1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[X] Soliciting Material Pursuant to Section 240.14a-12
ENSTAR INCOME PROGRAM 1984-1, L.P.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
2
ENSTAR INCOME PROGRAM 1984-1, L.P.
C/O ENSTAR COMMUNICATIONS CORPORATION
12444 POWERSCOURT DRIVE, SUITE 100
ST. LOUIS, MISSOURI 63131
September 14, 2000
To the Limited Partners of Enstar Income Program 1984-1, L.P.:
The attached report (the "Report") is being provided to you pursuant to
Rule 14a-12 under the Securities Exchange Act of 1934 as "build-up material"
relative to a consent solicitation presently contemplated by Enstar
Communications Corporation ("Enstar Communications"), the general partner of
Enstar Income Program 1984-1, L.P. ("Enstar 1984").
THE REPORT IS NOT A PROXY STATEMENT OR A CONSENT STATEMENT. ENSTAR
COMMUNICATIONS EXPECTS THAT IT WILL FILE A CONSENT STATEMENT WITH THE SECURITIES
AND EXCHANGE COMMISSION IN THE NEAR FUTURE. WHEN YOU RECEIVE IT, PLEASE READ THE
CONSENT STATEMENT CAREFULLY, BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION ABOUT
ENSTAR COMMUNICATIONS AND THE PROPOSAL IT WILL BE ASKING THE LIMITED PARTNERS TO
APPROVE. THE CONSENT STATEMENT WILL BE MAILED TO THE LIMITED PARTNERS AFTER IT
HAS BEEN FILED IN DEFINITIVE FORM WITH THE SECURITIES AND EXCHANGE COMMISSION.
YOU MAY OBTAIN A FREE COPY OF THE CONSENT STATEMENT, WHEN IT BECOMES
AVAILABLE, AT THE SEC'S WEB SITE AT http://www.sec.gov. A FREE COPY OF THE
ATTACHED REPORT IS ALSO AVAILABLE AT THE SEC'S WEB SITE. YOU MAY ALSO OBTAIN A
FREE COPY OF THE CONSENT STATEMENT (WHEN IT IS AVAILABLE) AND OF THE ATTACHED
REPORT FROM ENSTAR COMMUNICATIONS CORPORATION, 12444 POWERSCOURT DRIVE, SUITE
100, ST. LOUIS, MISSOURI, 63131, ATTENTION: MS. CAROL WOLF, MANAGER OF
PARTNERSHIP RELATIONS; OR CALL MS. WOLF AT (314) 543-2389 OR RALPH KELLY AT
(314) 543-2388.
The participants in the solicitation and their equity interests in
Enstar 1984 are:
NAME AND ADDRESS CAPACITY OF AMOUNT AND NATURE OF
OF PARTICIPANT PARTICIPANT BENEFICIAL OWNERSHIP
-------------- ----------- --------------------
1. Enstar Income Program 1984-1, L.P. Registrant Not applicable
c/o Enstar Communications
Corporation
12444 Powerscourt Drive
Suite 100
St. Louis, Missouri 63131
2. Enstar Communications Corporation General Partner 1% partnership interest
12444 Powerscourt Drive
Suite 100
St. Louis, Missouri 63131
3
ENSTAR INCOME PROGRAM 1984-1, L.P.
C/O ENSTAR COMMUNICATIONS CORPORATION
12444 POWERSCOURT DRIVE, SUITE 100
ST. LOUIS, MISSOURI 63131
---------
QUARTERLY REPORT
---------
Dear Limited Partner:
As the general partner of Enstar Income Program 1984-1, L.P., ("Enstar
1984" or the "Partnership"), we are pleased to enclose the Partnership's
Quarterly Report on Form 10-Q for the three months ended June 30, 2000, and to
announce that on August 31, 2000, Enstar 1984 sold all of its South Carolina
cable system assets to Catawba Services, Inc., an unaffiliated company, for a
purchase price of $5,250,000. We expect to be distributing the proceeds of that
sale, net of transaction costs and applicable withholding taxes, in accordance
with the provisions of the partnership agreement, within the next few weeks.
Presently, we estimate that this distribution from the sale of the South
Carolina assets would total approximately $150 per Unit.
