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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to _____________________
Commission file number 0-17507
Kagan Media Partners, L.P.
____________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 22-2931567
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(State of organization) (I.R.S. Employer
Identification No.)
126 Clock Tower Place
Carmel, California 93923
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(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (408) 624-1536
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 .
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Kagan Media Partners, L.P.
Quarterly Report on Form 10-Q for the
Quarter Ended September 30, 1995
Table of Contents
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Page
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements 2
Schedule of Investments -
September 30, 1995 (unaudited) 2
Statements of Assets and Liabilities -
September 30, 1995 and December 31, 1994
(unaudited) 4
Statements of Operations for the three
months ended September 30, 1995 and 1994
(unaudited) 5
Statement of Operations for the nine
months ended September 30, 1995 and 1994
(unaudited) 6
Statements of Cash Flows for the nine
months ended September 30, 1995 and 1994
(unaudited) 7
Statements of Changes in Net Assets for
the nine months ended September 30, 1995 and
for the year ended December 31, 1994
(unaudited) 8
Selected Per Unit Data and Ratios (unaudited) 9
Notes to Financial Statements (unaudited) 10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 13
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 6. Exhibits and Reports on Form 8-K 18
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
KAGAN MEDIA PARTNERS, L.P.
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1995
(UNAUDITED)
<TABLE>
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PRINCIPAL
AMOUNT/
TOTAL INVESTMENT AMORTIZED % OF
SHARES INVESTMENT DATE COST VALUE INVESTMENTS
- ------ ---------- ---------- --------- ----- -----------
<S> <C> <C> <C> <C> <C>
PARTICIPATING DEBT INVESTMENT
IN MANAGED COMPANY:
$6,000,000 Tele-Media Company
of Mid-America, L.P.,
14.0% Senior Subordinated
Notes due 9/30/01
(29.3% of net assets) October 1989 $6,030,857 $3,400,000 33.0%
---------- ----------
HIGH-YIELD DEBT INVESTMENT
IN MANAGED COMPANY:
$8,997,786 Vista/Narragansett Cable,
L.P., Zero Coupon Senior
Subordinated Notes due
12/31/97
(40.6% of net assets) January 1990 $7,837,257 $4,700,000 45.6%
---------- ----------
</TABLE>
The accompanying notes are an integral part
of these financial statements
2
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KAGAN MEDIA PARTNERS, L.P.
SCHEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT/
TOTAL INVESTMENT AMORTIZED % OF
SHARES INVESTMENT DATE COST VALUE INVESTMENTS
- ------ ---------- ---------- --------- ----- -----------
<S> <C> <C> <C> <C> <C>
HIGH-YIELD DEBT INVESTMENTS
IN NON-MANAGED COMPANIES:
$1,000,000 Comcast Corporation,
10.25% Senior
Subordinated Debentures
due 10/15/01 April 1992 $ 1,003,698 $ 1,062,500 10.3%
$ 790,000 Century Communications
Corporation, 11.875%
Senior Subordinated
Debentures due 10/15/03 March 1993 896,502 838,388 8.1%
----------- ----------- ----
TOTAL HIGH-YIELD DEBT
INVESTMENTS IN NON-MANAGED
COMPANIES (16.4% of net assets) 1,900,200 1,900,888 18.4%
----------- ----------- ----
EQUITY INVESTMENTS
IN NON-MANAGED COMPANIES:
8,000 sh. Tele-Communication Inc.,
Class A Common Stock(1),(2) August 1993 145,733 140,000 1.4%
2,000 sh. Tele-Communications Inc.,
Series A(1),(2)
Liberty Media Group August 1995 45,017 53,000 .5%
2,500 sh. Multimedia, Inc.,
Common Stock(2) August 1993 80,625 108,750 1.1%
----------- ----------- ---
TOTAL EQUITY INVESTMENTS
IN NON-MANAGED COMPANIES
(2.6% of net assets) 271,375 301,750 3.0%
----------- ----------- ---
TOTAL INVESTMENTS
(88.9% of net assets) $16,039,689 $10,302,638 100.0%
=========== =========== =====
</TABLE>
The accompanying notes are an integral part
of these financial statements
- ---------------
(1) In August 1995, Tele-Communications Inc. completed the equity
offering of a subsidiary, Tele-Communications Inc. Series A Liberty Media
Group. In connection with this transaction, stockholders of Tele-Communications
Inc. received one share of Tele-Communications Inc. Series A Liberty
Media Group stock for every four shares of Tele-Communications
Inc. shares owned.
