SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
March 31,1996
0-16690
(Commission File Number)
ML MEDIA OPPORTUNITY PARTNERS, L.P.
(Exact name of registrant as specified in its governing
instruments)
Delaware
(State or other jurisdiction of organization)
13-3429969
(IRS Employer Identification No.)
World Financial Center
South Tower - 14th Floor
New York, New York 10080-6114
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(212) 236-6472
N/A
Former name, former address and former fiscal year if changed
since last report
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No .
ML Media Opportunity Partners, L.P.
Part I - Financial Information.
Item 1. Financial Statements
TABLE OF CONTENTS
Consolidated Balance Sheets as of March 31, 1996
(Unaudited) and December 31, 1995 (Unaudited)
Consolidated Statements of Operations for the
thirteen week periods ended March 31, 1996
(Unaudited) and March 31, 1995 (Unaudited)
Consolidated Statements of Cash Flows for the
thirteen week periods ended March 31, 1996
(Unaudited) and March 31, 1995 (Unaudited)
Notes to the Consolidated Financial Statements
for the thirteen week period ended
March 31, 1996 (Unaudited)
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA OPPORTUNITY PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 1996 (UNAUDITED) AND
DECEMBER 31, 1995 (UNAUDITED)
March 31, December 31,
1996 1995
<S> <C> <C>
ASSETS:
Cash and cash equivalents
$ 632,306 $ 570,336
Investment in joint
venture and common stock
1,261,666 1,261,666
Other assets 17,655 87,354
TOTAL ASSETS $ 1,911,627 $ 1,919,356
LIABILITIES AND PARTNERS'
CAPITAL:
Liabilities:
Accounts payable and
accrued liabilities $ 538,138 $ 539,327
Net Liabilities of
Discontinued Operations:
Production Segment 140,711 140,711
Television and Radio
Station Segment - -
Total Liabilities 678,849 680,038
Commitments and
Contingencies
</TABLE>
(Continued on the following page.)
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA OPPORTUNITY PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 1996 (UNAUDITED)
AND DECEMBER 31, 1995 (UNAUDITED)
(continued)
March 31, December 31,
1996 1995
<S> <C> <C> <C>
Partners' Capital:
General Partner:
Capital contributions,
net of offering
expenses 1,019,428 1,019,428
Cash Distributions (120,077) (120,077)
Cumulative loss (866,531) (866,466)
32,820 32,885
Limited Partners:
Capital contributions,
net of offering
expenses (112,147.1
Units of Limited
Partnership Interest) 100,914,316 100,914,316
Tax allowance cash
distribution (2,040,121) (2,040,121)
Other cash distributions
(11,887,582) (11,887,582)
Cumulative loss (85,786,655) (85,780,180)
1,199,958 1,206,433
Total Partners' Capital
1,232,778 1,239,318
TOTAL LIABILITIES AND
PARTNERS' CAPITAL $ 1,911,627 $ 1,919,356
See Notes to Consolidated Financial Statements (Unaudited).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA OPPORTUNITY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THIRTEEN WEEK PERIODS ENDED
MARCH 31, 1996 (UNAUDITED)
AND MARCH 31, 1995 (UNAUDITED)
March 31, March 31,
1996 1995
<S> <C> <C>
Partnership Operating Expenses:
General and administrative $ 14,029 $ 36,936
Management fees - 617,015
14,029 653,951
Interest Income 7,489 38,490
Loss from Partnership operations (6,540) (615,461)
Discontinued operations:
Gain on Sale of Discontinued
Television and Radio Station
Segment - 1,684,328
Income from discontinued operations
- 1,684,328
NET(LOSS)/INCOME $ (6,540) $ 1,068,867
(Continued on the following page.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA OPPORTUNITY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THIRTEEN WEEK PERIODS ENDED
MARCH 31, 1996 (UNAUDITED)
AND MARCH 31, 1995 (UNAUDITED)
<S> <C> <C>
Per Unit of Limited Partnership
Interest:
Loss from Partnership operations $ (.06) $ (5.43
)
Gain on Sale of discontinued
operations - 14.87
NET(LOSS)/INCOME $ (.06) $ 9.44
Number of Units 112,147.1 112,147.1
See Notes to Consolidated Financial Statements (Unaudited).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA OPPORTUNITY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTEEN WEEK PERIODS ENDED MARCH 31, 1996 (UNAUDITED)
AND MARCH 31, 1995 (UNAUDITED)
March 31, March 31,
1996 1995
<S> <C> <C>
Cash flows from operating
activities:
Net (Loss)/Income $ (6,540) $ 1,068,867
Adjustments to reconcile net
(loss)/income to net cash provided
by/(used in) operating activities:
Gain on Sale of Discontinued
Television and Radio Station
Segment - (1,684,328)
Change in operating assets and
liabilities:
Other assets 69,699 (1,659)
Accounts payable and accrued
liabilities (1,189) (63,692)
Net cash provided by/(used in)
operating activities 61,970 (680,812)
(Continued on the following page.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA OPPORTUNITY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTEEN WEEK PERIODS ENDED MARCH 31, 1996 (UNAUDITED)
AND MARCH 31, 1995 (UNAUDITED)
<S> <C> <C>
Cash flows from investing
activities:
Proceeds from sale of radio station
WMXN-FM - 3,334,013
Net cash provided by investing
activities - 3,334,013
Net increase in cash and
cash equivalents 61,970 2,653,201
Cash and cash equivalents at
beginning of year 570,336 2,150,473
Cash and cash equivalents at end of
period $ 632,306 $ 4,803,674
Interest paid $ 280,508 $ 837,107
Supplemental Disclosure:
Effective February 21, 1995, the Partnership sold the assets of
radio station WMXN-FM.
