<PAGE>
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 June 30, 1999
-------------
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)
Georgia 58-1755230
- ------------------------------------------------ ----------------------------
(State or other jurisdiction of incorporation or (I.R.S. Employer
organization) Identification Number)
10900 Wilshire Boulevard - 15th Floor
Los Angeles, California 90024
- ------------------------------------------------ ----------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including (310) 824-9990
area code: ----------------------------
- --------------------------------------------------------------------------------
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>
PART I - FINANCIAL INFORMATION
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
CONDENSED BALANCE SHEETS
----------------------------------------
<TABLE>
<CAPTION>
December 31, June 30,
1998* 1999
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 542,000 $ 827,100
Accounts receivable, less allowance of $6,000 and
$5,800 for possible losses 34,400 65,900
Prepaid expenses and other assets 33,700 146,200
Property, plant and equipment, less accumulated
depreciation and amortization of $5,396,200 and $5,761,700 3,048,800 2,778,700
Franchise cost, net of accumulated
amortization of $2,622,600 and $2,746,000 927,400 831,800
Deferred loan costs and other deferred charges, net 52,500 42,400
------------ ------------
$ 4,638,800 $ 4,692,100
============ ============
LIABILITIES AND PARTNERSHIP CAPITAL
LIABILITIES:
Accounts payable $ 292,700 $ 293,200
Due to affiliates 576,600 604,600
Note payable - affiliate 1,350,000 1,350,000
------------ ------------
TOTAL LIABILITIES 2,219,300 2,247,800
------------ ------------
COMMITMENTS AND CONTINGENCIES
PARTNERSHIP CAPITAL (DEFICIT):
General partners (138,400) (138,200)
Limited partners 2,557,900 2,582,500
------------ ------------
TOTAL PARTNERSHIP CAPITAL 2,419,500 2,444,300
------------ ------------
$ 4,638,800 $ 4,692,100
============ ============
</TABLE>
*As presented in the audited financial statements.
See accompanying notes to condensed financial statements.
-2-
<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
CONDENSED STATEMENTS OF OPERATIONS
----------------------------------------
<TABLE>
<CAPTION>
Unaudited
------------------------------
Three months ended
June 30,
------------------------------
1998 1999
------------ ------------
<S> <C> <C>
REVENUES $ 916,800 $ 869,000
------------ ------------
OPERATING EXPENSES:
Service costs 296,800 283,300
General and administrative expenses 107,900 153,200
General Partner management fees
and reimbursed expenses 132,600 132,000
Depreciation and amortization 208,600 258,600
------------ ------------
745,900 827,100
------------ ------------
OPERATING INCOME 170,900 41,900
------------ ------------
OTHER INCOME (EXPENSE):
Interest income 10,700 5,300
Interest expense (60,200) (38,100)
Gain on sale of cable assets 200 -
------------ ------------
(49,300) (32,800)
------------ ------------
NET INCOME $ 121,600 $ 9,100
============ ============
Net income allocated to General Partners $ 1,200 $ 100
============ ============
Net income allocated to Limited Partners $ 120,400 $ 9,000
============ ============
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 1.51 $ 0.11
============ ============
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 79,818 79,818
============ ============
</TABLE>
See accompanying notes to condensed financial statements.
-3-
<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
CONDENSED STATEMENTS OF OPERATIONS
----------------------------------------
<TABLE>
<CAPTION>
Unaudited
----------------------------
Six months ended
June 30,
----------------------------
1998 1999
------------ ------------
<S> <C> <C>
REVENUES $ 1,840,400 $ 1,736,600
------------ ------------
OPERATING EXPENSES:
Service costs 598,700 592,500
General and administrative expenses 216,400 277,500
General Partner management fees
and reimbursed expenses 262,600 262,000
Depreciation and amortization 418,200 515,800
------------ ------------
1,495,900 1,647,800
------------ ------------
OPERATING INCOME 344,500 88,800
------------ ------------
OTHER INCOME (EXPENSE):
Interest income 18,400 11,300
Interest expense (120,800) (75,300)
Gain on sale of cable assets 200 -
------------ ------------
(102,200) (64,000)
------------ ------------
NET INCOME $ 242,300 $ 24,800
============ ============
Net income allocated to General Partners $ 2,400 $ 200
============ ============
Net income allocated to Limited Partners $ 239,900 $ 24,600
============ ============
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 3.01 $ 0.31
============ ============
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 79,818 79,818
============ ============
</TABLE>
See accompanying notes to condensed financial statements.
