<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, 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, June 30,
1995* 1996
-------------- -------------
(unaudited)
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 238,200 $ 916,000
-------------- -------------
Equity in net assets of Joint Ventures:
Enstar IV/PBD Systems Venture 1,772,100 1,315,900
Enstar Cable of Macoupin County 828,100 515,500
-------------- -------------
2,600,200 1,831,400
Deferred loan costs, net 43,400 35,000
-------------- -------------
$ 2,881,800 $ 2,782,400
============== =============
LIABILITIES AND PARTNERSHIP CAPITAL
-----------------------------------
LIABILITIES:
Note payable $ 1,000,000 $ 1,000,000
Accounts payable 13,600 15,400
Due to affiliates 5,400 6,900
-------------- -------------
TOTAL LIABILITIES 1,019,000 1,022,300
-------------- -------------
PARTNERSHIP CAPITAL (DEFICIT):
General partners (64,500) (65,500)
Limited partners 1,927,300 1,825,600
-------------- -------------
TOTAL PARTNERSHIP CAPITAL 1,862,800 1,760,100
-------------- -------------
$ 2,881,800 $ 2,782,400
============== =============
</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
June 30,
-----------------------------------
1995 1996
------------ ------------
<S> <C> <C>
OPERATING EXPENSES:
General and administrative expenses $ 9,900 $ 10,500
------------ ------------
(9,900) (10,500)
------------ ------------
OTHER INCOME (EXPENSE):
Interest income 3,200 9,500
Interest expense (31,600) (29,300)
------------ ------------
(28,400) (19,800)
------------ ------------
LOSS BEFORE EQUITY IN NET INCOME
OF JOINT VENTURES (38,300) (30,300)
------------ ------------
EQUITY IN NET INCOME
OF JOINT VENTURES:
Enstar IV/PBD Systems Venture 40,700 114,900
Enstar Cable of Macoupin County 15,400 18,600
------------ ------------
56,100 133,500
------------ ------------
NET INCOME $ 17,800 $ 103,200
============ ============
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ .44 $ 2.56
============ ============
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
-----------------------------------
Six months ended
June 30,
-----------------------------------
1995 1996
----------- -------------
<S> <C> <C>
OPERATING EXPENSES:
General and administrative expenses $ 14,600 $ 17,100
----------- -------------
(14,600) (17,100)
----------- -------------
OTHER INCOME (EXPENSE):
Interest income 8,100 13,700
Interest expense (62,700) (59,100)
----------- -------------
(54,600) (45,400)
----------- -------------
LOSS BEFORE EQUITY IN NET INCOME
OF JOINT VENTURES (69,200) (62,500)
----------- -------------
EQUITY IN NET INCOME
OF JOINT VENTURES:
Enstar IV/PBD Systems Venture 75,700 173,800
Enstar Cable of Macoupin County 25,100 37,400
----------- -------------
100,800 211,200
----------- -------------
NET INCOME $ 31,600 $ 148,700
=========== =============
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ .79 $ 3.69
=========== =============
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
------------------------------------
Six months ended
June 30,
------------------------------------
1995 1996
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 31,600 $ 148,700
Adjustments to reconcile net income
to net cash provided by operating activities:
Equity in net income of Joint Ventures (100,800) (211,200)
Amortization of deferred loan costs 8,300 8,400
Increase from changes in:
Accounts payable and due to affiliates 3,300 3,400
------------- ------------
Net cash used in operating activities (57,600) (50,700)
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from Joint Ventures - 980,000
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (251,600) (251,500)
------------- ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (309,200) 677,800
------------- ------------
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 525,600 238,200
------------- ------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 216,400 $ 916,000
============= ============
</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 six months ended June 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 six months ended June 30, 1996 are not
necessarily indicative of results for the entire year.
2. TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES
The Partnership has a management and service agreement (the
"Agreement") with a wholly-owned subsidiary of the Corporate General Partner
(the "Manager") pursuant to which it pays a monthly management fee of 5% of
gross revenues. The Agreement also provides that the Partnership will reimburse
the Manager for (i) direct expenses incurred on behalf of the Partnership and
(ii) 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, 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 $83,400 and $164,000 and reimbursement of expenses of
approximately $119,300 and $225,600 under the management agreements for the
three and six months ended June 30, 1996. In addition, the Macoupin Joint
Venture paid the Corporate General Partner approximately $4,400 and $8,700 in
respect of its 1% special interest during the three and six months ended June
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 $28,900
and 54,100 in the three and six months ended June 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)
=======================================
2. TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES (CONTINUED)
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 $412,400 and $814,900 for these programming services for the three
and six months ended June 30, 1996. Programming fees are included in service
costs in the statements of operations for the three and six months ended June
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
June 30, 1996 and December 31, 1995, and the results of its operations for the
three and six months ended June 30, 1996 and 1995, have been included. The
results of operations for the three and six months ended June 30, 1996 are not
necessarily indicative of results for the entire year.
