UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the period ended September 30, 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. Yes [X] 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
October 31, 1994
----------------------------- ---------------
Common Stock, $0.01 par value 51,607,323<PAGE>
<PAGE> 1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
September 30, December 31,
1994 1993
------------ -----------
ASSETS
- - ----------------------
Current Assets:
Cash and cash equivalents $81,894 $ 86,366
Marketable securities -- 16,465
Accounts receivable, less
allowance for doubtful accounts 163,477 156,784
Program rights, prepaid expenses
and other current assets 26,482 21,960
-------- --------
Total current assets 271,853 281,575
Property and equipment, at cost,
less accumulated depreciation 464,871 405,762
Other noncurrent assets 67,270 61,807
Investments in and advances to
unconsolidated affiliates 258,182 264,172
Intangible assets, less accumulated
amortization 2,047,068 1,896,207
--------- ---------
Total assets $3,109,244 $2,909,523
========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
- - -----------------------------
Current Liabilities:
Current portion of long-term
bank debt $180,819 $146,891
Accounts payable, accrued expenses 221,241 203,953
-------- --------
Total current liabilities 402,060 350,844
(continued)<PAGE>
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
September 30, December 31,
1994 1993
------------ -----------
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) (continued)
- - ------------------------------
Long-term bank debt $1,625,788 $1,551,447
Deferred income taxes 789,044 735,049
Film contract rights and other
noncurrent liabilities 16,447 13,091
Minority interests in equity of
consolidated subsidiaries 60,775 56,209
Redeemable preferred stock of
a subsidiary -- 1,305,248
Stockholders' Equity (Deficit):
Common stock (55,329,000
shares issued) 553 553
Additional paid-in capital 1,008,887 224,689
Deficit (620,576) (1,150,205)
---------- -----------
388,864 (924,963)
Less common stock in treasury,
at cost (173,734) (177,402)
---------- -----------
Total stockholders'
equity (deficit) 215,130 (1,102,365)
---------- -----------
Total liabilities and
stockholders' equity
(deficit) $3,109,244 $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
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, Ended September 30,
----------------- -------------------
1994 1993 1994 1993
---- ---- ----- ----
Net Revenues $225,027 $175,145 $636,242 $497,576
-------- -------- -------- --------
Operating Costs and
Expenses:
Operating expenses 123,332 96,362 376,906 274,491
Corporate expenses 2,554 2,525 7,326 5,718
Depreciation 15,529 11,933 42,685 33,735
Amortization of
intangible assets 21,874 19,732 62,507 59,196
Loss on disposal of
cellular equipment -- -- -- 46,583
-------- -------- -------- --------
163,289 130,552 489,424 419,723
Operating Income 61,738 44,593 146,818 77,853
-------- -------- -------- --------
Other Income (Expense):
Equity in income of
unconsolidated
affiliates 28,616 26,906 92,817 76,215
Investment and other 1,243 1,880 3,406 6,106
Gain on redemption of
preferred stock of
a subsidiary -- -- 468,689 --
Interest expense (30,900) (24,070) (78,182) (72,194)
-------- -------- -------- --------
(1,041) 4,716 486,730 10,127
-------- -------- -------- --------
(continued)<PAGE>
<PAGE> 4
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, Ended September 30,
----------------- -------------------
1994 1993 1994 1993
---- ---- ----- ----
Income Before Income
Tax Expense and
Minority Interests $60,697 $49,309 $633,548 $87,980
Income Tax Expense 16,120 36,489 49,431 47,384
-------- -------- -------- --------
Income Before
Minority Interests 44,577 12,820 584,117 40,596
Minority Interests:
In net income (loss)
of consolidated
subsidiaries 6,684 5,728 20,913 (2,440)
Provision for preferred
stock dividends of
a subsidiary -- 33,575 33,575 100,725
-------- -------- -------- --------
Net Income (Loss) $37,893 $(26,483) $529,629 $(57,689)
======== ========= ======== =========
Net Income (Loss)
per share $0.73 $(0.51) $ 10.19 $(1.12)
======== ========= ======== =========
Average Common and
Equivalent Shares
Outstanding 52,110 51,448 51,991 51,438
======== ========= ======== =========
See notes to condensed consolidated financial statements.
