<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, 2000
----------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------------- --------------------
Commission File Number 0-15686
-------------
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
incorporation or organization) Identification Number)
12444 Powerscourt Dr., Suite 100
St. Louis, Missouri 63131
---------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (314) 965-0555
---------------------
--------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Exhibit Index located at Page E-1.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ENSTAR INCOME PROGRAM IV-3, L.P.
CONDENSED BALANCE SHEETS
======================================
<TABLE>
<CAPTION>
December 31, September 30,
1999* 2000
---------------- -----------------
(Unaudited)
ASSETS:
<S> <C> <C>
Cash $ 1,046,200 $ 2,070,500
Accounts receivable, net of allowance for doubtful accounts of $900 and
$10,700, respectively 38,700 58,500
Prepaid expenses and other assets 75,000 37,800
Equity in net assets of Joint Venture 1,105,400 1,206,300
Property, plant and equipment, net of accumulated
depreciation of $4,932,300 and $5,116,600, respectively 1,728,000 1,667,600
Franchise cost, net of accumulated
amortization of $2,416,900 and $2,490,100 157,400 84,700
---------------- -----------------
$ 4,150,700 $ 5,125,400
================ =================
LIABILITIES AND PARTNERSHIP CAPITAL
LIABILITIES:
Accounts payable $ 192,200 $ 104,900
Due to affiliates 148,400 957,600
---------------- -----------------
340,600 1,062,500
---------------- -----------------
PARTNERSHIP CAPITAL (DEFICIT):
General Partner (45,000) (41,400)
Limited Partners 3,855,100 4,104,300
---------------- -----------------
TOTAL PARTNERSHIP CAPITAL 3,810,100 4,062,900
---------------- -----------------
$ 4,150,700 $ 5,125,400
================ =================
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
-----------
* Agrees with audited balance sheet included in the Partnership's Annual Report
on Form 10-K
-2-
<PAGE> 3
ENSTAR INCOME PROGRAM IV-3, L.P.
CONDENSED STATEMENTS OF OPERATIONS
======================================
<TABLE>
<CAPTION>
Unaudited
-----------------------------------
Three months ended
September 30,
-----------------------------------
1999 2000
---------------- ----------------
<S> <C> <C>
REVENUES $ 653,500 $ 622,400
--------------- ----------------
OPERATING EXPENSES:
Service costs 198,800 225,500
General and administrative expenses 91,500 111,200
General partner management fees
and reimbursed expenses 87,300 94,900
Depreciation and amortization 130,700 87,800
--------------- ----------------
508,300 519,400
--------------- ----------------
OPERATING INCOME 145,200 103,000
--------------- ----------------
OTHER INCOME (EXPENSE):
Interest income 9,500 17,700
Interest expense (1,900) (1,400)
--------------- ----------------
7,600 16,300
--------------- ----------------
INCOME BEFORE EQUITY IN NET INCOME
OF JOINT VENTURE 152,800 119,300
EQUITY IN NET INCOME OF JOINT VENTURE 59,500 52,500
--------------- ----------------
NET INCOME $ 212,300 $ 171,800
=============== ================
Net income allocated to General Partner $ 2,100 $ 1,700
=============== ================
Net income allocated to Limited Partners $ 210,200 $ 170,100
=============== ================
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 5.27 $ 4.26
=============== ================
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 39,900 39,900
=============== ================
</TABLE>
The accompanying notes are an integral part of these
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,
-----------------------------------
1999 2000
--------------- ----------------
<S> <C> <C>
REVENUES $ 1,945,700 $ 1,881,800
--------------- ----------------
OPERATING EXPENSES:
Service costs 691,200 622,100
General and administrative expenses 318,300 294,900
General partner management fees
and reimbursed expenses 259,800 263,000
Depreciation and amortization 391,000 278,300
--------------- ----------------
1,660,300 1,458,300
--------------- ----------------
OPERATING INCOME 285,400 423,500
--------------- ----------------
OTHER INCOME (EXPENSE):
Interest income 25,200 47,700
Interest expense (8,400) (6,500)
--------------- ----------------
16,800 41,200
--------------- ----------------
INCOME BEFORE EQUITY IN NET INCOME
OF JOINT VENTURE 302,200 464,700
EQUITY IN NET INCOME OF JOINT VENTURE 177,600 164,000
--------------- ----------------
NET INCOME $ 479,800 $ 628,700
=============== ================
Net income allocated to General Partner $ 4,800 $ 6,300
=============== ================
Net income allocated to Limited Partners $ 475,000 $ 622,400
=============== ================
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 11.90 $ 15.60
=============== ================
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 39,900 39,900
=============== ================
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
-4-
<PAGE> 5
ENSTAR INCOME PROGRAM IV-3, L.P.
