<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1997 COMMISSION FILE NUMBER 333-09529
---------------------------
BENEDEK COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
---------------------------
Delaware 36-4076007
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
---------------------------
100 Park Avenue 61101
Rockford, Illinois (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: 815-987-5350
---------------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered:
------------------- ----------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
None
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, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
-- ----
100% of the voting common stock of the registrant is owned by Mr. A.
Richard Benedek and none of the voting common stock of the registrant is held by
non-affiliates.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date: At May 14, 1997,
there were outstanding 7,030,000 shares of common stock, $0.01 par value.
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION
FORM 10-Q TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item
Number Page
- ------ ----
<S> <C> <C>
PART I - FINANCIAL STATEMENTS
ITEM 1. FINANCIAL STATEMENTS
Introductory Comments......................................................................... 1
Benedek Communications Corporation and Subsidiary
Consolidated Balance Sheets as of December 31, 1996 and March 31, 1997...................... 2
Consolidated Statements of Operations for the Three Months Ended
March 31, 1996 and 1997.................................................................. 3
Consolidated Statement of Stockholder's Deficit for the Three Months Ended
March 31, 1997........................................................................... 4
Consolidated Statements of Cash Flows for the Three Months Ended March 31,
1996 and 1997............................................................................ 5
Notes to Consolidated Financial Statements.................................................. 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS........................................................... 14
PART II - OTHER INFORMATION
ITEM 6. Exhibits and reports on Form 8-K.............................................................. 20
SIGNATURES............................................................................................... 21
</TABLE>
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARY
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTRODUCTORY COMMENTS:
The Financial Statements included herein have been prepared by Benedek
Communications Corporation (the "Company") without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations. It is
suggested that these Financial Statements be read in conjunction with the
financial information set forth in the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996.
-1-
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
ASSETS 1996 1997
---- ----
(Unaudited)
<S> <C> <C>
Current Assets
Cash and cash equivalents.............................................. $ 8,091,683 $4,864,510
Receivables
Trade, net.......................................................... 23,744,311 19,889,573
Due from Seller..................................................... 474,011 525,678
Other............................................................... 385,063 681,676
Current portion of program broadcast rights............................ 4,427,832 3,380,923
Prepaid expenses....................................................... 1,453,007 2,072,572
Deferred income taxes.................................................. 1,333,000 1,280,000
------------------ ------------------
TOTAL CURRENT ASSETS.................................... 39,908,907 32,694,932
------------------ ------------------
Property and Equipment.................................................... 84,021,301 80,082,608
------------------ ------------------
Intangible Assets......................................................... 354,622,296 352,165,510
------------------ ------------------
Other Assets
Program broadcast rights, less current portion......................... 2,298,365 2,005,019
Deferred loan costs.................................................... 13,385,766 13,284,744
Land held for sale..................................................... 109,000 109,000
Other.................................................................. 670,605 669,384
------------------ ------------------
16,463,736 16,068,147
------------------ ------------------
$ 495,016,240 $ 481,011,197
================== ==================
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current Liabilities
Current maturities of notes and leases payable......................... $ 14,015,273 $ 17,441,474
Current maturities of program broadcast rights payable................. 6,119,953 5,145,016
Accounts payable and accrued expenses.................................. 15,368,581 9,774,854
Deferred revenue....................................................... 707,347 668,510
------------------ ------------------
TOTAL CURRENT LIABILITIES............................... 36,211,154 33,029,854
------------------ ------------------
Long-Term Obligations
Notes and leases payable (Note D)...................................... 344,219,003 344,560,394
Program broadcast rights payable....................................... 1,592,400 1,364,162
Deferred revenue....................................................... 4,435,165 4,284,823
Deferred income taxes.................................................. 54,600,000 50,542,000
------------------ ------------------
404,846,568 400,751,379
------------------ ------------------
Exchangeable redeemable senior preferred stock (Note C)................... 58,462,223 61,906,508
------------------ ------------------
Seller junior discount preferred stock (Note C)........................... 47,057,040 47,988,769
------------------ ------------------
Commitments
Stockholder's Deficit
Common stock, Class A $0.01 par value 25,000,000
authorized, none issued or outstanding.............................. - -
Common stock, Class B $0.01 par value 25,000,000
authorized, 7,030,000 issued and outstanding........................ 70,300 70,300
Additional paid-in capital............................................. (35,346,586) (36,433,460)
Accumulated deficit.................................................... (16,284,459) (26,302,153)
------------------ ------------------
(51,560,745) (62,665,313)
------------------ ------------------
$ 495,016,240 $ 481,011,197
================== ==================
</TABLE>
-2-
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------------
1996 1997
---- -----
<S> <C> <C>
Net revenues................................................................ $ 11,682,871 $ 28,078,473
------------------ ------------------
Operating expenses:
Selling, technical and program expenses.................................. 5,537,572 14,690,278
General and administrative............................................... 2,010,695 4,715,779
Depreciation and amortization............................................ 1,360,430 7,746,663
Corporate................................................................ 495,892 696,318
------------------ ------------------
9,404,589 27,849,038
------------------ ------------------
OPERATING INCOME...................................................... 2,278,282 229,435
------------------ ------------------
Financial income (expense):
Interest expense:
Cash interest......................................................... (4,026,253) (7,076,007)
Other interest........................................................ (100,457) (3,607,503)
------------------ ------------------
(4,126,710) (10,683,510)
Interest income.......................................................... 105,855 39,599
------------------ ------------------
(4,020,855) (10,643,911)
------------------ ------------------
(LOSS) BEFORE INCOME TAX BENEFIT...................................... (1,742,573) (10,414,476)
Income tax benefit.......................................................... - 3,775,657
------------------ ------------------
NET (LOSS)............................................................ (1,742,573) (6,638,819)
Preferred stock dividends and accretion..................................... - (4,376,016)
------------------ ------------------
Net income (loss) applicable to common stock................................ $ (1,742,573) $ (11,014,835)
================== ===================
Earnings (loss) per common share......................................... $ (0.25) $ (1.57)
================== ===================
Weighted-average common shares outstanding............................... 7,030,000 7,030,000
