<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 JUNE 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)
--------------
60195
2895 GREENSPOINT PARKWAY (ZIP CODE)
HOFFMAN ESTATES, IL
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (847) 585-3450
--------------
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
August 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 June 30, 2000.............. 3
Consolidated Statements of Operations for the Three Months Ended
June 30, 1999 and 2000.......................................................... 4
Consolidated Statements of Operations for the Six Months Ended
June 30, 1999 and 2000.......................................................... 5
Consolidated Statements of Stockholders' (Deficit) for the Six
Months Ended June 30, 2000 ..................................................... 6
Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 1999 and 2000.......................................................... 7
Notes to Consolidated Financial Statements.......................................... 9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations..................................................................... 12
PART II - Other Information
Item 1. Legal Proceedings................................................................... 20
Item 6. Exhibits and Reports on Form 8-K.................................................... 20
Signatures ................................................................................... 21
</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"), 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.
-2-
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1999 2000
---------------- -------------
ASSETS (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Current Assets
Cash and cash equivalents............................................................ $ 3,278 $ 2,754
Receivables
Trade, net........................................................................ 27,619 30,483
Notes receivable-officers......................................................... 275 275
Other............................................................................. 983 778
Current portion of program broadcast rights.......................................... 5,844 2,634
Prepaid expenses..................................................................... 1,979 2,702
Deferred income taxes................................................................ 1,085 1,105
------------------ ----------------
TOTAL CURRENT ASSETS....................................................... 41,063 40,731
------------------ ----------------
Property and equipment, net ............................................................ 62,782 77,761
------------------ ----------------
Intangible assets, net ................................................................. 335,348 387,493
------------------ ----------------
Other assets
Program broadcast rights, less current portion ...................................... 1,270 961
Deferred loan costs.................................................................. 6,060 5,304
Deposit on and costs of acquisitions................................................. 10,294 -
Notes receivable-officers............................................................ 720 1,220
Other................................................................................ 239 196
------------------ ----------------
18,583 7,681
------------------ ----------------
$ 457,776 $ 513,666
================== ================
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current Liabilities
Current maturities of notes payable.................................................. $ 1,300 $ 1,174
Due to Sellers....................................................................... - 481
Current portion of program broadcast liabilities..................................... 8,608 5,533
Accounts payable and accrued expenses ............................................... 10,169 10,403
Deferred revenue..................................................................... 579 585
------------------ ----------------
TOTAL CURRENT LIABILITIES.................................................. 20,656 18,176
------------------ ----------------
Long-Term Obligations
Notes payable ....................................................................... 426,279 437,485
Program broadcast liabilities ....................................................... 978 598
Deferred revenue .................................................................... 2,435 2,153
Deferred income taxes ............................................................... 23,291 51,899
------------------ ----------------
452,983 492,135
------------------ ----------------
Exchangeable redeemable senior preferred stock ........................................ 122,092 129,934
------------------ ----------------
Seller junior discount preferred stock ................................................. 59,539 61,921
------------------ ----------------
Stockholders' (Deficit)
Common stock, Class A................................................................ - -
Common stock, Class B................................................................ 74 74
Additional paid-in capital........................................................... (64,296) (65,229)
Accumulated deficit.................................................................. (132,651) (122,704)
Stockholder's note receivable ....................................................... (621) (641)
------------------ ----------------
(197,494) (188,500)
------------------ ----------------
$ 457,776 $ 513,666
================== ================
</TABLE>
-3-
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
-----------------------------------
1999 2000
---- ----
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND
PER SHARE DATA)
<S> <C> <C>
Net revenues.................................................. $ 37,238 $ 41,517
---------------- ----------------
