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, 2001
--------------------------------------------------
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 0-16789
-------
Enstar Income/Growth Program Five-B, L.P.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Georgia 58-1713008
- -------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
12405 Powerscourt Drive
St. Louis, Missouri 63131
- -------------------------------- ------------------------
(Address of principal (Zip Code)
executive offices)
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
--- ---
2
PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
CONDENSED BALANCE SHEETS
================================================================================
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2001 2000 *
----------- -------------
(UNAUDITED)
ASSETS
ASSETS:
Cash $ 1,800 $ 4,600
Equity in net assets of Joint Venture 4,887,500 4,887,200
----------- -------------
$ 4,889,300 $ 4,891,800
=========== =============
LIABILITIES AND PARTNERSHIP CAPITAL
LIABILITIES:
Accounts payable $ 3,700 $ 2,700
Due to affiliates 113,600 90,800
----------- -------------
117,300 93,500
----------- -------------
PARTNERSHIP CAPITAL (DEFICIT):
General Partners (76,300) (76,000)
Limited Partners 4,848,300 4,874,300
----------- -------------
TOTAL PARTNERSHIP CAPITAL 4,772,000 4,798,300
----------- -------------
$ 4,889,300 $ 4,891,800
=========== =============
</Table>
* Agrees with audited balance sheet included in the Partnership's Annual
Report on Form 10-K.
The accompanying notes are an integral part of these condensed
financial statements.
2
3
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
CONDENSED STATEMENTS OF OPERATIONS
================================================================================
<Table>
<Caption>
UNAUDITED
------------------------
THREE MONTHS ENDED
JUNE 30,
------------------------
2001 2000
---------- ----------
OPERATING EXPENSES:
General and administrative expenses $ 10,200 $ 18,300
---------- ----------
LOSS BEFORE EQUITY IN NET INCOME
OF JOINT VENTURE (10,200) (18,300)
EQUITY IN NET INCOME
OF JOINT VENTURE (27,500) 159,900
---------- ----------
NET INCOME (LOSS) $ (37,700) $ 141,600
========== ==========
Net income (loss) allocated to General Partners $ (400) $ 1,400
========== ==========
Net income (loss) allocated to Limited Partners $ (37,300) $ 140,200
========== ==========
NET INCOME (LOSS) PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ (0.62) $ 2.34
========== ==========
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 59,830 59,830
========== ==========
</Table>
The accompanying notes are an integral part of these condensed
financial statements.
3
4
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
CONDENSED STATEMENTS OF OPERATIONS
===============================================================================
<Table>
<Caption>
UNAUDITED
--------------------------
SIX MONTHS ENDED
JUNE 30,
--------------------------
2001 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 300 247,500
----------- -----------
NET INCOME (LOSS) $ (26,300) $ 203,100
=========== ===========
Net income (loss) allocated to General Partners $ (300) $ 2,000
=========== ===========
Net income (loss) allocated to Limited Partners $ (26,000) $ 201,100
=========== ===========
NET INCOME (LOSS) PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ (0.43) $ 3.36
=========== ===========
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 59,830 59,830
=========== ===========
</Table>
The accompanying notes are an integral part of these condensed
financial statements.
4
5
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
CONDENSED STATEMENTS OF CASH FLOWS
================================================================================
<Table>
<Caption>
UNAUDITED
--------------------------
SIX MONTHS ENDED
JUNE 30,
--------------------------
2001 2000
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (26,300) $ 203,100
Adjustments to reconcile net income (loss)
to net cash from operating activities:
Equity in net income of Joint Venture (300) (247,500)
Changes in:
Accounts payable and due to affiliates 23,800 34,000
----------- -----------
Net cash from operating activities (2,800) (10,400)
----------- -----------
DECREASE IN CASH (2,800) (10,400)
CASH AT BEGINNING OF PERIOD 4,600 19,300
----------- -----------
CASH AT END OF PERIOD $ 1,800 $ 8,900
=========== ===========
</Table>
The accompanying notes are an integral part of these condensed
financial statements.
