<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, 2000
COMMISSION FILE NUMBER: 333-09529
--------------
BENEDEK COMMUNICATIONS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
--------------
<TABLE>
<S> <C>
DELAWARE 36-4076007
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
--------------
100 PARK AVENUE 61101
ROCKFORD, ILLINOIS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (815) 987-5350
--------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED:
------------------- --------------------
<S> <C>
NONE NONE
</TABLE>
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 Benedek Communications Corporation is
owned by affiliates.
Indicate the number of shares outstanding of each of Benedek Communications
Corporation's classes of common stock, as of the latest practicable date:
At May 11, 2000, there were outstanding 7,400,000 shares of Class B common
stock, $0.01 par value, and no shares of Class A common stock, $0.01 par value.
================================================================================
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
ITEM
NUMBER PART I -- FINANCIAL STATEMENTS PAGE
- ------ ----
<S> <C> <C>
Item 1. Financial Statements
Introductory Comments............................................................... 2
Consolidated Balance Sheets as of December 31, 1999 and March 31, 2000............. 3
Consolidated Statements of Operations for the Three Months Ended
March 31, 1999 and 2000......................................................... 4
Consolidated Statements of Stockholders' (Deficit) for the Three
Months Ended March 31, 2000 .................................................... 5
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 1999 and 2000......................................................... 6
Notes to Consolidated Financial Statements.......................................... 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations..................................................................... 11
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings................................................................... 17
Item 6. Exhibits and Reports on Form 8-K.................................................... 17
Signatures ...................................................................................... 18
</TABLE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
PART I
ITEM 1. FINANCIAL STATEMENTS.
IMPORTANT EXPLANATORY NOTE:
This Form 10-Q is filed, without audit, pursuant to the Securities
Exchange Act of 1934, as amended, for Benedek Communications Corporation
("Benedek Communications"). Unless the context otherwise requires, references to
the "Company" refer to Benedek Communications and its wholly owned subsidiary,
Benedek Broadcasting Corporation ("Benedek Broadcasting"). Benedek Broadcasting
operates twenty-three television stations and owns the following subsidiaries:
Benedek License Corporation ("BLC"), The WMTV Trust and its subsidiary, WMTV
License Co., LLC ("WMTV LLC"), Benedek Interactive Media, LLC ("BIM") and
Benedek Cable, Inc. ("BCI"), a non-recourse subsidiary. Benedek Communications
is a holding company with minimal separate operations from its operating
subsidiary, Benedek Broadcasting. All significant intercompany accounts and
transactions have been eliminated.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions for Form 10-Q and Article 10 of
Regulation S-X. 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 Annual Reports on Form 10-K of the
Company for the fiscal year ended December 31, 1999.
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<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 2000
------------------ ----------------
ASSETS (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Current Assets
Cash and cash equivalents.................................................... $ 3,278 $ 2,222
Receivables
Trade, net............................................................. 27,619 23,184
Notes receivable-officers................................................. 275 305
Due from Sellers.......................................................... - 928
Other..................................................................... 983 771
Current portion of program broadcast rights.................................. 5,844 4,234
Prepaid expenses............................................................. 1,979 2,483
Deferred income taxes........................................................ 1,085 1,085
----------- ------------
TOTAL CURRENT ASSETS............................................... 41,063 35,212
----------- ------------
Property and equipment ......................................................... 62,782 78,957
----------- ------------
Intangible assets .............................................................. 335,348 389,093
----------- ------------
Other assets
Program broadcast rights, less current portion .............................. 1,270 1,562
Deferred loan costs.......................................................... 6,060 5,661
Deposit on and costs of acquisitions......................................... 10,294 -
Notes receivable-officers.................................................... 720 940
Other........................................................................ 239 172
----------- ------------
18,583 8,335
----------- ------------
$ 457,776 $ 511,597
=========== ============
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current Liabilities
Current maturities of notes payable.......................................... $ 1,300 $ 1,176
Current portion of program broadcast liabilities............................. 8,608 6,463
Accounts payable and accrued expenses ....................................... 10,169 11,721
Deferred revenue............................................................. 579 592
----------- ------------
TOTAL CURRENT LIABILITIES.......................................... 20,656 19,952
----------- ------------
Long-Term Obligations
Notes payable ............................................................... 426,279 428,013
Program broadcast liabilities ............................................... 978 1,495
Deferred revenue ............................................................ 2,435 2,294
Deferred income taxes ....................................................... 23,291 54,859
----------- ------------
452,983 486,661
