<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, 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)
<TABLE>
<CAPTION>
<S> <C>
Georgia 58-1648318
------------------------------------------------- ----------------------------------------------------
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
12444 Powerscourt Dr., Suite 100
St. Louis, Missouri 63131
------------------------------------------------- ----------------------------------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
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, June 30,
1999* 2000
----------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS:
Cash $ 283,800 $ 665,300
Prepaid expenses 2,900 1,900
----------------- -----------------
Equity in net assets of Joint Ventures:
Enstar IV/PBD Systems Venture 2,394,600 2,837,000
Enstar Cable of Macoupin County 1,105,400 1,153,800
----------------- -----------------
3,500,000 3,990,800
----------------- -----------------
Deferred loan costs, net 21,700 22,000
----------------- -----------------
$ 3,808,400 $ 4,680,000
================= =================
LIABILITIES AND PARTNERSHIP CAPITAL
LIABILITIES:
Accounts payable $ 3,500 $ 3,300
Due to affiliates 21,300 553,900
----------------- -----------------
24,800 557,200
----------------- -----------------
PARTNERSHIP CAPITAL (DEFICIT):
General Partner (45,200) (41,200)
Limited Partners 3,828,800 4,164,000
----------------- -----------------
TOTAL PARTNERSHIP CAPITAL 3,783,600 4,122,800
----------------- -----------------
$ 3,808,400 $ 4,680,000
================= =================
</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
June 30,
-------------------------------------
1999 2000
---------------- -----------------
<S> <C> <C>
OPERATING EXPENSES:
General and administrative expenses $ (8,400) $ (18,200)
---------------- -----------------
OTHER INCOME (EXPENSE):
Interest income 2,600 6,400
Interest expense (9,200) (5,700)
---------------- -----------------
(6,600) 700
---------------- -----------------
LOSS BEFORE EQUITY IN NET INCOME
OF JOINT VENTURES (15,000) (17,500)
---------------- -----------------
EQUITY IN NET INCOME
OF JOINT VENTURES:
Enstar IV/PBD Systems Venture 204,500 275,500
Enstar Cable of Macoupin County 65,100 65,300
---------------- -----------------
269,600 340,800
---------------- -----------------
NET INCOME $ 254,600 $ 323,300
================ =================
Net income allocated to General Partner $ 2,500 $ 3,200
================ =================
Net income allocated to Limited Partners $ 252,100 $ 320,100
================ =================
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 6.33 $ 8.03
================ =================
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
-------------------------------------
Six months ended
June 30,
-------------------------------------
1999 2000
---------------- -----------------
<S> <C> <C>
OPERATING EXPENSES:
General and administrative expenses $ (19,800) $ (40,500)
---------------- -----------------
OTHER INCOME (EXPENSE):
Interest income 4,500 9,500
Interest expense (18,300) (7,800)
---------------- -----------------
(13,800) 1,700
---------------- -----------------
LOSS BEFORE EQUITY IN NET INCOME
OF JOINT VENTURES (33,600) (38,800)
---------------- -----------------
EQUITY IN NET INCOME
OF JOINT VENTURES:
Enstar IV/PBD Systems Venture 444,000 517,400
Enstar Cable of Macoupin County 118,100 111,500
---------------- -----------------
562,100 628,900
---------------- -----------------
NET INCOME $ 528,500 $ 590,100
================ =================
Net income allocated to General Partner $ 5,300 $ 5,900
================ =================
Net income allocated to Limited Partners $ 523,200 $ 584,200
================ =================
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 13.13 $ 14.66
================ =================
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 39,848 39,849
================ =================
</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
-------------------------------------
Six months ended
June 30,
-------------------------------------
1999 2000
---------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 528,500 $ 590,100
Adjustments to reconcile net income to net cash
from operating activities:
Equity in net income of Joint Ventures (562,100) (628,900)
Amortization of deferred loan costs 6,200 3,200
Changes in:
Prepaid expenses 2,200 1,000
Accounts payable and due to affiliates 126,100 532,400
---------------- -----------------
Net cash from operating activities 100,900 497,800
---------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from Joint Ventures 169,000 138,100
---------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (251,600) (250,900)
Deferred loan costs - (3,500)
---------------- -----------------
