<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2000
--------------------
[ ] 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 1-5846
THE LIBERTY CORPORATION
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
South Carolina 57-0507055
(State or other jurisdiction of (IRS Employer
incorporation or organization) identification No.)
Post Office Box 789, Wade Hampton Boulevard, Greenville, SC 29602
--------------------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: 864/609-8256
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 [ ]
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock as of the latest practicable date.
Number of shares Outstanding
Title of each class as of September 30, 2000
------------------- ----------------------------
Common Stock 19,915,781
Page 1 of 17 sequentially numbered pages.
The Exhibit Index is on Page 16.
<PAGE> 2
PART I, ITEM 1
THE LIBERTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED AND CONDENSED BALANCE SHEETS
(In 000's)
<TABLE>
<CAPTION>
SEPTEMBER 30, December 31,
2000 1999
------------------- -----------------
<S> <C> <C>
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 3,640 $ 6,373
Receivables (net of allowance for doubtful accounts) 32,301 31,624
Program rights 5,831 3,415
Prepaid and other current assets 4,966 5,772
Deferred income taxes 3,498 2,333
Net assets of discontinued operations 490,275 479,645
------------------- -----------------
Total current assets 540,511 529,162
Property Plant and Equipment
Land 5,294 4,973
Buildings and improvements 33,338 32,362
Furniture and equipment 130,147 118,932
Less: Accumulated depreciation (97,282) (93,375)
------------------- -----------------
71,497 62,892
Intangibles (net of accumulated amortization) 261,574 217,916
Other assets 43,614 44,716
------------------- -----------------
Total assets 917,196 854,686
=================== =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses 20,548 17,293
Program contract obligations 5,602 3,092
Accrued income taxes 9,853 (3,616)
Revolving credit facility 258,000 234,000
------------------- -----------------
Total current liabilities 294,003 250,769
Deferred income taxes 29,559 27,849
Other liabilities 12,391 21,844
------------------- -----------------
Total liabilities 335,953 300,462
------------------- -----------------
Shareholders' Equity
Common Stock 113,089 100,112
Series 1995-A Convertible Preferred Stock, $35.00 redemption value, shares
issued and outstanding -0- shares at 9/30/00 and 429,485 at 12/31/99 -- 15,031
Unearned Stock Compensation (7,571) (5,057)
Retained Earnings 474,879 445,329
Accumulated Other Comprehensive Income:
Unrealized Investment Gains / (Losses) 846 (1,191)
------------------- -----------------
Total Shareholders' Equity 581,243 554,224
------------------- -----------------
Total Liabilities and Shareholders' Equity $ 917,196 $ 854,686
=================== =================
</TABLE>
See Notes to Consolidated and Condensed Financial Statements.
2
<PAGE> 3
THE LIBERTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED AND CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months ended Nine Months Ended
September 30, September 30,
----------------------------- ----------------------------
(In 000's, except per share data) 2000 1999 2000 1999
------------- ------------ ----------- ------------
(Unaudited)
<S> <C> <C> <C> <C>
REVENUES
Station revenues (net of commissions) $ 40,058 $ 35,091 $ 114,737 $ 105,894
Cable advertising and other revenues 3,234 2,399 9,539 6,962
------------- ------------ ----------- ------------
NET REVENUES 43,292 37,490 124,276 112,856
EXPENSES
Operating expenses 23,187 20,358 68,166 59,369
Amortization of program rights 1,704 1,284 4,792 4,377
Depreciation and amortization of intangibles 5,272 4,199 14,864 12,468
Corporate, general, and administrative expenses 2,661 2,534 8,025 6,287
------------- ------------ ----------- ------------
TOTAL OPERATING EXPENSES 32,824 28,375 95,847 82,501
OPERATING INCOME 10,468 9,115 28,429 30,355
Net investment income 724 137 12,016 1,192
Interest expense 4,314 3,754 12,705 11,253
------------- ------------ ----------- ------------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 6,878 5,498 27,740 20,294
Provision for income taxes 2,885 2,364 11,448 8,042
------------- ------------ ----------- ------------
INCOME FROM CONTINUING OPERATIONS 3,993 3,134 16,292 12,252
Income from discontinued operations (net of taxes) 7,573 14,075 26,061 20,544
------------- ------------ ----------- ------------
NET INCOME $ 11,566 $ 17,209 $ 42,353 $ 32,796
============= ============ =========== ============
EARNINGS PER SHARE:
Basic earnings per common share from continuing operations $0.21 $0.15 $0.83 $0.60
Basic earnings per common share from discontinued operations 0.39 0.73 1.35 1.08
------------- ------------ ----------- ------------
Basic earnings per common share $0.60 $0.88 $2.18 $1.68
Diluted earnings per common share from continuing operations $0.20 $0.15 $0.83 $0.59
Diluted earnings per common share from discontinued operations 0.38 0.72 1.32 1.08
------------- ------------ ----------- ------------
Diluted earnings per common share $0.58 $0.87 $2.15 $1.67
Dividends Per Common Share $0.22 $0.22 $0.66 $0.66
</TABLE>
See Notes to Consolidated and Condensed Financial Statements.