<PAGE>
<PAGE> 5
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Nine Months Ended September 30,
1994 1993
-------------------------------
Net cash provided by
operating activities $156,586 $155,589
-------- --------
Investing Activities:
Proceeds from sale of
marketable securities 16,465 34,114
Purchase of marketable securities -- (36,689)
Proceeds from sale of
capital equipment 8,016 --
Capital expenditures (110,492) (79,474)
Cellular and television
acquisitions (176,952) --
Net investments in and
advances from unconsolidated
affiliates 8,986 8,823
-------- --------
Net cash used in
investing activities (253,977) (73,226)
Financing Activities:
Proceeds from borrowings 340,000 --
Repayment of bank debt (231,731) (43,320)
Increase in deferred
commitment/financing fees (5,366) --
Redemption of preferred stock (13,167) --
Proceeds from common stock
issued for stock purchase
plan, stock options and
related tax benefits 4,277 1,942
Purchase of common stock
for treasury (1,094) (1,028)
-------- --------
Net cash provided by (used in)
financing activities 92,919 (42,406)
(continued)<PAGE>
<PAGE> 6
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Dollars in thousands)
(Unaudited)
Nine Months Ended September 30,
1994 1993
-------------------------------
Increase (Decrease) in Cash
and Cash Equivalents $(4,472) $39,957
Cash and Cash Equivalents at
Beginning of Period 86,366 102,909
-------- --------
Cash and Cash Equivalents at
End of Period $81,894 $142,866
======== ========
Supplemental Disclosures Of Cash Flow Information
Interest payments were $69,725 and $64,729 for the nine months ended
September 30, 1994 and 1993, respectively. Net tax payments were
$55,287 and $36,025 for the nine months ended September 30, 1994 and
1993 respectively.
See notes to condensed consolidated financial statements.
<PAGE>
<PAGE> 7
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
partnerships (principally New York and Dallas) in which LIN has
voting control (the Company). The Company s investments in
cellular partnerships in which it has voting interests of 50% or
less but more than 20% (principally Los Angeles and Houston) 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 and nine month periods ended September
30, 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 and nine months
ended September 30, 1994 and 1993 is as follows:
<PAGE>
<PAGE> 8
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
2. Summarized Financial Data (continued)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
At 100%(1) 1994 1993 1994 1993
- - ------------- ---- ---- ----- ----
Net revenues $173,977 $179,734 $615,096 $514,777
Net income 66,574 62,688 218,338 182,682
LIN's equity in
net income 28,616 26,906 92,817 76,215
(1) The Philadelphia results are included through June 24, 1994.
(see note 3 below)
3. Redemption of Preferred Stock of a Subsidiary
On June 24, 1994 the Company's subsidiary, LCH Communications
("LCH") redeemed all the outstanding Redeemable Preferred Stock
of LCH held by Comcast Cellular Communications, Inc. a subsidiary
of Comcast Corporation, in exchange for all of the capital stock
of a subsidiary of LCH Communications whose assets consisted
primarily of LIN's 49.99% interest in the Philadelphia "A Block"
cellular system and its interest in GuestInformant (a publisher
of advertiser-supported hard cover magazines placed in hotel
rooms). This transaction resulted in a non-cash, tax-free gain
of $468.7 million. The gain represents the excess of the fair
values of the assets exchanged over their book values. The
$783.8 million difference between the book value of the Preferred
Stock and the fair values of the assets exchanged was credited to
Additional Paid-In Capital. The results of operations of
GuestInformant and the equity in income of the Philadelphia
cellular venture are reflected in the Company's results of
operations through June 24, 1994.
