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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 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: 000-15706
ENSTAR INCOME PROGRAM IV-2, L.P.
--------------------------------
(Exact name of registrant as specified in its charter)
GEORGIA 58-1648318
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
12405 POWERSCOURT DRIVE
ST. LOUIS, MISSOURI 63131
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(Address of principal executive offices including zip code)
(314) 965-0555
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(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 [ ]
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ENSTAR INCOME PROGRAM IV-2, L.P.
QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 2003
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE NO.
--------
Item 1. Financial Statements - Enstar Income Program IV-2, L.P.
Condensed Statements on Net Assets in Liquidation as of March 31, 2003
and December 31, 2002 3
Condensed Statement of Changes in Net Assets in Liquidation for the three months
ended March 31, 2003 4
Condensed Statement of Operations for the three months ended March 31, 2002 5
Condensed Statement of Cash Flows for the three months ended March 31, 2002 6
Notes to Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 18
Item 4. Controls and Procedures 23
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 24
Item 6. Exhibits and Reports on Form 8-K 24
SIGNATURES 25
CERTIFICATIONS 26
PART I. FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS.
ENSTAR INCOME PROGRAM IV-2, L.P.
CONDENSED STATEMENTS OF NET ASSETS IN LIQUIDATION
(SEE NOTE 2)
MARCH 31, DECEMBER 31,
2003 2002
-------------- ------------
(UNAUDITED)
ASSETS:
Cash and cash equivalents $ 174,700 $ 136,400
Equity in net assets of PBD Joint Venture 2,545,700 2,837,300
Equity in net assets of Macoupin Joint Venture -- 42,000
-------------- ------------
Total assets 2,720,400 3,015,700
-------------- ------------
LIABILITIES:
Accounts payable and accrued liabilities 370,600 370,900
Due to affiliates 96,900 439,100
-------------- ------------
Total liabilities 467,500 810,000
-------------- ------------
NET ASSETS IN LIQUIDATION:
General Partners (19,600) (20,100)
Limited Partners 2,272,500 2,225,800
-------------- ------------
$ 2,252,900 $ 2,205,700
============== ============
See accompanying notes to condensed financial statements.
3
ENSTAR INCOME PROGRAM IV-2, L.P.
CONDENSED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
(SEE NOTE 2)
THREE MONTHS ENDED MARCH 31, 2003
(UNAUDITED)
Additions:
Distribution from PBD Joint Venture $ 350,000
Distribution from Macoupin Joint Venture 42,000
Interest income 200
-------------
392,200
Deductions:
General and administrative expenses 11,400
Equity in changes in net assets in liquidation of PBD Joint Venture 291,600
Equity in changes in net assets in liquidation of Macoupin Joint Venture 42,000
-------------
Total deductions 345,000
-------------
Net increase in net assets in liquidation 47,200
NET ASSETS IN LIQUIDATION, beginning of period 2,205,700
-------------
NET ASSETS IN LIQUIDATION, end of period $ 2,252,900
=============
See accompanying notes to condensed financial statements.
4
ENSTAR INCOME PROGRAM IV-2, L.P.
CONDENSED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2002
(UNAUDITED)
EQUITY IN NET INCOME OF JOINT VENTURES:
Enstar IV/PBD Systems Venture $ 693,100
Enstar Cable of Macoupin County 40,100
-------------
733,200
-------------
OPERATING EXPENSES:
General and administrative expenses (11,400)
-------------
(11,400)
-------------
OTHER EXPENSE:
Other expense (65,300)
-------------
(65,300)
-------------
NET INCOME $ 656,500
=============
NET INCOME ALLOCATED TO GENERAL PARTNERS $ 6,600
=============
NET INCOME ALLOCATED TO LIMITED PARTNERS $ 649,900
=============
NET INCOME PER UNIT OF LIMITED PARTNERSHIP
INTEREST $ 16.31
=============
LIMITED PARTNERSHIP UNITS OUTSTANDING
DURING THE PERIOD 39,848
=============
See accompanying notes to condensed financial statements.
5
ENSTAR INCOME PROGRAM IV-2, L.P.
CONDENSED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2002
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 656,500
Adjustments to reconcile net income to net
cash from operating activities:
Equity in net income of joint ventures (733,200)
Changes in:
Accrued liabilities and due to affiliates 64,300
-----------
Net cash from operating activities (12,400)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from Joint Ventures 126,500
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Net cash from investing activities 126,500
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CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (125,800)
-----------
Net cash from financing activities (125,800)
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Net decrease in cash (11,700)
CASH, beginning of period 80,600
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CASH, end of period $ 68,900
===========
See accompanying notes to condensed financial statements.
6
ENSTAR INCOME PROGRAM IV-2, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. INTERIM FINANCIAL STATEMENTS
The accompanying condensed interim financial statements for Enstar Income
Program IV-2, L.P. (the Partnership) as of March 31, 2003, and for the three
months ended March 31, 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
months ended March 31, 2003 are not necessarily indicative of results for the
entire year.
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 March 31, 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 such periods is presented on a different basis of
accounting than the financial statements for the three months ended March 31,
2002, which is 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.
2. LIQUIDATION BASIS ACCOUNTING AND SALES OF CABLE SYSTEMS
Our Corporate General Partner continues to operate our cable television systems
during our divestiture transactions for the benefit of our unitholders.
