Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
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 0-15367
OUTLET COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware 05-0425681
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
23 Kenney Drive 02920
Cranston, Rhode Island (Zip Code)
(Address of principal executive offices)
(401) 455-9200
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
Class of Common Stock September 30, 1995
- ---------------------- -------------------
Class A Common Stock, par value $.01 per share 6,581,131 shares
<PAGE>
OUTLET COMMUNICATIONS, INC. AND SUBSIDIARIES
INDEX
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets --
September 30, 1995 and December 31, 1994
Condensed Consolidated Statements of Operations --
Three Months and Nine Months Ended
September 30, 1995 and September 30, 1994
Condensed Consolidated Statements of Cash Flows --
Nine Months Ended September 30, 1995 and
September 30, 1994
Notes to Condensed Consolidated Financial
Statements
Item 2. Management's Discussion and Analysis
Part II. Other Information
Item 1. Legal Proceedings
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
PART I. FINANCIAL INFORMATION
OUTLET COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, September 30,
1994 1995
------------ --------------
(Note) (Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 7,840,000 $ 4,387,000
Trade accounts receivable, less allowance
for doubtful accounts (December--$321,000;
September--$346,000) 13,640,000 12,932,000
Film contract rights 3,350,000 4,773,000
Other current assets 1,171,000 1,144,000
------------ ------------
TOTAL CURRENT ASSETS 26,001,000 23,236,000
OTHER ASSETS
Film contract rights 1,012,000 1,282,000
Deferred financing costs 3,019,000 2,783,000
Other 380,000 565,000
------------ ------------
4,411,000 4,630,000
PROPERTY AND EQUIPMENT 49,632,000 57,917,000
Less accumulated depreciation 27,115,000 30,016,000
------------ ------------
22,517,000 27,901,000
INTANGIBLE ASSETS, less accumulated amortization
(December--$20,149,000; September--$22,042,000) 76,999,000 75,106,000
------------ ------------
$129,928,000 $130,873,000
============ ============
<PAGE>
OUTLET COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS-Continued
December 31, September 30,
1994 1995
------------ --------------
(Note) (Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 801,000 $ 265,000
Accrued expenses 10,394,000 8,677,000
Film contracts payable 4,174,000 4,841,000
Deferred revenue 833,000 833,000
Federal and state income taxes 2,724,000 1,558,000
Current portion of long-term debt 4,500,000 4,875,000
------------ ------------
TOTAL CURRENT LIABILITIES 23,426,000 21,049,000
LONG-TERM DEBT
Senior bank loan 15,000,000 11,250,000
10 7/8% Senior Subordinated Notes 60,000,000 60,000,000
------------ ------------
75,000,000 71,250,000
OTHER LIABILITIES
Film contracts payable 1,019,000 1,251,000
Unfunded pensions 2,355,000 2,278,000
Deferred revenue 3,889,000 3,264,000
Deferred income taxes 4,403,000 7,603,000
Other 3,432,000 3,432,000
------------ ------------
15,098,000 17,828,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common Stock 66,000 66,000
Capital Surplus 32,476,000 32,495,000
Accumulated deficit (16,138,000) (11,815,000)
------------ ------------
16,404,000 20,746,000
------------ ------------
$129,928,000 $130,873,000
============ ============
Note: The balance sheet at December 31, 1994 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
See accompanying notes.
<PAGE>
<TABLE>
OUTLET COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
1994 1995 1994 1995
<S> <C> <C> <C> <C>
Net revenue $ 13,695,000 $ 15,399,000 $ 39,981,000 $ 46,726,000
Expenses:
Technical, programming and news 5,055,000 5,954,000 14,150,000 16,016,000
Selling, general and administrative 2,790,000 3,413,000 7,849,000 9,880,000
Corporate expenses 578,000 608,000 1,649,000 1,723,000
Depreciation 821,000 1,036,000 2,203,000 2,986,000
Amortization of intangible assets 715,000 631,000 1,925,000 1,893,000
------------ ------------ ------------ ------------
9,959,000 11,642,000 27,776,000 32,498,000
------------ ------------ ------------ ------------
Operating income 3,736,000 3,757,000 12,205,000 14,228,000
Other income (expense):
Interest expense (2,116,000) (2,133,000) (6,315,000) (6,397,000)
Interest income 30,000 71,000 59,000 263,000
Other income 48,000 283,000 180,000 431,000
Other expense (229,000) (487,000) (432,000) (1,002,000)
------------ ------------ ------------ ------------
Income before income taxes 1,469,000 1,491,000 5,697,000 7,523,000
Income taxes (benefit) (1,529,000) 633,000 300,000 3,200,000
------------ ------------ ------------ ------------
Net income $ 2,998,000 $ 858,000 $ 5,397,000 $ 4,323,000
============ ============ ============ ============
Income per common and common equivalent share $ 0.45 $ 0.13 $ 0.82 $ 0.64
============ ============ ============ ============
Weighted average number of shares of common stock
and common stock equivalents 6,571,445 6,806,863 6,566,978 6,806,085
============ ============ ============ ============
See accompanying notes.
