<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 June 30, 1997
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
- ---------------------------------------- ------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 267-5500
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (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>
PART I - FINANCIAL INFORMATION
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Balance Sheets
(unaudited)
(see note 2)
June 30, December 31,
1997 1996
--------- ------------
Assets amounts in thousands
- ------
Cash and cash equivalents (note 4) $ 86,145 4,729
Trade and other receivables, net of
allowance for doubtful receivables 872 480
Prepaid expenses -- 93
Property and equipment:
Land -- 39
Cable distribution systems 17,538 62,216
Support equipment 1,421 4,876
-------- ------
18,959 67,131
Less accumulated depreciation 10,252 28,399
-------- ------
8,707 38,732
-------- ------
Franchise costs and other intangibles 24,556 75,688
Less accumulated amortization 15,327 46,811
-------- ------
9,229 28,877
-------- ------
Funds held in escrow (note 2) 2,337 --
Other assets, net of accumulated 249 298
amortization -------- ------
$107,539 73,209
======== ======
(continued)
I-1
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Balance Sheets (continued)
(see note 2)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------- -------------
amounts in thousands
<S> <C> <C>
Liabilities and Partners' Equity
- --------------------------------
Cash overdraft $ 732 1,710
Accounts payable 12 162
Accrued expenses:
Franchise fees 59 618
Other 145 616
-------- ------
204 1,234
-------- ------
Subscriber advance payments and
converter deposits 109 1,015
Amounts due to related parties (note 6) 2,624 1,451
Debt (note 5) -- 7,500
-------- ------
Total liabilities 3,681 13,072
-------- ------
Partners' equity (deficit):
General partner (2,264) (2,701)
Limited partners 106,122 62,838
-------- ------
Total partners' equity 103,858 60,137
-------- ------
Commitments and contigencies (notes 2,
6 and 7)
$107,539 73,209
======== ======
</TABLE>
See accompanying notes to financial statements.
I-2
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Statements of Operations
(unaudited)
(See note 2)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
-------------------- ------------------
1997 1996 1997 1996
---------- -------- -------- --------
amounts in thousands,
except unit amounts
<S> <C> <C> <C> <C>
Revenue $ 4,744 7,019 11,867 13,744
Operating costs and expenses:
Programming (primarily from related
parties - note 6) 993 1,415 2,547 2,784
Operating (including allocations from
related parties - note 6) 651 772 1,379 1,459
Selling, general and administrative
(including charges from related
parties - note 6) 2,306 2,355 4,777 4,580
Depreciation and amortization 1,864 3,586 5,159 7,221
-------- ------- ------- -------
Total operating expenses 5,814 8,128 13,862 16,044
-------- ------- ------- -------
Operating loss (1,070) (1,109) (1,995) (2,300)
Other income (expense):
Interest expense -- (77) (135) (197)
Interest income 567 26 579 455
Gain on sale of cable television
systems (note 2) 45,272 -- 45,272 --
Share of earnings of Newport News
Cablevision, Ltd. ("Newport News")
(note 2) -- 8 -- 39,915
-------- ------- ------- -------
Net earnings (loss) $ 44,769 (1,152) 43,721 37,873
======== ======= ======= =======
Earnings (loss) per limited partnership
unit (note 3) $221.60 (5.70) 216.41 187.47
======== ======= ======= =======
Limited partnership units outstanding 200,005 200,005 200,005 200,005
======== ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
I-3
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Statement of Partners' Equity
Six months ended June 30, 1997
(unaudited)
(See note 2)
General Limited
partner partners Total
--------- -------- -------
amounts in thousands
Balance at January 1, 1997 $(2,701) 62,838 60,137
Net earnings 437 43,284 43,721
------- ------- -------
Balance at June 30, 1997 $(2,264) 106,122 103,858
======= ======= =======
See accompanying notes to financial statements.