----------- ------------
Exchangeable redeemable senior preferred stock ................................ 122,092 125,961
----------- ------------
Seller junior discount preferred stock ......................................... 59,539 60,718
----------- ------------
Stockholders' (Deficit)
Common stock, Class A........................................................ - -
Common stock, Class B........................................................ 74 74
Additional paid-in capital................................................... (64,296) (64,758)
Accumulated deficit.......................................................... (132,651) (116,379)
Stockholder's note receivable ............................................... (621) (632)
----------- ------------
(197,494) (181,695)
----------- ------------
$ 457,776 $ 511,597
=========== ============
</TABLE>
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<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------
1999 2000
---- ----
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND
PER SHARE DATA)
<S> <C> <C>
Net revenues.................................................. $ 32,281 $ 31,733
-------------- -------------
Operating expenses:
Selling, technical and program expenses.................... 15,187 16,050
General and administrative................................. 6,660 5,604
Depreciation and amortization.............................. 7,814 5,196
Corporate.................................................. 1,241 1,349
-------------- -------------
30,902 28,199
-------------- -------------
Net gain on sale of stations ................................. - 61,300
-------------- -------------
Operating income.................................. 1,379 64,834
-------------- -------------
Financial income (expense):
Interest expense:
Cash interest.......................................... (6,343) (6,776)
Other interest......................................... (4,540) (4,915)
-------------- -------------
(10,883) (11,691)
Interest income............................................ 38 262
-------------- -------------
(10,845) (11,429)
-------------- -------------
Income (loss) before income tax benefit ................... (9,466) 53,405
Income tax (expense) benefit ................................. 3,254 (32,557)
-------------- -------------
Net income (loss) ........................................... (6,212) 20,848
Preferred stock dividends and accretion....................... (4,558) (5,049)
-------------- -------------
Net income (loss) applicable to common stock.................. $ (10,770) $ 15,799
============== =============
Basic earnings (loss) per common share........................ $ (1.46) $ 2.14
============== =============
Weighted-average common shares outstanding-basic.............. 7,400,000 7,400,000
============== =============
Diluted earnings (loss) per common share...................... $ (1.46) $ 1.99
============== =============
Weighted-average common shares outstanding-diluted............ 7,400,000 7,930,000
============== =============
</TABLE>
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<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT)
THREE MONTHS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
ADDITIONAL STOCKHOLDER'S
COMMON PAID-IN ACCUMULATED NOTE
STOCK CAPITAL DEFICIT RECEIVABLE TOTAL
----------- ------------- --------------- --------------- --------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1999...... $ 74 $ (64,296) $ (132,651) $ (621) $ (197,494)
Accretion to exchangeable
redeemable senior preferred
stock ....................... - (473) - - (473)
Dividends on preferred
stock...................... - - (4,576) - (4,576)
Accrued interest on note
receivable................... - 11 - (11) -
Net income .................... - - 20,848 - 20,848
------- ------------ ------------- ---------- ------------
Balance at March 31, 2000......... $ 74 $ (64,758) $ (116,379) $ (632) $ (181,695)
======= ============ ============= ========== ============
</TABLE>
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<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------------
1999 2000
---- ----
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities
Net income (loss)....................................................... $ (6,212) $ 20,848
Adjustments to reconcile net (loss) to net cash provided
by operating activities:
Amortization of program broadcast rights.......................... 1,939 2,071
Depreciation and amortization..................................... 5,377 2,779
Amortization of intangibles and deferred loan costs............... 2,913 2,828
Amortization of note discount..................................... 4,028 4,495
Deferred income taxes............................................. (3,397) 31,568
Net gain on sale of stations...................................... - (61,300)
Changes in operating assets and liabilities,
net of effects of acquisitions and dispositions:
Receivables....................................................... 3,052 4,396
Due from sellers.................................................. - (928)
Prepaid expenses and other........................................ (275) (503)
Payments on program broadcast liabilities......................... (2,218) (2,318)
Accounts payable and accrued expenses............................. (2,871) 1,549
Deferred revenue.................................................. (262) (128)
--------- ---------
Net cash provided by operating activities....................... 2,074 5,357
--------- ---------
Cash flows from investing activities
Purchase of property and equipment...................................... (1,981) (2,426)
Payment for acquisition of stations..................................... - (8,775)
Proceeds from sale of station........................................... - 7,388
Other, net.............................................................. 16 285
--------- ---------
Net cash (used in) investing activities......................... (1,965) (3,528)
--------- ---------
Cash flows from financing activities
Principal payments on notes payable..................................... (3,074) (2,885)
Net borrowings on long-term revolver ................................... 1,000 -
Payment of debt and preferred stock acquisition costs................... (282) -
--------- ---------
Net cash (used in) financing activities......................... (2,356) (2,885)
--------- ---------