</TABLE>
<PAGE>
OUTLET COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30, September 30,
1994 1995
------------- --------------
Cash from operations $ 13,552,000 $ 8,824,000
Investing activities:
Capital expenditures-net of disposals (1,908,000) (8,370,000)
Investment in time brokerage agreements (1,061,000) (551,000)
Investment in station acquisition (5,473,000)
------------ ------------
(8,442,000) (8,921,000)
Financing activities:
Payment of term loan (2,625,000) (3,375,000)
Other 45,000 19,000
------------ ------------
(2,580,000) (3,356,000)
------------ ------------
Net increase (decrease) in cash and cash $ 2,530,000 $ (3,453,000)
equivalents ============ ============
See accompanying notes.
<PAGE>
OUTLET COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 1995
Note 1 - Basis of Presentation
- ------------------------------
The accompanying unaudited condensed consolidated financial statements
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. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the nine month
period ended September 30, 1995 are not necessarily indicative of the results
that may be expected for the year ended December 31, 1995. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-K for the year
ended December 31, 1994.
Note 2 - Income (Loss) Per Share
- ---------------------------------
Income (loss) per share has been computed by dividing net income (loss)
by the weighted average number of shares of common stock and common stock
equivalents outstanding (when dilutive).
Note 3 - Contingent Liabilities and Commitments
- ------------------------------------------------
The Company has commitments to acquire approximately $10,492,000 of film
contract rights at September 30, 1995.
At September 30, 1995, the Company remains contingently liable on
approximately $11,698,000 of store leases associated with its retail division
which was sold as of the fiscal year ended January 31, 1983. All of the
leases have been assumed by others and management believes that future
payments, if any, would not be material to the Company's financial statements.
The Company also remains contingently liable on approximately $4,183,000
of building and tower leases related to radio and television stations sold in
March 1990.
The Company may be subject to litigation arising from its normal business
operations. Any liability which may result therefrom, to the extent not
provided by insurance or accruals, would not have a material effect on the
Company's financial position.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OUTLET COMMUNICATIONS, INC. AND SUBSIDIARIES
The Company's operations consist of three owned television stations and
one television station operated under a time brokerage agreement. The owned
stations include two NBC network-affiliated VHF television stations and one
NBC network-affiliated UHF television station. The two VHF television
stations are WJAR, which serves the Providence, Rhode Island-New Bedford,
Massachusetts area and WCMH, which serves the Columbus, Ohio area. The UHF
television station, acquired by the Company on August 10, 1994, is WNCN which
serves the Raleigh-Durham (Fayetteville, Goldsboro and Rocky Mount), North
Carolina market area.
Since April 18, 1994, the Company has also operated UHF television
station WWHO, Chillicothe, Ohio, under a time brokerage agreement with that
station's licensee. The Company serves as a broker for the sale of WWHO's
advertising time and provides it with certain programming and operating
capabilities. In return, the Company retains a substantial percentage of
WWHO's net operating income to the extent that it exceeds cumulative net
operating losses. WWHO is affiliated with The WB Television Network.
On August 2, 1995 the Company executed a definitive merger agreement with
the National Broadcasting Company, Inc. ("NBC") and CO Acquisition
Corporation, a subsidiary of NBC, providing for a transaction in which NBC
would acquire the Company and the Company's stockholders would receive $47.25
per common share in cash. The merger agreement was approved by the Company's
Board of Directors and by the holders of a majority of the Company's
outstanding common stock. Closing of the transaction is subject to approval
by the Federal Communications Commission.
<PAGE>
Three Months Ended September 30, 1995 and September 30, 1994
The following table sets forth a comparison of total Company operating
results for the third quarters of 1994 and 1995.
