<PAGE>
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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 June 30, 1997
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 June 30, 1997; Common Stock (Nonvoting), par value $.01 per share
- - 8,588,091 shares outstanding at June 30, 1997.
<PAGE>
PART I. FINANCIAL INFORMATION
GRANITE BROADCASTING CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1997 1996
- ------ ------------- -------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,922,913 $ 555,753
Accounts receivable, net 33,291,455 27,057,451
Film contract rights 5,929,040 6,276,660
Other assets 5,214,129 9,784,966
------------ ------------
Total current assets 46,357,537 43,674,830
Property and equipment, net 35,119,556 33,562,019
Film contract rights and other noncurrent assets 4,068,294 4,284,578
Deferred financing fees, net 12,675,056 14,181,662
Intangible assets, net 527,572,327 356,860,115
------------ ------------
$625,792,770 $452,563,204
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
Current liabilities:
Accounts payable $ 3,381,173 $ 4,016,964
Accrued interest 6,433,027 6,071,378
Other accrued liabilities 6,663,973 4,497,534
Film contract rights and other current liabilities 10,704,061 9,578,365
------------ ------------
Total current liabilities 27,182,234 24,164,241
Long-term debt 382,757,005 351,560,900
Film contract rights payable 3,321,577 3,383,428
Deferred tax and other noncurrent liabilities 30,693,210 31,102,272
Commitments
Redeemable preferred stock 197,775,235 45,487,500
Stockholders' deficit:
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
8,588,091 shares of Common Stock (Nonvoting) (8,499,716
shares at December 31, 1996) issued and outstanding 87,665 86,782
Additional paid-in capital 36,179,252 45,547,145
Accumulated deficit (48,457,932) (45,375,910)
Less: Unearned compensation (2,811,601) (2,506,279)
Note receivable from officer (886,875) (886,875)
Treasury stock (47,000) ---
------------ ------------
Total stockholders' deficit (15,936,491) (3,135,137)
------------ ------------
$625,792,770 $452,563,204
============ ============
</TABLE>
See accompanying notes.
-1-
<PAGE>
GRANITE BROADCASTING CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- ------------------------
1997 1996 1997 1996
------------ ------------ ----------- ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net revenue $41,332,130 $33,961,195 $ 73,629,941 $62,590,830
Station operating expenses 20,752,548 17,009,608 40,549,309 34,527,535
Time brokerage agreement fees 150,000 --- 300,000 ---
Depreciation expense 1,382,195 1,529,169 2,757,671 3,002,549
Amortization expense 3,541,325 2,428,510 6,712,061 4,855,977
Corporate expense 1,812,316 1,021,882 3,286,070 2,011,896
Non-cash compensation expense 186,153 115,319 378,519 229,856
----------- ----------- ---------- -----------
Operating income 13,507,593 11,856,707 19,646,311 17,963,017
Other expenses:
Equity in net loss of investee 400,000 --- 800,000 ---
Interest expense, net 10,010,482 9,198,301 19,788,601 18,048,031
Non-cash interest expense 566,933 454,825 1,142,488 978,636
Other 107,344 219,225 299,040 344,858
----------- ----------- ---------- -----------
Income (loss) before income taxes
and extraordinary items 2,422,834 1,984,356 (2,383,818) (1,408,508)
Provision for income taxes 227,250 174,600 377,400 235,689
----------- ----------- ---------- -----------
Income (loss) before
extraordinary items 2,195,584 1,809,756 (2,761,218) (1,644,197)
Extraordinary gain (loss) --- 618,902 (320,804) (2,891,250)
----------- ----------- ---------- -----------
Net income (loss) $ 2,195,584 $ 2,428,658 $ (3,082,022) $(4,535,447)
=========== =========== ============ ===========
Net income (loss) attributable to
common stockholders $(3,688,713) $ 1,547,338 $(13,163,123) $(6,298,085)
=========== =========== ============ ===========
Per common share:
Income (loss) before extraordinary
items $(0.42) $0.10 $ (1.47) $ (0.40)
Extraordinary gain (loss) -- 0.07 (0.04) (0.34)
----------- ----------- ------------ -----------
Net income (loss) $(0.42) $0.17 $ (1.51) $ (0.74)
=========== =========== ============ ===========
Weighted average common
shares and equivalents outstanding 8,764,858 9,184,842 8,750,368 8,545,183
</TABLE>
See accompanying notes.
