<PAGE> 1
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, 1999
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 Identification No.)
incorporation or organization)
9197 South Peoria Street
Englewood, Colorado 80112
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (720) 875-4000
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> 2
PART I - FINANCIAL INFORMATION
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Balance Sheet
(unaudited)
(see note 2)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
-------- ------------
Assets amounts in thousands
<S> <C> <C>
Cash and cash equivalents (note 4) $ 16,301 16,134
Trade and other receivables, net of allowance for doubtful accounts
389 381
Property and equipment:
Distribution systems 19,249 18,610
Support equipment and buildings 1,495 1,473
-------- -------
20,744 20,083
Less accumulated depreciation 13,071 12,269
-------- -------
7,673 7,814
-------- -------
Franchise costs and other intangibles 24,649 24,649
Less accumulated amortization 20,141 19,052
-------- -------
4,508 5,597
-------- -------
Funds held in escrow (note 6) 494 494
Other assets, net of accumulated amortization 46 81
-------- -------
$ 29,411 30,501
======== =======
Liabilities and Partners' Equity
Accounts payable and accrued liabilities $ 221 275
Other liabilities 613 639
Amounts due to related parties (note 5) 342 1,140
-------- -------
Total liabilities 1,176 2,054
-------- -------
Partners' equity (deficit):
General partner (3,019) (3,017)
Limited partners 31,254 31,464
-------- -------
Total partners' equity 28,235 28,447
-------- -------
Commitments and contingencies (notes 2, 6 and 7)
$ 29,411 30,501
======== =======
</TABLE>
See accompanying notes to financial statements.
I-1
<PAGE> 3
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,
------------------------- ------------------------
1999 1998 1999 1998
--------- -------- -------- --------
amounts in thousands, except unit amounts
<S> <C> <C> <C> <C>
Revenue $ 2,578 2,311 5,009 4,538
Operating costs and expenses:
Programming (primarily from related parties -
note 5) 617 552 1,228 1,110
Operating (including allocations from related
parties - note 5) 259 275 571 526
Selling, general and administrative (including
charges from related parties - note 5) 902 771 1,834 1,486
Year 2000 costs (allocated from related parties
--note 5) 77 -- 77 --
Depreciation and amortization 947 943 1,891 1,969
--------- -------- -------- --------
Total operating expenses 2,802 2,541 5,601 5,091
--------- -------- -------- --------
Operating loss (224) (230) (592) (553)
Other income (expense):
Interest income 191 219 380 339
Write-off of deferred loan costs -- -- -- (202)
--------- -------- -------- --------
Net loss $ (33) (11) (212) (416)
========= ======== ======== ========
Net loss per limited partnership unit
("Unit") (note 3) $ (.16) (.05) (1.05) (2.06)
========= ======== ======== ========
Limited partnership units outstanding 200,005 200,005 200,005 200,005
========= ======== ======== ========
</TABLE>
See accompanying notes to financial statements.
I-2
<PAGE> 4
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Statement of Partners' Equity
Six months ended June 30, 1999
(unaudited)
(see note 2)
<TABLE>
<CAPTION>
General Limited
partner partners Total
------- -------- -------
amounts in thousands
<S> <C> <C> <C>
Balance at January 1, 1999 $(3,017) 31,464 28,447
Net loss (2) (210) (212)
------- ------- -------
Balance at June 30, 1999 $(3,019) 31,254 28,235
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
I-3
<PAGE> 5
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Statements of Cash Flows
(unaudited)
(see note 2)
<TABLE>
<CAPTION>
Six months ended
June 30,
-----------------------
1999 1998
-------- -------
amounts in thousands
(see note 4)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (212) (416)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization 1,891 1,969
Write-off of deferred loan costs -- 202
Changes in operating assets and liabilities:
Net change in receivables and other assets 27 190
Net change in accounts payable and accrued liabilities, other
liabilities and amounts due to related parties (878) (10,389)
-------- -------
Net cash provided by (used in) operating activities 828 (8,444)
-------- -------
Cash flows from investing activities:
Capital expended for property and equipment (662) (237)
Proceeds from sale of cable television systems, net of disposition fees -- 766
Other investing activities 1 9
-------- -------
Net cash provided by (used in) investing activities (661) 538
-------- -------
Cash flows from financing activities -
change in cash overdraft -- 310
-------- -------
Net change in cash and cash
equivalents 167 (7,596)
Cash and cash equivalents:
Beginning of period 16,134 17,711
-------- -------
End of period $ 16,301 10,115
======== =======
</TABLE>
See accompanying notes to financial statements.
I-4
<PAGE> 6
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Notes to Financial Statements
June 30, 1999
(unaudited)
(1) Basis of Financial Statement Preparation
The accompanying financial statements of American Cable TV Investors
5, Ltd. ("ACT 5" or the "Partnership") are unaudited. In the opinion
of management, all adjustments (consisting only of normal recurring
accruals) have been made which are necessary to present fairly the
financial position of the Partnership as of June 30, 1999 and its
results of operations for the six months ended June 30, 1999 and 1998.
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, 1998 Annual Report on Form 10-K.
The Partnership's general partner is IR-TCI Partners V, L.P. ("IR-TCI"
or the "General Partner"), a Colorado limited partnership. The general
partner of IR-TCI is TCI Ventures Five, Inc., a subsidiary of TCI
Cablevision Associates, Inc. ("Cablevision"). 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 is an indirect subsidiary of
Tele-Communications, Inc. ("TCI") and is the managing agent of the
Partnership.
On March 9, 1999, AT&T Corp. ("AT&T") acquired TCI in a merger (the
"AT&T Merger"). In the AT&T Merger, TCI became a subsidiary of AT&T.
