<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
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Commission file number 0-18495
Enstar Income/Growth Program Six-B, L.P.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Georgia 58-1754588
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
10900 Wilshire Boulevard, 15th Floor, Los Angeles, CA 90024
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (310)824-9990
-----------------------------
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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
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<PAGE> 2
PART I - FINANCIAL INFORMATION
ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1995* 1996
----------- -----------
(unaudited)
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 39,800 $ 341,400
Receivables, less allowance of $4,600 and
$3,500 for possible losses 88,200 35,100
Insurance claims receivable 306,300 357,600
Cable materials, equipment, supplies and other 57,300 48,800
Property, plant and equipment less accumulated depreciation
and amortization of $1,991,000 and $2,107,900 3,567,700 3,499,300
Franchise cost, net of accumulated
amortization of $1,897,700 and $1,987,300 2,400,700 2,313,000
Customer lists and other intangible costs, net of
accumulated amortization of $280,800 and $284,600 305,700 304,100
----------- -----------
$ 6,765,700 $ 6,899,300
=========== ===========
LIABILITIES AND PARTNERSHIP CAPITAL
LIABILITIES:
Notes payable $ 1,630,700 $ 1,630,700
Accounts payable 186,400 203,800
Due to affiliates 1,274,900 1,406,600
----------- -----------
TOTAL LIABILITIES 3,092,000 3,241,100
----------- -----------
COMMITMENTS AND CONTINGENCIES
PARTNERSHIP CAPITAL (DEFICIT):
General partners (35,900) (36,100)
Limited partners 3,709,600 3,694,300
----------- -----------
TOTAL PARTNERSHIP CAPITAL 3,673,700 3,658,200
----------- -----------
$ 6,765,700 $ 6,899,300
=========== ===========
</TABLE>
*As presented in the audited financial statements.
See accompanying notes to condensed financial statements.
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<PAGE> 3
ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Unaudited
-----------------------------
Three months ended
March 31,
-----------------------------
1995 1996
--------- ---------
<S> <C> <C>
REVENUES $ 522,800 $ 575,200
--------- ---------
OPERATING EXPENSES:
Service costs 174,200 189,100
General and administrative expenses 83,900 97,900
General Partner management fees
and reimbursed expenses 46,200 54,200
Depreciation and amortization 244,100 211,600
--------- ---------
548,400 552,800
--------- ---------
OPERATING INCOME (LOSS) (25,600) 22,400
--------- ---------
OTHER INCOME (EXPENSE):
Interest income 1,300 1,300
Interest expense (46,400) (39,200)
--------- ---------
(45,100) (37,900)
--------- ---------
NET LOSS $ (70,700) $ (15,500)
========= =========
NET LOSS PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ (1.91) $ (.42)
========= =========
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 36,626 36,626
========= =========
</TABLE>
See accompanying notes to condensed financial statements.
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<PAGE> 4
ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Unaudited
-----------------------------
Three months ended
March 31,
-----------------------------
1995 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (70,700) $ (15,500)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 244,100 211,600
Amortization of deferred loan costs 100 --
Increase (decrease) from changes in:
Receivables (36,600) 1,800
Cable materials, equipment,
supplies and other 7,500 8,500
Accounts payable and due to affiliates (8,400) 149,100
--------- ---------
Net cash provided by operating activities 136,000 355,500
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (104,500) (49,800)
Increase in intangible assets (11,600) (4,100)
--------- ---------
Net cash used in investing activities (116,100) (53,900)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt (35,200) --
Deferred loan costs (600) --
--------- ---------
Net cash used in financing activities (35,800) --
--------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (15,900) 301,600
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 193,100 39,800
--------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 177,200 $ 341,400
========= =========
</TABLE>
See accompanying notes to condensed financial statements.
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<PAGE> 5
ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
========================================
1. INTERIM FINANCIAL STATEMENTS
The accompanying condensed interim financial statements for the three
months ended March 31, 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 $28,800 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 Managers. 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 $25,400 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 affiliates of the Corporate General Partner in addition to the
Manager due to the fact that there are no such employees directly employed by
the Partnership. The Partnership reimburses the affiliates for its allocable
share of the affiliates' operational costs. The total amount charged to the
Partnership for these costs approximated $56,500 in the three months ended March
31, 1996. No management fee is payable to the affiliates 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
$102,300 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 and 1995.
