<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File No. 0-16784
AMERICAN CABLE TV INVESTORS 5, LTD.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
State of Colorado 84-1048934
------------------------------- -----------------
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
5619 DTC Parkway
Englewood, Colorado 80111
- - --------------------------------------- ----------------
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
(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
--- ---
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Balance Sheets
(unaudited)
<CAPTION>
September 30, December 31,
1996 1995
------------- -----------
Assets amounts in thousands
<S> <C> <C>
Cash and cash equivalents (note 4) $ 2,629 1,338
Trade and other receivables, net of
allowance for doubtful receivables 504 451
Prepaid expenses 138 124
Investment in Newport News
Cablevision, Ltd.
("Newport News") (notes 2 and 5) 2,074 --
Property and equipment:
Land 39 39
Cable distribution systems 61,262 57,340
Support equipment 4,755 4,418
------ ------
66,056 61,797
Less accumulated depreciation 26,372 22,003
------ ------
39,684 39,794
------ ------
Franchise costs and other intangibles 75,688 75,688
Less accumulated amortization 44,829 38,638
------ ------
30,859 37,050
------ ------
Other assets, net of accumulated
amortization 319 385
------ ------
$76,207 79,142
======= ======
</TABLE>
(continued)
I-1
<PAGE>
<TABLE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Balance Sheets (continued)
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
amounts in thousands
Liabilities and Partners' Equity
<S> <C> <C>
Accounts payable $ 22 127
Accrued expenses:
Franchise fees 511 523
Other 1,287 1,159
------ ------
1,798 1,682
------ ------
Subscriber advance payments and
converter deposits 948 1,323
Amounts due to related parties
(note 7) 9,937 5,264
Debt (note 6) 2,000 8,700
Negative investment in Newport News
(notes 2 and 5) -- 4,206
------ ------
Total liabilities 14,705 21,302
------ ------
Partners' equity (deficit):
General partner (2,687) (2,724)
Limited partners 64,189 60,564
------- -------
Total partners' equity 61,502 57,840
------- -------
Commitments (note 7)
$76,207 79,142
======= ======
</TABLE>
See accompanying notes to financial statements.
I-2
<PAGE>
<TABLE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Statements of Operations
(unaudited)
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------ -----------------
1996 1995 1996 1995
---- ---- ---- ----
amounts in thousands,
except unit amounts
<S> <C> <C> <C> <C>
Revenue $ 7,000 6,566 20,744 19,129
Operating costs and expenses:
Programming (primarily from
related parties - note 7) 1,492 1,269 4,276 3,640
Operating (including
allocations from related
parties - note 7) 751 677 2,210 1,993
Selling, general and
administrative (including
charges from related parties
- note 7) 2,263 2,009 6,843 6,061
Depreciation and amortization 3,414 3,645 10,635 10,897
----- ----- ------ ------
Total operating expenses 7,920 7,600 23,964 22,591
----- ----- ------ ------
Operating loss (920) (1,034) (3,220) (3,462)
Other income (expense):
Interest expense (46) (216) (243) (717)
Interest income 28 36 483 51
Other income -- -- -- 199
Share of earnings (losses)
of Newport News (notes 2
and 5) 61 (41) 39,976 (251)
----- ----- ------ -----
Net earnings (loss) $ (877) (1,255) 36,996 (4,180)
====== ====== ====== ======
Earnings (loss) per limited
partnership unit (note 3) $(4.34) (6.21) 183.13 (20.69)
====== ====== ====== =======
Limited partnership units
outstanding 200,005 200,005 200,005 200,005
======= ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
I-3
<PAGE>
<TABLE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Statement of Partners' Equity
Nine months ended September 30, 1996
(unaudited)
<CAPTION>
General Limited
partner partners Total
------- -------- ------
amounts in thousands
<S> <C> <C> <C>
Balance at January 1, 1996 $(2,724) 60,564 57,840
Distribution (333) (33,001) (33,334)
Net earnings 370 36,626 36,996
----- ------ -------
Balance at September 30, 1996 $(2,687) 64,189 61,502
======= ====== ======
</TABLE>
See accompanying notes to financial statements.