-2-
<PAGE>
GRANITE BROADCASTING CORPORATION
STATEMENT OF STOCKHOLDERS' DEFICIT
SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Class A Common Additional
Common Stock Paid-in Accumulated
Stock (Nonvoting) Capital Deficit
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996 $ 1,785 $ 84,997 $ 45,547,145 $(45,375,910)
Dividends on redeemable
preferred stock (9,887,499)
Accretion of offering costs
related to Cumulative
Exchangeable Preferred Stock (193,602)
Exercise of stock options 10 5,240
Conversion of redeemable
preferred stock into Common
Stock (Nonvoting) 50 24,950
Issuance of Common Stock
(Nonvoting) 823 (823)
Repurchase of redeemable
preferred stock
Grant of Stock Award Under
Management Stock Plan 683,841
Stock expense related to
Management Stock Plan
Net loss (3,082,022)
------------ ------------ ------------ ------------
Balance at June 30, 1997 $ 1,785 $ 85,880 $ 36,179,252 $(48,457,932)
============ ============ ============ ============
<CAPTION>
Total
Unearned Note Receivable Treasury Stockholders'
Compensation from Officer Stock Deficit
------------ --------------- ------------ ------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996 $ (2,506,279) $ (886,875) $ 0 $ (3,135,137)
Dividends on redeemable
preferred stock (9,887,499)
Accretion of offering costs
related to Cumulative
Exchangeable Preferred Stock (193,602)
Exercise of stock options 5,250
Conversion of redeemable
preferred stock into Common
Stock (Nonvoting) 25,000
Issuance of Common Stock
(Nonvoting) -
Repurchase of redeemable
preferred stock (47,000) (47,000)
Grant of Stock Award Under
Management Stock Plan (683,841) -
Stock expense related to
Management Stock Plan 378,519 378,519
Net loss (3,082,022)
------------ ------------ ------------ ------------
Balance at June 30, 1997 $ (2,811,601) $ (886,875) $ (47,000) $(15,936,491)
============ ============ ============ ============
</TABLE>
See accompanying notes.
-3-
<PAGE>
GRANITE BROADCASTING CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1997 1996
----- ----
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (3,082,022) $ (4,535,447)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Amortization of intangible assets 6,712,061 4,855,977
Depreciation 2,757,671 3,002,549
Non-cash compensation expense 378,519 229,856
Non-cash interest expense 1,142,488 978,636
Equity in net loss of investee 800,000 ---
Extraordinary loss 320,804 2,891,250
Change in assets and liabilities net of effects from
acquisitions of stations:
Increase in accounts receivable (6,234,004) (1,010,455)
Increase (decrease) in accounts payable and
accrued liabilities 1,761,489 (1,927,382)
Decrease in film contract rights and other assets 3,318,740 2,196,964
Decrease in film contract rights
payable and other liabilities (2,437,093) (1,325,999)
Increase in other assets (1,294,040) (951,601)
------------- -------------
Net cash provided by operating activities 4,144,613 4,404,348
Cash flows from investing activities:
Payment for acquisitions of stations, net of cash acquired (172,713,906) ---
Investment in Datacast (750,000) ---
Capital expenditures (2,387,718) (3,689,327)
------------- -------------
Net cash used in investing activities (175,851,624) (3,689,327)
Cash flows from financing activities:
Proceeds from bank loan 54,500,000 18,500,000
Repayment of bank debt (4,000,000) (107,000,000)
Proceeds from preferred stock offering, net 143,993,950 ---
Proceeds from senior subordinated notes --- 109,450,000
Repurchase of senior subordinated notes (19,405,000) (15,500,000)
Dividends paid (1,762,156) (1,762,638)
Payment of deferred financing fees (210,873) (3,305,771)
Other financing activities (41,750) ---
------------- -------------
Net cash provided by financing activities 173,074,171 381,591
------------- -------------
Net increase in cash and cash equivalents 1,367,160 1,096,612
Cash and cash equivalents, beginning of period 555,753 95,123
------------- -------------
Cash and cash equivalents, end of period $ 1,922,913 $ 1,191,735
============= =============
Supplemental information:
Cash paid for interest $ 19,418,807 $ 17,957,728
Income taxes paid 193,000 42,000
Non-cash capital expenditures 310,024 277,902
Stock dividend 3,240,625 ---
Other non-cash financing activity --- 886,875
</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"), 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 and six-month periods ended June 30, 1997 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1997. For further information, refer to the Company's consolidated
financial statements and notes thereto for the year ended December 31, 1996
which were included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1996. All significant intercompany accounts and transactions
have been eliminated. Certain amounts in the prior year have been reclassified
to conform to 1997 presentation. Data at and for the year ended December 31,
1996 are 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 - Acquisitions
- ---------------------
On January 31, 1997, the Company acquired substantially all of the assets of
WXON-TV, the WB affiliate serving Detroit, Michigan, for $175,000,000 and the
assumption of certain liabilities. The Company financed the acquisition by
borrowing approximately $27,500,000 under its credit agreement and issuing
150,000 shares of its 12-3/4% Cumulative Exchangeable Preferred Stock, par value
$0.01 per share (the "New Preferred Stock"), at $1,000 per share. Dividends on
the New Preferred Stock are payable semi-annually on April 1 and October 1 of
each year. The Company may elect to pay dividends prior to April 1, 2002 in
additional shares of New Preferred Stock. Dividends on the New Preferred Stock
are cumulative and accrue without interest, if unpaid.