CONDENSED STATEMENTS OF CASH FLOWS
======================================
<TABLE>
<CAPTION>
Unaudited
-----------------------------------
Nine months ended
September 30,
-----------------------------------
1999 2000
--------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 479,800 $ 628,700
Adjustments to reconcile net income to net cash
from operating activities:
Equity in net income of Joint Venture (177,600) (164,000)
Depreciation and amortization 391,000 278,300
Changes in:
Accounts receivable, prepaid expenses and other assets (47,400) 17,400
Accounts payable and due to affiliates (190,700) 721,900
--------------- ----------------
Net cash from operating activities 455,100 1,482,300
--------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (95,100) (144,700)
Increase in intangible assets (2,400) (500)
Distributions from Joint Venture 35,000 63,100
--------------- ----------------
Net cash from investing activities (62,500) (82,100)
--------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (377,800) (375,900)
--------------- ----------------
INCREASE IN CASH 14,800 1,024,300
CASH AT BEGINNING OF PERIOD 812,200 1,046,200
--------------- ----------------
CASH AT END OF PERIOD $ 827,000 $ 2,070,500
=============== ================
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
-5-
<PAGE> 6
ENSTAR INCOME/GROWTH PROGRAM IV-3, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
======================================
1. INTERIM FINANCIAL STATEMENTS
The accompanying condensed interim financial statements for
Enstar Income Program IV-3, L.P. (the "Partnership") as of September 30, 2000,
and for the three and nine months ended September 30, 2000 and 1999, are
unaudited. These condensed interim financial statements should be read in
conjunction with the audited financial statements and notes thereto included in
our latest Annual Report on Form 10-K. In the opinion of management, the
condensed interim financial statements reflect all adjustments (consisting only
of normal recurring adjustments) necessary for a fair presentation of the
results of such periods. The results of operations for the three and nine months
ended September 30, 2000, are not necessarily indicative of results for the
entire year.
2. TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES
The Partnership has a management and service agreement (the
"Management Agreement") with Enstar Cable Corporation (the "Manager"), a wholly
owned subsidiary of Enstar Communications Corporation (ECC), the corporate
general partner, pursuant to which the Partnership pays a monthly management fee
of 5% of gross revenues to the Manager. The Partnership's management fee expense
approximated $31,100 and $94,100 for the three and nine months ended September
30, 2000, respectively. For the three and nine months ended September 30, 1999,
the Partnership's management fee expense approximated $32,700 and $97,300,
respectively. The Manager has entered into an identical agreement with Enstar
Cable of Macoupin County (the "Joint Venture"), a Georgia general partnership of
which the Partnership is a co-general partner, except that that the Joint
Venture pays the Manager only a 4% management fee. The Joint Venture's
management fee expense approximated $19,900 and $59,700 for the three and nine
months ended September 30, 2000, respectively. For the three and nine months
ended September 30, 1999, the Joint Venture's management fee expense
approximated $20,000 and $59,800, respectively. In addition, the Joint Venture
is also required to distribute to ECC (which is the corporate general partner of
the Joint Venture as well as of the Partnership) an amount equal to 1% of the
Joint Venture's gross revenues, representing ECC's interest as the corporate
general partner of the Joint Venture. The Joint Venture's management fee expense
to ECC approximated $5,000 and $14,900 during the three and nine months ended
September 30, 2000, respectively. For the three and nine months ended September
30, 1999, the Joint Venture's management fee expense to ECC approximated $5,000
and $15,000, respectively. No management fee is payable to the Manager by the
Partnership in respect of any amounts received by the Partnership from the Joint
Venture. Management fees are non-interest bearing.
The Management Agreement provides that the Partnership
reimburse the Manager for direct expenses incurred on behalf of the Partnership
and the Partnership's allocable share of the Manager's operational costs.
Additionally, Charter Communications Holding Company, LLC and its affiliates
(collectively, "Charter") provide other management and operational services for
the
-6-
<PAGE> 7
ENSTAR INCOME/GROWTH PROGRAM IV-3, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
======================================
Partnership and the Joint Venture. Such services were provided by Falcon
Communications, L.P. and its affiliates (collectively, "Falcon") prior to
November 12, 1999. These expenses are charged to the properties served based
primarily on the Partnership's allocable share of operational cost associated
with the services provided. The Partnership and the Joint Venture reimburse the
affiliates for their allocable share of the affiliates' costs. The total amount
charged to the Partnership for these costs approximated $63,800 and $168,900 for
the three and nine months ended September 30, 2000, respectively. For the three
and nine months ended September 30, 1999, the total amount charged to the
Partnership for these costs approximated $54,600 and $162,500, respectively. The
total amount charged to the Joint Venture for these costs approximated $58,900
and $166,600 for the three and nine months ended September 30, 2000,
respectively. For the three and nine months ended September 30, 1999, the total
amount charged to the Joint Venture for these costs approximated $52,900 and
$147,400, respectively. There is no duplication of reimbursed expenses of the
Manager.
