<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 8-K
---------------------
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): February 5, 1999
STC BROADCASTING, INC.
----------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware
----------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)
333-29555 75-2676358
------------------------ ------------------------------------
(Commission File Number) (I.R.S. Employer Identification No.)
3839 4th Street North
Suite 420
St. Petersburg, Florida 33703
--------------------------------------- -------------------
(Address of Principal Executive Offices) (Zip Code)
(727) 821-7900
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
================================================================================
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On February 5, 1999, STC Broadcasting, Inc., a Delaware corporation
("STC"), consummated the acquisition (the "Acquisition") of the assets related
to Station WUPW-TV (the "WUPW Assets") from Raycom America, Inc., a Delaware
corporation that is an indirect wholly owned subsidiary of Raycom Media, Inc.,
pursuant to the terms of an Asset Purchase Agreement dated July 24, 1998. The
aggregate purchase price paid for the WUPW assets was $72.6 million and was
determined as a result of an arm's length negotiation between STC and Raycom
Media, Inc.
WUPW, Channel 36, is the UHF FOX-affiliated station serving the Toledo,
Ohio market. WUPW owns assets that constitute plant, equipment, and other
physical property used in the operation of the television station and will
continue to be utilized by STC for such purposes.
STC financed the Acquisition, together with associated closing costs,
with (i) $40 million of borrowings under the revolver portion of STC's Amended
and Restated Credit Agreement, and (ii) $37.5 million of newly issued Series B
Preferred Stock of the Company.
1
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired.
WUPW-TV A Division of Raycom Media, Inc.
- Report of Independent Certified Public Accountants
- Statements of Assets, Liabilities and Equity as of December
31, 1998 and 1997
- Statements of Operations and Equity for the years ended
December 31, 1998 and 1997
- Statements of Cash Flows for the years ended December 31,
1998 and 1997
- Notes to Financial Statements
(b) Pro Forma Financial Information.
- Balance Sheet at September 30, 1998
- Notes to Balance Sheet
- Statement of Operations for the year ended December 31, 1997
- Statement of Operations for the nine months ended September
30, 1998
- Notes to Statements of Operations
(c) Exhibits.
2.1 Asset Purchase Agreement by and between Elcom of Ohio, Inc.
and STC Broadcasting, Inc., dated as of July 24, 1998
(Incorporated by reference to the Company's Form 10-Q for the
period April 1, 1998 to June 30, 1998).
2
<PAGE> 4
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 hereunto duly authorized.
STC BROADCASTING, INC.
Date: February 16, 1999 By: /s/ David A. Fitz
----------------------------------
David A. Fitz
Senior Vice President and
Chief Financial Officer
3
<PAGE> 5
Item 7(a)
WUPW-TV, A DIVISION OF RAYCOM MEDIA, INC.
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998 AND 1997,
TOGETHER WITH REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE> 6
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Raycom Media, Inc.:
We have audited the accompanying statements of assets, liabilities and equity
of WUPW-TV, a division of Raycom Media, Inc., as of December 31, 1998 and 1997,
and the related statements of operations and equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the assets, liabilities and equity of WUPW-TV, a
division of Raycom Media, Inc., as of December 31, 1998 and 1997, and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Tampa, Florida,
January 29, 1999
<PAGE> 7
WUPW-TV, A DIVISION OF RAYCOM MEDIA, INC.
STATEMENTS OF ASSETS, LIABILITIES AND EQUITY
AS OF DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
ASSETS 1998 1997
-------- --------- -----------
(pledged for Parent debt - see Note 7)
<S> <C> <C>
CURRENT ASSETS:
Cash $ -- $ 117,402
Amount of receivables, net of allowance of approximately $68,000
and $116,000 for doubtful accounts at December 31, 1998 and
1997, respectively 2,747,378 2,500,251
Current portion of program rights 489,098 397,297
Other current assets 299,133 314,736
----------- -----------
Total current assets 3,535,609 3,329,686
PROPERTY AND EQUIPMENT, net 1,919,906 2,122,368
PROGRAM RIGHTS, net of current portion 930,045 765,611
INTANGIBLE ASSETS, net 61,976,608 65,501,079
----------- -----------
Total assets (pledged for Parent debt -
see Note 7) $68,362,168 $71,718,744
=========== ===========
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 369,253 $ 510,578
Current portion of program rights payable 1,331,265 1,361,320
----------- -----------
Total current liabilities 1,700,518 1,871,898
PROGRAM RIGHTS PAYABLE, net of current portion 836,175 885,977
COMMITMENTS AND CONTINGENCIES
PAYABLE TO PARENT 37,923,232 36,874,220
----------- -----------
Total liabilities 40,459,925 39,632,095
PARENT'S EQUITY IN DIVISION 27,902,243 32,086,649
----------- -----------
Total liabilities and equity $68,362,168 $71,718,744
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 8
WUPW-TV, A DIVISION OF RAYCOM MEDIA, INC.
