<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, 1995
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 0-15686
Enstar Income Program IV-3, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Georgia 58-1648320
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION OR ORGANIZATION)
10900 Wilshire Boulevard, 15th Floor, Los Angeles, CA 90024
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (310) 824-9990
FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT.
Indicate by check X whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
<PAGE> 2
PART I - FINANCIAL INFORMATION
ENSTAR INCOME PROGRAM IV-3, L.P.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30,
1994* 1995
------------ -------------
(unaudited)
<S> <C> <C>
ASSETS:
Equity in net assets of joint venture $ 800,100 $ 842,500
Cash and cash equivalents 664,900 924,000
Receivables, less allowance of $1,400
and $3,200 for possible losses 17,800 25,500
Prepaid expenses and other 11,900 23,600
Property, plant and equipment, less accumulated depreciation
and amortization of $3,704,000 and $4,046,000 1,648,000 1,363,200
Franchise cost, net of accumulated
amortization of $1,474,000 and $1,615,100 1,087,000 949,600
Deferred loan costs and other, net 45,900 38,600
----------- -----------
$ 4,275,600 $ 4,167,000
=========== ===========
LIABILITIES AND PARTNERSHIP CAPITAL
-----------------------------------
LIABILITIES:
Note payable $ 383,200 $ 383,200
Accounts payable 226,800 206,800
Due to affiliates 180,600 308,000
----------- -----------
TOTAL LIABILITIES 790,600 898,000
----------- -----------
COMMITMENTS AND CONTINGENCIES
PARTNERSHIP CAPITAL (DEFICIT):
General partners (48,500) (50,700)
Limited partners 3,533,500 3,319,700
----------- -----------
TOTAL PARTNERSHIP CAPITAL 3,485,000 3,269,000
----------- -----------
$ 4,275,600 $ 4,167,000
=========== ===========
</TABLE>
*As presented in the audited financial statements.
See accompanying notes to condensed financial statements.
-2-
<PAGE> 3
ENSTAR INCOME PROGRAM IV-3, L.P.
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Unaudited
------------------
Three months ended
September 30,
------------------
1994 1995
--------- ---------
<S> <C> <C>
REVENUES $ 562,500 $ 581,300
--------- ---------
OPERATING EXPENSES:
Service costs 216,900 179,000
General and administrative expenses 83,700 73,100
General Partner management fees
and reimbursed expenses 77,200 78,300
Depreciation and amortization 173,400 174,800
--------- ---------
551,200 505,200
--------- ---------
OPERATING INCOME 11,300 76,100
--------- ---------
OTHER INCOME (EXPENSE):
Interest income 2,800 8,000
Interest expense (15,000) (15,500)
--------- ---------
(12,200) (7,500)
--------- ---------
INCOME (LOSS) BEFORE EQUITY IN NET
INCOME OF JOINT VENTURE (900) 68,600
EQUITY IN NET INCOME
OF JOINT VENTURE 7,100 17,200
--------- ---------
NET INCOME $ 6,200 $ 85,800
========= =========
NET INCOME PER UNIT OF
LIMITED PARTNERSHIP INTEREST $ 0.15 $ 2.13
========= =========
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 39,900 39,900
========= =========
</TABLE>
See accompanying notes to condensed financial statements.
-3-
<PAGE> 4
ENSTAR INCOME PROGRAM IV-3, L.P.
