<PAGE>
- --------------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 September 30, 1999
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 November 11, 1999; Common Stock (Nonvoting), par value $.01 per
share - 17,960,841 shares outstanding at November 11, 1999.
<PAGE>
PART I. FINANCIAL INFORMATION
GRANITE BROADCASTING CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1999 1998
- ------ ------------- -------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 55,038,237 $ 762,392
Accounts receivable, net 28,492,021 32,830,227
Film contract rights 21,087,169 9,671,443
Other assets 9,327,623 9,627,807
------------ ------------
Total current assets 113,945,050 52,891,869
Property and equipment, net 34,107,775 33,040,152
Film contract rights 13,071,802 4,497,956
Other noncurrent assets 2,596,882 2,788,083
Deferred financing fees, net 9,015,935 11,086,733
Intangible assets, net 609,677,603 677,669,324
------------ ------------
$782,415,047 $781,974,117
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
- ----------------------------------------------
Current liabilities:
Accounts payable $ 2,860,233 $ 4,031,837
Accrued interest 11,333,561 5,107,551
Income taxes payable 34,028,619 5,774,889
Other accrued liabilities 5,004,656 4,133,202
Film contract rights 22,084,095 13,648,629
Other current liabilities 4,591,321 5,763,882
------------ ------------
Total current liabilities 79,902,485 38,459,990
Long-term debt 313,981,277 426,399,159
Film contract rights payable 22,664,834 5,920,122
Deferred tax liability 81,864,023 78,308,597
Other noncurrent liabilities 23,025,293 18,005,696
Commitments
Cumulative Exchangeable Preferred Stock, net of offering costs 203,930,665 185,167,313
Cumulative Convertible Exchangeable Preferred Stock --- 31,183,400
Stockholders' equity (deficit):
Common Stock: 41,000,000 shares authorized consisting of 1,000,000 shares
of Class A Common Stock, $.01 par value, and 40,000,000 shares of Common
Stock (Nonvoting), $.01 par value; 178,500 shares of Class A Common Stock
and 17,960,841 shares of Common Stock (Nonvoting) (11,608,032
shares at December 31,1998) issued and outstanding 181,393 117,865
Additional paid-in capital 25,264,610 14,233,125
Accumulated earnings (deficit) 34,970,024 (12,006,267)
Less: Unearned compensation (2,435,682) (2,881,008)
Treasury stock (47,000) (47,000)
Note receivable from officer (886,875) (886,875)
------------ ------------
Total stockholders' equity (deficit) 57,046,470 (1,470,160)
------------ ------------
$782,415,047 $781,974,117
============ ============
</TABLE>
See accompanying notes.
-1-
<PAGE>
GRANITE BROADCASTING CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
------------------------------------------ -----------------------------------
1999 1998 1999 1998
------------------------ ----------------- ------------------ --------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net revenues $ 35,578,729 $ 35,917,480 $ 110,378,956 $116,376,621
Station operating expenses 22,884,702 21,295,176 68,043,639 65,982,640
Time brokerage agreement fees --- 111,124 --- 427,810
Depreciation expense 1,447,013 1,318,128 4,247,228 4,063,965
Amortization expense 6,696,536 5,160,835 19,539,434 12,339,347
Corporate expense 1,817,541 1,996,203 6,524,565 5,947,835
Non-cash compensation expense 204,193 210,157 727,901 759,385
------------------- ----------------- ------------------ --------------
Operating income 2,528,744 5,825,857 11,296,189 26,855,639
Other expenses:
Equity in net loss of investee --- --- 133,603 973,439
Interest expense, net 9,232,562 10,062,300 29,231,335 28,857,559
Non-cash interest expense 663,900 462,016 2,124,366 1,370,939
Net gain on asset dispositions (101,291,854) (57,775,928) (101,291,854) (57,775,928)
Gain from insurance settlement --- --- (2,655,408) ---
Other 725,893 520,557 1,396,597 1,037,172
------------------- ----------------- ------------------ --------------
Income before income taxes
and extraordinary item
93,198,243 52,556,912 82,357,550 52,392,458
Provision for income taxes 37,953,269 7,369,000 34,488,279 10,540,000
------------------- ----------------- ------------------ --------------
Income before extraordinary item 55,244,974 45,187,912 47,869,271 41,852,458
Extraordinary loss on early
extinguishment of debt, net of tax (892,980) (222,772) (892,980) (2,962,510)
------------------- ----------------- ------------------ --------------
Net income $ 54,351,994 $ 44,965,140 $ 46,976,291 $ 38,889,948
=================== ================= ================== ==============
Net income attributable to
common shareholders $ 47,482,936 $ 38,612,518 $ 26,536,992 $ 20,000,528
=================== ================= ================== ==============
Per common share:
Income before extraordinary item $ 3.49 $ 3.65 $ 2.17 $ 2.29
Extraordinary loss (0.06) (0.02) (0.06) (0.30)
------------------- ----------------- ------------------ --------------
Net income $ 3.43 $ 3.63 $ 2.11 $ 1.99
=================== ================= ================== ==============
Weighted average common
shares outstanding 13,846,000 10,652,000 12,578,000 10,029,000
Net income attributable to common
shareholders - assuming dilution $ 47,972,605 $ 39,312,915 $ 28,212,941 $ 22,264,518
=================== ================= ================== ==============
Per common share-assuming dilution:
Income before extraordinary item $ 2.53 $ 2.19 $ 1.55 $ 1.43
Extraordinary loss (0.05) (0.01) (0.05) (0.17)
------------------- ----------------- ------------------ --------------
Net income $ 2.48 $ 2.18 $ 1.50 $ 1.26
=================== ================= ================== ==============
Adjusted weighted average
common shares - assuming dilution 19,369,000 18,018,000 18,770,000 17,603,000
</TABLE>
See Accompanying Notes
-2-
<PAGE>
