<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
FORM 10-Q
-------------
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended September 30, 1997
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: 333-03741
333-03741-01
MUZAK LIMITED PARTNERSHIP
MUZAK CAPITAL CORPORATION
(EXACT NAME OF REGISTRANTS AS SPECIFIED IN THEIR CHARTER)
DELAWARE 13-3647593
DELAWARE 91-1722302
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
2901 THIRD AVE., SUITE 400
SEATTLE, WA 98121
(206) 633-3000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE
OF REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
N/A
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
Indicate by check mark whether the registrants: (1) have 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
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes /x/ No / /
Muzak Capital Corporation meets the conditions set forth in General Instruction
H (1) (a) and (b) of Form 10-Q and is therefore filing this form with the
reduced disclosure format.
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrants have filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes / / No / /
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, at November 14,
1997: Muzak Capital Corporation - 100.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MUZAK LIMITED PARTNERSHIP
Consolidated Balance Sheet
(In thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................ $ 17,079 $ 25,686
Accounts receivable, net of allowance for doubtful
accounts of $470 and $496........................... 15,950 15,600
Inventories, net of reserve for obsolescence
of $350 and $0...................................... 3,286 3,722
Prepaid expenses..................................... 1,387 1,607
Other................................................ 904 351
------------- ------------
Total current assets............................... 38,606 46,966
Property and equipment, net........................... 38,045 37,182
Deferred costs and intangible assets, net............. 32,377 33,765
Other................................................. 2,215 1,129
------------- ------------
Total assets........................................ $ 111,243 $ 119,042
------------- ------------
------------- ------------
LIABILITIES AND PARTNERS' DEFICIT
Current Liabilities:
Accounts payable..................................... $ 7,543 $ 8,681
Advance billings..................................... 4,928 4,688
Accrued interest..................................... 5,000 2,500
Accrued expenses..................................... 3,507 2,423
Current portion of long-term obligations............. 469 482
Current portion of equity repurchase obligations..... 500 -
------------- ------------
Total current liabilities........................... 21,947 18,774
Long-term obligations, net of current portion......... 100,756 100,620
Unearned installation income.......................... 4,054 3,637
Commitments and contingencies......................... - -
Redeemable preferred partnership interests............ 6,390 6,091
Equity repurchase obligations, net of current portion. 737 -
Partners' Deficit:
Limited partners' interests (deficiencies)........... (2,195) 2,170
General partner's deficiencies....................... (20,446) (12,250)
------------- ------------
Total partners' deficit............................. (22,641) (10,080)
------------- ------------
Total liabilities and partners' deficit............. $ 111,243 $ 119,042
------------- ------------
------------- ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
MUZAK LIMITED PARTNERSHIP
Consolidated Statement of Operations
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -------------------
1997 1996 1997 1996
------- -------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
Music and other business services...................... $14,737 $13,619 $43,515 $40,596
Equipment and related services......................... 8,496 8,785 23,583 23,965
------- -------- ------- -------
Total revenues........................................ 23,233 22,404 67,098 64,561
------- -------- ------- -------
Cost of revenues:
Music and other business services...................... 4,954 3,792 13,575 11,293
Equipment and related services......................... 6,110 5,789 16,076 16,093
------- -------- ------- -------
Total cost of revenues................................ 11,064 9,581 29,651 27,386
------- -------- ------- -------
Gross profit............................................ 12,169 12,823 37,447 37,175
Selling, general and administrative expenses............ 7,812 7,645 24,425 22,752
Depreciation............................................ 2,687 2,677 8,491 7,832
Amortization............................................ 2,425 2,384 7,370 6,848
------- -------- ------- -------
Operating income (loss)................................ (755) 117 (2,839) (257)
Other income (expense):
Interest expense....................................... (2,696) (1,819) (8,071) (5,393)
Interest income........................................ 264 21 874 73
Equity in losses of joint venture...................... (194) (24) (688) (142)
Other income (expense), net............................ (16) (22) 339 (183)
------- -------- ------- -------
Net loss............................................... (3,397) (1,727) (10,385) (5,902)
Redeemable preferred returns........................... (100) (274) (299) (817)
------- -------- ------- -------
Net loss attributable to general and limited partners.. ($3,497) ($2,001) ($10,684) ($6,719)