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Unaudited
--------------------------
Nine months ended
September 30,
--------------------------
1994 1995
----------- -----------
<S> <C> <C>
REVENUES $ 1,680,800 $ 1,731,600
----------- -----------
OPERATING EXPENSES:
Service costs 593,100 612,800
General and administrative expenses 229,200 219,300
General Partner management fees
and reimbursed expenses 244,900 223,200
Depreciation and amortization 529,900 532,100
----------- -----------
1,597,100 1,587,400
----------- -----------
OPERATING INCOME 83,700 144,200
----------- -----------
OTHER INCOME (EXPENSE):
Interest income 4,100 21,700
Interest expense (42,400) (46,400)
----------- -----------
(38,300) (24,700)
----------- -----------
INCOME BEFORE EQUITY IN NET INCOME
OF JOINT VENTURE 45,400 119,500
EQUITY IN NET INCOME
OF JOINT VENTURE 8,200 42,300
----------- -----------
NET INCOME $ 53,600 $ 161,800
=========== ===========
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 1.33 $ 4.01
=========== ===========
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 39,900 39,900
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
-4-
<PAGE> 5
ENSTAR INCOME PROGRAM IV-3, L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Unaudited
--------------------------
Nine months ended
September 30,
--------------------------
1994 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 53,600 $ 161,800
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in net income of Joint Venture (8,200) (42,300)
Depreciation and amortization 529,900 532,100
Amortization of deferred loan costs 8,200 8,200
Increase (decrease) from changes in:
Accounts receivable and prepaid expenses (12,300) (19,400)
Deferred loan costs (5,700) --
Accounts payable and due to affiliates 12,900 107,400
--------- ---------
Net cash provided by operating activities 578,400 747,800
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (69,800) (92,800)
Increase in intangible assets (30,300) (18,100)
Distributions from Joint Venture 150,000 --
--------- ---------
Net cash provided by (used in) investing activities 49,900 (110,900)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (377,800) (377,800)
--------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS 250,500 259,100
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 242,200 664,900
--------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 492,700 $ 924,000
========= =========
</TABLE>
See accompanying notes to condensed financial statements.
-5-
<PAGE> 6
ENSTAR INCOME PROGRAM IV-3, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL STATEMENTS
The accompanying condensed interim financial statements for the three
and nine months ended September 30, 1995 and 1994 are unaudited. These condensed
interim financial statements should be read in conjunction with the audited
financial statements and notes thereto included in the Partnership's latest
Annual Report on Form 10-K. In the opinion of management, such statements
reflect all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the results of such periods. The results of
operations for the three and nine months ended September 30, 1995 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 with a
wholly-owned subsidiary of the Corporate General Partner (the "Manager") for a
monthly management fee of 5% of revenues, excluding revenues from the sale of
cable television systems or franchises. Management fees approximated $29,100 and
$86,600 for the three and nine months ended September 30, 1995.
In addition to the monthly management fees described above, the
Partnership reimburses the Manager for direct expenses incurred on behalf of the
Partnership and for the Partnership's allocable share of operational costs
associated with services provided by the Manager. All cable television
properties managed by the Corporate General Partner and its subsidiaries are
charged a proportionate share of these expenses. Corporate office allocations
and district office expenses are charged to the properties served based
primarily on the respective percentage of basic subscribers or homes passed
(dwelling units within a system) within the designated service areas. The total
amount charged to the Partnership for these services approximated $49,200 and
$136,600 for the three and nine months ended September 30, 1995.
The Manager has entered into an identical agreement with Enstar Cable
of Macoupin County, a Georgia General Partnership, of which the Partnership is a
co-partner (the "Macoupin Joint Venture"), except that the Joint Venture pays
the Manager only a 4% management fee. However, the Joint Venture is required to
distribute to Enstar Communications Corporation (which is the Corporate General
Partner of the Macoupin County Joint Venture as well as of the Partnership) an
amount equal to 1% of the Joint Venture's gross revenues in respect of Enstar
Communications Corporation's interest as Corporate General Partner of the Joint
Venture. No management fee is payable by the Partnership in respect of any
amounts received by the Partnership from the Macoupin Joint Venture, and there
is no duplication of reimbursed expenses and costs of the Manager. The Macoupin
Joint Venture paid the Manager management fees of approximately $16,900 and
$49,100 and reimbursement of expenses of $35,000 and $105,900 under its
management agreement for the three and nine months ended September 30, 1995. In
addition, the Macoupin Joint Venture paid the Corporate General Partner
approximately $4,200 and $12,300 in respect of its 1% special interest during
the three and nine months ended September 30, 1995. Management fees and
reimbursed expenses due the Corporate General Partner are non-interest bearing.
-6-
<PAGE> 7
ENSTAR INCOME PROGRAM IV-3, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(CONTINUED)
2. TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES (CONCLUDED)
Certain programming services have been purchased through an affiliate
of the Partnership and the Macoupin Joint Venture. In turn, the affiliate
charges the Partnership and the Joint Venture for these costs based on an
estimate of what the entities could negotiate for such programming on a
stand-alone basis. The Partnership paid the affiliate $131,200 and $401,300 and
the Macoupin Joint Venture paid the affiliate $91,800 and $273,300 for these
programming services for the three and nine months ended September 30, 1995.
Programming fees are included in service costs in the statements of operations
for the three and nine months ended September 30, 1995 and 1994.