(Decrease) in cash and cash equivalents......................... (2,247) (1,056)
Cash and cash equivalents:
Beginning............................................................. 4,291 3,278
--------- ---------
Ending................................................................ $ 2,044 $ 2,222
========= =========
</TABLE>
(Continued)
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<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------------
1999 2000
---- ----
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Supplemental Disclosure of Cash Flow Information:
Cash payments for interest................................................ $ 10,384 $ 7,148
Cash payments for income taxes............................................ 264 8
======== =========
Supplemental Schedule of Noncash Investing and Financing Activities:
Acquisition of program broadcast rights................................... $ 684 $ 920
Notes payable incurred for purchase of property and equipment............. 394 -
Equipment acquired by barter transactions................................. 56 63
Dividends accrued on redeemable preferred stock........................... 4,112 4,576
Accrued interest on note receivable stockholder added to
additional paid-in capital............................................. 8 11
Accretion to exchangeable redeemable senior preferred stock............... 446 473
======== =========
Acquisition of stations:
Property and equipment acquired at fair market value...................... $ - $ 25,563
Intangible assets acquired ............................................... - 116,432
Program broadcast rights acquired......................................... - 2,422
Program broadcast liabilities assumed..................................... - (2,346)
Other, net................................................................ - (75)
-------- ---------
141,996
Less: Fair value of assets swapped....................................... - (122,927)
-------- ---------
Cash purchase price, including fees paid.................................. - 19,069
Less: Deposit and costs paid in 1999 .................................... - (10,294)
-------- ---------
Payment and costs paid in 2000 ........................................... $ - $ 8,775
======== =========
Sale of stations:
Property and equipment sold............................................... - $ 8,876
Intangible assets sold.................................................... - 60,258
Program broadcast rights sold............................................. - 2,589
Program broadcast liabilities transferred................................. - (2,627)
Other, net ............................................................... - (81)
-------- ---------
69,015
Gain recognized on sale of stations ...................................... - 61,300
-------- ---------
130,315
Less: Fair value of assets swapped....................................... - (122,927)
-------- ---------
Proceeds from sale of station net of fees paid............................ $ - $ 7,388
======== =========
</TABLE>
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<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NOTE A) - NATURE OF BUSINESS AND BASIS OF PRESENTATION
NATURE OF BUSINESS
The Company is a holding company with minimal operations other than from
its wholly owned subsidiary, Benedek Broadcasting. Benedek Broadcasting owns and
operates twenty-three television stations (the "Stations") located throughout
the United States. The operating revenues of the Stations 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. 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. Segment information is not
presented since all of the Company's revenue is attributed to a single
reportable segment.
BASIS OF PRESENTATION
The consolidated financial statements of the Company include the accounts
of the Company and its wholly owned subsidiary, Benedek Broadcasting and its
wholly owned subsidiaries, BLC, BCI, BIM, and the WMTV LLC. All significant
intercompany items and transactions have been eliminated in consolidation.
During 1998, BCI was formed as the entity through which Benedek
Broadcasting delivers The Warner Bros. Television Network programming to local
cable companies in 15 of its 20 markets ranked above 100 as measured by Nielsen
surveys. BCI holds minimal assets and had insignificant operations in both 1999
and 2000.
During October 1998, in order to comply with certain FCC duopoly rules,
Benedek Broadcasting transferred all assets and liabilities related to WMTV-TV,
serving Madison, Wisconsin, to the WMTV Trust, a disposition trust, and BLC
transferred the related FCC license to WMTV LLC. Since Benedek Broadcasting is
the sole beneficiary of this grantor trust, the assets, liabilities and results
of operations from this trust are included in the consolidated financial
statements of the Company. Due to changes in FCC duopoly rules, the WMTV Trust
and its subsidiary, WMTV LLC were dissolved February 29, 2000 and all assets and
liabilities related to them were transferred to Benedek Broadcasting and BLC,
respectively.
BIM was formed in December 1999 and has minimal assets and had no
operations in either 1999 or 2000.
-8-
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(NOTE B) - ACQUISITION AND SALE OF STATIONS
On November 19, 1999, the Company entered into an Asset Purchase Agreement
with The Chronicle Publishing Company ("Chronicle") and on December 10, 1999,
the Company entered into an Asset Exchange Agreement with WGRC, Inc. ("WGRC").
Pursuant to these agreements, WGRC acquired the television broadcast assets of
WOWT-TV and KAKE-TV, Chronicle's television stations in Omaha, Nebraska and
Wichita, Kansas, respectively, and then immediately transferred the same to the
Company in exchange for the television broadcast assets of WWLP-TV, the
Company's station in Springfield, Massachusetts, and an additional $18,000,000
payment by the Company to WGRC for the Chronicle stations. At December 31, 1999,
the Company had deposited $10,000,000 in an escrow account related to this
transaction. The remaining $8,000,000 was funded from the proceeds of the sale
of KOSA-TV discussed below. The transaction was structured, to the extent
feasible, as a tax-free exchange pursuant to Section 1031 of the Internal
Revenue Code and accounted for under the purchase method of accounting in
accordance with APB Opinion No. 16.
