<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, 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)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
-------------------- -------------------
Assets amounts in thousands
- ------
<S> <C> <C>
Cash and cash equivalents (note 4) $29,219 4,729
Trade and other receivables, net of allowance for doubtful
receivables 516 480
Prepaid expenses -- 93
Property and equipment:
Land -- 39
Cable distribution systems 17,622 62,216
Support equipment 1,420 4,876
------- ------
19,042 67,131
Less accumulated depreciation 10,610 28,399
------- ------
8,432 38,732
------- ------
Franchise costs and other intangibles 21,764 75,688
Less accumulated amortization 13,352 46,811
------- ------
8,412 28,877
------- ------
Funds held in escrow (note 2) 2,337 --
Other assets, net of accumulated amortization 228 298
------- ------
$49,144 73,209
======= ======
</TABLE>
(continued)
I-1
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Balance Sheets (continued)
(see note 2)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
--------------------- --------------------
<S> <C> <C>
amounts in thousands
Liabilities and Partners' Equity
- --------------------------------
Cash overdraft $15,432 1,710
Accounts payable 24 162
Accrued expenses:
State income taxes withheld from distributions (note 2) 600 --
Franchise fees 122 618
Other 410 616
------- ------
1,132 1,234
------- ------
Subscriber advance payments and converter deposits 104 1,015
Amounts due to related parties (note 6) 2,928 1,451
Debt (note 5) -- 7,500
------- ------
Total liabilities 19,620 13,072
------- ------
Partners' equity (deficit):
General partner (3,007) (2,701)
Limited partners 32,531 62,838
------- ------
Total partners' equity 29,524 60,137
------- ------
Commitments and contingencies (notes 2, 6,
and 7)
$49,144 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 Nine months ended
September 30, September 30,
----------------------------------- ----------------------------------
1997 1996 1997 1996
----------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
amounts in thousands,
except unit amounts
Revenue $ 2,163 7,000 14,030 20,744
Operating costs and expenses:
Programming (primarily from related parties
- note 6) 500 1,492 3,047 4,276
Operating (including allocations from
related parties - note 6) 170 751 1,549 2,210
Selling, general and administrative
(including charges from related parties -
note 6) 373 2,263 5,150 6,843
Depreciation and amortization 948 3,414 6,107 10,635
-------- ------- ------- -------
Total operating expenses 1,991 7,920 15,853 23,964
-------- ------- ------- -------
Operating income (loss) 172 (920) (1,823) (3,220)
Other income (expense):
Interest expense -- (46) (135) (243)
Interest income 1,140 28 1,719 483
Gain (adjustment to gain) on sale of cable
television systems (note 2) (897) -- 44,375 --
Share of earnings of Newport News
Cablevision, Ltd. ("Newport News") (note 2) -- 61 -- 39,976
-------- ------- ------- -------
Net earnings (loss) $ 415 (877) 44,136 36,996
======== ======= ======= =======
Earnings (loss) per limited partnership unit
(note 3) $ 2.05 (4.34) 218.47 183.13
======== ======= ======= =======
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
Nine months ended September 30, 1997
(unaudited)
(See note 2)
<TABLE>
<CAPTION>
General Limited
partner partners Total
------- -------- -----
<S> <C> <C> <C>
amounts in thousands
Balance at January 1, 1997 $(2,701) 62,838 60,137
Distribution (747) (74,002) (74,749)
Net earnings 441 43,695 44,136
------- ------- -------
Balance at September 30, 1997 $(3,007) 32,531 29,524
======= ======= =======
</TABLE>
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)
<TABLE>
<CAPTION>
Nine months ended
September 30,
--------------------------------
1997 1996
--------------- ---------------
<S> <C> <C>
amounts in thousands
(see note 4)
Cash flows from operating activities:
Net earnings $ 44,136 36,996
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization 6,107 10,635
Gain on sale of cable television systems (44,375) --
Share of earnings of Newport News -- (39,976)
Changes in operating assets and liabilities, net of effects from
sale of cable television systems:
Net change in receivables, prepaid expenses, and other assets 57 (67)
Net change in accounts payable, accrued expenses, subscriber
advance payments and converter deposits, and amounts due to
related parties 832 4,309
-------- -------
Net cash provided by operating activities 6,757 11,897
-------- -------
Cash flows from investing activities:
Capital expended for property and equipment (1,031) (4,279)
Proceeds from sale of cable television systems, net of disposition
fees and funds held in escrow 87,270 --
Distribution from Newport News -- 33,696
Other investing activities 21 11
-------- -------
Net cash provided by investing activities 86,260 29,428
-------- -------
Cash flows from financing activities:
Repayments of debt (8,500) (6,700)
Borrowings of debt 1,000 --
Change in cash overdraft 13,722 6,173
Distributions to partners (74,749) (33,334)
-------- -------
Net cash used in financing activities (68,527) (33,861)
-------- -------
Net increase in cash and cash equivalents 24,490 7,464
Cash and cash equivalents:
Beginning of period 4,729 2,132
-------- -------
End of period $ 29,219 9,596
======== =======
</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, 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 September 30, 1997 and the results of its
operations for the nine months ended September 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.
