<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
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Commission File Number 0-16789
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Enstar Income/Growth Program Five-B, L.P.
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(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
Georgia 58-1713008
-------------------------------------------------------------- ------------------------------------------
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification Number)
organization)
12444 Powerscourt Dr., Suite 100
St. Louis, Missouri 63131
-------------------------------------------------------------- ------------------------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
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/GROWTH PROGRAM FIVE-B, L.P.
CONDENSED BALANCE SHEETS
===============================================
<TABLE>
<CAPTION>
December 31, September 30,
1999* 2000
-------------------- ------------------
(Unaudited)
ASSETS:
<S> <C> <C>
Cash $ 19,300 $ 5,000
Equity in net assets of Joint Venture 4,601,600 4,880,000
-------------------- ------------------
$ 4,620,900 $ 4,885,000
==================== ==================
LIABILITIES AND PARTNERSHIP CAPITAL
LIABILITIES:
Accounts payable $ 200 $ 3,300
Due to affiliates 5,600 47,800
-------------------- ------------------
5,800 51,100
-------------------- ------------------
PARTNERSHIP CAPITAL (DEFICIT):
General Partner (77,800) (75,800)
Limited Partners 4,692,900 4,909,700
-------------------- ------------------
TOTAL PARTNERSHIP CAPITAL 4,615,100 4,833,900
-------------------- ------------------
$ 4,620,900 $ 4,885,000
==================== ==================
</TABLE>
The accompanying notes are in 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/GROWTH PROGRAM FIVE-B, L.P.
CONDENSED STATEMENTS OF OPERATIONS
===============================================
<TABLE>
<CAPTION>
Unaudited
---------------------------------------
Three months ended
September 30,
---------------------------------------
1999 2000
------------------- ------------------
<S> <C> <C>
OPERATING EXPENSES:
General and administrative expenses $ (12,600) $ (15,200)
------------------ -----------------
LOSS BEFORE EQUITY IN NET INCOME
OF JOINT VENTURE (12,600) (15,200)
EQUITY IN NET INCOME OF JOINT VENTURE 70,500 30,900
------------------ -----------------
NET INCOME $ 57,900 $ 15,700
================== =================
Net income allocated to General Partner $ 600 $ 200
================== =================
Net income allocated to Limited Partners $ 57,300 $ 15,500
================== =================
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 0.96 $ 0.26
================== =================
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.
CONDENSED STATEMENTS OF OPERATIONS
===============================================
<TABLE>
<CAPTION>
Unaudited
--------------------------------------
Nine months ended
September 30,
--------------------------------------
1999 2000
------------------ -----------------
<S> <C> <C>
OPERATING EXPENSES:
General and administrative expenses $ (39,200) $ (59,600)
------------------ -----------------
LOSS BEFORE EQUITY IN NET INCOME
OF JOINT VENTURE (39,200) (59,600)
EQUITY IN NET INCOME OF JOINT VENTURE 128,900 278,400
------------------ -----------------
NET INCOME $ 89,700 218,800
================== =================
Net income allocated to General Partner $ 900 $ 2,200
================== =================
Net income allocated to Limited Partners $ 88,800 $ 216,600
================== =================
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 1.48 $ 3.62
================== =================
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 59,830 59,830
================== =================
</TABLE>
See accompanying notes to condensed financial statements.
-4-
<PAGE> 5
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, 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 $ 89,700 $ 218,800
Adjustments to reconcile net income to net cash from operating activities:
Equity in net income of Joint Venture (128,900) (278,400)
Changes in:
Accounts payable and due to affiliates (5,200) 45,300
---------------- ----------------
Net cash from operating activities (44,400) (14,300)
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from Joint Venture 45,000 --
---------------- ----------------
INCREASE (DECREASE) IN CASH 600 (14,300)
CASH AT BEGINNING OF PERIOD 200 19,300
---------------- ----------------
CASH AT END OF PERIOD $ 800 $ 5,000
================ ================
</TABLE>
See accompanying notes to condensed financial statements.
