-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, LGyYO/YUycM5puHa5fCKaKZMakOP5AchylM6BxW+ON/pFG7W7zLebhUfMCBuHqDS d8Pm6fThpce41tU6c7cvmA== 0000785959-95-000008.txt : 19950616 0000785959-95-000008.hdr.sgml : 19950616 ACCESSION NUMBER: 0000785959-95-000008 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19941230 FILED AS OF DATE: 19950322 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ML MEDIA PARTNERS LP CENTRAL INDEX KEY: 0000785959 STANDARD INDUSTRIAL CLASSIFICATION: TELEVISION BROADCASTING STATIONS [4833] IRS NUMBER: 133221085 STATE OF INCORPORATION: DE FISCAL YEAR END: 1229 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-14871 FILM NUMBER: 95522447 BUSINESS ADDRESS: STREET 1: WORLD FINANCIAL CENTER STREET 2: SOUTH TOWER-8TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10080 BUSINESS PHONE: 2122366577 MAIL ADDRESS: STREET 1: WORLD FINANCIAL CENTER STREET 2: SOUTH TOWER - 8TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10080 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 30, 1994 0-14871 (Commission File Number) ML MEDIA PARTNERS, L.P. (Exact name of registrant as specified in its governing Securities registered pursuant to Section 12(b) of the Act: None (Title of Class) instruments) Delaware (State or other jurisdiction of organization) 13-3321085 (IRS Employer Identification No.) World Financial Center South Tower - 14th Floor New York, New York 10080-6114 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 236-6577 Securities registered pursuant to Section 12(g) of the Act: None (Title of Class) Securities registered pursuant to Section 12(g) of the Act: Units of Limited Partnership Interest (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in a definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Documents incorporated by reference: Part I - Pages 12 through 19 and 38 through 46 of Prospectus, dated February 4, 1986, as supplemented by Supplements, dated June 4, 1986, November 4, 1986 and December 18, 1986, filed pursuant to Rules 424(b) and 424 (c), respectively, under the Securities Act of 1933. Part I Item 1. Business Formation ML Media Partners, L.P. ("Registrant"), a Delaware limited partnership, was organized February 1, 1985. Media Management Partners, a New York general partnership (the "General Partner"), is Registrant's sole general partner. The General Partner is a joint venture, between RP Media Management (a joint venture organized as a New York general partnership under New York law consisting of The Elation H. Rule Company and IMP Media Management, Inc.), and ML Media Management Inc. ("MLMM"), a Delaware corporation and an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. and an affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"). The General Partner was formed for the purpose of acting as general partner of Registrant. The Elton H. Rule Company was controlled by Elton H. Rule until his death in May of 1990. As a result of Mr. Rule's death, the general partner interest of the Elton H. Rule Company in RP Media Management may be redeemed or acquired by a company controlled by I. Martin Pompadur. Registrant is engaged in the business of acquiring, financing, holding, developing, improving, maintaining, operating, leasing, selling, exchanging, disposing of and otherwise investing in and dealing with media businesses and direct and indirect interests therein. (Reference is made to Note 9 of "Financial Statements and Supplementary Data" included in Item 8 hereof for segment information). Registrant offered through Merrill Lynch up to 250,000 units of limited partnership interest ("Units") at $1,000 per Unit. The Registration Statement relating to the offering was filed on December 19, 1985 pursuant to the Securities Act of 1933 under Registration Statement No. 33-2290 and was declared effective on February 3, 1986 and amendments thereto became effective on September 18, 1986, November 4, 1986 and on December 12, 1986 (such Registration Statement, as amended from and after each such date, the "Registration Statement"). Reference is made to the prospectus dated February 4, 1986 filed with the Securities and Exchange Commission pursuant to Rule 424 (b) under the Securities Act of 1933, as supplemented by supplements dated June 4, 1986, November 4, 1986 and December 18, 1986 which have been filed pursuant to Rule 424 (c) under the Securities Act of 1933 (such Prospectus, as supplemented from and after each such date, the "Prospectus"). Pursuant to Rule 12b-23 of the Securities and Exchange Commission's General Rules and Regulations promulgated under the Securities Exchange Act of 1934, as amended, the description of Registrant's business set forth under the heading "Risk and Other Important Factors" at pages 12 through 19 and under the heading "Investment Objectives and Policies" at pages 38 through 46 of the above-referenced Prospectus is hereby incorporated herein by reference. The offering of Units commenced on February 4, 1986. Registrant held four Closings of Units; the first for subscriptions accepted prior to May 14, 1986 representing 144,990 Units aggregating $144,990,000; the second for subscriptions accepted thereafter and prior to October 9, 1986 representing 21,540 additional Units aggregating $21,540,000; the third for subscriptions accepted thereafter and prior to November 18, 1986 representing 6,334 additional Units aggregating $6,334,000; and the fourth and final Closing of Units for subscriptions accepted thereafter and prior to March 2, 1987 representing 15,130 additional Units aggregating $15,130,000. At these Closings, including the initial limited partner capital contribution of $100, subscriptions for an aggregate of 187,994.1 Units representing the aggregate purchase price of $187,994,100 were accepted. During 1989, the initial limited partner's capital contribution of $100 was returned. Media Properties As of December 30, 1994, Registrant's investments in media properties consist of a 50% interest in a joint venture which owns two cable television systems, an FM and AM radio station combination, and a background music service in Puerto Rico; four cable television systems in California; two VHF television stations in Lafayette, Louisiana and Rockford, Illinois; an FM and AM radio station combination in Bridgeport, Connecticut; a corporation which owns an FM radio station in Cleveland, Ohio; and an FM and AM radio station combination in Anaheim, California. The Universal Cable systems were sold on July 8, 1992. In addition, an FM and AM radio station combination in Indianapolis, Indiana was sold on October 1, 1993. Puerto Rico Investments Cable Television Investments Pursuant to the management agreement and joint venture agreement dated December 16, 1986 (the "Joint Venture Agreement"), as amended and restated, between Registrant and Century Communications Corp., a Texas corporation ("Century"), the parties formed a joint venture under New York law, Century-ML Cable Venture (the "Venture"), in which each has a 50% ownership interest. Registrant and Century each initially contributed cash of $25 million to the Venture. Century is a wholly-owned subsidiary of Century Communications Corp., a publicly held New Jersey corporation unaffiliated with the General Partner or any of its affiliates. On December 16, 1986 the Venture, through its wholly-owned subsidiary corporation, Century-ML Cable Corporation ("C-ML Cable Corp."), purchased all of the stock of Cable Television Company of Greater San Juan, Inc. ("San Juan Cable"), utilizing the combined investment of the venturers together with debt financing, and liquidated San Juan Cable into C-ML Cable Corp. The final purchase price for San Juan Cable common stock was approximately $141.7 million. C-ML Cable Corp., as successor to San Juan Cable, is the operator of the largest cable television system in Puerto Rico. On September 24, 1987, the Venture acquired all of the assets of Community Cable-Vision of Puerto Rico, Inc., Community Cablevision of Puerto Rico Associates, and Community Cablevision Incorporated (collectively, the "Community Companies"), which consisted of a cable television system serving the communities of Catano, Toa Baja and Toa Alta, Puerto Rico, which are contiguous to San Juan Cable. The Community Companies were acquired pursuant to an Asset Acquisition Agreement entered into on April 22, 1987, between Century Community Holding Corp., a wholly-owned subsidiary of Century, and the Community Companies, and thereafter assigned to the Venture. The Venture purchased all of the assets of the Community Companies for $12.0 million, which was paid entirely from a portion of the proceeds of the debt financing described below. C-ML Cable Corp. and the Community Companies are herein referred to as C-ML Cable ("C-ML Cable"). Registrant's two cable properties in Puerto Rico are herein defined as the "Puerto Rico Systems." The Puerto Rico Systems currently serve approximately 112,228 basic subscribers, pass approximately 262,505 homes and consist of approximately 1,775 linear miles of cable plant. During 1994, Registrant's share of the net revenues of the Puerto Rico Systems totalled $21,525,793 (20.3% of operating revenues of Registrant). During 1993, Registrant's share of the net revenues of the Puerto Rico Systems totalled $20,206,318 (20.1% of operating revenues of Registrant). During 1992, Registrant's share of the net revenues of the Puerto Rico Systems totalled $18,265,681 (18.2% of operating revenues of Registrant). Pursuant to a credit agreement (the "C-ML Credit Agreement") entered into at the time of closing of the San Juan Cable acquisition, C-ML Cable Corp. was allowed to borrow up to $100 million to finance the San Juan Cable acquisition, as well as certain capital improvements and working capital requirements associated therewith. C-ML Cable Corp. borrowed approximately $91 million under the credit facility at closing. Of this amount, approximately $19 million was used to repay existing bank debt of San Juan Cable. Refer to Note 6 of "Item 8. Financial Statements and Supplementary Data" for further information regarding the C-ML Credit Agreement. The Venture financed the acquisition of the Community Companies with additional proceeds from the C-ML Credit Agreement. Pursuant to the C-ML Credit Agreement, as amended, C-ML Cable Corp.'s line of credit had been increased from $100 million to $108 million. The purchase price of the Community Companies of approximately $12 million was paid entirely with additional borrowings by C-ML Cable Corp. of $12 million, which C-ML Cable Corp. in turn loaned to the Venture. Radio Investments On February 15, 1989, Registrant and Century entered into a Management Agreement and Joint Venture Agreement whereby a new joint venture, Century-ML Radio Venture ("C-ML Radio"), was formed under New York law, and responsibility for the management of radio stations to be acquired by C-ML Radio was assumed by Registrant. On March 10, 1989, C-ML Radio acquired all of the issued and outstanding stock of Acosta Broadcasting Corporation ("Acosta"), Fidelity Broadcasting Corporation ("Fidelity"), and Broadcasting and Background Systems Consultants Corporation ("BBSC"); all located in San Juan, Puerto Rico. The purchase price for the stock was approximately $7.8 million. The acquisition was financed with $900,000 of Registrant equity, $900,000 of equity from Century, and the balance of approximately $6 million from proceeds of the C-ML Credit Agreement. At the time of acquisition, Acosta owned radio stations WUNO-AM and Noti Uno News, Fidelity owned radio station WFID-FM, and BBSC owned Beautiful Music Services, all serving various communities within Puerto Rico. In connection with the purchase of Acosta, Fidelity and BBSC, the Venture amended the C-ML Credit Agreement on March 8, 1989, increasing the line of credit available under the C-ML Credit Agreement from $108 million to $114 million. In February, 1990, C-ML Radio acquired the assets of Radio Ambiente Musical Puerto Rico, Inc. ("RAM"), a background music service. The purchase price was approximately $200,000 and was funded with cash generated by C-ML Radio. The operations of RAM were consolidated into those of BBSC. Effective March 8, 1989, C-ML Cable Corp. amended the C-ML Credit Agreement, primarily to restructure certain restrictive covenants, provide for additional equity contributions to C-ML Cable Corp. of $2.5 million each from Registrant and Century and to extend the maturity date. Effective January 1, 1994, all of the assets of C-ML Radio were transferred to the Venture in exchange for the assumption by the Venture of all the obligations of C-ML Radio and the issuance to Century and Registrant by the Venture of new certificates evidencing partnership interests of 50% and 50%, respectively. The transfer was made pursuant to a Transfer of Assets and Assumption of Liabilities Agreement. At the time of this transfer, Registrant and Century entered into an amended and restated management agreement and joint venture agreement (the "Revised Joint Venture Agreement") governing the affairs of the revised Venture (herein referred to as the "Revised Venture"). Under the terms of the Revised Joint Venture Agreement, Century is responsible for the day-to-day operations of the Puerto Rico Systems and Registrant is responsible for the day-to-day operations of the C-ML Radio properties. For providing services of this kind, Century is entitled to receive annual compensation of 5% of the Puerto Rico Systems' net gross revenues (defined as gross revenues from all sources less monies paid to suppliers of pay TV product, e.g., HBO, Cinemax, Disney and Showtime) and Registrant is entitled to receive annual compensation of 5% of the C-ML Radio properties' gross revenues (after agency commissions, rebates or discounts and excluding revenues from barter transactions). All significant policy decisions relating to the Revised Venture, the operation of the Puerto Rico Systems and the operation of the C-ML Radio properties, however, will only be made upon the concurrence of both Registrant and Century. Registrant may require a sale of the assets and business of the Puerto Rico Systems or the C-ML Radio properties at any time. If Registrant proposes such a sale, Registrant must first offer Century the right to purchase Registrant's 50% interest in the Revised Venture at 50% of the total fair market value of the Venture at such time as determined by independent appraisal. If Century elects to sell the assets, Registrant may elect to purchase Century's interest in the Revised Venture on similar terms. During 1994, Registrant's share of the net revenues of the C-ML Radio properties totalled $2,761,508 (2.6% of operating revenues of Registrant). During 1993 and prior years, Registrant's investment in the C-ML Radio properties was accounted for under the equity method of accounting. California Cable Systems In December, 1986, ML California Cable Corporation ("ML California"), a wholly-owned subsidiary of Registrant, entered into an agreement (the "Stock Sale and Purchase Agreement") with SCIPSCO, Inc. ("SCIPSCO"), a wholly-owned subsidiary of Storer Communications, Inc. for the acquisition by ML California of four cable television systems servicing the California communities of Anaheim, Manhattan/Hermosa Beach, Rohnert Park, and Fairfield and surrounding areas. The acquisition was completed on December 23, 1986 with the purchase by ML California of all of the stock of four subsidiaries of SCIPSCO which at closing owned all the assets of the California cable television systems. The term "California Cable Systems" or "California Cable" as used herein means either the cable systems or the owning entities, as the context requires. The California Cable Systems currently serve approximately 136,022 basic subscribers, pass 218,992 homes and consist of approximately 2,035 linear miles of plant. The purchase price for the California Cable Systems was approximately $170 million, which included certain tax liabilities of approximately $20 million in connection with the liquidation of ML California. The purchase price was funded with approximately $60 million of equity from Registrant with the balance advanced from the proceeds of debt financing. Registrant and California Cable arranged the acquisition financing pursuant to a credit agreement (the "ML California Credit Agreement") entered into at the time of closing. Refer to Notes 2 and 6 of "Item 8. Financial Statements and Supplementary Data" for further information regarding the ML California Credit Agreement. On December 30, 1986, ML California was liquidated into Registrant and transferred all of its assets, except its FCC licenses, subject to its liabilities, to Registrant. The licenses were transferred to ML California Associates, a partnership formed between Registrant and the General Partner for the purpose of holding the licenses in which Registrant is Managing General Partner and 99.99% equity holder. The daily operations of the California Cable Systems are managed by MultiVision Cable TV Corp. ("MultiVision"), a cable television multiple system operator ("MSO") controlled by I. Martin Pompadur. Mr. Pompadur, President, Secretary and Director of RP Media Management and Chairman and Chief Executive Officer of MultiVision, organized MultiVision in January 1988 to provide MSO services to cable television systems acquired by entities under his control, with those entities paying cost for those services pursuant to an agreement to allocate certain management costs, (the "Cost Allocation Agreement") with MultiVision. Mr. Pompadur is, indirectly, the general partner of ML Media Opportunity Partners, L.P., a publicly held limited partnership, and Registrant. ML Media Opportunity Partners, L.P. and its subsidiaries had invested in cable television systems that were managed by MultiVision, prior to their sale, pursuant to the same Cost Allocation Agreement. Registrant engaged Merrill Lynch & Co. and Daniels & Associates in January, 1994 to act as its financial advisors in connection with a possible sale of all or a portion of Registrant's California Cable Systems. On November 28, 1994, Registrant entered into an agreement (the "Asset Purchase Agreement") with Century to sell to Century substantially all of the assets used in the operations of Registrant's California Cable Systems serving the Anaheim, Hermosa Beach/Manhattan Beach, Rohnert Park/Yountville and Fairfield communities. The base purchase price for the systems will be $286 million, subject to reduction by an amount equal to 11 times the amount by which the operating cash flow of the systems (as adjusted in accordance with the Asset Purchase Agreement) is less than $26 million for the 12-month period prior to the closing, and subject to further adjustment as provided in the Asset Purchase Agreement. In addition, Registrant has the right to terminate the Asset Purchase Agreement if the purchase price would be less than $260 million based on the formula described above. Consummation of the transactions provided for in the Asset Purchase Agreement is subject to the satisfaction of certain conditions, including obtaining approvals from the Federal Communications Commission and the municipal authorities issuing the franchises for the systems. Merrill Lynch & Co. did not, nor will it, receive a fee or other form of compensation for acting as financial advisor in connection with the sale of the California Cable Systems. Registrant is currently unable to determine the impact of the February 22, 1994 FCC action and previous FCC actions (see below) on its ability to consummate the sale of the California Cable systems or the potential timing and ultimate value of such sale. However, as discussed below, the FCC actions have had, and will have, a detrimental impact on the revenues and profits of the California Cable systems. During 1994, California Cable generated operating revenues of $55,024,025 (52.0% of operating revenues of Registrant). During 1993, California Cable generated operating revenues of $55,197,638 (55.0% of operating revenues of Registrant). During 1992, California Cable generated operating revenues of $52,838,582 (52.6% of operating revenues of Registrant). KATC Television Station On September 17, 1986 Registrant entered into an acquisition agreement (the "Assets Purchase Agreement") with Loyola University, a Louisiana non-profit corporation ("Loyola"), for the acquisition by Registrant of substantially all the assets of television station KATC-TV, Lafayette Louisiana ("KATC-TV" or the "Station"). The acquisition was completed on February 2, 1987 for a purchase price of approximately $26,750,000. KATC-TV is a VHF affiliate of the American Broadcasting Company television network from which it obtains entertainment, news and sports programming. It is one of three commercial stations licensed to service Lafayette, Louisiana, an area of approximately 196,820 television households. As part of the purchase, Registrant succeeded to all business contracts, agreements, leases, commitments and orders in connection with the operation of the Station. Registrant did not assume any existing debt of the Station or Loyola, nor did it assume any liabilities of the Station other than certain contractual commitments in the ordinary course of Station operations. All FCC licenses were transferred to KATC Associates, a partnership formed for the purpose of holding the licenses in which Registrant is the Managing General Partner and 99.999% equity holder. Registrant received the required FCC and local approvals for the acquisition of the Station and the transfer of all licenses. As consideration for part of the purchase price, Loyola agreed not to compete with the Station in the Station's designated market area for two years. During 1994, the Station generated operating revenues of $6,078,081 (5.7% of operating revenues of Registrant). During 1993, the Station generated operating revenues of $5,276,512 (5.3% of operating revenues of Registrant). During 1992, the Station generated operating revenues of $5,120,331 (5.1% of operating revenues of Registrant). Registrant used its equity to purchase the Station for cash; however, subsequent to the purchase, in order to refinance a portion of its equity investment, Registrant entered into a Revolving Credit Loan Agreement (the "KATC Loan") in the initial amount of $17.0 million. On June 21, 1989, Registrant entered into an Agreement of Consolidation, Extension, Amendment and Restatement (the "WREX- KATC Loan") which replaced the KATC Loan and the WREX Loan (see below) with a total borrowing facility of up to $27.1 million. Refer to Notes 2 and 6 of "Item 8. Financial Statements and Supplementary Data" for further information regarding the WREX- KATC Loan. Registrant has experienced, and expects to experience, principal payment and covenant defaults under the WREX-KATC Loan. Registrant sought unsuccessfully to restructure the WREX-KATC Loan and, as a result, decided to market WREX and KATC for sale. On March 6, 1995, Registrant entered into a non-binding letter of intent to sell KATC with a third party not affiliated with the General Partner or any of its affiliates. The sale of KATC is subject to negotiation of a definitive purchase and sale agreement and numerous other conditions. The ultimate transfer of the license of KATC to a potential buyer will also be subject to the prior approval of the FCC. (As discussed below, on February 23, 1995, Registrant entered into a non-binding letter of intent to sell WREX). If Registrant is unable to complete the sales of WREX and KATC on terms acceptable to Registrant, Registrant will seek to refinance the WREX-KATC Loan with a new lender. WREX Television Station On April 29, 1987, Registrant entered into an acquisition agreement (the "Asset Purchase Agreement") with Gilmore Broadcasting Corporation, a Delaware corporation ("Gilmore"), for the acquisition by Registrant of substantially all the assets of television station WREX-TV, Rockford, Illinois ("WREX-TV"). The acquisition was accomplished on August 31, 1987, by payment of the purchase price of approximately $18 million. Registrant funded the acquisition with $7 million of equity and $11 million of debt. WREX-TV is a VHF affiliate of the American Broadcasting Company television network from which it obtains entertainment, news and sports programming. It is one of four commercial stations licensed to serve Rockford, Illinois, an area of approximately 162,440 television households. As part of the purchase, Registrant succeeded to all business contracts, agreements, leases, commitments and orders in connection with the operation of WREX-TV, including contracts with certain key employees. Registrant did not assume any existing debt of WREX-TV or Gilmore, nor did it assume any liabilities of WREX-TV other than certain contractual commitments in the ordinary course of operations. FCC licenses and all other permits and authorizations necessary for the operations of WREX- TV have been transferred to WREX Associates, a partnership between the General Partner and Registrant formed specifically for this purpose in which Registrant is the Managing General Partner and has a 99.999% equity interest. As consideration for part of the purchase price, Gilmore agreed not to compete with WREX-TV in its designated market area for three years. During 1994, WREX-TV generated operating revenues of $5,506,056 (5.2% of operating revenues of Registrant). During 1993, WREX-TV generated operating revenues of $4,925,030 (4.9% of operating revenues of Registrant). During 1992, WREX-TV generated operating revenues of $4,794,592 (4.8% of operating revenues of Registrant). To finance the purchase of WREX-TV, Registrant entered into a Revolving Credit Loan Agreement (the "WREX Loan"), which provided for borrowings of up to $11 million. The WREX Loan was subsequently replaced by the WREX-KATC Loan. Refer to Notes 2 and 6 of "Item 8. Financial Statements and Supplementary Data" for further information regarding the WREX-KATC Loan. As discussed above, Registrant has decided to market WREX and KATC for sale. On February 23, 1995, Registrant entered into a non-binding letter of intent to sell WREX with a third party not affiliated with the General Partner or any of its affiliates. The sale of WREX is subject to negotiation of a definitive purchase and sale agreement and numerous other conditions. The ultimate transfer of the license of WREX to a potential buyer will also be subject to the prior approval of the FCC. (As discussed above, on March 6, 1995, Registrant entered into a non- binding letter of intent to sell KATC). If Registrant is unable to complete the sales of WREX and KATC on terms acceptable to Registrant, Registrant will seek to refinance the WREX-KATC Loan with a new lender. WEBE-FM Radio On August 20, 1987, Registrant entered into an Asset Purchase Agreement with 108 Radio Company, L.P., for the acquisition of the business and assets of radio station WEBE-FM, Westport, Connecticut ("WEBE-FM") which serves Fairfield and New Haven counties. Currently, WEBE-FM serves approximately 125,000 listeners each week in the Fairfield County market. The total acquisition cost of $12 million was funded by an equity contribution of $4.5 million and long-term debt of $7.5 million. At the time of closing, the FCC licenses and all other permits and authorizations necessary for the operation of WEBE-FM were transferred to WEBE Associates, a partnership between the General Partner and Registrant formed especially for this purpose, and of which Registrant is the 99.999% owner. In connection with the financing of WEBE-FM, Registrant entered into a credit agreement on December 16, 1987 (the "WEBE Loan") with the Connecticut National Bank. The WEBE Loan provided for borrowings up to $7.5 million. On July 19, 1989, Registrant entered into an Amended and Restated Credit Security and Pledge Agreement (the "Wincom-WEBE-WICC Loan") which provided for borrowings up to $35 million and which was used, in part, to repay the WEBE Loan. On July 30, 1993, Registrant and Chemical Bank executed an amendment to the Wincom- WEBE-WICC Loan (the "Restructuring Agreement"), effective January 1, 1993, which cured all previously outstanding defaults pursuant to the Wincom-WEBE-WICC Loan. Refer to Notes 2 and 6 of "Item 8. Financial Statements and Supplementary Data" for further information regarding the Wincom-WEBE-WICC Loan and the Restructuring Agreement. During 1994, WEBE-FM generated operating revenues of $5,286,984 (5.0% of operating revenues of Registrant). During 1993, WEBE-FM generated operating revenues of $4,403,464 (4.4% of operating revenues of Registrant). During 1992, WEBE-FM generated operating revenues of $3,967,239 (4.0% of operating revenues of Registrant). Wincom On August 26, 1988, Registrant acquired 100% of the stock of Wincom Broadcasting Corporation ("Wincom"), an Ohio corporation headquartered in Cleveland. At acquisition, Wincom and its subsidiaries owned and operated five radio stations - WQAL-FM, Cleveland, Ohio; WCKN-AM/WRZX-FM, Indianapolis, Indiana (the "Indianapolis Stations", including the Indiana University Sports Radio Network, which was discontinued after the first half of 1992); KBEZ-FM, Tulsa, Oklahoma; and WEJZ-FM, Jacksonville, Florida. The purchase price for the stock of Wincom was approximately $46 million, of which approximately $26 million was funded with Registrant's equity funds. The balance of $20 million was financed with Registrant borrowings. To finance the acquisition of Wincom, Registrant entered into a Credit Security and Pledge Agreement with Chemical Bank (the "Wincom Loan") for a term loan in the amount of $20 million. The Wincom Loan was subsequently replaced by the Wincom-WEBE-WICC Loan. On July 30, 1993, Registrant and Chemical Bank executed the Restructuring Agreement, effective January 1, 1993, which cured all previously outstanding defaults pursuant to the Wincom- WEBE-WICC Loan. Refer to Notes 2 and 6 of "Item 8. Financial Statements and Supplementary Data" for further information regarding the Wincom-WEBE-WICC Loan and the Restructuring Agreement. On November 27, 1989, Registrant entered into an asset purchase agreement with Renda Broadcasting Corp. ("Renda"), whereby Registrant sold, on July 31, 1990, the business and assets of radio stations KBEZ-FM, Tulsa, Oklahoma and WEJZ-FM, Jacksonville, Florida to Renda. The net proceeds from the sale of the stations, which totalled approximately $10.3 million, were used to repay outstanding principal under the Wincom-WEBE-WICC Loan, as required by that agreement. On April 30, 1993, WIN Communications of Indiana, Inc., a 100%- owned subsidiary of Wincom, entered into an Asset Purchase Agreement to sell substantially all of the assets of the Indianapolis Stations to Broadcast Alchemy, L.P.("Alchemy") for gross proceeds of $7 million. Alchemy is not affiliated with Registrant. The proposed sale was subject to approval by the FCC, which granted its approval on September 22, 1993. On October 1, 1993, the date of the sale of the Indianapolis Stations, the net proceeds from such sale, which totalled approximately $6.1 million, were remitted to Chemical Bank, as required by the terms of the Restructuring Agreement, to reduce the outstanding principal amount of the Series B Term Loan due Chemical Bank pursuant to the Restructuring Agreement. Certain additional amounts from the net proceeds from the sale of the Indianapolis Stations, including an escrow deposit of $250,000, are required to be paid to Chemical Bank when received. Refer to Notes 2 and 6 of "Item 8. Financial Statements and Supplementary Data" for further information regarding the Restructuring Agreement. During 1994, Wincom generated operating revenues of $4,349,191 (4.1% of operating revenues of Registrant). During 1993, Wincom generated operating revenues of $5,269,021 (5.2% of operating revenues of Registrant). During 1992, Wincom generated operating revenues of $5,388,050 (5.4% of operating revenues of Registrant). Universal On September 19, 1988 Registrant acquired 100% of the stock of Universal Cable Holdings, Inc. ("Universal Cable"), a Delaware Corporation, pursuant to a stock purchase agreement (the "Stock Purchase Agreement") executed on June 17, 1988. Universal Cable, through three wholly-owned subsidiaries, owned and operated cable television systems located in Kansas, Nebraska, Colorado, Oklahoma and Texas. The aggregate purchase price was approximately $43 million, of which approximately $12 million was funded with Registrant's equity. The balance of $31 million was financed by Registrant borrowings. Registrant borrowed an additional $4.6 million after closing for working capital purposes. Both borrowings were pursuant to a Revolving Credit Agreement (the "Universal Credit Agreement") dated as of September 19, 1988. On July 8, 1992, Registrant sold Universal; all proceeds of sale were paid to the lender to Universal and Registrant was released from all obligations under the Universal Credit Agreement. Refer to Note 3 of "Item 8. Financial Statements and Supplementary Data" for further information on the sale of Universal. During the 193-day period in which Registrant owned Universal in 1992, Universal generated operating revenues of $4,681,966 (4.7% of operating revenues of Registrant). WICC-AM On July 19, 1989, Registrant purchased all of the assets of radio station WICC-AM located in Bridgeport, Connecticut from Connecticut Broadcasting Company, Inc. The purchase price of $6.25 million was financed solely from proceeds of the Wincom- WEBE-WICC Loan. On July 30, 1993, Registrant and Chemical Bank executed the Restructuring Agreement, effective January 1, 1993, which cured all previously outstanding defaults pursuant to the Wincom-WEBE-WICC Loan. Refer to Notes 2 and 6 of "Item 8. Financial Statements and Supplementary Data" for further information regarding the Wincom-WEBE-WICC Loan and the Restructuring Agreement. At the time of closing, the FCC licenses and all other permits and authorizations necessary for the operation of WICC-AM were transferred to WICC Associates, a partnership between the General Partner and Registrant formed especially for this purpose, and of which Registrant is the 99.999% owner. During 1994, WICC-AM generated operating revenues of $2,115,461 (2.0% of operating revenues of Registrant). During 1993, WICC-AM generated operating revenues of $1,875,348 (1.9% of operating revenues of Registrant). During 1992, WICC-AM generated operating revenues of $1,814,294 (1.8% of operating revenues of Registrant). Anaheim Radio Stations On November 16, 1989, Registrant acquired KORG-AM and KEZY-FM (the "Anaheim Radio Stations") located in Anaheim, California, from Anaheim Broadcasting Corporation. The total acquisition cost was $15,125,000. At the time of closing, the FCC licenses and all other permits and authorizations necessary for the operation of the Anaheim Radio Stations were transferred to Anaheim Radio Associates, a partnership between the General Partner and Registrant formed especially for this purpose, and of which Registrant owns 99.999%. To finance the acquisition of the Anaheim Radio Stations, on November 16, 1989, Registrant entered into a $16.5 million revolving credit bridge loan ("the Anaheim Radio Loan") with Bank of America. On May 15, 1990, Registrant entered into the revised ML California Credit Agreement, which was used in part to repay and refinance the Anaheim Radio Loan. Refer to Notes 2 and 6 of "Item 8. Financial Statements and Supplementary Data" for further information regarding the ML California Credit Agreement. During 1994, the Anaheim Radio Stations generated operating revenues of $3,263,109 (3.1% of operating revenues of Registrant). During 1993, the Anaheim Radio Stations generated operating revenues of $3,049,363 (3.1% of operating revenues of Registrant). During 1992, the Anaheim Radio Stations generated operating revenues of $3,103,438 (3.1% of operating revenues of Registrant). Employees As of December 30, 1994 Registrant employed approximately 500 persons at its wholly-owned properties. The business of Registrant is managed by the General Partner. RP Media Management, ML Media Management Inc. and ML Leasing Management Inc., all affiliates of the General Partner, perform certain management and administrative services for Registrant. COMPETITION Cable Television Cable television systems compete with other communications and entertainment media, including off-air television broadcast signals that a viewer is able to receive directly using the viewer's own television set and antenna. The extent of such competition is dependent in part upon the quality and quantity of such off-air signals. In the areas served by Registrant's systems, a substantial variety of broadcast television programming can be received off-air. In those areas, the extent to which cable television service is competitive depends largely upon the system's ability to provide a greater variety of programming than that available off-air and the rates charged by Registrant's cable systems for programming. Cable television systems also are susceptible to competition from other multiple- channel video programming delivery systems, from other forms of home entertainment such as video cassette recorders, and in varying degrees from other sources of entertainment in the area, including motion picture theaters, live theater and sporting events. On December 17, 1993, the first high-powered direct broadcast satellite ("DBS") designed to provide nationwide multiple-channel video programming delivery services was successfully launched. Service was initiated in June 1994 and a second satellite was launched in August 1994. These satellites currently provide over 150 channels of digital DBS service to subscribers. In recent years, the FCC has adopted polices providing for authorization of new technologies and a more favorable operating environment for certain existing technologies which provide, or have the potential to provide, substantial additional competition for cable television systems. For example, the FCC has revised its rules on MMDS (or "wireless cable") to foster MMDS services competitive with cable television systems, has authorized telephone companies to deliver video services through a common- carrier-based service called "video dialtone," and, most recently, has proposed a new service, the Local Multipoint Distribution Service ("LMDS"), which would employ technology similar to cellular telephone systems for the distribution of television programming directly to subscribers. Moreover, it is currently studying the issue of whether telephone companies should be permitted any direct involvement in video programming. At the same time, a major legislative initiative is underway in Congress and within the Clinton-Gore Administration to re-write the Communications Act of 1934, in order to facilitate development of the so-called "information superhighway" by, among other things, encouraging more competition in the provision of both local telephone and local cable service. One proposal being considered in this process is whether the current statutory ban on telephone companies providing cable service within their own local exchange areas should be eliminated. The term "information superhighway" generally refers to a combination of technological improvements or advances that would give the American public widespread access to a new broadband, interactive communications system, capable of supplying vast new quantities of both data and video. Certain other legislative or regulatory initiatives that may result in additional competition for cable television systems are described in the following sections. The competitive environment surrounding cable television was further altered during the past year by a series of marketplace announcements documenting the heightened involvement of telephone companies in the cable television business. Some of these involve the purchase of existing cable systems by telephone companies outside their own exchange areas, while others contemplate expanded joint ventures between certain