================== ===================
</TABLE>
-3-
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S DEFICIT
Three Months Ended March 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Additional
Common Paid-In Accumulated
Stock Capital Deficit Total
------------ ----------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996.............. $ 70,300 $ (35,346,586) $ (16,284,459) $ (51,560,745)
Accretion to exchangeable redeemable
senior preferred stock.............. - (997,141) - (997,141)
Financial costs related to the sale of
exchangeable redeemable senior
preferred stock..................... - (89,733) - (89,733)
Dividends payable on preferred stock... - - (3,378,875) (3,378,875)
Net (loss)............................. - - (6,638,819) (6,638,819)
------------ ----------------- ----------------- ------------------
Balance at March 31, 1997................. $ 70,300 $ (36,433,460) $ (26,302,153) $ (62,665,313)
============ ================= ================= ==================
</TABLE>
-4-
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------------------
1996 1997
---- ----
<S> <C> <C>
Cash Flows From Operating Activities
Net (loss).............................................................. $ (1,742,573) $ (6,638,819)
Adjustments to reconcile net (loss) to
net cash (used in) operating activities:
Amortization of program broadcast rights........................... 597,308 1,559,041
Depreciation and amortization...................................... 892,420 5,287,763
Amortization of intangibles and deferred loan costs................ 568,467 2,947,237
Amortization of note discount...................................... - 3,117,054
Loss on sale of property and equipment............................. - 2,111
Deferred income taxes.............................................. - (4,005,000)
Other.............................................................. - (18,105)
Changes in operating assets and liabilities, net of
effects of acquisitions:
Receivables........................................................ 4,638,951 3,558,123
Due to sellers..................................................... - (51,667)
Prepaid expenses and other......................................... (294,940) (619,563)
Payments on program broadcast rights payable....................... (522,121) (1,421,961)
Accounts payable and accrued expenses.............................. (4,222,411) (5,596,751)
Deferred revenue................................................... (69,877) (189,180)
------------------ -------------------
NET CASH (USED IN) OPERATING ACTIVITIES.......................... (154,776) (2,069,717)
------------------ -------------------
Cash Flows From Investing Activities
Purchase of property and equipment...................................... (612,766) (572,009)
Proceeds from sale of equipment......................................... - 3,655
Deposit on acquisition.................................................. (1,000,000) -
Payment of acquisition costs............................................ (334,569) -
Other .................................................................. (15) (1,849)
------------------ -------------------
NET CASH (USED IN) INVESTING ACTIVITIES.......................... (1,947,350) (570,203)
------------------ -------------------
Cash Flows From Financing Activities
Principal payments on notes and capital leases payable.................. (85,276) (108,092)
Payment of debt and preferred stock acquisition costs................... (99,374) (479,161)
------------------ -------------------
NET CASH (USED IN) FINANCING ACTIVITIES.......................... (184,650) (587,253)
------------------ -------------------
(DECREASE) IN CASH AND CASH EQUIVALENTS.......................... (2,286,776) (3,227,173)
Cash and cash equivalents:
Beginning............................................................... 9,668,331 8,091,683
------------------ -------------------
Ending.................................................................. $ 7,381,555 $ 4,864,510
================== ====================
</TABLE>
(Continued)
-5-
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------------
1996 1997
---- ----
<S> <C> <C>
Supplemental Disclosure of Cash Flow Information
Cash payments for interest............................................... $ 8,034,064 $ 11,372,655
Cash payments for income taxes........................................... - 253,566
=================== =================
Supplemental Schedule of Noncash Investing and Financing Activities
Acquisition of program broadcast rights.................................. $ 80,312 $ 218,787
Notes and capital leases payable incurred for purchase of equipment...... - 758,631
Equipment acquired by barter transactions................................ 41,888 24,198
Dividends accrued on redeemable preferred stock.......................... - 3,378,875
Accretion to exchangeable redeemable senior preferred stock.............. - 997,141
=================== =================
</TABLE>
-6-
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(NOTE A) - NATURE OF BUSINESS AND BASIS OF PRESENTATION
NATURE OF BUSINESS:
Benedek Communications Corporation (the "Company") was formed on April 10,
1996. The Company is a holding company that derives its operating income and
cash flow from its subsidiary, Benedek Broadcasting Corporation ("Benedek
Broadcasting") which owns and operates 22 television stations (the "Stations")
located throughout the United States. These stations operate under network
affiliation contracts, which provide programs to the affiliated stations and the
stations sell commercial time during the programs to national, regional and
local advertisers. The networks also sell commercial time during the programs to
national advertisers. Credit arrangements are determined on an individual
customer basis.
BASIS OF PRESENTATION:
The interim unaudited consolidated financial statements include the
accounts of the Company and its wholly owned subsidiary Benedek Broadcasting and
Benedek License Corporation ("BLC"), a wholly owned subsidiary of Benedek
Broadcasting. All significant intercompany items and transactions have been
eliminated in the interim unaudited consolidated financial statements. Benedek
Broadcasting and the Company had identical stock ownership, so the
capitalization of the Company by the stockholder with Benedek Broadcasting stock
was accounted for in a manner similar to pooling-of-interests accounting. These
consolidated financial statements include the consolidated financial statements
of Benedek Broadcasting for the period prior to June 6, 1996 recast to reflect
the difference in par value of the Company's and Benedek Broadcasting's stock.
The interim unaudited consolidated financial statements include all adjustments,
consisting of normal and recurring adjustments, which are considered necessary
in the opinion of management for the fair presentation of the financial position
as of March 31, 1997 and the results of operations and cash flows for the three
months ended March 31, 1996 and 1997. These financial statements do not include
all the information and footnotes required by generally accepted accounting
principles.
Operating results for the three month periods ended March 31, 1996 and 1997
are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 1997.
(NOTE B) - ACQUISITIONS, RELATED PARTY AND BUSINESS COMBINATIONS
The Company was formed by the sole stockholder of Benedek Broadcasting. On
June 6, 1996, Benedek Broadcasting completed two acquisitions. These
acquisitions included (i) the assets of the television broadcasting division of
Stauffer Communications, Inc. consisting of five television stations for a total
purchase price of $54,500,000 and (ii) all the issued and outstanding capital
stock of Brissette Broadcasting Corporation which owned and operated eight
television stations for a purchase price of $270,000,000. At the closing of
these acquisitions, the sole stockholder of Benedek Broadcasting contributed all
of the outstanding shares of common stock of Benedek Broadcasting to the Company
in exchange for the issuance to him of all of the outstanding shares of common
stock of the Company.
These acquisitions have been accounted for under the purchase method of
accounting. Accordingly, the results of the operations for the acquired stations
are included in the consolidated financial statements since
-7-
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
the date of acquisition. The purchase price has been allocated to acquired
assets and liabilities based on their relative fair values as of the closing
date. The excess of the purchase price over the net assets received from the
acquisitions is being amortized on a straight-line method over a period of 40
years.