Effective September 15, 1995, the Partnership sold all of the
capital stock of Avant Development Corporation.
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited).
ML MEDIA OPPORTUNITY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRTEEN WEEK PERIOD ENDED MARCH 31, 1996 (UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
ML Media Opportunity Partners, L.P. (the "Partnership") was
formed and the Certificate of Limited Partnership was filed under
the Delaware Revised Uniform Limited Partnership Act on June 23,
1987. Operations commenced on March 23, 1988 with the first
closing of the sale of units of limited partnership interest
("Units"). Subscriptions for an aggregate of 112,147.1 Units
were accepted and are now outstanding.
Media Opportunity 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 Opportunity Management,
L.P., a limited partnership under Delaware law, and ML
Opportunity Management Inc., 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 is $1,132,800 which represents 1% of the
total Partnership capital contributions.
Pursuant to the terms of the Amended and Restated Agreement of
Limited Partnership, 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.
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information. They do not
include all information and footnotes required by generally
accepted accounting principles for complete financial statements.
In the opinion of the General Partner, the financial statements
include all adjustments necessary to reflect fairly the financial
position of the Partnership as of March 31, 1996 and the results
of operations and cash flows of the Partnership for the interim
periods presented. All adjustments are of a normal recurring
nature. The results of operations for the three months ended
March 31, 1996, are not necessarily indicative of the results of
operations for the entire year.
Additional information, including the audited year end 1995
Financial Statements and the Summary of Significant Accounting
Policies, is included in the Partnership's filing on Form 10-K
for the year ended December 31, 1995 on file with the Securities
and Exchange Commission.
2. Liquidity and Capital Resources
At March 31, 1996, the Partnership had $632,306 in cash and cash
equivalents. The Partnership will continue to attempt to sell or
otherwise dispose of its remaining investments in media
properties.
TCS Television Partners L.P. ("TCS")continues to be in default on
covenants under its note agreements as of March 31, 1996 and
expects to default on the majority of its scheduled principal
payments under its note agreements for the remainder of 1996. TCS
is in the process of marketing the remaining TCS stations for
sale (see below).
Sale of WMXN-FM
On February 21, 1995, US Radio of Norfolk, Inc. purchased WMXN-FM
for approximately $3.5 million. Following payment of a
transaction fee to a third party unaffiliated with the
Partnership and/or its affiliates, approximately $3.3 million was
remitted to the Partnership. The Partnership recognized a gain
of approximately $1.7 million for financial reporting purposes in
1995 on the sale of WMXN-FM. In addition, on March 7, 1995 and
February 28, 1996, approximately $400,000 and $66,000,
respectively, were returned to the Partnership from WMXN-FM's
cash balances.
Disposition of IMPLP/IMPI and Intelidata
Effective July 1, 1993, the Partnership entered into three
transactions to sell the business and liquidate the assets of
IMPLP/IMPI and Intelidata. Subsequent to the sale of the
businesses, the Partnership advanced net additional funds
totaling approximately $100,000 through December 31, 1995 to
IMPLP/IMPI and Intelidata to fund cash shortfalls resulting from
the pre-sale claims of certain creditors and liquidation costs.
The Partnership anticipates that it will make additional such
advances to IMPLP/IMPI and Intelidata during 1996. The aggregate
amounts of the Partnership's obligations to fund such advances,
including certain contractual obligations, is not currently
anticipated to exceed the amount of the writedown. It is
unlikely that the Partnership will recover any portion of its
investment in IMPLP/IMPI/Intelidata.
