<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, 1996
-------------------------------------
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 OF
INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
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, June 30,
1995* 1996
----------- -----------
(unaudited)
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 942,400 $ 636,400
Receivables, less allowance of $9,300
and $2,600 for possible losses 27,300 17,600
Prepaid expenses and other 22,200 33,600
Equity in net assets of joint venture 828,100 515,500
Property, plant and equipment, less accumulated depreciation
and amortization of $4,143,400 and $4,369,900 1,539,700 1,448,000
Franchise cost, net of accumulated
amortization of $1,662,200 and $1,756,400 902,500 808,400
Deferred loan costs and other, net 31,600 24,300
----------- -----------
$ 4,293,800 $ 3,483,800
=========== ===========
LIABILITIES AND PARTNERSHIP CAPITAL
-----------------------------------
LIABILITIES:
Accounts payable $ 503,600 $ 224,100
Due to affiliates 247,600 243,900
Note payable 383,200 -
----------- -----------
TOTAL LIABILITIES 1,134,400 468,000
----------- -----------
COMMITMENTS AND CONTINGENCIES
PARTNERSHIP CAPITAL (DEFICIT):
General partners (51,700) (53,100)
Limited partners 3,211,100 3,068,900
----------- -----------
TOTAL PARTNERSHIP CAPITAL 3,159,400 3,015,800
----------- -----------
$ 4,293,800 $ 3,483,800
=========== ===========
</TABLE>
*As presented in the audited financial statements.
See accompanying notes to condensed financial statements.
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<PAGE> 3
ENSTAR INCOME PROGRAM IV-3, L.P.
CONDENSED STATEMENTS OF OPERATIONS
==================================
<TABLE>
<CAPTION>
Unaudited
------------------------------
Three months ended
June 30,
------------------------------
1995 1996
---------- ----------
<S> <C> <C>
REVENUES $ 578,100 $ 599,500
---------- ----------
OPERATING EXPENSES:
Service costs 219,700 204,300
General and administrative expenses 78,900 108,800
General Partner management fees
and reimbursed expenses 72,600 81,700
Depreciation and amortization 181,700 186,800
---------- ----------
552,900 581,600
---------- ----------
OPERATING INCOME 25,200 17,900
---------- ----------
OTHER INCOME (EXPENSE):
Interest income 6,900 6,300
Interest expense (16,000) (5,300)
Gain on sale of assets - 1,000
---------- ----------
(9,100) 2,000
---------- ----------
INCOME BEFORE EQUITY IN NET
INCOME OF JOINT VENTURE 16,100 19,900
EQUITY IN NET INCOME
OF JOINT VENTURE 15,400 18,600
---------- ----------
NET INCOME $ 31,500 $ 38,500
========== ==========
NET INCOME PER UNIT OF
LIMITED PARTNERSHIP INTEREST $ .78 $ .96
========== ==========
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,
-----------------------------
1995 1996
----------- -----------
<S> <C> <C>
REVENUES $ 1,150,300 $ 1,183,800
----------- -----------
OPERATING EXPENSES:
Service costs 433,800 391,300
General and administrative expenses 146,200 204,600
General Partner management fees
and reimbursed expenses 144,900 153,000
Depreciation and amortization 357,300 363,900
----------- -----------
1,082,200 1,112,800
----------- -----------
OPERATING INCOME 68,100 71,000
----------- -----------
OTHER INCOME (EXPENSE):
Interest income 13,700 13,300
Interest expense (30,900) (14,400)
Gain on sale of assets - 1,000
----------- -----------
(17,200) (100)
----------- -----------
INCOME BEFORE EQUITY IN NET
INCOME OF JOINT VENTURE 50,900 70,900
EQUITY IN NET INCOME
OF JOINT VENTURE 25,100 37,400
----------- -----------
NET INCOME $ 76,000 $ 108,300
=========== ===========
NET INCOME PER UNIT OF
LIMITED PARTNERSHIP INTEREST $ 1.89 $ 2.69
=========== ===========
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,
---------------------------------
1995 1996
----------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 76,000 $ 108,300
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in net income of Joint Venture (25,100) (37,400)
Depreciation and amortization 357,300 363,900
Amortization of deferred loan costs 5,500 5,500
Decrease from changes in:
Accounts receivable and prepaid expenses (23,200) (1,800)
Accounts payable and due to affiliates (111,400) (283,100)
----------- -------------
Net cash provided by operating activities 279,100 155,400
----------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (44,400) (169,800)
Increase in intangible assets (14,700) (6,500)
Distributions from Joint Venture - 350,000
----------- -------------
Net cash provided by (used in) investing activities (59,100) 173,700
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of debt - (383,200)
Distributions to partners (251,900) (251,900)
----------- -------------
Net cash used in financing activities (125,900) (635,100)
----------- -------------
DECREASE IN CASH AND CASH EQUIVALENTS (31,900) (306,000)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 664,900 942,400
----------- -------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 633,000 $ 636,400
=========== =============
</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, 1996 and 1995 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 six months ended June 30, 1996 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 $30,000
and $59,200 for the three and six months ended June 30, 1996.
