<PAGE>
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 March 31, 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
-------------------------------------------------------------
(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
----- -----
<PAGE>
PART I - FINANCIAL INFORMATION
AMERICAN CABLE TV INVESTORS 3
(A Limited Partnership)
Balance Sheets
(unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---------- -------------
Assets amounts in thousands
- ------
<S> <C> <C>
Cash and cash equivalents $ 5,336 5,057
Receivables 10 39
Investment in American Cable TV of
Redlands
Joint Venture ("Redlands")(note 1) -- 204
------- ------
$ 5,346 5,300
======= ======
Liabilities and Partners' Equity
- --------------------------------
Accounts payable and accrued expenses 98 118
Amounts due to related parties (note 4) 399 278
------- ------
Total liabilities 497 396
------- ------
Partners' equity (deficit):
General partners (2,124) (2,110)
Limited partners 6,973 7,014
------- ------
Total partners' equity 4,849 4,904
------- ------
Commitments and contingencies (notes 4
and 5)
$ 5,346 5,300
======= ======
</TABLE>
See accompanying notes to financial statements.
I-1
<PAGE>
AMERICAN CABLE TV INVESTORS 3
(A Limited Partnership)
Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
-----------------------
1996 1995
------------ ---------
<S> <C> <C>
amounts in thousands,
except unit amounts
Selling, general and administrative
expenses (note 4) $ (124) (25)
Interest income 69 93
Share of earnings of Redlands (note 1) -- 7
------- ------
Net earnings (loss) $ (55) 75
======= ======
Earnings (loss) per limited partnership
unit
(note 2) $ (0.59) 0.80
======= ======
Limited partnership units outstanding 70,005 70,005
======= ======
</TABLE>
See accompanying notes to financial statements.
I-2
<PAGE>
AMERICAN CABLE TV INVESTORS 3
(A Limited Partnership)
Statement of Partners' Equity
Three months ended March 31, 1996
(unaudited)
<TABLE>
<CAPTION>
General Limited
partners partners Total
--------- --------- ------
<S> <C> <C> <C>
amounts in thousands
Balance at January 1, 1996 $(2,110) 7,014 4,904
Net loss (14) (41) (55)
------- ----- -----
Balance at March 31, 1996 $(2,124) 6,973 4,849
======= ===== =====
</TABLE>
See accompanying notes to financial statements.
I-3
<PAGE>
AMERICAN CABLE TV INVESTORS 3
(A Limited Partnership)
Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
---------------------
1996 1995
----------- --------
<S> <C> <C>
amounts in thousands
(see note 3)
Cash flows from operating activities:
Net earnings (loss) $ (55) 75
Adjustments to reconcile net
earnings (loss)
to net cash provided by operating
activities:
Share of earnings of Redlands
Change in receivables 29 --
Change in accounts payable,
accrued expenses
and amounts due to related 95 89
parties ------ -----
Net cash provided by
operating 69 157
activities ------ -----
Cash flows from investing activities -
Distribution from Redlands 210 --
------ -----
Cash flows from financing activities -- --
------ -----
Net increase in cash
and cash equivalents 279 157
Cash and cash
equivalents:
Beginning of period 5,057 5,692
------ -----
End of period $5,336 5,849
====== =====
</TABLE>
See accompanying notes to financial statements.
I-4
<PAGE>
AMERICAN CABLE TV INVESTORS 3
(A Limited Partnership)
Notes to Financial Statements
March 31, 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 majority-
owned subsidiary of Tele-Communications, Inc. ("TCI"), is the managing
agent of the Partnership and owns 100% of the common stock of a general
partner of the managing general partner 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 March 31, 1996, and the
results of its operations for the three months ended March 31, 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 earnings (loss) per limited partnership unit is calculated by dividing
net earnings (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
earnings (losses) for the three months ended March 31, 1996 and 1995 have
been allocated using the post-Payback percentages set forth above.
(continued)
I-5
<PAGE>
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 three
months or less to be cash equivalents. At March 31, 1996, $5,312,000 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 $9,000 for both of the three
month periods ended March 31, 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) legal fees and costs 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 the Partnership. 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.
(continued)
I-6
<PAGE>
AMERICAN CABLE TV INVESTORS 3
(A Limited Partnership)
Notes to Financial Statements
Section 21 of the Partnership'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 the Partnership,
provided that the General Partners determine, in good faith, that such
course of conduct was in the best interests of the Partnership and did not
constitute proven fraud, negligence, breach of fiduciary duty or
misconduct.
Through March 31, 1996, the Partnership 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 $1,256,000. Consistent with the terms of the Partnership
Agreement, this amount has been advanced by the Partnership and ACT 2. The
Partnership's 50% share of such fees and expenses for the three months
ended March 31, 1996, which totals approximately $102,000, has been
included in selling, general, and administrative expenses in the
accompanying financial statements. Fees and costs 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.
I-7
<PAGE>
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 month periods
ended March 31, 1996 and 1995 include (i) the advancement of legal fees and
costs associated with the litigation described in note 5 to the accompanying
financial statements, (ii) legal and other costs associated with its
administration and dissolution, and (iii) interest income earned on its invested
cash and cash equivalent balances. Changes in interest income for the three
month period ended March 31, 1996, as compared to the corresponding prior year
amounts, are due primarily to changes in the amount of available cash held for
investment.
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.
I-8
<PAGE>
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 March 31,
1996 - none
II-1
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Partnership 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: May 14, 1996 By: /s/ Gary K. Bracken
------------------------------
Gary K. Bracken
Vice President and Controller
(Principal Accounting Officer)
II-2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 5,336
<SECURITIES> 0
<RECEIVABLES> 10
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,346
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,849
<TOTAL-LIABILITY-AND-EQUITY> 5,346
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (55)
<INCOME-TAX> 0
<INCOME-CONTINUING> (55)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (55)
<EPS-PRIMARY> (1.78)
<EPS-DILUTED> 0
</TABLE>