Immediately prior to the AT&T Merger, TCI restructured its ownership
of certain of its subsidiaries, including the merger of its
subsidiary, TCI Communications, Inc. ("TCIC") into TCI. The AT&T
Merger has not had and 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 prior period amounts have been reclassified for comparability
with the 1999 presentation.
(continued)
I-5
<PAGE> 7
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Notes to Financial Statements
(2) Pending Asset Sale
On August 12, 1998, the Partnership entered into an agreement that
provides for the sale of its remaining cable television system located
in and around Riverside, California ("Riverside" or the "Riverside
System") to Century Communications Corp. ("Century"), an unaffiliated
third party, for a cash sales price of $33,000,000, subject to certain
adjustments (the "Riverside Sale"). Pursuant to the asset purchase
agreement, $1,500,000 of such sales price will be subject to
indemnifiable claims for 180 days following consummation of the
Riverside Sale. On January 1, 1999, Century assigned its interest in
the Riverside Sale to Century Valley Cable Corp. ("Century Sub"), a
wholly-owned subsidiary of Century.
In August 1998, TCI and Century signed a definitive agreement to
establish a joint venture that will combine multiple cable television
systems in Southern California (the "Joint Venture"). Among those
systems to be contributed to the Joint Venture by TCI is the cable
television system serving customers in Redlands, California (the
"Redlands System"). The Riverside System currently utilizes office
facilities, personnel and certain cable distribution assets (including
the headend) of the Redlands System. In the event the Riverside Sale
is consummated, the Riverside System is among those systems to be
contributed to the Joint Venture by Century. TCI will have an
approximate 25% interest in the Joint Venture, which will be managed
by Century. In the event that the Joint Venture is consummated prior
to the Riverside Sale, or the Joint Venture is consummated and the
Riverside Sale is not consummated, Cablevision will continue to manage
the Riverside System. The Partnership has agreed that in the event the
Joint Venture is consummated prior to the Riverside Sale, Cablevision
may engage the Joint Venture to perform all or some portion of the
day-to-day management of the Riverside System.
The Riverside Sale was approved by the Partnership's limited partners
("Limited Partners") at a special meeting that occurred on December
11, 1998.
(continued)
I-6
<PAGE> 8
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Notes to Financial Statements
In connection with the Riverside Sale, the Partnership and Century
filed certain forms with the City of Moreno Valley, California
("Moreno Valley") and the County of Riverside (the "Riverside
Franchise") requesting that each such franchising authority approve
the transfer of the franchise for their respective area to Century.
Century and the Joint Venture have also filed forms with Moreno Valley
and the Riverside Franchise relating to the transfer of the franchises
to the Joint Venture. On March 5, 1999, Century announced that it had
entered into an agreement to merge (the "Merger") with and into
Adelphia Communications Corporation ("Adelphia"). In the event the
Merger is consummated, Adelphia will control the Joint Venture.
Century and Adelphia have filed certain forms with Moreno Valley and
the Riverside Franchise relating to the Merger. On June 22, 1999,
Moreno Valley adopted a resolution rejecting the proposed transfer of
the Moreno Valley franchise to Century. Representatives of the
Partnership and Century have requested that Moreno Valley rescind this
resolution and agree to a reasonable extension in order to reach an
agreement on the terms of the franchise transfer. Moreno Valley has
indicated an interest in continuing negotiations on such matter. The
Riverside Franchise has requested additional financial information
from the Partnership and Century. The Partnership and Century have
agreed to extend the Riverside Franchise's review period in order to
respond to such request. The Partnership and Century are diligently
pursuing all available means to receive approval from Moreno Valley
and the Riverside Franchise. However, there can be no assurance as to
(i) whether such approvals will be received, (ii) the time frame in
which any approvals might be obtained, and (iii) whether any
conditions that might be imposed on the transfer will be acceptable to
Century and/or the Joint Venture. The Partnership and Century have
entered into a contract extension to enable the Partnership and
Century to obtain the requisite approvals. Subject to approval of the
franchise transfers and satisfaction or waiver of customary conditions
to closing, consummation of the Riverside Sale is expected to occur
during the second half of 1999.
In the event that the Riverside Sale is consummated, of which there
can be no assurance, the Partnership will have sold all of its assets
(other than cash and funds held in escrow) and, pursuant to the
Partnership's limited partnership agreement, will ultimately be
dissolved and terminated. Assuming the Riverside Sale and the
dissolution and liquidation of the Partnership had occurred on June
30, 1999, the Partnership estimates that the pro forma distribution to
Limited Partners would have been $232 per $500 Unit. The Partnership
anticipates that an initial distribution will be made to its partners
as soon as practicable after the date of the closing of the Riverside
Sale. It is expected that a final liquidating distribution will be
made as soon as practicable after all funds held in escrow have been
released to the Partnership, subject to the receipt of any
indemnifiable claims. No assurance can be given as to the timing or
amount of such distributions.
In the event that the Riverside Sale is not consummated, it is
currently the General Partner's intention to seek a substitute buyer
for the Riverside System. There is no assurance that the General
Partner could arrange for a substitute sale transaction for the
Riverside System at an appropriate price or on terms acceptable to the
Partnership. If the General Partner's efforts in arranging a
substitute sale transaction prove to be unsuccessful, the General
Partner would continue to operate the Riverside System.
(continued)
I-7
<PAGE> 9
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 Partner and 75% to the Limited Partners. Although
distributions have been made which allowed Limited Partners to achieve
Payback, Limited Partners have not yet received a 6% return on their
aggregate contributions. Accordingly, amounts will continue to be
allocated 99% to the Limited Partners and 1% to the General Partner
until such 6% return has been achieved.