On April 10, 2002, pursuant to an asset purchase agreement dated August 29,
2001, the Partnership, together with its affiliates, Enstar Income Program IV-1,
L.P. ("Enstar IV-1"), collectively with the Partnership, "the Venturers", and
Enstar Income Program IV-3, L.P., completed the sale of the Enstar Cable of
Macoupin County's (Macoupin Joint Venture) systems to Charter Communications
Entertainment I, LLC ("CCE-I"), an affiliate of the Corporate General Partner
and an indirect subsidiary of Charter Communications, Inc. ("Charter"), for a
total sale price of approximately $9,076,800, the Partnership's one-third share
of which is approximately $3,025,600, and, together with Enstar IV-1, the sale
to Interlink Communications Partners, LLC of the Enstar IV/PBD Systems Venture's
(PBD Joint Venture) (collectively with the Macoupin Joint Venture, "the Joint
Ventures") Mt. Carmel system for a total sale price of approximately $4,994,800,
the Partnership's one-half share of which is approximately $2,497,400 (the
"Charter Sale"). The Charter Sale is part of a larger transaction in which the
Partnership and five other affiliated partnerships (which, together with the
Partnership are collectively referred to as the "Charter Selling Partnerships")
sold all of their assets used in the operation of their respective Illinois
cable television systems to CCE-I and two of its affiliates (also referred to,
with CCE-I, as the "Purchasers") for a total cash sale price of $63,000,000.
Each Charter Selling Partnership received the same value per customer. In
addition, the Limited Partners of each of the Charter Selling Partnerships
approved an amendment to their respective partnership agreement to allow the
sale of assets to an affiliate of such partnership's General Partner. The
Purchasers are each indirect subsidiaries of the Corporate General Partner's
ultimate parent company, Charter, and, therefore, are affiliates of the
Partnership and each of the other Charter Selling Partnerships.
In addition, on March 21, 2002, pursuant to an asset purchase agreement dated
September 4, 2001, the Partnership, together with Enstar IV-1, completed the
sale of the Poplar Bluff franchise area with the City of Poplar Bluff, Missouri
for a sale price of approximately $8,000,000 (the "Poplar Bluff Sale"), the
Partnership's one-half share of which is approximately $4,000,000.
The Charter Sale and Poplar Bluff Sale resulted from a sale process actively
pursued since 1999, when the Corporate
7
ENSTAR INCOME PROGRAM IV-2, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
General Partner sought purchasers for all of the cable television systems of the
Selling Partnerships, as well as eight other affiliated limited partnership
cable operators 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 Joint Ventures and the other affiliated Enstar
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 Ventures' systems to operate on a two-way basis
with improved technical capacity, insufficiency of Joint Ventures cash reserves
and cash flows from operations to finance such expenditures, limited customer
growth potential due to the Joint Ventures' systems' rural location, and a
general inability of a small cable system operator such as the Joint Ventures to
benefit from economies of scale and the ability to combine and integrate systems
that large cable operators have. In addition, the City of Poplar Bluff sold
bonds to raise money to construct a competing cable system. Although limited
plant upgrades have been made, the Corporate General Partner projected that if
the Joint Ventures made the comprehensive additional upgrades deemed necessary
to enable enhanced and competitive services, particularly two-way capability,
the Joint Ventures 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.
On November 8, 2002, the Venturers entered into an asset purchase agreement
providing for the sale of the PBD Joint Venture's remaining cable system in
Dexter, Missouri to Telecommunications Management, LLC (Telecommunications
Management) for a total sale price of approximately $3,148,000, (approximately
$825 per customer acquired). This sale is a part of a larger transaction in
which the Venturers and eight other affiliated partnerships (which, together
with the Venturers are collectively referred to as the "Telecommunications
Management Selling Partnerships") would sell all of their remaining assets used
in the operation of their respective cable systems to Telecommunications
Management for a total cash sale price of approximately $15,341,600 (before
adjustments) (the Telecommunications Management Sale). The Telecommunications
Management Sale is subject to the approval of a majority of the holders of the
Partnerships' units and approval of the holders of the other Telecommunications
Management Selling Partnerships. In addition, the transaction is subject to
certain closing conditions, including regulatory and franchise approvals. In
March and April 2003, a majority of the Limited Partners of the Venturers
approved the Telecommunications Management Sale and a plan of liquidation.
On February 6, 2003, the Partnership entered into a side letter amending the
asset purchase agreement providing for the sale of all of its cable systems to
Telecommunications Management. The February 6, 2003 side letter amends the asset
purchase agreement and Deposit Escrow Agreement to extend the date of the second
installment of the deposit and the Outside Closing Date each by 60 days. On
April 7, 2003, the second installment of the escrow deposit was due and was not
made.
On April 24, 2003, the Partnership entered into another side letter amending the
asset purchase agreement providing for the sale of all of its cable systems to
Telecommunications Management. The April 24, 2003 side letter amends the asset
purchase agreement and Deposit Escrow Agreement to extend the date of the second
installment of the deposit to May 15, 2003 and the Outside Closing Date to
September 30, 2003.
The Partnership finalized its proposed plan of liquidation in December 2002 in
connection with the filing of a proxy to obtain partner approval for the sale of
the PBD Joint Venture's final cable system and the subsequent liquidation and
dissolution of the PBD 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 December 31, 2002. Upon changing to the liquidation
basis of accounting, the Partnership recorded $17,400 of accrued costs of
liquidation in accounts payable and accrued liabilities representing an estimate
of the costs to be incurred after the sale of the PBD Joint Venture's final
cable system but prior to dissolution of the Partnership. In addition, the
Partnership's equity in net assets of the PBD Joint Venture decreased by
$15,300, as a result of the accrued costs of liquidation recorded at the PBD
Joint Venture. No further adjustments have been recorded to reflect the
Partnership's equity in net assets of the PBD Joint Venture at estimated
realizable value. Distributions ultimately made to the partners upon liquidation
will differ from the net assets in liquidation recorded in the accompanying
statements of net assets in liquidation of the
8
ENSTAR INCOME PROGRAM IV-2, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Partnership as a result of adjustments recorded to the realizable value of the
assets of the PBD Joint Venture and adjustments if any to estimated costs of
liquidation. No adjustments were made to estimated costs of liquidation during
the three months ended March 31, 2003.
