10-Q 1 amcabtv10q6-04.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [x] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended JUNE 30, 2004 [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from __________ to __________ Commission File Number: 0-16784 American Cable TV Investors 5, Ltd. Exact name of registrant as specified in charter Colorado 84-1048934 ---------------------------- ----------------------------- State of organization I.R.S. employer I.D. # c/o Comcast Corporation 1500 Market Street, Philadelphia, PA 19102-2148 -------------------------------------------------------------------------------- Address of principal executive office (215) 665-1700 -------------------------------------------------------------------------------- Registrant's telephone number 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 Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12-b2 of the Exchange Act). Yes No X AMERICAN CABLE TV INVESTORS 5, LTD. FORM 10-Q QUARTER ENDED JUNE 30, 2004 TABLE OF CONTENTS

1 AMERICAN CABLE TV INVESTORS 5, LTD. ----------------------------------- (A Colorado Limited Partnership) STATEMENT OF OPERATIONS (Unaudited)

3 AMERICAN CABLE TV INVESTORS 5, LTD. ----------------------------------- (A Colorado Limited Partnership) NOTES TO FINANCIAL STATEMENTS (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, 2004 and its results of operations for the three and six months ended June 30, 2004 and 2003. The results of operations for the interim periods are not necessarily indicative of the results for the full year. These financial statements should be read in conjunction with the financial statements and related notes thereto included in the Partnership's December 31, 2003 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. ("Ventures Five"), a subsidiary of TCI Cablevision Associates, Inc. ("Cablevision"). Cablevision is an indirect subsidiary of Comcast Cable Holdings, LLC ("Comcast Cable Holdings") and is the managing agent of the Partnership. Comcast Cable Holdings is an indirect subsidiary of Comcast Corporation ("Comcast"). 2. TRANSACTIONS WITH RELATED PARTIES The Partnership has a management agreement with an affiliate of Comcast Cable Holdings whereby this affiliate is responsible for performing all services necessary for the management of the Partnership. The Partnership is charged a management fee related to these services. During the three and six months ended June 30, 2004, general and administrative expenses in the Partnership's statement of operations include $9,000 and $18,000, respectively, related to this agreement. During the three and six months ended June 30, 2003, general and administrative expenses in the Partnership's statement of operations include $9,000 and $18,000, respectively, related to this agreement. Amounts due to related parties, which represent non-interest-bearing payables to Comcast Cable Holdings and its affiliates, consist of the net effect of cash advances and certain intercompany expense charges. 3. 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 (and certain affiliates of the General Partner) of ACT 5. 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 sale of the Partnership's cable television system located in and around Riverside, California (the "Riverside Sale") and that certain defendants breached their fiduciary duty in connection with the Riverside Sale. Also named as a defendant is Lehman Brothers Inc. ("Lehman"), which provided to ACT 5 a fairness opinion relative to the Riverside Sale. 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. The engagement agreement between ACT 5 and Lehman provides that, subject to certain conditions set forth in more detail in the engagement agreement, Lehman is entitled to be indemnified for any liability or loss, and to be reimbursed by ACT 5 for legal fees and costs incurred as a result of its rendering of services in connection with the fairness opinion. The General Partner and its affiliates and Lehman each submitted a demand for indemnification. Consequently, legal fees and costs incurred by the defendants with respect to the above lawsuit have been reflected in general and administrative expenses in the accompanying statements of operations in the period that such legal fees were incurred by the defendants. For the three and six months ended June 30, 2004, legal fees and costs related to the above lawsuit of $359,000 and $392,000, 4 AMERICAN CABLE TV INVESTORS 5, LTD. ----------------------------------- (A Colorado Limited Partnership) NOTES TO FINANCIAL STATEMENTS (Unaudited) respectively, have been so included in general and administrative expenses. For the three and six months ended June 30, 2003, legal fees and costs related to the above lawsuit of $16,000 and $41,000, respectively, have been so included in general and administrative expenses. In March 2004, plaintiff agreed in principle to a settlement of all claims against all defendants (other than Lehman) for $3,750,000, plus the defendants' waiver of their claims against ACT 5 for reimbursement of their legal expenses. Through June 2004, the three TCI Defendants incurred approximately $1.4 million in attorneys' fees and other costs. As a result of the settlement, the amounts incurred by the settling defendants have been treated as a capital contribution as of May 19, 2004, decreasing amounts due to affiliates. This transaction is