Net loss per Unit is calculated by dividing net loss attributable to
the Limited Partners by the number of Units outstanding during each
period.
(4) Supplemental Disclosure of Cash Flow Information
The Partnership considers investments with original maturities of
three months or less to be cash equivalents. At June 30, 1999,
$15,643,000 of the Partnership's cash and cash equivalents was
invested in money market funds.
(5) 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 customers served by the Partnership,
aggregated $1,227,000 and $1,102,000 for the six months ended June 30,
1999 and 1998, 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 $301,000 and $272,000 for the six months ended
June 30, 1999 and 1998, respectively.
(continued)
I-8
<PAGE> 10
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Notes to Financial Statements
The Partnership also reimburses Cablevision for direct out-of-pocket
and indirect expenses allocable to the Partnership and for certain
personnel employed on a full or part-time basis to perform accounting,
marketing, technical or other services. Such reimbursements amounted
to $117,000 and $99,000 for the six months ended June 30, 1999 and
1998, respectively.
Riverside shares office facilities, personnel and certain distribution
assets with the Redlands System. As a result, the majority of
Riverside's operating and administrative salaries and expenses are
charged to Riverside based upon Riverside's estimated utilization of
such office facilities and personnel. During the six months ended June
30, 1999 and 1998, Riverside's operating and administrative salaries
and expenses amounted to $1,318,000 and $1,123,000, respectively.
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 charges.
Costs incurred by TCI and allocated to ACT 5 with respect to the
remediation of ACT 5's year 2000 issues aggregated $77,000 through June
30, 1999. See note 7.
(6) Commitments and 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.
On April 1, 1997, the Partnership sold its cable television system
located in and around Shelbyville and Manchester, Tennessee (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. Pursuant to the asset purchase agreement, $494,000 of
such sales price was placed in escrow (the "Southern Tennessee
Escrow") and was subject to indemnifiable claims by Rifkin through
March 31, 1998. Prior to March 31, 1998, Rifkin filed a claim against
the Southern Tennessee Escrow relating to a class action lawsuit filed
by a customer challenging late fee charges with respect to the
Southern Tennessee System. Such claim has had and will continue to
have the effect of delaying the release of the Southern Tennessee
Escrow. In addition, any judgment against the Southern Tennessee
System may have the effect of reducing the amount of the Southern
Tennessee Escrow ultimately released to ACT 5.
(continued)
I-9
<PAGE> 11
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Notes to Financial Statements
(7) Year 2000 Costs
In addition to the property and equipment owned by the Riverside
System, certain office facilities, personnel, and cable distribution
assets of the Redlands System, and certain software and equipment of
TCI are utilized by the Riverside System (collectively, the
"Riverside/Redlands Systems"). Accordingly, the assessment and
remediation of ACT 5's year 2000 issues are dependent upon the
assessment and remediation by TCI of certain of its own year 2000
issues and the year 2000 issues of the Riverside/Redlands Systems.
During the six months ended June 30, 1999, TCI, in its capacity as the
indirect parent of the managing agent of ACT 5, continued its
enterprise-wide, comprehensive efforts to assess and remediate the
Riverside/Redlands Systems' computer systems and related software and
equipment to ensure such systems, software and equipment recognize,
process and store information in the year 2000 and thereafter. TCI's
year 2000 remediation efforts include an assessment of the
Riverside/Redlands Systems' most critical systems, such as customer
service and billing systems, headends and other cable plant systems
that support the Riverside/Redlands Systems' programming services,
business support operations, and other equipment and facilities. TCI
also continued its efforts to verify the year 2000 readiness of ACT
5's significant suppliers and vendors and continued to communicate
with significant business partners and affiliates to assess such
partners' and affiliates' year 2000 status.
ACT 5's year 2000 remediation efforts are being managed by the year
2000 Program Management Office ("PMO") of TCI. The PMO is responsible
for overseeing, coordinating and reporting on ACT 5's year 2000
remediation efforts. At June 30, 1999, it was comprised of a
340-member, full-time staff, accountable to executive management of
TCI.
During the six months ended June 30, 1999, TCI continued its survey of
significant third-party vendors and suppliers whose systems, services
or products are important to ACT 5's operations. The year 2000
readiness of such vendors and suppliers is critical to continued
provision of the Riverside/Redlands Systems' cable service. TCI has
examined the public disclosures regarding compliance status made by
vendors of critical systems products utilized by ACT 5 (such as
addressable controllers, accounting systems and other critical hardware
and software), and TCI is in the process of examining the public
disclosures regarding compliance status made by critical suppliers
(such as utilities, banking, and similar critical operational
services). Verification of the survey results may include, as deemed
necessary, conducting functionality tests, reviewing vendors' test data
certifications, engaging in regular conferences with vendors' year 2000
teams, or re-examining public disclosures for changes in status. For
those vendors and suppliers who do not expect to be year 2000 ready by
December 31, 1999, or are deemed to be critical to ACT 5's operations,
contingency planning efforts are underway to make such changes as are
required to continue critical operations.
(continued)
I-10
<PAGE> 12
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
Notes to Financial Statements
Year 2000 expenses and capital expenditures incurred during the six
months ended June 30, 1999 were $77,000. Management of TCI currently
estimates ACT 5's remaining costs to be not less than $171,000,
bringing the total estimated cost associated with ACT 5's year 2000
remediation efforts to be not less than $248,000.
The failure to correct a material year 2000 problem in the Redlands
System could result in an interruption or failure of ACT 5's provision
of cable service through the Riverside System. There can be no
assurance that ACT 5's systems, the Riverside/Redlands Systems, or the
systems of other companies on which ACT 5 relies will be converted in
time or that any such failure to convert by ACT 5 or other companies
will not have a material adverse effect on its financial position,
results of operations, or cash flows.
