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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 June 30, 2001
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 No. 0-16784
AMERICAN CABLE TV INVESTORS 5, LTD.
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(Exact name of Registrant as specified in its charter)
State of Colorado 84-1048934
------------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
188 Inverness Drive West
Englewood, Colorado 80112
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (720) 267-7000
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
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PART I - FINANCIAL INFORMATION
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Balance Sheets
(unaudited)
(see note 2)
<Table>
<Caption>
June 30, December 31,
2001 2000
------------ ------------
amounts in thousands
Assets
Cash and cash equivalents (note 4) $ 9,465 9,240
Receivables -- 61
Funds held in escrow (note 6) 494 494
------------ ------------
$ 9,959 9,795
============ ============
Liabilities and Partners' Equity
Accrued liabilities $ 25 60
Unclaimed limited partner distribution checks 435 437
Amounts due to related parties (note 5) 88 3
------------ ------------
Total liabilities 548 500
------------ ------------
Partners' equity (deficit):
General partner (3,207) (3,208)
Limited partners 12,618 12,503
------------ ------------
Total partners' equity 9,411 9,295
------------ ------------
Commitments and contingencies (notes 2 and 6)
$ 9,959 9,795
============ ============
</Table>
See accompanying notes to financial statements.
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AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Statements of Earnings
(unaudited)
(see note 2)
<Table>
<Caption>
Three months ended Six months ended
June, June,
---------------------- ----------------------
2001 2000 2001 2000
--------- --------- --------- ---------
amounts in thousands,
except unit amounts
General and administrative expenses $ (85) (74) (125) (142)
Interest income 108 371 241 1,071
Adjustment to gain on sale of cable television system (note 2)
-- 66 -- 66
--------- --------- --------- ---------
Net earnings $ 23 363 116 995
========= ========= ========= =========
Net earnings per limited partnership unit ("Unit") (note 3)
$ .11 1.80 .57 4.93
========= ========= ========= =========
Limited partnership units outstanding 200,005 200,005 200,005 200,005
========= ========= ========= =========
</Table>
See accompanying notes to financial statements.
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AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Statement of Partners' Equity
Six months ended June 30, 2001
(unaudited)
(see note 2)
<Table>
<Caption>
General Limited
partner partners Total
------------- ------------- ------------
amounts in thousands
Balance at January 1, 2001 $ (3,208) 12,503 9,295
Net earnings 1 115 116
------------- ------------- ------------
Balance at June 30, 2001 $ (3,207) 12,618 9,411
============= ============= ============
</Table>
See accompanying notes to financial statements.
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AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Statements of Cash Flows
(unaudited)
(see note 2)
<Table>
<Caption>
Six months ended
June 30,
--------------------
2001 2000
-------- --------
amounts in thousands
(see note 4)
Cash flows from operating activities:
Net earnings $ 116 995
Adjustments to reconcile net earnings to net cash provided by (used in)
operating activities:
Adjustment to gain on sale of cable television system -- (66)
Changes in operating assets and liabilities:
Net change in receivables and other assets 61 335
Net change in accounts payable, accrued liabilities and amounts due
to related parties 48 (1,400)
-------- --------
Net cash provided by (used in) operating activities 225 (136)
Cash flows from investing activities - additional proceeds from sale of cable
television system -- 1,566
Cash flows from financing activities - distribution to partners -- (41,011)
-------- --------
Net change in cash and cash
equivalents 225 (39,581)
Cash and cash equivalents:
Beginning of period 9,240 49,067
-------- --------
End of period $ 9,465 9,486
======== ========
</Table>
See accompanying notes to financial statements.
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AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Notes to Financial Statements
June 30, 2001
(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, 2001 and its net
earnings for the six months ended June 30, 2001 and 2000. The net
earnings for any interim period are not necessarily indicative of net
earnings 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, 2000 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., a subsidiary of TCI
Cablevision Associates, Inc. ("Cablevision"). The limited partner of
IR-TCI is Cablevision Equities VI, a limited partnership whose partners
are certain former officers and key employees of the predecessor of
Cablevision. Cablevision is an indirect subsidiary of AT&T Broadband,
LLC ("AT&T Broadband") and is the managing agent of the Partnership.
As further described in note 2, the Partnership has sold substantially
all of its cable television assets.
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.
