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
SEPTEMBER 30, 2003
[ ] 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
- -------------------------- ---------------------------
State of organization I.R.S. employer I.D. #
c/o Comcast Corporation
1500 Market Street, Philadelphia, PA 19102-2148
- -------------------------------------------------------------------------------
Address of principal executive office
(215) 665-1700
- -------------------------------------------------------------------------------
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 SEPTEMBER 30, 2003
TABLE OF CONTENTS
Page Number
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Balance Sheet as of September 30, 2003 and December 31, 2002 (Unaudited)...............1
Statement of Operations for the Three and Nine Months Ended
September 30, 2003 and 2002 (Unaudited)................................................2
Statement of Cash Flows for the Nine Months Ended
September 30, 2003 and 2002 (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
___________________________________
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEET
(Unaudited)
September 30, December 31,
2003 2002
--------------- ---------------
(Amounts in thousands)
Assets
Cash and cash equivalents............................................ $ 9,872 $9,792
Funds held in escrow................................................. 494 494
--------------- ---------------
$10,366 $10,286
=============== ===============
Liabilities and Partners' equity
Unclaimed limited partner distribution checks........................ $440 $441
Amounts due to related parties....................................... 2,377 2,124
--------------- ---------------
Total liabilities........................................... 2,817 2,565
--------------- ---------------
Contingencies (Note 3)
Partners' equity (deficit):
General partner................................................. (3,226) (3,224)
Limited partners................................................ 10,775 10,945
--------------- ---------------
Total partners' equity...................................... 7,549 7,721
--------------- ---------------
$10,366 $10,286
=============== ===============
See accompanying notes to financial statements.
1
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
-------------- ------------- ------------- -------------
(Amounts in thousands, except unit amounts)
General and administrative expenses..................... $ (80) $ (447) $ (253) $ (1,380)
Interest income......................................... 24 42 81 133
-------------- ------------- ------------- -------------
Net loss........................................... $ (56) $ (405) $ (172) $ (1,247)
============== ============= ============= =============
Net loss per limited partnership unit ("Unit").......... $ (0.28) $ (2.00) $ (.85) $ (6.17)
============== ============= ============= =============
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)
Nine Months Ended
September 30,
2003 2002
------------ -------------
(amounts in thousands)
Cash flows from operating activities:
Net loss...................................................................... $ (172) $ (1,247)
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....................................... 252 1,382
------------ -------------
Net cash provided by operating activities............................ 80 135
Cash and cash equivalents:
Beginning of period.................................................. 9,792 9,481
------------ -------------
End of period........................................................ $ 9,872 $ 9,616
============ =============
See accompanying notes to financial statements.
3
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 September 30, 2003 and its results of operations for the three and nine
months ended September 30, 2003 and 2002. The results of operations for the
interim periods 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, 2002 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 nine months ended
September 30, 2003 and 2002, general and administrative expenses in the
Partnership's statement of operations includes $9,000, $9,000, $27,000 and
$27,000, 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
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 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. On May 18, 2001, the Court denied the Defendants' motion to dismiss the
complaint. A trial date has been set for March 2004. 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. 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 expenses incurred as
a result of its rendering of services in connection with the fairness opinion.
The General Partner and its affiliates and Lehman each have submitted a demand
for indemnification. Consequently, legal
4
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
fees 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 nine months ended September 30, 2003 and 2002,
legal fees related to the above lawsuit of $31,000, $340,000, $72,000 and
$1,104,000, respectively, have been included in general and administrative
expenses in the accompanying statements of operations.
On August 1, 2002, the plaintiff in the above lawsuit filed a motion to
bar defendants from recovering indemnification for attorneys' fees and costs
during the pendency of the lawsuit. On September 16, 2002, plaintiff and the
General Partner, Ventures Five, and Comcast (the "TCI Defendants") filed with
the court a stipulation by which the TCI Defendants agreed that ACT 5 would not
reimburse Comcast for legal fees or expenses of the TCI Defendants unless, at
the conclusion of the case, the court authorizes the indemnification payment.
The plaintiff withdrew its motion without prejudice.
On October 7, 2002, the TCI Defendants and plaintiff filed motions for
partial summary judgment with respect to certain of the plaintiff's claims in
the above lawsuit. The court has not yet ruled on these motions and they remain
pending.
On January 31, 2003, the court denied plaintiff's motion seeking to bar
Lehman from recovering indemnification of attorney's fees and costs during the
pendency of this lawsuit. As a result, Lehman is entitled to indemnification
pursuant to the terms of its engagement agreement and Comcast is entitled to
reimbursement by ACT 5 for such indemnification payments.
Although no assurance can be given as to the outcome of the remaining
indemnification matters, based on information currently available to management,
ACT 5 believes that the TCI Defendants are entitled to indemnification pursuant
to the terms of the Partnership Agreement. Accordingly, management of ACT 5
intends to continue to reflect covered expenses in general and administrative
expenses. From the inception of the lawsuit through September 30, 2003, claims
for indemnification have been submitted to ACT 5 totaling approximately $2.1
million. Such amounts are reflected in amounts due to related parties in the
accompanying balance sheet at September 30, 2003.
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 against the Southern Tennessee Escrow and the lawsuit
described above 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, 2002.
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 nine months ended September 30, 2003 and 2002 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 decreased $367,000 and
$1,127,000 during the three and nine months ended September 30, 2003, as
compared to the corresponding prior year periods. Such decreases are due to
legal fees associated with the litigation described in note 3 to the
accompanying financial statements. Interest income relates to interest earned on
the Partnership's cash and cash equivalents. Interest income decreased $18,000
and $52,000 during the three and nine months ended September 30, 2003, 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 quarterly 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 adequate and designed 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.,
----------------------------------
Its General Partner
BY: TCI VENTURES FIVE, INC.
----------------------------------
A General Partner
By: /s/ LAWRENCE J. SALVA
----------------------------------
Lawrence J. Salva
Senior Vice President
(Principal Accounting Officer)
Dated: November 12, 2003
8