Note 3 - Long term debt
- -----------------------
In March 1997, the Company purchased $19,405,000 face amount of its 9-3/8%
Senior Subordinated Notes due December 1, 2005 (the "9-3/8% Notes") at a
discount. As a result, the Company recognized an extraordinary loss, after the
write-off of a portion of related deferred financing fees, of $320,804.
Note 4 - Net income (loss) per common share
- --------------------------------------------
Net loss per common share for the three month period ended June 30, 1997 and the
six month periods ended June 30, 1997 and 1996 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
preferred stock into Common Stock (Nonvoting) would have been antidilutive for
those periods presented. Net income per common share for the three month period
ended June 30, 1996 is calculated by dividing net loss attributable to common
stockholders by the weighted average number of shares of common stock and common
stock equivalents outstanding. The calculation assumes the conversion of
certain convertible preferred stock and the exercise of certain outstanding
stock options.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128 "Earnings Per Share" (FAS 128), which establishes new standards for
computing and presenting earnings per share. FAS 128 is effective for financial
statements issued for periods ending after December 15, 1997, including interim
periods. Management does not believe that the implementation of FAS 128 will
have a material impact on the Company's per share amounts.
Note 5 - Related party transactions
- -----------------------------------
On April 16, 1997, the Company made a loan to an officer in the amount of
$441,530 to pay certain personal taxes. The loan is a term loan which provides
for an annual interest rate of 8%, payable annually on April 16 of each year,
with all principal and remaining interest due on April 16, 2001.
-5-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
- ------------
The consolidated financial statements of the Company reflect increases between
the three and six month periods ended June 30, 1997 and 1996 in substantially
all line items. The principal reasons for such increases are the acquisition of
WXON-TV, the WB affiliate serving Detroit, Michigan, on January 31, 1997 and the
operation of WLAJ-TV, the ABC affiliate serving Lansing, Michigan, under a time
brokerage agreement which commenced in October 1996. It is anticipated that
the Company's consolidated financial statements for the year ended December 31,
1997 will reflect significant increases in substantially all line items compared
to the prior year due to the acquisition of WXON-TV and the operation of WLAJ-
TV.
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,
programming and 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 month and
six month periods ended June 30, 1997 and 1996:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1997 1996 1997 1996
------------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Operating income $13,508,000 $11,856,000 $19,646,000 $17,963,000
Add:
Time brokerage agreement fees 150,000 --- 300,000 ---
Depreciation and amortization 4,923,000 3,958,000 9,470,000 7,858,000
Corporate expense 1,812,000 1,022,000 3,286,000 2,012,000
Non-cash compensation 186,000 115,000 379,000 230,000
----------- ----------- ----------- -----------
Broadcast cash flow $20,579,000 $16,951,000 $33,081,000 $28,063,000
=========== =========== =========== ===========
</TABLE>
"Broadcast cash flow" means operating income plus time brokerage agreement fees,
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.
Three Months Ended June 30, 1997 and 1996
- -----------------------------------------
Net revenue for the three months ended June 30, 1997 totaled $41,332,000, an
increase of $7,371,000 or 22 percent compared to $33,961,000 for the three
months ended June 30, 1996. Of the increase, $5,559,000 was due to the
inclusion of three months of operations of WXON-TV and WLAJ-TV. The remaining
increase was primarily due to increased local and national advertising revenue
and incremental revenue from the Company's various internet ventures, partially
offset by lower political advertising revenue in a non-election year.
Station operating expenses for the three months ended June 30, 1997 totaled
$20,753,000, an increase of $3,743,000 or 22 percent compared to $17,010,000 for
the three months ended June 30, 1996. Of the increase, $2,124,000 was due to
the inclusion of three months of operations of WXON-TV and WLAJ-TV. The
remaining increase was primarily due to increased news and administrative
expenses.
