UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 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.)
420 N.W. Fifth Street
Evansville, Indiana 47708
(address of principal executive offices)
(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
<PAGE>
TABLE OF CONTENTS
PART NO. ITEM NO. Page No.
- -------- -------- --------
I 1 FINANCIAL STATEMENTS
Consolidated Statements of Financial Position
November 30, 1998 and February 28, 1998 3
Consolidated Statements of Operations and
Members' Deficiency for the Three Months
Ended November 30, 1998 and 1997 and
Nine Months Ended November 30, 1998 and 1997 4
Consolidated Statements of Cash Flows for the
Nine Months Ended November 30, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
2 MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS 7
II 6 EXHIBITS AND REPORTS ON
FORM 8-K 15
2
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
Brill Media Company, LLC
(A Limited Liability Company)
Consolidated Statements of Financial Position
<TABLE>
<CAPTION>
November 30 February 28
1998 1998
------------------------------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 6,118,135 $ 10,917,613
Accounts receivable, net 6,291,936 3,544,246
Interest receivable on notes from managed affiliates -- 324,357
Inventories 554,992 628,711
Other current assets 705,685 567,632
------------------------------
Total current assets 13,670,678 15,982,559
Notes receivable from managed affiliates 18,025,747 16,315,747
Property and equipment 22,971,745 20,713,615
Less: Accumulated depreciation 9,922,192 8,874,995
------------------------------
Net property and equipment 13,049,553 11,838,620
Goodwill and FCC licenses, net 11,804,223 12,056,591
Covenants not to compete, net 4,053,763 3,884,427
Other assets, net 6,029,162 6,071,047
------------------------------
21,887,148 22,012,065
Amount due from affiliate 3,076,729 --
------------------------------
$ 69,709,855 $ 66,148,991
==============================
Liabilities and members' deficiency
Current liabilities:
Amounts payable to affiliates $ 632,091 $ 724,587
Accounts payable 1,757,797 745,210
Accrued payroll and related expenses 782,208 595,762
Accrued interest 3,666,816 1,341,390
Other accrued expenses 537,626 195,378
Current maturities of long-term obligations 1,160,162 1,005,875
------------------------------
Total current liabilities 8,536,700 4,608,202
Long-term notes and other obligations 113,154,404 109,050,787
Members' deficiency (51,981,249) (47,509,998)
------------------------------
$ 69,709,855 $ 66,148,991
==============================
</TABLE>
See accompanying notes to the consolidated financial statements.
3
<PAGE>
Brill Media Company, LLC
(A Limited Liability Company)
Consolidated Statements of Operations and Members' Deficiency
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
November 30 November 30
1998 1997 1998 1997
------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 10,789,764 $ 7,874,950 $ 31,482,863 $ 22,975,007
Operating expenses:
Operating departments 7,718,187 5,580,750 22,511,320 15,685,093
Incentive plan -- 60,000 -- 545,000
Management fees 695,106 526,717 2,021,895 1,598,431
Time brokerage agreement fees 12,000 12,000 36,000 36,000
Consulting 92,025 62,998 216,021 180,994
Depreciation 369,453 264,408 1,074,926 772,720
Amortization 347,855 284,450 1,020,042 525,165
------------------------------------------------------------
9,234,626 6,791,323 26,880,204 19,343,403
------------------------------------------------------------
Operating income 1,555,138 1,083,627 4,602,659 3,631,604
Other income (expense):
Interest - managed affiliates 525,291 656,643 1,551,657 1,220,225
Interest - affiliates, net 49,066 65,240 39,810 193,318
Interest - other, net (3,385,574) (3,060,260) (9,969,358) (7,450,455)
Amortization of deferred financing costs (149,615) (198,948) (449,247) (481,824)
Gain (loss) on sale of assets, net 4,278 2,356 4,278 (6,592)
Other, net (34,371) (22,845) (130,307) (44,808)
------------------------------------------------------------
(2,990,925) (2,557,814) (8,953,167) (6,570,136)
------------------------------------------------------------
Loss before income taxes (1,435,787) (1,474,187) (4,350,508) (2,938,532)
Income tax provision 55,183 24,884 136,783 102,750
------------------------------------------------------------
Net loss (1,490,970) (1,499,071) (4,487,291) (3,041,282)
Members' deficiency, beginning of period (50,490,279) (31,150,194) (47,509,998) (26,609,973)
Capital contributions -- 1,020 16,040 3,010
Distributions -- (9,210,000) -- (12,210,000)
------------------------------------------------------------
Members' deficiency, end of period $(51,981,249) $(41,858,245) $(51,981,249) $(41,858,245)
============================================================
</TABLE>
See accompanying notes to the consolidated financial statements.
