<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, 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
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ENSTAR INCOME PROGRAM IV-3, L.P.
--------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
GEORGIA 58-1648320
-------------------------------------------------------------------------------------------------------
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
10900 WILSHIRE BOULEVARD, 15TH FLOOR, LOS ANGELES, CA 90024
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (310) 824-9990
-----------------------------
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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, June 30,
1994* 1995
----------- -----------
(unaudited)
<S> <C> <C>
ASSETS:
Equity in net assets of joint venture $ 800,100 $ 825,200
Cash and cash equivalents 664,900 633,000
Receivables, less allowance of $1,400
and $1,800 for possible losses 17,800 41,000
Prepaid expenses and other 11,900 11,900
Property, plant and equipment, less accumulated depreciation
and amortization of $3,704,000 and $3,934,000 1,648,000 1,438,100
Franchise cost, net of accumulated
amortization of $1,474,000 and $1,568,000 1,087,000 996,700
Deferred loan costs and other, net 45,900 42,400
----------- -----------
$ 4,275,600 $ 3,988,300
=========== ===========
LIABILITIES AND PARTNERSHIP CAPITAL
LIABILITIES:
Note payable $ 383,200 $ 383,200
Accounts payable 226,800 192,200
Due to affiliates 180,600 103,800
----------- -----------
TOTAL LIABILITIES 790,600 679,200
----------- -----------
COMMITMENTS AND CONTINGENCIES
PARTNERSHIP CAPITAL (DEFICIT):
General partners (48,500) (50,200)
Limited partners 3,533,500 3,359,300
----------- -----------
TOTAL PARTNERSHIP CAPITAL 3,485,000 3,309,100
----------- -----------
$ 4,275,600 $ 3,988,300
=========== ===========
</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
June 30,
--------------------------
1994 1995
--------- ---------
<S> <C> <C>
REVENUES $ 565,400 $ 578,100
--------- ---------
OPERATING EXPENSES:
Service costs 193,200 219,700
General and administrative expenses 74,300 78,900
General Partner management fees
and reimbursed expenses 88,300 72,600
Depreciation and amortization 168,800 181,700
--------- ---------
524,600 552,900
--------- ---------
OPERATING INCOME 40,800 25,200
--------- ---------
OTHER INCOME (EXPENSE):
Interest income 500 6,900
Interest expense (14,900) (16,000)
--------- ---------
(14,400) (9,100)
--------- ---------
INCOME BEFORE EQUITY IN NET
INCOME OF JOINT VENTURE 26,400 16,100
EQUITY IN NET INCOME
OF JOINT VENTURE 5,400 15,400
========= =========
NET INCOME $ 31,800 $ 31,500
========= =========
NET INCOME PER UNIT OF
LIMITED PARTNERSHIP INTEREST $ .79 $ .78
========= =========
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
-----------------------------
Six months ended
June 30,
-----------------------------
1994 1995
----------- -----------
<S> <C> <C>
REVENUES $ 1,118,300 $ 1,150,300
----------- -----------
OPERATING EXPENSES:
Service costs 376,200 433,800
General and administrative expenses 145,500 146,200
General Partner management fees
and reimbursed expenses 167,700 144,900
Depreciation and amortization 356,500 357,300
----------- -----------
1,045,900 1,082,200
----------- -----------
OPERATING INCOME 72,400 68,100
----------- -----------
OTHER INCOME (EXPENSE):
Interest income 1,300 13,700
Interest expense (27,400) (30,900)
----------- -----------
(26,100) (17,200)
----------- -----------
INCOME BEFORE EQUITY IN NET INCOME
OF JOINT VENTURE 46,300 50,900
EQUITY IN NET INCOME
OF JOINT VENTURE 1,100 25,100
=========== ===========
NET INCOME $ 47,400 $ 76,000
=========== ===========
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 1.17 $ 1.89
=========== ===========
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
------------------------
Six months ended
June 30,
------------------------
1994 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 47,400 $ 76,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in net income of Joint Venture (1,100) (25,100)
Depreciation and amortization 356,500 357,300
Amortization of deferred loan costs 5,300 5,500
Decrease from changes in:
Accounts receivable and prepaid expenses (44,200) (23,200)
Deferred loan costs (5,100) --
Accounts payable and due to affiliates (157,900) (111,400)
--------- ---------
Net cash provided by operating activities 200,900 279,100
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (42,700) (44,400)
Increase in intangible assets (27,200) (14,700)
--------- ---------
Net cash used in investing activities (69,900) (59,100)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (251,900) (251,900)
