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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
February 7, 1997 (January 31, 1997)
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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)
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Item 1. Changes in Control of Registrant
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Not Applicable
Item 2. Acquisition of Assets
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On January 31, 1997, Granite Broadcasting Corporation ("Granite" or the
"Company"), through its wholly-owned subsidiary WXON, Inc., acquired from
WXON-TV, Inc., a Michigan corporation, substantially all of the assets used
in the operation of television station WXON-TV, the WB Network affiliated
station serving Detroit, Michigan (the "WXON Acquisition"). The terms and
conditions of the acquisition were determined based upon arms length
negotiations between Granite and WXON-TV, Inc. and are set forth in that
certain Purchase and Sale Agreement, dated as of December 2, 1996, by and
between Granite and WXON-TV, Inc. (the "Purchase Agreement").
In consideration for the assets purchased from WXON-TV, Inc., Granite
paid approximately $175 million in cash and assumed certain liabilities of
WXON-TV, Inc. as set forth in the Purchase Agreement.
The assets purchased by Granite include, in part, all broadcasting and
other equipment, office furniture, fixtures, tapes, machinery, office
materials and supplies, spare parts, tubes and other tangible personal
property of every kind and description owned, leased or held and used by or
useful to WXON-TV, Inc. in connection with the business and operations of
WXON-TV. Granite intends to continue to use these assets in the manner that
such assets were previously used by WXON-TV, Inc.
The Purchase Agreement, filed as Exhibit 1 to the Company's Current
Report on Form 8-K, dated and filed with the Securities and Exchange
Commission (the "Commission") on December 17, 1996, is incorporated herein by
reference.
The Company financed the WXON Acquisition with a combination of: (i) bank
borrowings under its Third Amended and Restated Credit Agreement, dated as of
September 4, 1996, among Granite, the Lenders named therein, Bankers Trust
Company, as Agent, and The Bank of New York, First Union National Bank of
North Carolina, Goldman Sachs Credit Partners L.P. and Union Bank of
California, as Co-Agents (the "Credit Agreement"); and (ii) the net proceeds
of the sale of 150,000 shares of its 12-3/4% Cumulative Exchangeable
Preferred Stock (the "New Preferred Stock"). The offering (the "Offering")
of the New Preferred Stock was completed on January 31, 1997. The New
Preferred Stock was not registered under the Securities Act of 1933, as
amended, or state securities laws and may not be offered or sold in the
United States absent registration under the Securities Act and applicable
state securities laws or applicable exemptions from the registration
requirements thereof.
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The Credit Agreement, filed as Exhibit 4.35 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1996, filed with the
Commission on November 14, 1996, is incorporated herein by reference.
Item 3. Bankruptcy or Receivership
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Not Applicable
Item 4. Changes in Registrant's Certifying Accountants
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Not Applicable
Item 5. Other Events
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Not Applicable
Item 6. Resignation of Registrant's Directors
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Not Applicable
Item 7. Financial Statements and Exhibits
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A. Financial Statements of Business Acquired. The financial statements
of WXON-TV required to be disclosed pursuant to this Item 7.A. and the Report
of Independent Auditors thereon, will be filed with the Commission on or
before April 16, 1997.
B. Pro Forma Financial Information.
(See following pages)
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PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
The pro forma condensed consolidated financial statements presented below
are based on the historical financial statements of the Company, WXON-TV and
WLAJ-TV. The pro forma condensed consolidated statement of operations for the
year ended December 31, 1996 gives effect to: (i) the WXON Acquisition; (ii)
the operation of WLAJ-TV pursuant to a time brokerage agreement dated as of
October 17, 1996; and (iii) the application of the net proceeds of the
Offering and the application of additional borrowings under the Credit
Agreement as if such transactions occurred on January 1, 1996. The pro forma
condensed consolidated balance sheet as of December 31, 1996 gives effect to:
(i) the WXON Acquisition; and (ii) the application of the net proceeds of the
Offering and the application of additional borrowings under the Credit
Agreement as if such transactions occurred on December 31, 1996.
The pro forma condensed consolidated financial statements give effect to the
acquisition described above under the purchase method of accounting and are
based upon the assumptions and adjustments described in the accompanying
notes. The pro forma information is not necessarily indicative of the results
that would have been reported had such events actually occurred on the dates
specified, nor is it indicative of the Company's future results.