(2) Non-income producing security.
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KAGAN MEDIA PARTNERS, L.P.
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS: 1995 1994
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<S> <C> <C>
Investments -
Participating debt investment in managed
company, at value (amortized cost -
$6,030,857 and $,6,033,319 respectively) $ 3,400,000 $ 4,045,000
High-yield debt investments in managed
companies, at value (amortized cost -
$7,837,257 and $7,632,076 , respectively) 4,700,000 3,550,000
High-yield debt investments in non-managed
companies, at value (amortized cost -
$1,900,200 and $1,906,954, respectively) 1,900,888 1,801,138
Equity investments in non-managed companies,
at market value (cost - $271,375) 301,750 245,250
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Total investments (notes 5 and 6) 10,302,638 9,641,388
Cash and cash equivalents 1,220,382 2,325,407
Accrued interest receivable, net 95,287 260,679
Prepaid insurance 58,078 46,021
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Total assets $11,676,385 $12,273,495
=========== ===========
COMMITMENTS AND CONTINGENCIES (notes 4,5,6)
LIABILITIES:
Accounts payable and accrued expenses 42,584 48,438
Investment advisory fees payable 25,127 23,930
Independent General Partners' fees payable 14,375 14,375
Distributions payable to partners - 957,256
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Total liabilities 82,086 1,043,999
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NET ASSETS:
Operating General Partners 630,478 626,830
Limited Partners (equivalent to $7.90
and $7.64 , respectively, per limited
partnership unit based on 1,388,473
units outstanding at each date) 10,963,821 10,602,666
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Net assets 11,594,299 11,229,496
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Total liabilities and net assets $11,676,385 $12,273,495
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these financial statements
4
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KAGAN MEDIA PARTNERS, L.P.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
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<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $ 62,965 $393,621
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Total investment income 62,965 393,621
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Expenses:
Investment advisory fees (Note 2) 25,127 23,930
Independent General Partner fees (Note 4) 18,750 18,750
Insurance expense 18,623 20,965
Professional fees 11,500 15,162
General and administrative expenses 16,593 19,135
Amortization of deferred organization expenses - 29,365
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Total expenses 90,593 127,307
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NET INVESTMENT (LOSS) INCOME (27,628) 266,314
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REALIZED AND UNREALIZED (LOSS) GAIN
ON INVESTMENTS:
Net realized gain on investments - 238,944
Net decrease in unrealized appreciation
of investments (827,682) (71,178)
--------- --------
Net (loss) gain on investments (827,682) 167,766
--------- --------
NET (DECREASE) INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $(855,310) $434,080
========= ========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
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KAGAN MEDIA PARTNERS, L.P.
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
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<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest 401,499 1,701,468
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Total investment income 401,499 1,701,468
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Expenses:
Investment advisory fees (Note 2) 75,381 71,790
Independent General Partner fees (Note 4) 56,250 56,250
Insurance expense 60,047 62,529
Professional fees 47,500 58,734
General and administrative expenses 52,803 45,583
Amortization of deferred organization expenses - 88,093
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Total expenses 291,981 382,979
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NET INVESTMENT INCOME 109,518 1,318,489
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REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments - 1,087,308
Net increase (decrease) in unrealized appreciation
of investments 255,285 (1,016,417)
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Net gain on investments 255,285 70,891
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NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $364,803 $1,389,380
======== ==========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
6
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KAGAN MEDIA PARTNERS, L.P.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase in net assets resulting from operations $ 364,803 $ 1,389,380
----------- -----------
Adjustments to reconcile net increase in net assets resulting from
operations to net cash provided by operating activities:
Amortization of discounts and premiums on investments (195,965) (269,597)
Amortization of deferred organization expenses - 88,093
Decrease (increase) in accrued interest receivable (44,608) 124,493
(Increase) in prepaid insurance (12,057) (20,320)
(Decrease) in accounts payable and accrued expenses (5,854) (3,408)
Increase in investment advisory fees payable 1,197 599
