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 30, 1994
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)
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 Elation 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 30, 1994, Registrant's investments in media
properties consist of a 50% interest in a joint venture which
owns two cable television systems, an FM and AM radio station
combination, and a background music service 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;
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. C-ML Cable Corp., as successor
to 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 (collectively, the "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 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.
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
112,228 basic subscribers, pass approximately 262,505 homes and
consist of approximately 1,775 linear miles of cable plant.
During 1994, Registrant's share of the net revenues of the Puerto
Rico Systems totalled $21,525,793 (20.3% of operating revenues of
Registrant).
During 1993, Registrant's share of the net revenues of the Puerto
Rico Systems totalled $20,206,318 (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).
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. Refer to Note 6 of "Item 8. Financial
Statements and Supplementary Data" for further information
regarding the C-ML Credit Agreement.
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.
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. 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, increasing the line of credit available under the C-ML
Credit Agreement from $108 million to $114 million.
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.
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.
Effective January 1, 1994, all of 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 Registrant by the Venture 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.
During 1994, Registrant's share of the net revenues of the C-ML
Radio properties totalled $2,761,508 (2.6% of operating revenues
of Registrant).
During 1993 and prior years, Registrant's investment in the C-ML
Radio properties was accounted for under the equity method of
accounting.
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 136,022 basic subscribers, pass 218,992 homes and
consist of approximately 2,035 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 had invested in cable television systems that were
managed by MultiVision, prior to their sale, pursuant to the same
Cost Allocation Agreement.
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.
On November 28, 1994, Registrant entered into an agreement (the
"Asset Purchase Agreement") with Century to sell to Century
substantially all of the assets used in the operations of
Registrant's California Cable Systems serving the Anaheim,
Hermosa Beach/Manhattan Beach, Rohnert Park/Yountville and
Fairfield communities. The base purchase price for the systems
will be $286 million, subject to reduction by an amount equal to
11 times the amount by which the operating cash flow of the
systems (as adjusted in accordance with the Asset Purchase
Agreement) is less than $26 million for the 12-month period prior
to the closing, and subject to further adjustment as provided in
the Asset Purchase Agreement. In addition, Registrant has the
right to terminate the Asset Purchase Agreement if the purchase
price would be less than $260 million based on the formula
described above. Consummation of the transactions provided for
in the Asset Purchase Agreement is subject to the satisfaction of
certain conditions, including obtaining approvals from the
Federal Communications Commission and the municipal authorities
issuing the franchises for the systems.
Merrill Lynch & Co. did not, nor will it, receive a fee or other
form of compensation for acting as financial advisor in
connection with the sale of the California Cable Systems.
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 consummate the sale of the California Cable
systems or the potential timing and ultimate value of such 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 1994, California Cable generated operating revenues of
$55,024,025 (52.0% of operating revenues of Registrant).
During 1993, California Cable generated operating revenues of
$55,197,638 (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).
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 196,820
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 agreed not to compete with the Station in
the Station's designated market area for two years.
During 1994, the Station generated operating revenues of
$6,078,081 (5.7% of operating revenues of Registrant).
During 1993, the Station generated operating revenues of
$5,276,512 (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).
Registrant used its equity to purchase the Station for cash;
however, subsequent to the purchase, in order to refinance a
portion of its 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 Notes 2 and 6 of "Item 8. Financial Statements and
Supplementary Data" for further information regarding the WREX-
KATC Loan.
Registrant has experienced, and expects to experience, principal
payment and covenant defaults under the WREX-KATC Loan.
Registrant sought unsuccessfully to restructure the WREX-KATC
Loan and, as a result, decided to market WREX and KATC for sale.
On March 6, 1995, Registrant entered into a non-binding letter of
intent to sell KATC with a third party not affiliated with the
General Partner or any of its affiliates. The sale of KATC is
subject to negotiation of a definitive purchase and sale
agreement and numerous other conditions. The ultimate transfer
of the license of KATC to a potential buyer will also be subject
to the prior approval of the FCC. (As discussed below, on
February 23, 1995, Registrant entered into a non-binding letter
of intent to sell WREX). If Registrant is unable to complete the
sales of WREX and KATC on terms acceptable to Registrant,
Registrant will seek to refinance the WREX-KATC Loan with a new
lender.
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 162,440 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 1994, WREX-TV generated operating revenues of $5,506,056
(5.2% of operating revenues of Registrant).
During 1993, WREX-TV generated operating revenues of $4,925,030
(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).
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 Notes 2
and 6 of "Item 8. Financial Statements and Supplementary Data"
for further information regarding the WREX-KATC Loan.
As discussed above, Registrant has decided to market WREX and
KATC for sale. On February 23, 1995, Registrant entered into a
non-binding letter of intent to sell WREX with a third party not
affiliated with the General Partner or any of its affiliates.
The sale of WREX is subject to negotiation of a definitive
purchase and sale agreement and numerous other conditions. The
ultimate transfer of the license of WREX to a potential buyer
will also be subject to the prior approval of the FCC. (As
discussed above, on March 6, 1995, Registrant entered into a non-
binding letter of intent to sell KATC). If Registrant is unable
to complete the sales of WREX and KATC on terms acceptable to
Registrant, Registrant will seek to refinance the WREX-KATC Loan
with a new lender.
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. Currently, WEBE-FM serves approximately 125,000
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 Notes 2 and 6 of "Item 8.
Financial Statements and Supplementary Data" for further
information regarding the Wincom-WEBE-WICC Loan and the
Restructuring Agreement.
During 1994, WEBE-FM generated operating revenues of $5,286,984
(5.0% of operating revenues of Registrant).
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).
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 Notes 2 and 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. Certain
additional amounts from the net proceeds from the sale of the
Indianapolis Stations, including an escrow deposit of $250,000,
are required to be paid to Chemical Bank when received. Refer to
Notes 2 and 6 of "Item 8. Financial Statements and Supplementary
Data" for further information regarding the Restructuring
Agreement.
During 1994, Wincom generated operating revenues of $4,349,191
(4.1% of operating revenues of Registrant).
During 1993, Wincom generated operating revenues of $5,269,021
(5.2% of operating revenues of Registrant).
During 1992, Wincom generated operating revenues of $5,388,050
(5.4% 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).
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 Notes 2 and 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 1994, WICC-AM generated operating revenues of $2,115,461
(2.0% of operating revenues of Registrant).
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).
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 Notes 2 and 6 of
"Item 8. Financial Statements and Supplementary Data" for
further information regarding the ML California Credit Agreement.
During 1994, the Anaheim Radio Stations generated operating
revenues of $3,263,109 (3.1% of operating revenues of
Registrant).
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).
Employees
As of December 30, 1994 Registrant employed approximately 500
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 was initiated in June 1994 and a
second satellite was launched in August 1994. These satellites
currently provide over 150 channels of digital DBS service to
subscribers.
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.
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 economic recession at
the beginning of this decade 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 of the additional, recently
launched broadcast networks develops program offerings
competitive with those of the more established networks.
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 at the beginning of this decade.
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 1993-94 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 the 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 by 1994. However,
in November 1993, a three judge panel of the D.C. Circuit found
the indecency rules to be unconstitutional and remanded them to
the Commission. Subsequently, on February 16, 1994, the U.S.
Court of Appeals for the D.C. Circuit vacated the panel decision
pending rehearing and a decision by the full Court of Appeals.
In the meantime, the effectiveness of the indecency provisions
remain stayed. Similarly, challenges to the constitutionality of
the mandatory carriage provision remain pending. Although a
special three judge panel of the U.S. District Court for the
District of Columbia upheld the constitutionality of the
mandatory carriage provision, the U.S. Supreme Court vacated that
decision in June 1994 and remanded the case to the District Court
for further proceedings. Accordingly, a final determination on
the constitutionality of the mandatory carriage rules must await
a further fact-finding procedure before the District Court and a
possible further appeal to the U.S. Supreme Court. Currently,
the must carry rules remain in effect. On a separate matter, in
September 1993 the United States District Court for the District
of Columbia found that the horizontal ownership limits called for
by the 1992 Cable Act are unconstitutional. Accordingly, the
Commission has stayed the effect of horizontal ownership rules
until final judicial resolution of the issue. 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). As required by the 1992
Cable Act, the FCC adopted rules setting maximum reasonable rates
and other terms for the use of such leased channels. 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. The FCC's major actions include the following:
(1) a modification of its benchmark methodology in a way which
effectively required 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.
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 became 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. When assessing the appropriate
regulatory treatment of "a la carte" packages, the FCC stated it
would 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 would 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 would 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.
On November 10, 1994, the FCC adopted new "going forward" rules
and further tightened its regulation of a la carte packages.
These new rules allow operators to pass through the costs, plus a
20 cent per channel mark-up, for channels newly added to
regulated tiers. Through 1996, however, operators will be
subject to an aggregate of $1.50 cap on the amount they may
increase cable program service tier rates due to channel
additions. The FCC also established a "new products tier"
intended to provide operators unregulated pricing and packaging
flexibility, particularly for newer services, so long as they
preserve the fundamental nature of their preexisting regulated
tiers. Outside of the "new products" approach, however, the
Commission reversed its approach to a la carte packages and ruled
that all (non-premium) packages of services -- even if also
available on an a la carte basis -- would be treated as a
regulated tier.
Several cable industry interests have challenged or 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. These interim
rules remain the subject of both a further FCC rulemaking and a
pending appeal in the U.S. Court of Appeals for the D.C. Circuit.
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. FCC implementing rules
give local franchising authorities 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. However, 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. District courts in Washington,
Alabama, Maine, Illinois the District of Columbia and Virginia
have also ruled that the 1984 Act's ban on the provision of video
programming is unconstitutional. The Fourth and the Ninth
Circuits have upheld District Court decisions on appeal.
The FCC has also 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. In
October 1994 the Commission issued a reconsideration order in
which it affirmed this video dialtone framework.
In January 1995, the Commission issued another Notice of Proposed
Rulemaking on the adoption of rules to govern the ability of
telephone companies to provide video programming directly to
their subscribers. In that proceeding, the Commission will
consider the extent to which Title II and Title VI of the
Communications Act should apply to telephone companies that
provide video programming to subscribers over their own video
dialtone systems. In addition, the Commission will consider
whether telephone companies that are no longer subject to the
cross-ownership ban should be allowed to become video programmers
on their own video dialtone platforms, subject to appropriate
safeguards. Indeed, on January 12, 1995, the Commission approved
Bell Atlantic's application to commence a six month videodialtone
service market in Arlington, Virginia in which -- based on Bell
Atlantic's successful cross ownership ban challenge -- it could
carry and package affiliated programming subject to safeguards.
Various aspects of the FCC's video dialtone and telephone/cable
cross-ownership decisions remain subject to appeal by both the
cable industry and telephone companies. Registrant cannot
predict the outcome of any such 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 were introduced in recent sessions of Congress and
are again under active consideration that would eliminate the
cable/telco cross-ownership ban, subject to certain conditions.
The two most prominent in the last session were 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
provided 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 included 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 included a separate subsidiary requirement
and a general proscription against cross-subsidization. Some
current proposals not yet introduced as bills contemplate a
similar, but possibly more permissive framework for telephone
company entry into cable.
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: As required by the Cable Act, in September
1994 the Commission issued a report assessing the status of
competition in the market for the delivery of video programming.
Although the Commission found that cable television continues to
dominate the distribution of multi-channel video programming to
consumers in most markets, it noted that competing distribution
technologies have made substantial strides since 1990. The
Commission identified several types of dominant firm strategic
behavior, policy-relevant barriers to entry, and technological
bottlenecks that could adversely affect performance in the multi-
channel video distribution market. Although the Commission
determined that several specific reforms might improve market
performance, it concluded that most of the competitive issues
identified would require ongoing monitoring.
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. Since then, the FCC
has 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 July 1994, the
Commission established a negotiated rulemaking committee to
develop technical rules and to reach a consensus on sharing the
28 GHz band between terrestrial (LMDS) and satellite users. In
September, however, the negotiated rulemaking committee reported
to the Commission that it was unable to reach a consensus on
sharing. Registrant cannot predict how the LMDS sharing issue
will be resolved.
Video Dialtone: Telephone company ownership of cable television
systems in the same areas was prohibited by the 1984 Cable Act,
but has been the subject of the successful challenges noted
above. In any case, 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." 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, over thirty video
dialtone applications have been filed with the FCC. Some of the
first proposals are in the beginning stages of technical trials
and the Commission has now granted more video dialtone
experimental and commercial authorizations.
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" service. It allocated 120 MHz of spectrum in the
2 GHz band for licensed broadband PCS services, divided into
three 30 MHz blocks (blocks A, B and C) and three 10 MHz blocks
(blocks D, E and F). The Commission has also established two
different service areas for these blocks based on Rand McNally's
Basic Trading Areas (BTAs) and Major Trading Areas (MTAs). Thus,
there are up to six PCS licenses available in each geographic
area. The Commission will use competitive bidding to assign the
PCS licenses. The auction rules were finalized in July 1994 and
modified in November 1994. Auctions for the A and B block
auctions began in December 1994. Registrant cannot predict the
outcome of these auctions. Three broadband PCS licenses were
awarded to pioneer's preference winners in December 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. In 1994, the U.S.
District Court for the District of Columbia granted waivers to:
(1) BellSouth for the purpose of providing cable television
services in Las Vegas, Nevada, Anchorage, Bethel, and Kenai
Peninsula, Alaska, Harris County, Texas, Chicago, Illinois and
Fort Bend County, Texas; (2) Pacific Telesis Group for the
purpose of providing cable television service in Chicago,
Illinois; and (3) US West for the purpose of providing cable
television service in and around Atlanta, Georgia. In addition,
numerous other line of business waiver requests are currently
pending before the Department of Justice and the United States
District Court for the District of Columbia.
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 1995 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 United States Satellite Broadcasting
Company ("USSB") jointly launched a new high-powered satellite
with 16 transponders, from which they can provide DBS service to
the entire country. In June 1994, Hughes and USSB initiated DBS
service, and in August 1994 they launched a second satellite
which is now operational. In December 1994, two DBS permittees,
EchoStar Satellite Corporation and Directsat Corporation, merged
their DBS authorizations. Service from these permittees is
expected to commence in early 1995. In addition, Advanced
Communications Corporation has applied for authority to assign
its DBS authorizations to TEMPO DBS, Inc. which plans to initiate
service in 1996. The other parties that hold authorizations to
provide DBS services have not yet launched their proposed
satellites. 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 early 1996.
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.
After a special three-judge district court rejected the
challenge, the Supreme Court remanded the case to the district
court for further proceedings. Registrant cannot predict the
outcome of the case.
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. Copyright
royalty arbitration panels, to be convened by the Librarian of
Congress as necessary, are responsible for distributing the
royalty payments among copyrights owners and for periodically
adjusting the royalty rates.
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, 1999. The Copyright Office suspended its rule denying
MMDS coverage of the cable compulsory license until enactment of
The Satellite Home Viewer Act of 1994, which expanded the scope
of cable compulsory license to include MMDS. 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 May 4, 1994, the Commission released an order implementing the
1992 Cable Act requirements for compatibility between cable and
consumer electronics equipment. In this order, the Commission
adopted a three-phase plan for achieving compatibility between
cable systems and consumer electronics. The Phase I requirements
include the following: (1) cable operators are prohibited from
scrambling or otherwise encrypting signals carried on the basic
tier; (2) cable operators are prohibited from taking actions that
would prevent equipment with remote control capabilities from
operating with commercially available remote controls; (3) cable
operators must offer subscribers supplemental equipment for
resolving specific compatibility problems; and (4) cable
operators must provide more compatibility information to
subscribers. During Phase II, cable operators must use the new
"Decoder Interface" standard that is presently being developed.
Finally, the third phase of the compatibility plan addresses
future standards issues to be raised in a future Notice of
Inquiry.
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. In 1994, the Internal Revenue
Service issued temporary regulations implementing the provision
for retroactive amortization of intangible property acquired
prior to the Omnibus Budget Reconciliation Act of 1993.
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.
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.
During 1993, Congress enacted legislation to reduce tax
exemptions, enjoyed by certain U.S. companies with investments in
Puerto Rico, arising under Section 936 of the Internal Revenue
Code. However, the availability of 936 Funds -- reduced rate
funds available to certain borrowers from commercial banks in
Puerto Rico -- was not affected by the legislation. Registrant
believes that the reduction of tax exemptions pursuant to Section
936 has not had a material negative impact on the Puerto Rican
economy nor on Registrant's Puerto Rican operations, nor is it
currently expected to.
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 twenty AM and twenty FM stations
nationwide. 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.
In addition, in January 1995, the FCC adopted rules to allocate
spectrum for satellite digital audio radio service ("DARS").
Satellite DARS systems potentially could provide for regional or
nationwide distribution of radio programming with fidelity
comparable to compact disks. The FCC will consider service and
licensing regulations in a further rulemaking proceeding. Four
applications for licenses to provide satellite DARS are currently
pending before the FCC. 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. Related to this proceeding is another in
which the FCC has invited comment on various proposals to modify
its "attribution" rules. Attribution essentially is the
definition of the kinds of ownership or other interests that
trigger application of the FCC's radio and television ownership
rules. Among the proposals under consideration is one to allow
limited partners in widely held limited partnerships to hold
small equity interests without attribution, even though they do
not meet the so-called "insulation" criteria that might otherwise
exempt them from attribution. 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 early 1996. Although subject to revision in
the coming year, the FCC has adopted a timetable for advanced
television implementation. 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.