We are further pleased to announce that as of June 21, 2000, the
Partnership (together with five other Enstar-affiliated limited partnerships)
entered into a comprehensive Asset Purchase Agreement with Multimedia
Acquisition Corp. (an affiliate of Gans Multimedia Partnership) pursuant to
which Multimedia would purchase substantially all of the Partnership's North
Carolina and Tennessee cable television systems and other operating assets (and
substantially all of the cable systems and other operating assets of the other
five selling partnerships) for an aggregate purchase price of $27,621,500, of
which $13,691,119 would be paid to Enstar 1984, subject to closing adjustments.
Neither Multimedia nor Gans is affiliated with the Partnership or any affiliate
of the Partnership.
The Multimedia agreement is the result of an extensive process we began
in 1999 to engage a respected industry broker, identify prospective purchasers
of the selling partnerships' cable systems and to negotiate a definitive
purchase agreement covering all or substantially all of those assets. Of the
bids we received, Multimedia offered the most favorable price and other terms.
Multimedia's obligation to purchase the selling partnerships' cable
system assets, including Enstar 1984's, is contingent on (i) each and every
selling partnership obtaining the approval of its respective limited partners;
and (ii) the grantors of the franchises covering 90% of the selling
partnerships' aggregate number of subscribers consenting to the assignment of
those franchises to Multimedia. We anticipate that this process will require
several months.
Following the sale to Multimedia we would repay the Partnership's
debts, fund required reserves, and terminate the Partnership by making
liquidating cash distributions to its partners in accordance with the
liquidation provisions of the partnership agreement. We presently expect
4
that the Multimedia sale will result in liquidating distributions to the limited
partners of approximately $375 per Unit (subject to closing adjustments and
federal and state taxes). This would be in addition to the distributions from
the South Carolina sale.
We presently expect that the sale to Multimedia would close in the
first quarter of 2001 and anticipate making the initial liquidating distribution
approximately 60 days after the closing. We also expect that after required
closing adjustments are completed (which we expect to occur approximately 6
months after the closing), final liquidating distributions would be made of any
remaining funds.
The liquidating distributions and time-frames contemplated above are
estimates, only. There is no assurance that the sale of the Partnership's assets
will close within the time period indicated, if at all, or that the liquidating
distributions will not differ substantially from those set forth above.
As noted in the cover letter to this Report, at this time we are not
soliciting your consent to or approval of the Multimedia sale and subsequent
liquidation. We will seek your consent for the sale of the North Carolina and
Tennessee cable television systems only through a formal Consent Solicitation
Statement that we must file with the Securities and Exchange Commission before
we send it to you. We are now in the process of preparing the Consent
Solicitation Statement and at this time expect to send it (together with
appropriate consent cards) to you within the next several weeks. When you
receive our Consent Solicitation Statement, please read it carefully before you
vote, because it will contain important information pertinent to the General
Partner, the Partnership, the Multimedia sale, the reasons for it, the
liquidation and distribution process and voting procedures.
ENSTAR COMMUNICATIONS CORPORATION
General Partner
5
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, 2000
----------------------------------------
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 0-13333
-------------
Enstar Income Program 1984-1, L.P.
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(Exact name of Registrant as specified in its charter)
Georgia 58-1581136
- -------------------------------------------------------------- ------------------------------------------
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification Number)
organization)
12444 Powerscourt Dr., Suite 100
St. Louis, Missouri 63131
- -------------------------------------------------------------- ------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area (314) 965-0555
code: -----------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report.
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes X No
---- ----
Exhibit Index located at Page E-1.
6
PART I - FINANCIAL INFORMATION
ENSTAR INCOME PROGRAM 1984-1,L.P.
