<PAGE>
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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 SEPTEMBER 30, 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)
--------------
2895 GREENSPOINT PARKWAY, SUITE 250
HOFFMAN ESTATES, IL 60195
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (847) 585-3450
100 PARK AVENUE, ROCKFORD, ILLINOIS 61101
(Former Principal Executive Offices)
--------------
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of Benedek Communications
Corporation's classes of common stock, as of the latest practicable date: At
October 27, 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 INFORMATION PAGE
------ ----
<S> <C> <C>
Item 1. Financial Statements
Important Explanatory Note.......................................................... 3
Consolidated Balance Sheets as of December 31, 1999 and September 30, 2000.......... 4
Consolidated Statements of Operations for the Three Months Ended
September 30, 1999 and 2000..................................................... 5
Consolidated Statements of Operations for the Nine Months Ended
September 30, 1999 and 2000..................................................... 6
Consolidated Statements of Stockholders' (Deficit) for the Nine Months Ended
September 30, 1999 and 2000..................................................... 7
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1999
and 2000........................................................................ 8
Notes to Consolidated Financial Statements.......................................... 10
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations...................................................................... 13
Item 3. Quantitative and Qualitative Disclosure About Market Risk........................... 20
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................................................... 21
Item 6. Exhibits and Reports on Form 8-K.................................................... 21
Signatures ......................................................................................... 22
2
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
IMPORTANT EXPLANATORY NOTE:
This Form 10-Q is filed, without audit, according to the Securities
Exchange Act of 1934, as amended, for Benedek Communications Corporation
("Benedek Communications"). Unless the context otherwise requires, references to
"the Company" refers to Benedek Communications and its subsidiaries on a
consolidated basis. Unless the context otherwise requires, references to
"Benedek Broadcasting" refers to Benedek Broadcasting Corporation and its
subsidiaries: Benedek License Corporation ("BLC"), Benedek Interactive Media,
LLC ("BIM") and Benedek Cable, Inc. ("BCI"), a non-recourse subsidiary, on a
consolidated basis. Benedek Broadcasting owns and operates 23 television
stations. 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 Benedek
Communications for the fiscal year ended December 31, 1999.
3
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1999 2000
---- ----
ASSETS (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Current Assets
Cash and cash equivalents ...................................... $ 3,278 $ 5,597
Receivables
Trade, net .................................................... 27,619 26,312
Notes receivable-officers ................................... 275 58
Other ....................................................... 983 848
Current portion of program broadcast rights .................... 5,844 8,081
Prepaid expenses ............................................... 1,979 2,242
Deferred income taxes .......................................... 1,085 1,134
--------- ---------
TOTAL CURRENT ASSETS .................................... 41,063 44,272
--------- ---------
Property and equipment .............................................. 62,782 75,939
--------- ---------
Intangible assets ................................................... 335,348 384,642
--------- ---------
Other assets
Program broadcast rights, less current portion ................. 1,270 707
Deferred loan costs ............................................ 6,060 4,915
Deposit on and costs of acquisitions ........................... 10,294 --
Notes receivable-officers ...................................... 720 1,822
Other .......................................................... 239 175
--------- ---------
18,583 7,619
--------- ---------
$ 457,776 $ 512,472
========= =========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current Liabilities
Current maturities of notes payable ............................ $ 1,300 $ 1,266
Current portion of program broadcast liabilities ............... 8,608 11,298
Accounts payable and accrued expenses .......................... 10,169 10,646
Deferred revenue ............................................... 579 581
--------- ---------
TOTAL CURRENT LIABILITIES ............................... 20,656 23,791
--------- ---------
Long-Term Obligations
Notes payable .................................................. 426,279 437,757
Program broadcast liabilities .................................. 978 144
Deferred revenue ............................................... 2,435 2,013
Deferred income taxes .......................................... 23,291 49,393
--------- ---------
452,983 489,307
--------- ---------
Senior exchangeable preferred stock, liquidation
preference, 1999-$120,280; 2000-$130,956 ....................... 122,092 135,371
--------- ---------
Seller junior discount preferred stock .............................. 59,539 63,147
--------- ---------
Stockholders' (Deficit)
Common stock, Class A ............................................... -- --
Common stock, Class B ............................................... 74 74
Additional paid-in capital .......................................... (64,296) (65,841)