<PAGE>
<PAGE> 9
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
4. Pending Transactions
In June 1994 the Company announced that it intends to distribute
the common stock of its subsidiary, LIN Television Corporation,
to the Company's stockholders on a tax-free basis. LIN also
announced that it and LIN Television Corporation entered into a
definitive agreement to acquire WTNH-TV, the ABC affiliate in
Hartford-New Haven, Connecticut from Cook Inlet Communications
Corporation for approximately $120 million in cash and 11.5% of
the common stock of LIN Television Corporation. These
transactions will create a public company which owns seven
network-affiliated television stations, including stations in
Dallas, Indianapolis, Hartford-New Haven and Norfolk.
Following the spin-off, it is expected that approximately 42% of
LIN Television Corporation's shares will be publicly owned and
approximately 46% will be owned by McCaw Cellular Communications,
Inc. These transactions are subject to Federal Communications
Commission and other approvals. The Internal Revenue Service has
ruled that no gain or loss will be recognized by (and no amount
will be included in the income of) the shareholders of the
Company as a result of the spin-off. The closing of the WTNH
acquisition and spin-off are expected to occur by year-end 1994.
5. Income (Loss) Per Share
For the 1994 periods, the computation of primary earnings per
share is based on the weighted average number of outstanding
common shares and additional share equivalents assuming the
exercise of stock options. A separate earnings per share
calculation for the excess of carrying amount of preferred stock
over the fair value of consideration transferred to the holder of
the preferred stock added to primary net income is also included.
For the 1993 periods, common stock equivalents are excluded as
their effect is anti-dilutive. Net income (loss) per share was
calculated as follows:
<PAGE>
<PAGE> 10
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
5. Income (loss) Per Share (continued)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1994 1993 1994 1993
---- ---- ----- ----
Shares outstanding:
Weighted average
shares outstanding 51,577 51,436 51,541 51,433
Share equivalents 533 -- 450 --
------- ------- ------- -------
Adjusted shares
outstanding 52,110 51,436 51,991 51,433
======= ======= ======= =======
Net Income (Loss) $37,893 $(26,483) $529,629 $(57,689)
Excess carrying value
of preferred stock
over fair value of
consideration
transferred -- -- 783,823 --
------- ------- ------- -------
Total $37,893 $(26,483) $1,313,452 $(57,689)
======= ========= ========== =========
Net Income (loss)
per share:
Primary income (loss)
per share $0.73 $(0.51) $10.19 $(1.12)
Amount per share
excess carrying value
of preferred stock
over fair value of
consideration
transferred -- -- 15.08 --
------- ------- ------- -------
Net Income (loss) per
share, including excess
of carrying value of
preferred stock over
fair value of
consideration
transferred $0.73 $(0.51) $25.27 $(1.12)
======= ======= ======= =======
<PAGE>
<PAGE> 11
PART I. FINANCIAL INFORMATION
Item 2. Management s Discussion and Analysis of Financial Condition
and Results of Operations
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
Management s Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
1994 v. 1993
Due to the effect of the LCH transaction discussed in Note 3 to the
Condensed Consolidated Financial Statements above, LIN's financial
results for the quarter and nine months ended September 30, 1994 are
not directly comparable to the financial results of prior periods.
The Company s net revenues for the third quarter and nine months of
1994 increased 28% versus the same periods in 1993. Net revenues for
the Company s consolidated cellular operations for the three and nine
month periods ended September 30, 1994 increased 35% and 34%,
respectively, over the 1993 comparable periods. The increases in
cellular revenues were principally due to a 46% increase in the
subscriber bases at the consolidated cellular operations since
September 30, 1993 offset in part by a 6% decrease in average monthly
revenue per subscriber. Net revenues for the media operations
increased 7% and 9% for the three and nine month periods ended
September 30, 1994, from the same periods in the prior year,
reflecting continued improvement in both the national economy and the
local economies where the Company operates, which stimulated growth in
advertising spending.
