<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 June 30, 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>
June 30, December 31,
1996 1995
--------- -------------
Assets amounts in thousands
- - ------
<S> <C> <C>
Cash and cash equivalents $ 5,194 5,057
Receivables 10 39
Investment in American Cable TV of
Redlands
Joint Venture ("Redlands")(note 1) -- 204
------- ------
$ 5,204 5,300
======= ======
Liabilities and Partners' Equity
- - --------------------------------
Accounts payable and accrued expenses 153 118
Amounts due to related parties (note 4) 224 278
------- ------
Total liabilities 377 396
------- ------
Partners' equity (deficit):
General partners (2,129) (2,110)
Limited partners 6,956 7,014
------- ------
Total partners' equity 4,827 4,904
------- ------
Commitments and contingencies (notes 4
and 5)
$ 5,204 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 Six months
ended ended
June 30, June 30,
----------------- ----------------
1996 1995 1996 1995
-------- ------- ------- -------
<S> <C> <C> <C> <C>
amounts in thousands,
except unit amounts
Selling, general and administrative
expenses (note 5) $ (155) (21) (279) (46)
Interest income 133 87 202 180
Share of earnings of Redlands -- 4 -- 11
------- ------ ------ ------
Net earnings (loss) $ (22) 70 (77) 145
======= ====== ====== ======
Earnings (loss) per limited partnership
unit (note 2) $ (0.24) 0.75 (0.82) 1.55
======= ====== ====== ======
Limited partnership units outstanding 70,005 70,005 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
Six months ended June 30, 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 (19) (58) (77)
------- ----- -----
Balance at June 30, 1996 $(2,129) 6,956 4,827
======= ===== =====
</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>
Six months ended
June 30,
----------------------
1996 1995
----------- ---------
<S> <C> <C>
amounts in thousands
(see note 3)
Cash flows from operating activities:
Net earnings (loss) $ (77) 145
Adjustments to reconcile net
earnings (loss) to net cash used in
operating activities:
Share of earnings of Redlands -- (11)
Change in receivables 29 19
Change in accounts payable,
accrued expenses amount amounts
due to related parties (25) (700)
------ -----
Net cash used in (73) (547)
operating activities ------ -----
Cash flows from investing activities -
Distribution from Redlands 210 --
------ -----
Cash flows from financing activities -- --
------ -----
Net increase (decrease)
in cash and cash
equivalents 137 (547)
Cash and cash equivalents:
Beginning of period 5,057 5,692
------ -----
End of period $5,194 5,145
====== =====
</TABLE>
See accompanying notes to financial statements.
I-4
<PAGE>
AMERICAN CABLE TV INVESTORS 3
(A Limited Partnership)
Notes to Financial Statements
June 30, 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 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 June 30, 1996, and the
results of its operations for the six months ended June 30, 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 six months ended June 30, 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 six months
or less to be cash equivalents. At June 30, 1996, $5,000,000 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 $18,000 for both of the six
month periods ended June 30, 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 and other fees and expenses
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 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 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 ACT 3'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 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 June 30, 1996, ACT 3 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 $1,524,000. Consistent with the terms of the Partnership
Agreement, this amount has been advanced by ACT 3 and ACT 2. ACT 3's 50%
share of such fees and expenses for the six months ended June 30, 1996,
which totals approximately $236,000, has been included in selling, general,
and administrative expenses in the accompanying financial statements. Fees
and expenses 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 six month periods
ended June 30, 1996 and 1995 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 its invested cash and
cash equivalents. Changes in interest income for the six month period ended June
30, 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 June 30,
1996 - none
II-1
<PAGE>
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: August 13, 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 JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> JAN-01-1996 APR-01-1996
<PERIOD-END> JUN-30-1996 JUN-30-1996
<CASH> 5,194 5,194
<SECURITIES> 0 0
<RECEIVABLES> 10 10
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 5,204 5,204
<CURRENT-LIABILITIES> 0 0
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 4,827 4,827
<TOTAL-LIABILITY-AND-EQUITY> 5,204 5,204
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (77) (22)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (77) (22)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (77) (22)
<EPS-PRIMARY> (0.82)<F1> (0.24)<F1>
<EPS-DILUTED> 0 0
<FN>
<F1>AMOUNT REPRESENTS NET EARNINGS (LOSS) PER LIMITED PARTNERSHIP UNIT.
</FN>
</TABLE>