Depreciation and amortization increased by $965,000, or 24 percent during the
three months ended June 30, 1997 compared to the same period a year earlier,
primarily due to the inclusion of three months of operations of WXON-TV and
WLAJ-TV. Corporate expense increased $790,000, or 77 percent during the three
months ended June 30, 1997 compared to the same period a year earlier, primarily
due to higher administrative costs associated
-6-
<PAGE>
with the expansion of the Company's corporate office to manage its expanded
station group. Non-cash compensation expense increased $71,000 or 62 percent
during the three months ended June 30, 1997 compared to the same period a year
earlier due to the granting of additional awards payable in Common Stock
(Nonvoting) to certain executive employees of the Company under the Company's
Management Stock Plan.
The equity in net loss of investee of $400,000 for the three months ended June
30, 1997 resulted from the Company recognizing its pro rata share of the net
loss of Datacast, LLC under the equity method of accounting. Net interest
expense was $10,010,000 compared to $9,198,000 a year earlier, an increase of 9
percent, primarily due to higher levels of outstanding indebtedness as a result
of the acquisition of WXON-TV. Non-cash interest expense totaled $567,000 for
the three months ended June 30, 1997, an increase of $112,000 or 25 percent
compared to the same period a year earlier, due to the amortization of
additional deferred financing fees incurred in connection with the amendment and
restatement of the Company's credit facility which was amended and restated on
September 4, 1996.
Six Months Ended June 30, 1997 and 1996
- ---------------------------------------
Net revenues for the six months ended June 30, 1997 totaled $73,630,000, an
increase of $11,039,000 or 18 percent compared to $62,591,000 for the six months
ended June 30, 1996. Of the increase, $9,140,000 resulted from the inclusion of
five months of operations of WXON-TV and six months of operations of WLAJ-TV.
The remaining increase was primarily due to increased local and national
advertising revenue and incremental revenue from the Company's various internet
ventures, partially offset by lower political advertising revenue in a non-
election year.
Station operating expenses totaled $40,549,000, an increase of $6,021,000 or 17
percent compared to $34,528,000 for the six months ended June 30, 1996. Of the
increase, $3,492,000 was due to the inclusion of five months of operations of
WXON-TV and six months of operations of WLAJ-TV. The remaining increase was
primarily due to increased news and administrative expenses.
Depreciation and amortization increased by $1,612,000, or 21 percent during the
six months ended June 30, 1997 compared to the same period a year earlier,
primarily due to the inclusion of five months of operations of WXON-TV and six
months of operations of WLAJ-TV. Corporate expense increased $1,274,000, or 63
percent during the six months ended June 30, 1997 compared to the same period a
year earlier, primarily due to higher administrative costs associated with the
expansion of the Company's corporate office to manage its expanded station
group. Non-cash compensation expense increased $149,000 or 65 percent during
the six months ended June 30, 1997 compared to the same period a year earlier
due to the granting of additional awards payable in Common Stock (Nonvoting) to
certain executive employees under the Company's Management Stock Plan
The equity in net loss of investee of $800,000 for the six months ended June 30,
1997 resulted from the Company recognizing its pro rata share of the net loss of
Datacast, LLC under the equity method of accounting. Net interest expense was
$19,789,000 compared to $18,048,000 a year earlier, an increase of 10 percent,
primarily due to higher levels of outstanding indebtedness as a result of the
acquisition of WXON-TV. Non-cash interest expense totaled $1,142,000 for the
six months ended June 30, 1997, an increase of $163,000 or 17 percent compared
to the same period a year earlier, primarily due to the amortization of
additional deferred financing fees incurred in connection with the amendment and
restatement of the Company's credit facility which was amended and restated on
September 4, 1996, offset in part, by the write-off of a portion of deferred
financing fees in conjunction with the repurchase of the Company's 9 3/8% Notes.
During the six months ended June 30, 1997, the Company purchased $19,405,000
face amount of its 9-3/8% Notes at a discount. In connection with the
repurchase of this debt, the Company recognized an extraordinary loss, after the
write-off of a portion of related deferred financing fees, of $321,000. During
the six months ended June 30, 1996, the Company recognized a net extraordinary
loss on the early extinguishment of debt of $2,891,000.
Liquidity and Capital Resources
- -------------------------------
In October 1996, the Company entered into agreements with the owner of WLAJ-TV,
including a time brokerage agreement pursuant to which the Company operates
WLAJ-TV and an agreement to acquire substantially all the assets used in the
operation of WLAJ-TV for approximately $19.4 million in cash and the assumption
of certain liabilities. The Company anticipates financing the acquisition of
WLAJ-TV with borrowings under its credit agreement's revolving working capital
facility. In connection with these agreements, the Company agreed to provide a
loan guarantee of up to $12,000,000 in favor of the owner of WLAJ-TV.
