Items 8 and 15 (a) (1) and (2) and corresponding references in Items 1, 6,
7 and 7A are omitted from this filing for the reasons described in Item 15.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Fiscal Year Ended December 31, 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.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3321085
- --------------------------------------------------------------------------------
(State or other jurisdiction of organization) (IRS Employer Identification No.)
Four World Financial Center - 23rd Floor
New York, New York 10080
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (800) 288-3694
Securities registered pursuant to Section 12(b) of the Act:
None
- --------------------------------------------------------------------------------
(Title of Class)
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
- --------------------------------------------------------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes No X
------ ---------
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in a definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
---------
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes No X
------- -----
As of March 1, 2005, 187,061 units of limited partnership interest ("Units")
were held by non-affiliates of the registrant. There is no established public
trading market for such Units.
18
Part I
Item 1. Business.
--------
Formation
ML Media Partners, L.P. (the "Registrant" or the "Partnership"), a Delaware
limited partnership, was organized February 1, 1985. Media Management Partners,
a New York general partnership (the "General Partner"), is Registrant's sole
general partner. The General Partner is a joint venture, organized as a general
partnership under New York law, between RP Media Management ("RPMM") and ML
Media Management Inc. ("MLMM"). MLMM, a Delaware corporation, is an indirect
wholly-owned subsidiary of Merrill Lynch & Co., Inc. and an affiliate of Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"). RPMM was organized
as a general partnership under New York law, consisting of The Elton H. Rule
Company and IMP Media Management Inc. As a result of the death of Elton H. Rule,
the owner of The Elton H. Rule Company, the general partner interest of The
Elton H. Rule Company was acquired by IMP Media Management Inc., a corporation
controlled by I. Martin Pompadur and a corporation wholly-owned by I. Martin
Pompadur. The General Partner was formed for the purpose of acting as general
partner of Registrant.
Registrant was formed 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.
On February 4, 1986, Registrant commenced the offering through Merrill
Lynch of up to 250,000 units of limited partnership interest ("Units") at $1,000
per Unit. Registrant held four closings of Units; the first for subscriptions
accepted prior to May 14, 1986 representing 144,990 Units aggregating
$144,990,000; the second for subscriptions accepted thereafter and prior to
October 9, 1986 representing 21,540 Units aggregating $21,540,000; the third for
subscriptions accepted thereafter and prior to November 18, 1986 representing
6,334 Units aggregating $6,334,000; and the fourth and final closing of Units
for subscriptions accepted thereafter and prior to March 2, 1987 representing
15,130 Units aggregating $15,130,000. At these closings, including the initial
limited partner capital contribution, subscriptions for an aggregate of
187,994.1 Units representing the aggregate capital contributions of $187,994,100
were accepted. During 1989, the initial limited partner's capital contribution
of $100 was returned.
The Registration Statement relating to the offering was filed on December 19,
1985 pursuant to the Securities Act of 1933 under Registration Statement No.
33-2290 and was declared effective on February 3, 1986 and amendments thereto
became effective on September 18, 1986, November 4, 1986 and on December 12,
1986 (such Registration Statement, as amended from and after each such date, the
"Registration Statement").
Media Properties
Century/ML Cable Venture
As of December 31, 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")).
The Venture owns two cable television systems in Puerto Rico.
(a) Litigation Against Adelphia Communications Corporation and Others
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. 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 a lawsuit against the Venture,
Adelphia and Highland in New York State Supreme Court, 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.
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. Adelphia, Century and the Venture filed
counterclaims against Registrant alleging, among other things, that the
Recapitalization Agreement was an invalid fraudulent conveyance and that
Registrant aided and abetted a breach of fiduciary duty by certain members of
the Rigas family in entering into the Recapitalization Agreement.
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. Both Adelphia and Highland have filed
counterclaims against the Registrant seeking the return of those funds.
The Court has ruled that the Venture, Adelphia, Century and Highland
defaulted in their obligations to pay the purchase price set under the
Recapitalization Agreement to Registrant by no later than September 30, 2002,
subject to a determination that the Recapitalization Agreement is enforceable.
The determination of enforceability has been reduced to two claims. On April 15,
2004, the Court ruled that it was going to dismiss all but one of the eleven
counterclaims filed by Adelphia and Century. The sole remaining counterclaim
alleges that the Registrant aided and abetted a breach of fiduciary duty by the
Rigas family members against Adelphia and Century. 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 litigation as to these remaining issues is continuing;
however, it is difficult to predict when this lawsuit may be finally resolved.
(b) Bankruptcy Claims Against Adelphia, Century and the Venture
On October 8, 2004, Registrant filed claims in the Chapter 11 cases of
Adelphia and Century, including its claim for breach of the Recapitalization
Agreement, its secured claim against Century for breach of the Recapitalization
Agreement, and other claims based on Adelphia's breaches of the management
provisions of the Joint Venture Agreement and breach of fiduciary duty. The
Venture separately has filed its own claims against Adelphia and Century.
Because the Venture was placed into Chapter 11 bankruptcy by Adelphia,
creditors of the Venture also had to file claims against the Venture. On January
15, 2004, Registrant filed a claim against the Venture for breach of the
Recapitalization Agreement. 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. That period has been extended, but
modified to allow any of Registrant, Adelphia or Century to propose a plan of
reorganization. The exclusivity period has been further extended by the Court
and currently expires on June 30, 2005.
(c) Related Matters
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. Pursuant to a letter agreement with the Vaughn Group,
the Partnership agreed that it would not discuss or negotiate a sale of the
interests in the Venture with any other person, except Adelphia, during an
exclusivity period, which expired in May 2004. No agreement was reached with the
Vaughn Group and the Partnership began marketing all of the interests in the
Venture, and Adelphia began marketing a portion of its interests in the Venture.
Several non-binding bids were received for all of the interests in the Venture.
Adelphia and Century have informally agreed to join with the Partnership in a
potential sale of all of the interests in the Venture and the sale process is
continuing. Adelphia, Century and the Partnership are currently negotiating
exclusively with one potential purchaser. However, there can be no assurances
that any agreement will be reached to sell the Partnership's interest in the
Venture on terms acceptable to the Partnership. In addition, any sale will be
subject to approval of the Bankruptcy Court.
