<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, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission file number 0-17687
Enstar Income/Growth Program Six-A, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
Georgia 58-1755230
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
10900 Wilshire Boulevard, 15th Floor, Los Angeles, CA 90024
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (310) 824-9990
</TABLE>
- --------------------------------------------------------------------------------
FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE
LAST REPORT.
Indicate by check x whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No
--- ---
<PAGE> 2
PART I - FINANCIAL INFORMATION
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1995* 1996
------------ -------------
(unaudited)
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 175,800 $ 499,400
Receivables, less allowance of $8,000 and
$4,100 for possible losses 38,900 6,900
Prepaid expenses and other 27,800 48,900
Property, plant and equipment less accumulated depreciation
and amortization of $3,853,700 and $3,933,400 4,256,200 4,137,700
Franchise cost, net of accumulated
amortization of $8,038,900 and $8,303,400 2,418,400 2,156,900
Deferred loan costs and other, net 40,200 41,100
----------- -----------
$ 6,957,300 $ 6,890,900
=========== ===========
LIABILITIES AND PARTNERSHIP CAPITAL
LIABILITIES:
Notes payable $ 4,125,000 $ 4,125,000
Accounts payable 445,800 380,500
Due to affiliates 297,800 425,300
----------- -----------
TOTAL LIABILITIES 4,868,600 4,930,800
----------- -----------
COMMITMENTS AND CONTINGENCIES
PARTNERSHIP CAPITAL (DEFICIT):
General partners (141,800) (143,100)
Limited partners 2,230,500 2,103,200
----------- -----------
TOTAL PARTNERSHIP CAPITAL 2,088,700 1,960,100
----------- -----------
$ 6,957,300 $ 6,890,900
=========== ===========
</TABLE>
*As presented in the audited financial statements.
See accompanying notes to condensed financial statements.
-2-
<PAGE> 3
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Unaudited
-------------------------
Three months ended
March 31, 1996,
-------------------------
1995 1996
--------- ---------
<S> <C> <C>
REVENUES $ 802,600 $ 851,300
--------- ---------
OPERATING EXPENSES:
Service costs 262,500 276,800
General and administrative expenses 85,400 108,900
General Partner management fees
and reimbursed expenses 106,700 112,100
Depreciation and amortization 453,700 403,700
--------- ---------
908,300 901,500
--------- ---------
OPERATING LOSS (105,700) (50,200)
--------- ---------
OTHER INCOME (EXPENSE):
Interest income 6,000 3,400
Interest expense (94,900) (81,800)
--------- ---------
(88,900) (78,400)
--------- ---------
NET LOSS $(194,600) $(128,600)
========= =========
NET LOSS PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ (2.41) $ (1.60)
========= =========
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 79,818 79,818
========= =========
</TABLE>
See accompanying notes to condensed financial statements.
-3-
<PAGE> 4
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Unaudited
-------------------------
Three months ended
March 31, 1996,
-------------------------
1995 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(194,600) $(128,600)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 453,700 403,700
Amortization of deferred loan costs 8,100 5,700
Increase (decrease) from changes in:
Accounts receivable and prepaid expenses (92,000) 10,900
Accounts payable and due to affiliates (34,600) 62,200
--------- ---------
Net cash provided by operating activities 140,600 353,900
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (35,300) (16,900)
Increase in intangible assets (5,500) (9,700)
--------- ---------
Net cash used in investing activities (40,800) (26,600)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Deferred loan costs (11,600) (3,700)
Repayment of debt (125,000) --
--------- ---------
(136,600) (3,700)
--------- ---------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (36,800) 323,600
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 579,200 175,800
--------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 542,400 $ 499,400
========= =========
</TABLE>
See accompanying notes to condensed financial statements.
-4-
<PAGE> 5
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL STATEMENTS
The accompanying condensed interim financial statements for the three
months ended March 31, 1996 and 1995 are unaudited. These condensed interim
financial statements should be read in conjunction with the audited financial
statements and notes thereto included in the Partnership's latest Annual Report
on Form 10-K. In the opinion of management, such statements reflect all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the results of such periods. The results of operations for
the three months ended March 31, 1996 are not necessarily indicative of results
for the entire year.
2. TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES
The Partnership has a management and service agreement with a wholly
owned subsidiary of the Corporate General Partner (the "Manager") for a monthly
management fee of 5% of revenues, excluding revenues from the sale of cable
television systems or franchises. Management fees approximated $42,600 for the
three months ended March 31, 1996.
In addition to the monthly management fee described above, the
Partnership reimburses the Manager for direct expenses incurred on behalf of the
Partnership and for the Partnership's allocable share of operational costs
associated with services provided by the Manager. All cable television
properties managed by the Corporate General Partner and its subsidiary are
charged a proportionate share of these expenses. Corporate office allocations
and district office expenses are charged to the properties served based
primarily on the respective percentage of basic subscribers or homes passed
(dwelling units within a system) within the designated service areas. The total
amount charged to the Partnership for these services approximated $69,500 for
the three months ended March 31, 1996. Management fees and reimbursed expenses
due the Corporate General Partner are non-interest bearing.
The Partnership also receives certain system operating management
services from an affiliate of the Corporate General Partner in addition to the
Manager, due to the fact that there are no such employees directly employed by
one of the Partnership's cable systems. The Partnership reimburses the affiliate
for its allocable share of the affiliate's operational costs. The total amount
charged to the Partnership for these costs approximated $10,800 in the three
months ended March 31, 1996. No management fee is payable to the affiliate by
the Partnership and there is no duplication of reimbursed expenses and costs
paid to the Manager.
Certain programming services have been purchased through an affiliate
of the Partnership. In turn, the affiliate charges the Partnership for these
costs based on an estimate of what the Partnership could negotiate for such
programming services on a stand-alone basis. The Partnership paid the affiliate
$176,200 for programming services for the three months ended March 31, 1996.
Programming fees are included in service costs in the statements of operations
for the three months ended March 31, 1996.
-5-
<PAGE> 6
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONCLUDED)
3. EARNINGS PER UNIT OF LIMITED PARTNERSHIP INTEREST
Earnings and losses per unit of limited partnership interest is based
on the average number of units outstanding during the periods presented. For
this purpose, earnings and losses are allocated 99% to the limited partners and
1% to the general partners.
4. RECLASSIFICATIONS
Certain 1995 amounts have been reclassified to conform to the 1996
presentation.
-6-
<PAGE> 7
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INTRODUCTION
On February 8, 1996, President Clinton signed into law the
Telecommunications Act of 1996 (the "1996 Telecom Act"). This statute
substantially changed the competitive and regulatory environment for
telecommunications providers by significantly amending the Communications Act of
1934, including certain of the rate regulation provisions previously imposed by
the Cable Television Consumer Protection and Competition Act of 1992 (the "1992
Cable Act"). Compliance with those rate regulations has had a negative impact on
the Partnership's revenues and cash flow. However, the Partnership believes that
recent policy decisions by the Federal Communications Commission (the "FCC")
will permit it to increase regulated service rates in the future in response to
specified historical and anticipated future cost increases, although certain
costs may continue to rise at a rate in excess of that which the Partnership
will be permitted to pass on to its customers. The 1996 Telecom Act provides
that certain of the rate regulations will be phased-out altogether in 1999.
Further, the regulatory environment will continue to change pending, among other
things, the outcome of legal challenges and FCC rulemaking and enforcement
activity in respect of the 1992 Cable Act and the completion of a significant
number of FCC rulemakings under the 1996 Telecom Act. There can be no assurance
as to what, if any, future action may be taken by the FCC, Congress or any other
regulatory authority or court, or the effect thereof on the Partnership's
business. Accordingly, the Partnership's historic interim financial results as
described below are not necessarily indicative of future performance.
In addition to the information set forth in this report, reference is
made to the Partnership's Annual Report on Form 10-K for the year ended December
31, 1995 for additional information regarding regulatory matters and the effect
thereof on the Partnership's business.
