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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended March 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number 0-17507
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Kagan Media Partners, L.P.
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(Exact name of registrant as specified in its charter)
Delaware 22-2931567
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(State of organization) (IRS 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 MARCH 31, 1996
TABLE OF CONTENTS
<TABLE>
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Page
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements 2
Schedule of Investments -
March 31, 1996 (unaudited) 2
Statements of Assets and Liabilities -
March 31, 1996 and December 31, 1995
(unaudited) 4
Statements of Operations for the three
months ended March 31, 1996 and 1995
(unaudited) 5
Statements of Cash Flows for the nine
months ended March 31, 1996 and 1995
(unaudited) 6
Statements of Changes in Net Assets for the three
months ended March 31, 1996 and for the year ended
December 31, 1995
(unaudited) 7
Selected Per Unit Data and Ratios (unaudited) 8
Notes to Financial Statements (unaudited) 9
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 13
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 17
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
KAGAN MEDIA PARTNERS, L.P.
SCHEDULE OF INVESTMENTS
MARCH 31, 1996
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(UNAUDITED)
<TABLE>
<CAPTION>
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(1)
October 1989 $6,029,177 $3,400,000 61.7%
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TOTAL PARTICIPATING DEBT
INVESTMENT IN MANAGED
COMPANY (50.5 % of net assets) 6,029,177 3,400,000 61.7%
---------- ---------- ----
</TABLE>
The accompanying notes are an integral part
of these financial statements
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(1) The notes also bear contingent and/or participating interest to be computed
under specified formulas. The accrual of interest on these notes was
discontinued by the Partnership effective October 1, 1993.
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KAGAN MEDIA PARTNERS, L.P.
SCHEDULE OF INVESTMENTS (CONTINUED)
MARCH 31, 1996
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(UNAUDITED)
<TABLE>
<CAPTION>
Principal
Amount/ Investment Amortized % of Total
Shares Investment Date Cost Value Investments
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<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 1,003,470 1,055,000 19.2%
$ 790,000 Century Communications
Corporation , 11.875%
Senior Subordinated
Debentures Due 10/15/03 March 1993 891,955 851,225 15.5%
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TOTAL HIGH-YIELD DEBT
INVESTMENTS IN NON-MANAGED
COMPANIES (28.3% of net assets) 1,895,425 1,906,225 34.7%
----------- ----------- ------
EQUITY INVESTMENTS
IN NON-MANAGED COMPANIES:
8,00 sh.. Tele-Communications, Inc.,
Class A Common Stock* August 1993 145,733 148,000 2.7%
2,000 sh. Tele-Communications, Inc.,
New Liberty Media Group Series A
Class A Common Stock* August 1995 45,017 52,250 .9%
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TOTAL EQUITY INVESTMENTS
IN NON-MANAGED COMPANIES
(3.0% of net assets) 190,750 200,250 3.6%
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TOTAL INVESTMENTS (81.8%
of net assets) $8,115,352 $5,506,475 100.0%
========== ========== ======
</TABLE>
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*Non-income producing security.
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KAGAN MEDIA PARTNERS, L.P.