Net cash from financing activities (251,600) (254,400)
---------------- -----------------
INCREASE IN CASH 18,300 381,500
CASH AT BEGINNING OF PERIOD 265,300 283,800
---------------- -----------------
CASH AT END OF PERIOD $ 283,600 $ 665,300
================ =================
</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 June 30, 2000 and for
the three and six months ended June 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 six months ended June 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 $85,900 and $172,200, for the
three and six months ended June 30, 2000, respectively. For the three and six
months ended June 30, 1999, the Joint Ventures' management fee expense to the
Manager approximated $89,300 and $176,900, 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 $10,000 for the three and six months
ended June 30, 2000, respectively. For the three and six months ended June 30,
1999, Enstar Cable of Macoupin County's management fee expense to ECC
approximated $5,100 and $10,000, 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
-6-
<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 $214,600 and $429,700 for the three
and six months ended June 30, 2000, respectively. For the three and six months
ended June 30, 1999, the total amount charged to Joint Ventures for these costs
approximated $122,500 and $239,600, 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 15 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 $282,100 and $671,500 for the three
and six months ended June 30, 2000, respectively. For the three and six months
ended June 30, 1999, programming fee expense was $464,100 and $914,300,
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 Enstar IV/PBD Systems
Venture. The investment in Enstar IV/PBD Systems Venture is accounted for on the
equity method. Summarized financial information for Enstar IV/PBD Systems
Venture as of June 30, 2000 and December 31, 1999, and the results of its
operations for the three and six months ended June 30, 2000 and 1999 have been
included. The results of operations for the three and six months ended June 30,
2000 are not necessarily indicative of results for the entire year.
<TABLE>
<CAPTION>
December 31, June 30,
1999* 2000
------------------ -------------------
(Unaudited)
<S> <C> <C>
Current assets $ 3,440,700 $ 4,033,200
Investment in cable television properties, net 1,772,800 1,808,700
Other assets 2,400 700
------------------ -------------------
$ 5,215,900 $ 5,842,600
================== ===================
Current liabilities $ 426,700 $ 168,600
Venturers' capital 4,789,200 5,674,000
------------------ -------------------
$ 5,215,900 $ 5,842,600
================== ===================
</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
June 30,
---------------------------------------
1999 2000
------------------ -----------------
REVENUES $ 1,398,200 $ 1,320,100
------------------ -----------------
<S> <C> <C>
OPERATING EXPENSES:
Service costs 451,400 344,600
General and administrative expenses 268,000 151,300
General partner management fees and reimbursed expenses 142,900 233,400
Depreciation and amortization 159,100 85,600
------------------ -----------------
1,021,400 814,900
------------------ -----------------
OPERATING INCOME 376,800 505,200
OTHER INCOME (EXPENSE):
Interest income 29,600 47,900
Interest expense (4,700) (2,300)
Gain on sale of cable assets 3,500 -
------------------ -----------------
NET INCOME $ 405,200 $ 550,800
================== =================
</TABLE>
-9-
<PAGE> 10
ENSTAR INCOME PROGRAM IV-2, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
====================================
<TABLE>
<CAPTION>
Unaudited
--------------------------------------
Six months ended
June 30,
--------------------------------------
1999 2000
------------------ ----------------
<S> <C> <C>
REVENUES $ 2,758,400 $ 2,647,400
------------------ ----------------
OPERATING EXPENSES:
Service costs 876,800 758,600
General and administrative expenses 492,500 310,900
General partner management fees and reimbursed expenses 282,200 454,500
Depreciation and amortization 273,000 170,800
------------------ ----------------
1,924,500 1,694,800
------------------ ----------------
OPERATING INCOME 833,900 952,600
OTHER INCOME (EXPENSE):
Interest income 60,600 88,300
Interest expense (10,000) (6,100)
Gain on sale of cable assets 3,500 -
------------------ ----------------
NET INCOME $ 888,000 $ 1,034,800
================== ================
</TABLE>
-10-
<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 June
30, 2000 and December 31, 1999, and the results of its operations for the three
and six months ended June 30, 2000 and 1999, have been included. The results of
operations for the three and six months ended June 30, 2000 are not necessarily
indicative of results for the entire year.
