<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, 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 (I.R.S. EMPLOYER IDENTIFICATION NO.)
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,
1995* 1996
------------ -------------
(unaudited)
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 942,400 $ 565,500
Receivables, less allowance of $9,300
and $3,200 for possible losses 27,300 22,900
Prepaid expenses and other 22,200 28,600
Equity in net assets of joint venture 828,100 549,500
Property, plant and equipment, less accumulated depreciation
and amortization of $4,143,400 and $4,486,400 1,539,700 1,525,400
Franchise cost, net of accumulated
amortization of $1,662,200 and $1,803,500 902,500 761,300
Deferred loan costs and other, net 31,600 9,900
---------- ----------
$4,293,800 $3,463,100
========== ==========
LIABILITIES AND PARTNERSHIP CAPITAL
LIABILITIES:
Accounts payable $ 503,600 $ 219,200
Due to affiliates 247,600 240,400
Note payable 383,200 -
---------- ----------
TOTAL LIABILITIES 1,134,400 459,600
---------- ----------
COMMITMENTS AND CONTINGENCIES
PARTNERSHIP CAPITAL (DEFICIT):
General partners (51,700) (53,300)
Limited partners 3,211,100 3,056,800
---------- ----------
TOTAL PARTNERSHIP CAPITAL 3,159,400 3,003,500
---------- ----------
$4,293,800 $3,463,100
========== ==========
</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,
---------------------------------
1995 1996
-------- --------
<S> <C> <C>
REVENUES $581,300 $613,700
-------- --------
OPERATING EXPENSES:
Service costs 179,000 190,300
General and administrative expenses 73,100 73,300
General Partner management fees
and reimbursed expenses 78,300 84,500
Depreciation and amortization 174,800 171,600
-------- --------
505,200 519,700
-------- --------
OPERATING INCOME 76,100 94,000
-------- --------
OTHER INCOME (EXPENSE):
Interest income 8,000 5,600
Interest expense (15,500) (14,200)
Loss on sale of cable assets - (5,700)
-------- --------
(7,500) (14,300)
-------- --------
INCOME BEFORE EQUITY IN NET
INCOME OF JOINT VENTURE 68,600 79,700
EQUITY IN NET INCOME
OF JOINT VENTURE 17,200 33,900
-------- --------
NET INCOME $ 85,800 $113,600
======== ========
NET INCOME PER UNIT OF
LIMITED PARTNERSHIP INTEREST $ 2.13 $ 2.82
======== ========
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,
-----------------------------------
1995 1996
---------- ----------
<S> <C> <C>
REVENUES $1,731,600 $1,797,500
---------- ----------
OPERATING EXPENSES:
Service costs 612,800 581,600
General and administrative expenses 219,300 277,900
General Partner management fees
and reimbursed expenses 223,200 237,500
Depreciation and amortization 532,100 535,500
---------- ----------
1,587,400 1,632,500
---------- ----------
OPERATING INCOME 144,200 165,000
---------- ----------
OTHER INCOME (EXPENSE):
Interest income 21,700 18,900
Interest expense (46,400) (28,600)
Loss on sale of cable assets - (4,700)
---------- ----------
(24,700) (14,400)
---------- ----------
INCOME BEFORE EQUITY IN NET
INCOME OF JOINT VENTURE 119,500 150,600
EQUITY IN NET INCOME
OF JOINT VENTURE 42,300 71,300
---------- ----------
NET INCOME $ 161,800 $ 221,900
========== ==========
NET INCOME PER UNIT OF
LIMITED PARTNERSHIP INTEREST $ 4.01 $ 5.51
========== ==========
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,
---------------------------------
1995 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $161,800 $221,900
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in net income of Joint Venture (42,300) (71,400)
Depreciation and amortization 532,100 535,500
Amortization of deferred loan costs 8,200 17,400
Loss on sale of cable assets - 4,700
Decrease from changes in:
Accounts receivable and prepaid expenses (19,400) (2,000)
Accounts payable and due to affiliates 107,400 (291,600)
-------- --------
Net cash provided by operating activities 747,800 414,500
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (92,800) (374,500)
Proceeds from sale of cable assets - 1,500
Increase in intangible assets (18,100) (7,400)
Distributions from Joint Venture - 350,000
-------- --------
Net cash used in investing activities (110,900) (30,400)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of debt - (383,200)
Distributions to partners (377,800) (377,800)
-------- --------
Net cash used in financing activities (377,800) (761,000)
-------- --------
INCREASE IN CASH AND CASH
EQUIVALENTS 259,100 376,900
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 664,900 942,400
-------- --------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $924,000 $565,500
======== ========
</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, 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 nine months ended September 30,
1996 are not necessarily indicative of results for the entire year.
