Item 2. Properties
Maryland Cable Systems
The physical assets of the Maryland Cable Systems comprise the majority of Registrant's physical assets. The principal physical assets of the Systems include signal receiving apparatus, headends, distribution systems and subscriber connection equipment. The signal receiving apparatus of each System includes a tower, antenna, ancillary electronic equipment and earth stations for the reception of satellite signals. Each Maryland Cable System has one headend, consisting of electronic equipment necessary for the reception, amplification and modulation of signals, located near the receiving devices. The Prince George's System also has three "hub-site" headends, which can amplify and modulate signals from the main headend but cannot independently receive satellite delivered signals. The distribution systems of the Prince George's consist of 1,244 miles of coaxial cables and related electronic equipment. Subscriber connection equipment consists of house or apartment drop equipment and decoding converters. Substantially all of the Systems' decoding converters in Maryland are fully addressable, which allows the System operator to activate or terminate services electronically. The physical components of the Systems require regular maintenance, as well as periodic upgrading to keep pace with technological advances and regulatory standards.
The headquarters for the Systems are located in Lanham, Maryland on a 4.3 acre site owned by Maryland Cable. This facility contains a 22,000 square foot two-story brick building, which includes a fully equipped production studio, a small warehouse and the main headend for the Prince George's System. Maryland Cable also owns a small building on a one-half acre lot in Leesburg, Virginia, which contains office space and the headend for the Leesburg System, and small sites in Prince George's County for two of its hub-sites.
Maryland Cable leases three locations in Prince George's County, which include a site for its third hub-site and two fully- equipped production studios used for local origination and public access programming.
Maryland Cable and Holdings believe that the properties owned and leased by Maryland Cable are in reasonably good condition and adequate for the operation of the Systems.
Maryland Cable holds two BRS and three TVRO licenses from the FCC that are used in connection with the operation of the Systems.
The Systems' coaxial cables are generally attached to utility poles under rental agreements with local public utilities. In some areas, the distribution cable is buried in underground ducts or trenches. Most of the pole attachment agreements for the Systems were initially entered into by predecessors of Prime Cable. Maryland Cable has received all of the consents to the assignment of the pole attachment agreements used by the Systems. Future increases in pole attachment rates cannot be predicted, but are subject to regulation by the FCC and the Federal Pole Attachments Act.
Windsor Systems
The principal physical assets of the Windsor Systems include signal receiving apparatus, one headend, a distribution system and subscriber connection equipment. The signal receiving apparatus of the Windsor Systems includes a tower, antennae, ancillary electronic equipment and earth stations for the reception of satellite signals. The Windsor Systems has one headend, consisting of electronic equipment necessary for the reception, amplification and modulation of signals, located near the receiving devices. The distribution system of the Windsor Systems consists of approximately 90 miles of coaxial cable and related electronic equipment. Subscriber connection equipment consists of house or apartment drop equipment and decoding converters. The physical components of the Windsor Systems require regular maintenance, as well as periodic upgrading to keep pace with technological advances and regulatory standards.
Registrant leases one location in Williamston, North Carolina which includes a site for its single headend (expiring in 1998) and a 2,600 square foot office (expiring in 1994) to serve the Windsor Systems.
Registrant believes that the properties owned and leased by Registrant in Williamston are in reasonably good condition and adequate for the operation of the Windsor System.
Registrant holds two TVRO licenses from the FCC that are used in connection with the operation of the Windsor System.
The Windsor System's coaxial cables are generally attached to utility poles under rental agreements with local public utilities. In some areas, the distribution cable is buried in underground ducts or trenches. Most of the pole attachment agreements for the Windsor Systems were initially entered into by predecessors of Registrant. Registrant has entered into new pole attachment agreements used by the Windsor Systems. Future increases in pole attachment rates cannot be predicted, but are subject to regulation by the FCC and the Federal Pole Attachments Act.
Norfolk Radio
Registrant's radio station, WMXN-FM in Norfolk, Virginia leases its office and studio space under a ten year lease which, with thirty days prior notice, can be canceled after five years upon payment of a cancellation penalty. The station also leases space on a tower for its broadcast antenna and space in a building that houses its transmission equipment. The tower and building leases expire in 1994 with an option to renew for an additional five years.
WMXN-FM owns its office furniture, studio equipment, and transmission equipment. Registrant believes that the properties leased by WMXN-FM and the furniture and equipment owned by the station are in reasonably good condition and are adequate for the operation of the station.
WMXN-FM holds a license from the FCC that is used in connection with broadcasting operations at the station.
Other Properties
Paradigm and BBAD operate out of leased office space in California. Paradigm and BBAD own their office furniture and office equipment. Registrant believes that the properties leased by Paradigm and BBAD and the furniture and equipment owned by those companies are in reasonably good condition and are adequate for the operation of the company.
TCS owns the land and studio buildings at each of its three locations (Columbus, Georgia; Terre Haute, Indiana; and St. Joseph, Missouri) as well as broadcasting transmitters, antennas and towers at each location. In addition, TCS owns technical broadcasting equipment as well as the furniture and fixtures at TCS's three stations.
Registrant believes that the properties owned by the stations and the other equipment and furniture and fixtures owned are in reasonably good condition and are adequate for the operations of the stations.
The physical assets of Registrant's remaining investments are not included in the consolidated balance sheet of Registrant.
Item 3.
Item 3. Legal Proceedings
Refer to "Item 1. Business - Maryland Cable Corp." for information regarding bankruptcy filing made by Maryland Cable Corp.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters which required a vote during the fourth quarter of the fiscal year covered by this report.
Part II
Item 5.
Item 5. Market for Registrant's Common Stock and 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.
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.
As of January 28, 1994, the number of owners of Units was 15,143. Registrant does not distribute dividends, but rather Distributable Cash From Operations, Distributable Refinancing Proceeds, and Distributable Sale Proceeds, to the extent available. On June 6, 1989, Registrant made a federal tax allowance cash distribution in an amount equal to 33% of the 1988 federal taxable income to all limited partners owning Units in 1988 in proportion to their federal taxable income from the ownership of Units. The total amount distributed was $2,040,121. There have been no distributions since that time. Item 6.
Item 6. Selected Financial Data
Year Ended Year Ended Year Ended December 31, December 31, December 31, 1989 1990 1991
Total Revenues $ 41,128,616 $ 42,936,437 $ 43,289,706
Losses from continuing operations attributable to Common Stockholders/ Partners $(15,838,169) $(43,946,253) $(77,895,462)
Loss from continuing operations per unit of Limited Partnership Interest $ (139.81) $ (387.94) $ (687.64)
Number of Units 112,147.1 112,147.1 112,147.1
As of As of DecemberAs of December December 31, 31, 31, 1989 1990 1991
Total Assets $285,298,872 $250,244,698 $187,061,204
Borrowings $186,721,730 $201,107,698 $212,570,908
Note:Total revenues include operating revenues and interest income.
Year Ended Year Ended December 31, December 31, 1992 1993
Total Revenues $ 52,661,661 $ 62,663,710
Losses from continuing operations attributable to Common Stockholders/ Partners $(36,364,608) $(33,526,155)
Loss from continuing operations per unit of Limited Partnership Interest $ (321.02) $ (295.96)
As of DecemberAs of December 31, 31, 1992 1993
Total Assets $169,777,942 $191,150,624
Borrowings $232,112,727 $285,623,555
Number of Units 112,147.1 112,147.1
Certain items have been restated to conform to 1993 presentation for discontinued operations.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources
At December 31, 1993, Registrant had $4,978,035 in cash and cash equivalents, of which $1,456,352 was limited for use at the operating level and $3,521,683 was Registrant's working capital.
At December 31, 1992, Registrant had $9,801,975 in cash and cash equivalents, of which $3,132,465 was limited for use at the operating level and $6,669,510 was Registrant's working capital.
During 1993, Registrant continued its operations phase. Registrant advanced an additional approximately $0.7 million to IMPLP/IMPI and its affiliate, Intelidata, prior to the sale of these businesses and assets in July 1993.
In summary of Registrant's liquidity status, of the approximately $3.5 million that Registrant has for working capital, a portion may be utilized to support anticipated funding needs or possible restructurings, as appropriate, of Maryland Cable, TCS and its other investments. Registrant has no contractual commitment to advance funds to any of its investments except for the commitments described below.
Registrant, in the appropriate circumstances, will consider utilizing its working capital to fund cash shortfalls or to restructure the debt of certain of its investments. Registrant is also pursuing the sale of certain investments. Refer to "Item 8.
Item 8. Financial Statements and Supplementary Data
Page ML Media Opportunity Partners, L.P.
Independent Auditors' Report 83-84
Consolidated Balance Sheets as of December 31, 1993 and December 31, 1992 85-86
Consolidated Statements of Operations for the years ended December 31, 1993, December 31, 1992 and December 31, 1991 87-88
Consolidated Statements of Cash Flows for the years ended December 31, 1993, December 31, 1992 and December 31, 1991 89-92
Consolidated Statements of Changes in Partners' Capital (Deficit) for the years ended December 31, 1993, December 31, 1992 and December 31, 1991 93
Notes to the Consolidated Financial Statements for the years ended December 31, 1993, December 31, 1992 and December 31, 1991 94-143
Schedule III - Condensed Financial Information of Registrant as of December 31, 1993, December 31, 1992 and December 31, 1991 144-150
Schedule V - Property, Plant and Equipment as of December 31, 1993, December 31, 1992 and December 31, 1991 151
Schedule VI - Accumulated Depreciation of Property, Plant and Equipment as of December 31, 1993, December 31, 1992 and December 31, 1991 152
Schedule VIII - Accumulated Amortization of Intangible Assets and Deferred Charges as of December 31, 1993, December 31,1992, and December 31, 1991 153
Schedule X - Supplementary Income Statement Information for the years ended December 31, 1993, December 31, 1992 and December 31, 1991 154
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 Opportunity Partners, L.P.:
We have audited the accompanying consolidated financial statements and the related financial statement schedules of ML Media Opportunity Partners, L.P. (the "Partnership") and its affiliated entities, listed in the accompanying table of contents. These financial statements and financial statement schedules are the responsibility of the Partnership's general partner. Our responsibility is to express an opinion on the 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 31, 1993 and 1992 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993 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, subsequent to December 31, 1993, Maryland Cable Holdings Corp. ("Holdings") and its wholly-owned subsidiary, Maryland Cable Corp., filed a plan of reorganization under Chapter 11 of the Federal Bankruptcy Code. Holdings, a majority-owned entity, has total assets and operating revenues comprising 70 percent and 70 percent, respectively, of the Partnership's consolidated assets and operating revenues in the accompanying 1993 consolidated financial statements. The accompanying consolidated financial statements do not purport to reflect or provide for the consequences of the bankruptcy proceedings. In particular, such consolidated financial statements do not purport to show (a) as to assets, their realizable value on a liquidation basis or their availability to satisfy liabilities; (b) as to prepetition liabilities, the amounts that may be allowed for claims or contingencies, or the status and priority thereof; (c) as to partners' capital accounts, the effect of any changes in the capitalization of the Partnership; or (d) as to the operations, the effect of any changes that may be made in its business. The outcome of these matters is not presently determinable.
The accompanying consolidated financial statements have been prepared assuming that the Partnership will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Partnership's operations have incurred recurring net losses which have resulted in a partners' deficit. In addition, if the Partnership is unsuccessful in completing debt restructurings, it will not be able to satisfy its ongoing obligations. The ultimate outcome of the foregoing cannot presently be determined and these circumstances raise substantial doubt about the Partnership's ability to continue as a going concern. Management's plans concerning these matters are also described in Note 2. Accordingly, the consolidated financial statements do not include adjustments that might result from the outcome of the uncertainties referred to herein and in the preceding paragraph.
DELOITTE & TOUCHE New York, New York March 22, 1994
ML MEDIA OPPORTUNITY PARTNERS, L.P. CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1993 AND DECEMBER 31, 1992
Notes 1993 1992 ASSETS: Cash and cash equivalents 1,2 $ 4,978,035 $ 9,801,975 Accounts receivable (net of allowance for doubtful accounts of $405,692 at December 31, 1993 and $275,340 at December 31, 1992) 5,173,106 2,293,837 Prepaid expenses and deferred charges (net of accumulated amortization of $11,990,712 at December 31, 1993, and $7,828,872 at December 31 1992) 1 3,140,868 4,928,377 Property, plant and equipment(net of accumulated depreciation of $42,681,054 at December 31, 1993 and $24,821,936 at December 31, 1992) 1,2,4 51,065,834 50,291,411 Intangible assets (net of accumulated amortization of $85,360,574 at December 31, 1993 and $63,989,829 at December 31, 1992) 1,2,5 121,975,677 96,768,568 Investment in joint ventures and common stock 1,8,10 1,261,666 727,128 Production costs and other assets 1,2 3,555,438 4,966,646 TOTAL ASSETS 6 $ 191,150,624 $ 169,777,942
(Continued on the following page)
ML MEDIA OPPORTUNITY PARTNERS, L.P. CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1993 AND DECEMBER 31, 1992 (continued) Notes 1993 1992 LIABILITIES AND PARTNERS' DEFICIT: Liabilities: Borrowings 2,6 $ 285,623,555 $ 232,112,727 Accounts payable and accrued liabilities 16,354,374 9,723,892 Net liabilities of discontinued operations 15 - 185,611 Deferred revenue 1 - 4,247,495 Subscriber and other advance payments 429,387 520,375 Total Liabilities 302,407,316 246,790,100 Commitments and Contingencies 2,3,6,7 Minority interest 3 99,854 26,969 Partners' Deficit: General Partners: Capital contributions, net of offering expenses 1 1,019,428 1,019,428 Cumulative loss (2,112,501) (1,769,327) (1,093,073) (749,899) Limited Partners: Capital contributions, net of offering expenses (112,147.1 Units of Limited Partnership 1 100,914,316 100,914,316 Interest) Tax allowance cash distribution (2,040,121) (2,040,121) Cumulative loss (209,137,668) (175,163,423) (110,263,473) (76,289,228) Total Partners' Deficit (111,356,546) (77,039,127) TOTAL LIABILITIES AND PARTNERS' DEFICIT $ 191,150,624 $ 169,777,942
See Notes to Consolidated Financial Statements
ML MEDIA OPPORTUNITY PARTNERS, L.P. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1993, DECEMBER 31, 1992 AND DECEMBER 31, 1991 Year Ended Year Ended Year Ended December 31, December 31, December 31, NOTE 1993 1992 1991 S
Operating Revenues 1 $ 62,453,885 $ 52,143,892 $ 42,041,854
Operating Expenses: Property operating expenses 29,730,657 26,515,117 17,697,058 General and administrative 7 13,376,340 9,552,676 9,403,245 Depreciation and amortization 1,4, 18,837,857 16,548,840 15,349,103 Management fees 7 3,073,417 2,986,799 2,896,993 Management expense 7 1,197,346 936,356 900,674 Loss on write-down of Maryland Cable 2 - - 40,000,000 Loss on writedown of assets 2 515,919 - -
66,731,536 56,539,788 86,247,073 Operating loss from continuing operations (4,277,651) (4,395,896) (44,205,219)
Other(Expense) Income: Interest expense 6 (32,469,947) (28,104,963) (29,697,998) Interest income 209,825 517,769 1,247,852 Other expenses (170,054) (140,116) (74,053) Gain on sale of assets 14 3,952,407 - - (28,477,769) (27,727,310) (28,524,199) Loss from continuing operations before equity in loss of joint ventures and minority interest share of net loss of consolidated joint ventures (32,755,420) (32,123,206) (72,729,418)
Equity in loss of joint ventures 1,8, (1,288,838) (4,720,934) (5,166,044)
ML MEDIA OPPORTUNITY PARTNERS, L.P. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1993, DECEMBER 31, 1992 AND DECEMBER 31, 1991 (continued)
Year Ended Year Ended Year Ended December 31, December 31, December 31, NOTE 1993 1992 1991 S
Minority interest share of net loss of consolidated joint ventures 3 518,103 479,532 -
Loss from continuing operations (33,526,155) (36,364,608) (77,895,462)
Loss from discontinued operations 15 (791,264) (2,007,742) (1,345,563)
NET LOSS $(34,317,419) $(38,372,350) $(79,241,025)
Per Unit of Limited Partnership Interest:
Loss from continuing operations $ (295.96) $ (321.02) $ (687.64)
Loss from discontinued operations (6.98) (17.72) (11.88)
NET LOSS $ (302.94) $ (338.74) $ (699.52)
Number of Units 112,147.1 112,147.1 112,147.1
See Notes to Consolidated Financial Statements.
