ITEM 1 BUSINESS
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. The general partner of IR-TCI is TCI Ventures Five, Inc. ("TCIV 5"), a subsidiary of TCI Cablevision Associates, Inc. ("Cablevision"). Cablevision is an indirect subsidiary of Comcast Cable Holdings, LLC (formerly AT&T Broadband, LLC) ("Comcast Cable Holdings"), and is the managing agent of the Partnership. Comcast Cable Holdings is an indirect subsidiary of Comcast Corporation ("Comcast").
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").
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 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 required a payment of $500,000 from Century to the City of Moreno Valley and releases the Partnership from any liability.
On December 7, 1999, Comcast Cable Holdings 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. Comcast Cable Holdings, through certain of its subsidiaries, owns a 100% ownership interest in IR-TCI.
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 5 to the accompanying financial statements are resolved. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources."
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Not applicable.
NARRATIVE DESCRIPTION OF BUSINESS
Not meaningful.
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. ("ACT 5"), 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 defendants 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. Also, named as a defendant is Lehman Brothers, Inc. ("Lehman") which provided to ACT 5 a fairness opinion relative to the Riverside Sale. On February 10, 2000, the Defendants filed motions to dismiss Plaintiff's complaint. On September 29, 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.
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 expenses incurred as a result of its rendering of services in connection with the fairness opinion. The General Partner and its affiliates and Lehman each have submitted a demand for indemnification. Consequently, legal fees of $945,000, $130,000 and $1,131,000 for the years ended December 31, 2004, 2003 and 2002, respectively, 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 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 the settlement date, 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.
Under the settlement agreement, plaintiff could continue to pursue its claims against Lehman, which would continue to receive reimbursement of its legal fees and costs from ACT 5. Plaintiff would 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 could not collect on any judgment against Lehman unless the Court specifically determined 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 under its engagement agreement with ACT 5 or under applicable law.
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 reduced the $3,750,000 settlement sum to be paid by the settling defendants, thereby diminishing the recovery by certain Limited Partners.
Plaintiff thereafter continued to pursue its separate claims against Lehman. Under the settlement agreement as approved by the Court, as well as Lehman's engagement agreement with ACT 5, ACT 5 continued to be responsible to reimburse Lehman for its legal fees and costs incurred in the defense of the litigation. From the inception of the lawsuit through December 31, 2004, ACT 5 has incurred legal fees related to Lehman totaling approximately $1.3 million.
The trial of plaintiff's claims against Lehman was held in September 2004. On October 27, 2004 the Court issued its judgment in favor of Lehman and dismissed
plaintiff's claims against Lehman. The Court also ordered that plaintiff pay Lehman its court costs in an amount to be later determined by the Court.
On November 24, 2004, Plaintiff filed a notice of appeal of the judgment in favor of Lehman to the Court. On December 16, 2004, Plaintiff and Lehman filed a stipulated withdrawal of the appeal after Lehman and ACT 5 agreed not to pursue a claim against the Plaintiff for costs awarded to Lehman in the judgment. Also on December 16, 2004, the Court granted the motion and dismissed Plaintiff's appeal.
Under the above described settlement agreement and Lehman's engagement agreement with ACT 5, ACT 5 has incurred obligations to reimburse Lehman for its trial related attorneys' fees. While there may be additional obligations incurred for work accomplished in the litigation by Lehman's counsel, such amounts are not expected to be significant as the case has been dismissed and there is no further appeal.
ITEM 4
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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, 2004, 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.
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, 2004 are summarized as follows (such information should be read in conjunction with the Partnership's financial statements included in Item 8 in this Form 10-K):
Summary Balance Sheet Data:
ITEM 7
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The Partnership has sold all of its cable television assets. As a result, 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 5 to the accompanying financial statements are resolved. See "Liquidity and Capital Resources."
Results of Operations
Pending the resolution of the contingencies described in Note 5 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, 2004 and 2003 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 $724,000 during the year ended December 31, 2004, as compared to the corresponding prior year period. Such increase is primarily due to an increase in legal activity and related fees for the 2004 trial.
Interest income relates to interest earned on the Partnership's cash and cash equivalents. Interest income increased $12,000 and decreased $63,000 during the years ended December 31, 2004 and 2003, respectively, as compared to the corresponding prior year periods. Such increase in 2004 and decrease in 2003 is due to an improvement and decline, respectively, in interest rates during each year.