5
6
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
================================================================================
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, 2001, and
for the three and six months ended June 30, 2001 and 2000, are unaudited. These
condensed interim financial statements should be read in conjunction with the
audited financial statements and notes thereto included in our Annual Report on
Form 10-K for the year ended December 31, 2000. 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, 2001, are not necessarily indicative of results for the entire
year.
2. TRANSACTIONS WITH THE GENERAL PARTNERS AND AFFILIATES
The Partnership has a management and service agreement (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 $131,400 for the
three and six months ended June 30, 2001, respectively. For the three and six
months ended June 30, 2000, the Joint Venture's management fee expense
approximated $65,300 and $130,500, respectively. In addition, the Joint Venture
is also required to distribute to ECC (which is also the corporate general
partner of the Joint Venture) 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
$16,400 and $32,900 during the three and six months ended June 30, 2001,
respectively. For the three and six months ended June 30, 2000, the Joint
Venture's management fee expense to ECC approximated $16,300 and $32,600,
respectively. No management fee is payable to the Manager by the Partnership
with respect to 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. 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 these costs
approximated $214,600 and $512,600 for the three and six months ended June 30,
2001, respectively. For the three and six months ended June 30, 2000, the total
amount charged to the Joint Venture for these costs approximated $250,600 and
$529,900, respectively.
Substantially all programming services are purchased through Charter.
Charter charges the Joint Venture for these costs based on its actual costs. The
Joint Venture recorded programming fee expense of $321,900 and $645,500 for the
three and six months ended June 30, 2001, respectively. For the three and six
months ended June 30, 2000, programming fee expense was $218,900 and $503,000,
respectively. Programming fees are included in service costs in the accompanying
condensed statements of operations.
6
7
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
================================================================================
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 amounts were outstanding under its revolving loan facility and pays a
commitment fee to Enstar Finance Company, LLC, on the unborrowed portion of its
facility.
3. NET INCOME (LOSS) PER UNIT OF LIMITED PARTNERSHIP INTEREST
Net income (loss) per unit of limited partnership interest is based on the
average number of units outstanding during the periods presented. For this
purpose, net income (loss) has been allocated 99% to the Limited Partners and 1%
to the General Partners. The General Partners do not own units of partnership
interest in the Partnership, but rather hold a participation interest in the
income, losses and distributions of the Partnership.
4. EQUITY IN NET ASSETS OF ENSTAR CABLE OF CUMBERLAND VALLEY (JOINT VENTURE)
The Partnership and an affiliated partnership (Enstar Income/Growth Program
Five-A, L.P.) each own 50% of the Joint Venture. Each shares 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, 2001, and December 31, 2000, and the results of its
operations for the three and six months ended June 30, 2001 and 2000 follow. The
results of operations for the three and six months ended June 30, 2001, are not
necessarily indicative of results for the entire year.
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2001 2000 *
----------- ------------
(UNAUDITED)
Current assets $ 3,629,900 $ 2,769,100
Investment in cable television
properties, net 7,310,600 7,848,200
Other assets 12,500 38,300
----------- -----------
$10,953,000 $10,655,600
=========== ===========
Current liabilities $ 1,178,000 $ 881,200
Venturers' capital 9,775,000 9,774,400
----------- -----------
$10,953,000 $10,655,600
=========== ===========
</Table>
* Agrees with audited balance sheet included in the Partnership's Annual
Report on Form 10-K.