ML MEDIA OPPORTUNITY PARTNERS, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1993, DECEMBER 31, 1992 AND DECEMBER 31, 1991
1993 1992 1991 Cash flows from operating activities:
Net loss $(34,317,419 $(38,372,350) $(79,241,025) )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization 18,837,857 16,548,840 15,349,103
Bad debt reserve adjustment - - -
Accretion of original issue discount 19,665,623 19,652,226 16,946,541
Equity in loss of joint ventures 1,288,838 4,720,934 5,166,044
(Gain) Loss on sale of assets (3,952,407) - 225,000
Loss on write-down of assets 515,919 - -
Increase in minority interest 76,667 - -
Loss on write-down of Maryland Cable - - 40,000,000
Minority interest share of net loss (518,103) (479,532) -
Change in operating assets and liabilities (net of effects of acquisition):
ML MEDIA OPPORTUNITY PARTNERS, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1993, DECEMBER 31, 1992 AND DECEMBER 31, 1991
1993 1992 1991 (Increase) decrease in accounts receivable 786,816 204,749 (691,750)
Decrease in interest receivable - - 64,475
(Increase) decrease in prepaid expenses and deferred charges (999,609) 16,749 (1,509,309)
(Increase) decrease in production costs and other assets 2,871,751 (1,799,525) -
Increase (decrease) in accounts payable and accrued liabilities 398,236 (1,721,804) 6,567,835
Increase (decrease) in subscriber and other advance payments (86,395) 399,872 (41,584)
ML MEDIA OPPORTUNITY PARTNERS, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1993, DECEMBER 31, 1992 AND DECEMBER 31, 1991 (continued)
1993 1992 1991
(Decrease) increase in deferred revenue (4,247,495 2,343,176 290,714 ) Net cash provided by (used in)operating activities 320,279 1,513,335 3,126,044
Cash flows from investing activities: Purchase of property, plant and equipment (5,266,736) (5,672,494) (5,067,978) Proceeds from sale of property, plant and equipment 10,229,746 - - Increase in intangible assets (2,630) (144,379) (556,371) Other - 1,211,132 - Investment in joint - (168,750) (3,922,083) ventures Investment in GCC stock and note receivable - (2,000,011) - Proceeds from redemption/sale of note/rights 100,000 596,172 275,000
Net cash used in investing activities 5,060,380 (6,178,330) (9,271,432)
ML MEDIA OPPORTUNITY PARTNERS, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1993, DECEMBER 31, 1992 AND DECEMBER 31, 1991 (continued)
1993 1992 1991 Cash flows from financing activities: Principal payments on bank loans (10,204,599) (110,407) (7,078,721) Capital contributions by minority joint venture partners - 506,500 -
Net cash (used in) provided by financing activities (10,204,599) 396,093 (7,078,721)
Net decrease in cash and cash equivalents (4,823,940) (4,268,902) (13,224,109)
Cash and cash equivalents at beginning of year 9,801,975 14,070,877 27,294,986
Cash and cash equivalents at end of year $ 4,978,035 $ 9,801,975 $ 14,070,877
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Effective in 1992, the Partnership controls the operations of Paradigm and consolidates its ownership interest in Paradigm.
Effective in 1993, the Partnership controls the operations of TCS and as a result consolidated TCS's total assets and total liabilities.
Effective July 1, 1993, the Partnership sold the business and assets of IMPLP and Intelidata.
Effective September 30, 1993, Maryland Cable consummated the sale of the Leesburg System.
See Notes to Consolidated Financial Statements.
ML MEDIA OPPORTUNITY PARTNERS, L.P. CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) FOR THE YEARS ENDED DECEMBER 31, 1993, DECEMBER 31, 1992, AND DECEMBER 31, 1991
General Limited Partner Partners Total
Balance, December 31, 1990 $ 426,234 $ 40,148,014 $ 40,574,248
1991:
Net Loss (792,410) (78,448,615) (79,241,025)
Partners' Deficit at December 31, 1991 $ (366,176) $ (38,300,601) $ (38,666,777)
1992:
Net Loss (383,723) (37,988,627) (38,372,350)
Partners' Deficit at December 31, 1992 $ (749,899) $ (76,289,228) $ (77,039,127)
1993:
Net Loss (343,174) (33,974,245) (34,317,419)
Partners' Deficit at December 31, 1993 $(1,093,073) $(110,263,473) $(111,356,546)
See Notes to Consolidated Financial Statements.
ML MEDIA OPPORTUNITY PARTNERS, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1993, DECEMBER 31, 1992, AND DECEMBER 31, 1991
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ML Media Opportunity Partners, L.P. (the "Partnership"), was formed and the Certificate of Limited Partnership was filed under the Delaware Revised Uniform Limited Partnership Act on June 23, 1987. Operations commenced on March 23, 1988 with the first closing of the sale of units of limited partnership interest. Media Opportunity Management Partners (the "General Partner") is a joint venture, organized as a general partnership under New York law, between RP Opportunity Management, L.P., a limited partnership under Delaware law, and ML Opportunity Management Inc., a Delaware corporation and an indirect wholly- owned subsidiary of Merrill Lynch & Co., Inc. The General Partner was formed for the purpose of acting as general partner of the Partnership. The General Partner's total capital contribution was $1,132,800 at December 31, 1993 which represents 1% of the total Partnership capital contributions.
Pursuant to the terms of the Amended and Restated Agreement of Limited Partnership, the General Partner is liable for all general obligations of the Partnership to the extent not paid by the Partnership. The limited partners are not liable for the obligations of the Partnership in excess of the amount of their contributed capital.
The 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 31, 1993, the Partnership's primary investments consisted of:
90% ownership of Maryland Cable Holdings Corp. ("Holdings"), which wholly-owns Maryland Cable Corp. ("Maryland Cable"), which in turn owns cable television systems serving northern Prince George's County, Maryland (the "Maryland Cable Systems" or the "System");
99% ownership of ML Cable Partners, which holds a participation in the senior bank debt of Maryland Cable (see Note 2);
Ownership of 351,665 shares of common stock (an ownership percentage of approximately 4.2%) of General Cellular Corporation ("GCC"), a cellular telecommunications operator based in California;
51% ownership of TCS Television Partners, L.P. ("TCS"), which owns all the outstanding common stock of TCS Television Inc. which owns all the outstanding common stock of Avant Development Corporation and Fabri Development Corporation which own and operate three network affiliated television stations serving Columbus, Georgia; Terre Haute, Indiana and St. Joseph, Missouri;
100% ownership of WMXN-FM ("WMXN-FM"), a radio station in Norfolk, Virginia;
50% ownership of Paradigm Entertainment, L.P. ("Paradigm"), a Beverly Hills, California company involved in the production of television and cable programming (see Note 13 regarding the allocation of profits and losses) which owns 52% of Bob Banner Associates Development ("BBAD") based upon capital contributions;
36.8% ownership of Media Ventures Investments, Ltd. ("Investments", formerly Media Ventures International Limited, "Media Ventures"), a United Kingdom corporation formed to develop or acquire European media and entertainment companies; and a 13.8% ownership of European Media Partners, Ltd. ("EMP, Ltd.");
100% ownership of the Windsor Systems (the "Windsor Systems" or "Windsor"), cable television systems serving Williamston, North Carolina and surrounding areas.
Basis of Accounting and Fiscal Year
The Partnership's records are maintained on the accrual basis of accounting for financial reporting and tax purposes. The Partnership consolidates its interests in Holdings, WMXN-FM, the Windsor Systems, TCS and Paradigm/BBAD. Investments, EMP, Ltd., and GCC are accounted for on the cost method of accounting. The Partnership carried its 41% interest in TCS under the equity method through March 26, 1993 at which date its ownership interest increased to 51%. The Partnership carried its interest in Investments under the equity method of accounting in 1992 and prior years. The Partnership carried its interest in Paradigm under the equity method of accounting in 1991. The fiscal year of the Partnership shall be the calendar year.
See Note 15 regarding the discontinued operations of IMPLP/IMPI and Intelidata.
Certain 1991 and 1992 items have been reclassified to conform to 1993 presentation for discontinued operations.
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 installations and connections. Subscriber services paid in advance are recorded as income as earned.
Revenues from distribution and television licensing agreements are recognized when films are available for telecasting in accordance within the provisions of Statement of Financial Accounting Standard No. 53.
Production Costs
Film costs are capitalized as incurred. Costs of released productions and residuals are amortized in the proportion that revenue bears to the estimated ultimate revenue for each film.
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:
Buildings 30 years Cable television transmission and distribution systems and related equipment 5-12 years Other 5-7 years
Initial subscriber connection costs, as related 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 charged to operating expense as incurred, and improvements, 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 approximately 20-40 years Franchise life of the franchise Other Intangibles various Deferred Charges 3-10 years
The Partnership periodically evaluates the recoverability of goodwill using consistent objective methodologies. Such methodologies may include recoverability from cash flows, recoverability from operating income, recoverability from net income or fair value determination.
Change in Estimated Useful Life
Concurrent with the write-down in 1991 of intangible assets (goodwill) for Maryland Cable, the estimated useful life of goodwill was changed in the fourth quarter of 1991 from a life of 40 years to a life of 20 years. The effect of this change in accounting estimate was to increase the 1991 amortization expense and net loss by $592,000 ($5.23 per unit of limited partnership interest).
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 corporations which are consolidated in the accompanying financial statements which are taxable entities.
Effective January 1, 1993, the corporations owned by the Partnership adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"). For the corporations owned by the Partnership which are consolidated in the accompanying financial statements, 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, 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 (see Note 12).
Interest Rate Exchange Agreement
The differential to be paid or received on the interest rate exchange agreement is accrued and recognized over the life of the agreement.
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 Maryland Cable's Amended Credit Agreement during 1992 and 1993; however, this interest rate exchange agreement expired in December 1993.
Statement of Cash Flows
Short-term investments which have an original maturity of ninety days or less are considered cash equivalents. Interest paid in 1993, 1992 and 1991 was $10,708,585, $10,192,232 and $9,571,120, respectively.
Statement of Financial Accounting Standards No. 112
In November 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits" ("SFAS No. 112"). This pronouncement, effective in the first quarter 1994, 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 will not be material on the Partnership's financial positions and results of operations.
2. Liquidity
At December 31, 1993, the Partnership had approximately $4,978,035 in cash and cash equivalents, of which $1,456,352 was limited for use at the operating level and $3,521,683 was the Partnership's working capital.
At December 31, 1992, the Partnership had approximately $9,801,975 in cash and cash equivalents, of which $3,132,465 was limited for use at the operating level and $6,669,510 was the Partnership's working capital.
Maryland Cable
Proposed Restructuring
Maryland Cable is currently in default under its bank credit agreement by virtue of its failure to pay the principal amount of its senior bank debt ($85 million prior to excluding the effect of the participation of ML Cable) on maturity on December 31, 1993. As a result of this default of the senior bank debt, there is also a default under the Discount Notes.
On December 31, 1993, the Partnership, Maryland Cable, Holdings and ML Cable Partners entered into an agreement (the "Exchange Agreement") with Water Street Corporate Recovery Fund I, L.P. (the "Water Street Fund") providing for the restructuring of Maryland Cable. The Water Street Fund holds approximately 85% of the outstanding principal amount of the 15-3/8% Senior Subordinated Discount Notes due 1998 (the "Discount Notes") of Maryland Cable, which, as described below, are currently in default. Also, as of December 31, 1993, another holder of the Discount Notes (representing 7% of the outstanding principal amount) joined in the Exchange Agreement.
Pursuant to the Exchange Agreement, the Water Street Fund and the other holders of the Discount Notes would exchange their Discount Notes and their Class B Common Stock of Holdings (see Note 3) for all of the partnership interests of a newly formed limited partnership ("NEWCO") that would acquire all of the assets of Maryland Cable, subject to the liabilities of Maryland Cable. The Partnership would receive an aggregate of $2,670,000 in satisfaction of the $3,600,000 in Subordinated Promissory Notes held by the Partnership, plus accrued interest of approximately $2.7 million, and the $5,379,833 in deferred management fees payable to the Partnership, and $100 for its Common Stock of Holdings. ML Cable Partners, which is 99% owned by the Partnership, would receive payment in full of the $6,830,000 participation that it holds in the senior bank debt of Maryland Cable (see Note 6). In addition, the Partnership would be paid at closing a management fee for managing the Maryland Cable Systems from January 1, 1994 to the date on which all the terms of the Exchange Agreement are satisfied, based on the gross revenues of the Systems during that period. If, prior to the satisfaction of all of the terms of the Exchange Agreement, holders of the Discount Notes transfer a majority of the outstanding principal amount of the Discount Notes, the Partnership would receive an additional payment equal to 5% of the amount by which the Value (as defined) of the Systems exceeds $180,000,000. The Exchange Agreement also provides for a payment of $500,000 to MultiVision (see Note 7)in settlement of severance and other costs relating to the termination of MultiVision as manager.
The Exchange Agreement is subject to numerous conditions, including approval by the holders of at least 99% of the aggregate principal amount of the Discount Notes, the consent of the franchising authorities and the Federal Communications Commission and to the transfer of the Systems to NEWCO, NEWCO borrowing $100,000,000 to be used to repay Maryland Cable's senior bank debt, and the agreement from the holders of the senior bank debt to accept payment of the principal amount of the senior bank debt and accrued interest thereon, and no additional fees, interest or other payments for agreeing to extend the maturity of the senior bank debt beyond December 31, 1993.
As of March 10, 1994, the requisite approvals from the holders of the Discount Notes and the senior bank debt had not been received. As a result, as provided in the Exchange Agreement, on March 10, 1994, Maryland Cable and Holdings filed a consolidated plan of reorganization of Maryland Cable and Holdings (the "Prepackaged Plan") under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court-Southern District of New York. This filing included a "Prepackaged Plan", to which the requisite majority of all impaired creditors other than the holders of the senior debt had consented. Under the Prepackaged Plan, the Partnership would receive materially the same aggregate consideration as it would receive under the terms of the Exchange Agreement.
The Prepackaged Plan filed differs from the Exchange Agreement most significantly in the treatment of the secured bank debt of Maryland Cable. Under the Prepackaged Plan, each holder of Maryland Cable's bank debt would receive deferred cash payments pursuant to newly issued promissory notes in a principal amount equal to their proportionate share of the total bank debt, bearing interest at the same rate as provided for in the original Amended Credit Agreement with a maturity date of December 31, 1998 (the original maturity date under the Amended Credit Agreement). Maryland Cable and the agent for the holders of Maryland Cable's bank debt are currently negotiating revised terms for these newly issued promissory notes, however, there is no assurance that Maryland Cable and the agent will reach agreement on these terms. The Exchange Agreement provided for a forbearance by the holders of the bank debt under the Amended Credit Agreement and the refinancing or repayment of all outstanding bank debt obligations upon closing.
There is no assurance that the Prepackaged Plan as filed will be approved or that the proposed restructuring described in the Prepackaged Plan will be consummated.
On January 18, 1994, as a result of the defaults under the senior bank debt, the holders of the senior bank debt exercised their rights under events of default to collect Maryland Cable's lockbox receipts and apply such receipts towards the repayment of the outstanding senior bank debt, related accrued interest, and fees and expenses. As of March 9, 1994, one day prior to the filing of the Prepackaged Plan, the holders of the senior bank debt applied approximately $4,800,000 in lockbox receipts towards the repayment of the outstanding senior bank debt, related accrued interest, and fees and expenses.
The Partnership is currently unable to determine the impact of the February 22, 1994 FCC action and previous FCC actions on the Prepackaged Plan (see below).
Impact of Cable Legislation
The future liquidity of the Partnership's cable operations, Maryland Cable and Windsor, is likely to be negatively affected by recent and ongoing changes in legislation governing the cable industry. The potential impact of such legislation 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 imposes significant new regulations on the cable television industry. The 1992 Cable Act required the development of detailed regulations and other guidelines by the FCC, most of which have now been adopted but remain subject to petitions for reconsideration before the FCC and/or court appeals.