3
<PAGE> 4
THE LIBERTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED AND CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
(In 000's) 2000 1999
----------- -----------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 42,353 $ 32,796
Adjustments to reconcile net income to net cash provided by (used in) operating
activities:
Gain on sale of operating assets (631) (392)
Realized investment (gains) losses (9,208) 278
Depreciation 4,746 11,100
Amortization of intangibles 10,118 2,437
Amortization of program rights 4,792 4,376
Cash paid for program rights (4,698) (4,430)
Provision for deferred income taxes 545 116
Changes in operating assets and liabilities:
Receivables (677) (19,238)
Other assets (4,976) (1,610)
Accounts payable and accrued expenses 3,255 13,782
Accrued taxes 13,469 2,716
Other liabilities (9,453) 2,706
All other operating activities, net (421) 4,962
Net cash (used in) provided by operating activities of discontinued operations (41,060) 860
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 8,154 50,459
INVESTMENT ACTIVITIES
Purchase of property and equipment (7,439) (7,995)
Net cash paid for purchase of television stations (59,782) --
Investment securities sold 13,686 340
Investment securities matured -- 1,273
Investment securities acquired (1,138) (1,072)
Purchase of investment properties (2,000) (2,016)
Proceeds from sale of investment properties 14,343 2,774
Other (net) -- 615
Net cash provided by (used in) investing activities of discontinued operations 53,216 (23,867)
----------- -----------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES 10,886 (29,948)
FINANCING ACTIVITIES
Proceeds from borrowings 2,426,500 2,298,000
Principal payments on debt (2,402,500) (2,331,000)
Dividends paid (13,303) (13,582)
Stock issued for employee benefit and compensation programs 158 3,493
Redemption of preferred stock -- (306)
Repurchase of common stock (10,428) --
Net cash provided by financing activities of discontinued operations 24,012 23,170
----------- -----------
NET CASH PROVIDED BY(USED IN) FINANCING ACTIVITIES 24,439 (20,225)
----------- -----------
(DECREASE) INCREASE IN CASH 43,479 286
Cash at beginning of year (including cash at discontinued operations of $5,518
and $12,106 at December 31, 1999 and 1998 respectively) 11,891 16,633
----------- -----------
CASH AT END OF PERIOD (INCLUDING CASH AT DISCONTINUED OPERATIONS OF $51,730 AND
$10,546 AT SEPTEMBER 30, 2000 AND 1999 RESPECTIVELY) $ 55,370 $ 16,919
=========== ===========
</TABLE>
See Notes to Consolidated and Condensed Financial Statements.
4
<PAGE> 5
THE LIBERTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS
September 30, 2000
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated and condensed financial statements
of The Liberty Corporation and Subsidiaries have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. The information included is
not necessarily indicative of the annual results that may be expected for
the year ended December 31, 2000, but it does reflect all adjustments
(which are of a normal and recurring nature) considered, in the opinion of
management, necessary for a fair presentation of the results for the
interim periods presented. The December 31, 1999 financial information was
derived from the Company's previously filed 1999 Form 10-K. For further
information, refer to the consolidated financial statements and footnotes
thereto included in The Liberty Corporation annual report on Form 10-K for
the year ended December 31, 1999.
On February 29, 2000 the Company completed the acquisition of KCBD, the
NBC affiliate in Lubbock, TX in a cash transaction for $59.8 million. The
transaction was accounted for as a purchase, and accordingly, its results
of operations are included in the accompanying consolidated financial
statements since the date of acquisition. This purchase was funded using
proceeds from the Company's credit facility.
2. REDEMPTION OF 1995-A SERIES PREFERRED STOCK
On August 25, 2000 the Company completed the redemption of all of the
outstanding shares of its Series 1995-A Cumulative Convertible Preferred
Stock. Shares were called for redemption at $35.00 per share plus accrued
dividends for the period from July 1, 2000 through the redemption date
(September 5, 2000). Prior to the redemption date, all shares of the
1995-A Series were converted in to common stock.