CONDENSED BALANCE SHEETS
======================================================
December 31, June 30,
1999* 2000
----------------- -----------------
(Unaudited)
ASSETS:
Cash $ 1,963,500 $ 2,565,800
Accounts receivable, net of allowance for doubtful accounts of $700 and
$11,200, respectively 90,700 269,900
Insurance claim receivable 27,900 107,700
Prepaid expenses and other assets 160,300 105,800
Property, plant and equipment, net of accumulated
depreciation of $11,793,400 and $12,167,900, respectively 4,189,700 4,036,400
Franchise cost, net of accumulated
amortization of $127,400 and $131,100, respectively 53,000 49,300
Deferred loan costs and other deferred charges, net 52,800 46,500
----------------- -----------------
$ 6,537,900 $ 7,181,400
================= =================
LIABILITIES AND PARTNERSHIP CAPITAL
-----------------------------------
LIABILITIES:
Accounts payable $ 425,500 $ 344,100
Due to affiliates 1,217,700 1,220,900
----------------- -----------------
1,643,200 1,565,000
----------------- -----------------
PARTNERSHIP CAPITAL (DEFICIT):
General partner (23,800) (16,600)
Limited partners 4,918,500 5,633,000
----------------- -----------------
TOTAL PARTNERSHIP CAPITAL 4,894,700 5,616,400
----------------- -----------------
$ 6,537,900 $ 7,181,400
================= =================
The accompanying notes are an integral part of these condensed
financial statements.
- ---------
*Agrees with audited balance sheet included in the Partnership's Annual Report
on Form 10-K
-2-
7
ENSTAR INCOME PROGRAM 1984-1,L.P.
CONDENSED STATEMENTS OF OPERATIONS
=====================================================
Unaudited
-------------------------------------
Three months ended
June 30,
-------------------------------------
1999 2000
---------------- -----------------
REVENUES $ 1,284,400 $ 1,265,300
---------------- -----------------
OPERATING EXPENSES:
Service costs 487,100 368,600
General and administrative expenses 191,500 165,500
General partner management fees
and reimbursed expenses 151,400 142,200
Depreciation and amortization 230,400 215,500
---------------- -----------------
1,060,400 891,800
---------------- -----------------
OPERATING INCOME 224,000 373,500
---------------- -----------------
OTHER INCOME (EXPENSE):
Interest income 13,000 29,200
Interest expense (23,500) (18,300)
Cost of sale of cable television systems - (21,300)
---------------- -----------------
(10,500) (10,400)
---------------- -----------------
NET INCOME $ 213,500 $ 363,100
================ =================
Net income allocated to General Partner $ 2,100 $ 3,600
================ =================
Net income allocated to Limited Partners $ 211,400 $ 359,500
================ =================
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 7.06 $ 12.01
================ =================
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 29,940 29,940
================ =================
The accompanying notes are an integral part of these condensed
financial statements.
-3-
8
ENSTAR INCOME PROGRAM 1984-1,L.P.
CONDENSED STATEMENTS OF OPERATIONS
====================================================
Unaudited
-------------------------------------
Six months ended
June 30,
-------------------------------------
1999 2000
---------------- -----------------
REVENUES $ 2,550,100 $ 2,539,100
---------------- -----------------
OPERATING EXPENSES:
Service costs 933,600 791,100
General and administrative expenses 355,500 362,700
General partner management fees
and reimbursed expenses 299,300 309,500
Depreciation and amortization 441,600 425,800
---------------- -----------------
2,030,000 1,889,100
---------------- -----------------
OPERATING INCOME 520,100 650,000
---------------- -----------------
OTHER INCOME (EXPENSE):
Interest income 23,900 51,700
Interest expense (47,200) (35,400)
Cost of sale of cable television systems - (24,400)
Casualty gain - 79,800
---------------- -----------------
(23,300) 71,700
---------------- -----------------
NET INCOME $ 496,800 $ 721,700
================ =================
Net income allocated to General Partner $ 5,000 $ 7,200
================ =================
Net income allocated to Limited Partners $ 491,800 $ 714,500
================ =================
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 16.43 $ 23.86
================ =================
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 29,940 29,940
================ =================
The accompanying notes are an integral part of these condensed
financial statements.
-4-
9
ENSTAR INCOME PROGRAM 1984-1,L.P.
CONDENSED STATEMENTS OF CASH FLOWS
====================================================
Unaudited
-------------------------------------
Six months ended
June 30,
-------------------------------------
1999 2000
---------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 496,800 $ 721,700
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization 441,600 425,800
Amortization of deferred loan costs 14,800 14,900
Changes in:
Receivables, prepaid expenses and other assets (130,200) (195,300)
Accounts payable and due to affiliates 215,600 (78,300)
---------------- -----------------
Net cash from operating activities 1,038,600 888,800
---------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (341,600) (277,400)
---------------- -----------------
Net cash from investing activities (341,600) (277,400)
---------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Deferred loan costs - (9,100)
---------------- -----------------
Net cash from financing activities - (9,100)
---------------- -----------------
INCREASE IN CASH 697,000 602,300
CASH AT BEGINNING OF PERIOD 1,036,000 1,963,500
---------------- -----------------
CASH AT END OF PERIOD $ 1,733,000 $ 2,565,800
================ =================
The accompanying notes are an integral part of these condensed
financial statements.