Operating expenses:
Selling, technical and program expenses.................... 15,908 18,383
General and administrative................................. 5,451 6,296
Depreciation and amortization.............................. 6,759 7,008
Corporate.................................................. 1,086 1,451
---------------- ----------------
29,204 33,138
---------------- ----------------
Gain on sale of stations, net ................................ 13,523 205
---------------- ----------------
Operating income.................................. 21,557 8,584
---------------- ----------------
Financial income (expense):
Interest expense:
Cash interest.......................................... (7,227) (6,908)
Other interest......................................... (3,692) (5,106)
---------------- ----------------
(10,919) (12,014)
Interest income............................................ 35 49
---------------- ----------------
(10,884) (11,965)
---------------- ----------------
Income (loss) before income tax (expense) benefit ......... 10,673 (3,381)
Income tax (expense) benefit ................................. (3,164) 1,751
---------------- ----------------
Income (loss) before extraordinary item ...................... 7,509 (1,630)
---------------- ----------------
Extraordinary item, loss on early extinguishments
of debt less applicable income taxes of $8,120 ........... (12,180) -
---------------- ----------------
Net (loss) .................................................. (4,671) (1,630)
Preferred stock dividends and accretion....................... (4,808) (5,175)
---------------- ----------------
Net (loss) applicable to common stock......................... $ (9,479) $ (6,805)
================ ================
Basic and diluted earnings (loss) per common share:
Income (loss) before extraordinary item.................... $ 0.37 $ (0.92)
Extraordinary item......................................... (1.65) -
---------------- ----------------
(Loss) per common share.................................... $ (1.28) $ (0.92)
================ ================
Weighted-average common shares outstanding.................... 7,400,000 7,400,000
================ ================
</TABLE>
-4-
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
1999 2000
---- ----
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND
PER SHARE DATA)
<S> <C> <C>
Net revenues ..................................... $ 69,519 $ 73,251
----------- -----------
Operating expenses:
Selling, technical and program expenses ....... 31,095 34,451
General and administrative .................... 12,111 11,883
Depreciation and amortization ................. 14,573 12,204
Corporate ..................................... 2,327 2,800
----------- -----------
60,106 61,338
----------- -----------
Gain on sale of stations, net .................... 13,523 61,505
----------- -----------
Operating income ..................... 22,936 73,418
----------- -----------
Financial income (expense):
Interest expense:
Cash interest ............................. (13,570) (13,684)
Other interest ............................ (8,232) (10,020)
----------- -----------
(21,802) (23,704)
Interest income ............................... 73 312
----------- -----------
(21,729) (23,392)
----------- -----------
Income before income tax (expense) benefit .... 1,207 50,026
Income tax (expense) benefit ..................... 90 (30,808)
----------- -----------
Income before extraordinary item ................. 1,297 19,218
----------- -----------
Extraordinary item, loss on early extinguishments
of debt less applicable income taxes of $8,120 (12,180) --
----------- -----------
Net income (loss)................................. (10,883) 19,218
Preferred stock dividends and accretion .......... (9,366) (10,224)
----------- -----------
Net income (loss) applicable to common stock ..... $ (20,249) $ 8,994
=========== ===========
Basic earnings (loss) per common share:
Income (loss) before extraordinary item ....... $ (1.09) $ 1.22
Extraordinary item ............................ (1.65) --
----------- -----------
Earnings (loss) per common share .............. $ (2.74) $ 1.22
=========== ===========
Weighted-average common shares outstanding-basic.. 7,400,000 7,400,000
=========== ===========
Diluted earnings per common share:
Income before extraordinary item .............. $ (1.09) $ 1.16
Extraordinary item ............................ (1.65) --
----------- -----------
Earnings per common share ..................... $ (2.74) $ 1.16
=========== ===========
Weighted-average common shares outstanding-diluted 7,400,000 7,775,000
=========== ===========
</TABLE>
-5-
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT)
Six Months Ended June 30, 2000
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
ADDITIONAL STOCKHOLDER'S
COMMON PAID-IN ACCUMULATED NOTE
STOCK CAPITAL DEFICIT RECEIVABLE TOTAL
------------ ------------ --------------- ------------- ----------
<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 ..................... -- (953) -- -- (953)
Dividends on preferred
stock ................... -- -- (9,271) -- (9,271)
Accrued interest on note
receivable ................ -- 20 -- (20) --
Net income .................. -- -- 19,218 -- 19,218
--------- --------- ------------- --------- ---------
Balance at June 30, 2000 ....... $ 74 $ (65,229) $ (122,704) $ (641) $(188,500)
========= ========= ============= ========= =========
</TABLE>
-6-
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
----------------------------
1999 2000
---- ----
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities
Net income (loss) ......................................................... $ (10,883) $ 19,218
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Amortization of program broadcast rights ............................ 3,883 4,276
Depreciation and amortization ....................................... 9,741 7,185
Loss on early extinguishments of debt ............................... 20,300 --