Three Months Ended September 30
1994 1995 Increase(Decrease)
Percent Percent 1995 vs. 1994
of Net of Net Percentage
Dollars in thousands Amount Revenue Amount Revenue Amount Change
- --------------------- ------ ------- ------ ------- ------ ----------
Net revenue $13,695 100.0% $15,399 100.0% $1,704 12.4%
Expenses:
Technical, programming
and news 5,055 36.9 5,954 38.7 899 17.8%
Selling, general and
administrative 2,790 20.4 3,413 22.2 623 22.3%
Corporate expenses 578 4.2 608 3.9 30 5.2%
Depreciation and
amortization 1,536 11.2 1,667 10.8 131 8.5%
Operating income $ 3,736 27.3% $ 3,757 24.4% $ 21 .6%
====== ====== ====== ====== =====
Net cash provided
by operations (a) $ 7,993 58.4% $ 1,079 7.0% ($6,914) (86.5%)
====== ====== ====== ====== ===== ======
Operating cash
flow (a) $ 5,272 38.5% $ 5,424 35.2% $ 152 2.9%
====== ====== ====== ====== ===== ======
(a) "Net cash provided by operations" includes all cash flows
(including working capital changes) other than cash flows
associated with investing or financing activities.
"Operating cash flow" means operating income plus depreciation
and amortization.
Net revenue of $15,399,000 in the third quarter of 1995 increased by
$1,704,000 or 12.4% when compared with net revenue of $13,695,000 in the third
quarter of 1994. WJAR and WCMH increased their third quarter revenue by 10.5%
and 2.2%, respectively, in comparison with the prior year. The 1994 station
additions, WNCN and WWHO, provided an aggregate revenue increase in the
current quarter of 7.2%.
WJAR's revenues from national advertising sources increased by 33.8% in
the 1995 third quarter although local revenue decreased by 14.4%. The latter
decrease was attributable to an absence of political advertising in the
current quarter. In 1994, an election year, the third quarter benefited from
significant political activity. Without the effect of political advertising,
WJAR's local revenue improved by 11.9% in the 1995 third quarter.
At WCMH, revenue in the third quarter of 1995 set a new record high. The
station benefited from improvement in advertising rates as well as an increase
in commercial production. The effect of political revenue on the station's
quarterly comparisons was not significant.
<PAGE>
Both of the Company's VHF television stations experienced increases in
network compensation. This resulted from the stations' favorable renewal of
their affiliation with the NBC network as of September 1, 1994.
Since becoming part of the Company's operations in 1994, television
stations WNCN and WWHO have made steady progress. Through improvements in
organizational structure, programming and delivery of signal, the stations
have become more productive; have been able to increase their advertising
rates; and have otherwise improved their overall revenue performance. The
1995 third quarter saw a continuation of improved programming and increased
revenue. In the quarter, WNCN added to its programming, and to its revenue
potential, by implementing a local news show and by becoming an affiliate of
the NBC network.
Technical, programming and news expenses of $5,954,000 in the 1995 third
quarter increased by $899,000 or 17.8% from $5,055,000 in the prior year
period. All of the increase was attributable to inclusion of operating
expenses for WNCN and WWHO in the current year's quarter. Without the added
stations, there was a decrease of $298,000 or 6.6% in technical, programming
and news expenses. This was due primarily to continued reductions in film
syndication costs at the VHF television stations. Also contributing to the
favorable expense comparison with the prior year was the elimination of news
costs incurred in September 1994 for WJAR's television coverage of Rhode
Island primary elections. In addition, WCMH eliminated its coverage of this
year's Little Brown Jug, a harness horse racing event. As a percent to
revenue, technical, programming and news expenses increased to 38.7% in the
current quarter from 36.9% a year ago.
Selling, general and administrative expenses of $3,413,000 in the third
quarter of 1995 increased by $623,000 or 22.3% compared with $2,790,000 in the
1994 third quarter. The increase primarily reflected increased expenses
resulting from the 1994 additions of WNCN and WWHO. Also contributing to the
expense increase were additional advertising and promotion expenses incurred
by WJAR. As a percent of revenue, selling, general and administrative
expenses increased to 22.2% in the 1995 third quarter from 20.4% a year ago.
Corporate expenses had a minor increase of $30,000 or 5.2% when compared
with the prior year period. As a percent to revenue, such expenses decreased
to 3.9% in the current quarter from 4.2% a year ago. Depreciation expense
increased in the 1995 third quarter due to the Company's 1994 investments in
television stations WNCN and WWHO. Amortization of intangible assets
decreased because certain programming and advertising contracts acquired with
the new stations became fully amortized.