-7-
<PAGE>
On January 31, 1997, the Company acquired substantially all of the assets of
WXON-TV for $175,000,000 and the assumption of certain liabilities. The Company
financed the acquisition through the sale of 150,000 shares of its New Preferred
Stock at $1,000 per share and borrowings of $27,500,000 under its credit
agreement.
The Company has called for redemption, effective September 1, 1997, all
outstanding 12.75% Senior Subordinated Debentures at 106.375% of the principal
amount thereof, plus accrued interest, for an aggregate consideration of
$67,650,000. The Company anticipates using borrowings under its credit
agreement to fund this redemption.
The Company's credit agreement allows for revolving credit borrowings of
$200,000,000 and permits borrowings of up to $300,000,000 in the aggregate. The
revolving credit facility can be used to fund future acquisitions of broadcast
stations and for general corporate purposes. As of July 31, 1997, subject to
compliance with financial covenants, the Company had $128,000,000 of the
revolving credit facility borrowings available for acquisitions and working
capital purposes.
Cash flows provided by operating activities were $4,145,000 during the six
months ended June 30, 1997 compared to cash flows provided by operating
activities of $4,404,000 during the six months ended June 30, 1996, a decrease
of $259,000 or less than 6 percent. Such decrease was primarily a result of an
increase in net operating assets and higher cash interest expense, offset, in
part, by higher operating cash flow.
Cash flows used in investing activities were $175,852,000 during the six months
ended June 30, 1997, compared to $3,689,000 during the six months ended June 30,
1996. Cash flows used in investing activities during the six months ended June
30, 1997 related primarily to the acquisition of WXON-TV while cash flows used
in investing activities during the six months ended June 30, 1996 were related
entirely to capital expenditures.
Cash flows provided by financing activities were $173,074,000 during the six
months ended June 30, 1997 compared to cash flows provided by financing
activities of $382,000 during the six months ended June 30, 1996. The increase
resulted primarily from the issuance of the New Preferred Stock, an increase in
net borrowings and a decrease in payments for deferred financing fees.
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
---------------------------------------------------
Not applicable
ITEM 5. Other Information
-----------------
Not applicable
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
a. Exhibits
--------
3.4 First Amendment to the Third Amended and Restated Credit
Agreement.
11. Statement of Computation of Per Share Earnings.
27. Financial Data Schedule.
-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 August 8, 1997 /s/ W. DON CORNWELL
----------------------------------------------
(W. Don Cornwell)
Chief Executive Officer
Date August 8, 1997 /s/ LAWRENCE I. WILLS
----------------------------------------------
(Lawrence I. Wills)
Vice President, Finance and Controller
(Principal Accounting Officer)
<PAGE>
EXHIBIT 3.4
GRANITE BROADCASTING CORPORATION
FIRST AMENDMENT
TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT
This FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT (THIS
"AMENDMENT") is dated as of June 6, 1997 and entered into by and among Granite
Broadcasting Corporation, a Delaware corporation ("COMPANY"), the Guarantors
listed on the signature pages hereof (the "GUARANTORS"), the financial
institutions listed on the signature pages hereof ("LENDERS"), Bankers Trust
Company, as agent for Lenders (in such capacity, "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, N.A., as co-agents (in such capacity, "CO-
AGENTS"), and is made with reference to that certain Third Amended and Restated
Credit Agreement dated as of September 4, 1996 (the "CREDIT AGREEMENT"), by
and among Company, Lenders, Agent and Co-Agents. Capitalized terms used herein
without definition shall have the same meanings herein as set forth in the
Credit Agreement.
RECITALS
WHEREAS, Company and Lenders desire to amend the Credit
Agreement to permit Company to (i) repurchase up to $20,000,000 of Company
Common Stock in the market and (ii) pay certain dividends with respect to its 12
3/4% Cumulative Exchangeable Preferred Stock in cash.
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, and pursuant to
subsection 10.6 of the Credit Agreement, the parties hereto agree as follows:
SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT
AMENDMENTS TO SECTION 7: COMPANY'S NEGATIVE COVENANTS
------------------------------------------------------
RESTRICTED JUNIOR PAYMENTS.
