10-Q 1 d10q.txt FORM 10-Q (PERIOD MARCH 31, 2001) ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, DC 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 31, 2001. or [_]Transition report pursuant to Section 13 of 15(d) of the Securities Exchange Act of 1934 for transition period from to . Commission File No. 333-38689 ---------------- FOX SPORTS NETWORKS, LLC (Exact name of registrant as specified in its charter) Delaware 95-4577574 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.)

1440 South Sepulveda Boulevard, Los Angeles, CA 90025 (Address of principal executive offices) Registrant's telephone number, including area code: (310) 444-8123 ---------------- Indicate by check mark whether the Registrant has (1) 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) been subject to such filing requirements for the past 90 days. Yes [X] No [_] ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- PART I FINANCIAL INFORMATION Item 1. Financial Statements FOX SPORTS NETWORKS, LLC (A Delaware Limited Liability Company) CONDENSED CONSOLIDATED BALANCE SHEETS March 31, 2001 and June 30, 2000 (Dollars in thousands)

The accompanying notes are an integral part of these condensed consolidated balance sheets. 2 FOX SPORTS NETWORKS, LLC (A Delaware Limited Liability Company) CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS For the Three Months and the Nine Months Ended March 31, 2001 and 2000 (Dollars in thousands)

The accompanying notes are an integral part of these condensed consolidated financial statements. 3 FOX SPORTS NETWORKS, LLC (A Delaware Limited Liability Company) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months Ended March 31, 2001 and 2000 (Dollars in thousands)

The accompanying notes are an integral part of these condensed consolidated financial statements. 4 FOX SPORTS NETWORKS, LLC (A Delaware Limited Liability Company) NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2001 (unaudited) (Dollars in thousands) (1) Basis of Presentation The accompanying unaudited condensed consolidated financial statements of Fox Sports Networks, LLC (the "Company") have been prepared by the Company pursuant to the instructions for Form 10-Q and Article 10 of Regulation S-X and, accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted where permitted by regulation. In management's opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, primarily consisting of normal recurring accruals, necessary for a fair presentation of the consolidated results of operations for the interim periods presented. The condensed consolidated results of operations for such interim periods are not necessarily indicative of the results that may be expected for future interim periods or for the year ended June 30, 2001. These interim condensed consolidated financial statements and the notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended June 30, 2000. The preparation of unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in th United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Because of the use of estimates inherent in the financial reporting process, actual results could differ from those estimates. The Company consolidates all subsidiaries in which voting control is held by either the Company or Fox Entertainment Group, Inc. ("Fox"), its parent. The percentage of ownership, together with the degree to which the Company controls the management and operation of a Regional Sports Network ("RSN"), determines the appropriate accounting treatment for the Company's interest in that particular RSN. If the Company owns a majority interest in a particular RSN, but neither the Company nor Fox have voting control, the ownership interest is accounted for using the equity method of accounting. In July 1999, The News Corporation Limited acquired from Liberty Media Corporation ("Liberty") substantially all of Liberty's 50% interest in the Company and transferred that interest to Fox in exchange for common stock. In connection with this transaction, voting control of certain majority-owned subsidiaries of the Company, previously held by Liberty, was acquired by Fox and, accordingly, these subsidiaries have been consolidated commencing with the three months ended September 30, 1999. (See Note 4.) These majority-owned subsidiaries which were previously accounted for using the equity method of accounting, are: Fox Sports Net Pittsburgh, LP (formerly Liberty/Fox KBL LP) Fox Sports Net Chicago Holdings, LLC (formerly Fox/Liberty Chicago LP) Fox Sports Net Bay Area Holdings, LLC (formerly Fox/Liberty Bay Area LP) Fox Sports Net Upper Midwest Holdings, LP (formerly Fox/Liberty Upper Midwest LP) Fox Sports Net Distribution, LP (formerly Fox/Liberty Distribution LP) 5 FOX SPORTS NETWORKS, LLC (A Delaware Limited Liability Company) NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) March 31, 2001 (unaudited) (Dollars in thousands) (2) Debt Debt at March 31, 2001 and June 30, 2000 is summarized as follows:

In July 1999, 19/th/ Holdings Corporation ("19/th/ Holdings"), a wholly-owned subsidiary of Fox acquired the debt outstanding under a bank facility from a group of banks, ("the /19th/ Facility"). Borrowings under the 19/th/ Facility bear interest at a fixed rate determined on an annual basis by 19/th/ Holdings. 19/th/ Holdings has determined that the rate of interest on this debt through June 2001 shall be 8%. In July 2000, the 19/th/ Facility was amended to increase the total amount available to $900,000. (3) Summarized Financial Information Summarized unaudited statement of operations information for subsidiaries accounted for under the equity method for which separate financial information would be required for annual periods, is as follows:

(4) Supplemental Disclosure to Unaudited Condensed Consolidated Statements of Cash Flows The consolidation of certain majority-owned subsidiaries previously accounted for using the equity method (see Note 1) is a non-cash investing activity that resulted in increases to various assets and liabilities on the Company's unaudited condensed consolidated balance sheet that are not reflected in the unaudited condensed consolidated statements of cash flows for the nine months ended March 31, 2000. Such increases primarily consisted of a $78,072 increase in investments in equity affiliates, a $48,148 decrease in receivables from equity affiliates and a $20,428 increase in minority interest. Included in other assets is a non-cash increase of $15,000 related to cable carriage arrangements for the distribution of programming services of the Company, received in conjunction with the sale of Home Team Sports Limited Partnership ("HTS") (see Note 6). This amount is not reflected in the unaudited condensed consolidated statement of cash flows for the nine months ended March 31, 2001. 6 FOX SPORTS NETWORKS, LLC (A Delaware Limited Liability Company) NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) March 31, 2001 (unaudited) (Dollars in thousands) In February 2001, the Company acquired certain assets and assumed certain liabilities of Midwest Sports Channel ("MSC") (see Note 6). This transaction resulted in increases of $9,356 in Trade and other receivables, net, $3,343 in Program rights, $4,951 in Property and equipment, net, $30,301 in Excess cost, $493 in Other assets, and $8,571 in Accounts payable and accrued expenses. Had the transaction occurred at July 1, 2000 with respect to the nine month period ended March 31, 2001, and July 1, 1999 with respect to the nine month period ended March 31, 2000, the pro forma revenue would have increased by approximately $26,000 and $28,200, respectively, and net income would have increased by $4,300 and $4,200, respectively. Debt increased by $44,962 and $36,866 in the nine months ended March 31, 2001 and 2000, respectively, related to accrued interest on the debt outstanding under the 19/th/ Facility. (5) Reclassifications Certain reclassifications have been made to the prior period financial statements in order to conform to the current year presentation. (6) Acquisition and Disposal In February 2001, the Company acquired certain assets and assumed certain liabilities of MSC, a regional sports network serving the Minneapolis, Minnesota and Milwaukee, Wisconsin areas, from Viacom Inc. ("Viacom") pursuant to an Assignment and Assumption Agreement (the "Agreement") between the Company, Viacom and Comcast Corporation ("Comcast"). The Agreement assigned Comcast's rights and obligations to purchase MSC from Viacom to the Company. The Company paid a total of $34.9 million of cash to Viacom and Comcast for the acquired net assets of MSC and incurred other costs which were capitalized, the source of which was borrowings under the 19/th/ Facility. The excess of the net purchase price over the net assets acquired of $30.3 million is reflected within Excess cost, net in the unaudited condensed consolidated balance sheet and will be amortized over a useful life of 40 years. Concurrent with this transaction, the Company sold its 34.298% interest in HTS to Comcast for $31.0 million in cash and $15.0 million in cable carriage arrangements related to the distribution of the Company's programming services, which resulted in recording a gain on sale of affiliate of $40.8 million. Subsequent to the completion of the MSC transaction, the Company rebranded the RSN as Fox Sports Net. The acquisition has been accounted for as a purchase business combination. The Company has performed a preliminary purchase price allocation and will finalize this allocation within twelve months from the date of acquisition. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This document contains statements that constitute "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. The words "expect," "estimate," "anticipate," "predict," "believe" and similar expressions and variations thereof are intended to identify forward-looking statements. These statements appear in a number of places in this document and include statements regarding the intent, belief or current expectations of the Company, its members or its officers with respect to, among other things, trends affecting the Company's financial condition or results of operations. The readers of this document are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those risks and uncertainties discussed in this document under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in the Company's Annual Report on Form 10-K for the year ended June 30, 2000 under the headings "Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." The Company does not ordinarily make projections of its future operating results and undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Readers should carefully review the risk factors discussed in the other