--------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS (120,900) (31,900)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 242,200 664,900
--------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 121,300 $ 633,000
========= =========
</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 six months ended June 30, 1995 and 1994 are unaudited. It is suggested that
these condensed interim financial statements be read in conjunction with the
audited financial statements and notes thereto included in the Partnership's
latest Annual Report on Form 10-K. In the opinion of management, such statements
reflect all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the results of such periods. The results of
operations for the three and six months ended June 30, 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 $28,900 and
$57,500 for the three and six months ended June 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 $43,700 and
$87,400 for the three and six months ended June 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 $16,200 and
$32,200 and reimbursement of expenses of $35,600 and $70,900 under its
management agreement for the three and six months ended June 30, 1995. In
addition, the Macoupin Joint Venture paid the Corporate General Partner
approximately $4,100 and $8,100 in respect of its 1% special interest during the
three and six months ended June 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 (CONT.)
===============================================
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 $137,100 and $270,100 and
the Macoupin Joint Venture paid the affiliate $92,800 and $181,500 for these
programming services for the three and six months ended June 30, 1995.
Programming fees are included in service costs in the statements of operations
for the three and six months ended June 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 (CONT.)
===============================================
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 June 30, 1995 and December 31, 1994 and the results of its operations for
the three and six months ended June 30, 1995 and 1994 have been included. The
results of operations for the three and six months ended June 30, 1995 are not
necessarily indicative of results for the entire year.
<TABLE>
<CAPTION>
December 31, June 30,
1994* 1995
------------ ----------
(unaudited)
<S> <C> <C>
Current assets $ 622,800 $1,005,100
Investment in cable television
properties, net 2,018,800 1,724,500
Other assets 6,000 7,700
---------- ----------
$2,647,600 $2,737,300
========== ==========
Current liabilities $ 247,200 $ 261,600
Venturers' capital 2,400,400 2,475,700
---------- ----------
$2,647,600 $2,737,300
========== ==========
</TABLE>
*As presented in the audited financial statements.
-8-
<PAGE> 9
ENSTAR INCOME PROGRAM IV-3, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONCLUDED)
===================================================
5. EQUITY IN NET ASSETS OF JOINT VENTURE (CONCLUDED)
<TABLE>
<CAPTION>
Unaudited
------------------------
Three months ended
June 30,
------------------------
1994 1995
--------- ---------
<S> <C> <C>
REVENUES $ 401,300 $ 406,200
--------- ---------
OPERATING EXPENSES:
Service costs 128,500 113,700
General and administrative expenses 39,300 38,300
General Partner management fees and reimbursed expenses 60,300 55,900
Depreciation and amortization 163,900 159,400
--------- ---------
392,000 367,300
--------- ---------
OPERATING INCOME 9,300 38,900
OTHER INCOME (EXPENSE):
Interest income 8,500 9,000
Interest expense (1,700) (1,600)
--------- ---------
NET INCOME $ 16,100 $ 46,300
========= =========
</TABLE>
<TABLE>
<CAPTION>
Unaudited
------------------------
Three months ended
June 30,
------------------------
1994 1995
--------- ---------
<S> <C> <C>
REVENUES $ 792,900 $ 805,300
--------- ---------
OPERATING EXPENSES:
Service costs 250,100 239,600
General and administrative expenses 77,700 70,900
General Partner management fees and reimbursed expenses 115,400 111,200
Depreciation and amortization 358,600 321,700
--------- ---------
801,800 743,400
--------- ---------
OPERATING INCOME (LOSS) (8,900) 61,900
OTHER INCOME (EXPENSE):
Interest income 14,600 15,900
Interest expense (2,400) (2,500)
--------- ---------
NET INCOME $ 3,300 $ 75,300
========= =========
</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
On February 22, 1994, by the Federal Communications Commission (the
"FCC") announced significant amendments to its regulations implementing certain
provisions of the 1992 Cable Act, including those relating to rate regulation
which had previously become effective on September 1, 1993, which regulations
became effective during the quarter ended September 30, 1994. Additional
amendments were adopted November 10, 1994 and became effective January 1, 1995.