Gain on sale of station ............................................. (13,523) (61,505)
Amortization of intangibles and deferred loan costs ................. 5,839 5,815
Amortization of note discount ....................................... 8,232 9,186
Deferred income taxes ............................................... (8,584) 28,608
Changes in operating assets and liabilities, net of effects of acquisitions
and dispositions:
Receivables ......................................................... (1,211) (3,159)
Due to sellers ...................................................... -- 481
Prepaid expenses and other .......................................... (383) (721)
Payments on program broadcast liabilities ........................... (3,989) (4,163)
Accounts payable and accrued expenses ............................... (4,607) (1,150)
Deferred revenue .................................................... (400) (276)
--------- ---------
Net cash provided by operating activities ......................... 4,415 3,795
--------- ---------
Cash flows from investing activities
Purchase of property and equipment ........................................ (3,493) (5,461)
Payment for acquisition of stations ....................................... (9,498) (8,582)
Proceeds from sale of station ............................................. -- 7,632
Other, net ................................................................ 19 249
--------- ---------
Net cash (used in) investing activities ........................... (12,972) (6,162)
--------- ---------
Cash flows from financing activities
Principal payments on notes payable ....................................... (614) (3,197)
Net borrowings on long-term revolver ...................................... 55,000 4,500
Issuance of Term Loan .................................................. 220,000 --
Proceeds from Notes Payable ............................................ -- 540
Redemption of Senior Secured Notes ..................................... (149,933) --
Payment of existing term loans ......................................... (108,317) --
Payment of debt and preferred stock acquisition costs ..................... (5,073) --
--------- ---------
Net cash provided by financing activities ......................... 11,063 1,843
--------- ---------
Increase (decrease) in cash and cash equivalents .................. 2,506 (524)
Cash and cash equivalents:
Beginning ............................................................... 4,291 3,278
--------- ---------
Ending .................................................................. $ 6,797 $ 2,754
========= =========
(Continued)
</TABLE>
-7-
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS-(Continued)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
---------------------------
1999 2000
---- ----
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Supplemental Disclosure of Cash Flow Information:
Cash payments for interest ....................................... $ 18,057 $ 13,684
Cash payments for income taxes ................................... 408 2,229
========= =========
Supplemental Schedule of Noncash Investing and Financing Activities:
Acquisition of program broadcast rights .......................... $ 1,591 $ 178
Notes payable incurred for purchase of property and equipment .... 2,544 50
Equipment acquired by barter transactions ........................ 90 96
Dividends accrued on redeemable preferred stock .................. 8,467 9,271
Accrued interest on note receivable stockholder added to
additional paid-in capital .................................... 16 20
Accretion to exchangeable redeemable senior preferred stock ...... 899 953
========= =========
Acquisition of stations:
Property and equipment acquired at fair market value ............. $ 6,238 $ 25,693
Intangible assets acquired ....................................... 27,574 117,424
Program broadcast rights acquired ................................ 1,595 2,421
Program broadcast liabilities assumed ............................ (1,595) (2,346)
Assumption of pension liability .................................. -- (1,305)
Other, net ....................................................... 17 (50)
--------- ---------
33,829 141,837
Less: Fair value of assets swapped .............................. (24,272) (122,961)
--------- ---------
Cash purchase price, including fees paid ......................... 9,557 18,876
--------- ---------
Less: Deposit and costs paid in 1998 and 1999, respectively ..... (59) (10,294)
--------- ---------
Payment and costs paid in 1999 and 2000, respectively ............ $ 9,498 $ 8,582
========= =========
Sale of stations:
Property and equipment sold ...................................... $ 2,733 $ 8,876
Intangible assets sold ........................................... 8,028 60,258
Program broadcast rights sold .................................... 300 2,589
Program broadcast liabilities transferred ........................ (292) (2,627)
Other, net ....................................................... (20) (8)
--------- ---------
10,749 69,088
Gain recognized on sale of stations .............................. 13,523 61,505
--------- ---------
24,272 130,593
Less: Fair value of assets swapped .............................. (24,272) (122,961)
--------- ---------
Proceeds from sale of station, net of fees paid .................. $ -- $ 7,632
========= =========
</TABLE>
-8-
<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 and BIM. All significant intercompany items
and transactions have been eliminated in consolidation.
(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 $141,837,000 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 $876,000. 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 $61,224,000 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
$306,000.
-9-
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
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 $281,000 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.