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 1996 AND DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS: 1996 1995
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<S> <C> <C>
Investments -
Participating debt investment in managed
company, at value (amortized cost -
$6,029,177 and $6,030,073, respectively) $3,400,000 $ 3,400,000
High-yield debt investments in non-managed
companies, at value (amortized cost -
$1,895,425 and $1,897,840, respectively) 1,906,225 1,927,275
Equity investments in non-managed companies,
at market value (cost - $190,750) 200,250 212,500
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Total investments 5,506,475 5,539,775
Cash and cash equivalents 1,201,479 6,144,423
Accrued interest receivable 94,952 46,709
Prepaid insurance 21,512 39,795
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Total assets $6,824,418 $11,770,702
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LIABILITIES:
Accounts payable and accrued expenses $ 38,995 $ 45,698
Investment advisory fees payable 26,383 25,126
Independent General Partners' fees payable 14,375 14,375
Distributions payable to partners 14,726 4,908,743
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Total liabilities 94,479 4,993,942
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NET ASSETS:
Operating General Partners 581,835 582,303
Limited Partners (equivalent to $4.43
and $4.46, respectively, per limited
partnership unit based on 1,388,473
units outstanding) 6,148,104 6,194,457
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Net assets 6,729,939 6,776,760
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Total liabilities and net assets $6,824,418 $11,770,702
========== ===========
</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 THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
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<CAPTION>
1996 1995
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INVESTMENT INCOME:
Income:
Interest, net $ 91,492 $171,882
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Total investment income 91,492 171,882
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Expenses:
Investment advisory fees (Note 2) 26,383 25,127
Independent General Partner fees (Note 4) 18,750 18,750
Insurance expense 18,283 20,712
Professional fees 24,000 26,000
General and administrative expenses 20,908 16,413
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Total expenses 108,324 107,002
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NET INVESTMENT (LOSS) INCOME (16,832) 64,880
UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net (increase) decrease in unrealized depreciation
of investments (29,989) 822,001
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NET (DECREASE) INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ (46,821) $886,881
========= ========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
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KAGAN MEDIA PARTNERS, L.P.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (decrease) increase in net assets resulting from operations $ (46,821) $ 886,881
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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 3,311 (98,936)
Increase in accrued interest receivable (48,243) (46,298)
Decrease in prepaid insurance 18,283 20,712
(Decrease) increase in accounts payable and accrued expenses (6,703) 17,140
Increase in investment advisory fees payable 1,257 1,197
Net increase (decrease) in unrealized depreciation of investments 29,989 (822,001)
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Total adjustments (2,106) (928,186)
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Net cash used in operating activities (48,927) (41,305)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions paid to partners (4,894,017) (957,256)
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Net cash used in financing activities (4,894,017) (957,256)
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NET DECREASE IN CASH AND CASH EQUIVALENTS (4,942,944) (998,561)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,144,423 2,325,407
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,201,479 $ 1,326,846
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</TABLE>
The accompanying notes are an integral part
of these financial statements.
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KAGAN MEDIA PARTNERS, L.P.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
AND FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
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<S> <C> <C>
(Decrease) increase in net assets resulting from operations:
Net investment loss income $ (16,832) $ 68,818
Net realized loss on investments -- (3,236,259)
Net (increase) decrease in unrealized depreciation of investments (29,989) 3,623,448
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Net (decrease) increase in net assets resulting from
operations (46,821) 456,007
Distributions to partners from:
Net cash from operations -- (899,961)
Net cash from capital transactions -- (4,008,782)
Total decrease in net assets (46,821) (4,452,736)
Net assets:
Beginning of period 6,776,760 11,229,496
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End of period, including undistributed net investment
income of $220,101 and $236,933, respectively $ 6,729,939 $ 6,776,760
=========== ============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
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KAGAN MEDIA PARTNERS, L.P.
SELECTED PER UNIT DATA AND RATIOS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
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1996 1995
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Per Unit Data:
Investment income $ .07 $ .12
Expenses (.08) (.08)
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Net investment (loss) income (.01) .04
Net (increase) decrease in unrealized
depreciation of investments (.02) .59
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Net (decrease) increase in net asset value (.03) .63
Net asset value at beginning of period 4.46 7.64
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Net asset value at end of period $ 4.43 $ 8.27
========== ==========
Ratios (annualized):
Ratio of expenses to average net assets 6.42% 3.67%
Ratio of net investment income to average net
assets -- (1) 5.89%
Number of limited partnership units at end of
period 1,388,473 1,388,473
</TABLE>
(1) Net investment loss was reported for the period.
The accompanying notes are an integral part
of these financial statement
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KAGAN MEDIA PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(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 March 31, 1996 and the results of its operations, changes in
net assets and its cash flows for the three 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, 1995.
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, 1996 will be $105,532. The investment advisory fee attributable to
the three months ended March 31, 1996 of $26,383 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 three months ended March 31, 1996.
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 three months ended March 31, 1996 totaled
$18,750.
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4. VISTA/NARRAGANSETT SALE
In January 1990, the Partnership acquired $6,800,000, 15.5% Senior
Subordinated Notes (the "Notes") of Vista/Narragansett Cable, L.P.