Accumulated deficit ................................................. (132,651) (132,727)
Stockholder's note receivable ....................................... (621) (650)
--------- ---------
(197,494) (199,144)
--------- ---------
$ 457,776 $ 512,472
========= =========
</TABLE>
4
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------
1999 2000
---- ----
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND
PER SHARE DATA)
<S> <C> <C>
Net revenues .......................................... $ 33,208 $ 39,519
----------- -----------
Operating expenses:
Selling, technical and program expenses ......... 15,682 18,608
General and administrative ...................... 5,655 6,310
Depreciation and amortization ................... 5,464 7,253
Corporate ....................................... 1,089 1,477
----------- -----------
27,890 33,648
----------- -----------
Gain (loss) on sale of stations, net .................. (220) 32
----------- -----------
Operating income ................................ 5,098 5,903
----------- -----------
Financial income (expense):
Interest expense:
Cash interest ............................... (5,730) (7,389)
Other interest .............................. (5,518) (5,004)
----------- -----------
(11,248) (12,393)
Interest income ................................. 80 112
----------- -----------
(11,168) (12,281)
----------- -----------
(Loss) before income taxes and extraordinary item (6,070) (6,378)
Income tax (expense) benefit .......................... (60) 2,396
----------- -----------
(Loss) before extraordinary item ...................... (6,130) (3,982)
Extraordinary item, loss on early extinguishment
of debt less applicable income taxes of $1 ........ (2) --
----------- -----------
Net (loss) ............................................ (6,132) (3,982)
Preferred stock dividends and accretion ............... (4,697) (6,662)
----------- -----------
Net (loss) applicable to common stock ................. $ (10,829) $ (10,644)
=========== ===========
Basic and diluted (loss) per common share:
(Loss) before extraordinary item ................ $ (1.46) $ (1.44)
Extraordinary item .............................. -- --
----------- -----------
(Loss) per common share ......................... $ (1.46) $ (1.44)
=========== ===========
Weighted-average common shares outstanding ............ 7,400,000 7,400,000
=========== ===========
</TABLE>
5
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------
1999 2000
----------- -----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND
PER SHARE DATA)
<S> <C> <C>
Net revenues ..................................... $ 102,727 $ 112,770
----------- -----------
Operating expenses:
Selling, technical and program expenses ...... 46,777 53,059
General and administrative ................... 17,766 18,193
Depreciation and amortization ................ 20,037 19,457
Corporate .................................... 3,416 4,277
----------- -----------
87,996 94,986
----------- -----------
Gain on sale of stations, net .................... 13,303 61,537
----------- -----------
Operating income ............................. 28,034 79,321
----------- -----------
Financial income (expense):
Interest expense:
Cash interest ............................ (19,300) (21,073)
Other interest ........................... (13,750) (15,024)
----------- -----------
(33,050) (36,097)
Interest income .............................. 153 424
----------- -----------
(32,897) (35,673)
----------- -----------
Income (loss) before income taxes ............ (4,863) 43,648
Income tax (expense) benefit ..................... 30 (28,412)
----------- -----------
Income (loss) before extraordinary item .......... (4,833) 15,236
Extraordinary item, loss on early extinguishments
of debt less applicable income taxes of $8,121 (12,182) --
----------- -----------
Net income (loss) ................................ (17,015) 15,236
Preferred stock dividends and accretion .......... (14,063) (16,886)
----------- -----------
Net (loss) applicable to common stock ............ $ (31,078) $ (1,650)
=========== ===========
Basic and diluted (loss) per common share:
(Loss) before extraordinary item .............. $ (2.55) $ (0.22)
Extraordinary item ............................ (1.65) --
----------- -----------
(Loss) per common share ....................... $ (4.20) $ (0.22)
=========== ===========
Weighted-average common shares outstanding ....... 7,400,000 7,400,000
=========== ===========
</TABLE>
6
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT)
NINE MONTHS ENDED SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
ADDITIONAL STOCKHOLDER'S
PAID-IN ACCUMULATED NOTE
COMMON 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 senior exchangeable preferred
stock........................ -- (1,574) -- -- (1,574)
Dividends on preferred stock................ -- -- (15,312) -- (15,312)
Accrued interest on note receivable......... -- 29 -- (29) --
Net income.................................. -- -- 15,236 -- 15,236
----------- ----------- ------------ ---------- ---------
Balance at September 30, 2000.................. $ 74 $ (65,841) $ (132,727) $ (650) $(199,144)
=========== =========== ============ ========== =========
</TABLE>
7
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1999 2000
---- ----
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities
Net income (loss) ......................................................... $ (17,015) $ 15,236
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Amortization of program broadcast rights .................. 5,858 6,656
Depreciation and amortization ............................. 12,669 11,581
Amortization of intangibles and deferred loan costs ....... 8,802 9,077
Loss on early extinguishment of debt ...................... 20,302 --
Gain on sale of station ................................... (13,303) (61,537)
Amortization of note discount ............................. 12,778 13,757
