaling $125,800 and $377,300 during
the three and nine months ended September 30, 1996. However, there can be no
assurances regarding the level, timing or continuation of future distributions
beyond 1996.
In December, 1993 the Partnership obtained from a lender a $2,000,000
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 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 required to pay a commitment fee of 1/2% 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 was in compliance with the loan covenants at September 30, 1996. Its
commitment will decrease by $450,000 in 1996 to $1,450,000, and since the
outstanding amount at September 30, 1996 is $1,000,000, no principal payments of
debt are due in 1996.
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Operating activities used $12,700 less cash for the nine months ended
September 30, 1996 compared with the prior year period, primarily due to an
increase in the Partnership's net income of $13,600 after adding back non-cash
amortization of deferred loan costs and equity in net income of Joint Ventures,
offset by a $900 decrease in cash provided by accounts payable and due to
affiliates.
Cash provided by investing activities increased by $878,000 in the nine
months ended September 30, 1996 as compared to the corresponding period in 1995,
as a result of increased 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. However, the Partnership does not believe that its
financial results have been, or will be, adversely affected by inflation in a
material way, provided that it is able to increase its service rates
periodically, of which there can be no assurance.
-17-
<PAGE> 18
ENSTAR INCOME PROGRAM IV-2, 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.
-18-
<PAGE> 19
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-2, L.P.
a GEORGIA LIMITED PARTNERSHIP
-----------------------------
(Registrant)
By: ENSTAR COMMUNICATIONS CORPORATION
General Partner
Date: November 12, 1996 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 SEPTEMBER 30 1996, AND THE STATEMENTS OF OPERATIONS FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 766,100
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,863,100
<CURRENT-LIABILITIES> 23,100
<BONDS> 1,000,000
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,863,100
<SALES> 0
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<CGS> 0
<TOTAL-COSTS> 25,800
<OTHER-EXPENSES> (22,100)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 88,000
<INCOME-PRETAX> 354,400
<INCOME-TAX> 0
<INCOME-CONTINUING> 354,400
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<EPS-PRIMARY> 8.80
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