I-4
<PAGE>
<TABLE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Statements of Cash Flows
(unaudited)
<CAPTION>
Nine months ended
September 30,
-----------------
1996 1995
---- ----
amounts in thousands
(see note 4)
Cash flows from operating activities:
<S> <C> <C>
Net earnings (loss) $36,996 (4,180)
Adjustments to reconcile net earnings
(loss) to net cash provided by operating
activities:
Depreciation and amortization 10,635 10,897
Share of (earnings) losses of Newport
News (39,976) 251
Net change in receivables, prepaid
expenses and other assets (67) (366)
Net change in accounts payable,
accrued expenses, subscriber
advance payments and converter
deposits, and amounts due
to related parties 4,309 345
------ -----
Net cash provided by operating
activities 11,897 6,947
------- ------
Cash flows from investing activities:
Capital expended for property and equipment (4,279) (3,896)
Distribution from Newport News 33,696 --
Other investing activities 11 151
------ -------
Net cash provided by (used in)
investing activities 29,428 (3,745)
------- ------
Cash flows from financing activities:
Repayments of debt (6,700) (2,500)
Distributions to partners (33,334) --
------- -------
Net cash used in financing activities (40,034) (2,500)
------- -------
Net increase in cash and cash
equivalents 1,291 702
Cash and cash equivalents:
Beginning of period 1,338 599
------- ------
End of period $ 2,629 1,301
======= ======
</TABLE>
See accompanying notes to financial statements.
I-5
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Notes to Financial Statements
September 30, 1996
(unaudited)
(1) Basis of Financial Statement Preparation
The accompanying financial statements of American Cable TV
Investors 5, Ltd. (the "Partnership" or "ACT 5") 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, 1996 and the
results of its operations for the nine months ended
September 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.
The Partnership and American Cable TV Investors 4, Ltd.
("ACT 4"), an affiliated partnership, have 40% and 60%
ownership interests in Newport News, respectively.
The Partnership's general partner is IR-TCI Partners V, L.P.
("IR-TCI"), a Colorado limited partnership. At December 31,
1995, the two general partners of IR-TCI were TCI Ventures
Five, Inc. ("TCIV 5"), a subsidiary of TCI Cablevision
Associates, Inc. ("Cablevision"), and Integrated Cable Corp.
V. ("ICC"), an indirect subsidiary of Presidio Capital Corp.
("Presidio"). The limited partner of IR-TCI is Cablevision
Equities VI, a limited partnership whose partners are
certain former officers and key employees of the predecessor
of Cablevision. Cablevision, an indirect majority-owned
subsidiary of Tele-Communications, Inc. ("TCI"), is the
managing agent of the Partnership. By letter dated January
17, 1996, ICC advised TCIV 5 of its withdrawal as a general
partner of IR-TCI, the general partner of ACT 5. In
accordance with the terms of the IR-TCI Limited Partnership
Agreement, TCIV 5 elected to continue the business of IR-
TCI. The withdrawal of ICC is not expected to have a
material effect on the Partnership's results of operations
or financial condition.
In March of 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 121,
Accounting for The Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of ("Statement No. 121"),
effective for fiscal years beginning after December 15,
1995. Statement No. 121 requires impairment losses to be
recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are
less than the assets' carrying amount. Statement No. 121
also addresses the accounting for long-lived assets that are
expected to be disposed of.
(continued)
I-6
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Notes to Financial Statements
The Partnership adopted Statement No. 121 effective January
1, 1996. Such adoption did not have a significant effect on
the financial position or results of operations of the
Partnership. The Partnership periodically reviews the
carrying amount of its long-lived assets to determine
whether current events or circumstances warrant adjustments
to such carrying amounts. The Partnership considers
historical and expected future net operating losses to be
its primary indicators of potential impairment. Assets are
grouped and evaluated for impairment at the lowest level for
which there are identifiable cash flows that are largely
independent of the cash flows of other groups of assets
("Assets"). The Partnership deems Assets to be impaired if
the Partnership is unable to recover the carrying value of
its Assets over their expected remaining useful life through
a forecast of undiscounted future operating cash flows
directly related to the Assets. If Assets are deemed to be
impaired, the loss is measured as the amount by which the
carrying amount of the Assets exceeds their fair values.
The Partnership generally measures fair value by considering
sales prices for similar assets or by discounting estimated
future cash flows. Considerable management judgment is
necessary to estimate discounted future cash flows.
Accordingly, actual results could vary significantly from
such 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 revenue and
expenses during the reporting period. Actual results could
differ from those estimates.