I-11
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the Partnership's Management's Discussion and Analysis of Financial
Condition and Results of Operations included in the Partnership's Annual Report
on Form 10-K for the year ended December 31, 1998. The following discussion
focuses on material changes in the trends, risks and uncertainties affecting
the Partnership's results of operations and financial condition. Reference
should also be made to the Partnership's financial statements included herein.
Certain statements 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 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 regulatory and competitive
environment of the industries in which the Partnership operates; uncertainties
inherent in new business strategies; uncertainties inherent in the changeover
to the year 2000, including the Partnership's projected state of readiness, the
projected cost of remediation, the expected date of completion of each program
or phase, the projected worst case scenarios, and the expected contingency
plans associated with such worst case scenarios; new product launches and
development plans; rapid technological changes, the acquisition, development
and/or financing of telecommunications networks and services; the development
and provision of programming for new television and telecommunications
technologies; future financial performance, including availability, terms and
deployment of capital; the ability of vendors to deliver required equipment,
software and services; availability of qualified personnel; changes in, or
failure or inability to comply with, government regulations, including, without
limitation, regulations of the Federal Communications Commission ("FCC"), and
adverse outcomes from regulatory proceedings; changes in the nature of key
strategic relationships with partners and joint venturers; competitor responses
to the Partnership's products and services and the overall market acceptance of
such products and services; and other factors. These forward-looking statements
(and such risks, uncertainties and other factors) speak only as of the date of
this Report, and 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 other change in events, conditions or
circumstances on which any such statement is based. Any statement contained
within Management's Discussion and Analysis of Financial Condition and Results
of Operations in this Form 10-Q related to year 2000 are hereby denominated as
"Year 2000 Statements" within the meaning of the Year 2000 Information and
Readiness Disclosure Act.
I-12
<PAGE> 14
AT&T Merger
On March 9, 1999, AT&T acquired TCI in a merger. In the AT&T Merger,
TCI became a subsidiary of AT&T. Immediately prior to the AT&T Merger, TCI
restructured its ownership of certain of its subsidiaries, including the merger
of its subsidiary, TCIC into TCI. The AT&T Merger has not had and is not
expected to have a material effect on the Partnership's results of operations
or financial condition.
Pending Asset Sale
On August 12, 1998, the Partnership entered into an agreement that
provides for the sale of the Riverside System to Century, an unaffiliated third
party, for a cash sales price of $33,000,000, subject to certain adjustments.
Pursuant to the asset purchase agreement for the Riverside Sale, $1,500,000 of
such sales price will be subject to indemnifiable claims for 180 days following
consummation of the Riverside Sale. On January 1, 1999, Century assigned its
interest in the Riverside Sale to Century Sub.
In August 1998, TCI and Century signed a definitive agreement to
establish the Joint Venture. Among those systems to be contributed to the Joint
Venture by TCI is the Redlands System. The Riverside System currently utilizes
office facilities, personnel and certain cable distribution assets (including
the headend) of the Redlands System. In the event the Riverside Sale is
consummated, the Riverside System is among those systems to be contributed to
the Joint Venture by Century. TCI will have a 25% interest in the Joint
Venture, which will be managed by Century. In the event that the Joint Venture
is consummated prior to the Riverside Sale, or the Joint Venture is consummated
and the Riverside Sale is not consummated, Cablevision will continue to manage
the Riverside System. The Partnership has agreed that in the event the Joint
Venture is consummated prior to the Riverside Sale, Cablevision may engage the
Joint Venture to perform all or some portion of the day-to-day management of
the Riverside System.
The Riverside Sale was approved by the Limited Partners at a special
meeting that occurred on December 11, 1998.
I-13
<PAGE> 15
In connection with the Riverside Sale, the Partnership and Century
filed certain forms with Moreno Valley and the Riverside Franchise requesting
that each such franchising authority approve the transfer of the franchise for
their respective area to Century. Century and the Joint Venture have also filed
forms with Moreno Valley and the Riverside Franchise relating to the transfer of
the franchises to the Joint Venture. On March 5, 1999, Century announced that it
had entered into an agreement to merge with and into Adelphia. In the event the
Merger is consummated, Adelphia will control the Joint Venture. Century and
Adelphia have filed certain forms with Moreno Valley and the Riverside Franchise
relating to the Merger. On June 22, 1999, Moreno Valley adopted a resolution
rejecting the proposed transfer of the Moreno Valley franchise to Century.
Representatives of the Partnership and Century have requested that Moreno Valley
rescind this resolution and agree to a reasonable extension in order to reach an
agreement on the terms of the franchise transfer. Moreno Valley has indicated an
interest in continuing negotiations on such matter. The Riverside Franchise has
requested additional financial information from the Partnership and Century. The
Partnership and Century have agreed to extend the Riverside Franchise's review
period in order to respond to such request. The Partnership and Century are
diligently pursuing all available means to receive approval from Moreno Valley
and the Riverside Franchise. However, there can be no assurance as to (i)
whether such approvals will be received, (ii) the time frame in which any
approvals might be obtained, and (iii) whether any conditions that might be
imposed on the transfer will be acceptable to Century and/or the Joint Venture.
The Partnership and Century have entered into a contract extension to enable the
Partnership and Century to obtain the requisite approvals. Subject to approval
of the franchise transfers and satisfaction or waiver of customary conditions to
closing, consummation of the Riverside Sale is expected to occur during the
second half of 1999.