GRANITE BROADCASTING CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
Nine Months Ended September 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Class A Common Additional
Common Stock Paid-in Accumulated Unearned Note Receivable
Stock (Nonvoting) Capital Deficit Compensation from Officer
--------- ------------- ------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 $1,785 $116,080 $14,233,125 $(12,006,267) $(2,881,008) $(886,875)
Dividends on redeemable
preferred stock (20,064,188)
Accretion of offering costs
related to Cumulative
Exchangeable Preferred Stock (375,111)
Exercise of stock options 228 108,672
Conversion of Convertible
Preferred Stock into Common
Stock (Nonvoting) 62,367 31,121,033
Issuance of Common Stock
(Nonvoting) 933 (933)
Grant of stock award under
stock plans 282,575 (282,575)
Stock expense related to
stock plans (40,563) 727,901
Net income 46,976,291
--------- ------------- ------------- -------------- -------------- -------------
Balance at September 30, 1999 $1,785 $179,608 $25,264,610 $34,970,024 $(2,435,682) $(886,875)
========= ============= ============= ============== ============== =============
<CAPTION>
Total
Stockholders'
Treasury Equity
Stock (Deficit)
--------- -------------
<S> <C> <C>
Balance at December 31, 1998 $(47,000) $(1,470,160)
Dividends on redeemable
preferred stock (20,064,188)
Accretion of offering costs
related to Cumulative
Exchangeable Preferred Stock (375,111)
Exercise of stock options 108,900
Conversion of Convertible
Preferred Stock into Common
Stock (Nonvoting) 31,183,400
Issuance of Common Stock
(Nonvoting) -
Grant of stock award under
stock plans -
Stock expense related to
stock plans 687,338
Net income 46,976,291
--------- -------------
Balance at September 30, 1999 $(47,000) $57,046,470
========= =============
</TABLE>
-3-
<PAGE>
GRANITE BROADCASTING CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1999 1998
-------------- ---------------
Cash flows from operating activities: (Unaudited)
<S> <C> <C>
Net income $ 46,976,291 $ 38,889,948
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of intangible assets 19,539,434 12,339,347
Depreciation 4,247,228 4,063,965
Non-cash compensation expense 727,901 759,385
Non-cash interest expense 2,124,366 1,370,939
Equity in net loss of investee 133,603 973,439
Deferred taxes 8,455,521 4,749,000
Net gain on disposition of assets (101,291,854) (57,775,928)
Gain from insurance proceeds (2,655,408) ---
Extraordinary loss 1,373,815 4,557,510
Change in assets and liabilities:
Decrease in accounts receivable, net 4,338,206 6,370,696
Increase in accounts payable and accrued liabilities 5,925,860 3,040,029
Increase in income taxes payable 23,353,730 4,077,596
(Increase) decrease in film contract rights and other noncurrent assets (29,912,752) 1,421,224
Increase in film contract rights payable and other current liabilities 24,007,617 5,622,273
(Decrease) in deferred tax and other noncurrent liabilities 1,529,915 (9,400,236)
(Increase) decrease in other assets (123,786) 2,576,729
------------- -------------
Net cash provided by operating activities 5,689,857 23,635,916
Cash flows from investing activities:
Payment for acquisition of station --- (170,869,424)
Proceeds from disposition of assets, net 171,308,975 149,990,381
Insurance proceeds received 6,747,789 ---
WB affiliation payment (4,243,921) (14,500,000)
Investment in Datacast (133,603) (500,000)
Capital expenditures (10,315,767) (5,264,108)
------------- -------------
Net cash provided by (used in) investing activities 163,363,473 (41,143,151)
Cash flows from financing activities:
Proceeds from bank loan 54,500,000 38,000,000
Repayment of bank debt (135,000,000) (151,500,000)
Retirement of senior subordinated notes (32,065,000) (33,922,700)
Proceeds from senior subordinated notes, net --- 174,482,000
Dividends paid (1,776,629) (2,296,531)
Payment of deferred financing fees (503,965) (7,113,347)
Other financing activities 68,109 198,967
------------- -------------
Net cash (used in) provided by financing activities (114,777,485) 17,848,389
------------- -------------
Net increase in cash and cash equivalents 54,275,845 341,154
Cash and cash equivalents, beginning of period 762,392 2,170,927
------------- -------------
Cash and cash equivalents, end of period $ 55,038,237 $ 2,512,081
============== =============
Supplemental information:
Cash paid for interest $ 23,400,000 $ 19,547,000
Income taxes paid 1,691,000 154,000
Non-cash capital expenditures 88,000 478,000
Non-cash dividend 18,388,500 10,392,000
</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 nine month periods ended September 30, 1999 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1999. For further information, refer to the Company's consolidated
financial statements and notes thereto for the year ended December 31, 1998
which were included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998. All significant intercompany accounts and transactions
have been eliminated. Certain amounts in the prior year have been reclassified
to conform to 1998 presentation. Data as of and for the year ended December 31,
1998 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 -Dispositions
- --------------------
On July 30, 1999, the Company completed the disposition of WEEK-FM to the
Cromwell Group, Inc. of Illinois for $1,150,000 in cash. On August 31, 1999, the
Company completed the disposition of KEYE-TV, the CBS affiliate serving Austin,
Texas, to CBS Corporation for $160,000,000 in cash. A portion of the proceeds
from the sale of these stations was used to repay outstanding indebtedness under
the Company's bank credit agreement (the "Credit Agreement"). The Company
recognized a pre-tax gain for financial statement reporting purposes on the sale
of these stations of $103,470,000.