(2) Asset Sales
On January 1, 1996, Newport News sold its cable television
system (the "Newport News System") to Cox Communications
Rhode Island, Inc. (formerly Cox Cable Hampton Roads, Inc.
("Cox)), an unaffiliated third party, for cash proceeds of
$121,886,000 (the "Newport News Sale"). Pursuant to the
terms of the sale agreement, $5,000,000 of the sales price
was placed in escrow (the "Newport News Escrow") and was
subject to any indemnifiable claims made by Cox through
September 27, 1996. Subsequent to September 30, 1996, the
Newport News Escrow plus accrued interest of $170,000 was
released to Newport News. The Partnership has a 40%
ownership interest in Newport News. In connection with the
Newport News Sale, Newport News used most of the cash
proceeds to (i) repay bank debt and related accrued interest
of $24,306,000, (ii) pay disposition fees of $3,668,000
($2,751,000 to Cablevision and $917,000 to Presidio) and
(iii) make distributions to the Partnership and ACT 4 of
$33,696,000 and $50,544,000, respectively. The Partnership
used most of its share of the net proceeds from the Newport
News Sale to make distributions on March 29, 1996 to its
general and limited partners of $333,000 ($266,000 to
Cablevision and $67,000 to Presidio) and $33,001,000 ($165
per $500 limited partnership unit ("Unit") for limited
partners of record as of January 1, 1996), respectively.
(continued)
I-7
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Notes to Financial Statements
The Partnership has three signed letters of intent for the
purchase of its remaining cable television assets
(collectively, the "Proposed Asset Sales"). The Partnership
is in the process of obtaining definitive agreements for the
Proposed Asset Sales. The Proposed Asset Sales represent
the culmination of a competitive auction initiated by the
Partnership in 1996.
Subject to the execution of definitive sale agreements, the
approval of the Partnership's limited partners, the receipt
of regulatory approvals and other closing conditions,
consummation of the Proposed Asset Sales is expected to
occur in the first or second quarter of 1997. There is no
assurance that any of the Proposed Asset Sales will be
consummated.
The following table sets forth the assets (exclusive of
certain assets not directly allocable to the Partnership's
cable television systems) and revenue for each of the
Partnership's cable television systems:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
Total Assets ---- ----
------------
<S> <C> <C>
Southern Tennessee $ 6,620 6,689
Riverside 21,446 23,281
St. Mary's 22,256 23,386
Lower Delaware 23,811 25,786
------ ------
$74,133 79,142
======= ======
</TABLE>
<TABLE>
<CAPTION>
Nine months
ended September 30,
Revenue 1996 1995
------- ---- ----
<S> <C> <C>
Southern Tennessee $ 2,881 2,778
Riverside 6,230 6,028
St. Mary's 5,075 4,552
Lower Delaware 6,558 5,771
----- -----
$20,774 19,129
======= =======
</TABLE>
(continued)
I-8
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Notes to Financial Statements
To the extent that any of the Proposed Asset Sales are
consummated, the Partnership expects that it would use the
resulting cash proceeds to (i) repay amounts due under the
bank credit facility, (ii) repay amounts due to related
parties, (iii) fund any necessary reserves for contingent
liabilities that might arise subsequent to the date of this
Quarterly Report on Form 10-Q or as required pursuant to any
proposed asset sale agreement, (iv) fund any necessary
maintenance and technological improvements to any remaining
cable television assets of the Partnership and (v) make
distributions to the Partnership's partners with any
remaining cash proceeds. The Partnership anticipates that
any distributions to the Partnership's partners would be
made as soon as practicable after the consummation of the
Proposed Asset Sales, except for amounts to be held in
escrow. However, there is no assurance as to the timing or
amount of such distributions.
In the event that any or all of the Proposed Asset Sales are
not consummated, it is currently the General Partner's
intention to seek another buyer for the system(s). If the
General Partner is unable to arrange an alternative sale at
an appropriate price or on terms acceptable to the
Partnership, the General Partner might decide to retain all
or a portion of net cash proceeds from any consummated sales
to fund technological improvements to the Partnership's
remaining cable television assets. The General Partner
anticipates that it would pursue such a course of action
only after evaluating all relevant factors. If the General
Partner were to decide that making technological
improvements to the remaining cable television systems was
the appropriate course of action, net cash proceeds from any
consummated sales would only be available to fund
distributions to partners to the extent any proceeds were
not otherwise used to fund technological improvements.