4
<PAGE>
Brill Media Company, LLC
(A Limited Liability Company)
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended November 30
1998 1997
-----------------------------
<S> <C> <C>
Operating activities
Net loss $ (4,487,291) $ (3,041,282)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 2,094,968 1,297,885
Amortization of deferred financing costs and original issue 3,961,109 481,824
discount
Management fees accrual 560,172 553,933
Affiliate interest accrual 283,448 (198,235)
Additional interest accrual -- 2,020,592
Incentive plan accrual -- 545,000
(Gain) loss on sale of assets, net (4,278) 6,592
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable (2,520,357) (720,295)
Other current assets (59,294) (344,196)
Accounts payable 983,445 445,010
Other accrued expenses 2,809,119 (392,971)
-----------------------------
Net cash provided by operating activities 3,621,041 653,857
Investing activities
Purchase of property and equipment (1,348,001) (609,885)
Purchase of newspapers, net of cash acquired (50,000) (899,642)
Proceeds from sale of assets 54,895 30,415
Payment for noncompetition agreement (450,000) (3,000,000)
Loans to managed affiliates (1,710,000) (14,585,868)
Loan to affiliate (3,000,000) --
Decrease in amounts due from affiliates -- 4,157,453
Increase in other assets (46,510) (127,295)
-----------------------------
Net cash used in investing activities (6,549,616) (15,034,822)
Financing Activities
Increase (decrease) in amounts due to affiliates (690,819) 353,108
Payment of deferred financing costs (491,802) (518,025)
Principal payments on long-term obligations (758,769) (695,324)
Proceeds from long-term borrowings 54,447 26,781,988
Capital contributions 16,040 3,010
Distributions -- (12,210,000)
-----------------------------
Net cash provided by (used in) financing activities (1,870,903) 13,714,757
-----------------------------
Net decrease in cash and cash equivalents (4,799,478) (666,208)
Cash and cash equivalents at beginning of period 10,917,613 775,363
-----------------------------
Cash and cash equivalents at end of period $ 6,118,135 $ 109,155
=============================
</TABLE>
See accompanying notes to the consolidated financial statements.
5
<PAGE>
Brill Media Company, LLC
Notes to the Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
The accompanying unaudited 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). These statements have been prepared in accordance
with generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments, consisting of normal recurring
accruals, considered necessary for a fair presentation have been included along
with the elimination of all intercompany balances and transactions. Operating
results for both the three month and the nine month periods ended November 30,
1998 are not necessarily indicative of the results that may be expected for the
year ending February 28, 1999. For further information, refer to the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended February 28, 1998.
2. Pending Dispositions and Completed Acquisitions
On October 24, 1997, the Company entered into contracts to sell the
operating assets of its Missouri stations (collectively, the Missouri
Properties). The Company also executed Time Brokerage Agreements (TBAs) under
which the proposed buyers provide programming and related services to the
Missouri Properties beginning November 1, 1997, for $50,000 per month, until
transfer of the Federal Communications Commission (FCC) licenses is complete.
Accordingly, other than pursuant to the TBAs, 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 TBAs.
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 transactions would violate federal or Missouri antitrust
laws. The Company complied with the demand. The Attorney General of the State of
Missouri has since filed comments with the FCC objecting to the proposed
transfers. The FCC has taken no further action on the Petition to Deny. The
Company believes that, even if the Petition to Deny were granted, any adverse
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
6
<PAGE>
reaching approximately 164,000 households in the north-central portion of the
lower peninsula of Michigan (the 1998 News acquisitions). Of such acquisitions,
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.
