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
September 27, 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 September 27, 1996
(Unaudited) and December 29, 1995 (Unaudited)
Consolidated Income Statements for the Thirteen and Thirty-
Nine Week Periods Ended September 27, 1996 (Unaudited) and
September 29, 1995 (Unaudited)
Consolidated Statements of Cash Flows for the Thirty-Nine
Week Periods Ended September 27, 1996 (Unaudited) and
September 29, 1995 (Unaudited)
Notes to Consolidated Financial Statements for the Thirty-
Nine Week Period Ended September 27, 1996 (Unaudited)
<PAGE>
ML MEDIA PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 27, 1996 (UNAUDITED) AND DECEMBER 29, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
September 27, December 29,
1996 1995
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 90,520,616 $ 40,124,366
Investments held by escrow
agents 6,000,000 1,000,000
Accounts receivable (net of
allowance for doubtful
accounts of $721,810 and
$856,484, respectively) 7,188,578 12,215,484
Prepaid expenses and deferred
charges (net of
accumulated amortization of
$3,386,339 and $7,352,383,
respectively) 1,059,747 2,842,996
Property, plant and
equipment(net of accumulated
depreciation of $48,959,493
and $117,750,459,
respectively)
21,112,310 72,989,071
Intangible assets (net of
accumulated amortization of
$53,478,756 and
$121,657,283, respectively)
34,455,245 79,636,581
Other assets 1,216,349 1,389,998
TOTAL ASSETS $161,552,845 $210,198,496
</TABLE>
(Continued on the following page.)
<PAGE>
ML MEDIA PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 27, 1996 (UNAUDITED) AND DECEMBER 29, 1995
(UNAUDITED)
(continued)
<TABLE>
<CAPTION>
September 27, December 29,
1996 1995
<S> <C> <C>
LIABILITIES AND PARTNERS'
CAPITAL/(DEFICIT):
Liabilities:
Borrowings $ 61,998,428 $ 182,821,928
Accounts payable and
accrued liabilities 20,988,692 27,630,778
Subscriber advance payments 1,605,321 2,109,929
Total Liabilities 84,592,441 212,562,635
Commitments and Contingencies
(Note 4)
Partners' Capital/(Deficit):
General Partner:
Capital contributions, net of
offering expenses 1,708,299 1,708,299
Cumulative income/(loss) 292,064 (1,593,066)
Cash distribution (1,167,841) (75,957)
832,522 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 (115,616,310) (7,519,760)
Cumulative income/(loss) 28,914,501 (157,713,346)
76,127,882 (2,403,415)
Total Partners'
Capital/(Deficit) 76,960,404 (2,364,139)
TOTAL LIABILITIES AND
PARTNERS' CAPITAL/(DEFICIT)
$ 161,552,845 $ 210,198,496
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited).
<PAGE>
ML MEDIA PARTNERS, L.P.
CONSOLIDATED INCOME STATEMENTS
FOR THE THIRTEEN AND THIRTY-NINE WEEK PERIODS ENDED SEPTEMBER 27, 1996
(UNAUDITED) AND SEPTEMBER 29, 1995 (UNAUDITED)
<TABLE>
<CAPTION> Thirteen Weeks Thirty-Nine Weeks
September 27, September 29, September 27, September 29,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
REVENUES:
Operating
revenues $ 12,632,540 $ 28,078,350 $ 59,864,452 $ 82,708,840
Interest 1,316,077 68,815 2,061,842 207,960
Gain on sale
of California
Cable Systems - - 186,020,511 -
Gain on sale
of WREX - 8,456,121 - 8,456,121
Total revenues 13,948,617 36,603,286 247,946,805 91,372,921
COSTS AND
EXPENSES:
Property
operating 4,158,461 9,747,703 20,765,428 30,078,603
General and
adminis-
trative 2,130,461 6,303,598 11,780,127 17,328,824
Depreciation
and amorti-
zation 3,276,773 6,622,716 16,950,957 21,540,678
Interest
expense 1,392,380 4,349,855 8,903,200 14,029,862
Management
fees 302,917 392,472 1,034,116 1,188,388
Total costs
and expenses 11,260,992 27,416,344 59,433,828 84,166,355
NET INCOME $ 2,687,625 $ 9,186,942 $188,512,977 $ 7,206,566
PER UNIT OF LIMITED PARTNERSHIP INTEREST:
NET INCOME $ 14.15 $ 48.38 $ 992.73 $ 37.95
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 THIRTY-NINE WEEK PERIODS ENDED SEPTEMBER 27, 1996 (UNAUDITED)
AND SEPTEMBER 29, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
September September 29,
27, 1995
1996
<S> <C> <C>
Cash flows from operating activities:
Net income $188,512,97 $ 7,206,566
7
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 16,950,957 21,540,678
Bad debt expense 335,111 248,717
Gain on sale of California Cable
Systems (186,020,51 -
1)
Gain on sale of WREX - (8,456,121)
Changes in operating assets and
liabilities:
Decrease/(Increase):
Accounts receivable 3,992,842 1,392,209
Short-term investments held by agent (5,000,000) 6,000,000
Prepaid expenses and deferred charges 416,839 (551,775)
Other assets (41,947) (1,676,664)
(Decrease)/Increase:
Accounts payable and accrued
liabilities (10,044,443 (3,152,428)
)
Subscriber advance payments (42,106 171,417
)
Net cash provided by
operating activities 9,059,719 22,722,599
</TABLE>
(Continued on the following page.)