Liquidity and Capital Resources
At December 31, 2004, the Partnership held cash and cash equivalents of $9,300,000. 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 5 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. Accrued interest of approximately $121,000 has not yet been recognized by ACT 5 pending final resolution of the claims against the escrow account.
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 contingencies described in Note 5 will be paid by ACT 5. As of December 31, 2004, the partnership has recognized an amount payable to the General Partner of approximately $840,000 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.
At December 31, 2004, the Partnership had approximately $440,000 of unclaimed distribution checks payable to certain Limited Partners which were written on a bank account that 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
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners of American Cable TV Investors 5, Ltd.
We have audited the accompanying balance sheet of American Cable TV Investors 5, Ltd. (a Colorado Limited Partnership) (the "Partnership") as of December 31, 2004 and 2003, and the related statements of operations, partners' equity and cash flows for each of the three years in the period ended December 31, 2004. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 present fairly, in all material respects, the financial position of the Partnership as of December 31, 2004 and 2003, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America.
As described in Note 3, the Partnership is no longer actively engaged in the cable television business. A final determination of the Partnership's liabilities and any liquidating distribution cannot be made in connection with the Partnership's dissolution until the contingencies described in Note 5 are resolved.
Philadelphia, Pennsylvania March 23, 2005
AMERICAN CABLE TV INVESTORS 5, LTD. (A Colorado Limited Partnership)
BALANCE SHEET
See accompanying notes to financial statements.
AMERICAN CABLE TV INVESTORS 5, LTD. (A Colorado Limited Partnership)
STATEMENT OF OPERATIONS
See accompanying notes to financial statements.
AMERICAN CABLE TV INVESTORS 5, LTD. (A Colorado Limited Partnership)
STATEMENT OF CASH FLOWS
See accompanying notes to financial statements.
AMERICAN CABLE TV INVESTORS 5, LTD. (A Colorado Limited Partnership)
STATEMENT OF PARTNERS' EQUITY
See accompanying notes to financial statements.
AMERICAN CABLE TV INVESTORS 5, LTD. (A Colorado Limited Partnership)
NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
1. 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 currently has no operations and is expected to be dissolved when the remaining litigation against it is concluded (See Note 5).
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. ("TCIV 5"), 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").
As further described in Note 3, the Partnership has sold all of its cable television assets.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Allocation of Net Earnings and Net Losses Net earnings and net losses are 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) are 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.
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, 2004 and 2003, $8,925,000 and $8,810,000 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.
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, 2004 was 200,005.
AMERICAN CABLE TV INVESTORS 5, LTD. (A Colorado Limited Partnership)
NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 (Continued)
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.
Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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.
3. 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, $1,500,000 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 required a payment of $500,000 from Century and releases the Partnership from any liability.
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 5 are resolved.
4. 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 years ended December 31, 2004, 2003 and 2002, general and administrative expenses in the Partnership's statement of operations includes $36,000, $36,000 and $36,000, 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.
5. 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
AMERICAN CABLE TV INVESTORS 5, LTD. (A Colorado Limited Partnership)
NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 (Continued)
soliciting limited partner approval of the sale of the Partnership's cable television system located in and around Riverside, California 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 years ended December 31, 2004, 2003 and 2002, legal fees and costs related to the above lawsuit of $945,000, $130,000 and $1,131,000, 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 the settlement date, 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 December 31, 2004.
Under the settlement agreement, plaintiff could continue to pursue its claims against Lehman, which would continue to receive reimbursement of its legal fees and costs from ACT 5. Plaintiff would 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 could not collect on any judgment against Lehman unless the Court specifically determined 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 under its engagement agreement with ACT 5 or under applicable law.
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 reduced the $3,750,000 settlement sum to be paid by the settling defendants, thereby diminishing the recovery by [certain] Limited Partners.
Plaintiff thereafter continued to pursue its separate claims against Lehman. Under the settlement agreement as approved by the Court, as well as Lehman's engagement agreement with ACT 5, ACT 5 continued to be responsible to reimburse Lehman for its legal fees and costs incurred in the defense of the litigation. From the inception of the lawsuit through December 31, 2004, ACT 5 has incurred legal fees related to Lehman totaling approximately $1.3 million.