major cable companies and regional telephone companies. Broadcast Television Operating results for broadcast television stations are affected by the availability, popularity and cost of programming; competition for local, regional and national advertising revenues; the availability to local stations of compensation payments from national networks with which the local stations are affiliated; competition within the local markets from programming on other stations or from other media; competition from other technologies, including cable television; and government regulation and licensing. Due primarily to increased competition from cable television, with that medium's plethora of viewing alternatives and from the Fox Network, the share of viewers watching the major U.S. networks, ABC, CBS, and NBC, has declined significantly over the last ten years. This reduction in viewer share has made it increasingly difficult for local stations to increase their revenues from advertising. The combination of these reduced shares and the impact of the economic recession at the beginning of this decade on the advertising market resulted in generally deteriorating performance at many local stations affiliated with ABC, CBS, and NBC. Although the share of viewers watching the major networks has recently leveled off or increased slightly, additional audience and advertiser fragmentation may occur if, as planned, one or more of the additional, recently launched broadcast networks develops program offerings competitive with those of the more established networks. Radio Industry The radio industry is highly competitive and dynamic, and reaches a larger portion of the population than any other medium. There are generally several stations competing in an area and most larger markets have twenty or more viable stations; however, stations tend to focus on a specific target market by programming music or other formats that appeal to certain demographically specific audiences. As a result of these factors, radio is an effective medium for advertisers as it can have mass appeal or be focused on a specific market. While radio has not been subject to an erosion in market share such as that experienced by broadcast television, it was also subject to the depressed nationwide advertising market at the beginning of this decade. Recent changes in FCC multiple ownership rules have led to more concentration in some local radio markets as a single party is permitted to own additional stations or provide programming and sell advertising on stations it does not own. Registrant is subject to significant competition, in many cases from competitors whose media properties are larger than Registrant's media properties. LEGISLATION AND REGULATION Cable Television Industry The cable television industry is extensively regulated by the federal government, some state governments and most local franchising authorities. In addition, the Copyright Act of 1976 (the "Copyright Act") imposes copyright liability on all cable television systems for their primary and secondary transmissions of copyrighted programming. The regulation of cable television systems at the federal, state and local levels is subject to the political process and has been in constant flux over the past decade. This process continues to generate proposals for new laws and for the adoption or deletion of administrative regulations and policies. Further material changes in the law and regulatory requirements, especially as a result of the 1992 Cable Act (the "1992 Cable Act"), must be expected. There can be no assurance that the Registrant's Cable Systems will not be adversely affected by future legislation, new regulations or judicial or administrative decisions. The following is a summary of federal laws and regulations materially affecting the cable television industry and a description of certain state and local laws with which the cable industry must comply. Federal Statutes The Cable Act imposes certain uniform national standards and guidelines for the regulation of cable television systems. Among other things, the legislation regulates the provision of cable television service pursuant to a franchise, specifies a procedure and certain criteria under which a cable television operator may request modification of its franchise, establishes criteria for franchise renewal, sets maximum fees payable by cable television operators to franchising authorities, authorizes a system for regulating certain subscriber rates and services, outlines signal carriage requirements, imposes certain ownership restrictions, and sets forth customer service, consumer protection, and technical standards. Violations of the Cable Act or any FCC regulations implementing the statutory law can subject a cable operator to substantial monetary penalties and other sanctions. Federal Regulations Federal regulation of cable television systems under the Cable Act and the Communications Act of 1934 is conducted primarily through the FCC, although, as discussed below, the Copyright Office also regulates certain aspects of cable television system operation. Among other things, FCC regulations currently contain detailed provisions concerning non-duplication of network programming, sports program blackouts, program origination, ownership of cable television systems and equal employment opportunities. There are also comprehensive registration and reporting requirements and various technical standards. Moreover, pursuant to the 1992 Cable Act, the FCC has, among other things, established new regulations concerning mandatory signal carriage and retransmission consent, consumer service standards, the rates that may be charged to subscribers, and the rates and conditions for commercial channel leasing. The FCC also issues permits, licenses or registrations for microwave facilities, mobile radios and receive-only satellite earth stations, all of which are commonly used in the operation of cable systems. The FCC is authorized to impose monetary fines upon cable television systems for violations of existing regulations and may also suspend licenses and other authorizations and issue cease and desist orders. It is likewise authorized to promulgate various new or modified rules and regulations affecting cable television, many of which are discussed in the following paragraphs. The 1992 Cable Act In 1992, over the veto of President Bush, the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act") was enacted by vote of Congress. The 1992 Cable Act clarifies and modifies certain provisions of the 1984 Cable Act as well as codifying certain FCC regulations and adding a number of new requirements. Implementation of the new legislation was generally left to the FCC. Throughout 1993-94 the FCC undertook or completed a substantial number of complicated rulemaking proceedings resulting in a host of new regulatory requirements or guidelines. Several of the provisions of the 1992 Cable Act and certain FCC regulations implemented pursuant thereto are being tested in court. Registrant cannot predict the result of any pending or future court challenges or the shape any still-pending or proposed FCC regulations may ultimately take, nor can Registrant predict the effect of either on its operations. As discussed in greater detail elsewhere in this filing, some of the principal provisions of the 1992 Cable Act include: (1) a mandatory carriage requirement coupled with alternative provisions for retransmission consent as to over-the-air television signals; (2) rate regulations that completely replace the rate provisions of the 1984 Cable Act; (3) consumer protection provisions; (4) a three-year ownership holding requirement; (5) some clarification of franchise renewal procedures; and (6) FCC authority to examine and set limitations on the horizontal and vertical integration of the cable industry. Other provisions of the wide-ranging 1992 Cable Act include: a prohibition on "buy-throughs," an arrangement whereby subscribers are required to subscribe to a program tier other than basic in order to receive certain per-channel or per-program services; requiring the FCC to develop minimum signal standards, rules for the disposition of home wiring upon termination of cable service, and regulations regarding compatibility of cable service with consumer television receivers and video cassette recorders; a requirement that the FCC promulgate rules limiting children's access to indecent programming on access channels; notification requirements regarding sexually explicit programs; and more stringent equal employment opportunity rules for cable operators. The 1992 Cable Act also contains a provision barring both cable operators and certain vertically integrated program suppliers from engaging in practices which unfairly impede the availability of programming to other multichannel video programming distributors. In sum, the 1992 Cable Act codifies, initiates, or mandates an entirely new set of regulatory requirements and standards. It is an unusually complicated and sometimes confusing legislative enactment whose ultimate impact depends on a multitude of FCC enforcement decisions as well as certain yet- to-be concluded FCC proceedings. It is also subject to pending and future judicial challenges. Because of these factors, and the on-going nature of so many highly complicated and uncertain administrative proceedings, it is only possible, at this juncture, to simply note the key features of the new law. How and to what extent most of these individual provisions will impact Registrant's operations must necessarily await future developments at the FCC, before the courts, and in the marketplace. Although still subject to various reconsideration petitions, further rulemaking notices, or pending court appeals, the FCC has adopted new regulations in the areas mandated by the 1992 Cable Act. These include rules and regulations governing the following areas: indecency on leased access channels, obscenity on public, educational and governmental ("PEG") channels, mandatory carriage and retransmission consent of over-the-air signals, home wiring, equal employment opportunity, tier "buy-throughs," customer service standards, cable television ownership standards, program access, carriage of home shopping stations, and rate regulation. Most of these new regulations went into effect by 1994. However, in November 1993, a three judge panel of the D.C. Circuit found the indecency rules to be unconstitutional and remanded them to the Commission. Subsequently, on February 16, 1994, the U.S. Court of Appeals for the D.C. Circuit vacated the panel decision pending rehearing and a decision by the full Court of Appeals. In the meantime, the effectiveness of the indecency provisions remain stayed. Similarly, challenges to the constitutionality of the mandatory carriage provision remain pending. Although a special three judge panel of the U.S. District Court for the District of Columbia upheld the constitutionality of the mandatory carriage provision, the U.S. Supreme Court vacated that decision in June 1994 and remanded the case to the District Court for further proceedings. Accordingly, a final determination on the constitutionality of the mandatory carriage rules must await a further fact-finding procedure before the District Court and a possible further appeal to the U.S. Supreme Court. Currently, the must carry rules remain in effect. On a separate matter, in September 1993 the United States District Court for the District of Columbia found that the horizontal ownership limits called for by the 1992 Cable Act are unconstitutional. Accordingly, the Commission has stayed the effect of horizontal ownership rules until final judicial resolution of the issue. Registrant is unable to predict the ultimate outcome of these proceedings or the impact upon its operations of various FCC regulations still being formulated and/or interpreted. As previously noted, under the broad statutory scheme, cable operators are subject to a two- level system of regulation with some matters under federal jurisdiction, others subject strictly to local regulation, and still others subject to both federal and local regulation. Following are descriptions of some of the more significant regulatory areas of concern to cable operators. Franchises The Cable Act affirms the right of franchising authorities to award one or more franchises within their jurisdictions and prohibits future cable television systems from operating without a franchise. The 1992 Cable Act provides that franchising authorities may not grant an exclusive franchise or unreasonably deny award of a competing franchise. The Cable Act also provides that in granting or renewing franchises, franchising authorities may establish requirements for cable-related facilities and equipment but may not specify requirements for video programming or information services other than in broad categories. Under the 1992 Cable Act, franchising authorities are now exempted from money damages in cases involving their exercise of regulatory authority, including the award, renewal, or transfer of a franchise, except for cases involving discrimination on race, sex, or similar impermissible grounds. Remedies are limited exclusively to injunctive or declaratory relief. Franchising authorities may also build and operate their own cable systems without a franchise. The Cable Act permits local franchising authorities to require cable operators to set aside certain channels for PEG access programming and to impose a franchise fee of up to five percent of gross annual system revenues. The Cable Act further requires cable television systems with 36 or more channels to designate a portion of their channel capacity for commercially leased access by third parties, which generally is available to commercial and non-commercial parties to provide programming (including programming supported by advertising). As required by the 1992 Cable Act, the FCC adopted rules setting maximum reasonable rates and other terms for the use of such leased channels. The FCC also has jurisdiction to resolve disputes over the provision of leased access. In 1993, the U.S. Supreme Court ended a period of prolonged confusion over the reach of the 1984 Cable Act's franchising requirements by rejecting a constitutional challenge to the Act's definition of "cable system." In FCC v. Beach Communications, Inc., 113 S. Ct. 2096 (1993), the Court held that the Act's exemption of certain satellite master antenna television ("SMATV") systems from general franchising requirements is rationally related to legitimate policy goals. Under the terms of the Act, SMATV systems serving more than one building need not obtain a franchise if the buildings are commonly owned and are not interconnected by wire using a public right-of-way. Reversing a 1992 decision of the U.S. Court of Appeals for the D.C. Circuit, the Supreme Court held that the distinction drawn between commonly-owned buildings and separately-owned buildings is constitutionally valid. The result of this decision is that SMATV systems interconnecting separately-owned buildings and systems that wire buildings together using a public right-of-way must obtain a franchise and comply with the franchising requirements of the Cable Act. In 1992, the FCC permitted telephone companies to engage in so- called "video dialtone" operations in their local exchange areas pursuant to which neither they nor the programming entities they serve are required to obtain a local cable franchise (see "Video Dialtone" below). Rate Regulation The 1992 Cable Act completely supplants the rate regulation provisions of the 1984 Cable Act. The 1992 Act establishes that rate regulation applies to rates charged for the basic tier of service by any cable system not subject to "effective competition," which is, in turn, deemed to exist if (1) fewer than 30 percent of the households in the service area subscribe to the system, (2) at least 50 percent of the households in the franchise area are served by two multichannel video programming distributors and at least 15 percent of the households in the franchise area subscribe to the additional operator, or (3) a franchising authority for that franchise area itself serves as a multichannel video programming distributor offering service to at least 50 percent of the households in the franchise area. Under this new statutory definition, the Registrant's systems, like most cable systems in most areas, are not presently subject to effective competition. The basic tier must include all signals required to be carried under the 1992 Cable Act's mandatory carriage provisions, all PEG channels required by the franchise, and all broadcast signals other than "superstations." Acting pursuant to the foregoing statutory mandate, the FCC, on May 3, 1993, released a Report and Order ("Rate Order") establishing a new regulatory scheme governing the rates for certain cable television services and equipment. The new rules, among other things, set certain benchmarks which will enable local franchise authorities to require rates for "basic service" (as noted, essentially, local broadcast and access channels) and the FCC (upon receipt of individual complaints) to require rates for certain satellite program services (excluding premium channels) to fall approximately 10% from September 30, 1992 levels, unless the cable operator is already charging rates that are at a so-called "competitive" benchmark level or it can justify a higher rate based on a cost-of-service showing. Rates of all regulated cable systems will then be subject to a price cap that will govern the extent to which rates can be raised in the future without a cost-of-service showing. The rules announced in May 1993, became effective on September 1, 1993, but remained subject to considerable debate and uncertainty as several major issues and FCC proceedings awaited resolution. On February 22, 1994, the FCC adopted a series of additional measures that expand and substantially alter its cable rate regulations. The FCC's major actions include the following: (1) a modification of its benchmark methodology in a way which effectively required cable rates to be reduced, on average, an additional 7% (i.e., beyond the 10% reduction previously ordered in 1993) from their September 30, 1992 level, or to the new benchmark, whichever is less; (2) the issuance of new standards and requirements to be used in making cost-of-service showings by cable operators who seek to justify rates above the levels determined by the benchmark approach; and (3) the clarification and/or reaffirmation of a number of "going forward" issues that had been the subject of various petitions for reconsideration of its May 3, 1993 Rate Order. In deciding to substantially revise its benchmark methodology for regulated cable rates, the FCC has actually created two benchmark systems. Thus, whereas the modified rate regulations adopted on February 22, 1994 became effective as of May 15, 1994, regulated rates in effect before that date will continue to be governed by the old benchmark system. Under the FCC's revised benchmark regulations, systems not facing "effective competition" that have become subject to regulation will be required to set their rates at a level equal to their September 30, 1992 rates minus a revised "competitive differential" of 17 percent (a "differential" which, as noted, was set at 10 percent in the FCC's May 1993 Rate Order). Cable operators who seek to charge rates higher than those produced by applying the competitive differential may elect to invoke new cost-of-service procedures (discussed below). In addition to revising the benchmark formula and the competitive differential used in setting initial regulated cable rates, the FCC adopted rules to simplify the calculations used to adjust those rates for inflation and external costs in the future. The FCC also concluded that it will treat increases in compulsory copyright fees incurred by carrying distant broadcast signals as external costs in a fashion parallel to increases in the contractual costs for nonbroadcast programming. It will not, however, accord external cost treatment to pole attachment fees. In its May 1993 Rate Order the FCC exempted from rate regulation the price of packages of "a la carte" channels if certain conditions were met. Upon reconsideration, however, the FCC on February 22, 1994 effectively tightened its regulatory treatment of "a la carte" packages by establishing more elaborate criteria designed to ensure that such practices are not employed so as to unduly evade rate regulation. When assessing the appropriate regulatory treatment of "a la carte" packages, the FCC stated it would consider, inter alia, the following factors as possibly suggesting that such packages do not qualify for non-regulated treatment: whether the introduction of the package avoids a rate reduction that otherwise would have been required under the FCC's rules; whether an entire regulated tier has been eliminated and turned into an "a la carte" package; whether a significant number or percentage of the "a la carte" channels were removed from a regulated service tier; whether the package price is deeply discounted when compared to the price of an individual channel; and whether the subscriber must pay significant equipment or other charges to purchase an individual channel in the package. In addition, the FCC would consider factors that will reflect in favor of non-regulated treatment such as whether the channels in the package have traditionally been offered on an "a la carte" basis or whether the subscriber is able to select the channels that comprise the "a la carte" package. "A la carte" packages which are found to evade rate regulation rather than enhance subscriber choice would be treated as regulated tiers, and operators engaging in such practices may be subject to forfeitures or other sanctions by the FCC. In another action, the FCC adopted a methodology for determining rates when channels are added to or deleted from regulated tiers and announced that it will treat programming costs as external costs and that operators may recover the full amount of programming expenses associated with added channels. Operators may also recover a mark-up on their programming expenses. These adjustments and calculations are to be made on a new FCC form. On November 10, 1994, the FCC adopted new "going forward" rules and further tightened its regulation of a la carte packages. These new rules allow operators to pass through the costs, plus a 20 cent per channel mark-up, for channels newly added to regulated tiers. Through 1996, however, operators will be subject to an aggregate of $1.50 cap on the amount they may increase cable program service tier rates due to channel additions. The FCC also established a "new products tier" intended to provide operators unregulated pricing and packaging flexibility, particularly for newer services, so long as they preserve the fundamental nature of their preexisting regulated tiers. Outside of the "new products" approach, however, the Commission reversed its approach to a la carte packages and ruled that all (non-premium) packages of services -- even if also available on an a la carte basis -- would be treated as a regulated tier. Several cable industry interests have challenged or announced that they will challenge these and other rate regulation decisions of the FCC in a federal court of appeals. Registrant is unable to predict the timing or outcome of any such appeals. In a separate action on February 22, 1994, the FCC adopted interim rules to govern cost of service proceedings initiated by cable operators. Operators who elect to pursue cost of service proceedings will have their rates based on their allowable costs, in a proceeding based on principles similar to those that govern cost-based rate regulation of telephone companies. Under this methodology, cable operators may recover, through the rates they charge for regulated cable service, their normal operating expenses and a reasonable return on investment. The FCC has, for these purposes, established an interim industry-wide rate of return of 11.25%. It has also determined that acquisition costs above book value are presumptively excluded from the rate base. At the same time, certain intangible, above-book costs, such as start-up losses (limited to losses actually incurred during a two- year start-up period) and the costs of obtaining franchise rights and some start-up organizational costs such as customer lists, may be allowed. There are no threshold requirements limiting the cable systems eligible for a cost of service showing, except that, once rates have been set pursuant to a cost of service approach, cable operators may not file a new cost of service showing to justify new rates for a period of two years. Finally, the FCC notes that it will, in certain individual cases, consider a special hardship showing (or the need for special rate relief) where an operator demonstrates that the rates set by a cost of service proceeding would constitute confiscation of investment and that some higher rate would not represent exploitation of customers. In considering whether to grant such a request, the FCC emphasizes that, among other things, it would examine the overall financial condition of the operator and whether there is a realistic threat of termination of service. These interim rules remain the subject of both a further FCC rulemaking and a pending appeal in the U.S. Court of Appeals for the D.C. Circuit. The 1992 Cable Act also prohibits cable operators from requiring customers to subscribe to any tier of service other than the basic service tier in order to gain access to programming offered on a per-channel or per-program basis. This so-called "anti-buy- through" provision does not apply, however, to systems that do not have the capacity to offer basic tier customers programming on a per-channel or per-program basis due to a lack of addressable converters or other technological limitations. This exemption may be claimed until a system has been modified to eliminate the technical impediments, or for a period of ten years after the enactment of the 1992 law. The FCC also may grant a cable operator a waiver of the "anti-buy-through" provision if it determines that compliance with the rule will require an operator to raise its rates. Renewal and Transfer The 1984 Cable Act established procedures for the renewal of cable television franchises. The procedures were designed to provide incumbent franchisees with a fair hearing on past performances, an opportunity to present a renewal proposal and to have it fairly and carefully considered, and a right of appeal if the franchising authority either fails to follow the procedures or denies renewal unfairly. These procedures were intended to provide an incumbent franchisee with substantially greater protection than previously available against the denial of its franchise renewal application. The 1992 Cable Act seeks to address some of the issues left unresolved by the earlier Act. It provides a more definite timetable in which the franchising authority is to act on a renewal request. It also narrows the range of circumstances in which a franchised operator might contend that the franchising authority had constructively waived non-compliance with its franchise. Cable system operators are sometimes confronted by challenges in the form of proposals for competing cable franchises in the same geographic area, challenges which may arise in the context of renewal proceedings. In Rolla Cable Systems v. City of Rolla, a federal district court in Missouri in 1991 upheld a city's denial of franchise renewal to an operator whose level of technical services was found deficient under the renewal standards of the 1984 Cable Act. Local franchising authorities also have, in some circumstances, proposed to construct their own cable systems or decided to invite other private interests to compete with the incumbent cable operator. Judicial challenges to such actions by incumbent system operators have, to date, generally been unsuccessful. Registrant cannot predict the outcome or ultimate impact of these or similar franchising and judicial actions. The 1992 Cable Act directs that no cable operator may transfer ownership of a cable system within 36 months (or three-years) of its acquisition or initial construction. FCC implementing rules give local franchising authorities primary responsibility to oversee compliance with the three-year holding requirement by requiring cable systems to certify (and submit) certain information to the franchiser in order to demonstrate that the holding requirement does not apply to a particular transfer. Disputes concerning compliance, however, will be resolved by the FCC. The 1992 Cable Act also provides that in cases where the three-year holding period does not apply, and where local consent to a transfer is required, the franchise authority must act within 120 days of submission of a transfer request or the transfer is deemed approved. The 120-day period commences upon the submission to local franchising authorities of information now required on a new standardized FCC transfer form. The franchise authority may request additional information beyond that required under FCC rules. Further, the 1992 Cable Act gives local franchising officials the authority to prohibit the sale of a cable system if the proposed buyer operates another cable system in the jurisdiction or if such sale would reduce competition in cable service. Cable System Ownership Restrictions Cross-Ownership: The Cable Act prohibits local exchange telephone companies from owning cable television systems within their exchange service areas, except in rural areas or by specific waiver. The Act also prohibits telephone companies from providing video programming directly to subscribers. The regulations are of particularly competitive importance because these telephone companies already own much of the plant necessary for cable television operation, such as poles, ducts and rights- of-way. In late 1992, subsidiaries of Bell Atlantic Corporation filed suit in federal district court in Virginia against the FCC and United States government, alleging that the prohibition against video programming is an unconstitutional restraint of free speech and denial of equal protection. On August 24, 1993, Judge Ellis of the U.S. District Court for the Eastern District of Virginia ruled that the cable-telco cross-ownership prohibition in the Cable Act violated Bell Atlantic's First Amendment rights. Chesapeake and Potomac Telephone Co. of Virginia v. United States, No. 92-1751-A (E.D. Va. Aug. 1993). On September 30, 1993, Judge Ellis clarified the scope of his decision by ruling that it applies only to Bell Atlantic Corporation and its telephone company subsidiaries in the mid- Atlantic states. As a result, other telephone companies are not free to enter the cable television business, unless they obtain similar relief from other courts or unless the Supreme Court upholds the decision on appeal. However, subsequent to this decision, other Bell Operating Companies have filed their own constitutional challenges to the same statutory restriction in other U.S. district courts. District courts in Washington, Alabama, Maine, Illinois the District of Columbia and Virginia have also ruled that the 1984 Act's ban on the provision of video programming is unconstitutional. The Fourth and the Ninth Circuits have upheld District Court decisions on appeal. The FCC has also relaxed its telephone-cable restrictions to permit local telephone companies (local exchange carriers) to offer broadband video services under the so-called video dialtone approach. In the same proceeding, the FCC ruled that neither a local exchange carrier nor a separate programming entity providing service under a video dialtone arrangement would be required to obtain a local cable franchise. In addition, the FCC allowed telephone companies to hold financial interests of up to five percent in co-located cable companies, and it also recommended that Congress repeal its cross-ownership ban. The FCC also ruled that interexchange carriers, such as AT&T, MCI and US Sprint, are not subject to the current statutory restrictions on telephone company/cable television cross-ownership. In October 1994 the Commission issued a reconsideration order in which it affirmed this video dialtone framework. In January 1995, the Commission issued another Notice of Proposed Rulemaking on the adoption of rules to govern the ability of telephone companies to provide video programming directly to their subscribers. In that proceeding, the Commission will consider the extent to which Title II and Title VI of the Communications Act should apply to telephone companies that provide video programming to subscribers over their own video dialtone systems. In addition, the Commission will consider whether telephone companies that are no longer subject to the cross-ownership ban should be allowed to become video programmers on their own video dialtone platforms, subject to appropriate safeguards. Indeed, on January 12, 1995, the Commission approved Bell Atlantic's application to commence a six month videodialtone service market in Arlington, Virginia in which -- based on Bell Atlantic's successful cross ownership ban challenge -- it could carry and package affiliated programming subject to safeguards. Various aspects of the FCC's video dialtone and telephone/cable cross-ownership decisions remain subject to appeal by both the cable industry and telephone companies. Registrant cannot predict the outcome of any such appeals. In 1989, the FCC authorized a limited five-year waiver of its cable-telephone cross-ownership ban to permit General Telephone Company of California ("General") to construct coaxial and fiber optic cable facilities in Cerritos, California, on an experimental basis. The experiment called for General to lease the facilities to two customers, Apollo Cablevision ("Apollo"), the system franchisee, and GTE Service Corporation ("GTE"), an affiliate of General. GTE proposed to use its leased facilities, inter alia, to test certain types of cable in comparison with fiber optic facilities for carriage of voice, data and video signals (including a "video on demand" service). The waiver was granted subject to several reporting conditions, accounting safeguards against unauthorized telephone rate payer subsidization of the cable experiment, and a requirement that General contract with another entity to provide the video programming. In response to a petition for review filed by the National Cable Television Association, the U.S. Court of Appeals for the D.C. Circuit, on September 18, 1990, remanded the proceeding to the FCC because the Commission had failed to explain why Apollo's corporate parent needed to be involved in construction of the system and thereby give rise to a prohibited affiliation. After an extended period of unsuccessful settlement negotiations with the parties, the FCC, in July 1992, invited public comment on what action it should take. On November 9, 1993, the FCC rescinded both its original waiver in its entirety and GTE's authority to operate and maintain the coaxial and fiber optic cable facilities in Cerritos. While this FCC order was to become effective within 120 days of its release, GTE was directed to provide the FCC with its specific plan for compliance within 30 days. In January, 1994, after the FCC denied GTE's request for stay of this order (or extension of its deadlines), the U.S. Court of Appeals for the Ninth Circuit granted a stay pending its resolution of GTE's petition for review of the FCC rescission order. Registrant cannot predict the outcome of the pending judicial review proceeding, or the likelihood of similar waivers being granted to other telephone companies in the future. Several bills were introduced in recent sessions of Congress and are again under active consideration that would eliminate the cable/telco cross-ownership ban, subject to certain conditions. The two most prominent in the last session were S.1086, introduced by Senator Danforth (R-Mo.) and H.R.3636, introduced by Reps. Markey (D-Ma.) and Fields (R-Tx). These bills generally provided that a telephone company may provide video programming service within its franchise area in accordance with various regulatory safeguards, but may not acquire an existing cable system. The safeguards in H.R.3636 included a requirement that video programming service be provided through an affiliate separate from the telephone operating company, restrictions on telemarketing, affiliate transactions rules, a requirement that the telco's video affiliate establish a video platform with up to 75 percent of its capacity available to unaffiliated program suppliers, and a prohibition against cross-subsidization. The safeguards in S.1086 included a separate subsidiary requirement and a general proscription against cross-subsidization. Some current proposals not yet introduced as bills contemplate a similar, but possibly more permissive framework for telephone company entry into cable. Under the 1992 Cable Act, common ownership of a co-located cable system and MMDS system is prohibited. Further, common ownership of cable systems and some types of private cable (e.g., "SMATV") systems is prohibited. Concentration of Ownership: The 1992 Cable Act directed the FCC to establish reasonable limits on the number of cable subscribers a single company may reach through cable systems it owns ("horizontal concentration") and the number of system channels that a cable operator could use to carry programming services in which it holds an ownership interest ("vertical concentration"). The horizontal ownership restrictions of the Act were struck down by a federal district court as an unconstitutional restriction on speech. Pending final judicial resolution of this issue, the FCC stayed the effective date of its horizontal ownership limitations, which would place a 30 percent nationwide limit on subscribers by any one entity. Registrant cannot predict the final version of any such limitations or their effect on Registrant's operations. The FCC's vertical restriction consists of a "channel occupancy" standard which places a 40% limit on the number of channels that may be occupied by services from programmers in which the cable operator has an attributable ownership interest. Further, the Act and FCC rules restrict the ability of programmers to enter into exclusive contracts with cable operators. Registrant cannot predict the effect on its operations of these legislative enactments or the implementing regulations. Foreign Ownership: A measure was approved by the House in the 1992 Congress to restrict foreign ownership of cable systems, but was deleted by a House-Senate Conference Committee from the legislation that subsequently was enacted as the 1992 Cable Act. Video Marketplace: As required by the Cable Act, in September 1994 the Commission issued a report assessing the status of competition in the market for the delivery of video programming. Although the Commission found that cable television continues to dominate the distribution of multi-channel video programming to consumers in most markets, it noted that competing distribution technologies have made substantial strides since 1990. The Commission identified several types of dominant firm strategic behavior, policy-relevant barriers to entry, and technological bottlenecks that could adversely affect performance in the multi- channel video distribution market. Although the Commission determined that several specific reforms might improve market performance, it concluded that most of the competitive issues identified would require ongoing monitoring. FCC Limits on Broadcast Network/Cable Cross-ownership: In 1992, the FCC modified its ban on broadcast television network ownership of cable systems. Such ownership now is permitted provided that network-controlled systems do not constitute more than (1) 10% of the homes passed nationwide by cable systems, and (2) 50% of the homes passed by cable within a