Partnership's Remaining Investments
As of March 31, 1996, the Partnership's investments in media
properties consisted of:
Ownership of 351,665 shares of common stock of Western
Wireless Corporation ("WWC"), a cellular telecommunications
company;
51.005% ownership of TCS, which owns (i) 20% of the
outstanding common stock of Fabri Development Corporation
("Fabri"), which in turn owns and operates two network
affiliated television stations serving Terre Haute, Indiana
and St. Joseph, Missouri and (ii) 100% of the outstanding
common stock of TCS Television, Inc., ("TCS Inc.") which in
turn owns the 80% of the outstanding common stock of Fabri
not owned by TCS;
50% ownership of Paradigm Entertainment, L.P. ("Paradigm"),
a California based company which owns three movies and a
participating interest in Bob Banner Associates Development
("BBAD") programs;
and a 13.8% ownership of MV Technology Limited ("MVT"), a
United Kingdom corporation whose sole purpose is to manage a
10% interest in Teletext ("Teletext"), a United Kingdom
corporation organized to acquire United Kingdom franchise
rights to provide data in text form to television viewers
via television broadcast sidebands.
The status of all of the Partnership's remaining investments is
discussed in more detail below.
TCS Television Partners, L.P.
TCS remains in default on covenants under its note agreements as
of March 31, 1996 and expects to default on the majority of its
scheduled principal payments under its note agreements for the
remainder of 1996. TCS engaged in discussions with its note
holders regarding a potential restructuring of TCS's note
agreements, but ultimately decided to pursue a sale of the TCS
stations. The Partnership engaged Furman Selz Incorporated to
assist it in marketing the TCS television stations for sale.
On September 15, 1995, TCS Inc., a wholly owned subsidiary of
TCS, completed the sale to The Spartan Radiocasting Company
("Spartan") of all of the outstanding capital stock of Avant
Development Corporation ("Avant"), a 100% owned corporate
subsidiary of TCS, Inc. which owns WRBL-TV for a net sales price
of $22.7 million. From the proceeds of the sale, a reserve of
approximately $1.4 million was established to cover certain
expenses and liabilities relating to the sale and $1,250,000 was
deposited into an indemnity escrow account to secure TCS Inc.'s
indemnification obligations account to Spartan for taxes and
other liabilities. In addition, approximately $18.9 million was
applied to repay a portion of TCS' total indebtedness of
approximately $43 million as of December 31, 1994, which is
secured by a pledge of the shares of Fabri, another wholly owned
subsidiary of TCS Inc. which owns and operates KQTV-TV, St.
Joseph, Missouri and WTWO-TV Terre Haute, Indiana and
approximately $1.1 million in closing costs. The Partnership is
actively marketing these two stations for potential sale during
1996. The Partnership recognized a gain, for financial reporting
purposes, on the sale of Avant of approximately $17.6 million,
partially offset by a reserve for estimated losses on such future
sale of the remaining television stations of TCS of approximately
$9.9 million.
While TCS remains in default, the note holders have the option to
exercise their rights under the notes, which rights include the
ability to foreclose on the stock of Fabri, but not the other
assets of the Partnership. Nevertheless, it is the Partnership's
intention to actively pursue a sale of the two remaining TCS
television stations. No assurance can be made that the two
remaining TCS television stations will be sold since the
Partnership may not be able to reach a final agreement with
potential purchasers on terms acceptable to the Partnership.
Whether or not the Partnership is able to sell all the TCS
television stations, it is unlikely that the Partnership will
recover more than a nominal amount of its investment in TCS.
GCC/WWC
On January 20, 1994, the majority stockholders of General
Cellular Corporation ("GCC") and certain holders of interests in
MARKETS Cellular Limited Partnership ("Markets") and PN Cellular,
Inc. ("PNCI") executed a Memorandum of Intention (the
"Memorandum") pursuant to which the parties thereto expressed
their intent to effect a proposed business combination of GCC and
Markets.
The Partnership executed an Exchange Agreement and Plan of Merger
("Agreement"), dated July 20, 1994, to which the majority
stockholders of GCC and the majority owners of Markets are
parties. Pursuant to the Agreement, the Partnership exchanged
its shares in GCC for an equal number of shares in WWC, a new
company which was organized to own the equity interest of GCC and
Markets. Following the consummation of the business combination
on July 29, 1994, WWC became the owner of 100% of the Partnership
interests in Markets and approximately 95% of the outstanding
common stock of GCC. Subsequently, WWC acquired the remaining
shares and now owns 100% of the outstanding common stock of GCC.