-4-
<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
STATEMENTS OF CASH FLOWS
----------------------------------------
<TABLE>
<CAPTION>
Unaudited
------------------------------
Six months ended
June 30,
------------------------------
1998 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 242,300 $ 24,800
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 418,200 515,800
Amortization of deferred loan costs 8,400 8,400
Gain on sale of cable assets (200) -
Increase (decrease) from changes in:
Accounts receivable, prepaid expenses and other assets (43,300) (144,000)
Accounts payable (99,100) 500
------------ ------------
Net cash provided by operating activities 526,300 405,500
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (48,700) (120,600)
Increase in intangible assets (11,500) (27,800)
Proceeds from sale of property, plant and equipment 200 -
------------ ------------
Net cash used in investing activities (60,000) (148,400)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Due to affiliates (18,300) 28,000
Deferred loan costs (2,400) -
Repayment of debt (450,000) -
------------ ------------
Net cash provided by (used in) financing activities (470,700) 28,000
------------ ------------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (4,400) 285,100
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 659,400 542,000
------------ ------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 655,000 $ 827,100
============ ============
</TABLE>
See accompanying notes to condensed financial statements.
-5-
<PAGE>
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
and six months ended June 30, 1999 and 1998 are unaudited. These condensed
interim financial statements should be read in conjunction with the audited
financial statements and notes thereto included in the Partnership's latest
Annual Report on Form 10-K. In the opinion of management, such statements
reflect all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the results of such periods. The results
of operations for the three and six months ended June 30, 1999 are not
necessarily indicative of results for the entire year.
2. TRANSACTIONS WITH THE GENERAL PARTNERS 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 fee expense approximated
$43,400 and $86,800 for the three and six months ended June 30, 1999.
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. The Corporate General
Partner has contracted with Falcon Communications, L.P. ("FCLP"), successor
to Falcon Holding Group, L.P. ("FHGLP"), an affiliated partnership, to
provide corporate management services for the Partnership. 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
$88,600 and $175,200 for the three and six months ended June 30, 1999.
Management fees and reimbursed expenses due the Corporate General Partner are
non-interest bearing.
On September 30, 1997, the Corporate General Partner contributed a
$269,300 receivable balance from the Partnership for past due management fees
and reimbursed expenses as an equity contribution to its subsidiary, Enstar
Finance Company, LLC ("EFC"). This balance remains an outstanding obligation
of the Partnership. In the normal course of business, the Partnership pays
interest and principal to EFC, its primary lender.
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 the Partnership. 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 $5,200 and $9,500 for
the three and six months ended June 30, 1999. 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.
-6-
<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
----------------------------------------
2. TRANSACTIONS WITH THE GENERAL PARTNERS AND AFFILIATES (CONTINUED)
Substantially all programming services have been purchased through FCLP.
FCLP, in the normal course of business, purchases cable programming services
from certain affiliated program suppliers. Such purchases of programming
services are made on behalf of the Partnership and the other partnerships
managed by the Corporate General Partner as well as for FCLP's own cable
television operations. FCLP charges the Partnership for these services 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 Partnership recorded programming fee expense of
$205,400 and $407,800 for the three and six months ended June 30, 1999.
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 have been allocated 99% to the Limited
Partners and 1% to the General Partners. The General Partners do not own
units of partnership interest in the Partnership, but rather hold a
participation interest in the income, losses and distributions of the
Partnership.
-7-
<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
The Cable Television Consumer Protection and Competition Act of 1992
(the "1992 Cable Act") required the Federal Communications Commission ("FCC")
to, among other things, implement extensive regulation of the rates charged
by cable television systems for basic and programming service tiers,
installation, and customer premises equipment leasing. Compliance with those
rate regulations has had a negative impact on the Partnership's revenues and
cash flow. The Telecommunications Act of 1996 (the "1996 Telecom Act")
substantially changed the competitive and regulatory environment for cable
television and telecommunications service providers. Among other changes, the
1996 Telecom Act ended the regulation of cable programming service tier rates
on March 31, 1999. 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, 1998 for additional
information regarding such matters and the effect thereof on the
Partnership's business.
RESULTS OF OPERATIONS
The Partnership's revenues decreased from $916,800 to $869,000, or by
5.2%, and from $1,840,400 to $1,736,600, or by 5.6%, for the three and six
months ended June 30, 1999 as compared to the corresponding periods in 1998.