In the event that the Riverside Sale is consummated, of which there
can be no assurance, the Partnership will have sold all of its assets (other
than cash and funds held in escrow) and, pursuant to the Partnership's limited
partnership agreement, will ultimately be dissolved and terminated. Assuming
the Riverside Sale and the dissolution and liquidation of the Partnership had
occurred on June 30, 1999, the Partnership estimates that the pro forma
distribution to Limited Partners would have been $232 per $500 Unit. The
Partnership anticipates that an initial distribution will be made to its
partners as soon as practicable after the date of the closing of the Riverside
Sale. It is expected that a final liquidating distribution will be made as soon
as practicable after all funds held in escrow have been released to the
Partnership, subject to the receipt of any indemnifiable claims. No assurance
can be given as to the timing or amount of such distributions.
In the event that the Riverside Sale is not consummated, it is
currently the General Partner's intention to seek a substitute buyer for the
Riverside System. There is no assurance that the General Partner could arrange
for a substitute sale transaction for the Riverside System at an appropriate
price or on terms acceptable to the Partnership. If the General Partner's
efforts in arranging a substitute sale transaction prove to be unsuccessful,
the General Partner would continue to operate the Riverside System.
I-14
<PAGE> 16
Regulation
The operation of the Riverside System is regulated at the federal,
state and local levels. The Cable Television Consumer Protection and
Competition Act of 1992 (the "1992 Cable Act") and the Telecommunications Act
of 1996 (the "1996 Telecom Act", and together with the 1992 Cable Act, the
"Cable Acts") established rules under which the Riverside System's regulated
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. The FCC's authority to regulate
any cable programming service tier ("CPST") expired on March 31, 1999. At June
30, 1999, none of the Riverside System's franchise areas were subject to such
rate regulation. However, if a local franchise authority becomes certified to
regulate rates, basic service and associated equipment rates would be subject
to rate regulation.
During the six months ended June 30, 1999, approximately 33% of the
Riverside System's revenue was derived from Regulated Services (exclusive of
CPST). As noted above, any increases in rates charged for such services are
subject to regulation 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"). Although the California MMDS
Operator has generated increased competition 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 customer 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. Direct
broadcast satellite ("DBS") has emerged as significant competition to cable
television systems. DBS service is available within the franchise areas
serviced by the Riverside System. However, the Partnership is unable to predict
what effect such competition will have on Riverside's financial condition or
results of operations.
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 Partnership expects that the Riverside
System will face substantial competition from telephone companies for the
provision of video services, whether it is through wireless cable, or through
upgraded telephone networks. The Partnership assumes that all major telephone
companies have already entered or may enter the business of providing video
services. 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-15
<PAGE> 17
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 is providing digital video services.
The primary capital cost of digital video services is the purchase and
installation of digital set-top devices. Accordingly, the capital costs
incurred are dependent upon the number of digital set-top devices required. The
Riverside System had approximately 2,300 subscribers to digital video services
at June 30, 1999. Capital costs incurred by the Riverside System during the six
months ended June 30, 1999 related to digital video services were not
significant. The Riverside System plans to increase the number of subscribers
to digital video services.
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.
The Riverside System
The following table sets forth information for the Riverside System
for the periods indicated (amounts in thousands):
<TABLE>
<CAPTION>
June 30, June 30,
1999 1998
-------- --------
<S> <C> <C>
Basic Customers (1) 20.3 19.1
Premium Subscriptions (1)(2) 19.7 21.0
</TABLE>
<TABLE>
<CAPTION>
Six months ended
June 30,
------------------
1999 1998
------ -----
<S> <C> <C>
Revenue (3) $5,009 4,538
====== =====
Operating Cash Flow (4) $1,867 1,787
====== =====
</TABLE>
(1) From June 30, 1998 to June 30, 1999, Riverside experienced an
increase of 1,200 basic customers and a decrease of 1,300
premium subscriptions. Such decrease in premium subscriptions
is comprised of a 700 subscription decrease in traditional
premium subscriptions, a 300 subscription decrease in
"STARZ!" subscriptions and a 300 subscription decrease in
"ENCORE" subscriptions during this period. The monthly charge
for "ENCORE" and "STARZ!", which are indirectly owned by TCI,
generally ranges from $1.00 to $7.00, as compared to $9.00 to
$10.00 for other premium services. As described under
Competition above, Riverside is subject to competition from
the California MMDS Operator and DBS providers. The
Partnership currently is unable to predict the future effect
of such competition on Riverside's financial condition and
results of operations.
I-16
<PAGE> 18
(2) A basic customer 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 income before depreciation, amortization, and
management fees ("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. The amounts reflected
in the table 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.
The Riverside System passed approximately 31,500 homes at both June
30, 1999 and 1998.
On August 12, 1998, the Partnership entered into an agreement that
provides for the sale of the Riverside System. The Riverside Sale was approved
by the Limited Partners at a special meeting that occurred on December 11,
1998. Subject to the receipt of regulatory approvals and satisfaction or waiver
of customary conditions to closing, consummation of the Riverside Sale is
expected to occur during the second half of 1999. There is no assurance that
the Riverside Sale will be consummated. See Pending Asset Sale above for
additional information regarding the Riverside Sale.
Year 2000
In addition to the property and equipment owned by the Riverside
System, certain office facilities, personnel, and cable distribution assets of
the Redlands System, and certain software and equipment of TCI are utilized by
the Riverside/Redlands Systems. Accordingly, the assessment and remediation of
ACT 5's year 2000 issues are dependent upon the assessment and remediation by
TCI of certain of its own year 2000 issues and the year 2000 issues of the
Riverside/Redlands Systems.
