<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, 2000
-------------------------
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
incorporation or organization) Identification Number)
12444 Powerscourt Dr., Suite 100
St. Louis, Missouri 63131
---------------------------------------- -------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (314) 965-0555
-----------------------------
--------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Exhibit Index located at Page E-1.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ENSTAR INCOME PROGRAM IV-2, L.P.
CONDENSED BALANCE SHEETS
==================================================
<TABLE>
<CAPTION>
December 31, September 30,
1999* 2000
----------- -------------
(Unaudited)
<S> <C> <C>
ASSETS:
Cash $ 283,800 $ 545,000
Prepaid expenses 2,900 1,900
----------- -----------
Equity in net assets of Joint Ventures:
Enstar IV/PBD Systems Venture 2,394,600 3,020,600
Enstar Cable of Macoupin County 1,105,400 1,206,500
----------- -----------
3,500,000 4,227,100
----------- -----------
Deferred loan costs, net 21,700 21,700
----------- -----------
$ 3,808,400 $ 4,795,700
=========== ===========
LIABILITIES AND PARTNERSHIP CAPITAL
-----------------------------------
LIABILITIES:
Accounts payable $ 3,500 $ 3,800
Due to affiliates 21,300 565,400
----------- -----------
24,800 569,200
----------- -----------
PARTNERSHIP CAPITAL (DEFICIT):
General Partner (45,200) (39,500)
Limited Partners 3,828,800 4,266,000
----------- -----------
TOTAL PARTNERSHIP CAPITAL 3,783,600 4,226,500
----------- -----------
$ 3,808,400 $ 4,795,700
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
---------
* Agrees with audited balance sheet included in the Partnership's Annual
Report on Form 10-K
-2-
<PAGE> 3
ENSTAR INCOME PROGRAM IV-2, L.P.
CONDENSED STATEMENTS OF OPERATIONS
==================================================
<TABLE>
<CAPTION>
Unaudited
----------------------------
Three months ended
September 30,
----------------------------
1999 2000
--------- ----------
<S> <C> <C>
OPERATING EXPENSES:
General and administrative expenses $ (10,100) $ (13,700)
--------- ---------
OTHER INCOME (EXPENSE):
Interest income 3,700 8,600
Interest expense (8,300) (2,200)
--------- ---------
(4,600) 6,400
--------- ---------
LOSS BEFORE EQUITY IN NET INCOME
OF JOINT VENTURES (14,700) (7,300)
--------- ---------
EQUITY IN NET INCOME
OF JOINT VENTURES:
Enstar IV/PBD Systems Venture 257,500 183,600
Enstar Cable of Macoupin County 59,500 52,600
--------- ---------
317,000 236,200
--------- ---------
NET INCOME $ 302,300 $ 228,900
========= =========
Net income allocated to General Partner $ 3,000 $ 2,300
========= =========
Net income allocated to Limited Partners $ 299,300 $ 226,600
========= =========
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 7.51 $ 5.69
========= =========
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 39,848 39,848
========= =========
</TABLE>
The accompanying notes are an integral part of these 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,
---------------------------
1999 2000
--------- ----------
<S> <C> <C>
OPERATING EXPENSES:
General and administrative expenses $ (29,900) $ (54,200)
--------- ---------
OTHER INCOME (EXPENSE):
Interest income 8,200 18,100
Interest expense (26,600) (10,000)
--------- ---------
(18,400) 8,100
--------- ---------
LOSS BEFORE EQUITY IN NET INCOME
OF JOINT VENTURES (48,300) (46,100)
--------- ---------
EQUITY IN NET INCOME
OF JOINT VENTURES:
Enstar IV/PBD Systems Venture 701,500 701,000
Enstar Cable of Macoupin County 177,600 164,100
--------- ---------
879,100 865,100
--------- ---------
NET INCOME $ 830,800 $ 819,000
========= =========
Net income allocated to General Partner $ 8,300 $ 8,200
========= =========
Net income allocated to Limited Partners $ 822,500 $ 810,800
========= =========
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 20.64 $ 20.35
========= =========
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 39,848 39,848
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
-4-
<PAGE> 5
ENSTAR INCOME PROGRAM IV-2, L.P.
