-67-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
December 31, 1993
0-14871
(Commission File Number)
ML MEDIA PARTNERS, L.P.
(Exact name of registrant as specified in its governing
Securities registered pursuant to Section 12(b) of the Act:
None
(Title of Class)
instruments)
Delaware
(State or other jurisdiction of organization)
13-3321085
(IRS Employer Identification No.)
World Financial Center
South Tower - 14th Floor
New York, New York 10080-6114
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(212) 236-6577
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of Class)
MEDIAS\MED10K.93
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No .
Indicate by check mark 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 a 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]
Documents incorporated by reference:
Part I - Pages 12 through 19 and 38 through 46 of Prospectus,
dated February 4, 1986, as supplemented by Supplements, dated
June 4, 1986, November 4, 1986 and December 18, 1986, filed
pursuant to Rules 424(b) and 424 (c), respectively, under the
Securities Act of 1933.
Part I
Item 1. Business
Formation
ML Media Partners, L.P. ("Registrant"), a Delaware limited
partnership, was organized February 1, 1985. Media Management
Partners, a New York general partnership (the "General Partner"),
is Registrant's sole general partner. The General Partner is a
joint venture, between RP Media Management (a joint venture
organized as a New York general partnership under New York law
consisting of The Elton H. Rule Company and IMP Media Management,
Inc.), and ML Media Management Inc. ("MLMM"), a Delaware
corporation and an indirect wholly-owned subsidiary of Merrill
Lynch & Co., Inc. and an affiliate of Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch"). The General
Partner was formed for the purpose of acting as general partner
of Registrant. The Elton H. Rule Company was controlled by Elton
H. Rule until his death in May of 1990. As a result of Mr.
Rule's death, the general partner interest of the Elton H. Rule
Company in RP Media Management may be redeemed or acquired by a
company controlled by I. Martin Pompadur.
Registrant is engaged in the business of acquiring, financing,
holding, developing, improving, maintaining, operating, leasing,
selling, exchanging, disposing of and otherwise investing in and
dealing with media businesses and direct and indirect interests
therein. (Reference is made to Note 9 of "Financial Statements
and Supplementary Data" included in Item 8 hereof for segment
information).
Registrant offered through Merrill Lynch up to 250,000 units of
limited partnership interest ("Units") at $1,000 per Unit. The
Registration Statement relating to the offering was filed on
December 19, 1985 pursuant to the Securities Act of 1933 under
Registration Statement No. 33-2290 and was declared effective on
February 3, 1986 and amendments thereto became effective on
September 18, 1986, November 4, 1986 and on December 12, 1986
(such Registration Statement, as amended from and after each such
date, the "Registration Statement"). Reference is made to the
prospectus dated February 4, 1986 filed with the Securities and
Exchange Commission pursuant to Rule 424 (b) under the Securities
Act of 1933, as supplemented by supplements dated June 4, 1986,
November 4, 1986 and December 18, 1986 which have been filed
pursuant to Rule 424 (c) under the Securities Act of 1933 (such
Prospectus, as supplemented from and after each such date, the
"Prospectus"). Pursuant to Rule 12b-23 of the Securities and
Exchange Commission's General Rules and Regulations promulgated
under the Securities Exchange Act of 1934, as amended, the
description of Registrant's business set forth under the heading
"Risk and Other Important Factors" at pages 12 through 19 and
under the heading "Investment Objectives and Policies" at pages
38 through 46 of the above-referenced Prospectus is hereby
incorporated herein by reference.
The offering of Units commenced on February 4, 1986. Registrant
held four Closings of Units; the first for subscriptions accepted
prior to May 14, 1986 representing 144,990 Units aggregating
$144,990,000; the second for subscriptions accepted thereafter
and prior to October 9, 1986 representing 21,540 additional Units
aggregating $21,540,000; the third for subscriptions accepted
thereafter and prior to November 18, 1986 representing 6,334
additional Units aggregating $6,334,000; and the fourth and final
Closing of Units for subscriptions accepted thereafter and prior
to March 2, 1987 representing 15,130 additional Units aggregating
$15,130,000. At these Closings, including the initial limited
partner capital contribution of $100, subscriptions for an
aggregate of 187,994.1 Units representing the aggregate purchase
price of $187,994,100 were accepted. During 1989, the initial
limited partner's capital contribution of $100 was returned.
Media Properties
As of December 31, 1993, Registrant's investments in media
properties consist of a 50% interest in a joint venture which
owns two cable television systems in Puerto Rico; four cable
television systems in California; two VHF television stations in
Lafayette, Louisiana and Rockford, Illinois; an FM and AM radio
station combination in Bridgeport, Connecticut; a corporation
which owns an FM radio station in Cleveland, Ohio; a 49.999%
interest in a joint venture which owns an FM and AM radio station
combination and a background music service in Puerto Rico; and an
FM and AM radio station combination in Anaheim, California. The
Universal Cable systems were sold on July 8, 1992. In addition,
an FM and AM radio station combination in Indianapolis, Indiana
was sold on October 1, 1993.
Puerto Rico Investments
Cable Television Investments
Pursuant to the management agreement and joint venture agreement
dated December 16, 1986 (the "Joint Venture Agreement"), as
amended and restated, between Registrant and Century
Communications Corp., a Texas corporation ("Century"), the
parties formed a joint venture under New York law, Century-ML
Cable Venture (the "Venture"), in which each has a 50% ownership
interest. Registrant and Century each initially contributed cash
of $25 million to the Venture. Century is a wholly-owned
subsidiary of Century Communications Corp., a publicly held New
Jersey corporation unaffiliated with the General Partner or any
of its affiliates. On December 16, 1986 the Venture, through its
wholly-owned subsidiary corporation, Century-ML Cable Corporation
("C-ML Cable Corp."), purchased all of the stock of Cable
Television Company of Greater San Juan, Inc. ("San Juan Cable"),
utilizing the combined investment of the venturers together with
debt financing, and liquidated San Juan Cable into C-ML Cable
Corp. The final purchase price for San Juan Cable common stock
was approximately $141.7 million. San Juan Cable is the operator
of the largest cable television system in Puerto Rico.
On September 24, 1987, the Venture acquired all of the assets of
Community Cable-Vision of Puerto Rico, Inc., Community
Cablevision of Puerto Rico Associates, and Community Cablevision
Incorporated ("Community Companies"), which consisted of a cable
television system serving the communities of Catano, Toa Baja and
Toa Alta, Puerto Rico, which are contiguous to San Juan Cable. C-
ML Cable Corp. and the Community Companies are herein referred to
as C-ML Cable ("C-ML Cable"). Registrant's two cable properties
in Puerto Rico are herein defined as the "Puerto Rico Systems."
The Puerto Rico Systems currently serve approximately 104,677
basic subscribers, pass approximately 259,790 homes and consist
of approximately 1,775 linear miles of plant.
The Community Companies were acquired pursuant to an Asset
Acquisition Agreement entered into on April 22, 1987, between
Century Community Holding Corp., a wholly-owned subsidiary of
Century, and the Community Companies, and thereafter assigned to
the Venture. The Venture purchased all of the assets of the
Community Companies for $12.0 million, which was paid entirely
from a portion of the proceeds of the debt financing described
below.
During 1993, Registrant's share of the net revenues of the Puerto
Rico Systems totalled $20,060,514 (20.1% of operating revenues of
Registrant).
During 1992, Registrant's share of the net revenues of the Puerto
Rico Systems totalled $18,265,681 (18.2% of operating revenues of
Registrant).
During 1991, Registrant's share of the net revenues of the Puerto
Rico Systems totalled $17,340,529 (17.5% of operating revenues of
Registrant).
Pursuant to a credit agreement (the "C-ML Credit Agreement")
entered into at the time of closing of the San Juan Cable
acquisition, C-ML Cable Corp. was allowed to borrow up to $100
million to finance the San Juan Cable acquisition, as well as
certain capital improvements and working capital requirements
associated therewith. C-ML Cable Corp. borrowed approximately
$91 million under the credit facility at closing. Of this
amount, approximately $19 million was used to repay existing bank
debt of San Juan Cable.
The Venture financed the acquisition of the Community Companies
with additional proceeds from the C-ML Credit Agreement.
Pursuant to the C-ML Credit Agreement, as amended, C-ML Cable
Corp.'s line of credit had been increased from $100 million to
$108 million. The purchase price of the Community Companies of
approximately $12 million was paid entirely with additional
borrowings by C-ML Cable Corp. of $12 million, which C-ML Cable
Corp. in turn loaned to the Venture.
Radio Investments
On February 15, 1989, Registrant and Century entered into a
Management Agreement and Joint Venture Agreement whereby a new
joint venture, Century-ML Radio Venture ("C-ML Radio"), was
formed under New York law, and responsibility for the management
of radio stations to be acquired by C-ML Radio was assumed by
Registrant. As of December 31, 1993, Registrant has a 49.99%
interest, and Century has a 50.01% interest, in C-ML Radio (see
below).
On March 10, 1989, C-ML Radio acquired all of the issued and
outstanding stock of Acosta Broadcasting Corporation ("Acosta"),
Fidelity Broadcasting Corporation ("Fidelity"), and Broadcasting
and Background Systems Consultants Corporation ("BBSC"); all
located in San Juan, Puerto Rico. The purchase price for the
stock was approximately $7.8 million.
The acquisition was financed with $900,000 of Registrant equity,
$900,000 of equity from Century, and the balance of approximately
$6 million from proceeds of the C-ML Credit Agreement. Refer to
Note 6 of "Item 8. Financial Statements and Supplementary Data"
for further information regarding the C-ML Credit Agreement. At
the time of acquisition, Acosta owned radio stations WUNO-AM and
Noti Uno News, Fidelity owned radio station WFID-FM, and BBSC
owned Beautiful Music Services, all serving various communities
within Puerto Rico.
In connection with the purchase of Acosta, Fidelity and BBSC, the
Venture amended the C-ML Credit Agreement on March 8, 1989 which
increased the line of credit available under the C-ML Credit
Agreement from $108 million to $114 million(refer to Note 6 of
"Item 8. Financial Statements and Supplementary Data"). The
Venture borrowed the increased available amount of $6 million and
advanced it to C-ML Radio in exchange for a demand note from C-ML
Radio. C-ML Radio used these proceeds to finance, in part, the
acquisition of Acosta, Fidelity and BBSC. The remainder of the
total $7.8 million acquisition price was financed with equal
equity contributions from Registrant and Century.
In February, 1990, C-ML Radio acquired the assets of Radio
Ambiente Musical Puerto Rico, Inc. ("RAM"), a background music
service. The purchase price was approximately $200,000 and was
funded with cash generated by C-ML Radio. The operations of RAM
were consolidated into those of BBSC.
As of December 31, 1993, the results of operations of C-ML Radio
are not consolidated into the operations of Registrant as the
equity method of accounting is used.
Effective March 8, 1989, C-ML Cable Corp. amended the C-ML Credit
Agreement, primarily to restructure certain restrictive
covenants, provide for additional equity contributions to C-ML
Cable Corp. of $2.5 million each from Registrant and Century and
to extend the maturity date. Refer to Note 6 of "Item 8.
Financial Statements and Supplementary Data" for further
information regarding the C-ML Credit Agreement.
Effective January 1, 1994, all the assets of C-ML Radio were
transferred to C-ML Cable, in exchange for the assumption by C-ML
Cable of all the obligations of C-ML Radio and the issuance to
Century and Registrant by C-ML Cable of new certificates
evidencing partnership interests of 50% and 50%, respectively.
The transfer was made pursuant to a Transfer of Assets and
Assumption of Liabilities Agreement. At the time of this
transfer, Registrant and Century entered into an amended and
restated management agreement and joint venture agreement (the
"Revised Joint Venture Agreement") governing the affairs of the
revised Venture (herein referred to as the "Revised Venture").
Under the terms of the Revised Joint Venture Agreement, Century
is responsible for the day-to-day operations of the Puerto Rico
Systems and Registrant is responsible for the day-to-day
operations of the C-ML Radio properties. For providing services
of this kind, Century is entitled to receive annual compensation
of 5% of the Puerto Rico Systems' net gross revenues (defined as
gross revenues from all sources less monies paid to suppliers of
pay TV product, e.g., HBO, Cinemax, Disney and Showtime) and
Registrant is entitled to receive annual compensation of 5% of
the C-ML Radio properties' gross revenues (after agency
commissions, rebates or discounts and excluding revenues from
barter transactions). All significant policy decisions relating
to the Revised Venture, the operation of the Puerto Rico Systems
and the operation of the C-ML Radio properties, however, will
only be made upon the concurrence of both Registrant and Century.
Registrant may require a sale of the assets and business of the
Puerto Rico Systems or the C-ML Radio properties at any time. If
Registrant proposes such a sale, Registrant must first offer
Century the right to purchase Registrant's 50% interest in the
Revised Venture at 50% of the total fair market value of the
Venture at such time as determined by independent appraisal. If
Century elects to sell the assets, Registrant may elect to
purchase Century's interest in the Revised Venture on similar
terms.
California Cable Systems
In December, 1986, ML California Cable Corporation ("ML
California"), a wholly-owned subsidiary of Registrant, entered
into an agreement (the "Stock Sale and Purchase Agreement") with
SCIPSCO, Inc. ("SCIPSCO"), a wholly-owned subsidiary of Storer
Communications, Inc. for the acquisition by ML California of four
cable television systems servicing the California communities of
Anaheim, Manhattan/Hermosa Beach, Rohnert Park, and Fairfield and
surrounding areas. The acquisition was completed on December 23,
1986 with the purchase by ML California of all of the stock of
four subsidiaries of SCIPSCO which at closing owned all the
assets of the California cable television systems. The term
"California Cable Systems" or "California Cable" as used herein
means either the cable systems or the owning entities, as the
context requires. The California Cable Systems currently serve
approximately 131,830 basic subscribers, pass 216,328 homes and
consist of approximately 2,250 linear miles of plant.
The purchase price for the California Cable Systems was
approximately $170 million, which included certain tax
liabilities of approximately $20 million in connection with the
liquidation of ML California. The purchase price was funded with
approximately $60 million of equity from Registrant with the
balance advanced from the proceeds of debt financing.
Registrant and California Cable arranged the acquisition
financing pursuant to a credit agreement (the "ML California
Credit Agreement") entered into at the time of closing. Refer to
Notes 2 and 6 of "Item 8. Financial Statements and Supplementary
Data" for further information regarding the ML California Credit
Agreement.
On December 30, 1986, ML California was liquidated into
Registrant and transferred all of its assets, except its FCC
licenses, subject to its liabilities, to Registrant. The
licenses were transferred to ML California Associates, a
partnership formed between Registrant and the General Partner for
the purpose of holding the licenses in which Registrant is
Managing General Partner and 99.99% equity holder.
The daily operations of the California Cable Systems are managed
by MultiVision Cable TV Corp. ("MultiVision"), a cable television
multiple system operator ("MSO") controlled by I. Martin
Pompadur. Mr. Pompadur, President, Secretary and Director of RP
Media Management and Chairman and Chief Executive Officer of
MultiVision, organized MultiVision in January 1988 to provide MSO
services to cable television systems acquired by entities under
his control, with those entities paying cost for those services
pursuant to an agreement to allocate certain management costs,
(the "Cost Allocation Agreement") with MultiVision. Mr. Pompadur
is, indirectly, the general partner of ML Media Opportunity
Partners, L.P., a publicly held limited partnership, and
Registrant. ML Media Opportunity Partners, L.P. and its
subsidiaries have invested in cable television systems now
managed by MultiVision pursuant to the same Cost Allocation
Agreement. The total customer base managed by Multivision
declined significantly during 1992 as a result of divestitures by
companies other than Registrant which had utilized the management
services of Multivision, leading to slightly higher programming
prices for all its managed systems including California Cable.
Registrant engaged Merrill Lynch & Co. and Daniels & Associates
in January, 1994 to act as its financial advisors in connection
with a possible sale of all or a portion of Registrant's
California Cable Systems.
There can be no assurances that Registrant will be able to enter
into an agreement to sell the systems on terms acceptable to
Registrant or that any such sale will be consummated. If a sale
is consummated, it is expected that it would be consummated no
earlier than the second half of 1994.
As an alternative to a sale, Registrant and its financial
advisors may consider other strategic transactions to maximize
the value of the California Cable Systems, such as a joint
venture or an affiliation agreement with a larger multiple system
operator. Merrill Lynch & Co. will not receive a fee or other
form of compensation for acting as financial advisor in
connection with a sale or other strategic transaction.
Registrant is currently unable to determine the impact of the
February 22, 1994 FCC action and previous FCC actions (see below)
on its ability to sell the California Cable systems or the
potential timing and value of such a sale. However, as discussed
below, the FCC actions have had, and will have, a detrimental
impact on the revenues and profits of the California Cable
systems.
During 1993, California Cable generated operating revenues of
$54,988,374 (55.0% of operating revenues of Registrant).
During 1992, California Cable generated operating revenues of
$52,838,582 (52.6% of operating revenues of Registrant).
During 1991, California Cable generated operating revenues of
$48,583,606 (49.0%) of operating revenues of Registrant).
KATC Television Station
On September 17, 1986 Registrant entered into an acquisition
agreement (the "Assets Purchase Agreement") with Loyola
University, a Louisiana non-profit corporation ("Loyola"), for
the acquisition by Registrant of substantially all the assets of
television station KATC-TV, Lafayette Louisiana ("KATC-TV" or the
"Station"). The acquisition was completed on February 2, 1987
for a purchase price of approximately $26,750,000. KATC-TV is a
VHF affiliate of the American Broadcasting Company television
network from which it obtains entertainment, news and sports
programming. It is one of three commercial stations licensed to
service Lafayette, Louisiana, an area of approximately 194,500
television households.
As part of the purchase, Registrant succeeded to all business
contracts, agreements, leases, commitments and orders in
connection with the operation of the Station. Registrant did not
assume any existing debt of the Station or Loyola, nor did it
assume any liabilities of the Station other than certain
contractual commitments in the ordinary course of Station
operations. All FCC licenses were transferred to KATC
Associates, a partnership formed for the purpose of holding the
licenses in which Registrant is the Managing General Partner and
99.999% equity holder. Registrant received the required FCC and
local approvals for the acquisition of the Station and the
transfer of all licenses. As consideration for part of the
purchase price, Loyola had agreed not to compete with the Station
in the Station's designated market area for two years.
During 1993, the Station generated operating revenues of
$5,264,556 (5.3% of operating revenues of Registrant).
During 1992, the Station generated operating revenues of
$5,120,331 (5.1% of operating revenues of Registrant).
During 1991, the Station generated operating revenues of
$5,511,818 (5.6% of operating revenues of Registrant).
Registrant purchased the Station for cash; however, subsequent to
the purchase, in order to refinance a portion of the equity
investment, Registrant entered into a Revolving Credit Loan
Agreement (the "KATC Loan") in the initial amount of $17.0
million.
On June 21, 1989, Registrant entered into an Agreement of
Consolidation, Extension, Amendment and Restatement (the "WREX-
KATC Loan") which replaced the KATC Loan and the WREX Loan (see
below) with a total borrowing facility of up to $27.1 million.
Refer to Note 6 of "Item 8. Financial Statements and
Supplementary Data" for further information regarding the WREX-
KATC Loan.
WREX Television Station
On April 29, 1987, Registrant entered into an acquisition
agreement (the "Asset Purchase Agreement") with Gilmore
Broadcasting Corporation, a Delaware corporation ("Gilmore"), for
the acquisition by Registrant of substantially all the assets of
television station WREX-TV, Rockford, Illinois ("WREX-TV"). The
acquisition was accomplished on August 31, 1987, by payment of
the purchase price of approximately $18 million. Registrant
funded the acquisition with $7 million of equity and $11 million
of debt. WREX-TV is a VHF affiliate of the American Broadcasting
Company television network from which it obtains entertainment,
news and sports programming. It is one of four commercial
stations licensed to serve Rockford, Illinois, an area of
approximately 159,750 television households.
As part of the purchase, Registrant succeeded to all business
contracts, agreements, leases, commitments and orders in
connection with the operation of WREX-TV, including contracts
with certain key employees. Registrant did not assume any
existing debt of WREX-TV or Gilmore, nor did it assume any
liabilities of WREX-TV other than certain contractual commitments
in the ordinary course of operations. FCC licenses and all other
permits and authorizations necessary for the operations of WREX-
TV have been transferred to WREX Associates, a partnership
between the General Partner and Registrant formed specifically
for this purpose in which Registrant is the Managing General
Partner and has a 99.999% equity interest. As consideration for
part of the purchase price, Gilmore agreed not to compete with
WREX-TV in its designated market area for three years.
During 1993, WREX-TV generated operating revenues of $4,920,860
(4.9% of operating revenues of Registrant).
During 1992, WREX-TV generated operating revenues of $4,794,592
(4.8% of operating revenues of Registrant).
During 1991, WREX-TV generated operating revenues of $4,368,677
(4.4% of operating revenues of Registrant).
To finance the purchase of WREX-TV, Registrant entered into a
Revolving Credit Loan Agreement (the "WREX Loan"), which provided
for borrowings of up to $11 million. The WREX Loan was
subsequently replaced by the WREX-KATC Loan. Refer to Note 6 of
"Item 8. Financial Statements and Supplementary Data" for
further information regarding the WREX-KATC Loan.
WEBE-FM Radio
On August 20, 1987, Registrant entered into an Asset Purchase
Agreement with 108 Radio Company, L.P., for the acquisition of
the business and assets of radio station WEBE-FM, Westport,
Connecticut ("WEBE-FM") which serves Fairfield and New Haven
counties (WEBE-FM was subsequently moved to Bridgeport,
Connecticut). Currently, WEBE-FM serves approximately 117,200
listeners each week in the Fairfield County market. The total
acquisition cost of $12 million was funded by an equity
contribution of $4.5 million and long-term debt of $7.5 million.
At the time of closing, the FCC licenses and all other permits
and authorizations necessary for the operation of WEBE-FM were
transferred to WEBE Associates, a partnership between the General
Partner and Registrant formed especially for this purpose, and of
which Registrant is the 99.999% owner.
In connection with the financing of WEBE-FM, Registrant entered
into a credit agreement on December 16, 1987 (the "WEBE Loan")
with the Connecticut National Bank. The WEBE Loan provided for
borrowings up to $7.5 million.
On July 19, 1989, Registrant entered into an Amended and Restated
Credit Security and Pledge Agreement (the "Wincom-WEBE-WICC
Loan") which provided for borrowings up to $35 million and which
was used, in part, to repay the WEBE Loan. On July 30, 1993,
Registrant and Chemical Bank executed an amendment to the Wincom-
WEBE-WICC Loan (the "Restructuring Agreement"), effective January
1, 1993, which cured all previously outstanding defaults pursuant
to the Wincom-WEBE-WICC Loan. Refer to Note 6 of "Item 8.
Financial Statements and Supplementary Data" for further
information regarding the Wincom-WEBE-WICC Loan and the
Restructuring Agreement.
During 1993, WEBE-FM generated operating revenues of $4,403,464
(4.4% of operating revenues of Registrant).
During 1992, WEBE-FM generated operating revenues of $3,967,239
(4.0% of operating revenues of Registrant).
During 1991, WEBE-FM generated operating revenues of $3,892,235
(3.9% of operating revenues of Registrant).
Wincom
On August 26, 1988, Registrant acquired 100% of the stock of
Wincom Broadcasting Corporation ("Wincom"), an Ohio corporation
headquartered in Cleveland. At acquisition, Wincom and its
subsidiaries owned and operated five radio stations - WQAL-FM,
Cleveland, Ohio; WCKN-AM/WRZX-FM, Indianapolis, Indiana (the
"Indianapolis Stations", including the Indiana University Sports
Radio Network, which was discontinued after the first half of
1992); KBEZ-FM, Tulsa, Oklahoma; and WEJZ-FM, Jacksonville,
Florida.
The purchase price for the stock of Wincom was approximately $46
million, of which approximately $26 million was funded with
Registrant's equity funds. The balance of $20 million was
financed with Registrant borrowings.
To finance the acquisition of Wincom, Registrant entered into a
Credit Security and Pledge Agreement with Chemical Bank (the
"Wincom Loan") for a term loan in the amount of $20 million. The
Wincom Loan was subsequently replaced by the Wincom-WEBE-WICC
Loan. On July 30, 1993, Registrant and Chemical Bank executed
the Restructuring Agreement, effective January 1, 1993, which
cured all previously outstanding defaults pursuant to the Wincom-
WEBE-WICC Loan. Refer to Note 6 of "Item 8. Financial
Statements and Supplementary Data" for further information
regarding the Wincom-WEBE-WICC Loan and the Restructuring
Agreement.
On November 27, 1989, Registrant entered into an asset purchase
agreement with Renda Broadcasting Corp. ("Renda"), whereby
Registrant sold, on July 31, 1990, the business and assets of
radio stations KBEZ-FM, Tulsa, Oklahoma and WEJZ-FM,
Jacksonville, Florida to Renda. The net proceeds from the sale
of the stations, which totalled approximately $10.3 million, were
used to repay outstanding principal under the Wincom-WEBE-WICC
Loan, as required by that agreement.
On April 30, 1993, WIN Communications of Indiana, Inc., a 100%-
owned subsidiary of Wincom, entered into an Asset Purchase
Agreement to sell substantially all of the assets of the
Indianapolis Stations to Broadcast Alchemy, L.P.("Alchemy") for
gross proceeds of $7 million. Alchemy is not affiliated with
Registrant. The proposed sale was subject to approval by the
FCC, which granted its approval on September 22, 1993. On
October 1, 1993, the date of the sale of the Indianapolis
Stations, the net proceeds from such sale, which totalled
approximately $6.1 million, were remitted to Chemical Bank, as
required by the terms of the Restructuring Agreement, to reduce
the outstanding principal amount of the Series B Term Loan due
Chemical Bank pursuant to the Restructuring Agreement. In
addition, certain additional amounts from the net proceeds from
the sale of the Indianapolis Stations, including an escrow
deposit of $250,000, may ultimately be paid to Chemical Bank.
Refer to Note 6 of "Item 8. Financial Statements and
Supplementary Data" for further information regarding the
Restructuring Agreement.
During 1993, Wincom generated operating revenues of $5,229,301
(5.2% of operating revenues of Registrant).
During 1992, Wincom generated operating revenues of $5,388,050
(5.4% of operating revenues of Registrant).
During 1991, Wincom generated operating revenues of $5,509,113
(5.6% of operating revenues of Registrant).
Universal
On September 19, 1988 Registrant acquired 100% of the stock of
Universal Cable Holdings, Inc. ("Universal Cable"), a Delaware
Corporation, pursuant to a stock purchase agreement (the "Stock
Purchase Agreement") executed on June 17, 1988. Universal Cable,
through three wholly-owned subsidiaries, owned and operated cable
television systems located in Kansas, Nebraska, Colorado,
Oklahoma and Texas.
The aggregate purchase price was approximately $43 million, of
which approximately $12 million was funded with Registrant's
equity. The balance of $31 million was financed by Registrant
borrowings. Registrant borrowed an additional $4.6 million after
closing for working capital purposes. Both borrowings were
pursuant to a Revolving Credit Agreement (the "Universal Credit
Agreement") dated as of September 19, 1988.
On July 8, 1992, Registrant sold Universal; all proceeds of sale
were paid to the lender to Universal and Registrant was released
from all obligations under the Universal Credit Agreement. Refer
to Note 3 of "Item 8. Financial Statements and Supplementary
Data" for further information on the sale of Universal.
During the 193-day period in which Registrant owned Universal in
1992, Universal generated operating revenues of $4,681,966 (4.7%
of operating revenues of Registrant).
During 1991, Universal generated operating revenues of $8,525,093
(8.6% of operating revenues of Registrant).
WICC-AM
On July 19, 1989, Registrant purchased all of the assets of radio
station WICC-AM located in Bridgeport, Connecticut from
Connecticut Broadcasting Company, Inc. The purchase price of
$6.25 million was financed solely from proceeds of the Wincom-
WEBE-WICC Loan. On July 30, 1993, Registrant and Chemical Bank
executed the Restructuring Agreement, effective January 1, 1993,
which cured all previously outstanding defaults pursuant to the
Wincom-WEBE-WICC Loan. Refer to Note 6 of "Item 8. Financial
Statements and Supplementary Data" for further information
regarding the Wincom-WEBE-WICC Loan and the Restructuring
Agreement.
At the time of closing, the FCC licenses and all other permits
and authorizations necessary for the operation of WICC-AM were
transferred to WICC Associates, a partnership between the General
Partner and Registrant formed especially for this purpose, and of
which Registrant is the 99.999% owner.
During 1993, WICC-AM generated operating revenues of $1,875,348
(1.9% of operating revenues of Registrant).
During 1992, WICC-AM generated operating revenues of $1,814,294
(1.8% of operating revenues of Registrant).
During 1991, WICC-AM generated operating revenues of $1,844,952
(1.9% of operating revenues of Registrant).
Anaheim Radio Stations
On November 16, 1989, Registrant acquired KORG-AM and KEZY-FM
(the "Anaheim Radio Stations") located in Anaheim, California
from Anaheim Broadcasting Corporation. The total acquisition
cost was $15,125,000. At the time of closing, the FCC licenses
and all other permits and authorizations necessary for the
operation of the Anaheim Radio Stations were transferred to
Anaheim Radio Associates, a partnership between the General
Partner and Registrant formed especially for this purpose, and of
which Registrant owns 99.999%.
To finance the acquisition of the Anaheim Radio Stations, on
November 16, 1989, Registrant entered into a $16.5 million
revolving credit bridge loan ("the Anaheim Radio Loan") with Bank
of America.
On May 15, 1990, Registrant entered into the revised ML
California Credit Agreement, which was used in part to repay and
refinance the Anaheim Radio Loan. Refer to Note 6 of "Item 8.
Financial Statements and Supplementary Data" for further
information regarding the ML California Credit Agreement.
During 1993, the Anaheim Radio Stations generated operating
revenues of $3,049,363 (3.1% of operating revenues of
Registrant).
During 1992, the Anaheim Radio Stations generated operating
revenues of $3,103,438 (3.1% of operating revenues of
Registrant).
During 1991, the Anaheim Radio Stations generated operating
revenues of $3,184,990 (3.2% of operating revenues of
Registrant).
Employees
As of December 31, 1993 Registrant employed approximately 510
persons at its wholly-owned properties. The business of
Registrant is managed by the General Partner. RP Media
Management, ML Media Management Inc. and ML Leasing Management
Inc., all affiliates of the General Partner, perform certain
management and administrative services for Registrant.
COMPETITION
Cable Television
Cable television systems compete with other communications and
entertainment media, including off-air television broadcast
signals that a viewer is able to receive directly using the
viewer's own television set and antenna. The extent of such
competition is dependent in part upon the quality and quantity of
such off-air signals. In the areas served by Registrant's
systems, a substantial variety of broadcast television
programming can be received off-air. In those areas, the extent
to which cable television service is competitive depends largely
upon the system's ability to provide a greater variety of
programming than that available off-air and the rates charged by
Registrant's cable systems for programming. Cable television
systems also are susceptible to competition from other multiple-
channel video programming delivery systems, from other forms of
home entertainment such as video cassette recorders, and in
varying degrees from other sources of entertainment in the area,
including motion picture theaters, live theater and sporting
events. On December 17, 1993, the first high-powered direct
broadcast satellite ("DBS") designed to provide nationwide
multiple-channel video programming delivery services was
successfully launched. Service to home subscribers from this
satellite is expected to be available beginning sometime during
the first half of 1994.
In recent years, the FCC has adopted polices providing for
authorization of new technologies and a more favorable operating
environment for certain existing technologies which provide, or
have the potential to provide, substantial additional competition
for cable television systems. For example, the FCC has revised
its rules on MMDS (or "wireless cable") to foster MMDS services
competitive with cable television systems, has authorized
telephone companies to deliver video services through a common-
carrier-based service called "video dialtone," and, most
recently, has proposed a new service, the Local Multipoint
Distribution Service ("LMDS"), which would employ technology
similar to cellular telephone systems for the distribution of
television programming directly to subscribers. Moreover, it is
currently studying the issue of whether telephone companies
should be permitted any direct involvement in video programming.
At the same time, a major legislative initiative is underway in
Congress and within the Clinton-Gore Administration to re-write
the Communications Act of 1934, in order to facilitate
development of the so-called "information superhighway" by, among
other things, encouraging more competition in the provision of
both local telephone and local cable service. One proposal being
considered in this process is whether the current statutory ban
on telephone companies providing cable service within their own
local exchange areas should be eliminated. The term "information
superhighway" generally refers to a combination of technological
improvements or advances that would give the American public
widespread access to a new broadband, interactive communications
system, capable of supplying vast new quantities of both data and
video. Certain other legislative or regulatory initiatives that
may result in additional competition for cable television systems
are described in the following sections.
The competitive environment surrounding cable television was
further altered during the past year by a series of marketplace
announcements documenting the heightened involvement of telephone
companies in the cable television business. Some of these
involve the purchase of existing cable systems by telephone
companies outside their own exchange areas, while others
contemplate expanded joint ventures between certain major cable
companies and regional telephone companies. Although the most
prominent recent development in this regard, the planned merger
of Tele-Communications, Inc., the largest cable operator in the
country, with Bell Atlantic Corporation, one of the Bell
Operating Companies, was terminated in February, 1994, similar
combinations are possible in the future.
Broadcast Television
Operating results for broadcast television stations are affected
by the availability, popularity and cost of programming;
competition for local, regional and national advertising
revenues; the availability to local stations of compensation
payments from national networks with which the local stations are
affiliated; competition within the local markets from programming
on other stations or from other media; competition from other
technologies, including cable television; and government
regulation and licensing. Due primarily to increased competition
from cable television, with that medium's plethora of viewing
alternatives and from the Fox Network, the share of viewers
watching the major U.S. networks, ABC, CBS, and NBC, has declined
significantly over the last ten years. This reduction in viewer
share has made it increasingly difficult for local stations to
increase their revenues from advertising. The combination of
these reduced shares and the impact of the recent economic
recession on the advertising market, resulted in generally
deteriorating performance at many local stations affiliated with
ABC, CBS, and NBC. Although the share of viewers watching the
major networks has recently leveled off or increased slightly,
additional audience and advertiser fragmentation may occur if, as
planned, one or more additional over-the-air broadcast networks
is successfully launched.
Radio Industry
The radio industry is highly competitive and dynamic, and reaches
a larger portion of the population than any other medium. There
are generally several stations competing in an area and most
larger markets have twenty or more viable stations; however,
stations tend to focus on a specific target market by programming
music or other formats that appeal to certain demographically
specific audiences. As a result of these factors, radio is an
effective medium for advertisers as it can have mass appeal or be
focused on a specific market. While radio has not been subject
to an erosion in market share such as that experienced by
broadcast television, it was also subject to the depressed
nationwide advertising market. Recent changes in FCC multiple
ownership rules have led to more concentration in some local
radio markets as a single party is permitted to own additional
stations or provide programming and sell advertising on stations
it does not own.
Registrant is subject to significant competition, in many cases
from competitors whose media properties are larger than
Registrant's media properties.
LEGISLATION AND REGULATION
Cable Television Industry
The cable television industry is extensively regulated by the
federal government, some state governments and most local
franchising authorities. In addition, the Copyright Act of 1976
(the "Copyright Act") imposes copyright liability on all cable
television systems for their primary and secondary transmissions
of copyrighted programming. The regulation of cable television
systems at the federal, state and local levels is subject to the
political process and has been in constant flux over the past
decade. This process continues to generate proposals for new
laws and for the adoption or deletion of administrative
regulations and policies. Further material changes in the law
and regulatory requirements, especially as a result of the 1992
Cable Act (the "1992 Cable Act"), must be expected. There can be
no assurance that the Registrant's Cable Systems will not be
adversely affected by future legislation, new regulations or
judicial or administrative decisions.
The following is a summary of federal laws and regulations
materially affecting the cable television industry and a
description of certain state and local laws with which the cable
industry must comply.
Federal Statutes
The Cable Act imposes certain uniform national standards and
guidelines for the regulation of cable television systems. Among
other things, the legislation regulates the provision of cable
television service pursuant to a franchise, specifies a procedure
and certain criteria under which a cable television operator may
request modification of its franchise, establishes criteria for
franchise renewal, sets maximum fees payable by cable television
operators to franchising authorities, authorizes a system for
regulating certain subscriber rates and services, outlines signal
carriage requirements, imposes certain ownership restrictions,
and sets forth customer service, consumer protection, and
technical standards. Violations of the Cable Act or any FCC
regulations implementing the statutory law can subject a cable
operator to substantial monetary penalties and other sanctions.
Federal Regulations
Federal regulation of cable television systems under the Cable
Act and the Communications Act of 1934 is conducted primarily
through the FCC, although, as discussed below, the Copyright
Office also regulates certain aspects of cable television system
operation. Among other things, FCC regulations currently contain
detailed provisions concerning non-duplication of network
programming, sports program blackouts, program origination,
ownership of cable television systems and equal employment
opportunities. There are also comprehensive registration and
reporting requirements and various technical standards.
Moreover, pursuant to the 1992 Cable Act, the FCC has, among
other things, established new regulations concerning mandatory
signal carriage and retransmission consent, consumer service
standards, the rates that may be charged to subscribers, and the
rates and conditions for commercial channel leasing. The FCC
also issues permits, licenses or registrations for microwave
facilities, mobile radios and receive-only satellite earth
stations, all of which are commonly used in the operation of
cable systems.
The FCC is authorized to impose monetary fines upon cable
television systems for violations of existing regulations and may
also suspend licenses and other authorizations and issue cease
and desist orders. It is likewise authorized to promulgate
various new or modified rules and regulations affecting cable
television, many of which are discussed in the following
paragraphs.
The 1992 Cable Act
In 1992, over the veto of President Bush, the Cable Television
Consumer Protection and Competition Act of 1992 (the "1992 Cable
Act") was enacted by vote of Congress. The 1992 Cable Act
clarifies and modifies certain provisions of the 1984 Cable Act
as well as codifying certain FCC regulations and adding a number
of new requirements. Implementation of the new legislation was
generally left to the FCC. Throughout 1993 the FCC undertook or
completed a substantial number of complicated rulemaking
proceedings resulting in a host of new regulatory requirements or
guidelines. Several of the provisions of the 1992 Cable Act and
certain FCC regulations implemented pursuant thereto are being
tested in court. Registrant cannot predict the result of any
pending or future court challenges or the shape any still-pending
or proposed FCC regulations may ultimately take, nor can
Registrant predict the effect of either on its operations.
As discussed in greater detail elsewhere in this filing, some of
the principal provisions of the 1992 Cable Act include: (1) a
mandatory carriage requirement coupled with alternative
provisions for retransmission consent as to over-the-air
television signals; (2) rate regulations that completely replace
the rate provisions of the 1984 Cable Act; (3) consumer
protection provisions; (4) a three-year ownership holding
requirement; (5) some clarification of franchise renewal
procedures; and (6) FCC authority to examine and set limitations
on the horizontal and vertical integration of the cable industry.