------- -------- ------- -------
------- -------- ------- -------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
MUZAK LIMITED PARTNERSHIP
Consolidated Statement of Cash Flows
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------
1997 1996
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss.......................................................... $ (10,385) $ (5,902)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Provision for doubtful accounts................................. 361 379
Provision for inventory obsolescence............................ 350 0
Depreciation.................................................... 8,491 7,832
Amortization, net of deferred financing cost.................... 7,372 6,848
Deferred financing cost amortization............................ 495 907
Equity in losses of joint venture............................... 688 142
Gain on sale of affiliate....................................... (389) -
Write-off of national account installation costs................ 180 -
Non-cash incentive compensation................................. 177 -
Change in operating assets and liabilities:
Accounts receivable............................................. (711) 280
Inventories..................................................... (94) (6)
Accounts payable................................................ (1,138) 2,996
Advance billings................................................ 240 63
Accrued interest................................................ 2,500 (758)
Accrued expenses................................................ 1,166 1,342
Unearned installation income.................................... 418 633
Other, net...................................................... 188 127
------- -------
Net cash provided by operating activities....................... 9,909 14,883
------- -------
INVESTING ACTIVITIES
Additions to property and equipment.............................. (9,418) (7,151)
Additions to deferred costs and intangible assets................ (4,437) (5,303)
Investment in joint venture...................................... (804) -
Proceeds from sale of affiliate.................................. 1,260 -
Acquisition of accounts.......................................... (2,381) -
Other, net....................................................... (240) 189
------- ------
Net cash used in investing activities......................... (16,020) (12,265)
------- ------
FINANCING ACTIVITIES
Borrowings under revolving notes payable, net.................... - 3,500
Principal payments on long-term debt............................. (92) (5,480)
Principal payments under capital leases.......................... (323) (293)
Contributions (withdrawal) by partners........................... (2,026) 311
Other, net....................................................... (54) (197)
------- ------
Net cash used in financing activities.......................... (2,495) (2,159)
------- ------
Net increase (decrease) in cash and cash equivalents........... (8,606) 459
CASH AND CASH EQUIVALENTS, beginning of period..................... 25,685 1,115
------- ------
CASH AND CASH EQUIVALENTS, end of period........................... $17,079 $ 1,574
------- ------
------- ------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
MUZAK LIMITED PARTNERSHIP
FORM 10-Q
Notes To Consolidated Financial Statements
Nine Months Ended September 30, 1997 and 1996
(Unaudited)
NOTE 1. FINANCIAL STATEMENT PREPARATION:
The consolidated financial statements as of September 30, 1997 and December
31, 1996 and for the three and nine month periods ended September 30, 1997
and 1996 have been prepared by Muzak Limited Partnership (the "Company")
pursuant to the rules and regulations of the Securities and Exchange
Commission (the "Commission"). The financial information as of and for the
three and nine month periods ended September 30, 1997 and 1996 is unaudited,
but, in the opinion of management, reflects all adjustments (consisting only
of normal recurring adjustments and accruals) necessary for a fair
presentation of the financial position, results of operations and cash flows
for the interim periods. Certain information and note disclosures normally
included in the Company's annual financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
in accordance with the rules and regulations of the Commission. These
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto contained in the Company's Annual
Report on Form 10-K filed with the Commission on March 31, 1997.
The results of operations for the three and nine month periods ended
September 30, 1997 are not necessarily indicative of the Company's results of
operations for the entire fiscal year ended December 31, 1997.
Certain reclassifications of prior year balances have been made for
consistent presentation.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation - The accompanying consolidated financial statements
of the Company include the accounts of the Company and its wholly-owned
subsidiary, Muzak Capital Corporation. All significant intercompany accounts
and transactions have been eliminated in consolidation.
New Accounting Pronouncements - SFAS No. 130, "Reporting Comprehensive Income"
and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," were recently issued and are effective for the Company's year
ending December 31, 1998. The Company is currently evaluating the effects of
these standards. Management believes that the impact of adopting these
standards will not be material to the financial statements, taken as a whole.