Operating costs and expenses increased 28% and 37% during the third
quarter and nine months of 1994, respectively, over the same periods
last year. The increases were primarily the result of a 53% and 71%
increase in marketing costs for the third quarter and nine months of
1994, respectively, over the comparable periods in 1993. Marketing
cost increases were primarily related to a 43% and 55% increase in
gross new cellular subscribers for the same periods. Media operations
costs decreased 6% for the third quarter and increased 3% for the
nine months. The decrease in the third quarter was due primarily to
the absence of the GuestInformant operating results during the third
quarter of 1994 as discussed in Note 3 to the Condensed Consolidated
Financial Statements. The nine month increase was due to an increase
in general and administrative costs, partially offset by the absence
of GuestInformant costs.
Depreciation expense increased 30% and 27% during the third quarter
and nine months of 1994, respectively, over the same periods in the
prior year due primarily to higher levels of cellular property and
equipment in service at the consolidated cellular operations. <PAGE>
<PAGE> 12
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
RESULTS OF OPERATIONS (continued)
Equity in income of unconsolidated cellular affiliates increased 6%
and 22% during the quarter and nine months ended September 30, 1994,
respectively, compared to the same periods in 1993, due primarily to
increased net revenues and net income at the Los Angeles and Houston
Cellular ventures offset by the absence of the Philadelphia venture's
operations during the third quarter of 1994 as explained above. The
revenues of the unconsolidated cellular affiliates decreased 3% for
the third quarter of 1994 compared to the prior year third quarter
due primarily to the absence of the Philadelphia operations, but
increased 19% for the nine month period ended September 30, 1994
compared to the same period in the prior year. The increase for the
nine month period was due to increases in the subscriber bases since
September 1993 offset by the absence of the Philadelphia operations
and a decline in average revenue per subscriber. Operating expenses
for those affiliates were up 9% and 29% for the third quarter and nine
months of 1994, respectively, over the comparable periods in 1993.
The increases were due to higher marketing, customer support and
administrative costs related to growth in the subscriber bases offset
in part, by the absence of the Philadelphia operations during the
third quarter of 1994.
The gain on redemption of preferred stock resulted from the LCH
transaction as discussed in Note 3 to the Condensed Consolidated
Financial Statements above.
Interest expense (which includes the amortization of financing and
commitment fees) increased during the third quarter and nine months of
1994, compared to the same periods in the prior year. The increase
for the third quarter was due primarily to higher average borrowing
rates and a higher average debt balance outstanding on the Company's
cellular bank credit facility (see Liquidity and Capital Resources
below). The nine month increase was due primarily to higher average
borrowing rates.
McCaw Cellular Communications Inc. ("McCaw") owns an approximate 52%
interest in the Company. In September 1994, McCaw became a wholly
owned subsidiary of AT&T Corp. Following the merger, Craig O. McCaw
resigned as a director of the Company and as the Company's Chairman
and Chief Executive Officer. James L. Barksdale was elected to fill
the positions of Chairman and Chief Executive Officer. In addition,
four new directors, each of whom is an employee of AT&T, were
appointed to the Company's Board of Directors: Lewis M. Chakrin,
Dennis J. Carey, Rolla P. Huff and W. Preston Granbery.
<PAGE>
<PAGE> 13
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
LEGISLATION, 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) operators such as Nextel, which has
launched cellular-like services in the greater Los Angeles area.
Nextel intends to launch similar services in other metropolitan areas,
including New York, Dallas and Houston, in 1995 and 1996.
In late 1993 and early 1994, the FCC adopted a series of rules for the
licensing of new messaging and voice-grade mobile communications
services, commonly called personal communications services ("PCS").
For the first time, the FCC will assign spectrum to PCS licensees by
means of auctions. In auctions conducted during the summer and fall
of this year, the FCC awarded 40 national and regional messaging
licenses. Additional messaging licenses will be auctioned in 1995.
Several of the recipients of messaging licenses have announced plans
to provide two-way short message services, which may compete with
cellular offerings.