Substantially all programming services have been purchased
through Charter since November 12, 1999. Before that time, substantially all
programming services were purchased through Falcon. Falcon charged the
Partnership and the Joint Venture for these costs based on an estimate of what
ECC could negotiate for such programming services for the 14 partnerships ECC
managed as a group. Charter charges the Partnership and the Joint Venture for
these costs based on its costs. The Partnership and Joint Venture recorded
programming fee expense of $242,800 and $693,300 for the three and nine months
ended September 30, 2000, respectively. For the three and nine months ended
September 30, 1999, programming fee expense for the Partnership and Joint
Venture was $298,500 and $868,200, respectively.
The cable system in one of the Partnership's franchise areas
does not have headend equipment to receive and retransmit its cable television
signal. The system relies on another partnership managed by ECC with systems
located in neighboring communities to provide its cable television signal. The
Partnership is not charged a fee for this service.
3. NET INCOME PER UNIT OF LIMITED PARTNERSHIP INTEREST
Net income per unit of limited partnership interest is based
on the average number of units outstanding during the periods presented. For
this purpose, net income has been allocated 99% to the Limited Partners and 1%
to the General Partner. The General Partner does not own units of partnership
interest in the Partnership, but rather holds a participation interest in the
income, losses and distributions of the Partnership.
-7-
<PAGE> 8
ENSTAR INCOME/GROWTH PROGRAM IV-3, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
======================================
4. SALE OF CABLE SYSTEMS
On June 21, 2000, (as amended on September 29, 2000) the
Partnership, together with certain affiliates, (collectively, the "Sellers")
entered into a purchase and sale agreement (the "Gans I Agreement") with
Multimedia Acquisition Corp., an affiliate of Gans Multimedia Partnership, (the
"Purchaser"). The Gans I Agreement provides for the Purchaser to acquire the
assets comprising the Partnership's cable system serving Fulton, Kentucky, as
well as certain assets of other affiliates. The aggregate purchase price payable
to the Sellers pursuant to the Gans I Agreement is $27,621,500 in cash (subject
to normal closing adjustments). Of that amount, $3,396,727 (subject to normal
closing adjustments) is payable to the Partnership. The allocation of the
purchase price among each of the Sellers was assigned by the Purchaser for each
of the systems.
On August 8, 2000, (as amended on September 29, 2000) the
Partnership and Joint Venture, together with certain affiliates, (collectively,
the "Selling Affiliates") entered into a purchase and sale agreement (the "Gans
II Agreement") with Multimedia Acquisition Corp., an affiliate of Gans
Multimedia Partnership, (the "Buyer"). The Gans II Agreement provides for the
Buyer to acquire the assets comprising the Partnership's and Joint Venture's
cable systems serving Macoupin County and Shelbyville, Illinois, as well as
certain assets of other affiliates. The aggregate purchase price payable to the
Selling Affiliates pursuant to the Gans II Agreement is $95,574,600 in cash
(subject to normal closing adjustments). Of that amount, $10,378,700 (subject to
normal closing adjustments) is payable to the Partnership. The allocation of the
purchase price among each of the Selling Affiliates was assigned by the Buyer
for each of the systems.
Both of these purchase and sale agreements are subject to
numerous closing conditions, including without limitation: (a) receipt of the
necessary governmental consents to transfer franchises covering an aggregate of
90% of the subscribers to be sold; (b) receipt of certain other material
consents and approvals required for the consummation of the sale; (c) receipt of
the necessary approvals of the Limited Partners; and (d) other standard closing
conditions. With respect to clause (c) above, completion of the transaction is
contingent on the Limited Partners of the Partnership and the other selling
affiliates voting to approve the sale.
-8-
<PAGE> 9
ENSTAR INCOME/GROWTH PROGRAM IV-3, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
======================================
5. EQUITY IN NET ASSETS OF JOINT VENTURE
The Partnership and two affiliated partnerships (Enstar Income
Program IV-1, L.P. and Enstar Income Program IV-2, L.P.) each own one-third
(1/3) of the Joint Venture. Each of the co-partners share equally in the profits
and losses of the Joint Venture. The investment in the Joint Venture is
accounted for on the equity method. Summarized financial information for the
Joint Venture as of September 30, 2000, and December 31, 1999, and the results
of its operations for the three and nine months ended September 30, 2000 and
1999, have been included. The results of operations for the three and nine
months ended September 30, 2000, are not necessarily indicative of results for
the entire year.