7
8
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
================================================================================
<Table>
<Caption>
UNAUDITED
---------------------------
THREE MONTHS ENDED
JUNE 30,
---------------------------
2001 2000
----------- -----------
REVENUES $ 1,633,900 $ 1,632,000
----------- -----------
OPERATING EXPENSES:
Service costs 558,000 360,800
General and administrative expenses 288,100 171,200
General partner management fees and reimbursed expenses 296,300 332,200
Depreciation and amortization 491,400 452,300
----------- -----------
1,633,800 1,316,500
----------- -----------
OPERATING INCOME 100 315,500
OTHER INCOME (EXPENSE):
Interest income 32,100 19,200
Interest expense (7,600) (15,000)
Other expense (79,700) --
----------- -----------
(55,200) 4,200
----------- -----------
NET INCOME (LOSS) $ (55,100) $ 319,700
=========== ===========
</Table>
8
9
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
================================================================================
<Table>
<Caption>
UNAUDITED
--------------------------
SIX MONTHS ENDED
JUNE 30,
--------------------------
2001 2000
----------- -----------
REVENUES $ 3,285,700 $ 3,262,300
----------- -----------
OPERATING EXPENSES:
Service costs 1,081,700 804,400
General and administrative expenses 498,400 362,900
General partner management fees and reimbursed expenses 676,900 693,000
Depreciation and amortization 973,700 904,000
----------- -----------
3,230,700 2,764,300
----------- -----------
OPERATING INCOME 55,000 498,000
OTHER INCOME (EXPENSE):
Interest income 50,200 31,500
Interest expense (24,900) (34,600)
Other expense (79,700) --
----------- -----------
(54,400) (3,100)
----------- -----------
NET INCOME $ 600 $ 494,900
=========== ===========
</Table>
9
10
ENSTAR INCOME/GROWTH PROGRAM FIVE-B, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
5. COMMITMENTS
The Joint Venture, together with certain affiliates (collectively, the
"Selling Partnerships"), entered into a purchase and sale agreement, dated as of
August 8, 2000, as amended September 29, 2000 (the "Agreement"), with Multimedia
Acquisition Corp., an affiliate of Gans Multimedia Partnership ("Gans"). The
Agreement provided for Gans to acquire the Joint Venture's Monticello, Kentucky
cable system, as well as certain assets of the other Selling Partnerships.
Following a series of discussions and meetings, the Joint Venture and Gans
determined that they will not be able to agree on certain further amendments to
the Agreement that are required in order to satisfy conditions precedent to
close the transaction. In light of this, present economic and financial market
conditions, and their impact on Gans' inability to arrange financing in order to
close the acquisition, on April 18, 2001 the parties agreed to terminate the
Agreement.
The Joint Venture's corporate general partner will continue to operate the
Joint Venture's cable television systems and will continue to investigate
potential divestiture transactions for the benefit of its unitholders.
6. NEW ACCOUNTING STANDARDS
In July 2001, the Financial Accounting Standards Board adopted
Statements of Financial Accounting Standards (SFAS) No. 141 "Business
Combinations" and No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141
requires all business combinations initiated after June 30, 2001 to be accounted
for using the purchase method of accounting. SFAS No. 141 is required to be
implemented for all acquisitions initiated after June 30, 2001 and all business
combinations accounted for using the purchase method for which the date of
acquisition is July 1, 2001 or later. Adoption of SFAS No. 141 will not impact
the condensed financial statements of the Partnership.
Under SFAS No. 142, goodwill is no longer subject to amortization over its
useful life, rather, it is subject to at least annual assessments of impairment.
Also, under SFAS No. 142, an intangible asset should be recognized if the
benefit of the intangible is obtained through contractual or other legal rights
or if the intangible asset can be sold, transferred, licensed, rented or
exchanged. Such intangibles will be amortized over their useful lives. Certain
intangibles have indefinite useful lives and will not be amortized. SFAS No. 142
will be implemented by the Partnership on January 1, 2002. All goodwill and
intangible assets acquired after June 30, 2001 will be immediately subject to
the provisions of SFAS No. 142. The Partnership is currently in process of
assessing the future impact of adoption of SFAS No. 142.
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, 2000, 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, the financial condition and results of
operations of the Partnership are significantly impacted by the matters of the
Joint Venture. The following discussion reflects such consideration and provides
a separate discussion for each entity.
10
11
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 from its operations to the Partnership and the Partnership did
not pay distributions to its partners during the three and six months ended June
30, 2001.
THE JOINT VENTURE
The Joint Venture's revenues increased from $1,632,000 to $1,633,900, or
0.1%, and from $3,262,300 to $3,285,700, or 0.7%, for the three and six months
ended June 30, 2001, respectively, as compared to the corresponding periods in
2000. The increases were due to an increase in the number of premium service
customers, partially offset by a decline in the number of basic service
customers. As of June 30, 2001 and 2000, the Joint Venture had approximately
14,900 and 15,000 basic service customers, respectively, and 3,800 and 1,800
premium service customers, respectively.