2. TRANSACTIONS WITH THE CORPORATE 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 $30,700
and $89,900 for the three and nine months ended September 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 $53,800
and $147,600 for the three and nine months ended September 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 $18,600 and $53,400 and reimbursement of expenses of $40,800 and
$112,100 under its management agreement for the three and nine months ended
September 30, 1996. In addition, the Macoupin Joint Venture paid the Corporate
General Partner approximately $4,600 and $13,300 in respect of its 1% special
interest during the three and nine months ended September 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 CORPORATE 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 $500 and $12,000 for these
costs in the three and nine months ended September 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 $131,900 and $268,800 and
the Macoupin Joint Venture paid the affiliate $101,900 and $290,700 for these
programming services for the three and nine months ended September 30, 1996.
Programming fees are included in service costs in the statements of operations
for the three and nine months ended September 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 September 30, 1996 and December 31, 1995 and the results of its
operations for the three and nine months ended September 30, 1996 and 1995 have
been included. The results of operations for the three and nine months ended
September 30, 1996 are not necessarily indicative of results for the entire
year.
<TABLE>
<CAPTION>
December 31, September 30,
1995* 1996
------------ -------------
(unaudited)
<S> <C> <C>
Current assets $1,110,000 $ 429,700
Investment in cable television
properties, net 1,722,800 1,539,900
Other assets 7,300 6,500
---------- ----------
$2,840,100 $1,976,100
========== ==========
Current liabilities $ 355,500 $ 327,700
Venturers' capital 2,484,600 1,648,400
---------- ----------
$2,840,100 $1,976,100
========== ==========
</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,
--------------------------
1995 1996
---- ----
<S> <C>
REVENUES $ 422,100 $ 463,900
---------- ----------
OPERATING EXPENSES:
Service costs 135,500 130,300
General and administrative expenses 32,200 15,500
General Partner management fees and reimbursed expenses 56,100 64,000
Depreciation and amortization 155,800 152,700
---------- ----------
379,600 362,500
---------- ----------
OPERATING INCOME 42,500 101,400
OTHER INCOME (EXPENSE):
Interest income 10,600 3,200
Interest expense (1,500) (2,700)
---------- ----------
NET INCOME $ 51,600 $ 101,900
========== ==========
Unaudited
--------------------------
Nine months ended
September 30,
--------------------------
1995 1996
---- ----
REVENUES $1,227,400 $1,333,900
---------- ----------
OPERATING EXPENSES:
Service costs 375,100 402,000
General and administrative expenses 103,100 91,800
General Partner management fees and reimbursed expenses 167,300 178,800
Depreciation and amortization 477,500 457,700
---------- ----------
1,123,000 1,130,300
---------- ----------
OPERATING INCOME 104,400 203,600
OTHER INCOME (EXPENSE):
Interest income 26,500 16,300
Interest expense (4,000) (6,500)
Gain on sale of assets - 600
---------- ----------
NET INCOME $ 126,900 $ 214,000
========== ==========
</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 $581,300 to $613,700, or by
5.6%, and from $1,731,600 to $1,797,500, or by 3.8%, for the three and nine
months ended September 30, 1996 as compared to the corresponding periods in
1995. Of the $32,400 increase in revenues for the three months ended September
30, 1996 as compared to the corresponding period in 1995, $35,000 was due to
increases in regulated service rates that were implemented by the Partnership
in the second quarter of 1996, an increase of $18,500 due to the restructuring
of The Disney Channel from a premium channel to a tier channel effective July
1, 1996 and $1,300 was due an increase in other revenue producing items. These
increases were partially offset by an $18,300 decrease as a result of a
reduction in the number of subscriptions for service and by a $4,100 decrease
in advertising sales revenue. Of the $65,900 increase in revenues for the nine
months ended September 30, 1996 as compared to the corresponding period in
1995,
-10-
<PAGE> 11
ENSTAR INCOME PROGRAM IV-3, L.P.
