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 28, 1997
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 28, 1997
(Unaudited) and December 27, 1996 (Unaudited)
Consolidated Statements of Operations for the Thirteen
Week Periods Ended March 28, 1997 (Unaudited) and
March 29, 1996 (Unaudited)
Consolidated Statements of Cash Flows for the Thirteen
Week Periods Ended March 28, 1997 (Unaudited) and
March 29, 1996 (Unaudited)
Notes to the Consolidated Financial Statements for the
Thirteen Week Period Ended March 28, 1997 (Unaudited)
<PAGE>
ML MEDIA PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 28, 1997 (UNAUDITED) AND DECEMBER 27, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
March 28, December 27,
1997 1996
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 93,514,488 $ 91,591,280
Investments held by escrow
agents 6,324,317 6,244,252
Accounts receivable (net
of allowance for doubtful
accounts of $517,301 and
$798,773, respectively) 6,835,459 6,768,307
Prepaid expenses and deferred
charges (net of
accumulated amortization of
$3,521,230 and $3,481,529,
respectively) 822,023 984,574
Property, plant and
equipment(net of accumulated
depreciation of $16,474,084
and $15,246,042,
respectively) 21,021,127 20,582,046
Intangible assets (net of
accumulated amortization of
$55,213,483 and $54,346,121,
respectively) 32,720,518 33,587,880
Other assets 1,211,961 1,236,485
TOTAL ASSETS $162,449,893 $160,994,824
</TABLE>
(Continued on the following page.)
<PAGE>
ML MEDIA PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 28, 1997 (UNAUDITED) AND DECEMBER 27, 1996 (UNAUDITED)
(continued)
<TABLE>
<CAPTION>
March 28, December 27,
1997 1996
<S> <C> <C>
LIABILITIES AND PARTNERS'
CAPITAL:
Liabilities:
Borrowings $ 59,223,978 $ 60,348,428
Accounts payable and
accrued liabilities 21,235,749 20,941,830
Subscriber advance payments 1,526,806 1,545,835
Total Liabilities 81,986,533 82,836,093
Commitments and
Contingencies (Note 3)
Partners' Capital:
General Partner:
Capital contributions, net of
offering expenses 1,708,299 1,708,299
Cash distributions (1,167,841) (1,167,841)
Cumulative income 327,093 304,047
867,551 844,505
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 distributions (115,616,310) (115,616,310)
Cumulative income 32,382,428 30,100,845
79,595,809 77,314,226
Total Partners' Capital 80,463,360 78,158,731
TOTAL LIABILITIES AND
PARTNERS' CAPITAL $ 162,449,893 $ 160,994,824
</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 28, 1997 (UNAUDITED) AND
MARCH 29, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
March 28, March 29,
1997 1996
<S> <C> <C>
REVENUES:
Operating revenues $ 12,094,489 $ 25,244,355
Interest 783,734 108,513
Total revenues 12,878,223 25,352,868
COSTS AND EXPENSES:
Property operating 4,589,863 8,799,752
General and administrative 2,192,328 5,364,409
Depreciation and amortization 2,171,240 7,769,657
Interest expense 1,317,245 4,255,642
Management fees 302,918 377,858
Total costs and expenses 10,573,594 26,567,318
NET INCOME/(LOSS) $ 2,304,629 $ (1,214,450
)
Per Unit of Limited Partnership
Interest:
NET INCOME/(LOSS) $ 12.14 $ (6.40
)
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 28, 1997 (UNAUDITED) AND
MARCH 29, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
March 28, March 29,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income/(loss) $ 2,304,62 $ (1,214,45
9 0)
Adjustments to reconcile net
income/(loss) to net cash provided by
operating activities:
Depreciation and amortization 2,171,240 7,769,657
Bad debt expense/(recovery, net) (205,993) 99,415
Changes in operating assets and
liabilities:
Decrease/(Increase):
Accounts receivable 138,841 1,383,102
Investments held by escrow agents (80,065) (15,600)
Prepaid expenses and deferred 122,850 (67,117)
charges
Other assets 24,524 (44,387)
(Decrease)/Increase:
Accounts payable and accrued
liabilities 293,919 (507,227)
Subscriber advance payments (19,029) 61,075
Net cash provided by operating
activities 4,750,916 7,464,468
</TABLE>
(Continued on the following page.)