<PAGE>
NOTE 3. PROPERTY AND EQUIPMENT, NET:
Property and equipment consist of the following (in thousands):
September 30, December 31,
1997 1996
------------- ------------
Equipment provided to subscribers................ $ 55,181 $ 49,340
Machinery and equipment.......................... 12,195 10,745
Vehicles......................................... 3,394 3,072
Furniture and fixtures........................... 2,527 2,260
Land and buildings............................... 858 858
Leasehold improvements........................... 862 916
-------- --------
Total property and equipment................ 75,017 67,191
Less: Accumulated depreciation and amortization.. (36,972) (30,009)
-------- --------
$ 38,045 $ 37,182
-------- --------
-------- --------
NOTE 4. DEFERRED COSTS AND INTANGIBLE ASSETS, NET:
Deferred costs and intangible assets consists of the following (in thousands):
September 30, December 31,
1997 1996
------------- ------------
Income producing contracts...................... $ 41,694 $ 39,830
Deferred subscriber acquisition costs........... 13,670 11,056
Master recording rights and deferred
production costs.............................. 11,468 9,883
Deferred financing costs........................ 4,341 4,423
Organization costs.............................. 4,441 4,432
Non-compete agreements.......................... 861 846
Other........................................... 788 758
-------- --------
Total deferred costs and intangible assets.. 77,263 71,228
Less: Accumulated amortization.................. (44,886) (37,463)
-------- --------
$ 32,377 $ 33,765
-------- --------
-------- --------
<PAGE>
NOTE 5. LONG-TERM OBLIGATIONS:
Long-term obligations are summarized as follows (in thousands):
September 30, December 31,
1997 1996
------------- ------------
Senior notes.................................... $100,000 $100,000
Capital lease obligations....................... 1,150 935
Other........................................... 75 167
-------- --------
Total long-term obligations................. 101,225 101,102
Less: Current portion........................... (469) (482)
-------- --------
$100,756 $100,620
-------- --------
-------- --------
NOTE 6. SEVERANCE AGREEMENTS:
During the second quarter of 1997, the Company entered into individual severance
agreements with six separated management employees which provide for the
following:
Severance Payments: Included in Selling, General & Administration expense, the
Company took a charge of approximately $750,000 in the second quarter of 1997
for severance payments for the separated employees.
Equity Repurchase Obligations: The severance agreements provided for the
redemption of the separated employees' entire partnership interest in the
Company. The total original repurchase obligation for the separated employees'
partnership interests was $2,357,000 at a redemption price of $2.33 per
partnership interest unit. In accordance with these severance agreements, on
July 15, 1997, the Company redeemed 311,233 partnership interest units totaling
$725,172. Partially offsetting these redemptions were the purchase of 107,296
partnership interest units by existing and new management employees for
$250,000. In addition, the Company paid $1,262,000 to five of the six separated
management members in exchange for notes bearing interest at 7% per annum. On
September 30, 1997, the Company redeemed 158,572 partnership interest units of
one of the separated management employees for $369,473 leaving a liability for
equity repurchase obligation of $1,237,000 on this date.
Options to Purchase Partnership Interest Units: The options of the six
separated management employees were canceled by the Company. Four of the
separated management employees received $24,828 in the aggregate for such
canceled options and new options were issued to the two remaining individuals.
The Company has adequately accrued compensation expense related to the new and
the canceled options.
Settlement of Equity Repurchase Obligation: On October 3, 1997, the Company
sold a total of 606,777 partnership interest units to management employees of
the Company for $1,413,790 at a price of $2.33 per partnership interest unit.
On October 15, 1997, the 7% notes receivable due from the separated management
employees in the total principal amount of for $1,262,000 were retired and the
redemption of all of the outstanding partnership interest units of the separated
management employees was completed.
<PAGE>
NOTE 7. OPTIONS FOR PARTNERSHIP INTEREST UNITS:
In the second quarter of 1997, the Company entered into employment agreements
with two executive officers for a term of four years. As part of these
agreements, these executive officers have been granted options to acquire
1,500,000 partnership interest units of the Company at an exercise price of
$2.33 a unit vesting in equal annual amounts over a three year period. A
portion of these options are subject to the Company meeting specific performance
standards.
NOTE 8. SUBSEQUENT EVENTS:
The Company has a signed letter of intent related to an acquisition for a total
purchase price of approximately $1.5 million.
In October 1997, the Company entered into two commitments with separate vendors
to purchase equipment for $418,000 and $412,000 to be completed in January 1998
and October 1998, respectively.