Net realized gain on investments - (1,087,308)
Net (increase) decrease in unrealized appreciation of investments
including accrued interest receivable (255,285) 1,016,417
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Total adjustments (512,572) (151,031)
------------ -----------
Net cash (used in) provided by operating activities (147,769) 1,238,349
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from repayment or disposition of investments - 14,410,834
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Net cash provided by investing activities - 14,410,834
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CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions paid to partners (957,256) (7,404,236)
------------ -----------
Net cash used in financing activities (957,256) (7,404,236)
------------ -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
(1,105,025) 8,244,947
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,325,407 800,688
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,220,382 $ 9,045,635
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
7
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KAGAN MEDIA PARTNERS, L.P.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
AND FOR THE YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
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<S> <C> <C>
Increase in net assets resulting from operations:
Net investment income $ 109,518 $ 1,434,067
Net realized gain on investments - 1,087,308
Net decrease in unrealized appreciation of investments 255,285 (1,159,242)
----------- ------------
Net increase in net assets resulting from operations 364,803 1,362,133
Distributions to partners from:
Net cash from operations - (1,262,247)
Net cash from capital transactions - (13,385,448)
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Total (decrease) in net assets 364,803 (13,285,562)
Net assets:
Beginning of period $11,229,496 24,515,058
----------- ------------
End of period, including undistributed net investment income of
$1,215,774 and $1,106,256, respectively $11,594,299 $ 11,229,496
=========== ============
</TABLE>
The accompanying notes are an integral
part of these financial statements.
8
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KAGAN MEDIA PARTNERS, L.P.
SELECTED PER UNIT DATA AND RATIOS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
---------------------- ----------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Per Unit Data:
Investment income $ .04 $ .28 $ .29 $ 1.21
Expenses .06 .09 .21 .27
---------- ---------- ---------- ----------
Net investment income (.02) .19 .08 .94
Net realized gain on investments - .17 - .77
Net decrease in unrealized appreciation of
investments (.59) (.05) .18 (.72)
Cash distributions declared to partners - (4.88)* - (9.76)*
---------- ---------- ---------- ----------
Net decrease in net asset value (.61) (4.57) .26 (8.77)
Net asset value:
Beginning of period
8.51 12.91 7.64 17.11
---------- ---------- ---------- ----------
End of period
$ 7.90 $ 8.34 $ 7.90 $ 8.34
========== ========== ========== ==========
Ratios (annualized):
Ratio of expenses to average net assets 3.01% 3.30% 3.29% 2.58%
Ratio of net investment income to average net
assets - 6.91% 1.23% 8.88%
Number of limited partnership units at end of
period 1,388,473 1,388,473 1,388,473 1,388,473
</TABLE>
- ---------------------
*Represents average distribution per Unit of investment. Distributions made in
respect of the second quarter and third quarter of 1994 were made based upon
Partners' Preferred Return Accounts in accordance with the Partnership
Agreement.
The accompanying notes are an integral part
of these financial statement
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KAGAN MEDIA PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(UNAUDITED)
1. GENERAL
The accompanying unaudited interim financial statements include all adjustments
(including normal recurring adjustments) which are, in the opinion of the
General Partners, necessary to fairly present the financial position of the
Partnership as of September 30, 1995 and the results of its operations, changes
in net assets and its cash flows for the nine months then ended.
These financial statements should be read in conjunction with the Significant
Accounting Policies and other Notes to Financial Statements included in the
Partnership's annual audited financial statements for the year ended December
31, 1994. Certain reclassifications of the 1994 comparative information have
been made in order to conform such information to the 1995 presentation.
2. INVESTMENT ADVISORY AND ANALYSIS FEES
As the Partnership's principal Investment Adviser, the Managing General Partner
is responsible for the identification of investments and all other investment
advisory services necessary for the operation of the Partnership in carrying out
its investment objectives and policies. As compensation for its services, the
Investment Adviser receives an annual investment advisory fee which initially
was $75,000, escalating by an amount equal to 5% of the prior year's annual fee
in each calendar year. The investment advisory fee to be paid for the year
ended December 31, 1995 will be $100,507. The investment advisory fee
attributable to the nine months ended September 30, 1995 of $75,381 ($25,127 for
the three months ended September 30, 1995) has been charged to operations.