(continued)
I-9
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Notes to Financial Statements
(3) Allocation of Net Earnings and Net Losses
Net earnings and net losses shall be allocated 99% to the
limited partners and 1% to the general partner and
distributions of Cash from Operations, Sales or Refinancings
(all as defined in the Partnership's limited partnership
agreement) shall be distributed 99% to the limited partners
and 1% to the general partner until cumulative distributions
to the limited partners equal the limited partners'
aggregate contributions ("Payback"), plus 6% per annum.
After the limited partners have received distributions equal
to Payback plus 6% per annum, the allocations of net
earnings, net losses and credits, and distributions of Cash
from Operations, Sales or Refinancings shall be 25% to the
general partners and 75% to the limited partners.
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 each period.
(4) Supplemental Disclosure of Cash Flow Information
The Partnership considers investments with initial
maturities of six months or less to be cash equivalents. At
September 30, 1996, $104,000 of the Partnership's cash and
cash equivalents was invested in money market funds.
Cash paid by the Partnership for interest was $246,000 and
$783,000 during the nine months ended September 30, 1996 and
1995, respectively.
(5) Investment in Newport News
Net earnings and net losses of Newport News are allocated
and distributions are made to the Partnership and to ACT 4
in the ratio of their respective ownership interests. See
note 2.
(6) Debt
The Partnership's bank credit facility provided for a
revolving line of credit of $15,000,000 at September 30,
1996. Such revolving line of credit is reduced quarterly
beginning March 31, 1998 through December 31, 1999. Interest
is paid quarterly at variable rates (6.4% at September 30,
1996) depending on certain financial ratios. The agreement
contains several covenants whereby the Partnership agrees to
the maintenance of certain cash flow ratios and limitations
on other indebtedness and distributions. The credit
agreement is secured by substantially all of the
Partnership's assets.
In addition, the Partnership is required to pay an annual
commitment fee of 3/8%, payable quarterly, of the unborrowed
funds, and a quarterly agent's fee. Such fees were not
significant during the nine months ended September 30, 1996
and 1995.
(7) Transactions with Related Parties
The Partnership purchases programming services from
affiliates of TCI. The charges, which generally approximate
such TCI affiliates' cost and are based upon the number of
subscribers served by the Partnership, aggregated $4,110,000
and $3,308,000 during the nine months ended September 30,
1996 and 1995, respectively.
(continued)
I-10
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Notes to Financial Statements
The Partnership has a management agreement with Cablevision,
whereby Cablevision is responsible for performing all
services necessary for the management of the Partnership's
cable television systems. As compensation for these
services, the Partnership pays a management fee equal to 6%
of gross revenue, as defined in the management agreement.
Such fees amounted to $1,235,000 and $1,140,000 for the nine
months ended September 30, 1996 and 1995, respectively.
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 aggregated $357,000 for both
the nine months ended September 30, 1996 and 1995.
Riverside shares office facilities, personnel and certain
distribution assets with certain affiliated cable television
systems. As a result, the majority of Riverside's operating
and administrative salaries and expenses are allocated based
upon Riverside's estimated utilization of such office
facilities and personnel. During the nine months ended
September 30, 1996 and 1995, Riverside's operating and
administrative salaries and expenses aggregated $1,799,000
and $1,726,000, respectively.
ACT 5 is also obligated to pay a disposition fee to
Cablevision equal to 3% of the gross proceeds from the sale
of any cable television system owned by ACT 5. This fee is
due and payable at the time the cable television system is
sold if the consideration received is greater than its
adjusted cost, as defined in ACT 5's limited partnership
agreement. To the extent ACT 5 at its termination has not
made distributions to the limited partners equal to Payback,
the net disposition fees received by Cablevision will be
returned to ACT 5 to the extent necessary to allow ACT 5 to
make distributions equal to Payback. In the event that the
disposition fees refunded by Cablevision are insufficient to
provide Payback, Cablevision will not be obligated to make
up the deficiency. See notes 2 and 3.
Amounts due to related parties, which represent non-interest-
bearing payables to TCI and its affiliates, consist of the
net effect of cash advances and certain intercompany expense
allocations.