Of the $47,800 decrease in revenues for the three months ended June 30, 1999,
$51,200 was due to decreases in the number of subscriptions for basic,
premium, tier and equipment rental services, and $6,300 was due to decreases
in other revenue producing items, including installation revenue. The
decrease was partially offset by a $9,700 increase due to increases in
regulated service rates that were implemented by the Partnership in June
1999. Of the $103,800 decrease in revenues for the six months ended June 30,
1999, $97,100 was due to decreases in the number of subscriptions for basic,
premium, tier and equipment rental services, and $16,400 was due to decreases
in other revenue producing items, including installation revenue. The
decrease was partially offset by a $9,700 increase in regulated service rates
that were implemented by the Partnership in June 1999. As of June 30, 1999,
the Partnership had approximately 8,800 basic subscribers and 2,000 premium
service units.
Service costs decreased from $296,800 to $283,300, or by 4.5%, and from
$598,700 to $592,500, or by 1.0%, for the three and six months ended June 30,
1999 as compared to the corresponding periods in 1998. Service costs
represent costs directly attributable to providing cable services to
customers. The decreases were primarily due to increases in capitalization of
labor and overhead costs resulting from a greater number of capital projects
in the 1999 periods.
-8-
<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
RESULTS OF OPERATIONS (CONTINUED)
General and administrative expenses increased from $107,900 to $153,200,
or by 42.0%, and from $216,400 to $277,500, or by 28.2%, for the three and
six months ended June 30, 1999 as compared to the corresponding periods in
1998. The increases were primarily due to increases in insurance premiums,
telephone costs and professional fees, including audit and legal fees.
Management fees and reimbursed expenses remained relatively unchanged,
decreasing from $132,600 to $132,000, or by less than 1.0%, and from $262,600
to $262,000, or by less than 1.0%, for the three and six months ended June
30, 1999 as compared to the corresponding periods in 1998. Management fees
decreased in direct relation to decreases in revenues as described above.
Reimbursed expenses increased primarily due to higher personnel costs
resulting from staff additions, and due to increased allocated telephone
expenses.
Depreciation and amortization expense increased from $208,600 to
$258,600, or by 24.0%, and from $418,200 to $515,800, or by 23.3%, for the
three and six months ended June 30, 1999 as compared to the corresponding
periods in 1998, primarily due to a reduction in the remaining life of
certain plant assets that must be replaced under a provision of one of the
Partnership's franchise agreements.
The Partnership's operating income decreased from $170,900 to $41,900,
or by 75.5%, and from $344,500 to $88,800, or by 74.2%, for the three and six
months ended June 30, 1999 as compared to the corresponding periods in 1998,
primarily due to decreases in revenues and increases in general and
administrative expenses as well as depreciation and amortization as described
above.
Interest income decreased from $10,700 to $5,300, or by 50.5%, and from
$18,400 to $11,300, or by 38.6%, for the three and six months ended June 30,
1999 as compared to the corresponding periods in 1998, primarily due to lower
average cash balances available for investment in the 1999 periods.
Interest expense decreased from $60,200 to $38,100, or by 36.7%, and
from $120,800 to $75,300, or by 37.7%, for the three and six months ended
June 30, 1999 as compared to the corresponding periods in 1998, due to lower
average borrowings in the 1999 periods.
Due to the factors described above, the Partnership's net income
decreased from $121,600 to $9,100, or by 92.5%, and from $242,300 to $24,800,
or by 89.8%, for the three and six months ended June 30, 1999 as compared to
the corresponding periods in 1998.
Based on its experience in the cable television industry, the
Partnership believes that operating income before depreciation and
amortization ("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 41.4% to 34.6% and 41.4% to 34.8% during the three and six
months ended June 30, 1999 as
-9-
<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
RESULTS OF OPERATIONS (CONTINUED)
compared to the corresponding periods in 1998. The decrease was primarily
caused by lower revenues and higher general and administrative expenses as
described above. EBITDA decreased from $379,500 to $300,500, or by 20.8%, and
from $762,700 to $604,600, or by 20.7%, for the three and six months ended
June 30, 1999 as compared to the corresponding periods in 1998.
LIQUIDITY AND CAPITAL RESOURCES
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's capital expenditures were $120,600 for the six months ended
June 30, 1999.