-5-
<PAGE> 6
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
===============================================
1. INTERIM FINANCIAL STATEMENTS
The accompanying condensed interim financial statements for Enstar
Income/Growth Program Five-B, 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 Manager has entered into an identical
agreement with Enstar Cable of Cumberland Valley (the "Joint Venture"), a
Georgia general partnership of which the Partnership is a co-general partner,
except that the Joint Venture pays the Manager only a 4% management fee. The
Joint Venture's management fee expense approximated $65,500 and $196,000 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 $67,800 and $203,700, 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 $16,400 and $49,000 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 $16,900
and $50,900, 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 also 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 Partnership
and the Joint Venture. Such services were provided by Falcon Communications,
L.P. and its affiliates (collectively, "Falcon") prior to November 12, 1999.
This results from the fact that there are no employees directly employed by the
Partnership and the Joint Venture. These expenses are charged to the properties
served based primarily on the Partnership's allocable share of operational costs
associated with the services provided. The Joint Venture reimburses the
affiliates for the Partnership's allocable share of the affiliates' costs. The
total amount charged to the Joint Venture for
-6-
<PAGE> 7
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS - (Continued)
===============================================
these costs approximated $291,200 and $821,100 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 $66,800 and $195,300, respectively. There is no duplication
of reimbursed expenses to 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 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 Joint Venture for these costs based on its costs. The Joint Venture
recorded programming fee expense of $280,200 and $783,200 for the three and nine
months ended September 30, 2000, respectively. For the three and nine months
ended September 30, 1999, programming fee expense was $360,600 and $1,054,900,
respectively.
In the normal course of business, the Joint Venture paid interest and
principal to Enstar Finance Company, LLC, its primary lender and a subsidiary of
ECC, when there were amounts outstanding under the facility and pays a
commitment fee to Enstar Finance Company, LLC, on the unborrowed portion of its
facility.
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 FIVE-B, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS - (Continued)
===============================================
4. 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 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 $ 1,361,700 $ 2,278,000
Investment in cable television properties, net 9,104,800 8,052,700
Other assets 55,300 31,800
------------------ ------------------
$ 10,521,800 $ 10,362,500
================== ==================
Current liabilities $ 1,318,600 $ 602,400
Venturers' capital 9,203,200 9,760,100
------------------ ------------------
$ 10,521,800 $ 10,362,500
================== ==================
</TABLE>
---------
* Agrees with audited balance sheet included in the Partnership's
Annual Report on Form 10-K.
-8-
<PAGE> 9
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS - (Continued)
===============================================
<TABLE>
<CAPTION>
Unaudited
--------------------------------------
Three months ended
September 30,
--------------------------------------
1999 2000
----------------- -----------------
<S> <C> <C>
REVENUES $ 1,693,700 $ 1,638,400
----------------- -----------------
OPERATING EXPENSES:
Service costs 698,000 578,400
General and administrative expenses 231,900 160,000
General partner management fees
and reimbursed expenses 151,500 373,100
Depreciation and amortization 439,700 450,400
----------------- -----------------
1,521,100 1,561,900
----------------- -----------------
OPERATING INCOME 172,600 76,500
OTHER INCOME (EXPENSE):
Interest income 13,700 3,900
Interest expense (45,200) (18,500)
----------------- -----------------
NET INCOME $ 141,100 $ 61,900
================= =================
</TABLE>
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<PAGE> 10
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS - (Continued)
===============================================
<TABLE>
<CAPTION>
Unaudited
---------------------------------------
Nine months ended
September 30,
---------------------------------------
1999 2000
------------------ -----------------
<S> <C> <C>
REVENUES $ 5,092,600 $ 4,900,700
------------------ -----------------
OPERATING EXPENSES:
Service costs 2,118,900 1,382,800
General and administrative expenses 773,700 522,900
General partner management fees
and reimbursed expenses 449,900 1,066,100
Depreciation and amortization 1,377,600 1,354,400
------------------ -----------------
4,720,100 4,326,200
------------------ -----------------
OPERATING INCOME 372,500 574,500
OTHER INCOME (EXPENSE):
Interest income 30,400 35,400
Interest expense (145,000) (53,100)
------------------ -----------------
NET INCOME $ 257,900 $ 556,800
================== =================
</TABLE>
-10-
<PAGE> 11
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS - (Continued)
===============================================
5. SALE OF CABLE SYSTEMS
On August 8, 2000, (as amended on September 29, 2000) the Joint
Venture, together with certain affiliates, (collectively, the "Sellers") entered
into a purchase and sale agreement (the "Agreement") with Multimedia Acquisition
Corp., an affiliate of Gans Multimedia Partnership, (the "Purchaser"). The
Agreement provides for the Purchaser to acquire the assets comprising the Joint
Venture, as well as certain assets of other affiliates.
