UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the period ended March 31, 1994.
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: 0-2481
LIN Broadcasting Corporation
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(Exact name of registrant as specified in its charter)
Delaware 62-0673800
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5295 Carillon Point, Kirkland, WA 98033
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(Address of principal executive offices) (Zip Code)
(206) 828-1902
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(Registrant's telephone number, including area code)
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
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at April 30, 1994
Common Stock, $0.01 par value 51,524,055 shares
<PAGE>
<PAGE> 1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
March 31, December 31,
1994 1993
---------- -----------
ASSETS
- - ---------------------
Current Assets:
Cash and cash equivalents $94,283 $86,366
Marketable securities 13,334 16,465
Accounts receivable, less allowance
for doubtful accounts 166,934 156,784
Film contract rights, prepaid
expenses and other current assets 23,411 21,960
--------- ---------
Total current assets 297,962 281,575
Property and equipment, at cost,
less accumulated depreciation 412,003 405,762
Other noncurrent assets 61,017 61,807
Investments in and advances to
unconsolidated affiliates 269,428 264,172
Intangible assets, less accumulated
amortization 1,874,655 1,896,207
--------- ---------
Total assets $2,915,065 $2,909,523
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
- - -------------------------------------
Current Liabilities:
Current portion of long-term
bank debt $161,013 $146,891
Accounts payable, accrued expenses
and other current liabilities 211,257 203,953
--------- ---------
Total current liabilities 372,270 350,844
Long-term bank debt 1,509,040 1,551,447
Deferred income taxes 736,214 735,049
Film contract rights and other
noncurrent liabilities 12,200 13,091
Minority interests in equity of
consolidated subsidiaries 63,096 56,209
Redeemable preferred stock of
a subsidiary 1,338,823 1,305,248
(continued)<PAGE>
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
(Dollars in thousands)
(Unaudited)
March 31, December 31,
1994 1993
---------- -----------
LIABILITIES AND STOCKHOLDERS'
DEFICIT (continued)
- - ---------------------
Stockholders' Deficit:
Common stock (55,329,000 shares
issued) $ 553 $ 553
Paid-in capital 225,062 224,689
Deficit (1,165,300) (1,150,205)
----------- -----------
(939,685) (924,963)
Less common stock in treasury,
at cost (3,812,000) and
3,826,000 shares, respectively) 176,893 177,402
----------- -----------
Total stockholders' deficit (1,116,578) (1,102,365)
----------- -----------
Total liabilities and
stockholders' deficit $2,915,065 $2,909,523
=========== ===========
See notes to condensed consolidated financial statements.
<PAGE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
Three Months Ended March 31,
1994 1993
----------------------------
Net Revenues $191,627 $151,233
--------- ---------
Operating Costs and Expenses:
Direct costs and expenses 128,516 86,684
Corporate expenses 2,613 1,444
Depreciation 13,081 10,666
Amortization of intangible assets 19,701 19,732
--------- ---------
163,911 118,526
--------- ---------
Operating Income 27,716 32,707
--------- ---------
Other Income (Expense):
Equity in income of unconsolidated
affiliates 31,848 24,729
Investment and other income 1,237 2,524
Interest expense (22,520) (24,228)
--------- ---------
10,565 3,025
--------- ---------
Income Before Income Tax Expense
and Minority Interests 38,281 35,732
Income Tax Expense 12,914 10,802
--------- ---------
Income Before Minority Interests 25,367 24,930
Minority Interests:
In net income of consolidated
subsidiaries (6,887) (5,947)
Provision for preferred stock
dividends of a subsidiary (33,575) (33,575)
--------- ---------
Net Loss $(15,095) $(14,592)
========= =========
Net Loss Per Share $(0.29) $(0.28)
========= =========
Average Common and Equivalent
Shares Outstanding 51,511 51,430
========= =========
See notes to condensed consolidated financial statements.