Service costs increased from $360,800 to $558,000, or 54.7%, and from
$804,400 to $1,081,700, or 34.5%, for the three and six months ended June 30,
2001, respectively, as compared to the corresponding periods in 2000. Service
costs represent programming costs and other costs directly attributable to
providing cable services to customers. The increases were primarily due to the
increase in customers and pole rental fees, as compared to the corresponding
periods in prior year. In addition, there was a decrease in the level of such
services being provided and billed to the Macoupin Joint Venture by Charter.
Such services are being provided internally, therefore, increasing service
costs.
Gross margin decreased from $1,271,200 to $1,075,900, or 15.4%, and from
$2,457,900 to $2,204,000, or 10.3%, for the three and six months ended June 30,
2001, respectively, as compared to the corresponding periods in 2000. As a
percentage of revenues, gross margin decreased from 77.9% to 65.8%, and from
75.3% to 67.1%, for the three and six months ended June 30, 2001, respectively,
as compared to the corresponding periods in 2000. The decreases were primarily
due to the increase in service costs described above.
General and administrative expenses increased from $171,200 to $288,100, or
68.3%, and from $362,900 to $498,400, or 37.3%, for the three and six months
ended June 30, 2001, respectively, as compared to the corresponding periods in
2000. The increases were primarily due to an increase in professional fees
coupled with an increase in new employees, as compared to the corresponding
periods in the prior year.
General partner management fees and reimbursed expenses decreased from
$332,200 to $296,300, or 10.8%, and from $693,000 to $676,900, or 2.3%, for the
three and six months ended June 30, 2001, respectively, as compared to the
corresponding periods in 2000. The decreases were primarily due to a decrease in
the level of such services being provided and billed to the Macoupin Joint
Venture by Charter. Such services are being provided internally, therefore,
increasing service costs.
Depreciation and amortization expense increased from $452,300 to $491,400,
or 8.6%, and from $904,000 to $973,700, or 7.7%, for the three and six months
ended June 30, 2001, respectively, as compared to the corresponding periods in
2000. The increases were primarily due to fixed asset additions in 2000 to
upgrade the Joint Venture's cable systems.
Due to the factors described above, operating income decreased from $315,500
to $100, or nearly 100.0%, and from $498,000 to $55,000, or 89.0%, for the three
and six months ended June 30, 2001, respectively, as compared to the
corresponding periods in 2000.
Interest income increased from $19,200 to $32,100, or 67.2%, and from
$31,500 to $50,200, or 59.4%, for the three and six months ended June 30, 2001,
respectively, as compared to the corresponding periods in 2000. The increases
were due to higher cash balances available for investment, as compared to the
corresponding periods in 2000.
Interest expense decreased from $15,000 to $7,600, or 49.3%, and from
$34,600 to $24,900, or 28.0%, for the three and six months ended June 30, 2001,
respectively, as compared to the corresponding periods in 2000. The decreases
were due to lower average outstanding borrowings, partially offset by commitment
fees on the unborrowed portion of the Joint Venture's loan facility.
Other expense of $79,700 for the three and six months ended June 30, 2001
represents expenses associated with the termination of the Agreement with Gans.
11
12
Due to the factors described above, net income decreased from $319,700 to a
net loss of $55,100, or 117.2%, and from $494,900 to $600, or 99.9%, for the
three and six months ended June 30, 2001, respectively, as compared to the
corresponding periods in 2000.
Based on experience in the cable television industry, the Joint Venture
believes that income before interest, income taxes, 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 decreased from $1,402,000 to $949,000, or 32.3%, for the six
months ended June 30, 2001, as compared to the corresponding period in 2000.
EBITDA as a percentage of revenues decreased from 43.0% to 28.9%, during the six
months ended June 30, 2001, as compared to the corresponding period in 2000.
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.
The Joint Venture, together with certain affiliates (collectively, the
"Selling Partnerships"), entered into a purchase and sale agreement, dated as of
August 8, 2000, as amended September 29, 2000 (the "Agreement"), with Multimedia
Acquisition Corp., an affiliate of Gans Multimedia Partnership ("Gans"). The
Agreement provided for Gans to acquire the Joint Venture's Monticello, Kentucky
cable system, as well as certain assets of the other Selling Partnerships.