<TABLE>
<CAPTION>
December 31, June 30,
1999* 2000
------------------ -----------------
(Unaudited)
<S> <C> <C>
Current assets $ 1,807,500 $ 2,323,000
Investment in cable television properties, net 1,730,200 1,640,300
Other assets 1,200 600
------------------ -----------------
$ 3,538,900 $ 3,963,900
================== =================
Current liabilities $ 222,700 $ 502,600
Venturers' capital 3,316,200 3,461,300
------------------ -----------------
$ 3,538,900 $ 3,963,900
================== =================
</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
June 30,
---------------------------------------
1999 2000
------------------ -----------------
<S> <C> <C>
REVENUES $ 505,400 $ 497,200
------------------ -----------------
OPERATING EXPENSES:
Service costs 158,200 159,000
General and administrative expenses 34,000 39,100
General partner management fees and reimbursed expenses 74,000 72,100
Depreciation and amortization 55,200 54,900
------------------ -----------------
321,400 325,100
------------------ -----------------
OPERATING INCOME 184,000 172,100
OTHER INCOME (EXPENSE):
Interest income 13,800 25,900
Interest expense (2,500) (2,000)
------------------ -----------------
NET INCOME $ 195,300 $ 196,000
================== =================
</TABLE>
-12-
<PAGE> 13
ENSTAR INCOME PROGRAM IV-2, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
====================================
<TABLE>
<CAPTION>
Unaudited
---------------------------------------
Six months ended
June 30,
---------------------------------------
1999 2000
------------------ -----------------
<S> <C> <C>
REVENUES $ 995,900 $ 995,700
------------------ -----------------
OPERATING EXPENSES:
Service costs 323,000 334,200
General and administrative expenses 87,300 101,400
General partner management fees and reimbursed expenses 144,300 157,400
Depreciation and amortization 109,600 109,500
------------------ -----------------
664,200 702,500
------------------ -----------------
OPERATING INCOME 331,700 293,200
OTHER INCOME (EXPENSE):
Interest income 27,800 45,800
Interest expense (5,100) (4,500)
------------------ -----------------
NET INCOME $ 354,400 $ 334,500
================== =================
</TABLE>
-13-
<PAGE> 14
ENSTAR INCOME PROGRAM IV-2, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
====================================
5. SUBSEQUENT EVENT
On August 8, 2000, the Partnership, together with certain
affiliates, (collectively, the "Sellers") entered into a purchase and sale
agreement (the "Agreement") with Multimedia Acquisition Corp., an affiliate of
Gans Multimedia Partnership, (the "Purchaser"). The 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 Agreement is $94,929,400 in cash (subject to normal closing adjustments).
Of that amount, $7,376,700 (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.
The Purchaser's obligation to acquire the cable systems is
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 of all of the Sellers; (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 of each
Seller; 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.
On July 13, 2000, the Partnership entered into a non-binding
letter of intent to sell the Partnership's cable systems serving Poplar Bluff,
Missouri, to an unrelated purchaser. Consummation of this sale is subject to
certain conditions, including approval by a majority of the Limited Partners and
other standard closing conditions, such as obtaining regulatory approvals. There
can be no assurance that this proposed sale will be consummated.
-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 IV-1, L.P.) in respect to Enstar
IV/PBD Joint Venture, and (Enstar IV-1, L.P. and Enstar IV-3, L.P.) in respect
to Enstar Cable of Macoupin County, under both joint venture agreements with
respect to capital contributions, obligation 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 $138,100 and we distributed $250,900 to the partners during the six
months ended June 30, 2000, respectively. For the six months ended June 30,
1999, the Joint Ventures distributed $169,000 and we distributed $251,600 to the
partners, respectively.
