UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED FEBRUARY 28, 1998
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________.
Commission File Number: 333-44177
BRILL MEDIA COMPANY, LLC
(Exact name of registrant as specified in its charter)
Virginia 52-2071822
(State of Formation) (I.R.S. Employer Identification No.)
(812) 423-6200
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
_X_ YES ___ NO
STATE THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY
NON-AFFILIATES OF THE REGISTRANT
None
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
TABLE OF CONTENTS
PART NO. ITEM NO. Page No.
- -------- -------- --------
I 1 Business 3
2 Properties 19
3 Legal Proceedings 20
4 Submission of Matters to a Vote
of Security Holders 20
II 5 Market for the Registrant's
Common Equity and Related
Stockholder Matters 20
6 Selected Financial Data 21
7 Management's Discussion and
Analysis of Financial Condition
and Results of Operations 23
7A Quantitative and Qualitative
Disclosures About Market Risk 30
8 Financial Statements and
Supplementary Data 31
9 Changes in and Disagreements
with Accountants on Accounting
and Financial Disclosure 53
III 10 Directors and Executive Officers
of the Registrant 54
11 Executive Compensation 56
12 Security Ownership of Certain
Beneficial Owners and Management 58
13 Certain Relationships and
Related Transactions 58
IV 14 Exhibits, Financial Statement
Schedules, and Reports on
Form 8-K 60
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<PAGE>
PART I
ITEM 1. BUSINESS
General
Brill Media Company, LLC, a Virginia limited liability company ("BMC"),
collectively with its direct and indirect subsidiaries (the "Subsidiaries"), is
referred to herein as the "Company." The Company is a diversified media
enterprise that acquires, develops, manages, and operates radio stations,
newspapers and related businesses in middle markets. The Company presently owns,
operates, or manages fifteen radio stations (the "Stations") serving five
markets located in Pennsylvania, Kentucky/Indiana, Colorado,
Minnesota/Wisconsin, and Missouri. The Company's newspaper businesses (the
"Newspapers") operate integrated newspaper publishing, printing and print
advertising distribution operations, providing total-market print advertising
coverage throughout a thirty-one-county area in central and north-central
portions of the lower peninsula of Michigan. This operation offers a two-edition
daily newspaper, twenty-two weekly publications, web offset printing operations
for Newspapers' publications and outside customers, and private distribution
systems. The Company is wholly owned indirectly by Alan R. Brill ("Mr. Brill"),
who founded the business and began its operations in 1981. The Company's overall
operations, including its sales and marketing strategy, long-range planning, and
management support services are managed by Brill Media Company, L.P. ("BMCLP"),
a limited partnership indirectly owned by Mr. Brill. See "Item 13. Certain
Relationships and Related Transactions".
The Company generally considers radio "middle markets" to be markets ranked
80 to 200 by the Arbitron Company ("Arbitron"). The Company considers "middle
markets" for purposes of its newspaper operations to be generally comparable to
the smaller markets in such range.
Pending Transactions
Subsidiaries of the Company have entered into agreements to (i) sell three
radio stations in central Missouri (the "Missouri Properties") and (ii) buy one
radio station in Loveland, Colorado. These transactions are described in Note 3
to the financial statements included in this Report and are referred to herein
as the "Pending Transactions."
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<PAGE>
Radio Stations Overview
Unless otherwise indicated herein, audience ratings and market radio
advertising revenues have been obtained from INVESTING IN RADIO, 1997 MARKET
REPORT--THIRD EDITION, BIA Publications Inc. ("BIA"). Revenue rankings in the
Company's radio markets have been derived by comparing the Company's revenues in
each market to the revenues for the Company's competitors (utilizing the
estimated revenues for each competing radio station as provided by BIA). Metro
rank for the Company's markets have been obtained from Arbitron's RADIO MARKET
REPORT.
Audience rankings for the Fort Collins/Greeley/Loveland, Colorado market
("Fort Collins") have been taken from ARBITRON RADIO CUSTOM SURVEY RADIO AREA
REPORT, FALL 1997. No published market revenues or revenue rankings on the Fort
Collins market is available, and market revenues and revenue ranking in the
market have been estimated by the Company, without the benefit of any
independent investigation or confirmation, on the basis of its knowledge of each
market and published retail sales statistics. The Missouri Properties have
operated pursuant to TBAs (as defined below) since November 1, 1997 and,
therefore, no audience ratings or market advertising revenues are provided.
The terms local marketing agreement ("LMA"), time brokerage agreement
("TBA") and joint sales agreement ("JSA") are referred to in various places in
this Report. An LMA or TBA refers to an agreement, although it may take various
forms, under which one party agrees in consideration of a fee paid to provide,
on a cooperative basis, the programming, sales, marketing and similar services
for a separately owned radio station located in the same radio market and
realize the financial benefit of such activities. A JSA refers to an agreement,
similar to an LMA or TBA, under which a radio station agrees to provide the
sales and marketing services for another station while the owner of such other
radio station provides the programming for such other radio station. LMAs, TBAs
and JSAs are more fully described in "--Federal Regulation of Radio
Broadcasting."
Set forth below is a list of the Stations, specifying their broadcasting
frequency, Federal Communications Commission ("FCC") class, format, control,
market, market rank and group rank by ratings and revenues.
<TABLE>
<CAPTION>
Station Group
Arbitron Rank
FCC Owned/ Market --------------------
Station Frequency Class Format Managed Markets (s) Rank Ratings Revenues
- ------- --------- ----- ------ ------- ----------- ---- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WIOV-FM 105.1(1) FM-B Country Owned Lancaster, PA 110 4 1
Reading, PA 130 2 2
WBKR-FM 92.5 FM-C Country Owned Evansville, IN 125(2) 1 1
WKDQ-FM 99.5 FM-C Country Managed(3) and Owensboro/
WSTO-FM 96.1 FM-C Adult Hits Managed(3) Henderson, KY
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WOMI-AM 1490 AM-C News/Talk Owned
WVJS-AM 1420 AM-B News/Talk Managed(3)
KTRR-FM 102.5 FM-C2 Adult Hits Managed(4) Fort Collins/ 135 1 1
KUAD-FM 99.1 FM-C1 Country Owned Greeley/
Loveland, CO
KKCB-FM 105.1 FM-C1 Country Owned Duluth, MN/ 207 1 1
KLDJ-FM 101.7 FM-C2 Oldies Owned Superior, WI
WEBC-AM 560 AM-B News/Talk Owned
KATI-FM 94.3 FM-C2 Country Owned(5) Jefferson City/ N/A(6) N/A(6) N/A(6)
KTXY-FM 106.9 FM-C Adult Hits Owned(5) Columbia/
KLIK-AM 950 AM-B Country Owned (5) Lake of the
Ozarks, MO
</TABLE>
- ----------
(1) WIOV-FM serves both Lancaster and Reading. The Company also owns and
operates WIOV-AM, an AM-C station in Reading. Ratings and revenues ranks for
WIOV-FM include WIOV-AM.
(2) The Company estimates that on a combined basis the
Evansville/Owensboro/Henderson market would have an Arbitron rank of 125 based
on separate rankings of 151 and 255 for Evansville and Owensboro, respectively.
(3) WKDQ-FM, WSTO-FM and WVJS-AM are operated by the Company and owned by
entities (the "Managed Affiliates") which are indirectly owned by Mr. Brill but
are not subsidiaries.
(4) The Company manages KTRR-FM pursuant to a TBA pending completion of its
acquisition. See Note 3 of the financial statements included in this Report.
(5) The Missouri Properties (KATI-FM, KTXY-FM and KLIK-AM) are under contract
for sale. See Note 3 of the financial statements included in this Report.
(6) The Missouri Properties servicing Jefferson City/Columbia/Lake of the
Ozarks, Missouri have operated pursuant to TBAs with their proposed buyers since
November 1, 1997 and accordingly, no rankings are provided for the Missouri
Properties.
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<PAGE>
Radio Industry Overview
Radio stations generate the majority of their revenue from the sale of
advertising time to local and national spot advertisers and national network
advertisers. Radio is considered an efficient means of reaching specifically
identified demographic groups. Radio stations are typically classified by their
on-air format, such as country, adult contemporary, oldies or news/ talk. A
radio station's format and style of presentation enable it to target certain
demographic and geographic groups. By capturing a specific listening audience
share of a market's radio audience, with particular concentration in a targeted
demographic group, a radio station is able to market its broadcasting time to
advertisers seeking to reach a specific audience. Advertisers and radio stations
utilize data published by audience measuring services, such as Arbitron, to
estimate how many people within particular geographic markets and demographic
groups listen to specific radio stations.
A radio station's local sales staff generates the majority of its local and
regional advertising sales through direct solicitations of local advertising
agencies and businesses. To generate national advertising sales, a radio station
will engage a firm that specializes in soliciting radio advertising sales on a
national level. National sales representatives obtain advertising principally
from advertising agencies located outside the radio station's market and receive
commissions based on the revenue from the advertising obtained.
The Company believes that the radio business in middle markets differs
significantly from that of the major markets. This distinction is characterized
by the fewer number of radio stations in smaller markets, the fewer number of
advertising alternatives, the greater relevance of any single business (or radio
station) to the market's life, the greater proportion of advertising that is
sold locally as opposed to national accounts and the much smaller proportion of
advertising that is controlled by agencies. For these reasons, in middle markets
a radio station has greater flexibility in competitive and sales strategy and
has greater control, through its own direct marketing efforts, on its own
outcome, as compared to major markets.
With fewer competitors in a middle market a radio station can pursue
listeners on a broader basis and serve a broader spectrum of advertisers, be
less subject to competitive changes of competitors and, most importantly, deal
directly with customers and around agencies if necessary to demonstrate and
convince advertisers of the effectiveness of advertising on the station. A radio
station does not have to wait for programming to be successful to draw customers
when it can deal with potential clients directly on the basis of its
effectiveness.
As a result of ownership deregulation (see "--Federal Regulation of Radio
Broadcasting"), middle market owners also can achieve the mass and efficiencies
of major market operations through multiple radio station ownership. Such
deregulation has greatly increased opportunities for ownership of radio stations
in middle markets and has greatly increased the liquidity of radio station
trading in the marketplace and, therefore, the liquidity that the financing
markets are willing to offer.
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<PAGE>
Newspapers Overview
Set forth below is a list of the Newspaper publications specifying the
location and circulation of each.
NEWSPAPER LOCATION CIRCULATION
- --------- -------- -----------
MORNING SUN Mt. Pleasant, MI 12,700
ISABELLA COUNTY HERALD Mt. Pleasant, MI 16,200
MT. PLEASANT BUYERS GUIDE Mt. Pleasant, MI 27,700
CLARE COUNTY BUYERS GUIDE Clare, MI 11,000
ALMA REMINDER Alma, MI 20,500
CADILLAC BUYERS GUIDE Cadillac, MI 21,500
CARSON CITY REMINDER Carson City, MI 10,800
EDMORE ADVERTISER Edmore, MI 17,600
HEMLOCK SHOPPERS GUIDE Hemlock, MI 12,300
GLADWIN BUYERS GUIDE Gladwin, MI 16,200
MIDLAND BUYERS GUIDE Midland, MI 27,800
ST. JOHNS REMINDER St. Johns, MI 16,300
THE NORTHEASTERN SHOPPER (NORTH EDITION) Tawas City, MI 24,400
THE NORTHEASTERN SHOPPER (SOUTH EDITION) Tawas City, MI 15,600
NORTHERN STAR Gaylord, MI 17,600
ALPENA STAR Alpena, MI 18,900
PRESQUE ISLE STAR Alpena, MI 7,300
PETOSKEY STAR AD-VERTISER Petoskey, MI 12,800
CHARLEVOIX COUNTY STAR Petoskey, MI 10,800
STAR AD-VERTISER Kalkaska, MI 12,800
STAR BUYER'S GUIDE Prudenville, MI 14,000
STAR BUYER'S GUIDE West Branch, MI 15,000
STRAITS AREA STAR Cheboygan, MI 13,000
-------
Total Circulation 372,800
=======
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<PAGE>
The Newspapers serve a thirty-one county area of small communities in the
central and north-central portions of the lower peninsula of Michigan, where
there are few other newspapers, one local television station, and few radio
stations. The Company has central offices and production facilities in Mt.
Pleasant, Michigan and Gaylord, Michigan and leads the central and north-central
Michigan market in media billings.
The Company's two edition daily newspaper, the MORNING SUN, has a paid
circulation averaging 12,700 readers and is the only daily newspaper published
in Gratiot, Isabella and southern Clare counties. The Company's weekly newspaper
and twenty one weekly shopping guides are delivered free to more than 360,000
households in the central and north-central portions of the lower peninsula of
Michigan. The Company's multiple products and private delivery system permit
advertisers to buy customized advertising coverage for the portion of the local
market that best reaches their potential customers. The Company also publishes
numerous niche publications such as vacation guides and a monthly business
report. The Newspapers have a widely diversified base of advertising and
printing customers and during the year ended February 28, 1998 no one customer
represented more than 2% of the Company's revenues.
The Newspapers' market covers an area approximately 120 miles by 240 miles,
containing a total population in excess of 800,000 people. The area's relatively
low population density makes print the only medium to serve the market
efficiently. The Newspapers' market coverage includes the Michigan counties of
Alcona, Alpena, Antrim, Arenac, Clare, Charlevoix, Cheyboygan, Clinton,
Crawford, Emmet, Gladwin, Gratiot, Iosco, Isabella, Kalkaska, Mecosta, Midland,
Missaukee, Montcalm, Montgomery, Oscada, Ogemaw, Osceola, Ostego, Presque Isle,
Roscommon, Saginaw, Wexford and parts of Bay, Lake and MacKinac counties.
DISTRIBUTION. In addition to delivering its publications, the Newspapers
also deliver over 60 million advertising insert pieces per year to residents in
central and north-central portions of the lower peninsula of Michigan.
Customized delivery to a particular zone can be specifically created for an
advertiser to reach as few as 150 households or more than 360,000 households on
a given day at less than half the cost charged by the post office. Newspapers'
distribution system includes several hundred independent contractor delivery
personnel and enables an advertiser to buy any part of the Company's
distribution area that best serves the advertiser's needs.
Newspaper Industry Overview
Newspaper publishing is one of the oldest and largest segments of the media
industry. Newspapers are an important medium for local advertising. The
newspaper industry in the United States is comprised of the following segments:
national and major metropolitan dailies; small metropolitan suburban dailies;
suburban and community non-dailies; and free circulation "total market coverage"
publications and shoppers ("Shoppers").
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<PAGE>
In many communities, the local newspapers provide a combination of social
and economic connections which make it attractive for readers and advertisers
alike. The Company believes that small metropolitan and suburban dailies as well
as suburban and community non-dailies and Shoppers are generally effective in
addressing the needs of local readers and advertisers under widely varying
economic conditions. The Company believes that because small metropolitan and
suburban daily newspapers rely on a broad base of local retail and local
classified advertising rather than more volatile national and major account
advertising, their advertising revenues tend to be relatively stable. In
addition, the Company believes such newspapers tend to publish information which
is of particular interest to the local reader and which national and major
metropolitan newspapers, television and radio generally do not report to the
same extent. Most small metropolitan and suburban daily newspapers are the only
daily local newspaper in the communities they serve. The Company believes that
relatively few daily newspapers have been established in recent years due to the
high cost of starting a daily newspaper operation and building a franchise
identity.
Shoppers provide nearly 100% penetration in their areas of distribution and
generally derive revenues solely from advertising. These publications have
limited or no news or editorial content. The shoppers are delivered on Sundays
by carriers and are free to the consumer.
The newspaper industry, as represented by larger markets at one end and
smaller markets on the other, is composed of two distinct sub-industries. They
differ particularly because of the influences of size, alternative claims on
readers' attention, alternative advertising vehicles, alternative newspaper
competitors, methods and costs of distribution, labor costs and flexibility,
other cost structures, and significance of the product to its readers and
customers. In all of these parameters the Company believes that in middle
markets, these factors are more favorable to the financial results and stability
of a newspaper business. These factors also create a more vital product for the
readers in a middle market than newspapers may be in a major market, which
typically has numerous and diverse information and entertainment sources.
Acquisition Strategy
The Company seeks to acquire underperforming middle market media businesses
whose acquisition costs are low relative to potential revenues and cashflow. The
Company focuses on developing significant long-term franchises in middle
markets. The Company then seeks to improve revenues and cashflow, using its
particular promotional, marketing, sales, programming and editorial approaches.
The Company targets businesses that it believes operate in underdeveloped market
segments with a low level of competition and a strong economic base, as well as
radio stations with competitive technical facilities and businesses that are
located in areas deemed desirable for relocation in terms of personnel
recruitment.
The Company believes that its acquisition strategy, properly implemented,
has a number of specific benefits, including (i) diversification of revenues and
cashflow across a broader base of industries, properties and markets, (ii)
geographic clustering which has allowed improved
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<PAGE>
cashflow margins through the consolidation of facilities, centralized
newsgathering, cross-selling of advertising and elimination of redundant
expenses, (iii) improved access to consultants and other industry resources,
(iv) greater appeal to qualified industry management talent and (v) efficiencies
from economies of scale.
If and when achieved, new acquisitions may adversely affect near-term
operating results due to increased capital requirements, transitional management
and operating adjustments, increased interest costs associated with acquisition
debt, and other factors. Any future acquisitions may be highly-leveraged, and
such acquisitions well may increase the Company's overall leveraged position.
There can be no assurance that debt or equity financing for such acquisitions
will be available on acceptable terms, or that the Company will be able to
identify or consummate any new acquisitions. Any failure to make necessary
acquisitions, or the making of unsuccessful acquisitions, could have a material,
adverse effect on the future financial condition and operating results of the
Company.
Advertising Sales
Virtually all of the Company's revenue is generated from local, regional
and national advertising for its Stations and Newspapers. During the year ended
February 28, 1998, approximately 96% of the Company's revenues were generated
from the sale of local and regional advertising. Additional revenue is generated
from the sale of national advertising, network compensation payments and other
miscellaneous transactions. The major categories of the Company's advertisers
include retailers, restaurants, fast food, automotive and grocery. Each local
sales staff solicits advertising either directly from the local advertiser or
indirectly through an advertising agency with emphasis placed on direct contact.
In so doing, the Company seeks to address individual advertiser needs and more
effectively design an advertising campaign to help the advertiser sell its
product. The Company employs personnel in each of its markets to produce
advertisements for the customers. National sales are obtained via outside firms
specializing in advertising on a national level. The firms are paid a commission
based on a percentage of gross revenue from national advertising. Local and
regional sales are predominantly generated by the Company's local sales staff.