<PAGE>
ML MEDIA PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTEEN WEEK PERIODS ENDED MARCH 28, 1997 (UNAUDITED)
AND MARCH 29, 1996 (UNAUDITED)
(continued)
<TABLE>
<CAPTION>
March 28, March 29,
1997 1996
<S> <C> <C>
Cash flows from investing activities:
Purchase of property, plant and
equipment (1,703,258) (2,687,513)
Net cash used in investing activities (1,703,258) (2,687,513)
Cash flows from financing activities:
Principal payments on borrowings (1,124,450) (375,000)
Net cash used in financing activities (1,124,450) (375,000)
Net increase in cash and cash
equivalents 1,923,208 4,401,955
Cash and cash equivalents at the
beginning of year 91,591,280 40,124,366
Cash and cash equivalents at the
end of period $93,514,488 $44,526,321
Cash paid for interest $ 244,298 $ 3,087,754
</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 28, 1997 (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 28, 1997
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 28, 1997 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 1996 Annual
Report on Form 10-K filed with the Commission on April 11, 1997.
Certain reclassifications were made to the 1996 financial
statements to conform with the current period's presentation.
2. California Cable Systems, KATC, Puerto Rico Radio and Wincom-
WEBE-WICC
The information set forth in the Liquidity and Capital Resources
section of Part I, Item 2; Management's Discussion and Analysis
of Financial Condition and Results of Operations under the
headings California Cable Systems, KATC, Puerto Rico Radio and
Wincom-WEBE-WICC is hereby incorporated herein by reference and
made a part hereof.
3. Contingencies
On May 1, 1996, a purported class action lawsuit was filed in
Orange County Superior Court 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 March 28, 1997, Registrant had $93,514,488 in cash and cash
equivalents. Of this amount, approximately $29.7 million is
restricted for use at C-ML Cable and C-ML Radio and approximately
$37.0 million is in cash reserves to cover both operating
liabilities and litigation contingencies relating to the
California Cable Systems prior to their sale. In addition,
approximately $6.1 million is dedicated to fund both actual and
contingent liabilities resulting from the sale of WREX and KATC.
The remaining investments account for approximately $11.8 million
of cash limited for use at the operating level. The cash at C-ML
Cable has been dedicated for the funding of its capital
expenditure programs and to satisfy its future debt service
requirements. C-ML Cable's debt service requirements include
annual principal payments of $20 million which will commence
November 30, 1998. In addition, the amount payable for accrued
management fees and expenses owed to the General Partner amounted
to approximately $2.7 million as of March 28, 1997.
Registrant's ongoing cash needs will be to fund debt service,
capital expenditures and working capital needs. During the
thirteen week period ended March 28, 1997, cash interest paid was
$244,298 and principal repayments of $1,124,450 were made. During
the remainder of 1997, Registrant is required by its various debt
agreements to make scheduled principal repayments of $9,223,978
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
unrestricted cash to meet all its contractual debt obligations of
all of its investments; however, such debt obligations are
recourse only to specified assets.
As of March 28, 1997, Registrant's investments in media
properties consisted of a 50% interest in a 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; 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.
Although no assurance can be made concerning the precise timing
of the ultimate disposition of Registrant's remaining media
properties, Registrant currently anticipates that selling its
remaining investments in media properties will run through 1998.
On May 1, 1996, a purported class action lawsuit was filed in
Orange County Superior Court 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.
California Cable Systems
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. On May 31, 1996,
Registrant consummated such sale pursuant to the terms of the
Asset Purchase Agreement. The base purchase price for the
California Cable Systems was $286 million, subject to certain
adjustments including an operating cash flow, as well as a
working capital adjustment, as provided in the Asset Purchase
Agreement.
Pursuant to the Asset Purchase Agreement and a letter agreement,
entered into by Registrant and Century at closing, Registrant
deposited $5 million into an indemnity escrow account, which has
been classified on the accompanying Consolidated Balance Sheet as
Investments held by escrow agents.