The pro forma results of operations for the three months ended March 31,
1996, assuming the acquisitions of Stauffer Communications, Inc. and Brissette
Broadcasting Corporation had taken place on January 1, 1996 as compared to the
actual results for the three months ended March 31, 1997 are as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------------
1996 1997
---- ----
(Pro forma) (Actual)
<S> <C> <C>
Net revenue................................................................. $ 27,619,092 $ 28,078,473
Operating expenses.......................................................... (26,339,145) (27,849,038)
Financial expenses.......................................................... (10,285,832) (10,643,911)
------------------ ------------------
(Loss) before income tax benefit......................................... (9,005,885) (10,414,476)
Income tax benefit.......................................................... 3,172,354 3,775,657
------------------ ------------------
Net (loss) .............................................................. (5,833,531) (6,638,817)
Preferred stock dividends and accretion..................................... (4,142,048) (4,376,016)
------------------ ------------------
Net (loss) applicable to common stock....................................... $ (9,975,579) $ (11,014,833)
================== ==================
(Loss) per common share.................................................. $ (1.42) $ (1.57)
================== ==================
Weighted-average common shares outstanding.................................. 7,030,000 7,030,000
================== ==================
</TABLE>
(NOTE C) - REDEEMABLE EQUITY SECURITIES AND DISCOUNT NOTES
Concurrent with the acquisitions described in (Note B), the Company entered
into the following financing transactions, the net proceeds of which were
contributed by the Company to Benedek Broadcasting.
(1) The Company sold 60,000 Units in a private placement, which generated
proceeds of $60,000,000. Each Unit consisted of (i) ten shares of
Exchangeable Redeemable Senior Preferred Stock, (ii) ten Initial
Warrants, and (iii) 14.8 Contingent Warrants.
(i) Exchangeable Redeemable Senior Preferred Stock - The Company issued
600,000 shares of 15% Exchangeable Redeemable Senior Preferred
Stock due 2007, with an initial liquidation preference equal to the
proceeds received of $60,000,000. Of these proceeds, $9,000,000 was
allocated to the initial warrants described in (ii) below. The
Exchangeable Redeemable Senior Preferred Stock is being accreted to
its initial liquidation preference of $60,000,000 using the
effective interest method commencing on June 5, 1996 and ending on
July 1, 2000. Dividends are payable to holders of the outstanding
shares at the rate of 15% per annum of the then effective
liquidation preference per share, payable quarterly beginning July
1, 1996 and accruing from June 5, 1996. The Company has the option
to pay dividends on any dividend payment date occurring on or
before July 1, 2001 either in cash or by adding such dividends to
the then
-8-
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
effective liquidation preference. The Company also has the option
to immediately redeem these shares, in whole or in part, at
predetermined redemption prices. The Company is required to redeem
the outstanding shares on July 1, 2007 at a redemption price equal
to 100% of the then effective liquidation preference plus any
accrued and unpaid dividends to the date of redemption. The
Exchangeable Redeemable Senior Preferred Stock is exchangeable into
debentures at the Company's option, subject to certain conditions,
in whole on any scheduled dividend payment due. The Exchangeable
Redeemable Senior Preferred Stock has been registered with the
Securities and Exchange Commission pursuant to a registration
statement declared effective in October 1996.
(ii) Initial Warrants - The Company issued 600,000 Initial Warrants
which expire on July 1, 2007 each of which entitles the holder
thereof to purchase one share of Class A Common Stock at an
exercise price of $0.01 per share. The value of the warrants at the
date of issuance was $9,000,000 which was allocated to paid-in
capital.
(iii) Contingent Warrants - The Company issued 888,000 Contingent
Warrants, each warrant to acquire one share of Class A Common
Stock at an exercise price of $0.01 per share. The Contingent
Warrants were issued to an escrow agent and are not outstanding.
The Contingent Warrants are not separable from the Exchangeable
Redeemable Senior Preferred Stock and will not be delivered out of
escrow unless the Exchangeable Redeemable Senior Preferred Stock
is not redeemed on or prior to July 1, 2000. Since it is
management's intention to redeem the Exchangeable Redeemable
Senior Preferred Stock prior to any release of the Contingent
Warrants from escrow subject to a 15% redemption premium, no
allocation of the proceeds was made to the Contingent Warrants and
the amount of the redemption premium payable at such time is being
accreted as a constructive distribution over the period commencing
on the issue date June 5, 1996 and ending on July 1, 2000.
(2) Seller Junior Discount Preferred Stock - The Company issued 450,000
shares of Seller Junior Discount Preferred Stock due July 1, 2008 with
an aggregate liquidation preference equal to the proceeds of
$45,000,000. Dividends are payable to the holders of the Seller Junior
Discount Preferred Stock at 7.92% per annum until the fifth anniversary
of the issuance thereof and thereafter at increasing rates up to 18%.
Since the Company intends to redeem the Seller Junior Discount Preferred
Stock prior to the fifth anniversary, dividends are being accrued at the
initial rate. The dividends on the Seller Junior Discount Preferred
Stock are cumulative from the date of issuance. Until the fifth
anniversary of the issuance thereof, dividend payments on the Seller
Junior Discount Preferred Stock may not be made in cash and instead will
be added automatically to the liquidation preference and as a result
will be deemed paid in full and will not accumulate. The Seller Junior
Discount Preferred Stock is subject to mandatory redemption in whole on
July 1, 2008 and the Company has the option to redeem these shares in
whole or in part at a price equal to the sum of the liquidation value
per share plus an amount equal to all accumulated and unpaid dividends
per share to the date of redemption.
-9-
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(3) 13 1/4% Senior Subordinated Discount Notes due 2006 - The Company issued
Senior Subordinated Discount Notes due 2006 (the "Notes") with a
principal amount of $170,000,000. The Notes were issued at a discount of
$79,821,800 which generated gross proceeds of $90,178,200. The Notes
mature on May 15, 2006 and yield 13.25% per annum with no cash interest
accruing prior to May 15, 2001. Thereafter, cash interest will accrue
until maturity payable semiannually, commencing November 15, 2001. On or
after May 15, 2000, the Notes are redeemable at the option of the
Company, in whole or in part, at predetermined redemption prices and
under specified conditions. The Notes are subordinated to all Senior
Debt of the Company. The Notes contain various restrictive covenants,
all of which the Company was in compliance with at March 31, 1997. The
Notes have been registered with the Securities and Exchange Commission
pursuant to a registration statement declared effective in October 1996.
The following table summarizes these activities as follows:
<TABLE>
<CAPTION>
Exchangeable
Redeemable Seller 13 1/4%
Senior Junior Discount Senior
Preferred Preferred Subordinated
Stock Stock Discount Notes
-------------------- ------------------ -----------------
<S> <C> <C> <C>
Issuance of preferred stock......... $ 51,000,000 $ 45,000,000 $ -
Issuance of senior subordinated
discount notes................... - - 90,178,200
Accrued dividends................... 7,704,270 2,988,769 -
Accretion of discount............... 3,202,238 - -
Amortization of note discount....... - - 9,986,566
-------------------- ------------------ -----------------
Balance at March 31, 1997........... $ 61,906,508 $ 47,988,769 $ 100,164,766
==================== ================== =================
</TABLE>
Since the Company derives all of its operating income and cash flow from
Benedek Broadcasting, the Company's ability to pay its obligations including (i)
interest on and principal of the Notes, (ii) redemption of and cash dividends on
the Exchangeable Redeemable Senior Preferred Stock, and (iii) redemption of and
cash dividends on the Seller Junior Discount Preferred Stock will be dependent
primarily upon receiving dividends and other payments or advances from Benedek
Broadcasting. Benedek Broadcasting is a separate and distinct legal entity and
has no obligation, contingent or otherwise, to pay any amounts to the Company or
to make funds available to the Company for debt service or any other obligation.