("Vista/Narragansett") due January 8, 1995. Under the terms of the Notes,
interest at the rate of 12.75% per annum was payable currently with the balance
of interest (2.75% per annum) added to the principal balance of the Notes. On
May 1, 1991, Vista/Narragansett ceased making interest payments. A restructuring
agreement of Vista/Narragansett's capital structure was reached during 1992 and
was executed in March 1993.
Under the restructuring, the Partnership agreed to defer interest accrued but
uncollected as of September 30, 1992 in the amount of $2,247,786 and agreed to
cease accruing interest on the Notes subsequent to September 30, 1992.
The Partnership restated the Notes in the form of a non-interest bearing note
in the principal amount of $9,047,786, which represented the original principal
plus the interest accrued through September 30, 1992. In 1994, the Partnership
received $50,000 which was treated as a reduction in principal. The Notes were
to be paid only out of proceeds of the sale of Vista/Narragansett's cable
systems. Any sale by Vista/Narragansett required the approval of the
Partnership.
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/Narragansett had been received on March 22, 1995. The Partnership agreed
to allow management of Vista/Narragansett to pursue the offer. 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. On December
29, 1995, the sale of the assets of Vista/Narragansett was consummated. The
Partnership received proceeds of $4,778,499 as its share of the distributed
proceeds from the sale. In addition, the Partnership will receive a portion of
any amounts remaining in a $400,000 escrow account established by
Vista/Narragansett at closing to provide collateral to the buyer in respect of
Vista/Narragansett's compliance with its representation and warranties. This
escrow account will not be terminated until December 1996. The Partnership has
released Vista/Narragansett from all of its financial obligations under the
Notes. The Notes, which had an amortized cost of $7,837,257, were valued at
$4,700,000 at September 30, 1995, which represented approximately 46% of the
investments held by the Partnership based upon the valuation at such date.
The proceeds received from the Vista/Narragansett sale represented
substantially all of the distributions declared to partners at December 31,
1995 and paid in February 1996.
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5. TM-MA INVESTMENT
The Partnership holds a senior-participation instrument from Tele-Media
Company of Mid-America, L.P. ("TM-MA") that 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 December 31, 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, 1993. Consequently, the
Partnership stopped accruing interest on the notes, effective October 1, 1993. A
balance of $210,000 remained outstanding at such date.
In the fourth quarter of 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 Sale Agreement, the Partnership would
be entitled receive approximately $3,400,000 for its senior participation
instrument, which is significantly less than the principal amount of such
instrument. As of February 29, 1996, the TM-MA Sale Agreement was amended.
Pursuant to this amendment, the closing under the agreement may occur as late as
September 30, 1996. The TM-MA Sale Agreement is subject to numerous conditions.
In addition, Phoenix Leasing Corporation, a subordinated lender that owns a
subordinated note similar to the Partnership's senior participation instrument,
has commenced suit against TM-MA to collect the obligations owed by TM-MA to
Phoenix Leasing Corporation. It is impossible to predict the outcome of any
legal proceedings and its impact on this or any proposed sale. In light of the
foregoing, there can be no assurance that the transaction contemplated by the
TM-MA Sale Agreement can be consummated on schedule or at all. 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. TM-MA has advised the Partnership that it believes that this
lawsuit is without merit. TM-MA is attempting to negotiate a resolution with the
equity interests, and, absent a successful resolution, TM-MA has advised the
Partnership that it is prepared to make a prepackaged filing under Chapter 11 of
the U.S. Bankruptcy Code to facilitate the timely consummation of the TM-MA Sale
Agreement. During 1995, the Partnership recorded unrealized depreciation of its
investment in TM-MA of $641,754, which represented the difference between the
sum of the carrying value of the investment ($4,045,000), adjusted for
amortization and the estimated value of the Partnership's interests based upon
the TM-MA Sale Agreement. In addition, the Partnership realized a loss of
$210,000 to recognize the write-off of the interest receivable previously
accrued.