In June 1994, two parties with direct broadcast satellite ("DBS")
authorizations, Hughes Communications Galaxy, Inc. ("Hughes")
under the trade name DIRECTV, Inc., and United States Satellite
Broadcasting Company ("USSB"), initiated DBS service from a new
high-powered satellite. In August 1994, Hughes and USSB launched
a second satellite, which is now operational. Hughes and USSB
currently provide over 150 channels of digital DBS service to
subscribers. The FCC has approved or is considering applications
to combine DBS authorizations. In December 1994, two DBS
permittees, EchoStar Satellite Corporation and Directsat
Corporation, merged their DBS authorizations upon approval from
the FCC, and expect to commence service as early as fall 1995.
Also, Advanced Communications Corporation has applied for
authority to assign its DBS authorizations to TEMPO DBS, Inc.,
whose DBS, Inc. hopes to initiate DBS service in 1996. Three
other parties have not yet launched their proposed satellites.
Registrant cannot predict the competitive effect of DBS
operations on the terrestrial television broadcast industry in
general or the Registrant's operations in particular.
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 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.
The number of owners of Units as of January 16, 1995 was 16,141.
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.
Beginning with December 1994 client account statements, MLPF&S
implemented new guidelines for valuing limited partnerships and
other direct investments reported on client account statements.
As a result, MLPF&S no longer reports general partner estimates
of per Unit limited partnership net asset value on its client
account statements, although a partnership's general partner may
continue to provide its estimate of net asset value in quarterly
reports to unit holders. Pursuant to the new guidelines,
estimated values for limited partnership investments will be
provided annually to MLPF&S by independent valuation services.
The estimated values will be based on financial and other
information available to the independent services on the prior
August 15th. MLPF&S clients may contact their Merrill Lynch
Financial Consultants or telephone the number provided to them on
their account statements to obtain a general description of the
methodology used by the independent valuation services to
determine their estimates of value. The estimated values
provided by the independent services are not market values and
Unit holders may not be able to sell their Units or realize the
amounts shown on their MLPF&S statements upon a sale. In
addition, Unit holders may not realize the amount shown on their
account statements upon the liquidation of Registrant over its
remaining life.
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, 1993 or 1994.
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 30, December 31, December 25,
1994 1993 1992
<S> <C> <C> <C>
Operating Revenues $105,910,208 $100,401,671 $100,443,967
Net (Loss) Income $( 1,450,756) $ 1,377,340 $( 9,280,770)
(Loss) Income per
Unit of Limited
Partnership
Interest $ (7.64) $ 7.25 $ (48.87)
Number of Units 187,994 187,994 187,994
As of As of As of
December 30, December 31, December 25,
1994 1993 1992
Total Assets $238,330,358 $249,851,937 $261,554,442
Borrowings $218,170,968 $232,568,349 $245,994,745
</TABLE>
<TABLE>
<CAPTION>
Year Ended Year Ended
December 27, December 28,
1991 1990
<S> <C> <C>
Operating Revenues $ 99,185,423 $ 93,559,410
Net (Loss) Income $(51,049,551) $(41,491,591)
(Loss) Income per
Unit of Limited
Partnership
Interest $ (268.83) $ (218.50)
Number of Units 187,994 187,994
As of As of
December 27, December 28,
1991 1990
Total Assets $310,248,561 $358,192,902
Borrowings $279,440,750 $280,048,250
</TABLE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
As of December 30, 1994, Registrant had $26,682,289 in cash and
cash equivalents, of which $22,115,559 was limited for use at the
operating level and the remaining $4,566,730 was Registrant's
working capital.
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.
During 1994, Registrant continued its operations phase and began
the process of liquidating certain of its media properties.
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. On November 28, 1994, Registrant
entered into an agreement to sell substantially all of the assets
used in the operations of Registrant's California Cable Systems
subject to numerous conditions to closing (see below). Due in
part to the negative impact of cable regulation on cable
television rates, Registrant experienced certain covenant
defaults under its Revised ML California Credit Agreement at
September 30 and December 30, 1994 (see below). These defaults
were cured during the first quarter of 1995, and Registrant
sought and received, during the first quarter of 1995, an
amendment to the Revised ML California Credit Agreement which
should enable Registrant to remain in compliance with the amended
terms of that agreement until December 29, 1995 (see below) while
attempting to consummate the sale of the California Cable cable
television systems. Also during 1994, Registrant continued its
negotiations with the lender to KATC and WREX concerning a
potential restructuring of the WREX-KATC Loan. Registrant was
unsuccessful in its efforts to obtain a restructuring, and
instead, in the fourth quarter of 1994 decided to sell the two
television stations (see below). During the first quarter of
1995, Registrant executed non-binding letters of intent to sell
WREX and KATC.
California Cable
On November 28, 1994, Registrant entered into an agreement (the
"Asset Purchase Agreement") with Century Communications Corp.
("Century") to sell to Century substantially all of the assets
used in the operations of Registrant's California Cable Systems
serving the Anaheim, Hermosa Beach/Manhattan Beach, Rohnert
Park/Yountville and Fairfield communities. The base purchase
price for the systems will be $286 million, subject to reduction
by an amount equal to 11 times the amount by which the operating
cash flow of the systems (as adjusted in accordance with the
Asset Purchase Agreement) is less than $26 million for the 12-
month period prior to the closing, and subject to further
adjustment as provided in the Asset Purchase Agreement. In
addition, Registrant has the right to terminate the Asset
Purchase Agreement if the purchase price would be less than $260
million based on the formula described above. Consummation of
the transactions provided for in the Asset Purchase Agreement is
subject to the satisfaction of certain conditions, including
obtaining approvals from the Federal Communications Commission
and the municipal authorities issuing the franchises for the
systems.
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 consummate the sale of the California Cable
systems or the potential timing and ultimate value of such 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.
As of December 30, 1994, California Cable represented
approximately 50.5% of the consolidated assets of Registrant and
approximately 52.0% of the consolidated operating revenues.
As of September 30, 1994 and December 30, 1994, due in part to
the negative impact of rate re-reregulation on the operations of
the California Cable Systems, Registrant was in default of
certain financial covenants contained in the revised ML
California Credit Agreement. In addition, as of December 30,
1994, Registrant expected to be unable to meet during 1995 the
principal payment requirements then contained in the revised ML
California Credit Agreement. These defaults were cured during
the first quarter of 1995.
Effective February 23, 1995, Registrant and the banks entered
into a first amendment (the "First Amendment") to the revised ML
California Credit Agreement that provided for reduced principal
payments and less restrictive covenants during the first three
quarters of 1995. In exchange, Registrant paid an amendment fee
of $322,969 to the banks and agreed to allow the banks to charge
a higher interest rate on outstanding borrowings under the
revised ML California Credit Agreement. (A further fee will be
due to the lenders if the sale of the California Cable Systems is
not consummated prior to December 29, 1995.) Certain other terms
of the revised ML California Credit Agreement were also affected
by the First Amendment.
Registrant currently expects that it will be able to remain in
compliance with the terms of the revised ML California Credit
Agreement, as amended by the First Amendment, until December 29,
1995, during which period Registrant would seek to consummate the
sale of the California Cable Systems to Century. Registrant
currently expects that if the sale of the California Cable
Systems is not consummated prior to December 29, 1995, Registrant
will be unable to meet the scheduled December 29, 1995 principal
payment due to the banks pursuant to the revised ML California
Credit Agreement, as amended by the First Amendment.
In December 1993, the California Cable Systems received a
favorable decision with respect to a property tax appeal filed
with one county served by the California Cable Systems. The
county had the right to appeal the decision for a period of six
months. This period expired without appeal during the second
quarter of 1994. Also in December of 1993, the California Cable
Systems reached a favorable agreement in principle with a second
county served by the California Cable Systems where an appeal
relating to property taxes had also been filed. During 1994, the
California Cable Systems executed a settlement agreement and
finalized assessed property values with, and received a refund of
approximately $700,000 from, this second county. In part as a
result of these developments, the California Cable Systems
continue to be entitled to receive tax refunds. On December 31,
1993 Registrant reduced by approximately $2.2 million the general
and administrative expense of California Cable in order to
account for these tax refunds. During the fourth quarter of
1994, Orange County, California, in which a significant
percentage of the California Cable Systems are located, filed for
bankruptcy. At December 30, 1994 and December 31, 1993, the net
property tax refund receivable from Orange County was
approximately $1.7 million. Registrant ultimately expects to
file a claim for such property tax refunds for approximately $2.8
million.
At December 30, 1994, Registrant had funds in an escrow account
totalling $785,731, which funds were included in other assets on
the accompanying consolidated balance sheets. The funds were
deposited in such account in accordance with Registrant's
agreement with Cable Telecommunications Joint Powers Agency
("CTJPA") to be held for the benefit of CTJPA's subscribers
pending determination of Registrant's potential need to make
refunds to the subscribers in connection with rate re-regulation.
In the first quarter of 1995, Registrant was required to deposit
$680,000 in another escrow account pursuant to an agreement with
the City of Fairfield, California to be held for the benefit of
the City of Fairfield's subscribers pending determination of
Registrant's potential need to make refunds to the subscribers in
connection with rate re-regulation. The General Partner
currently believes that under the FCC's existing decisions, the
most material issues in Registrant's rate cases should ultimately
be decided in a manner predominantly favorable to Registrant.
WREX-KATC
On October 31, 1994, Registrant retained The Ted Hepburn Company
to assist it in marketing WREX and KATC for sale. Although it
intends to sell one or both television stations, Registrant may
not be able to reach final agreement(s) with potential purchases
of one or both stations on terms acceptable to Registrant. If
acceptable agreement(s) cannot be reached, Registrant will
attempt to refinance the WREX-KATC loan with a new lender.
On February 23, 1995 and March 6, 1995, Registrant entered into
non-binding letters of intent to sell WREX and KATC,
respectively. The sales of WREX and KATC are subject to
negotiation of definitive purchase and sale agreements and
numerous other conditions. The ultimate transfer of the licenses
of WREX and KATC to potential buyers will also be subject to the
prior approval of the FCC.
During 1994, 1993 and 1992, Registrant defaulted on the majority
of its quarterly principal payments due under its WREX-KATC Loan.
As of December 30, 1994, WREX-KATC was in default of $5,632,993
in principal, after giving effect to $867,007 in payments made
during 1993 and 1994 from cash generated by the operations of
WREX and KATC. Registrant is not in default of any regularly
scheduled interest payments under the WREX-KATC Loan and is
contesting certain nominal default rate interest charges. In
addition, as of December 28, 1990 and continuing through December
30, 1994, 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 any subsequent defaults. As required by the terms of
the WREX-KATC Loan, subsequent to entering into the WREX-KATC
Loan in 1989, Registrant advanced a total of $1.0 million to WREX-
KATC, including $10,000 in 1993.
Registrant expects to experience future principal payment and
covenant defaults under the WREX-KATC Loan. Registrant sought
unsuccessfully to restructure the WREX-KATC Loan and, as
discussed above, decided to sell WREX and KATC. Registrant does
not currently intend to, nor is it obligated to, advance any
further working capital to WREX and KATC. The lender to WREX-
KATC 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. The principal amount outstanding under the WREX-
KATC Loan is $23,382,993 as of December 30, 1994.
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. Registrant was
in compliance with all terms of its Wincom-WEBE-WICC Loan and the
Restructuring Agreement at December 30, 1994.
Impact of Cable Legislation and Regulation
Refer to discussion in Note 2 to Item 8. Financial Statements
and Supplementary Data.
Summary
Registrant's ongoing cash needs will be to fund debt service,
capital expenditures and working capital needs. During 1994,
cash interest paid was $15,388,775, and principal repayments of
$14,397,381 were made. During 1994, Registrant did not comply
with scheduled principal payments under its WREX-KATC Loan.
During 1995, Registrant is required by its various debt
agreements to make scheduled principal repayments of $27,157,993,
(as well as the past due principal of $5,632,993 under the WREX-
KATC Loan), under all of its debt agreements. If the WREX-KATC
Loan is accelerated as a result of the aforementioned defaults,
Registrant would be required to make additional principal
payments totalling $14,250,000 in 1995.
Based upon a review of the current financial performance of
Registrant's investments, Registrant continues to monitor its
working capital level. 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. Registrant does not
currently expect to, nor is it obligated to, advance any of its
unrestricted working capital to WREX and KATC.
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
1994 vs. 1993
During 1994 and 1993, Registrant had total operating revenues of
approximately $105.9 million and $100.4 million, respectively.
The approximate $5.5 million increase was primarily due to the
consolidation of the operating results (approximately $2.6
million in revenue) of Registrant's 50% interest in the C-ML
Radio properties following the transfer of C-ML Radio's assets to
the Revised Venture on January 1, 1994. This increase, combined
with increases at C-ML Cable and Registrant's remaining radio and
broadcast television properties, was partially offset by
decreases at Wincom due to the sale of the Indianapolis Stations
and at California Cable.
Registrant's 50% share of the revenues of C-ML Cable increased by
approximately $1.3 million in 1994 compared to 1993. The
increase in revenues at C-ML Cable occurred as a result of higher
average levels of basic subscribers, due to successful marketing
efforts and the extension of cable plant to pass additional
homes. The average level of basic subscribers at C-ML Cable
increased to 108,453 in 1994 from 105,323 in 1993, and the total
number of basic subscribers increased to 112,228 at the end of
1994 from 104,677 at the end of 1993. The number of average
premium subscribers at C-ML Cable decreased to 69,027 during 1994
from 73,178 during 1993 due to weakness in the local economy
(which was exacerbated by a severe drought, which has since
ended), as well as to continuing industry-wide softness in
subscriber demand for premium services and the restructuring of C-
ML Cable's rates and services in the second half of 1993. Total
premium subscribers decreased to 68,735 at the end of 1994 from
69,319 at the end of 1993.
Television stations KATC and WREX reported a combined increase of
approximately $1.4 million in revenue as a result of higher
revenues attributable to political advertising at both stations
and higher revenues attributable to national advertising at KATC.
The Wincom-WEBE-WICC radio group reported a net increase of
approximately $0.2 million, as increased advertising revenues at
WICC, WQAL and WEBE were mostly offset by a decrease of
approximately $0.9 million in revenues at Wincom, primarily due
to the sale of the Indianapolis Stations at the beginning of the
fourth quarter of 1993. Revenues increased by approximately $0.2
million at KORG/KEZY due primarily to increased barter revenue at
KEZY.
Revenues at California Cable decreased by approximately $0.2
million, primarily as a result of a change in policy for
accounting for franchise fees in September 1993 (approximately
$1.2 million), as well as to lower pay-per-view revenues (due to
an absence of strong event programming). The overall decrease in
revenues at California Cable occurred despite increases in basic
revenue due primarily to the positive impact of increases in
average basic subscribers. Average basic subscribers increased
to 133,926 in 1994 from 132,105 in 1993 due to successful
marketing efforts and extension of cable plant to pass additional
homes. In addition, total basic subscribers increased to 136,022
at the end of 1994 from 131,830 at the end of 1993. Reversing
recent annual trends, California Cable experienced growth in
premium subscriptions during 1994 due to heavy promotional
efforts and reduced promotional rates, especially in the second
half of the year. Total premium subscriptions increased to
77,749 at the end of 1994 from 73,625 at the end of 1993.
However, average premium subscribers decreased to 75,687 during
1994 from 76,480 during 1993 due primarily to the relatively high
number of premium subscriptions at the beginning of 1993. The
decrease in average premium subscriptions was offset by increases
in average premium rates, resulting in flat premium revenues from
1993 to 1994.
During 1994 and 1993, Registrant incurred property operating
expenses of approximately $38.8 million and $33.8 million,
respectively, in connection with the operation of its cable,
radio and television properties. Registrant's total property
operating expenses increased by approximately $5.0 million from
year to year as a result of: an increase of approximately $2.6
million at the combined cable and radio operations of the Revised
Venture, due to the consolidation of the 1994 operating results
of the Revised Venture's radio properties on January 1, 1994
(approximately $1.7 million) and to a non-recurring adjustment to
property tax accruals in 1993 at C-ML Cable (approximately $0.9
million); an increase of approximately $2.5 million at California
Cable, due primarily to higher basic programming costs (due to
increased fees to programmers and the increased number of average
basic subscribers) and higher marketing and copyright fees
associated with rate and service restructuring in response to re-
regulation; and an increase of approximately $0.1 million at
KORG/KEZY due primarily to increased barter expense at KEZY.
These increases were partially offset by a net decrease of $0.2
million at the Wincom-WEBE-WICC group, where higher operating
expenses at WEBE and WICC (due primarily to higher sales
commissions and other expenses) were outweighed, by decreased
property operating expenses at Wincom due to the sale of the
Indianapolis Stations at the beginning of the fourth quarter of
1993.
During 1994 and 1993, Registrant incurred general and
administrative expenses of approximately $20.9 million and $20.0
million, respectively. Registrant's total general and
administrative expenses increased by approximately $0.9 million
from year to year as a result of increases of approximately: $1.3
million at California Cable, due to a one-time reversal of
property tax assessments in the fourth quarter of 1993 due to a
favorable decision regarding property tax assessments (partially
offset by a decrease due primarily to reduced expenses for
franchise fees and lower property taxes); $0.4 million at the
combined cable and radio operations of the Revised Venture, due
primarily to the consolidation of the operating results of the
Revised Venture's radio properties on January 1, 1994; and
approximately $0.1 million at WREX, primarily due to increased
employee-related insurance costs. These increases were partially
offset by a decrease of approximately $0.7 million at the Wincom-
WEBE-WICC radio group primarily due to the sale of the
Indianapolis Stations at the beginning of the fourth quarter of
1993. The remaining increases or decreases at Registrant's
properties were immaterial either individually or in the
aggregate.
Registrant earned interest income of approximately $193,000 and
$147,000 during 1994 and 1993, respectively, on its working
capital balance.