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 $51,700 and
$93,800 for the three and six months ended June 30, 1996.
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 $17,800 and
$34,800 and reimbursement of expenses of $38,300 and $71,300 under its
management agreement for the three and six months ended June 30, 1996. In
addition, the Macoupin Joint Venture paid the Corporate General Partner
approximately $4,400 and $8,700 in respect of its 1% special interest during
the three and six months ended June 30, 1996. 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)
The Partnership also receives certain system operating management
services from an affiliate of the Corporate General Partner in addition to the
Manager, due to the fact that there are no such employees directly employed by
one of the Partnership's cable systems. The Partnership reimburses the
affiliate for its allocable share of the affiliates' operational costs. The
total amount charged to the Partnership approximated $6,100 and $11,500 for
these costs in the three and six months ended June 30, 1996. No management fee
is payable to the affiliate by the Partnership and there is no duplication of
reimbursed expenses and costs paid to the Manager.
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 $139,300 and $268,800
and the Macoupin Joint Venture paid the affiliate $94,600 and $188,800 for
these programming services for the three and six months ended June 30, 1996.
Programming fees are included in service costs in the statements of operations
for the three and six months ended June 30, 1996 and 1995.
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 1995 amounts have been reclassified to conform to the 1996
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 June 30, 1996 and December 31, 1995 and the results of its operations for
the three and six months ended June 30, 1996 and 1995 have been included. The
results of operations for the three and six months ended June 30, 1996 are not
necessarily indicative of results for the entire year.
<TABLE>
<CAPTION>
December 31, June 30
1995* 1996
--------------- -------------
(unaudited)
<S> <C> <C>
Current assets $ 1,110,000 $ 338,100
Investment in cable television
properties, net 1,722,800 1,459,300
Other assets 7,300 7,400
--------------- -------------
$ 2,840,100 $ 1,804,800
--------------- -------------
Current liabilities $ 355,500 $ 258,300
Venturers' capital 2,484,600 1,546,500
--------------- -------------
$ 2,840,100 $ 1,804,800
=============== =============
</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
June 30,
-----------------------------------
1995 1996
------------- ------------
<S> <C> <C>
REVENUES $ 406,200 $ 444,800
------------- ------------
OPERATING EXPENSES:
Service costs 113,700 142,100
General and administrative expenses 38,300 35,000
General Partner management fees and reimbursed expenses 55,900 60,500
Depreciation and amortization 159,400 153,200
------------- ------------
367,300 390,800
------------- ------------
OPERATING INCOME 38,900 54,000
OTHER INCOME (EXPENSE):
Interest income 9,000 3,700
Interest expense (1,600) (2,700)
Gain on sale of assets - 600
------------- ------------
NET INCOME $ 46,300 $ 55,600
============= ============
</TABLE>
<TABLE>
<CAPTION>
Unaudited
-----------------------------------
Six months ended
June 30,
-----------------------------------
1995 1996
------------- ------------
<S> <C> <C>
REVENUES $ 805,300 $ 870,000
------------- ------------
OPERATING EXPENSES:
Service costs 239,600 271,700
General and administrative expenses 70,900 76,300
General Partner management fees and reimbursed expenses 111,200 114,800
Depreciation and amortization 321,700 305,000
------------- ------------
743,400 767,800
------------- ------------
OPERATING INCOME 61,900 102,200
INTEREST INCOME (EXPENSE):
Interest income 15,900 13,100
Interest expense (2,500) (3,800)
Gain on sale of assets - 600
------------- ------------
NET INCOME $ 75,300 $ 112,100
============= ============
</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 8, 1996, President Clinton signed into law the
Telecommunications Act of 1996 (the "1996 Telecom Act"). This statute
substantially changed the competitive and regulatory environment for
telecommunications providers by significantly amending the Communications Act
of 1934, including certain of the rate regulation provisions previously imposed
by the Cable Television Consumer Protection and Competition Act of 1992 (the
"1992 Cable Act"). Compliance with those rate regulations has had a negative
impact on the Partnership's revenues and cash flow. However, in accordance
with policy decisions by the Federal Communications Commission (the "FCC"), the
Partnership will increase regulated service rates in the future in response to
specified historical and anticipated future 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 1996 Telecom Act provides
that certain of the rate regulations will be phased-out altogether in 1999.
