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/GROWTH PROGRAN FIVE-B, 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/GOWTH PROGRAM FIVE-B, 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/Growth Program Five-B, 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/Growth Program Five-B, L.P. ("Enstar Five-B").
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 Five-B are:
NAME AND ADDRESS CAPACITY OF AMOUNT AND NATURE OF
OF PARTICIPANT PARTICIPANT BENEFICIAL OWNERSHIP
-------------- ----------- --------------------
1. Enstar Income/Growth Program Registrant Not applicable
Five-B, L.P.
c/o Enstar Communications
Corporation
12444 Powerscourt Drive
Suite 100
St. Louis, Missouri 63131
2. Enstar Communications General Partner 0.5% partnership
Corporation interest
12444 Powerscourt Drive
Suite 100
St. Louis, Missouri 63131
3
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, 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/Growth Program Five-B, L.P.,
("Enstar Five-B" 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.
We are further pleased to announce that as of August 8, 2000, Enstar
Cable of Cumberland Valley, a general partnership in which Enstar Five-B owns a
50% interest (the "Joint Venture"), (together with eight other Enstar-affiliated
limited and general partnerships) has entered into a comprehensive Asset
Purchase Agreement (the "Purchase Agreement") with Multimedia Acquisition Corp.
(an affiliate of Gans Multimedia Partnership). Neither Multimedia nor Gans is
affiliated with the Partnership or any affiliate of the Partnership.
The general partnership interest in the Joint Venture is Enstar
Five-B's only cable system asset. Pursuant to the Purchase Agreement, Multimedia
would purchase substantially all of the cable television systems and other
operating assets of each of those selling partnerships, including the Joint
Venture, for a combined, aggregate purchase price of $94,929,400, of which
$12,739,500 would be paid to Enstar Five-B, subject to closing adjustments. This
amount constitutes Enstar Five-B's allocable portion of the sale proceeds that
would be received by the Joint Venture.
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 the Joint Venture's, is contingent on (i) each and
every selling partnership obtaining the approval of its respective limited or
general 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
4
partners in accordance with the liquidation provisions of the partnership
agreement. We presently expect that the liquidating distributions to the limited
partners would approximate $190 per Unit (subject to closing adjustments and
federal and state taxes).
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 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
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Commission File Number 0-16789
-------------
Enstar Income/Growth Program Five-B, L.P.
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(Exact name of Registrant as specified in its charter)
Georgia 58-1713008
- ------------------------------------ --------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
12444 Powerscourt Dr., Suite 100
St. Louis, Missouri 63131
---------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (314) 965-0555
---------------------------
- --------------------------------------------------------------------------------
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/GROWTH PROGRAM FIVE-B,L.P.
CONDENSED BALANCE SHEETS
=======================================
December 31, June 30,
1999* 2000
----------- -----------
(Unaudited)
ASSETS:
Cash $ 19,300 $ 8,900
Equity in net assets of Joint Venture 4,601,600 4,849,100
----------- -----------
$ 4,620,900 $ 4,858,000
=========== ===========
LIABILITIES AND PARTNERSHIP CAPITAL
-----------------------------------
LIABILITIES:
Accounts payable $ 200 $ 2,600
Due to affiliates 5,600 37,200
----------- -----------
5,800 39,800
----------- -----------
PARTNERSHIP CAPITAL (DEFICIT):
General Partner (77,800) (75,800)
Limited Partners 4,692,900 4,894,000
----------- -----------
TOTAL PARTNERSHIP CAPITAL 4,615,100 4,818,200
----------- -----------
$ 4,620,900 $ 4,858,000
=========== ===========
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/GROWTH PROGRAM FIVE-B,L.P.