The parties have entered into a stockholders agreement containing
certain restrictions on transfer, registration rights and
corporate governance provisions. On March 15, 1996, WWC filed a
registration statement with the Securities and Exchange
Commission in order to make a public offering of its stock. On
May 3, 1996, WWC issued a preliminary prospectus which disclosed
a 3.1 to 1 stock split and an estimated offering price subsequent
to the stock split ranging from $21 to $24 per share. Subsequent
to the 3.1 to 1 stock split described above, the Partnership'
will own 1,090,162 shares of WWC. The Partnership has elected to
include all of its 351,665 shares (1,090,162 post-split) of WWC
in WWC's public offering. However, there can be no assurances
that WWC's public offering will be consummated as contemplated or
that the Partnership will be able to sell its shares in
connection with such offering.
Paradigm/BBAD
Effective June 23, 1992, Paradigm formed a general partnership
with Bob Banner Associates ("Associates") to start a new
production company, BBAD. Pursuant to this new general
partnership arrangement between Paradigm and Associates, during
1992 Paradigm advanced approximately $942,000 and Associates
advanced approximately $457,000 to fund BBAD's operations and the
development of certain programming concepts. Initially, Paradigm
owned 67% and Associates owned 33% of BBAD, based on their
capital contributions to BBAD. In addition, Associates
contributed an additional approximately $0.7 million and Paradigm
contributed approximately $0.3 million from existing cash
balances during 1993 to fund BBAD's operations. As of December
31, 1995, the Partnership had advanced a total of approximately
$7.5 million to Paradigm (net of funds returned by Paradigm).
Due in part to the Partnership's unwillingness to advance
additional funds to fund the continuing operating losses and
possible winding down of Paradigm's and BBAD's operating
activities, the Partnership recorded in the second quarter of
1993 a writedown of approximately $516,000 of certain assets of
Paradigm and BBAD to reduce the Partnership's net investment to a
net realizable value of zero.
Through the end of 1993, Paradigm had produced three television
movies which had aired as well as one syndicated series (which
was discontinued after thirteen episodes), and BBAD had produced
one television movie which had aired and one series. BBAD had
also developed other program concepts which may be produced as
either movies or series for television.
On April 25, 1996, Paradigm sold the rights in one of its films
to Fenady Associates, Inc., which is not an affiliate of the
Partnership, for $80,000, all such proceeds were received by the
Partnership. The Partnership will recognize a gain for financial
reporting purposes of $80,000 on the sale of the film in the
second quarter of 1996.
Refer to Note 3 for further information regarding Paradigm and
BBAD.
Investments and EMP, Ltd. and MVT
Effective August 12, 1994, the Partnership and European Media
Partners, Ltd. ("EMP, Ltd.") restructured the ownership of EMP,
Ltd. and certain of its subsidiaries in order to enable EMP, Ltd.
to attract additional capital from ALP Enterprises, Inc. ("ALP
Enterprises") and other potential third party investors. In the
restructuring, based on certain representations from EMP, Ltd.
and ALP Enterprises, the Partnership sold to Clarendon and ALP
Enterprises for nominal consideration the Partnership's shares in
EMP, Ltd. Simultaneously, the Partnership and EMP, Ltd. entered
into an agreement whereby EMP, Ltd.'s 10% interest in Teletext
was transferred, together with a 350,000 loan (approximately
$543,000 at then-current exchange rates) from EMP, Ltd. to a
newly formed entity, MVT. After the transfer, the Partnership
owned 13.8% of the issued common shares of MVT, while EMP, Ltd.
owns the remaining 86.2%. MVT's sole purpose is to manage its
10% interest in Teletext. MVT will pay an annual fee to EMP,
Ltd. for management services provided by EMP, Ltd. in connection
with overseeing MVT's investment in Teletext. Following the
restructuring, the Partnership no longer has any interest in EMP,
Ltd.
The Partnership has the right to require EMP, Ltd. to purchase
the Partnership's interest in MVT at any time between December
31, 1994 and December 31, 1997. EMP, Ltd. has the right to
require the Partnership to sell the Partnership's interest in MVT
to EMP, Ltd. at any time between September 30, 1995 and September
30, 1998. In January, 1996, EMP, Ltd. decided to exercise its
right to require the Partnership to sell its interest in MVT to
EMP, Ltd. and notified the Partnership of its intention to
acquire the Partnership's interest. The Partnership is currently
negotiating the terms of such sale. During 1995, the Partnership
received approximately $108,000 in dividends from MVT.
Summary
In summary of the Partnership's liquidity status, the Partnership
has $632,306 in cash and cash equivalents available for working
capital purposes. The Partnership has no contractual commitment
to advance funds to any of its existing investments, other than
its obligation to fund cash shortfalls resulting from pre-sale
claims and liquidation costs related to its former investments in
IMPLP/IMPI and Intelidata.
3. DISCONTINUED OPERATIONS
Television and Radio Station Segment
Due to the Partnership's decision to dispose of its interest in
its television and radio stations, the Partnership has presented
its Television and Radio Station Segment as discontinued
operations. The Partnership sold two of its stations in 1995
(see Note 2) and intends to sell the remaining two stations in
1996.