The total purchase price and costs of the acquisition of KAKE-TV and
WOWT-TV was approximately $141,996,000 which consisted of the fair market value
of the WWLP-TV assets of $122,927,000, cash payment of $18,000,000 and fees and
costs of the transaction of approximately $1,069,000. The purchase price has
been allocated to acquired assets and liabilities based on their relative fair
values as of the closing date on March 31, 2000.
A gain of approximately $61,193,000 was recorded to reflect the disposition
of WWLP-TV. The gain consisted of the fair market value of the WWLP-TV assets of
$122,927,000 less their book value of $61,431,000 and fees of approximately
$303,000.
On December 15, 1999, the Company entered into an Asset Purchase Agreement
with ICA Broadcasting I, Ltd. ("ICA") pursuant to which the Company sold the
television broadcast assets of KOSA-TV, in Odessa, Texas to ICA for a cash
payment of $8,000,000 on March 21, 2000. A gain of approximately $107,000 was
recorded on the sale of KOSA-TV which consisted of the excess of the $8,000,000
sale price over the book value of the assets of $7,584,000 less fees of the
transaction. The Company wrote down the KOSA-TV assets during 1999 by
$6,920,000, as a result of the signing of the Asset Purchase Agreement with ICA
which contemplated the sale.
-9-
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The unaudited pro forma results of operations and earnings per share for
the three months ended March 31, 1999 and 2000, assuming only the acquisitions
of WOWT-TV and KAKE-TV ("Acquisitions"), and assuming both the Acquisitions and
dispositions of WWLP-TV and KOSA-TV (the "Dispositions"), had occurred on
January 1, 1999, are presented in the table below.
<TABLE>
<CAPTION>
Acquisitions Acquisitions and Dispositions
-------------- -- -------------- -------------- -- --------------
1999 2000 1999 2000
---- ---- ---- ----
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Net revenue........................ $ 39,370 $ 39,169 $ 35,689 $ 35,182
-------------- -------------- -------------- --------------
Net (loss)......................... $ (6,465) $ (5,033) $ (6,583) $ (5,714)
============== ============== ============== ==============
(Loss) per common share......... $ (1.49) $ (1.36) $ (1.51) $ (1.45)
============== ============== ============== ==============
</TABLE>
The pro forma results of operations and earnings per share for the three
months ended March 31, 1999 and 2000 refer to the operating results of the
Acquisitions and Dispositions as if such Stations were owned or sold by the
Company on January 1, 1999 with pro forma adjustments only for depreciation and
amortization, interest and income taxes. The pro forma results do not include
the gain on the sale of stations for either period presented.
(NOTE C) - PENDING ADOPTION OF ACCOUNTING STANDARD
The FASB (Financial Accounting Standards Board) has issued FASB statement
No. 133 "Accounting for Derivative Instruments and Hedging Activities" which the
Company will be required to adopt for its fiscal year ending December 31, 2001.
This pronouncement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, (collectively referred to as derivatives) and for hedging activities.
It requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. This pronouncement is not expected to have a significant impact
on the Company's financial statements since currently the Company's only
derivative financial instrument is an interest rate cap.
-10-
<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. Wherever possible the Company has identified
these forward looking statements by words such as "anticipates," "believes,"
"estimates," "expects" and similar expressions. 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, pricing fluctuations in local and
national advertising, program ratings and changes in programming costs, among
other factors. The Company assumes no obligation to update publicly any forward
looking statements, whether as a result of new information, future events or
otherwise.
Except as otherwise provided, the financial data set forth below is derived
from the historical consolidated financial statements of the Company, prepared
in accordance with generally accepted accounting principles. Such historical
financial data includes the results of operations of KKTV which was operated
under a time brokerage agreement (a "TBA") with the Ackerley Group, Inc. from
January 1, 1999 until the Company's acquisition of KKTV on May 1, 1999, net of
the fees associated with such TBA. The historical financial data also includes
the limited operating results and TBA fee revenue of KCOY-TV which was being
operated by the Ackerley Group, Inc. under a TBA from January 1, 1999 until the
Ackerley Group, Inc's acquisition of KCOY-TV on May 1, 1999. KCOY-TV was
exchanged for KKTV in a transaction which closed on May 1, 1999.