Other provisions of the wide-ranging 1992 Cable Act include: a
prohibition on "buy-throughs," an arrangement whereby subscribers
are required to subscribe to a program tier other than basic in
order to receive certain per-channel or per-program services;
requiring the FCC to develop minimum signal standards, rules for
the disposition of home wiring upon termination of cable service,
and regulations regarding compatibility of cable service with
consumer television receivers and video cassette recorders; a
requirement that the FCC promulgate rules limiting children's
access to indecent programming on access channels; notification
requirements regarding sexually explicit programs; and more
stringent equal employment opportunity rules for cable operators.
The 1992 Cable Act also contains a provision barring both cable
operators and certain vertically integrated program suppliers
from engaging in practices which unfairly impede the availability
of programming to other multichannel video programming
distributors. In sum, the 1992 Cable Act codifies, initiates, or
mandates an entirely new set of regulatory requirements and
standards. It is an unusually complicated and sometimes
confusing legislative enactment whose ultimate impact depends on
a multitude of FCC enforcement decisions as well as certain yet-
to-be concluded FCC proceedings. It is also subject to pending
and future judicial challenges. Because of these factors, and
the on-going nature of so many highly complicated and uncertain
administrative proceedings, it is only possible, at this
juncture, to simply note the key features of the new law. How
and to what extent most of these individual provisions will
impact Registrant's operations must necessarily await future
developments at the FCC, before the courts, and in the
marketplace.
Although still subject to various reconsideration petitions,
further rulemaking notices, or pending court appeals, the FCC has
adopted new regulations in most areas mandated by the 1992 Cable
Act. These include rules and regulations governing the following
areas: indecency on leased access channels, obscenity on public,
educational and governmental ("PEG") channels, mandatory carriage
and retransmission consent of over-the-air signals, home wiring,
equal employment opportunity, tier "buy-throughs," customer
service standards, cable television ownership standards, program
access, carriage of home shopping stations, and rate regulation.
Most of these new regulations went into effect within the past
year, even though the FCC standards on indecency on certain
access channels were overturned as unconstitutional by the U.S.
Court of Appeals for the District of Columbia Circuit on November
23, 1993, and the constitutionality of the mandatory carriage
provision of the 1992 Cable Act is now pending before the U.S.
Supreme Court (after having been found constitutional by a 2-1
decision of a special three-judge panel of the U.S. District
Court for the D.C. Circuit on April 8, 1993). The Registrant is
unable to predict the ultimate outcome of these proceedings or
the impact upon its operations of various FCC regulations still
being formulated and/or interpreted.
As previously noted, under the broad statutory scheme, cable
operators are subject to a two- level system of regulation with
some matters under federal jurisdiction, others subject strictly
to local regulation, and still others subject to both federal and
local regulation. Following are descriptions of some of the more
significant regulatory areas of concern to cable operators.
Franchises
The Cable Act affirms the right of franchising authorities to
award one or more franchises within their jurisdictions and
prohibits future cable television systems from operating without
a franchise. The 1992 Cable Act provides that franchising
authorities may not grant an exclusive franchise or unreasonably
deny award of a competing franchise. The Cable Act also provides
that in granting or renewing franchises, franchising authorities
may establish requirements for cable-related facilities and
equipment but may not specify requirements for video programming
or information services other than in broad categories.
Under the 1992 Cable Act, franchising authorities are now
exempted from money damages in cases involving their exercise of
regulatory authority, including the award, renewal, or transfer
of a franchise, except for cases involving discrimination on
race, sex, or similar impermissible grounds. Remedies are
limited exclusively to injunctive or declaratory relief.
Franchising authorities may also build and operate their own
cable systems without a franchise.
The Cable Act permits local franchising authorities to require
cable operators to set aside certain channels for PEG access
programming and to impose a franchise fee of up to five percent
of gross annual system revenues. The Cable Act further requires
cable television systems with 36 or more channels to designate a
portion of their channel capacity for commercially leased access
by third parties, which generally is available to commercial and
non-commercial parties to provide programming (including
programming supported by advertising). The FCC was required by
the 1992 Cable Act to adopt new rules setting maximum reasonable
rates and other terms for the use of such leased channels. This
was done as part of the FCC's comprehensive cable rate regulation
order released on May 3, 1993. The FCC also has jurisdiction to
resolve disputes over the provision of leased access.
In 1993, the U.S. Supreme Court ended a period of prolonged
confusion over the reach of the 1984 Cable Act's franchising
requirements by rejecting a constitutional challenge to the Act's
definition of "cable system." In FCC v. Beach Communications,
Inc., 113 S. Ct. 2096 (1993), the Court held that the Act's
exemption of certain satellite master antenna television
("SMATV") systems from general franchising requirements is
rationally related to legitimate policy goals. Under the terms
of the Act, SMATV systems serving more than one building need not
obtain a franchise if the buildings are commonly owned and are
not interconnected by wire using a public right-of-way.
Reversing a 1992 decision of the U.S. Court of Appeals for the
D.C. Circuit, the Supreme Court held that the distinction drawn
between commonly-owned buildings and separately-owned buildings
is constitutionally valid. The result of this decision is that
SMATV systems interconnecting separately-owned buildings and
systems that wire buildings together using a public right-of-way
must obtain a franchise and comply with the franchising
requirements of the Cable Act.
In 1992, the FCC permitted telephone companies to engage in so-
called "video dialtone" operations in their local exchange areas
pursuant to which neither they nor the programming entities they
serve are required to obtain a local cable franchise (see "Video
Dialtone" below).
Rate Regulation
The 1992 Cable Act completely supplants the rate regulation
provisions of the 1984 Cable Act. The 1992 Act establishes that
rate regulation applies to rates charged for the basic tier of
service by any cable system not subject to "effective
competition," which is, in turn, deemed to exist if (1) fewer
than 30 percent of the households in the service area subscribe
to the system, (2) at least 50 percent of the households in the
franchise area are served by two multichannel video programming
distributors and at least 15 percent of the households in the
franchise area subscribe to the additional operator, or (3) a
franchising authority for that franchise area itself serves as a
multichannel video programming distributor offering service to at
least 50 percent of the households in the franchise area. Under
this new statutory definition, the Registrant's systems, like
most cable systems in most areas, are not presently subject to
effective competition. The basic tier must include all signals
required to be carried under the 1992 Cable Act's mandatory
carriage provisions, all PEG channels required by the franchise,
and all broadcast signals other than "superstations."
Acting pursuant to the foregoing statutory mandate, the FCC, on
May 3, 1993, released a Report and Order ("Rate Order")
establishing a new regulatory scheme governing the rates for
certain cable television services and equipment. The new rules,
among other things, set certain benchmarks which will enable
local franchise authorities to require rates for "basic service"
(as noted, essentially, local broadcast and access channels) and
the FCC (upon receipt of individual complaints) to require rates
for certain satellite program services (excluding premium
channels) to fall approximately 10% from September 30, 1992
levels, unless the cable operator is already charging rates that
are at a so-called "competitive" benchmark level or it can
justify a higher rate based on a cost-of-service showing. Rates
of all regulated cable systems will then be subject to a price
cap that will govern the extent to which rates can be raised in
the future without a cost-of-service showing. The rules
announced in May 1993, became effective on September 1, 1993, but
remained subject to considerable debate and uncertainty as
several major issues and FCC proceedings awaited resolution.
On February 22, 1994, the FCC adopted a series of additional
measures that expand and substantially alter its cable rate
regulations. Based on FCC news releases dated February 22, the
FCC's major actions include the following: (1) a modification of
its benchmark methodology in a way which will effectively require
cable rates to be reduced, on average, an additional 7% (i.e.,
beyond the 10% reduction previously ordered in 1993) from their
September 30, 1992 level, or to the new benchmark, whichever is
less; (2) the issuance of new standards and requirements to be
used in making cost-of-service showings by cable operators who
seek to justify rates above the levels determined by the
benchmark approach; and (3) the clarification and/or
reaffirmation of a number of "going forward" issues that had been
the subject of various petitions for reconsideration of its May
3, 1993 Rate Order. Several weeks earlier, and partly in
anticipation of these actions, the FCC extended its industry-wide
freeze on rates for regulated cable services until May 15, 1994.
It is expected that the new benchmark standards and cost-of-
service rules will become effective prior to the current
termination date of the rate freeze.
In deciding to substantially revise its benchmark methodology for
regulated cable rates, the FCC has actually created two benchmark
systems. Thus, whereas the modified rate regulations adopted on
February 22, 1994 will become effective as of May 15, 1994,
regulated rates in effect before that date will continue to be
governed by the old benchmark system.
Under the FCC's revised benchmark regulations, systems not facing
"effective competition" that have become subject to regulation
will be required to set their rates at a level equal to their
September 30, 1992 rates minus a revised "competitive
differential" of 17 percent (a "differential" which, as noted,
was set at 10 percent in the FCC's May, 1993 Rate Order). Cable
operators who seek to charge rates higher than those produced by
applying the competitive differential may elect to invoke new
cost-of-service procedures (discussed below).
In addition to revising the benchmark formula and the competitive
differential used in setting initial regulated cable rates, the
FCC adopted rules to simplify the calculations used to adjust
those rates for inflation and external costs in the future. The
FCC also concluded that it will treat increases in compulsory
copyright fees incurred by carrying distant broadcast signals as
external costs in a fashion parallel to increases in the
contractual costs for nonbroadcast programming. It will not,
however, accord external cost treatment to pole attachment fees.
In its May 1993 Rate Order the FCC exempted from rate regulation
the price of packages of "a la carte" channels if certain
conditions were met. Upon reconsideration, however, the FCC on
February 22, 1994 effectively tightened its regulatory treatment
of "a la carte" packages by establishing more elaborate criteria
designed to ensure that such practices are not employed so as to
unduly evade rate regulation. Now, when assessing the
appropriate regulatory treatment of "a la carte" packages, the
FCC will consider, inter alia, the following factors as possibly
suggesting that such packages do not qualify for non-regulated
treatment: whether the introduction of the package avoids a rate
reduction that otherwise would have been required under the FCC's
rules; whether an entire regulated tier has been eliminated and
turned into an "a la carte" package; whether a significant number
or percentage of the "a la carte" channels were removed from a
regulated service tier; whether the package price is deeply
discounted when compared to the price of an individual channel;
and whether the subscriber must pay significant equipment or
other charges to purchase an individual channel in the package.
In addition, the FCC will consider factors that will reflect in
favor of non-regulated treatment such as whether the channels in
the package have traditionally been offered on an "a la carte"
basis or whether the subscriber is able to select the channels
that comprise the "a la carte" package. "A la carte" packages
which are found to evade rate regulation rather than enhance
subscriber choice will be treated as regulated tiers, and
operators engaging in such practices may be subject to
forfeitures or other sanctions by the FCC.
In another action, the FCC adopted a methodology for determining
rates when channels are added to or deleted from regulated tiers
and announced that it will treat programming costs as external
costs and that operators may recover the full amount of
programming expenses associated with added channels. Operators
may also recover a mark-up on their programming expenses. These
adjustments and calculations are to be made on a new FCC form yet
to be released.
Several groups representing the cable industry have announced
that they will challenge these and other rate regulation
decisions of the FCC in a federal court of appeals. Registrant
is unable to predict the timing or outcome of any such appeals.
In a separate action on February 22, 1994, the FCC adopted
interim rules to govern cost of service proceedings initiated by
cable operators. Operators who elect to pursue cost of service
proceedings will have their rates based on their allowable costs,
in a proceeding based on principles similar to those that govern
cost-based rate regulation of telephone companies. Under this
methodology, cable operators may recover, through the rates they
charge for regulated cable service, their normal operating
expenses and a reasonable return on investment. The FCC has, for
these purposes, established an interim industry-wide rate of
return of 11.25%. It has also determined that acquisition costs
above book value are presumptively excluded from the rate base.
At the same time, certain intangible, above-book costs, such as
start-up losses (limited to losses actually incurred during a two-
year start-up period) and the costs of obtaining franchise rights
and some start-up organizational costs such as customer lists,
may be allowed. There are no threshold requirements limiting the
cable systems eligible for a cost of service showing, except
that, once rates have been set pursuant to a cost of service
approach, cable operators may not file a new cost of service
showing to justify new rates for a period of two years. Finally,
the FCC notes that it will, in certain individual cases, consider
a special hardship showing (or the need for special rate relief)
where an operator demonstrates that the rates set by a cost of
service proceeding would constitute confiscation of investment
and that some higher rate would not represent exploitation of
customers. In considering whether to grant such a request, the
FCC emphasizes that, among other things, it would examine the
overall financial condition of the operator and whether there is
a realistic threat of termination of service.
The 1992 Cable Act also prohibits cable operators from requiring
customers to subscribe to any tier of service other than the
basic service tier in order to gain access to programming offered
on a per-channel or per-program basis. This so-called "anti-buy-
through" provision does not apply, however, to systems that do
not have the capacity to offer basic tier customers programming
on a per-channel or per-program basis due to a lack of
addressable converters or other technological limitations. This
exemption may be claimed until a system has been modified to
eliminate the technical impediments, or for a period of ten years
after the enactment of the 1992 law. The FCC also may grant a
cable operator a waiver of the "anti-buy-through" provision if it
determines that compliance with the rule will require an operator
to raise its rates.
Renewal and Transfer
The 1984 Cable Act established procedures for the renewal of
cable television franchises. The procedures were designed to
provide incumbent franchisees with a fair hearing on past
performances, an opportunity to present a renewal proposal and to
have it fairly and carefully considered, and a right of appeal if
the franchising authority either fails to follow the procedures
or denies renewal unfairly. These procedures were intended to
provide an incumbent franchisee with substantially greater
protection than previously available against the denial of its
franchise renewal application. The 1992 Cable Act seeks to
address some of the issues left unresolved by the earlier Act.
It provides a more definite timetable in which the franchising
authority is to act on a renewal request. It also narrows the
range of circumstances in which a franchised operator might
contend that the franchising authority had constructively waived
non-compliance with its franchise.
Cable system operators are sometimes confronted by challenges in
the form of proposals for competing cable franchises in the same
geographic area, challenges which may arise in the context of
renewal proceedings. In Rolla Cable Systems v. City of Rolla, a
federal district court in Missouri in 1991 upheld a city's denial
of franchise renewal to an operator whose level of technical
services was found deficient under the renewal standards of the
1984 Cable Act. Local franchising authorities also have, in some
circumstances, proposed to construct their own cable systems or
decided to invite other private interests to compete with the
incumbent cable operator. Judicial challenges to such actions by
incumbent system operators have, to date, generally been
unsuccessful. Registrant cannot predict the outcome or ultimate
impact of these or similar franchising and judicial actions.
The 1992 Cable Act directs that no cable operator may transfer
ownership of a cable system within 36 months (or three-years) of
its acquisition or initial construction. On July 23, 1993, the
FCC released the text of new rules designed to implement this
provision. Under these rules, local franchising authorities are
given primary responsibility to oversee compliance with the three-
year holding requirement by requiring cable systems to certify
(and submit) certain information to the franchiser in order to
demonstrate that the holding requirement does not apply to a
particular transfer. Disputes concerning compliance, however,
will be resolved by the FCC. The 1992 Cable Act also provides
that in cases where the three-year holding period does not apply,
and where local consent to a transfer is required, the franchise
authority must act within 120 days of submission of a transfer
request or the transfer is deemed approved. The 120-day period
commences upon the submission to local franchising authorities of
information now required on a new standardized FCC transfer form.
The franchise authority may request additional information beyond
that required under FCC rules. Further, the 1992 Cable Act gives
local franchising officials the authority to prohibit the sale of
a cable system if the proposed buyer operates another cable
system in the jurisdiction or if such sale would reduce
competition in cable service.
Cable System Ownership Restrictions
Cross-Ownership: The Cable Act prohibits local exchange
telephone companies from owning cable television systems within
their exchange service areas, except in rural areas or by
specific waiver. The Act also prohibits telephone companies from
providing video programming directly to subscribers. The
regulations are of particularly competitive importance because
these telephone companies already own much of the plant necessary
for cable television operation, such as poles, ducts and rights-
of-way. In late 1992, subsidiaries of Bell Atlantic Corporation
filed suit in federal district court in Virginia against the FCC
and United States government, alleging that the prohibition
against video programming is an unconstitutional restraint of
free speech and denial of equal protection. On August 24, 1993,
Judge Ellis of the U.S. District Court for the Eastern District
of Virginia ruled that the cable-telco cross-ownership
prohibition in the Cable Act violated Bell Atlantic's First
Amendment rights. Chesapeake and Potomac Telephone Co. of
Virginia v. United States, No. 92-1751-A (E.D. Va. Aug. 1993).
On September 30, 1993, Judge Ellis clarified the scope of his
decision by ruling that it applies only to Bell Atlantic
Corporation and its telephone company subsidiaries in the mid-
Atlantic states. As a result, other telephone companies are not
free to enter the cable television business, unless they obtain
similar relief from other courts or unless the Supreme Court
upholds the decision on appeal. Indeed, subsequent to this
decision, other Bell Operating Companies have filed their own
constitutional challenges to the same statutory restriction in
other U.S. district courts. In the meantime, Judge Ellis'
decision has been appealed to the U.S. Court of Appeals for the
Fourth Circuit.
The FCC recently relaxed its telephone-cable restrictions to
permit local telephone companies (local exchange carriers) to
offer broadband video services under the so-called video dialtone
approach. In the same proceeding, the FCC ruled that neither a
local exchange carrier nor a separate programming entity
providing service under a video dialtone arrangement would be
required to obtain a local cable franchise. In addition, the FCC
allowed telephone companies to hold financial interests of up to
five percent in co-located cable companies, and it also
recommended that Congress repeal its cross-ownership ban. The
FCC also ruled that interexchange carriers, such as AT&T, MCI and
US Sprint, are not subject to the current statutory restrictions
on telephone company/cable television cross-ownership. Various
aspects of the FCC's video dialtone and telephone/cable cross-
ownership decisions have been appealed to the U.S. Court of
Appeals for the D.C. Circuit by both the cable industry and
certain telephone companies. Registrant cannot predict the
outcome of these appeals.
In 1989, the FCC authorized a limited five-year waiver of its
cable-telephone cross-ownership ban to permit General Telephone
Company of California ("General") to construct coaxial and fiber
optic cable facilities in Cerritos, California, on an
experimental basis. The experiment called for General to lease
the facilities to two customers, Apollo Cablevision ("Apollo"),
the system franchisee, and GTE Service Corporation ("GTE"), an
affiliate of General. GTE proposed to use its leased facilities,
inter alia, to test certain types of cable in comparison with
fiber optic facilities for carriage of voice, data and video
signals (including a "video on demand" service). The waiver was
granted subject to several reporting conditions, accounting
safeguards against unauthorized telephone rate payer
subsidization of the cable experiment, and a requirement that
General contract with another entity to provide the video
programming.
In response to a petition for review filed by the National Cable
Television Association, the U.S Court of Appeals for the D.C.
Circuit, on September 18, 1990, remanded the proceeding to the
FCC because the Commission had failed to explain why Apollo's
corporate parent needed to be involved in construction of the
system and thereby give rise to a prohibited affiliation. After
an extended period of unsuccessful settlement negotiations with
the parties, the FCC, in July 1992, invited public comment on
what action it should take. On November 9, 1993, the FCC
rescinded both its original waiver in its entirety and GTE's
authority to operate and maintain the coaxial and fiber optic
cable facilities in Cerritos. While this FCC order was to become
effective within 120 days of its release, GTE was directed to
provide the FCC with its specific plan for compliance within 30
days. In January, 1994, after the FCC denied GTE's request for
stay of this order (or extension of its deadlines), the U.S.
Court of Appeals for the Ninth Circuit granted a stay pending its
resolution of GTE's petition for review of the FCC rescission
order. Registrant cannot predict the outcome of the pending
judicial review proceeding, or the likelihood of similar waivers
being granted to other telephone companies in the future.
Several bills have been introduced in Congress that would
eliminate the cable/telco cross-ownership ban, subject to certain
conditions. The two most prominent are S.1086, introduced by
Senator Danforth (R-Mo.) and H.R.3636, introduced by Reps. Markey
(D-Ma.) and Fields (R-Tx). These bills generally provide that a
telephone company may provide video programming service within
its franchise area in accordance with various regulatory
safeguards, but may not acquire an existing cable system. The
safeguards in H.R.3636 include a requirement that video
programming service be provided through an affiliate separate
from the telephone operating company, restrictions on
telemarketing, affiliate transactions rules, a requirement that
the telco's video affiliate establish a video platform with up to
75 percent of its capacity available to unaffiliated program
suppliers, and a prohibition against cross-subsidization. The
safeguards in S.1086 include a separate subsidiary requirement
and a general proscription against cross-subsidization.
Under the 1992 Cable Act, common ownership of a co-located cable
system and MMDS system is prohibited. Further, common ownership
of cable systems and some types of private cable (e.g., "SMATV")
systems is prohibited.
Concentration of Ownership: The 1992 Cable Act directed the FCC
to establish reasonable limits on the number of cable subscribers
a single company may reach through cable systems it owns
("horizontal concentration") and the number of system channels
that a cable operator could use to carry programming services in
which it holds an ownership interest ("vertical concentration").
The horizontal ownership restrictions of the Act were struck down
by a federal district court as an unconstitutional restriction on
speech. Pending final judicial resolution of this issue, the FCC
stayed the effective date of its horizontal ownership
limitations, which would place a 30 percent nationwide limit on
subscribers by any one entity. Registrant cannot predict the
final version of any such limitations or their effect on
Registrant's operations. The FCC's vertical restriction consists
of a "channel occupancy" standard which places a 40% limit on the
number of channels that may be occupied by services from
programmers in which the cable operator has an attributable
ownership interest. Further, the Act and FCC rules restrict the
ability of programmers to enter into exclusive contracts with
cable operators. Registrant cannot predict the effect on its
operations of these legislative enactments or the implementing
regulations.
Foreign Ownership: A measure was approved by the House in the
1992 Congress to restrict foreign ownership of cable systems, but
was deleted by a House-Senate Conference Committee from the
legislation that subsequently was enacted as the 1992 Cable Act.
Video Marketplace: The FCC has sought public comment in a
general inquiry concerning changes in the nature of the video
marketplace. This proceeding was prompted by a 1991 study by the
FCC's Office of Plans and Policy that called into question the
competitive balance in the video marketplace due in part to the
proliferation of cable services. The inquiry will examine all
federal regulations affecting broadcast television, including
multiple ownership restrictions. The inquiry will focus on
increased competition in the market; technological advances in
delivery of video programming; the ability of competitors,
including cable operators, to rely on revenue from direct viewer
payment in addition to advertising; and the increase in the
availability of national sources of programming. Registrant
cannot predict the outcome of this proceeding. To date, however,
the only new regulatory proposals resulting from the inquiry have
been in the area of television ownership deregulation. See
"Television Industry," below.
FCC Limits on Broadcast Network/Cable Cross-ownership: In 1992,
the FCC modified its ban on broadcast television network
ownership of cable systems. Such ownership now is permitted
provided that network-controlled systems do not constitute more
than (1) 10% of the homes passed nationwide by cable systems, and
(2) 50% of the homes passed by cable within a particular
television Area of Dominant Influence ("ADI"). These limitations
will not apply where the network-owned system receives
competition from another multichannel video service provider.
Registrant is unable to predict the effect upon its operations of
the repeal of the former prohibition.
Alternative Video Programming Services
Wireless Cable: The FCC has expanded the authorization of MMDS
services to provide "wireless cable" via multiple microwave
transmissions to home subscribers. In 1990, the FCC increased
the availability of channels for use in wireless cable systems by
eliminating MMDS ownership restrictions and simplifying various
processing and administrative rules. The FCC also modified
equipment and technical standards to increase service
capabilities and improve service quality. In 1991, the FCC
resolved certain additional wireless cable issues, including
channel allocations for MMDS, Operational Fixed Service ("OFS")
and Instructional Television Fixed Service ("ITFS") facilities,
direct application by wireless operators for use of certain ITFS
channels, and restrictions on ownership or operation of wireless
facilities by cable entities. In 1992, the FCC proposed a new
service, LMDS, which also could be used to supply multichannel
video and other communications services directly to subscribers.
This service would operate in the 28 GHz frequency range and,
consistent with the nature of operations in that range, the FCC
envisions that LMDS transmitters could serve areas of only six to
twelve miles in diameter. Accordingly, it is proposed that LMDS
systems utilize a grid of transmitter "cells," similar to the
structure of cellular telephone operations. In January 1994, the
Commission announced that it would issue a Second Notice of
Proposed Rule Making in this proceeding designed to determine
whether it should implement a Negotiated Rule Making Proceeding
to allow participants to reach a consensus on sharing the 28 GHz
band between terrestrial (LMDS) and satellite users. Registrant
cannot predict the outcome of the FCC's proceeding.
Video Dialtone: Telephone company ownership of cable television
systems in the same areas was prohibited by the 1984 Cable Act.
In 1991, however, the FCC modified its rules to allow telephone
companies to play a greater role in delivery of video services
through an arrangement termed "video dialtone." (A U.S. district
court in Virginia subsequently held the cross-ownership
restriction unconstitutional, but the court's ruling is currently
limited only to the particular telephone company plaintiffs in
that case.) Although still largely conceptual, the video
dialtone model would be a common carrier based service, analogous
to the ordinary telephone dialtone, whereby local telephone
companies could provide customers access to video programming,
videotext, videophone and other future advanced services. In
such an arrangement, the telephone company may provide the
facilities to deliver programming to subscribers, but may not
itself provide the programming or dictate how that programming
should be offered. To date, thirteen video dialtone applications
have been filed with the FCC, with most of the proposals
contemplating service areas in California, the Washington, D.C.,
metropolitan area, and the northeast. Some of the first
proposals are in the beginning stages of technical trials.
Personal Communications Service ("PCS"): In August, 1993, the
FCC established rules for a new portable telephone service, the
Personal Communications Service ("PCS"). PCS has potential to
compete with landline local telephone exchange services. Among
several parties expressing interest in PCS were cable television
operators, whose plant structures present possible synergies for
PCS operation. In September 1993, the FCC adopted rules for
"broadband PCS" services. It allocated 120 MHz in the 2 GHz band
for licensed broadband services, and an additional 40 MHz for
unlicensed services. PCS licenses will be granted for Basic
Trading Areas (BTAs) and Major Trading Areas, with up to seven
licenses available in each geographic area. The FCC will use
competitive bidding to assign PCS licenses to licensees. The
auction rules have not yet been finalized, and almost every
aspect of the PCS rules is subject to petitions for
reconsideration. Registrant cannot predict the outcome of these
proceedings. The first PCS licenses are to be issued May 7,
1994.
Information and Interexchange Services (Modified Final Judgment):
The Consent Decree that terminated the United States v. AT&T
antitrust litigation in 1982 (known as the Modified Final
Judgment or "MFJ") prohibited the Bell Operating Companies and
their affiliates (collectively, the "Regional Bells") from, inter
alia, providing "information" and "interexchange
telecommunications" services. The information services
restriction was understood to prohibit the Regional Bells from
owning cable television systems. In 1991, the United States
District Court removed that restriction but stayed the effect of
its decision. The United States Court of Appeals for the
District of Columbia Circuit lifted the stay later that year and
affirmed the removal of the restriction in 1993. The Supreme
Court has denied a petition for writ of certiorari of that
decision. Consequently, the MFJ no longer restricts the Regional
Bells from providing information services.
The interexchange telecommunications restriction in the MFJ
prohibits the Regional Bells from providing telecommunications
services across Local Access and Transport Areas ("LATAs") as
defined in the Consent Decree. The interexchange restriction has
been interpreted as prohibiting the Regional Bells from operating
receive-only earth stations at a cable system headend, as well as
from operating a cable system that crosses a LATA boundary. In
1993, the U.S. District Court for the District of Columbia
granted Southwestern Bell Corporation a waiver of the
interexchange line of business restriction for the purposes of
acquiring and operating cable systems in Montgomery County,
Maryland, and Arlington County, Virginia. U S West has requested
a waiver of this restriction in connection with its investment in
the cable properties of Time Warner Entertainment Company.
In addition, all seven Regional Bells have moved for a waiver of
the interexchange line of business restriction to allow them to
provide information services on an interexchange basis. That
motion is currently being reviewed by the U.S. Department of
Justice.
Congress may consider legislation in 1994 that would remove the
interexchange services restriction in whole or in part.
Legislation affecting the MFJ may also specify the terms and
conditions, including regulatory safeguards, pursuant to which
the Regional Bells may provide information and interexchange
services.
There can be no assurance that cable television systems of
Registrant will not be adversely affected by future judicial
decisions or legislation in this area.
Other New Technologies: Several technologies exist or have been
proposed that have the potential to increase competition in the
provision of video programming. Currently, cable subscribers can
receive programming received by home satellite dishes or via
satellite master antenna television facilities ("SMATV"). In
addition, the FCC has authorized nine entities to provide
programming directly to home subscribers through direct broadcast
satellites ("DBS"). On December 17, 1993, two such parties,
Hughes Communications Galaxy ("Hughes"), an affiliate of the
General Motors Company, and Unites States Satellite Broadcasting
Company jointly launched a new high-powered satellite with 16
transponders, from which they can provide DBS service to the
entire country. Service is expected to begin sometime during the
first half of 1994. Hughes also expects to launch a second 16-
transponder satellite in late Spring 1994. Another technological
development in the making with significant implications for video
programming is "high definition television" ("HDTV"). A private
sector Advisory Panel was organized by the FCC in 1987 to study
various issues relating to advanced television systems ("ATV"),
including HDTV. It is anticipated that with the assistance and
recommendations of this Advisory Panel the FCC should be in a
position to establish a technical standard for HDTV broadcasting
by mid-1995.
Programming Issues
Retransmission Consent and Mandatory Carriage: The 1992 Cable
Act gives television stations the right to withhold permission
for cable systems to carry their signals, to require compensation
in exchange for such permission ("retransmission consent"), or,
alternatively, in the case of local stations, to demand carriage
without compensation ("must carry").
The FCC's implementing regulations required broadcasters to elect
between must-carry and retransmission consent by June 17, 1993,
with the choice binding for three years. A broadcast station has
the right to choose must-carry, assuming it can deliver a signal
of specified strength, with regard to cable systems in its Area
of Dominant Influence as defined by the audience measurement
service, Arbitron. Stations electing to grant retransmission
authority were expected to conclude their consent agreements
with cable systems by October 6, 1993, the date on which systems'
authority to carry broadcast signals without consent expired.
While monetary compensation is possible in return for such
consent, many broadcast station operators accepted arrangements
that do not require payment but involve other types of
consideration, such as use of a second cable channel, advertising
time, and joint programming efforts. The must carry provisions
of the FCC's rules have been challenged as unconstitutional. A
special three-judge district court rejected the challenge. That
decision has been appealed, and the Supreme Court of the United
States heard oral argument in the case on January 12, 1994. Its
decision is expected later this year. Registrant cannot predict
the outcome of the case. Meanwhile, a separate challenge to the
retransmission consent aspect of the 1992 Act was rejected by a
Federal district court.
The 1992 Cable Act also requires cable systems to carry a
broadcast television station, at the election of the station, on
the same channel as its broadcast channel, the channel on which
it was carried by the cable system on July 19, 1985, or the
channel on which it was carried on January 1, 1992.
FCC rules formerly required cable television operators to make
available and install A/B switches to those subscribers who
request them. (An A/B switch is an input selector which permits
conversion from reception via the cable television systems to use
of an off-air antenna). This requirement was abolished by the
1992 Cable Act.
Copyright: Cable television systems are subject to the Copyright
Act of 1976 which, among other things, covers the carriage of
television broadcast signals. Pursuant to the Copyright Act,
cable operators obtain a compulsory license to retransmit
copyrighted programming broadcast by local and distant stations
in exchange for contributing a percentage of their revenues as
statutory royalties to the U.S. Copyright Office. The amount of
this royalty payment varies depending on the amount of system
revenues from certain sources, the number of distant signals
carried, and the locations of the cable television system with
respect to off-air television stations and markets. The
Copyright Royalty Tribunal ("CRT"), which the Copyright Office
established to distribute royalty payments generally and to
review and adjust royalty rates in limited situations, recently
was replaced by copyright arbitration royalty panels, to be
convened by the Librarian of Congress as necessary.
In July, 1991, the U.S. Copyright Office affirmed an earlier
decision that satellite carriers and MMDS systems are not "cable
systems" within the meaning of the Copyright Act, and, therefore,
are not entitled to the compulsory licensing scheme that would
allow them to retransmit broadcast signals in exchange for
payment of a fee. Unlike cable entities, these systems will have
to negotiate with the individual copyright holders for the right
to retransmit copyrighted broadcast signals. Satellite carriers,
however, can continue to retransmit broadcast signals under an
alternative compulsory copyright system until the end of 1994.
In response to Congressional concerns about the ability of these
new technologies to compete with cable, the Copyright Office has
delayed the effective date of its decision in this area until
January 1, 1995. The Copyright Office has also tentatively ruled
that some SMATV systems meet the Copyright Act's definition of
cable system and thus are eligible for a compulsory license.
Congress established the compulsory license in 1976 to serve as a
means of compensating program suppliers for cable retransmission
of broadcast programming. The FCC has recommended that Congress
eliminate the compulsory copyright license for cable
retransmission of both local and distant broadcast programming.
In addition, legislative proposals have been and may continue to
be made to simplify or eliminate the compulsory license. As
noted, the 1992 Cable Act will require cable systems to obtain
permission of certain broadcast licensees in order to carry their
signals ("retransmission consent") should such stations so elect.
(See "Retransmission Consent and Mandatory Carriage" above) This
permission will be needed in addition to the copyright permission
inherent in the compulsory license. Without the compulsory
license, cable operators would need to negotiate rights for the
copyright ownership of each program carried on each broadcast
station transmitted by the system. Registrant cannot predict
whether Congress will act on the FCC recommendations or similar
proposals.
Exclusivity: Except for retransmission consent, the FCC imposes
no restriction on the number or type of distant (or "non-local")
television signals a system may carry. FCC regulations, however,
require cable television systems serving more than 1,000
subscribers, at the request of a local network affiliate, to
protect the local affiliate's broadcast of network programs by
blacking out duplicated programs of any distant network-
affiliated stations carried by the system. Similar rules require
cable television systems to black out the broadcast on distant
stations of certain local sporting events not broadcast locally.
The FCC rules also provide exclusivity protection for syndicated
programs. Under these rules, television stations may compel
cable operators to black out syndicated programming broadcast
from distant signals where the local broadcaster has negotiated
exclusive local rights to such programming. Syndicated program
suppliers are afforded similar rights for a period of one year
from the first sale of that program to any television broadcast
station in the United States. The FCC rules allow any
broadcaster to bargain for and enforce exclusivity rights.
However, exclusivity protection may not be granted against a
station that is generally available over-the-air in the cable
system's market. Cable systems with fewer than 1,000 subscribers
are exempt from compliance with the rules. Although broadcasters
generally may acquire exclusivity only within 35 miles of their
community of license, they may acquire national exclusive rights
to syndicated programming. The ability to secure national rights
is intended to assist "superstations" whose local broadcast
signals are then distributed nationally via satellite. The 35-
mile limitation is currently under re-examination by the FCC,
which could extend the blackout zone to a larger area.
Cable Origination Programming: The FCC also requires that cable
origination programming meet certain standards similar to those
imposed on broadcasters. These standards include regulations
governing political advertising and programming, advertising
during children's programming, rules on lottery information, and
sponsorship identification requirements.
Customer Service: On July 1, 1993, following a public rulemaking
proceeding mandated by the 1992 Cable Act, new FCC rules on
customer service standards became effective. The standards
govern cable system office hours, telephone availability,
installations, outages, service calls, and communications between
the cable operator and subscriber, including billing and refund
policies. Although the FCC has stated that its standards are
"self effectuating," it has also provided that a franchising
authority wishing to enforce particular customer service
standards must give the system at least 90 days advance written
notice. Franchise authorities may also agree with cable
operators to adopt stricter standards and may enact any state or
municipal law or regulation which imposes a stricter or different
customer service standard than that set by the FCC. Enforcement
of customer service standards, including those set by the FCC, is
entrusted to local franchising authorities.
Pole Attachment Rates and Technical Standards
The FCC currently regulates the rates and conditions imposed by
public utilities for use of their poles, unless, under the
Federal Pole Attachments Act, a state public service commission
demonstrates that it is entitled to regulate the pole attachment
rates. The FCC has adopted a specific formula to administer pole
attachment rates under this scheme. The validity of this FCC
function was upheld by the U.S. Supreme Court.
In 1990, new FCC standards on signal leakage became effective.
Like all systems, Registrant's cable television systems are
subject to yearly reporting requirements regarding compliance
with these standards. Further, the FCC has instituted on-site
inspections of cable systems to monitor compliance. Any failure
by Registrant's cable television systems to maintain compliance
with these new standards could adversely affect the ability of
Registrant's cable television systems to provide certain
services.
The Cable Act empowers the FCC to set certain technical standards
governing the quality of cable signals and to preempt local
authorities from imposing more stringent technical standards.
The FCC's preemptive authority over technical standards for
channels carrying broadcast signals has been affirmed by the U.S.
Supreme Court. On March 4, 1992, the FCC adopted new mandatory
technical standards for cable carriage of all video programming,
including retransmitted broadcast material, cable originated
programs and pay channels. The 1992 Cable Act includes a
provision requiring the FCC to prescribe regulations establishing
minimum technical standards. The 1992 Cable Act also codified
the right of franchising authorities to seek waivers to impose
technical standards more stringent than those prescribed by the
FCC. The FCC has determined that its 1992 rule making proceeding
satisfied the mandate of the 1992 Cable Act. The new standards,
which became effective December 30, 1992, focus primarily on the
quality of the signal delivered to the cable subscriber's
television. Registrant cannot predict the impact of these new
rules upon Registrant's operations.
On December 1, 1993, the FCC released a Notice of Proposed Rule
Making intended to implement the 1992 Cable Act requirements for
compatibility between cable and consumer electronics equipment.
The proposals include the following: (1) requiring cable
operators to provide equipment to enable the operation of TV/VCR
features that make simultaneous use of multiple signals;
(2) giving subscribers the option of having all signals not
requiring a converter passed directly to the TV receiver or VCR;
(3) prohibiting cable systems from scrambling signals on the
basic tier; (4) requiring operators to permit use of commercially
available remote controls; and (5) requiring cable operators to
provide more information to consumers. Registrant cannot predict
the outcome of this proceeding or the specific impact of such
requirements on its operations.
Tax Considerations
Legislation which for the first time would allow amortization of
goodwill and certain intangibles that arise in a business
acquisition for federal income tax purposes was enacted as part
of the Omnibus Budget Reconciliation Act of 1993. The measure
permits intangible "assets" to be amortized over a 15-year
period. The legislation includes certain governmental rights and
licenses -- e.g., cable franchises -- among the intangibles
eligible for such amortization. There is currently pending in
Congress a proposal by Sen. Simon (D-Ill.) to amend the new law
to permit only 75% of the value of such intangibles to be
amortized over a 15-year period. Registrant cannot predict
whether or in what form the Simon proposal will be adopted and
what, if any, impact such changes would have on its operations.
(Additional tax considerations are discussed below in the State
and Local Regulation section.)
At least one cable operator has successfully argued in court that
cable franchises may be depreciated under pre-existing law. In
Tele-Communications, Inc. v. Comm'r of IRS, the U.S. Court of
Appeals upheld the decision of the Tax Court, which had rejected
the argument of the Internal Revenue Service that such
amortization was available only to commercial franchises.