The net liabilities of discontinued operations of the Television
and Radio Station Segment on the Consolidated Balance Sheets are
comprised of the following:
<TABLE>
<CAPTION>
As of As of
March 31, December 31,
1996 1995
<S> <C> <C>
Property, plant and
equipment, net $ 3,183,856 $ 3,277,806
Intangible assets, net 32,652,716 32,939,937
Other assets 6,052,573 6,801,971
Borrowings (23,336,433) (24,045,943)
Other liabilities (18,552,712) (18,973,771)
Net liabilities of
discontinued operations $ 0 $ 0
</TABLE>
Included in net liabilities of discontinued operations is the
reserve established for expected losses on the disposition of the
remaining stations comprising the Television and Radio Station
Segment (inclusive of expected operating losses through the date
of disposal)(See Note 2).
The aggregate amount of borrowings is detailed as follows:
<TABLE>
<CAPTION> As of As of
March 31, December 31,
1996 1995
<S> <C> <C>
Senior Secured Notes-TCS $ 12,009,629 $ 12,719,139
Senior Secured Subordinated
Notes-TCS 11,326,804 11,326,804
$ 23,336,433 $ 24,045,943
During 1996, TCS paid down $709,510 on secured borrowings, which
included outstanding principal payments totaling $299,450 which
had become due and owing in 1995.
The Partnership recorded a gain of $1,684,328 on the sale of WMXN-
FM during the first quarter of 1995(see Note 2).
Production Segment
Paradigm is not currently producing television programs, and the
Partnership has not advanced any funds to Paradigm and/or BBAD
since the second quarter of 1992. It is the Partnership's
intention to attempt to sell its interest in the Paradigm and/or
BBAD programs and projects. However, it is unlikely that the
Partnership will recover more than a nominal portion, if any, of
its original investment in Paradigm and/or BBAD.
Due to the expected disposition of Paradigm, the Partnership's
Production Segment has been presented as discontinued operations.
The net liabilities of the discontinued operations of the
Production Segment on the Consolidated Balance Sheets are
comprised of the following:
</TABLE>
<TABLE>
<CAPTION>
As of As of
March 31, December 31,
1996 1995
<S> <C> <C>
Cash $ 54,152 $ 57,131
Accounts payable and
accrued liabilities (194,863) (197,842)
Net liabilities of
discontinued operations $ (140,711) $ (140,711)
</TABLE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Liquidity and Capital Resources.
At March 31, 1996, Registrant had $632,306 in cash and cash
equivalents available for working capital purposes.
Registrant will continue to attempt to sell or otherwise dispose
of its remaining investments in media properties, and then
liquidate.
TCS Television Partners L.P. ("TCS") continues to be in default
on covenants under its note agreements as of March 31, 1996 and
expects to default on the majority of its scheduled principal
payments under its note agreements for the remainder of 1996.
TCS is in the process of marketing the remaining TCS stations for
sale (see below).
On May 3, 1996, WWC issued a preliminary prospectus which
disclosed a 3.1 to 1 stock split and an estimated offering price
subsequent to the stock split ranging from $21 to $24 per share.
Subsequent to the 3.1 to 1 stock split described above,
Registrant will own 1,090,162 shares of WWC. Registrant has
elected to include all of its 351,665 shares (1,090,162 post-
split) of WWC in WWC's public offering. However, there can be no
assurances that the WWC public offering will be consummated as
contemplated or that Registrant will be able to sell its shares
in connection with such offering.
On April 25, 1996, Paradigm sold the rights in one of its films
to Fenady Associates, Inc., which is not an affiliate of
Registrant, for $80,000, all such proceeds were paid to
Registrant. Registrant will recognize a gain for financial
reporting purposes of $80,000 on the sale of the film in the
second quarter of 1996.
The information set forth in Part I Item 1, Financial Statements
Footnote 2, Liquidity and Capital Resources, appearing on pages
11 through 16 hereof is hereby incorporated herein by reference
and made a part hereof.
Broadcast Television
Operating results for broadcast television stations are affected
by the availability, popularity and cost of programming;
competition for local, regional and national advertising
revenues; the availability to local stations of compensation
payments from national networks with which the local stations are
affiliated; competition within the local markets from programming
on other stations or from other media; competition from other
technologies, including cable television; and government
regulation and licensing. Due primarily to increased competition
from cable television, with that medium's plethora of viewing
alternatives and from the Fox Network, the share of viewers
watching the major U.S. networks, ABC, CBS, and NBC, has declined
significantly over the last ten years. This reduction in viewer
share has made it increasingly difficult for local stations to
increase their revenues from advertising. The combination of
these reduced shares and the impact of the economic recession at
the beginning of this decade on the advertising market resulted
in generally deteriorating performance at many local stations
affiliated with ABC, CBS, and NBC. Although the share of viewers
watching the major networks has recently leveled off or increased
slightly, additional audience and advertiser fragmentation may
occur if, as planned, one or more of the additional, recently
launched broadcast networks develops program offerings
competitive with those of the more established networks.