The Corporate General Partner's intention is to settle the outstanding
obligations of the Partnership and terminate the Partnership as expeditiously as
possible. Final dissolution of the Partnership and related cash distributions to
the partners will occur upon obtaining final resolution of all liquidation
issues.
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 identical agreements with the PBD Joint Venture
and the Macoupin Joint Venture of which the Partnership is a joint venturer and
co-general partner, except that the Macoupin Joint Venture pays Enstar Cable a
4% management fee. The PBD Joint Venture's management fee expense approximated
$17,400 and $52,400 for the three months ended March 31, 2003 and 2002,
respectively. The Macoupin Joint Venture's management fee expense approximated
$19,000 for three months ended March 31, 2002. In addition, the Macoupin Joint
Venture is also required to pay the Corporate General Partner an amount equal to
1% of the Macoupin Joint Venture's gross revenues. The Macoupin Joint Venture's
management fee expense to the the Corporate General Partner approximated $4,700
for the three months ended March 31, 2002. No management fee is payable to
Enstar Cable by the Partnership with respect to any amounts received by the
Partnership from the Joint Ventures. 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 and its affiliates provide other management and operational services for
the Partnership and the Joint Ventures. 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 total amount
charged to the PBD Joint Venture for these services was $18,700 and $149,200 for
the three months ended March 31, 2003 and 2002, respectively. The total amount
charged to the Macoupin Joint Venture for these costs approximated $49,100 for
the three months ended March 31, 2002.
Substantially all programming services are purchased through Charter. Charter
charges the Joint Ventures for these costs based on an allocation of its costs.
The PBD Joint Venture recorded programming fee expense of $99,200 and $284,700
for the three months ended March 31, 2003 and 2002, respectively. The Macoupin
Joint Venture recorded programming fee expense of $107,000 for the three months
ended March 31, 2002. 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 and an SEC investigation. Charter is unable to predict the outcome
of these lawsuits and government investigations. 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
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 excluding gain on sale of cable systems has been allocated 99% to the
Limited Partners and 1% to the General Partners. Gain on sale of cable systems
has been allocated in accordance with the partnership agreement, first to the
Limited Partners and then to the General Partners to
9
ENSTAR INCOME PROGRAM IV-2, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
eliminate any negative equity balance on the date of sale, and then in the
amount of 99% to the Limited partners and 1% to the General Partners. Gain and
losses will be allocated in this manner until the Limited Partners have received
an amount equal to their adjusted subscription amount and liquidation
preference, as defined, and thereafter 80% to the Limited Partners and 20% 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. Upon dissolution of the
Partnership, any negative capital account balances remaining after all
allocation and distributions are made must be funded by the respective partners.
Distributions have been allocated in accordance with the partnership agreement,
99% to the Limited Partners and 1% to the General Partners. Distributions will
be allocated in this manner until the Limited Partners have received an amount
equal to their adjusted subscription amount and liquidation preference, as
defined, and thereafter 80% to the Limited Partners and 20% to the General
Partners.
5. EQUITY IN NET ASSETS OF JOINT VENTURES
ENSTAR IV/PBD SYSTEMS VENTURE
The Partnership and an affiliated partnership, Enstar IV-1, each own 50% of the
PBD Joint Venture. The PBD Joint Venture was initially funded through capital
contributions made by each venturer during 1986. In 1986, the PBD Joint Venture
acquired cable television systems in Missouri and Illinois. Each joint venturer
shares equally in the profits and losses of the PBD Joint Venture. The
investment in the PBD Joint Venture is accounted for on the equity method.
Condensed financial information for the PBD Joint Venture as of March 31, 2003
and December 31, 2002 and the three months ended March 31, 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 months ended March 31, 2002.
The PBD Joint Venture finalized its proposed plan of liquidation in December
2002 in connection with the Partnership's filing of a proxy to obtain the
approval of the Limited Partners for the sale of the PBD Joint Venture's final
cable system and the subsequent liquidation and dissolution of the PBD Joint
Venture and the Partnerships. In March and April 2003, the required number of
votes necessary to implement the plan of liquidation were obtained. As a result,
the PBD Joint Venture changed its basis of accounting to the liquidation basis
as of December 31, 2002. Upon changing to liquidation basis accounting, the PBD
Joint Venture recorded $30,600 of accrued costs of liquidation in accounts
payable and accrued liabilities representing an estimate of the costs to be
incurred after the sale of the final cable system but prior to dissolution of
the PBD Joint Venture. Because management is unable to develop reliable
estimates of future operating results or the ultimate realizable value of
property, plant and equipment due to the current uncertainties surrounding the
final dissolution of the PBD Joint Venture, no adjustments have been recorded to
reflect assets at estimated realizable values or to reflect estimates of future
operating results. These adjustments will be reflected once a sale is imminent
and the net sales proceeds are reasonably estimable. Accordingly, the assets in
the accompanying statement of net assets in liquidation of the PBD Joint Venture
as of March 31, 2003 and December 31, 2002 have been stated at historical book
values. Distributions ultimately made to the Venturers upon liquidation will
differ from the net assets in liquidation recorded in the accompanying statement
of net assets in liquidation as a result of future operations, the sale proceeds
ultimately received by the PBD Joint Venture and adjustments if any to estimated
costs of liquidation. No adjustments were made to estimated costs of liquidation
during the three months ended March 31, 2003.