Deferred income taxes ..................................... (8,671) 26,103
Changes in operating assets and liabilities, net of effects of
acquisitions and dispositions:
Receivables ............................................................... 1,382 1,340
Due from sellers .......................................................... -- 100
Prepaid expenses and other ................................................ (608) (263)
Payments on program broadcast liabilities ................................. (5,841) (6,423)
Accounts payable and accrued expenses ..................................... (4,786) (949)
Deferred revenue .......................................................... (534) (420)
--------- ---------
Net cash provided by operating activities ......... 11,033 14,258
--------- ---------
Cash flows from investing activities
Purchase of property and equipment ........................................ (6,376) (7,541)
Payment for acquisition of stations ....................................... (9,501) (8,584)
Proceeds from sale of station ............................................. 215 7,632
Other, net ................................................................ (674) (614)
--------- ---------
Net cash (used in) investing activities ........... (16,336) (9,107)
--------- ---------
Cash flows from financing activities
Principal payments on notes payable .......................................... (903) (3,478)
Net borrowings on long-term revolver ......................................... 55,000 2,500
Issuance of Term Loan ........................................................ 220,000 --
Proceeds from Notes Payable .................................................. -- 540
Redemption of Senior Secured Notes ........................................... (149,936) --
Payment of existing term loans ............................................... (108,317) --
Redemption of discount notes ................................................. (2,591) (2,394)
Redemption of warrants ....................................................... (2,955) --
Payment of debt and preferred stock acquisition costs ........................ (5,234) --
--------- ---------
Net cash provided by (used in) financing activities 5,064 (2,832)
--------- ---------
Increase (decrease) in cash and cash equivalents .. (239) 2,319
Cash and cash equivalents:
Beginning ......................................................... 4,291 3,278
--------- ---------
Ending ............................................................ $ 4,052 $ 5,597
========= =========
</TABLE>
8
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS-(CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1999 2000
---- ----
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Supplemental Disclosure of Cash Flow Information:
Cash payments for interest .................................. $ 24,322 $ 20,661
Cash payments for income taxes, net of refunds .............. 588 2,185
========= =========
Supplemental Schedule of Noncash Investing and Financing Activities:
Acquisition of program broadcast rights ..................... $ 9,371 $ 7,750
Notes payable incurred for purchase of property and equipment 3,358 518
Equipment acquired by barter transactions ................... 156 143
Dividends accrued on redeemable preferred stock ............. 12,704 15,312
Accrued interest on note receivable stockholder added to
additional paid-in capital ................................. 25 29
Accretion to senior exchangeable preferred stock ............ 1,358 1,574
========= =========
Acquisition of stations:
Property and equipment acquired at fair market value ........ $ 6,238 $ 25,693
Intangible assets acquired .................................. 27,574 117,426
Program broadcast rights acquired ........................... 1,595 932
Program broadcast liabilities assumed ....................... (1,595) (868)
Assumption of pension liability ............................. -- (1,305)
Other, net .................................................. 20 (39)
--------- ---------
33,832 141,839
Less: Fair value of assets swapped ......................... (24,272) (122,961)
--------- ---------
Cash purchase price, including fees paid .................... 9,560 18,878
Less: Deposit and costs paid in 1998 and 1999, respectively (59) (10,294)
--------- ---------
Payment and costs paid in 1999 and 2000, respectively ....... $ 9,501 $ 8,584
========= =========
Sale of stations:
Property and equipment sold ................................. $ 3,094 $ 8,876
Intangible assets sold ...................................... 8,102 60,258
Program broadcast rights sold ............................... 300 351
Program broadcast liabilities transferred ................... (292) (338)
Other, net .................................................. (20) (91)
--------- ---------
11,184 69,056
Gain recognized on sale of stations ......................... 13,303 61,537
--------- ---------
24,487 130,593
Less: Fair value of assets swapped ......................... (24,272) (122,961)
--------- ---------
Proceeds from sale of station net of fees paid .............. $ 215 $ 7,632
========= =========
</TABLE>
9
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NOTE A) - NATURE OF BUSINESS AND BASIS OF PRESENTATION
NATURE OF BUSINESS
Benedek Communications is a holding company with minimal operations
other than from its wholly owned subsidiary, Benedek Broadcasting. Benedek
Broadcasting owns and operates 23 network affiliated television stations (the
"Stations") located throughout the United States. The Stations are
geographically diverse and serve markets in 24 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 include the accounts of Benedek
Communications, and its subsidiaries, on a consolidated basis. All significant
intercompany items and transactions have been eliminated in consolidation.