Television Industry
The Telecommunications Act of 1996 (the "1996 Act") liberalizes
the television ownership rules by eliminating the national
ownership cap. A person or entity may now directly or indirectly
own, operate, or control, or have a cognizable interest in any
number of television stations nationwide. The 1996 Act also
raises the national television audience reach limit from 25% to
35% of all United States households. Although the 1996 Act
retains the television duopoly rule, which prohibits ownership of
two TV stations in the same market, the 1996 Act directs the FCC
to reexamine the rule through a rulemaking. With respect to the
radio/TV cross-ownership restriction, the 1996 Act extends the
FCC's one-to-a-market waiver policy to the top 50 markets.
Congress also directed the FCC to revise the dual network rule to
permit broadcast stations to affiliate with two or more networks,
unless the combination is composed of (1) two of the four
established networks (i.e., ABC, CBS, NBC, and Fox) or (2) any of
the four networks and one of the two emerging networks. The 1996
Act eliminates the network/cable cross-ownership ban, but ensures
carriage, channel positioning, and nondiscriminatory treatment of
nonaffiliated broadcast stations. The 1996 Act also repeals the
statutory ban (but not the related FCC rules) on the common
ownership of a television station and a cable system in
situations where the cable system is located within the Grade B
contour of the television station. In addition, the 1996 Act
grandfathers certain television LMAs which were in existence upon
enactment and are in compliance with FCC regulations. Last, the
1996 Act requires the FCC to review its ownership rules
biennially to determine whether they are necessary in the public
interest.
The 1996 Act also has several provisions relating to broadcast
license reform. The 1996 Act permits the FCC to extend broadcast
license terms for both radio and television stations up to 8
years. Moreover, renewal of a broadcast license is now required
under certain circumstances without considering competing
applications.
On a local basis, FCC rules currently allow an entity to have an
attributable interest (as defined below) in only one television
station in a market. In addition, FCC rules and/or the
Communications Act generally prohibit an individual or entity
from having an attributable interest in a television station and
a radio station (for which a waiver may now be sought in the top
50 markets under the 1996 Act), daily newspaper or cable
television system that is located in the same local market area
served by the television station. Proposals currently before the
FCC would substantially alter these standards. For example, in a
recently initiated rulemaking proceeding, the FCC suggests
narrowing the geographic scope of the local television cross-
ownership rule (the so-called "duopoly" rule) from Grade B to
Grade A contours, and eliminating the television/radio cross-
ownership restriction (the so-called "one-to-a-market" rule)
entirely, or at least exempting larger markets. These rulemaking
proposals may be changed and/or expanded in a new rulemaking
proceeding that is anticipated this year as a result of the 1996
Act.
Under current FCC regulations, holders of debt instruments, non-
voting stock and certain limited partnership interests (provided
the licensee certifies that the limited partners are not
"materially involved" in the management or operation of the
subject media property) are not generally considered to own an
"attributable" interest in a particular media property. In the
case of corporations, ownership of television licenses generally
is "attributed" to all officers and directors of a licensee, as
well as shareholders who own 5% or more of the outstanding voting
stock of a licensee, except that certain institutional investors
who exert no control or influence over a licensee may own up to
10% of such outstanding voting stock before attribution results.
In addition, the FCC's cross-interest policy, which precludes an
individual or entity from having an attributable interest in one
media property and a "meaningful" (but not attributable) interest
in a broadcast, cable or newspaper property in the same area, may
be invoked in certain circumstances to reach interests not
expressly covered by the multiple ownership rules. On January
12, 1995, the FCC released a "Notice of Proposed Rule Making"
designed to permit a "thorough review of its broadcast media
attribution rules." Among other things, the FCC is considering
the following: (i) whether to change the voting stock
attribution benchmarks from five percent to ten percent and, for
passive investors, from ten percent to twenty percent; (ii)
whether there are any circumstances in which non-voting stock
interests, which are currently considered non-attributable,
should be considered attributable; (iii) whether the FCC should
eliminate its single majority shareholder exception (pursuant to
which voting interests in excess of five percent are not
considered cognizable if a single majority shareholder owns more
than fifty percent of the voting stock); (iv) whether to relax
insulation standards for business development companies and other
widely-held limited partnerships; (v) how to treat limited
liability companies and other new business forms for attribution
purposes; (vi) whether to eliminate or codify the cross-interest
policy; and (vii) whether to adopt a new policy which would
consider whether multiple "cross interest" or other significant
business relationships (such as time brokerage agreements, debt
relationships, or holdings of non-attributable interests), which
individually do not raise concerns, raise issues with respect to
diversity and competition.