Competition
GENERAL. Each of the Company's Stations and Newspapers competes in varying
degrees with other newspapers, magazines, direct mail, free shoppers, outdoor
advertising, other FM and AM radio stations, television and cable television
stations, and other media present within their respective markets. Radio
broadcasting and newspaper distribution also are exposed to competition from
developing media technologies, such as the delivery of audio programming through
cable television or telephone wires, the introduction of digital radio
broadcasting, which may provide a medium for the delivery by satellite or
terrestrial means of multiple audio programming formats to local and national
audiences, the increasing development and use of direct
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<PAGE>
mail advertising, the growth of wireless communications and fiber optic delivery
systems, the development of televised shopping programs, the potential for
televised "newspapers," and the increasing growth of the Internet. The Stations
and Newspapers also may encounter competition from future, unforeseen
developments in technology that subsequently may be commercialized, and at all
times they will face potential, additional competition from new or expanding
market entrants. The Company cannot predict what effect, if any, these or other
new technologies or competitors may have on the Company.
RADIO. The radio broadcasting industry is highly competitive. The success
of each of the Company's Stations in its middle markets depends largely upon the
effectiveness of its direct marketing and sales efforts and its share of the
overall advertising revenue within its market supported by its audience ratings.
The Company's audience ratings and advertising revenues are subject to change,
and any adverse change in a particular market affecting advertising expenditures
or in the relative market positions of the radio stations located in that market
could have a material adverse effect on the revenue of the Company's Stations
located in that market. There can be no assurance that any one of the Company's
Stations will be able to maintain or increase its current audience ratings or
advertising revenue market share.
Recent changes in the FCC's policies and rules permit increased ownership
and operation of multiple local radio stations. Management believes that radio
stations that operate under common management or elect to take advantage of
joint arrangements such as LMAs or JSAs may in certain circumstances have lower
operating costs and may be able to offer advertisers more attractive rates and
services. Although the Company currently operates multiple Stations in each of
its markets and intends to pursue the creation of additional multiple radio
station groups, the Company's competitors in certain markets include operators
of multiple radio stations or operators who already have entered into LMAs or
JSAs. The Company also competes with other radio station groups to purchase
additional radio stations. Some of these groups are owned or operated by
companies that have substantially greater financial and other resources than the
Company.
NEWSPAPERS. The Company's Newspapers compete primarily with other daily and
weekly newspapers, shoppers, shared mail packages and other local advertising
media. The Newspapers also compete in varying degrees for advertisers and
readers with magazines, other radio stations, broadcast television, telephone
book directories and other communications media that operate in their markets.
The Company believes that its production systems and technologies, which enable
it to publish separate editions in narrowly targeted zones, allow it to compete
effectively in its markets.
Federal Regulation of Radio Broadcasting
GENERAL. The ownership, operation and sale of broadcast stations, including
those licensed to the Company, are subject to the jurisdiction of the FCC, which
acts under authority derived from the Communications Act of 1934, as amended
(the "Communications Act"). The Communications Act was amended in 1996 by the
Telecommunications Act to make changes in
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several broadcast laws. Among other things, the FCC assigns frequency bands for
broadcasting; issues broadcast station licenses; determines whether to approve
changes in ownership or control of broadcast station licensees; regulates
equipment used by broadcast stations; adopts and implements regulations and
policies that directly or indirectly affect the ownership, operation and
employment practices of broadcast stations; and has the power to impose
penalties for violations of its rules under the Communications Act.
The following is a brief summary of certain provisions of the
Communications Act and of specific FCC regulations and policies. Failure to
observe these or other rules and policies can result in the imposition of
various sanctions, including monetary forfeitures, the grant of "short" (less
than the maximum) license renewal terms or, for particularly egregious
violations, the denial of a license renewal application, the revocation of a
license or the denial of FCC consent to acquire additional broadcast properties.
Reference should be made to the Communications Act, FCC rules and the public
notices and rulings of the FCC for further information concerning the nature and
extent of federal regulation of broadcast stations.
LICENSE GRANT AND RENEWAL. Radio broadcast licenses are granted for maximum
terms of eight years. Licenses may be renewed through an application to the FCC.
The FCC may not consider competing applications for the frequency being used by
the renewal applicant if the FCC finds that the broadcast station has served the
public interest, convenience and necessity, that there have been no serious
violations by the licensee of the Communications Act or the rules and
regulations of the FCC, and that there have been no other violations by the
licensee of the Communications Act or the rules and regulations of the FCC that,
when taken together, would constitute a pattern of abuse.
Petitions to deny license renewals can be filed by interested parties,
including members of the public. Such petitions may raise various issues before
the FCC. The FCC is required to hold hearings on renewal applications if the FCC
is unable to determine that renewal of a license would serve the public
interest, convenience and necessity, or if a petition to deny raises a
"substantial and material question of fact" as to whether the grant of the
renewal application would be prima facie inconsistent with the public interest,
convenience and necessity. Also, during certain periods when a renewal
application is pending, the transferability of the applicant's license is
restricted. Such a petition presently is pending against KUAD-FM, one of the
Company's Stations, which broadcasts from Windsor, Colorado, alleging violations
of the FCC equal employment opportunity rules, and the FCC staff has asked that
Station to supply additional information (subject to resolution of the
constitutionality of such rules in ongoing litigation to which the Company is
not a party). The Company is not currently aware of any facts that would prevent
the timely renewal of its licenses to operate any of its other Stations,
although there can be no assurance that the Company's licenses will be renewed.
A local market competitor has objected to the transfer of the licenses for
the Missouri Properties and on December 12, 1997, filed with the FCC a Petition
to Deny the license transfers and to terminate the TBA under which the proposed
buyers currently operate the Missouri Properties. No action
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has been taken on the Petition to Deny by the FCC, and the Company believes that
even if the Petition to Deny were granted, the consequences would not be
material to the Company. The Attorney General of the State of Missouri on
January 9, 1998 filed a civil investigative demand on the Company to provide
documents in order to consider whether the proposed transaction would violate
federal or Missouri antitrust laws. The Company has complied with the demand.
The Attorney General also has filed comments on the Petition to Deny.
The FCC classifies each AM and FM station. An AM station operates on either
a clear channel, regional channel or local channel. A clear channel is one on
which AM stations are assigned to serve wide areas. Clear channel AM stations
are classified as either: Class A stations, which operate on an unlimited time
basis and are designated to render primary and secondary service over an
extended area; Class B stations, which operate on an unlimited time basis and
are designed to render service only over a primary service area; and Class D
stations, which operate either during daytime hours only, during limited times
only or on an unlimited time basis with low nighttime power. A regional channel
is one on which Class B and Class D AM stations may operate and serve primarily
a principal center of population and the rural areas contiguous to it. A local
channel is one on which AM stations operate on an unlimited time basis and serve
primarily a community and the suburban and rural areas immediately contiguous
thereto. Class C AM stations operate on a local channel and are designed to
render service only over a primary service area that may be reduced as a
consequence of interference.
The minimum and maximum facilities requirements for an FM station are
determined by its class. FM class designations depend upon the geographic zone
in which the transmitter of the FM station is located. In general, commercial FM
stations are classified as follows, in order of increasing power and antenna
height: Class A, B1, B, C3, C2, C1 and C. The parameters for each classification
are as follows:
MAXIMUM ANTENNA HEIGHT
(HAAT)*
CLASS MAXIMUM POWER IN METERS
----- ------------- ----------------
A 6 kw 100
B1 25 kw 100
B 50 kw 150
C3 25 kw 100
C2 50 kw 150
C1 100 kw 299
C 100 kw 600
- ----------
* Height Above Average Terrain
The following table sets forth the market, call letters, FCC license
classification, HAAT, power and frequency of each of the Stations owned,
operated or managed by the Company, assuming the consummation of the Pending
Transactions, and the date on which each Station's FCC license expires.
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<TABLE>
<CAPTION>
EXPIRATION
FCC HAAT IN POWER IN DATE OF FCC
MARKET STATION CLASS METERS KILOWATTS FREQUENCY LICENSE
- ------ ------- ----- ------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Lancaster/Reading WIOV-FM B 212 25 105.1 mhz 8/1/98*
Pennsylvania WIOV-AM C NA 1 1240 khz 8/1/98*
Evansville, Indiana/ WBKR-FM C 320 100 92.5 mhz 8/1/04
Owensboro/Henderson, WOMI-AM C NA 1 1490 khz 8/1/04
Kentucky WVJS-AM B NA 5 1420 khz 8/1/04
WSTO-FM C 303 100 96.1 mhz 8/1/04
WKDQ-FM C 300 100 99.5 mhz 8/1/04
Fort Collins/Greeley/Loveland, KUAD-FM C1 200 100 99.1 mhz 4/1/97*
Colorado KTRR-FM C2 150 50 102.5 mhz 8/1/05
Duluth, WEBC-AM B NA 5 560 khz 4/1/05
Minnesota/Superior, KKCB-FM C1 240 100 105.1 mhz 4/1/05
Wisconsin KLDJ-FM C2 251 25 101.7 mhz 4/1/05
</TABLE>
- ----------
* Renewal applications pending
OWNERSHIP MATTERS. The Communications Act prohibits the assignment of a
broadcast license or the transfer of control of a broadcast licensee without the
prior approval of the FCC. In determining whether to assign, transfer, grant or
renew a broadcast license, the FCC considers a number of factors pertaining to
the licensee, including compliance with various rules limiting common ownership
of media properties, the "character" of the licensee and those persons holding
"attributable" interests therein, compliance with the Communications Act,
including the limitation on alien ownership, as well as compliance with other
FCC rules and policies, including equal employment opportunity requirements. As
part of the license renewal and transfer application process, notice of the
filing of such application is made and third parties are provided with
opportunities to file informal objections or formal petitions to deny the
application. Interested parties also may seek review of the application by the
full FCC and by federal courts.
The Communications Act and FCC rules also generally restrict the common
ownership, operation or control of radio broadcast stations serving the same
local market, of a radio broadcast station and a television broadcast station
serving the same local market, and of a radio broadcast station and a daily
newspaper serving the same local market. Under these "cross-ownership" rules,
absent waivers, the Company would not be permitted to acquire any daily
newspaper or television broadcast station (other than low power television) in a
local market where it then owned any radio broadcast station.
In response to the Telecommunications Act, the FCC amended its multiple
ownership rules to eliminate the national limits on ownership of AM and FM
stations. The FCC's broadcast multiple ownership rules restrict the number of
radio stations one person or entity may own, operate or control on a local
level. These limits are:
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(i) in a market with 45 or more commercial radio stations, a person or
entity may own, operate or control up to eight commercial radio stations,
not more than five of which are in the same service (FM or AM);
(ii) in a market with between 30 and 44 (inclusive) commercial radio
stations, a person or entity may own, operate or control up to seven
commercial radio stations, not more than four of which are in the same
service;
(iii) in a market with between 15 and 29 (inclusive) commercial radio
stations, a person or entity may own, operate or control up to six
commercial radio stations, not more than four of which are in the same
service;
(iv) in a market with 14 or fewer commercial radio stations, a person
or entity may own, operate or control up to five commercial radio stations,
not more than three of which are in the same service, except that a person
or entity may not own, operate or control more than 50% of the radio
stations in such market.
None of these multiple ownership rules requires any change in the Company's
current ownership of radio stations. However, these rules will limit the number
of additional stations which the Company may acquire in the future in its
markets.
The FCC generally applies its television/radio/newspaper cross-ownership
rules and its broadcast multiple ownership rules by considering the
"attributable," or cognizable interests held by a person or entity. A person or
entity can have an attributable interest in a radio station, television station
or daily newspaper by being an officer, director, partner or shareholder of a
company that owns that station or newspaper. Whether that interest is cognizable
under the FCC's ownership rules is determined by the FCC's attribution rules. If
an interest is attributable, the FCC treats the person or entity who holds that
interest as the "owner" of the radio station, television station or daily
newspaper in question for purposes of applying the FCC's ownership rules.
With respect to a corporation, officers and directors and persons or
entities that directly or indirectly can vote 5% or more of the corporation's
stock (10% or more of such stock in the case of insurance companies, investment
companies, bank trust departments and certain other "passive investors" that
hold such stock for investment purposes only) generally are attributed with
ownership of whatever radio stations, television stations and daily newspapers
the corporation owns.
With respect to a partnership, the interest of a general partner is
attributable, as is the interest of any limited partner who is "materially
involved" in the media-related activities of the partnership. Debt instruments,
nonvoting stock, options and warrants for voting stock that have not yet been
exercised, limited partnership interests where the limited partner is not
"materially involved" in the media-related activities of the partnership, and
minority (under 5%) voting stock, generally do not subject their holders to
attribution. However, the FCC is currently reviewing its
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rules on attribution of broadcast interests, and it may modify its criteria. See
"--Proposed Changes" below.
Since under the doctrine of attributed ownership all of the Company's
Stations are deemed to be owned by Mr. Brill, the FCC multiple ownership rules
could serve to limit to some extent the ability of the Company to acquire
additional broadcast stations in some markets.
PROGRAMMING AND OPERATION. The Communications Act requires broadcasters to
serve the "public interest." Since 1981, the FCC gradually has relaxed or
eliminated many of the more formalized procedures it developed to promote the
broadcast of certain types of programming responsive to the needs of a broadcast
station's community of license. However, licensees continue to be required to
present programming that is responsive to community problems, needs and
interests and to maintain records demonstrating such responsiveness. Complaints
from listeners concerning a broadcast station's programming will be considered
by the FCC when it evaluates the licensee's renewal application, but such
complaints also may be filed and considered at any time.
Broadcast stations also must pay regulatory and application fees and follow
various FCC rules that regulate, among other things, political advertising, the
broadcast of obscene or indecent programming, sponsorship identification and
technical operations (including limits on radio frequency radiation). In
addition, FCC rules (which have been declared unconstitutional by a federal
court of appeals decision which is being appealed by the FCC) require licensees
to develop and implement programs designed to promote equal employment
opportunities for women and minorities and submit reports to the FCC on these
matters annually and in connection with a renewal application. The broadcast of
contests and lotteries is regulated by FCC rules.
Failure to observe these or other rules and policies can result in the
imposition of various sanctions, including monetary forfeitures, the grant of
"short" (less than the maximum) renewal terms or, for particularly egregious
violations, the denial of a license renewal application or the revocation of a
license.
In 1985, the FCC adopted rules regarding human exposures to levels of radio
frequency radiation. These rules require applicants for new broadcast stations,
renewals of broadcast licenses or modifications of existing licenses to inform
the FCC at the time of filing such applications whether a new or existing
broadcast facility would expose people to radio frequency radiation in excess of
certain guidelines. More restrictive radiation limits became effective on
October 15, 1997. The Company anticipates that such regulations will not have a
material effect on its business.
LOCAL MARKETING AGREEMENTS. Over the past five years, a number of radio
stations, including certain of the Company's Stations, have entered into LMAs
and TBAs. These agreements take various forms. Separately-owned and licensed
radio stations may agree to function cooperatively in terms of programming,
advertising sales and other matters, subject to compliance
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with the antitrust laws and the FCC's rules and policies, including the
requirement that the licensee of each radio station maintain independent control
over the programming and other operations of its own radio station. The FCC has
held that such agreements do not violate the Communications Act as long as the
licensee of the radio station that is being substantially programmed by another
entity maintains complete responsibility for, and control over, operations of
its radio station and otherwise ensures compliance with applicable FCC rules and
policies and that the entity providing the programming is in compliance with the
FCC local ownership rules.
A radio station that brokers substantial time on another radio station in
its market or engages in an LMA with a radio station in the same market will be
considered to have an attributable ownership interest in the brokered radio
station for purposes of the FCC's ownership rules, discussed above. As a result,
a radio station may not enter into an LMA that allows it to program more than
15% of the broadcast time, on a weekly basis, of another local radio station
that it could not own under the FCC's local multiple ownership rules. FCC rules
also prohibit the broadcast licensee from simulcasting more than 25% of its
programming on another radio station in the same broadcast service (i.e., AM-AM
or FM-FM) where the two radio stations serve substantially the same geographic
area, whether the licensee owns the radio stations or owns one and programs the
other through an LMA arrangement.
Another example of a cooperative agreement between differently owned radio
stations in the same market is a JSA, whereby one radio station sells
advertising time in combination, both on itself and on a radio station under
separate ownership. In the past, the FCC has determined that issues of joint
advertising sales should be left to antitrust enforcement. Currently, JSAs are
not deemed by the FCC to be attributable for the purpose of its multiple
ownership rules. However, the FCC has outstanding a notice of proposed
rulemaking, which, if implemented, could require certain radio station operators
to terminate any JSA it might have with a radio station with which such operator
could not have an LMA.
ANTITRUST CONSIDERATIONS. The Company is aware that the U.S. Federal Trade
Commission (the "FTC") and the Antitrust Division of the U.S. Department of
Justice (the "DOJ"), which evaluate transactions to determine whether those
transactions should be challenged under the federal antitrust laws, have been
increasingly active recently in their review of radio station acquisitions,
particularly where an operator proposes to acquire additional radio stations in
its existing markets.
For an acquisition meeting certain size thresholds, the Hart-Scott-Rodino
Act (the "HSR Act") and the rules promulgated thereunder require the parties to
file Notification and Report Forms with the FTC and the DOJ and to observe
specified waiting period requirements before consummating the acquisition. At
any time before or after the consummation of a proposed acquisition, the FTC or
the DOJ could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the acquisition or
seeking divestiture of the business acquired or other assets of the acquiring
company. Acquisitions that are not required to be reported under the HSR Act may
be investigated by the FTC or the DOJ under
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<PAGE>
the antitrust laws before or after consummation. In addition, private parties
may under certain circumstances bring legal action to challenge an acquisition
under the antitrust laws.
As part of its increased scrutiny of radio station acquisitions, the DOJ
has stated publicly that it believes that LMAs, JSAs and other similar
agreements customarily entered into in connection with radio station transfers
prior to the expiration of the waiting period under the HSR Act could violate
the HSR Act because they may constitute acquisitions or joint ventures subject
to the filing and waiting period provisions of the HSR Act.