Certain amounts have been reclassified for comparability with the 1997
presentation.
(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 nine months ended September 30, 1997 and 1996, the Partnership's
financial statements included revenue from the Southern Tennessee System of
$995,000 and $2,881,000, 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 $30,547,000 (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 nine months ended
September 30, 1997 and 1996, the Partnership's financial statements
included revenue from the St. Mary's System of $2,166,000 and $5,075,000,
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 an
adjusted sales price of $42,191,000 (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 nine
months ended September 30, 1997 and 1996, the Partnership's financial
statements included revenue from the Lower Delaware System of $4,462,000
and $6,558,000, 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, repay debt and related
accrued interest of $8,652,000, and 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. See notes 5 and 6.
The Partnership has been marketing for sale the Riverside System. To
date, the Partnership has not received any acceptable bids for the sale of
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 September 30, 1997 and December
31, 1996, $17,588,000 and $19,490,000, respectively, of the Partnership's
total assets were attributable to Riverside. During the nine months ended
September 30, 1997 and 1996, Riverside generated revenue of $6,407,000 and
$6,230,000 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. ACT 5's September 1997 distributions of
proceeds from the Consummated Sales allowed Limited Partners to achieve
Payback. See note 2.
(continued)
I-8
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Notes to Financial Statements
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 September 30, 1997, $29,219,000
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 $246,000
during the nine months ended September 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
$3,047,000 and $4,110,000 during the nine months ended September 30, 1997
and 1996, respectively.
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 $842,000 and $1,235,000 for the nine months ended September 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 $271,000 and
$357,000 for the nine months ended September 30, 1997 and 1996,
respectively.
(continued)
I-9
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Notes to Financial Statements
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, 1997
and 1996, Riverside's operating and administrative salaries and expenses
aggregated $1,018,000 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. In connection with the Consummated Sales, disposition fees of
$2,778,000 were paid to Cablevision.
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 that ACT 5 may be required to make payments 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 have a
material effect upon the Partnership's financial condition.
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 an adjusted sales price of $30,547,000.
During June 1997, the Partnership sold the Lower Delaware System to Mediacom, an
unaffiliated third party, for an adjusted sales price of $42,191,000. 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>
Nine months ended
September 30,
-----------------------
1997 1996
-------- ---------
<S> <C> <C>
Revenue $7,623 14,514
Operating costs and expenses before depreciation
and amortization 4,620 7,731
------ ------
Operating cash flow (1) 3,003 6,783
Depreciation and amortization 3,104 8,545
------ ------
Operating loss $ (101) (1,762)
====== ======
</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 for sale the Riverside System. To
date, the Partnership has not received any acceptable bids for the sale of 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 Riverside System 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 basic and tier service rates and 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 nine months ended September 30, 1997, approximately 68% 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 Riverside'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 system. 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.
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. In
this regard, Riverside deployed digital compression technology in its service
areas during the third quarter of 1997. The Partnership 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. 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.
- -----------------
I-13
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
General (continued)
-------------------
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 DBS. 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 some 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.
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 may face competition from telephone
companies for the provision of 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.
