-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LGHJuo/fHk4T94o910qyb7xXC6F16YF/BwfpUFbwVGWh4n/fwIgoesGElwpPLs61 0zMIPdmU3xy9RUAOJa6ntQ== 0000950148-96-001568.txt : 19960813 0000950148-96-001568.hdr.sgml : 19960813 ACCESSION NUMBER: 0000950148-96-001568 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960812 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENSTAR INCOME PROGRAM II-1 LP CENTRAL INDEX KEY: 0000757595 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 581628877 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14508 FILM NUMBER: 96607922 BUSINESS ADDRESS: STREET 1: 10900 WILSHIRE BLVD 15TH FLOOR CITY: LOS ANGELES STATE: CA ZIP: 90024 BUSINESS PHONE: 3108249990 MAIL ADDRESS: STREET 1: 474 SOUTH RAYMOND AVE #200 CITY: PASADENA STATE: CA ZIP: 91105 10-Q 1 FORM 10-Q DATED JUNE 30, 1996 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 June 30, 1996 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-14508 Enstar Income Program II-1, L.P. (Exact name of registrant as specified in its charter) Georgia 58-1628877 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer identification no.)
10900 Wilshire Boulevard, 15th Floor, Los Angeles, CA 90024 (Address of principal executive offices) (Zip code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (310) 824-9990 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 --- --- 2 PART I - FINANCIAL INFORMATION ENSTAR INCOME PROGRAM II-1, L.P. CONDENSED BALANCE SHEETS
December 31, June 30, 1995* 1996 ----------- ---------- (unaudited) ASSETS: Cash and cash equivalents $2,657,300 $3,000,400 Accounts receivable less allowance of $5,500 and $4,700 for possible losses 48,100 19,000 Prepaid expenses and other 16,400 42,300 Property, plant and equipment, less accumulated depreciation and amortization of $3,893,000 and $4,043,300 1,322,200 1,218,800 Franchise cost, less accumulated amortization of $8,800 and $13,100 63,500 66,100 Deferred charges, net 10,700 11,000 ---------- ---------- $4,118,200 $4,357,600 ========== ========== LIABILITIES AND PARTNERSHIP CAPITAL LIABILITIES: Accounts payable $ 186,800 $ 159,000 Due to affiliates 111,800 116,700 ---------- ---------- TOTAL LIABILITIES 298,600 275,700 ---------- ---------- COMMITMENTS AND CONTINGENCIES PARTNERSHIP CAPITAL (DEFICIT): General partners (35,700) (33,100) Limited partners 3,855,300 4,115,000 ---------- ---------- TOTAL PARTNERSHIP CAPTAL 3,819,600 4,081,900 ---------- ---------- $4,118,200 $4,357,600 ========== ==========
*As presented in the audited financial statements. See accompanying notes to condensed financial statements. -2- 3 ENSTAR INCOME PROGRAM II-1, L.P. CONDENSED STATEMENTS OF OPERATIONS
Unaudited --------------------- Three months ended June 30, --------------------- 1995 1996 -------- -------- REVENUES $665,900 $666,500 -------- -------- OPERATING EXPENSES: Service costs 206,000 190,800 General and administrative expenses 64,000 79,000 General Partner management fees and reimbursed expenses 89,100 94,800 Depreciation and amortization 182,600 84,800 -------- -------- 541,700 449,400 -------- -------- OPERATING INCOME 124,200 217,100 -------- -------- OTHER INCOME (EXPENSE): Interest income 26,100 30,600 Interest expense (2,800) (800) Gain on sale of cable assets - 700 -------- -------- 23,300 30,500 -------- -------- NET INCOME $147,500 $247,600 ======== ======== NET INCOME PER UNIT OF LIMITED PARTNERSHIP INTEREST $ 4.88 $ 8.19 ======== ======== AVERAGE LIMITED PARTNERSHIP UNITS OUTSTANDING DURING PERIOD 29,936 29,936 ======== ========
See accompanying notes to condensed financial statements. -3- 4 ENSTAR INCOME PROGRAM II-1, L.P. CONDENSED STATEMENTS OF OPERATIONS
Unaudited ------------------------- Six months ended June 30, ------------------------- 1995 1996 ---------- ---------- REVENUES $1,301,500 $1,316,200 ---------- ---------- OPERATING EXPENSES: Service costs 411,300 390,300 General and administrative expenses 109,800 170,600 General Partner management fees and reimbursed expenses 179,100 179,400 Depreciation and amortization 305,600 181,900 ---------- ---------- 1,005,800 922,200 ---------- ---------- OPERATING INCOME 295,700 394,000 ---------- ---------- OTHER INCOME (EXPENSE): Interest income 50,600 58,800 Interest expense (3,400) (2,200) Gain on sale of cable assets - 700 ---------- ---------- 47,200 57,300 ---------- ---------- NET INCOME $ 342,900 $ 451,300 ========== ========== NET INCOME PER UNIT OF LIMITED PARTNERSHIP INTEREST $ 11.34 $ 14.92 ========== ========== AVERAGE LIMITED PARTNERSHIP UNITS OUTSTANDING DURING PERIOD 29,936 29,936 ========== ==========