documents filed by the Company with the Securities and Exchange Commission. This report should be read in conjunction with the unaudited condensed consolidated financial statements of the Company and related notes set forth elsewhere herein. The following discussion and analysis should be read in conjunction with the Management's Discussion and Analysis included in the Company's Annual Report on Form 10-K for the year ended June 30, 2000. Introduction Fox Sports Networks, LLC (together with its subsidiaries, the "Company") was formed to provide cable programming through its interests in regional sports networks ("RSNs") and Fox Sports Net ("FSN"), a national sports programming service, and through FX Network ("FX"), a general entertainment network. The Company's interests in the sports programming business are derived through its 99.5% ownership interests in Fox Sports Net, LLC and Fox Sports RPP Holdings, LLC, while its interest in FX is derived through its 99% ownership interest in FX Networks, LLC. The Company was formed in April 1996, pursuant to a 50%/50% joint venture between Fox Entertainment Group, Inc. ("Fox"), a majority owned subsidiary of The News Corporation Limited ("News Corporation") and Liberty Media Corporation ("Liberty"), a wholly-owned subsidiary of AT&T Corp ("AT&T"). In July 1999, News Corporation acquired from Liberty substantially all of Liberty's 50% interest in the Company and its businesses. News Corporation transferred the acquired interests to Fox in exchange for common stock of Fox. In August 1997, the Company issued $500.0 million aggregate principal amount of its 8 7/8% Senior Notes due 2007 and $405.0 million aggregate principal amount at maturity ($252.3 million gross proceeds) of its 9 3/4% Senior Discount Notes due 2007 (together, the "Offering"). The net proceeds from these notes were used, along with proceeds from the Bank Facility (as defined below), to finance the Company's acquisition of a 40% interest in Regional Programming Partners ("RPP") which was formed to hold interests in RSNs and related businesses then owned by Rainbow Media Sports Holdings, Inc. ("Rainbow"). In connection with this transaction ("the Rainbow Transaction"), the Company and Rainbow also formed National Sports Partners (the "National Sports Partnership") as a 50%/50% partnership to operate FSN, and National Advertising Partners (the "National Advertising Partnership") as a 50%/50% partnership to act as a national advertising sales representative for the RSNs which are affiliated with FSN. RPP is managed by Rainbow, while the National Sports Partnership and the National Advertising Partnership are managed by the Company. In connection with the consummation of the Rainbow Transaction, the Company and a group of banks amended and restated an existing credit agreement to permit borrowings by Fox Sports Net, LLC, Fox Sports 8 RPP Holdings, LLC and FX Networks, LLC, each a subsidiary of the Company (together, the "Co-Borrowers"), in the amount of $800.0 million (the "Bank Facility"). The Bank Facility was comprised of a $400.0 million revolving credit facility and a $400.0 million term loan facility. The proceeds of the loans under the Bank Facility were used to finance, in part, the Rainbow Transaction. In July 1999, 19/th/ Holdings Corporation, a wholly-owned subsidiary of Fox, acquired the debt outstanding under the Bank Facility from the group of banks, and in so doing, assumed the rights and obligations of the group of banks under the Bank Facility. The Company and 19/th/ Holdings Corporation subsequently amended and restated the Bank Facility to provide, among other things, a fixed rate of interest, determined by 19/th/ Holdings Corporation on an annual basis, and eliminated substantially all of the affirmative and negative covenants other than with respect to the payment of principal and interest (the "19/th/ Facility"). In July 2000, the Company and 19/th/ Holdings amended the 19/th/ Facility to increase the revolving facility to $500.0 million and the total facility to $900.0 million. The Company currently expects that remaining availability under the 19/th/ Facility will primarily be used for investments in certain subsidiaries of the Company and for working capital purposes. Significant Accounting Practices Basis of Presentation The Company's ownership interests in the RSNs are held either directly or indirectly and have different voting rights attached thereto. The Company consolidates all subsidiaries in which voting control is held by either the Company or Fox, its parent. The percentage of ownership, together with the degree to which the Company controls the management and operation of an RSN, determines the appropriate accounting treatment for the Company's interest in that particular RSN. If the Company owns a majority interest in a particular RSN, but neither the Company nor Fox have voting control, the ownership interest is accounted for using the equity method of accounting. Under the equity method of accounting, the financial condition and results of operations of entities are not reflected on a consolidated basis and, accordingly, the consolidated revenues and expenses of the Company, as reported on its consolidated statements of operations, do not include revenues and expenses related to the entities accounted for under the equity method. In February 2001, the Company acquired certain