STATEMENTS OF OPERATIONS AND EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
REVENUES:
Broadcasting revenues, net of agency and national
representative commissions of approximately
$2,060,000 and $1,972,000 for 1998 and 1997,
respectively $ 10,064,080 $ 9,397,959
Trade and barter 1,413,486 1,463,904
Other 126,499 111,921
------------ ------------
Total revenues 11,604,065 10,973,784
------------ ------------
OPERATING EXPENSES:
Station operating 2,342,516 2,049,849
Selling, general and administrative 1,984,564 2,202,591
Trade and barter 1,227,767 1,366,385
Depreciation of property and equipment 417,643 362,701
Amortization of intangible assets 3,524,471 3,399,975
Corporate overhead 199,650 393,481
------------ ------------
Total operating expenses 9,696,611 9,774,982
------------ ------------
OPERATING INCOME 1,907,454 1,198,802
INTEREST EXPENSE (6,347,860) (6,234,110)
------------ ------------
LOSS BEFORE INCOME TAXES (4,440,406) (5,035,308)
INCOME TAX BENEFIT 256,000 225,000
------------ ------------
NET LOSS (4,184,406) (4,810,308)
PARENT'S EQUITY IN DIVISION, beginning balance 32,086,649 36,896,957
------------ ------------
PARENT'S EQUITY IN DIVISION, ending balance $ 27,902,243 $ 32,086,649
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 9
WUPW-TV, A DIVISION OF RAYCOM MEDIA, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(4,184,406) $(4,810,308)
Adjustments to reconcile net loss to net cash used in operating activities-
Depreciation of property and equipment 417,643 362,701
Amortization of intangible assets 3,524,471 3,399,975
Amortization of program rights 793,371 818,017
Payments on program rights payable (1,129,463) (1,078,842)
Changes in operating assets and liabilities-
Accounts receivable (247,127) (109,647)
Other current assets 15,603 (98,130)
Accounts payable and accrued expenses (141,325) (82,138)
----------- -----------
Net cash used in operating activities (951,233) (1,598,372)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (215,181) (129,512)
----------- -----------
Net cash used in investing activities (215,181) (129,512)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net transfers from parent 1,049,012 1,729,242
----------- -----------
Net cash provided by financing activities 1,049,012 1,729,242
----------- -----------
NET (DECREASE) INCREASE IN CASH (117,402) 1,358
CASH, beginning of year 117,402 116,044
----------- -----------
CASH, end of year $ -- $ 117,402
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 10
WUPW-TV, A DIVISION OF RAYCOM MEDIA, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
1. ORGANIZATION AND NATURE OF OPERATIONS:
WUPW-TV (the Station) has been a division of Raycom Media, Inc. (Raycom or the
Parent) since September 1996. The Station operates a commercial television
station in the Toledo, Ohio, designated market area. The Station has a network
affiliation with FOX Broadcasting Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
The accompanying financial statements have been prepared from the books and
records maintained by the Station and those of the Parent. The statements of
operations include allocations for corporate overhead. Management of the Parent
considers the allocation methods used to be reasonable.
Concentration of Risk and Accounts Receivable
The Station serves the Toledo, Ohio, demographic area. Accordingly, the revenue
potential of the Station is dependent on the economy in this area. The Station
monitors its accounts receivable through continuing credit evaluations.
Historically, the Station has not had significant uncollectable accounts.