Compliance with these rules has had, and will most likely continue to have, a
significant negative impact on the Partnership's revenues and cash flow. The
Partnership's management presently believes that revenues for the first six
months of 1995 fully reflect the impact of the 1992 Cable Act. Nonetheless,
management expects that certain costs, including programming costs, will
continue to rise at a rate in excess of that which the Partnership will be
permitted to pass on to its customers. Furthermore, given events since the
enactment of the 1992 Cable Act, there can be no assurance as to what, if any,
future action may be taken by Congress, the FCC or any other regulatory
authority or court, or the effect thereof on the Partnership's business.
Specifically, the FCC recently issued a proposal that may allow cable operators
to file abbreviated cost of service filings for system rebuilds and upgrades,
providing for additional rate increases related to significant capital
expenditures. There is also legislation currently being debated in Congress that
could significantly revise the 1992 Cable Act, although there can be no
certainty as to the final provisions of such legislation, or whether it will
become law.
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 $12,700, or by 2.3%, and by
$32,000, or by 2.9%, for the three and six months ended June 30, 1995 compared
to the corresponding periods in 1994. Of the three months' increase, $11,000 was
due to increases in regulated service rates permitted under the 1992 Cable Act
that were implemented by the Partnership in April 1995, $7,400 was due to
increases in unregulated rates charged for premium services and $4,600 was due
to increases in the number of subscriptions for services and 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 Partnership to be approximately $10,300 for the three months ended June 30,
1995. Of the six months' increase, $26,100 was due to increases in the number of
subscriptions for services, $11,000 was due to increases in regulated service
rates permitted under the 1992 Cable Act that were implemented by the
Partnership in April 1995, $9,600 was due to increases in unregulated rates
charged for premium services and $5,800 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 $20,500 for the six months ended June 30, 1995.
-10-
<PAGE> 11
ENSTAR INCOME PROGRAM IV-3, L.P.
RESULTS OF OPERATIONS (CONT.)
Service costs increased by $26,500, or by 13.7%, and by $57,600, or by
15.3%, for the three and six months ended June 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'
increase, $16,200 was due to increases in programming fees (including primary
satellite fees), $6,500 was due to an increase in property taxes and $3,400 was
due to an increase in franchise fees. Of the six months' increase, $29,800 was
due to increases in programming fees, $9,500 was due to an increase in personnel
costs, $6,600 was due to an increase in property taxes and $6,600 was due to
increased franchise fees. 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 increased by $4,600, or by 6.2%,
for the three months ended June 30, 1995 and remained relatively unchanged for
the six months ended June 30, 1995 as compared to the corresponding periods in
1994. The three months' increase was principally due to a $6,200 increase in
professional fees.
Management fees and reimbursed expenses decreased by $15,700, or by
17.8%, and by $22,800, or by 13.6%, for the three and six months ended June 30,
1995 as compared to the corresponding periods in 1994, primarily due to
decreased reimbursable expenses allocated by the Corporate General Partner.
Reimbursed expenses decreased due to lower allocated personnel costs, property
taxes, computer service and consulting fees, postage costs and telephone
expense. Management fees increased by $700, or by 2.5%, and by $1,600, or by
2.9%, for the three and six month periods as a result of increased revenues.
Depreciation and amortization expense increased by $12,900, or by 7.6%,
for the three months ended June 30, 1995 and remained relatively unchanged for
the six months ended June 30, 1995 as compared to the corresponding periods in
1994. The three months' increase was primarily due to a reduction of the
estimated useful life of existing plant being replaced.