The historical financial data reflects the results of operations through
the date of the sale of KOSA-TV, the Company's station in Odessa, Texas
("KOSA-TV") which was sold to ICA Broadcasting I, Ltd. ("ICA") effective on
March 22, 2000. In addition, the historical financial data reflects the results
of operations of WWLP-TV, Springfield, Massachusetts ("WWLP-TV") which was
exchanged for the television broadcast assets of KAKE-TV, Wichita, Kansas
("KAKE-TV") and WOWT-TV, Omaha, Nebraska ("WOWT-TV") effective on March 31, 2000
(the "2000 Swap"). The effect of this exchange on the historical financial data
is that the assets of KAKE-TV and WOWT-TV have been included while the assets of
WWLP-TV have been excluded from the consolidated balance sheets of the Company
as of March 31, 2000.
As used herein, "Same Station" data refers to the historical results of
operations of all 23 television stations currently operated by the Company as if
such stations were owned by the Company throughout the periods indicated with
pro forma adjustments only for depreciation and amortization and TBA fees and
revenue. Same Station information excludes the results of Benedek Cable, Inc., a
nonrecourse subsidiary. Same Station information does not purport to represent
what the Company's results of operations would have been if such transactions
had been effected at the beginning of such periods and does not purport to
project results of operations of the Company in any future period.
Broadcast cash flow is defined as operating income, excluding net income of
nonrecourse subsidiaries, before financial income as derived from the
consolidated statements of operations plus depreciation and amortization,
amortization of program broadcast rights, corporate expenses and noncash
compensation less payments for program broadcast liabilities and net gain on
sale of stations. The Company has included broadcast cash flow data because (i)
the information is a measurement utilized by lenders to measure the Company's
ability to service its debt and pay for capital expenditures, (ii) the
information is a measurement utilized by industry analysts to determine a market
value of the Company's television stations and (iii) the information is a
measurement industry analysts utilize when
-11-
<PAGE>
evaluating and comparing the operating performance of the Company. Broadcast
cash flow does 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. Broadcast cash flow is also not reflected in the Company's
consolidated statements of cash flows; but it is a common and meaningful measure
for comparison to other companies in the broadcast industry. The amounts
excluded from broadcast cash flow are significant components in understanding
and assessing the Company's results of operations and cash flows. The term
"broadcast cash flow" may not be the same terminology utilized by other
companies in the presentation of similar information.
Adjusted EBITDA is defined as operating income, excluding net income of
nonrecourse subsidiaries, 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 liabilities and net gain on sale of stations. The Company
has included Adjusted EBITDA data because (i) the information is a measurement
utilized by lenders to measure the Company's ability to service its debt and pay
for capital expenditures, (ii) the information is a measurement utilized by
industry analysts to determine a private market value of the Company's
television stations and (iii) the information is a measurement industry analysts
utilize when evaluating and comparing the operating performance of the Company.
Adjusted EBITDA does 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. Adjusted EBITDA is also not reflected in the Company's
consolidated statements of cash flows; but it is a common and meaningful measure
for comparison to other companies in the broadcast industry. The amounts
excluded from Adjusted EBITDA are significant components in understanding and
assessing the Company's results of operations and cash flows. The term "Adjusted
EBITDA" may not be the same terminology utilized by other companies in the
presentation of similar information.
The Company believes that Adjusted EBITDA and broadcast cash flow
information discussed below provide meaningful information as to the performance
of the television stations owned by the Company, particularly information that
is presented on a Same Station basis. Changes from year to year indicate how the
Company has performed in its efforts to increase net sales and manage expenses
on an operating basis.
The Company owns 23 network-affiliated television stations (the "Stations")
in the United States. The Stations are diverse in geographic and network
affiliation, serve small to medium-sized markets and, in the aggregate, reach
communities in 24 states. Eleven of the Stations are affiliated with CBS, seven
are affiliated with ABC, four are affiliated with NBC, and one is affiliated
with Fox.
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.
On November 19, 1999, the Company entered into an Asset Purchase Agreement
with Chronicle and on December 10, 1999, the Company entered into an Asset
Exchange Agreement with WGRC. WGRC
-12-
<PAGE>
acquired the television broadcast assets of WOWT-TV and KAKE-TV, Chronicle's
television stations in Omaha, Nebraska and Wichita, Kansas, respectively, and
then immediately transferred the same to the Company in exchange for the
television broadcast assets of WWLP-TV, the Company's station in Springfield,
Massachusetts, and an additional $18.0 million payment by the Company to WGRC
for the Chronicle Stations. At December 31, 1999, the Company had deposited
$10.0 million in an escrow account related to this transaction. The remaining
$8.0 million was funded from the proceeds of the sale of KOSA-TV as discussed
below. The transaction was structured, to the extent feasible, as a tax-free
exchange pursuant to Section 1031 of the Internal Revenue Code and recorded
under the purchase method of accounting.