Program Rights
Program rights and the corresponding contractual obligations are recorded when
the license period begins and the programs are available for use. Program
rights are carried at the lower of unamortized cost or estimated net realizable
value evaluated on a program-by-program basis. Any reduction in unamortized
costs to net realizable value is included in amortization of program rights in
the accompanying statements of operations. Such reductions in unamortized costs
for the years ended 1998 and 1997 were not material. Costs of programming are
amortized on the future number of showings on an accelerated basis
contemplating the estimated revenue to be earned per showing, but generally not
exceeding five years. Program rights and the corresponding contractual
obligations are classified as current or long-term based on estimated usage and
payment terms, respectively.
<PAGE> 11
-2-
Property and Equipment
Property and equipment are recorded at cost and are depreciated on a
straight-line basis over the estimated useful lives of the assets as follows:
<TABLE>
<CAPTION>
Years
--------
<S> <C>
Buildings and improvements 10 - 30
Broadcast equipment 7
Furniture and other equipment 3 - 5
Vehicles 5
</TABLE>
Expenditures for maintenance and minor repairs are charged to operations as
incurred.
Impairment of Long-lived Assets
Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount should be addressed. The
Station has determined that there has been no impairment in the carrying value
of long-lived assets as of December 31, 1998.
Trade and Barter Transactions
Trade transactions represent the exchange of commercial air time for
merchandise or services. Barter transactions represent the exchange of
commercial air time for programming. Trade transactions are generally recorded
at the fair market value of the merchandise or services received. Barter
transactions are generally recorded at the fair market value of the commercial
air time relinquished. Revenue is recognized on barter and trade transactions
when the commercials are broadcast, and expenses are recorded when the program,
merchandise or service received is utilized.
<PAGE> 12
-3-
Income Taxes
The Station and the Parent file a consolidated federal income tax return and
state and local income tax returns for each applicable state and local
government.
The accompanying financial statements have been prepared in accordance with the
separate return method of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," whereby the allocation of the consolidated
federal, state and local tax provision is based on what the Station's total
federal, state and local tax provision would have been had the Station filed
income tax returns outside its consolidated group. Given that the Parent is
ultimately responsible for the Station's tax liability, the total income tax
liability is recorded as an increase in the payable to parent in the
accompanying statements of assets, liabilities and equity.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following at December 31, 1998 and
1997:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Buildings and improvements $ 291,504 $ 289,987
Broadcast equipment 2,711,879 2,541,961
Furniture and other equipment 481,883 438,137
Vehicles 41,968 41,968
----------- -----------
3,527,234 3,312,053
Less- Accumulated depreciation (1,607,328) (1,189,685)
----------- -----------
$ 1,919,906 $ 2,122,368
=========== ===========
</TABLE>
<PAGE> 13
-4-
4. INTANGIBLE ASSETS:
Intangible assets are recorded at cost and are being amortized over a period of
20 years using the straight-line method. Intangible assets consisted of the
following at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
FCC License $ 39,100,000 $ 39,100,000
Network affiliate agreement 6,196,000 6,196,000
Goodwill 24,743,959 24,743,959
------------ ------------
70,039,959 70,039,959
Less- Accumulated amortization (8,063,351) (4,538,880)
------------ ------------
$ 61,976,608 $ 65,501,079
============ ============
</TABLE>
5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses consisted of the following as of
December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Accounts payable $180,627 $288,745
Accrued agency fees 101,110 96,915
Accrued commissions and bonuses 78,562 72,698
Other 8,954 52,220
-------- --------
$369,253 $510,578
======== ========
</TABLE>
6. PROGRAM RIGHTS PAYABLE:
The aggregate scheduled maturities of program rights payable subsequent to
December 31, 1998, are as follows:
<TABLE>
<CAPTION>
Year Ending December 31, Amount
----------------------- -----------
<S> <C>
1999 $ 1,331,265
2000 607,324
2001 224,951
2002 3,900
-----------
2,167,440
Less- Current portion (1,331,265)
-----------
Long-term portion of program rights payable $ 836,175
===========
</TABLE>
<PAGE> 14
-5-
7. PARENT DEBT AND INTEREST EXPENSE:
Raycom entered into a loan and credit agreement (the Agreement) to facilitate
the purchase of the Station in September 1996. Under the terms of the
Agreement, substantially all of the assets of the Station were pledged. The
pledged assets will be released upon the exchange of the Station to STC
Broadcasting, Inc. (STC) (see Note 12).