The Corporate General Partner's intention is to settle the outstanding
obligations of the PBD Joint Venture and terminate the PBD Joint Venture as
expeditiously as possible. Final dissolution of the PBD Joint Venture and
related cash distributions to the partners will occur upon obtaining final
resolution of all liquidation issues.
Distributions from the PBD Joint Venture to the Partnership were $350,000 and
$126,500 during the three months ended March 31, 2003 and 2002, respectively.
10
ENSTAR INCOME PROGRAM IV-2, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
ENSTAR IV/PBD SYSTEMS VENTURE
CONDENSED STATEMENTS OF NET ASSETS IN LIQUIDATION
(SEE NOTE 2)
MARCH 31, DECEMBER 31,
2003 2002
--------------- ---------------
(UNAUDITED)
ASSETS:
Cash and cash equivalents $ 4,543,300 $ 5,788,900
Prepaid expenses 7,100 5,200
Property, plant and equipment 818,400 818,400
Franchise cost 3,500 3,500
--------------- ---------------
Total assets 5,372,300 6,616,000
--------------- ---------------
LIABILITIES:
Accounts payable 20,500 21,400
Accrued liabilities 74,700 106,800
Due to affiliates 185,700 813,200
--------------- ---------------
Total liabilities 280,900 941,400
--------------- ---------------
NET ASSETS IN LIQUIDATION
Enstar Income Program IV-1, L.P. 2,545,700 2,837,300
Enstar Income Program IV-2, L.P. 2,545,700 2,837,300
--------------- ---------------
$ 5,091,400 $ 5,674,600
=============== ===============
11
ENSTAR INCOME PROGRAM IV-2, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
ENSTAR IV/PBD SYSTEMS VENTURE
CONDENSED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
(SEE NOTE 2)
THREE MONTHS ENDED MARCH 31, 2003
(UNAUDITED)
Additions:
Revenues $ 348,400
Interest income 10,800
-------------
Total additions 359,200
-------------
Deductions:
Service costs 148,800
General and administrative expenses 44,300
General partner management fees and reimbursed expenses 36,100
Distributions to venturers 700,000
Capital expenditures 5,600
Other expense 7,600
-------------
Total deductions 942,400
-------------
Net decrease in net assets in liquidation (583,200)
NET ASSETS IN LIQUIDATION, beginning of period 5,674,600
-------------
NET ASSETS IN LIQUIDATION, end of period $ 5,091,400
=============
12
ENSTAR INCOME PROGRAM IV-2, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
ENSTAR IV/PBD SYSTEMS VENTURE
CONDENSED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2002
(UNAUDITED)
REVENUES $ 1,047,600
-------------
OPERATING EXPENSES:
Service costs 406,900
General and administrative expenses 116,900
General partner management fees and reimbursed expenses 201,600
Depreciation and amortization 273,500
-------------
998,900
-------------
Operating income 48,700
OTHER INCOME:
Interest income 2,300
Gain on sale of cable systems 1,335,200
-------------
1,337,500
-------------
NET INCOME $ 1,386,200
=============
13
ENSTAR INCOME PROGRAM IV-2, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
ENSTAR CABLE OF MACOUPIN COUNTY
The Partnership and two affiliated partnerships, Enstar IV-1 and Enstar Income
Program IV-3, L.P. (Enstar IV-3, collectively referred to as the "Joint
Venturers"), each own one-third of the Macoupin Joint Venture. Each of the Joint
Venturers share equally in the profits and losses of the Macoupin Joint Venture.
The investment in the Macoupin Joint Venture is accounted for on the equity
method.
As a result of the sale of the Macoupin Joint Venture's systems, the Macoupin
Joint Venture changed its basis of accounting to the liquidation basis on April
10, 2002. Accordingly, the assets in the accompanying statement of net assets in
liquidation as of December 31, 2002 are stated at estimated realizable values
and the liabilities are reflected at estimated settlement amounts. There were no
significant adjustments recorded upon changing to liquidation basis accounting.
Net assets in liquidation as of December 31, 2002 represent the estimated
distribution to the Venturers. In January 2003, all remaining assets of the
Macoupin Joint Venture were distributed including a final distribution of
$126,000 made to the Joint Venturers of which the Partnership's portion is
$42,000.
Condensed financial information for the Macoupin Joint Venture as of December
31, 2002 and for the three months ended March 31, 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 months ended March 31, 2002. As all remaining assets of the Macoupin
Joint Venture have been distributed, the statement of net assets in liquidation
is not presented as of March 31, 2003.
14
ENSTAR INCOME PROGRAM IV-2, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
ENSTAR CABLE OF MACOUPIN COUNTY
CONDENSED STATEMENT OF NET ASSETS IN LIQUIDATION
DECEMBER 31, 2002
ASSETS:
Cash and cash equivalents $ 171,700
--------------
Total assets 171,700
--------------
LIABILITIES:
Due to affiliates 45,700
--------------
Total liabilities 45,700
--------------
NET ASSETS IN LIQUIDATION:
Enstar Income Program IV-1, L.P. 42,000
Enstar Income Program IV-2, L.P. 42,000
Enstar Income Program IV-3, L.P. 42,000
--------------
$ 126,000
==============
15
ENSTAR INCOME PROGRAM IV-2, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
ENSTAR CABLE OF MACOUPIN COUNTY
CONDENSED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
THREE MONTHS ENDED MARCH 31, 2003
(UNAUDITED)
Deductions:
Distribution to joint venturers $ (126,000)
---------------
Net decrease in net assets in liquidation (126,000)
NET ASSETS IN LIQUIDATION, beginning of period 126,000
---------------
NET ASSETS IN LIQUIDATION, end of period $ --
===============
16
ENSTAR INCOME PROGRAM IV-2, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
ENSTAR CABLE OF MACOUPIN COUNTY
CONDENSED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2002
(UNAUDITED)
REVENUES $ 474,000
------------
OPERATING EXPENSES:
Service costs 157,900
General and administrative expenses 49,200
General partner management fees and reimbursed expenses 72,800
Depreciation and amortization 75,800
------------
355,700
------------
Operating income 118,300
OTHER INCOME:
Interest income 2,000
------------
NET INCOME $ 120,300
============
17
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 us. 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 us. 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.