RESULTS OF OPERATIONS
The Partnership's revenues increased from $802,600 to $851,300, or by
6.1%, for the quarter ended March 31, 1996 as compared to the corresponding
period in 1995. Of the $48,700 increase in revenues, $30,600 was due to
increases in regulated service rates permitted under the 1992 Cable Act that
were implemented by the Partnership in April 1995, $4,400 resulted from
increases in other revenue producing items and $2,300 was due to an increase in
the number of subscriptions for service. In February 1996, the Partnership
recognized revenue totaling $11,400 from the State of Illinois, received as
payment for relocating several plant miles of cable as required by the state.
Service costs increased from $262,500 to $276,800, or by 5.4%, for the
quarter ended March 31, 1996 as compared to the corresponding period in 1995.
Service costs represent costs directly attributable to providing cable services
to customers. Of the $14,300 increase, $6,000 was due to an increase in
copyright fees, $2,700 was due to an increase in personnel costs, $2,300 was due
to a decrease in capitalization of labor and overhead expense, $1,900 was due to
an increase in system power costs and $1,500 was due to an increase in franchise
fees.
-7-
<PAGE> 8
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
RESULTS OF OPERATIONS (CONCLUDED)
General and administrative expenses increased from $85,400 to $108,900,
or by 27.5%, for the quarter ended March 31, 1996 as compared to the
corresponding period in 1995. Of the $23,500 increase, $8,100 was due to an
increase in marketing expense, $6,300 was due to an increase in bad debt
expense, $4,600 was due to expenses allocated by an affiliate of the General
Partner (for system operating management services) and $4,300 was due to higher
insurance premiums.
Management fees and reimbursed expenses increased from $106,700 to
$112,100, or by 5.1%, for the quarter ended March 31, 1996 as compared to the
corresponding period in 1995 due to a $2,900 increase in reimbursed expenses
allocated by the Corporate General Partner resulting from higher personnel costs
and office rent. Management fees increased by $2,500, or by 6.2%, in direct
relation to increases in revenues.
Depreciation and amortization expense decreased from $453,700 to
$403,700, or by 11.0%, for the quarter ended March 31, 1996 as compared to the
corresponding period in 1995 due to the effect of certain tangible assets
becoming fully depreciated and certain intangible assets becoming fully
amortized.
Operating loss decreased from $105,700 to $50,200, or by 52.5%, for the
quarter ended March 31, 1996 as compared to the corresponding period in 1995,
principally due to decreased depreciation and amortization and increased
revenues as described above.
Interest expense decreased from $94,900 to $81,800, or by 13.8%, for
the quarter ended March 31, 1996 as compared to the corresponding period in 1995
due to a decrease in average borrowings from $4,623,700 in the 1995 period
versus $4,125,000 in the 1996 quarter.
Due to the factors described above, the Partnership's net loss
decreased from $194,600 to $128,600, or by 33.9%, for the quarter ended March
31, 1996 as compared to the corresponding period in 1995.
LIQUIDITY AND CAPITAL RESOURCES
The FCC's amended rate regulation rules were implemented during the
quarter ended September 30, 1994. Compliance with these rules has had a negative
impact on the Partnership's revenues and cash flow.
The Partnership's primary objective, having invested its net offering
proceeds in cable systems, is to distribute to its partners all available cash
flow from operations and proceeds from the sale of cable systems, if any, after
providing for expenses, debt service and capital requirements relating to the
expansion, improvement and upgrade of its cable systems. The Partnership
currently relies exclusively on the availability of cash generated from
operations to fund its ongoing expenses, debt service and capital requirements.
In general, these requirements involve expansion, improvement and upgrade of the
Partnership's existing cable systems. As of the date of this Report,
substantially all of the available channel capacity in the Partnership's systems
is being utilized and each of such systems requires rebuilding. The rebuild
program is presently estimated to require
-8-
<PAGE> 9
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONCLUDED)
aggregate capital expenditures of approximately $3.0 million, although the
majority of the total is not planned to be spent until 1998 and 1999.
