<PAGE>
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 quarterly period ended March 31, 1996
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 0-19728
GRANITE BROADCASTING CORPORATION
(exact name of registrant as specified in its charter)
DELAWARE 13-3458782
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
767 Third Avenue
34th Floor
New York, New York 10017
Telephone number: (212) 826-2530
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_____
------
(APPLICABLE ONLY TO CORPORATE ISSUERS:)
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class A Voting Common Stock, par value $.01 per share - 178,500 shares
outstanding at March 31, 1996; Common Stock (Nonvoting), par value $.01 per
share - 8,298,966 shares outstanding at March 31, 1996.
<PAGE>
PART I. FINANCIAL INFORMATION
GRANITE BROADCASTING CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1996 1995
- - ------ --------- ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,354,430 $ 95,123
Accounts receivable, net 22,633,125 26,186,579
Film contract rights 4,516,019 5,813,366
Other assets 4,231,351 3,854,774
------------ ------------
Total current assets 35,734,925 35,949,842
Property and equipment, net 32,204,637 32,132,126
Film contract rights and other noncurrent assets 4,281,976 3,725,612
Deferred financing fees, net 14,045,461 14,849,529
Intangible assets, net 363,503,529 365,564,029
------------ ------------
$449,770,528 $452,221,138
============ ============
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
- - ------------------------------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 2,703,803 $ 4,770,793
Accrued interest 8,477,344 5,595,610
Other accrued liabilities 3,511,490 3,252,518
Film contract rights and other current liabilities 8,231,029 7,708,442
------------ ------------
Total current liabilities 22,923,666 21,327,363
Long-term debt 344,454,700 341,000,000
Film contract rights payable 3,881,370 3,669,534
Deferred tax and other noncurrent liability 31,886,678 31,869,240
Redeemable preferred stock 45,487,500 45,487,500
Stockholders' equity:
Common Stock: 41,000,000 shares authorized consisting of
1,000,000 shares of Voting Common Stock, $.01 par value,
and 40,000,000 shares of Common Stock (Nonvoting), $.01
par value; 178,500 shares of Voting Common Stock and
8,298,966 shares of Common Stock (Nonvoting) (8,218,240
shares at December 31,1995) issued and outstanding 84,774 83,967
Additional paid in capital 45,982,076 46,864,202
Accumulated deficit (43,554,303) (36,590,198)
Less: Unearned compensation (1,375,933) (1,490,470)
------------ ------------
Total stockholders' equity 1,136,614 8,867,501
------------ ------------
$449,770,528 $452,221,138
============ ============
</TABLE>
See accompanying notes.
-1-
<PAGE>
GRANITE BROADCASTING CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
<S> <C> <C>
1996 1995
---- ----
(Unaudited)
Net revenues $28,629,635 $16,455,798
Station operating expenses 17,517,927 10,337,693
Depreciation expense 1,473,380 804,940
Amortization expense 2,951,278 1,447,547
Corporate expense 990,014 811,816
Non-cash compensation expense 114,537 80,913
----------- -----------
Operating income 5,582,499 2,972,889
Other expenses:
Interest expense, net 8,849,730 3,710,095
Other 125,633 94,260
----------- -----------
Loss before income taxes and extraordinary item (3,392,864) (831,466)
Provision for income taxes (61,089) -
----------- -----------
Loss before extraordinary item (3,453,953) (831,466)
Extraordinary loss on early extinguishment of debt (3,510,152) -
----------- -----------
Net loss $(6,964,105) $ (831,466)
=========== ===========
Net loss attributable to common stockholders $(7,845,424) $(1,769,942)
=========== ===========
Per common share:
Loss before extraordinary item $ (0.51) $(0.39)
Extraordinary loss on early extinguishment
of debt (0.42) -
----------- -----------
Net loss $ (0.93) $(0.39)
=========== ===========
Weighted average common shares outstanding 8,464,012 4,577,524
</TABLE>
See accompanying notes.