During the six months ended June 30, 1999, TCI, in its capacity as the
indirect parent of the managing agent of ACT 5, continued its enterprise-wide,
comprehensive efforts to assess and remediate the Riverside/Redlands Systems'
computer systems and related software and equipment to ensure such systems,
software and equipment recognize, process and store information in the year
2000 and thereafter. TCI's year 2000 remediation efforts include an assessment
of the Riverside/Redlands Systems' most critical systems, such as customer
service and billing systems, headends and other cable plant systems that
support the Riverside/Redlands Systems' programming services, business support
operations, and other equipment and facilities. TCI also continued its efforts
to verify the year 2000 readiness of ACT 5's significant suppliers and vendors
and continued to communicate with significant business partners and affiliates
to assess such partners' and affiliates' year 2000 status.
I-17
<PAGE> 19
ACT 5's year 2000 remediation efforts are being managed by the year
2000 PMO of TCI. The PMO is responsible for overseeing, coordinating and
reporting on ACT 5's year 2000 remediation efforts. At June 30, 1999, it was
comprised of a 340-member, full-time staff, accountable to executive management
of TCI.
The PMO has defined a four-phase approach to determining the year 2000
readiness of the Riverside/Redlands Systems' systems, software and equipment.
Such approach is intended to provide a detailed method for tracking the
evaluation, repair and testing of the Riverside/Redlands Systems' critical
systems, software and equipment. Phase 1, Assessment, involves the inventory of
all critical systems, software and equipment and the identification of any year
2000 issues. Phase 1 also includes the preparation of the workplans needed for
remediation. Phase 2, Remediation, involves repairing, upgrading and/or
replacing any non-compliant critical equipment and systems. Phase 3, Testing,
involves testing the Riverside/Redlands Systems' critical systems, software,
and equipment for year 2000 readiness, or in certain cases, relying on test
results provided to TCI. Phase 4, Implementation, involves placing compliant
systems, software and equipment into production or service.
Management believes that the progress of remediation of the
Riverside/Redlands Systems closely follows that of TCI as a whole, and that the
phase completion data set forth below for TCI may be considered to be a useful
guide for estimating the Riverside/Redlands Systems' phase completion and
ultimately the progress of remediating potential year 2000 issues impacting ACT
5's operations.
At June 30, 1999, TCI's overall progress by phase was as follows:
<TABLE>
<CAPTION>
Percentage of Year 2000 Expected Completion Date
Phase Projects Completed by Phase* -All Year 2000 Projects
- ----- ---------------------------- ------------------------
<S> <C> <C>
Phase 1-Assessment 100% Completed
Phase 2-Remediation 99% August 1999
Phase 3-Testing 81% September 1999
Phase 4-Implementation 56% September 1999
</TABLE>
- ---------------------
*The percentages set forth above were calculated by dividing the number of year
2000 projects that have completed a given phase by the total number of year
2000 projects.
The completion dates set forth above are based on TCI's current
expectations. However, due to the uncertainties inherent in year 2000
remediation, no assurances can be given as to whether such projects will be
completed on such dates.
TCI has completed the inventory and assessment of critical systems with
embedded technologies that impact ACT 5's operations. The progress by phase of
year 2000 compliance work on such systems is included in the table above.
I-18
<PAGE> 20
During the six months ended June 30, 1999, TCI continued its survey of
significant third-party vendors and suppliers whose systems, services or
products are important to ACT 5's operations. The year 2000 readiness of such
vendors and suppliers is critical to continued provision of the
Riverside/Redlands Systems' cable service. TCI has examined the public
disclosures regarding compliance status made by vendors of critical systems
products utilized by ACT 5 (such as addressable controllers, accounting systems
and other critical hardware and software), and TCI is in the process of
examining the public disclosures regarding compliance status made by critical
suppliers (such as utilities, banking, and similar critical operational
services). The majority are either year 2000 ready, require the implementation
of an adjustment to the company's systems, or are expected to be year 2000 ready
by the third quarter of 1999. Verification of the survey results may include, as
deemed necessary, conducting functionality tests, reviewing vendors' test data
certifications, engaging in regular conferences with vendors' year 2000 teams,
or re-examining public disclosures for changes in status. For those vendors and
suppliers who do not expect to be year 2000 ready by December 31, 1999, or are
deemed to be critical to ACT 5's operations, contingency planning efforts are
underway to make such changes as are required to continue critical operations.
Year 2000 expenses and capital expenditures incurred during the six
months ended June 30, 1999 were $77,000. Management of TCI currently estimates
ACT 5's remaining costs to be not less than $171,000, bringing the total
estimated cost associated with ACT 5's year 2000 remediation efforts to be not
less than $248,000. Although no assurances can be given, TCI currently expects
that (i) cash flow from operations or advances from TCI will fund the costs
associated with year 2000 compliance and (ii) the total projected cost
associated with ACT 5's year 2000 program will not be material to ACT 5's
financial position, results of operations or cash flows.
The failure to correct a material year 2000 problem in the Redlands
System could result in an interruption or failure of ACT 5's provision of cable
service through the Riverside System. Management believes that TCI's year 2000
efforts in the Riverside/Redlands Systems will significantly reduce ACT 5's
risks associated with the changeover to the year 2000 and has implemented
certain contingency plans to minimize the effect of any potential year 2000
related disruptions. The risks and the uncertainties discussed below and the
associated contingency plans relate to systems, software, equipment, and
services that TCI has deemed critical in regard to customer service, business
operations, financial impact or safety.
The failure of addressable controllers contained in the
Riverside/Redlands Systems' headend could disrupt the delivery of premium
services to customers and could necessitate crediting customers for failure to
receive such premium services. In this unlikely event, management expects that
it will identify and transmit the lowest cost programming tier. Unless other
contingency plans are developed with the programmers, premium and adult content
channels would not likely be transmitted until the addressable controller had
been repaired.