On November 1, 1998, the Company acquired three weekly shopping guide
publications and a print distribution operation reaching approximately 66,000
households in the north-western portion of the lower peninsula of Michigan (the
1999 News acquisition) for total consideration of $1,760,000, which consisted of
$500,000 cash at closing, a secured seller note and a six year covenant not to
compete.
3. Long Term Debt
Long-term obligations include the Company's 12% senior notes due 2007 (the
Notes) and appreciation notes due 2007 (the Appreciation Notes). The Notes are
senior unsecured obligations of BMC and a subsidiary of BMC, Brill Media
Management, Inc. (Media). The Appreciation Notes are unsecured subordinated
obligations of BMC and Media. The Notes and Appreciation Notes are
unconditionally guaranteed, fully, jointly, and severally, by each of the
Company's subsidiaries other than Media (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 Media and the Guarantors
have not been presented because management has determined that they would not be
material to investors.
4. Affiliate Transaction
During fiscal year 1999, the Company has advanced $1,710,000 to certain of
its affiliates (the Managed Affiliates) under the existing Managed Affiliates
Notes (which are described in Item 2 below).
ITEM 2. MANAGEMENT'S DISSCUSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General Information and Basis of Presentation
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
7
<PAGE>
thirty-five-county area in the central and northern portions of the lower
peninsula of Michigan. This operation offers a three-edition daily newspaper,
twenty-five weekly publications, web offset printing operations for Newspapers'
publications and outside customers, and private distribution systems. Mr. Brill
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., a limited
partnership indirectly owned by Mr. Brill.
Recent Developments
In December 1998, the Company received notice from the FCC that the
petition to deny license renewal for KUAD-FM located in Windsor, Colorado, has
been dismissed and license renewal granted.
In December 1998, the Company received notice from the FCC that the request
for transfer of the KTRR-FM license to the Company has been granted. This
station is located in Loveland, Colorado. The Company is currently operating the
radio station under a TBA and is working toward completion of the acquisition.
Results of Operations
The Company's unaudited consolidated financial statements tend not to be
directly comparable from period to period due to both completed acquisitions and
pending dispositions. These activities are identified in the notes to the
audited and unaudited consolidated financial statements of the Company.
Three Months Ended November 30, 1998 Compared to Three Months Ended November 30,
1997
Revenues for the three months ended November 30, 1998 were $10.8 million, a
$2.9 million or 37.0% increase from the prior comparative period. For the
current quarter, Stations' revenues represented $4.1 million and Newspapers'
revenues represented $6.7 million.
Stations' revenues, excluding the Missouri Properties, increased $.5
million or 14.0% from the prior comparative period. Total revenues of the
Stations increased $.3 million from the prior comparative period.
The Newspapers' revenues increased $2.6 million or 65.5% from the prior
comparative period. The 1999 and 1998 News acquisitions accounted for $2.4
million of the increase.
Operating expenses for the three months ended November 30, 1998 were $9.2
million, a $2.4 million or 36.0% increase from the prior comparative period.
8
<PAGE>
The Stations' operating expenses, excluding the Missouri Properties,
increased $.3 million or 10.7% over the prior comparative period primarily
as a result of salary and promotional related expenditures necessary for
continued market expansion. Total operating expenses of the Stations were
unchanged from the prior comparative period.
The Newspapers' operating expenses increased $2.5 million over the prior
comparative period. Of this increase, $2.3 million was attributable to the
1999 and 1998 News acquisitions.
As a result of the above, operating income for the three months ended
November 30, 1998 was $1.6 million, up $.5 million from the prior comparative
period.
Other income (expense) for the three months ended November 30, 1998 was
$3.0 million of net expense, an increase of $.4 million or 16.9% over the prior
comparative period. This is primarily due to an increase in interest expense
associated with the additional borrowing and financing activities for the
acquisitions referenced above.
