<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 8-K/A (Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 14,1997 (January 31,
1997(1))
----------------------
GRANITE BROADCASTING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-19728 13-3458782
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
767 Third Avenue, 34th Floor
New York, New York 10017
(212) 826-2530
(Address, including zip code, and telephone number, including area code of
registrant's principal executive offices)
- ------------------------------
(1) Represents the date of consummation of an acquisition previously reported
on Form 8-K. This Amendment contains financial statements relating to such
acquisition that are required to be filed not later than 60 days after the
date the Form 8-K relating to such acquisition must be filed.
<PAGE>
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
----------------------------------------
NOT APPLICABLE
ITEM 2. ACQUISITION OF ASSETS
-----------------------------
The Company filed a Form 8-K on February 7, 1997 that described the
acquisition, on January 31, 1997, by Granite Broadcasting Corporation
("Granite"), through its wholly-owned subsidiary, of substantially all of the
assets used in the operation of television station WXON-TV, the WB Network
affiliated station serving Detroit, Michigan. This Form 8-K/A amends such
previously filed Form 8-K by supplying the audited and unaudited financial
information as permitted by Item 7 of Form 8-K.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
----------------------------------
NOT APPLICABLE
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANTS
------------------------------------------------------
NOT APPLICABLE
ITEM 5. OTHER EVENTS
--------------------
NOT APPLICABLE
ITEM 6. RESIGNATION OF REGISTRANT'S DIRECTORS
---------------------------------------------
NOT APPLICABLE
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
-----------------------------------------
(See following pages)
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<PAGE>
7. A. Financial Statements of Businesses Acquired.
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
WXON-TV, Inc.
We have audited the accompanying balance sheets of WXON-TV, Inc. as of
September 30, 1996 and 1995, and the related statements of income and retained
earnings and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of WXON-TV, Inc. at September
30, 1996 and 1995, and the results of its operations and its cash flows for the
years then ended, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
January 17, 1997
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<PAGE>
WXON-TV, Inc.
Balance Sheets
<TABLE>
<CAPTION>
SEPTEMBER 30, JANUARY 30,
1996 1995 1997
------------ ------------- --------------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash............................................................... $ 142,239 $ 846,383 $ 268,766
Marketable securities.............................................. 215,923 211,204 1,820,709
Accounts receivable, net of allowance for doubtful accounts
($120,000 in 1996 and $128,000 in 1995)........................... 3,332,485 3,283,585 3,545,783
Notes receivable from officers..................................... 7,665,615 4,703,359 7,614,894
Prepaid expenses and other assets.................................. 204,556 52,626 103,380
Program rights, including $3,413,758 and $3,178,875
of barter in 1996 and 1995, respectively.......................... 4,626,203 5,350,918 4,650,037
----------- ----------- -----------
Total current assets................................................ 16,187,021 14,448,075 18,003,569
Property and equipment, net......................................... 290,609 381,254 267,117
Deposits (principally with IRS)..................................... 1,253,768 975,232 1,253,510
Program rights...................................................... 842,546 1,497,753 82,352
Goodwill............................................................ 260,612 260,612 260,612
----------- ----------- -----------
Total assets........................................................ $18,834,556 $17,562,926 $19,867,160
----------- ----------- -----------
----------- ----------- -----------
Liabilities and shareholders' equity
Current liabilities:
Note payable due bank.............................................. $ 2,457,681 $ 600,000 $ --
Accounts payable................................................... 163,150 185,216 80,506
Accrued liabilities................................................ 408,472 341,343 80,144
Deferred revenue................................................... -- -- 5,000,000
Obligations for program rights, including $3,413,758 and
$3,178,875 of barter in 1996 and 1995, respectively............... 5,463,735 6,210,706 4,951,927
----------- ----------- -----------
Total current liabilities........................................... 8,493,038 7,337,265 10,112,577
Obligations for program rights...................................... 697,490 1,626,934 --
Shareholders' equity:
Common stock, $1 par value:
300,000 shares authorized 58,000 shares
issued and outstanding........................................... 58,000 58,000 58,000
Capital in excess of par value..................................... 294,621 294,621 294,621
Retained earnings.................................................. 9,300,939 8,246,106 9,401,962
----------- ----------- -----------
9,653,560 8,598,727 9,754,583
Net unrealized loss on marketable securities........................ (9,532) -- --
----------- ----------- -----------
Total shareholders' equity.......................................... 9,644,028 8,598,727 9,754,583
----------- ----------- -----------
Total liabilities and shareholders' equity.......................... $18,834,556 $17,562,926 $19,867,160
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See accompanying notes.