particular television Area of Dominant Influence ("ADI"). These limitations will not apply where the network-owned system receives competition from another multichannel video service provider. Registrant is unable to predict the effect upon its operations of the repeal of the former prohibition. Alternative Video Programming Services Wireless Cable: The FCC has expanded the authorization of MMDS services to provide "wireless cable" via multiple microwave transmissions to home subscribers. In 1990, the FCC increased the availability of channels for use in wireless cable systems by eliminating MMDS ownership restrictions and simplifying various processing and administrative rules. The FCC also modified equipment and technical standards to increase service capabilities and improve service quality. Since then, the FCC has resolved certain additional wireless cable issues, including channel allocations for MMDS, Operational Fixed Service ("OFS") and Instructional Television Fixed Service ("ITFS") facilities, direct application by wireless operators for use of certain ITFS channels, and restrictions on ownership or operation of wireless facilities by cable entities. In 1992, the FCC proposed a new service, LMDS, which also could be used to supply multichannel video and other communications services directly to subscribers. This service would operate in the 28 GHz frequency range and, consistent with the nature of operations in that range, the FCC envisions that LMDS transmitters could serve areas of only six to twelve miles in diameter. Accordingly, it is proposed that LMDS systems utilize a grid of transmitter "cells," similar to the structure of cellular telephone operations. In July 1994, the Commission established a negotiated rulemaking committee to develop technical rules and to reach a consensus on sharing the 28 GHz band between terrestrial (LMDS) and satellite users. In September, however, the negotiated rulemaking committee reported to the Commission that it was unable to reach a consensus on sharing. Registrant cannot predict how the LMDS sharing issue will be resolved. Video Dialtone: Telephone company ownership of cable television systems in the same areas was prohibited by the 1984 Cable Act, but has been the subject of the successful challenges noted above. In any case, the FCC modified its rules to allow telephone companies to play a greater role in delivery of video services through an arrangement termed "video dialtone." The video dialtone model would be a common carrier based service, analogous to the ordinary telephone dialtone, whereby local telephone companies could provide customers access to video programming, videotext, videophone and other future advanced services. In such an arrangement, the telephone company may provide the facilities to deliver programming to subscribers, but may not itself provide the programming or dictate how that programming should be offered. To date, over thirty video dialtone applications have been filed with the FCC. Some of the first proposals are in the beginning stages of technical trials and the Commission has now granted more video dialtone experimental and commercial authorizations. Personal Communications Service ("PCS"): In August, 1993, the FCC established rules for a new portable telephone service, the Personal Communications Service ("PCS"). PCS has potential to compete with landline local telephone exchange services. Among several parties expressing interest in PCS were cable television operators, whose plant structures present possible synergies for PCS operation. In September 1993, the FCC adopted rules for "broadband PCS" service. It allocated 120 MHz of spectrum in the 2 GHz band for licensed broadband PCS services, divided into three 30 MHz blocks (blocks A, B and C) and three 10 MHz blocks (blocks D, E and F). The Commission has also established two different service areas for these blocks based on Rand McNally's Basic Trading Areas (BTAs) and Major Trading Areas (MTAs). Thus, there are up to six PCS licenses available in each geographic area. The Commission will use competitive bidding to assign the PCS licenses. The auction rules were finalized in July 1994 and modified in November 1994. Auctions for the A and B block auctions began in December 1994. Registrant cannot predict the outcome of these auctions. Three broadband PCS licenses were awarded to pioneer's preference winners in December 1994. Information and Interexchange Services (Modified Final Judgment): The Consent Decree that terminated the United States v. AT&T antitrust litigation in 1982 (known as the Modified Final Judgment or "MFJ") prohibited the Bell Operating Companies and their affiliates (collectively, the "Regional Bells") from, inter alia, providing "information" and "interexchange telecommunications" services. The information services restriction was understood to prohibit the Regional Bells from owning cable television systems. In 1991, the United States District Court removed that restriction but stayed the effect of its decision. The United States Court of Appeals for the District of Columbia Circuit lifted the stay later that year and affirmed the removal of the restriction in 1993. The Supreme Court has denied a petition for writ of certiorari of that decision. Consequently, the MFJ no longer restricts the Regional Bells from providing information services. The interexchange telecommunications restriction in the MFJ prohibits the Regional Bells from providing telecommunications services across Local Access and Transport Areas ("LATAs") as defined in the Consent Decree. The interexchange restriction has been interpreted as prohibiting the Regional Bells from operating receive-only earth stations at a cable system headend, as well as from operating a cable system that crosses a LATA boundary. In 1993, the U.S. District Court for the District of Columbia granted Southwestern Bell Corporation a waiver of the interexchange line of business restriction for the purposes of acquiring and operating cable systems in Montgomery County, Maryland, and Arlington County, Virginia. In 1994, the U.S. District Court for the District of Columbia granted waivers to: (1) BellSouth for the purpose of providing cable television services in Las Vegas, Nevada, Anchorage, Bethel, and Kenai Peninsula, Alaska, Harris County, Texas, Chicago, Illinois and Fort Bend County, Texas; (2) Pacific Telesis Group for the purpose of providing cable television service in Chicago, Illinois; and (3) US West for the purpose of providing cable television service in and around Atlanta, Georgia. In addition, numerous other line of business waiver requests are currently pending before the Department of Justice and the United States District Court for the District of Columbia. In addition, all seven Regional Bells have moved for a waiver of the interexchange line of business restriction to allow them to provide information services on an interexchange basis. That motion is currently being reviewed by the U.S. Department of Justice. Congress may consider legislation in 1995 that would remove the interexchange services restriction in whole or in part. Legislation affecting the MFJ may also specify the terms and conditions, including regulatory safeguards, pursuant to which the Regional Bells may provide information and interexchange services. There can be no assurance that cable television systems of Registrant will not be adversely affected by future judicial decisions or legislation in this area. Other New Technologies: Several technologies exist or have been proposed that have the potential to increase competition in the provision of video programming. Currently, cable subscribers can receive programming received by home satellite dishes or via satellite master antenna television facilities ("SMATV"). In addition, the FCC has authorized nine entities to provide programming directly to home subscribers through direct broadcast satellites ("DBS"). On December 17, 1993, two such parties, Hughes Communications Galaxy ("Hughes"), an affiliate of the General Motors Company, and United States Satellite Broadcasting Company ("USSB") jointly launched a new high-powered satellite with 16 transponders, from which they can provide DBS service to the entire country. In June 1994, Hughes and USSB initiated DBS service, and in August 1994 they launched a second satellite which is now operational. In December 1994, two DBS permittees, EchoStar Satellite Corporation and Directsat Corporation, merged their DBS authorizations. Service from these permittees is expected to commence in early 1995. In addition, Advanced Communications Corporation has applied for authority to assign its DBS authorizations to TEMPO DBS, Inc. which plans to initiate service in 1996. The other parties that hold authorizations to provide DBS services have not yet launched their proposed satellites. Another technological development in the making with significant implications for video programming is "high definition television" ("HDTV"). A private sector Advisory Panel was organized by the FCC in 1987 to study various issues relating to advanced television systems ("ATV"), including HDTV. It is anticipated that with the assistance and recommendations of this Advisory Panel the FCC should be in a position to establish a technical standard for HDTV broadcasting by early 1996. Programming Issues Retransmission Consent and Mandatory Carriage: The 1992 Cable Act gives television stations the right to withhold permission for cable systems to carry their signals, to require compensation in exchange for such permission ("retransmission consent"), or, alternatively, in the case of local stations, to demand carriage without compensation ("must carry"). The FCC's implementing regulations required broadcasters to elect between must-carry and retransmission consent by June 17, 1993, with the choice binding for three years. A broadcast station has the right to choose must-carry, assuming it can deliver a signal of specified strength, with regard to cable systems in its Area of Dominant Influence as defined by the audience measurement service, Arbitron. Stations electing to grant retransmission authority were expected to conclude their consent agreements with cable systems by October 6, 1993, the date on which systems' authority to carry broadcast signals without consent expired. While monetary compensation is possible in return for such consent, many broadcast station operators accepted arrangements that do not require payment but involve other types of consideration, such as use of a second cable channel, advertising time, and joint programming efforts. The must carry provisions of the FCC's rules have been challenged as unconstitutional. After a special three-judge district court rejected the challenge, the Supreme Court remanded the case to the district court for further proceedings. Registrant cannot predict the outcome of the case. The 1992 Cable Act also requires cable systems to carry a broadcast television station, at the election of the station, on the same channel as its broadcast channel, the channel on which it was carried by the cable system on July 19, 1985, or the channel on which it was carried on January 1, 1992. FCC rules formerly required cable television operators to make available and install A/B switches to those subscribers who request them. (An A/B switch is an input selector which permits conversion from reception via the cable television systems to use of an off-air antenna). This requirement was abolished by the 1992 Cable Act. Copyright: Cable television systems are subject to the Copyright Act of 1976 which, among other things, covers the carriage of television broadcast signals. Pursuant to the Copyright Act, cable operators obtain a compulsory license to retransmit copyrighted programming broadcast by local and distant stations in exchange for contributing a percentage of their revenues as statutory royalties to the U.S. Copyright Office. The amount of this royalty payment varies depending on the amount of system revenues from certain sources, the number of distant signals carried, and the locations of the cable television system with respect to off-air television stations and markets. Copyright royalty arbitration panels, to be convened by the Librarian of Congress as necessary, are responsible for distributing the royalty payments among copyrights owners and for periodically adjusting the royalty rates. In July, 1991, the U.S. Copyright Office affirmed an earlier decision that satellite carriers and MMDS systems are not "cable systems" within the meaning of the Copyright Act, and, therefore, are not entitled to the compulsory licensing scheme that would allow them to retransmit broadcast signals in exchange for payment of a fee. Unlike cable entities, these systems will have to negotiate with the individual copyright holders for the right to retransmit copyrighted broadcast signals. Satellite carriers, however, can continue to retransmit broadcast signals under an alternative compulsory copyright system until the end of 1994. In response to Congressional concerns about the ability of these new technologies to compete with cable, the Copyright Office has delayed the effective date of its decision in this area until January 1, 1999. The Copyright Office suspended its rule denying MMDS coverage of the cable compulsory license until enactment of The Satellite Home Viewer Act of 1994, which expanded the scope of cable compulsory license to include MMDS. The Copyright Office has also tentatively ruled that some SMATV systems meet the Copyright Act's definition of cable system and thus are eligible for a compulsory license. Congress established the compulsory license in 1976 to serve as a means of compensating program suppliers for cable retransmission of broadcast programming. The FCC has recommended that Congress eliminate the compulsory copyright license for cable retransmission of both local and distant broadcast programming. In addition, legislative proposals have been and may continue to be made to simplify or eliminate the compulsory license. As noted, the 1992 Cable Act will require cable systems to obtain permission of certain broadcast licensees in order to carry their signals ("retransmission consent") should such stations so elect. (See "Retransmission Consent and Mandatory Carriage" above) This permission will be needed in addition to the copyright permission inherent in the compulsory license. Without the compulsory license, cable operators would need to negotiate rights for the copyright ownership of each program carried on each broadcast station transmitted by the system. Registrant cannot predict whether Congress will act on the FCC recommendations or similar proposals. Exclusivity: Except for retransmission consent, the FCC imposes no restriction on the number or type of distant (or "non-local") television signals a system may carry. FCC regulations, however, require cable television systems serving more than 1,000 subscribers, at the request of a local network affiliate, to protect the local affiliate's broadcast of network programs by blacking out duplicated programs of any distant network- affiliated stations carried by the system. Similar rules require cable television systems to black out the broadcast on distant stations of certain local sporting events not broadcast locally. The FCC rules also provide exclusivity protection for syndicated programs. Under these rules, television stations may compel cable operators to black out syndicated programming broadcast from distant signals where the local broadcaster has negotiated exclusive local rights to such programming. Syndicated program suppliers are afforded similar rights for a period of one year from the first sale of that program to any television broadcast station in the United States. The FCC rules allow any broadcaster to bargain for and enforce exclusivity rights. However, exclusivity protection may not be granted against a station that is generally available over-the-air in the cable system's market. Cable systems with fewer than 1,000 subscribers are exempt from compliance with the rules. Although broadcasters generally may acquire exclusivity only within 35 miles of their community of license, they may acquire national exclusive rights to syndicated programming. The ability to secure national rights is intended to assist "superstations" whose local broadcast signals are then distributed nationally via satellite. The 35- mile limitation is currently under re-examination by the FCC, which could extend the blackout zone to a larger area. Cable Origination Programming: The FCC also requires that cable origination programming meet certain standards similar to those imposed on broadcasters. These standards include regulations governing political advertising and programming, advertising during children's programming, rules on lottery information, and sponsorship identification requirements. Customer Service: On July 1, 1993, following a public rulemaking proceeding mandated by the 1992 Cable Act, new FCC rules on customer service standards became effective. The standards govern cable system office hours, telephone availability, installations, outages, service calls, and communications between the cable operator and subscriber, including billing and refund policies. Although the FCC has stated that its standards are "self effectuating," it has also provided that a franchising authority wishing to enforce particular customer service standards must give the system at least 90 days advance written notice. Franchise authorities may also agree with cable operators to adopt stricter standards and may enact any state or municipal law or regulation which imposes a stricter or different customer service standard than that set by the FCC. Enforcement of customer service standards, including those set by the FCC, is entrusted to local franchising authorities. Pole Attachment Rates and Technical Standards The FCC currently regulates the rates and conditions imposed by public utilities for use of their poles, unless, under the Federal Pole Attachments Act, a state public service commission demonstrates that it is entitled to regulate the pole attachment rates. The FCC has adopted a specific formula to administer pole attachment rates under this scheme. The validity of this FCC function was upheld by the U.S. Supreme Court. In 1990, new FCC standards on signal leakage became effective. Like all systems, Registrant's cable television systems are subject to yearly reporting requirements regarding compliance with these standards. Further, the FCC has instituted on-site inspections of cable systems to monitor compliance. Any failure by Registrant's cable television systems to maintain compliance with these new standards could adversely affect the ability of Registrant's cable television systems to provide certain services. The Cable Act empowers the FCC to set certain technical standards governing the quality of cable signals and to preempt local authorities from imposing more stringent technical standards. The FCC's preemptive authority over technical standards for channels carrying broadcast signals has been affirmed by the U.S. Supreme Court. On March 4, 1992, the FCC adopted new mandatory technical standards for cable carriage of all video programming, including retransmitted broadcast material, cable originated programs and pay channels. The 1992 Cable Act includes a provision requiring the FCC to prescribe regulations establishing minimum technical standards. The 1992 Cable Act also codified the right of franchising authorities to seek waivers to impose technical standards more stringent than those prescribed by the FCC. The FCC has determined that its 1992 rule making proceeding satisfied the mandate of the 1992 Cable Act. The new standards, which became effective December 30, 1992, focus primarily on the quality of the signal delivered to the cable subscriber's television. Registrant cannot predict the impact of these new rules upon Registrant's operations. On May 4, 1994, the Commission released an order implementing the 1992 Cable Act requirements for compatibility between cable and consumer electronics equipment. In this order, the Commission adopted a three-phase plan for achieving compatibility between cable systems and consumer electronics. The Phase I requirements include the following: (1) cable operators are prohibited from scrambling or otherwise encrypting signals carried on the basic tier; (2) cable operators are prohibited from taking actions that would prevent equipment with remote control capabilities from operating with commercially available remote controls; (3) cable operators must offer subscribers supplemental equipment for resolving specific compatibility problems; and (4) cable operators must provide more compatibility information to subscribers. During Phase II, cable operators must use the new "Decoder Interface" standard that is presently being developed. Finally, the third phase of the compatibility plan addresses future standards issues to be raised in a future Notice of Inquiry. Tax Considerations Legislation which for the first time would allow amortization of goodwill and certain intangibles that arise in a business acquisition for federal income tax purposes was enacted as part of the Omnibus Budget Reconciliation Act of 1993. The measure permits intangible "assets" to be amortized over a 15-year period. The legislation includes certain governmental rights and licenses -- e.g., cable franchises -- among the intangibles eligible for such amortization. In 1994, the Internal Revenue Service issued temporary regulations implementing the provision for retroactive amortization of intangible property acquired prior to the Omnibus Budget Reconciliation Act of 1993. At least one cable operator has successfully argued in court that cable franchises may be depreciated under pre-existing law. In Tele-Communications, Inc. v. Comm'r of IRS, the U.S. Court of Appeals upheld the decision of the Tax Court, which had rejected the argument of the Internal Revenue Service that such amortization was available only to commercial franchises. State and Local Regulation Local Authority: Cable television systems are generally operated pursuant to non-exclusive franchises, permits or licenses issued by a municipality or other local governmental entity. The franchises are generally in the nature of a contract between the cable television system owner and the issuing authority and typically cover a broad range of provisions and obligations directly affecting the business of the systems in question. Except as otherwise specified in the Cable Act or limited by specific FCC rules and regulations, the Cable Act permits state and local officials to retain their primary responsibility for selecting franchisees to serve their communities and to continue regulating other essentially local aspects of cable television. The constitutionality of franchising cable television systems by local governments has been challenged as a burden on First Amendment rights but the U.S. Supreme Court has declared that while cable activities "plainly implicate First Amendment interest" they must be balanced against competing societal interests. The applicability of this broad judicial standard to specific local franchising activities is subject to continuing interpretation by the federal courts. Cable television franchises generally contain provisions governing the fees to be paid to the franchising authority, the length of the franchise term, renewal and sale or transfer of the franchise, design and technical performance of the system, use and occupancy of public streets, and the number and types of cable services provided. The specific terms and conditions of the franchise directly affect the profitability of the cable television system. Franchises are generally issued for fixed terms and must be renewed periodically. There can be no assurance that such renewals will be granted or that renewals will be made on similar terms and conditions. Various proposals have been introduced at state and local levels with regard to the regulation of cable television systems and a number of states have adopted legislation subjecting cable television systems to the jurisdiction of centralized state governmental agencies, some of which impose regulation of a public utility character. Increased state and local regulations may increase cable television system expenses. During 1993, Congress enacted legislation to reduce tax exemptions, enjoyed by certain U.S. companies with investments in Puerto Rico, arising under Section 936 of the Internal Revenue Code. However, the availability of 936 Funds -- reduced rate funds available to certain borrowers from commercial banks in Puerto Rico -- was not affected by the legislation. Registrant believes that the reduction of tax exemptions pursuant to Section 936 has not had a material negative impact on the Puerto Rican economy nor on Registrant's Puerto Rican operations, nor is it currently expected to. Radio Industry In 1992, the FCC adopted substantial changes to its restrictions on the ownership of radio stations. The new rules allow a single entity to control as many as twenty AM and twenty FM stations nationwide. As to ownership within a given market, the maximum varies depending on the number of radio stations within the market. In markets with fewer than fifteen stations, a single entity may control three stations (no more than two of which could be FM), provided that the combination represents less than fifty percent of the stations in the market. In contrast, in markets with fifteen or more radio stations, a single entity may control as many as two AM and two FM stations, provided that the combined audience share of the stations does not exceed twenty- five percent. In addition, the FCC placed limitations on local marketing agreements through which the licensee of one radio station provides the programming for another licensee's station in the same market. Stations operating in the same service (e.g., both stations AM) and the same market are prohibited from simulcasting more than twenty-five percent of their programming. Moreover, in determining the number of stations that a single entity may control, an entity programming a station pursuant to a local marketing agreement is required to count that station toward its maximum even though it does not own the station. In addition to these new radio ownership limitations, the pending television proceeding described below includes proposals for further relaxation of the FCC's restrictions on ownership of television and radio stations within the same area. In addition, in January 1995, the FCC adopted rules to allocate spectrum for satellite digital audio radio service ("DARS"). Satellite DARS systems potentially could provide for regional or nationwide distribution of radio programming with fidelity comparable to compact disks. The FCC will consider service and licensing regulations in a further rulemaking proceeding. Four applications for licenses to provide satellite DARS are currently pending before the FCC. In addition, the FCC has undertaken an inquiry into the terrestrial broadcast of DARS signals, addressing, inter alia, the need for spectrum outside the existing FM band and the role of existing broadcasters. Registrant cannot predict the outcome of these proceedings. Television Industry In June, 1992, the FCC initiated a rule making proceeding inviting public comment on whether existing television ownership rules should be revised to allow broadcast television licensees greater flexibility to respond to growing competition in the distribution of video programming. Among the proposed changes are: (1) raising the national television ownership limit from 12 to as many as 24 stations, perhaps restricted by a national audience reach maximum higher than the current 25%; (2) easing restrictions on the ownership by a single entity of two television stations having overlapping signal contours; and (3) easing the so-called "one-to-a-market" rule that currently (with some exceptions) prevents the common ownership of a television station and one or more radio stations in the same area. The timetable for completion of the proceeding is not certain, and Registrant cannot predict whether the changes proposed will in fact be adopted or the impact of such changes on Registrant's business. Related to this proceeding is another in which the FCC has invited comment on various proposals to modify its "attribution" rules. Attribution essentially is the definition of the kinds of ownership or other interests that trigger application of the FCC's radio and television ownership rules. Among the proposals under consideration is one to allow limited partners in widely held limited partnerships to hold small equity interests without attribution, even though they do not meet the so-called "insulation" criteria that might otherwise exempt them from attribution. Also pending at the FCC is an inquiry proceeding examining the possible re-imposition of broadcast commercial time limitations that were repealed by the FCC in 1984. Registrant cannot predict whether the proceeding will result in such a proposal or the extent of any such regulation. In 1987, the FCC initiated a rule making proceeding on advanced television, which includes high definition television ("HDTV"). With the help of a private sector advisory committee, the Commission is attempting to establish a technical standard for HDTV broadcasting by early 1996. Although subject to revision in the coming year, the FCC has adopted a timetable for advanced television implementation. After the standard is set, existing broadcasters will have three years in which to apply for a second channel assignment to be used for HDTV broadcasts. Such broadcasts must begin within six years of the standard-setting. If these deadlines are not met, existing broadcasters will be subject to competition for the HDTV channel. For some period, currently thought to be fifteen years, broadcasters will broadcast on both their current "NTSC" channel and their HDTV channel, in a so-called "simulcast" mode. At the end of the period, all broadcasts on the NTSC channel must cease, whether or not every broadcaster is broadcasting HDTV. The use of the HDTV channel sufficient to meet the FCC's minimum requirements will require construction of new facilities, including a transmitter, exciter, antenna, and transmission line. Additional equipment for making the full conversion to HDTV will include cameras, switchers, tape machines, and the like. In June 1994, two parties with direct broadcast satellite ("DBS") authorizations, Hughes Communications Galaxy, Inc. ("Hughes") under the trade name DIRECTV, Inc., and United States Satellite Broadcasting Company ("USSB"), initiated DBS service from a new high-powered satellite. In August 1994, Hughes and USSB launched a second satellite, which is now operational. Hughes and USSB currently provide over 150 channels of digital DBS service to subscribers. The FCC has approved or is considering applications to combine DBS authorizations. In December 1994, two DBS permittees, EchoStar Satellite Corporation and Directsat Corporation, merged their DBS authorizations upon approval from the FCC, and expect to commence service as early as fall 1995. Also, Advanced Communications Corporation has applied for authority to assign its DBS authorizations to TEMPO DBS, Inc., whose DBS, Inc. hopes to initiate DBS service in 1996. Three other parties have not yet launched their proposed satellites. Registrant cannot predict the competitive effect of DBS operations on the terrestrial television broadcast industry in general or the Registrant's operations in particular. Item 2. Properties A description of the media properties of Registrant is contained in Item 1 above. Registrant owns or leases real estate for certain headend and transmitting equipment along with space for studios and offices. Refer to Item 8. "Financial Statements and Supplementary Data" for further information regarding Registrant's properties. For additional description of Registrant's business refer to Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Item 3. Legal Proceedings There are no material legal proceedings against Registrant or to which Registrant is a party. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of the limited partners of Registrant during the fiscal year covered by this report. Part II Item 5. Market for Registrant's Common Stock and Related Stockholder Matters A public market for Registrant's Units does not now exist, and it is not anticipated that such a market will develop in the future. Accordingly, accurate information as to the market value of a Unit at any given date is not available. The number of owners of Units as of January 16, 1995 was 16,141. Effective November 9, 1992, Registrant was advised that Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch" or "MLPF&S") introduced a new limited partnership secondary service through Merrill Lynch's Limited Partnership Secondary Transaction Department ("LPSTD"). This service will assist Merrill Lynch clients wishing to buy or sell Registrant Units. Beginning with December 1994 client account statements, MLPF&S implemented new guidelines for valuing limited partnerships and other direct investments reported on client account statements. As a result, MLPF&S no longer reports general partner estimates of per Unit limited partnership net asset value on its client account statements, although a partnership's general partner may continue to provide its estimate of net asset value in quarterly reports to unit holders. Pursuant to the new guidelines, estimated values for limited partnership investments will be provided annually to MLPF&S by independent valuation services. The estimated values will be based on financial and other information available to the independent services on the prior August 15th. MLPF&S clients may contact their Merrill Lynch Financial Consultants or telephone the number provided to them on their account statements to obtain a general description of the methodology used by the independent valuation services to determine their estimates of value. The estimated values provided by the independent services are not market values and Unit holders may not be able to sell their Units or realize the amounts shown on their MLPF&S statements upon a sale. In addition, Unit holders may not realize the amount shown on their account statements upon the liquidation of Registrant over its remaining life. Registrant does not distribute dividends. Registrant distributes Distributable Cash From Operations and Distributable Sale and Refinancing Proceeds, to the extent available. There were no distributions in 1992, 1993 or 1994. Item 6. Selected Financial Data
Year Ended Year Ended Year Ended December 30, December 31, December 25, 1994 1993 1992 Operating Revenues $105,910,208 $100,401,671 $100,443,967 Net (Loss) Income $( 1,450,756) $ 1,377,340 $( 9,280,770) (Loss) Income per Unit of Limited Partnership Interest $ (7.64) $ 7.25 $ (48.87) Number of Units 187,994 187,994 187,994 As of As of As of December 30, December 31, December 25, 1994 1993 1992 Total Assets $238,330,358 $249,851,937 $261,554,442 Borrowings $218,170,968 $232,568,349 $245,994,745
Year Ended Year Ended December 27, December 28, 1991 1990 Operating Revenues $ 99,185,423 $ 93,559,410 Net (Loss) Income $(51,049,551) $(41,491,591) (Loss) Income per Unit of Limited Partnership Interest $ (268.83) $ (218.50) Number of Units 187,994 187,994 As of As of December 27, December 28, 1991 1990 Total Assets $310,248,561 $358,192,902 Borrowings $279,440,750 $280,048,250