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PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 1996
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Granite
Broadcasting WXON-TV WLAJ-TV
Corporation Twelve Months Nine Months
Year Ended ended ended
December 31, December 31, September 30, Pro Forma
1996 1996 1996 adjustments Pro Forma
<S> <C> <C> <C> <C> <C>
Net revenue $129,164 $17,804 $3,057 $511 (a) $150,536
Station operating expenses 72,089 7,177 2,624 (1,276)(b) 80,614
Depreciation expense 6,144 81 557 (357)(c) 6,425
Amortization expense 11,824 7 27 4,300 (d) 16,158
Corporate expense 4,800 151 (151)(e) 4,800
Non-cash compensation 496 496
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Operating income (loss) 33,811 10,539 (302) 42,043
Equity in net loss of
investee 995 995
Interest expense (income),
net 36,915 (417) 665 2,668 (f) 39,831
Other expense (income) 1,034 (69) 47 1,012
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Income (loss) before
income taxes and
extraordinary item (5,133) 11,025 (1,014) 205
Provision for income
taxes (761) (217) (978)
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Income (loss) before
extraordinary item (5,894) $10,808 $(1,014) (773)
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Dividend on preferred
stock 3,525 19,125 (g) 22,650
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Loss before extraordinary
item attributable to
common shareholders $(9,419) $(23,423)
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------- -------
Loss before extraordinary
item per common share $( 1.09) $ (2.72)
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------- -------
Weighted average
common shares
outstanding(h) 8,612 8,612
</TABLE>
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PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
December 31, 1996
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Granite
Broadcasting WXON-TV
Corporation December 31, Pro Forma Pro
December 31, 1996 1996 Adjustments Forma
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 556 $ 556
Accounts receivable, net 27,057 27,057
Film contract rights and other
assets 16,062 $2,905 $ (5,000)(i) 13,967
------ ------ ------
TOTAL CURRENT ASSETS 43,675 2,905 41,580
PROPERTY AND EQUIPMENT, NET 33,562 203 1,797 (i) 35,562
OTHER NONCURRENT ASSETS 18,466 18,466
INTANGIBLE ASSETS 356,860 173,356 (i) 531,966
1,750 (j)
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TOTAL ASSETS $452,563 $3,108 $627,574
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LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES:
Accounts payable $ 4,017 $ 4,017
Accrued liabilities 10,025 10,025
Film contract rights payable 9,578 3,261 12,839
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TOTAL CURRENT LIABILITIES 23,620 3,261 26,881
LONG-TERM DEBT 351,561 27,400 (k) 378,961
FILM CONTRACT RIGHTS PAYABLE 3,383 3,383
DEFERRED INCOME TAXES AND OTHER
NONCURRENT LIABILITIES 31,646 31,646
REDEEMABLE PREFERRED STOCK 45,488 144,350 (k) 189,838
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock 87 87
Additional paid in capital 45,547 45,547
Accumulated deficit (45,376) (45,376)
Less: Unearned compensation (2,506) (2,506)
Note receivable from officer (887) (887)
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Total stockholders'deficit (3,135) (3,135)
Net assets to be acquired (153) 153 (l) 0
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Total liabilities and
stockholders' equity $452,563 $3,108 $627,574
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-------- ------- --------
</TABLE>
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NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Adjustments reflected in the pro forma condensed consolidated financial
statements are explained as follows:
(a) To adjust net revenue to reflect negotiated increases in network
compensation revenue at WLAJ-TV and reduced national representative
commissions at WXON-TV.
(b) To adjust station operating expenses as follows:
To eliminate the cost of news programming no longer
aired and production expenses for a program that is
also no longer aired at WLAJ-TV............................ $ 85,000
To reduce amortization of film contract rights at
WXON-TV to reflect the net assets to be acquired based
on the preliminary allocation of the purchase price........ 416,000
To reduce salary and wages and related benefit costs
associated with permanent staff reductions at WLAJ-TV
made during 1996........................................... 381,000
To eliminate sales commissions paid on barter transactions
at WLAJ-TV................................................. 16,000
To eliminate the cost of a studio lease at WLAJ-TV which
was terminated during 1996.................................. 53,000
To eliminate a management fee paid to a related party
of WXON-TV.................................................. 273,000
To adjust station operating expenses for certain other
general and administrative expense at WLAJ-TV.............. 52,000
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$1,276,000
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(c) To eliminate depreciation expense of WLAJ-TV and to record additional
depreciation expense at WXON-TV based on the preliminary allocation of the
purchase price.
