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 June 30, 2000
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: 333-80523
SUSQUEHANNA MEDIA CO.
(Exact name of registrant as specified in its charter)
DELAWARE 23-2722964
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
140 East Market Street
York, Pennsylvania 17401
(717) 848-5500
(Address, including zip code and telephone number,
including area code, of registrant's principal
executive offices)
(Not Applicable)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
---------- ---------
As of August 10, 2000, there were 1,100,000 total shares of common stock, $1.00
par value outstanding.
<PAGE>
SUSQUEHANNA MEDIA CO.
FORM 10-Q
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION...............................................1
ITEM 1. FINANCIAL STATEMENTS................................................1
CONDENSED CONSOLIDATED BALANCE SHEETS.....................................1
CONDENSED CONSOLIDATED INCOME STATEMENTS..................................2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS...........................3
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS......................4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.................................7
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK........11
PART II - OTHER INFORMATION...................................................12
ITEM 1. LEGAL PROCEEDINGS..................................................12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K...................................12
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---- ----
(unaudited)
ASSETS
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 1,182 $ 639
Accounts receivable, net 46,049 43,017
Other current assets 5,249 4,400
Interest receivable from Parent 3,349 -
-------- --------
Total Current Assets 55,829 48,056
Property, Plant and Equipment, net 130,657 124,088
Intangible Assets, net 211,979 215,125
Note Receivable from Parent 111,329 111,329
Investments and Other Assets 30,105 27,544
-------- --------
$ 539,899 $ 526,142
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 17,058 $ 15,350
Current portion of long-term debt 63 59
Accrued interest 3,564 3,108
Accrued income taxes 2,794 227
Deferred income taxes 386 815
Accrued ESOP benefits costs 3,839 1,370
Other accrued expenses 13,707 11,919
-------- --------
Total Current Liabilities 41,411 32,848
-------- --------
Long-term Debt 394,329 405,562
-------- --------
Other Liabilities 745 832
-------- --------
Deferred Income Taxes 38,185 37,166
-------- --------
Minority Interests 22,910 18,453
-------- --------
Stockholders' Equity
Preferred stock - voting, 7% cumulative with par value of $100,
authorized 110,000 shares, 70,499.21 issued and outstanding 7,050 7,050
Common stock - voting, $1 par value, authorized 1,100,000
shares, 1,100,000 shares issued and outstanding 1,100 1,100
Retained earnings 34,169 23,131
-------- --------
Total Stockholders' Equity 42,319 31,281
-------- --------
$ 539,899 $ 526,142
======= =======
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
1
<PAGE>
SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS
(Dollars in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Radio $ 60,732 $ 47,839 $ 102,414 $ 82,230
Cable 23,107 20,332 45,252 39,520
Other 1,457 767 2,727 1,400
------- -------- --------- ---------
Total revenues 85,296 68,938 150,393 123,150
------- -------- --------- ---------
Operating Expenses
Operating and programming 29,259 24,659 52,997 44,836
Selling 9,624 7,959 17,668 14,501
General and administrative 13,989 11,904 26,448 22,890
Depreciation and amortization 7,720 7,091 14,959 13,763
------- -------- --------- ---------
Total operating expenses 60,592 51,613 112,072 95,990
------- -------- --------- ---------
Operating Income 24,704 17,325 38,321 27,160
Other Income (Expense)
Interest expense (8,103) (7,054) (16,160) (12,006)
Interest income from loan to Parent 1,666 941 3,330 941
Replacement of cable distribution system (1,261) - (1,261) -
Pension curtailment gain - 2,299 - 2,299
Other (1) (48) (3) (76)
------- -------- --------- ---------
Income Before Income Taxes, Extraordinary
Loss and Minority Interests 17,005 13,463 24,227 18,318
Income Taxes 6,990 5,540 9,876 7,616
------- -------- --------- ---------
Income Before Extraordinary
Loss and Minority Interests 10,015 7,923 14,351 10,702
Extraordinary Loss (related to early retirement
of debt, net of tax benefit) - (3,316) - (3,316)
------- -------- --------- ---------
Income Before Minority Interest 10,015 4,607 14,351 7,386
Minority Interests (1,679) (690) (2,578) (1,362)
-------- -------- ---------- ---------
Net Income and Comprehensive Income 8,336 3,917 11,773 6,024
Preferred Dividends Declared (124) (124) (247) (247)
------- -------- --------- ---------
Net Income Available for Common Shares $ 8,212 $ 3,793 $ 11,526 $ 5,777
======= ======== ========= =========