See accompanying notes to condensed financial statements. -4- 5 ENSTAR INCOME PROGRAM II-1, L.P. STATEMENTS OF CASH FLOWS
Unaudited ------------------------- Six months ended June 30, ------------------------- 1995 1996 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 342,900 $ 451,300 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 305,600 181,900 Gain on sale of cable assets - (700) Increase (decrease) from changes in: Accounts receivable, prepaid expenses and other (19,300) 3,200 Accounts payable and due to affiliates (79,900) (22,900) ---------- ---------- Net cash provided by operating activities 549,300 612,800 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (143,600) (77,900) Increase in intangible assets (16,800) (11,800) Proceeds from sale of cable assets - 9,000 ---------- ---------- Net cash used in investing activities (160,400) (80,700) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Distributions to partners (189,000) (189,000) ---------- ---------- INCREASE IN CASH AND CASH EQUIVALENTS 199,900 343,100 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,327,500 2,657,300 ---------- ---------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $2,527,400 $3,000,400 ========== ==========
See accompanying notes to condensed financial statements. -5- 6 ENSTAR INCOME PROGRAM II-1, 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, 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 and six months ended June 30, 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 $33,300 and $65,800 for the three and six months ended June 30, 1996. In addition to the monthly management fee described above, the Partnership reimburses the Manager for direct expenses incurred on behalf of the Partnership and for the Partnership's allocable share of operational costs associated with services provided by the Manager. All cable television properties managed by the Corporate General Partner and its subsidiaries 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 $61,500 and $113,600 for the three and six months ended June 30, 1996. Management fees and reimbursed expenses due the Corporate General Partner are non-interest bearing. 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 $129,000 and $258,000 for these programming services for the three and six months ended June 30, 1996. Programming fees are included in service costs in the statements of operations for the three and six months ended June 30, 1996 and 1995. -6- 7 ENSTAR INCOME PROGRAM II-1, 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 period presented. For this purpose, earnings and losses are allocated 99% to the limited partners and 1% to the general partners. 4. RECLASSIFICATIONS Certain 1995 amounts have been reclassified to conform to the 1996 presentation. -7- 8 ENSTAR INCOME PROGRAM II-1, 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, in accordance with policy decisions by the Federal Communications Commission (the "FCC"), the Partnership will 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. 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, 1995 for additional information regarding such matters and the effect thereof on the Partnership's business. RESULTS OF OPERATIONS The Partnership's revenues increased from $665,900 to $666,500 (less than one-percent) and from $1,301,500 to $1,316,200, or by 1.1%, for the three and six months ended June 30, 1996 as compared to the corresponding periods in 1995. Of the $600 increase in revenues for the three months ended June 30, 1996 as compared to the corresponding period in 1995, $21,300 was due to increases in regulated service rates that were implemented by the Partnership in the second quarter in each of 1995 and 1996 and $1,700 resulted from increases in other revenue producing items consisting primarily of advertising sales