<PAGE>
<PAGE> 4
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Three Months Ended March 31,
1994 1993
----------------------------
Net cash provided by operating
activities $58,573 $60,985
-------- --------
Investing Activities:
Proceeds from sale of marketable
securities 3,092 13,997
Purchases of marketable securities -- (10,931)
Capital expenditures (33,684) (27,907)
Cellular acquisitions (1,500) --
Net investments in and advances
(to) from unconsolidated
affiliates 8,913 (2,710)
-------- --------
Net cash used in investing
activities (23,179) (27,551)
-------- --------
Financing Activities:
Repayment of bank debt (28,285) (7,649)
Proceeds from common stock issued
for stock purchase plan, stock
options and related tax benefits 1,292 850
Purchase of common stock for treasury (484) (347)
-------- --------
Net cash used for financing
activities (27,477) (7,146)
-------- --------
Increase in Cash and Cash Equivalents 7,917 26,288
Cash and Cash Equivalents at
Beginning of Period 86,366 102,909
-------- --------
Cash and Cash Equivalents at
End of Period $94,283 $129,197
======== ========
See notes to condensed consolidated financial statements.
<PAGE>
<PAGE> 5
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
1. Basis Of Presentation:
The condensed consolidated financial statements include the
accounts of LIN Broadcasting Corporation (LIN), its
majority-owned (based on voting control) subsidiaries and
cellular ventures (New York, Dallas and Newton, Texas RSA-
17) in which LIN has voting control (the "Company"). The
Company's investments in cellular ventures in which it has
voting interests of 50% or less but more than 20% (Los
Angeles, Philadelphia, Houston and Galveston) are accounted
for on the equity method.
These financial statements have been prepared without audit,
pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote
disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such
rules and regulations. These condensed consolidated
financial statements should be read in conjunction with the
audited consolidated financial statements and notes thereto
included in the Company's Form 10-K for the year ended
December 31, 1993.
The financial information included herein reflects all
adjustments (consisting of normal recurring adjustments)
which are, in the opinion of management, necessary to a fair
presentation of the results for interim periods. The
results of operations for the three month period ended March
31, 1994 are not necessarily indicative of the results to be
expected for the full year.
2. Summarized Financial Data
Summarized income statement information for the cellular
ventures accounted for on the equity method for the three
months ended March 31, 1994 and 1993 is as follows:
Three Months Ended
March 31,
-------------------
At 100% 1994 1993
------- ---- ----
Net revenues $213,427 $159,868
Net income 75,624 60,039
LIN's equity in net income 31,848 24,729
<PAGE>
<PAGE> 6
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
3. Supplemental Disclosures Of Cash Flow Information
Interest payments were $16,866 and $24,697 for the three
months ended March 31, 1994 and 1993, respectively. Net
federal and state income tax payments were $12,121 and
$10,966 for the three months ended March 31, 1994 and 1993,
respectively.
<PAGE>
<PAGE> 7
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
THREE MONTHS 1994 v. THREE MONTHS 1993
Net revenues increased 27% during the first quarter of 1994 to
$191.6 million from $151.2 million in the first quarter of 1993.
This increase was composed of a 32% increase in cellular revenues
and an 11% increase in media revenues. The cellular revenue
increase was primarily attributable to a 39% increase in the
subscriber bases of the consolidated cellular operations.
Monthly revenue per subscriber was essentially unchanged due
primarily to an increase in average minutes of use per subscriber
offset by a lower average rate per minute. The media revenue
increase reflects improvement in the economy which stimulated
increased advertiser spending.
Direct costs and expenses increased 48% primarily due to a
significant increase in marketing expenses in the cellular
operations. Cellular marketing expenses increased 108% from the
1993 first quarter due to a 104% increase in gross subscriber
additions in the consolidated cellular operations. Cellular
customer support and administrative expenses increased 35% while
programming, production and promotion cost in the media
operations increased 17% over the same period last year.
Depreciation expense increased 23% principally due to higher
levels of cellular property and equipment in service.
Equity in the income of unconsolidated cellular affiliates rose
to $31.8 million in the first quarter of 1994 from $24.7 million
in the first quarter of 1993 reflecting revenue and income
increases in the cellular ventures (Los Angeles, Philadelphia,
Houston and Galveston) carried under equity accounting. The
revenues of these ventures increased 34% primarily due to a 40%
increase in the number of subscribers offset, in part, by a
slight decline in average revenue per subscriber. Direct costs
and expenses increased 45%, largely from higher marketing and
administrative costs. The unconsolidated ventures experienced a
58% increase in gross subscriber additions in the first quarter
of 1994 compared to the same period in 1993.