3. EARNINGS PER UNIT OF LIMITED PARTNERSHIP INTEREST
Earnings and losses per unit of limited partnership interest is based
on the average number of units outstanding during the periods presented. For
this purpose, earnings and losses are allocated 99% to the limited partners and
1% to the general partners.
4. RECLASSIFICATIONS
Certain 1994 amounts have been reclassified to conform to the 1995
presentations.
-7-
<PAGE> 8
ENSTAR INCOME PROGRAM IV-3, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(CONTINUED)
5. EQUITY IN NET ASSETS OF JOINT VENTURE
Each of the Partnership and two affiliated partnerships (Enstar Income
Program IV-1, L.P. and Enstar Income Program IV-2, L.P.) owns one third (1/3) of
Enstar Cable of Macoupin County (the "Macoupin Joint Venture"). Each of the
co-partners shares equally in the profits and losses of the Macoupin Joint
Venture. The investment in the Macoupin Joint Venture is accounted for on the
equity method. Summarized financial information for the Macoupin Joint Venture
as of September 30, 1995 and December 31, 1994 and the results of its operations
for the three and nine months ended September 30, 1995 and 1994 have been
included. The results of operations for the three and nine months ended
September 30, 1995 are not necessarily indicative of results for the entire
year.
<TABLE>
<CAPTION>
December 31, September 30,
1994* 1995
---------- ----------
(unaudited)
<S> <C> <C>
Current assets $ 622,800 $1,061,100
Investment in cable television
properties, net 2,018,800 1,808,200
Other assets 6,000 8,700
---------- ----------
$2,647,600 $2,878,000
========== ==========
Current liabilities $ 247,200 $ 350,700
Venturers' capital 2,400,400 2,527,300
---------- ----------
$2,647,600 $2,878,000
========== ==========
</TABLE>
*As presented in the audited financial statements.
-8-
<PAGE> 9
ENSTAR INCOME PROGRAM IV-3, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONCLUDED)
ENSTAR CABLE OF MACOUPIN COUNTY
<TABLE>
<CAPTION>
Unaudited
----------------------
Three months ended
September 30,
----------------------
1994 1995
--------- ---------
<S> <C> <C>
REVENUES $ 404,600 $ 422,100
--------- ---------
OPERATING EXPENSES:
Service costs 123,100 135,500
General and administrative expenses 42,100 32,200
General Partner management fees and reimbursed expenses 54,300 56,100
Depreciation and amortization 171,700 155,800
--------- ---------
391,200 379,600
--------- ---------
OPERATING INCOME 13,400 42,500
OTHER INCOME (EXPENSE):
Interest income 8,800 10,600
Interest expense (800) (1,500)
--------- ---------
NET INCOME $ 21,400 $ 51,600
========= =========
</TABLE>
<TABLE>
<CAPTION>
Unaudited
--------------------------
Nine months ended
September 30,
--------------------------
1994 1995
----------- -----------
<S> <C> <C>
REVENUES $ 1,197,500 $ 1,227,400
----------- -----------
OPERATING EXPENSES:
Service costs 373,200 375,100
General and administrative expenses 119,800 103,100
General Partner management fees and reimbursed expenses 169,700 167,300
Depreciation and amortization 530,300 477,500
----------- -----------
1,193,000 1,123,000
----------- -----------
OPERATING INCOME 4,500 104,400
OTHER INCOME (EXPENSE):
Interest income 23,400 26,500
Interest expense (3,200) (4,000)
----------- -----------
NET INCOME $ 24,700 $ 126,900
=========== ===========
</TABLE>
-9-
<PAGE> 10
ENSTAR INCOME PROGRAM IV-3, L.P.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
Compliance with the rules adopted by the Federal Communications
Commission (the "FCC") to implement the rate regulation provisions of the 1992
Cable Act has had a significant negative impact on the Partnership's revenues
and cash flow. Based on certain FCC decisions that have been released, however,
the Partnership's management presently believes that revenues for the first nine
months of 1995 reflect the impact of the 1992 Cable Act in all material
respects. Moreover, recent policy decisions by the FCC make it more likely that
in the future the Partnership will be permitted to increase regulated service
rates in response to specified cost increases, although certain costs may
continue to rise at a rate in excess of that which the Partnership will be
permitted to pass on to its customers. The FCC has recently adopted a procedure
under which cable operators may file abbreviated cost of service showings for
system rebuilds and upgrades, the result of which would be a permitted increase
in regulated rates to allow recovery of a portion of those costs. The FCC has
also proposed a new procedure for the pass-through of increases in inflation and
certain external costs, such as programming costs, under which cable operators
could increase rates based on actual and anticipated cost increases for the
coming year. In addition to these FCC actions, Congress is presently considering
legislation that could significantly revise, among other things, the rate
regulation provisions of the 1992 Cable Act, although there can be no certainty
as to the final provisions of such legislation, or whether it will become law.