-5-
10
ENSTAR INCOME PROGRAM 1984-1,L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
=====================================================
1. INTERIM FINANCIAL STATEMENTS
The accompanying condensed interim financial statements for
the Enstar Income Program 1984-1, L.P. (the "Partnership") as of June 30, 2000
and for the three and six months ended June 30, 2000 and 1999 are unaudited.
These condensed interim financial statements should be read in conjunction with
the audited financial statements and notes thereto included in our latest Annual
Report on Form 10-K. In the opinion of management, the condensed interim
financial 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,
2000 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 (the
"Management Agreement") with Enstar Cable Corporation (the "Manager"), a wholly
owned subsidiary of Enstar Communications Corporation (ECC), the corporate
general partner, for a monthly management fee of 5% of gross revenues to the
Manager, excluding revenues from the sale of cable television systems or
franchises. Management fee expense approximated $63,300 and $127,000 for the
three and six months ended June 30, 2000, respectively. For the three and six
months ended June 30, 1999, management fee expense approximated $64,700 and
$127,500, respectively. Management fees are non-interest bearing.
The Management Agreement provides that the Partnership
reimburse 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. Additionally, Charter Communications Holding
Company, LLC and its affiliates (collectively, "Charter") provide other
management and operational services for the Partnership. Such services were
provided by Falcon Communications, L.P. and its affiliates (collectively,
"Falcon") prior to November 12, 1999. These expenses are charged to the
properties served based primarily on the Partnership's allocable share of
operational costs associated with services provided. The total amount charged to
the Partnership for these services approximated $78,900 and $182,500 for the
three and six months ended June 30, 2000, respectively. For the three and six
months ended June 30, 1999, the total amount charged to the Partnership for
these services approximated $86,700 and $171,800, respectively.
On September 30, 1997, ECC contributed $462,300 of previously
deferred management fees and reimbursed expenses as an equity contribution to
Enstar Finance Company, LLC, a subsidiary of ECC. The balance remains an
outstanding obligation of the Partnership. In the normal course of business, the
Partnership pays interest and principal to Enstar Finance Company, LLC, its
primary lender, when there are amounts outstanding under the facility and pays a
commitment fee on the unborrowed portion of its facility.
-6-
11
ENSTAR INCOME PROGRAM 1984-1,L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
====================================
Substantially all programming services have been purchased
through Charter since November 12, 1999. Before that time, substantially all
programming services were purchased through Falcon. Falcon charged the
Partnership for these costs based on an estimate of what ECC could negotiate for
such programming services for the 15 partnerships managed as a group. Charter
charges the Partnership for these costs based on its costs. The Partnership
recorded programming fee expense of $232,800 and $492,100 for the three and six
months ended June 30, 2000, respectively. For the three and six months ended
June 30, 1999, programming fee expense was $302,800 and $592,800, respectively.
Programming fees are included in service costs in the statements of operations.
3. NET INCOME PER UNIT OF LIMITED PARTNERSHIP INTEREST
Net income per unit of limited partnership interest is based
on the average number of units outstanding during the periods presented. For
this purpose, net income has been allocated 99% to the Limited Partners and 1%
to the General Partner. The General Partner does not own units of partnership
interest in the Partnership, but rather holds a participation interest in the
income, losses and distributions of the Partnership.
4. SALE OF CABLE SYSTEMS
On June 21, 2000, the Partnership, together with certain
affiliates, (collectively, the "Sellers") entered into a purchase and sale
agreement (the "Agreement") with Multimedia Acquisition Corp., an affiliate of
Gans Multimedia Partnership, (the "Purchaser"). The Agreement provides for the
Purchaser to acquire the assets comprising the Partnership's cable systems
serving Snowhill, North Carolina and Brownsville, Tennessee, as well as certain
assets of other affiliates.
The aggregate purchase price payable to the Sellers pursuant
to the Agreement is $27,621,500 in cash (subject to normal closing adjustments).