The FCC will begin auctioning new voice-grade PCS licenses - or
broadband PCS licenses - in December 1994. Under FCC rules, as many
as six broadband PCS licenses will be issued for a given geographic
area, increasing the likelihood of additional competition for wireless
services. Broadband PCS licenses will be issued for 51 Major Trading
Areas ("MTAs") and 493 Basic Trading Areas ("BTAs"), which are
generally larger than cellular MSAs and RSAs.
The FCC's broadband PCS rules allow the Company to bid on licenses for
MTAs and BTAs in areas in which it does not currently have a
significant cellular presence, and to acquire broadband PCS licenses
aggregating up to 40 MHz in such areas. The Company is restricted to
acquiring only one 10 MHz license, however, in any area in which it
maintains a significant ownership interest in cellular networks. The
Company has entered into a bidding agreement with AT&T Corp. whereby
AT&T will bid on behalf of the Company for those broadband PCS
licenses that are specified by the Company.
The Omnibus Budget Reconciliation Act of 1993 and implementing rules
adopted by the FCC specify that cellular and other commercial mobile
providers should be subject to similar regulatory treatment, including
federal pre-emption of state rate and entry regulation and exemption
from tariffing requirements. States are permitted to 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 were <PAGE>
<PAGE> 14
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
LEGISLATION, REGULATION AND COMPETITION (continued)
required to petition the FCC by August 10, 1994 in order to continue
enforcing their regulations while their petitions are being reviewed
by the FCC.
Two of the states in which the Company operates, New York and
California, currently regulate cellular rates and have chosen to
petition the FCC to retain their jurisdiction. The New York State
Public Service Commission has requested authority to continue to
require that cellular carriers tariff their services, subject to
Commission oversight. The California Public Utilities Commission
(CPUC) has sought authority not only to continue its existing regime
for regulating cellular rates but also to require cellular carriers to
interconnect, on request, with switch-based resellers at rates that do
not exceed current wholesale prices. The CPUC has taken the position
that it may impose this interconnection rate policy immediately, and
the Company's Los Angeles cellular affiliate (LACTC) has received a
reseller request to interconnect. LACTC has petitioned the CPUC to
stay the effectiveness of the ruling. The Company does not anticipate
that the CPUC's ruling will have a material adverse effect on its
financial position or results of operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of funds are its operations and its
bank credit facilities. Cash provided by operating activities totaled
$156.6 million for the nine months of 1994, compared to $155.6 million
for the same period in 1993. The change was primarily due to improved
operating results offset in part by a decrease in cash received from
equity affiliates. The decline in cash received from the Company's
equity affiliates is primarily due to an increase in capital
expenditures in order to install digital cellular equipment in the Los
Angels and Houston cellular systems.
The Company has bank credit facilities for both its cellular business
and its broadcast business. LIN Cellular Network, a wholly-owned
subsidiary of the Company which holds all of the Company's cellular
interests, has two bank credit facilities. Under the Senior Credit
Facility, the Company had $1.5 billion outstanding and $180 million
available as of September 30, 1994. Under the Senior Unsecured
Facility, the Company had $150 million outstanding and $50 million
available as of September 30, 1994. LIN Television Corporation, a
wholly-owned subsidiary of the Company which owns six and operates an
additional two television broadcast stations pursuant to local<PAGE>
<PAGE> 15
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES (continued)
marketing agreements, had $188 million outstanding and no additional
funds available as of September 30, 1994 on its bank credit facility.
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. The
Company is currently in compliance with all bank covenants and is
making scheduled repayments. Further discussion of the Company's bank
credit facilities, including restrictions on certain activities by the
Company, is set forth in the Company's annual report on Form 10-K for
the year ended December 31, 1993.
Cash used by investing activities increased substantially, primarily
due to the purchase of an additional interest in the New York cellular
system and the acquisition of Connecticut RSA #1. In addition, the
cellular operations continue to require substantial capital to
purchase additional cell sites and switching equipment, including
investments in digital cellular equipment, in order to provide
increased system capacity, coverage areas and new services. The
Company has now launched commercial digital cellular service in New
York and Los Angeles and is testing and constructing the digital
networks in Dallas and Houston, respectively. In addition, in order
to provide efficient and high-quality support to the rapidly growing
subscriber base, the Company continues to invest in administrative
support systems and equipment.