If the Company should grow in size, whether through acquisitions or
otherwise, it will become increasingly vulnerable to scrutiny under various
antitrust and similar regulatory laws administered by various federal and state
authorities, laws and regulations in which considerations of absolute or
relative size or market share may be relevant if not controlling. Such laws and
regulations are quite complex and subject to amendment and to frequent
variations in interpretation or enforcement. As a result of such increased
scrutiny, the Company could experience delays, increased costs, and compelled
changes in connection with future transactions. If it were to be determined that
one or more of the Company or its Subsidiaries had violated or were violating
one or more of such laws or regulations, in addition to liability for resulting
damages, any affected entity could face potential regulatory or court-ordered
divestiture of one or more properties. Any such result could have a material,
adverse effect upon the Company.
PROPOSED CHANGES. In December, 1994, the FCC initiated a proceeding to
solicit comment on whether it should revise its radio and television ownership
"attribution" rules by among other proposals (i) raising the basic benchmark for
attributing ownership in a corporate licensee from 5% to 10% of the licensee's
voting stock, (ii) increasing from 10% to 20% of the licensee's voting stock the
attribution benchmark for "passive investors" in corporate licensees, (iii)
restricting the availability of the attribution exemption when a single party
controls more than 50% of the voting stock; and (iv) considering LMAs, JSAs,
debt and non-voting stock interests to be attributable under certain
circumstances. No decision has been made by the FCC in these matters. At this
time, no determination can be made as to what effect, if any, this proposed
rulemaking will have on the Company.
From time to time, the Congress and the FCC have considered, and in the
future may consider and adopt, new or revised laws, regulations, and policies
regarding a wide variety of matters that, directly or indirectly, could affect
the operation, ownership, and profitability of the Stations, result in the loss
of audience share and advertising revenues for the Stations, or affect the
Company's ability to acquire additional radio stations or to finance such
acquisitions. Such matters include: proposals to impose spectrum use or other
fees on FCC licensees; the FCC's equal employment opportunity rules and matters
relating to political broadcasting; technical and frequency allocation matters;
proposals to restrict or prohibit the advertising of beer, wine, and other
alcoholic beverages on radio; changes in the FCC's cross-interest, multiple
ownership, and cross-ownership policies; changes to broadcast technical
requirements; proposals to allow telephone or cable television companies to
deliver audio and video programming to the home through existing
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<PAGE>
phone lines; proposals to limit the tax deductibility of advertising expenses by
advertisers; and proposals to auction the right to use the radio broadcast
spectrum to the highest bidder, instead of granting FCC licenses without such
bidding.
The Company cannot predict whether any proposed changes will be adopted or
what other matters might be considered in the future, nor can it judge in
advance what impact, if any, the implementation of any of these proposals or
changes might have on the Company.
The foregoing brief description does not purport to be comprehensive and
reference should be made to the Communications Act, the Telecommunications Act,
the FCC's rules, and the public notices and rulings of the FCC for further
information concerning the nature and extent of federal regulation of radio
broadcast stations.
Employees
At February 28, 1998, the Company employed approximately 468 persons
full-time and 118 persons part-time. None of such employees is covered by
collective bargaining agreements, and the Company considers its relations with
its employees to be good. Several hundred independent contractor delivery
personnel distribute the Newspapers' publications.
The Company employs several on-air personalities with large loyal audiences
in their respective markets. The loss of one of these personalities could result
in a short-term loss of audience share, but the Company does not believe that
any such loss would have a material adverse effect on the Company's financial
condition or results of operations.
Industry Segments
Revenues and other information for the Company's radio and newspaper
business segments are provided in Note 10 of the financial statements included
in this Report.
ITEM 2. PROPERTIES
The types of properties required to support the Stations include offices,
studios, transmitter sites and antenna sites. A Station's studios are generally
housed with its offices in business districts, while transmitter sites and
antenna sites are generally located so as to provide maximum market coverage.
After giving effect to the Pending Transactions, the Company will own
studio facilities in Ephrata, Pennsylvania; Owensboro, Kentucky; Windsor,
Colorado; and Duluth, Minnesota; and own transmitter and antenna sites in
Reading, Pennsylvania; Owensboro, Kentucky; and Duluth, Minnesota. The Company
leases its remaining studio and office facilities, and leases certain
transmitter and antenna sites. The Company does not anticipate any difficulties
in renewing any facility leases or in leasing alternative or additional space,
if required. The Company owns
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substantially all of its other station equipment, consisting principally of
transmitting antennae, transmitters, studio equipment and general office
equipment.
The Newspapers' facilities for administration, printing and distribution
are leased. The Company does not anticipate any difficulties in renewing any
facility leases or in leasing alternative or additional space, if required. The
Company owns a late model Goss Community press line and other various modern
editorial, classified, composing and camera equipment.
No one property is material to the Company's operations. The Company
believes that its properties are generally in good condition and suitable for
its operations; however, it continually looks for opportunities to upgrade its
properties and intends to upgrade studios, office space, and transmission
facilities in certain markets.
ITEM 3. LEGAL PROCEEDINGS
Currently and from time to time the Company is involved in litigation
incidental to the conduct of its business, but it is not a party to any lawsuit
or proceeding that, in the opinion of the Company, is likely to have a material
adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
The operating agreement of BMC provides that its business shall be managed
by its manager, which presently is Brill Media Management, Inc. ("Media"). Media
also is a Subsidiary of BMC. In lieu of an annual meeting, the current directors
of Media were appointed by written consent as of February 10, 1998.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
The common equity of BMC is comprised of membership interests (the
"Membership Interests"), all of which are indirectly owned by Mr. Brill. The
Company during the fiscal year ended February 28, 1998 declared and paid in cash
a total of $12.2 million in dividends.
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<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data presented below should be read in
conjunction with the consolidated financial statements of Brill Media Company,
LLC and notes thereto included elsewhere in this document and "Management's
Discussion and Analysis of Financial Condition and Results of Operations." The
selected consolidated financial data (except for the other financial and
operating data) of Brill Media Company, LLC (i) as of and for the year ended
February 28, 1994 has been derived from schedules which primarily include
information from the separate audited combined financial statements of The
Broadcasting Businesses of Alan R. Brill and the separate audited consolidated
financial statements of Central Michigan Newspapers, Inc., (ii) as of and for
the year ended February 28, 1995 and as of February 29, 1996 have been derived
from the audited combined financial statements of The Radio and Newspaper
Businesses of Alan R. Brill and (iii) for the year ended February 29, 1996 and
as of and for the years ended February 28, 1997 and 1998 have been derived from
the audited consolidated financial statements of Brill Media Company, LLC.
<TABLE>
<CAPTION>
Fiscal Year Ended February 28 or 29,
------------------------------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
Statement of Operations Data: (dollars in thousands)
<S> <C> <C> <C> <C> <C>
Revenues:
Radio $ 15,038 $ 13,596 $ 13,096 $ 12,650 $ 10,961
Newspaper 14,529 13,440 12,217 10,537 10,499
--------- --------- --------- --------- ---------
Total revenues 29,567 27,036 25,313 23,187 21,460
Operating expenses:
Operating departments 20,806 19,043 18,640 17,530 16,352
Incentive plan (620) 628 1,467 634 176
Other 291 86 37 -- --
Management fees 2,075 1,945 1,833 1,679 1,521
Depreciation and
Amortization 1,863 1,395 1,312 1,111 1,277
--------- --------- --------- --------- ---------
Total operating
expenses 24,415 23,097 23,289 20,954 19,326
--------- --------- --------- --------- ---------
Operating income 5,152 3,939 2,024 2,233 2,134
Other income (expense):
Interest expense, net (9,470) (7,432) (7,130) (5,842) (4,645)
Other, net (101) 1,007 (80) (144) 3,463
--------- --------- --------- --------- ---------
Total other income
(expense) (9,571) (6,425) (7,210) (5,986) (1,182)
--------- --------- --------- --------- ---------
Income (loss) before income taxes
and extraordinary items (4,419) (2,486) (5,186) (3,753) 952
Income tax provision (benefit) 149 286 (39) 68 168
--------- --------- --------- --------- ---------
Income (loss) before
extraordinary items (4,568) (2,772) (5,147) (3,821) 784
Extraordinary items (a) (4,124) -- 6,915 -- 245
--------- --------- --------- --------- ---------
Net income (loss) $ (8,692) $ (2,772) $ 1,768 $ (3,821) $ 1,029
========= ========= ========= ========= =========
</TABLE>
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<TABLE>
<CAPTION>
Other Financial and Operating
Data:
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
Operating activities $ 2,201 $ (513) $ 37 $ 920 $ 79
Investing activities (22,387) 59 (1,167) (120) (3,377)
Financing activities 30,328 (845) 2,654 (452) 3,377
Cash dividends declared 12,210 520 -- -- 500
Media Cashflow (b) 10,520 8,010 6,673 5,657 5,108
EBITDA (b) 7,015 5,334 3,336 3,344 3,411
Capital expenditures excluding
acquisitions 959 1,269 977 974 833
<CAPTION>
Statement of Financial
Position Data:
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 10,918 $ 775 $ 2,075 $ 550 $ 202
Working capital (deficit) 11,374 1,014 2,398 (334) (1,881)
Intangible and other assets 22,012 7,855 7,411 5,171 5,242
Total assets 66,149 26,442 26,011 21,784 21,938
Total debt including due to
affiliates (c ) 110,057 50,475 61,636 58,715 55,160
Members' deficiency (47,510) (26,610) (38,354) (40,123) (36,302)
</TABLE>
(a) The extraordinary item in fiscal 1998 reflects a $1,324,000 write-off of
previously deferred financing costs along with a prepayment penalty of $2.8
million related to the early extinguishment of senior debt. In fiscal 1996,
the extraordinary item reflects an adjustment of accrued interest in the
amount of $7.0 million related to subordinated debt for which contingent
interest had been accrued at the maximum rate but was reduced at maturity
pursuant to terms of an alternative valuation formula, as defined in the
agreement. The gain was offset by the write-off of certain previously
deferred financing fees of $131,000.
(b) "EBITDA" is defined as operating income before depreciation and
amortization expenses. "Media Cashflow" is defined as EBITDA plus
management fees; incentive plan expense; time brokerage agreement fees
paid; acquisition related consulting expense; and interest income from
loans made by the Company to Managed Affiliates. Management fees payable to
BMCLP are subordinated, to the extent provided in the senior notes'
indenture, to the prior payment of the senior notes. Although Media
Cashflow and EBITDA are not measures of performance calculated in
accordance with GAAP, management believes that these measures are useful to
an investor in evaluating the Company because these measures are widely
used in the media industry to evaluate a media company's operating
performance. However, Media Cashflow and EBITDA should not be considered in
isolation or as substitutes for net income, cash flows from operating
activities and other income or cash flow statements prepared in accordance
with GAAP as measures of liquidity or profitability. In addition, "EBITDA"
and "Media Cashflow" as determined by the Company may not be comparable to
related or similar measures as reported by other companies and do not
represent funds available for discretionary use.
(c) Total debt including due to affiliates includes the senior note,
obligations under capital leases, unsecured and subordinated obligations,
performance incentive plan liabilities and debt due to affiliates.
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<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The following discussion and analysis of the financial condition and
results of operations of the Company should be read in conjunction with the
consolidated financial statements of Brill Media Company, LLC and notes thereto
included elsewhere in this document.
Brill Media Company, LLC was organized in 1997. The Subsidiaries, all of
which are wholly-owned, include various radio, newspaper and related businesses.
The Stations own and operate FM and AM radio stations in Pennsylvania, Colorado,
Indiana/Kentucky, Minnesota/Wisconsin, and Missouri. The Newspapers own and
operate integrated newspaper publishing, printing and print advertising
distribution operations, providing total-market print advertising coverage
throughout a thirty-one-county area in central and north-central portions of the
lower peninsula of Michigan. The historical financial statements of Brill Media
Company, LLC included elsewhere in this Report include the financial position
and results of operations on a consolidated basis.
The Stations' revenues are derived primarily from advertising revenues. In
general, each Station receives revenues for advertising sold for placement
within the Station's programming. Advertising is sold in time increments and is
priced primarily based on a Station's program's popularity within the
demographic group an advertiser desires to reach, as well as quality of service
provided to the customer, creativity in marketing the client's products and
services, the personal relationship between the Station's account executive and
the client, and the client's view of the popularity of the Station among its
target customer base. In addition, advertising rates are affected by the number
of advertisers competing for available time, the size and demographic make-up of
the markets served by the Stations and the availability of alternative
advertising media in the market area. Rates are highest during the most
desirable listening hours, with corresponding reductions during other hours.
During the year ended February 28, 1998, over 90% of the Stations' revenues
were generated from local advertising, which is sold primarily by a Station's
sales staff. The remainder of the advertising revenues represents national
advertising and network compensation payments. In addition to any commissions
paid to its sales staff, the Stations generally pay commissions to advertising
agencies on local and national advertising and to sales representation firms on
national advertising. The advertising revenues of a Station generally are
highest in the second and fourth calendar quarters of each year, due in part to
increases in consumer advertising in the spring and retail advertising in the
period leading up to and including the holiday season. During the year ended
February 28, 1998, no single customer in any of the Stations' markets provided
more than 2% of the Company's revenues.
In the broadcasting industry, radio stations often utilize trade (or
barter) agreements to exchange advertising time for goods or services (such as
other media advertising, travel or lodging), in lieu of cash. In order to
preserve most of its on-air inventory for cash advertising,
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<PAGE>
the Company generally enters into trade agreements only if the goods or services
bartered to the Company will be used in the Company's business. The Company has
minimized its use of trade agreements and has sold over 90% of its radio
advertising time for cash for the year ended February 28, 1998. In addition, it
is the Company's general policy not to pre-empt radio advertising spots paid for
in cash with radio advertising spots paid for in trade.
Each Station's financial results depend on a number of factors, including
the general strength of the local and national economies, population growth, the
ability to provide popular programming, local market and regional competition,
the relative efficiency of radio broadcasting compared to other advertising
media, signal strength, development of competitive technologies and government
regulation and policies.
The Newspapers' revenues are derived primarily from advertising and
subscription revenues and to a lesser extent, from printing and print
distribution revenues. In general, newspaper publications receive revenue for
advertising sold to reach readership within its geographical distribution area
and its customers' marketing areas. The combined coverage and timing of the
numerous weekly publications and the daily publications provide the Newspapers
with flexibility and efficiencies to create a competitive advantage in
attracting advertisers. As an inducement to its customers, the Newspapers offer
advertisers more efficient buys when they purchase ad placement in multiple
publications. The Newspapers have a widely diversified customer base, and for
the year ended February 28, 1998, no single customer of the Newspapers
represented more than 2% of the Company's revenues. The Newspapers' financial
results are dependent on a number of factors, particularly those that impact
local retail sales, including the general strength of the local and national
economies, population growth, local and regional market competition and the
perceived relative efficiency of newspapers compared to other advertising media.
The following table sets forth the percentage of revenues generated by the
Company's Stations and Newspapers.
YEARS ENDED FEBRUARY 28 OR 29,
--------------------------------------------------
REVENUES 1994 1995 1996 1997 1998
- -------- ---- ---- ---- ---- ----
Stations 51% 55% 52% 50% 51%
Newspapers 49 45 48 50 49
--- --- --- --- ---
100 100 100 100 100
=== === === === ===
The primary operating expenses incurred in the ownership and operation of
the Stations include employee salaries and commissions, programming, advertising
and promotion expenses.
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For the Newspapers the primary operating expenses are employee salaries and
commissions, newsprint and delivery charges. Newsprint represents the
Newspapers' single largest raw material expense, the cost of which is cyclical
and may vary widely from period to period. The Company also incurs and will
continue to incur significant depreciation and amortization expense as a result
of completed and future acquisitions of radio stations and newspapers as well as
interest expense due to existing borrowings and future borrowings. The
consolidated financial statements of Brill Media Company, LLC tend not to be
directly comparable from period to period due to the Company's acquisition and
disposition activity.
Income Taxes
The taxable income or loss of the Company's "S" corporation and limited
liability company subsidiaries for federal income tax purposes is passed through
to Mr. Brill. Accordingly, the financial statements include no provision for
federal income taxes of the Company's "S" corporation or limited liability
company subsidiaries. Certain of the Company's subsidiaries are "C"
corporations. The "C" corporations are in loss carryforward positions at
February 28, 1998 for income tax purposes. As a result of net operating loss
carryforwards and temporary differences, the Company has net deferred tax assets
at February 28, 1998 and 1997 of $7,831,991 and $6,022,103, respectively and has
established equivalent valuation allowances.
Impact of Year 2000
The Company has developed a plan to modify its information technology to
recognize the year 2000 and has identified critical data processing systems that
will be upgraded or replaced with new systems. However, it is not possible to
estimate the extent of year 2000 deficiencies in all of the Company's systems,
the costs to the Company of correcting such deficiencies and the time frame in
which any required corrections will be made. In addition, numerous uncertainties
relating to such matters exist, including the ability to locate, test and
correct or replace relevant computer codes in software and embedded
microprocessors, the availability and cost of personnel trained in this area, if
required, and the extent to which third parties will be able to timely correct
year 2000 problems which originate with such third parties, but which impact the
Company's operations. Given such uncertainties, there can be no assurances that
year 2000- related deficiencies and required corrective measures will not have a
material adverse effect on the Company's business, financial conditions or
results of operations.
Results of Operations
Year Ended February 28, 1998 Compared to Year Ended February 28, 1997
Revenues for the year ended February 28, 1998 were $29.5 million; a $2.5
million or 9.4% increase from $27.0 million for the year ended February 28,
1997. The Stations' revenues were $15.0 million; a 10.6% increase from $13.6
million for the year ended February 28, 1997. Newspapers' revenues were $14.5
million; an 8.1% increase from $13.4 million for the year
-25-
<PAGE>
ended February 28, 1997. The $1.4 million or 10.6% increase in Stations' revenue
was due to continuing operations growth, the further development of the Colorado
and Minnesota Stations, and additional time brokerage agreement fees, offset by
lost revenue due to the operations of the Missouri Stations being operated by
the prospective buyers pursuant to TBAs effective November 1, 1997. The
Newspapers' revenue increase of $1.1 million or 8.1% was due to fiscal 1998
third and fourth quarter acquisitions of eleven weekly shoppers, a printing
business and two print distribution operations and the acquisition of a weekly
shopper in the second quarter of fiscal 1997.
Operating expenses for the year ended February 28, 1998 were $24.4 million,
an increase of $1.3 million or 5.7% from $23.1 million for the year ended
February 28, 1997. The Stations' operating expenses increased due to the
development of the Colorado and Minnesota Stations and expansion in the
Indiana/Kentucky market. Newspapers' operating expenses decreased slightly due
to decreases in incentive plan expense and operating departments from existing
operations, offset by increases related to current and prior year acquisitions.