I-4
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Statements of Cash Flows
(unaudited)
(See note 2)
Six months ended
June 30,
----------------------
1997 1996
----------- ---------
amounts in thousands
(see note 4)
Cash flows from operating activities:
Net earnings $ 43,721 37,873
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 5,159 7,221
Gain on sale of cable television
systems (45,272) --
Share of earnings of Newport News -- (39,915)
Changes in operating assets and
liabilities, net of effects from
sale of cable television systems:
Net change in receivables,
prepaid expenses, and other
assets (361) 91
Net change in accounts
payable, accrued expenses,
subscriber advance payments
and converter deposits, and
amounts due to related parties (16) 3,653
-------- -------
Net cash provided by operating
activities 3,231 8,923
-------- -------
Cash flows from investing activities:
Capital expended for property and
equipment (825) (1,925)
Proceeds from sale of cable television
systems, net of disposition fees 87,491 --
Distribution from Newport News -- 33,696
Other investing activities (3) 8
-------- -------
Net cash provided by investing
activities 86,663 31,779
-------- -------
Cash flows from financing activities:
Repayments of debt (8,500) (6,700)
Borrowings of debt 1,000 --
Change in cash overdraft (978) --
Distributions to partners -- (33,334)
-------- -------
Net cash used in financing
activities (8,478) (40,034)
-------- -------
Net increase in cash and cash
equivalents 81,416 668
Cash and cash equivalents:
Beginning of period 4,729 1,338
-------- -------
End of period $ 86,145 2,006
======== =======
See accompanying notes to financial statements.
I-5
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Notes to Financial Statements
June 30, 1997
(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 June 30, 1997 and the results of its operations
for the six months ended June 30, 1997 and 1996. 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, 1996 Annual Report on Form 10-K.
The Partnership and American Cable TV Investors 4, Ltd. ("ACT 4"), an
affiliated partnership, had 40% and 60% ownership interests in Newport
News, respectively. As a result of the sale of its cable television system
on January 1, 1996, Newport News was liquidated during the fourth quarter
of 1996.
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. (together with its
consolidated subsidiaries "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.
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.
(continued)
I-6
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Notes to Financial Statements
(2) Asset Sales
-----------
On January 1, 1996, Newport News sold the cable television system that was
located in and around Newport News, Virginia (the "Newport News System") to
Cox Communications Rhode Island, Inc. ("Cox"), an unaffiliated third party,
for cash proceeds of $121,886,000 (the "Newport News Sale"). The
Partnership had a 40% ownership interest in Newport News.
In connection with the Newport News Sale, Newport News used most of the net
cash proceeds to (i) repay bank debt and related accrued interest of
$24,306,000, (ii) pay disposition fees of $3,668,000 to Cablevision and
(iii) make distributions to the Partnership and ACT 4 of $35,789,000 and
$53,684,000, respectively. The Partnership used most of its share of the
net proceeds from the Newport News Sale to make distributions in 1996 to
Presidio, TCIV 5 and ACT 5's limited partners (the "Limited Partners") of
$67,000, $266,000 and $33,001,000 ($165 per $500 limited partnership unit
("Unit") for Limited Partners of record as of January 1, 1996),
respectively.
At December 31, 1996, the Partnership owned four cable television systems
that were located in and around (i) Shelbyville and Manchester, Tennessee
("Southern Tennessee" or the "Southern Tennessee System"), (ii) Riverside,
California ("Riverside" or the "Riverside System"), (iii) St. Mary's
County, Maryland ("St Mary's" or the "St. Mary's System") and (iv) Lower
Delaware ("Lower Delaware" or the "Lower Delaware System").
On April 1, 1997, the Partnership sold the Southern Tennessee System to
Rifkin Acquisition Partners, L.L.L.P. ("Rifkin"), an unaffiliated third
party, for an adjusted sales price of $19,647,000 (the "Southern Tennessee
Sale"). Pursuant to the asset purchase agreement for the Southern Tennessee
Sale, $494,000 of such sales price has been placed in escrow and will be
subject to indemnifiable claims by Rifkin through March 31, 1998. During
the six months ended June 30, 1997 and 1996, the Partnership's financial
statements included revenue from the Southern Tennessee System of $995,000
and $1,934,000, respectively.
