SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
June 28, 1996
0-14871
(Commission File Number)
ML MEDIA PARTNERS, L.P.
(Exact name of registrant as specified in its governing
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) 236-6575
N/A
Former name, former address and former fiscal year if changed
since last report
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 .
<PAGE>
ML MEDIA PARTNERS, L.P.
PART I - FINANCIAL INFORMATION.
Item 1. Financial Statements.
TABLE OF CONTENTS
Consolidated Balance Sheets as of June 28, 1996
(Unaudited) and December 29, 1995 (Unaudited)
Consolidated Statements of Operations for the Thirteen and
Twenty-Six Week Periods Ended June 28, 1996 (Unaudited)
and June 30, 1995 (Unaudited)
Consolidated Statements of Cash Flows for the Twenty-Six
Week Periods Ended June 28, 1996 (Unaudited) and June 30,
1995 (Unaudited)
Notes to the Consolidated Financial Statements for the
Twenty-Six Week Period Ended June 28, 1996 (Unaudited)
<PAGE>
ML MEDIA PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 28, 1996 (UNAUDITED) AND DECEMBER 29, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
June 28, December 29,
1996 1995
<S> <C> <C>
ASSETS:
Cash and cash equivalents $203,151,094 $ 41,124,366
Investment held by escrow
agent 5,000,000 -
Accounts receivable (net of
allowance for doubtful
accounts of $668,440 and
$856,484, respectively) 8,416,605 12,215,484
Prepaid expenses and deferred
charges (net of
accumulated amortization of
$5,913,939 and $7,352,383,
respectively) 1,022,707 2,842,996
Property, plant and
equipment(net of accumulated
depreciation of $46,609,535
and $117,750,459,
respectively)
22,188,314 72,989,071
Intangible assets (net of
accumulated amortization of
$52,611,391 and
$121,657,283, respectively)
35,322,610 79,636,581
Other assets 1,200,578 1,389,998
TOTAL ASSETS $276,301,908 $210,198,496
</TABLE>
(Continued on the following page.)
<PAGE>
ML MEDIA PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 28, 1996 (UNAUDITED) AND DECEMBER 29, 1995 (UNAUDITED)
(continued)
<TABLE>
<CAPTION>
June 28, December 29,
1996 1995
<S> <C> <C>
LIABILITIES AND PARTNERS'
CAPITAL/(DEFICIT):
Liabilities:
Borrowings $ 62,148,428 $ 182,821,928
Accounts payable and
accrued liabilities 29,103,565 27,630,778
Subscriber advance payments 1,588,702 2,109,929
Total Liabilities 92,840,695 212,562,635
Commitments and Contingencies
Partners' Capital/(Deficit):
General Partner:
Capital contributions, net of
offering expenses 1,708,299 1,708,299
Cumulative income/(loss) 265,187 (1,593,066)
Cash distribution (75,957) (75,957)
1,897,529 39,276
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)
Cash distribution (7,519,760) (7,519,760)
Cumulative income/(loss) 26,253,753 (157,713,346)
181,563,684 (2,403,415)
Total Partners'
Capital/(Deficit) 183,461,213 (2,364,139)
TOTAL LIABILITIES AND
PARTNERS' CAPITAL/(DEFICIT)
$276,301,908 $ 210,198,496
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited).
<PAGE>
ML MEDIA PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THIRTEEN AND TWENTY-SIX WEEK PERIODS ENDED JUNE 28, 1996
(UNAUDITED) AND JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION> Thirteen Weeks Twenty-Six Weeks
June 28, 1996 June 30, 1995 June 28, 1996 June 30, 1995
<S> <C> <C> <C> <C>
REVENUES:
Operating
revenues $ 21,929,891 $ 28,356,548 $ 47,231,912 $ 54,630,490
Interest 694,918 70,139 745,765 139,145
Gain on sale
of California
Cable Systems 186,020,511 - 186,020,511 -
Total revenues 208,645,320 28,426,687 233,998,188 54,769,635
COSTS AND
EXPENSES:
Property
operating 7,807,215 10,339,709 16,606,967 20,330,900
General and
adminis-
trative 4,761,546 5,509,395 9,649,666 11,025,226
Depreciation
and amorti-
zation 5,904,527 7,451,539 13,674,184 14,917,962
Interest
expense 3,255,178 4,906,252 7,510,820 9,680,007
Management
fees 353,341 397,958 731,199 795,916
Total costs
and expenses 22,081,807 28,604,853 48,172,836 56,750,011
NET
INCOME/(LOSS) $186,563,513 $ (178,166) $185,825,352 $ (1,980,376)
PER UNIT OF LIMITED PARTNERSHIP INTEREST:
NET
INCOME/(LOSS) $ 982.47 $ (0.94) $ 978.58 $ (10.43)
Number of
Units 187,994 187,994 187,994 187,994
See Notes to Consolidated Financial Statements (Unaudited).