THE ENSTAR IV/PBD SYSTEMS VENTURE
The PBD Joint Venture's revenues decreased from $1,398,200 to
$1,320,100, or by 5.6%, and from $2,758,400 to $2,647,400, or by 4.0%, for the
three and six months ended June 30, 2000, as compared to the corresponding
periods in 1999. Of the $78,100 decrease in revenues for the 3 months ended June
30, 2000, $91,600 was due to decreases in the number of subscribers for basic,
premium, tier and equipment rental services and $39,800 was due to decreases in
other revenue producing items. These decreases were partially offset by a
$53,300 increase due to increases in
-15-
<PAGE> 16
ENSTAR INCOME PROGRAM IV-2, L.P.
regulated service rates that the PBD Joint Venture implemented in 1999. Of the
$111,000 decrease in revenues for the six months ended June 30, 2000, $165,900
was due to decreases in the number of subscribers for basic, premium, tier and
equipment rental services and $42,500 was due to a decrease for other revenue
producing items. The increases were partially offset by $97,400 of rate
increases. As of June 30, 2000, the PBD Joint Venture had approximately 12,000
basic subscribers and 2,800 premium service units.
Effective with the acquisition of Falcon Communications, L.P.
(Falcon) by Charter Communications Holdings Company, LLC 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 decreased from $862,300
to $729,300, or by 15.4%, and from $1,651,500 to $1,524,000, or by 7.7%, for the
three and six months ended June 30, 2000, as compared to the corresponding
periods in 1999.
Service costs decreased from $451,400 to $344,600, or by
23.7%, and from $876,800 to $758,600, or by 13.5%, for the three and six months
ended June 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 Joint Venture, as discussed
above.
General and administrative expenses decreased from $268,000 to
$151,300, or by 43.5%, and from $492,500 to $310,900, or by 36.9%, for the three
and six months ended June 30, 2000, as compared to the corresponding periods in
1999. The decreases were attributable to decreases 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 $142,900 to $233,400, or by 63.3%, and from $282,200 to $454,500,
or by 61.1%, for the three and six months ended June 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. This has resulted in more reimbursable cost to the PBD Joint Venture
and lower service costs and general and administrative expenses for the PBD
Joint Venture.
Depreciation and amortization expense decreased from $159,100
to $85,600, or by 46.2%, and from $273,000 to $170,800, or by 37.4%, for the
three and six months ended June 30,
-16-
<PAGE> 17
ENSTAR INCOME PROGRAM IV-2, L.P.
2000, as compared to the corresponding periods in 1999, due to certain tangible
assets becoming fully depreciation.
Operating income increased from $376,800 to $505,200, or by
34.1%, and from $833,900 to $952,600, or by 14.2%, for the three and six months
ended June 30, 2000, as compared to the corresponding periods in 1999, primarily
due to the factors described above.
Interest income, net of interest expense, increased from
$24,900 to $45,600, or by 83.1%, and from $50,600 to $82,200, or by 62.5%, for
the three and six months ended June 30, 2000, as compared to the corresponding
periods in 1999. The increase was primarily due to higher average cash balances
available for investment and due to higher average interest rates earned on
invested funds during the current year.
Due to the factors described above, the PBD Joint Venture's
net income increased from $405,200 to $550,800, or by 35.9%, and from $888,000
to $1,034,800, or by 16.5%, for the three and six months ended June 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 increased from 38.3% to 44.8% and
from 40.1% to 42.4% during the three and six months ended June 30, 2000, as
compared to the corresponding periods in 1999. The increase was primarily due to
decreases in programming fees as described above. EBITDA increased from $535,900
to $590,800, or by 10.2%, and from $1,106,900 to $1,123,400, or by 1.5%, for the
three and six months ended June 30, 1999, as compared to the corresponding
periods in 1999.
ENSTAR CABLE OF MACOUPIN COUNTY
The Macoupin County Joint Venture's revenues decreased from
$505,400 to $497,200, or by 1.6%, and decreased from $995,900 to $995,700, or by
less than 1%, for the three and six months ended June 30, 2000, as compared to
the corresponding periods in 1999. Of the $8,200 decrease in revenues for the
six months ended June 30, 2000, $30,000 was due to decreases in the number of
subscribers for basic, premium, and equipment rental services and $5,600 was due
to a decrease in other revenue producing items. The decreases were partially
offset by a $27,400 increase in regulated service rates that we implemented in
2000. Of the $200 decrease in revenues for the six months ended June 30, 2000,
$38,600 was due the number of subscribers for basic, premium, and equipment
rental services and $1,000 was due to a decrease in other revenue producing
items. The
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ENSTAR INCOME PROGRAM IV-2, L.P.
decrease was partially offset by a $39,400 increase in the rates. As of June 30,
2000, we had approximately 4,300 basic subscribers and 1,100 premium service
units.