Liquidated Media Properties
The Partnership has completed the sale of the following media properties:
o an AM and FM radio station combination in Bridgeport, Connecticut was
sold on August 31, 1999;
o a corporation which owns an FM radio station in Cleveland, Ohio was sold
on January 28, 1999;
o an AM and FM radio station combination in Anaheim, California was sold on
January 4, 1999;
o an AM and FM radio station combination and a background music service in
San Juan, Puerto Rico was sold on June 3, 1998;
o four cable television systems located in the California communities of
Anaheim, Hermosa Beach/Manhattan Beach, Rohnert Park/Yountville, and Fairfield
were sold on May 31, 1996;
o a VHF television station located in Lafayette, Louisiana was sold on
September 30, 1995;
o a VHF television station located in Rockford, Illinois was sold on July
31, 1995;
o an AM and FM radio station combination in Indianapolis, Indiana was sold
on October 1, 1993;
o the Universal Cable systems were sold on July 8, 1992; and
o two radio stations, one located in Tulsa, Oklahoma and the other in
Jacksonville, Florida, were sold on July 31, 1990.
Puerto Rico Investments
Cable Television Investments
Pursuant to the management agreement and joint venture agreement dated
December 16, 1986 (the "Joint Venture Agreement"), as amended and restated,
between Registrant and Century, the parties formed the Venture under New York
law, in which each has a 50% ownership interest. On December 16, 1986 the
Venture, through its wholly-owned subsidiary corporation, Century-ML Cable
Corporation ("C-ML Cable Corp."), purchased all of the stock of Cable Television
Company of Greater San Juan, Inc. ("San Juan Cable"), and liquidated San Juan
Cable into C-ML Cable Corp. C-ML Cable Corp., as successor to San Juan Cable, is
the operator of the largest cable television system in Puerto Rico.
On September 24, 1987, the Venture acquired all of the assets of Community
Cable-Vision of Puerto Rico, Inc., Community Cablevision of Puerto Rico
Associates, and Community Cablevision Incorporated (collectively, the "Community
Companies"), which consisted of a cable television system serving the
communities of Catano, Toa Baja and Toa Alta, Puerto Rico, which are contiguous
to San Juan Cable. C-ML Cable Corp. and the Community Companies are herein
referred to as C-ML Cable ("C-ML Cable").
On October 1, 1999, Adelphia, through its wholly owned subsidiary Arahova
Communications Inc. ("Arahova"), consummated its acquisition of Century. While
Adelphia's purchase included Century's 50% interest in C-ML Cable, it did not
include a purchase of Registrant's 50% interest in C-ML Cable.
On December 13, 2001, Registrant entered into the Recapitalization
Agreement described above.
Radio Investments
On February 15, 1989, Registrant and Century entered into a Management
Agreement and Joint Venture Agreement whereby a new joint venture, Century-ML
Radio Venture ("C-ML Radio"), was formed under New York law. Responsibility for
the management of radio stations to be acquired by C-ML Radio was assumed by
Registrant.
On March 10, 1989, C-ML Radio acquired all of the issued and outstanding
stock of Acosta Broadcasting Corporation ("Acosta"), Fidelity Broadcasting
Corporation ("Fidelity"), and Broadcasting and Background Systems Consultants
Corporation ("BBSC"), all located in San Juan, Puerto Rico. The purchase price
for the stock was approximately $7.8 million. At the time of acquisition, Acosta
owned radio stations WUNO-AM and Noti Uno News, Fidelity owned radio station
WFID-FM, and BBSC owned Beautiful Music Services, all serving various
communities within Puerto Rico.
In February 1990, C-ML Radio acquired the assets of Radio Ambiente Musical
Puerto Rico, Inc. ("RAM"), a background music service. The purchase price was
approximately $200,000 and was funded with cash generated by C-ML Radio. The
operations of RAM were consolidated into those of BBSC.
Effective January 1, 1994, all of the assets of C-ML Radio were transferred
to the Venture in exchange for the assumption by the Venture of all the
obligations of C-ML Radio and the issuance to Century and Registrant by the
Venture of new certificates evidencing partnership interests of 50% and 50%,
respectively. The transfer was made pursuant to a Transfer of Assets and
Assumption of Liabilities Agreement. At the time of this transfer, Registrant
and Century entered into an amended and restated management agreement and joint
venture agreement (the "Revised Joint Venture Agreement") governing the affairs
of the Venture as revised.
Under the terms of the Revised Joint Venture Agreement, Century is
responsible for the day-to-day operations of C-ML Cable and until the sale of
C-ML Radio (see below), Registrant was responsible for the day-to-day operations
of C-ML Radio. For providing services of this kind, Century is entitled to
receive annual compensation of 5% of C-ML Cable's net gross revenues (defined as
gross revenues from all sources less monies paid to suppliers of pay TV product,
e.g., HBO, Cinemax, Disney and Showtime) and Registrant was entitled to receive
annual compensation of 5% of C-ML Radio's gross revenues including the local
marketing agreement ("LMA") revenue (after agency commissions, rebates or
discounts and excluding revenues from barter transactions). Pursuant to the
Recapitalization Agreement, Century was entitled to increase the management fee
from 5% to 10% and Century was obligated to reimburse the Venture the excess fee
if the transaction does not close. With the Venture, Highland and Adelphia
having now defaulted, Registrant intends to pursue its rights under the
Recapitalization Agreement seeking reimbursement of the excess fees.
On June 3, 1998, the Venture consummated the sale of C-ML Radio pursuant to
a sales agreement entered into in October 1997 between the Venture and Madifide,
Inc. The base sales price for C-ML Radio was approximately $11.5 million,
approximately $5.8 million of which was Registrant's share, subject to closing
adjustments. Pursuant to an LMA entered into, effective as of October 1, 1997,
the buyer was allowed to program the station from such date through the date of
sale. C-ML Radio collected a monthly LMA fee from the buyer, which was equal to
the operating income for that month, provided however, that it not be less than
$50,000 or more than $105,000. The monthly fee was recognized as revenue during
the LMA period and Registrant did not recognize any operating revenues nor incur
any net operating expenses of C-ML Radio during the LMA period. At the closing,
the Venture and Madifide, Inc. entered into escrow agreements pursuant to which
the Venture deposited, in aggregate, approximately $725,040, $362,520 of which
was Registrant's share, into three separate escrow accounts with respect to
which indemnification, benefit, and chattel mortgage claims could be made by
Madifide, Inc. for a period of one year. All of the escrows have been released.
