<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 March 31, 1997
----------------------
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 0-16789
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Enstar Income/Growth Program Five-B, L.P.
- -----------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Georgia 58-1713008
- --------------------------------------- --------------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
10900 Wilshire Boulevard - 15th Floor
Los Angeles, California 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 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
--- ---
<PAGE> 2
PART I - FINANCIAL INFORMATION
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
CONDENSED BALANCE SHEETS
=========================================
<TABLE>
<CAPTION>
December 31, March 31,
1996* 1997
------------ -----------
(Unaudited)
<S> <C> <C>
ASSETS:
Cash $ 4,500 $ 2,100
Due from affiliates 2,900 2,300
Equity in net assets of Joint Venture 4,294,000 4,287,200
------------ -----------
$ 4,301,400 $ 4,291,600
============ ===========
</TABLE>
LIABILITIES AND PARTNERSHIP CAPITAL
-----------------------------------
<TABLE>
<S> <C> <C>
LIABILITIES:
Accounts payable $ 16,000 $ 15,900
----------- -----------
PARTNERSHIP CAPITAL (DEFICIT):
General partners (81,200) (81,300)
Limited partners 4,366,600 4,357,000
----------- -----------
TOTAL PARTNERSHIP CAPITAL 4,285,400 4,275,700
----------- -----------
$ 4,301,400 $ 4,291,600
=========== ===========
</TABLE>
*As presented in the audited financial statements.
See accompanying notes to condensed financial statements.
-2-
<PAGE> 3
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
CONDENSED STATEMENTS OF OPERATIONS
==========================================
<TABLE>
<CAPTION>
Unaudited
-----------------------------
Three months ended
March 31,
------------------------------
1996 1997
------------- ------------
<S> <C> <C>
OPERATING EXPENSES:
General and administrative expenses $ (8,600) $ (7,100)
----------- ----------
OTHER EXPENSE:
Interest expense - (800)
----------- ----------
LOSS BEFORE EQUITY IN NET LOSS
OF JOINT VENTURE (8,600) (7,900)
EQUITY IN NET LOSS OF JOINT VENTURE (111,800) (1,800)
----------- ---------
NET LOSS $ (120,400) $ (9,700)
=========== =========
NET LOSS PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ (1.99) $ (.16)
=========== =========
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 59,830 59,830
=========== =========
</TABLE>
See accompanying notes to condensed financial statements.
-3-
<PAGE> 4
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
STATEMENTS OF CASH FLOWS
=========================================
<TABLE>
<CAPTION>
Unaudited
----------------------------
Three months ended
March 31,
----------------------------
1996 1997
----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (120,400) $ (9,700)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Equity in net loss of Joint Venture 111,800 1,800
Distributions from Joint Venture 3,500 5,000
Increase (decrease) from changes in:
Due from affiliates 4,300 600
Accounts payable and due to affiliates 6,000 (100)
-------- --------
Net cash provided by (used in) operating activities 5,200 (2,400)
-------- --------
INCREASE (DECREASE) IN CASH 5,200 (2,400)
CASH AT BEGINNING OF PERIOD 700 4,500
-------- --------
CASH AT END OF PERIOD $ 5,900 $ 2,100
======== ========
</TABLE>
See accompanying notes to condensed financial statements.
-4-
<PAGE> 5
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
=========================================
1. INTERIM FINANCIAL STATEMENTS
The accompanying condensed interim financial statements for the three
months ended March 31, 1997 and 1996 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 months ended March 31, 1997 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
"Agreement") with a wholly owned subsidiary of the Corporate General Partner
(the "Manager") pursuant to which it pays a monthly management fee of 5% of
gross revenues. The Agreement also provides that the Partnership will
reimburse the Manager for (i) direct expenses incurred on behalf of the
Partnership and (ii) the Partnership's allocable share of the Manager's
operational costs. No such costs and expenses were incurred or charged to the
Partnership for these services during the three months ended March 31, 1997.
The Manager has entered into an identical agreement with Enstar Cable of
Cumberland Valley, a Georgia general partnership, of which the Partnership is
co-general partner (the "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 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 the Corporate General Partner of the
Joint Venture. No management fee is payable to the Manager by the Partnership
in respect of any amounts received by the Partnership from the Joint Venture,
and there is no duplication of reimbursed expenses and costs of the Manager.