On April 16, 1997, the Partnership sold the St. Mary's System to Gans
Multimedia Partnership ("Gans"), an unaffiliated third party, for an
adjusted sales price of $30,780,000 (the "St. Mary's Sale"). Pursuant to
the asset purchase agreement for the St. Mary's Sale, $766,000 of such
sales price has been placed in escrow and will be subject to indemnifiable
claims by Gans through April 15, 1998. During the six months ended June 30,
1997 and 1996, the Partnership's financial statements included revenue from
the St. Mary's System of $2,166,000 and $3,320,000, respectively.
(continued)
I-7
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Notes to Financial Statements
On June 24, 1997, the Partnership sold the Lower Delaware System to
Mediacom Delaware LLC ("Mediacom"), an unaffiliated third party, for a
preliminary adjusted sales price of $42,179,000 (the "Lower Delaware
Sale"). Pursuant to the asset purchase agreement for the Lower Delaware
Sale, $1,077,000 of such sales price has been placed in escrow and will be
subject to indemnifiable claims by Mediacom through June 23, 1998. During
the six months ended June 30, 1997 and 1996, the Partnership's financial
statements included revenue from the Lower Delaware System of $4,462,000
and $4,406,000, respectively.
The St. Mary's Sale, the Southern Tennessee Sale, and the Lower Delaware
Sale are collectively referred to herein as the "Consummated Sales." The
Consummated Sales were approved by the Limited Partners at a special
meeting that occurred on March 26, 1997.
The Partnership used proceeds from the Consummated Sales to pay disposition
fees of $2,778,000 to Cablevision and repay debt and related accrued
interest of $8,652,000. See notes 5 and 6. The Partnership anticipates that
it will use proceeds from the Consummated Sales to make distributions to
its general and Limited Partners during the third quarter of 1997 of
$747,000 and $74,002,000 ($370 per Unit for Limited Partners of record as
of July 1, 1997), respectively. The distributions to the Partnership's
partners, which are based upon the Partnership's historical financial
position at June 30, 1997, do not include any amounts held in escrow, do
not reflect any contingent liabilities which may arise subsequent to the
date of this Quarterly Report on Form 10-Q, and are based on various
assumptions with respect to sales price adjustments, reserves for
contingent liabilities, and other matters. As such, the actual amounts
distributed to the Partnership's partners may vary from the above amounts.
There is no assurance as to the timing or amount of any such distributions.
(continued)
I-8
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Notes to Financial Statements
The Partnership has been marketing and continues to market for sale the
Riverside System. There is no assurance that the Partnership can arrange
for a sale of the Riverside System at an appropriate price or on terms
acceptable to the Partnership. If the Partnership is unable to arrange for
a sale of the Riverside System at an appropriate price or on terms
acceptable to the Partnership, the Partnership will continue to operate the
Riverside System. Any sale of the Riverside System would be subject to
Limited Partner approval. At June 30, 1997 and December 31, 1996,
$18,006,000 and $19,490,000, respectively, of the Partnership's total
assets were attributable to Riverside. During the six months ended June 30,
1997 and 1996, Riverside generated revenue of $4,242,000 and $4,079,000
respectively.
(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.
Net earnings (loss) per limited partnership unit is calculated by dividing
net earnings (loss) attributable to the Limited Partners by the number of
limited partnership units outstanding during each period.
(4) Supplemental Disclosure of Cash Flow Information
------------------------------------------------
The Partnership considers investments with initial maturities of three
months or less to be cash equivalents. At June 30, 1997, $86,063,000 of the
Partnership's cash and cash equivalents was invested in money market funds.
ACT 5 is exposed to credit loss in the event of non-performance by the
other parties to such financial instruments. However, ACT 5 does not
anticipate non-performance by the other parties.
