<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------
Amendment No. 1
to
Form 10-K
[_]Annual Report pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934 for the fiscal year ended .
or
[X]Transition report pursuant to Section 13 of 15(d) of the Securities
Exchange Act of 1934 for transition period from January 1, 1999 to June 30,
1999.
Commission File No. 333-38689
----------------
FOX SPORTS NETWORKS, LLC
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 95-4577574
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
1440 South Sepulveda Boulevard, Los Angeles, CA 90025
(Address of principal executive offices)
Registrant's telephone number, including area code: (310) 444-8123
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
----------------
Indicate by check mark whether the Registrant has (1) 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) been subject to such
filing requirements for the past 90 days.
Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Aggregate market value of Registrant's voting stock held by non-affiliates:
Not applicable
Number of shares of common stock outstanding as of the close of the period
covered by this report: None
Documents incorporated by reference: None
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
The Registrant hereby amends part IV of its Transitional Report on Form 10-
K, filed on November 8, 1999, for the period from January 1, 1999 to June 30,
1999 in its entirety as follows:
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The following documents are filed as part of this Annual Report on Form
10-K for the fiscal year ended June 30, 1999.
1. Financial Statements:
Financial Statements filed herewith are listed in the "Index to
Consolidated Financial Statements" at page F-1. In addition, the
following financial statements are incorporated by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998:
Financial Statements of Liberty/Fox ARC, L.P. for the period from
Inception (April 30, 1996) to December 31, 1996,
2. Schedules:
Financial statement schedules to this form are listed in the "Index
to Consolidated Financial Statements" at page F-1 herein.
3. Exhibits:
<TABLE>
<CAPTION>
Exhibit No Description of Exhibit
---------- ----------------------
<C> <S>
3.1* Certificate of Formation of Fox/Liberty Networks, LLC (f/k/a
Liberty/Fox U.S. Sports LLC), as amended.
4.1* Form of Notes (included in Exhibits 4(b) & 4(c)).
4.2(a)* Senior Notes Indenture, dated as of August 25, 1997 (the "Senior
Notes Indenture"), among Fox/Liberty Networks, LLC and FLN
Finance, Inc. as co-obligors, and the Bank of New York, as
Trustee.
(b)** First Supplemental Indenture, dated as of March 31, 1998, among
Fox/Liberty Networks, LLC, FLN Finance, Inc. and the Bank of New
York, as Trustee.
4.3(a)* Senior Discount Notes Indenture, dated as of August 25, 1997 (the
"Senior Discount Notes Indenture"), among Fox/Liberty Networks,
LLC and FLN Finance, Inc., as co-obligors and The Bank of New
York, as Trustee.
(b)** First Supplemental Indenture, dated as of March 31, 1998, among
Fox/Liberty Networks, LLC, FLN Finance, Inc. and the Bank of New
York, as Trustee.
4.4* Senior Notes Registration Rights Agreement, dated as of August
25, 1997, among Fox/Liberty Networks, LLC and FLN Finance, Inc.,
as Issuers and Merrill Lynch, Pierce, Fenner & Smith Incorporated
and Bear, Stearns & Co. Inc., as Initial Purchasers.
4.5* Senior Discount Notes Registration Rights Agreement, dated as of
August 25, 1997, among Fox/Liberty Networks, LLC and FLN Finance,
Inc., as Issuers and Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Bear, Stearns & Co. Inc., as Initial Purchasers.
4.6* Senior Notes Liquidated Damages Agreement, dated as of August 25,
1997, among Fox/Liberty Networks, LLC and FLN Finance, Inc., as
Issuers and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated and Bear, Stearns & Co. Inc., as Initial
Purchasers.
4.7* Senior Discount Notes Liquidated Damages Agreement, dated as of
August 25, 1997, among Fox/Liberty Networks, LLC and FLN Finance,
Inc., as Issuers and Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Bear, Stearns & Co. Inc., as
Initial Purchasers. Senior Notes Deposit Agreement, dated as of
August 25, 1997, among Fox/Liberty Networks, LLC and FLN Finance,
Inc., and The Bank of New York, as Securities Intermediary and as
Trustee.
</TABLE>
1
<PAGE>
<TABLE>
<C> <S>
4.8* Senior Notes Deposit Agreement, dated as of August 25, 1997,
among Fox/Liberty Networks, LLC and FLN Finance, Inc., and The
Bank of New York, as Securities Intermediary and as Trustee.
4.9* Senior Discount Notes Deposit Agreement, dated as of August 25,
1997, among Fox/Liberty Networks, LLC and FLN Finance, Inc., and
The Bank of New York, as Securities Intermediary and as Trustee.
10.1(a)* Agreement Regarding Ownership Interests, dated April 29, 1996, by
and among Liberty Media Corporation, News America Holdings
Incorporated, Fox Regional Sports Holdings, Inc., LMC Newco U.S.,
Inc., and Liberty/Fox Sports Financing LLC
(b)* First Amended and Restated Agreement Regarding Ownership
Interests, dated as of December 15, 1997, by and among Liberty
Media Corporation, News America Holdings Incorporated, Fox
Regional Sports Holdings, Inc., LMC Newco U.S., Inc., and
Liberty/Fox
10.2* Operating Agreement of Fox Sports RPP Holdings, LLC, dated June
20, 1997, by and among Fox/Liberty Networks LLC, Liberty Sports
Member, Inc. and Fox Regional Sports Member, Inc.
10.3* Operating Agreement of FX Networks, LLC (f/k/a Liberty/Fox FX
Operations LLC), dated April 29, 1996, by and among Liberty/Fox
U.S. Sports LLC, Liberty FX, Inc. and FX Holdings, Inc.
10.4(a)* Operating Agreement of Fox/Liberty Networks, LLC (f/k/a
Liberty/Fox U.S. Sports LLC), dated April 29, 1996, by and among
LMC Newco U.S., Inc., Fox Regional Sports Holdings, Inc. and
Liberty/Fox Sports Financing LLC.
(b)* First Amended and Restated Operating Agreement of Fox/Liberty
Networks, LLC, dated December 15, 1997 by and among LMC Newco
U.S., Inc., Fox Regional Sports Holdings, Inc. and Liberty/Fox
SportsFinancing LLC.
10.5* Operating Agreement of Fox Sports Net, LLC (f/k/a Liberty/Fox
Regional Sports LLC), dated April 29, 1996, by and among
Liberty/Fox U.S. Sports LLC, Liberty Sports Member, Inc. and Fox
Regional SportsMember, Inc.
10.6* Formation Agreement, dated June 22, 1997, among Rainbow Media
Sports Holdings, Inc. and Fox Sports Net, LLC.
10.7* Form of General Partnership Agreement of Regional Programming
Partners between Rainbow Regional Holdings, Inc. and Fox Sports
RPP Holdings, LLC.
10.8* Form of General Partnership Agreement of National Sports Partners
between Rainbow National Sports Holdings, Inc. and Fox Sports
National Holdings, LLC.
10.9* Form of General Partnership Agreement of National Advertising
Partners between Rainbow Advertising Holdings, Inc. and Fox
Sports Ad Sales Holdings, LLC.
10.10(a)* Credit Agreement, dated as of September 12, 1997, among Fox
Sports Net, LLC and FX Networks, LLC, as Borrowers, and
Fox/Liberty Networks, LLC and Subsidiary Guarantors, as
Guarantors, and The Chase Manhattan Bank, as Administrative
Agent, and Chase Securities Inc., as Syndication Agent, and TD
Securities (USA) Inc., as Documentation Agent.
(b)* Form of Amendment and Restated Credit Agreement dated as of
December 15, 1997 among Fox Sports Net, LLC, FX Networks, LLC and
Fox Sports RPP Holdings, LLC, as Borrowers, and Fox/Liberty
Networks, LLC and The Chase Manhattan Bank, as Administrative
Agent, Chase Securities Inc., as Syndication Agent, and TD
Securities (USA) Inc., as Documentation Agent.
(c)** First Amendment to the Credit Agreement, dated as of April 20,
1998 among Fox Sports Net, LLC, FX Networks, LLC, Fox Sports RPP
Holdings, LLC, as Borrowers and Fox/Liberty Networks, LLC and The
Chase Manhattan Bank, as Administrative Agent, Chase Securities
Inc., as Syndication Agent and TDSecurities (USA) Inc., as
Documentation Agent.
</TABLE>
2
<PAGE>
<TABLE>
<C> <S>
(d)** Second Amendment to the Credit Agreement, dated as of April 24,
1998, among Fox Sports Net, LLC, FX Networks, LLC, Fox Sports
RPP Holdings, LLC, as Borrowers and Fox/Liberty Networks, LLC
and The Chase Manhattan Bank, as Administrative Agent, Chase
Securities Inc., as Syndication Agent and TD Securities (USA)
Inc., as Documentation Agent.
(e)**** Third Amendment to the Credit Agreement, dated as of March 9,
1999, among Fox Sports Net, LLC, FX Networks, LLC, Fox Sports
RPP Holdings, LLC, as Borrowers and Fox/Liberty Networks, LLC
and The Chase Manhattan Bank, as Administrative Agent, Chase
Securities Inc., as Syndication Agent and TD Securities (USA)
Inc., as Documentation Agent.
(f)# Amended and Restated Credit Agreement dated as of July 15, 1999,
among Fox Sports Net, LLC, FX Networks, LLC, Fox Sports RPP
Holdings, LLC, as Borrowers and Fox Sports Networks, LLC and
19th Holdings Corporation.
10.12***+ Employment Agreement between Fox/Liberty Networks, LLC (f/k/a
Liberty/Fox U.S. Sports LLC) and Jeff Shell, dated February 4,
1998.
10.13#+ Employment Agreement between Fox Channels Services, LLC and
Louis LaTorre, dated effective July 1, 1999.
10.14#+ Employment Agreement between Fox Sports Net, LLC and Robert L.
Thompson, dated effective June 1, 1999.
10.15****+ Employment Agreement between Fox/Liberty Networks, LLC and Tracy
Dolgin, dated February 12, 1999.
10.16(a)***++ Fox/Liberty Networks, LLC Equity Appreciation Rights Plan for
Management and Key Employees, Effective as of May 1, 1996.
(b)#++ Amendment to Fox Sports Networks, LLC Equity Appreciation Rights
Plan for Management and Key Employees, Effective as of June 10,
1999.
27# Financial Data Schedule.
</TABLE>
- --------
* Incorporated by reference to the Company's Registration Statement on Form
S-4, as amended (File No. 333- 38689).
** Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 1998.
*** Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997.
**** Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1998.
# Incorporated by reference to the Company's Transition Report on Form 10-K
for the fiscal year ended June 30, 1999.
+ Denotes an employment contract.
++ Denotes a compensation plan.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the last quarter of the period
covered by this report.
3
<PAGE>
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunder duly authorized.
FOX SPORTS NETWORKS, LLC
Dated: March 24, 2000
/s/ Jeff Shell
By: _________________________________
Jeff Shell
President
(Principal Executive Officer)
/s/ Dennis Farrell
By: _________________________________
Dennis Farrell
Senior Vice President, Finance
(Principal Financial Officer and
Principal Accounting Officer)
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed by the following persons in the capacities and on
the dates stated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<C> <S> <C>
Fox Regional Sports Holdings, Inc. Member of Fox Sports March 24, 2000
Networks, LLC
</TABLE>
/s/ Raymond L. Parrish
By: _____________________________
Raymond L. Parrish
Vice President
<TABLE>
<S> <C> <C>
Fox Regional Sports Holdings II, Inc. Member of Fox Sports March 24, 2000
Networks, LLC
/s/ Raymond L. Parrish
By: _____________________________
Raymond L. Parrish
Vice President
Fox Sports Net Financing, LLC Member of Fox Sports March 24, 2000
Networks, LLC
By: Fox Regional Sports Holdings II, Member of Fox Sports Net March 24, 2000
Inc. Financing, LLC
/s/ Raymond L. Parrish
By: _____________________________
Raymond L. Parrish
Vice President
By: Fox Entertainment Group, Inc. Member of Fox Sports Net March 24, 2000
Financing, LLC
</TABLE>
/s/ Raymond L. Parrish
By: _____________________________
Raymond L. Parrish
Vice President
4
<PAGE>
FOX SPORTS NETWORKS, LLC
INDEX TO
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Fox Sports Networks, LLC
Consolidated Financial Statements....................................... F-2
Report of Independent Public Accountants................................ F-3
Consolidated Balance Sheets as of June 30, 1999 and December 31, 1998
and 1997............................................................... F-4
Consolidated Statements of Operations for the six months ended June 30,
1999, the years ended December 31, 1998 and 1997 and the eight months
ended December 31, 1996................................................ F-5
Consolidated Statements of Members' Equity for the six months ended June
30, 1999, the years ended December 31, 1998 and 1997 and the eight
months ended December 31, 1996......................................... F-6
Consolidated Statements of Cash Flows for the six months ended June 30,
1999, the years ended December 31, 1998 and 1997 and the eight months
ended December 31, 1996................................................ F-7
Notes to Consolidated Financial Statements.............................. F-8
Liberty Sports, Inc. and subsidiaries--Domestic Operations
Financial Statements ................................................... F-23
Independent Auditors' Report ........................................... F-24
Combined Statement of Operations and Equity for the period January 1,
1996 to April 29, 1996 ................................................ F-25
Combined Statement of Cash Flows for the period January 1, 1996 to April
29, 1996 .............................................................. F-26
Notes to Combined Financial Statements ................................. F-27
FX Networks, LLC
Financial Statements ................................................... F-31
Report of Independent Public Accountants ............................... F-32
Statements of Operations for the periods ended April 29, 1996 .......... F-33
Statements of Cash Flows for the periods ended April 29, 1996 .......... F-34
Notes to Financial Statements .......................................... F-35
Regional Programming Partners and Subsidiaries
Consolidated Financial Statements ...................................... F-38
Independent Auditors' Report ........................................... F-39
Consolidated Balance Sheets as of December 31, 1999 and 1998 ........... F-40
Consolidated Statements of Income for the years ended December 31, 1999
and 1998 and the period from December 18, 1997 (Inception) to December
31, 1997............................................................... F-41
Consolidated Statements of Partners' Capital for the years ended
December 31, 1999 and 1998 and the period from December 18, 1997
(Inception) to December 31, 1997....................................... F-42
Consolidated Statements of Cash Flows for the years ended December 31,
1999 and 1998 and the period from December 18, 1997 (Inception) to
December 31, 1997 ..................................................... F-43
Notes to Consolidated Financial Statements ............................. F-44
National Sports Partners
Financial Statements ................................................... F-55
Report of Independent Public Accountants ............................... F-56
Balance Sheets as of December 31, 1999 and 1998 ........................ F-57
Statements of Operations for the years ended December 31, 1999 and 1998
and the period from Inception (December 18, 1997) to December 31, 1997
....................................................................... F-58
Statements of Venturers' Equity (Deficit) for the years ended December
31, 1999 and 1998 and for the period from Inception (December 18, 1997)
to December 31, 1997 .................................................. F-59
Statements of Cash Flows for the years ended December 31, 1999 and 1998
and the period from Inception (December 18, 1997) to December 31, 1997
....................................................................... F-60
Notes to Financial Statements .......................................... F-61
Condensed Financial Statements of the Company on Schedule
Report of Independent Public Accountants on Schedule.................... S-2
Schedule I--Balance Sheets as of June 30, 1999 and December 31, 1998 and
1997................................................................... S-3
Schedule I--Statements of Operations for the six months ended June 30,
1999, the years ended December 31, 1998 and 1997 and the eight months
ended December 31, 1996................................................ S-4
Schedule I--Statements of Cash Flows for the six months ended June 30,
1999, the years ended December 31, 1998 and 1997 and the eight months
ended December 31, 1996................................................ S-5
Schedule I--Notes to Condensed Financial Statements..................... S-6
Schedule II--Valuation and Qualifying Accounts for the six months ended
June 30, 1999, the years ended December 31, 1998 and 1997 and the eight
months ended December 31, 1996 ........................................ S-7
</TABLE>
F-1
<PAGE>
FOX SPORTS NETWORKS, LLC
CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 1999 and December 31, 1998 and 1997
With Report of Independent Public Accountants
F-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Members of
Fox Sports Networks, LLC:
We have audited the accompanying consolidated balance sheets of Fox Sports
Networks, LLC and subsidiaries, a Delaware limited liability company (the
"Company") as of June 30, 1999 and December 31, 1998 and 1997, and the related
consolidated statements of operations, members' equity and cash flows for the
six months ended June 30, 1999, the years ended December 31, 1998 and 1997 and
the period from inception (April 30, 1996) to December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Fox Sports
Networks, LLC and subsidiaries as of June 30, 1999 and December 31, 1998 and
1997, and the results of their operations and their cash flows for the six
months ended June 30, 1999, the years ended December 31, 1998 and 1997 and the
period from inception (April 30, 1996) to December 31, 1996 in conformity with
generally accepted accounting principles.