Interest expense was allocated to the Station to represent a reasonable charge
for the debt incurred to facilitate the Station's purchase. The payable to
parent balances as of December 31, 1998 and 1997, represent the net position of
intercompany charges between the Station and the Parent. The Parent has not
stipulated repayment terms of the payable to parent balance as of December 31,
1998, for the next five years or thereafter.
8. INCOME TAXES:
The following table reflects the income tax benefit that the Station would have
recorded if it had filed tax returns as a separate legal entity for the years
ended December 31, 1998 and 1997, respectively:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Federal benefit $(366,000) $(327,000)
State provision 110,000 102,000
--------- ---------
Income tax benefit $(256,000) $(225,000)
========= =========
</TABLE>
The total income tax benefit differs from the amounts computed by applying the
federal statutory rate of 34 percent to loss before income taxes as follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Tax benefit at the statutory rate $(1,510,000) $(1,712,000)
State tax expense, net of federal tax benefit 73,000 67,000
Valuation allowance 748,000 1,000,000
Nondeductible goodwill amortization 428,000 386,000
Other 5,000 34,000
----------- -----------
Income tax benefit $ (256,000) $ (225,000)
=========== ===========
</TABLE>
<PAGE> 15
-6-
Deferred income taxes reflect the tax effect of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Components of the Station's net
deferred tax liability, included in payable to parent, as of December 31, 1998
and 1997, are as follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss (NOL) carryforward $ 2,021,000 $ 1,266,000
Accruals and allowances 84,000 91,000
Less- Valuation allowance (2,105,000) (1,357,000)
----------- -----------
Deferred tax liabilities: - -
Intangible assets (8,599,000) (8,955,000)
Property and equipment (149,000) (159,000)
----------- -----------
$(8,748,000) $(9,114,000)
=========== ===========
</TABLE>
The tax effect of NOLs of approximately $755,000 and $1,001,000 was generated
for the years ended December 31, 1998 and 1997, respectively. On a stand-alone
basis, management of the Station does not believe that the Station would
generate taxable income in future years. Therefore, management established a
valuation allowance to fully offset the NOL generated during the years ended
December 31, 1998 and 1997.
9. COMMITMENTS AND CONTINGENCIES:
The Station has various agreements relating to future program rights not
available for broadcast at December 31, 1998. Future minimum payments under the
terms of these agreements as of December 31, 1998, are as follows:
<TABLE>
<CAPTION>
Year Ending
December 31, Amount
------------ -------------
<S> <C>
1999 $ 92,716
2000 131,950
2001 396,485
2002 607,662
2003 518,768
Thereafter 553,640
------------
$ 2,301,221
============
</TABLE>
<PAGE> 16
-7-
The Station is involved in claims and actions arising in the ordinary course of
business. In the opinion of management, after consultation with legal counsel,
the ultimate disposition of these matters is not expected to have a material
adverse effect on the operations of the Station.
10. RELATED-PARTY TRANSACTIONS:
The Station's financial information is included in the consolidated financial
statements of Raycom. Certain management services are provided to the Station
by Raycom. Such services include data processing, legal, tax, treasury, risk
management and other support services. Allocated expenses are based on Raycom's
estimate of expenses related to the services provided to the Station in
relation to those provided to other divisions or subsidiaries of Raycom.
Management believes that these allocations were made on a reasonable basis. The
Station was allocated expenses of approximately $200,000 and $393,000 for the
years ended December 31, 1998 and 1997, respectively. These amounts were
classified as corporate overhead for the years ended December 31, 1998 and
1997, and are shown separately in the accompanying statements of operations. As
discussed in Note 7, Raycom allocated interest expense to the Station in 1998
and 1997.
11. EMPLOYEE BENEFITS:
Substantially all employees of the Station are covered under a benefit plan
qualifying under Internal Revenue Code Section 401(k) (the Plan). The Plan
allows the participants to contribute up to 18 percent of their pre-tax
compensation in the plan year, subject to statutory limitations. The Plan
covers substantially all employees of the Station who meet certain minimum age
or service requirements. Contributions from the Station are made in an amount
equal to 25 to 50 percent of the participating employee contributions, to the
extent such contributions do not exceed 4 percent of the employees'
compensation for the plan year. Station contributions are based on certain
year-end financial objectives of the Stations. Amounts contributed by the
Station under the Plan were approximately $10,000 and $7,000 for 1998 and 1997,
respectively, and are included in station operating and general and
administrative expenses in the accompanying statements of operations.