Cash paid by the Partnership for interest was $152,000 and $208,000 during
the six months ended June 30, 1997 and 1996, respectively.
(5) Debt
----
During the quarter ended June 30, 1997, the Partnership used cash proceeds
from the Southern Tennessee Sale to repay all amounts outstanding under the
bank credit facility. In connection with such repayment, the Partnership
also terminated the bank credit facility.
(6) 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
$2,547,000 and $2,672,000 during the six months ended June 30, 1997 and
1996, respectively.
(continued)
I-9
<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 $766,000 and $800,000 for the six months ended June 30, 1997 and 1996,
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 $205,000 and
$238,000 for the six months ended June 30, 1997 and 1996, respectively.
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 six months ended June 30, 1997 and
1996, Riverside's operating and administrative salaries and expenses
aggregated $873,000 and $1,200,000, 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. In connection with the Consummated Sales,
disposition fees of $2,778,000 were paid to Cablevision. ACT 5 anticipates
that Payback will be reached upon the distribution of proceeds from the
Consummated Sales. 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.
(7) Contingencies
-------------
ACT 5 has contingent liabilities related to legal proceedings and other
matters arising in the ordinary course of business. Although it is
reasonably possible ACT 5 may incur losses upon conclusion of such matters,
an estimate of any loss or range of loss cannot be made. In the opinion of
management, it is expected that amounts, if any, which may be required to
satisfy such contingencies will not be material in relation to the
accompanying financial statements.
I-10
<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, 1996 Annual
Report on Form 10-K.
Certain statements included in this Quarterly Report on Form 10-Q
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other important factors that
could cause the actual results, performance or achievements of the Partnership,
or industry results, to differ materially from any future results, performance
or achievements expressed or implied by such forward-looking statements. Such
risks, uncertainties and other factors include, among others: general economic
and business conditions and industry trends; the continued strength of multi-
channel video and telecommunication networks and the distribution and production
of programming for multi-channel video distribution; uncertainties inherent in
proposed business strategies and development plans, future financial
performance, including availability, terms and deployment of capital; the
ability of vendors to deliver required equipment, software and services; product
launches; availability of qualified personnel; changes in, or the failure or
inability to comply with, government regulation, and adverse outcomes from
regulatory proceedings; changes in the nature of key strategic relationships
with affiliates; competitor responses to the Partnership's products and
services, and the overall market acceptance of such products and services,
including acceptance of the pricing of such products and services; and other
factors. These forward-looking statements speak only as of the date of this
Quarterly Report on Form 10-Q. The Partnership expressly disclaims any
obligation or undertaking to disseminate any updates or revisions to any
forward-looking statement contained herein to reflect any change in the
Partnership's expectations with regard thereto or any change in events,
conditions or circumstances on which any such statement is based.
I-11
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
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 had a 40% interest in Newport News. During April 1997, the
Partnership sold the Southern Tennessee System to Rifkin, an unaffiliated third
party, for an adjusted sales price of $19,647,000 and the St. Mary's System to
Gans, an unaffiliated third party, for a preliminary adjusted sales price of
$30,780,000. During June 1997, the Partnership sold the Lower Delaware System to
Mediacom, an unaffiliated third party, for a preliminary adjusted sales price of
$42,179,000. The following table sets forth summary information with respect to
the operating results of the cable systems which were sold pursuant to the
Consummated Sales for the periods indicated (amounts in thousands):
<TABLE>
<CAPTION>
Six months ended
June 30,
----------------
1997 1996
------ ------
<S> <C> <C>
Revenue $7,623 9,660
Operating costs and expenses before
depreciation and amortization 4,620 5,103
------ ------
Operating cash flow (1) 3,003 4,557
Depreciation and amortization 3,104 5,167
------ ------
Operating loss $ (101) (610)
====== ======
</TABLE>
(1) "Operating Cash Flow," which represents income before depreciation
and amortization, is a commonly used measure of value and borrowing
capacity. Operating Cash Flow is not intended to be a substitute for a
measure of performance in accordance with generally accepted accounting
principles and should not be relied upon as such.