Further, the regulatory environment will continue to change pending, among
other things, the outcome of legal challenges and FCC rulemaking and
enforcement activity in respect of the 1992 Cable Act and the completion of a
significant number of FCC rulemakings under the 1996 Telecom Act. There can 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. Accordingly, the Partnership's historic interim
financial results as described below are not necessarily indicative of future
performance.
This Report includes certain forward looking statements regarding,
among other things, future results of operations, regulatory requirements,
competition, capital needs and general business conditions applicable to the
Partnership. Such forward looking statements involve risks and uncertainties
including, without limitation, the uncertainty of legislative and regulatory
changes and the rapid developments in the competitive environment facing cable
television operators such as the Partnership. In addition to the information
provided herein, reference is made to the Partnership's Annual Report on Form
10-K for the year ended December 31, 1995 for additional information regarding
such matters and the effect thereof on the Partnership's business.
RESULTS OF OPERATIONS
THE PARTNERSHIP
The Partnership's revenues increased from $578,100 to $599,500, or by
3.7%, and from $1,150,300 to $1,183,800, or by 2.9%, for the three and six
months ended June 30, 1996 as compared to the corresponding periods in 1995. Of
the $21,400 increase in revenues for the three months ended June 30, 1996 as
compared to the corresponding period in 1995, $39,000 was due to increases in
regulated service rates that were implemented by the Partnership in the second
quarter in each of 1995 and 1996, partially offset by a $17,700 decrease as a
result of a reduction in the number of subscriptions for service. Of the
$33,500 increase in revenues for the six months ended June 30, 1996 as compared
to the corresponding period in 1995, $70,000 was due to increases in regulated
service rates that were implemented by the Partnership as discussed above and
$1,400 resulted from increases in other revenue producing items, partially
offset by a $38,000 decrease as a result of a reduction in the number of
subscriptions for service. As of June 30, 1996, the Partnership had
approximately 6,200 homes subscribing to cable service and 2,300 premium
service units.
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<PAGE> 11
ENSTAR INCOME PROGRAM IV-3, L.P.
RESULTS OF OPERATIONS (CONTINUED)
Service costs decreased from $219,700 to $204,300, or by 7.0%, and
decreased from $433,800 to $391,300, or by 9.8%, for the three and six months
ended June 30, 1996 as compared to the corresponding periods in 1995. Service
costs represent costs directly attributable to providing cable services to
customers. Of the $15,400 decrease in service costs for the three months ended
June 30, 1996 as compared to the corresponding period in 1995, $10,000 was due
to an increase in capitalization of labor and overhead expense due to a greater
number of capital projects, $5,900 was due to a decrease in personnel costs,
$5,500 was due to a decrease in franchise fees and $3,600 was due to a decrease
in property taxes. These decreases were partially offset by a $3,800 increase
in repair and maintenance expense and a $2,200 increase in programming fees
charged by program suppliers. Of the $42,500 decrease in service costs for the
six months ended June 30, 1996 as compared to the corresponding period in 1995,
$21,200 was due to an increase in capitalization of labor and overhead expense
due to a greater number of capital projects, $17,900 was due to a decrease in
personnel costs, $3,600 was due to a decrease in property taxes and $2,100 was
due to a decrease in franchise fees. These decreases were partially offset by a
$2,500 increase in system power costs.