The Investment Adviser also receives an investment analysis fee equal to 0.75%
of the amount invested by the Partnership in senior- participation instruments,
as consideration for structuring, due diligence and financial analysis in
connection with an investment. There were no investment analysis fees paid
during the nine months ended September 30, 1995.
3. INDEPENDENT GENERAL PARTNER FEES
As compensation for services rendered to the Partnership, each of the three
Independent General Partners receives a fee of $6,250 per quarter, plus
out-of-pocket expenses. Fees for the nine months ended September 30, 1995
totaled $56,250.
4. LITIGATION
On May 30, 1995, a class action lawsuit entitled, "In re PaineWebber
Partnership Litigation," in which the Administrative General Partner and
affiliates of the Administrative General Partner, amongst others, are
defendants, was certified by the United States District Court for the Southern
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District of New York for class action treatment of the plaintiffs' claims.
Allegations include lack of adequate disclosure in sales materials, false and
misleading representations and sales to unsuitable investors. The lawsuit
alleges the Administrative General Partner and their affiliates violated the
Racketeer Influenced and Corrupt Organizations Act and the federal securities
laws. The Plaintiffs seek unspecified damages. The General Partners believe
these actions will be resolved without material adverse effect on the
Partnership's financial statements, taken as a whole.
5. VISTA NEGOTIATIONS
As of December 31, 1994 the Vista investment was valued at $3,550,000. In late
March 1995 the Partnership was advised by the management of Vista/Narragansett
that a third party offer for purchase of the assets of Vista had been received
on March 22, 1995. The purchase price reflected in the offer is not sufficient
to repay in full the approximate $9.0 million obligation owed to the
Partnership. The Partnership agreed to accept a discount to the full obligation
if the transaction could be closed promptly and on reasonable terms. On June 14,
1995, management of Vista/Narragansett signed a letter of intent to accept the
offer and on August 8, 1995, entered into a purchase and sale agreement pursuant
to which the purchase would be consummated by December 31, 1995. Based upon the
terms of the purchase and sale agreement, if consummated, the Partnership would
be entitled to receive approximately $4,700,000 of sales proceeds. Based upon
this agreement, the Partnership has increased its carrying value in
Vista/Narragansett from $3,550,000 at December 31, 1994 to $4,700,000 at
September 30, 1995.
6. TELE-MEDIA COMPANY OF MID-AMERICA, L.P.
The Partnership holds a senior-participation instrument from Tele-Media Company
of Mid-America, L.P. ("TM-MA") which is in the form of a participating debt
investment and consists of $6 million in principal amount of senior subordinated
debt of TM-MA due September 30, 2001. The debt, which is subject to certain
prepayment provisions, bears current interest at a rate of 14% and contingent
interest to be computed under a specified formula.
As of year-end 1993, TM-MA was in default under its senior debt instruments. As
a result of this default, the senior lenders to TM- MA blocked payment to the
Partnership of the interest due on the Partnership's participating debt
investment at December 31, 1994. Consequently, the Partnership stopped accruing
interest on the notes effective October 1, 1993. $210,000 of accrued interest
receivable was refelected on the Partnership's Statement of Assets and
Liabilities at December 31, 1994.
Subsequent to September 30, 1995, negotiations for the sale of the assets of
TM-MA to an unaffiliated joint venture were completed in principle (TM-MA Sale
Agreement). Under the terms of the TM-MA Agreement, which would be scheduled to
close during the first half of 1996, the Partnership would be entitled to
receive approximately $3,400,000 for its Senior participation instrument,
which is significantly less than the principal amount of such interest held by
the Partnership. In October 1995, certain equity interests filed a lawsuit
opposing the TM-MA Sale Agreement and are seeking among other things to have a
receiver appointed to administer TM-MA's assets. The TM-MA Sale Agreement is
currently in the process of being definitively documented and is subject to
numerous conditions. There can be no assurance that the transactions
contemplated by the TM-MF Sales Agreement can be consumated on schedule or at
all. TM-MA has advised the Partnership that it believes that this lawsuit is
without merit. It is impossible to predict the outcome of any legal
proceedings and its impact on this or any proposed sale. At September 30, 1995
the Partnership recorded unrealized depreciation of its
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investment in TM-MA of $855,000, which represented (i) the difference between
the sum of the carrying value of the investment at June 30, 1995 ($4,045,000)
plus $210,000 accrued interest receivable and (ii) the estimated value of
Partnership's interests based upon the TM-MA Sale Agreement.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1995, the Partnership held one subordinated debt investment
in a managed company with an amortized cost of approximately $6 million, one
high-yield debt investment in a managed company with an amortized cost of
approximately $7.8 million, two high-yield debt investments in non-managed
companies with amortized cost of approximately $1.9 million, and equity
investments in three non-managed companies with a cost of approximately $0.3
million.
Of these investments remaining, only the high yield debt investments in
non-managed companies (Comcast Corporation and Century Communications
Corporation), which represent approximately 12% of the remaining investment
portfolio on an amortized cost basis (approximately 18% of the remaining
portfolio based upon the September 30, 1995 valuation), generate current
investment income. On an annualized basis, this income is less than the
Partnership's current level of operating costs. It is anticipated that the
Partnership will utilize cash reserves established from a portion of the
proceeds from the prepayments of investments received during 1994, to fund
operations until the liquidation of its investments (see discussion below).
Subsequent to September 30, 1995, negotiations for the sale of the assets of
TM-MA to an unaffiliated joint venture were completed in principle (TM-MA Sale
Agreement). Under the terms of the TM-MA Agreement, which would be scheduled to
close during the first half of 1996, the Partnership would be entitled to
receive approximately $3,400,000 for its Senior participation instrument,
which is significantly less than the principal amount of such interest held by
the Partnership. In October 1995, certain equity interests filed a lawsuit
opposing the TM-MA Sale Agreement and are seeking among other things to have a
receiver appointed to administer TM-MA's assets. The TM-MA Sale Agreement is
currently in the process of being definitively documented and is subject to
numerous conditions. There can be no assurance that the transactions
contemplated by the TM-MF Sale Agreement can be consumated on schedule or at
all. TM-MA has advised the Partnership that it believes that this lawsuit is
without merit. It is impossible to predict the outcome of any legal
proceedings and its impact on this or any proposed sale. At September 30, 1995
the Partnership recorded unrealized depreciation of its investment in TM-MA of
$855,000, which represented (i) the difference between the sum of the carrying
value of the investment at June 30, 1995 ($4,045,000) plus $210,000 accrued
interest receivable and (ii) the estimated value of Partnership's interests
based upon the TM-MA Sale Agreement.
As of December 31, 1994 the Vista investment was valued at $3,550,000. In late
March 1995 the Partnership was advised by the management of Vista/Narragansett
that a third party offer for purchase of the assets of Vista had been received
on March 22, 1995. The purchase price reflected in the offer is not sufficient
to repay in full the approximate $9.0 million obligation owed to the
Partnership. The Partnership agreed to accept a discount to the full obligation
if the transaction could be closed promptly and on reasonable terms. On June 14,
1995, management of Vista/Narragansett signed a letter of intent to accept the
offer, and on August 8, 1995, entered into a purchase and sale agreement
pursuant to which the purchase would be consummated no later than December 31,
1995. Based upon the terms of the purchase and sale agreement, if consummated,
the Partnership would be entitled to receive approximately $4,700,000 of sales
proceeds. Based upon this agreement, the Partnership increased its carrying
value in
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<PAGE> 15
Vista/Narragansett from $3,550,000 at December 31, 1994 to $4,700,000 at
September 30, 1995. It is anticipated that the proceeds generated by the
aforementioned sales, if consummated, would be distributed to partners.
It is anticipated that the Partnership will not make any additional investments
other than temporary investments of its working capital in short term U.S.
government securities. At September 30, 1995, the Partnership's cash of
$1,220,382 was primarily invested in government securities. This cash amount
was $1,105,025 less than the balance at December 31, 1994 due to the cash
distribution paid to partners on February 15, 1995 as well as cash used in
operating activities. Accrued interest receivable decreased $165,392 from
$260,679 at December 31, 1994 to $95,287 at September 30, 1995. The reason for
this decrease is the unrealized loss recognized with respect to the $210,000
of accrued interest relating to the TM-MA notes based upon the current
valuation of TM-MA partially offset by the buildup of accrued interest on the
Comcast and Century notes which is paid semi-annually in April and October.
