<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _____ to _____
Commission File Number 2-90004
AMERICAN CABLE TV INVESTORS 3
-------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
State of Colorado 84-0939576
-------------------------------- ----------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
5619 DTC Parkway
Englewood, Colorado 80111
- ---------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 267-5500
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
70,005 Limited Partnership Units Sold to Investors at $500 per Unit
Indicate by check mark whether 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 such shorter period that Registrant was
required to file such reports); and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [_] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [X]
State the aggregate market value of the voting stock held by non-affiliates
of the Registrant. -- N/A
<PAGE>
AMERICAN CABLE TV INVESTORS 3
1996 ANNUAL REPORT ON FORM 10-K
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I
Item 1. Business.................................................. I-1
Item 2. Properties................................................ I-2
Item 3. Legal Proceedings......................................... I-2
Item 4. Submission of Matters to a Vote of Security Holders....... I-2
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters............................. II-1
Item 6. Selected Financial Data................................... II-2
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... II-3
Item 8. Financial Statements and Supplementary Data............... II-3
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.................... II-3
PART III
Item 10. Directors and Executive Officers of the Registrant........ III-1
Item 11. Executive Compensation.................................... III-4
Item 12. Security Ownership of Certain Beneficial Owners
and Management......................................... III-4
Item 13. Certain Relationships and Related Transactions............ III-4
PART IV
Item 14. Exhibits, Financial Statements and Financial Statement
Schedules, and Reports on Form 8-K..................... IV-1
</TABLE>
<PAGE>
PART I.
Item 1. Business.
- ------ --------
(a) General Development of Business
-------------------------------
American Cable TV Investors 3 (the "Partnership" or "Act 3") is a
California limited partnership which was formed in January of 1984 for the
purpose of acquiring, developing and operating cable television systems.
Through December 31, 1995 the Partnership had a 35% ownership interest in
American Cable TV of Redlands Joint Venture ("Redlands"), which also was formed
for the purpose of acquiring, developing and operating cable television systems.
American Cable TV Investors 2 ("ACT 2"), an affiliate, owned the 65% majority
interest in Redlands. 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. See note 1 to the accompanying financial
statements.
The Partnership's two general partners (the "General Partners") are John
V. Saeman and IR-TCI Partners III, a California limited partnership and the
Partnership's managing general partner (the "Managing General Partner"). The
two general partners of the Managing General Partner are Integrated Cable Corp.
("Cable Corp."), an indirect subsidiary of Presidio Capital Corp. ("Presidio"),
and TCI Ventures, Inc., a subsidiary of TCI Cablevision Associates, Inc.
("Cablevision"). Integrated Resources, Inc. ("Integrated") transferred its
ownership interest in Cable Corp. to a subsidiary of Presidio in connection with
the November 1994 conclusion of Integrated's bankruptcy proceedings. The limited
partner of the Managing General Partner is Cablevision Equities IV, a limited
partnership whose partners are certain former officers and key employees of the
predecessor of Cablevision. Cablevision is an indirect wholly-owned subsidiary
of Tele-Communications, Inc. ("TCI") and is the managing agent of the
Partnership. See note 3 to the accompanying financial statements. In its public
offering that was conducted from October 1984 through December 1985, the
Partnership sold 70,005 limited partnership units at a price of $500 per unit
("Unit").
Effective December 1, 1993, the Partnership sold all of its cable
television assets in four separate sales transactions (collectively, the "Sales
Transactions"). As a result of the Sales Transactions, 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. The Partnership is currently unable
to predict the timing or amount of any such liquidating distributions due
primarily to the existence of the litigation described in note 4 to the
accompanying financial statements.
Prior to the consummation of the Sales Transactions, the Partnership's
cable television assets were comprised of three wholly-owned cable television
systems (collectively, the "Wholly-Owned Systems") and the above-described 35%
ownership interest in Redlands. The Wholly-Owned Systems were located in and
around (i) Tuolumne County, California, (ii) southeast Georgia and (iii)
Murfreesboro, Gallatin and Franklin Counties and Estill Springs, Tennessee.
Redlands owned a cable television system located in and around Redlands,
California (the "Redlands System").
I-1
<PAGE>
(b) Financial Information about Industry Segments
---------------------------------------------
Not applicable.
(c) Narrative Description of Business
---------------------------------
Not applicable.
(d) Financial Information about Foreign and Domestic Operations and
---------------------------------------------------------------
Export Sales
------------
Not applicable.
Item 2. Properties.
- ------ ----------
Not applicable.
Item 3. Legal Proceedings.
- ------ -----------------
On September 30, 1994, a limited partner of the Partnership filed suit
in United States District Court for the District of Colorado against
the managing general partner of the Partnership. See note 4 to the
accompanying financial statements.
Item 4. Submission of Matters to a Vote of Security Holders.
- ------ ---------------------------------------------------
None.
I-2
<PAGE>
PART II.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
- ------ ---------------------------------------------------------------------
In its public offering that was conducted from October 1984 through
December 1985, the Partnership sold 70,005 Units at a price of $500 per Unit.