For additional information on the Consummated Sales, see note 2 to the
accompanying financial statements.
The Partnership has been marketing and continues to market for sale the
Riverside System. There is no assurance that the Partnership can arrange for a
sale of the Riverside System at an appropriate price or on terms acceptable to
the Partnership. If the Partnership is unable to arrange for a sale of the
Riverside System at an appropriate price or on terms acceptable to the
Partnership, the Partnership will continue to operate the Riverside System. Any
sale of the Riverside System would be subject to Limited Partner approval.
Regulation. The operation of the Partnership's cable television systems is
regulated at the federal, state and local levels. The 1992 Cable Act and the
Telecommunications Act of 1996 (together with the 1992 Cable Act, the "Cable
Acts") established rules under which the Partnership's basic and tier service
rates and its equipment and installation charges (the "Regulated Services") are
regulated if a complaint is filed or if the appropriate franchise authority is
certified.
I-12
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
General (continued)
-------------------
During the six months ended June 30, 1997, approximately 72% of the
Partnership's revenue and approximately 66% of Riverside's revenue was derived
from Regulated Services. As noted above, any increases in rates charged for
Regulated Services are regulated by the Cable Acts. Moreover, competitive
factors may limit the Partnership's ability to increase its service rates.
Competition. Since 1992, most of Riverside's service areas have been
subject to competition from a multi-channel multi-point distribution system
("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 has resulted in a loss of
subscribers in Riverside's service area, the Partnership is currently unable to
predict the extent of the competitive effect at this time on the Partnership's
financial condition or results of operations. For additional information
concerning the revenue and subscriber bases of Riverside, see The Riverside
System below.
In addition to MMDS, Riverside competes with other distributors of the same
or similar video programming as that offered by its cable systems. During 1996
and 1997, the Partnership has experienced a competitive impact from medium power
and high power direct broadcast satellites ("DBS") providers. Estimated DBS
customers nationwide increased from approximately 2.2 million at the end of 1995
to approximately 4.4 million at the end of 1996, and the Partnership expects
that competition from DBS will continue to grow. DBS Service is now available
within Riverside's service areas. However, the Partnership is unable to predict
what effect such competition will have on Riverside's financial condition or
results of operations.
I-13
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
General (continued)
-------------------
The Riverside System is 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 Riverside's financial condition
and results of operations, the Partnership does believe that the continued
evolution of such factors could place Riverside at a competitive disadvantage if
it were not to implement certain technological improvements. Due to the
competitive environment within Riverside's service area, the Partnership is
currently considering the deployment of digital compression technology in the
Riverside System but has no specific plans with respect to more extensive
advancements or improvements that would involve the replacement of coaxial trunk
cable with fiber optic cable. Riverside shares a headend with an affiliated
cable television system. Accordingly, Riverside could not proceed with the
implementation of digital compression technology unless such affiliated cable
television system also implemented digital compression technology. The
Partnership would not proceed with the implementation of any significant
technological advancements or improvements without first conducting additional
analysis of the economic feasibility of such advancements and improvements. See
"Liquidity and Capital Resources" below.
-------------------------------
Notwithstanding the existence of the above-described competition, the
Partnership currently believes that the Riverside System is not subject to
"effective competition" as defined in the 1992 Cable Act. In the event that
there are providers of video programming providing, in the aggregate, service to
more than 15% (and one of which is 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. Such a finding is determined by the Federal Communications
Commission ("FCC") after a cable operator files for decertification. 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 will be 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.