12. SUBSEQUENT EVENT:
Raycom has entered into an asset purchase agreement (the Agreement) with STC.
The Agreement, dated July 24, 1997, specifies that Raycom will transfer
substantially all of the assets of the Station to STC in exchange for cash
consideration. The exchange is expected to occur in February 1999.
<PAGE> 17
Item 7(b)
STC Broadcasting, Inc. and Subsidiaries
Unaudited Pro Forma Financial Information
The following unaudited Pro Forma Statements of Operations are based on the ten
months ended December 31, 1997, and the nine months ended September 30, 1998 of
the Company and the two months ended February 28, 1997 of the predecessor
company. The Unaudited Balance Sheet is based on the Company's September 30,
1998 statement. The financial statements referred to for 1997 were included in
the Company's Form 10-K filed for the year ended December 31, 1997, and
financial statements for 1998 were included in the Company's Form 10-Q for the
quarter ended September 30, 1998. These pro forma statements should be read in
conjunction with these documents. These pro forma statements have been prepared
to illustrate the effects of the transactions described below.
On February 5, 1999, the Company consummated the acquisition (the
"Acquisition") of the assets related to Station WUPW-TV (the "WUPW Assets")
from Raycom America, Inc., a Delaware corporation that is an indirect wholly
owned subsidiary of Raycom Media, Inc., pursuant to the terms of an Asset
Purchase Agreement dated July 24, 1998. The aggregate purchase price paid for
the WUPW assets was $72.6 million and was determined as a result of an arm's
length negotiation between the Company and Raycom Media, Inc. WUPW, Channel 36,
is the UHF FOX-affiliated station serving the Toledo, Ohio market.
The Company financed the Acquisition, together with associated closing costs,
with (i) $40 million of borrowings under the revolver portion of STC's Amended
and Restated Credit Agreement, and (ii) $37.5 million of newly issued Series B
Preferred Stock of the Company.
The following Unaudited Pro Forma Statements of Operations for the year ended
December 31, 1997 and the nine months ended September 30, 1998 give effect to
the Acquisition as if such transaction had occurred on January 1, 1997. The Pro
Forma Unaudited Balance Sheet as of September 30,1998 has been prepared as if
the Acquisition had occurred on that date.
The Acquisition will be accounted for using the purchase method of accounting
and the purchase price will be allocated to tangible and intangible assets and
liabilities acquired based upon their respective fair values. The allocation of
the aggregate purchase price reflected in the pro forma financial information is
preliminary. The final allocation of the purchase price is contingent upon the
receipt of final appraisals, however, that allocation is not expected to differ
materially from the preliminary allocation.
The pro forma financial information is based on the historical financial
statements of the Company and the assumptions and adjustments described in the
accompanying notes. The Unaudited Pro Forma Statements of Operations do not
purport to represent what the Company's results of operations actually would
have been if the Acquisition had occurred as of the date indicated or what
results will be for any future periods. The pro forma financial information is
based upon assumptions that the Company believes are reasonable.