Of that amount, $13,691,119 (subject to closing adjustments) is payable to the
Partnership. The allocation of the purchase price among each of the Sellers was
assigned by the Purchaser for each of the systems.
The Purchaser's obligation to acquire the cable systems is
subject to numerous closing conditions, including without limitation: (a)
receipt of the necessary governmental consents to transfer franchises covering
an aggregate of 90% of the subscribers of all of the Sellers; (b) receipt of
certain other material consents and approvals required for the consummation of
the sale; (c) receipt of the necessary approvals of the Limited Partners of each
Seller; and (d) other standard closing conditions. With respect to clause (c)
above, completion of the transaction is contingent on the Limited Partners of
the Partnership and the other selling affiliates voting to approve the sale.
-7-
12
ENSTAR INCOME PROGRAM 1984-1,L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
=====================================
The Partnership entered into an asset purchase agreement to
sell the Partnership's remaining cable systems serving Kershaw, South Carolina,
in a separate transaction to an unrelated purchaser for $5,250,000 (subject to
normal closing adjustments). The closing of the sale is to occur on or before
August 31, 2000. Completion of this sale is subject to standard closing
conditions, such as obtaining regulatory approvals. There can be no assurance
that this proposed sale will be completed.
-8-
13
ENSTAR INCOME PROGRAM 1984-1,L.P.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INTRODUCTION
This report includes certain forward-looking statements
regarding, among other things, our 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 our Annual Report on Form 10-K
for the year ended December 31, 1999 for additional information regarding such
matters and the effect thereof on the Partnership's business.
RESULTS OF OPERATIONS
Revenues decreased from $1,284,400 to $1,265,300, or by 1.5%,
and from $2,550,100 to $2,539,100, or by 0.4%, for the three and six months
ended June 30, 2000, as compared to the corresponding periods in 1999. Of the
$19,100 decrease for the three months ended June 30, 2000, $39,700 was due to
decreases in the number of subscribers for basic, pay, tier, and equipment
rental services. These decreases were partially offset by a $16,200 increase due
to increases in regulated service rates that we implemented in 1999 and a $4,400
increase in other revenue producing items. Of the $11,000 decrease in revenues
for the six months ended June 30, 2000, $66,000 was due to decreases in the
number of subscribers for basic, pay, tier, and equipment rental services. The
decreases were partially offset by a $38,900 increase in regulated service rates
that we implemented in 1999 and a $16,100 increase in other revenue producing
items. As of June 30, 2000, the partnership had approximately 10,600 basic
subscribers and 4,100 premium service units.
Effective with the acquisition of Falcon Communications, L.P.
(Falcon) by Charter Communications Holdings Company, LLC on November 12, 1999,
certain activities previously incurred at the Partnership and expensed through
service cost and general and administrative expense have been either eliminated
by Charter, or have been reimbursed by the Partnership based on Charter's costs
incurred. These reimbursed costs are included in general partner management fees
and reimbursed expenses on the Partnership's statements of operations. The total
of service costs, general and administrative expenses and general partner
management fees and reimbursed expenses decreased from $830,000 to $676,300, or
by 18.5%, and from $1,588,400 to $1,463,300, or by 7.9%, for the three and six
months ended June 30, 2000, as compared to the corresponding periods in 1999.
Service costs decreased from $487,100 to $368,600, or by
24.3%, and from $933,600 to $791,100, or by 15.3%, for the three and six months
ended June 30, 2000, as compared to the corresponding periods in 1999. Service
costs represent costs directly attributable to providing cable services to
customers. The decrease was primarily due to decreases in programming fees and
increases in capitalization of labor and overhead costs due to a greater number
of capital projects during the first six months of 2000 and certain costs
incurred at the Partnership prior to the Charter acquisition on November 12,
1999 that are now incurred by Charter and reimbursed by the
-9-
14
ENSTAR INCOME PROGRAM 1984-1,L.P.
Partnership, as discussed above. Programming fees decreased as a result of lower
rates that Charter has extended to the Partnership and a decrease in
subscribers.
General and administrative expenses decreased from $191,500 to
$165,500, or by 13.6%, and increased from $355,500 to $362,700, or by 2.0%, for
the three and six months ended June 30, 2000, as compared to the corresponding
periods in 1999. For the three months ended June 30, 2000, the decrease is due
to decreases in personnel costs, insurance costs and certain costs incurred by
Charter and reimbursed by the Partnership prior to the Charter acquisition. For
the six months ended June 30, 2000, the increase is due to increases in
professional fees, postage, and bad debt expense.