Interest expense of approximately $16.0 million and $17.5 million
in 1994 and 1993, respectively, represents the cost incurred for
borrowed funds utilized to acquire various media properties. The
approximate $1.5 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, ($1.5
million); and (2) lower average outstanding borrowings under the
Wincom-WEBE-WICC Restructuring Agreement ($0.5 million);
partially offset by generally higher floating interest rates
under the WREX-KATC loan ($0.3 million); and increased interest
expense at C-ML Cable of $0.2 million due to consolidation of the
operating results of The Revised Venture's radio properties on
January 1, 1994.
Registrant's depreciation and amortization expense totalled
approximately $30.2 million and $31.4 million in 1994 and 1993,
respectively. This $1.2 million decrease resulted primarily
from: decreases of approximately: $1.6 million at WREX and KATC,
due primarily to full depreciation of certain equipment,
particularly at KATC during the first quarter of 1994; $0.1
million at the combined cable and radio operations of the Revised
Venture, primarily due to the consolidation of the operating
results of the Revised Venture's radio properties on January 1,
1994; $0.1 million at the Wincom-WEBE-WICC radio group due to the
sale of the Indianapolis Stations at the beginning of the fourth
quarter of 1993 outweighing increased depreciation and
amortization expense at WQAL due to equipment purchases;
partially offset by an increase of approximately $0.4 million at
California Cable, attributable to greater depreciation expense
associated with capital expenditures. The remaining increases or
decreases in depreciation and amortization expense at
Registrant's properties were immaterial, either individually or
in the aggregate.
Results of Operations
1993 vs. 1992
During 1993 and 1992, Registrant's operating revenues remained
flat from year to year. A $4.7 million decrease attributable to
the sale of Universal on July 8, 1992, was offset partially by
increases of approximately $2.4 million at California Cable and
approximately $1.9 million at C-ML Cable. 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 $0.4
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 2 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 $0.1 million
and $0.2 million during 1993 and 1992, respectively. The slight
decrease in interest income is due to lower market interest rates
in 1993 compared to 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.
Statement of Financial Accounting Standards No. 112
Effective January 1, 1994, Registrant adopted Statement of
Financial Accounting Standards No. 112, "Employers Accounting for
Postemployment Benefits" ("SFAS No. 112"). This pronouncement
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 was not material to Registrant's financial condition or
results of operations during 1994.
Additional Operating Information
Registrant owned cable systems that passed 218,992 homes,
provided basic cable television service to 136,022 subscribers,
and accounted for 77,749 pay units as of December 30, 1994. In
addition, Registrant holds a 50% interest in the Venture, which
in turn, through C-ML Cable, passed 262,505 homes, provided basic
cable television service to 112,228 subscribers and accounted for
68,735 pay units as of December 30, 1994. The following table
shows the numbers of basic subscribers and pay units at
Registrant's wholly-owned California Cable and at C-ML Cable at
December 25, 1992, December 31, 1993 and December 30, 1994:
<TABLE>
<CAPTION>
December 25, December 31, December 30,
1992 1993 1994
<S> <C> <C> <C>
Homes Passed
California Systems 213,586 216,328 218,992
Wholly-Owned 213,586 216,328 218,992
C-ML Cable 261,757 259,790 262,505
Basic Subscribers
California Systems 132,380 131,830 136,022
Wholly-Owned 132,380 131,830 136,022
C-ML Cable 105,968 104,677 112,228
Pay Units
California Systems 79,334 73,625 77,749
Wholly-Owned 79,334 73,625 77,749
C-ML Cable 77,037 69,319 68,735
</TABLE>
Since December 25, 1992, 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. Despite an increase in homes
passed in 1993, 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 re-regulation. However, the
number of basic subscribers increased from December 31, 1993 to
December 30, 1994 due to the extension of cable plant to pass
incremental homes and potential new subscribers, marketing
efforts, and broadly-defined customer retention efforts including
ongoing attention to technical quality and customer service. The
number of pay units in Registrant's California Cable Systems
decreased from December 25, 1992 to December 30, 1994, primarily
as a result of a weak local economy in southern California,
although the number of pay units increased from the end of 1993
to the end of 1994 due to heavy promotional efforts and reduced
promotional rates.
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.
However, the overall number of homes passed by the Puerto Rico
Systems increased slightly from the end of 1993 to the end of
1994 due primarily to the extension of cable plant to pass
incremental homes. 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 in response to re-regulation of the cable
industry. However, the number of basic subscribers increased
from the end of 1993 to the end of 1994. This is due to the
extension of cable service to pass additional homes, as well as
to an increased level of marketing during 1994. The number of
pay units at the Puerto Rico Systems declined sharply from
December 25, 1992 to December 30, 1994, primarily due to
continuing industry-wide softness in subscriber demand for
premium services and the lack of intense promotional campaigns in
1994, as well as to a severe drought that affected the San Juan
economy in 1994.
Basic penetration was 62.1% and the pay-to-basic ratio 57.2% in
Registrant's wholly-owned systems as of December 30, 1994. By
comparison, industry sources estimate that the national average
basic penetration rate was 64.2% and the national average pay-to-
basic ratio was 74.0% as of December 30, 1994. 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 42.5% and the pay-to-basic ratio 61.0% in the
Puerto Rico Systems as of December 30, 1994. Average figures for
Puerto Rico are not available from a reliable source.
As of December 30, 1994, Registrant operated two television
stations in United States cities and seven radio stations in
three cities in the United States and one city 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, 1994.
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, 1994.
Registrant's radio station WQAL-FM in Cleveland, Ohio competes
with approximately 25 other radio stations in the Cleveland
market according to Arbitron, an accepted industry source.
According to Arbitron, the station was ranked number nine in the
market in terms of listeners 12+ as of the Fall, 1994 rating
period.
Registrant's radio stations WEBE-FM and WICC-AM in Fairfield
County, Connecticut compete with approximately 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, 1994 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 may 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
ML Media Partners, L.P.
Independent Auditors' Report
Consolidated Balance Sheets as of December 30, 1994 and
December 31, 1993
Consolidated Statements of Operations for the years ended
December 30, 1994, December 31, 1993 and December 25, 1992
Consolidated Statements of Cash Flows for the years ended
December 30, 1994, December 31, 1993 and December 25, 1992
Consolidated Statements of Changes in Partners' Deficit
for the years ended December 30, 1994, December 31, 1993
and December 25, 1992
Notes to the Consolidated Financial Statements for the
years ended December 30, 1994, December 31, 1993 and
December 25, 1992
Schedule I - Condensed Financial Information of Registrant
as of December 30, 1994, December 31, 1993 and December
25, 1992
Schedule II - Valuation and Qualifying Accounts as of
December 30, 1994, December 31, 1993 and December 25, 1992
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.
<PAGE>
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
consolidated financial statements and financial statement
schedules are the responsibility of the Partnership's general
partner. Our responsibility is to express an opinion on the
consolidated 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 30, 1994 and
December 31, 1993 and the results of their operations and their
cash flows for each of the three years in the period ended
December 30, 1994 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 discussed in Note 2 to the consolidated financial statements,
during the fourth quarter of 1994, Orange County, California
filed for bankruptcy. At December 30, 1994 and December 31,
1993, the Partnership has a net receivable from Orange County,
California relating to property tax refunds totaling
approximately $1.7 million.
As discussed in Note 2 to the consolidated financial statements,
the Partnership was in default under its WREX-KATC Loan as of
December 30, 1994. 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 Partnership has
therefore decided to market WREX and KATC for sale. The ultimate
outcome of the Partnership's attempt to sell WREX and KATC 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 and financial
statement schedules.
Also as discussed in Note 2 to the consolidated financial
statements, the Partnership expects that it will be unable to
meet the scheduled December 29, 1995 principal payment pursuant
to the revised ML California Credit Agreement if the sale of the
California Cable Systems is not consummated. No adjustment that
may result from the outcome of this matter has been made in the
accompanying consolidated financial statements and financial
statement schedules.
/s/ Deloitte & Touche LLP
New York, New York
March 9, 1995
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 30, 1994 AND DECEMBER 31, 1993
Notes 1994 1993
<S> <C> <C> <C>
ASSETS:
Cash and cash equivalents 1,2 $ 26,682,289 $ 26,916,477
Short-term investments held
by agent 1 6,000,000 -
Accounts receivable (net of
allowance for doubtful
accounts of $808,919 at
December 30, 1994 and
$677,188 at December 31,
1993) 2,7 11,751,637 9,286,116
Prepaid expenses and
deferred charges (net of
accumulated amortization of
$7,782,985 at December 30,
1994, and $7,241,088 at
December 31, 1993) 1 3,640,813 4,399,276
Property, plant and
equipment(net of accumulated
depreciation of $120,556,173
at December 30, 1994 and
$104,955,637 at December 31,
1993) 1,4 85,053,152 92,400,494
Intangible assets (net
of accumulated amortization
of $122,438,628 at December
30, 1994 and $111,069,407 at
December 31, 1993) 1,5 102,344,420 111,146,204
Other assets 10 2,858,047 5,703,370
TOTAL ASSETS 2,6 $238,330,358 $249,851,937
LIABILITIES AND PARTNERS'
DEFICIT:
Liabilities:
Borrowings 2,6,11 $218,170,968 $232,568,349
Accounts payable and
accrued liabilities 7 34,522,652 29,989,412
Subscriber advance payments 1,895,400 2,102,082
Total Liabilities 254,589,020 264,659,843
</TABLE>
(Continued on the following page)
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 30, 1994 AND DECEMBER 31, 1993
(continued)
Notes 1994 1993
<S> <C> <C> <C>
Commitments and
Contingencies 2,8
Partners' Deficit:
General Partner:
Capital contributions, net
of offering expenses 1 1,708,299 1,708,299
Cumulative loss (1,807,968) (1,793,460)
(99,669) (85,161)
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 (178,988,684) (177,552,436)
(16,158,993) (14,722,745)
Total Partners' Deficit (16,258,662) (14,807,906)
TOTAL LIABILITIES AND
PARTNERS' DEFICIT $ 238,330,358 $ 249,851,937
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 30, 1994, DECEMBER 31, 1993
AND DECEMBER 25, 1992
Notes 1994 1993 1992
<S> <C> <C> <C> <C>
REVENUES:
Operating revenue 1 $105,910,208 $100,401,671 $100,443,967
Interest 192,875 147,466 158,738
Gain on sale of
assets 3 122,154 4,988,390 -
Total revenues 106,225,237 105,537,527 100,602,705
COSTS AND
EXPENSES:
Property opera-
ting 14 38,764,954 33,764,437 36,301,114
General and
administrative 2,7,8 20,907,542 20,003,401 22,703,107
Depreciation and
amortization 1,4,5 30,180,011 31,419,885 31,516,609
Interest expense 6 16,046,700 17,500,965 23,437,581
Management fees 7 1,591,831 1,591,831 1,629,882
Other 184,955 179,455 190,182
Loss on sale of
Universal 3 - - 6,399,000
Total costs and
expenses 107,675,993 104,459,974 122,177,475
(Loss) Income
before provision
for income taxes
and extraordinary
item
(1,450,756) 1,077,553 (21,574,770)
</TABLE>
(Continued on the following page)
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 30, 1994, DECEMBER 31, 1993
AND DECEMBER 25, 1992
(continued)
Notes 1994 1993 1992
<S> <C> <C> <C> <C>
Provision for
income taxes-
Wincom 1,12 - 190,000 -
(Loss) Income
before
extraordinary
item (1,450,756) 887,553 (21,574,770)
Extraordinary
item-gain on
extinguishment
of debt 3 - 489,787 12,294,000
NET (LOSS) INCOME $ (1,450,756) $ 1,377,340 $ (9,280,770)
Per Unit of Limited
Partnership Interest:
(Loss) Income
before extra-
ordinary item $ (7.64) $ 4.67 $ (113.61)
Extraordinary
item - 2.58 64.74
NET (LOSS) INCOME $ (7.64) $ 7.25 $ (48.87)
Number of Units 187,994 187,994 187,994
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 30, 1994, DECEMBER 31, 1993
AND DECEMBER 25, 1992
1994 1993 1992
<S> <C> <C> <C>
Cash flows from
operating activities:
Net (loss) income $(1,450,756) $ 1,377,340 $ (9,280,770)
Adjustments to
reconcile
net (loss) income to
net cash provided by
operating activities:
Depreciation and
amortization 30,180,011 31,419,885 31,516,609
Bad debt expense 319,392 327,194 292,141
Equity in earnings of
joint venture - (143,582) (26,028)
Loss on sale of
Universal - - 6,399,000
Gain on extinguishment
of debt - (489,787) (12,294,000)
Gain on sale of assets (122,154) (4,988,390) -
Change in operating
assets and
liabilities:
Increase in short-term
investments held by
agent (6,000,000) - -
(Increase)/decrease in
accounts receivable (2,451,478) (2,733,479) 446,295
Decrease/(increase) in
prepaid expenses and
deferred charges 272,316 (1,471,007) 4,588
Decrease/(increase) in
other assets (94,528) (171,090) 219,336
Increase in accounts
payable and accrued
liabilities 4,443,739 193,632 611,859
(Decrease)/Increase in
subscriber advance
payments (206,682) 172,655 91,062
</TABLE>
(Continued on the following page)
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 30, 1994, DECEMBER 31, 1993
AND DECEMBER 25, 1992
(continued)
1994 1993 1992
<S> <C> <C> <C>
Net cash provided by
operating 24,889,860 23,493,371 17,980,092
activities
Cash flows from
investing activities:
Proceeds from sale of
assets 243,142 7,447,854 -
Purchase of property,
plant and equipment (10,688,588) (10,205,727) (10,044,019)
Intangible assets (281,221) (322,723) (335,581)
Net cash used in
investing activities (10,726,667) ( 3,080,596) (10,379,600)
Cash flows from
financing
activities:
Principal payments on
bank loans (14,397,381) (14,874,901) (9,125,974)
Proceeds from
borrowings - 1,448,505 11,279,969
Net cash (used in)
provided by
financing (14,397,381) (13,426,396) 2,153,995
activities
Net increase in cash
and cash (234,188) 6,986,379 9,754,487
equivalents
Cash and cash
equivalents at the
beginning of year 26,916,477 19,930,098 10,175,611
Cash and cash
equivalents at end
of year $ 26,682,289 $ 26,916,477 $ 19,930,098
Cash paid for $ 15,388,775 $ 17,246,267 $ 21,070,472
interest
</TABLE>
<PAGE>
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 $696,000,
$1,067,000 and $1,094,000 was acquired but not paid for as of
December 30, 1994, December 31, 1993 and December 25, 1992,
respectively.
See Notes to Consolidated Financial Statements.
<PAGE>
ML MEDIA PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 30, 1994, DECEMBER 25, 1992
AND DECEMBER 27, 1991
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
<S> <C> <C> <C>
Balance, 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)
1994:
Net Loss (14,508) (1,436,248) (1,450,756)
Partners' Deficit at
December 30, 1994 $ (99,669) $(16,158,993) $(16,258,662)
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
ML MEDIA PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 30, 1994, DECEMBER 31, 1993 AND
DECEMBER 25, 1992
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 30, 1994, the Partnership's investments consisted
of a 50% interest in Century - ML Cable Venture (the "Revised
Venture") which owns an FM and AM radio station combination (WFID-
FM and WUNO-AM, respectively) and a background music service in
San Juan, Puerto Rico and, 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) and Wincom Broadcasting Corporation
("Wincom"), a corporation that owns an FM radio station in
Cleveland, Ohio (WQAL-FM).
Certain reclassifications were made to the 1993 financial
statements to conform with the current period's presentation.
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 Revised Venture,
which effective January 1, 1994 also includes the operations of C-
ML Radio. 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.
Short-term investments held by agent
Short-term investments held by agent represents investments with
maturities of less than 30 days.
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:
<TABLE>
<CAPTION>
<S> <C>
Machinery, Equipment and Distribution Systems 5-12 years
Buildings 15-30.5 years
Other 3-10 years
</TABLE>
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:
<TABLE>
<CAPTION>
<S> <C>
Goodwill 40 years
Franchise life of the franchise
Other Intangibles various
Deferred Costs 4-10 years
</TABLE>
Asset Impairment
The Partnership assesses the impairment of assets on a regular
basis or immediately upon the occurrence of a significant event
in the marketplace or an event that directly impacts its assets.
The methodology varies depending on the type of asset but
typically consists of comparing the net book value of the asset
to either: 1) the undiscounted expected future cash flows
generated by the asset, and/or 2) the current market values
obtained from industry sources.
If the net book value of a particular asset is materially higher
than the estimated net realizable value, and the asset is
considered to be permanently impaired, the Partnership will write
down the net book value of the asset accordingly; however, the
Partnership may not write its assets down to a value below the
asset-related non-recourse debt. The Partnership relies on
industry sources and its experience in the particular marketplace
to determine whether an asset impairment is other than temporary.
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. Operating revenue,
as it relates to the radio broadcasting properties is net of
commissions paid to advertising agencies.
Franchise Fees
In September 1993, as a result of recently enacted cable
regulation legislation which allows for the direct pass through
of franchise fees to subscribers, California Cable changed its
policy for accounting for franchise fees billed to subscribers
and paid to various franchising authorities. Such amounts are
now recorded in a balance sheet account with no effect on its
results of operations.
Prior to September 1993, for certain of its franchises,
California Cable factored franchise fees into the amounts billed
to subscribers and recorded such amounts as revenues on the
accrual basis. For these franchises, amounts paid to franchising
authorities were recorded as expenses on the accrual basis.
Franchise fee expense recorded by California Cable during 1993
and 1992 amounted to approximately $1,192,000 and $837,000
respectively. These amounts approximate the franchise fees which
were billed to subscribers and included in revenues in those
years.