assets and assumed certain liabilities of Midwest Sports Channel ("MSC"), a regional sports network serving the Minneapolis, Minnesota and Milwaukee, Wisconsin areas, from Viacom Inc. ("Viacom") pursuant to an agreement between the Company, Viacom and Comcast Corporation ("Comcast"). The agreement assigned Comcast's rights and obligations to purchase MSC from Viacom to the Company. Concurrent with this transaction, the Company sold its 34.298% interest in D.C./Baltimore RSN to Comcast. MSC has been rebranded as Fox Sports Net ("North RSN"). The following RSNs, together with Fox Sports Direct and FX Networks, LLC, are consolidated in the financial statements of the Company, at March 31, 2001 and 2000: West RSN, West 2 RSN, Northwest RSN, Utah RSN, Arizona RSN, South RSN, Southwest RSN, Rocky Mountain RSN, Midwest RSN, Pittsburgh RSN and Detroit RSN. The North RSN was acquired in February 2001 and is consolidated at March 31, 2001. As of March 31, 2001 and 2000, the following are accounted for using the equity method of accounting: Sunshine RSN, Chicago RSN, Bay Area RSN, RPP, National Sports Partnership and National Advertising Partnership. The D.C./Baltimore RSN was disposed of in February 2001 and was accounted for using the equity method of accounting at March 31, 2000. Because the Company reports the results of a significant number of its subsidiary entities on the equity method, its financial results do not represent the total combined revenues and expenses of all the businesses in which the Company holds ownership interests. 9 Results of Operations Three months ended March 31, 2001 as compared with the three months ended March 31, 2000 Total revenues for the three months ended March 31, 2001 were $254.7 million, an increase of $35.9 million, or 16%, over the three months ended March 31, 2000. Programming revenue was the largest source of revenue, representing 52% of total revenue, or $133.4 million, for the three months ended March 31, 2001. Advertising and direct broadcast revenue represented 24% and 17%, respectively, of total revenue, or $61.2 million and $44.5 million, respectively, for the three months ended March 31, 2001. For the three months ended March 31, 2000, programming revenue was $112.1 million and advertising and direct broadcast revenue were $57.6 and $35.9 million, respectively, or 51%, 26% and 16%, respectively of total revenues. Programming and advertising revenue increased by $21.3 million and $3.6 million, respectively, in the three months ended March 31, 2001 as compared to the three months ended March 31, 2000. These increases represent a 19% and 6% increase in programming and advertising revenue, respectively, between the periods. The increase in programming revenue is comprised primarily of increases in the average rate per subscriber at the RSNs arising from new affiliation agreements, a 2% increase in the number of subscribers at the RSNs, and the continued subscriber growth at FX. FX reached over 60 million households as of March 31, 2001, a 27% increase over March 31, 2000. The increase in advertising revenue of 6% is comprised of a 26% increase in advertising revenue at FX, partially offset by a 6% decrease by the RSNs. At FX, a 27% increase in average audience during the three months ended March 31, 2001, as compared to the same period in the prior year, is primarily due to the significant increase in subscribers. CPMs from advertisers on FX increased in the period, primarily on the strength of the increase in average audience. These factors, along with the successful premiere of FX's third original movie, A Glimpse of Hell, and the debut of National Association of Stock Car Auto Racing ("NASCAR") contributed to the 26% increase in advertising revenue. Advertising revenue at the RSNs for the three months ended March 31, 2001 decreased by 6%, as compared to the same period in the prior year, primarily due to the softness in the advertising market. Operating expenses totaled $180.6 million for the three months ended March 31, 2001, representing 71% of total revenues and an increase of $31.6 million, or 21%, over the same period in the prior year. These expenses consist primarily of rights fees, programming and production costs. Operating expenses for the three months ended March 31, 2000 totaled $148.9 million, or 68% of total revenues. The increase in operating expenses in the current year is primarily due to increases in rights fees of the RSNs as a result of an increase in the number of NBA and NHL cable and broadcast events as compared to the prior year and higher average rights fees per event, arising from new cable and broadcast rights agreements. Programming and production expenses also increased at FX primarily in conjunction with the debut season of NASCAR and increased original programming. General and administrative expenses totaled $24.0 million for the three months ended March 31, 2001, which represented 9% of total revenues. General and administrative expenses for the three months ended March 31, 2000 totaled $19.9 million, or 9% of total revenues. The increase in general and administrative expenses is primarily due to the Company relocating and paying rent for two offices during the relocation, as well as increases in salaries and fringe benefits arising from increases in the number of employees and wage increases before the Company's announced hiring freeze. Depreciation and amortization expenses totaled $14.6 million and $13.0 million for the three months ended March 31, 2001 and 2000, respectively. The increase between the periods is primarily due to increased amortization of cable carriage fees, arising from new affiliation agreements with cable operators, and increased depreciation expense from additional purchases of property and equipment. Interest expense for the three months ended March 31, 2001 and 2000 totaled $37.3 million and $32.6 million, respectively. The increase in interest expense is primarily due to additional borrowings under the 19/th/ Facility and increased interest accreted on the Senior Discount Notes. 