I-11
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Management's Discussion and Analysis of
- - --------------------------------------
Financial Condition and Results of Operations
---------------------------------------------
The following discussion should be read in conjunction with
the accompanying financial statements and the Partnership's
December 31, 1995 Annual Report on Form 10-K.
General
Asset Sales. On January 1, 1996, Newport News sold the
Newport News System to Cox, an unaffiliated third party, for cash
proceeds of $121,886,000. The Partnership has a 40% interest in
Newport News. The Partnership has three signed letters of intent
for the purchase of its remaining cable television assets. There
is no assurance that any of the Proposed Asset Sales will be
consummated. See note 2 to the accompanying financial
statements.
Regulation. On October 5, 1992, Congress enacted the
Cable Television Consumer Protection and Competition Act of 1992
(the "1992 Cable Act"). In 1993 and 1994, the Federal
Communications Commission ("FCC") adopted certain rate
regulations required by the 1992 Cable Act and imposed a
moratorium on certain rate increases. As a result of such
actions, the Partnership's basic and tier service rates and its
equipment and installation charges (the "Regulated Services") are
subject to the jurisdiction of local franchising authorities and
the FCC. The regulations established bench mark rates in 1993,
which were further reduced in 1994, to which the rates charged by
cable operators for Regulated Services were required to conform.
The Partnership reduced its rates in 1993 and 1994 and
limited its rate increases in 1995 and 1996 in response to FCC
regulations. The Partnership believes that it has complied, in
all material respects, with the provisions of the 1992 Cable Act,
including its rate setting provisions. However, the
Partnership's rates for Regulated Services are subject to review
by the FCC, if a complaint has been filed, or by the appropriate
franchise authority, if such authority has been certified. If,
as a result of the review process, a system cannot substantiate
its rates, it could be required to retroactively reduce its rates
to the appropriate benchmark and refund the excess portion of
rates received. Any refunds of the excess portion of tier
service rates would be retroactive to the date of complaint. Any
refunds of the excess portion of all other Regulated Service
rates would be retroactive to one year prior to the
implementation of the rate reductions.
On February 8, 1996, the Telecommunications Act of 1996 (the
"1996 Telecom Act") was signed into law. Because the 1996
Telecom Act does not deregulate cable programming services tier
rates until 1999 (and basic service tier rates will remain
regulated thereafter), the Partnership believes that the 1993 and
1994 rate regulations have had and will continue to have a
material adverse effect on its results of operations.
(continued)
I-12
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
General (continued)
Competition. Multichannel multipoint distribution systems
("MMDS") deliver programming services over microwave channels
received by subscribers with a special antenna. Since 1992, most
of Riverside's service areas have been subject to competition
from an MMDS operator (the "California MMDS Operator"). The
Partnership believes that the California MMDS Operator's service
is available to over 50% of the households in Riverside's service
areas and that the California MMDS Operator does not presently
serve more than 15% of the households in any given franchise
area. Although the above-described competition could have an
adverse effect on the Partnership's financial condition and
results of operations, the Partnership is unable to predict the
extent of any such effect at this time. For additional
information concerning the revenue and subscriber bases of
Riverside, see "Partnership's Cable Systems" below.
In addition to MMDS, the Partnership competes with other
distributors of the same or similar video programming as that
offered by its cable systems. One such competitor is the direct
broadcast satellite business ("DBS"). DBS services are offered
directly to subscribers owning home satellite dishes that vary in
size depending upon the power of the satellite. At least two DBS
operators offer nationwide video services that can be received by
a satellite dish that measures approximately eighteen inches in
diameter. DBS operators can acquire the right to distribute over
satellite all of the significant cable television programming
currently available to the Partnership's cable systems. As the
cost of equipment needed to receive these transmissions and the
installation costs continue to decline, it is expected that the
Partnership will experience increased and substantial competition
from DBS operators. In this regard, DBS service is now available
within the service areas of all of the Partnership's cable
television systems.
Existing law precludes rate regulation wherever a cable
operator faces "effective competition." Notwithstanding the
existence of the above-described competition, the Partnership
currently believes that none of its cable television systems are
subject to "effective competition" as defined in the 1992 Cable
Act. In the event that any provider of video programming were to
provide service to more than 15% (and be available to more than
50%) of the households in a given franchise area, such franchise
area would be subject to "effective competition" and accordingly,
would not be subject to rate regulation under the 1992 Cable Act.