(NOTE D) - NOTES PAYABLE AND AMENDMENT TO THE CREDIT AGREEMENT
(a) Term Loans and Revolver. As part of the financing transactions described
in (Note C), on June 6, 1996, Benedek Broadcasting entered into a Credit
Agreement which includes two Term Loan Facilities consisting of (i) a Series A
Facility of $70,000,000 at the bank's base rate plus 2.75% or the Eurodollar
rate plus 3.75% per annum (currently 9.31%) and (ii) a Series B Facility of
$58,000,000 at the bank's base rate plus 3.25% or the Eurodollar rate plus 4.25%
per annum (currently 9.81%). The current rates reflect the February 1997
amendment, as discussed below. The Term Loan Facilities provide for quarterly
principal payments until final maturity (except in the first year during which
amortization will be on a semiannual
-10-
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
basis). The Series A Facility and the Series B Facility mature on May 1, 2001
and November 1, 2002, respectively. Benedek Broadcasting is required to make
scheduled aggregate amortization payments on the Series A and Series B
Facilities, as follows: during the first year after closing, $6.0 million;
during the second year after closing, $11.0 million; during the third year after
closing, $14.5 million; during the fourth year after closing, $16.0 million;
during the fifth year after closing, $27.5 million; during the sixth year after
closing, $15.0 million; and during the first half of the seventh year after
closing, $38.0 million.
The Credit Agreement, as amended, also includes a Revolving Credit Facility of
$10,000,000, which bears interest at the bank's base rate plus 2.75% or the
Eurodollar rate plus 3.75% per annum. There were no outstanding borrowings on
the Revolving Credit Facility as of March 31, 1997. The unused portion of the
Revolving Credit Facility bears interest at 0.5% a month.
The Credit Agreement, as amended, also contains several mandatory principal
prepayment clauses, one of which Benedek Broadcasting was subject to at March
31, 1997. This clause stipulates that Benedek Broadcasting prepay the Term Loan
Facilities by an amount equal to 50% of the Consolidated Excess Cash Flow, as
defined by the agreement, no later than 100 days after the end of the year.
Benedek Broadcasting has reflected the additional $5,683,000 as a current
maturity of debt at March 31, 1997.
The Term Loan Facilities and the Revolving Credit Facility are guaranteed by
the Company and secured by certain of the Company's and Benedek Broadcasting's
present and future property and assets. The Term Loan Facilities are also
guaranteed by BLC and are collateralized by all of the stock of BLC which is
also collateral on the Senior Secured Notes which have an equal position in the
stock of BLC to the Term Loan Facilities.
The Term Loan Facilities contain various restrictive covenants and require
compliance with certain financial ratios and covenants. On February 28, 1997,
Benedek Broadcasting amended the Credit Agreement as it relates to certain
restrictive covenants and financial ratios through June 30, 1998. As part of the
amendment, effective February 28, 1997, Benedek Broadcasting agreed to increase
the interest rate on the Term Loan Facilities and Revolving Credit Facility by
an additional 50 basis points. Benedek Broadcasting also agreed to reduce the
available Revolving Credit Facility from $15,000,000 to $10,000,000. Benedek
Broadcasting is in compliance with the covenants as of March 31, 1997.
(b) Senior Secured Notes. During 1995, Benedek Broadcasting issued
$135,000,000 of 11 7/8% Senior Secured Notes due 2005 (the "Senior Secured
Notes"). The Senior Secured Notes bear interest at the rate of 11 7/8% payable
semiannually on March 1 and September 1 of each year and mature in March 2005.
The Senior Secured Notes may be redeemed by Benedek Broadcasting in whole or in
part after March 1, 2000 subject to certain prepayment premiums. The Senior
Secured Notes contain various restrictive covenants relating to prepayment
premiums. The Senior Secured Notes contain various restrictive covenants
relating to limitations on dividends, transactions with affiliates, further
issuance of debt, and the sales of assets, among others. Benedek Broadcasting
was in compliance with these covenants at March 31, 1997.
-11-
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Senior Secured Notes are collateralized by all of the stock of BLC, which
is also collateral on the Term Loan Facilities which have an equal position in
the stock of BLC to the Senior Secured Notes. The Senior Secured Notes are also
collateralized by certain agreements and contract rights related to the Stations
which include network affiliation agreements and certain general intangibles.
Notes payable consist of the following:
<TABLE>
<CAPTION>
March 31, 1997
---------------
<S> <C>
Senior secured notes........................ $ 135,000,000
Term loan series A.......................... 67,500,000
Term loan series B.......................... 57,500,000
Senior subordinated discount notes.......... 100,164,766
Other....................................... 1,187,102
------------------
362,001,868
------------------
Less current maturities..................... 17,441,474
-----------------
$ 344,560,394
=================
</TABLE>
(NOTE E) - INCOME TAX MATTERS AND CHANGE IN TAX STATUS
Prior to the consummation of the acquisitions and the related financing,
Benedek Broadcasting, with the consent of its stockholder, elected to be taxed
under sections of federal and state income tax law, which provided that, in lieu
of corporation income taxes, the stockholder separately accounted for Benedek
Broadcasting's income, deductions, losses and credits. Due to the structure of
the financing for the acquisitions, the election to be taxed as an "S"
Corporation automatically terminated and Benedek Broadcasting became subject to
federal and state income taxes. As a result, Benedek Broadcasting recognized a
net deferred tax asset of approximately $3,550,000. Concurrent with the change
in tax status the accumulated deficit of $41,072,877, which existed on that
date, was reclassified to additional paid-in capital.
(NOTE F) - COMMON STOCK AND OTHER SECURITIES
Common stock consists of the following numbers of shares:
<TABLE>
<CAPTION>
Authorized Issued Outstanding
---------- ------ -----------
<S> <C> <C> <C>
Class A common $0.01 par value................................ 25,000,000 - -
Class B common $0.01 par value................................ 25,000,000 7,030,000 7,030,000
</TABLE>
The Board of Directors of the Company has authorized 2,500,000 shares of
preferred stock of which 1,050,000 was issued in conjunction with the financing
discussed in (Note C). The Board has the right and ability to set the terms and
preferences of the preferred stock. The Board has not set the terms and
preferences of the remaining 1,450,000 unissued shares.
-12-
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
OVERVIEW
This Quarterly Report on Form 10-Q contains forward-looking statements that
involve risks and uncertainties. Actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including changes in national and regional economies, competition in
the television business, successful integration of acquired television stations,
pricing fluctuations in local and national advertising, program ratings and
changes in programming costs, among other factors.
