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, 1997
( ) 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
-------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
State of California 84-0939576
- -------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5619 DTC Parkway
Englewood, Colorado 80111
- ----------------------------------------- --------------
(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
----- ------
PART I - FINANCIAL INFORMATION
AMERICAN CABLE TV INVESTORS 3
(A Limited Partnership)
Balance Sheets
(unaudited)
September 30, December 31,
1997 1996
------------ -----------
Assets amounts in thousands
- ------
Cash and cash equivalents $ 4,954 4,967
======= ======
Liabilities and Partners' Equity
- --------------------------------
Accounts payable and accrued expenses $ 274 67
Amounts due to related parties (note 4) 109 205
------- ------
Total liabilities 383 272
------- ------
Partners' equity (deficit):
General partners (2,193) (2,162)
Limited partners 6,764 6,857
------- ------
Total partners' equity 4,571 4,695
------- ------
Contingency (note 5)
$ 4,954 4,967
======= ======
See accompanying notes to financial statements.
I-1
AMERICAN CABLE TV INVESTORS 3
(A Limited Partnership)
Statements of Operations
(unaudited)
Three months Nine months
ended ended
September 30, September 30,
----------------- ----------------
1997 1996 1997 1996
-------- ------- ------- -------
amounts in thousands,
except unit amounts
General and administrative expenses
(note 5) $ (218) (98) (285) (377)
Interest income 67 58 161 260
Other income -- 32 -- 32
------- ------ ------ ------
Net loss $ (151) (8) (124) (85)
======= ====== ====== ======
Loss per limited partnership unit
(note 2) $ (1.62) (0.09) (1.33) (0.91)
======= ====== ====== ======
Limited partnership units outstanding 70,005 70,005 70,005 70,005
======= ====== ====== ======
See accompanying notes to financial statements.
I-2
AMERICAN CABLE TV INVESTORS 3
(A Limited Partnership)
Statement of Partners' Equity
Nine months ended September 30, 1997
(unaudited)
General Limited
partners partners Total
--------- --------- ------
amounts in thousands
Balance at January 1, 1997 $(2,162) 6,857 4,695
Net loss (31) (93) (124)
------- ----- -----
Balance at September 30, 1997 $(2,193) 6,764 4,571
======= ===== =====
See accompanying notes to financial statements.
I-3
AMERICAN CABLE TV INVESTORS 3
(A Limited Partnership)
Statements of Cash Flows
(unaudited)
Nine months ended
September 30,
----------------------
1997 1996
------------ --------
amounts in thousands
(see note 3)
Cash flows from operating activities:
Net loss $ (124) (85)
Adjustments to reconcile net loss to net cash
used in operating activities:
Change in receivables -- 29
Change in accounts payable, accrued expenses
and amounts due to related parties 111 (287)
------ -----
Net cash used in operating activities (13) (343)
------ -----
Cash flows from investing activities -
Distribution from Redlands -- 210
------ -----
Cash flows from financing activities -- --
------ -----
Net decrease in cash and cash equivalents (13) (133)
Cash and cash equivalents:
Beginning of period 4,967 5,057
------ -----
End of period $4,954 4,924
====== =====
See accompanying notes to financial statements.
I-4
AMERICAN CABLE TV INVESTORS 3
(A Limited Partnership)
Notes to Financial Statements
September 30, 1997
(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 revenues
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, 1997, and the
results of its operations for the nine months ended September 30, 1997 and
1996. 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, 1996 Annual Report on Form 10-K.
(2) Allocation of Net Earnings and Net Losses
-----------------------------------------
Pursuant to the Partnership's limited partnership agreement (the
"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 losses for the nine months ended
September 30, 1997 and 1996 have been allocated using the post-Payback
percentages set forth above.
(continued)
I-5
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, 1997, $4,934,000 of money
market funds were 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, 1997 and 1996.
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 ACT 3 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 managing general partner as
defendants. The lawsuit, as amended, alleges that the defendants violated
disclosure requirements under the Securities Exchange Act of 1934 and that
certain defendants breached a fiduciary duty to the plaintiffs in
connection with the sale of the Redlands, California cable television
system.
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 2 as of the close
of business on October 1, 1993, excluding, however, the defendants, their
parent corporations, subsidiaries, and affiliates. On January 7, 1997, the
District Court issued an order consolidating this case with a similar case
filed against the managing general partner of ACT 3 (the "Consolidated
Cases").
On or about October 27, 1997, the defendants entered into a preliminary
settlement agreement (the "Settlement Agreement") in connection with the
Consolidated Cases. On November 5, 1997, the District Court approved the
form of notice to be transmitted to the class members relative to the
proposed settlement, and scheduled a hearing before the District Court (the
"Settlement Hearing") for January 7, 1998 at 3 p.m., to determine whether
the Settlement Agreement should be approved and whether a final judgment
should be entered in connection with the Settlement Agreement. Counsel for
the class members will endeavor to mail to class members a notice of the
Settlement Hearing along with the plan for distributing the settlement
amount as set forth in the Settlement Agreement.
(continued)
I-6
AMERICAN CABLE TV INVESTORS 3
(A Limited Partnership)
Notes to Financial Statements
Section 21 of 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, 1997, ACT 2 and ACT 3 have received requests from the
general partners and certain of their affiliates for the advancement of
legal and other fees and expenses associated with the above-described
lawsuit totaling $2.3 million. Consistent with the terms of the
Partnership Agreement, this amount has been advanced by ACT 2 and ACT 3.
ACT 3's 50% share of such fees and expenses for the nine months ended
September 30, 1997 and 1996, which total $206,000 and $313,000,
respectively, has been included in general and administrative expenses in
the accompanying financial statements.
I-7
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 three and nine
month periods ended September 30, 1997 and 1996 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 the
Partnership's invested cash and cash equivalents. Interest income for the nine
month period ended September 30, 1997, has been decreased by $34,000 to reverse
the overaccrual of interest income in prior periods.
Material Changes in Financial Condition
---------------------------------------
ACT 3 anticipates that it will make liquidating distributions in connection
with its dissolution as soon as possible following the final determination and
satisfaction of ACT 3's liabilities. In this regard, as described in note 5 to
the accompanying financial statements, a Settlement Agreement has been entered
into in connection with the Consolidated Cases. Liquidating distributions will
be made as soon as practicable upon approval of the Settlement Agreement and
entry of final judgment.
I-8
AMERICAN CABLE TV INVESTORS 3
(A Limited Partnership)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- ------ --------------------------------
(a) Exhibits:
(27) Financial Data Schedule
(b) Reports on Form 8-K filed during the quarter ended September 30, 1997
- none
II-1
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 10, 1997 By: /s/ Gary K. Bracken
------------------------------
Gary K. Bracken
Vice President and Controller
(Principal Accounting Officer)
II-2