CONDENSED STATEMENTS OF OPERATIONS
=======================================
Unaudited
----------------------------------
Three months ended
June 30,
----------------------------------
1999 2000
--------- ---------
OPERATING EXPENSES:
General and administrative expenses $ (14,000) $ (18,300)
--------- ---------
LOSS BEFORE EQUITY IN NET INCOME
OF JOINT VENTURE (14,000) (18,300)
EQUITY IN NET INCOME OF JOINT VENTURE 45,400 159,900
--------- ---------
NET INCOME $ 31,400 $ 141,600
========= =========
Net income allocated to General Partner $ 300 $ 1,400
========= =========
Net income allocated to Limited Partners $ 31,100 $ 140,200
========= =========
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 0.52 $ 2.34
========= =========
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 59,830 59,830
========= =========
The accompanying notes are an integral part of these condensed
financial statements.
-3-
8
ENSTAR INCOME/GROWTH PROGRAM FIVE-B,L.P.
CONDENSED STATEMENTS OF OPERATIONS
=======================================
Unaudited
----------------------------
Six months ended
June 30,
----------------------------
1999 2000
---------- ----------
OPERATING EXPENSES:
General and administrative expenses $ (26,600) $ (44,400)
--------- ---------
LOSS BEFORE EQUITY IN NET INCOME
OF JOINT VENTURE (26,600) (44,400)
EQUITY IN NET INCOME OF JOINT VENTURE 58,400 247,500
--------- ---------
NET INCOME $ 31,800 203,100
========= =========
Net income allocated to General Partner $ 300 $ 2,000
========= =========
Net income allocated to Limited Partners $ 31,500 $ 201,100
========= =========
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 0.53 $ 3.36
========= =========
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 59,830 59,830
========= =========
The accompanying notes are an integral part of these condensed
financial statements.
-4-
9
ENSTAR INCOME/GROWTH PROGRAM FIVE-B,L.P.
CONDENSED STATEMENTS OF CASH FLOWS
=======================================
Unaudited
-------------------------------
Six months ended
June 30,
-------------------------------
1999 2000
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 31,800 $ 203,100
Adjustments to reconcile net income to net cash from operating activities:
Equity in net income of Joint Venture (58,400) (247,500)
Changes in:
Accounts payable and due to affiliates (4,300) 34,000
--------- ---------
Net cash from operating activities (30,900) (10,400)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from Joint Venture 32,000 --
--------- ---------
INCREASE (DECREASE) IN CASH 1,100 (10,400)
CASH AT BEGINNING OF PERIOD 200 19,300
--------- ---------
CASH AT END OF PERIOD $ 1,300 $ 8,900
========= =========
The accompanying notes are an integral part of these condensed
financial statements.
-5-
10
ENSTAR INCOME/GROWTH PROGRAM FIVE-B,L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
=======================================
1. INTERIM FINANCIAL STATEMENTS
The accompanying condensed interim financial statements for
Enstar Income/Growth Program Five-B, 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, pursuant to which the Partnership pays a monthly management fee
of 5% of gross revenues to the Manager. The Manager has entered into an
identical agreement with Enstar Cable of Cumberland Valley (the "Joint
Venture"), a Georgia general partnership of which the Partnership is a
co-general partner, except that the Joint Venture pays the Manager only a 4%
management fee. The Joint Venture's management fee expense approximated $65,300
and $130,500 for the three and six months ended June 30, 2000, respectively. For
the three and six months ended June 30, 1999, the Joint Venture's management fee
expense approximated $67,400 and $135,900, respectively. In addition, the Joint
Venture is also required to distribute to ECC (which is the corporate general
partner of the Joint Venture as well as of the Partnership) an amount equal to
1% of the Joint Venture's gross revenues, representing ECC's interest as the
corporate general partner of the Joint Venture. The Joint Venture's management
fee expense to ECC approximated $16,300 and $32,600 during the three and six
months ended June 30, 2000, respectively. For the three and six months ended
June 30, 1999, the Joint Venture's management fee expense to ECC approximated
$16,900 and $34,000, respectively. No management fee is payable to the Manager
by the Partnership in respect of any amounts received by the Partnership from
the Joint Venture. Management fees are non-interest bearing.
