<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
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Commission File Number 0-18495
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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 Number)
incorporation or organization)
10900 Wilshire Boulevard - 15th Floor
Los Angeles, California 90024
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including (310) 824-9990
area code:
---------------------------------
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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-B, L.P.
CONDENSED BALANCE SHEETS
========================================
<TABLE>
<CAPTION>
December 31, June 30,
1998 1999
----------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS:
Cash $ 362,300 $ 834,500
Accounts receivable, less allowance of $1,900 and
$2,400 for possible losses 82,800 83,800
Prepaid expenses and other assets 64,100 145,900
Property, plant and equipment, less accumulated
depreciation and amortization of $3,409,900 and $4,281,400 3,508,100 4,129,900
Franchise cost, net of accumulated
amortization of $2,976,700 and $3,157,500 1,361,500 1,184,600
Intangible costs, net of accumulated amortization of
$398,600 and $411,900 187,500 151,900
----------------- -----------------
$ 5,566,300 $ 6,530,600
================= =================
LIABILITIES AND PARTNERSHIP CAPITAL
LIABILITIES:
Accounts payable $ 193,100 $ 45,600
Due to affiliates 504,000 799,600
Note payable - affiliate 1,400,000 2,500,000
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TOTAL LIABILITIES 2,097,100 3,345,200
----------------- -----------------
COMMITMENTS AND CONTINGENCIES
PARTNERSHIP CAPITAL (DEFICIT):
General partners (38,000) (40,800)
Limited partners 3,507,200 3,226,200
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TOTAL PARTNERSHIP CAPITAL 3,469,200 3,185,400
----------------- -----------------
$ 5,566,300 $ 6,530,600
================= =================
</TABLE>
*As presented in the audited financial statements.
See accompanying notes to condensed financial statements.
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<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.
CONDENSED STATEMENTS OF OPERATIONS
===========================================
<TABLE>
Caption
Unaudited
-------------------------------------
Three months ended
June 30,
-------------------------------------
1998 1999
---------------- -----------------
<S> <C> <C>
REVENUES $ 768,100 $ 758,700
---------------- -----------------
OPERATING EXPENSES:
Service costs 251,300 267,800
General and administrative expenses 112,600 134,100
General Partner management fees
and reimbursed expenses 71,000 69,000
Depreciation and amortization 281,700 298,000
---------------- -----------------
716,600 768,900
---------------- -----------------
OPERATING INCOME (LOSS) 51,500 (10,200)
---------------- -----------------
OTHER INCOME (EXPENSE):
Interest income 5,000 2,000
Interest expense (40,500) (40,100)
Cost of sale of cable television systems - (75,700)
Gain on sale of cable assets 900 -
---------------- -----------------
(34,600) (113,800)
---------------- -----------------
NET INCOME (LOSS) $ 16,900 $ (124,000)
================ =================
Net income (loss) allocated to General Partners $ 200 $ (1,200)
================ =================
Net income (loss) allocated to Limited Partners $ 16,700 $ (122,800)
================ =================
NET INCOME (LOSS) PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 0.46 $ (3.35)
================ =================
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 36,626 36,626
================ =================
</TABLE>
See accompanying notes to condensed financial statements.
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<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.
CONDENSED STATEMENTS OF OPERATIONS
=============================================
<TABLE>
<CAPTION>
Unaudited
-------------------------------------
Six months ended
June 30,
-------------------------------------
1998 1999
---------------- -----------------
<S> <C> <C>
REVENUES $ 1,521,700 $ 1,503,800
---------------- -----------------
OPERATING EXPENSES:
Service costs 510,400 539,500
General and administrative expenses 211,700 261,800
General Partner management fees
and reimbursed expenses 138,500 136,000
Depreciation and amortization 554,100 601,000
---------------- -----------------
1,414,700 1,538,300
---------------- -----------------
OPERATING INCOME (LOSS) 107,000 (34,500)
---------------- -----------------
OTHER INCOME (EXPENSE):
Interest income 8,100 5,700
Interest expense (81,600) (72,900)
Cost of sale of cable television systems - (182,100)
Gain on sale of cable assets 900 -
---------------- -----------------
(72,600) (249,300)
---------------- -----------------
NET INCOME (LOSS) $ 34,400 $ (283,800)
================ =================
Net income (loss) allocated to General Partners $ 300 $ (2,800)
================ =================
Net income (loss) allocated to Limited Partners $ 34,100 $ (281,000)
================ =================
NET INCOME (LOSS) PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 0.93 $ (7.67)
================ =================
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 36,626 36,626
================ =================
</TABLE>
See accompanying notes to condensed financial statements.