Certain amounts in the nine months ended September 30, 1999 have been
reclassified to conform to the classification for the nine months ended
September 30, 2000. These reclassifications had no effect on the net loss for
the nine months ended September 30, 2000.
(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. 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 $141,839,000, which consisted of the fair market value
of the WWLP-TV assets of $122,961,000, cash payment of $18,000,000 and fees and
costs of the transaction of approximately $878,000. 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.
10
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
A gain of approximately $61,226,000 was recorded to reflect the
disposition of WWLP-TV. The gain consisted of the fair market value of the
WWLP-TV assets of $122,961,000 less their book value of $61,431,000 and fees of
approximately $304,000.
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 $311,000
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 $7,625,000 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.
The unaudited pro forma results of operations and earnings per share
for the nine months ended September 30, 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 ("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 .............................. $125,076 $120,206 $112,535 $116,237
--------- --------- --------- ---------
(Loss) before extraordinary item ......... $ (5,569) $(13,292) $ (6,901) $(13,520)
Extraordinary item ...................... (12,182) -- (12,182) --
--------- --------- --------- ---------
Net (loss) ............................... $(17,751) $(13,292) $(19,083) $(13,520)
========= ========= ========= =========
Basic and diluted (loss) per common share:
(Loss) before extraordinary item.... $ (2.65) $ (4.08) $ (2.83) $ (4.11)
Extraordinary item ................. (1.65) -- (1.65) --
--------- --------- --------- ---------
(Loss) per common share ............ $ (4.30) $ (4.08) $ (4.48) $ (4.11)
========= ========= ========= =========
</TABLE>
11
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
The pro forma results of operations and earnings per share for the nine
months ended September 30, 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) - REPURCHASE OF DISCOUNT NOTES
During July 2000, the Company acquired a portion of its 13 1/4% Senior
Subordinated Discount Notes (the "Discount Notes") with a face amount of
$3,005,000. The Discount Notes had an accreted value of $2,649,000 and were
purchased for a total of $2,394,000.
(NOTE D) - 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.
(NOTE E) - SUBSEQUENT EVENTS
On October 18, 2000, the Company commenced a cash tender offer and
consent solicitation for all of its outstanding Discount Notes. This tender
offer is part of the Company's financing plan, the purpose of which is to (i)
reduce the Company's aggregate interest expense by refinancing the Discount
Notes and existing credit facility, (ii) extend the maturities of the Company's
debt securities and (iii) enhance the Company's operating and financial
flexibility. At September 30, 2000, the accreted value of the Discount Notes was
approximately $151,412,000.
On October 18, 2000, the Company also commenced a consent solicitation
from the registered holders of its Senior Exchangeable Preferred Stock, seeking
their consent with respect to the adoption of amendments to the certificate of
designation to permit the Company to enter into the financing plan among other
things.
As mentioned above, in addition to this tender offer, the Company
contemplates the refinancing of its outstanding bank term loan and revolver,
which totaled approximately $281,000,000 at September 30, 2000. It is
anticipated that the refinancing will be accomplished through the issuance of
new senior secured notes in the aggregate principal amount of approximately
$450,000,000 and entering into a new $25,000,000 revolving credit facility.
Proceeds remaining from the issuance of the senior secured notes, after funding
the tender offer and payment of the outstanding bank indebtedness, will be used
to pay the related fees and expenses of the transaction, and any remaining
amount will be used for working capital purposes.
12
<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 fees (the "1999 Swap"). 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. The 1999 Swap
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 former station in Odessa,
Texas, which was sold to ICA effective on March 21, 2000. In addition, the
historical financial data reflects the results of operations of WWLP-TV,
Springfield, Massachusetts, which was exchanged for the television broadcast
assets of KAKE-TV, Wichita, Kansas and WOWT-TV, Omaha, Nebraska effective 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 September 30, 2000.
The term, "Same Station" data refers to the historical results of
operations for all 23 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 depreciation and amortization and TBA fees and
revenue. Same Station information excludes the results of BCI, a nonrecourse
subsidiary. Same Station information does not claim 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 claim to project results
of operations of the Company in any future period.
Broadcast cash flow 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,
corporate expenses, net loss on the sale of stations and noncash compensation,
less payments on program broadcast liabilities and net gain on sale of stations.
The Company has included broadcast cash flow data because the
information is a measurement (i) used by lenders to measure the Company's
ability to service its debt and pay for capital expenditures; (ii) used by
industry analysts to determine a market value of the Company's television
stations; and (iii) used by industry analysts when evaluating and comparing the
Company's operating performance.