10 Equity loss of affiliates for the three months ended March 31, 2001 and 2000 was $13.2 million and $10.3 million, respectively. The increase over the same period in the prior year is primarily due to inclusion of a shorter period of earnings of the D.C./Baltimore RSN and increased programming expenses at National Sports Partnership, partially offset by improvements at National Advertising Partners. The Company recorded a gain of $40.8 million from the sale of the D.C./Baltimore RSN. Nine months ended March 31, 2001 as compared with the nine months ended March 31, 2000 Total revenues for the nine months ended March 31, 2001 were $714.9 million, an increase of $86.6 million, or 14%, over the nine months ended March 31, 2000. Programming revenue was the largest source of revenue, representing 51% of total revenue, or $365.8 million, for the nine months ended March 31, 2001. Advertising and direct broadcast revenue represented 25% and 17%, respectively, of total revenue, or $175.9 million and $122.0 million, respectively, for the nine months ended March 31, 2001. For the nine months ended March 31, 2000, programming revenue was $309.8 million and advertising and direct broadcast revenue were $165.5 million and $102.5 million, respectively, or 49%, 26% and 16%, respectively, of total revenues. Programming and advertising revenue increased by $56.0 million and $10.4 million, respectively, in the nine months ended March 31, 2001, as compared to the nine months ended March 31, 2000. These increases represent an 18% and 6% increase in programming and advertising revenue, respectively, between the periods. The increase in programming revenue is comprised primarily of increases in the average rate per subscriber at the RSNs, increased subscribers at the RSNs and the continued subscriber growth at FX. The increase in advertising revenue of 6% is comprised of a 17% increase in advertising revenue at FX, while advertising revenue at the RSNs decreased 1% as compared to the prior year. At FX, a 24% increase in average audience during the nine months ended March 31, 2001, as compared to the same period in the prior year, is primarily due to the significant increase in subscribers. CPMs from advertisers on FX increased in the period, primarily on the strength of the increase in average audience. These factors, along with the success of FX's first three original movies, Deliberate Intent, The Sight, and A Glimpse of Hell, as well as the debut of NASCAR, contributed to the 17% increase in advertising revenue. The softness in the advertising market, partially offset by an increase in the number of MLB, NBA and NHL events, caused advertising revenue at the RSNs for the nine months ended March 31, 2001 to decrease 1% over the same period in the prior year. Operating expenses totaled $479.0 million for the nine months ended March 31, 2001, representing 67% of total revenues and an increase of $56.0 million, or 13%, over the same period in the prior year. These expenses consist primarily of rights fees, programming and production costs. Operating expenses for the nine months ended March 31, 2000 totaled $423.1 million, or 67% of total revenues. The increase in operating expenses in the current year is primarily due to the increase in rights fees of the RSNs as a result of an increase in the number of MLB, NBA and NHL events and higher average rights fees per event, arising from new cable and broadcast rights agreements. Programming expenses also increased at FX primarily in conjunction with increased original programming and NASCAR. General and administrative expenses totaled $66.5 million for the nine months ended March 31, 2001, which represented 9% of total revenues. General and administrative expenses for the nine months ended March 31, 2000 totaled $56.0 million, or 9% of total revenues. The increase in general and administrative expenses is primarily due to increases in salaries and fringe benefits arising from increases in the number of employees and wage increases before the Company's announced hiring freeze as well as incurring rent for two offices during relocation. Depreciation and amortization expenses totaled $42.8 million and $31.5 million for the nine months ended March 31, 2001 and 2000, respectively. The increase between the periods is primarily due to increased amortization of cable carriage fees, arising from new affiliation agreements with cable operators, and increased depreciation expense from additional purchases of property and equipment. 