Based on its belief that the market for cable systems has generally
improved, the Corporate General Partner has been evaluating strategies for
liquidating the Partnership. These strategies include the potential sale of
substantially all of the Partnership's assets to third parties and/or
affiliates of the Corporate General Partner, and the subsequent liquidation
of the Partnership. The Corporate General Partner expected to complete its
evaluation within the next several months and intended to advise unitholders
promptly if it believed that commencing a liquidating transaction would be in
the best interests of unitholders. On May 26, 1999, however, Charter
Communications ("Charter") signed an agreement to acquire all of the cable
television assets of FCLP and to acquire Enstar Communications Corporation,
the Partnership's Corporate General Partner. The Corporate General Partner
and Charter have decided to implement a strategy for liquidating the
Partnership that involves selling its systems to third parties. Accordingly,
the Corporate General Partner will commence discussions with cable brokers
regarding the sale of the systems, although no assurance can be given
regarding the likelihood, if any, of receiving appropriate offers to purchase
the systems. Any such sale and corresponding liquidation is unlikely to close
before the sale of the Corporate General Partner to Charter.
Following the close of all pending transactions, Charter will serve
approximately 6.2 million customers and will be the nation's fourth largest
cable operator. Headquartered in St. Louis, Missouri, Charter was acquired by
Paul G. Allen in 1998. More information about Charter can be accessed on the
Internet at www.chartercom.com.
As of the date of this Report, 95% of the available channel capacity is
being utilized in the Partnership's systems that serve 78% of its customers.
The Partnership plans to upgrade its cable system to increase channel
capacity in two franchise areas, which together serve 63% of the
Partnership's total customer base. One of the upgrades is required in an
existing franchise agreement. The estimated cost to upgrade the cable system
in this franchise area is approximately $2.4 million and must be completed by
June 2000. Another of the Partnership's franchise agreements is under
negotiation for renewal and the Partnership believes that the renewed
franchise agreement may require the Partnership to upgrade its cable plant at
an estimated cost of $1.5 million within 24 months. The full upgrade program
is estimated to require aggregate capital expenditures of approximately $3.9
million. Capital expenditures budgeted for 1999 include $2.4 million for the
required rebuild and approximately $346,400 for the upgrade of other assets.
As of June 30, 1999, upgrade expenditures totaled approximately $58,300 and
other capital expenditures approximated $62,300.
-10-
<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Partnership is party to a loan agreement with EFC. The loan
agreement provides for a revolving loan facility of $4,563,000 (the
"Facility"). Total outstanding borrowings were $1,350,000 at June 30, 1999.
The Partnership's management expects to increase borrowings under the
Facility in the future to fund the upgrade of the Partnership's systems.
However, the Partnership's borrowing capacity and its present cash reserves
may be insufficient to fund its entire upgrade program. Consequently, the
Partnership may need to rely on increased cash flow from operations or new
sources of borrowing in order to meet its future liquidity requirements.
There can be no assurance that such cash flow increases can be attained, or
that additional future borrowings will be available to the Partnership on
acceptable terms. If the Partnership is not able to attain such cash flow
increases, or obtain new sources of borrowings, the Partnership may not be
able to complete its full upgrade program. As a result, the value of the
Partnership's systems would be lower than that of systems rebuilt to a higher
technical standard.
The Partnership'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 (7.75% at June 30, 1999) plus 0.625%, or at an offshore
rate plus 1.875%. Under certain circumstances, the Partnership 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 Partnership believes it was in compliance with
the covenants at June 30, 1999.
The Corporate General Partner contributed its $269,300 receivable
balance from the Partnership for past due management fees and reimbursed
expenses as an equity contribution to EFC. This balance remains an
outstanding obligation of the Partnership.
The Facility does not restrict the payment of distributions to partners
unless an event of default exists thereunder or the Partnership's ratio of
debt to cash flow is greater than 4 to 1. However, as a result of the pending
upgrade program discussed above, the Corporate General Partner has concluded
that it is not prudent for the Partnership to resume paying distributions at
this time.
In October 1998, FCLP reinstated third party insurance coverage for all
of the cable television properties owned or managed by FCLP 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 managed by FCLP.
Approximately 73% of the Partnership's subscribers are served by its
system in Flora, Illinois and neighboring communities. Significant damage to
the system due to seasonal weather conditions or other events could have a
material adverse effect on the Partnership's liquidity and cash flows. The
Partnership 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.