-2-
<PAGE>
GRANITE BROADCASTING CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Three Months Ended March 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Class A Common Additional Total
Common Stock Paid-in Accumulated Unearned Stockholders'
Stock (Nonvoting) Capital Deficit Compensation Equity
------- ---------- ---------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $1,785 $82,182 $46,864,202 $(36,590,198) $(1,490,470) $8,867,501
Dividend on Cumulative
Convertible Exchangeable
Preferred Stock (881,319) (881,319)
Issuance of Common Stock
(Nonvoting) 807 (807)
Stock expense related to
Management Stock Plan 114,537 114,537
Net loss (6,964,105) (6,964,105)
------ ------- ----------- ------------ ----------- ----------
Balance at March 31, 1996 $1,785 $82,989 $45,982,076 $(43,554,303) $(1,375,933) $1,136,614
====== ======= =========== ============ =========== ==========
</TABLE>
-3-
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1995
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from operating
activities:
Net loss $ (6,964,105) $ (831,466)
Adjustments to reconcile net
loss to net cash
provided by (used in)
operating activities:
Amortization of intangible
assets and deferred
financing fees 2,951,278 1,447,547
Depreciation 1,473,380 804,940
Extraordinary loss on early
extinguishment of debt 3,510,152 -
Non-cash compensation expense 114,537 80,913
Change in assets and
liabilities:
Decrease in accounts
receivable 3,553,454 989
Increase (decrease) in accrued
liabilities 3,140,706 (1,106,304)
(Decrease) increase in
accounts payable (2,066,990) 476,695
Decrease (increase) in film
contract rights
and other noncurrent assets 740,983 (733,385)
Increase in film contract
rights payable
and other liabilities 734,423 844,303
Increase in other assets (823,238) (1,756,072)
------------- ------------
Net cash provided by (used
in) operating activities 6,364,580 (771,840)
------------- ------------
Cash flows from investing
activities:
Payment for acquisition of
station, net of
cash acquired - (53,922,975)
Capital expenditures (1,443,898) (2,184,307)
------------- ------------
Net cash used investing
activities (1,443,898) (56,107,282)
------------- ------------
Cash flows from financing
activities:
Proceeds from bank financing 1,000,000 62,250,000
Proceeds from senior
subordinated notes 109,450,000 -
Repayment of bank debt (107,000,000) -
Payment of deferred financing
fees (3,230,056) (1,919,009)
Dividends paid (881,319) (917,320)
Redemption of Adjustable Rate
Preferred Stock - (2,000,000)
------------- ------------
Net cash (used in) provided
by financing activities (661,375) 57,413,671
------------- ------------
Net increase in cash and cash
equivalents 4,259,307 534,549
Cash and cash equivalents,
beginning of period 95,123 1,947,562
------------- ------------
Cash and cash equivalents, end
of period $ 4,354,430 $ 2,482,111
============= ============
Supplemental information:
Cash paid for interest $ 5,967,996 $ 4,622,939
Income taxes paid 12,500 -
Non-cash capital expenditures 101,993 -
</TABLE>
See accompanying notes.
-4-
<PAGE>
GRANITE BROADCASTING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 - Basis of presentation
- - --------------------------------
The accompanying unaudited consolidated financial statements include the
accounts of Granite Broadcasting Corporation and its subsidiaries (the
"Company") and have been prepared in accordance with the instructions to Form
10-Q and do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
Operating results for the three month period ended March 31, 1996 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1996. For further information, refer to the Company's consolidated
financial statements and notes thereto for the year ended December 31, 1995
which were included in the Company's Form 10-K dated March 28, 1996. All
significant intercompany accounts and transactions have been eliminated. Data
at December 31, 1995 is derived from the Company's audited consolidated
financial statements.
In the opinion of management, all adjustments of a normal recurring nature which
are necessary for a fair presentation of the results for the interim periods
have been made.
Note 2 - Long Term Debt
- - -----------------------
On February 22, 1996, the Company completed an offering of $110,000,000
principal amount of its 9 3/8% Series A Senior Subordinated Notes (the "9 3/8%
Notes") due December 1, 2005. Proceeds from the sale of the 9 3/8% Notes were
used to repay all outstanding term loan and revolving credit borrowings under
the existing bank credit agreement and for general working capital purposes. In
connection with the repayment of the term loan (which is not subject to being
reborrowed), the Company incurred an extraordinary loss on the early
extinguishment of debt of $3,510,152 related to the write-off of deferred
financing fees.