Interest expense (which includes the amortization of the
financing and commitment fees) decreased $1.7 million,
principally due to lower debt levels on both of the Company's
credit facilities.
The provision for preferred stock dividends is a result of the
issuance, by a subsidiary of the Company, of $850 million of
redeemable preferred stock which is held by a subsidiary of
Comcast Corporation.
<PAGE>
<PAGE> 8
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
REGULATION AND COMPETITION
In addition to B Block cellular competition, the Company and its
unconsolidated affiliates expect to face competition from
enhanced specialized mobile services (ESMR) operations, such as
Nextel, which are launching cellular-like services in the
Company's Los Angeles market. Other ESMR networks are scheduled
to begin either operation or construction in other cities as
well.
In September 1993, the FCC adopted rules for the licensing of
personal communications services ("PCS"). While the Company and
other cellular carriers will be eligible to compete for these
licenses, the amount of PCS spectrum that cellular carriers may
acquire in their own cellular market areas is limited.
Furthermore, the FCC's rules provide for as many as seven PCS
licenses in any market area, so the likelihood of additional
competition in wireless services has increased. The FCC has also
established Rand-McNally Major Trading Areas ("MTAs") and Basic
Trading Areas ("BTAs") as the licensing areas for PCS services.
Both MTAs and BTAs are larger than a cellular MSA or RSA. In
some instances, an MTA may exceed in size the Company's cluster
of cellular licenses in a particular geographic region. It is
expected that PCS licenses will begin to be awarded in 1994.
Several parties to the FCC proceeding including the Company have
petitioned for reconsideration of certain aspects of the PCS
rules and it is possible that the FCC could amend its rules based
upon these petitions.
Some of the PCS spectrum is already used by cellular carriers for
microwave transmissions. The FCC has determined that the
existing microwave users must be phased out or relocated to new
frequencies once PCS is deployed. However, the FCC's rules
enable displaced microwave users to obtain compensation from PCS
licensees for vacating PCS spectrum and provide for a transition
period before incumbent microwave users are forced to relocate.
Pursuant to the Omnibus Budget Reconciliation Act of 1993, signed
into law in August 1993, the FCC will auction the spectrum that
it has allocated for PCS licenses. Auctions are scheduled to
begin in late 1994. The FCC has recently adopted generic rules
for conducting auctions and is still considering proposed rules
for broadband PCS licenses. These proposed rules include a
provision for the submission of bids to acquire all licenses
available within a common spectrum block, thus offering a new PCS
entrant the possibility of obtaining national coverage. Because
the auction rules are only preliminary, it is uncertain how they
will affect the Company's competitive position.
The Omnibus Budget Reconciliation Act of 1993 also specifies that
cellular and other commercial mobile providers should be subject
to similar regulatory treatments, including federal pre-emption
of state rate and entry regulation and exemption from tariffing
<PAGE>
<PAGE> 9
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
REGULATION AND COMPETITION (continued)
requirements. A state may petition the FCC for the right to
regulate the rates of commercial mobile providers but must
demonstrate that rates will be unreasonable without the state's
regulatory oversight. States that currently regulate cellular
must petition the FCC by August 10, 1994, in order to retain rate
regulatory jurisdiction while the petition is reviewed by the
FCC. It is unclear which, if any states will petition the FCC.
In light of the uncertainty as to how the legislation will be
implemented, and as to the nature of the additional competitive
services covered thereby, it is impossible to quantify the impact
of these legislative and regulatory initiatives or such
competition on the Company at this time.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of funds are its operations and
two bank credit facilities. Cash provided by operating
activities totaled $58.6 million for the quarter ended March 31,
1994, compared to $61.0 million for the same period in 1993. The
decrease was primarily due to the increased net loss and a
decrease in cash received from equity affiliates. A substantial
contribution to the Company's operating cash flow continues to be
provided by the Los Angeles affiliate. In the event the
California economy remains weak or the business of the Los
Angeles affiliate is otherwise adversely affected, the Company's
cash flow could similarly be adversely affected. Under its bank
credit facilities, the Company had $1.67 billion outstanding on
March 31, 1994. The Company had an additional $240 million
available on its cellular bank facility as of March 31, 1994.