Except as otherwise provided, the financial data set forth below is derived
from the historical financial statements of the Company prepared in accordance
with generally accepted accounting principles. Such historical financial data
includes the results of operations of five television stations acquired from
Stauffer Communications, Inc. (the "Stauffer Stations") and eight television
stations acquired from Brissette Broadcasting Corporation (the "Brissette
Stations," and together with the Stauffer Stations, the "Acquired Stations")
from the date of the acquisition thereof on June 6, 1996. As used herein, "Same
Station" data refers to the historical results of operations of all 22
television stations currently owned by the Company as if such stations were
owned by the Company throughout the periods indicated with pro forma adjustments
only for corporate expenses, depreciation and amortization and interest.
As used herein, "Adjusted EBITDA" is defined as operating income before
financial income as derived from the consolidated statements of operations plus
depreciation and amortization, amortization of program broadcast rights and
noncash compensation less payments for program broadcast rights. "Adjusted
EBITDA" as defined in Benedek Broadcasting's Credit Agreement excludes from the
foregoing definition certain noncash revenues used in determining operating
income. As used herein,"broadcast cash flow" is defined as Adjusted EBITDA plus
corporate expenses. Adjusted EBITDA and broadcast cash flow are measures used by
certain investors to measure a company's ability to service debt. Adjusted
EBITDA and broadcast cash flow should not be considered as a substitute for
measures of performance prepared in accordance with generally accepted
accounting principles.
The operating revenues of the Company are derived primarily from the sale of
advertising time and, to a lesser extent, from compensation paid by the networks
for broadcasting network programming and barter transactions for goods and
services. Revenue depends on the ability of the Company to provide popular
programming which attracts audiences in the demographic groups targeted by
advertisers, thereby allowing the Company to sell advertising time at
satisfactory rates. Revenue also depends significantly on factors such as the
national and local economy and the level of local competition.
For the three months ended March 31, 1997, the Company reported net revenues
of $28.1 million compared to net revenues of $11.7 million for the three months
ended March 31, 1996. The increase in 1997 net revenues was due to the
acquisitions of the Acquired Stations which represented $16.5 million. The
Company had a net loss of $6.6 million for the three months ended March 31, 1997
compared to a net loss of $1.7 million for the three months ended March 31,
1996. Adjusted EBITDA for the three months ended March 31, 1997 was $8.1 million
as compared to $3.7 million for the three months ended March 31, 1996.
Local/regional advertising and national advertising constitute the largest
categories of the Company's operating revenues and represent approximately 85.9%
of gross revenues for the three months ended March 31, 1997 as compared to 86.1%
for the three months ended March 31, 1996.
-13-
<PAGE>
<PAGE>
Approximately 54.8% of the gross revenues of the Company in the three months
ended March 31, 1997 was generated from local and regional advertising, which is
sold primarily by the Stations' sales staff, and the remainder of the
advertising revenues is comprised primarily of national advertising, which is
sold by national sales representatives retained by the Company. The Company
generally pays commissions to advertising agencies on local, regional and
national advertising and to national sales representatives on national
advertising. Net revenues reflect deductions from gross revenues for commissions
payable to advertising agencies and national sales representatives.
The Company's primary operating expenses are employee compensation,
programming and depreciation and amortization. Changes in compensation expense
result primarily from adjustments to fixed salaries based on employee
performance and inflation and, to a lesser extent, from changes in sales
commissions paid based on levels of advertising revenues. Programming expense
consists primarily of amortization of program rights. The Company purchases
first run and off-network syndicated programming on an ongoing basis and has a
policy of closely matching payments for and amortization of program rights in
each period. A network- affiliated station receives approximately two-thirds of
its required daily programming from the network at no cost. For the three months
ended March 31, 1997, depreciation and amortization increased $6.4 million from
$1.3 million to $7.7 million due to the acquisition of the Acquired Stations.
Depreciation and amortization expense has increased as assets purchased at fair
market value in connection with the acquisitions of the Acquired Stations began
to depreciate. Barter expense generally offsets barter revenue and reflects the
fair market value of goods and services received. The Company's operating
expenses (excluding depreciation and amortization) represent approximately 71.6%
of net revenues for the three months ended March 31, 1997 as compared to
approximately 68.9% of net revenues for the three months ended March 31, 1996.
On June 6, 1996, the Company acquired substantially all of the broadcast
television assets (including working capital of approximately $1.6 million) of
the Stauffer Stations consisting of five principal broadcast television stations
and four satellite broadcast television stations for a purchase price of $54.5
million. The principal stations acquired by the Company were KCOY-TV, Santa
Maria, California; WIBW-TV, Topeka, Kansas; KMIZ-TV, Columbia, Missouri;
KGWC-TV, Casper, Wyoming; and KGWN-TV, Cheyenne, Wyoming. KGWC-TV operates two
satellite stations, KGWL-TV, Lander, Wyoming, and KGWR-TV, Rock Springs,
Wyoming, both of which rebroadcast the programming of KGWC-TV. KGWN-TV operates
two satellite stations, KSTF-TV, Scottsbluff, Nebraska, and KTVS-TV, Sterling,
Colorado, both of which rebroadcast the programming of KGWN-TV. All of the
Stauffer Stations are affiliated with CBS, except for KMIZ-TV, Columbia,
Missouri, which is affiliated with ABC.
On June 6, 1996, the Company acquired all of the capital stock of Brissette
for $270.0 million in cash and preferred stock. All of the outstanding
indebtedness of Brissette was paid in full by the sellers at the closing.
Pursuant to the Brissette purchase agreement, at the closing Brissette was
required to have working capital of at least $8.8 million and any amount in
excess thereof was to be paid to the sellers. By acquiring all of the capital
stock of Brissette, the Company acquired eight network-affiliated television
stations including WMTV-TV, the NBC affiliate serving Madison, Wisconsin;
WWLP-TV, the NBC affiliate serving Springfield, Massachusetts; WILX-TV, the NBC
affiliate serving Lansing, Michigan; WHOI-TV, the ABC affiliate serving Peoria,
Illinois; WSAW-TV, the CBS affiliate serving Wausau, Wisconsin; WTRF-TV, the CBS
affiliate serving Wheeling, West Virginia and Steubenville, Ohio; KAUZ-TV, the
CBS affiliate serving Wichita Falls, Texas; and KOSA-TV, the CBS affiliate
serving Odessa, Texas. Of the $270.0 million paid for the capital stock of
Brissette, $225.0 million was paid in cash and $45.0 million was paid by the
issuance of the junior preferred stock of the Company to General Electric
Capital Corporation ("GECC") and Paul Brissette.