General partner management fees and reimbursed expenses
decreased from $151,400 to $142,200, or by 6.1%, and increased from $299,300 to
$309,500, or by 3.4%, for the three and six months ended June 30, 2000, as
compared to the corresponding periods in 1999. The increase for the six months
ended June 30, 2000, represents certain costs incurred by Charter that were
previously incurred by the Partnership prior to the Charter acquisition. The
decrease for the three months ended June 30, 2000, represents certain costs that
Charter has been able to eliminate.
Depreciation and amortization expense decreased from $230,400
to $215,500, or by 6.5%, and from $441,600 to $425,800, or by 3.6%, for the
three and six months ended June 30, 2000, as compared to the corresponding
periods in 1999. The decrease was primarily due to the effect of certain
intangible assets becoming fully amortized.
Operating income increased from $224,000 to $373,500, or by
66.7%, and from $520,100 to $650,000, or by 25.0%, for the three and six months
ended June 30, 2000, as compared to the corresponding periods in 1999, primarily
due to decreases in personnel costs, professional fees, and programming fees as
described above.
Interest income increased from $13,000 to $29,200, or by
124.6%, and from $23,900 to $51,700, or by 116.3%, for the three and six months
ended June 30, 2000, as compared to the corresponding periods in 1999, primarily
due to higher average cash balances available for investment.
Interest expense decreased from $23,500 to $18,300, or by
22.1%, and from $47,200 to $35,400, or by 25.0%, for the three and six months
ended June 30, 2000, as compared to the corresponding periods in 1999, primarily
due to a reduction in commitment fees paid under our loan facility, which was
reduced on November 12, 1999.
Cost of sale of cable television systems was $21,300 and
$24,400 for the three and six months ended June 30, 2000. These costs relate to
professional fees incurred in preparation for the sale of the Kershaw, South
Carolina, cable television system.
Casualty gain was $0 and $79,800 for the three and six months
ended June 30, 2000. This gain relates to an insurance reimbursement received in
the first quarter of 2000 for damages caused by Hurricane Floyd in September
1999. The reimbursement was used for plant repairs and refunds to customers for
cable outages.
-10-
15
ENSTAR INCOME PROGRAM 1984-1,L.P.
Due to the factors described above, our net income increased
from $213,500 to $363,100, or by 70.1%, and from $496,800 to $721,700, or by
45.3%, for the three and six months ended June 30, 2000, as compared to the
corresponding periods in 1999.
Based on our experience in the cable television industry, we
believe that operating income before depreciation and amortization, or 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 increased from 35.4% to 46.6% and 37.7% to 42.4% during the three and
six months ended June 30, 2000, as compared to the corresponding period in 1999.
The increase was primarily due to decreases in personnel costs, professional
fees, and programming fees as described above. EBITDA increased from $454,400 to
$589,000, or by 29.6%, and from $961,700 to $1,075,800, or by 11.9%, during the
three and six months ended June 30, 2000, as compared to the corresponding
period in 1999.
LIQUIDITY AND CAPITAL RESOURCES
Our primary objective is to distribute to our 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. In
general, these capital requirements involve expansion, improvement and upgrade
of our existing cable systems.
In accordance with the partnership agreement, the Enstar
Communications Corporation has implemented a plan for liquidating the
Partnership. On June 21, 2000, the Partnership, together with certain
affiliates, (collectively, the "Sellers") entered into a purchase and sale
agreement (the "Agreement") with Multimedia Acquisition Corp., an affiliate of
Gans Multimedia Partnership, (the "Purchaser"). The Agreement provides for the
Purchaser to acquire the assets comprising the Partnership's cable systems
serving Snowhill, North Carolina and Brownsville, Tennessee, as well as certain
assets of other affiliates.
The aggregate purchase price payable to the Sellers pursuant
to the Agreement is $27,621,500 in cash (subject to normal closing adjustments).
Of that amount, $13,691,119 (subject to closing adjustments) is payable to the
Partnership. The allocation of the purchase price among each of the Sellers was
assigned by the Purchaser for each of the systems.