At December 31, 1996, there were approximately 4,300 Unit holders.
The Partnership made no cash distributions during the year ended December
31, 1996. In January of 1994, the Partnership's limited partners (the "Limited
Partners") received cash distributions of $1,000 per Unit in connection with the
Sales Transactions.
The Partnership anticipates that final cash distributions to its partners
will occur as soon as possible following the final determination and
satisfaction of its liabilities. However, the Partnership is currently unable
to predict the timing or amount of any such liquidating distributions due
primarily to the existence of the litigation described in note 4 to the
accompanying financial statements. For additional information, see
"Management's Discussion and Analysis of Financial Condition and Results of
- ---------------------------------------------------------------------------
Operations - General."
- ---------------------
Although the Units are freely transferable, no public trading market for
the Units exists. To the extent that an informal or secondary market exists,
Limited Partners may only be able to sell Units at a substantial discount from
the Units' proportionate share of the underlying net assets of the Partnership.
II-1
<PAGE>
Item 6. Selected Financial Data.
- ------ -----------------------
Selected financial data related to the Partnership's financial condition
and results of operations for the five years ended December 31, 1996 are
summarized as follows (such information should be read in conjunction with the
Partnership's financial statements included elsewhere herein):
SUMMARY BALANCE SHEET DATA:
--------------------------
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------
1996(1) 1995(1) 1994(1) 1993(1) 1992
----- ------ ------ ---- ----
amounts in thousands
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 4,967 5,057 5,692 88,860 2,337
Investment in Redlands $ -- 204 178 6,732 (4,068)
Property and equipment, net $ -- -- -- -- 22,184
Franchise costs and
other intangibles, net $ -- -- -- -- 6,722
Total assets $ 4,967 5,300 5,928 95,825 28,286
Debt $ -- -- -- 475 14,685
Partners' equity $ 4,695 4,904 5,187 90,139 10,252
Outstanding Units 70 70 70 70 70
</TABLE>
SUMMARY STATEMENT OF OPERATIONS DATA:
------------------------------------
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------------------------------
1996 (2) 1995(2) 1994(2) 1993(2) 1992
--------- ------- ------- ------- ----
amounts in thousands, except per Unit data
<S> <C> <C> <C> <C> <C>
Revenue $ -- -- -- 20,053 19,991
Operating income (loss) $ (512) (637) (154) 2,828 3,810
Share of earnings (losses)
of Redlands $ -- 26 57 10,749 (1,012)
Gain on sale of cable
television systems $ -- -- -- 66,766 --
Interest expense $ -- -- -- (635) (1,072)
Earnings (loss) before
extraordinary item $ (209) (283) 244 80,062 1,873
Earnings (loss) per Unit
before extraordinary item $ (2.24) (3.03) 2.61 943.65 26.49
Distributions per Unit (3) $ -- -- 1,000 -- --
</TABLE>
____________________
(1) The December 31, 1996, 1995, 1994 and 1993 summary balance sheet data
reflect the effects of the Sales Transactions.
(2) As a result of the December 1, 1993 consummation of the Sales
Transactions, the Partnership's statement of operations include (i) no
cable television operating results for the years ended December 31,
1996, 1995, and 1994 and (ii) eleven months of cable television
operating results for the year ended December 31, 1993.
(3) In January 1994, the Partnership made a distribution of $1,000 per
Unit to its Limited Partners. The Partnership anticipates that final
cash distributions to its partners will occur as soon as possible
following the final determination and satisfaction of its liabilities.
See "Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations-General."
------------------------------
II-2
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
- ------ ---------------------------------------------------------------
Results of Operations.
- ---------------------
General
-------
Effective December 1, 1993, the Partnership sold all of its cable
television assets in four separate Sales Transactions. As a result of the Sales
Transactions, which were approved by the Limited Partners (and the limited
partners of ACT 2 in the case of the sale of the Redlands System), 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.
However, the Partnership is currently unable to predict the timing or amount of
such final cash distributions due primarily to the existence of the litigation
described in note 4 to the accompanying financial statements.
Inflation has not had a significant impact on the Partnership's financial
condition or results of operations during the three-year period ended December
31, 1996.
Results of Operations
---------------------
As a result of the Sales Transactions, 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 years ended December 31, 1996, 1995, and 1994 include (i)
$395,000 and $526,000 in 1996 and 1995, respectively, for the advancement of
legal fees and costs associated with the litigation described in note 4 to the
accompanying financial statements, (ii) costs associated with the
administration of the Partnership and (iii) interest income earned on the
Partnership's invested cash and cash equivalents. The Partnership also
recognized other expenses in 1994 due to differences between the final post-
closing settlement amounts and amounts previously accrued. Changes in interest
income are due primarily to changes in the amount of available cash held for
investment.
Liquidity and Capital Resources
-------------------------------
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 is
currently unable to predict the timing or amount of any such liquidating cash
distributions due primarily to the existence of the litigation described in note
4 to the accompanying financial statements.
Item 8. Financial Statements and Supplementary Data.