Cash from financing activities increased due to additional borrowings
offset, in part, by repayments of debt and cash paid in connection
with the redemption of the Preferred Stock. The company borrowed $210
million, of which $175 million was used to fund cellular acquisitions
and $35 million was used for working capital purposes. The Company
made scheduled principal payments on its cellular and television debt
facilities of $101.7 million for the nine months ending September 30,
1994.
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 term portion of the Company's Cellular
Senior Credit Facility increases over the next several years. The
Company expects to have sufficient internally generated funds to repay
its indebtedness at maturity, however, there can be no assurance that
this will occur.
<PAGE>
<PAGE> 16
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES (continued)
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 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> 17
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 (LACTC) filed lawsuits against the partnership
and certain other parties in California state court, seeking
injunctive relief, damages, treble damages, punitive damages and
restitution. (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)). These cases are now set for trial in
April 1995 and have been consolidated. 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. Plaintiffs seek damages in excess of $1,000,000,
punitive damages, treble damages, restitution, and injunctive relief.
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. Plaintiffs preliminarily estimate their special damages in
this case at $21,600,000. Plaintiffs further seek treble damages,
punitive damages, restitution, and injunctive relief. This case has
been set for trial in February 1995. Discovery is proceeding in all
four of these cases.
In August 1994 a class action was filed against LACTC in California
state court on behalf of the partnership's cellular telephone service
customers and former customers in the greater Los Angeles area (Thomas
and Nicola v. Los Angeles Cellular Telephone Company, et al., Case No.
734316, Superior Court of California, Orange County). The complaint <PAGE>
<PAGE> 18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings (continued)
alleges that LACTC has engaged in price fixing for cellular service
rates with other cellular carriers in violation of California law.
The complaint seeks actual damages on behalf of the class in excess of
$100,000,000. The complaint further seeks treble damages and
injunctive relief. A similar class action complaint was filed against
LACTC in federal court in October of 1994, on behalf of former and
current cellular customers of both LACTC and its competitor Los
Angeles SMSA. This case also specifically names Los Angeles SMSA and
its affiliate AirTouch Cellular (PacTel Cellular) as defendants.
(Kagan and Sifuentes v. Los Angeles Cellular Telephone Company, et
al., Case No. 94-6923, U.S. District Court, Central District of
California). The complaint alleges that defendants engaged in price
fixing for cellular service rates in violation of Sections 1
and 2 of the Sherman Act and seeks damages, treble damages and
injunctive relief. Neither of these two class actions has been
certified by the court at this time.
LACTC intends to defend all the above-referenced lawsuits vigorously,
and believes that it has meritorious defenses to the allegations
contained in the complaints. The Company does not expect that the
decisions in these legal proceedings will have a material adverse
effect on its financial position or results of operations.
A class action complaint similar to the Thomas case described above
was filed in November 1993 against PacTel Cellular (AirTouch), Los
Angeles SMSA and others in California state court (Garabedian v.
LASMSA Limited Partnership et al., Case No 721144, Superior Court of
California, Orange County). The complaint, brought on behalf of
current and former customers of Los Angeles SMSA and LACTC, alleges
that PacTel Cellular and LACTC conspired to fix cellular service
prices. Like the Thomas case, the Garabedian complaint seeks damages
in excess of $100,000,000, treble damages and injunctive relief. The
class has not been certified by the court at this time. Parties in
Garabedian have moved to consolidate this action with the Thomas case.
If successful, such motions could have the effect of making LACTC a
defendant in the Garabedian case.
The Company is aware of an antitrust investigation being conducted by
the California State Attorney General involving the pricing of
cellular telephone service in the Los Angeles area market from about
1986 to the early 1990s. No formal charge or complaint has been
filed. The Company and LACTC are cooperating fully with the Attorney
General's investigation and believe that the relevant pricing
practices were and are in compliance with the antitrust laws.