Arthur Andersen LLP
Los Angeles, California
September 17, 1999
F-3
<PAGE>
FOX SPORTS NETWORKS, LLC
(A Delaware Limited Liability Company)
CONSOLIDATED BALANCE SHEETS
June 30, 1999 and
December 31, 1998 and 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31,
June 30, ---------------------
1999 1998 1997
---------- ---------- ----------
ASSETS
------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents.................. $ 59,145 $ 42,918 $ 49,560
Trade and other receivables, net of
allowance for doubtful accounts of
$21,925, $9,324 and $1,714 at June 30,
1999, December 31, 1998 and 1997.......... 164,739 138,139 136,661
Receivables from equity affiliates, net.... 43,892 33,577 37,858
Program rights............................. 106,790 88,620 50,373
Notes receivable, current.................. 1,935 1,928 3,376
Prepaid expenses and other current assets.. 13,968 9,939 7,886
---------- ---------- ----------
Total current assets..................... 390,469 315,121 285,714
Property and equipment, net.................. 53,794 49,306 42,027
Investments in equity affiliates............. 856,948 871,432 850,201
Note receivable, long-term................... 12 24 4,432
Program rights............................... 103,567 106,459 78,110
Excess cost, net............................. 493,965 521,133 514,608
Other assets................................. 33,743 28,460 42,666
---------- ---------- ----------
Total Assets............................. $1,932,498 $1,891,935 $1,817,758
========== ========== ==========
<CAPTION>
LIABILITIES AND MEMBERS' EQUITY
-------------------------------
<S> <C> <C> <C>
Current liabilities:
Accounts payable and accrued expenses...... $ 195,961 $ 164,329 $ 176,241
Program rights payable..................... 73,061 56,651 23,232
Current portion of long-term debt.......... 13,253 15,450 80,216
Accrued interest........................... 18,903 24,833 17,413
Other current liabilities.................. 9,168 13,806 11,515
---------- ---------- ----------
Total current liabilities................ 310,346 275,069 308,617
Non-current program rights payable........... 96,021 123,581 110,693
Long-term debt, net of current portion....... 1,488,178 1,401,891 1,246,291
Minority interest............................ 2,207 1,191 (114)
Commitments and contingencies................
Members' equity.............................. 35,746 90,203 152,271
---------- ---------- ----------
Total Liabilities and Members' Equity.... $1,932,498 $1,891,935 $1,817,758
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-4
<PAGE>
FOX SPORTS NETWORKS, LLC
(A Delaware Limited Liability Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Periods Ended June 30, 1999
and December 31, 1998, 1997 and 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
Six months Year ended Year ended April 30 to
ended June December 31, December 31, December 31,
30, 1999 1998 1997 1996
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Programming................ $171,085 $301,734 $226,469 $ 85,288
Advertising................ 95,583 160,499 117,874 37,685
Direct broadcast........... 56,725 121,759 91,663 5,711
Infomercial................ 12,735 23,270 16,420 4,261
Other...................... 28,125 47,932 19,366 11,847
-------- -------- -------- ---------
364,253 655,194 471,792 144,792
-------- -------- -------- ---------
Expenses:
Operating.................. 296,059 485,276 420,888 197,445
General and
administrative............ 39,264 90,662 65,558 31,609
Depreciation and
amortization.............. 12,239 21,662 18,968 8,507
-------- -------- -------- ---------
347,562 597,600 505,414 237,561
-------- -------- -------- ---------
Operating income (loss)...... 16,691 57,594 (33,622) (92,769)
-------- -------- -------- ---------
Other (income) expenses:
Interest, net.............. 54,781 110,425 34,142 3,819
Subsidiaries' income tax
expense (benefit), net.... 233 1,456 (1,590) 3,437
Loss on sale of assets..... 2,767 121 -- 4,913
Equity loss of affiliates,
net....................... 11,160 5,913 9,018 12,024
Other...................... 471 (1,478) 401 --
Minority interest.......... 1,736 3,225 2,864 187
-------- -------- -------- ---------
71,148 119,662 44,835 24,380
-------- -------- -------- ---------
Net loss..................... $(54,457) $(62,068) $(78,457) $(117,149)
======== ======== ======== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
FOX SPORTS NETWORKS, LLC
(A Delaware Limited Liability Company)
CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY
For the Periods Ended June 30, 1999
and December 31, 1998, 1997 and 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
LMC Liberty/Fox Fox Regional Total
Newco Sports Sports Members'
US, Inc. Financing, LLC Holdings, Inc. Equity
-------- -------------- -------------- --------
<S> <C> <C> <C> <C>
BALANCE, APRIL 30, 1996...... $ 8,000 $243,577 $96,300 $347,877
(representing the initial
contributions of the
members)
Net loss................... (36,132) (44,885) (36,132) (117,149)
-------- -------- ------- --------
BALANCE, DECEMBER 31, 1996... (28,132) 198,692 60,168 230,728
Net loss................... (24,199) (30,059) (24,199) (78,457)
-------- -------- ------- --------
BALANCE, DECEMBER 31, 1997... (52,331) 168,633 35,969 152,271
Net loss................... (19,144) (23,780) (19,144) (62,068)
-------- -------- ------- --------
BALANCE, DECEMBER 31, 1998... (71,475) 144,853 16,825 90,203
Net loss................... (16,796) (20,865) (16,796) (54,457)
-------- -------- ------- --------
BALANCE, JUNE 30, 1999....... $(88,271) $123,988 $ 29 $ 35,746
======== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
FOX SPORTS NETWORKS, LLC
(A Delaware Limited Liability Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Periods Ended June 30, 1999
and December 31, 1998, 1997 and 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
Six months Year ended Year ended April 30 to
ended June December 31, December 31, December 31,
30, 1999 1998 1997 1996
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net loss................... $(54,457) $(62,068) $ (78,457) $(117,149)
Adjustments to reconcile
net loss to net cash
(used in) provided by
operating activities:
Additional amortization
of program rights....... -- -- -- 80,000
Depreciation and
amortization............ 12,239 21,662 18,968 8,507
Interest accretion and
amortization of debt
issuance costs.......... 15,660 29,868 9,431 --
Loss on sale of assets... 2,767 121 -- 4,913
Equity loss of
affiliates.............. 11,160 5,913 9,018 12,024
Minority interest........ 1,736 3,225 2,864 187
Changes in operating assets
and liabilities:
Trade and other
receivables............. (13,441) (1,373) (47,296) (8,029)
Program rights........... (16,578) (65,871) (77,266) (3,205)
Prepaid expenses and
other operating assets.. (7,130) (4,812) (10,715) (239)
Accounts payable and
accrued expenses........ 37,417 (14,529) 51,462 33,939
Program rights payable... (10,872) 46,278 26,749 (1,149)
Other operating
liabilities............. (10,568) 9,553 18,517 4,512
-------- -------- ---------- ---------
Net cash (used in)
provided by operating
activities............ (32,067) (32,033) (76,725) 14,311
-------- -------- ---------- ---------
Cash flows from investing
activities:
Advances from equity
affiliates................ 3,883 96,084 102,497 56,666
Advances to equity
affiliates................ (14,198) (92,913) (106,555) (78,651)
Notes receivable collected
from (issued to)
third parties............. 16,005 5,856 540 (1,700)
Purchases of property and
equipment................. (9,942) (14,665) (31,321) (11,202)
Distributions from equity
affiliates................ 6,752 40,051 4,704 563
Investments in equity
affiliates................ (23,063) (67,671) (857,325) (4,046)
Purchase of program rights
and related assets........ -- -- (45,000) --
Acquisition of FIT TV, net
of cash acquired.......... -- (3,618) -- --
Proceeds from sale of
investment................ -- 900 -- --
Cash sold upon sale of
merchandising assets...... -- -- -- (429)
-------- -------- ---------- ---------
Net cash used in
investing activities.. (20,563) (35,976) (932,460) (38,799)
-------- -------- ---------- ---------
Cash flows from financing
activities:
Cash overdraft, included in
accounts payable.......... -- -- -- 2,133
Borrowings of long-term
debt...................... 92,000 155,000 1,720,078 48,448
Repayment of long-term
debt...................... (22,423) (91,713) (648,960) (24,800)
Deferred debt issuance
costs..................... -- -- (18,357) --
Distribution to minority
shareholder of
subsidiary................ (720) (1,920) (1,980) (600)
-------- -------- ---------- ---------
Net cash provided by
financing activities.. 68,857 61,367 1,050,781 25,181
-------- -------- ---------- ---------
Net increase (decrease) in
cash and cash equivalents... 16,227 (6,642) 41,596 693
Cash and cash equivalents,
beginning of period......... 42,918 49,560 7,964 7,271
-------- -------- ---------- ---------
Cash and cash equivalents,
end of period............... $ 59,145 $ 42,918 $ 49,560 $ 7,964
======== ======== ========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
FOX SPORTS NETWORKS, LLC
(A Delaware Limited Liability Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
(Dollars in thousands)
(1) Organization
Fox Sports Networks, LLC (formerly Fox/Liberty Networks, LLC), a Delaware
limited liability company, (together with its subsidiaries, the "Company") was
formed in April 1996, to own and operate programming services featuring
predominantly sports and sports related programming, as well as a national
general entertainment programming service.
The Company's members as of June 30, 1999 and December 31, 1998 and 1997,
were:
<TABLE>
<CAPTION>
Interest
--------
<S> <C>
Fox Regional Sports Holdings, Inc. ("FRSH") ...................... 30.843%
(a wholly-owned subsidiary of Fox Entertainment Group, Inc.
("Fox"), a majority owned subsidiary of News America Incorporated
("NAI"), a wholly-owned subsidiary of The News Corporation
Limited "TNCL")
LMC Newco U.S., Inc. ("LMCI")..................................... 30.843%
(a wholly-owned subsidiary of Liberty Sports, Inc. ("LSI"), a
wholly-owned subsidiary of Liberty Media Corporation ("LMC"))
Liberty/Fox Sports Financing, LLC................................. 38.314%
-------
(50% owned by each of LMCI and NAI)
100.000%
=======
</TABLE>
Liberty Sports, Inc. (a predecessor operation) contributed its interest in
regional sports programming businesses (which then operated under the name
"Prime Sports"), interests in non-managed sports businesses, satellite
distribution services and technical facilities. Fox and its subsidiaries
contributed cash, all of its assets and liabilities in the FX cable network (a
predecessor operation), and certain assets related to regional sports
programming.
In July 1999, TNCL acquired substantially all of Liberty Sports, Inc.'s
interest in the Company and transferred the interest acquired to Fox in
exchange for common stock (See Note 13).
(2) Significant Accounting Policies
(a) Basis of Presentation
The accompanying consolidated financial statements include the operations of
the Company and those majority-owned subsidiaries and entities for which there
is a controlling voting interest. All significant intercompany accounts and
transactions have been eliminated in consolidation. The subsidiaries
consolidated include the following intermediary holding companies (and their
subsidiaries):
Fox Sports Net, LLC, which is comprised of the following:
<TABLE>
<S> <C>
--Liberty/Fox West LLC --Liberty/Fox ARC LP
--Fox/Liberty Ad Sales LLC --Liberty/Fox Southeast LLC
--Liberty/Fox Northwest LP --Liberty/Fox Utah LLC
--Liberty/Fox Sunshine LLC --Liberty/Fox Arizona LLC
--Fox Sports Detroit, LLC --Fox/Liberty Network Programming LLC
FX Networks, LLC
Fox Sports RPP Holdings, LLC
</TABLE>
F-8
<PAGE>
FOX SPORTS NETWORKS, LLC
(A Delaware Limited Liability Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
June 30, 1999
(Dollars in thousands)
On March 13, 1997, upon the acquisition of the remaining interests in
Affiliated Regional Communications, Ltd. and affiliates ("ARC") by Liberty/Fox
ARC LP, the Company assumed management control of the consolidated
subsidiaries of Liberty/Fox ARC LP, and from that date the consolidated
subsidiaries of ARC and their operations were consolidated.
In September 1997, Fox Sports Detroit, LLC, a majority-owned subsidiary of
the Company, was formed for the purpose of providing sports and sports related
programming in the Detroit, Michigan area (See Note 3(e)).
In December 1997, the Company consummated a transaction with Rainbow Media
Sports Holdings, Inc. ("Rainbow"), a subsidiary of CSC Holdings, Inc.
(formerly Cablevision Systems Corporation) ("Cablevision"), pursuant to which
(i) Fox Sports RPP Holdings, LLC was formed to hold an interest in Regional
Programming Partners ("RPP"), which in turn was formed to hold interests in
Rainbow's existing regional sports networks ("RSN's") and certain other
businesses, (ii) National Sports Partners ("NSP") was formed to operate Fox
Sports Net ("FSN") a national programming service, and (iii) National
Advertising Partners ("NAP") was formed to act as the national advertising
sales representative for the RSNs which are affiliated with FSN. The Company
contributed $850,000 for its 40 percent interest in RPP, which exceeded its
equity in the underlying net assets of RPP by $314,420 (See Note 6(b)). Had
the investment occurred at the beginning of the year ended December 31, 1997
(January 1, 1997) and the eight month period December 31, 1996 (April 30,
1996), pro-forma net loss would have increased by $2,234 and $9,099,
respectively. The pro-forma results have been prepared for comparative
purposes only and do not purport to be indicative of the results of operations
which actually would have resulted had the investment occurred on the dates
indicated, or which may result in the future.
(b) Cash Equivalents
Cash equivalents consist of short-term investments with an original maturity
of less than 90 days. The carrying amounts of cash and cash equivalents
approximate their fair values due to their short maturities.
(c) Program Rights
The Company has multi-year contracts for the cable telecast rights of
syndicated entertainment programs and sporting events. Pursuant to these
contracts, an asset is recorded for the rights acquired and a liability is
recorded for the obligation incurred, at the gross amount of the liability
when the programs or sporting events are available for telecast. Program
rights for entertainment programs are amortized over the term of the contract
using the straight-line method. Program rights for sporting events which are
for a specified number of games are amortized on an event-by-event basis, and
those which are for a specified season are amortized over the term of the
season on a straight-line basis.
At the inception of these contracts and periodically thereafter, the Company
evaluates the recoverability of the costs associated therewith against the
revenues associated with the program material and related expenses. Where an
evaluation indicates that a multi-year contract will result in an ultimate
loss, additional amortization is provided to currently recognize that loss.
The Company and its predecessor, Liberty Sports, Inc., have entered into or
committed to contracts for program rights to telecast college football and
Major League Baseball games, respectively. In 1996, the Company performed an
in-depth evaluation and determined that these contracts would produce losses
over the term of the
F-9
<PAGE>
FOX SPORTS NETWORKS, LLC
(A Delaware Limited Liability Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
June 30, 1999
(Dollars in thousands)
respective contracts. Accordingly, the Company and its affiliates recorded
$109,000 in additional amortization related to these contracts during the
period from inception (April 30, 1996) to December 31, 1996.
(d) Property and Equipment
Property and equipment are stated at cost, which includes acquisition costs
allocated to tangible assets acquired. Depreciation for financial statement
purposes is provided using the straight-line method over an estimated useful
life of three to five years.
(e) Other Assets
At June 30, 1999 and December 31, 1998 and 1997 other assets included
$16,342, $17,063 and $17,896, respectively, of debt issuance costs related to
the issuance of Senior Notes and Senior Discount Notes (the "Notes"--See Note
7(c)) and $4,639, $4,989 and $5,391, respectively, of debt issuance costs
related to a credit facility with a group of banks (the "Credit Agreement"--
See Note 7(b)). These costs are amortized using the effective interest method
over the term of the respective debt instrument. Amortization expense was
$1,147, $2,321 and $461 in the aggregate for the six months ended June 30,
1999 and the years ended December 31, 1998 and 1997, respectively, and is
included in interest expense.
(f) Investments in Affiliates
The consolidated financial statements include the operations of subsidiary
companies more than 50% owned. Investments in and advances to affiliates in
which the Company has a substantial ownership interest of approximately 20 to
50%, or for which the Company owns more than 50% but does not control policy
decisions, are accounted for by the equity method. Under this method of
accounting, the original investment is increased or decreased by the Company's
share of income or losses and dividends.
Partnerships in which the Company acts as a limited partner, but in which
the third party general partner exercises management control, are not
consolidated regardless of the ownership interest. If these investments meet
the conditions outlined in the paragraph above then the partnerships are
accounted for under the equity method.
(g) Excess Cost
Excess cost represents the difference between the cost of acquiring
programming entities and amounts assigned to their tangible and intangible
assets. Such amounts are amortized on a straight-line basis over 40 years.
Amortization expense was $7,037, $14,300, $11,776 and $5,241 for the six
months ended June 30, 1999, the years ended December 31, 1998 and 1997 and the
period from inception (April 30, 1996) to December 31, 1996, respectively. At
June 30, 1999 and December 31, 1998 and 1997, excess cost, net included
accumulated amortization of $92,813, $86,470 and $72,170, respectively.
The Company periodically reviews the propriety of the carrying amount of its
excess cost as well as the related amortization period to determine whether
current events or circumstances warrant adjustments to the carrying value
and/or the estimates of useful lives. This evaluation consists of the
Company's projection of undiscounted operating cash flows over the remaining
lives of the excess cost. Based on its review, the Company believes that no
significant impairment of its excess cost has occurred.