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources As of December 30, 1994, Registrant had $26,682,289 in cash and cash equivalents, of which $22,115,559 was limited for use at the operating level and the remaining $4,566,730 was Registrant's working capital. As of December 31, 1993, Registrant had $26,916,477 in cash and cash equivalents, of which $22,479,254 was limited for use at the operating level and the remaining $4,437,223 was Registrant's working capital. During 1994, Registrant continued its operations phase and began the process of liquidating certain of its media properties. Registrant engaged Merrill Lynch & Co. and Daniels & Associates in January, 1994 to act as its financial advisors in connection with a possible sale of all or a portion of Registrant's California Cable Systems. On November 28, 1994, Registrant entered into an agreement to sell substantially all of the assets used in the operations of Registrant's California Cable Systems subject to numerous conditions to closing (see below). Due in part to the negative impact of cable regulation on cable television rates, Registrant experienced certain covenant defaults under its Revised ML California Credit Agreement at September 30 and December 30, 1994 (see below). These defaults were cured during the first quarter of 1995, and Registrant sought and received, during the first quarter of 1995, an amendment to the Revised ML California Credit Agreement which should enable Registrant to remain in compliance with the amended terms of that agreement until December 29, 1995 (see below) while attempting to consummate the sale of the California Cable cable television systems. Also during 1994, Registrant continued its negotiations with the lender to KATC and WREX concerning a potential restructuring of the WREX-KATC Loan. Registrant was unsuccessful in its efforts to obtain a restructuring, and instead, in the fourth quarter of 1994 decided to sell the two television stations (see below). During the first quarter of 1995, Registrant executed non-binding letters of intent to sell WREX and KATC. California Cable On November 28, 1994, Registrant entered into an agreement (the "Asset Purchase Agreement") with Century Communications Corp. ("Century") to sell to Century substantially all of the assets used in the operations of Registrant's California Cable Systems serving the Anaheim, Hermosa Beach/Manhattan Beach, Rohnert Park/Yountville and Fairfield communities. The base purchase price for the systems will be $286 million, subject to reduction by an amount equal to 11 times the amount by which the operating cash flow of the systems (as adjusted in accordance with the Asset Purchase Agreement) is less than $26 million for the 12- month period prior to the closing, and subject to further adjustment as provided in the Asset Purchase Agreement. In addition, Registrant has the right to terminate the Asset Purchase Agreement if the purchase price would be less than $260 million based on the formula described above. Consummation of the transactions provided for in the Asset Purchase Agreement is subject to the satisfaction of certain conditions, including obtaining approvals from the Federal Communications Commission and the municipal authorities issuing the franchises for the systems. Registrant is currently unable to determine the impact of the February 22, 1994 FCC action and previous FCC actions (see below) on its ability to consummate the sale of the California Cable systems or the potential timing and ultimate value of such sale. However, as discussed below, the FCC actions have had, and will have, a detrimental impact on the revenues and profits of the California Cable systems. As of December 30, 1994, California Cable represented approximately 50.5% of the consolidated assets of Registrant and approximately 52.0% of the consolidated operating revenues. As of September 30, 1994 and December 30, 1994, due in part to the negative impact of rate re-reregulation on the operations of the California Cable Systems, Registrant was in default of certain financial covenants contained in the revised ML California Credit Agreement. In addition, as of December 30, 1994, Registrant expected to be unable to meet during 1995 the principal payment requirements then contained in the revised ML California Credit Agreement. These defaults were cured during the first quarter of 1995. Effective February 23, 1995, Registrant and the banks entered into a first amendment (the "First Amendment") to the revised ML California Credit Agreement that provided for reduced principal payments and less restrictive covenants during the first three quarters of 1995. In exchange, Registrant paid an amendment fee of $322,969 to the banks and agreed to allow the banks to charge a higher interest rate on outstanding borrowings under the revised ML California Credit Agreement. (A further fee will be due to the lenders if the sale of the California Cable Systems is not consummated prior to December 29, 1995.) Certain other terms of the revised ML California Credit Agreement were also affected by the First Amendment. Registrant currently expects that it will be able to remain in compliance with the terms of the revised ML California Credit Agreement, as amended by the First Amendment, until December 29, 1995, during which period Registrant would seek to consummate the sale of the California Cable Systems to Century. Registrant currently expects that if the sale of the California Cable Systems is not consummated prior to December 29, 1995, Registrant will be unable to meet the scheduled December 29, 1995 principal payment due to the banks pursuant to the revised ML California Credit Agreement, as amended by the First Amendment. In December 1993, the California Cable Systems received a favorable decision with respect to a property tax appeal filed with one county served by the California Cable Systems. The county had the right to appeal the decision for a period of six months. This period expired without appeal during the second quarter of 1994. Also in December of 1993, the California Cable Systems reached a favorable agreement in principle with a second county served by the California Cable Systems where an appeal relating to property taxes had also been filed. During 1994, the California Cable Systems executed a settlement agreement and finalized assessed property values with, and received a refund of approximately $700,000 from, this second county. In part as a result of these developments, the California Cable Systems continue to be entitled to receive tax refunds. On December 31, 1993 Registrant reduced by approximately $2.2 million the general and administrative expense of California Cable in order to account for these tax refunds. During the fourth quarter of 1994, Orange County, California, in which a significant percentage of the California Cable Systems are located, filed for bankruptcy. At December 30, 1994 and December 31, 1993, the net property tax refund receivable from Orange County was approximately $1.7 million. Registrant ultimately expects to file a claim for such property tax refunds for approximately $2.8 million. At December 30, 1994, Registrant had funds in an escrow account totalling $785,731, which funds were included in other assets on the accompanying consolidated balance sheets. The funds were deposited in such account in accordance with Registrant's agreement with Cable Telecommunications Joint Powers Agency ("CTJPA") to be held for the benefit of CTJPA's subscribers pending determination of Registrant's potential need to make refunds to the subscribers in connection with rate re-regulation. In the first quarter of 1995, Registrant was required to deposit $680,000 in another escrow account pursuant to an agreement with the City of Fairfield, California to be held for the benefit of the City of Fairfield's subscribers pending determination of Registrant's potential need to make refunds to the subscribers in connection with rate re-regulation. The General Partner currently believes that under the FCC's existing decisions, the most material issues in Registrant's rate cases should ultimately be decided in a manner predominantly favorable to Registrant. WREX-KATC On October 31, 1994, Registrant retained The Ted Hepburn Company to assist it in marketing WREX and KATC for sale. Although it intends to sell one or both television stations, Registrant may not be able to reach final agreement(s) with potential purchases of one or both stations on terms acceptable to Registrant. If acceptable agreement(s) cannot be reached, Registrant will attempt to refinance the WREX-KATC loan with a new lender. On February 23, 1995 and March 6, 1995, Registrant entered into non-binding letters of intent to sell WREX and KATC, respectively. The sales of WREX and KATC are subject to negotiation of definitive purchase and sale agreements and numerous other conditions. The ultimate transfer of the licenses of WREX and KATC to potential buyers will also be subject to the prior approval of the FCC. During 1994, 1993 and 1992, Registrant defaulted on the majority of its quarterly principal payments due under its WREX-KATC Loan. As of December 30, 1994, WREX-KATC was in default of $5,632,993 in principal, after giving effect to $867,007 in payments made during 1993 and 1994 from cash generated by the operations of WREX and KATC. Registrant is not in default of any regularly scheduled interest payments under the WREX-KATC Loan and is contesting certain nominal default rate interest charges. In addition, as of December 28, 1990 and continuing through December 30, 1994, Registrant was in default of financial covenants under its WREX-KATC Loan. The lender granted waivers for the defaults as of December 28, 1990. However, the lender has not granted waivers for any subsequent defaults. As required by the terms of the WREX-KATC Loan, subsequent to entering into the WREX-KATC Loan in 1989, Registrant advanced a total of $1.0 million to WREX- KATC, including $10,000 in 1993. Registrant expects to experience future principal payment and covenant defaults under the WREX-KATC Loan. Registrant sought unsuccessfully to restructure the WREX-KATC Loan and, as discussed above, decided to sell WREX and KATC. Registrant does not currently intend to, nor is it obligated to, advance any further working capital to WREX and KATC. The lender to WREX- KATC has informed Registrant that it reserves all of its rights and remedies under the WREX-KATC Loan agreement, including the right to accelerate the maturity of the indebtedness under the WREX-KATC Loan and to foreclose on, or otherwise force a sale of, the assets of WREX and KATC (but not the other assets of Registrant.) Borrowings under the WREX-KATC Loan are nonrecourse to Registrant. The principal amount outstanding under the WREX- KATC Loan is $23,382,993 as of December 30, 1994. Wincom-WEBE-WICC On July 30, 1993, Registrant and Chemical Bank executed an amendment to the Wincom-WEBE-WICC Loan (the "Restructuring Agreement") effective January 1, 1993, which cured all previously outstanding defaults pursuant to the Wincom-WEBE-WICC Loan. Refer to Note 6 of "Item 8. Financial Statements and Supplementary Data" for further information regarding the Wincom- WEBE-WICC Loan and the Restructuring Agreement. Registrant was in compliance with all terms of its Wincom-WEBE-WICC Loan and the Restructuring Agreement at December 30, 1994. Impact of Cable Legislation and Regulation Refer to discussion in Note 2 to Item 8. Financial Statements and Supplementary Data. Summary Registrant's ongoing cash needs will be to fund debt service, capital expenditures and working capital needs. During 1994, cash interest paid was $15,388,775, and principal repayments of $14,397,381 were made. During 1994, Registrant did not comply with scheduled principal payments under its WREX-KATC Loan. During 1995, Registrant is required by its various debt agreements to make scheduled principal repayments of $27,157,993, (as well as the past due principal of $5,632,993 under the WREX- KATC Loan), under all of its debt agreements. If the WREX-KATC Loan is accelerated as a result of the aforementioned defaults, Registrant would be required to make additional principal payments totalling $14,250,000 in 1995. Based upon a review of the current financial performance of Registrant's investments, Registrant continues to monitor its working capital level. Registrant does not have sufficient cash to meet all of the contractual debt obligations of all of its investments, nor is it obligated to do so. Registrant does not currently expect to, nor is it obligated to, advance any of its unrestricted working capital to WREX and KATC. Current and future maturities under Registrant's existing credit facilities are described in Note 6 of "Item 8. Financial Statements and Supplementary Data". Results of Operations 1994 vs. 1993 During 1994 and 1993, Registrant had total operating revenues of approximately $105.9 million and $100.4 million, respectively. The approximate $5.5 million increase was primarily due to the consolidation of the operating results (approximately $2.6 million in revenue) of Registrant's 50% interest in the C-ML Radio properties following the transfer of C-ML Radio's assets to the Revised Venture on January 1, 1994. This increase, combined with increases at C-ML Cable and Registrant's remaining radio and broadcast television properties, was partially offset by decreases at Wincom due to the sale of the Indianapolis Stations and at California Cable. Registrant's 50% share of the revenues of C-ML Cable increased by approximately $1.3 million in 1994 compared to 1993. The increase in revenues at C-ML Cable occurred as a result of higher average levels of basic subscribers, due to successful marketing efforts and the extension of cable plant to pass additional homes. The average level of basic subscribers at C-ML Cable increased to 108,453 in 1994 from 105,323 in 1993, and the total number of basic subscribers increased to 112,228 at the end of 1994 from 104,677 at the end of 1993. The number of average premium subscribers at C-ML Cable decreased to 69,027 during 1994 from 73,178 during 1993 due to weakness in the local economy (which was exacerbated by a severe drought, which has since ended), as well as to continuing industry-wide softness in subscriber demand for premium services and the restructuring of C- ML Cable's rates and services in the second half of 1993. Total premium subscribers decreased to 68,735 at the end of 1994 from 69,319 at the end of 1993. Television stations KATC and WREX reported a combined increase of approximately $1.4 million in revenue as a result of higher revenues attributable to political advertising at both stations and higher revenues attributable to national advertising at KATC. The Wincom-WEBE-WICC radio group reported a net increase of approximately $0.2 million, as increased advertising revenues at WICC, WQAL and WEBE were mostly offset by a decrease of approximately $0.9 million in revenues at Wincom, primarily due to the sale of the Indianapolis Stations at the beginning of the fourth quarter of 1993. Revenues increased by approximately $0.2 million at KORG/KEZY due primarily to increased barter revenue at KEZY. Revenues at California Cable decreased by approximately $0.2 million, primarily as a result of a change in policy for accounting for franchise fees in September 1993 (approximately $1.2 million), as well as to lower pay-per-view revenues (due to an absence of strong event programming). The overall decrease in revenues at California Cable occurred despite increases in basic revenue due primarily to the positive impact of increases in average basic subscribers. Average basic subscribers increased to 133,926 in 1994 from 132,105 in 1993 due to successful marketing efforts and extension of cable plant to pass additional homes. In addition, total basic subscribers increased to 136,022 at the end of 1994 from 131,830 at the end of 1993. Reversing recent annual trends, California Cable experienced growth in premium subscriptions during 1994 due to heavy promotional efforts and reduced promotional rates, especially in the second half of the year. Total premium subscriptions increased to 77,749 at the end of 1994 from 73,625 at the end of 1993. However, average premium subscribers decreased to 75,687 during 1994 from 76,480 during 1993 due primarily to the relatively high number of premium subscriptions at the beginning of 1993. The decrease in average premium subscriptions was offset by increases in average premium rates, resulting in flat premium revenues from 1993 to 1994. During 1994 and 1993, Registrant incurred property operating expenses of approximately $38.8 million and $33.8 million, respectively, in connection with the operation of its cable, radio and television properties. Registrant's total property operating expenses increased by approximately $5.0 million from year to year as a result of: an increase of approximately $2.6 million at the combined cable and radio operations of the Revised Venture, due to the consolidation of the 1994 operating results of the Revised Venture's radio properties on January 1, 1994 (approximately $1.7 million) and to a non-recurring adjustment to property tax accruals in 1993 at C-ML Cable (approximately $0.9 million); an increase of approximately $2.5 million at California Cable, due primarily to higher basic programming costs (due to increased fees to programmers and the increased number of average basic subscribers) and higher marketing and copyright fees associated with rate and service restructuring in response to re- regulation; and an increase of approximately $0.1 million at KORG/KEZY due primarily to increased barter expense at KEZY. These increases were partially offset by a net decrease of $0.2 million at the Wincom-WEBE-WICC group, where higher operating expenses at WEBE and WICC (due primarily to higher sales commissions and other expenses) were outweighed, by decreased property operating expenses at Wincom due to the sale of the Indianapolis Stations at the beginning of the fourth quarter of 1993. During 1994 and 1993, Registrant incurred general and administrative expenses of approximately $20.9 million and $20.0 million, respectively. Registrant's total general and administrative expenses increased by approximately $0.9 million from year to year as a result of increases of approximately: $1.3 million at California Cable, due to a one-time reversal of property tax assessments in the fourth quarter of 1993 due to a favorable decision regarding property tax assessments (partially offset by a decrease due primarily to reduced expenses for franchise fees and lower property taxes); $0.4 million at the combined cable and radio operations of the Revised Venture, due primarily to the consolidation of the operating results of the Revised Venture's radio properties on January 1, 1994; and approximately $0.1 million at WREX, primarily due to increased employee-related insurance costs. These increases were partially offset by a decrease of approximately $0.7 million at the Wincom- WEBE-WICC radio group primarily due to the sale of the Indianapolis Stations at the beginning of the fourth quarter of 1993. The remaining increases or decreases at Registrant's properties were immaterial either individually or in the aggregate. Registrant earned interest income of approximately $193,000 and $147,000 during 1994 and 1993, respectively, on its working capital balance. Interest expense of approximately $16.0 million and $17.5 million in 1994 and 1993, respectively, represents the cost incurred for borrowed funds utilized to acquire various media properties. The approximate $1.5 million decrease in interest expense is due to:(1) the expiration of unfavorable interest rate hedge agreements pursuant to, and lower average outstanding borrowings under, the Revised ML California Cable Credit Agreement, ($1.5 million); and (2) lower average outstanding borrowings under the Wincom-WEBE-WICC Restructuring Agreement ($0.5 million); partially offset by generally higher floating interest rates under the WREX-KATC loan ($0.3 million); and increased interest expense at C-ML Cable of $0.2 million due to consolidation of the operating results of The Revised Venture's radio properties on January 1, 1994. Registrant's depreciation and amortization expense totalled approximately $30.2 million and $31.4 million in 1994 and 1993, respectively. This $1.2 million decrease resulted primarily from: decreases of approximately: $1.6 million at WREX and KATC, due primarily to full depreciation of certain equipment, particularly at KATC during the first quarter of 1994; $0.1 million at the combined cable and radio operations of the Revised Venture, primarily due to the consolidation of the operating results of the Revised Venture's radio properties on January 1, 1994; $0.1 million at the Wincom-WEBE-WICC radio group due to the sale of the Indianapolis Stations at the beginning of the fourth quarter of 1993 outweighing increased depreciation and amortization expense at WQAL due to equipment purchases; partially offset by an increase of approximately $0.4 million at California Cable, attributable to greater depreciation expense associated with capital expenditures. The remaining increases or decreases in depreciation and amortization expense at Registrant's properties were immaterial, either individually or in the aggregate. Results of Operations 1993 vs. 1992 During 1993 and 1992, Registrant's operating revenues remained flat from year to year. A $4.7 million decrease attributable to the sale of Universal on July 8, 1992, was offset partially by increases of approximately $2.4 million at California Cable and approximately $1.9 million at C-ML Cable. Revenues at California Cable would have been higher in the absence of the rate reductions mandated by the FCC. Despite the higher level of average basic subscribers at California Cable, the number of basic subscribers decreased from 132,380 at the end of 1992 to 131,830 at the end of 1993 due to weakness in the local economy as well as to negative consumer reaction to both a modest rate increase in the northern California systems and the restructuring of rates following re-regulation. In addition, despite the higher level of average basic subscribers at C-ML Cable, the number of basic subscribers decreased from 105,968 at the end of 1992 to 104,677 at the end of 1993 due in part to negative consumer reaction to both a modest rate increase and the restructuring of rates following re-regulation. The number of premium subscribers continued to decrease from 79,334 at the end of 1992 to 73,625 at the end of 1993 at California Cable, due to weakness in the local economy as well as continuing industry-wide softness in subscriber demand for premium services and the decline in basic subscribers. Similar factors caused a decline in premium subscribers at the C-ML Cable systems from 77,037 at the end of 1992 to 69,319 at the end of 1993. Registrant anticipates that as a result of the weakness in the California economy, there will be continued pressure on the levels of both basic subscribers and premium subscribers during 1994. Television stations KATC and WREX reported a combined increase of approximately $0.3 million in revenue as a result of stronger local revenues, particularly at KATC, partially offset by lower political revenues which did not recur in 1993. The Wincom-WEBE- WICC radio group reported a net increase of approximately $0.4 million, as increased advertising revenues at WICC, WQAL and WEBE offset approximately $1.0 million in revenues lost due to the sale of the Indianapolis Stations at the beginning of the fourth quarter of 1993 and the discontinuation of the Indiana University Sports Radio Network after the second quarter of 1992. The remaining increases or decreases in total operating revenue at Registrant's other properties were immaterial, either individually or in the aggregate. During 1993 and 1992, Registrant incurred property operating expenses of approximately $33.8 million and $36.3 million, respectively, in connection with the operation of its cable, radio and television properties. Registrant's total property operating expenses decreased by approximately $2.5 million from year to year as a result of: a $1.5 million decrease attributable to the 1992 sale of Universal; a $1.1 million decrease at the Wincom-WEBE-WICC radio group attributable primarily to the sale of the Indianapolis Stations at the beginning of the fourth quarter of 1993 and the discontinuation of the Indiana University Sports Radio Network after the second quarter of 1992; and a $0.4 million decrease at KORG/KEZY due primarily to a non-recurring write-off of uncollectible accounts receivable in the first half of 1992 as well as to lower sales commissions and promotion and engineering expenses; a net decrease at C-ML Cable of $0.4 million, due to a reversal of approximately $1.0 million related to property taxes (Refer to Note 14 of "Item 8. Financial Statements and Supplementary Data" for further information regarding property taxes) partially offset by an increase of $0.6 million due primarily to an increase in variable costs, such as programming costs, resulting from the increase in operating revenues; partially offset by a $0.8 million increase at California Cable due to increased basic programming costs resulting from the higher level of average basic subscribers and generally higher programming costs, as well as increased marketing expenses; and an increase of $0.2 million at television stations KATC and WREX, due primarily to the expansion of the news operations at both stations. During 1993 and 1992, Registrant incurred general and administrative expenses of approximately $20.0 million and $22.7 million, respectively. Registrant's total general and administrative expenses decreased by approximately $2.7 million from year to year as a result of: a decrease of $1.2 million due to the 1992 sale of Universal; a decrease of $0.3 million at the Wincom-WEBE-WICC radio group due primarily to the sale of the Indianapolis Stations at the beginning of the fourth quarter of 1993; and a net decrease at California Cable of $1.3 million primarily due to a favorable decision regarding property tax assessments which resulted in the reversal of approximately $2.2 million in property tax assessments (Refer to Note 2 of "Item 8. Financial Statements and Supplementary Data" for further information regarding property taxes) partially offset by a $0.9 million increase due to increased costs of benefits, general and health insurance, and bad debt expense. The remaining increases or decreases in general and administrative expenses at Registrant's other properties were immaterial, either individually or in the aggregate. Registrant earned interest income of approximately $0.1 million and $0.2 million during 1993 and 1992, respectively. The slight decrease in interest income is due to lower market interest rates in 1993 compared to 1992. Interest expense of approximately $17.5 million and $23.4 million in 1993 and 1992, respectively, represents the cost incurred for borrowed funds utilized to acquire various media properties. The approximately $5.9 million decrease in interest expense is due to:(1) the expiration of unfavorable interest rate hedge agreements pursuant to, and lower average outstanding borrowings under, the Revised ML California Cable Credit Agreement, ($4.0 million);(2) the sale of Universal in July 1992 ($2.7 million);(3) the expiration of unfavorable interest rate hedge agreements pursuant to, and lower average outstanding borrowings under, the WREX-KATC Loan ($0.5 million); and (4) reduced rates under the Wincom-WEBE-WICC Restructuring Agreement ($0.6 million); partially offset by increased interest expense at C-ML Cable due to higher interest rates under the fixed rate C-ML Notes compared to the floating rates under the original C-ML Credit Agreement ($1.7 million). Registrant's depreciation and amortization expense totalled approximately $31.4 million and $31.5 million in 1993 and 1992, respectively. This $0.1 million decrease resulted primarily from: a $1.8 million decline attributable to the 1992 sale of Universal; and a $0.2 million decrease at the Wincom-WEBE-WICC radio group due to the sale of the Indianapolis Stations at the beginning of the fourth quarter of 1993; partially offset by a $1.7 million increase at California Cable and a $0.3 million increase at C-ML Cable attributable to greater depreciation expense associated with capital expenditures. The remaining increases or decreases in depreciation and amortization expense at Registrant's other properties were immaterial, either individually or in the aggregate. Statement of Financial Accounting Standards No. 112 Effective January 1, 1994, Registrant adopted Statement of Financial Accounting Standards No. 112, "Employers Accounting for Postemployment Benefits" ("SFAS No. 112"). This pronouncement establishes accounting standards for employers who provide benefits to former or inactive employees after employment, but before retirement. These benefits include, but are not limited to, salary-continuation, disability related benefits including workers' compensation, and continuation of health care and life insurance benefits. The statement requires employers to accrue the obligations associated with service rendered to date for employee benefits accumulated or vested where payment is probable and can be reasonably estimated. The effect of adopting SFAS No. 112 was not material to Registrant's financial condition or results of operations during 1994. Additional Operating Information Registrant owned cable systems that passed 218,992 homes, provided basic cable television service to 136,022 subscribers, and accounted for 77,749 pay units as of December 30, 1994. In addition, Registrant holds a 50% interest in the Venture, which in turn, through C-ML Cable, passed 262,505 homes, provided basic cable television service to 112,228 subscribers and accounted for 68,735 pay units as of December 30, 1994. The following table shows the numbers of basic subscribers and pay units at Registrant's wholly-owned California Cable and at C-ML Cable at December 25, 1992, December 31, 1993 and December 30, 1994:
December 25, December 31, December 30, 1992 1993 1994 Homes Passed California Systems 213,586 216,328 218,992 Wholly-Owned 213,586 216,328 218,992 C-ML Cable 261,757 259,790 262,505 Basic Subscribers California Systems 132,380 131,830 136,022 Wholly-Owned 132,380 131,830 136,022 C-ML Cable 105,968 104,677 112,228 Pay Units California Systems 79,334 73,625 77,749 Wholly-Owned 79,334 73,625 77,749 C-ML Cable 77,037 69,319 68,735
Since December 25, 1992, Registrant has experienced an overall increase at its California Cable Systems in the number of homes passed. Homes passed growth has been attributable primarily to extensions of existing cable plant. Despite an increase in homes passed in 1993, the number of basic subscribers decreased from December 25, 1992 to December 31, 1993, due to weakness in the local economy as well as to negative consumer reaction to both a modest rate increase in the northern California systems and the restructuring of rates following re-regulation. However, the number of basic subscribers increased from December 31, 1993 to December 30, 1994 due to the extension of cable plant to pass incremental homes and potential new subscribers, marketing efforts, and broadly-defined customer retention efforts including ongoing attention to technical quality and customer service. The number of pay units in Registrant's California Cable Systems decreased from December 25, 1992 to December 30, 1994, primarily as a result of a weak local economy in southern California, although the number of pay units increased from the end of 1993 to the end of 1994 due to heavy promotional efforts and reduced promotional rates. An audit and update of C-ML Cable's database of homes passed resulted in a reduction in the number of homes passed recorded by the Puerto Rico Systems from the end of 1992 to the end of 1993. However, the overall number of homes passed by the Puerto Rico Systems increased slightly from the end of 1993 to the end of 1994 due primarily to the extension of cable plant to pass incremental homes. The Puerto Rico Systems experienced a decrease in the number of basic subscribers from 1992 to 1993 primarily due to the loss of basic subscribers following the repackaging of the C-ML Cable Systems' rate structure in the third quarter of 1993 in response to re-regulation of the cable industry. However, the number of basic subscribers increased from the end of 1993 to the end of 1994. This is due to the extension of cable service to pass additional homes, as well as to an increased level of marketing during 1994. The number of pay units at the Puerto Rico Systems declined sharply from December 25, 1992 to December 30, 1994, primarily due to continuing industry-wide softness in subscriber demand for premium services and the lack of intense promotional campaigns in 1994, as well as to a severe drought that affected the San Juan economy in 1994. Basic penetration was 62.1% and the pay-to-basic ratio 57.2% in Registrant's wholly-owned systems as of December 30, 1994. By comparison, industry sources estimate that the national average basic penetration rate was 64.2% and the national average pay-to- basic ratio was 74.0% as of December 30, 1994. The pay-to-basic ratio in Registrant's wholly-owned systems is lower than the industry average because most of Registrant's basic subscribers are located in areas where off-air reception of television signals is poor so customers subscribe largely for reception purposes, having lesser interest in premium services. Basic penetration was 42.5% and the pay-to-basic ratio 61.0% in the Puerto Rico Systems as of December 30, 1994. Average figures for Puerto Rico are not available from a reliable source. As of December 30, 1994, Registrant operated two television stations in United States cities and seven radio stations in three cities in the United States and one city in San Juan, Puerto Rico. Each of Registrant's broadcast properties competes with numerous other outlets in its area, with the number of competing outlets varying from location to location. Stations are rated in each market versus competitors based on the number of viewers or listeners tuned to the various outlets in that market. The information below briefly describes, for each station owned by Registrant, the number of competitors that each station faces in its market and the station's ranking in that market, where applicable. Registrant's television station WREX-TV in Rockford, Illinois competes with three other television stations in the Rockford market according to Nielsen, an accepted industry source. According to Nielsen, the station was ranked number two in the market on a weekly sign-on to sign-off basis as of the industry- standard measurement period ending November, 1994. Registrant's television station KATC-TV in Lafayette, Louisiana competes with two other television stations in the Lafayette market according to Nielsen. According to Nielsen, the station was ranked number two in the market on a weekly sign-on to sign- off basis as of the industry-standard measurement period ending November, 1994. Registrant's radio station WQAL-FM in Cleveland, Ohio competes with approximately 25 other radio stations in the Cleveland market according to Arbitron, an accepted industry source. According to Arbitron, the station was ranked number nine in the market in terms of listeners 12+ as of the Fall, 1994 rating period. Registrant's radio stations WEBE-FM and WICC-AM in Fairfield County, Connecticut compete with approximately 45 other radio stations in the Fairfield County market according to Arbitron. According to Arbitron, WEBE-FM was ranked number two in Fairfield County and WICC-AM was ranked number one in Bridgeport, Connecticut in terms of listeners 12+ as of the Fall, 1994 rating period. Market rating information was not available from a reliable source for Registrant's radio stations in San Juan, Puerto Rico. While reliable data is available from Arbitron for Registrant's radio stations in Anaheim, California, this information is not available to Registrant, as it does not subscribe to Arbitron or any other ratings service in the Anaheim market. The above information on competition and ratings for Registrant's broadcast properties may give a distorted view of the success of, or competitive challenges to, each of the properties for a number of reasons. For example, the signals of stations listed as competitors may not be of equal strength throughout the market. In addition, the competitive threat posed by stations that serve essentially the same broadcast area is largely dependent upon factors (e.g., financial strength, format, programming, management, etc.) unknown to or outside the control of Registrant. Finally, rating information is segmented according to numerous demographic groups (e.g., listeners 12 +, women 25- 34, etc.), some of which are considered more attractive than others by advertisers. Consequently, a station may be ranked highly for one group but not another, with strength in different groups having substantially different impacts on financial performance. For purposes of the discussion above, the most general type of rating was used. Item 8. Financial Statements and Supplementary Data TABLE OF CONTENTS ML Media Partners, L.P. Independent Auditors' Report Consolidated Balance Sheets as of December 30, 1994 and December 31, 1993 Consolidated Statements of Operations for the years ended December 30, 1994, December 31, 1993 and December 25, 1992 Consolidated Statements of Cash Flows for the years ended December 30, 1994, December 31, 1993 and December 25, 1992 Consolidated Statements of Changes in Partners' Deficit for the years ended December 30, 1994, December 31, 1993 and December 25, 1992 Notes to the Consolidated Financial Statements for the years ended December 30, 1994, December 31, 1993 and December 25, 1992 Schedule I - Condensed Financial Information of Registrant as of December 30, 1994, December 31, 1993 and December 25, 1992 Schedule II - Valuation and Qualifying Accounts as of December 30, 1994, December 31, 1993 and December 25, 1992 Schedules not listed are omitted because of the absence of the conditions under which they are required or because the information is included in the financial statements or the notes thereto. INDEPENDENT AUDITORS' REPORT ML Media Partners, L.P.: We have audited the accompanying consolidated financial statements and the related financial statement schedules of ML Media Partners, L.P. (the "Partnership") and its affiliated entities, listed in the accompanying table of contents. These consolidated financial statements and financial statement schedules are the responsibility of the Partnership's general partner. Our responsibility is to express an opinion on the consolidated financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the general partner, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Partnership and its affiliated entities at December 30, 1994 and December 31, 1993 and the results of their operations and their cash flows for each of the three years in the period ended December 30, 1994 in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein. As discussed in Note 2 to the consolidated financial statements, during the fourth quarter of 1994, Orange County, California filed for bankruptcy. At December 30, 1994 and December 31, 1993, the Partnership has a net receivable from Orange County, California relating to property tax refunds totaling approximately $1.7 million. As discussed in Note 2 to the consolidated financial statements, the Partnership was in default under its WREX-KATC Loan as of December 30, 1994. As a result, the lenders could accelerate payment of the debt under the loan agreement and foreclose on the assets that collateralize that debt. The Partnership has therefore decided to market WREX and KATC for sale. The ultimate outcome of the Partnership's attempt to sell WREX and KATC cannot presently be determined. Accordingly, no adjustment that may result from the outcome of this matter has been made in the accompanying consolidated financial statements and financial statement schedules. Also as discussed in Note 2 to the consolidated financial statements, the Partnership expects that it will be unable to meet the scheduled December 29, 1995 principal payment pursuant to the revised ML California Credit Agreement if the sale of the California Cable Systems is not consummated. No adjustment that may result from the outcome of this matter has been made in the accompanying consolidated financial statements and financial statement schedules. /s/ Deloitte & Touche LLP New York, New York March 9, 1995
ML MEDIA PARTNERS, L.P. CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 30, 1994 AND DECEMBER 31, 1993 Notes 1994 1993 ASSETS: Cash and cash equivalents 1,2 $ 26,682,289 $ 26,916,477 Short-term investments held by agent 1 6,000,000 - Accounts receivable (net of allowance for doubtful accounts of $808,919 at December 30, 1994 and $677,188 at December 31, 1993) 2,7 11,751,637 9,286,116 Prepaid expenses and deferred charges (net of accumulated amortization of $7,782,985 at December 30, 1994, and $7,241,088 at December 31, 1993) 1 3,640,813 4,399,276 Property, plant and equipment(net of accumulated depreciation of $120,556,173 at December 30, 1994 and $104,955,637 at December 31, 1993) 1,4 85,053,152 92,400,494 Intangible assets (net of accumulated amortization of $122,438,628 at December 30, 1994 and $111,069,407 at December 31, 1993) 1,5 102,344,420 111,146,204 Other assets 10 2,858,047 5,703,370 TOTAL ASSETS 2,6 $238,330,358 $249,851,937 LIABILITIES AND PARTNERS' DEFICIT: Liabilities: Borrowings 2,6,11 $218,170,968 $232,568,349 Accounts payable and accrued liabilities 7 34,522,652 29,989,412 Subscriber advance payments 1,895,400 2,102,082 Total Liabilities 254,589,020 264,659,843
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ML MEDIA PARTNERS, L.P. CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 30, 1994 AND DECEMBER 31, 1993 (continued) Notes 1994 1993 Commitments and Contingencies 2,8 Partners' Deficit: General Partner: Capital contributions, net of offering expenses 1 1,708,299 1,708,299 Cumulative loss (1,807,968) (1,793,460) (99,669) (85,161) Limited Partners: Capital contributions, net of offering expenses (187,994 Units of Limited Partnership Interest) 1 169,121,150 169,121,150 Tax allowance cash distribution (6,291,459) (6,291,459) Cumulative loss (178,988,684) (177,552,436) (16,158,993) (14,722,745) Total Partners' Deficit (16,258,662) (14,807,906) TOTAL LIABILITIES AND PARTNERS' DEFICIT $ 238,330,358 $ 249,851,937
See Notes to Consolidated Financial Statements.
ML MEDIA PARTNERS, L.P. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 30, 1994, DECEMBER 31, 1993 AND DECEMBER 25, 1992 Notes 1994 1993 1992 REVENUES: Operating revenue 1 $105,910,208 $100,401,671 $100,443,967 Interest 192,875 147,466 158,738 Gain on sale of assets 3 122,154 4,988,390 - Total revenues 106,225,237 105,537,527 100,602,705 COSTS AND EXPENSES: Property opera- ting 14 38,764,954 33,764,437 36,301,114 General and administrative 2,7,8 20,907,542 20,003,401 22,703,107 Depreciation and amortization 1,4,5 30,180,011 31,419,885 31,516,609 Interest expense 6 16,046,700 17,500,965 23,437,581 Management fees 7 1,591,831 1,591,831 1,629,882 Other 184,955 179,455 190,182 Loss on sale of Universal 3 - - 6,399,000 Total costs and expenses 107,675,993 104,459,974 122,177,475 (Loss) Income before provision for income taxes and extraordinary item (1,450,756) 1,077,553 (21,574,770)
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ML MEDIA PARTNERS, L.P. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 30, 1994, DECEMBER 31, 1993 AND DECEMBER 25, 1992 (continued) Notes 1994 1993 1992 Provision for income taxes- Wincom 1,12 - 190,000 - (Loss) Income before extraordinary item (1,450,756) 887,553 (21,574,770) Extraordinary item-gain on extinguishment of debt 3 - 489,787 12,294,000 NET (LOSS) INCOME $ (1,450,756) $ 1,377,340 $ (9,280,770) Per Unit of Limited Partnership Interest: (Loss) Income before extra- ordinary item $ (7.64) $ 4.67 $ (113.61) Extraordinary item - 2.58 64.74 NET (LOSS) INCOME $ (7.64) $ 7.25 $ (48.87) Number of Units 187,994 187,994 187,994
See Notes to Consolidated Financial Statements.