Nine Months Ended November 30, 1998 Compared to Nine Months Ended November 30,
1997
Revenues for the nine months ended November 30, 1998 were $31.5 million, a
$8.5 million or 37.0% increase from the prior comparative period. For the
current fiscal year, Stations' revenues represented $11.6 million and
Newspapers' revenues represented $19.9 million.
Stations' revenues, excluding the Missouri Properties, grew $.9 million or
8.4% from the prior comparative period due to continued operations growth.
Total revenues of the Stations decreased $.2 million from the prior
comparative period.
The Newspapers' revenues increased $8.7 million or 78.6% from the prior
comparative period. The 1999 and 1998 News acquisitions accounted for $8.0
million of the increase.
Operating expenses for the nine months ended November 30, 1998 were $26.9
million, a $7.5 million or 39.0% increase from the prior comparative period.
The Stations' operating expenses, excluding the Missouri Properties,
increased $1.1 million or 12.8% from the prior comparative period primarily
as a result of salary and promotional related expenditures necessary for
continued market expansion. The total operating expenses of the Stations
were unchanged from the prior comparative period.
The 1999 and 1998 News acquisitions represented $7.3 million of increased
operating expenses.
9
<PAGE>
As a result of the above, operating income for the nine months ended
November 30, 1998 was $4.6 million, an increase of $1.0 million or 26.7% from
the prior comparative period.
Other income (expense) for the nine months ended November 30, 1998 was $9.0
million of net expense, an increase of $2.4 million or 36.3% over the prior
comparative period. Of this increase, $2.5 million is due to an increase in
interest expense associated with the additional borrowings under the Notes and
financing activities for the acquisitions referenced above, offset by $.3
million of increased managed affiliate interest income.
Liquidity and Capital Resources
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. During the nine
months ended November 30, 1998, accounts receivable net of accounts payable
increased by $1.7 million, as a result of seasonal fluctuations and the 1999 and
1998 News acquisitions.
Net cash provided by operating activities was $3.6 million for the nine
months ended November 30, 1998. The increase of $3.0 million from the
comparative fiscal 1998 period is primarily attributable to cash flow generated
by the operating activities of the 1998 News acquisitions and the change to a
semi-annual frequency of interest payments (June/December) offset by increased
payments of managements fees, along with the timing related to the collection of
receivables and the payment of operating expenses.
Net cash used in investing activities was $6.5 million for the nine months
ended November 30, 1998. The cash used in investing activities for the current
reporting period is primarily attributable to the additional loans to Managed
Affiliates, a loan to an affiliate, the 1999 News Acquisition and purchase of
property and equipment. The decrease of $8.5 million in cash used in investing
activities from the prior comparative reporting period is related primarily to
decreased loans to Managed Affiliates, news acquisitions and non-compete
agreement payments, offset by increased purchases of property and equipment and
the prior year receipt of amounts due from affiliates.
Net cash used in financing activities was $1.9 million for the nine months
ended November 30, 1998. The use of cash for the current reporting period is
attributable primarily to payments of amounts due to affiliates, deferred
financing costs and long-term obligations. The decrease of $15.6 million in cash
provided by financing activities from the prior comparative reporting period is
related primarily to the increased payment of amounts due to affiliates and
fiscal 1998 proceeds from long-term borrowings net of distributions.
10
<PAGE>
Media cashflow was $10.83 million and $8.53 million for the nine month
periods ended November 30, 1998 and 1997, respectively. Media cashflow
represents EBITDA plus incentive plan expense, management fees, time brokerage
fee expense, consulting expense, income from temporary cash investments and
interest income from loans made by the Company to Managed Affiliates. EBITDA is
generally defined as net income plus the income tax provision, consolidated
interest expense, depreciation expense and amortization expense. Media cashflow
and EBITDA as used above include the earnings of unrestricted subsidiaries and
therefore differ from the same terms as defined in the indenture under which the
Company's Notes were issued (the Indenture).