Basic Net Income Per Common Share
Income Before Extraordinary Loss $ 7.47 $ 6.46 $ 10.48 $ 8.26
Extraordinary Loss - (3.01) - (3.01)
------- -------- --------- ---------
$ 7.47 $ 3.45 $ 10.48 $ 5.25
======= ======== ========= =========
Diluted Net Income Per Common Share
Income Before Extraordinary Loss $ 7.47 $ 6.00 $ 10.48 $ 7.66
Extraordinary Loss - (2.96) - (2.96)
------- ------- --------- ---------
$ 7.47 $ 3.04 $ 10.48 $ 4.70
======= ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
2
<PAGE>
SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------
2000 1999
---- ----
<S> <C> <C>
Cash Flows from Operating Activities
Income before minority interests $ 14,351 $ 7,386
Adjustments to reconcile net income to net cash:
Depreciation and amortization 14,959 13,763
Deferred income taxes 590 1,978
Equity in earnings of investees (479) (54)
Loss on replacement of cable distribution system 1,261 -
Deferred financing amortization 515 381
Imputed deferred compensation - 53
Deferred financing expense write-off - 2,556
Curtailment gain - (2,299)
Changes in assets and liabilities:
Increase in accounts receivable, net (3,032) (6,501)
Increase in other current assets (869) (742)
Increase in interest receivable from parent (3,329) (941)
Increase in accounts payable 1,708 774
Increase in accrued interest 456 1,791
Increase in accrued income taxes 2,567 684
Increase in accrued ESOP benefits cost 2,469 2,353
Increase in other accrued expenses 2,177 2,039
Increase in other liabilities 355 -
--------- ---------
Net cash provided by operating activities 33,699 23,221
--------- ---------
Cash Flows from Investing Activities
Purchase of property, plant and equipment, net (17,121) (12,788)
Purchase of other assets (1,251) -
Increase in investments, other assets and intangible assets (2,596) (219)
Purchase of cable assets (1,300) (32,400)
Loan to Susquehanna Pfaltzgraff Co. - (116,850)
Partnership capital contribution - (1,400)
---------- ----------
Net cash used by investing activities (22,268) (163,657)
---------- ----------
Cash Flows from Financing Activities
Increase (decrease) in revolving credit borrowing (11,200) 70,300
Payments of preferred dividends (247) (247)
Non-voting subsidiary common stock transactions 559 14
Proceeds from long-term debt - 350,000
Repayment of refinanced debt - (272,600)
Payment of deferred financing costs - (7,560)
---------- ----------
Net cash provided by (used in) financing activities (10,888) 139,907
---------- ----------
Net Increase (Decrease) in Cash and Cash Equivalents 543 (529)
Cash and Cash Equivalents, beginning 639 1,942
---------- ----------
Cash and Cash Equivalents, ending $ 1,182 $ 1,413
========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
<PAGE>
SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
Pursuant to the rules and regulations of the Securities and Exchange
Commission, the condensed consolidated interim financial statements included
herein have been prepared, without audit, by Susquehanna Media Co. (the
"Company"). The financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to the Form 10-Q and Regulation S-X. Accordingly, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted; however, the Company believes that the disclosures are
adequate to make the information presented not misleading. The consolidated
financial statements included herein should be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Company's December 31, 1999 Annual Report on Form 10-K filed with the Securities
and Exchange Commission.
The condensed consolidated financial statements (the "financial
statements") include the accounts of Susquehanna Media Co. and all its
subsidiaries. All significant intercompany accounts and transactions have been
eliminated.
In the opinion of management, the accompanying condensed consolidated
interim financial statements contain all material adjustments (consisting only
of normal recurring adjustments), necessary to present fairly the consolidated
financial position of the Company at June 30, 2000 and the results of its
operations for the three and six months ended June 30, 2000 and 1999 and its
cash flows for the six months ended June 30, 2000 and 1999.
Interim results are not necessarily indicative of results for the full
year or future periods.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. Recent Developments
On July 20, 2000, pursuant to an Asset Purchase Agreement among
Susquehanna Radio Corp., a majority owned subsidiary of the registrant, as
Purchaser and Entercom Communications Corp., Entercom Kansas City, LLC and
Entercom Kansas City License, LLC as Sellers, the registrant acquired, in
consideration of the payment of $113.2 million, the assets of Kansas City radio
stations KCMO-AM, KCMO-FM and KCFX-FM. Radio broadcast rights for the Kansas
City Chiefs NFL franchise through the 2002 football season were included in the
purchase. The registrant's existing credit facilities were used to finance the
acquisition.