<PAGE>
ML MEDIA PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTY-NINE WEEK PERIODS ENDED SEPTEMBER 27, 1996 (UNAUDITED)
AND SEPTEMBER 29, 1995 (UNAUDITED)
(continued)
<TABLE>
<CAPTION>
September September
27, 29,
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) -
Proceeds from sale of WREX - 18,295,725
Purchase of property, plant and
equipment (6,445,263) (7,422,545)
Additions to intangible assets (10,000) (218,150)
Net cash provided by investing
activities 271,348,465 10,655,030
Cash flows from financing activities:
Principal payments on borrowings, net (120,823,500 (24,647,119
) )
Cash distribution (109,188,434 -
)
Net cash used in financing activities (230,011,934 (24,647,119
) )
Net increase in cash and cash
equivalents 50,396,250 8,730,510
Cash and cash equivalents at
beginning of year 40,124,366 26,682,289
Cash and cash equivalents at end of
period $ 90,520,61 $ 35,412,799
6
Interest paid $ 8,098,69 $ 14,976,261
0
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited).
ML MEDIA PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRTY-NINE WEEK PERIOD ENDED SEPTEMBER 27, 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 September 27,
1996 and the results of operations and cash flows of the
Partnership for the interim periods presented. The results of
operations for the thirty-nine week period ended September 27,
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.
Certain reclassifications were made to the 1995 financial
statements to conform with the current period's presentation.
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 action is presently in
the discovery phase and no determination of class action
confirmation has yet been attempted by the plaintiffs. 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 sought to be added to the
purported class action lawsuit.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Liquidity and Capital Resources.
As of September 27, 1996, Registrant had $91,520,616 in cash and
cash equivalents, of which $40.9 million was limited for use at
the operating level. The amount payable for deferred management
fees and expenses owed to the General Partner amounted to $1.8
million as of September 27, 1996. In addition, Registrant has
reserved approximately $40.7 million to fund both actual and
contingent liabilities resulting from the sale of the California
Cable Systems (see below).
Registrant's ongoing cash needs will be to fund debt service and
working capital needs. During the thirty-nine week period ended
September 27, 1996 cash interest paid was $8.1 million and
principal repayments of $120.8 million 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.
Although no assurance can be made concerning the precise timing
of the ultimate disposition of Registrant's remaining media
properties, Registrant currently anticipates selling its
remaining investments in media properties within the next twelve
to twenty-four months.
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 September 27, 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, from the proceeds from the sale
of the Systems Registrant has remitted deferred management fees
and expenses owed to the General Partner of approximately $7.6
million and will remit an additional $1.6 million, for a total of
$9.2 million.
From the net proceeds from the sale of the Systems, 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, $1,091,884
was remitted to the General Partner representing its 1% share.
In accordance with the Partnership Agreement, any amounts which
may be available for distribution from any unused reserves will
be distributed to partners of record as of the date such unused
reserves are released, 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 September 27, 1996.
On May 31, 1996, Win Communications, Inc. filed with the FCC an
application for renewal of the license of WQAL-FM, Cleveland,
Ohio. On September 3, 1996, the National Rainbow Coalition filed
a petition to deny the renewal application. Win Communications,
Inc. filed an opposition to the petition on October 3, 1996 and
the matter remains pending. Pursuant to Section 307(c)(3) of the
Communications Act, the station's license shall continue in
effect pending final action on the renewal application by the
FCC.