On December 15, 1999, the Company entered into an Asset Purchase Agreement
with ICA pursuant to which the Company sold the television broadcast assets of
KOSA-TV, in Odessa, Texas to ICA for a cash payment of $8.0 million.
Accordingly, the Company recorded a lower of cost or market adjustment of
approximately $6.9 million in 1999 to write down the assets of KOSA-TV to the
sales price less estimated selling costs. This transaction was completed on
March 21, 2000.
In January 2000, the FCC granted its approval to assign all of the FCC
licenses and authorizations from WMTV License Co., LLC ("License Co.") to BLC.
License Co. was wholly owned by Philip A. Jones, solely in his capacity as
trustee under The WMTV Trust, which was formed to hold the assets of television
station WMTV (TV), Madison, Wisconsin to comply with FCC rules and regulations.
On February 29, 2000, The WMTV Trust transferred all of the assets of WMTV to
Benedek Broadcasting, and License Co. transferred all of the FCC licenses and
authorizations to BLC.
The following table sets forth certain historical results of the operations
and operating data for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------
1999 2000
---- ----
(IN THOUSANDS)
<S> <C> <C>
Operating income......................... 1,379 64,834
Add:
Amortization of program broadcast
rights............................. 1,939 2,071
Depreciation and amortization...... 7,814 5,196
Corporate expenses................. 1,241 1,349
Operating loss of BCI.............. 60 -
Less:
Payments on program
broadcast liabilities........... (2,218) (2,318)
Net gain on sale of stations...... - (61,300)
Operation gain of BCI.............. - (42)
------ -------
Broadcast cash flow(1)................... 10,215 9,790
====== =======
</TABLE>
(1) Excludes BCI, a nonrecourse subsidiary
-13-
<PAGE>
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
The following table provides both historical information and Same Station
information for the year ended March 31, 1999 and 2000. The Same Station
information gives effect to the 1999 Swap, the 2000 Swap and KOSA-TV disposition
as if the exchanges and disposition were consummated prior to January 1, 1999.
<TABLE>
<CAPTION>
HISTORICAL SAME STATION1
THREE MONTHS ENDED MARCH 31, THREE MONTHS ENDED MARCH 31,
---------------------------- ----------------------------
1999 2000 % CHANGE 1999 2000 % CHANGE
---- ---- -------- ---- ---- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Local/regional..................... $20,728 $19,582 (5.5)% $23,084 $22,009 (4.7)%
National........................... 11,030 12,188 10.5 12,302 13,231 7.6
Political.......................... 173 831 380.3 184 903 390.8
Other.............................. 5,154 4,164 (19.2) 4,738 4,322 (8.8)
-------- -------- -------- -------- --------- ------
37,085 36,765 (0.9) 40,308 40,465 0.4
Direct costs....................... 4,804 5,032 4.7 5,324 5,483 3.0
-------- -------- -------- -------- --------- ------
Net revenues....................... $32,281 $31,733 (1.7)% $34,984 $34,982 0.0%
Operating expenses:
Selling, technical and
program expenses............. 15,187 16,050 5.7 17,627 18,102 2.7
General and administrative..... 6,660 5,604 (15.9) 6,189 6,248 1.0
Depreciation and amortization. 7,814 5,196 (33.5) 8,011 6,560 (18.1)
Corporate...................... 1,241 1,349 8.7 1,241 1,349 8.7
-------- -------- -------- -------- --------- ------
30,902 28,199 (8.8) 33,068 32,259 (2.4)
-------- -------- -------- -------- --------- ------
Net gain (loss) on sale of stations - 61,300 100.0 - - -
-------- -------- -------- -------- --------- ------
Operating income............... $ 1,379 $64,834 4,601.5% $ 1,916 $ 2,723 42.1%
======== ======== ======== ======== ======== ======
Broadcast cash flow(1)............. $10,215 $ 9,790 (4.2)% $10,969 $10,644 (3.0)%
Broadcast cash flow margin(1)...... 31.6% 30.9% 31.4% 30.5%
Adjusted EBITDA(1)................. $ 8,974 $ 8,441 (5.9)% $ 9,728 $ 9,295 (4.5)%
Adjusted EBITDA margin(1).......... 27.7% 26.6% 27.8% 26.6%
</TABLE>
(1)Excludes BCI, a nonrecourse subsidiary
Net revenues for the three months ended March 31, 2000 decreased $0.6
million or 1.7% to $31.7 million from $32.3 million for the three months ended
March 31, 1999. Political advertising revenue for the three months ended March
31, 2000 was $0.8 million compared to $0.2 million for the three months ended
March 31, 1999. Gross revenues excluding political advertising revenue decreased
$1.0 million or 2.6% to $35.9 million from $36.9 million for the three months
ended March 31, 1999. The decrease was caused by lower than expected advertising
revenues in the Company's small-to medium-sized markets. The Company has not
experienced the increase in revenues from internet-related advertising that has
had a positive effect on revenues of broadcasters in larger markets during the
three months ended March 31, 2000.