Registrant cannot predict whether the IRS will appeal the
decision to the Supreme Court of the United States or the outcome
of such an appeal.
State and Local Regulation
Local Authority: Cable television systems are generally operated
pursuant to non-exclusive franchises, permits or licenses issued
by a municipality or other local governmental entity. The
franchises are generally in the nature of a contract between the
cable television system owner and the issuing authority and
typically cover a broad range of provisions and obligations
directly affecting the business of the systems in question.
Except as otherwise specified in the Cable Act or limited by
specific FCC rules and regulations, the Cable Act permits state
and local officials to retain their primary responsibility for
selecting franchisees to serve their communities and to continue
regulating other essentially local aspects of cable television.
The constitutionality of franchising cable television systems by
local governments has been challenged as a burden on First
Amendment rights but the U.S. Supreme Court has declared that
while cable activities "plainly implicate First Amendment
interest" they must be balanced against competing societal
interests. The applicability of this broad judicial standard to
specific local franchising activities is subject to continuing
interpretation by the federal courts.
Cable television franchises generally contain provisions
governing the fees to be paid to the franchising authority, the
length of the franchise term, renewal and sale or transfer of the
franchise, design and technical performance of the system, use
and occupancy of public streets, and the number and types of
cable services provided. The specific terms and conditions of
the franchise directly affect the profitability of the cable
television system. Franchises are generally issued for fixed
terms and must be renewed periodically. There can be no
assurance that such renewals will be granted or that renewals
will be made on similar terms and conditions.
Various proposals have been introduced at state and local levels
with regard to the regulation of cable television systems and a
number of states have adopted legislation subjecting cable
television systems to the jurisdiction of centralized state
governmental agencies, some of which impose regulation of a
public utility character. Increased state and local regulations
may increase cable television system expenses.
Both Congress and the Treasury Department have shown interest in
proposals by the Clinton administration to abolish or reduce tax
exemptions, enjoyed by certain companies with investments in
Puerto Rico, arising under Section 936 of the Internal Revenue
Code. The ultimate outcome of such proposals, which are highly
tentative, cannot currently be predicted. However, the
elimination of 936 Funds -- reduced rate funds available to
certain borrowers from commercial banks in Puerto Rico -- could
potentially increase the cost of borrowing funds under the C-ML
Revolving Credit Agreement. However, C-ML Cable currently has no
borrowings outstanding under the C-ML Revolving Credit Agreement.
In addition, the elimination or reduction of tax exemptions
pursuant to Section 936 could negatively affect the Puerto Rican
economy, and therefore Registrant's investments in Puerto Rico.
Due to the uncertainty surrounding possible legislation affecting
Puerto Rico, it is not currently possible to predict the outcome
or impact of any potential future government actions on
Registrant's Puerto Rican operations.
Radio Industry
In 1992, the FCC adopted substantial changes to its restrictions
on the ownership of radio stations. The new rules allow a single
entity to control as many as eighteen AM and eighteen FM stations
nationwide. As of September 16, 1994, those maximums will be
increased to twenty AMs and twenty FMs. As to ownership within a
given market, the maximum varies depending on the number of radio
stations within the market. In markets with fewer than fifteen
stations, a single entity may control three stations (no more
than two of which could be FM), provided that the combination
represents less than fifty percent of the stations in the market.
In contrast, in markets with fifteen or more radio stations, a
single entity may control as many as two AM and two FM stations,
provided that the combined audience share of the stations does
not exceed twenty-five percent.
In addition, the FCC placed limitations on local marketing
agreements through which the licensee of one radio station
provides the programming for another licensee's station in the
same market. Stations operating in the same service (e.g., both
stations AM) and the same market are prohibited from simulcasting
more than twenty-five percent of their programming. Moreover, in
determining the number of stations that a single entity may
control, an entity programming a station pursuant to a local
marketing agreement is required to count that station toward its
maximum even though it does not own the station.
In addition to these new radio ownership limitations, the pending
television proceeding described below includes proposals for
further relaxation of the FCC's restrictions on ownership of
television and radio stations within the same area.
Also currently pending are proceedings in which the FCC is
examining alternatives for the possible implementation of digital
audio radio services ("DARS"). DARS systems potentially could
allow delivery of audio signals with fidelity comparable to
compact discs. In a rulemaking proceeding, the Commission is
considering a proposed spectrum allocation for satellite DARS.
There also are four applications on file at the FCC for satellite
DARS licenses. In addition, the FCC has undertaken an inquiry
into the terrestrial broadcast of DARS signals, addressing, inter
alia, the need for spectrum outside the existing FM band and the
role of existing broadcasters. Registrant cannot predict the
outcome of these proceedings.
Television Industry
In June, 1992, the FCC initiated a rule making proceeding
inviting public comment on whether existing television ownership
rules should be revised to allow broadcast television licensees
greater flexibility to respond to growing competition in the
distribution of video programming. Among the proposed changes
are: (1) raising the national television ownership limit from 12
to as many as 24 stations, perhaps restricted by a national
audience reach maximum higher than the current 25%; (2) easing
restrictions on the ownership by a single entity of two
television stations having overlapping signal contours; and
(3) easing the so-called "one-to-a-market" rule that currently
(with some exceptions) prevents the common ownership of a
television station and one or more radio stations in the same
area. The timetable for completion of the proceeding is not
certain, and Registrant cannot predict whether the changes
proposed will in fact be adopted or the impact of such changes on
Registrant's business. Also pending at the FCC is an inquiry
proceeding examining the possible re-imposition of broadcast
commercial time limitations that were repealed by the FCC in
1984. Registrant cannot predict whether the proceeding will
result in such a proposal or the extent of any such regulation.
In 1987, the FCC initiated a rule making proceeding on advanced
television, which includes high definition television ("HDTV").
With the help of a private sector advisory committee, the
Commission is attempting to establish a technical standard for
HDTV broadcasting by mid-1995. After the standard is set,
existing broadcasters will have three years in which to apply for
a second channel assignment to be used for HDTV broadcasts. Such
broadcasts must begin within six years of the standard-setting.
If these deadlines are not met, existing broadcasters will be
subject to competition for the HDTV channel.
For some period, currently thought to be fifteen years,
broadcasters will broadcast on both their current "NTSC" channel
and their HDTV channel, in a so-called "simulcast" mode. At the
end of the period, all broadcasts on the NTSC channel must cease,
whether or not every broadcaster is broadcasting HDTV. The use
of the HDTV channel sufficient to meet the FCC's minimum
requirements will require construction of new facilities,
including a transmitter, exciter, antenna, and transmission line.
Additional equipment for making the full conversion to HDTV will
include cameras, switchers, tape machines, and the like.
Item 2. Properties
A description of the media properties of Registrant is contained
in Item 1 above. Registrant owns or leases real estate for
certain headend and transmitting equipment along with space for
studios and offices. Refer to Item 8. "Financial Statements and
Supplementary Data" for further information regarding
Registrant's properties.
For additional description of Registrant's business refer to Item
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Item 3. Legal Proceedings
There are no material legal proceedings against Registrant or to
which Registrant is a party.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the limited partners of
Registrant during the fourth quarter of the fiscal year covered
by this report.
Part II
Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters
A public market for Registrant's Units does not now exist, and it
is not anticipated that such a market will develop in the future.
Accordingly, accurate information as to the market value of a
Unit at any given date is not available.
Effective November 9, 1992, Registrant was advised that Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch" or
"MLPF&S") introduced a new limited partnership secondary service
through Merrill Lynch's Limited Partnership Secondary Transaction
Department ("LPSTD"). This service will assist Merrill Lynch
clients wishing to buy or sell Registrant Units.
The number of owners of Units as of January 28, 1994 was 16,446.
Registrant does not distribute dividends. Registrant distributes
Distributable Cash From Operations and Distributable Sale and
Refinancing Proceeds, to the extent available. There were no
distributions in 1992 or 1993.
Item 6. Selected Financial Data
Year Ended Year Ended Year Ended
December 31, December 25, December 27,
1993 1992 1991
Operating Revenues $ 99,990,757 $100,443,967 $ 99,185,423
Net Income (Loss) $ 1,377,340 $( 9,280,770) $(51,049,551)
Income (Loss) per
Unit of Limited
Partnership Interest
$ 7.25 $ (48.87) $ (268.83)
Number of Units 187,994 187,994 187,994
As of DecemberAs of December As of
31, 1993 25, 1992 December 27,
1991
Total Assets $249,851,937 $261,554,442 $310,248,561
Borrowings $232,568,349 $245,994,745 $279,440,750
Year Ended Year Ended
December 28, December 29,
1990 1989
Operating Revenues $ 93,559,410 $ 88,353,300
Net Income (Loss) $(41,491,591) $(35,319,437)
Income (Loss) per
Unit of Limited
Partnership Interest
$ (218.50) $ (186.00)
Number of Units 187,994 187,994
As of As of
December 28, December 29,
1990 1989
Total Assets $358,192,902 $395,011,414
Borrowings $280,048,250 $281,270,533
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
As of December 31, 1993, Registrant had $26,916,477 in cash and
cash equivalents, of which $22,479,254 was limited for use at the
operating level and the remaining $4,437,223 was Registrant's
working capital.
As of December 25, 1992, Registrant had $19,930,098 in cash and
cash equivalents, of which $15,677,696 was limited for use at the
operating level and the remaining $4,252,402 was Registrant's
working capital.
During 1993, Registrant continued its operations phase and
continued to focus on resolving difficulties in complying with
certain of its debt agreements. On July 30, 1993, Registrant
executed a Second Amendment to the Wincom-WEBE-WICC Loan which
cured the previously outstanding principal and interest payment
and covenant defaults pursuant to the Wincom-WEBE-WICC Loan
(Refer to Note 6 of "Item 8. Financial Statements and
Supplementary Data"). Additionally, Registrant sold the
Indianapolis Stations on October 1, 1993; the net proceeds of the
sale were paid to Chemical Bank to reduce the principal
outstanding under the Wincom-WEBE-WICC Loan. Registrant
continued its negotiations with the lender to KATC and WREX,
although no agreement was concluded (see below for further
information regarding the WREX-KATC Loan).
The Partnership engaged Merrill Lynch & Co. and Daniels &
Associates in January, 1994 to act as its financial advisors in
connection with a possible sale of all or a portion of
Registrant's California Cable Systems.
There can be no assurances that the Partnership will be able to
enter into an agreement to sell the California Cable Systems on
terms acceptable to the Partnership or that any such sale will be
consummated. If a sale is consummated, it is expected that it
would be consummated no earlier than the second half of 1994.
As of December 31, 1993, California Cable represented
approximately 53% of the consolidated assets of Registrant and
approximately 55% of the consolidated operating revenues.
Impact of Cable Legislation
The future liquidity of Registrant's cable operations, California
Cable and C-ML Cable, is likely to be negatively affected by
recent and ongoing changes in legislation governing the cable
industry. The potential impact of such legislation on Registrant
is described below.
On October 5, 1992, Congress overrode the President's veto of the
Cable Consumer Protection and Competition Act of 1992 (the "1992
Cable Act") which imposes significant new regulations on the
cable television industry. The 1992 Cable Act required the
development of detailed regulations and other guidelines by the
Federal Communications Commission ("FCC"), most of which have now
been adopted but remain subject to petitions for reconsideration
before the FCC and/or court appeals.
On May 3, 1993, the FCC released a Report and Order relating to
the regulation of rates for certain cable television programming
services and equipment. These rules establish certain benchmarks
which will enable local franchise authorities to require rates
for "basic service" (minimally, local broadcast and access
channels) and the FCC (upon receipt of individual complaints) to
require rates for certain satellite program services (excluding
premium channels) to fall approximately 10% from September 30,
1992 levels, unless the cable operator is already charging rates
that are at a so-called "competitive" benchmark level or it can
justify a higher rate based on a cost-of-service showing. Rates
of all regulated cable systems will then be subject to a price
cap that will govern the extent to which rates can be raised in
the future without a cost-of-service showing. Several other key
matters are still pending before the FCC that will ultimately
shape and complete this new regulatory framework for cable
industry rates. For example, in a complicated multi-faceted
document released on August 27, 1993, the FCC simultaneously: (1)
issued a First Order on Reconsideration of the foregoing May 3
rate order (confirming or clarifying certain benchmark rate
methodology issues); (2) adopted a Second Report and Order
(deciding to continue to include systems with less than 30%
penetration in the universe of systems whose rates were used to
establish benchmarks, a decision that, if unchanged, avoids a
potentially downward adjustment of the previously announced
benchmark rates); and (3) issued a Third Notice of Proposed
Rulemaking (addressing such "going forward" issues as how cable
rates should be modified when channels are added or deleted, how
costs incurred for rebuilds should be treated, and whether cable
operators should be required to use the same methodology to
determine rates for both basic and expanded basic tiers). In
addition, a separate yet related rulemaking proceeding was
initiated by the FCC on July 16, 1993 to establish the proposed
standards and certain other ground rules for cost-of-service
showings by cable operators seeking to justify cable rates in
excess of the FCC prescribed benchmark/price cap levels. While
continuing to express a strong preference for its benchmark
approach, the FCC's "Notice of Proposed Rulemaking" in this
proceeding outlines an alternative regulatory scheme that would
combine certain elements of traditional ratebase/rate of return
regulation with a more streamlined approach uniquely tailored to
the cable industry. Comments in response to both the Third
Notice of Proposed Rulemaking and the separate cost-of-service
rulemaking were received by the FCC on or before October 7, 1993.
In the meantime, the FCC's overall cable service rate regulation
rules took effect on September 1, 1993, and the industry-wide
freeze on rates for regulated cable service remains in effect
until May 15, 1994. Furthermore, by Order released September 17,
1993, the FCC initiated an industry-wide survey of cable rate
changes and service restructuring as of the starting date of its
rate freeze (April 5, 1993) and the effective date of rate
regulation (September 1, 1993) in order to gauge the early
effectiveness of its cable rate regulations. The results of this
survey, which could further impact rate regulation actions by the
FCC, were announced on February 22, 1994.
On February 22, 1994, the FCC adopted a series of additional
measures that expand and substantially alter its cable rate
regulations. Based on FCC news releases dated February 22, the
FCC's major actions include the following: (1) a modification of
its benchmark methodology in a way which will effectively require
cable rates to be reduced, on average, an additional 7% (i.e.,
beyond the 10% reduction previously ordered in 1993) from their
September 30, 1992 level, or to the new benchmark, whichever is
less; (2) the issuance of new standards and requirements to be
used in making cost-of-service showings by cable operators who
seek to justify rates above the levels determined by the
benchmark approach; and (3) the clarification and/or
reaffirmation of a number of "going forward" issues that had been
the subject of various petitions for reconsideration of its May
3, 1993 Rate Order. Several weeks earlier, and partly in
anticipation of these actions, the FCC extended its industry-wide
freeze on rates for regulated cable services until May 15, 1994.
It is expected that the new benchmark standards and cost-of-
service rules will become effective prior to the current
termination date of the rate freeze.
In addition to the rate reregulation described above, among other
things, the 1992 Cable Act provides that certain qualified local
television stations may require carriage by cable operators, or
elect to negotiate for payment of fees or other forms of
compensation by the cable operator to the stations in exchange
for allowing retransmission of their signals. The deadline for
making such elections was June 17, 1993. Negotiations between
cable operators and those television stations which elected to
pursue retransmission agreements were carried out between the
foregoing election date and October 6, 1993, the deadline under
the 1992 Cable Act for obtaining retransmission consent. If some
type of agreement (either final or interim pending further
negotiations) was not reached by October 6, 1993, cable operators
could have been forced to discontinue carriage of those
television stations which elected to pursue retransmission
consent (see below).
In its May 1993 Rate Order the FCC exempted from rate regulation
the price of packages of "a la carte" channels if certain
conditions were met. Upon reconsideration, however, the FCC on
February 22, 1994 effectively tightened its regulatory treatment
of "a la carte" packages by establishing more elaborate criteria
designed to ensure that such practices are not employed so as to
unduly evade rate regulation. Now, when assessing the
appropriate regulatory treatment of "a la carte" packages, the
FCC will consider, inter alia, the following factors as possibly
suggesting that such packages do not qualify for non-regulated
treatment: whether the introduction of the package avoids a rate
reduction that otherwise would have been required under the FCC's
rules; whether an entire regulated tier has been eliminated and
turned into an "a la carte" package; whether a significant number
or percentage of the "a la carte" channels were removed from a
regulated service tier; whether the package price is deeply
discounted when compared to the price of an individual channel;
and whether the subscriber must pay significant equipment or
other charges to purchase an individual channel in the package.
In addition, the FCC will consider factors that will reflect in
favor of non-regulated treatment such as whether the channels in
the package have traditionally been offered on an "a la carte"
basis or whether the subscriber is able to select the channels
that comprise the "a la carte" package. "A la carte" packages
which are found to evade rate regulation rather than enhance
subscriber choice will be treated as regulated tiers, and
operators engaging in such practices may be subject to
forfeitures or other sanctions by the FCC.
In a separate action on February 22, 1994, the FCC adopted
interim rules to govern cost of service proceedings initiated by
cable operators. Operators who elect to pursue cost of service
proceedings will have their rates based on their allowable costs,
in a proceeding based on principles similar to those that govern
cost-based rate regulation of telephone companies. Under this
methodology, cable operators may recover, through the rates they
charge for regulated cable service, their normal operating
expenses and a reasonable return on investment. The FCC has, for
these purposes, established an interim industry-wide rate of
return of 11.25%. It has also determined that acquisition costs
above book value are presumptively excluded from the rate base.
At the same time, certain intangible, above-book costs, such as
start-up losses (limited to losses actually incurred during a two-
year start-up period) and the costs of obtaining franchise rights
and some start-up organizational costs such as customer lists,
may be allowed. There are no threshold requirements limiting the
cable systems eligible for a cost of service showing, except
that, once rates have been set pursuant to a cost of service
approach, cable operators may not file a new cost of service
showing to justify new rates for a period of two years. Finally,
the FCC notes that it will, in certain individual cases, consider
a special hardship showing (or the need for special rate relief)
where an operator demonstrates that the rates set by a cost of
service proceeding would constitute confiscation of investment
and that some higher rate would not represent exploitation of
customers. In considering whether to grant such a request, the
FCC emphasizes that, among other things, it would examine the
overall financial condition of the operator and whether there is
a realistic threat of termination of service.
Registrant is currently unable to assess the full impact of the
February 22, 1994 FCC action and the 1992 Cable Act upon its
business prospects or future financial results. However, the rate
reductions mandated by the FCC in May of 1993 have had, and will
most likely continue to have, a detrimental impact on the
revenues and profits of Registrant's cable television operations.
In addition, the rate reductions and limits on the pricing of a-
la-carte cable services proposed on February 22, 1994 are likely
to have a further detrimental impact on those revenues and
profits. Although the impact of the 1992 Cable Act and the
recent FCC actions cannot yet be ascertained precisely, once
fully implemented, certain aspects of the new law may have a
material negative impact on the financial condition, liquidity,
and value of Registrant.
In addition, Registrant is currently unable to determine the
impact of the February 22, 1994 FCC action and previous FCC
actions on its ability to sell the California Cable Systems or
the potential timing and value of such a sale. However, as
discussed below, the FCC actions have had, and will have, a
detrimental impact on the revenues and profits of the California
Cable systems.
Refer to Note 15 of "Item 8. Financial Statements and
Supplementary Data" for more information regarding the possible
sale of California Cable.
California Cable
As an example of the effects of the 1992 Cable Act, in complying
with the benchmark regulatory scheme without considering the
effect of any future potential cost-of-service showing,
Registrant's California Cable properties, on a franchise by
franchise basis, were required to reduce present combined basic
service rates (broadcast tier and satellite service tier)
effective September 1, 1993. In addition, pursuant to the 1992
Cable Act, revenue from secondary outlets and from remote control
units was eliminated or reduced significantly. Registrant took
certain actions to seek to defray some of the resulting revenue
declines, which among others included instituting charges for
converters, as permitted by the 1992 Cable Act, offering
programming services on an a-la-carte basis, which services are
not subject to rate regulation, and aggressively marketing
unregulated premium services to those subscribers benefiting from
decreased basic rates. Despite the institution of these actions
by the California Cable Systems, the May, 1993 rate regulations
enacted pursuant to the 1992 Cable Act have had a detrimental
impact on the revenues and profits of the California Cable
Systems. In addition, Registrant is currently unable to
determine whether its a-la-carte restructuring is in accordance
with the terms of the February 22, 1994 FCC action. The further
rate reduction mandated by the February 22, 1994 FCC action and
any limits imposed by such action on a-la-carte pricing will have
a further detrimental impact on those revenues and profits.
By the October 6 deadline (noted above), Registrant's California
Cable systems had reached agreement with all broadcast stations
within their service areas electing retransmission consent. In
some cases, these agreements obligate the Systems to carry
additional programming services affiliated with the broadcast
stations. The costs of these additional program services will
not be material to the operations of the Systems.
Registrant's May 15, 1990 loan agreement for California Cable
(the "Revised ML California Credit Agreement") was structured as
a revolving credit facility through September 30, 1992, at which
time all outstanding borrowings under the facility converted to a
term loan that is scheduled to fully amortize by September 30,
1999, with additional borrowing ability under the revolving
credit facility being terminated. As of December 31, 1993,
$141,375,000 was outstanding under the Revised ML California
Credit Agreement. As of December 31, 1993, Registrant was in
compliance with all covenants under the Revised ML California
Credit Agreement. However, particularly in light of the February
22, 1994 FCC action, it is likely that Registrant will experience
covenant defaults under the Revised ML California Credit
Agreement during 1994. Proceeds from the Revised ML California
Credit Agreement are restricted to the use of the California
Media operations and are generally not available for the working
capital needs of Registrant.
Refer to Note 15 of "Item 8. Financial Statements and
Supplementary Data" for further information regarding California
Cable.
The recent earthquakes in the Los Angeles Southern California
region did not materially affect Registrant's California Cable
plant.
C-ML Cable
On September 30, 1993, C-ML Cable entered into an amendment to
the C-ML Revolving Credit Agreement whereby the Termination Date
(the date upon which all revolving credit borrowings outstanding
under the C-ML Revolving Credit Agreement are converted into a
term loan) was extended from September 30, 1993 to December 15,
1993. Effective December 15, 1993, C-ML Cable entered into a
second amendment to the C-ML Revolving Credit Agreement whereby
the debt facility was converted into a reducing revolving credit
facility with a final maturity of December 31, 1998. Beginning
December 31, 1993, the amount of borrowing availability under the
C-ML Revolving Credit Agreement is reduced quarterly each year.
Outstanding amounts under the debt facility may be prepaid at any
time subject to certain conditions. As of December 31, 1993,
there were no borrowings outstanding under the C-ML Revolving
Credit Agreement. (Refer to Note 6 of "Item 8. Financial
Statements and Supplementary Data" for further information).
Registrant is currently unable to ascertain fully the impact of
the February 22, 1994 FCC action and previous FCC actions on the
Puerto Rico Systems. While the impact of a September 1, 1993
rate and tier restructuring to comply with the 1992 Cable Act did
not have a significant negative impact on the revenues and
profits of C-ML Cable, it is likely that the February 22, 1994
FCC action will have a detrimental impact on the revenues and
profits of the Puerto Rico Systems. Registrant does not expect
that this detrimental impact will result in any defaults under
the C-ML Notes or the C-ML Revolving Credit Agreement during
1994.
WREX-KATC
During 1989, Registrant entered into the $27.1 million WREX-KATC
Loan with Manufacturers Hanover Trust Company ("MHT") to combine,
replace and refinance both the KATC Loan with MHT and the WREX
Loan with MHT. As of December 31, 1993, the outstanding
principal balance under the WREX-KATC Loan amounted to
approximately $23.5 million.
During 1993 and 1992, Registrant defaulted on the quarterly
principal payments due in respect of its WREX-KATC Loan. As of
December 31, 1993, WREX-KATC was in default of $2,967,873 in
principal, after giving effect to $782,127 in principal payments
made during 1993 from cash generated by the operations of WREX
and KATC. Registrant is not in default of any interest payments
under the WREX-KATC Loan. In addition, as of December 28, 1990
and continuing through December 31, 1993, Registrant was in
default of financial covenants under its WREX-KATC Loan. The
lender granted waivers for the defaults as of December 28, 1990.
However, the lender has not granted waivers for the 1991, 1992 or
1993 defaults. As required by the terms of the WREX-KATC Loan,
Registrant advanced an additional $10,000 of its working capital
to WREX and KATC in April, 1993; bringing the total of such
required advances made to $1.0 million. Registrant expects to
experience future payment and covenant defaults under the WREX-
KATC Loan, and is seeking to restructure the WREX-KATC Loan.
Registrant has engaged The Blackstone Group as its restructuring
advisor, to be utilized when deemed necessary, in Registrant's
efforts to restructure the WREX-KATC Loan with the lender. The
outcome of Registrant's restructuring efforts cannot be predicted
at this time, but Registrant does not intend to, nor is it
obligated to, advance any further working capital to WREX and
KATC, although it may possibly choose to in the context of a
successful restructuring of the WREX-KATC Loan. The lender has
informed Registrant that it reserves all of its rights and
remedies under the WREX-KATC Loan agreement, including the right
to accelerate the maturity of the indebtedness under the WREX-
KATC Loan and to foreclose on, or otherwise force a sale of, the
assets of WREX and KATC (but not the other assets of Registrant).
Borrowings under the WREX-KATC Loan are nonrecourse to
Registrant.
As of December 31, 1993, KATC and WREX represented approximately
9% of the consolidated assets of the Partnership and
approximately 10% of the consolidated operating revenue.
Wincom-WEBE-WICC
On July 30, 1993, Registrant and Chemical Bank executed an
amendment to the Wincom-WEBE-WICC Loan (the "Restructuring
Agreement") effective January 1, 1993, which cured all previously
outstanding defaults pursuant to the Wincom-WEBE-WICC Loan.
Refer to Note 6 of "Item 8. Financial Statements and
supplementary Data" for further information regarding the Wincom-
WEBE-WICC Loan and the Restructuring Agreement.
Summary
Registrant's ongoing cash needs will be to fund debt service,
capital expenditures and working capital needs. During 1993,
cash interest paid was $17,246,267, and principal repayments of
$14,874,901 were made. During 1993, Registrant did not comply
with scheduled principal payments under its WREX-KATC Loan.
During 1994, Registrant is required by its various debt
agreements to make scheduled principal repayments of $15,337,500,
(as well as the past due principal of $2,967,873 under the WREX-
KATC Loan), under all of its debt agreements, unless the WREX-
KATC Loan is accelerated as a result of the aforementioned
defaults, which would require that the additional $17,750,000
principal outstanding under the WREX-KATC Loan be repaid in full
in 1994.
Based upon a review of the current financial performance of
Registrant's investments, Registrant continues to monitor its
unrestricted working capital level. To the extent that
Registrant determines that it must maintain or increase its
unrestricted working capital level it may take certain actions,
which actions may include the continuing deferral of certain
general partner management fees and the continuing deferral of
certain general partner reimbursements of out-of-pocket expenses
and the sale of certain assets. Registrant does not have
sufficient cash to meet all of the contractual debt obligations
of all of its investments nor is it obligated to do so. As
discussed above, Registrant does not currently expect to advance
working capital to WREX and KATC, although it may possibly choose
to in the context of a successful restructuring.
Current and future maturities under Registrant's existing credit
facilities are described in Note 6 of "Item 8. Financial
Statements and Supplementary Data".
Results of Operations
1993 vs. 1992
During 1993 and 1992, Registrant had total operating revenues of
approximately $100.0 million and $100.4 million, respectively.
The approximate $0.4 million decrease was primarily due to
decreases in the cable television group, including a decrease of
$4.7 million attributable to the sale of Universal on July 8,
1992, offset partially by increases of approximately $2.1 million
at California Cable and approximately $1.8 million at C-ML Cable.
The increase in revenue at California Cable resulted generally
from a higher level of average basic subscribers, modest rate
increases and higher advertising and home shopping revenues,
offset partially by lower premium revenues, while the increase in
revenue at C-ML Cable resulted primarily from a higher average
level of basic subscribers and higher average revenue per
subscriber (due to a rate restructuring to comply with re-
regulation), as well as to increased advertising revenue. The
increase in revenues at California Cable would have been higher
in the absence of the rate reductions mandated by the FCC.
Despite the higher level of average basic subscribers at
California Cable, the number of basic subscribers decreased from
132,380 at the end of 1992 to 131,830 at the end of 1993 due to
weakness in the local economy as well as to negative consumer
reaction to both a modest rate increase in the northern
California systems and the restructuring of rates following re-
regulation. In addition, despite the higher level of average
basic subscribers at C-ML Cable, the number of basic subscribers
decreased from 105,968 at the end of 1992 to 104,677 at the end
of 1993 due in part to negative consumer reaction to both a
modest rate increase and the restructuring of rates following re-
regulation. The number of premium subscribers continued to
decrease from 79,334 at the end of 1992 to 73,625 at the end of
1993 at California Cable, due to weakness in the local economy as
well as continuing industry-wide softness in subscriber demand
for premium services and the decline in basic subscribers.
Similar factors caused a decline in premium subscribers at the C-
ML Cable systems from 77,037 at the end of 1992 to 69,319 at the
end of 1993. Registrant anticipates that as a result of the
weakness in the California economy, there will be continued
pressure on the levels of both basic subscribers and premium
subscribers during 1994.
Television stations KATC and WREX reported a combined increase of
approximately $0.3 million in revenue as a result of stronger
local revenues, particularly at KATC, partially offset by lower
political revenues which did not recur in 1993. The Wincom-WEBE-
WICC radio group reported a net increase of approximately $0.3
million, as increased advertising revenues at WICC, WQAL and WEBE
offset approximately $1.0 million in revenues lost due to the
sale of the Indianapolis Stations at the beginning of the fourth
quarter of 1993 and the discontinuation of the Indiana University
Sports Radio Network after the second quarter of 1992. The
remaining increases or decreases in total operating revenue at
Registrant's other properties were immaterial, either
individually or in the aggregate.
During 1993 and 1992, Registrant incurred property operating
expenses of approximately $33.8 million and $36.3 million,
respectively, in connection with the operation of its cable,
radio and television properties. Registrant's total property
operating expenses decreased by approximately $2.5 million from
year to year as a result of: a $1.5 million decrease attributable
to the 1992 sale of Universal; a $1.1 million decrease at the
Wincom-WEBE-WICC radio group attributable primarily to the sale
of the Indianapolis Stations at the beginning of the fourth
quarter of 1993 and the discontinuation of the Indiana University
Sports Radio Network after the second quarter of 1992; and a $0.4
million decrease at KORG/KEZY due primarily to a non-recurring
write-off of uncollectible accounts receivable in the first half
of 1992 as well as to lower sales commissions and promotion and
engineering expenses; a net decrease at C-ML Cable of $0.4
million, due to a reversal of approximately $1.0 million related
to property taxes (Refer to Note 14 of "Item 8. Financial
Statements and Supplementary Data" for further information
regarding property taxes) partially offset by an increase of $0.6
million due primarily to an increase in variable costs, such as
programming costs, resulting from the increase in operating
revenues; partially offset by a $0.8 million increase at
California Cable due to increased basic programming costs
resulting from the higher level of average basic subscribers and
generally higher programming costs, as well as increased
marketing expenses; and an increase of $0.2 million at television
stations KATC and WREX, due primarily to the expansion of the
news operations at both stations.
During 1993 and 1992, Registrant incurred general and
administrative expenses of approximately $20.0 million and $22.7
million, respectively. Registrant's total general and
administrative expenses decreased by approximately $2.7 million
from year to year as a result of: a decrease of $1.2 million due
to the 1992 sale of Universal; a decrease of $0.3 million at the
Wincom-WEBE-WICC radio group due primarily to the sale of the
Indianapolis Stations at the beginning of the fourth quarter of
1993; and a net decrease at California Cable of $1.3 million
primarily due to a favorable decision regarding property tax
assessments which resulted in the reversal of approximately $2.2
million in property tax assessments (Refer to Note 14 of "Item 8.
Financial Statements and Supplementary Data" for further
information regarding property taxes) partially offset by a $0.9
million increase due to increased costs of benefits, general and
health insurance, and bad debt expense. The remaining increases
or decreases in general and administrative expenses at
Registrant's other properties were immaterial, either
individually or in the aggregate.
Registrant earned interest income of approximately $0.6 million
and $0.2 million during 1993 and 1992, respectively. The
increase in interest income is due to a substantially higher
level of working capital at California Cable and C-ML Cable
during 1993 as compared to 1992, partially offset by lower market
interest rates in 1993 than in 1992.
Interest expense of approximately $17.5 million and $23.4 million
in 1993 and 1992, respectively, represents the cost incurred for
borrowed funds utilized to acquire various media properties. The
approximately $5.9 million decrease in interest expense is due
to:(1) the expiration of unfavorable interest rate hedge
agreements pursuant to, and lower average outstanding borrowings
under, the Revised ML California Cable Credit Agreement, ($4.0
million);(2) the sale of Universal in July 1992 ($2.7
million);(3) the expiration of unfavorable interest rate hedge
agreements pursuant to, and lower average outstanding borrowings
under, the WREX-KATC Loan ($0.5 million); and (4) reduced rates
under the Wincom-WEBE-WICC Restructuring Agreement ($0.6
million); partially offset by increased interest expense at C-ML
Cable due to higher interest rates under the fixed rate C-ML
Notes compared to the floating rates under the original C-ML
Credit Agreement ($1.7 million).
Registrant's depreciation and amortization expense totalled
approximately $31.4 million and $31.5 million in 1993 and 1992,
respectively. This $0.1 million decrease resulted primarily
from: a $1.8 million decline attributable to the 1992 sale of
Universal; and a $0.2 million decrease at the Wincom-WEBE-WICC
radio group due to the sale of the Indianapolis Stations at the
beginning of the fourth quarter of 1993; partially offset by a
$1.7 million increase at California Cable and a $0.3 million
increase at C-ML Cable attributable to greater depreciation
expense associated with capital expenditures. The remaining
increases or decreases in depreciation and amortization expense
at Registrant's other properties were immaterial, either
individually or in the aggregate.
1992 vs. 1991
During 1992 and 1991, Registrant had total operating revenues of
approximately $100.4 million and $99.2 million, respectively.
Revenues in 1992 included approximately one-half year of
Universal Cable's revenues as a result of its sale on July 8,
1992.
Total operating revenue earned during 1992 increased by
approximately $1.3 million over total operating revenue earned
during 1991. This increase is attributable primarily to
increases of approximately: $4.3 million at California Cable, due
primarily to a moderate rate increase, an increase in the number
of basic customers, and higher advertising revenue; $0.9 million
at C-ML Cable, due primarily to a moderate rate increase and an
increase in the number of basic customers; and $0.4 million at
WREX-TV, due primarily to increased revenues derived from
political advertising expenditures during the 1992 election year.
These increases were offset by decreases of approximately: $3.8
million at Universal due to the sale of the Universal cable
systems on July 8, 1992; $0.4 million at KATC-TV due primarily to
weakness in local advertising in the Lafayette, Louisiana market
served by the station; and $0.1 million at Wincom, due primarily
to reduced revenues in the fourth quarter resulting from a change
in the formats of the Indianapolis radio stations in the second
half of 1992.
During 1992 and 1991, Registrant incurred property operating
expenses of approximately $36.3 million and $37.7 million,
respectively, in connection with the operations of its radio,
television and cable properties. Property operating expenses
incurred in 1992 decreased by approximately $1.4 million compared
to property operating expenses incurred in 1991. This decrease
is attributable primarily to decreases of approximately: $1.3
million at Universal due to the sale of the Universal cable
systems on July 8, 1992; $0.7 million at Wincom due primarily to
cost reduction measures (including staff reductions and reduced
promotional expense), principally at the Indianapolis radio
stations; and $0.2 million at radio stations KORG/KEZY due
primarily to charges in the third and fourth quarters of 1991
(and less significantly in the first quarter of 1992) related to
bad debt expense. These decreases were partially offset by
increases of approximately: $0.6 million at California Cable, due
primarily to higher programming costs attributable to wholesale
cost increases; $0.3 million at WREX-TV, due primarily to higher
selling and promotion expense associated with higher revenue, as
well as the purchase of certain new programming beginning in the
Summer and Fall of 1992; and $0.2 million at KATC-TV, due
primarily to a non-recurring non-cash charge for copyright
expense. Increases or decreases in property operating expenses
at Registrant's other properties were immaterial, either
individually or in aggregate.
Registrant earned interest income of approximately $0.2 million
and $0.3 million during 1992 and 1991, respectively, which was
earned primarily on unexpended Registrant funds. From 1991 to
1992, interest income decreased due to declining interest rates.
Interest expense of approximately $23.4 million and $30.7
million, incurred in 1992 and 1991, respectively, represents the
cost incurred for borrowed funds utilized to acquire various
media properties. The decrease in interest expense from 1991 to
1992 of approximately $7.3 million is due primarily to: the
expiration of interest rate hedge agreements under the C-ML
Credit Agreement, WREX-KATC Loan and Wincom-WEBE-WICC Loan; the
sale of the Universal cable systems on July 8, 1992 (which sale
resulted in the discharge of all indebtedness under the Universal
Credit Agreement); and generally lower market interest rates in
1992 compared to 1991.
Registrant incurred various non-cash charges resulting from the
depreciation and amortization of plant, property and equipment,
franchise rights, goodwill, other intangible assets, and certain
deferred costs and prepaid expenses. Depreciation and
amortization expense of approximately $31.5 million and $37.0
million were incurred in 1992 and 1991, respectively.
The net decrease in depreciation and amortization from 1991 to
1992 of approximately $5.5 million was due primarily to net
decreases of approximately: $2.0 million at Wincom, due primarily
to a write-off of intangible assets (principally goodwill) during
1991, which resulted in a lower amortizable basis in 1992; $1.5
million at Universal, due to the sale of the Universal cable
systems on July 8, 1992; $1.4 million at Registrant primarily due
to fully amortized finance fees at the end of 1991 and the first
half of 1992 which resulted in a lower amortizable basis in 1992;
$0.5 million at California Cable, due primarily to lower
amortization due to fully amortized franchise rights of certain
franchises, offset slightly by increased depreciation due to
capital expenditures; and $0.2 million at radio stations KORG and
KEZY, due primarily to full amortization during 1991 of certain
intangibles related to the original acquisition. Increases or
decreases in depreciation and amortization at Registrant's other
properties were immaterial, either individually or in aggregate.
During 1992 and 1991, Registrant incurred general and
administrative expenses of approximately $22.7 million and $21.7
million, respectively in connection with the operations of its
radio, television and cable properties. General and
administration expenses incurred by Registrant in 1992 increased
by approximately $1.0 million compared to general and
administrative expenses incurred by Registrant in 1991. The
primary components of this increase were increases of
approximately: $1.1 million at California Cable, due primarily to
higher insurance costs and property taxes; $0.8 million at
Registrant, resulting principally from adjustments of accruals
based on estimates to actual amounts incurred; and $0.4 million
at radio stations WEBE and WICC, due primarily to a non-recurring
adjustment to rental expense in 1992 with respect to the
stations' jointly leased office space. These increases were
partially offset by decreases of approximately: $0.9 million at
Universal, due to the sale of the Universal cable systems on July
8, 1992; $0.3 million at radio stations KORG and KEZY, due
primarily to a write-off in 1991 of certain barter accounts
receivable and $0.2 million at Wincom, due to general expense
reduction measures. Increases or decreases in general and
administrative expenses at Registrant's other properties were
immaterial, either individually or in the aggregate.