3. REDEMPTION OF 1994-A and 1994-B SERIES PREFERRED STOCK
On May 25, 1999 ("the redemption date") the Company completed the
redemption of all of the outstanding shares of its 1994-A Series voting
cumulative preferred stock, and its 1994-B Series voting cumulative
preferred stock. Shares were called for redemption at $35.00 per share and
$37.50 per share for the 1994-A and 1994-B preferred stock, respectively,
plus accrued dividends from April 1, 1999 through the redemption date.
Prior to the redemption date, all shares of the 1994-A Series were
converted into common stock, and all but 8,170 shares of the 1994-B Series
were converted into common stock.
4. COMPREHENSIVE INCOME
The components of comprehensive income, net of related income taxes, for
the three-month and six-month periods ended June 30, 2000 and 1999,
respectively, are as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
(In 000's)
Net Income $ 11,566 $ 17,209 $ 42,353 $ 32,796
Unrealized gains / (losses) on securities 6,178 (11,183) 2,037 (26,935)
-------- -------- -------- --------
Comprehensive income (loss) $ 17,744 $ 6,026 $ 44,390 $ 5,861
======== ======== ======== ========
</TABLE>
5
<PAGE> 6
Notes to Consolidated and Condensed
Financial Statements -- continued
5. DISCONTINUED OPERATIONS
On June 19, 2000, The Liberty Corporation ("Liberty") entered into a
Purchase Agreement (the "Purchase Agreement") with Royal Bank of Canada
("RBC"), a Canadian-chartered bank, pursuant to which RBC was to acquire
from Liberty all of the issued and outstanding shares of capital stock of
Liberty Life Insurance Company, Liberty Insurance Services Corporation,
The Liberty Marketing Corporation, LC Insurance Limited and Liberty
Capital Advisors, Inc., for a total of approximately $648 million,
consisting of a dividend from Liberty Life Insurance Company of up to
$70.0 million and the balance in cash from Royal Bank of Canada. On
September 29, 2000 the shareholders of the Company approved the purchase
agreement described above. Accordingly, these entities have been treated
as discontinued operations in the accompanying financial statements. The
transaction closed on November 1, 2000 with Liberty receiving $631 million
in net cash proceeds and approximately $16 million in non-cash assets (see
Note 9).
The assets and liabilities of the discontinued operations were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, December 31
2000 1999
-----------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Investments:
Fixed maturity securities available for sale, $849,047 $859,296
Equity securities, primarily at market 23,027 77,652
Mortgage loans 244,378 230,497
Policy loans 92,351 91,964
Other long-term investments 13,472 13,564
Short-term investments 5,117 1,930
-----------------------------------------------------------------------------------------------
Total investments 1,227,392 1,274,903
-----------------------------------------------------------------------------------------------
Cash 51,730 5,519
Accrued investment income 13,621 13,592
Receivables net of bad debt reserves 32,082 31,045
Receivable from reinsurers 257,253 266,141
Deferred acquisition costs 301,499 304,419
Buildings and equipment, at cost, less accumulated 25,984 27,881
depreciation
Goodwill related to insurance acquisitions, at cost, net of
accumulated amortization 21,181 21,904
Other assets 40,028 39,559
-----------------------------------------------------------------------------------------------
Total assets $1,970,770 $1,984,963
-----------------------------------------------------------------------------------------------
Liabilities:
Policy liabilities:
Future policy benefits $1,278,382 $1,278,233
Claims and benefits payable 29,739 33,806
Policyholder funds 25,269 24,969
-----------------------------------------------------------------------------------------------
1,333,390 1,337,008
Accrued income taxes 1,894 19,054
Deferred income taxes 84,570 81,513
Accounts payable and accrued expenses 56,478 65,682
Other liabilities 4,163 2,061
-----------------------------------------------------------------------------------------------
Total liabilities 1,480,495 1,505,318
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
Net assets of discontinued operations $490,275 $479,645
-----------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 7
Notes to Consolidated and Condensed
Financial Statements -- continued
Summarized disclosure of the Company's discontinued operations is as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------- -----------------------------
2000 1999 2000 1999
-------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 86,527 $ 99,989 $ 278,796 $ 286,619
Expenses 76,060 78,988 241,884 256,258
-------------- ------------- ------------ ------------
Income before taxes from
discontinued operations 10,467 21,001 36,912 30,361
Income taxes 2,894 6,926 10,851 9,817
-------------- ------------- ------------ ------------
Income from discontinued
operations $ 7,573 $ 14,075 $ 26,061 $ 20,544
============== ============= ============ ============
</TABLE>
6. SEGMENT REPORTING
The Company operates primarily in the television broadcasting and cable
advertising businesses. The Company currently owns and operates twelve
television stations, primarily in the Southeast and Midwest. Each of the
stations is affiliated with a major network, with seven NBC affiliates,
three ABC affiliates, and two CBS affiliates. The Company evaluates
segment performance based on income before income taxes, excluding
unusual, or non-operating items.