The Purchaser's obligation to acquire the cable systems is
subject to numerous closing conditions, including without limitation: (a)
receipt of the necessary governmental consents to transfer franchises covering
an aggregate of 90% of the subscribers of all of the Sellers; (b) receipt of
certain other material consents and approvals required for the consummation of
the sale; (c) receipt of the necessary approvals of the Limited Partners of each
Seller; and (d) other standard closing
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ENSTAR INCOME PROGRAM 1984-1,L.P.
conditions. With respect to clause (c) above, completion of the transaction is
contingent on the Limited Partners of the Partnership and the other selling
affiliates voting to approve the sale.
The Partnership entered into an asset purchase agreement to
sell the Partnership's remaining cable systems serving Kershaw, South Carolina,
in a separate transaction to an unrelated purchaser for $5,250,000 (subject to
normal closing adjustments). The closing of the sale is to occur on or before
August 31, 2000. Completion of this sale is subject to standard closing
conditions, such as obtaining regulatory approvals. There can be no assurance
that this proposed sale will be completed.
As of the date of this report, each of our systems requires an
upgrade, as substantially all of the available channel capacity in our cable
television systems is being utilized. We presently estimate that the entire
upgrade program will cover 12 franchise areas and require aggregate capital
expenditures of approximately $8,300,000. Of the 12 franchise areas to be
upgraded, the upgrade is required with respect to eight franchise areas and to
be completed by June 2000, December 2001 and February 2002. These required
upgrades are estimated to cost approximately $4.4 million. The Partnership did
not complete the first required upgrade by June 30, 2000 due to the general
partner's intention to sell the system located in Kershaw, South Carolina.
However, the Partnership has been granted an extension until December 2000 to
complete this upgrade. If the franchise authority imposes the $100 per day
penalty for failing to timely complete the upgrade, it is not expected to have a
material adverse impact on our results of operations or financial condition.
The Partnership relies upon the availability of cash generated
from operations and possible borrowings to fund its ongoing expenses, debt
service and capital requirements. Our capital expenditures were $277,400 for the
six months ended June 30, 2000. We believe that possible borrowings under our
credit agreement together with cash flow from operations will be adequate to
fund capital expenditures and other liquidity requirements.
Our loan facility with Enstar Finance Company, LLC, has a
maximum loan commitment of $4,800,000. We pay a commitment fee of 0.5% to Enstar
Finance Company, LLC, on the unborrowed portion of the facility. We had no
outstanding borrowings under the facility as of June 30, 2000.
Our loan facility matures on August 31, 2001, at which time
all amounts then outstanding are due in full. Borrowings bear interest at the
lender's base rate (9.135% at June 30, 2000) plus 0.625%, or at an offshore rate
(6.27% at June 30, 2000) plus 1.875%. Under certain circumstances, we are
required to make mandatory prepayments, which permanently reduce the maximum
commitment under the loan facility. The loan facility contains certain financial
tests and other covenants including, among others, restrictions on incurrence of
indebtedness, investments, sales of assets, acquisitions and other covenants,
defaults and conditions. The loan facility does not restrict the payment of
distributions to partners unless an event of default exists thereunder or our
ratio of debt to cash flow is greater than 4 to 1. However, due to the upgrade
program discussed above, the General Partner believes it is critical to conserve
cash and borrowing capacity and, consequently, has concluded that it would not
be prudent for the Partnership to resume paying distributions at this time.
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ENSTAR INCOME PROGRAM 1984-1,L.P.
The city of Covington, Tennessee rejected our franchise
renewal proposal in June 1999. The franchise agreement with the city expired in
1994 and we have continued to operate our cable system in Covington and pay
franchise fees to the city. In March 2000, Charter submitted another proposal to
the city on behalf of the Partnership that was subsequently rejected. At this
time, a municipal utility is moving forward with its plan to obtain financing
for construction of a system that would compete directly with the Partnership's
system. Construction is targeted to occur over an 18-month period. As it has
been proposed, the new system would be more technically advanced than the
Partnership's system and offer high speed internet access in addition to cable
television services. We believe that such a system, if built, would result in a
loss of our subscribers and have a significant adverse impact on the
partnership's financial condition and results of operations.
In January 2000, the franchise authority in Bolivar, Tennessee
authorized its municipal utility to construct and operate a competing cable
system in that franchise area. Our franchise agreement with the city expired in
1995. As we have in Covington, the Partnership has continued to operate our
cable system in Bolivar and pay franchise fees to the franchise authority.