On April 28, 2000, the Federal Communications Commission (FCC) issued a
Report and Order which approved the Company's Petition for Rule Making to create
a new FM signal, in College Park, GA which would permit WHMA-FM to relocate and
serve the Atlanta Metro Area. The Company submitted an application for a
construction permit on July 14, 2000. As described in the
4
<PAGE>
original purchase agreement, the Company must pay WHMA-FM's former owners $10
million within six months after the construction permit becomes a final order or
on the FCC's granting of program test authority, whichever first occurs. The
Company expects to use its existing senior credit facility to fund this payment.
On June 16, 2000, a Petition for Reconsideration was filed with the FCC by
another applicant. The outcome of, or delay or impact resulting from, such
Petition for Reconsideration cannot be determined at this time.
On April 10, 2000, Susquehanna Pfaltzgraff Co.'s (the Company's parent)
Board of Directors changed the method of determining the repurchase value for
Susquehanna Radio Co.'s Employee Stock Plan and Susquehanna Cable Co.'s (SCC's)
Performance Share Plan. Over a period beginning July 1, 2000 through April 1,
2002, repurchase values for both plans will transition to values based upon
Susquehanna Pfaltzgraff Co.'s annual independent ESOP valuation. SCC's
Performance Share Plan is a non-qualified deferred compensation plan. Based on
values used in the December 31, 1999 ESOP valuation, compensation expense of
$3.0 million will be recognized in July 2000 for the increase in performance
share value.
3. Segment Information
The Company's business units have separate management teams and
infrastructures that offer different products and services. The business units
have been aggregated into three reportable segments; Radio, Cable and Other.
These business segments are consistent with the Company's management of these
businesses and its financial reporting structure. Accounting policies, as
described in the Company's most recent audited financial statements, are applied
consistently across all segments.
Segment information (in thousands of dollars) follows:
<TABLE>
<CAPTION>
Radio Cable Other Consolidated
----- ----- ----- -------------
<S> <C> <C> <C> <C>
For the Three Months Ended June 30, 2000
Operating income $ 20,927 $ 3,046 $ 731 $ 24,704
Interest expense, net 1,091 3,507 3,505 8,103
Depreciation and amortization 2,013 5,554 153 7,720
Income (loss) before income taxes 19,834 (1,720) (1,109) 17,005
Provision (benefit) for income taxes 7,817 (595) (232) 6,990
Identifiable assets 226,465 181,719 131,715 539,899
Capital expenditures 1,074 7,984 58 9,116
For the Three Months Ended June 30, 1999
Operating income 13,567 3,681 77 17,325
Interest expense, net 1,570 3,186 2,298 7,054
Depreciation and amortization 2,035 4,887 169 7,091
Income (loss) before income taxes 13,767 920 (1,224) 13,463
Provision (benefit) for income taxes 5,520 430 (410) 5,540
Identifiable assets 217,697 171,944 129,913 519,554
Capital expenditures 404 4,854 937 6,195
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
For the Six Months Ended June 30, 2000
Operating income $ 31,052 $ 6,066 $ 1,203 $ 38,321
Interest expense, net 2,330 6,753 7,077 16,160
Depreciation and amortization 3,883 10,817 259 14,959
Income (loss) before income taxes 28,719 (1,947) (2,545) 24,227
Provision (benefit) for income taxes 11,287 (670) (741) 9,876
Identifiable assets 226,465 181,719 131,715 539,899
Capital expenditures 1,700 15,217 203 17,120
For the Six Months Ended June 30, 1999
Operating income 19,709 7,164 287 27,160
Interest expense, net 3,342 5,572 3,092 12,006
Depreciation and amortization 4,044 9,376 343 13,763
Income (loss) before income taxes 18,107 2,017 (1,806) 18,318
Provision (benefit) for income taxes 7,254 1,352 (990) 7,616
Identifiable assets 217,697 171,944 129,913 519,554
Capital expenditures 1,377 10,177 1,234 12,788
</TABLE>
4. Contingencies and Commitments
An unrelated cable television Multiple System Operator (MSO) purchased
a 14.9% interest in Susquehanna Cable Co. and a 17.75% interest in each of
Susquehanna Cable Co.'s cable television operating subsidiaries in 1993. On
January 18, 2000, the MSO was acquired by an unrelated company. Cable
programming formerly acquired through the MSO will cost approximately $1.9
million more in 2000 due to the ownership change.