(i) Section 7.5 of the Credit Agreement is hereby amended by adding
new subsections 7.5(iv) and (v) thereto as follows:
<PAGE>
"(iv) Company may make payments in order to repurchase, in one or a
series of transactions, up to $20,000,000 of Company Common Stock in the
market; provided that (a) no Event of Default or Potential Event of Default
--------
shall have occurred and be continuing at the time of such repurchase, and (b)
immediately after giving effect to each repurchase, Company is in compliance
on a Pro Forma Basis with all covenants set forth in Section 6 and 7 of this
Agreement; provided further that (x) at the time of each such repurchase the
--------
ratio of Consolidated Total Debt to Consolidated Broadcast Cash Flow as
calculated pursuant to Section 7.6A is not greater than 6.25 to 1 and (y)
immediately after giving effect to each such repurchase Company can
demonstrate on a Pro Forma Basis that the ratio of Consolidated Total Debt
to Consolidated Broadcast Cash Flow as calculated pursuant to Section 7.6A is
not greater than 6.25 to 1.
(v) if no Potential Event of Default or Event of Default has occurred
and is continuing, and Company has declared a dividend with respect to its 12
3/4% Cumulative Exchangeable Preferred Stock, to the extent that such
dividend would result in the issuance of fractional shares, Company may pay
that part of such dividend in cash instead of issuing such fractional shares."
SECTION 2. CONDITIONS TO EFFECTIVENESS
This Amendment shall become effective (the "FIRST AMENDMENT
EFFECTIVE DATE") only upon receipt by Agent of counterparts hereof duly
executed by Company, Guarantors and Requisite Lenders or, in the case of any
Lender, telecopy or telephone confirmation from such Lender of its execution
hereof.
SECTION 3. COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Requisite Lenders to enter into this Amendment and
to amend the Credit Agreement in the manner provided herein, Company represents
and warrants to each Lender that the following statements are true, correct and
complete:
A. AUTHORIZATION; BINDING OBLIGATIONS. Company has all requisite
corporate power and authority to enter into this Amendment. The execution,
delivery and performance of this Amendment have been duly authorized by all
necessary corporate action by Company. This Amendment has been duly
executed and delivered by Company and is the legally valid and binding
obligation of Company, enforceable against Company in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally and by equitable principles relating to enforceability.
B. NO CONFLICT. The execution and delivery by Company of this
Amendment do not and will not (i) violate any provision of any law or any
governmental rule or regulation applicable to Company or any of its
<PAGE>
Subsidiaries, the Certificate or Articles of Incorporation or Bylaws of Company
or any of its Subsidiaries or any order, judgment or decree of any court or
other agency of government binding on Company or any of its Subsidiaries,
(ii) conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any Contractual Obligation of Company or
any of its Subsidiaries, (iii) result in or require the creation or imposition
of any Lien upon any of the properties or assets of Company or any of its
Subsidiaries (other than any Liens created under any of the Loan Documents in
favor of Agent on behalf of Lenders), or (iv) require any approval of
stockholders or any approval or consent of any Person under any Contractual
Obligation of Company or any of its Subsidiaries.
C. GOVERNMENTAL CONSENTS. The execution and delivery by Company
of this Amendment do not and will not require any registration with, consent
or approval of, or notice to, or other action to, with or by, any federal, state
or other governmental authority or regulatory body, except to the extent that
Company is required to file this Amendment with the FCC.
D. INCORPORATION OF REPRESENTATIONS. Each representation and
warranty of Company contained in each of the Loan Documents is true, correct
and complete in all material respects on and as of the First Amendment
Effective Date to the same extent as though made on and as of the First
Amendment Effective Date except to the extent such representations and
warranties relate to an earlier date, in which case they were true, correct and
complete in all material respects as of such earlier date.
E. ABSENCE OF DEFAULT. No event has occurred and is continuing or
would result from the execution, delivery or performance of this Amendment
that constitutes or would constitute an Event of Default or a Potential Event of
Default after giving effect to this Amendment.
SECTION 4. ACKNOWLEDGEMENT AND CONSENT
Each Guarantor hereby acknowledges that it has read this Amendment and
consents to the terms thereof and further hereby confirms and agrees that,
notwithstanding the effectiveness of this Amendment, the obligations of such
Guarantor under the Subsidiary Guaranty shall not be impaired or affected and
the Subsidiary Guaranty is, and shall continue to be, in full force and effect
and is hereby confirmed and ratified in all respects.
<PAGE>
SECTION 5. MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
(i) On and after the First Amendment Effective Date, each reference
in the Credit Agreement to "this Agreement", "hereunder", "hereof",
"herein" or words of like import referring to the Credit Agreement, and each
reference in the other Loan Documents to the "Credit Agreement",
"thereunder", "thereof" or words of like import referring to the Credit
Agreement shall mean and be a reference to the Credit Agreement, as amended by
this Amendment.
(ii) Except as specifically amended by this Amendment, the Credit
Agreement and the other Loan Documents shall remain in full force and effect
and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this Amendment shall
not, except as expressly provided herein, constitute a waiver of any provision
of, or operate as a waiver of any right, power or remedy of Agent or any Lender
under, the Credit Agreement or any of the other Loan Documents.