Statement of Financial Accounting Standards No. 112
In November 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 112, "Employers'
Accounting for Postemployment Benefits" ("SFAS No. 112"). This
pronouncement, effective in the first quarter of 1994,
establishes accounting standards for employers who provide
benefits to former or inactive employees after employment, but
before retirement. These benefits include, but are not limited
to, salary-continuation, disability related benefits including
workers' compensation, and continuation of health care and life
insurance benefits. The statement requires employers to accrue
the obligations associated with service rendered to date for
employee benefits accumulated or vested where payment is probable
and can be reasonably estimated. The effect of adopting SFAS No.
112 will not be material on Registrant's financial condition and
results of operations.
Additional Operating Information
Registrant owned cable systems that passed 216,328 homes,
provided basic cable television service to 131,830 subscribers,
and accounted for 73,625 pay units as of December 31, 1993. In
addition, Registrant holds a 50% interest in the Venture, which
in turn, through C-ML Cable, passed 259,790 homes, provided basic
cable television service to 104,677 subscribers and accounted for
69,319 pay units as of December 31, 1993. The following table
shows the numbers of basic subscribers and pay units at each of
Registrant's wholly-owned cable investments and at C-ML at
December 27, 1991, December 25, 1992, and December 31, 1993:
December 27, December 25, December 31,
1991 1992 1993
Homes Passed
California Systems 208,356 213,586 216,328
Universal 38,808 0 0
Wholly-Owned 247,164 213,586 216,328
C-ML Cable 259,580 261,757 259,790
Basic Subscribers
California Systems 128,633 132,380 131,830
Universal 29,750 0 0
Wholly-Owned 158,383 132,380 131,830
C-ML Cable 103,101 105,968 104,677
Pay Units
California Systems 80,614 79,334 73,625
Universal 14,054 0 0
Wholly-Owned 94,668 79,334 73,625
C-ML Cable 78,903 77,037 69,319
Since December 27, 1991, Registrant has experienced an overall
increase at its California Cable Systems in the number of homes
passed. Homes passed growth has been attributable primarily to
extensions of existing cable plant. The increased basic
subscriber levels experienced in 1992 at the California Cable
Systems were due to the extension of cable plant to pass new
potential subscribers, marketing efforts, and broadly-defined
customer retention efforts including ongoing attention to
technical quality and customer service. However, the number of
basic subscribers decreased from December 25, 1992 to December
31, 1993, due to weakness in the local economy as well as to
negative consumer reaction to both a modest rate increase in the
northern California systems and the restructuring of rates
following regulation. In addition, the number of pay units in
Registrant's California Cable Systems decreased from December 27,
1991 to December 31, 1993, primarily as a result of a weak local
economy in southern California. An audit and update of C-ML
Cable's database of homes passed, resulted in a reduction in the
number of homes passed recorded by the Puerto Rico Systems from
the end of 1992 to the end of 1993. The overall number of homes
passed by the Puerto Rico Systems increased slightly from the end
of 1991 to the end of 1992. The Puerto Rico Systems experienced
an increase in the number of basic subscribers from 1991 to 1992.
This is due to the extension of cable service to pass additional
homes, as well as to an increased level of marketing during 1992.
The Puerto Rico Systems experienced a decrease in the number of
basic subscribers from 1992 to 1993 primarily due to the loss of
basic subscribers following the repackaging of the C-ML Cable
Systems' rate structure in the third quarter of 1993 due to re-
regulation of the cable industry. The number of pay units at the
Puerto Rico Systems declined sharply from December 27, 1991 to
December 31, 1993, primarily due to continuing industry-wide
softness in subscriber demand for premium services and the lack
of intense promotional campaigns in 1993.
Basic penetration was 60.9% and the pay-to-basic ratio 55.8% in
Registrant's wholly-owned systems as of December 31, 1993. By
comparison, industry sources estimate that the national average
basic penetration rate was 63.0% and the national average pay-to-
basic ratio was 73.0% as of December 31, 1993. The pay-to-basic
ratio in Registrant's wholly-owned systems is lower than the
industry average because most of Registrant's basic subscribers
are located in areas where off-air reception of television
signals is poor so customers subscribe largely for reception
purposes, having lesser interest in premium services. Basic
penetration was 40.3% and the pay-to-basic ratio 66.2% in the
Puerto Rico Systems as of December 31, 1993. Average figures for
Puerto Rico are not available from a reliable source.
As of December 31, 1993, Registrant operated two television
stations in United States cities and seven radio stations in four
cities in the United States and in San Juan, Puerto Rico. Each
of Registrant's broadcast properties competes with numerous other
outlets in its area, with the number of competing outlets varying
from location to location. Stations are rated in each market
versus competitors based on the number of viewers or listeners
tuned to the various outlets in that market.
The information below briefly describes, for each station owned
by Registrant, the number of competitors that each station faces
in its market and the station's ranking in that market, where
applicable.
Registrant's television station WREX-TV in Rockford, Illinois
competes with three other television stations in the Rockford
market according to Nielsen, an accepted industry source.
According to Nielsen, the station was ranked number two in the
market on a weekly sign-on to sign-off basis as of the industry-
standard measurement period ending November, 1993.
Registrant's television station KATC-TV in Lafayette, Louisiana
competes with two other television stations in the Lafayette
market according to Nielsen. According to Nielsen, the station
was ranked number two in the market on a weekly sign-on to sign-
off basis as of the industry-standard measurement period ending
November, 1993.
Registrant's radio station WQAL-FM in Cleveland, Ohio competes
with 25 other radio stations in the Cleveland market according to
Arbitron, an accepted industry source. According to Arbitron,
the station was ranked number seven in the market in terms of
listeners 12+ as of the Fall, 1993 rating period.
Registrant's radio stations WEBE-FM and WICC-AM in Fairfield
County, Connecticut compete with 45 other radio stations in the
Fairfield County market according to Arbitron. According to
Arbitron, WEBE-FM was ranked number two in Fairfield County and
WICC-AM was ranked number one in Bridgeport, Connecticut in terms
of listeners 12+ as of the Fall, 1993 rating period.
Market rating information was not available from a reliable
source for Registrant's radio stations in San Juan, Puerto Rico.
While reliable data is available from Arbitron for Registrant's
radio stations in Anaheim, California, this information is not
available to Registrant, as it does not subscribe to Arbitron or
any other ratings service in the Anaheim market.
The above information on competition and ratings for Registrant's
broadcast properties may give a distorted view of the success of,
or competitive challenges to, each of the properties for a number
of reasons. For example, the signals of stations listed as
competitors may not be of equal strength throughout the market.
In addition, the competitive threat posed by stations that serve
essentially the same broadcast area is largely dependent upon
factors (e.g., financial strength, format, programming,
management, etc.) unknown to or outside the control of
Registrant. Finally, rating information is segmented according
to numerous demographic groups (e.g., listeners 12 +, women 25-
34, etc.), some of which are considered more attractive than
others by advertisers. Consequently, a station can be ranked
highly for one group but not another, with strength in different
groups having substantially different impacts on financial
performance. For purposes of the discussion above, the most
general type of rating was used.
Item 8. Financial Statements and Supplementary Data
TABLE OF CONTENTS
Page
ML Media Partners, L.P.
Independent Auditors' Report 68-69
Consolidated Balance Sheets as of December 31, 1993 and
December 25, 1992 70-71
Consolidated Statements of Operations for the years ended
December 31, 1993, December 25, 1992 and December 27, 1991
72-73
Consolidated Statements of Cash Flows for the years ended
December 31, 1993, December 25, 1992 and December 27, 1991
74-76
Consolidated Statements of Changes in Partners' Capital
(Deficit) for the years ended December 31, 1993, December
25, 1992 and December 27, 1991 77
Notes to the Consolidated Financial Statements for the
years ended December 31, 1993, December 25, 1992 and
December 27, 1991 78-115
Schedule III - Condensed Financial Information of
Registrant as of December 31, 1993, December 25, 1992 and
December 27, 1991 116-122
Schedule V - Property, Plant and Equipment as of December
31, 1993, December 25, 1992 and December 27, 1991 123
Schedule VI - Accumulated Depreciation of Property, Plant
and Equipment as of December 31, 1993, December 25, 1992
and December 27, 1991 124
Schedule VIII - Accumulated Amortization of Intangible
Assets and Accumulated Amortization of Prepaid Expenses
and Deferred Charges as of December 31, 1993, December 25,
1992 and December 27, 1991 125
Schedule X - Supplementary Income Statement Information
for the years ended December 31, 1993, December 25, 1992
and December 27, 1991 126
Schedules not listed are omitted because of the absence of the
conditions under which they are required or because the
information is included in the financial statements or the notes
thereto.
INDEPENDENT AUDITORS' REPORT
ML Media Partners, L.P.:
We have audited the accompanying consolidated financial
statements and the related financial statement schedules of ML
Media Partners, L.P. (the "Partnership") and its affiliated
entities, listed in the accompanying table of contents. These
financial statements and financial statement schedules are the
responsibility of the Partnership's general partner. Our
responsibility is to express an opinion on the financial
statements and financial statement schedules 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 the general partner, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of the
Partnership and its affiliated entities at December 31, 1993 and
December 25, 1992 and the results of their operations and their
cash flows for each of the three years in the period ended
December 31, 1993 in conformity with generally accepted
accounting principles. Also, in our opinion, such financial
statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present
fairly in all material respects the information set forth
therein.
As emphasized in Note 2 to the consolidated financial statements,
the Partnership was in default under one of its loan agreements
as of December 31, 1993. If the Partnership is unable to
restructure or amend this loan agreement, the Partnership will be
unable to satisfy its ongoing debt obligations under the
agreement. As a result, the lenders could accelerate payment of
the debt under the loan agreement and foreclose on the assets
that collateralize that debt. The ultimate outcome of the
Partnership's attempt to restructure this debt obligation cannot
presently be determined. Accordingly, no adjustment that may
result from the outcome of this matter has been made in the
accompanying consolidated financial statements.
As emphasized in Note 2 to the consolidated financial statements,
the recent Federal legislation concerning the regulation of the
cable television industry may have a detrimental impact on the
financial condition, liquidity and value of the Partnership's
cable systems and it is likely that the Partnership will
experience covenant defaults under a cable system debt agreement.
The cable operations have total assets and operating revenues
comprising 76 percent and 75 percent, respectively, of the
Partnership's consolidated assets and operating revenues in the
accompanying 1993 consolidated financial statements. The
ultimate impact of such regulation cannot presently be
determined. Accordingly, no adjustment that may result from the
outcome of this matter has been made in the accompanying
consolidated financial statements.
DELOITTE & TOUCHE
New York, New York
March 22, 1994
ML MEDIA PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1993 AND DECEMBER 25, 1992
Notes 1993 1992
ASSETS:
Cash and cash equivalents 1,2 $26,916,477 $19,930,098
Accounts receivable (net
of allowance for doubtful
accounts of $677,188 at
December 31, 1993 and
$538,888 at December 25,
1992) 14 9,286,116 6,879,831
Prepaid expenses and
deferred charges (net of
accumulated amortization
of $7,241,088 at December
31, 1993, and $6,601,766
at December 25, 1992) 1 4,399,276 3,610,935
Property, plant and
equipment(net of
accumulated depreciation
of $104,955,637 at
December 31, 1993 and
$91,378,707 at December
25, 1992) 1,2,4 92,400,494 103,758,253
Intangible assets (net
of accumulated
amortization of
$111,069,407 at December
31, 1993 and $112,996,421
at December 25, 1992) 1,2,5 111,146,204 121,986,627
Other assets 6,10 5,703,370 5,388,698
TOTAL ASSETS 6 $249,851,937 $261,554,442
LIABILITIES AND PARTNERS'
DEFICIT:
Liabilities:
Borrowings 2,6,11 $232,568,349 $245,994,745
Accounts payable and
accrued liabilities 7 29,989,412 29,815,516
Subscriber advance payments 2,102,082 1,929,427
Total Liabilities 264,659,843 277,739,688
Commitments and
Contingencies 8,14
(Continued on the following page)
ML MEDIA PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1993 AND DECEMBER 25, 1992
(continued)
Notes 1993 1992
Partners' Deficit:
General Partner:
Capital contributions, net
of offering expenses 1 1,708,299 1,708,299
Cumulative loss (1,793,460) (1,807,233)
(85,161) (98,934)
Limited Partners:
Capital contributions, net
of offering expenses
(187,994 Units of Limited
Partnership Interest) 1 169,121,150 169,121,150
Tax allowance cash
distribution (6,291,459) (6,291,459)
Cumulative loss (177,552,436) (178,916,003)
(14,722,745) (16,086,312)
Total Partners' Deficit (14,807,906) (16,185,246)
TOTAL LIABILITIES AND
PARTNERS' DEFICIT $ 249,851,937 $ 261,554,442
See Notes to Consolidated Financial Statements.
ML MEDIA PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, DECEMBER 25, 1992
AND DECEMBER 27, 1991
Notes 1993 1992 1991
REVENUES:
Operating revenue 1 $ 99,990,757 $100,443,967 $ 99,185,423
Interest 558,380 158,738 273,704
Gain on sale of
assets 3 4,988,390 - -
Total revenues 105,537,527 100,602,705 99,459,127
COSTS AND EXPENSES:
Property operating 14 33,764,437 36,301,114 37,652,907
General and
administrative 7,8,1 20,003,401 22,703,107 21,708,878
4
Depreciation and
amortization 1,4,5 31,419,885 31,516,609 36,975,908
Interest expense 6 17,500,965 23,437,581 30,701,430
Management fees 7 1,591,831 1,629,882 1,667,934
Other 179,455 190,182 195,203
Loss on sale of
Universal 3 - 6,399,000 -
Loss on write-down
of Wincom 5 - - 21,606,418
Total costs and
expenses 104,459,974 122,177,475 150,508,678
Income (loss)
before provision
for income taxes
and extraordinary
item 1,077,553 (21,574,770) (51,049,551)
Provision for
income taxes-
Wincom 1,12 190,000 - -
Income (loss)
before
extraordinary
item 887,553 (21,574,770) (51,049,551)
Extraordinary item-
gain on extin-
guishment of debt 3 489,787 12,294,000 -
NET INCOME (LOSS) $ 1,377,340 $ (9,280,770) $(51,049,551)
(Continued on the following page)
ML MEDIA PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, DECEMBER 25, 1992
AND DECEMBER 27, 1991
(continued)
Notes 1993 1992 1991
Per Unit of
Limited
Partnership
Interest:
Income (loss)
before
extraordinary
item $ 4.67 $ (113.61) $ (268.83)
Extraordinary item 2.58 64.74 -
NET INCOME (LOSS) $ 7.25 $ (48.87) (268.83)
Number of Units 187,994 187,994 187,994
See Notes to Consolidated Financial Statements.
ML MEDIA PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, DECEMBER 25, 1992
AND DECEMBER 27, 1991
1993 1992 1991
Cash flows from operating
activities:
Net income (loss) $ 1,377,340 $ (9,280,770 $(51,049,551
) )
Adjustments to reconcile
net income (loss) to net
cash provided by
operating activities:
Depreciation and
amortization 31,419,885 31,516,609 36,975,908
Bad debt expense 327,194 292,141 372,304
Equity in earnings of
joint venture (143,582) (26,028) (3,724)
Loss on sale of Universal - 6,399,000 -
Gain on extinguishment of
debt (489,787) (12,294,000 -
)
Loss on write-down of
Wincom - - 21,606,418
Gain on sale of assets (4,988,390) - -
Change in operating assets
and liabilities:
Decrease/(increase) in
accounts receivable (2,733,479) 446,295 1,851,467
Decrease/(increase)in
prepaid expenses and
deferred charges (1,471,007) 4,588 (799,284)
Decrease/(increase) in
other assets (171,090) 219,336 209,082
Increase in accounts
payable and accrued
liabilities 193,632 611,859 5,135,167
Increase in subscriber
advance payments 172,655 91,062 56,189
Net cash provided by
operating activities 23,493,371 17,980,092 14,353,976
(Continued on the following page)
ML MEDIA PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, DECEMBER 25, 1992
AND DECEMBER 27, 1991
(continued)
1993 1992 1991
Cash flows from investing
activities:
Proceeds from sale of
assets 7,447,854 - -
Purchase of property,
plant and equipment (10,205,727 (10,044,019) (12,856,086)
)
Intangible assets (322,723 (335,581) (115,202)
)
Net cash used in investing
activities ( 3,080,596 (10,379,600) (12,971,288)
)
Cash flows from financing
activities:
Principal payments on bank
loans (14,874,901) (9,125,974) (15,321,250)
Proceeds from borrowings 1,448,505 11,279,969 14,713,750
Net cash (used in)
provided (13,426,396) 2,153,995 (607,500)
by financing activities
Net increase in cash and
cash equivalents 6,986,379 9,754,487 775,188
Cash and cash equivalents
at the beginning of year 19,930,098 10,175,611 9,400,423
Cash and cash equivalents
at end of year $26,916,477 $19,930,098 $ 10,175,611
Cash paid for interest $17,246,267 $21,070,472 $ 26,803,211
Supplemental Disclosure of Non-Cash Investing and Financing
Activities:
Borrowings and related liabilities of approximately $43,400,000
were fully discharged related to the disposition of the Universal
Cable Systems as of December 25, 1992. See Note 3 for additional
information.
Property, plant and equipment of approximately $1,067,000,
$1,094,000 and $1,619,000 was acquired but not paid for as of
December 31, 1993, December 25, 1992 and December 27, 1991,
respectively.
See Notes to Consolidated Financial Statements.
ML MEDIA PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1993, DECEMBER 25, 1992
AND DECEMBER 27, 1991
General Limited
Partner Partners Total
Balance, December 28, 1990 $ 504,370 $ 43,640,705 $ 44,145,075
1991:
Net Loss (510,496) (50,539,055) (51,049,551)
Partners' Deficit at
December 27, 1991 (6,126) (6,898,350) (6,904,476)
1992:
Net Loss (92,808) (9,187,962) (9,280,770)
Partners' Deficit at
December 25, 1992 (98,934) (16,086,312) (16,185,246)
1993:
Net Income 13,773 1,363,567 1,377,340
Partners' Deficit at
December 31, 1993 $ (85,161) $(14,722,745 $(14,807,906
) )
See Notes to Consolidated Financial Statements.
ML MEDIA PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1993, DECEMBER 25, 1992
AND DECEMBER 27, 1991
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ML Media Partners, L.P. (the "Partnership") was formed and the
Certificate of Limited Partnership was filed under the Delaware
Revised Uniform Limited Partnership Act on February 1, 1985.
Operations commenced on May 14, 1986 with the first closing of
the sale of units of limited partnership interest ("Units").
Subscriptions for an aggregate of 187,994 Units were accepted and
are now outstanding.
Media Management Partners (the "General Partner") is a joint
venture, organized as a general partnership under the laws of the
State of New York, between RP Media Management (a joint venture
organized as a general partnership under the laws of the State of
New York, consisting of The Elton H. Rule Company and IMP Media
Management, Inc.), and ML Media Management Inc., a Delaware
corporation and an indirect wholly-owned subsidiary of Merrill
Lynch & Co., Inc. The General Partner was formed for the purpose
of acting as general partner of the Partnership. The General
Partner's total capital contribution was $1,898,934 which
represents 1% of the total Partnership capital contributions.
Pursuant to the terms of the Amended and Restated Agreement of
Limited Partnership (the "Partnership Agreement"), the General
Partner is liable for all general obligations of the Partnership
to the extent not paid by the Partnership. The limited partners
are not liable for the obligations of the Partnership in excess
of the amount of their contributed capital.
The purpose of the Partnership is to acquire, finance, hold,
develop, improve, maintain, operate, lease, sell, exchange,
dispose of and otherwise invest in and deal with media businesses
and direct and indirect interests therein. As of December 31,
1993, the Partnership's investments consisted of a 50% interest
in Century - ML Cable Venture (the "Venture"), which through its
wholly-owned subsidiary corporation, Century- ML Cable
Corporation("C-ML Cable") operates two cable television systems
in Puerto Rico (the "Puerto Rico Systems"); four cable television
systems in California ("California Cable" or the "California
Systems"); two VHF television stations (KATC located in
Lafayette, Louisiana and WREX located in Rockford, Illinois); an
FM (WEBE-FM) and AM (WICC-AM) radio station combination in
Bridgeport, Connecticut; an FM and AM radio station combination
in Anaheim, California (KEZY-FM and KORG-AM, respectively);
Wincom Broadcasting Corporation ("Wincom"), a corporation that
owns an FM radio station in Cleveland, Ohio (WQAL-FM); and a
49.999% interest in Century-ML Radio Venture ("C-ML Radio"),
which owns an FM and AM radio station combination (WFID-FM and
WUNO-AM, respectively) and background music service in San Juan,
Puerto Rico.
Basis of Accounting and Fiscal Year
The Partnership's records are maintained on the accrual basis of
accounting for financial reporting and tax purposes. Pursuant to
generally accepted accounting principles, the Partnership
recognizes revenue as various services are provided. The
Partnership consolidates its 100% interest in Wincom; its
99.999% interests in ML California Associates, KATC Associates,
WREX Associates, WEBE Associates, WICC Associates and Anaheim
Radio Associates; and its pro rata 50% interest in the C-ML Cable
Venture. The Partnership accounts for its 49.999% interest in C-
ML Radio under the equity method (see Note 10). The Partnership
also consolidated its 100% interest in Universal Cable Holdings,
Inc. ("Universal") prior to its sale in July, 1992. See Note 3
for information regarding the sale of Universal. All
intercompany accounts have been eliminated.
The fiscal year of the Partnership ends on the last Friday of
each calendar year.
Property and Depreciation
Property, plant and equipment is stated at cost, less accumulated
depreciation. Property, plant and equipment is depreciated using
the straight-line method over the following estimated useful
lives:
Machinery, Equipment and Distribution Systems 5-12 years
Buildings 15-30.5 years
Other 3-10 years
Initial subscriber connection costs, as it relates to the cable
television systems, are capitalized and included as part of the
distribution systems. Costs related to disconnects and reconnects
are expensed as incurred. Expenditures for maintenance and
repairs are also expensed as incurred. Betterments, replacement
equipment and additions are capitalized and depreciated over the
remaining life of the assets.
Intangible Assets and Deferred Charges
Intangible assets and deferred charges are being amortized on a
straight-line basis over various periods as follows:
Goodwill 40 years
Franchise life of the franchise
Other Intangibles various
Deferred Costs 4-10 years
The Partnership periodically evaluates the recoverability of
goodwill using consistent, objective methodologies. Such
methodologies may include recoverability from cash flows,
recoverability from operating income, recoverability from net
income or fair value determination.
Barter Transactions
As is customary in the broadcasting industry, the Partnership
engages in the bartering of commercial air time for various goods
and services. Barter transactions are recorded based on the fair
market value of the products and/or services received. The goods
and services are capitalized or expensed as appropriate when
received or utilized. Revenues are recognized when the
commercial spots are aired.
Broadcast Program Rights
The Partnership's television stations' broadcast program rights,
included in other assets, represent license agreements for the
right to broadcast programs which are available at the balance
sheet date. Amortization is recorded on a straight-line basis
over the period of the license agreements or upon run usage.
Revenue Recognition
Operating revenue, as it relates to the cable television systems,
includes earned subscriber service revenues and charges for
installation and connections. Subscriber services paid for in
advance are recorded as income when earned.
Income Taxes
No provision for income taxes has been made for the Partnership
because all income and losses are allocated to the partners for
inclusion in their respective tax returns. However, the
Partnership owns certain entities which are consolidated in the
accompanying financial statements and which are taxable.
Effective December 26, 1992 the Partnership adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS No. 109"). For certain entities owned by the
Partnership which are taxpayers, SFAS No. 109 requires the
recognition of deferred income taxes for the tax consequences of
differences between the bases of assets and liabilities for
income tax and financial statement reporting purposes, based on
enacted tax laws. Valuation allowances are established, when
necessary, to reduce deferred tax assets to the amount expected
to be realized. For the Partnership, SFAS No. 109 requires the
disclosure of the difference between the tax bases and the
reported amounts of the Partnership's assets and liabilities.
Statement of Financial Accounting Standards No. 112
In November 1992, Financial Accounting Standards Board issued
Statement on Financial Accounting Standards No. 112, "Employers'
Accounting for Postemployment Benefits" ("SFAS No. 112"). This
pronouncement, effective in 1994, establishes accounting
standards for employers who provide benefits to former or
inactive employees after employment, but before retirement.
These benefits include, but are not limited to, salary-
continuation, disability related benefits including workers'
compensation, and continuation of health care and life insurance
benefits. The statement requires employers to accrue the
obligations associated with service rendered to date for employee
benefits accumulated or vested where payment is probable and can
be reasonably estimated. The effect of adopting SFAS No. 112
will not be material on the Partnership's financial position and
results of operations.
Interest Rate Exchange Agreements
The differential to be paid or received on the interest rate
exchange agreements is accrued and recognized over the life of
the agreement.
The Partnership was exposed to credit loss in the event of non-
performance by the other parties to interest rate exchange
agreements in connection with the Revised ML California Credit
Agreement and the WREX-KATC Loan during 1992; however, these
interest rate exchange agreements expired during 1993.
Statements of Cash Flows
Short-term investments which have an original maturity of ninety
days or less are considered cash equivalents.
2. LIQUIDITY
The Partnership's ongoing cash needs will be to fund debt
service, capital expenditures and working capital needs.
As of December 31, 1993, the Partnership had $26,916,477 in cash
and cash equivalents, of which $22,479,254 was limited for use at
the operating level and the remaining $4,437,223 was the
Partnership's working capital.
As of December 25, 1992, the Partnership had $19,930,098 in cash
and cash equivalents, of which $15,677,696 was limited for use at
the operating level and the remaining $4,252,402 was the
Partnership's working capital.
The Partnership engaged Merrill Lynch & Co. and Daniels &
Associates in January, 1994 to act as its financial advisors in
connection with a possible sale of all or a portion of
Registrant's California Cable Systems.
There can be no assurances that the Partnership will be able to
enter into an agreement to sell the California Cable Systems on
terms acceptable to the Partnership or that any such sale will be
consummated. If a sale is consummated, it is expected that it
would be consummated no earlier than the second half of 1994.
Impact of Cable Legislation
The future liquidity of the Partnership's cable operations,
California Cable and C-ML Cable, is likely to be negatively
affected by recent and ongoing changes in legislation governing
the cable industry. The potential impact of such legislation on
the Partnership is described below.
On October 5, 1992, Congress overrode the President's veto of the
Cable Consumer Protection and Competition Act of 1992 (the "1992
Cable Act") which imposes significant new regulations on the
cable television industry. The 1992 Cable Act required the
development of detailed regulations and other guidelines by the
Federal Communications Commission ("FCC"), most of which have now
been adopted but remain subject to petitions for reconsideration
before the FCC and/or court appeals.
On May 3, 1993, the FCC released a Report and Order relating to
the regulation of rates for certain cable television programming
services and equipment. These rules establish certain benchmarks
which will enable local franchise authorities to require rates
for "basic service" (minimally, local broadcast and access
channels) and the FCC (upon receipt of individual complaints) to
require rates for certain satellite program services (excluding
premium channels) to fall approximately 10% from September 30,
1992 levels, unless the cable operator is already charging rates
that are at a so-called "competitive" benchmark level or it can
justify a higher rate based on a cost-of-service showing. Rates
of all regulated cable systems will then be subject to a price
cap that will govern the extent to which rates can be raised in
the future without a cost-of-service showing. Several other key
matters are still pending before the FCC that will ultimately
shape and complete this new regulatory framework for cable
industry rates. For example, in a complicated multi-faceted
document released on August 27, 1993, the FCC simultaneously: (1)
issued a First Order on Reconsideration of the foregoing May 3
rate order (confirming or clarifying certain benchmark rate
methodology issues); (2) adopted a Second Report and Order
(deciding to continue to include systems with less than 30%
penetration in the universe of systems whose rates were used to
establish benchmarks, a decision that, if unchanged, avoids a
potentially downward adjustment of the previously announced
benchmark rates); and (3) issued a Third Notice of Proposed
Rulemaking (addressing such "going forward" issues as how cable
rates should be modified when channels are added or deleted, how
costs incurred for rebuilds should be treated, and whether cable
operators should be required to use the same methodology to
determine rates for both basic and expanded basic tiers). In
addition, a separate yet related rulemaking proceeding was
initiated by the FCC on July 16, 1993 to establish the proposed
standards and certain other ground rules for cost-of-service
showings by cable operators seeking to justify cable rates in
excess of the FCC prescribed benchmark/price cap levels. While
continuing to express a strong preference for its benchmark
approach, the FCC's "Notice of Proposed Rulemaking" in this
proceeding outlines an alternative regulatory scheme that would
combine certain elements of traditional ratebase/rate of return
regulation with a more streamlined approach uniquely tailored to
the cable industry. Comments in response to both the Third
Notice of Proposed Rulemaking and the separate cost-of-service
rulemaking were received by the FCC on or before October 7, 1993.
In the meantime, the FCC's overall cable service rate regulation
rules took effect on September 1, 1993, and the industry-wide
freeze on rates for regulated cable service remains in effect
until May 15, 1994. Furthermore, by Order released September 17,
1993, the FCC initiated an industry-wide survey of cable rate
changes and service restructuring as of the starting date of its
rate freeze (April 5, 1993) and the effective date of rate
regulation (September 1, 1993) in order to gauge the early
effectiveness of its cable rate regulations. The results of this
survey, which could further impact rate regulation actions by the
FCC, were announced on February 22, 1994.
On February 22, 1994, the FCC adopted a series of additional
measures that expand and substantially alter its cable rate
regulations. Based on FCC news releases dated February 22, the
FCC's major actions include the following: (1) a modification of
its benchmark methodology in a way which will effectively require
cable rates to be reduced, on average, an additional 7% (i.e.,
beyond the 10% reduction previously ordered in 1993) from their
September 30, 1992 level, or to the new benchmark, whichever is
less; (2) the issuance of new standards and requirements to be
used in making cost-of-service showings by cable operators who
seek to justify rates above the levels determined by the
benchmark approach; and (3) the clarification and/or
reaffirmation of a number of "going forward" issues that had been
the subject of various petitions for reconsideration of its May
3, 1993 Rate Order. Several weeks earlier, and partly in
anticipation of these actions, the FCC extended its industry-wide
freeze on rates for regulated cable services until May 15, 1994.
It is expected that the new benchmark standards and cost-of-
service rules will become effective prior to the current
termination date of the rate freeze.
In addition to the rate reregulation described above, among other
things, the 1992 Cable Act provides that certain qualified local
television stations may require carriage by cable operators, or
elect to negotiate for payment of fees or other forms of
compensation by the cable operator to the stations in exchange
for allowing retransmission of their signals. The deadline for
making such elections was June 17, 1993. Negotiations between
cable operators and those television stations which elected to
pursue retransmission agreements were carried out between the
foregoing election date and October 6, 1993, the deadline under
the 1992 Cable Act for obtaining retransmission consent. If some
type of agreement (either final or interim pending further
negotiations) was not reached by October 6, 1993, cable operators
could have been forced to discontinue carriage of those
television stations which elected to pursue retransmission
consent (see below).
In its May 1993 Rate Order the FCC exempted from rate regulation
the price of packages of "a la carte" channels if certain
conditions were met. Upon reconsideration, however, the FCC on
February 22, 1994 effectively tightened its regulatory treatment
of "a la carte" packages by establishing more elaborate criteria
designed to ensure that such practices are not employed so as to
unduly evade rate regulation. Now, when assessing the
appropriate regulatory treatment of "a la carte" packages, the
FCC will consider, inter alia, the following factors as possibly
suggesting that such packages do not qualify for non-regulated
treatment: whether the introduction of the package avoids a rate
reduction that otherwise would have been required under the FCC's
rules; whether an entire regulated tier has been eliminated and
turned into an "a la carte" package; whether a significant number
or percentage of the "a la carte" channels were removed from a
regulated service tier; whether the package price is deeply
discounted when compared to the price of an individual channel;
and whether the subscriber must pay significant equipment or
other charges to purchase an individual channel in the package.
In addition, the FCC will consider factors that will reflect in
favor of non-regulated treatment such as whether the channels in
the package have traditionally been offered on an "a la carte"
basis or whether the subscriber is able to select the channels
that comprise the "a la carte" package. "A la carte" packages
which are found to evade rate regulation rather than enhance
subscriber choice will be treated as regulated tiers, and
operators engaging in such practices may be subject to
forfeitures or other sanctions by the FCC.
In a separate action on February 22, 1994, the FCC adopted
interim rules to govern cost of service proceedings initiated by
cable operators. Operators who elect to pursue cost of service
proceedings will have their rates based on their allowable costs,
in a proceeding based on principles similar to those that govern
cost-based rate regulation of telephone companies. Under this
methodology, cable operators may recover, through the rates they
charge for regulated cable service, their normal operating
expenses and a reasonable return on investment. The FCC has, for
these purposes, established an interim industry-wide rate of
return of 11.25%. It has also determined that acquisition costs
above book value are presumptively excluded from the rate base.
At the same time, certain intangible, above-book costs, such as
start-up losses (limited to losses actually incurred during a two-
year start-up period) and the costs of obtaining franchise rights
and some start-up organizational costs such as customer lists,
may be allowed. There are no threshold requirements limiting the
cable systems eligible for a cost of service showing, except
that, once rates have been set pursuant to a cost of service
approach, cable operators may not file a new cost of service
showing to justify new rates for a period of two years. Finally,
the FCC notes that it will, in certain individual cases, consider
a special hardship showing (or the need for special rate relief)
where an operator demonstrates that the rates set by a cost of
service proceeding would constitute confiscation of investment
and that some higher rate would not represent exploitation of
customers. In considering whether to grant such a request, the
FCC emphasizes that, among other things, it would examine the
overall financial condition of the operator and whether there is
a realistic threat of termination of service.
The Partnership is currently unable to assess the full impact of
the February 22, 1994 FCC action and the 1992 Cable Act upon its
business prospects or future financial results. However, the rate
reductions mandated by the FCC in May of 1993 have had, and will
most likely continue to have, a detrimental impact on the
revenues and profits of the Partnership's cable television
operations. In addition, the rate reductions and limits on the
pricing of a-la-carte cable services proposed on February 22,
1994 are likely to have a further detrimental impact on those
revenues and profits. Although the impact of the 1992 Cable Act
and the recent FCC actions cannot yet be ascertained precisely,
once fully implemented, certain aspects of the new law may have a
material negative impact on the financial condition, liquidity,
and value of the Partnership.
In addition, the Partnership is currently unable to determine the
impact of the February 22, 1994 FCC action and previous FCC
actions on its ability to sell the California Cable Systems or
the potential timing and value of such a sale. However, as
discussed below, the FCC actions have had, and will have, a
detrimental impact on the revenues and profits of the California
Cable Systems.
Refer to Note 15 of "Item 8. Financial Statements and
Supplementary Data" for more information regarding the possible
sale of California Cable.
California Cable
As an example of the effects of the 1992 Cable Act, in complying
with the benchmark regulatory scheme without considering the
effect of any future potential cost-of-service showing, the
Partnership's California Cable Systems, on a franchise by
franchise basis, were required to reduce present combined basic
service rates (broadcast tier and satellite service tier)
effective September 1, 1993. In addition, pursuant to the 1992
Cable Act, revenue from secondary outlets and from remote control
units was eliminated or reduced significantly. The Partnership
took certain actions to seek to defray some of the resulting
revenue declines, which among others included instituting charges
for converters, as permitted by the 1992 Cable Act, offering
programming services on an a-la-carte basis, which services are
not subject to rate regulation, and aggressively marketing
unregulated premium services to those subscribers benefiting from
decreased basic rates. Despite the institution of these actions
by the California Cable Systems, the May, 1993 rate regulations
enacted pursuant to the 1992 Cable Act had a detrimental impact
on the revenues and profits of the California Cable Systems. In
addition, the Partnership is currently unable to determine
whether its a-la-carte restructuring is in accordance with the
terms of the February 22, 1994 FCC action. The further rate
reduction mandated by the February 22, 1994 FCC action and any
limits imposed by such action on a-la-carte pricing will have a
further detrimental impact on those revenues and profits.
By the October 6 deadline (noted above), the Partnership's
California Cable systems had reached agreement with all broadcast
stations within their service areas electing retransmission
consent. In some cases, these agreements obligate the Systems to
carry additional programming services affiliated with the
broadcast stations. The costs of these additional program
services will not be material to the operations of California
Cable.
As of December 31, 1993, the Partnership was in compliance with
all covenants under the revised ML California Credit Agreement
(the "Revised ML California Credit Agreement") (see Note 6).
However, particularly in light of the February 22, 1994 FCC
action, it is likely that the Partnership will experience
covenant defaults under the Revised ML California Credit
Agreement during 1994.
C-ML Cable
On September 30, 1993, C-ML Cable entered into an amendment to
the C-ML Revolving Credit Agreement (see Note 6) whereby the
Termination Date (the date upon which all revolving credit
borrowings outstanding under the C-ML Revolving Credit Agreement
are converted into a term loan) was extended from September 30,
1993 to December 15, 1993. Effective December 15, 1993, C-ML
Cable entered into a second amendment to the C-ML Revolving
Credit Agreement whereby the debt facility was converted into a
reducing revolving credit facility with a final maturity of
December 31, 1998. Beginning December 31, 1993, the amount of
borrowing availability under the C-ML Revolving Credit Agreement
is reduced quarterly each year. Outstanding amounts under the
debt facility may be prepaid at any time subject to certain
conditions. As of December 31, 1993, there were no borrowings
outstanding under the C-ML Revolving Credit Agreement.
The Partnership is currently unable to ascertain the full impact
of the February 22, 1994 FCC action and previous FCC actions on
the Puerto Rico Systems. While the impact of a September 1, 1993
rate and tier restructuring to comply with the 1992 Cable Act did
not have a significant negative impact on the revenues and
profits of C-ML Cable, it is likely that the February 22, 1994
FCC action will have a detrimental impact on the revenues and
profits of the Puerto Rico Systems. The Partnership does not
expect that this likely detrimental impact will result in any
defaults under the C-ML Notes or the C-ML Revolving Credit
Agreement during 1994.
WREX-KATC
During 1993 and 1992, the Partnership defaulted on the quarterly
principal payments due with respect to its WREX-KATC Loan. As of
December 31, 1993, WREX-KATC was in default of $2,967,873 in
principal, after giving effect to $782,127 in principal payments
made during 1993 from cash generated by the operations of WREX
and KATC. The Partnership is not in default of any interest
payments under the WREX-KATC Loan. In addition, as of December
28, 1990 and continuing through December 31, 1993, the
Partnership was in default of financial covenants under its WREX-
KATC Loan. The lender granted waivers for the defaults as of
December 28, 1990. However, the lender has not granted waivers
for the 1991, 1992 or 1993 defaults. As required by the terms of
the WREX-KATC Loan, the Partnership advanced an additional
$10,000 of its working capital to WREX and KATC in April, 1993;
bringing the total of such required advances to $1.0 million.