considered a non-cash financing activity in the accompanying statement of cash flows as of June 30, 2004. Under the settlement agreement, plaintiff will continue to pursue its claims against Lehman, which will continue to receive reimbursement of its legal fees and costs from ACT 5. Plaintiff will be limited in collecting on any judgment against Lehman to an amount of not more than: (a) $3,750,000, plus (b) the total amount previously or hereafter paid to Lehman by ACT 5 as reimbursement for Lehman's legal fees and costs. Further, plaintiff cannot collect on any judgment against Lehman unless the Court specifically determines that, as to the amount to be collected: (a) Lehman's liability resulted directly from Lehman's gross negligence, bad faith and/or willful misconduct, or (b) Lehman otherwise is not entitled to indemnification or reimbursement from, and/or the other protections from liability to, ACT 5 pursuant to the engagement letter or otherwise. On May 19, 2004, the Court entered an order approving the proposed settlement. On June 28, 2004, the Court awarded plaintiff's counsel $1,012,500 in attorneys' fees, in addition to its earlier award of $271,603 in costs, which amounts will reduce the $3,750,000 settlement sum to be paid by the settling defendants, thereby diminishing the recovery by certain Limited Partners. Plaintiff is continuing to pursue its separate claims against Lehman. A trial is scheduled to begin in the fall of 2004. Under the settlement agreement as approved by the Court, ACT 5 will continue to be responsible to reimburse Lehman for its legal fees and costs incurred in the defense of the litigation. If, however, plaintiff prevails on its claims against Lehman, ACT 5 may obtain reimbursement from Lehman for certain or all of the legal fees and costs previously and hereafter paid by ACT 5 on Lehman Brothers' behalf. From the inception of the lawsuit through June 30, 2004, ACT 5 has incurred legal fees related to Lehman totaling approximately $1 million. 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 the 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 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. The claim in the litigation against Lehman and the claim against the Southern Tennessee Escrow have had and will continue to have the effect of delaying any final liquidating distributions of the Partnership. 5 AMERICAN CABLE TV INVESTORS 5, LTD. ----------------------------------- (A Colorado Limited Partnership) ITEM 2. 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, 2003. Material Changes in Results of Operations The Partnership has sold all of its cable television assets and, therefore, is no longer actively engaged in the cable television business. Pending the resolution of the contingencies described in note 3 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. The Partnership's results of operations for the three and six months ended June 30, 2004 and 2003 include general and administrative ("G&A") expenses and interest income. The Partnership's G&A expenses are primarily comprised of legal fees and costs associated with the administration of the Partnership. G&A expenses increased $281,000 and $299,000 during the three and six months ended June 30, 2004, as compared to the corresponding prior year periods. Such increases are due to legal fees associated with the litigation described in note 3 to the accompanying financial statements and audit fees. Interest income relates to interest earned on the Partnership's cash and cash equivalents. Interest income decreased $6,000 and $14,000 during the three and six months ended June 30, 2004, as compared to the corresponding prior year periods. Such changes are due to fluctuations in interest rates. ITEM 4. CONTROLS AND PROCEDURES Our principal executive officer and our co-chief financial officers, after evaluating the effectiveness of our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) as of the end of the period covered by this report, have concluded, based on the evaluation of these controls and procedures required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15, that our disclosure controls and procedures were effective to ensure that material information relating to us would be made known to them by others within those entities. Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our last fiscal quarter that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 6 AMERICAN CABLE TV INVESTORS 5, LTD. ----------------------------------- (A Colorado Limited Partnership) PART II - OTHER INFORMATION Item 1. Legal Proceedings Refer to Note 3 to our financial statements included in Item 1 for a discussion of recent developments related to our legal proceedings. Item 6. Exhibits and Reports on Form 8-K. a) Exhibits required to be filed by Item 601 of Regulation S-K: 31 Certifications of Principal Executive Officer and Co-Chief Financial Officers pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32 Certification of Principal Executive Officer and Co-Chief Financial Officers pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. b) Reports on Form 8-K: None. 7 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 By: /s/ LAWRENCE J. SALVA ----------------------------------------------------- Lawrence J. Salva Senior Vice President (Principal Accounting Officer) Dated: August 12, 2004 8

AMERICAN CABLE TV INVESTORS 5 LTD 10-Q