Under its bank credit facilities, the Company must remain in
compliance with a series of financial covenants which compare the
levels of the Company's cellular and broadcast indebtedness to
its cellular and broadcast cash flows as of the end of each
quarter. Although the Company is currently in compliance with
all bank covenants and is reducing its debt through scheduled
repayments, the ratios of indebtedness to cash flow required to
be maintained by the bank credit facilities decrease over the
course of 1994. It will be necessary for the Company to continue
to reduce debt or to increase cash flow in order to remain in
compliance. Further discussion of the Company's bank credit
facilities, including restrictions on certain activities by the
Company, and the Company's Redeemable Preferred Stock is set
forth in the Company's Form 10-K for the year ended December 31,
1993.
Cash used by investing activities decreased 16%, primarily due to
an increase in capital expenditures for the cellular operations
offset by investments in and net advances from unconsolidated
affiliates. The cellular operations continue to require
<PAGE>
<PAGE> 10
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES (continued)
substantial capital to purchase additional cell sites, switching
equipment and administrative support systems equipment to provide
additional capacity for the growing subscriber bases, to provide
increased coverage areas and new services, and to expand and
streamline back office systems. During the first quarter of
1994, the Company completed the conversion to a new cellular
system in the Dallas market. This project is expected to cost
approximately $100 million with approximately $66 million having
been expended through March 31, 1994, including $11 million
during the first quarter of 1994. The Company began commercial
offering of digital cellular service in New York during the
quarter and expects to begin offering digital cellular service in
Dallas during the second quarter. The Company also uses capital
to make acquisitions of strategic cellular interests, primarily
in markets adjacent to the major interests the Company already
owns. As of March 31, 1994, the Company had commitments of
approximately $175 million to acquire additional interests in the
New York City cellular licensee as well as to purchase 100% of
the Connecticut-1 RSA near the New York market. The Company may
utilize additional borrowings under its cellular bank credit
facility to fund these acquisitions.
While the Company has generated sufficient cash to meet its
expenditure requirements, the Company continues to have
substantial debt service, and other operating and capital
requirements. In particular, amortization of the Company's
credit facilities increases over the next few years. While the
Company expects to have sufficient internally generated funds to
repay its indebtedness at maturity, there can be no assurance
that this will occur.
If the Company does not generate sufficient funds, it may seek to
issue additional debt through a private or public offering, sell
equity or sell certain cellular interests, broadcast properties
or other assets. There can be no assurance that the Company will
be able to obtain such additional financing or sell assets when
needed, or if it is able to obtain such financing or sell assets,
that the terms will be favorable to the Company or its
stockholders. Finally, the Company will be required by the terms
of its bank credit facilities to apply the proceeds of asset
sales under certain circumstances not reinvested in similar
assets to the repayment of loans thereunder.
It is the Company's policy to carefully monitor the state of its
business, cash requirements and capital structure. From time to
time, the Company may enter into transactions pursuant to which
debt is extinguished, including sales of assets or equity, joint
ventures, reorganizations or recapitalizations. There can be no
assurance that any further such transactions will be undertaken
or, if undertaken, will be favorable to stockholders.
<PAGE>
<PAGE> 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is from time to time a defendant in and is threatened
with various legal proceedings arising from its regular business
activities. The Company is also party to routine filings with
the FCC and state regulatory authorities and customary regulatory
proceedings pending in connection with interconnection, rates,
and practices and proceedings concerning the telecommunications
industry in general and other proceedings which management does
not expect to have a material adverse effect on the financial
position or results of operations of the Company.