Similarly, given events since the enactment of the 1992 Cable Act, there can
also be no assurance as to what, if any, future action may be taken by the FCC,
Congress or any other regulatory authority or court, or the effect thereof on
the Partnership's business.
In addition to the information set forth in this report, reference is
made to the Partnership's Annual Report on Form 10-K for the year ended December
31, 1994 for additional information regarding regulatory matters and the effect
thereof on the Partnership's business.
RESULTS OF OPERATIONS
THE PARTNERSHIP
The Partnership's revenues increased by $18,800, or by 3.3%, and by
$50,800, or by 3.0%, for the three and nine months ended September 30, 1995
compared to the corresponding periods in 1994. Of the three months' increase,
$22,500 was due to increases in regulated service rates permitted under the 1992
Cable Act that were implemented by the Partnership in April 1995, $12,200 was
due to increases in unregulated rates charged for premium services implemented
during the fourth quarter of 1994 and $5,900 was due to increases in the number
of subscriptions for services. These increases were partially offset by an
$11,500 decrease in other revenue producing items and by rate decreases
implemented in September 1994 to comply with the 1992 Cable Act, estimated by
the Partnership to be approximately $10,300 for the three months ended September
30, 1995. Of the nine months' increase, $33,500 was due to increases
-10-
<PAGE> 11
ENSTAR INCOME PROGRAM IV-3, L.P.
RESULTS OF OPERATIONS (CONTINUED)
in regulated service rates permitted under the 1992 Cable Act that were
implemented by the Partnership in April 1995, $24,000 was due to increases in
the number of subscriptions for services, $21,700 was due to increases in
unregulated rates charged for premium services implemented during the fourth
quarter of 1994 and $2,400 was due to other revenue producing items. These
increases were partially offset by rate decreases implemented in 1994 to comply
with the 1992 Cable Act, estimated by the Partnership to be approximately
$30,800 for the nine months ended September 30, 1995.
Service costs decreased by $37,900, or by 17.5%, and increased by
$19,700, or by 3.3%, for the three and nine months ended September 30, 1995 as
compared to the corresponding periods in 1994. Service costs represent costs
directly attributable to providing cable services to customers. Of the three
months' decrease, $27,700 was due to a decrease in personnel costs, $4,900 was
due to an increase in capitalization of labor and overhead costs, $3,900 was due
to a decrease in repair and maintenance expense and $3,800 was due to a decrease
in franchise fees due to a one time charge to franchise fee expense in the third
quarter of 1994. These decreases were partially offset by a $3,200 increase in
programming fees (including primary satellite fees). Of the nine months'
increase, $33,000 was due to increases in programming fees, $7,000 was due to an
increase in property taxes and $4,100 was due to an increase in pole rent
expense. These increases were partially offset by decreases of $18,200 in
personnel costs and $5,200 in repair and maintenance expense combined with a
$5,000 increase in capitalization of labor and overhead costs. The increases in
programming expense were also due to expanded programming usage relating to
retransmission consent arrangements implemented to comply with the 1992 Cable
Act.
General and administrative expenses decreased by $10,600, or by 12.7%,
and by $9,900, or by 4.3%, for the three and nine months ended September 30,
1995 as compared to the corresponding periods in 1994. Of the three months'
decrease, $5,900 was due to lower insurance premiums, $2,500 was due to a
decrease in personnel costs and $2,400 was due to a decrease in marketing
expense. These decreases were partially offset by increases of $3,900 in
professional fees and $1,700 in bad debt expense. Of the nine months' decrease,
$3,400 was due to a reduction in costs associated with implementation of the
1992 Cable Act, $3,300 was due to a decrease in bad debt expense, $2,900 was due
to a decrease in marketing expense and $2,600 was due to lower insurance
premiums. These decreases were partially offset by a $9,900 increase in
professional fees.