The Joint Venture paid the Manager management fees of approximately $72,100 and
reimbursement of expenses of approximately $71,300 under its management
agreement for the three months ended March 31, 1997. In addition, the Joint
Venture paid the Corporate General Partner approximately $18,000 in respect of
its 1% special interest during the three months ended March 31, 1997.
Management fees and reimbursed expenses due the Corporate General Partner are
non-interest bearing.
The Joint Venture also receives certain system operating management
services from affiliates of the Corporate General Partner in addition to the
Manager, due to the fact that there are no such employees directly employed by
the Partnership. The Joint Venture reimburses the affiliates for the Joint
Venture's allocable share of the affiliates' operational costs. The total
amount charged to the Joint Venture for these costs approximated $151,600 for
the three months ended March 31, 1997. No management fee is payable to the
affiliates by the Joint Venture and there is no duplication of reimbursed
expenses and costs paid to the Manager.
-5-
<PAGE> 6
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(CONTINUED)
=========================================
2. TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES (CONCLUDED)
Certain programming services have been purchased through an affiliate
of the Joint Venture. In turn, the affiliate charges the Joint Venture for
these costs based on an estimate of what the Corporate General Partner could
negotiate for such programming services for the 15 partnerships managed by the
Corporate General Partner as a group. The Joint Venture recorded programming
fee expense of $332,900 for the three months ended March 31, 1997. Programming
fees are included in service costs in the statements of operations.
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 1996 amounts have been reclassified to conform to the 1997
presentation.
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<PAGE> 7
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(CONTINUED)
=========================================
5. EQUITY IN NET ASSETS OF JOINT VENTURE
The Partnership and an affiliated partnership (Enstar Income/Growth
Program Five-A, L.P.) each own 50% 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 March 31, 1997 and
December 31, 1996 and the results of its operations for the three months ended
March 31, 1997 and 1996 have been included. The results of operations for the
three months ended March 31, 1997 are not necessarily indicative of results for
the entire year.
<TABLE>
<CAPTION>
December 31, March 31,
1996* 1997
------------ -----------
(Unaudited)
<S> <C> <C>
Current assets $ 2,872,100 $ 1,617,600
Investment in cable television properties, net 12,807,100 12,238,600
Other assets 153,400 139,100
------------ ------------
$ 15,832,600 $ 13,995,300
============ ============
Current liabilities $ 1,177,400 $ 1,353,700
Long-term debt 6,067,200 4,067,200
Venturers' capital 8,588,000 8,574,400
------------ ------------
$ 15,832,600 $ 13,995,300
============ ============
</TABLE>
*As presented in the audited financial statements.
-7-
<PAGE> 8
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(CONCLUDED)
=========================================
5. EQUITY IN NET ASSETS OF JOINT VENTURE (CONCLUDED)
<TABLE>
<CAPTION>
Unaudited
--------------------------------
Three months ended
March 31,
--------------------------------
1996 1997
------------ ------------
<S> <C> <C>
REVENUES $ 1,591,800 $ 1,802,400
------------ ------------
OPERATING EXPENSES:
Service costs 591,700 624,200
General and administrative expenses 204,900 237,300
General Partner management fees
and reimbursed expenses 145,900 161,400
Depreciation and amortization 704,600 663,700
------------ ------------
1,647,100 1,686,600
------------ ------------
OPERATING INCOME (LOSS) (55,300) 115,800
OTHER INCOME (EXPENSE):
Interest income 14,000 27,100
Interest expense (182,300) (146,400)
----------- -----------
NET LOSS $ (223,600) $ (3,500)
=========== ===========
</TABLE>
-8-
<PAGE> 9
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, 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. 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 1996 Telecom Act.
There can be no assurance as to what, if any, further 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
historical 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, 1996 for additional information regarding
such matters and the effect thereof on the Partnership's business.