I-14
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
General (continued)
-------------------
The Riverside System. The following table sets forth information for the
Riverside System for the periods indicated (amounts in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
-------------- ------------
<S> <C> <C>
Basic Subscribers (1) 18.8 19.1
Premium Subscriptions (1)(2) 18.8 22.0
Homes Passed 31.5 31.3
Nine months ended
September 30,
-------------------------
1997 1996
----------- ------------
Revenue (3) $6,407 6,230
====== =====
Operating Cash Flow (4) $2,698 2,047
====== =====
</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
September 30, 1997, Riverside experienced a decrease of 3,200 premium
subscriptions and 300 basic subscribers. Such decrease in premium
subscriptions is comprised of a 2,300 decrease in traditional premium
subscriptions, a 200 decrease in STARZ! subscriptions and a 700
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.
(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.
------------------------------------------
I-15
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
General (continued)
-------------------
(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
nine month period ended September 30, 1997, as compared to the corresponding
prior year period, resulted primarily from the impact of the Consummated Sales.
See "General" above.
Revenue decreased $6,714,000 or 32% during the nine month period ended
September 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 $177,000
or 3% during the nine month period ended September 30, 1997, as compared to the
corresponding prior year period. Such increase is primarily attributable to a
4% 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.
Programming expense decreased $1,229,000 or 29% for the nine month period
ended September 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 $109,000 or 8% during the nine month
period ended September 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 decreased $1,693,000
or 25% during the nine month period ended September 30, 1997, as compared to the
corresponding prior year period. The decrease is the net result of (i)
decreases due to the timing of the Consummated Sales, (ii) decreases due to
cost-cutting measures implemented at the end of 1996 and, (iii) legal and other
expenses incurred in connection with the Consummated Sales of approximately
$648,000. SG&A expenses for Riverside decreased $457,000 or 19% for the nine
month period ended September 30, 1997, as compared to the corresponding prior
year period. Such decrease is primarily attributable to reductions in marketing
costs during 1997 and other cost-cutting measures implemented at the end of
1996.
I-16
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Material Changes in Results of Operations (continued)
- -----------------------------------------------------
Depreciation and amortization decreased $4,528,000 or 43% during the nine
month period ended September 30, 1997, as compared to the corresponding prior
year period. Such decrease was the result of (i) 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 $258,000 or 9% for the nine month period ended September 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 $1,236,000 during the nine month period ended
September 30, 1997, as compared to the corresponding prior year period. Such
increase is due to an increase in the weighted average balance of cash and cash
equivalents.
The Partnership reduced its gain from the Consummated Sales by $897,000 in
the third quarter of 1997 as a result of the reclassification of brokerage fees
from SG&A expenses and certain post-closing adjustments.
Material Changes in Financial Condition
---------------------------------------
During the nine months ended September 30, 1997, the Partnership received
net cash proceeds from the Consummated Sales of $87,270,000. The Partnership
used cash proceeds from the Consummated Sales to repay debt and related accrued
interest of $8,652,000, to pay disposition fees to Cablevision of $2,778,000 and
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. In connection with the repayment
of debt, the Partnership also terminated its bank credit facility.
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 nine months ended
-------
September 30, 1997, the Partnership expended $1,031,000 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 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-17
<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, 1997
- 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 12, 1997 By: /s/ Gary K. Bracken
---------------------------
Gary K. Bracken
Vice President and Controller
(Principal Accounting Officer)
II-2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 29,219
<SECURITIES> 0
<RECEIVABLES> 516
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 19,042
<DEPRECIATION> 10,610
<TOTAL-ASSETS> 49,144
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 29,524
<TOTAL-LIABILITY-AND-EQUITY> 49,144
<SALES> 0
<TOTAL-REVENUES> 14,030
<CGS> 0
<TOTAL-COSTS> 4,596
<OTHER-EXPENSES> 6,107
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 135
<INCOME-PRETAX> 44,136
<INCOME-TAX> 0
<INCOME-CONTINUING> 44,136
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 44,136
<EPS-PRIMARY> 218.47<F1>
<EPS-DILUTED> 0
<FN>
<F1>EPS Primary represents net earnings per limited partnership unit.
</FN>
</TABLE>