(continued)
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AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Notes to Financial Statements
(2) Riverside Sale
On December 7, 1999, the Partnership consummated the sale of its
remaining cable television system serving subscribers located in and
around Riverside, California (the "Riverside System") to Century
Exchange LLC ("Century"), a subsidiary of Adelphia Communications
Corporation, for an adjusted sales price of $33,399,000 (the "Riverside
Sale"). The Riverside Sale was approved by the Limited Partners at a
special meeting that occurred on December 11, 1998. In accordance with
the terms of the asset purchase agreement relating to the Riverside
Sale, $1.5 million of the sales price was placed in escrow for 180 days
in order to satisfy any indemnifiable claims which could be made by
Century. On June 5, 2000, the funds held in escrow were released to ACT
5. ACT 5 received interest of $39,000 in conjunction with the release
of the funds held in escrow. In connection with the Riverside Sale,
Century and the Partnership waived the condition to closing that all
required consents be obtained prior to closing the Riverside Sale, as
such condition related to the transfer to Century of the franchise
agreement between the Partnership and the City of Moreno Valley that
authorizes the Partnership to provide cable television service to
subscribers located in and around Moreno Valley, California (the
"Moreno Franchise Agreement"). Accordingly, all of the Riverside
System's cable television assets other than the Moreno Franchise
Agreement were transferred to Century on December 7, 1999. In
connection with the Riverside Sale, the Partnership entered into a
management agreement with Century pursuant to which Century will be
entitled to all net cash flows generated by the portion of the
Riverside System that is subject to the Moreno Franchise Agreement
until such time as the City of Moreno Valley approves the transfer of
the Moreno Franchise Agreement from the Partnership to Century. On
February 13, 2001, the City of Moreno Valley passed a resolution
indicating that the Partnership, by entering into the management
agreement, in effect, transferred the franchise without city approval,
thereby causing a material default under the franchise agreement. The
Partnership has responded by providing the City of Moreno Valley a
supplemental agreement with Century by which the partners reaffirm that
they did not intend to transfer control of the franchise. In July 2001,
the City of Moreno Valley preliminarily approved the transfer of the
Moreno Valley Franchise Agreement to Century. The proposed settlement
and transfer approval is subject to final documentation. Such
settlement and transfer requires an aggregate payment of $500,000 from
the Partnership and Century. The Partnership's portion of such payment
has not yet been determined.
On December 7, 1999, AT&T Broadband and Century contributed cable
television systems to a joint venture (the "Joint Venture") that
combined multiple cable television systems in Southern California.
Among those systems to be contributed to the Joint Venture by AT&T
Broadband was the cable television system serving customers in
Redlands, California (the "Redlands System"). The Riverside System was
among those systems to be contributed to the Joint Venture by Century.
AT&T Broadband has an approximate 25% interest in the Joint Venture,
which is managed by Century. AT&T Broadband, through certain of its
subsidiaries, owns a 100% ownership interest in IR-TCI.
(continued)
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AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Notes to Financial Statements
In connection with the Riverside Sale, the Partnership made a
distribution to its General Partner and Limited Partners of $410,000
and $40,601,000 ($203 per Unit for Limited Partners of record as of
April 1, 2000), respectively, in April 2000.
As a result of the Riverside Sale, the Partnership is no longer
actively engaged in the cable television business. A final
determination of the Partnership's liabilities and any liquidating
distributions cannot be made in connection with the Partnership's
dissolution until the settlement of the Moreno Valley Franchise
Agreement is finalized and the contingencies described in note 6 are
resolved.
(3) Allocation of Net Earnings and Net Losses
Net earnings and net losses shall be allocated 99% to ACT 5's limited
partners ("Limited Partners") and 1% to the General Partner and
distributions of Cash from Operations, Sales or Refinancings (all as
defined in the Partnership's limited partnership agreement) shall be
distributed 99% to the Limited Partners and 1% to the General Partner
until cumulative distributions to the Limited Partners equal the
Limited Partners' aggregate contributions ("Payback"), plus 6% per
annum. After the Limited Partners have received distributions equal to
Payback plus 6% per annum, the allocations of net earnings, net losses
and credits, and distributions of Cash from Operations, Sales or
Refinancings shall be 25% to the General Partner and 75% to the Limited
Partners. Although ACT 5's distributions of proceeds from the sales of
its cable television systems allowed Limited Partners to achieve
Payback, distributions did not allow Limited Partners to achieve a 6%
return on their aggregate contributions; therefore, amounts will
continue to be allocated 99% to the Limited Partners and 1% to the
General Partner. See note 2.
Net earnings (loss) per Unit is calculated by dividing net earnings
(loss) attributable to the Limited Partners by the number of Units
outstanding during each period.
(4) Supplemental Disclosure of Cash Flow Information
The Partnership considers investments with original maturities of three
months or less to be cash equivalents. At June 30, 2001, $9,240,000 of
the Partnership's cash and cash equivalents was invested in money
market funds.
(5) 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,
marketing, technical or other services. Such reimbursements amounted to
$18,000 for each of the six months ended June, 2001 and 2000.
Amounts due to related parties, which represent non-interest-bearing
payables to AT&T Broadband and its affiliates, consist of the net
effect of cash advances and certain intercompany expense charges.