General and administrative expenses increased from $78,900 to
$108,800, or by 37.9%, and from $146,200 to $204,600, or by 40.0%, for the
three and six months ended June 30, 1996 as compared to the corresponding
periods in 1995. Of the $29,900 increase for the three months ended June 30,
1996 as compared to the corresponding period in 1995, $22,300 was due to higher
insurance premiums, $4,100 was due to expenses allocated by an affiliate of the
General Partner (for operational management services) and $4,100 was due to an
increase in personnel costs. These increases were partially offset by a $4,000
decrease in professional fees and a $2,700 increase in capitalization of labor
and overhead expense. Of the $58,400 increase for the six months ended June 30,
1996 as compared to the corresponding period in 1995, $30,800 was due to higher
insurance premiums, $11,600 was due to an increase in personnel costs, $8,800
was due to expenses allocated by an affiliate of the General Partner (for
operational management services), $4,800 was due to increases in bad debt
expense and $4,500 was due to an increase in marketing expense. These increases
were partially offset by a $2,700 increase in capitalization of labor and
overhead expense and a $2,600 decrease in professional fees.
Management fees and reimbursed expenses increased from $72,600 to
$81,700, or by 12.5%, and from $144,900 to $153,000, or by 5.6%, for the three
and six months ended June 30, 1996 as compared to the corresponding periods in
1995. Reimbursable expenses increased by $8,000 and $6,400 for the three and
six months ended June 30, 1996 from the corresponding 1995 periods, primarily
due to higher allocated personnel costs, rent expense and professional fees.
Management fees increased by $1,100 and $1,700 for the three and six months
ended June 30, 1996 from the corresponding 1995 periods in direct relation to
increased revenues as described above.
Depreciation and amortization expense increased from $181,700 to
$186,800, or by 2.8%, and from $357,300 to $363,900, or by 1.9%, for the three
and six months ended June 30, 1996 as compared to the corresponding periods in
1995 due to asset additions related to the upgrade of the Partnership's plant.
Operating income decreased from $25,200 to $17,900, or by 29.0%, and
increased from $68,100 to $71,000, or by 4.3%, for the three and six months
ended June 30, 1996 as compared to the corresponding periods in 1995. The
$7,300 decrease for the three months ended June 30, 1996 was primarily due to
-11-
<PAGE> 12
ENSTAR INCOME PROGRAM IV-3, L.P.
RESULTS OF OPERATIONS (CONTINUED)
increases in general and administrative expenses while the $2,900 increase for
the six month period was principally due to increases in revenues and decreases
in service costs as described above.
Interest income decreased from $6,900 to $6,300, or by 8.7%, and from
$13,700 to $13,300, or by 2.9%, for the three and six months ended June 30,
1996 as compared to the corresponding periods in 1995 due to lower interest
rates earned on invested funds.
Interest expense decreased from $16,000 to $5,300, or by 66.9%, and
from $30,900 to $14,400, or by 53.4%, for the three and six months ended June
30, 1996 as compared to the corresponding periods in 1995 due to the repayment
of the note payable in February 1996.
DISTRIBUTIONS TO PARTNERS
The Partnership distributed $125,900 and $251,900 to its partners
during the three and six months ended June 30, 1996. The Joint Venture
distributed $150,000 and $350,000 to the Partnership during the three and six
months ended June 30, 1996.
THE MACOUPIN JOINT VENTURE
The Joint Venture's revenues increased from $406,200 to $444,800, or
by 9.5%, and from $805,300 to $870,000, or by 8.0%, for the three and six
months ended June 30, 1996 as compared to the corresponding periods in 1995. Of
the $38,600 increase in revenues for the three months ended June 30, 1996 as
compared to the corresponding period in 1995, $32,800 was due to increases in
regulated service rates that were implemented by the Partnership in each of
April 1995 and 1996 and $7,700 resulted from increases in advertising sales and
other revenue producing items. These increases were partially offset by a
$1,900 decrease as a result of a reduction in the number of subscriptions for
service. Of the $64,700 increase in revenues for the six months ended June 30,
1996 as compared to the corresponding period in 1995, $57,400 was due to
increases in regulated service rates that were implemented by the Partnership
as discussed above and $10,200 resulted from increases in advertising sales and
other revenue producing items. These increases were partially offset by a
$2,900 decrease as a result of a reduction in the number of subscriptions for
service. As of June 30, 1996, the Joint Venture had approximately 4,500 homes
subscribing to cable service and 2,100 premium service units.