CONDENSED STATEMENTS OF CASH FLOWS
==================================================
<TABLE>
<CAPTION>
Unaudited
------------------------------
Nine months ended
September 30,
------------------------------
1999 2000
--------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 830,800 $ 819,000
Adjustments to reconcile net income to net cash
from operating activities:
Equity in net income of Joint Ventures (879,100) (865,100)
Amortization of deferred loan costs 9,300 3,400
Changes in:
Prepaid expenses (500) 1,000
Accounts payable and due to affiliates 127,400 544,400
--------- ---------
Net cash from operating activities 87,900 502,700
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from Joint Ventures 307,000 138,000
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (377,400) (376,100)
Deferred loan costs -- (3,400)
--------- ---------
Net cash from financing activities (377,400) (379,500)
--------- ---------
INCREASE IN CASH 17,500 261,200
CASH AT BEGINNING OF PERIOD 265,300 283,800
--------- ---------
CASH AT END OF PERIOD $ 282,800 $ 545,000
========= =========
</TABLE>
The accompanying notes are an integral part of these 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
Enstar Income Program IV-2, L.P. (the "Partnership") as of September 30, 2000,
and for the three and nine months ended September 30, 2000 and 1999, are
unaudited. These condensed interim financial statements should be read in
conjunction with the audited financial statements and notes thereto included in
our latest Annual Report on Form 10-K. In the opinion of management, the
condensed interim financial 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, 2000, 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
"Management Agreement") with Enstar Cable Corporation (the "Manager"), a wholly
owned subsidiary of Enstar Communications Corporation (ECC), the corporate
general partner, pursuant to which the Partnership pays a monthly management fee
of 5% of gross revenues to the Manager. The Manager has entered into identical
agreements with Enstar IV/PBD Systems Venture and Enstar Cable of Macoupin
County (collectively, the "Joint Ventures"), both Georgia general partnerships,
of which the Partnership is a co-general partner, except that Enstar Cable of
Macoupin County pays the Manager only a 4% management fee. The Joint Ventures'
management fee expense to the Manager approximated $86,900 and $259,100, for the
three and nine months ended September 30, 2000, respectively. For the three and
nine months ended September 30, 1999, the Joint Ventures' management fee expense
to the Manager approximated $88,800 and $265,700, respectively. In addition,
Enstar Cable of Macoupin County is also required to distribute to ECC (which is
the corporate general partner of the Joint Ventures as well as of the
Partnership) an amount equal to 1% of Enstar Cable of Macoupin County Joint
Venture's gross revenues, representing ECC's interest as the corporate general
partner of Enstar Cable of Macoupin County. Enstar Cable of Macoupin County's
management fee expense to ECC approximated $5,000 and $14,900 for the three and
nine months ended September 30, 2000, respectively. For the three and nine
months ended September 30, 1999, Enstar Cable of Macoupin County's management
fee expense to ECC approximated $5,000 and $15,000, respectively. No management
fee is payable to the Manager by the Partnership in respect of any amounts
received by the Partnership from the Joint Ventures. Management fees are
non-interest bearing.
The Management Agreement also provides that the Partnership
reimburse the Manager for direct expenses incurred on behalf of the Partnership
and the Partnership's allocable share of the Manager's operational costs.
Additionally, Charter Communications Holding Company, LLC and its affiliates
(collectively, "Charter") provide other management and operational services for
the Partnership and the Joint Ventures. Such services were provided by Falcon
Communications, L.P. and
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<PAGE> 7
ENSTAR INCOME PROGRAM IV-2, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
==================================================
its affiliates (collectively, "Falcon") prior to November 12, 1999. These
expenses are charged to the properties served based primarily on the
Partnership's allocable share of operational costs associated with the services
provided. The Joint Ventures reimburse the affiliates for the Partnership's
allocable share of the affiliates' costs. The total amount charged to the Joint
Ventures for these costs are approximated at $283,000 and $712,800 for the three
and nine months ended September 30, 2000, respectively. For the three and nine
months ended September 30, 1999, the total amount charged to Joint Ventures for
these costs approximated $126,400 and $366,000, respectively. There is no
duplication of reimbursed expenses of the Manager.
Substantially all programming services have been purchased
through Charter since November 12, 1999. Before that time, substantially all
programming services were purchased through Falcon. Falcon charged the Joint
Ventures for these costs based on an estimate of what ECC could negotiate for
such programming services for the 14 partnerships ECC managed as a group.
Charter charges the Joint Ventures for these costs based on its costs. The Joint
Ventures recorded programming fee expense of $400,000 and $1,071,500 for the
three and nine months ended September 30, 2000, respectively. For the three and
nine months ended September 30, 1999, programming fee expense was $496,600 and
$1,410,900, respectively.
In the normal course of business, the Joint Ventures paid
interest and principal to Enstar Finance Company, LLC, its primary lender and a
subsidiary of ECC, when there were amounts outstanding under the facility and
pays a commitment fee to Enstar Finance Company, LLC, on the unborrowed portion
of its facility.
3. NET INCOME PER UNIT OF LIMITED PARTNERSHIP INTEREST
Net income per unit of limited partnership interest is based
on the average number of units outstanding during the periods presented. For
this purpose, net income has been allocated 99% to the Limited Partners and 1%
to the General Partner. The General Partner does not own units of partnership
interest in the Partnership, but rather holds a participation interest in the
income, losses and distributions of the Partnership.
-7-
<PAGE> 8
ENSTAR INCOME PROGRAM IV-2, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
==================================================
4. EQUITY IN NET ASSETS OF JOINT VENTURES
ENSTAR IV/PBD SYSTEMS VENTURE
The Partnership and an affiliated partnership (Enstar Income
Program IV-1, L.P.) each own 50% of Enstar IV/PBD Systems Venture. Each of the
co-partners share equally in the profits and losses of the Enstar IV/PBD Systems
Venture. The investment in the Enstar IV/PBD Systems Venture is accounted for on
the equity method. Summarized financial information for Enstar IV/PBD Systems
Venture as of September 30, 2000, and December 31, 1999, and the results of its
operations for the three and nine months ended September 30, 2000 and 1999, have
been included. The results of operations for the three and nine months ended
September 30, 2000, are not necessarily indicative of results for the entire
year.