On October 24, 1997, the Company sold a total of 175,000 partnership interest
units to two executive officers of the Company at a price of $2.33 per unit for
$407,750. In addition, on October 24, 1997, the Company redeemed 175,000
partnership interest units from a retired management employee at a price of
$2.33 per partnership interest unit for a total redemption payment of $407,750.
NOTE 9. SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest expense for the nine month periods ended September 30,
1997 and 1996 was approximately $5,076,000 and $5,320,000, respectively.
Non-cash financing and investing items for the nine month periods ended
September 30, 1997 and 1996 include the following:
- The transfer of inventory, prepaid expenses, and machinery and equipment
with a book value of $394,000 from a business segment in exchange for a note
receivable in April, 1996.
- Organization costs of $700,000 related to an unconsummated equity financing
which were capitalized and included in accounts payable during the second
quarter of 1996 and were subsequently written off in the fourth quarter of
1996.
- National account installation costs of $180,000 in excess of billings
written off in the third quarter of 1997.
- Inventory obsolescence reserve of $350,000 established during the third
quarter of 1997.
- Purchases of vehicles acquired under capital leases during the nine month
periods ended September 30, 1997 and 1996 of approximately $538,000 and
$488,000, respectively.
<PAGE>
MUZAK CAPITAL CORPORATION
BALANCE SHEET
September 30, 1997
ASSETS
Cash........................................................... $ 1
STOCKHOLDER'S EQUITY
Preferred stock - authorized 10,000,000 shares of $0.01 par
value each; no shares issued and outstanding................ $ -
Common stock - authorized 30,000,000 shares of $0.01 par
value each; 100 shares issued and outstanding............... 1
----
TOTAL $ 1
----
----
THE ACCOMPANYING NOTE IS A INTEGRAL PART OF THESE FINANCIAL STATEMENTS
<PAGE>
NOTE TO FINANCIAL STATEMENT
Muzak Capital Corporation ("Capital Corp."), a wholly-owned subsidiary of
Muzak Limited Partnership ("the Company"), was formed on May 8, 1996. Capital
Corp. has no independent operations and is dependent on the cash flow of the
Company to meet its sole obligation as co-issuer with the Company of the 10%
Senior Notes due 2003, the payment of principal and interest thereon when due.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following should be read in conjunction with the Management's Discussion
and Analysis of Financial Condition and Results of Operations included in the
registrant's Form 10-K filed with the Securities and Exchange Commission on
March 31, 1997.
Forward-Looking Statements
When used in this Quarterly Report on Form 10-Q or future filings by the
Company, as defined below, and Capital Corp., as defined below, with the
Securities and Exchange Commission, in the Company's and Capital Corp's press
releases or other public communications, or in oral statements made with the
approval of an authorized executive officer, the words or phrases "will likely
result," "are expected to," "will continue," "is anticipated," "estimate,"
"project" or similar expressions are intended to identify "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. The Company and Capital Corp. wish to caution readers not to place
undo reliance on any such forward-looking statements, which speak only as of
the date made, and to advise readers that various factors, including rapid
technological change, competitive pricing, concentrations in and dependence on
satellite delivery capabilities, and development of new services could affect
the Company's and Capital Corp.'s financial performance and could cause the
Company's and Capital Corp.'s actual results for future periods to differ
materially from those anticipated or projected.
The Company and Capital Corp. do not undertake and specifically disclaim any
obligation to update any forward-looking statements to reflect the occurrence
of anticipated or unanticipated events or circumstances after the date of such
statements.
Results of Operations
Revenues. Total revenues increased 3.7% and 3.9% for the three and nine month
periods ended September 30, 1997, respectively, as compared to the same periods
in 1996. These increases were primarily due to a net increase in monthly
recurring service billings while equipment and related services revenues
declined as compared to the 1996 periods. Monthly recurring service billings
increased by $40,000 and $83,000 over the three and nine month periods ended
September 30, 1997, respectively, as compared to the same periods in 1996.
This increase in recurring business services revenue is partially offset by a
decline in equipment and related services revenue due to Muzak's affiliates
purchasing more subscriber equipment directly from outside vendors rather than
from Muzak. An additional factor influencing the revenue growth when
comparing quarter over quarter results is due to certain large one-time sales
of approximately $500,000 in the 1996 quarter not in the current quarter.