Operating income for the year ended February 28, 1998 was $5.1 million, an
increase of $1.2 million or 30.8% from $3.9 million for the year ended February
28, 1997. This increase was due primarily to increased operating revenues and
decreased charges for incentive plan expense as noted previously.
Other income (expense) for the year ended February 28, 1998 was $9.6
million of net expense, an increase of $3.2 million or 49% over $6.4 million for
the year ended February 28, 1997. The increase is due to increased net interest
expense and deferred financing cost amortization of $2.1 million in fiscal 1998
and a $1.1 million gain on the sale of the Fargo/Moorhead stations in the year
ended February 28, 1997. The increase of net interest expense in fiscal 1998 is
due to additional borrowings for acquisitions offset by $1.8 million of managed
affiliate interest income.
The extraordinary item in fiscal 1998 totaled $4.1 million and reflected
the costs related to the early extinguishment of debt which included a $1.3
million write-off of previously deferred financing costs and a $2.8 million
prepayment premium.
Year Ended February 28, 1997 Compared to Year Ended February 29, 1996
Revenues for the year ended February 28, 1997 were $27.0 million; a $1.7
million or 6.8% increase from $25.3 million for the year ended February 29,
1996. The Stations' revenues were $13.6 million; a 3.8% increase from $13.1
million for the year ended February 29, 1996. Newspapers' revenues were $13.4
million; a 10% increase from $12.2 million for the year ended February 29, 1996.
The $0.5 million or 3.8% increase in Stations' revenue was due to continuing
operations growth and further improvement of the Stations in Missouri, Minnesota
and Colorado, offset by lost revenue from the sale of the Fargo/Moorhead
stations. The Newspapers' revenue increase of $1.2 million or 10% was due to
continuing operations growth and from the fiscal 1997 acquisition of a weekly
shopper.
-26-
<PAGE>
Operating expenses for the year ended February 28, 1997 were $23.1 million,
a decrease of $0.2 million or 0.8% from $23.3 million for the year ended
February 29, 1996. The Stations' operating expenses decreased due to a reduction
in incentive plan expense. Increased operating expenses from new Stations in
Missouri, Minnesota and Colorado were offset by the reduction of expenses due to
the sale of the Fargo/Moorhead radio stations. Newspapers' operating expenses
increased due to the fiscal 1997 shopper acquisition.
Operating income for the year ended February 28, 1997 was $3.9 million, an
increase of $1.9 million or 94.6% from $2.0 million for the year ended February
29, 1996. This increase was due primarily to increased operating revenues and
decreased charges for incentive plan expense as noted previously.
Other income (expense) for the year ended February 28, 1997 was $6.4
million of net expense, a decrease of $0.8 million or 11% from $7.2 million for
the year ended February 28, 1996. The $0.8 million decrease is due to increased
net interest expense of $0.3 million offset by the $1.1 million gain from the
sale of the Fargo/Moorhead radio stations.
The extraordinary item in fiscal 1996 reflects an adjustment of accrued
interest in the amount of $7.0 million related to subordinated debt for which
contingent interest had been accrued at the maximum rate but was reduced at
maturity pursuant to terms of an alternative valuation formula, as defined in
the agreement. The gain was partially offset by the write-off of previously
deferred financing fees of $131,000.
Liquidity and Capital Resources
The Company's primary liquidity needs are to fund capital expenditures,
provide working capital, meet debt service requirements and make acquisitions.
The Company's principal sources of liquidity are expected to be cashflow from
operations, cash on hand, additional debt financings and consummation of the
sale of the Missouri Properties.
Generally, the Company's operating expenses are paid before its advertising
revenues are collected. As a result, working capital requirements have increased
as the Company has grown and will likely increase in the future.
Net cash provided by (used in) operating activities was $2,201,000,
($513,000) and $37,000 for the years ended February 28, 1998, February 28, 1997
and February 29, 1996, respectively. The increase in cash provided by operating
activities in fiscal 1998 from fiscal 1997 is attributable to decreased payments
for management fees and interest. The decrease in cash provided from operating
activities in fiscal 1997 over fiscal 1996 resulted primarily from increased
payments for management fees and interest.
-27-
<PAGE>
Net cash provided by (used in) investing activities was ($22,387,000),
$59,000 and ($1,167,000) for the years ended February 28, 1998, February 28,
1997 and February 29, 1996, respectively. The cash used in investing activities
for fiscal 1998 is primarily attributable to the loans to managed affiliates and
the acquisitions of newspapers. The cash generated in fiscal 1997 compared to
the cash used in fiscal 1996 is due to the $1.9 million of proceeds on the sale
of radio stations in fiscal 1997 offset by increased capital expenditures and
loans to managed affiliates.
Net cash provided by (used in) financing activities was $30,328,000,
($845,000) and $2,654,000 for the years ended February 28, 1998, February 28,
1997 and February 29, 1996, respectively. The increase in cash provided in
fiscal 1998 is attributable primarily to the net increase in long term
borrowings offset by the payment of deferred financing costs and dividends. For
fiscal 1997 as compared to fiscal 1996, the net cash used in financing
activities resulted from the larger receipt of capital contributions which was
more than offset by payment of long-term debt, associated financing costs and
dividends.
EBITDA was $7,015,000, $5,334,000 and $3,336,000 for the years ended
February 28, 1998, February 28, 1997 and February 29, 1996, respectively. EBITDA
is defined as operating income before depreciation and amortization expenses.
Media Cash Flow was $10,520,000, $8,010,000 and $6,673,000 for the years ended
February 28, 1998, February 28, 1997 and February 29, 1996, respectively. Media
Cash Flow is defined as EBITDA plus management fees, incentive plan expense,
time brokerage agreement fees, acquisition related consulting expense and
interest income from loans made by the Company to Managed Affiliates. Although
EBITDA and Media Cash Flow are not measures of performance calculated in
accordance with GAAP, management believes that these measures are useful in
evaluating the Company and are widely used in the media industry to evaluate a
media company's performance. However, EBITDA and Media Cash Flow should not be
considered in isolation or as substitutes for net income, cash flows from
operating activities and other income or cash flow statements prepared in
accordance with GAAP as measures of liquidity or profitability. In addition,
EBITDA and Media Cash Flow as determined by the Company may not be comparable to
related or similar measures as reported by other companies and do not represent
funds available for discretionary use.
The Company has loaned approximately $17.3 million (of which $1.0 million
was loaned in June of 1998) to Managed Affiliates and received in return
therefor notes (the "Managed Affiliate Notes") which are unsecured, mature on
January 1, 2001 and bear interest at a rate of 12% per annum. The proceeds of
such loans were used by the Managed Affiliates to purchase property, equipment,
and intangibles and to provide working capital for operations. It is anticipated
that similar relationships may be initiated with other affiliates in the future.
The aggregate amount of Managed Affiliate Notes may not exceed $20 million
unless the Company first obtains a written opinion of an independent investment
bank of nationally recognized standing that such transaction is fair to the
Company from a financial point of view.
-28-
<PAGE>
As of February 28, 1998, the Company had approximately $110 million of
long-term obligations, including the Company's 12% Senior Notes due 2007 (the
"Senior Notes") and Appreciation Notes due 2007 (collectively, the
"Securities"). The Senior Notes will bear cash interest of 7 1/2% per annum from
the date of original issuance until December 15, 1999, and at a rate of 12% per
annum from and including December 15, 1999 until maturity. The Appreciation
Notes are non-interest bearing through June 15, 1999. The Company expects to
redeem the Appreciation Notes on June 15, 1999. If such redemption is not made,
additional interest expense will be accrued on a prospective basis, based on the
repurchase options as defined in Note 7 of the consolidated financial
statements. The Company's ability to pay interest on the Securities when due and
to satisfy its other obligations depends upon its future growth through
acquisitions and operating performance, and will be affected by financial,
business, market, technological, competitive and other conditions, developments,
pressures, and factors, many of which are beyond the control of the Company. The
Company is highly leveraged, and many of its competitors are believed to operate
with much less leverage and to have significantly greater operating and
financial flexibility and resources.
Historically, the Company has achieved significant growth through
acquisitions. In order for the Company to achieve needed future growth in
revenues and earnings and to replace the revenues and earnings of properties
that may be sold by one or more of the Subsidiaries from time to time,
additional acquisitions may be necessary. Meeting this need for acquisitions
will depend upon several factors, including the continued availability of
suitable financing. There can be no assurance that the Company can or will
successfully acquire and integrate future operations. In connection with future
acquisition opportunities, the Company, or one or more of its Subsidiaries, may
need to incur additional indebtedness or issue additional equity or debt
instruments. There can be no assurance that debt or equity financing for such
acquisitions will be available on acceptable terms, or that the Company will be
able to identify or consummate any new acquisitions.
In the past, depreciation, amortization, and interest charges have
contributed significantly to net losses incurred by the Company, and it is
expected that such net losses will continue in the future. On a combined basis,
the Company and its predecessors reported a net loss in three of their last five
fiscal years. In the fiscal year ended February 28, 1998, the Company reported a
net loss of $8.7 million. While the Company expects that the Subsidiaries'
cashflow will improve, the Company nonetheless expects that the Subsidiaries
will continue to incur substantial net losses. There can be no assurance that
the Company will not continue to generate net losses in the future.
In addition to its debt service obligations, the Company will require
liquidity for capital expenditures and working capital needs. Capital
expenditures in fiscal 1998 were $0.96 million of which $0.59 million related to
Station operations and $0.37 related to Newspaper operations. The Company
anticipates that capital expenditures in fiscal 1999 will approximate $0.9
million for existing properties.
-29-
<PAGE>
The indenture under which the Notes were issued (the "Indenture") limits
the Company's ability to incur additional indebtedness. In addition to certain
other permitted indebtedness, the Indenture permits the Company to incur
indebtedness under revolving credit facilities. Limitations in the Indenture on
the Company's ability to incur additional indebtedness, together with the highly
leveraged nature of the Company, could limit operating activities, including the
Company's ability to respond to market conditions, to provide for unanticipated
capital investments or to take advantage of business opportunities.
The Company believes that its cash on hand and cashflow from operations
will be sufficient to enable the Company to meet all of its cash operating
requirements for the next twelve months.
Seasonality
Seasonal revenue fluctuations are common in the newspaper and radio
broadcasting industries, caused by localized fluctuations in advertising
expenditures. Accordingly, the Stations' and Newspapers' quarterly operating
results have fluctuated in the past and will fluctuate in the future as a result
of various factors, including seasonal demands of retailers and the timing and
size of advertising purchases. Generally, in each calendar year the lowest level
of advertising revenues occurs in the first quarter and the highest levels occur
in the second and fourth quarters.
Inflation
The Company believes that inflation affects its business no more than it
generally affects other similar businesses.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
The Company is not required to disclose information regarding market risk.
-30-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Brill Media Company, LLC
(A Limited Liability Company)
Consolidated Financial Statements
Years ended February 28, 1998 and
1997, and February 29, 1996
Contents
Report of Independent Auditors ............................................. 32
Consolidated Financial Statements
Consolidated Statements of Financial Position .............................. 33
Consolidated Statements of Operations and Members' Deficiency .............. 34
Consolidated Statements of Cash Flows ...................................... 35
Notes to Consolidated Financial Statements ................................. 37
-31-
<PAGE>
Report of Independent Auditors
The Members of Brill Media Company, LLC
We have audited the accompanying consolidated statements of financial position
of Brill Media Company, LLC as of February 28, 1998 and 1997, and the related
consolidated statements of operations and members' deficiency and cash flows for
each of the three years in the period ended February 28, 1998. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Brill
Media Company, LLC at February 28, 1998 and 1997, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended February 28, 1998, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
Ernst & Young LLP
Chicago, Illinois
April 30, 1998,
except for Note 11, as which the date is
June 15, 1998
-32-
<PAGE>
Brill Media Company, LLC
(A Limited Liability Company)
Consolidated Statements of Financial Position
<TABLE>
<CAPTION>
February 28
1998 1997
------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 10,917,613 $ 775,363
Accounts receivable, net of allowance for doubtful accounts in
1998 - $174,685 and 1997 - $112,192 3,544,246 3,165,668
Interest receivable on notes from managed affiliates 324,357 3,606
Inventories 628,711 323,483
Other current assets 567,632 208,598
------------------------------
Total current assets 15,982,559 4,476,718
Notes receivable from managed affiliates 16,315,747 408,401
Property and equipment 20,713,615 16,398,115
Less: Accumulated depreciation 8,874,995 7,831,300
------------------------------
Net property and equipment 11,838,620 8,566,815
Goodwill and FCC licenses, net of accumulated amortization in 1998
- $1,891,192 and 1997 - $1,779,785 12,056,591 5,407,598
Covenants not to compete, net of accumulated amortization in 1998
- $696,973 and 1997 - $236,706 3,884,427 284,414
Other assets, net 6,071,047 2,162,643
------------------------------
22,012,065 7,854,655
Due from affiliates, net -- 5,135,648
------------------------------
$ 66,148,991 $ 26,442,237
==============================
Liabilities and members' deficiency
Current liabilities:
Short-term note $ -- $ 500,000
Amounts payable to affiliates 724,587 378,637
Accounts payable 745,210 701,826
Accrued payroll and related expenses 595,762 399,131
Accrued interest 1,341,390 372,394
Other accrued expenses 195,378 224,794
Current maturities of long-term obligations 1,005,875 882,439
------------------------------
Total current liabilities 4,608,202 3,459,221
Long-term notes and other obligations 109,050,787 49,592,989
Members' deficiency (47,509,998) (26,609,973)
------------------------------
$ 66,148,991 $ 26,442,237
==============================
</TABLE>
See accompanying notes
-33-
<PAGE>
Brill Media Company, LLC
(A Limited Liability Company)
Consolidated Statements of Operations and Members' Deficiency
<TABLE>
<CAPTION>
Year ended
Year ended February 28 February 29
1998 1997 1996
--------------------------------------------
<S> <C> <C> <C>
Revenues $ 29,566,647 $ 27,036,215 $ 25,312,931
Operating expenses:
Operating departments 20,805,920 19,042,885 18,639,701
Incentive plan (620,000) 627,966 1,467,034
Management fees 2,074,834 1,944,699 1,832,703
Time brokerage agreement fees, net 48,000 (54,500) --
Consulting 242,992 140,992 37,493
Depreciation 1,086,846 1,025,543 995,414
Amortization 776,064 369,484 316,558
--------------------------------------------
24,414,656 23,097,069 23,288,903
--------------------------------------------
Operating income 5,151,991 3,939,146 2,024,028
Other income (expense):
Interest - managed affiliates 1,759,329 16,653 --
Interest - affiliates, net 165,167 230,256 (293,956)
Interest - other, net (10,683,620) (7,190,504) (6,338,941)
Amortization of deferred financing costs (710,893) (488,712) (497,198)
Gain (loss) on sale of assets, net (6,909) 1,076,181 3,780
Other, net (93,853) (68,689) (84,067)
--------------------------------------------
(9,570,779) (6,424,815) (7,210,382)
--------------------------------------------
Loss before income taxes and
extraordinary items (4,418,788) (2,485,669) (5,186,354)
Income tax provision (benefit) 148,868 286,504 (38,869)
--------------------------------------------
Loss before extraordinary items (4,567,656) (2,772,173) (5,147,485)
Extraordinary items (4,124,209) -- 6,915,435
--------------------------------------------
Net income (loss) (8,691,865) (2,772,173) 1,767,950
Members' deficiency, beginning of year (26,609,973) (38,354,467) (40,122,517)
Capital contributions 1,840 15,036,667 100
Dividends (12,210,000) (520,000) --
--------------------------------------------
Members' deficiency, end of year $(47,509,998) $(26,609,973) $(38,354,467)
============================================
</TABLE>
See accompanying notes.
-34-
<PAGE>
Brill Media Company, LLC
(A Limited Liability Company)
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended
Year ended February 28 February 29
1998 1997 1996
--------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income (loss) $ (8,691,865) $ (2,772,173) $ 1,767,950
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization 1,862,910 1,395,027 1,311,972
Amortization of deferred financing costs and
original issue discount 1,502,729 488,712 313,481
Management fees accrual 670,833 (620,451) 293,806
Affiliate interest accrual (24,444) 1,842 463,594
Additional interest accrual 2,874,964 1,817,674 2,215,159
Incentive plan accrual (620,000) 627,966 1,467,034
(Gain) loss on sale of assets, net 6,909 (1,076,181) (3,780)
Extraordinary items 4,124,209 -- (6,915,435)
Changes in operating assets and liabilities:
Accounts receivable (238,368) (135,593) (251,820)
Other current assets (371,229) 109,418 (192,561)
Accounts payable (22,866) (440,686) (480,039)
Other accrued expenses 1,126,733 91,521 47,805
--------------------------------------------
Net cash provided by (used in) operating activities 2,200,515 (512,924) 37,166
Investing activities
Insurance proceeds on destroyed assets -- 244,293 --
Purchase of property and equipment (959,409) (1,268,847) (976,938)
Purchase of newspapers, net of cash acquired (6,574,233) (17,222) --
Purchase of radio stations -- -- (55,000)
Proceeds from sale of radio station -- 1,917,544 --
Proceeds from sale of assets 30,915 44,003 13,280
Loans to managed affiliates (15,907,346) (408,401) --
Payment for noncompetition agreement (3,000,000) -- --
Increase in other assets (134,059) (452,554) (147,904)
Decrease in amounts due from affiliates 4,157,453 -- --
--------------------------------------------
Net cash provided by (used in) investing activities (22,386,679) 58,816 (1,166,562)
</TABLE>
-35-
<PAGE>
Brill Media Company, LLC
(A Limited Liability Company)
Consolidated Statements of Cash Flows (continued)
<TABLE>
<CAPTION>
Year ended
Year ended February 28 February 29
1998 1997 1996
-----------------------------------------------
<S> <C> <C> <C>
Financing activities
Increase (decrease) in amounts due to affiliates $ 353,944 $ (79,309) $ 32,254
Payment of deferred financing costs and other (8,902,305) (491,168) (1,616,923)
Principal payments on long-term obligations (70,890,441) (742,698) (36,241,465)
Proceeds from long-term borrowings 122,475,376 142,697 40,479,877
Payment of short-term obligation (500,000) -- --
Capital contributions 1,840 845,210 100
Dividends (12,210,000) (520,000) --
-----------------------------------------------
Net cash provided by (used in) financing activities 30,328,414 (845,268) 2,653,843
-----------------------------------------------
Net increase (decrease) in cash and cash equivalents 10,142,250 (1,299,376) 1,524,447
Cash and cash equivalents at beginning of year 775,363 2,074,739 550,292
-----------------------------------------------
Cash and cash equivalents at end of year $ 10,917,613 $ 775,363 $ 2,074,739
===============================================
Supplemental disclosures of cash flow information:
Interest paid $ 5,977,788 $ 6,116,898 $ 4,161,993
Income taxes paid 157,432 216,046 118,131
</TABLE>
See accompanying notes.