Operating income decreased by $15,600, or by 38.2%, and by $4,300, or
by 5.9%, for the three and six months ended June 30, 1995 as compared to the
corresponding periods in 1994, principally due to increases in programming fees,
professional fees and property taxes as described above.
Interest income increased by $6,400 and $12,400 for the three and six
months ended June 30, 1995 as compared to the corresponding periods in 1994,
primarily due to higher average interest rates earned on higher investment
balances.
Interest expense increased by $1,100, or by 7.4%, and by $3,500, or by
12.8%, for the three and six months ended June 30, 1995 as compared to the
corresponding periods in 1994, primarily due to an increase in the average
interest rate paid on borrowings (10.5% and 10.4% for the three and six month
periods in 1995 versus 8.4% and 8.0% for the corresponding periods in 1994).
-11-
<PAGE> 12
ENSTAR INCOME PROGRAM IV-3, L.P.
RESULTS OF OPERATIONS (CONT.)
DISTRIBUTIONS TO PARTNERS
The Partnership distributed $125,900 and $251,900 to its partners
during the three and six months ended June 30, 1995. The Joint Venture did not
make distributions to the Partnership during the three and six months ended June
30, 1995.
THE MACOUPIN JOINT VENTURE
The Joint Venture's revenues increased by $4,900, or by 1.2%, and by
$12,400, or by 1.6%, for the three and six months ended June 30, 1995 as
compared to the corresponding periods in 1994. Of the three months' increase,
$6,200 was due to increases in the number of subscriptions for services, $5,400
was due to increases in regulated service rates permitted under the 1992 Cable
Act that were implemented by the Partnership in April 1995 and $3,200 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 $9,900. Of the six months'
increase, $21,600 was due to increases in the number of subscriptions for
services, $7,600 was due to other revenue producing items and $5,900 was due to
increases in regulated service rates permitted under the 1992 Cable Act that
were implemented by the Partnership in April 1995. 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 $19,700.
Revenues decreased by $3,000 due to decreases in rates charged for premium
services.
Service costs decreased by $14,800, or by 11.5%, and by $10,500, or by
4.2%, for the three and six months ended June 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'
decrease, $17,900 was due to a decrease in copyright fees resulting from a
change in copyright filing requirements, $4,000 was due to an increase in
capitalization of labor and overhead expense and $3,500 was due to a decrease in
repair and maintenance expense. These decreases were partially offset by an
increase of $7,400 in programming fees charged by program suppliers (including
primary satellite fees). Of the six months' decrease, $21,800 was due to a
decrease in copyright fees and $5,000 was due to an increase in capitalization
of labor and overhead expense related to greater construction activity. These
decreases were partially offset by an increase of $13,200 in programming fees
charged by program suppliers.
General and administrative expenses decreased by $1,000, or by 2.5%,
and by $6,800, or by 8.8%, for the three and six months ended June 30, 1995 as
compared to the corresponding periods in 1994. The three and six months'
decreases were principally due to decreases in bad debt expense of $2,400 and
$7,400, respectively.
-12-
<PAGE> 13
ENSTAR INCOME PROGRAM IV-3, L.P.
RESULTS OF OPERATIONS (CONTINUED)
Management fees and reimbursed expenses decreased by $4,400, or by
7.3%, and by $4,200, or by 3.6%, for the three and six months ended June 30,
1995 as compared to the corresponding periods in 1994, due to lower reimbursable
expenses payable to the Corporate General Partner. Reimbursed expenses decreased
due to lower allocated personnel costs, computer service and consulting fees,
and postage, telephone and marketing expenses.
Depreciation and amortization expense decreased by $4,500, or by 2.8%,
and by $36,900, or by 10.3%, for the three and six months ended June 30, 1995 as
compared to the corresponding periods in 1994, primarily due to the retirement
of certain tangible and intangible assets.
Operating income increased by $29,600 and by $70,800 for the three and
six months ended June 30, 1995 as compared to the corresponding periods in 1994,
principally due to lower copyright fees and depreciation and amortization
expense as described above.
Interest income increased by $500, or by 5.9%, and by $1,300, or by
8.9%, for the three and six months ended June 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 six months ended June 30, 1995.