RESULTS OF OPERATIONS (Continued)
$105,000 was due to increases in regulated service rates that were implemented
by the Partnership in the second quarter in each of 1995 and 1996, an increase
of $18,500 due to the restructuring of The Disney Channel discussed above and
$9,000 resulted from increases in other revenue producing items. These
increases were partially offset by a $56,300 decrease as a result of a
reduction in the number of subscriptions for service and by a $10,300 decrease
in advertising sales revenue. As of September 30, 1996, the Partnership had
approximately 6,200 homes subscribing to cable service and 2,000 premium
service units. The decrease of 270 premium units from June 30, 1996 was
primarily due to approximately 230 premium units that became tier subscriptions
under the restructuring discussed above.
Service costs increased from $179,000 to $190,300, or by 6.3%, for the
quarter ended September 30, 1996 and decreased from $612,800 to $581,600, or by
5.1%, for the nine months ended September 30, 1996 as compared to the
corresponding periods in 1995. Service costs represent costs directly
attributable to providing cable services to customers. Of the $11,300 increase
in service costs for the three months ended September 30, 1996 as compared to
the corresponding period in 1995, $15,400 was due to an increase in personnel
costs, $8,500 was due to an increase in copyright fees and $2,100 was due to an
increase in system power costs. These increases were partially offset by a
$10,600 increase in capitalization of labor and overhead expense due to a
greater number of capital projects during the quarter and to a $6,600 decrease
in franchise fees. Of the $31,200 decrease in service costs for the nine months
ended September 30, 1996 as compared to the corresponding period in 1995,
$31,800 was due to an increase in capitalization of labor and overhead expense
due to a greater number of capital projects, $8,700 was due to a decrease in
franchise fees, $4,200 was due to a decrease in property taxes and $2,500 was
due to a decrease in personnel costs. These decreases were partially offset by
a $9,800 increase in copyright fees and a $4,600 increase in system power
costs.
General and administrative expenses remained relatively unchanged
increasing from $73,100 to $73,300 (less than one-percent) and increased from
$219,300 to $277,900, or by 26.7%, for the three and nine months ended
September 30, 1996 as compared to the corresponding periods in 1995. Of the
$58,600 increase for the nine months ended September 30, 1996 as compared to
the corresponding period in 1995, $33,700 was due to higher insurance premiums,
$12,200 was due to an increase in personnel costs, $12,100 was due to an
increase in marketing expense and $8,800 was due to expenses allocated by an
affiliate of the General Partner (for operational management services). These
increases were partially offset by a $5,100 decrease in professional fees, a
$4,600 increase in capitalization of labor and overhead expense and a $4,600
decrease in customer billing expense.
Management fees and reimbursed expenses increased from $78,300 to
$84,500, or by 7.9%, and from $223,200 to $237,500, or by 6.4%, for the three
and nine months ended September 30, 1996 as compared to the corresponding
periods in 1995. Reimbursable expenses increased by $4,600 and $11,000 for the
three and nine months ended September 30, 1996 from the corresponding 1995
periods, primarily due to higher allocated personnel costs, professional fees
and computer service expense. Management fees increased by $1,600 and $3,300
for the three and nine months ended September 30, 1996 from the corresponding
1995 periods in direct relation to increased revenues as described above.
Depreciation and amortization expense decreased from $174,800 to
$171,600, or by 1.8%, for the quarter ended September 30, 1996 and increased
from $532,100 to $535,500 (less than one-percent) for the nine months ended
September 30, 1996 as compared to the corresponding periods in 1995. The three
-11-
<PAGE> 12
ENSTAR INCOME PROGRAM IV-3, L.P.
RESULTS OF OPERATIONS (Continued)
month decrease was primarily due to the effect of certain tangible assets
becoming fully depreciated and certain intangible assets becoming fully
amortized. The nine month increase was primarily due to asset additions related
to the upgrade of the Partnership's plant.
Operating income increased from $76,100 to $94,000, or by 23.5%, and
from $144,200 to $165,000, or by 14.4%, for the three and nine months ended
September 30, 1996 as compared to the corresponding periods in 1995 principally
due to increased revenues as described above.
Interest income decreased from $8,000 to $5,600, or by 30.0%, and from
$21,700 to $18,900, or by 12.9%, for the three and nine months ended September
30, 1996 as compared to the corresponding periods in 1995 due to lower interest
rates earned on invested funds and lower cash balances available for
investment.
Interest expense decreased from $15,500 to $14,200, or by 8.4%, and
from $46,400 to $28,600, or by 38.4%, for the three and nine months ended
September 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 $377,800 to its partners
during the three and nine months ended September 30, 1996. The Joint Venture
did not make any distributions during the three months and distributed $350,000
to the Partnership during the nine months ended September 30, 1996.