<TABLE>
<CAPTION>
December 31, September 30,
1999* 2000
------------- --------------
(Unaudited)
<S> <C> <C>
Current assets $3,440,700 $4,772,500
Investment in cable television properties, net 1,772,800 1,874,600
Other assets 2,400 500
---------- ----------
$5,215,900 $6,647,600
========== ==========
Current liabilities $ 426,700 $ 606,500
Venturers' capital 4,789,200 6,041,100
---------- ----------
$5,215,900 $6,647,600
========== ==========
</TABLE>
------------
* Agrees with audited balance sheet included in the Partnership's Annual Report
on Form 10-K
-8-
<PAGE> 9
ENSTAR INCOME PROGRAM IV-2, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
==================================================
<TABLE>
<CAPTION>
Unaudited
-----------------------------------
Three months ended
September 30,
-----------------------------------
1999 2000
----------- -----------
<S> <C> <C>
REVENUES $ 1,359,600 $ 1,340,600
----------- -----------
OPERATING EXPENSES:
Service costs 486,300 461,100
General and administrative expenses 143,800 188,600
General partner management fees and reimbursed expenses 142,300 291,100
Depreciation and amortization 100,500 87,300
----------- -----------
872,900 1,028,100
----------- -----------
OPERATING INCOME 486,700 312,500
OTHER INCOME (EXPENSE):
Interest income 34,500 56,500
Interest expense (2,800) (1,900)
Loss on sale of cable assets (3,500) --
----------- -----------
NET INCOME $ 514,900 $ 367,100
=========== ===========
</TABLE>
-9-
<PAGE> 10
ENSTAR INCOME PROGRAM IV-2, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
==================================================
<TABLE>
<CAPTION>
Unaudited
-----------------------------------
Nine months ended
September 30,
-----------------------------------
1999 2000
----------- -----------
<S> <C> <C>
REVENUES $ 4,118,000 $ 3,988,000
----------- -----------
OPERATING EXPENSES:
Service costs 1,363,100 1,219,700
General and administrative expenses 636,300 499,500
General partner management fees and reimbursed expenses 424,500 745,600
Depreciation and amortization 373,500 258,100
----------- -----------
2,797,400 2,722,900
----------- -----------
OPERATING INCOME 1,320,600 1,265,100
OTHER INCOME (EXPENSE):
Interest income 95,100 144,800
Interest expense (12,800) (8,000)
----------- -----------
NET INCOME $ 1,402,900 $ 1,401,900
=========== ===========
</TABLE>
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<PAGE> 11
ENSTAR INCOME PROGRAM IV-2, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
==================================================
ENSTAR CABLE OF MACOUPIN COUNTY
The Partnership and two affiliated partnerships (Enstar Income
Program IV-1, L.P. and Enstar Income Program IV-3, L.P.) each own one-third
(1/3) of Enstar Cable of Macoupin County. Each of the co-partners share equally
in the profits and losses of Enstar Cable of Macoupin County. The investment in
Enstar Cable of Macoupin County is accounted for on the equity method.
Summarized financial information for Enstar Cable of Macoupin County as of
September 30, 2000, and December 31, 1999, and the results of its operations for
the three and nine months ended September 30, 2000 and 1999, have been included.
The results of operations for the three and nine months ended September 30,
2000, are not necessarily indicative of results for the entire year.
<TABLE>
<CAPTION>
December 31, September 30,
1999* 2000
-------------- ---------------
(Unaudited)
<S> <C> <C>
Current assets $1,807,500 $2,688,500
Investment in cable television properties, net 1,730,200 1,612,000
Other assets 1,200 300
---------- ----------
$3,538,900 $4,300,800
========== ==========
Current liabilities $ 222,700 $ 681,800
Venturers' capital 3,316,200 3,619,000
---------- ----------
$3,538,900 $4,300,800
========== ==========
</TABLE>
---------
* Agrees with audited balance sheet included in the Partnership's Annual
Report on Form 10-K
-11-
<PAGE> 12
ENSTAR INCOME PROGRAM IV-2, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
==================================================
<TABLE>
<CAPTION>
Unaudited
---------------------------
Three months ended
September 30,
---------------------------
1999 2000
---------- ---------
<S> <C> <C>
REVENUES $ 499,900 $ 497,100
--------- ---------
OPERATING EXPENSES:
Service costs 174,700 173,300
General and administrative expenses 30,100 42,900
General partner management fees and reimbursed expenses 77,900 83,800
Depreciation and amortization 54,000 60,100
--------- ---------
336,700 360,100
--------- ---------
OPERATING INCOME 163,200 137,000
OTHER INCOME (EXPENSE):
Interest income 16,600 21,600
Interest expense (1,500) (900)
--------- ---------
NET INCOME $ 178,300 $ 157,700
========= =========
</TABLE>
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<PAGE> 13
ENSTAR INCOME PROGRAM IV-2, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
==================================================
<TABLE>
<CAPTION>
Unaudited
---------------------------
Nine months ended
September 30,
---------------------------
1999 2000
----------- -----------
<S> <C> <C>
REVENUES $ 1,495,800 $ 1,492,800
----------- -----------
OPERATING EXPENSES:
Service costs 497,700 507,500
General and administrative expenses 117,400 144,300
General partner management fees and reimbursed expenses 222,200 241,200
Depreciation and amortization 163,600 169,600
----------- -----------
1,000,900 1,062,600
----------- -----------
OPERATING INCOME 494,900 430,200
OTHER INCOME (EXPENSE):
Interest income 44,400 67,400
Interest expense (6,600) (5,400)
----------- -----------
NET INCOME $ 532,700 $ 492,200
=========== ===========
</TABLE>
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<PAGE> 14
ENSTAR INCOME PROGRAM IV-2, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
==================================================
5. SALE OF CABLE SYSTEM
On August 8, 2000, (as amended on September 29, 2000) the
Partnership, together with certain affiliates, (collectively, the "Sellers")
entered into a purchase and sale agreement (the "Gans II Agreement") with
Multimedia Acquisition Corp., an affiliate of Gans Multimedia Partnership, (the
"Purchaser"). The Gans II Agreement provides for the Purchaser to acquire the
assets comprising the Partnership's cable systems serving Macoupin, Illinois,
Mt. Carmel, Illinois and Dexter, Missouri, as well as certain assets of other
affiliates. The aggregate purchase price payable to the Sellers pursuant to the
Gans II Agreement is $95,574,600 in cash (subject to normal closing
adjustments). Of that amount, $7,579,200 (subject to closing adjustments) is
payable to the Partnership. The allocation of the purchase price among each of
the Sellers was assigned by the Purchaser for each of the systems.