The Partnership has $4,125,000 outstanding under its term loan
agreement. On December 29, 1995, the Partnership amended its term loan agreement
(the "Amendment") to, among other things, extend the maturity date by twelve
months from December 31, 1995 to December 31, 1996. The Amendment increases the
quarterly principal payments from $125,000 in 1995 to $250,000 through September
30, 1996. The remaining balance of $3,375,000 is due on December 31, 1996.
Unless the Partnership is able to refinance the term loan or negotiate an
additional extension, it will be unable to repay the term loan when it is
presently scheduled to mature. The Partnership made its scheduled principal
payment on April 1, 1996.
The amended term loan agreement restricts the Partnership from paying
distributions to the partners during the term of the agreement. The term loan
agreement also contains certain financial tests and other covenants including,
among others, restrictions on incurrence of indebtedness, investments, sale of
assets, acquisitions, and other covenants, defaults and conditions. The
Partnership believes that it was in compliance with its debt covenants as of
March 31, 1996.
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
Operating activities provided $213,300 more cash in the three months
ended March 31, 1996 than in the corresponding period of the prior year,
principally due to changes in accounts receivable and prepaid expenses which
provided $102,900 more cash. Increases in accounts payable and due to affiliates
provided additional cash of $96,800 due to a decrease in amounts paid to the
General Partner and third party creditors. Cash generated by Partnership
operations increased by $13,600 in the first quarter of 1996 after adding back
non-cash depreciation and amortization charges.
The Partnership used $14,200 less cash in investing activities in the
three months ended March 31, 1996 than in the corresponding 1995 quarter due to
an $18,400 decrease in capital expenditures which was partially offset by a
$4,200 increase in expenditures for intangible assets. Financing activities used
$132,900 less cash in the first quarter of 1996 due to a $125,000 reduction in
debt repayments and a decrease of $7,900 in the payment of deferred loan costs
related to the Partnership's loan agreement.
Operating income before depreciation and amortization (EBITDA) as a
percentage of revenues decreased from 43.4% during the first three months of
1995 to 41.5% during the corresponding 1996 period. The decrease was primarily
due to higher marketing costs and copyright fees as described above. EBITDA
increased from $348,000 to $353,500, or by 1.6%, for the three months ended
March 31, 1996 compared to the first three months of 1995.
INFLATION
Certain of the Partnership's expenses, such as those for wages and
benefits, equipment repair and replacement, and billing and marketing generally
increase with inflation. However, the Partnership does not believe that its
financial results have been, or will be, adversely affected by inflation in a
material way, provided that it is able to increase its service rates
periodically, of which there can be no assurance.
-9-
<PAGE> 10
ENSTAR INCOME/GROWTH PROGRAM SIX-A, 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.
-10-
<PAGE> 11
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 SIX-A, L.P.
a GEORGIA LIMITED PARTNERSHIP
(Registrant)
By: ENSTAR COMMUNICATIONS CORPORATION
General Partner
Date: May 9, 1996 By: /s/ Michael K. Menerey
-----------------------
Michael K. Menerey,
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT MARCH 31, 1996, AND THE STATEMENTS OF OPERATIONS FOR THE THREE MONTHS
ENDED MARCH 31, 1996, 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-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 499,400
<SECURITIES> 0
<RECEIVABLES> 11,000
<ALLOWANCES> 4,100
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 8,071,100
<DEPRECIATION> 3,933,400
<TOTAL-ASSETS> 6,890,900
<CURRENT-LIABILITIES> 805,800
<BONDS> 4,125,000
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 6,890,900
<SALES> 0
<TOTAL-REVENUES> 851,300
<CGS> 0
<TOTAL-COSTS> 901,500
<OTHER-EXPENSES> (3,400)
<LOSS-PROVISION> 8,900
<INTEREST-EXPENSE> 81,800
<INCOME-PRETAX> (128,600)
<INCOME-TAX> 0
<INCOME-CONTINUING> (128,600)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (128,600)
<EPS-PRIMARY> (1.60)
<EPS-DILUTED> 0
</TABLE>