(h) Long-Lived Assets
In March 1995, the Financial Accounting Standards Board issued Statement No.
121 ("SFAS 121") on accounting for the impairment of long-lived assets,
certain identifiable intangibles and goodwill related to assets
F-10
<PAGE>
FOX SPORTS NETWORKS, LLC
(A Delaware Limited Liability Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
June 30, 1999
(Dollars in thousands)
to be held and used. SFAS 121 also establishes accounting standards for long-
lived assets and certain identifiable intangibles to be disposed of. The
Company adopted the SFAS 121 from inception (April 30, 1996). See Note 2(g)
for the policy on excess cost.
(i) Revenue
Revenue from programming represents monthly subscriber fees received from
cable system operators and is recognized as earned. Advertising revenue is
recognized upon airing of commercials. The Company has sold advance
subscriptions to its direct broadcast satellite customers. Such amounts are
amortized to revenue monthly as revenue is earned. Infomercial revenue is
recognized when the program is aired.
(j) Non-Monetary Transactions
The Company trades commercial advertising spots in return for other
services, primarily programming. These trades are recorded at the fair value
of the asset surrendered or the fair value of the asset obtained, whichever is
more clearly evident. These transactions resulted in the recording of
approximately $0, $4,173, $8,539 and $2,512 in both advertising revenue and
programming expenses during the six months ended June 30, 1999, the years
ended December 31, 1998 and 1997 and the period from inception (April 30,
1996) to December 31, 1996, respectively.
(k) Income Taxes
No provision has been made for federal, state or foreign income taxes, as
the liability for such income taxes is the responsibility of the members.
(l) Segment Reporting
In June 1997, the Financial Accounting Standards Board issued Statement No.
131 ("SFAS 131") on the disclosure of segments of an enterprise. SFAS 131
establishes guidelines for determining operating segments within public
business enterprises. Based on these guidelines the Company reports
information under a single cable programming segment. The Company adopted SFAS
131 as of January 1, 1998.
(m) Major Customers
The Company recognized revenue from one customer which represented 11.8%,
14.3%, 18.1% and 34.6% of consolidated revenues for the six months ended June
30, 1999, the years ended December 31, 1998 and 1997 and the period from
inception (April 30, 1996) to December 31, 1996, respectively.
(n) Use of Estimates
The preparation of consolidated 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,
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements, and the reported amounts of revenues and
expenses during the reporting period. Because of the use of estimates inherent
in the financial reporting process, actual results could differ from those
estimates.
(o) Reclassifications
Certain reclassifications have been made to the prior year balances in order
to conform to the current year presentation.
F-11
<PAGE>
FOX SPORTS NETWORKS, LLC
(A Delaware Limited Liability Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
June 30, 1999
(Dollars in thousands)
(3) Supplemental Disclosures to Consolidated Statements of Cash Flows
Supplemental disclosure of cash flow information and non-cash investing and
financing activities for the period from inception (April 30, 1996) to
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
Acquisition Disposal Total
------------------------- --------------- --------
Prime Sports
Northwest(a) SportSouth(b) Merchandising(c)
------------ ------------ ---------------
<S> <C> <C> <C> <C>
Fair value of net assets
acquired/(disposed):
Cash.................. $ 1,328 $ 3,626 $ (429) $ 4,525
Accounts receivable... 4,663 10,691 (600) 14,754
Prepaid program
rights............... 425 -- -- 425
Prepaid expenses and
other current
assets............... 304 84 (10) 378
Inventory............. -- -- (3,064) (3,064)
Investment............ -- (2,135) -- (2,135)
Excess cost........... -- -- (5,771) (5,771)
Other assets.......... 46 102 (105) 43
Property and
equipment, net....... 2,832 259 (1,064) 2,027
Notes receivable...... 40 -- -- 40
Accounts payable and
accrued expenses..... (809) (1,640) 2,330 (119)
Program rights
payable.............. (91) -- -- (91)
Notes payable......... -- (18,002) -- (18,002)
------- -------- ------- --------
8,738 (7,015) (8,713) (6,990)
Less: existing
investment in
affiliates............. (6,427) 471 -- (5,956)
------- -------- ------- --------
2,311 (6,544) (8,713) (12,946)
Satisfied by:
Cash.................. (9,000) -- -- (9,000)
Note payable.......... -- (65,334) -- (65,334)
Note receivable....... -- -- 3,800 3,800
------- -------- ------- --------
Subtotal................ -- -- -- (83,480)
------- -------- ------- --------
Excess cost............. $(6,689) $(71,878) $(78,567)
======= ======== ========
Loss on sale............ $(4,913) $ (4,913)
======= ========
</TABLE>
- --------
(a) In July 1996, the Company paid $9,000 to Viacom, Inc. to purchase an
additional 40% interest in its affiliate, Prime Sports Northwest Network.
Subsequent to the purchase, Prime Sports Northwest Network was
consolidated with the Company. Had the additional 40% interest been
acquired at inception (April 30, 1996), the consolidated pro forma revenue
and income would have increased by $5,886 and $648, respectively. These
pro forma results have been prepared for comparative purposes only and do
not purport to be indicative of the results of operations which actually
would have resulted had the acquisitions occurred on the date indicated,
or which may result in the future.
(b) In October 1996, the Company purchased an additional 44% interest in its
affiliate, SportSouth Network, Ltd. ("SportSouth"), through the issuance
of a note in the amount of $65,334. SportSouth was then consolidated with
the Company. Had the additional 44% interest been acquired at inception
(April 30, 1996), the consolidated pro forma revenue and income would have
increased by $19,490 and $5,072, respectively. These pro forma results
have been prepared for comparative purposes only and do not purport to be
indicative of results of operations which actually would have resulted had
the acquisitions occurred on the date indicated, or which may result in
the future.
(c) In September 1996, the Company received a note receivable for
approximately $3,800 in connection with the sale of its merchandising
assets.
F-12
<PAGE>
FOX SPORTS NETWORKS, LLC
(A Delaware Limited Liability Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
June 30, 1999
(Dollars in thousands)
Supplemental disclosure of cash flow information and non-cash investing and
financing activities for the year ended December 31, 1997(e) (f) is as
follows:
<TABLE>
<CAPTION>
ARC Ltd(d)
----------
<S> <C>
Fair value of net assets acquired:
Cash............................................................ $ --
Accounts receivable............................................. 26,793
Prepaid program rights.......................................... 4,764
Prepaid expenses and other current assets....................... 19,249
Investment...................................................... 6,739
Excess cost..................................................... 103,806
Other assets.................................................... 305
Property and equipment, net..................................... 11,818
Notes receivable................................................ 6,869
Accounts payable and accrued expenses........................... (25,520)
Program rights payable.......................................... (3,522)
Unearned revenue................................................ (4,744)
Notes payable................................................... (49,000)
-------
97,557
Satisfied by:
Original investment............................................. (97,557)
-------
Excess cost....................................................... $ --
=======
</TABLE>
- --------
(d) In March 1997, Liberty/Fox ARC LP, an affiliate of the Company, paid
$40,000 to Group W to purchase the remaining 12.78% interest in Affiliated
Regional Communications, LTD and Affiliates ("ARC"). This transaction
resulted in Liberty/Fox ARC LP recording $25,785 in excess costs. In
conjunction with this transaction, the Company assumed management control
of the consolidated subsidiaries of Liberty/Fox ARC LP. Subsequent to the
purchase, the consolidated subsidiaries of ARC were consolidated with the
Company (see Note 2(a)). Had the additional 12.78% interest been acquired
at January 1, 1997 with respect to the year ended December 31, 1997 and
April 30, 1996 with respect to the eight months ended December 31, 1996,
the pro forma consolidated revenue would have increased by $29,913 and
$107,531, respectively, and pro forma consolidated income would have
increased by $372 and $482, respectively. These pro forma results have
been prepared for comparative purposes only and do not purport to be
indicative of the results of operations which actually would have resulted
had the acquisitions occurred on the date indicated, or which may result
in the future.
(e) In September 1997, the Company formed Fox Sports Detroit, LLC for the
purpose of providing sports and sports related programming to the Detroit,
Michigan area. Fox Sports Detroit, LLC entered into agreements to pay cash
of $45,000 and issue notes payable totaling $25,558 to secure certain
sports programming rights and other assets. Amounts remaining as excess
cost will be amortized over 40 years. Had the acquisition occurred at the
beginning of the period (January 1, 1997), and assuming that the full
$70,713 is recorded as excess cost and amortized over 40 years, the pro-
forma consolidated revenue would have increased, and loss would have
decreased, by $17,940 and $2,143, respectively. These pro-forma results
have been prepared for comparative purposes only and do not purport to be
indicative of the results of operations which actually would have resulted
had the acquisitions occurred on the date indicated, or which may result
in the future.
(f) In December 1997, the Company contributed net assets of $14,926 and $2,741
to NSP and NAP, respectively, for a 50% interest in each partnership. The
net assets contributed were comprised of certain accounts receivables,
fixed assets, investments and accrued liabilities.
F-13
<PAGE>
FOX SPORTS NETWORKS, LLC
(A Delaware Limited Liability Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
June 30, 1999
(Dollars in thousands)
Supplemental disclosure of cash flow information and non-cash investing and
financing activities for the year ended December 31, 1998 is as follows:
<TABLE>
<CAPTION>
Fit TV(g)
---------
<S> <C>
Book value of net assets acquired:
Cash............................................................. $ 132
Accounts receivable.............................................. 650
Prepaid program rights........................................... 725
Prepaid expenses................................................. 200
Property and equipment, net...................................... 11
Other assets..................................................... 156
Accounts payable and accrued expenses............................ (3,762)
Program rights payable........................................... (29)
Other current liabilities........................................ (158)
-------
(2,075)
Satisfied by:
Cash............................................................. 18,750
-------
Excess cost........................................................ $20,825
=======
</TABLE>
- --------
(g) In April 1998, the Company completed the acquisition of Fit TV
Partnership, with an effective date as of January 1, 1998, in which the
Company paid $15,000 to Cable Health TV, Inc. in 1997 and $1,875 each to
Reebok CHC, Inc. and Liberty CHC, Inc., representing 100% capital
interest and a 92% profit interest in Fit TV Partnership, and
accordingly, has been consolidated with the Company. An 8% minority
profit interest in Fit TV Partnership was acquired by a third party. Had
the capital interest been acquired at January 1, 1997 with respect to the
year ended December 31, 1997, and April 30, 1996 with respect to the
eight months ended December 31, 1996, the pro forma revenue would have
increased by $4,074 and $2,855, respectively, and net loss would have
increased by $7,561 and $4,429, respectively. These pro forma results
have been prepared for comparative purposes only and do not purport to be
indicative of the results of operations which actually would have
resulted had the acquisition occurred on the date indicated, or which may
result in the future.
Supplemental disclosure of cash flow information and non-cash investing and
financing activities for the six months ended June 30, 1999 (i) is as follows:
<TABLE>
<CAPTION>
Fit TV(h)
---------
<S> <C>
Book value of net assets disposed:
Accounts receivable............................................. $ (1,341)
Prepaid program rights.......................................... (1,300)
Prepaid expenses and other current assets....................... (274)
Property and equipment, net..................................... (57)
Excess cost..................................................... (20,131)
Other assets.................................................... (32)
Accounts payable and accrued expenses........................... 5,785
Program rights payable.......................................... 278
--------
(17,072)
Satisfied by:
Receivable...................................................... 14,500
--------
Loss on sale...................................................... $ (2,572)
========
</TABLE>
- --------
(h) In May 1999, the Company recorded a receivable from an affiliate of Fox
in connection with the sale of Fit TV Partnership.
F-14
<PAGE>
FOX SPORTS NETWORKS, LLC
(A Delaware Limited Liability Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
June 30, 1999
(Dollars in thousands)
(i) In April 1999, the Company received notes receivable of $19,635 as a
distribution from Liberty/Fox KBL LP.
Cash paid for interest was $46,426, $76,154, $24,848 and $5,330 for the six
months ended June 30, 1999, the years ended December 31, 1998 and 1997 and the
period from inception (April 30, 1996) to December 31, 1996, respectively.
(4) Related Party Transactions
For the six months ended June 30, 1999, the years ended December 31, 1998
and 1997 and the period from inception (April 30, 1996) to December 31, 1996,
the Company recognized the following revenue and expenses as a result of arms-
length transactions with affiliates of LSI and Fox :
<TABLE>
<CAPTION>
Six
months
ended Year ended Year ended April 30 to
June 30, December 31, December 31, December 31,
1999 1998 1997 1996
-------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue:
Programming.............. $43,521 $93,922 $92,244 $23,229
Advertising.............. 895 1,523 3,183 326
Direct broadcast......... -- -- 2,082 5,711
Interest income.......... 165 351 2,719 108
Other.................... 14,240 19,606 -- 3,358
Expenses:
Operating................ 31,997 62,216 65,736 12,631
General and
administrative.......... 3,202 2,775 4,156 2,340
Interest expense......... -- 25 1,570 293
</TABLE>
At June 30, 1999 and December 31, 1998 and 1997, receivables from related
parties were $23,012, $19,962 and $29,293, respectively, and payables to
related parties were $7,690, $19,631 and $21,476, respectively.
The Company has a non exclusive, royalty-free license from affiliates of Fox
to use the "FOX" brand name and certain related artwork in connection with the
Company's business.
(5) Property and Equipment
Property and equipment at June 30, 1999 and December 31, 1998 and 1997
consisted of the following:
<TABLE>
<CAPTION>
June 30, December 31, December 31,
1999 1998 1997
-------- ------------ ------------
<S> <C> <C> <C>
Studio and production equipment.......... $ 55,832 $ 50,455 $ 26,847
Office equipment......................... 17,986 16,733 14,823
Construction in progress................. 16,164 13,603 21,357
Other.................................... 4,200 4,365 5,614
-------- -------- --------
94,182 85,156 68,641
Accumulated depreciation................. (40,388) (35,850) (26,614)
-------- -------- --------
$ 53,794 $ 49,306 $ 42,027
======== ======== ========
</TABLE>
F-15
<PAGE>
FOX SPORTS NETWORKS, LLC
(A Delaware Limited Liability Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
June 30, 1999
(Dollars in thousands)
(6) Investments Accounted for Under the Equity Method
(a) Significant Subsidiaries
Summarized unaudited financial information for significant subsidiaries, as
defined in Rule 1-02(w) of Regulation S-X, accounted for under the equity
method is as follows:
Combined Financial Position
<TABLE>
<CAPTION>
June 30, December 31, December 31,
1999 1998 1997
---------- ------------ ------------
<S> <C> <C> <C>
Current assets............................. $ 395,827 $ 523,347 $ 584,433
Non-current assets......................... 1,857,925 1,883,399 1,820,560
---------- ---------- ----------
Total assets............................... $2,253,752 $2,406,746 $2,404,993
========== ========== ==========
Current liabilities........................ $ 246,878 $ 356,004 $ 400,986
Non-current liabilities.................... 634,259 573,111 588,881
Minority interest.......................... -- 64,117 129,495
Members' equity............................ 1,372,615 1,413,514 1,285,631
---------- ---------- ----------
Total liabilities and equity............... $2,253,752 $2,406,746 $2,404,993
========== ========== ==========
</TABLE>
Combined Operations
<TABLE>
<CAPTION>
Six months ended Year ended Year ended April 30 to
June 30, December 31, December 31, December 31,
1999 1998 1997 1996
---------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue................. $454,885 $783,156 $66,167 $125,373
Operating (loss)
income................. (27,904) (65,062) (24,647) 14,270
Net (loss) income....... (21,634) (29,834) (24,663) 7,205
</TABLE>
Liberty/Fox ARC LP was formed on April 30, 1996 and was accounted for under
the equity method for the period until March 1997. In March 1997, the Company
assumed management control of the consolidated subsidiaries of Liberty/Fox ARC
LP and, subsequent to this event, the consolidated subsidiaries of ARC were
consolidated with the Company.