Recent Developments, Proposed Legislation and Regulation
The FCC recently decided to eliminate the prime time access rule
("PTAR"), effective August 30, 1996. PTAR currently limits a
television station's ability to broadcast network programming
(including syndicated programming previously broadcast over a
network) during prime time hours. The elimination of PTAR could
increase the amount of network programming broadcast over a
station affiliated with ABC, NBC or CBS. Such elimination also
could result in (i) an increase in the compensation paid by the
network to a station (due to the additional prime time during
which network programming could be aired by a network-affiliated
station) and (ii) increased competition for syndicated network
programming that previously was unavailable for broadcast by
network affiliates during prime time.
The FCC also recently announced that it was rescinding its
remaining financial interest and syndication ("fin-syn") rules.
The fin-syn rules restricted the ability of ABC, CBS and NBC to
obtain financial interests in, or participation in syndication
of, prime-time entertainment programming created by independent
producers for airing during the networks' evening schedules.
The FCC currently has under consideration, and the FCC and the
Congress both may in the future adopt, new laws, regulations and
policies regarding a wide variety of matters which could,
directly or indirectly, affect the operation and ownership of the
Registrant's broadcast properties. In addition to the matters
noted above, such pending or potential subject areas include, for
example, the license renewal process, spectrum use fees,
political advertising rates, potential advertising restrictions
on certain products (such as beer and wine), the rules and
policies to be applied in enforcing the FCC's equal employment
opportunity regulations, possible changes in the deductibility of
advertising expenses, the standards to govern evaluation of
television programming directed toward children, and violent and
indecent programming. In addition, on June 15, 1995, the FCC
initiated a review and update of certain long-standing rules
governing the programming practices of broadcast television
networks and their affiliates. Specifically, the FCC will
consider whether to modify, repeal or retain the following
programming-related rules: (1) the right to reject rule which
ensures that a network affiliate retains the right to reject
network programming; (2) the time option rule that currently
prohibits a network from holding an option to use specified
amounts of an affiliate's broadcast time; (3) the exclusive
affiliation rule that forbids a network from preventing an
affiliate from broadcasting the programming of another network;
(4) the dual network rule that prevents a single entity from
owning more than one broadcast television network; and (5) the
network territorial exclusivity rule that prohibits an agreement
between a network program not taken by the affiliate, and
prohibits an agreement that would prevent another station located
in a different community from broadcasting any of the network's
programs. Moreover, in a separate but related proceeding
initiated on June 14, 1995, the FCC is considering whether to
modify or repeal rules that currently forbid a network from
influencing an affiliate's advertising rates during non-network
broadcast time, and whether to modify or repeal a rule forbidding
a network from acting as an advertising representative for the
sale of non-network time.
Advanced Television:
The FCC has proposed the adoption of rules for implementing
advanced television ("ATV") service in the United States.
Implementation of digital ATV will improve the technical quality
of television signals receivable by viewers, and will enable
television broadcasters the flexibility to provide new services,
including high-definition television ("HDTV"), simultaneous
multiple programs of standard definition television ("SDTV"), and
data broadcasting. The FCC must adopt service rules before
broadcasting with the new ATV technology can begin. The FCC
began an ATV rulemaking proceeding in 1987 and, by late 1992,
decided to assign to each existing broadcaster a second channel
for the purpose of transitioning to ATV service. Under the
transition plan, which would commence upon FCC adoption of the
ATV transmission standard and allotment plan, broadcasters would
have six years to begin ATV broadcasting on their second channel,
and fifteen years to continue current "NTSC" broadcasts on their
original channel. For most of this period, "simulcasting" would
be required, i.e., broadcasters would be required to transmit the
same programs on both the ATV and NTSC channels.
Although the 1996 Act generally does not address this transition
plan, the 1996 Act does direct the FCC -- if it issues additional
licenses for ATV -- to limit eligibility for the licenses to
existing television broadcast licensees, and adopt regulations to
permit future licensees to offer ancillary or supplementary
services on designated frequencies. These regulations, however,
must preserve ATV technology and quality and avoid derogation of
ATV services. The regulations must also apply to any ancillary
or supplementary service regulations applicable to analogous
services (except that no ancillary or supplementary service shall
have "must-carry" rights or be deemed a MVPD). Moreover, if an
ATV licensee is directly or indirectly compensated for the
provision of ancillary or supplementary services, the FCC is
directed to collect an annual fee (or some other method of
payment) that (1) recovers an amount that would have been
recovered had such services been licensed pursuant to a spectrum
auction and (2) avoids unjust enrichment. With respect to the
1992 transition plan, the 1996 Act states that if broadcasters
are issued a transition channel, either the original or
additional license held by the broadcaster must be surrendered to
the FCC for reallocation, reassignment, or both.
