Items 1, 2 and 3 of Part I are omitted from this filing for the reasons
described in Part II, Item 5.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended March 26, 2004
Or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission file number 0-14871
ML MEDIA PARTNERS, L.P.
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(Exact name of registrant as specified in its charter)
Delaware 13-3321085
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Four World Financial Center - 23rd Floor
New York, New York 10080
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (800) 288-3694
Title of each Class Name of each exchange on which registered
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None Not applicable
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes No X
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Indicate by check mark whether the registrant is an accelerated filer as
defined in Rule 12b-2 of the Exchange Act.
Yes X No
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ML-MEDIA PARTNERS, L.P.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Item 3. Quantitative and Qualitative Disclosure about Market Risk.
Item 4. Controls and Procedures.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of
Equity Securities.
Item 3. Defaults upon Senior Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
---------------------
See Part II, Item 5.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
------------------------------------------------------------------
See Part II, Item 5.
Item 3. Quantitative and Qualitative Disclosure about Market Risk.
----------------------------------------------------------
See Part II, Item 5.
Item 4. Controls and Procedures.
------------------------
ML Media Partners, L.P. (the "Registrant" or the "Partnership") maintains
disclosure controls and procedures designed to ensure that information required
to be disclosed in Registrant's filings under the Securities Exchange Act of
1934, as amended, is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission's rules and
forms. Registrant's chief executive officer and chief financial officer have
evaluated, with the participation of Registrant's management, the effectiveness
of Registrant's disclosure controls and procedures as of the end of the period
covered by this report. Based on the evaluation, Registrant's chief executive
officer and chief financial officer concluded that Registrant's disclosure
controls and procedures are effective. However, see Part II, Item 5, Other
Information.
There have been no changes in Registrant's internal control over financial
reporting that occurred during the period covered by this Form 10-Q that have
materially affected, or are reasonably likely to materially affect, Registrant's
internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
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As of March 26, 2004, Registrant's sole remaining operating investment in
media properties is its 50% interest in Century/ML Cable Venture (the "Venture"
or "C-ML Cable"), a joint venture with Century Communications Corp. ("Century",
a subsidiary of Adelphia Communications Corporation ("Adelphia")) that owns two
cable television systems in Puerto Rico. On December 13, 2001, Registrant
entered into a Leveraged Recapitalization Agreement (the "Recapitalization
Agreement") pursuant to which the Venture agreed to redeem Registrant's 50%
interest in the Venture at a closing to be held on September 30, 2002, for a
purchase price of $279.8 million. Highland Holdings ("Highland"), a Pennsylvania
general partnership owned by members of the Rigas family (the controlling
shareholders of Adelphia at that time), agreed to arrange financing for the
Venture in the amount required to redeem Registrant's interest in the Venture
and Adelphia agreed to guaranty the financing. If the Venture failed for any
reason to redeem Registrant's 50% interest in the Venture, the Recapitalization
Agreement required Adelphia to purchase Registrant's interest in the Venture at
the same price and on the same terms that applied to the redemption in the
Recapitalization Agreement. Century pledged its 50% interest in the Venture as
security for Adelphia's obligation to consummate the purchase of Registrant's
interest in the Venture if the Venture failed to redeem the interest. However,
on June 10, 2002, Century filed a voluntary petition for relief under Chapter 11
of the Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of
New York and, under bankruptcy law, Century's bankruptcy filing precludes
Registrant from foreclosing at this time and will significantly delay
Registrant's ability to foreclose on Century's 50% interest.
On June 12, 2002, Registrant commenced an action against the Venture,
Adelphia and Highland in New York Supreme Court, New York County, seeking
specific performance of the Recapitalization Agreement and compensatory and
punitive damages for breach by the defendants, including, but not limited to,
payment of the full purchase price of $279.8 million for Registrant's interest
in the Venture.
Century and Adelphia removed Registrant's action to the United States
Bankruptcy Court for the Southern District of New York. Adelphia filed its own
Chapter 11 bankruptcy on June 25, 2002, and Registrant's actions have been
docketed as adversary proceedings before the Bankruptcy Judge overseeing the
bankruptcy of Adelphia and Century. In addition, on September 30, 2002, Adelphia
and Century, over the Registrant's objections, caused the Venture to file for
bankruptcy protection.
On June 21, 2002, the Bankruptcy Judge permitted Registrant to withdraw the
$10 million that had been deposited in escrow by Highland as security for
Highland's, Adelphia's and the Venture's performance of their obligations under
the Recapitalization Agreement.