Broadcast cash flow does not claim to represent cash provided by
operating activities as reflected in the Company's consolidated financial
statements. It 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
13
<PAGE>
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, before financial income
as derived from the consolidated statements of operations plus depreciation and
amortization, amortization of program broadcast rights, net loss on the sale of
stations and noncash compensation, less payments on program broadcast
liabilities and net gain on sale of stations.
The Company has included Adjusted EBITDA data because the information
is a measurement (i) used by lenders to measure the Company's ability to service
its debt and pay for capital expenditures;(ii) used by industry analysts to
determine a market value of the Company's television stations; and (iii) used by
industry analysts when evaluating and comparing the Company's operating
performance.
Adjusted EBITDA does not claim to represent cash provided by operating
activities as reflected in the Company's consolidated financial statements. It
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 revenue and manage expenses
on an operating basis.
The Company owns 23 network-affiliated television stations throughout
the United States. The Stations are diverse in geographic and network
affiliation, serve 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 modest 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 that 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 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 former station in Springfield, Massachusetts, and an additional
$18.0 million payment made 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.
14
<PAGE>
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(TV)
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 September 30, Nine Months Ended September 30,
------------------------------- ------------------------------
1999 2000 1999 2000
---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C>
Operating income .............................. $ 5,098 $ 5,903 $ 28,034 $ 79,321
Add:
Amortization of program broadcast
rights ................................... 1,975 2,380 5,858 6,656
Depreciation and amortization ............ 5,464 7,253 20,037 19,457
Corporate expenses ....................... 1,089 1,477 3,416 4,277
Net loss on sale of stations ............. 220 -- -- --
Less:
Payments for program broadcast liabilities (1,851) (2,261) (5,841) (6,423)
Net gain on sale of stations ............. -- (32) (13,303) (61,537)
-------- -------- -------- --------
Broadcast cash flow ........................... $11,995 $14,720 $ 38,201 $ 41,751
======== ======== ======== ========
</TABLE>
15
<PAGE>
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1999
The following table provides both historical information and Same
Station information for the three months ended September 30, 1999 and 2000. The
Same Station information gives effect to the 1999 Swap, the 2000 Swap and KOSA
disposition as if the exchanges and disposition were consummated prior to
January 1, 1999.
<TABLE>
<CAPTION>
Historical Same Station(1)
Three Months Ended September 30, Three Months Ended September 30,
--------------------------------- ---------------------------------
1999 2000 % Change 1999 2000 % Change
---- ---- -------- ---- ---- --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Local/regional ............................. $22,121 $23,573 6.6% $24,480 $23,410 (4.4)%
National ................................... 11,614 13,313 14.6 12,618 13,265 5.1
Political .................................. 347 4,980 1335.2 347 4,979 1334.9
Other ...................................... 4,336 4,307 (0.7) 4,581 4,301 (6.1)
------- ------- ------- -------- -------- -------
38,418 46,173 20.2 42,026 45,955 9.3
Direct costs ............................... 5,210 6,654 27.7 5,669 6,481 14.3
------- ------- ------- -------- -------- -------
Net revenues ............................... 33,208 39,519 19.0 36,357 39,474 8.6
Operating expenses:
Selling, technical and
program expenses ...................... 15,682 18,608 18.7 17,622 18,522 5.1
General and administrative ............ 5,655 6,310 11.6 6,383 6,316 (1.0)
Depreciation and amortization ......... 5,464 7,253 32.7 8,653 8,191 (5.3)
Corporate ............................. 1,089 1,477 35.6 1,089 1,477 35.6
------- ------- ------- -------- -------- -------
27,890 33,648 20.6 33,747 34,506 2.2
Gain (loss) on sales of stations, net ...... (220) 32 100.0 -- -- --
------- ------- ------- -------- -------- -------
Operating income ...................... $ 5,098 $ 5,903 15.8% $ 2,610 $ 4,968 90.3%
======= ======== ====== ======== ======== =======
Broadcast cash flow ........................ $11,995 $14,720 22.7% $12,540 $14,756 17.7%
Broadcast cash flow margin ................. 36.1% 37.2% 34.5% 37.4%
Adjusted EBITDA ............................ $10,906 $13,243 21.4% $11,451 $13,279 16.0%
Adjusted EBITDA margin ..................... 32.8% 33.5% 31.5% 33.6%
</TABLE>
(1) Excludes BCI, a nonrecourse subsidiary
Net revenues for the three months ended September 30, 2000 increased
$6.3 million or 19.0% to $39.5 million from $33.2 million for the three months
ended September 30, 1999. Political advertising revenue for the three months
ended September 30, 2000 was $5.0 million compared to $0.3 million for the three
months ended September 30, 1999. Gross revenues excluding political advertising
revenue increased $3.1 million or 8.2% to $41.2 million from $38.1 million for
the three months ended September 30, 1999. The increase was caused primarily by
the 2000 Swap.