-36-
<PAGE>
Brill Media Company, LLC
(A Limited Liability Company)
Notes to Consolidated Financial Statements
Years ended February 28, 1998 and 1997 and February 29, 1996
1. Basis of Presentation and Business
Basis of Presentation
The consolidated financial statements include the accounts of Brill Media
Company, LLC (BMC) and its subsidiaries, all of which are wholly owned
(collectively the Company). BMC's members are directly owned by Alan R. Brill
(Mr. Brill). All intercompany balances and transactions have been eliminated in
consolidation.
Effective December 30, 1997, various radio and newspaper businesses owned by Mr.
Brill were contributed, at historical cost, to a newly formed limited liability
company, BMC Holdings, LLC (Holdings), a wholly owned subsidiary of BMC. BMC and
Holdings were formed in 1997 with minimal capital contributions and had no
operations prior to the contribution of the radio and newspaper businesses. This
reorganization of entities under common control has been presented in these
consolidated financial statements similar to a pooling of interest. Accordingly,
all prior periods have been restated to reflect the reorganization.
BMC was organized as a limited liability company under the laws of the state of
Virginia and has a term of 50 years.
Business
The Company is a diversified media enterprise that acquires, develops, manages,
and operates radio stations, newspapers and related businesses in middle
markets. The Company presently owns or operates twelve radio stations serving
five markets located in Pennsylvania, Kentucky/Indiana, Colorado,
Minnesota/Wisconsin, and Missouri (collectively referred to herein as Radio),
and additionally, manages three radio stations located in the Kentucky/Indiana
market that are owned by affiliates of the Company - see Note 9. The Company
operates integrated newspaper publishing, printing and print advertising
distribution operations, providing total-market print advertising coverage
throughout a thirty-one-county area in the central and north-central portions of
the lower peninsula of Michigan (collectively referred to herein as News). These
operations offer a two-edition daily newspaper, twenty-two weekly publications,
two web offset printing operations for newspaper publications and outside
customers, and three private distribution companies.
-37-
<PAGE>
2. Significant Accounting Policies
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with a maturity of
three months or less to be cash equivalents.
Inventories
Inventories, consisting primarily of newsprint, are stated at the lower of cost
(first in, first out) or market.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided under the
straight-line method over the estimated useful lives of the various assets as
follows:
Buildings and improvements 10 to 40 years
Towers and antennae 13 to 20 years
Machinery and equipment 3 to 20 years
Broadcast equipment 3 to 13 years
Furniture and fixtures 3 to 10 years
Intangible Assets
Goodwill and FCC licenses are being amortized as required by generally accepted
accounting principles. Amortization is calculated on the straight-line basis
over a period of 40 years.
Covenants not to compete are being amortized on the straight-line basis over the
agreements' terms of five to six years.
Deferred financing costs and favorable leasehold rights are being amortized on
the straight-line basis over the terms of the underlying debt (10 years) or
leases (3-20 years).
Long-Lived Assets
The Company annually considers whether indicators of impairment of long-lived
assets held for use (including intangibles) are present. If such indicators are
present, the Company determines whether the sum of the estimated undiscounted
future cash flows is less than their carrying amounts. The Company recognizes
any impairment loss based on the excess of the carrying amount of the assets
over their fair value. The Company
-38-
<PAGE>
2. Significant Accounting Policies (continued)
evaluated the ongoing value of its property and equipment and other long-lived
assets as of February 28, 1998. From this evaluation, the Company determined
that there were no indications of impairment and as such, no impairment loss has
been recognized for the year ended February 28, 1998.
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 amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Advertising
Advertising costs are expensed as incurred and totaled $1,089,331, $838,534, and
$801,356, for the years ended February 28, 1998, 1997 and February 29, 1996,
respectively.
Revenue Recognition
The Company recognizes revenue when an ad is aired by Radio or a publication is
distributed by News. Radio also receives fees under time brokerage agreements,
which are recognized based on a stated amount per month.
Recently Issued Accounting Standards
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131
"Disclosure about Segments of an Enterprise and Related Information" which
requires companies to report financial and descriptive information about their
operating segments based on a management approach. The Company is required to
adopt SFAS No. 131 in fiscal 1999.
In April 1998, the AcSEC issued Statement of Position 98-5 "Reporting on the
Costs of Start-Up Activities" (SOP), which requires all start-up costs to be
expensed as incurred. Companies will be required to write-off previously
capitalized start-up or organization costs upon adoption of the SOP. The Company
is required to adopt the SOP in fiscal 2000.
The Company does not expect SFAS No. 131 or the SOP to have a material effect on
its financial statements.
-39-
<PAGE>
2. Significant Accounting Policies (continued)
Reclassifications
Certain amounts in the 1996 and 1997 financial statements have been reclassified
to conform to the 1998 presentation.
3. Acquisitions and Dispositions
During the year ended February 29, 1996, the Company acquired two radio
stations, located in Missouri and Minnesota for cash of $55,000 and $1,069,500
in notes payable to the sellers. The Company also secured a covenant not to
compete from one of the prior owners for $300,000 discounted at 11% to $165,290
for financial statement purposes.
On July 9, 1996, the Company acquired the common stock of Clinton Distribution,
Inc., which owned and operated a weekly newspaper located in Michigan and paid
cash of $50,000 and entered into a note payable with the seller of $340,704. The
Company also entered into a covenant not to compete with the seller for
$200,000, discounted at 12% to $127,430 for financial statement purposes.
In February, 1996, the Company entered into a contract to sell all operating
assets of its radio stations located in Fargo, North Dakota, and Moorhead,
Minnesota, for $2,000,000 in cash. The pretax gain was approximately $1,065,000,
net of related expenses. The Company further contracted to lease the programming
of the radio stations to the buyer under a time brokerage agreement (TBA)
beginning March 1, 1996, for $15,000 per month, until transfer of the FCC
license on August 13, 1996. Accordingly, other than pursuant to the TBA, no
broadcast revenue or operating expenses were recorded for these stations
subsequent to February 29, 1996.
On June 27, 1996, the Company executed a TBA effective August 5, 1996, to
operate a radio station located in Loveland, Colorado. The TBA also gives the
Company an option to purchase the station. In connection with this option, the
Company made a nonrefundable payment of $200,000 to the owner of the station in
fiscal 1997. In May 1997, the Company exercised its option to purchase the
station for an additional $1,800,000 and paid $100,000 into escrow. The purchase
price includes the initial $200,000 payment, $550,000 in cash payable at
closing, to which the escrow deposit of $100,000 may be applied, and a note
payable to the seller in the amount of $1,250,000. The Company will also enter
into a five-year, $500,000 covenant not to compete.
-40-
<PAGE>
3. Acquisitions and Dispositions (continued)
On July 25, 1997, the Company paid $3,000,000 for a noncompetition agreement
among the Company, one of the managed affiliates (see Note 9), and the former
owner of the related radio stations.
On October 24, 1997, the Company entered into contracts to sell the operating
assets of its Missouri radio stations (collectively, the Missouri Properties),
for a net cash price of $7,419,000, plus assumed liabilities of $256,000. The
expected pretax gain will be approximately $5 million, net of related expenses,
which will be recognized upon transfer of the FCC licenses. The Company further
contracted to lease the programming of the combined radio stations to the buyer
under a TBA beginning November 1, 1997, for $50,000 per month, until transfer of
the FCC licenses is complete. Accordingly, other than pursuant to the TBA, no
broadcast revenue or operating expenses were recorded for the Missouri
Properties subsequent to October 31, 1997. Applications for transfer of the
broadcast licenses of the Missouri Properties have been filed with the FCC by
the buyers. A local market competitor has objected to the transfer of the
licenses and on December 12, 1997, filed with the FCC a Petition to Deny the
license transfers and to terminate the TBA. No action has been taken on the
Petition to Deny by the FCC. The Attorney General of the State of Missouri on
January 9, 1998 filed a civil investigative demand on the Company to provide
documents in order to consider whether the proposed transaction would violate
federal or Missouri antitrust laws. The Company has complied with the demand and
no further action has been taken with the State. The Company believes that, even
if the Petition to Deny were granted, the consequences to the Company would not
be material.
During the year ended February 28, 1998, the Company acquired eleven weekly
shopping guide publications, a printing business and two print distribution
operations reaching approximately 164,000 households in the north-central
portion of the lower peninsula of Michigan (the 1998 News acquisitions) for an
aggregate purchase price of $10,305,757. The Company paid cash in the aggregate
of $6,574,233 and entered into notes payable with the sellers totaling
$4,350,000 of which $3,650,000 has been discounted at 12% to $3,031,524 for
financial statement purposes. The Company also secured covenants not to compete
from the various sellers, totaling $1,904,000, discounted at 20% to $1,115,528
for financial statement purposes. Two weekly shopping guide publications and one
print distribution operation were acquired on October 1, 1997 and nine weekly
shopping guide publications, the printing business and one distribution
operation were acquired on February 23, 1998.
-41-
<PAGE>
3. Acquisitions and Dispositions (continued)
The purchase price for the 1998 News acquisitions has been allocated as follows:
Property and equipment $ 3,300,000
Intangibles 6,713,082
Inventory 251,634
Other assets, net of current liabilities 41,041
------------
$ 10,305,757
============
The above acquisitions have been accounted for as purchases, and the financial
statements include the results of operations from the acquisition dates.
The following table represents unaudited pro forma financial information which
presents the Company's consolidated results of operations for the years ended
February 28, 1998 and 1997 as if the acquisitions and dispositions noted above
and related financings (see Note 7) occurred March 1, 1996.
1998 1997
-----------------------------
Revenues $36,442,947 $34,035,512
Operating income 6,123,253 4,984,863
Net loss 6,778,182 8,371,880
The pro forma information does not purport to be indicative of results that
actually would have occurred had the acquisitions, dispositions and related
financings been made on the date indicated or of results which may occur in the
future.
4. Property and Equipment
Property and equipment consists of the following at February 28, 1998 and 1997:
1998 1997
----------------------------
Land $ 611,304 $ 646,647
Buildings and improvements 3,156,680 2,594,508
Towers and antennae 2,193,671 1,962,264
Machinery and equipment 6,717,037 4,162,151
Broadcast equipment 4,243,808 4,106,725
Furniture and fixtures 3,291,115 2,425,820
Construction in progress 500,000 500,000
----------------------------
$20,713,615 $16,398,115
============================
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<PAGE>
4. Property and Equipment (continued)
Property and equipment includes the following assets under capital leases at
February 28, 1998:
Buildings and improvements $ 828,337
Towers and antennae 700,000
Machinery and equipment 262,991
Broadcast equipment 508,514
Furniture and fixtures 246,115
-----------
$2,545,957
===========
5. Income Taxes
The taxable income or loss of the Company's "S" corporation or limited liability
company subsidiaries for federal income tax purposes is ultimately passed
through to Mr. Brill. Accordingly, the financial statements include no provision
for federal income taxes of the Company's "S" corporation or limited liability
company subsidiaries. Certain of the Company's subsidiaries are "C"
corporations. The Company calculates its current and deferred income tax
provisions for the "C" corporations using the liability method. Under the
liability method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax basis of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse.
At February 28, 1998, the "C" corporations had net operating loss carryforwards
of approximately $17.6 million for federal income tax purposes which expire in
fiscal years 1999 through 2013.
As a result of net operating loss carryforwards and temporary differences, the
Company has net deferred tax assets and has established a valuation allowance at
February 28, 1998 and 1997, as follows:
1998 1997
--------------------------
Gross deferred tax assets:
Incentive plan expense $ 1,416,417 $ 1,685,877
Net operating loss carryforwards 7,048,013 5,281,599
Other 415,028 313,814
--------------------------
8,879,458 7,281,290
Gross deferred tax liabilities:
Deferred gain on replacement assets (943,306) (1,154,401)
Other (104,161) (104,786)
-------------------------
(1,047,467) (1,259,187)
-------------------------
Net deferred tax asset 7,831,991 6,022,103
Valuation allowance (7,831,991) (6,022,103)
-------------------------
Net deferred tax asset recognized in the balance
sheet $ -- $ --
=========================
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<PAGE>
5. Income Taxes (continued)
Deferred income taxes reflect the net 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.
The components of the provision (benefit) for income taxes are as follows:
Year ended
Year ended February 28 February 29
1998 1997 1996
-----------------------------------------
Current federal tax $ 22,954 $ 80,000 $ --
Current state tax 125,914 206,504 (38,869)
----------------------------------------
$ 148,868 $ 286,504 $ (38,869)
========================================
The provision (benefit) for income taxes for the "C" corporations differs from
the amount of income tax benefit computed by applying the United States federal
income tax rate to loss before income taxes and extraordinary items. A
reconciliation of the differences is as follows:
<TABLE>
<CAPTION>
Year ended
Year ended February 28 February 29
1998 1997 1996
------------------------------------------
<S> <C> <C> <C>
"C" corporations income tax benefit at statutory
federal tax rate $(1,584,605) $ (870,606) $(1,838,365)
Increase (decrease) resulting from:
State income taxes, net of federal benefit (208,356) (17,343) (350,071)
Change in valuation allowance 1,864,242 1,024,242 2,162,782
Other, net 77,587 150,211 (13,215)
-----------------------------------------
Income tax provision (benefit) $ 148,868 $ 286,504 $ (38,869)
=========================================
</TABLE>
-44-
<PAGE>
6. Other Assets
Other assets consist of the following at February 28, 1998 and 1997:
1998 1997
---------------------------
Deferred financing costs $5,581,835 $2,105,218
Favorable leasehold rights 384,728 384,728
Other 691,072 923,437
---------------------------
6,657,635 3,413,383
Less: Accumulated amortization 586,588 1,250,740
---------------------------
$6,071,047 $2,162,643
===========================
7. Long-Term Notes and Other Obligations
Long-term obligations consist of the following at February 28, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
---------------------------
<S> <C> <C>
Senior unsecured notes (net of unamortized discount of
$9,817,227), interest only payable semi-annually $95,182,773 $ --
Senior note, interest at 17 1/2% -- 41,824,718
Senior secured seller notes, payable in quarterly installments
of $127,648 including interest at stated rate of 7% with final
installment of $1,895,638 due February 2004 3,031,524 --
Senior secured seller notes, payable monthly 801,191 872,929
Mortgage notes, payable monthly 1,143,912 1,297,055
Capital leases, payable monthly 782,802 959,000
Subordinated secured seller notes, payable monthly 1,533,578 945,286
Appreciation notes, unsecured and subordinated, (net of unamortized
discount of $581,383) 2,418,617 --
Unsecured noncompetition agreements, net of imputed interest,
payable through 2004 1,115,528 --
Unsecured notes, payable monthly 511,737 421,440
Performance incentive plans 3,535,000 4,155,000
---------------------------
110,056,662 50,475,428
Less: Current maturities 1,005,875 882,439
---------------------------
$109,050,787 $ 49,592,989
===========================
</TABLE>
-45-
<PAGE>
7. Long-Term Notes and Other Obligations (continued)
On December 30, 1997, the Company issued $105,000,000 of 12% senior notes (the
Senior Notes) and $3,000,000 of appreciation notes (the Appreciation Notes),
both due in 2007. The Company received net proceeds of approximately $96.8
million. The proceeds were used, in part, to pay off the Company's existing
senior note of $70 million plus accrued interest of $1.9 million and a
prepayment penalty of $2.8 million. The Company also wrote off previously
deferred financing costs of $1,324,209 related to the senior note. This expense,
plus the prepayment penalty, has been reflected as an extraordinary loss on the
early extinguishment of debt in the accompanying 1998 statement of operations
and members' deficiency.
The Senior Notes bear cash interest, payable semiannually, at a rate of 7 1/2%
through December 15, 1999, and at 12% after such date until maturity. The Senior
Notes were issued at a discount of approximately $10,539,000, which is being
amortized to yield an effective interest rate of 12.2% over the term of the
Senior Notes. The Senior Notes are not redeemable by the Company prior to
December 15, 2002 except in the event of an initial public offering. After such
date, the Senior Notes are redeemable, at the Company's option, at the following
redemption prices (expressed in percentages of principal amount), if redeemed
during the 12 month period commencing on December 15th of the years set forth
below, plus accrued and unpaid interest:
Period Redemption Price
------------------------------------------------------
2002 106%
2003 104%
2004 102%
2005 and thereafter 100%
In addition, the Senior Notes are redeemable at the Company's option upon an
initial public offering of the Company's capital stock with proceeds of at least
$25 million. In such event, the Company may redeem up to 25% of the aggregate
principal amount of the Senior Notes at 112% of the Accreted Value, as defined,
prior to December 15, 1999, and at 112% of the principal amount subsequent to
December 15, 1999, provided the principal amount outstanding after such
redemption is at least $79 million.
-46-
<PAGE>
7. Long-Term Notes and Other Obligations (continued)
Upon the occurrence of a change in control, as defined, each holder of the
Senior Notes has the right to require the Company to purchase all or any part of
such holder's notes, in the case of a repurchase date prior to December 15,
1999, at a purchase price in cash equal to 101% of the Accreted Value and for
any repurchase date on or after December 15, 1999, at a purchase price in cash
equal to 101% of the principal amount thereof, plus accrued and unpaid interest.
The Appreciation Notes are non-interest bearing but were discounted at 17% for
financial reporting purposes resulting in an original issue discount of
approximately $651,000. This original issue discount is being amortized to yield
an effective interest rate of 17% through June 15, 1999, based on management's
expectation that the Company will redeem, subject to certain defined
limitations, the Appreciation Notes on such date.
The Appreciation Notes entitle the holder to a cash payment, at maturity, equal
to the principal amount plus the amount by which the specified percentage, as
defined, of the value, as defined, of the Company at maturity, exceeds the
principal amount. The specified percentage is approximately 5% and the value of
the Company is equal to 12 times media cash flow, as defined, for the most
recent four fiscal quarters plus the cash and cash equivalents less the
aggregate amount of indebtedness, as defined, of the Company and its
subsidiaries. If an initial public offering has not occurred, the Company may
redeem the Appreciation Notes at the following dates and amounts.