All of our cable television business operations are conducted through
participation as a partner with a 50% and a one-third interest in Enstar IV/PBD
Systems Venture (the PBD Joint Venture) and Enstar Cable of Macoupin County (the
Macoupin Joint Venture), (collectively, the Joint Ventures), respectively. Our
participation in the Joint Ventures is equal to our affiliated partner, Enstar
Income Program IV-1, L.P. (Enstar IV-1), of the PBD Joint Venture, and partners,
Enstar IV-1 and Enstar Income Program IV-3, L.P. (Enstar IV-3), of the Macoupin
Joint Venture, 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 Ventures. The following discussion
reflects such consideration, and with respect to results of operations, a
separate discussion is provided for each entity.
RESULTS OF OPERATIONS
THE PARTNERSHIP
The Partnership finalized its proposed plan of liquidation in December 2002 in
connection with the filing of a proxy to obtain partner approval for the sale of
the PBD Joint Venture's final cable system and the subsequent liquidation and
dissolution of the PBD 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 December 31, 2002. Upon changing to the liquidation
basis of accounting, the Partnership recorded $17,400 of accrued costs of
liquidation in accounts payable and accrued liabilities representing an estimate
of the costs to be incurred after the sale of the PBD Joint Venture's final
cable system but prior to dissolution of the Partnership. In addition, the
Partnership's equity in net assets of the PBD Joint Venture decreased by $15,300
as a result of the accrued costs of liquidation recorded at the PBD Joint
Ventures. No further adjustments have been recorded to reflect the Partnership's
equity in net assets of the PBD Joint Venture at estimated realizable value.
Distributions ultimately made to the partners upon liquidation will differ from
the net assets in liquidation recorded in the accompanying statement of net
assets in liquidation of the Partnership as a result of adjustments recorded to
the realizable value of the assets of the PBD Joint Venture and adjustments if
any to estimated costs of liquidation. No adjustments were made to estimated
costs of liquidation during the three months ended March 31, 2003.
General and administrative expenses remained $11,400 for the three months ended
March 31, 2003 and 2002.
Interest income of $200 for the three months ended March 31, 2003 is due to
higher average cash balances available for investment.
Other expense of $65,300 for the three months ended March 31, 2002, represents
estimated transaction costs and taxes and related adjustments associated with
the sale of certain of the Joint Ventures' cable systems.
THE ENSTAR IV/PBD SYSTEMS VENTURE
The PBD Joint Venture finalized its proposed plan of liquidation in December
2002 in connection with the Partnership's filing of a proxy to obtain the
approval of the Limited Partners for the sale of the PBD Joint Venture's final
cable system and the subsequent liquidation and dissolution of the PBD Joint
Venture and the Partnerships. In March and April 2003, the required number of
votes necessary to implement the plan of liquidation were obtained.
18
As a result, the PBD Joint Venture changed its basis of accounting to the
liquidation basis as of December 31, 2002. Upon changing to liquidation basis
accounting, the PBD Joint Venture recorded $30,600 of accrued costs of
liquidation in accounts payable and accrued liabilities representing an estimate
of the costs to be incurred after the sale of the final cable system but prior
to dissolution of the PBD Joint Venture. Because management is unable to develop
reliable estimates of future operating results or the ultimate realizable value
of property, plant and equipment due to the current uncertainties surrounding
the final dissolution of the PBD Joint Venture, no adjustments have been
recorded to reflect assets at estimated realizable values or to reflect
estimates of future operating results. These adjustments will be reflected once
a sale is imminent and the net sales proceeds are reasonably estimable.
Accordingly, the assets in the accompanying statements of net assets in
liquidation of the PBD Joint Venture as of March 31, 2003 and December 31, 2002
have been stated at historical book values. Distributions ultimately made to the
joint venturers upon liquidation will differ from the net assets in liquidation
recorded in the accompanying statement of net assets in liquidation as a result
of future operations, the sale proceeds ultimately received by the PBD Joint
Venture and adjustments if any to estimated costs of liquidation. No adjustments
were made to estimated costs of liquidation during the three months ended March
31, 2003.
On March 21, 2002 and April 10, 2002, the PBD Joint Venture completed the sales
of the Poplar Bluff and the Mt. Carmel cable television systems, respectively.
Accordingly, results of operations for the three months ended March 31, 2003 are
not comparable to and are on a different basis of accounting than the three
months ended March 31, 2002.
The PBD Joint Venture's revenues decreased $699,200 from $1,047,600 to $348,400,
or 66.7%, for the three months ended March 31, 2003 compared to the
corresponding period in 2002. The decrease was due to a decline in the number of
basic and premium service customers primarily as a result of the sale of the PBD
Joint Venture's cable systems in March and April 2002. As of March 31, 2003 and
2002, the PBD Joint Venture had approximately 3,600 and 9,900 basic service
customers, respectively, and 500 and 2,100 premium service customers,
respectively. The Poplar Bluff and Mt. Carmel systems sold in March and April
2002 had approximately 6,200 basic service customers and 1,500 premium
customers.
Service costs decreased $258,100 from $406,900 to $148,800, or 63.4%, for the
three months March 31, 2003 compared to the corresponding period in 2002.
Service costs represent programming costs and other costs directly attributable
to providing cable services to customers. The decrease was primarily due to the
sale of the PBD Joint Venture's cable systems in March and April 2002.
General and administrative expenses decreased $72,600 from $116,900 to $44,300,
or 62.1%, for the three months ended March 31, 2003 compared to the
corresponding period in 2002. The decrease was primarily due to the sale of the
PBD Joint Venture's cable systems in March and April 2002.
General partner management fees and reimbursed expenses decreased $165,500 from
$201,600 to $36,100, or 82.1%, for the three months ended March 31, 2003
compared to the corresponding period in 2002. These costs represent
administrative costs reimbursed to Charter by the PBD Joint Venture based on
Charter's actual costs incurred. The decrease was primarily due to a decrease in
management fees and reimbursable costs as a result of the sale of the PBD Joint
Venture's cable systems.
Depreciation and amortization expense decreased from $273,500 to $0 for the
three months ended March 31, 2003 compared to the corresponding period in 2002,
primarily due to the sale of the PBD Joint Venture's cable systems. In addition,
depreciation and amortization ceased upon the adoption of liquidation basis
accounting.
Interest income increased $8,500 from $2,300 to $10,800 for the three months
ended March 31, 2003 compared to the corresponding period in 2002. The increase
was primarily due to higher average cash balances available for investment.
Other expense totaled $7,600 for the three months ended March 31, 2003. Other
expense represents costs incurred in connection with the proposed sales
transaction.
Gain on sale of cable systems totaled $1,335,200 for the three months ended
March 31, 2002. Gain on sale of cable systems represents the difference between
the sale proceeds and the net book value of investment related to the Poplar
Bluff sale.
19
The PBD Joint Venture distributed $700,000 to the Venturers as a result of the
sale of the PBD Joint Venture's cable systems.
ENSTAR CABLE OF MACOUPIN COUNTY
On April 10, 2002, the Macoupin Joint Venture completed the sale of its cable
systems and accordingly had no results of operations for the three months ended
March 31, 2003.
Final dissolution of the Macoupin Joint Venture occurred in Janauary 2003 with
the final cash distribution to the joint venturers of $126,000.
LIQUIDITY AND CAPITAL RESOURCES
Our primary objective, having invested net offering proceeds in the Joint
Ventures, is to distribute to our partners all available cash from the sale of
the Joint Ventures' cable systems and all cash flow, if any, from operations
after providing for expenses and any planned capital requirements relating to
the expansion, improvement and upgrade of such cable television systems.
All of our cable television business operations are conducted through our
participation as a partner in the Joint Ventures. We distributed $125,800 during
the three months ended March 31, 2002. Distributions from the Joint Ventures
were $392,000 and $126,500 during the three months ended March 31, 2003 and
2002, respectively.
Cash and cash equivalents increased $38,400 from $136,400 at December 31, 2002
to $174,800 at March 31, 2003 primarily due to distributions of $392,000
received from the Joint Ventures offset by a repayment of $350,000 on the
amounts due to affiliates. Amounts due to affiliates at December 31, 2002
primarily represent accrued and unpaid management fees and other allocated
expenses accrued since the fourth quarter of 2000. Cash and cash equivalents
decreased $11,700 from $80,600 at December 31, 2001 to $68,900 at March 31, 2002
primarily as a result of $12,400 of cash used by operating activities.
We believe that cash generated by operations of the PBD Joint Venture will be
adequate to fund any required capital expenditures as required by franchise
authorities and other liquidity requirements in 2003 and through the proposed
sale. At this time, the PBD Joint Venture does not anticipate making significant
additional upgrades to the Dexter, Missouri cable plant or headend electronics.
INVESTING ACTIVITIES
Significant capital would be required for a comprehensive plant and headend
upgrade, particularly in light of the high cost of electronics to enable two-way
service, to offer high speed cable modem Internet and other interactive
services, as well as to increase channel capacity and allow a greater variety of
video services. The Joint Ventures' capital expenditures for recent upgrades
have been made with available funds, and have enhanced the economic value of the
Joint Ventures' systems and permitted the Joint Ventures to comply with
franchise agreements.
The estimated cost of upgrading the PBD Joint Venture's system to two-way
capability in order to be able to offer high-speed Internet service from the
Dexter, Missouri headend, as well as to increase channel capacity and allow
additional video services, would be approximately $2.4 million (for an upgrade
to 550 megahertz (MHz) capacity) to $2.8 million (for an upgrade to 870 MHz
capacity). Given the high cost of such a comprehensive upgrade effort, the
limited funds available to us, the pending sale and the belief that a
comprehensive plan is not economically prudent, the Corporate General Partner
does not presently anticipate that it will proceed with a comprehensive upgrade
plan. Provided there are available funds, the Corporate General Partner will,
however, continue to evaluate alternative, cost-effective solutions to increase
channel capacity, pay-per-view services, and digital services which would
enhance the value of our system, maintain compliance with franchise agreements
and be economically prudent.
Cash generated by operations of the Joint Ventures, together with available cash
balances will be used to fund any
20
capital expenditures as required by franchise authorities. However, our cash
reserves will be insufficient to fund a comprehensive upgrade program. If our
system is not sold, we will need to rely on increased cash flow from operations
or new sources of financing in order to meet our future liquidity requirements.