Total expenses of $11,642,000 in the third quarter of 1995 increased by
$1,683,000 or 16.9% from $9,959,000 in the prior year. The increase was
virtually all attributable to the 1994 station additions described above. As
a percent of revenue, total 1995 third quarter expenses were 75.6%, up from
72.7% in the prior year period.
<PAGE>
Operating income of $3,757,000 in the 1995 third quarter increased by
$21,000 or .6% compared with $3,736,000 in the prior year. However, operating
income decreased as a percent of revenue, from 27.3% in the third quarter of
1994 to 24.4% in the third quarter of 1995. The decrease in operating income
percent was primarily attributable to operating losses sustained by the two
UHF television stations.
The overall increased operating income contributed marginally to the
Company's operating cash flow. Operating cash flow of $5,424,000 increased by
$152,000 or 2.9% from last year's $5,272,000 and represented 35.2% of revenue
compared with 38.5% of revenue in the prior year.
In the third quarter of 1995, total interest expense of $2,133,000
increased by $17,000 or .8% compared to $2,116,000 a year ago. The Company
has reduced its outstanding long-term debt by making quarterly payments on a
term loan with a bank. However, rising market interest rates caused the
interest rate on such borrowing to increase. This resulted in an increase in
the current quarter's interest expense. The ratio of operating cash flow -
$5,424,000, to interest expense - $2,133,000, in the 1995 third quarter of 2.5
to 1 was equal to such ratio in the third quarter of 1994.
Interest income improved in 1995 because of increased cash balances
maintained during the current period and because of higher returns on invested
funds. Other income increased in 1995 because of a gain on the sale of
marketable securities and because of the reversal of an accrual for music
license fees that was no longer required. The increase in other expense in
1995 primarily includes costs related to the agreement to merge Outlet with
NBC.
The Company's 1995 third quarter income before income taxes totalled
$1,491,000. This was an improvement of $22,000 or 1.5% compared with pretax
income in the prior year period of $1,469,000. After a 1995 third quarter
provision for income taxes of $633,000, which increased deferred income taxes
payable, net income was $858,000 or $.13 per share. This compares with net
income in the prior year period of $2,998,000 or $.45 per share. Net income
in the 1994 third quarter was favorably affected by an income tax benefit of
$1,529,000, principally representing an adjustment of prior year net operating
losses.
Net cash provided by operations in the third quarter of 1995 totalled
$1,079,000. This was a decrease of $6,914,000 or 86.5% compared to net cash
provided by operations of $7,993,000 in the third quarter of 1994. The
decrease principally reflects an amount of $5,000,000 included in the prior
year's quarter representing a one-time payment received from NBC upon renewal
of the Company's affiliation with that network. The decrease also includes a
net reduction of approximately $1.2 million in outstanding trade accounts
payable and accrued expenses in the 1995 third quarter when compared with the
same period a year ago. This reduction primarily represents payments made in
the current quarter on outstanding obligations related to WNCN.
<PAGE>
During the third quarter of 1995, the Company increased its cash
investment in film contract rights by $1,253,000, primarily by making payment
on film contract obligations. After giving effect to the period's
amortization of film contract rights of $1,188,000, the increased net
investment in film contract rights was $65,000. This compares with a cash
investment in film contract rights of $1,471,000 during the third quarter of
1994 and a net increased investment in film contract rights of $154,000 for
that period.
The Company's increased volume of business activity, along with
additional television properties, caused outstanding trade accounts receivable
to trend higher in the 1995 third quarter compared with the same period a year
ago.
Nine Months Ended September 30, 1995 and September 30, 1994
The following table sets forth a comparison of total Company operating
results for the first nine months of 1994 and 1995.
Nine Months Ended September 30
1994 1995 Increase(Decrease)
Percent Percent 1995 vs. 1994
of Net of Net Percentage
Dollars in thousands Amount Revenue Amount Revenue Amount Change
- --------------------- ------ ------- ------ ------- ------ ----------
Net revenue $39,981 100.0% $46,726 100.0% $6,745 16.9%
Expenses:
Technical, programming
and news 14,150 35.4 16,016 34.3 1,866 13.2
Selling, general and
administrative 7,849 19.7 9,880 21.1 2,031 25.9
Corporate expenses 1,649 4.1 1,723 3.7 74 4.5
Depreciation and
amortization 4,128 10.3 4,879 10.4 751 18.2
Operating income $12,205 30.5% $14,228 30.5% $2,023 16.6
====== ====== ====== ====== =====
Net cash provided
by operations (a) $13,552 33.9% $ 8,824 18.9% ($4,728) (34.9%)
====== ====== ====== ====== ===== =====
Operating cash
flow (a) $16,333 40.9% $19,107 40.9% $2,774 17.0%
====== ====== ====== ====== ===== =====
(a) "Net cash provided by operations" includes all cash flows
(including working capital changes) other than cash flows
associated with investing or financing activities.