During March 2000, the Company restructured the organization of its
local sales departments to place a greater emphasis on local and regional
advertising revenues. The Company shifted certain local advertising accounts to
national representatives to better reflect the actual source of revenue. As a
result of the restructuring and the new philosophy, it may be difficult to make
year-to-year comparisons of trends in local/regional and national sales for the
three months ended September 30, 2000 as compared to the three months ended
September 30, 1999.
On a Same Station basis, net revenues for the three months ended
September 30, 2000 increased $3.1 million or 8.6% to $39.5 million from $36.4
million for the three months ended September 30, 1999. The increase was the
result of higher political advertising revenue for the three months ended
September 30, 2000 as compared to September 30, 1999. Political advertising
revenue was $5.0 million for the three months ended September 30, 2000 as
compared to $0.3 million for the three months ended September 30, 1999.
16
<PAGE>
Operating expenses for the three months ended September 30, 2000
increased $5.7 million or 20.6% to $33.6 million from $27.9 million for the
three months ended September 30, 1999. The increase in operating expenses was
caused by increased costs due to the effect of the 2000 Swap. As a percentage of
net revenues, operating expenses increased to 85.1% for the three months ended
September 30, 2000 compared to 84.0% for the corresponding period in 1999. On a
Same Station basis, operating expenses for the three months ended September 30,
2000 increased $0.8 million or 2.2% to $34.5 million from $33.7 million for the
three months ended September 30, 1999. The increase in operating expenses
resulted primarily from increased sales related expenses and increased corporate
expenses in the three months ended September 30, 2000.
Operating income for the three months ended September 30, 2000
increased $0.8 million to $5.9 million from $5.1 million for the three months
ended September 30, 1999. On a Same Station basis, operating income for the
three months ended September 30, 2000 increased $2.4 million or 90.3% to $5.0
million from $2.6 million for the three months ended September 30, 1999.
Financial (expenses), net for the Company for the three months ended
September 30, 2000 increased $1.1 million or 10.0% to $12.3 million from $11.2
million in the three months ended September 30, 1999 as a result of higher
levels of debt resulting from the 2000 Swap.
Income tax benefit for the Company for the three months ending
September 30, 2000 was $2.4 million as compared to an expense of $0.1 million
for the three months ended September 30, 1999.
At September 30, 2000, the Company had approximately $15.7 million in
net operating loss carryforwards, which expire in 2007 through 2019 that are
available to offset future income tax liabilities.
Net loss for the Company was $4.0 million for the three months ended
September 30, 2000 as compared to a net loss of $6.1 million for the three
months ended September 30, 1999.
Broadcast cash flow for the three months ended September 30, 2000
increased $2.7 million or 22.7% to $14.7 million from $12.0 million for the
three months ended September 30, 1999. As a percentage of net revenues,
broadcast cash flow margin increased to 37.2% for the three months ended
September 30, 2000 from 36.1% for the three months ended September 30, 1999. On
a Same Station basis, broadcast cash flow for the three months ended September
30, 2000 increased $2.3 million or 17.7% to $14.8 million from $12.5 million for
the three months ended September 30, 1999. As a percentage of net revenues,
broadcast cash flow margin on a Same Station basis increased to 37.4% for the
three months ended September 30, 2000 from 34.5% for the three months ended
September 30, 1999.
17
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1999
The following table provides both historical information and Same
Station information for the nine months ended September 30, 1999 and 2000. The
Same Station information gives effect to the 1999 Swap, the 2000 Swap and the
KOSA disposition as if the exchanges and disposition were consummated prior to
January 1, 1999.