Following a series of discussions and meetings, the Joint Venture and Gans
determined that they will not be able to agree on certain further amendments to
the Agreement that are required in order to satisfy conditions precedent to
close the transaction. In light of this, present economic and financial market
conditions, and their impact on Gans' inability to arrange financing in order to
close the acquisition, on April 18, 2001 the parties agreed to terminate the
Agreement.
The Joint Venture's corporate general partner will continue to operate the
Joint Venture's cable television systems and will continue to investigate
potential divestiture transactions for the benefit of its unitholders.
The Joint Venture relies upon the availability of cash generated from
operations to fund its liquidity requirements and capital requirements. The
Joint Venture was required to upgrade its system in Campbell County, Tennessee
under a provision of its franchise agreement. The upgrade began in 1998 and
$1,385,000 was incurred as of June 30, 2001. The franchise agreement required
the project to be completed by January 2000. The Joint Venture did not meet
this requirement, although the project has been completed. Under this upgrade
initiative, no additional capital expenditures are currently planned. 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.
However, no assurances can be given that the franchising authority will not
take action that is adverse to the Joint Venture.
The loan facility with Enstar Finance Company, LLC, has a maximum loan
commitment of $4,800,000. The Joint Venture pays a commitment fee of 0.5% to
Enstar Finance Company, LLC, on the unborrowed portion of the facility. The
Joint Venture had no outstanding borrowings under the facility as of June 30,
2001. The loan facility matures on August 31, 2001, at which time any amounts
then outstanding would be due in full. It is anticipated that the loan facility
will not be extended or replaced. The Partnership relies upon cash flows from
operations to meet liquidity requirements and fund necessary capital
expenditures. Although the Partnership currently maintains a cash balance,
there can be no assurance that the Partnership's cash balance combined with
future cash flows will be adequate to meet its future liquidity requirements
or to fund future capital expenditures.
The Joint Venture continues to conserve cash and, consequently, has
concluded that it would not be prudent for the Joint Venture to resume paying
distributions at this time.
12
13
The Joint Venture maintains insurance coverage for all of the cable
television properties owned or managed by it to cover damage to cable
distribution plant and customer connections and against business interruptions
resulting from such damage. This coverage is subject to a significant annual
deductible, which applies to all of the cable television properties owned or
managed by Charter, including those of the Joint Venture.
Approximately 95% of the Joint Venture's customers 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 insurable risks.
NEW ACCOUNTING STANDARDS
In July 2001, the Financial Accounting Standards Board adopted
Statements of Financial Accounting Standards (SFAS) No. 141 "Business
Combinations" and No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141
requires all business combinations initiated after June 30, 2001 to be accounted
for using the purchase method of accounting. SFAS No. 141 is required to be
implemented for all acquisitions initiated after June 30, 2001 and all business
combinations accounted for using the purchase method for which the date of
acquisition is July 1, 2001 or later. Adoption of SFAS No. 141 will not impact
the condensed financial statements of the Partnership.
Under SFAS No. 142, goodwill is no longer subject to amortization over its
useful life, rather, it is subject to at least annual assessments of impairment.
Also, under SFAS No. 142, an intangible asset should be recognized if the
benefit of the intangible is obtained through contractual or other legal rights
or if the intangible asset can be sold, transferred, licensed, rented or
exchanged. Such intangibles will be amortized over their useful lives. Certain
intangibles have indefinite useful lives and will not be amortized. SFAS No. 142
will be implemented by the Partnership on January 1, 2002. All goodwill and
intangible assets acquired after June 30, 2001 will be immediately subject to
the provisions of SFAS No. 142. The Partnership is currently in process of
assessing the future impact of adoption of SFAS No. 142.
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.
13
14
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
None.
(b) REPORTS ON FORM 8-K
On May 1, 2001, the Registrant filed a current
report on Form 8-K to announce the termination of
its sale agreement with Multimedia Acquisition Corp.
14
15
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, 2001 By: /s/ Paul E. Martin
------------------------
Paul E. Martin, Vice President and
Corporate Controller (Principal
Financial Officer and Principal
Accounting Officer)
15