All of the Partnership's cable television business operations are
conducted through its participation as a partner with a 50% interest in Enstar
Cable of Cumberland Valley. The Partnership participates equally with its
affiliated partner (Enstar Income/Growth Program Five-A, L.P.) under the Joint
Venture Agreement with respect to capital contributions, obligations and
commitments, and results of operations. Accordingly in considering the
financial condition and results of operations of the Partnership, 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
All of the Partnership's cable television business operations, which
began in January 1988, are conducted through its participation as a partner in
the Joint Venture. The Joint Venture distributed an aggregate of $5,000 to the
Partnership, representing the Partnership's pro rata share of the cash flow
distributed from the Joint Venture's operations during the three months ended
March 31, 1997. The Partnership did not pay distributions to its partners
during the three months ended March 31, 1997.
-9-
<PAGE> 10
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
RESULTS OF OPERATIONS (CONTINUED)
THE JOINT VENTURE
The Joint Venture's revenues increased from $1,591,800 to $1,802,400,
or by 13.2%, for the quarter ended March 31, 1997 as compared to the
corresponding period in 1996. Of the $210,600 increase, $208,700 was due to
increases in regulated service rates that were implemented by the Joint Venture
in the second, third and fourth quarters of 1996, $50,700 was due to the
restructuring of The Disney Channel from a premium channel to a tier channel
effective July 1, 1996 and $20,700 was due to increases in other revenue
producing items including incentive fees from programmers and charges for
franchise fees the Joint Venture passed through to its customers. These
increases were partially offset by a decrease of $69,500 due to decreases in
the number of subscriptions for basic, premium and tier services. As of March
31, 1997, the Joint Venture had approximately 17,000 homes subscribing to cable
service and 3,300 premium service units.
Service costs increased from $591,700 to $624,200, or by 5.5%, for the
quarter ended March 31, 1997 as compared to the corresponding period in 1996.
Service costs represent costs directly attributable to providing cable services
to customers. Of the $32,500 increase, $31,900 was due to increased
programming fees charged by program suppliers (including primary satellite
fees) and $10,000 was due to an increase in franchise fees. These increases
were partially offset by a $5,800 decrease in property taxes and a $4,800
decrease in pole rent expense. The increase in programming fees during the
three months ended March 31, 1997 included a $16,100 increase related to the
restructuring of The Disney Channel discussed above.
General and administrative expenses increased from $204,900 to
$237,300, or by 15.8%, for the quarter ended March 31, 1997 as compared to the
corresponding period in 1996. Of the $32,400 increase, $9,300 was due to
higher insurance premiums, $7,900 was due to an increase in marketing expense,
$4,600 was due to an increase in bad debt expense, $3,300 was due to an
increase in personnel costs and $7,300 was composed of nominal increases in
various other accounts.
Management fees and reimbursed expenses increased from $145,900 to
$161,400, or by 10.6%, for the quarter ended March 31, 1997 as compared to the
corresponding period in 1996. Of the $15,500 increase, management fees
increased by $10,500 in direct relation to increased revenues as described
above and reimbursable expenses increased by $5,000, primarily due to higher
allocated personnel costs, professional fees and telephone expense.
Depreciation and amortization expense decreased from $704,600 to
$663,700, or by 5.8%, for the quarter ended March 31, 1997 as compared to the
corresponding period in 1996, due to the effect of certain intangible assets
becoming fully amortized.
The Joint Venture generated operating income of $115,800 for the
quarter ended March 31, 1997 as compared to an operating loss of $55,300 for
the corresponding period in 1996, primarily due to increases in revenues and
decreases in depreciation and amortization expense as described above.
Interest expense decreased from $182,300 to $146,400, or by 19.7%, for
the quarter ended March 31, 1997 as compared to the corresponding period in
1996, primarily due to a decrease in average borrowings from $6,767,200 in the
first three months of 1996 to $5,511,700 during the comparable 1997 quarter.
-10-
<PAGE> 11
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
RESULTS OF OPERATIONS (CONCLUDED)
Interest income increased from $14,000 to $27,100, or by 93.6%, for
the quarter ended March 31, 1997 as compared to the corresponding period in
1996, due to higher cash balances available for investment and higher interest
rates earned on invested cash.
Due to the factors described above, the Joint Venture's net loss
decreased from $223,600 to $3,500, or by 98.4%, for the quarter ended March 31,
1997 as compared to the corresponding period in 1996.