<TABLE>
<CAPTION>
Historical Same Station(1)
Nine Months Ended September 30, Nine Months Ended September 30,
------------------------------------ ---------------------------------
1999 2000 % Change 1999 2000 % Change
---- ---- -------- ---- ---- --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Local/regional ............................. $ 67,231 $ 69,299 3.1% $ 74,310 $ 71,296 (4.1)%
National ................................... 36,390 41,676 14.5 39,462 42,607 8.0
Political .................................. 721 7,274 908.9 774 7,342 848.6
Other ...................................... 14,306 13,225 (7.6) 14,296 13,315 (6.9)
--------- --------- ---------- -------- --------- --------
118,648 131,474 10.8 128,842 134,560 4.4
Direct costs ............................... 15,921 18,704 17.5 17,304 18,686 8.0
--------- --------- ---------- -------- --------- --------
Net revenues ............................... 102,727 112,770 9.8 111,538 115,874 3.9
Operating expenses:
Selling, technical and
program expenses ...................... 46,777 53,059 13.4 53,179 54,870 3.2
General and administrative ............ 17,766 18,193 2.4 18,519 18,755 1.3
Depreciation and amortization ......... 20,037 19,457 (2.9) 24,480 21,442 (12.4)
Corporate ............................. 3,416 4,277 25.2 3,416 4,277 25.2
--------- --------- ---------- -------- --------- --------
87,996 94,986 7.9 99,594 99,344 (0.3)
Gain on sales of stations, net ............. 13,303 61,537 362.6 -- -- --
--------- --------- ---------- -------- --------- --------
Operating income ...................... $ 28,034 $ 79,321 182.9% $ 11,944 $ 16,530 38.4%
========= ========= ========== ======== ========= ========
Broadcast cash flow ........................ $ 38,201 $ 41,751 9.3% $ 39,963 $ 42,741 7.0%
Broadcast cash flow margin ................. 37.2% 37.0% 35.8% 36.9%
Adjusted EBITDA ............................ $ 34,785 $ 37,474 7.7% $ 36,547 $ 38,464 5.2%
Adjusted EBITDA margin ..................... 33.9% 33.2% 32.8% 33.2%
</TABLE>
(1) Excludes BCI, a nonrecourse subsidiary
Net revenues for the nine months ended September 30, 2000 increased
$10.1 million or 9.8% to $112.8 million from $102.7 million for the three months
ended September 30, 1999. Gross revenues excluding political advertising revenue
increased $6.3 million or 5.3% to $124.2 million for the nine months ended
September 30, 2000 from $117.9 million for the nine months ended September 30,
1999. On a Same Station basis, net revenues for the nine months ended September
30, 2000 were $115.9 million as compared to $111.5 million for the nine months
ended September 30, 1999 due to an increase of $6.6 million in political
advertising revenue.
During March 2000, the Company restructured the organization of its
local sales departments to place a greater emphasis on local and regional
advertising revenues. The Company shifted certain local advertising accounts to
national representatives to better reflect the actual source of revenue. As a
result of the restructuring and the new philosophy, it may be difficult to make
year-to-year comparisons of trends in local/regional and national sales for the
nine months ended September 30, 2000 as compared to the nine months ended
September 30, 1999.
Operating expenses for the nine months ended September 30, 2000
increased $7.0 million or 7.9% to $95.0 million from $88.0 million for the nine
months ended September 30, 1999. The increase in operating expenses was
attributable primarily to increases in payroll related costs in both selling,
technical and program expenses and corporate. The increase was offset by a $0.6
million decrease in depreciation expense. On a
18
<PAGE>
Same Station basis, operating expenses for the nine months ended September 30,
2000 decreased $0.3 million or 0.3% to $99.3 million from $99.6 million for
the nine months ended September 30, 1999.
Gain on the sale of stations, net for the nine months ended September
30, 2000 was $61.5 million as compared to $13.3 million for the nine months
ending September 30, 1999. The $48.2 million or 362.6% increase is a result of
the 2000 Swap.
Operating income for the nine months ended September 30, 2000 increased
$51.3 million or 182.9% to $79.3 million from $28.0 million for the nine months
ended September 30, 1999, due to the 2000 Swap. On a Same Station basis,
operating income for the nine months ended September 30, 2000 increased $4.6
million or 38.4% to $16.5 million from $11.9 million for the nine months ended
September 30, 1999.
Financial (expenses), net for the nine months ended September 30, 2000
increased $2.8 million or 8.5% to $35.7 million from $32.9 million for the nine
months ended September 30, 1999.
Income tax expense for the Company for the nine months ended September
30, 2000 was $28.4 million compared to no income tax benefit or expense for the
nine months ended September 30, 1999. The increase in expense was a result of
the non-deductible gain, in accordance with Section 1031 of the Internal Revenue
Code, associated with the 2000 Swap.
Net income for the Company for the nine months ended September 30, 2000
was $15.2 million as compared to $17.0 million net loss for the nine months
ended September 30, 1999.