</TABLE>
<PAGE>
ML MEDIA PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWENTY-SIX WEEK PERIODS ENDED JUNE 28, 1996 (UNAUDITED) AND
JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
June 28, June 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income/(loss) $185,825,352 $ (1,980,376)
Adjustments to reconcile net
income/(loss) to net cash provided
by operating activities:
Depreciation and amortization 13,674,184 14,917,962
Bad debt expense 138,200 291,383
Gain on sale of California Cable
Systems (186,020,511) -
Changes in operating assets and
liabilities:
Decrease/(Increase):
Accounts Receivable 2,962,546 1,282,810
Short-term investments held by agent (5,000,000) 6,000,000
Prepaid expenses and deferred 500,018 (165,989)
charges
Other assets (26,177) (2,890,059)
(Decrease)/Increase:
Accounts payable and accrued
liabilities (1,935,017) (3,506,091)
Subscriber advance payments (58,726) 182,697
Net cash provided by operating
activities 10,059,869 14,132,337
</TABLE>
(Continued on the following page.)
<PAGE>
ML MEDIA PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWENTY-SIX WEEK PERIODS ENDED JUNE 28, 1996 (UNAUDITED)
AND JUNE 30, 1995 (UNAUDITED)
(continued)
<TABLE>
<CAPTION>
June 28, June 30,
1996 1995
<S> <C> <C>
Cash flows from investing activities:
Proceeds from sale of California
Cable Systems 286,000,000 -
Payment of costs incurred related to
sale of California Cable Systems (8,196,272) -
Purchase of property, plant and
equipment (5,153,369) (4,991,850)
Additions to intangible assets (10,000) (373,431)
Net cash provided by/(used in)
investing activities 272,640,359 (5,365,281)
Cash flows from financing activities:
Principal payments on borrowings (120,673,500) (6,290,039)
Net cash used in financing activities (120,673,500) (6,290,039)
Net increase in cash and cash
equivalents 162,026,728 2,477,017
Cash and cash equivalents at
beginning of year 41,124,366 26,682,289
Cash and cash equivalents at end of
period $ 203,151,094 $ 29,159,306
Interest paid $ 7,781,487 $ 11,771,859
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited).
ML MEDIA PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWENTY-SIX WEEK PERIOD ENDED JUNE 28, 1996 (UNAUDITED)
1. Basis of Presentation
The unaudited consolidated financial statements included herein
reflect all normal recurring adjustments which are, in the
opinion of the General Partner, necessary for a fair presentation
of the financial position of the Partnership as of June 28, 1996
and the results of operations and cash flows of the Partnership
for the interim periods presented. The results of operations for
the twenty-six week period ended June 28, 1996 are not
necessarily indicative of the results of operations that may be
expected for the entire year. Certain information and note
disclosures normally included in the financial statements
provided herein and prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to the rules of the Securities and Exchange Commission
("Commission"). These unaudited consolidated financial
statements should be read in conjunction with the audited
consolidated financial statements and notes thereto, included in
the Partnership's 1995 Annual Report on Form 10-K filed with the
Commission on March 28, 1996.
2. Statement of Financial Accounting Standards No. 121
Effective January 1, 1996, the Partnership adopted Statement of
Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of" ("SFAS 121"). There was no material effect from the
adoption of SFAS 121 on the Partnership's financial position and
results of operations.
3. California Cable and WINCOM-WEBE-WICC
The information set forth in the Liquidity and Capital Resources
section of Item 2; Management's Discussion and Analysis of
Financial Condition and Results of Operations under the headings
California Cable and WINCOM-WEBE-WICC is hereby incorporated
herein by reference and made a part hereof.
4. Contingencies
On May 1, 1996, a purported class action lawsuit was filed
against the Partnership on behalf of subscribers of the
California Cable Systems serving Anaheim, Villa Park and adjacent
areas of unincorporated Orange County, California. This
purported class action lawsuit alleges that excessive late fee
payments have been charged to such subscribers since April, 1992
and seeks refunds of late fee payments to subscribers, and
related interest, damages and legal costs. The Partnership is
presently unable to estimate its potential liability, if any,
related to this purported class action or whether any additional
members may be added to the purported class action.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Liquidity and Capital Resources.