I-14
<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 by any means. 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 Riverside System expects that it will face 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 significant
competition in the delivery of video services. Based on the foregoing, the
Partnership continues to believe that the Riverside System could 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 Riverside System. The following table sets forth information for the
Riverside System for the periods indicated (amounts in thousands):
<TABLE>
<CAPTION>
June 30,
-------------
1997 1996
-------------
<S> <C> <C>
Basic Subscribers (1) 18.9 19.3
Premium Subscriptions (1)(2) 18.3 22.0
Homes Passed 31.3 31.1
Six months ended
June 30,
----------------
1997 1996
------- ------
Revenue (3) $4,241 4,077
======= ======
Operating Cash Flow (4) $1,722 1,297
======= ======
</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. From December 31, 1996 to
June 30, 1997, Riverside experienced a decrease of 3,700 premium
subscriptions and 200 basic subscribers. Such decrease in premium
subscriptions is comprised of a 2,400 decrease in traditional premium
subscriptions, a 500 decrease in STARZ! subscriptions and an 800
decrease in "ENCORE" 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. The Partnership currently is unable to predict the extent of
the effect of competition from the California MMDS Operator on
Riverside's financial condition and results of operations.
I-15
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
General (continued)
- -------------------
(2) 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. In addition to competition, fluctuations in
premium subscriptions may also result from 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, Riverside
typically experiences reductions in the number of its premium
subscriptions.
(3) For additional information concerning Riverside's revenue, see
"Material Changes in Results of Operations" below.
------------------------------------------
(4) Operating Cash Flow is a measure of value and borrowing capacity
within the cable television industry. Changes in Operating Cash Flow
result from the net effect of the revenue and expense variances
discussed in "Material Changes in Results of Operations" below. Such
-----------------------------------------
foregoing amounts do not include allocations of certain indirect
expenses of the Partnership and 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.
Material Changes in Results of Operations
-----------------------------------------
The decreases in revenue, programming costs and operating costs for the six
month period ended June 30, 1997, as compared to the corresponding prior year
period, resulted primarily from the impact of the Consummated Sales. See
"General" above.
Revenue decreased $1,877,000 or 14% during the six month period ended June
30, 1997, as compared to the corresponding prior year period. Such decrease is
primarily attributable to the reduction in revenue attributable to the timing of
the Consummated Sales. Revenue for Riverside increased $164,000 or 4% during the
six month period ended June 30, 1997, as compared to the corresponding prior
year period. Such increase is primarily attributable to a 6% increase in the
weighted average rate received for Regulated Services which was partially offset
by decreases in the number of basic subscribers and premium subscriptions. For
additional information, see "General - The Riverside System and Regulation"
-------
above.
I-16
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Material Changes in Results of Operations (continued)
- -----------------------------------------------------
Programming expense decreased $125,000 or 5% for the six month period ended
June 30, 1997, as compared to the corresponding prior year period. Such decrease
is primarily attributable to the timing of the Consummated Sales. Programming
expense for Riverside increased $94,000 or 10% during the six month period ended
June 30, 1997, as compared to the corresponding prior year period. Such increase
is primarily attributable to higher programming rates. Riverside cannot
determine whether and to what extent increases in the cost of programming will
affect its future operating costs.
Selling, general and administrative ("SG&A") expenses increased $198,000 or
4% during the six month period ended June 30, 1997, as compared to the
corresponding prior year period. The increase is the net result of (i) increases
due to legal and other costs associated with the Consummated Sales of
approximately $1,082,000, (ii) decreases due to the timing of the Consummated
Sales, and (iii) decreases due to cost-cutting measures implemented at the end
of 1996. SG&A expenses for Riverside decreased $312,000 or 20% for the six month
period ended June 30, 1997, as compared to the corresponding prior year period.
Such decrease is primarily attributable to cost-cutting measures implemented at
the end of 1996.
Depreciation and amortization decreased $2,063,000 or 29% during the six
month period ended June 30, 1997, as compared to the corresponding prior year
period. Such decrease was the result of (i) the timing of the Consummated Sales
and (ii) certain of the Partnership's assets becoming fully depreciated during
the last half of 1996. Depreciation and amortization for Riverside decreased
$274,000 or 14% for the six month period ended June 30, 1997, as compared to the
corresponding prior year period. Such decrease is primarily attributable to
certain of Riverside's assets becoming fully depreciated during the last half of
1996.