Service costs increased from $113,700 to $142,100, or by 25.0%, and
from $239,600 to $271,700, or by 13.4%, for the three and six months ended June
30, 1996 as compared to the corresponding periods in 1995. Service costs
represent costs directly attributable to providing cable services to customers.
Of the $28,400 increase in service costs for the three months ended June 30,
1996 as compared to the corresponding period in 1995, $28,900 was due to an
increase in copyright fees and $9,900 was due an increase in personnel costs.
These increases were partially offset by an increase of $14,800 in
capitalization of labor and overhead expense due to a greater number of capital
projects during the quarter ended June 30, 1996. Of the $32,100 increase in
service costs for the six months ended June 30, 1996 as compared to the
corresponding period in 1995, $28,800 was due to an increase in copyright fees,
$14,300 was due to an
-12-
<PAGE> 13
ENSTAR INCOME PROGRAM IV-3, L.P.
RESULTS OF OPERATIONS (CONCLUDED)
increase in personnel costs and $7,300 was due to an increase in programming
fees charged by program suppliers (including primary satellite fees). These
increases were partially offset by an increase of $21,000 in capitalization of
labor and overhead expense due to a greater number of capital projects during
the six month period.
General and administrative expenses decreased from $38,300 to $35,000,
or by 8.6%, and increased from $70,900 to $76,300, or by 7.6%, for the three
and six months ended June 30, 1996 as compared to the corresponding periods in
1995. Of the $3,300 decrease for the three months ended June 30, 1996 as
compared to the corresponding period in 1995, $5,300 was due to an increase in
capitalization of labor and overhead expense, $2,800 was due to a decrease in
customer billing expense, $2,300 was due to a decrease in postage and messenger
expense and $2,100 was due to a decrease in bad debt expense. These decreases
were partially offset by a $4,400 increase in marketing expense, a $2,100
increase in re-regulation expense and a $1,700 increase in personnel costs. Of
the $5,400 increase for the six months ended June 30, 1996 as compared to the
corresponding period in 1995, $5,500 was due to an increase in marketing
expense, $3,800 was due to an increase in personnel costs, $1,900 was due to an
increase in bad debt expense and $1,500 was due to an increase in advertising
sales expense. These increases were partially offset by a $5,400 increase in
capitalization of labor and overhead expense and a $2,600 decrease in postage
and messenger expense.
Management fees and reimbursed expenses increased from $55,900 to
$60,500, or by 8.2%, and from $111,200 to $114,800, or by 3.2%, for the three
and six months ended June 30, 1996 as compared to the corresponding periods in
1995. Reimbursable expenses increased by $2,700 and by $400 for the three and
six months ended June 30, 1996 from the corresponding 1995 periods, primarily
due to higher allocated personnel costs, rent expense and professional fees.
Management fees increased by $1,900 and $3,200 for the three and six months
ended June 30, 1996 from the corresponding 1995 periods in direct relation to
increased revenues as described above.
Depreciation and amortization expense decreased from $159,400 to
$153,200, or by 3.9%, and from $321,700 to $305,000, or by 5.2%, for the three
and six months ended June 30, 1996 as compared to the corresponding periods in
1995 due to the effect of certain tangible assets becoming fully depreciated
and certain intangible assets becoming fully amortized.
Operating income increased from $38,900 to $54,000, or by 38.8%, and
from $61,900 to $102,200, or by 65.1%, for the three and six months ended June
30, 1996 as compared to the corresponding periods in 1995 principally due to
decreased depreciation and amortization and increased revenues as described
above.
Interest income, net of interest expense, decreased from $7,400 to
$1,000, or by 86.5%, and from $13,400 to $9,300, or by 30.6%, for the three
and six months ended June 30, 1996 as compared to the corresponding periods in
1995 due to lower average cash balances available for investment.