As of June 28, 1996, Registrant had $203,151,094 in cash and cash
equivalents, of which $37,191,539 was limited for use at the
operating level. From the net proceeds from the sale of
California Cable Systems (see below), on August 15, 1996
Registrant made an initial cash distribution to Limited Partners
of record on May 31, 1996, of $575 per $1,000 limited partnership
unit totaling $108,096,550. In addition, $1,109,884 was remitted
to the General Partner representing its 1% share. Registrant
will use approximately $9.2 million of these proceeds to pay
deferred management fees and expenses owed to the General
Partner, and has reserved approximately $40.7 million to fund
both actual and contingent liabilities of the Systems.
On May 31, 1996, Registrant completed the previously reported
sale of substantially all of the assets used in the operations of
Registrant's California Cable Systems ("Systems" or "California
Cable") to Century Communications Corp. ("Century") (see below).
As of June 28, 1996, Registrant's investments in media properties
consisted of a 50% interest in Century-ML Cable Venture, which
owns an FM (WFID-FM) and AM (WUNO-AM) radio station combination
and a background music service in San Juan, Puerto Rico, and
Century-ML Cable Corporation, which operates two cable television
systems in Puerto Rico; an FM (WEBE-FM) and AM (WICC-AM) radio
station combination in Bridgeport, Connecticut; an FM (KEZY-FM)
and AM (KORG-AM) radio station combination in Anaheim,
California, and Wincom Broadcasting Corporation ("Wincom"), a
corporation that owns an FM radio station (WQAL-FM) in Cleveland,
Ohio.
California Cable
On May 31, 1996, Registrant consummated the sale to Century of
substantially all of the assets used in the operations of the
Systems serving the Anaheim, Hermosa Beach/Manhattan Beach,
Rohnert Park/Yountville and Fairfield communities, pursuant to
the Asset Purchase Agreement (the "Asset Purchase Agreement")
dated November 28, 1994, as amended, between Registrant and
Century.
The base purchase price for the Systems was $286 million, subject
to certain adjustments, including a working capital adjustment,
as provided in the Asset Purchase Agreement.
At the closing, Registrant and Century entered into a letter
agreement (the "Letter Agreement") with respect to certain
matters. Pursuant to the Asset Purchase Agreement and the Letter
Agreement, Registrant deposited $5 million into an indemnity
escrow account, which is being classified on the accompanying
Consolidated Balance Sheet as Investment held by escrow agent,
and agreed to hold cash reserves of approximately $5.1 million
pending the resolution of certain rate regulation and other
matters relating to charges by Registrant to its subscribers for
cable service.
From the purchase price for the Systems, approximately $119.1
million was paid to Bank of America, as agent, to repay in full
all outstanding indebtedness under the Amended and Restated
Credit Agreement dated as of May 15, 1990, as amended, between
Registrant and the banks party thereto and to pay the brokerage
fee of approximately $3 million. Registrant intends to hold
approximately $40.7 million, including the $5.1 million discussed
above, in reserve to cover both operating liabilities and
litigation contingencies relating to the Systems' operations
prior to their sale, as well as a potential significant purchase
price adjustment. In addition, Registrant will remit deferred
management fees and expenses owed to the General Partner of
approximately $9.2 million.
In accordance with the Partnership Agreement, any future
distributions which may be available from any unused reserves
will be made to partners of record as of the date when the amount
of such subsequent distributions is determined and approved,
rather than to the partners of record on May 31, 1996, the date
of the sale.
WINCOM-WEBE-WICC
Registrant was in compliance with all terms of its Wincom-WEBE-
WICC Loan and Restructuring Agreement as of June 28, 1996.
Impact of Cable Legislation and Regulation
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
Under the 1992 Cable Act, cable systems' rates for service and
related subscriber equipment are subject to regulation by the FCC
and local franchising authorities. However, only the rates of
cable systems that are not subject to "effective competition" may
be regulated. A cable system is subject to effective competition
if one of the following conditions is met: (1) fewer than 30% of
the households in the franchise area subscribe to the system; (2)
at least 50% of the households in the franchise area are served
by two multichannel video programming distributors ("MVPD") and
at least 15% of the households in the franchise area subscribe to
any MVPD other than the dominant cable system; or (3) a
franchising authority for that franchise area itself serves as an
MVPD offering service to at least 50% of the households in the
franchise area. The Telecommunication Act of 1996 (the "1996
Act") adds a fourth condition: the mere offering by a local
exchange carrier ("LEC"), or an entity using the LEC's
facilities, of video programming services (including 12 or more
channels of programming, at least some of which are television
broadcasting signals) directly to subscribers by any means (other
than direct-to-home satellite services) in the franchise area of
an unaffiliated cable operator. The FCC has solicited comment on
whether this condition also should include a percentage pass or
penetration rate. Under these regulations, the Partnership's
systems, like most cable systems in most areas, are not currently
subject to effective competition. Consequently, the rates
charged by the Partnership's systems are subject to rate
regulation under certain circumstances.
