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
March 29, 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) 236-6577
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 March 29, 1996
(Unaudited) and December 29, 1995 (Unaudited)
Consolidated Statements of Operations for the Thirteen
Week Periods Ended March 29, 1996 (Unaudited) and
March 31, 1995 (Unaudited)
Consolidated Statements of Cash Flows for the Thirteen
Week Periods Ended March 29, 1996 (Unaudited) and
March 31, 1995 (Unaudited)
Notes to the Consolidated Financial Statements for the
Thirteen Week Period Ended March 29, 1996 (Unaudited)
<PAGE>
ML MEDIA PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 29, 1996 (UNAUDITED) AND DECEMBER 29, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
March 29, December 29,
1996 1995
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 45,541,921 $ 41,124,366
Accounts receivable (net
of allowance for doubtful
accounts of $927,040 and
$856,484, respectively) 10,732,967 12,215,484
Prepaid expenses and deferred
charges (net of accumulated
amortization of $7,468,014
and $7,352,383,
respectively) 2,794,683 2,842,996
Property, plant and equipment
(net of accumulated
depreciation of $122,906,424
and $117,750,459,
respectively)
70,482,506 72,989,071
Intangible assets (net of
accumulated amortization of
$123,937,633 and
$121,657,283, respectively)
77,138,318 79,636,581
Other assets 1,434,385 1,389,998
TOTAL ASSETS $208,124,780 $210,198,496
</TABLE>
(Continued on the following page.)
<PAGE>
ML MEDIA PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 29, 1996 (UNAUDITED) AND DECEMBER 29, 1995 (UNAUDITED)
(continued)
<TABLE>
<CAPTION>
March 29, December 29,
1996 1995
<S> <C> <C>
LIABILITIES AND PARTNERS'
CAPITAL/(DEFICIT):
Liabilities:
Borrowings $ 182,446,928 $182,821,928
Accounts payable and
accrued liabilities 27,085,437 27,630,778
Subscriber advance payments 2,171,004 2,109,929
Total Liabilities 211,703,369 212,562,635
Commitments and
Contingencies
Partners' Capital/(Deficit):
General Partner:
Capital contributions, net of
offering expenses 1,708,299 1,708,299
Cumulative loss (1,605,210) (1,593,066)
Cash distribution (75,957) (75,957)
27,132 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 loss (158,915,652) (157,713,346)
(3,605,721) (2,403,415)
Total Partners' (3,578,589) (2,364,139)
Capital/(Deficit)
TOTAL LIABILITIES AND
PARTNERS' CAPITAL/(DEFICIT) $ 208,124,780 $ 210,198,496
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited).
<PAGE>
ML MEDIA PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THIRTEEN WEEK PERIODS ENDED MARCH 29, 1996 (UNAUDITED) AND
MARCH 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
March 29, March 31,
1996 1995
<S> <C> <C>
REVENUES:
Operating revenues $ 25,302,021 $ 26,273,942
Interest 50,847 69,006
Total revenues 25,352,868 26,342,948
COSTS AND EXPENSES:
Property operating 8,799,752 9,991,191
General and administrative 5,364,409 5,515,831
Depreciation and amortization 7,769,657 7,466,423
Interest expense 4,255,642 4,773,755
Management fees 377,858 397,958
Total costs and expenses 26,567,318 28,145,158
NET LOSS $ (1,214,450) $ (1,802,210)
Per Unit of Limited Partnership
Interest:
NET LOSS $ (6.40) $ (9.49)
Number of Units 187,994 187,994
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited).
<PAGE>
ML MEDIA PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTEEN WEEK PERIODS ENDED MARCH 29, 1996 (UNAUDITED) AND
MARCH 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
March 29, March 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,214,450) $ (1,802,210)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization 7,769,657 7,466,423
Bad debt expense 99,415 352,202
Changes in operating assets and
liabilities:
Decrease/(Increase):
Accounts receivable 1,383,102 785,537
Short-term investments held by agent - 6,000,000
Prepaid expenses and deferred charges (67,117) 78,991
Other assets (44,387) (1,222,004)
(Decrease)/Increase:
Accounts payable and accrued
liabilities (507,227) (2,780,018)
Subscriber advance payments 61,075 111,832
Net cash provided by operating
activities 7,480,068 8,990,753
</TABLE>
(Continued on the following page.)