Operating income before depreciation and amortization (EBITDA) as a
percentage of revenues decreased from 48.8% to 46.6% and from 47.6% to 46.8%
for the three and six months ended June 30, 1996 as compared to the
corresponding periods in 1995. EBITDA increased from $198,300 to $207,200, or
by 4.5%, and from $383,600 to $407,200, or by 6.2%, for the three and six
months ended June 30, 1996 as compared to the corresponding period in 1995
primarily due to increased revenues as described above.
-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
negative impact on the Partnership's revenues and cash flow.
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 1996 capital expenditures of $1,441,000, which
include costs of $978,000 for completing the rebuild in the community of
Shelbyville, Illinois. Additionally, the Joint Venture has budgeted 1996
capital expenditures totaling $348,700 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 existing cash and cash generated by
operations of the Partnership and Joint Venture will be adequate to fund
capital expenditures and the continued payment of distributions in 1996.
Management also believes that it is essential to preserve liquidity by
reserving cash for future rebuild requirements, including the continued future
rebuild in the community of Auburn, Illinois.
The Partnership paid distributions totaling $125,900 and $251,900
during the three and six months ended March 31, 1996. However, there can be no
assurances regarding the level, timing or continuation of future distributions
beyond 1996.
On February 9, 1996, the Partnership repaid the balance of $383,200 on
its $1,000,000 revolving bank credit facility, which terminated the facility.
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
Operating activities provided $123,700 less cash in the six months
ended June 30, 1996 as compared with the prior year period, primarily due to a
$171,700 increase in cash used to pay liabilities owed to the General Partner
and third-party creditors in the 1996 period. This was offset by an increase
in the Partnership's net income of $26,600 after adding back non-cash items
consisting of depreciation, amortization and equity in net income of Joint
Venture. Cash used in accounts receivable and prepaid expenses decreased
$21,400.
Investing activities provided net cash of $173,700 in the six months
ended June 30, 1996 as compared with the prior year period when investing
activities used net cash totaling $59,100. The change was due to a $350,000
increase in distributions from the Joint Venture and an $8,200 decrease in
expenditures for intangible assets, offset by a $125,400 increase in capital
expenditures. Cash used in financing activities used $383,200 more cash during
the six months ended June 30, 1996 than in the comparable six months of 1995
due to the repayment of the revolving bank credit facility.
-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 35.8% to 34.2% and from 37.0% to 36.7%
for the three and six months ended June 30, 1996 as compared to the
corresponding periods in 1995. The decrease was primarily caused by increases
in general and administrative expenses as described above. EBITDA decreased
from $206,900 to $204,700, or by 1.1%, for the three months ended June 30, 1996
as compared to the corresponding period in 1995 and increased from $425,400 to
$434,900, or by 2.2%, for the six months ended June 30, 1996 as compared to the
corresponding period in 1995.
INFLATION
Certain of the Partnership's expenses, such as those for wages and
benefits, equipment repair and replacement, and billing and marketing generally
increase with inflation. However, the Partnership does not believe that its
financial results have been, or will be, adversely affected by inflation in a
material way, provided that it is able to increase its service rates
periodically, of which there can be no assurance.
-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 7, 1996 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, 1996, AND THE STATEMENTS OF OPERATIONS FOR THE SIX MONTHS
ENDED JUNE 30, 1996, 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-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 636,400
<SECURITIES> 0
<RECEIVABLES> 20,200
<ALLOWANCES> 2,600
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 5,817,900
<DEPRECIATION> 4,369,900
<TOTAL-ASSETS> 3,483,800
<CURRENT-LIABILITIES> 468,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,483,800
<SALES> 0
<TOTAL-REVENUES> 1,183,800
<CGS> 0
<TOTAL-COSTS> 1,112,800
<OTHER-EXPENSES> (14,300)
<LOSS-PROVISION> 9,000
<INTEREST-EXPENSE> 14,400
<INCOME-PRETAX> 108,300
<INCOME-TAX> 0
<INCOME-CONTINUING> 108,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 108,300
<EPS-PRIMARY> 2.69
<EPS-DILUTED> 0
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