WREX
On July 31, 1995, Registrant completed the sale to Quincy
Newspapers, Inc. ("Quincy") of substantially all of the assets
used in the operations of Registrant's television station WREX-
TV, Rockford, Illinois ("WREX"), other than cash and accounts
receivable. The purchase price for the assets was approximately
$18.4 million subject to certain adjustments. A reserve of
approximately $2.3 million was established to cover certain
purchase price adjustments and expenses and liabilities relating
to the sale. Quincy did not assume the accounts payable and
certain other liabilities of WREX and Registrant remained liable
for such liabilities. On the sale of WREX, Registrant recognized
a gain for financial reporting purposes of approximately $8.5
million in the third quarter of 1995.
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 some of which remain subject to petitions for
reconsideration before the FCC and/or court of appeals. The
United States Court of Appeals for the District of Columbia
Circuit recently upheld the constitutionality of a number of
provisions of the 1992 Cable Act, including (i) rate regulation;
(ii) the revocation of cable operator immunity from liability for
carriage of obscene programming on public, educational,
governmental and leased access channels; (iii) premium channel
preview notice and blocking requirements; (iv) program access;
and (v) municipal immunity.
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 Telecommunications 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, Registrant's system,
like most cable systems in most areas, are not currently subject
to effective competition. Consequently, the rates charged by
Registrant'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
exempt 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 FCC 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 FCC's
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's final
cost-of-service rules modified 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 Registrant'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 required 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 FCC's
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 in which that
operator serves 50,000 or fewer subscribers.
Beginning 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 FCC'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 FCC 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 FCC also recently requested comment on a
proposal to allow cable operators greater flexibility in pricing
the BST and CPST. Under the proposal, a cable operator would be
allowed to decrease the rate for its BST and take a corresponding
(revenue neutral) increase in the rate for its CPST.
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.
Results of Operations.
For the thirteen week periods ended September 27, 1996 and
September 29, 1995:
Registrant's net income for the thirteen week period ended
September 27, 1996 was $2.7 million, as compared to net income of
$9.2 million for the 1995 period. The decrease in net income for
the 1996 period is primarily due to the gain on sale of WREX of
$8.5 million during the 1995 period and other factors described
below.
Operating Revenues.
During the thirteen week periods ended September 27, 1996 and
September 29, 1995, Registrant had total operating revenues of
approximately $12.6 million and $28.1 million, respectively. The
approximate $15.5 million decrease in operating revenues was
primarily due to a combined decrease of approximately $16.3
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
$450,000 at C-ML Cable. The increase in operating revenues at C-
ML Cable reflects an increase in basic subscriber rates and
advertising revenues as well as an increase in the number of
basic subscribers from 114,762 at the end of the third quarter of
1995 to 117,994 at the end of the third quarter of 1996, and an
increase in premium subscribers from 71,038 at the end of the
third quarter of 1995 to 75,361 at the end of the third 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 $1.3 million
and $69,000 during the third quarters 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 third quarters of 1996 and 1995, Registrant incurred
property operating expenses of approximately $4.2 million and
$9.7 million, respectively. Registrant's total property
operating expenses decreased by approximately $5.5 million from
year to year primarily due to a combined decrease of
approximately $5.9 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. The remaining
increases or decreases in property operating expense at
Registrant's other properties were immaterial, either
individually or in the aggregate.
General and Administrative Expense.
During the third quarters of 1996 and 1995, Registrant incurred
general and administrative expenses of approximately $2.1 million
and $6.3 million, respectively. Registrant's total general and
administrative expenses decreased by approximately $4.2 million
from year to year primarily due to a combined decrease of
approximately $4.3 million resulting from the sale of the
California Cable during the second quarter of 1996 and 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 $3.3 million and $6.6 million during the third
quarters of 1996 and 1995, respectively. Registrant's total
depreciation and amortization expense decreased by approximately
$3.3 million from year to year due to a combined $4.6 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; partially offset by increases of
approximately $0.9 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 $1.4 million and $4.3 million
in the third quarters of 1996 and 1995, respectively, represents
the cost incurred for borrowed funds utilized to acquire various
media properties. The approximate $3.0 million decrease in
interest expense is due primarily to a decrease of approximately
$2.9 million related to the full repayment of the outstanding
borrowings of California Cable and Radio during the second
quarter of 1996 and the full repayment of the outstanding
borrowings 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 thirty-nine week periods ended September 27, 1996 and
September 29, 1995:
Registrant's net income for the thirty-nine week periods ended
September 27, 1996 was $188.5 million, as compared to net income
of $7.2 million for the 1995 period. The increase in net income
for the 1996 period is primarily due to the gain on the sale of
California Cable of $186.0 million during the 1996 period, the
gain on sale of WREX of $8.5 million during the 1995 period and
other factors described below.