The Partnership expects to experience future principal payment
and covenant defaults under the WREX-KATC Loan, and is seeking to
restructure the WREX-KATC Loan. The Partnership has engaged The
Blackstone Group as its restructuring advisor, to be utilized
when deemed necessary, in the Partnership's efforts to
restructure the WREX-KATC Loan with the lender. The outcome of
these restructuring efforts cannot be predicted at this time, but
the Partnership does not intend to, nor is it obligated to,
advance any further working capital to WREX and KATC, although it
may possibly choose to in the context of a successful
restructuring of the WREX-KATC Loan. The lender has informed the
Partnership that it reserves all of its rights and remedies under
the WREX-KATC Loan agreement, including the right to accelerate
the maturity of the indebtedness under the WREX-KATC Loan and to
foreclose on, or otherwise force a sale of, the assets of WREX
and KATC (but not the other assets of the Partnership.)
Borrowings under the WREX-KATC Loan are nonrecourse to the
Partnership.
Wincom-WEBE-WICC
On July 30, 1993, the Partnership and Chemical Bank executed an
amendment to the Wincom-WEBE-WICC Loan (the "Restructuring
Agreement") effective January 1, 1993, which cured all previously
outstanding defaults pursuant to the Wincom-WEBE-WICC Loan (see
Note 6). In addition, as discussed in Note 3, the Partnership
sold certain assets and remitted a portion of the proceeds to the
lender as required under the terms of the Restructuring
Agreement.
Summary
Based upon a review of the current financial performance of the
Partnership's investments, the Partnership continues to monitor
its unrestricted working capital level. To the extent that the
Partnership determines that it must maintain or increase its
unrestricted working capital level it may take certain actions,
which actions may include the continuing deferral of certain
general partner management fees, the continuing deferral of
certain general partner reimbursements of out-of-pocket expenses
and the sale of certain assets. The Partnership does not have
sufficient cash to meet all of the contractual debt obligations
of all of its investments nor is it obligated to do so. As
discussed above, the Partnership does not currently expect to
advance working capital to WREX and KATC, although it may
possibly choose to in the context of a successful restructuring.
As of December 31, 1993, KATC and WREX represented approximately
9% of the consolidated assets of the Partnership and
approximately 10% of the consolidated operating revenue.
3. DISPOSITION OF ASSETS
Wincom
On April 30, 1993, WIN Communications of Indiana, Inc., a 100%-
owned subsidiary of Wincom, entered into an Asset Purchase
Agreement to sell substantially all of the assets of WCKN-AM/WRZX-
FM, Indianapolis, Indiana (the "Indianapolis Stations") to
Broadcast Alchemy, L.P.("Alchemy") for gross proceeds of $7
million. Alchemy is not affiliated with the Partnership. The
proposed sale was subject to approval by the FCC, which granted
its approval on September 22, 1993. On October 1, 1993, the date
of the sale of the Indianapolis Stations, the net proceeds from
such sale, which totalled approximately $6.1 million, were
remitted to Chemical Bank, as required by the terms of the
Restructuring Agreement, to reduce the outstanding principal
amount of the Series B Term Loan due Chemical Bank. In addition,
certain additional amounts from the gross proceeds from the sale
of the Indianapolis Stations, including an escrow deposit of
$250,000, may ultimately be paid to Chemical Bank. The
Partnership recognized a gain of approximately $4.7 million on
the sale of the Indianapolis Stations. In addition, the
Partnership recognized an extraordinary gain of approximately
$0.5 million as a result of the remittance to Chemical Bank of
the approximately $6.1 million net proceeds to reduce the
outstanding principal amount of the Series B Term Loan and the
simultaneous forgiveness of the entire Series C Term Loan due
Chemical Bank pursuant to the Restructuring Agreement (see Note
6). The remaining portion of the forgiveness of the Series C
Note will be amortized against interest expense over the
remaining life of the loan. As of October 1, 1993 (the date of
the sale), the Indianapolis Stations represented approximately 1%
of the consolidated assets of the Partnership. In addition, for
the year ended December 31, 1993, the Indianapolis Stations
represented approximately 1% of the consolidated operating
revenues of the Partnership.
Universal
On July 8, 1992, the Partnership consummated the sale of all of
the issued and outstanding capital stock of Universal to
Ponca/Universal Holdings, Inc., a Delaware corporation ("Ponca"),
for aggregate consideration of approximately $31.6 million.
Ponca is not affiliated with the Partnership.
Consideration was paid at closing as follows: [i] approximately
$30.2 million was paid to the lenders in full discharge of the
obligations of Universal under a credit agreement dated September
19, 1988, as amended, and under an interest rate exchange
agreement dated December 12, 1988, which obligations were
approximately $43.4 million at Closing; [ii] $1.0 million was
deposited into an escrow account with the lenders, which was
subsequently paid to the lenders, to provide Ponca with its sole
recourse for recovering any indemnification payments or purchase
price adjustments that may be due it under the stock purchase
agreement; and [iii] approximately $0.4 million was used to pay
closing costs associated with the sale. No proceeds were
retained by the Partnership and the Partnership recognized a loss
of approximately $6.4 million on the sale and an extraordinary
gain of approximately $12.3 million on the extinguishment of
debt. The lenders have unconditionally released the Partnership
and Universal from all other obligations relating to the credit
and interest rate exchange agreements. These obligations of
Universal (noted above) were nonrecourse to the Partnership.
See Note 13 for information regarding pro forma data for the
effects of the disposition of Universal.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
December 31, December 25,
1993 1992
Land and Improvements $ 5,087,438 $ 5,587,676
Buildings 10,827,637 11,613,180
Cable Distribution
Systems and Equipment 178,332,482 173,696,231
Other 3,108,574 4,239,873
197,356,131 195,136,960
Less accumulated (104,955,637) (91,378,707)
depreciation
Property, plant and
equipment, net $ 92,400,494 $103,758,253
5. INTANGIBLE ASSETS
Intangible assets consisted of the following:
December 31, December 25,
1993 1992
Goodwill $ 81,091,611 $ 88,756,605
Franchises 115,268,361 114,945,638
FCC Broadcast Licenses 4,746,304 4,746,304
Network Affiliation 10,892,168 10,892,168
Contracts
Other 10,217,167 15,642,333
222,215,611 234,983,048
Less accumulated (111,069,407) (112,996,421)
amortization
Intangible assets, net $ 111,146,204 $ 121,986,627
In 1991, as a result of the Partnership's view of the future
prospects of the business of the Wincom-WEBE-WICC group, the
Partnership concluded that there had been an impairment, which
approximated $21.6 million, of the value of Wincom and, as a
result, wrote off the intangible assets (principally, goodwill)
related to Wincom during the fourth quarter of 1991.
6. BORROWINGS
At December 31, 1993 and December 25, 1992, the aggregate amount
of borrowings as reflected on the balance sheet of the
Partnership is as follows:
December 31, December 25,
1993 1992
A)C-ML Notes/C-ML Credit
Agreement $ 50,000,000 $ 48,551,495
B)Revised ML California
Credit Agreement 141,375,000 148,500,000
C)WREX-KATC Loan 23,467,873 24,250,000
D)Restructuring
Agreement/Wincom-WEBE-WICC
Loan 17,725,476 24,693,250
TOTAL $232,568,349 $245,994,745
A) On December 31, 1992, obligations under the C-ML Credit
Agreement were fully repaid with the proceeds of a $100
million offering of Senior Secured Notes (the "C-ML Notes"),
which were purchased by institutional lenders. The terms of
the C-ML Notes provide for lower debt service payments in
the short-term than the C-ML Credit Agreement, due to the
lack of mandatory principal payments. Borrowings under the
C-ML Notes bear semi-annual interest at a fixed annual rate
of 9.47% with annual principal payments of $20 million
payable beginning November 30, 1998 and the final principal
payment due November 30, 2002. The C-ML Notes require that
C-ML Cable maintain certain ratios such as debt to operating
cash flow, interest expense coverage and debt service
coverage and restricts such items as cash distributions and
certain additional indebtedness. In addition, on December
1, 1992, C-ML Cable entered into a $20.0 million revolving
credit agreement (the "C-ML Revolving Credit Agreement")
with Citibank, N.A. to provide C-ML Cable future flexibility
for cable system expansion, capital expenditures, working
capital needs of C-ML Cable and payment of certain
liabilities, including management fee obligations accrued in
prior years payable to Century Communications Corp. (see
Note 10). Borrowings under the C-ML Notes and the C-ML
Revolving Credit Agreement are nonrecourse to the
Partnership and are collateralized with substantially all of
the Venture's interest in the Puerto Rico Systems, as well
as by all of the assets of the Venture, the Venture's
interest in C-ML Cable, and all of the assets of C-ML Radio.
On September 30, 1993, C-ML Cable entered into an amendment
to the C-ML Revolving Credit Agreement whereby the
Termination Date (the date upon which all revolving credit
borrowings outstanding under the C-ML Revolving Credit
Agreement are converted into a term loan) was extended from
September 30, 1993 to December 15, 1993. Effective December
15, 1993, C-ML Cable entered into a second amendment to the
C-ML Revolving Credit Agreement whereby the debt facility
was converted into a reducing revolving credit with a final
maturity of December 31, 1998. Beginning December 31, 1993,
the amount of borrowing availability under the C-ML
Revolving Credit Agreement is reduced quarterly each year.
Outstanding amounts under the debt facility may be prepaid
at any time subject to certain conditions. As of December
31, 1993, there were no borrowings outstanding under the C-
ML Revolving Credit Agreement. As of December 31, 1993,
outstanding borrowings under the C-ML Notes totaled $100
million, of which $50 million is reflected on the
Partnership's balance sheet (see Note 10). In 1992, the
effective interest rate on the old C-ML Credit Agreement was
approximately 6.3%.
B) On May 15, 1990, the Partnership entered into a $160 million
Amended and Restated Credit Agreement (the "Revised ML
California Credit Agreement") with a group of banks led by
Bank of America National Trust and Savings Association ("B
of A"). The original ML California Credit Agreement was
amended to allow the Partnership to borrow up to $160
million, if certain operating levels outlined in the Revised
ML California Credit Agreement were met by the California
Systems, with the proceeds used to: refinance all
outstanding borrowings under the $115 million original ML
California Credit Agreement; repay all outstanding
borrowings under the $16.5 million Anaheim Radio Loan; repay
working capital advances to the Partnership; and pay various
refinancing expenses. Upon repayment from the proceeds of
the Revised ML California Credit Agreement, the Anaheim
Radio Loan was canceled. An additional $13.0 million was
borrowed during 1991 and 1992. The Revised ML California
Credit Agreement was structured as a revolving credit
facility through September 30, 1992, at which time all
outstanding borrowings under the facility, totalling $150
million, were converted to a term loan that is scheduled to
fully amortize by September 30, 1999. As a result, since
October 1, 1992, the operations of the California Systems
and the Anaheim Radio Stations (collectively, the
"California Media Operations") have been prohibited from
borrowing additional amounts under the Revised ML California
Credit Agreement.
The Revised ML California Credit Agreement contains numerous
covenants and restrictions regarding the California Media
Operations, including limitations on indebtedness,
acquisitions and divestitures of media properties, and
distributions to the Partnership, all as outlined in the
Revised ML California Credit Agreement. The California
Media Operations must also meet certain tests such as the
ratio of Funded Debt to Operating Cash Flow, the Fixed
Charge Ratio and the ratio of Operating Cash Flow to Debt
Service, all as defined in the Revised ML California Credit
Agreement. As of December 31, 1993, the Partnership was in
full compliance with all covenants under the revised ML
California Credit Agreement. Proceeds from the Revised ML
California Credit Agreement are restricted to the use of the
California Media Operations and are generally not available
for the working capital needs of the Partnership.
Borrowings under the Revised ML California Credit Agreement
bear interest at an annual rate equal to, at the
Partnership's option, either B of A's Reference Rate or an
Offshore Rate plus the Applicable Margin, as defined, which
ranges from .75% to 1.50% in the case of Reference Rate
Loans and from 1.25% to 2.50% in the case of Offshore Rate
Loans, depending on the Funded Debt Ratio of the California
Media Operations. On May 15, 1990, in an effort to reduce
its exposure to upward fluctuations in interest rates, and
as required by the terms of the Revised ML California Credit
Agreement, the Partnership entered into two three-year
interest rate exchange agreements totalling $100 million,
which expired during 1993. Of this amount, $80 million was
swapped at a fixed rate of 8.82% per annum and $20 million
was swapped at a fixed rate of 9.04% per annum. During the
terms of those swaps, all borrowings in excess of the $100
million that were subject to the revised ML California
Credit Agreement bore interest at floating market interest
rates as outlined above. All borrowings under the Revised ML
California Credit Agreement currently bear interest at
floating rates. The overall effective interest rate for the
borrowings under the Revised ML California Credit Agreement
was approximately 6.48%, 8.35% and 10.6% during 1993, 1992
and 1991, respectively.
Borrowings under the Revised ML California Credit Agreement
are nonrecourse to the Partnership and are collateralized
with substantially all of the assets of the California Media
Operations as well as a pledge of the Partnership's interest
in Anaheim Radio Associates.
See Note 2 regarding potential future defaults under the
Revised ML California Credit Agreement.
C) On June 21, 1989, the Partnership entered into an Agreement
of Consolidation, Extension, Amendment and Restatement (the
"WREX-KATC Loan") which provided a reducing revolving credit
line with a bank providing for borrowings of up to $27.1
million through June 30, 1989. The WREX-KATC Loan is
collateralized by all of the assets of KATC-TV and WREX-TV.
The Partnership, if no event of default had occurred (as
discussed in Note 2), had options to elect to pay interest
on the WREX-KATC Loan based upon the bank's reference rate
or London Interbank Offered Rates, plus applicable margins.
As a result of defaults under the WREX-KATC Loan, the bank
has restricted interest rate options to the reference rate
only. The WREX-KATC Loan requires mandatory quarterly
principal repayments, which commenced on June 30, 1989, and
continue through December 31, 1998. However, see below for
a discussion of the possible acceleration of the principal
repayments due to the defaults.
During the first part of 1992, the Partnership had two
interest rate exchange agreements for the WREX-KATC Loan,
both of which expired during 1992. The Partnership entered
into an interest rate swap on June 24, 1987 under which the
Partnership received market-rate LIBOR and paid a fixed rate
of 9.7% on the notional amount of $7 million through June
24, 1992. The Partnership entered into an interest rate
swap on September 22, 1987 under which the Partnership
received market-rate LIBOR and paid a fixed rate of 9.78% on
the notional amount of $6.5 million through September 22,
1992. The Partnership also entered into an interest rate
exchange agreement on September 26, 1990, that fixed the
underlying unadjusted LIBOR rate on $11 million of the WREX-
KATC Loan at 8.2% through September 26, 1991. The
Partnership was not party to any interest rate hedge
agreements during 1993 with respect to the WREX-KATC Loan.
All borrowings under the WREX-KATC Loan currently bear
interest at floating rates. The effective interest rate on
the WREX-KATC Loan was approximately 7.5% during 1993. In
part due to the expired interest rate exchange agreements,
the effective interest rate on the WREX-KATC Loan was
approximately 7.7% and 11.7% during 1992 and 1991,
respectively.
The WREX-KATC Loan requires that KATC-TV and WREX-TV
maintain minimum levels of operating cash flow and certain
ratios such as debt to operating income and interest and/or
debt service coverage and restricts such items as cash
distributions, additional indebtedness or asset sales. The
WREX-KATC Loan also includes other standard and usual loan
covenants. Borrowings under the WREX-KATC Loan are
nonrecourse to the Partnership and are collateralized with
substantially all the assets of KATC-TV and WREX-TV. At
December 31, 1993, there was no further availability under
the WREX-KATC Loan.
See Note 2 regarding defaults under this loan.
D) On July 19, 1989, the Partnership entered into an amended
and restated credit, security and pledge agreement ("the
Wincom-WEBE-WICC Loan") which was used to replace the
original Wincom credit, security and pledge agreement with
Chemical Bank, repay the original WEBE-FM revolving
credit/term loan agreement and finance the acquisition of
WICC-AM. The Wincom-WEBE-WICC Loan was structured as a
revolving credit line that provided for borrowings of up to
$35 million through December 31, 1990. On December 31,
1990, outstanding borrowings of approximately $24.7 million
on the Wincom-WEBE Loan were converted to a term loan.
Principal payments were scheduled to commence on March 31,
1991 and to continue quarterly through June 30, 1997. No
such principal payments were made (see below).
The Partnership, if no event of default had occurred, had
options to elect to pay interest on the Wincom-WEBE-WICC
Loan based upon the bank's reference rate or London
Interbank Offered Rates, plus applicable margins. As a
result of defaults under the Wincom-WEBE-WICC Loan, the
lender restricted interest rate options to reference rate
only; although these defaults were cured pursuant to the
Restructuring Agreement, the Partnership may borrow only at
the reference rate. The Partnership entered into an
interest rate swap on July 20, 1989 under which the
Partnership received market-rate LIBOR and paid a fixed base
rate of 8.47% on the notional amount of $10 million through
July 20, 1991. The Partnership entered into an interest
rate swap on August 15, 1989 under which the Partnership
received market-rate LIBOR and paid a fixed base rate of
8.34% on the notional amount of $10 million through August
15, 1991. The Partnership was not party to any interest
rate hedge agreements during 1993 with respect to the Wincom-
WEBE-WICC Loan. The effective interest rate on the Wincom-
WEBE-WICC Loan was approximately 7.8%, 8.1% and 10.4% during
1993, 1992 and 1991, respectively.
The Wincom-WEBE-WICC Loan requires that the Wincom-WEBE-WICC
group maintain minimum covenant levels of certain ratios
such as debt to operating profit and debt service coverage,
and restricts such items as: cash; the payment of management
fees, distributions or dividends; additional indebtedness;
or asset sales by or at Wincom, WEBE-FM or WICC-AM. The
Wincom-WEBE-WICC Loan also included other standard and usual
loan covenants. Borrowings under the Wincom-WEBE-WICC Loan
are nonrecourse to the Partnership and are collateralized
with substantially all of the assets of the Wincom-WEBE-WICC
group.
On July 30, 1993, the Partnership and Chemical Bank executed
an amendment to the Wincom-WEBE-WICC Loan (the
"Restructuring Agreement"), effective January 1, 1993, which
cured all previously outstanding principal and interest
payment and covenant defaults pursuant to the Wincom-WEBE-
WICC Loan. In addition, as part of the restructuring
process, the Partnership agreed to sell substantially all of
the assets of the Indianapolis Stations (see Note 3).
The Restructuring Agreement provided for the outstanding
principal and interest due Chemical Bank as of December 31,
1992 (approximately $24.7 million and $2.0 million,
respectively) to be divided into three notes as follows: a
Series A Term Loan in the amount of $13 million; a Series B
Term Loan in the amount of approximately $11.7 million; and
a Series C Term Loan in the amount of approximately $2.0
million (which represented all the accrued interest
outstanding under the Wincom-WEBE-WICC Loan as of December
31, 1992).
The Series A Term Loan bears interest, payable monthly, at
Chemical Bank's Alternate Base Rate plus 1-3/4% effective
January 1, 1993, with principal payments due quarterly in
increasing amounts beginning March 31, 1994 and continuing
through the final maturity at December 31, 1997. Additional
principal payments are also required annually from Excess
Cash Flow, as defined in the Restructuring Agreement. On
July 30, 1993, as required by the Restructuring Agreement,
the Partnership paid all the interest due on the Series A
Term Loan from January 1, 1993 to July 31, 1993, totalling
$593,306, from cash generated by the stations. The
principal amount of the Series A Term Loan increased by $2
million to $15 million upon the consummation of the sale of
the Indianapolis Stations on October 1, 1993 (see below) and
such increase was offset by a simultaneous reduction in the
Series B Term Loan. On January 28, 1994, the Partnership
made a required principal payment under the Series A Term
Loan in the amount of $656,406 from cash generated by the
stations. There was $15 million outstanding under the
Series A Term Loan as of December 31, 1993.
The Series B Term Loan bears interest at a rate equal to
Chemical Bank's Alternate Base Rate plus 1-3/4% beginning on
April 30, 1994, with interest payments accruing, and payable
annually only from Excess Cash Flow. In addition, a minimum
of $4 million of Series B Term Loan principal was due to
Chemical Bank on or prior to June 30, 1994. On October 1,
1993, the date of the sale of the Indianapolis Stations, the
net proceeds from such sale, which totalled approximately
$6.1 million, were remitted to Chemical Bank, as required by
the terms of the Restructuring Agreement, to reduce the
outstanding principal amount of the Series B Term Loan.
Certain additional amounts from the net proceeds from the
sale of the Indianapolis Stations, including an escrow
deposit of $250,000, may ultimately be paid to Chemical
Bank. On October 1, 1993, the Series B Term Loan principal
amount was permanently reduced by $2 million, offset by a
simultaneous increase in the Series A Term Loan. On July
30, 1993, as required by the Restructuring Agreement, the
Partnership made a principal payment of $220,899 under the
Series B Term Loan from cash generated by the stations and
made additional required principal payments of $100,000 on
October 1, 1993, $33,797 on November 1, 1993 and $545,304 on
December 29, 1993. After giving effect to the principal
payment made as a result of the sale of the Indianapolis
Stations, and the other principal payments and adjustments
discussed above, there was approximately $2.7 million
outstanding under the Series B Term Loan on December 31,
1993. On January 28, 1994, the Partnership made a required
principal payment under the Series B Loan in the amount of
$68,594 from cash generated by the Stations. The remaining
principal amount of the Series B Term Loan is due on
December 31, 1997.
The Series C Term Loan was to bear interest at a fixed rate
equal to 6% per annum beginning April 30, 1994, with
interest payments accruing, and payable annually only from
Excess Cash Flow. The principal amount of the Series C Term
Loan was due on December 31, 1997. As a result of the
principal payment made on the Series B Term Loan from the
net proceeds from the sale of the Indianapolis Stations
exceeding $6 million (described above), the full principal
amount of the Series C Term Loan was forgiven by Chemical
Bank on October 1, 1993 pursuant to the terms of the
Restructuring Agreement (see Note 3).
After the Series A Term Loan and the Series B Term Loan,
which together totalled approximately $17.7 million on
December 31, 1993, have been satisfied in full, any
remaining cash proceeds generated from the operations of, or
the sale proceeds from the sale of, the stations in the
Wincom-WEBE-WICC Group will be divided between the
Partnership and Chemical Bank, with the Partnership
receiving 85% and Chemical Bank receiving 15%, respectively.
As of December 31, 1993, the Partnership was in full
compliance with all covenants under the Restructuring
Agreement.
At December 31, 1993, the annual aggregate amounts of
principal payments (without considering potential
accelerations made possible by defaults) required for the
borrowings as reflected in the consolidated balance sheet of
the Partnership are as follows:
Year Ending Principal Amount
1994 $ 18,305,373
1995 21,525,000
1996 25,225,000
1997 49,200,476
1998 50,187,500
Thereafter 68,125,000
TOTAL $232,568,349
Based upon the restrictions of the borrowings as described
above, approximately $245 million of assets are restricted
from distribution by the entities in which the Partnership
has an interest.
During 1993 and at certain dates in 1992 and 1991, the
Partnership was in violation of payments and debt covenants
under the WREX-KATC Loan. The principal amount payable in
1994 would increase by an additional $17,750,000 if the
lender to WREX and KATC required immediate payment.
7. TRANSACTIONS WITH THE GENERAL PARTNER AND ITS AFFILIATES
During the years ended December 31, 1993, December 25, 1992 and
December 27, 1991 the Partnership incurred the following expenses
in connection with services provided by the General Partner and
its affiliates:
1993 1992 1991
Media Management
Partners (General
Partner)
Partnership Mgmt. fee $ 557,979 $ 557,979 $ 557,979
Property Mgmt. fee 1,033,852 1,071,903 1,109,955
Reimbursement of
Operating Expenses 1,074,071 744,797 884,900
$2,665,902 $2,374,679 $2,552,834
In addition, the Partnership, through the California Systems, is
party to an agreement with Multivision Cable TV Corp.
("Multivision"), an affiliate of the General Partner, whereby
Multivision provides the California Systems (and provided
Universal before its sale) with certain administrative services.
The reimbursed cost charged to the California Systems and
Universal (for 1992 and 1991) for these services amounted to an
aggregate of $1,481,562 for 1993, $1,653,648 for 1992, and
$1,758,576 for 1991. These costs do not include programming
costs that are charged, without markup, to the California Systems
(and had been charged to Universal) under an agreement to
allocate certain management costs.
Also, the Partnership has a payable to RP Media Management of
$231,664 as of December 31, 1993 related to the payment by RP
Media Management of operating expenses on behalf of the
television and radio stations owned by the Partnership.
See Note 2 for a discussion of deferral of General Partner fees
and reimbursement of operating expenses. As of December 31, 1993
and December 25, 1992, the amounts payable to the General Partner
were approximately $11.3 million and $8.4 million, respectively.
8. COMMITMENTS AND CONTINGENCIES
Lease Commitments
C-ML Cable rents office and warehouse facilities under various
operating lease agreements. In addition, Wincom, the Anaheim
Radio Stations, KATC-TV, WEBE-FM and WICC-AM lease office space,
broadcast facilities and certain other equipment under various
operating lease agreements. The California Systems rent office
space, equipment, and space on utility poles under operating
leases with terms of less than one year, or under agreements
which are generally terminable on short notice. Rental expense
was incurred as follows:
1993 1992 1991
California Systems $ 355,311 $ 373,999 $ 351,411
Universal - 72,495 144,094
KATC-TV 19,011 - -
WICC-AM 105,182 105,182 66,336
Anaheim Radio Stations 120,672 118,743 107,400
WEBE-FM 164,715 162,968 114,973
Wincom 196,337 228,209 220,303
$ 961,228 $1,061,596 $1,004,517
Future minimum commitments under all of the above agreements in
excess of one year are as follows:
Year Ending Amount
1994 $ 625,357
1995 497,228
1996 439,008
1997 364,860
1998 234,033
Thereafter 968,783
$3,129,269
9. SEGMENT INFORMATION
The following analysis provides segment information for the two
main industries in which the Partnership operates. The Cable
Television Systems segment consists of the Partnership's 50%
share of the Venture, the California Systems and Universal (for
1991 and the 193-day period in 1992 that the Partnership owned
Universal). The Television & Radio Stations segment consists of
KATC-TV, WREX-TV, WEBE-FM, Wincom, WICC-AM, and the Anaheim Radio
Stations.
Cable Television
Television and Radio
1993 Systems Stations Total
Operating Revenue $ 75,048,888 $ 24,941,869 $ 99,990,757
Operating expenses
before gain on sale of
assets (60,907,083) (24,933,540) (85,840,623)
Gain on sale of assets 272,872 4,715,518 4,988,390
Operating Income 14,414,677 4,723,847 19,138,524
Plus: depreciation and
amortization 26,064,361 5,352,429 31,416,790
Operating income before
depreciation and
amortization 40,479,038 10,076,276 50,555,314
Less: depreciation and
amortization (26,064,361) (5,352,429) (31,416,790)
Operating Income $ 14,414,677 $ 4,723,847 19,138,524
Interest Income 558,380
Interest Expense (17,500,965)
Partnership General
Expenses, net (1,451,968)
Equity in income of
subsidiary 143,582
Extraordinary item-
gain on extinguishment
of debt 489,787
Net Income $ 1,377,340
Cable Television
Television and Radio
1993 Systems Stations Total
Identifiable Assets $190,242,858 $ 53,882,827 244,125,685
Partnership Assets 5,726,252
Total $249,851,937
Capital Expenditures $ 9,652,316 $ 530,093 $ 10,182,409
Depreciation and
Amortization $ 26,064,361 $ 5,352,429 31,416,790
Partnership Depreciation
and Amortization 3,095
Total $ 31,419,885
Cable Television
Television and Radio
1992 Systems Stations Total
Operating Revenue $ 75,786,229 $ 24,657,738 $100,443,967
Operating expenses
before loss on sale of
Universal (64,170,063) (26,803,134) (90,973,197)
Loss on sale of
Universal (6,399,000) - (6,399,000)
Operating Income (Loss) 5,217,166 (2,145,396) 3,071,770
Plus: depreciation and
amortization 25,781,077 5,626,804 31,407,881
Operating income before
depreciation and
amortization 30,998,243 3,481,408 34,479,651
Less: depreciation and
amortization (25,781,077) (5,626,804) (31,407,881)
Operating Income (Loss) $ 5,217,166 $ (2,145,396) 3,071,770
Interest Income 158,738
Interest Expense (23,437,581)
Partnership General
Expenses, net (1,393,725)
Equity in income of
subsidiary 26,028
Extraordinary item-gain
on extinguishment of
debt 12,294,000
Net Loss $ (9,280,770)
Identifiable Assets $197,267,828 $ 58,893,399 256,161,227
Partnership Assets 5,393,215
Total $261,554,442
Capital Expenditures $ 9,588,063 $ 674,093 $ 10,262,156
Depreciation and
Amortization $ 25,781,077 $ 5,626,804 31,407,881
Partnership Depreciation
and Amortization 108,728
Total $ 31,516,609
Cable Television and
Television Radio
1991 Systems Stations Total
Operating Revenue $ 74,449,228 $ 24,736,195 $ 99,185,423
Operating expenses
before loss on write-
down of Wincom (67,327,159) (30,043,483) (97,370,642)
Loss on write-down of
Wincom - (21,606,418) (21,606,418)
Operating Income (Loss) 7,122,069 (26,913,706) (19,791,637)
Plus: depreciation and
amortization 27,556,745 7,907,727 35,464,472
Operating income before
depreciation and
amortization 34,678,814 (19,005,979) 15,672,835
Less: depreciation and
amortization (27,556,745) (7,907,727) (35,464,472)
Operating Income (Loss) $ 7,122,069 $(26,913,706) (19,791,637)
Interest Income 273,704
Interest Expense (30,701,430)
Partnership General
Expenses, net (830,188)
Net Loss $(51,049,551)
Identifiable Assets $240,975,149 $ 63,971,068 304,946,217
Partnership Assets 5,302,344
Total $310,248,561
Capital Expenditures $ 12,309,796 $ 343,156 $ 12,652,952
Depreciation and
Amortization $ 27,556,745 $ 7,907,727 35,464,472
Partnership Depreciation
and Amortization 1,511,436
Total $ 36,975,908
10. JOINT VENTURES
Pursuant to a management agreement and joint venture agreement
dated December 16, 1986 (the "Joint Venture Agreement"), as
amended and restated, between the Partnership and Century
Communications Corp., ("Century"), the parties formed a joint
venture in which each has a 50% ownership interest. The Venture
subsequently acquired and operated Cable Television Company of
Greater San Juan, Inc. ("San Juan Cable"). The Venture also
acquired all of the assets of Community Cable-Vision of Puerto
Rico, Inc., Community Cablevision of Puerto Rico Associates, and
Community Cablevision Incorporated ("Community Companies"), which
consisted of a cable television system serving the communities of
Catano, Toa Baja and Toa Alta, Puerto Rico, which are contiguous
to San Juan Cable. The Community Companies and San Juan Cable
are collectively referred to as C-ML Cable.
On February 15, 1989, the Partnership and Century entered into a
Management Agreement and joint venture agreement whereby C-ML
Radio was formed as a joint venture and responsibility for the
management of radio stations acquired by C-ML Radio was assumed
by the Partnership.
Effective January 1, 1994, all the assets of C-ML Radio were
transferred to the Venture, in exchange for the assumption by the
Venture of all the obligations of C-ML Radio and the issuance to
Century and the Partnership of new certificates evidencing a
partnership interest of 50% and 50%, respectively, in the
Venture. Simultaneously, Century and the Partnership entered
into an amended and restated management agreement and joint
venture agreement (the "Revised Joint Venture Agreement")
governing the affairs of the revised Venture. The transfer was
made pursuant to a Transfer of Assets and Assumption of
Liabilities Agreement, which was required under the terms of the
C-ML Notes.
Under the terms of the Revised Joint Venture Agreement, Century
is responsible for the day-to-day operations of the Puerto Rico
Systems and the Partnership is responsible for the day-to-day
operations of the C-ML Radio properties. For providing services
of this kind, Century is entitled to receive annual compensation
of 5% of the Puerto Rico Systems' net gross revenues (defined as
gross revenues from all sources less monies paid to suppliers of
pay TV product, e.g., HBO, Cinemax, Disney and Showtime) and the
Partnership is entitled to receive annual compensation of 5% of
the C-ML Radio properties' gross revenues (after agency
commissions, rebates or discounts and excluding revenues from
barter transactions). All significant policy decisions relating
to the Venture, the operation of the Puerto Rico Systems and the
operation of the C-ML Radio properties, however, will only be
made upon the concurrence of both the Partnership and Century.
The Partnership may require a sale of the assets and business of
the Puerto Rico Systems or the C-ML Radio properties at any time.
If the Partnership proposes such a sale, the Partnership must
first offer Century the right to purchase the Partnership's 50%
interest in the assets being sold at 50% of the total fair market
value at such time as determined by independent appraisal. If
Century elects to sell either the Puerto Rico Systems or the C-ML
Radio properties, the Partnership may elect to purchase Century's
interest in the assets being sold on similar terms.
The total assets, total liabilities, net capital, total revenues
and net loss of the Venture (which excludes C-ML Radio) are as
follows:
December 31, December 25,
1993 1992
Total Assets $114,300,000 $115,800,000
Total Liabilities $114,400,000 $115,600,000
Net Capital (Deficit) $ (100,000) $ 200,000
1993 1992 1991
Total Revenues $ 40,400,000 $ 36,500,000 $ 34,700,000
Net Loss $ (300,000 $ (700,000) $ (7,200,000)
)
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement on Financial Accounting Standards No. 107, "Disclosures
about Fair Value of Financial Instruments", requires companies to
report the fair value of certain on- and off-balance sheet assets
and liabilities which are defined as financial instruments.
Considerable judgment is necessarily required in interpreting
data to develop the estimates of fair value. Accordingly, the
estimates presented herein are not necessarily indicative of the
amounts that the Partnership could realize in a current market
exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the
estimated fair value amounts.
Assets, including cash and cash equivalents and accounts
receivable, and liabilities, such as trade payables, are carried
at amounts which approximate fair value.
The General Partner has been able to estimate the fair value of
the C-ML Notes based on a discounted cash flow analysis. As of
December 31, 1993, the fair value of the C-ML Notes is estimated
to be approximately $109 million, of which approximately $54.5
million pertains to the amount reflected on the Partnership's
Consolidated Balance Sheet. The General Partner estimated that
the fair value of the C-ML Credit Agreement, which was
subsequently refinanced, as of December 25, 1992 had approximated
the carrying value.
The General Partner has been able to estimate the fair value of
the Revised ML California Credit Agreement by using a value based
on a discounted cash flow analysis. As of December 31, 1993 and
December 25, 1992, the estimated fair value approximates the
carrying values of the Revised ML California Agreement.
The General Partner has been able to estimate the fair value of
the Wincom-WEBE-WICC Restructuring Agreement by using a value
based on a discounted cash flow analysis. As of December 31,
1993, the fair value of the Wincom-WEBE-WICC Restructuring
Agreement approximates the carrying value.
As of December 25, 1992 (prior to the Restructuring Agreement),
considering the uncertainty of the Partnership's ability to meet
its obligations under the Wincom-WEBE-WICC Loan and related
accrued interest, the General Partner believed that using the
Partnership's future cash flows relating to debt service to
estimate the fair value of the Loan was not appropriate. In
addition, because of the uncertainty related to the ultimate
outcome of the Partnership's restructuring efforts, which could
not be predicted at the time, the General Partner considered the
estimation of the fair value of this loan to be impracticable.
Considering the uncertainty of the Partnership's ability to meet
its obligations under the WREX-KATC Loan and the related accrued
interest, the General Partner believes that using the
Partnership's future cash flows relating to debt-service to
estimate the fair value of the loans is not appropriate. In
addition, because of the uncertainty related to the ultimate
outcome of the Partnership's restructuring efforts, which could
not be predicted as of December 31, 1993 or December 25, 1992,
the General Partner considers estimation of the fair value of the
WREX-KATC Loan to be impracticable.
Other Financial Instruments
As discussed in Note 6, the Partnership entered into two swap
agreements in connection with the Revised ML California Credit
Agreement. The fair value of these agreements were estimated
based on the expected future cash flows. The fair value of these
agreements resulted in a net swap obligation of approximately
$2.0 million as of December 25, 1992. These two swap agreements
expired in May 1993.
12. INCOME TAXES
As discussed in Note 1, the Partnership adopted SFAS No. 109 as
of December 26, 1992. The cumulative effect of this change in
accounting principle is immaterial and there is no effect on the
provision for income taxes for the current year.
Certain entities owned by the Partnership are taxable entities
and thus are required under SFAS No. 109 to recognize deferred
income taxes. The components of the net deferred tax asset at
December 31, 1993 are as follows:
Deferred tax assets:
Basis of intangible assets $ 1,485,774
Net operating loss carryforward 30,078,208
Alternative minimum tax credit 100,000
Other 279,228
31,943,210
Deferred tax liability:
Basis of property, plant and equipment (971,125)
Total 30,972,085
Less: valuation allowance (30,972,085)
Net deferred tax asset $ 0
The components of the provision for income taxes for the year
ended December 31, 1993 relate to Wincom and are as follows:
Federal:
Current $ 100,000
Deferred 0
$ 100,000
State and Local:
Current $ 90,000
Deferred 0
$ 90,000
Total Provision $ 190,000
The change in the net deferred tax asset for the year ended
December 31, 1993 amounted to a reduction of $1,438,655 which was
fully offset by a corresponding change in the valuation
allowance.
No provision for income taxes was required for the years ended
December 25, 1992 and December 27, 1991.
At December 31, 1993, the taxable entities have available net
operating loss carryforwards which may be applied against future
taxable income. Such net operating loss carryforwards expire at
various dates from 1994 through 2007.
For the Partnership, the differences between the tax bases of
assets and liabilities and the reported amounts at December 31,
1993 are as follows:
Partners' Deficit - financial statements $(14,807,906)
Differences:
Offering expenses 19,063,585
Basis of property, plant and equipment and
intangible assets (55,087,465)
Cumulative losses of stock investments
(corporations) 78,857,467
Nondeductible management fees 7,999,324
Other 2,455,435
Partners' Capital - income tax basis $ 38,480,440
13. PRO FORMA DATA (Unaudited)
The following pro forma data was prepared to illustrate the
estimated effects on the operations of the Partnership of the
disposition of Universal which was sold on July 8, 1992:
1992 1991
Total Revenues $100,602,705 $ 99,459,127
Less: Universal (4,681,966) (8,525,093)
95,920,739 90,934,034
Net Loss $ (9,280,770) $(51,049,551)
Less: Universal net
loss 2,481,462 4,388,370
Less: Loss on sale of
Universal 6,399,000 -
Less: Extraordinary
gain on extinguishment
of debt of Universal (12,294,000) -
$(12,694,308) $(46,661,181)
Per Unit of Limited
Partnership Interest:
Net Loss $ (66.85) $ (245.72)
14. OTHER EVENTS
The California Systems have filed property tax assessment appeals
with various counties in California related to changes in the
methods used by assessors to value tangible property and
possessory interests. The revised methods significantly increased
property taxes since they included values attributed to what the
California Systems believe to be nontaxable, intangible assets.