<TABLE>
<CAPTION>
December 31, September 30,
1999* 2000
--------------- ---------------
(Unaudited)
<S> <C> <C>
Current assets $ 1,807,500 $ 2,688,500
Investment in cable television properties, net 1,730,200 1,612,000
Other assets 1,200 300
--------------- ---------------
$ 3,538,900 $ 4,300,800
=============== ===============
Current liabilities $ 222,700 $ 681,800
Venturers' capital 3,316,200 3,619,000
--------------- ---------------
$ 3,538,900 $ 4,300,800
=============== ===============
</TABLE>
---------
* Agrees with audited balance sheet included in the Partnership's Annual
Report on Form 10-K.
-9-
<PAGE> 10
ENSTAR INCOME/GROWTH PROGRAM IV-3, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
======================================
<TABLE>
<CAPTION>
Unaudited
-------------------------------------
Three months ended
September 30,
-------------------------------------
1999 2000
--------------- ---------------
<S> <C> <C>
REVENUES $ 499,900 $ 497,100
--------------- ---------------
OPERATING EXPENSES:
Service costs 174,700 173,300
General and administrative expenses 30,100 42,900
General partner management fees and reimbursed expenses 77,900 83,800
Depreciation and amortization 54,000 60,100
--------------- ---------------
336,700 360,100
--------------- ---------------
OPERATING INCOME 163,200 137,000
OTHER INCOME (EXPENSE):
Interest income 16,600 21,600
Interest expense (1,500) (900)
--------------- ---------------
NET INCOME $ 178,300 $ 157,700
=============== ===============
</TABLE>
-10-
<PAGE> 11
ENSTAR INCOME/GROWTH PROGRAM IV-3, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
======================================
<TABLE>
<CAPTION>
Unaudited
-------------------------------------
Nine months ended
September 30,
-------------------------------------
1999 2000
--------------- ---------------
<S> <C> <C>
REVENUES $ 1,495,800 $ 1,492,800
--------------- ---------------
OPERATING EXPENSES:
Service costs 497,700 507,500
General and administrative expenses 117,400 144,300
General partner management fees and reimbursed expenses 222,200 241,200
Depreciation and amortization 163,600 169,600
--------------- ---------------
1,000,900 1,062,600
--------------- ---------------
OPERATING INCOME 494,900 430,200
OTHER INCOME (EXPENSE):
Interest income 44,400 67,400
Interest expense (6,600) (5,400)
--------------- ---------------
NET INCOME $ 532,700 $ 492,200
=============== ===============
</TABLE>
-11-
<PAGE> 12
ENSTAR INCOME PROGRAM IV-3, L.P.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INTRODUCTION
This report includes certain forward-looking statements
regarding, among other things, our future results of operations, regulatory
requirements, competition, capital needs and general business conditions
applicable to the Partnership. Such forward-looking statements involve risks and
uncertainties including, without limitation, the uncertainty of legislative and
regulatory changes and the rapid developments in the competitive environment
facing cable television operators such as the Partnership. In addition to the
information provided herein, reference is made to our Annual Report on Form 10-K
for the year ended December 31, 1999, for additional information regarding such
matters and the effect thereof on the Partnership's business.
The Partnership conducts its cable television business
operations both (i) through the direct ownership and operation of certain cable
television systems and (ii) through its participation as a partner with a
one-third (1/3) interest in Enstar Cable of Macoupin County (the "Joint
Venture"). Our participation is equal to our affiliated partners (Enstar Income
Program IV-1, L.P. and Enstar Income Program IV-2, L.P.) with respect to capital
contributions, obligations and commitments, and results of operations.
Accordingly, in considering the financial condition and results of operations,
consideration must also be made of those matters as they relate to the Joint
Venture. The following discussion reflects such consideration and provides a
separate discussion for each entity.
RESULTS OF OPERATIONS
THE PARTNERSHIP
Our revenues decreased from $653,500 to $622,400, or by 4.8%,
and from $1,945,700 to $1,881,800, or by 3.3%, for the three and nine months
ended September 30, 2000, as compared to the corresponding periods in 1999. Of
the $31,100 decrease for the three months ended September 30, 2000, $41,350 was
due to decreases in the number of subscribers for basic, premium and tier
services and $8,150 was due to decreases in other revenue producing items. The
decrease was partially offset by a $18,400 increase due to increases in
regulated service rates that we implemented in 1999. Of the $63,900 decrease for
the nine months ended September 30, 2000, $126,150 was due to decreases in the
number of subscribers for basic, premium and tier services and $19,350 was due
to decreases in other revenue producing items. The decrease was partially offset
by a $81,600 increase due to increases in regulated service rates that we
implemented in 1999. As of September 30, 2000, the Partnership had approximately
5,300 basic subscribers and 2,100 premium service units.
Effective with the acquisition of Falcon Communications, L.P.