The unaudited pro forma results of operations and earnings per share for
the six months ended June 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 (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......................... $ 84,466 $ 80,686 $ 76,072 $ 76,700
Income (loss) before extraordinary
item................................ $ 1,094 $ (6,783) $ 311 $ (7,163)
Extraordinary item.................. (12,180) -- (12,180) --
--------------- -------------- -------------- --------------
Net (loss).......................... $ (11,086) $ (6,783) $ (11,869) $ (7,163)
=============== ============== ============== ==============
Basic and diluted (loss) per
common share........................
(Loss) before extraordinary
item........................... $ (1.12) $ (2.30) $ (1.22) $ (2.35)
Extraordinary item............... (1.65) -- (1.65) --
--------------- -------------- -------------- --------------
(Loss) per common share.......... $ (2.77) $ (2.30) $ (2.87) $ (2.35)
==============================================================================================================
</TABLE>
The pro forma results of operations and earnings per share for the six
months ended June 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.
-10-
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Note C) - Earnings per Share
Basic and diluted earnings per share were calculated as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
1999 2000 1999 2000
---- ---- ---- ----
(IN THOUSANDS, EXCEPT SHARE
AND PER SHARE DATA)
<S> <C> <C> <C> <C>
Net income(loss) applicable to common stock
before extraordinary item..................... $ 2,701 $ (6,805) $ (8,069) $ 8,994
Extraordinary item............................ (12,180) - (12,180) -
----------- ----------- ----------- ----------
Net income (loss) applicable to common stock.. $ (9,479) $ (6,805) $ (20,249) $ 8,994
Weighted-average common
shares outstanding - basic............... 7,400,000 7,400,000 7,400,000 7,400,000
----------- ----------- ----------- ----------
Effect of dilutive securities:
Stock based compensation................. - -- -- 10,000
Initial Warrants......................... - -- -- 365,000
----------- ----------- ----------- ----------
Weighted-average common shares
shares outstanding - dilutive..... 7,400,000 7,400,000 7,400,000 7,775,000
Basic EPS
Income(loss) before extraordinary
item................................... $ 0.37 $ (0.92) $ (1.09) $ 1.22
Extraordinary item........................... (1.65) -- (1.65) --
=========== =========== =========== ==========
Earnings (loss) per common share............. $ (1.28) $ (0.92) $ (2.74) $ 1.22
=========== =========== =========== ==========
Diluted EPS
Income before extraordinary
item.................................... $ 0.37 $ (0.92) $ (1.09) $ 1.16
Extraordinary item........................... (1.65) -- (1.65) --
=========== =========== =========== ==========
Earnings per common share.................... $ (1.28) $ (0.92) $ (2.74) $ 1.16
=========== =========== =========== ==========
</TABLE>
(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.
-11-
<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 (1999 Station Swap).
KCOY-TV was exchanged for KKTV in a transaction, which closed on May 1, 1999.
The historical financial data also 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 Station Swap"). The effect of the 2000 Station Swap 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 June 30, 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 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
-12-
<PAGE>
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 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
-13-
<PAGE>
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.
The following table sets forth certain historical results of the operations
and operating data for the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1999 2000 1999 2000
---- ---- ---- ----
(In thousands) (In thousands)
<S> <C> <C> <C> <C>
Operating income......................... $ 21,557 $ 8,584 $ 22,936 $ 73,418
Add:
Amortization of program broadcast
rights............................. 1,944 2,205 3,883 4,276
Depreciation and amortization...... 6,759 7,008 14,573 12,204
Corporate expenses................. 1,086 1,451 2,327 2,800
Operating loss of BCI................ 33 108 93 66
Less:
Payments on program
broadcast liabilities........... (1,771) (1,845) (3,989) (4,163)
Net gain on sale of stations...... (13,523) (205) (13,523) (61,505)
---------- --------- --------- ----------
Broadcast cash flow(1)................... $ 16,085 $ 17,306 $ 26,300 $ 27,096
========== ========= ========= ==========
</TABLE>
(1) Excludes BCI, a nonrecourse subsidiary
-14-
<PAGE>
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999
The following table provides both historical information and Same
Station information for the three months ended June 30, 1999 and 2000. The Same
Station information gives effect to the 1999 Station Swap, the 2000 Station Swap
and KOSA-TV disposition as if the exchanges and disposition were consummated
prior to January 1, 1999.