These appeals cover the tax years from 1987 to present.
In December 1993, the California Systems obtained a favorable
decision by one county's assessment appeals board. This decision
will result in a significant reduction in assessed values and
accordingly, a significant refund of property taxes to the
California Systems. The county has the right for six months from
the decision date to elect to appeal the decision of the
assessment appeals board and seek a stay of their obligation to
refund the taxes. To date, the county has not elected to appeal
and the California Systems believe that the election to appeal is
unlikely. However, if appealed, the California Systems believe
that it is probable that the decision of the board will be
ultimately upheld by a reviewing court.
In December 1993, the California Systems reached favorable
agreement in principle with another county in California where an
appeal relating to property taxes was filed. Presently, the
California Systems are working on the settlement agreement and
finalization of the assessed values. Once finalized, this
settlement agreement would result in a significant refund of
property taxes to the California Systems.
Based upon these recent developments, the California Systems have
estimated the probable property tax refund amount and accordingly
have recognized a receivable and related reduction to general and
administrative expense amounting to $2,182,000 at December 31,
1993.
In addition, C-ML Cable reduced its estimate of its Puerto Rican
property tax liability by $2,000,000 during 1993. This change in
estimate was due mainly to the positive results of a property tax
examination completed in November 1993 by the Collection Center
of Municipal Taxes, an agency of the Puerto Rican government with
authority over all real and personal property tax matters. Based
on these developments, the Partnership has reduced accrued
liabilities and has credited property operating expenses for $1
million, based on its 50% ownership of C-ML Cable.
15. SUBSEQUENT EVENT
The Partnership engaged Merrill Lynch & Co. and Daniels &
Associates in January, 1994 to act as its financial advisors in
connection with a possible sale of all or a portion of the
Partnership's California Cable Systems.
There can be no assurances that the Partnership will be able to
enter into an agreement to sell the California Cable Systems on
terms acceptable to the Partnership or that any such sale will be
consummated. If a sale is consummated, it is expected that it
would be consummated no earlier than the second half of 1994.
As an alternative to a sale, the Partnership and its financial
advisors may consider other strategic transactions to maximize
the value of the California Cable Systems, such as a joint
venture or an affiliation agreement with a larger multiple system
operator. Merrill Lynch & Co. will not receive a fee or other
form of compensation for acting as financial advisor in
connection with a sale or other strategic transaction.
The Partnership is currently unable to determine the impact of
the February 22, 1994 FCC action and previous FCC actions, as
discussed in Note 2, or its ability to sell the California Cable
Systems or the potential timing and value of such sale.
As of December 31, 1993, California Cable represented
approximately 53% of the consolidated assets of the Partnership
and approximately 55% of the consolidated operating revenues.
ML MEDIA PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
AS DECEMBER 31, 1993 AND DECEMBER 25, 1992
SCHEDULE III CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ML Media Partners, L.P.
Condensed Balance Sheets
as of December 31, 1993 and December 25, 1992
Notes 1993 1992
ASSETS:
Cash and cash equivalents 3 $ 4,437,223 $ 4,252,402
Accrued interest 11,905 4,176
Prepaid expenses and
deferred charges (net of
accumulated amortization
of $4,755,452 at December
31, 1993, and $4,752,356
at December 25, 1992) 12,381 15,476
Investment in Subsidiaries 1,2 (8,395,362) (12,278,320)
TOTAL ASSETS $ (3,933,853) $ (8,006,266)
LIABILITIES AND PARTNERS'
DEFICIT:
Liabilities:
Accounts payable and
accrued liabilities $ 10,874,053 $ 8,178,980
Partners' Deficit:
General Partner:
Capital contributions, net
of offering expenses 1,708,299 1,708,299
Cumulative loss (1,793,460) (1,807,233)
(85,161) (98,934)
Limited Partners:
Capital contributions, net
of offering expenses
(187,994 Units of Limited
Partnership Interest) 169,121,150 169,121,150
Tax allowance cash
distribution (6,291,459) (6,291,459)
Cumulative loss (177,552,436) (178,916,003)
(14,722,745) (16,086,312)
Total Partners' Deficit (14,807,906) (16,185,246)
TOTAL LIABILITIES AND
PARTNERS' DEFICIT $ (3,933,853) $ (8,006,266)
See Notes to Condensed Financial Statements.
ML MEDIA PARTNERS, L.P.
AS OF DECEMBER 31, 1993, DECEMBER 25, 1992, DECEMBER 27, 1991
SCHEDULE III CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Cont'd)
ML Media Partners, L.P.
Condensed Statements of Operations
For the Years Ended December 31, 1993, December 25, 1992
and December 27, 1991
Year Ended Year Ended Year Ended
December 31, December 25, December 27,
NOTE 1993 1992 1991
S
REVENUES:
Service fee income
from C-ML Radio $ 198,977 $ 469,794 $ -
Interest 147,466 158,738 273,704
Total revenues 346,443 628,532 273,704
COSTS AND EXPENSES:
General and
administrative 1,409,387 1,431,637 591,103
Amortization 3,095 108,728 1,511,436
Management fees to
general partner 1,591,831 1,629,882 1,667,934
Total costs and
expenses 3,004,313 3,170,247 3,770,473
Share of subsidiaries'
income (loss) before
provision for income
taxes and
extraordinary item 2 3,735,423 (19,033,055 (47,552,782
) )
Income (loss) before
provision for income
taxes and
extraordinary item 1,077,553 (21,574,770 (51,049,551)
)
Provision for income
taxes of (190,000) - -
subsidiaries
Extraordinary item-
gain on
extinguishment of
debt of subsidiaries 489,787 12,294,000 -
NET INCOME (LOSS) $ 1,377,340 $(9,280,770 $(51,049,55
) 1)
See Notes to Condensed Financial Statements.
ML MEDIA PARTNERS, L.P.
AS DECEMBER 31, 1993 AND DECEMBER 25, 1992
AND DECEMBER 27, 1991
SCHEDULE III CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Cont'd)
ML Media Partners, L.P.
Condensed Statements of Cash Flows
For the Years Ended December 31, 1993 and December 25, 1992,
and December 27, 1991
1993 1992 1991
Cash flows from operating activities:
Net income (loss) $ 1,377,340 $(9,280,770) $(51,049,551)
Adjustments to
reconcile net income
(loss) to net cash
provided by (used in)
operating activities:
Reimbursement of
management fees
received from
subsidiaries - - 686,000
Amortization 3,095 108,728 1,511,436
Share of
subsidiaries' net
income/(loss) before
provision for income
taxes and
extraordinary item (3,735,423) 19,033,055 47,552,782
Share of
subsidiaries'
provision for income
taxes 190,000 - -
Share of
subsidiaries'
extraordinary item (489,787) (12,294,000) -
Change in assets and
liabilities:
Decrease/(Increase)
in accrued interest (7,729) 27,118 15,738
Decrease/(Increase)
in prepaid expenses,
deferred charges and
other (143,582) 188,164 293,260
ML MEDIA PARTNERS, L.P.
AS DECEMBER 31, 1993 AND DECEMBER 25, 1992
AND DECEMBER 27, 1991
SCHEDULE III CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Cont'd)
ML Media Partners, L.P.
Condensed Statements of Cash Flows
For the Years Ended December 31, 1993 and December 25, 1992,
and December 27, 1991
1993 1992 1991
Increase in accounts
payable and accrued
liabilities 2,695,073 2,527,452 1,251,918
Net Cash provided by
(used in) operating
activities (111,013) 309,747 261,583
Cash flows from
investing activities:
Net increase in
investment in
subsidiaries 295,834 (26,624) (1,852,614)
Net
Increase/(Decrease)
in cash and cash
equivalents 184,821 283,123 (1,591,031)
Cash and cash
equivalents at
beginning of year 4,252,402 3,969,279 5,560,310
Cash and cash
equivalents at end
of year $ 4,437,223 $ 4,252,402 $ 3,969,279
See Notes to Condensed Financial Statements.
ML MEDIA PARTNERS, L.P.
AS OF DECEMBER 31, 1993, DECEMBER 25, 1992
AND DECEMBER 27, 1991
Schedule III CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(Cont'd)
ML Media Partners, L.P.
Notes To Condensed Financial Statements
For the Years Ended December 31, 1993
December 25, 1992 and December 27, 1991
1. Organization
As of December 31, 1993, ML Media Partners, L.P. (the
"Partnership") wholly-owned Wincom, KATC-TV, WREX-TV, WEBE-FM,
WICC-AM, the California Systems and the Anaheim Radio Stations.
In addition, the Partnership wholly-owned Universal for all of
1991 and for the 193-day period in 1992. The Partnership also
had a 99.999% interest in KATC Associates, WREX Associates, WEBE
Associates, WICC Associates, Anaheim Radio Associates, ML
California Associates; a 50% interest in Century - ML Cable
Venture; and a 49.999% interest in Century - ML Radio Venture
(see Note 10). All of the preceding investments shall herein be
referred to as the "Subsidiaries".
2. Investment in Subsidiaries
The Partnership's investment in the Subsidiaries is accounted for
under the equity method in the accompanying condensed financial
statements.
The following is a summary of the financial position and results
of operations of the Subsidiaries:
December 31, December 25,
1993 1992
Assets $ 245,390,428 $ 257,282,388
Liabilities (253,785,790) (269,560,708)
Investment in Subsidiaries $ (8,395,362) $ (12,278,320)
Year Ended Year Ended Year Ended
December 31, December 25, December 27,
1993 1992 1991
Revenues $100,202,694 $ 99,974,173 $ 98,761,013
Share of
subsidiaries'
income (loss)
before provision
for income taxes
and extraordinary
item 3,735,423 (19,033,055) (47,552,782)
Provision for
income taxes of
subsidiaries (190,000) - -
Extraordinary item-
gain on
extinguishment of
debt of
subsidiaries 489,787 12,294,000 -
Share of
subsidiaries'
Net Income (Loss) $ 4,035,210 $ (6,739,055) $(47,552,782)
ML MEDIA PARTNERS, L.P.
AS OF DECEMBER 31, 1993, DECEMBER 25, 1992
AND DECEMBER 27, 1991
Schedule III CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(Cont'd)
ML MEDIA PARTNERS, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1993
DECEMBER 25, 1992 AND DECEMBER 27, 1991
3. Cash and Cash Equivalents
At December 31, 1993, the Partnership had $4,437,223 in cash and
cash equivalents, of which $207,843 was invested in a bankers
acceptance and $4,222,403 was invested in commercial paper. In
addition, the Partnership had $6,977 invested in cash and demand
deposits. These funds are held in reserve for the operating
requirements of the Partnership.
Per the terms of the WREX-KATC Loan (see Notes 2 and 6), the bank
had the right, if certain events of default occurred under the
WREX-KATC Loan, to request working capital advances from the
Partnership to WREX-TV and KATC-TV in an amount not to exceed
$1.0 million. The Partnership contributed $600,000 to WREX-TV and
KATC-TV in the first quarter of 1991, $100,000 during the fourth
quarter of 1991, $290,000 in early 1992 and $10,000 in April,
1993. The Partnership does not intend to, nor is it obligated
to, advance any further working capital to WREX and KATC.
At December 25, 1992, the Partnership had $4,252,402 in cash and
cash equivalents, of which $112,109 was invested in a bankers
acceptance and $4,085,981 was invested in commercial paper. In
addition, the Partnership had $54,312 invested in cash and demand
deposits.
ML MEDIA PARTNERS, L.P.
AS OF DECEMBER 31, 1993, DECEMBER 25, 1992 AND DECEMBER 27, 1991
Schedule V Property, Plant and Equipment
Balance at Retirements
Beginning of and Other Balance at
Perio Period Additions Changes End of Period
d
1993 $195,136,960 $10,182,409 $ (7,963,238) $197,356,131
(2)
1992 $198,619,291 $10,262,156 $(13,744,487) $195,136,960
(1)
1991 $186,182,059 $12,652,952 $ (215,720) $198,619,291
(1) Retirements and Other Changes includes the sale of property,
plant and equipment of Universal in the amount of
$13,510,601 (see Note 3).
(2) Retirements and Other Changes includes the sale of property,
plant and equipment of the Indianapolis Stations in the
amount of $2,938,203 (see Note 3).
ML MEDIA PARTNERS, L.P.
AS OF DECEMBER 31, 1993, DECEMBER 25, 1992 AND DECEMBER 27, 1991
Schedule VI Accumulated Depreciation of Property, Plant &
Equipment
Additions
Balance at Charged to Retirements
Beginning of Costs and and Other Balance at
Perio Period Expenses Changes End of Period
d
1993 $91,378,707 $19,574,073 $(5,997,143) (2) $104,955,637
1992 $77,184,913 $19,024,546 $(4,830,752) (1) $ 91,378,707
1991 $58,881,222 $18,499,808 $ (196,117) $ 77,184,913
(1) Retirements and Other Changes includes the accumulated
depreciation of property, plant and equipment related to the
sale of Universal in the amount of $4,615,513 (see Note 3).
(2) Retirements and Other Changes includes the accumulated
depreciation of property, plant and equipment related to the
sale of the Indianapolis Stations in the amount of
$1,161,921 (see Note 3).
ML MEDIA PARTNERS, L.P.
AS OF DECEMBER 31, 1993, DECEMBER 25, 1992 AND DECEMBER 27, 1991
Schedule VIII Accumulated Amortization of Intangible Assets
and Accumulated Amortization of Prepaid Expenses
and Deferred Charges
Additions
Charged to
Balance at Costs and
Beginning of Expenses or Deductions and Balance at
Perio Period Other Other End of Period
d Accounts
Intangible Assets
1993 $112,996,421 $11,163,146 $(13,090,160) (4) $111,069,407
1992 $107,868,052 $11,885,557 $ (6,757,188) (2) $112,996,421
1991 $ 68,590,822 $16,458,117 $ 22,819,113 (1) $107,868,052
Prepaid Expenses and Deferred Charges
1993 $6,601,766 $ 682,666 (43,344) $7,241,088
1992 $6,385,771 $ 606,506 $ (390,511)(3) $6,601,766
1991 $4,433,494 $2,017,983 $ (65,706) $6,385,771
(1) Deductions and Other for Intangible Assets includes the
write-off of intangible assets (principally, goodwill)
related to Wincom for approximately $21.6 million.
(2) Deductions and Other for Intangible Assets consists of the
accumulated amortization of intangible assets related to the
sale of Universal in the amount of $6,757,188 (see Note 3).
(3) Deductions and Other for Prepaid Expenses and Deferred
Charges includes the accumulated amortization of prepaid
expenses and deferred charges related to the sale of
Universal in the amount of $312,492 (see Note 3).
(4) Deductions and Other for Intangible Assets consists of the
accumulated amortization of intangible assets related to the
sale of the Indianapolis Stations in the amount of
$13,090,160 (see Note 3).
ML MEDIA PARTNERS, L.P.
FOR THE YEARS ENDED DECEMBER 31, 1993, DECEMBER 25, 1992
AND DECEMBER 27, 1991
Schedule X Supplementary Income Statement Information
Item Charged to costs and expenses
1993 1992 1991
Maintenance and Repairs $ 957,153 $1,107,115 $1,015,088
Taxes, other than
payroll and income $3,645,936 $3,423,621 $3,137,266
taxes
Royalties $1,056,484 $1,207,258 $1,219,837
Advertising costs $1,410,848 $1,560,991 $1,753,911
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
Part III
Item 10. Directors and Executive Officers of Registrant
Registrant has no executive officers or directors. The General
Partner manages Registrant's affairs and has general
responsibility and authority in all matters affecting its
business. The responsibilities of the General Partner are
carried out either by its executive officers (all of whom are
executive officers of either RP Media Management or ML Media
Management Inc.) or executive officers of RP Media Management or
ML Media Management Inc. acting on behalf of the General Partner.
The executive officers and directors of the General Partner, RP
Media Management and ML Media Management Inc. are:
RP Media Management (the "Management Company")
Served in Present
Capacity
Name Since (1) Position Held
I. Martin Pompadur 1/01/86 President, Chief Executive
Officer, Chief Operating
Officer, Secretary,
Director
Elizabeth McNey Yates 4/01/88 Executive Vice President
(1) Directors hold office until their successors are elected and
qualified. All officers serve at the pleasure of the Board
of Directors of the respective entity.
ML Media Management Inc. ("MLMM")
Served in Present
Capacity
Name Since (1) Position Held
Kevin K. Albert 02/19/91 President
12/16/85 Director
Robert F. Aufenanger 02/02/93 Executive Vice President
03/28/88 Director
Robert W. Seitz 02/02/93 Vice President
02/01/93 Director
James K. Mason 02/01/93 Director
Steven N. Baumgarten 02/02/93 Vice President
David G. Cohen 03/07/94 Treasurer
(1) Directors hold office until their successors are elected and
qualified. All executive officers serve at the pleasure of
the Board of Directors of the respective entity.
Media Management Partners (the "General Partner")
Served in Present
Capacity
Name Since (1) Position Held
I. Martin Pompadur 3/22/91 Chairman
1/30/87 President
Elizabeth McNey Yates 3/01/90 Senior Vice President
Kevin K. Albert 3/22/91 Senior Vice President
Robert F. Aufenanger 8/12/88 Vice President
Steven N. Baumgarten 2/02/93 Vice President
David G. Cohen 3/07/94 Treasurer
(1) All executive officers serve at the pleasure of the Partners
of the General Partner.
I. Martin Pompadur, 58, is the Chairman and Chief Executive
Officer of GP Station Partners which is the General Partner of
Television Station Partners, L.P., a private limited partnership
that owns and operates four network affiliated television
stations. He is the Chairman and Chief Executive Officer of
PBTV, Inc., the Managing General Partner of Northeastern
Television Investors Limited Partnership, a private limited
partnership which owns and operates WBRE-TV, a network affiliated
station in Wilkes-Barre Scranton, Pennsylvania. Mr. Pompadur is
also Chairman and Chief Executive Officer of U.S. Cable Partners,
a general partner of U.S. Cable Television Group, L.P. ("U.S.
Cable"), which owns and operates cable systems in ten states. He
is also the Chief Executive Officer and Chief Operating Officer
of RP Opportunity Management, L.P. ("RPOM"), a limited
partnership organized under the laws of Delaware, which is
indirectly owned and controlled by Mr. Pompadur. RPOM is a
partner in Media Opportunity Management Partners, an affiliate of
the General Partner, and the general partner of ML Media
Opportunity Partners, L.P. which was formed to invest in under
performing and turnaround media business and which presently owns
two cable television systems, an FM radio station, a 51% interest
in an entity which owns three network affiliated television
stations, an equity position in a cellular telecommunications
company, and which participates in a joint venture to produce
programming for broadcast and cable television, and in London-
based joint ventures in various media operations in Europe. Mr.
Pompadur is the Principal Executive Officer of ML Media
Opportunity Partners, L.P. Mr. Pompadur is also Chief Executive
Officer of MultiVision Cable TV Corp. ("MultiVision"), a cable
television multiple system operator ("MSO") organized in January
1988 and owned principally by Mr. Pompadur to provide MSO
services to cable television systems acquired by entities under
his control. Mr. Pompadur is a principal owner, member of the
Board of Directors and Secretary of Caribbean International News
Corporation ("Caribbean"). Caribbean owns and publishes EL
Vocero, the largest Spanish language daily newspaper in the U.S.
He is a principal shareholder in Hunter Publishing Company, Inc.,
publisher of monthly trade magazines. Mr. Pompadur served as
president of Ziff Corporation from 1977 through 1982. Ziff
Corporation was the holding company for Ziff-Davis Publishing
Company, one of the world's largest publishers of special
interest and business publications, as well as Ziff-Davis
Broadcasting Company, operator of six network affiliated
television stations. Before joining Ziff Corporation, Mr.
Pompadur was with ABC, Inc. for 17 years. At ABC, Inc., he was a
member of the Board of Directors and also served in the following
capacities: General Manager of the Television Network; Vice
President of the Broadcast Division; and President of the Leisure
Activities Group, which included ABC Publishing, Records, Music
Publishing and Motion Picture theatres.
Elizabeth McNey Yates, 31, Executive Vice President of RP Media
Management and Senior Vice President of Media Management
Partners, joined RP Companies Inc., an entity controlled by Mr.
Pompadur, in April 1988 and has senior executive responsibilities
in the areas of finance, operations, administration and
acquisitions. Prior to joining Mr. Pompadur, Ms. Yates was
employed in Merrill Lynch Investment Banking's Partnership
Finance Department, where she was actively involved in
structuring and implementing public partnership offerings and in
monitoring investments made by Merrill Lynch managed
partnerships. Ms. Yates is an Executive Vice President of RP
Opportunity Management.
Kevin K. Albert, 41, a Managing Director of Merrill Lynch
Investment Banking Group ("ML Investment Banking"), joined
Merrill Lynch in 1981. Mr. Albert works in the Equity Private
Placement Group and is involved in structuring and placing a
diversified array of private equity financings including common
stock, preferred stock, limited partnership interests and other
equity-related securities. Mr. Albert has a B.A. and an M.B.A.
from the University of California, Los Angeles. Mr. Albert is
also a director of Maiden Lane Partners, Inc. ("Maiden Lane"), an
affiliate of the general partner of Liberty Equipment Investors -
1983; a director of Whitehall Partners Inc. ("Whitehall"), an
affiliate of MLMM and the general partner of Liberty Equipment
Investors L.P. - 1984; a director of ML Film Entertainment Inc.
("ML Film"), an affiliate of MLMM and the managing general
partner of the general partners of Delphi Film Associates, Delphi
Film Associates II, III, IV, V and ML Delphi Premier Partners; a
director of ML Opportunity Management Inc. ("ML Opportunity"), an
affiliate of the General Partner and a joint venturer in Media
Opportunity Management Partners, the general partner of ML Media
Opportunity Partners, L.P.; a director of MLL Antiquities Inc.
("MLL Antiquities"), an affiliate of MLMM and the administrative
general partner of The Athena Fund II, L.P.; a director of ML
Mezzanine II Inc. ("ML Mezzanine II"), an affiliate of MLMM and
sole general partner of the managing general partner of ML-Lee
Acquisition Fund II, L.P. and ML-Lee Acquisition Fund (Retirement
Accounts) II, L.P.; a director of ML Mezzanine Inc. ("ML
Mezzanine"), an affiliate of MLMM and the sole general partner of
the managing general partner of ML-Lee Acquisition Fund, L.P.; a
director of Merrill Lynch Venture Capital Inc. ("ML Venture"), an
affiliate of MLMM and the general partner of the Managing General
Partner of ML Venture Partners I, L.P. ("Venture I"), ML Venture
Partners II, L.P. ("Venture II"), and ML Oklahoma Venture
Partners Limited Partnership ("Oklahoma"); a director of Merrill
Lynch R&D Management Inc. ("ML R&D"), an affiliate of MLMM and
the general partner of the General Partner of ML Technology
Ventures, L.P.; and a director of MLL Collectibles Inc. ("MLL
Collectibles"), an affiliate of MLMM and the administrative
general partner of The NFA World Coin Fund, L.P. Mr. Albert also
serves as an independent general partner of Venture I and Venture
II.
Robert F. Aufenanger, 40, a Vice President of Merrill Lynch & Co.
Corporate Strategy, Credit and Research and a Director of the
Partnership Management Department, joined Merrill Lynch in 1980.
Mr. Aufenanger is responsible for the ongoing management of the
operations of the equipment and project related limited
partnerships for which subsidiaries of ML Leasing Equipment
Corp., an affiliate of Merrill Lynch, are general partners. Mr.
Aufenanger was previously Controller of Merrill Lynch Leasing
Inc. from 1982 through 1984 and had worked for the international
public accounting firm of Ernst & Whinney from 1975 to 1980. Mr.
Aufenanger has a B.S. from St. John's University, is a New York
State licensed C.P.A. and is a member of the American Institute
of Certified Public Accountants and the N.Y.S. Society of
Certified Public Accountants. Mr. Aufenanger is also a director
of Maiden Lane, Whitehall, ML Opportunity, ML Film, MLL
Antiquities, ML Venture, ML R&D, MLL Collectibles, ML Mezzanine
and ML Mezzanine II.
Robert W. Seitz, 47, is a First Vice President of Merrill Lynch &
Co. Corporate Strategy, Credit and Research and a Managing
Director within the Corporate Credit Division of Merrill Lynch.
Mr. Seitz is the Private Client Senior Officer and is also
responsible for the firm's Partnership Management and Asset
Recovery Management Departments. Prior to his present assignment,
Mr. Seitz was a Managing Director and the Senior Credit Officer
of the Merrill Lynch Public Finance Group, and before that,
manager of Western Hemisphere Business Development for the
Merrill Lynch International Banks. Prior to joining Merrill
Lynch, Mr. Seitz served as a Vice President and Unit Head in
Corporate Banking at Citibank, N.A. for ten years. Mr. Seitz
holds an MBA in Finance and Marketing from the University of
Rochester and a Bachelor of Arts in Psychology from Gettysburg
College. Mr. Seitz is also a director of Maiden Lane, Whitehall,
ML Opportunity, ML Venture, ML R&D, ML Film, MLL Antiquities, and
MLL Collectibles.
James K. Mason, 41, a Managing Director of ML Investment Banking,
is a senior member of the Telecom, Media and Technology group. He
joined Merrill Lynch Investment Banking in 1978. Mr. Mason is
responsible for advising Merrill Lynch's entertainment and media
industry clients on such matters as financings, divestitures,
restructurings, mergers and acquisitions. Mr. Mason is also a
director of ML Opportunity Management Inc. Prior to joining
Merrill Lynch, Mr. Mason was involved in news and production at
Metromedia Inc.'s WNEW-TV and at Capital Cities' WTVD-TV. He also
was station manager for the NBC-TV affiliate in Raleigh-Durham,
North Carolina. Mr. Mason has two B.A. degrees from Duke
University, and an M.B.A. from Columbia University Graduate
School of Business.
Steven N. Baumgarten, 38, a Vice President of Merrill Lynch & Co.
Corporate Strategy, Credit and Research, joined Merrill Lynch in
1986. Mr. Baumgarten shares responsibility for the ongoing
management of the operations of the equipment and project related
limited partnerships for which subsidiaries of ML Leasing
Equipment Corp., an affiliate of Merrill Lynch, are general
partners. Mr. Baumgarten was previously Manager of Financial
Analysis for the same group from 1986 through 1988. Mr.
Baumgarten has an MBA from New York University, a J.D. from the
Boston University School of Law and a B.A. from the State
University of New York at Stony Brook. Mr. Baumgarten is a
member of the Bar in the state of Massachusetts and is a member
of the American Bar Association.
David G. Cohen, 31, an Assistant Vice President of Merrill Lynch
& Co. Corporate Strategy, Credit and Research, joined Merrill
Lynch in 1987. Mr. Cohen's responsibilities include
controllership and financial management functions for certain
partnerships for which subsidiaries of ML Leasing Equipment
Corp., an affiliate of Merrill Lynch, are general partners.
Prior to joining Merrill Lynch, Mr. Cohen worked for the
international public accounting firm of Arthur Andersen & Co.
from 1984 through 1987. Mr. Cohen has a B.S. from the University
of Maryland and is a New York State Certified Public Accountant.
Item 11.Executive Compensation
Registrant does not pay the executive officers or directors of
the General Partner any remuneration. See Note 7 to the
Financial Statements included in Item 8. hereof, however, for
sums paid by Registrant to the General Partner and its affiliates
for the years ended December 31, 1993, December 25, 1992, and
December 27, 1991.
Item 12.Security Ownership of Certain Beneficial Owners and
Management
As of February 1, 1994, no person was known by Registrant to be
the beneficial owner of more than 5 percent of the Units.
To the knowledge of the General Partner, as of February 1, 1994,
no officer or director of the General Partner, nor the officers
or directors as a group, is the beneficial owner of 5% or more of
the outstanding common stock of Merrill Lynch & Co., Inc.
RP Media Management is owned 50% by IMP Media Management, Inc.
and 50% by The Elton H. Rule Company. IMP Media Management is
100% owned by Mr. I. Martin Pompadur and The Elton H. Rule
Company is 100% owned by the estate of Mr. Elton H. Rule.
Item 13.Certain Relationships and Related Transactions
Refer to Note 7 to the Financial Statements included in Item 8
hereof, and in Item 1 for a description of the relationship of
the General Partner and its affiliates to Registrant and its
subsidiaries.
Part IV
Item 14.Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a) Financial Statements, Financial Statement Schedules and
Exhibits
Financial Statements and Financial Statement Schedules
See Item 8. "Financial Statements and Supplementary Data-Table
of Contents".
Exhibits Incorporated by Reference
3.1 Amended and Restated Exhibit 3.1 to Form S-1
Certificate of Limited Registration Statement (File No.
Partnership. 33-2290)
3.2.1 Second Amended and Exhibit 3.2.1 to Form 10-K Report
Restated Agreement of Limited for the fiscal year ended December
Partnership dated May 14, 1986. 26, 1986 (File No. 0-14871)
3.2.2 Amendment No. 1 dated Exhibit 3.2.2 to Form 10-K Report
February 27, 1987 to Second for the fiscal year ended December
Amended and Restated Agreement 26, 1986 (File No. 0-14871)
of Limited Partnership.
10.1.1 Joint Venture Exhibit 10.1.1 to Form 10-K Report
Agreement dated July 2, 1986 for the fiscal year ended December
between Registrant and Century 26, 1986 (File No. 0-14871)
Communications Corp.("CCC")
10.1.2 Management Agreement Exhibit 10.1.2 to Form 10-K Report
and Joint Venture Agreement for the fiscal year ended December
dated December 16, 1986 between 26, 1986 (File No. 0-14871)
Registrant and CCC (attached as
Exhibit 1 to Exhibit 10.3).
10.1.3 Management Agreement Exhibit 10.1.3 to Form 10-K Report
and Joint Venture Agreement for the fiscal year ended December
dated as of February 15, 1989 30, 1988 (File No. 0-14871)
between Registrant and CCC.
10.1.4 Amended and Restated
Management Agreement and Joint
Venture Agreement of Century/ML
Cable Venture dated January 1,
1994 between Century
Communications Corp. and
Registrant.
10.2.1 Stock Purchase Exhibit 28.1 to Form 8-K Report
Agreement dated July 2, 1986 dated December 16, 1986 (File No.
between Registrant and the 33-2290)
sellers of shares of Cable
Television Company of Greater
San Juan, Inc.
10.2.2 Assignment dated July Exhibit 10.2.2 to Form 10-K Report
2, 1986 between Registrant and for the fiscal year ended December
Century-ML Cable Corporation ("C-26, 1986 (File No. 0-14871)
ML").
10.2.3 Transfer of Assets and
Assumption of Liabilities
Agreement dated January 1, 1994
between Century-ML Radio
Venture, Century/ML Cable
Venture, Century Communications
Corp. and Registrant.
10.3 Amended and Restated Exhibit 10.3.5 to Form 10-K Report
Credit Agreement dated as of for the fiscal year ended December
March 8, 1989 between Citibank, 30, 1988 (File No. 0-14871)
N.A., Agent, and C-ML.
10.3.1 Note Agreement dated Exhibit 10.3.1 to Form 10-K Report
as of December 1, 1992 between for the fiscal year ended December
Century-ML Cable Corporation, 25, 1992 (File No. 0-14871)
Century/ML Cable Venture,
Jackson National Life Insurance
Company, The Lincoln National
Life Insurance Company and
Massachusetts Mutual Life
Insurance Company.
10.3.2 Second Restated Credit Exhibit 10.3.2 to Form 10-K Report
Agreement dated December 1, 1992 for the fiscal year ended December
among Century-ML Cable 25, 1992 (File No. 0-14871)
Corporation, Century/ML Cable
Venture and Citibank.
10.3.3 Amendment dated as of Exhibit 10.3.3 to Form 10-Q for
September 30, 1993 among Century-the quarter ended September 24,
ML Cable Corporation, the banks 1993 (File No. 0-14871)
parties to the Credit Agreement,
and Citibank, N.A. and
Century/ML Cable Venture.
10.3.4 Amendment dated as of
December 15, 1993 among Century-
ML Cable Corporation, the banks
parties to the Credit Agreement,
and Citibank, N.A. and
Century/ML Cable Venture.
10.4 Pledge Agreement dated Exhibit 10.4 to Form 10-K Report
December 16, 1986 among for the fiscal year ended December
Registrant, CCC, and Citibank, 26, 1986 (File No. 0-14871)
N.A., Agent.
10.5 Guarantee dated as of Exhibit 10.5 to Form 10-K Report
December 16, 1986 among for the fiscal year ended December
Registrant, CCC and Citibank, 25, 1987 (File No. 0-14871)
N.A., Agent.
10.6 Assignment of Accounts Exhibit 10.6 to Form 10-K Report
Receivable dated as of December for the fiscal year ended December
16, 1986 among Registrant, CCC 25, 1987 (File No. 0-14871)
and Citibank, N.A., Agent.
10.7 Real Property Mortgage Exhibit 10.7 to Form 10-K for the
dated as of December 16, 1986 fiscal year ended December 30,
among Registrant, CCC and 1988 (File No. 0-14871)
Citibank, N.A., Agent.
10.8 Stock Sale and Purchase Exhibit 28.1 to Form 8-K Report
Agreement dated as of December dated December 23, 1986 (File No.
5, 1986 between SCIPSCO, Inc. 33-2290)
and ML California Cable Corp.
("ML California").
10.9 Security Agreement dated as Exhibit 10.10 to Form 10-K Report
of December 22, 1986 among for the fiscal year ended December
Registrant, ML California and 26, 1987 (File No. 0-14871)
BA.
10.10 Assets Purchased Exhibit 28.1 to Form 8-K Report
Agreement dated as of September dated February 2, 1987
17, 1986 between Registrant and
Loyola University.
10.11 Asset Acquisition Exhibit 28.1 to Form 8-K Report
Agreement dated April 22, 1987 dated October 14, 1987 (File No.
between Community Cable-Vision 33-2290)
of Puerto Rico Associates,
Community Cable-Vision of Puerto
Rico, Inc., Community Cable-
Vision Incorporated and Century
Communications Corp., as
assigned.
10.12 Asset Purchase Exhibit 2.1 to Form 8-K Report
Agreement dated April 29, 1987 dated September 16, 1987 (File No.
between Registrant and Gilmore 33-2290)
Broadcasting Corporation.
10.13 License Holder Pledge Exhibit 2.5 to Form 8-K Report
Agreement dated August 27, 1987 dated September 15, 1987 (File No.
by Registrant and Media 33-2290)
Management Partners in favor of
Manufacturers Hanover.
10.14 Asset Purchase Exhibit 28.1 to Form 8-K Report
Agreement dated August 20, 1987 dated January 15, 1988 (File No.
between 108 Radio Company 33-2290)
Limited Partnership and
Registrant.
10.15 Security Agreement Exhibit 28.3 to Form 8-K Report
dated as of December 16, 1987 dated January 15, 1988 (File No.
between Registrant and CNB. 33-2290)
10.16 Asset Purchase Exhibit 10.25 to Form 10-K Report
Agreement dated as of January 9, for the fiscal year ended December
1989 between Registrant and 30, 1988 (File No. 0-14871)
Connecticut Broadcasting
Company, Inc. ("WICC").
10.17.1 Stock Purchase Exhibit 28.2 to Form 10-Q for the
Agreement dated June 17, 1988 quarter ended June 24, 1988 (File
between Registrant and the No. 0-14871)
certain sellers referred to
therein relating to shares of
capital stock of Universal Cable
Holdings, Inc. ("Universal").
10.17.2 Amendment and Consent Exhibit 2.2 to Form 8-K Report
dated July 29, 1988 between dated September 19, 1988 (File No.
Russell V. Keltner, Larry G. 0-14871)
Wiersig and Donald L. Benson,
Universal Cable Midwest, Inc.
and Registrant.
10.17.3 Amendment and Consent Exhibit 2.3 to Form 8-K Report
dated July 29, 1988 between dated September 19, 1988 (File No.
Ellsworth Cable, Inc., Universal 0-14871)
Cable Midwest, Inc. and
Registrant.
10.17.4 Amendment and Consent Exhibit 2.4 to Form 8-K Report
dated August 29, 1988 between ST dated September 19, 1988 (File No.
Enterprises, Ltd., Universal 0-14871)
Cable Communications, Inc. and
Registrant.
10.17.5 Amendment and Consent Exhibit 2.5 to Form 8-K Report
dated September 19, 1988 between dated September 19, 1988 (File No.
Dennis Wudtke, Universal Cable 0-14871)
Midwest, Inc., Universal Cable
Communications, Inc. and
Registrant.
10.17.6 Amendment and Consent Exhibit 10.26.6 to Form 10-K
dated October 14, 1988 between Report for the fiscal year ended
Down's Cable, Inc., Universal December 30, 1988 (File No. 0-
Cable Midwest, Inc. and 14871)
Registrant.
10.17.7 Amendment and Consent Exhibit 10.26.7 to Form 10-K
dated October 14, 1988 between Report for the fiscal year ended
SJM Cablevision, Inc., Universal December 30, 1988 (File No. 0-
Cable Midwest, Inc. and 14871)
Registrant.
10.17.8 Bill of Sale and Exhibit 2.6 to Form 8-K Report
Transfer of Assets dated as of dated September 19, 1988 (File No.
September 19, 1988 between 0-14871)
Registrant and Universal Cable
Communications Inc.
10.18 Credit Agreement dated Exhibit 10.27 to Form 10-K Report
as of September 19, 1988 among for the fiscal year ended December
Registrant, Universal, certain 30, 1988 (File No. 0-14871)
subsidiaries of Universal, and
Manufacturers Hanover Trust
Company, as Agent.
10.19 Stock Purchase Exhibit 10.28 to Form 10-K Report
Agreement dated October 6, 1988 for the fiscal year ended December
between Registrant and the 30, 1988 (File No. 0-14871)
certain sellers referred to
therein relating to shares of
capital stock of Acosta
Broadcasting Corp.
10.20 Stock Purchase Exhibit 28.1 to Form 10-Q for the
Agreement dated April 19, 1988 quarter ended June 24, 1988 (File
between Registrant and the No. 0-14871)
certain sellers referred to
therein relating to shares of
capital stock of Wincom
Broadcasting Corporation.
10.21 Subordination Exhibit 2.3 to Form 8-K Report
Agreement dated as of August 15, dated August 26, 1988 (File No. 0-
1988 among Wincom, the 14871)
Subsidiaries, Registrant and
Chemical Bank.
10.22 Management Agreement Exhibit A to Exhibit 10.30.2 above
dated August 26, 1988 between
Registrant and Wincom.
10.22.1 Management Agreement Exhibit 10.22.1 to Form 10-Q for
by and between Fairfield the quarter ended June 25, 1993
Communications, Inc. and (File No. 0-14871)
Registrant and ML Media
Opportunity Partners, L.P. dated
May 12, 1993.
10.22.2 Sharing Agreement by Exhibit 10.22.2 to Form 10-Q for
and among Registrant, ML Mediathe quarter ended June 25, 1993
Opportunity Partners, L.P., RP(File No. 0-14871)
Companies, Inc., Radio Equity
Partners, Limited Partnership
and Fairfield Communications,
Inc.