<TABLE>
<CAPTION>
December 31, June 30,
1995* 1996
--------------- -------------
(unaudited)
<S> <C> <C>
Current assets $ 1,525,900 $ 1,354,600
Investment in cable television
properties, net 2,587,100 1,985,600
Other assets 75,300 71,000
--------------- -------------
$ 4,188,300 $ 3,411,200
=============== =============
Current liabilities $ 644,300 $ 779,400
Venturers' capital 3,544,000 2,631,800
--------------- -------------
$ 4,188,300 $ 3,411,200
=============== =============
</TABLE>
*As presented in the audited financial statements.
-8-
<PAGE> 9
ENSTAR INCOME PROGRAM IV-2, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(CONCLUDED)
=======================================
ENSTAR IV/PBD SYSTEMS VENTURE (CONCLUDED)
<TABLE>
<CAPTION>
Unaudited
------------------------------------
Three months ended
June 30,
------------------------------------
1995 1996
------------- -------------
<S> <C> <C>
REVENUES $ 1,263,300 $ 1,312,700
------------- -------------
OPERATING EXPENSES:
Service costs 450,700 457,900
General and administrative expenses 136,800 182,700
General Partner management fees and reimbursed expenses 156,100 146,600
Depreciation and amortization 447,800 300,700
------------- -------------
1,191,400 1,087,900
------------- -------------
OPERATING INCOME 71,900 224,800
OTHER INCOME (EXPENSE):
Interest income 13,500 10,200
Interest expense (4,000) (3,800)
Loss on sale of assets - (1,500)
------------- -------------
NET INCOME $ 81,400 $ 229,700
============= =============
</TABLE>
<TABLE>
<CAPTION>
Unaudited
------------------------------------
Six months ended
June 30,
------------------------------------
1995 1996
------------- -------------
<S> <C> <C>
REVENUES $ 2,499,900 $ 2,584,400
------------- -------------
OPERATING EXPENSES:
Service costs 883,200 925,100
General and administrative expenses 270,600 381,900
General Partner management fees and reimbursed expenses 306,100 283,500
Depreciation and amortization 905,400 659,800
------------- -------------
2,365,300 2,250,300
------------- -------------
OPERATING INCOME 134,600 334,100
OTHER INCOME (EXPENSE):
Interest income 23,100 21,800
Interest expense (6,200) (6,800)
Loss on sale of assets - (1,500)
------------- -------------
NET INCOME $ 151,500 $ 347,600
============= =============
</TABLE>
-9-
<PAGE> 10
ENSTAR INCOME PROGRAM IV-2, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(CONCLUDED)
=======================================
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 June 30, 1996 and December 31, 1995 and the results of its operations for
the three and six months ended June 30, 1996 and 1995 have been included. The
results of operations for the three and six months ended June 30, 1996 are not
necessarily indicative of results for the entire year.
<TABLE>
<CAPTION>
December 31, June 30
1995* 1996
--------------- -------------
(unaudited)
<S> <C> <C>
Current assets $ 1,110,000 $ 338,100
Investment in cable television
properties, net 1,722,800 1,459,300
Other assets 7,300 7,400
--------------- -------------
$ 2,840,100 $ 1,804,800
=============== =============
Current liabilities $ 355,500 $ 258,300
Venturers' capital 2,484,600 1,546,500
--------------- -------------
$ 2,840,100 $ 1,804,800
=============== =============
</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
June 30,
-----------------------------------
1995 1996
------------- ------------
<S> <C> <C>
REVENUES $ 406,200 $ 444,800
------------- ------------
OPERATING EXPENSES:
Service costs 113,700 142,100
General and administrative expenses 38,300 35,000
General Partner management fees and reimbursed expenses 55,900 60,500
Depreciation and amortization 159,400 153,200
------------- ------------
367,300 390,800
------------- ------------
OPERATING INCOME 38,900 54,000
OTHER INCOME (EXPENSE):
Interest income 9,000 3,700
Interest expense (1,600) (2,700)
Gain on sale of assets - 600
------------- ------------
NET INCOME $ 46,300 $ 55,600
============= ============
</TABLE>
<TABLE>
<CAPTION>
Unaudited
-----------------------------------
Six months ended
June 30,
-----------------------------------
1995 1996
------------- ------------
<S> <C> <C>
REVENUES $ 805,300 $ 870,000
------------- ------------
OPERATING EXPENSES:
Service costs 239,600 271,700
General and administrative expenses 70,900 76,300
General Partner management fees and reimbursed expenses 111,200 114,800
Depreciation and amortization 321,700 305,000
------------- ------------
743,400 767,800
------------- ------------
OPERATING INCOME 61,900 102,200
OTHER INCOME (EXPENSE):
Interest income 15,900 13,100
Interest expense (2,500) (3,800)
Gain on sale of assets - 600
------------- ------------
NET INCOME $ 75,300 $ 112,100
============= ============
</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
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 $400,000 and $980,000
to the Partnership during the three and six months ended June 30, 1996. The
Partnership distributed $125,700 and $251,500 to its partners during the three
and six months ended June 30, 1996.