<PAGE>
ML MEDIA PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTEEN WEEK PERIODS ENDED MARCH 29, 1996 (UNAUDITED)
AND MARCH 31, 1995 (UNAUDITED)
(continued)
<TABLE>
<CAPTION>
March 29, March 31,
1996 1995
<S> <C> <C>
Cash flows from investing activities:
Purchase of property, plant and
equipment (2,687,513) (1,799,712)
Intangible assets - (263,851)
Net cash used in investing activities (2,687,513) (2,063,563)
Cash flows from financing activities:
Principal payments on borrowings (375,000) (2,173,653)
Net cash used in financing activities (375,000) (2,173,653)
Net increase in cash and cash
equivalents 4,417,555 4,753,537
Cash and cash equivalents as of the
beginning of year 41,124,366 26,682,289
Cash and cash equivalents as of the
end of period $45,541,921 $31,435,826
Interest paid $ 3,087,754 $ 5,197,436
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited).
<PAGE>
ML MEDIA PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRTEEN WEEK PERIOD ENDED MARCH 29, 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 March 29, 1996
and the results of operations and cash flows of the Partnership
for the interim periods presented. The results of operations for
the thirteen week period ended March 29, 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
("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.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Liquidity and Capital Resources.
As of March 29, 1996, Registrant had $45,541,921 in cash and cash
equivalents, of which $41,663,716 was limited for use at the
operating level and the remaining $3,878,205 was Registrant's
working capital.
During 1996, Registrant continued its operations phase and the
process of liquidating certain of the media properties (see
below).
As of March 29, 1996, Registrant's investments in media
properties consisted of four cable television systems in
California ("California Cable Systems"); 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 and 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, through its wholly-owned subsidiary corporation,
Century-ML Cable Corporation, operates two cable television
systems in Puerto Rico.
On November 28, 1994, Registrant entered into an agreement to
sell substantially all of the assets used in the operations of
California Cable Systems (see below).
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 Registrant's California Cable Systems serving Anaheim and
Hermosa Beach/Manhattan Beach and Rohnert Park/Yountville and
Fairfield. The base purchase price specified in the Asset
Purchase Agreement for the California Cable Systems is $286
million, subject to reduction by an amount equal to 11 times the
amount, if any, by which the operating cash flow of the
California Cable 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 of the sale from the Federal Communications
Commission ("FCC") and the municipal authorities issuing the
franchises for the California Cable Systems and the approvals of
certain franchise extensions, including the renewal of the
franchise licenses for the Anaheim and Villa Park communities.
The Asset Purchase Agreement provides that Registrant and Century
each have the right to terminate the Asset Purchase Agreement if
the closing did not occur by December 31, 1995. Accordingly, as
of January 1, 1996, each party became vested with the right to
elect to terminate the Asset Purchase Agreement.
Registrant, Century and the City of Anaheim have reached
agreement on the terms of the Anaheim Transfer and the Anaheim
Transfer has been approved; the approval became final on April 4,
1996, since no legally sufficient objection under the Anaheim
City Charter procedures for a public referendum was raised.
Registrant, Century and Villa Park have also reached agreement on
the terms of the Villa Park Transfer and the Villa Park Transfer
was approved by the Villa Park City Council on March 26, 1996. As
of April 4, 1996, all regulatory approvals required to sell the
California Cable Systems to Century had been obtained. Although
no assurances can be given that the sale of the California Cable
Systems under the Asset Purchase Agreement will be consummated,
Registrant is continuing its efforts to resolve the remaining
outstanding issues necessary to consummate the closing with
Century. In addition, no assurances can be given as to the
timing of any sale of the California Cable Systems or as to the
sale price that might be realized in connection with any such
sale, if the sale to Century is not consummated, but Registrant
believes that, under current market conditions, the California
Cable Systems represent an attractive investment opportunity for
a suitable buyer.
Pursuant to the Amended and Restated Credit Agreement (the
"Revised ML California Credit Agreement"), a payment of principal
in the amount of approximately $13.1 million (the "Principal
Payment") became due and payable by the Registrant on December
29, 1995. Since the sale of the California Cable Systems did not
occur by that date, Registrant was unable to make the entire
Principal Payment, but did make a $3,555,000 partial payment.
Effective December 29, 1995, Registrant and the banks entered
into a third amendment (the "Third Amendment") to the Revised ML
California Credit Agreement that provided for reduced principal
payments for the fourth quarter of 1995 and required a new
quarterly principal payment of $15,812,500 to be due and payable
on April 1, 1996. In addition, the Third Amendment increased the
Registrant's cost of borrowing. As of March 29, 1996, Registrant
was in compliance under the Revised ML California Credit
Agreement and the outstanding principal debt balance was
$120,148,500.