Note 3 - Net loss per common share
- - ----------------------------------
Net loss per common share for the three month periods ended March 31, 1996 and
1995 is calculated by dividing net loss attributable to common stockholders by
the weighted average number of shares of common stock outstanding. The inclusion
of additional shares assuming the exercise of outstanding stock options and the
conversion of certain convertible preferred stock would have been antidilutive
for the three month periods ended March 31, 1996 and 1995.
-5-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
- - ------------
The consolidated financial statements of the Company reflect significant
increases between the three months ended March 31, 1996 and 1995 in
substantially all line items. The principal reasons for such increases are the
acquisition of KEYE-TV on February 1, 1995, the acquisition of WWMT-TV on June
1, 1995 and the acquisition of WKBW-TV on June 29, 1995. It is anticipated that
the Company's consolidated financial statements for the year ended December 31,
1996 will reflect significant increases in substantially all line items compared
to the prior year due to the acquisitions of KEYE-TV, WWMT-TV and WKBW-TV. The
Company may recognize significant taxable income as a result of the acquisition
of WKBW-TV. Such taxable income could potentially eliminate substantially all
of the Company's net operating losses for federal income tax purposes available
for future utilization, and could result in the Company being in a taxable
position in present and future years. For financial reporting purposes, any
taxes paid arising from the consummation of the acquisition of WKBW-TV is
considered additional purchase price and allocated to goodwill.
The Company's revenues are derived principally from local and national
advertising and, to a lesser extent, from network compensation for the broadcast
of programming and revenues from studio rental and commercial production
activities. The primary operating expenses involved in owning and operating
television stations are employee salaries, depreciation and amortization and
programming, advertising and promotion expenses. Numbers referred to in the
following discussion have been rounded to the nearest thousand.
The following table sets forth certain operating data for the three months ended
March 31, 1996 and 1995:
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1996 1995
---- ----
<S> <C> <C>
Operating income $ 5,582,000 $2,973,000
Add:
Depreciation and amortization 4,425,000 2,252,000
Corporate expense 990,000 812,000
Non-cash compensation 115,000 81,000
----------- ----------
Broadcast cash flow $11,112,000 $6,118,000
=========== ==========
</TABLE>
"Broadcast cash flow" means operating income plus depreciation, amortization,
corporate expense and non-cash compensation. The Company has included broadcast
cash flow data because such data are commonly used as a measure of performance
for broadcast companies and are also used by investors to measure a company's
ability to service debt. Broadcast cash flow is not, and should not be used as,
an indicator or alternative to operating income, net income or cash flow as
reflected in the consolidated financial statements, is not a measure of
financial performance under generally accepted accounting principles and should
not be considered in isolation or as a substitute for measures of performance
prepared in accordance with generally accepted accounting principles.
The Company believes that the adoption of Statements of Financial Accounting
Standards No. 115 (Accounting for Certain Investments in Debt and Equity
Securities), No. 119 (Disclosure about Derivative Financial Instruments and Fair
Value of Financial Instruments), No. 121 (Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of) and No. 123
(Accounting for Stock Based Compensation) have not, to the extent in effect, and
will not have a material effect on its financial position and results of
operations.
Three months ended March 31, 1996 and 1995
- - ------------------------------------------
Net revenues for the three months ended March 31, 1996 totaled $28,630,000, an
increase of $12,174,000 or 74% compared to $16,456,000 for the three months
ended March 31, 1995. Of this increase, $11,084,000 was due to the inclusion of
one additional month of operations of KEYE-TV and three months of operations of
WWMT-TV and WKBW-TV. The remaining increase of $1,090,000 resulted primarily
from increased network compensation and increased political spending in an
election year. Net revenue at the Company's nine stations (including revenue
derived by KEYE-TV, WWMT-TV and WKBW-TV prior to their acquisition by the
Company) increased $1,621,000, or 6.0% during the three months ended March 31,
1996 as compared to the same period in 1995.
-6-
<PAGE>
Station operating expenses totaled $17,518,000, an increase of $7,180,000 or 69%
compared to $10,338,000 for the three months ended March 31, 1995. Of this
increase, $6,088,000 was due to the inclusion of one additional month of
operations of KEYE-TV and three months of operations of WWMT-TV and WKBW-TV.
The remaining increase of $1,092,000 resulted from increased news expenses,
primarily associated with the launch of a news operation at KEYE-TV, and
increased promotion expenses. Station operating expenses at the Company's nine
stations (including station operating expenses of KEYE-TV, WWMT-TV and WKBW-TV
prior to their acquisition by the Company) increased $947,000, or 5.7% during
the three months ended March 31, 1996 as compared to the same period in 1995.