On May 3, 1993, the FCC released a Report and Order relating to the regulation of rates for certain cable television programming services and equipment. These rules establish certain benchmarks which will enable local franchise authorities to require rates for "basic service" (minimally, 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. Several other key matters are still pending before the FCC that will ultimately shape and complete this new regulatory framework for cable industry rates. For example, in a complicated multi-faceted document released on August 27, 1993, the FCC simultaneously: (1) issued a First Order on Reconsideration of the foregoing May 3 rate order (confirming or clarifying certain benchmark rate methodology issues); (2) adopted a Second Report and Order (deciding to continue to include systems with less than 30% penetration in the universe of systems whose rates were used to establish benchmarks, a decision that, if unchanged, avoids a potentially downward adjustment of the previously announced benchmark rates); and (3) issued a Third Notice of Proposed Rulemaking (addressing such "going forward" issues as how cable rates should be modified when channels are added or deleted, how costs incurred for rebuilds should be treated, and whether cable operators should be required to use the same methodology to determine rates for both basic and expanded basic tiers). In addition, a separate yet related rulemaking proceeding was initiated by the FCC on July 16, 1993 to establish the proposed standards and certain other ground rules for cost-of-service showings by cable operators seeking to justify cable rates in excess of the FCC prescribed benchmark/price cap levels. While continuing to express a strong preference for its benchmark approach, the FCC's "Notice of Proposed Rulemaking" in this proceeding outlines an alternative regulatory scheme that would combine certain elements of traditional ratebase/rate of return regulation with a more streamlined approach uniquely tailored to the cable industry. Comments in response to both the Third Notice of Proposed Rulemaking and the separate cost-of-service rulemaking were received by the FCC on or before October 7, 1993. In the meantime, the FCC's overall cable service rate regulation rules took effect on September 1, 1993, and the industry-wide freeze on rates for regulated cable service remains in effect until May 15, 1994. Furthermore, by Order released September 17, 1993, the FCC initiated an industry-wide survey of cable rate changes and service restructuring as of the starting date of its rate freeze (April 5, 1993) and the effective date of rate regulation (September 1, 1993) in order to gauge the early effectiveness of its cable rate regulations. The results of this survey, which could further impact rate regulation actions by the FCC, were announced on February 22, 1994 (see below).
In addition to the rate reregulation described above, among other things, the 1992 Cable Act provides that certain qualified local television stations may require carriage by cable operators, or elect to negotiate for payment of fees or other forms of compensation by the cable operator to the stations in exchange for allowing retransmission of their signals. The deadline for making such elections was June 17, 1993. Negotiations between cable operators and those television stations which elected to pursue retransmission agreements were carried out between the foregoing election date and October 6, 1993, the deadline under the 1992 Cable Act for obtaining retransmission consent. If some type of agreement (either final or interim pending further negotiations) was not reached by October 6, 1993, cable operators could have been forced to discontinue carriage of those television stations which elected to pursue retransmission consent (see below).
On February 22, 1994, the FCC adopted a series of additional measures that expand and substantially alter its cable rate regulations. Based on FCC news releases dated February 22, the FCC's major actions include the following: (1) a modification of its benchmark methodology in a way which will effectively require 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. Several weeks earlier, and partly in anticipation of these actions, the FCC extended its industry- wide freeze on rates for regulated cable services until May 15, 1994. It is expected that the new benchmark standards and cost- of-service rules will become effective prior to the current termination date of the rate freeze.
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. Now, when assessing the appropriate regulatory treatment of a-la-carte packages, the FCC will 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 will 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 will be treated as regulated tiers, and operators engaging in such practices may be subject to forfeitures or other sanctions by the FCC.
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.
The Partnership is currently unable to assess the full impact of the 1992 Cable Act upon its business prospects or future financial results. However, the rate reductions mandated by the FCC in May of 1993, have had, and will most likely continue to have a detrimental impact on the revenues and profits of the Partnership's cable television operations. Although the impact of the 1992 Cable Act cannot yet be ascertained precisely, once fully implemented, certain aspects of the new law may have a material negative impact on the financial condition, liquidity, and value of the Partnership.
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 cable properties, 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. In addition, pursuant to the 1992 Cable Act, revenue from secondary outlets and from remote control units was eliminated or reduced significantly. The Partnership took certain actions to seek to defray some of the resulting revenue declines, which among others included 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 Partnership's cable systems, the rate regulation required by the 1992 Cable Act had a detrimental impact on the revenues and profits of the Partnership's cable systems. In addition, the Partnership is currently unable to determine whether its a-la-carte restructuring is in accordance with the terms of the February 22, 1994 FCC action. The further rate reduction mandated by the February 22, 1994 FCC action and any limits imposed by such action on a-la-carte pricing are likely to have a further detrimental impact on those revenues and profits.
By the October 6 deadline (noted above), the Partnership's Maryland Cable Systems and Windsor Systems had reached agreement with all broadcast stations within their service areas electing retransmission consent. In some cases, these agreements obligate the Maryland Cable Systems and the Windsor Systems to carry additional programming services affiliated with the broadcast stations. The costs of these additional program services will not be material to the operations of the Maryland Cable Systems or the Windsor Systems.
WMXN-FM
During 1993, WMXN-FM generated sufficient revenues to cover its operating costs (before management fees).
The Partnership entered into an Option Agreement, effective January 25, 1994, with U.S. Radio, Inc. ("U.S. Inc."), a Delaware corporation, and an affiliated entity, U.S. Radio, L.P. ("U.S. Radio"), a Delaware limited partnership, neither of which is affiliated with the Partnership. Pursuant to the Option Agreement, the Partnership granted U.S. Inc. an option (the "Call") to purchase substantially all of the assets of WMXN-FM (the "Assets") for a cash price of $3.5 million at any time prior to January 15, 1995. Also pursuant to the Option Agreement, U.S. Inc. granted the Partnership the option (the "Put") to sell the Assets to U.S. Inc. for a cash price of $3.5 million at any time (a) within 30 days after the expiration of the Call or (b) within 30 days of the termination by the Partnership of the LMA (see below) as a result of a material breach of the LMA by U.S. Radio. If the Call or Put is exercised, the Partnership and U.S. Inc. will immediately revise as necessary and execute an Asset Purchase Agreement which is an exhibit to the Option Agreement. If the Call or Put is timely exercised but U.S. Inc. fails to execute the Asset Purchase Agreement, then, subject to certain conditions, the Partnership may elect to cause U.S. Radio to sell its radio stations WOWI- FM, in Norfolk, Virginia, and WSVY-AM in Portsmouth, Virginia, together with WMXN-FM (collectively, the "Stations"), with the first $3.5 million of proceeds, less transaction costs, from such sale to be retained by the Partnership. The acquisition of WMXN-FM by U.S. Inc., and/or the sale of the Stations, is subject to the prior approval of the FCC. There can be no assurance that the sale of WMXN-FM or the sale of the Stations will be consummated.
Effective January 31, 1994, the Partnership entered into a Time Brokerage Agreement (the "LMA") with U.S. Radio. The LMA calls for the Partnership to make broadcasting time available on WMXN- FM to U.S. Radio and for U.S. Radio to provide radio programs to be broadcast on WMXN-FM, subject to certain terms and conditions, including the rules and regulations of the FCC. In exchange for providing broadcasting time to U.S. Radio, the Partnership will receive a monthly fee approximately equal to its cost of operating WMXN-FM. The LMA will continue until the earlier of: (i) March 1, 1995 (if neither the Call nor Put has been exercised); (ii) the consummation of the acquisition of WMXN-FM by U.S. Inc. pursuant to the Option Agreement; or (iii) the consummation of a joint sale of the Stations.
The Partnership may choose to advance additional funds to WMXN- FM if any are required; however, the Partnership has no obligation to advance any additional funds to WMXN-FM and WMXN- FM has no borrowed funds.
TCS
As of December 31, 1993, TCS was in default of covenants under the note agreements (see Note 6) and failed to make a scheduled principal payment of $500,000 due February 28, 1994. In addition, TCS expects to default on the majority of its scheduled principal payments for the remainder of 1994 as well as in 1995. TCS is engaged in negotiations with its note holders, although the outcome of these negotiations cannot be predicted at this time. While TCS remains in default, the note holders have the option to exercise their rights under the notes, which rights include the right to foreclose on the assets of TCS, but not the other assets of the Partnership.
During the final quarter of 1992, TCS concluded that there had been an impairment of the value of the enterprise and, as a result, wrote-down its intangible assets (goodwill) by a total of $6 million, which resulted in the Partnership's $2,460,000 share of this write-down.
See Note 13 for further discussion related to TCS.
Paradigm/BBAD
Paradigm and/or BBAD are not currently producing a sufficient number of television programs to cover overhead costs indefinitely, although the Partnership has not advanced any funds to Paradigm and/or BBAD since the second quarter of 1992. Paradigm and/or BBAD have taken several steps to reduce operating costs, primarily by reducing the number and compensation of employees. However, Paradigm and/or BBAD did not operate profitably during 1993, and are currently dependent on outside sources, primarily Associates, to finance Paradigm's and/or BBAD's monthly operating costs. The Partnership has elected not to fund such operating costs. The Partnership has no obligation to advance any additional funds to Paradigm and/or BBAD and actively sought a strategic partner that would share in meeting Paradigm's and/or BBAD's potential future funding needs, but was unable to identify such a partner. Paradigm and/or BBAD have no liability for borrowed funds. Registrant is negotiating with Associates the terms of an agreement under which Paradigm would retain the three television movies and the series developed by it, and the other projects and program concepts developed by Paradigm and/or BBAD would be assigned to Associates, and Paradigm would retain a percentage interest in all such projects and concepts. In any event, the Partnership will most likely recover only a nominal portion, if any, of its original investment in Paradigm and/or BBAD. Due in part to the Partnership's unwillingness to advance additional funds to fund the continuing operating losses and possible winding down of Paradigm's and BBAD's operating activities, the Partnership recorded in the second quarter of 1993 a writedown of approximately $516,000 of certain assets of Paradigm and BBAD to reduce the Partnership's net investment to a net realizable value of zero. (see Note 13 for further discussion).
Windsor
The Partnership must make equal monthly payments of principal and interest on the ten-year Windsor Note (see Note 6) issued in connection with the acquisition of Windsor. The outstanding principal balance of the Windsor Note as of December 31, 1993 was $1,981,654. In July, 1992, the Partnership began making monthly payments on the Windsor Note which were sufficient to pay all interest due; however, those payments were not sufficient to pay all of its scheduled monthly installments of principal; the Partnership is therefore in default of the Windsor Note. On June 23, 1992, the holder of the Windsor Note gave the Partnership notice of default, and informed the Partnership that it has the ability to accelerate the maturity of the indebtedness and foreclose on the assets of Windsor (but not the other assets of the Partnership). During 1993, Windsor's operations did not generate sufficient cash to service fully its scheduled installments on the Windsor Note. The Partnership does not anticipate advancing any funds to Windsor.
On November 16, 1993, the Partnership entered into an Asset Purchase Agreement with Tar River Communications, Inc. ("Tar River") to sell the assets of the Windsor Systems to Tar River for a base purchase price of $3,240,000, subject to adjustment based on the number of subscribers to the Windsor Systems on the Closing Date and the accounts receivable and accounts payable of the systems on the Closing Date. The sale is subject to various conditions, including consent from the franchising authorities and extensions of the franchises for the Windsor Systems until 10 years after the Closing Date. The closing is currently expected to occur in mid-1994.
The Partnership is currently unable to determine the impact of the February 22, 1994 FCC action and previous FCC actions on the sale of the Windsor systems or the potential timing of such a sale. However, as discussed above, the FCC actions have had, and will have, a detrimental impact on the revenues and profits of the Windsor systems.
Investments and EMP, Ltd.
As of December 31, 1993, Registrant had advanced approximately $2 million to Investments.
During 1993, EMP, Ltd. and its affiliates continued to distribute television programs. On July 30, 1993, EMP, Ltd. sold its Neomedion shares back to Charles Dawson, while Charles Dawson sold his shares in EMP, Ltd. back to Clarendon. The stock of Neomedion is now controlled 75% by Charles Dawson and 25% by Investments. In addition, after the exchange of shares, EMP, Ltd. was owned 13.8% by the Partnership, 45.6% by Clarendon, and 40.6% by ALP Enterprises.
Investments, EMP, Ltd. and their affiliates are, currently, reliant on their cash balances and/or additional funding from ALP Enterprises or other, as yet unidentified, financing sources to fund their continuing operations. Furthermore, the Partnership expects to advance no further funds to Investments, EMP, Ltd., or their affiliates beyond those funds already advanced. If Investments, EMP, Ltd. and their affiliates are unable to support their operations from current cash balances and/or additional funding from ALP Enterprises or other, as yet unidentified, financing sources, Investments and EMP, Ltd. might be forced to cease their operations. In any event, it is unlikely the Registrant will recover its $2 million investment in Investments. Investments, EMP and EMP, Ltd. have no liability for borrowed funds (see Note 13 for further discussion).
Summary
In summary of the Partnership's liquidity status, of the approximately $3.5 million that the Partnership has available for working capital, a portion may be utilized to support anticipated funding needs, or possible restructurings, as appropriate, of Maryland Cable, TCS and its other investments. The Partnership has no contractual commitment to advance funds to any of these investments except for the commitments described below.
The Partnership, in the appropriate circumstances, will consider utilizing its working capital to fund cash shortfalls or to restructure the debt of certain of its investments. The Partnership is also pursuing the sale of certain investments. Any additional use of the Partnership's working capital to support its existing investments is at the discretion of the Partnership except for commitments made by the Partnership for certain obligations of Maryland Cable (to the extent that Maryland Cable does not discharge those obligations). Although the Partnership has sufficient funds to meet these commitments, it does not have sufficient cash to meet all of the contractual obligations of Maryland Cable, nor does it have sufficient cash to fund indefinitely the cash shortfalls of certain of its other investments. In addition, the recent regulatory changes affecting the cable television industry will likely have a material negative impact on the Partnership's liquidity status.
3. MINORITY INTEREST
Maryland Cable
The Partnership owns all of the capital stock of Holdings exclusive of the Class B Common Stock (see Notes 2 and 6). The minority interest represents public ownership of the 2,000,000 outstanding shares of Class B Common Stock of Holdings.
Unless prohibited by certain defined events in the Amended Credit Agreement (see Note 6) and the indenture for the Discount Notes, Holdings will be required, within 90 days after November 15, 1994, to offer to repurchase for cash all Class B Common Stock and underlying Common Stock then outstanding in either (i) a single repurchase transaction or (ii) three annual repurchase transactions, in the first two of which it will offer to purchase one-third of the Class B Common Stock and underlying Common Stock outstanding on November 15, 1994, and in the third of which it will offer to purchase all Class B Common Stock and underlying Common Stock then outstanding. The purchase price in each repurchase transaction will be based on the then independently appraised value of the Common Stock.
See Note 2 regarding possible effects of the proposed restructuring of Maryland Cable on the Class B Common Stock.
The minority interest on the balance sheets of the Partnership as of December 31, 1993 and December 31, 1992 is zero for Maryland Cable due to the recognition of losses of minority ownership interests reflected in the prior years.
Paradigm/BBAD
The Partnership's consolidated financial statements include 100% of the assets, liabilities and results of operations of Paradigm and its affiliate, BBAD. The Partnership owns a 50% ownership interest in Paradigm and owns approximately 52% in BBAD through Paradigm based upon capital contributions. The remaining approximate 48% in BBAD is owned by Bob Banner Associates, an entity which is not otherwise affiliated with the Partnership except as a 25% limited partner in Paradigm. The Partnership's net loss was decreased by approximately $518,000 and $429,000 for the years ended December 31, 1993 and December 31, 1992 as a result of the minority interest in BBAD.
TCS
As discussed further in Note 13, on March 26, 1993, the Partnership's total ownership interest in TCS increased to 51% and thus the Partnership has included TCS in the consolidated financial statements as of December 31, 1993.
No minority interest has been recorded for the period or as of December 31, 1993 due to cumulative losses which have been incurred and the lack of an obligation on the part of the minority shareholder to fund such losses.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
December 31, December 31, 1993 1992
Land $ 3,109,182 $ 1,966,500 Buildings 8,648,074 2,237,387 Cable distribution systems and equipment 78,594,897 68,175,710 Other 3,394,735 2,733,750 93,746,888 75,113,347 Less accumulated depreciation (42,681,054) (24,821,936) Property, plant and equipment, net $51,065,834 $50,291,411
Certain 1993 items include the effects of the consolidation of TCS as of March 26, 1993.