In July 1999 the Company and the American Broadcasting Companies, Inc. ("ABC")
agreed to terminate the ABC affiliation of KNTV, the ABC affiliate serving San
Jose-Salinas-Monterey, California, effective July 2000. The Company received
$14,000,000 in cash on September 1, 1999 in accordance with the agreement. The
Company recognized a loss for financial statement reporting purposes on the sale
of the affiliation of $2,178,000.
The Company anticipates paying 1999 federal and state income taxes of
approximately $30,452,000 during the fourth quarter of 1999. Such taxes relate
primarily to the gain on the sale of the Austin station and to the gain, for tax
purposes, on the sale of the ABC affiliation at KNTV.
During the third quarter of 1999, the Company reclassified certain of its
intangible assets between FCC license and network affiliation based on appraised
values. As both of these intangible assets are being
-5-
<PAGE>
amortized over a 40-year life, other than the impact on the loss on the sale of
the affiliation, the reclassification had no impact to the results of operations
for the nine months ended September 30, 1999.
Note 3 - Long Term Debt
- -----------------------
On July 7, 1999, the Company repurchased $2,000,000 principal amount of its 10
3/8% Senior Subordinated Notes, due May 15, 2005 (the "10 3/8% Notes") and
$9,635,000 principal amount of its 8 7/8% Senior Subordinated Notes, due May 15,
2008 (the "8 7/8% Notes"). On September 24, 1999, the Company repurchased
$20,430,000 principal amount of its 9 3/8% Senior Subordinated Notes, due
December 1, 2005 (the "9 3/8% Notes"). As a result of these transactions, the
Company incurred an extraordinary loss including the write-off of a portion of
related deferred financing fees, net of tax benefit, of $893,000 during the
third quarter of 1999.
On August 31, 1999, the Company used $95,000,000 of the proceeds from the sale
of the Austin station to repay all of its outstanding indebtedness under its
Credit Agreement. The Company had no outstanding borrowings under the Credit
Agreement at September 30, 1999.
Note 4 - Conversion of Preferred Stock
- --------------------------------------
On August 16, 1999 the Company announced it would redeem all outstanding shares
of its Cumulative Convertible Exchangeable Preferred Stock on September 15, 1999
at a redemption price of $25.97 per share, plus accrued but unpaid dividends
(the "Redemption Price"). Holders of the Cumulative Convertible Exchangeable
Preferred Stock had the option to accept the Redemption Price or convert each
preferred share into five shares of the Company's Common Stock (Nonvoting) at
any time on or before September 10, 1999. As a result, 1,247,336 shares of the
Cumulative Convertible Exchangeable Preferred Stock were converted into
6,236,680 shares of Common Stock (Nonvoting) prior to September 10, 1999.
Note 5 - Recent Developments
- ----------------------------
On August 5, 1999 the Federal Communications Commission announced the relaxation
of certain television ownership rules, thus enabling the Company to continue to
own and operate KNTV, the ABC affiliate serving San Jose-Salinas-Monterey,
California, in addition to operating KBWB-TV, the WB affiliate serving San
Francisco-Oakland-San Jose, California.
Note 6 - Per-share calculations
- -------------------------------
The per-share calculations shown on the face of the income statement for the
three and nine month periods ended September 30, 1999 and 1998 are computed in
accordance with the Statement of Financial Accounting Standards ("SFAS") No. 128
"Earnings per Share." The following table sets forth the computation of basic
and diluted earnings per share:
-6-
<PAGE>
<TABLE>
<CAPTION>
Three months ended Three months ended Nine months ended Nine months ended
September 30, 1999 September 30, 1998 September 30, 1999 September 30, 1998
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Income before
extraordinary item $55,244,974 $45,187,912 $47,869,271 $41,852,458
Extraordinary loss on early
extinguishment of debt (892,980) (222,772) (892,980) (2,962,510)
------------------- ------------------- ------------------- -------------------
Net income 54,351,994 44,965,140 46,976,291 38,889,948
LESS:
- -Preferred stock dividends
Convertible preferred 489,669 700,397 1,675,949 2,263,990
Exchangeable preferred 6,254,352 5,527,188 18,388,239 16,250,319
- -Accretion on exchangeable
Preferred 125,037 125,037 375,111 375,111
------------------- ------------------- ------------------- -------------------
Income attributable to common
shareholders $47,482,936 $38,612,518 $26,536,992 $20,000,528
=================== =================== =================== ==================
Effect of dilutive securities:
PLUS:
Convertible preferred
Stock dividends 489,669 700,397 1,675,949 2,263,990
------------------- ------------------- ------------------- -------------------
Income attributable
to common shareholders -
Assuming dilution $47,972,605 $39,312,915 $28,212,941 $22,264,518
=================== =================== =================== ==================
- ---------------------------------------------------------------------------------------------------------------------------
Weighted average common
Shares outstanding for basic
Income per share 13,846,000 10,652,000 12,578,000 10,029,000
=================== =================== =================== ==================
ADD:
Effect of dilutive securities:
Preferred stock conversions 4,289,000 7,107,000 5,542,000 7,107,000
Stock award plans 17,000 - - 30,000
Stock options 1,217,000 259,000 650,000 437,000
------------------- ------------------- ------------------- -------------------
Total potentially dilutive
common shares 5,523,000 7,366,000 6,192,000 7,574,000
Adjusted weighted average
Common shares outstanding-
assuming dilution 19,369,000 18,018,000 18,770,000 17,603,000
=================== =================== =================== ==================
Per common share:
Basic income before
extraordinary item $ 3.49 $ 3.65 $ 2.17 $ 2.29
Basic extraordinary loss (0.06) (0.02) (0.06) (0.30)
------------------- ------------------- ------------------- -------------------
Basic income per share $ 3.43 $ 3.63 $ 2.11 $ 1.99
=================== =================== =================== ==================
Diluted income before
extraordinary item $ 2.53 $ 2.19 $ 1.55 $ 1.43
Diluted extraordinary loss (0.05) (0.01) (0.05) (0.17)
------------------- ------------------- ------------------- -------------------
Diluted income per share $ 2.48 $ 2.18 $ 1.50 $ 1.26
=================== =================== =================== ==================
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain sections of this Form 10-Q contain various forward looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, which
represent the Company's expectations or beliefs concerning future events. The
forward-looking statements include, without limitation, the Company's ability to
meet its future liquidity needs and its disclosure concerning Year 2000 issues.