The Management Agreement also provides that the Partnership
reimburse the Manager for direct expenses incurred on behalf of the Partnership
and the Partnership's allocable share of the Manager's operational costs.
Additionally, Charter Communications Holding Company, LLC and its affiliates
(collectively, "Charter") provide other management and operational services for
the Partnership and the Joint Venture. Such services were provided by Falcon
Communications, L.P. and its affiliates (collectively, "Falcon") prior to
November 12, 1999. This results from the fact that there are no employees
directly employed by the Partnership and the Joint Venture. These expenses are
charged to the properties served based primarily on the Partnership's allocable
share of operational costs associated with the services provided. The Joint
Venture reimburses the affiliates for the Partnership's allocable share of the
affiliates' costs. The total amount charged to the Joint Venture for
-6-
11
ENSTAR INCOME/GROWTH PROGRAM FIVE-B,L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
=======================================
these costs approximated $250,600 and $529,900 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 Joint Venture for these costs approximated
$65,000 and $128,500, respectively. There is no duplication of reimbursed
expenses to the Manager.
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 Joint
Venture for these costs based on an estimate of what ECC could negotiate for
such programming services for the 15 partnerships ECC managed as a group.
Charter charges the Joint Venture for these costs based on its costs. The Joint
Venture recorded programming fee expense of $218,900 and $503,000 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 $353,000 and $694,300,
respectively.
In the normal course of business, the Joint Venture paid
interest and principal to Enstar Finance Company, LLC, its primary lender and a
subsidiary of ECC, when there were amounts outstanding under the facility and
pays a commitment fee to Enstar Finance Company, LLC, on the unborrowed portion
of its facility.
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.
-7-
12
ENSTAR INCOME/GROWTH PROGRAM FIVE-B,L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
=======================================
4. EQUITY IN NET ASSETS OF JOINT VENTURE
The Partnership and an affiliated partnership (Enstar
Income/Growth Program Five-A, L.P.) each own 50% of the Joint Venture. Each of
the co-partners share equally in the profits and losses of the Joint Venture.
The investment in the Joint Venture is accounted for on the equity method.
Summarized financial information for the Joint Venture as of June 30, 2000 and
December 31, 1999 and the results of its operations for the three and six months
ended June 30, 2000 and 1999 have been included. The results of operations for
the three and six months ended June 30, 2000 are not necessarily indicative of
results for the entire year.
December 31, June 30,
1999* 2000
-------------- ----------------
(Unaudited)
Current assets $ 1,361,700 $ 1,734,800
Investment in cable television properties, net 9,104,800 8,356,600
Other assets 55,300 40,300
----------- -----------
$10,521,800 $10,131,700
=========== ===========
Current liabilities $ 1,318,600 $ 433,600
Venturers' capital 9,203,200 9,698,100
----------- -----------
$10,521,800 $10,131,700
=========== ===========
- ---------
* Agrees with audited balance sheet included in the Partnership's Annual Report
on Form 10-K.