F-16
<PAGE>
FOX SPORTS NETWORKS, LLC
(A Delaware Limited Liability Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
June 30, 1999
(Dollars in thousands)
(b) Unconsolidated Affiliates
The following table reflects the Company's ownership interests in majority
and minority owned affiliates as of:
<TABLE>
<CAPTION>
June 30, December 31, December 31,
Entity 1999 1998 1997
------ -------- ------------ ------------
<S> <C> <C> <C>
Majority Owned Affiliates
Liberty/Fox Chicago LP.................... 98.0% 98.0% 98.0%
Liberty/Fox KBL LP........................ 60.0% 60.0% 60.0%
Liberty/Fox Bay Area LP................... 98.0% 98.0% 98.0%
Liberty/Fox Upper Midwest LP.............. 98.0% 98.0% 98.0%
Liberty/Fox Distribution LP............... 98.0% 98.0% 98.0%
Minority Owned Affiliates
LMC Sunshine Inc. ........................ 48.5% 48.5% 48.5%
Cable Ad Partners-cost method............. 0.0% 0.0% 8.0%
Sunshine Network Joint Venture............ 49.0% 49.0% 49.0%
Prime Sports Network-Upper Midwest Joint
Venture.................................. 33.0% 33.0% 33.0%
Home Team Sports Limited Partnership...... 34.3% 34.3% 34.3%
Prime Sports Channel Prism Associates..... 0.0% 0.0% 33.3%
Mountain Mobile TV........................ 33.3% 33.3% 33.3%
Regional Programming Partners............. 40.0% 40.0% 40.0%
National Sports Partners.................. 50.0% 50.0% 50.0%
National Advertising Partners............. 50.0% 50.0% 50.0%
CTV Sports Net............................ 20.0% 20.0% 0.0%
Carolina Hurricanes Programming Joint
Venture.................................. 33.3% 33.3% 0.0%
</TABLE>
The following table reflects the carrying value of the Company's investments
accounted for under the equity method and the Company's equity in earnings
(losses) of its majority and minority owned affiliates:
<TABLE>
<CAPTION>
Investment
-----------------------------------
June 30, December 31, December 31,
Entity 1999 1998 1997
------ -------- ------------ ------------
<S> <C> <C> <C>
Majority Owned Affiliates................ $(21,163) $ (7,734) $(20,845)
Minority Owned Affiliates................ 878,111 879,166 871,046
-------- -------- --------
$856,948 $871,432 $850,201
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Equity in Earnings (Losses)
-------------------------------------------------------
Six months ended Year ended Year ended April 30 to
June 30, December 31, December 31, December 31,
Entity 1999 1998 1997 1996
------ ---------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Majority Owned
Affiliates............. $ 6,205 $ 13,111 $(2,288) $(17,163)
Minority Owned
Affiliates............. (17,365) (19,024) (6,730) 5,139
-------- -------- ------- --------
$(11,160) $ (5,913) $(9,018) $(12,024)
======== ======== ======= ========
</TABLE>
F-17
<PAGE>
FOX SPORTS NETWORKS, LLC
(A Delaware Limited Liability Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
June 30, 1999
(Dollars in thousands)
Prior to the contribution of the above majority owned entities to the
Company (see Note 1), there were certain regional networks that were wholly
owned and consolidated by Liberty Sports, Inc. (a predecessor company and a
Company shareholder). Upon contribution of these entities to the Company,
Liberty Sports, Inc. retained management control through a general partnership
minority interest. Hence, these operations are not consolidated by the
Company, although it owns the majority of the limited partnership interests.
The Company's investment in several of its affiliates exceeded its equity in
the underlying net assets by a total of $332,988, $334,096 and $342,302 at
June 30, 1999 and December 31, 1998 and 1997, respectively. These excess
amounts are being amortized on a straight-line basis over 40 years. The
amortization aggregated $4,777, $7,876, $1,025 and $574 during the six months
ended June 30, 1999, the years ended December 31, 1998 and 1997 and the period
from inception (April 30, 1996) to December 31, 1996, respectively, and is
included in the Company's share of equity loss of affiliates.
(7) Debt
Debt at June 30, 1999 and December 31, 1998 and 1997 is summarized as
follows:
<TABLE>
<CAPTION>
June 30, December 31, December 31,
1999 1998 1997
---------- ------------ ------------
<S> <C> <C> <C>
Turner Note Payable(a)................ $ -- $ -- $ 65,334
Chase Manhattan Bank--Term(b)......... 400,000 400,000 400,000
Chase Manhattan Bank--Revolver(b)..... 277,000 205,000 60,000
Senior Notes(c)....................... 500,000 500,000 500,000
Senior Discount Notes(c).............. 300,786 286,878 260,828
Other................................. 23,645 25,463 40,345
---------- ---------- ----------
1,501,431 1,417,341 1,326,507
Less current portion.................. (13,253) (15,450) (80,216)
---------- ---------- ----------
$1,488,178 $1,401,891 $1,246,291
========== ========== ==========
</TABLE>
Annual future minimum maturities of debt are as follows:
<TABLE>
<S> <C>
Year ending June 30:
2000............................................................ $ 13,253
2001............................................................ 2,471
2002............................................................ 2,636
2003............................................................ 2,813
2004............................................................ 2,473
Thereafter...................................................... 1,477,785
----------
$1,501,431
==========
</TABLE>
The fair value of the Company's debt is estimated based on the quoted market
prices for the same or similar issues or on the current rates offered to the
Company for debt of the same remaining maturities. Rates on the Company's debt
approximate current market rates, and as such, the carrying amount of
borrowings outstanding approximates fair value.
(a) On October 10, 1996, LMC Southeast Sports, Inc. purchased Turner Sports
Programming, Inc.'s 44% partnership interest in SportSouth. LMC Southeast
Sports, Inc. signed a promissory note to Turner Broadcasting Company for
$65,334, plus interest at a rate of 7.5% per annum. The Note was paid in
full at maturity on October 10, 1998.
(b) On December 15, 1997, Fox Sports Net, LLC, FX Networks, LLC and Fox Sports
RPP Holdings, LLC (together, the "Co-Borrowers"), entered into a credit
agreement (the "Credit Agreement") with a group of banks. In July 1999,
19th Holdings Corporation, (a wholly-owned subsidiary of Fox) acquired the
debt
F-18
<PAGE>
FOX SPORTS NETWORKS, LLC
(A Delaware Limited Liability Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
June 30, 1999
(Dollars in thousands)
outstanding under the Credit Agreement and assumed the rights and
obligations of the group of banks thereunder. The Company and 19th Holdings
Corporation subsequently amended and restated the Credit Agreement and
eliminated substantially all of the affirmative and negative covenants other
than with respect to the payment of principal and interest (the "19th
Agreement"). The 19th Agreement provides for a $400,000 term loan and a
$400,000 revolving credit facility ("the Facilities"). Borrowings under the
Facilities are guaranteed by the Company, the Co-Borrowers and certain
subsidiaries of Fox Sports Net, LLC and are secured by substantially all of
the assets of the Company. Borrowings under the facilities bear interest at
a fixed rate determined on an annual basis by 19th Holdings Corporation.
19th Holdings Corporation has determined that the rate of interest on this
debt through June 2000 shall be 8%. Amounts outstanding under the revolving
credit facility and principal under the term loan are due September 30,
2004.
(c) In August 1997, Fox Sports Networks, LLC (formerly Fox/Liberty Networks,
LLC) (the "Issuer") privately sold $500,000 aggregate principal amount of
its 8 7/8% Senior Notes due 2007 and $405,000 aggregate principal amount at
maturity ($252.3 million gross proceeds) of its 9 3/4% Senior Discount
Notes due 2007 (collectively the "Old Notes") in a transaction (the
"Offering") exempt from registration under the Securities Act of 1933, as
amended ("1933 Act"). In January 1998, pursuant to an exchange offer (the
"Exchange Offer"), the Issuer exchanged all of the Old Notes for new notes
(the "Notes") which were registered by the Issuer under the 1933 Act. The
terms of the Notes are substantially identical to the terms of the Old
Notes. The Issuer received no proceeds from the issuance of the Notes in
the Exchange Offer. Interest on the Senior Notes is payable semi-annually.
Interest payments on the Senior Discount Notes commence in February 2003.
Interest accretes to principal prior to the commencement of interest
payments. At June 30, 1999 and December 31, 1998 and 1997 the unamortized
discount on the Senior Discount Notes was $104,214, $118,122, and $144,669,
respectively. Interest expense, resulting from the amortization of the
discount, was $13,908, $26,547, and $8,053 for the six months ended June
30, 1999, the years ended December 31, 1998 and 1997, respectively. The
indentures pursuant to which the Notes were issued include certain
covenants regarding, among other things, limitations on the incurrence of
debt and distributions to partners. The Notes are unsecured.
Interest expense was $56,052, $112,961, $49,183 and $4,235 for the six months
ended June 30, 1999, the years ended December 31, 1998 and 1997 and the period
from inception (April 30, 1996) to December 31, 1996, respectively. Interest
income was $1,271, $2,536, $15,041 and $416 for the six months ended June 30,
1999, the years ended December 31, 1998 and 1997 and the period from inception
(April 30, 1996) to December 31, 1996, respectively.
(8) Additional Interests Earned by Company's Members
The Company consists of numerous limited liability companies, general and
limited partnerships and corporations. The equity ownership of individual
entities in the chain of entities holding interests in regional sports networks
and FX Networks, LLC include interests held directly by affiliates of LSI and
Fox. Generally, each regional sports network is owned by the Company through a
chain of entities in which the Company has a direct or indirect interest of
approximately 98%, with the remaining fractional interests being held equally
by the affiliates of Fox and LSI. (See Note 13).
(9) 401(k) Plan
During 1997, the Company implemented a defined contribution plan under
section 401(k) of the Internal Revenue Code (the "401(k) Plan") covering most
of the employees of the Company. Under the 401(k) Plan,
F-19
<PAGE>
FOX SPORTS NETWORKS, LLC
(A Delaware Limited Liability Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
June 30, 1999
(Dollars in thousands)
participating employees may elect to defer a portion of their compensation.
The Company makes contributions to the 401(k) Plan based on a percentage of
employee contributions. Maximum employee and Company contributions are limited
by Internal Revenue Code regulations and by specific 401(k) Plan provisions.
For the six months ended June 30, 1999, the years ended December 31, 1998 and
1997, the Company contributed $3,186, $4,757 and $4,013, respectively to the
401(k) Plan.
(10) Equity Appreciation Rights Plan
In October 1997, the Company adopted the Fox/Liberty Networks, LLC Equity
Appreciation Rights Plan for management and key employees (the "Plan"), with
an effective date of May 1, 1996. A committee was appointed by the Company to
administer and interpret this Plan. The maximum number of Appreciation Rights
available for grant under this plan was 300,000. The rights vest over five
years and require a minimum number of hours worked per year of vesting.
In August 1999, the Plan was amended, with an effective date of June 30,
1999, to provide that no further Appreciation Rights could be granted under
the Plan after such effective date and the value of Appreciation Rights was
fixed at $250 as of the effective date and as of December 31, 1998. All
participants with outstanding Appreciation Rights will continue to vest over
time, provided that as Appreciation Rights vest, the participant shall be
deemed to have exercised their right to receive cash payments equal to the
excess of $250 over the grant value of such vested Appreciation Rights.
During 1999, the Company granted 18,000 rights at $185. During 1998, the
Company granted 28,000 and 18,000 rights at $185 and $135, respectively.
During 1997, the Company granted 185,100 rights at $135. The value of the 1999
and 1998 grants were based on an independent valuation and the value of the
1997 grants were based on the initial value determined by the Company's
members. At June 30, 1999 and December 31, 1998 and 1997, 118,260, 118,260 and
74,040 rights had vested, respectively, with a weighted average exercise
period of 6.8 years at June 30, 1999. Compensation expense was $5,150 and
$13,526 with respect to vested Appreciation Rights for the six months ended
June 30, 1999 and the year ended December 31, 1998, respectively.
(11) Supplemental Condensed Financial Information (unaudited)
<TABLE>
<CAPTION>
Three months Three months
Six months ended ended
ended June 30, June 30,
June 30, 1998 1999 1998
------------- ------------ ------------
<S> <C> <C> <C>
Revenues............................. $326,023 $192,310 $169,414
Operating income (loss).............. 23,286 (10,425) 6,027
</TABLE>
F-20
<PAGE>
FOX SPORTS NETWORKS, LLC
(A Delaware Limited Liability Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
June 30, 1999
(Dollars in thousands)
(12) Commitments and Contingencies
(a) Operating Leases
The Company leases transponders, office facilities, and equipment and
microwave channels used to carry its broadcast signals. These leases, which
are classified as operating leases, expire at various dates through 2010.
Future minimum payments, by year, under noncancelable operating leases with a
term of one year or more consist of the following at June 30, 1999:
Year ending June 30:
<TABLE>
<S> <C>
2000.............................................................. $17,162
2001.............................................................. 12,879
2002.............................................................. 10,832
2003.............................................................. 10,364
2004.............................................................. 8,605
Thereafter........................................................ 17,277
-------
Total minimum lease payments...................................... $77,119
=======
</TABLE>
Total lease expense was approximately $15,030, $27,396, $17,137 and $7,881
for the six months ended June 30, 1999, the years ended December 31, 1998 and
1997 and the period from inception (April 30, 1996) to December 31, 1996,
respectively.
(b) Long-term Program Rights Contracts
The Company has long-term program rights contracts which require payments
through 2010. Future minimum payments, including unrecorded amounts, by year,
are as follows at June 30, 1999:
<TABLE>
<S> <C>
Year ending June 30:
2000........................................................... $ 269,818
2001........................................................... 219,951
2002........................................................... 197,333
2003........................................................... 174,129
2004........................................................... 161,882
Thereafter..................................................... 451,713
----------
Total minimum program rights payments.......................... $1,474,826
==========
</TABLE>
The Company licenses television and feature film programming on a long-term
basis from various related parties, and accordingly records a program rights
asset and payable for the contractual amounts. At June 30, 1999 and December
31, 1998 and 1997, the unamortized program rights were $168,240, $150,771 and
$108,672, respectively, and the program rights payable were $144,256, $134,652
and $103,444, respectively.
(c) Litigation
In the ordinary course of business, the Company has become involved in
disputes or litigation. While the result of such disputes cannot be predicted
with certainty, in management's opinion, based in part on the advice of
counsel, the ultimate resolution of these disputes will not have a material
effect on the Company's financial position or results of operations.
F-21
<PAGE>
FOX SPORTS NETWORKS, LLC
(A Delaware Limited Liability Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
June 30, 1999
(Dollars in thousands)
(13) Subsequent Event
In July 1999, TNCL acquired from LMCI substantially all of LMCI's 50%
interest in the Company and its businesses. TNCL transferred the acquired
interests to Fox in exchange for common stock of Fox. As a result of these
transactions, Fox owns substantially all of the Company and has changed the
name of the Company to Fox Sports Networks, LLC, has changed the Company's
fiscal year end to coincide with that of Fox and, through 19th Holdings
Corporation, has acquired the debt outstanding under the Credit Agreement (See
Note 7(b)). The Company's fiscal year has been changed from a calendar year to
a 52-53 week fiscal year ending on the Sunday closest to June 30 in each year.
F-22
<PAGE>
LIBERTY SPORTS, INC. AND SUBSIDIARIES--DOMESTIC OPERATIONS
FINANCIAL STATEMENTS
F-23
<PAGE>
LIBERTY SPORTS, INC. AND SUBSIDIARIES--DOMESTIC OPERATIONS
FINANCIAL STATEMENTS
With Independent Auditors' Report
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Fox Sports Networks, LLC:
We have audited the accompanying combined statements of operations and
equity and cash flows of Liberty Sports, Inc. and subsidiaries--Domestic
Operations for the period from January 1, 1996 to April 29, 1996. These
combined financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these combined
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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 audit provides a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
Liberty Sports, Inc. and subsidiaries--Domestic Operations for the period from
January 1, 1996 to April 29, 1996, in conformity with generally accepted
accounting principles.
KPMG LLP
Dallas, Texas
June 28, 1996
F-24
<PAGE>
LIBERTY SPORTS, INC. AND SUBSIDIARIES--DOMESTIC OPERATIONS
COMBINED STATEMENT OF OPERATIONS AND EQUITY
(amounts in thousands)
<TABLE>
<CAPTION>
January
1, 1996
to April
29, 1996
--------
<S> <C>
Revenues (note 4):
Programming......................................................... $ 37,484
Advertising......................................................... 27,696
Direct broadcast.................................................... 23,709
Network support..................................................... 2,471
Other............................................................... 8,393
--------
99,753
--------
Operating costs and expenses (notes 4 and 7):
Operating........................................................... 60,664
General and administrative.......................................... 27,993
Depreciation and amortization....................................... 10,788
--------
99,445
--------
Operating income (loss)........................................... 308
--------
Other income (expense):
Interest expense.................................................... (1,963)
Interest income..................................................... 91
Equity in earnings of affiliates (note 5)........................... 219
Minority interest in earnings of subsidiaries....................... (1,076)
Other, net.......................................................... 1,467
--------
(1,262)
--------
Loss before income taxes.......................................... (954)
Income tax benefit (note 6)........................................... 217
--------
Net loss.......................................................... (737)
Equity, beginning of period........................................... 236,788
Net change in Parent's investment..................................... (11,570)
--------
Equity, end of period................................................. $224,481
========
</TABLE>
See accompanying notes to combined financial statements.