Under the 1992 Cable Act, a local franchising authority may
certify with the FCC to regulate the Basic Service Tier ("BST")
and associated subscriber equipment of a cable system within its
jurisdiction. By law, the BST must include all broadcast signals
(with the exception of national "superstations"), including those
required to be carried under the mandatory carriage provisions of
the 1992 Cable Act, as well as public, educational, and
governmental ("PEG") access channels required by the franchise.
The FCC has jurisdiction over the Cable Programming Service Tier
("CPST"), which generally includes programming other than that
carried on the BST or offered on a per-channel or per-program
basis. The 1996 Act, however, confines rate regulation to the
BST after three years: on March 31, 1999, the CPST will be
exempted from regulation. The 1996 Act also modifies the rules
governing complaints for rate increases on the CPST by replacing
the current procedure. The current procedure, mandated by the
1992 Cable Act, allows subscribers to file complaints directly
with the FCC. Under the new procedure, only a local franchising
authority may file an FCC complaint, and then only if the
franchising authority receives more than one subscriber complaint
within 90 days of the effective date of a rate increase. The FCC
must issue a final order within 90 days after receiving a
franchising authority's complaint.
Effective September 1, 1993, regulated cable systems were
required to use the FCC-prescribed "benchmark" approach to set
initial rates for BSTs and CPSTs. Cable systems whose rates
exceeded the applicable benchmark were required to reduce their
rates either to the benchmark or by 10%, whichever reduction was
less. The Commission subsequently modified its rules, however,
to establish a second round of benchmark rate rollbacks, which
became effective May 15, 1994. Under this more stringent regime,
each cable system whose BST or CPST is subject to regulation is
required to select from among the following methodologies to set
a permitted rate: (1) a full reduction rate; (2) a transition
rate; (3) a rate based on a streamlined rate reduction; or (4) a
cost-of-service showing. The full reduction rate is a system's
September 30, 1992 rate, measured on an average regulated revenue
per subscriber basis, reduced by 17%. Under the transition rate
approach, low-price cable systems (as determined under the FCC's
revised benchmark formula) and systems owned by small operators
(operators with a total subscriber base of 15,000 or less and not
affiliated with or controlled by another operator) are not
initially required to reduce rates to the full reduction rate
level, but instead are permitted to cap their rates at March 31,
1994 levels, subject to possible further reduction based on cost
studies. The streamlined rate reduction approach allows a cable
system to reduce each billed item of regulated cable service as
of March 31, 1994 by 14%, rather than completing various FCC rate
regulation forms and establishing cost-based equipment and
installation charges. This approach is available only to cable
systems of 15,000 or fewer subscribers that are owned by a cable
company serving a total of 400,000 or fewer subscribers over all
of its systems. While the U.S. Court of Appeals for the D.C.
Circuit has upheld these regulations, the regulations may be
subject to further judicial review, and may be altered by ongoing
FCC rulemakings and case-by-case adjudications.
The cost-of-service approach allows a cable system to recover
through regulated rates its normal operating expenses and a
reasonable return on investment. Prior to May 15, 1994, the
effective date of FCC "interim" cost-of-service rules, the
Commission permitted cable systems to use general cost-of-service
principles, such as those historically used to set rates for
public utilities. Beginning May 15, 1994, the FCC's interim
rules took effect, which, among other things, established an
industry-wide rate of return of 11.25% and presumptively excluded
from a cable system's rate base acquisition costs above book
value (while allowing certain intangible, above-book costs, such
as start-up losses incurred during a two-year start-up period)
and the costs of obtaining franchise rights. The FCC recently
adopted final cost-of-service rules, which modify the interim
rules, in relevant part, by: (1) retaining the 11.25% rate of
return, but proposing, in a further notice of proposed
rulemaking, to use a system's actual debt cost and capital
structure to determine its final rate of return; (2) establishing
a rebuttable presumption that 34% of the purchase price of cable
systems purchased prior to May 15, 1994 (and not just the portion
of the price allocable to intangibles) must be excluded from rate
base; and (3) replacing the presumption of a two-year period for
accumulated start-up losses with a case-by-case determination of
the appropriate period. Additionally, the 1996 Act restricts the
FCC from disallowing certain operator losses for cost-of-service
filings. 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
systems may not file a new cost-of-service showing to justify new
rates for a period of two years. An appeal of the interim rules
brought before the U.S. Court of Appeals for the D.C. Circuit has
been held in abeyance pending adoption of the final rules. Given
the recent changes to the interim rules, it is uncertain whether
the appeal will now go forward.