However, the 1996 Telecom Act expands the definition of effective
competition to include any franchise area where a local exchange
carrier (or affiliate) provides video programming services to
subscribers by any means other than through direct broadcast
satellite. There is no penetration minimum for the local
exchange carrier to qualify as an effective competitor, but it
must provide "comparable" programming services (12 channels
including one broadcast) in the franchise area. The California
MMDS Operator was acquired by the local exchange carrier in July
1995. The FCC is conducting a rulemaking to clarify the
statutory language with respect to the expanded definition of
"effective competition." If the FCC rules were to indicate that
the California MMDS Operator provides "effective competition" to
Riverside, the Partnership would take the appropriate steps to
attempt to deregulate Riverside's service rates. Even if
Riverside's rates were to be deregulated, the Partnership
believes that competitive and other factors may limit Riverside's
ability to increase its service rates.
(continued)
I-13
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
General (continued)
The 1996 Telecom Act eliminated the statutory and regulatory
restrictions that prevented telephone companies from competing
with cable operators for the provision of video services. The
1996 Telecom Act allows local telephone companies, including the
regional bell operating companies, to compete with cable
television operators both inside and outside their telephone
service areas. The Partnership expects that it will face
substantial competition from telephone companies for the
provision of video services. The Partnership assumes that all
major telephone companies have already entered or soon will enter
the business of providing video services. The major telephone
companies have greater financial resources than the Partnership,
and the 1992 Cable Act ensures that telephone company providers
of video services will have access to acquiring all of the
significant cable television programming services. Additionally,
the 1996 Telecom Act eliminates certain federal restrictions on
utility holding companies and thus frees all utility companies to
provide cable television services. The Partnership expects this
could result in another source of competition in the delivery of
video services. The Partnership is aware that one regional bell
operating company has completed installation of a fiber optic
network within Lower Delaware's franchise areas. Based on the
foregoing, the Partnership continues to believe that its cable
systems will experience competition from alternative providers of
video programming services in the future. The Partnership
presently cannot predict the effect that any such competition
might have on its financial condition or results of operations.
The Partnership's cable television systems are presently
operating in an external environment that is characterized by
rapidly changing competitive, regulatory, technological and
economic factors. Although the Partnership generally is unable
to predict the effect that such changing factors might have on
its financial condition and results of operations, the
Partnership does believe that the continued evolution of such
factors could place the Partnership at a competitive disadvantage
if it were not to implement certain technological improvements to
its cable television systems. This is particularly true of the
cable television systems operated by Lower Delaware and St.
Mary's, which systems (i) offer significantly fewer channels,
(ii) experience higher maintenance costs and (iii) provide a
lower quality picture than is currently attainable by state-of-
the-art cable television systems and DBS. The Partnership
believes that the most effective method to maintain competitive
position would be to deploy digital compression technology
in those systems that have available channel band width.
Technological improvements could include the replacement
of coaxial trunk cable with optical fiber along with
deployment of digital compression technology for those
systems which do not have available channel band width. The
Partnership's preliminary analyses indicate that the cost of
technological improvements could be significant. The Partnership
would only consider proceeding with the implementation of
technological improvements if it believed that such an investment
would be prudent based upon (i) the anticipated holding period
for the applicable cable television system, (ii) franchise
requirements and (iii) other relevant factors. As described
above under "Asset Sales," the Partnership has three signed
letters of intent for the purchase of its remaining cable
television systems. In this regard, the Partnership would only
consider proceeding with such technological improvements in the
event that (i) any or all of the Proposed Asset Sales are not
consummated or (ii) technological improvements were to be
mandated by franchise authorities. See "Material Changes in
Financial Condition" below.