June 15 of Amount
------------------------------------------------------
1999 $ 3,000,000
2000 8,300,000
2001 12,800,000
2002 18,000,000
2003 24,000,000
2004 31,000,000
2005 39,000,000
2006 48,000,000
2007 58,000,000
Upon the occurrence of an initial public offering, sale of the Company or
liquidation of the Company, each holder of the Appreciation Notes has the right
to require the Company to redeem all or any part of such holder's notes at the
relevant Specified Event Purchase Price, as defined. In addition, if an initial
public offering has not occurred on or before a date set forth below, the
holders may require the Company to redeem its Appreciation
-47-
<PAGE>
7. Long-Term Notes and Other Obligations (continued)
Notes, in whole or in part, on such date at a price equal to their pro rata
percentage, of the amount set forth below opposite such date (which amount, in
each case, represents payment in full of all principal and interest thereon):
Date Amount
---------------------------------------------------
June 30, 2003 $24,300,000
June 30, 2004 20,000,000
June 30, 2005 13,000,000
Should the Company not redeem the Appreciation Notes on June 15, 1999, as
expected by management, additional interest expense will be accrued on a
prospective basis, based on the optional and mandatory repurchase options
defined above.
The Senior Notes are senior unsecured obligations of the Company and the
Appreciation Notes are unsecured subordinated obligations of the Company. The
Senior Notes and Appreciation Notes are unconditionally guaranteed, fully,
jointly, and severally, by each of the Company's subsidiaries (the Guarantors)
all of which are wholly owned. BMC is a holding company and has no operations,
assets, or cash flows separate from its investments in its subsidiaries.
Accordingly, separate financial statements and other disclosures concerning the
Guarantors have not been presented because management has determined that they
would not be material to investors.
The Senior Notes restrict the Company from the following in excess of defined
limitations: incurring additional indebtedness; making restricted payments to
subsidiaries; creating or permitting any liens to exist; making distributions
from restricted subsidiaries; selling assets and subsidiary stock; transactions
with affiliates; completing sale/leaseback transactions; designating
unrestricted subsidiaries; establishing future note guarantors, engaging in
other than permitted business activities; and completing mergers and
acquisitions.
The Company's senior secured seller notes and mortgage notes are secured by the
respective property for which the loan was initiated, and are effectively senior
in right of payment to the Senior Notes.
During fiscal year 1998 and 1997, the Company entered into new capital leases
totaling approximately $109,000 and $347,000 respectively. The present value of
obligations under capital leases at February 28, 1998, includes $478,541 in
amounts due to affiliates of the Company.
-48-
<PAGE>
7. Long-Term Notes and Other Obligations (continued)
The Company has performance incentive plans with certain executives. Such plans
accumulate value based on certain defined performance factors. The executives
were vested to the extent of $3,535,000 and $4,155,000, as of February 28, 1998
and 1997, respectively, which was recorded as a long-term obligation. Payments
under the terms of the plans would commence only upon the death, disability,
retirement, or termination of employment of an executive, and can be made at the
discretion of the Company in amounts and on terms no less favorable to the
executive than quarterly payments of 2.5% of the vested amount.
In fiscal 1996, the Company paid $3,250,000 to a subordinated note holder. This
payment reflected the original principal only, and $7,046,813 of contingent
interest which had been accrued at the maximum rate was reduced at maturity
pursuant to the terms of an alternative valuation formula, as defined in the
agreement. The Company also wrote off certain previously deferred financing
costs at the time of the refinancing totaling $131,378. The net gain of
$6,915,435 related to these transactions has been reflected as an extraordinary
item in the accompanying 1996 statement of operations and members' deficiency.
Aggregate maturities of long-term obligations during the next five years are as
follows:
Fiscal Year Amount
-------------------------------------------
1999 $1,005,875
2000 1,081,910
2001 1,160,023
2002 908,607
2003 837,919
The estimated fair market value of the Company's Senior Notes and Appreciation
Notes was approximately $99,225,000 at February 28, 1998, based on the average
trading price at that date. The fair market value of the Company's remaining
long-term debt approximates its carrying value.
-49-
<PAGE>
8. Commitments
The Company leases certain land, buildings, and equipment. Rent expense for
fiscal years 1998, 1997, and 1996 was $278,592, $247,328, and $210,998,
respectively. Future minimum lease payments under operating leases that have
initial or remaining noncancelable terms in excess of one year as of February
28, 1998, are as follows:
Fiscal Year Amount
---------------------------------------
1999 $166,022
2000 70,388
2001 27,813
2002 20,192
2003 20,452
Thereafter 76,148
9. Transactions With Affiliates
Brill Media Company, LP (BMCLP), owned indirectly by Mr. Brill, is a group
executive management operation which provides supervisory activities and certain
corporate-wide administrative services to the Company. BMCLP earns a fee, paid
monthly as permitted, based on a percentage of revenue under standard
contractual arrangements. The Company incurred management fees to BMCLP in
fiscal years 1998, 1997, and 1996 of approximately $2,075,000, $1,945,000 and
$1,833,000, respectively. The payment of management fees is subordinated to the
payment of the Company's obligations under the Senior Notes.
The Company has management agreements and loans with affiliates, owned by Mr.
Brill, which operate radio stations in the same markets as the Company. In
accordance with the management agreements, the managed affiliates pay fixed
management fees plus a variable fee based on performance, as defined. The
Company earned $240,000 and $40,000 in fiscal years 1998 and 1997, respectively,
in management fees from these managed affiliates.
At February 28, 1998 and 1997, notes receivable from managed affiliates totaled
$16,315,747 and $408,401 plus accrued interest of $324,357 and $3,606,
respectively. In connection with the Company's issuance of the Senior Notes and
Appreciation Notes - see Note 7, the Company refinanced the outstanding 17.5%
notes receivable from managed affiliates. The current notes receivable bear
interest at 12%, payable semi-annually. Principal and any outstanding accrued
interest is due in January 2001. The Senior Notes indenture generally limits the
Company to $20 million of outstanding loans to managed affiliates.
-50-
<PAGE>
9. Transactions With Affiliates (continued)
At February 28, 1997, due from affiliates included notes receivable from Mr.
Brill totaling $3,966,194, plus accrued interest of $84,244, affiliate notes
receivable of $1,886,909 plus accrued interest of $28,840, and $40,000 for
management fees from the managed affiliates, net of accrued management fees
payable of $144,153, operating payables due to affiliates of $226,386, and a
$500,000 demand note payable which bears interest at prime plus 1% (effectively,
9.25% at February 28, 1997). At February 28, 1997, amounts payable to affiliates
include notes payable of $374,779, plus accrued interest of $3,858.
At February 28, 1998, amounts payable to affiliates include accrued management
fees of $184,346 and other operating payables of $40,241 and a $500,000 demand
note payable which bears interest at prime plus 1% (effectively, 9.5% at
February 28, 1998).
An affiliate of the Company has exercised its option to acquire a facility that
is currently partially occupied by the Company. The Company will effect a lease
with and has advanced to this affiliate $500,000 for the Company's share of the
"build out" costs to renovate and occupy additional space in this facility to
consolidate certain of its operations. Additionally, another affiliate of the
Company acquired a building that upon completion of its build out will be leased
to and occupied by the Company. Each of the leases will be at prevailing market
rental rates.
During the year ended February 28, 1997, the Company received capital
contributions of $15,036,667, of which $14,191,457 were outstanding affiliate
receivables owed to BMCLP by the Company and were offset by Company payables to
BMCLP.
10. Business Segments
The Company has been engaged in two principal businesses: operation of AM and FM
radio stations (Radio) and publication of daily and weekly newspapers and
shoppers (News).
-51-
<PAGE>
10. Business Segments (continued)
Information for the years ended February 28, 1998 and 1997, and February 29,
1996, regarding the Company's major business segments is presented in the
following table:
Radio News Total
-----------------------------------------
Revenues:
1998 $15,038,174 $14,528,473 $29,566,647
1997 13,595,820 13,440,395 27,036,215
1996 13,095,663 12,217,268 25,312,931
Operating income:
1998 1,743,993 3,407,998 5,151,991
1997 1,897,712 2,041,434 3,939,146
1996 883,897 1,140,131 2,024,028
Identifiable assets:
1998 35,740,717 30,408,274 66,148,991
1997 11,074,545 15,367,692 26,442,237
1996 14,499,338 11,511,203 26,010,541
Depreciation and amortization expense:
1998 1,271,684 591,226 1,862,910
1997 917,438 477,589 1,395,027
1996 807,917 504,055 1,311,972
Capital expenditures:
1998 590,527 368,882 959,409
1997 336,952 931,895 1,268,847
1996 819,440 157,498 976,938
11. Subsequent Event
On June 15, 1998, the Company made additional loans to managed affiliates
totaling $1,000,000.
-52-
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The Company has not made any changes in, nor has it had any disagreements
with its accountants on, accounting and financial disclosure.
-53-
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors of Media are elected annually by its sole shareholder, BMC.
Executive officers of Media are elected by, and serve at the pleasure of,
Media's board of directors. The following table sets forth certain information
with regard to Media's principal executive officers and directors as of June 30,
1998:
NAME AGE POSITION
---- --- --------
Alan R. Brill 55 Director, President, Chief Executive Officer and
Treasurer
Robert M. Leich 55 Director
Philip C. Fisher 59 Director
Clifton E. Forrest 49 Director, Vice President (Newspapers), and
Assistant Secretary
Charles W. Laughlin 69 Director
Alan L. Beck 46 Vice President (Radio)
Donald C. TenBarge 40 Vice President, Chief Financial Officer,
Secretary and Assistant Treasurer
Information concerning the experience and affiliations of the directors and
executive officers of Media is as set forth below.
ALAN R. BRILL, DIRECTOR, PRESIDENT, CHIEF EXECUTIVE OFFICER AND TREASURER.
Mr. Brill founded the Company's predecessor beginning in 1981 and has worked in
the media industry for 24 years. Prior to starting the Company, after Peace
Corps service in Ecuador, Mr. Brill joined Arthur Young & Co. in New York City
where he practiced as a CPA with a diversified clientele. In 1972, he joined a
new, publicly-traded real estate investment trust in Atlanta as a senior
financial and administrative executive. The trust was involved in short and
long-term real estate loans, primarily to proprietary hospitals. In 1973, he was
recruited by Worrell Newspapers, Inc., a large, privately-owned newspaper group
headquartered in Charlottesville, Virginia, as its chief financial officer and
named to the company's Board of Directors. As a senior executive in the company,
Mr. Brill was involved in or responsible for all the company's numerous
acquisitions and financings, had a role in most significant operating matters
and built a small television group for the company. Soon after the founder
transferred his ownership interest to his son and withdrew from the business,
Mr. Brill left Worrell to form the Company's predecessor in 1981. Mr. Brill
-54-
<PAGE>
earned a B.A. in economics and mathematics from DePauw University and an M.B.A.
from Harvard Business School. Mr. Brill is a Certified Public Accountant.
ROBERT M. LEICH, DIRECTOR. Mr. Leich is President of Diversified
Healthcare, Inc., successor to Charles Leich & Co., one of the country's largest
independent drug distributors. He is a director of Old National Bank,
Evansville, Indiana and of the National Wholesale Druggists Association. He has
served on the board of numerous civic and business organizations. Mr. Leich
graduated from Yale University and received his M.B.A. degree from Indiana
University at Bloomington.
PHILIP C. FISHER, DIRECTOR. Dr. Fisher is Dean of Business, University of
Southern Indiana and has published extensively on the case study method for
entrepreneurial businesses. He has held numerous civic and business posts,
including the board of the Evansville Chamber of Commerce and the executive
committee of the Indiana Council for Economic Education. He received his
undergraduate degree from Wayne State College, an M.B.A. from the University of
South Dakota, and a Ph.D. from the Graduate School of Business of Stanford
University.
CLIFTON E. FORREST, DIRECTOR, VICE PRESIDENT (NEWSPAPERS) AND ASSISTANT
SECRETARY. Mr. Forrest joined the Company's predecessors in 1981 as publisher of
CMN. In 1987, he moved to Evansville to become a senior officer of BMCLP. His
responsibilities consist of managing the publishing, printing and distribution
areas and overseeing employee benefit plans, risk management programs, personnel
issues, and certain other matters. Mr. Forrest has 33 years of industry
experience including 10 years at Worrell Newspapers, Inc. where he served in
various roles publishing daily and weekly newspapers in five different states.
Mr. Forrest earned a B.A. degree with an emphasis in journalism, marketing,
advertising and industrial sociology from Wichita State University.
CHARLES W. LAUGHLIN, DIRECTOR. Mr. Laughlin is a lawyer and presently of
counsel to Thompson & McMullan, P.C., a law firm in Richmond, Virginia. Mr.
Laughlin received his undergraduate degree from the College of William & Mary
and his J.D. from the University of Virginia. After completing a clerkship with
the United States Court of Appeals for the Fourth Circuit, he has practiced law
in Richmond, Virginia since 1956 and has served as counsel to the Company since
its inception.
ALAN L. BECK, VICE PRESIDENT (RADIO). Mr. Beck joined the Company's
predecessor in 1985 as President/General Manager of the Pennsylvania Stations.
After two years, he moved to the BMCLP where he became Vice President-Radio
Group Operations. Currently, his major responsibilities include supervising the
Stations and promotional companies through the general managers, and acting as a
resource for other operations. Mr. Beck has 22 years of experience in all facets
of the radio and television industries. Mr. Beck earned a B.A. degree in
marketing from Southern Illinois University.
-55-
<PAGE>
DONALD C. TENBARGE, VICE PRESIDENT, CHIEF FINANCIAL OFFICER, SECRETARY AND
ASSISTANT TREASURER. Mr. TenBarge joined BMCLP in 1988. He is responsible for
the financial management and reporting of all operations and companies. In
addition to managing the information systems, Mr. TenBarge also participates in
financing activities and acquisitions. Prior to joining BMCLP, Mr. TenBarge was
a manager in a regional CPA firm where he spent nine years engaged in many
aspects of audit, tax, systems, and financial planning. Mr. TenBarge earned a
B.S. in Accounting from the University of Evansville and is a Certified Public
Accountant.
The Company's businesses depend to a significant extent upon the efforts,
abilities, and expertise of Messrs. Brill, TenBarge, Beck, and Forrest. The loss
of any of these executives of BMCLP potentially would have an adverse effect on
the Company. Neither BMCLP nor the Company has any long-term employment contract
with Mr. Brill or any other executive officer. Mr. Brill has procured key man
insurance on his life in the face amount of $5.0 million for the Company's
benefit.
To the full extent permitted by applicable Virginia law, Media is obligated
to indemnify its officers and directors for liabilities and expenses incurred by
them because of their status as officers or directors of Media.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company to Mr.
Brill, as its President, Chief Executive Officer and Treasurer, in all
capacities during the periods indicated. The Company did not pay any of its
executive officers salary and bonus in excess of $100,000 in fiscal 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------------------------------------
OTHER ANNUAL ALL OTHER
SALARY BONUS COMPENSATION COMPENSATION
NAME AND PRINCIPAL POSITION YEAR $ $ $ $
- --------------------------- ---- ------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Alan R. Brill........................... 1998 0 0 0 0
President, Chief Executive Officer,
Treasurer and Director(1)
</TABLE>
- ----------
(1) Mr. Brill received no compensation from the Company, and the other executive
officers of the Company received no significant compensation from the Company.
All such persons also serve as officers of, and receive compensation from,
BMCLP. BMCLP provides management services to the Company and also to affiliated
and unaffiliated entities other than the Company pursuant to administrative
management agreements. During fiscal 1996, fiscal 1997 and fiscal 1998, BMCLP
earned approximately $1.8 million, $1.9 million and $2.1 million, respectively,
for such services to the Company. See "Certain Relationships and Related
Transactions."
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<PAGE>
Options/SAR Grants in Fiscal 1998
The following table sets forth certain information with respect to
option grants made to Mr. Brill for the fiscal year ended February 28, 1998.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS/SARS STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION FOR
OPTIONS/ SARS EMPLOYEES IN PRICE EXPIRATION OPTION TERM
NAME GRANTED FISCAL YEAR ($/SH) DATE 5% 10%
- ---- ------- ----------- ------ ---- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Alan R. Brill............ 0 N/A N/A N/A $0 $0 $
0
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR 1998 AND 1998
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/
ACQUIRED ON OPTIONS/SARS AT FISCAL SARS AT FISCAL YEAR-
EXERCISE VALUE YEAR-END, EXERCISABLE/ END, EXERCISABLE/
NAME (#)(1) REALIZED ($) UNEXERCISABLE (#) UNEXERCISABLE
- ---- ------ ------------ ----------------- -------------
<S> <C> <C> <C> <C>
Alan R. Brill.......... 0 $0 0 $0
</TABLE>
The Company made no grants to Mr. Brill of options or stock appreciation
rights, and Mr. Brill did not exercise any stock or appreciation rights, in the
fiscal year ended February 28, 1998. Mr. Brill held no options or SARs of the
Company as of February 28, 1998.
Incentive Plan Agreements and Compensation of Directors
The Company has entered into performance incentive plan agreements (the
"Plans") with Clifton E. Forrest with respect to the Newspapers business and
Alan L. Beck with respect to the Stations' business (the "Executives") in their
capacities as executives of the Company. The Plans accumulate increments
annually based on certain defined performance criteria. As of February 28, 1998,
vested interests of the Executives in the Plans totaled $1,500,000 for Mr.
Forrest, and $1,535,000 for Mr. Beck. Payments under the Plans will commence
only upon fulfillment of certain contingencies, including the Executive's death,
disability, retirement, or employment termination and can be paid, at the
Company's option, in amounts not to exceed quarterly payments of 2.5% of the
Executive's vested amount. The Company also participates in a defined
contribution profit sharing plan to which all Company employees may make
voluntary contributions.
In the year ended February 28, 1998, Thompson & McMullan, P.C. (to which
Mr. Laughlin is of counsel) received approximately $389,000 in fees from the
Company.
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<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Mr. Brill is the ultimate owner of all of the equity of the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since their organization or acquisition, each Subsidiary or affiliate owner
of a Newspaper or Station has paid management fees to Brill Media Company, L.P.
("BMCLP") pursuant to management agreements (the "Administrative Management
Agreements"). BMCLP is a limited partnership whose limited partners are Alan R.
