UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended
JUNE 30, 2004
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________ to __________
Commission File Number: 0-16784
American Cable TV Investors 5, Ltd.
Exact name of registrant as specified in charter
Colorado 84-1048934
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State of organization I.R.S. employer I.D. #
c/o Comcast Corporation
1500 Market Street, Philadelphia, PA 19102-2148
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Address of principal executive office
(215) 665-1700
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Registrant's telephone number
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12-b2 of the Exchange Act).
Yes No X
AMERICAN CABLE TV INVESTORS 5, LTD.
FORM 10-Q
QUARTER ENDED JUNE 30, 2004
TABLE OF CONTENTS
Page Number
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Balance Sheet as of June 30, 2004 and December 31, 2003 (Unaudited)....................1
Statement of Operations for the Three and Six Months Ended
June 30, 2004 and 2003 (Unaudited).....................................................2
Statement of Cash Flows for the Six Months Ended
June 30, 2004 and 2003 (Unaudited).....................................................3
Notes to Financial Statements (Unaudited)..............................................4
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..............................................................6
ITEM 4. Controls and Procedures................................................................6
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings......................................................................7
ITEM 6. Exhibits and Reports on Form 8-K.......................................................7
SIGNATURES .......................................................................................8
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AMERICAN CABLE TV INVESTORS 5, LTD.
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(A Colorado Limited Partnership)
PART I FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEET
(Unaudited)
June 30, December 31,
2004 2003
---------------- ----------------
(Amounts in thousands)
Assets
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Cash and cash equivalents............................................ $9,227 $9,184
Funds held in escrow................................................. 494 494
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$9,721 $9,678
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Liabilities and Partners' equity
--------------------------------
Unclaimed limited partner distribution checks........................ 440 440
Amounts due to related parties....................................... 847 1,772
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Total liabilities........................................... 1,287 2,212
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Contingencies (Note 3)
Partners' equity (deficit):
General partner................................................. (1,833) (3,227)
Limited partners................................................ 10,267 10,693
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Total partners' equity...................................... 8,434 7,466
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$9,721 $9,678
================ ================
See accompanying notes to financial statements.
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AMERICAN CABLE TV INVESTORS 5, LTD.
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(A Colorado Limited Partnership)
STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
------------- ---------- ---------- ----------
(Amounts in thousands, except unit and per unit amounts)
General and administrative expenses................ ($397) ($116) ($472) ($173)
Interest income.................................... 22 28 43 57
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Net loss...................................... ($375) ($88) ($429) ($116)
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Allocation of Net Loss:
General Partner............................... ($4) ($1) ($4) ($1)
============= ========== ========== ==========
Limited Partners.............................. ($371) ($87) ($425) ($115)
============= ========== ========== ==========
Net loss per limited partnership unit.............. ($1.86) ($.44) ($2.13) ($.58)
============= ========== ========== ==========
Limited partnership units outstanding.............. 200,005 200,005 200,005 200,005
============= ========== ========== ==========
See accompanying notes to financial statements.
2
AMERICAN CABLE TV INVESTORS 5, LTD.
-----------------------------------
(A Colorado Limited Partnership)
STATEMENT OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
2004 2003
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(amounts in thousands)
Cash flows from operating activities:
Net loss..................................................................... ($429) ($116)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Changes in operating assets and liabilities:
Net change in unclaimed limited partner distribution checks and
amounts due to related parties.................................. 472 172
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Net cash provided by operating activities........................... 43 56
Cash and cash equivalents:
Beginning of period................................................. 9,184 9,792
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End of period....................................................... $9,227 $9,848
============= =============
See accompanying notes to financial statements.
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AMERICAN CABLE TV INVESTORS 5, LTD.
-----------------------------------
(A Colorado Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF FINANCIAL STATEMENT PREPARATION
The accompanying financial statements of American Cable TV Investors 5, Ltd.
("ACT 5" or 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
June 30, 2004 and its results of operations for the three and six months ended
June 30, 2004 and 2003. The results of operations for the interim periods are
not necessarily indicative of the results for the full year.
These financial statements should be read in conjunction with the financial
statements and related notes thereto included in the Partnership's December 31,
2003 Annual Report on Form 10-K.
The Partnership's general partner is IR-TCI Partners V, L.P. ("IR-TCI" or the
"General Partner"), a Colorado limited partnership. The general partner of
IR-TCI is TCI Ventures Five, Inc. ("Ventures Five"), a subsidiary of TCI
Cablevision Associates, Inc. ("Cablevision"). Cablevision is an indirect
subsidiary of Comcast Cable Holdings, LLC ("Comcast Cable Holdings") and is the
managing agent of the Partnership. Comcast Cable Holdings is an indirect
subsidiary of Comcast Corporation ("Comcast").