10.23 Amended and Restated Exhibit 10.33 to Form 10-Q for the
Credit, Security and Pledge quarter ended June 30, 1989 (File
Agreement dated as of August 15, No. 0-14871)
1988, as amended and restated as
of July 19, 1989 among
Registrant, Wincom Broadcasting
Corporation, Win Communications
Inc., Win Communications of
Florida, Inc., Win
Communications Inc. of Indiana,
WEBE Associates, WICC
Associates, Media Management
Partners, and Chemical Bank and
Chemical Bank, as Agent.
10.23.1 Second Amendment dated Exhibit 10.23.1 to Form 10-Q for
as of July 30, 1993 to the the quarter ended June 25, 1993
Amended and Restated Credit, (File No. 0-14871)
Security and Pledge Agreement
dated as of August 15, 1988, as
amended and restated as of July
19, 1989 and as amended by the
First Amendment thereto dated as
of August 14, 1989 among
Registrant, Wincom Broadcasting
Corporation, Win Communications
Inc., Win Communications Inc. of
Indiana, WEBE Associates, WICC
Associates, Media Management
Partners, and Chemical Bank and
Chemical Bank, as Agent.
10.24 Agreement of Exhibit 10.34 to Form 10-Q for the
Consolidation, Extension, quarter ended June 30, 1989 (File
Amendment and Restatement of the No. 0-14871)
WREX Credit Agreement and KATC
Credit Agreement between
Registrant and Manufacturers
Hanover Trust Company dated as
of June 21, 1989.
10.25 Asset Purchase Exhibit 10.35 to Form 10-Q for the
Agreement between ML Media quarter ended September 29, 1989
Partners, L.P. and Anaheim (File No. 0-14871)
Broadcasting Corporation dated
July 11, 1989.
10.26 Asset Purchase Exhibit 10.36 to Form 10-K Report
Agreement between WIN for the fiscal year ended December
Communications Inc. of Indiana, 28, 1990 (File No. 0-14871)
and WIN Communications of
Florida, Inc. and Renda
Broadcasting Corp. dated
November 27, 1989.
10.26.1 Asset Purchase Exhibit 10.26.1 to Form 10-Q for
Agreement between WIN the quarter ended June 25, 1993
Communications of Indiana, Inc. (File No. 0-14871)
and Broadcast Alchemy, L.P.
dated April 30, 1993.
10.26.2 Joint Sales Agreement Exhibit 10.26.2 to Form 10-Q for
between WIN Communications of the quarter ended June 25, 1993
Indiana, Inc. and Broadcast (File No. 0-14871)
Alchemy, L.P. dated May 1, 1993.
10.27 Credit Agreement dated Exhibit 10.39 to Form 10-Q for the
as of November 15, 1989 between quarter ended June 29, 1990 (File
ML Media Partners, L.P. and Bank No. 0-14871)
of America National Trust and
Savings Association.
10.28 Asset Purchase Exhibit 10.38 to Form 10-Q for the
Agreement dated November 27, quarter ended June 29, 1990 (File
1989 between Win Communications No. 0-14871)
and Renda Broadcasting Corp.
10.29 Amended and Restated Exhibit 10.39 to Form 10-Q for the
Credit Agreement dated as of May quarter ended June 29, 1990 (File
15, 1990 among ML Media No. 0-14871)
Partners, L.P. and Bank of
America National Trust and
Saving Association, individually
and as Agent.
10.30 Stock Purchase Exhibit 10.40.1 to Form 10-Q for
Agreement between Registrant and the quarter ended March 27, 1992
Ponca/Universal Holdings, Inc. (File No. 0-14871)
dated as of April 3, 1992.
10.30.1 Earnest Money Escrow Exhibit 10.40.1 to Form 10-Q for
Agreement between Registrant and the quarter ended March 27, 1992
Ponca/Universal Holdings, Inc. (File No. 0-14871)
dated as of April 3, 1992.
10.30.2 Indemnity Escrow Exhibit 10.40.2 to Form 8-K Report
Agreement between Registrant and dated July 8, 1992 (File No. 0-
Ponca/Universal Holdings, Inc. 14871)
dated as of July 8, 1992.
10.30.3 Assignment by Exhibit 10.40.3 to Form 8-K Report
Registrant in favor of Chemical dated July 8, 1992 (File No. 0-
Bank, in its capacity as agent 14871)
for itself and the other banks
party to the credit agreement
dated as of September 19, 1988,
among Registrant, Universal,
certain subsidiaries of
Universal, and Manufacturers
Hanover Trust Company, as agent.
10.30.4 Confirmation of final Exhibit 10.40.4 to Form 10-Q for
Universal agreements between the quarter ended September 25,
Registrant and Manufacturers 1992 (File No. 0-14871)
Hanover Trust Company, dated
April 3, 1992.
10.30.5 Letter regarding Exhibit 10.40.5 to Form 10-Q for
discharge and release of the the quarter ended September 25,
Universal Companies and 1992 (File No. 0-14871)
Registrant dated July 8, 1992
between Registrant and Chemical
Bank (as successor, by merger,
to Manufacturers Hanover Trust
Company).
18.1 Letter from Deloitte, Exhibit 18.1 to Form 10-K Report
Haskins & Sells regarding the for the fiscal year ended December
change in accounting method, 30, 1988 (File No. 0-14871)
dated March 30, 1989.
99 Pages 12 through 19 and 38 Prospectus dated February 4, 1986,
through 46 of Prospectus dated filed pursuant to Rule 424(b)
February 4, 1986, filed pursuant under the Securities Act of 1933,
to Rule 424(b) under the as amended (File No. 33-2290)
Securities Act of 1933, as
amended.
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized.
ML MEDIA PARTNERS, L.P.
By: Media Management Partners
General Partner
By: ML Media Management Inc.
Dated: March 31, 1994 /s/ Kevin K. Albert
Kevin K. Albert
Director and President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of Registrant in the capacities and on the dates
indicated.
RP MEDIA MANAGEMENT
Signature Title Date
/s/ I. Martin Pompadur President, Secretary March 31, 1994
(I. Martin Pompadur) and Director
(principal executive
officer)
ML MEDIA MANAGEMENT INC.
Signature Title Date
/s/ Kevin K. Albert Director and March 31, 1994
(Kevin K. Albert) President of the
General Partner
/s/ Robert F. Aufenanger Director and March 31, 1994
(Robert F. Aufenanger) Executive Vice
President of the
General Partner
/s/ James K. Mason Director of the March 31, 1994
(James K. Mason) General Partner
/s/ Robert W. Seitz Director and Vice March 31, 1994
(Robert W. Seitz) President of the
General Partner
/s/ David G. Cohen Treasurer of the March 31, 1994
(David G. Cohen) General Partner
(principal financial
officer and principal
accounting officer)
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized.
ML MEDIA PARTNERS, L.P.
By: Media Management Partners
General Partner
By: ML Media Management Inc.
Dated: March , 1994
Kevin K. Albert
Director and President
Pursuant to the requirements of the Securities Exchange Act of
l934, this report has been signed below by the following persons
on behalf of Registrant in the capacities and on the dates
indicated.
RP MEDIA MANAGEMENT
Signature Title Date
_______________________ President, Secretary March , 1994
(I. Martin Pompadur) and Director
(principal executive
officer)
ML MEDIA MANAGEMENT INC. ("MLMM")
Signature Title Date
_______________________ Director and March , 1994
(Kevin K. Albert) President
_______________________ Director and March , 1994
(Robert F. Aufenanger) Executive Vice
President
_______________________ Director March , 1994
(James K. Mason)
_______________________ Director and Vice March , 1994
(Robert W. Seitz) President
_______________________ Treasurer March , 1994
(David G. Cohen) (principal financial
officer and
principal accounting
officer)
AMENDED AND RESTATED
MANAGEMENT AGREEMENT
AND
JOINT VENTURE AGREEMENT
OF CENTURY/ML CABLE VENTURE
January 1, 1994
The parties to this agreement (referred to as the
"Venturers") are Century Communications Corp., a Texas corpora-
tion ("Century"), and ML Media Partners, L.P., a Delaware
limited partnership ("ML Media").
RECITALS
A. Pursuant to an agreement dated July 2, 1986,
Century and ML Media formed a joint venture (the "Joint
Venture") for the purpose of acquiring at least ninety percent
of the outstanding shares of common stock of Cable Television
Company of Greater San Juan, Inc. (the "Company"), a California
corporation that owned and operated a cable television system
(the "Original System") in San Juan, Puerto Rico. The Joint
Venture, in turn, organized as a wholly-owned subsidiary
Century-ML Cable Corporation, a Delaware corporation (the
"Subsidiary").
B. Pursuant to a Management Agreement and Joint
Venture Agreement dated December 16, 1986 (the "1986
Agreement"), the Venturers provided for the continuance and
governance of the Joint Venture, the contributions to the Joint
Venture that were required for the acquisition by the
Subsidiary of the Company's shares, the liquidation of the
Company into the Subsidiary, and the ownership and operation of
the Original System by the Subsidiary, including the
appointment of Century as manager of the Original System.
C. On September 21, 1987, the Joint Venture acquired
cable television systems serving Toa Alta, Catano and Toa Baja,
Puerto Rico (together with the Original System, the "Systems")
and amended the 1986 Agreement to appoint Century as the
manager of those systems.
D. On February 15, 1989, Century and ML Media formed
a joint venture known as Century-ML Radio Venture (the "Radio
Venture") to acquire Acosta Broadcasting Corp. ("Acosta"),
Fidelity Broadcasting Corp. ("Fidelity") and Broadcasting &
Background Systems Consultants, Corporation ("Broadcasting"),
which were subsequently liquidated into the Radio Venture.
Acosta owned radio station WUNO (AM), San Juan, Puerto Rico
("WUNO") and NotiUno News and distributed NotiUno News to the
NotiUno News Network (the "News Network"), Fidelity owned radio
station WFID (FM), Rio Piedras, Puerto Rico ("WFID"), and
Broadcasting owned "Beautiful Music Services". WUNO and WFID
are sometimes referred to as the "Stations" and WUNO, WFID, the
News Network and Beautiful Music Services are sometimes
referred to as the "Radio Businesses".
E. Pursuant to a Management Agreement and Joint
Venture Agreement dated as of February 15, 1989 (the "Radio
Venture Agreement"), the Venturers provided for the formation
and governance of the Radio Venture, the contributions to the
Radio Venture necessary for the acquisition of Acosta, Fidelity
and Broadcasting, and the ownership and operation of the
Stations and Radio Businesses by the Radio Venture, including
the appointment of ML Media as manager of the Stations and the
Radio Businesses.
F. The Joint Venture and the Subsidiary are parties
to separate Note Agreements, each dated as of December 1, 1992,
which provided for the issuance and sale to certain purchasers
of the Subsidiary's $100,000,000 9.47% Senior Secured Notes due
November 30, 2002 (the "Note Agreements"), and a Second
Restated Credit Agreement dated as of December 1, 1992 with
Citibank, N.A. as agent, and the banks named therein, which
provided to the Subsidiary a revolving and term loan credit
facility in a principal amount not to exceed $20,000,000 (the
"Credit Facility"). Under the Note Agreements, the Credit
Facility and certain related documents, the Radio Venture is
required to transfer all of its assets to the Joint Venture and
the Joint Venture is required to assume all of the liabilities
of the Radio Venture (the "Asset Transfer").
G. Contemporaneously with the execution of this
agreement, the Venturers are causing the Asset Transfer to
occur. The Venturers wish to provide in this agreement for the
continuation of the Joint Venture and their respective rights
and obligations under the 1986 Agreement, as amended, and the
Radio Venture Agreement (each of which is being superseded by
this agreement), including the continuation of the appointment
of Century as manager of the Systems and of ML Media as manager
of the Stations and Radio Businesses. Accordingly, it is the
intention of the Venturers that (i) the assets and business of
the Systems shall constitute the "Cable Division" of the Joint
Venture and the Subsidiary, (ii) the assets and business of the
Stations and Radio Businesses shall constitute the "Radio
Division" of the Joint Venture, (iii) the Cable Division and
the Radio Division (each of which is sometimes referred to as a
"Division") shall be operated and managed as though each was a
separate business under separate management, and (iv) Century
shall be the manager of the Cable Division and ML Media shall
be the manager of the Radio Division, with the rights and
obligations as manager of those businesses that each possessed
prior to the Asset Transfer and as are set forth herein.
<PAGE>
It is therefore agreed as follows:
1. Continuation of Joint Venture; Interests in the
Joint Venture. The Venturers shall continue the Joint Venture
in accordance with the terms of this agreement. The name of
the Joint Venture shall continue to be Century/ML Cable Venture
and the Joint Venture from time to time may adopt and conduct
business under such fictitious or trade names as the management
board of the Joint Venture (created pursuant to section 7.1)
determines appropriate. The Joint Venture shall have such
places of business as the management board of the Joint Venture
from time to time may establish. Interests in the Joint
Venture shall be evidenced by a certificate in the form of
Exhibit A, which shall bear a legend evidencing the
restrictions on transfer in Section 9.
2. Purpose of the Joint Venture. The purposes of
the Joint Venture are to (a) own and operate, and subsequently
dispose of, the Systems, (b) own and operate, and subsequently
dispose of, the Stations and the Radio Businesses, and
(c) conduct all activities incidental to the ownership and
operation of the Systems, the Stations and the Radio
Businesses. The Joint Venture may also engage in such other
business activity as the management board may determine. Each
of the Venturers shall cause the Joint Venture and the
Subsidiary to perform any remaining obligations for which they
may be responsible under the purchase agreements pursuant to
which the assets of the Joint Venture, the Radio Venture or the
Subsidiary were acquired. Each of the Venturers confirms its
guaranty of any remaining obligations of the purchaser
heretofore undertaken and to be undertaken under the purchase
agreement relating to the acquisition of the Original System.
3. Term of Joint Venture. The Joint Venture shall
continue until the earlier of (a) December 31, 2035 and (b) the
date the Joint Venture is dissolved in accordance with section
10.
4. Capital Contributions.
4.1 Capital Contributions; Reimbursement. Each
of the Venturers has contributed its required percentage of the
amount required, together with the proceeds of any bank
financing obtained by the Joint Venture or the Subsidiary, to
consummate the acquisition of the assets of the Joint Venture
and the Subsidiary and to pay all expenses relating to the
acquisition of those assets, including, but not limited to,
brokers' fees. If ML Media or Century (the "Paying Party")
pays (or has paid) more than fifty percent of any liability,
cost or expense arising in connection with the acquisition of
those assets, or in connection with the operations of the
System, the Stations or the Radio Businesses or the management
of the Cable Division or the Radio Division, the other Venturer
promptly shall reimburse the Paying Party for the excess,
together with interest on the excess at the rate of interest
equal to the reference rate of Citibank, N.A., in effect from
time to time, from the date the payment by the Paying Party was
made.
4.2 No Other Mandatory Contributions; No With-
drawals. Except as provided in section 4.1, neither Venturer
shall be required to make any capital contribution to the Joint
Venture. Neither Venturer shall be entitled to withdraw any
part of its capital contributions or to receive any distribu-
tions from the Joint Venture, except as expressly provided in
this agreement.
4.3 No Liability for Capital Contributions.
Neither Venturer shall be personally liable for the return of
any portion of the capital contribution of either of the
Venturers; the return of those capital contributions shall be
made solely from the Joint Venture's assets. Neither Venturer
shall have the right to demand or receive property other than
cash for its interest in the Joint Venture or to receive cash
for that interest otherwise than as expressly provided in this
agreement.
4.4 No Interest. Neither Venturer shall
receive any interest on its capital contributions.
4.5 No Additional Venturers. No additional
venturers shall be admitted to the Joint Venture.
5. Cash Distributions.
5.1 Time of Distributions. Distributions of
cash from any source (other than pursuant to section 10) shall
be made at the time or times determined by the management
board.
5.2 Allocations of Cash Distributions. All
distributions of cash shall be allocated equally between the
Venturers.
6. Tax Allocations. For federal income tax
purposes, all items of income, gain, loss, deduction and credit
shall be allocated equally between the Venturers.
7. Management.
7.1 Management Board. The business and affairs
of the Joint Venture shall be under the general supervision of
a management board consisting initially of Dr. Leonard Tow
("Tow") and one other designee of Century and two members
designated from time to time by ML Media. Upon the death,
insolvency, adjudication of incompetence or disability of Tow
(but only during the period of Tow's disability or incompe-
tence), the management board shall consist of two members
designated from time to time by each of Century and ML Media.
The management board shall hold regular meetings not less
frequently than quarterly, shall act by unanimous vote of its
members (except as otherwise provided in this agreement), and
shall adopt such rules of procedure as it may from time to time
determine. The Joint Venture shall vote the stock of the
Subsidiary in accordance with the determination of the
management board. All matters relating to the purchase
agreements under which the Joint Venture, the Radio Venture or
the Subsidiary acquired its assets shall be determined by the
management board. As used in this agreement, the term
"disability" means the inability, by reason of physical or
mental illness, to perform substantially all of the duties of
chief executive officer of Century for a period of 180
consecutive days, it being understood and agreed that Tow shall
once again be entitled to membership on such board on the
termination of his incompetence or disability.
7.2 Board of Directors of the Subsidiary.
Subject to the provisions of section 7.3, the board of
directors of the Subsidiary shall consist of the four members
of the management board of the Joint Venture, and the Joint
Venture shall vote the stock of the Subsidiary to elect those
persons as directors. In addition to supervising the
management of the Original System, before the beginning of each
year the board of directors of the Subsidiary shall establish
for the following year an operations budget, a capital expense
budget, a cash management budget and such other budgets and
operational objectives as it shall determine appropriate. The
Subsidiary's certificate of incorporation and bylaws shall
provide for unanimous vote of the directors with respect to the
matters referred to in section 7.4.
7.3 Manager of the Systems.
(a) Century shall be engaged by the Joint
Venture and the Subsidiary as the manager of the Systems in
perpetuity, subject to termination as provided herein or upon
the sale of the Systems, and, subject to the general
supervision of the management board of the Joint Venture and
the board of directors of the Subsidiary and to the provisions
of this section 7.3 and the provisions of section 7.4, Century
shall be responsible for the day-to-day operations of the
Systems and for the supervision of the Subsidiary's business.
Century shall provide to the Joint Venture and the Subsidiary
the services of Tow (so long as he is employed by Century and
is not disabled or incompetent) and any other officers or
employees of Century that Century may reasonably determine are
required to perform its obligations as manager of the Systems.
Century shall perform its responsibilities as manager of the
Systems diligently, to the best of its ability and in the best
interests of the Joint Venture and the Subsidiary. If Century
is removed (as provided in section 7.3(d)) as manager of the
Systems, ML Media shall become the manager of the Systems, with
the duties and responsibilities previously held by Century, and
shall be entitled to a management fee in the same amount (or
equal to its out-of-pocket expenses in managing the Systems, if
greater) and payable in the same manner as the management fee
payable to Century.
Century's responsibilities as manager of the Systems
shall include, without limitation, the following, and Century
shall have the power and authority, subject to the general
supervision of the management board of the Joint Venture and
the board of directors of the Subsidiary, to take any acts and
execute any instruments necessary to perform the following:
(1) Causing the Systems to purchase, or
enter into purchase agreements with respect to, any and all
materials, supplies, machinery and equipment necessary for the
operation and maintenance of the Systems and for the
construction or installation of any additions to or
replacements thereof;
(2) Causing the Systems to enter into any
and all agreements with third parties to supply services
required for the operation, maintenance, construction,
expansion or replacement of the Systems, including, but not
limited to, agreements with program suppliers, data processing
organizations, advertising agencies, marketing and/or sales
persons or organizations, installers, general and other
contractors, subcontractors, or others as are deemed by Century
to be necessary for the proper operation, maintenance or
improvement of the Systems, and overseeing all performances
under such agreements;
(3) Keeping or causing to be kept all
necessary books and records;
(4) Causing to be timely filed all
Federal, state and local reports as may be required, including,
without limitation, all reports and returns for income taxes,
unemployment compensation, workmen's compensation, copyright
fees, and property taxes and all other FCC and Puerto Rico
Public Service Commission ("PSC") and other regulatory reports;
(5) Selecting, employing, instructing,
discharging, and otherwise supervising the General Manager of
the Systems, and, acting through and with the General Manager
of the Systems, selecting and employing, supervising,
instructing, discharging, and otherwise managing all employees
of the Systems and any agents or independent contractors
considered by Century or the General Manager to be necessary
for the proper operation, maintenance or improvement of the
Systems;
(6) Causing the Systems to be maintained
and serviced at all times in conformance with applicable
franchises;
(7) Causing to be purchased and maintained
in effect such policies of insurance as is customary in the
cable television industry;
(8) To the full extent it is able to do
so, making available to the Systems its buying power upon any
purchase which may be made or contracts which may be entered
into by Century as agent for or otherwise on behalf of the
Systems;
(9) With the assistance of the General
Manager and other employees of the Systems, developing and
submitting to the management board of the Joint Venture and the
board of directors of the Subsidiary for its approval operating
and capital improvements budgets (the "Budgets") covering the
System's next fiscal year;
(10) Providing programming services, such
as:
(a) periodic evaluation of the programming
activities of the Systems and recommendations
for the improvement or modification of program
offerings or alignments; and
(b) programming contract administration,
including the authority and responsibility (i)
to negotiate with program suppliers the terms of
programming contracts for programming to be
supplied to and telecast over the Systems, (ii)
to enter into programming contracts on behalf of
the Systems, (iii) for the billing of
subscribers for programming services, (iv) for
the processing of programming billings of
programming suppliers and (v) for acting as
agent for the Systems with respect to
programming matters;
(11) Carrying out all negotiations with unions,
whether relating to elections, contracts, grievances or other
matters and assisting the attorneys for the Joint Venture and
the Subsidiary in the preparation of union contracts if any are
required;
(12) Representing the Joint Venture and the
Subsidiary before all governmental authorities with respect to
any matter necessary or desirable and relating to the Systems
(such representation to be made jointly with ML Media if the
relevant matter also relates to the Stations or the Radio
Businesses);
(13) Performing all other management services
which Century may deem necessary or desirable for the efficient
operation of the Systems; and
(14) Preparing and delivering all reports
required of the Cable Division, the Joint Venture and the
Subsidiary pursuant to the Note Agreements, the Credit Facility
and all related agreements, it being understood and agreed that
ML Media shall cooperate in furnishing all this information.
(b) Century shall be entitled to receive
from the Subsidiary for its services as manager of the Systems
a management fee in an amount equal to five percent of the
total Net Gross Revenues of the Systems. The following
provisions shall apply with respect to the management fee:
(i) The term "Net Gross Revenues" means
the gross revenues of the Systems from all
sources less the aggregate amount paid by the
Systems to suppliers of pay television product
(e.g., HBO, Cinemax, Disney and Showtime).
(ii) Payments with respect to the
management fee shall be made monthly in arrears,
not more than 30 days after the end of each
month, based on a determination by the chief
financial officer of the Cable Division of the
Net Gross Revenues for that month.
(iii) Net Gross Revenues for each month
shall be determined by the chief financial
officer of the Cable Division, subject to
adjustment based on the accountants'
determination described below. Copies of the
determination by the chief financial officer of
the Cable Division shall be prepared as soon as
practicable after the end of each month and
shall be delivered to and reviewed by the
management board of the Joint Venture and the
board of directors of the Subsidiary. Within
120 days after the end of each calendar year,
the Joint Venture and the Subsidiary shall cause
their independent public accountants to
determine the Net Gross Revenues of the Systems
for that year and the management fee payable to
Century for that year and to deliver a copy to
Century. Within 10 days after receipt by the
Joint Venture and the Subsidiary of the
accountants' determination (which shall be final
and binding on the Joint Venture, the Subsidiary
and Century), the Joint Venture and the
Subsidiary shall pay to Century (or Century
shall repay to the Joint Venture and the
Subsidiary pro rata in proportion to the number
of subscribers served by their respective
Systems) the amount by which the management fee
for the year payable to Century as determined by
the accountants exceeds (or is less than) the
amount paid to Century for that year.
(iv) If the terms of any financing to
which the Joint Venture or the Subsidiary is a
party require that Century subordinate its
rights to receive payment of any management
fees, Century shall subordinate its right but
only to the extent required by any lender and
shall execute any instrument to evidence that
subordination that the lender may reasonably
request; Century shall not be required to
subordinate such deferred management fees to any
other distributions.
(v) The management fee shall not be
payable, but shall be deferred, to the extent
cash is not available to pay the fee or payment
of the fee would result in a default under any
credit agreement to which the Joint Venture or
the Subsidiary is a party (including, but not
limited to, the Note Agreements and the Credit
Facility).
(vi) If in any year Century acts as
manager of one or more of the Systems for less
than a full year, the management fee for that
year shall be determined by the chief financial
officer of the Cable Division based on the Net
Gross Revenues of the respective Systems for the
period during which Century was manager of those
Systems.
(c) The Joint Venture and the Subsidiary
shall reimburse Century (pro rata in proportion to the number
of subscribers served by their respective Systems) for out-of-
pocket expenses for travel, hotels and meals for Century's
personnel and for out-of-pocket fees and expenses to third
parties (e.g., accountants and attorneys) and similar expenses,
but Century shall bear all other expenses, including personnel
and overhead costs incurred in performing its services as
manager of the Systems.
(d) The designees of ML Media on the
management board of the Joint Venture and the board of
directors of the Subsidiary may elect to remove Century as
manager of the Systems if Century breaches in any material
respect any material provision of this agreement and the breach
is not cured within 30 days after notice of breach from ML
Media (or if not curable within such time then within a
reasonable time thereafter) or if Tow sells his entire interest
in Century.
(e) If the designees of ML Media on the
management board of the Joint Venture and the board of
directors of the Subsidiary elect to remove Century as manager
of the Systems in accordance with section 7.3(d), the Joint
Venture shall take all such action as may be necessary to cause
the Joint Venture and the Subsidiary to effect the removal.
(f) Century shall use its best efforts to
obtain the same rates for programming for the Systems as it
obtains for other systems owned or managed by Century or an
affiliate of Century, based on the number of subscribers of all
cable systems owned or managed by Century or an affiliate of
Century.
(g) The Joint Venture shall cause the
Subsidiary to carry out the provisions of this section 7.3 to
the extent that those provisions apply to the Subsidiary.
7.4 Participation of Management Board and Board
of Directors of Subsidiary. The limited partnership agreement
of ML Media requires that ML Media maintain "significant
control" over any media property in which it has less than 100
percent interest, which would include the Systems.
Accordingly, although Century, as the manager of the Systems,
shall have responsibility for the day-to-day operations of the
Systems, it is intended that the manager will consult with, and
obtain the approval of, the designees of ML Media on the
management board of the Joint Venture and the board of
directors of the Subsidiary on all significant matters relating
to the Systems. Without limiting the overall authority of the
board of directors of the Subsidiary, the following actions may
be taken after the date of this agreement only with the
unanimous consent of the members of the management board of the
Joint Venture and the board of directors of the Subsidiary:
(a) the entry into any business activity other
than the ownership and operation of the Systems;
(b) the sale or other disposition of the
Systems or the sales of assets in any 12 month period with an
aggregate market value in excess of $100,000;
(c) any borrowing in excess of $100,000, any
refinancing of any borrowing in excess of $100,000, or any
voluntary prepayment of any borrowing;
(d) any capital expenditures in excess of
$50,000 that are not contemplated by the capital expense budget
established as provided in section 7.2;
(e) the creation of any pledge or encumbrance
on, or the grant of any security interest in, any of the assets
of the Subsidiary, other than in connection with a capitalized
lease with aggregate rentals or sales (including conditional
sales) of less than $50,000;
(f) the entering into of any lease, agreement
or other commitment that involves more than $50,000 per year,
other than any commitment consistent with the capital expense
budget established as provided in section 7.2;
(g) any other material transaction not in the
ordinary course of business; and
(h) any other proposed transaction that, in the
good faith judgment of the manager, would be material to the
assets, business or prospects of the Systems.
7.5 Manager of the Radio Businesses and
Stations.
(a) ML Media shall be engaged by the Joint
Venture as the manager of the Radio Businesses and the Stations
in perpetuity, subject to termination as provided herein or
upon the sale of the Radio Businesses and the Stations, and,
subject to the general supervision of the management board of
the Joint Venture and the provisions of this section 7.5 and
section 7.6, ML Media shall be responsible for the day-to-day
operations of the Radio Businesses and the Stations. ML Media
shall provide to the Stations and the Radio Businesses the
services of I. Martin Pompadur ("Pompadur") (so long as he
maintains an interest in ML Media and is not disabled or
incompetent) and any other officers or employees of ML Media
that ML Media may reasonably determine are required to perform
its obligations as manager of the Radio Businesses and the
Stations. ML Media shall perform its responsibilities as
manager of the Radio Businesses and the Stations diligently, to
the best of its ability and in the best interests of the Joint
Venture. If ML Media is removed (as provided in section
7.5(d)) as manager of the Radio Businesses and the Stations,
Century shall become the manager of the Radio Businesses and
the Stations, with the duties and responsibilities previously
held by ML Media, and shall be entitled to a management fee in
the same amount (or equal to its out-of-pocket expenses in
managing the Radio Businesses and Stations, if greater) and
payable in the same manner as the management fee payable to ML
Media.
ML Media's responsibilities as manager of the Radio
Businesses and Stations shall include, without limitation, the
following, and ML Media shall have the power and authority,
subject to the general supervision of the management board of
the Joint Venture, to take any acts and execute any instruments
necessary to perform the following:
(1) Causing the Stations and the Radio
Businesses to purchase, or enter into purchase agreements
with respect to, any and all materials, supplies, machin-
ery and equipment necessary for the operation and main-
tenance of the Stations and the Radio Businesses and for
any construction or additions or replacements thereof;
(2) Causing the Stations and the Radio
Businesses to enter into any and all agreements with third
parties to supply services required for the operation and
maintenance of the Stations and the Radio Businesses,
including, but not limited to, agreements with program
suppliers, data processing organizations, advertising
agencies, marketing and/or sales persons or organizations
or others as are deemed by ML Media to be necessary for
the proper operation and maintenance of the Stations and
the Radio Businesses, and overseeing all performances
under such agreements;
(3) Keeping or causing to be kept all
necessary books and records;
(4) Causing to be timely filed with
respect to the Stations and the Radio Businesses all
Federal, state and local reports as may be required,
including, without limitation, all reports and returns for
income taxes, unemployment compensation, workmen's
compensation, and property taxes and all other Federal
Communications Commission ("FCC") and other regulatory
reports;
(5) Selecting, employing, instructing,
discharging, and otherwise supervising the General Manager
of each of the Stations and, acting through and with the
General Manager of each of the Stations, selecting and
employing, supervising, instructing, discharging, and
otherwise managing all employees of the Stations and any
agents or independent contractors considered by ML Media
or the General Manager to be necessary for the proper
operation of the Stations;
(6) Causing the Stations to be operated at
all times in conformance with applicable regulations;
(7) Causing to be purchased and maintained
in effect such policies of insurance as is customary in
the radio industry;
(8) With the assistance of the General
Manager and other employees of each of the Stations and of
the Radio Businesses, developing and submitting to the
management board for approval operating and capital
improvements budgets covering the next fiscal year for the
Stations and the Radio Businesses;
(9) Providing format and applicable
programming services, such as:
(i) periodic evaluation of the
formats and the programming activities of the
Stations and the Radio Businesses and recommendations
for the improvement or modification of the formats
and the program offerings or alignments; and
(ii) programming contract adminis-
tration, as applicable, including the authority and
responsibility (A) to negotiate with program sup-
pliers the terms of programming contracts for pro-
gramming to be supplied to and broadcast over the
Stations, as applicable, (B) to enter into program-
ming contracts on behalf of the Stations and the
Radio Businesses and (C) for acting as agent for the
Stations and the Radio Businesses with respect to
format and applicable programming matters;
(10) Carrying out all negotiations with
unions relating to the Radio Businesses and the Stations,
whether relating to elections, contracts, grievances or
other matters and assisting the Joint Venture's attorneys
in the preparation of union contracts if any are required;
(11) Representing the Joint Venture before
all governmental authorities with respect to any matter
necessary or desirable and relating to the Stations or the
Radio Businesses (such representation to be made jointly
with Century if the relevant matter also relates to the
Systems);
(12) Performing all other management
services that ML Media may deem necessary or desirable for
the efficient operation of the Stations and the Radio
Businesses; and
(13) Providing to Century such reports and
other information in connection with the Stations and the
Radio Businesses as Century may require in preparing and
delivering all reports required pursuant to the Note
Agreements and the Credit Facility.
(b) ML Media shall be entitled to receive from
the Joint Venture for its services as manager of the Stations
and the Radio Businesses a management fee in an amount equal to
five percent of the total Gross Revenues of the Stations and
the Radio Businesses. The following provisions shall apply
with respect to the management fee:
(1) The term "Gross Revenues" means the
gross revenues of the Stations and the Radio Businesses
from all sources, after agency commissions, rebates or
discounts and excluding revenues from barter transactions
of any kind.
(2) Payments with respect to the manage-
ment fee shall be made monthly in arrears, not more than
30 days after the end of each month, based on a determi-
nation by the chief financial officer of the Radio
Division of the Gross Revenues for that month.
(3) Gross Revenues for each month shall be
determined by the chief financial officer of the Radio
Division, subject to adjustment based on the accountants'
determination described below. Copies of the
determination by the chief financial officer of the Radio
Division shall be prepared as soon as practicable after
the end of each month and shall be delivered to and
reviewed by the management board of the Joint Venture.
Within 120 days after the end of each calendar year, the
Joint Venture shall cause its independent public
accountants to determine the Gross Revenues of the
Stations and the Radio Businesses for that year and the
management fee payable to ML Media for that year and to
deliver a copy to ML Media. Within 10 days after receipt
by the Joint Venture of the accountants' determination
(which shall be final and binding on the Joint Venture and
ML Media) the Joint Venture shall pay to ML Media (or ML
Media shall repay to the Joint Venture) the amount by
which the management fee for the year payable to ML Media
as determined by the accountants exceeds (or is less than)
the amount paid to ML Media for that year.
(4) If the terms of any financing to which
the Joint Venture or the Subsidiary is a party require
that ML Media subordinate its right to receive payment of
any management fees, ML Media shall subordinate its right
but only to the extent required by any lender and shall
execute any instrument to evidence that subordination that
the lender may reasonably request; ML Media shall not be
required to subordinate such deferred management fees to
any other distributions.
(5) The management fee payable pursuant to
this section 7.5 shall not be payable, but shall be de-
ferred, to the extent cash from the operation of the
Stations and the Radio Businesses is not available to pay
the fee or payment of the fee would result in a default
under any credit agreement to which the Joint Venture or
the Subsidiary is a party.
(6) If in any year ML Media acts as
manager of the Stations and the Radio Businesses for less
than a full year, the management fee for that year shall
be determined by the chief financial officer of the Radio
Division based on the Gross Revenues of the Stations and
the Radio Businesses for the period during which ML Media
was manager of the Stations and the Radio Businesses.
(c) The Joint Venture shall reimburse ML Media
for out-of-pocket expenses for travel, hotels and meals for its
personnel and for out-of-pocket fees and expenses to third
parties (e.g., accountants and attorneys) and similar expenses,
but ML Media shall bear all other expenses, including personnel
and overhead costs incurred in performing its services as
manager of the Stations and the Radio Businesses.
(d) The designees of Century on the management
board of the Joint Venture may elect to remove ML Media as
manager of the Stations and the Radio Businesses if ML Media
breaches in any material respect any material provision of this
agreement and the breach is not cured within 30 days after
notice of breach from Century (or if not curable within such
time then within a reasonable time thereafter) or if Pompadur
sells his entire interest in ML Media.
(e) If the designees of Century on the manage-
ment board of the Joint Venture elect to remove ML Media as
manager of the Stations and the Radio Businesses in accordance
with section 7.5(d), the Joint Venture shall take all such
action as may be necessary to effect the removal.
7.6 Participation of Management Board.
Although ML Media, as manager of the Stations and the Radio
Businesses, shall have responsibility for the day-to-day
operations of the Stations and the Radio Businesses, it is in-
tended that the manager will consult with, and obtain the
approval of, the designees of Century on the management board
of the Joint Venture on all significant matters relating to the
Stations and the Radio Businesses. The following actions may
be taken after the date of this agreement only with the
unanimous consent of the members of the management board of the
Joint Venture:
(a) the entry into any business activity other
than the ownership and operation of the Stations and the Radio
Businesses;
(b) the sale or other disposition of the
Stations or the Radio Businesses or the sales of assets in any
12 month period with an aggregate market value in excess of
$100,000;
(c) any borrowing in excess of $100,000, any
refinancing of any borrowing in excess of $100,000, or any
voluntary prepayment of any borrowing;
(d) any capital expenditure in excess of
$50,000 that is not contemplated by the capital expense budget
established as provided in section 7.5;
(e) the creation of any pledge or encumbrance
on, or the grant of any security interest in, any of the assets
of the Stations or the Radio Businesses, other than in
connection with a capitalized lease with aggregate rentals or
sales (including conditional sales) of less than $50,000;
(f) the entering into of any lease, agreement
or other commitment that involves more than $50,000 per year,
other than any commitment consistent with the capital expense
budget established as provided in section 7.5;
(g) any other material transaction not in the
ordinary course of business; and
(h) any other proposed transaction that, in the
good faith judgment of the manager, would be material to the
assets, business or prospects of the Stations and the Radio
Businesses.
7.7 Other Activities. Either Venturer may have
an interest in other businesses ventures of any kind, independ-
ently or with others, including the ownership and operation of
other cable television systems, radio stations or radio
businesses, and neither the Joint Venture nor the other
Venturer shall have any rights in or to those independent
ventures.
7.8 No Partition, Sale or Appraisal. Neither
Venturer shall have the right to (a) require partition of any
of the Joint Venture's property or (b) compel any sale of the
Joint Venture's assets, except as provided in section 12.
7.9 Joint Venture Funds. The Joint Venture's
funds shall be deposited or invested in one or more bank
accounts, money market funds, treasury bills, certificates of
deposit or other short-term interest bearing obligations. The
Joint Venture's funds shall be used only for the business of
the Joint Venture. Funds not belonging to the Joint Venture
shall not be commingled with the Joint Venture's funds.
7.10 Transactions with Affiliates. Neither the
Joint Venture nor the Subsidiary shall engage in any
transactions with any affiliate of a Venturer without the
unanimous consent of the management board, except for the man-
agement of the Systems by Century and the management of the
Stations and the Radio Businesses by ML Media (in each case as
provided in this agreement) and except for legal representation
by Leavy Rosensweig & Hyman or another law firm in which David
Z. Rosensweig is a partner.
7ATI No Right to Bind the Joint Venture.
Neither Venturer shall have any right or authority to assume or
create any obligation or responsibility, express or implied, on
behalf of the Joint Venture or the other Venturer, or to bind
the other Venturer or the Joint Venture in any respect, except
for obligations or responsibilities of the Joint Venture that
have been expressly authorized by the management board of the
Joint Venture in accordance with the terms of this agreement.
8. Fiscal Year; Reports.
8.1 Fiscal Year. The Joint Venture's fiscal
year shall be the calendar year unless changed by the
management board of the Joint Venture.
8.2 Books of Account. Complete and accurate
books of account shall be kept by the Joint Venture at the
principal office of the Joint Venture (or at such other office
as the management board may designate). The determinations of
the management board with respect to the treatment of any item
or its allocation for federal, state or local income tax
purposes shall be binding upon the Venturers so long as that
determination is not inconsistent with any express provision of
this agreement. Each of the Venturers shall have full access
to all books and records of the Joint Venture.