Brill and Northwest Radio, Inc., an affiliate owned indirectly by Mr. Brill, and
whose general partner is Brill Media Company, Inc., also an affiliate of the
Company also owned by Mr. Brill. Acting pursuant to such Administrative
Management Agreements, BMCLP is responsible for and provides to the Stations and
Newspapers long-range strategic planning, management support and oversight,
establishment of primary policies and procedures, resource allocation,
accounting and auditing, regulatory and legal compliance and support, license
renewals and the evaluation of potential acquisitions. In addition, executives
of BMCLP visit the Company's Stations and Newspapers on a frequent basis to
review performance, to assist local management with programming, production,
sales, and recruiting efforts, to develop, implement, and verify overall Station
and Newspaper operating and marketing strategies, and, most importantly, to
remain aware of developments in each market. The executives of BMCLP are the
same persons that are executives of BMC (see "Directors and Executive Officers
of the Registrant"), for which they presently receive no compensation from the
Company.
Pursuant to such Administrative Management Agreements, BMCLP earns an
annual fee, paid monthly as permitted, equal to ten percent of each Station's
net cash revenues and five percent of each of the Newspapers' net cash revenues.
Non-operating Subsidiaries and affiliates pay a nominal flat fee for any such
service received. For the years ended February 28, 1998, February 28, 1997 and
February 29, 1996 the aggregate amount of such Administrative Management
Agreement fees charged to Subsidiaries was approximately $2.1 million, $1.9
million and $1.8 million, respectively.
Pursuant to reimbursement agreements, from time to time third-party
services or products (such as insurance coverage) may be provided to one or more
of the Company, its Subsidiaries, or their affiliates, in which case such costs
are reimbursed on a ratable basis to the provider, which may be BMCLP, the
Company, or another Subsidiary or affiliate.
From time to time one or more of the Subsidiaries may provide management
services to a Managed Affiliate on an agreed fee basis for services rendered.
Such fees generally consist of a nominal fixed fee plus a variable additional
fee based upon the Managed Affiliate's performance. One of the Company's
Subsidiaries, Tri-State Broadcasting, Inc.
-58-
<PAGE>
("Tri-State") has entered into such agreements (the "Tri-State Agreements") with
two Managed Affiliates, TSB III, LLC, the owner and operator of Stations WSTO-FM
and WVJS-AM licensed to Owensboro, Kentucky and TSB IV, LLC, the owner and
operator of Station WKDQ-FM, licensed to Henderson, Kentucky, each an entity
wholly owned indirectly by Mr. Brill. Pursuant to the Tri-State Agreements,
Tri-State will receive from each of the Managed Affiliates a monthly fee of
$10,000 and an additional annual fee based upon such Managed Affiliate's
financial performance. The Company charged the Managed Affiliates $240,000 for
the year ended February 28, 1998, for such services.
During the year ended February 28, 1998, the Company declared and paid in
cash $12.2 million in dividends.
On a temporary basis, at a present cost of approximately $70,000 per year,
a Subsidiary, Central Michigan Newspapers, Inc. ("CAN"), presently leases space
from the current owner of a facility that will be owned by CMR Investments, L.P.
("CMR") a limited partnership affiliate of the Company (in which BMCLP's and the
Company's executives, Messrs. Brill, Forrest, and Beck each has an interest as a
limited partner) after closing of the purchase of such property by CMR. CAN has
advanced to CMR the sum of $500,000 (a portion of the insurance proceeds
resulting from a fire loss at CAN's prior production facilities) for CAN's share
of the "build out" costs of new quarters that CAN will lease from CMR and will
occupy after CMR has acquired and renovated the property. After renovation is
complete, CMR and CAN will effect the long-term lease for occupancy of the
improved property for use as the Newspapers' main office and production
facility, all at a cost no greater than that required for comparable space
elsewhere in that market, if available, and CAN will be relieved of its present
several facility commitments.
DRI, LLC, an affiliate owned indirectly by Mr. Brill, recently acquired
title to a building in Duluth, Minnesota (the "Duluth Building"). It is
anticipated that DRI, LLC will enter into a lease on market rental terms with
the Subsidiary Northland Broadcasting, LLC for use of a portion of the Duluth
Building as a studio facility for the Duluth, Minnesota/Superior, Wisconsin
Stations.
From time to time various Company Subsidiaries and affiliates have entered
into loan transactions between themselves, which transactions are duly recorded
in the appropriate Company books and records and the annual effects of which are
fully reflected in the Company's financial statements.
The Company has loaned approximately $17.3 million (of which $1.0 million
was loaned in June of 1998) to Managed Affiliates and received in return
therefor Managed Affiliate Notes which are unsecured, mature on January 1, 2001
and bear interest at a rate of 12% per annum. The proceeds of such loans were
used by the Managed Affiliates to purchase property, equipment, and intangibles
and to provide working capital for operations. Total interest income earned by
the Company on these loans totalled $1,759,000 for the year
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<PAGE>
ended February 28, 1998. It is anticipated that similar relationships may be
initiated with other affiliates in the future. No transaction may cause the
aggregate principal amount of Managed Affiliate Notes then outstanding to exceed
$20.0 million unless: (i) the Board of Directors, including a majority of the
disinterested members of the Board, determines that the terms of the transaction
are no less favorable than those that could be obtained at the time of such
transaction in arms-length dealings with a person who is not an "Affiliate";
(ii) the Company obtains a written opinion of an independent investment bank of
nationally recognized standing that the transaction is fair to the Company from
a financial point of view; and (iii) the Company at the time of the transaction
is able to make a "Restricted Payment" (as such terms are defined in the
Indenture) in an amount equal to such excess amount.
BMCLP will provide management services to certain of the Subsidiaries and
may provide such services to other affiliates. Mr. Brill owns and controls,
directly or indirectly, all of such entities, which also may enter into other
contractual relationships from time to time. Such relationships may present a
conflict between Mr. Brill's interests, as the ultimate owner of all parties to
such relationships, and the interest of the holders of the Securities.
The Company is subject to provisions of Virginia law that restrict
transactions between the Company and its directors and officers, but the Company
does not additionally have a conflicts policy.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(A)(1) CONSOLIDATED FINANCIAL STATEMENTS
The following consolidated financial statements of the Company are
attached hereto:
Report of Independent Auditors
Consolidated Statements of Financial Position at February 28, 1998 and
1997
Consolidated Statements of Operations and Members' Deficiency for the
Years Ended February 28, 1998 and 1997 and February 29, 1996
Consolidated Statements of Cash Flows for the Years Ended February 28,
1998 and 1997 and February 29, 1996
Notes to Consolidated Financial Statements
(A)(2) FINANCIAL STATEMENT SCHEDULES
The following financial statement schedule is set forth herein:
-60-
<PAGE>
Schedule II - Valuation and Qualifying Accounts and Reserves
All other statements and schedules have been omitted because they are not
required under related instructions, are inapplicable or are immaterial, or the
information is shown in the consolidated financial statements of the Company or
the notes thereto.
Brill Media Company, LLC
Schedule II - Valuation and Qualifying Accounts and Reserves
<TABLE>
<CAPTION>
Deductions -
Balance at Charged to Amounts
Beginning of Costs and Written Off Net Balance at End
Description Period Expenses Recoveries of Period
----------- ------ -------- ---------- ---------
<S> <C> <C> <C> <C>
Year ended February 28, 1998:
Allowance for doubtful accounts $ 112,192 $ 402,803 $(340,310) $ 174,685
Year ended February 28, 1997
Allowance for doubtful accounts 184,902 289,363 (362,073) 112,192
Year ended February 29, 1996
Allowance for doubtful accounts 90,261 292,305 (197,664) 184,902
</TABLE>
(A)(3) EXHIBITS:
(A)(4) REPORTS ON FORM 8-K
The Company on May 11, 1998 filed a report on Form 8-K to report, in
Items 2 and 7 thereof, the acquisition of certain newspaper publishing, printing
and distribution assets in northern Michigan. The report included the following
financial statements as exhibits thereto:
(a) Financial Statements of Business Acquired - Star Publications, Inc.,
Central Printing Corporation and Advertiser's Postal Service Corporation
(1) Independent Auditor's Report
(2) Combined Balance Sheet as of December 31, 1997
(3) Combined Statement of Income and Retained Earnings for the year
ended December 31, 1997
(4) Combined Statement of Cash Flows for the year ended December 31,
1997
(5) Notes to Combined Financial Statements
(b) Pro Forma Financial Information of Brill Media Company, LLC
(1) Unaudited Pro Forma Condensed Combined Statement of Operations for
the year ended February 28, 1997 and nine months ended November
30, 1997.
(2) Notes to Unaudited Pro Forma Condensed Combined Statement of
Operations for the year ended February 28, 1997 and nine months
ended November 30, 1997.
(3) Unaudited Pro Forma Condensed Combined Statement of Operations for
the nine months ended November 30, 1997
(4) Notes to Unaudited Pro Forma Condensed Combined Statement of
Operations for the nine months ended November 30, 1997
(5) Unaudited Pro Forma Condensed Combined Balance Sheet as of
November 30, 1997
(6) Notes to Unaudited Pro Forma Condensed Combined Balance Sheet as
of November 30, 1997
-61-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Brill
Media Company, LLC has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BRILL MEDIA COMPANY, LLC
By: BRILL MEDIA MANAGEMENT, INC.,
Manager
June 30, 1998 By /s/ Alan R. Brill
----------------------------------
Alan R. Brill
DIRECTOR, PRESIDENT, CHIEF
EXECUTIVE OFFICER AND TREASURER
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Brill Media
Management, Inc., as Manager of Brill Media Company, LLC, and in the capacities
and on the dates indicated.
<TABLE>
<CAPTION>
DATE SIGNATURE TITLE
---- --------- -----
<S> <C> <C>
June 30, 1998 /s/ Alan R. Brill Director, President, Chief Executive Officer and
---------------------------- Treasurer (Principal Executive Officer)
Alan R. Brill
June 30, 1998 /s/ Donald C. TenBarge Vice President, Chief Financial Officer, Secretary and
---------------------------- Assistant Treasurer (Principal Financial and Accounting
Donald C. TenBarge Officer)
June 30, 1998 /s/ Robert M. Leich Director
----------------------------
Robert M. Leich
June 30, 1998 /s/ Philip C. Fisher Director
----------------------------
Philip C. Fisher
June 30, 1998 /s/ Clifton E. Forrest Director, Vice President, and Assistant Secretary
----------------------------
Clifton E. Forrest
June 30, 1998 /s/ Charles W. Laughlin Director
----------------------------
Charles W. Laughlin
</TABLE>
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<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
2(a) Assets Purchase Agreement dated February 23, 1998 by and among Upper
Michigan Newspapers, LLC, Star Publications, Inc., Gordon G. (as
trustee), Daniel F. Walsh (as trustee), James R. Glasser, David
Baragrey and Mike Adams (incorporated by reference to Exhibit 2(a)
to the Current Report on Form 8-K of Brill Media Company, LLC dated
February 23, 1998 (the "Company's Current Report on Form 8-K"))
2(b) Assets Purchase Agreement dated February 23, 1998 by and among
Advertisers P.S., LLC, Advertiser's Postal Service Corp., Gordon G.
Everett (as trustee), Daniel F. Walsh (as trustee), James R.
Glasser, August A. Tranquilla, Clara Tranquilla, Douglas C. Johnson,
Sherry L. Johnson, Mike Adams and Ken Bradstreet (incorporated by
reference to Exhibit 2(b) to the Company's Current Report on Form
8-K)
2(c) Assets Purchase Agreement dated February 23, 1998 by and among
Central Printing Service, LLC, Central Printing Corporation, Gordon
G. Everett (as trustee), Daniel F. Walsh (as trustee), James R.
Glasser, August A. Tranquilla, Clara Tranquilla, William L. Ezo,
Jeffery Bodette, Frank E. Noverr, Paul Gunderson, Douglas C. Johnson
and Sherry L. Johnson (incorporated by reference to Exhibit 2(c) to
the Company's Current Report on Form 8-K)
3(i)(a) Articles of Organization of Brill Media Company, LLC (incorporated
by reference to Exhibit 3(i)(a) to the Registration Statement on
Form S-4 of Brill Media Company, LLC and Brill Media Managment, Inc.
(No. 333- 44177)(the "Company's Registration Statement on Form S-
4"))
3(i)(b) Articles of Incorporation of Brill Media Management, Inc.
(incorporated by reference to Exhibit 3(i)(b) to the Company's
Registration Statement on Form S-4)
3(i)(c) Articles of Organization of BMC Holdings, LLC (incorporated by
reference to Exhibit 3(i)(c) to the Company's Registration Statement
on Form S-4)
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<PAGE>
3(i)(d) Articles of Incorporation of Reading Radio, Inc. (incorporated by
reference to Exhibit 3(i)(d) to the Company's Registration Statement
on Form S-4)
3(i)(e) Articles of Incorporation of Tri-State Broadcasting, Inc.
(incorporated by reference to Exhibit 3(i)(e) to the Company's
Registration Statement on Form S-4)
3(i)(f) Articles of Incorporation of Northern Colorado Radio, Inc.
(incorporated by reference to Exhibit 3(i)(f) to the Company's
Registration Statement on Form S-4)
3(i)(g) Articles of Incorporation of NCR II, Inc. (incorporated by reference
to Exhibit 3(i)(g) to the Company's Registration Statement on Form
S-4)
3(i)(h) Articles of Incorporation of Central Missouri Broadcasting, Inc.
(incorporated by reference to Exhibit 3(i)(h) to the Company's
Registration Statement on Form S-4)
3(i)(i) Articles of Incorporation of CMB II, Inc. (incorporated by reference
to Exhibit 3(i)(i) to the Company's Registration Statement on Form
S-4)
3(i)(j) Articles of Organization of Northland Broadcasting, LLC
(incorporated by reference to Exhibit 3(i)(j) to the Company's
Registration Statement on Form S-4)
3(i)(k) Articles of Incorporation of NB II, Inc. (incorporated by reference
to Exhibit 3(i)(k) to the Company's Registration Statement on Form
S-4)
3(i)(l) Articles of Incorporation of Central Michigan Newspapers, Inc.
(incorporated by reference to Exhibit 3(i)(l) to the Company's
Registration Statement on Form S-4)
3(i)(m) Articles of Incorporation of Cadillac Newspapers, Inc. (incorporated
by reference to Exhibit 3(i)(m) to the Company's Registration
Statement on Form S-4)
3(i)(n) Articles of Incorporation of CMN Associated Publications, Inc.
(incorporated by reference to Exhibit 3(i)(n) to the Company's
Registration Statement on Form S-4)
3(i)(o) Articles of Limited Partnership of Central Michigan Distribution
Co., L.P. (incorporated by reference to Exhibit 3(i)(o) to the
Company's Registration Statement on Form S-4)
3(i)(p) Articles of Incorporation of Central Michigan Distribution Co., Inc.
(incorporated by reference to
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<PAGE>
Exhibit 3(i)(p) to the Company's Registration Statement on Form S-4)
3(i)(q) Articles of Incorporation of Gladwin Newspapers, Inc. (incorporated
by reference to Exhibit 3(i)(q) to the Company's Registration
Statement on Form S-4)
3(i)(r) Articles of Incorporation of Graph Ads Printing, Inc. (incorporated
by reference to Exhibit 3(i)(r) to the Company's Registration
Statement on Form S-4)
3(i)(s) Articles of Incorporation of Midland Buyers Guide, Inc.
(incorporated by reference to Exhibit 3(i)(s) to the Company's
Registration Statement on Form S-4)
3(i)(t) Articles of Incorporation of St. Johns Newspapers, Inc.
(incorporated by reference to Exhibit 3(i)(t) to the Company's
Registration Statement on Form S-4)
3(i)(u) Articles of Organization of Huron P.S., LLC (incorporated by
reference to Exhibit 3(i)(u) to the Company's Registration Statement
on Form S-4)
3(i)(v) Articles of Organization of Huron Newspapers, LLC (incorporated by
reference to Exhibit 3(i)(v) to the Company's Registration Statement
on Form S-4)
3(i)(w) Articles of Organization of Huron Holdings, LLC (incorporated by
reference to Exhibit 3(i)(w) to the Company's Registration Statement
on Form S-4)
3(i)(x) Articles of Organization of Northern Colorado Holdings, LLC
(incorporated by reference to Exhibit 3(i)(x) to the Company's
Registration Statement on Form S-4)
3(i)(y) Articles of Organization of NCR III, LLC (incorporated by reference
to Exhibit 3(i)(y) to the Company's Registration Statement on Form
S-4)
3(i)(z) Articles of Organization of NCH II, LLC (incorporated by reference
to Exhibit 3(i)(z) to the Company's Registration Statement on Form
S-4)
3(i)(aa) Articles of Organization of Northland Holdings, LLC (incorporated by
reference to Exhibit 3(i)(aa) to the Company's Registration
Statement on Form S-4)
3(i)(bb) Articles of Incorporation of CMN Holding, Inc. (incorporated by
reference to Exhibit 3(i)(bb) to the Company's Registration
Statement on Form S-4)
3(i)(cc) Articles of Incorporation of Brill Radio, Inc. (incorporated by
reference to Exhibit 3(i)(cc) to the Company's Registration
Statement on Form S-4)
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<PAGE>
3(i)(dd) Articles of Incorporation of Brill Newspapers, Inc. (incorporated by
reference to Exhibit 3(i)(dd) to the Company's Registration
Statement on Form S-4)
3(i)(ee) Articles of Organization of Advertisers P.S., LLC (incorporated by
reference to Exhibit 3(i)(ee) to the Company's Registration
Statement on Form S-4)
3(i)(ff) Articles of Organization of Central Printing Service, LLC
(incorporated by reference to Exhibit 3(i)(ff) to the Company's
Registration Statement on Form S-4)
3(i)(gg) Articles of Incorporation of Upper Michigan Management, Inc.
(incorporated by reference to Exhibit 3(i)(gg) to the Company's
Registration Statement on Form S-4)
3(i)(hh) Articles of Organization of Upper Michigan Holdings, LLC
(incorporated by reference to Exhibit 3(i)(hh) to the Company's
Registration Statement on Form S-4)
3(i)(ii) Articles of Incorporation of Upper Michigan Holdings, Inc.
(incorporated by reference to Exhibit 3(i)(ii) to the Company's
Registration Statement on Form S-4)
3(i)(jj) Articles of Organization of Upper Michigan Newspapers, LLC
(incorporated by reference to Exhibit 3(i)(jj) to the Company's
Registration Statement on Form S-4)
3(i)(kk) Articles of Incorporation of BMC Holdings, Inc. (incorporated by
reference to Exhibit 3(i)(kk) to the Company's Registration
Statement on Form S-4)
3(i)(ll) Articles of Incorporation of Huron Holdings Management, Inc.