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<PAGE>
WXON-TV, Inc.
Statements of Income and Retained Earnings
<TABLE>
<CAPTION>
FOUR MONTH FOUR MONTH
PERIOD ENDED PERIOD ENDED
YEARS ENDED SEPTEMBER 30, JANUARY 30, JANUARY 31,
1996 1995 1997 1996
------------- ------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net revenues.......................................... $19,636,708 $20,370,703 $ 5,613,841 $ 7,131,797
Barter revenue........................................ 5,434,729 5,637,872 1,553,707 1,973,822
----------- ----------- ----------- -----------
Total revenue....................................... 25,071,437 26,008,575 7,167,548 9,105,619
Station operating expense, including
$273,000 in related party management
fees in 1996 and 1995 and $650,000 and
$825,000 in related party national sales
representative fees in 1996 and 1995,
respectively......................................... 13,812,451 13,989,667 4,009,446 5,002,675
Depreciation expense.................................. 121,386 168,134 23,492 30,020
----------- ----------- ------------ -----------
Total operating expenses............................ 13,933,837 14,157,801 4,032,938 5,032,695
Operating income...................................... 11,137,600 11,850,774 3,134,610 4,072,924
Other income (expense):
Interest income including $565,337 in
1996 and $178,442 in 1995 from related
parties............................................ 596,738 313,179 96,977 86,759
Interest expense.................................... (161,984) (2,917) (35,564) (37,689)
Realized loss on marketable securities.............. -- (117,698) -- --
Other income (loss)................................. 32,479 (2,391) -- --
----------- ----------- ---------- -----------
467,233 190,173 61,413 49,070
----------- ----------- ---------- -----------
Net income........................................... 11,604,833 12,040,947 3,196,023 4,121,994
Retained earnings at beginning of period............. 8,246,106 7,850,159 9,300,939 8,246,106
S corporation distributions.......................... (10,550,000) (11,645,000) (3,095,000) (3,550,000)
----------- ----------- ---------- -----------
Retained earnings at end of period.................... $ 9,300,939 $ 8,246,106 $ 9,401,962 $ 8,818,100
----------- ----------- ---------- -----------
----------- ----------- ---------- -----------
</TABLE>
See accompanying notes.
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<PAGE>
WXON-TV, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
FOUR MONTH FOUR MONTH
PERIOD ENDED PERIOD ENDED
YEARS ENDED SEPTEMBER 30, JANUARY 30, JANUARY 31,
1996 1995 1997 1996
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
(UNAUDITED)
Cash flows from operating activities
Net income........................................... $ 11,604,833 $ 12,040,947 $ 3,196,023 $4,121,994
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation expense................................. 121,386 168,134 23,492 30,020
Loss on sale of marketable securities................ -- 117,698 -- --
Loss on sale of fixed assets......................... 822 2,414 -- --
Program rights assets and liabilities................ (296,492) (765,152) (472,938) (86,914)
(Increase) decrease in assets:
Accounts receivable.................................. (48,900) 411,353 (213,298) (686,461)
Deposits............................................. (278,536) (21,669) 258 --
Prepaid expense and other assets..................... (151,930) (13,173) 101,176 28,919
Increase (decrease) in liabilities:
Accounts payable..................................... (22,066) 56,583 (82,644) (31,203)
Accrued liabilities.................................. 67,129 (17,852) (328,328) (250,384)
------------- ------------- ------------- ------------
Net cash provided by operating activities............ 10,996,246 11,979,283 2,223,741 3,125,921
Cash flows from investing activities
Net cash paid for marketable securities.............. (14,251) (56,439) (1,595,254) (5,001)
Proceeds from sale of marketable securities.......... -- 1,689,849 -- --
Purchase of fixed assets............................. (31,564) (84,696) -- --
------------- ------------- ------------- ------------
Net cash provided by (used in) investing