On September 29, 2000, the Partnership, together with certain
affiliates, (collectively, the "Selling Affiliates") entered into a purchase and
sale agreement (the "Gans III Agreement") with Multimedia Acquisition Corp., an
affiliate of Gans Multimedia Partnership, (the "Buyer"). The Gans III Agreement
provides for the Purchaser to acquire the assets comprising the Partnership's
cable systems serving Poplar Bluff, Missouri, as well as certain assets of other
affiliates. The aggregate purchase price payable to the Selling Affiliates
pursuant to the Gans III Agreement is $5,522,400 in cash (subject to normal
closing adjustments). Of that amount, $2,761,200 (subject to closing
adjustments) is payable to the Partnership. The allocation of the purchase price
among each of the Selling Affiliates was assigned by the Buyer for each of the
systems.
Both of these purchase and sale agreements are subject to
numerous closing conditions, including without limitation: (a) receipt of the
necessary governmental consents to transfer franchises covering an aggregate of
90% of the subscribers to be sold; (b) receipt of certain other material
consents and approvals required for the consummation of the sale; (c) receipt of
the necessary approvals of the Limited Partners; and (d) other standard closing
conditions. With respect to clause (c) above, completion of the transaction is
contingent on the Limited Partners of the Partnership and the other selling
affiliates voting to approve the sale.
-14-
<PAGE> 15
ENSTAR INCOME PROGRAM IV-2, L.P.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
This report includes certain forward-looking statements regarding,
among other things, our future results of operations, regulatory requirements,
competition, capital needs and general business conditions applicable to the
Partnership. Such forward-looking statements involve risks and uncertainties
including, without limitation, the uncertainty of legislative and regulatory
changes and the rapid developments in the competitive environment facing cable
television operators such as the Partnership. In addition to the information
provided herein, reference is made to our Annual Report on Form 10-K for the
year ended December 31, 1999, for additional information regarding such matters
and the effect thereof on the Partnership's business.
All of the our cable television business operations are conducted
through participation as a partner with a 50% and a one-third (1/3) interest in
Enstar IV/PBD Systems Venture (the "PBD Joint Venture") and Enstar Cable of
Macoupin County (the "Macoupin County Joint Venture"), (collectively, the "Joint
Ventures"), respectively. Our participation in the Joint Ventures is equal to
our affiliated partner (Enstar Income Program IV-1, L.P.) in respect to the PBD
Joint Venture, and (Enstar Income Program IV-1, L.P. and Enstar Income Program
IV-3, L.P.) in respect to the Macoupin County Joint Venture, with respect to
capital contributions, obligations an 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
provides a separate discussion for each entity.
RESULTS OF OPERATIONS
THE PARTNERSHIP
All of our cable television business operations are conducted through
our participation as a partner in the Joint Ventures. The Joint Ventures
distributed $138,000 to the Partnership and we distributed $376,100 to the
partners during the nine months ended September 30, 2000. For the nine months
ended September 30, 1999, the Joint Ventures distributed $307,000 to the
Partnership and we distributed $377,400 to the partners.
THE ENSTAR IV/PBD SYSTEMS VENTURE
The PBD Joint Venture's revenues decreased from $1,359,600 to
$1,340,600, or by 1.4%, and from $4,118,000 to $3,988,000, or by 3.2%, for the
three and nine months ended September 30, 2000, as compared to the corresponding
periods in 1999. Of the $19,000 decrease in revenues for the three months ended
September 30, 2000, $40,000 was due to decreases in the number of subscribers
for basic, premium, tier and equipment rental services. The decrease was
partially offset by a $11,000 increase due to increases in regulated service
rates that the PBD Joint Venture implemented in 1999 and a $10,000 increase due
to increases in other revenue producing items. Of
-15-
<PAGE> 16
ENSTAR INCOME PROGRAM IV-2, L.P.
the $130,000 decrease in revenues for the nine months ended September 30, 2000,
$205,900 was due to decreases in the number of subscribers for basic, premium,
tier and equipment rental services and $32,500 was due to a decrease in other
revenue producing items. The decreases were partially offset by a $108,400
increase due to increases in regulated service rates. As of September 30, 2000,
the PBD Joint Venture had approximately 12,100 basic subscribers and 3,800
premium service units.
Effective with the acquisition of Falcon Communications, L.P. (Falcon)
by Charter Communications Holdings Company, LLC (Charter) on November 12, 1999,
certain activities previously incurred at the PBD Joint Venture and expensed
through service cost and general and administrative expense have been either
eliminated by Charter, or have been reimbursed by the PBD Joint Venture based on
Charter's costs incurred. These reimbursed costs are included in general partner
management fees and reimbursed expenses on the PBD Joint Venture's statements of
operations. The total of service costs, general and administrative expenses and
general partner management fees and reimbursed expenses increased from $772,400
to $940,800, or by 21.8%, and from $2,423,900 to $2,464,800, or by 1.7%, for the
three and nine months ended September 30, 2000, as compared to the corresponding
periods in 1999.