The MSO may offer to purchase the Company's interest in its cable
television operations. The Company must either accept or reject an offer within
sixty days. If the Company rejects the offer, the MSO may require the Company to
repurchase the MSO's holdings at the offer price plus a fee equal to 3% of the
MSO's $25,000,000 investment, compounded annually from 1993.
If the MSO does not offer to purchase the Company's cable television
operations by December 1, 2000, the Company may elect to pay the MSO a fee equal
to 1.5% of the MSO's $25,000,000 investment compounded annually from 1993 and
avoid any further fee obligation. No liability has been recorded due to the
uncertainty of future events.
On April 22, 1999, the MSO was granted a three year "Put Right." After
an eighteen-month holding period beginning May 12, 1999, the MSO may require the
Company to repurchase its ownership interest at a price to be determined by
independent appraisers. The "Put Right" may not be exercised if exercise would
create default under certain debt agreements. If the "Put Right" is exercised,
the Company may, at its sole discretion and in lieu of acquiring the MSO's
ownership interests, sell Cable and pay the MSO its pro rata share of net
proceeds.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Cautionary Note Regarding Forward-Looking Statements
Some of the statements in this Form 10-Q, as well as statements made by
the Company in filings with government regulatory bodies, including the
Securities and Exchange Commission, and in periodic press releases and other
public comments and communications, constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Certain, but not necessarily all, of such forward-looking statements can be
identified by the use of forward-looking terminology, such as "believes,"
"expects," "may," "will," "should," "approximately," or "anticipates" or the
negative thereof or other variations thereof or comparable terminology, or by
discussion of strategies, each of which involves risks and uncertainties. All
statements other than of historical facts included herein or therein, including
those regarding market trends, the Company's financial position, business
strategy, projected plans and objectives of management for future operations,
are forward-looking statements. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors that may cause the actual
results or performance of the Company to be materially different from any future
results, performance or achievements expressed or implied by the forward-looking
statements. Such factors include, but are not limited to, general economic and
business conditions (both nationally and in the Company's markets), acquisition
opportunities, expectations and estimates concerning future financial
performance, financing plans and access to adequate capital on favorable terms,
the Company's ability to service its outstanding indebtedness, the impact of
competition, existing and future regulations affecting the Company's business,
nonrenewal of cable franchises, advances in technology and the ability of the
Company to adapt to such advances, decreases in the Company's customers
advertising and entertainment expenditures and other factors over which the
Company may have little or no control.
7
<PAGE>
Results of Operations
The following table summarizes the Company's consolidated historical
results of operations and consolidated historical results of operations as a
percentage of revenues for the three and six months ended June 30, 2000 and
1999.
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Radio $ 60.7 71.2% $ 47.8 69.4% $ 102.4 68.1% $ 82.2 66.8%
Cable 23.2 27.2% 20.3 29.5% 45.3 30.1% 39.5 32.1%
Other 1.4 1.6% 0.8 1.1% 2.7 1.8% 1.4 1.1%
------ ------ ------ ------ ------ ------ ------ ------
Total revenues 85.3 100.0% 68.9 100.0% 150.4 100.0% 123.1 100.0%
------ ------ ------ ------ ------ ------ ------ ------
Operating expenses
Operating and programming 29.2 34.2% 24.6 35.7% 53.0 35.2% 44.8 36.4%
Selling, general and
administrative 23.6 27.7% 19.9 28.9% 44.1 29.3% 37.4 30.4%
Depreciation and amortization 7.8 9.1% 7.1 10.3% 15.0 10.0% 13.8 11.2%
------ ------ ------ ------ ------ ------ ------ ------
Total operating expenses 60.6 71.0% 51.6 74.9% 112.1 74.5% 96.0 78.0%
------ ------ ------ ------ ------ ------ ------ ------
Operating income $ 24.7 29.0% $ 17.3 25.1% $ 38.3 25.5% $ 27.1 22.0%
====== ====== ====== ====== ====== ====== ====== =====
Net income $ 8.3 9.7% $ 3.9 5.7% $ 11.8 7.8% $ 6.0 4.9%
====== ====== ====== ====== ====== ====== ====== =====
Adjusted EBITDA $ 34.4 40.3% $ 25.7 37.3% $ 57.1 38.0% $ 43.3 35.2%
====== ====== ====== ====== ====== ====== ====== =====
</TABLE>
Three Months Ended June 30, 2000 Compared to the Three Months Ended
June 30, 1999
Revenues. Revenues increased $16.4 million or 24% from 1999 to 2000.