Upon closing, Registrant set aside approximately $40.7 million in
a cash reserve to cover both operating liabilities and litigation
contingencies relating to the California Cable Systems'
operations prior to their sale, as well as a potential purchase
price adjustment. In addition, the initial sales proceeds of the
California Cable Systems were dedicated to pay approximately $9.2
million to the General Partner for accrued management fees and
expenses as of the date of sale; of this amount, approximately
$7.6 million was paid through March 29, 1997 and the balance will
be paid in the remainder of 1997.
In accordance with the Amended and Restated Agreement of Limited
Partnership, any amounts which may be available for distribution
from any unused cash balances, after accounting for certain other
expenses of Registrant including certain expenses incurred after
May 31, 1996, 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. As of
March 28, 1997, Registrant has approximately $37.0 million
remaining in cash reserves to cover both operating liabilities
and litigation contingencies relating to the California Cable
Systems prior to their sale.
KATC
In the second quarter of 1997, Registrant received approximately
$1.1 million, including interest, from the release of certain
proceeds generated from the sale of KATC which were deposited
into an indemnity escrow account at the time of such sale. Such
funds, taken together with the proceeds, if any, from
Registrant's other reserves, after accounting for certain other
expenses of Registrant, will be distributed as soon as
practicable to the partners in accordance with the terms of the
Partnership Agreement.
Puerto Rico Radio
On May 1, 1997, Century-ML Cable Venture, which includes C-ML
Radio, entered into a non-binding letter of intent to sell the C-
ML Radio stations, however, there can be no assurance that this
will lead to a definitive sale contract or eventual closing.
Registrant anticipates receiving no proceeds from such sale as
any sale proceeds received from such sale is required to be
applied against the outstanding senior indebtedness of C-ML Radio
and C-ML Cable, since they are jointly financed.
Wincom-WEBE-WICC
On July 30, 1993, Registrant and Chemical Bank (now known as the
Chase Manhattan Bank; the "Wincom Bank") executed an amendment to
the Wincom-WEBE-WICC Loan (the "Restructuring Agreement"),
effective January 1, 1993. Pursuant to the final maturity date
set forth in the Restructuring Agreement, all amounts outstanding
under the Series A Term Loan and the Series B Term Loan will
become due and payable on December 31, 1997. As a result of an
ambiguity in the covenant provisions in the Restructuring
Agreement, the Wincom Bank may take the position that Registrant
is in default of a negative loan covenant. If the Wincom Bank
was successful in asserting this position, Registrant would be in
default and the Wincom Bank could exercise its contractual
remedies which include its right to accelerate the December 31,
1997 due date of the entire amount of the loan. However, based
upon Registrant's conversations with a representative of the
Wincom Bank, Registrant does not believe that it is in default.
The Wincom-WEBE-WICC group currently does not, nor does it expect
to in the future, have sufficient cash to pay all outstanding
amounts on such final maturity date. Accordingly, the Wincom-
WEBE-WICC group anticipates obtaining a refinancing of such loan,
although there can be no assurances that it will be able to do so
on economically satisfactory terms.
Cable Industry 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 ("Commission" or "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 distribution ("MVPD")
systems 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") added a fourth condition: the mere offering
(regardless of penetration) by a local exchange carrier, or an
entity using the local exchange carrier'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. Under these regulations,
Registrant's systems, 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 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 rate regulation. The 1996 Act also modifies the
rules governing the filing of complaints for rate increases on
the CPST. Under the former procedures, mandated by the 1992
Cable Act, subscribers were allowed 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 "subscriber complaints" 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.
The FCC's rate regulations generally required regulated cable
systems to use an FCC-prescribed "benchmark" approach to set
initial rates for BSTs and CPSTs. Cable systems ultimately were
required to reduce their rates by approximately 17% from the
rates in effect on September 30, 1992. Certain modifications of
the rules were made for low-price cable systems 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). The United States Court of Appeals has upheld these
regulations, but these and other rate regulations may be subject
to further judicial review, and may be altered by ongoing FCC
rulemaking and case-by-case review.