-8-
13
ENSTAR INCOME/GROWTH PROGRAM FIVE-B,L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
=======================================
Unaudited
----------------------------------
Three months ended
June 30,
----------------------------------
1999 2000
----------- -----------
REVENUES $ 1,687,800 $ 1,632,000
----------- -----------
OPERATING EXPENSES:
Service costs 708,300 360,800
General and administrative expenses 257,700 171,200
General partner management fees
and reimbursed expenses 149,300 332,200
Depreciation and amortization 447,200 452,300
----------- -----------
1,562,500 1,316,500
----------- -----------
OPERATING INCOME 125,300 315,500
OTHER INCOME (EXPENSE):
Interest income 10,000 19,200
Interest expense (44,400) (15,000)
----------- -----------
NET INCOME $ 90,900 $ 319,700
=========== ===========
-9-
14
ENSTAR INCOME/GROWTH PROGRAM FIVE-B,L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
=======================================
Unaudited
-----------------------------------
Six months ended
June 30,
-----------------------------------
1999 2000
----------- -----------
REVENUES $ 3,398,900 $ 3,262,300
----------- -----------
OPERATING EXPENSES:
Service costs 1,420,900 804,400
General and administrative expenses 541,800 362,900
General partner management fees
and reimbursed expenses 298,400 693,000
Depreciation and amortization 937,900 904,000
----------- -----------
3,199,000 2,764,300
----------- -----------
OPERATING INCOME 199,900 498,000
OTHER INCOME (EXPENSE):
Interest income 16,700 31,500
Interest expense (99,800) (34,600)
----------- -----------
NET INCOME $ 116,800 $ 494,900
=========== ===========
-10-
15
ENSTAR INCOME/GROWTH PROGRAM FIVE-B,L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
=======================================
5. SUBSEQUENT EVENT
On August 8, 2000, the Joint Venture, 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 Joint Venture, as well as certain
assets of other affiliates.
The aggregate purchase price payable to the Sellers pursuant
to the Agreement is $94,929,400 in cash (subject to normal closing adjustments).
Of that amount, $12,739,500 (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.
-11-
16
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, 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.
All of our cable television business operations are conducted
through our participation as a partner with a 50% interest in Enstar Cable of
Cumberland Valley (the "Joint Venture"). Our participation is equal to our
affiliated partner (Enstar Income/Growth Program Five-A, L.P.) under the joint
venture agreement with respect to capital contributions, obligations and
commitments, and results of operations. Accordingly, in considering our
financial condition and results of operations, consideration must also be made
of those matters as they relate to the Joint Venture. The following discussion
reflects such consideration and provides a separate discussion for each entity.
RESULTS OF OPERATIONS
THE PARTNERSHIP
All of our cable television business operations are conducted
through our participation as a partner in the Joint Venture. The Joint Venture
did not distribute cash flow from its operations to the Partnership and the
Partnership did not pay distributions to its partners during the three and the
six months ended June 30, 2000.
THE JOINT VENTURE
The Joint Venture's revenues decreased from $1,687,800 to
$1,632,000, or by 3.3%, and from $3,398,900 to $3,262,300, or by 4.0%, for the
three and six months ended June 30, 2000, as compared to the corresponding
periods in 1999. The $55,800 decrease for the three months ended June 30, 2000
was due to decreases in the number of subscriptions for basic, premium, tier and
equipment rental services. Of the $136,600 decrease for the six months ended
June 30, 2000, $124,371 was due to a decrease in the number of subscribers for
basic, premium and tier equipment rental services. As of June 30, 2000, the
Joint Venture had approximately 15,000 basic subscribers and 1,800 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 Joint Venture and expensed through
service cost and general and administrative expense have been either eliminated
by Charter or have been reimbursed by the Joint Venture based on Charter's costs
incurred. These reimbursed costs are included in general partner management fees
and reimbursed expenses on the Joint Venture's statements of operations. The
total of service costs,
-12-
17
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
general and administrative expenses and general partner management fees and
reimbursed expenses decreased from $1,115,300 to $864,200, or by 22.5%, and from
$2,261,100 to $1,860,300, or by 17.7%, for the three and six months ended June
30, 2000, as compared to the corresponding periods in 1999.
Service costs decreased from $708,300 to $360,800, or by
49.1%, and from $1,420,900 to $804,400, or by 43.4%, 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 lower programming fees resulting
from lower rates that Charter has extended to the Joint Venture and certain
costs incurred by the Joint Venture prior to the Charter acquisition that are
now incurred by Charter and reimbursed by the Joint Venture, as discussed above.