California Cable Systems
In December 1986, ML California Cable Corporation ("ML California"), a
wholly-owned subsidiary of Registrant, entered into an agreement with SCIPSCO,
Inc. ("SCIPSCO"), a wholly-owned subsidiary of Storer Communications, Inc. for
the acquisition by ML California of four cable television systems servicing the
California communities of Anaheim, Hermosa Beach/Manhattan Beach, Rohnert
Park/Yountville, and Fairfield and surrounding areas. The acquisition was
completed on December 23, 1986 with the purchase by ML California of all of the
stock of four subsidiaries of SCIPSCO, which at closing owned all the assets of
the California cable television systems. The term "California Cable Systems" or
"California Cable" as used herein means either the cable systems or the owning
entities, as the context requires.
On December 30, 1986, ML California was liquidated into Registrant and
transferred all of its assets, except its Federal Communications Commission
("Commission" or "FCC") licenses, subject to its liabilities, to Registrant. The
licenses were transferred to ML California Associates, a partnership formed
between Registrant and the General Partner for the purpose of holding the
licenses in which Registrant is Managing General Partner and 99.99% equity
holder.
On November 28, 1994, Registrant entered into an agreement (the "Asset
Purchase Agreement") with Century to sell to Century substantially all of the
assets used in Registrant's California Cable Systems. On May 31, 1996,
Registrant consummated such sale pursuant to the terms of the Asset Purchase
Agreement. The base purchase price for the California Cable Systems was $286
million, subject to certain adjustments including an operating cash flow as well
as a working capital adjustment as provided in the Asset Purchase Agreement.
On August 15, 1996, Registrant made a cash distribution to limited partners
of record on May 31, 1996 of approximately $108.1 million ($575 per Unit) and
approximately $1.1 million to its General Partner, representing its 1% share,
from net distributable sales proceeds from the sale of the California Cable
Systems.
In addition, upon closing of the sale of the California Cable Systems,
Registrant set aside approximately $40.7 million in a cash reserve to cover
operating liabilities, current litigation, and litigation contingencies relating
to the California Cable Systems' operations prior to and resulting from their
sale, as well as a potential purchase price adjustment. In accordance with the
terms of the Partnership Agreement, any amounts which may be available for
distribution from any unused cash reserves, after accounting for certain other
expenses of Registrant including certain expenses incurred after May 31, 1996,
will be distributed to partners of record as of the date such unused reserves
are released, rather than to the partners of record on May 31, 1996, the date of
the sale.
Effective August 14, 1997, reserves in the amount of approximately $13.2
million were released and, after accounting for certain expenses of Registrant,
in accordance with the terms of the Partnership Agreement, were included in the
cash distribution that was distributed to partners on November 25, 1997. On
March 1, 1999, reserves in the amount of approximately $6.1 million were
released and, in accordance with the terms of the Partnership Agreement, were
included in the cash distribution made to partners on March 31, 1999. Effective
December 14, 2001, reserves in the amount of approximately $6.7 million were
released and, after accounting for certain expenses of Registrant, in accordance
with the terms of the Partnership Agreement, were included in the cash
distribution that was distributed to partners on January 25, 2002.
As of December 31, 2004, Registrant had approximately $6.5 million
remaining in cash reserves to cover operating liabilities, current litigation,
and litigation contingencies relating to the California Cable Systems prior to
and resulting from their sale.
WEBE-FM and WICC-AM
On August 20, 1987, Registrant entered into an Asset Purchase Agreement
with 108 Radio Company, L.P. for the acquisition of the business and assets of
radio station WEBE-FM, Westport, Connecticut ("WEBE-FM" or "WEBE"), which serves
Fairfield and New Haven counties, for $12.0 million.
On July 19, 1989, Registrant purchased all of the assets of radio station
WICC-AM located in Bridgeport, Connecticut ("WICC-AM" or "WICC") from
Connecticut Broadcasting Company, Inc. The purchase price of $6.25 million was
financed solely from proceeds of the Wincom-WEBE-WICC Loan.
On August 31, 1999, Registrant consummated a sale to Aurora Communications,
LLC ("Aurora") (formerly known as Shadow Communications, LLC) of substantially
all of the assets used in the operations of Registrant's radio stations, WEBE-FM
and WICC-AM (the "Connecticut Stations"), pursuant to a sales agreement dated
April 22, 1999 (the "Connecticut Agreement").
The base sales price for the Connecticut Stations was $66 million, subject
to certain adjustments, including a working capital adjustment, as provided in
the Connecticut Agreement.
Pursuant to the Connecticut Agreement, Registrant deposited $3.3 million
into an indemnity escrow account against which Aurora could make indemnification
claims until December 31, 2000; no such claims were made. At the closing,
pursuant to the terms of the Wincom-WEBE-WICC Loan, an initial amount of
approximately $8.2 million was paid to the Wincom Bank, as partial payment of
the lender's 15% residual interest in the net proceeds from the sale of the
Connecticut Stations. In addition, Registrant held approximately $11.5 million
of the sales proceeds to pay (or to reserve for payment of) expenses and
liabilities relating to the operations of the Connecticut Stations prior to the
sale, as well as wind-down expenses, sale-related expenses, contingent
obligations of the Connecticut Stations, and the balance of the 15% residual
interest in the net sales proceeds payable to the lender under the
Wincom-WEBE-WICC Loan. On October 29, 1999, the remaining sales proceeds of
approximately $36.4 million, after accounting for certain expenses of
Registrant, were distributed to partners of record as of August 31, 1999, in
accordance with the terms of the Partnership Agreement.
On January 24, 2001, $3.3 million plus interest was released from the
escrow account relating to the sale of the Connecticut Stations. In addition, on
April 30, 2001, approximately $4.6 million was released from the reserve
established upon such sale. In accordance with the terms of the Partnership
Agreement, the amounts of such discharged escrowed proceeds and released
reserves from the sale of the Connecticut Stations, after accounting for certain
expenses of Registrant, were included in a cash distribution to partners on May
29, 2001.
As of December 31, 2004, Registrant had approximately $74,000 remaining in cash
reserves from the sale of the Connecticut Stations.
Wincom
On August 26, 1988, Registrant acquired 100% of the stock of Wincom
Broadcasting Corporation ("Wincom"), an Ohio corporation headquartered in
Cleveland, for $46.0 million. At acquisition, Wincom and its subsidiaries owned
and operated five radio stations - WQAL-FM, Cleveland, Ohio; WCKN-AM/WRZX-FM,
Indianapolis, Indiana (the "Indianapolis Stations", including the Indiana
University Sports Radio Network, which was discontinued after the first half of
1992); KBEZ-FM, Tulsa, Oklahoma; and WEJZ-FM, Jacksonville, Florida. On July 31,
1990, Registrant sold the business and assets of KBEZ-FM and WEJZ-FM to Renda
Broadcasting Corp. for net proceeds of approximately $10.3 million. On October
1, 1993, Registrant sold the Indianapolis stations, which generated net proceeds
in the approximate amount of $6.1 million. All proceeds of the sales were paid
to the lender.