Alternatively, cable operators may seek to have their rates
regulated under a "cost-of-service" approach, which, much like
the method historically used to regulate the rates of local
exchange carriers, allows cable system operators to recover
through regulated rates their normal operating expenses, and a
reasonable return on investment. The final cost-of-service rules
ultimately adopted by the FCC: (1) establish an industry-wide
11.25% rate of return, (but the commission has proposed to use a
cable system's actual debt cost and capital structure to
determine its final rate of return); (2) establish 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 the rate
base; and (3) replaced the presumption of a two-year period for
accumulated start-up losses with a case-by-case determination of
the appropriate period. 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.
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, annual FCC regulatory fees 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, each cable system was subject to an
aggregate cap of $1.50 on the amount it may increase CPST rates
due to channel additions. The FCC has also adopted "tier
flexibility" rules that allow cable operators to reduce BST rates
and take a corresponding revenue neutral, increase in CPST rates.
The FCC's regulatory treatment of "a la carte" packages of
channels has been a source of particular regulatory uncertainty
for many cable systems. 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, the FCC
revised its 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 Cable Act, the FCC has
established special rate and administrative treatment for small
cable systems and small cable companies. In addition to
transition rate relief and streamlined rate reduction approaches
to setting initial permitted rates, 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 United States
serving approximately 12% of all cable subscribers. The 1996 Act
further deregulates small cable companies: under the 1996 Act,
an operator that, directly or through an affiliate, serves fewer
than 1% of all subscribers in the United States (approximately
600,000 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
basic tier was the only tier subject to regulation as of December
31, 1994) in any franchise area in which that operator serves
50,000 or fewer subscribers.
Beginning in late 1995, the FCC demonstrated an increased
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 has adopted or
proposed 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 proposed 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 also provides operator flexibility for subscriber
notification of rate and service changes. The 1996 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. The FCC has adopted rules
implementing a number of provisions of the 1996 Act and is
considering the adoption of others.
On March 31, 1997, the United States Supreme Court, in a 5-4
decision, upheld the constitutionality of the must-carry
provisions of the 1992 Cable Act. As a result, the regulations
promulgated by the FCC to implement the must-carry provisions
will remain in effect. Under those rules, cable operators
generally are required to devote up to one-third of their
activated channel capacity to the carriage of local commercial
television stations.
Radio Industry Regulation
The 1996 Act completely revised the radio ownership rules most
recently changed by the FCC in 1992. The 1996 Act eliminated the
national radio ownership restriction and, as a result, any number
of AM or FM broadcast stations may be owned or controlled by one
entity nationally. The 1996 Act also greatly eased local radio
ownership restrictions. As with the old rules, the maximum
varies depending on the number of radio stations within the
market. In markets with more than 45 stations, one company may
own, operate, or control eight stations, with no more than five
in any one service (AM or FM). In markets of 30-44 stations, one
company may own seven stations, with no more than four in any one
service. In markets with 15-29 stations, one entity may own six
stations, with no more than four in any one service. In markets
with 14 commercial stations or less, one company may own up to
five stations or 50% of all of the stations, whichever is less,
with no more than three in any one service.
In 1992, the FCC placed limitations on local marketing agreements
("LMAs") through which the licensee of one radio station provides
the programming for another licensee's station in the same
market. Stations operating in the same service (e.g., where both
stations are AM) and in the same market are prohibited from
simulcasting more than 25% of their programming. Moreover, in
determining the number of stations that a single entity may
control in a local market, an entity programming a station
pursuant to an LMA is required, under certain circumstances, to
count that station toward its maximum even though it does not own
the station.
In addition, in January 1995, the FCC adopted rules to allocate
spectrum for satellite digital audio radio service ("DARS").
Satellite DARS systems potentially could provide for regional or
nationwide distribution of radio programming with fidelity
comparable to compact disks. An auction for DARS spectrum was
held on April 1, 1997 for two licenses to provide nationwide DARS
services. In addition, the FCC has undertaken an inquiry into
the terrestrial broadcast of DARS signals, addressing, among
other things, the need for spectrum outside the existing FM band
and the role of existing broadcasters in providing such a
service. Further, in 1995, the laboratory testing of a number of
competing in-band on-channel terrestrial DARS technologies was
completed, with many of the systems progressing to the next stage
of field testing. Registrant cannot predict the outcome of these
proceedings or the ultimate impact of DARS on its stations.