<TABLE>
<CAPTION>
HISTORICAL SAME STATION(1)
THREE MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30,
--------------------------- ----------------------------
1999 2000 % CHANGE 1999 2000 % CHANGE
---- ---- -------- ---- ---- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Local/regional..................... $ 24,383 $26,117 7.1% $26,747 $25,877 (3.3)%
National........................... 13,745 16,171 17.7 14,542 16,111 10.8
Political.......................... 201 1,462 627.4 242 1,460 503.3
Other.............................. 4,817 4,754 (1.3) 4,977 4,692 (5.7)
-------- ------- ----- ------- ------- -----
43,146 48,504 12.4 46,508 48,140 3.5
Direct costs....................... 5,908 6,987 18.3 6,311 6,722 6.5
-------- ------- ----- ------- ------- -----
Net revenues....................... 37,238 41,517 11.5 40,197 41,418 3.0
-------- ------- ----- ------- ------- -----
Operating expenses:
Selling, technical and
program expenses............. 15,908 18,383 15.6 17,930 18,246 1.8
General and administrative..... 5,451 6,296 15.5 5,947 6,191 4.1
Depreciation and amortization. 6,759 7,008 3.7 7,816 6,691 (14.4)
Corporate...................... 1,086 1,451 33.6 1,086 1,451 33.6
-------- ------- ----- ------- ------- -----
29,204 33,138 13.5 32,779 32,579 (0.6)
-------- ------- ----- ------- ------- -----
Gain on sale of stations, net...... 13,523 205 (98.5) -- -- --
-------- ------- ----- ------- ------- -----
Operating income............... $ 21,557 $ 8,584 (60.2)% $ 7,418 $ 8,839 19.2%
======== ======= ===== ======= ======= =====
Broadcast cash flow(1)............. $ 16,085 $17,306 7.6% $16,454 $17,341 5.4%
Broadcast cash flow margin(1)...... 43.2% 41.7% 40.9% 41.9%
Adjusted EBITDA(1)................. $ 14,999 $15,855 5.7% $15,368 $15,890 3.4%
Adjusted EBITDA margin(1).......... 40.3% 38.2% 39.3% 38.4%
(1) Excludes BCI, a nonrecourse subsidiary
Net revenues for the three months ended June 30, 2000 increased $4.3
million or 11.5% to $41.5 million from $37.2 million for the three months ended
June 30, 1999. Political advertising revenue for the three months ended June 30,
2000 was $1.5 million compared to $0.2 million for the three months ended
June 30, 1999. Gross revenues excluding political advertising revenue increased
$4.1 million or 9.6% to $47.0 million from $42.9 million for the three months
ended June 30, 1999. The increase was primarily the result of the 2000 Station
Swap.
On a Same Station basis, net revenues for the three months ended
June 30, 2000 increased $1.2 million or 3.0% to $41.4 million from $40.2
million for the three months ended June 30, 1999. The increase was the result of
higher political advertising revenue for the three months ended June 30, 2000 as
compared to June 30, 1999. Political advertising revenue was $1.5 million for
the three months ended June 30, 2000 as compared to $0.2 million for the three
months ended June 30, 1999.
Operating expenses for the three months ended June 30, 2000 increased
$3.9 million or 13.5% to $33.1 million from $29.2 million for the three months
ended June 30, 1999. The increase in operating expenses was caused by increased
costs reflected in the three months ended June 30, 2000 due to the effect of the
2000 Station Swap. As a percentage of net revenues, operating expenses increased
to 79.8% for the three months ended June 30, 2000 compared to 78.4% for the same
period ending 1999. On a Same Station basis, operating expenses for the three
months ended June 30, 2000 decreased $0.2 million or 0.6% to $32.6 million from
$32.8 million for the three months ended June 30, 1999.
-15-
<PAGE>
Gain on sale of stations, net for the three months ended June 30, 2000
was $0.2 million as compared to $13.5 million for the three months ended June
30, 1999. The gain in the three months ended June 30, 1999 was the result of the
1999 Station Swap pursuant to which, the KCOY assets with a fair market value
$24.3 million, were exchanged for the assets of KKTV. KCOY-TV's book value for
the assets was $10.8 million.
Operating income for the three months ended June 30, 2000 decreased
$13.0 million to $8.6 million from $21.6 million for the three months ended June
30, 1999 due to the net gain on sale of stations for the three months ended June
30, 1999. On a Same Station basis, operating income for the three months ended
June 30, 2000 increased $1.4 million or 19.2% to $8.8 million from $7.4 million
for the three months ended June 30, 1999.