THE PBD JOINT VENTURE
The Joint Venture's revenues increased from $1,263,300 to $1,312,700,
or by 3.9%, and from $2,499,900 to $2,584,400, or by 3.4%, for the three and
six months ended June 30, 1996 as compared to the corresponding periods in
1995. Of the $49,400 increase in revenues for the three months ended June 30,
1996 as compared to the corresponding period in 1995, $63,900 was due to
increases in regulated service rates that were implemented by the Partnership
in the second quarter of both 1995 and 1996 and $7,900 resulted from increases
in other revenue producing items consisting primarily of advertising sales.
These increases were partially offset by a $22,400 decrease as a result of a
reduction in the number of subscriptions for service. Of the $84,500 increase
in revenues for the six months ended June 30, 1996 as compared to the
corresponding period in 1995, $100,500 was due to increases in regulated
service rates that were implemented by the Partnership as discussed above and
$15,400 resulted from increases in other revenue producing items. These
increases were partially offset by a $31,400 decrease as a result of a
reduction in the number of subscriptions for service. As of June 30, 1996, the
Joint Venture had approximately 13,900 homes subscribing to cable service and
4,800 premium service units.
Service costs increased from $450,700 to $457,900, or by 1.6%, and
from $883,200 to $925,100, or by 4.7%, for the three and six months ended June
30, 1996 as compared to the corresponding periods in 1995. Service costs
represent costs directly attributable to providing cable services to customers.
Of the $7,200 increase in service costs for the three months ended June 30,
1996 as compared to the corresponding period in 1995, $7,300 was due to an
increase in personnel costs, $3,800 was due to an increase in copyright fees
and $2,300 was due to an increase in programming fees. These increases were
partially offset by a $2,900 decrease in repair and maintenance expense and a
$2,600 decrease in franchise fees. Of the $41,900 increase in service costs for
the six months ended June 30, 1996 as compared to the corresponding period in
1995, $20,100 was due to an increase in personnel costs, $12,800 was due to a
decrease in capitalization of labor and overhead expense resulting from fewer
capital projects during the 1996 period, $11,500 was due to an increase in
copyright fees and $7,500 was due to an increase in programming fees. These
increases were partially offset by a $12,500 decrease in repair and maintenance
expense.
General and administrative expenses increased from $136,800 to
$182,700, or by 33.6%, and from $270,600 to $381,900, or by 41.1%, for the
three and six months ended June 30, 1996 as compared to the corresponding
periods in 1995. Of the $45,900 increase for the three months ended June 30,
1996 as compared to the corresponding period in 1995, $22,500 was due to
expenses allocated by an affiliate of the General Partner (for operational
management services), $9,900 was due to an increase in personnel costs, $6,500
was due to an increase in bad debt expense and $5,100 was due to an increase in
telephone expense. These increases were partially offset by a $3,100 increase
in capitalization of labor and overhead expense. Of
-13-
<PAGE> 14
ENSTAR INCOME PROGRAM IV-2, L.P.
RESULTS OF OPERATIONS (CONTINUED)
the $111,300 increase for the six months ended June 30, 1996 as compared to the
corresponding period in 1995, $42,500 was due to expenses allocated by an
affiliate of the General Partner (for operational management services), $18,800
was due to an increase in personnel costs, $14,600 was due to higher insurance
premiums, $11,700 was due to an increase in marketing expense, $11,300 was due
to an increase in bad debt expense and $7,500 was due to an increase in
telephone expense.