Management fees and reimbursed expenses increased by $1,100, or by
1.4%, and decreased by $21,700, or by 8.9%, for the three and nine months ended
September 30, 1995 as compared to the corresponding periods in 1994. The three
months' increase was primarily due to an increase in management fees. The nine
months' decrease was primarily due to decreased reimbursable expenses allocated
by the Corporate General Partner including lower allocated personnel costs,
property taxes, repair and maintenance expense, postage costs and telephone
expense. Management fees increased by $1,000, or by 3.6%, and by $2,600, or by
3.1%, for the three and nine month periods as a result of increased revenues as
described above.
Depreciation and amortization expense increased by $1,400 (less than
1%), and by $2,200, (less than 1%),
-11-
<PAGE> 12
ENSTAR INCOME PROGRAM IV-3, L.P.
RESULTS OF OPERATIONS (CONTINUED)
Operating income increased by $64,800 and by $60,500 for the three and
nine months ended September 30, 1995 as compared to the corresponding periods in
1994, principally due to increases in revenues and decreases in personnel costs
as described above. The nine months' increase was also due to lower reimbursed
expenses allocated by the General Partner.
Interest income increased by $5,200 and $17,600 for the three and nine
months ended September 30, 1995 as compared to the corresponding periods in
1994, primarily due to higher average interest rates earned on higher investment
balances.
Interest expense remained relatively unchanged for the three months
ended September 30, 1995 and increased by $4,000, or by 9.4%, for the nine
months ended September 30, 1995 as compared to the corresponding periods in
1994. The nine months' increase was primarily due to an increase in the average
interest rate paid on borrowings (10.4% for the first nine months of 1995 versus
8.3% for the corresponding period in 1994).
DISTRIBUTIONS TO PARTNERS
The Partnership distributed $125,900 and $377,800 to its partners
during the three and nine months ended September 30, 1995. The Joint Venture did
not make distributions to the Partnership during the three and nine months ended
September 30, 1995.
THE MACOUPIN JOINT VENTURE
The Joint Venture's revenues increased by $17,500, or by 4.3%, and by
$29,900, or by 2.5%, for the three and nine months ended September 30, 1995 as
compared to the corresponding periods in 1994. Of the three months' increase,
$14,200 was due to increases in regulated service rates permitted under the 1992
Cable Act that were implemented by the Partnership in April 1995, $9,400 was due
to increases in the number of subscriptions for services and $3,700 was due to
increases in unregulated rates charged to customers for premium services
implemented during the fourth quarter of 1994. These increases were partially
offset by rate decreases implemented in September 1994 to comply with the 1992
Cable Act, estimated by the Joint Venture to be approximately $9,800. Of the
nine months' increase, $31,300 was due to increases in the number of
subscriptions for services, $20,100 was due to increases in regulated service
rates permitted under the 1992 Cable Act that were implemented by the
Partnership in April 1995 $8,100 was due to other revenue producing items. These
increases were partially offset by rate decreases implemented in September 1994
to comply with the 1992 Cable Act, estimated by the Joint Venture to be
approximately $29,600.
Service costs increased by $12,400, or by 10.1%, and by $1,900 (less
than one percent) for the three and nine months ended September 30, 1995 as
compared to the corresponding periods in 1994. Service costs represents costs
directly attributable to providing cable services to customers. Of the three
months' increase, $19,000 was due to an increase in copyright fees resulting
from a change in copyright
-12-
<PAGE> 13
ENSTAR INCOME PROGRAM IV-3, L.P.
RESULTS OF OPERATIONS (CONCLUDED)
filing requirements, $1,300 was due to an increase in personnel expenses and
$1,100 was due to an increase in pole rent expense. These increases were
partially offset by an $8,200 increase in capitalization of labor and overhead
costs and a $2,600 decrease in repair and maintenance expense.
General and administrative expenses decreased by $9,900, or by 23.5%,
and by $16,700, or by 13.9%, for the three and nine months ended September 30,
1995 as compared to the corresponding periods in 1994. Of the three months'
decrease, $6,800 was due to lower insurance premiums, $2,400 was due to a
decrease in marketing expense and $2,300 was due to a decrease in personnel
costs. Of the nine months' decrease, $6,900 was due to a decrease in bad debt
expense, $5,600 was due to a decrease in marketing expense, $3,300 was due to
lower insurance premiums and $2,200 was due to an increase in capitalization of
labor and overhead expense. These decreases were partially offset by a $1,700
increase in repair and maintenance expense.