THE MACOUPIN JOINT VENTURE
The Joint Venture's revenues increased from $422,100 to $463,900, or
by 9.9%, and from $1,227,400 to $1,333,900, or by 8.7%, for the three and nine
months ended September 30, 1996 as compared to the corresponding periods in
1995. Of the $41,800 increase in revenues for the three months ended September
30, 1996 as compared to the corresponding period in 1995, $31,200 was due to
increases in regulated service rates that were implemented by the Partnership
in April 1996, an increase of $13,600 due to the restructuring of The Disney
Channel from a premium channel to a tier channel effective July 1, 1996 and
$7,900 resulted from increases in advertising sales and other revenue producing
items. These increases were partially offset by a $10,900 decrease as a result
of a reduction in the number of subscriptions for premium and tier services.
Of the $106,500 increase in revenues for the nine months ended September 30,
1996 as compared to the corresponding period in 1995, $88,600 was due to
increases in regulated service rates that were implemented by the Partnership
in each of April 1995 and 1996, $18,100 resulted from increases in advertising
sales and other revenue producing items and an increase of $13,600 resulted
from the restructuring of The Disney Channel discussed above. These increases
were partially offset by a $13,800 decrease as a result of a reduction in the
number of subscriptions for premium and tier services. As of September 30,
1996, the Joint Venture had approximately 4,500 homes subscribing to cable
service and 1,800 premium service units. The decrease of 240 premium units from
June 30, 1996 was primarily due to approximately 220 premium units that became
tier subscriptions under the restructuring discussed above.
-12-
<PAGE> 13
ENSTAR INCOME PROGRAM IV-3, L.P.
RESULTS OF OPERATIONS (Continued)
Service costs decreased from $135,500 to $130,300, or by 3.9%, for the
quarter ended September 30, 1996 and increased from $375,100 to $402,000, or by
7.2%, for the nine months ended September 30, 1996 as compared to the
corresponding periods in 1995. Service costs represent costs directly
attributable to providing cable services to customers. Of the $5,200 decrease
in service costs for the three months ended September 30, 1996 as compared to
the corresponding period in 1995, $12,600 was due to a decrease in copyright
fees and $10,700 was due to an increase in capitalization of labor and overhead
expense due to a greater number of capital projects during the quarter ended
September 30, 1996. These decreases were partially offset by an increase of
$10,100 in programming fees charged by program suppliers (including primary
satellite fees) and a $3,700 increase in personnel costs. Of the $26,900
increase in service costs for the nine months ended September 30, 1996 as
compared to the corresponding period in 1995, $18,000 was due to an increase in
personnel costs, $17,400 was due to an increase in programming fees and $16,200
was due to an increase in copyright fees. These increases were partially
offset by an increase of $31,700 in capitalization of labor and overhead
expense due to a greater number of capital projects during the nine month
period. The increases in programming fees during the three and nine months
ended September 30, 1996 included a $3,600 increase due to the restructuring of
The Disney Channel discussed above.
General and administrative expenses decreased from $32,200 to $15,500,
or by 51.9%, and from $103,100 to $91,800, or by 11.0%, for the three and nine
months ended September 30, 1996 as compared to the corresponding periods in
1995. Of the $16,700 decrease for the three months ended September 30, 1996 as
compared to the corresponding period in 1995, $12,300 was due to lower
insurance premiums, $10,400 was due to an increase in capitalization of labor
and overhead expense and $3,200 was due to a decrease in personnel costs. These
decreases were partially offset by a $9,400 increase in marketing expense. Of
the $11,300 decrease for the nine months ended September 30, 1996 as compared
to the corresponding period in 1995, $15,800 was due to an increase in
capitalization of labor and overhead expense, $13,200 was due to lower
insurance premiums and $3,400 was due to a decrease in postage and messenger
expense. These decreases were partially offset by a $14,900 increase in
marketing expense, a $2,500 increase in re-regulation costs and a $2,300
increase in advertising sales expense. Management fees and reimbursed
expenses increased from $56,100 to $64,000, or by 14.1%, and from $167,300 to
$178,800, or by 6.9%, for the three and nine months ended September 30, 1996 as
compared to the corresponding periods in 1995. Reimbursable expenses increased
by $5,800 and by $6,200 for the three and nine months ended September 30, 1996
from the corresponding 1995 periods, primarily due to higher allocated
personnel costs, professional fees and computer service expense. Management
fees increased by $2,100 and $5,300 for the three and nine months ended
September 30, 1996 from the corresponding 1995 periods in direct relation to
increased revenues as described above.