Although media cashflow is not a measure of performance calculated in
accordance with GAAP, management believes it is useful in evaluating the Company
and is widely used in the media industry to evaluate a media company's
performance. However, media cashflow should not be considered in isolation or as
a substitute for net income, cash flows from operating activities and other
income or cash flow statements prepared in accordance with GAAP as a measure of
liquidity or profitability. In addition, media cashflow as determined by the
Company may not be comparable to related or similar measures as reported by
other companies and does not represent funds available for discretionary use.
The Company has loaned approximately $18.0 million to Managed Affiliates
and received in return 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 have been used by the Managed Affiliates to purchase property,
equipment, and intangibles and provide working capital. 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. For the nine month period ended November 30, 1998,
the Managed Affiliates reported combined revenues of $3.7 million, net loss of
$1.7 million and media cash flow of $.74 million.
The Notes require semi-annual cash interest payments on each June 15 and
December 15 of $3.9 million through December 15, 1999 and $6.3 million from June
15, 2000 until maturity. The holders of the Appreciation Notes have the right to
require redemption of the Appreciation Notes at various prices and upon various
events (including an initial public offering) and dates, including a right to
require redemption of the Appreciation Notes at an aggregate price of $24
million on June 30, 2003 if an initial public offering has not occurred on or
before that date. The Company intends, subject to its rights under the
Indenture, to redeem the Appreciation Notes on June 15, 1999 at a redemption
price of $3 million, but there can be no assurances that it will meet the
conditions under which those rights can be exercised. The Company anticipates if
necessary, the possibility of an additional equity contribution by Mr. Brill,
which the Company believes would allow it to redeem the Appreciation Notes.
However, there can
11
<PAGE>
be no assurances that the Company or Mr. Brill will have sufficient resources to
redeem the Appreciation Notes or make an additional equity contribution.
The Company's ability to pay interest on the Notes when due, redeem the
Appreciation Notes and to satisfy its other obligations depends upon its future
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.
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 and to take
advantage of business opportunities.
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, consummation of the sale of the Missouri Properties
and indebtedness permitted under the Indenture. The Company believes that
liquidity from such sources should be sufficient to permit the Company to meet
its debt service obligations, capital expenditures and working capital needs for
the next 12 months, although additional capital resources may be required in
connection with the further implementation of the Company's acquisition strategy
and the potential redemption of the Appreciation Notes on June 15, 1999.
During the nine month period ended November 30, 1998, the Company has
expended $1.3 million to purchase property and equipment and projects
approximately
12
<PAGE>
$.3 million will be required during the fourth quarter of fiscal year 1999. The
increase in projected capital expenditures for fiscal 1999 is primarily due to
improvements at broadcast transmission facilities and Newspaper acquisition
activities.
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.
Year 2000
The Company has commenced a process to ensure year 2000 compliance of all
hardware; software; the Stations' broadcast systems; the Newspapers' publishing,
production and distribution systems; business office systems; and ancillary
equipment that are date dependent. The process involves three phases:
Phase I - Inventory and Data Collection
This phase involves inventorying the above categories at each of the
Company's locations to identify date dependent items. This phase was commenced
in the fourth quarter of fiscal 1998 and has been substantially completed as of
the date hereof.
Phase II - Remediation
This phase involves requests to information and non-information technology
system vendors for verification that the items identified in Phase I as being
date dependent are in fact Year 2000 compliant. This portion of the phase was
commenced in the first quarter of fiscal 1999 and has been substantially
completed as of the date hereof. This phase also includes implementing the steps
necessary to upgrade and/or replace necessary items, for which a projected
completion date is identified below.
o The Company has concluded, through written confirmations and manufacturer
website notices, that essentially all local area network (LAN) hardware and
software, business office software and systems, and broadcast systems for
the Stations are year 2000 compliant.
o The Company has determined that, for the Stations, one production and
on-air system still requires upgrading and a minor number of personal
computers at various locations will require replacement. It is expected
that these actions will be completed by the end of the third quarter of
fiscal year 2000.
13
<PAGE>
o The Company has concluded, through written confirmations and manufacturer
website notices, that essentially all LAN hardware and software along with
publishing and production systems for the Newspapers are year 2000
compliant.
o The Company has determined that, for the Newspapers, one distribution
software package will require replacement, the accounting software at two
locations will require upgrading and a minor number of personal computers
at various locations will require replacement. It is expected that these
actions will be completed by the end of the third quarter of fiscal year
2000.