(Falcon) by Charter Communications Holdings Company, LLC (Charter) on November
12, 1999, certain activities previously incurred at the Partnership and expensed
through service cost and general and administrative expense have been either
eliminated by Charter, or have been reimbursed by the Partnership based on
Charter's costs incurred. These reimbursed costs are included in general partner
management fees and
-12-
<PAGE> 13
ENSTAR INCOME PROGRAM IV-3, L.P.
reimbursed expenses on the Partnership's statements of operations. The total of
service costs, general and administrative expenses and general partner
management fees and reimbursed expenses increased from $377,600 to $431,600, or
by 14.3% and from $1,269,300 to $1,180,000, or by 7.0%, for the three and nine
months ended September 30, 2000, as compared to the corresponding periods in
1999.
Our service costs increased from $198,800 to $225,500, or by 13.4%, and
decreased from $691,200 to $622,100, or by 10.0%, for the three and nine months
ended September 30, 2000, as compared to the corresponding periods of 1999.
Service costs represent costs directly attributable to providing cable services
to customers. For the three months ended September 30, 2000, the increase was
attributable to higher payroll expense, partially offset by lower programming
fees resulting from lower rates that Charter has extended to the Partnership.
For the nine months ended September 30, 2000, the decrease was primarily due to
lower programming fees resulting from lower rates that Charter has extended to
the Partnership.
Our general and administrative expenses increased from $91,500
to $111,200, or by 21.5%, and decreased from $318,300 to $294,900, or by 7.4%
for the three and nine months ended September 30, 2000, as compared to the
corresponding periods in 1999. The increase was primarily due to increased bad
debt expense. The decrease was due to lower marketing expense.
Our management fees and reimbursed expenses increased from
$87,300 to $94,900, or by 8.7%, and from $259,800 to $263,000, or by 1.2%, for
the three and nine months ended September 30, 2000, as compared to the
corresponding periods in 1999. Management fees decreased slightly in direct
relation to decreased revenues, as discussed above. Reimbursed expenses
increased due to a third quarter increase in bank fees.
Our depreciation and amortization expense decreased from
$130,700 to $87,800, or by 32.8%, and from $391,000 to $278,300, or by 28.8%,
for the three and nine months ended September 30, 2000, as compared to the
corresponding periods in 1999. The decrease was due to the impact of certain
tangible assets becoming fully depreciated and certain intangible assets
becoming fully amortized.
Due to the factors described above, our operating income
decreased from $145,200 to $103,000, or by 29.1%, and increased from $285,400 to
$423,500, or by 48.4%, for the three and nine months ended September 30, 2000,
as compared to the corresponding periods in 1999.
Our interest income, net of interest expense, increased from
$7,600 to $16,300, or by 114.5%, and from $16,800 to $41,200, or by 145.2%, for
the three and nine months ended September 30, 2000, as compared to the
corresponding periods in 1999. The increase was primarily due to higher average
cash balances available for investment and higher average interest rates earned
on invested funds in the current year period.
The equity in net income of the Joint Venture decreased from
$59,500 to $52,500, or by 11.8%, and from $177,600 to $164,000, or by 7.7%, for
the three and nine months ended September 30, 2000, as compared to the
corresponding periods in 1999. The decrease was due to factors described below.
-13-
<PAGE> 14
ENSTAR INCOME PROGRAM IV-3, L.P.
Due to the factors described above, our net income decreased
from $212,300 to $171,800, or by 19.1%, and increased from $479,800 to $628,700,
or by 31.0%, for the three and nine months ended September 30, 2000, as compared
to the corresponding periods in 1999.
Based on our experience in the cable television industry, we
believe that operating income before depreciation and amortization, or EBITDA,
and related measures of cash flow serve as important financial analysis tools
for measuring and comparing cable television companies in several areas, such as
liquidity, operating performance and leverage. EBITDA is not a measurement
determined under generally accepted accounting principles (GAAP) and does not
represent cash generated from operating activities in accordance with GAAP.
EBITDA should not be considered by the reader as an alternative to net income as
an indicator of financial performance or as an alternative to cash flows as a
measure of liquidity. In addition, the definition of EBITDA may not be identical
to similarly titled measures used by other companies. EBITDA as a percentage of
revenues decreased from 42.2% to 30.7% and increased from 34.8% to 37.3% during
the three and nine months ended September 30, 2000, as compared to the
corresponding periods in 1999. The changes in EBITDA as a percentage of revenues
were primarily due to the factors described above. EBITDA decreased from
$275,900 to $190,800, or by 30.1%, and increased from $676,400 to $701,800, or
by 3.8%, for the three and nine months ended September 30, 2000, as compared to
the corresponding periods in 1999.
The Partnership distributed $375,900 to our partners during
the nine months ended September 30, 2000. For the nine months ended September
30, 1999, the Partnership distributed $377,800 to our partners.