Because the sale of the California Cable Systems was not
consummated by April 1, 1996, Registrant was unable to make the
entire principal payment of approximately $15.8 million due on
that date under the Revised ML California Credit Agreement, but
did make a $2.0 million partial payment. In addition, Registrant
and the banks entered into a fourth amendment (the "Fourth
Amendment") on March 29, 1996 to the Revised ML California Credit
Agreement deferring the due date of the remaining principal
payment until May 31, 1996. If the sale of the California Cable
Systems does not occur by May 31, 1996, Registrant will be unable
to make the principal payment of $13,812,500 due on such date.
Should such payment not be made, Registrant would be in default
under the terms of the Revised ML California Credit Agreement
which would enable the banks to accelerate the payment
obligations with respect to the full amount owing under the
Revised ML California Credit Agreement and take other actions to
enforce their rights under the Revised ML California Credit
Agreement.
The loan under the Revised ML California Credit Agreement is
nonrecourse to the other assets of Registrant.
At March 29, 1996 and December 29, 1995, Registrant had a net
property tax refund receivable from Orange County, California of
approximately $1.8 million and $2.3 million, respectively. The
decrease of approximately $0.5 million represents a portion of
the property tax refund received from Orange County during the
first quarter of 1996.
As of March 29, 1996, Registrant had funds related to the
Northern California Systems in an escrow account totalling
$828,258, which funds were included in other assets on the
accompanying Consolidated Balance Sheet. The funds were
deposited in such account during 1994 in accordance with
Registrant's Agreement with the 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.
As of March 29, 1996, Registrant had funds in an additional
escrow account totalling $177,974, which funds were included in
other assets on the accompanying Consolidated Balance Sheet. The
funds, which initially totalled $680,000, were deposited in such
account during the first quarter of 1995 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 FCC has not yet made a decision on the CTJPA rate appeal.
However, the FCC's decision on the most material issues in
Registrant's other rate cases have been decided in a manner
predominantly favorable to Registrant. The FCC decision on the
Fairfield rate appeal was predominantly favorable to Registrant,
and as a result of the city's rate structure, pursuant to such
decision, the escrowed amounts were reduced to the current level.
WINCOM-WEBE-WICC
Registrant was in compliance with all terms of its Wincom-WEBE-
WICC Loan and the Restructuring Agreement as of March 29, 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. On enactment, 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 also
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. The 1996 Act, however, directs
the FCC, within 120 days, to revise these rules to permit cable
operators to aggregate, on a franchise, system, regional, or
company level, their equipment costs into broad categories
(except for equipment used only to receive a rate regulated basic
service tier).
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 cable
programming services tier and also of the basic service tier
(provided that the basic tier 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 preliminarily 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,
capital expenditures and working capital needs. During the
thirteen week period ended March 29, 1996 cash interest paid was
$3,087,754, and principal repayments of $375,000 were made.
During the remainder of 1996, Registrant is required by its
various debt agreements to make scheduled principal repayments of
$31,975,000 under all of its debt agreements. If the Revised ML
California Cable Agreement is accelerated as a result of the sale
to Century not being consummated or otherwise, Registrant would
be required to satisfy the remaining loan balance of $120,148,500
on May 31, 1996. In addition, since 1989, the General Partner of
Registrant has voluntarily deferred certain of its management
fees and certain reimbursements of out-of-pocket expenses.
Accordingly, Registrant has been accruing the amount of such
deferred fees and expenses. As of March 29, 1996 the amount
payable to the General Partner was approximately $8.5 million.
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. Registrant does not currently expect to, nor
is it obligated to, advance any of its unrestricted working
capital to California Cable Systems.
Results of Operations.
1996 vs. 1995.
Operating Revenues.
During the thirteen week periods ended March 29, 1996 and March
31, 1995, Registrant had total operating revenues of
approximately $25.3 million and $26.3 million, respectively. The
approximate $1.0 million decrease was primarily due to a decline
in television revenues of approximately $2.7 million as a result
of the sale of the Registrant's television stations in 1995,
offset by increases of approximately $700,000 and $900,000 at
California Cable and C-ML Cable, respectively.
The increase in revenue at California Cable resulted primarily
from an increase in basic subscribers as well as rate increases
instituted during 1995. Revenues generated from the increase in
the number of basic subscribers from 136,082 at the end of the
first quarter 1995 to 139,147 at the end of the first quarter of
1996, were somewhat offset by a decrease in revenues due to a
decline in the number of premium subscriptions from 74,806 to
69,684, over the same period. The increase in the number of
basic subscribers from year to year was a result of increased
marketing efforts. The number of basic subscribers increased
from 138,864 at the end of 1995 to 139,147 at the end of the
first quarter of 1996.
The increase in revenues at C-ML Cable reflects an increase in
the number of basic subscribers, from 113,579 at the end of the
first quarter of 1995 to 117,481 at the end of the first quarter
of 1996 due primarily to successful marketing efforts, as well as
an increase in the basic rate which was instituted during 1995.