5. INTANGIBLE ASSETS
Intangible assets consisted of the following:
December 31, December 31, 1993 1992
Goodwill $190,736,257 $153,701,951 Franchise Rights 13,251,181 6,445,241 Other 3,348,813 611,205 207,336,251 160,758,397 Less accumulated amortization (85,360,574) (63,989,829) Intangible assets, net $121,975,677 $ 96,768,568
Certain 1993 items include the effects of the consolidation of TCS as of March 26, 1993.
6. BORROWINGS
At December 31, 1993 and December 31, 1992 the aggregate amount of borrowings reflected on the balance sheets of the Partnership is detailed as follows:
December 31, December 31, 1993 1992 A) Amended Credit Agreement/Maryland Cable Loan Agreement $ 78,236,097 $ 87,265,408 B) Senior Subordinated Discount Notes 162,406,000 142,740,377 C) Windsor Note 1,981,654 2,106,942 D) Senior Secured Note-TCS 31,323,000 - (1) E) Senior Subordinated Secured Note-TCS 11,326,804 - (1) F) Senior Secured Fee Note-TCS 350,000 - (1) Total $285,623,555 $232,112,727
(1) The Partnership accounted for its interest in TCS under the equity method of accounting in 1992.
A) See Note 2 regarding principal payment defaults under, and the restructuring of, Maryland Cable's debt.
In connection with the financing of the acquisition of its cable operation, Maryland Cable entered into a credit agreement on November 4, 1988 with a group of financial institutions led by Citibank, N.A. ("the Maryland Cable Loan Agreement"). As a result of Maryland Cable's inability to make scheduled payments under this agreement, on September 6, 1991 Maryland Cable entered into an Amended and Restated Credit Agreement (the "Amended Credit Agreement") relating to its outstanding senior indebtedness of $92,500,000. Under the Amended Credit Agreement, Maryland Cable's senior lenders waived all defaults under the original Maryland Cable Loan Agreement, changed the maturity date of the loan from September 30, 1998 to December 31, 1993, limited mandatory principal payments due prior to maturity to quarterly installments of $250,000 commencing March 31, 1993, required interest to be paid quarterly until June 1992 and monthly thereafter, and revised certain financial and operating covenants. The loans under the Amended Credit Agreements are secured by liens on essentially all of Maryland Cable's assets and are guaranteed by Holdings, whose guarantee is secured by a pledge of all of Maryland Cable's stock. During 1993 Maryland Cable paid interest at rates equal to 1.25% over Citibank's base rate or 2.25% over LIBOR with respect to $77,500,000, and 3% over Citibank's base rate or 4% over LIBOR with respect to $15,000,000 of its outstanding senior indebtedness subject to its obligations under the interest rate exchange agreement described below.
The Amended Credit Agreement also provided for the conversion to a note (the "Default Interest Note") of $1,595,408 in default interest that had been incurred as of September 6, 1991. Interest accrued on the Default Interest Note at the rate of 1.25% over Citibank's base rate until September 30, 1993, when the obligation was discharged upon the sale of the Leesburg Systems (see Note 14). The amount of debt forgiven and related accrued interest was amortized as a reduction of interest expense over the remaining life of the Amended Credit Agreement (through December 31, 1993). The obligation had been scheduled to become due on December 31, 1993.
The Amended Credit Agreement generally restricts Maryland Cable's abilities regarding investments, dispositions, additional indebtedness, mergers, consolidations, cash distributions and capital expenditures. Borrowings under the Amended Credit Agreement are collateralized by substantially all of the assets of Maryland Cable.
In connection with the Amended Credit Agreement, Holdings issued Warrants to its senior lenders that are exercisable at any time prior to December 31, 1998 for up to 10% of Holdings' common stock (on a fully-diluted basis) and have antidilution protection. The Warrants are exercisable prior to a restructuring for nominal consideration and after a restructuring for an amount determined pursuant to an agreed formula.
The Warrants and the common stock issuable upon exercise of the Warrants may be put to Holdings any time after December 31, 1993 or upon certain major corporate events (such as a change of control, a disposition of a substantial amount of Maryland Cable's assets or a repayment of all obligations under the Amended Credit Agreement) and may be called by Holdings upon or after a repayment of all obligations under the Amended Credit Agreement. The price payable upon exercise of a put or a call will be equal to the fair market value of the common stock issued or issuable upon exercise of the Warrants, except that prior to December 31, 1993 the price was to be determined on the basis of an agreed formula.
On September 6, 1991, the Partnership advanced $6,761,700 to ML Cable, an affiliate controlled by the Partnership, which then purchased a $6,830,000 participation in the Maryland Cable loan from Maryland Cable's senior lenders.
On December 31, 1988, Maryland Cable entered into a three- year interest rate exchange agreement on a notional amount of $27 million under which Maryland Cable received LIBOR and paid a fixed rate of 9.69%. Maryland Cable also entered into a five-year interest rate exchange agreement on a notional amount of $40 million under which Maryland Cable received LIBOR and paid a fixed rate of 9.745%. In part due to these agreements, the effective interest rate on the borrowings under the Amended Credit Agreement was approximately 5.9% in 1993, 9.15% in 1992 and 11.85% in 1991.
B) See Note 2 regarding defaults under and the restructuring of Maryland Cable's debt.
In connection with the financing of the acquisition of its cable operation, Maryland Cable issued approximately $77.5 million of Discount Notes. The Discount Notes will mature on November 15, 1998 with a maturity value of $162,406,000. Semi-annual interest payments are due on each May 15 and November 15, commencing May 15, 1994 at the rate of 15-3/8% per annum. No interest accrued on the Discount Notes until November 15, 1993 other than amortization of the original issue discount which results in an effective interest rate of 15-3/8%. On November 15, 1993, the Discount Notes became redeemable at the option of Maryland Cable, in whole or in part, initially at 104% of the principal amount, then declining 2% each year, ratably, to 100% of the principal amount on or after November 15, 1995, plus accrued interest to the date of redemption. The Discount Notes are subordinate to obligations under the Amended Credit Agreement.
No dividends have been paid by Maryland Cable to Holdings. Such dividends are currently prohibited by the terms of the Amended Credit Agreement and restricted by the indenture for the Discount Notes.
C) In connection with the acquisition of the Windsor Systems, the Partnership issued a note to the seller (the "Windsor Note") for $3,030,000. The Windsor Note is payable over a ten-year period in equal monthly installments of principal and interest, bearing interest at a rate of 9% per annum. Payments under the Windsor Note are collateralized solely by a security interest in the assets of the Windsor Systems. See Note 2 for information regarding defaults under the Windsor Note and information regarding the potential sale of the Windsor Systems.
D-E-F)On June 1, 1990, TCS entered into note purchase agreements, with a group of insurance companies, which provided for senior secured borrowings of $35 million (the "Senior Secured Notes") and subordinated secured borrowings of $10 million (the "Subordinated Notes"). These commitments, as restructured (see below), require mandatory payments each year until 1997. The agreements contain covenants that include requirements to maintain certain financial tests and ratios (including notes to cash flow ratio and interest to cash flow ratio) and restrictions and limitations on capital expenditures, sale of assets, consulting fees, corporate overhead, investments, and leases.
TCS also entered into a security and pledge agreement dated as of June 1, 1990 with a bank, whereby it is a condition to the purchaser's obligation under the note purchase agreements that TCS grant to the security trustee a security interest in and lien upon (i) all of the capital stock of each corporation which owns or operates one or more stations and (ii) all of TCS's present and future right, title and interest in the subsidiary notes, to secure TCS's indenture obligations.
On December 14, 1992, TCS negotiated agreements to amend its note agreements. TCS had been unable to generate sufficient funds from operations to fully meet its obligations under its note purchase agreements. The Senior Secured Notes and the Subordinated Notes were amended to reschedule principal payments. In addition, the amended agreements contain certain options for required prepayments and restrictions requiring excess cash to be paid based upon a calculation outlined within the agreements. As payment for a transaction fee, the senior lenders were issued additional notes due May 31, 1997, in the amount of $350,000 (the "Senior Secured Fee Notes"). Also, upon sale of the TCS stations or retirement of the debt, the subordinated lenders will receive compensation equal to 20% (or 25% in some circumstances) of the value of the assets of TCS after subtracting all outstanding debt. All previous defaults under the Senior Secured Notes and the Subordinated Notes were waived.
Under the amended note agreements, the Senior Secured Notes and the Senior Secured Fee Notes accrue interest at the rate of 10.69% per annum payable on the last day of February, May, August and November. However, TCS has the option to defer payment of interest on the Senior Secured Fee Notes until May 31, 1997. All deferred interest will be compounded quarterly at the stated rate of 10.69%. In addition, the amended loan agreement required accrued interest due through December 14, 1992 on the Subordinated Note of $1,326,804 to be reclassified into the original Subordinated Note amount of $10,000,000. The restated Subordinated Note total of $11,326,804 will accrue interest at the rate of 12.69% per annum compounded quarterly on the 15th of March, June, September and December until either certain conditions are met (refer to amended note agreement for specific conditions), or until December 15, 1995.
See Note 2 regarding defaults under the amended TCS loan agreements.
At December 31, 1993, the annual aggregate amounts of principal payments required for the borrowings reflected in the consolidated balance sheet of the Partnership are, unless accelerated as discussed in Note 2, as follows:
Year Ending Principal Amount
1994 $ 81,195,584 1995 2,656,047 1996 5,589,447 1997 33,625,783 1998 162,556,694 Thereafter - TOTAL $285,623,555
Based upon the restrictions of debt as described above, approximately $183 million of assets are restricted from distribution by the entities in which the Partnership has an interest.
7. TRANSACTIONS WITH THE GENERAL PARTNER AND ITS AFFILIATES
During the years ended December 31, 1993, 1992, and 1991, the Partnership incurred the following expenses in connection with services provided by the General Partner and its affiliates:
Year Ended Year Ended Year Ended December 31, December 31, December 31, 1993 1992 1991
Media Opportunity Management Partners (General Partner):
Partnership Management fee $ 838,205 $ 814,582 $ 790,089 Property Management fee 2,235,212 2,172,217 2,106,904 $3,073,417 $2,986,799 $2,896,993
In addition, the Partnership, through the Windsor Systems and Maryland Cable, entered into an agreement with Multivision, an affiliate of the General Partner, whereby Multivision provided the Windsor Systems (through June 29, 1992) and Maryland Cable with certain administrative services. The reimbursed cost to the Windsor Systems and Maryland Cable for these services amounted to $977,414 for the year ended December 31, 1993, $936,356 for the year ended December 31, 1992 and $900,674 for the year ended December 31, 1991. These costs do not include programming costs that are charged to the Windsor Systems and Maryland Cable under a cost allocation agreement. Effective June 30, 1992, the Partnership entered into a management agreement with Cablevision Systems Corporation, which is not affiliated with the Partnership, to manage the day-to-day operations and maintain the books and records of the Windsor Systems. These responsibilities are subject to the direction and control of the General Partner.
The total customer base managed by MultiVision declined significantly during 1992 as a result of divestitures by companies other than the Partnership, which had utilized the managerial services of MultiVision, leading to slightly higher programming prices for all its managed systems, including the Maryland Cable and Windsor Systems.
8. SUMMARIZED FINANCIAL INFORMATION OF EQUITY AFFILIATES
The following table presents summarized financial information on a combined basis of the Partnership's investments that were accounted for by the equity method. Amounts presented include the amounts of Investments (for 1991 and 1992 only), the accounts of Paradigm (for 1991 only) and TCS (for 1991, 1992 and through March 26, 1993).
At December 31, 1993, TCS and Paradigm are consolidated in the accompanying financial statements and Investments is accounted for using the cost method. See Note 13 for further information. Summary Income Statements:
Year Ended Year Ended Year Ended December 31, December 31, December 31, 1993 1992 1991
Net Revenues $ 3,138,783 $ 13,619,640 $ 16,958,033 Costs and Expenses (4,667,568) (24,807,219) (25,053,592) Net Loss $ (1,528,785) $(11,187,579) $ (8,095,559)
Partnership's equity in net losses:
A. Paradigm $ - $ - $ (2,505,588) B. Investments - (227,164) (624,691) C. TCS (1,288,838) (4,493,770) (2,035,765) Total Partnership's equity in net losses $ (1,288,838) $ (4,720,934) $ (5,166,044)
Summary Balance Sheets: As of December 31,
Total Assets $49,267,987
Total Liabilities $49,695,656
Total Deficit $ (427,669)
Partnership's Investment:
A. Paradigm $ - B. Investments (42,173) C. TCS (634,538) Total Partnership's Investment in joint ventures $ (676,711)
9. SEGMENT INFORMATION
The following analysis provides segment information for the main industries in which the Partnership consolidates its operations. The Cable Television Systems segment consists of the Windsor Systems and Holdings. The Television and Radio Stations segment consists of TCS (commencing as of March 26, 1993) and WMXN-FM. The Production segment consists of Paradigm (commencing in 1992). The Business Information Services segment consisted of IMPLP and Intelidata (see Note 15).
Television Cable and Television Radio Systems Stations Production Total
Operating Revenue $ 44,726,689 11,829,273 5,897,923 $ 62,453,885
Operating expenses before gain on sale of assets 45,560,189 11,677,753 7,207,351 64,445,293 Gain on sale of assets (3,952,407) -- -- (3,952,407) Operating Income (Loss) 3,118,907 151,520 (1,309,428 1,960,999 )
Plus: depreciation and 16,110,905 2,265,324 20,715 18,396,944 amortization
Operating income (loss) before
depreciation 19,229,812 2,416,844 (1,288,713 20,357,943 and )
amortization
Less:
depreciation and (16,110,905) (2,265,324) (20,715) (18,396,944)
amortization Operating Income $ 3,118,907 $ 151,520 $(1,309,428 1,960,999 (Loss) )
Interest Income 209,825 Interest Expense (32,469,947) Partnership General Expenses, net (2,456,297)
Television Cable and Television Radio Systems Stations Production Total
Continued
Equity in loss of joint ventures (1,288,838) Minority in interest share of subsidiary net loss 518,103 Loss from
discontinued operations (Business Information Services (791,264) segment)
Net Loss $(34,317,419 )
Identifiable Assets $137,017,141 $48,598,880 $ 185,269 $185,801,290
Partnership Assets 5,349,334 Total $191,150,624
Capital $ 5,331,099 $ 591,454 $ 20,349 $ 5,942,902 Expenditures
Depreciation and $ 16,110,905 $ 2,265,324 $ 20,715 18,396,944 Amortization Partnership 440,913 Amortization Total $ 18,837,857
Cable Television Systems Radio Station Production
Operating Revenue $ 42,668,337 $1,729,175 $ 7,746,380
Operating expenses 43,160,325 2,594,088 8,827,869 Operating loss (491,988) (864,913) (1,081,489)
Plus: depreciation and amortization 15,761,314 332,757 23,871
Operating income (loss) before depreciation and amortization 15,269,326 (532,156) (1,057,618) Less: depreciation and amortization (15,761,314) (332,757) (23,871) Operating Loss $ (491,988) $ (864,913) $(1,081,489)
Interest Income Interest Expense Partnership General Expenses, net Equity in loss of joint ventures Minority interest in consolidated joint ventures Loss from discontinued operations (Business Information Services segment) Net Loss Identifiable Assets $152,255,256 $2,689,446 $ 5,539,377 Partnership Assets Total
Capital Expenditures $ 4,551,563 $ 20,048 $ 165,104
Depreciation and Amortization $ 15,761,314 $ 332,757 $ 23,871 Partnership Amortization Total
Total
1992 Continued
Operating Revenue $ 52,143,892 Operating expenses 54,582,282 Operating loss (2,438,390)
Plus: depreciation and amortization 16,117,942
Operating income (loss) before depreciation and amortization 13,679,552 Less: depreciation and amortization (16,117,942) Operating Loss $(2,438,390)
Interest Income 517,769 Interest Expense (28,104,963) Partnership General Expenses, net (2,097,622) Equity in loss of joint ventures (4,720,934) Minority interest in consolidated joint ventures 479,532 Loss from discontinued operations (Business Information Services segment) (2,007,742) Net Loss $(38,372,350)
Identifiable Assets 160,484,079 Partnership Assets 9,293,863 Total $169,777,942
Capital Expenditures $ 4,736,715
Depreciation and Amortization 16,117,942 Partnership Amortization 430,898 Total $ 16,548,840
Cable Television Systems Radio Total Station
Operating Revenue $ 41,056,426 $ 985,428 $ 42,041,854
Operating expenses before write-down of Maryland Cable 39,643,000 4,760,155 44,403,155 Write-down of Maryland Cable 40,000,000 - 40,000,000 Operating Loss (38,586,574) (3,774,727) (42,361,301)
Plus: depreciation and amortization 12,756,853 2,481,837 15,238,690
Operating loss income before depreciation and amortization (25,829,721) (1,292,890) (27,122,611) Less: depreciation and amortization (12,756,853) (2,481,837) (15,238,690) Operating Loss $(38,586,574 $(3,774,727) (42,361,301) )
Interest Income 1,247,852 Interest Expense (29,697,998) Partnership General Expenses, net (1,917,971) Equity in loss of joint ventures (5,166,044) Loss from discontinued operations (Business Information Services segment) (1,345,563) Net Loss $(79,241,025 )
Cable Television Systems Radio Total Station
Continued
Identifiable Assets $163,526,466 $ 3,116,499 $166,642,965
Partnership Assets 20,418,239
Total $187,061,204
Capital Expenditures $ 4,956,315 $ 245,463 $ 5,201,778
Depreciation and Amortization $ 12,756,853 $ 2,481,837 15,238,690
Partnership Amortization 110,413
Total $ 15,349,103
10. Investment in General Cellular Corporation
On May 24, 1989, the Partnership entered into a subscription and purchase agreement (the "Subscription Agreement") to purchase 500,000 shares of Series A Convertible Preferred Stock ("Preferred Stock") of General Cellular Corporation ("GCC") at $30 per share, for a total subscription of $15 million. GCC is a California-based owner and operator of cellular telephone systems.