The aggregate purchase price payable to the Sellers pursuant to the
Agreement is $95,574,600 in cash (subject to normal closing adjustments). Of
that amount, $12,739,500 (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.
The Purchaser's obligation to acquire the cable systems is 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 of all of the Sellers; (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 of each Seller; 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.
-11-
<PAGE> 12
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, 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.
All of our cable television business operations are conducted through
our participation as a partner with a 50% interest in Enstar Cable of Cumberland
Valley (the "Joint Venture"). Our participation is equal to our 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 our 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
All of our cable television business operations are conducted through
our participation as a partner in the Joint Venture. The Joint Venture did not
distribute cash flow from its operations to the Partnership and the Partnership
did not pay distributions to its partners during the three and the nine months
ended September 30, 2000.
THE JOINT VENTURE
The Joint Venture's revenues decreased from $1,693,700 to $1,638,400,
or by 3.3%, and from $5,092,600 to $4,900,700, or by 3.8%, for the three and
nine months ended September 30, 2000, as compared to the corresponding periods
in 1999. Of the $55,300 decrease for the three months ended September 30, 2000,
$66,400 was due to decreases in the number of subscriptions for basic, premium,
tier and equipment rental services and $9,300 was due to decreases in other
revenue producing items. The decreases were partially offset by a $20,400
increase in regulated service rates that were implemented in 2000. Of the
$191,900 decrease for the nine months ended September 30, 2000, $190,800 was due
to a decrease in the number of subscribers for basic, premium and tier equipment
rental services and $21,500 was due to decreases in other revenue producing
items. The decreases were partially offset by a $20,400 increase in regulated
service rates that were implemented in 2000. As of September 30, 2000, the Joint
Venture had approximately 14,700 basic subscribers and 4,200 premium service
units.
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<PAGE> 13
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
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 $1,081,400 to $1,111,500,
or by 2.8%, and decreased from $3,342,500 to $2,971,800, or by 11.1%, for the
three and nine months ended September 30, 2000, as compared to the corresponding
periods in 1999.
Service costs decreased from $698,000 to $578,400, or by 17.1%, and
from $2,118,900 to $1,382,800, or by 34.7%, for the three and nine months ended
September 30, 2000, as compared to the corresponding periods in 1999. Service
costs represent costs directly attributable to providing cable services to
customers. The decrease was primarily due to lower programming fees resulting
from lower rates that Charter has extended to the Joint Venture and certain
costs incurred by the Joint Venture prior to the Charter acquisition that are
now incurred by Charter and reimbursed by the Joint Venture, as discussed above.
General and administrative expenses decreased from $231,900 to
$160,000, or by 31.0%, and from $773,700 to $522,900, or by 32.4%, for the three
and nine months ended September 30, 2000, as compared to the corresponding
periods in 1999. The decrease was primarily due to decreases in marketing, bad
debt expenses and certain costs incurred by the Joint Venture prior to the
Charter acquisition that are now incurred by Charter and reimbursed by the Joint
Venture, as discussed above.