Management fees and reimbursed expenses increased by $1,800, or by
3.3%, and decreased by $2,400, or by 1.4%, for the three and nine months ended
September 30, 1995 as compared to the corresponding periods in 1994. The three
months' increase was partially due to increased reimbursed expenses payable to
the Corporate General Partner resulting from higher allocated marketing
expenses. The nine months' decrease was primarily due to decreased reimbursed
expenses including lower allocated personnel costs, property taxes and
telephone, postage and messenger expenses. Management fees for the three and
nine month periods increased in direct relation to increased revenues as
described above.
Depreciation and amortization expense decreased by $15,900, or by 9.3%,
and by $52,800, or by 10.0%, for the three and nine months ended September 30,
1995 as compared to the corresponding periods in 1994, primarily due to the
effect of certain tangible assets becoming fully depreciated and intangible
assets becoming fully amortized.
Operating income increased by $29,100 and by $99,900 for the three and
nine months ended September 30, 1995 as compared to the corresponding periods in
1994, principally due to increased revenues and decreased depreciation and
amortization expense as described above.
Interest income increased by $1,800, or by 20.5%, and by $3,100, or by
13.3%, for the three and nine months ended September 30, 1995 as compared to the
corresponding periods in 1994, due to higher average interest rates earned on
invested cash balances during the three and nine months ended September 30,
1995.
Operating income before depreciation and amortization (EBITDA) as a
percentage of revenues increased from 45.8% to 47.0% for the three months ended
September 30, 1995 and from 44.7% to 47.4% for the nine months ended September
30, 1995 as compared to the corresponding periods in 1994. These increases were
primarily caused by increased revenues and capitalization of labor and overhead
costs as described above. EBITDA increased by $13,200, or by 7.1%, and by
$47,100, or by 8.8%, for the three and nine months ended September 30, 1995 as
compared to the corresponding periods in 1994.
-13-
<PAGE> 14
ENSTAR INCOME PROGRAM IV-3, L.P.
LIQUIDITY AND CAPITAL RESOURCES
The FCC's amended rate regulation rules were implemented during the
quarter ended September 30, 1994. Compliance with these rules has had a
significant negative impact on the Partnership's revenues and cash flow.
However, as discussed above, recent policy decisions of the FCC and pending
legislation may make it more likely that the Partnership will be permitted to
increase regulated service rates in response to certain cost increases.
The Partnership's primary objective, having invested its net offering
proceeds in cable systems and the Joint Venture, is to distribute to its
partners all available cash flow from operations and proceeds from the sale of
cable systems, if any, after providing for expenses, debt service and capital
requirements relating to the expansion, improvement and upgrade of its cable
systems. The Partnership relies upon the availability of cash generated from
operations and possible borrowings to fund its ongoing expenses, debt service
and capital requirements. In general, these requirements involve expansion,
improvement and upgrade of the Partnership's existing cable television systems.
The Partnership has budgeted 1995 capital expenditures of $350,000, which
include costs of $210,000 for the first phase of a $975,000 rebuild in the
community of Shelbyville, Illinois. Additionally, the Joint Venture has budgeted
1995 capital expenditures totaling $365,000 for the upgrade of its existing
cable plant and for the first segment of a $1,500,000 rebuild in the community
of Auburn, Illinois.
Management believes that cash generated by operations of the
Partnership and Joint Venture, together with available borrowings, will be
adequate to fund capital expenditures in 1995. Management also believes that it
is essential to preserve liquidity by reserving cash for future rebuild
requirements, including the planned rebuilds in the communities of Shelbyville
and Auburn, Illinois.
The Partnership paid distributions totaling $125,900 and $377,800
during the three and nine months ended September 30, 1995, respectively.
However, there can be no assurance regarding the level, timing or continuation
of future distributions beyond 1995.
The Partnership has a $1,000,000 revolving bank credit agreement (the
"Facility") maturing on September 30, 1997. Loans under the Facility are secured
by substantially all of the Partnership's assets. Interest is payable at the
Base Rate plus 1.5%. "Base Rate" means the higher of the lender's prime rate or
the Federal Funds Effective Rate plus 1/2%. The Facility provides for quarterly
reductions of the maximum commitment beginning September 30, 1994, payable at
the end of each fiscal quarter. The Partnership is permitted to prepay amounts
outstanding under the Facility at any time without penalty, and is able to
reborrow throughout the term of the Facility up to the maximum commitment then
available so long as no event of default exists. The Partnership is also
required to pay a commitment fee of 1/2% per annum on the unused portion of the
Facility. The Facility contains certain financial tests and other covenants
including, among others, restrictions on capital expenditures, incurrence of
indebtedness, distributions and investments, sale of assets, acquisitions, and
other covenants, defaults and conditions. The Partnership believes that it was
in compliance with the Facility's loan covenants as of September 30, 1995. The
Partnership's loan commitment will decrease by $250,000 in 1995 to $650,000 and
by $400,000 in 1996 to $250,000. Repayment of principal is required to the
extent the loan balance then outstanding exceeds the reduced maximum commitment.