In addition, the number of premium subscriptions increased from
69,794 at the end of the first quarter of 1995, to 74,477 at the
end of the first quarter of 1996, primarily due to marketing
promotions. The number of basic subscribers increased from
115,655 at the end of 1995 to 117,481 at the end of the first
quarter of 1996.
Other increases or decreases in operating revenues at
Registrant's other properties were immaterial either individually
or in the aggregate.
Property Operating Expense.
During the first thirteen weeks of 1996 and 1995, Registrant
incurred property operating expenses of approximately $8.8
million and $10.0 million, respectively. Registrant's total
property operating expenses decreased by approximately $1.2
million due to a decrease of approximately $1.4 million due to
the sale of the television stations in 1995, partially offset by
an increase in operating expenses at C-ML Cable of approximately
$100,000 due primarily to increased salary and management
expenses and increases at the Wincom-WEBE-WICC group of
approximately $200,000 due mostly to increased sales commissions
and promotional expenses. Other 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 thirteen weeks of 1996 and 1995, Registrant
incurred general and administrative expenses of approximately
$5.4 million and $5.5 million, respectively. Registrant's total
general and administrative expenses decreased by approximately
$200,000 due to a decrease of approximately $600,000 due to the
sale of the television stations in 1995, partially offset by
increases at California Cable of approximately $400,000 due
mostly to costs related to the pending disposition. Other
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 totalled
approximately $7.8 million and $7.5 million for the first
thirteen weeks of 1996 and 1995, respectively. The increase of
approximately $300,000 was due to: an increase at C-ML Cable of
approximately $900,000 due to writeoffs of fixed assets, offset
in part by an approximate $200,000 decrease due to the sale of
the television stations in 1995; and approximately a $300,000
decrease at California Cable Systems and radio stations KORG-AM
and KEZY-FM due to assets which were fully depreciated in 1995.
Other decreases in depreciation and amortization expense at
Registrant's other properties were immaterial either individually
or in the aggregate.
Interest Expense.
Registrant's interest expense represents the cost incurred for
borrowed funds used to acquire various media properties and
during the first thirteen weeks of 1996 and 1995 amounted to
approximately $4.3 million and $4.8 million, respectively.
Registrant's interest expense. The decrease of approximately
$500,000 in interest expense is due to a decrease of
approximately $600,000 due to the sale of the television stations
in 1995, offset by an increase of approximately $200,000 at
California Cable Systems and radio stations KORG-AM and KEZY-FM
due to higher floating interest rates. Other decreases in
interest expense at Registrant's other properties were immaterial
either individually on in the aggregate.
<PAGE>
PART II - OTHER INFORMATION.
Item 6. Exhibits and Reports on Form 8-K.
A). Exhibits:
Exhibit # Description
27. Financial Data Schedule
B). Reports on Form 8-K
During the period covered by this report, Registrant filed with
the Commission a Current Report on Form 8-K dated December 31,
1995. This Current Report contained details regarding the status
of negotiations for the sale of substantially all of the assets
of the California Cable Operations ("California Cable") to
Century Communications Corp.
In addition, 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.
<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: May 13, 1996 /s/ Kevin K. Albert
Kevin K. Albert
Director and President
Dated: May 13, 1996 /s/ Robert F. Aufenanger
Robert F. Aufenanger
Director and Executive Vice
President
Dated: May 13, 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: May 13, 1996 /s/I. Martin Pompadur
I. Martin Pompadur
President, Secretary and
Director
(principal executive officer of
the Registrant)
Dated: May 13, 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 March 29, 1996 Form
10Q Consolidated Balance Sheets and Consolidated Statements
of Operations as of March 29, 1996, and is qualified in its
entirety by reference to such financial statements.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-END> MAR-29-1996
<CASH> 45,542
<SECURITIES> 0
<RECEIVABLES> 11,660
<ALLOWANCES> 927
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 193,389
<DEPRECIATION> 122,906
<TOTAL-ASSETS> 208,125
<CURRENT-LIABILITIES> 0
<BONDS> 182,447
<COMMON> 0
0
0
<OTHER-SE> (3,579)
<TOTAL-LIABILITY-AND-EQUITY> 208,125
<SALES> 0
<TOTAL-REVENUES> 25,353
<CGS> 0
<TOTAL-COSTS> 8,800
<OTHER-EXPENSES> 8,148
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,256
<INCOME-PRETAX> (1,214)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,214)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,214)
<EPS-PRIMARY> (6.40)
<EPS-DILUTED> 0
</TABLE>