In August 1993 and in December 1993, two dealers for the Los
Angeles cellular partnership filed lawsuits against the
partnership and certain other parties in the California state
court, seeking injunctive relief and monetary damages (Goldenwest
Cellular Corp. v. Los Angeles SMSA Ltd. Partnership; PacTel
Cellular; The Good Guys Inc., Case No. 715479 (Superior Court of
California, Orange County), and Autophone, Inc. v. Los Angeles
Cellular Telephone Co.; Los Angeles SMSA Ltd. Partnership; PacTel
Cellular, et al, Case No. 722299 (Superior Court of California,
Orange County)). The lawsuits allege various torts and statutory
violations, including price-fixing regarding cellular equipment
and service, below-cost sales of equipment, fraud, interference
with economic relationship, unfair competition, discrimination
among agents, and conspiracy. A third lawsuit addressing similar
facts and raising many of the same claims (Cellular Activators,
et al. v. Los Angeles Cellular Telephone Company, et al., Case
No. 729278 (Superior Court of California, Orange County)) was
filed in May 1994, but it has not yet been served. A fourth suit
was filed in February 1994 (Cel-Tech Communications, Inc. et al
v. Los Angeles Cellular Telephone Company et al, Case No.
VC015535 (Superior Court of California, Los Angeles County))
containing claims relating to equipment sales and seeking
injunctive relief, restitution and monetary damages; these claims
include unfair practices, restraint of trade, tortious
interference, and unfair competition relating in part to
allegations of below-cost sales of equipment. All of these cases
are in their early stages. The August 1993 and December 1993
cases have been consolidated. The partnership intends to defend
each lawsuit vigorously, believes that it has meritorious
defenses to the allegations contained in the complaints, and does
not expect that the ultimate results of these legal proceedings
will have a material adverse effect on its financial position or
results of operations.
In September 1993, a proposed class action lawsuit was filed by a
cellular subscriber in a District Court in Texas (Crowley and
Weemes v. Houston Cellular Telephone Co.; McCaw Cellular
Communications, Inc.; LIN Broadcasting Corp., Case No. 93-0879,
Harrison County, Texas, 71st Judicial District). The lawsuit
alleges that the renewal provisions and liquidated damages
provisions of the annual subscriber agreements of various
cellular carriers, including the Houston cellular partnership,
are void and unenforceable, and are contrary to public policy. <PAGE>
<PAGE> 12
Item 1. Legal Proceedings (continued)
The plaintiffs also seek monetary damages. No class has yet been
certified. The partnership intends to defend the lawsuit
vigorously, believes that it has meritorious defenses to the
allegations contained in the complaint, and does not expect that
the ultimate results of this legal proceeding will have a
material adverse effect on its financial position or results of
operations.
Item 5.
(a) Supplemental Proportionate Operating Data.
<PAGE>
<PAGE> 13
LIN BROADCASTING CORPORATION
SUPPLEMENTAL FINANCIAL DATA
(Dollars in thousands)
(Unaudited)
The following data is provided to assist in understanding the
financial results of LIN's cellular and media operations. The
cellular operating data has been prepared using "proportionate
consolidation." This presentation differs from the consolidation
methodology used to prepare the Company's principal financial
statements in accordance with generally accepted accounting
principles (GAAP). Proportionate consolidation details the
operating results of all LIN's cellular interests, including
those carried on the equity method in the GAAP financials,
weighted by LIN's ownership in those results.
Three Months Ended
March 31,
1994 1993
---------------------
Cellular:
Net revenues $222,395 $167,205
-------- ---------
Direct costs and expenses 69,803 50,162
Marketing 67,775 37,193
Depreciation 17,424 14,313
Amortization 18,977 18,973
-------- ---------
173,979 120,641
-------- ---------
Operating income $48,416 $46,564
======== =========
Total subscribers 1,575,000 1,130,000
Proportionate subscribers(1) 958,000 682,000
Media:
Net revenues $41,914 $37,697
-------- ---------
Direct costs and expenses 27,564 25,268
Depreciation 1,707 1,704
Amortization 859 859
-------- ---------
30,130 27,831
-------- ---------
Operating income $11,784 $9,866
======== =========
(1) Calculated by multiplying (i) the total subscribers of a
licensee in which, as of the date specified, the Company
owned an interest, by (ii) the percentage ownership interest
in that licensee which the Company owned on such date.<PAGE>
<PAGE>
SIGNATURE
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.
LIN Broadcasting Corporation
(Registrant)
DONALD GUTHRIE
------------------------------
Donald Guthrie
Senior Vice President - Finance
Date: May 16, 1994