"Operating cash flow" means operating income plus depreciation
and amortization.
For the first nine months of 1995, net revenue totalled $46,726,000.
This was an increase of $6,745,000 or 16.9% compared with $39,981,000 in the
prior year period. Improved revenues at WJAR accounted for approximately 40%
of the total revenue increase and the two UHF television stations added during
1994 accounted for approximately 44% of the revenue increase.
<PAGE>
Television stations WJAR and WCMH had year-to-date revenue gains of 18%
and 4.3% respectively. Revenues from local and national advertising sources
at these two television stations increased over the prior year by 1.7% and
12.4%, respectively. The absence of political advertising in the current year
contributed to the reduced rate of increase in local revenue. Both of the VHF
television stations maintained higher unit advertising rates in the first nine
months of 1995 compared to 1994. Network compensation increased by more than
73%. The revenue increase provided by television stations WWHO and WNCN
amounted to approximately 7.5% of the prior year's revenue total.
Technical, programming and news expenses of $16,016,000 increased by
$1,866,000 or 13.2% in the first nine months of 1995 compared with the same
period a year ago. The increase resulted from inclusion of expenses of
stations WWHO and WNCN in the current year. In a year-to-year comparison of
technical, programming and news expenses at the VHF stations, there was a 5.6%
decrease due, primarily, to a reduction in film syndication costs.
In the first nine months of 1995, selling, general and administrative
expenses increased over the prior year period by $2,031,000, or 25.9%. Of
this amount, $1,956,000 resulted from WWHO and WNCN, the new stations added in
1994. The remaining increase primarily represents sales commissions payable
on increased revenues and additional promotion costs at WJAR. Depreciation
expense increased in the first nine months of 1995 because of the Company's
prior year investments in WWHO and WNCN. Amortization of intangible assets
decreased as certain programming and advertising contracts acquired with the
new television stations became fully amortized.
Total expenses of $32,498,000 in the first nine months of 1995 increased
by $4,722,000 or 17% compared to $27,776,000 in the same prior year period.
As a percent of revenue, total expenses for the 1995 year-to-date of 69.5% was
approximately equal to the percent of the prior year.
The Company's operating income of $14,228,000 for the first nine months
of 1995 increased by $2,023,000 or 16.6% when compared with operating income
of $12,205,000 in the first nine months of 1994. The current year's
improvement reflects a 16.9% increase in revenues reduced by a 17% increase in
total expenses. The improvement also contributed to a 17% increase in
operating cash flow.
Interest expense increased by $82,000 in the first nine months of 1995
compared with the first nine months of 1994. This resulted from the impact of
rising market interest rates on the borrowing rate of the Company's senior
loan with a bank. In the first nine months of 1995, the ratio of operating
cash flow - $19,107,000, to interest expense - $6,397,000, was 3.0 to 1. In
the first nine months of 1994, this ratio was 2.6 to 1.
<PAGE>
Interest income improved in 1995 because of increased cash balances
maintained during the current period and because of higher returns on invested
funds. Other income increased in 1995 because of a gain on the sale of
marketable securities and because of the reversal of an accrual for music
license fees that was no longer required. The increase in other expense
includes added costs of stock options along with charges associated with the
UHF stations and expenses related to the agreement to merge the Company with
NBC.
Income before income taxes for the first nine months of 1995 amounted to
$7,523,000. This was an improvement of $1,826,000 compared to pretax income
of $5,697,000 in the prior year period. After a 1995 provision for income
taxes of $3,200,000, which increased deferred income taxes payable, net income
was $4,323,000 or $.64 per share. This compares with net income in the first
nine months of 1994 of $5,397,000 or $.82 per share. Net income in 1994 was
favorably affected by a third quarter income tax benefit of $1,529,000,
principally representing an adjustment of prior year net operating losses.
Net cash provided by operations in the first nine months of 1995 totalled
$8,824,000. This was a decrease of $4,728,000 or 34.9% compared with net cash
provided by operations of $13,552,000 in the first nine months of 1994. The
decrease primarily reflects the one-time payment of $5,000,000 received from
NBC in the prior year. Cash payments for interest installments in the first
nine months of 1995 increased slightly, to $7,760,000 from $7,683,000 in the
prior year period.