- ------ -------------------------------------------
The financial statements of the Partnership are filed under this item
beginning on page II-4. All financial statement schedules are omitted as they
are not required or are not applicable.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- ------ ---------------------------------------------------------------
Financial Disclosure.
--------------------
None.
II-3
<PAGE>
Independent Auditors' Report
The Partners
American Cable TV Investors 3:
We have audited the accompanying balance sheets of American Cable TV Investors 3
(a limited partnership) as of December 31, 1996 and 1995, and the related
statements of operations, partners' equity (deficit), and cash flows for each of
the years in the three-year period ended December 31, 1996. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As discussed in note 1 to the financial statements, the Partnership sold all of
its cable television assets in December of 1993 and is currently in the process
of determining its final liabilities so liquidating distributions can be made.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Cable TV Investors 3
as of December 31, 1996 and 1995, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31,
1996, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Denver, Colorado
March 14, 1997
II-4
<PAGE>
AMERICAN CABLE TV INVESTORS 3
(A Limited Partnership)
Balance Sheets
December 31, 1996 and 1995
(see note 1)
<TABLE>
<CAPTION>
Assets 1996 1995
- ------ ---------- ----------
amounts in thousands
<S> <C> <C>
Cash and cash equivalents $ 4,967 5,057
Receivables -- 39
Investment in American Cable TV of Redlands
Joint Venture ("Redlands") (note 1) -- 204
------- ------
$ 4,967 5,300
======= ======
Liabilities and Partners' Equity
- --------------------------------
Accounts payable and accrued expenses $ 67 118
Amounts due to related parties (notes 1 and 3) 205 278
------- ------
Total liabilities 272 396
------- ------
Partners' equity (deficit):
General partners (2,162) (2,110)
Limited partners 6,857 7,014
------- ------
Total partners' equity 4,695 4,904
------- ------
Contingency (note 4)
$ 4,967 5,300
======= ======
</TABLE>
See accompanying notes to financial statements.
II-5
<PAGE>
AMERICAN CABLE TV INVESTORS 3
(A Limited Partnership)
Statements of Operations
Years ended December 31, 1996, 1995 and 1994
(see note 1)
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- -----
amounts in thousands,
except per unit amounts
<S> <C> <C> <C>
Selling, general, and administrative
(notes 3 and 4) $ (512) (637) (154)
Interest income 303 328 399
Share of earnings of Redlands
(notes 1 and 2) -- 26 57
Other expense -- -- (58)
------ ----- ----
Net earnings (loss) $ (209) (283) 244
====== ===== ====
Earnings (loss) per limited
partnership unit ("Unit") $(2.24) (3.03) 2.61
====== ===== ====
</TABLE>
See accompanying notes to financial statements.
II-6
<PAGE>
AMERICAN CABLE TV INVESTORS 3
(A Limited Partnership)
Statements of Partners' Equity (Deficit)
Years ended December 31, 1996, 1995 and 1994
(see note 1)
<TABLE>
<CAPTION>
General Limited
partners partners Total
--------- --------- --------
amounts in thousands
<S> <C> <C> <C>
Balance at January 1, 1994 $ 13,091 77,048 90,139
Net earnings 61 183 244
Distribution to partners (15,191) (70,005) (85,196)
-------- ------- -------
Balance at December 31, 1994 (2,039) 7,226 5,187
Net loss (71) (212) (283)
-------- ------- -------
Balance at December 31, 1995 (2,110) 7,014 4,904
Net loss (52) (157) (209)
-------- ------- -------
Balance at December 31, 1996 $ (2,162) 6,857 4,695
======== ======= =======
</TABLE>
See accompanying notes to financial statements.
II-7
<PAGE>
AMERICAN CABLE TV INVESTORS 3
(A Limited Partnership)
Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
(see note 1)
<TABLE>
<CAPTION>
1996 1995 1994
------- ----- -------
amounts in thousands
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $(209) (283) 244
Adjustments to reconcile net earnings (loss) to net
cash used in operating activities:
Payment of expenses accrued but not
paid in prior periods -- -- (475)
Receipt of interest earned but not
received in prior periods -- -- 541
Share of earnings of Redlands -- (26) (57)
Changes in operating assets and
liabilities:
Decrease in receivables and other
assets 39 19 175
Increase (decrease) in:
Accounts payable and accrued
expenses (51) 48 (508)
Amounts due to related parties (79) (393) (1,664)
----- ---- ------
Net cash used in operating
activities (300) (635) (1,744)
----- ---- ------
Cash flows from investing activities:
Distribution received from Redlands 210 -- 5,300
Repayment of loan to Redlands -- -- 770
Payment of disposition fees related to 1993 sales -- -- (2,298)
----- ---- ------
Net cash provided by
investing activities $ 210 -- 3,772
----- ---- ------
</TABLE>
(continued)
II-8
<PAGE>
AMERICAN CABLE TV INVESTORS 3
(A Limited Partnership)
Statements of Cash Flows, continued
<TABLE>
<CAPTION>
1996 1995 1994
------- ------ --------
amounts in thousands
<S> <C> <C> <C>
Cash flows from financing activities -
Distributions to partners $ -- -- (85,196)
------ ----- -------
Net decrease in cash and cash
equivalents (90) (635) (83,168)
Cash and cash equivalents:
Beginning of year 5,057 5,692 88,860
------ ----- -------
End of year $4,967 5,057 5,692
====== ===== =======
</TABLE>
See accompanying notes to financial statements.