Customer service networks and/or automated voice response systems
failure could prevent access to customer account information, hamper
installation scheduling and disable the processing of pay-per-view requests.
ACT 5 plans to have its customer service representatives answer telephone calls
from customers in the event of outages and expects to retrieve needed customer
information manually from the billing service provider.
I-19
<PAGE> 21
A failure of the services provided by billing systems service
providers could result in a loss of customer records which could disrupt the
ability to bill customers for a protracted period. ACT 5 plans to prepare
electronic backup records of its customer billing information prior to the year
2000 to allow for data recovery. In addition, ACT 5 continues to monitor the
year 2000 readiness of its key customer-billing suppliers.
Advertising revenue could be adversely affected by the failure of
certain equipment which could impede or prevent the insertion of advertising
spots in ACT 5's programming. ACT 5 anticipates that it can minimize such
effect by manually resetting the dates each day until the equipment is
repaired.
Security and fire protection systems failure could leave facilities
vulnerable to intrusion and fire. ACT 5 expects to return such systems to
normal functioning by turning the power off and then on again ("power off/on").
ACT 5 also plans to have additional security staff on site and plans to
implement a backup plan for communicating with local fire and police
departments. Also, certain personal computers interface with and control
elevators, escalators, wireless systems, public access systems and certain
telephony systems. In the event such computers cease operating, conducting a
power off/on is expected to resume normal functioning. If a power off/on does
not resume normal functioning, management expects to resolve the problem by
resetting the computer to a pre-designated date which precedes the year 2000.
In the event that the local public utility cannot supply power, TCI
expects to supply power for a limited time to the Riverside/Redlands Systems'
cable headend and office sites through backup generators.
The financial impact of any or all of the above worst-case scenarios
has not been and cannot be estimated by ACT 5 due to the numerous uncertainties
and variables associated with such scenarios.
If critical systems related to ACT 5's cable TV and programming
services are not successfully remediated, ACT 5 could face claims of breach of
contract from parties to the Riverside Sale, from certain programming providers,
from advertisers and from other cable TV businesses that rely on ACT 5's
programming services. ACT 5 has not determined the possible losses from any such
claims of breach of contract.
Material Changes in Results of Operations
Revenue increased $471,000 or 10% for the six months ended June 30,
1999, as compared to the corresponding prior year period. Revenue from cable
customers accounted for a 9% increase in revenue, primarily due to a $344,000
increase in basic revenue, a $97,000 increase in pay-per-view revenue, and a
$5,000 increase in premium revenue. ACT 5 experienced a 4% increase in its
average basic rate, an increase of 5% in the number of average basic customers,
a 3% increase in its average rate for traditional premium services and a 2%
decrease in the number of average traditional premium subscriptions.
Additionally, advertising sales accounted for the remaining 1% increase in
revenue.
Programming expense increased $118,000 or 11% for the six months ended
June 30, 1999, as compared to the corresponding prior year period. Such
increase is due to higher programming rates. It is anticipated that the
Partnership's programming costs will continue to increase in future periods.
I-20
<PAGE> 22
Operating expenses increased $45,000 or 9% for the six months ended
June 30, 1999, as compared to the corresponding prior year period. Such increase
is primarily due to an increase in labor and other costs associated with the
deployment of digital products. Such increases were partially offset by
reductions attributable to higher capitalized labor and overhead resulting
primarily from increased installation activities.
Selling, general and administrative expenses increased $348,000 or 23%
for the six months ended June 30, 1999, as compared to the corresponding prior
year period. Such increase is primarily due to increased expenses associated
with Limited Partner communications, increased franchise fees, increased
marketing costs associated with the deployment of digital products, increased
management fees, and increased billing costs.
ACT 5's year 2000 costs include fees and other expenses allocated from
TCI in connection with TCI's comprehensive efforts to review and correct
computer systems, equipment and related software to ensure readiness for the
year 2000. See detailed discussion above.
Depreciation and amortization expense decreased $78,000 or 4% for the
six months ended June 30, 1999, as compared to the corresponding prior year
period. Amortization expense for the six months ended June 30, 1998 includes
$92,000 attributable to the year ended December 31, 1997. Exclusive of such
amount, depreciation and amortization was relatively constant during the six
month periods ended June 30, 1999 and 1998.
Other Income and Expense
Interest income increased $41,000 or 12% for the six months ended June
30, 1999, as compared to the corresponding prior year period. Such increase is
primarily due to a higher balance of interest-earning assets in 1999, as
compared to 1998.
During the first quarter of 1998, the Partnership wrote off $202,000
of deferred loan costs that were related to debt that was repaid in 1997.
Material Changes in Financial Condition
As previously described under Pending Asset Sale, the Partnership
entered into an agreement that provides for the sale of the Riverside System.
In the event that the Riverside Sale is consummated, the Partnership
anticipates that it would use all or a portion of the available net cash
proceeds to satisfy its liabilities, including any amounts due to related
parties, and make distributions to the Partnership's partners.
In the event that the Riverside Sale is consummated, of which there
can be no assurance, the Partnership will have sold all of its assets (other
than cash and funds held in escrow) and, pursuant to the Partnership's limited
partnership agreement, will ultimately be dissolved and terminated. Assuming
the Riverside Sale and the dissolution and liquidation of the Partnership had
occurred on June 30, 1999, the Partnership estimates that the pro forma
distribution to Limited Partners would have been $232 per $500 Unit. The
Partnership anticipates that an initial distribution will be made to its
partners as soon as practicable after the date of the closing of the Riverside
Sale. It is expected that a final liquidating distribution will be made as soon
as practicable after all funds held in escrow have been released to the
Partnership, subject to the receipt of any indemnifiable claims. No assurance
can be given as to the timing or amount of such distributions.