In 1990, the Partnership wrote down the value of its preferred stock in GCC of $15,000,000, because of GCC's inability at that time to raise the financing critical to its viability as a going concern.
On March 17, 1992, a plan of reorganization under Chapter 11 of the U.S. Bankruptcy Code became effective, in which GCC was recapitalized by an investor group. As part of the plan of reorganization, GCC's outstanding debt was reduced from approximately $97 million to $20 million. Under the plan, the Partnership's 500,000 shares of Preferred Stock were converted to 199,281 shares of common stock, prior to the effect of the Partnership's exercise of rights pursuant to a rights offering. The rights offering provided that existing shareholders, including the Partnership, could purchase additional ownership in GCC. Each right consisted of the right to purchase from GCC a unit consisting of one share of common stock and $9.09 in principal amount of senior notes, for a total unit price of $19.09. On March 4, 1992, the Partnership exercised 52,384 rights, for a total price of $1,000,011. By exercising these rights, the Partnership purchased: a) 52,384 shares of common stock of GCC, which increased the Partnership ownership position in GCC to 251,665 shares; and b) senior notes with a face value of $476,171. On August 19, 1992, GCC redeemed the senior notes, repaying to the Partnership $476,171, plus accrued interest.
On October 26, 1992, GCC completed a second rights offering pursuant to which existing shareholders, including the Partnership, were issued rights to purchase one additional share of common stock for each 1.75 shares owned, for a price of $10.00. The Partnership purchased 100,000 additional shares for an investment of $1,000,000. In addition, the Partnership sold 43,809 rights to purchase shares for a price of $120,000 to an unaffiliated entity. Additionally, effective November 3, 1993, the Partnership sold 61,160 rights to purchase shares for a price of $100,000 to several unaffiliated entities. GCC raised $25,281,000 in the offering to assist it in completing its business plan of purchasing and operating clusters of cellular systems in certain geographic areas.
As of December 31, 1993, after giving effect to the recapitalization and the rights offerings, the Partnership's 351,665 common shares in GCC equate to an ownership percentage of approximately 4.2%.
11. FAIR MARKET VALUE
Statement of 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.
Borrowings
As of December 31, 1993, considering the uncertainty of the Partnership's ability to meet its obligations under the Amended Credit Agreement, Senior Subordinated Discount Notes, Windsor Note, and the TCS debt obligations, management believes that using the Partnership's future cash flows related 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 restructuring efforts (see Note 2), the General Partner considers estimation of the fair value of these loans based on collateral value and other methods to be impracticable.
As of December 31, 1992, the General Partner had been able to estimate the fair value of its loans under the Amended Credit Agreement/Maryland Cable Loan Agreement and the Windsor Note by estimating the value of the underlying collateral. Accordingly, the fair value of these loans approximated their carrying values.
As of December 31, 1992, considering the uncertainty of the Partnership's ability to meet its obligations under the Senior Subordinated Discount Notes, management believed that using the Partnership's future cash flows related to debt-service to estimate the fair value of the loans was not appropriate. In addition, because of the uncertainty related to the ultimate outcome of the Partnership's restructuring efforts which could not be predicted at that time (see Note 2), the General Partner considered estimation of the fair value of this loan based on collateral value and other methods to be impracticable.
Other Financial Instruments
As discussed in Note 6, the Partnership entered into a swap agreement in connection with the Maryland Cable Loan Agreement. The fair value of this agreement was estimated based on the expected future cash flows. The fair value of this agreement resulted in a net swap obligation of approximately $2.4 million as of December 31, 1992. Such swap agreement expired in December 1993.
The Partnership owns 351,665 shares of common stock of GCC. It is not practicable to estimate the fair value of this investment because of the lack of a quoted market price and the inability to estimate fair value without incurring excessive costs. The approximate $1.3 million and $1.4 million carrying amount as of December 31, 1993 and December 31, 1992, respectively, represents the adjusted cost of the investment, which management believes is not impaired. No dividends were received during the years ended December 31, 1993 and December 31, 1992.
12. ACCOUNTING FOR INCOME TAXES
As discussed in Note 1, the corporations owned by the Partnership adopted SFAS No. 109 effective January 1, 1993. The cumulative effect of this change in accounting principle is immaterial and there is no effect on the provision for income taxes for the current year.
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 31, 1993 are as follows:
Deferred tax assets: Net operating loss carryforward $ 40,896,465 Allowance for doubtful accounts 155,396 41,051,861 Deferred tax liabilities: Basis of property, plant and equipment (761,871) Basis of intangible assets (446,103) ( 1,207,974)
Total 39,843,887 Less: valuation allowance (39,843,887) Net deferred tax asset $ 0
The change in the net deferred tax asset for the year ended December 31, 1993 amounted to an increase of approximately $10,400,000 due to an increase in the net operating loss carryforward offset by a corresponding reduction due to a change in the valuation allowance.
No provision for income taxes was required for the years ended December 31, 1992 and 1991.
At December 31, 1993, 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 2003 through 2008.
For the Partnership, the differences between the tax bases of assets and liabilities and the reported amounts at December 31, 1993 are as follows:
Partners' Deficit - financial statements $(111,356,546) Differences: Offering expenses 11,346,156 Basis of property, plant and equipment and intangible assets (31,132,326) Unrealized loss on common stock investment 15,000,000 Cumulative income (losses) of stock investments (corporations) 178,371,722 Management fees 2,984,289 Other (1,056,383)
Partners' Deficit - income tax basis $ 64,156,912
13. OTHER INVESTMENTS
TCS
On January 17, 1990, the Partnership entered into a limited partnership agreement with Riverdale Media Corporation ("Riverdale"), forming TCS. The agreement was subsequently amended to include Commonwealth Capital Partners, L.P. ("Commonwealth") as a limited partner. Initially, Riverdale was the general partner of TCS, and owned 20.01% of the entity. The Partnership and Commonwealth were limited partners owning 41% and 38.99%, respectively. Riverdale has contracted with ML Media Opportunity Consulting Partners, a wholly-owned subsidiary of the Partnership, to provide management services for TCS.
On June 19, 1990, TCS completed its acquisition of three network affiliated television stations; WRBL-TV, the CBS affiliate serving Columbus, Georgia; WTWO-TV, the NBC affiliate serving Terre Haute, Indiana; and KQTV-TV, the ABC affiliate serving St. Joseph, Missouri (the "TCS Stations"). The purchase price of $49 million, a non-compete payment of $7 million, and starting working capital and closing costs of approximately $5 million were funded by the sale by TCS of senior notes totaling $35 million and subordinated notes totaling $10 million, and equity of $16 million. The Partnership's total equity contribution and incurred costs were approximately $8.3 million as of December 31, 1993 (including approximately $170,000 noted below). In addition, the Partnership had loaned TCS approximately $400,000 for working capital purposes during 1991.
On December 14, 1992, the Partnership concluded agreements to restructure the debt and ownership arrangements of TCS.
Concurrent with the new debt arrangements (as detailed in Note 6), the equity partners in TCS agreed to seek regulatory approval to alter the ownership structure of the company. On March 26, 1993, the Partnership was granted such approval by the FCC. As a result, on March 26, 1993, the Partnership and Commonwealth purchased the 20.01% ownership interest held by Riverdale. On March 26, 1993, a wholly-owned subsidiary of the Partnership became the new sole general partner of TCS and the Partnership's total ownership interest in TCS increased from 41% to 51% (1% of which is the general partner interest). The Partnership utilized approximately $170,000 of its working capital reserve to acquire the additional 10% interest.
The Partnership consolidated TCS as of March 26, 1993, the date it received regulatory approval for the restructuring of the ownership of TCS. During 1991, 1992 and through March 25, 1993, the Partnership utilized the equity method of accounting (see Note 1). The following data was prepared to illustrate the effects of TCS on the operations of the Partnership:
1993 1992 1991 Total Revenues - TCS $ 9,977,792 $ -- $ -- Total Expenses - TCS 13,119,062 -- --
Equity in loss of joint venture - TCS (1,288,838) (4,493,770) (2,035,765)
Net Loss - TCS $ (4,430,108) $ (4,493,770) $ (2,035,765)
Therefore, as a result of TCS being consolidated by the Partnership, the total revenues and total expenses of the Partnership increased by approximately $10.0 million and $13.1 million, respectively, for the year ended December 31, 1993.
As a result of TCS's operations being consolidated by the Partnership, the total assets and total liabilities of the Partnership increased by approximately $46.1 million and $50.4 million, respectively, as of December 31, 1993.
Paradigm/BBAD
On May 31, 1991, the Partnership, Productions, GLP Co. and Associates entered into a new agreement (the "Revised Paradigm Agreement") that amended the original Paradigm Agreement. Under the terms of the Revised Paradigm Agreement, effective June 16, 1991 the general partner interests of GLP Co. and Associates in Paradigm were converted to limited partner interests. GLP Co. and Associates each retained their 25% ownership in Paradigm and the Partnership retained its 50% beneficial interest. Under the terms of the Revised Paradigm Agreement, Paradigm retained ownership of all program concepts developed by Paradigm prior to June 15, 1991, but assigned the task of further developing these program concepts to GLP Co. and/or Associates as independent contractors. Per the Revised Paradigm Agreement, if GLP Co. or Associates were to develop any new program concepts during the period in which they were acting as independent contractors for Paradigm, GLP Co. or Associates would be required to offer Paradigm the right to finance the production of such program concepts. Regardless of Paradigm's decision to finance the further development of the new program concepts, Paradigm will receive a share of the profits and fees, if any, from such new program concepts.
The consulting agreements described above expired on December 31, 1991. Effective with the expiration, Associates continued, without a formal agreement, to develop projects to offer to Paradigm. As was the case under the Revised Paradigm Agreement, the Partnership had the option of financing such projects in return for equity interests in such projects. During 1992, the Partnership advanced approximately $1.0 million to Paradigm to fund Paradigm's operations and the production of its television programs. Offsetting these advances during 1992, Paradigm returned to the Partnership $2.5 million of such advances, which Paradigm received from broadcasters as fees for movies produced. As of December 31, 1993, Registrant had advanced a net amount of approximately $7.5 million to Paradigm.
Effective June 23, 1992, Paradigm formed a general partnership with Associates to start a new production company, BBAD. Pursuant to this new general partnership arrangement between Paradigm and Associates, during 1992 Paradigm advanced approximately $942,000 and Associates advanced approximately $457,000 to fund BBAD's operations and the development of certain programming concepts. Initially, Paradigm owned 67% and Associates owned 33% of BBAD, based on their capital contributions to BBAD. In addition, Associates contributed an additional approximately $0.7 million and Paradigm contributed approximately $0.3 million from existing cash balances during 1993 to fund BBAD's operations. As of December 31, 1993, Paradigm owns 52% and Associates owns 48% based upon their capital contributions and certain adjustments. The Partnership and Associates are continuing to negotiate the terms on which BBAD would acquire and continue to develop Paradigm's and/or BBAD's programs and programming concepts.
Through the end of 1993, Paradigm had produced three television movies which had aired as well as one syndicated series (which was discontinued after thirteen episodes), and BBAD had produced one television movie which had aired and one series. BBAD had also developed other program concepts which may be produced as either movies or series for television.
In addition to the programs discussed above, BBAD has continued to develop new program concepts, primarily for other television movies and series. The Partnership continued to monitor the development of these program concepts to determine BBAD's additional cash needs. BBAD is not currently producing a sufficient number of programs to cover overhead costs indefinitely, although the Partnership has not advanced any funds to Paradigm or BBAD since the second quarter of 1992. Paradigm and/or BBAD have taken several steps to reduce operating costs, primarily by reducing the number, and compensation, of employees. However, Paradigm and BBAD did not operate profitably during 1993, and are currently dependent on outside sources, primarily Associates, to finance BBAD's monthly operating costs. The Partnership has elected not to fund such operating costs. In any event, the Partnership will most likely recover only a nominal portion, if any, of its original investment in Paradigm and/or BBAD. The Partnership has no obligation to advance any additional funds to Paradigm and/or BBAD and actively sought a strategic partner that would share in meeting Paradigm's and/or BBAD's potential future funding needs, but was unable to identify such a partner. The Partnership is negotiating with Associates the terms of an agreement under which Paradigm would retain the three television movies and the series developed by it, and the other projects and program concepts developed by Paradigm and/or BBAD would be assigned to Associates for further development at Associates' expense, while Paradigm would retain a percentage interest in all such projects and concepts. Paradigm and/or BBAD have no liability for borrowed funds.
The Partnership consolidated Paradigm in 1992. Prior to this the Partnership utilized the equity method of accounting. The following data was prepared to illustrate the effects of Paradigm on the operations of the Partnership:
1993 1992 1991 Total Revenues- Paradigm $ 5,917,189 $ 7,746,380 $ --
Total Expenses, net of minority interest-Paradigm (6,689,248) $(8,398,789) $ --
Equity in loss of joint venture- Paradigm -- -- (2,505,588)
Net Loss-Paradigm $ (772,059) $ (652,409) $(2,505,588)
Investments and EMP, Ltd.
On September 1, 1989, the Partnership entered into a stockholders agreement ("the Media Ventures Agreement") with Peter Clark ("Clark") and Alan Morris ("Morris") to form Media Ventures International, Limited ("Media Ventures"), a United Kingdom corporation with a mandate to engage in media businesses including but not limited to: program packaging and distribution; executive search for the media and entertainment sector; trade markets and trade publishing; screen entertainment retailing; and television broadcasting in the United Kingdom. At closing the Partnership held 50%, Clark held 46% and Morris held 4% of the stock of Media Ventures. The Partnership subsequently assigned 1% of its stock in Media Ventures to Morris. The Partnership committed to advance up to $2 million to Media Ventures or its affiliate, European Media Partners ("EMP"), over a three year period to fund their operations. The ownership of EMP parallels that of Media Ventures after the aforementioned assignment by the Partnership of 1% to Morris. As of December 31, 1991, the Partnership had advanced all of its original $2.0 million commitment to Media Ventures.