F-25
<PAGE>
LIBERTY SPORTS, INC. AND SUBSIDIARIES--DOMESTIC OPERATIONS
COMBINED STATEMENT OF CASH FLOWS
(amounts in thousands)
<TABLE>
<CAPTION>
January 1,
1996
to April 29,
1996
------------
<S> <C>
Cash flows from operating activities:
Net loss........................................................ $ (737)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization................................. 10,788
Equity in earnings of affiliates.............................. (219)
Minority interest............................................. 1,076
Deferred income taxes......................................... (1,176)
Changes in operating assets and liabilities:
Receivables................................................. (9,198)
Inventories................................................. (167)
Prepaid program rights...................................... 1,197
Other assets................................................ (1,906)
Payables, accruals and unearned revenue..................... (2,881)
--------
Net cash used in operating activities..................... (3,223)
--------
Cash flows from investing activities:
Capital expended for property and equipment..................... (4,544)
Additional investments in and loans to affiliates............... (2,500)
Return of capital from affiliates............................... 1,000
--------
Net cash used in investing activities..................... (6,044)
--------
Cash flows from financing activities:
Borrowings of long-term debt.................................... 28,600
Repayments of long-term debt.................................... (8,956)
Change in Parent's investment................................... (11,570)
--------
Net cash provided by financing activities................. 8,074
--------
Decrease in cash and cash equivalents............................. (1,193)
Cash and cash equivalents at beginning of period.................. 10,453
--------
Cash and cash equivalents at end of period........................ $ 9,260
========
</TABLE>
See accompanying notes to combined financial statements.
F-26
<PAGE>
LIBERTY SPORTS, INC. AND SUBSIDIARIES--DOMESTIC OPERATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS
(1) Organization
Liberty Sports, Inc. was incorporated on November 13, 1989 as TCI Sports,
Inc., a wholly-owned subsidiary of Tele-Communications, Inc. ("TCI"). On March
29, 1991, the name was changed to Liberty Sports, Inc. and the ownership was
transferred to Liberty Media Corporation ("LMC"), an affiliate of TCI. On
August 4, 1994, LMC became a wholly-owned subsidiary of TCI.
Liberty Sports, Inc. and subsidiaries--Domestic Operations primarily provide
television sports programming services to customers throughout the United
States, sell advertising time in such programming and provide management and
technical services to other sports networks.
(2) Significant Accounting Policies
(a) Basis of Presentation
The accompanying combined financial statements include the accounts of
Liberty Sports, Inc. and its domestic majority-owned subsidiaries and other
entities in which it has a controlling voting interest (collectively, "LSI--
Domestic" or the "Company"). All significant intercompany accounts and
transactions have been eliminated in combination.
(b) Investments in Affiliates
Investments in affiliates are accounted for under the equity method. Under
this method, the investment, originally recorded at cost, is adjusted to
recognize LSI-Domestic's share of net earnings or losses of the affiliate as
they occur rather than as dividends or other distributions are received,
limited to the extent of LSI-Domestic's investment in, advances to and
guarantees on behalf of, the investee. LSI's share of net earnings or losses
of affiliates includes the amortization of purchase adjustments.
(c) Revenues
Revenue from programming represents affiliate fees received from cable
system operators and is recognized monthly as earned. Advertising revenue is
recognized upon airing of commercials.
Network support revenue is received from related parties for network,
traffic and master control operation services provided by the Company. Such
revenue is recognized as earned.
The Company has sold advance subscriptions to its direct broadcast satellite
customers. Such amounts are amortized to revenue monthly as revenue is earned.
(d) Nonmonetary Transactions
The Company trades commercial advertising spots in return for other
services, primarily programming. These trades are recorded at the fair value
of the asset surrendered or the fair value of the asset obtained, whichever is
more clearly evident. These transactions resulted in the recording of
approximately $2,050,000 in both advertising revenue and expenses during the
period January 1, 1996 to April 29, 1996.
(e) Use of Estimates
The preparation of the 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
F-27
<PAGE>
LIBERTY SPORTS, INC. AND SUBSIDIARIES--DOMESTIC OPERATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Because of the use of estimates inherent in the
financial reporting process, actual results could differ from those estimates.
(3) Supplemental Disclosures to Combined Statements of Cash Flows
Cash paid for interest was $1,805,000 for the period January 1, 1996 to
April 29, 1996. Cash paid for income taxes during the period January 1, 1996
to April 29, 1996 was not material.
(4) Related Party Transactions
For the period January 1, 1996 to April 29, 1996, the Company recognized the
following revenue and expenses as a result of transactions with related
parties, primarily TCI and its affiliates (amounts in thousands):
<TABLE>
<S> <C>
Revenues and other:
Programming....................................................... $12,213
Direct broadcast.................................................. 5,908
Network support................................................... 2,375
Other............................................................. 824
Expenses:
Programming fees.................................................. 2,865
Direct broadcast programming fees................................. 3,094
</TABLE>
(5) Investments in Affiliates
The following table reflects LSI Domestic's share of earnings (losses)
(principally accounted for under the equity method) of each of these
affiliates (amounts in thousands):
<TABLE>
<CAPTION>
Entity
------
<S> <C>
SportsChannel Chicago Associates ("SC-CHI").......................... $2,877
Prime SportsChannel Network Associates............................... (2,169)
Sunshine Network Joint Venture ("Sunshine").......................... 669
SportsSouth Network Ltd.............................................. 2,026
Prime Sports Network--Upper Midwest Joint Venture.................... --
SportsChannel Prism Associates....................................... 139
Rocky Mountain Mobile TV............................................. 93
Home Team Sports Limited Partnership ("HTS")......................... 397
SportsChannel Pacific................................................ --
Global Music Channel................................................. (3,813)
------
$ 219
======
</TABLE>
The Company's investment in three of these affiliates (Sunshine, HTS, and
SC-CHI) exceeded its equity in the underlying net assets. These excess amounts
are being amortized over the estimated useful lives of the investment
affiliate agreements and sports contracts. This amortization aggregated
$222,000 for the period January 1, 1996 to April 29, 1996 and is included in
LSI Domestic's share of earnings.
F-28
<PAGE>
LIBERTY SPORTS, INC. AND SUBSIDIARIES--DOMESTIC OPERATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Summarized financial operating results for affiliates accounted for under
the equity method is as follows:
Combined Operations
(amounts in thousands)
<TABLE>
<CAPTION>
January 1,
1996 to
April 29,
1996
----------
<S> <C>
Revenues.......................................................... $90,170
Operating, general and administrative expenses.................... (80,772)
Depreciation and amortization..................................... (1,290)
-------
Operating income................................................ 8,108
Interest income................................................... (144)
Other, net........................................................ (30)
-------
Net income...................................................... $ 7,934
=======
</TABLE>
(6) Income Taxes
The Company accounts for income taxes using Statement of Financial
Accounting Standards No. 109 ("SFAS No. 109"), "Accounting for Income Taxes."
SFAS No. 109 requires the use of the asset and liability method of accounting
for income taxes. Under the asset and liability method, deferred tax assets
and liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted tax rates in effect for
the year in which those temporary differences are expected to be recovered or
settled. Under SFAS No. 109, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes
the enactment date.
The Company is included in the consolidated federal income tax returns filed
by TCI. Federal income taxes are calculated on a separate return basis in the
accompanying consolidated financial statements.
Income tax benefit (expense) attributable to loss before income taxes for
the period January 1, 1996 to April 29, 1996 consists of the following:
<TABLE>
<S> <C>
Current:
Federal............................................................. $(921)
State............................................................... (38)
Deferred.............................................................. 1,176
-----
Total................................................................. $ 217
=====
</TABLE>
Actual income tax benefit differs from the "expected" income tax benefit
for the period January 1, 1996 to April 29, 1996 (computed by applying the
U.S. federal corporate tax rate of 35% to loss before income taxes) as follows
(amounts in thousands):
<TABLE>
<S> <C>
Computed "expected" tax benefit........................................ $334
Minority interest in earnings of consolidated subsidiary............... (640)
Other, net............................................................. 523
----
$217
====
</TABLE>
F-29
<PAGE>
LIBERTY SPORTS, INC. AND SUBSIDIARIES--DOMESTIC OPERATIONS
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(7) Commitments and Contingencies
The Company leases transponders, office facilities, and equipment and
microwave channels used to carry its broadcast signals. These leases, which
are classified as operating leases, expire at various dates through 2000.
Future minimum lease payments under noncancellable operating leases by
calendar year are summarized as follows (amounts in thousands):
<TABLE>
<S> <C>
1996................................................................. $15,791
1997................................................................. 15,196
1998................................................................. 15,073
1999................................................................. 13,561
2000................................................................. 10,177
Thereafter........................................................... 5,500
</TABLE>
Total lease expense was approximately $4,049,000 for the period January 1,
1996 to April 29, 1996.
The Company has long-term sports program rights contracts which require
payments through 2005. Future minimum payments by calendar year are as follows
(amounts in thousands):
<TABLE>
<S> <C>
1996................................................................ $ 58,051
1997................................................................ 59,854
1998................................................................ 56,999
1999................................................................ 53,166
2000................................................................ 45,736
Thereafter.......................................................... 128,187
</TABLE>
The Company has guaranteed obligations of certain equity affiliates under
program rights agreements aggregating $3,331,000 in 1996; $3,598,000 in 1997;
and $2,857,000 in 1998.
Liberty Sports, Inc. and its domestic affiliates are parties to various
lawsuits and claims arising in the ordinary course of business. While the
outcome of such claims, lawsuits or other proceedings against the Company
cannot be predicted with certainty, management expects that such liability, to
the extent not provided through insurance or otherwise, will not have a
material adverse effect on the operating results or financial condition of the
Company.
(8) Subsequent Event
Effective April 29, 1996, Liberty Sports, Inc. contributed substantially all
of its domestic assets and liabilities to certain limited liability companies
and limited partnerships (collectively, the "Domestic Venture"). The members
of the Domestic Venture are certain affiliates of Liberty Sports, Inc. and
certain affiliates of The News Corporation Limited, each of which owns,
through its affiliates, 50% of the Domestic Venture. The Domestic Venture was
formed to provide sports programming services in the United States and Canada.
F-30
<PAGE>
FX NETWORKS, LLC
(A Limited Liability Company)
FINANCIAL STATEMENTS
For the Ten Months Ended April 29, 1996
Together with Report of Independent Public Accountants
F-31
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Fox Sports Networks, LLC:
We have audited the accompanying statements of Operations and Cash Flows of
FX NETWORKS, LLC (the Company, a Delaware limited liability company) for the
ten months ended April 29, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits. The financial
statements of FX Networks, LLC for the four months ended April 29, 1996 were
not audited by us and, accordingly, we do not express an opinion on them.
We conducted our audit in accordance with generally accepted auditing
standards. 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of FX NETWORKS, LLC's operations and its
cash flows for the ten months ended April 29, 1996 in conformity with
generally accepted accounting principles.
Arthur Andersen LLP
Los Angeles, California
August 4, 1997
F-32
<PAGE>
FX NETWORKS, LLC
(A Delaware Limited Liability Company)
STATEMENTS OF OPERATIONS
For the Periods Ended April 29, 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
Four Ten
Months Ended Months Ended
April 29, April 29,
1996 1996
------------ ------------
(unaudited)
<S> <C> <C>
Revenue:
Programming......................................... $24,291 $ 55,934
Advertising......................................... 8,287 17,358
Infomercial......................................... 947 2,109
------- --------
33,525 75,401
------- --------
Expenses:
Operating........................................... 26,220 63,369
General and administrative.......................... 7,941 19,936
Depreciation and amortization....................... 201 480
------- --------
34,362 83,785
------- --------
Interest expense...................................... 3,354 7,898
------- --------
Net Loss.......................................... $(4,191) $(16,282)
======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-33
<PAGE>
FX NETWORKS, LLC
(A Delaware Limited Liability Company)
STATEMENTS OF CASH FLOWS
For the Periods Ended April 29, 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
Four months Ten months
ended April 29, Ended April 29,
1996 1996
--------------- ---------------
(unaudited)
<S> <C> <C>
Cash Flows from Operating Activities:
Net income................................... $(4,191) $(16,282)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization.............. 201 480
Changes in operating assets and liabilities:
Accounts receivables....................... (3,998) (9,110)
Program rights............................. (6,785) (7,194)
Other assets............................... 359 (167)
Accounts payable and accrued expenses...... (1,136) (927)
Program rights payable..................... 6,263 6,254
------- --------
Net cash used in operating activities.... (9,287) (26,946)
------- --------
Cash Flows from Investing Activities:
Purchases of property and equipment.......... (191) (521)
------- --------
Net cash used in investing activities.... (191) (521)
------- --------
Cash Flows from Financing Activities:
Related Party Payable........................ 9,478 27,467
------- --------
Net cash provided by financing
activities.............................. 9,478 27,467
------- --------
Net Increase (Decrease) in Cash and Cash
Equivalents................................... -- --
Cash and Cash Equivalents, beginning of year... -- --
------- --------
Cash and Cash Equivalents, end of year......... $ -- $ --
======= ========
Supplemental Cash Flow Information
Cash paid for interest....................... $ 3,354 $ 7,898
======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-34
<PAGE>
FX NETWORKS, LLC
(A Delaware Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
(Information for the four month period ended April 29, 1996 is unaudited)
For the Ten Months Ended April 29, 1996
(Dollars in thousands)
(1) Organization
FX Networks, LLC was formed on July 1, 1993 as a division of Fox, Inc.
("Fox"), a subsidiary of The News Corporation Limited, as a basic cable
exclusive service distributed on a per subscriber basis, to provide general
entertainment and sports programming services and sell commercial advertising
time during its programming.
(2) Significant Accounting Policies
(a) Basis of Presentation
The accompanying financial statements of the Company present the operations
and cash flows for the interim four month period ended April 29, 1996
(unaudited) for the purpose of comparison to the year ended December 31, 1997
for its successor company, Fox/Liberty Networks, LLC.
(b) Program Rights
The Company has multi-year contracts for broadcast rights of syndicated
entertainment programs. Program rights are amortized over the term of the
contract using the straight-line method.
At the inception of these contracts and periodically thereafter, the Company
evaluates the recoverability of the costs associated therewith against the
advertising revenues directly associated with the program material and related
expenses. Where an evaluation indicates that a multi-year contract will result
in an ultimate loss, additional amortization is provided to recognize that
loss currently.
(c) Property and Equipment
Property and equipment are stated at cost. Depreciation for financial
statement purposes is provided using the straight-line method over estimated
useful lives of 3 to 5 years.
(d) Income Taxes
No provision has been made for income tax expense or benefit in the
accompanying consolidated financial statements as the income or losses of the
Company are reported in the respective income tax returns of the partners.
(e) Revenue
Programming revenue represents monthly subscriber fees received from cable
system operations and is recognized as earned. Advertising revenue is
recognized as earned.
(f) Use of 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,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Because of the use of estimates inherent in the financial
reporting process, actual results could differ from those estimates.
F-35
<PAGE>
FX NETWORKS, LLC
(A Delaware Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information for the four month period ended April 29, 1996 is unaudited)
For the Ten Months Ended April 29, 1996
(Dollars in thousands)
(g) Allocation of expenses
Fox allocates costs, such as rent and payroll, incurred on behalf of the
Company based on the percentage of services rendered to the Company. These
allocated expenses are included in general and administrative expenses in the
Statements of Operations. Management believes the allocation method used is
reasonable.
(h) Interim Financial Data (unaudited)
The interim financial data for the period ended April 29, 1996 has been
prepared by the Company and is unaudited; however, in the opinion of the
Company, the interim data includes all adjustments, consisting only of normal
recurring adjustments, necessary for a fair statement of the results of
operations and cash flows for the interim period. Results for the interim
period are not necessarily indicative of the results to be achieved for the
full year.
(3) Related Party Transactions
The Company recognized the following revenue and expenses as a result of
arms-length transactions with related parties (amounts in thousands):
<TABLE>
<CAPTION>
Four Months Ten Months
Ended April 29, Ended April 29,
1996 1996
--------------- ---------------
(unaudited)
<S> <C> <C>
Revenue:
Advertising................................ $ 159 $ 248
Expenses:
Interest expense........................... 3,354 7,898
Production................................. 7,932 23,068
Programming fees........................... 3,604 7,695
</TABLE>
TCI, which became a related party as a result of the Joint Venture (see Note
5), had transactions with the Company resulting in revenues of $25,310 for the
ten month period ended April 29, 1996.
(4) Commitments and Contingencies
(a) Leases
The Company leases transponders and equipment used to carry its broadcast
signals. These leases, which are classified as operating leases, expire at
various dates through 2006.
Total lease expense was approximately $3,912, and $1,564, for the ten months
and four months ended April 29, 1996 (unaudited).
(b) Long-term Program Rights Contracts
The Company has long-term program rights contracts which require payments
through 1999.
F-36
<PAGE>
FX NETWORKS, LLC
(A Delaware Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information for the four month period ended April 29, 1996 is unaudited)
For the Ten Months Ended April 29, 1996
(Dollars in thousands)
(c) Litigation
The Company is a party to various lawsuits and claims arising in the
ordinary course of business. While the outcome of such claims, lawsuits or
other proceedings against the Company cannot be predicted with certainty,
management expects that such liability will not have a material adverse effect
on the operating results or financial position of the Company.
(5) Subsequent Event
On April 30, 1996, The News Corporation Limited contributed a majority of
the assets and liabilities of the Company to Fox/Liberty Networks, LLC as part
of a joint venture formed by The News Corporation Limited and Tele-
Communications, Inc.
