<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(MARK ONE)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
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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 (I.R.S. Employer Identification
of incorporation or Number)
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 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 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
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<PAGE>
PART I - FINANCIAL INFORMATION
ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30,
1998 1999
------------- --------------
(Unaudited)
<S> <C> <C>
ASSETS:
Cash $ 362,300 $ 586,700
Accounts receivable, less allowance of $1,900 and
$1,800 for possible losses 82,800 80,300
Prepaid expenses and other assets 64,100 136,700
Property, plant and equipment, less accumulated
depreciation and amortization of $3,937,500 and $4,393,500 3,508,100 4,657,600
Franchise cost, net of accumulated
amortization of $2,976,700 and $3,247,900 1,361,500 1,096,900
Intangible costs, net of accumulated amortization of
$398,600 and $421,100 187,500 137,400
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$5,566,300 $ 6,695,600
============= ==============
LIABILITIES AND PARTNERSHIP CAPITAL
LIABILITIES:
Accounts payable $ 193,100 $ 279,300
Due to affiliates 504,000 743,300
Note payable - affiliate 1,400,000 2,500,000
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TOTAL LIABILITIES 2,097,100 3,522,600
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COMMITMENTS AND CONTINGENCIES
PARTNERSHIP CAPITAL (DEFICIT):
General partners (38,000) (41,000)
Limited partners 3,507,200 3,214,000
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TOTAL PARTNERSHIP CAPITAL 3,469,200 3,173,000
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$5,566,300 $ 6,695,600
============= ==============
</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
September 30,
------------------------------
1998 1999
---------- ----------
<S> <C> <C>
REVENUES $ 754,200 $ 747,200
---------- ----------
OPERATING EXPENSES:
Service costs 259,000 274,600
General and administrative expenses 109,300 115,600
General Partner management fees
and reimbursed expenses 68,500 70,000
Depreciation and amortization 284,600 239,800
---------- ----------
721,400 700,000
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OPERATING INCOME 32,800 47,200
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OTHER INCOME (EXPENSE):
Interest income 5,500 7,000
Interest expense (37,200) (59,200)
Cost of sale of cable television systems (20,100) (7,400)
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(51,800) (59,600)
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NET LOSS $ (19,000) $ (12,400)
========== ==========
Net loss allocated to General Partners $ (200) $ (100)
========== ==========
Net loss allocated to Limited Partners $ (18,800) $ (12,300)
========== ==========
NET LOSS PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ (0.51) $ (0.34)
========== ==========
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
---------------------------------
Nine months ended
September 30,
---------------------------------
1998 1999
----------- -----------
<S> <C> <C>
REVENUES $ 2,275,900 $ 2,251,000
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OPERATING EXPENSES:
Service costs 769,400 814,100
General and administrative expenses 321,000 377,400
General Partner management fees
and reimbursed expenses 207,000 206,000
Depreciation and amortization 838,700 840,800
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2,136,100 2,238,300
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OPERATING INCOME 139,800 12,700
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OTHER INCOME (EXPENSE):
Interest income 13,600 12,700
Interest expense (118,800) (132,100)
Cost of sale of cable television systems (20,100) (189,500)
Gain on sale of cable assets 900 -
----------- -----------
(124,400) (308,900)
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NET INCOME (LOSS) $ 15,400 $ (296,200)
=========== ===========
Net income (loss) allocated to General Partners $ 200 $ (3,000)
=========== ===========
Net income (loss) allocated to Limited Partners $ 15,200 $ (293,200)
=========== ===========
NET INCOME (LOSS) PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 0.42 $ (8.01)
=========== ===========
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.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Unaudited
---------------------------------
Nine months ended
September 30,
---------------------------------
1998 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 15,400 $ (296,200)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 838,700 840,800
Amortization of deferred loan costs 7,100 7,200
Gain on sale of cable assets (900) -
Increase (decrease) from changes in:
Receivables 28,200 2,500
Prepaid expenses and other assets (25,900) (72,600)
Accounts payable 35,200 86,200
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Net cash provided by operating activities 897,800 567,900
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (482,500) (1,674,900)
Increase in intangible assets (11,700) (7,900)
Proceeds from sale of property, plant and equipment 900 -
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Net cash used in investing activities (493,300) (1,682,800)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Due to affiliates (19,600) 239,300
Repayment of debt (150,000) -
Borrowings from affiliate - 1,100,000
Deferred loan costs (1,300) -
----------- -----------
Net cash provided by (used in) financing activities (170,900) 1,339,300
----------- -----------
INCREASE IN CASH 233,600 224,400
CASH AT BEGINNING OF PERIOD 304,800 362,300
----------- -----------
CASH AT END OF PERIOD $ 538,400 $ 586,700
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
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<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 nine months ended September 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 nine months ended September 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 $37,300
and $112,500 for the three and nine months ended September 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"), 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 $32,700 and $93,500 for the three and nine months ended
September 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 deferred payment of a portion of its management fees
and reimbursed expenses due the Corporate General Partner and programming fees
due FCLP in 1999. As of September 30, 1999, deferred management fees and
reimbursed expenses totaled approximately $53,300 and deferred programming fees
totaled approximately $269,900. Payment was deferred to make additional funds
available to the Partnership for its franchise-required rebuilds. These and any
amounts deferred in future periods will be paid upon the sale of the
Partnership's assets to affiliates. See Note 3 of Notes to Condensed Financial
Statements.