THE JOINT VENTURE
The Joint Venture's revenues decreased from $499,900 to
$497,100, or by less than 1.0%, and from $1,495,800 to $1,492,800, or by less
than 1.0%, for the three and nine months ended September 30, 2000, as compared
to the corresponding periods in 1999. Of the $2,800 decrease in revenues for the
three months ended September 30, 2000, $29,900 was due to decreases in the
number of subscribers for basic, premium, and equipment rental services and $400
was due to a decrease in other revenue producing items. The decreases were
partially offset by a $27,500 increase in regulated service rates that we
implemented in 2000. Of the $3,000 decrease in revenues for the nine months
ended September 30, 2000, $68,500 was due to a decrease in the number of
subscribers for basic, premium, and equipment rental services and $1,400 was due
to a decrease in other revenue producing items. The decrease was partially
offset by a $66,900 increase in the rates. As of September 30, 2000, we had
approximately 4,300 basic subscribers and 1,500 premium service units.
Effective with the acquisition of Falcon Communications, L.P.
(Falcon) by Charter Communications Holdings Company, LLC (Charter) on November
12, 1999, certain activities previously incurred at the Joint Venture and
expensed through service cost and general and administrative expense have been
either eliminated by Charter, or have been reimbursed by the Joint Venture based
on Charter's costs incurred. These reimbursed costs are included in general
partner management fees and reimbursed expenses on the Joint Venture's
statements of operations. The total of service costs, general and administrative
expenses and general partner management fees and reimbursed expenses increased
from $282,700 to $300,000, or by 6.1%, and from $837,300 to
-14-
<PAGE> 15
ENSTAR INCOME PROGRAM IV-3, L.P.
$893,000, or by 6.7%, for the three and nine months ended September 30, 2000, as
compared to the corresponding periods in 1999.
Service costs decreased from $174,700 to $173,300, or by less
than 1.0%, and increased from $497,700 to $507,500, or 2.0% for the three and
nine months ended September 30, 2000, as compared to the corresponding periods
in 1999. For the three months ended September 30, 2000, the decrease was
primarily due to the lower programming rates that Charter has extended to us.
The decrease was partially offset due to higher personnel costs resulting from
staff additions. For the nine months ended September 30, 2000, the increase was
primarily due to higher personnel costs resulting from staff additions, which
was partially offset due to the lower programming rates mentioned above and a
decrease in subscribers. In addition, a $40,000 programming rebate was received
in prior year, which decreased service costs for the nine months ended September
30, 1999.
General and administrative expenses increased from $30,100 to
$42,900, or by 42.5%, and from $117,400 to $144,300, or by 22.9%, for the three
and nine months ended September 30, 2000, as compared to the corresponding
periods in 1999. The increase was due to higher bad debt expense incurred in
2000 and in the costs associated with customer billings.
General partner management fees and reimbursed expenses
increased from $77,900 to $83,800, or by 7.6%, and from $222,200 to $241,200, or
by 8.6%, for the three and nine months ended September 30, 2000, as compared to
the corresponding periods in 1999. As discussed above, Charter now performs
certain management and operational functions formerly performed at the Joint
Venture.
Depreciation and amortization expense increased from $54,000
to $60,100, or by 11.3%, and from $163,600 to $169,600, or by 3.7%, for the
three and nine months ended September 30, 2000, as compared to the corresponding
periods in 1999, due to an increase in capital expenditures for cable system
upgrades.
Due to the factors described above, operating income decreased
from $163,200 to $137,000, or by 16.1%, and from $494,900 to $430,200, or by
13.1%, for the three and nine months ended September 30, 2000, as compared to
the corresponding periods in 1999.
Interest income, net of interest expense, increased from
$15,100 to $20,700, or by 37.1% and from $37,800 to $62,000, or by 64.0% for the
three and nine months ended September 30, 2000, as compared to the corresponding
periods in 1999. The increase was primarily due to higher average cash balances
available for investment and due to higher average interest rates earned on
invested funds during the current year period.
Due to the factors described above, the Joint Venture's net
income decreased from $178,300 to $157,700, or by 11.6%, and from $532,700 to
$492,200, or by 7.6%, for the three and nine months ended September 30, 2000, as
compared to the corresponding periods in 1999.
Based on its experience in the cable television industry, the
Joint Venture believes that operating income before depreciation and
amortization, or EBITDA, and related measures of cash flow serve as important
financial analysis tools for measuring and comparing cable television companies
in several areas, such as liquidity, operating performance and leverage. EBITDA
is not a measurement
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ENSTAR INCOME PROGRAM IV-3, L.P.
determined under generally accepted accounting principles (GAAP) and does not
represent cash generated from operating activities in accordance with GAAP.