I-21
<PAGE> 23
Prior to the release of the Southern Tennessee Escrow, Rifkin filed a
claim against such escrow relating to a class action lawsuit filed by a
customer challenging late fee charges with respect to the Southern Tennessee
System. Such claim has had and will continue to have the effect of delaying the
release of the Southern Tennessee Escrow. In addition, any judgment against the
Southern Tennessee System may have the effect of reducing the amount of the
Southern Tennessee Escrow ultimately released to ACT 5.
The Partnership's other liabilities represent unclaimed distribution
checks to certain Limited Partners which were written on a bank account which
was subsequently closed. Such checks will either be reissued to such Limited
Partners or released to the respective state of such Limited Partners' last
known residence upon dissolution of the Partnership.
During the six months ended June 30, 1999, the Partnership used cash
provided by operating activities of $828,000 to fund investing activities of
$661,000 and an increase in cash and cash equivalents of $167,000. See the
Partnership's statements of cash flows included in the accompanying financial
statements.
The Partnership estimates that during 1999 it will spend approximately
$1.4 million for capital expenditures related to Riverside, of which $928,000
relates to digital video services. The estimated digital video services capital
expenditures are based upon the achievement of a target level of new customers
to such services, and therefore the estimate of capital expenditures will
fluctuate based on the actual number of new customers which subscribe to
digital video services. Additionally, such estimated amounts assume a full year
of capital expenditures for Riverside and that no significant technological
improvements will be implemented to the Riverside System. See related
discussion under Competition and The Riverside System.
The Partnership anticipates that cash on hand and cash provided by
operating activities will be sufficient to fund estimated capital expenditures
(exclusive of any significant technological improvements, as described under
Competition), and to meet its other liquidity requirements.
I-22
<PAGE> 24
AMERICAN CABLE TV INVESTORS 5, LTD.
(A Colorado Limited Partnership)
PART II - OTHER INFORMATION
Item 5. Other Information
On February 8, 1999, in connection with the sale of American Cable TV
Investor 5, Ltd.'s (the "Partnership") cable television system serving
Riverside, California (the "Riverside System") to Century
Communications Corp. ("Century") (the "Riverside Sale"), the
Partnership and Century filed a Form 394 with (i) the City of Moreno
Valley, California (the "Moreno Valley Franchise") and (ii) the County
of Riverside, California (the "Riverside Franchise"), requesting that
each such franchising authority approve the transfer of the franchise
for their respective area to Century. Pursuant to the rules of the
Federal Communication Commission, a franchising authority has 120 days
(the "Review Period") to act upon a request to transfer a cable
franchise.
Tele-Communications, Inc. ("TCI"), an affiliate of the Partnership,
and Century have signed a letter of intent to establish a joint
venture (the "Joint Venture") that will combine multiple cable
television systems in Southern California. In the event the Riverside
Sale is consummated, the Riverside System is among those systems to be
contributed to the Joint Venture by Century. TCI will have an
approximate 25% interest in the Joint Venture, which will be managed
by Century. On March 5, 1999, Century announced that it had entered
into an agreement to merge (the "Merger") with and into Adelphia
Communications Corporation ("Adelphia"). In the event the Merger is
consummated, Adelphia will control the Joint Venture. Forms 394 have
also been filed by (i) Century and the Joint Venture relating to the
transfers of the Moreno Valley Franchise and the Riverside Franchise
to the Joint Venture and (ii) Century and Adelphia relating to the
Merger.
With respect to the Riverside Franchise, the County of Riverside has
requested additional financial information from the Partnership and
Century. The Partnership and Century have agreed to extend the Review
Period in order to respond to such request. With respect to the Moreno
Valley Franchise, on June 22, 1999 the City Council of the City of
Moreno Valley adopted a resolution rejecting the proposed transfer.
Representatives of the Partnership and Century have requested that the
City Council rescind this resolution and agree to a reasonable
extension of the Review Period in order to reach an agreement on the
terms of the franchise transfer. The City Council has indicated an
interest in continuing negotiations on such matter.
The Partnership and Century are diligently pursuing all available
means to receive approval form the County of Riverside and the City of
Moreno Valley. However, there can be no assurance as to (i) whether
such approvals will be received, (ii) the time frame in which any
approvals might be obtained or (iii) whether any conditions that might
be imposed on the transfer will be acceptable to Century and/or the
Joint Venture.
The Partnership and Century have entered into a contract extension to
enable the Partnership and Century to obtain the requisite approvals.
II-23
<PAGE> 25
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, 1999:
None.
II-24
<PAGE> 26
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 13, 1999 By: /s/ Ann M. Koets
--------------------------------
Ann M. Koets
Vice President
(Chief Accounting Officer)
II-25
<PAGE> 27
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
(27) Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 16,301
<SECURITIES> 0
<RECEIVABLES> 389
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 20,744
<DEPRECIATION> 13,071
<TOTAL-ASSETS> 29,411
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 28,235
<TOTAL-LIABILITY-AND-EQUITY> 29,411
<SALES> 0
<TOTAL-REVENUES> 5,009
<CGS> 0
<TOTAL-COSTS> 1,799
<OTHER-EXPENSES> 1,891
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (212)
<INCOME-TAX> 0
<INCOME-CONTINUING> (212)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (212)
<EPS-BASIC> (1.05)<F1>
<EPS-DILUTED> 0
<FN>
<F1>EPS-PRIMARY REPRESENTS NET LOSS PER LIMITED PARTNERSHIP UNIT
</FN>
</TABLE>