The following tables summarize financial information for continuing
operations by segment for the three and nine-month periods ended September
30, 2000 and 1999:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- ---------------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUE
Broadcasting $ 40,058 $ 35,091 $ 114,737 $ 105,894
Cable advertising 2,573 2,365 7,842 6,886
Other 661 34 1,697 76
--------- --------- --------- ---------
TOTAL REVENUE 43,292 $ 37,490 124,276 $ 112,856
========= ========= ========= =========
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES
Broadcasting $ 13,789 $ 11,639 $ 37,902 $ 36,386
Cable advertising 175 361 512 1,307
Corporate & other (7,086) (6,502) (10,674) (17,399)
--------- --------- --------- ---------
TOTAL INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES $ 6,878 $ 5,498 $ 27,740 $ 20,294
========= ========= ========= =========
</TABLE>
Assets by segment were $351,512,000, $4,908,000 and $67,003,000 for the
Broadcasting, Cable Advertising, and Corporate & Other segments,
respectively, as of September 30, 2000.
7
<PAGE> 8
Notes to Consolidated and Condensed
Financial Statements -- continued
7. EARNINGS
PER SHARE The calculation of basic and diluted earnings per common share
from continuing operations is as follows:
<TABLE>
<CAPTION>
(In 000's except per share data) THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ -------------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
(Unaudited)
NUMERATOR - EARNINGS:
Income from continuing operations $ 3,993 $ 3,134 $ 16,292 $ 12,252
Preferred dividends -- (229) (365) (1,018)
-------- -------- -------- --------
Numerator for basic earnings per common
share from continuing operations $ 3,993 $ 2,905 15,927 $ 11,234
Effect of dilutive securities -- -- 365 --
-------- -------- -------- --------
Numerator for diluted earnings per common
share from continuing operations $ 3,993 $ 2,905 $ 16,292 $ 11,234
======== ======== ======== ========
DENOMINATOR - AVERAGE SHARES OUTSTANDING:
Denominator for basic earnings per common
share from continuing operations -
weighted average shares 19,443 19,262 19,281 18,877
Effect of dilutive securities:
Preferred stock 228 -- 356 --
Stock options 65 166 84 174
-------- -------- -------- --------
Denominator for diluted earnings per common
share from continuing operations 19,736 19,428 19,721 19,051
======== ======== ======== ========
Basic earnings per common share from
continuing operations $ 0.21 $ 0.15 $ 0.83 $ 0.60
Diluted earnings per common share from
continuing operations $ 0.20 $ 0.15 $ 0.83 $ 0.59
</TABLE>
The diluted income from continuing operations per common share calculation
excludes the effect of potentially dilutive shares when the inclusion of
those shares in the calculation would have an anti-dilutive effect. For
the three and nine month periods ending September 30, 1999, respectively,
the Company had 521,000 and 851,000 weighted average shares of preferred
securities which were not included in the diluted income from continuing
operations per common share calculation as their effect was antidilutive.
8
<PAGE> 9
Notes to Consolidated and Condensed
Financial Statements -- continued
8. COMMITMENTS AND CONTINGENCIES
On June 19, 2000, Liberty announced it had signed a letter of intent to
acquire the outstanding stock of Jackson, Mississippi based Civic
Communications, under which Liberty will pay Civic's shareholders $204
million in cash. Civic Communications is an owner-operator of three
network affiliated television stations in the central United States. The
Company intends to use a portion of the proceeds from the sale of its
insurance operations to fund the purchase of Civic Communications.
9. SUBSEQUENT EVENTS
On November 1, 2000 the Company completed the sale of its insurance
operations to the Royal Bank of Canada (see Note 5. "Discontinued
Operations"). In connection with this transaction the Company anticipates
recording an estimated net-of-tax gain of approximately $10 million in the
fourth quarter of 2000. In accordance with the terms of the Company's
revolving credit facility, the Company repaid its credit facility in full.
The Company no longer maintains a revolving credit facility with any
lender.
10. RECLASSIFICATIONS
Certain reclassifications have been made in the previously reported
financial statements to make the prior year amounts comparable to those of
the current year.