Management fees and reimbursed expenses decreased from $156,100 to
$146,600, or by 6.1%, and from $306,100 to $283,500, or by 7.4%, for the three
and six months ended June 30, 1996 as compared to the corresponding periods in
1995. Reimbursable expenses decreased by $11,900 and $26,800 for the three and
six months ended June 30, 1996 from the corresponding 1995 periods, primarily
due to lower allocated personnel costs and marketing expense. Management fees
increased by $2,400 and $4,200 for the three and six months ended June 30, 1996
from the corresponding 1995 periods in direct relation to increased revenues as
described above.
Depreciation and amortization expense decreased from $447,800 to
$300,700, or by 32.9%, and from $905,400 to $659,800, or by 27.1%, for the
three and six months ended June 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 $71,900 to $224,800, or by 182%, and
from $134,600 to $334,100, or by 148%, for the three and six months ended June
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 $9,500 to
$6,400, or by 32.6%, and from $16,900 to $15,000, or by 11.2%, for the three
and six months ended June 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 decreased from 41.1% to 40.0% and from 41.6% to 38.5%
for the three and six months ended June 30, 1996 as compared to the
corresponding periods in 1995. These decreases were primarily caused by
increases in general and administrative expenses as described above. EBITDA
increased from $519,700 to $525,500, or by 1.1%, and decreased from $1,040,000
to $993,900, or by 4.4% for the three and six months ended June 30, 1996 as
compared to the corresponding periods in 1995.
THE MACOUPIN JOINT VENTURE
The Joint Venture's revenues increased from $406,200 to $444,800, or
by 9.5%, and from $805,300 to $870,000, or by 8.0%, for the three and six
months ended June 30, 1996 as compared to the corresponding periods in 1995. Of
the $38,600 increase in revenues for the three months ended June 30, 1996 as
compared to the corresponding period in 1995, $32,800 was due to increases in
regulated service rates that were implemented by the Partnership in each of
April 1995 and 1996 and $7,700 resulted from
-14-
<PAGE> 15
ENSTAR INCOME PROGRAM IV-2, L.P.
RESULTS OF OPERATIONS (CONTINUED)
increases in advertising sales and other revenue producing items. These
increases were partially offset by a $1,900 decrease as a result of a reduction
in the number of subscriptions for service. Of the $64,700 increase in revenues
for the six months ended June 30, 1996 as compared to the corresponding period
in 1995, $57,400 was due to increases in regulated service rates that were
implemented by the Partnership as discussed above and $10,200 resulted from
increases in advertising sales and other revenue producing items. These
increases were partially offset by a $2,900 decrease as a result of a reduction
in the number of subscriptions for service. As of June 30, 1996, the Joint
Venture had approximately 4,500 homes subscribing to cable service and 2,100
premium service units.
Service costs increased from $113,700 to $142,100, or by 25.0%, and
from $239,600 to $271,700, or by 13.4%, for the three and six months ended June
30, 1996 as compared to the corresponding periods in 1995. Service costs
represent costs directly attributable to providing cable services to customers.
Of the $28,400 increase in service costs for the three months ended June 30,
1996 as compared to the corresponding period in 1995, $28,900 was due to an
increase in copyright fees and $9,900 was due an increase in personnel costs.
These increases were partially offset by an increase of $14,800 in
capitalization of labor and overhead expense due to a greater number of capital
projects during the quarter ended June 30, 1996. Of the $32,100 increase in
service costs for the six months ended June 30, 1996 as compared to the
corresponding period in 1995, $28,800 was due to an increase in copyright fees,
$14,300 was due to an increase in personnel costs and $7,300 was due to an
increase in programming fees charged by program suppliers (including primary
satellite fees). These increases were partially offset by an increase of
$21,000 in capitalization of labor and overhead expense due to a greater number
of capital projects during the six month period.
General and administrative expenses decreased from $38,300 to $35,000,
or by 8.6%, and increased from $70,900 to $76,300, or by 7.6%, for the three
and six months ended June 30, 1996 as compared to the corresponding periods in
1995. Of the $3,300 decrease for the three months ended June 30, 1996 as
compared to the corresponding period in 1995, $5,300 was due to an increase in
capitalization of labor and overhead expense, $2,800 was due to a decrease in
customer billing expense, $2,300 was due to a decrease in postage and messenger
expense and $2,100 was due to a decrease in bad debt expense. These decreases
were partially offset by a $4,400 increase in marketing expense, a $2,100
increase in re-regulation expense and a $1,700 increase in personnel costs. Of
the $5,400 increase for the six months ended June 30, 1996 as compared to the
corresponding period in 1995, $5,500 was due to an increase in marketing
expense, $3,800 was due to an increase in personnel costs, $1,900 was due to an
increase in bad debt expense and $1,500 was due to an increase in advertising
sales expense. These increases were partially offset by a $5,400 increase in
capitalization of labor and overhead expense and a $2,600 decrease in postage
and messenger expense.