6. LITIGATION
In November 1994, a series of purported class actions (the "New York Limited
Partnership Actions") were filed in the United States District Court for the
Southern District
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of New York concerning PaineWebber Incorporated sale and sponsorship of various
limited partnership investments, including those offered by the Partnership. The
lawsuits were brought against PaineWebber Incorporated and Paine Webber Group,
Inc. (together, "PaineWebber"), among others, by allegedly dissatisfied
partnership investors. In March 1995, after the actions were consolidated under
the title In re: PaineWebber Limited Partnerships Litigation, the plaintiffs
amended their complaint to assert claims against a variety of other defendants,
including Mezzanine Capital Corp., an affiliate of PaineWebber and the
Administrative General Partner in the Partnership ("Administrative General
Partner").
The amended complaint in the New York Limited Partnership Actions alleged
that, in connection with the sale of interests in the Partnership, PaineWebber
and the Administrative General Partners (1) failed to provide adequate
disclosure of the risks involved with each partnership; (2) made false and
misleading representations about the safety of the investments and the
partnership's anticipated performance; and (3) marketed the partnerships to
investors for whom such investments were not suitable. The plaintiffs also
alleged that following the sale of the partnership investments PaineWebber and
the Administrative General Partner misrepresented financial information about
the partnership's value and performance. The amended complaint alleged that
PaineWebber and the Administrative General Partner violated the Racketeer
Influenced and Corrupt Organizations Act ("RICO") and the federal securities
laws. The plaintiffs sought unspecified damages, including reimbursement for all
sums invested by them in the partnerships, as well as disgorgement of all fees
and other income derived by PaineWebber from the limited partnerships. In
addition, the plaintiffs also sought treble damages under RICO.
On May 30, 1995, the US District Court certified class action treatment of
the plaintiffs' claims in the class action entitled, In re: PaineWebber Limited
Partnerships Litigation.
In January 1996, PaineWebber signed a memorandum of understanding with the
plaintiffs in the class action outlining the terms under which the parties have
agreed to settle the case. Pursuant to that memorandum of understanding,
PaineWebber irrevocably deposited $125 million into an escrow fund under the
supervision of the United States District Court for the Southern District of New
York to be used to resolve the litigation in accordance with a definitive
settlement agreement and plan of allocation which the parties expect to submit
to the court for its consideration and approval within the next several months.
Until a definitive settlement and plan of allocation is approved by the court,
there can be no assurance what, if any, payment or non-monetary benefits will be
made available to unitholders in the Partnership.
In February 1996, approximately 150 plaintiffs filed an action entitled
Abbate v. PaineWebber Inc. in Sacramento, California Superior Court against
PaineWebber Incorporated and various affiliated entities concerning the
plaintiff's purchases of various limited partnership interests. The complaint
alleges, among other things, that PaineWebber and its related entities committed
fraud and misrepresentation and breached fiduciary duties allegedly owed to the
plaintiffs by selling or promoting limited partnership investments that were
unsuitable for the plaintiffs and by overstating the benefits, understating the
risks and
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failing to state material facts concerning the investments. The complaint seeks
compensatory damages of $15 million plus punitive damages.
Under certain limited circumstances, pursuant to the Partnership Agreement
and other contractual obligations, PaineWebber and its affiliates, including the
Administrative General Partner, could be entitled to indemnification from the
Partnership for expenses and liabilities in connection with these cases. The
General Partners are unable to determine the impact of these actions on the
Partnership's financial statements, taken as a whole.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1996, the Partnership held one subordinated debt investment in a
managed company with an amortized cost of approximately $6 million, two
high-yield debt investments in non-managed companies with amortized cost of
approximately $1.9 million, and equity investments in two non-managed companies
with a cost of approximately $0.2 million.
Of these investments remaining, only the high yield debt investments in
non-managed companies (Comcast Corporation and Century Communications
Corporation), which represent approximately 23% of the remaining investment
portfolio on an amortized cost basis (approximately 35% of the remaining
portfolio based upon the March 31, 1996 valuation), generate current investment
income. On an annualized basis, this income is less than the Partnership's
current level of operating costs.