These sales where for sound and paging systems installed in certain schools
in Texas. After eliminating these variances, the remaining variance reflects
increases in revenue due to the growth in our monthly recurring billing. This
growth in billing is the result of the sales effort during 1997 being focused
on growing the core music and other business services. The revenues in these
product categories are generally higher margin and longer term.
Gross Profit. Gross profit decreased 5.1% over the three month period and
increased 0.7% over the nine month period ended September 30, 1997,
respectively, as compared to the same periods in 1996 and gross margins as a
percentage of revenues decreased over the same periods. Gross margins for
the three and nine month periods ended September 30, 1997 were 52.4% and
55.8%, respectively, declining from 57.2% and 57.6% for the
<PAGE>
same periods during 1996. The gross profit decline for the three month period
is primarily due to approximately $750,000 in one-time charges taken in the
third quarter related to inventory, licensing fees and the buyout of a
satellite segment lease. For the nine month periods, these one-time charges
are partially offset by increased revenues related to the net increase in
monthly recurring service billings.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased as a percentage of revenues for the three
month period and increased for the nine month period ended September 30,
1997, as compared to the same periods in 1996. These expenses, as a
percentage of revenues, were 33.6% and 36.4% for the three and nine month
periods ended September 30, 1997, as compared to 34.1% and 35.2% for the same
periods in 1996. The decrease during the three month period is primarily the
result of an accrued bonus reversal made in the third quarter of 1997. The
increase over the nine month period is a result of approximately $750,000 in
severance charges during the second quarter of 1997 related to certain
management changes as well as increased sales costs incurred to generate the
increases in monthly recurring services billings as compared to the same
periods last year. As commissions are paid based on the future value of
these new contracts, these sales costs are incurred prior to the benefits
derived from the recurring revenues. Because of this, as long as the Company
continues to experience high sales levels, sales costs associated with these
recurring sales will continue to negatively impact immediate operating
results.
Depreciation and Amortization. Depreciation and amortization expenses
increased $50,000 and $1.2 million for the three and nine month periods ended
September 30, 1997, respectively, as compared to the same periods during
1996. These increases were primarily the result of investments in maintaining
and expanding the subscriber base over the last twelve months as well as
capital investments in other business opportunities, such as costs of the new
EchoStar uplink facility and start-up costs to create the Company's internet
MUSICSERVER product. Partially offsetting the depreciation and amortization
on these investments over the three month period is approximately $22.5
million in five year assets which were fully depreciated/amortized at the end
of August, 1997.
Interest Expense and Other Income. Interest expense net of interest income,
equity in losses of joint venture and other income and expense increased
$800,000 and $1.9 million for the three and nine month periods ended
September 30, 1997, respectively, as compared to the same periods during
1996. These increases were primarily the result of increased interest
expense for the 1997 periods related to an increase in average interest
bearing debt outstanding since the October 1996 offering by the Company and
Capital Corp. of $100 million of the 10% Senior Notes due 2003. Average
interest-bearing debt for the nine months ended September 30, 1997 was $101.1
million compared to $60.8 million for the nine months ended September 30,
1996.
Net Loss. Net loss increased to $3.4 and $10.4 million for the three and
nine month periods ended September 30, 1997, respectively, as compared to
$1.7 and $5.9 million for the same periods in 1996.
<PAGE>
Liquidity and Capital Resources
Nine Months Ended September 30, 1997. Cash and cash equivalents decreased
from $25.7 million as of December 31, 1996 to $17.1 million as of September
30, 1997. The Company's cash provided by operations for this period was $9.9
million, including net cash provided by changes in operating assets and
liabilities of $2.6 million. Operating cash flow and the reduction in cash
and cash equivalents were primarily used to fund capital requirements
associated with maintaining and expanding the subscriber base. In addition
to these capital requirements, investing activities include $1,260,000 in
proceeds from the sale of the Spokane, Washington operation, three
acquisitions consuming $2,380,000 and an additional investment of $800,000 in
Muzak Europe B.V., a joint venture in Europe in which the Company is a 50%
partner. Financing activities include $2,357,000 paid to six separated
members of management on July 15, 1997, in accordance with severance
agreements to redeem partnership interest units and in exchange for notes
bearing interest at 7% per annum. These notes were retired and the remainder
of the outstanding partnership interest units of these separated members of
management were redeemed on October 15, 1997.