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
Effective January 1, 1994, the Partnership adopted Statement on
Financial Accounting Standards No. 112, "Employers' Accounting
for Postemployment Benefits" ("SFAS No. 112"). This
pronouncement 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 the adoption of SFAS No. 112 was not material to the
Partnership's financial position or results of operations as of
and for the year ending December 30, 1994.
Interest Rate Exchange Agreements
The differential to be paid or received on interest rate exchange
agreements is accrued and recognized over the life of the
agreements.
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 during 1993 and the WREX-KATC Loan during 1992; however
these interest rate exchange agreements expired during 1993 and
1992, respectively.
Statements of Cash Flows
Short-term investments held by the Partnership 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 30, 1994, the Partnership had $26,682,289 in cash
and cash equivalents, of which $22,115,559 was limited for use at
the operating level and the remaining $4,566,730 was the
Partnership's working capital.
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.
On November 28, 1994, the Partnership entered into an agreement
to sell substantially all of the assets used in the operations of
the Partnership's California Cable Systems subject to numerous
conditions to closing (see below).
California Cable
On November 28, 1994, the Partnership entered into an agreement
(the "Asset Purchase Agreement") with Century Communications
Corp. ("Century") to sell to Century substantially all of the
assets used in the operations of the Partnership's California
Cable Systems serving the Anaheim, Hermosa Beach/Manhattan Beach,
Rohnert Park/Yountville and Fairfield communities. The base
purchase price for the systems will be $286 million, subject to
reduction by an amount equal to 11 times the amount by which the
operating cash flow of the systems (as adjusted in accordance
with the Asset Purchase Agreement) is less than $26 million for
the 12-month period prior to the closing, and subject to further
adjustment as provided in the Asset Purchase Agreement. In
addition, the Partnership has the right to terminate the Asset
Purchase Agreement if the purchase price would be less than $260
million based on the formula described above. Consummation of
the transactions provided for in the Asset Purchase Agreement is
subject to the satisfaction of certain conditions, including
obtaining approvals from the Federal Communications Commission
and the municipal authorities issuing the franchises for the
systems.
As of September 30, 1994 and December 30, 1994, due in part to
the negative impact of rate-reregulation on the operations of the
California Cable Systems, the Partnership was in default of
certain financial covenants contained in the revised ML
California Credit Agreement. In addition, as of December 30,
1994, the Partnership expected to be unable to meet during 1995
the principal payment requirements then contained in the revised
ML California Credit Agreement. These defaults were cured during
the first quarter of 1995.
Effective February 23, 1995, the Partnership and the banks
entered into a first amendment (the "First Amendment") to the
revised ML California Credit Agreement that provided for reduced
principal payments and less restrictive covenants during the
first three quarters of 1995. In exchange, the Partnership paid
an amendment fee of $322,969 to the banks and agreed to allow the
banks to charge a higher interest rate on outstanding borrowings
under the revised ML California Credit Agreement. (A further fee
will be due to the lenders if the sale of the California Cable
Systems is not consummated prior to December 29, 1995.) Certain
other terms of the revised ML California Credit Agreement were
also affected by the First Amendment.
The Partnership currently expects that it will be able to remain
in compliance with the terms of the revised ML California Credit
Agreement, as amended by the First Amendment, until December 29,
1995, during which period the Partnership would seek to
consummate the sale of the California Cable Systems to Century.
The Partnership currently expects that if the sale of the
California Cable Systems is not consummated prior to December 29,
1995, the Partnership will be unable to meet the scheduled
December 29, 1995 principal payment due to the banks pursuant to
the revised ML California Credit Agreement, as amended by the
First Amendment.
The California Cable Systems 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 had significantly
increased property taxes since they included values attributed to
what the California Systems believed to be nontaxable, intangible
assets. These appeals covered the tax years from 1987 to
present.
In December 1993, the California Cable Systems received a
favorable decision with respect to a property tax appeal filed
with one county served by the California Cable Systems. The
county had the right to appeal the decision for a period of six
months. This period expired without appeal during the second
quarter of 1994. Also in December of 1993, the California Cable
Systems reached a favorable agreement in principle with a second
county served by the California Cable Systems where an appeal
relating to property taxes had also been filed. During 1994, the
California Cable Systems executed a settlement agreement and
finalized assessed property values with, and received a refund of
approximately $700,000 from, this second county. In part as a
result of these developments, the California Cable Systems
continue to be entitled to receive tax refunds. On December 31,
1993 the Partnership reduced by approximately $2.2 million the
general and administrative expense of California Cable in order
to account for these tax refunds. During the fourth quarter of
1994, Orange County, California, in which a significant
percentage of the California Cable systems are located, filed for
bankruptcy. At December 30, 1994 and December 31, 1993, the net
property tax refund receivable from Orange County was
approximately $1.7 million. The Partnership ultimately expects
to file a claim for such property tax refunds for approximately
$2.8 million.
At December 30, 1994, the Partnership had funds in an escrow
account totalling $785,731, which funds were included in other
assets on the accompanying consolidated balance sheets. The
funds were deposited in such account in accordance with the
Partnership's agreement with Cable Telecommunications Joint
Powers Agency ("CTJPA") to be held for the benefit of CTJPA's
subscribers pending determination of the Partnership's potential
need to make refunds to the subscribers in connection with rate
re-regulation.
In the first quarter of 1995, the Partnership was required to
deposit $680,000 in another escrow account pursuant to an
agreement with the City of Fairfield, California to be held for
the benefit of the City of Fairfield's subscribers pending
determination of the Partnership's potential need to make refunds
to the subscribers in connection with rate re-regulation. The
General Partner currently believes that under the FCC's existing
decisions, the most material issues in the Partnership's rate
cases should ultimately be decided in a manner predominantly
favorable to the Partnership.
WREX-KATC
On October 31, 1994, the Partnership retained The Ted Hepburn
Company to assist it in marketing WREX and KATC for sale.
Although it intends to sell one or both television stations, the
Partnership may not be able to reach final agreement(s) with
potential purchasers of one or both stations on terms acceptable
to the Partnership. If acceptable agreement(s) cannot be
reached, the Partnership will attempt to refinance the WREX-KATC
loan with a new lender.
On February 23, 1995 and March 6, 1995, the Partnership entered
into non-binding letters of intent to sell WREX and KATC,
respectively. The sales of WREX and KATC are subject to
negotiation of definitive purchase and sale agreements and
numerous other conditions. The ultimate transfers of the
licenses of WREX and KATC to potential buyers will also be
subject to the prior approval of the FCC.
During 1994, 1993 and 1992, the Partnership defaulted on the
majority of its quarterly principal payments due under its WREX-
KATC Loan. As of December 30, 1994, WREX-KATC was in default of
$5,632,993 in principal, after giving effect to $867,007 in
payments made during 1993 and 1994 from cash generated by the
operations of WREX and KATC. The Partnership is not in default
of any regularly scheduled interest payments under the WREX-KATC
Loan and is contesting certain nominal default rate interest
charges. In addition, as of December 28, 1990 and continuing
through December 30, 1994, 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 any subsequent defaults. As
required by the terms of the WREX-KATC Loan, subsequent to
entering into the WREX-KATC Loan in 1989, the Partnership
advanced a total of $1.0 million to WREX-KATC, including $10,000
in 1993.
The Partnership expects to experience future payment and covenant
defaults under the WREX-KATC Loan. The Partnership sought
unsuccessfully to restructure the WREX-KATC Loan and, as
discussed above, decided to sell WREX and KATC. The Partnership
does not intend to, nor is it obligated to, advance any further
working capital to WREX and KATC. The lender to WREX-KATC 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
The Partnership was in compliance with all terms of its Wincom-
WEBE-WICC Loan and the Restructuring Agreement at December 30,
1994.
Impact of Cable Legislation and Regulation
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 and
regulation governing the cable industry. The potential impact of
such legislation and regulation 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 imposed 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 of appeals.
Rate Regulation
The 1992 Cable Act completely supplanted 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 Partnership'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 expanded and substantially altered its cable rate
regulations. The FCC's major actions included the following:
(1) a modification of its benchmark methodology in a way which
effectively required 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.
In deciding to substantially revise its benchmark methodology for
regulated cable rates, the FCC actually created two benchmark
systems. Thus, whereas the modified rate regulations adopted on
February 22, 1994 became effective as of May 15, 1994, regulated
rates in effect before that date 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. When assessing the appropriate
regulatory treatment of "a la carte" packages, the FCC stated it
would 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 would 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 would 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.
On November 10, 1994, the FCC adopted new "going forward" rules
and further tightened its regulation of a la carte packages.
These new rules allow operators to pass through the costs, plus a
20 cent per channel mark-up, for channels newly added to
regulated tiers. Through 1996, however, operators will be
subject to an aggregate of $1.50 cap on the amount they may
increase cable program service tier rates due to channel
additions. The FCC also established a "new products tier"
intended to provide operators unregulated pricing and packaging
flexibility, particularly for newer services, so long as they
preserve the fundamental nature of their preexisting regulated
tiers. Outside of the "new products" approach, however, the
Commission reversed its approach to a la carte packages and ruled
that all (non-premium) packages of services -- even if also
available on an a la carte basis -- would be treated as a
regulated tier.
Several cable industry interests have challenged or announced
that they will challenge these and other rate regulation
decisions of the FCC in a federal court of appeals. The
Partnership 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. These interim
rules remain the subject of both a further FCC rulemaking and a
pending appeal in the U.S. Court of Appeals for the D.C. Circuit.
The Partnership is currently unable to assess the full impact of
the FCC's further rate regulation decisions and the 1992 Cable
Act generally upon its business prospects or future financial
results. However, the rate reductions mandated by the FCC in May
of 1993 and February of 1994 have had, and will most likely
continue to have, a detrimental impact on the revenues and
profits on the Partnership's cable television operations.
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 an
additional negative impact on the financial condition, liquidity,
and value of the Partnership. The rate reductions and limits on
the pricing of a-la-carte tiers are principally responsible for
the occurrence of since-cured and possible future defaults under
the revised ML California Credit Agreement.
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 consummate the sale of the California
Cable Systems or the potential timing and ultimate value of such
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.
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, and again effective July 14, 1994.
In addition, pursuant to the 1992 Cable Act, revenue from
secondary outlets and from remote control units was eliminated or
reduced significantly. At that time, the Partnership began
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 and February, 1994 rate regulations enacted pursuant to
the 1992 Cable Act had a detrimental impact on the revenues and
profits of the California Cable Systems. For example, in 1994
the revenues of the California Cable Systems decreased slightly
compared to 1993 after having increased in every previous year.
Any limits imposed by the FCC on a-la-carte pricing will have a
further detrimental impact on the revenues and profits of the
California Cable Systems.
The Partnership is currently unable to ascertain the full impact
of the February 22, 1994 FCC action and previous FCC actions on
the C-ML Cable 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, the February 22, 1994 FCC action had a
detrimental impact on the revenues and profits on C-ML Cable.
For example, while the revenues of the C-ML Cable systems
increased in 1994 compared to 1993, the increase in revenues of
the C-ML Cable Systems was lower than in previous years.
However, the Partnership does not presently anticipate that this
reduced rate of revenue growth will result in any defaults under
the C-ML Notes or the C-ML Revolving Credit Agreement during
1995. There were no defaults under the C-ML Notes or the C-ML
Revolving Credit Agreement at December 30, 1994.
Summary
Based upon a review of the current financial performance of the
Partnership's investments, the Partnership continues to monitor
its working capital level. 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. The
Partnership does not currently expect to, nor is it obligated to,
advance any of its unrestricted working capital to WREX and KATC.
As of December 30, 1994, KATC and WREX represented approximately
9.7% of the consolidated assets of the Partnership and
approximately 10.9% 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, will 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:
<TABLE>
<CAPTION>
December 30, December 31,
1994 1993
<S> <C> <C>
Land and Improvements $ 5,632,210 $ 5,087,438
Buildings 11,320,418 10,827,637
Cable Distribution
Systems and Equipment 185,566,436 178,332,482
Other 3,090,261 3,108,574
205,609,325 197,356,131
Less accumulated (120,556,173) (104,955,637)
depreciation
Property, plant and
equipment, net $ 85,053,152 $ 92,400,494
</TABLE>
5. INTANGIBLE ASSETS
Intangible assets consisted of the following:
<TABLE>
<CAPTION>
December 30, December 31,
1994 1993
<S> <C> <C>
Goodwill $ 83,429,567 $ 81,091,611
Franchises 115,497,842 115,268,361
FCC Broadcast Licenses 4,746,304 4,746,304
Network Affiliation 10,892,168 10,892,168
Contracts
Other 10,217,167 10,217,167
224,783,048 222,215,611
Less accumulated (122,438,628) (111,069,407)
amortization
Intangible assets, net $ 102,344,420 $ 111,146,204
</TABLE>
6. BORROWINGS
At December 30, 1994 and December 31, 1993, the aggregate amount
of borrowings as reflected on the balance sheet of the
Partnership is as follows:
<TABLE>
<CAPTION>
December 30, December 31,
1994 1993
<S> <C> <C>
A)C-ML Notes/C-ML Credit
Agreement $ 50,000,000 $ 50,000,000
B)Revised ML California
Credit Agreement 129,187,500 141,375,000
C)WREX-KATC Loan 23,382,993 23,467,873
D)Restructuring
Agreement/Wincom-WEBE-WICC
Loan 15,600,475 17,725,476
TOTAL $218,170,968 $232,568,349
</TABLE>
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 provided 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 (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
30, 1994, there were no borrowings outstanding under the C-
ML Revolving Credit Agreement. As of December 30, 1994,
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
Media Operations (see below), 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. 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
originally bore 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
ranged 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 5.83%, 6.48%, and 8.35% during 1994, 1993,
and 1992, respectively. Pursuant to the terms of the First
Amendment, dated February 23, 1995, to the revised ML
California Credit Agreement, the applicable margin was
increased for periods following December 31, 1994, to
between 2.50% and 2.75% for Offshore Rate Loans and between
1.50% and 1.75% for Reference Rate Loans.
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 for additional information regarding the First
Amendment and defaults (since cured) 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 8.7% during 1994 and
7.5% in 1993. In part due to the expired interest rate
exchange agreements, the effective interest rate on the WREX-
KATC Loan was approximately 7.7% during 1992.
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 30, 1994, 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 1994 with respect to the Wincom-
WEBE-WICC Loan. The effective interest rate on the Wincom-
WEBE-WICC Loan was approximately 8.7%, 7.8%, and 8.1% during
1994, 1993 and 1992, respectively.
The Wincom-WEBE-WICC Loan required 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.
During 1993, 1992 and 1991, the Partnership defaulted on
scheduled principal payments and interest payments due under
the Wincom-WEBE-WICC Loan. Furthermore, during 1993, 1992
and 1991, and periods during 1990, the Partnership was in
default of most of its covenants under its Wincom-WEBE-WICC
Loan.
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. In addition to making four scheduled quarterly
principal payments totalling $400,000 during 1994, on
December 16, 1994 the Partnership made an optional principal
payment under the Series A Term Loan of $1 million from cash
generated by the stations. There was approximately $12.9
million outstanding under the Series A Term Loan as of
December 30, 1994. On January 31, 1995, the Partnership
made a required excess cash flow principal payment under the
Series A Term Loan of $309,908 from cash generated by the
stations.
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, will 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. 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. On December
16, 1994 the Partnership made an optional interest payment
under the Series B Term Loan of $175,852 from cash generated
by the stations, which payment represented all accrued
interest then due under the Series B Term Loan. As of
December 30, 1994, there was approximately $2.7 million of
principal due under the Series B Term Loan. On January 31,
1995, the Partnership made a required Excess Cash Flow
interest payment under the Series B Term Loan of $35,554
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 principal and interest due under the Series A Term
Loan and the Series B Term Loan 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 30, 1994, the Partnership was in full
compliance with all covenants under the Restructuring
Agreement.
At December 30, 1994, 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:
<TABLE>
<CAPTION>
<S> <C>
Year Ending Principal Amount
1995 $ 27,157,993
1996 25,225,000
1997 47,475,475
1998 50,187,500
1999 38,125,000
Thereafter 30,000,000
TOTAL $218,170,968
</TABLE>
Based upon the restrictions of the borrowings as described
above, approximately $234 million of assets are restricted
from distribution by the entities in which the Partnership
has an interest.
During 1994, 1993 and 1992, the Partnership was in violation
of payments and debt covenants under the WREX-KATC Loan.
The principal amount payable in 1995 would increase by an
additional $14,250,000 if the lender to WREX and KATC
required immediate payment.
As discussed in Note 2, if the sale of the California Cable
Systems is not consummated prior to December 29, 1995, the
Partnership will be unable to meet the scheduled December
29, 1995 principal payment due under its ML California
Credit Agreement, as amended by the First Amendment. The
lenders would then have the right to accelerate the maturity
of the indebtedness under this loan and to foreclose on, or
otherwise force a sale of, the assets of the California
Media Operations (but not the other assets of the
Partnership).
7. TRANSACTIONS WITH THE GENERAL PARTNER AND ITS AFFILIATES
During the years ended December 30, 1994, December 31, 1993 and
December 25, 1992 the Partnership incurred the following expenses
in connection with services provided by the General Partner and
its affiliates:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Media Management
Partners (General
Partner)
Partnership Mgmt. fee $ 557,979 $ 557,979 $ 557,979
Property Mgmt. fee 1,033,852 1,033,852 1,071,903
Reimbursement of
Operating Expenses 993,622 1,074,071 744,797
$2,585,453 $2,665,902 $2,374,679
</TABLE>
In addition, the Partnership, through the California Cable
Systems, is party to an agreement with MultiVision Cable TV Corp.
