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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 SEPTEMBER 30, 2003
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: 000-16779
ENSTAR INCOME/GROWTH PROGRAM FIVE-A, L.P.
------------------------------------------
(Exact name of registrant as specified in its charter)
GEORGIA 58-1712898
------- ----------
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
12405 POWERSCOURT DRIVE
ST. LOUIS, MISSOURI 63131
-------------------------
(Address of principal executive offices including zip code)
(314) 965-0555
--------------
(Registrant's telephone number, including area code)
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 reports), and (2) has been subject to such filing requirements
for the past 90 days. YES [X] NO [ ]
================================================================================
ENSTAR INCOME/GROWTH PROGRAM FIVE-A, L.P.
QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 2003
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements - Enstar Income/Growth Program Five-A, L.P.
Condensed Statements of Net Assets in Liquidation as of September 30, 2003 3
and December 31, 2002
Condensed Statements of Changes in Net Assets in Liquidation for the three and 4
nine months ended September 30, 2003
Condensed Statements of Operations for the three and nine months ended September 30, 2002 5
Condensed Statement of Cash Flows for the nine months ended September 30, 2002 6
Notes to Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 14
Item 4. Controls and Procedures 16
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 19
EXHIBIT INDEX 20
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PART I. FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS.
================================================================
ENSTAR INCOME/GROWTH PROGRAM FIVE-A, L.P.
CONDENSED STATEMENTS OF NET ASSETS IN LIQUIDATION
(SEE NOTE 2)
SEPTEMBER 30, DECEMBER 31,
2003 2002
------------- ------------
(UNAUDITED)
ASSETS:
Cash and cash equivalents ...................... $ 1,205,000 $ 3,400
Due from General Partners ...................... 31,500 --
Equity in net assets of Joint Venture .......... 640,300 6,640,800
------------- ------------
Total assets ................................. 1,876,800 6,644,200
------------- ------------
LIABILITIES:
Accounts payable and accrued liabilities ....... 23,900 30,000
Due to affiliates .............................. -- 125,200
------------- ------------
Total liabilities ............................ 23,900 155,200
------------- ------------
NET ASSETS IN LIQUIDATION:
General Partners ............................... -- 15,200
Limited Partners ............................... 1,852,900 6,473,800
------------- ------------
$ 1,852,900 $ 6,489,000
============= ============
See accompanying notes to condensed financial statements.
3
ENSTAR INCOME/GROWTH PROGRAM FIVE-A, L.P.
CONDENSED STATEMENTS OF CHANGES IN NET ASSETS IN LIQUIDATION
(SEE NOTE 2)
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
.......................................................................... SEPTEMBER 30, 2003 SEPTEMBER 30, 2003
------------------ ------------------
Additions:
Distribution from Joint Venture ....................................... $ 5,750,000 $ 5,970,000
----------------- -----------------
Total additions ..................................................... 5,750,000 5,970,000
----------------- -----------------
Deductions:
General and administrative expenses ................................... 4,400 19,400
Equity in changes in net assets in liquidation of Joint Venture ....... 5,785,800 6,000,500
Distribution to partners .............................................. 4,556,600 4,556,600
Other ................................................................. 300 29,600
----------------- -----------------
Total deductions .................................................... 10,347,100 10,606,100
----------------- -----------------
Net decrease in net assets in liquidation ............................... (4,597,100) (4,636,100)
NET ASSETS IN LIQUIDATION, beginning of period .......................... 6,450,000 6,489,000
----------------- -----------------
NET ASSETS IN LIQUIDATION, end of period ................................ $ 1,852,900 $ 1,852,900
================= =================
See accompanying notes to condensed financial statements.
4
ENSTAR INCOME/GROWTH PROGRAM FIVE-A, L.P.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2002 SEPTEMBER 30, 2002
------------------ ------------------
EQUITY IN NET INCOME OF JOINT VENTURE .................... $ 48,400 $ 153,200
OPERATING EXPENSES:
General and administrative expenses .................... 11,900 48,800
----------------- -----------------
NET INCOME ............................................... $ 36,500 $ 104,400
================= =================
NET INCOME ALLOCATED TO GENERAL PARTNERS ................. $ 400 $ 1,000
================= =================
NET INCOME ALLOCATED TO LIMITED PARTNERS ................. $ 36,100 $ 103,400
================= =================
NET INCOME PER UNIT OF LIMITED PARTNERSHIP INTEREST ...... $ 0.60 $ 1.73
================= =================
LIMITED PARTNERSHIP UNITS OUTSTANDING
DURING PERIOD ............................................ 59,766 59,766
================= =================
See accompanying notes to condensed financial statements.
5
ENSTAR INCOME/GROWTH PROGRAM FIVE-A, L.P.
CONDENSED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2002
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ......................................................... $ 104,400
Adjustments to reconcile net income to net cash from
operating activities:
Equity in net income of joint venture ............................ (153,200)
Changes in:
Accounts payable, accrued liabilities and due to affiliates ...... (24,500)
---------
Net cash used in operating activities .......................... (73,300)
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from joint venture ................................... 75,000
---------
Net cash used in investing activities .......................... 75,000
---------
Net decrease in cash ........................................... 1,700
CASH, beginning of period ............................................ 1,300
---------
CASH, end of period .................................................. $ 3,000
=========
See accompanying notes to condensed financial statements.
6
ENSTAR INCOME/GROWTH PROGRAM FIVE-A, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. INTERIM FINANCIAL STATEMENTS
The accompanying condensed interim financial statements for Enstar Income/Growth
Program Five-A, L.P. (the Partnership) as of September 30, 2003, and for the
three and nine months ended September 30, 2003 and 2002, are unaudited. These
condensed interim financial statements should be read in conjunction with the
audited financial statements and notes thereto included in the Partnership's
Annual Report on Form 10-K for the year ended December 31, 2002. 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 changes in net assets in
liquidation for the three and nine months ended September 30, 2003 are not
necessarily indicative of results for the entire year.
The Partnership and an affiliated partnership, Enstar Income/Growth Program
Five-B, L.P. ("Enstar Five-B") (collectively, the "Venturers"), each own 50% of
Enstar Cable of Cumberland Valley (the "Joint Venture"). The Partnership did not
own or operate any cable television operations in 2003 and 2002 other than
through its investment in the Joint Venture.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. These estimates include useful lives of property, plant and
equipment, valuation of long-lived assets and allocated operating costs. Actual
results could differ from those estimates.
As discussed in Note 2, the financial statements as of September 30, 2003 and
December 31, 2002 are presented on a liquidation basis of accounting.
Accordingly, the financial information in the condensed statements of changes in
net assets in liquidation for the three and nine months ended September 30, 2003
is presented on a different basis of accounting than the financial statements
for the three and nine months ended September 30, 2002, which are prepared on
the historical cost basis of accounting. As a result, depreciation and
amortization ceased upon conversion to liquidation accounting and capital
expenditures are expensed as incurred.
Certain reclassifications have been made to conform to current period
presentation.
2. LIQUIDATION ACCOUNTING AND SALES OF CABLE SYSTEMS
Effective August 31, 2003, pursuant to an asset purchase agreement dated
November 8, 2002 as amended, the Joint Venture completed the sale of its only
remaining cable system to Telecommunications Management, LLC (Telecommunications
Management) for a total adjusted sales price of approximately $393,600
(approximately $550 per customer acquired), subject to post closing adjustments
(the Telecommunications Management Sale). The Telecommunications Management Sale
was part of a larger transaction in which the Partnership and eight other
affiliated partnerships sold all of their remaining assets used in the
operations of their respective cable systems to Telecommunications Management
for a total cash sales price of $12,354,600 after closing adjustments. Excess of
net proceeds over net book value of cable systems in the Joint Venture's
statement of changes in net assets in liquidation, represents the cash proceeds
net of transaction costs received from the Telecommunications Management Sale in
excess of the net book value of the cable system assets sold.
On March 31, 2003, pursuant to an asset purchase agreement dated September 30,
2002, the Joint Venture completed the sale of headends in and around Monticello,
Kentucky to Access Cable Television, Inc. for a total sale price of
approximately $6 million. Also on March 31, 2003, pursuant to an asset purchase
agreement dated October 8, 2002, the Joint Venture completed the sale of
headends in and around Russell Springs, Kentucky to Cumberland Cellular, Inc.
(collectively with the Monticello headends, the "Monticello Systems") for a
total sale price of approximately $3 million.
The Partnership finalized its proposed plan of liquidation on November 30, 2002
in connection with the filing of a proxy to obtain partner approval for the
sales of the Monticello Systems and the subsequent liquidation and dissolution
of the Joint Venture and the Partnership. In March 2003, the required number of
votes necessary to
7
ENSTAR INCOME/GROWTH PROGRAM FIVE-A, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
implement the plan of liquidation were obtained. As a result, the Partnership
changed its basis of accounting to the liquidation basis as of November 30,
2002. Accordingly, the assets in the accompanying statement of net assets in
liquidation as of September 30, 2003 and December 31, 2002 have been stated at
estimated realizable values and the liabilities have been reflected at estimated
settlement amounts. The change to liquidation basis accounting resulted in an
increase to equity in net assets of joint venture of $1.6 million. In addition,
estimated accrued costs of liquidation of $23,200 were recorded in accounts
payable and accrued liabilities on the accompanying statement of net assets in
liquidation as an estimate of costs to be incurred subsequent to the sales of
the systems but prior to final dissolution of the Partnership. Net assets in
liquidation as of September 30, 2003 represent the estimated distributions to
the Limited Partners and the General Partners. Distributions ultimately made to
the partners upon liquidation will differ from the net assets in liquidation
recorded in the Partnership's accompanying statements on net assets in
liquidation as of September 30, 2003 as a result of adjustments recorded to the
realizable value of the assets of the Joint Venture and adjustments to estimated
costs of liquidation. No adjustments were made to accrued costs of liquidation
during the three and nine months ended September 30, 2003.
The Corporate General Partner's intention is to terminate the Partnership as
expeditiously as possible. After paying or providing for the payment of the
expenses of the sales, the Corporate General Partner will make one or more
distributions of the Partnership's allocable share of the remaining net sale
proceeds distributed from the Joint Venture, in accordance with its partnership
agreement. The Partnership made an initial distribution payment to the partners
of approximately $4.6 million in July 2003 and intends to make a second
distribution in 2004 upon release of the Monticello Systems indemnity escrows
and the receipt of the remaining proceeds of such escrows if any. A final
liquidating distribution will occur on or after approximately 13 months
following the close of the Telecommunications Management Sale upon the release
of the indemnity escrow and the receipt of the remaining proceeds of such escrow
if any.
In 1999, the Corporate General Partner sought purchasers for all of the cable
television systems of the Partnership and other affiliated Partnerships of which
the Corporate General Partner is also the general partner. This effort was
undertaken primarily because, based on the Corporate General Partner's
experience in the cable television industry, it was concluded that generally
applicable market conditions and competitive factors were making (and would
increasingly make) it extremely difficult for smaller operators of rural cable
systems (such as the Partnership and the other affiliated partnerships) to
effectively compete and be financially successful. This determination was based
on the anticipated cost of electronics and additional equipment to enable the
Joint Venture's systems to operate on a two-way basis with improved technical
capacity, insufficiency of Joint Venture's cash reserves and cash flows from
operations to finance such expenditures, limited customer growth potential due
to the Joint Venture's systems' rural location, and a general inability of a
small cable system operator such as the Joint Venture to benefit from economies
of scale and the ability to combine and integrate systems that large cable
operators have. Although, certain limited upgrades have been made, the Corporate
General Partner projected that if the Joint Venture made the additional
comprehensive upgrades deemed necessary, the Joint Venture would not recoup the
costs or regain its ability to operate profitably within the remaining term of
its franchises, and as a result, making these upgrades would not be economically
prudent.
3. TRANSACTIONS WITH THE GENERAL PARTNERS AND AFFILIATES
The Partnership has a management and service agreement (the Management
Agreement) with Enstar Cable Corporation (Enstar Cable), a wholly owned
subsidiary of the Corporate General Partner, for a monthly management fee of 5%
of gross revenues. No management fees were paid by the Partnership during 2003
and 2002.
Enstar Cable 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 joint venturer and co-general partner, except that the
Joint Venture pays Enstar Cable a 4% management fee. The Joint Venture's
management fee expense approximated $1,900 and $63,100 for the three months
ended September 30, 2003 and 2002, respectively, and $62,800 and $191,200 for
the nine months ended September 30, 2003 and 2002, respectively. In addition,
the Joint Venture is also required to distribute to the Corporate General
Partner an amount equal to 1% of the Joint Venture's gross revenues. The Joint
Venture's management fee expense to the Corporate General Partner approximated
$500 and $15,800 during the three months ended September 30, 2003 and 2002,
respectively, and $15,700 and $47,800 during
8
ENSTAR INCOME/GROWTH PROGRAM FIVE-A, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
the nine months ended September 30, 2003 and 2002, respectively. No management
fee is payable to Enstar Cable 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 Enstar
Cable for direct expenses incurred on behalf of the Partnership and the
Partnership's allocable share of Enstar Cable's operational costs. Additionally,
Charter Communications Holding Company, LLC, a direct parent of the Corporate
General Partner, and its affiliates (collectively, Charter) provide other
management and operational services for the Partnership and the Joint Venture.
These expenses are charged to the properties served based primarily on the
Partnership's or Joint Venture's allocable share of operational costs associated
with the services provided. The total amount charged to the Joint Venture for
these costs approximated $15,300 and $169,200 for the three months ended
September 30, 2003 and 2002, respectively, and $199,000 and $528,400 for the
nine months ended September 30, 2003 and 2002, respectively.
Substantially all programming services are purchased through Charter. Charter
charges the Joint Venture for these costs based on an allocation of its costs.
The Joint Venture recorded programming fee expense of $12,000 and $313,300 for
the three months ended September 30, 2003 and 2002, respectively, and $335,200
and $943,900 for the nine months ended September 30, 2003 and 2002,
respectively. Programming fees are included in service costs in the accompanying
condensed statements of changes in net assets in liquidation and statements of
operations.
As disclosed in Charter's Quarterly Report on Form 10-Q, the parent of the
Corporate General Partner and the Manager is the defendant in twenty-two class
action and shareholder lawsuits and is the subject of a grand jury investigation
being conducted by the United States Attorney's Office for the Eastern District
of Missouri into certain of its accounting and reporting practices, focusing on
how Charter reported customer numbers and its reporting of amounts received from
digital set-top terminal suppliers for advertising. The United States Attorney's
Office has publicly stated that Charter is not currently a target of the
investigation. Charter has also been advised by the United States Attorney's
Office that no member of its board of directors, including its Chief Executive
Officer, is a target of the investigation. On July 24, 2003, a federal grand
jury charged four former officers of Charter with conspiracy and mail and wire
fraud, alleging improper accounting and reporting practices focusing on revenue
from digital set-top terminal suppliers and inflated subscriber account numbers.
On July 25, 2003, one of the former officers who was indicted entered a guilty
plea. Charter has informed the Corporate General Partner that they are fully
cooperating with the investigation.
Charter is unable to predict the outcome of the class action lawsuits and
government investigations at this time. An unfavorable outcome of these matters
could have a material adverse effect on Charter's results of operations and
financial condition, which could in turn have a material adverse effect on the
Partnership.
4. NET INCOME PER UNIT OF LIMITED PARTNERSHIP INTEREST
The amended Partnership Agreement generally provides that all cash
distributions, as defined, be allocated 1% to the General Partners and 99% to
the Limited Partners until the Limited Partners have received aggregate cash
distributions equal to their original capital contributions ("Capital Payback").
The Partnership Agreement also provides that all partnership profits, gains,
operational losses, and credits, all as defined, be allocated 1% to the General
Partners and 99% to the Limited Partners until the Limited Partners have been
allocated net profits equal to the amount of cash flow required for Capital
Payback. After the Limited Partners have received cash flow equal to their
initial investments, the General Partners will only receive a 1% allocation of
cash flow from sale or liquidation of a system until the Limited Partners have
received an annual simple interest return of at least 10% of their initial
investments less any distributions from previous system sales or refinancing of
systems. Thereafter, the respective allocations will be made 20% to the General
Partners and 80% to the Limited Partners. Any losses from system sales or
exchanges shall be allocated first to all partners having positive capital
account balances (based on their respective capital accounts) until all such
accounts are reduced to zero and thereafter to the Corporate General Partner.
All allocations to individual Limited Partners will be based on their respective
limited partnership ownership interests.
Upon the disposition of substantially all of the Partnership's assets, gains
shall be allocated first to the Limited
9
ENSTAR INCOME/GROWTH PROGRAM FIVE-A, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Partners having negative capital account balances until their capital accounts
are increased to zero, next equally among the General Partners until their
capital accounts are increased to zero, and thereafter as outlined in the
preceding paragraph. Upon dissolution of the Partnership, any negative capital
account balances remaining after all allocations and distributions are made must
be funded by the respective partners. The Partnership Agreement limits the
amount of debt the Partnership may incur. Due from General Partners as of
September 30, 2003 represents negative capital account balances that are
expected to be funded by the General Partners.
5. EQUITY IN NET ASSETS OF ENSTAR CABLE OF CUMBERLAND VALLEY (JOINT VENTURE)
Each of the Venturers share equally in the profits and losses of the Joint
Venture. The investment in the Joint Venture is accounted for on the equity
method. Condensed financial information for the Joint Venture as of September
30, 2003 and December 31, 2002 and for the three and nine months ended September
30, 2003 are presented in the following statement of net assets in liquidation
and statement of changes in net assets in liquidation. The condensed results of
operations is also presented for the three and nine months ended September 30,
2002.
The Joint Venture finalized its proposed plan of liquidation on November 30,
2002 in connection with the Partnership's filing of a proxy to obtain approval
of the Limited Partners of the Venturers for the sale of the Joint Venture's
final cable systems and the subsequent liquidation and dissolution of the Joint
Venture and the Partnerships. In March 2003, the required number of votes
necessary to implement the plan of liquidation were obtained. As a result, the
Joint Venture changed its basis of accounting to the liquidation basis as of
November 30, 2002. Accordingly, the assets in the accompanying statement of net
assets in liquidation as of September 30, 2003 and December 31, 2002 have been
stated at estimated realizable values and the liabilities have been reflected at
estimated settlement amounts. The change to liquidation basis accounting
resulted in an increase to property, plant and equipment of $2.9 million and
recognition of an asset for expected operating results for the Monticello system
through the date of sale (March 31, 2003) of $454,000. Assets for the Pomme de
Terre system were not adjusted, prior to the sale of its assets, as the amounts
were not estimable due to uncertainties surrounding the ultimate sale of that
system. In addition, estimated accrued costs of liquidation of $100,800 were
recorded in accounts payable and accrued liabilities on the accompanying
statement of net assets in liquidation as an estimate of costs to be incurred
subsequent to the sales of the systems but prior to final dissolution of the
Joint Venture. Net assets in liquidation as of September 30, 2003 represent the
estimated distributions to the Venturers. Distributions ultimately made to the
Venturers upon liquidation will differ from the net assets in liquidation
recorded in the accompanying statements of net assets in liquidation as of
September 30, 2003 as a result of post closing purchase price adjustments and
adjustments to estimated costs of liquidation. The estimated realizable value of
the Monticello system and the system sold in the Telecommunications Management
Sale exceeded the proceeds received from the sales of the systems by $253,300
and $9,000, respectively primarily as a result of post closing purchase price
adjustments and additional costs of the sales. No adjustments were made to
estimated costs of liquidation during the three and nine months ended September
30, 2003.
The Corporate General Partner's intention is to settle the outstanding
obligations of the Joint Venture and terminate the Joint Venture as
expeditiously as possible. Final dissolution of the Joint Venture and related
cash distributions to the Venturers will occur upon obtaining final resolution
of all liquidation issues.
Distributions from the Joint Venture to the Partnership were $5,750,000 and
$75,000 during the three months ended September 30, 2003 and 2002, respectively,
and $5,970,000 and $75,000 during the nine months ended September 30, 2003 and
2002, respectively. Distributions of $5,750,000 were made from the Joint Venture
to the Partnership in July 2003 as an initial distribution of net sales proceeds
of the Monticello Systems.
10
ENSTAR INCOME/GROWTH PROGRAM FIVE-A, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
ENSTAR CABLE OF CUMBERLAND VALLEY
CONDENSED STATEMENTS OF NET ASSETS IN LIQUIDATION
(SEE NOTE 2)
SEPTEMBER 30, DECEMBER 31,
2003 2002
------------- ------------
(UNAUDITED)
ASSETS:
Cash and cash equivalents ................................ $ 1,064,900 $ 5,557,000
Accounts receivable, net ................................. -- 156,300
Prepaid expenses and other assets ........................ -- 53,900
Accrued net operating results through date of sale ....... -- 391,000
Property, plant and equipment ............................ -- 8,950,800
Franchise cost ........................................... -- 291,000
Escrow deposits .......................................... 474,100 --
------------- ------------
Total assets ........................................... 1,539,000 15,400,000
------------- ------------
LIABILITIES:
Accounts payable and accrued liabilities ................. 138,200 799,800
Due to purchaser ......................................... 31,400 --
Due to affiliates ........................................ 88,800 1,318,600
------------- ------------
Total liabilities ...................................... 258,400 2,118,400
------------- ------------
NET ASSETS IN LIQUIDATION .................................. $ 1,280,600 $ 13,281,600
============= ============
11
ENSTAR INCOME/GROWTH PROGRAM FIVE-A, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
ENSTAR CABLE OF CUMBERLAND VALLEY
CONDENSED STATEMENTS OF CHANGES IN NET ASSETS IN LIQUIDATION
(SEE NOTE 2)
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2003 SEPTEMBER 30, 2003
------------------ ------------------
Additions:
Revenues ........................................................... $ 47,900 $ 1,568,900
Interest income .................................................... 1,200 45,900
----------------- -----------------
Total additions .................................................. 49,100 1,614,800
----------------- -----------------
Deductions:
Service costs ...................................................... 21,000 484,400
General and administrative expenses ................................ 1,800 223,100
General and partner management fees and reimbursed expenses ........ 17,700 277,500
Capital expenditures ............................................... -- 37,500
Distributions to venturers ......................................... 11,500,000 11,940,000
Excess of net book value of cable systems over net proceeds ........ 80,200 262,300
----------------- -----------------
Total deductions ................................................. 11,620,700 13,224,800
----------------- -----------------
Recognition of accrued net operating results ....................... -- (391,000)
----------------- -----------------
Net decrease in net assets in liquidation ............................ (11,571,600) (12,001,000)
NET ASSETS IN LIQUIDATION, beginning of period ....................... 12,852,200 13,281,600
----------------- -----------------
NET ASSETS IN LIQUIDATION, end of period ............................. $ 1,280,600 $ 1,280,600
================= =================
12
ENSTAR INCOME/GROWTH PROGRAM FIVE-A, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
ENSTAR CABLE OF CUMBERLAND VALLEY
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2002 SEPTEMBER 30, 2002
------------------ ------------------
REVENUES ........................................................ $ 1,576,400 $ 4,779,700
------------------ ------------------
OPERATING EXPENSES:
Service costs ................................................. 599,500 1,752,400
General and administrative expenses ........................... 233,900 693,400
General partner management fees and reimbursed expenses ....... 248,100 767,400
Depreciation and amortization ................................. 418,300 1,307,800
------------------ ------------------
1,499,800 4,521,000
------------------ ------------------
Operating income ............................................ 76,600 258,700
------------------ ------------------
OTHER INCOME:
Interest income ............................................... 20,100 47,800
------------------ ------------------
20,100 47,800
------------------ ------------------
Net income .................................................... $ 96,700 $ 306,500
================== ==================
13
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 costs of liquidation, legal requirements, and our estimated
future distributions. Such forward-looking statements involve risks and
uncertainties including, without limitation, the uncertainty of legislative and
regulatory changes and the costs required to liquidate 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, 2002 for additional
information regarding such matters and the effect thereof on our business.
Effective August 31, 2003, pursuant to an asset purchase agreement dated
November 8, 2002 as amended, the Joint Venture completed the sale of its only
remaining cable system to Telecommunications Management, LLC (Telecommunications
Management) for a total adjusted sales price of approximately $393,600
(approximately $550 per customer acquired), subject to post closing adjustments
(the Telecommunications Management Sale). The Telecommunications Management Sale
was part of a larger transaction in which the Partnership and eight other
affiliated partnerships sold all of their remaining assets used in the
operations of their respective cable systems to Telecommunications Management
for a total cash sales price of $12,354,600 after closing adjustments. Excess of
net proceeds over net book value of cable systems in the Joint Venture's
statement of changes in net assets in liquidation represents the cash proceeds
net of transaction costs received from the Telecommunications Management Sale in
excess of the net book value of the cable system assets sold.
On March 31, 2003, pursuant to an asset purchase agreement dated September 30,
2002, the Joint Venture completed the sale of headends in and around Monticello,
Kentucky to Access Cable Television, Inc. for a total sale price of
approximately $6 million. Also on March 31, 2003, pursuant to an asset purchase
agreement dated October 8, 2002, the Joint Venture completed the sale of
headends in and around Russell Springs, Kentucky to Cumberland Cellular, Inc.
(collectively with the Monticello headends, the "Monticello Systems") for a
total sale price of approximately $3 million.
The Partnership finalized its proposed plan of liquidation on November 30, 2002
in connection with the filing of a proxy to obtain partner approval for the
sales of the Monticello Systems and the subsequent liquidation and dissolution
of the Joint Venture and the Partnership. In March 2003, the required number of
votes necessary to implement the plan of liquidation were obtained. As a result,
the Partnership changed its basis of accounting to the liquidation basis as of
November 30, 2002. Accordingly, the assets in the accompanying statement of net
assets in liquidation as of September 30, 2003 and December 31, 2002 have been
stated at estimated realizable values and the liabilities have been reflected at
estimated settlement amounts. The change to liquidation basis accounting
resulted in an increase to equity in net assets of joint venture of $1.6
million. In addition, estimated accrued costs of liquidation of $23,200 were
recorded in accounts payable and accrued liabilities on the accompanying
statement of net assets in liquidation as an estimate of costs to be incurred
subsequent to the sales of the systems but prior to final dissolution of the
Partnership. Net assets in liquidation as of September 30, 2003 represent the
estimated distributions to the Limited Partners and the General Partners.
Distributions ultimately made to the partners upon liquidation will differ from
the net assets in liquidation recorded in the Partnership's accompanying
statements on net assets in liquidation as of September 30, 2003 as a result of
adjustments recorded to the realizable value of the assets of the Joint Venture
and adjustments to estimated costs of liquidation. No adjustments were made to
accrued costs of liquidation during the three and nine months ended September
30, 2003.
All of our cable television business operations have been 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-B, L.P.) under the joint venture agreement
with respect to capital contributions, obligations and commitments, and results
of operations. Accordingly, in considering the financial condition and results
of operations for us, consideration must also be made of those matters as they
relate to the Joint Venture. The following discussion reflects such
consideration, and with respect to results of operations, a separate discussion
is provided for each entity.
14
RESULTS OF OPERATIONS
THE PARTNERSHIP
The Partnership operated its Joint Venture through August 31, 2003 but had no
operations for the period subsequent to that date as a result of the
Telecommunications Management Sale and the sales of the Monticello Systems
discussed above. Accordingly, no discussion of operating results for the period
from July 1, 2003 to September 30, 2003 and the three months ended September 30,
2002, as well as the period from January 1, 2003 to September 30, 2003 and the
nine months ended September 30, 2002, has been provided as such analysis is not
relevant.
Net assets in liquidation at September 30, 2003 were $1,852,900, consisting of
current assets of $1,876,800, offset by current liabilities of $23,900. The net
change in net assets in liquidation for the three and nine months ended
September 30, 2003 was a decrease of $4,597,100 and $4,636,100, respectively,
which was primarily due to distributions of net sales proceeds to the Limited
Partners.
THE JOINT VENTURE
The Joint Venture operated its properties through August 31, 2003 but had no
operations for the period subsequent to that date as a result of the
Telecommunications Management Sale and sales of the Monticello Systems discussed
above. Accordingly, no discussion of operating results for the period from July
1, 2003 to September 30, 2003 and the three months ended September 30, 2002, as
well as the period from January 1, 2003 to September 30, 2003 and the nine
months ended September 30, 2002, has been provided as such analysis is not
relevant.
Net assets in liquidation at September 30, 2003 were $1,280,600, consisting of
current assets of $1,539,000, offset by current liabilities of $258,400. The net
change in net assets in liquidation for three and nine months ended September
30, 2003 was a decrease of $11,571,600 and $12,001,000, respectively, which was
primarily due to distributions to the venturers.
LIQUIDITY AND CAPITAL RESOURCES
THE PARTNERSHIP
Cash and cash equivalents increased $1,201,600 from $3,400 at December 31, 2002
to $1,205,000 at September 30, 2003 primarily due to distributions of $5,970,000
received from the Joint Ventures offset by distributions of $4,556,600 to
partners. Cash and cash equivalents increased $1,700 from $1,300 at December 31,
2001 to $3,000 at September 30, 2002 as a result of $73,300 of cash used by
operating activities and $75,000 in distributions from joint venture.
The Corporate General Partner's intention is to terminate the Partnership as
expeditiously as possible. After paying or providing for the payment of the
expenses of the sales, the Corporate General Partner will make one or more
distributions of the Partnership's allocable share of the remaining net sale
proceeds distributed from the Joint Venture, in accordance with its partnership
agreement. The Partnership made an initial distribution payment to the partners
of approximately $4.6 million in July 2003 and intends to make a second
distribution in 2004 upon release of the Monticello Systems indemnity escrows
and the receipt of the remaining proceeds of such escrows if any. A final
liquidating distribution will occur on or after approximately 13 months
following the close of the Telecommunications Management Sale upon the release
of the indemnity escrow and the receipt of the remaining proceeds of such escrow
if any.
THE JOINT VENTURE
The Joint Venture had capital expenditures of $37,500 for the nine months ended
September 30, 2003 and $1,770,700 for the nine months ended September 30, 2002.
In 2002, the Joint Venture commenced a limited plant and technological upgrade
to a small system digital solution necessary to maintain compliance with
franchise agreements. This effort was halted in the fourth quarter of 2002 upon
entering into the asset purchase agreements for the sales of the remaining cable
systems.
15
CERTAIN TRENDS AND UNCERTAINTIES
Charter and our Corporate General Partner have had communications and
correspondence with representatives of certain limited partners, and others,
concerning certain Enstar partnerships of which our Corporate General Partner is
also the Corporate General Partner. While we are not aware of any formal
litigation which has been filed relating to the communications and
correspondence, or the subject matter referred to therein, it is impossible to
predict what actions may be taken in the future or what loss contingencies may
result therefrom.
As disclosed in Charter's Quarterly Report on Form 10-Q, the parent of the
Corporate General Partner and the Manager is the defendant in twenty-two class
action and shareholder lawsuits and is the subject of a grand jury investigation
being conducted by the United States Attorney's Office for the Eastern District
of Missouri into certain of its accounting and reporting practices, focusing on
how Charter reported customer numbers and its reporting of amounts received from
digital set-top terminal suppliers for advertising. The United States Attorney's
Office has publicly stated that Charter is not currently a target of the
investigation. Charter has also been advised by the United States Attorney's
Office that no member of its board of directors, including its Chief Executive
Officer, is a target of the investigation. On July 24, 2003, a federal grand
jury charged four former officers of Charter with conspiracy and mail and wire
fraud, alleging improper accounting and reporting practices focusing on revenue
from digital set-top terminal suppliers and inflated subscriber account numbers.
On July 25, 2003, one of the former officers who was indicted entered a guilty
plea. Charter has informed the Corporate General Partner that they are fully
cooperating with the investigation.
Charter is unable to predict the outcome of the class action lawsuits and
government investigations at this time. An unfavorable outcome of these matters
could have a material adverse effect on Charter's results of operations and
financial condition, which could in turn have a material adverse effect on us.
ITEM 4. CONTROLS AND PROCEDURES.
As of the end of the period covered by this report, our Corporate General
Partner, including our Chief Administrative Officer and Principal Financial
Officer, evaluated the effectiveness of the design and operation of our
disclosure controls and procedures with respect to the information generated for
use in this Quarterly Report. The evaluation was based in part upon reports and
affidavits provided by a number of executives. Based upon, and as of the date of
that evaluation, our Chief Administrative Officer and Principal Financial
Officer concluded that the disclosure controls and procedures were effective to
provide reasonable assurances that information required to be disclosed in the
reports we file or submit under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the
Commission's rules and forms.
There was no change in our internal control over financial reporting during the
quarter ended September 30, 2003 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.
In designing and evaluating the disclosure controls and procedures, our
management recognized that any controls and procedures, no matter how well
designed and operated, can provide only reasonable, not absolute, assurance of
achieving the desired control objectives and management necessarily was required
to apply its judgment in evaluating the cost-benefit relationship of possible
controls and procedures. Based upon the above evaluation, we believe that our
controls do provide such reasonable assurances.
16
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS
Exhibit
Number Description of Document
------- -----------------------
2.1 Asset Purchase Agreement, dated September 30, 2002, by and between
Access Cable Television, Inc. and Enstar Cable of Cumberland
Valley. (Incorporated by reference to Exhibit 2.1 to the
registrant's quarterly report on Form 10-Q filed on November 13,
2002 (File No. 000-16779)).
2.2 Asset Purchase Agreement, dated October 8, 2002, by and between
Cumberland Cellular, Inc. and Enstar Cable of Cumberland Valley.
(Incorporated by reference to Exhibit 2.1 to the registrant's
quarterly report on Form 10-Q filed on November 13, 2002 (File No.
000-16779)).
2.3a Asset Purchase Agreement, dated November 8, 2002, by and among
Telecommunications Management, LLC and Enstar Income Program II-2,
L.P., Enstar Income Program IV-3, L.P., Enstar Income Program
1984-1, L.P., Enstar Income/Growth Program Six-A, L.P., Enstar
VII, L.P., Enstar VIII, L.P., Enstar X, L.P., Enstar XI, L.P.,
Enstar IV/PBD Systems Venture and Enstar Cable of Cumberland
Valley (Incorporated by reference to Exhibit 2.1 to the quarterly
report of Form 10-Q of Enstar Income Program II-2, L.P. filed on
November 12, 2002 (File No. 000-14505)).
2.3b Letter of Amendment, dated as of February 6, 2003, between Enstar
Income Program II-2, L.P., Enstar Income Program IV-3, L.P.,
Enstar Income Program 1984-1, L.P., Enstar Income/Growth Program
Six-A, L.P., Enstar VII, L.P., Enstar VIII. L.P., Enstar X, L.P.,
Enstar XI, L.P., Enstar IV/PBD Systems Venture and Enstar Cable of
Cumberland Valley and Telecommunications Management, LLC
(Incorporated by reference to Exhibit 2.1 to the current report on
Form 8-K of Enstar Income/Growth Program Five-A, L.P. filed on
February 14, 2003 (File No. 000-16779)).
2.3c Letter of Amendment, dated as of April 24, 2003, between Enstar
Income Program II-2, L.P., Enstar Income Program IV-3, L.P.,
Enstar Income Program 1984-1, L.P., Enstar Income/Growth Program
Six-A, L.P., Enstar VII, L.P., Enstar VIII. L.P., Enstar X, L.P.,
Enstar XI, L.P., Enstar IV/PBD Systems Venture and Enstar Cable of
Cumberland Valley and Telecommunications Management, LLC
(Incorporated by reference to Exhibit 2.1 to the current report on
Form 8-K of Enstar Income/Growth Program Five-A, L.P. filed on
April 25, 2003 (File No. 000-16779)).
2.3d Letter of Amendment, dated as of November 8, 2002, between Enstar
Income Program II-2, L.P., Enstar Income Program IV-3, L.P.,
Enstar Income Program 1984-1, L.P., Enstar Income/Growth Program
Six-A, L.P., Enstar VII, L.P., Enstar VIII. L.P., Enstar X, L.P.,
Enstar XI, L.P., Enstar IV/PBD Systems Venture and Enstar Cable of
Cumberland Valley and Telecommunications Management, LLC
(Incorporated by reference to Exhibit 2.1 to the current report on
Form 8-K of Enstar Income/Growth Program Five-A, L.P. filed on
June 9, 2003 (File No. 000-16779)).
2.3e Close of Asset Purchase Agreement, dated as of September 11, 2003,
between Enstar Income Program II-2, L.P., Enstar Income Program
IV-3, L.P., Enstar Income Program 1984-1, L.P., Enstar
Income/Growth Program Six-A, L.P., Enstar VII, L.P., Enstar VIII.
L.P., Enstar X, L.P., Enstar XI, L.P., Enstar IV/PBD Systems
Venture and Enstar Cable of Cumberland Valley and
Telecommunications Management, LLC (Incorporated by reference to
Exhibit 2.1 to the current report on Form 8-K of Enstar
Income/Growth Program Five-A, L.P. filed on September 16, 2003
(File No. 000-16779)).
31.1 Certificate of Chief Administrative Officer pursuant to Rule
13a-14(a)/Rule 15d-14(a) under the Securities Exchange Act of
1934. *
31.2 Certificate of Chief Financial Officer pursuant to Rule
13a-14(a)/Rule 15d-14(a) under the Securities Exchange Act of
1934. *
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief
Administrative Officer). *
32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Principal Financial Officer). *
* filed herewith
17
(B) REPORTS ON FORM 8-K
On September 16, 2003 the registrant filed a current report on Form 8-K
dated September 11, 2003 to announce the close of the asset purchase
agreement dated November 8, 2002.
18
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-A, L.P.
By: ENSTAR COMMUNICATIONS CORPORATION
-------------------------------------------
Corporate General Partner
Date: November 14, 2003 By: /s/ Paul E. Martin
-------------------------------------------
Name: Paul E. Martin
Title: Senior Vice President and Corporate
Controller (Principal Financial Officer and
Principal Accounting Officer)
19
EXHIBIT INDEX
Exhibit
Number Description of Document
- ------- -----------------------
2.1 Asset Purchase Agreement, dated September 30, 2002, by and between
Access Cable Television, Inc. and Enstar Cable of Cumberland
Valley. (Incorporated by reference to Exhibit 2.1 to the
registrant's quarterly report on Form 10-Q filed on November 13,
2002 (File No. 000-16779)).
2.2 Asset Purchase Agreement, dated October 8, 2002, by and between
Cumberland Cellular, Inc. and Enstar Cable of Cumberland Valley.
(Incorporated by reference to Exhibit 2.1 to the registrant's
quarterly report on Form 10-Q filed on November 13, 2002 (File No.
000-16779)).
2.3a Asset Purchase Agreement, dated November 8, 2002, by and among
Telecommunications Management, LLC and Enstar Income Program II-2,
L.P., Enstar Income Program IV-3, L.P., Enstar Income Program
1984-1, L.P., Enstar Income/Growth Program Six-A, L.P., Enstar
VII, L.P., Enstar VIII, L.P., Enstar X, L.P., Enstar XI, L.P.,
Enstar IV/PBD Systems Venture and Enstar Cable of Cumberland
Valley (Incorporated by reference to Exhibit 2.1 to the quarterly
report of Form 10-Q of Enstar Income Program II-2, L.P. filed on
November 12, 2002 (File No. 000-14505)).
2.3b Letter of Amendment, dated as of February 6, 2003, between Enstar
Income Program II-2, L.P., Enstar Income Program IV-3, L.P.,
Enstar Income Program 1984-1, L.P., Enstar Income/Growth Program
Six-A, L.P., Enstar VII, L.P., Enstar VIII, L.P., Enstar X, L.P.,
Enstar XI, L.P., Enstar IV/PBD Systems Venture and Enstar Cable of
Cumberland Valley and Telecommunications Management, LLC
(Incorporated by reference to Exhibit 2.1 to the current report on
Form 8-K of Enstar Income/Growth Program Five-A, L.P. filed on
February 14, 2003 (File No. 000-16779)).
2.3c Letter of Amendment, dated as of April 24, 2003, between Enstar
Income Program II-2, L.P., Enstar Income Program IV-3, L.P.,
Enstar Income Program 1984-1, L.P., Enstar Income/Growth Program
Six-A, L.P., Enstar VII, L.P., Enstar VIII, L.P., Enstar X, L.P.,
Enstar XI, L.P., Enstar IV/PBD Systems Venture and Enstar Cable of
Cumberland Valley and Telecommunications Management, LLC
(Incorporated by reference to Exhibit 2.1 to the current report on
Form 8-K of Enstar Income/Growth Program Five-A, L.P. filed on
April 25, 2003 (File No. 000-16779)).
2.3d Letter of Amendment, dated as of November 8, 2002, between Enstar
Income Program II-2, L.P., Enstar Income Program IV-3, L.P.,
Enstar Income Program 1984-1, L.P., Enstar Income/Growth Program
Six-A, L.P., Enstar VII, L.P., Enstar VIII, L.P., Enstar X, L.P.,
Enstar XI, L.P., Enstar IV/PBD Systems Venture and Enstar Cable of
Cumberland Valley and Telecommunications Management, LLC
(Incorporated by reference to Exhibit 2.1 to the current report on
Form 8-K of Enstar Income/Growth Program Five-A, L.P. filed on
June 9, 2003 (File No. 000-16779)).
2.3e Close of Asset Purchase Agreement, dated as of September 11, 2003,
between Enstar Income Program II-2, L.P., Enstar Income Program
IV-3, L.P., Enstar Income Program 1984-1, L.P., Enstar
Income/Growth Program Six-A, L.P., Enstar VII, L.P., Enstar VIII,
L.P., Enstar X, L.P., Enstar XI, L.P., Enstar IV/PBD Systems
Venture and Enstar Cable of Cumberland Valley and
Telecommunications Management, LLC (Incorporated by reference to
Exhibit 2.1 to the current report on Form 8-K of Enstar
Income/Growth Program Five-A, L.P. filed on September 16, 2003
(File No. 000-16779)).
31.1 Certificate of Chief Administrative Officer pursuant to Rule
13a-14(a)/Rule 15d-14(a) under the Securities Exchange Act of
1934. *
31.2 Certificate of Chief Financial Officer pursuant to Rule
13a-14(a)/Rule 15d-14(a) under the Securities Exchange Act of
1934. *
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief
Administrative Officer). *
32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Principal Financial Officer). *
* filed herewith
20