The Company cautions that these forward-looking statements are further qualified
by important factors that could cause actual results to differ materially from
those in the forward looking statements. Such factors include, without
limitation, general economic conditions, competition in the markets in which the
Company's stations are located, technological change and innovation in the
broadcasting industry and proposed legislation.
Introduction
- ------------
The Company is a group broadcaster that operates nine network-affiliated
television stations. 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. Comparisons of
the Company's consolidated financial statements for the three and nine months
ended September 30, 1999 against prior periods have been affected by the
acquisition of KBWB-TV, the WB affiliate serving San Francisco-Oakland-San Jose
California, which occurred on July 20, 1998, the sale of WWMT-TV, the CBS
affiliate serving Grand Rapids-Kalamazoo-Battle Creek, Michigan, which occurred
on July 15, 1998, the sale of WLAJ-TV, the ABC affiliate serving Lansing,
Michigan, which occurred on August 17, 1998, and the sale of KEYE-TV, the CBS
affiliate serving Austin, Texas, which occurred on August 31, 1999. It is
anticipated that comparisons of the Company's consolidated financial statements
for the year ended December 31, 1999 against prior periods will also be affected
by the aforementioned transactions. Numbers referred to in the following
discussion have been rounded to the nearest thousand.
-8-
<PAGE>
The following table sets forth certain operating data for the three and nine
months ended September 30, 1999 and 1998:
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
1999 1998 1999 1998
--------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
Operating income $ 2,529,000 $ 5,826,000 $11,296,000 $26,856,000
Add:
Time brokerage agreement fees --- 111,000 --- 428,000
Depreciation and amortization 8,143,000 6,479,000 23,786,000 16,403,000
Corporate expense 1,818,000 1,996,000 6,525,000 5,948,000
Non-cash compensation 204,000 210,000 728,000 759,000
----------- ----------- ----------- -----------
Broadcast cash flow $12,694,000 $14,622,000 $42,335,000 $50,394,000
=========== =========== =========== ===========
</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 September 30, 1999 and 1998
- ----------------------------------------------
Net revenue totaled $35,579,000; a decrease of $338,000 or 1 percent compared to
$35,917,000 for the three months ended September 30, 1998. The slight decrease
was primarily due to the loss of political advertising revenue in a non-election
year and the loss of revenue from the disposition of the Austin station in
August 1999 and the disposition of the Kalamazoo and Lansing stations in 1998.
The decrease was offset, in part, by strong growth in advertising revenue at the
Company's WB affiliates.
Station operating expenses totaled $22,885,000; an increase of $1,590,000 or 7.5
percent compared to $21,295,000 for the three months ended September 30, 1998.
The increase was primarily due to increases in programming, promotion and news
expense.
Amortization expense increased $1,536,000 or 30 percent due to additional
intangible amortization expense associated with the acquisition of the San
Francisco station.
The net gain on asset dispositions of $101,292,000 resulted primarily from the
sale of the Company's Austin station in August 1999, offset, in part, by the
loss on the sale of the ABC affiliation at KNTV.
-9-
<PAGE>
Net interest expense decreased $829,000 during the three months ended September
30, 1999 as compared to the same period a year earlier primarily due to lower
levels of outstanding indebtedness. The Company used the proceeds from the sale
of its Austin station to repay $115,000,000 of debt.
The Company reported income before taxes and extraordinary item of $93,198,000
during the third quarter and will partially offset this income with its
remaining available net operating loss carryforwards. The provision for income
taxes for the third quarter consists of $25,401,000 of current federal and state
taxes and $12,071,000 of deferred taxes.
During the third quarter, the Company repurchased $32,065,000 principal amount
of its subordinated notes at various prices. In connection with the
repurchases, the Company incurred an extraordinary loss after the write-off of
related deferred financing fees, net of tax benefit, of $893,000.
Nine months ended September 30, 1999 and 1998
- ---------------------------------------------
Net revenue totaled $110,379,000 a decrease of $5,998,000 or 5 percent compared
to $116,377,000 for the nine months ended September 30, 1998. The decrease was
primarily due to the loss of Olympic-related advertising revenue at the
Company's CBS affiliated stations and the loss of political advertising in a
non-election year. The decrease was also due to the loss of revenue from the
disposition of the Kalamazoo, Lansing and Austin stations, offset, in part, by
the added revenues from the acquisition of the San Francisco station.
Station operating expenses totaled $68,044,000; an increase of $2,061,000 or 3
percent compared to $65,983,000 for the nine months ended September 30, 1998.
The increase was primarily due to increases in programming and promotion
expenses, offset, in part, by an overall reduction in expenses resulting from
the acquisition and dispositions.
Amortization expense increased $7,200,000 or 58 percent due to additional
intangible amortization expense at San Francisco. Corporate expense increased
$577,000 or 10 percent primarily due to the earlier incurrence of certain
expenses. It is anticipated that corporate expense will decrease during the
fourth quarter of 1999 as compared to the same period a year earlier, resulting
in a slight increase for the full year.
The net gain on asset dispositions of $101,292,000 resulted primarily from the
sale of the Company's Austin station in August 1999, offset, in part, by the
loss on the sale of the ABC affiliation at KNTV.