("MultiVision"), an affiliate of the General Partner, whereby
MultiVision provides the California Cable Systems (and provided
Universal before its sale) with certain administrative services.
The reimbursed cost charged to the California Cable Systems and
Universal (for 1992) for these services amounted to an aggregate
of $1,937,332 for 1994, $1,481,562 for 1993, and $1,653,648 for
1992. These costs do not include programming costs that are
charged, without markup, to the California Cable 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
$317,666 as of December 30, 1994 related to the payment by RP
Media Management of operating expenses on behalf of the
television and radio stations owned by the Partnership.
The total customer base managed by MultiVision declined
significantly during 1992 primarily as a result of divestitures
by companies other than the Partnership, and secondarily as a
result of the sale of Universal, all of which had utilized the
managerial services of MultiVision. The decline in MultiVision's
customer base led to slightly higher programming prices for
California Cable. Further reductions during 1994 of the customer
base managed by MultiVision, again due to divestitures by
companies other than the Partnership, also resulted in slightly
higher programming prices for California Cable.
As of December 30, 1994 and December 31, 1993, the amounts
payable to the General Partner were approximately $14.1 million
and $11.3 million, respectively.
<PAGE>
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:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
California Systems $ 360,417 $ 355,311 $ 373,999
Universal - - 72,495
KATC-TV 13,199 19,011 -
WICC-AM 105,182 105,182 105,182
Anaheim Radio Stations 120,453 120,672 118,743
WEBE-FM 166,362 164,715 162,968
Wincom 152,844 196,337 228,209
$ 918,457 $ 961,228 $1,061,596
</TABLE>
Future minimum commitments under all of the above agreements in
excess of one year are as follows:
<TABLE>
<CAPTION>
<S> <C>
Year Ending Amount
1995 $ 586,840
1996 546,001
1997 528,429
1998 484,911
1999 490,869
Thereafter 2,559,715
$5,196,765
</TABLE>
<PAGE>
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 C-ML Cable, the California Systems and Universal
(for 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, the Anaheim Radio
Stations, and the Partnership's 50% share of the C-ML Radio
Stations.
<TABLE>
<CAPTION>
Cable Television
Television and Radio
1994 Systems Stations Total
<S> <C> <C> <C>
Operating Revenue $ 76,549,818 $ 29,360,390 $105,910,208
Operating expenses
before gain on sale of
assets (66,605,154) (25,132,667) (91,737,821)
Gain on sale of assets 122,154 - 122,154
Operating Income 10,066,818 4,227,723 14,294,541
Plus: depreciation and
amortization 26,295,664 3,871,986 30,167,650
Operating income before
depreciation and
amortization 36,362,482 8,099,709 44,462,191
Less: depreciation and
amortization (26,295,664) (3,871,986) (30,167,650)
Operating Income $ 10,066,818 $ 4,227,723 14,294,541
Interest Income 192,875
Interest Expense (16,046,700)
Partnership General
Expenses, net 108,528
Net Loss $ (1,450,756)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Cable Television
Television and Radio
1994 Systems Stations Total
<S> <C> <C> <C>
Identifiable Assets $174,323,336 $ 59,402,010 $233,725,346
Partnership Assets 4,605,012
Total $238,330,358
Capital Expenditures $ 8,950,367 $ 1,354,113 $ 10,304,480
Depreciation and
Amortization $ 26,295,664 $ 3,871,986 30,167,650
Partnership
Depreciation and
Amortization 12,361
Total $ 30,180,011
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Cable Television
Television and Radio
1993 Systems Stations Total
<S> <C> <C> <C>
Operating Revenue $ 75,403,956 $ 24,997,715 $100,401,671
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 14,769,745 4,779,693 19,549,438
Plus: depreciation and
amortization 26,064,361 5,352,429 31,416,790
Operating income before
depreciation and
amortization 40,834,106 10,132,122 50,966,228
Less: depreciation and
amortization (26,064,361) (5,352,429) (31,416,790)
Operating Income $ 14,769,745 $ 4,779,693 19,549,438
Interest Income 147,466
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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Cable Television
Television and Radio
1993 Systems Stations Total
<S> <C> <C> <C>
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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Cable Television
Television and Radio
1992 Systems Stations Total
<S> <C> <C> <C>
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
</TABLE>
<PAGE>
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, 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 of 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 by the Venture of new certificates
evidencing a partnership interest 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, the Partnership 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 C-ML Cable
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
C-ML Cable 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 C-ML Cable or the C-ML Radio
properties, the Partnership may elect to purchase Century's
interest in the assets being sold on similar terms.
<PAGE>
The total assets, total liabilities, net capital, total revenues
and net loss of the Revised Venture (which does not include C-ML
Radio for the years ended December 31, 1993 and December 25,
1992, during which time such investment was accounted for under
the equity method) are as follows:
<TABLE>
<CAPTION>
December 30, December 31,
1994 1993
<S> <C> <C>
Total Assets $118,600,000 $114,300,000
Total Liabilities $114,700,000 $114,400,000
Net Capital (Deficit) $ 3,900,000 $ (100,000)
</TABLE>
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Total Revenues $ 48,600,000 $ 40,400,000 $ 36,500,000
Net Income $ 1,200,000 $ (300,000) $ (700,000)
(Loss)
</TABLE>
<PAGE>
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 30, 1994 and December 31, 1993, the fair value of the C-
ML Notes is estimated to be approximately $94 million and $109
million, respectively, of which approximately $47 million and
$54.5 million, respectively pertains to the amount reflected on
the Partnership's Consolidated Balance Sheet.
The General Partner has been able to estimate the fair value of
the revised ML California Credit Agreement based on (i) the price
at which the Partnership expects to sell the California Cable
Systems to Century; and (ii) the floating rate nature of all
borrowings outstanding under the revised ML California Credit
Agreement. Based on this analysis, the General Partner
determined that, as of December 30, 1994, the estimated fair
value of the revised ML California Credit Agreement approximated
its carrying value. As of December 31, 1993, the General Partner
had been able to estimate the fair value of the Revised ML
California Credit by using a discounted cash flow analysis and
determined that the estimated fair value approximated the
carrying values.
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 30,
1994 and December 31, 1993, the fair value of the Wincom-WEBE-
WICC Restructuring Agreement approximates the carrying value.
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 efforts to sell WREX and KATC, which
could not be predicted as of December 30, 1994 and December 31,
1993, the General Partner considers estimation of the fair value
of the WREX-KATC Loan to be impracticable.
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 was immaterial and there was no effect on
the provision for income taxes in the year of adoption.
<PAGE>
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 30, 1994 and December 31, 1993 are as follows:
<TABLE>
<CAPTION>
December 30, December 31,
1994 1993
<S> <C>
Deferred tax assets:
Basis of intangible assets $ 151,933 $ 182,007
Net operating loss carryforward 26,361,367 31,079,901
Alternative minimum tax credit 76,000 100,000
Other 16,652 34,206
26,605,952 31,396,114
Deferred tax liability:
Basis of property, plant and
equipment (83,530) (118,963)
Total 26,522,422 31,277,151
Less: valuation allowance (26,522,422) (31,277,151)
Net deferred tax asset $ 0 $ 0
</TABLE>
There is no provision for income taxes required for the year
ended December 31, 1994. The change in the net deferred tax
asset of $4,754,729 relates primarily to the utilization and
expiration of net operating loss carryforwards and was fully
offset by a corresponding reduction in the valuation allowance.
The components of the provision for income taxes for the year
ended December 31, 1993 relate to Wincom and are as follows:
<TABLE>
<CAPTION>
<S> <C>
December 31,
1993
Federal:
Current $ 100,000
Deferred 0
$ 100,000
State and Local:
Current $ 90,000
Deferred 0
$ 90,000
Total Provision $ 190,000
</TABLE>
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 year ended
December 25, 1992.
At December 30, 1994, 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 1995 through 2007.
<PAGE>
For the Partnership, the differences between the tax bases of
assets and liabilities and the reported amounts at December 30,
1994 and December 31, 1993 are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
December 30, December 31,
1994 1993
Partners' Deficit - financial
statements $ (16,258,662) $(14,807,906)
Differences:
Offering expenses 19,063,585 19,063,585
Basis of property, plant and
equipment and intangible assets
(47,602,928) (55,087,465)
Cumulative losses of stock
investments (corporations) 77,536,460 78,857,467
Nondeductible management fees 9,941,987 7,999,324
Other 1,783,712 2,455,435
Partners' Capital - income tax
basis $ 44,464,154 $ 38,480,440
</TABLE>
<PAGE>
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:
<TABLE>
<CAPTION>
1992
<S> <C>
Total Revenues $100,602,705
Less: Universal (4,681,966)
95,920,739
Net Loss $ (9,280,770)
Less: Universal net
loss 2,481,462
Less: Loss on sale of
Universal 6,399,000
Less: Extraordinary
gain on extinguishment
of debt of Universal (12,294,000)
$(12,694,308)
Per Unit of Limited
Partnership Interest:
Net Loss $ (66.85)
</TABLE>
14. OTHER EVENTS
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 had reduced accrued liabilities and
credited property operating expenses for $1 million, based on its
50% ownership of C-ML Cable.
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA PARTNERS, L.P.
AS OF DECEMBER 30, 1994 AND DECEMBER 31, 1993
SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ML Media Partners, L.P.
Condensed Balance Sheets
as of December 30, 1994 and December 31, 1993
Notes 1994 1993
<S> <C> <C> <C>
ASSETS:
Cash and cash equivalents 3 $ 4,566,730 $ 4,437,223
Accrued interest 38,282 11,905
Prepaid expenses and
deferred charges (net of
accumulated amortization of
$4,767,813 at December 30,
1994, and $4,755,452 at
December 31, 1993) - 12,381
Investment in Subsidiaries 1,2 (7,260,541) (8,395,362)
TOTAL ASSETS $ (2,655,529) $ (3,933,853)
LIABILITIES AND PARTNERS'
DEFICIT:
Liabilities:
Accounts payable and accrued
liabilities $ 13,603,133 $ 10,874,053
Partners' Deficit:
General Partner:
Capital contributions, net
of offering expenses 1,708,299 1,708,299
Cumulative loss (1,807,968) (1,793,460)
(99,669) (85,161)
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 (178,988,684) (177,552,436)
(16,158,993) (14,722,745)
Total Partners' Deficit (16,258,662) (14,807,906)
TOTAL LIABILITIES AND
PARTNERS' DEFICIT $ (2,655,529) $ (3,933,853)
</TABLE>
See Notes to Condensed Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA PARTNERS, L.P.
FOR THE YEARS ENDED DECEMBER 30, 1994, DECEMBER 31, 1993,
DECEMBER 25, 1992
SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Cont'd)
ML Media Partners, L.P.
Condensed Statements of Operations
For the Years Ended December 30, 1994, December 31, 1993
and December 25, 1992
Year Ended Year Ended Year Ended
December 30, December 31, December 25,
NOTE 1994 1993 1992
S
<S> <C> <C> <C> <C>
REVENUES:
Service fee
income from C-ML
Radio $ 235,120 $ 198,977 $ 469,794
Interest 192,875 147,466 158,738
Total revenues 427,995 346,443 628,532
COSTS AND
EXPENSES:
General and
administrative 1,409,380 1,409,387 1,431,637
Amortization 12,361 3,095 108,728
Management fees
to general
partner 1,591,831 1,591,831 1,629,882
Total costs and
expenses 3,013,572 3,004,313 3,170,247
Share of
subsidiaries'
income (loss)
before provision
for income taxes
and extra-
ordinary item 2 1,134,821 3,735,423 (19,033,055)
</TABLE>
Continued on following page.
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA PARTNERS, L.P.
FOR THE YEARS ENDED DECEMBER 30, 1994, DECEMBER 31, 1993,
DECEMBER 25, 1992
SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Cont'd)
ML Media Partners, L.P.
Condensed Statements of Operations
For the Years Ended December 30, 1994, December 31, 1993
and December 25, 1992
(Continued)
Year Ended Year Ended Year Ended
December 30, December 31, December 25,
NOTE 1994 1993 1992
S
<S> <C> <C> <C> <C>
(Loss) Income
before provision
for income taxes
and extra-
ordinary item (1,450,756) 1,077,553 (21,574,770)
Provision for
income taxes of
subsidiaries - (190,000) -
Extraordinary item-
gain on
extinguishment of
debt of
subsidiaries - 489,787 12,294,000
NET (LOSS) INCOME $(1,450,756) $ 1,377,340 $ (9,280,770)
</TABLE>
See Notes to Condensed Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA PARTNERS, L.P.
FOR THE YEARS ENDED DECEMBER 30, 1994 AND DECEMBER 31, 1993
AND DECEMBER 25, 1992
SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Cont'd)
ML Media Partners, L.P.
Condensed Statements of Cash Flows
For the Years Ended December 30, 1994 and December 31, 1993,
and December 25, 1992
1994 1993 1992
Cash flows from operating activities:
<S> <C> <C> <C>
Net income (loss) $ (1,450,756) $ 1,377,340 $(9,280,770)
Adjustments to
reconcile net income
(loss) to net cash
provided by (used in)
operating activities:
Reimbursement of
management fees
received from
subsidiaries - - -
Amortization 12,361 3,095 108,728
Share of
subsidiaries' net
income/(loss) before
provision for income
taxes and
extraordinary item (1,134,821) (3,735,423) 19,033,055
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 (26,377) (7,729) 27,118
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA PARTNERS, L.P.
FOR THE YEARS ENDED DECEMBER 30, 1994 AND DECEMBER 31, 1993
AND DECEMBER 25, 1992
SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Cont'd)
ML Media Partners, L.P.
Condensed Statements of Cash Flows
For the Years Ended December 30, 1994 and December 31, 1993,
and December 25, 1992
1994 1993 1992
<S> <C> <C> <C>
Decrease/(Increase)
in prepaid expenses,
deferred charges and
other - (143,582) 188,164
Increase in accounts
payable and accrued
liabilities 2,729,100 2,695,073 2,527,452
Net Cash provided by
(used in) operating
activities 129,507 (111,013) 309,747
Cash flows from
investing activities:
Net increase in
investment in
subsidiaries - 295,834 (26,624)
Net
Increase/(Decrease)
in cash and cash
equivalents 129,507 184,821 283,123
Cash and cash
equivalents at
beginning of year 4,437,223 4,252,402 3,969,279
Cash and cash
equivalents at end
of year $ 4,566,730 $ 4,437,223 $ 4,252,402
</TABLE>
See Notes to Condensed Financial Statements.
<PAGE>
ML MEDIA PARTNERS, L.P.
FOR THE YEARS ENDED DECEMBER 30, 1994, DECEMBER 31, 1993
AND DECEMBER 25, 1992
Schedule I CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(Cont'd)
ML Media Partners, L.P.
Notes To Condensed Financial Statements
For the Years Ended December 30, 1994
December 31, 1993 and December 25, 1992
1. Organization
As of December 30, 1994, 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 a 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, and ML
California Associates; as well as a 50% interest in The Venture
(see Note 10 to the consolidated financial statements). 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:
<TABLE>
<CAPTION>
December 30, December 31,
1994 1993
<S> <C> <C>
Assets $ 233,725,346 $ 245,390,428
Liabilities (240,985,887) (253,785,790)
Investment in Subsidiaries $ (7,260,541) $ (8,395,362)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 30, December 31, December 25,
1994 1993 1992
<S> <C> <C> <C>
Revenues $105,910,208 $100,202,694 $ 99,974,173
Share of
subsidiaries'
income (loss)
before provision
for income taxes
and extraordinary
item 1,134,821 3,735,423 (19,033,055)
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) $ 1,134,821 $ 4,035,210 $ (6,739,055)
</TABLE>
<PAGE>
ML MEDIA PARTNERS, L.P.
FOR THE YEARS ENDED DECEMBER 30, 1994, DECEMBER 31, 1993
AND DECEMBER 25, 1992
Schedule I CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(Cont'd)
ML MEDIA PARTNERS, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 30, 1994
DECEMBER 31, 1993 AND DECEMBER 25, 1992
3. Cash and Cash Equivalents
At December 30, 1994, the Partnership had $4,566,730 in cash and
cash equivalents, of which $4,550,590 was invested in commercial
paper. In addition, the Partnership had $16,140 invested in
cash. 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 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 were held in reserve for the operating
requirements of the Partnership.
<PAGE>
ML MEDIA PARTNERS, L.P.
AS OF DECEMBER 30, 1994, DECEMBER 31, 1993 AND DECEMBER 25, 1992
Schedule II Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Additions
Charged to
Balance at Costs and
Beginning of Expenses or Deductions and Balance at
Perio Period Other Other End of
d Accounts Period
Intangible Assets
<S> <C> <C> <C> <C>
1994 $111,069,407 $11,369,221 $ - $122,438,628
1993 $112,996,421 $11,163,146 $(13,090,160) (3) $111,069,407
1992 $107,868,052 $11,885,557 $ (6,757,188) (1) $112,996,421
Prepaid Expenses and Deferred Charges
1994 $7,241,087 $ 545,574 $ (3,676) $7,782,985
1993 $6,601,766 $ 682,666 $ (43,344) $7,241,088
1992 $6,385,771 $ 606,506 $ (390,511) (2) $6,601,766
</TABLE>
(1) 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).
(2) 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).
(3) 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).
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, 59, 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 President and a Director 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 51.005% interest in an entity which owns
three network affiliated television stations, and an equity
position in a cellular telecommunications company. 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.
Elizabeth McNey Yates, 32, 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. Ms. Yates is an Executive Vice President of RP
Opportunity Management.
Kevin K. Albert, 42, 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 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 II, III, IV, V and ML Delphi
Premier Partners, L.P.; 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, 41, 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 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, 48, 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,
joined Merrill Lynch in 1981. Mr. Seitz is the Private Client
Senior Officer and is also responsible for the firm's Partnership
Management and Asset Recovery Management Departments. 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, 42, 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.