Operating income before depreciation and amortization (EBITDA) as a
percentage of revenues increased from 40.8% to 43.2% for the quarter ended
March 31, 1997 as compared to the corresponding period in 1996. The increase
was primarily due to increases in revenues as discussed above. EBITDA
increased from $649,300 to $779,500, or by 20.1%, for the quarter ended March
31, 1997 as compared to the corresponding period in 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's primary objective, having invested its net offering
proceeds in the Joint Venture, is to distribute to its partners distributions
of cash flow received from the Joint Venture's operations and proceeds from the
sale of the Joint Venture's cable systems, if any, after providing for
expenses, debt service and capital requirements relating to the expansion,
improvement and upgrade of such cable systems. The Joint Venture 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 Joint
Venture's existing cable television systems. The Joint Venture has budgeted
capital expenditures of approximately $688,700 in 1997, primarily for equipment
upgrades.
Management believes that cash generated by operations of the Joint
Venture, together with available cash and proceeds from borrowings, will be
adequate to fund capital expenditures, debt service and other liquidity
requirements in 1997. As a result, the Corporate General Partner intends to
use its cash for such purposes. Accordingly, management does not anticipate a
resumption of distributions to unitholders during 1997.
In December 1993, the Joint Venture obtained a $9,000,000 reducing
revolving credit facility (the "Facility") maturing on September 30, 1999. The
Facility is secured by substantially all of the Joint Venture's assets.
Interest is payable at the Base Rate plus 1.50%. "Base Rate" means the higher
of the lender's prime rate or the Federal Funds effective rate plus 1/2%. The
Facility provides for quarterly reductions of the maximum commitment, which
began on September 30, 1994, and which are payable at the end of each fiscal
quarter. The Joint Venture is permitted to prepay amounts outstanding under
the Facility at any time without penalty, and is able to re-borrow throughout
the term of the Facility up to the maximum commitment then available so long as
no event of default exists. The Joint Venture is also required to pay a
commitment fee of 1/2% per annum on the unused portion of the Facility. The
Facility contains certain financial tests and other covenants including, among
others, restrictions on capital expenditures, incurrence of indebtedness,
distributions and investments, sale of assets, acquisitions, and other
covenants, defaults and conditions. The Joint Venture believes that it was in
compliance with its loan covenants as of March 31,
-11-
<PAGE> 12
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONCLUDED)
1997. The Joint Venture's maximum commitment of $6,850,000 at December 31,
1996 will decrease by $1,850,000 in 1997 to $5,000,000, by $2,100,000 in 1998
to $2,900,000 and by $1,100,000 through June 30, 1999 with a final installment
of $1,800,000 due on September 30, 1999. On March 7, 1997, the Joint Venture
elected to prepay $2,000,000 of its note payable balance, which reduced its
outstanding borrowings from $6,067,200 to $4,067,200.
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Operating activities used cash approximating $2,400 during the three
months ended March 31, 1997 as compared with the corresponding period in 1996
when operating activities provided cash totaling $5,200. The Partnership used
$6,100 more cash to pay liabilities in the first quarter of 1997 than in the
comparable 1996 period due to differences in the timing of payments. Changes
in receivable balances provided $3,700 less cash in the 1997 period due to
differences in the timing of collections. Distributions of cash flow from
operations of the Joint Venture provided $1,500 more cash in the first quarter
of 1997 than the comparable three months in 1996. Partnership expenses used
$700 less cash during the three months ended March 31, 1997 than in the
corresponding three months in 1996 after adding back non-cash equity in net
loss of Joint Venture.
INFLATION
Certain of the Partnership's expenses, such as those for equipment
repair and replacement, 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.
-12-
<PAGE> 13
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, 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.
<PAGE> 14
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/GROWTH PROGRAM FIVE-B, L.P.
a GEORGIA LIMITED PARTNERSHIP
-----------------------------
(Registrant)
By: ENSTAR COMMUNICATIONS CORPORATION
General Partner
Date: May 6, 1997 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 MARCH 31, 1997, AND THE STATEMENTS OF OPERATIONS FOR THE THREE MONTHS
ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,100
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,291,600
<CURRENT-LIABILITIES> 15,900
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,291,600
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 7,100
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 800
<INCOME-PRETAX> (9,700)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,700)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,700)
<EPS-PRIMARY> (0.16)
<EPS-DILUTED> 0
</TABLE>