Litigation
Information on a class action entitled, "In re PaineWebber Partnership
Litigation," was contained in the Partnership's prior reports. On May 30, 1995,
the court certified class action treatment of the plaintiffs' claims.
RESULTS OF OPERATIONS
Investment Income and Expenses
The Partnership's investment income consists primarily of interest income earned
from the various debt investments which are held by the Partnership. Major
expenses consist of professional fees, the amortization of the deferred
organization expenses (which is a non-cash expense), the investment advisory fee
and Independent General Partners' fees. Professional fees consist of custodial
(which is included in general and administrative expenses), legal and audit
fees.
1995 Compared to 1994
The Partnership's net investment (loss) or income was ($27,628) and $109,518 for
the quarter and nine months ended September 30, 1995 (the "1995 Quarter and 1995
Period") as compared to net investment income of $266,314 and $1,318,489 for the
quarter and nine months ended September 30, 1994 (the "1994 Quarter" and "1994
Period"). The principal reasons for the decrease in net investment income was
the repayment of the TeleMedia Broadcasting notes in June 1994, the Cablevision
prepayment in early September 1994 and the subsequent distribution to partners
of a substantial portion of the proceeds. Both of these investments generated
investment income during 1994. Additionally, the Partnership did not recognize
any accretion of the Vista notes in the 1995 Quarter. The value of the Vista
investment had been established in the second quarter of 1995 based upon the
proposed sale discussed above.
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<PAGE> 16
Total expenses decreased $36,714 and $90,998 or 29% and 24%, respectively for
the 1995 Quarter and 1995 Period as compared to the 1994 Quarter and 1994
Period. This overall decrease was primarily the result of the absence of the
amortization of deferred organization expenses, which were fully amortized by
the fourth quarter of 1994. This decrease was partially offset in the 1995
Period as compared to the 1994 Period by an increase in general and
administrative expenses and by the annual increase in investment advisory fees
based upon the Partnership Agreement.
Net Unrealized Appreciation (Depreciation) of Investments
The Kagan Executive Committee values the Partnership's investments on a
quarterly basis utilizing a variety of methods. Securities that are publicly
traded and for which market quotations are readily available, are valued based
on the highest bid price for such securities as of the last trading day of the
fiscal quarter.
In accordance with portfolio valuation guidelines ("Guidelines") adopted by the
General Partners, investments for which market quotations are not readily
available are valued at cost (the "Cost Method") unless the Kagan Executive
Committee determines that significant events have occurred with respect to such
investments which necessitate the use of an alternate valuation methodology.
The Managing General Partner is responsible for applying the Guidelines and
performing the due diligence necessary to determine whether such significant
events have occurred and for presenting to the Kagan Executive Committee its
conclusion as to whether the use of the Cost Method is appropriate with respect
to any particular investment. The Kagan Executive Committee then determines
whether to continue to use the Cost Method for each investment or whether to use
an alternate valuation methodology. If the Kagan Executive Committee determines
that the use of the Cost Method is not appropriate for a particular investment,
then the Managing General Partner is required to propose an alternate valuation
methodology and, based upon its analysis, is required to determine the market
value of the investment. The Managing General Partner is required to present to
the General Partners its conclusions as to the fair market value for the
investment in question and the General Partners are then responsible for
determining the fair market value for that investment in good faith.
As of December 31, 1994, the Partnership had recorded net unrealized
depreciation of investments of $6,202,336. During the nine months ended
September 30, 1995, the Partnership recorded net additional unrealized
appreciation of $255,285 ($827,682 of unrealized depreciation during the quarter
ended September 30, 1995). At September 30, 1995, the Partnership had recorded
aggregate net unrealized depreciation of investments of $5,947,051.