Having set an initial permitted rate for regulated service using
one of the above methodologies, a cable system may adjust its
rate going forward either quarterly or annually under the FCC's
"price cap" mechanism, which accounts for inflation, changes in
"external costs," and changes in the number of regulated
channels. External costs include state and local taxes
applicable to the provision of cable television service,
franchise fees, the costs of complying with certain franchise
requirements, and retransmission consent fees and copyright fees
incurred for the carriage of broadcast signals. In addition, a
cable system may treat as external (and thus pass through to its
subscribers) the costs, plus a 20 cent per channel mark-up, for
channels newly added to a CPST. Through 1996, however, each
cable system is subject to an aggregate cap of $1.50 on the
amount it may increase CPST rates due to channel additions.
The FCC's regulatory treatment of "a la carte" packages of
channels has been a source of particular regulatory uncertainty
for many cable systems and -- like the rate rollbacks -- has
negatively affected the Partnership's revenues and profits.
Under the 1992 Cable Act, per-channel and per-program offerings
("a la carte" channels) are exempt from rate regulation. In
implementing rules pursuant to the 1992 Cable Act, the FCC
likewise exempted from rate regulation packages of a la carte
channels if certain conditions were met. Upon reconsideration,
however, the FCC tightened its regulatory treatment of these a la
carte packages by supplementing its initial conditions with a
number of additional criteria designed to ensure that cable
systems creating collective a la carte offerings do not
improperly evade rate regulation. The FCC later reversed its
approach to a la carte packages by ruling that all non-premium
packages of channels -- even if also available on an a la carte
basis -- would be treated as a regulated tier. To ease the
negative effect of these policy shifts on cable systems (and to
further mitigate the rate regulations' disincentive for adding
new program services) the FCC at the same time adopted rules
allowing systems to create currently unregulated "new products
tiers", provided that the fundamental nature of preexisting
regulated tiers is preserved.
The charges for subscriber equipment and installation also are
regulated by the FCC and local franchising authorities. FCC
rules require that charges for converter boxes, remote control
units, connections for additional television receivers, and cable
installations must be based on a cable system's actual costs,
plus an 11.25% rate of return. The regulations further dictate
that the charges for each variety of subscriber equipment or
installation charge be listed individually and "unbundled" from
the charges for cable service. Pursuant to the 1996 Act,
however, cable operators may aggregate, on a franchise, system,
regional, or company level, their equipment costs and subscriber
charges into broad categories.
In accordance with the intent of the 1992 Act, the FCC has
established special rate and administrative treatment for small
cable systems and small cable companies. In addition to the
transition rate relief and streamlined rate reduction approaches
to setting initial permitted rates (discussed above), the
Commission has provided for the following relief mechanisms for
small cable systems and companies: (1) a simplified cost-of-
service approach for small systems owned by small companies in
which a per-channel rate below $1.24 is considered presumptively
reasonable; and (2) a system of any size owned by a small cable
company that incurs additional monthly per subscriber headend
costs of one full cent or more for the addition of a channel may
recover a 20 cent mark-up, the license fee (if any) for the
channel, as well as the actual cost of the headend equipment
necessary to add new channels (not to exceed $5,000 per channel)
for adding not more than seven new channels through 1997. By
these actions, the FCC stated that it has expanded the category
of systems eligible for special rate and administrative treatment
to include approximately 66% of all cable systems in the U.S.
serving approximately 12% of all cable subscribers. The 1996 Act
further deregulates small cable companies: under the Act, an
operator that, directly or through an affiliate, serves fewer
than 1% of all subscribers in the U.S. (617,000 subscribers) and
is not affiliated with an entity whose gross annual revenues
exceed $250 million is exempt from rate regulation of the CPST
and also of the BST (provided that the BST was the only tier
subject to regulation as of 12/31/94) in any franchise area in
which that operator serves 50,000 or fewer subscribers.
In late 1995, the FCC demonstrated increasing willingness to
settle some or all of the rate cases pending against a multiple
system operator ("MSO") by entering into a "social contract" or
rate settlement (collectively "social contract/settlement").