8.3 Reports. Within 90 days after the end of
each fiscal year the Joint Venture shall furnish to each
Venturer audited financial statements of the Joint Venture and
the Subsidiary, together with the opinions of independent
certified public accountants with respect to those financial
statements. The audited financial statements shall be prepared
in compliance with Regulation S-X under the Securities Act of
1933 and any other regulations applicable to ML Media as a
publicly held partnership or Century as a publicly held
company. The audited financial statements shall include a
balance sheet of the Joint Venture and the Subsidiary as of the
end of the year and a statement of income and a statement of
cash flow of the Joint Venture and the Subsidiary for the year,
setting forth in each case in comparative form the figures as
of the end of and for the previous fiscal year. Within 45 days
after the end of each of the first three fiscal quarters, the
Joint Venture shall furnish to each Venturer unaudited finan-
cial statements, including a balance sheet of the Joint Venture
and the Subsidiary as of the end of the quarter and a statement
of income and a statement of cash flow of the Joint Venture and
the Subsidiary for the quarter and for the year to date, set-
ting forth in each case in comparative form the figures as of
the end of and for the comparable periods in the previous
fiscal year.
8.4 K-1 Reports. Within 60 days after the end
of each calendar year, the Joint Venture shall furnish to each
Venturer a copy of schedule K-1 to the Joint Venture's federal
income tax return for that year and any other information
reasonably requested by a Venturer in connection with the
preparation of its federal income tax return.
8.5 Operating Reports and Monthly Financial
Statements.
(a) Century shall furnish the following reports
with respect to the Systems to the board of directors of the
Subsidiary and to the Joint Venture, which shall furnish those
reports to each of the Venturers:
1. Monthly subscriber connection reports.
2. Monthly operating statements.
3. Quarterly financial plans and budgets.
4. Quarterly analysis of actual operating
results.
In addition, Century as manager of the Systems shall
maintain all books and records required to prepare the
financial statements of the Subsidiary or to assist in the
preparation of the financial statements of the Joint Venture
referred to in section 8.3 or otherwise required for the
Systems and the Subsidiary to comply with all applicable law
and the franchises for the Systems.
(b) ML Media shall furnish the following
reports with respect to the Stations and the Radio Businesses
to the Joint Venture, which shall furnish those reports to each
of the Venturers:
1. Monthly operating statements.
2. Quarterly financial plans and budgets.
3. Quarterly analysis of actual operating
results.
In addition, ML Media as manager of the Stations and
Radio Businesses shall maintain all books and records required
to assist in the preparation of the financial statements of the
Joint Venture referred to in section 8.3 or otherwise required
for the Stations and the Radio Businesses to comply with all
applicable law.
9. No Transfers of Joint Venture Interests. Except
as contemplated or permitted by section 12 and for the pledge
to Citibank, N.A., as collateral agent for itself and the banks
under the Credit Facility and for the purchasers of the
Subsidiary's notes under the Note Agreements, no Venturer may
sell, transfer, assign or otherwise dispose of all or any
portion of its interest in the Joint Venture, or enter into any
agreement as a result of which any person shall have an inter-
est in, or right to receive distributions from, the Joint
Venture, without the consent of the management board of the
Joint Venture. Any attempted sale, transfer or assignment of
an interest in, or the right to receive distributions from, the
Joint Venture otherwise than pursuant to those pledge
agreements, the Credit Facility or the Note Agreements or in
accordance with section 12 shall be void.
10. Dissolution; Liquidation; Termination of
Management Agreement.
10.1 Dissolution Prior to Expiration of Term.
The Joint Venture shall be dissolved prior to the expiration of
its term only upon the occurrence of one of the following
events:
(a) the Venturers' election to dissolve the
Joint Venture; or
(b) termination of the operations of the Joint
Venture and the Subsidiary or the sale or other
disposition by the Joint Venture and the Subsidiary of all
of their assets.
10.2 Liquidation and Distribution of Assets.
Upon dissolution of the Joint Venture, the management board
shall proceed to sell or dispose of any assets not previously
sold or disposed of (to the extent feasible) within a
reasonable time and, after paying or making provision for all
liabilities to creditors of the Joint Venture, shall distribute
the Joint Venture's cash and other assets among the Venturers
in accordance with the provisions for distributions set forth
in section 5.2 of this agreement.
10.3 Termination. The Joint Venture shall
terminate when all property owned by the Joint Venture and the
Subsidiary has been disposed of and the assets, after payment
of or provisions for liabilities to the Joint Venture's
creditors, have been distributed among the Venturers as pro-
vided in section 10.2.
10.4 Termination of Management Agreement. At
such time as management services are no longer provided by ML
Media or Century pursuant to this agreement, the Management
Agreement portion of this Amended and Restated Management
Agreement and Joint Venture Agreement shall terminate.
11. Tax Matters.
11.1 Elections. To the extent that the Joint
Venture may be or is required to make elections for federal,
state or local income tax purposes, the elections shall be made
in a manner best calculated, in the opinion of the management
board, to minimize the cash requirements of the Joint Venture
and the Venturers. Neither Venturer shall treat a Joint Ven-
ture item on its federal, state or local income tax returns in
a manner inconsistent with the treatment of the Joint Venture
item on the Joint Venture's federal, state or local income tax
return.
11.2 Tax Matters Partner. Century shall be the
Tax Matters Partner (as that term is defined in section 6231 of
the Internal Revenue Code of 1986 (the "Code")) for the Joint
Venture.
11.3 Additional Provisions Relating to Tax
Matters Partner.
(a) The Tax Matters Partner shall exercise the
duties and responsibilities provided in Subchapter C of Chapter
63 of Subtitle F of the Code and this agreement. The Tax
Matters Partner shall be reimbursed by the Joint Venture for
reasonable expenses incurred as a result of acting in that
capacity, including fees of outside counsel and public ac-
countants. The Tax Matters Partner shall keep the other Ven-
turer informed of all administrative and judicial proceedings
for the adjustment at the Joint Venture level of Joint Venture
items and shall promptly provide to the other Venturer copies
of any notices or communications received from the Internal
Revenue Service or any state or local tax authority. The other
Venturer shall promptly provide to the Tax Matters Partner
copies of all correspondence to or from, or summaries of any
other communications with, the Internal Revenue Service or any
state or local tax authority regarding any aspect of the Joint
Venture and Joint Venture items.
(b) Neither Venturer shall enter into settle-
ment negotiations with the Internal Revenue Service or the
Departments of the Treasury or Justice or any state or local
tax authority with respect to the federal income tax treatment
of Joint Venture items until completion of settlement negoti-
ations by the Tax Matters Partner on behalf of the Joint Ven-
ture. However, the Tax Matters Partner shall not bind the
other Venturer to a settlement agreement unless that Venturer
has given its written consent to the agreement, which consent
shall not be unreasonably withheld.
(c) The Tax Matters Partner shall not file a
(i) request for an administrative adjustment of any Joint
Venture item under section 6227(b) of the Code, (ii) petition
for readjustment of Joint Venture items under section 6226(a)
of the Code, or (iii) petition for an adjustment with respect
to Joint Venture items under section 6228(a) of the Code with-
out first notifying the other Venturer of the intended action
(including the proposed treatment of the Joint Venture item(s)
and the proposed court, if applicable). Neither Venturer shall
file a (1) request for an administrative adjustment of Joint
Venture items under section 6227(a) of the Code, (2) petition
for readjustment of Joint Venture items under section 6226(b)
of the Code, or (3) civil action for refund under section
6228(b)(2) of the Code without first giving reasonable advance
notice of the intended action (including the proposed treatment
of the Joint Venture item(s) and the proposed court, if applic-
able) to the Tax Matters Partner.
(d) The provisions of this section regarding
the Tax Matters Partner shall survive the termination of this
agreement or the termination of either Venturer's interest
under this agreement and shall remain binding on the Venturers
for a period of time necessary to resolve with the Internal
Revenue Service or any state or local tax authority all matters
regarding the taxation of the Joint Venture. The terms used in
this section 11 shall have the meaning accorded them in sec-
tions 6221 through 6232 of the Code.
12. Right to Require Sale.
(a) Notwithstanding anything in this agreement
to the contrary, at any time or times ML Media may request, by
notice to Century, that (i) Century purchase ML Media's
interest in the Joint Venture, (ii) the Joint Venture and the
Subsidiary sell all of the assets and business of the Cable
Division, or (iii) the Joint Venture sell all of the assets and
business of the Radio Division. ML Media may deliver a request
under any one of clauses (i), (ii) or (iii) or under both
clauses (ii) and (iii).
(b) If ML Media makes a request under section
12(a)(i) or under both sections 12(a)(ii) and 12(a)(iii), the
following shall apply:
(i) Century shall elect, by notice given
to ML Media within 15 days after the notice from ML Media, to
either (x) cause the Joint Venture and the Subsidiary to sell
all of the assets and business of the Cable Division and the
Radio Division for prices and at times consistent with prudent
business practice (and approved by ML Media), or (y) purchase,
or cause the Joint Venture to purchase (ML Media concurring in
such purchase), all of ML Media's interest in the Joint Venture
for a purchase price equal to the fair market value of the
interest, payable in cash at the closing of the purchase. If
Century elects to sell all of the assets and business of the
Cable Division and the Radio Division then ML Media may elect,
by notice given to Century within 20 days after the notice to
Century, to purchase (or designate a purchaser of) Century's
interest in the Joint Venture for a purchase price equal to the
fair market value of the interest payable in cash at the clos-
ing. If ML Media does not so elect the management board of the
Joint Venture and the board of directors of the Subsidiary
shall diligently proceed to locate one or more purchasers and
to consummate the sale of the assets and business of the Cable
Division and the Radio Division as provided above.
(ii) If ML Media makes a request under
Section 12(a)(ii) or section 12(a)(iii) (but not both) Century
shall elect, by notice given to ML Media within 15 days after
the notice from ML Media, to either (x) cause the Joint Venture
and, in the case of a request under section 12(a)(ii), the
Subsidiary to sell all of the assets and business of the
Division to which the request relates for prices and at times
consistent with prudent business practice (and approved by ML
Media), or (y) purchase all of ML Media's interest in the
Division to which the request relates for a purchase price
equal to the fair market value of the interest, payable in cash
at the closing of the purchase. If Century elects to sell all
of the assets and business of either the Cable Division or the
Radio Division pursuant to this section 12(b)(ii), then ML
Media may elect, by notice given to Century within 20 days
after the notice to Century, to purchase (or designate a
purchaser of) Century's interest in that Division for a
purchase price equal to the fair market value of the interest
payable in cash at the closing. If ML Media does not so elect
the management board of the Joint Venture and, in the case of a
request under section 12(a)(ii), the board of directors of the
Subsidiary shall diligently proceed to locate one or more
purchasers and to consummate the sale of the assets and
business of the Cable Division or the Radio Division (as the
case may be) as provided above.
(c) The fair market value of the interest of
Century or ML Media in the Joint Venture or in the Cable
Division or the Radio Division, as the case may be, shall be an
amount equal to 50% of the fair market value, as of the date of
the seller's notice, of (i) in the case of the Joint Venture,
all of the assets and business of the Cable Division and the
Radio Division (and of any cash and cash equivalents held by
the Joint Venture) and (ii) in the case of the Cable Division
or the Radio Division, all of the assets and business of that
Division (and of any cash and cash equivalents of that
Division). The fair market value of all of the assets and
business of the Cable Division or the Radio Division shall be
an amount equal to the sum of the aggregate purchase price that
an unrelated third party or parties would pay for all of the
assets and business of that Division, other than cash and cash
equivalents and accounts receivable, subject to all of the
liabilities of that Division, plus the amount of cash and cash
equivalents and the amount of accounts receivable (less a
reserve for uncollectible accounts determined in accordance
with generally accepted accounting principles consistently
applied), as determined by an appraiser selected by Century and
ML Media within 15 days after Century's or ML Media's notice of
election to purchase (or, if they are unable to agree upon the
selection of an appraiser within that period, Century shall
select one appraiser, ML Media shall select one appraiser and
the two appraisers shall select a third appraiser and the fair
market value shall be the arithmetic average of the fair market
value determined by each of the three appraisers), except that
any appraiser making a determination of the fair market value
of ML Media's interest (but not Century's interest) in the
Joint Venture, the Cable Division or the Radio Division shall
not include as a liability of the Joint Venture, the Cable
Division or the Radio Division the amount of any Make-Whole
Amount (as defined in the Note Agreements) or other prepayment
premium or penalty that may be due under the Note Agreements or
any of the documents delivered in connection with the Note
Agreements. The Joint Venture shall instruct the appraiser or
appraisers to determine the fair market value within 30 days.
The Joint Venture shall bear the fees and expenses of the
appraiser or appraisers.
(d) If the interest of a Venturer in the
Joint Venture or either Division is to be purchased pursuant to
this section 12 by the other Venturer the closing of the
purchase shall be held on a date specified by the purchaser
(not later than 30 days after receipt of the appraisal and
after obtaining all necessary final regulatory approvals,
including final approval by the FCC and, in the case of the
Cable Division, the Puerto Rico Public Service Commission). At
the closing, the seller shall assign its interest in the Joint
Venture or the applicable Division to the purchaser, its
designee or the Joint Venture, as the case may be, and the
purchaser shall pay the amount determined by the appraiser, in
cash. In addition to the foregoing, if the interest of a
Venturer in only one Division is being sold at the closing, the
purchaser shall agree to indemnify and hold harmless the seller
against all liabilities relating to or arising out of that
Division and the parties shall amend the allocation and
distribution provisions of this agreement to provide the
purchaser with all income, gain and loss and all cash
distributions arising from or relating to the operations of
that Division.
(e) Upon the purchase by a Venturer of the
interest of the other Venturer in the Joint Venture or the
Division managed by the selling Venturer, the management by the
selling Venturer of the Division for which it previously had
management responsibility shall terminate.
(f) Upon the sale of the assets of the Cable
Division or the Radio Division, the management board shall,
after paying or making provision for all liabilities to
creditors of the Joint Venture, distribute the cash and other
assets of the Division between the Venturers in accordance with
the provisions for distributions set forth in section 5.2 of
this agreement.
13. Limitation of Rights. Notwithstanding any other
provision of this agreement, any sale, transfer or other
disposition of any of the interests in the Joint Venture as
provided in section 12 of this agreement or any other action
taken or proposed to be taken by the Venturers under this
agreement that would affect the operational, voting or any
other form of control of the Joint Venture, the Subsidiary, the
Systems, the Stations or the Radio Businesses shall be pursuant
to Section 310(d) of the Communications Act of 1934, as
amended, and, with respect to the Joint Venture, the Subsidiary
and the Systems, the Puerto Rico Public Service Laws, and the
applicable rules and regulations under that Act and Laws and,
to the extent required by that Act and Laws, subject to the
explicit prior approval of the FCC or the PSC.
14. Other Action. Each Venturer shall take all such
action, and execute and deliver all such additional documents
and instruments, including, but not limited to, certificates
required in connection with the formation of the Joint Venture
or the operation of its business in any jurisdiction, as may be
necessary or appropriate to carry out this agreement.
15. Miscellaneous.
15.1 Entire Agreement; Amendment. This
agreement contains a complete statement of the arrangements
between the Venturers with respect to the Joint Venture and
supersedes all prior agreements and understandings among them
with respect to the Joint Venture. This agreement cannot be
changed or terminated orally.
15.2 Notices. Any notice or other
communication under this agreement shall be in writing and
shall be considered given when delivered in person or mailed by
registered mail, postage prepaid and return receipt requested,
addressed to the party intended as the recipient at the address
listed below or at such other address as that party may
designate by written notice to the other:
If to Century, to it at:
50 Locust Avenue
New Canaan, Connecticut 06840
If to ML Media, to it at:
350 Park Avenue - 16th Floor
New York, New York 10022
15.3 Governing Law. This agreement shall be
governed by, and construed in accordance with, the law of the
State of New York applicable to agreements made and to be
performed in New York.
15.4 No Recourse. No person shall have
recourse to, or assert any liability against, any limited
partner of ML Media with respect to any of the obligations or
liabilities of ML Media under this agreement, but any such
person shall look solely to the assets of ML Media and of the
general partner of ML Media.
15.5 Counterparts. This agreement may be
executed in one or more counterparts, all of which together
shall constitute this agreement.
ML MEDIA PARTNERS, L.P.
By Media Management Partners
By RP Media Management
By IMP Media Management, Inc.
By ______________________________
CENTURY COMMUNICATIONS CORP.
By _________________________________
TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES AGREEMENT
Agreement entered in San Juan, Puerto Rico this 1st day
of January 1994 by and among Century-ML Radio Venture, a joint
venture organized under the laws of New York (the "Transferor");
Century/ML Cable Venture, a joint venture organized under the
laws of New York (the "Transferee"); Century Communications
Corp., a Texas corporation ("Century"); and ML Media Partners,
L.P., a Delaware limited partnership ("ML Media" and,
collectively with Century, the "Joint Venturers").
WITNESSETH
WHEREAS, Transferor is the owner and operator of
certain radio stations and other related businesses in Puerto
Rico;
WHEREAS, Transferee is the owner and operator of
certain cable television systems in Puerto Rico;
WHEREAS, Century owns a 50.001% interest in the
Transferor and a 50% interest in the Transferee and ML Media owns
a 49.999% interest in the Transferor and a 50% interest in the
Transferee;
WHEREAS, the Joint Venturers have agreed to cause the
Transferor to transfer all of its assets to the Transferee and to
cause the Transferee to assume all of the liabilities of the
Transferor;
NOW THEREFORE, in consideration of the premises and for
other good and valuable consideration, the sufficiency of which
is hereby acknowledged, the parties agree as follows:
1. Transfer of Assets. Transferor hereby transfers
and delivers to Transferee all of its assets (the "Assets") for
the consideration specified in Section 3.
The Assets include, without limitation:
i) all interests in real property and all buildings
and other improvements and fixtures owned by
Transferor. Transferee and Transferor agree to
execute deeds of conveyance and all other
documents necessary to transfer title to
Transferee of such assets;
ii) all machinery and equipment, furniture, computer
hardware, office supplies, automobiles and other
vehicles, and other tangible personal property
owned by Transferor;
iii) all franchises, licenses, permits, consents,
contractual rights, and certificates of any
regulatory, administrative or other governmental
agency or body issued to or held by Transferor
which are transferable to Transferee under
applicable law;
iv) all trade secrets, confidential business
information, know-how, drawings, specifications,
designs, plans, proposals, technical data and any
other intangible property owned by the Transferor;
v) all leases of, or purchase contracts for,
equipment, vehicles or other tangible personal
property;
vi) all computer software and books, records, ledgers,
documents, correspondence, lists, plats,
architectural plans, drawings, files, papers,
studies, reports, and other printed or written
materials; and
vii) all rights, privileges, powers and franchises of a
public or private nature, and all and every other
interest of any type and nature.
2. Assumption of Liabilities. Transferee hereby
assumes and becomes responsible for all the liabilities and
obligations, contractual or otherwise, of the Transferor (the
"Assumed Liabilities").
3. Consideration: On this same date Century and ML
Media shall surrender for cancellation the certificates issued
pursuant to Section 1 of the Management Agreement and Joint
Venture Agreement dated December 16, 1986 between Century and ML
Media (the "Joint Venture Agreement"), which certificates
evidence their respective 50% interest in the Transferee. In
exchange therefor, Century shall receive a certificate issued
pursuant to Section 1 of the Joint Venture Agreement, evidencing
a 50% interest in the Transferee and ML Media shall receive a
certificate evidencing a 50% interest in Transferee.
4. Entire Agreement. This Agreement constitutes the
entire understanding and agreement of the parties with respect to
the subject matter hereof and thereof and supersedes all prior
and contemporaneous agreements or understandings, inducements or
conditions, express or implied, written or oral, between the
parties with respect hereto.
5. Governing Law. This Agreement shall be governed
by and construed in accordance with the internal laws (and not
the law of conflicts) of the Commonwealth of Puerto Rico.
6. Amendments and Waivers. No amendments of any
provision of this Agreement shall be valid unless the same shall
be in writing and signed by Transferee and Transferor. No waiver
by any party of any breach hereunder, whether intentional or not,
shall be deemed to extend to any prior or subsequent breach
hereunder or affect in any way any rights arising by virtue of
any prior or subsequent such occurrence.
7. Severability. Any provision of this Agreement
which is found by a court of competent jurisdiction to be
illegal, invalid or unenforceable shall be deemed severed from
the Agreement and shall not affect the continuing legality,
validity or enforceability of the remaining terms and provisions.
8. Expenses. Transferee and Transferor shall each
bear its own costs and expenses (including legal fees and
expenses) incurred in connection with the negotiation and
execution of this Agreement and the transactions contemplated
hereby.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date first above written.
CENTURY COMMUNICATIONS CORP. CENTURY/ML CABLE VENTURE
By:________________________ By: Century Communications Group
By:_________________________
By: ML Media Partners, L.P.
By: Media Management Partners
By: RP Media Management
By: IMP Media Management, Inc.
By:____________________________
CENTURY-ML RADIO VENTURE
By: Century Communications Group
By:_________________________
ML MEDIA PARTNERS, L.P.
By: ML Media Partners, L.P.
By: Media Management Partners By: Media Management Partners
By: RP Media Management By: RP Media Management
By: IMP Media Management, By: IMP Media Management, Inc.
Inc.
By:________________________ By:____________________________
PLAN OF REORGANIZATION OF
JOINT VENTURES
I. PARTIES
A. CENTURY-ML RADIO VENTURE ("Radio Venture") is a
joint venture organized under the laws of the State of New York,
engaged in the radio business in Puerto Rico. The partners of
Radio Venture are Century Communications Corp. ("Century"), a
Texas corporation, not engaged in trade or business in Puerto
Rico, and ML Media Partners, L.P. ("ML Media"), a limited
partnership organized under the laws of the State of Delaware,
not engaged in trade or business in Puerto Rico, with interests
of 50.001% and 49.999%, respectively, in Radio Venture.
B. CENTURY/ML CABLE VENTURE ("Cable Venture") is a
joint venture organized and existing under the laws of the State
of New York, engaged in the cable television business in Puerto
Rico. The partners of Cable Venture are Century and ML Media,
each with a 50% interest in Cable Venture.
II. The Plan of Reorganization
A. Transfer of Assets and Assumption of Liabilities
Upon the issuance of certain rulings requested from the
Puerto Rico Treasury Department, Radio Venture will transfer all
of the its assets to Cable Venture in exchange for the assumption
by Cable Venture of all the obligations of Radio Venture and the
issuance to the Radio Venture partners of partnership interests
in Cable Venture.
B. The Transfer of Assets and Assumption of
Liabilities Agreement
The transfer of assets and assumption of liabilities
will be effected pursuant a Transfer of Assets and Assumption of
Liabilities Agreement in the form of Exhibit A.
C. Dissolution of the Radio Venture
As soon as practicable after the transfer of its assets
to the Cable Venture, the Radio Venture shall cease to exist and
shall be dissolved.
Adopted by Cable Venture and Radio Venture this 1st day
of January, 1994.
CENTURY/ML CABLE VENTURE CENTURY-ML RADIO VENTURE
By: Century Communications, By: Century Communications
Corp. Corp.
By:_________________________ By:___________________________
By: ML Media Partners, L.P. By: ML Media Partners, L.P.
By: Media Management Partners By: Media Management Partners
By: RP Media Management By: RP Media Management
By: IMP Media Management, Inc. By: IMP Media Management, Inc.
By:__________________________ By:___________________________
UNANIMOUS CONSENT OF PARTNERS
OF CENTURY-ML RADIO VENTURE AND CENTURY/ML CABLE VENTURE
Century Communications Corp. and ML Media Partners,
L.P., being all the partners of CENTURY-ML RADIO VENTURE ("Radio
Venture") and of CENTURY/ML CABLE VENTURE ("Cable Venture"),
joint ventures organized under the laws of the State of New York,
do hereby agree and consent in writing to the adoption of the
Plan of Reorganization of Joint Ventures, to be executed by and
between Radio Venture and Cable Venture by virtue of which all
the assets of Radio Venture will be transferred, subject to its
liabilities, to Cable Venture, pursuant to that certain Transfer
of Assets and Assumption of Liabilities Agreement to be executed
by Cable Venture and Radio Venture, in pursuance of such Plan of
Reorganization of Joint Ventures.
The management boards of Radio Venture and Cable
Venture are hereby authorized to perform or authorize any and all
acts contemplated in the Plan, and any and all such further acts
and things as they may consider desirable to carry out the
purposes of the Plan, including the execution and filing of all
such certificates, documents, information, returns, tax returns,
petitions, and/or requests to the government agencies and other
documents which may be necessary or appropriate to implement the
Plan. The management boards of Radio Venture and Cable Venture
are authorized to adopt such variations or amendments of the
provisions of the Plan as may be necessary or appropriate to
effectuate the complete transfer of Radio Venture's assets, and
the assumption by Cable Venture of the liabilities of Radio
Venture, and, thereafter, the dissolution of Radio Venture.
At New York, New York, this 1st day of January, 1994.
CENTURY COMMUNICATIONS CORP.
By:____________________________________
ML MEDIA PARTNERS, L.P.
By: Media Management Partners
By: RP Media Management
By: IMP Media Management, Inc.
By:______________________________
EXECUTION COPY
AMENDMENT
AMENDMENT dated as of December 15, 1993 among
CENTURY-ML CABLE CORPORATION, a Delaware corporation (the
"Borrower"), the banks parties to the Credit Agreement referred
to below (the "Banks"), Citibank, N.A., as agent (the "Agent")
for the Banks thereunder, and CENTURY/ML CABLE VENTURE, a
general partnership organized and existing under the laws of
the State of New York (the "Joint Venture").
PRELIMINARY STATEMENTS:
(1) The Borrower, the Banks and the Agent have
entered into a Credit Agreement dated as of December 16, 1986,
as amended by Amendment No. 1 thereto dated as of September 21,
1987, Amendment No. 2 thereto, contained in that certain
Amendment, Consent and Release dated as of June 23, 1988, and
Amendment No. 3 thereto dated as of January 31, 1989, as
amended and restated by Amended and Restated Credit Agreement
dated as of March 8, 1989, as amended by an amendment dated as
of October 6, 1989, and as amended and restated by Second
Restated Credit Agreement dated as of December 1, 1992, as
amended by an amendment dated as of September 30, 1993 (as so
amended and restated, the "Credit Agreement"; unless otherwise
defined herein the terms defined in the Credit Agreement being
used herein as therein defined).
(2) The Borrower, the Joint Venture and the Banks
have agreed to further amend the Credit Agreement as
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and
the mutual covenants herein contained, the parties hereto
hereby agree as follows:
SECTION 1. Amendments to Credit Agreement. The
Credit Agreement is, effective as of the date hereof and
subject to the satisfaction of the conditions precedent set
forth in Section 2 hereof, hereby amended as follows:
(a) Section 1.01 is amended by adding a definition
thereto, in proper alphabetical order, to read as follows:
"Commitment Reduction Date" has the meaning specified
in Section 2.04(b).
(b) The definition for "Termination Date" in Section
1.01 is amended by replacing the date "December 15, 1993"
therein with the date "December 31, 1998".
(c) Section 2.04 is amended in full to read as
follows:
"SECTION 2.04. Reduction of the Commitment. (a)
Optional. The Borrower shall have the right, prior to
the Termination Date, upon at least two Business Days'
notice to the Agent, to terminate in whole or reduce
in part the unused portion of the Commitment of the
Banks; provided that (i) the amount of the Commitment
shall not be reduced to an amount which is less than
the aggregate principal amount of Advances then
outstanding and (ii) each partial reduction shall be
in an aggregate amount of $1,000,000 or an integral
multiple thereof.
(b) Mandatory. The Commitment shall be
permanently reduced on the last day of each December,
March, June and September in each year listed below,
commencing on December 31, 1993, and ending on
December 31, 1998 (each such date being a "Commitment
Reduction Date"), and the amount of the reduction on
each such Commitment Reduction Date shall be equal to
the product obtained by multiplying (i) the Commitment
on December 31, 1993 (without giving effect to any
Commitment reduction on such date) by (ii) the
percentage set forth below for such Commitment
Reduction Date:
> > Amortization Percentage For >
> > Commitment Reduction Date Specified >
>Year > March 31 > June 30 > September 30 > December 31 >
>1993 > xxxxx > xxxx > xxxx > 3.00 >
>1994 > 3.00 > 3.00 > 3.00 > 3.00 >
>1995 > 4.00 > 4.00 > 4.00 > 4.00 >
>1996 > 5.75 > 5.75 > 5.75 > 5.75 >
>1997 > 6.50 > 6.50 > 6.50 > 6.50 >
>1998 > 5.00 > 5.00 > 5.00 > 5.00 >
provided, however, that on the Termination Date the
Commitment shall be zero."
(d) Section 2.05 is amended in full to read as
follows:
"SECTION 2.05. Repayment of Advances. The
Borrower shall, on the Termination Date, repay to the
Agent for the ratable account of the Banks the
aggregate outstanding principal amount of the
Advances."
(e) Section 2.07 is amended by adding at the end
thereof a new subsection (h), to read as follows:
"(h) On each Commitment Reduction Date, the
Borrower shall prepay the Advances in an aggregate
principal amount equal to the amount, if any, by which
the aggregate outstanding principal amount of the
Advances exceeds the Commitment on such Commitment
Reduction Date (after giving effect to all reductions
of the Commitment on such Commitment Reduction Date),
together with accrued interest to the date of such
prepayment on the principal amount prepaid and all
amounts then owing under Section 8.04(c) in respect of
such prepayment. Each such prepayment shall be
applied to the Advances of the Banks ratably."
(f) Section 5.01(h) is amended by replacing the
reference to "Termination Date" therein with the date
"September 30, 1993".
SECTION 2. Conditions of Effectiveness. This
Amendment shall become effective as of December 15, 1993 when,
and only when, the Agent shall have received counterparts of
this Amendment executed by the Borrower, the Joint Venture and
all of the Banks or, as to any of the Banks, advice
satisfactory to the Agent that such Banks have executed this
Amendment, and Section 1 hereof shall become effective when,
and only when, the Agent shall have additionally received (a)
counterparts of this Amendment with the Consent attached hereto
executed by the Radio Venture, Century and ML Media and (b) all
of the following documents, each document (unless otherwise
indicated) being dated the date of receipt thereof by the Agent
(which date shall be the same for all such documents other than
the opinion described in clause (ii) below), in form and
substance satisfactory to the Agent:
(i) Certified copies of all documents evidencing
necessary corporate action and governmental approvals, if
any, with respect to this Amendment, any consents thereto
and the matters contemplated hereby.
(ii) A favorable opinion of Leavy Rosensweig & Hyman,
counsel for the Borrower and the Joint Venture, dated on or
before December 24, 1993.
(iii) A certificate signed by a duly authorized
officer of each of the Borrower and the Joint Venture
stating that:
(A) The representations and warranties contained
in Section 3 hereof are correct on and as of the date
of such certificate as though made on and as of such
date; and
(B) No event has occurred and is continuing, or
would result from the effectiveness of this Amendment
or any matter contemplated hereby, which constitutes a
Default.
SECTION 3. Representations and Warranties of the
Borrower and the Joint Venture. Each of the Borrower and the
Joint Venture represents and warrants as follows:
(a) The Borrower is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction indicated at the beginning of this Amendment.
(b) The Joint Venture is a partnership duly organized
and validly existing under the laws of the jurisdiction
indicated at the beginning of this Amendment.
(c) The execution, delivery and performance by each
of the Borrower and the Joint Venture of this Amendment and
the Loan Documents, as amended hereby, to which it is or is
to be a party are within such Person's respective corporate
or partnership powers, as the case may be, have been duly
authorized by all necessary corporate or partnership (and,
if required, stockholder or partner) action, as the case
may be, and do not contravene (i) any provision of such
Person's certificate of incorporation, by-laws, partnership
certificate, partnership agreement or other constitutive
document or (ii) law or any contractual restriction binding
on or affecting it, or result in, or require, the creation
or imposition of any mortgage, deed of trust, pledge, lien,
security interest or other charge, encumbrance or
preferential arrangement of any nature (other than pursuant
to the Security Documents) upon or with respect to any of
the properties now owned or hereafter acquired by such
Person.
(d) No authorization, approval or other action by,
and no notice to or filing with, any governmental authority
or regulatory body is required for the due execution,
delivery and performance by each of the Borrower and the
Joint Venture of this Amendment or any of the Loan
Documents, as amended hereby, to which it is or is to be a
party, other than, with respect to the Loan Documents, (x)
such authorizations, approvals, notices and filings as have
been obtained or made and are in full force and effect as
of the date hereof, as set forth on Schedule 2 to the
Credit Agreement, and (y) in the case of the exercise of
remedies under the Loan Documents, to the extent that such
exercise would result in a voluntary or involuntary
assignment or transfer of control of any Franchises, any
required consent, authorization or approval of the FCC or
the Public Service Commission of the Commonwealth of Puerto
Rico.
(e) This Amendment and each of the other Loan
Documents, as amended hereby, to which either the Borrower
or the Joint Venture is a party constitute legal, valid and
binding obligations of the Borrower and the Joint Venture
enforceable against the Borrower and the Joint Venture in
accordance with their respective terms, subject, in the
case of enforceability, to the effect of any bankruptcy,
insolvency or similar law affecting creditors' rights
generally and general principles of equity (regardless of
whether considered in a proceeding at equity or in law).
(f) The Security Documents consisting of security
agreements to which either the Borrower or the Joint
Venture is a party constitute valid and perfected first
priority security interests and liens in and to the
collateral covered thereby enforceable against all third
parties in all jurisdictions and secure the payment of all
obligations of the Borrower and the Joint Venture under the
Loan Documents, as amended hereby.
(g) The balance sheets of the Joint Venture and its
Subsidiaries as at December 31, 1992 and the related
statements of income, retained earnings and cash flows of
the Joint Venture and its Subsidiaries for the Fiscal Year
then ended, copies of which have been furnished to the
Agent and each Bank, fairly present the financial condition
of the Joint Venture and its Subsidiaries as at such date
and the results of the operations of the Joint Venture and
its Subsidiaries for the period ended on such date, all in
accordance with United States generally
accepted accounting principles applied on a consistent
basis, and since December 31, 1992, there has been no
material adverse change in such condition or operations.
(h) To the best of the Borrower's and the Joint
Venture's knowledge after due inquiry, there is no pending
or threatened action or proceeding affecting the Joint
Venture or any of its subsidiaries before any court,
governmental agency or arbitrator, which could reasonably
be expected to materially adversely affect the financial
condition or operations of the Joint Venture or any
subsidiary or which purports to affect the legality,
validity or enforceability of this Amendment or any of the
other Loan Documents, as amended hereby.
SECTION 4. Reference to and Effect on the Loan
Documents. (a) Upon the effectiveness of Section 1 hereof, on
and after the date hereof each reference in the Credit
Agreement to "this Agreement", "hereunder", "hereof" or words
of like import referring to the Credit Agreement, and each
reference in the other Loan Documents to "the Credit
Agreement", "thereunder", "thereof" or words of like import
referring to the Credit Agreement, shall mean and be a
reference to the Credit Agreement as amended hereby.
(b) Except as specifically amended above, the Credit
Agreement and the Notes, and all other Loan Documents, are and
shall continue to be in full force and effect and are hereby in
all respects ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein,
operate as a waiver of any right, power or remedy of any Bank
or the Agent under any of the Loan Documents, nor constitute a
waiver of any provision of any of the Loan Documents.
SECTION 5. Costs, Expenses and Taxes. The Borrower
agrees to pay on demand all costs and expenses of the Agent in
connection with the preparation, execution, delivery,
administration, modification and amendment of this Amendment
and the other instruments and documents to be delivered
hereunder, including, without limitation, the reasonable fees
and out-of-pocket expenses of counsel for the Agent with
respect thereto and with respect to advising the Agent as to
its rights and responsibilities hereunder and thereunder. The
Borrower further agrees to pay on demand all costs and
expenses, if any (including, without limitation, reasonable
counsel fees and expenses), in connection with the enforcement
(whether through negotiations, legal proceedings or otherwise)
of this Amendment and the other instruments and documents to be
delivered hereunder, including, without limitation, reasonable
counsel fees and expenses in connection with the enforcement of
rights under this Section 5. In addition, the Borrower shall
pay any and all stamp and other taxes payable or determined to
be payable in connection with the execution and delivery of
this Amendment and the other instruments and documents to be
delivered hereunder, and agrees to hold the Agent and each Bank
harmless from and against any and all liabilities with respect
to or resulting from any delay in paying or omission to pay
such taxes.
SECTION 6. Execution in Counterparts. This Amendment
may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and
all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature
page to this Amendment by telecopier shall be effective as
delivery of a manually executed counterpart of this Amendment.
SECTION 7. Governing Law. This Amendment shall be
governed by, and construed in accordance with, the laws of the
State of New York.
IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be executed by their respective officers
thereunto duly authorized, as of the date first above written.
CENTURY-ML CABLE CORPORATION
By
Title:
CENTURY/ML CABLE VENTURE
By: Century Communications
Corp., as general partner
By
Title:
By: ML Media Partners, L.P.,
as general partner
By: Media Management Partners,
its general partner
By: RP Media Management, a
general partner
By: IMP Media Management, Inc.,
a general partner
By
Title:
CITIBANK, N.A.,
as Agent
By
Title:
CITIBANK, N.A.
By
Title:
<PAGE>
CONSENT
Dated as of September 30, 1993
The undersigned, CENTURY-ML RADIO VENTURE, a New York
general partnership, CENTURY COMMUNICATIONS CORP., a Texas
corporation, and ML MEDIA PARTNERS, L.P., a Delaware limited
partnership, each hereby consents to the foregoing Amendment to
which this Consent is Annex A (terms defined in such Amendment
are used herein as therein defined). Each of the undersigned
hereby further confirms and agrees (a) to the extent that it is
a party thereto, that each of (i) the Radio Venture Note,
(ii) the Radio Venture Guaranty, (iii) the Century Pledge
Agreement, (iv) the ML Media Pledge Agreement and (v) the other
Loan Documents is, and shall continue to be, in full force and
effect and is hereby ratified and confirmed in all respects
except that, upon the effectiveness of, and on and after the
date of, the said Amendment, each reference in any Loan
Document to the Loan Documents or any thereof, "thereunder",
"thereof" or words of like import shall mean and be a reference
to the Loan Documents or such Loan Document as amended by the
said Amendment and (b) the Security Documents to which it is a
party and all of the Collateral described therein do, and shall
continue to, secure the payment of all of the Obligations (as
defined therein).
CENTURY-ML RADIO VENTURE
By: Century Communications
Corp., as general partner
By
Title:
By: ML Media Partners, L.P.,
as general partner
By: Media Management Partners,
its general partner
By: RP Media Management, a
general partner
By: IMP Media Management, Inc.,
a general partner
By
Title:
2
CENTURY COMMUNICATIONS CORP.
By
Title:
ML MEDIA PARTNERS, L.P.
By: Media Management Partners,
its general partner
By: RP Media Management, a
general partner
By: IMP Media Management, Inc.,
a general partner
By
Title:
