SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
December 31, 1999
0-14871
(Commission File Number)
ML MEDIA PARTNERS, L.P.
(Exact name of registrant as specified in its governing
Securities registered pursuant to
Section 12(b) of the Act:
Delaware
(State or other jurisdiction of organization)
13-3321085
(IRS Employer Identification No.)
2 World Financial Center, 14th Floor
New York, New York 10281-6114
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code:
(212) 236-6577
Securities registered pursuant to
Section 12(b) of the Act:
None
- --------------------------------------------------------------------------------
(Title of Class)
<PAGE>
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
- --------------------------------------------------------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No .
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in a definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
<PAGE>
Part I.
Item 1. Business.
Formation
ML Media Partners, L.P. (the "Registrant" or the "Partnership"), a Delaware
limited partnership, was organized February 1, 1985. Media Management Partners,
a New York general partnership (the "General Partner"), is Registrant's sole
general partner. The General Partner is a joint venture, organized as a general
partnership under New York law, between RP Media Management ("RPMM") and ML
Media Management Inc. ("MLMM"). MLMM is a Delaware corporation and an indirect
wholly-owned subsidiary of Merrill Lynch & Co., Inc. and an affiliate of Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"). RPMM is organized
as a general partnership under New York law, consisting of The Elton H. Rule
Company and IMP Media Management Inc. As a result of the death of Elton H. Rule,
the owner of The Elton H. Rule Company, the general partner interest of the
Elton H. Rule Company may either be redeemed or acquired by a company controlled
by I. Martin Pompadur. The General Partner was formed for the purpose of acting
as general partner of Registrant.
Registrant was formed to acquire, finance, hold, develop, improve, maintain,
operate, lease, sell, exchange, dispose of and otherwise invest in and deal with
media businesses and direct and indirect interests therein.
On February 4, 1986, Registrant commenced the offering through Merrill Lynch of
up to 250,000 units of limited partnership interest ("Units") at $1,000 per
Unit. Registrant held four closings of Units; the first for subscriptions
accepted prior to May 14, 1986 representing 144,990 Units aggregating
$144,990,000; the second for subscriptions accepted thereafter and prior to
October 9, 1986 representing 21,540 Units aggregating $21,540,000; the third for
subscriptions accepted thereafter and prior to November 18, 1986 representing
6,334 Units aggregating $6,334,000; and the fourth and final closing of Units
for subscriptions accepted thereafter and prior to March 2, 1987 representing
15,130 Units aggregating $15,130,000. At these closings, including the initial
limited partner capital contribution, subscriptions for an aggregate of
187,994.1 Units representing the aggregate capital contributions of $187,994,100
were accepted. During 1989, the initial limited partner's capital contribution
of $100 was returned.
The Registration Statement relating to the offering was filed on December 19,
1985 pursuant to the Securities Act of 1933 under Registration Statement No.
33-2290 and was declared effective on February 3, 1986 and amendments thereto
became effective on September 18, 1986, November 4, 1986 and on December 12,
1986 (such Registration Statement, as amended from and after each such date, the
"Registration Statement").
Media Properties
As of December 31, 1999, Registrant's sole remaining operating investment in
media properties is its 50% interest in a joint venture which owns two cable
television systems in Puerto Rico.
As of December 31, 1999, Registrant has completed the sale of the following
media properties:
an AM and FM radio station combination in Bridgeport, Connecticut was sold
on August 31, 1999;
a corporation which owns a FM radio station in Cleveland, Ohio was sold on
January 28, 1999;
an AM and FM radio station combination in Anaheim, California was sold on
January 4, 1999;
an AM and FM radio station combination and a background music service in
San Juan, Puerto Rico was sold on June 3, 1998;
four cable television systems located in the California communities of
Anaheim, Hermosa Beach/Manhattan Beach, Rohnert Park/Yountville, and
Fairfield were sold on May 31, 1996;
two VHF television stations, one located in Lafayette, Louisiana and the
other in Rockford, Illinois, were sold on September 30, 1995 and July 31,
1995, respectively;
an AM and FM radio station combination in Indianapolis, Indiana was sold on
October 1, 1993;
the Universal Cable systems were sold on July 8, 1992; and
two radio stations, one located in Tulsa, Oklahoma and the other in
Jacksonville, Florida, were sold on July 31, 1990.
Puerto Rico Investments
Cable Television Investments
Pursuant to the management agreement and joint venture agreement dated December
16, 1986 (the "Joint Venture Agreement"), as amended and restated, between
Registrant and Century Communications Corp. ("Century"), the parties formed a
joint venture under New York law, Century-ML Cable Venture (the "Venture"), in
which each has a 50% ownership interest. On December 16, 1986 the Venture,
through its wholly-owned subsidiary corporation, Century-ML Cable Corporation
("C-ML Cable Corp."), purchased all of the stock of Cable Television Company of
Greater San Juan, Inc. ("San Juan Cable"), and liquidated San Juan Cable into
C-ML Cable Corp. C-ML Cable Corp., as successor to San Juan Cable, is the
operator of the largest cable television system in Puerto Rico.
On September 24, 1987, the Venture acquired all of the assets of Community
Cable-Vision of Puerto Rico, Inc., Community Cablevision of Puerto Rico
Associates, and Community Cablevision Incorporated (collectively, the "Community
Companies"), which consisted of a cable television system serving the
communities of Catano, Toa Baja and Toa Alta, Puerto Rico, which are contiguous
to San Juan Cable. C-ML Cable Corp. and the Community Companies are herein
referred to as C-ML Cable ("C-ML Cable").
On October 1, 1999, Adelphia Communications Corporation ("Adelphia"), through
its wholly owned subsidiary Arahova Communications Inc. ("Arahova"), consummated
its acquisition of Century. While Adelphia's purchase included Century's 50%
interest in C-ML Cable, it did not include a purchase of Registrant's 50%
interest in C-ML Cable. Registrant negotiated with Adelphia regarding the sale
to Adelphia of Registrant's interest in the Venture, but no definitive
arrangement was concluded.
On February 18, 2000, Registrant triggered the "buy-sell" provision in the Joint
Venture Agreement, and Adelphia elected to cause the Venture to sell C-ML Cable.
A dispute arose between Registrant and Adelphia over, among other things, the
terms of the sale pursuant to the Joint Venture Agreement, and on March 24, 2000
Registrant commenced a suit against Adelphia. See "Item 3. Legal Proceedings".
As of December 31, 1999, C-ML Cable serves 133,320 basic subscribers, passes
approximately 305,000 homes and consists of approximately 1,938 linear miles of
cable plant.
During 1999, Registrant's share of the net operating revenues of C-ML Cable
totaled $35,162,727 (100.0% of operating revenues of Registrant's continuing
operations).
During 1998, Registrant's share of the net operating revenues of C-ML Cable
totaled $32,575,174 (100.0% of operating revenues of Registrant's continuing
operations).
During 1997, Registrant's share of the net operating revenues of C-ML Cable
totaled $29,404,870 (100.0% of operating revenues of Registrant's continuing
operations).
Radio Investments
On February 15, 1989, Registrant and Century entered into a Management Agreement
and Joint Venture Agreement whereby a new joint venture, Century-ML Radio
Venture ("C-ML Radio"), was formed under New York law. Responsibility for the
management of radio stations to be acquired by C-ML Radio was assumed by
Registrant.
On March 10, 1989, C-ML Radio acquired all of the issued and outstanding stock
of Acosta Broadcasting Corporation ("Acosta"), Fidelity Broadcasting Corporation
("Fidelity"), and Broadcasting and Background Systems Consultants Corporation
("BBSC"); all located in San Juan, Puerto Rico. The purchase price for the stock
was approximately $7.8 million. At the time of acquisition, Acosta owned radio
stations WUNO-AM and Noti Uno News, Fidelity owned radio station WFID-FM, and
BBSC owned Beautiful Music Services, all serving various communities within
Puerto Rico.
In February 1990, C-ML Radio acquired the assets of Radio Ambiente Musical
Puerto Rico, Inc. ("RAM"), a background music service. The purchase price was
approximately $200,000 and was funded with cash generated by C-ML Radio. The
operations of RAM were consolidated into those of BBSC.
Effective January 1, 1994, all of the assets of C-ML Radio were transferred to
the Venture in exchange for the assumption by the Venture of all the obligations
of C-ML Radio and the issuance to Century and Registrant by the Venture of new
certificates evidencing partnership interests of 50% and 50%, respectively. The
transfer was made pursuant to a Transfer of Assets and Assumption of Liabilities
Agreement. At the time of this transfer, Registrant and Century entered into an
amended and restated management agreement and joint venture agreement (the
"Revised Joint Venture Agreement") governing the affairs of the venture as
revised.
Under the terms of the Revised Joint Venture Agreement, Century is responsible
for the day-to-day operations of C-ML Cable and until the sale of C-ML Radio
(see below), Registrant was responsible for the day-to-day operations of C-ML
Radio. For providing services of this kind, Century is entitled to receive
annual compensation of 5% of C-ML Cable's net gross revenues (defined as gross
revenues from all sources less monies paid to suppliers of pay TV product, e.g.,
HBO, Cinemax, Disney and Showtime) and Registrant was entitled to receive annual
compensation of 5% of C-ML Radio's gross revenues including the local marketing
agreement ("LMA") revenue (after agency commissions, rebates or discounts and
excluding revenues from barter transactions).
On June 3, 1998, the Venture consummated the sale of C-ML Radio pursuant to a
sales agreement entered into in October 1997 between the Venture and Madifide,
Inc. The base sales price for C-ML Radio was approximately $11.5 million,
approximately $5.8 million of which is Registrant's share, subject to closing
adjustments. Pursuant to an LMA entered into, effective as of October 1, 1997,
the buyer was allowed to program the station from such date through the date of
sale. C-ML Radio collected a monthly LMA fee from the buyer which was equal to
the operating income for that month, provided however, that it not be less than
$50,000 nor more than $105,000. The monthly fee was recognized as revenue during
the LMA period and Registrant did not recognize any operating revenues nor incur
any net operating expenses of C-ML Radio during the LMA period. At the closing,
the Venture and Madifide, Inc. entered into escrow agreements pursuant to which
the Venture deposited, in aggregate, approximately $725,040, $362,520 of which
is Registrant's share, into three separate escrow accounts with respect to which
indemnification, benefit, and chattel mortgage claims may be made by Madifide,
Inc. for a period of one year. As of December 25, 1998, the balance of these
escrows was classified on the accompanying Consolidated Balance Sheet as
Investments held by escrow agents. During the second quarter of 1999, the
remaining escrow of $324,999 was released.
Pursuant to the terms of the outstanding senior indebtedness that jointly
finances C-ML Radio and C-ML Cable, the net proceeds, and escrow amounts when
discharged, if any, from the resulting sale of C-ML Radio must be retained by
the Venture and cannot be distributed to Registrant or its partners.
During 1998, until its sale on June 3, 1998, Registrant's share of the net
operating revenues of C-ML Radio totaled $165,004 (0.8% of operating revenues
from Registrant's discontinued operations - Radio Station Segment).
During 1997, Registrant's share of the net operating revenues of C-ML Radio
totaled $2,051,576 (8.6% of operating revenues from Registrant's discontinued
operations - Radio Station Segment).
California Cable Systems
In December, 1986, ML California Cable Corporation ("ML California"), a
wholly-owned subsidiary of Registrant, entered into an agreement with SCIPSCO,
Inc. ("SCIPSCO"), a wholly-owned subsidiary of Storer Communications, Inc. for
the acquisition by ML California of four cable television systems servicing the
California communities of Anaheim, Hermosa Beach/Manhattan Beach, Rohnert
Park/Yountville, and Fairfield and surrounding areas. The acquisition was
completed on December 23, 1986 with the purchase by ML California of all of the
stock of four subsidiaries of SCIPSCO which at closing owned all the assets of
the California cable television systems. The term "California Cable Systems" or
"California Cable" as used herein means either the cable systems or the owning
entities, as the context requires.
On December 30, 1986, ML California was liquidated into Registrant and
transferred all of its assets, except its Federal Communications Commission
("Commission" or "FCC") licenses, subject to its liabilities, to Registrant. The
licenses were transferred to ML California Associates, a partnership formed
between Registrant and the General Partner for the purpose of holding the
licenses in which Registrant is Managing General Partner and 99.99% equity
holder.
On November 28, 1994, Registrant entered into an agreement (the "Asset Purchase
Agreement") with Century to sell to Century substantially all of the assets used
in 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.
On August 15, 1996, Registrant made a cash distribution to limited partners of
record on May 31, 1996, of approximately $108.1 million ($575 per Unit) and
approximately $1.1 million to its General Partner, representing its 1% share,
from net distributable sales proceeds from the sale of the California Cable
Systems.
In addition, upon closing of the sale of the California Cable Systems,
Registrant set aside approximately $40.7 million in a cash reserve to cover
operating liabilities, current litigation, and litigation contingencies relating
to the California Cable Systems' operations prior to and resulting from their
sale, as well as a potential purchase price adjustment. In accordance with the
terms of the Partnership Agreement, any amounts which may be available for
distribution from any unused cash reserves, 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.
Effective August 14, 1997, reserves in the amount of approximately $13.2 million
were released and, after accounting for certain expenses of Registrant, in
accordance with the terms of the Partnership Agreement, were included in the
cash distribution that was distributed to partners on November 25, 1997. On
March 1, 1999, reserves in the amount of approximately $6.1 million were
released and, in accordance with the terms of the Partnership Agreement, were
included in the cash distribution made to partners on March 31, 1999. As of
December 31, 1999, Registrant has approximately $15.2 million remaining in cash
reserves to cover operating liabilities, current litigation, and litigation
contingencies relating to the California Cable Systems prior to and resulting
from their sale.
<PAGE>
WREX Television Station
On April 29, 1987, Registrant entered into an acquisition agreement with Gilmore
Broadcasting Corporation, a Delaware corporation ("Gilmore"), for the
acquisition by Registrant of substantially all the assets of television station
WREX-TV, Rockford, Illinois ("WREX-TV" or "WREX"). The acquisition was
consummated on August 31, 1987 for $18 million.
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, 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 WREX, and the balance of approximately $16.1 million was applied to repay a
portion of the bank indebtedness secured by the assets of WREX and KATC (as
defined below). Quincy did not assume certain 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 $8.8 million in 1995.
effective August 14, 1997 approximately $1.8 million, a portion of the reserve
established at the time of the WREX-TV sale, was released. In accordance with
the terms of the Partnership Agreement, such released reserve amounts, after
accounting for certain expenses of Registrant, were included in the cash
distribution made to partners on November 25, 1997. In addition, effective
December 26, 1997 the remaining reserve established at the time of the WREX sale
of approximately $161,000 was released. Thus, during 1997, Registrant recognized
a gain on sale of WREX of approximately $2.0 million resulting from the release
of reserves and reversal of previous accruals.
KATC Television Station
On September 17, 1986, Registrant entered into an acquisition agreement with
Loyola University, a Louisiana non-profit corporation ("Loyola"), for the
acquisition by Registrant of substantially all the assets of television station
KATC-TV, Lafayette Louisiana ("KATC-TV" or "KATC"). The acquisition was
completed on February 2, 1987 for a purchase price of approximately $26.7
million.
On September 30, 1995, Registrant completed the sale to KATC Communications,
Inc. (the "KATC Buyer") of substantially all of the assets used in the
operations of Registrant's television station KATC, other than cash and accounts
receivable. The KATC Buyer did not assume certain liabilities of KATC and
Registrant remained liable for such liabilities. The purchase price for the
assets was $24.5 million. From the proceeds of the sale, approximately $6.3
million was applied to repay in full the remaining bank indebtedness secured by
the assets of KATC and WREX; a reserve of approximately $2.0 million was
established to cover certain purchase price adjustments and expenses and
liabilities relating to KATC; $1.0 million was deposited into an indemnity
escrow account to secure Registrant's indemnification obligations to the KATC
Buyer; approximately $7.6 million was applied to pay a portion of accrued fees
and expenses owed to the General Partner; and the remaining amount of
approximately $7.6 million ($40 per Unit) was distributed to partners in
December, 1995. Registrant recognized a gain for financial reporting purposes of
approximately $14.0 million on the sale of KATC in 1995.
On June 24, 1997, Registrant received the discharge of escrowed proceeds of $1.0
million (and approximately $100,000 of interest earned thereon) generated from
the sale of KATC. In addition, effective August 14, 1997, approximately $1.5
million, a portion of the reserve established at the time of the KATC sale, was
released. In accordance with the terms of the Partnership Agreement, the amount
of such released reserve and discharged escrowed proceeds, after accounting for
certain expenses of Registrant, were included in the cash distribution made to
partners on November 25, 1997. In addition, effective December 26, 1997, the
remaining reserve established at the time of the KATC sale of approximately
$218,000 was released. Thus, during 1997, Registrant recognized a gain on sale
of KATC of approximately $1.7 million resulting from the release of reserves and
reversal of previous accruals.
WEBE-FM and WICC-AM
On August 20, 1987, Registrant entered into an Asset Purchase Agreement with 108
Radio Company, L.P. for the acquisition of the business and assets of radio
station WEBE-FM, Westport, Connecticut ("WEBE-FM" or "WEBE"), which serves
Fairfield and New Haven counties, for $12.0 million.
On July 19, 1989, Registrant purchased all of the assets of radio station
WICC-AM located in Bridgeport, Connecticut ("WICC-AM" or "WICC") from
Connecticut Broadcasting Company, Inc. The purchase price of $6.25 million was
financed solely from proceeds of the Wincom-WEBE-WICC Loan.
On August 31, 1999, Registrant consummated a sale to Aurora Communications, LLC
("Aurora") (formerly known as Shadow Communications, LLC) of substantially all
of the assets used in the operations of Registrant's radio stations, WEBE-FM and
WICC-AM (the "Connecticut Stations"), pursuant to a sales agreement dated April
22, 1999 (the "Connecticut Agreement").
The base sales price for the Connecticut Stations was $66 million, subject to
certain adjustments, including a working capital adjustment, as provided in the
Connecticut Agreement.
Pursuant to the Connecticut Agreement, Registrant deposited $3.3 million into an
indemnity escrow account against which Aurora may make indemnification claims
until December 31, 2000. At the closing, pursuant to the terms of the
Wincom-WEBE-WICC Loan, approximately $8.2 million was paid to the Wincom Bank,
as partial payment of the lender's 15% residual interest in the net proceeds
from the sale of the Connecticut Stations. In addition, approximately $6.6
million was applied to repay certain amounts owed to Registrant by the
Connecticut Stations. The General Partner has determined to add this amount to
Registrant's working capital to meet potential Registrant expenses and
contingencies. If working capital is not utilized by Registrant, in accordance
with the terms of the Partnership Agreement, it will ultimately be distributed
to the partners, in accordance with the terms of the Partnership Agreement. In
addition, Registrant held approximately $11.5 million of the sales proceeds to
pay (or to reserve for payment of) expenses and liabilities relating to the
operations of the Connecticut Stations prior to the sale, as well as wind-down
expenses, sale-related expenses, contingent obligations of the Connecticut
Stations, and the balance of the 15% residual interest in the net sales proceeds
payable to the lender under the Wincom-WEBE-WICC Loan.
On October 29, 1999, the remaining sales proceeds of approximately $36.4
million, after accounting for certain expenses of Registrant, were distributed
to partners of record as of August 31, 1999, in accordance with the terms of the
Partnership Agreement. To the extent any amounts reserved or paid into escrow as
described above are subsequently released, such amounts will be distributed to
partners of record as of the dates when such escrow or reserves are released.
Registrant recognized a gain of approximately $39.7 million on the sale of the
Connecticut Stations. As of December 31, 1999, Registrant had approximately $8.1
million remaining in cash reserves from the sale of the Connecticut Stations.
During 1999, until its sale on August 31, 1999, WEBE-FM generated net operating
revenues of $5,821,382 (71.6% of operating revenues from Registrant's
discontinued operations - Radio Station Segment).
During 1998, WEBE-FM generated net operating revenues of $8,485,300 (38.8% of
operating revenues from Registrant's discontinued operations - Radio Station
Segment).
During 1997, WEBE-FM generated net operating revenues of $7,851,792 (33.0% of
operating revenues from Registrant's discontinued operations - Radio Station
Segment).
During 1999, until its sale on August 31, 1999, WICC-AM generated net operating
revenues of $2,175,342 (26.8% of operating revenues from Registrant's
discontinued operations - Radio Station Segment).
During 1998, WICC-AM generated net operating revenues of $3,174,571 (14.5% of
operating revenues from Registrant's discontinued operations - Radio Station
Segment).
During 1997, WICC-AM generated net operating revenues of $2,969,144 (12.5% of
operating revenues from Registrant's discontinued operations - Radio Station
Segment).
Wincom
On August 26, 1988, Registrant acquired 100% of the stock of Wincom Broadcasting
Corporation ("Wincom"), an Ohio corporation headquartered in Cleveland for $46.0
million. At acquisition, Wincom and its subsidiaries owned and operated five
radio stations - WQAL-FM, Cleveland, Ohio; WCKN-AM/WRZX-FM, Indianapolis,
Indiana (the "Indianapolis Stations", including the Indiana University Sports
Radio Network, which was discontinued after the first half of 1992); KBEZ-FM,
Tulsa, Oklahoma; and WEJZ-FM, Jacksonville, Florida. On July 31, 1990,
Registrant sold the business and assets of KBEZ-FM and WEJZ-FM to Renda
Broadcasting Corp. for net proceeds of approximately $10.3 million. On October
1, 1993, Registrant sold the Indianapolis stations which generated net proceeds
in the approximate amount of $6.1 million. All proceeds of the sales were paid
to the lender.
On January 28, 1999, Registrant consummated a sale to Chancellor Media
Corporation of Los Angeles ("Chancellor") of the stock of Wincom, pursuant to a
stock purchase agreement (the "Cleveland Agreement") dated August 11, 1998.
Wincom owns all of the outstanding stock of Win Communications, Inc. ("WIN"),
which owns and operates the radio station WQAL-FM, serving Cleveland, Ohio (the
"Cleveland Station").
The base sales price for the Cleveland Station was $51,250,000, subject to
certain adjustments for the apportionment of current assets and liabilities as
of the closing date, as provided for in the Cleveland Agreement, resulting in a
reduction of the base sales price of approximately $1.6 million.
Pursuant to the Cleveland Agreement, Registrant deposited $2.5 million into an
indemnity escrow account against which Chancellor may make indemnification
claims for a period of up to two years after the closing. Approximately $2.0
million was used to repay in full the remaining outstanding balance of the
Wincom-WEBE-WICC Loan and pursuant to the terms of the Wincom-WEBE-WICC Loan, an
initial amount of approximately $7.3 million was paid to the Wincom Bank,
pursuant to its 15% residual interest in the net sales proceeds from the sale of
Wincom. In addition, Registrant held approximately $2.6 million of the sales
proceeds to pay (or to reserve for payment of) wind-down expenses, sale-related
expenses and the balance, if any, of the Wincom Bank's residual interest. The
remaining sales proceeds of $35.3 million were included in the cash distribution
made to partners on March 30, 1999 in accordance with the terms of the
Partnership Agreement.
On February 4, 2000, Registrant received the discharge of escrowed proceeds of
$1.5 million, plus interest earned thereon, generated from the sale of the
Cleveland Station. In accordance with the terms of the Partnership Agreement,
the amount of such discharged escrowed proceeds, after accounting for certain
expenses of Registrant, will be included in the cash distribution to limited
partners of $1,485,153 ($7.90 per Unit) and $15,001 to its General Partner,
representing its 1% share. This cash distribution to limited partners will be
paid to limited partners of record as of February 4, 2000 and will be
distributed to partners by the end of the second quarter of 2000.
To the extent any amounts reserved or paid into escrow as described above are
subsequently released, such amounts will be distributed to partners of record as
of the date of such release from such escrow or reserves. Registrant recognized
a gain of approximately $41.5 million on the sale of the Cleveland Station. As
of December 31, 1999, Registrant had approximately $2.5 million remaining in
cash reserves from the sale of the Cleveland Station.
During 1999, until its sale on January 28, 1999, Wincom generated net operating
revenues of $129,575 (1.6% of operating revenues from Registrant's discontinued
operations - Radio Station Segment).
During 1998, Wincom generated net operating revenues of $6,041,783 (27.6% of
operating revenues from Registrant's discontinued operations - Radio Station
Segment).
During 1997, Wincom generated net operating revenues of $6,995,768 (29.4% of
operating revenues from Registrant's discontinued operations - Radio Station
Segment).
Wincom-WEBE-WICC Loan
On July 19, 1989, Registrant entered into an Amended and Restated Credit
Security and Pledge Agreement which provided for borrowings up to $35.0 million
for use in connection with the Wincom-WEBE-WICC Loan. On July 30, 1993,
Registrant and the Wincom Bank executed an amendment to the Wincom-WEBE-WICC
Loan, effective January 1, 1993, which cured all previously outstanding defaults
pursuant to the Wincom-WEBE-WICC Loan. On December 31, 1997, the
Wincom-WEBE-WICC Loan matured and became due and payable in accordance with its
terms. Registrant remained in default on the Wincom-WEBE-WICC Loan during 1998,
and as of December 25, 1998 a principal balance of $1,993,137 was outstanding.
Although in 1999, Registrant repaid the remaining outstanding principal balance
of the Wincom-WEBE-WICC Loan in full plus accrued interest, the default has not
been waived by the Wincom Bank.
KEZY-FM and KORG-AM
On November 16, 1989, Registrant acquired an AM ("KORG-AM") and an FM
("KEZY-FM") (jointly the "Anaheim Stations" or "KORG/KEZY") radio station
combination located in Anaheim, California, from Anaheim Broadcasting
Corporation. The total acquisition cost was approximately $15.1 million.
On January 4, 1999, Registrant consummated a sale to Citicasters Co., a
subsidiary of Jacor Communications, Inc. ("Citicasters") of substantially all of
the assets, other than cash and accounts receivable, used in the operations of
Registrant's radio stations, KORG-AM and KEZY-FM, serving Anaheim, California
(the "Anaheim Stations"), pursuant to the asset purchase agreement (the "Anaheim
Agreement") dated September 14, 1998, as amended.
The base sales price for the Anaheim Stations was $30,100,000, subject to
certain adjustments for the apportionment of income and liabilities as of the
closing date, as provided for in the Anaheim Agreement, resulting in a reduction
of the base sales price of approximately $20,000.
Pursuant to the Anaheim Agreement, Registrant deposited $1.0 million into an
indemnity escrow account against which Citicasters may make indemnification
claims for a period of one year after the closing. In addition, Registrant held
approximately $5.2 million of the sales proceeds to pay (or to reserve for
payment of) expenses and liabilities relating to the operations of the Anaheim
Stations prior to the sale as well as wind-down expenses, sale-related expenses
and contingent obligations of the Anaheim Stations. The remaining sales proceeds
of approximately $23.9 million were included in the cash distribution made to
partners on March 30, 1999, after accounting for certain expenses of Registrant,
in accordance with the terms of the Partnership Agreement.
On January 31, 2000, Registrant received the discharge of escrowed proceeds of
$1.0 million, plus interest earned thereon, generated from the sale of the
Anaheim Stations. In accordance with the terms of the Partnership Agreement, the
entire amount of such discharged escrowed proceeds was used to account for
certain expenses of Registrant. As of December 31, 1999, Registrant had
approximately $3.9 million remaining in cash reserves from the sale of the
Anaheim Stations.
To the extent any amounts reserved as described above are subsequently released,
such amounts will be distributed to partners of record as of the date of such
release from reserves. Registrant recognized a gain of approximately $19.8
million on the sale of the Anaheim Stations.
During 1998, the Anaheim Stations generated net operating revenues of $3,989,661
(18.3% of operating revenues from Registrant's discontinued operations - Radio
Station Segment).
During 1997, the Anaheim Stations generated net operating revenues of $3,950,833
(16.6% of operating revenues from Registrant's discontinued operations - Radio
Station Segment).
Employees.
As of December 31, 1999, Registrant and its consolidated subsidiaries employed
approximately 280 persons. The business of Registrant is managed by the General
Partner. RPMM, MLMM and ML Leasing Management Inc., all affiliates of the
General Partner, employ individuals who perform the management and
administrative services for Registrant.
COMPETITION.
Cable Television
Cable television systems compete with other communications and entertainment
media, including off-air television broadcast signals that a viewer is able to
receive directly using the viewer's own television set and antenna. The extent
of such competition is dependent in part upon the quality and quantity of such
off-air signals. In the areas served by Registrant's systems, a substantial
variety of broadcast television programming can be received off-air. In those
areas, the extent to which cable television service is competitive depends
largely upon the system's ability to provide a greater variety of programming
than that available off-air and the rates charged by Registrant's cable systems
for programming. Cable television systems also are susceptible to competition
from other multichannel video programming distribution ("MVPD") systems, from
other forms of home entertainment such as video cassette recorders, and in
varying degrees from other sources of entertainment in the area, including
motion picture theaters, live theater and sporting events.
In recent years, the level of competition in the MVPD market has increased
significantly. Notably, several entities provide high-powered direct broadcast
satellite ("DBS") service in the continental United States. In addition, the FCC
has adopted polices providing for authorization of new technologies and a more
favorable operating environment for certain existing technologies which provide,
or have the potential to provide, substantial additional competition to cable
television systems. For example, the FCC has revised its rules on multi-channel
multi-point distribution service ("MMDS" or "wireless cable") to foster MMDS
services competitive with cable television systems, has authorized telephone
companies to deliver directly to their subscribers video programming and has
authorized the local multipoint distribution service ("LMDS"), which can employ
technology analogous to that used by cellular telephone systems to distribute
multiple channels of video programming and other data directly to subscribers.
Moreover, the Telecommunications Act of 1996 (the "1996 Act") substantially
reformed the Communications Act of 1934, as amended (the "Communications Act")
by, among other things, permitting telephone companies to enter the MVPD market
through a number of means, including in-region cable systems. Regulatory
initiatives that will result in additional competition for cable television
systems are described in the following sections.
<PAGE>
LEGISLATION AND REGULATION.
Cable Television Industry
The cable television industry is extensively regulated by the federal
government, some state governments and most local franchising authorities. In
addition, the Copyright Act of 1976 (the "Copyright Act") imposes copyright
liability on all cable television systems for their primary and secondary
transmissions of copyrighted programming. The regulation of cable television
systems at the federal, state and local levels is subject to the political
process and has been in constant flux over the past decade. This process
continues to generate proposals for new laws and for the adoption or deletion of
administrative regulations and policies. Further material changes in the law and
regulatory requirements, especially as a result of both the 1996 Act and the
Cable Television Consumer Protection and Competition Act of 1992 (the "1992
Cable Act"), must be expected. There can be no assurance that the Registrant's
cable systems will not be adversely affected by future legislation, new
regulations or judicial or administrative decisions. The following is a summary
of federal laws and regulations materially affecting the cable television
industry and a description of certain state and local laws with which the cable
industry must comply.
Federal Statutes
The Communications Act imposes certain uniform national standards and guidelines
for the regulation of cable television systems. Among other things, the
Communications Act regulates the provision of cable television service pursuant
to a franchise, specifies a procedure and certain criteria under which a cable
television operator may request modification of its franchise, establishes
criteria for franchise renewal, sets maximum fees payable by cable television
operators to franchising authorities, authorizes a system for regulating certain
subscriber rates and services, outlines signal carriage requirements, imposes
certain ownership restrictions, and sets forth customer service, consumer
protection, and technical standards.
The 1996 Act's cable provisions expanded and in some cases significantly
modified the rules applicable to cable systems. Most significantly, the 1996 Act
took steps to reduce, or in some cases eliminate, rate regulation of cable
systems, while also allowing substantially greater telephone company
participation in the MVPD market, as well as promoting cable operator provision
of telecommunications services.
Violations of the Communications Act or any FCC regulations implementing the
statutory laws can subject a cable operator to substantial monetary penalties
and other sanctions.
Federal Regulations
Federal regulation of cable television systems is conducted primarily through
the FCC under the Communications Act, although, as discussed below, the
Copyright Office also regulates certain aspects of cable television system
operation. Among other things, FCC regulations currently contain detailed
provisions concerning non-duplication of network programming, sports program
blackouts, program origination, ownership of cable television systems and equal
employment opportunities. There are also comprehensive registration and
reporting requirements and various technical standards. Moreover, pursuant to
the 1992 Cable Act, the FCC has, among other things, established regulations
concerning mandatory signal carriage and retransmission consent, consumer
service standards, the rates for service, equipment, and installation that may
be charged to subscribers, and the rates and conditions for commercial channel
leasing. The FCC also issues permits, licenses or registrations for microwave
facilities, mobile radios and receive-only satellite earth stations, all of
which are commonly used in the operation of cable systems.
The FCC is authorized to impose monetary fines upon cable television systems for
violations of existing regulations and may also suspend licenses and other
authorizations and issue cease and desist orders. It is likewise authorized to
promulgate various new or modified rules and regulations affecting cable
television, many of which are discussed in the following paragraphs.
The 1992 Cable Act and the 1996 Act
The 1992 Cable Act clarified and modified certain provisions of the Cable
Communications and Policy Act of 1984 ("1984 Cable Act"). It also codified
certain FCC regulations and added a number of new requirements. Subsequent to
the passage of the 1992 Cable Act, the FCC undertook a substantial number of
complicated rulemaking proceedings resulting in a host of new regulatory
requirements or guidelines. Several of the provisions of the 1992 Cable Act and
certain FCC regulations implemented pursuant thereto are still being tested in
court. At the same time, a number of provisions have been modified by the 1996
Act. Registrant cannot predict the result of any pending or future court
challenges or the shape any still-pending or proposed FCC regulations ultimately
may take, nor can Registrant predict the effect of either on its operations.
As discussed in greater detail elsewhere in this filing, some of the principal
provisions of the 1992 Cable Act include: (1) a mandatory carriage requirement
coupled with alternative provisions for retransmission consent as to
over-the-air television signals; (2) rate regulations; (3) consumer protection
provisions; (4) some clarification of franchise renewal procedures; and (5) FCC
authority to examine and set limitations on the horizontal and vertical
integration of the cable industry.
Other provisions of the 1992 Cable Act included: (1) a prohibition on
"buy-throughs," an arrangement whereby subscribers are required to subscribe to
a program tier other than basic in order to receive certain per-channel or
per-program services; (2) requiring the FCC to develop minimum signal standards,
rules for the disposition of home wiring upon termination of cable service, and
regulations regarding compatibility of cable service with consumer television
receivers and video cassette recorders; (3) a requirement that the FCC
promulgate rules limiting children's access to indecent programming on access
channels; (4) notification requirements regarding sexually explicit programs;
and (5) more stringent equal employment opportunity rules for cable operators.
Of these provisions, the 1996 Act addresses cable equipment compatibility, as
further discussed below.
The 1992 Cable Act also contained a provision barring both cable operators and
certain vertically integrated program suppliers from engaging in practices which
unfairly impede the availability of programming to other multichannel video
programming distributors. In sum, the 1992 Cable Act established an entirely new
set of regulatory requirements and standards. Adding to the complexity is the
1996 Act, which in some areas mandates additional regulation and in other areas
modifies or eliminates extant cable laws.
As previously noted, under the broad statutory scheme, cable operators are
subject to a two-level system of regulation with some matters under federal
jurisdiction, others subject strictly to local regulation, and still others
subject to both federal and local regulation. Following are descriptions of some
of the more significant regulatory areas of concern to cable operators.
Franchises / State and Local Regulation
Cable television systems are generally operated pursuant to non-exclusive
franchises, permits or licenses issued by a local government entity. The
franchises are generally contracts between the cable system owner and the
issuing authority and typically cover a broad range of obligations directly
affecting the business of the operations in question. The 1984 Cable Act
provided that in granting or renewing franchises, franchising authorities may
establish requirements for cable-related facilities and equipment but may not
specify requirements for video programming or information services other than in
broad categories. The 1992 Cable Act provided that franchising authorities may
not grant an exclusive franchise or unreasonably deny award of a competing
franchise.
Under the 1992 Cable Act, franchising authorities are now exempt from money
damages in cases involving their exercise of regulatory authority, including the
award, renewal, or transfer of a franchise, except for cases involving
discrimination on race, sex, or similar impermissible grounds. Remedies are
limited exclusively to injunctive or declaratory relief. Franchising authorities
may also build and operate their own cable systems without a franchise.
Cable television franchises generally contain provisions governing the length of
the franchise term, renewal and sale or transfer of the franchise, design and
technical performance of the system and the number and types of cable services
provided. There can be no assurance that franchises will be granted renewal or
that renewals will be based on terms and conditions similar to those in an
initial franchise.
Local franchising authorities are permitted to require cable operators to set
aside certain channels for PEG access programming and to impose a franchise fee
of up to 5% of gross annual system revenues. Cable television systems with 36 or
more channels also are required to designate a portion of their channel capacity
for commercially leased access by third parties, which generally is available to
commercial and non-commercial parties to provide programming (including
programming supported by advertising). As required by the 1992 Cable Act, the
FCC adopted rules setting maximum reasonable rates and other terms for the use
of such leased channels.
Various proposals have been introduced at state and local levels with regard to
the regulation of cable television systems, and a number of states have adopted
legislation subjecting cable television to the jurisdiction of centralized state
governmental agencies, some of which impose regulation of a public utility
character. Increased state and local regulations may increase cable television
system expenses.
Rate Regulation
Under the 1992 Cable Act, cable systems that are not subject to "effective
competition" are subject to regulation by local franchising authorities
regarding the rates that may be charged to subscribers. 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 MVPDs
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 1996 Act added a fourth condition: the
offering by a local exchange carrier, or an entity using the local exchange
carrier's ("LEC") 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.
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 PEG access channels required by the franchise. Pursuant to FCC rules, the
Telecommunications Regulatory Board of Puerto Rico (the "Board") filed for
certification to regulate the rates of the cable system operated by the Venture.
The cable system operator contested the certification, claiming that it was
subject to effective competition, and therefore exempt from rate regulation,
because fewer than 30 percent of the households in the system's franchise area
subscribe to the system. The FCC's Cable Services Bureau upheld the
certification and in November 1998 the Commission denied the operator's
application for review of the decision, as well as a request for stay. The cable
operator filed a petition for reconsideration of the FCC's denial of the
application for review. The petition for reconsideration is pending. Under FCC
rules, a cable system remains subject to rate regulation until the FCC finds
that effective competition exists. The franchising authority for the San Juan
Cable System in Puerto Rico has been authorized by the FCC to regulate the basic
cable service and equipment rates and charges of the system. The franchising
authority has not yet sent a notice to the system to initiate rate regulation.
Regulation may result in reduced revenues going forward and in refunds to
customers for charges above those allowed by the FCC's rate regulations for up
to 12 months retroactively from when the new rates are initiated or the
franchising authority issues a potential refund accounting order. Registrant is
currently assessing the potential impact of any such regulation.
Pursuant to the 1996 Act, the FCC's jurisdiction to regulate the rates of 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, expired on March 31, 1999. The CPST is now exempt from rate regulation.
The FCC has announced, however, that it will continue to process and rule upon
rate complaints relating to the CPST for periods prior to April 1, 1999.
Rates for basic services generally are set pursuant to a benchmark formula. In
the alternative, an operator may opt for cost-of-service methodology to show
that its basic service rates are reasonable. This approach allows cable system
operators to recover normal operating expenses as well as a reasonable return on
investment. The cost-of-service rules currently allow for an industry-wide
11.25% rate of return. The Commission has reserved the right to alter its
established benchmarks. The FCC's rules also limit increases in regulated rates
to an inflation indexed amount plus increases in certain costs, such as taxes,
franchise fees, programming cost, and the costs of complying with certain
franchise requirements. In addition, rates can be adjusted if an operator
completes a significant system rebuild or upgrade.
Parties periodically have called upon the FCC to freeze cable rates and to
increase rate regulation. In addition, the Chairman of the FCC, who has
previously expressed concern that the March 31, 1999 sunset for regulation of
CPST rates may be unrealistic given the slow growth in competition in the MVPD
marketplace, has stated that the Commission will continue to take aggressive
actions to promote competition and urged Congress to do the same. Certain
members of Congress also have continued to express concern about cable rates and
there can be no assurance that either the FCC or Congress will not take action
in the future with regard to cable rates.
Renewal and Transfer
The 1984 Cable Act established procedures for the renewal of cable television
franchises. The procedures were designed to provide incumbent franchisees with a
fair hearing on past performances, an opportunity to present a renewal proposal
and to have it fairly and carefully considered, and a right of appeal if the
franchising authority either fails to follow the procedures or denies renewal
unfairly. These procedures were intended to provide an incumbent franchisee with
substantially greater protection than previously available against the denial of
its franchise renewal application.
The 1992 Cable Act sought to address some of the issues left unresolved by the
1984 Cable Act. It established a more definite timetable in which the
franchising authority is to act on a renewal request. It also narrowed the range
of circumstances in which a franchised operator might contend that the
franchising authority had constructively waived non-compliance with its
franchise.
Cable system operators are sometimes confronted by challenges in the form of
proposals for competing cable franchises in the same geographic area, challenges
which may arise in the context of renewal proceedings. Local franchising
authorities also have, in some circumstances, proposed to construct their own
cable systems or decided to invite other private interests to compete with the
incumbent cable operator. Judicial challenges to such actions by incumbent
system operators have, to date, generally been unsuccessful. Registrant cannot
predict the outcome or ultimate impact of these or similar franchising and
judicial actions.
Pursuant to the 1992 Cable Act, where local consent to a transfer is required,
the franchise authority must act within 120 days of submission of a transfer
request or the transfer is deemed approved. The 120-day period commences upon
the submission to local franchising authorities of information now required on a
new standardized FCC transfer form. The franchise authority may request
additional information beyond that required under FCC rules. Further, the 1992
Cable Act gave local franchising officials the authority to prohibit the sale of
a cable system if the proposed buyer operates another cable system in the
jurisdiction or if such sale would reduce competition in cable service.
Cable/Telephone Cross-Ownership
Prior to the passage of the 1996 Act, an LEC was generally prohibited from
owning a cable television system or offering video programming directly to
subscribers in the LEC's local telephone service area. The 1996 Act eliminated
the cable/telco cross-ownership ban and gave telephone companies four options
for entering into the MVPD market: (1) wireless entry; (2) common carrier entry;
(3) cable system entry; and (4) "open video system" entry, which is a new mode
of entry established by the 1996 Act that allows a common carrier to program 33%
of its video distribution system, while making the rest of its capacity
available to unaffiliated program providers. The open video system rules
generally subject open video system operators to reduced regulation. For
example, such operators are not subject to rate regulation. In City of Dallas v.
FCC, Case No. 60502 (5th Cir. Jan. 19, 1999), however, the Fifth Circuit
reversed the Commission's rule "preempting local franchise requirements for
[open video systems]." The 1996 Act also limited fees that open video system
operators may have to pay to local franchises and clarifies that such operators
are not subject to Title II common carrier requirements. Open video system
operators, which may include entities other than LECs, are required, however, to
comply with certain cable regulations, including the must-carry/retransmission
consent requirements and the rules governing carriage of PEG channels. Cable
companies are, in certain circumstances, also permitted to operate open video
systems.
Although telephone companies may now provide video programming to their
telephone subscribers, the 1996 Act maintains the prohibition on cable/telco
buy-outs. A LEC or any affiliate generally may not acquire more than a 10%
financial interest, or any management interest, in a cable operator serving the
LEC's telephone service area. Similarly, a cable operator may not acquire a 10%
financial interest, or any management interest, in a LEC providing telephone
exchange service within the cable operator's franchise area.
The 1996 Act also cleared the way for cable provision of telephony and clarified
that the provisions in the Communications Act governing cable operators do not
apply to cable operators' provision of telecommunications services. State
regulations that may prohibit the ability to provide telecommunications services
are preempted.
Cable/Broadcast Cross Ownership
The 1996 Act also eliminated the statutory ban on broadcast station/cable
cross-ownership. This cleared the way for the Commission to reconsider its rules
prohibiting the common ownership of a broadcast television station and a cable
system in the same local community. The FCC is now reviewing these rules.
Concentration of Ownership
The 1992 Cable Act directed the FCC to establish reasonable limits on the number
of cable subscribers a single company may reach through cable systems it owns
(horizontal concentration) and the number of system channels that an operator
can use to carry programming services in which it holds an ownership interest
(vertical concentration).
The horizontal ownership restrictions of the 1992 Cable Act were struck down by
a federal district court. Pending final judicial resolution of this issue, the
FCC voluntarily has stayed the effective date of its horizontal ownership
limitations since 1993. In an October, 1999 decision, the Commission announced
revisions to its horizontal ownership rules, but retained its stay of these
rules. The FCC retained its 30% nationwide cap, but relaxed it somewhat by
basing the cap on the percentage of multichannel video programming subscribers
served nationwide. (The cap previously was calculated according to the number of
cable homes passed). In addition, the decision modified the rules regarding the
attribution of limited partners with respect to both horizontal ownership and
vertical ownership (or "channel occupancy") rules. The new rules allow a limited
partnership interest to be treated as non-attributable for purposes of those
rules so long as the general partner is able to certify that the limited partner
is not materially involved in the video programming activities of the
partnership.
The FCC's vertical ownership restriction consists of a "channel occupancy"
standard which places a 40 percent limit on the number of channels (up to 75
channels) that may be occupied by programming services in which the cable
operator has an attributable ownership interest. Further, the 1992 Cable Act and
FCC rules restrict the ability of programmers in which cable operators hold an
attributable interest to enter into exclusive contracts with cable operators.
Vertically integrated programmers also are generally prohibited from favoring
cable operators over other multi-channel video programming distributors.
Open Access
Many Internet Service Providers ("ISPs") and local telephone companies recently
have been urging the FCC to require cable operators to sell "unbundled" access
to their networks, which would allow unaffiliated ISPs to combine the cable
transport service with their own content offerings into one high-speed Internet
service. Because digital broadband facilities are capable of delivering data
transmissions much more quickly than the standard telephone lines traditionally
used by ISPs, ISPs deem access to cable networks to be highly desirable.
Although the FCC recently decided not to impose open access regulations at this
time, many state and local franchise authorities also are now addressing the
issue. Registrant cannot predict what legislative, regulatory or judicial
changes may occur or their impact on the Registrant's business or operations.
Alternative Video Programming Services
Direct Broadcast Satellites: The FCC has authorized the provision of video
programming directly to home subscribers through high-powered direct broadcast
satellites ("DBS"). Since the launch of the first system in 1994, DBS has become
one of the most promising competitors in the multichannel video marketplace. DBS
providers served approximately 11 million customers at the end of 1999. In
addition, Congress recently amended the Satellite Home Viewer Act to allow DBS
operators to provide local broadcast station signals to subscribers in a manner
similar to cable operators, thereby removing a major competitive barrier to DBS
growth. Under the legislation, DBS operators also will become subject to
"must-carry" obligations to carry broadcast signals by January, 2002.
Digital Television: On April 3, 1997, the FCC announced that it had adopted
rules that will allow television broadcasters to provide digital television
("DTV") to consumers. The Commission also provided eligible existing
broadcasters with a second channel on which to provide DTV service. Television
broadcasters will be allowed to use their channels according to their best
business judgment. Such uses can include data transfer, subscription video,
interactive materials, and audio signals, although broadcasters will be required
to provide a free digital video programming service that is at least comparable
to today's analog service. Broadcasters will not be required to air "high
definition" programming or to simulcast their analog programming on the digital
channel.
Certain stations already have begun to broadcast a digital signal. Affiliates of
the top four networks (ABC, CBS, FOX, and NBC) in the top ten markets were
required to be on the air with a digital signal by May 1, 1999. Affiliates of
those networks in markets 11-30 were required to be on the air with a digital
signal by November 1, 1999. All other commercial stations are required to
construct their digital facilities by May 1, 2002. Although the FCC has targeted
December 1, 2006, as the date by which all broadcasters must return their analog
licenses, the Balanced Budget Act of 1997 allows broadcasters to keep both their
analog and digital licenses until at least 85 percent of television households
in their respective markets can receive a digital signal. The Commission has
announced that it will review the progress of DTV every two years and make
adjustments to the 2006 target date, if necessary.
Wireless Cable: The FCC has expanded the authorization of MMDS services to
provide "wireless cable" via multiple microwave transmissions to home
subscribers. In 1990, the FCC increased the availability of channels for use in
wireless cable systems by eliminating MMDS ownership restrictions and
simplifying various processing and administrative rules. Since then, the FCC has
resolved certain additional wireless cable issues, including channel allocations
for MMDS, Operational Fixed Service and Instructional Television Fixed Service
("ITFS") facilities, and restrictions on ownership or operation of wireless
facilities by cable entities.
Local Multipoint Distribution Service: The FCC has allocated a total of 1300 MHZ
of spectrum for LMDS, with one 1150 MHz license and one 150 MHz license
available in each of the 493 Rand McNally-defined Basic Trading Areas ("BTAs").
LMDS licensees are permitted to offer a wide variety of services, although most
LMDS licensees are expected to concentrate on providing fixed,
point-to-multipoint broadband data and video offerings.
Programming Issues
Mandatory Carriage and Retransmission Consent: The 1992 Cable Act required cable
operators to carry the signals of local commercial and non-commercial television
stations and certain low power television stations. Television broadcasters, on
a cable system-by-cable system basis, must make a choice once every three years
whether or not to proceed under the must carry rules or to waive that right to
mandatory but uncompensated carriage and negotiate a grant of retransmission
consent to permit the cable system to carry the station's signal.
The FCC, as well as Congress and the Administration, are currently considering
whether cable operators are, or should be, obligated to carry the digital
signals of broadcast stations. This issue is particularly contentious with
respect to the digital television transition period, when broadcasters' analog
and digital signals will be operating simultaneously.
Program Content Regulation: The 1996 Act contained a number of regulations
affecting program content. For example, a cable operator is required to fully
scramble or block the audio and video programming of each channel primarily
dedicated to the carriage of sexually explicit adult programming or to permit
the carriage of such programming to the hours between 10 p.m. and 6 a.m. After
the court order staying the FCC rules implementing these provisions was lifted,
the FCC, in May 1997, notified cable operators of their obligation to begin
complying with the provision and its rules. In December 1998, a federal district
court found the scrambling provision to be unconstitutional. This case was
appealed by the government directly to the Supreme Court and likely will be
decided by the Court by the summer of 2000.
Also, the FCC has adopted regulations requiring the "closed captioning" of
programming. The closed captioning rules went into effect January 1, 1998,
although a transition period has been established to enable cable operators and
programmers to achieve full compliance with the rules. The FCC has requested
comment and is considering the appropriate methods and schedules for phasing in
video description. Last, the FCC has adopted an order finding acceptable the
voluntary video programming rating system developed by distributors of video
programming - - including cable operators - - to identify programming that
contains sexual, violent or other indecent material. The Commission has also
established technical requirements for consumer electronic equipment to enable
the blocking of such video programming. Distributors of rated programs are
required to transmit these ratings, thereby permitting parents to block the
programs.
Copyright: Cable television systems are subject to the Copyright Act which,
among other things, covers the carriage of television broadcast signals.
Pursuant to the Copyright Act, cable operators obtain a compulsory license to
retransmit copyrighted programming broadcast by local and distant stations in
exchange for contributing a percentage of their revenues as statutory royalties
to the Copyright Office. The amount of this royalty payment varies depending on
the amount of system revenues from certain sources, the number of distant
signals carried, and the locations of the cable television system with respect
to off-air television stations and markets. Copyright royalty arbitration
panels, to be convened by the Librarian of Congress as necessary, are
responsible for distributing the royalty payments among copyright owners and for
periodically adjusting the royalty rates.
Recently, several types of multichannel video distributors that compete with
cable television systems were successful in gaining compulsory license coverage
of their retransmission of television broadcast signals. Recent amendments to
the Satellite Home Viewer Act have revised the compulsory copyright license
granted to DBS operators (and other satellite distributors) to allow for the
carriage of local network-affiliated broadcast stations. Legislation also has
provided a permanent copyright license to "wireless cable" systems.
The FCC has, in the past, recommended that Congress eliminate the compulsory
copyright license for cable retransmission of both local and distant broadcast
programming. In addition, legislative proposals have been and may continue to be
made to simplify or eliminate the compulsory license. Without the compulsory
license, cable operators would need to negotiate rights for the copyright
ownership of each program carried on each broadcast station transmitted by the
system. Registrant cannot predict whether Congress will act on the FCC or
Copyright Office recommendations or similar proposals.
Pole Attachment Rates, Inside Wiring, and Technical Standards
The FCC currently regulates the rates and conditions imposed by public utilities
for use of their poles, unless, under the Federal Pole Attachments Act, a state
public service commission demonstrates that it is entitled to regulate the pole
attachment rates. The FCC has adopted a specific formula to administer pole
attachment rates under this scheme. The 1996 Act revised the pole attachment
rules in a number of ways to encourage competition in the provision of
telecommunications services and to address inequity in the current pole
attachment rates. In 1998, the FCC revised its pole attachment rules; there are
Petitions for Reconsideration of these changes currently before the Commission.
A second proceeding addressing possible changes to the general pole attachment
fee calculations is still pending.
The FCC also has established procedures for the orderly disposition of multiple
dwelling unit ("MDU") wiring, making it easier for the owners and residents of a
MDU to change video service providers. Petitions seeking reconsideration of
certain aspects of these rules remain pending at the FCC, and at least one
judicial challenge to these rules has been filed in the U.S. Court of Appeals
for the Eighth Circuit.
The FCC also has set forth standards on signal leakage. Like all systems,
Registrant's cable television systems are subject to yearly reporting
requirements regarding compliance with these standards. Further, the FCC has
instituted on-site inspections of cable systems to monitor compliance. Any
failure by Registrant's cable television systems to maintain compliance with
these standards could adversely affect the ability of Registrant's cable
television systems to provide certain services.
The 1992 Cable Act empowered the FCC to set certain technical standards
governing the quality of cable signals and to preempt local authorities from
imposing more stringent technical standards. In 1992, the FCC adopted mandatory
technical standards for cable carriage of all video programming. Those standards
focus primarily on the quality of the signal delivered to the cable subscriber's
television.
As part of the 1996 Act, the FCC adopted regulations to ensure the commercial
availability of equipment (such as converter boxes and interactive equipment)
used to access services offered over multichannel video programming distribution
systems, from sources that are unaffiliated with any MVPD. These regulations
require that all MVPDs, including cable operators (1) allow customers to attach
their own equipment to their systems, (2) not prevent equipment from being
offered by retailers, manufacturers or other unaffiliated vendors, (3) separate
out security functions from non-security functions of equipment by July 1,
2000,(4) not offer equipment with integrated security and non-security functions
after January 1, 2005, and (5) provide, upon request, technical information
concerning interface parameters needed to permit equipment to operate with their
systems. MVPDs are allowed to protect the security of their systems and
programming from unauthorized reception. The rules are subject to sunset after
the markets for MVPDs and equipment become fully competitive in a particular
geographic market. Judicial challenges to these rules have been filed and remain
pending.
<PAGE>
State and Local Regulation
Local Authority: Cable television systems are generally operated pursuant to
non-exclusive franchises, permits or licenses issued by a municipality or other
local governmental entity. The franchises are generally contracts between the
cable television system owner and the issuing authority and typically cover a
broad range of provisions and obligations directly affecting the business of the
systems in question. Except as otherwise specified in the Communications Act or
limited by specific FCC rules and regulations, the Communications Act permits
state and local officials to retain their primary responsibility for selecting
franchisees to serve their communities and to continue regulating other
essentially local aspects of cable television.
Cable television franchises generally contain provisions governing the fees to
be paid to the franchising authority, the length of the franchise term, renewal
and sale or transfer of the franchise, design and technical performance of the
system, use and occupancy of public streets, and the number and types of cable
services provided. The specific terms and conditions of the franchise directly
affect the profitability of the cable television system. Franchises are
generally issued for fixed terms and must be renewed periodically. There can be
no assurance that such renewals will be granted or that renewals will be made on
similar terms and conditions.
Various proposals have been introduced at state and local levels with regard to
the regulation of cable television systems and a number of states have adopted
legislation subjecting cable television systems to the jurisdiction of
centralized state governmental agencies, some of which impose regulation of a
public utility character. Increased state and local regulations may increase
cable television system expenses.
Impact of Legislation and Regulation
As detailed above, the cable industry is subject to significant regulation. The
foregoing, however, does not purport to be a complete summary of all the
provisions of the Communications Act, the 1996 Act, or the 1992 Cable Act, nor
of the regulations and policies of the FCC thereunder. Because regulation of the
cable industry is subject to the political process, it continues to change.
Proposals for additional or revised regulations and requirements are pending
before and are being considered by Congress and federal regulatory agencies and
will continue to be generated. Also, various of the foregoing matters are now,
or may become, the subject of court litigation. Registrant cannot predict the
outcome of pending regulatory proposals, any future proposals, or any such
litigation. Nor can Registrant predict the impact of these on its business.
Item 2. Properties.
A description of the media properties of Registrant is contained in Item 1
above. Through C-ML Cable, Registrant owns or leases real estate for certain
transmitting equipment along with space for studios and offices. Registrant
believes that the properties owned by the stations and the other equipment and
furniture and fixtures owned are in reasonably good condition and are adequate
for the operations of the stations.
In addition, the offices of RPMM and MLMM are located at 444 Madison Avenue -
Suite 703, New York, New York 10022 and at 2 World Financial Center - 14th
Floor, New York, New York, 10281-6114; respectively.
Item 3. Legal Proceedings.
On August 29, 1997, a purported class action was commenced in New York Supreme
Court, New York County, on behalf of the limited partners of Registrant, against
Registrant, Registrant's general partner, Media Management Partners (the
"General Partner"), the General Partner's two partners, RP Media Management
("RPMM") and ML Media Management Inc. ("MLMM"), Merrill Lynch & Co., Inc. and
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"). The action
concerns Registrant's payment of certain management fees and expenses to the
General Partner and the payment of certain purported fees to an affiliate of
RPMM.
Specifically, the plaintiffs allege breach of the Amended and Restated Agreement
of Limited Partnership (the "Partnership Agreement"), breach of fiduciary
duties, and unjust enrichment by the General Partner in that the General Partner
allegedly: (1) improperly deferred and accrued certain management fees and
expenses in an amount in excess of $14.0 million, (2) improperly paid itself
such fees and expenses out of proceeds from sales of Registrant assets, and (3)
improperly paid MultiVision Cable TV Corp., an affiliate of RPMM, supposedly
duplicative fees in an amount in excess of $14.4 million.
With respect to Merrill Lynch & Co., Inc., Merrill Lynch, MLMM and RPMM,
plaintiffs claim that these defendants aided and abetted the General Partner in
the alleged breach of the Partnership Agreement and in the alleged breach of the
General Partner's fiduciary duties. Plaintiffs seek, among other things, an
injunction barring defendants from paying themselves management fees or expenses
not expressly authorized by the Partnership Agreement, an accounting,
disgorgement of the alleged improperly paid fees and expenses, and compensatory
and punitive damages. Defendants believe that they have good and meritorious
defenses to the action, and vigorously deny any wrongdoing with respect to the
alleged claims. Accordingly, defendants moved to dismiss the complaint and each
claim for relief therein. On March 3, 1999, the New York Supreme Court issued an
order granting defendants' motion and dismissing plaintiffs' complaint in its
entirety, principally on the grounds that the claims are derivative and
plaintiffs lack standing to bring suit because they failed to make a
pre-litigation demand on the General Partner. Plaintiffs have both appealed this
order and moved, inter alia, for leave to amend their complaint in order to
re-assert certain of their claims as derivative claims on behalf of Registrant.
The appeal and the motion for leave to amend are pending. Defendants have served
their brief in opposition to the appeal, arguing that the court should affirm
the Supreme Court's order dismissing plaintiffs' complaint. Oral argument of the
appeal is scheduled for May 2000. Defendants have also served papers in
opposition to the plaintiffs' motion for leave to amend their complaint. Oral
argument has been heard and the parties are awaiting a decision.
The Partnership Agreement provides for indemnification, to the fullest extent
provided by law, for any person or entity named as a party to any threatened,
pending or completed lawsuit by reason of any alleged act or omission arising
out of such person's activities as a General Partner or as an officer, director
or affiliate of either RPmm, MLMM or the General Partner, subject to specified
conditions. In connection with the purported class action filed on August 29,
1997, Registrant has received notices of requests for indemnification from the
following defendants named therein: the General Partner, RPMM, MLMM, Merrill
Lynch & Co., Inc. and Merrill Lynch. For the years ended December 31, 1999,
December 25, 1998 and December 26, 1997, Registrant incurred approximately
$205,000, $223,000 and $280,000, respectively, for legal costs relating to such
indemnification. Cumulatively, such legal costs amount to approximately $708,000
through December 31, 1999.
On March 24, 2000, Registrant commenced suit in New York Supreme Court, New York
County against Century, Adelphia and Arahova seeking a dissolution of the
Venture and the appointment of a receiver for the sale of the Venture's assets
(primarily the stock of the subsidiary of the Venture that owns the cable
systems). The complaint alleges that, as successor to Century's position as
Registrant's joint venture partner, Adelphia breached its fiduciary and
contractual obligations to Registrant with respect to the operations of the
Venture and by proposing to take action that would interfere with the sale of
the cable systems to a third party through an auction process conducted in
accordance with the terms of the joint venture agreement. In addition to
dissolution and the appointment of a receiver, Registrant seeks in the suit an
order directing Adelphia and its affiliates to comply with the terms of the
joint venture agreement. The complaint states that, if for any reason the court
should determine not to appoint a receiver, the courts should direct the Venture
to diligently proceed to locate an unrelated third party to buy the cable
systems at the highest possible price and that the defendants be enjoined from
interfering in any manner in the sale process, and seeks other equitable relief.
Registrant also seeks in the suit compensatory and punitive damages.
Registrant is not aware of any other material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters which required a vote of the limited partners of
Registrant during the fourth quarter of the fiscal year covered by this report.
<PAGE>
Part II.
Item 5. Market for Registrant's Common Stock and Stockholder Matters.
An established public market for Registrant's Units does not now exist, and it
is not anticipated that such a market will develop in the future. Accordingly,
accurate information as to the market value of a Unit at any given date is not
available.
As of March 21, 2000, the number of owners of Units was 13,089.
Merrill Lynch has implemented guidelines pursuant to which it reports estimated
values for limited partnership interests originally sold by Merrill Lynch (such
as Registrant's Units) two times per year. Such estimated values are provided to
Merrill Lynch by independent valuation services based on financial and other
information available to the independent services on (1) the prior August 15th
for reporting on December year-end and subsequent client account statements
through the following May's month-end client account statements, and on (2)
March 31st for reporting on June month-end and subsequent client account
statements through the November month-end client account statements of the same
year. The estimated values provided by the independent services and the
Registrant's current net asset value are not market values and Unit holders may
not be able to sell their Units or realize either amount upon a sale of their
Units. In addition, Unit holders may not realize the independent estimated value
or the Registrant's current net asset value amount upon the liquidation of
Registrant.
Registrant does not distribute dividends, but rather distributes Distributable
Cash From Operations, Distributable Refinancing Proceeds, and Distributable Sale
Proceeds, to the extent available. In 1995, $7.5 million ($40 per Unit) was
distributed to its limited partners and $75,957 to its General Partner from
distributable sales proceeds from the sale of KATC-TV. In 1996, $108.1 million
($575 per Unit) was distributed to its limited partners and $1.1 million to its
General Partner from distributable sales proceeds from the sale of California
Cable Systems. In 1997, $18.8 million ($100 per Unit) was distributed to its
limited partners and $189,893 accrued to its General Partner from the (i)
discharge of certain proceeds that were deposited into escrow upon the sale of
KATC-TV; (ii) discharge of certain proceeds that were deposited into escrow upon
the sale of the California Cable Systems; and (iii) release of certain reserves
previously established upon the sales of KATC-TV, WREX-TV and the California
Cable Systems. In 1998, the $189,893 accrued in 1997 was distributed to its
General Partner. In March 1999, $63.4 million ($337 per Unit) was distributed to
its limited partners and $639,939 to its General Partner from (i) distributable
sales proceeds from the sale of the Anaheim Stations, (ii) distributable sales
proceeds from the sale of the Cleveland Station and (iii) the release of certain
reserves previously established upon the sale of the California Cable Systems.
In October 1999, $35.7 million ($190 per Unit) was distributed to its limited
partners and $360,797 to its General Partner from distributable sales proceeds
from the sale of the Connecticut Stations. By the end of the second quarter of
2000, $1,485,153 ($7.90 per Unit) will be distributed to its limited partners
and $15,001 to its General Partner from the discharge of proceeds that were
deposited into escrow upon the sale of the Cleveland Station.
<PAGE>
Item 6. Selected Financial Data.
Certain reclassifications were made to the selected financial data for the years
ended 1998, 1997, 1996 & 1995 to present the Radio Station Segment and
television stations as discontinued operations (see Note 9).
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1999 December 25, 1998 December 26, 1997
----------------- ----------------- -----------------
<S> <C> <C>
Operating revenues $ 35,162,727 $ 32,575,174 $ 29,404,870
================= ================= =================
Gain on sale - Radio Station Segment $ 100,961,034 $ 2,752,975 $ -
================= ================= =================
Gain on sale of television stations $ - $ - $ 3,702,725
================= ================= =================
Write-off of fixed assets $ - $ 859,078 $ -
================= ================= =================
Income from discontinued operations -
Radio Station Segment and television
stations $ 3,184,469 $ 7,612,079 $ 6,247,584
================= ================= =================
Net Income $ 116,065,980 $ 14,169,444 $ 19,467,688
================= ================= =================
Net Income per Unit of Limited
Partnership Interest $ 611.22 $ 74.62 $ 102.52
================= ================= =================
Number of Units 187,994 187,994 187,994
================= ================= =================
As of As of As of
December 31, 1999 December 25, 1998 December 26, 1997
----------------- ----------------- -----------------
Total Assets $ 168,566,294 $ 158,629,085 $ 148,641,433
================= ================= =================
Borrowings $ 30,000,000 $ 40,000,000 50,000,000
================= ================= =================
</TABLE>
<TABLE>
<CAPTION>
Year Ended Year Ended
December 27, 1996 December 29, 1995
----------------- -----------------
<S> <C>
Operating revenues $ 50,688,279 $ 81,242,427
================= =================
Gain on sale of the California Cable
Systems $ 185,609,191 $ -
================= =================
Gain on sale of television stations $ - $ 22,796,454
================= =================
Income(Loss)from discontinued
operations - Radio Station Segment
and television stations $ 2,663,290 $ (154,921)
================= =================
Net Income $ 189,711,304 $ 21,490,240
================= =================
Net Income per Unit of Limited
Partnership Interest $ 999.04 $ 113.17
================= =================
Number of Units 187,994 187,994
================= =================
As of As of
December 27, 1996 December 29, 1995
----------------- -----------------
Total Assets $ 143,430,205 $ 161,585,028
================= =================
Borrowings $ 50,000,000 $ 142,732,306
================= =================
</TABLE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Liquidity and Capital Resources.
As of December 31, 1999, Registrant had $125,574,620 in cash and cash
equivalents. Of this amount, approximately $39.6 million is restricted for use
at the operating level of the Venture (as defined below) to fund capital
expenditure programs and satisfy future non-recourse debt service requirements
(including annual principal payments of $20 million, $10 million of which is
Registrant's share); approximately $15.2 million is held in cash to cover
operating liabilities, current litigation, and litigation contingencies relating
to the California Cable Systems prior to and resulting from their sale; and
approximately $14.5 million is held in cash to cover operating liabilities and
contingencies relating to the Anaheim Station, Cleveland Stations and
Connecticut Stations prior to and resulting from their sale. All remaining cash
and cash equivalents were available to Registrant for uses as provided in the
Amended and Restated Agreement of Limited Partnership (the "Partnership
Agreement. As of December 31, 1999, the amount payable for accrued management
fees and expenses owed to the General Partner amounted to approximately $1.0
million.
Registrant's ongoing cash needs will be to fund debt service, capital and
operating expenditures and required working capital as well as to provide for
costs and expenses related to the purported class action lawsuit and the
Adelphia Communications Corporation ("Adelphia") lawsuit (see below).
During the year ended December 31, 1999, principal repayments of $1,993,137 and
interest payments of $14,727 were made from a portion of the sales proceeds of
Wincom to pay in full the remaining balance under the Wincom-WEBE-WICC Loan. In
addition, during the year ended December 31, 1999, principal repayments of
$10,000,000 and interest payments of $3,788,000 were made in connection with
Registrant's C-ML Notes/Credit Agreement. During 2000, Registrant is required to
make scheduled principal repayments of $10.0 million under its C-ML Notes/Credit
Agreement.
On January 31, 2000, $1.0 million plus interest was released from the escrow
account relating to the sale of the Anaheim Stations (see further discussion
under KEZY-FM and KORG-AM below). On February 4, 2000, $1.5 million was released
from the escrow account relating to the sale of the Cleveland Station (see
further discussion under Wincom below). In accordance with the terms of the
Partnership Agreement, the entire amount of such discharged escrowed proceeds
from the sale of the Anaheim Stations was used to account for certain expenses
of Registrant. In addition, in accordance with the terms of the Partnership
Agreement, the amount of such discharged escrowed proceeds from the sale of the
Cleveland Station, after accounting for certain expenses of Registrant, will be
included in the cash distribution to limited partners of $1,485,153 ($7.90 per
Unit) and $15,001 to its General Partner, representing its 1% share. This cash
distribution to limited partners will be paid to limited partners of record as
of February 4, 2000 and will be distributed to partners by the end of the second
quarter of 2000.
As of December 31, 1999 Registrant's sole remaining operating investment in
media properties is its 50% interest in a joint venture (the "Venture"), which
owns 100% of the stock of Century-ML Cable Corporation ("C-ML Cable Corp."),
which owns and operates two cable television systems in Puerto Rico.
On October 1, 1999, Adelphia consummated its acquisition of Century. While
Adelphia's purchase included Century's 50% interest in C-ML Cable, it did not
include a purchase of Registrant's 50% interest in C-ML Cable. Registrant
negotiated with Adelphia regarding the sale to Adelphia of Registrant's interest
in the Venture, but no definitive arrangement was concluded.
On February 18, 2000, Registrant triggered the "buy-sell" provision in the joint
venture agreement (the "Joint Venture Agreement"), and Adelphia elected to cause
the Venture to sell C-ML Cable. A dispute arose between Registrant and Adelphia
over, among other things, the terms of the sale pursuant to the Joint Venture
Agreement, and on March 24, 2000 Registrant commenced a suit against Adelphia.
See "Item 3. Legal Proceedings".
On January 4, 1999, Registrant consummated the sale of substantially all of the
assets used in the operations of the KEZY-FM and KORG-AM radio station
combination (see further discussion under KEZY-FM and KORG-AM below). On January
28, 1999, Registrant consummated the sale of the stock of the WQAL-FM radio
station (see further discussion under Wincom below). On August 31, 1999,
Registrant consummated the sale of substantially all of the assets used in the
operations of the WEBE-FM and WICC-AM radio station combination (see further
discussion under WEBE-FM and WICC-AM below).
Registrant cannot presently determine when contingencies and required escrows
related to the sales of its properties will be resolved. In addition, the
General Partner currently anticipates that the pendency of certain litigation,
as discussed below, the related claims against Registrant for indemnification,
other costs and expenses related to such litigation, and the involvement of
management, will adversely affect (i) the timing of the termination of
Registrant, (ii) the amount of proceeds which may be available for distribution,
and (iii) the timing of the distribution to the limited partners of the net
proceeds from the liquidation of Registrant's assets.
In September 1998, much of Puerto Rico was devastated by Hurricane Georges.
Registrant's share of damage to the distribution plant was approximately
$859,000. Since such damaged assets were not covered by insurance policies nor
salvageable via repairs, such amount of net plant and equipment was written-off
during the year ended December 25, 1998. The Hurricane damage was determined to
have caused total loss of these assets. The write-off of net plant and equipment
of approximately $859,000 represented the net book value of distribution plant
destroyed by the Hurricane. During the years ended December 31, 1999 and
December 25, 1998, Registrant recorded, as revenue, approximately $335,000 and
$1.9 million, respectively, related to its share of anticipated insurance
recoveries related to subscriber refunds. Although C-ML Cable is in the process
of finalizing an insurance claim related to such hurricane damage, the ultimate
resolution of these claims is subject to further negotiations with the insurance
carrier.
On August 29, 1997, a purported class action was commenced in New York Supreme
Court, New York County, on behalf of the limited partners of Registrant, against
Registrant, Registrant's general partner, Media Management Partners (the
"General Partner"), the General Partner's two partners, RP Media Management
("RPMM") and ML Media Management Inc. ("MLMM"), Merrill Lynch & Co., Inc. and
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"). The action
concerns Registrant's payment of certain management fees and expenses to the
General Partner and the payment of certain purported fees to an affiliate of
RPMM.
Specifically, the plaintiffs allege breach of the Partnership Agreement, breach
of fiduciary duties, and unjust enrichment by the General Partner in that the
General Partner allegedly: (1) improperly deferred and accrued certain
management fees and expenses in an amount in excess of $14.0 million, (2)
improperly paid itself such fees and expenses out of proceeds from sales of
Registrant assets, and (3) improperly paid MultiVision Cable TV Corp., an
affiliate of RPMM, supposedly duplicative fees in an amount in excess of $14.4
million.
With respect to Merrill Lynch & Co., Inc., Merrill Lynch, MLMM and RPMM,
plaintiffs claim that these defendants aided and abetted the General Partner in
the alleged breach of the Partnership Agreement and in the alleged breach of the
General Partner's fiduciary duties. Plaintiffs seek, among other things, an
injunction barring defendants from paying themselves management fees or expenses
not expressly authorized by the Partnership Agreement, an accounting,
disgorgement of the alleged improperly paid fees and expenses, and compensatory
and punitive damages. Defendants believe that they have good and meritorious
defenses to the action, and vigorously deny any wrongdoing with respect to the
alleged claims. Accordingly, defendants moved to dismiss the complaint and each
claim for relief therein. On March 3, 1999, the New York Supreme Court issued an
order granting defendants' motion and dismissing plaintiffs' complaint in its
entirety, principally on the grounds that the claims are derivative and
plaintiffs lack standing to bring suit because they failed to make a
pre-litigation demand on the General Partner. Plaintiffs have both appealed this
order and moved, inter alia, for leave to amend their complaint in order to
re-assert certain of their claims as derivative claims on behalf of Registrant.
The appeal and the motion for leave to amend are pending. Defendants have served
their brief in opposition to the appeal, arguing that the court should affirm
the Supreme Court's order dismissing plaintiffs' complaint. Oral argument of the
appeal is scheduled for May 2000. Defendants have also served papers in
opposition to the plaintiffs' motion for leave to amend their complaint. Oral
argument has been heard and the parties are awaiting a decision.
The Partnership Agreement provides for indemnification, to the fullest extent
provided by law, for any person or entity named as a party to any threatened,
pending or completed lawsuit by reason of any alleged act or omission arising
out of such person's activities as a General Partner or as an officer, director
or affiliate of either RPMM, MLMM or the General Partner, subject to specified
conditions. In connection with the purported class action filed on August 29,
1997, Registrant has received notices of requests for indemnification from the
following defendants named therein: the General Partner, RPMM, MLMM, Merrill
Lynch & Co., Inc. and Merrill Lynch. For the years ended December 31, 1999,
December 25, 1998 and December 26, 1997, Registrant incurred approximately
$205,000, $223,000 and $280,000, respectively, for legal costs relating to such
indemnification. Cumulatively, such legal costs amount to approximately $708,000
through December 31, 1999.
On March 24, 2000, Registrant commenced suit in New York Supreme Court, New York
County against Century Communications Corp. ("Century") Adelphia and Arahova
Communications, Inc. (formerly Century) seeking a dissolution of the Venture and
the appointment of a receiver for the sale of the Venture's assets (primarily
the stock of the subsidiary of the Venture that owns the cable systems). The
complaint alleges that, as successor to Century's position as Registrant's joint
venture partner, Adelphia breached its fiduciary and contractual obligations to
Registrant with respect to the operations of the Venture and by proposing to
take action that would interfere with the sale of the cable systems to a third
party through an auction process conducted in accordance with the terms of the
joint venture agreement. In addition to dissolution and the appointment of a
receiver, Registrant seeks in the suit an order directing Adelphia and its
affiliates to comply with the terms of the joint venture agreement. The
complaint states that, if for any reason the court should determine not to
appoint a receiver, the courts should direct the Venture to diligently proceed
to locate an unrelated third party to buy the cable systems at the highest
npossible price and that the defendants be enjoined from interfering in any
manner in the sale process, and seeks other equitable relief. Registrant also
seeks in the suit compensatory and punitive damages.
WEBE-FM and WICC-AM
On August 31, 1999, Registrant consummated a sale to Aurora Communications, LLC
("Aurora") (formerly known as Shadow Communications, LLC) of substantially all
of the assets used in the operations of Registrant's radio stations, WEBE-FM and
WICC-AM (the "Connecticut Stations"), pursuant to a sales agreement dated April
22, 1999 (the "Connecticut Agreement").
The base sales price for the Connecticut Stations was $66 million, subject to
certain adjustments, including a working capital adjustment, as provided in the
Connecticut Agreement.
Pursuant to the Connecticut Agreement, Registrant deposited $3.3 million into an
indemnity escrow account against which Aurora may make indemnification claims
until December 31, 2000. At the closing, pursuant to the terms of the
Wincom-WEBE-WICC Loan, an initial amount of approximately $8.2 million was paid
to the Wincom Bank, as partial payment of the lender's 15% residual interest in
the net proceeds from the sale of the Connecticut Stations. In addition,
approximately $6.6 million was applied to repay certain amounts owed to
Registrant by the Connecticut Stations. The General Partner has determined to
add this amount to Registrant's working capital to meet potential Registrant
expenses and contingencies. If working capital is not utilized by Registrant, in
accordance with the terms of the Partnership Agreement, it will ultimately be
distributed to the partners, in accordance with the terms of the Partnership
Agreement. In addition, Registrant held approximately $11.5 million of the sales
proceeds to pay (or to reserve for payment of) expenses and liabilities relating
to the operations of the Connecticut Stations prior to the sale, as well as
wind-down expenses, sale-related expenses, contingent obligations of the
Connecticut Stations, and the balance of the 15% residual interest in the net
sales proceeds payable to the lender under the Wincom-WEBE-WICC Loan.
On October 29, 1999, the remaining sales proceeds of approximately $36.4
million, after accounting for certain expenses of Registrant, were distributed
to partners of record as of August 31, 1999, in accordance with the terms of the
Partnership Agreement. To the extent any amounts reserved or paid into escrow as
described above are subsequently released, such amounts will be distributed to
partners of record as of the dates when such escrow or reserves are released.
Registrant recognized a gain of approximately $39.7 million on the sale of the
Connecticut Stations. As of December 31, 1999, Registrant had approximately $8.1
million remaining in cash reserves from the sale of the Connecticut Stations.
Wincom
On January 28, 1999, Registrant consummated a sale to Chancellor Media
Corporation of Los Angeles ("Chancellor") of the stock of Wincom, pursuant to a
stock purchase agreement (the "Cleveland Agreement") dated August 11, 1998.
Wincom owns all of the outstanding stock of Win Communications, Inc., which owns
and operates the radio station WQAL-FM, serving Cleveland, Ohio (the "Cleveland
Station").
The base sales price for the Cleveland Station was $51,250,000, subject to
certain adjustments for the apportionment of current assets and liabilities as
of the closing date, as provided for in the Cleveland Agreement, resulting in a
reduction of the base sales price of approximately $1.6 million.
Pursuant to the Cleveland Agreement, Registrant deposited $2.5 million into an
indemnity escrow account against which Chancellor may make indemnification
claims for a period of up to two years after the closing. Approximately $2.0
million was used to repay in full the remaining outstanding balance of the
Wincom-WEBE-WICC Loan and pursuant to the terms of the Wincom-WEBE-WICC Loan, an
initial amount of approximately $7.3 million was paid to the Wincom Bank,
pursuant to its 15% residual interest in the net sales proceeds from the sale of
Wincom. In addition, Registrant held approximately $2.6 million of the sales
proceeds to pay (or to reserve for payment of) wind-down expenses, sale-related
expenses and the balance, if any, of the Wincom Bank's residual interest. The
remaining sales proceeds of $35.3 million were included in the cash distribution
made to partners on March 30, 1999 in accordance with the terms of the
Partnership Agreement.
On February 4, 2000, Registrant received the discharge of escrowed proceeds of
$1.5 million, plus interest earned thereon, generated from the sale of the
Cleveland Station. In accordance with the terms of the Partnership Agreement,
the amount of such discharged escrowed proceeds, after accounting for certain
expenses of Registrant, will be included in the cash distribution to limited
partners of $1,485,153 ($7.90 per Unit) and $15,001 to its General Partner,
representing its 1% share. This cash distribution to limited partners will be
paid to limited parters of record as of February 4, 2000 and will be distributed
to partners by the end of the second quarter of 2000.
To the extent any amounts reserved or paid into escrow as described above are
subsequently released, such amounts will be distributed to partners of record as
of the date of such release from such escrow or reserves. Registrant recognized
a gain of approximately $41.5 million on the sale of the Cleveland Station. As
of December 31, 1999, Registrant had approximately $2.5 million remaining in
cash reserves from the sale of the Cleveland Station.
On December 31, 1997, the Wincom-WEBE-WICC Loan matured and became due and
payable in accordance with its terms. Registrant remained in default on the
Wincom-WEBE-WICC Loan during 1998, and as of December 25, 1998 a principal
balance of $1,993,137 was outstanding. Although in 1999, Registrant repaid the
remaining outstanding principal balance of the Wincom-WEBE-WICC Loan in full
plus accrued interest, the default has not been waived by the Wincom Bank.
KEZY-FM and KORG-AM
On January 4, 1999, Registrant consummated a sale to Citicasters Co., a
subsidiary of Jacor Communications, Inc. ("Citicasters") of substantially all of
the assets, other than cash and accounts receivable, used in the operations of
Registrant's radio stations, KORG-AM and KEZY-FM, serving Anaheim, California
(the "Anaheim Stations"), pursuant to the asset purchase agreement (the "Anaheim
Agreement") dated September 14, 1998, as amended.
The base sales price for the Anaheim Stations was $30,100,000, subject to
certain adjustments for the apportionment of income and liabilities as of the
closing date, as provided for in the Anaheim Agreement, resulting in a reduction
of the base sales price of approximately $20,000.
Pursuant to the Anaheim Agreement, Registrant deposited $1.0 million into an
indemnity escrow account against which Citicasters may make indemnification
claims for a period of one year after the closing. In addition, Registrant held
approximately $5.2 million of the sales proceeds to pay (or to reserve for
payment of) expenses and liabilities relating to the operations of the Anaheim
Stations prior to the sale as well as wind-down expenses, sale-related expenses
and contingent obligations of the Anaheim Stations. The remaining sales proceeds
of approximately $23.9 million were included in the cash distribution made to
partners on March 30, 1999, after accounting for certain expenses of Registrant,
in accordance with the terms of the Partnership Agreement.
On January 31, 2000, Registrant received the discharge of escrowed proceeds of
$1.0 million, plus interest earned thereon, generated from the sale of the
Anaheim Stations. In accordance with the terms of the Partnership Agreement, the
entire amount of such discharged escrowed proceeds was used to account for
certain expenses of Registrant. As of December 31, 1999, Registrant had
approximately $3.9 million remaining in cash reserves from the sale of the
Anaheim Stations.
To the extent any amounts reserved as described above are subsequently released,
such amounts will be distributed to partners of record as of the date of such
release from reserves. Registrant recognized a gain of approximately $19.8
million on the sale of the Anaheim Stations.
Puerto Rico Radio
On June 3, 1998, the Venture consummated the sale of C-ML Radio pursuant to a
sales agreement entered into in October 1997 between the Venture and Madifide,
Inc. The base sales price for C-ML Radio was approximately $11.5 million,
approximately $5.8 million of which is Registrant's share, subject to closing
adjustments. At the closing, the Venture and Madifide, Inc. entered into escrow
agreements pursuant to which the Venture deposited, in aggregate, $725,040,
$362,520 of which is Registrant's share, into three separate escrow accounts
with respect to which indemnification, benefit, and chattel mortgage claims may
be made by Madifide, Inc. for a period of one year. As of December 25, 1998, the
balance of these escrows was classified on the accompanying Consolidated Balance
Sheet as Investments held by escrow agents. During the second quarter of 1999,
the remaining escrow of $324,999 was released. In 1998, Registrant recognized a
gain for financial reporting purposes of approximately $2.8 million on the sale
of C-ML Radio.
Pursuant to the terms of the outstanding senior indebtedness that jointly
financed C-ML Radio and C-ML Cable, the net proceeds and escrow amounts released
from the sale of C-ML Radio must be retained by the Venture and cannot be
distributed to Registrant or its partners.
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 Operation
serving the Anaheim, Hermosa Beach/Manhattan Beach, Rohnert Park/Yountville and
Fairfield communities (the "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.
In addition, upon closing of the sale of the California Cable Systems,
Registrant set aside approximately $40.7 million in a cash reserve to cover
operating liabilities, current litigation, and litigation contingencies relating
to the California Cable Systems' operations prior to and resulting from their
sale, as well as a potential purchase price adjustment. In accordance with the
terms of the Partnership Agreement, any amounts which may be available for
distribution from any unused cash reserves, after accounting for certain other
expenses of Registrant including certain expenses incurred after May 31, 1996,
are distributable to partners of record as of the date such unused reserves are
released, when Registrant determines such reserves are no longer necessary,
rather than to the partners of record on May 31, 1996, the date of the sale. On
March 1, 1999, reserves in the amount of approximately $6.1 million were
released and, in accordance with the terms of the Partnership Agreement, have
been included in the cash distribution, after accounting for certain expenses of
Registrant that was made on March 31, 1999. As of December 31, 1999, Registrant
had approximately $15.2 million remaining in such cash reserves to cover
operating liabilities, current litigation, and litigation contingencies relating
to the California Cable Systems prior to and resulting from their sale.
Recent Accounting Statement Adopted
The Partnership adopted Statement of Financial Accounting Standards ("SFAS") No.
133, "Accounting for Derivative Instruments and Hedging Activities" during the
first quarter of 1999. SFAS No. 133 established accounting and reporting
standards for derivative instruments and for hedging activities, requiring the
recognition of all derivatives as either assets or liabilities and to measure
those instruments at fair value, as well as to identify the conditions for which
a derivative may be specifically designed as a hedge. The Partnership currently
does not have any derivative instruments and is not engaged in hedging
activities.
Impact of Legislation and Regulation
The information set forth in the Legislation and Regulation Section of Part I,
Item 1. Business, is hereby incorporated by reference and made a part hereof.
Forward Looking Information
In addition to historical information contained or incorporated by reference in
this report on Form 10-K, Registrant may make or publish forward-looking
statements about management expectations, strategic objectives, business
prospects, anticipated financial performance, and other similar matters. In
order to comply with the terms of the safe harbor for such statements provided
by the Private Securities Litigation Reform Act of 1995, Registrant notes that a
variety of factors, many of which are beyond its control, affect its operations,
performance, business strategy, and results and could cause actual results and
experience to differ materially from the expectations expressed in these
statements. These factors include, but are not limited to, the effect of
changing economic and market conditions, trends in business and finance and in
investor sentiment, the level of volatility of interest rates, the actions
undertaken by both current and potential new competitors, the impact of current,
pending, and future legislation and regulation both in the United States and
throughout the world, and the other risks and uncertainties detailed in this
Form 10-K. Registrant undertakes no responsibility to update publicly or revise
any forward-looking statements.
Results of Operations
For the year ended December 31, 1999
Registrant's net income for the year ended December 31, 1999 was approximately
$116.1 million, which was comprised of the following components: (i) a gain of
approximately $101.0 million on the sales of the Anaheim Stations, the Cleveland
Station and the Connecticut Stations, (ii) net income from the operations of
C-ML Cable of approximately $9.1 million, (iii) net income from the discontinued
radio station segment of approximately $3.2 million and (iv) interest income of
approximately $4.6 million, partially offset by (v) management fees of
approximately $1.1 million and (vi) general and administrative expenses of
approximately $686,000.
For the year ended December 25, 1998
Registrant's net income for the year ended December 25, 1998 was approximately
$14.2 million, which was comprised of the following components: (i) a gain of
approximately $2.8 million on the sale of C-ML Radio, (ii) net income from the
operations of C-ML Cable of approximately $3.4 million, (iii) net income from
the discontinued radio station segment of approximately $7.6 million and (iv)
interest income of approximately $2.7 million, partially offset by (v)
management fees of approximately $1.2 million and (vi) general and
administrative expenses of approximately $1.1 million.
For the year ended December 26, 1997
Registrant's net income for the year ended December 26, 1997 was approximately
$19.5 million, which was comprised of the following components: (i) a gain of
approximately $3.7 million in connection with the sales of WREX and KATC, (ii)
net income from the operations of C-ML Cable of approximately $8.3 million,
(iii) net income from the discontinued radio station segment of approximately
$6.2 million and (iv) interest income of approximately $3.4 million, partially
offset by (v) management fees of approximately $1.2 million and (vi) general and
administrative expenses of approximately $900,000.
For the years ended December 31, 1999 and December 25, 1998
The increase in net income of approximately $101.9 million from the year ended
December 25, 1998 is primarily attributable to one-time gains on the sale of the
Anaheim Stations, the Cleveland Station and the Connecticut Stations in the 1999
period of approximately $19.8 million, $41.5 million and $39.7 million,
respectively, an increase in net income of C-ML Cable of approximately $5.8
million and an increase in interest income of approximately $1.8 million,
partially offset by the gain on the sale of C-ML Radio in the 1998 period of
approximately $2.8 million and a decrease in net income from the discontinued
radio station segment of approximately $4.4 million.
The increase in net income of C-ML Cable of approximately $5.8 million from the
year ended December 25, 1998 was primarily due to an increase in net operating
revenues of approximately $2.6 million resulting from an increase in basic
subscribers from 130,518 at the end of 1998 to 133,320 at the end of 1999 and an
increase in pay-per-view revenues resulting from popular boxing matches, as well
as an increase in pay subscribers from 80,072 to 83,048, a decrease in property
taxes of approximately $1.6 million due to the settlement with local authorities
resulting in a reversal in previously accrued expenses, a decrease in
depreciation and amortization expense of approximately $2.2 million due
primarily to a change in the accounting estimate for useful lives of intangible
assets and a decrease in interest expense of approximately $801,000 due to the
scheduled principal payment in late 1998. These increases in net income
components at C-ML Cable were partially offset by increases in general and
administrative expenses of approximately $1.9 million generally due to increased
revenues.
The decrease in net income from the discontinued radio station segment of $4.4
million from the year ended December 25, 1998 was primarily due to a decrease in
net income at the Cleveland Station, the Anaheim Stations, and the Connecticut
Stations in 1999 and C-ML Radio in 1998, partially offset by operational
expenses incurred in the 1998 period due to the sale of C-ML Radio.
The increase in interest income of approximately $1.8 million from the year
ended December 25, 1998 is due primarily to interest earned on the higher
average cash balances that existed during 1999 resulting from the sales of the
Cleveland Station, the Anaheim Stations and the Connecticut Stations, prior to
their cash distributions.
For the years ended December 25, 1998 and December 26, 1997
The decrease in net income of approximately $5.3 million from the year ended
December 26, 1997 is primarily attributable to gains recognized in connection
with the sales of WREX and KATC in the 1997 period of approximately $2.0 million
and $1.7 million, respectively, a decrease in net income of C-ML Cable of
approximately $4.9 million and a decrease in interest income of approximately
$616,000, offset by the gain on the sale of C-ML Radio in the 1998 period of
approximately $2.8 million and a increase in net income from the discontinued
radio station segment of approximately $1.4 million.
The decrease in net income of C-ML Cable of approximately $4.9 million from the
year ended December 26, 1997 was primarily due to an increase in general and
administrative expenses of approximately $5.5 million due to an increase in the
provision for income taxes for the 1998 period as the joint venture had used its
remaining net operating loss carryforwards and became a taxpayer; by an increase
in property operating expense of approximately $1.2 million which resulted from
expenses directly related to an increase in operating revenues, increased
maintenance costs, as well as in an increase in overtime expenses due to
Hurricane Georges; by a write-off of fixed assets of approximately $859,000 due
to damage caused by Hurricane Georges; by an increase in depreciation and
amortization expense of approximately $351,000 partially due to a net increase
in the asset base resulting from the plant expansion; as well as by an increase
in interest expense of approximately $140,000. These increases at C-ML Cable
were partially offset by an increase in net operating revenues of approximately
$3.2 million resulting from an increase in basic subscribers from 123,990 at the
end of 1997 to 130,518 at the end of 1998.
The increase in net income from the discontinued radio station segment of $1.4
million from the year ended December 26, 1997 was primarily due an increase in
net income at the Connecticut Stations in 1998, partially offset by operational
expenses incurred in the 1998 period due to the sale of C-ML Radio.
The decrease in interest income of approximately $616,000 from the year ended
December 26, 1997 is due primarily to interest earned on the lower average cash
reserve balances that existed during 1998 resulting from the fourth quarter 1997
cash distribution.
Additional Operating Information
As of December 31, 1999, Registrant's sole remaining operating investment in
media properties is its 50% interest in the Venture. The following table shows
the numbers of homes passed, basic and pay subscribers at C-ML Cable:
<TABLE>
<CAPTION>
As of As of As of
December 31, 1999 December 25, 1998 December 26, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Homes Passed 304,636 293,670 284,450
Basic Subscribers 133,320 130,518 123,990
Pay Subscriptions 83,048 80,072 68,445
</TABLE>
The overall number of homes passed by C-ML Cable increased from the end of 1997
to the end of 1999 due primarily to the extension of cable plant to pass
incremental homes, and the number of basic subscribers increased during the same
period. This is due to the extension of cable service to pass additional homes,
as well as to an increased level of marketing. The number of pay subscriptions
at C-ML Cable increased from the end of 1997 to the end of 1998 due to marketing
promotions for Showtime and The Movie Channel during the first half of 1998 and
increased from the end of 1998 to the end of 1999 due to an increase in
pay-per-view revenues resulting from popular boxing matches.
<PAGE>
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
As of December 31, 1999, Registrant maintains a portion of its cash equivalents
in financial instruments with original maturities of three months or less. These
financial instruments are subject to interest rate risk, and will decline in
value if interest rates increase. A significant increase or decrease in interest
rates would not have a material effect on Registrant's financial position.
Registrant's outstanding long-term debt as of December 31, 1999, bears interest
at fixed rates, therefore, changes in interest rates would have no effect on
Registrant's results of operations.
<PAGE>
Item 8. Financial Statements and Supplementary Data.
TABLE OF CONTENTS
ML Media Partners, L.P.
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 1999 and
December 25, 1998
Consolidated Income Statements for the Three Years
Ended December 31, 1999
Consolidated Statements of Cash Flows for the Three Years
Ended December 31, 1999
Consolidated Statements of Changes in Partners'
Capital for the Three Years Ended December 31, 1999
Notes to Consolidated Financial Statements for the
Three Years Ended December 31, 1999
No financial statement schedules are included because of the absence of the
conditions under which they are required or because the information is included
in the financial statements or the notes thereto.
<PAGE>
INDEPENDENT AUDITORS' REPORT
ML Media Partners, L.P.:
We have audited the accompanying consolidated financial statements of ML Media
Partners, L.P. (the "Partnership") and its affiliated entities, as listed in the
accompanying table of contents. These consolidated financial statements are the
responsibility of the Partnership's general partner. Our responsibility is to
express an opinion on the consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
general partner, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Partnership and its affiliated
entities as of December 31, 1999 and December 25, 1998 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
New York, New York
March 27, 2000
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1999 AND DECEMBER 25, 1998
Notes 1999 1998
----- -------------- --------------
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 125,574,620 $ 101,394,305
Investments held by escrow agents 6,975,972 321,023
Accounts receivable (net of allowance for doubtful accounts
of $605,910 and $540,407, respectively) 1,924,269 4,211,614
Prepaid expenses and deferred charges (net of
accumulated amortization of $585,969 and
$1,422,072, respectively) 620,792 450,748
Property, plant and equipment (net of accumulated
depreciation of $15,373,234 and $12,396,742,
respectively) 27,663,870 26,184,747
Intangible assets (net of accumulated amortization of
$33,149,500 and $32,977,332, respectively) 5,101,394 5,262,658
Other assets 705,377 2,147,421
Net assets of discontinued operations - Radio Station
Segment - 18,656,569
-------------- --------------
TOTAL ASSETS $ 168,566,294 $ 158,629,085
============== ==============
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Borrowings $ 30,000,000 $ 40,000,000
Accounts payable and accrued liabilities 27,280,587 24,237,067
Subscriber advance payments 2,486,731 1,585,448
-------------- --------------
Total Liabilities 59,767,318 65,822,515
============== ==============
Commitments and Contingencies 5,7
Partners' Capital:
General Partner:
Capital contributions, net of offering expenses 1,708,299 1,708,299
Cumulative cash distributions (2,358,470) (1,357,734)
Cumulative income 1,801,078 640,418
-------------- --------------
1,150,907 990,983
============== ==============
Limited Partners:
Capital contributions, net of offering expenses
(187,994 Units of Limited Partnership Interest) 169,121,150 169,121,150
Tax allowance cash distribution (6,291,459) (6,291,459)
Cumulative cash distributions (233,488,548) (134,415,710)
Cumulative income 178,306,926 63,401,606
-------------- --------------
107,648,069 91,815,587
-------------- --------------
Total Partners' Capital 108,798,976 92,806,570
-------------- --------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 168,566,294 $ 158,629,085
============== ==============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA PARTNERS, L.P.
CONSOLIDATED INCOME STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1999
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Partnership Operating Revenues and
Expenses:
REVENUES:
Operating revenues $ 35,162,727 $ 32,575,174 $ 29,404,870
Interest 4,557,395 2,737,050 3,352,983
-------------- -------------- --------------
Total revenues 39,720,122 35,312,224 32,757,853
-------------- -------------- --------------
COSTS AND EXPENSES:
Property operating 8,156,049 9,369,196 8,158,973
General and administrative 10,469,605 9,012,746 3,313,599
Depreciation and amortization 4,330,765 6,497,946 6,143,721
Interest expense 3,750,709 4,561,180 4,412,510
Management fees 1,092,517 1,207,688 1,211,671
Write-off of fixed assets - 859,078 -
-------------- -------------- --------------
Total costs and expenses 27,799,645 31,507,834 23,240,474
-------------- -------------- --------------
Income from
continuing operations 11,920,477 3,804,390 9,517,379
-------------- -------------- --------------
DISCONTINUED OPERATIONS:
Income from discontinued operations
- Radio Station Segment 3,184,469 7,612,079 6,247,584
Gain on sale - Radio Station Segment 100,961,034 2,752,975 -
-------------- -------------- --------------
Gain on sale of television stations - - 3,702,725
-------------- -------------- --------------
Total discontinued operations 104,145,503 10,365,054 9,950,309
-------------- -------------- --------------
NET INCOME $ 116,065,980 $ 14,169,444 $ 19,467,688
============== ============== ==============
Per Unit of Limited
Partnership
Interest:
Income from continuing operations $ 62.78 $ 20.03 $ 50.12
-------------- -------------- --------------
Income from discontinued operations
- Radio Station Segment 16.77 40.09 32.90
Gain on sale - Radio Station Segment 531.67 14.50 -
Gain on sale of television stations - - 19.50
-------------- -------------- --------------
548.44 54.59 52.40
-------------- -------------- --------------
NET INCOME $ 611.22 $ 74.62 $ 102.52
============== ============== ==============
Number of Units 187,994 187,994 187,994
============== ============== ==============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 31, 1999
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 116,065,980 $ 14,169,444 $ 19,467,688
Adjustments to reconcile net income
to net cash provided by operating
activities:
Income from discontinued operations
- Radio Station Segment (3,184,469) (7,612,079) (6,247,584)
Depreciation and amortization 4,330,765 6,497,946 6,143,721
Bad debt expense/(recovery) 324,137 318,676 (117,767)
Gain on sale of discontinued operations:
Radio Station Segment (100,961,034) (2,752,975) -
Television stations - - (3,702,725)
Write-off of fixed assets - 859,078 -
Changes in operating assets
and liabilities:
(Increase)/Decrease:
Accounts receivable 2,017,285 1,487,818 683,226
Investments held by escrow agents (6,654,949) (321,023) 6,244,252
Prepaid expenses and deferred charges (141,835) 758,495 (536,204)
Other assets 2,490,142 (1,404,799) (680,267)
(Decrease)/Increase:
Accounts payable and accrued liabilities (1,548,581) 2,855,383 7,775,070
Subscriber advance payments 901,283 113,044 (40,017)
-------------- -------------- --------------
Net cash provided by continuing operations 13,638,724 14,969,008 28,989,393
Net cash provided by discontinued operations
- Radio Station Segment 3,464,825 8,525,374 7,568,416
-------------- -------------- --------------
Net cash provided by operating activities 17,103,549 23,494,382 36,557,809
-------------- -------------- --------------
Cash flows from investing activities:
Proceeds from sale of discontinued operations
- Radio Station Segment $ 125,179,279 $ 5,768,750 $ -
Payment of costs incurred related to sale
of discontinued operations
- Radio Station Segment (321,023) (41,497) -
Payment of costs incurred related to sale
of the California Cable Systems (60,004) (138,970) (2,455,065)
Purchase of property, plant and equipment (5,638,885) (8,086,847) (7,731,495)
Purchase of property, plant and equipment
of discontinued operations - Radio
Station Segment (5,287) (33,610) (185,848)
Payment for intangible assets (10,603) - -
-------------- -------------- --------------
Net cash provided by (used in) investing
activities 119,143,477 (2,532,174) (10,372,408)
-------------- -------------- --------------
Cash flows from financing activities:
Principal payments on borrowings (10,000,000) (10,000,000) -
Principal payments on borrowings of
discontinued operations
- Radio Station Segment (1,993,137) (2,250,901) (6,104,390)
Limited partners cash distributions (99,072,838) - (18,799,400)
General Partner cash distributions (1,000,736) (189,893) -
-------------- -------------- --------------
Net cash used in financing activities (112,066,711) (12,440,794) (24,903,790)
-------------- -------------- --------------
Net increase in cash and cash equivalents 24,180,315 8,521,414 1,281,611
Cash and cash equivalents at beginning of year 101,394,305 92,872,891 91,591,280
-------------- -------------- --------------
Cash and cash equivalents at end of year $ 125,574,620 $ 101,394,305 $ 92,872,891
============== ============== ==============
Cash paid for interest $ 3,802,727 $ 5,070,031 $ 5,614,297
============== ============== ==============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE THREE YEARS ENDED DECEMBER 31, 1999
General Limited
Partner Partners Total
-------------- -------------- --------------
<S> <C> <C> <C>
1997:
Partners' Capital as of December 27, 1996 $ 844,505 $ 77,314,226 $ 78,158,731
Net Income 194,677 19,273,011 19,467,688
Cash Distribution (189,893) (18,799,400) (18,989,293)
-------------- -------------- --------------
Partners' Capital as of December 26, 1997 849,289 77,787,837 78,637,126
1998:
Net Income 141,694 14,027,750 14,169,444
-------------- -------------- --------------
Partners' Capital as of December 25, 1998 990,983 91,815,587 92,806,570
1999:
Net Income 1,160,660 114,905,320 116,065,980
Cash Distributions (1,000,736) (99,072,838) (100,073,574)
-------------- -------------- --------------
Partners' Capital as of December 31, 1999 $ 1,150,907 $ 107,648,069 $ 108,798,976
============== ============== ==============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
ML MEDIA PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1999
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ML Media Partners, L.P. (the "Partnership") was formed and the Certificate of
Limited Partnership was filed under the Delaware Revised Uniform Limited
Partnership Act on February 1, 1985. Operations commenced on May 14, 1986 with
the first closing of the sale of units of limited partnership interest
("Units"). Subscriptions for an aggregate of 187,994 Units were accepted and are
now outstanding.
Media Management Partners (the "General Partner") is a joint venture, organized
as a general partnership under the laws of the State of New York, between RP
Media Management ("RPMM"), a joint venture organized as a general partnership
under the laws of the State of New York, consisting of The Elton H. Rule Company
and IMP Media Management, Inc., and ML Media Management Inc. ("MLMM"), a
Delaware corporation and an indirect wholly-owned subsidiary of Merrill Lynch &
Co., Inc. The General Partner was formed for the purpose of acting as general
partner of the Partnership. The General Partner's total capital contribution
amounted to $1,898,934 which represents 1% of the total Partnership capital
contributions.
Pursuant to the terms of the Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement"), the General Partner is liable for all
general obligations of the Partnership to the extent not paid by the
Partnership. The limited partners are not liable for the obligations of the
Partnership in excess of the amount of their contributed capital.
The Partnership was formed to acquire, finance, hold, develop, improve,
maintain, operate, lease, sell, exchange, dispose of and otherwise invest in and
deal with media businesses and direct and indirect interests therein.
As of December 31, 1999, the Partnership's sole remaining operating investment
in media properties is its 50% interest in a joint venture (the "Venture"),
which owns 100% of the stock of Century-ML Cable Corporation ("C-ML Cable
Corp."), which owns and operates two cable television systems in Puerto Rico.
Reclassifications
Certain reclassifications were made to the 1997 and 1998 consolidated balance
sheets, income statements and statements of cash flows to present the Radio
Station Segment and television stations as discontinued operations (see Note 9).
Basis of Accounting and Fiscal Year
The Partnership's records are maintained on the accrual basis of accounting for
financial reporting and tax purposes. Pursuant to generally accepted accounting
principles, the Partnership recognizes revenue as various services are provided.
The Partnership consolidates its pro rata 50% interest in the Venture. In
addition, the Partnership consolidated its 100% interest in Wincom; its 99.999%
interests in WEBE-FM, WICC-AM, KEZY-FM and KORG-AM, California Cable Systems,
KATC-TV and WREX-TV prior to their respective dispositions (see Note 2). All
intercompany accounts have been eliminated. The fiscal year of the Partnership
ends on the last Friday of each calendar year.
Cash Equivalents
Short-term investments which have an original maturity of ninety days or less
are considered cash equivalents.
Property and Depreciation
Property, plant and equipment is stated at cost, less accumulated depreciation.
Property, plant and equipment is depreciated using the straight-line method over
the following estimated useful lives:
Machinery, Equipment and Distribution Systems 5-12 years
Buildings 15-30.5 years
Other 3-20 years
Initial subscriber connection costs, as it relates to the cable television
systems, are capitalized and included as part of the distribution systems. Costs
related to disconnects and reconnects are expensed as incurred. Expenditures for
maintenance and repairs are charged to operating expense as incurred.
Betterments, replacement equipment and additions are capitalized and depreciated
over the remaining life of the assets.
Intangible Assets and Deferred Charges
Intangible assets and deferred charges are being amortized on a straight-line
basis over various periods as follows:
Franchise 40 years
Other Intangibles Various
Deferred Costs 4-10 years
The excess of cost over fair value of net assets acquired ("Goodwill") in
business combinations consummated since inception of the Partnership is being
amortized over forty years using the straight-line method.
Asset Impairment
The Partnership assesses the impairment of assets on a regular basis or
immediately upon the occurrence of a significant event in the marketplace or an
event that directly impacts its assets. The methodology varies depending on the
type of asset but typically consists of comparing the net book value of the
asset to either: (1) the undiscounted expected future cash flows generated by
the asset, and/or (2) the current market values obtained from industry sources.
If the net book value of a particular asset is materially higher than the
estimated net realizable value, and the asset is considered to be permanently
impaired, the Partnership will write down the net book value of the asset
accordingly; however, the Partnership may not write its assets down to a value
below the asset-related non-recourse debt. The Partnership relies on industry
sources and its experience in the particular marketplace to determine whether an
asset impairment is other than temporary.
Barter Transactions
As is customary in the broadcasting industry, the Partnership engages in the
bartering of commercial air time for various goods and services. Barter
transactions are recorded based on the fair market value of the products and/or
services received. The goods and services are capitalized or expensed as
appropriate when received or utilized. Revenues are recognized when the
commercial spots are aired.
Revenue Recognition
Operating revenue, as it relates to the cable television systems, includes
earned subscriber service revenues and charges for installation and connections.
These revenues are recorded at the time the services are performed. Since such
subscriber service and installation and connection charges represent up-front,
non-refundable fees, and do not include content service agreements, such
revenues are not deferred over an extended benefit period. Subscriber services
paid for in advance are recorded as income when earned. Operating revenue, as it
related to the radio broadcasting properties was recorded net of commissions
paid to advertising agencies.
Management Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclosures about
Fair Value of Financial Instruments", requires companies to report the fair
value of certain on- and off-balance sheet assets and liabilities which are
defined as financial instruments.
Considerable judgment is required in interpreting data to develop the estimates
of fair value. Accordingly, the estimates presented herein are not indicative of
the amounts that the Partnership could realize in a current market exchange. The
use of different market assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts.
Income Taxes
The Partnership accounts for income taxes pursuant to SFAS No. 109 "Accounting
for Income Taxes". No provision for income taxes has been made for the
Partnership because all income and losses are allocated to the partners for
inclusion in their respective tax returns. However, the Partnership owns certain
entities which are consolidated in the accompanying financial statements which
are taxable entities.
For entities owned by the Partnership which are consolidated in the accompanying
financial statements, SFAS No. 109 requires the recognition of deferred income
taxes for the tax consequences of differences between the bases of assets and
liabilities for income tax and financial statement reporting, based on enacted
tax laws. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized. For the Partnership,
SFAS No. 109 requires the disclosure of the difference between the tax bases and
the reported amounts of the Partnership's assets and liabilities (see Note 12).
Recent Accounting Statements Adopted
The Partnership adopted Statement of Financial Accounting Standards ("SFAS") No.
133, "Accounting for Derivative Instruments and Hedging Activities" during the
first quarter of 1999. SFAS No. 133 establishes accounting and reporting
standards for derivative instruments and for hedging activities, requiring the
recognition of all derivatives as either assets or liabilities and to measure
those instruments at fair value, as well as to identify the conditions for which
a derivative may be specifically designed as a hedge. The Partnership currently
does not have any derivative instruments and is not engaged in hedging
activities.
2. DISPOSITION OF ASSETS
WEBE-FM and WICC-AM
On August 31, 1999, the Partnership consummated a sale to Aurora Communications,
LLC ("Aurora") (formerly known as Shadow Communications, LLC) of substantially
all of the assets used in the operations of the Partnership's radio stations,
WEBE-FM and WICC-AM (the "Connecticut Stations"), pursuant to a sales agreement
dated April 22, 1999 (the "Connecticut Agreement").
The base sales price for the Connecticut Stations was $66 million, subject to
certain adjustments, including a working capital adjustment, as provided in the
Connecticut Agreement.
Pursuant to the Connecticut Agreement, the Partnership deposited $3.3 million
into an indemnity escrow account against which Aurora may make indemnification
claims until December 31, 2000. At the closing, pursuant to the terms of the
Wincom-WEBE-WICC Loan, approximately $8.2 million was paid to the Wincom Bank,
as partial payment of the lender's 15% residual interest in the net proceeds
from the sale of the Connecticut Stations (see Note 5). In addition,
approximately $6.6 million was applied to repay certain amounts owed to the
Partnership by the Connecticut Stations. The General Partner has determined to
add this amount to the Partnership's working capital to meet potential
Partnership expenses and contingencies. If working capital is not utilized by
the Partnership, in accordance with the terms of the Partnership Agreement, it
will ultimately be distributed to the partners, in accordance with the terms of
the Partnership Agreement. In addition, the Partnership held approximately $11.5
million of the sales proceeds to pay (or to reserve for payment of) expenses and
liabilities relating to the operations of the Connecticut Stations prior to the
sale, as well as wind-down expenses, sale-related expenses, contingent
obligations of the Connecticut Stations, and the balance of the 15% residual
interest in the net sales proceeds payable to the lender under the
Wincom-WEBE-WICC Loan.
On October 29, 1999, the remaining sales proceeds of approximately $36.4
million, after accounting for certain expenses of the Partnership, were
distributed to partners of record as of August 31, 1999, in accordance with the
terms of the Partnership Agreement. To the extent any amounts reserved or paid
into escrow as described above are subsequently released, such amounts will be
distributed to partners of record as of the dates when such escrow or reserves
are released. The Partnership recognized a gain of approximately $39.7 million
on the sale of the Connecticut Stations. As of December 31, 1999, the
Partnership had approximately $8.1 million remaining in cash reserves from the
sale of the Connecticut Stations.
Wincom
On January 28, 1999, the Partnership consummated a sale to Chancellor Media
Corporation of Los Angeles ("Chancellor") of the stock of Wincom, pursuant to a
stock purchase agreement (the "Cleveland Agreement") dated August 11, 1998.
Wincom owns all of the outstanding stock of Win Communications, Inc., which owns
and operates the radio station WQAL-FM, serving Cleveland, Ohio (the "Cleveland
Station").
The base sales price for the Cleveland Station was $51,250,000, subject to
certain adjustments for the apportionment of current assets and liabilities as
of the closing date, as provided for in the Cleveland Agreement, resulting in a
reduction of the base sales price of approximately $1.6 million.
Pursuant to the Cleveland Agreement, the Partnership deposited $2.5 million into
an indemnity escrow account against which Chancellor may make indemnification
claims for a period of up to two years after the closing. Approximately $2.0
million was used to repay in full the remaining outstanding balance of the
Wincom-WEBE-WICC Loan and pursuant to the terms of the Wincom-WEBE-WICC Loan, an
initial amount of approximately $7.3 million was paid to the Wincom Bank,
pursuant to its 15% residual interest in the net sales proceeds from the sale of
Wincom (see Note 5). In addition, the Partnership held approximately $2.6
million of the sales proceeds to pay (or to reserve for payment of) wind-down
expenses, sale-related expenses and the balance, if any, of the Wincom Bank's
residual interest. The remaining sales proceeds of $35.3 million were included
in the cash distribution made to partners on March 30, 1999 in accordance with
the terms of the Partnership Agreement.
On February 4, 2000, the Partnership received the discharge of escrowed proceeds
of $1.5 million, plus interest earned thereon, generated from the sale of the
Cleveland Station. In accordance with the terms of the Partnership Agreement,
the amount of such discharged escrowed proceeds, after accounting for certain
expenses of the Partnership, will be distributed to partners of record as of
February 4, 2000, the date of release of escrow.
To the extent any amounts reserved or paid into escrow as described above are
subsequently released, such amounts will be distributed to partners of record as
of the date of such release from such escrow or reserves. The Partnership
recognized a gain of approximately $41.5 million on the sale of the Cleveland
Station. As of December 31, 1999, the Partnership had approximately $2.5 million
remaining in cash reserves from the sale of the Cleveland Station.
On December 31, 1997, the Wincom-WEBE-WICC Loan matured and became due and
payable in accordance with its terms. The Partnership remained in default on the
Wincom-WEBE-WICC Loan during 1998, and as of December 25, 1998 a principal
balance of $1,993,137 was outstanding. Although in 1999, the Partnership repaid
the remaining outstanding principal balance of the Wincom-WEBE-WICC Loan in full
plus accrued interest, the default has not been waived by the Wincom Bank.
KEZY-FM and KORG-AM
On January 4, 1999, the Partnership consummated a sale to Citicasters Co., a
subsidiary of Jacor Communications, Inc. ("Citicasters") of substantially all of
the assets, other than cash and accounts receivable, used in the operations of
the Partnership's radio stations, KORG-AM and KEZY-FM, serving Anaheim,
California (the "Anaheim Stations"), pursuant to the asset purchase agreement
(the "Anaheim Agreement") dated September 14, 1998, as amended.
The base sales price for the Anaheim Stations was $30,100,000, subject to
certain adjustments for the apportionment of income and liabilities as of the
closing date, as provided for in the Anaheim Agreement, resulting in a reduction
of the base sales price of approximately $20,000.
Pursuant to the Anaheim Agreement, the Partnership deposited $1.0 million into
an indemnity escrow account against which Citicasters may make indemnification
claims for a period of one year after the closing. In addition, the Partnership
held approximately $5.2 million of the sales proceeds to pay (or to reserve for
payment of) expenses and liabilities relating to the operations of the Anaheim
Stations prior to the sale as well as wind-down expenses, sale-related expenses
and contingent obligations of the Anaheim Stations. The remaining sales proceeds
of approximately $23.9 million were included in the cash distribution made to
partners on March 30, 1999, after accounting for certain expenses of the
Partnership, in accordance with the terms of the Partnership Agreement.
On January 31, 2000, the Partnership received the discharge of escrowed proceeds
of $1.0 million, plus interest earned thereon, generated from the sale of the
Anaheim Stations. In accordance with the terms of the Partnership Agreement, the
entire amount of such discharged escrowed proceeds was used to account for
certain expenses of the Partnership. As of December 31, 1999, the Partnership
had approximately $3.9 million remaining in cash reserves from the sale of the
Anaheim Stations.
To the extent any amounts reserved as described above are subsequently released,
such amounts will be distributed to partners of record as of the date of such
release from reserves. The Partnership recognized a gain of approximately $19.8
million on the sale of the Anaheim Stations.
Puerto Rico Radio
On June 3, 1998, the Venture consummated the sale of an FM (WFID-FM) and an AM
(WUNO-AM) radio station, including Noti Uno News, combination and a background
music service in San Juan, Puerto Rico ("C-ML Radio") pursuant to a sales
agreement entered into in October 1997 between the Venture and Madifide, Inc.
The base sales price for C-ML Radio was approximately $11.5 million,
approximately $5.8 million of which is the Partnership's share, subject to
closing adjustments. Pursuant to a local marketing agreement ("LMA") entered
into, effective as of October 1, 1997, the buyer was allowed to program the
station from such date through the date of sale. C-ML Radio collected a monthly
LMA fee from the buyer which was equal to the operating income for that month,
provided however, that it not be less than $50,000 nor more than $105,000. The
monthly fee was recognized as revenue during the LMA period and the Partnership
did not recognize any operating revenues nor incur any net operating expenses of
C-ML Radio during the LMA period. At the closing, the Venture and Madifide, Inc.
entered into escrow agreements pursuant to which the Venture deposited, in
aggregate, $725,040, $362,520 of which is the Partnership's share, into three
separate escrow accounts with respect to which indemnification, benefit, and
chattel mortgage claims may be made by Madifide, Inc. for a period of one year.
As of December 25, 1998, the balance of these escrows was classified on the
accompanying Consolidated Balance Sheets as Investments held by escrow agents.
During the second quarter of 1999, escrows of $324,999 were released. In 1998,
the Partnership recognized a gain for financial reporting purposes of
approximately $2.8 million on the sale of C-ML Radio.
Pursuant to the terms of the outstanding senior indebtedness that jointly
finances C-ML Radio and C-ML Cable, the net proceeds and escrow amounts released
from the sale of C-ML Radio must be retained by the Venture and cannot be
distributed to the Partnership or its partners.
California Cable Systems
On November 28, 1994, the Partnership entered into an agreement (the "Asset
Purchase Agreement") with Century Communications Corp. ("Century") to sell to
Century substantially all of the assets used in the Partnership's California
Cable Operation serving the Anaheim, Hermosa Beach/Manhattan Beach, Rohnert
Park/Yountville and Fairfield communities (the "California Cable Systems"). On
May 31, 1996, the Partnership 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.
In addition, upon closing of the sale of the California Cable Systems, the
Partnership set aside approximately $40.7 million in a cash reserve to cover
operating liabilities, current litigation, and litigation contingencies relating
to the California Cable Systems' operations prior to and resulting from their
sale, as well as a potential purchase price adjustment. In accordance with the
terms of the Partnership Agreement, any amounts which may be available for
distribution from any unused cash reserves, after accounting for certain other
expenses of the Partnership including certain expenses incurred after May 31,
1996, are distributable to partners of record as of the date such unused
reserves are released, when the Partnership determines such reserves are no
longer necessary, rather than to the partners of record on May 31, 1996, the
date of the sale. On March 1, 1999, reserves in the amount of approximately $6.1
million were released and, in accordance with the terms of the Partnership
Agreement, have been included in the cash distribution made on March 31, 1999.
As of December 31, 1999, the Partnership had approximately $15.2 million
remaining in such cash reserves.
KATC
On June 24, 1997, the Partnership received the discharge of escrowed proceeds of
$1.0 million (and approximately $100,000 of interest earned thereon) generated
from the 1995 sale of KATC-TV, Lafayette, Louisiana ("KATC"). In addition,
effective August 14, 1997, approximately $1.5 million, a portion of the reserve
established at the time of the KATC sale, was released. In accordance with the
terms of the Partnership Agreement, the amount of such released reserve and
discharged escrowed proceeds, after accounting for certain expenses of the
partnership, were included in the cash distribution made to partners on November
25, 1997. in addition, effective December 26, 1997, the remaining reserve
established at the time of the 1995 sale of KATC, of approximately $218,000 was
released. Thus, during 1997, the Partnership recognized a gain on sale of KATC
of approximately $1.7 million resulting from the release of reserves and
reversal of previous accruals.
WREX
effective August 14, 1997, approximately $1.8 million, a portion of the reserve
established at the time of the 1995 sale of WREX-TV, Rockford, Illinois
("WREX"), was released. In accordance with the terms of the Partnership
Agreement, such released reserve amount, after accounting for certain expenses
of the Partnership, were included in the cash distribution made to partners on
November 25, 1997. In addition, effective December 26, 1997, the remaining
reserve established at the time of the 1995 sale of WREX of approximately
$161,000 was released. Thus, during 1997, the Partnership recognized a gain on
sale of WREX of approximately $2.0 million resulting from the release of
reserves and reversal of previous accruals.
<PAGE>
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
As of As of
December 31, 1999 December 25, 1998
----------------- -----------------
<S> <C> <C>
Land and Improvements $ 19,141 $ 19,141
Buildings 1,581,953 1,494,384
Cable Distribution Systems and Equipment 39,854,510 36,346,426
Other 1,581,500 721,538
----------------- -----------------
43,037,104 38,581,489
Less accumulated depreciation (15,373,234) (12,396,742)
----------------- -----------------
Property, plant and equipment, net $ 27,663,870 $ 26,184,747
================= =================
</TABLE>
4. INTANGIBLE ASSETS
Intangible assets consisted of the following:
<TABLE>
<CAPTION>
As of As of
December 31, 1999 December 25, 1998
----------------- -----------------
<S> <C> <C>
Goodwill $ 2,924,428 $ 2,924,428
Franchises 35,326,466 35,315,562
----------------- -----------------
38,250,894 38,239,990
Less accumulated amortization (33,149,500) (32,977,332)
----------------- -----------------
Intangible assets, net $ 5,101,394 $ 5,262,658
================= =================
</TABLE>
5. BORROWINGS
The aggregate amount of borrowings under the C-ML Notes/Credit Agreement, as
reflected on the Consolidated Balance Sheets of the Partnership is as follows:
<TABLE>
<CAPTION>
As of As of
December 31, 1999 December 25, 1998
----------------- -----------------
<S> <C> <C>
A) C-ML Notes/Credit Agreement $ 30,000,000 $ 40,000,000
----------------- -----------------
</TABLE>
The aggregate amount of borrowings under the Restructuring
Agreement/Wincom-WEBE-WICC Loan, which is included in the net assets of
discontinued operations - Radio Station Segment on the Consolidated Balance
Sheets of the Partnership is as follows:
<TABLE>
<CAPTION>
As of As of
December 31, 1999 December 25, 1998
----------------- -----------------
<S> <C> <C>
B) Restructuring Agreement/
Wincom-WEBE-WICC Loan $ - $ 1,993,137
================= =================
</TABLE>
A) Borrowings under the C-ML Notes bear semi-annual interest at a fixed
annual rate of 9.47%. Beginning November 30, 1998, annual principal
payments of $20 million, of which the Partnership's share is $10
million (see Note 9), commenced and will continue thereafter until
November 30, 2002. The C-ML Notes require that C-ML Cable maintain
certain ratios such as debt to operating cash flow, interest expense
coverage and debt service coverage and restricts such items as cash
distributions and certain additional indebtedness. Borrowings under the
C-ML Notes are nonrecourse to the Partnership and are collateralized
with substantially all of the Venture's interest in C-ML Cable as well
as by all of the assets of C-ML Cable.
As of December 31, 1999 and December 25, 1998, outstanding borrowings
under the C-ML Notes totaled $60 million, of which the Partnership's
share is $30 million, and $80 million, of which the Partnership's share
is $40 million, respectively.
B) In 1993 the Partnership and Chemical Bank (the "Wincom Bank") executed
an agreement amending the Wincom-WEBE-WICC Loan (the "Restructuring
Agreement") into three notes as follows: a Series A Term Loan in the
amount of $13.0 million; a Series B Term Loan in the amount of
approximately $11.7 million; and a Series C Term Loan in the amount of
approximately $2.0 million, which was forgiven by the Wincom Bank on
October 1, 1993 pursuant to the terms of the Restructuring Agreement.
The Series A Term Loan bears interest, payable monthly, at the Wincom
Bank's Alternate Base Rate plus 1-3/4% with principal payments due
quarterly through final maturity.
The Series B Term Loan bears interest at a rate equal to the Wincom
Bank's Alternate Base Rate plus 1-3/4% beginning on April 30, 1994,
with interest payments accruing, and payable annually only from Excess
Cash Flow through final maturity.
On December 31, 1997, the Wincom-WEBE-WICC Loan matured and became due
and payable in accordance with its terms. As of that date, $4,244,038
of such amount remained due and payable to the Wincom Bank. Although
the Partnership remained in default on the Wincom-WEBE-WICC Loan during
1998, it paid $2,250,901 of principal resulting in an outstanding
balance of $1,993,137 as of December 25, 1998. In 1999, the Partnership
repaid the remaining outstanding balance of the Wincom-WEBE-WICC Loan
in full, however, the default has not been waived by the Wincom Bank.
Borrowings under the Wincom-WEBE-WICC Loan remain nonrecourse to the
Partnership and remain collateralized with substantially all of the
assets of the Wincom-WEBE-WICC group.
Any remaining net Cash proceeds (as defined in the Restructuring
Agreement), from the sale of the stations in the Wincom-WEBE-WICC
group, after the principal and interest of the Wincom-WEBE-WICC Loan is
paid in full, will be divided between the Partnership and the Wincom
Bank, with the Partnership receiving 85% and the Wincom Bank receiving
15%, respectively. Pursuant to the terms of the Wincom-WEBE-WICC Loan,
an initial amount of approximately $15.5 million was paid to the Wincom
Bank in 1999, pursuant to its 15% residual interest in the net sales
proceeds from the sale of the Cleveland Station and the Connecticut
Stations (see Note 2).
As of December 31, 1999, the annual aggregate amounts of principal payments
required for the borrowings as reflected in the consolidated balance sheet of
the Partnership are as follows:
Year Ending Principal Amount
----------- ----------------
2000 $ 10,000,000
2001 10,000,000
2002 10,000,000
----------------
$ 30,000,000
================
Based upon the restrictions of the borrowings as described above, approximately
$75.2 million of assets are restricted from distribution by the entities in
which the Partnership has an interest as of December 31, 1999.
6. TRANSACTIONS WITH THE GENERAL PARTNER AND ITS AFFILIATES
During the three years ended December 31, 1999, the Partnership incurred the
following expenses in connection with services provided by the General Partner
and its affiliates:
<TABLE>
<CAPTION>
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Media Management Partners
(General Partner):
Partnership Mgmt. fee $ 557,979 $ 557,979 $ 557,979
Property Mgmt. fee 534,538 649,709 653,692
Reimbursement of Operating
Expenses 491,388 1,041,246 951,940
-------------- -------------- --------------
$ 1,583,905 $ 2,248,934 $ 2,163,611
============== ============== ==============
</TABLE>
<PAGE>
In addition, the Partnership, through the California Cable Systems, was party to
an agreement with MultiVision Cable TV Corp. ("MultiVision"), an affiliate of
the General Partner, whereby MultiVision provided the California Cable Systems
with certain administrative and day-to-day management services. The California
Cable Systems paid for these services at cost. The reimbursed costs incurred by
MultiVision on behalf of the California Cable Systems amounted to an aggregate
of $1,223,364, $1,512,955, and $804,843 for 1999, 1998 and 1997, respectively.
RP Radio Management Inc., an affiliate of the General Partner, provided certain
administrative and day-to-day management services to the Partnership's radio
station investments. The radio station investments paid for these services at
cost. The reimbursed costs incurred by RP Radio Management Inc. on behalf of the
Partnership's radio station investments totaled $693,929 during 1997. On
December 27, 1997, RP Radio Management Inc. was merged into RP Radio Management
LLC, an entity wholly owned by the Partnership.
RP Television, an affiliate of the General Partner, provided certain
administrative and accounting services to the Partnership's television stations.
The television stations paid for these services at cost. The reimbursed cost
incurred by RP Television on behalf of the Partnership's television stations
totaled $101,371 for 1997.
The reimbursed costs related to MultiVision, RP Radio Management Inc., and RP
Television are included in the Consolidated Income Statements.
As of December 31, 1999, December 25, 1998 and December 26, 1997, the amounts
payable to the General Partner for management fees and reimbursement of
operating expenses were approximately $1.0 million, $1.4 million and $4.5
million, respectively.
7. COMMITMENTS AND CONTINGENCIES
Lease Commitments
C-ML Cable rents office and warehouse facilities under various operating lease
agreements. In addition, prior to their dispositions, Wincom, the Anaheim
Stations, WEBE-FM and WICC-AM leased office space, broadcast facilities and
certain other equipment under various short term operating lease agreements.
Rental expense was incurred for the three years ended December 31, 1999 as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
WICC-AM $ 58,189 $ 78,862 $ 62,457
Anaheim Stations - 160,411 152,016
WEBE-FM 136,273 201,922 199,004
Wincom - 194,670 158,931
C-ML Cable 12,832 15,825 45,075
-------------- -------------- --------------
$ 207,294 $ 651,690 $ 617,483
============== ============== ==============
</TABLE>
Litigation
On August 29, 1997, a purported class action was commenced in New York Supreme
Court, New York County, on behalf of the limited partners of the Partnership,
against the Partnership, the General Partner, RPMM, MLMM, Merrill Lynch & Co.,
Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch").
The action concerns the Partnership's payment of certain management fees and
expenses to the General Partner and the payment of certain purported fees to an
affiliate of RPMM.
Specifically, the plaintiffs allege breach of the Amended and Restated Agreement
of Limited Partnership (the "Partnership Agreement"), breach of fiduciary
duties, and unjust enrichment by the General Partner in that the General Partner
allegedly: (1) improperly deferred and accrued certain management fees and
expenses in an amount in excess of $14.0 million, (2) improperly paid itself
such fees and expenses out of proceeds from sales of Partnership assets, and (3)
improperly paid MultiVision Cable TV Corp., an affiliate of RPMM, supposedly
duplicative fees in an amount in excess of $14.4 million.
With respect to Merrill Lynch & Co., Inc., Merrill Lynch, MLMM and RPMM,
plaintiffs claim that these defendants aided and abetted the General Partner in
the alleged breach of the Partnership Agreement and in the alleged breach of the
General Partner's fiduciary duties. Plaintiffs seek, among other things, an
injunction barring defendants from paying themselves management fees or expenses
not expressly authorized by the Partnership Agreement, an accounting,
disgorgement of the alleged improperly paid fees and expenses, and compensatory
and punitive damages. Defendants believe that they have good and meritorious
defenses to the action, and vigorously deny any wrongdoing with respect to the
alleged claims. Accordingly, defendants moved to dismiss the complaint and each
claim for relief therein. On March 3, 1999, the New York Supreme Court issued an
order granting the defendants' motion and dismissing plaintiffs' complaint in
its entirety, principally on the grounds that the claims are derivative and
plaintiffs lack standing to bring suit because they failed to make a
pre-litigation demand on the General Partner. Plaintiffs have both appealed this
order and moved, inter alia, for leave to amend their complaint in order to
re-assert certain of their claims as derivative claims on behalf of the
Partnership. The appeal and the motion for leave to amend are pending.
Defendants have served their brief in opposition to the appeal, arguing that the
court should affirm the Supreme Court's order dismissing plaintiffs' complaint.
Oral argument of the appeal is scheduled for May 2000. Defendants have also
served papers in opposition to the plaintiffs' motion for leave to amend their
complaint. Oral argument has been heard and the parties are awaiting a decision.
The Partnership Agreement provides for indemnification, to the fullest extent
provided by law, for any person or entity named as a party to any threatened,
pending or completed lawsuit by reason of any alleged act or omission arising
out of such person's activities as a General Partner or as an officer, director
or affiliate of either RPmm, MLMM or the General Partner, subject to specified
conditions. In connection with the purported class action filed on August 29,
1997, the Partnership has received notices of requests for indemnification from
the following defendants named therein: the General Partner, RPMM, MLMM, Merrill
Lynch & Co., Inc. and Merrill Lynch. For the years ended December 31, 1999,
December 25, 1998 and December 26, 1997, the Partnership incurred approximately
$205,000, $223,000 and $280,000, respectively, for legal costs relating to such
indemnification. Cumulatively, such legal costs amount to approximately $708,000
through December 31, 1999.
On March 24, 2000, the Partnership commenced suit in New York Supreme Court, New
York County against Century, Adelphia Communications Corp. ("Adelphia") and
Arahova Communications Inc. (formerly Century) seeking a dissolution of the
Venture and the appointment of a receiver for the sale of the Venture's assets
(primarily the stock of the subsidiary of the Venture that owns the cable
systems). The complaint alleges that, as successor to Century's position as the
Partnership's joint venture partner, Adelphia breached its fiduciary and
contractual obligations to the Partnership with respect to the operations of the
Venture and by proposing to take action that would interfere with the sale of
the cable systems to a third party through an auction process conducted in
accordance with the terms of the joint venture agreement. In addition to
dissolution and the appointment of a receiver, the Partnership seeks in the suit
an order directing Adelphia and its affiliates to comply with the terms of the
joint venture agreement. The complaint states that, if for any reason the court
should determine not to appoint a receiver, the courts should direct the Venture
to diligently proceed to locate an unrelated third party to buy the cable
systems at the highest possible price and that the defendants be enjoined from
interfering in any manner in the sale process, and seeks other equitable relief.
The Partnership also seeks in the suit compensatory and punitive damages.
8. SEGMENT INFORMATION
The Partnership's continuing operations are presented as one segment, the Cable
Television Systems segment, which operates in one geographical location and
consists of the Partnership's 50% share of C-ML Cable. The Partnership currently
presents the Radio Station Segment as discontinued operations (see Note 9).
9. DISCONTINUED OPERATIONS
Due to the recent dispositions (see Note 2) of C-ML Radio, KEZY-FM and KORG-AM,
Wincom, and WEBE-FM and WICC-AM on June 3, 1998, January 4, 1999, January 28,
1999, and August 31, 1999, respectively, the Partnership has presented its Radio
Station Segment as discontinued operations.
The December 25, 1998 Consolidated Balance Sheet, and the December 25, 1998 and
December 26, 1997 Consolidated Income Statements and Consolidated Statement of
Cash Flows have been restated to present such discontinued operations.
Accordingly, the revenues, costs and expenses, assets and liabilities, and cash
flows of these discontinued operations have been excluded from the respective
captions in the Consolidated Balance Sheets, Consolidated Income Statements and
Consolidated Statements of Cash Flows, and have been reported through the dates
of disposition as "Net assets of discontinued operations - Radio Station
Segment," "Income from discontinued operations - Radio Station Segment" and "Net
cash provided by discontinued operations - Radio Station Segment" for all
periods presented.
The net assets of discontinued operations of the Radio Station Segment on the
Consolidated Balance Sheet as of December 25, 1998 are comprised of the
following:
Property, plant and equipment, net $ 781,361
Intangible assets, net 19,812,637
Other assets including prepaid
expenses and deferred charges, net 1,226,105
Borrowings (1,993,137)
Accounts payable and accrued liabilities (1,170,397)
--------------
Net assets of discontinued operations
- Radio Station Segment $ 18,656,569
Accounts payable and accrued liabilities in the accompanying consolidated
balance sheet as of December 31, 1999 include approximately $4.3 million in
liabilities related to the discontinued Radio Station Segment, which were
assumed by the Partnership.
<PAGE>
Summarized results of discontinued operations of the Radio Station Segment and
television stations on the Consolidated Income Statements are as follows:
<TABLE>
<CAPTION>
December 31, 1999 December 25, 1998 December 26, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Operating revenues $ 8,126,299 $ 21,856,319 $ 23,819,113
----------------- ----------------- -----------------
Less:
4,927,103 13,784,606 16,901,263
Operating expenses
Interest expense 14,727 459,634 670,266
----------------- ----------------- -----------------
4,941,830 14,244,240 17,571,529
----------------- ----------------- -----------------
Income from discontinued operations
- Radio Station Segment 3,184,469 7,612,079 6,247,584
Gain on sale - Radio Station Segment 100,961,034 2,752,975 -
Gain on sale of television stations - - 3,702,725
----------------- ----------------- -----------------
Total discontinued operations $ 104,145,503 $ 10,365,054 $ 9,950,309
================= ================= =================
</TABLE>
10. JOINT VENTURES
Pursuant to a management agreement and joint venture agreement dated December
16, 1986 (the "Joint Venture Agreement"), as amended and restated, between the
Partnership and Century (the "Venture"), the parties formed a joint venture in
which each has a 50% ownership interest. The Venture, through its wholly-owned
subsidiary, Century-ML Cable Corporation ("C-ML Cable Corp."), subsequently
acquired Cable Television Company of Greater San Juan, Inc. ("San Juan Cable")
and liquidated San Juan Cable into C-ML Cable Corp. The Venture also acquired
all of the assets of Community Cable-Vision of Puerto Rico, Inc., Community
Cablevision of Puerto Rico Associates, and Community Cablevision Incorporated
(collectively, the "Community Companies"), which consisted of a cable television
system serving the communities of Catano, Toa Baja and Toa Alta, Puerto Rico,
which are contiguous to San Juan Cable. The Community Companies and C-ML Cable
Corp. are collectively referred to as C-ML Cable.
On February 15, 1989, the Partnership and Century entered into a management
agreement and joint venture agreement whereby a new joint venture, Century-ML
Radio Venture ("C-ML Radio"), was formed under New York law. responsibility for
the management of radio stations acquired by C-ML Radio was assumed by the
Partnership.
Effective January 1, 1994, all of the assets of C-ML Radio were transferred to
the Venture, in exchange for the assumption by the Venture of all the
obligations of C-ML Radio and the issuance to Century and the Partnership by the
Venture of new certificates evidencing a partnership interest of 50% and 50%,
respectively. The transfer was made pursuant to a Transfer of Assets and
Assumption of Liabilities Agreement. At the time of this transfer, the
Partnership and Century entered into an amended and restated management
agreement and joint venture agreement (the "Revised Joint Venture Agreement")
governing the affairs of the Venture as revised.
Under the terms of the Revised Joint Venture Agreement, Century is responsible
for the day-to-day operations of C-ML Cable and until its sale on June 3, 1998,
the Partnership was responsible for the day-to-day operations of C-ML Radio. For
providing services of this kind, Century is entitled to receive annual
compensation of 5% of C-ML Cable's net gross revenues (defined as gross revenues
from all sources less monies paid to suppliers of pay TV product, e.g., HBO,
Cinemax and Showtime) and the Partnership was entitled to receive annual
compensation of 5% of C-ML Radio's gross revenues including the LMA revenue
(after agency commissions, rebates or discounts and excluding revenues from
barter transactions). All significant policy decisions relating to the Venture,
the operation of C-ML Cable and the operation of C-ML Radio prior to its sale,
however, are only made upon the concurrence of both the Partnership and Century.
The Partnership may require a sale of such assets and business of C-ML Cable at
any time. If the Partnership proposes such a sale, the Partnership must first
offer Century the right to purchase the Partnership's 50% interest in such
assets being sold at 50% of the total fair market value at such time as
determined by independent appraisal. If Century elects to sell C-ML Cable, the
Partnership may elect to purchase Century's interest in such assets being sold
on similar terms.
On June 3, 1998, the Venture consummated the sale of C-ML Radio pursuant to a
sales agreement entered into in October 1997 between the Venture and Madifide,
Inc. (see Note 2).
On October 1, 1999, Adelphia Communications Corporation ("Adelphia") consummated
its acquisition of Century. While Adelphia's purchase included Century's 50%
interest in C-ML Cable, it did not include a purchase of the Partnership's 50%
interest in C-ML Cable. The Partnership negotiated with Adelphia regarding the
sale to Adelphia of the Partnership's interest in the Venture, but no definitive
arrangement was concluded.
On February 18, 2000, the Partnership triggered the "buy-sell" provision in the
Joint Venture Agreement, and Adelphia elected to cause the Venture to sell C-ML
Cable. A dispute arose between the Partnership and Adelphia over, among other
things, the terms of the sale pursuant to the Joint Venture Agreement, and on
March 24, 2000 the Partnership commenced a suit against Adelphia (see Note 7).
The total assets, total liabilities, net capital, total revenues and net income
of the Venture are as follows:
<TABLE>
<CAPTION>
December 31, 1999 December 25, 1998
----------------- -----------------
<S> <C> <C>
Total Assets $ 150,500,000 $ 155,600,000
================= =================
Total Liabilities $ 94,700,000 $ 118,400,000
================= =================
Net Capital $ 55,800,000 $ 37,200,000
================= =================
</TABLE>
<TABLE>
<CAPTION>
1999 1998 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Total Operating Revenues $ 70,300,000 $ 65,500,000 $ 62,900,000
================= ================= =================
Gain from Sale of C-ML Radio $ - $ 5,500,000 $ -
================= ================= =================
Net Income $ 18,600,000 $ 12,200,000 $ 16,400,000
================= ================= =================
</TABLE>
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
Assets, including cash and cash equivalents and accounts receivable and
liabilities, such as trade payables, are carried at amounts which approximate
fair value.
The General Partner has been able to determine the estimated fair value of the
C-ML Notes based on a discounted cash flow analysis. As of December 31, 1999 and
December 25, 1998, the estimated fair value of the C-ML Notes is approximately
$62 million and $84 million, respectively, of which approximately 50% of the
estimated fair value or $31 million and $42 million, respectively pertains to
the carrying amount reflected on the Partnership's Consolidated Balance Sheets.
12. ACCOUNTING FOR INCOME TAXES
Certain entities owned by the Partnership are taxable entities and thus are
required under SFAS No. 109 to recognize deferred income taxes. Income taxes
consist of the following:
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Current
Federal $ 4,771,500 $ 2,358,726 $ 155,331
State - 10,840 7,100
-------------- -------------- --------------
4,771,500 2,369,566 162,431
Deferred
Federal 1,051,500 1,660,878 (1,777,096)
State - - -
-------------- -------------- --------------
1,051,500 1,660,878 (1,777,096)
-------------- -------------- --------------
Recorded expense (benefit)
for income taxes $ 5,823,000 $ 4,030,444 $ (1,614,665)
============== ============== ==============
</TABLE>
<PAGE>
The components of the net deferred tax asset are as follows:
<TABLE>
<CAPTION>
As of As of
December 31, 1999 December 25, 1998
----------------- -----------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward $ - $ 5,922,662
Alternative minimum tax credit - 120,655
Other 131,500 1,345,995
----------------- -----------------
131,500 7,389,312
Deferred tax liabilities:
Basis of property, plant and equipment (1,272,000) (13,174)
----------------- -----------------
Total (1,140,500) 7,376,138
Less: valuation allowance - (7,259,920)
----------------- -----------------
Net deferred (liability)/tax asset $ (1,140,500) $ 116,218
================= =================
</TABLE>
For the Partnership, the differences between the tax basis of assets and
liabilities and the reported amounts are as follows:
<TABLE>
<CAPTION>
As of As of
December 31, 1999 December 25, 1998
----------------- -----------------
<S> <C> <C>
Partners' Capital - financial statements $ 108,798,976 $ 92,806,570
Differences:
Offering expenses 19,063,585 19,063,585
Basis of property, plant and equipment
and intangible assets 3,116,710 3,108,723
Cumulative losses of stock investments
(corporations) 4,872,241 54,273,267
Management fees 2,652,327 2,119,827
Other 18,614,329 7,626,906
----------------- -----------------
Partners' Capital - income tax bases $ 157,118,168 $ 178,998,878
================= =================
</TABLE>
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
<PAGE>
Part III.
Item 10. Directors and Executive Officers of the Registrant.
Registrant has no executive officers or directors. The General Partner manages
Registrant's affairs and has general responsibility and authority in all matters
affecting its business. The responsibilities of the General Partner are carried
out either by executive officers of RP Media Management or ML Media Management
Inc. acting on behalf of the General Partner. The executive officers and
directors of RP Media Management and ML Media Management Inc. are:
RP Media Management (the "Management Company")
<TABLE>
<CAPTION>
Served in
Present Capacity
Name Since (1) Position Held
- ------------------ ---------------- -------------
<S> <C> <C>
I. Martin Pompadur 1/01/86 President, Chief Executive Officer,
Chief Operating Officer, Secretary, Director
Elizabeth McNey Yates 4/01/88 Executive Vice President
</TABLE>
(1) The Director holds office until a successor is elected and qualified. All
executive officers serve at the pleasure of the Director.
<PAGE>
ML Media Management Inc. ("MLMM")
<TABLE>
<CAPTION>
Served in
Present Capacity
Name Since (1) Position Held
- --------------- ---------------- -------------
<S> <C> <C>
Kevin K. Albert 02/19/91 President
12/16/85 Director
James V. Caruso 11/20/98 Executive Vice President
11/20/98 Director
Michael A. Giobbe 08/11/95 Vice President
02/17/00 Director
Rosalie Y. Goldberg 11/05/99 Vice President
11/20/98 Director
James V. Bruno 11/05/99 Vice President
Diane T. Herte (2) 11/20/98 Vice President
Sandhya Rana 11/05/99 Vice President
11/05/99 Treasurer
</TABLE>
(1) Directors hold office until their successors are elected and qualified. All
executive officers serve at the pleasure of the Board of Directors.
(2) Ms. Herte held the position of Treasurer from August 11, 1995 through
November 19, 1998. Kevin T. Seltzer held the position of Treasurer from November
20, 1998 through November 4, 1999.
<PAGE>
I. Martin Pompadur, 64, Director and President of RP Media Management. Mr.
Pompadur is an Executive Vice President of News Corporation and President of
News Corporation-Eastern and Central Europe. He is also a member of News
Corporation's Executive Management Committee. In January 2000, Mr. Pompadur was
named Chairman of News Corporation Europe. Mr. Pompadur is also the Chairman and
Chief Executive Officer of GP Station Partners which is the General Partner of
Television Station Partners, L.P., a private limited partnership that owned and
operated four network affiliated television stations. These stations were sold
in January 1996 and this partnership was liquidated in December 1998. Mr.
Pompadur is the Chairman and Chief Executive Officer of PBTV, Inc., the Managing
General Partner of Northeastern Television Investors Limited Partnership, a
private limited partnership which owned and operated WBRE-TV, a network
affiliated station in Wilkes-Barre/Scranton, Pennsylvania. This station was sold
in January 1998 and was liquidated in December 1999. Mr. Pompadur is also the
President and a Director of RP Opportunity Management, L.P. ("RPOM"), a limited
partnership organized under the laws of Delaware, which is indirectly owned and
controlled by Mr. Pompadur. RPOM is a partner in Media Opportunity Management
Partners, an affiliate of the General Partner, and the general partner of ML
Media Opportunity Partners, L.P. which was formed to invest in under performing
and turnaround media businesses. Mr. Pompadur is the Principal Executive Officer
of ML Media Opportunity Partners, L.P. Mr. Pompadur is also Chief Executive
Officer of MultiVision Cable TV Corp. ("MultiVision"), a cable television
multiple system operator ("MSO") organized in January 1988 and owned principally
by Mr. Pompadur and the estate of Elton H. Rule to provide MSO services to cable
television systems acquired by entities under his control. Mr. Pompadur was the
Principal Executive Officer and principal owner of RP Radio Management Inc. ("RP
Radio"), a company owned principally by Mr. Pompadur to provide administrative
and day-to-day management services to Registrant's radio properties. On December
27, 1997, RP Radio Management Inc. was merged into RP Radio Management LLC, an
entity wholly owned by Registrant. Mr. Pompadur is a principal owner, member of
the Board of Directors and Secretary of Caribbean International News Corporation
("Caribbean"). Caribbean owns and publishes EL Vocero, the largest Spanish
language daily newspaper in the United States. Mr. Pompadur sits on the Boards
of Directors of the following companies: Bsky B, Fox Kids Europe, Stream,
Metromedia International, StoryFirst Communications and Big Star Entertainment.
Elizabeth McNey Yates, 36, Executive Vice President of RP Media Management,
joined RP Companies Inc., an entity controlled by Mr. Pompadur, in March 1988
and has senior executive responsibilities in the areas of finance, operations,
administration, acquisitions and dispositions. Ms. Yates is Chief Operating
Officer and Executive Vice President of RP Companies, Inc., Executive Vice
President of RPOM, Chief Operating Officer and Executive Vice President of RP
Radio. In addition, Ms. Yates is the President and Chief Operating Officer of
MultiVision.
Kevin K. Albert, 47, a Managing Director of Merrill Lynch Investment Banking
Group ("ML Investment Banking"), and the Private Sales and Divestitures Group of
Business Financial Services, joined Merrill Lynch in 1981. Mr. Albert's work in
the Equity Private Placement Group is involved in structuring and placing a
diversified array of private equity financings including common stock, preferred
stock, limited partnership interests and other equity-related securities. His
work in the Private Sales and Divestitures Group involves managing a team of
investment bankers executing middle-market exclusive sales transactions. Mr.
Albert is also a director of ML Opportunity Management Inc. ("ML Opportunity"),
an affiliate of MLMM and a joint venturer in Media Opportunity Management
Partners, the general partner of ML Media Opportunity Partners, L.P.; a director
of ML Mezzanine II Inc. ("ML Mezzanine II"), an affiliate of MLMM and sole
general partner of the managing general partner of ML-Lee Acquisition Fund II,
L.P. and ML-Lee Acquisition Fund (Retirement Accounts) II, L.P.; a director of
ML Mezzanine Inc. ("ML Mezzanine"), an affiliate of MLMM and the sole general
partner of the managing general partner of ML-Lee Acquisition Fund, L.P.; a
director of Merrill Lynch Venture Capital Inc. ("ML Venture"), an affiliate of
MLMM and the general partner of the Managing General Partner of ML Venture
Partners II, L.P. ("Venture II") and ML Oklahoma Venture Partners Limited
Partnership and a director of Merrill Lynch R&D Management Inc. ("ML R&D"), an
affiliate of MLMM and the general partner of the General Partner of ML
Technology Ventures, L.P. Mr. Albert also serves as an independent general
partner of Venture II.
James V. Caruso, 48, a Director of ML Investment Banking, joined Merrill Lynch
in January 1975. Mr. Caruso is the Director of Technology for the Global
Investment Banking Group. He is responsible for ensuring that the business
requirements of Investment Banking are supported by managing the development of
new technologies and enhancing existing systems. He is also responsible for
certain Merchant Banking business related activities. Mr. Caruso is also
Director of ML Opportunity, ML Venture, ML R&D, ML Mezzanine, ML Mezzanine II
and MLH Property Managers Inc., an affiliate of MLMM and the general partner of
MLH Income Realty Partnership VI.
Michael A. Giobbe, 41, a Vice President of ML Investment Banking, joined Merrill
Lynch in 1986. Mr. Giobbe is responsible for the ongoing management of the
operations of various project related limited partnerships for which
subsidiaries of ML Leasing Equipment Corp., an affiliate of Merrill Lynch, are
general partners. Mr. Giobbe is also a director of ML Opportunity, ML Venture
and ML R&D.
Rosalie Y. Goldberg, 62, a First Vice President and Senior Director of Merrill
Lynch's Private Client Group and the Director of its Special Investments Group.
Ms. Goldberg joined Merrill Lynch in 1975, and has held a number of management
positions in the Special Investments area, including the position of Manager for
Product Development and Origination from 1983 to 1989. Ms. Goldberg is also a
Director of ML Mezzanine, ML Mezzanine II, and ML Opportunity.
James V. Bruno, 33, a Vice President of ML Investment Banking, joined Merrill
Lynch in 1997. Mr. Bruno's responsibilities include controllership and financial
management functions for certain partnerships and other entities for which
subsidiaries of Merrill Lynch are the general partner or manager. Prior to
joining Merrill Lynch, Mr. Bruno was employed with Alliance Capital Management,
where he held similar responsibilities.
Diane T. Herte, 39, a Vice President of ML Investment Banking since 1996 and
previously an Assistant Vice President of Merrill Lynch & Co. Corporate Credit
Group since 1992, joined Merrill Lynch in 1984. Ms. Herte's responsibilities
include controllership, financial management and administrative functions for
partnerships for which subsidiaries of Merrill Lynch are the general partner or
manager. Ms. Herte is a director of ML Mezzanine and ML Mezzanine II.
Sandhya Rana, 27, an Assistant Vice President of ML Investment Banking since
2000, joined Merrill Lynch in 1996. Ms. Rana's responsibilities include
financial management functions for certain partnerships for which subsidiaries
of Merrill Lynch are the general partner or manager. Prior to joining Merrill
Lynch, Ms. Rana was employed with Deloitte & Touche, where she worked as an
auditor.
An Investment Committee of Registrant was established to have the responsibility
and authority for developing, in conjunction with the Management Company,
diversification objectives for the investments to be made by Registrant, for
reviewing and approving each investment proposed by the Management Company for
Registrant and for evaluating and approving dispositions of investments of
Registrant. The Investment Committee will also establish reserves for Registrant
for such purposes and in such amounts as it deems appropriate. A simple majority
vote shall be required for any proposed investment or disposition. The
Investment Committee also has the responsibility and authority for monitoring
the management of the investments of Registrant by the Management Company. The
current members of the Investment Committee are as follows:
RPMM Representative MLMM Representatives
------------------- --------------------
I. Martin Pompadur Kevin K. Albert
James V. Caruso
<PAGE>
Item 11. Executive Compensation.
Registrant does not pay the executive officers or directors of the General
Partner any remuneration. The General Partner does not presently pay any
remuneration to any of its executive officers or directors. See Note 6 to the
Financial Statements included in Item 8 hereof, however, for amounts paid by
Registrant to the General Partner and its affiliates for the three years ended
December 31, 1999.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
As of March 21, 2000, Smithtown Bay, LLC, having the mailing address 601 Carlson
Parkway, Suite 200, Minnetonka, Minnesota, 55305, is the owner of 15,055 Units,
representing approximately 8.0% of all such Units. As of March 21, 2000, no
person or entity, other than Smithtown Bay, LLC, was known by Registrant to be
the beneficial owner of more than five percent of the Units.
To the knowledge of the General Partner, as of February 1, 2000, the officers
and directors of the General Partner in aggregate own less than 1% of the
outstanding common stock of Merrill Lynch & Co., Inc.
RP Media Management is owned 50% by IMP Media Management, Inc. and 50% by the
Elton H. Rule Company. IMP Media Management, Inc. is wholly-owned by Mr. I.
Martin Pompadur and The Elton H. Rule Company is wholly-owned by the Rule Trust.
Item 13. Certain Relationships and Related Transactions.
Refer to Note 6 to the Financial Statements included in Item 8 hereof, and in
Item 1 for a description of the relationship of the General Partner and its
affiliates to Registrant and its subsidiaries.
<PAGE>
Part IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) Financial Statements, Financial Statement Schedules and Exhibits.
(1) Financial Statements
See Item 8. "Financial Statements and Supplementary Data."
(2) Financial Statement Schedules
No financial statement schedules are included because of the absence
of the conditions which require their inclusion or because the
required information is included in the financial statements or set
forth herein the notes thereto.
<TABLE>
<CAPTION>
(3) Exhibits Incorporated by Reference to
-------- ----------------------------
<S> <C> <C>
3.1 Amended and Restated Certificate Exhibit 3.1 to Registrant's Form S-1
of Limited Partnership the Registration Statement
(File No. 33-2290)
3.2.1 Second Amended and Restated Agreement of Exhibit 3.2.1 to Registrant's Annual
Limited Partnership dated May 14, 1986 Report on Form 10-K for the fiscal year
ended December 26, 1986
(File No. 0-14871)
3.2.2 Amendment No. 1 dated February 27, 1987 to Exhibit 3.2.2 to Registrant's Annual Report
Second Amended and Restated Agreement of on Form 10-K for the fiscal year ended
Limited Partnership December 26, 1986
(File No. 0-14871)
10.1.1 Joint Venture Agreement dated July 2, 1986 Exhibit 10.1.1 to Registrant's Annual Report
between Registrant and Century on Form 10-K for the fiscal year ended
Communications Corp.("CCC") December 26, 1986
(File No. 0-14871)
10.1.2 Management Agreement and Joint Venture Exhibit 10.1.2 to Registrant's Annual Report
Agreement dated December 16, 1986 between on Form 10-K for the fiscal year ended
Registrant and CCC (attached as Exhibit 1 December 26, 1986
to Exhibit 10.3) (File No. 0-14871)
10.1.3 Management Agreement and Joint Venture Exhibit 10.1.3 to Registrant's Annual Report
Agreement dated as of February 15, 1989 on Form 10-K for the fiscal year ended
between Registrant and CCC December 30, 1988
(File No. 0-14871)
10.1.4 Amended and Restated Management Agreement Exhibit 10.1.4 to Registrant's Annual Report
and Joint Venture Agreement of Century/ML on Form 10-K for the fiscal year ended
Cable Venture dated January 1, 1994 between December 31, 1993
Century Communications Corp. and Registrant (File No. 0-14871)
10.2.1 Stock Purchase Agreement dated July 2, 1986 Exhibit 28.1 to Registrant's
between Registrant and the sellers of Form 8-K Report dated December 16, 1986
shares of Cable Television Company of (File No. 33-2290)
Greater San Juan, Inc.
10.2.2 Assignment dated July 2, 1986 between Exhibit 10.2.2 to Registrant's Annual Report
Registrant and Century-ML Cable on Form 10-K for the fiscal year ended
Corporation ("C-ML") December 26, 1986
(File No. 0-14871)
10.2.3 Transfer of Assets and Assumption of Exhibit 10.2.3 to Registrant's Annual Report
Liabilities Agreement dated January 1, 1994 on Form 10-K for the fiscal year ended
between Century-ML Radio Venture, December 31, 1993
Century/ML Cable Venture, Century (File No. 0-14871)
Communications Corp. and Registrant
10.3 Amended and Restated Credit Agreement dated Exhibit 10.3.5 to Registrant's Annual Report
as of March 8, 1989 between Citibank, N.A., on Form 10-K for the fiscal year ended
Agent, and C-ML December 30, 1988
(File No. 0-14871)
10.3.1 Note Agreement dated as of December 1, 1992 Exhibit 10.3.1 to Registrant's Annual Report
between Century-ML Cable Corporation, on Form 10-K for the fiscal year ended
Century/ML Cable Venture, Jackson National December 25, 1992
Life Insurance Company, The Lincoln (File No. 0-14871)
National Life Insurance Company and
Massachusetts Mutual Life Insurance Company
10.3.2 Second Restated Credit Agreement dated Exhibit 10.3.2 to Registrant's Annual Report
December 1, 1992 among Century-ML Cable on Form 10-K for the fiscal year ended
Corporation, Century/ML Cable Venture and December 25, 1992
Citibank (File No. 0-14871)
10.3.3 Amendment dated as of September 30, 1993 Exhibit 10.3.3 to Registrant's Quarterly Report
among Century-ML Cable Corporation, the on Form 10-Q for the quarter ended
banks parties to the Credit Agreement, and September 24, 1993
Citibank, N.A. and Century/ML Cable Venture (File No. 0-14871)
10.3.4 Amendment dated as of December 15, 1993 Exhibit 10.3.4 to Registrant's Annual Report
among Century-ML Cable Corporation, the on Form 10-K for the fiscal year ended
banks parties to the Credit Agreement, and December 31, 1993
Citibank, N.A. and Century/ML Cable Venture (File No. 0-14871)
10.4 Pledge Agreement dated December 16, 1986 Exhibit 10.4 to Registrant's Annual Report
among Registrant, CCC, and Citibank, N.A., on Form 10-K for the fiscal year ended
Agent December 26, 1986
(File No. 0-14871)
10.5 Guarantee dated as of December 16, 1986 Exhibit 10.5 to Registrant's Annual Report
among Registrant, CCC and Citibank, N.A., on Form 10-K for the fiscal year ended
Agent December 25, 1987
(File No. 0-14871)
10.6 Assignment of Accounts Receivable dated as Exhibit 10.6 to Registrant's Annual Report
of December 16, 1986 among Registrant, CCC on Form 10-K for the fiscal year ended
and Citibank, N.A., Agent December 25, 1987
(File No. 0-14871)
10.7 Real Property Mortgage dated as of December Exhibit 10.7 to Registrant's Annual Report
16, 1986 among Registrant, CCC and on Form 10-K for the fiscal year ended
Citibank, N.A., Agent December 30, 1988
(File No. 0-14871)
10.8 Stock Sale and Purchase Agreement dated as Exhibit 28.1 to Registrant's
of December 5, 1986 between SCIPSCO, Inc. Form 8-K Report dated
and ML California Cable Corp. ("ML December 23, 1986
California") (File No. 33-2290)
10.8.1 Asset Purchase Agreement dated as of Exhibit 2 to Registrant's
November 28, 1994 among Registrant and Form 8-K Report dated
Century Communications Corp. November 28, 1994
(File No. 0-14871)
10.9 Security Agreement dated as of December Exhibit 10.10 to Registrant's Annual Report
22, 1986 among Registrant, ML California on Form 10-K for the fiscal year ended
and BA December 26, 1987
(File No. 0-14871)
10.10 Assets Purchased Agreement dated as of Exhibit 28.1 to Registrant's
September 17, 1986 between Registrant and Form 8-K Report dated
Loyola University February 2, 1987
(File No. 33-2290)
10.11 Asset Acquisition Agreement dated April 22, Exhibit 28.1 to Registrant's
1987 between Community Cable-Vision of Form 8-K Report dated
Puerto Rico Associates, Community October 14, 1987
Cable-Vision of Puerto Rico, Inc., (File No. 33-2290)
Community Cable-Vision Incorporated and
Century Communications Corp., as assigned
10.12 Asset Purchase Agreement dated April 29, Exhibit 2.1 to Registrant's
1987 between Registrant and Gilmore Form 8-K Report dated
Broadcasting Corporation September 16, 1987
(File No. 33-2290)
10.13 License Holder Pledge Agreement dated Exhibit 2.5 to Registrant's
August 27, 1987 by Registrant and Media Form 8-K Report dated
Management Partners in favor of September 15, 1987
Manufacturers Hanover (File No. 33-2290)
10.14 Asset Purchase Agreement dated August 20, Exhibit 28.1 to Registrant's
1987 between 108 Radio Company Limited Form 8-K Report dated
Partnership and Registrant January 15, 1988
(File No. 33-2290)
10.15 Security Agreement dated as of December 16, Exhibit 28.3 to Registrant's
1987 between Registrant and CNB Form 8-K Report dated
January 15, 1988
(File No. 33-2290)
10.16 Asset Purchase Agreement dated as of Exhibit 10.25 to Registrant's Annual Report
January 9, 1989 between Registrant and on Form 10-K for the fiscal year ended
Connecticut Broadcasting Company, Inc. December 30, 1988
("WICC") (File No. 0-14871)
10.17.1 Stock Purchase Agreement dated June 17, Exhibit 28.2 to Registrant's Quarterly Report
1988 between Registrant and the certain on Form 10-Q for the quarter ended
sellers referred to therein relating to June 24, 1988
shares of capital stock of Universal Cable (File No. 0-14871)
Holdings, Inc. ("Universal")
10.17.2 Amendment and Consent dated July 29, 1988 Exhibit 2.2 to Registrant's
between Russell V. Keltner, Larry G. Form 8-K Report dated
Wiersig and Donald L. Benson, Universal September 19, 1988
Cable Midwest, Inc. and Registrant (File No. 0-14871)
10.17.3 Amendment and Consent dated July 29, 1988 Exhibit 2.3 to Registrant's
between Ellsworth Cable, Inc., Universal Form 8-K Report dated
Cable Midwest, Inc. and Registrant September 19, 1988
(File No. 0-14871)
10.17.4 Amendment and Consent dated August 29, 1988 Exhibit 2.4 to Registrant's
between ST Enterprises, Ltd., Universal Form 8-K Report dated
Cable Communications, Inc. and Registrant September 19, 1988
(File No. 0-14871)
10.17.5 Amendment and Consent dated September 19, Exhibit 2.5 to Registrant's
1988 between Dennis Wudtke, Universal Cable Form 8-K Report dated
Midwest, Inc., Universal Cable September 19, 1988
Communications, Inc. and Registrant (File No. 0-14871)
10.17.6 Amendment and Consent dated October 14, Exhibit 10.26.6 to Registrant's Annual Report
1988 between Down's Cable, Inc., Universal on Form 10-K for the fiscal year ended
Cable Midwest, Inc. and Registrant December 30, 1988
(File No. 0-14871)
10.17.7 Amendment and Consent dated October 14, Exhibit 10.26.7 to Registrant's Annual Report
1988 between SJM Cablevision, Inc., on Form 10-K for the fiscal year ended
Universal Cable Midwest, Inc. and Registrant December 30, 1988
(File No. 0-14871)
10.17.8 Bill of Sale and Transfer of Assets dated Exhibit 2.6 to Registrant's
as of September 19, 1988 between Registrant Form 8-K Report dated
and Universal Cable Communications Inc. September 19, 1988
(File No. 0-14871)
10.18 Credit Agreement dated as of September 19, Exhibit 10.27 to Registrant's Annual Report
1988 among Registrant, Universal, certain on Form 10-K for the fiscal year ended
subsidiaries of Universal, and December 30, 1988
Manufacturers Hanover Trust Company, as (File No. 0-14871)
Agent
10.19 Stock Purchase Agreement dated October 6, Exhibit 10.28 to Registrant's Annual Report
1988 between Registrant and the certain on Form 10-K for the fiscal year ended
sellers referred to therein relating to December 30, 1988
shares of capital stock of Acosta (File No. 0-14871)
Broadcasting Corp.
10.20 Stock Purchase Agreement dated April 19, Exhibit 28.1 to Registrant's Quarterly Report
1988 between Registrant and the certain on Form 10-Q for the quarter ended
sellers referred to therein relating to June 24, 1988
shares of capital stock of Wincom (File No. 0-14871)
Broadcasting Corporation
10.21 Subordination Agreement dated as of August Exhibit 2.3 to Registrant's
15, 1988 among Wincom, the Subsidiaries, Form 8-K Report dated
Registrant and Chemical Bank August 26, 1988
(File No. 0-14871)
10.22 Management Agreement dated August 26, 1988 Exhibit A to Exhibit 10.30.2 above
between Registrant and Wincom
10.22.1 Management Agreement by and between Exhibit 10.22.1 to Registrant's Quarterly Report
Fairfield Communications, Inc. and on Form 10-Q for the quarter ended
Registrant and ML Media Opportunity June 25, 1993
Partners, L.P. dated May 12, 1993 (File No. 0-14871)
10.22.2 Sharing Agreement by and among Registrant, Exhibit 10.22.2 to Registrant's Quarterly Report on
ML Media Opportunity Partners, L.P., RP Form 10-Q for the quarter ended June 25, 1993
Companies, Inc., Radio Equity Partners, (File No. 0-14871)
Limited Partnership and Fairfield
Communications, Inc.
10.23 Amended and Restated Credit, Security and Exhibit 10.33 to Registrant's Quarterly Report on
Pledge Agreement dated as of August 15, Form 10-Q for the quarter ended June 30, 1989
1988, as amended and restated as of July (File No. 0-14871)
19, 1989 among Registrant, Wincom
Broadcasting Corporation, Win
Communications Inc., Win Communications of
Florida, Inc., Win Communications Inc. of
Indiana, WEBE Associates, WICC Associates,
Media Management Partners, and Chemical
Bank and Chemical Bank, as Agent
<PAGE>
10.23.1 Second Amendment dated as of July 30, 1993 Exhibit 10.23.1 to Registrant's Quarterly Report on
to the Amended and Restated Credit, Form 10-Q for the quarter ended June 25, 1993
Security and Pledge Agreement dated as of (File No. 0-14871)
August 15, 1988, as amended and restated as
of July 19, 1989 and as amended by the
First Amendment thereto dated as of August
14, 1989 among Registrant, Wincom
Broadcasting Corporation, Win
Communications Inc., Win Communications
Inc. of Indiana, WEBE Associates, WICC
Associates, Media Management Partners, and
Chemical Bank and Chemical Bank, as Agent
10.24 Agreement of Consolidation, Extension, Exhibit 10.34 to Registrant's Quarterly Report on
Amendment and Restatement of the WREX Credit Form 10-Q for the quarter ended June 30, 1989
Agreement and KATC Credit Agreement between (File No. 0-14871)
Registrant and Manufacturers Hanover Trust
Company dated as of June 21, 1989
10.25 Asset Purchase Agreement between ML Media Exhibit 10.35 to Registrant's Quarterly Report
Partners, L.P. and Anaheim Broadcasting on Form 10-Q for the quarter ended
Corporation dated July 11, 1989 September 29, 1989
(File No. 0-14871)
10.26 Asset Purchase Agreement between WIN Exhibit 10.36 to Registrant's Annual Report
Communications Inc. of Indiana, and WIN on Form 10-K for the fiscal year ended
Communications of Florida, Inc. and Renda December 28, 1990
Broadcasting Corp. dated November 27, 1989 (File No. 0-14871)
10.26.1 Asset Purchase Agreement between WIN Exhibit 10.26.1 to Registrant's Quarterly Report
Communications of Indiana, Inc. and on Form 10-Q for the quarter ended
Broadcast Alchemy, L.P. dated April 30, June 25, 1993
1993 (File No. 0-14871)
10.26.2 Joint Sales Agreement between WIN Exhibit 10.26.2 to Registrant's Quarterly Report
Communications of Indiana, Inc. and on Form 10-Q for the quarter ended
Broadcast Alchemy, L.P. dated May 1, 1993 June 25, 1993
(File No. 0-14871)
10.27 Credit Agreement dated as of November 15, Exhibit 10.39 to Registrant's Quarterly Report
1989 between ML Media Partners, L.P. and on Form 10-Q for the quarter ended
Bank of America National Trust and Savings June 29, 1990
Association (File No. 0-14871)
10.27.1 First Amendment and Limited Waiver dated Exhibit 10.27.1 to Registrant's Annual Report
as of February 23, 1995 to the Amended and on Form 10-K for the fiscal year ended
Restated Credit Agreement dated as of May December 30, 1994
15, 1990 among ML Media Partners, L.P. and (File 0-14871)
Bank of America National Trust and Saving
Association, individually and as Agent
10.28 Asset Purchase Agreement dated November 27, Exhibit 10.38 to Registrant's Quarterly Report
1989 between Win Communications and Renda on Form 10-Q for the quarter ended
Broadcasting Corp. June 29, 1990
(File No. 0-14871)
10.29 Amended and Restated Credit Agreement dated Exhibit 10.39 to Registrant's Quarterly Report
as of May 15, 1990 among ML Media Partners, on Form 10-Q for the quarter ended
L.P. and Bank of America National Trust and June 29, 1990
Saving Association, individually and as (File No. 0-14871)
Agent
10.30 Stock Purchase Agreement between Registrant Exhibit 10.40.1 to Registrant's Quarterly Report
and Ponca/Universal Holdings, Inc. dated as on Form 10-Q for the quarter ended
of April 3, 1992 March 27, 1992
(File No. 0-14871)
10.30.1 Earnest Money Escrow Agreement between Exhibit 10.40.1 to Registrant's Quarterly Report
Registrant and Ponca/Universal Holdings, on Form 10-Q for the quarter ended
Inc. dated as of April 3, 1992 March 27, 1992
(File No. 0-14871)
10.30.2 Indemnity Escrow Agreement between Exhibit 10.40.2 to Registrant's Form 8-K Report
Registrant and Ponca/Universal Holdings, dated July 8, 1992
Inc. dated as of July 8, 1992 (File No. 0-14871)
10.30.3 Assignment by Registrant in favor of Exhibit 10.40.3 to Registrant's Form 8-K Report
Chemical Bank, in its capacity as agent for dated July 8, 1992
itself and the other banks party to the (File No. 0-14871)
credit agreement dated as of September 19,
1988, among Registrant, Universal, certain
subsidiaries of Universal, and
Manufacturers Hanover Trust Company, as
agent
<PAGE>
10.30.4 Confirmation of final Universal agreements Exhibit 10.40.4 to Registrant's Quarterly Report
between Registrant and Manufacturers on Form 10-Q for the quarter ended
Hanover Trust Company, dated April 3, 1992 September 25, 1992
(File No. 0-14871)
10.30.5 Letter regarding discharge and release of Exhibit 10.40.5 to Registrant's Quarterly Report
the Universal Companies and Registrant on Form 10-Q for the quarter ended
dated July 8, 1992 between Registrant and September 25, 1992
Chemical Bank (as successor, by merger, to (File No. 0-14871)
Manufacturers Hanover Trust Company)
10.31.1 Asset Purchase Agreement dated May 25, 1995 Exhibit 10.1 to Registrant's
with Quincy Newspapers, Inc. to sell Form 8-K dated
substantially all of the assets used in the May 25, 1995
operations of the Registrant's television (File No. 0-14871)
station WREX-TV, Rockford, Illinois
10.31.3 Asset Purchase Agreement dated June 1, 1995 Exhibit to Registrant's
with KATC Communications, Inc., to sell Form 8-K Report dated
substantially all of the assets used in the June 1, 1995
operations of Registrant's television (File No. 0-14871)
station KATC-TV, Lafayette, Louisiana
10.32 Asset Purchase Agreement dated November 28, Exhibit to Registrant's
1994 with Century Communications Corp., to Form 8-K Report dated
sell substantially all of the assets used November 28, 1994
in Registrant's California Cable Systems. (File No. 0-14871)
10.33 Letter Agreement dated May 31, 1996 between Exhibit to Registrant's
Registrant and Century Communications Corp. Form 8-K Report dated
May 31, 1996
(File No. 0-14871)
10.34 Asset Purchase Agreement dated October 9, Exhibit 10.34 to Registrant's Annual Report
1997 with Madifide, Inc., to sell on Form 10-K for the fiscal year ended
substantially all of the assets used in the December 26, 1997
operations of Registrant's C-ML Radio. (File 0-14871)
10.35 Asset Purchase Agreement dated September Exhibit 1 to Registrant's Form
14, 1998, between Registrant and 8-K/A Report dated January 4, 1999
Citicasters Co., to sell substantially all (File No. 0-14871)
of the assets used in the operations of
Registrant's Anaheim Stations
10.36 Stock Purchase Agreement dated August 11, Exhibit 1 to Registrant's Form 8-K Report
1998, between Registrant and Chancellor dated January 28, 1999
Media Corporation of Los Angeles, to sell (File No. 0-14871)
the stock of Wincom
10.37 Asset Purchase Agreement dated April 22, Exhibit 1 to Registrant's
1999, between Registrant and Aurora Form 8-K Report dated
Communications LLC, to sell substantially August 31, 1999
all of the assets used in the operations of (File No. 0-14871)
Registrant's Connecticut Stations
18.1 Letter from Deloitte, Haskins & Sells Exhibit 18.1 to Registrant's Annual Report
regarding the change in accounting method, on Form 10-K for the fiscal year ended
dated March 30, 1989 December 30, 1988
(File No. 0-14871)
27.0 Financial Data Schedule to Form 10-K Report
for the fiscal year ended December 31, 1999
99 Pages 12 through 19 and 38 through 46 of Prospectus dated February 4, 1986, filed pursuant to Rule
Prospectus dated February 4, 1986, filed 424(b) under the Securities Act of 1933, as amended
pursuant to Rule 424(b) under the (File No. 33-2290)
Securities Act of 1933, as amended
(b) Reports on Form 8-K.
None.
(c) Exhibits.
See (a) (3) above.
(d) Financial Statement Schedules.
See (a) (2) above.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
ML MEDIA PARTNERS, L.P.
By: Media Management Partners
General Partner
By: ML Media Management Inc.
Dated: May 3, 2000 /s/ Kevin K. Albert
----------------------------
Kevin K. Albert
Director and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Registrant in the
capacities and on the dates indicated.
RP MEDIA MANAGEMENT
<TABLE>
<CAPTION>
Signature Title Date
- ------------- --------- -------
<S> <C> <C>
/s/ I. Martin Pompadur President, Secretary and Director May 3, 2000
- ---------------------------- (principal executive officer of the
(I. Martin Pompadur) Registrant)
/s/ Elizabeth McNey Yates Executive Vice President May 3, 2000
- ----------------------------
(Elizabeth McNey Yates)
</TABLE>
<PAGE>
ML MEDIA MANAGEMENT INC.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Kevin K. Albert Director and President May 3, 2000
- -------------------------
(Kevin K. Albert)
/s/ James V. Caruso Director and May 3, 2000
- ------------------------- Executive Vice President
(James V. Caruso)
/s/ Michael A. Giobbe Director and Vice President May 3, 2000
- -------------------------
(Michael A. Giobbe)
/s/ Sandhya Rana Vice President and Treasurer May 3, 2000
- ------------------------- (principal financial officer and
(Sandhya Rana) principal accounting officer of the
Registrant)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from the
year end 1999 Form 10-K Consolidated Balance Sheets and Consolidated Statements
of Operations as of December 31, 1999, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 125,575
<SECURITIES> 0
<RECEIVABLES> 2,530
<ALLOWANCES> 606
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 43,037
<DEPRECIATION> 15,373
<TOTAL-ASSETS> 168,566
<CURRENT-LIABILITIES> 0
<BONDS> 30,000
<COMMON> 0
0
0
<OTHER-SE> 108,799
<TOTAL-LIABILITY-AND-EQUITY> 168,566
<SALES> 0
<TOTAL-REVENUES> 39,720
<CGS> 0
<TOTAL-COSTS> 27,800
<OTHER-EXPENSES> 5,423
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,751
<INCOME-PRETAX> 11,920
<INCOME-TAX> 0
<INCOME-CONTINUING> 11,920
<DISCONTINUED> 104,146
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 116,066
<EPS-BASIC> 611.22
<EPS-DILUTED> 0
</TABLE>