Service costs decreased from $486,300 to $461,100, or by 5.2%, and from
$1,363,100 to $1,219,700, or by 10.5%, for the three and nine months ended
September 30, 2000, as compared to the corresponding periods in 1999. Service
costs represent costs directly attributable to providing cable services to
customers. The decrease was primarily due to lower programming fees resulting
from lower rates that Charter has extended to the PBD Joint Venture and certain
costs incurred at the PBD Joint Venture prior to the Charter acquisition that
are now incurred by Charter and reimbursed by the PBD Joint Venture, as
discussed above.
General and administrative expenses increased from $143,800 to
$188,600, or by 31.2%, and decreased from $636,300 to $499,500, or by 21.5%, for
the three and nine months ended September 30, 2000, as compared to the
corresponding periods in 1999. For the three months ended September 30, 2000,
the increase was attributable to an increase in bad debt expense and costs
associated with customer billings. For the nine months ended September 30, 2000,
the decrease was attributable to a decrease in marketing expenses, and certain
costs incurred at the PBD Joint Venture prior to the Charter acquisition that
are now incurred by Charter and reimbursed by the PBD Joint Venture, as
discussed above.
General partner management fees and reimbursed expenses increased from
$142,300 to $291,100, or by 104.6%, and from $424,500 to $745,600, or by 75.6%,
for the three and nine months ended September 30, 2000, as compared to the
corresponding periods in 1999. As discussed above, Charter now performs certain
management and operational functions formerly performed at the PBD Joint
Venture.
Depreciation and amortization expense decreased from $100,500 to
$87,300, or by 13.1%, and from $373,500 to $258,100, or by 30.9%, for the three
and nine months ended September 30, 2000, as compared to the corresponding
periods in 1999, due to the impact of certain tangible assets becoming fully
depreciated.
-16-
<PAGE> 17
ENSTAR INCOME PROGRAM IV-2, L.P.
Due to the factors described above, operating income decreased from
$486,700 to $312,500, or by 35.8%, and from $1,320,600 to $1,265,100, or by
4.2%, for the three and nine months ended September 30, 2000, as compared to the
corresponding periods in 1999.
Interest income, net of interest expense, increased from $31,700 to
$54,600, or by 72.2%, and from $82,300 to $136,800, or by 66.2%, for the three
and nine months ended September 30, 2000, as compared to the corresponding
periods in 1999. The increase was due to higher average cash balances available
for investment and higher average interest rates earned on invested funds during
the current year.
Due to the factors described above, the PBD Joint Venture's net income
decreased from $514,900 to $367,100, or by 28.7%, and from $1,402,900 to
$1,401,900, or by less than 1.0%, for the three and nine months ended September
30, 2000, as compared to the corresponding periods in 1999.
Based on its experience in the cable television industry, the PBD Joint
Venture believes that operating income before depreciation and amortization, or
EBITDA, and related measures of cash flow serve as important financial analysis
tools for measuring and comparing cable television companies in several areas,
such as liquidity, operating performance and leverage. EBITDA is not a
measurement determined under generally accepted accounting principles (GAAP) and
does not represent cash generated from operating activities in accordance with
GAAP. EBITDA should not be considered by the reader as an alternative to net
income, as an indicator of financial performance or as an alternative to cash
flows as a measure of liquidity. In addition, the definition of EBITDA may not
be identical to similarly titled measures used by other companies. EBITDA as a
percentage of revenues decreased from 43.2% to 29.8% and from 41.1% to 38.2%
during the three and nine months ended September 30, 2000, as compared to the
corresponding periods in 1999. The decrease was primarily due to the factors as
described above. EBITDA decreased from $587,200 to $399,800, or by 31.9%, and
from $1,694,100 to $1,523,200, or by 10.1%, for the three and nine months ended
September 30, 2000, as compared to the corresponding periods in 1999.
ENSTAR CABLE OF MACOUPIN COUNTY
The Macoupin County Joint Venture's revenues decreased from $499,900 to
$497,100, or by less than 1.0 %, and from $1,495,800 to $1,492,800, or by less
than 1.0%, for the three and nine months ended September 30, 2000, as compared
to the corresponding periods in 1999. Of the $2,800 decrease in revenues for the
three months ended September 30, 2000, $29,900 was due to decreases in the
number of subscribers for basic, premium, and equipment rental services and $400
was due to a decrease in other revenue producing items. The decreases were
partially offset by a $27,500 increase in regulated service rates that we
implemented in 2000. Of the $3,000 decrease in revenues for the nine months
ended September 30, 2000, $68,500 was due to a decrease in the number of
subscribers for basic, premium, and equipment rental services and $1,400 was due
to a decrease in other revenue producing items. The decrease was partially
offset by a $66,900 increase in the rates. As of September 30, 2000, we had
approximately 4,300 basic subscribers and 1,500 premium service units.
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ENSTAR INCOME PROGRAM IV-2, L.P.