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
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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)
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 $84,800 and $236,900 for
the three and nine months ended September 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.
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
$180,500 and $509,400 for the three and nine months ended September 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 $235 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 after obtaining the necessary
government approvals.
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 $7,400 and $189,500 during the three and
nine months ended September 30, 1999.
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<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
======================================================
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 $754,200 to $747,200, or by
1.0%, and from $2,275,900 to $2,251,000, or by 1.1%, for the three and nine
months ended September 30, 1999 as compared to the corresponding periods in
1998. Of the $7,000 decrease in revenues for the three months ended September
30, 1999, $27,900 was due to the establishment of reserves to refund certain
subscriber payments in the Villa Rica system and $2,900 was due to decreases in
installation revenue and other revenue producing items. The decrease was
partially offset by a $15,500 increase due to increases in regulated service
rates that were implemented by the Partnership in June 1999 and an $8,300
increase due to increases in the number of subscriptions for basic and premium
services. Of the $24,900 decrease in revenues for the nine months ended
September 30, 1999, $27,900 was due to the establishment of a subscriber refund
reserve as described above and $27,900 was due to decreases in installation
revenue, incentive fees from programmers and other revenue producing items. The
decrease was partially offset by a $12,100 increase due to increases in the
number of subscriptions for basic and premium services and an $18,800 increase
due to increases in regulated service rates as described above. As of September
30, 1999, the Partnership had approximately 7,500 basic subscribers and 2,100
premium service units.
Service costs increased from $259,000 to $274,600, or by 6.0%, and
from $769,400 to $814,100, or by 5.8%, for the three and nine months ended
September 30, 1999 as compared to the corresponding periods in 1998. Service
costs represent costs directly attributable to providing cable
-9-
<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 $109,300 to
$115,600, or by 5.8%, and from $321,000 to $377,400, or by 17.6%, for the three
and nine months ended September 30, 1999 as compared to the corresponding
periods in 1998. The increases were primarily due to higher insurance premiums
and personnel costs resulting from staff additions. The nine months' increase
was also due to increases in professional fees, including tax consulting and
legal fees.
Management fees and reimbursed expenses increased from $68,500 to
$70,000, or by 2.2%, and decreased from $207,000 to $206,000, or by less than
1.0%, respectively, for the three and nine months ended September 30, 1999 as
compared to the corresponding periods in 1998. Management fees decreased in
direct relation to decreased revenues as described above. Reimbursed expenses
increased as a result of growth in the Partnership's subscriber numbers which
increased its proportionate share of allocated expenses.
Depreciation and amortization expense decreased from $284,600 to
$239,800, or by 15.7%, and increased from $838,700 to $840,800, or by less than
1.0%, respectively, for the three and nine months ended September 30, 1999 as
compared to the corresponding periods in 1998. The quarterly decrease was
primarily due to the effect of certain tangible assets becoming fully
depreciated in June 1999. The nine months' increase was primarily due to the
depreciation of plant asset additions during the 1999 period.
Operating income increased from $32,800 to $47,200, or by 43.9%, and
decreased from $139,800 to $12,700, or by 90.9%, for the three and nine months
ended September 30, 1999, as compared to the corresponding periods in 1998. The
quarterly increase was primarily due to decreases in depreciation and
amortization as described above. The nine months' decrease was primarily due to
increases in programming fees and insurance premiums as described above.
Interest income increased from $5,500 to $7,000, or by 27.3%, and
decreased from $13,600 to $12,700, or by 6.6%, respectively, for the three and
nine months ended September 30, 1999 as compared to the corresponding periods in
1998. The quarterly increase was primarily due to higher average cash balances
available for investment. The nine months' decrease was primarily due to lower
average interest rates earned on invested cash during the 1999 period.
Interest expense increased from $37,200 to $59,200, or by 59.1%, and
from $118,800 to $132,100, or by 11.2%, respectively, for the three and nine
months ended September 30, 1999 as compared to the corresponding periods in
1998. The increases were primarily due to higher average outstanding borrowings
during the 1999 periods.
As of September 30, 1999, the Partnership incurred expenses of $7,400
and $189,500 in the three and nine months ended September 30, 1999 in connection
with the proposed sale of its cable television system assets.