During the first nine months of 1995, the Company increased its cash
investment in film contract rights by $4,296,000, primarily by making payment
on film contract obligations. After giving effect to the period's
amortization of film contract rights in the amount of $3,502,000, the
increased net investment in film contract rights was $794,000. This compares
with a cash investment in film contract rights of $4,159,000 during the first
nine months of 1994 and a net increased investment in film contract rights of
$406,000 for that period.
The Company decreased its accrued expenses by $1,717,000 in the first
nine months of 1995. The decrease was the result of a reduced requirement for
accrued interest expense at September 30, 1995 due to payment of a semi-annual
interest installment in July 1995.
Cash required by investing activities in the first nine months of 1995
amounted to $8,921,000. This included capital expenditures totalling
$8,370,000 of which approximately 75% was spent in behalf of WNCN. During the
period, WNCN moved its broadcast studio and offices to a newly leased facility
in Raleigh, North Carolina. This required capital outlays for new equipment,
fixtures and studio and office renovations.
<PAGE>
Investing activities also include payments of $551,000 made in connection
with entering into a time brokerage agreement with the licensee of a
television station to be constructed and operated in New Bedford,
Massachusetts. Subject to final regulatory approvals, it is expected that the
New Bedford station will be operational by the second quarter of 1996. It is
also anticipated that any further funds required in this venture will be
available from internal operations.
In the first nine months of 1994, cash required by investing activities
totalled $8,442,000. This included capital expenditures of $1,908,000 and an
investment of $1,061,000 pursuant to a time brokerage agreement entered into
with the licensee of television station WWHO. Investing activities also
include the purchase of television station WNCN (formerly WYED) in the
Raleigh, North Carolina market area for an aggregate price of $5,473,000.
Cash used by financing activities in the first nine months of 1995
totalled $3,356,000. This included payment of quarterly installments due on a
term loan with the Company's senior bank lender in the amount of $3,375,000.
In the first nine months of 1994, cash used by financing activities of
$2,580,000 included payment of such quarterly term loan installments totalling
$2,625,000.
The Company had a decrease in net working capital (excess of current
assets over current liabilities) to $2,187,000 at September 30, 1995 from
$2,575,000 at December 31, 1994. The decrease was primarily attributable to
funds used for capital expenditures. However, the approximate 1.1 to 1 ratio
of current assets to current liabilities remained unchanged at December 31,
1994 and at September 30, 1995. Because cash used in investing and financing
activities during the first nine months of 1995 exceeded net cash provided by
operations, there was a net decrease in cash on hand of $3,453,000.
The Company is benefitting from growth and improved operating results.
It is expected that continuation of this favorable trend, combined with
amounts currently available under the revolving credit facility ($5,000,000),
will provide adequate liquidity for the Company to meet its ongoing operating
and capital expenditure needs.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- ---------------------------
There are no pending legal proceedings or actions against the Company or
its subsidiaries which would have a material effect on the business or
financial condition of the Company except for the legal proceedings and
contingent lease and film obligations as described in Note 3 to the
consolidated condensed financial statements on page 7 of this report.
Item 5. Other Information
- ---------------------------
In connection with the Company's agreement with BAF Enterprises, Inc.,
("Licensee") wherein the Company agreed to broker Licensee's television
station to be constructed in New Bedford, Massachusetts, it is currently
expected that the station will be operational in the 1996 second quarter. It
was previously expected that the station would be operational in the 1995
fourth quarter.
Item 6. Exhibits and Reports on Form 8-K
- ------------------------------------------
(a) Exhibits -- None.
(b) Reports on Form 8-K
A report on Form 8-K dated August 2, 1995 was filed regarding the
Company entering into a merger agreement with National Broadcasting Company,
Inc. and CO Acquisition Corporation (together referred to as "NBC") whereby
NBC would acquire the Company, by way of merger, upon NBC making a cash
payment of $47.25 per common share to the Company's stockholders. The
transaction was approved by a majority of the Company's stockholders on August
2, 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OUTLET COMMUNICATIONS, INC.
---------------------------
(Registrant)
Date November 9, 1995 /s/ James G. Babb
------------------- --------------------------------
James G. Babb
Chairman of the Board,
President and
Chief Executive Officer
Date November 9, 1995 /s/ Felix W. Oziemblewski
------------------ --------------------------------
Felix W. Oziemblewski
Vice President-
Chief Financial Officer
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