<PAGE>
<PAGE> 19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings (continued)
In September 1993, a class action lawsuit was filed by cellular
subscribers in a District Court in Texas (Crowley and Weemes v.
Houston Cellular Telephone Co., et al., Case No. 93-0879, Harrison
County, Texas, 71st Judicial District). The defendants in this action
are Houston Cellular Telephone Company, LIN Broadcasting Corp.,
Metroplex Telephone Co., McCaw Cellular Communications, Inc., and
several affiliates of these entities providing cellular service in the
State of Texas. In general, the most recent complaint challenges the
liquidated damages and automatic renewal provisions in annual cellular
subscriber contracts. Plaintiffs assert that the contracts are void
as contracts of adhesion, void as unconscionable, void because the
cancellation provision is allegedly a penalty and void as against
public policy. Plaintiffs allege that the subscriber contracts
violate the Texas Deceptive Trade Practices Act, as unconscionable.
and assert that defendants have violated the Texas Free Enterprise and
Antitrust Act because the cancellation provisions of the contracts are
allegedly part of an intra-corporate conspiracy as well as a
conspiracy with cellular service competitors to divide cellular market
share by inhibiting subscriber ability to change providers through the
use of the challenged contract provisions. Plaintiffs allege two
separate sub-classes: (1) persons who were subject to the challenged
clauses and breached their contracts; and (2) persons who are
currently subject to contracts containing the challenged clauses.
Neither of these sub-classes has been certified by the court at this
time. Plaintiffs seek declaratory relief, damages, treble damages,
fees, costs and interest. Written and deposition discovery has
commenced. No trial date has been set. The defendants intend to
defend the lawsuit vigorously, and believe they have meritorious
defenses to the allegations contained in the complaint. The Company
does not expect that the decision in this legal proceeding will have a
material adverse effect on its financial position or results of
operations.
Item 5. Other Information
(a) Attachment of supplemental financial data.
Item 6. Exhibits and Reports on Form 8-K
(b) The Company filed an amendment to Form 8-K (Form 8-K/A) on
September 20, 1994 relating to LIN's redemption of all the
outstanding Redeemable Preferred Stock of LCH in exchange
for all of the capital stock of a subsidiary of LCH.
<PAGE>
<PAGE> 20
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
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 Nine Months Ended
September 30, September 30,
------------------ -----------------
1994 1993 1994 1993
---- ---- ----- ----
Cellular: (1)
Net revenues $238,315 $195,633 $710,517 $548,227
-------- -------- -------- --------
Direct costs and
expenses 71,604 57,575 217,274 160,834
Marketing 57,622 41,749 187,959 120,860
Depreciation 18,705 15,824 55,129 45,098
Amortization 21,171 19,143 60,376 57,090
Loss on disposal of
cellular equipment -- -- -- 26,471
-------- -------- -------- --------
169,102 134,291 520,738 410,353
-------- -------- -------- --------
Operating income $69,213 $61,342 $189,779 $137,874
======== ======== ======== ========
Proportionate
subscribers (2) 974,000 774,000 974,000 774,000
(continued)
<PAGE>
<PAGE> 21
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL DATA (continued)
(Dollars in thousands)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1994 1993 1994 1993
---- ---- ----- ----
Media: (3)
Net revenues $42,265 $39,362 $132,858 $121,428
-------- -------- -------- --------
Direct costs and
expenses 22,940 24,412 77,444 74,873
Depreciation 1,960 1,700 5,391 5,110
Amortization 823 859 2,541 2,577
-------- -------- -------- --------
25,723 26,971 85,376 82,560
-------- -------- -------- --------
Operating income $16,542 $12,391 $47,482 $38,868
======== ======== ======== ========
(1) The Philadelphia results are included through June 24, 1994.
(2) 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.
(3) The GuestInformant results are included through June 24, 1994.
<PAGE>
<PAGE> 22
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
-----------------------------
Date: November 14, 1994 Donald Guthrie
Senior Vice President - Finance