General partner management fees and reimbursed expenses increased from
$151,500 to $373,100, or by 146.3%, and from $449,900 to $1,066,100, or by
137.0%, 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 by the Joint
Venture. This has resulted in more reimbursable costs to the Joint Venture and
lower service costs and general and administrative expenses for the Joint
Venture. In addition, for the three months ended September 30, 2000, the General
Partner incurred additional bank fees, which are included in reimbursed
expenses.
Depreciation and amortization expense increased from $439,700 to
$450,400, or by 2.4%, and decreased from $1,377,600 to $1,354,400, or by 1.7%,
for the three and nine months ended September 30, 2000, as compared to the
corresponding periods in 1999. The increase for the three months is due to
additional depreciation related to plant asset additions in the third quarter.
The decrease for the nine months is due to the effect of certain intangible
assets becoming fully amortized in the fourth quarter of 1999.
Due to the factors described above, operating income decreased from
$172,600 to $76,500, or by 55.7%, and increased from $372,500 to $574,500, or by
54.2%, for the three and nine months ended September 30, 2000, as compared to
the corresponding periods in 1999.
-13-
<PAGE> 14
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
Interest income decreased from $13,700 to $3,900, or by 71.5%, and
increased from $30,400 to $35,400, or by 16.4%, 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, lower cash balances available for
investment were maintained, as compared to higher average cash balances
available for investment that were maintained during the first six months of
2000.
Interest expense decreased from $45,200 to $18,500, or by 59.1%, and
from $145,000 to $53,100, or by 63.4%, for the three and nine months ended
September 30, 2000, as compared to the corresponding periods in 1999. The
decrease is due to the repayment of outstanding borrowings during 1999. Interest
expense for the periods ended September 30, 2000 and 1999, includes commitment
fees on the unborrowed portion of the Joint Venture's loan facility.
Due to the factors described above, net income decreased from $141,100
to $61,900, or by 56.1%, and increased from $257,900 to $556,800, or by 115.9%,
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 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 36.2% to 32.2% and increased from 34.4% to
39.4% during the three and nine months ended September 30, 2000, as compared to
the corresponding periods in 1999. The decrease for the three months ended
September 30, 2000, was primarily due to the additional bank fees included in
reimbursed expenses. The increase for the nine months ended September 30, 2000,
was primarily due to decreases in programming fees as described above. EBITDA
decreased from $612,300 to $526,900, or by 13.9% and increased from $1,750,100
to $1,928,900, or by 10.2%, during the three and nine months ended September 30,
2000, as compared to the corresponding periods in 1999.
LIQUIDITY AND CAPITAL RESOURCES
Our primary objective is to distribute to our partners all available
cash flow received from the Joint Venture's operations and proceeds from the
sale of the 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, our corporate general partner, has implemented a plan for
liquidating the Partnership. On August 8, 2000, (as amended on September 29,
2000) the Joint Venture, together with certain affiliates, (collectively, the
"Sellers") entered into a purchase and sales agreement (the "Agreement") with
Multimedia Acquisition Corp., an affiliate of Gans Multimedia Partnership, (the
"Purchaser"). The
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<PAGE> 15
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
Agreement provides for the Purchaser to acquire the assets comprising the Joint
Venture, as well as certain assets of other affiliates.
The aggregate purchase price payable to the Sellers pursuant to the
Agreement is $95,574,600 in cash (subject to normal closing adjustments). Of
that amount, $12,739,500 (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.
The Purchaser's obligation to acquire the cable systems is 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 of all of the Sellers; (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 of each Seller; 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 Joint Venture relies upon the availability of cash generated from
operations and possible borrowings to fund its ongoing expenses, debt service
and capital requirements. The Joint Venture was required to upgrade its system
in Campbell County, Tennessee under a provision of its franchise agreement.