Service costs increased from $158,200 to $159,000, or by less
than 1%, and from $323,000 to $334,200, or by 3.5%, for the three and six months
ended June 30, 2000, as compared to the corresponding periods in 1999. The
increase was primarily due to higher personnel costs resulting from staff
additions and a $40,000 programming rebate received in prior year. The increase
was partially offset due to the lower programming rates that Charter has
extended to us and a decrease in subscribers.
General and administrative expenses increased from $34,000 to
$39,100, or by 15.0%, and from $87,300 to $101,400, or by 16.2%, for the three
and six months ended June 30, 2000, as compared to the corresponding periods in
1999. The increase was primarily due to higher professional fees incurred in
2000.
General partner management fees and reimbursed expenses
decreased from $74,000 to $72,100, or by 2.6%, and increased from $144,300 to
$157,400, or by 9.1%, for the three and six months ended June 30, 2000, as
compared to the corresponding periods in 1999. The increase for the six months
ended June 30, 2000, represents certain costs incurred by Charter that were
previously incurred by the Macoupin County Joint Venture prior to the Charter
acquisition on November 12, 1999. The decrease for the three months ended June
30, 2000, represents certain costs Charter has been able to eliminate.
Depreciation and amortization expense decreased from $55,200
to $54,900, or by less than 1%, and from $109,600 to $109,500, or by less than
1%, for the three and six months ended June 30, 2000, as compared to the
corresponding periods in 1999, due to the depreciation of plant asset additions.
Operating income decreased from $184,000 to $172,100, or by
6.5%, and from $331,700 to $293,200, or by 11.6%, for the three and six months
ended June 30, 2000, as compared to the corresponding periods in 1999. The
decrease was due to the factors discussed above.
Interest income, net of interest expense, increased from
$11,300 to $23,900, or by 111.5% and from $22,700 to $41,300, or by 81.9% for
the three and six months ended June 30, 2000, as compared to the corresponding
periods in 1999. The increase was primarily due to higher average cash balances
available for investment and due to higher average interest rates earned on
invested funds during the current year period.
Due to the factors described above, the Macoupin County Joint
Venture's net income increased from $195,300 to $196,000, or by less than 1%,
and decreased from $354,400 to $334,500, or by 5.6%, for the three and six
months ended June 30, 2000, as compared to the corresponding periods in 1999.
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ENSTAR INCOME PROGRAM IV-2, L.P.
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 47.3% to 45.7% and from 44.3% to 40.4% during the three and six months
ended June 30, 2000, as compared to the corresponding periods in 1999. The
decrease was primarily due to the factors described above. EBITDA decreased from
$239,200 to $227,000, or by 5.1%, and from $441,300 to $402,700, or by 8.7%, for
the three and six months ended June 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, the Partnership, together with certain
affiliates, (collectively, the "Sellers") entered into a purchase and sale
agreement (the "Agreement") with Multimedia Acquisition Corp., an affiliate of
Gans Multimedia Partnership, (the "Purchaser"). The 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 Agreement is $94,929,400 in cash (subject to normal closing adjustments).
Of that amount, $7,376,700 (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.
The Purchaser's obligation to acquire the cable systems is
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 of all of the Sellers; (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 of each
Seller; 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.
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ENSTAR INCOME PROGRAM IV-2, L.P.
On July 13, 2000, the Partnership entered into a non-binding
letter of intent to sell the Partnership's cable systems serving Poplar Bluff,
Missouri, to an unrelated purchaser. Consummation of this sale is subject to
certain conditions, including approval by a majority of the Limited Partners and
other standard closing conditions, such as obtaining regulatory approvals. There
can be no assurance that this proposed sale will be consummated.