B. FEES AND EXPENSES. Company acknowledges that all costs, fees
and expenses as described in subsection 10.2 of the Credit Agreement incurred by
Agent and its counsel with respect to this Amendment and the documents and
transactions contemplated hereby shall be for the account of Company.
C. HEADINGS. Section and subsection headings in this amendment
are included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
D. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT
LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
E. COUNTERPARTS. This Amendment may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
COMPANY:
GRANITE BROADCASTING CORPORATION
By: /s/ Ellen McClain
----------------------------
Ellen McClain
Vice President
LENDERS:
BANKERS TRUST COMPANY,
individually and as Agent
By: /s/ Patricia Hogan
---------------------------------------
Name: Patricia Hogan
Title: Vice President
GOLDMAN SACHS CREDIT PARTNERS L.P.,
as a Co-Agent and a Lender
By: /s/ Stephen B. King
---------------------------------------
Name: Stephen B. King
Title: Authorized Signatory
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA,
as a Co-Agent and a Lender
By: /s/ Jim F. Redman
--------------------------------------
Name: Jim F. Redman
Title: Senior Vice President
S-1
<PAGE>
THE BANK OF NEW YORK,
as a Co-Agent and a Lender
By: /s/ Brian C. Weddington
--------------------------------------
Name: Brian C. Weddington
Title: Assistant Vice President
UNION BANK OF CALIFORNIA, N.A.,
as a Co-Agent and a Lender
By: /s/ Kristina M. Mouzakis
-------------------------------------
Name: Kristina M. Mouzakis
Title: Assistant Vice President
THE BANK OF TOKYO-MITSUBISHI TRUST
COMPANY,
as a Lender
By: /s/ Glenn B. Eckert
--------------------------------------
Name: Glenn B. Eckert
Title: Vice President
BANQUE FRANCAISE DU COMMERCE
EXTERIEUR,
as a Lender
By: /s/ Peter Karl Harris
--------------------------------------
Name: Peter Karl Harris
Title: Vice President
S-2
<PAGE>
THE SUMITOMO BANK, LIMITED,
as a Lender
By: /s/ William N. Paty
--------------------------------------
Name: William N. Paty
Title: Vice President & Manager
By: /s/ James Drum
-------------------------------------
Name: James Drum
Title: Vice President
DRESDNER BANK AG, NEW YORK AND GRAND
CAYMAN BRANCHES,
as a Lender
By: /s/ William M. Lambert
--------------------------------------
Name: William M. Lambert
Title: Assistant Vice President
By: /s/ Jane A. Majeski
--------------------------------------
Name: Jane A. Majeski
Title: Vice President
ABN AMRO BANK N.V., NEW YORK BRANCH,
as a Lender
By: /s/ Francis O. Logan
--------------------------------------
Name: Francis O. Logan
Title: Group Vice President
By: /s/ Ann Schwalbenberg
--------------------------------------
Name: Ann Schwalbenberg
Title: Vice President
S-3
<PAGE>
HELLER FINANCIAL, INC.,
as a Lender
By: /s/ Linda W. Wolf
------------------------------------
Name: Linda W. Wolf
Title: Senior Vice President
MICHIGAN NATIONAL BANK,
as a Lender
By: /s/ Stephane Lubin
------------------------------------
Name: Stephane Lubin
Title: Relationship Manager
BANQUE PARIBAS,
as a Lender
By: /s/ William B. Schink
------------------------------------
Name: William B. Schink
Title: Vice President
By: /s/ Lynne S. Randall
------------------------------------
Name: Lynne S. Randall
Title: Vice President
THE BANK OF NOVA SCOTIA,
as a Lender
By: /s/ Vincent J. Fitzgerald, Jr.
------------------------------------
Name: Vincent J. Fitzgerald, Jr.
Title: Authorized Signatory
S-4
<PAGE>
BANQUE NATIONALE DE PARIS,
as a Lender
By: /s/ Serge Desrayaud
-----------------------------------
Name: Serge Desrayaud
Title: Vice President
By: /s/ Pamela Lucash
-----------------------------------
Name: Pamela Lucash
Title: Assistant Treasurer
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENNE,
as a Lender
By: /s/ Marcus Edward
-----------------------------------
Name: Marcus Edward
Title: Vice President
By: /s/ Brian O'Leary
-----------------------------------
Name: Brian O'Leary
Title: Vice President
S-5
<PAGE>
SUBSIDIARIES:
GRANITE RESPONSE TELEVISION, INC.