F-37
<PAGE>
REGIONAL PROGRAMMING PARTNERS AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1999 and 1998 and
Period from December 18, 1997 (Inception) to December 31, 1997
(With Independent Auditors' Report Thereon)
F-38
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
Regional Programming Partners:
We have audited the accompanying consolidated balance sheets of Regional
Programming Partners and subsidiaries as of December 31, 1999 and 1998, and
the related consolidated statements of income, partners' capital and cash
flows for the years ended December 31, 1999 and 1998, and for the period from
December 18, 1997 (Inception) to December 31, 1997. These consolidated
financial statements are the responsibility of the partnership's management.
Our responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Regional
Programming Partners and subsidiaries at December 31, 1999 and 1998, and the
results of their operations and their cash flows for the years ended December
31, 1999 and 1998, and for the period from December 18, 1997 (Inception) to
December 31, 1997, in conformity with generally accepted accounting
principles.
KPMG LLP
March 13, 2000
Melville, New York
F-39
<PAGE>
REGIONAL PROGRAMMING PARTNERS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents.............................. $ 47,297 $ 148,852
Trade accounts receivable (less allowance for doubtful
accounts of $8,086 and $8,356)........................ 101,277 77,090
Trade accounts receivable-affiliates, net.............. 19,082 16,603
Notes and other receivables-affiliates................. 180,578 180,519
Inventory.............................................. 1,959 2,483
Prepaid expenses and other current assets.............. 25,724 32,459
---------- ----------
Total current assets................................. 375,917 458,006
Notes receivable......................................... 43,231 41,320
Property and equipment, net.............................. 324,754 259,175
Investments in affiliates................................ 41,956 19,006
Other assets............................................. 5,441 4,905
Deferred costs, net of accumulated amortization of $3,681
and $2,249.............................................. 35,583 32,492
Intangible assets, net of accumulated amortization of
$337,518 and $249,700................................... 1,408,981 1,475,270
---------- ----------
$2,235,863 $2,290,174
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Current liabilities:
Accounts payable....................................... $ 40,903 $ 30,897
Accrued expenses....................................... 70,059 69,453
Accrued payroll and related benefits................... 36,222 39,974
Deferred revenue....................................... 107,532 121,135
Accounts payable--affiliates, net...................... 3,304 10,114
Contractual rights obligations, current................ 28,578 28,451
Capital lease obligations, current..................... 1,161 341
---------- ----------
Total current liabilities............................ 287,759 300,365
Long-term debt........................................... 355,000 330,000
Deferred compensation.................................... 3,971 8,747
Contractual rights obligations, long-term................ 74,540 103,041
Capital lease obligations, long-term..................... 13,698 445
Other liabilities........................................ 119,653 116,997
Minority interest........................................ -- 64,117
---------- ----------
Total liabilities.................................... 854,621 923,712
Commitments and contingencies
Partners' capital........................................ 1,381,242 1,366,462
---------- ----------
$2,235,863 $2,290,174
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-40
<PAGE>
REGIONAL PROGRAMMING PARTNERS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1999 AND 1998 AND THE PERIOD
FROM DECEMBER 18, 1997 (INCEPTION) TO DECEMBER 31, 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- -------
<S> <C> <C> <C>
Revenues, net (including affiliate amounts of
$112,042, $93,811 and $3,305).................... $860,167 $708,043 $56,957
Expenses:
Technical and operating (including affiliate
amounts of $15,276, $13,156 and $529).......... 592,980 479,550 32,091
Selling, general and administrative (including
affiliate amounts of $22,000, $12,104 and
$295).......................................... 142,718 122,276 9,472
Depreciation and amortization................... 115,895 123,410 3,884
-------- -------- -------
851,593 725,236 45,447
-------- -------- -------
Operating income (loss)......................... 8,574 (17,193) 11,510
-------- -------- -------
Other income (expense):
Share of affiliates' net income (loss).......... 15,572 11,839 (359)
Interest income................................. 17,632 24,318 973
Interest expense................................ (28,170) (29,876) (1,395)
Gain on sale of interest in subsidiary.......... -- 17,648 --
Write-off of deferred financing fees............ -- -- (6,538)
Minority interest............................... 1,444 758 (561)
Miscellaneous, net.............................. (272) (93) (1,520)
-------- -------- -------
6,206 24,594 (9,400)
-------- -------- -------
Net income...................................... $ 14,780 $ 7,401 $ 2,110
======== ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-41
<PAGE>
REGIONAL PROGRAMMING PARTNERS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
YEARS ENDED DECEMBER 31, 1999 AND 1998 AND THE PERIOD FROM
DECEMBER 18, 1997 (INCEPTION) TO DECEMBER 31, 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
RMHI FOX TOTAL
-------- -------- ----------
<S> <C> <C> <C>
Balance, December 18, 1997....................... $ -- $ -- $ --
Net assets contributed......................... 506,951 -- 506,951
Capital contributions.......................... -- 850,000 850,000
Adjustment of partnership capital.............. 307,220 (307,220) --
Net income..................................... 1,266 844 2,110
-------- -------- ----------
Balance, December 31, 1997....................... 815,437 543,624 1,359,061
Net income..................................... 4,441 2,960 7,401
-------- -------- ----------
Balance, December 31, 1998....................... 819,878 546,584 1,366,462
Net income..................................... 8,868 5,912 14,780
-------- -------- ----------
Balance, December 31, 1999....................... $828,746 $552,496 $1,381,242
======== ======== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-42
<PAGE>
REGIONAL PROGRAMMING PARTNERS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND 1998 AND THE PERIOD
FROM DECEMBER 18, 1997 (INCEPTION) TO DECEMBER 31, 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.................................. $ 14,780 $ 7,401 $ 2,110
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Amortization of deferred costs............ 1,432 1,423 (195)
Depreciation and amortization............. 115,895 123,410 3,884
Share of affiliates net (income) loss..... (15,572) (11,839) 359
Minority interest......................... (1,444) (758) 561
Gain on sale of interest in subsidiary.... -- (17,648) --
Write-off of deferred financing costs..... -- -- 6,538
Loss on sales of equipment................ -- 100 --
Changes in assets and liabilities:
Trade accounts receivable, net.......... (24,187) 14,380 6,160
Trade accounts receivable--affiliates,
net.................................... (2,479) 8,435 (7,072)
Notes and other receivables--
affiliates............................. (59) (69) --
Notes receivable........................ (1,911) 2,765 --
Prepaid expenses and other current
assets................................. 7,259 (4,225) (409)
Deferred costs and other assets......... (5,589) (1,263) --
Accounts payable and accrued
liabilities............................ 6,860 (13,983) 35,189
Deferred revenue........................ (13,603) 16,788 (39,377)
Accounts payable--affiliates, net....... (6,810) 3,496 (8,770)
Deferred compensation................... (4,776) (2,332) --
Contractual rights obligations.......... (28,374) (28,601) --
Other liabilities....................... 2,656 (3,546) --
--------- --------- ---------
Net cash provided by (used in)
operating activities................. 44,078 93,934 (1,022)
--------- --------- ---------
Cash flows from investing activities:
Capital expenditures........................ (76,140) (32,812) --
Loan to affiliates.......................... -- (180,000) --
Investments in affiliates, net.............. (6,378) 170 --
Purchase of interest in subsidiary.......... (87,045) (94,000) --
Net proceeds from sale of interest in
subsidiary................................. -- 19,884 --
Proceeds from sale of equipment............. -- 16 --
Additions to intangible assets.............. -- (11,010) --
--------- --------- ---------
Net cash used in investing
activities........................... (169,563) (297,752) --
--------- --------- ---------
Cash flows from financing activities:
Proceeds from bank debt..................... 25,000 -- 366,000
Debt repayments............................. -- (50,000) (812,000)
Cash capital contributions from partners.... -- -- 850,000
Principal payments on capital lease
obligations................................ (1,070) (308) --
--------- --------- ---------
Net cash provided by (used in)
financing activities................. 23,930 (50,308) 404,000
--------- --------- ---------
Net (decrease) increase in cash and cash
equivalents.................................. (101,555) (254,126) 402,978
Cash and cash equivalents at beginning of
period....................................... 148,852 402,978 --
--------- --------- ---------
Cash and cash equivalents at end of year...... $ 47,297 $ 148,852 $ 402,978
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-43
<PAGE>
REGIONAL PROGRAMMING PARTNERS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
December 31, 1999 and 1998
1. Summary of Significant Accounting Policies
Description of Business
Regional Programming Partners (the "Partnership") is a general partnership
organized as of December 18, 1997, under the provisions of the New York State
Partnership Law. In exchange for a 60% interest in the Partnership issued to a
subsidiary of Rainbow Media Holdings, Inc. ("RMHI"), affiliates of RMHI,
through various indirect transfers, contributed to the Partnership their
interests in Madison Square Garden, L.P. ("MSG"), six additional regional
sports networks, and Metro Channel LLC. MSG is a sports and entertainment
company that owns and operates the Madison Square Garden Arena and the
adjoining Theater at Madison Square Garden, the New York Knickerbockers
professional basketball team, the New York Rangers professional hockey team,
the New York Liberty professional women's basketball team, the New England
Seawolves professional arena football team, the Hartford Wolf Pack
professional hockey team, Madison Square Garden Network, Fox Sports New York
and Radio City Entertainment (which operates Radio City Music Hall in New York
City). The regional sports networks in which the Partnership owns interests
provide regional sports programming to the New York, New England, Chicago,
Cincinnati, Cleveland, San Francisco and Florida areas. Metro Channel LLC
provides regional and local sports, news and educational programming to the
New York metropolitan area. A subsidiary of Fox Sports Networks, LLC (formerly
Fox/Liberty Networks, LLC) ("Fox") contributed $850,000 in cash to the
Partnership in exchange for a 40% interest in the Partnership.
At December 31, 1999, RMHI is a 75% owned indirect subsidiary of Cablevision
Systems Corporation ("CSC"), and Fox is a wholly-owned subsidiary of Fox
Entertainment Group, Inc. A subsidiary of RMHI is the managing partner of the
Partnership. In order to align the partners' capital accounts to balances in
accordance with their ownership percentages after the initial contributions,
an adjustment was made to transfer $307,220 from Fox's capital account to
RMHI's capital account.
Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of the
Partnership and its majority-owned partnership interests. The Partnership's
interests in less than majority-owned entities are accounted for under the
equity method. All significant intercompany transactions and balances are
eliminated in consolidation. Minority interest represents minority partners
share of the net equity and operating results of certain consolidated
subsidiaries.
Revenue Recognition
The Partnership derives revenues principally from programming services
provided by its pay television networks, ticket sales, distributions of
league-wide revenue from its sports teams, advertising on its programming
networks and advertising and event sponsorships related to the MSG arena.
Programming revenue is recognized as services are provided to pay television
systems. Network advertising revenue is recognized as commercials are
telecast. Ticket sales and league-wide revenue are recognized as each team
plays its games. Revenues from the sale of advertising in the form of signage
and license fees from the rental of MSG's luxury suites are recognized ratably
over the term of the respective agreements. Event-related revenues are
recognized as the underlying event occurs.
F-44
<PAGE>
REGIONAL PROGRAMMING PARTNERS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
Cash and Cash Equivalents
The Partnership considers temporary cash investments with original
maturities of three months or less at the time of purchase to be cash
equivalents. At December 31, 1999 and 1998, cash includes restricted amounts
of $4,603 and $4,708, respectively. The Partnership paid cash interest expense
of approximately $25,091 and $26,562 for the years ended December 31, 1999 and
1998, respectively. There was no cash paid for interest during the period from
December 18, 1997 (Inception) to December 31, 1997. In 1999, the Partnership's
non-cash investing and financing activities included capital lease obligations
of $15,143 incurred when the Partnership entered into leases for new
equipment. On December 31, 1997, the MSG minority partner made a capital
contribution to MSG of transportation equipment valued at $38,000.
Inventory
Inventory consists of retail merchandise carried on a FIFO basis and is
stated at the lower of cost or market.
Property and Equipment
Property and equipment are stated at cost. Equipment under capital leases is
stated at the present value of minimum lease payments. Depreciation on
equipment is calculated on the straight-line basis over the estimated useful
lives of the assets or, with respect to equipment under capital leases and
leasehold improvements, amortized over the shorter of the lease term or the
assets' useful lives.
Deferred Costs
Costs incurred to obtain debt are deferred and amortized on a straight-line
basis over the life of the related debt. Costs incurred to acquire the rights
to various sporting events and programming, to the extent they are estimated
to be recovered from future revenues, are capitalized and amortized as the
programs are available for broadcast. Costs incurred to acquire player
contracts, including signing bonuses, are capitalized and amortized over the
contract period of the respective player.
Intangible Assets
Player contracts, which represent the value assigned to the total compliment
of players included on the professional hockey and basketball teams, are
amortized over a six-year period on the straight-line basis.
Franchises, broadcast rights and affiliation agreements represent the value
assigned to MSG's professional hockey and basketball franchises, telecast
rights to certain sporting events and agreements with cable systems to carry a
certain programming service of the Partnership. These assets are being
amortized over a weighted-average period of approximately thirty one years on
a straight-line basis.
Excess costs over fair value of net assets acquired resulting from the
acquisition of interests in MSG, Radio City Entertainment and a sports network
are being amortized over periods ranging from twenty five to forty years on a
straight-line basis. The independent appraisal of the assets and liabilities
of Radio City Entertainment, completed in 1998, resulted in the recording of
additional excess costs of approximately $80,045 relating to an unfavorable
lease.
Income Taxes
The Partnership operates as a general partnership; accordingly, its taxable
income or loss is included in the tax returns of the individual partners, and
no provision for income taxes is made by the Partnership.
F-45
<PAGE>
REGIONAL PROGRAMMING PARTNERS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
Contractual Rights Obligations
Contractual rights obligations represent the remaining reserves on
unfavorable contracts established prior to the formation of the Partnership.
Such reserves are being amortized as a reduction of technical and operating
expense over the life of the contracts.
Use of 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 and
disclosure of contingent assets and liabilities at the date of financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from these estimates.
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Partnership accounts for long-lived assets in accordance with the
provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." This Statement requires
that long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets
to be held and used is measured by a comparison of the carrying amount of an
asset to future net cash flows expected to be generated by the asset. If such
assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets to be disposed of are reported at the lower
of the carrying amount or fair value less costs to sell.
Commitments and Contingencies
Liabilities for loss contingencies arising from claims, assessments,
litigation, fines and penalties and other sources are recorded when it is
probable that a liability has been incurred and the amount of the assessment
can be reasonably estimated.
Reclassifications
Certain reclassifications have been made to the prior year financial
statements to conform to the current presentation.
2. Acquisitions and Dispositions
In April 1999, the Partnership redeemed the remaining limited partnership
interest held by ITT in MSG for $87,000. Such redemption was accounted for as
a purchase whereby the excess of redemption price paid over the equity
redeemed of $23,300 was allocated as follows:
<TABLE>
<S> <C>
Property and equipment........................................... $ 1,800
Player contracts................................................. 3,200
Franchises....................................................... 4,300
Excess costs over fair value of net assets acquired.............. 14,000
-------
$23,300
=======
</TABLE>
F-46
<PAGE>
REGIONAL PROGRAMMING PARTNERS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
In June 1998, the Partnership redeemed one-half of ITT's then remaining 7.8%
limited partnership interest in MSG for $94,000. Such redemption was accounted
for as a purchase whereby the excess of the redemption price paid over the
equity redeemed of $29,400 was allocated as follows:
<TABLE>
<S> <C>
Property and equipment........................................... $ 3,200
Player contracts................................................. 5,600
Franchises....................................................... 7,500
Excess costs over fair value of net assets acquired.............. 13,100
-------
$29,400
=======
</TABLE>
On January 29, 1998, the Partnership sold a 50% interest in SportsChannel
New England Limited Partnership for $19,884 resulting in a gain, net of
expenses, of $17,648.
3. Notes Receivable
Notes receivable includes a $40,000 loan made by Garden Programming, L.L.C.
("Garden Programming"), a wholly-owned subsidiary of MSG, to a broadcast
content provider on July 11, 1997. The loan matures on November 1, 2011, and
bears interest at a rate which approximates MSG's borrowing rate. The loan is
secured by certain assets of the borrower and a guarantee by an affiliate of
the borrower.