-4-
<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-B, 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 (loss) $ 34,400 $ (283,800)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 554,100 601,000
Amortization of deferred loan costs 3,900 4,800
Gain on sale of cable assets (900) -
Increase (decrease) from changes in:
Accounts receivable, prepaid expenses and other assets 22,100 (82,800)
Accounts payable 19,800 (147,500)
---------------- -----------------
Net cash provided by operating activities 633,400 91,700
---------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (294,000) (1,010,000)
Increase in intangible assets (9,300) (5,100)
Proceeds from sale of property, plant and equipment 900 -
---------------- -----------------
Net cash used in investing activities (302,400) (1,015,100)
---------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Due to affiliates 34,600 295,600
Repayment of debt (150,000) -
Borrowings from affiliate - 1,100,000
Deferred loan costs (1,300) -
---------------- -----------------
Net cash provided by (used in) financing activities (116,700) 1,395,600
---------------- -----------------
INCREASE IN CASH 214,300 472,200
CASH AT BEGINNING OF PERIOD 304,800 362,300
---------------- -----------------
CASH AT END OF PERIOD $ 519,100 $ 834,500
================ =================
</TABLE>
See accompanying notes to condensed financial statements.
-5-
<PAGE>
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 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
$37,900 and $75,200 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
$31,100 and $60,800 for the three and six months ended June 30, 1999. The
payment of management fees and reimbursed expenses was deferred in prior
years. On September 30, 1997, the Partnership obtained new financing and
subsequently used such borrowings and other available cash to pay $387,500 of
its previously deferred management fees and reimbursed expenses, which
approximated $632,100. The remaining $244,600 of these deferred amounts was
contributed as an equity contribution by the Corporate General Partner to its
subsidiary, Enstar Finance Company, LLC ("EFC"), and 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 affiliates of the Corporate General Partner in addition to the
Manager due to the fact that there are no 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 $78,600 and $152,100 for the three
and six months ended June 30, 1999. 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.
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<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-B, 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 $167,900 and $328,900 for the three and six months
ended June 30, 1999. Programming fees are included in service costs in the
statements of operations.
3. SALE OF PARTNERSHIP ASSETS
The Partnership has entered into an Asset Purchase Agreement, dated
as of November 6, 1998, with certain of its affiliates (the "Purchasers")
pursuant to which the Partnership intends to sell (the "Sale") to the
Purchasers all of the Partnership's cable systems for $10,473,000 in cash.
After the Sale is consummated, the Partnership intends to make one or more
liquidating distributions to the partners and, after providing for the
payment of the Partnership's obligations, cause the Partnership to dissolve,
terminate and be liquidated. After repayment of the Partnership's
obligations, the Partnership presently estimates that liquidating
distributions to unitholders would total approximately $227 per unit, less
applicable taxes, if any.
Under the partnership agreement, the Sale requires the approval of
unitholders holding at least a majority of the outstanding units. On June 28,
1999, the Partnership concluded a consent solicitation in which the holders
of 65.37% of the outstanding units voted to approve the Sale and subsequent
liquidation of the Partnership. The Partnership is currently working to
obtain the necessary government approvals required to close the Sale. The
Partnership believes it will be able to obtain the necessary approvals, but
can provide no assurance as to the timetable for receiving those approvals.
The Partnership intends to close the Sale and consummate the subsequent
liquidation of the Partnership as soon as reasonably practicable.
As of December 31, 1998, the Partnership had incurred costs of
approximately $90,500 related to the Sale, which were expensed. The
Partnership incurred additional Sale expenses of $75,700 and $182,100 during
the three and six months ended June 30, 1999.
4. 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.
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<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-B, 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 $768,100 to $758,700, or
by 1.2%, and from $1,521,700 to $1,503,800, or by 1.2%, for the three and six
months ended June 30, 1999 as compared to the corresponding periods in 1998.
Of the $9,400 decrease in revenues for the three months ended June 30, 1999,
$10,900 was due to decreases in installation revenue, incentive fees from
programmers and other revenue producing items and $3,100 was due to decreases
in the number of subscriptions for tier and equipment rental services. The
decrease was partially offset by a $4,600 increase due to the impact of
increases in regulated service rates that were implemented by the Partnership
in June 1999, offset in part by certain decreases in regulated rates
implemented in May 1998. Of the $17,900 decrease in revenues for the six
months ended May 30, 1999, $25,000 was due to decreases in installation
revenue, incentive fees from programmers and other revenue producing items.