Non-cash interest expense increased $753,000 or 55 percent during the nine
months ended September 30, 1999 as compared to the same period a year earlier,
reflecting the imputing of interest on a non-interest bearing obligation issued
in connection with the San Francisco acquisition. The gain on insurance proceeds
of $2,655,000 in 1998 resulted from insurance proceeds that the Company received
in excess of the net book value of assets that were destroyed in a fire at the
Company's Duluth station.
-10-
<PAGE>
The Company reported income before taxes and extraordinary item of $82,357,000
for the nine months ended September 30, 1999 and will partially offset this
income with its remaining available net operating loss carryforwards. The
provision for income taxes for the nine months ended September 30, 1999 consist
of $25,552,000 of current federal and state taxes and $8,456,000 of deferred
taxes.
Liquidity and Capital Resources
- -------------------------------
In July 1999 the Company and the American Broadcasting Companies, Inc. ("ABC")
agreed to terminate the ABC affiliation of KNTV, the ABC affiliate serving San
Jose-Salinas-Monterey, California, effective July 2000. The Company received
$14,000,000 in cash on September 1, 1999 in accordance with the agreement. KNTV
will more than double its local news programming to replace the programming
provided by ABC. In addition, KNTV plans to significantly expand cable carriage
to reach cable subscribers throughout the San Francisco-Oakland-San Jose
television market. The impact of this transaction on Company's operations cannot
be determined at this time; however, it is anticipated that with expanded cable
carriage, KNTV will gain access to greater advertising resources.
On July 30, 1999 the Company completed the disposition of WEEK-FM to the
Cromwell Group, Inc. of Illinois for $1,150,000 in cash. On August 31, 1999 the
Company completed the disposition of KEYE-TV, the CBS affiliate serving Austin,
Texas, to CBS Corporation for $160,000,000 in cash.
The Company's bank credit agreement (the "Credit Agreement") provides for
revolving credit borrowings of up to $260,000,000. The Credit Agreement can be
used to fund future acquisitions of broadcast stations and for general working
capital purposes, subject to certain limitations of the financial covenants
thereunder. In connection with the sale of the Austin station, the Company
repaid all of its outstanding indebtedness under the Credit Agreement. The
Company anticipates amending its existing Credit Agreement or entering into a
new credit agreement. As of November 11, 1999, the Company had no outstanding
borrowings under the Credit Agreement and had $57,121,000 of cash and cash
equivalents. The Company anticipates paying 1999 federal and state income taxes
of approximately $30,452,000 during the fourth quarter of 1999 relating
primarily to the gain on the sale of the Austin station and the gain, for tax
purposes, on the sale of the ABC affiliation at KNTV.
Net cash provided by operating activities was $5,690,000 during the nine months
ended September 30, 1999 compared to $23,636,000 during the nine months ended
September 30, 1998, a decrease of $17,946,000 or 76 percent. The decrease was
primarily due to lower operating cash flow, higher cash paid for interest and an
increase in net operating assets.
Net cash provided by investing activities was $163,363,000 during the nine
months ended September 30, 1999 compared to net cash used in investing
activities of $41,143,000 during the nine months ended September 30, 1998. The
increase was primarily due to the increase in proceeds from asset dispositions
over the prior year and the acquisition of the San Francisco station in 1998.
The Company anticipates that future requirements for capital expenditures will
include those incurred during the ordinary course of business,
-11-
<PAGE>
which include costs associated with the implementation of digital television
technology and Year 2000 issues.
Net cash used in financing activities was $114,777,000 during the nine months
ended September 30, 1999 compared to net cash provided by financing activities
of $17,848,000 during the nine months ended September 30, 1998. The decrease
resulted primarily from the issuance of subordinated notes during the nine
months ended September 30, 1998, offset in part, by a reduction in net debt
repayments and a reduction in payments for deferred financing fees.
The Company believes that internally generated funds from operations and credit
agreement borrowings 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. The Company expects that any future acquisitions
of television stations would be financed through funds generated from operations
and additional debt and equity financings.
Year 2000
- ---------
The Company is preparing for the impact of the Year 2000 on its business, as
well as on the businesses of its customers, suppliers and business partners.
The "Year 2000 Issue" is the result of computer programs that were written using
two digits rather than four to define the applicable year. Any of the computer
programs and/or hardware used by the Company that have date-sensitive software
or embedded chips may recognize a date using "00" as the year 1900 rather than
the year 2000. The Year 2000 Issue could result in system failure or
miscalculations in the operations at the Company's broadcast and corporate
locations. The disruption of operations could include, among other things, a
temporary inability to originate and transmit broadcast programming and
commercials, process financial information or engage in other normal business
activity. The Company may also be exposed to risks from third parties with
which the Company interacts who fail to adequately address their own Year 2000
Issues.
State of Readiness
- ------------------
The Company has developed a multiple phase approach to identify and evaluate its
state of Year 2000 readiness for both its information technology (IT) and non-IT
systems. The first phase was to develop a Company-wide, uniform strategy for
addressing the Year 2000 Issue and to assess the Company's current state of Year
2000 readiness. This included an internal review at each location of all IT and
non-IT systems for potential Year 2000 Issues. The Company has completed this
review and has identified the systems that need to be updated or replaced to
ensure Year 2000 compliance. Based on these system evaluations, the Company has
determined that it will be required to modify or replace portions of its
software and certain hardware so that its systems will properly utilize dates
beyond December 31, 1999. The primary systems that are being addressed are the
master control automation systems, IBM AS/400, the computer used to process
sales, traffic, accounts receivable, accounts payable and the general ledger,
and systems with embedded chips, including telephone and security systems.
-12-
<PAGE>
The next phase was to develop uniform test plans and test methodologies. The
Company has completed upgrading and testing its critical systems.