revenue. These increases were largely offset by a decrease of $22,400 due to a decrease in the number of subscriptions for service. Of the $14,700 increase in revenues for the six months ended June 30, 1996 as compared to the corresponding period in 1995, $37,000 was due to increases in regulated service rates that were implemented by the Partnership as discussed above and $8,600 resulted from increases in other revenue producing items consisting primarily of advertising sales revenue. These increases were partially offset by a decrease of $30,900 due to a decrease in the number of subscriptions for service. As of June 30, 1996, the Partnership had approximately 6,900 homes subscribing to cable service and 2,000 premium service units. -8- 9 ENSTAR INCOME PROGRAM II-1, L.P. RESULTS OF OPERATIONS (CONCLUDED) Service costs decreased from $206,000 to $190,800, or by 7.4%, and from $411,300 to $390,300, or by 5.1%, for the three and six months ended June 30, 1996 as compared to the corresponding periods for 1995. Service costs represent costs directly attributable to providing cable services to customers. Of the $15,200 decrease in service costs for the three months ended June 30, 1996 as compared to the corresponding period in 1995, $21,600 was due to an increase in capitalization of labor and overhead expense due to more capital projects during the three months ended June 30, 1996. This decrease was partially offset by a $4,300 increase in repair and maintenance expense and a $3,300 increase in franchise fees. Of the $21,000 decrease in service costs for the six months ended June 30, 1996 as compared to the corresponding period in 1995, $33,100 was due to an increase in capitalization of labor and overhead expense due to more capital projects during the six months period, which was partially offset by a $9,700 increase in franchise fees. General and administrative expenses increased from $64,000 to $79,000, or by 23.4%, and from $109,800 to $170,600, or by 55.4%, for the three and six months ended June 30, 1996 as compared to the corresponding periods in 1995. Of the $15,000 increase for the three months ended June 30, 1996 as compared to the corresponding period in 1995, $5,400 was due to an increase in marketing expense, $5,400 was due to higher insurance premiums and $4,000 was due to an increase in personnel costs. Of the $60,800 increase for the six months ended June 30, 1996 as compared to the corresponding period in 1995, $19,200 was due to an increase in marketing expense, $12,200 was due to higher insurance premiums, $8,000 was due to an increase in personnel costs, $7,000 was due to an increase in professional fees, $7,000 was due to an increase in business tax expense and $5,700 was due to higher bad debt expense. Management fees and reimbursed expenses increased from $89,100 to $94,800, or by 6.4%, during the three months ended June 30, 1996 as compared with the corresponding 1995 quarter, and remained relatively unchanged at $179,400 for the six months ended June 30, 1996 as compared to the first six months of 1995. The $5,700 increase for the three months period was due to increased reimbursable expenses allocated by the Corporate General Partner, including higher allocated personnel costs, rent expense and professional fees. Depreciation and amortization expense decreased from $182,600 to $84,800, or by 53.6%, and from $305,600 to $181,900, or by 40.5% for the three and six months ended June 30, 1996 as compared to the corresponding periods in 1995. The decrease in the three and six month periods was due to the effect of certain plant assets becoming fully depreciated in the fourth quarter of 1995. Operating income increased from $124,200 to $217,100, or by 74.8%, and from $295,700 to $394,000, or by 33.2% for the three and six months ended June 30, 1996 as compared to the corresponding periods for 1995 principally due to decreases in depreciation and amortization expense as described above. Interest income increased from $26,100 to $30,600, or by 17.2%, and from $50,600 to $58,800, or by 16.2% for the three and six months ended June 30, 1996 as compared to the corresponding periods for 1995 due to higher cash balances available for investment. Due to the factors described above, the Partnership's net income increased from $147,500 to $247,600, or by 67.9%, and from $342,900 to $451,300, or by 31.6% for the three and six months ended June 30, 1996 as compared to the corresponding periods for 1995. -9- 10 ENSTAR INCOME PROGRAM II-1, L.P. 