Operating income before depreciation and amortization (EBITDA) as a
percentage of revenues increased from 43.2% to 48.8% for the three months ended
June 30, 1995 and from 44.1% to 47.6% for the six months ended June 30, 1995 as
compared to the corresponding periods in 1994. These increases were primarily
caused by increased revenues and decreases in copyright fees as described above.
EBITDA increased by $25,100, or by 14.5%, and by $33,900, or by 9.7%, for the
three and six months ended June 30, 1995 as compared to the corresponding
periods in 1994.
LIQUIDITY AND CAPITAL RESOURCES
As previously stated, the FCC's amended rate regulation rules were
implemented during the quarter ended September 30, 1994. Compliance with these
rules has had, and most likely will continue to have, a significant negative
impact on the Partnership's revenues and cash flow.
The Partnership's primary objective, having invested its net offering
proceeds in cable systems, 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 $346,700, which include costs of $205,800 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
$366,600 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.
-13-
<PAGE> 14
ENSTAR INCOME PROGRAM IV-3, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONT.)
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 it is
essential to preserve liquidity by reserving cash for future rebuild
requirements including planned rebuilds in the communities of Shelbyville and
Auburn, Illinois.
The Partnership paid distributions totaling $125,900 and $251,900
during the three and six months ended June 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 year on the unused portion of the
Facility. The Facility contains certain financial tests and other covenants
including, among others, restrictions on capital expenditures, incurrence of
indebtedness, distributions and investments, sale of assets, acquisitions, and
other covenants, defaults and conditions. The Partnership believes that it was
in compliance with the Facility's loan covenants as of June 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 June 30, 1995 was $383,200.
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
Cash provided by operating activities increased from $200,900 to
$279,100, or by $78,200, for the six months ended June 30, 1995 compared with
the corresponding prior year period. The Partnership used $46,500 less cash to
pay liabilities owed to the General Partner and third-party creditors in the
1995 period. Changes in receivables, prepaid expenses and deferred loan costs
used $26,100 less cash in the six months ended June 30, 1995 than in the prior
year period. Partnership operations generated $5,600 more cash in the first six
months of 1995 after adding back non-cash items consisting of depreciation,
amortization and equity in net income of Joint Venture.
Investing activities used $10,800 less cash during the six months ended
June 30, 1995 than in the comparable 1994 period due to a $12,500 decrease in
expenditures for intangible assets, partially offset by a $1,700 increase in
capital expenditures.
-14-
<PAGE> 15
ENSTAR INCOME PROGRAM IV-3, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONCLUDED)
Operating income before depreciation and amortization (EBITDA) as a
percentage of revenues decreased from 37.1% to 35.8% during the three months
ended June 30, 1995 compared to the corresponding 1994 period. EBITDA decreased
form 38.4% to 37.0% during the six months ended June 30, 1995 as compared with
the equivalent period in 1994. The decreases were principally attributable to
increased programming fees. EBITDA decreased form $209,600 to $206,900, or by
1.3%, for the three months ended June 30, 1995 compared to the corresponding
quarter of 1994. EBITDA decreased from $428,900 to $425,400, or by 0.8%, during
the six months ended June 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: August 9, 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 JUNE 30, 1995, AND THE STATEMENTS OF OPERATIONS FOR THE SIX MONTHS
ENDED JUNE 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 633,000
<SECURITIES> 0
<RECEIVABLES> 42,800
<ALLOWANCES> 1,800
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 5,372,100
<DEPRECIATION> 3,934,000
<TOTAL-ASSETS> 3,988,300
<CURRENT-LIABILITIES> 296,000
<BONDS> 383,200
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,988,300
<SALES> 0
<TOTAL-REVENUES> 1,150,300
<CGS> 0
<TOTAL-COSTS> 1,082,200
<OTHER-EXPENSES> (13,700)
<LOSS-PROVISION> 4,200
<INTEREST-EXPENSE> 30,900
<INCOME-PRETAX> 76,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 76,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 76,000
<EPS-PRIMARY> 1.89
<EPS-DILUTED> 0
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