Management fees and reimbursed expenses increased from $55,900 to
$60,500, or by 8.2%, and from $111,200 to $114,800, or by 3.2%, for the three
and six months ended June 30, 1996 as compared to the corresponding periods in
1995. Reimbursable expenses increased by $2,700 and by $400 for the three and
six months ended June 30, 1996 from the corresponding 1995 periods, primarily
due to higher allocated personnel costs, rent expense and professional fees.
Management fees increased by $1,900 and $3,200 for the three and six months
ended June 30, 1996 from the corresponding 1995 periods in direct relation to
increased revenues as described above.
-15-
<PAGE> 16
ENSTAR INCOME PROGRAM IV-2, L.P.
RESULTS OF OPERATIONS (CONCLUDED)
Depreciation and amortization expense decreased from $159,400 to
$153,200, or by 3.9%, and from $321,700 to $305,000, or by 5.2%, for the three
and six months ended June 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 $38,900 to $54,000, or by 38.8%, and
from $61,900 to $102,200, or by 65.1%, for the three and six months ended June
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 $7,400 to
$1,000, or by 86.5%, and from $13,400 to $9,300, or by 30.6%, for the three
and six months ended June 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 decreased from 48.8% to 46.6% and from 47.6% to 46.8%
for the three and six months ended June 30, 1996 as compared to the
corresponding periods in 1995. EBITDA increased from $198,300 to $207,200, or
by 4.5%, and from $383,600 to $407,200, or by 6.2%, for the three and six
months ended June 30, 1996 as compared to the corresponding period in 1995
primarily due to increased revenues 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 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. Management
also believes, however, that it is essential to preserve liquidity by reserving
cash for future rebuild requirements, including a planned rebuild in the
community of Auburn, Illinois which is expected to cost approximately
$1,500,000.
The Partnership paid distributions totaling $125,700 and $251,500
during the three and six months ended June 30, 1996. However, there can be no
assurances regarding the level, timing or continuation of future distributions
beyond 1996.
-16-
<PAGE> 17
ENSTAR INCOME PROGRAM IV-2, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONCLUDED)
In December, 1993 the Partnership obtained from a lender a $2,000,000
revolving bank credit agreement (the "Facility") maturing on June 30, 1998.
Loans under the Facility are secured by substantially all of the Partnership's
assets. Interest is payable at the Base Rate plus 1.5%. "Base Rate" means the
higher of the lender's prime rate or the Federal Funds Effective Rate plus
1/2%. The Facility provides for quarterly reductions of the maximum commitment
beginning September 30, 1995, payable at the end of each fiscal quarter. The
Partnership will be permitted to prepay amounts outstanding under the Facility
at any time without penalty, and is able to reborrow throughout the term of the
Facility up to the maximum commitment then available so long as no event of
default exists. The Partnership will also be 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
June 30, 1996. Its commitment will decrease by $450,000 in 1996 to $1,450,000,
and since the outstanding amount at June 30, 1996 is $1,000,000, no principal
payments of debt are due in 1996.
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
Operating activities used $6,900 less cash for the six months ended
June 30, 1996 compared with the prior year period, primarily because the
Partnership provided $6,800 of additional cash after adding back non-cash
amortization of deferred loan costs and equity in net income of Joint Ventures
and a $100 increase in cash provided by accounts payable and due to affiliates.
Cash provided by investing activities increased by $980,000 in the
six months ended June 30, 1996 as compared to the corresponding period in 1995,
as a result of increased distributions from the Joint Ventures. Cash used by
financing activities decreased by $100 in the six months ended June 30, 1996 as
compared to the corresponding period in 1995 due to a decrease in distributions
to the partners.
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: August 7, 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 JUNE 30, 1996, AND THE STATEMENTS OF OPERATIONS FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 916,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,782,400
<CURRENT-LIABILITIES> 22,300
<BONDS> 1,000,000
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,782,400
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 17,100
<OTHER-EXPENSES> 13,700
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 59,100
<INCOME-PRETAX> 148,700
<INCOME-TAX> 0
<INCOME-CONTINUING> 148,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 148,700
<EPS-PRIMARY> 3.69
<EPS-DILUTED> 0
</TABLE>
