Item 1. Business.
(a) General Development of Business
American Cable TV Investors 5, Ltd. ("ACT 5" or the "Partnership") is a Colorado limited partnership that was formed in December of 1986 for the purpose of acquiring, developing and operating cable television systems. The Partnership's general partner is IR-TCI Partners V, L.P. ("IR-TCI" or the "General Partner"), a Colorado limited partnership. At December 31, 2001, the general partner of IR-TCI was TCI Ventures Five, Inc. ("TCIV 5"), 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 AT&T Broadband, LLC ("AT&T Broadband"), and is the managing agent of the Partnership. AT&T Broadband is a subsidiary of AT&T Corp.
In its public offering that was conducted from May of 1987 to February of 1989, the Partnership sold 200,005 limited partnership units at a price of $500 per unit ("Unit").
The Partnership had a 40% ownership interest in Newport News Cablevision Associates, L.P., and its subsidiary Newport News Cablevision, Ltd. (collectively, "Newport News"). Newport News owned and operated the cable system located in and around Newport News, Virginia (the "Newport News System"). American Cable TV Investors 4, Ltd., an affiliate, owned the 60% majority interest in Newport News. The Newport News System was sold to an unaffiliated third party for cash proceeds of $121,886,000 on January 1, 1996 (the "Newport News Sale"). The Partnership's share of the cash proceeds from the sale of the Newport News System was used to fund a distribution to ACT 5's limited partners ("Limited Partners") of $165 per Unit in 1996.
During 1997, ACT 5 sold three of its cable television systems in three separate transactions. The cable television systems were located in and around (i) Shelbyville and Manchester, Tennessee (the "Southern Tennessee System"), (ii) St. Mary's County, Maryland (the "St. Mary's System") and (iii) Lower Delaware (the "Lower Delaware System") (collectively, the "1997 Sales Transactions"). The 1997 Sales Transactions were approved by the Limited Partners at a special meeting that occurred on March 26, 1997. The cash proceeds from the 1997 Sales Transactions were used to fund a distribution to the Limited Partners of $370 per Unit in 1997.
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AMERICAN CABLE TV INVESTORS 5, LTD. (A Colorado Limited Partnership)
General Development of Business (continued)
On December 7, 1999, the Partnership consummated the sale of its remaining cable television system serving subscribers located in and around Riverside, California (the "Riverside System") to Century Exchange LLC ("Century"), a subsidiary of Adelphia Communications Corporation, for an adjusted sales price of $33,399,000 (the "Riverside Sale"). The Riverside Sale was approved by the Limited Partners at a special meeting that occurred on December 11, 1998. In connection with the Riverside Sale, Century and the Partnership waived the condition to closing that all required consents be obtained prior to closing the Riverside Sale, as such condition related to the transfer to Century of the franchise agreement between the Partnership and the City of Moreno Valley. The franchise agreement authorizes the Partnership to provide cable television service to subscribers located in and around Moreno Valley, California (the "Moreno Franchise Agreement"). Accordingly, all of the Riverside System's cable television assets other than the Moreno Franchise Agreement were transferred to Century on December 7, 1999. In connection with the Riverside Sale, the Partnership entered into a management agreement with Century pursuant to which Century would be entitled to all net cash flows generated by the portion of the Riverside System that was subject to the Moreno Franchise Agreement until such time as the City of Moreno Valley approved the transfer of the Moreno Franchise Agreement from the Partnership to Century. On December 18, 2001, the City of Moreno Valley approved the transfer of the Moreno Valley Franchise Agreement to Century. The settlement and transfer requires a payment of $500,000 from Century to the City of Moreno Valley and releases the Partnership from any liability.
On December 7, 1999, AT&T Broadband and Century contributed cable television systems to a joint venture (the "Joint Venture") that combined multiple cable television systems in Southern California. The Riverside System was among those systems that was contributed to the Joint Venture by Century. AT&T Broadband has an approximate 25% interest in the Joint Venture, which is managed by Century. AT&T Broadband, through certain of its subsidiaries, owns a 100% ownership interest in IR-TCI.
In connection with the Riverside Sale, the Partnership made a distribution to its General Partner and Limited Partners of $410,000 and $40,601,000 ($203 per Unit for Limited Partners of record as of April 1, 2000), respectively, in April 2000.
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As a result of the Riverside Sale, the Partnership is no longer actively engaged in the cable television business. A final determination of the Partnership's liabilities and any liquidating distributions cannot be made in connection with the Partnership's dissolution until the contingencies described in note 4 to the accompanying financial statements are resolved. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources."