<PAGE> 18
STC BROADCASTING, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA BALANCE SHEET
AS OF SEPTEMBER 30, 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
Company Pro Forma
Historical WUPW-TV Adjustments Pro Forma
---------- --------- ------------- ----------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,289 $ -- $ 2,667 (A) $ 6,956
Receivables 10,862 1,966 (1,966)(B) 10,862
Current portion of program rights 7,377 610 -- 7,987
Other current assets 1,520 47 21 (A/B) 1,588
--------- --------- ---------- ---------
Total current assets 24,048 2,623 722 27,393
--------- --------- ---------- ---------
PROPERTY AND EQUIPMENT, net 49,467 2,022 2,501 (C) 53,990
INTANGIBLE ASSETS, net 222,409 62,852 5,255 (C) 290,516
OTHER LONG-TERM ASSETS:
Deferred acquisition and financing costs 9,550 --- 1,735 (A) 11,285
Program rights, net of current portion 11,031 962 -- 11,993
Other 102 5 (5)(B) 102
--------- --------- ---------- ---------
Total other long-term assets 20,683 967 1,730 23,380
--------- --------- ---------- ---------
Total assets $ 316,607 $ 68,464 $ 10,208 $ 395,279
========= ========= ========== =========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,699 $ 432 $ (432)(B) $ 3,699
Accrued interest 458 -- -- 458
Accrued compensation 1,079 115 (115)(B) 1,079
Accrued other 844 245 (245)(B) 844
Current portion of program rights payable 7,592 1,421 (811)(B) 8,202
--------- --------- ---------- ---------
Total current liabilities 13,672 2,213 (1,603) 14,282
--------- --------- ---------- ---------
LONG-TERM DEBT 172,500 40,000 (A) 212,500
DEFERRED INCOME TAXES 22,662 -- -- 22,662
PROGRAM RIGHTS PAYABLE, net of current portion 11,300 915 47 (B) 12,262
OTHER LONG-TERM LIABILITIES 102 -- -- 102
REDEEMABLE PREFERRED STOCK 36,024 -- 37,100 (A) 73,124
STOCKHOLDER'S EQUITY 60,347 65,336 (65,336)(C) 60,347
--------- --------- ---------- ---------
Total liabilities and stockholder's equity $ 316,607 $ 68,464 $ 10,208 $ 395,279
========= ========= ========== =========
</TABLE>
See accompanying notes to Unaudited Pro Forma Balance Sheet.
<PAGE> 19
STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
(Dollars in thousands)
The following reflects the adjustments to balance sheet amounts related to
the Acquisition.
(A) The adjustment to Cash consists of:
<TABLE>
<S> <C>
Sale of preferred stock $ 37,500
Borrowing under New Credit Agreement 40,000
Payment of fees and expenses (1,735)
Purchase price for station (72,630)
Working capital acquired (68)
Payment of fees and expenses on preferred stock (400)
--------
$ 2,667
========
</TABLE>
(B) This adjustment reflects the elimination of assets that were not
acquired and the elimination of liabilities not assumed:
<TABLE>
<S> <C>
Assets:
Receivables $ (1,966)
Prepaids (47)
Other (5)
Liabilities:
Accounts payable (432)
Accrued expenses (360)
Film liabilities (764)
--------
Total: $ (462)
========
</TABLE>
(C) The preliminary proforma allocation of the purchase is as follows:
<TABLE>
<S> <C>
Purchase price $ 72,630
Estimated acquisition costs 1,735
Purchased working capital 68
--------
Total: 74,433
Less:
Elimination of WUPW stockholders' equity,
adjusted for net assets not being acquired (64,874)
--------
Excess of purchase price over historical
amounts to be allocated $ 9,559
========
</TABLE>
Allocation of excess purchase price based on preliminary estimated values:
<TABLE>
<S> <C>
Property and equipment $ 2,501
Intangibles 5,255
Deferred acquisition and financing costs 1,735
Prepaids 68
--------
Total: $ 9,559
========
</TABLE>
<PAGE> 20
STC BROADCASTING, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
Historical Historical Pro Forma
Company Predecessor WUPW-TV Adjustment Pro Forma
-------- ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
NET REVENUES: $ 36,231 $ 5,228 $10,974 $ -- $ 52,433
-------- ------- ------- --------- --------
OPERATING EXPENSES:
Station operating 11,539 2,079 2,050 -- 15,668
Selling, general and
administrative 8,212 1,526 2,203 -- 11,941
Trade and barter 1,390 181 1,366 -- 2,937
Depreciation of property
and equipment 3,475 757 363 277 (A) 4,872
Amortization of intangibles
and other long term assets 9,159 977 3,400 1,487 (B) 15,023
Corporate overhead 1,402 146 393 -- 1,941
-------- ------- -------- --------- --------
Total operating expenses 35,177 5,666 9,775 1,764 52,382
-------- ------- -------- --------- --------
OPERATING INCOME 1,054 (438) 1,199 (1,764) 51
OTHER INCOME (EXPENSE):
Interest income 289 20 -- -- 309
Interest expense (9,502) (963) (6,234) 3,434 (C) (13,265)
Other income, net 40 19 -- -- 59
-------- ------- -------- --------- --------
NET INCOME (LOSS) BEFORE INCOME
TAX BENEFIT (8,119) (1,362) (5,035) 1,670 (12,846)
INCOME TAX BENEFIT 299 -- 225 -- 524
-------- ------- -------- --------- --------
NET LOSS AFTER TAXES (7,820) (1,362) (4,810) 1,670 (12,322)
REDEEMABLE PREFERRED STOCK
DIVIDENDS AND ACCRETION (3,763) -- -- (2,344)(D) (6,107)
-------- ------- -------- --------- --------
NET LOSS APPLICABLE TO
COMMON STOCKHOLDER $(11,583) $(1,362) $ (4,810) $ (674) $(18,429)
======== ======= ======== ========= ========
BASIC AND DILUTED NET
LOSS PER COMMON SHARE $(11,583) $(18,429)
======== ========
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING 1,000 1,000
======== ========
</TABLE>
See accompanying notes to Unaudited Pro Forma Statement of Operations.