activities......................................... (45,815) 1,548,714 (1,595,254) (5,001)
Cash flows from financing activities
(Increase) decrease in notes receivable due from
related parties.................................... (2,962,256) (4,356,449) 50,721 (1,370,285)
Deposit received on pending sale of station.......... -- -- 5,000,000 --
Proceeds from note payable due bank.................. 2,457,681 600,000 -- 1,300,000
Repayment of note payable due bank................... (600,000) -- (2,457,681) --
S corporation distributions.......................... (10,550,000) (11,645,000) (3,095,000) (3,550,000)
------------- ------------- ------------- ------------
Net cash used in financing activities................ (11,654,575) (15,401,449) (501,960) (3,620,285)
Net increase (decrease) in cash...................... (704,144) (1,873,452) 126,527 (499,315)
Cash at beginning of period.......................... 846,383 2,719,835 142,239 846,383
------------- ------------- ------------- ------------
Cash at end of period................................ $ 142,239 $ 846,383 $ 268,766 $ 347,068
------------- ------------- ------------- ------------
------------- ------------- ------------- ------------
Supplemental disclosure of cash flow information
Cash paid during the year for:
Interest............................................. $ 148,279 $ -- $ -- $ --
</TABLE>
SEE ACCOMPANYING NOTES.
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<PAGE>
WXON-TV, Inc.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Nature of Business
WXON-TV, Inc. (the "Company") broadcasts commercial television
programming in the metropolitan Detroit television market. Commercial
time is sold and credit is granted to customers who are predominately
advertising agencies. Collateral is not required for credit granted.
Consequently, the Company's ability to collect amounts due from customers
is affected by economic fluctuations in the advertising industry and the
metropolitan Detroit television market. The accompanying unaudited
interim financial statements 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 of a normal recurring nature which are necessary for a fair
presentation of the results for the interim period have been made.
B. CASH
Cash includes cash in checking and savings accounts and cash on hand.
C. PROGRAM RIGHTS
Program rights represent the cost of broadcast license agreements for
television programming. In accordance with the provisions of "Financial
Accounting Standards Board Statement No. 63, Financial Reporting by
Broadcasters," the Company records assets and liabilities for broadcast
license agreements at the gross amount of the rights acquired and
obligations incurred under these license agreements when the license
period has begun, the cost of the program is known and the program has
been accepted and is available for its first telecast.
Barter programming transactions are accounted for at the fair market
value of programming received. Accordingly, the fair value of the
programming received is capitalized and amortized to expense as used. The
related liability for these barter programming transactions is also
recorded at the fair value of the programming received and is amortized to
income as commercial time is aired.
Amortization of program rights is computed for financial statement
purposes using a sliding-scale method based upon the total available runs
for a program and the number of times shown. The sliding-scale method
results in a higher amortization expense for the first time a program is
broadcast and a smaller amortization expense for each successive broadcast
of the same title. Amortization expense for financial statement purposes
for the years ended September 30, 1996 and 1995 amounted to $8,041,435 and
$8,620,402, respectively. Management estimates that amounts included in
current assets will be charged to operations in the next fiscal year.
Program rights are valued at the lower of unamortized cost or net
realizable value.
Gains of $41,277 and $414,205 in 1996 and 1995, respectively, on the sale
of program rights to third parties are recorded as a reduction in
programming expense.
d. Revenue Recognition
Revenue from the sale of advertising is recognized at the time the
advertisements are aired.