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. At June 30, 1996, the Partnership had no debt outstanding. The Partnership depends on cash flow from operations to meet operating requirements and fund necessary capital expenditures. Although the Partnership currently has a significant cash balance, there can be no assurance that the Partnership's cash flow will be adequate to meet its future liquidity requirements which include planned expenditures of approximately $2,429,000 to rebuild and upgrade its existing cable system beginning in 1996. As a result, the Partnership intends, if possible, to maintain cash reserves. In the future, the Partnership may also need to borrow, if such borrowings are available on terms acceptable to the Partnership, of which there can be no assurance. The Partnership paid distributions totaling $94,500 and $189,000 during the three and six months ended June 30, 1996, and expects to continue to pay distributions at this level during the remainder of 1996. There can, however, be no assurances regarding the level, timing or continuation of future distributions beyond the quarter ended June 30, 1996. SIX MONTHS ENDED JUNE 30, 1996 AND 1995 Cash provided by operating activities increased by $63,500 from $549,300 to $612,800 for the six months ended June 30, 1996 compared with the corresponding period in 1995. The Partnership used $57,000 less cash to pay liabilities owed to the General Partner and third party creditors during the six months ended June 30, 1996 compared with the first six months of 1995. Other operating items (receivables and prepaid expenses) used $22,500 less cash during the first six months of 1996. Partnership operations generated $16,000 less cash in the six months ended June 30, 1996 after adding back non-cash charges for depreciation and amortization and gain on the sale of cable assets. The Partnership used $79,600 less cash in investing activities in the six months ended June 30, 1996 than in the corresponding six months of 1995 due to a $65,700 decrease in expenditures for tangible assets and a $4,900 decrease in expenditures for intangible assets. The Partnership received proceeds of $9,000 from the sale of certain cable assets. Operating income before depreciation and amortization (EBITDA) as a percentage of revenues decreased from 46.1% and 46.2% during the three and six months ended June 30, 1995 to 45.3% and 43.8% in the three and six months ended June 30, 1996. The change was caused primarily by an increase in reimbursed expenses allocated by the Corporate General Partner, increased marketing costs and higher insurance premiums. EBITDA decreased from $306,800 to $301,900, or by 1.6%, and from $601,300 to $575,900, or by 4.2%, for the three and six months ended June 30, 1996 as compared to the corresponding periods for 1995. -10- 11 ENSTAR INCOME PROGRAM II-1, L.P. LIQUIDITY AND CAPITAL RESOURCES (CONCLUDED) 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. -11- 12 ENSTAR INCOME PROGRAM II-1, L.P. PART II. OTHER INFORMATION ITEMS 1-5. Not applicable. ITEM 6. Exhibits and Reports on Form 8-K (a) None (b) No reports on Form 8-K were filed during the quarter for which this report is filed. 13 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 PROGRAM II-1, L.P. a GEORGIA LIMITED PARTNERSHIP ----------------------------- (Registrant) By: ENSTAR COMMUNICATIONS CORPORATION General Partner Date: August 7, 1996 By: /s/ Michael K. Menerey ----------------------------------- Michael K. Menerey, Chief Financial Officer EX-27.1 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AT JUNE 30, 1996, AND THE STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1 6-MOS DEC-31-1996 JUN-30-1996 3,000,400 0 23,700 4,700 0 0 5,262,100 4,043,300 4,357,600 275,700 0 0 0 0 0 4,357,600 0 1,316,200 0 922,200 (58,800) 16,600 2,200 451,300 0 451,300 0 0 0 451,300 14.92 0
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