Interest income increased $124,000 during the six month period ended June
30, 1997, as compared to the corresponding prior year period. Such change is due
to changes in the weighted average balance of cash and cash equivalents.
Material Changes in Financial Condition
---------------------------------------
During the six months ended June 30, 1997, the Partnership received cash
proceeds from the Consummated Sales of $90,269,000. The Partnership used cash
proceeds from the Consummated Sales to repay debt and related accrued interest
of $8,652,000, and to pay disposition fees to Cablevision of $2,778,000. In
connection with the repayment of debt, the Partnership also terminated its bank
credit facility. The Partnership anticipates that it will use proceeds from the
Consummated Sales to make distributions to its general and Limited Partners
during the third quarter of 1997 of $747,000 and $74,002,000 ($370 per Unit for
Limited Partners of record as of July 1, 1997), respectively. There is no
assurance as to the timing or amount of any such distributions.
I-17
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Material Changes in Financial Condition (continued)
---------------------------------------------------
The Partnership estimated that during 1997 it would spend approximately
$3.1 million for capital expenditures (of which approximately $440,000,
$240,000, $970,000 and $1,450,000 related to Riverside, Southern Tennessee,
Lower Delaware, and St. Mary's, respectively). Such estimated capital
expenditures assumed (i) a full year of capital expenditures for each of the
Partnership's cable television systems and (ii) that, other than the possible
deployment of digital compression technology at the Riverside System, no
significant technological improvements would be implemented. See related
discussion under "General - Competition". During the six months ended June 30,
-------
1997, the Partnership expended $825,000 for capital expenditures. As a result of
the Consummated Sales, the Partnership has reduced its estimate of 1997 capital
expenditures from $3.1 million to $1.2 million.
The Partnership anticipates that cash on hand (after making the above
described distributions to its partners) and cash provided by Riverside's
operating activities will be sufficient to fund estimated capital expenditures
(exclusive of any significant technological improvements, as described under
"General - Competition") 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 June 30, 1997:
<TABLE>
<CAPTION>
Date of Report Items Reported Financial Statements Filed
-------------- -------------- --------------------------
<S> <C> <C>
April 16, 1997 Item 2 Pro forma financial information:
As of and for the year ended
December 31, 1996
May 1, 1997 Item 2 Pro forma financial information:
As of and for the year ended
December 31, 1996
June 2, 1997 Item 5 None
June 27, 1997 Item 2 Pro forma financial information:
As of and for the three months
ended March 31, 1997; Year ended
December 31, 1996
</TABLE>
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: August 12, 1997 By: /s/ Gary K. Bracken
------------------------------
Gary K. Bracken
Vice President and Controller
(Principal Accounting Officer)
II-2
<PAGE>
EXHIBIT INDEX
The following exhibits are filed herewith or are incorporated by reference
herein (according to the number assigned to them in Item 601 of Regulation S-K)
as noted:
(27) American Cable TV Investors 5, Ltd.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 86,145
<SECURITIES> 0
<RECEIVABLES> 872
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 18,959
<DEPRECIATION> 10,252
<TOTAL-ASSETS> 107,539
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 103,858
<TOTAL-LIABILITY-AND-EQUITY> 107,539
<SALES> 0
<TOTAL-REVENUES> 11,867
<CGS> 0
<TOTAL-COSTS> 3,926
<OTHER-EXPENSES> 5,159
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 135
<INCOME-PRETAX> 43,721
<INCOME-TAX> 0
<INCOME-CONTINUING> 43,721
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43,721
<EPS-PRIMARY> 216.41<F1>
<EPS-DILUTED> 0
<FN>
<F1>EPS Primary represents net earnings per limited partnership unit.
</FN>
</TABLE>