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<PAGE> 6
ENSTAR INCOME/GROWTH PROGRAM SIX-B, 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 classified to conform to the 1996
presentation.
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<PAGE> 7
ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INTRODUCTION
On February 8, 1996, President Clinton signed into law the
Telecommunications Act of 1996 (the "1996 Telecom Act"). This statute
substantially changed the competitive and regulatory environment for
telecommunications providers by significantly amending the Communications Act of
1934, including certain of the rate regulation provisions previously imposed by
the Cable Television Consumer Protection and Competition Act of 1992 (the "1992
Cable Act"). Compliance with those rate regulations has had a negative impact on
the Partnership's revenues and cash flow. 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 $522,800 to $575,200, or by
10.0%, for the quarter ended March 31, 1996 as compared to the corresponding
period in 1995. Of the $52,400 increase, $38,300 was due to increases in the
number of subscriptions for services and $16,900 was due to increases in
regulated service rates permitted under the 1992 Cable Act that were implemented
by the Partnership in April 1995. These increases were partially offset by a
$2,800 decrease in other revenue producing items.
Service costs increased from $174,200 to $189,100, or by 8.6%, 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 $14,900 increase, $13,000 related to increases in
programming fees (including primary satellite fees) and $1,600 was due to
increases in franchise fees. The increases in programming fees resulted from
higher rates charged by programming suppliers and from expanded programming
usage relating to channel line-up restructuring.
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<PAGE> 8
ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.
RESULTS OF OPERATIONS (CONCLUDED)
General and administrative expenses increased by $14,000 from $83,900
to $97,900, or by 16.7%, for the quarter ended March 31, 1996 as compared to the
corresponding period in 1995 due to increases of $4,400 in marketing expense,
$3,000 in insurance premiums, $2,700 in bad debt expense, $1,700 in customer
billing expense, $1,200 in professional fees and $1,100 in postage expense.
Management fees and reimbursed expenses increased from $46,200 to
$54,200, or by 17.3%, for the quarter ended March 31, 1996 as compared to the
corresponding period in 1995. Of the $8,000 increase, reimbursable expenses
increased by $5,300 due to higher allocated personnel costs and increased office
rent. Management fees increased by $2,700 in direct relation to increased
revenues as described above.
Depreciation and amortization expense decreased by $32,500 from
$244,100 to $211,600, or by 13.3%, for the quarter ended March 31, 1996 as
compared to the corresponding period in 1995 primarily due to the effect of
certain intangible assets becoming fully amortized.
Interest expense, net of interest income, decreased by $7,200 from
$45,100 to $37,900, or by 16.0%, for the quarter ended March 31, 1996 as
compared to the corresponding period in 1995 primarily due to a decrease in
average borrowings from $1,873,100 in the quarter ended March 31, 1995 to
$1,630,700 in the quarter ended March 31, 1996; and lower average interest rates
(9.6% during the quarter ended March 31, 1995 versus 9.1% during the quarter
ended March 31, 1996).
Due to the factors described above, the Partnership's net loss
decreased from $70,700 to $15,500, or by 78.1%, 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 aggregate capital expenditures of
approximately $8.0 million, although the majority of the total is not planned to
be spent until 1998 and 1999. One of these rebuilds is required by an existing
franchising agreement, and is estimated to cost approximately $7.2 million. The
Partnership's management believes that the Partnership's cash flow and other
sources of capital will be adequate to meet its current liquidity requirements,
which include necessary capital expenditures of approximately $500,000 in 1996,
$288,000 of which is to extend the
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<PAGE> 9
ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Partnership's systems to pass new serviceable homes in their franchise areas. To
incur this level of capital expenditures, however, the Partnership will be
required to continue to defer the payment of additional management fees in 1996.
Failure to rebuild the cable systems in a timely fashion could have an adverse
effect on the value of those systems compared to systems that have been rebuilt
to a higher technical standard. Funding rebuild capital expenditures beyond 1995
will require refinancing the Partnership's term loan agreement, and there can be
no assurance that the Partnership will be able to obtain such a refinancing on
terms acceptable to the Partnership.
As previously disclosed, in response to the FCC's amended rate
regulation rules and the Partnership's capital expenditure requirements,
distributions to Unitholders were discontinued subsequent to the distribution
paid for the period ended May 31, 1994. As stated at the time of the
announcement of this decision, management believes that it is critical for the
Partnership to preserve its liquidity through the retention of cash.