Management fees and reimbursed expenses increased from $56,100 to
$64,000, or by 14.1%, and from $167,300 to $178,800, or by 6.9%, for the three
and nine months ended September 30, 1996 as compared to the corresponding
periods in 1995. Reimbursable expenses increased by $5,800 and by $6,200 for
the three and nine months ended September 30, 1996 from the corresponding 1995
periods, primarily due to higher allocated personnel costs, professional fees
and computer service expense. Management fees increased by $2,100 and $5,300
for the three and nine months ended September 30, 1996 from the corresponding
1995 periods in direct relation to increased revenues as described above.
-13-
<PAGE> 14
ENSTAR INCOME PROGRAM IV-3, L.P.
RESULTS OF OPERTIONS (Concluded)
Depreciation and amortization expense decreased from $155,800 to
$152,700, or by 2.0%, and from $477,500 to $457,700, or by 4.2%, for the three
and nine months ended September 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 $42,500 to $101,400, or by 138%, and
from $104,400 to $203,600, or by 95%, for the three and nine months ended
September 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 $9,100 to
$500, or by 94.5%, and from $22,500 to $9,800, or by 56.4%, for the three and
nine months ended September 30, 1996 as compared to the corresponding periods
in 1995 due to lower average cash balances available for investment.
The Joint Venture's operating income before depreciation and
amortization (EBITDA) as a percentage of revenues increased from 47.0% to 54.8%
and from 47.4% to 49.6% for the three and nine months ended September 30, 1996
as compared to the corresponding periods in 1995. EBITDA increased from
$198,300 to $254,100, or by 28.1%, and from $581,900 to $661,300, or by 13.6%,
for the three and nine months ended September 30, 1996 as compared to the
corresponding period in 1995 primarily due to increased revenues and decreased
general and administrative expense as described above.
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, including its $301,800 share of the
$905,300 rebuild in the community of Auburn, Illinois which is expected to be
completed by year end.
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.
-14-
<PAGE> 15
ENSTAR INCOME PROGRAM IV-3, L.P.
LIQUIDITY AND CAPITAL RESOURCES (Concluded)
The Partnership paid distributions totaling $125,900 and $377,800
during the three and nine months ended September 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.
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Operating activities provided $333,300 less cash in the nine months
ended September 30, 1996 as compared with the prior year period, primarily due
to a $399,000 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 $48,300 after adding back non-cash
items consisting of depreciation, amortization, loss on sale of cable assets
and equity in net income of Joint Venture. Cash used in accounts receivable
and prepaid expenses decreased $17,400.
The Partnership used $80,500 less cash in investing activities in the
nine months ended September 30, 1996 as compared with the prior year period due
to a $350,000 increase in distributions from the Joint Venture, a $10,700
decrease in expenditures for intangible assets, offset by a $281,700 increase
in capital expenditures. Cash used in financing activities used $383,200 more
cash during the nine months ended September 30, 1996 than in the comparable
nine months of 1995 due to the repayment of the revolving bank credit facility.
The Partnership's operating income before depreciation and
amortization (EBITDA) as a percentage of revenues increased from 43.2% to 43.3%
for the three months and decreased from 39.1% to 39.0% for the nine months
ended September 30, 1996 as compared to the corresponding periods in 1995. The
three month increase was primarily caused by increases in revenues as described
above while the nine month decrease was primarily caused by increases in
general and administrative expenses as described above. EBITDA increased from
$250,900 to $265,600, or by 5.9%, for the three months ended September 30, 1996
as compared to the corresponding period in 1995 and increased from $676,300 to
$700,500, or by 3.6%, for the nine months ended September 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: November 12, 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 SEPTEMBER 30 1996, AND THE STATEMENTS OF OPERATIONS FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 565,500
<SECURITIES> 0
<RECEIVABLES> 26,100
<ALLOWANCES> 3,200
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 6,011,800
<DEPRECIATION> 4,486,400
<TOTAL-ASSETS> 3,463,100
<CURRENT-LIABILITIES> 459,600
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,463,100
<SALES> 0
<TOTAL-REVENUES> 1,797,500
<CGS> 0
<TOTAL-COSTS> 1,632,500
<OTHER-EXPENSES> 14,200
<LOSS-PROVISION> 14,300
<INTEREST-EXPENSE> 28,600
<INCOME-PRETAX> 221,900
<INCOME-TAX> 0
<INCOME-CONTINUING> 221,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 221,900
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