Outlook. The Company believes that its cash flows from operations, borrowing
availability and cash on hand will be adequate to support currently planned
business operations, capital expenditures and debt service requirements at
least through December, 1998. The Company currently has signed letters of
intent related to an acquisition for a total purchase price of approximately
$1.5 million. If the Company engages in one or more material acquisitions,
joint ventures or alliances or other major business initiatives requiring
significant cash commitments, or incurs unanticipated expenses, additional
capital could be required.
Muzak Capital Corporation. Muzak Capital Corporation ("Capital Corp."), a
wholly-owned subsidiary of the Company, was organized May 8, 1996, has
nominal assets and conducts no business operations. Capital Corp. has no
independent operations and is dependent on the cash flow of the Company to
meet its sole obligation, the payment of interest and principal on the Senior
Notes when due. A discussion of Capital Corp. has been omitted in the
period-to-period comparison due to its lack of significant assets and lack of
operations.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is subject to various proceedings arising in
the normal course of business, none of which,
individually or in the aggregate, is expected to have a
material adverse effect on the Company's financial
condition, results of operations or liquidity.
Item 2. Changes in Securities.
On July 15, 1997, the Company sold a total of 107,296
Class B limited partnership units to two executive
officers of the Company for total consideration of
$250,000. The sales of the 107,296 Class B limited
partnership units were made in a transaction exempt from
the registration requirements of the Securities Act of
1933, as amended, pursuant to Section 4(2) thereof.
In addition, on October 3, 1997, the Company sold a total
of 606,777 Class B limited partnership units to
approximately 17 management employees of the Company for
total consideration of $1.4 million. The sales of the
606,777 Class B limited partnership units were made in a
transaction exempt from the registration requirements of
the Securities Act of 1933, as amended, pursuant to
Section 4(2)3 thereof.
Furthermore, on October 24, 1997, the Company sold a
total of 175,000 Class B limited partnership units to two
executive officers of the Company for total consideration
of $407,750. The sales of the 175,000 Class B limited
partnership units were made in a transaction exempt from
the registration requirements of the Securities Act of
1933, as amended, pursuant to Section 4(2) thereof.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
27.1 Financial Data Schedule of Muzak Limited
Partnership
27.2 Financial Data Schedule of Muzak Capital
Corporation
(b) Reports on Form 8-K
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrants have duly caused this report to be signed on
their behalf by the undersigned thereunto duly authorized.
MUZAK LIMITED PARTNERSHIP
November __, 1997
By: /s/ Brad D. Bodenman
---------------------------
Brad D. Bodenman
Vice President, Finance and
Administration
(Principal Financial
Officer and Chief
Accounting Officer of Muzak
Limited Partnership)
MUZAK CAPITAL CORPORATION
November __, 1997
By: /s/ Brad D. Bodenman
---------------------------
Brad D. Bodenman
Vice President, Finance and
Administration
(Principal Financial
Officer and Chief
Accounting Officer of Muzak
Limited Partnership)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE BODY OF THE ACCOMPANYING FORM 10-Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000891983
<NAME> MUZAK LIMITED PARTNERSHIP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 17,079
<SECURITIES> 0
<RECEIVABLES> 16,420
<ALLOWANCES> 470
<INVENTORY> 3,286
<CURRENT-ASSETS> 38,606
<PP&E> 75,017
<DEPRECIATION> 36,972
<TOTAL-ASSETS> 111,243
<CURRENT-LIABILITIES> 21,947
<BONDS> 100,756
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 111,243
<SALES> 10,910
<TOTAL-REVENUES> 67,098
<CGS> 8,151
<TOTAL-COSTS> 29,651
<OTHER-EXPENSES> 40,286
<LOSS-PROVISION> 361
<INTEREST-EXPENSE> 8,071
<INCOME-PRETAX> (10,385)
<INCOME-TAX> 0
<INCOME-CONTINUING> (10,385)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,385)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE BODY OF THE ACCOMPANYING FORM 10-Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001013763
<NAME> MUZAK CAPITAL CORPORATION
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