On January 28, 1999, Registrant consummated a sale to Chancellor Media
Corporation of Los Angeles ("Chancellor") of the stock of Wincom, pursuant to a
stock purchase agreement (the "Cleveland Agreement") dated August 11, 1998.
Wincom owns all of the outstanding stock of Win Communications, Inc. ("WIN"),
which owns and operates the radio station WQAL-FM, serving Cleveland, Ohio (the
"Cleveland Station").
The base sales price for the Cleveland Station was $51,250,000, subject to
certain adjustments for the apportionment of current assets and liabilities as
of the closing date, as provided for in the Cleveland Agreement, resulting in a
reduction of the base sales price of approximately $1.6 million.
Pursuant to the Cleveland Agreement, Registrant deposited $2.5 million into
an indemnity escrow account against which Chancellor could make indemnification
claims for a period of up to two years after the closing; no such claims were
made. Approximately $2.0 million was used to repay in full the remaining
outstanding balance of the Wincom-WEBE-WICC Loan and pursuant to the terms of
the Wincom-WEBE-WICC Loan, an initial amount of approximately $7.3 million was
paid to the Wincom Bank, pursuant to its 15% residual interest in the net sales
proceeds from the sale of Wincom. In addition, Registrant held approximately
$2.6 million of the sales proceeds to pay (or to reserve for payment of)
wind-down expenses, sale-related expenses and the balance, if any, of the Wincom
Bank's residual interest. The remaining sales proceeds of $35.3 million were
included in the cash distribution made to partners on March 30, 1999 in
accordance with the terms of the Partnership Agreement.
On February 4, 2000, Registrant received the discharge of escrowed proceeds
of $1.5 million, plus interest earned thereon, generated from the sale of the
Cleveland Station. In accordance with the terms of the Partnership Agreement,
the amount of such discharged escrowed proceeds, after accounting for certain
expenses of Registrant, were included in the cash distribution to partners of
record as of February 4, 2000, on June 21, 2000.
On February 5, 2001, the remaining $1.0 million plus interest was released
from the escrow account relating to the sale of the Cleveland Station. In
addition, on April 30, 2001, approximately $2.3 million was released from the
reserve established upon such sale. In accordance with the terms of the
Partnership Agreement, the amounts of such discharged escrowed proceeds and
released reserves from the sale of the Cleveland Station, after accounting for
certain expenses of Registrant, were included in a cash distribution to partners
on May 29, 2001.
As of December 31, 2004, Registrant had approximately $76,000 remaining in cash
reserves from the sale of the Cleveland Station.
KEZY-FM and KORG-AM
On November 16, 1989, Registrant acquired an AM ("KORG-AM") and an FM
("KEZY-FM") (jointly the "Anaheim Stations" or "KORG/KEZY") radio station
combination located in Anaheim, California, from Anaheim Broadcasting
Corporation. The total acquisition cost was approximately $15.1 million.
On January 4, 1999, Registrant consummated a sale to Citicasters Co., a
subsidiary of Jacor Communications, Inc. ("Citicasters") of substantially all of
the assets, other than cash and accounts receivable, used in the operations of
the Anaheim Stations pursuant to the asset purchase agreement (the "Anaheim
Agreement") dated September 14, 1998, as amended.
The base sales price for the Anaheim Stations was $30,100,000, subject to
certain adjustments for the apportionment of income and liabilities as of the
closing date, as provided for in the Anaheim Agreement, resulting in a reduction
of the base sales price of approximately $20,000.
Pursuant to the Anaheim Agreement, Registrant deposited $1.0 million into
an indemnity escrow account against which Citicasters could make indemnification
claims for a period of one year after the closing. In addition, Registrant held
approximately $5.2 million of the sales proceeds to pay (or to reserve for
payment of) expenses and liabilities relating to the operations of the Anaheim
Stations prior to the sale as well as wind-down expenses, sale-related expenses
and contingent obligations of the Anaheim Stations. The remaining sales proceeds
of approximately $23.9 million were included in the cash distribution made to
partners on March 30, 1999, after accounting for certain expenses of Registrant,
in accordance with the terms of the Partnership Agreement.
On January 31, 2000, Registrant received the discharge of escrowed proceeds
of $1.0 million, plus interest earned thereon, generated from the sale of the
Anaheim Stations. In accordance with the terms of the Partnership Agreement, the
entire amount of such discharged escrowed proceeds was used to pay for certain
expenses of Registrant.
On April 30, 2001, approximately $4.1 million was released from the reserve
account relating to the sale of the Anaheim Stations. In accordance with the
terms of the Partnership Agreement, the amounts of such released reserves from
the sale of the Anaheim Stations, after accounting for certain expenses of
Registrant, was included in a cash distribution to partners on May 29, 2001.
As of December 31, 2004, Registrant had approximately $4,000 remaining in cash
reserves from the sale of the Anaheim stations.
Employees
Registrant does not have any employees.
COMPETITION
Cable Television
Cable television systems compete with other communications and
entertainment media, including over-the-air television broadcast signals. The
extent of this competition is dependent in part upon the quality and quantity of
such over-the-air signals. Because a substantial variety of broadcast television
programming can be received over the air in the areas served by Registrant's
systems, the extent to which Registrant's cable television service is
competitive depends largely upon the system's ability to provide a greater
variety of programming than that available over the air and the rates charged
for programming. Cable television systems also are susceptible to competition
from other multi-channel video programming distribution ("MVPD") systems, such
as direct broadcast satellite ("DBS") systems and satellite master antenna
television ("SMATV"); from other forms of home entertainment, such as video
cassette recorders; and in varying degrees from other sources of entertainment
in the area, including motion picture theaters, live theater, and sporting
events.
In recent years, the level of competition in the MVPD market has increased
significantly, most notably by the provision of high-powered DBS service in the
continental United States. In addition, the FCC has adopted policies providing
for authorization of new technologies and a more favorable operating environment
for certain existing technologies that provide, or have the potential to
provide, substantial additional competition to cable television systems.
Regulatory initiatives designed to enhance competition for cable television
systems are described in the following sections.