Financial (expenses), net for the Company for the three months ended
June 30, 2000 increased $1.1 million or 9.9% to $12.0 million from $10.9 million
in the three months ended June 30, 1999 as a result of higher levels of debt
resulting from the 2000 Station Swap.
Income tax benefit for the Company for the three months ending June 30,
2000 was $1.8 million as compared to an expense of $3.2 million for the three
months ended June 30, 1999. The 1999 tax expense was primarily the result of the
gain on the sale of stations from the 1999 Station Swap.
At June 30, 2000 the Company had approximately $15.8 million in net
operating loss carryforwards, which expire in 2007 through 2019 and that are
available to offset future tax liabilities.
Net loss for the Company was $1.6 million for the three months ended
June 30, 2000 as compared to a net loss of $4.7 million for the three months
ended June 30, 1999.
Broadcast cash flow for the three months ended June 30, 2000 increased
$1.2 million or 7.6% to $17.3 million from $16.1 million for the three months
ended June 30, 1999. As a percentage of net revenues, broadcast cash flow margin
decreased to 41.7% for the three months ended June 30, 2000 from 43.2% for the
three months ended June 30, 1999. On a Same Station basis, broadcast cash flow
for the three months ended June 30, 2000 increased $0.9 million or 5.4% to $17.3
million from $16.4 million for the three months ended June 30, 1999. As a
percentage of net revenues, broadcast cash flow margin on a Same Station basis
increased to 41.9% for the three months ended June 30, 2000 from 40.9% for the
three months ended June 30, 1999.
-16-
<PAGE>
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999
The following table provides both historical information and Same
Station information for the six months ended June 30, 1999 and 2000. The Same
Station information gives effect to the 1999 Station Swap, the 2000 Station
Swap, and the KOSA disposition as if the exchange and disposition were
consummated prior to January 1, 1999.
</TABLE>
<TABLE>
<CAPTION>
HISTORICAL SAME STATION(1)
SIX MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------ -------------------------------
1999 2000 % CHANGE 1999 2000 % CHANGE
---- ---- -------- ---- ---- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Local/regional..................... $ 45,110 $45,726 1.4% $ 49,830 $ 47,886 (3.9)%
National........................... 24,775 28,363 14.5 26,844 29,342 9.3
Political.......................... 374 2,294 513.4 427 2,363 453.4
Other.............................. 9,971 8,918 (10.6) 9,715 9,014 (7.2)
-------- ------- ----- -------- -------- -----
80,230 85,301 6.3 86,816 88,605 2.1
Direct costs....................... 10,711 12,050 12.5 11,635 12,205 4.9
-------- ------- ----- -------- -------- -----
Net revenues....................... 69,519 73,251 5.4 75,181 76,400 1.6
-------- ------- ----- -------- -------- -----
Operating expenses:
Selling, technical and
program expenses............. 31,095 34,451 10.8 35,557 36,348 2.2
General and administrative..... 12,111 11,883 (1.9) 12,136 12,439 2.5
Depreciation and amortization. 14,573 12,204 (16.3) 15,827 13,251 (16.3)
Corporate...................... 2,327 2,800 20.3 2,327 2,800 20.3
-------- ------- ----- -------- -------- -----
60,106 61,338 2.0 65,847 64,838 (1.5)
-------- ------- ----- -------- -------- -----
Gain on sale of stations, net...... 13,523 61,505 354.8 -- -- --
-------- ------- ----- -------- -------- -----
Operating income............... $ 22,936 $ 73,418 220.1% $ 9,334 $ 11,562 23.9%
======== ======== ===== ======== ======== ====
Broadcast cash flow(1)............. $ 26,300 $ 27,096 3.0% $ 27,423 $ 27,985 2.0%
Broadcast cash flow margin(1)...... 37.8% 37.0% 36.5% 36.6%
Adjusted EBITDA(1)................. $ 23,973 $ 24,296 1.3% $ 25,096 $ 25,185 0.3%
Adjusted EBITDA margin(1).......... 34.4% 33.2% 33.4% 33.0%
(1)Excludes BCI, a nonrecourse subsidiary
</TABLE>
Net revenues for the six months ended June 30, 2000 increased $3.7
million or 5.4% to $73.2 million from $69.5 million for the three months ended
June 30, 1999. Gross revenues excluding political advertising revenue increased
$3.2 million or 4.0% to $83.0 million from $79.8 million for the six months
ended June 30, 2000. On a Same Station basis, net revenues for the six months
ended June 30, 2000 increased to $76.4 million from $75.2 million for the six
months ended June 30, 1999 due to an increase in political advertising revenue.