Steven N. Baumgarten, 39, 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 is also a director of ML Film.
David G. Cohen, 32, 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.
Mr. Pompadur and Ms. Yates were each executive officers of
Maryland Cable Corp. and Maryland Cable Holdings Corp. at and
during the two years prior to the filing Maryland Cable and
Holdings on March 10, 1994 of a consolidated plan of
reorganization under Chapter 11 of the United States Bankruptcy
Code with the United States Bankruptcy Court for the Southern
District of New York. Maryland Cable Holdings Corp. was at the
time of such filings a subsidiary of ML Media Opportunity
Partners, L.P.
Mr. Aufenanger is an executive officer of Mid-Miami Diagnostics
Inc. ("Mid-Miami Inc."). On October 28, 1994 both Mid-Miami Inc.
and Mid-Miami Diagnostics, L.P. filed voluntary petitions for
protection from creditors under Chapter 7 of the United States
Bankruptcy Code in the United States Bankruptcy Court for the
Southern District of New York.
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 30, 1994, December 31, 1993 and
December 25, 1992.
Item 12.Security Ownership of Certain Beneficial Owners and
Management
As of February 1, 1995, 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, 1995,
the officers and directors of the General Partner in aggregate
own less than .01% 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".
<TABLE>
<CAPTION>
Exhibits Incorporated by Reference
<S> <C>
3.1Amended and Restated Certificate Exhibit 3.1 to Form S-1
of Limited Partnership. Registration Statement (File No.
33-2290)
3.2.1 Second Amended and Restated Exhibit 3.2.1 to Form 10-K Report
Agreement of Limited Partnership for the fiscal year ended December
dated May 14, 1986. 26, 1986 (File No. 0-14871)
3.2.2 Amendment No. 1 dated February Exhibit 3.2.2 to Form 10-K Report
27, 1987 to Second Amended and for the fiscal year ended December
Restated Agreement of Limited 26, 1986 (File No. 0-14871)
Partnership.
10.1.1Joint Venture Agreement dated Exhibit 10.1.1 to Form 10-K Report
July 2, 1986 between Registrant for the fiscal year ended December
and Century Communications 26, 1986 (File No. 0-14871)
Corp.("CCC")
10.1.2Management Agreement and Joint Exhibit 10.1.2 to Form 10-K Report
Venture Agreement dated December for the fiscal year ended December
16, 1986 between Registrant and 26, 1986 (File No. 0-14871)
CCC (attached as Exhibit 1 to
Exhibit 10.3).
10.1.3Management Agreement and Joint Exhibit 10.1.3 to Form 10-K Report
Venture Agreement dated as of for the fiscal year ended December
February 15, 1989 between 30, 1988 (File No. 0-14871)
Registrant and CCC.
10.1.4Amended and Restated Management Exhibit 10.1.4 to Form 10-K Report
Agreement and Joint Venture for the fiscal year ended December
Agreement of Century/ML Cable 31, 1993 (File No. 0-14871)
Venture dated January 1, 1994
between Century Communications
Corp. and Registrant.
10.2.1Stock Purchase Agreement dated Exhibit 28.1 to Form 8-K Report
July 2, 1986 between Registrant dated December 16, 1986 (File No.
and the sellers of shares of 33-2290)
Cable Television Company of
Greater San Juan, Inc.
10.2.2Assignment dated July 2, 1986 Exhibit 10.2.2 to Form 10-K Report
between Registrant and Century- for the fiscal year ended December
ML Cable Corporation ("C-ML"). 26, 1986 (File No. 0-14871)
10.2.3Transfer of Assets and Exhibit 10.2.3 to Form 10-K Report
Assumption of Liabilities for the fiscal year ended December
Agreement dated January 1, 1994 31, 1993 (File No. 0-14871)
between Century-ML Radio
Venture, Century/ML Cable
Venture, Century Communications
Corp. and Registrant.
10.3 Amended and Restated Credit Exhibit 10.3.5 to Form 10-K Report
Agreement dated as of March 8, for the fiscal year ended December
1989 between Citibank, N.A., 30, 1988 (File No. 0-14871)
Agent, and C-ML.
10.3.1Note Agreement dated as of Exhibit 10.3.1 to Form 10-K Report
December 1, 1992 between Century- for the fiscal year ended December
ML Cable Corporation, Century/ML 25, 1992 (File No. 0-14871)
Cable Venture, Jackson National
Life Insurance Company, The
Lincoln National Life Insurance
Company and Massachusetts Mutual
Life Insurance Company.
10.3.2Second Restated Credit Agreement Exhibit 10.3.2 to Form 10-K Report
dated December 1, 1992 among for the fiscal year ended December
Century-ML Cable Corporation, 25, 1992 (File No. 0-14871)
Century/ML Cable Venture and
Citibank.
10.3.3Amendment dated as of September Exhibit 10.3.3 to Form 10-Q for
30, 1993 among Century-ML Cable the quarter ended September 24,
Corporation, the banks parties 1993 (File No. 0-14871)
to the Credit Agreement, and
Citibank, N.A. and Century/ML
Cable Venture.
10.3.4Amendment dated as of December Exhibit 10.3.4 to Form 10-K Report
15, 1993 among Century-ML Cable for the fiscal year ended December
Corporation, the banks parties 31, 1993 (File No. 0-14871)
to the Credit Agreement, and
Citibank, N.A. and Century/ML
Cable Venture.
10.4 Pledge Agreement dated December Exhibit 10.4 to Form 10-K Report
16, 1986 among Registrant, CCC, for the fiscal year ended December
and Citibank, N.A., Agent. 26, 1986 (File No. 0-14871)
10.5 Guarantee dated as of December Exhibit 10.5 to Form 10-K Report
16, 1986 among Registrant, CCC for the fiscal year ended December
and Citibank, N.A., Agent. 25, 1987 (File No. 0-14871)
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 dated as Exhibit 10.7 to Form 10-K for the
of December 16, 1986 among fiscal year ended December 30,
Registrant, CCC and Citibank, 1988 (File No. 0-14871)
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").
10.8.1Asset Purchase Agreement dated Exhibit 2 to Form 8-K Report dated
as of November 28, 1994 among November 28, 1994 (File No. 0-
Registrant and Century 14871)
Communications Corp.
10.9 Security Agreement dated as of Exhibit 10.10 to Form 10-K Report
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 Agreement dated Exhibit 28.1 to Form 8-K Report
as of September 17, 1986 between dated February 2, 1987
Registrant and Loyola
University.
10.11 Asset Acquisition Agreement Exhibit 28.1 to Form 8-K Report
dated April 22, 1987 between dated October 14, 1987 (File No.
Community Cable-Vision of Puerto 33-2290)
Rico Associates, Community Cable-
Vision of Puerto Rico, Inc.,
Community Cable-Vision
Incorporated and Century
Communications Corp., as
assigned.
10.12 Asset Purchase Agreement dated Exhibit 2.1 to Form 8-K Report
April 29, 1987 between dated September 16, 1987 (File No.
Registrant and Gilmore 33-2290)
Broadcasting Corporation.
10.13 License Holder Pledge Agreement Exhibit 2.5 to Form 8-K Report
dated August 27, 1987 by dated September 15, 1987 (File No.
Registrant and Media Management 33-2290)
Partners in favor of
Manufacturers Hanover.
10.14 Asset Purchase Agreement dated Exhibit 28.1 to Form 8-K Report
August 20, 1987 between 108 dated January 15, 1988 (File No.
Radio Company Limited 33-2290)
Partnership and Registrant.
10.15 Security Agreement dated as of Exhibit 28.3 to Form 8-K Report
December 16, 1987 between dated January 15, 1988 (File No.
Registrant and CNB. 33-2290)
10.16 Asset Purchase Agreement dated Exhibit 10.25 to Form 10-K Report
as of January 9, 1989 between for the fiscal year ended December
Registrant and Connecticut 30, 1988 (File No. 0-14871)
Broadcasting Company, Inc.
("WICC").
10.17.1 Stock Purchase Agreement dated Exhibit 28.2 to Form 10-Q for the
June 17, 1988 between Registrant quarter ended June 24, 1988 (File
and the certain sellers referred No. 0-14871)
to therein relating to shares of
capital stock of Universal Cable
Holdings, Inc. ("Universal").
10.17.2 Amendment and Consent dated July Exhibit 2.2 to Form 8-K Report
29, 1988 between Russell V. dated September 19, 1988 (File No.
Keltner, Larry G. Wiersig and 0-14871)
Donald L. Benson, Universal
Cable Midwest, Inc. and
Registrant.
10.17.3 Amendment and Consent dated July Exhibit 2.3 to Form 8-K Report
29, 1988 between Ellsworth dated September 19, 1988 (File No.
Cable, Inc., Universal Cable 0-14871)
Midwest, Inc. and Registrant.
10.17.4 Amendment and Consent dated Exhibit 2.4 to Form 8-K Report
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 dated Exhibit 2.5 to Form 8-K Report
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 dated Exhibit 10.26.6 to Form 10-K
October 14, 1988 between Down's Report for the fiscal year ended
Cable, Inc., Universal Cable December 30, 1988 (File No. 0-
Midwest, Inc. and Registrant. 14871)
10.17.7 Amendment and Consent dated Exhibit 10.26.7 to Form 10-K
October 14, 1988 between SJM Report for the fiscal year ended
Cablevision, Inc., Universal December 30, 1988 (File No. 0-
Cable Midwest, Inc. and 14871)
Registrant.
10.17.8 Bill of Sale and Transfer of Exhibit 2.6 to Form 8-K Report
Assets dated as of September 19, dated September 19, 1988 (File No.
1988 between Registrant and 0-14871)
Universal Cable Communications
Inc.
10.18 Credit Agreement dated as of Exhibit 10.27 to Form 10-K Report
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 Agreement dated Exhibit 10.28 to Form 10-K Report
October 6, 1988 between for the fiscal year ended December
Registrant and the certain 30, 1988 (File No. 0-14871)
sellers referred to therein
relating to shares of capital
stock of Acosta Broadcasting
Corp.
10.20 Stock Purchase Agreement dated Exhibit 28.1 to Form 10-Q for the
April 19, 1988 between quarter ended June 24, 1988 (File
Registrant and the certain No. 0-14871)
sellers referred to therein
relating to shares of capital
stock of Wincom Broadcasting
Corporation.
10.21 Subordination Agreement dated as Exhibit 2.3 to Form 8-K Report
of August 15, 1988 among Wincom, dated August 26, 1988 (File No. 0-
the Subsidiaries, Registrant and 14871)
Chemical Bank.
10.22 Management Agreement dated Exhibit A to Exhibit 10.30.2 above
August 26, 1988 between
Registrant and Wincom.
10.22.1 Management Agreement by and Exhibit 10.22.1 to Form 10-Q for
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 and among Exhibit 10.22.2 to Form 10-Q for
Registrant, ML Media Opportunity the quarter ended June 25, 1993
Partners, L.P., RP Companies, (File No. 0-14871)
Inc., Radio Equity Partners,
Limited Partnership and
Fairfield Communications, Inc.
10.23 Amended and Restated Credit, Exhibit 10.33 to Form 10-Q for the
Security and Pledge Agreement quarter ended June 30, 1989 (File
dated as of August 15, 1988, as No. 0-14871)
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 as of Exhibit 10.23.1 to Form 10-Q for
July 30, 1993 to the Amended and the quarter ended June 25, 1993
Restated Credit, Security and (File No. 0-14871)
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 Consolidation, Exhibit 10.34 to Form 10-Q for the
Extension, Amendment and quarter ended June 30, 1989 (File
Restatement of the WREX Credit No. 0-14871)
Agreement and KATC Credit
Agreement between Registrant and
Manufacturers Hanover Trust
Company dated as of June 21,
1989.
10.25 Asset Purchase Agreement between Exhibit 10.35 to Form 10-Q for the
ML Media Partners, L.P. and quarter ended September 29, 1989
Anaheim Broadcasting Corporation (File No. 0-14871)
dated July 11, 1989.
10.26 Asset Purchase Agreement between Exhibit 10.36 to Form 10-K Report
WIN Communications Inc. of for the fiscal year ended December
Indiana, and WIN Communications 28, 1990 (File No. 0-14871)
of Florida, Inc. and Renda
Broadcasting Corp. dated
November 27, 1989.
10.26.1 Asset Purchase Agreement between Exhibit 10.26.1 to Form 10-Q for
WIN Communications of Indiana, the quarter ended June 25, 1993
Inc. and Broadcast Alchemy, L.P. (File No. 0-14871)
dated April 30, 1993.
10.26.2 Joint Sales Agreement between Exhibit 10.26.2 to Form 10-Q for
WIN Communications of Indiana, the quarter ended June 25, 1993
Inc. and Broadcast Alchemy, L.P. (File No. 0-14871)
dated May 1, 1993.
10.27 Credit Agreement dated as of Exhibit 10.39 to Form 10-Q for the
November 15, 1989 between ML quarter ended June 29, 1990 (File
Media Partners, L.P. and Bank of No. 0-14871)
America National Trust and
Savings Association.
10.27.1 First Amendment and Limited
Waiver dated as of February 23,
1995 to the Amended and Restated
Credit Agreement dated as of May
15, 1990 among ML Media
Partners, L.P. and Bank of
America National Trust and
Saving Association, individually
and as Agent.
10.28 Asset Purchase Agreement dated Exhibit 10.38 to Form 10-Q for the
November 27, 1989 between Win quarter ended June 29, 1990 (File
Communications and Renda No. 0-14871)
Broadcasting Corp.
10.29 Amended and Restated Credit Exhibit 10.39 to Form 10-Q for the
Agreement dated as of May 15, quarter ended June 29, 1990 (File
1990 among ML Media Partners, No. 0-14871)
L.P. and Bank of America
National Trust and Saving
Association, individually and as
Agent.
10.30 Stock Purchase Agreement between Exhibit 10.40.1 to Form 10-Q for
Registrant and Ponca/Universal the quarter ended March 27, 1992
Holdings, Inc. dated as of April (File No. 0-14871)
3, 1992.
10.30.1 Earnest Money Escrow Agreement Exhibit 10.40.1 to Form 10-Q for
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 Agreement Exhibit 10.40.2 to Form 8-K Report
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 Registrant in Exhibit 10.40.3 to Form 8-K Report
favor of Chemical Bank, in its dated July 8, 1992 (File No. 0-
capacity as agent for itself and 14871)
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 Universal Exhibit 10.40.4 to Form 10-Q for
agreements between Registrant the quarter ended September 25,
and Manufacturers Hanover Trust 1992 (File No. 0-14871)
Company, dated April 3, 1992.
10.30.5 Letter regarding discharge and Exhibit 10.40.5 to Form 10-Q for
release of the Universal the quarter ended September 25,
Companies and Registrant dated 1992 (File No. 0-14871)
July 8, 1992 between Registrant
and Chemical Bank (as successor,
by merger, to Manufacturers
Hanover Trust Company).
18.1 Letter from Deloitte, Haskins & Exhibit 18.1 to Form 10-K Report
Sells regarding the change in for the fiscal year ended December
accounting method, dated March 30, 1988 (File No. 0-14871)
30, 1989.
27.0 Financial Data Schedule to Form
10-K Report for the fiscal year
ended December 30, 1994.
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.
</TABLE>
(b) Reports on Form 8-K
Registrant filed with the Securities and Exchange
Commission a Current Report on Form 8-K dated November
28, 1994. This Current Report contained details
regarding the sale of California Cable.
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 22, 1995 /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 22, 1995
(I. Martin Pompadur) and Director
(principal executive
officer)
ML MEDIA MANAGEMENT INC.
Signature Title Date
/s/ Kevin K. Albert Director and March 22, 1995
(Kevin K. Albert) President
/s/ Robert F. Aufenanger Director and March 22, 1995
(Robert F. Aufenanger) Executive Vice
President
/s/ James K. Mason Director March 22, 1995
(James K. Mason)
/s/ Robert W. Seitz Director and Vice March 22, 1995
(Robert W. Seitz) President
/s/ David G. Cohen Treasurer (principal March 22, 1995
(David G. Cohen) financial officer and
principal accounting
officer)
[TYPE] EX - 10
[DOCUMENT-COUNT]
[SROS]
[FILER]
[ARTICLE]
Riders, if any, are at the end of the document.
ML MEDIA PARTNERS, L.P.
FIRST AMENDMENT AND LIMITED WAIVER
TO AMENDED AND RESTATED CREDIT AGREEMENT
This FIRST AMENDMENT AND LIMITED WAIVER TO AMENDED AND
RESTATED CREDIT AGREEMENT (this "Amendment") is dated as of
February 23, 1995 and entered into by and among ML MEDIA
PARTNERS, L.P., a Delaware public limited partnership
("Borrower"), of which Media Management Partners, a joint venture
consisting of RP Media Management and ML Media Management, Inc.,
is the sole general partner ("Management"), the financial
institutions listed on the signature pages hereof (individually
"Bank" and collectively "Banks") and BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION, as agent for the Banks (in such
capacity "Agent"), and, for purposes of Section 5 hereof,
Management, as a Credit Support Party (as defined in Section 5
hereof), and is made with reference to that certain Amended and
Restated Credit Agreement dated as of May 15, 1990 (the "Credit
Agreement"), by and among Borrower, Banks and Agent. Capitalized
terms used herein without definition shall have the same meanings
herein as set forth in the Credit Agreement
RECITALS
WHEREAS, Borrower and Banks desire to amend the Credit
Agreement to (i) increase the interest rates provided for
therein, (ii) defer certain principal payments provided for
therein, (iii) amend the mandatory prepayment provisions set
forth therein, (iv) amend the financial covenants set forth
therein, and (v) make certain other amendments, all as more
specifically set forth below;
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, the
parties hereto agree as follows:
1. AMENDMENTS TO THE CREDIT AGREEMENT
1.1 Amendments to Article 1: Definitions
A. Certain Defined Terms.
(i) Section 1.1 of the Credit Agreement is hereby
amended by adding thereto the following definitions, which shall
be inserted in proper alphabetical order:
"`Century' means Century Communications Corp., a New
Jersey corporation.