2. TRANSACTIONS WITH RELATED PARTIES
The Partnership has a management agreement with an affiliate of Comcast Cable
Holdings whereby this affiliate is responsible for performing all services
necessary for the management of the Partnership. The Partnership is charged a
management fee related to these services. During the three and six months ended
June 30, 2004, general and administrative expenses in the Partnership's
statement of operations include $9,000 and $18,000, respectively, related to
this agreement. During the three and six months ended June 30, 2003, general and
administrative expenses in the Partnership's statement of operations include
$9,000 and $18,000, respectively, related to this agreement.
Amounts due to related parties, which represent non-interest-bearing payables to
Comcast Cable Holdings and its affiliates, consist of the net effect of cash
advances and certain intercompany expense charges.
3. CONTINGENCIES
On November 2, 1999, a limited partner of ACT 5 filed suit in United States
District Court for the District of Colorado against the General Partner (and
certain affiliates of the General Partner) of ACT 5. The lawsuit alleges that
the defendants violated disclosure requirements under the Securities Exchange
Act of 1934 in connection with soliciting limited partner approval of the sale
of the Partnership's cable television system located in and around Riverside,
California (the "Riverside Sale") and that certain defendants breached their
fiduciary duty in connection with the Riverside Sale. Also named as a defendant
is Lehman Brothers Inc. ("Lehman"), which provided to ACT 5 a fairness opinion
relative to the Riverside Sale.
Section 21 of the Partnership Agreement provides that the General Partner and
its 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 5, provided that the General Partner
determines, in good faith, that such course of conduct was in the best interests
of ACT 5 and did not constitute proven fraud, negligence, breach of fiduciary
duty or misconduct. The engagement agreement between ACT 5 and Lehman provides
that, subject to certain conditions set forth in more detail in the engagement
agreement, Lehman is entitled to be indemnified for any liability or loss, and
to be reimbursed by ACT 5 for legal fees and costs incurred as a result of its
rendering of services in connection with the fairness opinion. The General
Partner and its affiliates and Lehman each submitted a demand for
indemnification. Consequently, legal fees and costs incurred by the defendants
with respect to the above lawsuit have been reflected in general and
administrative expenses in the accompanying statements of operations in the
period that such legal fees were incurred by the defendants. For the three and
six months ended June 30, 2004, legal fees and costs related to the above
lawsuit of $359,000 and $392,000,
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AMERICAN CABLE TV INVESTORS 5, LTD.
-----------------------------------
(A Colorado Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
respectively, have been so included in general and administrative expenses. For
the three and six months ended June 30, 2003, legal fees and costs related to
the above lawsuit of $16,000 and $41,000, respectively, have been so included in
general and administrative expenses.
In March 2004, plaintiff agreed in principle to a settlement of all claims
against all defendants (other than Lehman) for $3,750,000, plus the defendants'
waiver of their claims against ACT 5 for reimbursement of their legal expenses.
Through June 2004, the three TCI Defendants incurred approximately $1.4 million
in attorneys' fees and other costs. As a result of the settlement, the amounts
incurred by the settling defendants have been treated as a capital contribution
as of May 19, 2004, decreasing amounts due to affiliates. This transaction is
considered a non-cash financing activity in the accompanying statement of cash
flows as of June 30, 2004.
Under the settlement agreement, plaintiff will continue to pursue its claims
against Lehman, which will continue to receive reimbursement of its legal fees
and costs from ACT 5. Plaintiff will be limited in collecting on any judgment
against Lehman to an amount of not more than: (a) $3,750,000, plus (b) the total
amount previously or hereafter paid to Lehman by ACT 5 as reimbursement for
Lehman's legal fees and costs. Further, plaintiff cannot collect on any judgment
against Lehman unless the Court specifically determines that, as to the amount
to be collected: (a) Lehman's liability resulted directly from Lehman's gross
negligence, bad faith and/or willful misconduct, or (b) Lehman otherwise is not
entitled to indemnification or reimbursement from, and/or the other protections
from liability to, ACT 5 pursuant to the engagement letter or otherwise.
On May 19, 2004, the Court entered an order approving the proposed settlement.
On June 28, 2004, the Court awarded plaintiff's counsel $1,012,500 in attorneys'
fees, in addition to its earlier award of $271,603 in costs, which amounts will
reduce the $3,750,000 settlement sum to be paid by the settling defendants,
thereby diminishing the recovery by certain Limited Partners.
Plaintiff is continuing to pursue its separate claims against Lehman. A trial is
scheduled to begin in the fall of 2004. Under the settlement agreement as
approved by the Court, ACT 5 will continue to be responsible to reimburse Lehman
for its legal fees and costs incurred in the defense of the litigation. If,
however, plaintiff prevails on its claims against Lehman, ACT 5 may obtain
reimbursement from Lehman for certain or all of the legal fees and costs
previously and hereafter paid by ACT 5 on Lehman Brothers' behalf. From the
inception of the lawsuit through June 30, 2004, ACT 5 has incurred legal fees
related to Lehman totaling approximately $1 million.
On April 1, 1997, the Partnership sold its cable television system located in
and around Shelbyville and Manchester, Tennessee (the "Southern Tennessee
System") to Rifkin Acquisition Partners, L.L.L.P. ("Rifkin"). Pursuant to the
asset purchase agreement, $494,000 of the sales price was placed in escrow (the
"Southern Tennessee Escrow") and was subject to indemnifiable claims by Rifkin
through March 31, 1998. Prior to March 31, 1998, Rifkin filed a claim against
the Southern Tennessee Escrow relating to a class action lawsuit filed by a
customer challenging late fee charges with respect to the Southern Tennessee
System. On September 14, 1999, Rifkin sold the Southern Tennessee System to an
affiliate of Charter Communications, Inc. ("Charter"). In connection with such
sale, Charter was assigned the rights of the indemnification claim. The class
action lawsuit has been settled and dismissed. The amount of the Southern
Tennessee Escrow due Charter as a result of terms of the settlement agreement
has not yet been determined. Upon determination of amounts due Charter, the
remaining funds in the Southern Tennessee Escrow will be released to ACT 5.
The claim in the litigation against Lehman and the claim against the Southern
Tennessee Escrow have had and will continue to have the effect of delaying any
final liquidating distributions of the Partnership.
5
AMERICAN CABLE TV INVESTORS 5, LTD.
-----------------------------------
(A Colorado Limited Partnership)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Partnership's Management's Discussion and Analysis of Financial Condition and
Results of Operations included in the Partnership's Annual Report on Form 10-K
for the year ended December 31, 2003.
Material Changes in Results of Operations
The Partnership has sold all of its cable television assets and, therefore, is
no longer actively engaged in the cable television business. Pending the
resolution of the contingencies described in note 3 to the accompanying
financial statements, the Partnership will seek to make a final determination of
its liabilities so that liquidating distributions can be made in connection with
its dissolution. The Partnership's results of operations for the three and six
months ended June 30, 2004 and 2003 include general and administrative ("G&A")
expenses and interest income. The Partnership's G&A expenses are primarily
comprised of legal fees and costs associated with the administration of the
Partnership. G&A expenses increased $281,000 and $299,000 during the three and
six months ended June 30, 2004, as compared to the corresponding prior year
periods. Such increases are due to legal fees associated with the litigation
described in note 3 to the accompanying financial statements and audit fees.
Interest income relates to interest earned on the Partnership's cash and cash
equivalents. Interest income decreased $6,000 and $14,000 during the three and
six months ended June 30, 2004, as compared to the corresponding prior year
periods. Such changes are due to fluctuations in interest rates.
ITEM 4. CONTROLS AND PROCEDURES
Our principal executive officer and our co-chief financial officers, after
evaluating the effectiveness of our disclosure controls and procedures (as
defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) as
of the end of the period covered by this report, have concluded, based on the
evaluation of these controls and procedures required by paragraph (b) of
Exchange Act Rules 13a-15 or 15d-15, that our disclosure controls and procedures
were effective to ensure that material information relating to us would be made
known to them by others within those entities.
Changes in internal control over financial reporting. There were no changes in
our internal control over financial reporting identified in connection with the
evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that
occurred during our last fiscal quarter that have materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.
6
AMERICAN CABLE TV INVESTORS 5, LTD.
-----------------------------------
(A Colorado Limited Partnership)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Refer to Note 3 to our financial statements included in Item 1 for a
discussion of recent developments related to our legal proceedings.
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits required to be filed by Item 601 of Regulation S-K:
31 Certifications of Principal Executive Officer and Co-Chief
Financial Officers pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
32 Certification of Principal Executive Officer and Co-Chief
Financial Officers pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
b) Reports on Form 8-K:
None.
7
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 5, LTD.
(A Colorado Limited Partnership)
BY: IR-TCI PARTNERS V, L.P.,
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Its General Partner
BY: TCI VENTURES FIVE, INC.
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A General Partner
By: /s/ LAWRENCE J. SALVA
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Lawrence J. Salva
Senior Vice President
(Principal Accounting Officer)
Dated: August 12, 2004
8