9
<PAGE> 10
PART I, ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Unaudited)
The Liberty Corporation is a holding company with operations primarily in the
television broadcasting industry. The Company's television broadcasting
subsidiary, Cosmos Broadcasting, consists of twelve network-affiliated stations
located in the Southeast and Midwest, a cable advertising company, and a
direct-mail coupon company. Eleven of the Company's television stations were
ranked No. 1 or No. 2 in their markets by the May 2000 Nielsen ratings from
sigh-on to sigh-off. Seven of the Company's television stations are affiliated
with NBC, three with ABC, and two with CBS, and in the aggregate cover
approximately 2.7% of U.S. households.
Prior to September 29, 2000 the Company was also engaged in the insurance
industry. The Company's insurance operations consisted of Liberty Life Insurance
Company, Liberty Insurance Services, The Liberty Marketing Services Corporation,
LC Insurance Limited and Liberty Capital Advisors, Inc. On June 19, 2000, the
Company entered into a purchase agreement with Royal Bank of Canada ("RBC"), a
Canadian-chartered bank, pursuant to which RBC was to acquire from the Company
all of the issued and outstanding shares of capital stock of the companies
comprising its insurance operations, for a total of approximately $648 million,
consisting of a dividend from Liberty Life Insurance Company of up to $70.0
million and the balance in cash from Royal Bank of Canada. On September 29, 2000
the Company's shareholders approved the purchase agreement, and on November 1,
2000 the Company completed the sale to RBC. Accordingly, these entities have
been treated as discontinued operations in the accompanying financial statements
(see Note 3 and Note 9).
On June 19, 2000, Liberty also announced it had signed a letter of intent to
acquire the outstanding stock of Jackson, Mississippi based Civic
Communications, under which Liberty will pay Civic's shareholders $204 million
in cash. Civic Communications is an owner-operator of three network affiliated
television stations in the central United States. The Company intends to use a
portion of the proceeds from the sale of its insurance operations to fund the
purchase of Civic Communications.
SIGNIFICANT TRANSACTIONS AFFECTING COMPARABILITY BETWEEN PERIODS
TELEVISION STATION ACQUISITIONS
On February 29, 2000 the Company completed the acquisition of KCBD, the NBC
affiliate in Lubbock, TX in a cash transaction for $59.8 million. The
transaction was accounted for as a purchase, and accordingly, its results of
operations are included in the accompanying consolidated financial statements
since the date of acquisition.
This purchase was funded using proceeds from the Company's credit facility.
REDEMPTION OF 1995-A SERIES PREFERRED STOCK
On August 25, 2000 the Company completed the redemption of all of the
outstanding shares of its Series 1995-A Cumulative Convertible Preferred Stock.
Shares were called for redemption at $35.00 per share plus accrued dividends for
the period from July 1, 2000 through the redemption date (September 5, 2000).
Prior to the redemption date, all shares of the 1995-A Series were converted in
to common stock.
10
<PAGE> 11
Management's Discussions and Analysis continued
REDEMPTION OF 1994-A AND 1994-B SERIES PREFERRED STOCK
On May 25, 1999 ("the redemption date") the Company completed the redemption of
all of the outstanding shares of its 1994-A Series voting cumulative preferred
stock, and its 1994-B Series voting cumulative preferred stock. Shares were to
be redeemed at $35.00 per share and $37.50 per share for the 1994-A and 1994-B
preferred stock, respectively, plus accrued interest from April 1, 1999 through
the redemption date. Prior to the redemption date, all shares of the 1994-A
Series were converted into common stock, and all but 8,170 shares of the 1994-B
Series were converted into common stock.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1999
Net revenues were $43.3 million for the third quarter of 2000, an increase of
$5.8 million over the $37.5 million reported for the third quarter of 1999. On a
same station basis, which excludes the acquisition of KCBD during March of 2000
and the Company's direct mail coupon business, which was acquired in the fourth
quarter of 1999, revenues increased $2.7 million over the prior year period due
to increased local and political revenues, offset somewhat by softer national
revenue.
Operating expenses were $23.2 million for the third quarter of 2000, an increase
of $2.8 million over the $20.4 million reported for the third quarter of 1999.
The increase in operating expense is attributable to the KCBD acquisition in
March of 2000 and the expansion of the Company's cable advertising and direct
mail coupon businesses, along with increased personnel costs.
Amortization of program rights was $1.7 million for the third quarter of 2000,
an increase of $0.4 million over the $1.3 million reported for the third quarter
of 1999. This increase was due to the acquisition of KCBD during the first
quarter of 2000 and the timing of programming purchases and airings.