4. Property and Equipment
Property and equipment at December 31, 1999 and 1998, consist of the
following:
<TABLE>
<CAPTION>
Estimated
1999 1998 useful lives
-------- -------- -------------
<S> <C> <C> <C>
Land....................................... $ 23,450 $ 23,193
Building................................... 120,432 117,809 23 years
Program, service and test equipment........ 142,373 107,901 2 to 13 years
Microwave and other equipment.............. 12,090 8,646 2 to 9 years
Furniture and fixtures..................... 6,724 6,408 1 to 8 years
Leasehold improvements..................... 74,242 22,239 Life of lease
Transportation equipment................... 39,391 39,166 5 to 15 years
418,702 325,362
Less accumulated depreciation and
amortization.............................. 93,948 66,187
-------- --------
$324,754 $259,175
======== ========
</TABLE>
F-47
<PAGE>
REGIONAL PROGRAMMING PARTNERS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
5. Investments in Affiliates
The Partnership has a 50% ownership interest in each of SportsChannel
Chicago Associates, SportsChannel New England Limited Partnership and
SportsChannel Pacific Associates, a 30% partnership interest in SportsChannel
Florida Associates and a minority ownership interest in two musical
productions. The investment balance and income (loss) of investees is
comprised of the following:
<TABLE>
<CAPTION>
Investment Income (loss)
December 31, December 31,
--------------- -----------------------
Investees 1999 1998 1999 1998 1997
--------- ------- ------- ------- ------- -----
<S> <C> <C> <C> <C> <C>
SportsChannel Chicago
Associates..................... $30,563 $12,149 $ 9,414 $10,233 $ 219
SportsChannel Pacific
Associates..................... 6,682 5,853 3,829 2,142 (443)
SportsChannel New England, L.P.
............................... 2,686 1,794 892 832 --
SportsChannel Florida
Associates..................... 35 (2,412) 2,426 1,057 (135)
Other, net...................... 1,990 1,622 (989) (2,425) --
------- ------- ------- ------- -----
$41,956 $19,006 $15,572 $11,839 $(359)
======= ======= ======= ======= =====
</TABLE>
Several of the partnership agreements governing the operations of the
Partnership's investees contain buy-sell arrangements (generally providing for
a fair market determination of value) that may be initiated by one or more of
the partners under certain circumstances (as described in the partnership
agreements). Therefore, the Partnership's ownership interests in these
entities are subject to change.
6. Intangible Assets
Intangible assets at December 31, 1999 and 1998, consist of the following:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Player contracts, net of accumulated amortization of
$138,943 and $106,444............................... $ 56,981 $ 86,287
Franchises, broadcast rights and affiliation
agreements, net of accumulated amortization of
$28,709 and $17,269................................. 188,021 195,150
Excess costs over fair value of net assets acquired,
net of accumulated amortization of $169,866 and
$125,987............................................ 1,163,979 1,193,833
---------- ----------
$1,408,981 $1,475,270
========== ==========
</TABLE>
7. Long-Term Debt
Long-term debt at December 31, 1999 and 1998, consists of borrowings made by
MSG as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
MSG Credit Facility....................................... $335,000 $310,000
Garden Programming Promissory Notes....................... 20,000 20,000
-------- --------
Total................................................... $355,000 $330,000
======== ========
</TABLE>
MSG has a credit facility with various lending institutions consisting of a
$500,000 revolving facility (the "Revolver") which expires on December 31,
2004. Loans under the Revolver bear interest at current market rates plus a
margin (weighted average of 7.00% and 6.04% at December 31, 1999 and 1998,
respectively) based
F-48
<PAGE>
REGIONAL PROGRAMMING PARTNERS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
on MSG's consolidated leverage ratio (as defined). MSG is required to pay a
fee of .25% based on the unused portion of the commitment which as of December
31, 1999 and 1998 was $161,731 and $185,278, respectively.
The Revolver contains certain covenants and restrictions including the
maintenance of certain financial ratios. MSG is in compliance with these
covenants and restrictions as of December 31, 1999.
Garden Programming borrowed $20,000 under promissory notes with various
lending institutions (the "Promissory Notes") which are due July 2002. The
Promissory Notes bear interest at a margin above LIBOR (8.19% and 7.22% at
December 31, 1999 and 1998, respectively). These funds were used to partially
finance a $40,000 secured loan to a broadcast content provider (see Note 3).
MSG is party to letters of credit totaling $3,269 and $4,722 as of December
31, 1999 and 1998, respectively, which have been issued against the Revolver
to guarantee certain insurance and other operating activities. Management does
not expect performance to be required.
8. Leases
The Partnership has various long-term non-cancelable operating lease
agreements with non-affiliates for office space and practice facilities for
its professional sports teams and Radio City Music Hall which expire at
various dates through 2023. The leases generally provide for fixed annual
rentals plus certain other costs. Rent expense, net of amortization of the
liability established for unfavorable leaseholds, for the years ended
December 31, 1999 and 1998 was $12,991 and $16,559, respectively, and $275 for
the period from December 18, 1997 (Inception) to December 31, 1997. The
following is a schedule of future minimum payments for operating leases (with
initial or remaining terms in excess of one year) as of December 31, 1999:
<TABLE>
<S> <C>
Year ending December 31,
2000........................................................... $ 20,196
2001........................................................... 18,075
2002........................................................... 19,553
2003........................................................... 19,415
2004........................................................... 19,165
Thereafter..................................................... 256,240
--------
Total minimum lease payments..................................... $352,643
========
</TABLE>
Certain subsidiaries of the Partnership lease transponder space on a
satellite under capital leases through a sub-lease agreement with Rainbow
Network Communications ("RNC"), a subsidiary of RMHI, which expire in 2011.
Additionally, a subsidiary of the Partnership leases a landline from a third
party under a capital lease which expires in 2001. At December 31, 1999 and
1998, the gross amount of equipment and related accumulated depreciation
recorded under these leases were as follows:
<TABLE>
<CAPTION>
1999 1998
------- ------
<S> <C> <C>
Transponder................................................ $15,143 $ --
Landline................................................... 1,328 1,328
------- ------
16,471 1,328
Less accumulated depreciation.............................. 1,967 470
------- ------
$14,504 $ 858
======= ======
</TABLE>
F-49
<PAGE>
REGIONAL PROGRAMMING PARTNERS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
As of December 31, 1999 the future minimum capital lease payments are as
follows:
<TABLE>
<S> <C>
Years ending December 31,
2000........................................................... $ 2,206
2001........................................................... 1,868
2002........................................................... 1,800
2003........................................................... 1,800
2004........................................................... 1,800
Thereafter....................................................... 12,600
-------
Total minimum lease payments..................................... 22,074
Less amount representing interest................................ 7,215
-------
Present value of net minimum lease payments...................... 14,859
Less current installments........................................ 1,161
-------
Obligations under capital leases, excluding current
installments.................................................... $13,698
=======
</TABLE>
9. Other Liabilites
Other liabilities at December 31, 1999 and 1998, consist of the following:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Unfavorable lease obligation............................ $ 70,973 $ 74,175
Other................................................... 48,680 42,822
-------- --------
Total................................................... $119,653 $116,997
======== ========
</TABLE>
10. Affiliate Transactions
Notes and other receivables-affiliates includes a $180,000 loan made on June
1, 1998 by the Partnership to RMHI. Such loan is due on the earlier of demand
by the Partnership or March 31, 2002, and bears interest at a rate of LIBOR
plus 7/8% per annum.
The Partnership distributes certain programming to the pay television
industry under contracts called affiliation agreements. For the years ended
December 31, 1999 and 1998, approximately $112,042 and $93,811, respectively,
and $3,305 for the period from December 18, 1997 (Inception) to December 31,
1997, was earned under affiliation agreements with companies owned or managed
by affiliates of the partners in the Partnership.
National Sports Partners, which is managed by Fox and in which Fox and RMHI
each indirectly own a 50% interest, provides certain programming to the
Partnership. The Partnership was charged approximately $3,771 and $3,783 for
the years ended December 31, 1999 and 1998, respectively, and $130 for the
period from December 18, 1997 (Inception) to December 31, 1997, for this
programming.
RNC provides certain transmission and production services to the
Partnership. The Partnership was charged approximately $6,039 and $7,114 for
the years ended December 31, 1999 and 1998, respectively, and $263 for the
period from December 18, 1997 (Inception) to December 31, 1997, for these
services. In addition, CSC provides the Partnership with certain transmission
services. The Partnership was charged approximately $1,656 for the year ended
December 31, 1999, for such services.
F-50
<PAGE>
REGIONAL PROGRAMMING PARTNERS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
CSC, RMHI and certain of its subsidiaries provide the Partnership with
certain administrative, advertising, billing, computer, and creative services.
The Partnership was charged approximately $22,000 and $12,104 for the years
ended December 31, 1999 and 1998, respectively, and $295 for the period from
December 18, 1997 (Inception) to December 31, 1997, for such services.
The Partnership has an arrangement with National Advertising Partners
("NAP"), which is managed by Fox and in which Fox and RMHI each indirectly own
a 50% interest, to provide national advertising services to the Partnership in
exchange for a fee of 15% of the gross revenue, net of agency commissions,
from advertising sold by NAP. Fees charged by NAP on advertising revenues
amounted to approximately $2,076 and $1,956 for the years ended December 31,
1999 and 1998, respectively, and $136 for the period from December 18, 1997
(Inception) to December 31, 1997. A similar arrangement exists between a
subsidiary of the Partnership and a subsidiary of RMHI. Fees charged by this
affiliate on advertising revenue amounted to approximately $1,734 and $303 for
the years ended December 31, 1999 and 1998, respectively.
11. Pension and Other Postretirement Benefit Plans
CSC sponsors a cash balance pension plan and a 401(k) savings plan in which
the Partnership and its subsidiaries, other than MSG, participate. In
connection with the cash balance plan, the Partnership is charged by CSC for
credits made into an account established for each participant. Such credits
are based upon a percentage of eligible base pay and a market-based rate of
return. The Partnership also makes matching contributions for a portion of
employee voluntary contributions to the 401(k) savings plan. Total expense
related to these plans was approximately $296 and $130 for the years ended
December 31, 1999 and 1998, respectively, and $7 for the period from December
18, 1997 (Inception) to December 31, 1997.
MSG sponsors several non-contributory pension plans covering its non-union
employees and certain union employees. Benefits payable to retirees under
these plans are based upon years of service and participants' compensation and
are funded through trusts established under the plans. MSG's funding policy is
to meet the minimum funding requirements of the Employee Retirement Income
Security Act of 1974. Plan assets are invested in common stocks, bonds, United
States government securities and cash.
Components of MSG's net periodic pension cost for defined benefit plans for
the years ended December 31, 1999 and 1998, and the period from December 18,
1997 (Inception) to December 31, 1999 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- ----
<S> <C> <C> <C>
Service cost......................................... $ 2,529 $ 2,126 $ 52
Interest cost........................................ 1,996 1,796 63
Expected return on plan assets....................... (1,944) (1,707) (78)
Net amortization and deferral........................ 8 8 25
Recognized loss...................................... 22 31 --
------- ------- ----
Net periodic pension cost............................ $ 2,611 $ 2,254 $ 62
======= ======= ====
</TABLE>
F-51
<PAGE>
REGIONAL PROGRAMMING PARTNERS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
The funded status and the amounts recorded on the Partnership's balance
sheet for MSG's defined benefit pension plans at December 31, 1999 and 1998,
were as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Change in benefit obligation
Benefit obligation at beginning of year.................. $ 31,188 $ 25,518
Service cost............................................. 2,529 2,126
Interest cost............................................ 1,996 1,796
Actuarial (gain) loss.................................... (5,661) 2,415
Benefits paid............................................ (615) (667)
-------- --------
Benefit obligation at end of year........................ $ 29,437 $ 31,188
======== ========
Change in plan assets
Fair value of plan assets at beginning of year........... $ 19,736 $ 17,172
Actual return on plan assets............................. 1,795 2,065
Employer contributions................................... 698 1,166
Benefits paid............................................ (615) (667)
-------- --------
Fair value of plan assets at end of year................. $ 21,614 $ 19,736
======== ========
Funded status............................................ (7,823) (11,452)
Unrecognized transition amount........................... (38) (43)
Unrecognized prior service cost.......................... 9 21
Unrecognized net actuarial loss.......................... (2,944) 2,591
-------- --------
Accrued benefit cost..................................... $(10,796) $ (8,883)
======== ========
</TABLE>
Assumptions used in accounting for the plans are as follows:
<TABLE>
<CAPTION>
1999 1998
----- -----
<S> <C> <C>
Discount rate................................................ 7.50% 6.75%
Rate of return on plan assets................................ 10.00% 10.00%
Rate of increase in future compensation levels............... 5.00% 5.00%
</TABLE>
In addition, MSG contributes to various multiemployer defined benefit
pension plans. Pension expense recognized for these multiemployer plans for
the years ended December 31, 1999 and 1998 was approximately $2,784 and
$3,083, respectively, and $63 for the period from December 18, 1997
(Inception) to December 31, 1997.
MSG also sponsors a welfare plan which provides certain postretirement
health care and life insurance benefits to certain non-union employees and
their dependents who are eligible for early or normal retirement under MSG's
retirement plan. The welfare plan is insured through a managed care provider,
and MSG funds these benefits with premium payments.
F-52
<PAGE>
REGIONAL PROGRAMMING PARTNERS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
Components of MSG's cost for postretirement benefits for the years ended
December 31, 1999 and 1998, and the period from December 18, 1997 (Inception)
to December 31, 1997 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- ----
<S> <C> <C> <C>
Service cost............................................. $ 224 $ 160 $ 6
Interest cost............................................ 172 140 6
Amortization of unrecognized prior service benefit....... (176) (179) (7)
Recognized gain.......................................... (16) (37) --
----- ----- ---
Periodic postretirement benefit cost..................... $ 204 $ 84 $ 5
===== ===== ===
</TABLE>
The funded status and the amounts recorded on the Partnership's balance
sheet with respect to MSG's sponsored welfare plans are as follows:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Benefit obligation at beginning of year................... $ 2,404 $ 2,446
Service cost.............................................. 224 160
Interest cost............................................. 172 140
Actuarial gain............................................ (205) (472)
Amendments................................................ 163 163
Benefits paid, net of plan participant contributions...... (137) (33)
------- -------
Benefit obligation at end of year......................... $ 2,621 $ 2,404
======= =======
Plan assets............................................... $ -- $ --
Funded status............................................. $(2,621) $(2,404)
Unrecognized prior service cost........................... (2,708) (2,884)
Unrecognized net actuarial gain........................... (825) (799)
------- -------
Accrued benefit cost...................................... $(6,154) $(6,087)
======= =======
</TABLE>
The discount rate used in determining the accumulated postretirement benefit
obligation was 7.5% and 6.75% for 1999 and 1998, respectively. For measurement
purposes, a 5.7% annual rate of increase in the cost of covered health care
benefits was assumed for 2000. The rate was assumed to decrease gradually to
5% for 2004 and remain at that level thereafter.
Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. A one-percentage-point change in
assumed health care cost trend rates would have the following effect:
<TABLE>
<CAPTION>
One-percentage- One-percentage-
point increase point decrease
--------------- ---------------
<S> <C> <C>
Effect on the total of service and
interest cost components............... $ 73 $ (61)
Effect on postretirement benefit
obligations............................ $388 $(321)
</TABLE>
In addition, MSG contributes to multiemployer plans which provide health and
welfare benefits to active as well as retired employees. MSG incurred costs of
$4,855 and $5,006 related to those plans for the years ended December 31, 1999
and 1998, respectively and $116 for the period from December 18, 1997
(Inception) to December 31, 1997.
F-53
<PAGE>
REGIONAL PROGRAMMING PARTNERS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
12. Commitments
Subsidiaries of the Partnership have entered into long-term agreements with
several professional sports teams and others which provide such subsidiaries,
among other things, certain exclusive distribution rights to certain live
sporting events and obligate such subsidiaries to make minimum contractual
payments when the events are provided for distribution. Certain of these
contracts provide for payments which are guaranteed. MSG also has employment
agreements with players and coaches of its professional sports teams. Certain
of these contracts provide for payments which are guaranteed regardless of
employee injury or termination. MSG has obtained disability insurance on
certain players which provide benefits payable to MSG in the event of injury.
The approximate aggregate minimum contractual payments under these agreements
as of December 31, 1999, are as follows:
<TABLE>
<CAPTION>
Years ending
December 31,
------------
<S> <C>
2000.......................................................... $ 271,398
2001.......................................................... 217,300
2002.......................................................... 172,800
2003.......................................................... 136,164
2004.......................................................... 109,968
Thereafter ................................................... 1,020,554
----------
$1,928,184
==========
</TABLE>
13. Contingencies
The Partnership is a party to various legal matters arising out of the
ordinary conduct of its business. Management believes that the final outcome
of these matters will not have a material adverse effect on the financial
position of the Partnership.
14. Fair Value of Financial Instruments
The Partnership's financial instruments principally consist of cash and cash
equivalents, trade accounts receivable, notes receivable, accounts payable,
accrued expenses, long-term debt and contractual rights obligations. For all
instruments other than notes receivable, long-term debt and contractual rights
obligations, the carrying value of the instruments approximate their fair
value due to their short maturities. For notes receivable, long-term debt and
contractual rights obligations, carrying value approximates fair value as the
underlying instruments earn or bear interest at current rates offered to the
Partnership for the same or similar instruments.
15. Subsequent Event
On January 4, 2000, the Partnership purchased the 70% interest in
SportsChannel Florida Associates it did not already own for $130,000
(including the repayment of $20,000 of debt). The acquisition was funded with
cash on hand and the repayment of $100,500 of RMHI's outstanding loan from the
Partnership (see note 10).