II-9
<PAGE>
AMERICAN CABLE TV INVESTORS 3
(A Limited Partnership)
Notes to Financial Statements
December 31, 1996, 1995 and 1994
(1) Organization and Sales Transactions
-----------------------------------
American Cable TV Investors 3 (the "Partnership" or "ACT 3") is a
California limited partnership which was formed in January of 1984 for the
purpose of acquiring, developing, and operating cable television systems.
The Partnership had a 35% ownership interest in Redlands, which also was
formed in 1984 for the purpose of acquiring, developing and operating cable
television systems. American Cable TV Investors 2 ("ACT 2"), an affiliate,
owned the 65% majority interest in Redlands. In connection with a
dissolution, indemnification and contribution agreement (the "Dissolution
Agreement"), Redlands was dissolved on 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.
The Partnership's two general partners (the "General Partners") are John V.
Saeman and IR-TCI Partners III, a California limited partnership and the
Partnership's managing general partner (the "Managing General Partner").
The two general partners of the Managing General Partner are TCI Ventures
Inc., a wholly-owned subsidiary of TCI Cablevision Associates, Inc.
("Cablevision") and Integrated Cable Corp. ("Cable Corp."), an indirect
subsidiary of Presidio Capital Corp. ("Presidio"). The limited partner of
the Managing General Partner is Cablevision Equities IV, a limited
partnership whose partners are former officers and key employees of the
predecessor of Cablevision. Cablevision is an indirect subsidiary of Tele-
Communications, Inc. ("TCI") and is the managing agent of the Partnership.
See note 3. From October 1984 through December 1985, the Partnership sold
70,005 Units to the public resulting in gross proceeds of $35,002,500.
Effective December 1, 1993, the Partnership sold all of its cable
television assets in four separate sales transactions (collectively, the
"Sales Transactions"). As a result of the Sales Transactions, 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.
See note 4.
In one Sales Transaction, the Partnership sold its cable television system
located in and around Tuolumne County, California (the "Tuolumne System")
to York Cable Television, Inc. ("York") for net cash proceeds of
$19,266,000. In a simultaneous transaction, York exchanged the Tuolumne
System for a cable television system owned by an indirect wholly-owned
subsidiary of TCI. As a result of such transactions (collectively, the
"Tuolumne Sale"), TCI became the indirect owner of the Tuolumne System. At
the time of the Tuolumne Sale, York could have been deemed to be an
affiliate of TCI due to the fact that an affiliate of TCI indirectly held
an approximate 13% effective ownership interest in York.
In a second Sales Transaction, the Partnership sold its cable television
system located in southeast Georgia to Bresnan Communications Company
Limited Partnership ("Bresnan") for net cash proceeds of $25,529,000 (the
"Coastal Sale"). Bresnan is an indirect subsidiary of TCI.
(continued)
II-10
<PAGE>
AMERICAN CABLE TV INVESTORS 3
(A Limited Partnership)
Notes to Financial Statements
In a third Sales Transaction, the Partnership sold its cable television
system located in and around Murfreesboro, Gallatin and Franklin Counties
and Estill Springs, Tennessee to 1st CableVision, Inc. ("1st CableVision")
for net cash proceeds of $52,888,000 (the "Mid-Tennessee Sale"). On the
date of the Mid-Tennessee Sale, TCI indirectly held an effective economic
interest of 32% in 1st Cablevision.
The net cash proceeds set forth above for the Tuolumne, Coastal and Mid-
Tennessee Sales include post-closing adjustments of $197,000, $201,000 and
$497,000, respectively. Such post-closing adjustments were paid by the
Partnership to the respective buyers during 1994.
The Tuolumne, Coastal and Mid-Tennessee Sales (collectively, the "Wholly-
Owned System Sales") were approved by the limited partners of the
Partnership (the "Limited Partners") on November 23, 1993. Concurrently
with the December 1, 1993 closings, the Partnership used a portion of the
proceeds from the Wholly-Owned System Sales to repay bank debt of
$9,552,000 and pay disposition fees aggregating $605,000 to an unaffiliated
investment banking firm.
In a fourth Sales Transaction, Redlands sold its cable television system
located in and around Redlands, California (the "Redlands System") to an
indirect subsidiary of TCI for net cash proceeds of $65,661,000 (the
"Redlands Sale"). The Redlands Sale was approved by the Limited Partners
and the limited partners of ACT 2 on November 23, 1993. Concurrently with
the December 1, 1993 closing, Redlands used a portion of the resulting
proceeds to repay bank debt of $41,000,000 and pay a disposition fee to an
unaffiliated investment banking firm of $411,000. As noted above, the
Partnership had a 35% ownership interest in Redlands.