The decrease was partially offset by an increase of $4,100 due to increases
in the number of subscriptions for basic and premium services and an increase
of $3,000 due to the impact of rate increases in 1999 and decreases in 1998
as described above. As of June 30, 1999, the Partnership had approximately
7,600 basic subscribers and 2,200 premium service units.
Service costs increased from $251,300 to $267,800, or by 6.6%,
and from $510,400 to $539,500, or by 5.7%, 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
-8-
<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.
RESULTS OF OPERATIONS (CONTINUED)
services to customers. The increases were primarily due to increases in
programming fees resulting from higher rates charged by program suppliers.
General and administrative expenses increased from $112,600 to
$134,100, or by 19.1%, and from $211,700 to $261,800, or by 23.7%, for the
three and six months ended June 30, 1999 as compared to the corresponding
periods in 1998. The increases were primarily due to higher insurance
premiums, bad debt expense and personnel costs resulting from staff
additions. The increase for the six months was also due to increases in
professional fees, including tax consulting and legal fees.
Management fees and reimbursed expenses decreased from $71,000 to
$69,000, or by 2.8%, and from $138,500 to $136,000, or by 1.8%, 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 decreased revenues
as described above. Reimbursed expenses decreased primarily due to lower
allocated personnel costs resulting from staff reductions.
Depreciation and amortization expense increased from $281,700 to
$298,000, or by 5.8%, and from $554,100 to $601,000, or by 8.5%, for the
three and six months ended June 30, 1999 as compared to the corresponding
periods in 1998. The increases were 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 recorded an operating loss of $10,200 and $34,500
for the three and six months ended June 30, 1999 as compared to operating
income of $51,500 and $107,000 for the corresponding periods in 1998. The
decreases were primarily due to decreases in revenues and increases in
programming fees and depreciation and amortization as described above.
Interest income decreased from $5,000 to $2,000, or by 60.0%, and
from $8,100 to $5,700, or by 29.6%, for the three and six months ended June
30, 1999 as compared to the corresponding periods in 1998. The decreases were
primarily due to lower average cash balances available for investment.
Interest expense decreased from $40,500 to $40,100, or by 1.0%, and
from $81,600 to $72,900, or by 10.7%, for the three and six months ended June
30, 1999 as compared to the corresponding periods in 1998. The decreases were
primarily due to lower average interest rates in the 1999 periods. The
decrease for the six months period was also due to a decrease in average
outstanding borrowings.
As of June 30, 1999, the Partnership incurred expenses of $75,700
and $182,100 in the three and six months ended June 30, 1999 in connection
with the proposed sale of its cable television system assets.
Due to the factors described above, the Partnership recorded a net
loss of $124,000 and $283,800 for the three and six months ended June 30,
1999 as compared to net income of $16,900 and $34,400 for 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
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<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.
RESULTS OF OPERATIONS (CONTINUED)
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 43.4%
to 37.9% and 43.4% to 37.7% during the three and six months ended June 30,
1999 compared to the corresponding periods in 1998. The decrease was
primarily due to decreases in revenues and increases in programming fees and
general and administrative expenses as described above. EBITDA decreased from
$333,200 to $287,800, or by 13.6%, and from $661,100 to $566,500, or by
14.3%, during the three and six months ended June 30, 1999 as compared to the
corresponding periods in 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership has entered into an Asset Purchase Agreement, dated
as of November 6, 1998, with certain of its affiliates (the "Purchasers")
pursuant to which the Partnership intends to sell (the "Sale") to the
Purchasers all of the Partnership's cable systems for $10,473,000 in cash.
After the Sale is consummated, the Partnership intends to make one or more
liquidating distributions to the partners and, after providing for the
payment of the Partnership's obligations, cause the Partnership to dissolve,
terminate and be liquidated. After repayment of the Partnership's
obligations, the Partnership presently estimates that liquidating
distributions to unitholders would total approximately $227 per unit, less
applicable taxes, if any.
Under the partnership agreement, the Sale requires the approval of
unitholders holding at least a majority of the outstanding units. On June 28,
1999, the Partnership concluded a consent solicitation in which the holders
of 65.37% of the outstanding units voted to approve the Sale and subsequent
liquidation of the Partnership. The Partnership is currently working to
obtain the necessary government approvals required to close the Sale. The
Partnership believes it will be able to obtain the necessary approvals, but
can provide no assurance as to the timetable for receiving those approvals.