-14-
<PAGE>
<PAGE>
During the first quarter of 1997, the Company implemented several aspects of
the strategy involving the acquisitions of the Acquired Stations, including
adding approximately 60 hours per week in additional locally-produced news
programming. This news expansion is expected to provide future revenue growth,
the results of which the Company is just beginning to realize.
The Company has included Adjusted EBITDA and broadcast cash flow data because
such data is used by certain investors to measure a company's ability to service
debt. Adjusted EBITDA is used to pay principal and interest on long-term debt
and to fund capital expenditures. Adjusted EBITDA and broadcast cash flow do not
purport to represent cash provided by operating activities as reflected in the
Company's Consolidated Financial Statements, is not a measure of financial
performance under generally accepted accounting principles and should not be
considered in isolation or as a substitute for measures of performance prepared
in accordance with generally accepted accounting principles.
The following table sets forth the computation of broadcast cash flow and
Adjusted EBITDA for the periods indicated. The table includes the results of
operations of the Acquired Stations only from the closing date of June 6, 1996.
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------------------
1996 1997
---- ----
(Dollars in Thousands)
<S> <C> <C>
Operating income $ 2,278 $ 229
Add:
Amortization of program
broadcast rights 597 1,559
Depreciation and amortization 1,361 7,747
Corporate Expenses 496 696
Less:
Payment for program
broadcast liabilities (522) (1,422)
------- -------
Broadcast cash flow 4,209 8,809
Corporate 496 696
------- -------
Adjusted EBITDA $ 3,713 $ 8,113
======= =======
</TABLE>
-15-
<PAGE>
<PAGE>
The following table provides both historical and Same Station information. The
Same Station information gives effect to the acquisition of the Acquired
Stations as if such transactions were consummated on January 1, 1996. The Same
Station information for the three months ended March 31, 1996 does not purport
to represent what the Company's results of operations would have been if such
transactions had been effected at such date and do not purport to project
results of operations of the Company in any future period.
<TABLE>
<CAPTION>
Historical Same Station
Three Months Ended March 31, Three Months Ended March 31,
---------------------------------------------- --------------------------------------------
% %
1996 1997 Change 1996 1997 Change
---- ---- ------ ---- ---- ------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Net revenues ........................... $11,683 $28,078 140.3% $27,619 $28,078 1.7%
------- ------- ----- ------- ------- -----
Operating expenses:
Selling, technical and
program expenses ................... 5,538 14,690 165.2 13,300 14,690 10.4
General and administrative ........... 2,011 4,716 134.5 4,903 4,716 (3.8)
Depreciation and amortization ........ 1,360 7,747 469.6 7,243 7,747 6.9
Corporate ............................ 496 696 40.3 893 696 (22.0)
------- ------- ----- ------- ------- -----
9,405 27,849 196.1 26,339 27,849 5.7
------- ------- ------- ------- ------- -----
OPERATING INCOME .............. $ 2,278 $ 229 (89.9)% $ 1,280 $ 229 (82.1)%
======= ======= ======= ======= ======= =====
Broadcast cash flow .................... $ 4,209 $ 8,809 109.3% $ 9,625 $ 8,809 (8.5)%
Broadcast cash flow margin ............. 36.0% 31.4% 34.8% 31.4%
Adjusted EBITDA ........................ $ 3,713 $ 8,113 118.5% $ 8,732 $ 8,113 (7.0)%
Adjusted EBITDA margin ................. 31.8% 28.9% 31.6% 28.9%
</TABLE>
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
1996
Net revenues for the three months ended March 31, 1997 increased $16.4
million or 140.3% to $28.1 million from $11.7 million for the three months ended
March 31, 1996 primarily as a result of the acquisition on June 6, 1996 of the
Acquired Stations which increased net revenue by $16.5 million. On a Same
Station basis, net revenues for the three months ended March 31, 1997 increased
$0.5 million or 1.7% to $28.1 million from $27.6 million for the three months
ended March 31, 1996, despite a challenging national advertising environment and
a decline in political advertising revenue. Gross revenues on a Same Station
basis excluding political advertising revenue increased $1.0 million or 3.2%
from the three months ended March 31, 1996.
On a Same Station basis, the Company's 12 CBS affiliated stations and six ABC
affiliated stations were affected by weakness in advertising revenues for the
three months ended March 31, 1997. The Company's CBS affiliated stations' net
revenues increased by 2.1% for the first quarter 1997 as compared to 1996. The
Company's four NBC affiliated stations showed an increase in net revenues of
6.5% on a Same Station basis while the six ABC affiliated stations showed a
decrease in net revenues of 3.4% on a Same Station basis caused by a $0.3
million decrease in political revenues for those stations. The Company expects
that its CBS stations may benefit in the balance of the year from the improved
ratings performance of CBS network programming.
Operating expenses for the three months ended March 31, 1997 increased $18.4
million or 196.1% to $27.8 million from $9.4 million for the three months ended
March 31, 1996. Of the increase in operating expenses, $17.5 million was
attributable to the acquisition of the Acquired Stations. On a Same Station
basis, operating expenses for the three months ended March 31, 1997 increased
$1.5 million or 5.7% to $27.8
-16-
<PAGE>
<PAGE>
million from $26.3 million for the three months ended March 31, 1996. The
increase in operating expenses was primarily caused by the planned expansion of
locally-produced news programming and increased depreciation and amortization.
Operating income for the three months ended March 31, 1997 decreased $2.1
million or 89.9% to $0.2 million from $2.3 million for the three months ended
March 31, 1996.
Financial (expenses), net for the three months ended March 31, 1997 increased
$6.7 million or 164.7% to $10.6 million from $4.0 million in the three months
ended March 31, 1996, due to the Company's higher debt level following the
completion of the financing of the purchase price for the Acquired Stations in
June 1996.
Income tax benefit for the three months ended March 31, 1997 was $3.8 million
compared to none for the three months ended March 31, 1996. Reductions in the
deferred tax liabilities related to the acquisitions and the creation of
deferred tax assets generated the income tax benefit for the three months ended
March 31, 1997. For the three months ended March 31, 1996, the Company
recognized no income tax benefit due to its Subchapter S Corporation status.
Net loss for the three months ended March 31, 1997 was $6.6 million as
compared to a $1.7 million net loss for the three months ended March 31, 1996.