Due to the factors described above, the Partnership's net loss
decreased from $19,000 to $12,400 for the three months ended September 30, 1999
as compared to the corresponding period in
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<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.
RESULTS OF OPERATIONS (CONTINUED)
1998. For the nine months ended September 30, 1999, the Partnership recorded a
net loss of $296,200 as compared to net income of $15,400 for the corresponding
period 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 42.1% to 38.4% and 43.0% to 37.9% during
the three and nine months ended September 30, 1999 compared to the corresponding
periods in 1998. The decrease was primarily due to decreases in revenues and
increases in programming fees, insurance premiums and payroll costs as described
above. EBITDA decreased from $317,400 to $287,000, or by 9.6%, and from $978,500
to $853,500, or by 12.8%, during the three and nine months ended September 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 $235 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 after obtaining the necessary
government approvals.
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.
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<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-B, 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 $2,528,900 (the
"Facility"). The Partnership borrowed an additional $1,100,000 during the
first nine months of 1999 such that total outstanding borrowings under the
Facility were $2,500,000 as of September 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.
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 (8.25% at September 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 September 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.
The Partnership deferred payment of a portion of its management fees
and reimbursed expenses due the Corporate General Partner and programming
fees due FCLP in 1999. As of September 30, 1999, deferred management fees and
reimbursed expenses totaled approximately $53,300 and deferred programming
fees totaled approximately $269,900. Payment was deferred to make additional
funds available to the Partnership for its franchise-required rebuilds. These
and any amounts deferred in future periods will be paid upon the Sale of the
Partnership's assets to affiliates.
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 third 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
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<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
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, all were
evaluated during the assessment stage, approximately 8.5% are in the
remediation planning phase and 91.5% are in the implementation stage. FCLP
conducted limited testing of systems, software and equipment in the third
quarter of 1999 and placed 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
less than $500, none of which had been incurred as of September 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
-13-
<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
programming suppliers, power and telephone companies, various banking
institutions and the Partnership's customer billing service. The Partnership
has taken steps to attempt to satisfy itself that the third parties on which
it is heavily reliant are Year 2000 compliant and have developed satisfactory
contingency plans, or that alternative means of meeting the Partnership's
business requirements are available. However, the Partnership can predict
neither the likelihood of successful 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.
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, while FCLP has substantially completed all phases of
the Partnership's remediation program, it is dependent on third parties whose
progress is not within its control. 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 has developed 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 has
also examined 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.
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
Operating activities provided $311,800 less cash in the nine months
ended September 30, 1999 than in the corresponding period in 1998. Changes in
accounts receivable and prepaid expenses used $72,300 more cash in the first
nine months of 1999 due to timing differences in the collection of
receivables and in the payment of prepaid expenses. Changes in accounts
payable balances provided $51,000 more cash in the first nine months of 1999
due to differences in the timing of payments.
The Partnership used $1,189,600 more cash in investing activities
during the nine months ended September 30, 1999 than in the comparable nine
months of 1998 due to an increase of $1,192,400 in expenditures for tangible
assets related to rebuild construction, partially offset by a $3,700 decrease
in spending for intangible assets. Financing activities provided $1,510,200
more cash in the first nine months of 1999 than in the equivalent period of
1998. The Partnership borrowed $1,100,000 under its Facility with EFC in the
first nine months of 1999 as compared with the first nine months of 1998 when
the Partnership repaid $150,000 of its outstanding borrowings. Changes in
-14-
<PAGE>
ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
liabilities owed to the Corporate General Partner and other affiliates
provided $239,300 more cash in the first nine months of 1999 due to the
deferral of payments for management fees, reimbursed expenses and programming
fees.
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.
-15-
<PAGE>
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) 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-B, L.P.
a GEORGIA LIMITED PARTNERSHIP
-----------------------------
(Registrant)
By: ENSTAR COMMUNICATIONS CORPORATION
General Partner
Date: November 11, 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 SEPTEMBER 30, 1999, AND THE STATEMENTS OF OPERATIONS FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 586,700
<SECURITIES> 0
<RECEIVABLES> 82,100
<ALLOWANCES> 1,800
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 9,051,100
<DEPRECIATION> 4,393,500
<TOTAL-ASSETS> 6,695,000
<CURRENT-LIABILITIES> 1,022,600
<BONDS> 0
2,500,000
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 6,695,600
<SALES> 0
<TOTAL-REVENUES> 2,251,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 176,800
<LOSS-PROVISION> 53,200
<INTEREST-EXPENSE> 132,100
<INCOME-PRETAX> (296,200)
<INCOME-TAX> 0
<INCOME-CONTINUING> (296,200)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (296,200)
<EPS-BASIC> (8.01)
<EPS-DILUTED> 0
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