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 Venture 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 $1.1 million and plans to upgrade its
cable plant in Girard, Illinois at an estimated cost of approximately $1.0
million, provided the franchise agreement is renewed. The franchise agreement
under negotiation with Girard is expected to require completion of a plant
upgrade in the franchise area within two years. The Macoupin 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
$1.3 million and $6.2 million, respectively, provided franchise renewals are
obtained and adequate funds are available. At this time, the franchise authority
in Poplar Bluff has terminated negotiations to renew the franchise agreement
with the city. Although the Mt. Carmel, Illinois franchise agreement is still
under negotiation, the PBD Joint Venture anticipates that the franchise
agreement will require completion of an upgrade within 24 months. The PBD Joint
Venture has budgeted capital expenditures of $819,700 in 2000 to upgrade other
assets. In the first six months of 2000, capital expenditures by the Macoupin
County Joint Venture and PBD Joint Venture were approximately $20,000 and
$235,300, respectively.
The franchise agreement with the city of Poplar Bluff expired
in 1997 and the PBD Joint Venture has been negotiating renewal of the agreement
with the city since that time. On February 8, 2000, voters in the city of Poplar
Bluff approved the use of funds to finance construction of a municipally-owned
and operated cable system. The system is intended to compete directly with the
PBD Joint Venture's cable system both in the city and in Butler County,
Missouri. The city-owned cable system may be built to a higher technical
standard than the system owned by the PBD Joint Venture and may offer a greater
number of channels at a lower monthly subscriber rate. The city estimates that
its new system will be operational within two years. The PBD Joint Venture
believes that the competing system, if built, will have a material adverse
impact on its subscriber numbers, financial condition and results of operations.
As it has for three years, the PBD Joint Venture intends to continue operating
its cable system in Poplar Bluff under the terms of its expired franchise
agreement and continue paying franchise fees to the city until the system can be
sold. As of
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ENSTAR INCOME PROGRAM IV-2, L.P.
June 30, 2000, there were approximately 5,200 and 1,100 basic 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
Venture, 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 Venture intends to use
its 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 $2,000,000. The Joint Ventures paid its outstanding borrowings under
the facility during 1999 and presently has no borrowings outstanding under the
loan facility. The Joint Ventures pay a commitment fee of 0.5% to Enstar Finance
Company, LLC on the unborrowed portion of its facility. The Joint Ventures'
management expects to increase borrowings under the facility in the future for
system upgrades and other liquidity requirements.
The Joint Ventures' 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 (9.135% at June 30, 2000) plus 0.625%, or at
an offshore rate (6.27% at June 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 Joint
Ventures' ratio of debt to cash flow is greater than 4 to 1. We believe it is
critical for the Joint Ventures to conserve cash and borrowing capacity to fund
its anticipated capital expenditures. Accordingly, the Joint Ventures do not
anticipate an increase in distributions to the Partnership in order to fund
distributions to unitholders 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
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ENSTAR INCOME PROGRAM IV-2, L.P.
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 its management views as appropriate for
all other property, liability, automobile, workers' compensation and other types
of insurable risks.
Operating activities of the Partnership generated $396,900
more cash during the six months ended June 30, 2000 than in the corresponding
period in 1999 The Partnership paid distributions totaling $250,900 during the
six months ended June 30, 2000. However, there can be no assurance regarding the
level, timing or continuation of future distributions
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) Exhibit
10.1 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
IX, Ltd., Enstar Cable of Cumberland Valley and
Enstar Cable of Macoupin County, as Sellers.
(1)
27.1 Financial Data Schedule.*
(b) Reports on Form 8-K
- On July 18, 2000, an 8-K dated July 14, 2000,
was filed to announce a change in the
Partnership's principal independent accountants
(Item 4).
------
* Filed herewith
(1) Incorporated by reference to the Current Report on Form 10-Q of Enstar
Income Program II-1, L.P., filed with the Commission on or about August 14,
2000.
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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-2, L.P.
a GEORGIA LIMITED PARTNERSHIP
----------------------------
(Registrant)
By: ENSTAR COMMUNICATIONS CORPORATION
General Partner
Date: August 14, 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 Assets 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, 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 II-1, L.P., filed
with the Commission on or about August 14, 2000.)
27.1 Financial Data Schedule.
E-1