General and administrative expenses decreased from $257,700 to
$171,200, or by 33.6%, and from $541,800 to $362,900, or by 33.0%, for the three
and six months ended June 30, 2000, as compared to the corresponding periods in
1999. The decrease was primarily due to decreases in marketing, bad debt
expenses and certain costs incurred at the Joint Venture prior to the Charter
acquisition that are now incurred by Charter and reimbursed by the Joint
Venture, as discussed above.
General partner management fees and reimbursed expenses
increased from $149,300 to $332,200, or by 122.5%, and from $298,400 to
$693,000, or by 132.2%, for the three and six months ended June 30, 2000, as
compared to the corresponding periods in 1999. As discussed above, Charter now
performs certain management and operational functions formerly performed by the
Joint Venture. This has resulted in more reimbursable costs to the Joint Venture
and lower service costs and general and administrative expenses for the Joint
Venture.
Depreciation and amortization expense increased from $447,200
to $452,300, or by 1.1%, for the three months ended June 30, 2000 and 1999,
respectively, due to additional depreciation related to plant asset additions.
Depreciation and amortization expense decreased from $937,900 to $904,000, or by
3.6%, for the six months ended June 30, 2000 and 1999, respectively, due to the
effect of certain intangible assets becoming fully amortized in the fourth
quarter of 1999, partially offset by additional depreciation related to plant
asset additions.
Operating income increased from $125,300 to $315,500, or by
151.8%, and from $199,900 to $498,000, or by 149.1%, for the three and six
months ended June 30, 2000, as compared to the corresponding periods in 1999,
primarily due to a decrease in programming fees as described above.
Interest income increased from $10,000 to $19,200, or by
92.0%, and from $16,700 to $31,500, or by 88.6%, for the three and six months
ended June 30, 2000, as compared to the corresponding periods in 1999, due to
higher average cash balances available for investment during the current year.
Interest expense decreased from $44,400 to $15,000, or by
66.2%, and from $99,800 to $34,600, or by 65.3%, for the three and six months
ended June 30, 2000, due to the repayment of outstanding borrowings during 1999.
Interest expense for the periods ended June 30, 2000 and 1999 includes
commitment fees on the unborrowed portion of the Joint Venture's loan facility.
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ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
Due to the factors described above, net income increased from
$90,900 to $319,700, or by 251.7%, and from $116,800 to $494,900, or by 323.7%,
for the three and six months ended June 30, 2000, as compared to the
corresponding periods in 1999.
Based on its experience in the cable television industry, the
Joint Venture believes 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 33.9% to 47.0% and
from 33.5% to 43.0% during the three and six months ended June 30, 2000, as
compared to the corresponding periods in 1999. The increase was primarily due to
decreases in programming fees as described above. EBITDA increased from $572,500
to $767,800, or by 34.1% and from $1,137,800 to $1,402,000, or by 23.2%, during
the three and six months ended June 30, 2000, as compared to the corresponding
periods in 1999.
LIQUIDITY AND CAPITAL RESOURCES
Our primary objective is to distribute to our partners all
available cash flow received from the Joint Venture's operations and proceeds
from the sale of the Joint Venture's cable television systems, if any, after
providing for expenses, debt service and capital requirements relating to the
expansion, improvement and upgrade of such cable television systems.
In accordance with the partnership agreement, Enstar
Communications Corporation, our corporate general partner, has implemented a
plan for liquidating the Partnership. On August 8, 2000, the Joint Venture,
together with certain affiliates, (collectively, the "Sellers") entered into a
purchase and sales 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 Joint
Venture, as well as certain assets of other affiliates.
The aggregate purchase price payable to the Sellers pursuant
to the Agreement is $94,929,400 in cash (subject to normal closing adjustments).
Of that amount, $12,739,500 (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.
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ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
Enstar Communications Corporation is currently preparing a
proxy for submission to the Partnership's Limited Partners for the purpose of
approving or disapproving the sale. If all of the Joint Venture's assets are
sold, Enstar Communications Corporation will proceed to liquidate the
Partnership and Joint Venture following the settlement of their final
liabilities.