(continued)
I-14
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
General (continued)
Partnership's Cable Systems. The Partnership has three
signed letters of intent for the purchase of its remaining cable
television assets. See note 2 to the accompanying financial
statements. The following table sets forth information for the
Partnership's cable systems for the periods indicated (amounts in
thousands):
<TABLE>
<CAPTION>
September 30,
Basic Subscribers 1996 1995
----------------- ---- ----
<S> <C> <C>
Southern Tennessee 11.4 11.2
Riverside (1) 19.5 19.0
St. Mary's 18.5 17.5
Lower Delaware (2) 29.2 28.1
---- ----
78.6 75.8
==== ====
Premium Subscriptions (3)
------------------------
Southern Tennessee 8.4 8.0
Riverside (1) 22.9 21.0
St. Mary's 22.8 17.7
Lower Delaware (2) 23.2 17.2
---- ----
77.3 63.9
==== ====
Nine months ended
September 30,
Revenue (4) 1996 1995
------------ ---- ----
Southern Tennessee $ 2,881 2,778
Riverside (1) 6,230 6,028
St. Mary's 5,075 4,552
Lower Delaware 6,558 5,771
----- -----
$20,744 19,129
======= ======
</TABLE>
_________________________
(1) As described under "Competition" above, Riverside
is subject to competition from the California MMDS
Operator. Additionally, the economy within Riverside's
service areas has been adversely affected by military
base closures and downsizings. Although the foregoing
factors could have an adverse effect on Riverside's
financial condition and results of operations, the
Partnership is unable to predict the extent of any such
effect at this time.
(continued)
I-15
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
General (continued)
(2) Lower Delaware's basic subscribers and premium
subscriptions are subject to seasonal fluctuations and
generally are higher during the vacation months of May
through October as compared to November through April.
(3) A basic subscriber may subscribe to one or more
premium services and the number of premium services
reflected represents the total number of such
subscriptions. The 13,400 or 21% increase in the
Partnership's consolidated 1996 premium subscriptions
is comprised of a 6,900 increase in STARZ!
subscriptions, a 5,200 increase in "ENCORE"
subscriptions and a 1,300 increase in traditional
premium subscriptions. Fluctuations in the
Partnership's premium subscriptions are generally the
result of the timing of promotional campaigns that
involve the packaging of premium services at a lower
per-unit price than would otherwise be paid if such
services were purchased separately. As such packaged
prices expire, the Partnership typically experiences
reductions in the number of its traditional premium
subscriptions. The monthly charge for "ENCORE" and
STARZ!, which are indirectly owned by TCI, generally
ranges from $1.00 to $5.00, as compared to $9.00 to
$13.00 for other premium services.
(4) For additional information concerning the
Partnership's revenue, see "Material Changes in Results
of Operations" below.
Operating income before depreciation, amortization and
management fees ("Operating Cash Flow") is a measure of value and
borrowing capacity within the cable television industry. The
Partnership's Operating Cash Flow increased 1% from $8,575,000 in
1995 to $8,650,000 in 1996. Such increase is the net result of
the revenue and expense variances discussed in "Material Changes
in Results of Operations" below. During the nine months ended
September 30, 1996, Lower Delaware, St. Mary's, Riverside and
Southern Tennessee contributed $3,151,000 (36%), $2,062,000
(24%), $2,002,000 (23%) and $1,435,000 (17%), respectively, to
the aggregate Operating Cash Flow of the Partnership. The
foregoing amounts, which include allocations of certain
Partnership expenses, are not intended to be a substitute for a
measure of performance prepared in accordance with generally
accepted accounting principles and should not be relied upon as
such.
At September 30, 1996, Southern Tennessee, Riverside, St.
Mary's, and Lower Delaware passed approximately 14,500, 31,200,
26,700 and 35,000 homes, respectively.
(continued)
I-16
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Material Changes in Results of Operations
--------------------------------------------
Revenue increased 7% and 8% during the three and nine month
periods ended September 30, 1996, respectively, as compared to
the corresponding prior year amounts. Such increases are due
primarily attributable to (i) a 5% increase in the weighted
average rate received for Regulated Services (see related
discussion below), (ii) a 2% increase in the average number of
basic subscribers and (iii) a 14% increase in the average number
of premium subscriptions. The increase in the weighted average
rate received for Regulated Services is attributable to the
implementation during the first half of 1996, of rate increases
by three of the Partnership's four cable television systems. The
increase in the average number of premium subscriptions was
partially offset by decreases in the average monthly price
received for each premium subscription. For additional
information, see "General - Partnership's Cable Systems and
Regulation" above.
Programming expense increased 18% and 17% during the three
and nine month periods ended September 30, 1996, respectively, as
compared to the corresponding prior year amounts. Such increases
are primarily attributable to higher programming rates and an
increase in the average number of basic subscribers and premium
subscriptions as noted above. The Partnership cannot determine
whether and to what extent increases in the cost of programming
will affect its future operating costs. However, such
programming costs have increased at a greater percentage than
increases in revenue from Regulated Services. The Partnership's
regulated cable television systems increased their rates for
Regulated Services in June 1996.