On a Same Station basis, net revenues for the three months ended March 31,
2000 were flat at $35.0 million for both the three months ended March 31, 1999
and 2000. Network revenue decreased by $0.3 million on a Same Station basis for
the three months ended March 31, 2000 as compared to the three months ended
March 31, 1999 as a result of a decrease in compensation resulting from the
Company's new contract with ABC for five of its Stations, the effects of which
will be phased in over the contract term through 2004.
-14-
<PAGE>
Operating expenses for the three months ended March 31, 2000 decreased $2.7
million or 8.8% to $28.2 million from $30.9 million for the three months ended
March 31, 1999. The decrease in operating expenses was caused by a decrease in
depreciation and amortization and increased costs reflected in the three months
ended March 31, 1999 due to the effect of the 1999 Swap. As a percentage of net
revenues, operating expenses decreased to 88.9% for the three months ended March
31, 2000 compared to 95.7% for the same period ending 1999. On a Same Station
basis, operating expenses for the three months ended March 31, 2000 decreased
$0.8 million or 2.4% to $32.3 million from $33.1 million for the three months
ended March 31, 1999. The decrease in operating expenses resulted primarily from
a reduction in depreciation and amortization while other expenses were held
flat.
Net gain on sale of stations for the three months ended March 31, 2000 was
$61.3 million. A gain of $61.2 million was recorded to reflect the exchange of
WWLP-TV assets for KAKE-TV and WOWT-TV. The gain consisted of the fair market
value of the WWLP-TV assets of $122.9 million less their book value of $61.4
million and fees of $0.3 million. In addition, a gain of $0.1 million reflected
the sale of KOSA-TV for $8.0 million less the book value of the assets of $7.6
million and fees of the transaction.
Operating income for the three months ended March 31, 2000 increased $63.4
million to $64.8 million from $1.4 million for the three months ended March 31,
1999 due to the net gain on sale of stations. On a Same Station basis, operating
income for the three months ended March 31, 2000 increased $0.8 million or 42.1%
to $2.7 million from $1.9 million for the three months ended March 31, 1999.
Financial (expenses), net for the Company for the three months ended March
31, 2000 increased $0.8 million or 7.4% to $11.7 million from $10.9 million in
the three months ended March 31, 1999 as a result of higher levels of debt.
Income tax expense for the Company for the three months ending March 31,
2000 was $32.6 million as compared to a benefit of $3.3 million for the three
months ended March 31, 1999. The increase in income taxes is due to the $61.3
million gain on the sales of WWLP-TV and KOSA-TV. In addition, $25.4 million of
assets of WWLP-TV and KOSA-TV were nondeductible goodwill, which contributed to
the increase in income taxes for the three months ended March 31, 2000.
At March 31, 2000 the Company had approximately $18.6 million in net
operating loss carryforwards which expire in 2007 through 2019 that are
available to offset future tax liabilities.
Net income for the Company was $20.8 million for the three months ended
March 31, 2000 as compared to a net loss of $(6.2) million for the three months
ended March 31, 1999.
Broadcast cash flow for the three months ended March 31, 2000 decreased
$0.4 million or 4.2% to $9.8 million from $10.2 million for the three months
ended March 31, 1999. As a percentage of net revenues, broadcast cash flow
margin decreased to 30.9% for the three months ended March 31, 2000 from 31.6%
for the three months ended March 31, 1999.
On a Same Station basis, broadcast cash flow for the three months ended
March 31, 2000 decreased $0.3 million or 3.0% to $10.6 million from $10.9
million for the three months ended March 31, 1999. As a percentage of net
revenues, broadcast cash flow margin on a Same Station basis decreased to 30.5%
for the three months ended March 31, 2000 from 31.4% for the three months ended
March 31, 1999.
-15-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows from Operating Activities is the primary source of liquidity for
the Company and were $5.4 million for the three months ended March 31, 2000
compared to $2.1 million for the three months ended March 31, 1999. Cash
payments of interest expense totaled $7.1 million for the three months ended
March 31, 2000 as compared to $10.4 million for the three months ended March 31,
1999 and resulted in the decrease in cash flows from operating activities.
Cash Flows from Investing Activities were $(3.5) million for the three
months ended March 31, 2000, as compared to $(2.0) million for the three months
ended March 31, 1999. Cash flows from investing activities included $8.8 million
of costs and fees associated with the 2000 Swap which was offset, in part, by
$7.4 million of net proceeds from the sale of KOSA-TV.