ML MEDIA PARTNERS, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 30, 1994, DECEMBER 31, 1993 AND DECEMBER 25, 1992 1994 1993 1992 Cash flows from operating activities: Net (loss) income $(1,450,756) $ 1,377,340 $ (9,280,770) Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization 30,180,011 31,419,885 31,516,609 Bad debt expense 319,392 327,194 292,141 Equity in earnings of joint venture - (143,582) (26,028) Loss on sale of Universal - - 6,399,000 Gain on extinguishment of debt - (489,787) (12,294,000) Gain on sale of assets (122,154) (4,988,390) - Change in operating assets and liabilities: Increase in short-term investments held by agent (6,000,000) - - (Increase)/decrease in accounts receivable (2,451,478) (2,733,479) 446,295 Decrease/(increase) in prepaid expenses and deferred charges 272,316 (1,471,007) 4,588 Decrease/(increase) in other assets (94,528) (171,090) 219,336 Increase in accounts payable and accrued liabilities 4,443,739 193,632 611,859 (Decrease)/Increase in subscriber advance payments (206,682) 172,655 91,062
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ML MEDIA PARTNERS, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 30, 1994, DECEMBER 31, 1993 AND DECEMBER 25, 1992 (continued) 1994 1993 1992 Net cash provided by operating 24,889,860 23,493,371 17,980,092 activities Cash flows from investing activities: Proceeds from sale of assets 243,142 7,447,854 - Purchase of property, plant and equipment (10,688,588) (10,205,727) (10,044,019) Intangible assets (281,221) (322,723) (335,581) Net cash used in investing activities (10,726,667) ( 3,080,596) (10,379,600) Cash flows from financing activities: Principal payments on bank loans (14,397,381) (14,874,901) (9,125,974) Proceeds from borrowings - 1,448,505 11,279,969 Net cash (used in) provided by financing (14,397,381) (13,426,396) 2,153,995 activities Net increase in cash and cash (234,188) 6,986,379 9,754,487 equivalents Cash and cash equivalents at the beginning of year 26,916,477 19,930,098 10,175,611 Cash and cash equivalents at end of year $ 26,682,289 $ 26,916,477 $ 19,930,098 Cash paid for $ 15,388,775 $ 17,246,267 $ 21,070,472 interest
Supplemental Disclosure of Non-Cash Investing and Financing Activities: Borrowings and related liabilities of approximately $43,400,000 were fully discharged related to the disposition of the Universal Cable Systems as of December 25, 1992. See Note 3 for additional information. Property, plant and equipment of approximately $696,000, $1,067,000 and $1,094,000 was acquired but not paid for as of December 30, 1994, December 31, 1993 and December 25, 1992, respectively. See Notes to Consolidated Financial Statements. ML MEDIA PARTNERS, L.P. CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT FOR THE YEARS ENDED DECEMBER 30, 1994, DECEMBER 25, 1992 AND DECEMBER 27, 1991
General Limited Partner Partners Total Balance, December 27, 1991 $ (6,126) $ (6,898,350) $ (6,904,476) 1992: Net Loss (92,808) (9,187,962) (9,280,770) Partners' Deficit at December 25, 1992 (98,934) (16,086,312) (16,185,246) 1993: Net Income 13,773 1,363,567 1,377,340 Partners' Deficit at December 31, 1993 $ (85,161) $(14,722,745) $(14,807,906) 1994: Net Loss (14,508) (1,436,248) (1,450,756) Partners' Deficit at December 30, 1994 $ (99,669) $(16,158,993) $(16,258,662)
See Notes to Consolidated Financial Statements. ML MEDIA PARTNERS, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 30, 1994, DECEMBER 31, 1993 AND DECEMBER 25, 1992 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES ML Media Partners, L.P. (the "Partnership") was formed and the Certificate of Limited Partnership was filed under the Delaware Revised Uniform Limited Partnership Act on February 1, 1985. Operations commenced on May 14, 1986 with the first closing of the sale of units of limited partnership interest ("Units"). Subscriptions for an aggregate of 187,994 Units were accepted and are now outstanding. Media Management Partners (the "General Partner") is a joint venture, organized as a general partnership under the laws of the State of New York, between RP Media Management (a joint venture organized as a general partnership under the laws of the State of New York, consisting of The Elton H. Rule Company and IMP Media Management, Inc.), and ML Media Management Inc., a Delaware corporation and an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. The General Partner was formed for the purpose of acting as general partner of the Partnership. The General Partner's total capital contribution was $1,898,934 which represents 1% of the total Partnership capital contributions. Pursuant to the terms of the Amended and Restated Agreement of Limited Partnership (the "Partnership Agreement"), the General Partner is liable for all general obligations of the Partnership to the extent not paid by the Partnership. The limited partners are not liable for the obligations of the Partnership in excess of the amount of their contributed capital. The purpose of the Partnership is to acquire, finance, hold, develop, improve, maintain, operate, lease, sell, exchange, dispose of and otherwise invest in and deal with media businesses and direct and indirect interests therein. As of December 30, 1994, the Partnership's investments consisted of a 50% interest in Century - ML Cable Venture (the "Revised Venture") which owns an FM and AM radio station combination (WFID- FM and WUNO-AM, respectively) and a background music service in San Juan, Puerto Rico and, through its wholly-owned subsidiary corporation, Century-ML Cable Corporation ("C-ML Cable"), operates two cable television systems in Puerto Rico (the "Puerto Rico Systems"); four cable television systems in California ("California Cable" or the "California Systems"); two VHF television stations (KATC located in Lafayette, Louisiana and WREX located in Rockford, Illinois); an FM (WEBE-FM) and AM (WICC- AM) radio station combination in Bridgeport, Connecticut; an FM and AM radio station combination in Anaheim, California (KEZY-FM and KORG-AM, respectively) and Wincom Broadcasting Corporation ("Wincom"), a corporation that owns an FM radio station in Cleveland, Ohio (WQAL-FM). Certain reclassifications were made to the 1993 financial statements to conform with the current period's presentation. Basis of Accounting and Fiscal Year The Partnership's records are maintained on the accrual basis of accounting for financial reporting and tax purposes. Pursuant to generally accepted accounting principles, the Partnership recognizes revenue as various services are provided. The Partnership consolidates its 100% interest in Wincom; its 99.999% interests in ML California Associates, KATC Associates, WREX Associates, WEBE Associates, WICC Associates and Anaheim Radio Associates; and its pro rata 50% interest in the Revised Venture, which effective January 1, 1994 also includes the operations of C- ML Radio. The Partnership also consolidated its 100% interest in Universal Cable Holdings, Inc. ("Universal") prior to its sale in July, 1992. See Note 3 for information regarding the sale of Universal. All intercompany accounts have been eliminated. The fiscal year of the Partnership ends on the last Friday of each calendar year. Short-term investments held by agent Short-term investments held by agent represents investments with maturities of less than 30 days. Property and Depreciation Property, plant and equipment is stated at cost, less accumulated depreciation. Property, plant and equipment is depreciated using the straight-line method over the following estimated useful lives:
Machinery, Equipment and Distribution Systems 5-12 years Buildings 15-30.5 years Other 3-10 years
Initial subscriber connection costs, as it relates to the cable television systems, are capitalized and included as part of the distribution systems. Costs related to disconnects and reconnects are expensed as incurred. Expenditures for maintenance and repairs are also expensed as incurred. Betterments, replacement equipment and additions are capitalized and depreciated over the remaining life of the assets. Intangible Assets and Deferred Charges Intangible assets and deferred charges are being amortized on a straight-line basis over various periods as follows:
Goodwill 40 years Franchise life of the franchise Other Intangibles various Deferred Costs 4-10 years
Asset Impairment The Partnership assesses the impairment of assets on a regular basis or immediately upon the occurrence of a significant event in the marketplace or an event that directly impacts its assets. The methodology varies depending on the type of asset but typically consists of comparing the net book value of the asset to either: 1) the undiscounted expected future cash flows generated by the asset, and/or 2) the current market values obtained from industry sources. If the net book value of a particular asset is materially higher than the estimated net realizable value, and the asset is considered to be permanently impaired, the Partnership will write down the net book value of the asset accordingly; however, the Partnership may not write its assets down to a value below the asset-related non-recourse debt. The Partnership relies on industry sources and its experience in the particular marketplace to determine whether an asset impairment is other than temporary. Barter Transactions As is customary in the broadcasting industry, the Partnership engages in the bartering of commercial air time for various goods and services. Barter transactions are recorded based on the fair market value of the products and/or services received. The goods and services are capitalized or expensed as appropriate when received or utilized. Revenues are recognized when the commercial spots are aired. Broadcast Program Rights The Partnership's television stations' broadcast program rights, included in other assets, represent license agreements for the right to broadcast programs which are available at the balance sheet date. Amortization is recorded on a straight-line basis over the period of the license agreements or upon run usage. Revenue Recognition Operating revenue, as it relates to the cable television systems, includes earned subscriber service revenues and charges for installation and connections. Subscriber services paid for in advance are recorded as income when earned. Operating revenue, as it relates to the radio broadcasting properties is net of commissions paid to advertising agencies. Franchise Fees In September 1993, as a result of recently enacted cable regulation legislation which allows for the direct pass through of franchise fees to subscribers, California Cable changed its policy for accounting for franchise fees billed to subscribers and paid to various franchising authorities. Such amounts are now recorded in a balance sheet account with no effect on its results of operations. Prior to September 1993, for certain of its franchises, California Cable factored franchise fees into the amounts billed to subscribers and recorded such amounts as revenues on the accrual basis. For these franchises, amounts paid to franchising authorities were recorded as expenses on the accrual basis. Franchise fee expense recorded by California Cable during 1993 and 1992 amounted to approximately $1,192,000 and $837,000 respectively. These amounts approximate the franchise fees which were billed to subscribers and included in revenues in those years. Income Taxes No provision for income taxes has been made for the Partnership because all income and losses are allocated to the partners for inclusion in their respective tax returns. However, the Partnership owns certain entities which are consolidated in the accompanying financial statements and which are taxable. Effective December 26, 1992 the Partnership adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"). For certain entities owned by the Partnership which are taxpayers, SFAS No. 109 requires the recognition of deferred income taxes for the tax consequences of differences between the bases of assets and liabilities for income tax and financial statement reporting purposes, based on enacted tax laws. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. For the Partnership, SFAS No. 109 requires the disclosure of the difference between the tax bases and the reported amounts of the Partnership's assets and liabilities. Statement of Financial Accounting Standards No. 112 Effective January 1, 1994, the Partnership adopted Statement on Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits" ("SFAS No. 112"). This pronouncement establishes accounting standards for employers who provide benefits to former or inactive employees after employment, but before retirement. These benefits include, but are not limited to, salary-continuation, disability related benefits including workers' compensation, and continuation of health care and life insurance benefits. The statement requires employers to accrue the obligations associated with service rendered to date for employee benefits accumulated or vested where payment is probable and can be reasonably estimated. The effect of the adoption of SFAS No. 112 was not material to the Partnership's financial position or results of operations as of and for the year ending December 30, 1994. Interest Rate Exchange Agreements The differential to be paid or received on interest rate exchange agreements is accrued and recognized over the life of the agreements. The Partnership was exposed to credit loss in the event of non- performance by the other parties to interest rate exchange agreements in connection with the Revised ML California Credit Agreement during 1993 and the WREX-KATC Loan during 1992; however these interest rate exchange agreements expired during 1993 and 1992, respectively. Statements of Cash Flows Short-term investments held by the Partnership which have an original maturity of ninety days or less are considered cash equivalents. 2. LIQUIDITY The Partnership's ongoing cash needs will be to fund debt service, capital expenditures and working capital needs. As of December 30, 1994, the Partnership had $26,682,289 in cash and cash equivalents, of which $22,115,559 was limited for use at the operating level and the remaining $4,566,730 was the Partnership's working capital. As of December 31, 1993, the Partnership had $26,916,477 in cash and cash equivalents, of which $22,479,254 was limited for use at the operating level and the remaining $4,437,223 was the Partnership's working capital. On November 28, 1994, the Partnership entered into an agreement to sell substantially all of the assets used in the operations of the Partnership's California Cable Systems subject to numerous conditions to closing (see below). California Cable On November 28, 1994, the Partnership entered into an agreement (the "Asset Purchase Agreement") with Century Communications Corp. ("Century") to sell to Century substantially all of the assets used in the operations of the Partnership's California Cable Systems serving the Anaheim, Hermosa Beach/Manhattan Beach, Rohnert Park/Yountville and Fairfield communities. The base purchase price for the systems will be $286 million, subject to reduction by an amount equal to 11 times the amount by which the operating cash flow of the systems (as adjusted in accordance with the Asset Purchase Agreement) is less than $26 million for the 12-month period prior to the closing, and subject to further adjustment as provided in the Asset Purchase Agreement. In addition, the Partnership has the right to terminate the Asset Purchase Agreement if the purchase price would be less than $260 million based on the formula described above. Consummation of the transactions provided for in the Asset Purchase Agreement is subject to the satisfaction of certain conditions, including obtaining approvals from the Federal Communications Commission and the municipal authorities issuing the franchises for the systems. As of September 30, 1994 and December 30, 1994, due in part to the negative impact of rate-reregulation on the operations of the California Cable Systems, the Partnership was in default of certain financial covenants contained in the revised ML California Credit Agreement. In addition, as of December 30, 1994, the Partnership expected to be unable to meet during 1995 the principal payment requirements then contained in the revised ML California Credit Agreement. These defaults were cured during the first quarter of 1995. Effective February 23, 1995, the Partnership and the banks entered into a first amendment (the "First Amendment") to the revised ML California Credit Agreement that provided for reduced principal payments and less restrictive covenants during the first three quarters of 1995. In exchange, the Partnership paid an amendment fee of $322,969 to the banks and agreed to allow the banks to charge a higher interest rate on outstanding borrowings under the revised ML California Credit Agreement. (A further fee will be due to the lenders if the sale of the California Cable Systems is not consummated prior to December 29, 1995.) Certain other terms of the revised ML California Credit Agreement were also affected by the First Amendment. The Partnership currently expects that it will be able to remain in compliance with the terms of the revised ML California Credit Agreement, as amended by the First Amendment, until December 29, 1995, during which period the Partnership would seek to consummate the sale of the California Cable Systems to Century. The Partnership currently expects that if the sale of the California Cable Systems is not consummated prior to December 29, 1995, the Partnership will be unable to meet the scheduled December 29, 1995 principal payment due to the banks pursuant to the revised ML California Credit Agreement, as amended by the First Amendment. The California Cable Systems filed property tax assessment appeals with various counties in California related to changes in the methods used by assessors to value tangible property and possessory interests. The revised methods had significantly increased property taxes since they included values attributed to what the California Systems believed to be nontaxable, intangible assets. These appeals covered the tax years from 1987 to present. In December 1993, the California Cable Systems received a favorable decision with respect to a property tax appeal filed with one county served by the California Cable Systems. The county had the right to appeal the decision for a period of six months. This period expired without appeal during the second quarter of 1994. Also in December of 1993, the California Cable Systems reached a favorable agreement in principle with a second county served by the California Cable Systems where an appeal relating to property taxes had also been filed. During 1994, the California Cable Systems executed a settlement agreement and finalized assessed property values with, and received a refund of approximately $700,000 from, this second county. In part as a result of these developments, the California Cable Systems continue to be entitled to receive tax refunds. On December 31, 1993 the Partnership reduced by approximately $2.2 million the general and administrative expense of California Cable in order to account for these tax refunds. During the fourth quarter of 1994, Orange County, California, in which a significant percentage of the California Cable systems are located, filed for bankruptcy. At December 30, 1994 and December 31, 1993, the net property tax refund receivable from Orange County was approximately $1.7 million. The Partnership ultimately expects to file a claim for such property tax refunds for approximately $2.8 million. At December 30, 1994, the Partnership had funds in an escrow account totalling $785,731, which funds were included in other assets on the accompanying consolidated balance sheets. The funds were deposited in such account in accordance with the Partnership's agreement with Cable Telecommunications Joint Powers Agency ("CTJPA") to be held for the benefit of CTJPA's subscribers pending determination of the Partnership's potential need to make refunds to the subscribers in connection with rate re-regulation. In the first quarter of 1995, the Partnership was required to deposit $680,000 in another escrow account pursuant to an agreement with the City of Fairfield, California to be held for the benefit of the City of Fairfield's subscribers pending determination of the Partnership's potential need to make refunds to the subscribers in connection with rate re-regulation. The General Partner currently believes that under the FCC's existing decisions, the most material issues in the Partnership's rate cases should ultimately be decided in a manner predominantly favorable to the Partnership. WREX-KATC On October 31, 1994, the Partnership retained The Ted Hepburn Company to assist it in marketing WREX and KATC for sale. Although it intends to sell one or both television stations, the Partnership may not be able to reach final agreement(s) with potential purchasers of one or both stations on terms acceptable to the Partnership. If acceptable agreement(s) cannot be reached, the Partnership will attempt to refinance the WREX-KATC loan with a new lender. On February 23, 1995 and March 6, 1995, the Partnership entered into non-binding letters of intent to sell WREX and KATC, respectively. The sales of WREX and KATC are subject to negotiation of definitive purchase and sale agreements and numerous other conditions. The ultimate transfers of the licenses of WREX and KATC to potential buyers will also be subject to the prior approval of the FCC. During 1994, 1993 and 1992, the Partnership defaulted on the majority of its quarterly principal payments due under its WREX- KATC Loan. As of December 30, 1994, WREX-KATC was in default of $5,632,993 in principal, after giving effect to $867,007 in payments made during 1993 and 1994 from cash generated by the operations of WREX and KATC. The Partnership is not in default of any regularly scheduled interest payments under the WREX-KATC Loan and is contesting certain nominal default rate interest charges. In addition, as of December 28, 1990 and continuing through December 30, 1994, the Partnership was in default of financial covenants under its WREX-KATC Loan. The lender granted waivers for the defaults as of December 28, 1990. However, the lender has not granted waivers for any subsequent defaults. As required by the terms of the WREX-KATC Loan, subsequent to entering into the WREX-KATC Loan in 1989, the Partnership advanced a total of $1.0 million to WREX-KATC, including $10,000 in 1993. The Partnership expects to experience future payment and covenant defaults under the WREX-KATC Loan. The Partnership sought unsuccessfully to restructure the WREX-KATC Loan and, as discussed above, decided to sell WREX and KATC. The Partnership does not intend to, nor is it obligated to, advance any further working capital to WREX and KATC. The lender to WREX-KATC has informed the Partnership that it reserves all of its rights and remedies under the WREX-KATC Loan agreement, including the right to accelerate the maturity of the indebtedness under the WREX- KATC Loan and to foreclose on, or otherwise force a sale of, the assets of WREX and KATC (but not the other assets of the Partnership). Borrowings under the WREX-KATC Loan are nonrecourse to the Partnership. WINCOM-WEBE-WICC The Partnership was in compliance with all terms of its Wincom- WEBE-WICC Loan and the Restructuring Agreement at December 30, 1994. Impact of Cable Legislation and Regulation The future liquidity of the Partnership's cable operations, California Cable and C-ML Cable, is likely to be negatively affected by recent and ongoing changes in legislation and regulation governing the cable industry. The potential impact of such legislation and regulation on the Partnership is described below. On October 5, 1992, Congress overrode the President's veto of the Cable Consumer Protection and Competition Act of 1992 (the "1992 Cable Act") which imposed significant new regulations on the cable television industry. The 1992 Cable Act required the development of detailed regulations and other guidelines by the Federal Communications Commission ("FCC"), most of which have now been adopted but remain subject to petitions for reconsideration before the FCC and/or court of appeals. Rate Regulation The 1992 Cable Act completely supplanted the rate regulation provisions of the 1984 Cable Act. The 1992 Act establishes that rate regulation applies to rates charged for the basic tier of service by any cable system not subject to "effective competition," which is, in turn, deemed to exist if (1) fewer than 30 percent of the households in the service area subscribe to the system, (2) at least 50 percent of the households in the franchise area are served by two multichannel video programming distributors and at least 15 percent of the households in the franchise area subscribe to the additional operator, or (3) a franchising authority for that franchise area itself serves as a multichannel video programming distributor offering service to at least 50 percent of the households in the franchise area. Under this new statutory definition, the Partnership's systems, like most cable systems in most areas, are not presently subject to effective competition. The basic tier must include all signals required to be carried under the 1992 Cable Act's mandatory carriage provisions, all PEG channels required by the franchise, and all broadcast signals other than "superstations." Acting pursuant to the foregoing statutory mandate, the FCC, on May 3, 1993, released a Report and Order ("Rate Order") establishing a new regulatory scheme governing the rates for certain cable television services and equipment. The new rules, among other things, set certain benchmarks which will enable local franchise authorities to require rates for "basic service" (as noted, essentially, local broadcast and access channels) and the FCC (upon receipt of individual complaints) to require rates for certain satellite program services (excluding premium channels) to fall approximately 10% from September 30, 1992 levels, unless the cable operator is already charging rates that are at a so-called "competitive" benchmark level or it can justify a higher rate based on a cost-of-service showing. Rates of all regulated cable systems will then be subject to a price cap that will govern the extent to which rates can be raised in the future without a cost-of-service showing. The rules announced in May 1993, became effective on September 1, 1993, but remained subject to considerable debate and uncertainty as several major issues and FCC proceedings awaited resolution. On February 22, 1994, the FCC adopted a series of additional measures that expanded and substantially altered its cable rate regulations. The FCC's major actions included the following: (1) a modification of its benchmark methodology in a way which effectively required cable rates to be reduced, on average, an additional 7% (i.e., beyond the 10% reduction previously ordered in 1993) from their September 30, 1992 level, or to the new benchmark, whichever is less; (2) the issuance of new standards and requirements to be used in making cost-of-service showings by cable operators who seek to justify rates above the levels determined by the benchmark approach; and (3) the clarification and/or reaffirmation of a number of "going forward" issues that had been the subject of various petitions for reconsideration of its May 3, 1993 Rate Order. In deciding to substantially revise its benchmark methodology for regulated cable rates, the FCC actually created two benchmark systems. Thus, whereas the modified rate regulations adopted on February 22, 1994 became effective as of May 15, 1994, regulated rates in effect before that date continue to be governed by the old benchmark system. Under the FCC's revised benchmark regulations, systems not facing "effective competition" that have become subject to regulation will be required to set their rates at a level equal to their September 30, 1992 rates minus a revised "competitive differential" of 17 percent (a "differential" which, as noted, was set at 10 percent in the FCC's May 1993 Rate Order). Cable operators who seek to charge rates higher than those produced by applying the competitive differential may elect to invoke new cost-of-service procedures (discussed below). In addition to revising the benchmark formula and the competitive differential used in setting initial regulated cable rates, the FCC adopted rules to simplify the calculations used to adjust those rates for inflation and external costs in the future. The FCC also concluded that it will treat increases in compulsory copyright fees incurred by carrying distant broadcast signals as external costs in a fashion parallel to increases in the contractual costs for nonbroadcast programming. It will not, however, accord external cost treatment to pole attachment fees. In its May 1993 Rate Order the FCC exempted from rate regulation the price of packages of "a la carte" channels if certain conditions were met. Upon reconsideration, however, the FCC on February 22, 1994 effectively tightened its regulatory treatment of "a la carte" packages by establishing more elaborate criteria designed to ensure that such practices are not employed so as to unduly evade rate regulation. When assessing the appropriate regulatory treatment of "a la carte" packages, the FCC stated it would consider, inter alia, the following factors as possibly suggesting that such packages do not qualify for non-regulated treatment: whether the introduction of the package avoids a rate reduction that otherwise would have been required under the FCC's rules; whether an entire regulated tier has been eliminated and turned into an "a la carte" package; whether a significant number or percentage of the "a la carte" channels were removed from a regulated service tier; whether the package price is deeply discounted when compared to the price of an individual channel; and whether the subscriber must pay significant equipment or other charges to purchase an individual channel in the package. In addition, the FCC would consider factors that will reflect in favor of non-regulated treatment such as whether the channels in the package have traditionally been offered on an "a la carte" basis or whether the subscriber is able to select the channels that comprise the "a la carte" package. "A la carte" packages which are found to evade rate regulation rather than enhance subscriber choice would be treated as regulated tiers, and operators engaging in such practices may be subject to forfeitures or other sanctions by the FCC. In another action, the FCC adopted a methodology for determining rates when channels are added to or deleted from regulated tiers and announced that it will treat programming costs as external costs and that operators may recover the full amount of programming expenses associated with added channels. Operators may also recover a mark-up on their programming expenses. These adjustments and calculations are to be made on a new FCC form. On November 10, 1994, the FCC adopted new "going forward" rules and further tightened its regulation of a la carte packages. These new rules allow operators to pass through the costs, plus a 20 cent per channel mark-up, for channels newly added to regulated tiers. Through 1996, however, operators will be subject to an aggregate of $1.50 cap on the amount they may increase cable program service tier rates due to channel additions. The FCC also established a "new products tier" intended to provide operators unregulated pricing and packaging flexibility, particularly for newer services, so long as they preserve the fundamental nature of their preexisting regulated tiers. Outside of the "new products" approach, however, the Commission reversed its approach to a la carte packages and ruled that all (non-premium) packages of services -- even if also available on an a la carte basis -- would be treated as a regulated tier. Several cable industry interests have challenged or announced that they will challenge these and other rate regulation decisions of the FCC in a federal court of appeals. The Partnership is unable to predict the timing or outcome of any such appeals. In a separate action on February 22, 1994, the FCC adopted interim rules to govern cost of service proceedings initiated by cable operators. Operators who elect to pursue cost of service proceedings will have their rates based on their allowable costs, in a proceeding based on principles similar to those that govern cost-based rate regulation of telephone companies. Under this methodology, cable operators may recover, through the rates they charge for regulated cable service, their normal operating expenses and a reasonable return on investment. The FCC has, for these purposes, established an interim industry-wide rate of return of 11.25%. It has also determined that acquisition costs above book value are presumptively excluded from the rate base. At the same time, certain intangible, above-book costs, such as start-up losses (limited to losses actually incurred during a two- year start-up period) and the costs of obtaining franchise rights and some start-up organizational costs such as customer lists, may be allowed. There are no threshold requirements limiting the cable systems eligible for a cost of service showing, except that, once rates have been set pursuant to a cost of service approach, cable operators may not file a new cost of service showing to justify new rates for a period of two years. Finally, the FCC notes that it will, in certain individual cases, consider a special hardship showing (or the need for special rate relief) where an operator demonstrates that the rates set by a cost of service proceeding would constitute confiscation of investment and that some higher rate would not represent exploitation of customers. In considering whether to grant such a request, the FCC emphasizes that, among other things, it would examine the overall financial condition of the operator and whether there is a realistic threat of termination of service. These interim rules remain the subject of both a further FCC rulemaking and a pending appeal in the U.S. Court of Appeals for the D.C. Circuit. The Partnership is currently unable to assess the full impact of the FCC's further rate regulation decisions and the 1992 Cable Act generally upon its business prospects or future financial results. However, the rate reductions mandated by the FCC in May of 1993 and February of 1994 have had, and will most likely continue to have, a detrimental impact on the revenues and profits on the Partnership's cable television operations. Although the impact of the 1992 Cable Act and the recent FCC actions cannot yet be ascertained precisely, once fully implemented, certain aspects of the new law may have an additional negative impact on the financial condition, liquidity, and value of the Partnership. The rate reductions and limits on the pricing of a-la-carte tiers are principally responsible for the occurrence of since-cured and possible future defaults under the revised ML California Credit Agreement. In addition, the Partnership is currently unable to determine the impact of the February 22, 1994 FCC action and previous FCC actions on its ability to consummate the sale of the California Cable Systems or the potential timing and ultimate value of such sale. However, as discussed below, the FCC actions have had, and will have, a detrimental impact on the revenues and profits of the California Cable Systems. As an example of the effects of the 1992 Cable Act, in complying with the benchmark regulatory scheme without considering the effect of any future potential cost-of-service showing, the Partnership's California Cable Systems, on a franchise by franchise basis, were required to reduce present combined basic service rates (broadcast tier and satellite service tier) effective September 1, 1993, and again effective July 14, 1994. In addition, pursuant to the 1992 Cable Act, revenue from secondary outlets and from remote control units was eliminated or reduced significantly. At that time, the Partnership began instituting charges for converters, as permitted by the 1992 Cable Act, offering programming services on an a-la-carte basis, which services are not subject to rate regulation, and aggressively marketing unregulated premium services to those subscribers benefiting from decreased basic rates. Despite the institution of these actions by the California Cable Systems, the May, 1993 and February, 1994 rate regulations enacted pursuant to the 1992 Cable Act had a detrimental impact on the revenues and profits of the California Cable Systems. For example, in 1994 the revenues of the California Cable Systems decreased slightly compared to 1993 after having increased in every previous year. Any limits imposed by the FCC on a-la-carte pricing will have a further detrimental impact on the revenues and profits of the California Cable Systems. The Partnership is currently unable to ascertain the full impact of the February 22, 1994 FCC action and previous FCC actions on the C-ML Cable Systems. While the impact of a September 1, 1993 rate and tier restructuring to comply with the 1992 Cable Act did not have a significant negative impact on the revenues and profits of C-ML Cable, the February 22, 1994 FCC action had a detrimental impact on the revenues and profits on C-ML Cable. For example, while the revenues of the C-ML Cable systems increased in 1994 compared to 1993, the increase in revenues of the C-ML Cable Systems was lower than in previous years. However, the Partnership does not presently anticipate that this reduced rate of revenue growth will result in any defaults under the C-ML Notes or the C-ML Revolving Credit Agreement during 1995. There were no defaults under the C-ML Notes or the C-ML Revolving Credit Agreement at December 30, 1994. Summary Based upon a review of the current financial performance of the Partnership's investments, the Partnership continues to monitor its working capital level. The Partnership does not have sufficient cash to meet all of the contractual debt obligations of all of its investments, nor is it obligated to do so. The Partnership does not currently expect to, nor is it obligated to, advance any of its unrestricted working capital to WREX and KATC. As of December 30, 1994, KATC and WREX represented approximately 9.7% of the consolidated assets of the Partnership and approximately 10.9% of the consolidated operating revenue. 3. DISPOSITION OF ASSETS Wincom On April 30, 1993, WIN Communications of Indiana, Inc., a 100%- owned subsidiary of Wincom, entered into an Asset Purchase Agreement to sell substantially all of the assets of WCKN-AM/WRZX- FM, Indianapolis, Indiana (the "Indianapolis Stations") to Broadcast Alchemy, L.P.("Alchemy") for gross proceeds of $7 million. Alchemy is not affiliated with the Partnership. The proposed sale was subject to approval by the FCC, which granted its approval on September 22, 1993. On October 1, 1993, the date of the sale of the Indianapolis Stations, the net proceeds from such sale, which totalled approximately $6.1 million, were remitted to Chemical Bank, as required by the terms of the Restructuring Agreement, to reduce the outstanding principal amount of the Series B Term Loan due Chemical Bank. In addition, certain additional amounts from the gross proceeds from the sale of the Indianapolis Stations, including an escrow deposit of $250,000, will be paid to Chemical Bank. The Partnership recognized a gain of approximately $4.7 million on the sale of the Indianapolis Stations. In addition, the Partnership recognized an extraordinary gain of approximately $0.5 million as a result of the remittance to Chemical Bank of the approximately $6.1 million net proceeds to reduce the outstanding principal amount of the Series B Term Loan and the simultaneous forgiveness of the entire Series C Term Loan due Chemical Bank pursuant to the Restructuring Agreement (see Note 6). The remaining portion of the forgiveness of the Series C Note will be amortized against interest expense over the remaining life of the loan. As of October 1, 1993 (the date of the sale), the Indianapolis Stations represented approximately 1% of the consolidated assets of the Partnership. In addition, for the year ended December 31, 1993, the Indianapolis Stations represented approximately 1% of the consolidated operating revenues of the Partnership. Universal On July 8, 1992, the Partnership consummated the sale of all of the issued and outstanding capital stock of Universal to Ponca/Universal Holdings, Inc., a Delaware corporation ("Ponca"), for aggregate consideration of approximately $31.6 million. Ponca is not affiliated with the Partnership. Consideration was paid at closing as follows: [i] approximately $30.2 million was paid to the lenders in full discharge of the obligations of Universal under a credit agreement dated September 19, 1988, as amended, and under an interest rate exchange agreement dated December 12, 1988, which obligations were approximately $43.4 million at Closing; [ii] $1.0 million was deposited into an escrow account with the lenders, which was subsequently paid to the lenders, to provide Ponca with its sole recourse for recovering any indemnification payments or purchase price adjustments that may be due it under the stock purchase agreement; and [iii] approximately $0.4 million was used to pay closing costs associated with the sale. No proceeds were retained by the Partnership and the Partnership recognized a loss of approximately $6.4 million on the sale and an extraordinary gain of approximately $12.3 million on the extinguishment of debt. The lenders have unconditionally released the Partnership and Universal from all other obligations relating to the credit and interest rate exchange agreements. These obligations of Universal (noted above) were nonrecourse to the Partnership. See Note 13 for information regarding pro forma data for the effects of the disposition of Universal. 4. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consisted of the following:
December 30, December 31, 1994 1993 Land and Improvements $ 5,632,210 $ 5,087,438 Buildings 11,320,418 10,827,637 Cable Distribution Systems and Equipment 185,566,436 178,332,482 Other 3,090,261 3,108,574 205,609,325 197,356,131 Less accumulated (120,556,173) (104,955,637) depreciation Property, plant and equipment, net $ 85,053,152 $ 92,400,494
5. INTANGIBLE ASSETS Intangible assets consisted of the following:
December 30, December 31, 1994 1993 Goodwill $ 83,429,567 $ 81,091,611 Franchises 115,497,842 115,268,361 FCC Broadcast Licenses 4,746,304 4,746,304 Network Affiliation 10,892,168 10,892,168 Contracts Other 10,217,167 10,217,167 224,783,048 222,215,611 Less accumulated (122,438,628) (111,069,407) amortization Intangible assets, net $ 102,344,420 $ 111,146,204
6. BORROWINGS At December 30, 1994 and December 31, 1993, the aggregate amount of borrowings as reflected on the balance sheet of the Partnership is as follows:
December 30, December 31, 1994 1993 A)C-ML Notes/C-ML Credit Agreement $ 50,000,000 $ 50,000,000 B)Revised ML California Credit Agreement 129,187,500 141,375,000 C)WREX-KATC Loan 23,382,993 23,467,873 D)Restructuring Agreement/Wincom-WEBE-WICC Loan 15,600,475 17,725,476 TOTAL $218,170,968 $232,568,349
A) On December 31, 1992, obligations under the C-ML Credit Agreement were fully repaid with the proceeds of a $100 million offering of Senior Secured Notes (the "C-ML Notes"), which were purchased by institutional lenders. The terms of the C-ML Notes provided for lower debt service payments in the short-term than the C-ML Credit Agreement, due to the lack of mandatory principal payments. Borrowings under the C-ML Notes bear semi-annual interest at a fixed annual rate of 9.47% with annual principal payments of $20 million payable beginning November 30, 1998 and the final principal payment due November 30, 2002. The C-ML Notes require that C-ML Cable maintain certain ratios such as debt to operating cash flow, interest expense coverage and debt service coverage and restricts such items as cash distributions and certain additional indebtedness. In addition, on December 1, 1992, C-ML Cable entered into a $20.0 million revolving credit agreement (the "C-ML Revolving Credit Agreement") with Citibank, N.A. to provide C-ML Cable future flexibility for cable system expansion, capital expenditures, working capital needs of C-ML Cable and payment of certain liabilities, including management fee obligations accrued in prior years payable to Century (see Note 10). Borrowings under the C-ML Notes and the C-ML Revolving Credit Agreement are nonrecourse to the Partnership and are collateralized with substantially all of the Venture's interest in the Puerto Rico Systems, as well as by all of the assets of the Venture, the Venture's interest in C-ML Cable, and all of the assets of C-ML Radio. On September 30, 1993, C-ML Cable entered into an amendment to the C-ML Revolving Credit Agreement whereby the Termination Date (the date upon which all revolving credit borrowings outstanding under the C-ML Revolving Credit Agreement are converted into a term loan) was extended from September 30, 1993 to December 15, 1993. Effective December 15, 1993, C-ML Cable entered into a second amendment to the C-ML Revolving Credit Agreement whereby the debt facility was converted into a reducing revolving credit with a final maturity of December 31, 1998. Beginning December 31, 1993, the amount of borrowing availability under the C-ML Revolving Credit Agreement is reduced quarterly each year. Outstanding amounts under the debt facility may be prepaid at any time subject to certain conditions. As of December 30, 1994, there were no borrowings outstanding under the C- ML Revolving Credit Agreement. As of December 30, 1994, outstanding borrowings under the C-ML Notes totaled $100 million, of which $50 million is reflected on the Partnership's balance sheet (see Note 10). In 1992, the effective interest rate on the old C-ML Credit Agreement was approximately 6.3%. B) On May 15, 1990, the Partnership entered into a $160 million Amended and Restated Credit Agreement (the "Revised ML California Credit Agreement") with a group of banks led by Bank of America National Trust and Savings Association ("B of A"). The original ML California Credit Agreement was amended to allow the Partnership to borrow up to $160 million, if certain operating levels outlined in the Revised ML California Credit Agreement were met by the California Media Operations (see below), with the proceeds used to: refinance all outstanding borrowings under the $115 million original ML California Credit Agreement; repay all outstanding borrowings under the $16.5 million Anaheim Radio Loan; repay working capital advances to the Partnership; and pay various refinancing expenses. Upon repayment from the proceeds of the Revised ML California Credit Agreement, the Anaheim Radio Loan was canceled. An additional $13.0 million was borrowed during 1991 and 1992. The Revised ML California Credit Agreement was structured as a revolving credit facility through September 30, 1992, at which time all outstanding borrowings under the facility, totalling $150 million, were converted to a term loan that is scheduled to fully amortize by September 30, 1999. As a result, since October 1, 1992, the operations of the California Systems and the Anaheim Radio Stations (collectively, the "California Media Operations") have been prohibited from borrowing additional amounts under the Revised ML California Credit Agreement. The Revised ML California Credit Agreement contains numerous covenants and restrictions regarding the California Media Operations, including limitations on indebtedness, acquisitions and divestitures of media properties, and distributions to the Partnership, all as outlined in the Revised ML California Credit Agreement. The California Media Operations must also meet certain tests such as the ratio of Funded Debt to Operating Cash Flow, the Fixed Charge Ratio and the ratio of Operating Cash Flow to Debt Service, all as defined in the Revised ML California Credit Agreement. Proceeds from the Revised ML California Credit Agreement are restricted to the use of the California Media Operations and are generally not available for the working capital needs of the Partnership. Borrowings under the Revised ML California Credit Agreement originally bore interest at an annual rate equal to, at the Partnership's option, either B of A's Reference Rate or an Offshore Rate plus the Applicable Margin, as defined, which ranged from .75% to 1.50% in the case of Reference Rate Loans and from 1.25% to 2.50% in the case of Offshore Rate Loans, depending on the Funded Debt Ratio of the California Media Operations. On May 15, 1990, in an effort to reduce its exposure to upward fluctuations in interest rates, and as required by the terms of the Revised ML California Credit Agreement, the Partnership entered into two three-year interest rate exchange agreements totalling $100 million, which expired during 1993. Of this amount, $80 million was swapped at a fixed rate of 8.82% per annum and $20 million was swapped at a fixed rate of 9.04% per annum. During the terms of those swaps, all borrowings in excess of the $100 million that were subject to the revised ML California Credit Agreement bore interest at floating market interest rates as outlined above. All borrowings under the Revised ML California Credit Agreement currently bear interest at floating rates. The overall effective interest rate for the borrowings under the Revised ML California Credit Agreement was approximately 5.83%, 6.48%, and 8.35% during 1994, 1993, and 1992, respectively. Pursuant to the terms of the First Amendment, dated February 23, 1995, to the revised ML California Credit Agreement, the applicable margin was increased for periods following December 31, 1994, to between 2.50% and 2.75% for Offshore Rate Loans and between 1.50% and 1.75% for Reference Rate Loans. Borrowings under the Revised ML California Credit Agreement are nonrecourse to the Partnership and are collateralized with substantially all of the assets of the California Media Operations as well as a pledge of the Partnership's interest in Anaheim Radio Associates. See Note 2 for additional information regarding the First Amendment and defaults (since cured) under the Revised ML California Credit Agreement. C) On June 21, 1989, the Partnership entered into an Agreement of Consolidation, Extension, Amendment and Restatement (the "WREX-KATC Loan") which provided a reducing revolving credit line with a bank providing for borrowings of up to $27.1 million through June 30, 1989. The WREX-KATC Loan is collateralized by all of the assets of KATC-TV and WREX-TV. The Partnership, if no event of default had occurred (as discussed in Note 2), had options to elect to pay interest on the WREX-KATC Loan based upon the bank's reference rate or London Interbank Offered Rates, plus applicable margins. As a result of defaults under the WREX-KATC Loan, the bank has restricted interest rate options to the reference rate only. The WREX-KATC Loan requires mandatory quarterly principal repayments, which commenced on June 30, 1989, and continue through December 31, 1998. However, see below for a discussion of the possible acceleration of the principal repayments due to the defaults. During the first part of 1992, the Partnership had two interest rate exchange agreements for the WREX-KATC Loan, both of which expired during 1992. The Partnership entered into an interest rate swap on June 24, 1987 under which the Partnership received market-rate LIBOR and paid a fixed rate of 9.7% on the notional amount of $7 million through June 24, 1992. The Partnership entered into an interest rate swap on September 22, 1987 under which the Partnership received market-rate LIBOR and paid a fixed rate of 9.78% on the notional amount of $6.5 million through September 22, 1992. The Partnership also entered into an interest rate exchange agreement on September 26, 1990, that fixed the underlying unadjusted LIBOR rate on $11 million of the WREX- KATC Loan at 8.2% through September 26, 1991. The Partnership was not party to any interest rate hedge agreements during 1993 with respect to the WREX-KATC Loan. All borrowings under the WREX-KATC Loan currently bear interest at floating rates. The effective interest rate on the WREX-KATC Loan was approximately 8.7% during 1994 and 7.5% in 1993. In part due to the expired interest rate exchange agreements, the effective interest rate on the WREX- KATC Loan was approximately 7.7% during 1992. The WREX-KATC Loan requires that KATC-TV and WREX-TV maintain minimum levels of operating cash flow and certain ratios such as debt to operating income and interest and/or debt service coverage and restricts such items as cash distributions, additional indebtedness or asset sales. The WREX-KATC Loan also includes other standard and usual loan covenants. Borrowings under the WREX-KATC Loan are nonrecourse to the Partnership and are collateralized with substantially all the assets of KATC-TV and WREX-TV. At December 30, 1994, there was no further availability under the WREX-KATC Loan. See Note 2 regarding defaults under this loan. D) On July 19, 1989, the Partnership entered into an amended and restated credit, security and pledge agreement ("the Wincom-WEBE-WICC Loan") which was used to replace the original Wincom credit, security and pledge agreement with Chemical Bank, repay the original WEBE-FM revolving credit/term loan agreement and finance the acquisition of WICC-AM. The Wincom-WEBE-WICC Loan was structured as a revolving credit line that provided for borrowings of up to $35 million through December 31, 1990. On December 31, 1990, outstanding borrowings of approximately $24.7 million on the Wincom-WEBE Loan were converted to a term loan. Principal payments were scheduled to commence on March 31, 1991 and to continue quarterly through June 30, 1997. No such principal payments were made (see below). The Partnership, if no event of default had occurred, had options to elect to pay interest on the Wincom-WEBE-WICC Loan based upon the bank's reference rate or London Interbank Offered Rates, plus applicable margins. As a result of defaults under the Wincom-WEBE-WICC Loan, the lender restricted interest rate options to reference rate only; although these defaults were cured pursuant to the Restructuring Agreement, the Partnership may borrow only at the reference rate. The Partnership entered into an interest rate swap on July 20, 1989 under which the Partnership received market-rate LIBOR and paid a fixed base rate of 8.47% on the notional amount of $10 million through July 20, 1991. The Partnership entered into an interest rate swap on August 15, 1989 under which the Partnership received market-rate LIBOR and paid a fixed base rate of 8.34% on the notional amount of $10 million through August 15, 1991. The Partnership was not party to any interest rate hedge agreements during 1994 with respect to the Wincom- WEBE-WICC Loan. The effective interest rate on the Wincom- WEBE-WICC Loan was approximately 8.7%, 7.8%, and 8.1% during 1994, 1993 and 1992, respectively. The Wincom-WEBE-WICC Loan required that the Wincom-WEBE-WICC group maintain minimum covenant levels of certain ratios such as debt to operating profit and debt service coverage, and restricts such items as: cash; the payment of management fees, distributions or dividends; additional indebtedness; or asset sales by or at Wincom, WEBE-FM or WICC-AM. The Wincom-WEBE-WICC Loan also included other standard and usual loan covenants. Borrowings under the Wincom-WEBE-WICC Loan are nonrecourse to the Partnership and are collateralized with substantially all of the assets of the Wincom-WEBE-WICC group. During 1993, 1992 and 1991, the Partnership defaulted on scheduled principal payments and interest payments due under the Wincom-WEBE-WICC Loan. Furthermore, during 1993, 1992 and 1991, and periods during 1990, the Partnership was in default of most of its covenants under its Wincom-WEBE-WICC Loan. On July 30, 1993, the Partnership and Chemical Bank executed an amendment to the Wincom-WEBE-WICC Loan (the "Restructuring Agreement"), effective January 1, 1993, which cured all previously outstanding principal and interest payment and covenant defaults pursuant to the Wincom-WEBE- WICC Loan. In addition, as part of the restructuring process, the Partnership agreed to sell substantially all of the assets of the Indianapolis Stations (see Note 3). The Restructuring Agreement provided for the outstanding principal and interest due Chemical Bank as of December 31, 1992 (approximately $24.7 million and $2.0 million, respectively) to be divided into three notes as follows: a Series A Term Loan in the amount of $13 million; a Series B Term Loan in the amount of approximately $11.7 million; and a Series C Term Loan in the amount of approximately $2.0 million (which represented all the accrued interest outstanding under the Wincom-WEBE-WICC Loan as of December 31, 1992). The Series A Term Loan bears interest, payable monthly, at Chemical Bank's Alternate Base Rate plus 1-3/4% effective January 1, 1993, with principal payments due quarterly in increasing amounts beginning March 31, 1994 and continuing through the final maturity at December 31, 1997. Additional principal payments are also required annually from Excess Cash Flow, as defined in the Restructuring Agreement. On July 30, 1993, as required by the Restructuring Agreement, the Partnership paid all the interest due on the Series A Term Loan from January 1, 1993 to July 31, 1993, totalling $593,306, from cash generated by the stations. The principal amount of the Series A Term Loan increased by $2 million to $15 million upon the consummation of the sale of the Indianapolis Stations on October 1, 1993 (see below) and such increase was offset by a simultaneous reduction in the Series B Term Loan. On January 28, 1994, the Partnership made a required principal payment under the Series A Term Loan in the amount of $656,406 from cash generated by the stations. In addition to making four scheduled quarterly principal payments totalling $400,000 during 1994, on December 16, 1994 the Partnership made an optional principal payment under the Series A Term Loan of $1 million from cash generated by the stations. There was approximately $12.9 million outstanding under the Series A Term Loan as of December 30, 1994. On January 31, 1995, the Partnership made a required excess cash flow principal payment under the Series A Term Loan of $309,908 from cash generated by the stations. The Series B Term Loan bears interest at a rate equal to Chemical Bank's Alternate Base Rate plus 1-3/4% beginning on April 30, 1994, with interest payments accruing, and payable annually only from Excess Cash Flow. In addition, a minimum of $4 million of Series B Term Loan principal was due to Chemical Bank on or prior to June 30, 1994. On October 1, 1993, the date of the sale of the Indianapolis Stations, the net proceeds from such sale, which totalled approximately $6.1 million, were remitted to Chemical Bank, as required by the terms of the Restructuring Agreement, to reduce the outstanding principal amount of the Series B Term Loan. Certain additional amounts from the net proceeds from the sale of the Indianapolis Stations, including an escrow deposit of $250,000, will be paid to Chemical Bank. On October 1, 1993, the Series B Term Loan principal amount was permanently reduced by $2 million, offset by a simultaneous increase in the Series A Term Loan. On July 30, 1993, as required by the Restructuring Agreement, the Partnership made a principal payment of $220,899 under the Series B Term Loan from cash generated by the stations and made additional required principal payments of $100,000 on October 1, 1993, $33,797 on November 1, 1993 and $545,304 on December 29, 1993. On January 28, 1994, the Partnership made a required principal payment under the Series B Loan in the amount of $68,594 from cash generated by the Stations. On December 16, 1994 the Partnership made an optional interest payment under the Series B Term Loan of $175,852 from cash generated by the stations, which payment represented all accrued interest then due under the Series B Term Loan. As of December 30, 1994, there was approximately $2.7 million of principal due under the Series B Term Loan. On January 31, 1995, the Partnership made a required Excess Cash Flow interest payment under the Series B Term Loan of $35,554 from cash generated by the stations. The remaining principal amount of the Series B Term Loan is due on December 31, 1997. The Series C Term Loan was to bear interest at a fixed rate equal to 6% per annum beginning April 30, 1994, with interest payments accruing, and payable annually only from Excess Cash Flow. The principal amount of the Series C Term Loan was due on December 31, 1997. As a result of the principal payment made on the Series B Term Loan from the net proceeds from the sale of the Indianapolis Stations exceeding $6 million (described above), the full principal amount of the Series C Term Loan was forgiven by Chemical Bank on October 1, 1993 pursuant to the terms of the Restructuring Agreement (see Note 3). After principal and interest due under the Series A Term Loan and the Series B Term Loan have been satisfied in full, any remaining cash proceeds generated from the operations of, or the sale proceeds from the sale of, the stations in the Wincom-WEBE-WICC Group will be divided between the Partnership and Chemical Bank, with the Partnership receiving 85% and Chemical Bank receiving 15%, respectively. As of December 30, 1994, the Partnership was in full compliance with all covenants under the Restructuring Agreement. At December 30, 1994, the annual aggregate amounts of principal payments (without considering potential accelerations made possible by defaults) required for the borrowings as reflected in the consolidated balance sheet of the Partnership are as follows:
Year Ending Principal Amount 1995 $ 27,157,993 1996 25,225,000 1997 47,475,475 1998 50,187,500 1999 38,125,000 Thereafter 30,000,000 TOTAL $218,170,968
Based upon the restrictions of the borrowings as described above, approximately $234 million of assets are restricted from distribution by the entities in which the Partnership has an interest. During 1994, 1993 and 1992, the Partnership was in violation of payments and debt covenants under the WREX-KATC Loan. The principal amount payable in 1995 would increase by an additional $14,250,000 if the lender to WREX and KATC required immediate payment. As discussed in Note 2, if the sale of the California Cable Systems is not consummated prior to December 29, 1995, the Partnership will be unable to meet the scheduled December 29, 1995 principal payment due under its ML California Credit Agreement, as amended by the First Amendment. The lenders would then have the right to accelerate the maturity of the indebtedness under this loan and to foreclose on, or otherwise force a sale of, the assets of the California Media Operations (but not the other assets of the Partnership). 7. TRANSACTIONS WITH THE GENERAL PARTNER AND ITS AFFILIATES During the years ended December 30, 1994, December 31, 1993 and December 25, 1992 the Partnership incurred the following expenses in connection with services provided by the General Partner and its affiliates:
1994 1993 1992 Media Management Partners (General Partner) Partnership Mgmt. fee $ 557,979 $ 557,979 $ 557,979 Property Mgmt. fee 1,033,852 1,033,852 1,071,903 Reimbursement of Operating Expenses 993,622 1,074,071 744,797 $2,585,453 $2,665,902 $2,374,679
In addition, the Partnership, through the California Cable Systems, is party to an agreement with MultiVision Cable TV Corp. ("MultiVision"), an affiliate of the General Partner, whereby MultiVision provides the California Cable Systems (and provided Universal before its sale) with certain administrative services. The reimbursed cost charged to the California Cable Systems and Universal (for 1992) for these services amounted to an aggregate of $1,937,332 for 1994, $1,481,562 for 1993, and $1,653,648 for 1992. These costs do not include programming costs that are charged, without markup, to the California Cable Systems (and had been charged to Universal) under an agreement to allocate certain management costs. Also, the Partnership has a payable to RP Media Management of $317,666 as of December 30, 1994 related to the payment by RP Media Management of operating expenses on behalf of the television and radio stations owned by the Partnership. The total customer base managed by MultiVision declined significantly during 1992 primarily as a result of divestitures by companies other than the Partnership, and secondarily as a result of the sale of Universal, all of which had utilized the managerial services of MultiVision. The decline in MultiVision's customer base led to slightly higher programming prices for California Cable. Further reductions during 1994 of the customer base managed by MultiVision, again due to divestitures by companies other than the Partnership, also resulted in slightly higher programming prices for California Cable. As of December 30, 1994 and December 31, 1993, the amounts payable to the General Partner were approximately $14.1 million and $11.3 million, respectively. 8. COMMITMENTS AND CONTINGENCIES Lease Commitments C-ML Cable rents office and warehouse facilities under various operating lease agreements. In addition, Wincom, the Anaheim Radio Stations, KATC-TV, WEBE-FM and WICC-AM lease office space, broadcast facilities and certain other equipment under various operating lease agreements. The California Systems rent office space, equipment, and space on utility poles under operating leases with terms of less than one year, or under agreements which are generally terminable on short notice. Rental expense was incurred as follows:
1994 1993 1992 California Systems $ 360,417 $ 355,311 $ 373,999 Universal - - 72,495 KATC-TV 13,199 19,011 - WICC-AM 105,182 105,182 105,182 Anaheim Radio Stations 120,453 120,672 118,743 WEBE-FM 166,362 164,715 162,968 Wincom 152,844 196,337 228,209 $ 918,457 $ 961,228 $1,061,596
Future minimum commitments under all of the above agreements in excess of one year are as follows:
Year Ending Amount 1995 $ 586,840 1996 546,001 1997 528,429 1998 484,911 1999 490,869 Thereafter 2,559,715 $5,196,765
9. SEGMENT INFORMATION The following analysis provides segment information for the two main industries in which the Partnership operates. The Cable Television Systems segment consists of the Partnership's 50% share of the C-ML Cable, the California Systems and Universal (for the 193-day period in 1992 that the Partnership owned Universal). The Television & Radio Stations segment consists of KATC-TV, WREX-TV, WEBE-FM, Wincom, WICC-AM, the Anaheim Radio Stations, and the Partnership's 50% share of the C-ML Radio Stations.
Cable Television Television and Radio 1994 Systems Stations Total Operating Revenue $ 76,549,818 $ 29,360,390 $105,910,208 Operating expenses before gain on sale of assets (66,605,154) (25,132,667) (91,737,821) Gain on sale of assets 122,154 - 122,154 Operating Income 10,066,818 4,227,723 14,294,541 Plus: depreciation and amortization 26,295,664 3,871,986 30,167,650 Operating income before depreciation and amortization 36,362,482 8,099,709 44,462,191 Less: depreciation and amortization (26,295,664) (3,871,986) (30,167,650) Operating Income $ 10,066,818 $ 4,227,723 14,294,541 Interest Income 192,875 Interest Expense (16,046,700) Partnership General Expenses, net 108,528 Net Loss $ (1,450,756)
Cable Television Television and Radio 1994 Systems Stations Total Identifiable Assets $174,323,336 $ 59,402,010 $233,725,346 Partnership Assets 4,605,012 Total $238,330,358 Capital Expenditures $ 8,950,367 $ 1,354,113 $ 10,304,480 Depreciation and Amortization $ 26,295,664 $ 3,871,986 30,167,650 Partnership Depreciation and Amortization 12,361 Total $ 30,180,011
Cable Television Television and Radio 1993 Systems Stations Total Operating Revenue $ 75,403,956 $ 24,997,715 $100,401,671 Operating expenses before gain on sale of assets (60,907,083) (24,933,540) (85,840,623) Gain on sale of assets 272,872 4,715,518 4,988,390 Operating Income 14,769,745 4,779,693 19,549,438 Plus: depreciation and amortization 26,064,361 5,352,429 31,416,790 Operating income before depreciation and amortization 40,834,106 10,132,122 50,966,228 Less: depreciation and amortization (26,064,361) (5,352,429) (31,416,790) Operating Income $ 14,769,745 $ 4,779,693 19,549,438 Interest Income 147,466 Interest Expense (17,500,965) Partnership General Expenses, net (1,451,968) Equity in income of subsidiary 143,582 Extraordinary item- gain on extinguishment of debt 489,787 Net Income $ 1,377,340
Cable Television Television and Radio 1993 Systems Stations Total Identifiable Assets $190,242,858 $ 53,882,827 244,125,685 Partnership Assets 5,726,252 Total $249,851,937 Capital Expenditures $ 9,652,316 $ 530,093 $ 10,182,409 Depreciation and Amortization $ 26,064,361 $ 5,352,429 31,416,790 Partnership Depreciation and Amortization 3,095 Total $ 31,419,885
Cable Television Television and Radio 1992 Systems Stations Total Operating Revenue $ 75,786,229 $ 24,657,738 $100,443,967 Operating expenses before loss on sale of Universal (64,170,063) (26,803,134) (90,973,197) Loss on sale of Universal (6,399,000) - (6,399,000) Operating Income (Loss) 5,217,166 (2,145,396) 3,071,770 Plus: depreciation and amortization 25,781,077 5,626,804 31,407,881 Operating income before depreciation and amortization 30,998,243 3,481,408 34,479,651 Less: depreciation and amortization (25,781,077) (5,626,804) (31,407,881) Operating Income (Loss) $ 5,217,166 $ (2,145,396) 3,071,770 Interest Income 158,738 Interest Expense (23,437,581) Partnership General Expenses, net (1,393,725) Equity in income of subsidiary 26,028 Extraordinary item-gain on extinguishment of debt 12,294,000 Net Loss $ (9,280,770) Identifiable Assets $197,267,828 $ 58,893,399 256,161,227 Partnership Assets 5,393,215 Total $261,554,442 Capital Expenditures $ 9,588,063 $ 674,093 $ 10,262,156 Depreciation and Amortization $ 25,781,077 $ 5,626,804 31,407,881 Partnership Depreciation and Amortization 108,728 Total $ 31,516,609
10. JOINT VENTURES Pursuant to a management agreement and joint venture agreement dated December 16, 1986 (the "Joint Venture Agreement"), as amended and restated, between the Partnership and Century, the parties formed a joint venture in which each has a 50% ownership interest. The Venture subsequently acquired and operated Cable Television Company of Greater San Juan, Inc. ("San Juan Cable"). The Venture also acquired all of the assets of Community Cable- Vision of Puerto Rico, Inc., Community Cablevision of Puerto Rico Associates, and Community Cablevision Incorporated ("Community Companies"), which consisted of a cable television system serving the communities of Catano, Toa Baja and Toa Alta, Puerto Rico, which are contiguous to San Juan Cable. The Community Companies and San Juan Cable are collectively referred to as C-ML Cable. On February 15, 1989, the Partnership and Century entered into a Management Agreement and joint venture agreement whereby C-ML Radio was formed as a joint venture and responsibility for the management of radio stations acquired by C-ML Radio was assumed by the Partnership. Effective January 1, 1994, all of the assets of C-ML Radio were transferred to the Venture, in exchange for the assumption by the Venture of all the obligations of C-ML Radio and the issuance to Century and the Partnership by the Venture of new certificates evidencing a partnership interest of 50% and 50%, respectively. The transfer was made pursuant to a Transfer of Assets and Assumption of Liabilities Agreement. At the time of this transfer, the Partnership and Century entered into an amended and restated management agreement and joint venture agreement (the "Revised Joint Venture Agreement") governing the affairs of the revised Venture (herein referred to as the "Revised Venture"). Under the terms of the Revised Joint Venture Agreement, Century is responsible for the day-to-day operations of the C-ML Cable systems and the Partnership is responsible for the day-to-day operations of the C-ML Radio properties. For providing services of this kind, Century is entitled to receive annual compensation of 5% of the Puerto Rico Systems' net gross revenues (defined as gross revenues from all sources less monies paid to suppliers of pay TV product, e.g., HBO, Cinemax, Disney and Showtime) and the Partnership is entitled to receive annual compensation of 5% of the C-ML Radio properties' gross revenues (after agency commissions, rebates or discounts and excluding revenues from barter transactions). All significant policy decisions relating to the Venture, the operation of the Puerto Rico Systems and the operation of the C-ML Radio properties, however, will only be made upon the concurrence of both the Partnership and Century. The Partnership may require a sale of the assets and business of C-ML Cable or the C-ML Radio properties at any time. If the Partnership proposes such a sale, the Partnership must first offer Century the right to purchase the Partnership's 50% interest in the assets being sold at 50% of the total fair market value at such time as determined by independent appraisal. If Century elects to sell either the C-ML Cable or the C-ML Radio properties, the Partnership may elect to purchase Century's interest in the assets being sold on similar terms. The total assets, total liabilities, net capital, total revenues and net loss of the Revised Venture (which does not include C-ML Radio for the years ended December 31, 1993 and December 25, 1992, during which time such investment was accounted for under the equity method) are as follows:
December 30, December 31, 1994 1993 Total Assets $118,600,000 $114,300,000 Total Liabilities $114,700,000 $114,400,000 Net Capital (Deficit) $ 3,900,000 $ (100,000)
1994 1993 1992 Total Revenues $ 48,600,000 $ 40,400,000 $ 36,500,000 Net Income $ 1,200,000 $ (300,000) $ (700,000) (Loss)
11. FAIR VALUE OF FINANCIAL INSTRUMENTS Statement on Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments", requires companies to report the fair value of certain on- and off-balance sheet assets and liabilities which are defined as financial instruments. Considerable judgment is necessarily required in interpreting data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Partnership could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Assets, including cash and cash equivalents and accounts receivable, and liabilities, such as trade payables, are carried at amounts which approximate fair value. The General Partner has been able to estimate the fair value of the C-ML Notes based on a discounted cash flow analysis. As of December 30, 1994 and December 31, 1993, the fair value of the C- ML Notes is estimated to be approximately $94 million and $109 million, respectively, of which approximately $47 million and $54.5 million, respectively pertains to the amount reflected on the Partnership's Consolidated Balance Sheet. The General Partner has been able to estimate the fair value of the revised ML California Credit Agreement based on (i) the price at which the Partnership expects to sell the California Cable Systems to Century; and (ii) the floating rate nature of all borrowings outstanding under the revised ML California Credit Agreement. Based on this analysis, the General Partner determined that, as of December 30, 1994, the estimated fair value of the revised ML California Credit Agreement approximated its carrying value. As of December 31, 1993, the General Partner had been able to estimate the fair value of the Revised ML California Credit by using a discounted cash flow analysis and determined that the estimated fair value approximated the carrying values. The General Partner has been able to estimate the fair value of the Wincom-WEBE-WICC Restructuring Agreement by using a value based on a discounted cash flow analysis. As of December 30, 1994 and December 31, 1993, the fair value of the Wincom-WEBE- WICC Restructuring Agreement approximates the carrying value. Considering the uncertainty of the Partnership's ability to meet its obligations under the WREX-KATC Loan and the related accrued interest, the General Partner believes that using the Partnership's future cash flows relating to debt-service to estimate the fair value of the loans is not appropriate. In addition, because of the uncertainty related to the ultimate outcome of the Partnership's efforts to sell WREX and KATC, which could not be predicted as of December 30, 1994 and December 31, 1993, the General Partner considers estimation of the fair value of the WREX-KATC Loan to be impracticable. 12. INCOME TAXES As discussed in Note 1, the Partnership adopted SFAS No. 109 as of December 26, 1992. The cumulative effect of this change in accounting principle was immaterial and there was no effect on the provision for income taxes in the year of adoption. Certain entities owned by the Partnership are taxable entities and thus are required under SFAS No. 109 to recognize deferred income taxes. The components of the net deferred tax asset at December 30, 1994 and December 31, 1993 are as follows:
December 30, December 31, 1994 1993 Deferred tax assets: Basis of intangible assets $ 151,933 $ 182,007 Net operating loss carryforward 26,361,367 31,079,901 Alternative minimum tax credit 76,000 100,000 Other 16,652 34,206 26,605,952 31,396,114 Deferred tax liability: Basis of property, plant and equipment (83,530) (118,963) Total 26,522,422 31,277,151 Less: valuation allowance (26,522,422) (31,277,151) Net deferred tax asset $ 0 $ 0
There is no provision for income taxes required for the year ended December 31, 1994. The change in the net deferred tax asset of $4,754,729 relates primarily to the utilization and expiration of net operating loss carryforwards and was fully offset by a corresponding reduction in the valuation allowance. The components of the provision for income taxes for the year ended December 31, 1993 relate to Wincom and are as follows:
December 31, 1993 Federal: Current $ 100,000 Deferred 0 $ 100,000 State and Local: Current $ 90,000 Deferred 0 $ 90,000 Total Provision $ 190,000
The change in the net deferred tax asset for the year ended December 31, 1993 amounted to a reduction of $1,438,655 which was fully offset by a corresponding change in the valuation allowance. No provision for income taxes was required for the year ended December 25, 1992. At December 30, 1994, the taxable entities have available net operating loss carryforwards which may be applied against future taxable income. Such net operating loss carryforwards expire at various dates from 1995 through 2007. For the Partnership, the differences between the tax bases of assets and liabilities and the reported amounts at December 30, 1994 and December 31, 1993 are as follows:
December 30, December 31, 1994 1993 Partners' Deficit - financial statements $ (16,258,662) $(14,807,906) Differences: Offering expenses 19,063,585 19,063,585 Basis of property, plant and equipment and intangible assets (47,602,928) (55,087,465) Cumulative losses of stock investments (corporations) 77,536,460 78,857,467 Nondeductible management fees 9,941,987 7,999,324 Other 1,783,712 2,455,435 Partners' Capital - income tax basis $ 44,464,154 $ 38,480,440
13. PRO FORMA DATA (Unaudited) The following pro forma data was prepared to illustrate the estimated effects on the operations of the Partnership of the disposition of Universal which was sold on July 8, 1992:
1992 Total Revenues $100,602,705 Less: Universal (4,681,966) 95,920,739 Net Loss $ (9,280,770) Less: Universal net loss 2,481,462 Less: Loss on sale of Universal 6,399,000 Less: Extraordinary gain on extinguishment of debt of Universal (12,294,000) $(12,694,308) Per Unit of Limited Partnership Interest: Net Loss $ (66.85)
14. OTHER EVENTS C-ML Cable reduced its estimate of its Puerto Rican property tax liability by $2,000,000 during 1993. This change in estimate was due mainly to the positive results of a property tax examination completed in November 1993 by the Collection Center of Municipal Taxes, an agency of the Puerto Rican government with authority over all real and personal property tax matters. Based on these developments, the Partnership had reduced accrued liabilities and credited property operating expenses for $1 million, based on its 50% ownership of C-ML Cable.
ML MEDIA PARTNERS, L.P. AS OF DECEMBER 30, 1994 AND DECEMBER 31, 1993 SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT ML Media Partners, L.P. Condensed Balance Sheets as of December 30, 1994 and December 31, 1993 Notes 1994 1993 ASSETS: Cash and cash equivalents 3 $ 4,566,730 $ 4,437,223 Accrued interest 38,282 11,905 Prepaid expenses and deferred charges (net of accumulated amortization of $4,767,813 at December 30, 1994, and $4,755,452 at December 31, 1993) - 12,381 Investment in Subsidiaries 1,2 (7,260,541) (8,395,362) TOTAL ASSETS $ (2,655,529) $ (3,933,853) LIABILITIES AND PARTNERS' DEFICIT: Liabilities: Accounts payable and accrued liabilities $ 13,603,133 $ 10,874,053 Partners' Deficit: General Partner: Capital contributions, net of offering expenses 1,708,299 1,708,299 Cumulative loss (1,807,968) (1,793,460) (99,669) (85,161) Limited Partners: Capital contributions, net of offering expenses (187,994 Units of Limited Partnership Interest) 169,121,150 169,121,150 Tax allowance cash distribution (6,291,459) (6,291,459) Cumulative loss (178,988,684) (177,552,436) (16,158,993) (14,722,745) Total Partners' Deficit (16,258,662) (14,807,906) TOTAL LIABILITIES AND PARTNERS' DEFICIT $ (2,655,529) $ (3,933,853)
See Notes to Condensed Financial Statements.
ML MEDIA PARTNERS, L.P. FOR THE YEARS ENDED DECEMBER 30, 1994, DECEMBER 31, 1993, DECEMBER 25, 1992 SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Cont'd) ML Media Partners, L.P. Condensed Statements of Operations For the Years Ended December 30, 1994, December 31, 1993 and December 25, 1992 Year Ended Year Ended Year Ended December 30, December 31, December 25, NOTE 1994 1993 1992 S REVENUES: Service fee income from C-ML Radio $ 235,120 $ 198,977 $ 469,794 Interest 192,875 147,466 158,738 Total revenues 427,995 346,443 628,532 COSTS AND EXPENSES: General and administrative 1,409,380 1,409,387 1,431,637 Amortization 12,361 3,095 108,728 Management fees to general partner 1,591,831 1,591,831 1,629,882 Total costs and expenses 3,013,572 3,004,313 3,170,247 Share of subsidiaries' income (loss) before provision for income taxes and extra- ordinary item 2 1,134,821 3,735,423 (19,033,055)
Continued on following page.
ML MEDIA PARTNERS, L.P. FOR THE YEARS ENDED DECEMBER 30, 1994, DECEMBER 31, 1993, DECEMBER 25, 1992 SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Cont'd) ML Media Partners, L.P. Condensed Statements of Operations For the Years Ended December 30, 1994, December 31, 1993 and December 25, 1992 (Continued) Year Ended Year Ended Year Ended December 30, December 31, December 25, NOTE 1994 1993 1992 S (Loss) Income before provision for income taxes and extra- ordinary item (1,450,756) 1,077,553 (21,574,770) Provision for income taxes of subsidiaries - (190,000) - Extraordinary item- gain on extinguishment of debt of subsidiaries - 489,787 12,294,000 NET (LOSS) INCOME $(1,450,756) $ 1,377,340 $ (9,280,770)
See Notes to Condensed Financial Statements.