Operating costs increased 11% during each of the three and
nine month periods ended September 30, 1996, as compared to the
corresponding prior year amounts. Such increases are primarily
attributable to increased labor costs.
Selling, general and administrative ("SG&A") expenses
increased 13% during each of the three and nine months ended
September 30, 1996, as compared to the corresponding prior year
periods. Such increases are the result of (i) higher labor
costs, (ii) increased franchise fees (which are calculated as a
percentage of revenue) and (iii) other individually insignificant
increases in certain components of SG&A expenses.
Interest expense decreased $170,000 and $474,000 during the
three and nine month periods ended September 30, 1996,
respectively, as compared to the corresponding prior year
periods. Such decreases are due to a lower outstanding principal
amount in 1996, as compared to 1995.
Interest income decreased $8,000 and increased $432,000
during the three and nine month periods ended September 30, 1996,
respectively, as compared to the corresponding prior year
periods. Such charges are due to changes in the weighted average
balance of cash and cash equivalents.
Other income in 1995 represents a refund of a portion of the
state sales and use tax that was paid by the Partnership in
connection with the 1992 acquisitions of St. Mary's and Lower
Delaware.
(continued)
I-17
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Material Changes in Financial Condition
---------------------------------------
During the nine months ended September 30, 1996, the
Partnership used cash provided by operating activities and
investing activities of $11,897,000 and $29,428,000,
respectively, to fund financing activities of $40,034,000 and an
increase in cash of $1,291,000. See the Partnership's statements
of cash flows included in the accompanying financial statements.
The Partnership's bank credit facility provides for a
revolving line of credit of $15,000,000. At September 30, 1996,
$13,000,000 of the facility was unused. Such revolving line of
credit is reduced quarterly beginning March 31, 1998 through
December 31, 1999. Although the Partnership was in compliance
with the facility's restrictive covenants at September 30, 1996,
additional borrowings under the facility are subject to the
Partnership's continuing compliance with the restrictive
covenants (which include the maintenance of certain ratios of
total debt to cash flow and cash flow to debt service, as
defined). See note 6 to the accompanying financial statements.
The Partnership estimates that during 1996 it will spend
approximately $8,715,000 for capital expenditures (of which
approximately $1,025,000, $540,000, $3,450,000 and $3,700,000
relate to Riverside, Southern Tennessee, Lower Delaware, and St.
Mary's, respectively). Such estimated capital expenditures do
not include any costs associated with the implementation of
significant technological improvements to the Partnership's cable
television systems, as previously discussed under "General -
Competition". During the nine months ended September 30, 1996,
the Partnership expended $4,279,000 for capital expenditures.
The Partnership anticipates that its sources of liquidity
will be sufficient to fund estimated capital expenditures
(exclusive of any significant technological improvements, as
described under "General - Competition"), service outstanding
debt and meet its other liquidity requirements.
I-18
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(27) Financial Data Schedule
(b) Reports on Form 8-K filed during the quarter ended
September 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 5, LTD.
(A Colorado Limited Partnership)
By: IR-TCI PARTNERS V, L.P.,
Its General Partner
By: TCI VENTURES FIVE, INC.,
A General Partner
Date: November 14, 1996 By: /s/ Gary K. Bracken
Gary K. Bracken
Vice President and Controller
(Principal Accounting Officer)
II-2
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,629
<SECURITIES> 0
<RECEIVABLES> 504
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 66,056
<DEPRECIATION> 26,372
<TOTAL-ASSETS> 76,207
<CURRENT-LIABILITIES> 0
<BONDS> 2,000
0
0
<COMMON> 0
<OTHER-SE> 61,502
<TOTAL-LIABILITY-AND-EQUITY> 76,207
<SALES> 0
<TOTAL-REVENUES> 20,744
<CGS> 0
<TOTAL-COSTS> 6,486
<OTHER-EXPENSES> 10,635
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 243
<INCOME-PRETAX> 36,996
<INCOME-TAX> 0
<INCOME-CONTINUING> 36,996
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,996
<EPS-PRIMARY> 183.13
<EPS-DILUTED> 0<F1>
<FN>
<F1>EPS-Primary represents net earnings per limited partner.
</FN>
</TABLE>