Effective with the acquisition of Falcon Communications, L.P. (Falcon)
by Charter Communications Holdings Company, LLC (Charter) on November 12, 1999,
certain activities previously incurred at the Macoupin County Joint Venture and
expensed through service cost and general and administrative expense have been
either eliminated by Charter, or have been reimbursed by the Macoupin County
Joint Venture based on Charter's costs incurred. These reimbursed costs are
included in general partner management fees and reimbursed expenses on the
Macoupin County Joint Venture's statements of operations. The total of service
costs, general and administrative expenses and general partner management fees
and reimbursed expenses increased from $282,700 to $300,000, or by 6.1%, and
from $837,300 to $893,000, or by 6.7%, for the three and nine months ended
September 30, 2000, as compared to the corresponding periods in 1999.
Service costs decreased from $174,700 to $173,300, or by less than
1.0%, and increased from $497,700 to $507,500, or 2.0%, for the three and nine
months ended September 30, 2000, as compared to the corresponding periods in
1999. For the three months ended September 30, 2000, the decrease was primarily
due to the lower programming rates that Charter has extended to us. The decrease
was partially offset due to higher personnel costs resulting from staff
additions. For the nine months ended September 30, 2000, the increase was due to
higher personnel costs resulting from staff additions, which was partially
offset due to the lower programming rates mentioned above and a decrease in
subscribers. In addition, a $40,000 programming rebate was received in prior
year, which decreased service costs for the nine months ended September 30,
1999.
General and administrative expenses increased from $30,100 to $42,900,
or by 42.5%, and from $117,400 to $144,300, or by 22.9%, for the three and nine
months ended September 30, 2000, as compared to the corresponding periods in
1999. The increase was due to an increase in bad debt expense and in costs
associated with customer billings.
General partner management fees and reimbursed expenses increased from
$77,900 to $83,800, or by 7.6%, and from $222,200 to $241,200, or by 8.6%, for
the three and nine months ended September 30, 2000, as compared to the
corresponding periods in 1999. As discussed above, Charter now performs certain
management and operational functions formerly performed at the Macoupin County
Joint Venture.
Depreciation and amortization expense increased from $54,000 to
$60,100, or by 11.3%, and from $163,600 to $169,600, or by 3.7%, for the three
and nine months ended September 30, 2000, as compared to the corresponding
periods in 1999, due to an increase in capital expenditures for cable system
upgrades.
Due to the factors described above, operating income decreased from
$163,200 to $137,000, or by 16.1%, and from $494,900 to $430,200, or by 13.1%,
for the three and nine months ended September 30, 2000, as compared to the
corresponding periods in 1999.
Interest income, net of interest expense, increased from $15,100 to
$20,700, or by 37.1%, and from $37,800 to $62,000, or by 64.0%, for the three
and nine months ended September 30, 2000, as compared to the corresponding
periods in 1999. The increase was due to higher average
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ENSTAR INCOME PROGRAM IV-2, L.P.
cash balances available for investment and higher average interest rates earned
on invested funds during the current year period.
Due to the factors described above, the Macoupin County Joint Venture's
net income decreased from $178,300 to $157,700, or by 11.6%, and from $532,700
to $492,200, or by 7.6%, for the three and nine months ended September 30, 2000,
as compared to the corresponding periods in 1999.
Based on its experience in the cable television industry, the Macoupin
County Joint Venture believes that operating income before depreciation and
amortization, or EBITDA, and related measures of cash flow serve as important
financial analysis tools for measuring and comparing cable television companies
in several areas, such as liquidity, operating performance and leverage. EBITDA
is not a measurement determined under generally accepted accounting principles
(GAAP) and does not represent cash generated from operating activities in
accordance with GAAP. EBITDA should not be considered by the reader as an
alternative to net income, as an indicator of financial performance or as an
alternative to cash flows as a measure of liquidity. In addition, the definition
of EBITDA may not be identical to similarly titled measures used by other
companies. EBITDA as a percentage of revenues decreased from 43.4% to 39.6% and
from 44.0% to 40.2% during the three and nine months ended September 30, 2000,
as compared to the corresponding periods in 1999. The decrease was primarily due
to the factors described above. EBITDA decreased from $217,200 to $197,100, or
by 9.3%, and from $658,500 to $599,800, or by 8.9%, for the three and nine
months ended September 30, 2000, as compared to the corresponding periods in
1999.
LIQUIDITY AND CAPITAL RESOURCES
Our primary objective is to distribute to our partners all available
cash flow from the Joint Ventures' operations and proceeds from the sale of the
Joint Ventures' cable television systems, if any, after providing for expenses,
debt service and capital requirements relating to the expansion, improvement and
upgrade of such cable television systems.
In accordance with the partnership agreement, Enstar Communications
Corporation has implemented a plan for liquidating the Partnership. On August 8,
2000, (as amended on September 29, 2000) the Partnership, together with certain
affiliates, (collectively, the "Sellers") entered into a purchase and sale
agreement (the "Gans II Agreement") with Multimedia Acquisition Corp., an
affiliate of Gans Multimedia Partnership, (the "Purchaser"). The Gans II
Agreement provides for the Purchaser to acquire the assets comprising the
Partnership's cable systems serving Macoupin, Illinois, Mt. Carmel, Illinois and
Dexter, Missouri, as well as certain assets of other affiliates. The aggregate
purchase price payable to the Sellers pursuant to the Gans II Agreement is
$95,574,600 in cash (subject to normal closing adjustments). Of that amount,
$7,579,200 (subject to closing adjustments) is payable to the Partnership. The
allocation of the purchase price among each of the Sellers was assigned by the
Purchaser for each of the systems.