(incorporated by reference to Exhibit 3(i)(ll) to the Company's
Registration Statement on Form S-4)
3(i)(mm) Articles of Incorporation Huron Newspapers Management, Inc.
(incorporated by reference to Exhibit 3(i)(mm) to the Company's
Registration Statement on Form S-4)
3(i)(nn) Articles of Incorporation of Huron P.S. Management, Inc.
(incorporated by reference to Exhibit 3(i)(nn) to the Company's
Registration Statement on Form S-4)
3(i)(oo) Articles of Incorporation of Northern Colorado Holdings Management,
Inc. (incorporated by reference to Exhibit 3(i)(oo) to the Company's
Registration Statement on Form S-4)
3(i)(pp) Articles of Incorporation of Northland Broadcasting Management, Inc.
(incorporated by reference to Exhibit 3(i)(pp) to the Company's
Registration Statement on Form S-4)
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<PAGE>
3(i)(qq) Articles of Incorporation of Northland Holdings Management, Inc.
(incorporated by reference to Exhibit 3(i)(qq) to the Company's
Registration Statement on Form S-4)
3(ii)(a) Operating Agreement of Brill Media Company, LLC (incorporated by
reference to Exhibit 3(ii)(a) to the Company's Registration
Statement on Form S-4)
3(ii)(b) By-laws of Brill Media Management, Inc. (incorporated by reference
to Exhibit 3(ii)(b) to the Company's Registration Statement on Form
S-4)
3(ii)(c) Operating Agreement of BMC Holdings, LLC (incorporated by reference
to Exhibit 3(ii)(c) to the Company's Registration Statement on Form
S-4)
3(ii)(d) By-laws of Reading Radio, Inc. (incorporated by reference to Exhibit
3(ii)(d) to the Company's Registration Statement on Form S-4)
3(ii)(e) By-laws of Tri-State Broadcasting, Inc. (incorporated by reference
to Exhibit 3(ii)(e) to the Company's Registration Statement on Form
S-4)
3(ii)(f) By-laws of Northern Colorado Radio, Inc. (incorporated by reference
to Exhibit 3(ii)(f) to the Company's Registration Statement on Form
S-4)
3(ii)(g) By-laws of NCR II, Inc. (incorporated by reference to Exhibit
3(ii)(g) to the Company's Registration Statement on Form S-4)
3(ii)(h) By-laws of Central Missouri Broadcasting, Inc. (incorporated by
reference to Exhibit 3(ii)(h) to the Company's Registration
Statement on Form S-4)
3(ii)(i) By-laws of CMB II, Inc. (incorporated by reference to Exhibit
3(ii)(i) to the Company's Registration Statement on Form S-4)
3(ii)(j) Operating Agreement of Northland Broadcasting, LLC (incorporated by
reference to Exhibit 3(ii)(j) to the Company's Registration
Statement on Form S-4) (incorporated by reference to Exhibit
3(ii)(j) to the Company's Registration Statement on Form S-4)
3(ii)(k) By-laws of NB II, Inc. (incorporated by reference to Exhibit
3(ii)(k) to the Company's Registration Statement on Form S-4)
3(ii)(l) By-laws of Central Michigan Newspapers, Inc. (incorporated by
reference to Exhibit 3(ii)(l) to the Company's Registration
Statement on Form S-4)
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<PAGE>
3(ii)(m) By-laws of Cadillac Newspapers, Inc. (incorporated by reference to
Exhibit 3(ii)(m) to the Company's Registration Statement on Form
S-4)
3(ii)(n) By-laws of CMN Associated Publications, Inc. (incorporated by
reference to Exhibit 3(ii)(n) to the Company's Registration
Statement on Form S-4)
3(ii)(o) Partnership Agreement of Central Michigan Distribution Co., L.P.
(incorporated by reference to Exhibit 3(ii)(o) to the Company's
Registration Statement on Form S-4)
3(ii)(p) By-laws of Central Michigan Distribution Co., Inc. (incorporated by
reference to Exhibit 3(ii)(p) to the Company's Registration
Statement on Form S-4)
3(ii)(q) By-laws of Gladwin Newspapers, Inc. (incorporated by reference to
Exhibit 3(ii)(q) to the Company's Registration Statement on Form
S-4)
3(ii)(r) By-laws of Graph Ads Printing, Inc. (incorporated by reference to
Exhibit 3(ii)(r) to the Company's Registration Statement on Form
S-4)
3(ii)(s) By-laws of Midland Buyers Guide, Inc. (incorporated by reference to
Exhibit 3(ii)(s) to the Company's Registration Statement on Form
S-4)
3(ii)(t) By-laws of St. Johns Newspapers, Inc. (incorporated by reference to
Exhibit 3(ii)(t) to the Company's Registration Statement on Form
S-4)
3(ii)(u) Operating Agreement of Huron P.S., LLC (incorporated by reference to
Exhibit 3(ii)(u) to the Company's Registration Statement on Form
S-4)
3(ii)(v) Operating Agreement of Huron Newspapers, LLC (incorporated by
reference to Exhibit 3(ii)(v) to the Company's Registration
Statement on Form S-4)
3(ii)(w) Operating Agreement of Huron Holdings, LLC (incorporated by
reference to Exhibit 3(ii)(w) to the Company's Registration
Statement on Form S-4)
3(ii)(x) Operating Agreement of Northern Colorado Holdings, LLC (incorporated
by reference to Exhibit 3(ii)(x) to the Company's Registration
Statement on Form S-4)
3(ii)(y) Operating Agreement of NCR III, LLC (incorporated by reference to
Exhibit 3(ii)(y) to the Company's Registration Statement on Form
S-4)
3(ii)(z) Operating Agreement of NCH II, LLC (incorporated by reference to
Exhibit 3(ii)(z) to the Company's Registration Statement on Form
S-4)
-68-
<PAGE>
3(ii)(aa) Operating Agreement of Northland Holdings, LLC (incorporated by
reference to Exhibit 3(ii)(aa) to the Company's Registration
Statement on Form S-4)
3(ii)(bb) By-laws of CMN Holding, Inc. (incorporated by reference to Exhibit
3(ii)(bb) to the Company's Registration Statement on Form S-4)
3(ii)(cc) By-laws of Brill Radio, Inc. (incorporated by reference to Exhibit
3(ii)(cc) to the Company's Registration Statement on Form S-4)
3(ii)(dd) By-laws of Brill Newspapers, Inc. (incorporated by reference to
Exhibit 3(ii)(dd) to the Company's Registration Statement on Form
S-4)
3(ii)(ee) Operating Agreement of Advertisers P.S., LLC (incorporated by
reference to Exhibit 3(ii)(ee) to the Company's Registration
Statement on Form S-4)
3(ii)(ff) Operating Agreement of Central Printing Service, LLC (incorporated
by reference to Exhibit 3(ii)(ff) to the Company's Registration
Statement on Form S-4)
3(ii)(gg) By-laws of Upper Michigan Management, Inc. (incorporated by
reference to Exhibit 3(ii)(gg) to the Company's Registration
Statement on Form S-4)
3(ii)(hh) Operating Agreement of Upper Michigan Holdings, LLC (incorporated by
reference to Exhibit 3(ii)(hh) to the Company's Registration
Statement on Form S-4)
3(ii)(ii) By-laws of Michigan Holdings, Inc. (incorporated by reference to
Exhibit 3(ii)(ii) to the Company's Registration Statement on Form
S-4)
3(ii)(jj) Operating Agreement of Upper Michigan Newspapers, LLC (incorporated
by reference to Exhibit 3(ii)(jj) to the Company's Registration
Statement on Form S-4)
3(ii)(kk) By-laws of BMC Holdings, Inc. (incorporated by reference to Exhibit
3(ii)(kk) to the Company's Registration Statement on Form S-4)
3(ii)(ll) By-laws of Huron Holdings Management, Inc. (incorporated by
reference to Exhibit 3(ii)(ll) to the Company's Registration
Statement on Form S-4)
3(ii)(mm) By-laws of Huron Newspapers Management, Inc. (incorporated by
reference to Exhibit 3(ii)(mm) to the Company's Registration
Statement on Form S-4)
-69-
<PAGE>
3(ii)(nn) By-laws of Huron P.S. Management, Inc. (incorporated by reference to
Exhibit 3(ii)(nn) to the Company's Registration Statement on Form
S-4)
3(ii)(oo) By-laws of Northern Colorado Holdings Management, Inc. (incorporated
by reference to Exhibit 3(ii)(oo) to the Company's Registration
Statement on Form S-4)
3(ii)(pp) By-laws of Northland Broadcasting Management, Inc. (incorporated by
reference to Exhibit 3(ii)(pp) to the Company's Registration
Statement on Form S-4)
3(ii)(qq) By-laws of Northland Holdings Management, Inc. (incorporated by
reference to Exhibit 3(ii)(qq) to the Company's Registration
Statement on Form S-4)
4.1 Indenture dated as of December 30, 1997 among Brill Media Company,
LLC, Brill Media Management, Inc., the Subsidiary Guarantors named
therein, and United States Trust Company of New York, as Trustee,
with the forms of 12% Senior Notes due 2007 and Series B 12% Senior
Notes due 2007 included therein (incorporated by reference to
Exhibit 4.1 to the Company's Registration Statement on Form S-4)
4.2 Indenture dated as of December 30, 1997 among Brill Media Company,
LLC, Brill Media Management, Inc., the Subsidiary Guarantors named
therein, and United States Trust Company of New York, as Trustee,
with the forms of Appreciation Notes due 2007 and Series B
Appreciation Notes due 2007 included therein (incorporated by
reference to Exhibit 4.2 to the Company's Registration Statement on
Form S-4)
4.3 First Supplemental Indenture among Brill Media Company, LLC, Brill
Media Management, Inc., the Subsidiary Guarantors named therein, and
United States Trust Company of New York, as Trustee, relating to the
Appreciation Notes due 2007 (incorporated by reference to Exhibit
4.3 to the Company's Registration Statement on Form S-4)
4.4 First Supplemental Indenture among Brill Media Company, LLC, Brill
Media Management, Inc., the Subsidiary Guarantors named therein, and
United States Trust Company of New York, as Trustee, relating to the
12% Senior Notes due 2007 (incorporated by reference to Exhibit 4.4
to the Company's Registration Statement on Form S-4)
10.1(a) Performance Incentive Plan Agreement dated November 26, 1985 between
Central Michigan Newspapers, Inc. and Clifton E. Forrest
(incorporated by reference to Exhibit 10.1(a) to the Company's
Registration Statement on Form S-4)
-70-
<PAGE>
10.1(b) Performance Incentive Plan Agreement dated November 26, 1985 between
WIOV, Inc. and Alan L. Beck (incorporated by reference to Exhibit
10.1(b) to the Company's Registration Statement on Form S-4)
10.2 Managed Affiliates Subordination Agreement dated December 30, 1997
among Brill Media Company, L.P. and certain Subsidiaries
(incorporated by reference to Exhibit 10.2 to the Company's
Registration Statement on Form S-4)
10.3 Management Agreements dated December 30, 1987 between various
subsidiaries of Brill Media Company, LLC and Brill Media Company,
L.P. (incorporated by reference to Exhibit 10.3 to the Company's
Registration Statement on Form S-4)
10.4(a) Managed Affiliate Management Agreement dated December 30, 1997
between Tri-State Broadcasting, Inc. and TSB III, LLC (incorporated
by reference to Exhibit 10.4(a) to the Company's Registration
Statement on Form S-4)
10.4(b) Managed Affiliate Management Agreement dated December 30, 1997
between Tri-State Broadcasting, Inc. and TSB IV, LLC (incorporated
by reference to Exhibit 10.4(b) to the Company's Registration
Statement on Form S-4)
10.5(a) Managed Affiliate Promissory Note dated December 30, 1997 of TSB
III, LLC in favor of Tri-State Broadcasting, Inc. (incorporated by
reference to Exhibit 10.5(a) to the Company's Registration Statement
on Form S-4)
10.5(b) Managed Affiliate Promissory Note dated December 30, 1997 of TSB IV,
LLC in favor of Tri-State Broadcasting, Inc. (incorporated by
reference to Exhibit 10.5(b) to the Company's Registration Statement
on Form S-4)
10.6(a) Asset Purchase Agreement dated October 24, 1997 between CMBH, Inc.
and MVP Radio, Inc. (incorporated by reference to Exhibit 10.6(a) to
the Company's Registration Statement on Form S-4)
10.6(b) Asset Purchase Agreement dated October 24, 1997 between Central
Missouri Broadcasting, Inc. and Zimmer Radio of Mid-Missouri, Inc.
(incorporated by reference to Exhibit 10.6(b) to the Company's
Registration Statement on Form S-4)
10.7 Amended and Restated Credit Agreement dated as of September 30, 1997
by and among the Borrowers named therein, Amresco Funding
Corporation and Goldman Sachs Credit Partners L.P. (incorporated by
reference to Exhibit 10.7 to the Company's Registration Statement on
Form S-4)
-71-
<PAGE>
10.8(a) Time Brokerage Agreement dated November 1, 1997 between CMB II, Inc.
and MVP Radio, Inc. (incorporated by reference to Exhibit 10.8(a) to
the Company's Registration Statement on Form S-4)
10.8(b) Time Brokerage Agreement dated November 1, 1997 between Central
Missouri Broadcasting, Inc. and Zimmer Radio of Mid-Missouri, Inc.
(incorporated by reference to Exhibit 10.8(b) to the Company's
Registration Statement on Form S-4)
10.8(c) Time Brokerage Agreement dated June 27, 1996 between NCR II, Inc.
and Onyx, Inc. (incorporated by reference to Exhibit 10.8(c) to the
Company's Registration Statement on Form S-4)
10.9 Purchase Agreement dated December 22, 1997 by and among Brill Media
Company, LLC, Brill Media Management, Inc., the Subsidiary
Guarantors named therein, and NatWest Capital Markets Limited
(incorporated by reference to Exhibit 10.9 to the Company's
Registration Statement on Form S-4)
10.10(a) Registration Rights Agreement dated as of December 30, 1997 by and
among Brill Media Company, LLC, Brill Media Management, Inc., the
Subsidiary Guarantors named therein, and NatWest Capital Markets
Limited (incorporated by reference to Exhibit 10.10(a) to the
Company's Registration Statement on Form S-4)
10.10(b) Appreciation Notes Registration Rights Agreement dated as of
December 30, 1997 by and among Brill Media Company, LLC, Brill Media
Management, Inc., the Subsidiary Guarantors named therein, and
NatWest Capital Markets Limited (incorporated by reference to
Exhibit 10.10(b) to the Company's Registration Statement on Form
S-4)
10.11(a) Revolving Credit Agreement dated December 30, 1997 between various
Subsidiary Guarantors and BMC Holdings, LLC (incorporated by
reference to Exhibit 10.11(a) to the Company's Registration
Statement on Form S-4)
10.11(b) Revolving Credit Note dated December 30, 1997 between various
Subsidiary Guarantors and BMC Holdings, LLC (incorporated by
reference to Exhibit 10.11(b) to the Company's Registration
Statement on Form S-4)
10.11(c) Promissory Note dated December 30, 1997 between BMC Holdings, LLC
and Brill Media Company, LLC (incorporated by reference to Exhibit
10.11(c) to the Company's Registration Statement on Form S-4)
-72-
<PAGE>
10.12 Form of Seller Note (incorporated by reference to Exhibit 10 to the
Company's Current Report on Form 8-K)
21 Subsidiaries of Brill Media Company, LLC
27 Financial Data Schedule
-73-
EX-21
Subsidiaries
Subsidiaries of Brill Media Company, LLC
Brill Media Management, Inc.
BMC Holdings, LLC
Huron Holdings, LLC
Northern Colorado Holdings, LLC
NCR III, LLC
NCH II, LLC
Northland Holdings, LLC
CMN Holding, Inc.
Brill Radio, Inc.
Brill Newspapers, Inc.
Reading Radio, Inc.
Tri-State Broadcasting, Inc.
Northern Colorado Radio, Inc.
NCR II, Inc.
Central Missouri Broadcasting, Inc.
CMB II, Inc.
Northland Broadcasting, LLC
NB II, Inc.
Central Michigan Newspapers, Inc.
Cadillac Newspapers, Inc.
CMN Associated Publications, Inc.
Central Michigan Distribution Co., L.P.
Central Michigan Distribution Co., Inc.
Gladwin Newspapers, Inc.
Graph Ads Printing, Inc.
Midland Buyer's Guide, Inc.
St. Johns Newspapers, Inc.
Huron P.S., LLC
Huron Newspapers, LLC
Advertisers P.S., LLC
Central Printing Service, LLC
Upper Michigan Holdings, Inc.
Upper Michigan Holdings, LLC
Upper Michigan Management, Inc.
Upper Michigan Newspapers, LLC
BMC Holdings, Inc.
Huron Holdings Management, Inc.
Huron Newspapers Management, Inc.
Huron P.S. Management, Inc.
Northern Colorado Holdings Management, Inc.
Northland Broadcasting Management, Inc.
Northland Holdings Management, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
financial statements in the Form 10-K of Brill Medial Company, LLC for the
fiscal year ended February 28, 1998 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1997
<PERIOD-END> FEB-28-1998
<CASH> 10,918,000
<SECURITIES> 0
<RECEIVABLES> 3,719,000
<ALLOWANCES> 175,000
<INVENTORY> 629,000
<CURRENT-ASSETS> 15,983,000
<PP&E> 20,714,000
<DEPRECIATION> 8,875,000
<TOTAL-ASSETS> 66,149,000
<CURRENT-LIABILITIES> 4,608,000
<BONDS> 109,051,000
0
0
<COMMON> 0
<OTHER-SE> (47,510,000)
<TOTAL-LIABILITY-AND-EQUITY> 66,149,000
<SALES> 29,567,000
<TOTAL-REVENUES> 29,567,000
<CGS> 24,415,000
<TOTAL-COSTS> 24,415,000
<OTHER-EXPENSES> (101)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,470,000
<INCOME-PRETAX> (4,419,000)
<INCOME-TAX> 149,000
<INCOME-CONTINUING> (4,568,000)
<DISCONTINUED> 0
<EXTRAORDINARY> (4,124,000)
<CHANGES> 0
<NET-INCOME> (8,692,000)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