Depreciation and amortization was $5.3 million for the third quarter of 2000, an
increase of $1.1 million over the $4.2 million reported for the third quarter of
1999. The increase in depreciation and amortization expense is attributable to
the acquisition of KCBD during the first quarter of 2000.
Corporate, general, and administrative expenses were $2.7 million for the third
quarter of 2000, an increase of $0.2 million over the $2.5 million reported for
the third quarter of 1999. The increase in corporate general and administrative
expenses is due mainly to the timing of non-cash compensation expenses.
Net investment income was $0.7 for the third quarter of 2000, an increase of
$0.6 over the $0.1 million reported for the third quarter of 1999.
Interest expense was $4.3 million, an increase of $0.5 million over the $3.8
reported for the third quarter of 1999 due to higher debt levels in the current
year as a result of the KCBD acquisition in the first quarter of 2000.
11
<PAGE> 12
Management's Discussions and Analysis continued
CASH FLOW INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30
-------------------------------------------------
2000 1999
---------------------- ----------------------
BCFM(3) BCFM(3)
& &
CASH FLOW OCFM(4) CASH FLOW OCFM(4)
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Broadcast cash flow (1)
Stations $18,566 46% $15,383 44%
Cable advertising sales and other operations (167) (5%) 466 19%
---------- ----------
Consolidated broadcast cash flow 18,399 42% 15,849 42%
Corporate cash expenses (2,011) (2,351)
---------- ----------
Operating cash flow (2) $16,388 38% $13,498 36%
========== ==========
</TABLE>
(1) Broadcast cash flow is operating cash flow before cash headquarters
expenses.
(2) Operating cash flow is defined as operating income plus depreciation and
amortization, and non-cash compensation expense
(3) Broadcast cash flow margin (BCFM) is broadcast cash flow divided by net
revenue
(4) Operating cash flow margin (OCFM) is operating cash flow divided by net
revenue
Consolidated broadcast cash flow and broadcast cash flow margin were $18.4
million and 42% respectively for the quarter, compared with $15.8 million and
42% from the prior-year third quarter.
Operating cash flow and operating cash flow margin were $16.4 million and 38%
respectively for the quarter compared with $13.5 million and 36% from the
prior-year third quarter.
The Company has included operating cash flow and broadcast cash flow data
because management believes that such data are commonly used as measures of
performance among companies in the broadcast industry. The Company also believes
that these measures are frequently used by investors, analysts, valuation firms,
and lenders as some of the important determinants of underlying asset value.
Operating cash flow and broadcast cash flow should not be considered in
isolation, or as alternatives to operating income (as determined in accordance
with generally accepted accounting principles) as an indicator of the entity's
operating performance, or to cash flow from operating activities (as determined
in accordance with generally accepted accounting principles) as a measure of
liquidity. These measures are believed to be, but may not be, comparable to
similarly titled measures used by other companies.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1999
With the exception of net investment income, changes in income statement line
items on a year-to-date basis were substantially the same as those on a
quarterly basis. Please see the discussion of the three-month periods ended
September 30, 2000 and 1999 above for details.
Net revenues were $124.3 million for the nine-month period ended September 30,
2000, an increase of $11.4 million over the $112.9 million reported for the
nine-month period ended September 30, 1999. On a same station basis, which
excludes the acquisition of KCBD during March of 2000 and the Company's direct
mail coupon business, which was acquired in the fourth quarter of 1999, revenues
increased $4.0 million over the prior year period .
Operating expenses were $68.2 million for the nine-month period ended September
30, 2000, an increase of $8.8 million over the $59.4 million reported for the
nine-month period ended September 30, 1999.
12
<PAGE> 13
Management's Discussions and Analysis continued
Amortization of program rights was $4.8 million for the nine-month period ended
September 30, 2000, an increase of $0.4 million over the $4.4 million reported
for the nine-month period ended September 30, 1999.
Depreciation and was $14.9 million for the nine-month period ended September 30,
2000, an increase of $2.4 million over the $12.5 million reported for the
nine-month period ended September 30, 1999.
Corporate, general, and administrative expenses were $8.0 million for the
nine-month period ended September 30, 2000, an increase of $1.7 million over the
$6.3 million reported for the nine-month period ended September 30, 1999.
Net investment income was $12.0 million for the nine-month period ended
September 30, 1000 an increase of $10.8 million over the $1.2 million reported
for the nine-month period ended September 30 1999. The increase in net
investment income was due mainly to realized gains from the Company's equity
portfolio recognized during the first quarter of 2000.
