UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1996
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File No. 2-90004
AMERICAN CABLE TV INVESTORS 3
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(Exact name of Registrant as specified in its charter)
State of California 84-0939576
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State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5619 DTC Parkway
Englewood, Colorado 80111
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 267-5500
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,
and (2) has been subject to such filing requirements for the past
90 days. Yes X No
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PART I - FINANCIAL INFORMATION
AMERICAN CABLE TV INVESTORS 3
(A Limited Partnership)
Balance Sheets
(unaudited)
September 30, December 31,
1996 1995
------------ ------------
Assets amounts in thousands
Cash and cash equivalents $ 4,924 5,057
Receivables 10 39
Investment in American Cable TV of
Redlands Joint Venture
("Redlands")(note 1) -- 204
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$ 4,934 5,300
======= =======
Liabilities and Partners' Equity
Accounts payable and accrued expenses 68 118
Amounts due to related parties
(note 4) 47 278
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Total liabilities 115 396
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Partners' equity (deficit):
General partners (2,131) (2,110)
Limited partners 6,950 7,014
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Total partners' equity 4,819 4,904
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Commitments and contingencies
(notes 4 and 5) $ 4,934 5,300
======= =======
See accompanying notes to financial statements.
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AMERICAN CABLE TV INVESTORS 3
(A Limited Partnership)
Statements of Operations
(unaudited)
Three months Nine months
ended ended
September 30, September 30,
-------------- --------------
1996 1995 1996 1995
---- ---- ---- ----
amounts in thousands,
except unit amounts
Selling, general and
administrative expenses
(note 5) $ (98) (253) (377) (299)
Interest income 58 74 260 254
Other income 32 -- 32 --
Share of earnings of Redlands -- 2 -- 13
----- ----- ----- -----
Net loss $ (8) (177) (85) (32)
===== ===== ===== =====
Loss per limited partnership
unit (note 2) $(0.09) (1.90) (0.91) (0.34)
====== ===== ====== ======
Limited partnership units
outstanding 70,005 70,005 70,005 70,005
====== ====== ====== ======
See accompanying notes to financial statements.
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AMERICAN CABLE TV INVESTORS 3
(A Limited Partnership)
Statement of Partners' Equity
Nine months ended September 30, 1996
(unaudited)
General Limited
partners partners Total
amounts in thousands
Balance at January 1, 1996 $(2,110) 7,014 4,904
Net loss (21) (64) (85)
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Balance at September 30, 1996 $(2,131) 6,950 4,819
======= ====== ======
See accompanying notes to financial statements.
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AMERICAN CABLE TV INVESTORS 3
(A Limited Partnership)
Statements of Cash Flows
(unaudited)
Nine months ended
September 30,
-------------------
1996 1995
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amounts in thousands
(see note 3)
Cash flows from operating activities:
Net loss $ (85) (32)
Adjustments to reconcile net loss
to net cash used in operating activities:
Share of earnings of Redlands -- (13)
Change in receivables 29 19
Change in accounts payable, accrued
expenses and amounts due to related
parties (287) (459)
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Net cash used in operating activities (343) (485)
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Cash flows from investing activities -
Distribution from Redlands 210 --
------ ------
Cash flows from financing activities -- --
------ ------
Net decrease in cash
and cash equivalents (133) (485)
Cash and cash equivalents:
Beginning of period 5,057 5,692
------ ------
End of period $4,924 5,207
====== ======
See accompanying notes to financial statements.
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AMERICAN CABLE TV INVESTORS 3
(A Limited Partnership)
Notes to Financial Statements
September 30, 1996
(unaudited)
(1) Basis of Financial Statement Preparation
----------------------------------------
American Cable TV Investors 3 (the "Partnership" or "ACT 3")
and American Cable TV Investors 2 ("ACT 2") owned 35% and
65%, respectively, of Redlands, a joint venture which was
formed in 1984 to acquire, develop and operate cable
television systems in and around Redlands, California. In
connection with a dissolution, indemnification and
contribution agreement (the "Dissolution Agreement"),
Redlands was dissolved as of January 1, 1996. In accordance
with the terms of the Dissolution Agreement, Redlands' net
assets were distributed to ACT 2 and ACT 3 based on their
respective ownership interests.
TCI Cablevision Associates, Inc. ("Cablevision"), an
indirect subsidiary of Tele-Communications, Inc. ("TCI"), is
the managing agent of the Partnership.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could
differ from those estimates.
The accompanying financial statements of the Partnership are
unaudited. In the opinion of management, all adjustments
(consisting only of normal recurring accruals) have been
made which are necessary to present fairly the financial
position of the Partnership as of September 30, 1996, and
the results of its operations for the nine months ended
September 30, 1996 and 1995. The results of operations for
any interim period are not necessarily indicative of the
results for the entire year.
These financial statements should be read in conjunction
with the financial statements and related notes thereto
included in the Partnership's December 31, 1995 Annual
Report on Form 10-K.
(2) Allocation of Net Earnings and Net Losses
-----------------------------------------
Pursuant to the Partnership's limited partnership agreement,
net earnings and net losses of the Partnership are allocated
1% to the general partners and 99% to the limited partners
until the limited partners have received cumulative
distributions equal to their original capital contributions
("Payback"). After the limited partners have received
distributions equal to Payback, the allocations of net
earnings and net losses shall be 25% to the general partners
and 75% to the limited partners.
Net loss per limited partnership unit is calculated by
dividing net loss attributable to the limited partners by
the number of limited partnership units outstanding during
the period. The limited partners achieved Payback in 1994.
Accordingly, the Partnership's net losses for the nine
months ended September 30, 1996 and 1995 have been allocated
using the post-Payback percentages set forth above.
(continued)
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AMERICAN CABLE TV INVESTORS 3
(A Limited Partnership)
Notes to Financial Statements
(3) Supplemental Disclosure of Cash Flow Information
------------------------------------------------
The Partnership considers investments with initial
maturities of six months or less to be cash equivalents. At
September 30, 1996, $4,924,000 of commercial paper was
included in cash and cash equivalents. The Partnership is
exposed to credit loss in the event of non-performance by
the other parties to such financial instruments. However,
the Partnership does not anticipate non-performance by the
other parties.
(4) Transactions with Related Parties
---------------------------------
The Partnership reimburses Cablevision for direct out-of-
pocket and indirect expenses allocable to the Partnership
and for certain personnel employed on a full- or part-time
basis to perform accounting or other services. Such
reimbursements amounted to $27,000 for both of the nine
month periods ended September 30, 1996 and 1995.
Amounts due to related parties represent non-interest-
bearing payables to TCI and its affiliates consisting of (i)
the net effect of cash advances and certain expense
allocations and (ii) the advancement of legal and other fees
and expenses associated with the litigation described in
note 5.
(5) Litigation
----------
On September 30, 1994, a limited partner of the Partnership
filed suit in United States District Court for the District
of Colorado (the "District Court") against the managing
general partner of ACT 3. A similar suit was filed against
the managing general partner of ACT 2. The lawsuit, as
amended, also names certain affiliates of the Partnership's
managing general partner as defendants. The lawsuit alleges
that the defendants violated disclosure requirements under
the Securities Exchange Act of 1934 and that certain
defendants breached a fiduciary duty to the plaintiff in
connection with the sale of the Redlands cable television
system. The defendants believe that the claims asserted are
without merit and intend to vigorously defend the actions.
The defendants moved to dismiss various claims asserted in
the complaint and the plaintiff opposed such motions. The
defendants' motion was denied by the District Court on March
24, 1995.
On November 3, 1995, the District Court granted the
plaintiff's motion for certification of this case as a class
action. The class has been defined to include all persons
who were limited partners of ACT 3 as of the close of
business on October 1, 1993, excluding, however, the
defendants, their parent corporations, subsidiaries, and
affiliates. A pre-trial conference was conducted on April
9, 1996 and a trial has been scheduled for the spring of
1997. On August 5, 1996, the defendants filed a motion for
summary judgment on all of the plaintiff's claims, as well
as separate partial summary judgment motions with respect to
certain of the plaintiff's claims. The plaintiff filed a
cross-motion for partial summary judgment on one aspect of
the case. The motions have been fully briefed, however, the
District Court has not yet ruled on such motions.
(continued)
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AMERICAN CABLE TV INVESTORS 3
(A Limited Partnership)
Notes to Financial Statements
Section 21 of ACT 3's limited partnership agreement (the
"Partnership Agreement") provides that the General Partners
and their affiliates, subject to certain conditions set
forth in more detail in the Partnership Agreement, are
entitled to be indemnified for any liability or loss
incurred by them by reason of any act performed or omitted
to be performed by them in connection with the business of
ACT 3, provided that the General Partners determine, in good
faith, that such course of conduct was in the best interests
of ACT 3 and did not constitute proven fraud, negligence,
breach of fiduciary duty or misconduct.
Through September 30, 1996, ACT 3 and ACT 2 have received
requests from the General Partners and certain affiliates
for the advancement of legal and other fees and expenses
associated with the above-described lawsuit totaling
$1,677,000. Consistent with the terms of the Partnership
Agreement, this amount has been advanced by ACT 3 and ACT 2.
ACT 3's 50% share of such fees and expenses for the nine
months ended September 30, 1996 and 1995, which totals
approximately $313,000 and $221,000, respectively, has been
included in selling, general, and administrative expenses in
the accompanying financial statements. Fees and expenses
incurred by the defendants will continue to be paid in equal
shares by the Partnership and ACT 2 as they are incurred and
approved.
The litigation will have the effect of delaying the
Partnership's final cash distributions. In addition, any
successful indemnification claims by the defendants would
have the effect of reducing the amount of such final cash
distributions.
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AMERICAN CABLE TV INVESTORS 3
(A Limited Partnership)
Management's Discussion and Analysis of
- - ---------------------------------------
Financial Condition and Results of Operations
---------------------------------------------
Material Changes in Results of Operations
-----------------------------------------
The Partnership is no longer engaged in the cable television
business and is currently seeking to make a final determination
of its liabilities so that liquidating distributions can be made
in connection with its dissolution. Accordingly, the
Partnership's results of operations for the nine month periods
ended September 30, 1996 and 1995 include (i) the advancement of
legal and other fees and expenses associated with the litigation
described in note 5 to the accompanying financial statements,
(ii) costs associated with the administration of the Partnership,
and (iii) interest income earned on its invested cash and cash
equivalents. In addition, the Partnership recognized other
income in 1996 as a result of changes in amounts previously
accrued.
Material Changes in Financial Condition
---------------------------------------
The Partnership anticipates that it will make liquidating
distributions in connection with its dissolution as soon as
possible following the final determination and satisfaction of
its liabilities. However, the Partnership currently is unable to
predict the timing or amount of such final cash distributions due
primarily to the existence of the litigation described in note 5
to the accompanying financial statements.
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AMERICAN CABLE TV INVESTORS 3
(A Limited Partnership)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits:
(27) Financial Data Schedule
(b) Reports on Form 8-K filed during the quarter ended
September 30,
1996 - none
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
AMERICAN CABLE TV INVESTORS 3
(A Limited Partnership)
By: IR-TCI PARTNERS III,
Its Managing General Partner
By: TCI VENTURES, INC.,
A General Partner
Date: November 5, 1996 By: /s/ Gary K. Bracken
Gary K. Bracken
Vice President and Controller
(Principal Accounting Officer)
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