(d) To reflect increased amortization expense as follows:
(i) Amortization of excess costs of the purchase
price over net assets acquired $4,334,000
(ii) Elimination of historical amortization
expense in the financial statements of
WXON-TV and WLAJ-TV (34,000)
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$4,300,000
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(e) To eliminate historical corporate expense charged to WLAJ-TV.
(f) To record interest expense on additional borrowings under the Credit
Agreement, the monthly fee paid to the current owner of WLAJ-TV pursuant to
the time brokerage agreement and to eliminate historical interest expense
(income) in the financial statements of WXON-TV and WLAJ-TV.
(g) To reflect a dividend rate on the New Preferred Stock of 12-3/4%.
(h) Pro forma weighted average common shares outstanding does not include the
conversion of the Convertible Preferred Stock (which trades under the
symbol "GBTVP") and the exercise of any outstanding stock options as the
effect would be anti-dilutive.
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(i) To record the preliminary allocation of the purchase price of WXON-TV as
follows:
<TABLE>
<CAPTION>
Historical Carrying Estimated
Value as Reported Market Value
WXON-TV of Assets Pro Forma
Caption December 31, 1996 Purchased Adjustment
<S> <C> <C> <C>
Film contract rights and other assets $ 2,905,000 $ 2,905,000 $ --
Property and equipment 203,000 2,000,000 1,797,000
Intangible assets -- 173,356,000 173,356,000
Film contract rights payable and
other liabilities (3,261,000) (3,261,000) --
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Net assets (liabilities) $ (153,000) $175,000,000 $175,153,000
----------- ------------ -----------
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</TABLE>
The Company made a $5,000,000 deposit in connection with the WXON Acquisition.
(j) To reflect the incurrence of other costs associated with the WXON
Acquisition.
(k) To reflect the issuance of the New Preferred Stock offered hereby, net of
Offering related expenses, and the application of additional borrowings
under the Credit Agreement.
(l) To eliminate the seller's historical carrying value of the net assets of
WXON-TV.
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C. Exhibits.
1. Third Amended and Restated Credit Agreement, dated as of
September 4, 1996, among Granite, the Lenders named therein,
Bankers Trust Company, as Agent, and The Bank of New York, First
Union National Bank of North Carolina, Goldman Sachs Credit
Partners L.P. and Union Bank of California, as Co-Agents, filed
as Exhibit 4.35 to Granite Broadcasting Corporation's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1996,
filed with the Securities and Exchange Commission on November 14,
1996, is incorporated herein by reference.
2. Purchase and Sale Agreement, dated as of December 2, 1996, by and
between Granite Broadcasting Corporation and WXON-TV, Inc., filed
as Exhibit 1 to Granite Broadcasting Corporation's Current Report
on Form 8-K, dated and filed with the Securities and Exchange
Commission on December 17, 1996, is incorporated herein by
reference.
Item 8. Change in Financial Year
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Not Applicable
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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: February 7, 1997 By: /s/ LAWRENCE I. WILLS
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Name: Lawrence I. Wills
Its: Vice President -- Finance and Controller
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EXHIBIT INDEX
1. Third Amended and Restated Credit Agreement, dated as of September 4,
1996, among Granite, the Lenders named therein, Bankers Trust Company,
as Agent, and The Bank of New York, First Union National Bank of North
Carolina, Goldman Sachs Credit Partners L.P. and Union Bank of
California, as Co-Agents, filed as Exhibit 4.35 to Granite
Broadcasting Corporation's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996, filed with the Securities and
Exchange Commission on November 14, 1996, is incorporated herein by
reference.
2. Purchase and Sale Agreement, dated as of December 2, 1996, by and
between Granite Broadcasting Corporation and WXON-TV, Inc., filed as
Exhibit 1 to Granite Broadcasting Corporation's Current Report on Form
8-K, dated and filed with the Securities and Exchange Commission on
December 17, 1996, is incorporated herein by reference.
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