The decrease in unrealized depreciation of investments during the quarter and
nine months ended September 30, 1995 and the cumulative unrealized depreciation
of investments as of September 30, 1995, consisted of the following components:
15
<PAGE> 17
<TABLE>
<CAPTION>
UNREALIZED APPRECIATION/(DEPRECIATION) RECORDED
DURING THREE DURING THE CUMULATIVE
MONTHS ENDED NINE MONTHS ENDED AS OF
INVESTMENT SEPTEMBER 30, 1995 SEPTEMBER 30, 1995 SEPTEMBER 30, 1995
---------- ------------------ ------------------ ------------------
<S> <C> <C> <C>
Tele-Media Mid-America (1)
Notes (TM-MA) $(854,161) $(852,538) $(2,840,857)
Vista notes - 944,819 (3,137,257)
Comcast debentures 5,110 80,321 58,802
Century Communications
debentures 3,182 26,183 (58,114)
Tele-Communications Inc.
Tele-Communications Inc. Class A 1,983 11,017 (5,733)
Series A Liberty Media Group 7,983 7,983 7,983
Multimedia stock 12,187 37,500 28,125
--------- --------- -----------
$(827,682) $ 255,285 $(5,947,051)
========= ========= ==========
</TABLE>
(1) Includes related accrued interest of $210,000.
The overall decreases in value of the TM-MA and Vista investments since their
acquisition, for which market quotations are not readily available, reflect
the impact of the uncertainties created by the Cable Act of 1992 on the value
of smaller cable systems and the continuing difficulties that smaller cable
operators are experiencing in financing their operations. (See the
discussion of Vista third party offer and the TM-MA third party offer.)
Current legislation proposed in the U.S. House of Representatives would open
telephone and cable companies to competition. Such deregulation, if passed,
could significantly impact the cable industry. However, based upon the current
composition of the Partnerships' portfolio (which includes one investment
(Vista/Narragansett) for which a purchase and sale agreement has been
executed (see prior discussion) and the fact that the Partnership is no longer
making additional investments, the effect of any proposed legislation, if
passed, is not expected to be material.
The Comcast, Century Communications, Tele-Communications and Multimedia
investments were valued based on market quotations which are readily available
for these securities. These changes in value are reflective of changes in the
public markets for cable related debt and equity securities during these
periods.
16
<PAGE> 18
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Information on a class action entitled, "In re PaineWebber Partnership
Litigation," was contained in the Partnership's prior reports. On May 30, 1995,
the court certified class action treatment of the plaintiffs' claims.
17
<PAGE> 19
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits and Reports to be filed:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
11.1 Statement of Computation of Net Investment Income
Per Limited Partnership Unit.
20.1 Report Furnished to Securities Holders.
</TABLE>
18
<PAGE> 20
SIGNATURE
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.
Kagan Media Partners, L.P.
(Registrant)
By: Mezzanine Capital Corporation
A General Partner
Dated: November 10, 1995 By: /s/ Joseph P. Ciavarella
------------------------
Joseph P. Ciavarella
Vice President, Secretary
and Chief Financial and
Accounting Officer
19
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
11.1 Statement of Computation of Net Investment Income Per Limited
Partnership Unit.
20.1 Report Furnished to Securities Holders.
</TABLE>
21
<PAGE> 1
KAGAN MEDIA PARTNERS, L.P.
STATEMENT OF COMPUTATION OF NET
INVESTMENT (LOSS) INCOME PER LIMITED
PARTNERSHIP UNIT
<TABLE>
<CAPTION>
For the Three Months For the Nine months
Ended September 30, Ended September 30,
------------------- -------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Investment (Loss) Income $ (27,628) $ 266,314 $ 109,518 $1,318,489
Percentage Allocable to Limited
Partners 99% 99% 99% 99%
---------- --------- --------- ----------
Net Investment (Loss) Income Allocable
to Limited Partners (27,352) 263,651 108,423 1,305,304
Weighted Average Number of Limited
Partnership Units Outstanding 1,388,473 1,388,473 1,388,473 1,388,473
========== ========== ========= ==========
Net Investment (Loss) Income Per Limited
Partnership Unit $ (.02) $ .19 $ .08 $ .94
========== ========== ========= ==========
</TABLE>
23
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 1220382
<SECURITIES> 0
<RECEIVABLES> 95287
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 11676385
<CURRENT-LIABILITIES> 82086
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 11676385
<SALES> 0
<TOTAL-REVENUES> 401499
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 291981
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 109518
<INCOME-TAX> 0
<INCOME-CONTINUING> 109518
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