On September 29, 2000, the Partnership, together with certain
affiliates, (collectively, the "Selling Affiliates") entered into a purchase and
sale agreement (the "Gans III Agreement") with Multimedia Acquisition Corp., an
affiliate of Gans Multimedia Partnership, (the "Buyer"). The Gans
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ENSTAR INCOME PROGRAM IV-2, L.P.
III Agreement provides for the Purchaser to acquire the assets comprising the
Partnership's cable systems serving Poplar Bluff, Missouri, as well as certain
assets of other affiliates. The aggregate purchase price payable to the Selling
Affiliates pursuant to the Gans III Agreement is $5,522,400 in cash (subject to
normal closing adjustments). Of that amount, $2,761,200 (subject to closing
adjustments) is payable to the Partnership. The allocation of the purchase price
among each of the Selling Affiliates was assigned by the Buyer for each of the
systems.
Both of these purchase and sale agreements are subject to numerous
closing conditions, including without limitation: (a) receipt of the necessary
governmental consents to transfer franchises covering an aggregate of 90% of the
subscribers to be sold; (b) receipt of certain other material consents and
approvals required for the consummation of the sale; (c) receipt of the
necessary approvals of the Limited Partners; and (d) other standard closing
conditions. With respect to clause (c) above, completion of the transaction is
contingent on the Limited Partners of the Partnership and the other selling
affiliates voting to approve the sale.
Enstar Communications Corporation is currently preparing a proxy for
submission to the Partnership's Limited Partners for the purpose of approving or
disapproving the sale. If all of the Partnership's assets are sold, Enstar
Communications Corporation will proceed to liquidate the Partnership and Joint
Ventures following the settlement of their final liabilities.
The Joint Ventures rely upon the availability of cash generated from
operations and possible borrowings to fund their ongoing capital requirements.
In general, these requirements involve expansion, improvement and upgrade of the
Joint Ventures' existing cable television systems. The Macoupin Joint Venture is
required by a provision of its franchise agreement with the city of Carlinville,
Illinois to upgrade its cable system in the community by December 2001 at an
estimated cost of $1,100,000 and plans to upgrade its cable plant in Girard,
Illinois at an estimated cost of $1,000,000, provided the franchise agreement is
renewed. The franchise agreement under negotiation with Girard is expected to
require completion of a plant upgrade in the franchise area within two years.
The Macoupin County Joint Venture is budgeted to spend approximately $158,500 in
2000 for the upgrade of other assets. The PBD Joint Venture intends to upgrade
its Mt. Carmel, Illinois and Poplar Bluff, Missouri cable systems, at an
estimated cost of approximately $1,300,000 and $6,200,000, respectively,
provided franchise renewals are obtained and adequate funds are available. At
this time, the franchise authority in Poplar Bluff has terminated negotiations
to renew the franchise agreement with the city. Although the Mt. Carmel,
Illinois franchise agreement is still under negotiation, the PBD Joint Venture
anticipates that the franchise agreement will require completion of an upgrade
within 24 months. The PBD Joint Venture has budgeted capital expenditures of
$819,700 in 2000 to upgrade other assets. In the first nine months of 2000,
capital expenditures by the Macoupin County Joint Venture and PBD Joint Venture
were approximately $48,800 and $218,600, respectively.
The franchise agreement with the city of Poplar Bluff expired in 1997
and the PBD Joint Venture has been negotiating renewal of the agreement with
the city since that time. The city of Poplar Bluff passed a resolution in 1997
extending the PBD Joint Venture's franchise until such time as a renewal has
been approved or formally denied by the city. On February 8, 2000, voters in
the city of Poplar Bluff approved the use of funds to finance construction of a
municipally-owned and operated cable system. The system is intended to compete
directly with the PBD Joint Venture's cable system both in the city and in
Butler County, Missouri. The city-
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ENSTAR INCOME PROGRAM IV-2, L.P.
owned cable system may be built to a higher technical standard than the system
owned by the PBD Joint Venture and may offer a greater number of channels at a
lower monthly subscriber rate. The city estimates that its new system will be
operational within two years. The PBD Joint Venture believes that the competing
system, if built, will have a material adverse impact on its subscriber numbers,
financial condition and results of operations. As it has for three years, the
PBD Joint Venture intends to continue operating its cable system in Poplar Bluff
under the terms of its expired franchise agreement and continue paying franchise
fees to the city until the system can be sold. As of September 30, 2000, there
were approximately 4,800 and 1,100 basic subscribers in the city of Poplar Bluff
and Butler County, respectively, and 1,700 and 340 premium subscribers in the
city of Poplar Bluff and Butler County, respectively.
The Joint Ventures are presently rebuilding a number of their cable
systems because a majority of their customers are served by systems that have
not been rebuilt. The Joint Ventures had postponed a number of rebuild and
upgrade projects because of the uncertainty related to implementation of the
1992 Cable Act and the negative impact thereof on the Joint Ventures' businesses
and access to capital. As a result, these systems are 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 have had an adverse effect on the value of those systems compared
to systems that have been rebuilt to a higher technical standard.
We believe that cash generated by operations of the Joint Ventures,
together with available cash and proceeds from borrowings, will be adequate to
fund capital expenditures, debt service and other liquidity requirements in 2000
and beyond. As a result, the Joint Ventures intend to use their cash for such
purposes.
The Partnership is party to a loan agreement with Enstar Finance
Company, LLC, its primary lender and a subsidiary of Enstar Communications
Corporation. The loan agreement provides for a revolving loan facility of
$1,800,000. The Partnership paid its outstanding borrowings under the facility
during 1999 and presently has no borrowings outstanding under the loan facility.