EBITDA should not be considered by the reader as an alternative to net income,
as an indicator of financial performance or as an alternative to cash flows as a
measure of liquidity. In addition, the definition of EBITDA may not be identical
to similarly titled measures used by other companies. EBITDA as a percentage of
revenues decreased from 43.4% to 39.6% and from 44.0% to 40.2% during the three
and nine months ended September 30, 2000, as compared to the corresponding
periods in 1999. The decrease was primarily due to the factors described above.
EBITDA decreased from $217,200 to $197,100, or by 9.3%, and from $658,500 to
$599,800, or by 8.9%, for the three and nine months ended September 30, 2000, as
compared to the corresponding periods in 1999.
The Joint Venture distributed $63,100 and $35,000 to the
Partnership for the nine months ended September 30, 2000 and 1999, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Our primary objective is to distribute to our partners all
available cash flow from the Partnership's and Joint Venture's operations and
proceeds from the sale of the Partnership's and Joint Venture's cable television
systems, if any, after providing for expenses, debt service and capital
requirements relating to the expansion, improvement and upgrade of such cable
television systems.
In accordance with the partnership agreement, Enstar
Communications Corporation (ECC) has implemented a plan for liquidating the
Partnership. On June 21, 2000, (as amended on September 29, 2000) the
Partnership, together with certain affiliates, (collectively, the "Sellers")
entered into a purchase and sale agreement (the "Gans I Agreement") with
Multimedia Acquisition Corp., an affiliate of Gans Multimedia Partnership, (the
"Purchaser"). The Gans I Agreement provides for the Purchaser to acquire the
assets compromising the Partnership's cable system serving Fulton, Kentucky, as
well as certain assets of other affiliates. The aggregate purchase price payable
to the Sellers pursuant to the Gans I Agreement is $27,621,500 in cash (subject
to normal closing adjustments). Of that amount, $3,396,727 (subject to closing
adjustments) is payable to the Partnership. The allocation of the purchase price
among each of the Sellers was assigned by the Purchaser for each of the systems.
On August 8, 2000, (as amended on September 29, 2000) the
Partnership and the Joint Venture, together with certain affiliates,
(collectively, the "Selling Affiliates") entered into a purchase and sale
agreement (the "Gans II Agreement") with Multimedia Acquisition Corp., an
affiliate of Gans Multimedia Partnership, (the "Buyer"). The Gans II Agreement
provides for the Buyer to acquire the assets comprising the Partnership's and
Joint Venture's cable systems serving Macoupin County and Shelbyville, Illinois,
as well as certain assets of other affiliates. The aggregate purchase price
payable to the Selling Affiliates pursuant to the Gans II Agreement is
$95,574,600 in cash (subject to normal closing adjustments). Of that amount,
$10,378,700 (subject to closing adjustments) is payable to the Partnership. The
allocation of the purchase price among each of the Selling Affiliates was
assigned by the Buyer for each of the systems.
Both of these purchase and sale agreements are subject to
numerous closing conditions, including without limitation: (a) receipt of the
necessary governmental consents to transfer franchises
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ENSTAR INCOME PROGRAM IV-3, L.P.
covering an aggregate of 90% of the subscribers to be sold; (b) receipt of
certain other material consents and approvals required for the consummation of
the sale; (c) receipt of the necessary approvals of the Limited Partners; and
(d) other standard closing conditions. With respect to clause (c) above,
completion of the transaction is contingent on the Limited Partners of the
Partnership and the other selling affiliates voting to approve the sale.
Enstar Communications Corporation is currently preparing a
proxy for submission to the Partnership's Limited Partners for the purpose of
approving or disapproving the sale. If all of the Joint Venture's assets are
sold, Enstar Communications Corporation will proceed to liquidate the
Partnership and Joint Venture following the settlement of their final
liabilities.
The Partnership and the Joint Venture rely upon the
availability of cash generated from operations and possible borrowings to fund
their ongoing expenses and capital requirements. In general, these requirements
involve expansion, improvement and upgrade of the Partnership's and Joint
Venture's existing cable television systems.
The Joint Venture is required by a provision of its franchise
agreement with the city of Carlinville, Illinois to upgrade its cable system in
that community by December 2001 at an estimated cost of $1,100,000, and plans to
upgrade its cable plant in Girard, Illinois at an estimated cost of
approximately $1,000,000 provided the franchise agreement is renewed. The
franchise agreement under negotiation with Girard is expected to require
completion of a plant upgrade in the franchise area within two years. The
Partnership and the Joint Venture are budgeted to spend approximately $685,800
in 2000. The Partnership and the Joint Venture spent $192,800 during the nine
months ended September 30, 2000, on their cable systems.
Falcon purchased insurance coverage for all of the cable
television properties owned or managed by it to cover damage to cable
distribution plant and subscriber connections and against business interruptions
resulting from such damage. This coverage is subject to a significant annual
deductible which applies to all of the cable television properties owned or
formerly managed by Falcon through November 12, 1999, and currently managed by
Charter, including those of the partnership and the Partnership and Joint
Venture.