Depreciation and amortization increased $2,173,000, or 96% during the three
months ended March 31, 1996 compared to the same period a year earlier primarily
due to the inclusion of one additional month of operations of KEYE-TV and three
months of operations of WWMT-TV and WKBW-TV.
Corporate expense increased $178,000 or 22% during the three months ended March
31, 1996 compared to the same period a year earlier, primarily due to higher
administrative expenses resulting from the acquisitions of KEYE-TV, WWMT-TV and
WKBW-TV during 1995. Non-cash compensation expense increased $34,000 during the
three months ended March 31, 1996 compared to the same period a year earlier due
to the granting of additional shares of Common Stock (Nonvoting) to certain
executive employees under the Company's Management Stock Plan.
As a result of the above, operating income totaled $5,582,000, an increase of
$2,609,000 or 88% compared to $2,973,000 for the three months ended March 31,
1995.
Net interest expense was $8,850,000 compared to $3,710,000 a year earlier, an
increase of $5,140,000 or 139%, due primarily to higher levels of outstanding
indebtedness as a result of the acquisitions of KEYE-TV, WWMT-TV and WKBW-TV in
1995.
Loss before extraordinary item for the three months ended March 31, 1996 totaled
$3,454,000 compared to $831,000 for the same period a year earlier, an increase
of $2,623,000.
The Company completed an offering of $110,000,000 principal amount of its 9 3/8%
Series A Senior Subordinated Notes due December 2005 (the "9 3/8% Notes").
Proceeds from the sale of the 9 3/8% Notes were used to repay all outstanding
term loan and revolving credit borrowings under the Company's bank credit
agreement (the "Credit Agreement") and for general working capital purposes.
As a result of repaying the term loan, which is not subject to being reborrowed,
the Company incurred an extraordinary loss of $3,510,000 due to the write-off of
related deferred financing fees.
Net loss totaled $6,964,000 during the three months ended March 31, 1996
compared to a net loss of $831,000 during the same period a year earlier, an
increase of $6,133,000. This change is due to the changes in the line items
described above.
Broadcast cash flow totaled $11,112,000 for the three month period ended March
31, 1996, an increase of $4,994,000 or 82% compared to $6,118,000 during the
same period a year earlier. Of this increase, $5,026,000 was due to the
inclusion of one additional month of operations of KEYE-TV and three months of
operations of WWMT-TV and WKBW-TV. Broadcast cash flow at the Company's nine
stations (including broadcast cash flow derived by KEYE-TV, WWMT-TV and WKBW-TV
prior to their acquisition by the Company) increased $674,000, or 6.5% during
the three months ended March 31, 1996 as compared to the same period in 1995.
Liquidity and Capital Resources
- - -------------------------------
On February 22, 1996, the Company completed an offering of $110,000,000
principal amount of its 9 3/8% Notes due December 2005. Proceeds from the sale
of the 9 3/8% Notes were used to repay all outstanding term loan and revolving
credit borrowings under the Company's Credit Agreement and for general working
capital purposes. As of April 30, 1996, the Company had the entire $60,000,000
revolving credit facility under the Credit Agreement available for working
capital purposes.
Cash flows provided by operating activities were $6,365,000 during the three
months ended March 31, 1996 compared to cash flows used in operating activities
of $772,000 during the three months ended March 31, 1995, an increase of
$7,137,000. The increase was primarily due to an increase in broadcast cash
flow and a decrease in net operating assets offset, in part, by higher cash
interest expense.
-7-
<PAGE>
Cash flows used in investing activities were $1,444,000 during the three months
ended March 31, 1996, compared to $56,107,000 during the three months ended
March 31, 1995. Cash flows used in investing activities during the first
quarter of 1995 related primarily to the acquisition of KEYE-TV while cash flows
used in investing activities during the first quarter of 1996 were entirely
related to capital expenditures.
Cash flows used in financing activities were $661,000 during the three months
ended March 31, 1996 compared to cash flows provided by financing activities of
$57,414,000 during the three months ended March 31, 1995. The decrease in 1996
resulted primarily from a net decrease in bank borrowings and an increase in
payments for deferred financing fees partially offset by proceeds from the sale
of the 9 3/8% Notes in 1996 and redemption of the Company's Adjustable Rate
Preferred Stock in 1995.