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<PAGE>
WXON-TV, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
e. Property and Equipment
Buildings 10 years
Leasehold improvements 5 to 30 years
Production and transmitting equipment 5 to 7 years
Machinery and equipment 5 years
Furniture and fixtures 7 years
f. Goodwill
The Company was acquired in 1969 in a business combination accounted for
using the purchase method. Goodwill of $260,612 at September 30, 1996 and
1995 represents the excess of the purchase price over fair value of the
net assets acquired. In accordance with Accounting Principles Board
Opinion No. 16, "Business Combinations," goodwill recognized from business
combinations consummated prior to November 1, 1970 is not being amortized
because it has not diminished in value.
g. Advertising Costs
The Company expenses advertising costs as incurred. Advertising expense
for the years ended September 30, 1996 and 1995 was $185,116 and $304,587,
respectively.
h. Income Taxes
The Company, with the consent of its shareholders, elected under the
Internal Revenue Code to be an S corporation effective January 1, 1985. In
lieu of corporation income taxes, the shareholders of an S corporation are
taxed on their proportionate share of the Company's taxable income.
Therefore, no provision or liability for federal income taxes has been
included in these financial statements.
An S corporation with a year end other than a calendar year is required by
the Internal Revenue Service to make certain deposits based on projected
income. The amounts on deposit at September 30, 1996 and 1995 are
$1,253,095 and $974,817, respectively.
i. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
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<PAGE>
WXON-TV, INC.
NOTES TO FINANCIAL STATEMENTS
2. Marketable Securities
Marketable securities consist primarily of shares of mutual funds that are
considered available for sale securities and valued at fair value.
Management estimates fair value upon quoted market prices of the shares of
mutual funds held at the balance sheet dates. An unrealized holding loss
on marketable securities of $9,532 is included as a separate component of
stockholders' equity at September 30, 1996. There is no unrealized gain or
loss from marketable securities included as a separate component of
stockholders' equity at September 30, 1995.
There were no realized gains or losses from the sale of marketable
securities during the year ended September 30, 1996. During the year ended
September 30, 1995, the Company recognized a loss of $117,698 from the
sale of marketable securities for $1,689,849 that had a cost of $1,807,547.
3. Property and Equipment
The major classifications of property and equipment are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------
1996 1995
---------- ----------
<S> <C> <C>
Buildings........................................................... $ 86,223 $ 86,223
Leasehold improvements.............................................. 80,971 80,971
Production and transmitting equipment............................... 1,788,376 1,824,705
Machinery and equipment............................................. 261,701 261,992
Furniture and fixtures.............................................. 426,284 411,027
---------- ----------
2,643,555 2,664,918
Less accumulated depreciation....................................... 2,352,946 2,283,664
---------- ----------
Net property and equipment.......................................... $ 290,609 $ 381,254
---------- ----------
---------- ----------
</TABLE>
4. Note Payable
The Company has a line of credit with a bank permitting borrowings of up
to $3,000,000 with interest at the bank's prime rate (8.25% and 8.75%
at September 30, 1996 and 1995, respectively). The note is secured by all
items deposited in any account with the bank and accounts receivable.
The note has restrictive covenants regarding the extension of credit to
parties other than officers, sale of assets having an aggregate book
value in excess of $1,000,000, purchase or ownership of certain
securities, and change of control. The note was repaid subsequent to
year-end.
The carrying amount of the note payable approximates its fair value.
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<PAGE>
WXON-TV, INC.
NOTES TO FINANCIAL STATEMENTS
5. Obligations for Program Rights
The approximate obligations for recorded cash program rights for the years
subsequent to September 30, 1996, are as follows:
1997 $2,049,977
1998 534,556
1999 162,934
----------
$2,747,467
----------
----------
In addition to the recorded obligations, the Company is committed for
payments of approximately $988,000 at September 30, 1996, for the purchase
of program rights which did not meet the criteria for recording such
obligations at September 30, 1996.
6. Commitments and Contingencies
The Company leases office space under a long-term operating lease
agreement expiring in May 1999. The Company also has several other
operating lease agreements some of which may be terminated at the Company's
option upon prior written notice. Rent expense for office operating
leases during the years ended September 30, 1996 and 1995 was $244,470 and
$240,906, respectively.