At March 31, 1996, the Partnership's cash of $1,201,479 was primarily
invested in short-term US Government Securities. Accrued interest receivable
increased $48,243 from $46,709 at December 31, 1995 to $94,952 at March 31,
1996. This increase was due to the timing of the semi-annual interest payments
(paid in April 1996) relating to the Comcast Corp. and Century Communication
high yield debt investments held by the Partnership.
The Partnership will not make any additional investments other than temporary
investments of its working capital in short term US government securities. The
General Partners believe that the working capital reserves, together with the
interest income currently being generated, are sufficient to fund operating
expenses for the foreseeable future.
While the Partnership must be terminated no later than July 21, 2001 (subject
to the approval of a majority of the Limited Partners' interests, if such
approval is required under the Investment Company Act of 1940), it was
originally anticipated that the Partnership would be liquidated in 1998 or 1999.
In December 1995, the Partnership liquidated its investments in
Vista/Narragansett Cable, L.P. and Multimedia, Inc. The amounts received
composed substantially all of the distribution declared at December 31, 1995,
which was paid
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in February 1996. Additionally, Tele-Media Company of Mid America, L.P. entered
into an agreement for the sale of its assets to a third party, which if
consummated, would accelerate the liquidation of the Partnership's interests.
The Partnership holds a senior-participation instrument from Tele-Media
Company of Mid-America, L.P. ("TM-MA") that 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, 1993. Consequently, the Partnership stopped accruing
interest on the notes, effective October 1, 1993. $210,000 of accrued interest
receivable was reflected on the Partnership's Statement of Assets and Liability
at December 31, 1994.
In the fourth quarter of 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 Sale Agreement, the Partnership would
be entitled receive approximately $3,400,000 for its senior participation
instrument, which is significantly less than the principal amount of such
instrument. As of February 29, 1996, the TM-MA Sale Agreement was amended.
Pursuant to this amendment, the closing under the agreement may occur as late as
September 30, 1996. The TM-MA Sale Agreement is subject to numerous conditions.
There can be no assurance that the transaction contemplated by the TM-MA Sale
Agreement can be consummated on schedule or at all. 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. TM-MA has advised the Partnership that it believes that this lawsuit is
without merit. TM-MA is attempting to negotiate a resolution with the equity
interests, and, absent a successful resolution, TM-MA has advised the
Partnership that it is prepared to make a prepackaged filing under Chapter 11 of
the U.S. Bankruptcy Code to facilitate the timely consummation of the TM-MA Sale
Agreement. In addition, Phoenix Leasing Corporation, a subordinated lender that
owns a subordinated note similar to the Partnership's senior participation
instrument, has commenced suit against TM-MA to collect the obligations owed by
TM-MA to Phoenix Leasing Corporation. It is impossible to predict the outcome of
any legal proceedings and its impact on this or any proposed sale. During 1995,
the Partnership recorded unrealized depreciation of its investment in TM-MA of
$641,754, which represented the difference between the sum of the carrying value
of the investment ($4,045,000), adjusted for amortization and the estimated
value of the Partnership's interests based upon the TM-MA Sale Agreement
($3,400,000). In addition, the Partnership realized a loss of $210,000 to
recognize the write-off of the interest receivable previously accrued.
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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,
legal and audit fees.
1996 Compared to 1995
The Partnership's net investment (loss) income was $(16,832) for the quarter
ended March 31, 1996 (the "1996 Quarter") as compared to net investment income
of $64,880 for the quarter ended March 31, 1995 (the "1995 Quarter"). Interest
Income was $91,492 in the 1996 Quarter as compared to $171,882 in the 1995
Quarter. The principal reason for the difference in net investment income and
interest income was the accretion of interest income relating to the
Vista/Narragansett investment in the 1995 Quarter. The investment was liquidated
in December 1995 and thus no accretion was recognized in the 1996 Quarter.
Total expenses increased $1,322, or 1%, for the 1996 Quarter as compared to the
1995 Quarter which was consistent with the Partnership's level of operations.
Net Unrealized Appreciation 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
16
<PAGE> 17
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, 1995, the Partnership had recorded net unrealized
depreciation of $2,578,888. During the three months ended March 31, 1996, the
Partnership recorded net additional unrealized depreciation of $29,989.