Broadcast cash flow for the nine months ended September 30, 2000
increased $3.6 million or 9.3% to $41.8 million from $38.2 million for the nine
months ended September 30, 1999. As a percentage of net revenues, broadcast cash
flow margin decreased to 37.0% for the nine months ended September 30, 2000 from
37.2% for the nine months ended September 30, 1999. On a Same Station basis,
broadcast cash flow for the nine months ended September 30, 2000 increased $2.7
million or 7.0% to $42.7 million from $40.0 million for the nine months ended
September 30, 1999. As a percentage of net revenues, broadcast cash flow margin
on a Same Station basis increased to 36.9% for the nine months ended September
30, 2000 from 35.8% for the nine months ended September 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows from Operating Activities is the primary source of liquidity
for the Company and was $14.3 million for the nine months ended September 30,
2000 compared to $11.0 million for the nine months ended September 30, 1999.
Cash payments of interest expense totaled $20.7 million for the nine months
ended September 30, 2000 as compared to $24.3 million for the nine months ended
September 30, 1999. The decrease of $3.6 million in cash payments for interest
was offset by a $1.6 million increase in cash payments for income taxes.
Cash Flows from Investing Activities were $(9.1) million for the nine
months ended September 30, 2000, as compared to $(16.3) million for the nine
months ended September 30, 1999. Cash flows from investing activities for the
nine months ended September 30, 2000 included $8.6 million of costs and fees
associated with the 2000 Swap which was offset, in part, by $7.6 million of net
proceeds from the KOSA disposition. For the nine months ended September 30,
1999, cash flows from investing activities included $9.5 million of costs and
fees associated with the 1999 Swap. Purchase of property and equipment was $7.5
million for the nine months ended September 30, 2000 as compared to $6.4 million
for the nine months ended September 30, 1999.
Cash Flows from Financing Activities were $(2.8) million for the nine
months ended September 30, 2000 compared to $5.1 million for the nine months
ended September 30, 1999. The nine months ended September 30, 2000 included $2.5
million in net borrowings on the Company's Revolver (as defined below) compared
to $55.0 million for the nine months ended September 30, 1999. The Company made
$3.5 million in principal payments during the nine months ended September 30,
2000, which included a $2.4 million
19
<PAGE>
payment to satisfy the mortgage on WWLP prior to the 2000 Swap. In addition,
during the nine months ended September 30, 1999, the Company borrowed
$220.0 million under the term loan portion of a new credit facility ("the
Credit Facility"), paid off its existing term loans for $108.3 million and
redeemed Benedek Broadcasting's Senior Secured Notes for $149.9 million.
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
Benedek Communications), 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.
As of September 30, 2000, the Company had borrowed $220.0 million under
the Term Loan and $61.0 million under the Revolver. At September 30, 2000, the
Company could have borrowed approximately an additional $10.9 million under the
Revolver. During the nine months ended September 30, 2000, the highest
outstanding balance under the Revolver was $66.0 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.
During the three months ended September 30, 2000, the Company revised
the accumulated accretion of dividends on its 11 1/2% Senior Exchangeable
Preferred Stock. The result of this revision was to increase the carrying amount
by $1.4 million to $135.4 million. The resulting liquidation preference at
September 30, 2000 was $131.0 million. The revision was needed to adjust the
balance to the actual liquidation preference plus the accumulated prepayment
premium amortization as calculated on September 30, 2000.
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 its only
financial instrument is an interest rate cap.
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. The Company is entitled 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 September 30, 2000, the settlement rate was 6.62%.
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.
20
<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 6. EXHIBITS AND REPORTS ON FORM 8-K.
<TABLE>
<S> <C>
(a)(3) Exhibits.
*10.1 -- Second Amendment to loan agreement dated as of March 22,
2000 by and among Benedek Communications Corporation, as
parent; Benedek Broadcasting Corporation, as borrower; the
lenders (as defined in the Loan Agreement) and Toronto
Dominion (Texas), Inc., as administrative agent and as
collateral agent.
*27 -- Financial Data Schedule pursuant to Article 5 of Regulation
S-X with respect to Benedek Communications Corporation.
</TABLE>
*Filed herewith
(b) Reports on Form 8-K
None.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BENEDEK COMMUNICATIONS CORPORATION
(REGISTRANT)
By: /s/ K. James Yager
........................
K. JAMES YAGER
PRESIDENT AND CHIEF OPERATING OFFICER
(AUTHORIZED OFFICER)
By: /s/ Mary L. Flodin
..........................
MARY L. FLODIN
VICE PRESIDENT AND CONTROLLER
(PRINCIPAL ACCOUNTING OFFICER)
DATE: October 30, 2000
22