In January of 1994, Redlands (i) paid a disposition fee to Cablevision of
$2,416,000 in connection with the Redlands Sale, (ii) repaid all accrued
interest ($542,000) and principal ($770,000) outstanding pursuant to
Redlands' subordinated promissory note payable to the Partnership, (iii)
repaid all accrued interest ($1,007,000) and principal ($1,430,000)
outstanding pursuant to Redlands' subordinated promissory note payable to
ACT 2 and (iv) made initial cash distributions to the Partnership and ACT 2
of $5,300,000 and $8,989,000, respectively (which amounts have been
adjusted to reflect the allocation of the Redlands Sale disposition fees
pursuant to the ACT 2 and ACT 3 limited partnership agreements). The
Partnership then (i) paid a $2,298,000 disposition fee to Cablevision in
connection with the Wholly-Owned System Sales, (ii) repaid all amounts due
($476,000) pursuant to the Partnership's subordinated promissory note
payable to Cablevision and (iii) made initial distributions of $15,191,000
and $70,005,000 to its General Partners and Limited Partners, respectively.
(continued)
II-11
<PAGE>
AMERICAN CABLE TV INVESTORS 3
(A Limited Partnership)
Notcs to Financial Statements
The foregoing initial distribution amounts do not include any amounts that
might be included in the Partnership's final cash distributions. The
Partnership anticipates that the final cash distributions to its partners
will occur as soon as possible following the final determination and
satisfaction of its liabilities. However, the Partnership is currently
unable to predict the timing or amount of such final cash distribution due
primarily to the existence of the litigation described in note 4.
The allocation of cash distributions to the General and Limited Partners is
based upon percentages set forth in ACT 3's limited partnership agreement
(the "Partnership Agreement") and therefore, such allocation is not
directly affected by the General and Limited Partners' respective financial
statement capital account balances (which balances include the original
capital contributions of each class of partners and the allocation of the
Partnership's inception-to-date net earnings). Accordingly, the amounts
ultimately distributed to the Partnership's partners will not correspond to
the respective financial statement capital account balances of the General
and Limited Partners. However, due to differences in the financial
statement and federal income tax treatment of the allocation of the gain
recognized in connection with the Sales Transactions, the amounts
ultimately distributed to the Partnership's partners will correspond to
their respective capital account balances, as reported for federal income
tax purposes.
(2) Summary of Significant Accounting Policies
------------------------------------------
Allocation of Net Earnings and Net Losses
-----------------------------------------
Pursuant to the Partnership Agreement, net earnings and net losses of the
Partnership are allocated, and distributable cash from operations, sales or
refinancings, shall be distributed 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, net losses and credits, and distributions
of distributable cash from operations, sales or refinancings, shall be 25%
to the General Partners and 75% to the Limited Partners.
(continued)
II-12
<PAGE>
AMERICAN CABLE TV INVESTORS 3
(A Limited Partnership)
Notes to Financial Statements
Net earnings (loss) per Unit is calculated by dividing net earnings
attributable to the Limited Partners by the number of Units outstanding
during the year. The number of Units outstanding for each of the years in
the three-year period ended December 31, 1996 was 70,005. The
Partnership's January 1994 distributions allowed Limited Partners to
achieve Payback. Because such distributions were funded with proceeds from
the Sales Transactions (see note 1), Payback was deemed to have occurred in
connection with the December 1, 1993 consummation of the Sales
Transactions. Accordingly, the Partnership's net earnings (loss) for the
years ended December 31, 1996, 1995 and 1994 have been allocated using the
post-Payback percentages set forth above.
Statement of Cash Flows
-----------------------
Cash and cash equivalents consist of investments which are readily
convertible into cash and have maturities of three months or less at the
time of acquisition. At December 31, 1996 and 1995 $4,955,000 and
$5,000,000, respectively, 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.
Cash paid by the Partnership for interest was none in 1996 and 1995 and
$75,000 in 1994.
Investment in Redlands
----------------------
With the exception of disposition fees, earnings or losses of Redlands are
allocated and distributions are made to the Partnership and to ACT 2 in the
ratio of their respective ownership interests. Disposition fees are
allocated based upon the provisions set forth in the ACT 2 and ACT 3
limited partnership agreements. The Partnership accounted for its
investment in Redlands using the equity method. Under this method, the
investment, originally recorded at cost, was adjusted to recognize the
Partnership's share of the earnings or losses of Redlands as they occurred
and distributions as they were received. In connection with 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. See note 1.
Income Taxes
------------
No provision has been made for income tax expense or benefit in the
accompanying financial statements as the earnings or losses of the
Partnership are reported in the respective income tax returns of the
partners.
The Partnership had taxable income (losses) of $(220,000), $(166,000) and
$397,000 for the years ended December 31, 1996, 1995 and 1994,
respectively.
Estimates
---------
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 periods. Actual results could differ from
those estimates.
(continued)
II-13
<PAGE>
AMERICAN CABLE TV INVESTORS 3
(A Limited Partnership)
Notes to Financial Statements
(3) Transactions with Related Parties
---------------------------------
The consummation of the Sales Transactions resulted in the sale of all of
the Partnership's cable television assets to subsidiaries and affiliates of
TCI. In connection with the Sales Transactions, the Partnership and
Redlands paid disposition fees to Cablevision (as provided by the
Partnership's limited partnership agreement) and made distributions to
their partners. See note 1.