`Century Sale' means the consummation of the sale of
substantially all of the assets of the Systems to, and the
assumption of substantially all of the liabilities (other than
Borrower's Obligations under this Agreement) of the Systems by,
Century pursuant to and in accordance with the terms of the
Century Sale Agreement.
`Century Sale Agreement' means the Asset Purchase
Agreement dated November 28, 1994, by and between Borrower, as
seller, and Century, as buyer, pursuant to which the Borrower has
agreed to sell to Century substantially all of the assets of, and
Century has agreed to assume substantially all of the liabilities
(other than Borrower's Obligations under this Agreement) of, the
Systems.
`Century Sale Termination' means the termination of the
Century Sale Agreement, whether pursuant to Section 10 of the
Century Sale Agreement or otherwise, other than any termination
occurring as a result of a consummation of the Century Sale
pursuant to which Borrower's outstanding Obligations to Banks
under this Agreement are repaid in full concurrently with such
consummation.
`Escrow Agreements' means (a) the Escrow Agreement
dated November 28, 1994, by and among Borrower, Century and
Chemical Bank, as escrow agent, related to the Century Sale
Agreement, (b) Borrower's agreement with Cable Telecommunications
Joint Powers Agency ("CTJPA") pursuant to which Borrower has
established, and deposited the sum of $785,731 into, Account No.
1233061950 at Bank of America's Concord, California branch, which
sum is to be held for the benefit of CTJPA's subscribers pending
determination of Borrower's potential liability, if any, to make
refunds to CTJPA's subscribers, (c) Borrower's agreement with the
City of Fairfield ("Fairfield"), California, pursuant to which
Borrower has established, and deposited the sum of $680,000 into,
Account No. 1233361901 at Bank of America's Concord, California
branch, which sum is to be held for the benefit of Fairfield's
subscribers pending determination of Borrower's potential
liability, if any, to make refunds to Fairfield's subscribers,
and (d) each other escrow agreement, deposit account agreement or
other similar agreement or arrangement with any municipal or
county authority that has issued a Franchise to Borrower which
Borrower may enter into from time to time for the benefit of
subscribers to an identified System or Systems for the purpose of
holding available segregated funds to provide for potential
refunds, if any, to such subscribers with respect to a la carte
services and tier services and/or other rates or charges or which
Borrower may enter into from time to time for the benefit of any
such municipal or county authority that has issued a Franchise to
Borrower, in each case in the form delivered to the Agent
pursuant to Section 3E of the First Amendment or Section 7.14 of
this Agreement, as amended, supplemented or otherwise modified
from time to time in accordance with the provisions of Section
7.14 of this Agreement.
`First Amendment' means the First Amendment to Amended
and Restated Credit Agreement dated as of February 23, 1995,
entered into by and among Borrower, Banks and Agent and the
Credit Support Party (as defined therein), amending this
Agreement."
(ii) Section 1.1 of the Credit Agreement is hereby
further amended by deleting the definition of "Applicable
Margin" in its entirety and by substituting the following
therefor:
"`Applicable Margin' means a percentage to be added to
the Reference Rate for Reference Rate Loans on and after
December 31, 1994 and to the Offshore Rate for Offshore Rate
Loans with respect to any portion of an Interest Period for which
the Interest Payment Date occurs on and after December 31, 1994
as follows:
[CAPTION]
<TABLE>
Applicable Margin
<S> <C> <C>
Reference Offshore
Funded Debt Ratio Rate Loans Rate Loans
(a) Above 5.75:1.00 1.75% 2.75%
(b) 5.75:1.00 or less 1.50% 2.50%
</TABLE>
provided, however, in the event that a Century Sale
Termination occurs on or prior to December 29, 1995, or all of
the outstanding Obligations are not paid in full on or prior to
December 29, 1995, then the Applicable Margin shall be determined
pursuant to the foregoing clause (a) as if the Borrower's Funded
Debt Ratio at all times on and after December 31, 1994 was and is
above 5.75:1.00 and, to the extent that on any Interest Payment
Date occurring after December 31, 1994 the interest payable by
the Borrower was calculated under the foregoing clause (b),
Borrower shall pay to the Agent for the ratable account of the
Banks on the earlier to occur of the date of the Century Sale
Termination or December 29, 1995, interest in an amount equal to
the difference between (x) the amount of interest that would have
been payable on such prior Interest Payment Date pursuant to the
foregoing clause (a) and (y) the amount of interest actually paid
on such prior Interest Payment Date pursuant to the foregoing
clause (b)."
(iii) Section 1.1 of the Credit Agreement is hereby
further amended by inserting the following proviso in the
definition of "Operating Cash Flow" at the end of the first
sentence thereof immediately after the phrase "as the case
may be":
";provided, however that notwithstanding the foregoing,
Operating Cash Flow shall be determined without taking into
account (x) any reserves, write-downs or writeoffs which Borrower
is required to make in connection with approximately $2,400,000
in property tax refunds owing to Borrower from Orange County,
California and (y) any accruals which Borrower is required to
make in connection with up to $2,500,000 in bonuses which
Borrower has agreed to pay its employees in the event that such
employees remain in Borrower's employment until consummation of
the Century Sale; provided however that in no event shall
Borrower make any cash payments of such bonuses to any employee
while any Obligations under this Agreement remain outstanding."
1.2 Amendments to Article 2: Amount and Terms of
Commitments and Loans
A. Interest.
(i) Section 2.7(b) of the Credit Agreement is hereby
amended by inserting "Subject to the proviso contained in
the definition of `Applicable Margin'," as the first clause
in each of the first two sentences of Section 2.7(b).
(ii) Section 2.7(d) of the Credit Agreement is hereby
amended by deleting the second sentence thereof in its
entirety.
B. Repayment of Principal at Maturity. Section 2.8(b)
of the Credit Agreement is hereby amended by deleting the
proviso at the end thereof and by inserting in lieu thereof
the following:
"provided, however, that so long as no Century Sale
Termination occurs, the quarterly installments set forth in the
above table for the Principal Payment Dates on March 31, 1995,
June 30, 1995, September 29, 1995 and December 29, 1995
(collectively, the "Original Quarterly Installments") shall be
adjusted as follows: the Borrower shall pay to the Agent for the
ratable account of the Banks on each of March 31, 1995, June 30,
1995 and September 29, 1995, a quarterly installment equal to
$1,500,000 (collectively, the "Reduced Quarterly Installments"),
and on December 29, 1995, a quarterly installment equal to the
difference between (x) $17,625,000 and (y) the Reduced Quarterly
Installments paid by the Borrower; provided further that in the
event that a Century Sale Termination occurs on or prior to
December 29, 1995, then the Original Quarterly Installments shall
be effective for all Principal Payment Dates on or succeeding
such date of the Century Sale Termination and, in addition, on
the first such Principal Payment Date, Borrower shall pay to the
Agent for the ratable account of the Banks, a principal payment
equal to the difference between (a) the aggregate amount of the
Original Quarterly Installments for the Principal Payment Dates
occurring prior to the date of the Century Sale Termination and
(b) the aggregate amount of the Reduced Quarterly Installments
paid by the Borrower; and provided still further, that the final
installment of the Term Credit shall be in an amount equal to the
amount then outstanding under the Term Credit."
C. Mandatory Prepayment. Section 2.9(b) of the Credit
Agreement is hereby amended by deleting it in its entirety
and by inserting in lieu thereof the following:
(b) Notwithstanding anything to the contrary in
Section 2.9(a), in the event that the Borrower sells,
transfers or otherwise disposes of any System pursuant to
the Century Sale Agreement, then the Borrower shall, on the
day payment of the Net Proceeds of Sale is received, prepay
the Term Loans in an amount equal to such Net Proceeds of
Sale. Such prepayment shall be allocated to the
installments of the Term Loans in inverse order of maturity,
together with interest accrued thereon.
(c) From time to time, in the event that the
Borrower receives any distribution or payment of any amount
held pursuant to the Escrow Agreements (without duplication
of any amounts payable pursuant to Section 2.9(b) or Section
2.9(d)), then the Borrower shall, on the day such
distribution or payment is received, prepay the Term Loans
in an amount equal to the amount of such distribution or
payment. Such prepayment shall be allocated to the
installments of the Term Loans in inverse order of maturity,
together with interest accrued thereon.
(d) In the event that the Borrower's cash
balances, as determined in accordance with the Borrower's
past practices and procedures but without giving effect to
amounts held in the Reserve Account pursuant to the
provisions of Section 6.14 and without giving effect to an
aggregate amount equal to (i) one-twelfth of the annual
amount payable pursuant to clause (c)(i) of Section 7.11
times the number of calendar months elapsed since January 1,
1995 minus (ii) the actual Corporate Overhead payments made
to MultiVision since January 1, 1995, as of the last day of
any fiscal quarter exceed $5,000,000, then the Borrower
shall, as soon as practicable but in any event no later than
the sixtieth day after the last day of such fiscal quarter,
prepay the Term Loans in an amount equal to the amount by
which such cash balances exceed $5,000,000. Such prepayment
shall be allocated to the installments of the Term Loans in
inverse order of maturity, together with interest accrued
thereon."
1.3 Amendments to Article 3: Fees; Payments; Taxes; Changes
in Circumstances
A. Fees. Section 3.1 of the Credit Agreement is hereby
amended by adding a new paragraph at the end thereof as
follows:
"(f) In the event that a Century Sale Termination
occurs or all outstanding Obligations are not paid in full
on or prior to December 29, 1995, the Borrower agrees to pay
to the Agent for the ratable account of the Banks, a fee in
an amount equal to .25% of the amount of the outstanding
Loans on the date of the First Amendment, such fee to be
payable on the earlier to occur of the date of the Century
Sale Termination or December 29, 1995."
1.4 Amendments to Article 6: Borrower's Affirmative
Covenants
A. Financial Statements and Other Reports.
(i) Section 6.1(a) of the Credit Agreement is hereby
amended by deleting the first two lines thereof and by
inserting in lieu thereof "as soon as practicable, and in
any event within 55 days after the end of each calendar
month, (i) an unaudited" and by adding at the end of Section
6.1(a) the following:
"(ii) for informational purposes only, for each
calendar month for which Borrower does not deliver the
Certificate required pursuant to Section 6.1(d), a
Certificate executed by a Responsible Officer calculating
Borrower's Funded Debt Ratio as of the last day of such
calendar month (the "Monthly Determination Date"); provided
that in calculating the Funded Debt Ratio for purposes of
this Section 6.1(a)(ii), the Measurement Period for
determining the Operating Cash Flow of the Stations shall be
the period of twelve consecutive calendar months ending on
the Monthly Determination Date, and the Measurement Period
with respect to the Operating Cash Flow of the California
Cable Operations shall be determined by multiplying the
Operating Cash Flow of the California Cable Operations for
the three month period ending on the Monthly Determination
Date by four and subtracting from the resulting product the
amount of Management Fees actually paid during the period of
the twelve consecutive calendar months ending on the Monthly
Determination Date; and (iii) a narrative report, in form
and substance satisfactory to Requisite Banks, describing
the current status of the Borrower's renewals and extensions
of its Franchise agreements as required by Section 6.1 of
the Century Sale Agreement, the current status of Century's
receipt of the necessary consents and approvals for the
transfer of Borrower's Franchises and FCC Licenses to
Century, and any developments with respect to matters
generally related to the Century Sale and possible refunds
to subscribers with respect to a la carte services and tier
services occurring since the last such report."
(ii) Section 6.1(b) of the Credit Agreement is hereby
amended by deleting the reference to "75 days" contained in
the second line thereof and by inserting "55 days" in lieu
thereof.
(iii) Section 6.1(d) of the Credit Agreement is hereby
amended by adding the following at the end thereof:
"(iii) a Certificate executed by a Responsible Officer
setting forth in reasonable detail the amount by category of
all Corporate Overhead payments made by Borrower from the
Cable Assets to Multivision during the fiscal quarter for
which such financial statements are being delivered; and
(iv) to the extent not included in the financial statements
delivered pursuant to Paragraphs (b) and (c) above, a
statement of the Borrower's cash balances as of the end of
such fiscal period, calculated in accordance with the
Borrower's past practices and procedures but without giving
effect to amounts required to be held in the Reserve Account
pursuant to the provisions of Section 6.14 and without
giving effect to an aggregate amount equal to (i) one-
twelfth of the annual amount payable pursuant to clause
(c)(i) of Section 7.11 times the number of calendar months
elapsed since January 1, 1995 minus (ii) the actual
Corporate Overhead payments made to MultiVision since
January 1, 1995."
(iv) Section 6.1(g) of the Credit Agreement is hereby
amended by inserting the phrase ", including without
limitation, the occurrence of the Century Sale Termination,"
after the phrase "Material Adverse Change," in clause (iii)
thereof.
B. Reserve Account. Article 6 of the Credit Agreement is
hereby amended by adding a new section at the end thereof as
follows:
"6.14. Reserve Account. No later than the date of the First
Amendment, Borrower shall establish a general account (the
"Reserve Account") with the Bank of America into which Borrower
shall initially deposit the sum of $166,000, and shall
thereafter deposit, on the first Business Day of each month, the
sum of $83,000. Funds in the Reserve Account shall be used by
Borrower solely for the purposes of (i) making required deposits
under Escrow Agreements entered into by the Borrower after the
date of the First Amendment, (ii) paying refunds to subscribers
to any of the Systems (other than any subscribers covered by an
Escrow Agreement) with respect to a la carte services and tier
services and/or other rates or charges, (iii) making payments to
a municipal or county authority that has issued a Franchise to
Borrower in connection with any regulatory proceedings or any
disputes with such a Franchise authority concerning matters
related to the re-regulation of the cable industry generally by
the FCC, and (iv) subject to the inclusion of such funds in
Borrower's calculation of its cash balances pursuant to Section
6.1(d)(iv) and to Borrower's obligations to make payments to the
Agent under Section 2.9(d) in the event that such cash balances
exceed $5,000,000, Borrower may withdraw funds from the Reserve
Account at any time and use such funds for such purposes as
Borrower deems appropriate. Funds in the Reserve Account shall
not be included by Borrower in calculating the amount of
Borrower's cash balances for the purposes of Section 2.9(d) of
this Agreement; provided that at such time as Borrower obtains a
determination from the FCC that Borrower is either not liable to
some or all of such subscribers for such refunds or is liable to
any such subscribers in an aggregate amount which is less than
the aggregate amount held in the Reserve Account with respect to
such subscribers, Borrower shall include such funds in the
Reserve Account which are no longer required to pay refunds to
such subscribers in Borrower's next calculation of its cash
balances pursuant to Section 6.1(d)(iv) and, to the extent that
such cash balances exceed $5,000,000, Borrower shall make the
payments required pursuant to Section 2.9(d) of this Agreement.
Within 30 days after the end of each month, Borrower shall
deliver to Agent a statement as to the date and amount of all
deposits into and withdrawals from the Reserve Account during
the month for which the statement is being delivered and
describing in reasonable detail the disposition of the funds so
withdrawn."
1.5 Amendments to Article 7: Borrower's Negative Covenants
A. Restricted Junior Payments. Section 7.5 of the Credit
Agreement is hereby amended by inserting a period after the
phrase "the Borrower" in the fifth line of Section 7.5(a) and by
deleting the remaining text of Section 7.5 following such period.
B. Financial Covenants.
(i) Section 7.6(a) of the Credit Agreement is hereby
amended by inserting the following at the end thereof:
"provided however, that until the earlier to occur of any
Century Sale Termination or December 29, 1995, the ratios set
forth in the above table for the third and fourth fiscal quarters
in 1994 shall be 5.45 and 5.75, respectively, and for the first,
second and third fiscal quarters in 1995 shall be 6.65, 6.25 and
5.85, respectively. Effective on the last day of the first
fiscal quarter ending on or after the date of the Century Sale
Termination or December 29, 1995, whichever shall first occur,
the ratios for such last day of such fiscal quarter and all
succeeding fiscal quarters shall be as set forth in the above
table without giving effect to this proviso."
(ii) Section 7.6(b) of the Credit Agreement is hereby
amended by inserting the following at the end thereof:
"provided however, that until the earlier to occur of any
Century Sale Termination or December 29, 1995, the ratios set
forth in the above table for the fourth fiscal quarter in 1994
shall be 1.11, and for the first, second and third fiscal
quarters in 1995 shall be .95, .99 and 1.06, respectively.
Effective on the last day of the first fiscal quarter ending on
or after the date of the Century Sale Termination or December 29,
1995, whichever shall first occur, the ratios for such last day
of such fiscal quarter and for all succeeding fiscal quarters
shall be as set forth in the above table without giving effect to
this proviso."
(iii) Section 7.6(c) of the Credit Agreement is hereby
amended by inserting the following at the end thereof:
"provided however, that until the earlier to occur of any
Century Sale Termination or December 29, 1995, the ratios set
forth in the above table for the first, second and third fiscal
quarters in 1995 shall be .85, .93 and 1.00, respectively.
Effective on the last day of the first fiscal quarter ending on
or after the date of the Century Sale Termination or December 29,
1995, whichever shall first occur, the ratios for such last day
of such fiscal quarter and for all succeeding fiscal quarters
shall be as set forth in the above table without giving effect to
this proviso."