(b) Financial Information about Industry Segments
Not applicable.
(c) Narrative Description of Business
Not meaningful.
(d) Financial Information about Foreign and Domestic Operations and Export Sales
Not applicable.
Item 2.
Item 2. Properties.
Not meaningful.
Item 3.
Item 3. Legal Proceedings.
City Partnership Co. on behalf of itself and all others similarly situated and derivatively on behalf of American Cable TV Investors 5, Ltd., a Colorado limited partnership, plaintiff v. IR-TCI Partners V, L.P., TCI Ventures Five, Inc., Tele-Communications, Inc., Lehman Brothers, Inc. and Jack Langer, Defendants, and American Cable TV Investors 5, Ltd., a Colorado limited partnership, nominal defendants. On November 2, 1999 this action was filed in the United States District Court for the District of Colorado, Civil Action No. 99-N-2122. The Partnership was served in this action on December 6, 1999. This purported class action and derivative action asserts claims against the Company for violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and breach of fiduciary duty in connection with the sale of the Riverside System to Century Exchange LLC. On February 10, 2000, the Defendants filed motions to dismiss Plaintiff's complaint. On September 28, 2000, the Court dismissed the Plaintiff's complaint for failing to plead the Federal Securities Act claim properly. On October 13, 2000, the Plaintiff served an amended complaint to the Defendants and on November 13, 2000, Defendants filed motions to dismiss the amended complaint. On May 18, 2001, the Court denied the Defendant's motion to dismiss the complaint. A trial date has not yet been set. Based upon the limited facts available, management believes that, although no assurance can be given as to the outcome of this action, the ultimate disposition should not have a material adverse effect upon the financial condition of the Partnership.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
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AMERICAN CABLE TV INVESTORS 5, LTD. (A Colorado Limited Partnership)
PART II.
Item 5.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
In its public offering that was conducted from May 1987 to February 1989, the Partnership sold 200,005 Units to the public at a price of $500 per Unit. At December 31, 2001, there were approximately 11,217 Unit holders.
Although the Units are freely transferable, no public trading market for the Units exists. To the extent that an informal or secondary market exists, the Limited Partners may only be able to sell Units at a substantial discount from the Units' proportionate share of the estimated market value of the underlying net assets of the Partnership.
The Partnership used most of its share of the net proceeds from the Newport News Sale to make distributions in 1996 to Presidio Capital Corp. (a former general partner of the general partner), TCIV 5 and the Limited Partners of $67,000, $266,000 and $33,001,000 ($165 per Unit for Limited Partners of record as of January 1, 1996), respectively. The Partnership used most of the net proceeds from the sale of the Southern Tennessee, St. Mary's and Lower Delaware Systems to make distributions in 1997 to Presidio, TCIV 5 and the Limited Partners of $149,000, $598,000 and $74,002,000 ($370 per Unit for Limited Partners of record as of July 1, 1997), respectively.
The Partnership used most of the net proceeds from the Riverside Sale to make a distribution to its General Partner and Limited Partners of $410,000 and $40,601,000 ($203 per unit for Limited Partners of record as of April 1, 2000), respectively, in April 2000.
Item 6.
Item 6. Selected Financial Data.
Selected financial data related to the Partnership's financial condition and results of operations for the five years ended December 31, 2001 are summarized as follows (such information should be read in conjunction with the Partnership's financial statements included elsewhere herein):
SUMMARY BALANCE SHEET DATA:
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AMERICAN CABLE TV INVESTORS 5, LTD. (A Colorado Limited Partnership)
SUMMARY STATEMENT OF OPERATIONS DATA:
- ----------
(1) The December 31, 1999 summary balance sheet and summary statement of operations data reflect the effect of the Riverside Sale. As a result of the Riverside Sale, the Partnership's statement of operations for the year ended December 31, 1999 includes eleven months of operating results for the Riverside System. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - General".
(2) The December 31, 1997 summary balance sheet data and summary statement of operations data for the year ended December 31, 1997 reflect the effects of the 1997 Sales Transactions. As a result of the 1997 Sales Transactions, the Partnership's statement of operations for the year ended December 31, 1997 includes (i) three months of operating results for the Southern Tennessee and St. Mary's Systems, (ii) six months of operating results for the Lower Delaware System and (iii) twelve months of operating results for the Riverside System. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - General".
(3) The Partnership recorded an adjustment to the gain on the Riverside Sale of $66,000 during the second quarter of 2000.
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AMERICAN CABLE TV INVESTORS 5, LTD. (A Colorado Limited Partnership)
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
General
Asset Sales. On December 7, 1999, the Partnership consummated the sale of its remaining cable television system serving subscribers located in and around Riverside, California to Century for an adjusted sales price of $33,399,000. The Riverside Sale was approved by the Limited Partners at a special meeting that occurred on December 11, 1998. In connection with the Riverside Sale, Century and the Partnership waived the condition to closing that all required consents be obtained prior to closing the Riverside Sale, as such condition related to the transfer to Century of the franchise agreement between the Partnership and the City of Moreno Valley that authorizes the Partnership to provide cable television service to subscribers located in and around Moreno Valley, California. Accordingly, all of the Riverside System's cable television assets other than the Moreno Franchise Agreement were transferred to Century on December 7, 1999. In connection with the Riverside Sale, the Partnership entered into a management agreement with Century pursuant to which Century would be entitled to all net cash flows generated by the portion of the Riverside System that was subject to the Moreno Franchise Agreement until such time as the City of Moreno Valley approved the transfer of the Moreno Franchise Agreement from the Partnership to Century. On February 13, 2001, the City of Moreno Valley passed a resolution indicating that the Partnership, by entering into the management agreement, in effect, transferred the franchise without city approval, thereby causing a material default under the franchise agreement. On December 18, 2001, the City of Moreno Valley approved the transfer of the Moreno Valley Franchise Agreement to Century. The settlement and transfer requires a payment of $500,000 from Century and releases the Partnership from any liability.
On December 7, 1999, AT&T Broadband, an affiliate of the Partnership, and Century contributed cable television systems to the Joint Venture that combined multiple cable television systems in Southern California. Among those systems to be contributed to the Joint Venture by AT&T Broadband was the Redlands System. The Riverside System was among those systems that was contributed to the Joint Venture by Century. AT&T Broadband has an approximate 25% interest in the Joint Venture, which is managed by Century.
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AMERICAN CABLE TV INVESTORS 5, LTD. (A Colorado Limited Partnership)
The Partnership used most of the net proceeds from the Riverside Sale to make a distribution to its General Partner and Limited Partners of $410,000 and $40,601,000 ($203 per Unit for Limited Partners of record as of April 1, 2000), respectively, in April 2000.
As a result of the Riverside Sale, the Partnership is no longer actively engaged in the cable television business. A final determination of the Partnership's liabilities and any liquidating distributions cannot be made in connection with the Partnership's dissolution until the contingencies described in note 4 to the accompanying financial statements are resolved. See "Liquidity and Capital Resources."
Results of Operations
As a result of the Riverside Sale, the Partnership is no longer actively engaged in the cable television business. Pending the resolution of the contingencies described in note 4 to the accompanying financial statements, the Partnership will seek to make a final determination of its liabilities so that liquidating distributions can be made in connection with its dissolution. Accordingly, the Partnership's results of operations for the years ended December 31, 2001 and 2000 are primarily comprised of general and administrative ("G&A") expenses and interest income. The Partnership's G&A expenses are primarily comprised of costs associated with the administration of the Partnership. The Partnership's G&A expenses increased $175,000 during the year ended December 31, 2001, as compared to the corresponding prior year period. Such increase is primarily due to higher legal fees incurred in ACT 5's efforts to resolve the lawsuit as described in note 4 to the accompanying financial statements. The Partnership's results of operations for the year ended December 31, 2000 also reflect an adjustment to the gain on the Riverside Sale.
Interest income relates to interest earned on the Partnership's cash and cash equivalents. Interest income decreased $974,000 and increased $381,000 during the years ended December 31, 2001 and 2000, as compared to the corresponding prior year periods. Such decrease in 2001 is due to a decrease in the average balance of the Partnership's cash and cash equivalents resulting from a distribution made in April 2000 from the net cash proceeds received in connection with the Riverside Sale and a reduction in the average interest rate. The increase in 2000 is due to an increase in the average balance of the Partnership's cash and cash equivalents resulting from net cash proceeds received in connection with the Riverside Sale, an increase in the average interest rate and interest received in conjunction with the release of funds held in escrow.
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AMERICAN CABLE TV INVESTORS 5, LTD. (A Colorado Limited Partnership)
The Partnership recorded a gain from the Riverside Sale of $20,937,000 during the year ended December 31, 1999.
Liquidity and Capital Resources
At December 31, 2001, the Partnership held cash and cash equivalents of $9,481,000. The Partnership anticipates that it will make liquidating distributions in connection with its dissolution as soon as possible following the final determination and satisfaction of the Partnership's liabilities. See note 4 to the accompanying financial statements.
Pursuant to the asset purchase agreement for the sale of the Southern Tennessee System, $494,000 of the sales price for the Southern Tennessee System was placed in escrow (the "Southern Tennessee Escrow") and was subject to indemnifiable claims for up to one year following consummation of the sale of the Southern Tennessee System. Prior to its release, Rifkin Acquisition Partners, L.L.L.P. ("Rifkin"), the buyer of the Southern Tennessee System, filed a claim against the Southern Tennessee Escrow. Rifkin's claim related to a class action lawsuit filed by a customer challenging late fee charges with respect to the Southern Tennessee System. On September 14, 1999, Rifkin sold the Southern Tennessee System to an affiliate of Charter Communications, Inc. ("Charter"). In connection with such sale, Charter was assigned the rights to the indemnification claim. The above described class action lawsuit has been settled and dismissed. The amount of the Southern Tennessee Escrow due to Charter as a result of the terms of the settlement agreement has not yet been determined. Upon determination of amounts due Charter, the remaining funds in the Southern Tennessee Escrow will be released to ACT 5.
On November 2, 1999 a limited partner of ACT 5 filed suit in United States District Court for the District of Colorado against the General Partner of ACT 5. The lawsuit also names certain affiliates of the General Partner as defendants. The lawsuit alleges that the defendants violated disclosure requirements under the Securities Exchange Act of 1934 in connection with soliciting limited partner approval of the Riverside Sale and that certain defendants breached their fiduciary duty in connection with the Riverside Sale. On May 18, 2001, the Court denied the Defendant's motion to dismiss the complaint. A trial date has not yet been set. Based upon the limited facts available, management believes that, although no assurance can be given as to the outcome of this action, the ultimate disposition should not have a material adverse effect upon the financial condition of the Partnership.
Section 21 of the Partnership Agreement provides that the General Partner and its affiliates, subject to certain conditions set forth in more detail in the Partnership Agreement, are entitled to be indemnified for any liability or loss incurred by them by reason of any act performed or omitted to be performed by them in connection with the business of ACT 5, provided that the General Partner determines, in good faith, that such course of conduct was in the best interests of ACT 5 and did not constitute proven fraud, negligence, breach of fiduciary duty or misconduct. In this regard, it is anticipated that legal fees incurred by the defendants with respect to the above lawsuit will be paid by ACT 5. As of December 31, 2001, the partnership has recognized an amount payable to the General Partner of approximately $307,000 to cover out of pocket costs incurred to defend this lawsuit.
The claim against the Southern Tennessee Escrow and the above described lawsuit have had and will continue to have the effect of delaying any final liquidating distributions of the Partnership.
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AMERICAN CABLE TV INVESTORS 5, LTD. (A Colorado Limited Partnership)
At December 31, 2001, the Partnership had $441,000 of unclaimed distribution checks payable to certain Limited Partners which were written on a bank account which has been 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.
Item 8.
Item 8. Financial Statements and Supplementary Data.
The financial statements of the Partnership are filed under this item beginning on Page II-7. All financial statement schedules are omitted as they are not required or are not applicable.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
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AMERICAN CABLE TV INVESTORS 5, LTD. (A Colorado Limited Partnership)
Independent Auditors' Report
The Partners American Cable TV Investors 5, Ltd.:
We have audited the accompanying balance sheets of American Cable TV Investors 5, Ltd. (a Colorado limited partnership) as of December 31, 2001 and 2000, and the related statements of operations, partners' equity, and cash flows for each of the years in the three-year period ended December 31, 2001. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of American Cable TV Investors 5, Ltd. as of December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America.
As discussed in note 2 to the financial statements, the Partnership sold substantially all of its cable television assets and is currently in the process of completing its liquidating distributions.
KPMG LLP
Denver Colorado March 25, 2002
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AMERICAN CABLE TV INVESTORS 5, LTD. (A Colorado Limited Partnership)
Balance Sheets
December 31, 2001 and 2000
(See note 2)
See accompanying notes to financial statements.
II-8
AMERICAN CABLE TV INVESTORS 5, LTD. (A Colorado Limited Partnership)
Statements of Operations
Years ended December 31, 2001, 2000 and 1999
(See note 2)
See accompanying notes to financial statements.
II-9
AMERICAN CABLE TV INVESTORS 5, LTD. (A Colorado Limited Partnership)
Statements of Partners' Equity
Years ended December 31, 2001, 2000 and 1999
See accompanying notes to financial statements.
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AMERICAN CABLE TV INVESTORS 5, LTD. (A Colorado Limited Partnership)
Statements of Cash Flows
Years ended December 31, 2001, 2000 and 1999
(See note 2)
See accompanying notes to financial statements.
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AMERICAN CABLE TV INVESTORS 5, LTD. (A Colorado Limited Partnership)
Notes to Financial Statements
December 31, 2001, 2000 and 1999
(1) Summary of Significant Accounting Policies
Organization
American Cable TV Investors 5, Ltd. ("ACT 5" or the "Partnership") is a Colorado limited partnership that was formed in December of 1986 for the purpose of acquiring, developing, and operating cable television systems. The Partnership owned a 40% ownership interest in Newport News, which was also formed in 1986 for the purpose of acquiring, developing and operating a cable television system located in and around Newport News, Virginia (the "Newport News System"). American Cable TV Investors 4, Ltd. ("ACT 4"), an affiliate, owned the 60% majority interest in Newport News. As a result of the sale of the Newport News System on January 1, 1996, Newport News was liquidated in 1996.
The Partnership's general partner is IR-TCI Partners V, L.P. ("IR-TCI" or the "General Partner"), a Colorado limited partnership. At December 31, 2000, the general partner of IR-TCI was TCI Ventures Five, Inc. ("TCIV 5"), 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 AT&T Broadband, LLC ("AT&T Broadband"), and is the managing agent of the Partnership. AT&T Broadband is a subsidiary of AT&T Corp. Prior to its January 17, 1996 withdrawal, Integrated Cable Corp. V ("ICC"), an indirect subsidiary of Presidio Capital Corp. ("Presidio"), also served as a general partner of IR-TCI. 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 has not had and is not expected to have a material effect on the Partnership's results of operations or financial condition.
In its public offering that was conducted from May of 1987 to February of 1989, the Partnership sold 200,005 limited partnership units to the public resulting in gross proceeds of $100,002,500.
As further described in note 2, the Partnership has sold substantially all of its cable television assets.
(continued)
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AMERICAN CABLE TV INVESTORS 5, LTD. (A Colorado Limited Partnership)
Notes to Financial Statements
Allocation of Net Earnings and Net Losses
Net earnings and net losses shall be allocated 99% to ACT 5's limited partners ("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 ACT 5's distributions of proceeds from the sales of its cable television systems allowed Limited Partners to achieve Payback, distributions did not allow Limited Partners to achieve a 6% return on their aggregate contributions; therefore, amounts will continue to be allocated 99% to the Limited Partners and 1% to the General Partner. See note 2.
Cash and Cash Equivalents
Cash and cash equivalents consist of investments which are readily convertible into cash and have maturities of three months or less at the time of acquisition.
At December 31, 2001 and 2000, $9,254,000 and $9,008,000 of the Partnership's cash and cash equivalents were invested in money market funds, respectively. The Partnership is exposed to credit loss in the event of non-performance by the other parties to such financial instruments. However, the Partnership does not anticipate non-performance by the other parties.
Revenue Recognition
Revenue for customer fees, equipment rental, advertising, pay-per-view programming and revenue sharing agreements was recognized in the period that services were delivered. Installation revenue was recognized in the period the installation services were provided to the extent of direct selling costs. Any remaining amount was deferred and recognized over the estimated average period that subscribers were expected to remain connected to the system.
Net Earnings (Loss) Per Unit
Net earnings (loss) per Unit is calculated by dividing net earnings (loss) attributable to the Limited Partners by the number of Units outstanding during the period. The number of Units outstanding for each of the years in the three-year period ended December 31, 2001 was 200,005.
(continued)
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AMERICAN CABLE TV INVESTORS 5, LTD. (A Colorado Limited Partnership)
Notes to Financial Statements
Income Taxes
No provision has been made for income tax expense or benefit in the accompanying financial statements as the earnings or losses of the Partnership are reported in the respective income tax returns of the partners.
The Partnership had taxable earnings (loss) of $(215,000), $1.0 million and $13.1 million for the years ended December 31, 2001, 2000 and 1999, respectively.
Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
(continued)
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AMERICAN CABLE TV INVESTORS 5, LTD. (A Colorado Limited Partnership)
Notes to Financial Statements
(2) Asset Sales
On December 7, 1999, the Partnership consummated the sale of its remaining cable television system serving subscribers located in and around Riverside, California (the "Riverside System") to Century Exchange LLC ("Century"), a subsidiary of Adelphia Communications Corporation, for an adjusted sale price of $33,399,000 (the "Riverside Sale"). The Riverside Sale was approved by the Limited Partners at a special meeting that occurred on December 11, 1998. In accordance with the terms of the asset purchase agreement relating to the Riverside Sale, $1.5 million of the sales price was placed in escrow for 180 days in order to satisfy any indemnifiable claims which could be made by Century. On June 5, 2000, the funds held in escrow were released to ACT 5. ACT 5 received interest of $39,000 in conjunction with the release of the funds held in escrow. In connection with the Riverside Sale, Century and the Partnership waived the condition to closing that all required consents be obtained prior to closing the Riverside Sale, as such condition related to the transfer to Century of the franchise agreement between the Partnership and the City of Moreno Valley. The franchise agreement authorizes the Partnership to provide cable television service to subscribers located in and around Moreno Valley, California (the "Moreno Franchise Agreement"). Accordingly, all of the Riverside System's cable television assets other than the Moreno Franchise Agreement were transferred to Century on December 7, 1999. In connection with the Riverside Sale, the Partnership entered into a management agreement with Century pursuant to which Century would be entitled to all net cash flows generated by the portion of the Riverside System that was subject to the Moreno Franchise Agreement until such time as the City of Moreno Valley approved the transfer of the Moreno Franchise Agreement from the Partnership to Century. On February 13, 2001, the City of Moreno Valley passed a resolution indicating that the Partnership, by entering into the management agreement, in effect, transferred the franchise without city approval, thereby causing a material default under the franchise agreement. On December 18, 2001, the City of Moreno Valley approved the transfer of the Moreno Valley Franchise Agreement to Century. The settlement and transfer requires a payment of $500,000 from Century and releases the Partnership from any liability.
On December 7, 1999, AT&T Broadband and Century contributed cable television systems to a joint venture (the "Joint Venture") that combined multiple cable television systems in Southern California. The Riverside System was among those systems to be contributed to the Joint Venture by Century. AT&T Broadband has an approximate 25% interest in the Joint Venture, which is managed by Century. AT&T Broadband, through certain of its subsidiaries, owns a 100% interest in IR-TCI.
In connection with the Riverside Sale, the Partnership made a distribution to its General Partner and Limited Partners of $410,000 and $40,601,000 ($203 per Unit for Limited Partners of record as of April 1, 2000), respectively, in April 2000.
(continued)
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AMERICAN CABLE TV INVESTORS 5, LTD. (A Colorado Limited Partnership)
Notes to Financial Statements
As a result of the Riverside Sale, the Partnership is no longer actively engaged in the cable television business. A final determination of the Partnership's liabilities and any liquidating distributions cannot be made in connection with the Partnership's dissolution until the contingencies described in note 4 are resolved.
(3) Transactions with Related Parties
The Partnership purchased programming services from affiliates of AT&T Broadband. The charges, which generally approximated such affiliates' cost and were based upon the number of customers served by the Partnership, aggregated $2,333,000 in 1999.
The Partnership has a management agreement with Cablevision whereby Cablevision was responsible for performing all services necessary for the management of the Partnership's cable television systems. As compensation for these services, the Partnership paid a management fee equal to 6% of gross revenue, as defined in the management agreement. Such fees amounted to $567,000 during the year ended December 31, 1999.
The Partnership also reimburses Cablevision for direct out-of-pocket and indirect expenses allocable to the Partnership and for certain personnel employed on a full- or part-time basis to perform accounting, marketing, technical or other services. Such reimbursements amounted to $36,000 in 2001 and 2000 and $387,000 in 1999.
Riverside shared 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 were charged to Riverside based upon Riverside's estimated utilization of such office facilities and personnel. During the year ended December 31, 1999, Riverside's operating and administrative salaries and expenses aggregated $2,578,000.
ACT 5 was obligated to pay a disposition fee to Cablevision equal to 3% of the gross proceeds from the sale of any cable television system owned by ACT 5. This fee was due and payable at the time the cable television system was sold if the consideration received was greater than its adjusted cost, as defined in ACT 5's limited partnership agreement. In connection with the Riverside Sale, disposition fees of $1,000,000 were paid to Cablevision during 2000.
Amounts due to related parties, which represent non-interest-bearing payables to AT&T Broadband and its affiliates, consist of the net effect of cash advances and certain intercompany expense charges.
(continued)
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AMERICAN CABLE TV INVESTORS 5, LTD. (A Colorado Limited Partnership)
Notes to Financial Statements
Section 21 of the Partnership Agreement provides that the General Partner and its affiliates, subject to certain conditions set forth in more detail in the Partnership Agreement, are entitled to be indemnified for any liability or loss incurred by them by reason for any act performed or omitted to be performed by them in connection with the business of ACT 5 provided that the General Partner determines, in good faith, that such course of conduct was in the best interests of ACT 5 and did not constitute proven fraud, negligence, breach of fiduciary duty or misconduct. In this regard, it is anticipated that legal fees incurred by the defendants with respect to the above lawsuit will be paid by ACT 5. As of December 31, 2001, the partnership has recognized an amount payable to the General Partner of approximately $307,000 to cover out of pocket costs incurred to defend this lawsuit.
(4) Contingencies
On November 2, 1999 a limited partner of ACT 5 filed suit in United States District Court for the District of Colorado against the General Partner of ACT 5. The lawsuit also names certain affiliates of the General Partner as defendants. The lawsuit alleges that the defendants violated disclosure requirements under the Securities Exchange Act of 1934 in connection with soliciting limited partner approval of the Riverside Sale and that certain defendants breached their fiduciary duty in connection with the Riverside Sale. On May 18, 2001, the Court denied the Defendants' motion to dismiss the complaint. A trial date has not yet been set. Based upon the limited facts available, management believes that, although no assurance can be given as to the outcome of this action, the ultimate disposition should not have a material adverse effect upon the financial condition of the Partnership.
Section 21 of the Partnership Agreement provides that the General Partner and its affiliates, subject to certain conditions set forth in more detail in the Partnership Agreement, are entitled to be indemnified for any liability or loss incurred by them by reason of any act performed or omitted to be performed by them in connection with the business of ACT 5, provided that the General Partner determines, in good faith, that such course of conduct was in the best interests of ACT 5 and did not constitute proven fraud, negligence, breach of fiduciary duty or misconduct. In this regard, it is anticipated that legal fees incurred by the defendants with respect to the above lawsuit will be paid by ACT 5.
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"). 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. On September 14, 1999, Rifkin sold the Southern Tennessee System to an affiliate of Charter Communications, Inc. ("Charter"). In connection with such sale, Charter was assigned the rights of the indemnification claim. The above described class action lawsuit has been settled and dismissed. The amount of the Southern Tennessee Escrow due Charter as a result of terms of the settlement agreement has not yet been determined. Upon determination of amounts due Charter, the remaining funds in the Southern Tennessee Escrow will be released to ACT 5.
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AMERICAN CABLE TV INVESTORS 5, LTD. (A Colorado Limited Partnership)
The claim against the Southern Tennessee Escrow and the lawsuit described above have had and will continue to have the effect of delaying any final liquidating distributions of the Partnership.
(continued)
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AMERICAN CABLE TV INVESTORS 5, LTD. (A Colorado Limited Partnership)
Notes to Financial Statements
The Partnership leased certain property and equipment under operating leases. The Partnership's lease expense aggregated $132,000 in 1999, including $3,000 paid under pole rental agreements which were terminable on short notice by either party.
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AMERICAN CABLE TV INVESTORS 5, LTD.
PART III.
Item 10.
Item 10. Directors and Executive Officers of the Registrant.
As the Partnership has no directors or officers of its own, all of the Partnership's major decisions are made by IR-TCI whose general partner is TCIV 5. Until its withdrawal by letter dated January 17, 1996, ICC was also a general partner of the General Partner.
The Partnership has entered into a management agreement with Cablevision, pursuant to which Cablevision is responsible for managing the day-to-day operations of the Partnership.
As of February 15, 2002, the following executive officers and directors of TCIV 5 operate IR-TCI:
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AMERICAN CABLE TV INVESTORS 5, LTD.
(1) Directors of TCIV 5 serve until their successors are appointed and qualified.
There are no family relations, of first cousin or closer, among the individuals named above, by blood, marriage or adoption.
During the past five years, none of the persons named above has had any involvement in legal proceedings as would be material to an evaluation of that person's ability or integrity.
Pursuant to section 16(a) of the Securities Exchange Act of 1934, as amended, the officers and directors of the General Partner are required to file reports of ownership and changes in ownership with the Securities and Exchange Commission (the "Commission"). Officers and directors are required by regulation of the Commission to furnish the Partnership with copies of all Section 16(a) forms filed.
Based solely on its review of the copies of such forms received by it, or written representations from certain reporting persons that no Forms 5 were required for those persons, the Partnership believes that, during the fiscal year ended December 31, 2001, all applicable filing requirements were met.
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AMERICAN CABLE TV INVESTORS 5, LTD.
Item 11.
Item 11. Executive Compensation.
The Partnership pays no direct compensation to the individuals named above, but instead pays for their services through management and other fees paid to Cablevision. See "Certain Relationships and Related Transactions" below.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
No General or Limited Partner of the Partnership owns more than 5% of the Units.
None of the individuals referred to in Item 10 above owns (i) any Units of the Partnership or (ii) more than 1% of the outstanding shares of AT&T Corp., the ultimate parent and owner, directly or indirectly, of all of the voting stock of TCIV 5.
Item 13.
Item 13. Certain Relationships and Related Transactions.
Under a management agreement with Cablevision, Cablevision is reimbursed for direct out-of-pocket and indirect expenses allocable to the Partnership, and for certain personnel employed on a full- or part-time basis to perform accounting, marketing, technical, or other services. Such reimbursements aggregated $36,000 in 2001.
At December 31, 2001, the Partnership owed $307,000 to AT&T Broadband and its affiliates. Such amounts are non-interest-bearing and consist of the net effect of cash advances and certain intercompany expense allocations.
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AMERICAN CABLE TV INVESTORS 5, LTD.
PART IV.
Item 14.
Item 14. Exhibits, Financial Statements and Financial Statement Schedules and Reports on Form 8-K.
(a) (1) Financial Statements
Included in Part II of this Report:
(a) (2) Financial Statement Schedules
All schedules are omitted as they are not required or are not applicable.
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AMERICAN CABLE TV INVESTORS 5, LTD.
(a) (3) Exhibits
The following exhibits are incorporated by reference herein (according to the number assigned to them in Item 601 of Regulation S-K), as noted:
3 - Articles of Incorporation and Bylaws:
Limited Partnership Agreement, incorporated by reference to Exhibit A to Prospectus filed pursuant to Rule 424(b) as part of Registration Statement 33-12064.
Limited Partnership Agreement of General Partner, incorporated by reference to the Partnership's Annual Report on Form 10-K for the year ended December 31, 1987 (Commission File Number 0-16784).
10 - Material Contracts:
Management Agreement between Cablevision and the Partnership, ___ incorporated by reference to the Partnership's Annual Report on Form 10-K for the year ended December 31, 1987 (Commission File Number 0-16784).
Acquisition and Disposition Services Agreement between Cablevision and the Partnership, incorporated by reference to the Partnership's Annual Report on Form 10-K for the year ended December 31, 1987 (Commission File Number 0-16784).
Consulting Agreement, re: the Partnership between Cablevision and Presidio, incorporated by reference to the Partnership's Annual Report on Form 10-K for the year ended December 31, 1987 (Commission File Number 0-16784).
Asset Purchase Agreement by and between American Cable TV Investors 5, Ltd. and Gans Multimedia Partnership dated as of November 27, 1996, incorporated by reference to the Partnership's Current Report on Form 8-K filed February 11, 1997.
Asset Purchase Agreement by and between American Cable TV Investors 5, Ltd. and Rifkin Acquisition Partners, L.L.L.P. dated as of November 29, 1996, incorporated by reference to the Partnership's Current Report on Form 8-K filed February 11, 1997.
Asset Purchase Agreement by and between American Cable TV Investors 5, Ltd. and Mediacom LLC dated as of December 24, 1996, incorporated by reference to the Partnership's Current Report on Form 8-K filed February 11, 1997.
Asset Purchase Agreement by and between American Cable TV Investors 5, Ltd. and Century Communications Corp. dated as of August 12, 1998, incorporated by reference to the Partnership's Current Report on Form 8-K filed August 27, 1998.
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AMERICAN CABLE TV INVESTORS 5, LTD.
10 - Materials contracts, continued:
First Amendment, dated as of November 11, 1998, to Asset Purchase Agreement dated as of August 12, 1998, by and among American Cable TV Investors 5, Ltd. and Century Communications Corp., incorporated by reference to the Partnership's Annual Report on Form 10-K for the year ended December 31, 1998 (Commission File Number 0-16784).
Waiver and Indemnification Agreement by and between American Cable TV Investors 5, Ltd. and Adelphia Communications Corporation dated December 7, 1999, incorporated by reference to the Partnership's Annual Report on Form 10-K for the year ended December 31, 1999 (Commission File Number 0-16784).
(b) Reports on Form 8-K filed during the quarter ended December 31, 2001:
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
AMERICAN CABLE TV INVESTORS 5, LTD., A Colorado Limited Partnership By: IR-TCI PARTNERS V, L.P., Its General Partner
By: TCI VENTURES FIVE, INC., Its General Partner
By: /s/William T. Schleyer March 29, 2002 ------------------------------ William T. Schleyer President and Director - TCI Ventures Five, Inc. (Principal Executive Officer)
Pursuant to the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Partnership and in the capacities and on the dates indicated:
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