The Joint Venture relies upon the availability of cash
generated from operations and possible borrowings to fund its ongoing expenses,
debt service and capital requirements. The Joint Venture was required to upgrade
its system in Campbell County, Tennessee under a provision of its franchise
agreement. Upgrade expenditures are budgeted at a total estimated cost of
approximately $1,061,000. The upgrade began in 1998 and $126,100 had been
incurred as of June 30, 2000. The franchise agreement required the project to be
completed by January 2000. The Joint Venture did not meet this requirement,
although it has commenced the upgrade. The franchising authority has not given
any indication that it intends to take action adverse to the Joint Venture as
the result of the Joint Venture's noncompliance with the upgrade requirements in
the franchise agreement. No assurances can be given that the franchising
authority will not take action that is adverse to the Joint Venture. The Joint
Venture is budgeted to spend approximately $697,300 in 2000 for plant
extensions, new equipment and system upgrades, including its upgrade in
Tennessee, of which $48,000 had been incurred as of June 30, 2000.
We believe that cash generated by operations of the Joint
Venture, together with available cash and proceeds from borrowings, will be
adequate to fund capital expenditures, debt service and other liquidity
requirements in 2000 and beyond. As a result, the Joint Venture intends to use
its cash for such purposes.
The Joint Venture is party to a loan agreement with Enstar
Finance Company, LLC, its primary lender and a subsidiary of Enstar
Communications Corporation. The loan agreement provides for a revolving loan
facility of $1,000,000. The Joint Venture paid its outstanding borrowings under
the facility during 1999 and presently has no borrowings outstanding under the
loan facility. The Joint Venture pays a commitment fee of 0.5% to Enstar Finance
Company, LLC, on the unborrowed portion of its facility. The Joint Venture's
management expects to increase borrowings under the facility in the future for
system upgrades and other liquidity requirements.
The Joint Venture's 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, the Joint Venture 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.
The facility does not restrict the payment of distributions to
partners by the Partnership unless an event of default exists thereunder or the
Joint Venture's ratio of debt to cash flow is greater than 4 to 1. We believe it
is critical for the Joint Venture to conserve cash and borrowing capacity to
fund its anticipated capital expenditures. Accordingly, the Joint Venture does
not anticipate an increase in distributions to the Partnership in order to fund
distributions to unitholders at this time.
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
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ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
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 Joint Venture.
Approximately 94% of the Joint Venture's subscribers are
served by its system in Monticello, Kentucky and neighboring communities.
Significant damage to the system due to seasonal weather conditions or other
events could have a material adverse effect on the Joint Venture's liquidity and
cash flows. The Joint Venture 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.
Operating activities of the Partnership used $20,500 less cash
during the six months ended June 30, 2000 than in the corresponding period in
1999. Cash provided by investing activities for the Partnership decreased by
$32,000 due to decreased distributions from the Joint Venture.
INFLATION
Certain of the Joint Venture's 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 the Joint Venture is able to increase our service rates
periodically, of which there can be no assurance.
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ENSTAR INCOME/GROWTH PROGRAM FIVE-B, 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
August 8, 2000, by and among
Multimedia Acquisition Corp., as
Buyer, and Enstar Income Program
II-1, L.P., Enstar Income Program
II-2, L.P., Enstar Income Program
IV-3, L.P., Enstar Income/Growth
Program Six-A, L.P., Enstar IX,
Ltd., Enstar XI, Ltd., Enstar
IV/PBD Systems Venture, Enstar
Cable of Cumberland Valley and
Enstar Cable of Macoupin County, as
Sellers. (1)
27.1 Financial Data Schedule.*
(b) Reports on Form 8-K
- 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 Current Report on Form 10-Q of Enstar
Income Program II-1, L.P., filed with the Commission on or about August
14, 2000.
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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/GROWTH PROGRAM FIVE-B, 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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