(continued)
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AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Notes to Financial Statements
(6) Commitments and 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 of ACT 5. The lawsuit also names certain affiliates of the
General Partner as defendants. 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
Riverside Sale and that certain defendants breached their fiduciary
duty in connection with the Riverside Sale. On September 28, 2000, the
Court dismissed the Plaintiff's complaint for failing to plead the
Federal Securities Act claim properly. On October 13, 2000, the
Plaintiff served an amended complaint to the Defendants and on November
13, 2000, Defendants filed motions to dismiss the amended complaint. On
May 18, 2001, the Court denied the Defendants' motion to dismiss. A
trial date has not yet been set. Based upon the limited facts
available, management believes that, although no assurance can be given
as to the outcome of this action, the ultimate disposition should not
have a material adverse effect upon the financial condition of the
Partnership.
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. In this regard, it is anticipated that
legal fees incurred by the defendants with respect to the above lawsuit
will be paid by ACT 5.
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") for an adjusted sales price of $19,647,000. Pursuant to the
asset purchase agreement, $494,000 of such 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 against the Southern Tennessee Escrow, the lawsuit described
above and the settlement of the Moreno Valley Franchise Agreement
described in note 2 have had and will continue to have the effect of
delaying any final liquidating distributions of the Partnership.
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AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
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, 2000.
General
As further described in note 2 to the accompanying financial
statements, the Partnership has sold substantially all of its cable television
assets.
Material Changes in Net Earnings
As a result of the Riverside Sale, the Partnership is no longer
actively engaged in the cable television business. Pending the transfer of the
Moreno Valley Franchise Agreement and resolution of the contingencies described
in notes 2 and 6 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
net earnings for the three and six months ended June 30, 2001 and 2000 include
general and administrative ("G&A") expenses and interest income. The
Partnership's G&A expenses are primarily comprised of costs associated with the
administration of the Partnership. The Partnership's G&A expenses increased
$11,000 and decreased $17,000 during the three and six months ended June 30,
2001, respectively, as compared to the corresponding prior year periods,
primarily due to timing of certain G&A expenses including legal fees incurred in
ACT 5's efforts to resolve the lawsuit as described in note 6. The Partnership's
net earnings for the three and six months ended June 30, 2000, also reflect an
adjustment to the gain on the Riverside Sale.
Interest income relates to interest earned on the Partnership's cash
and cash equivalents. Interest income decreased $263,000 and $830,000 during the
three and six months ended June 30, 2001, as compared to the corresponding prior
year periods. Such decrease is due to a decrease in the average balance of the
Partnership's cash and cash equivalents resulting from a distribution made in
April 2000 from the net cash proceeds received in connection with the Riverside
Sale and a reduction in the average interest rate. Interest income for the three
and six months ended June 30, 2000 also includes interest received in
conjunction with the release of escrow funds from the Riverside Sale.
On April 1, 1997, the Partnership sold the Southern Tennessee System to
Rifkin for an adjusted sales price of $19,647,000. Pursuant to the asset
purchase agreement, $494,000 of the sales price for the Southern Tennessee
System was placed in escrow and was subject to indemnifiable claims for up to
one year following consummation of the sale of the Southern Tennessee System.
Prior to its release, 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. In
connection with such sale, Charter was assigned the rights to 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.
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AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
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
of ACT 5. The lawsuit also names certain affiliates of the General Partner as
defendants. 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 Riverside Sale and that certain
defendants breached their fiduciary duty in connection with the Riverside Sale.
On September 28, 2000, the Court dismissed the Plaintiff's complaint for failing
to plead the Federal Securities Act claim properly. On October 13, 2000, the
Plaintiff served an amended complaint to the Defendants and on November 13,
2000, Defendants filed motions to dismiss the amended complaint. On May 18,
2001, the Court denied the Defendants' motion to dismiss. A trial date has not
yet been set. Based upon the limited facts available, management believes that,
although no assurance can be given as to the outcome of this action, the
ultimate disposition should not have a material adverse effect upon the
financial condition of the Partnership.
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. In this regard, it is anticipated that
legal fees incurred by the defendants with respect to the above lawsuit will be
paid by ACT 5.
The claim against the Southern Tennessee Escrow, the above described
lawsuit and the settlement of the Moreno Valley Franchise Agreement described in
note 2 have had and will continue to have the effect of delaying any final
liquidating distributions of the Partnership.
At June 30, 2001, the Partnership had $435,000 of unclaimed
distribution checks payable to certain Limited Partners which were written on a
bank account which was subsequently closed. Such checks will either be reissued
to such Limited Partners or released to the respective state of such Limited
Partners' last known residence upon dissolution of the Partnership.
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AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- ------ --------------------------------
(a) Exhibits:
None.
(b) Reports on Form 8-K filed during the quarter ended June 30, 2001:
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 5, LTD.
(A Colorado Limited Partnership)
By: IR-TCI PARTNERS V, L.P.,
Its General Partner
By: TCI VENTURES FIVE, INC.,
A General Partner
Date: August 13, 2001 By: /s/ Scott D. Macdonald
--------------------------------
Scott D. Macdonald
Vice President and Controller
(Chief Accounting Officer)