C. Restrictions on Payments from California Media Assets.
Section 7.11 of the Credit Agreement is hereby amended by
deleting the phrase "under the Cost Allocation Agreement" each
place it appears in Section 7.11; by inserting the phrase
", commencing January 1, 1994, plus an additional $1,000,000"
immediately after the word "and" and prior to clause (d) of such
Section 7.11; and by deleting the phrase "allocable to the
Borrower" and by inserting in lieu thereof the phrase "payable by
the Borrower".
D. Management Fee. Section 7.12 of the Credit Agreement is
hereby amended by deleting it in its entirety and by inserting in
lieu thereof the following:
"7.12. Management Fee. The Borrower will not, and will
not permit any of its Subsidiaries to, directly or
indirectly, pay or commit to pay any management fees to the
General Partner or any of its Affiliates during any fiscal
year so long as Obligations are outstanding under this
Agreement; provided that the foregoing prohibition shall not
prohibit the Borrower from accruing Management Fees not in
excess of those provided for in the Limited Partnership
Agreement, as in effect on the date hereof and without regard
to any amendment or modification of such terms. All
liabilities of the Borrower and its Subsidiaries for the
payment of, and any payment of, Management Fees shall be
unsecured and shall be subordinated as provided for in the
Subordination Agreement."
E. FCC Licenses; Franchises and Materials Contracts.
Section 7.13 of the Credit Agreement is hereby amended by
deleting the reference to "The Borrower" at the beginning thereof
and by inserting in lieu thereof the phrase "Other than as may be
required in connection with the Century Sale pursuant to the
terms and conditions of the Century Sale Agreement, the
Borrower".
F. Amendment of Certain Agreements. Section 7.14 of the
Credit Agreement is hereby amended by deleting the caption in its
entirety and by inserting in lieu thereof "Amendment of Certain
Agreements" and by adding the following at the end thereof:
"The Borrower will, promptly upon execution thereof,
deliver copies to the Agent of all amendments, modifications
or waivers of any provision of the Century Sale Agreement and
the Escrow Agreements and will promptly deliver to Agent
copies of all other notices or agreements relating to the
Century Sale Agreement and the Escrow Agreements. The
Borrower will not amend, modify or waive any provision of or
terminate any Escrow Agreement without the prior written
consent of Requisite Banks if such amendment, modification,
waiver or termination would adversely affect any payment or
distribution to be made to the Borrower or to the Agent for
the ratable account of Banks under any such Escrow Agreement.
With respect to each Escrow Agreement in effect on the date
of the First Amendment, Borrower shall have no later than the
date of the First Amendment, delivered irrevocable
instructions to each such escrow agent or other depositary to
make all distributions or payments to be made to Borrower
directly to such of Borrower's accounts with Agent as shall
be designated by Agent. Borrower shall comply with the
provisions of the foregoing sentence with respect to each
Escrow Agreement to be entered into by Borrower after the
date of the First Amendment prior to entering into any such
Escrow Agreement, and Borrower shall deliver copies of each
such Escrow Agreement to Agent upon execution thereof."
1.6 Amendments to Article 10: Miscellaneous
A. Amendments, Waivers, Release of Collateral. Section 10.6
of the Credit Agreement is hereby amended by deleting the
reference to "Section 2.9(a)" contained therein and by inserting
in lieu thereof a reference to "Section 2.9".
B. Assignments and Participations. Section 10.8 of the
Credit Agreement is hereby amended by adding the following
immediately after the phrase "Section 3.5" referenced therein:
"; provided further that no minimum amount of
Loans and Commitments shall be required to be
assigned to any Assignee which, at the time of
such assignment, is already a Bank or an Affiliate
of such a Bank under this Agreement;"
2. LIMITED WAIVER
A. Subject to the terms and conditions set forth herein and
in reliance on the representations and warranties of Borrower
herein contained, Banks hereby waive (i) compliance with the
provisions of Section 6.9 of the Credit Agreement through and
including December 29, 1995; and (ii) provided that the First
Amendment Effective Date occurs on or prior to February 24, 1995,
receipt of interest at the increased rate provided for pursuant
to Section 2.7(d) with respect to the Event of Default existing
under Section 7.6(a) of the Credit Agreement and with respect to
any Event of Default existing prior to the First Amendment
Effective Date under Section 6.9 or Section 7.11 of the Credit
Agreement.
B. Without limiting the generality of the provisions of
Section 10.6 of the Credit Agreement, the waiver set forth above
shall be limited precisely as written and relates solely to the
noncompliance by Borrower with the provisions of Section 6.9 and
Section 2.7(d) of the Credit Agreement in the manner and to the
extent described above, and nothing in this Amendment shall be
deemed to:
(i) constitute a waiver of compliance by Borrower with
respect to (i) Section 6.9 and Section 2.7(d) of the Credit
Agreement in any other instance or (ii) any other term,
provision or condition of the Credit Agreement or any other
instrument or agreement referred to therein; or
(ii) prejudice any right or remedy that Agent or any
Bank may now have or may have in the future under or in
connection with the Credit Agreement or any other instrument
or agreement referred to therein.
C. Except as expressly set forth in this Amendment, the
terms, provisions and conditions of the Credit Agreement and the
other Loan Documents shall remain in full force and effect and in
all other respects are hereby ratified and confirmed. This
Amendment, and any delay or failure by Agent or Banks to exercise
any of their rights and remedies in connection with this
Amendment or otherwise, shall not impair any power, right or
privilege granted to Agent or Banks in the Credit Agreement or
any other Loan Document or by law available to them upon the
occurrence and during the continuation of any Event of Default
under the Credit Agreement or any other Loan Document.
1. CONDITIONS TO EFFECTIVENESS
Section 1 of this Amendment shall become effective only upon
the satisfaction of all of the following conditions precedent
(the date of satisfaction of such conditions being referred to
herein as the "First Amendment Effective Date"):
A. On or before the First Amendment Effective Date, the
Borrower shall deliver to the Agent with sufficient originally
executed copies, where appropriate, for each Bank the following,
each, unless otherwise noted, dated the First Amendment Effective
Date:
1. Certified copies of the Certificate of Limited
Partnership of the Borrower from the Secretary of State of
the State of Delaware, dated a recent date prior to the
First Amendment Effective Date;
2. Good Standing Certificate (or equivalent) for the
Borrower from the State of Delaware, dated a recent date
prior to the First Amendment Effective Date;
3. Certificate of Status of Foreign Limited
Partnership for the Borrower from the State of California,
dated a recent date prior to the First Amendment Effective
Date;
4. Good Standing Certificate (or equivalent) for the
Borrower from the State of New York, dated a recent date
prior to the First Amendment Effective Date;
5. Resolutions of the Board of Directors of IMP Media
Management, Inc., approving and authorizing the execution,
delivery and performance of this Amendment, certified as of
the First Amendment Effective Date by its corporate
secretary or an assistant secretary;
6. Resolutions of the Board of Directors of IMP Media
Management, Inc. designating and authorizing a specific
officer or officers of IMP Media Management, Inc. to give
and receive notices, including without limitation, Notices
of Borrowing and Notices of Conversion/Continuation, on
behalf of the Borrower to the Agent and the Banks under the
Credit Agreement;
7. Signature and incumbency certificates of the
officers of the Partner executing this Amendment;
8. An originally executed favorable written opinion of
Proskauer Rose Goetz & Mendelsohn, counsel for the Borrower,
as to Borrower's due authorization, execution and delivery
of this Amendment and that this Amendment, and the
Agreement, as amended by this Amendment, constitute the
legally valid and binding obligations of Borrower,
enforceable against Borrower in accordance with their
respective terms; and
9. Executed copies of this Amendment, executed and
delivered by Borrower and Credit Support Party.
B. Agent shall have received executed copies of this
Amendment, executed and delivered by Banks.
C. The Borrower shall have paid to the Agent for the ratable
account of the Banks, on the First Amendment Effective Date, an
amendment fee equal to .25% of the outstanding principal amount
of the Loans on the First Amendment Effective Date.
D. The Borrower shall have established the Reserve Account
in accordance with Section 6.14 of the Credit Agreement.
E. Agent shall have received executed or conformed true,
correct and complete copies of the Century Sale Agreement and the
Escrow Agreements, including any amendments, modifications,
waivers, exhibits or schedules thereto, as in effect on the First
Amendment Effective Date; the Century Sale Agreement and each
such Escrow Agreement shall be in full force and effect, without
amendment, waiver or modification of any provision thereof except
as disclosed in writing to the Agent and the Banks; each party
thereto shall not have failed to comply in any material respect
with any provision thereof to be complied with by such party; and
Agent shall have received a Certificate of a Responsible Officer
of the Borrower to the foregoing effect.
F. On or before the First Amendment Effective Date, all
partnership, corporate and other proceedings taken or to be taken
in connection with the transactions contemplated hereby and all
documents incidental thereto not previously found acceptable by
Agent, acting on behalf of Banks, and its counsel shall be
satisfactory in form and substance to Agent and such counsel, and
Agent and such counsel shall have received all such counterpart
originals or certified copies of such documents as Agent may
reasonably request.
1. BORROWER'S REPRESENTATIONS AND WARRANTIES
In order to induce Banks to enter into this Amendment and to
amend the Credit Agreement in the manner provided herein,
Borrower represents and warrants to each Bank that the following
statements are true, correct and complete:
A. Partnership Power and Authority. Borrower has all
requisite partnership power and authority to enter into this
Amendment and to carry out the transactions contemplated by, and
perform its obligations under, this Amendment and the Credit
Agreement as amended by this Amendment (the "Amended Agreement").
B. Authorization of Agreements. The execution and delivery
of this Amendment and the performance of this Amendment and the
Amended Agreement have been duly authorized by all necessary
partnership action on the part of Borrower. The General Partner,
and IMP Media Management, Inc. on behalf of the General Partner,
has the power and authority and the legal right to make, deliver
and perform on behalf of the Borrower, and thereby legally bind
the Borrower to perform, this Amendment and the Amended Agreement
and each of the General Partner, and IMP Media Management, Inc.
on behalf of the General Partner, has taken all necessary
partnership action to authorize the execution and delivery on
behalf of the Borrower of, and thereby legally bind the Borrower
to perform, this Amendment and the Amended Agreement.
C. No Conflict. The execution and delivery by Borrower of
this Amendment and the performance by Borrower of this Amendment
and the Amended Agreement do not and will not (i) violate any
provision of any law or any governmental rule or regulation
applicable to Borrower, the Limited Partnership Agreement of
Borrower or any order, judgment or decree of any court or other
agency of government binding on Borrower, (ii) conflict with,
result in a breach of or constitute (with due notice or lapse of
time or both) a default under any Contractual Obligation of
Borrower or the General Partner, (iii) result in or require the
creation or imposition of any Lien upon any of the properties or
assets of Borrower or the General Partner (other than any Liens
created under any of the Loan Documents in favor of Agent on
behalf of Banks), or (iv) require any approval of any partners or
stockholders or any approval or consent of any Person under any
Contractual Obligation of Borrower or the General Partner, except
for such approvals or consents which have been obtained on or
before the First Amendment Effective Date and disclosed in
writing to Agent and the Banks.
D. Governmental Consents. The execution and delivery by
Borrower of this Amendment and the performance by Borrower of
this Amendment and the Amended Agreement do not and will not
require any registration with, consent or approval of, or notice
to, or other action to, with or by, any federal, state or other
governmental authority or regulatory body.
E. Binding Obligation. This Amendment and the Amended
Agreement have been duly executed and delivered by Borrower and
are the legally valid and binding obligations of Borrower,
enforceable against Borrower in accordance with their respective
terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or
limiting creditors' rights generally or by equitable principles
relating to enforceability.
F. Incorporation of Representations and Warranties From
Credit Agreement. The representations and warranties contained
in Article 5 of the Credit Agreement are and will be true,
correct and complete in all material respects on and as of the
First Amendment Effective Date to the same extent as though made
on and as of that date, except to the extent such representations
and warranties specifically relate to an earlier date, in which
case they were true, correct and complete in all material
respects on and as of such earlier date and except for Material
Adverse Changes resulting from FCC regulations applicable to the
cable industry in general.
G. Absence of Default. After giving effect to this
Amendment, no event has occurred and is continuing or will result
from the consummation of the transactions contemplated by this
Amendment that would constitute an Event of Default or a Default.
1. ACKNOWLEDGEMENT AND CONSENT
Management is a party to the Assignment Agreement pursuant to
which Management has created Liens in favor of Agent on certain
collateral to secure the obligations of Management under the
Assignment Agreement and Borrower under the Loan Documents.
Management is referred to herein as the "Credit Support Party",
and the Assignment Agreement is referred to herein as the "Credit
Support Document".
The Credit Support Party hereby acknowledges that it has
reviewed the terms and provisions of the Credit Agreement and
this Amendment and consents to the amendment of the Credit
Agreement effected pursuant to this Amendment. The Credit
Support Party hereby confirms that the Credit Support Document to
which it is a party or otherwise bound and all collateral
encumbered thereby will continue to secure to the fullest extent
possible the payment and performance of all Obligations (as such
term is defined in the Credit Support Document), including
without limitation the payment and performance of all Obligations
of Borrower now or hereafter existing under or in respect of the
Amended Agreement and the Notes defined therein.
The Credit Support Party acknowledges and agrees that the
Credit Support Document to which it is a party or otherwise bound
shall continue in full force and effect and that all of its
obligations thereunder shall be valid and enforceable and shall
not be impaired or limited by the execution or effectiveness of
this Amendment. The Credit Support Party represents and warrants
that all representations and warranties contained in the Amended
Agreement and the Credit Support Document to which it is a party
or otherwise bound are true, correct and complete in all material
respects on and as of the First Amendment Effective Date to the
same extent as though made on and as of that date, except to the
extent such representations and warranties specifically relate to
an earlier date, in which case they were true, correct and
complete in all material respects on and as of such earlier date.
The Credit Support Party acknowledges and agrees that
(i) notwithstanding the conditions to effectiveness set forth in
this Amendment, such Credit Support Party is not required by the
terms of the Credit Agreement or any other Loan Document to
consent to the amendments to the Credit Agreement effected
pursuant to this Amendment and (ii) nothing in the Credit
Agreement, this Amendment or any other Loan Document shall be
deemed to require the consent of such Credit Support Party to any
future amendments to the Credit Agreement.
1. MISCELLANEOUS
A. Reference to and Effect on the Credit Agreement and the
Other Loan Documents.
(i) On and after the First Amendment Effective Date,
each reference in the Credit Agreement to "this Agreement",
"hereunder", "hereof", "herein" 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 Amended
Agreement.
(ii) Except as specifically amended by this Amendment,
the Credit Agreement and the other Loan Documents shall
remain in full force and effect and are hereby ratified and
confirmed.
(iii) The execution, delivery and performance of this
Amendment shall not, except as expressly provided herein,
constitute a waiver of any provision of, or operate as a
waiver of any right, power or remedy of Agent or any Bank
under, the Credit Agreement or any of the other Loan
Documents.
B. Fees and Expenses. Borrower acknowledges that all costs,
fees and expenses as described in Section 10.3 of the Credit
Agreement incurred by Agent and its counsel with respect to this
Amendment and the documents and transactions contemplated hereby
shall be for the account of Borrower and shall be payable by the
Borrower within 30 days of presentation of a statement or invoice
therefor.
C. Headings. Section and subsection headings in this
Amendment are included herein for convenience of reference only
and shall not constitute a part of this Amendment for any other
purpose or be given any substantive effect.
D. Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL
LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF
LAWS PRINCIPLES.
E. 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 an original, but all such counterparts
together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all
signature pages are physically attached to the same document.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective
officers thereunto duly authorized as of the date first written
above.
ML MEDIA PARTNERS, L.P.
By: Media Management Partners,
as General Partner
By: RP Media Management
By: IMP Media Management, Inc.
By: _________________________
Title:_________________________
MEDIA MANAGEMENT PARTNERS (for
purposes of Section 4 only), as a
Credit Support Party
By: RP Media Management
By: IMP Media Management, Inc.
By: _________________________
Title:_________________________
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By: __________________________
David Price, Vice President
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Bank
By: _____________________________
GiGi Johnson, Vice President
BANK OF HAWAII
By: ____________________
Title: ____________________
NATIONAL BANK OF CANADA
By: ____________________
Title: ____________________
NATWEST BANK N.A. (formerly National
Westminster Bank USA)
By: ____________________
Title: ____________________
THE BANK OF NOVA SCOTIA
By: ____________________
Title: ____________________
CIBC INC.
By: ____________________
Title: ____________________
SHAWMUT BANK CONNECTICUT, N.A.
By: ____________________
Title: ____________________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial
information extracted from the year end 1994 Form 10K
Consolidated Balance Sheets and Consolidated Statements of
Operations as of December 30, 1994, and is qualified in its
entirety by reference to such financial statements.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-30-1994
<PERIOD-END> DEC-30-1994
<CASH> 26,682
<SECURITIES> 6,000
<RECEIVABLES> 12,561
<ALLOWANCES> 809
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 205,609
<DEPRECIATION> 120,556
<TOTAL-ASSETS> 238,330
<CURRENT-LIABILITIES> 0
<BONDS> 218,171
<COMMON> 0
0
0
<OTHER-SE> (16,259)
<TOTAL-LIABILITY-AND-EQUITY> 238,330
<SALES> 0
<TOTAL-REVENUES> 106,225
<CGS> 0
<TOTAL-COSTS> 38,765
<OTHER-EXPENSES> 31,957
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,047
<INCOME-PRETAX> (1,451)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,451)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,451)
<EPS-PRIMARY> (7.64)
<EPS-DILUTED> 0
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