Upgrade expenditures are budgeted at a total estimated cost of approximately
$1,061,000. The upgrade began in 1998 and $126,500 had been incurred as of
September 30, 2000. The franchise agreement required the project to be completed
by January 2000. The Joint Venture did not meet this requirement, although it
has commenced the upgrade. The franchising authority has not given any
indication that it intends to take action adverse to the Joint Venture as the
result of the Joint Venture's noncompliance with the upgrade requirements in the
franchise agreement. No assurances can be given that the franchising authority
will not take action that is adverse to the Joint Venture. The Joint Venture is
budgeted to spend approximately $697,300 in 2000 for plant extensions, new
equipment and system upgrades, including its upgrade in Tennessee, of which
$288,800 had been incurred as of September 30, 2000.
We believe 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 2000
and beyond. As a result, the Joint Venture intends to use its cash for such
purposes.
The Joint Venture is party to a loan agreement with Enstar Finance
Company, LLC, its primary lender and a subsidiary of Enstar Communications
Corporation. The loan agreement provides for a revolving loan facility of
$1,000,000. The Joint Venture paid its outstanding borrowings under the facility
during 1999 and presently has no borrowings outstanding under the loan facility.
The Joint Venture pays a commitment fee of 0.5% to Enstar Finance Company, LLC,
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<PAGE> 16
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
on the unborrowed portion of its facility. The Joint Venture's management
expects to increase borrowings under the facility in the future for system
upgrades and other liquidity requirements.
The Joint Venture's facility matures on August 31, 2001, at which time
all amounts then outstanding are due in full. Borrowings bear interest at the
lender's base rate (9.5% at September 30, 2000) plus 0.625%, or at an offshore
rate (6.74% at September 30, 2000) plus 1.875%. Under certain circumstances, the
Joint Venture is required to make mandatory prepayments, which permanently
reduce the maximum commitment under the facility. The facility contains certain
financial tests and other covenants including, among others, restrictions on
incurrence of indebtedness, investments, sales of assets, acquisitions and other
covenants, defaults and conditions.
The facility does not restrict the payment of distributions to partners
by the Partnership unless an event of default exists thereunder or the Joint
Venture's ratio of debt to cash flow is greater than 4 to 1. We believe it is
critical for the Joint Venture to conserve cash and borrowing capacity to fund
its anticipated capital expenditures. Accordingly, the Joint Venture does not
anticipate an increase in distributions to the Partnership in order to fund
distributions to partners at this time.
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 formerly owned or managed by
Falcon through November 12, 1999, and currently managed by Charter, including
those of the Joint Venture.
Approximately 94% of the Joint Venture's subscribers are served by its
system in Monticello, Kentucky and neighboring communities. Significant damage
to the system due to seasonal weather conditions or other events could have a
material adverse effect on the Joint Venture's liquidity and cash flows. The
Joint Venture continues to purchase insurance coverage in amounts its management
views as appropriate for all other property, liability, automobile, workers'
compensation and other types of insurable risks.
Operating activities of the Partnership used $30,100 less cash during
the nine months ended September 30, 2000, than in the corresponding period in
1999. Cash provided by investing activities for the Partnership decreased by
$45,000 for the nine months ended September 30, 2000, as compared to the
corresponding period in 1999, due to decreased distributions from the Joint
Venture.
INFLATION
Certain of 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, we do not believe that our financial results
have been, or will be, adversely affected by inflation in a material way,
provided that the Joint Venture is able to increase our service rates
periodically, of which there can be no assurance.
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<PAGE> 17
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) Exhibits
10.1 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. (1)
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
Program IV-1, L.P. filed on November 13, 2000 (File No. 00015705).
-17-
<PAGE> 18
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: 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> 19
EXHIBIT INDEX
Exhibit
Number Description
10.1 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 (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