Therefore, at March 31, 1996, the Partnership had recorded aggregate net
unrealized depreciation of investments of $2,608,877.
The increase in unrealized depreciation of investments during the three months
ended March 31, 1996 and the cumulative unrealized depreciation of investments
as of March 31, 1996, consisted of the following components:
UNREALIZED APPRECIATION / (DEPRECIATION) RECORDED
<TABLE>
<CAPTION>
DURING THREE CUMULATIVE
MONTHS ENDED AS OF
INVESTMENT MARCH 31, 1996 MARCH 31, 1996
---------- -------------- --------------
<S> <C> <C>
Tele-Media Mid-America Notes $ 896 $(2,629,177)
Comcast debentures (24,885) 51,530
Century Communications debentures 6,250 (40,730)
Tele-Communications, Inc. stock (11,000) 2,267
Tele-Communication, Inc., New Liberty Media
Group Series A common stock (1,250) 7,233
----------- -----------
$ (29,989) $(2,608,877)
=========== ===========
</TABLE>
The significant decrease in value of the Tele-Media Mid-America investment,
since its acquisition, (for which market quotations are not readily available)
reflects the value inherent in the Partnership's position based on the third
party offer embodied in the TM-MA Agreement.
The Comcast, Century Communications, Tele-Communications, Inc. and
Tele-Communications, Inc. New Liberty Medial Group Series A 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.
17
<PAGE> 18
PART II. OTHER INFORMATION
Item 1. Legal Proceeds
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits and Reports to be filed:
Exhibit No. Description
----------- -----------
11.1 Statement of Computation of Net
Investment Income Per Limited
Partnership Unit.
20.1 Report Furnished to Securities
Holders.
(b) The Partnership filed a report on Form 8K dated
February 29, 1996, to report December 31, 1995 limited
partner Unit value.
18
<PAGE> 19
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: May 10, 1996 By: /s/ Joseph P. Ciavarella
------------------------
Joseph P. Ciavarella
Vice President, Secretary
and Chief Financial and
Accounting Officer
19
<PAGE> 20
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
11.1 Statement of Computation of Net Investment Income
Per Limited Partnership Unit.
20.1 Report Furnished to Securities Holders.
27 Financial Data Schedule
21
<PAGE> 1
EXHIBIT NO. 11.1
STATEMENT OF COMPUTATION
OF NET INVESTMENT (LOSS) INCOME
PER LIMITED PARTNERSHIP UNIT
22
<PAGE> 2
KAGAN MEDIA PARTNERS, L.P.
STATEMENT OF COMPUTATION OF NET INVESTMENT
(LOSS) INCOME PER LIMITED PARTNERSHIP UNIT
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31, 1995
1996 1995
---- ----
<S> <C> <C>
Net Investment (Loss) Income $ (16,832) $ 64,880
Percentage Allocable to Limited Partners 99% 99%
----------- ----------
Net Investment (Loss) Income Allocable to Limited Partners $ (16,664) $ 64,231
=========== ==========
Weighted Average Number of Limited Partnership Units Outstanding 1,388,473 1,388,473
=========== ==========
Net Investment (Loss) Income Per Limited Partnership Unit
$ (.01) $ .05
=========== ==========
</TABLE>
23
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from (a) Kagan
Media Partners LP March 31, 1996 10-Q and is qualified in its entirety by
reference to such (b) Form 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,201,479
<SECURITIES> 0
<RECEIVABLES> 94,952
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,317,943
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,824,418
<CURRENT-LIABILITIES> 94,479
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 6,729,939
<TOTAL-LIABILITY-AND-EQUITY> 6,824,418
<SALES> 0
<TOTAL-REVENUES> 91,492
<CGS> 0
<TOTAL-COSTS> 108,324
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (46,821)
<INCOME-TAX> 0
<INCOME-CONTINUING> (46,821)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (46,821)
<EPS-PRIMARY> 0<F1>
<EPS-DILUTED> 0
<FN>
<F1>.03 reduction in NAV per unit of limited paternership interest.
<F2>Partnership capital plus accumulated earnings of distributions.
</FN>
</TABLE>