Costs to Address the Company's Year 2000 Issues
- -----------------------------------------------
The Company will incur capital expenditures and incremental expenses to bring
current systems into compliance. Total incremental expenses have not had a
material impact on the Company's financial condition to date and are not at
present, based on known facts, expected to have a material impact on the
Company's financial condition. The Company estimates the total cost of
upgrading equipment will be approximately $1,500,000, of which approximately
$1,100,000 has been incurred through September 30, 1999. All Year 2000
expenditures are made out of each location's operating budget. There are no IT
projects that have been delayed due to Year 2000 efforts.
Risks of the Company's Year 2000 Issues
- ---------------------------------------
While the Company believes its efforts will provide reasonable assurance that
material disruptions will not occur due to internal Year 2000 failures, the
possibility of disruption, especially from third parties, still exists. The
Company's operations are vulnerable to system failures experienced by the
network program providers, certain satellite services, software and hardware
providers, local and long distance telephone providers, power companies,
financial services providers and others upon whom the Company relies for
supporting services. In an effort to determine its vulnerabilities to third-
party Year 2000 failures, the Company has requested Year 2000 compliance data
from all of its suppliers and vendors. The Company will use this information in
an attempt to identify whether any of these parties has a Year 2000 Issue that
may materially impact the Company's operations, liquidity, capital resources or
certain other functions. The Company does not, however, control the systems of
other companies, and cannot assure that these systems will be timely converted
and, if not converted, would not have an adverse effect on the Company's
business operations. In the event that the Company and/or its significant
vendors or suppliers do not complete their Year 2000 compliance efforts, the
Company could experience disruptions in its operations, including a temporary
inability to engage in normal broadcast or business activities. Disruptions in
the economy generally resulting from Year 2000 Issues also could affect the
Company.
Contingency Plan
- ----------------
The Company has developed a contingency plan to address system failures that are
critical to conduct its business. This plan includes, but is not limited to,
increases in overtime salaries and/or increases in personnel to operate systems
that would ordinarily be operated by a computer.
-13-
<PAGE>
Year 2000 Forward-Looking Statements
- ------------------------------------
The foregoing Year 2000 discussion contains "forward-looking statements" within
the meaning of Section 21E of the Securities Exchange Act of 1934. Such
statements, including without limitation, anticipated costs and the dates by
which the Company expects to complete certain actions, are based on management's
best current estimates, which were derived utilizing numerous assumptions about
future events, including the continued availability of certain resources,
representations received from third parties and other factors. However, there
can be no guarantee that these estimates will be achieved, and actual results
could differ materially from those anticipated. Specific factors that might
cause such material differences include, but are not limited to, the ability to
identify and remediate all relevant IT and non-IT systems, results of Year 2000
testing, adequate resolution of Year 2000 Issues by businesses and other third
parties who are service providers, suppliers or customers of the Company,
unanticipated system costs, the adequacy of and ability to develop and implement
contingency plans and similar uncertainties. The "forward-looking statements"
made in the foregoing Year 2000 discussion speak only as of the date on which
such statements are made, and the Company undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of unanticipated
events.
-14-
<PAGE>
PART II
-------
OTHER INFORMATION
-----------------
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
On October 26, 1999, the holders of all of the Company's Voting Common
Stock adopted resolutions by written consent in lieu of a special
meeting amending the Company's Bylaws to increase the number of
directors to 11 and electing Veronica Pollard as a director of the
Company.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
10.40 Limited Waiver, dated August 31, 1999, to the Fourth Amended and
Restated Credit Agreement, dated as of June 10, 1998, as amended,
by and among Granite Broadcasting Corporation, the Lenders listed
therein, and Bankers Trust Company, as Administrative Agent, The
Bank of New York, as Documentation Agent, and Goldman Sachs Credit
Partners L.P., Union Bank of California, N.A., and ABN Amro Bank
N.V., as Co-Agents.
10.41 Amendment, dated July 26, 1999, to the Network Affiliation
Agreement (KNTV(TV)).
27. Financial Data Schedule.
(b) Reports on Form 8-K
Current Report on Form 8-K, filed September 13, 1999, reporting the sale of the
assets of KEYE-TV, the CBS affiliated station serving the Austin, Texas
television market, to CBS Corporation for a purchase price of $160 million,
subject to certain adjustments. No financial statements were filed at such time.
-15-
<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 November 15, 1999 /s/ W. DON CORNWELL
---------------------------------------------
(W. Don Cornwell)
Chief Executive Officer
Date November 15, 1999 /s/ LAWRENCE I. WILLS
---------------------------------------------
(Lawrence I. Wills)
Vice President, Finance and Controller
(Principal Accounting Officer)
-16-
<PAGE>
EXHIBIT 10.40
LIMITED WAIVER
TO FOURTH AMENDED AND RESTATED CREDIT AGREEMENT
August 31, 1999
Granite Broadcasting Corporation
767 Third Avenue, 34th Floor
New York, New York 10017
Ladies and Gentlemen:
This Limited Waiver (this "Limited Waiver") is dated as of August 31,
1999 and is made with reference to that certain Fourth Amended and Restated
Credit Agreement dated as of June 10, 1998, by and among Granite Broadcasting
Corporation (the "Company"), the lenders party thereto ("Lenders"), Bankers
Trust Company, as Administrative Agent ("Administrative Agent"), The Bank of New
York, as Documentation Agent, and Goldman Sachs Credit Partners L.P., Union Bank
of California, N.A., and ABN Amro Bank N.V., as Co-Agents, as amended by that
certain First Amendment to Fourth Amended and Restated Credit Agreement dated as
of March 23, 1999 (as so amended, the "Credit Agreement"). Capitalized terms
used herein without definition shall have the meanings assigned to such terms in
the Credit Agreement.