Cash Flows from Financing Activities were $(2.9) million for the three
months ended March 31, 2000 compared to $(2.4) million for the three months
ended March 31, 1999. The three months ended March 31, 1999 included a $1.0
million drawdown on the Company's Revolver (as defined below).
The Company's Credit Facility includes an aggregate borrowing limit of
$310.0 million consisting of a $220.0 million term loan (the "Term Loan") and a
$90.0 million revolving credit facility (the "Revolver"). The Credit Facility
contains certain financial covenants, including, but not limited to, covenants
related to interest coverage, total and senior leverage ratios and fixed charge
ratio. In addition, the Credit Facility contains other affirmative and negative
covenants relating to, among other things, liens, payments on other debt,
restricted junior payments (excluding distributions from Benedek Broadcasting to
the Company) transactions with affiliates, mergers and acquisitions, sales of
assets, guarantees and investments. The Credit Facility also contains customary
events of default for highly-leveraged financings, including certain changes in
ownership or control of the Company. The Company and its lenders amended the
Credit Facility as of March 23, 2000 to modify the maximum Senior Leverage Ratio
(as defined in the Credit Facility) applicable for all fiscal quarters of the
year ending December 31, 2000.
At March 31, 2000, the Company had borrowed $220.0 million under the Term
Loan and $58.5 million under the Revolver. At March 31, 2000, the Company could
have borrowed approximately an additional $14.0 million under the Revolver.
During the three months ended March 31, 2000, the highest outstanding balance
under the Revolver was $58.5 million. The Company's ability to draw funds under
the Revolver is limited by its level of earnings and its ability to meet certain
financial covenants.
PENDING ADOPTION OF ACCOUNTING STANDARD
The FASB (Financial Accounting Standards Board) has issued FASB statement
No. 133 "Accounting for Derivative Instruments and Hedging Activities" which the
Company will be required to adopt for its fiscal year ending December 31, 2001.
This pronouncement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, (collectively referred to as derivatives) and for hedging activities.
It requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. This pronouncement is not expected to have a significant impact
on the Company's financial statements since currently the Company's only
financial instrument is an interest rate cap.
-16-
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS.
The Company currently and from time to time is involved in litigation
incidental to the conduct of its business. The Company is not currently a party
to any lawsuit or proceeding which, in the opinion of management, is likely to
have a material adverse effect on the company.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
During August 1999, in accordance with certain covenants of the Credit
Facility, the Company entered into an interest rate cap agreement which matures
in September 2001, to reduce the impact of changes in interest rates on its
floating-rate long-term debt. That agreement effectively entitles the Company to
receive from a financial institution the amount, if any, by which the British
Bankers' Association interest settlement rates ("settlement rate") for U.S.
dollar deposits exceeds 8.00% on a notional amount totaling $70,000,000 subject
to an amortization schedule. As of March 31, 2000, the settlement rate was
6.17%. Although the Company is exposed to credit loss in the event of
nonperformance by the counterparty on the interest rate cap, management does not
expect nonperformance by the counterparty.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a)(3) Exhibits.
*27 -- Financial Data Schedule pursuant to Article 5 of Regulation
S-X with respect to Benedek Communications Corporation.
*Filed herewith
(b) Reports on From 8-K
A current report on Form 8-K was filed March 31, 2000 to
announce the completion of a transaction involving the
acquisition of substantially all of the operating assets of
KAKE-TV and WOWT-TV through an exchange for the assets of the
Company's television station in Springfield, Massachusetts,
WWLP-TV.
-17-
<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: May 12, 2000
-18-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 1017522
<NAME> BENEDEK COMMUNICATIONS CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,222
<SECURITIES> 0
<RECEIVABLES> 25,419
<ALLOWANCES> 709
<INVENTORY> 0
<CURRENT-ASSETS> 35,212
<PP&E> 158,517
<DEPRECIATION> 79,560
<TOTAL-ASSETS> 511,597
<CURRENT-LIABILITIES> 19,952
<BONDS> 428,013
<COMMON> 74
186,679
0
<OTHER-SE> (181,769)
<TOTAL-LIABILITY-AND-EQUITY> 511,597
<SALES> 36,071
<TOTAL-REVENUES> 36,765
<CGS> 5,031
<TOTAL-COSTS> 5,031
<OTHER-EXPENSES> 28,070
<LOSS-PROVISION> 129
<INTEREST-EXPENSE> 11,691
<INCOME-PRETAX> 53,405
<INCOME-TAX> (32,357)
<INCOME-CONTINUING> 20,848
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,848
<EPS-BASIC> 2.14
<EPS-DILUTED> 1.99
</TABLE>