There can be no assurance that such cash flow increases can be attained, or that
additional future financing will be available on terms acceptable to us. If we
are not able to attain such cash flow increases, or obtain new sources of
borrowings, we will not be able to fully complete any cable system upgrades as
required by franchise authorities. As a result, the value of our system would
likely be lower than that of systems built to a higher technical standard.
LIQUIDATION BASIS ACCOUNTING AND SALES OF CABLE SYSTEMS
On April 10, 2002, pursuant to an asset purchase agreement dated August 29,
2001, the Partnership, together with its affiliates, Enstar Income Program IV-1,
L.P. ("Enstar IV-1"), collectively with the Partnership, "the Venturers", and
Enstar Income Program IV-3, L.P., completed the sale of the Macoupin Joint
Venture's systems to Charter Communications Entertainment I, LLC ("CCE-I"), an
affiliate of the Corporate General Partner and an indirect subsidiary of Charter
Communications, Inc. ("Charter"), for a total sale price of approximately
$9,076,800, the Partnership's one-third share of which is approximately
$3,025,600, and, together with Enstar IV-1, the sale to Interlink Communications
Partners, LLC of the PBD Joint Venture's (collectively with the Macoupin Joint
Venture, "the Joint Ventures") Mt. Carmel system for a total sale price of
approximately $4,994,800, the Partnership's one-half share of which is
approximately $2,497,400 (the "Charter Sale"). The Charter Sale is part of a
larger transaction in which the Partnership and five other affiliated
partnerships (which, together with the Partnership are collectively referred to
as the "Charter Selling Partnerships") sold all of their assets used in the
operation of their respective Illinois cable television systems to CCE-I and two
of its affiliates (also referred to, with CCE-I, as the "Purchasers") for a
total cash sale price of $63,000,000. Each Charter Selling Partnership received
the same value per customer. In addition, the Limited Partners of each of the
Charter Selling Partnerships approved an amendment to their respective
partnership agreement to allow the sale of assets to an affiliate of such
partnership's General Partner. The Purchasers are each indirect subsidiaries of
the Corporate General Partner's ultimate parent company, Charter, and,
therefore, are affiliates of the Partnership and each of the other Charter
Selling Partnerships.
In addition, on March 21, 2002, pursuant to an asset purchase agreement dated
September 4, 2001, the Partnership, together with Enstar IV-1, completed the
sale of the Poplar Bluff franchise area with the City of Poplar Bluff, Missouri
for a sale price of approximately $8,000,000 (the "Poplar Bluff Sale"), the
Partnership's one-half share of which is approximately $4,000,000.
The Charter Sale and Poplar Bluff Sale resulted from a sale process actively
pursued since 1999, when the Corporate General Partner sought purchasers for all
of the cable television systems of the Selling Partnerships, as well as eight
other affiliated limited partnership cable operators 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
Joint Ventures 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 Ventures' systems to
operate on a two-way basis with improved technical capacity, insufficiency of
Joint Ventures cash reserves and cash flows from operations to finance such
expenditures, limited customer growth potential due to the Joint Ventures'
systems' rural location, and a general inability of a small cable system
operator such as the Joint Ventures to benefit from economies of scale and the
ability to combine and integrate systems that large cable operators have. In
addition, the City of Poplar Bluff sold bonds to raise money to construct a
competing cable system. Although limited plant upgrades have been made, the
Corporate General Partner projected that if the Joint Ventures made the
comprehensive additional upgrades deemed necessary to enable enhanced and
competitive services, particularly two-way capability, the Joint Ventures 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.
On November 8, 2002, the joint venturers entered into an asset purchase
agreement providing for the sale of the PBD Joint Venture's remaining cable
system in Dexter, Missouri to Telecommunications Management, LLC
(Telecommunications Management) for a total sale price of approximately
$3,148,000, (approximately $825 per customer acquired). This sale is a part of a
larger transaction in which the Venturers and eight other affiliated
partnerships (which, together with the Venturers are collectively referred to as
the "Telecommunications
21
Management Selling Partnerships") would sell all of their remaining assets used
in the operation of their respective cable systems to Telecommunications
Management for a total cash sale price of approximately $15,341,600 (before
adjustments) (the Telecommunications Management Sale). The Telecommunications
Management Sale is subject to the approval of a majority of the holders of the
Partnerships' units and approval of the holders of the other Telecommunications
Management Selling Partnerships. In addition, the transaction is subject to
certain closing conditions, including regulatory and franchise approvals. In
March and April 2003, a majority of the Limited Partners of the Venturers
approved the Telecommunications Management Sale and a plan of liquidation.
On February 6, 2003, the Partnership entered into a side letter amending the
asset purchase agreement providing for the sale of all of its cable systems to
Telecommunications Management. The February 6, 2003 side letter amends the asset
purchase agreement and Deposit Escrow Agreement to extend the date of the second
installment of the deposit and the Outside Closing Date each by 60 days. On
April 7, 2003, the second installment of the escrow deposit was due and was not
made.
On April 24, 2003, the Partnership entered into another side letter amending the
asset purchase agreement providing for the sale of all of its cable systems to
Telecommunications Management. The April 24, 2003 side letter amends the asset
purchase agreement and Deposit Escrow Agreement to extend the date of the second
installment of the deposit to May 15, 2003 and the Outside Closing Date to
September 30, 2003.