During 1991, Media Ventures and EMP (together, the "Companies") and Registrant identified a strategic partner, ALP Enterprises (a company controlled by Arthur Price, and not affiliated with the Partnership), which agreed to invest up to approximately $700,000 at then-current exchange rates in EMP, Ltd. pursuant to a restructuring of the Companies which diluted the Partnership's ownership interest in the Companies. In the restructuring: Media Ventures' name was changed to Media Ventures Investments Ltd. ("Investments"); a new U.K. corporation, European Media Partners, Ltd. ("EMP, Ltd.") was formed; and Investments transferred its ownership in its programming subsidiary, International Programme Ventures ("IPV"), to EMP, Ltd. For any investments made by ALP Enterprises in EMP, Ltd., ALP Enterprises will receive from EMP, Ltd. a preferred return of 6% on its investment plus the return of its original investment prior to a pro rata distribution of the proceeds, if any, from the ultimate sale of any of EMP, Ltd.'s existing and future media businesses. As of December 31, 1993, ALP Enterprises had invested approximately $2 million in EMP, Ltd. at current exchange rates, including approximately $1.1 million in Teletext (see below). ALP Enterprises will not invest any funds in Investments. The Partnership is entitled to receive from Investments a preferred return of 14% on its original $2 million investment, plus the return of its original investment prior to the pro-rata distribution of the proceeds, if any, from the ultimate sale of any of Investments' existing and future media businesses. Because it lacks funding, and because its only significant investment, Neomedion (see below), is likely to generate a nominal return, if any, it is unlikely that the Partnership will recover any of its $2 million investment in Investments.
Subsequent to the restructuring, EMP, Ltd., through a wholly- owned subsidiary, acquired VATV, Ltd., a U.K. television program distributor, for approximately $126,000 in cash at then-current exchange rates. In addition, during the first quarter of 1992, Investments and EMP, Ltd. entered into a stock transaction to acquire a combined 50% interest in Neomedion, Ltd., an existing U.K. corporation that provides consulting services to the European media industry, in exchange for shares in Investments and EMP, Ltd. As a result, Investments and EMP, Ltd. each owned 25% of Neomedion, Ltd. After giving effect to the restructuring of the Companies and the Neomedion transaction, the Partnership owned 36.8% of the common stock of Investments, ALP Enterprises owned 13.8%, Clarendon (a company controlled by the Companies' founders, Clark and Morris) owned 41.4%, and Charles Dawson, the founder and head of Neomedion, Ltd., controlled the remaining 8.0%. The Partnership also owned 13.8% of the common stock of EMP, Ltd., ALP Enterprises owned 36.8%, Clarendon owned 41.4%, and Charles Dawson controlled the remaining 8.0%. The ownership of EMP, which is dormant, was unaffected by any of the transactions described above. Clarendon and Charles Dawson are not affiliated with the Partnership.
During 1992, EMP, Ltd. continued its European television programming distribution operations while searching for additional investment opportunities in the European media market. In addition, during the first half of 1992, EMP, Ltd. became a 10% equity owner in Teletext U.K., Ltd. ("Teletext"), a newly formed U.K. corporation organized by EMP, Ltd. to acquire U.K. franchise rights to provide data in text form to television viewers via television broadcast sidebands. EMP, Ltd. was actively involved in the initial start-up phase of Teletext, and ALP Enterprises contributed approximately $1.1 million at then- current exchange rates to EMP, Ltd. to allow EMP, Ltd. to acquire the 10% share in Teletext. Teletext took control of the franchise on January 1, 1993. The day-to-day operations of Teletext are managed by a newly formed management team; EMP, Ltd. and its partners monitor Teletext's operations. The other equity owners of Teletext are not affiliated with the Partnership.
On July 30, 1993, EMP, Ltd. sold its Neomedion shares back to Charles Dawson, while Charles Dawson sold his shares in EMP, Ltd. back to Clarendon. The stock of Neomedion is now controlled 75% by Charles Dawson and 25% by Investments. In addition, after the exchange of shares, EMP, Ltd. was owned 13.8% by the Partnership, 45.6% by Clarendon, and 40.6% by ALP Enterprises.
As of December 31, 1993, the primary ongoing business activities of Investments and EMP, Ltd. were conducted through EMP, Ltd.'s television programming subsidiaries, Teletext and Neomedion.
14. DISPOSITION OF ASSETS
Sale of the Leesburg Systems
On September 30, 1993, Maryland Cable consummated the sale of the Leesburg System to Benchmark Acquisition Fund I Limited Partnership (the "Buyer") for a base payment of approximately $10,180,000, of which $7,250,000 was paid to Citibank, N.A., to discharge $6,750,000 of bank debt and to pay a fee of $500,000 due in connection with the 1991 amendment to the Maryland Cable Loan agreement. An additional amount of $250,000 was deposited into an indemnity escrow account for a period of one year. Following the payment of certain fees and expenses, Maryland Cable retained approximately $2,480,000 in proceeds and may be entitled to additional payments following the closing based upon the amount of its accounts receivable, the number of subscribers served at closing and certain other adjustments. The Buyer is an affiliate of Benchmark Communications but is not affiliated with Maryland Cable or the Partnership. This sale resulted in an approximate $4.0 million gain.
In addition, as a result of the payment of $6,750,000 in bank debt, in accordance with the terms of the Amended Credit Agreement, the Default Interest Notes of $1,595,408, together with accrued interest of $252,338, ceased to be an Obligation under the Amended Credit Agreement (as defined therein) (see Note 6). These Obligations would have come due on December 31, 1993. The amount of the Default Interest Notes forgiven, plus accrued interest forgiven, may be utilized by the Banks as payment consideration of the exercise price of the Warrants the Banks hold, in the event of such exercise, pursuant to the terms of the Amended Credit Agreement (see Note 6 regarding Warrants). The amount of debt forgiven and related accrued interest was amortized as a reduction of interest expense over the remaining life of the Amended Credit Agreement (through December 31, 1993).
15. DISCONTINUED OPERATIONS
Effective July 1, 1993, the Partnership entered into three transactions to sell the business and assets of IMPLP/IMPI and Intelidata (the Business Information Services Segment). In two separate transactions, the Partnership sold the entire business and substantially all of the assets of IMPLP/IMPI and a portion of the business and assets of Intelidata to Phillips Business Information, Inc. ("PBI") for future consideration based on the revenues of IMPLP/IMPI and the portion of the Intelidata business acquired by PBI. PBI is not affiliated with the Partnership. At closing, PBI made non reference advances of $100,000 and $150,000 of royalties to IMPLP/IMPI and Intelidata, respectively, which advances would be recoverable by PBI from any future royalties payable by PBI to the Partnership. In addition, PBI agreed to assume certain liabilities of IMPLP/IMPI and Intelidata.
In the third transaction, the Partnership sold the remaining business and assets of Intelidata, which were not sold to PBI, to Romtec plc ("Romtec") in exchange for future consideration, based on both the amount of assets and liabilities transferred to Romtec and the combined profits of the portion of the Intelidata business acquired by Romtec and another, existing division of Romtec. In addition, certain liabilities of Intelidata were assumed by Romtec. Romtec is not affiliated with the Partnership.
As a result of the above transactions, the Partnership recorded a writedown of approximately $364,000 of certain assets of IMPLP/IMPI and Intelidata in the second quarter of 1993 to reduce the Partnership's net investment to a net realizable value of zero. Subsequent to the sale of the businesses, the Partnership advanced additional funds totaling approximately $0.1 million to IMPLP/IMPI and Intelidata to fund cash shortfalls resulting from the claims of certain creditors. The Partnership anticipates that it may make additional such advances to IMPLP/IMPI and Intelidata during 1994. The total of any Partnership obligations to fund such advances, including certain contractual obligations, is not currently anticipated to exceed the amount of the writedown. It is unlikely that the Partnership will recover its investment in IMPLP/IMPI /Intelidata.
As of July 1, 1993 (the date of sale), the Partnership had advanced approximately $4.2 million to IMPLP/IMPI and Intelidata to fund operating activities.
The net liabilities of discontinued operations on the Consolidated Balance Sheet include the net liabilities of IMPLP/IMPI and Intelidata. The prior year's consolidated financial statements have been restated to present IMPLP/IMPI and Intelidata as discontinued operations.
Net liabilities of discontinued operations were $0 and $185,611, as of December 31, 1993 and December 31, 1992, respectively. The 1992 amount consisted of: cash and cash equivalents; accounts receivable; prepaid expenses; property, plant and equipment; intangible assets; accounts payable and accrued liabilities; and deferred revenue. Total assets in 1992 were $868,475, and total liabilities were $1,054,086.
The results of IMPLP/IMPI and Intelidata have been reported separately in the Consolidated Statements of Operations as discontinued operations. Summarized results of the discontinued operations of this segment are as follows:
1993 1992 1991
Operating Revenues $ 978,359 $ 1,427,157 $ 169,414
Less: Operating Expenses 1,382,727 3,394,257 1,503,549
Operating Loss (404,368) (1,967,100) (1,334,135)
Other Expenses, net (386,896) (40,642) (11,428)
Loss from discontinued operations $ (791,264) $(2,007,742) $(1,345,563)
16. PRO FORMA DATA (Unaudited)
The following proforma data was prepared to illustrate the estimated effects on the operations of the Partnership of the potential future divestiture of Maryland Cable, Windsor and WMXN- FM on the Consolidated Balance Sheet and Consolidated Statement of Operations as of and for the year ended December 31, 1993:
December 31, 1993 Maryland Cable Windsor
Total Assets $ 191,150,624 $(134,524,125) $(2,493,016)
Total Liabilities $ 302,507,170 $(247,890,373) $(2,805,332)
Total Partners' Deficit $(111,356,546) $ 113,366,248 $ 312,316
Total Operating Revenues $ 62,453,885 $ (43,799,277) $ (927,412)
Net Loss $( 34,317,419) $ 24,261,818 $ 86,141
Pro Forma Giving Effect to WMXN-FM Divestitures
Total Assets $(2,512,609) $ 51,620,874
Total Liabilities $ (300,154) $ 51,511,311
Total Partners' Capital $(2,212,455) $ 109,563
Total Operating Revenues $(1,856,903) $ 15,870,293
Net Loss $ 227,959 $ (9,741,501)
*These figures are net of all intercompany balances and transactions which are eliminated in consolidation.
17. Subsequent Event
As discussed in Note 2, on March 10, 1994 Maryland Cable and Holdings filed a Prepackaged Plan under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court- Southern District of New York.
ML MEDIA OPPORTUNITY PARTNERS, L.P. AS OF DECEMBER 31, 1993 AND DECEMBER 31, 1992
SCHEDULE III CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ML Media Opportunity Partners, L.P. Condensed Balance Sheets as of December 31, 1993 and December 31, 1992
NOTES 1993 1992 ASSETS: Cash and cash equivalents 3 $ 3,521,683 $ 6,669,510 Advances to Subsidiaries 42,094 620,467 Interest receivable 7,644 14,681 Prepaid expenses and deferred charges 297,954 738,867 Investment in Subsidiaries 1,2 (114,516,638) (84,682,022) TOTAL ASSETS $(110,647,263) $ (76,638,497)
LIABILITIES AND PARTNERS' CAPITAL: Liabilities: Accounts payable and accrued liabilities $ 709,283 $ 400,630
Partners' Deficit: General Partner: Capital contributions, net of offering expenses 1,019,428 1,019,428 Cumulative loss (2,112,501) (1,769,327) (1,093,073) (749,899) Limited Partners: Capital contributions, net of offering expenses (112,147.1 Units of Limited Partnership Interest) 100,914,316 100,914,316 Tax allowance cash distribution (2,040,121) (2,040,121) Cumulative loss (209,137,668) (175,163,423) (110,263,473) (76,289,228) Total Partners' Deficit (111,356,546) (77,039,127) TOTAL LIABILITIES AND PARTNERS' DEFICIT $(110,647,263) $ (76,638,497)
See Notes to Condensed Financial Statements. ML MEDIA OPPORTUNITY PARTNERS, L.P. AS OF DECEMBER 31, 1993, DECEMBER 31, 1992, DECEMBER 31, 1991
SCHEDULE III CONDENSED FINANCIAL INFORMATION OF REGISTRANT Cont'd
ML Media Opportunity Partners, L.P. Condensed Statements of Operations For the Years Ended December 31, 1993, December 31, 1992, and December 31, 1991
Year Ended Year Ended Year Ended December 31, December 31, December 31, NOTES 1993 1992 1991 REVENUES: Interest $ 130,302 $ 517,769 $ 1,247,852
COSTS AND EXPENSES: General and administrative 19,930 1,390 235,320
Amortization 440,913 430,898 110,413
Management fees to general partner 3,073,417 2,986,799 2,896,993
Other 167,354 140,116 74,053
Total cost and expenses 3,701,614 3,559,203 3,316,779
Share of subsidiaries' loss from continuing operations 1,2 (29,954,843) (33,323,174) (75,826,535)
Loss from continuing operations (33,526,155) (36,364,608) (77,895,462)
Loss from discontinued operations of subsidiaries (791,264) (2,007,742) (1,345,563)
NET LOSS 2 $(34,317,419) $(38,372,350) $(79,241,025)
See Notes to Condensed Financial Statements. ML MEDIA OPPORTUNITY PARTNERS, L.P. AS OF DECEMBER 31, 1993, DECEMBER 31, 1992 AND DECEMBER 31, 1991
SCHEDULE III CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Cont'd)
ML Media Opportunity Partners, L.P. Condensed Statements of Cash Flow For the Years Ended December 31, 1993, December 31, 1992, and December 31, 1991
1993 1992 1991 Cash flows from operating activities:
Net loss $(34,317,419) $(38,372,350) $(79,241,025)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization 440,913 430,898 110,413
Loss on sale of note - - 225,000
Change in assets and liabilities:
Decrease in investment in subsidiaries 30,746,107 35,330,916 77,172,098
(Increase)/decrease in interest receivable 7,037 (3,116) 64,475
(Increase) in prepaid expenses and deferred charges - - (133,255)
(Decrease)/increase in accounts payable and accrued liabilities 308,653 (16,911) 340,217
Net cash used in operating activities (2,814,709) (2,630,563) (1,462,077)
ML MEDIA OPPORTUNITY PARTNERS, L.P. AS OF DECEMBER 31, 1993, DECEMBER 31, 1992 AND DECEMBER 31, 1991
SCHEDULE III CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Cont'd)
ML Media Opportunity Partners, L.P. Condensed Statements of Cash Flow For the Years Ended December 31, 1993, December 31, 1992, and December 31, 1991
1993 1992 1991 Cash flows from investing activities:
Advances from (to) subsidiaries 578,373 (122,916) (412,810)
Proceeds from sale of note - - 275,000
Net investment in subsidiaries (911,491) (2,660,423) (12,855,248)
Net cash used in investing activities (333,118) (2,783,339) (12,993,058)
Net decrease in cash and cash equivalents (3,147,827) (5,413,902) (14,455,135)
Cash and cash equivalents at beginning of year 6,669,510 12,083,412 26,538,547
Cash and cash equivalents at end of year $ 3,521,683 $ 6,669,510 $ 12,083,412
See Notes to Condensed Financial Statements. ML MEDIA OPPORTUNITY PARTNERS, L.P. AS OF DECEMBER 31, 1993, DECEMBER 31, 1992 AND DECEMBER 31, 1991
Schedule III CONDENSED FINANCIAL INFORMATION OF REGISTRANT Cont'd
ML Media Opportunity Partners, L.P. Notes To Condensed Financial Statements For the Years Ended December 31, 1993 December 31, 1992, and December 31, 1991
1. Organization
ML Media Opportunity Partners, L.P. (the "Partnership") wholly owns WMXN-FM and the Windsor Systems. The Partnership also has a 90% interest in Holdings (see Note 2), a 93.5% interest in IMPLP/IMPI and a 100% interest in Intelidata (see Note 14), a 50% interest in Paradigm, a 37% interest in Investments, a 49% interest in EMP, a 14% interest in EMP, Ltd., and a 51% interest in TCS. All of the preceding investments and the Partnership's other majority-owned subsidiaries shall herein be referred to as the "Subsidiaries." The Partnership carries its interest in GCC at cost.
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 (included in consolidated financial statements).
December 31, December 31, 1993 1992
Assets $ 187,281,249 $ 162,602,892 Liabilities (301,797,887) (247,284,914) Investment in Subsidiaries $(114,516,638) $ (84,682,022)
Year Ended Year Ended Year Ended December 31, December 31, December 31, 1993 1992 1991
Revenues $ 62,533,408 $ 52,143,892 $ 42,041,854
Partnership's share of subsidiaries' loss from continuing operations $(29,954,843) $(33,323,174) $(75,826,535)
Partnership's share of discontinued operations of subsidiaries (791,264) (2,007,742) (1,345,563)
Partnership's share of subsidiaries' net loss $(30,746,107) $(35,330,916) $(77,172,098)
ML MEDIA OPPORTUNITY PARTNERS, L.P. AS OF DECEMBER 31, 1993, DECEMBER 31, 1992 AND DECEMBER 31, 1991
Schedule III CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ML MEDIA OPPORTUNITY PARTNERS, L.P. NOTES TO CONDENSED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1993 DECEMBER 31, 1992, AND DECEMBER 31, 1991
3. Cash and Cash Equivalents
At December 31, 1993, the Partnership had $3,521,683 in cash and cash equivalents of which $597,467 was invested in banker acceptances and $2,854,509 was invested in commercial paper. In addition, the Partnership had $69,707 invested in cash and demand deposits.
At December 31, 1992, the Partnership had $6,669,510 in cash and cash equivalents of which $272,861 was invested in banker acceptances and $6,371,200 was invested in commercial paper. In addition, the Partnership had $25,449 invested in cash and demand deposits.
ML MEDIA OPPORTUNITY PARTNERS, L.P. AS OF DECEMBER 31, 1993, DECEMBER 31, 1992 AND DECEMBER 31, 1991
Schedule V Property, Plant and Equipment
Balance at Retirements Balance at Beginning of and Other End of Period Period Additions Changes Period
1993 $75,113,347 $22,675,116 (2) $(4,041,575) $93,746,888
1992 $70,523,323 $ 4,581,722 $ 8,302 (1) $75,113,347
1991 $65,491,725 $ 5,201,778 $ (170,180) $70,523,323
(1) Retirements and Other Changes includes the effect of consolidating the operations of Paradigm in 1992 in the amount of $154,993 (see Note 8).
(2) Additions includes the effect of consolidating the operations of TCS commencing in the second quarter of 1993 in the amount of $16,727,898 (see Note 8).
ML MEDIA OPPORTUNITY PARTNERS, L.P. AS OF DECEMBER 31, 1993, DECEMBER 31, 1992 AND DECEMBER 31, 1991
Schedule VI Accumulated Depreciation of Property, Plant and Equipment
Balance at Retirements Balance at Beginning of and Other End of Period Period Additions Changes Period
1993 $24,821,936 $19,513,128 (2) $(1,654,010) $42,681,054
1992 $17,933,910 $ 6,914,549 $(26,523)(1) $24,821,936
1991 $11,590,644 $ 6,418,677 $(75,411) $17,933,910
(1) Retirements and Other Changes includes the effect of consolidating the operations of Paradigm in 1992 in the amount of $70,871 (see Note 8).
(2) Additions includes the effect of consolidating the operations of TCS commencing in the second quarter of 1993 in the amount of $11,415,948 (see Note 8).
ML MEDIA OPPORTUNITY PARTNERS, L.P. AS OF DECEMBER 31, 1992, DECEMBER 31, 1992 AND DECEMBER 31, 1991
Schedule VIII Accumulated Amortization of Intangible Assets, Prepaid Expenses and Deferred Charges
Additions Charged to Costs and Balance at Expenses or Balance at Period Beginning of Other Deductions and End of Period Accounts Other Period
Intangible Assets
1993 $63,989,829 $22,582,183(2) $ (1,211,438) $85,360,574
1992 $58,024,203 $ 5,965,626 $ 0 $63,989,829
1991 $10,645,720 $ 7,378,483 $40,000,000(1) $58,024,203
Prepaid Expenses and Deferred Charges
1993 $7,828,872 $ 4,185,294(3) $ (23,454) $11,990,712
1992 $4,160,207 $ 3,668,665 $ 0 $ 7,828,872
1991 $1,751,796 $ 1,551,943 $ 856,468 $ 4,160,207
(1) Due to the $40,000,000 write-down of Maryland Cable's goodwill.
(2) Additions to "Intangible Assets" includes the effect of consolidating the operations of TCS commencing in the second quarter of 1993 in the amount of $15,695,763 (see Note 8).
(3) Additions to "Prepaid Expenses and Deferred Changes" includes the effect of consolidating the operations of TCS commencing in the second quarter of 1993 in the amount of $331,037 (see Note 8). ML MEDIA OPPORTUNITY PARTNERS, L.P. AS OF DECEMBER 31, 1993, DECEMBER 31, 1992 AND DECEMBER 31, 1991
Schedule X Supplementary Income Statement Information
Column A Column B
Charged to costs and Item expenses For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 1993 1992 1991
Maintenance and repairs $1,019,613 $803,316 $ 914,557
Taxes, other than payroll and income taxes $ 965,464 $977,259 $ 869,561
Royalties $ 194,788 $ 46,367 $ 0
Advertising costs $ 709,747 $507,520 $ 709,992
Item 9.
Item 9. Changes in and Disagreement with Accountants and Accounting and Financial Disclosure
None. Part III
Item 10.
Item 10. Directors and Executive Officers of the Partnership
Registrant has no executive officers or directors. The General Partner manages the 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 executive officers of EHR Opportunity Management, Inc. and IMP Opportunity Management, Inc. as general partners of RP Opportunity Management, L.P. or executive officers of ML Opportunity Management Inc., acting on behalf of the General Partner. The executive officers and directors of RP Opportunity Management, L.P. and ML Opportunity Management Inc. are:
RP Opportunity Management, L.P. (the "Management Company")
Served in Present Name Capacity Since (1) Position Held
Director and President I. Martin Pompadur 6/15/87 IMP Opportunity Management
Executive Vice President Elizabeth McNey Yates 4/01/88 IMP Opportunity Management
ML Opportunity Management Inc. ("MLOM")
Served in Present Name Capacity Since (1) Position Held
Kevin K. Albert 2/19/91 President 6/22/87 Director
Robert F. Aufenanger 2/02/93 Executive Vice President 3/28/88 Director
Robert W. Seitz 2/02/93 Vice President 2/01/93 Director
James K. Mason 2/01/93 Director
Steven N. Baumgarten 2/02/93 Vice President
David G. Cohen 3/07/94 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. I. Martin Pompadur, 58, 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 also is a Chairman and Chief Executive Officer of U.S. Cable Partners, a general partner of U.S. Cable Television Group, L.P. ("U.S. Cable"). U.S. Cable owns and operates cable systems in ten states. He is also the President and a director of RP Media Management ("RPMM"), a joint venture which is a partner in Media Management Partners ("MMP"), an affiliate of the General Partner and the general partner of ML Media Partners, L.P., which presently owns two network affiliated television stations, several cable television systems and several radio stations. Mr. Pompadur is the Chief Executive Officer of ML Media Partners, L.P. Mr. Pompadur is also Chief Executive Officer of MultiVision Cable TV Corp. ("Multivision"), a cable television multiple system operator ("MSO") 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. He is a principal shareholder in Hunter Publishing Company, Inc., the general partner of Hunter Publishing Limited Partnership, publisher of monthly trade magazines. Mr. Pompadur served as president of Ziff Corporation from 1977 through 1982. Ziff Corporation was the holding company for Ziff-Davis Publishing Company, one of the world's largest publishers of special interest and business publications, as well as Ziff-Davis Broadcasting Company, operator of six network affiliated television stations. Before joining Ziff Corporation, Mr. Pompadur was with ABC, Inc. for 17 years. At ABC, he was a member of the Board of Directors and also served in the following capacities: General Manager of the Television network; Vice President of the Broadcast Division; and President of the Leisure Activities Group, which included ABC Publishing, Records, Music Publishing and Motion Picture theaters.
Elizabeth McNey Yates, 31, 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. Prior to joining Mr. Pompadur, Ms. Yates was employed in Merrill Lynch Investment Banking's Partnership Finance Department, where she was actively involved in structuring and implementing public partnership offerings and in monitoring investments made by Merrill Lynch managed partnerships. Ms. Yates is an Executive Vice President of RPMM and Senior Vice President of MMP.
Kevin K. Albert, 41, 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 has a B.A. and an M.B.A. from the University of California, Los Angeles. Mr. Albert is also a director of Maiden Lane Partners, Inc. ("Maiden Lane"), an affiliate of the General Partner and the general partner of Liberty Equipment Investors - 1983; a director of Whitehall Partners Inc. ("Whitehall"), an affiliate of MLOM and the general partner of Liberty Equipment Investors L.P. - 1984; a director of ML Media Management Inc. ("ML Media"), an affiliate of MLOM and a joint venturer of Media Management Partners, the general partner of ML Media Partners, L.P.; a director of ML Film Entertainment Inc. ("ML Film"), an affiliate of MLOM and the managing general partner of the general partners of Delphi Film Associates, Delphi Film Associates II, III, IV, V and ML Delphi Premier Partners, L.P.; a director of MLL Antiquities Inc. ("MLL Antiquities"), an affiliate of MLOM 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 MLOM 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 MLOM and the sole general partner of the managing general partner of ML-Lee Acquisition Fund, L.P.; a director of Merrill Lynch Energy Investments Inc. ("MLEI"), an affiliate of MLOM and the general partner of Merrill Lynch Energy Partners I, L.P., Merrill Lynch Energy Partners II A, L.P. and Merrill Lynch Energy Partners II B, L.P.; a director of Merrill Lynch Venture Capital Inc. ("ML Venture"), an affiliate of MLOM 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 MLOM 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 MLOM 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, 40, 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 was previously Controller of Merrill Lynch Leasing Inc. from 1982 through 1984 and had worked for the international public accounting firm of Ernst & Whinney from 1975 to 1980. Mr. Aufenanger has a B.S. from St. John's University, is a New York State licensed C.P.A. and is a member of the American Institute of Certified Public Accountants and the N.Y.S. Society of Certified Public Accountants. Mr. Aufenanger is also a director of Maiden Lane, Whitehall, ML Media, ML Film, MLL Antiquities, ML Venture, ML R&D, MLL Collectibles and ML Mezzanine and ML Mezzanine II.
Robert W. Seitz, 47, 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. Mr. Seitz is the Private Client Senior Credit Officer and also is responsible for the firm's Partnership Management and Asset Recovery Management Departments. Prior to his present assignment, Mr. Seitz was a Managing Director and the Senior Credit Officer of the Merrill Lynch Public Finance Group, and before that, manager of Western Hemisphere Business Development for the Merrill Lynch International Banks. Prior to joining Merrill Lynch, Mr. Seitz served as a Vice President and Unit Head in Corporate Banking at Citibank, N.A. for ten years. Mr. Seitz holds an MBA in Finance and Marketing from the University of Rochester and a Bachelor of Arts in Psychology from Gettysburg College. Mr. Seitz is also a director of Maiden Lane, Whitehall, ML Media, ML Venture, ML R&D, ML Film, MLL Antiquities, and MLL Collectibles.
James K. Mason, 41, 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. Prior to joining Merrill Lynch, Mr. Mason was involved in news and production at Metromedia Inc.'s WNEW-TV and at Capital Cities' WTVD-TV. He also was station manager for the NBC-TV affiliate in Raleigh-Durham, North Carolina. Mr. Mason has two B.A. degrees from Duke University, and an M.B.A. from Columbia University Graduate School of Business. Mr. Mason is also a director of ML Media.
Steven N. Baumgarten, 38, 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 was previously Manager of Financial Analysis for the same group from 1986 through 1988. Mr. Baumgarten has an MBA from New York University, a J.D. from the Boston University School of Law and a B.A. from the State University of New York at Stony Brook. Mr. Baumgarten is a member of the Bar in the state of Massachusetts and is a member of the American Bar Association.
David G. Cohen, 31, 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. Prior to joining Merrill Lynch, Mr. Cohen worked for the international public accounting firm of Arthur Andersen & Co. from 1984 through 1987. Mr. Cohen has a B.S. from the University of Maryland and is a New York State Certified Public Accountant.
Item 11.
Item 11. Executive Compensation
The Partnership does not pay the executive officers or directors of the General Partner any remuneration. The General Partner does not presently pay any remuneration to any of its executive officers or directors. See Note 7 to the Financial Statements included in Item 8 hereof, however, for sums paid by Registrant to affiliates for the years ended December 31, 1993, December 31, 1992 and December 31, 1991.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
As of February 1, 1994, no person was known by the 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, 1994, no person is the beneficial owner of 5% or more of the outstanding common stock of Merrill Lynch & Co., Inc.
IMP Opportunity Management, Inc. is 100% owned by Mr. I. Martin Pompadur. Item 13.
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.
Item 14
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".
Exhibits Incorporated by Reference
3.1 Certificate of Limited Exhibit 3.1 to the Partnership Partnership's Form S-1 the Partnership Statement (File No. 33-15502)
3.2 Amended and Restated Exhibit 3.2 to the Agreement of Limited Partnership Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 1987 (File No. 33-15502)
10.1.1 Exchange Agreement Exhibit 10.1 to Form 8-K dated December 31, 1993. Report dated January 12, 1994
10.1.2 Consolidated Exhibit to Form 8-K Report Prepackaged Plan of dated March 10, 1994 Reorganization of Maryland Cable Corp. and Maryland Cable Holdings Corp.
10.1.3 Letter Agreement to Exhibit 10.1 to Registrant's Purchase and Sell all of the Annual Report on Form 10-K Assets of the community antenna for the fiscal year ended television systems owned by December 31, 1988 (File No. Windsor Cablevision, Inc. between 33-15502) Williamston Cable Television, Inc. and Windsor Cablevision, Inc. dated as of March 7, 1988.
10.1.4 Agreement between TCS, Exhibit 10.1 to Form 8-K Registrant, Commonwealth Capital Report dated December 14, Partners, L.P., and other 1992 (File No. 0-16690) parties, dated December 14, 1992.
10.1.5 Management Agreement Exhibit 10.1.1 to dated as of June 30, 1992 between Registrant's Annual Report on ML Media Opportunity Partners, Form 10-K for the fiscal year L.P. and Cablevision Systems ended December 31, 1992 (File Corporation. No. 0-16690)
10.2 Promissory Note from Exhibit 10.2 to Registrant's Williamston Cable Television, Annual Report on Form 10-K Inc. to Windsor Cablevision, Inc. for the fiscal year ended December 31, 1988 (File No. 33-15502)
10.2 Services Agreement between Exhibit 10.2 to Form 8-K Registrant, TCS Management Corp., Report dated December 14, and Commonwealth Capital 1992 (File 0-16690) Partners, L.P., dated December 14, 1992.
10.2.1 Asset Purchase Exhibit 10.2.1 to Agreement dated November 16, 1993 Registrant's Quarterly Report between Tar River Communications, on Form 10-Q for the quarter Inc. and Registrant. ended September 30, 1993 (File No. 0-16690) 10.3.1 Securities Purchase Exhibit 28.1 to Registrant's Agreement dated May 13, 1988 Quarterly Report on Form 10-Q relating to Prime Cable Systems. for the quarter ended June 30, 1988 (File No. 0-16690) 10.3.2 Amendment No. 1 to Exhibit 2(b) to Amendment No. Securities Purchase Agreement, 2 to the Registration dated as of October 21, 1988. Statement of Maryland Cable Corp. (File No. 33-23679) 10.3.3 Amendment No. 2 to Exhibit 2(c) to Maryland Securities Purchase Agreement, Cable Corp.'s Annual Report dated as of October 28, 1988. on Form 10-K for the fiscal year ended December 31, 1989 (File No. 33-23679)
10.3.4 Purchase and Sale Exhibit 10.3.4 to Agreement dated January 22, 1993 Registrant's Annual Report on between Maryland Cable Corp. and Form 10-K for the fiscal year Benchmark Acquisition Fund I ended December 31, 1992 (File Limited Partnership. No. 0-16690)
10.4 Credit Agreement dated Exhibit 28.2 to Registrant's November 4, 1988 between Maryland quarterly Report on Form 10-Q Cable Corp., and Citibank, N.A., for the quarter ended June as agent. 30, 1988 (File No. 0-16690)
10.5 Maryland Cable Corp. to Exhibit 4(a) to Maryland Security Pacific National Trust Cable Corp.'s Annual Report Company (New York) Trustee - on Form 10-K for the fiscal Indenture Dated as of November year ended December 31, 1989 15, 1988 - $162,406,000 Senior (File No. 33-23679) Subordinated Discount Notes due 1988.
10.6 Asset Purchase Agreement Exhibit 10.6 to Registrant's dated December 21, 1988 by and Annual Report on Form 10-K between CBN Continental for the fiscal year ended Broadcasting Network, Inc., and December 31, 1988 (File No. ML Media Opportunity Partners, 33-15502) L.P.