11 Interest expense for the nine months ended March 31, 2001 and 2000 totaled $110.2 million and $95.5 million, respectively. The increase in interest expense is primarily due to additional borrowings under the 19/th/ Facility and increased interest accreted on the Senior Discount Notes. Equity loss of affiliates for the nine months ended March 31, 2001 was $10.8 million, compared to $14.0 million for the nine months ended March 31, 2000. This improvement over the same period in the prior year is primarily due to improvements in the operations of RPP, the National Advertising Partnership, and Bay Area RSN, partially offset by increased losses at the National Sports Partnership. The Company recorded a gain of $40.8 million from the sale of the D.C./Baltimore RSN. Liquidity and Capital Resources The Company's liquidity requirements arise from (i) funding general working capital needs, (ii) its strategic plan to invest in and secure national distribution for its network sports and general entertainment programming, (iii) the acquisition of programming rights, and (iv) capital expenditure requirements. Net cash flows used in operating activities for the nine months ended March 31, 2001 were $9.3 million, an increase of $23.7 million over the nine months ended March 31, 2000. The increase was primarily attributed to contractual rights prepayments on certain long-term rights deals. Net cash flows used in investing activities for the nine months ended March 31, 2001 were $47.6 million, a decrease of $12.2 million over the nine months ended March 31, 2000. The decrease in cash used in investing activities was primarily due to higher distributions from certain equity affiliates. In the nine months ended March 31, 2001, the Company sold its interest in the D.C./Baltimore RSN, and acquired certain assets and assumed certain liabilities of Midwest Sports Channel. Net cash flows provided by financing activities for the nine months ended March 31, 2001 were $58.7 million, an increase of $63.3 million over the nine months ended March 31, 2000. The increase in cash provided by financing activities was primarily due to an increase in borrowings which were required to fund operations and the Company's acquisition of MSC. In August 1997, the Company issued $500.0 million aggregate principal amount of its 8 7/8% Senior Notes due 2007 and $405.0 million aggregate principal amount at maturity ($252.3 million gross proceeds) of its 9 3/4% Senior Discount Notes due 2007 (collectively, the "Notes") through the Offering. The indentures pursuant to which the Notes were issued include certain covenants regarding, among other things, limitations on the incurrence of debt and distributions to partners. The Company has a credit facility with 19/th/ Holdings Corporation, a wholly- owned subsidiary of Fox. Borrowings under the 19/th/ Facility bear interest at a fixed rate determined on an annual basis by 19/th/ Holdings. 19/th/ Holdings has determined that the rate of interest on this debt through June 2001 shall be 8%. During the nine months ended March 31, 2001, the Company incurred net borrowings of $65.6 million bringing the total amount borrowed under the 19/th/ Facility to $815.7 million as of March 31, 2001. The total unused commitment pursuant to the 19/th/ Facility was $84.3 million as of March 31, 2001. Future capital requirements will be substantial as the Company continues to invest in developing networks, acquire sports programming rights and explore opportunities to expand its distribution. Although no assurances can be given in this regard, the Company believes that its existing funds and the proceeds from borrowings under its credit facility, will be sufficient to meet its plan to secure national distribution, maintain and/or acquire programming, make anticipated capital expenditures, and meet its projected working capital requirements. Item 3. Quantitative and Qualitative Disclosures About Market Risk Not Applicable. 12 PART II OTHER INFORMATION Item 1. Legal Proceedings As of March 31, 2001, there are no material pending legal proceedings against the Company, other than routine litigation incidental to the Company's business, except as described in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2000. Item 2. Changes in Securities and Use of Proceeds Not Applicable. Item 3. Defaults Upon Senior Securities Not Applicable. Item 4. Submission of Matters to a Vote of Security Holders Not Applicable. Item 5. Other Information Not Applicable. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits None. (b) Reports on Form 8-K The Company filed a Form 8-K with the Securities and Exchange Commission related to the disposition of Home Team Sports Limited Partnership and the acquisition of certain assets and liabilities of Midwest Sports Channel on March 1, 2001. The Form 8-K includes the unaudited pro forma consolidated statements of operations for the year ended June 30, 2000 and for the six month period ended December 31, 2000. The Company filed a Form 8-K/A with the Securities and Exchange Commission related to the acquisition of certain assets and liabilities of Midwest Sports Channel on April 27, 2001. The Form 8-K/A includes the audited financial statements of Midwest Sports Channel for the years ended December 31, 2000, 1999, and 1998. 13 SIGNATURES 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. FOX SPORTS NETWORKS, LLC Dated: May 15, 2001 By: /s/ Andrew J. Mandell ___________________________________ Andrew J. Mandell Executive Vice President, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) 14

FOX SPORTS NETWORKS LLC 10-Q