Operating expenses for the six months ended June 30, 2000 increased
$1.2 million or 2.0% to $61.3 million from $60.1 million for the six months
ended June 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 $2.4 million
decrease in depreciation expense. On a Same Station basis, operating expenses
for the six months ended June 30, 2000 decreased $1.0 million or 1.5% to $64.8
million from $65.8 million for the six months ended June 30, 1999.
Operating income for the six months ended June 30, 2000 increased $50.5
million or 220.1% to $73.4 million from $22.9 million for the six months ended
June 30, 1999, due primarily to the gain from the 2000 Station Swap and KOSA
disposition. On a Same Station basis, operating income for the six months ended
June 30, 2000 increased $2.3 million or 23.9% to $11.6 million from $9.3 million
for the six months ended June 30, 1999.
-17-
<PAGE>
Financial (expenses), net for the six months ended June 30, 2000
increased $1.7 million or 7.7% to $23.4 million from $21.7 million for the six
months ended June 30, 1999.
Income tax expense for the Company for the six months ended June 30,
2000 was $30.8 million compared to an income tax benefit of $0.1 million for the
six months ended June 30, 1999.
Net Income for the Company for the six months ended June 30, 2000 was
$19.2 million as compared to $10.9 million net loss for the six months ended
June 30, 1999.
Broadcast cash flow for the six months ended June 30, 2000 increased
$0.7 million or 3.0% to $27.1 million from $26.3 million for the six months
ended June 30, 1999. As a percentage of net revenues, broadcast cash flow margin
decreased to 37.0% for the six months ended June 30, 2000 from 37.8% for the six
months ended June 30, 1999. On a Same Station basis, broadcast cash flow for the
six months ended June 30, 2000 increased $0.6 million or 2.0% to $28.0 million
from $27.4 million for the six months ended June 30, 1999. As a percentage of
net revenues, broadcast cash flow margin on a Same Station basis increased to
36.6% for the six months ended June 30, 2000 from 36.5% for the six months ended
June 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows from Operating Activities is the primary source of liquidity
for the Company and were $3.8 million for the six months ended June 30, 2000
compared to $4.4 million for the six months ended June 30, 1999. Cash interest
expense decreased $4.3 million and was $13.7 million for the six months ended
June 30, 2000 as compared to $18.0 million for the six months ended June 30,
1999. The decrease of $4.4 million in cash interest expense was offset by a $1.8
million increase in cash income taxes and a $3.2 million increase in receivables
caused in part by the 2000 Station Swap.
Cash Flows from Investing Activities were $(6.2) million for the six
months ended June 30, 2000, as compared to $(13.0) million for the six months
ended June 30, 1999. Cash flows from investing activities for the six months
ended June 30, 2000 included $8.6 million of costs and fees associated with the
2000 Station Swap which were offset, in part, by $7.6 million of net proceeds
from the sale of KOSA-TV. For the six months ended June 30, 1999, cash flows
from investing activities included $9.5 million of costs and fees associated
with the 1999 Station Swap. Purchase of property and equipment was $5.5 million
for the six months ended June 30, 2000 as compared to $3.5 million for the six
months ended June 30, 1999.
Cash Flows from Financing Activities were $1.8 million for the six
months ended June 30, 2000 compared to $11.0 million for the six months ended
June 30, 1999. The six months ended June 30, 2000 included $4.5 million in net
borrowings on the Company's Revolver (as defined below) and $3.2 million in
principal paid primarily in respect of the mortgage on WWLP-TV prior to the 2000
Station Swap. For the six months ended June 30, 1999, the Company issued the
Term Loan in the amount of $220.0 million, drew on the Revolver in the amount of
$55.0 million, paid off its existing term loans for $108.3 million and redeemed
its 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
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
-18-
<PAGE>
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 June 30, 2000, the Company has borrowed $220.0 million under the
Term Loan and $63.0 million under the Revolver. At June 30, 2000, the Company
could have borrowed approximately an additional $12.0 million under the
Revolver. During the six months ended June 30, 2000, the highest outstanding
balance under the Revolver was $63.0 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.
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.
-19-
<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 preceding 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 June 30, 2000, the settlement rate was 6.68%.
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.
<TABLE>
<S> <C>
(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 on March 31, 2000 and amended June 14, 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.
</TABLE>
-20-
<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: August 14, 2000
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