Registrant amended its complaint to add Century as a defendant as well, and
seeks damages for breach of the Recapitalization Agreement from all four
defendants (the Venture, Adelphia, Century and Highland), as well as specific
performance by Adelphia and Century of their obligations to turn over management
rights of the Venture to Registrant. Thereafter, Registrant moved for judgment
as a matter of law against all four defendants, and each of the defendants moved
to dismiss the amended complaint. On January 17, 2003, the Bankruptcy Court
denied defendants' motions, denied Registrant's motion in part and granted
Registrant's motion in part, holding that, to the extent the Recapitalization
Agreement is an enforceable contract, all defendants were in default under that
contract by no later than October 1, 2002, the last possible date for
consummation of the transactions contemplated by the Recapitalization Agreement.
Thereafter, on January 27, 2003, Adelphia and Century filed counterclaims
seeking to have the Recapitalization Agreement declared unenforceable as a
fraudulent conveyance and on the ground that the Recapitalization Agreement was
procured by the alleged fraud of the Rigas family on Adelphia, and seeking
additional unspecified damages. The Venture filed nearly identical counterclaims
on April 30, 2003, seeking to have its own obligations under the
Recapitalization Agreement declared unenforceable.
Because the Partnership has sued Adelphia, Century, the Venture and
Highland seeking to enforce its claim under the Recapitalization Agreement, and
because the Partnership claims entitlement to the recovery of its damages and/or
the sale proceeds from any of those entities, including the Venture, the
Partnership is "adverse" to the Venture for this purpose, and the Venture has
separate counsel. The Partnership moved to have each of these counterclaims
dismissed as a matter of law and to have the defendants' affirmative defenses
stricken. On April 15, 2004, the Court notified the parties that it had reached
a decision on the Partnership's motions, but that it intended to write a full
decision only if requested by the parties. The Court stated that it was going to
dismiss all but one of the counterclaims by Adelphia and Century. As to the
remaining counterclaim (for aiding and abetting a breach of fiduciary duty), the
Court indicated that it was likely that Adelphia would not be entitled to any
damages even if it could prove that claim, but stated that the Court would
decide that issue after more discovery had been taken. The Court also stated
that it was going to dismiss all but one of the counterclaims by the Venture,
leaving only a claim for constructive fraudulent conveyance to be further
developed through discovery. The Court has not yet entered an order implementing
these decisions and therefore the time to seek leave to appeal these decisions
has not yet started to run.
On March 31, 2003, the Bankruptcy Court refused to turn over day-to-day
management rights of the Venture to the Partnership, but granted the
Partnership's motion requiring Adelphia and Century to accept or reject the
Recapitalization Agreement by no later than June 30, 2003. Adelphia and Century
have elected to reject the Recapitalization Agreement, an election that will be
treated under the bankruptcy laws as a breach of the Recapitalization Agreement
by Adelphia and Century (giving the Partnership a claim for damages against
Adelphia and Century, payable through the bankruptcy proceedings of those
entities if the Recapitalization Agreement is held to be enforceable). As noted
above, because each of Adelphia, Century, the Venture and Highland are jointly
and severally obligated under the Recapitalization Agreement, the Partnership
will be entitled to satisfy any judgment for damages from the assets of the
Venture (which has sufficient net assets to satisfy such judgment) as well as
from Adelphia, Century and Highland.
Adelphia and Highland also seek recovery of the $10 million which had been
deposited into escrow as security for Highland's, Adelphia's and the Venture's
performance of their obligations under the Recapitalization Agreement and which
the Bankruptcy Judge permitted the Partnership to withdraw in June 2002.
Discovery proceedings with regard to the Partnership's claims and the
remaining counterclaims are continuing; however, due to the existence of
criminal prosecution against the Rigas family, discovery on the Partnership's
matter cannot be completed until after the conclusion of those criminal
proceedings and, therefore, it is difficult to predict when the Partnership's
matter may go to trial.
In addition, on April 21, 2003 the Bankruptcy Court denied the
Partnership's motion to dismiss the bankruptcy filing by the Venture. The
creditors of the Venture have filed their claims against the Venture (including
the claim of the Partnership for breach of the Recapitalization Agreement) and
the Venture is in the process of reviewing such claims. The Venture will then be
able to consider potential plans for reorganization that take these claims into
account.
The exclusivity period for the Venture (i.e., the period where only the
Venture can propose a plan of reorganization) was scheduled to expire on April
6, 2004, and the Partnership proposed an end to exclusivity so as to enable the
Partnership to propose its own plan of reorganization. The parties have now
agreed that exclusivity will be extended, but modified so as to allow any of the
Partnership, Adelphia or Century to propose a plan of reorganization.