Phase III - Verification
This phase involves reviewing all manufacturer websites on a quarterly
basis for any change in status and testing all items that are date dependent. It
is expected testing will be completed during the third quarter of fiscal year
2000.
Summation
To date, the Company believes that its major systems and equipment are Year
2000 compliant. The Company is not aware of any non-compliance that would be
material to repair or replace or that would have a material effect on operations
if compliance were not achieved, and accordingly the Company has not developed a
detailed contingency plan. The Company does not believe that non-compliance in
any systems that have not yet been reviewed would result in material costs or
disruption. The total cost of the Year 2000 project is estimated at
approximately $.3 million of which substantially all will be incurred in
calendar 1999. All expenditures are for capital projects and are anticipated to
be funded through operating cash flows. The Company is not aware of any
non-compliance by its customers or suppliers that would have a material impact
on operations. The Company has and will continue to correspond with customers
and suppliers through the coming twelve months with a view to eliminating or
limiting interruptions to operations. However, given the uncertainties
associated with the scope of the Year 2000 issue, 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.
Forward-Looking Statements
Certain items in this Form 10-Q constitute "forward-looking statements"
within the meaning of the Federal Private Securities Litigation Reform Act of
1995. Forward-looking statements are typically identified by the words
"believe," "expect," "anticipate," "intend," "estimate," and similar
expressions. Readers are cautioned that any such forward-looking statements are
not guarantees of future performance and that matters referred to in such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause actual results, performance or achievements of the
Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, but are not limited to, risks and uncertainties relating to
leverage,
14
<PAGE>
the need for additional funds, consummation of the pending acquisitions,
redemption of the Appreciation Notes, integration of the recently completed
acquisitions, the ability of the Company to achieve certain cost savings, the
management of growth, the introduction of new technology, changes in the
regulatory environment, the popularity of radio and newsprint as a
communication/advertising medium and changing consumer tastes. The Company
undertakes no obligation to publicly release the results of any revisions to
these forward-looking statements that may be made to reflect any future events
or circumstances.
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following exhibit is furnished with this report: Exhibit 27 --
Financial Data Schedule.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BRILL MEDIA COMPANY, LLC
By: BRILL MEDIA MANAGEMENT, INC.,
Manager
January 14, 1999 By /s/ Alan R. Brill
----------------------------------
Alan R. Brill
DIRECTOR, PRESIDENT, CHIEF
EXECUTIVE OFFICER AND TREASURER
January 14, 1999 By /s/ Donald C. TenBarge
----------------------------------
Donald C. TenBarge
VICE PRESIDENT, CHIEF FINANCIAL
OFFICER, SECRETARY AND TREASURER
(PRINCIPAL FINANCIAL
AND ACCOUNTING OFFICER)
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from financial
statements in the Form 10-Q of Brill Media Company, LLC for the nine months
ended November 30, 1998 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-START> MAR-01-1998
<PERIOD-END> NOV-30-1998
<CASH> 6,118,000
<SECURITIES> 0
<RECEIVABLES> 6,292,000
<ALLOWANCES> 0
<INVENTORY> 555,000
<CURRENT-ASSETS> 13,671,000
<PP&E> 22,972,000
<DEPRECIATION> 9,922,000
<TOTAL-ASSETS> 69,710,000
<CURRENT-LIABILITIES> 8,537,000
<BONDS> 113,154,000
0
0
<COMMON> 0
<OTHER-SE> (51,981,000)
<TOTAL-LIABILITY-AND-EQUITY> 69,710,000
<SALES> 31,483,000
<TOTAL-REVENUES> 31,483,000
<CGS> 26,880,000
<TOTAL-COSTS> 26,880,000
<OTHER-EXPENSES> 126,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,827,000
<INCOME-PRETAX> (4,351,000)
<INCOME-TAX> 137,000
<INCOME-CONTINUING> (4,487,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,487,000)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