The Partnership finalized its proposed plan of liquidation in December 2002 in
connection with the filing of a proxy to obtain partner approval for the sale of
the PBD Joint Venture's final cable system and the subsequent liquidation and
dissolution of the PBD Joint Venture and the Partnership. In April 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 December 31, 2002. Upon changing to the liquidation
basis of accounting, the Partnership recorded $17,400 of accrued costs of
liquidation in accounts payable and accrued liabilities representing an estimate
of the costs to be incurred after the sale of the PBD Joint Venture's final
cable system but prior to dissolution of the Partnership. In addition, the
Partnership's equity in net assets of the PBD Joint Venture decreased by $15,300
as a result of the accrued costs of liquidation recorded at the PBD Joint
Venture. No further adjustments have been recorded to reflect the Partnership's
equity in net assets of the PBD Joint Venture at estimated realizable value.
Distributions ultimately made to the partners upon liquidation will differ from
the net assets in liquidation recorded in the accompanying statements of net
assets in liquidation of the Partnership as a result of adjustments recorded to
the realizable value of the assets of the PBD Joint Venture and adjustments if
any to estimated costs of liquidation. No adjustments were made to estimated
costs of liquidation during the three months ended March 31, 2003.
The Corporate General Partner's intention is to settle the outstanding
obligations of the Partnership and terminate the Partnership as expeditiously as
possible. Final dissolution of the Partnership and related cash distributions to
the partners will occur upon obtaining final resolution of all liquidation
issues.
CERTAIN TRENDS AND UNCERTAINTIES
Insurance coverage is maintained for all of the cable television properties
owned or managed by Charter to cover damage to cable distribution systems,
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.
All of the PBD Joint Venture's customers from continuing operations are served
by its system in Dexter, Missouri, and neighboring communities. Significant
damage to this 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 PBD 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.
As disclosed in Charter's Quarterly Report on Form 10-Q, the parent of our
Corporate General Partner and our 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 and an SEC investigation. Charter is unable to predict the outcome
of these lawsuits and government investigations. An unfavorable outcome of these
matters could have a material adverse effect on Charter's results of operations
and
22
financial condition which could in turn have a material adverse effect on us.
It is difficult to assess the impact that the general economic slowdown will
have on future operations. This could result in reduced spending by customers
and advertisers, which could reduce the Joint Venture's revenues and operating
cash flow as well as the collectibility of accounts receivable.
INFLATION
Certain of our expenses, including the Joint Venture, such as those for wages
and benefits, equipment repair and replacement, and billing and marketing
generally increase with inflation. However, the Joint Ventures do not believe
that their financial results have been, or will be, adversely affected by
inflation in a material manner, provided that the Joint Venture is able to
increase our service prices periodically, of which there can be no assurance.
ITEM 4. CONTROLS AND PROCEDURES.
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. Within the 90 days prior
to the date of this report, our Corporate General Partner carried out an
evaluation, under the supervision and with the participation of our
management, including our Chief Administrative Officer and Principal
Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures. Based upon that evaluation, our Chief
Administrative Officer and Principal Financial Officer concluded that our
disclosure controls and procedures are effective to ensure that information
that is required to be disclosed by the Partnership in reports that it files
in its periodic SEC reports is recorded, processed, summarized and reported
within the terms specified in the SEC rules and forms.
(b) CHANGES IN INTERNAL CONTROLS. There were no significant changes in our
internal controls or in other factors that could significantly affect those
controls subsequent to the date that our Corporate General Partner carried
out this evaluation.
23
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
In December 2002, a proxy was filed with the SEC seeking to obtain approval of
the Limited Partners for the sale of the PBD Joint Venture's remaining cable
system and the subsequent liquidation and dissolution of the PBD Joint Venture
and the Partnership. On March 14, 2003, the SEC review process was completed and
proxy statements were mailed to the holders of limited partnership units. A
majority vote was reached in March 2003 although the solicitation period remains
open until May 16, 2003.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
Exhibit
Number Description of Document
- ------ -----------------------
2.1a 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)).
2.1b 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)).
2.1c 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)).
99.1 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).*
99.2 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
(b) REPORTS ON FORM 8-K
On February 14, 2003 the registrant filed a current report on Form 8-K dated
February 6, 2003 to announce it had entered into a side letter amending an
asset purchase agreement.
On April 25, 2003 the registrant filed a current report on Form 8-K dated
April 24, 2003 to announce it had entered into a side letter amending an
asset purchase agreement.
24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ENSTAR INCOME PROGRAM IV-2, L.P.
By: ENSTAR COMMUNICATIONS CORPORATION
---------------------------------
Corporate General Partner
Date: May 15, 2003 By: /s/ Paul E. Martin
-----------------------------------------
Name: Paul E. Martin
Title: Senior Vice President and Corporate
Controller (Principal Financial Officer and
Principal Accounting Officer)
25
CERTIFICATIONS
Certification of Chief Administrative Officer
I, Steven A. Schumm, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Enstar Income
Program IV-2, L.P.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: May 15, 2003
/s/ Steven A. Schumm
- ---------------------
Steven A. Schumm
Director, Executive Vice President,
Chief Administrative Officer and Interim
Chief Financial Officer
(Principal Executive Officer)
26
Certification of Principal Financial Officer
I, Paul E. Martin, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Enstar Income
Program IV-2, L.P.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: May 15, 2003
/s/ Paul E. Martin
- -------------------
Paul E. Martin
Senior Vice President and
Corporate Controller (Principal Financial Officer and
Principal Accounting Officer)
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EXHIBIT INDEX
Exhibit
Number Description of Document
------ -----------------------
2.1a 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)).
2.1b 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)).
2.1c 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)).
99.1 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).*
99.2 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
28