Broadcast cash flow for the three months ended March 31, 1997 increased $4.6
million or 109.3% to $8.8 million from $4.2 million for the three months ended
March 31, 1996 primarily as a result of the acquisition of the Acquired
Stations. As a percentage of net revenues, broadcast cash flow margin decreased
to 31.4% for the three months ended March 31, 1997 from 36.0% for the three
months ended March 31, 1996. On a Same Station basis, broadcast cash flow for
the three months ended March 31, 1997 decreased $0.8 million or 8.5% to $8.8
million from $9.6 million for the three months ended March 31, 1996. As a
percentage of net revenues, broadcast cash flow margin on a Same Station basis
decreased to 31.4% for the three months ended March 31, 1997 from 34.8% for the
three months ended March 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows from Operating Activities is the primary source liquidity for the
Company. For the first quarter 1997 and 1996, however, the Company used its cash
reserves to fund operating activities by $(2.1) million for the three months
ended March 31, 1997 as compared to $(0.2) million for the three months ended
March 31, 1996 due to the relatively fixed nature of expenses and the
seasonality of revenues. Cash flows from operating activities included cash
payments of interest expense which totaled $11.4 million for the three months
ended March 31, 1997 as compared to $8.0 million for the three months ended
March 31, 1996. The increase in payments of interest expense of $3.4 million was
due to the Company's higher debt level following the acquisition of the Acquired
Stations. Cash flows from operating activities for the three months ended March
31, 1996 included a $2.5 million signing bonus from CBS in consideration of the
1995 contract with the Company.
Cash Flows from Investing Activities were $(0.6) million for the three months
ended March 31, 1997 compared to $(1.9) million for the three months ended March
31, 1996. For the three months ended March 31, 1996, cash flows from investing
activities included a total of $1.3 million associated with the acquisitions of
the Acquired Stations.
-17-
<PAGE>
<PAGE>
Cash Flows from Financing Activities were $(0.6) million for the three months
ended March 31, 1997 compared to $(0.2) million for the three months ended March
31, 1996. For the three months ended March 31, 1997, cash flows from financing
activities included $0.5 million associated with the amendment of the Credit
Agreement.
On June 6, 1996, the Company, together with its subsidiary Benedek
Broadcasting, implemented a financing plan in order to finance the acquisitions
of the Acquired Stations and to pay fees and expenses related thereto. The
financing plan consisted of (i) the offer and sale by the Company of the Senior
Subordinated Discount Notes which generated gross proceeds of $90.2 million,
(ii) the sale by the Company of units consisting of Exchangeable Redeemable
Senior Preferred Stock and warrants which generated gross proceeds of $60.0
million, (iii) Benedek Broadcasting borrowing $128.0 million pursuant to the
Term Loan Facilities of the Credit Agreement and (iv) the Company issuing an
aggregate of $45.0 million initial liquidation preference of Seller Junior
Discount Preferred Stock to GECC and Mr. Paul Brissette. At March 31, 1997,
Benedek Broadcasting also had available to it $10.0 million under a revolving
credit facility under the Credit Agreement (the "Revolving Credit Facility").
From time to time throughout 1997, Benedek Broadcasting's cash needs will
require the use of the Revolving Credit Facility for general working capital
purposes and to fund capital expenditures. During the three months ended March
31, 1997, Benedek Broadcasting used $1.5 million of the Revolving Credit
Facility. At March 31, 1997, there were no outstanding borrowings under the
Revolving Credit Facility.
The Company did not meet certain financial ratios contained in the Credit
Agreement at September 30 and December 31, 1996, due to lower than expected
Adjusted EBITDA (as defined in the Credit Agreement). The lenders under the
Credit Agreement agreed to waive such noncompliance and have amended certain
covenants applicable to 1997 and the first half of 1998. The amendment provides
that for so long as the ratio of debt to Adjusted EBITDA (as defined in the
Credit Agreement) exceeds certain levels, the Term Loan Facilities will bear
interest at varying additional spreads from that originally provided for in the
Credit Agreement. The amendment further reduced the Revolving Credit Facility
from $15.0 million to $10.0 million and increased the percentage of excess cash
flow to be applied as prepayments of the Term Loan Facilities from 50% to 75%
until the Company's ratio of debt to Adjusted EBITDA is at 6.75 or lower. The
Company was in compliance with the revised financial covenants at March 31,
1997.
RECENT DEVELOPMENTS
In September 1996, the Company announced that it had reached an agreement in
principle with The Warner Bros. Television Network to develop a local cable
affiliate called the "WeB" in each of the Company's 20 markets which rank above
100. The WeB is intended to be a 24 hour, seven day a week television channel
which will broadcast Warner Bros. Network prime time programming, WB kids
programming and syndicated programming of Warner Bros. and others. The WeB is
scheduled to begin service in by the fall of 1998 in most 100-plus markets. The
Company will be responsible for all local sales efforts for the new channels in
its markets. The Company does not anticipate a significant effect on operations
during 1997 nor does it anticipate that significant capital expenditures will be
required in connection with the development of its WeB affiliates.
During 1996, Benedek Broadcasting made arrangements to acquire low power
television licenses in Columbia and Jefferson City, Missouri which is expected
to be completed in the second quarter of 1997. Benedek Broadcasting does not
expect material expenditures for the acquisition of these licenses or immediate
capital needs.
-18-
<PAGE>
<PAGE>
SEASONALITY
Net revenues of the Company are generally higher during the fourth quarter of
the year, primarily due to increased expenditures by advertisers in anticipation
of holiday season consumer spending and an increase in viewership during this
period and, to a lesser extent, during the second quarter of each year. Net
revenues for the first quarter are generally the lowest of the year.
INCOME TAXES
Historically, Benedek Broadcasting had elected to be taxed as a Subchapter S
Corporation. Therefore, for the period January 1, 1996 through June 6, 1996,
income taxes were not reflected in the consolidated financial statements, but
the income, deductions, losses and credits were passed to Benedek Broadcasting's
sole stockholder. Concurrent with the completion of the financing for the
acquisitions of the Acquired Stations, Benedek Broadcasting's election to be
taxed as a Subchapter S Corporation was terminated and Benedek Broadcasting
became subject to federal and state income taxes. In conjunction with the
acquisition of Brissette, a deferred tax liability of $53.3 million was
recognized primarily associated with the variance between future tax deductions
allowed for depreciation and amortization of intangibles and the amount of such
depreciation and amortization that will be reflected for book purposes.
For the three months ended March 31, 1997, a tax benefit of $3.8 million was
recognized consisting of a $4.0 million benefit related to the net reduction of
deferred income tax liabilities and $0.2 million of taxes currently due.
Under the provisions of the Internal Revenue Code, the Company has
approximately $9.4 million of actual net operating loss carryforwards available
to offset future tax liabilities of the Company, that begin to expire in 2007
through 2011.
EMERGING ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("FASB 128"), which
establishes standards for computing and presenting earnings per share. FASB 128
replaces the presentation of primary and fully diluted earnings per share with
basic and diluted earnings per share, respectively. Basic earnings per share are
computed by dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted earnings per
share are computed similarly to fully diluted earnings per share. The standard
is effective for financial statements for periods ending after December 15,
1997, with earlier application not permitted. No material effect is expected on
earnings per share as a result of the adoption of FASB 128.
-19-
<PAGE>
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a)(3) Exhibits.