LEGISLATION AND REGULATION
Cable Television Industry
The cable television industry is extensively regulated by the federal
government, primarily through the Federal Communications Commission, some state
governments and most local franchising authorities. In addition, the Copyright
Act of 1976 (the "Copyright Act") imposes copyright liability on all cable
television systems for their primary and secondary transmissions of copyrighted
programming. The regulation of cable television systems at the federal, state,
and local levels has been in constant flux over the past decade. Legislators and
government agencies continue to generate proposals for new laws and for the
adoption or deletion of administrative regulations and policies. Further
material changes in the law and regulatory requirements must be expected. There
can be no assurance that Registrant's cable systems will not be adversely
affected by future legislation, new regulations, or judicial or administrative
decisions. The following is a summary of federal laws and regulations materially
affecting the cable television industry and a description of certain state and
local laws with which the cable industry must comply.
Federal Statutes and Regulation
The Communications Act
The Communications Act of 1934, as amended, imposes uniform national
standards and guidelines for the regulation of cable television systems. Among
other things, the Communications Act regulates the provision of cable television
service pursuant to local franchise agreements, authorizes a system for
regulating certain subscriber rates and services, outlines signal carriage
requirements, imposes certain ownership restrictions, and sets forth customer
service, consumer protection, and technical standards.
Violations of the Communications Act or any FCC regulations implementing
the statutory laws can subject a cable operator to substantial monetary
penalties and other sanctions.
Federal Communications Commission
Federal regulation of cable television systems is conducted primarily
through the FCC pursuant to the Communications Act, although, as discussed
below, the Copyright Office also regulates certain aspects of cable television
system operation. FCC regulations currently contain detailed provisions
concerning non-duplication of network programming, sports program blackouts,
program origination and ownership of cable television systems. There are also
comprehensive registration and reporting requirements and various technical
standards. The FCC also has established regulations concerning mandatory signal
carriage and retransmission consent of broadcast television stations; consumer
service standards; the rates for service, equipment, and installation that may
be charged to subscribers; MVPD access to cable programming owned by cable
operators; and the rates and conditions for commercial channel leasing. The FCC
also issues permits, licenses, and registrations for microwave facilities,
mobile radios, and receive-only satellite earth stations, all of which are
commonly used in the operation of cable systems. The assignment of a permit,
license or authorization to a third party generally requires the prior approval
of the FCC.
The FCC is authorized to impose monetary fines upon cable television
systems for violations of existing regulations, to suspend licenses and other
authorizations, and to issue cease and desist orders. The agency also is
authorized to promulgate new rules and to modify existing rules affecting cable
television services.
Franchises / State and Local Regulation
Cable television systems are generally operated pursuant to non-exclusive
franchises, permits, or licenses issued by a local government entity. The
franchises are generally contracts between the cable system owner and the
issuing authority, and typically cover a broad range of obligations directly
affecting the cable operator's business. Except as otherwise specified in the
Communications Act or limited by specific FCC rules and regulations, the
Communications Act permits state and local officials to retain their primary
responsibility for selecting franchisees to serve their communities and to
continue regulating other essentially local aspects of cable television.
Cable television franchises generally contain provisions governing the
length of the franchise term, franchise renewal, sale or transfer of the
franchise, system design and technical performance, and the number and types of
cable services provided. The specific terms and conditions of the franchise
directly affect the profitability of the cable television system. Franchises are
generally issued for fixed terms and must be renewed periodically. There can be
no assurance that franchises will be granted renewal or that renewals will be
based on terms and conditions similar to those in an initial franchise.
In granting or renewing franchises, franchising authorities may establish
requirements for cable-related facilities and equipment, but may not specify
requirements for video programming or information services other than in broad
categories. Franchising authorities may not grant an exclusive franchise or
unreasonably deny award of a competing franchise.
Local franchising authorities are permitted to require cable operators to
set aside certain channels for public, educational, and governmental access
("PEG") programming and to impose a franchise fee of up to 5% of the gross
annual revenues derived from the operation of the cable system to provide cable
services. In addition, cable television systems with 36 or more channels are
required to designate a portion of their channel capacity for leased access,
which generally is available to commercial and non-commercial parties to provide
programming (including programming supported by advertising). The FCC has
adopted rules setting maximum reasonable rates and other terms for the use of
such leased channels.
Franchising authorities are exempt from money damages in cases involving
their exercise of regulatory authority, including the award, renewal, or
transfer of a franchise, unless the case involves discrimination based on race,
sex, or similar impermissible grounds. Remedies are limited exclusively to
injunctive or declaratory relief. Franchising authorities may also build and
operate their own cable systems without a franchise.
Various proposals have been introduced at state and local levels with
regard to the regulation of cable television systems, and a number of states
have adopted legislation subjecting cable television to the jurisdiction of
centralized state governmental agencies, some of which impose regulation of a
public utility character. Increased state and local regulations may increase
cable television system expenses.
Rate Regulation
Cable systems that are not subject to "effective competition" are subject
to regulation by local franchising authorities regarding the rates that may be
charged to subscribers. A cable system is subject to effective competition if
one of the following conditions is met: (1) fewer than 30% of the households in
the franchise area subscribe to the system; (2) at least 50% of the households
in the franchise area are served by two MVPDs and at least 15% of the households
in the franchise area subscribe to any MVPD other than the dominant cable
system; (3) a franchising authority for that franchise area itself serves as an
MVPD offering service to at least 50% of the households in the franchise area;
or (4) a local exchange carrier ("LEC"), or an entity using the LEC's
facilities, offers video programming services (including 12 or more channels of
programming, at least some of which are television broadcasting signals)
directly to subscribers by any means (other than direct-to-home satellite
services) in the franchise area of an unaffiliated cable operator.
A local franchising authority may certify with the FCC to regulate the
rates charged for the Basic Service Tier ("BST") of programming and the
associated subscriber equipment of a cable system within its jurisdiction. For
systems subject to rate regulation, the BST must include all broadcast signals
(with the exception of national "super stations") and any PEG access channels
required by the local franchise agreement.
Rates for basic services generally are set pursuant to a benchmark formula.
In the alternative, an operator may opt for a cost-of-service methodology to
show that its basic service rates are reasonable. In addition, the FCC's rules
limit increases in regulated rates to an inflation indexed amount plus increases
in certain costs, such as taxes, franchise fees, programming costs, and the
costs of complying with certain franchise requirements. Rates also can be
adjusted if an operator adds or deletes channels or completes a significant
system rebuild or upgrade.
Parties periodically have called upon the FCC to freeze cable rates and to
increase rate regulation. Congress and the FCC also have continued to express
some interest in cable rates and programming costs. Registrant cannot predict
the likelihood or potential outcome of any FCC or congressional action on these
issues.