KBVO, INC.
KBVO LICENSE, INC.
KNTV, INC.
KNTV LICENSE, INC.
RJR COMMUNICATIONS, INC.
KBJR LICENSE, INC.
SAN JOAQUIN COMMUNICATIONS
CORPORATION
KSEE LICENSE, INC.,
WPTA-TV, INC.
WPTA-TV LICENSE, INC.
WTVH, INC.
WTVH LICENSE, INC.
WWMT-TV, INC.
WWMT-TV LICENSE, INC.
WKBW-TV, INC.
WKBW-TV LICENSE, INC.
QUEEN CITY BROADCASTING, INC.
QUEEN CITY BROADCASTING
OF NEW YORK, INC.
WXON, INC.
WXON LICENSE, INC.
By: /s/ Lawrence I. Wills
--------------------------------
Lawrence I. Wills
Vice President
QUEEN CITY III LIMITED PARTNERSHIP
BY: WKBW-TV, INC.,
its General Partner
By: /s/ Lawrence I. Wills
-----------------------------
Lawrence I. Wills
Vice President
S-6
<PAGE>
GRANITE BROADCASTING CORPORATION
STATEMENT OF COMPUTATION OF PER SHARE EARNINGS
EXHIBIT 11
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
---------------------------- ---------------------------
1997 1996 1997 1996
-------------- ------------ ------------- ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Primary:
Average shares and
equivalents
outstanding 8,764,858 9,184,842 8,750,368 8,545,183
=========== ========== ============ ===========
Income (loss) before
extraordinary item $ 2,195,584 $1,809,756 $ (2,761,218) $(1,644,197)
Extraordinary gain (loss) --- 618,902 (320,804) (2,891,250)
----------- ---------- ------------ -----------
Net income (loss) $ 2,195,584 $2,428,658 $ (3,082,022) $(4,535,447)
=========== ========== ============ ===========
Net income (loss)
attributable to
common shareholders $(3,688,713) $1,547,338 $(13,163,123) $(6,298,087)
=========== ========== ============ ===========
Per common share:
Income (loss) before
extraordinary item $ (0.42) $ 0.10 $ (1.47) $ (0.40)
Extraordinary gain (loss) --- 0.07 (0.04) (0.34)
----------- ---------- ------------ -----------
Net income (loss) $ (0.42) $ 0.17 $ (1.51) $ (0.74)
=========== ========== ============ ===========
Fully Diluted:
Average shares and
equivalents
outstanding 8,764,858 9,184,842 8,750,368 8,545,183
=========== ========== ============ ===========
Income (loss) before
extraordinary item $ 2,195,584 $1,809,756 $ (2,761,218) $(1,644,197)
Extraordinary gain (loss) --- 618,902 (320,804) (2,891,250)
----------- ---------- ------------ -----------
Net income (loss) $ 2,195,584 $2,428,658 $ (3,082,022) $(4,535,447)
=========== ========== ============ ===========
Net income (loss)
attributable to
common shareholders $(3,688,713) $1,547,338 $(13,163,123) $(6,298,087)
=========== ========== ============ ===========
Per common share:
Income (loss) before
extraordinary item $ (0.42) $ 0.10 $ (1.47) $ (0.40)
Extraordinary gain (loss) --- 0.07 (0.04) (0.34)
----------- ---------- ------------ -----------
Net income (loss) $ (0.42) $ 0.17 $ (1.51) $ (0.74)
=========== ========== ============ ===========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE GRANITE BROADCASTING CORPORATION
2ND QUARTER 1997 10-Q AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,922,913
<SECURITIES> 0
<RECEIVABLES> 33,291,455
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 46,357,537
<PP&E> 35,119,556
<DEPRECIATION> 0
<TOTAL-ASSETS> 625,792,770
<CURRENT-LIABILITIES> 27,182,234
<BONDS> 382,757,005
197,775,235
0
<COMMON> 87,665
<OTHER-SE> (16,024,156)
<TOTAL-LIABILITY-AND-EQUITY> 625,792,770
<SALES> 0
<TOTAL-REVENUES> 73,629,941
<CGS> 0
<TOTAL-COSTS> 53,983,630
<OTHER-EXPENSES> 2,125,642
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,904,487
<INCOME-PRETAX> (2,383,818)
<INCOME-TAX> 377,400
<INCOME-CONTINUING> (2,761,218)
<DISCONTINUED> 0
<EXTRAORDINARY> (320,804)
<CHANGES> 0
<NET-INCOME> (3,082,022)
<EPS-PRIMARY> (1.51)
<EPS-DILUTED> (1.51)
</TABLE>