Pursuant to that certain Purchase and Sale Agreement dated as of April
28, 1999, by and among CBS Corporation, a Pennsylvania corporation, Company,
KBVO, Inc. ("KBVO") and KBVO License, Inc. ("KBVO License"), Company, KBVO and
KBVO License have agreed to sell television station KEYE-TV (formerly KBVO-TV)
serving Austin, Texas and the assets relating thereto (the "KEYE Sale") and the
closing of such transaction is expected to occur on or about August 31, 1999.
Company has informed Lenders that it intends to prepay all outstanding
Loans with the Net Cash Proceeds of the KEYE Sale and to use the Net Cash
Proceeds remaining after such prepayment (the "Excess Proceeds") to redeem or
repurchase a portion of its Subordinated Indebtedness in compliance with the
terms of the Credit Agreement and the indentures pursuant to which such
Subordinated Indebtedness was issued.
Company has also informed the Lenders that it does not expect to be
able to comply with the provisions of Subsection 7.6A (Maximum Total Debt Ratio)
until it has been able to effect such redemptions and has requested the waiver
of Subsections 7.6A, 7.5(iv) and 7.7 of the Credit Agreement on the terms and
conditions set forth below.
By their execution of a counterpart of this Limited Waiver, Requisite
Lenders agree to waive the provisions of Subsection 7.6A of the Credit Agreement
and the provisions of Subsections 7.7 and 7.5(iv) of the Credit Agreement
requiring compliance with the provisions of
<PAGE>
Subsection 7.6 and Subsections 7.5(iv)(b) and 7.5(iv)(f)(y), respectively, on a
Pro Forma Basis on the closing of the KEYE Sale and on any redemption or
repurchase of Convertible Preferred Stock; provided, that (i) Company prepays
--------
all Loans outstanding on the date of the closing of the KEYE Sale with the Net
Cash Proceeds thereof, (ii) Company would be in compliance with the provisions
of Subsection 7.6A if pro forma effect were given to the redemption of
Subordinated Indebtedness in an amount equal to the Excess Proceeds after giving
effect to any redemptions and repurchases thereof after the date of the KEYE
Sale, and (iii) the Excess Proceeds are, to the extent required by Subsection
2.4B(iii)(a) of the Credit Agreement, deposited in a collateral account
maintained with the Administrative Agent; provided, further, that the waiver of
-------- -------
Subsection 7.6A set forth herein shall remain in effect until the earlier of (x)
the date when the proposed redemption of Subordinated Indebtedness is effected
in accordance with the terms of the Credit Agreement or (y) the date which is
170 days after the date of the closing of the KEYE Sale.
Without limiting the generality of the provisions of subsection 10.6
of the Credit Agreement, the waiver set forth herein shall be limited precisely
as written and relate solely to compliance the provisions of Subsection 7.6A of
the Credit Agreement and the provisions of Subsections 7.7 and 7.5(iv) of the
Credit Agreement requiring compliance with the provisions of Subsection 7.6 and
Subsections 7.5(iv)(b) and 7.5(iv)(f)(y), respectively, on a Pro Forma Basis on
the closing of the KEYE Sale and on any redemption or repurchase of Convertible
Preferred Stock for the time period set forth above. Nothing in this Limited
Waiver shall be deemed to (a) constitute a waiver of any other term, provision
or condition of the Credit Agreement or any other instrument or agreement
referred to therein, (b) prejudice any right or remedy that Administrative Agent
may now have or may have in the future under or in connection with the Credit
Agreement or any other instrument or agreement referred to therein or (c) create
any obligation on the part of Administrative Agent to renew or extend the waiver
contained herein. Except as expressly set forth herein, the terms, provisions
and conditions of the Credit Agreement and the other Loan Documents shall remain
in full force and effect and in all other respects are hereby ratified and
confirmed.
Each Subsidiary of Company hereby acknowledges that it has read this
Limited Waiver and consents to the terms thereof and further hereby confirms and
agrees that, notwithstanding the effectiveness of this Limited Waiver, the
obligations of such Subsidiary 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.
In order to induce the Administrative Agent and Requisite Lenders to
enter into this Limited Waiver, the Company by its execution of a counterpart of
this Limited Waiver, represents and warrants that (a) no Event of Default or
Potential Event of Default exists under the Credit Agreement or the other Loan
Documents after giving effect to the waiver contemplated in this Limited Waiver,
(b) all representations and warranties contained in the Credit Agreement and the
other Loan Documents are true and correct in all material respects on and as of
the date hereof except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were true and correct
in all material respects on and as of such earlier date, and (c) the Company and
its Subsidiaries have performed all agreements to be performed on their part as
set forth in the Credit Agreement.
2
<PAGE>
This Limited Waiver 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. This Limited Waiver
shall become effective as of the date hereof upon the execution of counterparts
hereof duly executed by Company, its Subsidiaries and Requisite Lenders or, in
the case of any Lender, telecopy or telephone confirmation from such Lender of
its execution hereof. Company acknowledges that all costs, fees and expenses as
described in subsection 10.2 of the Credit Agreement incurred by Administrative
Agent and its counsel with respect to this Limited Waiver and the documents and
transactions contemplated hereby shall be for the account of Company. THIS
LIMITED WAIVER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES.
[Remainder of page intentionally left blank]
3
<PAGE>
ADMINISTRATIVE AGENT:
BANKERS TRUST COMPANY, individually and as
Administrative Agent and Collateral Agent
By: /s/ Patricia Hogan
------------------------------------
Patricia Hogan
Principal
ACKNOWLEDGED AND APPROVED BY:
BORROWER:
GRANITE BROADCASTING CORPORATION
By: /s/ Lawrence I. Wills
---------------------------
Lawrence I. Wills
Vice President
4
<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.
WEEK, INC.
WEEK LICENSE, INC.
WXON, INC.
WXON LICENSE, INC.