The Partnership intends to close the Sale and consummate the subsequent
liquidation of the Partnership as soon as reasonably practicable.
On May 26, 1999, Charter Communications, Inc. ("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. 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.
The Partnership is party to a loan agreement with EFC. The loan
agreement provides for a revolving loan facility of $2,528,900 (the
"Facility"). The Partnership borrowed an additional $1,100,000 during the
first six months of 1999 such that total outstanding borrowings under the
Facility were $2,500,000 as of June 30, 1999. All outstanding borrowings
under the Facility will be repaid in full with the proceeds from the Sale of
the Partnership's assets as described above.
-10-
<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Partnership's Facility matures on August 31, 2001, at which time
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 and compliance with material terms of various
agreements. The Partnership believes it was in compliance with the covenants
as of June 30, 1999.
The Corporate General Partner contributed $244,600 of its $632,100
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. Such receivable balance will be
repaid from the proceeds of the Sale of the Partnership's assets as described
above.
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 90% of the Partnership's subscribers are served by its
system in Villa Rica, Georgia 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.
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
-11-
<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
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 $1,000, none of which 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 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
-12-
<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
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
Operating activities provided $541,700 less cash in the six months
ended June 30, 1999 than in the corresponding period in 1998. Changes in
accounts payable balances used $167,300 more cash in the first six months of
1999 due to differences in the timing of payments. Changes in accounts
receivable and prepaid expenses used $104,900 more cash in the first six
months of 1999 due to timing differences in the collection of receivables and
in the payment of prepaid expenses.
The Partnership used $712,700 more cash in investing activities
during the six months ended June 30, 1999 than in the comparable six months
of 1998 due to an increase of $716,000 in expenditures for tangible assets
related to rebuild construction, partially offset by a $4,200 decrease in
spending for intangible assets. Financing activities provided $1,512,300 more
cash in the first six months of 1999 than in the equivalent period of 1998.
Changes in liabilities owed to the Corporate General Partner and other
affiliates provided $261,000 more cash in the first six months of 1999 due to
differences in the timing of payments. The Partnership borrowed $1,100,000
under its Facility with EFC in the first six months of 1999 as compared with
the first six months of 1998 when the Partnership repaid $150,000 of its
outstanding borrowings.
INFLATION
Certain of the Partnership's expenses, such as those for equipment
repair and replacement, billing and marketing generally increase with
inflation. However, the Partnership does not believe that its financial
results have been, or will be, adversely affected by inflation in a material
way, provided that it is able to increase its service rates periodically, of
which there can be no assurance.
-13-
<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.
PART II. OTHER INFORMATION
ITEMS 1-3. Not applicable.
ITEM 4. Submission of Matters to a Vote of Security Holders.
On June 28, 1999, the Partnership concluded a consent solicitation of
unitholders in which the Partnership solicited consents to a liquidation plan
which includes the sale of all of the Partnership's cable television systems
to certain affiliates of the Partnership and the subsequent liquidation of
the Partnership. See "Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations." The consent solicitation was
made by means of a Consent Solicitation Statement dated April 30, 1999, and a
Supplement to Consent Solicitation Statement dated June 9, 1999. The
liquidation plan was approved by the following vote:
Units Voted Units Voted Units Broker
to "APPROVE" to "DISAPPROVE" "ABSTAINING" "NON-VOTE"
------------ --------------- ------------ ----------
23,941 29 172 12,484
ITEM 5. Not applicable.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27.1 Financial Data Schedule
(b) The Registrant filed a Form 8-K dated June
25, 1999, in which it reported under Item 5
that a majority of unitholders approved the
Partnership's Liquidation Plan.
<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-B, 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
<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> 834,500
<SECURITIES> 0
<RECEIVABLES> 86,200
<ALLOWANCES> 2,400
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 8,411,300
<DEPRECIATION> 4,281,400
<TOTAL-ASSETS> 6,530,600
<CURRENT-LIABILITIES> 845,200
<BONDS> 2,500,000
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 6,530,600
<SALES> 0
<TOTAL-REVENUES> 1,503,800
<CGS> 0
<TOTAL-COSTS> 1,538,300
<OTHER-EXPENSES> 176,400
<LOSS-PROVISION> 36,100
<INTEREST-EXPENSE> 72,900
<INCOME-PRETAX> (283,800)
<INCOME-TAX> 0
<INCOME-CONTINUING> (283,800)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (283,800)
<EPS-BASIC> (7.67)
<EPS-DILUTED> 0
</TABLE>