Radio revenues increased $12.9 million or 27% from 1999 to 2000. Radio's revenue
growth was primarily due to higher advertising rates. Cable revenues increased
$2.8 million or 14% from 1999 to 2000. Cable's revenue growth was due to basic
service rate increases.
Operating income. Operating income increased $7.4 million or 43% from
1999 to 2000. Radio operating income for the second quarter was $20.9 million, a
$7.3 million or 54% increase over second quarter 1999. Improved Radio operating
income was driven by increased revenues. Cable operating income for the second
quarter was $3.0 million, a $0.7 million decrease from the second quarter 1999.
Increased programming costs and depreciation from completed cable system
rebuilds and new equipment more than offset revenue gains.
Net income. Net income for second quarter 1999 included a $3.3 million
extraordinary loss and a $2.3 million pretax curtailment gain. Net income,
excluding these items, increased approximately $2.5 million or 42% from 1999 to
2000, despite a $1.3 million loss on replacement of cable distribution system.
Improved results were achieved from operating income gains.
Depreciation and amortization. Depreciation and amortization increased
$0.6 million or 9% from 1999 to 2000. Completed phases of cable system rebuilds
and new equipment were responsible for the increase.
8
<PAGE>
Adjusted EBITDA. Adjusted EBITDA is defined as net income before income
taxes, extraordinary items, interest expense, interest income, depreciation and
amortization, employee stock ownership plan expense, minority interest and any
gain or loss on the disposition of assets. Adjusted EBITDA increased $8.7
million or 34% from 1999 to 2000. Radio's Adjusted EBITDA was $24.6 million, a
$8.0 million or 48% improvement over second quarter 1999. The increase in
Radio's Adjusted EBITDA was the result of higher advertising rates, which were
not accompanied by relatively higher expenses. Cable's Adjusted EBITDA was $9.0
million, an increase of $0.2 million or 2% over 1999. Basic service rate
increases drove Cable's improved Adjusted EBITDA.
The Company believes that Adjusted EBITDA provides a meaningful
comparison of operating performance because it is commonly used in the radio and
cable television industries to analyze and compare radio and cable television
companies on the basis of operating performance, leverage and liquidity.
Although the Company believes the calculation is helpful in understanding its
performance, Adjusted EBITDA should not be considered a substitute for net
income or cash flow as indicators of the Company's financial performance or its
ability to generate liquidity. Adjusted EBITDA as presented may not be
comparable to other similarly titled measures used by other companies.
Interest expense. Interest expense increased $1.0 million or 15% from
1999 to 2000, due to increased interest rates. The average interest rate on the
Company's credit facility was 7.9% for the three month period ended June 30,
2000.
Six Months Ended June 30, 2000 Compared to the Six Months Ended June 30, 1999
Revenues. Revenues increased $27.3 million or 22% from 1999 to 2000.
Radio revenues increased $20.2 million or 25% from 1999 to 2000. Similar to the
second quarter, Radio's revenue growth was primarily due to higher advertising
rates. Cable revenues increased $5.8 million or 15% from 1999 to 2000. Basic
service rate increases provided the Cable revenue growth for the first half.
Operating income. Operating income increased $11.2 million or 41% from
1999 to 2000. Radio operating income for the six months was $31.1 million, a
$11.4 million or 58% increase over same period 1999. Improved Radio operating
income was driven by higher revenues. Cable operating income for the six months
was $6.1 million, a $1.1 million or 15% decrease from the same period 1999.
Higher depreciation, related to completed rebuild phases and equipment placed in
service for new product launches and higher programming costs, caused the
decrease.
Net income. Net income for the six months 1999 included a $3.3 million
extraordinary loss and a $2.3 million pretax curtailment gain. Net income,
excluding these items, increased approximately $3.8 million or 48% from 1999 to
2000, despite a $1.3 million loss on replacement of cable distribution system.
Improved results were achieved from operating income gains.
Depreciation and amortization. Depreciation and amortization increased
$1.2 million or 9% from 1999 to 2000. The increase was caused by completed cable
plant rebuild phases and new equipment.