Interest expense was $12.7 million for the nine-month period ended September 30,
2000, an increase of $1.4 million over the $11.3 reported for the nine-month
period ended September 30, 1999.
CASH FLOW INFORMATION
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------
2000 1999
---------------------- ----------------------
BCFM(3) BCFM(3)
& &
CASH FLOW OCFM(4) CASH FLOW OCFM(4)
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Broadcast cash flow (1)
Stations $51,229 45% $47,529 45%
Cable advertising sales and other operations 87 1% 1,582 23%
---------- ----------
Consolidated broadcast cash flow 51,316 41% 49,111 44%
Corporate cash expenses (6,813) (6,146)
---------- ----------
Operating cash flow (2) $44,503 36% $42,965 38%
========== ==========
</TABLE>
(1) Broadcast cash flow is operating cash flow before cash headquarters
expenses.
(2) Operating cash flow is defined as operating income plus depreciation and
amortization, and non-cash compensation expense
(3) Broadcast cash flow margin (BCFM) is broadcast cash flow divided by net
revenue
(4) Operating cash flow margin (OCFM) is operating cash flow divided by net
revenue
Consolidated broadcast cash flow and broadcast cash flow margin were $51.3
million and 41% respectively for the nine months ended September 30, 2000 as
compared to $49.1 million and 44% for the nine months ended September 30, 1999.
Operating cash flow and operating cash flow margin were $44.5 million and 36%
respectively for the nine months ended September 30, 2000 as compared to $42.7
million and 38% for the nine months ended September 30, 1999.
13
<PAGE> 14
Management's Discussions and Analysis continued
The Company has included operating cash flow and broadcast cash flow data
because management believes that such data are commonly used as measures of
performance among companies in the broadcast industry. The Company also believes
that these measures are frequently used by investors, analysts, valuation firms,
and lenders as some of the important determinants of underlying asset value.
Operating cash flow and broadcast cash flow should not be considered in
isolation, or as alternatives to operating income (as determined in accordance
with generally accepted accounting principles) as an indicator of the entity's
operating performance, or to cash flow from operating activities (as determined
in accordance with generally accepted accounting principles) as a measure of
liquidity. These measures are believed to be, but may not be, comparable to
similarly titled measures used by other companies.
DISCONTINUED OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Revenues $ 86,527 $ 99,989 $ 278,796 $ 286,619
Expenses 76,060 78,988 241,884 256,258
------------- -------------- ------------- ------------
Income before taxes from discontinued operations 10,467 21,001 36,912 30,361
Income taxes 2,894 6,926 10,851 9,817
------------- -------------- ------------- ------------
Income from discontinued operations $ 7,573 $ 14,075 $ 26,061 $ 20,544
============= ============== ============= ============
</TABLE>
Income from discontinued operations, of $7.6 million and $14.1 million for the
three-month periods ended September 30, 2000 and 1999 respectively, and $26.1
million and $20.5 million for the nine-month periods ended September 30, 2000
and 1999 respectively reflect the operations of the Company's insurance
subsidiaries. On June 19, 2000, the Company entered into a Purchase Agreement
with Royal Bank of Canada ("RBC"), pursuant to which RBC was to acquire from the
Company all of the issued and outstanding shares of capital stock of Liberty
Life Insurance Company, Liberty Insurance Services Corporation, The Liberty
Marketing Corporation, LC Insurance Limited and Liberty Capital Advisors, Inc.,
for a total of $648.7 million. On September 29, 2000 the shareholders of the
Company approved the purchase agreement described above. The transaction closed
on November 1, 2000.
CAPITAL, FINANCING AND LIQUIDITY
At September 30, 2000 the Company's borrowings and notes payable amounted to
$258.0 million, an increase of $24 million from the $234.0 million outstanding
at December 31, 1999. As described in Note 8 above, subsequent to September 30,
2000 the Company sold its insurance subsidiaries. In accordance with the terms
of the Company's revolving credit facility, the Company used a portion of the
net cash proceeds from the sale of its insurance operations to repay its credit
facility in full. The Company no longer maintains a revolving credit facility
with any lender.
On June 19, 2000, Liberty announced it had signed a letter of intent to acquire
the outstanding stock of Jackson, Mississippi based Civic Communications, under
which Liberty will pay Civic's shareholders $204 million in cash. Civic
Communications is an owner-operator of three network affiliated television
stations in the central United States. The Company intends to use a portion of
the remaining proceeds from the sale of its insurance operations, after the
repayment of its revolving credit facility, to fund the purchase of Civic
Communications.