Approximately 81% of the Partnership's and Joint Venture's
subscribers are served by their systems in Shelbyville and Carlinville, Illinois
and neighboring communities. Significant damage to these systems due to seasonal
weather conditions or other events could have a material adverse effect on the
Partnership's and Joint Venture's liquidity and cash flows. The Partnership and
Joint Venture continue to purchase insurance coverage in amounts their
management views as appropriate for all other property, liability, automobile,
workers' compensation and other types of insurable risks.
Operating activities for the Partnership provided $1,027,200
more cash during the nine months ended September 30, 2000, than in the
corresponding period of 1999. The Partnership used $912,600 less cash to pay
liabilities owed to ECC and third party creditors, than in the corresponding
period in 1999, due to differences in the timing of payments. Changes in
accounts receivable, prepaid expenses and other assets provided $64,800 more
cash for the nine months ended September 30, 2000, than in the corresponding
period in 1999, due to differences in the timing of receivable collections and
the payment of prepaid expenses.
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ENSTAR INCOME PROGRAM IV-3, L.P.
Investing activities used $18,900 more cash in the nine months
ended September 30, 2000, than in the corresponding period of 1999. The change
was due to an increase in capital expenditures, offset by an increase in
distributions from the Joint Venture.
INFLATION
Certain of the Partnership's and the Joint Venture's expenses,
such as those for wages and benefits, equipment repair and replacement, and
billing and marketing generally increase with inflation. However, the
Partnership and the Joint Venture do not believe that their financial results
have been, or will be, adversely affected by inflation in a material way,
provided that the Partnership and the Joint Venture are able to increase their
service rates periodically, of which there can be no assurance.
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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) Exhibits
10.1 Amendment dated September 29, 2000, of the Asset
Purchase Agreement dated June 21, 2000, by and
among Multimedia Acquisition Corp., as Buyer, and
Enstar Income Program 1984-1, L.P., Enstar Income
Program IV-3, L.P., Enstar Income/Growth Program
Six-A, L.P., Enstar VII, Enstar VIII and Enstar X,
Ltd., as Sellers.(1)
10.2 Amendment dated September 29, 2000, of the Asset
Purchase Agreement dated August 8, 2000, by and
among Multimedia Acquisition Corp., as Buyer, and
Enstar Income Program II-1, L.P., Enstar Income
Program II-2, L.P., Enstar Income Program IV-3,
L.P., Enstar Income/Growth Program Six-A, L.P.,
Enstar IX, Ltd., Enstar XI, Ltd., Enstar IV/PBD
Systems Venture, Enstar Cable of Cumberland Valley
and Enstar Cable of Macoupin County, as Sellers.
(2)
27.1 Financial Data Schedule.*
(b) Reports on Form 8-K
- None
-------
* Filed herewith
(1) Incorporated by reference to the report on Form 10-Q of Enstar
Income/Growth Program Six-A, L.P. filed on November 13, 2000
(File No. 00017687).
(2) Incorporated by reference to the report on Form 10-Q of Enstar Income
Program IV-1, L.P. filed on November 13, 2000 (File No. 00015705).
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<PAGE> 20
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 13, 2000 By: /s/ Kent D. Kalkwarf
---------------------
Kent D. Kalkwarf
Executive Vice President and Chief
Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
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<PAGE> 21
EXHIBIT INDEX
Exhibit
Number Description
10.1 Amendment dated September 29, 2000, of the Asset Purchase Agreement
dated June 21, 2000, by and among Multimedia Acquisition Corp., as
Buyer, and Enstar Income Program 1984-1, L.P., Enstar Income Program
IV-3, L.P., Enstar Income/Growth Program Six-A, L.P., Enstar VII,
Enstar VIII and Enstar X, Ltd., as Sellers (incorporated by reference
to the Current Report on Form 10-Q of Enstar Income/Growth Program
Six-A, L.P. filed on November 13, 2000, File No. 00017687).
10.2 Amendment dated September 29, 2000, of the Asset Purchase Agreement,
dated August 8, 2000, by and among Multimedia Acquisition Corp., as
Buyer, and Enstar Income Program II-1, L.P., Enstar Income Program
II-2, L.P., Enstar Income Program IV-1, L.P., Enstar Income Program
IV-2, L.P., Enstar Income Program IV-3, L.P., Enstar Income/Growth
Program Five-A, L.P., Enstar Income/Growth Program Five-B, L.P., Enstar
Income/Growth Program Six-A, L.P., Enstar IX and Enstar XI, Ltd., as
Sellers (incorporated by reference to the Current Report on Form 10-Q
of Enstar Income Program IV-1, L.P. filed on November 13, 2000, File
No. 00015705).
27.1 Financial Data Schedule.
E-1