-11-
<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
YEAR 2000
During the second quarter of 1999, FCLP, on behalf of the Corporate
General Partner, continued its identification, evaluation and remediation of
the Partnership's Year 2000 business risks associated with operations
directly under the control of the Partnership and those risks that are
dependent on third parties related to its exposure to computer systems, to
operating equipment which is date sensitive and to the interface systems of
its vendors and service providers. The evaluation has focused on
identification, assessment and remediation of systems and equipment that may
fail to distinguish between the year 1900 and the year 2000 and, as a result,
may cease to operate or may operate improperly when dates after December 31,
1999 are introduced. Most of the Partnership's exposure to Year 2000 issues
is dependent in large part on third parties. Failure to identify and
remediate a critical Year 2000 issue could result in an interruption of
services to customers or in the interruption of critical business functions,
either of which could result in a material adverse impact on the
Partnership's financial results.
FCLP concluded that certain of the Partnership's internal information
systems were not Year 2000 compliant and elected to replace such software and
hardware with applications and equipment certified by the vendors as Year
2000 compliant. FCLP installed the new systems in the first quarter of 1999.
The cost of the implementation, including replacement software and hardware,
has been borne by FCLP. FCLP is continuing to utilize internal and external
resources to extend the functionality of the new systems. The Partnership
does not believe that any other significant information technology projects
affecting the Partnership have been delayed due to efforts to identify or
address Year 2000 issues.
Additionally, FCLP has continued to inventory the Partnership's internal
operating and revenue generating equipment to identify items that need to be
upgraded or replaced and has surveyed cable equipment manufacturers to
determine which of their models require upgrade or replacement to become Year
2000 compliant. Identification and evaluation, while ongoing, are
substantially completed and a plan has been developed to remediate or replace
non-compliant equipment. Of the total number of potentially non-compliant
items identified in the inventory, approximately 1.5% are in the assessment
stage. Approximately 14.4% of non-compliant items are in the remediation
planning phase and 85.6% are in the implementation stage. FCLP plans to
conduct limited testing of systems, software and equipment in the third
quarter of 1999 and place significant reliance on test results provided by
AT&T Broadband & Internet Services, an affiliate of FCLP. The cost of such
replacement or remediation to the Partnership is currently estimated to be
$40,600, of which $39,600 had been incurred as of June 30, 1999. FCLP has
also substantially completed the assessment and replacement or remediation of
the majority of the Partnership's internal equipment containing embedded
computer chips.
FCLP has continued to survey the Partnership's significant third party
vendors and service suppliers to determine the extent to which the
Partnership's interface systems are vulnerable should those third parties
fail to solve their own Year 2000 problems on a timely basis. The Partnership
is heavily dependent on third parties and these parties are themselves
heavily dependent on technology. For example, if a television broadcaster or
cable programmer encounters Year 2000 problems that impede its ability to
deliver its programming, the Partnership will be unable to provide that
programming to its cable customers, which would result in a loss of revenues,
although the Partnership
-12-
<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
would attempt to provide its customers with alternative program services.
Virtually all of the Partnership's most critical equipment vendors have
responded to the surveys regarding the Year 2000 compliance of their products
and indicated that they are already compliant or have indicated their intent
to be compliant. Additional compliance information has been obtained for
specific products from vendor Web sites, interviews, on-site visits, system
interface testing and industry group participation. Among the most
significant third party service providers upon which the Partnership relies
are programming suppliers, power and telephone companies, various banking
institutions and the Partnership's customer billing service. The Partnership
is taking steps to attempt to satisfy itself that the third parties on which
it is heavily reliant are Year 2000 compliant and are developing satisfactory
contingency plans, or that alternative means of meeting the Partnership's
business requirements are available, but cannot predict the likelihood of
such compliance nor the direct or indirect costs to the Partnership of
non-compliance by those third parties or of securing such services from
alternate compliant third parties. In areas in which the Partnership is
uncertain about the anticipated Year 2000 readiness of a significant third
party, FCLP is investigating available alternatives, if any.
FCLP believes that it has established an effective program to resolve
all significant Year 2000 issues in its control in a timely manner. As noted
above, however, FCLP has not yet completed all phases of the Partnership's
remediation program and is dependent on third parties whose progress is not
within its control. In the event that FCLP does not complete the
Partnership's currently planned additional remediation prior to the year
2000, management believes that the Partnership could experience significant
difficulty in producing and delivering its products and services and
conducting its business in the year 2000. In addition, disruptions
experienced by third parties with which the Partnership does business as well
as by the economy generally could also materially adversely affect the
Partnership. The amount of potential liability and lost revenue cannot be
reasonably estimated at this time.
FCLP has focused its efforts on identification and remediation of the
Partnership's Year 2000 exposures and is beginning to develop specific
contingency plans in the event it does not successfully complete its
remaining remediation as anticipated or experiences unforeseen problems.