In addition, the Partnership seeks to market the ownership interests in the
Venture to potential third-party purchasers and, on April 15, 2004, the
Bankruptcy Court directed Adelphia to cooperate in providing due diligence to
the Vaughn Group, as described in the Partnership's Current Report on Form 8-K
filed on April 6, 2004. The Partnership, Adelphia and Century are in the process
of submitting motions to the Bankruptcy Court to determine the appropriate
process for the marketing and potential sale of all or part of the interests in
the Venture.
For the three months ended March 26, 2004, Registrant incurred
approximately $446,000 for legal costs relating to the above litigation.
Cumulatively, the legal costs related to such litigation efforts totaled
approximately $5,183,000 through March 26, 2004.
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of
Equity Securities.
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Not applicable.
Item 3. Defaults Upon Senior Securities.
--------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
No matter was submitted to a vote of security holders during the period
covered by this report.
Item 5. Other Information.
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(a) For the reasons stated below, the Partnership's consolidated financial
statements for the quarterly periods ended March 28, 2003 and March 26, 2004
have been omitted from Item 1, Part I of this report. Accordingly, information
derived from the financial statements that otherwise would be included in Items
2 and 3 of Part I are also omitted. Financial statements for the fiscal years
ended December 31, 1999 and December 25, 1998 were filed on May 3, 2000 with the
Partnership's annual report on Form 10-K for the year ended December 31, 1999.
Additionally, financial statements for the quarter and year to date period ended
September 29, 2000 were filed with the Partnership's quarterly report on Form
10-Q for the quarter ended September 29, 2000.
The financial statements of C-ML Cable, the joint venture between the
Partnership and Adelphia that owns cable television systems in Puerto Rico, are
a material component of the Partnership's financial statements. Under the terms
of the joint venture agreement relating to C-ML Cable, Adelphia has the
responsibility for maintaining the books and records of the joint venture.
Although Adelphia had previously furnished to the Partnership audited financial
statements of C-ML Cable for the year ended December 31, 2000, the Partnership
has raised questions with respect to certain items in those financial
statements, as reported in the Partnership's Form 10-Q for the quarter ended
September 29, 2000. The Partnership has not received satisfactory responses from
Adelphia with respect to such questions, and accordingly, has been unable to
prepare financial statements for the years ended December 29, 2000, December 28,
2001, December 27, 2002 and December 26, 2003. In addition, as a result of the
recent events surrounding Adelphia as described above, Deloitte & Touche LLP,
the auditors for C-ML Cable, has retracted its audit of C-ML Cable for the years
ended December 31, 1999, 2000 and 2001. In consideration of these circumstances,
the Partnership has determined that it has been inappropriate and continues to
be inappropriate at this time to file financial statements that rely on
information contained in the financial statements of C-ML Cable for the years
ended December 31, 2000 and 2001. Additionally, audited statements of C-ML Cable
for the years ended December 31, 2002 and 2003 have not been released as of the
date of this filing. The Partnership, therefore, is unable to prepare and
include herewith, financial statements that rely on such financial information
of C-ML Cable.
(b) The Registrant has no executive officers or directors. Media Management
Partners, a New York general partnership (the "General Partner"), is
Registrant's sole general partner and manages the Registrant's affairs and has
general responsibility and authority in all matters affecting its business. As a
result, the Registrant must look to the directors of IMP Media Management, Inc.
and ML Media Management Inc., the corporate general partners of the General
Partner (or, in the case of RP Media Management, its corporate general partner),
as fulfilling the role of the Registrant's board. The Registrant does not have
in place procedures by which security holders may recommend nominees to the
Registrant's board.
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
1. Exhibits
The certifications required to be filed or furnished, respectively, with
this report pursuant to Rule 13a-14 under the Securities Exchange Act of 1934
have not been so filed or furnished herewith as a result of the matters
discussed in Part II, Item 5.
2. Reports on Form 8-K:
No report on Form 8-K was filed during the quarterly period covered by this
interim report. A Form 8-K was filed on April 6, 2004 as referenced in Part II,
Item 1.
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized on the 5th day of May, 2004.
ML-MEDIA PARTNERS, L.P.
By: Media Management Partners
General Partner
By: ML Media Management Inc.
By:
/s/ Kevin K. Albert
--------------------
Kevin K. Albert
Director and President
ML Media Management Inc.
RP Media Management
By:
/s/ I. Martin Pompadur
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(I. Martin Pompadur)
Director, President and Secretary
(Principal Executive Officer of Registrant)
ML Media Management Inc.
By:
/s/ Robert Ollwerther
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Robert Ollwerther
Vice President and Treasurer
ML Media Management Inc.
(Principal Financial Officer of Registrant)