Results of Operations.
For the thirteen week periods ended March 28, 1997 and March 29,
1996:
Net Income/Loss
Registrant's net income for the thirteen week period ended March
28, 1997 was approximately $2.3 million, as compared to a net
loss of approximately $1.2 million for the 1996 period. The
increase in net income for the 1997 period primarily resulted
from the sale of California Cable Systems during the second
quarter of 1996 and other factors described below.
Operating Revenues.
During the thirteen week periods ended March 28, 1997 and March
29, 1996, Registrant had total operating revenues of
approximately $12.1 million and $25.2 million, respectively. The
approximate $13.1 million decrease in operating revenues was
primarily due to a decrease of approximately $14.4 million in
operating revenues resulting from the sale of California Cable
Systems during the second quarter of 1996, partially offset by a
combined $820,000 increase in the Wincom-WEBE-WICC Group due to
an increase in market share as well as advertising rates. 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 $784,000 and
$109,000 during the first quarters of 1997 and 1996,
respectively. The increase is due primarily to interest earned
on the cash balances related to the sale of the California Cable
Systems.
Property Operating Expense.
During the first quarters of 1997 and 1996, Registrant incurred
property operating expenses of approximately $4.6 million and
$8.8 million, respectively. Registrant's total property
operating expenses decreased by approximately $4.2 million from
year to year primarily due to a decrease of approximately $4.9
million resulting from the sale of the California Cable Systems
during the second quarter of 1996. 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 first quarters of 1997 and 1996, Registrant incurred
general and administrative expenses of approximately $2.2 million
and $5.4 million, respectively. Registrant's total general and
administrative expenses decreased by approximately $3.2 million
from year to year primarily due to a decrease of approximately
$3.2 million resulting from the sale of the California Cable
Systems during the second quarter of 1996. 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 $2.2 million and $7.8 million during the first
quarters of 1997 and 1996, respectively. Registrant's total
depreciation and amortization expense decreased by approximately
$5.6 million from year to year due to a $4.5 million decrease
resulting from the sale of the California Cable Systems during
the second quarter of 1996 and a decrease of approximately $1.1
million at C-ML Cable which resulted from the write off of fixed
assets during the first quarter of 1996. 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 $1.3 million and $4.3 million
in the first quarters of 1997 and 1996, 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 to a decrease of approximately $2.9
million related to the repayment of outstanding borrowings.
PART II - OTHER INFORMATION.
Item 1. Legal Proceedings.
On May 1, 1996, a purported class action lawsuit was
filed in Orange County Superior Court 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.
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: May 12, 1997 /s/ Kevin K. Albert
Kevin K. Albert
Director and President
Dated: May 12, 1997 /s/ Robert F. Aufenanger
Robert F. Aufenanger
Director and Executive Vice
President
Dated: May 12, 1997 /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 12, 1997 /s/I. Martin Pompadur
I. Martin Pompadur
President, Secretary and
Director
(principal executive officer of
the Registrant)
Dated: May 12, 1997 /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 28, 1997 Form
10Q Consolidated Balance Sheets and Consolidated Statements
of Operations as of March 28, 1997, 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-27-1996
<PERIOD-END> MAR-27-1997
<CASH> 93,514
<SECURITIES> 6,324
<RECEIVABLES> 7,353
<ALLOWANCES> 517
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 37,495
<DEPRECIATION> 16,474
<TOTAL-ASSETS> 162,450
<CURRENT-LIABILITIES> 59,224
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 80,463
<TOTAL-LIABILITY-AND-EQUITY> 162,450
<SALES> 0
<TOTAL-REVENUES> 12,878
<CGS> 0
<TOTAL-COSTS> 4,590
<OTHER-EXPENSES> 4,666
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,317
<INCOME-PRETAX> 2,305
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,305
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,305
<EPS-PRIMARY> 12.14
<EPS-DILUTED> 0
</TABLE>