While the terms of each social contract/settlement vary according
to the underlying facts unique to the relevant cable systems, the
common elements include an agreement by an MSO to make a
specified subscriber refund (generally in the form of in-kind
service or a billing credit) in exchange for the dismissal, with
prejudice, of pending complaints and rate proceedings. In
addition, the FCC recently has adopted or proposed two measures
that may mitigate the negative effect of the Commission's rate
regulations on cable systems' revenues and profits, and allow
systems to more efficiently market cable service. The FCC
implemented an abbreviated cost-of-service mechanism for cable
systems of all sizes that permits systems to recover the costs of
"significant" upgrades (e.g., expansion of system bandwidth
capacity) that provide benefits to subscribers to regulated cable
service. This mechanism could make it easier for cable systems
to raise rates to cover the costs of an upgrade. The Commission
also has preliminary proposed, but not yet adopted, an optional
rate-setting methodology under which a cable operator serving
multiple franchise areas could establish uniform rates for
uniform cable service tiers offered in multiple franchise areas.
The 1996 Act affords cable operators greater rate flexibility for
service to multiple dwelling unit buildings by permitted bulk
discounts, provided that the discounted price is not predatory.
Prior to enactment of the 1996 Act, FCC rules mandated a uniform
rate structure throughout an operator's service area.
The 1996 Act also provides operator flexibility for subscriber
notification of rate and service changes. The Act permits cable
operators to use "reasonable" written means to notify subscribers
of rate and service changes; notice need not be inserted in
subscriber bills. Prior notice of a rate change is not required
for any rate change that is the result of regulatory fee,
franchise fee, or any other fee, tax, assessment, or change of
any kind imposed by a regulator or on the transaction between a
cable operator and a subscriber.
Summary
Registrant's ongoing cash needs will be to fund debt service and
working capital needs. During the twenty-six week period ended
June 28, 1996 cash interest paid was $7,781,487 and principal
repayments of $120,673,500 were made. During the remainder of
1996, Registrant is required by its various debt agreements to
make scheduled principal repayments of $300,000 under all of its
debt agreements.
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 its contractual debt obligations of all of its
investments; however, such debt obligations are recourse only to
specified assets.
Results of Operations.
Operating Revenues.
For the thirteen week periods ended June 28, 1996 and June 30,
1995:
During the thirteen week periods ended June 28, 1996 and June 30,
1995, Registrant had total operating revenues of approximately
$21.9 million and $28.4 million, respectively. The approximate
$6.5 million decrease in operating revenues was primarily due to
a combined decrease of approximately $7.6 million in operating
revenues resulting from the sale of California Cable during the
second quarter of 1996 and the sale of the television stations in
the second half of 1995. This decrease was partially offset by
an increase of approximately $700,000 at C-ML Cable; an increase
of approximately $223,000 at the Wincom-WEBE-WICC group,
primarily due to stronger market conditions at Wincom; and an
increase at KORG/KEZY of approximately $147,000 due to increased
advertising rates and operating revenue growth related to the
Mighty Ducks franchise. The increase in operating revenues at C-
ML Cable reflects an increase in the basic subscriber rates and
advertising revenues as well as an increase in the number of
basic subscribers from 114,980 at the end of the second quarter
of 1995 to 119,212 at the end of the second quarter of 1996, and
an increase in premium subscribers from 69,993 at the end of the
second quarter of 1995 to 74,385 at the end of the second quarter
1996, due to successful marketing efforts. The remaining
increases or decreases in operating revenues at Registrant's
other properties were immaterial, either individually or in the
aggregate.
Interest Income
Registrant earned interest income of approximately $695,000 and
$70,000 during the second quarter of 1996 and 1995, respectively.
The increase is due primarily to interest earned on the proceeds
from the sale of California Cable.
Property Operating Expense.
During the second quarter of 1996 and 1995, Registrant incurred
property operating expenses of approximately $7.8 million and
$10.3 million, respectively. Registrant's total property
operating expenses decreased by approximately $2.5 million from
year to year as a result of a combined decrease of approximately
$2.7 million resulting from the sale of California Cable during
the second quarter of 1996 and the sale of the television
stations in the second half of 1995, partially offset by an
increase of approximately $100,000 at KORG/KEZY due to sales
commissions and promotional expenses. The remaining increases or
decreases in property operating expenses at Registrant's other
properties were immaterial, either individually or in the
aggregate.
General and Administrative Expense.
During the second quarter of 1996 and 1995, Registrant incurred
general and administrative expenses of approximately $4.8 million
and $5.5 million, respectively. Registrant's total general and
administrative expenses decreased by approximately $700,000 from
year to year as a result of a decrease at California Cable of
approximately $200,000 due primarily to the sale of the
California Cable Systems in the second quarter of 1996 as well as
a decrease of approximately $700,000 due to the sale of the
television stations in the second half of 1995. The remaining
increases or decreases in general and administrative expenses at
Registrant's other properties were immaterial, either
individually or in the aggregate.