The Company believes that internally generated funds from operations, and
borrowings under its revolving working capital facility, if necessary, will be
sufficient to satisfy the Company's cash requirements for its existing
operations for the next twelve months and for the foreseeable future thereafter.
-8-
<PAGE>
PART II
-------
OTHER INFORMATION
-----------------
ITEM 1. Legal Proceedings
-----------------
Not applicable
ITEM 2. Changes in Securities
---------------------
Not applicable
ITEM 3. Defaults upon Senior Securities
-------------------------------
Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
On February 20, 1996, the holders of the Company's voting common stock
adopted resolutions by unanimous written consent in lieu of a special
meeting amending the Company's Bylaws. The Company's Bylaws, as
amended to date, were filed as Exhibit 3.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995, filed
on March 28, 1996.
ITEM 5. Other Information
-----------------
Not applicable
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
a. Exhibits
--------
11. Statement of Computation of Per Share Earnings.
b. Reports on Form 8-K
-------------------
Not applicable
-9-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has caused this report to be signed by an officer
and the principal accounting officer on its behalf by the undersigned thereunto
duly authorized.
GRANITE BROADCASTING CORPORATION
Registrant
Date May 10, 1996 /s/ W. DON CORNWELL
------------ --------------------------------------------
(W. Don Cornwell)
Chief Executive Officer
Date May 10, 1996 /s/ LAWRENCE I. WILLS
------------ --------------------------------------------
(Lawrence I. Wills)
Vice President, Finance and Controller
(Principal Accounting Officer)
-10-
<PAGE>
EXHIBIT 11
GRANITE BROADCASTING CORPORATION
STATEMENT OF COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------
1996 1995
---- ----
(Unaudited)
<S> <C> <C>
Primary:
Average shares of common stock
outstanding 8,464,012 4,577,524
=========== ===========
Loss before extraordinary item $(3,453,953) $ (831,466)
Extraordinary loss on early
extinguishment of debt (3,510,152) -
----------- -----------
Net loss $(6,964,105) $ (831,466)
=========== ===========
Net loss attributable to common stockholders $(7,845,424) $(1,769,942)
=========== ===========
Per common share:
Loss before extraordinary item $ (0.51) $ (0.39)
Extraordinary loss on early
extinguishment of debt (0.42) -
----------- -----------
Net loss $ (0.93) $ (0.39)
=========== ===========
Fully Diluted:
Average shares of common stock
outstanding 8,464,012 4,577,524
=========== ===========
Loss before extraordinary item $(3,453,953) $ (831,466)
Extraordinary loss on early
extinguishment of debt (3,510,152) -
----------- -----------
Net loss $(6,964,105) $ (831,466)
=========== ===========
Net loss attributable to common shareholders $(7,845,424) $(1,769,942)
=========== ===========
Per common share:
Loss before extraordinary item $ (0.51) $ (0.39)
Extraordinary loss on early
extinguishment of debt (0.42) -
----------- -----------
Net loss $ (0.93) $ (0.39)
=========== ===========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GRANITE
BROADCASTING CORPORATIONS FIRST QUARTER FORM 10-Q AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 4,354,430
<SECURITIES> 0
<RECEIVABLES> 22,633,125
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 35,734,925
<PP&E> 32,204,637
<DEPRECIATION> 0
<TOTAL-ASSETS> 449,770,528
<CURRENT-LIABILITIES> 22,923,666
<BONDS> 344,454,700
45,487,500
0
<COMMON> 84,774
<OTHER-SE> 1,051,840
<TOTAL-LIABILITY-AND-EQUITY> 449,770,528
<SALES> 0
<TOTAL-REVENUES> 28,629,635
<CGS> 0
<TOTAL-COSTS> 23,047,136
<OTHER-EXPENSES> 125,633
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,869,265
<INCOME-PRETAX> (3,392,864)
<INCOME-TAX> (61,089)
<INCOME-CONTINUING> (3,453,953)
<DISCONTINUED> 0
<EXTRAORDINARY> (3,510,152)
<CHANGES> 0
<NET-INCOME> (6,964,105)
<EPS-PRIMARY> (0.93)
<EPS-DILUTED> (0.93)
</TABLE>