Renewal and Transfer
The Communications Act contains procedures for the renewal of cable
television franchises. Among other things, the procedures were designed to
provide incumbent franchisees with a fair hearing on past performances, an
opportunity to present a renewal proposal and to have it fairly and carefully
considered, and a right of appeal if the franchising authority either fails to
follow the procedures or denies renewal unfairly.
Cable system operators are sometimes confronted by proposals for competing
local cable franchises. Such proposals may be presented during renewal
proceedings. In addition, local franchising authorities occasionally have
proposed to construct their own cable systems or decided to invite other private
interests to compete with the incumbent cable operator. Judicial challenges to
such actions by incumbent system operators have, to date, generally been
unsuccessful. Registrant cannot predict the outcome or ultimate impact of these
or similar franchising and judicial actions.
Under the Communications Act, when local consent to a transfer or
assignment of a franchise is required, the franchise authority must act within
120 days of submission of a transfer request. If this deadline is not met, the
transfer is deemed approved. The 120-day period commences upon the submission to
a local franchising authority of a standardized FCC transfer form. The franchise
authority may request additional information beyond that required on the form.
Among other things, local franchising officials may prohibit the sale of a cable
system if the proposed buyer operates another cable system in the jurisdiction
or if such sale would reduce competition in cable service. Approval by LFAs may
be required in order for the Venture to redeem Registrant's interest in the
Venture or to sell the Venture to a third party.
Cable/Telephone Cross-Ownership
The Communications Act also contains provisions regarding the ability of
local telephone exchange carriers ("LECs") to provide video programming.
Although telephone companies may now provide video programming to their
telephone subscribers, the Communications Act contains a prohibition on
cable/telco buy-outs. A LEC or any of its affiliates generally may not acquire
more than a 10% financial interest, or any management interest, in a cable
operator serving the LEC's telephone service area. Similarly, a cable operator
may not acquire a 10% financial interest, or any management interest, in a LEC
providing telephone exchange service within the cable operator's franchise area.
The Communications Act also allows for cable provision of telephony and
states that provisions in the Communications Act governing cable operators do
not apply to cable operators' provision of telecommunications services.
Concentration of Ownership
Pursuant to the directive of the Communications Act, the FCC promulgated
rules that allowed an entity to hold an "attributable interest" in cable systems
serving no more than 30% of all multi-channel video programming subscribers
served nationwide. The FCC also promulgated vertical ownership restrictions
based upon a "channel occupancy" standard, which placed a 40% limit on the
number of channels (up to 75 channels) that may be occupied by services from
programmers in which the cable operator has an attributable ownership interest.
In the same decision in which it revised its horizontal cap, the agency
also modified its rules regulating the attribution of limited partners with
respect to both the horizontal ownership and vertical ownership (or "channel
occupancy") rules to now allow a limited partnership interest to be treated as
non-attributable for purposes of those rules so long as the general partner is
able to certify that the limited partner is not materially involved in the video
programming activities of the partnership.
In 2001, a federal court of appeals held that both the horizontal and
vertical ownership limits that the FCC adopted pursuant to the 1992 Cable Act
were unconstitutional. Accordingly, the Court reversed and remanded the FCC's
ownership limits and vacated specific portions of the FCC's ownership
attribution rules. In September 2001, the Commission initiated a rulemaking
proceeding to reconsider the issue. That proceeding remains pending.
In addition, the Communications Act and FCC rules restrict the ability of
programmers in which cable operators hold an attributable interest to enter into
exclusive contracts with cable operators. In 2002, the FCC concluded that the
restrictions on exclusive arrangements continued to serve the public interest,
and extended the term of the restrictions through 2007. Vertically integrated
programmers also are generally prohibited from favoring cable operators over
other multi-channel video programming distributors.
Broadband Services
Many cable operators now offer high-speed Internet and other broadband
services over their cable systems. In 2002, the Commission released a
declaratory ruling concluding that cable modem service is properly classified as
an "interstate information service." Whether the service should be considered a
"cable service," a "telecommunications service," or an "information service" had
been the subject of considerable debate because the regulatory classification
has important implications on the ability of both the FCC and LFAs to regulate
cable modem services. In October 2003, the United States Court of Appeals for
the Ninth Circuit held, in Brand X Internet Services v. Federal Communications
Commission, that although cable modem service was not a cable service it was
part telecommunications service and part information service. The court
therefore vacated in part the FCC's declaratory ruling and remanded the case to
the agency for further proceedings. The FCC has appealed the court's decision.
At the same time that the declaratory ruling was issued, the agency
initiated a rulemaking proceeding to determine the regulatory implications of
this classification. Among other things, the proceeding will consider whether
the Commission should preclude state and local regulatory authorities from
regulating cable modem service and facilities. The FCC also tentatively
concluded in its notice of proposed rulemaking that cable modem service is
exempt from local franchise fees.
Alternative Video Programming Services
Direct Broadcast Satellites: DBS providers offer video programming directly
to home subscribers through high-powered direct broadcast satellites. Since the
launch of the first system in 1994, DBS has become one of the primary
competitors to cable operators in the multi-channel video-programming
marketplace. DBS providers served approximately 23 million customers as of June
of 2004. In addition, Congress has amended the Satellite Home Viewer Act to
allow DBS operators to provide local broadcast station signals to subscribers in
a manner similar to cable operators, thereby removing a major competitive
barrier to DBS growth. Under the legislation, DBS operators also became subject
to "must-carry" obligations to carry broadcast signals in January 2002.
Digital Television: In 1997, the FCC adopted rules allowing television
broadcasters to provide digital television ("DTV") to consumers and provided
eligible broadcasters with a second channel on which to provide DTV service.
Broadcasters generally will be allowed to use their increased digital capacity
according to their best business judgment. Such uses can include data transfer,
subscription video, interactive materials, and audio signals, although
broadcasters will be required to provide a free digital video programming
service that is at least comparable to today's analog service. Most television
stations have begun to broadcast a digital signal. Although the FCC has targeted
December 1, 2006 as the date by which all broadcasters must return their analog
licenses, the Balanced Budget Act of 1997 allows broadcasters to keep both their
analog and digital licenses until at least 85 percent of television households
in their respective markets can receive a digital signal. The Commission has
stated that it will review the progress of DTV every two years and make
adjustments to the 2006 target date, if necessary.