The Partnership pays a commitment fee of 0.5% to Enstar Finance Company, LLC on
the unborrowed portion of its facility. The Partnership's management expects to
increase borrowings under the facility in the future for system upgrades and
other liquidity requirements.
The Partnership's facility matures on August 31, 2001, at which time
all amounts then outstanding are due in full. Borrowings bear interest at the
lender's base rate (9.5% at September 30, 2000) plus 0.625%, or at an offshore
rate (6.74% at September 30, 2000) plus 1.875%. Under certain circumstances, the
Partnership is required to make mandatory prepayments, which permanently reduce
the maximum commitment under the facility. The facility contains certain
financial tests and other covenants including, among others, restrictions on
incurrence of indebtedness, investments, sales of assets, acquisitions and other
covenants, defaults and conditions.
The facility does not restrict the payments of distributions to
partners by the Partnership unless an event exists thereunder or the
Partnership's ratio of debt to cash flow is greater than 4 to 1. We believe it
is critical for the Partnership to conserve cash and borrowing capacity to
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ENSTAR INCOME PROGRAM IV-2, L.P.
fund its anticipated capital expenditures. Accordingly, the Partnership does not
anticipate an increase in distributions to partners at this time.
Falcon purchased insurance coverage for all of the cable television
properties owned or managed by it to cover damage to cable distribution plant
and subscriber connections and against business interruptions resulting from
such damage. This coverage is subject to a significant annual deductible which
applies to all of the cable television properties formerly owned or managed by
Falcon through November 12, 1999, and currently managed by Charter, including
those of the Joint Ventures.
Approximately 85% of the Joint Ventures' subscribers are served by
their systems in Poplar Bluff, Missouri and Carlinville, Illinois and
neighboring communities. Significant damage to these systems due to seasonal
weather conditions or other events could have a material adverse effect on the
Joint Ventures' liquidity and cash flows. The Joint Ventures continue to
purchase insurance coverage in amounts their management views as appropriate for
all other property, liability, automobile, workers' compensation and other types
of insurable risks.
Operating activities of the Partnership generated $414,800 more cash
during the nine months ended September 30, 2000, than in the corresponding
period in 1999. Investing activities of the Partnership generated $169,000 less
cash during the nine months ended September 30, 2000, than in the corresponding
period in 1999. Financing activities of the Partnership used $2,100 more cash
during the nine months ended September 30, 2000, than in the corresponding
period in 1999.
INFLATION
Certain of the Joint Ventures' expenses, such as those for wages and
benefits, equipment repair and replacement, and billing and marketing generally
increase with inflation. However, we do not believe that our financial results
have been, or will be, adversely affected by inflation in a material way,
provided that the Joint Ventures are able to increase our service rates
periodically, of which there can be no assurance.
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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) Exhibits
10.1 Amendment dated September 29, 2000, of the
Asset Purchase Agreement dated August 8, 2000,
by and among Multimedia Acquisition Corp., as
Buyer, and Enstar Income Program II-1, L.P.,
Enstar Income Program II-2, L.P., Enstar Income
Program IV-3, L.P., Enstar Income/Growth
Program Six-A, L.P., Enstar IX, Ltd., Enstar
XI, Ltd., Enstar IV/PBD Systems Venture, Enstar
Cable of Cumberland Valley and Enstar Cable of
Macoupin County, as Sellers. (1)
10.2 Asset Purchase Agreement dated September 29,
2000, by and among Multimedia Acquisition
Corp., as Buyer, and Enstar IV/PBD Systems
Venture, as Seller. (1)
27.1 Financial Data Schedule.*
(b) Reports on Form 8-K
- None
-------
* Filed herewith
(1) Incorporated by reference to the report on Form 10-Q of Enstar Income
Program IV-1, L.P. filed on November 13, 2000 (File No. 00015705).
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<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ENSTAR INCOME PROGRAM IV-1, L.P.
a GEORGIA LIMITED PARTNERSHIP
(Registrant)
By: ENSTAR COMMUNICATIONS CORPORATION
General Partner
Date: November 13, 2000 By: /s/ Kent D. Kalkwarf
---------------------
Kent D. Kalkwarf
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
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EXHIBIT INDEX
Exhibit
Number Description
10.1 Amendment dated September 29, 2000, of the Asset Purchase
Agreement dated August 8, 2000, by and among Multimedia
Acquisition Corp., as Buyer, and Enstar Income Program II-1,
L.P., Enstar Income Program II-2, L.P., Enstar Income Program
IV-3, L.P., Enstar Income/Growth Program Six-A, L.P., Enstar
IX, Ltd., Enstar XI, Ltd., Enstar IV/PBD Systems Venture,
Enstar Cable of Cumberland Valley and Enstar Cable of Macoupin
County, as Sellers (incorporated by reference to the Current
Report on Form 10-Q of Enstar Income Program IV-1, L.P., filed
with the Commission on or about November 13, 2000, File
No. 00015705).
10.2 Asset Purchase Agreement dated September 29, 2000, by and
among Multimedia Acquisition Corp., as Buyer, and Enstar
IV/PBD Systems Venture, as Seller (incorporated by reference
to the Current Report on Form 10-Q of Enstar Income Program
IV-1, L.P., filed with the Commission on or about November 13,
2000, File No. 00015705).
27.1 Financial Data Schedule.
E-1