The trial of plaintiff's claims against Lehman was held in September 2004. On October 27, 2004 the Court issued its judgment in favor of Lehman and dismissed plaintiff's claims against Lehman. The Court also ordered that plaintiff pay Lehman its court costs in an amount to be later determined by the Court.
AMERICAN CABLE TV INVESTORS 5, LTD. (A Colorado Limited Partnership)
NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 (Concluded)
On November 24, 2004, Plaintiff filed a notice of appeal of the judgment in favor of Lehman to the Court. On December 16, 2004, Plaintiff and Lehman filed a stipulated withdrawal of the appeal after Lehman and ACT 5 agreed not to pursue a claim against the Plaintiff for costs awarded to Lehman in the judgment. Also on December 16, 2004, the Court granted the motion and dismissed Plaintiff's appeal.
Under the above described settlement agreement and Lehman's engagement agreement with ACT 5, ACT 5 has incurred obligations to reimburse Lehman for its trial related attorneys' fees. While there may be additional obligations incurred for work accomplished in the litigation by Lehman's counsel, the case has been dismissed and there is no further appeal.
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. Accrued interest of $121,000 has not yet been recognized by ACT 5 pending final resolution of the claims against the escrow account.
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.
6. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
ITEM 9
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A
ITEM 9A CONTROLS AND PROCEDURES
Our chief 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.
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.
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.
The Partnership has entered into a management agreement with an affiliate of Comcast Cable Holdings, pursuant to which this affiliate is responsible for managing the day-to-day operations of the Partnership.
As of December 31, 2004, the following executive officers and directors of TCIV 5 operate IR-TCI:
(1) Directors of TCIV 5 serve until their successors are appointed and qualified.
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 an affiliate of Comcast Cable Holdings. 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.
ITEM 13
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Under a management agreement with an affiliate of Comcast Cable Holdings, this affiliate 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 2004.
At December 31, 2004, the Partnership owed $1,457,000 to Comcast Corporation and its affiliates. Such amounts are non-interest-bearing and consist of the net effect of cash advances and certain intercompany expense allocations.
ITEM 14
ITEM 14 PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit Fees
The aggregate fees billed by Deloitte & Touche LLP for professional services rendered for the audit of our annual financial statements for the fiscal years ended December 31, 2004 and 2003 and for the reviews of the financial statements included in our Quarterly Reports on Form 10-Q for 2004 and 2003 totaled $20,000 and $20,000, respectively.
Audit-Related and All Other Fees
There were no other audit-related fees or other services rendered by our principal accountant during the fiscal years ended December 31, 2004 and 2003.
The Partnership itself has no Board of Directors or Audit Committee. The Audit Committee of the sole indirect shareholder of the General Partner, Comcast Corporation, pre-approves all audit and non-audit services provided by its independent auditors prior to the engagement of the independent auditors with respect to such services including the audit fees of the Partnership.
PART IV
ITEM 15
ITEM 15 EXHIBITS, FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements
(b) (i) Financial Statement Schedules
All schedules are omitted as they are not required or are not applicable.
(c) Reports on Form 8K:
None.
(d) 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.
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.
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/ Brian L. Roberts ------------------------------------- Brian L. Roberts Dated: March 31, 2005 Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By: /s/ Brian L. Roberts ------------------------------------ Brian L. Roberts Chairman TCI Ventures Five, Inc. Dated: March 31, 2005 (Principal Executive Officer)
By: /s/ Lawrence S. Smith ------------------------------------ Lawrence S. Smith Executive Vice President; Director TCI Ventures Five, Inc. Dated: March 31, 2005 (Co-Principal Financial Officer)
By: /s/ John R. Alchin ------------------------------------ John R. Alchin Executive Vice President; Treasurer TCI Ventures Five, Inc. Dated: March 31, 2005 (Co-Principal Financial Officer)
By: /s/ David L. Cohen ------------------------------------ David L. Cohen Executive Vice President; Director Dated: March 31, 2005 TCI Ventures Five, Inc.
By: /s/ Arthur R. Block ------------------------------------ Arthur R. Block Senior Vice President; Secretary; Director Dated: March 31, 2005 TCI Ventures Five, Inc.
By: /s/ Lawrence J. Salva ------------------------------------ Lawrence J. Salva Senior Vice President TCI Ventures Five, Inc. Dated: March 31, 2005 (Principal Accounting Officer)