The outstanding loan balance at September 30, 1995 was $383,200.
-14-
<PAGE> 15
ENSTAR INCOME PROGRAM IV-3, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONCLUDED)
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
Cash provided by operating activities increased from $578,400 to
$747,800, or by $169,400, for the nine months ended September 30, 1995 compared
with the corresponding prior year period. The Partnership used $94,500 less cash
to pay liabilities owed to the General Partner and third-party creditors in the
1995 period. Partnership operations generated $76,300 more cash in the first
nine months of 1995 after adding back non-cash items consisting of depreciation,
amortization and equity in net income of Joint Venture. Changes in receivables,
prepaid expenses and deferred loan costs used $1,400 more cash in the nine
months ended September 30, 1995 than in the prior year period.
Investing activities used $160,800 more cash during the nine months
ended September 30, 1995 than in the comparable 1994 period due to a $150,000
decrease in distributions from the Joint Venture. The Partnership used $23,000
more cash for capital expenditures, partially offset by a $12,200 decrease in
expenditures for intangible assets.
Operating income before depreciation and amortization (EBITDA) as a
percentage of revenues increased from 32.8% to 43.2 % during the three months
ended September 30, 1995 compared to the corresponding 1994 period. EBITDA as a
percentage of revenues increased from 36.5% to 39.1% during the nine months
ended September 30, 1995 as compared with the equivalent period in 1994. The
increases were principally attributable to increased revenues and decreased
personnel costs. The nine months' increase was also due to lower reimbursed
expenses allocated by the General Partner. EBITDA increased from $184,700 to
$250,900, or by 35.8%, for the three months ended September 30, 1995 compared to
the corresponding quarter of 1994. EBITDA increased from $613,600 to $676,300,
or by 10.2%, during the nine months ended September 30, 1995 as compared to the
prior year period.
INFLATION
Certain of the Partnership's expenses, such as those for wages and
benefits, equipment repair and replacement and billing and marketing generally
increase with inflation. The Partnership does not believe that its financial
results have been, or will be, adversely affected by inflation, provided that it
is able to increase its service rates periodically, of which there can be no
assurance due to the re-regulation of rates charged for certain cable services.
-15-
<PAGE> 16
ENSTAR INCOME PROGRAM IV-3, L.P.
PART II. OTHER INFORMATION
ITEMS 1-5. Not applicable.
ITEM 6. Exhibits and Reports on Form 8-K
(a) None
(b) No Reports on Form 8-K were filed during the
quarter for which this report is filed.
-16-
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ENSTAR INCOME PROGRAM IV-3, L.P.
a GEORGIA LIMITED PARTNERSHIP
-----------------------------
(Registrant)
By: ENSTAR COMMUNICATIONS CORPORATION
General Partner
Date: November 6, 1995 By: /s/ Michael K. Menerey
----------------------------
Michael K. Menerey,
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT SEPTEMBER 30, 1995. AND THE STATEMENTS OF OPERATIONS FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 924,000
<SECURITIES> 0
<RECEIVABLES> 28,700
<ALLOWANCES> 3,200
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 5,409,200
<DEPRECIATION> 4,046,000
<TOTAL-ASSETS> 4,167,000
<CURRENT-LIABILITIES> 514,800
<BONDS> 383,200
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,167,000
<SALES> 0
<TOTAL-REVENUES> 1,731,600
<CGS> 0
<TOTAL-COSTS> 1,587,400
<OTHER-EXPENSES> (21,700)
<LOSS-PROVISION> 11,400
<INTEREST-EXPENSE> 46,400
<INCOME-PRETAX> 161,800
<INCOME-TAX> 0
<INCOME-CONTINUING> 161,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 161,800
<EPS-PRIMARY> 4.01
<EPS-DILUTED> 0
</TABLE>