Recent developments may alter the FCC's 1992 transition plan. In
a 1995 further notice of proposed rulemaking, the FCC formally
has questioned all of its earlier ATV decisions except for its
prior determination to award second channels to existing
broadcasters. For example, the agency is considering a shorter
(e.g., ten year) transition period, and likely will adopt
modified simulcasting rules. The FCC also may assess fees on
broadcasters that choose to offer some multiple program SDTV or
data services on a subscription basis. In the meantime, on May
9, 1996, the FCC initiated a formal proceeding looking toward
final adoption of new technical standards that would govern ATV
service.
Recently, some members of Congress have proposed authorizing the
FCC to auction ATV channels, which would require existing
broadcasters to bid against other potential providers of ATV
service. Even if ATV channels are awarded without auction to
existing broadcasters, the implementation of ATV will impose some
near-term financial burdens on stations providing the service.
At the same time, there is potential for increased revenues from
new ATV services (although subscription services may be subject
to FCC fees). While Registrant believes the FCC will authorize
ATV, Registrant cannot predict precisely when or under what
conditions such an authorization will occur, when NTSC operations
must cease, or the overall effect the transition to ATV might
have on Registrant's business.
Summary
In summary of Registrant's liquidity status, Registrant has
$632,306 in cash and cash equivalents available for working
capital purposes. Registrant has no contractual commitment to
advance funds to any of its existing investments, other than its
obligation to fund cash shortfalls resulting from pre-sale claims
and liquidation costs related to its former investments in
IMPLP/IMPI and Intelidata.
Results of Operations.
1996 vs. 1995.
Registrant generated a net loss of approximately $7,000 in the
first quarter of 1996, which was comprised primarily of general
and administrative expenses of approximately $14,000, partially
offset by interest income of approximately $7,000.
Registrant generated net income of approximately $1.1 million in
the first quarter of 1995, which was comprised primarily of a
gain of approximately $1.7 million on the sale of radio station
WMXN-FM, partially offset by management fees of approximately
$617,000.
The decrease in net income of approximately $1.0 million from
1995 is primarily attributable to a one time gain on the sale of
radio station WMXN-FM of approximately $1.7 million during the
first quarter of 1995, which was partially offset by a decrease
in management fees of approximately $617,000. Due to insufficient
current and foreseeable liquidity, no management fees were
accrued for financial accounting purposes for the first quarter
of 1996.
PART II - OTHER INFORMATION.
Item 3. Defaults Upon Senior Securities.
The information set forth in Part I Item 1, Financial Statements
Footnote 2, Liquidity and Capital Resources appearing on pages 11
and 13 hereof and the information set forth in Part I Item 2,
Management's Discussion and Analysis of Financial Condition and
Results of Operations appearing on page 19 hereof is hereby
incorporated herein by reference and made a part hereof.
Item 6. Exhibits and Reports on Form 8-K.
A). Exhibits:
Exhibit # Description
27. Financial Data Schedule
B). Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
ML MEDIA OPPORTUNITY PARTNERS, L.P.
By: RP Opportunity Management, L.P.
General Partner
By: IMP Opportunity Management Inc.
Dated: May 15, 1996 /s/ I. Martin Pompadur
I. Martin Pompadur
Director and President
(principal executive officer
of the Registrant)
Dated: May 15, 1996 /s/ Elizabeth McNey Yates
Elizabeth McNey Yates
Executive Vice President
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
ML MEDIA OPPORTUNITY PARTNERS, L.P.
By: Media Opportunity Management Partners
General Partner
By: ML Opportunity Management Inc.
Dated: May 15, 1996 /s/ Kevin K. Albert
Kevin K. Albert
Director and President
Dated: May 15, 1996 /s/ Robert F. Aufenanger
Robert F. Aufenanger
Director and Executive Vice President
Dated: May 15, 1996 /s/ Diane T. Herte
Diane T. Herte
Treasurer
(principal accounting officer and
principal financial officer
of the Registrant)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial
information extracted from the quarter ended 1995 Form
10-Q Consolidated Balance Sheets and Consolidated
Statements of Operations as of March 31, 1996, and is
qualified in its entirety by reference to such
financial statements.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 630
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,912
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 1,233
<TOTAL-LIABILITY-AND-EQUITY> 1,912
<SALES> 0
<TOTAL-REVENUES> 7
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (6)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> 0
</TABLE>