The Company anticipates that its primary sources of cash, those being current
cash balances, remaining proceeds from the sale of its insurance operations, and
operating cash flow, will be sufficient to finance the operating requirements of
its stations and their anticipated capital expenditures, for both the next 12
months and the foreseeable future thereafter.
14
<PAGE> 15
Management's Discussions and Analysis continued
CASH FLOWS
The Company's net cash flow from operating activities was $8.2 million for the
first nine months of 2000 compared to $50.5 million for the same period of 1999.
The Company's net cash provided by investing activities was $10.9 million for
the nine month period ended September 30, 2000, as compared to net cash used in
investing activities of $29.9 million for the same period of 1999. Net cash
provided by financing activities for the nine months ended September 30, 2000
was $24.4 million compared to net cash used in financing activities of $20.2
million for the first nine months of 1999.
IMPACT OF YEAR 2000
The Year 2000 issue is the result of computer programs written to use two digits
rather than four to define the applicable year. Any computer programs or
hardware that have date sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculations causing disruptions of operations including
among other things, a temporary inability to process transactions, pay personnel
properly, or engage in normal business activities.
To date, the Company has not experienced any disruptions in its operations as a
result of Year 2000 issues. The Company will continue to monitor its systems and
operations for the remainder of the year for problems or issues related to the
Year 2000.
ACCOUNTING DEVELOPMENTS
In June, 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, " Accounting for Derivative Instruments
and Hedging Activities". This standard is required to be adopted in years
beginning after June 15, 1999. The Statement will require the Company to
recognize all derivatives on the balance sheet at fair value. Derivatives that
are not hedges must be adjusted to fair value through income. If the derivative
is a hedge, depending on the nature of the hedge, changes in the fair value of
derivatives will be either offset against the change in fair value of the hedged
assets, liabilities or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings. Historically the Company's use of derivatives has been
limited to fixing the cost of borrowings on a portion of its outstanding debt.
At this time the Company does not believe the effect of Statement 133 will be
material to the earnings and financial position of the Company.
FORWARD LOOKING INFORMATION
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. Certain information contained herein or in any
other written or oral statements made by, or on behalf of the Company, is or may
be viewed as forward looking. The words "expect," "believe," "anticipate" or
similar expressions identify forward-looking statements. Although the Company
has used appropriate care in developing any such forward looking information,
forward looking information involves risks and uncertainties that could
significantly impact actual results. These risks and uncertainties include, but
are not limited to, the following: changes in national and local markets for
television advertising; changes in general economic conditions, increasing
competition in the Company's markets; and future regulatory actions or
conditions, effecting either the television broadcasting industry as whole or
specific to the markets the Company serves. The Company undertakes no obligation
to publicly update or revise any forward looking statements, whether as a result
of new information, future developments, or otherwise.
15
<PAGE> 16
PART II, ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a. A special meeting of shareholders was held September 29, 2000.
b. No directors were elected or voted upon at the special meeting.
c. The sole matter voted upon at the special meeting was to approve the
sale of Liberty's insurance operations to the Royal Bank of Canada.
The votes were cast as follows:
Broker
For Against Abstentions Non-votes
--------------------------------------------------------
17,442,552 1,247,602 167,352 --
d. There were no settlements between the registrant and any other
participants.
PART II, ITEM 6. EXHIBIT AND REPORTS ON FORM 8-K
a. A list of the exhibits filed with this report is included in the
Index to Exhibits filed herewith.
b. The Company filed a current report on Form 8-K dated August 22, 2000
with respect to its Definitive Proxy Statement on Schedule 14A,
filed with the Securities and Exchange Commission (the "SEC") on
August 22, 2000, regarding the consent of Ernst & Young LLP ("Ernst
& Young"), the Company's independent auditors, to the reference made
to Ernst & Young in the Proxy Statement and to the incorporation by
reference of certain financial statements in the Proxy Statement and
in certain registration statements filed by Liberty with the SEC.
INDEX TO EXHIBITS
EXHIBIT 11 Consolidated Earnings Per Share Computation (included in Note 7 of
Notes to Consolidated and Condensed Financial Statements)
EXHIBIT 27 Financial Data Schedule (Electronic Filing Only)
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
THE LIBERTY CORPORATION Date: November 9, 2000
-----------------------
(Registrant)
/s/ G. Neil Smith
-----------------
G. Neil Smith
Principal Financial Officer
/s/ Martha G. Williams
----------------------
Martha G. Williams
Vice President, General Counsel and Secretary
17