Although the municipal utility has not obtained funds to build a cable system,
we believe that if a competing system were built, the loss of subscribers would
have an adverse impact on the Partnership's financial condition and results of
operations. Additionally, the loss of either franchise would constitute an event
of default under our loan agreement and would preclude us from borrowing under
our loan facility to finance our franchise-required rebuilds. This would require
the Partnership to identify alternative sources of financing. Enstar
Communications Corporation is assessing various strategies to mitigate the
impact of these potential overbuilds in the event that our systems are not sold
to third parties. As of June 30, 2000, there were approximately 1,800 and 1,300
basic subscribers in the cities of Covington and Bolivar, respectively.
Falcon purchased insurance coverage for all of the cable
television properties owned or managed by it 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 formerly
owned or managed by Falcon through November 12, 1999, and currently managed by
Charter, including those of the Partnership. We have recorded a receivable of
approximately $107,700 for insurance recovery due to us under this policy.
Approximately 65% of our subscribers are served by our system
in Brownsville, Tennessee and neighboring communities. Significant damage to the
system due to seasonal weather conditions or other events could have a material
adverse effect on our liquidity and cash flows. We continue to purchase
insurance coverage in amounts our management views as appropriate for all other
property, liability, automobile, workers' compensation and other types of
insurable risks.
Our operating activities provided $149,800 less cash in the
six months ended June 30, 2000 than in the first six months of 1999. Changes in
accounts receivable and prepaid expenses used $65,100 more cash in the first six
months of 2000 due to differences in the timing of receivable collections and
the payment of prepaid expenses. We used $293,900 more cash to pay liabilities
owed to affiliates and third party creditors during the six months ended June
30, 2000 due to differences in the timing of payments.
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ENSTAR INCOME PROGRAM 1984-1,L.P.
Investing activities used $64,200 less cash during the six
months ended June 30, 2000 than in the corresponding quarter of 1999 due to a
decrease in capital expenditures. Financing activities used $9,100 more cash in
the six months ended June 30, 2000 than in the comparable six months of 1999 due
to deferred loan costs related to our amended loan facility.
INFLATION
Certain of our expenses, such as those for wages and benefits,
equipment repair and replacement, and billing and marketing generally increase
with inflation. However, we do not believe that our financial results have been,
or will be, adversely affected by inflation in a material way, provided that we
are able to increase our service rates periodically, of which there can be no
assurance.
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ENSTAR INCOME PROGRAM 1984-1,L.P.
PART II. OTHER INFORMATION
ITEMS 1-5. Not applicable.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Asset Purchase Agreement dated June
21, 2000, by and among Multimedia
Acquisition Corp., as Buyer, and
Enstar Income Program 1984-1, L.P.,
Enstar Income Program IV-3, L.P.,
Enstar Income/Growth Program Six-A,
L.P., Enstar VII, L.P., Enstar VIII,
L.P. and Enstar X, Ltd., as Sellers.
(1)
27.1 Financial Data Schedule.*
(b) Reports on Form 8-K
- On June 30, 2000, an 8-K dated June
21, 2000, was filed to announce an
Asset Purchase Agreement dated June
21, 2000, by and among Multimedia
Acquisition Corp., as Buyer, and
Enstar Income Program 1984-1, L.P.,
Enstar Income Program IV-3, L.P.,
Enstar Income/Growth Program Six-A,
L.P., Enstar VII, L.P., Enstar VIII,
L.P. and Enstar X, Ltd., as Sellers
(Item 5).
- On July 18, 2000, an 8-K dated July
14, 2000, was filed to announce a
change in the Partnership's
principal independent accountants
(Item 4).
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* Filed herewith.
(1) Incorporated by reference to the report on Form 8-K of Enstar Income
Program 1984-1, L.P. filed on June 30, 2000 (File No. 000-13333).
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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 1984-1, L.P.
a GEORGIA LIMITED PARTNERSHIP
----------------------------
(Registrant)
By: ENSTAR COMMUNICATIONS CORPORATION
General Partner
Date: August 14, 2000 By: /s/ Kent D. Kalkwarf
----------------------------------------------
Kent D. Kalkwarf
Executive Vice President and Chief
Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
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