The Partnership also 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 $36,000 in
each of the years in 1996, 1995 and 1994.
Amounts due to related parties, which represent non-interest-bearing
payables to TCI and its affiliates, consist of (i) the net effect of cash
advances and certain intercompany expense allocations and (ii) the
advancement of legal and other fees and expenses associated with the
litigation described in note 4.
(4) 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. On August 5, 1996, the
defendants filed a motion for summary judgment on all of the plaintiff's
claims, as well as separate partial summary judgment motions with respect
to certain of the plaintiff's claims. The plaintiff filed a cross-motion
for partial summary judgment on one aspect of the case. The motions have
been fully briefed, however, the District Court has not yet ruled on such
motions. On January 7, 1997, the District Court issued an order
consolidating this case with a similar case filed against the managing
general partner of ACT 2 (the "Consolidated Cases"). The Consolidated
Cases have been set for a four week jury trial beginning September 29,
1997.
(continued)
II-14
<PAGE>
AMERICAN CABLE TV INVESTORS 3
(A Limited Partnership)
Notes to Financial Statements
Section 21 of 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 December 31, 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 $1.8 million. 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 years ended December 31, 1996 and
1995 which total $395,000 and $526,000, respectively, 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.
II-15
<PAGE>
PART III.
Item 10. Directors and Executive Officers of the Registrant.
- ------- --------------------------------------------------
As the Partnership has no directors or officers of its own, the
Partnership's major decisions are made by the Managing General Partner whose
general partners are Cable Corp. and TCI Ventures, Inc. ("TCI Ventures").
The Partnership previously had entered into a management agreement with
Cablevision, pursuant to which Cablevision was responsible for the day-to-day
operations of the Partnership's cable television systems. Such agreement was
terminated in connection with the consummation of the Sales Transactions.
However, Cablevision continues to serve as the managing agent of the
Partnership.
As of January 31, 1997, the following executive officers and directors of
TCI Ventures and Cable Corp. operate the Managing General Partner:
<TABLE>
<CAPTION>
Name Position
----------- -----------
<S> <C>
Marvin Jones (1)(2) Director and President of TCI Ventures since March 1996.
- ------------------ President of one of the cable groups of TCI Communications,
Born September 11, 1937 Inc. ("TCIC"), a subsidiary of TCI, since November 1, 1996. Mr.
Jones has performed consulting services in the cable television
industry since December 1991.
Gary K. Bracken (2) Vice President and Controller of Cablevision and TCI Ventures
- ------------------- March 1992. Mr. Bracken has been Controller of TCIC since
Born July 29, 1939 Appointed TCIC Senior Vice President in December 1991. Was
Vice President and Principal Accounting Officer of TCIC in
Stephen M. Brett Director of TCI Ventures since August 1995. Vice President and
- ---------------- Secretary of Cablevision and TCI Ventures since March 1992.
Born September 20, 1940 Executive Vice President and Secretary of TCI since January of
1994; Mr. Brett was appointed TCIC Senior Vice President and
General Counsel as of December 1991.
Bernard W. Schotters Vice President and Treasurer of Cablevision and TCI Ventures since
- -------------------- March 1992. Appointed TCIC Senior Vice President-Finance and
Born November 25, 1944 Treasurer in December 1991. Was appointed TCIC Vice President
of Finance in 1984.
</TABLE>
III-1
<PAGE>
<TABLE>
<S> <C>
Karen M. Ryugo (2) Director and President of Cable Corp. since March 1995. Ms.
- ------------------ Ryugo has been a Senior Vice President of Wexford Management
Born October 8, 1959 LLC and its predecessor entities since November 1995 and a Vice
President from March 1995 through October 1995. In addition,
she has been a Principal at Wexford Capital Corp. since January
1995. From July 1988 through December 1994, Ms. Ryugo was
employed by Steinhardt Management Company, Inc. Ms. Ryugo
is a director of Resurgence Properties Inc.
Mark Plaumann (2) Director and Vice President of Cable Corp. since March 1995.
- ----------------- Mr. Plaumann has been a Senior Vice President of Wexford
Born September 1, 1955 Management LLC and its predecessor entities since November
1995 and a Vice President from February 1995 through October
1995. In addition, he was a managing director at Alvarez &
Marsal Inc. from February 1990 through January 1995.
Jay Maymudes Vice President, Secretary and Treasurer of Cable Corp. since
- ------------ March 1995. Mr. Maymudes has been Chief Financial Officer,
Born February 25, 1961 Vice President and Treasurer of Presidio since August 1994; Chief
Financial Officer and Senior Vice President of Wexford
Management LLC and its predecessor entities since November
1995 and Chief Financial Officer and Vice President from July
1994; Chief Financial Officer and a Vice President of
Resurgence Properties Inc. since July 1994, also an Assistant
Secretary of Resurgence from July 1994 to February 1995 when
he became the Secretary; from December 1988 through June
1994, Mr. Maymudes was Secretary and Treasurer, and since
February 1990, Senior Vice President of Dusco, Inc.