The future operating lease commitments for the next five years are
estimated as follows:
1997 $ 266,118
1998 262,586
1999 205,264
2000 102,000
2001 102,000
Beyond 2001 510,000
----------
$1,447,968
----------
----------
From October 1, 1995 through December 3, 1995, the Company violated an FCC
requirement limiting the amount of commercial time in children's
programming. The Company exceeded these commercial limits on children's
programming during weekend broadcasts on 48 separate occasions.
Violations of the commercial limits rule must be reported to the FCC at
the time the station files its license renewal application, at which time
the FCC will determine what penalty, if any, to issue against the station.
The Company is currently unable to estimate the penalty, if any, to be
assessed. However, the Company and its legal counsel do not believe that
such violations will have a material effect on its financial position or
on its ability to renew its FCC license. As such, no loss contingency has
been accrued.
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WXON-TV, INC.
NOTES TO FINANCIAL STATEMENTS
7. Related Party Transactions
The majority shareholder and another shareholder formed a sales
representative firm that entered into an exchange agreement to act as the
Company's national sales representative. The agreement became effective
July 24, 1989 and is effective until terminated by either party upon six
months written notice to the other party. Commissions are to be paid by
the Company to the related party at an amount equal to its expenses plus
an agreed upon amount, which in total amounted to approximately $650,000
and $825,000 for the years ended September 30, 1996 and 1995, respectively.
A related corporation, owned by a minority shareholder, performed
management services for the Company during the years ended September 30,
1996 and 1995, which amounted to approximately $273,000, respectively.
The Company has notes receivable due from officers totaling $7,665,615
and $4,703,359 at September 30, 1996 and 1995, respectively. The notes
receivable are unsecured and due on demand with interest at 9% per annum.
Interest income from related party notes receivable amounted to $565,337
and $178,442 for the years ended September 30, 1996 and 1995, respectively.
The Company also purchases programs, production and other services from
related parties. Payments for these related party transactions were
approximately $96,000 and $85,000 for the years ended September 30, 1996
and 1995, respectively.
8. RETIREMENT PLAN
The Company has an employee 401(k) retirement plan (the "Plan") covering
all eligible employees. The contributions to the Plan are based upon
elective salary deferrals by Plan participants. An officer of the Company
is the trustee of the Plan. The Company did not make any contributions to
the Plan during the years ended September 30, 1996 and 1995.
9. FINANCIAL INSTRUMENTS
The Company maintains its cash balances in one financial institution
located in the metropolitan Detroit area. The balances are insured by the
Federal Deposit Insurance Corporation up to $100,000. At September 30,
1996 and 1995, the Company's uninsured cash balances total approximately
$500,000 and $1,200,000, respectively.
Concentrations of credit risk with respect to trade accounts receivable
are limited due to the large number of customers comprising the company's
customer base and their dispersion across different industries and
geographical locations.
10. SUBSEQUENT EVENT
In January 1997, the Company sold its broadcast license and certain
assets and liabilities to Granite Broadcasting Corporation for
$175,000,000 in cash.
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WXON-TV, INC.
NOTES TO FINANCIAL STATEMENTS
B. Pro Forma Financial Information.
The pro forma financial information required to be disclosed pursuant to
this item 7.B. was included in Granite's current Report on Form 8-K filed
with the Commission on February 7, 1997.
C. Exhibits.
23.1 Consent of Independent Auditors (Ernst & Young LLP).
Item 8. Change in Financial Year
Not Applicable
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<PAGE>
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 hereunto duly authorized.
GRANITE BROADCASTING CORPORATION
Dated: April 14, 1997 By: /s/ LAWRENCE I. WILLS
------------------------------------
Name: Lawrence I. Wills
Its: Vice President--Finance and Controller
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<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-91056) pertaining to the Employee Stock Purchase Plans of
Granite Broadcasting Corporation and to the incorporation therein of our
report dated January 17, 1997, with respect to the financial statements of
WXON-TV, Inc. included in Form 8-K/A filed by Granite Broadcasting
Corporation on April 14, 1997 with the Securities and Exchange Commission.
Ernst & Young LLP
New York, New York
April 14, 1997