Wireless Cable: The FCC allows holders of MVDDS and LMDS licenses to
provide video programming services - sometimes referred to as "wireless cable" -
via multiple microwave transmissions to home subscribers.
Programming Issues
Mandatory Carriage and Retransmission Consent: Cable operators are required
to carry the signals of local commercial and non-commercial television stations
and certain low power television stations. Television broadcasters, on a cable
system-by-cable system basis, must decide once every three years whether to
proceed under the must carry rules or to waive that right to mandatory but
uncompensated carriage and negotiate a grant of retransmission consent to permit
the cable system to carry the station's signal.
With regard to broadcast stations eligible for mandatory carriage, the FCC
has concluded that cable operators need not carry both the digital and analog
signals of a broadcaster, that broadcast stations operating only in digital are
entitled to mandatory carriage, and that digital-only television stations are
entitled only to carriage of a single programming stream.
Program Content Regulation: The FCC has adopted regulations requiring the
"closed captioning" of programming. In addition, the FCC has adopted an order
finding acceptable the voluntary video programming rating system developed by
distributors of video programming--including cable operators--to identify
programming that contains sexual, violent, or other indecent material. The
Commission has also established technical requirements for consumer electronic
equipment to enable the blocking of such video programming. Distributors of
rated programs are required to transmit these ratings, thereby permitting
parents to block the programs.
Copyright: Cable television systems are subject to the Copyright Act of
1976, which, among other things, covers the carriage of television, broadcast
signals. The Copyright Act grants cable operators a compulsory license to
retransmit copyrighted programming broadcast by local and distant stations in
exchange for contributing a percentage of their revenues as statutory royalties
to the Copyright Office. The amount of this royalty payment varies depending on
the amount of system revenues from certain sources, the number of distant
signals carried, and the locations of the cable television system with respect
to off-air television stations and markets.
Several types of multi-channel video programming distributors that compete
with cable operators have been successful in gaining compulsory license coverage
of their retransmission of television broadcast signals.
The FCC has, in the past, recommended that Congress eliminate the
compulsory copyright license for cable retransmission of both local and distant
broadcast programming. In addition, legislative proposals have been and may
continue to be made to simplify or eliminate the compulsory license. Without the
compulsory license, cable operators would need to negotiate rights for the
copyright ownership of each program carried on each broadcast station
transmitted by the system. Registrant cannot predict whether Congress will act
on any such FCC or Copyright Office recommendations or similar proposals.
Pole Attachment Rates, Inside Wiring, and Technical Standards
The FCC currently regulates the rates and conditions imposed by public
utilities for use of their poles, unless, under the Federal Pole Attachments
Act, a state public service commission demonstrates that it is entitled to
regulate the pole attachment rates. The FCC has adopted a specific formula to
administer pole attachment rates under this scheme. The Supreme Court has
determined, in Gulf Power et. al. v. FCC, that the protections of the Pole
Attachments Act extend to cable operators' offering of Internet access services
and to wireless service providers. In December, 2002, the United States Court of
Appeals for the District of Columbia Circuit generally upheld the FCC's pole
attachment rules.
In addition, the FCC has established procedures for the orderly disposition
of multiple dwelling unit ("MDU") wiring, designed to make it easier for the
owners and residents of a MDU to change video service providers.
The FCC also has set forth standards on signal leakage. Like all systems,
Registrant's cable television systems are subject to yearly reporting
requirements regarding compliance with these standards. Further, the FCC has
instituted on-site inspections of cable systems to monitor compliance. Any
failure by Registrant's cable television systems to maintain compliance with
these standards could adversely affect the ability of Registrant's cable
television systems to provide certain services.
The FCC is empowered to set certain technical standards governing the
quality of cable signals and to preempt local authorities from imposing more
stringent technical standards. In 1992, the FCC adopted mandatory technical
standards for cable carriage of all video programming. Those standards focus
primarily on the quality of the signal delivered to the cable subscriber's
television.
The FCC also has adopted regulations to ensure the commercial availability
of equipment (such as converter boxes and interactive equipment) used to access
services offered over multi-channel video programming distribution systems, from
sources that are unaffiliated with any MVPD. These regulations require that all
MVPDs, including cable operators, (1) allow customers to attach their own
equipment to their systems, (2) not prevent equipment from being offered by
retailers, manufacturers or other unaffiliated vendors, (3) separate out
security functions from non-security functions of digital equipment, (4) not
offer equipment with integrated security and non-security functions after July
1, 2006, and (5) provide, upon request, technical information concerning
interface parameters needed to permit equipment to operate with their systems.
MVPDs are allowed to protect the security of their systems and programming from
unauthorized reception. The rules are subject to sunset after the markets for
MVPDs and equipment become fully competitive in a particular geographic market.
Impact of Legislation and Regulation
As detailed above, the cable industry is subject to significant regulation.
The foregoing, however, does not purport to be a complete summary of all the
provisions of the Communications Act, the 1996 Act nor of the regulations and
policies of the FCC thereunder. Because regulation of the cable industry is
subject to the political process, it continues to change. Proposals for
additional or revised regulations and requirements are pending before and are
being considered by Congress and federal regulatory agencies and will continue
to be generated. Also, several of the foregoing matters are now, or may become,
the subject of court litigation. Registrant cannot predict the outcome of
pending regulatory proposals, any future proposals, or any such litigation. Nor
can Registrant predict the impact of these on its business.
Available Information
The Registrant does not have an internet address. However, the Registrant
will provide free of charge, upon written request, a copy of its paper filings
to the Securities and Exchange Commission. Such requests should be directed to
ML Media Partners, L.P., 101 Hudson Street, Jersey City, NJ 07302, Attn:
Ignathea Barrett.
Item 2. Properties
A description of the media properties of Registrant is contained in Item 1
above. C-ML Cable owns or leases real estate for certain transmitting equipment
along with space for studios and offices.
In addition, the offices of RPMM and MLMM are located at 444 Madison Avenue
- - Suite 703, New York, New York 10022 and at Four World Financial Center - 23rd
Floor, New York, New York, 10080, respectively.
Item 3. Legal Proceedings
Adelphia Litigation
On March 24, 2000, Registrant commenced suit (the "Original Adelphia
Litigation") in New York Supreme Court (the "Court"), New York County, against
Century, Adelphia and Arahova Communications Inc. seeking a dissolution of the
Venture and the appointment of a receiver for the sale of the Venture's assets
(primarily the stock of the subsidiary of the Venture that owns the cable
systems). The complaint alleged that, as successor to Century's position as
Registrant's joint venture partner, Adelphia breached its fiduciary and
contractual obligations to Registrant with respect to the operations of the
Venture and by proposing to take action that would interfere with the sale of
the cable systems to a third party through an auction process conducted in
accordance with the terms of the joint venture agreement. Registrant also sought
in the suit an order directing Adelphia and its affiliates to comply with the
terms of the joint venture agreement and sought other equitable relief.