Adjusted EBITDA. Adjusted EBITDA is defined as net income before income
taxes, extraordinary items, interest expense, interest income, depreciation and
amortization, employee stock ownership plan expense, minority interest and any
gain or loss on the disposition of assets. Adjusted EBITDA increased $13.8
million or 32% from 1999 to 2000. Radio's Adjusted EBITDA was $38.0 million, a
$12.3 million or 48% improvement over 1999. The increase in Radio's Adjusted
EBITDA was the result of higher advertising rates, which were not accompanied by
relatively higher expenses. Cable's Adjusted EBITDA
9
<PAGE>
was $17.7 million, an increase of $0.7 million or 4% over 1999. Basic service
rate increases drove Cable's improved Adjusted EBITDA.
The Company believes that Adjusted EBITDA provides a meaningful
comparison of operating performance because it is commonly used in the radio and
cable television industries to analyze and compare radio and cable television
companies on the basis of operating performance, leverage and liquidity.
Although the Company believes the calculation is helpful in understanding its
performance, Adjusted EBITDA should not be considered a substitute for net
income or cash flow as indicators of the Company's financial performance or its
ability to generate liquidity. Adjusted EBITDA as presented may not be
comparable to other similarly titled measures used by other companies.
Interest expense. Interest expense increased $4.2 million or 35% from
1999 to 2000. In May 1999, the Company borrowed $116.9 million under its
existing credit facilities and loaned the proceeds to its Parent. The six months
ended June 30, 2000 includes interest on this borrowing over the entire period.
The average interest rate on the Company's senior credit facility was 8.1% for
the six month period ended June 30, 2000.
Liquidity and Capital Resources
The Company's primary sources of liquidity are cash flow from
operations and borrowings under its senior credit facilities. The Company's
future needs for liquidity arise primarily from capital expenditures, potential
acquisitions of radio stations and cable systems, potential repurchases of its
common stock, and interest payable on outstanding indebtedness and its senior
credit facilities.
Net cash provided by operating activities was $33.7 million for the six
months ended June 30, 2000. The Company's net cash provided by operating
activities was generated by normal operations.
Net cash used by investing activities was $22.3 million for the six
months ended June 30, 2000. Capital expenditures, excluding acquisitions, were
$17.1 million and $12.8 million for the six months ended June 30, 2000 and 1999,
respectively. Capital expenditures were made to upgrade and maintain cable
systems and to purchase equipment necessary to launch new Cable product lines.
The Company expects to make capital expenditures of $35.0 million in 2000, of
which $17.1 million has been spent through June 30, 2000, primarily for cable
systems upgrades. We expect to use existing credit facilities to fund the cable
systems upgrades.
Net cash used by financing activities was $10.9 million for the six
months ended June 30, 2000, including a reduction in the revolving credit
facility of $11.2 million. At June 30, 2000, the Company had $199.3 million
borrowing availability under its new senior credit facility, of which
approximately $113.2 million was used on July 20, 2000 to purchase the Kansas
City radio stations as discussed in Note 2 to the Condensed Consolidated
Financial Statements.
The Company believes that funds generated from operations and the
borrowing availability under its new senior credit facility will be sufficient
to finance its current operations, its debt service obligations, and its planned
capital expenditures. From time to time, the Company evaluates potential
acquisitions of radio stations and cable television systems. In connection with
future acquisition opportunities, the Company may incur additional debt or issue
additional equity or debt securities depending on market conditions and other
factors. Except as noted in this Form 10-Q, the Company has no current
commitments or agreements with respect to any material acquisitions.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We monitor and evaluate changes in market conditions on a regular
basis. Based upon the most recent review, management has determined that there
have been no material developments affecting market risk since the filing of the
Company's December 31, 1999 Annual Report on Form 10-K filed with the Securities
and Exchange Commission.
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PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is a party to various legal proceedings arising in the
ordinary course of business. In the opinion of management of the Company,
however, there are no legal proceedings pending against the Company likely to
have a material adverse effect on the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) See Exhibit Index
(b) The Company did not file any reports on Form 8-K during the quarter ended
June 30, 2000. However, the Company filed a Form 8-K on August 2, 2000
concerning the acquisition of three Kansas City radio stations.
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SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
August 10, 2000 SUSQUEHANNA MEDIA CO.
By: /s/ John L. Finlayson
-----------------------------------
John L. Finlayson
Vice President and Principal Financial
and Accounting Officer
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EXHIBIT INDEX
Exhibit Number Description
27 Financial Data Schedule (for SEC use only)
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