As previously disclosed, certain affiliates of the Corporate General
Partner are separately engaged in the ownership and operation of cable
television systems. One such affiliate is currently engaged in the negotiation
of the purchase and sale of cable television systems with an unaffiliated third
party. In the course of those discussions, such third party has, on an
unsolicited basis, indicated an interest in acquiring the Partnership's Villa
Rica cable system. Although the Corporate General Partner had not been seeking a
buyer for any of the Partnership's properties, it intends to investigate such a
sale to determine if a transaction is feasible on terms that it believes to be
in the best interests of the Partnership and its partners. If pursued, any such
transaction would likely be considered in the context of a liquidation or other
winding-up of the Partnership, given that the Villa Rica system represents
approximately 90% of the Partnership's customers. The concept for such a
transaction is only in the relatively early stages of consideration and there
can be no assurance regarding whether or not a transaction will be negotiated or
if so, the terms or form thereof. In particular, such a transaction may require
a vote of unitholders or, alternatively, be effected by acquiring units from
existing holders. Whether as part of a transaction of the sort described above,
or otherwise, the Corporate General Partner, its affiliates and the business
associates of such persons reserve the right at any time, or from time to time,
to acquire units in individually negotiated transactions, in the open market or
otherwise.
On March 31, 1996, the outstanding balance of the Partnership's term
loan was $1,630,700 and was payable in quarterly installments ranging from
$85,600 to $161,000, plus interest. Scheduled principal payments total $342,200
in 1996 and $422,800 in 1997.
The Partnership's term loan agreement contains certain financial tests
and other covenants including, among others, restrictions relating to
acquisitions of cable systems and capital expenditures. The Partnership believes
that it was in compliance with its debt covenants as of March 31, 1996. As of
March 31, 1996, the Partnership owed the Corporate General Partner $964,800 for
deferred management fees and reimbursable expenses, and also owed an affiliate
in excess of $400,000 for programming fees. These deferred amounts will be
repaid when the Partnership refinances its credit facility or at such time as
the cable television systems are sold.
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<PAGE> 10
ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONCLUDED)
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
Cash provided by operating activities increased by $219,500 from
$136,000 for the three months ended March 31, 1995 to $355,500 for the three
months ended March 31, 1996. Changes in accounts payable and due to affiliates
used $157,500 less cash in the 1996 period for the payment of liabilities owed
to the Corporate General Partner and third party creditors. Partnership
operations generated $22,600 of additional income after adding back non-cash
depreciation and amortization charges. Changes in receivables and inventory
balances provided $39,400 of additional cash in the first three months of 1996.
The Partnership used $62,200 less cash in investing activities during
the three months ended March 31, 1996 than in the comparable three months of
1995 due to decreases of $54,700 in expenditures for tangible assets and $7,500
in expenditures for intangible assets. Financing activities used $35,800 less
cash in the quarter ended March 31, 1996 than in the prior year period due
primarily to a reduction in debt repayments.
Operating income before depreciation and amortization (EBITDA) as a
percentage of revenues decreased from 41.8% to 40.7% during the first three
months of 1996 compared to the corresponding 1995 period. The change was
primarily due to increased programming expense. EBITDA increased from $218,500
to $234,000, or by 7.1%, 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.
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<PAGE> 11
ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.
PART II. OTHER INFORMATION
ITEMS 1-5. Not applicable.
ITEM 6. Exhibits and Reports on Form 8-K
(a) None
(b) No reports on Form 8-K were filed for the quarter for which
this report is filed.
<PAGE> 12
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-B, 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> 341,400
<SECURITIES> 0
<RECEIVABLES> 396,200
<ALLOWANCES> 3,500
<INVENTORY> 48,800
<CURRENT-ASSETS> 0
<PP&E> 5,607,200
<DEPRECIATION> 2,107,900
<TOTAL-ASSETS> 6,899,300
<CURRENT-LIABILITIES> 1,610,400
<BONDS> 1,630,700
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 6,899,300
<SALES> 0
<TOTAL-REVENUES> 575,200
<CGS> 0
<TOTAL-COSTS> 552,800
<OTHER-EXPENSES> (1,300)
<LOSS-PROVISION> 17,500
<INTEREST-EXPENSE> 39,200
<INCOME-PRETAX> (15,500)
<INCOME-TAX> 0
<INCOME-CONTINUING> (15,500)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,500)
<EPS-PRIMARY> (.42)
<EPS-DILUTED> 0
</TABLE>