<PAGE> 21
STC BROADCASTING, INC. AND SUBSIDIAIRIES
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(Dollars in thousands)
(A) Reflects the incremental change in depreciation due to purchase accounting
adjustments to property and equipment consistent with depreciation
policies utilized by the Company.
(B) Reflects the incremental change in amortization due to purchase accounting
adjustments to intangible assets and deferred acquisition costs consistent
with amortization policies utilized by the Company net of reduced
amortization on loan acquisition costs written off upon entering into new
credit agreement.
(C) Reflects the adjustment due to incremental borrowing under new senior
credit agreement and the elimination of WUPW interest charge.
(D) Represents the dividend requirement on the New Series B Preferred Stock.
<PAGE> 22
STC BROADCASTING, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR NINE MONTHS ENDED SEPTEMBER 30, 1998
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
Company Pro Forma
9 Months WUPW-TV Adjustment Pro Forma
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
NET REVENUES $ 44,053 $ 8,193 $ -- $ 52,246
OPERATING EXPENSES:
Station operating 14,480 1,654 -- 16,134
Selling, general and administrative 10,473 1,557 -- 12,030
Trade and barter 1,380 995 -- 2,375
Depreciation of property and equipment 5,270 315 165 (A) 5,750
Amortization of intangibles and other
long-term assets 12,020 2,649 1,016 (B) 15,685
Corporate expenses 1,482 137 -- 1,619
-------- -------- -------- --------
Total operating expenses 45,105 7,307 1,181 53,593
-------- -------- -------- --------
OPERATING INCOME (LOSS) (1,052) 886 (1,181) (1,347)
OTHER INCOME (EXPENSE):
Interest income 133 -- -- 133
Interest expense (11,567) (4,748) 2,648 (C) (13,667)
Gain on asset swap 17,488 -- -- 17,488
Other income, net 13 -- -- 13
-------- -------- -------- --------
NET INCOME (LOSS) BEFORE INCOME TAX 5,015 (3,862) 1,467 2,620
INCOME TAX (BENEFIT) (850) 197 -- (653)
-------- -------- -------- --------
NET INCOME (LOSS) 5,865 (4,059) 1,467 3,273
EXTRAORDINARY ITEM - LOSS
ON EARLY RETIREMENT OF DEBT (4,586) -- -- (4,586)
REDEEMABLE PREFERRED STOCK
DIVIDENDS AND ACCRETION (3,761) -- (1,758) (D) (5,519)
-------- -------- -------- --------
NET INCOME (LOSS) APPLICABLE TO
COMMON SHAREHOLDER $ (2,482) $ (4,059) $ (291) (6,832)
======== ======== ======== ========
BASIC NET INCOME (LOSS)
PER COMMON SHARE $ (2,482) $ (6,832)
======== ========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 1,000 1,000
======== ========
</TABLE>
See accompanying notes to Unaudited Pro Forma Statement of Operations.
<PAGE> 23
STC BROADCASTING, INC. AND SUBSIDIAIRIES
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(Dollars in thousands)
(A) Reflects the incremental change in depreciation due to purchase accounting
adjustments to property and equipment consistent with depreciation
policies utilized by the Company.
(B) Reflects the incremental change in amortization due to purchase accounting
adjustments to intangible assets and deferred acquisition costs consistent
with amortization policies utilized by the Company net of reduced
amortization on loan acquisition costs written off upon entering into new
credit agreement.
(C) Reflects the adjustment due to incremental borrowing under new senior
credit agreement and the elimination of WUPW interest charge.
(D) Represents the dividend requirement on the New Series B Preferred Stock.