Depreciation and Amortization Expense.
Registrant's depreciation and amortization expense totaled
approximately $5.9 million and $7.4 million during the second
quarter of 1996 and 1995, respectively. Registrant's total
depreciation and amortization expense decreased by approximately
$1.5 million from year to year due to a $2.3 million decrease
resulting from the sale of California Cable during the second
quarter of 1996 and the sale of the television stations in the
second half of 1995; offset by an increase of approximately $1.0
million at C-ML Cable due to the write-off of fixed assets. The
remaining increases or decreases in depreciation and amortization
expense at Registrant's other properties were immaterial, either
individually or in the aggregate.
Interest Expense.
Interest expense of approximately $3.3 million and $4.9 million
in the second quarter of 1996 and 1995, respectively, represents
the cost incurred for borrowed funds utilized to acquire various
media properties. The approximate $1.6 million decrease in
interest expense is due primarily to a decrease of approximately
$1.4 million related to the full repayment of the outstanding
borrowings of California Cable and the sale of the television
stations in the second half of 1995. The remaining increases or
decreases in interest expense at Registrant's other properties
were immaterial, either individually or in the aggregate.
For the twenty-six week periods ended June 28, 1996 and June 30,
1995:
Operating Revenues.
During the twenty-six week periods ended June 28, 1996 and June
30, 1995, Registrant had total operating revenues of
approximately $47.2 million and $54.6 million, respectively. The
approximate $7.4 million decrease in operating revenues was
primarily due to a combined decrease of $9.5 million in operating
revenues resulting from the sale of California Cable during the
second quarter of 1996 and the sale of the television stations in
the second half of 1995; partially offset by a $1.6 million
increase in operating revenues at C-ML Cable. The Wincom-WEBE-
WICC group and KORG/KEZY reported increases in revenues of
$300,000 and $200,000, respectively. The increase in operating
revenues at C-ML Cable reflects an increase in the basic
subscriber and pay rates and advertising revenues as well as an
increase in the number of basic subscribers from 114,980 at the
end of the second quarter of 1995 to 119,212 at the end of the
second quarter of 1996, and an increase in premium subscribers
from 69,993 at the end of the second quarter of 1995 to 74,385 at
the end of the second quarter of 1996, due to successful
marketing efforts. The increase in the operating revenues at the
Wincom-WEBE-WICC group were primarily due to stronger market
conditions at Wincom. The increase in revenues at KORG/KEZY was
the result of increased advertising rates and revenue growth
related to the Mighty Ducks franchise.
Interest Income.
Registrant earned interest income of approximately $746,000 and
$139,000 during the first twenty-six weeks of 1996 and 1995,
respectively. The increase is due primarily to interest earned on
the proceeds from the sale of California Cable.
Property Operating Expense.
During the first twenty-six weeks of 1996 and 1995, Registrant
incurred property operating expenses of approximately $16.6
million and $20.3 million, respectively. Registrant's total
property operating expenses decreased by approximately $3.7
million from year to year due primarily to: a combined decrease
of approximately $4.2 million resulting from the sale of
California Cable during the second quarter of 1996 and the sale
of the television stations in the second half of 1995; partially
offset by an increase of approximately $100,000 at C-ML Cable due
to franchise taxes; an increase of approximately $100,000 at
KORG/KEZY resulting from an increase in sales commission and
promotional expenses and a combined increase of approximately
$200,000 at the Wincom-WEBE-WICC group due to increases in direct
and bad debt expense as well as expenses tied to higher operating
revenues. The remaining increases or decreases in property
operating expenses at Registrant's other properties were
immaterial, either individually or in the aggregate.
General and Administrative Expense.
During the first twenty-six weeks of 1996 and 1995, Registrant
incurred general and administrative expenses of approximately
$9.6 million and $11.0 million, respectively. Registrant's total
general and administrative expenses decreased by approximately
$1.4 million from year to year as a result of a decrease at
California Cable of approximately $300,000 due to the sale of the
California Cable Systems in the second quarter of 1996 as well as
a decrease of approximately $1.3 million due to the sale of the
television stations in the second half of 1995. The remaining
increases or decreases in general and administrative expenses at
Registrant's other properties were immaterial, either
individually or in the aggregate.
Depreciation and Amortization Expense.