</TABLE>
III-2
<PAGE>
<TABLE>
<S> <C>
Arthur Amron Vice President and Assistant Secretary of Cable Corp. since
- ------------ March 1995. Mr. Amron has been General Counsel of Wexfor
Born December 3, 1956 Management LLC and its predecessor entities since November
1994, Senior Vice President since November 1995 and Vice
President from November 1994 through October 1995. Mr.
Amron was employed as an attorney by Schulte, Roth & Zabel
from 1992 through November 1994 and previously by
Debervoise & Plimpton.
Robert Holtz Vice President of Cable Corp. since March 1995. Mr. Holtz has
- ------------ been a Vice President and Secretary of Presidio since August
Born November 30, 1967 1994; Senior Vice President of Wexford Management LLC and
its predecessor entities since November 1995 and a Vice
President from March 1994 through October 1995; Vice
President and Assistant Secretary for Resurgence Properties,
Inc. since March 1994; and a Vice President of Wexford Capital
Corp. since November 1994. From 1989 through May 1994, Mr.
Holtz was employed by and since 1993 was a Vice President of
Bear Sterns Real Estate.
</TABLE>
(1) Mr. Jones was appointed TCIC Executive Vice President and Chief
Operating Officer in March 1997.
(2) Directors of TCI Ventures and Cable Corp. serve until their successors
are appointed and qualified.
There are no family relations, of first cousin or closer, among the
individuals named above, by blood, marriage or adoption.
During the past five years, none of the persons named above has had any
involvement in such legal proceedings as would be material to an evaluation of
that person's ability or integrity.
Pursuant to section 16(a) of the Securities Exchange Act of 1934, as
amended, officers and directors of the General Partners are required to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission (the "Commission"). Officers and directors are required by
regulation of the Commission to furnish the Partnership with copies of all
Section 16(a) forms filed.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons, the Partnership believes
that, during the fiscal year ended December 31, 1996, all applicable filing
requirements were complied with.
III-3
<PAGE>
Item 11. Executive Compensation.
- ------- ----------------------
The Partnership pays no direct compensation to the individuals named above,
but instead pays for their services through management and other fees paid to
Cablevision. See "Certain Relationships and Related Transactions" below.
------------------------------------------------
Item 12. Security Ownership of Certain Beneficial Owners and Management.
- ------- --------------------------------------------------------------
No General or Limited Partner of the Partnership owns more than 5% of the
Units of the Partnership.
None of the individuals referred to in Item 10 above own (i) any Units of
the Partnership or (ii) more than 1% of the outstanding shares of TCI, the
ultimate parent and owner, directly or indirectly, of all of the voting stock of
TCI Ventures. However, John V. Saeman, the Partnership's individual general
partner, owns 20 Units. In addition, an indirect subsidiary of TCI owns 200
Units.
Item 13. Certain Relationships and Related Transactions.
- ------- ----------------------------------------------
Pursuant to the Partnership's limited partnership agreement, Cablevision is
reimbursed 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 aggregated $36,000 in 1996.
At December 31, 1996, the Partnership owed $205,000 to TCI and its
affiliates. Such amounts are non-interest-bearing and consist of (i) the net
effect of cash advances and certain intercompany expense allocations and (ii)
the advancement of legal and other fees and expenses associated with the
litigation described in note 4 to the accompanying financial statements.
III-4
<PAGE>
PART IV.
Item 14. Exhibits, Financial Statements and Financial Statement Schedules, and
- ------- ---------------------------------------------------------------------
Reports on Form 8-K.
-------------------
(a) (1) Financial Statements
--------------------
<TABLE>
<CAPTION>
Included in Part II of the Report: Page
----
<S> <C>
Independent Auditors' Report II-4
Balance Sheets, December 31, 1996 and 1995 II-5
Statement of Operations,
Years ended December 31, 1996, 1995 and 1994 II-6
Statements of Partners' Equity (Deficit),
Years ended December 31, 1996, 1995 and 1994 II-7
Statements of Cash Flows,
Years ended December 31, 1996, 1995 and 1994 II-8
Notes to Financial Statements,
December 31, 1996, 1995 and 1994 II-10
</TABLE>
(a) (2) Financial Statement Schedules
-----------------------------
All schedules are omitted as they are not required or are not
applicable.
IV-1
<PAGE>
(a) (3) Exhibits
--------
The following exhibits are filed herewith or incorporated by reference herein
(according to the number assigned to them in Item 601 of Regulation S-K), as
noted:
3 - Articles of Incorporation and Bylaws:
Limited Partnership Agreement, incorporated by reference from Exhibit A to
Prospectus filed pursuant to Rule 242(b) as part of Registration Statement
2-90004.
Second Amendment to Partnership Agreement of the Partnership.
Amendment to the Partnership's Limited Partnership Agreement, dated
November 24, 1993, incorporated by reference to the Partnership's Annual
Report on Form 10-K for the year ended December 31, 1993 (Commission File
No. 2-90004).