F-54
<PAGE>
NATIONAL SPORTS PARTNERS
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
TOGETHER WITH REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS
F-55
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Joint Venturers of National Sports Partners:
We have audited the accompanying balance sheets of National Sports Partners
(the "Joint Venture") as of December 31, 1999 and 1998, and the related
statements of operations, venturers' equity (deficit) and cash flows for the
years ended December 31, 1999, 1998 and the period from inception (December
18, 1997) to December 31, 1997. These financial statements are the
responsibility of the Joint Venture'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. 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 National Sports Partners
as of December 31, 1999 and 1998, and the results of its operations and its
cash flows for the years ended December 31, 1999, 1998 and the period from
inception to December 31, 1997 in conformity with accounting principles
generally accepted in the United States.
Arthur Andersen LLP
Los Angeles, California
March 10, 2000
F-56
<PAGE>
NATIONAL SPORTS PARTNERS
BALANCE SHEETS
As of December 31, 1999 and 1998
(Amounts in thousands)
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents................................... $10,424 $ 3,209
Accounts receivable, net of allowance for doubtful accounts
of $1,374 and $3,760 at December 31, 1999 and 1998,
respectively............................................... 40,277 32,257
Prepaid program rights...................................... 5,217 3,453
Other assets................................................ 2,713 900
------- -------
Total current assets...................................... 58,631 39,819
Property and equipment, net................................... 6,745 9,717
Long-term receivable.......................................... 10,000 5,000
------- -------
Total Assets.................................................. $75,376 $54,536
======= =======
LIABILITIES AND VENTURERS' EQUITY (DEFICIT)
-------------------------------------------
Current liabilities:
Accounts payable and accrued expenses....................... $29,865 $36,344
Program rights payable...................................... 6,443 9,232
Other liabilities........................................... 10,430 4,942
------- -------
Total current liabilities................................. 46,738 50,518
Long-term program rights payable.............................. 8,871 13,881
Commitments and contingencies
Venturers' equity (deficit)................................... 19,767 (9,863)
------- -------
Total Liabilities and Venturers' Equity (Deficit)............. $75,376 $54,536
======= =======
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-57
<PAGE>
NATIONAL SPORTS PARTNERS
STATEMENTS OF OPERATIONS
For The Years Ended December 31, 1999 And 1998
And For The Period From Inception
(December 18, 1997) To December 31, 1997
(Amounts in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Programming.................................... $ 28,568 $ 28,690 $ 841
Advertising.................................... 51,580 34,589 215
Other.......................................... 14,058 11,834 24
-------- -------- --------
94,206 75,113 1,080
Expenses:
Operating...................................... 124,062 110,645 21,096
General and administrative..................... 5,769 6,284 235
Depreciation................................... 3,459 6,053 144
-------- -------- --------
Operating loss................................... (39,084) (47,869) (20,395)
Interest income, net............................. 286 401 5
-------- -------- --------
Net loss......................................... $(38,798) $(47,468) $(20,390)
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-58
<PAGE>
NATIONAL SPORTS PARTNERS
STATEMENTS OF VENTURERS' EQUITY (DEFICIT)
For The Years Ended December 31, 1999 And 1998
And For The Period From Inception
(December 18, 1997) To December 31, 1997
(Amounts in thousands)
<TABLE>
<CAPTION>
Fox Sports Rainbow
National National Sports
Holdings, LLC Holdings, LLC Total
------------- --------------- --------
<S> <C> <C> <C>
BALANCE--DECEMBER 18, 1997
(representing the initial
contributions of the venturers)...... $ 10,405 $ 3,074 $ 13,479
Net loss............................. (10,195) (10,195) (20,390)
-------- -------- --------
BALANCE--DECEMBER 31, 1997............. 210 (7,121) (6,911)
Contributions from venturers......... 22,258 22,258 44,516
Net loss............................. (23,734) (23,734) (47,468)
-------- -------- --------
BALANCE--DECEMBER 31, 1998............. (1,266) (8,597) (9,863)
Contributions from venturers......... 34,214 34,214 68,428
Net loss............................. (19,399) (19,399) (38,798)
-------- -------- --------
BALANCE--DECEMBER 31, 1999............. $ 13,549 $ 6,218 $ 19,767
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-59
<PAGE>
NATIONAL SPORTS PARTNERS
STATEMENTS OF CASH FLOWS
For The Years Ended December 31, 1999 And 1998
And For The Period From Inception
(December 18, 1997) To December 31, 1997
(Amounts in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ...................................... $(38,798) $(47,468) $(20,390)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation................................. 3,459 6,053 144
Additional amortization of program rights.... -- -- 16,616
Changes in operating assets and liabilities:
Accounts receivable.......................... (8,020) (30,142) 321
Prepaid program rights....................... (1,764) (2,140) (1,313)
Other assets and long term receivables....... (6,813) (5,487) --
Accounts payable and accrued expenses........ (6,479) 27,603 2,048
Program rights payable....................... (7,799) 6,497 --
Other liabilities............................ 5,488 2,059 2,574
-------- -------- --------
Net cash used in operating activities......... (60,726) (43,025) --
-------- -------- --------
Cash flows from investing activities:
Purchase of property and equipment............. (487) (548) --
-------- -------- --------
Net cash used by investing activities........ (487) (548) --
-------- -------- --------
Cash flows from financing activities:
Contributions from venturers................... 68,428 44,516 --
-------- -------- --------
Net cash provided by financing activities.... 68,428 44,516 --
-------- -------- --------
Net change in cash and cash equivalents.......... 7,215 943 --
Cash and cash equivalents, beginning of period... 3,209 2,266 2,266
-------- -------- --------
Cash and cash equivalents, end of period......... $ 10,424 $ 3,209 $ 2,266
======== ======== ========
Supplemental disclosure of cash flow information:
Cash paid for interest......................... $ 86 $ -- $ --
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-60
<PAGE>
NATIONAL SPORTS PARTNERS
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
(Amounts in thousands)
1. Organization
National Sports Partners (the "Joint Venture") is a 50%-50% joint venture
between Fox Sports National Holdings, LLC ("Fox"), a Delaware limited
liability company, and Rainbow National Sports Holdings, LLC ("Rainbow"), a
Delaware limited liability company. Fox is the managing venturer.
The Joint Venture was organized on December 18, 1997, when both Fox and
Rainbow contributed certain programming interests to operate a national sports
programming service, Fox Sports Net ("FSN"). FSN provides affiliated regional
sports networks ("RSNs") with 24 hour per day national sports programming
featuring live sporting events and original programming, as well as a national
sports news program, Fox Sports News, which telecasts pre-game and post-game
programming.
Fox contributed nonmonetary assets of $10,405, comprised primarily of
certain fixed assets, net of accrued liabilities assumed by the Joint Venture.
Rainbow contributed cash of $2,266 and nonmonetary assets of $808, consisting
primarily of certain accounts receivable, fixed assets, net of accrued
liabilities assumed by the Joint Venture.
During 1999, the Joint Venture incurred net losses of $38,798. In accordance
with the Joint Venture Agreement dated December 18, 1997, Fox and Rainbow
contributed $34,214 each to the Joint Venture during 1999. The Joint Venture
has received contributions of $5,256 each from Fox and Rainbow through March
9, 2000 and expects the venturers to continue to fund in accordance with the
2000 operating budget. To the extent that one venturer does not fund according
to the 2000 operating budget, the other venturer has committed to make capital
contributions sufficient to ensure that the operations of the Joint Venture
are funded through 2000.
2. Significant Accounting Policies
a. Cash Equivalents
Cash equivalents consist of short-term investments with an original maturity
of less than 90 days. The carrying amounts of cash equivalents approximate
their fair values due to their short maturities.
b. Program Rights
The Joint Venture has multi-year contracts for broadcast rights of sporting
events. Pursuant to these contracts, an asset is recorded for the rights
acquired and a liability is recorded for the obligation incurred, at the gross
amount of the liability when the sporting event is available for telecast.
Program rights are amortized on an event-by-event basis. At the inception of
these contracts and periodically thereafter, the Joint Venture evaluates the
recoverability of the costs associated therewith against the revenues
associated with the program material and related expenses. Where an evaluation
indicates that a multi-year contract will result in an ultimate loss,
additional amortization is provided to currently recognize that loss. In 1997,
the Joint Venture recorded $16,616 of additional amortization relating to its
long-term program rights contracts.
c. Property and Equipment
Property and equipment are stated at cost. Depreciation for financial
statement purposes are provided using the straight-line method over an
estimated useful life of 3 to 5 years.
d. Income Taxes
No provision has been made for federal, state or foreign income taxes as the
liability for such income taxes is the responsibility of the venturers.
F-61
<PAGE>
NATIONAL SPORTS PARTNERS
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999
(Amounts in thousands)
e. Allocation of Joint Venturers' Net Income or Net Losses
Income or losses from the Joint Venture are allocated to the venturers in
accordance with their respective contractual interests of 50% each.
f. Revenue
Revenue from programming represents monthly subscriber fees received from
the RSNs and is recognized when earned. Advertising revenue is recognized upon
airing of commercials.
g. Use of 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,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Because of the use of estimates inherent in the financial
reporting process, actual results could differ from those estimates.
h. Reclassifications
Certain reclassifications have been made to the prior year balances to
conform to the current year presentation.
3. Property and Equipment
Property and equipment at December 31, 1999 and 1998 consists of the
following:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Studio and production equipment............................ $ 5,432 $ 5,613
Office equipment........................................... 10,969 10,301
------- -------
16,401 15,914
Accumulated depreciation................................... (9,656) (6,197)
------- -------
$ 6,745 $ 9,717
======= =======
</TABLE>
4. Related Party Transactions
For the years ended December 31, 1999, 1998 and the period from inception
(December 18, 1997) to December 31, 1997, the Joint Venture recognized the
following revenues and expenses as a result of arms-length transactions with
affiliates of Fox and Rainbow:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- ------
<S> <C> <C> <C>
Revenues:
Programming........................................ $27,531 $27,461 $ 810
Advertising........................................ 351 -- --
Other.............................................. 4,000 3,750 --
Expenses:
Operating.......................................... 29,892 17,397 1,207
General and administrative......................... 5,623 5,127 198
</TABLE>
F-62
<PAGE>
NATIONAL SPORTS PARTNERS
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1999
(Amounts in thousands)
The Joint Venture had the following related party balances as of December
31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Accounts receivable......................................... $15,380 $11,776
Accounts payable and accrued expenses....................... 14,715 10,234
</TABLE>
5. Commitments
The Joint Venture has long-term sports program rights contracts which
require payments through 2008. Future minimum payments, including unrecorded
amounts, by year are as follows at December 31, 1999:
<TABLE>
<S> <C>
2000................................................................ $ 69,511
2001................................................................ 55,776
2002................................................................ 40,102
2003................................................................ 38,833
2004................................................................ 40,083
Thereafter.......................................................... 111,500
--------
$355,805
========
</TABLE>
F-63
<PAGE>
FOX SPORTS NETWORKS, LLC
FINANCIAL STATEMENT SCHEDULES
WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
S-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
To the Members of
Fox Sports Networks, LLC:
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements of Fox Sports Networks, LLC (the
"Company") included elsewhere in this Form 10-K and have issued our report
thereon dated September 17, 1999. Our audit was made for the purpose of
forming an opinion on the basic financial statements taken as a whole.
Schedules I and II are the responsibility of the Company's management and are
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. These
schedules have been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
Arthur Andersen LLP
Los Angeles, California
September 17, 1999
S-2
<PAGE>
FOX SPORTS NETWORKS, LLC
(A Delaware Limited Liability Company)
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF COMPANY
BALANCE SHEETS
June 30, 1999 and
December 31, 1998 and 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, December 31, December 31,
1999 1998 1997
-------- ------------ ------------
<S> <C> <C> <C>
ASSETS
Cash......................................... $ 151 $ 137 $ --
Investments in subsidiaries.................. 856,045 891,006 911,489
Other assets................................. 16,342 17,063 18,083
-------- -------- --------
Total Assets............................... $872,538 $908,206 $929,572
======== ======== ========
LIABILITIES AND MEMBERS' EQUITY
Accrued liabilities.......................... $ 36,006 $ 31,125 $ 16,473
Long-term debt............................... 800,786 786,878 760,828
Members' equity.............................. 35,746 90,203 152,271
-------- -------- --------
Total Liabilities and Members' Equity...... $872,538 $908,206 $929,572
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these combined balance sheets.
S-3
<PAGE>
FOX SPORTS NETWORKS, LLC
(A Delaware Limited Liability Company)
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF COMPANY
STATEMENTS OF OPERATIONS
For the Periods Ended June 30, 1999,
and December 31, 1998, 1997 and 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
Six months Year ended Year ended April 30 to
ended June 30, December 31, December 31, December 31,
1999 1998 1997 1996
-------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest expense, net... $ 36,817 $ 71,783 $ 12,914 $ --
Other expenses.......... 5,150 13,531 -- --
Equity in (income) loss
of subsidiaries........ 12,490 (23,246) 65,543 117,149
-------- -------- -------- ---------
Net loss................ $(54,457) $(62,068) $(78,457) $(117,149)
======== ======== ======== =========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
S-4
<PAGE>
FOX SPORTS NETWORKS, LLC
(A Delaware Limited Liability Company)
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF COMPANY
STATEMENTS OF CASH FLOWS
For the Periods Ended June 30, 1999,
and December 31, 1998, 1997 and 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
Six months Year ended Year ended April 30 to
ended June 30, December 31, December 31, December 31,
1999 1998 1997 1996
-------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cash flows from
operating activities:
Net loss............... $(54,457) $(62,068) $(78,457) $(117,149)
Adjustments to
reconcile net loss to
net cash used in
operating activities:
Interest accretion.... 13,908 26,050 8,550 --
Equity in (income)
loss of affiliates... 12,490 (23,246) 65,543 117,149
Changes in operating
assets and
liabilities:
Other assets.......... 721 1,020 (18,083) --
Accrued liabilities... 4,881 14,652 16,473 --
-------- -------- -------- ---------
Net cash used in
operating
activities......... (22,457) (43,592) (5,974) --
-------- -------- -------- ---------
Cash flows from
investing activities:
Distributions from
equity affiliates..... 42,871 144,267 58,040 --
Investments in equity
affiliates............ (20,400) (100,538) (804,344) --
-------- -------- -------- ---------
Net cash provided by
(used in) investing
activities......... 22,471 43,729 (746,304) --
-------- -------- -------- ---------
Cash flows from
financing activities:
Proceeds from notes.... -- -- 752,278 --
-------- -------- -------- ---------
Net cash provided by
financing
activities......... -- -- 752,278 --
-------- -------- -------- ---------
Net increase in cash and
cash equivalents....... 14 137 -- --
Cash and cash
equivalents, beginning
of period.............. 137 -- -- --
-------- -------- -------- ---------
Cash and cash
equivalents, end of
period................. $ 151 $ 137 $ -- $ --
======== ======== ======== =========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
S-5
<PAGE>
FOX SPORTS NETWORKS, LLC
(A Delaware Limited Liability Company)
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF COMPANY
NOTES TO CONDENSED FINANCIAL INFORMATION
June 30, 1999
(Dollars in thousands)
(1) Debt
Annual future minimum maturities of debt are as follows:
<TABLE>
<S> <C>
Year ending June 30:
2000.............................................................. $ --
2001.............................................................. --
2002.............................................................. --
2003.............................................................. --
2004.............................................................. --
Thereafter........................................................ 800,786
--------
$800,786
========
</TABLE>
(2) Commitments and Contingencies
The Company has guaranteed certain obligations of its subsidiaries.
S-6
<PAGE>
FOX SPORTS NETWORKS, LLC
(A Delaware Limited Liability Company)
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
<TABLE>
<CAPTION>
Balance at Charged to Balance at
Beginning Costs and End of
of Period Expenses Deductions Other Period
---------- ---------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C>
SIX MONTHS ENDED JUNE
30, 1999
Allowance for doubtful
accounts............. $ (9,234) $(10,991) $ 2,253 $(3,953)(1) $(21,925)
Program rights
reserve.............. (18,727) -- 13,669 -- (5,058)
YEAR ENDED DECEMBER 31,
1998
Allowance for doubtful
accounts............. (1,714) (9,109) 1,570 (71)(1) (9,324)
Program rights
reserve.............. (38,344) -- 19,617 -- (18,727)
YEAR ENDED DECEMBER 31,
1997
Allowance for doubtful
accounts............. (957) (1,586) 1,029 (200)(1) (1,714)
Program rights
reserve.............. (80,000) -- 41,656 -- (38,344)
EIGHT MONTHS ENDED
DECEMBER 31, 1996
Allowance for doubtful
accounts............. (454) (535) 32 -- (957)
Program rights
reserve.............. -- (80,000) -- -- (80,000)
</TABLE>
- --------
(1) Represents balances from businesses sold or acquired during the period and
balances transferred from other accounts.
S-7