10.7 Agency and Cost Allocation Exhibit 10(a) to Maryland Agreement, as amended. Cable Corp.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1989 (File No. 33-23679)
10.8 Fee Sharing Agreement Exhibit 10(b) to Maryland between ML Media Opportunity Cable Corp.'s Annual Report Partners, L.P. and Maryland Cable on Form 10-K for the fiscal Corp. year ended December 31, 1989 (File No. 33-23679)
10.9 Subordination Agreement by Exhibit 28(a) to Maryland and among ML Media Opportunity Cable Corp.'s Annual Report Partners, L.P., Maryland Cable on Form 10-K for the fiscal Corp. and Security Pacific year ended December 31, 1989 National Trust Company (New York) (File No. 33-23679) as trustee.
10.10.1 Guaranty of Cellular Exhibit 10.10.1 to Holdings, Inc. dated May 19, Registrant's Quarterly Report 1989. on Form 10-Q for the quarter ended June 30, 1989 (File No. 0-16690)
10.10.2 Security and Pledge Exhibit 10.10.2 to Agreement between Cellular Registrant's Quarterly Report Holdings, Inc. and ML Media on Form 10-Q for the quarter Opportunity Partners, L.P. dated ended June 30, 1989 (File No. as of May 19, 1989. 0-16690)
10.10.3 Subscription and Exhibit 10.10.3 to Purchase Agreement 666,667 shares Registrant's Quarterly Report of Series A Convertible Preferred on Form 10-Q for the quarter Stock of General Cellular corp. ended June 30, 1989 (File No. Dated as of May 19, 1989. 0-16690)
10.10.4 Certificate of Exhibit 10.10.4 to Designations, Preferences, and Registrant's Quarterly Report Relative Rights of Series A on Form 10-Q for the quarter Convertible Preferred Stock of ended June 30, 1989 (File No. General Cellular Corporation. 0-16690)
10.10.5 Registration Rights Exhibit 10.10.5 to Agreement Dated as of May, 19, Registrant's Quarterly Report 1989 between General Cellular on Form 10-Q for the quarter Corp. and ML Media Opportunity ended June 30, 1989 (File No. Partners, L.P. 0-16690)
10.11 Limited Partnership Exhibit 10.11 to Registrant's Agreement between Bob Banner Quarterly Report on Form 10-Q Associates, the Gary L. Pudney for the quarter ended June Co. and ML Media Opportunity 30, 1989 (File No. 0-16690) Productions, Inc. and ML Media Opportunity Partners, L.P.
10.12 Stockholders Agreement Exhibit 10.12 to Registrant's dated as of September 1, 1989 Annual Report on Form 10-K among Mediaventures International for the fiscal year ended Limited, ML Media Opportunity December 31, 1991 Partners, L.P., Peter Clark and (File No. 0-16690) Alan Morris.
10.13 Limited Partnership Exhibit 10.13 to Registrant's Agreement of European Media Annual Report on Form 10-K Partners dated as of September 1, for the fiscal year ended 1989 among Mediaventures Limited, December 31, 1991 ML Media Opportunity Europe, Inc. (File No. 0-16690) and ML Media Opportunity Partners, L.P.
10.14 Stock Purchase Exhibit 10.14 to Registrant's Agreement dated as of January 17, Annual Report on Form 10-K 1990 between Malcolm Glazer and for the fiscal year ended TCS Television Partners, L.P. December 31, 1991 (File No. 0-16690)
10.15 Limited Partnership Exhibit 10.15 to Registrant's Agreement of TCS Television Annual Report on Form 10-K Partners, L.P. dated January 17, for the fiscal year ended 1990 between Riverdale Media December 31, 1991 Corp. and ML Media Opportunity (File No. 0-16690) Partners, L.P.
10.16 First Amendment to Exhibit 10.16 to Registrant's Credit Agreement dated as of Annual Report on Form 10-K November 14, 1989 by and among for the fiscal year ended Maryland Cable Corp., and December 31, 1991 Citibank, N.A., as Agent. (File No. 0-16690)
10.17 Second Amendment to Exhibit 10.17 to Registrant's Credit Agreement dated March 30, Annual Report on Form 10-K 1990 by and among Maryland Cable for the fiscal year ended Corp. and Citibank, N.A., as December 31, 1991 Agent. (File No. 0-16690)
10.18 Security and Pledge Exhibit 10.18 to Registrant's Agreement between General Annual Report on Form 10-K Cellular Corporation and ML Media for the fiscal year ended Opportunity Partners, L.P. dated December 31, 1991 as of June 15, 1990. (File No. 0-16690)
10.19 Employment Agreement Exhibit 10.19 to Registrant's dated June 22, 1990 between Annual Report on Form 10-K Jessica J. Josephson and for the fiscal year ended International Media Publishing, December 31, 1991 Inc. (File No. 0-16690)
10.19.1 Agreement dated Exhibit 10.19.1 to November 1, 1992 between Venture Registrant's Annual Report on Media and Communications, L.P., Form 10-K for the fiscal year ML Media Opportunity Partners, ended December 31, 1992 L.P., Jessica J. Josephson, (File No. 0-16690) International Media Strategies, Inc. and International Media Publishing, L.P.
10.20 Limited Partnership Exhibit 10.20 to Registrant's Agreement of International Media Annual Report on Form 10-K Publishing L.P. dated June 22, for the fiscal year ended 1990. December 31, 1991 (File No. 0-16690)
10.20.1 Bill of Sale and Exhibit 10.20.1 to Agreement dated as of July 16, Registrant's Quarterly Report 1993 between International Media on Form 10-Q for the quarter Publishing, L.P. and Phillips ended June 30, 1993 Business Information Inc. (File No. 0-16690)
10.20.2 Bill of Sale and Exhibit 10.20.2 to Agreement dated as of July 16, Registrant's Quarterly Report 1993 between Intelidata Limited on Form 10-Q for the quarter and Phillips Business Information ended June 30, 1993 Inc. (File No. 0-16690)
10.20.3 Sale and Purchase Exhibit 10.20.3 to Agreement dated as of August 6, Registrant's Quarterly Report 1993 between Intelidata Limited on Form 10-Q for the quarter and Romtec plc. ended September 30, 1993 (File No. 0-16690)
10.21 TCS Television Exhibit 10.21 to Registrant's Partners, L.P. Note Purchase Annual Report on Form 10-K Agreement dated June 1, 1990. for the fiscal year ended December 31, 1991 (File No. 0-16690)
10.22 Amended and Restated Exhibit 10.22 to Registrant's Credit Agreement dated as of Annual Report on Form 10-K September 6, 1991, among Maryland for the fiscal year ended Cable Corp., Maryland Cable December 31, 1991 Holdings Corp. and Citibank, N.A. (File No. 0-16690) as Agent.
10.23 Participation Agreement Exhibit 10.23 to Registrant's dated as of September 6, 1991, Annual Report on Form 10-K among ML Cable Partners, L.P. and for the fiscal year ended Citibank, N.A., as Agent. December 31, 1991 (File No. 0-16690)
10.24 Limited Partnership Exhibit 10.24 to Registrant's Agreement of ML Cable Partners, Annual Report on Form 10-K L.P. dated as of September 4, for the fiscal year ended 1991. December 31, 1991 (File No. 0-16690)
10.25 Certificate of Limited Exhibit 10.25 to Registrant's Partnership of ML Cable Partners, Annual Report on Form 10-K L.P. for the fiscal year ended December 31, 1991 (File No. 0-16690)
10.26 Warrant Purchase Exhibit 10.26 to Registrant's Agreement dated as of September Annual Report on Form 10-K 6, 1991, among Maryland Cable for the fiscal year ended Holdings Corp. and Citibank, December 31, 1991 N.A., as Agent. (File No. 0-16690)
10.27 Class A Warrant to Exhibit 10.27 to Registrant's Purchase Common Stock of Maryland Annual Report on Form 10-K Cable Holdings corp., dated for the fiscal year ended September 6, 1991. December 31, 1991 (File No. 0-16690)
10.28 Amended and Restated Exhibit 10.28 to Registrant's Subordination Agreement dated as Annual Report on Form 10-K of September 6, 1991, among for the fiscal year ended Registrant, Maryland Cable Corp., December 31, 1991 Maryland Cable Holdings Corp. and (File No. 0-16690) Citibank, N.A. as Agent.
10.29 Amendatory Agreement, Exhibit 10.29 to Registrant's dated as of September 6, 1991Annual Report on Form 10-K among Maryland Cable Corp.,for the fiscal year ended Maryland Cable Holdings Corp.,December 31, 1991 and Citibank, N.A. as Agent.(File No. 0-16690)
10.30 Amended and Restated Exhibit 10.30 to Registrant's Guaranty to Maryland Cable Corp., Annual Report on Form 10-K dated as of September 6, 1991, by for the fiscal year ended Citibank, N.A. as Agent, and December 31, 1991 Maryland Cable Holdings Corp. (File No. 0-16690)
10.31 Agent's Fee Agreement Exhibit 10.31 to Registrant's dated as of September 6, 1991, Annual Report on Form 10-K between Citibank, N.A. and for the fiscal year ended Maryland Cable Corp. December 31, 1991 (File No. 0-16690)
10.32 Co-Sale Agreement dated Exhibit 10.32 to Registrant's as of September 6, 1991, among Annual Report on Form 10-K Registrant and Maryland Cable for the fiscal year ended Holdings Corp. December 31, 1991 (File No. 0-16690)
10.33 Agreement for the Sale Exhibit 10.33 to Registrant's and Purchase of Information Annual Report on Form 10-K Research Division of Logica UK for the fiscal year ended Limited, dated December 17, 1991. December 31, 1991 (File No. 0-16690)
10.34 Memorandum and Articles Exhibit 10.34 to Registrant's of Association of Intelidata Annual Report on Form 10-K Limited, dated as of October 18, for the fiscal year ended 1991. December 31, 1991 (File No. 0-16690)
10.35 Agreement among Bob Exhibit 10.35 to Registrant's Banner Associates, The Gary L. Annual Report on Form 10-K Pudney Co., ML Media Opportunity for the fiscal year ended Productions, Inc., and Registrant December 31, 1991 for withdrawal of Bob Banner (File No. 0-16690) Associates and the Gary L. Pudney Co. as General Partners from Paradigm Entertainment L.P. dated May 31, 1991.
10.35.1 Partnership Agreement Exhibit 10.35.1 to dated June 23, 1992 among Bob Registrant's Annual Report on Banner Associates, Inc. and Form 10-K for the fiscal year Paradigm Entertainment, L.P. ended December 31, 1992 (File No. 0-16690) 10.36a Articles of Association Exhibit 10.36a to Form 10-Q of Media Ventures Investments for the quarter ended March Ltd. 31, 1992 (File No. 0-16690)
10.36b Special Resolution of Exhibit 10.36b to Form 10-Q Media Ventures Investments Ltd. for the quarter ended March 31, 1992 (File No. 0-16690)
10.36c Articles of Association Exhibit 10.36c to Form 10-Q of European Media Partners, Ltd. for the quarter ended March 31, 1992 (File No. 0-16690)
10.36d Special Resolution of Exhibit 10.36d to Form 10-Q European Media Partners, Ltd. for the quarter ended March 31, 1992 (File No. 0-16690)
10.36e Certificate of Exhibit 10.36e to Form 10-Q Incorporation on Change of Name for the quarter ended March (various). 31, 1992 (File No. 0-16690)
10.36f Resolution of Exhibit 10.36f to Form 10-Q Investment by ALP Enterprises in for the quarter ended March European Media Partners, Ltd. 31, 1992 (File No. 0-16690)
10.36g Resolution of initial Exhibit 10.36g to Form 10-Q ownership structure of European for the quarter ended March Media Partners, Ltd. 31, 1992 (File No. 0-16690)
10.36h Agreement to transfer Exhibit 10.36h to Form 10-Q of International Programme for the quarter ended March Ventures Limited to European 31, 1992 Media Partners, Ltd. (File No. 0-16690)
10.36i Agreement for the Sale Exhibit 10.36i to Form 10-Q and Purchase of 50% of the issued for the quarter ended March Share Capital of Neomedion Ltd. 31, 1992 (File No. 0-16690)
10.36j Listing of Shareholders Exhibit 10.36j to Form 10-Q at May 14, 1992 of Mediaventures for the quarter ended March Investments Ltd., European Media 31, 1992 Partners, Ltd. and Neomedion Ltd. (File No. 0-16690)
10.37 Management Agreement by Exhibit 10.37 to Quarterly and between Fairfield Report on Form 10-Q for the Communications, Inc. and ML Media quarter ended June 30, 1993 Partners, L.P. and Registrant (File No. 0-16690) dated May 15, 1993.
10.37.1 Sharing Agreement by Exhibit 10.37.1 to Quarterly and among ML Media Partners, Report on Form 10-Q for the L.P., Registrant, RP Companies, quarter ended June 30, 1993 Inc., Radio Equity Partners, (File No. 0-16690) Limited Partnership and Fairfield Communications, Inc.
10.37.2 Option Agreement by and between U.S. Radio, Inc. and Registrant relating to station WMXN-FM dated January 25, 1994.
10.37.3 Time Brokerage Agreement by and between U.S. Radio, L.P. and Registrant relating to station WMXN-FM dated January 25, 1994.
99.1 Pages 13 through 21 and 41 Exhibit 28.1 to Registrant's through 50 of Prospectus of the Annual Report on Form 10-K Partnership dated December 31, for the fiscal year ended 1987, filed pursuant to Rule December 31, 1987 424(b) under the Securities Act (File No. 33-15502) of 1933.
99.2 Pages 12 through 15, 17, 18, Exhibit 28.2 to Registrant's 22 through 25, 41 through 53 and Annual Report on Form 10-K 55 through 72 of Prospectus for for the fiscal year ended Maryland Cable Corp.'s offering December 31, 1988 of $162,406,000 Senior (File No. 33-15502) Subordinated Discount Notes due 1998 and Maryland Cable Holdings Corp.'s offering of 2,000,000 Shares of Class B common Stock.
99.3 Form 8-K Current Report for Exhibit 28.3 to Registrant's ML Media Opportunity Partners, Quarterly Report on form 10-Q L.P. dated November 17, 1988. for the quarter ended September 29, 1989 (File No. 0-16690)
(b) Reports on Form 8-K
None.
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 OPPORTUNITY PARTNERS, L.P. By: Media Opportunity Management Partners General Partner
By: ML Opportunity Management Inc.
Dated: March 31, 1994 /s/ Kevin K. Albert Kevin K. Albert 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 OPPORTUNITY MANAGEMENT, L.P.
By: IMP Opportunity Management Inc. a general partner
Signature Title Date
/s/ I. Martin Pompadur Director and March 31, 1994 (I. Martin Pompadur) President(principal executive officer of the Registrant)
ML OPPORTUNITY MANAGEMENT INC. ("MLOM")
Signature Title Date
Each with respect to MLOM unless otherwise noted)
/s/ Kevin K. Albert Director and March 31, 1994 (Kevin K. Albert) President
/s/ Robert F. Aufenanger Director and March 31, 1994 (Robert F. Aufenanger) Executive Vice President
/s/ James K. Mason Director March 31, 1994 (James K. Mason)
/s/ Robert W. Seitz Director and Vice March 31, 1994 (Robert W. Seitz) President
/s/ David G. Cohen Treasurer March 31, 1994 (David G. Cohen) (principal accounting officer and principal financial officer of the Registrant) 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 OPPORTUNITY PARTNERS, L.P. By:Media Opportunity Management Partners General Partner
By:ML Opportunity Management Inc.
Dated: March , 1994 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 OPPORTUNITY MANAGEMENT, L.P.
By:IMP Opportunity Management Inc. a general partner
Signature Title Date
Director and March , 1994 (I. Martin Pompadur) President(principal executive officer)
ML OPPORTUNITY MANAGEMENT INC. ("MLOM")
Signature Title Date
Director and March , 1994 (Kevin K. Albert) President
Director and March , 1994 (Robert F. Aufenanger) Executive Vice President
Director March , 1994 (James K. Mason)
Director and Vice March , 1994 (Robert W. Seitz) President
Treasurer March , 1994 (David G. Cohen) (principal accounting officer and principal financial officer of the Registrant)