Registrant's depreciation and amortization expense totaled
approximately $13.7 million and $14.9 million in the first twenty-
six weeks of 1996 and 1995, respectively. The approximately $1.2
million decrease in Registrant's total depreciation and
amortization expense from year to year was the result of a $2.9
million decrease due to the sale of California Cable during the
second quarter of 1996 and the sale of the television stations in
the second half of 1995; offset by a $2.0 million increase at C-
ML Cable due to the write-off of fixed assets. In addition,
KORG/KEZY had a decrease of approximately $300,000 due to fully
amortized assets. The remaining increases or decreases in
depreciation and amortization expense at Registrant's other
properties were immaterial, either individually or in the
aggregate.
Interest Expense.
Interest expense of approximately $7.5 million and $9.7 million
in the first twenty-six weeks of 1996 and 1995, respectively,
represents the cost incurred for borrowed funds utilized to
acquire various media properties. The approximately $2.2 million
decrease in interest expense is due primarily to a decrease of
approximately $2.1 million related to the full repayment of the
outstanding borrowings of California Cable in the second quarter
of 1996 and the sale of the television stations in the second
half of 1995. The remaining increases or decreases in
depreciation and amortization expense at Registrant's other
properties were immaterial, either individually or in the
aggregate.
<PAGE>
PART II - OTHER INFORMATION.
Item 1. Legal Proceedings.
On May 1, 1996, a purported class action lawsuit was
filed against Registrant on behalf of subscribers of the
California Cable Systems serving Anaheim, Villa Park and
adjacent areas of unincorporated Orange County,
California. This purported class action lawsuit alleges
that excessive late fee payments have been charged to
such subscribers since April, 1992 and seeks refunds of
late fee payments to subscribers, and related interest,
damages and legal costs. Registrant is presently unable
to estimate its potential liability, if any, related to
this purported class action or whether any additional
members may be added to the purported class action.
Registrant is not aware of any other material legal
proceedings.
Item 6. Exhibits and Reports on Form 8-K.
A). Exhibits:
Exhibit # Description
27. Financial Data Schedule
B). Reports on Form 8-K
Registrant filed with the Commission a Current
Report on Form 8-K dated April 4, 1996. This
Current Report contained details regarding the
Revised ML California Credit Agreement which
deferred the due date of the remaining principal
payment, as well as an update on the status of
negotiations for the sale of California Cable
Systems ("California Cable").
Registrant filed with the Commission a Current
Report on Form 8-K dated May 31, 1996. This
Current Report contained details regarding the
consummation of the sale of substantially all of
the assets of California Cable to Century.
In addition, Registrant filed with the Commission
a Current Report on Form 8-K/A dated May 31, 1996.
This Current Report contained details regarding
the pro forma effect of the sale of substantially
all of the assets of California Cable to Century.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
ML MEDIA PARTNERS, L.P.
By: Media Management Partners
General Partner
By: ML Media Management Inc.
Dated: August 16, 1996 /s/ Kevin K. Albert
Kevin K. Albert
Director and President
Dated: August 16, 1996 /s/ Robert F. Aufenanger
Robert F. Aufenanger
Director and Executive Vice
President
Dated: August 16, 1996 /s/ Diane T. Herte
Diane T. Herte
Treasurer
(principal accounting officer
and principal financial
officer of the Registrant)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
ML MEDIA PARTNERS, L.P.
By: Media Management Partners
General Partner
By: RP Media Management
Dated: August 16, 1996 /s/I. Martin Pompadur
I. Martin Pompadur
President, Secretary and
Director
(principal executive officer of
the Registrant)
Dated: August 16, 1996 /s/Elizabeth McNey Yates
Elizabeth McNey Yates
Executive Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial
information extracted from the quarter June 28, 1996 Form
10Q Consolidated Balance Sheets and Consolidated Statements
of Operations as of June 28, 1996, and is qualified in its
entirety by reference to such financial statements.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-END> JUN-28-1996
<CASH> 203,151
<SECURITIES> 5,000
<RECEIVABLES> 9,085
<ALLOWANCES> 668
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 68,798
<DEPRECIATION> 46,610
<TOTAL-ASSETS> 276,302
<CURRENT-LIABILITIES> 0
<BONDS> 62,148
<COMMON> 0
0
0
<OTHER-SE> 183,461
<TOTAL-LIABILITY-AND-EQUITY> 276,302
<SALES> 0
<TOTAL-REVENUES> 233,998
<CGS> 0
<TOTAL-COSTS> 16,607
<OTHER-EXPENSES> 14,405
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,511
<INCOME-PRETAX> 185,825
<INCOME-TAX> 0
<INCOME-CONTINUING> 185,825
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 185,825
<EPS-PRIMARY> 978.58
<EPS-DILUTED> 0
</TABLE>