WLAJ, INC.
WLAJ LICENSE, INC.
WEEK-TV LICENSE, INC.
PACIFIC FM INCORPORATED
KOFY-TV LICENSE, INC.
By: /s/ Lawrence I. Wills
-----------------------------
Lawrence I. Wills
Vice President
LENDERS:
THE BANK OF NEW YORK,
as Documentation Agent and a Lender
By: _________________________________________
Name:_______________________________
Title:_______________________________
5
<PAGE>
GOLDMAN SACHS CREDIT PARTNERS L.P.,
as a Co-Agent and a Lender
By: _________________________________________
Name:______________________________
Title:______________________________
UNION BANK OF CALIFORNIA, N.A.,
as a Co-Agent and a Lender
By: _________________________________________
Name:_______________________________
Title:_______________________________
ABN AMRO BANK N.V., NEW YORK BRANCH,
as a Co-Agent and a Lender
By: _________________________________________
Name:_______________________________
Title:_______________________________
NATEXIS BANQUE BFCE,
as a Lender
By: _________________________________________
Name:_______________________________
Title:_______________________________
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENNE,
as a Lender
By: _________________________________________
Name:_______________________________
Title:_______________________________
By: _________________________________________
Name:_______________________________
Title:_______________________________
6
<PAGE>
HELLER FINANCIAL, INC.,
as a Lender
By: _________________________________________
Name:_______________________________
Title:_______________________________
PARIBAS,
as a Lender
By: _________________________________________
Name:_______________________________
Title:_______________________________
By: _________________________________________
Name:_______________________________
Title:_______________________________
THE BANK OF NOVA SCOTIA,
as a Lender
By: _________________________________________
Name:_______________________________
Title:_______________________________
BANQUE NATIONALE DE PARIS,
as a Lender
By: _________________________________________
Name:_______________________________
Title:_______________________________
By: _________________________________________
Name:_______________________________
Title:_______________________________
7
<PAGE>
MELLON BANK, N.A.,
as a Lender
By: _________________________________________
Name:_______________________________
Title:_______________________________
BANK OF TOKYO-MITSUBISHI TRUST,
as a Lender
By: _________________________________________
Name:_______________________________
Title:_______________________________
FREMONT FINANCIAL CORPORATION,
as a Lender
By: _________________________________________
Name:_______________________________
Title:_______________________________
SOUTHERN PACIFIC BANK,
as a Lender
By: _________________________________________
Name:_______________________________
Title:_______________________________
8
<PAGE>
EXHIBIT 10.41
American Broadcasting Companies, Inc. [LOGO]
July 26, 1999
Granite Broadcasting
Attn: W. Don Cornwell
767 Third Avenue, 28th Floor
New York, NY 10017
Dear Mr. Cornwell:
This will constitute an Amendment to the Primary Television Affiliation
Agreement between American Broadcasting Companies, Inc. ("ABC" or "we") and KNTV
License, Inc. ("KNTV") or "you") dated January 3, 1996 (the "Agreement").
You and we agree that the Agreement shall terminate effective midnight
at the end of the day July 2, 2000 on the following terms:
1. We agree to pay you, in addition to all other compensation due
to you pursuant to the Agreement, the total sum of $14 million
within ten (10) days of execution of the Amendment. It is agreed
that the Amendment will be executed no later than September 1,
1999.
2. Each party shall continue to enjoy its respective rights under
the Agreement and to be subject to its respective obligations
under the Agreement until the time of termination herein
provided.
3. Neither party shall have any continuing obligation under the
Agreement subsequent to the time of termination, provided that
ABC shall be obligated to pay you any compensation owing to you
pursuant to Schedule A for broadcasting network sponsored
programs prior to termination, and further provided that the
reciprocal indemnification obligations set forth in paragraph
VI.S. of the Agreement shall continue with respect to materials
broadcast prior to termination.
4. You and we agree to keep confidential the existence and terms of
this Amendment until a mutually agreeable date which shall be on
or about September 1, 1999. It is contemplated that the
termination of KNTV's ABC network affiliation will be announced
at that time by means of a joint press release or announcement
or separate press releases or announcements approved by both
parties.
<PAGE>
Granite Broadcasting -2- July 26, 1999
5. You and we agree to cooperate to insure an orderly transition in the shift
of ABC network service from KNTV to ABC's new affiliate in the market.
If the foregoing is in accordance with your understanding, please indicate
your consent by signing the space provided below.
Sincerely yours,
American Broadcasting Companies, Inc.
By:____________________________
Title:___________________________
Accepted and Agreed to by:
KNTV License, Inc.
By:__________________________
Title:_________________________
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GRANITE
BROADCASTING CORPORATION'S 3RD QUARTER FORM 10-Q AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 55,038,237
<SECURITIES> 0
<RECEIVABLES> 28,492,021
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 113,945,050
<PP&E> 34,107,775
<DEPRECIATION> 0
<TOTAL-ASSETS> 782,415,047
<CURRENT-LIABILITIES> 79,902,485
<BONDS> 313,981,277
203,930,665
0
<COMMON> 181,393
<OTHER-SE> 56,865,077
<TOTAL-LIABILITY-AND-EQUITY> 782,415,047
<SALES> 0
<TOTAL-REVENUES> 110,378,956
<CGS> 0
<TOTAL-COSTS> 99,082,767
<OTHER-EXPENSES> (100,856,644)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,785,283
<INCOME-PRETAX> 82,357,550
<INCOME-TAX> 34,488,279
<INCOME-CONTINUING> 47,869,271
<DISCONTINUED> 0
<EXTRAORDINARY> 892,980
<CHANGES> 0
<NET-INCOME> 46,976,291
<EPS-BASIC> 2.11
<EPS-DILUTED> 1.50
</TABLE>