Agreement of Limited Partnership of Managing General Partner, incorporated
by reference to the Partnership's Annual Report on Form 10-K for the year
ended December 31, 1984 (Commission File No. 2-90004).
10 - Material Contracts:
Form of Consulting Agreement between the Partnership and Cablevision,
incorporated by reference to Registration Statement 2-90004.
Form of Acquisition and Disposition Services Agreement between the
Partnership and Cablevision, incorporated by reference to Registration
Statement 2-90004.
Form of Indemnification of Individual General Partner, incorporated by
reference to Registration Statement 2-90004.
Joint Venture Agreement between the Partnership and American Cable TV
Investors 2, incorporated by reference to Amendment No. 1 to Registration
Statement 2-90004.
<PAGE>
Dissolution, Indemnification and Contribution Agreement dated as of January
1, 1996 by and between American Cable TV Investors 2 and American Cable TV
Investors 3 incorporated by reference to the Partnership's Annual Report on
Form 10-K dated December 31, 1995.
27 - Financial Data Schedule.
(b) Reports on Form 8-K filed during the quarter ended December 31, 1996:
None.
IV-3
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By: /s/ Marvin Jones March 28, 1997
----------------------------
Marvin Jones
President and Director - TCI Ventures, Inc.
(Principal Executive Officer)
By: INTEGRATED CABLE CORP., a General Partner
By: /s/ Karen Ryugo March 28, 1997
----------------------------
Karen Ryugo
President and Director - Integrated Cable Corp.
(Principal Executive Officer)
Pursuant to the Securities Exchange Act of 1934, this report has been signed by
the following persons on behalf of the Partnership and in the capacities and on
the dates indicated:
<TABLE>
<CAPTION>
Signature Date
--------------- ----
<S> <C>
/s/ Marvin Jones March 28, 1997
----------------------------------
Marvin Jones
President and Director - TCI Ventures, Inc.
(Principal Executive Officer)
/s/ Bernard W. Schotters March 28, 1997
----------------------------------
Vice President and Treasurer - TCI Ventures, Inc.
(Chief Financial Officer)
/s/ Gary K. Bracken March 28, 1997
----------------------------------
Gary K. Bracken
Vice President and Controller - TCI Ventures, Inc.
(Principal Accounting Officer)
</TABLE>
IV-4
<PAGE>
<TABLE>
<CAPTION>
Signature Date
--------------- ----
<S> <C>
/s/ Stephen M. Brett March 28, 1997
---------------------------------
Stephen M. Brett
Vice President and Secretary and
Director - TCI Ventures, Inc.
/s/ Karen Ryugo March 28, 1997
----------------------------------
Karen Ryugo
President and Director - Integrated
Cable Corp.
(Principal Executive Officer)
/s/ Mark Plaumann March 28, 1997
----------------------------------
Mark Plaumann
Director - Integrated Cable Corp.
</TABLE>
IV-5
<PAGE>
AMERICAN CABLE TV INVESTORS 3
EXHIBIT INDEX
-------------
The following exhibits are filed herewith or incorporated by reference herein
(according to the number assigned to them in Item 601 of Regulation S-K), as
noted:
3 - Articles of Incorporation and Bylaws:
Limited Partnership Agreement, incorporated by reference from Exhibit A
to Prospectus filed pursuant to Rule 242(b) as part of Registration
Statement 2-90004.
Second Amendment to Partnership Agreement of the Partnership.
Amendment to the Partnership's Limited Partnership Agreement, dated
November 24, 1993, incorporated by reference to the Partnership's Annual
Report on Form 10-K for the year ended December 31, 1993 (Commission
File No. 2-90004).
Agreement of Limited Partnership of Managing General Partner,
incorporated by reference to the Partnership's Annual Report on Form 10-
K for the year ended December 31, 1984 (Commission File No. 2-90004).
10 - Material Contracts:
Form of Consulting Agreement between the Partnership and Cablevision,
incorporated by reference to Registration Statement 2-90004.
Form of Acquisition and Disposition Services Agreement between the
Partnership and Cablevision, incorporated by reference to Registration
Statement 2-90004.
Form of Indemnification of Individual General Partner, incorporated by
reference to Registration Statement 2-90004.
Joint Venture Agreement between the Partnership and American Cable TV
Investors 2, incorporated by reference to Amendment No. 1 to
Registration Statement 2-90004.
<PAGE>
Dissolution, Indemnification and Contribution Agreement dated as of
January 1, 1996 by and between American Cable TV Investors 2 and
American Cable TV Investors 3 incorporated by reference to the
Partnership's Annual Report on Form 10-K for the year ended December 31,
1995.
27 - Financial Data Schedule.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-01-1996
<CASH> 4,967
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,967
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,695
<TOTAL-LIABILITY-AND-EQUITY> 4,967
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (209)
<INCOME-TAX> 0
<INCOME-CONTINUING> (209)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (209)<F1>
<EPS-PRIMARY> (2.24)
<EPS-DILUTED> 0
<FN>
<F1> Represents net earnings per share limited partnership unit
</FN>
</TABLE>