Operating Revenues.
During the thirty-nine week periods ended September 27, 1996 and
September 29, 1995, Registrant had total operating revenues of
approximately $59.9 million and $82.7 million, respectively. The
approximate $22.8 million decrease in operating revenues was
primarily due to a combined decrease of $25.8 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 $2.1
million increase in operating revenues at C-ML Cable. The
increase in operating revenues at C-ML Cable reflects an increase
in basic subscriber rates and advertising revenues as well as an
increase in the number of basic subscribers from 114,762 at the
end of the third quarter of 1995 to 117,994 at the end of the
third quarter of 1996, and an increase in premium subscribers
from 71,038 at the end of the third quarter of 1995 to 75,361 at
the end of the third 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 $2.1 million
and $208,000 during the first thirty-nine 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 thirty-nine weeks of 1996 and 1995, Registrant
incurred property operating expenses of approximately $20.8
million and $30.1 million, respectively. Registrant's total
property operating expenses decreased by approximately $9.3
million from year to year due primarily to a combined decrease of
approximately $10.0 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. 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 thirty-nine weeks of 1996 and 1995, Registrant
incurred general and administrative expenses of approximately
$11.8 million and $17.3 million, respectively. Registrant's
total general and administrative expenses decreased by
approximately $5.5 million from year to year due primarily to a
combined decrease of approximately $5.9 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. 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 $16.9 million and $21.5 million in the first thirty-
nine weeks of 1996 and 1995, respectively. The approximately
$4.6 million decrease in Registrant's total depreciation and
amortization expense from year to year was primarily due to a
combined decrease of $7.4 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; offset by
a $2.9 million increase 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 $8.9 million and $14.0 million
in the first thirty-nine weeks of 1996 and 1995, respectively,
represents the cost incurred for borrowed funds utilized to
acquire various media properties. The approximately $5.1 million
decrease in interest expense is due primarily to a decrease of
approximately $4.9 million related to the full repayment of the
outstanding borrowings of California Cable and Radio during the
second quarter of 1996 and the full repayment of the outstanding
borrowings 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.
<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. The action is presently in the
discovery phase and no determination of class action
confirmation has yet been attempted by the plaintiffs.
Registrant is presently unable to estimate its potential
liability, if any, related to this purported class
action or whether any additional members may be sought
to be added to the purported class action lawsuit.
On May 31, 1996, Win Communications, Inc. filed with the
FCC an application for renewal of the license of WQAL-
FM, Cleveland, Ohio. On September 3, 1996, the National
Rainbow Coalition filed a petition to deny the renewal
application. Win Communications, Inc. filed an
opposition to the petition on October 3, 1996 and the
matter remains pending. Pursuant to Section 307(c)(3)
of the Communications Act, the station's license shall
continue in effect pending final action on the renewal
application by the FCC.
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
None
<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: November 12, 1996 /s/ Kevin K. Albert
Kevin K. Albert
Director and President
Dated: November 12, 1996 /s/ Robert F. Aufenanger
Robert F. Aufenanger
Director and Executive Vice
President
Dated: November 12, 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: November 12, 1996 /s/I. Martin Pompadur
I. Martin Pompadur
President, Secretary and
Director
(principal executive officer of
the Registrant)
Dated: November 12, 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 September 27, 1996
Form 10Q Consolidated Balance Sheets and Consolidated
Statements of Operations as of September 27, 1996, and is
qualified in its entirety by reference to such financial
statements.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-29-1995
<PERIOD-END> SEP-27-1996
<CASH> 90,521
<SECURITIES> 6,000
<RECEIVABLES> 7,910
<ALLOWANCES> 720
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 70,072
<DEPRECIATION> 48,959
<TOTAL-ASSETS> 161,553
<CURRENT-LIABILITIES> 0
<BONDS> 61,998
<COMMON> 0
0
0
<OTHER-SE> 76,960
<TOTAL-LIABILITY-AND-EQUITY> 161,553
<SALES> 0
<TOTAL-REVENUES> 247,947
<CGS> 0
<TOTAL-COSTS> 32,765
<OTHER-EXPENSES> 17,985
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,903
<INCOME-PRETAX> 188,513
<INCOME-TAX> 0
<INCOME-CONTINUING> 188,513
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 188,513
<EPS-PRIMARY> 992.73
<EPS-DILUTED> 0
</TABLE>