ML MEDIA PARTNERS, L.P. FOR THE YEARS ENDED DECEMBER 30, 1994 AND DECEMBER 31, 1993 AND DECEMBER 25, 1992 SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Cont'd) ML Media Partners, L.P. Condensed Statements of Cash Flows For the Years Ended December 30, 1994 and December 31, 1993, and December 25, 1992 1994 1993 1992 Cash flows from operating activities: Net income (loss) $ (1,450,756) $ 1,377,340 $(9,280,770) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Reimbursement of management fees received from subsidiaries - - - Amortization 12,361 3,095 108,728 Share of subsidiaries' net income/(loss) before provision for income taxes and extraordinary item (1,134,821) (3,735,423) 19,033,055 Share of subsidiaries' provision for income taxes - 190,000 - Share of subsidiaries' extraordinary item - (489,787) (12,294,000) Change in assets and liabilities: Decrease/(Increase) in accrued interest (26,377) (7,729) 27,118
ML MEDIA PARTNERS, L.P. FOR THE YEARS ENDED DECEMBER 30, 1994 AND DECEMBER 31, 1993 AND DECEMBER 25, 1992 SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Cont'd) ML Media Partners, L.P. Condensed Statements of Cash Flows For the Years Ended December 30, 1994 and December 31, 1993, and December 25, 1992 1994 1993 1992 Decrease/(Increase) in prepaid expenses, deferred charges and other - (143,582) 188,164 Increase in accounts payable and accrued liabilities 2,729,100 2,695,073 2,527,452 Net Cash provided by (used in) operating activities 129,507 (111,013) 309,747 Cash flows from investing activities: Net increase in investment in subsidiaries - 295,834 (26,624) Net Increase/(Decrease) in cash and cash equivalents 129,507 184,821 283,123 Cash and cash equivalents at beginning of year 4,437,223 4,252,402 3,969,279 Cash and cash equivalents at end of year $ 4,566,730 $ 4,437,223 $ 4,252,402
See Notes to Condensed Financial Statements. ML MEDIA PARTNERS, L.P. FOR THE YEARS ENDED DECEMBER 30, 1994, DECEMBER 31, 1993 AND DECEMBER 25, 1992 Schedule I CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Cont'd) ML Media Partners, L.P. Notes To Condensed Financial Statements For the Years Ended December 30, 1994 December 31, 1993 and December 25, 1992 1. Organization As of December 30, 1994, ML Media Partners, L.P. (the "Partnership") wholly-owned Wincom, KATC-TV, WREX-TV, WEBE-FM, WICC-AM, the California Systems and the Anaheim Radio Stations. In addition, the Partnership wholly-owned Universal for all of 1991 and for a 193-day period in 1992. The Partnership also had a 99.999% interest in KATC Associates, WREX Associates, WEBE Associates, WICC Associates, Anaheim Radio Associates, and ML California Associates; as well as a 50% interest in The Venture (see Note 10 to the consolidated financial statements). All of the preceding investments shall herein be referred to as the "Subsidiaries". 2. Investment in Subsidiaries The Partnership's investment in the Subsidiaries is accounted for under the equity method in the accompanying condensed financial statements. The following is a summary of the financial position and results of operations of the Subsidiaries:
December 30, December 31, 1994 1993 Assets $ 233,725,346 $ 245,390,428 Liabilities (240,985,887) (253,785,790) Investment in Subsidiaries $ (7,260,541) $ (8,395,362)
Year Ended Year Ended Year Ended December 30, December 31, December 25, 1994 1993 1992 Revenues $105,910,208 $100,202,694 $ 99,974,173 Share of subsidiaries' income (loss) before provision for income taxes and extraordinary item 1,134,821 3,735,423 (19,033,055) Provision for income taxes of subsidiaries - (190,000) - Extraordinary item- gain on extinguishment of debt of subsidiaries - 489,787 12,294,000 Share of subsidiaries' Net Income (Loss) $ 1,134,821 $ 4,035,210 $ (6,739,055)
ML MEDIA PARTNERS, L.P. FOR THE YEARS ENDED DECEMBER 30, 1994, DECEMBER 31, 1993 AND DECEMBER 25, 1992 Schedule I CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Cont'd) ML MEDIA PARTNERS, L.P. NOTES TO CONDENSED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 30, 1994 DECEMBER 31, 1993 AND DECEMBER 25, 1992 3. Cash and Cash Equivalents At December 30, 1994, the Partnership had $4,566,730 in cash and cash equivalents, of which $4,550,590 was invested in commercial paper. In addition, the Partnership had $16,140 invested in cash. These funds are held in reserve for the operating requirements of the Partnership. Per the terms of the WREX-KATC Loan (see Notes 2 and 6), the bank had the right, if certain events of default occurred under the WREX-KATC Loan, to request working capital advances from the Partnership to WREX-TV and KATC-TV in an amount not to exceed $1.0 million. The Partnership contributed $600,000 to WREX-TV and KATC-TV in the first quarter of 1991, $100,000 during the fourth quarter of 1991, $290,000 in early 1992 and $10,000 in April, 1993. The Partnership does not intend to, nor is it obligated to, advance any further working capital to WREX and KATC. At December 31, 1993, the Partnership had $4,437,223 in cash and cash equivalents, of which $207,843 was invested in a bankers acceptance and $4,222,403 was invested in commercial paper. In addition, the Partnership had $6,977 invested in cash and demand deposits. These funds were held in reserve for the operating requirements of the Partnership. ML MEDIA PARTNERS, L.P. AS OF DECEMBER 30, 1994, DECEMBER 31, 1993 AND DECEMBER 25, 1992 Schedule II Valuation and Qualifying Accounts
Additions Charged to Balance at Costs and Beginning of Expenses or Deductions and Balance at Perio Period Other Other End of d Accounts Period Intangible Assets 1994 $111,069,407 $11,369,221 $ - $122,438,628 1993 $112,996,421 $11,163,146 $(13,090,160) (3) $111,069,407 1992 $107,868,052 $11,885,557 $ (6,757,188) (1) $112,996,421 Prepaid Expenses and Deferred Charges 1994 $7,241,087 $ 545,574 $ (3,676) $7,782,985 1993 $6,601,766 $ 682,666 $ (43,344) $7,241,088 1992 $6,385,771 $ 606,506 $ (390,511) (2) $6,601,766
(1) Deductions and Other for Intangible Assets consists of the accumulated amortization of intangible assets related to the sale of Universal in the amount of $6,757,188 (see Note 3). (2) Deductions and Other for Prepaid Expenses and Deferred Charges includes the accumulated amortization of prepaid expenses and deferred charges related to the sale of Universal in the amount of $312,492 (see Note 3). (3) Deductions and Other for Intangible Assets consists of the accumulated amortization of intangible assets related to the sale of the Indianapolis Stations in the amount of $13,090,160 (see Note 3). Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Part III Item 10. Directors and Executive Officers of Registrant Registrant has no executive officers or directors. The General Partner manages Registrant's affairs and has general responsibility and authority in all matters affecting its business. The responsibilities of the General Partner are carried out either by its executive officers (all of whom are executive officers of either RP Media Management or ML Media Management Inc.) or executive officers of RP Media Management or ML Media Management Inc. acting on behalf of the General Partner. The executive officers and directors of the General Partner, RP Media Management and ML Media Management Inc. are: RP Media Management (the "Management Company") Served in Present Capacity Name Since (1) Position Held I. Martin Pompadur 1/01/86 President, Chief Executive Officer, Chief Operating Officer, Secretary, Director Elizabeth McNey Yates 4/01/88 Executive Vice President (1) Directors hold office until their successors are elected and qualified. All officers serve at the pleasure of the Board of Directors of the respective entity. ML Media Management Inc. ("MLMM") Served in Present Capacity Name Since (1) Position Held Kevin K. Albert 02/19/91 President 12/16/85 Director Robert F. Aufenanger 02/02/93 Executive Vice President 03/28/88 Director Robert W. Seitz 02/02/93 Vice President 02/01/93 Director James K. Mason 02/01/93 Director Steven N. Baumgarten 02/02/93 Vice President David G. Cohen 03/07/94 Treasurer (1) Directors hold office until their successors are elected and qualified. All executive officers serve at the pleasure of the Board of Directors of the respective entity. Media Management Partners (the "General Partner") Served in Present Capacity Name Since (1) Position Held I. Martin Pompadur 3/22/91 Chairman 1/30/87 President Elizabeth McNey Yates 3/01/90 Senior Vice President Kevin K. Albert 3/22/91 Senior Vice President Robert F. Aufenanger 8/12/88 Vice President Steven N. Baumgarten 2/02/93 Vice President David G. Cohen 3/07/94 Treasurer (1) All executive officers serve at the pleasure of the Partners of the General Partner. I. Martin Pompadur, 59, is the Chairman and Chief Executive Officer of GP Station Partners which is the General Partner of Television Station Partners, L.P., a private limited partnership that owns and operates four network affiliated television stations. He is the Chairman and Chief Executive Officer of PBTV, Inc., the Managing General Partner of Northeastern Television Investors Limited Partnership, a private limited partnership which owns and operates WBRE-TV, a network affiliated station in Wilkes-Barre Scranton, Pennsylvania. Mr. Pompadur is also Chairman and Chief Executive Officer of U.S. Cable Partners, a general partner of U.S. Cable Television Group, L.P. ("U.S. Cable"), which owns and operates cable systems in ten states. He is also the President and a Director of RP Opportunity Management, L.P. ("RPOM"), a limited partnership organized under the laws of Delaware, which is indirectly owned and controlled by Mr. Pompadur. RPOM is a partner in Media Opportunity Management Partners, an affiliate of the General Partner, and the general partner of ML Media Opportunity Partners, L.P. which was formed to invest in under performing and turnaround media business and which presently owns 51.005% interest in an entity which owns three network affiliated television stations, and an equity position in a cellular telecommunications company. Mr. Pompadur is the Principal Executive Officer of ML Media Opportunity Partners, L.P. Mr. Pompadur is also Chief Executive Officer of MultiVision Cable TV Corp. ("MultiVision"), a cable television multiple system operator ("MSO") organized in January 1988 and owned principally by Mr. Pompadur to provide MSO services to cable television systems acquired by entities under his control. Mr. Pompadur is a principal owner, member of the Board of Directors and Secretary of Caribbean International News Corporation ("Caribbean"). Caribbean owns and publishes EL Vocero, the largest Spanish language daily newspaper in the U.S. Elizabeth McNey Yates, 32, Executive Vice President of RP Media Management and Senior Vice President of Media Management Partners, joined RP Companies Inc., an entity controlled by Mr. Pompadur, in April 1988 and has senior executive responsibilities in the areas of finance, operations, administration and acquisitions. Ms. Yates is an Executive Vice President of RP Opportunity Management. Kevin K. Albert, 42, a Managing Director of Merrill Lynch Investment Banking Group ("ML Investment Banking"), joined Merrill Lynch in 1981. Mr. Albert works in the Equity Private Placement Group and is involved in structuring and placing a diversified array of private equity financings including common stock, preferred stock, limited partnership interests and other equity-related securities. Mr. Albert is also a director of Maiden Lane Partners, Inc. ("Maiden Lane"), an affiliate of the general partner of Liberty Equipment Investors - 1983; a director of Whitehall Partners Inc. ("Whitehall"), an affiliate of MLMM and the general partner of Liberty Equipment Investors L.P. - 1984; a director of ML Film Entertainment Inc. ("ML Film"), an affiliate of MLMM and the managing general partner of the general partners of Delphi Film Associates II, III, IV, V and ML Delphi Premier Partners, L.P.; a director of ML Opportunity Management Inc. ("ML Opportunity"), an affiliate of the General Partner and a joint venturer in Media Opportunity Management Partners, the general partner of ML Media Opportunity Partners, L.P.; a director of MLL Antiquities Inc. ("MLL Antiquities"), an affiliate of MLMM and the administrative general partner of The Athena Fund II, L.P.; a director of ML Mezzanine II Inc. ("ML Mezzanine II"), an affiliate of MLMM and sole general partner of the managing general partner of ML-Lee Acquisition Fund II, L.P. and ML-Lee Acquisition Fund (Retirement Accounts) II, L.P.; a director of ML Mezzanine Inc. ("ML Mezzanine"), an affiliate of MLMM and the sole general partner of the managing general partner of ML-Lee Acquisition Fund, L.P.; a director of Merrill Lynch Venture Capital Inc. ("ML Venture"), an affiliate of MLMM and the general partner of the Managing General Partner of ML Venture Partners I, L.P. ("Venture I"), ML Venture Partners II, L.P. ("Venture II"), and ML Oklahoma Venture Partners Limited Partnership ("Oklahoma"); a director of Merrill Lynch R&D Management Inc. ("ML R&D"), an affiliate of MLMM and the general partner of the General Partner of ML Technology Ventures, L.P.; and a director of MLL Collectibles Inc. ("MLL Collectibles"), an affiliate of MLMM and the administrative general partner of The NFA World Coin Fund, L.P. Mr. Albert also serves as an independent general partner of Venture I and Venture II. Robert F. Aufenanger, 41, a Vice President of Merrill Lynch & Co. Corporate Strategy, Credit and Research and a Director of the Partnership Management Department, joined Merrill Lynch in 1980. Mr. Aufenanger is responsible for the ongoing management of the operations of the equipment and project related limited partnerships for which subsidiaries of ML Leasing Equipment Corp., an affiliate of Merrill Lynch, are general partners. Mr. Aufenanger is also a director of Maiden Lane, Whitehall, ML Opportunity, ML Film, MLL Antiquities, ML Venture, ML R&D, MLL Collectibles, ML Mezzanine and ML Mezzanine II. Robert W. Seitz, 48, is a First Vice President of Merrill Lynch & Co. Corporate Strategy, Credit and Research and a Managing Director within the Corporate Credit Division of Merrill Lynch, joined Merrill Lynch in 1981. Mr. Seitz is the Private Client Senior Officer and is also responsible for the firm's Partnership Management and Asset Recovery Management Departments. Mr. Seitz is also a director of Maiden Lane, Whitehall, ML Opportunity, ML Venture, ML R&D, ML Film, MLL Antiquities, and MLL Collectibles. James K. Mason, 42, a Managing Director of ML Investment Banking, is a senior member of the Telecom, Media and Technology group. He joined Merrill Lynch Investment Banking in 1978. Mr. Mason is responsible for advising Merrill Lynch's entertainment and media industry clients on such matters as financings, divestitures, restructurings, mergers and acquisitions. Mr. Mason is also a director of ML Opportunity Management Inc. Steven N. Baumgarten, 39, a Vice President of Merrill Lynch & Co. Corporate Strategy, Credit and Research, joined Merrill Lynch in 1986. Mr. Baumgarten shares responsibility for the ongoing management of the operations of the equipment and project related limited partnerships for which subsidiaries of ML Leasing Equipment Corp., an affiliate of Merrill Lynch, are general partners. Mr. Baumgarten is also a director of ML Film. David G. Cohen, 32, an Assistant Vice President of Merrill Lynch & Co. Corporate Strategy, Credit and Research, joined Merrill Lynch in 1987. Mr. Cohen's responsibilities include controllership and financial management functions for certain partnerships for which subsidiaries of ML Leasing Equipment Corp., an affiliate of Merrill Lynch, are general partners. Mr. Pompadur and Ms. Yates were each executive officers of Maryland Cable Corp. and Maryland Cable Holdings Corp. at and during the two years prior to the filing Maryland Cable and Holdings on March 10, 1994 of a consolidated plan of reorganization under Chapter 11 of the United States Bankruptcy Code with the United States Bankruptcy Court for the Southern District of New York. Maryland Cable Holdings Corp. was at the time of such filings a subsidiary of ML Media Opportunity Partners, L.P. Mr. Aufenanger is an executive officer of Mid-Miami Diagnostics Inc. ("Mid-Miami Inc."). On October 28, 1994 both Mid-Miami Inc. and Mid-Miami Diagnostics, L.P. filed voluntary petitions for protection from creditors under Chapter 7 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York. Item 11.Executive Compensation Registrant does not pay the executive officers or directors of the General Partner any remuneration. See Note 7 to the Financial Statements included in Item 8. hereof, however, for sums paid by Registrant to the General Partner and its affiliates for the years ended December 30, 1994, December 31, 1993 and December 25, 1992. Item 12.Security Ownership of Certain Beneficial Owners and Management As of February 1, 1995, no person was known by Registrant to be the beneficial owner of more than 5 percent of the Units. To the knowledge of the General Partner, as of February 1, 1995, the officers and directors of the General Partner in aggregate own less than .01% of the outstanding common stock of Merrill Lynch & Co., Inc. RP Media Management is owned 50% by IMP Media Management, Inc. and 50% by The Elton H. Rule Company. IMP Media Management is 100% owned by Mr. I. Martin Pompadur and The Elton H. Rule Company is 100% owned by the estate of Mr. Elton H. Rule. Item 13.Certain Relationships and Related Transactions Refer to Note 7 to the Financial Statements included in Item 8 hereof, and in Item 1 for a description of the relationship of the General Partner and its affiliates to Registrant and its subsidiaries. Part IV Item 14.Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) Financial Statements, Financial Statement Schedules and Exhibits Financial Statements and Financial Statement Schedules See Item 8. "Financial Statements and Supplementary Data-Table of Contents".
Exhibits Incorporated by Reference 3.1Amended and Restated Certificate Exhibit 3.1 to Form S-1 of Limited Partnership. Registration Statement (File No. 33-2290) 3.2.1 Second Amended and Restated Exhibit 3.2.1 to Form 10-K Report Agreement of Limited Partnership for the fiscal year ended December dated May 14, 1986. 26, 1986 (File No. 0-14871) 3.2.2 Amendment No. 1 dated February Exhibit 3.2.2 to Form 10-K Report 27, 1987 to Second Amended and for the fiscal year ended December Restated Agreement of Limited 26, 1986 (File No. 0-14871) Partnership. 10.1.1Joint Venture Agreement dated Exhibit 10.1.1 to Form 10-K Report July 2, 1986 between Registrant for the fiscal year ended December and Century Communications 26, 1986 (File No. 0-14871) Corp.("CCC") 10.1.2Management Agreement and Joint Exhibit 10.1.2 to Form 10-K Report Venture Agreement dated December for the fiscal year ended December 16, 1986 between Registrant and 26, 1986 (File No. 0-14871) CCC (attached as Exhibit 1 to Exhibit 10.3). 10.1.3Management Agreement and Joint Exhibit 10.1.3 to Form 10-K Report Venture Agreement dated as of for the fiscal year ended December February 15, 1989 between 30, 1988 (File No. 0-14871) Registrant and CCC. 10.1.4Amended and Restated Management Exhibit 10.1.4 to Form 10-K Report Agreement and Joint Venture for the fiscal year ended December Agreement of Century/ML Cable 31, 1993 (File No. 0-14871) Venture dated January 1, 1994 between Century Communications Corp. and Registrant. 10.2.1Stock Purchase Agreement dated Exhibit 28.1 to Form 8-K Report July 2, 1986 between Registrant dated December 16, 1986 (File No. and the sellers of shares of 33-2290) Cable Television Company of Greater San Juan, Inc. 10.2.2Assignment dated July 2, 1986 Exhibit 10.2.2 to Form 10-K Report between Registrant and Century- for the fiscal year ended December ML Cable Corporation ("C-ML"). 26, 1986 (File No. 0-14871) 10.2.3Transfer of Assets and Exhibit 10.2.3 to Form 10-K Report Assumption of Liabilities for the fiscal year ended December Agreement dated January 1, 1994 31, 1993 (File No. 0-14871) between Century-ML Radio Venture, Century/ML Cable Venture, Century Communications Corp. and Registrant. 10.3 Amended and Restated Credit Exhibit 10.3.5 to Form 10-K Report Agreement dated as of March 8, for the fiscal year ended December 1989 between Citibank, N.A., 30, 1988 (File No. 0-14871) Agent, and C-ML. 10.3.1Note Agreement dated as of Exhibit 10.3.1 to Form 10-K Report December 1, 1992 between Century- for the fiscal year ended December ML Cable Corporation, Century/ML 25, 1992 (File No. 0-14871) Cable Venture, Jackson National Life Insurance Company, The Lincoln National Life Insurance Company and Massachusetts Mutual Life Insurance Company. 10.3.2Second Restated Credit Agreement Exhibit 10.3.2 to Form 10-K Report dated December 1, 1992 among for the fiscal year ended December Century-ML Cable Corporation, 25, 1992 (File No. 0-14871) Century/ML Cable Venture and Citibank. 10.3.3Amendment dated as of September Exhibit 10.3.3 to Form 10-Q for 30, 1993 among Century-ML Cable the quarter ended September 24, Corporation, the banks parties 1993 (File No. 0-14871) to the Credit Agreement, and Citibank, N.A. and Century/ML Cable Venture. 10.3.4Amendment dated as of December Exhibit 10.3.4 to Form 10-K Report 15, 1993 among Century-ML Cable for the fiscal year ended December Corporation, the banks parties 31, 1993 (File No. 0-14871) to the Credit Agreement, and Citibank, N.A. and Century/ML Cable Venture. 10.4 Pledge Agreement dated December Exhibit 10.4 to Form 10-K Report 16, 1986 among Registrant, CCC, for the fiscal year ended December and Citibank, N.A., Agent. 26, 1986 (File No. 0-14871) 10.5 Guarantee dated as of December Exhibit 10.5 to Form 10-K Report 16, 1986 among Registrant, CCC for the fiscal year ended December and Citibank, N.A., Agent. 25, 1987 (File No. 0-14871) 10.6 Assignment of Accounts Exhibit 10.6 to Form 10-K Report Receivable dated as of December for the fiscal year ended December 16, 1986 among Registrant, CCC 25, 1987 (File No. 0-14871) and Citibank, N.A., Agent. 10.7 Real Property Mortgage dated as Exhibit 10.7 to Form 10-K for the of December 16, 1986 among fiscal year ended December 30, Registrant, CCC and Citibank, 1988 (File No. 0-14871) N.A., Agent. 10.8 Stock Sale and Purchase Exhibit 28.1 to Form 8-K Report Agreement dated as of December dated December 23, 1986 (File No. 5, 1986 between SCIPSCO, Inc. 33-2290) and ML California Cable Corp. ("ML California"). 10.8.1Asset Purchase Agreement dated Exhibit 2 to Form 8-K Report dated as of November 28, 1994 among November 28, 1994 (File No. 0- Registrant and Century 14871) Communications Corp. 10.9 Security Agreement dated as of Exhibit 10.10 to Form 10-K Report December 22, 1986 among for the fiscal year ended December Registrant, ML California and 26, 1987 (File No. 0-14871) BA. 10.10 Assets Purchased Agreement dated Exhibit 28.1 to Form 8-K Report as of September 17, 1986 between dated February 2, 1987 Registrant and Loyola University. 10.11 Asset Acquisition Agreement Exhibit 28.1 to Form 8-K Report dated April 22, 1987 between dated October 14, 1987 (File No. Community Cable-Vision of Puerto 33-2290) Rico Associates, Community Cable- Vision of Puerto Rico, Inc., Community Cable-Vision Incorporated and Century Communications Corp., as assigned. 10.12 Asset Purchase Agreement dated Exhibit 2.1 to Form 8-K Report April 29, 1987 between dated September 16, 1987 (File No. Registrant and Gilmore 33-2290) Broadcasting Corporation. 10.13 License Holder Pledge Agreement Exhibit 2.5 to Form 8-K Report dated August 27, 1987 by dated September 15, 1987 (File No. Registrant and Media Management 33-2290) Partners in favor of Manufacturers Hanover. 10.14 Asset Purchase Agreement dated Exhibit 28.1 to Form 8-K Report August 20, 1987 between 108 dated January 15, 1988 (File No. Radio Company Limited 33-2290) Partnership and Registrant. 10.15 Security Agreement dated as of Exhibit 28.3 to Form 8-K Report December 16, 1987 between dated January 15, 1988 (File No. Registrant and CNB. 33-2290) 10.16 Asset Purchase Agreement dated Exhibit 10.25 to Form 10-K Report as of January 9, 1989 between for the fiscal year ended December Registrant and Connecticut 30, 1988 (File No. 0-14871) Broadcasting Company, Inc. ("WICC"). 10.17.1 Stock Purchase Agreement dated Exhibit 28.2 to Form 10-Q for the June 17, 1988 between Registrant quarter ended June 24, 1988 (File and the certain sellers referred No. 0-14871) to therein relating to shares of capital stock of Universal Cable Holdings, Inc. ("Universal"). 10.17.2 Amendment and Consent dated July Exhibit 2.2 to Form 8-K Report 29, 1988 between Russell V. dated September 19, 1988 (File No. Keltner, Larry G. Wiersig and 0-14871) Donald L. Benson, Universal Cable Midwest, Inc. and Registrant. 10.17.3 Amendment and Consent dated July Exhibit 2.3 to Form 8-K Report 29, 1988 between Ellsworth dated September 19, 1988 (File No. Cable, Inc., Universal Cable 0-14871) Midwest, Inc. and Registrant. 10.17.4 Amendment and Consent dated Exhibit 2.4 to Form 8-K Report August 29, 1988 between ST dated September 19, 1988 (File No. Enterprises, Ltd., Universal 0-14871) Cable Communications, Inc. and Registrant. 10.17.5 Amendment and Consent dated Exhibit 2.5 to Form 8-K Report September 19, 1988 between dated September 19, 1988 (File No. Dennis Wudtke, Universal Cable 0-14871) Midwest, Inc., Universal Cable Communications, Inc. and Registrant. 10.17.6 Amendment and Consent dated Exhibit 10.26.6 to Form 10-K October 14, 1988 between Down's Report for the fiscal year ended Cable, Inc., Universal Cable December 30, 1988 (File No. 0- Midwest, Inc. and Registrant. 14871) 10.17.7 Amendment and Consent dated Exhibit 10.26.7 to Form 10-K October 14, 1988 between SJM Report for the fiscal year ended Cablevision, Inc., Universal December 30, 1988 (File No. 0- Cable Midwest, Inc. and 14871) Registrant. 10.17.8 Bill of Sale and Transfer of Exhibit 2.6 to Form 8-K Report Assets dated as of September 19, dated September 19, 1988 (File No. 1988 between Registrant and 0-14871) Universal Cable Communications Inc. 10.18 Credit Agreement dated as of Exhibit 10.27 to Form 10-K Report September 19, 1988 among for the fiscal year ended December Registrant, Universal, certain 30, 1988 (File No. 0-14871) subsidiaries of Universal, and Manufacturers Hanover Trust Company, as Agent. 10.19 Stock Purchase Agreement dated Exhibit 10.28 to Form 10-K Report October 6, 1988 between for the fiscal year ended December Registrant and the certain 30, 1988 (File No. 0-14871) sellers referred to therein relating to shares of capital stock of Acosta Broadcasting Corp. 10.20 Stock Purchase Agreement dated Exhibit 28.1 to Form 10-Q for the April 19, 1988 between quarter ended June 24, 1988 (File Registrant and the certain No. 0-14871) sellers referred to therein relating to shares of capital stock of Wincom Broadcasting Corporation. 10.21 Subordination Agreement dated as Exhibit 2.3 to Form 8-K Report of August 15, 1988 among Wincom, dated August 26, 1988 (File No. 0- the Subsidiaries, Registrant and 14871) Chemical Bank. 10.22 Management Agreement dated Exhibit A to Exhibit 10.30.2 above August 26, 1988 between Registrant and Wincom. 10.22.1 Management Agreement by and Exhibit 10.22.1 to Form 10-Q for between Fairfield the quarter ended June 25, 1993 Communications, Inc. and (File No. 0-14871) Registrant and ML Media Opportunity Partners, L.P. dated May 12, 1993. 10.22.2 Sharing Agreement by and among Exhibit 10.22.2 to Form 10-Q for Registrant, ML Media Opportunity the quarter ended June 25, 1993 Partners, L.P., RP Companies, (File No. 0-14871) Inc., Radio Equity Partners, Limited Partnership and Fairfield Communications, Inc. 10.23 Amended and Restated Credit, Exhibit 10.33 to Form 10-Q for the Security and Pledge Agreement quarter ended June 30, 1989 (File dated as of August 15, 1988, as No. 0-14871) amended and restated as of July 19, 1989 among Registrant, Wincom Broadcasting Corporation, Win Communications Inc., Win Communications of Florida, Inc., Win Communications Inc. of Indiana, WEBE Associates, WICC Associates, Media Management Partners, and Chemical Bank and Chemical Bank, as Agent. 10.23.1 Second Amendment dated as of Exhibit 10.23.1 to Form 10-Q for July 30, 1993 to the Amended and the quarter ended June 25, 1993 Restated Credit, Security and (File No. 0-14871) Pledge Agreement dated as of August 15, 1988, as amended and restated as of July 19, 1989 and as amended by the First Amendment thereto dated as of August 14, 1989 among Registrant, Wincom Broadcasting Corporation, Win Communications Inc., Win Communications Inc. of Indiana, WEBE Associates, WICC Associates, Media Management Partners, and Chemical Bank and Chemical Bank, as Agent. 10.24 Agreement of Consolidation, Exhibit 10.34 to Form 10-Q for the Extension, Amendment and quarter ended June 30, 1989 (File Restatement of the WREX Credit No. 0-14871) Agreement and KATC Credit Agreement between Registrant and Manufacturers Hanover Trust Company dated as of June 21, 1989. 10.25 Asset Purchase Agreement between Exhibit 10.35 to Form 10-Q for the ML Media Partners, L.P. and quarter ended September 29, 1989 Anaheim Broadcasting Corporation (File No. 0-14871) dated July 11, 1989. 10.26 Asset Purchase Agreement between Exhibit 10.36 to Form 10-K Report WIN Communications Inc. of for the fiscal year ended December Indiana, and WIN Communications 28, 1990 (File No. 0-14871) of Florida, Inc. and Renda Broadcasting Corp. dated November 27, 1989. 10.26.1 Asset Purchase Agreement between Exhibit 10.26.1 to Form 10-Q for WIN Communications of Indiana, the quarter ended June 25, 1993 Inc. and Broadcast Alchemy, L.P. (File No. 0-14871) dated April 30, 1993. 10.26.2 Joint Sales Agreement between Exhibit 10.26.2 to Form 10-Q for WIN Communications of Indiana, the quarter ended June 25, 1993 Inc. and Broadcast Alchemy, L.P. (File No. 0-14871) dated May 1, 1993. 10.27 Credit Agreement dated as of Exhibit 10.39 to Form 10-Q for the November 15, 1989 between ML quarter ended June 29, 1990 (File Media Partners, L.P. and Bank of No. 0-14871) America National Trust and Savings Association. 10.27.1 First Amendment and Limited Waiver dated as of February 23, 1995 to the Amended and Restated Credit Agreement dated as of May 15, 1990 among ML Media Partners, L.P. and Bank of America National Trust and Saving Association, individually and as Agent. 10.28 Asset Purchase Agreement dated Exhibit 10.38 to Form 10-Q for the November 27, 1989 between Win quarter ended June 29, 1990 (File Communications and Renda No. 0-14871) Broadcasting Corp. 10.29 Amended and Restated Credit Exhibit 10.39 to Form 10-Q for the Agreement dated as of May 15, quarter ended June 29, 1990 (File 1990 among ML Media Partners, No. 0-14871) L.P. and Bank of America National Trust and Saving Association, individually and as Agent. 10.30 Stock Purchase Agreement between Exhibit 10.40.1 to Form 10-Q for Registrant and Ponca/Universal the quarter ended March 27, 1992 Holdings, Inc. dated as of April (File No. 0-14871) 3, 1992. 10.30.1 Earnest Money Escrow Agreement Exhibit 10.40.1 to Form 10-Q for between Registrant and the quarter ended March 27, 1992 Ponca/Universal Holdings, Inc. (File No. 0-14871) dated as of April 3, 1992. 10.30.2 Indemnity Escrow Agreement Exhibit 10.40.2 to Form 8-K Report between Registrant and dated July 8, 1992 (File No. 0- Ponca/Universal Holdings, Inc. 14871) dated as of July 8, 1992. 10.30.3 Assignment by Registrant in Exhibit 10.40.3 to Form 8-K Report favor of Chemical Bank, in its dated July 8, 1992 (File No. 0- capacity as agent for itself and 14871) the other banks party to the credit agreement dated as of September 19, 1988, among Registrant, Universal, certain subsidiaries of Universal, and Manufacturers Hanover Trust Company, as agent. 10.30.4 Confirmation of final Universal Exhibit 10.40.4 to Form 10-Q for agreements between Registrant the quarter ended September 25, and Manufacturers Hanover Trust 1992 (File No. 0-14871) Company, dated April 3, 1992. 10.30.5 Letter regarding discharge and Exhibit 10.40.5 to Form 10-Q for release of the Universal the quarter ended September 25, Companies and Registrant dated 1992 (File No. 0-14871) July 8, 1992 between Registrant and Chemical Bank (as successor, by merger, to Manufacturers Hanover Trust Company). 18.1 Letter from Deloitte, Haskins & Exhibit 18.1 to Form 10-K Report Sells regarding the change in for the fiscal year ended December accounting method, dated March 30, 1988 (File No. 0-14871) 30, 1989. 27.0 Financial Data Schedule to Form 10-K Report for the fiscal year ended December 30, 1994. 99 Pages 12 through 19 and 38 Prospectus dated February 4, 1986, through 46 of Prospectus dated filed pursuant to Rule 424(b) February 4, 1986, filed pursuant under the Securities Act of 1933, to Rule 424(b) under the as amended (File No. 33-2290) Securities Act of 1933, as amended.