3.1 -- Certificate of Incorporation of the Registrant, as amended,
incorporated by reference to Exhibit 3.1 to the Registrant's
Registration Statement on Form S-4, File No. 333-09529, filed on
August 2, 1996 (the "S-4 Registration Statement").
3.2 -- By-Laws of the Registrant, incorporated by reference to Exhibit
3.2 to the S-4 Registration Statement.
3.3 -- Certificate of Designation of the Powers, Preferences and
Relative, Participating, Optional and Other Special Rights of
15.0% Exchangeable Redeemable Senior Preferred Stock Due 2007 and
Qualifications, Limitations and Restrictions thereof, incorporated
by reference to Exhibit 3.3 to the S-4 Registration Statement.
3.4 -- Certificate of Designation, Preferences and Relative,
Participating, Optional and Other Special Rights of Series C
Junior Discount Preferred Stock and Qualifications, Limitations
and Restrictions thereof, incorporated by reference to Exhibit 3.4
to the S-4 Registration Statement.
4.1 -- Indenture dated as of May 15, 1996 between the Registrant and
United States Trust Company of New York, relating to the 13-1/4%
Senior Subordinated Discount Notes due 2006, incorporated by
reference to Exhibit 4.1 to the S-4 Registration Statement.
4.2 -- Form of 13-1/4% Senior Subordinated Discount Note due 2006
(included in Exhibit 4.1 hereof), incorporated by reference to
Exhibit 4.2 to the S-4 Registration Statement.
4.3 -- Indenture dated as of March 1, 1995 between Benedek Broadcasting
Corporation ("Benedek Broadcasting") and The Bank of New York,
relating to the 11-7/8% Senior Secured Notes due 2005 of Benedek
Broadcasting, incorporated by reference to Exhibit 4.3 to the S-4
Registration Statement.
4.4 -- Form of 11-7/8% Senior Secured Note due 2005 of Benedek
Broadcasting (included in Exhibit 4.3 hereof), incorporated by
reference to Exhibit 4.4 to the S-4 Registration Statement.
4.5 -- Certificate of Designation of the Powers, Preferences and
Relative, Participating, Optional and Other Special Rights of
15.0% Exchangeable Redeemable Senior Preferred Stock due 2007 and
Qualifications, Limitations and Restrictions thereof (filed as
Exhibit 3.3 hereof), incorporated by reference to Exhibit 4.5 to
the S-4 Registration Statement.
4.6 -- Certificate of Designation, Preferences and Relative,
Participating, Optional and Other Special Rights of Series C
Junior Discount Preferred Stock and Qualifications, Limitations
and Restrictions thereof (filed as Exhibit 3.4 hereof),
incorporated by reference to Exhibit 4.6 to the S-4 Registration
Statement.
4.7 -- Warrant Agreement dated as of June 5, 1996 between the
Registrant and IBJ Schroder Bank & Trust Company with respect to
Class A Common Stock of the Registrant, incorporated by reference
to Exhibit 4.7 to the S-4 Registration Statement.
*27 -- Financial Data Schedule pursuant to Article 5 of Regulation S-X.
- ---------------
*Filed herewith
(b) Reports on Form 8-K
None.
-20-
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
BENEDEK COMMUNICATIONS CORPORATION
(REGISTRANT)
By: /s/ RONALD L. LINDWALL
...............................
Ronald L. Lindwall
Senior Vice President and Chief Financial Officer
(Authorized Officer and Principal Accounting Officer)
DATE: April 14, 1997
-21-
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
LOCATION OF
EXHIBIT
IN SEQUENTIAL
EXHIBIT NUMBERING
No. DESCRIPTION SYSTEM
- ------ ----------- ------
<S> <C> <C>
3.1 -- Certificate of Incorporation of the Registrant, as amended,
incorporated by reference to Exhibit 3.1 to the Registrant's
Registration Statement on Form S-4, File No. 333-09529, filed on
August 2, 1996 (the "S-4 Registration Statement").
3.2 -- By-Laws of the Registrant, incorporated by reference to Exhibit
3.2 to the S-4 Registration Statement.
3.3 -- Certificate of Designation of the Powers, Preferences and
Relative, Participating, Optional and Other Special Rights of
15.0% Exchangeable Redeemable Senior Preferred Stock Due 2007 and
Qualifications, Limitations and Restrictions thereof, incorporated
by reference to Exhibit 3.3 to the S-4 Registration Statement.
3.4 -- Certificate of Designation, Preferences and Relative,
Participating, Optional and Other Special Rights of Series C
Junior Discount Preferred Stock and Qualifications, Limitations
and Restrictions thereof, incorporated by reference to Exhibit 3.4
to the S-4 Registration Statement.
4.1 -- Indenture dated as of May 15, 1996 between the Registrant and
United States Trust Company of New York, relating to the 13-1/4%
Senior Subordinated Discount Notes due 2006, incorporated by
reference to Exhibit 4.1 to the S-4 Registration Statement.
4.2 -- Form of 13-1/4% Senior Subordinated Discount Note due 2006
(included in Exhibit 4.1 hereof), incorporated by reference to
Exhibit 4.2 to the S-4 Registration Statement.
4.3 -- Indenture dated as of March 1, 1995 between Benedek Broadcasting
Corporation ("Benedek Broadcasting") and The Bank of New York,
relating to the 11-7/8% Senior Secured Notes due 2005 of Benedek
Broadcasting, incorporated by reference to Exhibit 4.3 to the S-4
Registration Statement.
4.4 -- Form of 11-7/8% Senior Secured Note due 2005 of Benedek
Broadcasting (included in Exhibit 4.3 hereof), incorporated by
reference to Exhibit 4.4 to the S-4 Registration Statement.
4.5 -- Certificate of Designation of the Powers, Preferences and
Relative, Participating, Optional and Other Special Rights of
15.0% Exchangeable Redeemable Senior Preferred Stock due 2007 and
Qualifications, Limitations and Restrictions thereof (filed as
Exhibit 3.3 hereof), incorporated by reference to Exhibit 4.5 to
the S-4 Registration Statement.
4.6 -- Certificate of Designation, Preferences and Relative,
Participating, Optional and Other Special Rights of Series C
Junior Discount Preferred Stock and Qualifications, Limitations
and Restrictions thereof (filed as Exhibit 3.4 hereof),
incorporated by reference to Exhibit 4.6 to the S-4 Registration
Statement.
4.7 -- Warrant Agreement dated as of June 5, 1996 between the
Registrant and IBJ Schroder Bank & Trust Company with respect to
Class A Common Stock of the Registrant, incorporated by reference
to Exhibit 4.7 to the S-4 Registration Statement.
*27 -- Financial Data Schedule pursuant to Article 5 of Regulation S-X.
</TABLE>
- -----------------
* Filed herewith
<PAGE>
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<PERIOD-START> JAN-1-1997
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