<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 March 31, 1997
----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------- ----------------
Commission File Number 0-15706
------------
Enstar Income Program IV-2, L.P.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Georgia 58-1648318
- ------------------------------------ ----------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
10900 Wilshire Boulevard - 15th Floor
Los Angeles, California 90024
- -------------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 824-9990
-----------------
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
<PAGE> 2
PART I - FINANCIAL INFORMATION
ENSTAR INCOME PROGRAM IV-2, L.P.
CONDENSED BALANCE SHEETS
=====================================
<TABLE>
<CAPTION>
December 31, March 31,
1996* 1997
----------- -----------
(Unaudited)
ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 619,300 $ 478,000
Prepaid expenses -- 300
----------- -----------
619,300 478,300
----------- -----------
Equity in net assets of Joint Ventures:
Enstar IV/PBD Systems Venture 1,769,400 1,999,200
Enstar Cable of Macoupin County 601,700 634,900
----------- -----------
2,371,100 2,634,100
----------- -----------
Deferred loan costs, net 26,400 22,300
----------- -----------
$ 3,016,800 $ 3,134,700
=========== ===========
LIABILITIES AND PARTNERSHIP CAPITAL
-----------------------------------
LIABILITIES:
Accounts payable $ 14,800 $ 14,600
Due to affiliates 9,600 6,500
Note payable 1,000,000 1,000,000
----------- -----------
TOTAL LIABILITIES 1,024,400 1,021,100
----------- -----------
PARTNERSHIP CAPITAL (DEFICIT):
General partners (63,200) (62,000)
Limited partners 2,055,600 2,175,600
----------- -----------
TOTAL PARTNERSHIP CAPITAL 1,992,400 2,113,600
----------- -----------
$ 3,016,800 $ 3,134,700
=========== ===========
</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
March 31,
------------------------------
1996 1997
------------- -------------
OPERATING EXPENSES:
<S> <C> <C>
General and administrative expenses $ (6,600) $ (6,500)
--------- ---------
OTHER INCOME (EXPENSE):
Interest income 4,200 6,400
Interest expense (29,800) (25,900)
--------- ---------
(25,600) (19,500)
--------- ---------
LOSS BEFORE EQUITY IN NET INCOME
OF JOINT VENTURES (32,200) (26,000)
--------- ---------
EQUITY IN NET INCOME
OF JOINT VENTURES:
Enstar IV/PBD Systems Venture 58,900 234,700
Enstar Cable of Macoupin County 18,800 38,300
--------- ---------
77,700 273,000
--------- ---------
NET INCOME $ 45,500 $ 247,000
========= =========
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 1.13 $ 6.14
========= =========
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.
STATEMENTS OF CASH FLOWS
=========================================
<TABLE>
<CAPTION>
Unaudited
--------------------------
Three months ended
March 31,
--------------------------
1996 1997
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 45,500 $ 247,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in net income of Joint Ventures (77,700) (273,000)
Distributions from Joint Ventures 580,000 10,000
Amortization of deferred loan costs 4,300 4,100
Increase (decrease) from changes in:
Prepaid expenses -- (300)
Accounts payable and due to affiliates 4,300 (3,300)
--------- ---------
Net cash provided by (used in) operating activities 556,400 (15,500)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (125,800) (125,800)
--------- ---------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 430,600 (141,300)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 238,200 619,300
--------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 668,800 $ 478,000
========= =========
</TABLE>
See accompanying notes to condensed financial statements.
-4-
<PAGE> 5
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
months ended March 31, 1997 and 1996 are unaudited. These condensed interim
financial statements should be read in conjunction with the audited financial
statements and notes thereto included in the Partnership's latest Annual Report
on Form 10-K. In the opinion of management, such statements reflect all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the results of such periods. The results of operations for
the three months ended March 31, 1997 are not necessarily indicative of results
for the entire year.
2. TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES
The Partnership has a management and service agreement (the "Agreement")
with a wholly-owned subsidiary of the Corporate General Partner (the "Manager")
pursuant to which it pays a monthly management fee of 5% of gross revenues. The
Agreement also provides that the Partnership will reimburse the Manager for (i)
direct expenses incurred on behalf of the Partnership and (ii) for the
Partnership's allocable share of the Manager's operational costs. No such costs
and expenses were incurred or charged to the Partnership for these services
during the three months ended March 31, 1997. The Manager has entered into
identical agreements with Enstar IV/PBD Systems Venture and Enstar Cable of
Macoupin County (both Georgia general partnerships, of which the Partnership is
a co-general partner - herein referred to as the "Joint Ventures"), except that
Enstar Cable of Macoupin County (the "Macoupin Joint Venture") pays the Manager
only a 4% management fee. However, the Macoupin Joint Venture is required to
distribute to Enstar Communications Corporation (which is the Corporate General
Partner of the Macoupin 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 $88,500 and reimbursement of
expenses of approximately $125,800 under the management agreements for the three
months ended March 31, 1997. In addition, the Macoupin Joint Venture paid the
Corporate General Partner approximately $4,800 in respect of its 1% special
interest during the three months ended March 31, 1997. Management fees and
reimbursed expenses due the Corporate General Partner are non-interest bearing.
The Joint Ventures also receive certain system operating management
services from an affiliate of the Corporate General Partner in addition to the
Manager, due to the fact that there are no such employees directly employed by
the Joint Ventures' cable systems. The Joint Ventures reimburse the affiliate
for their allocable share of the affiliate's operational costs. The total amount
charged to the Joint Ventures for these costs approximated $35,300 in the three
months ended March 31, 1997. No management fee is payable to the affiliate by
the Joint Ventures and there is no duplication of reimbursed expenses and costs
paid to the Manager.
-5-
<PAGE> 6
ENSTAR INCOME PROGRAM IV-2, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(CONTINUED)
=============================================
2. TRANSACTIONS WITH THE 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 Corporate General Partner could negotiate
for such programming services for the 15 partnerships managed by the Corporate
General Partner as a group. The Joint Ventures recorded programming fee expense
of $420,300 for the three months ended March 31, 1997. Programming fees are
included in service costs in the statements of operations.
3. EARNINGS PER UNIT OF LIMITED PARTNERSHIP INTEREST
Earnings and losses per unit of limited partnership interest is based on
the average number of units outstanding during the periods presented. For this
purpose, earnings and losses are allocated 99% to the limited partners and 1% to
the general partners.
4. RECLASSIFICATIONS
Certain 1996 amounts have been reclassified to conform to the 1997
presentation.
-6-
<PAGE> 7
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
March 31, 1997 and December 31, 1996, and the results of its operations for the
three months ended March 31, 1997 and 1996, have been included. The results of
operations for the three months ended March 31, 1997 are not necessarily
indicative of results for the entire year.
<TABLE>
<CAPTION>
December 31, March 31,
1996* 1997
------------- -------------
(Unaudited)
<S> <C> <C>
Current assets $ 2,310,800 $ 3,023,200
Investment in cable television
properties, net 1,841,900 1,740,400
Other assets 71,600 67,300
------------- -------------
$ 4,224,300 $ 4,830,900
============= =============
Current liabilities $ 685,500 $ 832,600
Venturers' capital 3,538,800 3,998,300
------------- -------------
$ 4,224,300 $ 4,830,900
============= =============
</TABLE>
*As presented in the audited financial statements.
-7-
<PAGE> 8
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
March 31,
------------------------------
1996 1997
------------- -------------
<S> <C> <C>
REVENUES $ 1,271,700 $ 1,383,400
------------- -------------
OPERATING EXPENSES:
Service costs 467,200 465,000
General and administrative expenses 199,200 166,500
General Partner management fees and reimbursed expenses 136,900 147,900
Depreciation and amortization 359,100 162,900
------------- -------------
1,162,400 942,300
------------- -------------
OPERATING INCOME 109,300 441,100
OTHER INCOME (EXPENSE):
Interest income 11,600 28,400
Interest expense (3,000) -
------------- -------------
NET INCOME $ 117,900 $ 469,500
============= =============
</TABLE>
-8-
<PAGE> 9
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 March 31, 1997 and December 31, 1996, and the results of its operations
for the three months ended March 31, 1997 and 1996, have been included. The
results of operations for the three months ended March 31, 1997 are not
necessarily indicative of results for the entire year.
<TABLE>
<CAPTION>
December 31, March 31,
1996* 1997
------------- -------------
(Unaudited)
<S> <C> <C>
Current assets $ 528,400 $ 667,700
Investment in cable television
properties, net 1,550,400 1,497,800
Other assets 5,600 5,100
------------- -------------
$ 2,084,400 $ 2,170,600
============= =============
Current liabilities $ 279,300 $ 265,500
Venturers' capital 1,805,100 1,905,100
------------- -------------
$ 2,084,400 $ 2,170,600
============= =============
</TABLE>
*As presented in the audited financial statements.
-9-
<PAGE> 10
ENSTAR INCOME PROGRAM IV-2, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(CONCLUDED)
====================================================
ENSTAR CABLE OF MACOUPIN COUNTY (CONCLUDED)
<TABLE>
<CAPTION>
Unaudited
------------------------------
Three months ended
March 31,
------------------------------
1996 1997
------------- -------------
<S> <C> <C>
REVENUES $ 425,200 $ 481,600
------------- -------------
OPERATING EXPENSES:
Service costs 129,600 130,000
General and administrative expenses 41,300 14,100
General Partner management fees and reimbursed expenses 54,300 71,200
Depreciation and amortization 151,800 154,600
------------- -------------
377,000 369,900
------------- -------------
OPERATING INCOME 48,200 111,700
OTHER INCOME (EXPENSE):
Interest income 9,400 5,700
Interest expense (1,100) (2,400)
------------- -------------
NET INCOME $ 56,500 $ 115,000
============= =============
</TABLE>
-10-
<PAGE> 11
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. 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 1996 Telecom Act. There can be no
assurance as to what, if any, further action may be taken by the FCC, Congress
or any other regulatory authority or court, or the effect thereof on the
Partnership's business. Accordingly, the Partnership's historical financial
results as described below are not necessarily indicative of future performance.
This Report includes certain forward looking statements regarding, among
other things, future results of operations, regulatory requirements,
competition, capital needs and general business conditions applicable to the
Partnership. Such forward looking statements involve risks and uncertainties
including, without limitation, the uncertainty of legislative and regulatory
changes and the rapid developments in the competitive environment facing cable
television operators such as the Partnership. In addition to the information
provided herein, reference is made to the Partnership's Annual Report on Form
10-K for the year ended December 31, 1996 for additional information regarding
such matters and the effect thereof on the Partnership's business.
All of the Partnership's cable television business operations are
conducted through its participation as a general partner in both 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.
-11-
<PAGE> 12
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 $10,000 to the
Partnership during the three months ended March 31, 1997. The Partnership
distributed $125,800 to its partners during the three months ended March 31,
1997.
THE PBD JOINT VENTURE
The Joint Venture's revenues increased from $1,271,700 to $1,383,400, or
by 8.8%, for the quarter ended March 31, 1997 as compared to the corresponding
period in 1996. Of the $111,700 increase, $103,900 was due to increases in
regulated service rates that were implemented by the Joint Venture in the second
and fourth quarters of 1996, $12,900 was due to increases in other revenue
producing items including advertising sales revenue and $10,900 was due to the
restructuring of The Disney Channel from a premium channel to a tier channel
effective July 1, 1996. These increases were offset by a $16,000 decrease in
revenues due to decreases in the number of subscriptions for basic and tier
services. As of March 31, 1997, the Joint Venture had approximately 13,400 homes
subscribing to cable service and 4,500 premium service units.
Service costs remained relatively unchanged, decreasing from $467,200 to
$465,000 (less than one percent) for the quarter ended March 31, 1997 as
compared to the corresponding period in 1996. Service costs represent costs
directly attributable to providing cable services to customers.
General and administrative expenses decreased from $199,200 to $166,500,
or by 16.4%, for the quarter ended March 31, 1997 as compared to the
corresponding period in 1996. Of the $32,700 decrease, $26,200 was due to lower
insurance premiums, $3,900 was due to a decrease in expenses allocated by an
affiliate of the Corporate General Partner that provides system operating
management services to the Joint Venture, and $3,500 was due to lower compliance
costs associated with reregulation by the FCC.
Management fees and reimbursed expenses increased from $136,900 to
$147,900, or by 8.0%, for the quarter ended March 31, 1997 as compared to the
corresponding period in 1996. Of the $11,000 increase, management fees increased
by $5,600 in direct relation to increased revenues as described above.
Reimbursed expenses increased by $5,400, primarily due to higher allocated
personnel costs, professional fees and telephone expense.
Depreciation and amortization expense decreased from $359,100 to
$162,900, or by 54.6%, for the quarter ended March 31, 1997 as compared to the
corresponding period in 1996 due to the effect of certain tangible assets
becoming fully depreciated and certain intangible assets becoming fully
amortized.
Operating income increased from $109,300 to $441,100 for the quarter
ended March 31, 1997 as compared to the corresponding period in 1996, primarily
due to decreased depreciation and amortization expense and increased revenues as
described above.
-12-
<PAGE> 13
ENSTAR INCOME PROGRAM IV-2, L.P.
RESULTS OF OPERATIONS (CONTINUED)
Interest income, net of interest expense, increased from $8,600 to
$28,400 for the quarter ended March 31, 1997 as compared to the corresponding
period in 1996 due to higher cash balances available for investment.
Due to the factors described above, the Joint Venture's net income
increased from $117,900 to $469,500 for the quarter ended March 31, 1997 as
compared to the corresponding period in 1996.
Operating income before depreciation and amortization (EBITDA) as a
percentage of revenues increased from 36.8% to 43.7% for the quarter ended March
31, 1997 as compared to the corresponding period in 1996. EBITDA increased from
$468,400 to $604,000, or by 28.9%, for the quarter ended March 31, 1997 as
compared to the corresponding period in 1996 primarily due to increases in
revenues as described above.
THE MACOUPIN JOINT VENTURE
The Joint Venture's revenues increased from $425,200 to $481,600, or by
13.3%, for the quarter ended March 31, 1997 as compared to the corresponding
period in 1996. Of the $56,400 increase, $34,200 was due to increases in
regulated service rates that were implemented by the Joint Venture in the second
and fourth quarters of 1996, $16,300 was due to the restructuring of The Disney
Channel from a premium channel to a tier channel effective July 1, 1996, $4,300
was due to increases in other revenue producing items including advertising
sales and $1,600 was due to an increase in the number of subscriptions for basic
service. As of March 31, 1997, the Joint Venture had approximately 4,500 homes
subscribing to cable service and 1,700 premium service units.
Service costs remained relatively unchanged increasing from $129,600 to
$130,000 (less than one percent) for the quarter ended March 31, 1997 as
compared to the corresponding period in 1996. Service costs represent costs
directly attributable to providing cable services to customers.
General and administrative expenses decreased from $41,300 to $14,100,
or by 65.9%, for the quarter ended March 31, 1997 as compared to the
corresponding period in 1996. Of the $27,200 decrease, $12,700 was due to an
increase in capitalization of labor and overhead expense resulting from the
rebuild of the Partnership's Auburn, Illinois cable system, $8,300 was due a
decrease in personnel costs, $2,900 was due to a decrease in customer billing
expense and $2,500 was due to a decrease in bad debt expense.
Management fees and reimbursed expenses increased from $54,300 to
$71,200, or by 31.1%, for the quarter ended March 31, 1997 as compared to the
corresponding period in 1996. Of the $16,900 increase, reimbursable expenses
increased by $14,100, primarily due to higher allocated personnel costs
resulting from staff additions and wage increases. Management fees increased by
$2,800 in direct relation to increased revenues as described above.
Depreciation and amortization expense increased from $151,800 to
$154,600, or by 1.8%, for the quarter ended March 31, 1997 as compared to the
corresponding period in 1996 due to asset additions related to the upgrade of
the Joint Venture's plant.
-13-
<PAGE> 14
ENSTAR INCOME PROGRAM IV-2, L.P.
RESULTS OF OPERATIONS (CONCLUDED)
Operating income increased from $48,200 to $111,700 for the quarter
ended March 31, 1997 as compared to the corresponding period in 1996, primarily
due to increased revenues as described above.
Interest income, net of interest expense, decreased from $8,300 to
$3,300, or by 60.2%, for the quarter ended March 31, 1997 as compared to the
corresponding period in 1996 due to lower average cash balances available for
investment.
Due to the factors described above, the Joint Venture's net income
increased from $56,500 to $115,000 for the quarter ended March 31, 1997 as
compared to the corresponding period in 1996.
Operating income before depreciation and amortization (EBITDA) as a
percentage of revenues increased from 47.0% to 55.3% for the quarter ended March
31, 1997 as compared to the corresponding period in 1996. EBITDA increased from
$200,000 to $266,300, or by 33.2%, for the quarter ended March 31, 1997 as
compared to the corresponding period in 1996, primarily due to increased
revenues as described above.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's primary objective, having invested its net offering
proceeds in the Joint Ventures, is to distribute to its partners all available
cash flow from operations and proceeds from the sale of cable systems, after
providing for expenses, debt service and capital requirements relating to the
expansion, improvement and upgrade of the Joint Ventures' cable systems. The
Joint Ventures rely upon the availability of cash generated from operations and
possible borrowings to fund their ongoing capital requirements. In general,
these requirements involve expansion, improvement and upgrade of the Joint
Ventures' existing cable television systems. The Macoupin Joint Venture is
required to rebuild its Auburn, Illinois cable system by June 30, 1997 at an
estimated total cost of $379,000 as a condition of its franchise agreement.
Capital expenditures related to the rebuild totaled approximately $226,000 in
1996, and the Joint Venture has budgeted additional expenditures of $153,000 in
1997 to complete the rebuild. The Joint Venture is also rebuilding portions of
its cable systems in surrounding communities at an estimated additional cost of
approximately $770,000. Capital expenditures approximated $460,000 in 1996 and
additional construction expenditures of $310,000 are budgeted for 1997. Total
rebuild construction costs approximated $90,900 during the first quarter of
1997. The PBD Joint Venture has budgeted capital expenditures of approximately
$1,509,200 in 1997, which include $1,248,800 for the rebuild of its Mt. Carmel,
Illinois cable system. Management believes that cash generated by the Joint
Ventures' operations in 1997, together with available borrowings, will be
adequate to fund capital expenditures and allow for continued distributions to
partners. To incur this level of capital expenditures, however, the Partnership
will be required to obtain a waiver from its lender that would permit the Joint
Ventures to exceed the limitation on such expenditures imposed by the loan
covenants in the Partnership's bank credit agreement. There can be no assurance
that the Partnership will be able to obtain such a waiver.
As discussed in prior reports, the Joint Ventures postponed a number of
rebuild and upgrade projects that were planned for 1994 and 1995 because of the
uncertainty related to implementation of the 1992 Cable Act and the negative
impact thereof on the Joint Ventures' businesses and access to capital. Although
the
-14-
<PAGE> 15
ENSTAR INCOME PROGRAM IV-2, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONCLUDED)
Joint Ventures are presently rebuilding a number of their cable systems, a
majority of their customers are served by systems that will not be rebuilt by
the end of 1997. As a result, these systems will be significantly less
technically advanced than had been expected prior to the implementation of
reregulation. The Joint Ventures believe that the delays in upgrading many of
their systems will, under present market conditions, most likely have an adverse
effect on the value of those systems compared to systems that have been rebuilt
to a higher technical standard.
The Partnership paid distributions totaling $125,800 during the three
months ended March 31, 1997. However, there can be no assurance regarding the
level, timing or continuation of future distributions.
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 Partnership paid a facility fee of $31,500 to the lender prior to funding
the Facility. The Facility provides for quarterly reductions of the maximum
commitment 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 also 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's management believes that it was in compliance with
loan covenants at March 31, 1997. The maximum commitment under the credit
facility will decrease by $900,000 in 1997 to $550,000. Since the aggregate
principal amount outstanding at March 31, 1997 was $1,000,000, principal
payments of $450,000 will be due in 1997.
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Operating activities used net cash of $15,500 in the three months ended
March 31, 1997 as compared with the prior year period when operating activities
provided net cash totaling $556,400. The change was primarily due to a $570,000
decrease in distributions from the Joint Ventures. The Partnership used $7,600
more cash to pay liabilities owed to the General Partner and third party
creditors due to differences in the timing of payments and $300 more cash for
prepaid expenses. This was partially offset by a $6,000 increase in cash
generated by Partnership operations after adding back non-cash amortization of
deferred loan costs and equity in net income of 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.
-15-
<PAGE> 16
ENSTAR INCOME PROGRAM IV-2, L.P.
<TABLE>
<S> <C>
PART II. OTHER INFORMATION
ITEMS 1-5. Not applicable.
ITEM 6. Exhibits and Reports on Form 8-K
(a) None
(b) The Registrant filed a Form 8-K dated March 11,
1997, in which it reported under Item 5 that an
unsolicited offer to purchase partnership units had
been made without the consent of the Corporate
General Partner.
</TABLE>
<PAGE> 17
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: May 12, 1997 By: /s/ Michael K. Menerey
-------------------------
Michael K. Menerey,
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT MARCH 31, 1997, AND THE STATEMENTS OF OPERATIONS FOR THE THREE MONTHS
ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 478,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,134,700
<CURRENT-LIABILITIES> 21,100
<BONDS> 1,000,000
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,134,700
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 6,500
<OTHER-EXPENSES> (6,400)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,900
<INCOME-PRETAX> 247,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 247,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 247,000
<EPS-PRIMARY> 6.14
<EPS-DILUTED> 0
</TABLE>