(b) Reports on Form 8-K Registrant filed with the Securities and Exchange Commission a Current Report on Form 8-K dated November 28, 1994. This Current Report contained details regarding the sale of California Cable. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ML MEDIA PARTNERS, L.P. By: Media Management Partners General Partner By: ML Media Management Inc. Dated: March 22, 1995 /s/ Kevin K. Albert Kevin K. Albert Director and President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Registrant in the capacities and on the dates indicated. RP MEDIA MANAGEMENT Signature Title Date /s/ I. Martin Pompadur President, Secretary March 22, 1995 (I. Martin Pompadur) and Director (principal executive officer) ML MEDIA MANAGEMENT INC. Signature Title Date /s/ Kevin K. Albert Director and March 22, 1995 (Kevin K. Albert) President /s/ Robert F. Aufenanger Director and March 22, 1995 (Robert F. Aufenanger) Executive Vice President /s/ James K. Mason Director March 22, 1995 (James K. Mason) /s/ Robert W. Seitz Director and Vice March 22, 1995 (Robert W. Seitz) President /s/ David G. Cohen Treasurer (principal March 22, 1995 (David G. Cohen) financial officer and principal accounting officer) [TYPE] EX - 10 [DOCUMENT-COUNT] [SROS] [FILER]
EX-10 2 [ARTICLE] Riders, if any, are at the end of the document. ML MEDIA PARTNERS, L.P. FIRST AMENDMENT AND LIMITED WAIVER TO AMENDED AND RESTATED CREDIT AGREEMENT This FIRST AMENDMENT AND LIMITED WAIVER TO AMENDED AND RESTATED CREDIT AGREEMENT (this "Amendment") is dated as of February 23, 1995 and entered into by and among ML MEDIA PARTNERS, L.P., a Delaware public limited partnership ("Borrower"), of which Media Management Partners, a joint venture consisting of RP Media Management and ML Media Management, Inc., is the sole general partner ("Management"), the financial institutions listed on the signature pages hereof (individually "Bank" and collectively "Banks") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as agent for the Banks (in such capacity "Agent"), and, for purposes of Section 5 hereof, Management, as a Credit Support Party (as defined in Section 5 hereof), and is made with reference to that certain Amended and Restated Credit Agreement dated as of May 15, 1990 (the "Credit Agreement"), by and among Borrower, Banks and Agent. Capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement RECITALS WHEREAS, Borrower and Banks desire to amend the Credit Agreement to (i) increase the interest rates provided for therein, (ii) defer certain principal payments provided for therein, (iii) amend the mandatory prepayment provisions set forth therein, (iv) amend the financial covenants set forth therein, and (v) make certain other amendments, all as more specifically set forth below; NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: 1. AMENDMENTS TO THE CREDIT AGREEMENT 1.1 Amendments to Article 1: Definitions A. Certain Defined Terms. (i) Section 1.1 of the Credit Agreement is hereby amended by adding thereto the following definitions, which shall be inserted in proper alphabetical order: "`Century' means Century Communications Corp., a New Jersey corporation. `Century Sale' means the consummation of the sale of substantially all of the assets of the Systems to, and the assumption of substantially all of the liabilities (other than Borrower's Obligations under this Agreement) of the Systems by, Century pursuant to and in accordance with the terms of the Century Sale Agreement. `Century Sale Agreement' means the Asset Purchase Agreement dated November 28, 1994, by and between Borrower, as seller, and Century, as buyer, pursuant to which the Borrower has agreed to sell to Century substantially all of the assets of, and Century has agreed to assume substantially all of the liabilities (other than Borrower's Obligations under this Agreement) of, the Systems. `Century Sale Termination' means the termination of the Century Sale Agreement, whether pursuant to Section 10 of the Century Sale Agreement or otherwise, other than any termination occurring as a result of a consummation of the Century Sale pursuant to which Borrower's outstanding Obligations to Banks under this Agreement are repaid in full concurrently with such consummation. `Escrow Agreements' means (a) the Escrow Agreement dated November 28, 1994, by and among Borrower, Century and Chemical Bank, as escrow agent, related to the Century Sale Agreement, (b) Borrower's agreement with Cable Telecommunications Joint Powers Agency ("CTJPA") pursuant to which Borrower has established, and deposited the sum of $785,731 into, Account No. 1233061950 at Bank of America's Concord, California branch, which sum is to be held for the benefit of CTJPA's subscribers pending determination of Borrower's potential liability, if any, to make refunds to CTJPA's subscribers, (c) Borrower's agreement with the City of Fairfield ("Fairfield"), California, pursuant to which Borrower has established, and deposited the sum of $680,000 into, Account No. 1233361901 at Bank of America's Concord, California branch, which sum is to be held for the benefit of Fairfield's subscribers pending determination of Borrower's potential liability, if any, to make refunds to Fairfield's subscribers, and (d) each other escrow agreement, deposit account agreement or other similar agreement or arrangement with any municipal or county authority that has issued a Franchise to Borrower which Borrower may enter into from time to time for the benefit of subscribers to an identified System or Systems for the purpose of holding available segregated funds to provide for potential refunds, if any, to such subscribers with respect to a la carte services and tier services and/or other rates or charges or which Borrower may enter into from time to time for the benefit of any such municipal or county authority that has issued a Franchise to Borrower, in each case in the form delivered to the Agent pursuant to Section 3E of the First Amendment or Section 7.14 of this Agreement, as amended, supplemented or otherwise modified from time to time in accordance with the provisions of Section 7.14 of this Agreement. `First Amendment' means the First Amendment to Amended and Restated Credit Agreement dated as of February 23, 1995, entered into by and among Borrower, Banks and Agent and the Credit Support Party (as defined therein), amending this Agreement." (ii) Section 1.1 of the Credit Agreement is hereby further amended by deleting the definition of "Applicable Margin" in its entirety and by substituting the following therefor: "`Applicable Margin' means a percentage to be added to the Reference Rate for Reference Rate Loans on and after December 31, 1994 and to the Offshore Rate for Offshore Rate Loans with respect to any portion of an Interest Period for which the Interest Payment Date occurs on and after December 31, 1994 as follows: [CAPTION] Applicable Margin Reference Offshore Funded Debt Ratio Rate Loans Rate Loans (a) Above 5.75:1.00 1.75% 2.75% (b) 5.75:1.00 or less 1.50% 2.50%
provided, however, in the event that a Century Sale Termination occurs on or prior to December 29, 1995, or all of the outstanding Obligations are not paid in full on or prior to December 29, 1995, then the Applicable Margin shall be determined pursuant to the foregoing clause (a) as if the Borrower's Funded Debt Ratio at all times on and after December 31, 1994 was and is above 5.75:1.00 and, to the extent that on any Interest Payment Date occurring after December 31, 1994 the interest payable by the Borrower was calculated under the foregoing clause (b), Borrower shall pay to the Agent for the ratable account of the Banks on the earlier to occur of the date of the Century Sale Termination or December 29, 1995, interest in an amount equal to the difference between (x) the amount of interest that would have been payable on such prior Interest Payment Date pursuant to the foregoing clause (a) and (y) the amount of interest actually paid on such prior Interest Payment Date pursuant to the foregoing clause (b)." (iii) Section 1.1 of the Credit Agreement is hereby further amended by inserting the following proviso in the definition of "Operating Cash Flow" at the end of the first sentence thereof immediately after the phrase "as the case may be": ";provided, however that notwithstanding the foregoing, Operating Cash Flow shall be determined without taking into account (x) any reserves, write-downs or writeoffs which Borrower is required to make in connection with approximately $2,400,000 in property tax refunds owing to Borrower from Orange County, California and (y) any accruals which Borrower is required to make in connection with up to $2,500,000 in bonuses which Borrower has agreed to pay its employees in the event that such employees remain in Borrower's employment until consummation of the Century Sale; provided however that in no event shall Borrower make any cash payments of such bonuses to any employee while any Obligations under this Agreement remain outstanding." 1.2 Amendments to Article 2: Amount and Terms of Commitments and Loans A. Interest. (i) Section 2.7(b) of the Credit Agreement is hereby amended by inserting "Subject to the proviso contained in the definition of `Applicable Margin'," as the first clause in each of the first two sentences of Section 2.7(b). (ii) Section 2.7(d) of the Credit Agreement is hereby amended by deleting the second sentence thereof in its entirety. B. Repayment of Principal at Maturity. Section 2.8(b) of the Credit Agreement is hereby amended by deleting the proviso at the end thereof and by inserting in lieu thereof the following: "provided, however, that so long as no Century Sale Termination occurs, the quarterly installments set forth in the above table for the Principal Payment Dates on March 31, 1995, June 30, 1995, September 29, 1995 and December 29, 1995 (collectively, the "Original Quarterly Installments") shall be adjusted as follows: the Borrower shall pay to the Agent for the ratable account of the Banks on each of March 31, 1995, June 30, 1995 and September 29, 1995, a quarterly installment equal to $1,500,000 (collectively, the "Reduced Quarterly Installments"), and on December 29, 1995, a quarterly installment equal to the difference between (x) $17,625,000 and (y) the Reduced Quarterly Installments paid by the Borrower; provided further that in the event that a Century Sale Termination occurs on or prior to December 29, 1995, then the Original Quarterly Installments shall be effective for all Principal Payment Dates on or succeeding such date of the Century Sale Termination and, in addition, on the first such Principal Payment Date, Borrower shall pay to the Agent for the ratable account of the Banks, a principal payment equal to the difference between (a) the aggregate amount of the Original Quarterly Installments for the Principal Payment Dates occurring prior to the date of the Century Sale Termination and (b) the aggregate amount of the Reduced Quarterly Installments paid by the Borrower; and provided still further, that the final installment of the Term Credit shall be in an amount equal to the amount then outstanding under the Term Credit." C. Mandatory Prepayment. Section 2.9(b) of the Credit Agreement is hereby amended by deleting it in its entirety and by inserting in lieu thereof the following: (b) Notwithstanding anything to the contrary in Section 2.9(a), in the event that the Borrower sells, transfers or otherwise disposes of any System pursuant to the Century Sale Agreement, then the Borrower shall, on the day payment of the Net Proceeds of Sale is received, prepay the Term Loans in an amount equal to such Net Proceeds of Sale. Such prepayment shall be allocated to the installments of the Term Loans in inverse order of maturity, together with interest accrued thereon. (c) From time to time, in the event that the Borrower receives any distribution or payment of any amount held pursuant to the Escrow Agreements (without duplication of any amounts payable pursuant to Section 2.9(b) or Section 2.9(d)), then the Borrower shall, on the day such distribution or payment is received, prepay the Term Loans in an amount equal to the amount of such distribution or payment. Such prepayment shall be allocated to the installments of the Term Loans in inverse order of maturity, together with interest accrued thereon. (d) In the event that the Borrower's cash balances, as determined in accordance with the Borrower's past practices and procedures but without giving effect to amounts held in the Reserve Account pursuant to the provisions of Section 6.14 and without giving effect to an aggregate amount equal to (i) one-twelfth of the annual amount payable pursuant to clause (c)(i) of Section 7.11 times the number of calendar months elapsed since January 1, 1995 minus (ii) the actual Corporate Overhead payments made to MultiVision since January 1, 1995, as of the last day of any fiscal quarter exceed $5,000,000, then the Borrower shall, as soon as practicable but in any event no later than the sixtieth day after the last day of such fiscal quarter, prepay the Term Loans in an amount equal to the amount by which such cash balances exceed $5,000,000. Such prepayment shall be allocated to the installments of the Term Loans in inverse order of maturity, together with interest accrued thereon." 1.3 Amendments to Article 3: Fees; Payments; Taxes; Changes in Circumstances A. Fees. Section 3.1 of the Credit Agreement is hereby amended by adding a new paragraph at the end thereof as follows: "(f) In the event that a Century Sale Termination occurs or all outstanding Obligations are not paid in full on or prior to December 29, 1995, the Borrower agrees to pay to the Agent for the ratable account of the Banks, a fee in an amount equal to .25% of the amount of the outstanding Loans on the date of the First Amendment, such fee to be payable on the earlier to occur of the date of the Century Sale Termination or December 29, 1995." 1.4 Amendments to Article 6: Borrower's Affirmative Covenants A. Financial Statements and Other Reports. (i) Section 6.1(a) of the Credit Agreement is hereby amended by deleting the first two lines thereof and by inserting in lieu thereof "as soon as practicable, and in any event within 55 days after the end of each calendar month, (i) an unaudited" and by adding at the end of Section 6.1(a) the following: "(ii) for informational purposes only, for each calendar month for which Borrower does not deliver the Certificate required pursuant to Section 6.1(d), a Certificate executed by a Responsible Officer calculating Borrower's Funded Debt Ratio as of the last day of such calendar month (the "Monthly Determination Date"); provided that in calculating the Funded Debt Ratio for purposes of this Section 6.1(a)(ii), the Measurement Period for determining the Operating Cash Flow of the Stations shall be the period of twelve consecutive calendar months ending on the Monthly Determination Date, and the Measurement Period with respect to the Operating Cash Flow of the California Cable Operations shall be determined by multiplying the Operating Cash Flow of the California Cable Operations for the three month period ending on the Monthly Determination Date by four and subtracting from the resulting product the amount of Management Fees actually paid during the period of the twelve consecutive calendar months ending on the Monthly Determination Date; and (iii) a narrative report, in form and substance satisfactory to Requisite Banks, describing the current status of the Borrower's renewals and extensions of its Franchise agreements as required by Section 6.1 of the Century Sale Agreement, the current status of Century's receipt of the necessary consents and approvals for the transfer of Borrower's Franchises and FCC Licenses to Century, and any developments with respect to matters generally related to the Century Sale and possible refunds to subscribers with respect to a la carte services and tier services occurring since the last such report." (ii) Section 6.1(b) of the Credit Agreement is hereby amended by deleting the reference to "75 days" contained in the second line thereof and by inserting "55 days" in lieu thereof. (iii) Section 6.1(d) of the Credit Agreement is hereby amended by adding the following at the end thereof: "(iii) a Certificate executed by a Responsible Officer setting forth in reasonable detail the amount by category of all Corporate Overhead payments made by Borrower from the Cable Assets to Multivision during the fiscal quarter for which such financial statements are being delivered; and (iv) to the extent not included in the financial statements delivered pursuant to Paragraphs (b) and (c) above, a statement of the Borrower's cash balances as of the end of such fiscal period, calculated in accordance with the Borrower's past practices and procedures but without giving effect to amounts required to be held in the Reserve Account pursuant to the provisions of Section 6.14 and without giving effect to an aggregate amount equal to (i) one- twelfth of the annual amount payable pursuant to clause (c)(i) of Section 7.11 times the number of calendar months elapsed since January 1, 1995 minus (ii) the actual Corporate Overhead payments made to MultiVision since January 1, 1995." (iv) Section 6.1(g) of the Credit Agreement is hereby amended by inserting the phrase ", including without limitation, the occurrence of the Century Sale Termination," after the phrase "Material Adverse Change," in clause (iii) thereof. B. Reserve Account. Article 6 of the Credit Agreement is hereby amended by adding a new section at the end thereof as follows: "6.14. Reserve Account. No later than the date of the First Amendment, Borrower shall establish a general account (the "Reserve Account") with the Bank of America into which Borrower shall initially deposit the sum of $166,000, and shall thereafter deposit, on the first Business Day of each month, the sum of $83,000. Funds in the Reserve Account shall be used by Borrower solely for the purposes of (i) making required deposits under Escrow Agreements entered into by the Borrower after the date of the First Amendment, (ii) paying refunds to subscribers to any of the Systems (other than any subscribers covered by an Escrow Agreement) with respect to a la carte services and tier services and/or other rates or charges, (iii) making payments to a municipal or county authority that has issued a Franchise to Borrower in connection with any regulatory proceedings or any disputes with such a Franchise authority concerning matters related to the re-regulation of the cable industry generally by the FCC, and (iv) subject to the inclusion of such funds in Borrower's calculation of its cash balances pursuant to Section 6.1(d)(iv) and to Borrower's obligations to make payments to the Agent under Section 2.9(d) in the event that such cash balances exceed $5,000,000, Borrower may withdraw funds from the Reserve Account at any time and use such funds for such purposes as Borrower deems appropriate. Funds in the Reserve Account shall not be included by Borrower in calculating the amount of Borrower's cash balances for the purposes of Section 2.9(d) of this Agreement; provided that at such time as Borrower obtains a determination from the FCC that Borrower is either not liable to some or all of such subscribers for such refunds or is liable to any such subscribers in an aggregate amount which is less than the aggregate amount held in the Reserve Account with respect to such subscribers, Borrower shall include such funds in the Reserve Account which are no longer required to pay refunds to such subscribers in Borrower's next calculation of its cash balances pursuant to Section 6.1(d)(iv) and, to the extent that such cash balances exceed $5,000,000, Borrower shall make the payments required pursuant to Section 2.9(d) of this Agreement. Within 30 days after the end of each month, Borrower shall deliver to Agent a statement as to the date and amount of all deposits into and withdrawals from the Reserve Account during the month for which the statement is being delivered and describing in reasonable detail the disposition of the funds so withdrawn." 1.5 Amendments to Article 7: Borrower's Negative Covenants A. Restricted Junior Payments. Section 7.5 of the Credit Agreement is hereby amended by inserting a period after the phrase "the Borrower" in the fifth line of Section 7.5(a) and by deleting the remaining text of Section 7.5 following such period. B. Financial Covenants. (i) Section 7.6(a) of the Credit Agreement is hereby amended by inserting the following at the end thereof: "provided however, that until the earlier to occur of any Century Sale Termination or December 29, 1995, the ratios set forth in the above table for the third and fourth fiscal quarters in 1994 shall be 5.45 and 5.75, respectively, and for the first, second and third fiscal quarters in 1995 shall be 6.65, 6.25 and 5.85, respectively. Effective on the last day of the first fiscal quarter ending on or after the date of the Century Sale Termination or December 29, 1995, whichever shall first occur, the ratios for such last day of such fiscal quarter and all succeeding fiscal quarters shall be as set forth in the above table without giving effect to this proviso." (ii) Section 7.6(b) of the Credit Agreement is hereby amended by inserting the following at the end thereof: "provided however, that until the earlier to occur of any Century Sale Termination or December 29, 1995, the ratios set forth in the above table for the fourth fiscal quarter in 1994 shall be 1.11, and for the first, second and third fiscal quarters in 1995 shall be .95, .99 and 1.06, respectively. Effective on the last day of the first fiscal quarter ending on or after the date of the Century Sale Termination or December 29, 1995, whichever shall first occur, the ratios for such last day of such fiscal quarter and for all succeeding fiscal quarters shall be as set forth in the above table without giving effect to this proviso." (iii) Section 7.6(c) of the Credit Agreement is hereby amended by inserting the following at the end thereof: "provided however, that until the earlier to occur of any Century Sale Termination or December 29, 1995, the ratios set forth in the above table for the first, second and third fiscal quarters in 1995 shall be .85, .93 and 1.00, respectively. Effective on the last day of the first fiscal quarter ending on or after the date of the Century Sale Termination or December 29, 1995, whichever shall first occur, the ratios for such last day of such fiscal quarter and for all succeeding fiscal quarters shall be as set forth in the above table without giving effect to this proviso." C. Restrictions on Payments from California Media Assets. Section 7.11 of the Credit Agreement is hereby amended by deleting the phrase "under the Cost Allocation Agreement" each place it appears in Section 7.11; by inserting the phrase ", commencing January 1, 1994, plus an additional $1,000,000" immediately after the word "and" and prior to clause (d) of such Section 7.11; and by deleting the phrase "allocable to the Borrower" and by inserting in lieu thereof the phrase "payable by the Borrower". D. Management Fee. Section 7.12 of the Credit Agreement is hereby amended by deleting it in its entirety and by inserting in lieu thereof the following: "7.12. Management Fee. The Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly, pay or commit to pay any management fees to the General Partner or any of its Affiliates during any fiscal year so long as Obligations are outstanding under this Agreement; provided that the foregoing prohibition shall not prohibit the Borrower from accruing Management Fees not in excess of those provided for in the Limited Partnership Agreement, as in effect on the date hereof and without regard to any amendment or modification of such terms. All liabilities of the Borrower and its Subsidiaries for the payment of, and any payment of, Management Fees shall be unsecured and shall be subordinated as provided for in the Subordination Agreement." E. FCC Licenses; Franchises and Materials Contracts. Section 7.13 of the Credit Agreement is hereby amended by deleting the reference to "The Borrower" at the beginning thereof and by inserting in lieu thereof the phrase "Other than as may be required in connection with the Century Sale pursuant to the terms and conditions of the Century Sale Agreement, the Borrower". F. Amendment of Certain Agreements. Section 7.14 of the Credit Agreement is hereby amended by deleting the caption in its entirety and by inserting in lieu thereof "Amendment of Certain Agreements" and by adding the following at the end thereof: "The Borrower will, promptly upon execution thereof, deliver copies to the Agent of all amendments, modifications or waivers of any provision of the Century Sale Agreement and the Escrow Agreements and will promptly deliver to Agent copies of all other notices or agreements relating to the Century Sale Agreement and the Escrow Agreements. The Borrower will not amend, modify or waive any provision of or terminate any Escrow Agreement without the prior written consent of Requisite Banks if such amendment, modification, waiver or termination would adversely affect any payment or distribution to be made to the Borrower or to the Agent for the ratable account of Banks under any such Escrow Agreement. With respect to each Escrow Agreement in effect on the date of the First Amendment, Borrower shall have no later than the date of the First Amendment, delivered irrevocable instructions to each such escrow agent or other depositary to make all distributions or payments to be made to Borrower directly to such of Borrower's accounts with Agent as shall be designated by Agent. Borrower shall comply with the provisions of the foregoing sentence with respect to each Escrow Agreement to be entered into by Borrower after the date of the First Amendment prior to entering into any such Escrow Agreement, and Borrower shall deliver copies of each such Escrow Agreement to Agent upon execution thereof." 1.6 Amendments to Article 10: Miscellaneous A. Amendments, Waivers, Release of Collateral. Section 10.6 of the Credit Agreement is hereby amended by deleting the reference to "Section 2.9(a)" contained therein and by inserting in lieu thereof a reference to "Section 2.9". B. Assignments and Participations. Section 10.8 of the Credit Agreement is hereby amended by adding the following immediately after the phrase "Section 3.5" referenced therein: "; provided further that no minimum amount of Loans and Commitments shall be required to be assigned to any Assignee which, at the time of such assignment, is already a Bank or an Affiliate of such a Bank under this Agreement;" 2. LIMITED WAIVER A. Subject to the terms and conditions set forth herein and in reliance on the representations and warranties of Borrower herein contained, Banks hereby waive (i) compliance with the provisions of Section 6.9 of the Credit Agreement through and including December 29, 1995; and (ii) provided that the First Amendment Effective Date occurs on or prior to February 24, 1995, receipt of interest at the increased rate provided for pursuant to Section 2.7(d) with respect to the Event of Default existing under Section 7.6(a) of the Credit Agreement and with respect to any Event of Default existing prior to the First Amendment Effective Date under Section 6.9 or Section 7.11 of the Credit Agreement. B. Without limiting the generality of the provisions of Section 10.6 of the Credit Agreement, the waiver set forth above shall be limited precisely as written and relates solely to the noncompliance by Borrower with the provisions of Section 6.9 and Section 2.7(d) of the Credit Agreement in the manner and to the extent described above, and nothing in this Amendment shall be deemed to: (i) constitute a waiver of compliance by Borrower with respect to (i) Section 6.9 and Section 2.7(d) of the Credit Agreement in any other instance or (ii) any other term, provision or condition of the Credit Agreement or any other instrument or agreement referred to therein; or (ii) prejudice any right or remedy that Agent or any Bank may now have or may have in the future under or in connection with the Credit Agreement or any other instrument or agreement referred to therein. C. Except as expressly set forth in this Amendment, the terms, provisions and conditions of the Credit Agreement and the other Loan Documents shall remain in full force and effect and in all other respects are hereby ratified and confirmed. This Amendment, and any delay or failure by Agent or Banks to exercise any of their rights and remedies in connection with this Amendment or otherwise, shall not impair any power, right or privilege granted to Agent or Banks in the Credit Agreement or any other Loan Document or by law available to them upon the occurrence and during the continuation of any Event of Default under the Credit Agreement or any other Loan Document. 1. CONDITIONS TO EFFECTIVENESS Section 1 of this Amendment shall become effective only upon the satisfaction of all of the following conditions precedent (the date of satisfaction of such conditions being referred to herein as the "First Amendment Effective Date"): A. On or before the First Amendment Effective Date, the Borrower shall deliver to the Agent with sufficient originally executed copies, where appropriate, for each Bank the following, each, unless otherwise noted, dated the First Amendment Effective Date: 1. Certified copies of the Certificate of Limited Partnership of the Borrower from the Secretary of State of the State of Delaware, dated a recent date prior to the First Amendment Effective Date; 2. Good Standing Certificate (or equivalent) for the Borrower from the State of Delaware, dated a recent date prior to the First Amendment Effective Date; 3. Certificate of Status of Foreign Limited Partnership for the Borrower from the State of California, dated a recent date prior to the First Amendment Effective Date; 4. Good Standing Certificate (or equivalent) for the Borrower from the State of New York, dated a recent date prior to the First Amendment Effective Date; 5. Resolutions of the Board of Directors of IMP Media Management, Inc., approving and authorizing the execution, delivery and performance of this Amendment, certified as of the First Amendment Effective Date by its corporate secretary or an assistant secretary; 6. Resolutions of the Board of Directors of IMP Media Management, Inc. designating and authorizing a specific officer or officers of IMP Media Management, Inc. to give and receive notices, including without limitation, Notices of Borrowing and Notices of Conversion/Continuation, on behalf of the Borrower to the Agent and the Banks under the Credit Agreement; 7. Signature and incumbency certificates of the officers of the Partner executing this Amendment; 8. An originally executed favorable written opinion of Proskauer Rose Goetz & Mendelsohn, counsel for the Borrower, as to Borrower's due authorization, execution and delivery of this Amendment and that this Amendment, and the Agreement, as amended by this Amendment, constitute the legally valid and binding obligations of Borrower, enforceable against Borrower in accordance with their respective terms; and 9. Executed copies of this Amendment, executed and delivered by Borrower and Credit Support Party. B. Agent shall have received executed copies of this Amendment, executed and delivered by Banks. C. The Borrower shall have paid to the Agent for the ratable account of the Banks, on the First Amendment Effective Date, an amendment fee equal to .25% of the outstanding principal amount of the Loans on the First Amendment Effective Date. D. The Borrower shall have established the Reserve Account in accordance with Section 6.14 of the Credit Agreement. E. Agent shall have received executed or conformed true, correct and complete copies of the Century Sale Agreement and the Escrow Agreements, including any amendments, modifications, waivers, exhibits or schedules thereto, as in effect on the First Amendment Effective Date; the Century Sale Agreement and each such Escrow Agreement shall be in full force and effect, without amendment, waiver or modification of any provision thereof except as disclosed in writing to the Agent and the Banks; each party thereto shall not have failed to comply in any material respect with any provision thereof to be complied with by such party; and Agent shall have received a Certificate of a Responsible Officer of the Borrower to the foregoing effect. F. On or before the First Amendment Effective Date, all partnership, corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incidental thereto not previously found acceptable by Agent, acting on behalf of Banks, and its counsel shall be satisfactory in form and substance to Agent and such counsel, and Agent and such counsel shall have received all such counterpart originals or certified copies of such documents as Agent may reasonably request. 1. BORROWER'S REPRESENTATIONS AND WARRANTIES In order to induce Banks to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, Borrower represents and warrants to each Bank that the following statements are true, correct and complete: A. Partnership Power and Authority. Borrower has all requisite partnership power and authority to enter into this Amendment and to carry out the transactions contemplated by, and perform its obligations under, this Amendment and the Credit Agreement as amended by this Amendment (the "Amended Agreement"). B. Authorization of Agreements. The execution and delivery of this Amendment and the performance of this Amendment and the Amended Agreement have been duly authorized by all necessary partnership action on the part of Borrower. The General Partner, and IMP Media Management, Inc. on behalf of the General Partner, has the power and authority and the legal right to make, deliver and perform on behalf of the Borrower, and thereby legally bind the Borrower to perform, this Amendment and the Amended Agreement and each of the General Partner, and IMP Media Management, Inc. on behalf of the General Partner, has taken all necessary partnership action to authorize the execution and delivery on behalf of the Borrower of, and thereby legally bind the Borrower to perform, this Amendment and the Amended Agreement. C. No Conflict. The execution and delivery by Borrower of this Amendment and the performance by Borrower of this Amendment and the Amended Agreement do not and will not (i) violate any provision of any law or any governmental rule or regulation applicable to Borrower, the Limited Partnership Agreement of Borrower or any order, judgment or decree of any court or other agency of government binding on Borrower, (ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of Borrower or the General Partner, (iii) result in or require the creation or imposition of any Lien upon any of the properties or assets of Borrower or the General Partner (other than any Liens created under any of the Loan Documents in favor of Agent on behalf of Banks), or (iv) require any approval of any partners or stockholders or any approval or consent of any Person under any Contractual Obligation of Borrower or the General Partner, except for such approvals or consents which have been obtained on or before the First Amendment Effective Date and disclosed in writing to Agent and the Banks. D. Governmental Consents. The execution and delivery by Borrower of this Amendment and the performance by Borrower of this Amendment and the Amended Agreement do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any federal, state or other governmental authority or regulatory body. E. Binding Obligation. This Amendment and the Amended Agreement have been duly executed and delivered by Borrower and are the legally valid and binding obligations of Borrower, enforceable against Borrower in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. F. Incorporation of Representations and Warranties From Credit Agreement. The representations and warranties contained in Article 5 of the Credit Agreement are and will be true, correct and complete in all material respects on and as of the First Amendment Effective Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date and except for Material Adverse Changes resulting from FCC regulations applicable to the cable industry in general. G. Absence of Default. After giving effect to this Amendment, no event has occurred and is continuing or will result from the consummation of the transactions contemplated by this Amendment that would constitute an Event of Default or a Default. 1. ACKNOWLEDGEMENT AND CONSENT Management is a party to the Assignment Agreement pursuant to which Management has created Liens in favor of Agent on certain collateral to secure the obligations of Management under the Assignment Agreement and Borrower under the Loan Documents. Management is referred to herein as the "Credit Support Party", and the Assignment Agreement is referred to herein as the "Credit Support Document". The Credit Support Party hereby acknowledges that it has reviewed the terms and provisions of the Credit Agreement and this Amendment and consents to the amendment of the Credit Agreement effected pursuant to this Amendment. The Credit Support Party hereby confirms that the Credit Support Document to which it is a party or otherwise bound and all collateral encumbered thereby will continue to secure to the fullest extent possible the payment and performance of all Obligations (as such term is defined in the Credit Support Document), including without limitation the payment and performance of all Obligations of Borrower now or hereafter existing under or in respect of the Amended Agreement and the Notes defined therein. The Credit Support Party acknowledges and agrees that the Credit Support Document to which it is a party or otherwise bound shall continue in full force and effect and that all of its obligations thereunder shall be valid and enforceable and shall not be impaired or limited by the execution or effectiveness of this Amendment. The Credit Support Party represents and warrants that all representations and warranties contained in the Amended Agreement and the Credit Support Document to which it is a party or otherwise bound are true, correct and complete in all material respects on and as of the First Amendment Effective Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date. The Credit Support Party acknowledges and agrees that (i) notwithstanding the conditions to effectiveness set forth in this Amendment, such Credit Support Party is not required by the terms of the Credit Agreement or any other Loan Document to consent to the amendments to the Credit Agreement effected pursuant to this Amendment and (ii) nothing in the Credit Agreement, this Amendment or any other Loan Document shall be deemed to require the consent of such Credit Support Party to any future amendments to the Credit Agreement. 1. MISCELLANEOUS A. Reference to and Effect on the Credit Agreement and the Other Loan Documents. (i) On and after the First Amendment Effective Date, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to the "Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement shall mean and be a reference to the Amended Agreement. (ii) Except as specifically amended by this Amendment, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed. (iii) The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of Agent or any Bank under, the Credit Agreement or any of the other Loan Documents. B. Fees and Expenses. Borrower acknowledges that all costs, fees and expenses as described in Section 10.3 of the Credit Agreement incurred by Agent and its counsel with respect to this Amendment and the documents and transactions contemplated hereby shall be for the account of Borrower and shall be payable by the Borrower within 30 days of presentation of a statement or invoice therefor. C. Headings. Section and subsection headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose or be given any substantive effect. D. Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. E. Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. [Remainder of page intentionally left blank] IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. ML MEDIA PARTNERS, L.P. By: Media Management Partners, as General Partner By: RP Media Management By: IMP Media Management, Inc. By: _________________________ Title:_________________________ MEDIA MANAGEMENT PARTNERS (for purposes of Section 4 only), as a Credit Support Party By: RP Media Management By: IMP Media Management, Inc. By: _________________________ Title:_________________________ BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By: __________________________ David Price, Vice President BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Bank By: _____________________________ GiGi Johnson, Vice President BANK OF HAWAII By: ____________________ Title: ____________________ NATIONAL BANK OF CANADA By: ____________________ Title: ____________________ NATWEST BANK N.A. (formerly National Westminster Bank USA) By: ____________________ Title: ____________________ THE BANK OF NOVA SCOTIA By: ____________________ Title: ____________________ CIBC INC. By: ____________________ Title: ____________________ SHAWMUT BANK CONNECTICUT, N.A. By: ____________________ Title: ____________________
EX-27 3 ART. 5 FDS FOR THE YEAR ENDED 1994 10-K
5 This schedule contains summary financial information extracted from the year end 1994 Form 10K Consolidated Balance Sheets and Consolidated Statements of Operations as of December 30, 1994, and is qualified in its entirety by reference to such financial statements. 1,000 12-MOS DEC-30-1994 DEC-30-1994 26,682 6,000 12,561 809 0 0 205,609 120,556 238,330 0 218,171 0 0 0 (16,259) 238,330 0 106,225 0 38,765 31,957 0 16,047 (1,451) 0 (1,451) 0 0 0 (1,451) (7.64) 0
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