Considerable effort has been directed toward distinguishing between those
contingencies with a greater probability of occurring from those whose
occurrence is considered remote, and on those systems whose failure poses a
material risk to the Partnership's results of operations and financial
condition. FCLP is also examining the Partnership's business interruption
strategies to evaluate whether they would satisfactorily meet the demands of
failures arising from Year 2000 related problems. FCLP intends to examine the
Partnership's status periodically to determine the necessity of establishing
and implementing such contingency plans or additional strategies, which could
involve, among other things, manual workarounds, adjusting staffing
strategies and sharing resources.
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
Cash provided by operating activities decreased by $120,800 for the six
months ended June 30, 1999 from the corresponding period in 1998. Changes in
receivables and prepaid expenses used $100,700 more cash in the first six
months of 1999 than in the corresponding period in 1998 due to differences in
the timing of receivable collections and in the payment of prepaid expenses.
The Partnership used $99,600 less cash to pay liabilities owed to third-party
creditors due to differences in the timing of payments.
-13-
<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Partnership used $88,400 more cash in investing activities during
the six months ended June 30, 1999 than in the comparable six months of 1998,
primarily due to an increase of $71,900 in expenditures for tangible assets
and an increase of $16,300 in expenditures for intangible assets. Financing
activities provided $498,700 more cash in the first six months of 1999 than
in the corresponding period of 1998. The Partnership used $450,000 less cash
for the repayment of debt and $46,300 less cash to pay liabilities owed to
the Corporate General Partner in the first six months of 1999 than in the
corresponding period of 1998 due to differences in the timing of payments.
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.
-14-
<PAGE>
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) Exhibit 10.22 - A resolution of the village of Junction
City, Illinois extending the Cable Television Franchise of
Enstar Income/Growth Program Six-A. Adopted April 19, 1999.
Exhibit 27.1 - Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter for
which this report is filed.
<PAGE>
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: August 13, 1999 By: /s/ Michael K. Menerey
----------------------
Michael K. Menerey,
Executive Vice President,
Chief Financial Officer and
Secretary
<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-A, L.P.
EXHIBIT INDEX
Exhibit
Number Description
10.22 A resolution of the village of Junction City, Illinois extending
the Cable Television Franchise of Enstar Income/Growth Program
Six-A. Adopted April 19, 1999.
27.1 Financial Data Schedule
<PAGE>
EXHIBIT 10.22
RESOLUTION
Extending the Cable Television Franchise of
Enstar Income/Growth Program Six-A ("Falcon") in Junction City, IL
WHEREAS, Enstar Income/Growth Program Six-A (hereafter referred to as
"Falcon") lawfully provides cable television service to residents of Junction
City, IL; and,
WHEREAS, Junction City desires that Falcon continue to provide
uninterrupted cable TV service to its subscribers in the Village pursuant to
a valid cable television franchise; and,
WHEREAS, the public health, safety and welfare of the residents of the
Village will be served by granting a franchise extension to Falcon pending
completion of the franchise renewal process; and,
WHEREAS, Junction City and Falcon will each retain their respective
legal rights and responsibilities under the franchise and under applicable
federal, state and local law, including the right to initiate formal Cable
Act renewal procedures;
NOW, THEREFORE, BE IT RESOLVED that the cable television franchise under
which Falcon has previously been operating in Junction City is hereby
extended until such time as the Village shall formally grant or deny
franchise renewal, consistent with the provisions of Section 626 of the Cable
Communications Policy Act of 1984, as amended.
ADOPTED this 19th day of April, 1999
BY:
/s/ DALLAS KINNEY
- ----------------------------
Dallas Kinney
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT JUNE 30, 1999, AND THE STATEMENTS OF OPERATIONS FOR THE SIX MONTHS
ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 827,100
<SECURITIES> 0
<RECEIVABLES> 71,700
<ALLOWANCES> 5,800
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 8,540,400
<DEPRECIATION> 5,761,700
<TOTAL-ASSETS> 4,692,100
<CURRENT-LIABILITIES> 897,800
<BONDS> 1,350,000
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,692,100
<SALES> 0
<TOTAL-REVENUES> 1,736,600
<CGS> 0
<TOTAL-COSTS> 1,647,800
<OTHER-EXPENSES> (11,300)
<LOSS-PROVISION> 19,000
<INTEREST-EXPENSE> 75,300
<INCOME-PRETAX> 24,800
<INCOME-TAX> 0
<INCOME-CONTINUING> 24,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,800
<EPS-BASIC> .31
<EPS-DILUTED> 0
</TABLE>