Registrant also sought in the suit compensatory and punitive damages.
Litigation continued in the New York Supreme Court (including an order
granting Registrant partial summary judgment (which was affirmed on appeal), a
consent order with respect to management, an order requiring Adelphia to proceed
with an accounting and an order holding Adelphia in contempt of Court), until
December 13, 2001, at which time the matter was placed in abeyance pursuant to a
Stipulation of Settlement pending the closing of transactions contemplated by
the Recapitalization Agreement (see "Media Properties" in Item 1, above). As a
result of the default by Adelphia in its obligations to close under the
Recapitalization Agreement, Registrant may resume prosecution of that action, in
addition to pursuing other remedies for Adelphia's default, although the action
is now before the Bankruptcy Court for the Southern District of New York rather
than the New York Supreme Court, as a result of Adelphia's and Century's filings
for bankruptcy and their removal of such action.
For the years ended December 31, 2004, December 26, 2003 and December 27,
2002, Registrant incurred approximately $0, $0 and $78,000, respectively, for
legal costs relating to the Original Adelphia Litigation. Cumulatively, the
legal costs related to such litigation efforts totaled approximately $3,815,000
through December 31, 2004.
On June 12, 2002, Registrant commenced a new 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.
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. Adelphia, Century and the Venture filed
counterclaims against Registrant alleging, among other things, that the
Recapitalization Agreement was an invalid fraudulent conveyance and that
Registrant aided and abetted a breach of fiduciary duty by certain members of
the Rigas family in entering into the Recapitalization Agreement.
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. Both Adelphia and Highland have filed
counterclaims against the Registrant seeking the return of those funds.
The Court has ruled that the Venture, Adelphia, Century and Highland
defaulted in their obligations to pay the purchase price set under the
Recapitalization Agreement to Registrant by no later than September 30, 2002,
subject to a determination that the Recapitalization Agreement is enforceable.
The determination of enforceability has been reduced to two claims. On April 15,
2004, the Court ruled that it was going to dismiss all but one of the eleven
counterclaims filed by Adelphia and Century. The sole remaining counterclaim
alleges that the Registrant aided and abetted a breach of fiduciary duty by the
Rigas family members against Adelphia and Century. 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 litigation as to these remaining issues is continuing;
however, it is difficult to predict when this lawsuit may be finally resolved.
Bankruptcy Claims Against Adelphia, Century and the Venture - On October 8,
2004, Registrant filed claims in the Chapter 11 cases of Adelphia and Century,
including its claim for breach of the Recapitalization Agreement, its secured
claim against Century for breach of the Recapitalization Agreement, and other
claims based on Adelphia's breaches of the management provisions of the Joint
Venture Agreement and breach of fiduciary duty. The Venture separately has filed
its own claims against Adelphia and Century.
Because the Venture was placed into Chapter 11 bankruptcy by Adelphia,
creditors of the Venture also had to file claims against the Venture. On January
15, 2004, Registrant filed a claim against the Venture for breach of the
Recapitalization Agreement. 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. That period has been extended but modified
to allow any of Registrant, Adelphia or Century to propose a plan of
reorganization. The exclusivity period has been further extended by the Court
and currently expires on June 30, 2005.
Related Matters - 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. Pursuant to a letter agreement with
the Vaughn Group, the Partnership agreed that it would not discuss or negotiate
a sale of the interests in the Venture with any other person, except Adelphia,
during an exclusivity period, which expired in May 2004. No agreement was
reached with the Vaughn Group and the Partnership began marketing all of the
interests in the Venture, and Adelphia began marketing a portion of its
interests in the Venture. Several non-binding bids were received for all of the
interests in the Venture. Adelphia and Century have informally agreed to join
with the Partnership in a potential sale of all of the interests in the Venture
and the sale process is continuing. Adelphia, Century and the Partnership are
currently negotiating exclusively with one potential purchaser. However, there
can be no assurances that any agreement will be reached to sell the
Partnership's interest in the Venture on terms acceptable to the Partnership. In
addition, any sale will be subject to approval of the Bankruptcy Court.
For the years ended December 31, 2004, December 26, 2003 and December 27,
2002, Registrant incurred legal costs relating to the litigation arising from
the breach of the Recapitalization Agreement of $2,207,000, $2,385,000 and
$2,352,000, respectively. Cumulatively, the legal costs related to such
litigation efforts totaled approximately $6,944,000 through December 31, 2004.
These costs are in addition to the costs relating to the Original Adelphia
Litigation discussed above.
Registrant is not aware of any other material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
There were no matters which required a vote of the limited partners of
Registrant during the fiscal year covered by this report. Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
--------------------------------------------------------------------
An established 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.
As of March 1, 2005, the number of owners of Units was approximately
10,484.
Registrant does not distribute dividends, but rather distributes
Distributable Cash from Operations, Distributable Refinancing Proceeds, and
Distributable Sale Proceeds, to the extent available. In January 2002, $49.4
million ($263 per Unit) was distributed to its limited partners and $499,418 to
its General Partner from the release of reserves from the sale of the California
Cable Systems, as well as operating cash balances held by the Partnership. No
distributions were made to partners during the fiscal years ended December 31,
2004 and December 26, 2003.
Registrant made no purchases of Units during the fiscal year ended December
31, 2004.
Item 6. Selected Financial Data
See note in Item 15
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation
-----------------------------------------------------------------
See note in Item 15
Item 7A. Quantitative and Qualitative Disclosure about Market Risk
See note in Item 15
Item 8. Financial Statement and Supplemental Data
See note in Item 15
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
-----------------------------------------------------------------
None.
Item 9A. 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 IV, Item 15, 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-K that have
materially affected, or are reasonably likely to materially affect, Registrant's
internal control over financial reporting.
Item 9B. Other Information
None.
Part III
Item 10. Directors and Executive Officers of Registrant
Registrant has no executive officers or directors. The General Partner
manages Registrant's affairs and has general responsibility and authority in all
matters affecting its business. The responsibilities of the General Partner are
carried out either by executive officers of RP Media Management or ML Media
Management Inc. acting on behalf of the General Partner. The executive officers
and directors of RP Media Management and ML Media Management Inc. are: