<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 March 31, 2000
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 (I.R.S. Employer
incorporation 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
May 15, 2000; Common Stock (Nonvoting), par value $.01 per share - 18,259,646
shares outstanding at May 15, 2000.
<PAGE>
PART I. FINANCIAL INFORMATION
GRANITE BROADCASTING CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 2000 1999
- -------- -------------- --------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,688,128 $ 5,453,542
Accounts receivable, net 27,461,953 33,017,344
Film contract rights 14,385,381 17,510,909
Other assets 11,416,465 10,399,749
-------------- --------------
Total current assets 56,951,927 66,381,544
Property and equipment, net 39,765,519 39,176,169
Film contract rights and other noncurrent assets 12,125,974 14,267,912
Deferred financing fees, net 7,169,132 8,209,537
Intangible assets, net 595,929,661 602,555,693
-------------- --------------
$ 711,942,213 $ 730,590,855
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 3,434,825 $ 3,120,875
Accrued interest 9,206,371 3,487,384
Other accrued liabilities 6,357,909 7,779,475
Film contract rights 21,494,159 22,049,869
Other current liabilities 6,819,438 6,473,693
-------------- --------------
Total current liabilities 47,312,702 42,911,296
Long-term debt 292,595,927 303,874,304
Film contract rights payable 14,925,745 18,000,393
Deferred tax liability 83,955,924 84,117,915
Other noncurrent liabilities 20,152,790 20,894,010
Commitments
Cumulative Exchangeable Preferred
Stock, net of offering costs 217,486,896 210,708,780
Stockholders' equity:
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 18,259,446
shares of Common Stock (Nonvoting) (17,964,081
shares at December 31,1999) issued and
outstanding 184,379 181,425
Additional paid-in capital 16,925,309 17,909,802
Retained earnings 21,317,300 35,123,239
Less: Unearned compensation (1,730,884) (1,946,434)
Treasury stock (297,000) (297,000)
Note receivable from officer (886,875) (886,875)
-------------- --------------
Total stockholders' equity 35,512,229 50,084,157
-------------- --------------
Total liabilities and stockholders' equity $ 711,942,213 $ 730,590,855
============== ==============
</TABLE>
See accompanying notes.
-1-
<PAGE>
GRANITE BROADCASTING CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
2000 1999
--------------- --------------
(Unaudited)
<S> <C> <C>
Net revenues $ 33,339,280 $ 33,874,817
Station operating expenses 25,398,867 22,524,984
Depreciation expense 1,377,962 1,387,257
Amortization expense 6,882,420 6,408,515
Corporate expense 3,074,569 1,972,138
Non-cash compensation expense 215,550 264,099
--------------- --------------
Operating (loss) income (3,610,088) 1,317,824
Other expenses:
Equity in net loss of investee
--- 133,603
Interest expense, net 7,311,287 9,997,776
Non-cash interest expense 739,475 707,227
Other 334,361 343,640
--------------- --------------
Loss before income taxes and extraordinary item (11,995,211) (9,864,422)
Benefit for income taxes (3,183,920) (3,441,000)
--------------- --------------
Loss before extraordinary item (8,811,291) (6,423,422)
Extraordinary gain, net of tax 1,783,468 ---
--------------- --------------
Net loss $(7,027,823) $ (6,423,422)
--------------- --------------
Net loss attributable to common shareholders $ (13,805,939) $ (13,021,711)
--------------- --------------
Per common share:
Basic and diluted loss before extraordinary item $ (0.85) $ (1.10)
Basic and diluted extraordinary gain, net of tax 0.10 ---
--------------- --------------
Basic and diluted net loss $ (0.75) $ (1.10)
--------------- --------------
Basic and diluted weighted average common shares
outstanding 18,301,863 11,890,745
--------------- --------------
</TABLE>
See accompanying notes.
-2-
<PAGE>
GRANITE BROADCASTING CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Three Months Ended March 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
Class A Common Additional Total
Common Stock Paid-in Retained Unearned Note Receivable Treasury Stockholders'
Stock (Nonvoting) Capital Earnings Compensation from Officer Stock Equity
------ ----------- ----------- ------- ------------ --------------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999 $1,785 $179,640 $17,909,802 $35,123,239 $(1,946,434) $(886,875) $(297,000) $50,084,157
Dividends on Cumulative
Exchangable Preferred Stock (6,653,079) (6,653,079)
Accretion of offering costs
related to Cumulative
Exchangeable Preferred Stock (125,037) (125,037)
Exercise of stock options 2,301 (972,509) (970,208)
Issuance of Common Stock
(Nonvoting) 653 (653) -
Stock expense related to
stock plans (11,331) 215,550 204,219
Net loss (7,027,823) (7,027,823)
------ ----------- ----------- ----------- ------------ ------------- ---------- ------------
Balance at March 31, 2000 $1,785 $182,594 $16,925,309 $21,317,300 $(1,730,884) $(886,875) $(297,000) $35,512,229
====== =========== =========== =========== ============ ============= ========== ============
</TABLE>
See accompanying notes.
-3-
<PAGE>
GRANITE BROADCASTING CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three months ended March 31,
------------------------------
2000 1999
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (7,027,823) $ (6,423,422)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Amortization of intangible assets 6,882,420 6,408,515
Depreciation 1,377,962 1,387,257
Non-cash compensation expense 215,550 264,099
Non-cash interest expense 739,475 707,227
Equity in net loss of investee --- 133,603
Deferred tax benefit (161,991) (3,591,000)
Extraordinary gain (2,972,447) ---
Change in assets and liabilities:
Decrease in accounts receivable 5,555,391 4,002,186
Increase in other current assets (2,110,488) (2,146,647)
Decrease in film contract rights and other non current assets 5,315,239 2,922,584
Increase in accounts payable, accrued interest and
other accrued liabilities 3,651,108 4,832,305
Decrease in film contract rights and other current liabilities (3,488,946) (2,890,986)
Decrease in other non current liabilities (108,164) (780,712)
---------------- ---------------
Net cash provided by operating activities 7,867,286 4,825,009
---------------- ---------------
Cash flows from investing activities:
WB Network affiliation payment (881,868) (354,954)
Insurance proceeds received 973,604 1,641,662
Other investing activities (132,672) (133,603)
Capital expenditures (1,908,489) (2,845,072)
---------------- ---------------
Net cash used in investing activities (1,949,425) (1,691,967)
---------------- ---------------
Cash flows from financing activities:
Proceeds from bank financing 33,000,000 4,000,000
Repayment of bank debt (7,973,604) (5,613,399)
Retirement of senior subordinated notes (32,440,725) ---
Dividends paid --- (594,056)
Payment for deferred financing fees (265,865) ---
Other financing activities, net (3,081) (440,972)
---------------- ---------------
Net cash used in financing activities (7,683,275) (2,648,427)
---------------- ---------------
Net (decrease) increase in cash and cash equivalents (1,765,414) 484,615
Cash and cash equivalents, beginning of period 5,453,542 762,392
---------------- ---------------
Cash and cash equivalents, end of period $ 3,688,128 $ 1,247,007
================ =================
Supplemental information:
Cash paid for interest $ 1,710,118 $ 1,856,632
Income taxes paid 90,200 1,567,550
Non-cash capital expenditures 59,000 46,000
Non-cash dividend 6,653,079 5,879,535
</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. For further
information, refer to the Company's consolidated financial statements and notes
thereto for the year ended December 31, 1999 which were included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999. All
significant intercompany accounts and transactions have been eliminated.
Information as of, and for the year ended December 31, 1999 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 November 16, 1999, the Company entered into a definitive agreement to acquire
WNGS-TV, the UPN affiliate serving Buffalo, New York, from Caroline K. Powley
for $23,000,000 in cash. The acquisition was subject to certain conditions,
which were not satisfied by the seller and, as a result, the agreement was
terminated on April 21, 2000. The related $2,000,000 escrow deposit was returned
to the Company in April 2000.
Note 3 - Long Term Debt
- -----------------------
During the first quarter of 2000 the Company repurchased $28,390,000 principal
amount of its 8 7/8% Senior Subordinated Notes due May 15, 2008 (the "8 7/8%
Notes"); $1,000,000 principal amount of its 9 3/8% Senior Subordinated Notes due
December 1, 2005 (the "9 3/8% Notes); and $7,000,000 of its 10 3/8 Senior
Subordinated Notes due May 15, 2005 (the "10 3/8% Notes"), all at a discount. As
a result of the aforementioned repurchases, the Company incurred an
extraordinary gain after the write-off of related deferred financing fees, net
of tax, of approximately $1,783,000.
Subsequent to the first quarter, the Company repurchased an additional
$19,515,000 principal amount of its 8 7/8% Notes; $3,100,000 principal amount of
its 9 3/8% Notes; and $15,375,000 of its 10 3/8% Notes, all at a discount.
The Company was obligated to make an offer to purchase at par $9,328,000 (the
"Offer Amount") of its 10 3/8% Notes and its 8 7/8% Notes resulting from the
sale of the Austin station in August 1999, pursuant to the terms of the
indentures governing the 10 3/8% and 8 7/8% Notes. The Company made such an
offer to purchase (the "Offer to Purchase") on April 28, 2000. The Offer Amount
will first be applied to any 10 3/8% Notes duly tendered pursuant to the Offer
to Purchase. The Offer to Purchase expires on May 30, 2000. As mentioned above,
the Company has and will continue to repurchase its Subordinated Notes on the
open market while this Offer to Purchase is outstanding.
-5-
<PAGE>
Note 4 - Recent Developments
- ----------------------------
On February 14, 2000, the Company announced the formation of a strategic
alliance (the "Strategic Alliance") with the National Broadcasting Company, Inc.
("NBC"). Pursuant to the Strategic Alliance, KNTV is to become the NBC affiliate
in the San Francisco-Oakland-San Jose California DMA for a ten-year term
commencing on January 1, 2002 (the "San Francisco Affiliation"). The Company
intends to file a petition with the Federal Communications Commission (the
"FCC") to change KNTV's market designation from San Jose, California to San
Francisco-Oakland-San Jose, California. In connection with the affiliation
switch to NBC, the Company intends to expand KNTV's coverage to include a
greater percentage of the San Francisco-Oakland-San Jose DMA. The Company has
received permission from the FCC to increase KNTV's signal coverage, and began
broadcasting at increased power in May 2000. The Company is also seeking to
reach all cable homes in the San Francisco-Oakland-San Jose DMA through expanded
cable coverage.
In addition, NBC is to extend the term of the Company's NBC affiliation
agreements with KSEE, WEEK and KBJR until December 31, 2011. As part of such
extension, NBC's affiliation payment obligations to Granite for such stations
will terminate as of December 31, 2001.
In consideration for the San Francisco Affiliation, the Company will pay NBC
$362,000,000 in nine annual installments, with the initial payment in the amount
of $61,000,000 being due January 1, 2002. In addition, Granite is to grant NBC a
warrant to acquire 2.5 million shares of the Company's Common Stock (Nonvoting),
par value $0.01 per share (the "Common Stock (Nonvoting)"), at an exercise price
of $12.50 per share (the "A Warrant") and a warrant to purchase 2.0 million
shares of Common Stock (Nonvoting) at an exercise price of $15.00 per share (the
"B Warrant"). The A Warrant vests in full on December 31, 2000. The B Warrant
vests in full on January 1, 2002, if the San Francisco Affiliation is in effect
on that date. Each warrant, once vested, remains exercisable until December 31,
2011 and may be exercised for cash or surrender of a portion of a then
exercisable warrant. The aggregate number of shares issuable upon exercise of
the warrants (assuming they are exercised for cash) would represent
approximately 20.0% of the Common Stock (Nonvoting) outstanding as of March 31,
2000 after giving effect to their issuance. Granite has also agreed to pay
$2,430,000 during 2001 in promotion expenses in connection with KNTV's
affiliation switch to NBC. Other terms of the Strategic Alliance include a right
of first refusal in favor of NBC on the sale of KNTV, and an NBC right to
purchase KNTV upon an uncured event of default by Granite, at a value to be
determined by an independent appraiser. In addition, NBC will have the right to
terminate the San Francisco Affiliation if it elects to acquire an attributable
interest in another station in the San Francisco-Oakland-San Jose DMA upon
payment to Granite of a fee of $14,500,000.
-6-
<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. 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.
Consequently, all forward-looking statements made herein are qualified by these
cautionary statements and the cautionary language set forth in the Company's
most recent Form 10K report and other documents filed with the Securities and
Exchange Commission.
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. The Company's
operating revenues are generally lower in the first calendar quarter and
generally higher in the fourth calendar quarter than in the other two quarters,
due in part to increases in retail advertising in the fall months in preparation
for the holiday season, and in election years due to increased political
advertising. Operating results for the three-month period ended March 31, 2000
are not necessarily indicative of the results that may be expected for the year
ended December 31, 2000. Comparisons of the Company's consolidated financial
statements for the three month period ended March 31, 2000 against the prior
period has been affected by the sale of KEYE-TV, the CBS affiliate serving
Austin, Texas, which occurred August 31, 1999 (the "Austin Sale"). It is
anticipated that comparisons of the Company's consolidated financial statements
for the year ended December 31, 2000 against prior periods will be affected by
the aforementioned transaction. Numbers referred to in the following discussion
have been rounded to the nearest thousand.
The following table sets forth certain operating data for the three months ended
March 31, 2000 and 1999:
2000 1999
---- ----
(Unaudited)
Operating (loss) income $ (3,610,000) $ 1,318,000
Add:
Depreciation and amortization 8,260,000 7,796,000
Corporate expense 3,075,000 1,972,000
Non-cash compensation 216,000 264,000
Program amortization 5,643,000 3,068,000
Film payments (3,974,000) (3,715,000)
-------------- --------------
Broadcast cash flow $ 9,610,000 $ 10,703,000
============== ==============
-7-
<PAGE>
"Broadcast cash flow" is defined as operating income plus depreciation,
amortization, corporate expense, non-cash compensation and program amortization,
less program payments. The Company has included broadcast cash flow data because
such data is commonly used as a measure of performance for broadcast companies
and is 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 March 31, 2000 and 1999
- ------------------------------------------
Net revenue totaled $33,339,000; a decrease of $536,000 or 2 percent as compared
to $33,875,000 for the three months ended March 31, 1999. The decrease was
primarily due to the Austin Sale, offset in part, by increases in local,
national and political advertising revenue.
Station operating expenses totaled $25,399,000; an increase of $2,874,000 or 13
percent as compared to $22,525,000 for the three months ended March 31, 1999.
The increase was primarily due to increases in programming, promotion and sales
expense at the Company's WB affiliates as well as an increase in news expense at
the Company's San Francisco duopoly, offset in part, by a reduction in expenses
resulting from the Austin Sale. The Company anticipates making additional
investments in the news operation at its San Franciso duopoly during the
remainder of the year.
Amortization expense increased $474,000 or 7 percent primarily due to additional
intangible amortization expense associated with the acquisition of KBWB, the San
Francisco WB affiliate. Corporate expense increased $1,103,000 or 56 percent
primarily due to increased professional fees, including those costs associated
with the termination of the Buffalo UPN affiliate acquisition, and additional
incremental costs incurred in connection with the Company's Internet business.
Net interest expense decreased $2,686,000 or 27 percent primarily due to lower
levels of outstanding indebtedness. The Company used the net proceeds from the
Austin Sale to repay $129,000,000 of debt during the fourth quarter of 1999. In
addition, during the first quarter of 2000 the Company repurchased $36,390,000
face amount of its subordinated notes at a discount, further reducing its net
debt outstanding.
In connection with the aforementioned repurchases that occurred during the first
quarter of 2000, the Company incurred an extraordinary gain after the write-off
of related deferred financing fees, net of tax, of $1,783,000.
Liquidity and Capital Resources
- -------------------------------
The Company's existing bank credit agreement was amended and restated on June
10, 1998 (as amended and restated and as further amended from time to time, the
"Fourth Amended and Restated Credit Agreement" or the "Credit Agreement") to
create a reducing revolving credit facility of up to $260,000,000 and permits
additional borrowings of up to $240,000,000. The proceeds from this facility are
available for acquisitions and for general working capital purposes as defined
in the agreement. As of February 16, 2000 and March 17, 2000, the Company
amended the Credit Agreement to revise the maximum consolidated total debt to
consolidated cash flow ratio covenant contained therein. As of May 15, 2000 the
Company had $85,672,000
-8-
<PAGE>
of borrowing outstanding under the Credit Agreement and the ability to borrow in
compliance with the financial covenants thereunder an additional $36,342,000 for
acquisitions and working capital purposes. The Company expects to enter into a
replacement credit agreement (the "New Credit Agreement") during the year 2000
to enable the Company to meet its long term borrowing needs.
On February 14, 2000, the Company announced the formation of the Strategic
Alliance with NBC. Pursuant to the Strategic Alliance, KNTV is to become the NBC
affiliate in the San Francisco-Oakland-San Jose California market for a ten-year
term commencing on January 1, 2002. In addition, NBC is to extend the term of
the Company's NBC affiliation agreements with KSEE, WEEK and KBJR until December
31, 2011. As part of such extension, NBC's affiliation payment obligations to
Granite for such stations will terminate as of December 31, 2001. In
consideration for the San Francisco Affiliation, the Company will pay NBC
$362,000,000 in nine annual installments, with the initial payment in the amount
of $61,000,000 being due January 1, 2002. The Company has also agreed to pay
$2,430,000 during 2001 in promotion expenses in connection with KNTV's
affiliation switch to NBC.
On November 16, 1999, the Company entered into a definitive agreement to acquire
WNGS-TV, the UPN affiliate serving Buffalo, New York, from Caroline K. Powley
for $23,000,000 in cash. The acquisition was subject to certain conditions,
which were not satisfied by the seller and, as a result, the agreement was
terminated on April 21, 2000. The related $2,000,000 escrow deposit was returned
to the Company in April 2000.
Through May 15, 2000, the Company has repurchased $74,380,000 of its
Subordinated Notes at a discount. (See Note 3 - Long Term Debt).
The Company was obligated to make an offer to purchase at par $9,328,000 (the
"Offer Amount") of its 10 3/8% Notes and its 8 7/8% Notes resulting from the
Austin sale, pursuant to the terms of the indentures governing the 10 3/8% and 8
7/8% Notes. The Company made such an Offer to Purchase on April 28, 2000. The
Offer Amount will first be applied to any 10 3/8% Notes duly tendered pursuant
to the Offer to Purchase. The Offer to Purchase expires on May 30, 2000. As
mentioned above, the Company has and will continue to repurchase its bonds on
the open market while this Offer to Purchase is outstanding.
Cash flow provided by operating activities was $7,867,000 during the three
months ended March 31, 2000 compared to cash flow provided by operating
activities of $4,825,000 during the three months ended March 31, 1999, an
increase of $3,042,000 or 63 percent. The increase was primarily due to a
decrease in net operating assets, offset in part, by lower operating cash flow.
Cash flow used in investing activities was $1,949,000 during the three months
ended March 31, 2000 compared to $1,692,000 during the three months ended March
31, 1999. The increase was primarily a result of a decrease in insurance
proceeds received and an increase in WB network affiliation payments, offset in
part, by a decrease in capital expenditures.
Cash flow used in financing activities was $7,683,000 during the three months
ended March 31, 2000 compared to $2,648,000 during the three months ended March
31, 1999. The increase resulted primarily from a net reduction in long-term
debt.
The Company anticipates that future requirements for capital expenditures will
include those incurred during the ordinary course of business, which include
costs associated with the implementation of digital television technology. The
Company believes that internally generated funds from operations and borrowings
under the Credit Agreement and the New Credit Agreement 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.
-9-
<PAGE>
PART II
OTHER INFORMATION
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk.
----------------------------------------------------------
The Company's earnings are affected by changes in short-term interest
rates as a result of its Credit Agreement. Under its Credit Agreement,
the Company pays interest at floating rates based on Eurodollar. The
Company has not entered into any agreements to hedge such risk. Assuming
the balance under the Credit Agreement as of December 31, 1999 remains
outstanding in 2000, a 2% increase in Eurodollar would increase interest
expense by $340,000. This analysis does not consider the effects of the
reduced level of overall economic activity that could exist in such an
environment. Further, in the event of an increase in interest rates,
management could potentially take actions to mitigate its exposure to
the change.
ITEM 4. Submission of Matters to a Vote of Securities Holders.
------------------------------------------------------
None
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
a. Exhibits
--------
10.46 The Granite Broadcasting Corporation 2000 Stock Option
Plan, dated as of April 25, 2000
27. Financial Data Schedule
b. Reports on Form 8-K
-------------------
None
-10-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has caused this report to be signed by an officer
and the principal accounting officer on its behalf by the undersigned thereunto
duly authorized.
GRANITE BROADCASTING CORPORATION
Registrant
Date: May 15, 2000 /s/ W. DON CORNWELL
-----------------------------------------------
(W. Don Cornwell)
Chief Executive Officer
Date: May 15, 2000 /s/ LAWRENCE I. WILLS
-----------------------------------------------
(Lawrence I. Wills)
Vice President, Finance and Controller
(Principal Accounting Officer)
-11-
<PAGE>
EXHIBIT 10.46
GRANITE BROADCASTING CORPORATION
2000 STOCK OPTION PLAN
1. Purpose. The purpose of the Granite Broadcasting Corporation 2000 Stock
-------
Option Plan (the "Plan") is to provide a means by which certain employees,
officers, directors and consultants of Granite Broadcasting Corporation (the
"Company") and its Affiliates (as defined below) may be given an opportunity to
purchase non-voting common stock of the Company. Options that may be granted
under this Plan include (a) "incentive stock options" as such term is defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code")
("Incentive Stock Options") and (b) options which would not constitute Incentive
Stock Options ("Nonqualified Stock Options") (Incentive Stock Options and
Nonqualified Stock Options collectively referred to as "Options"). The Plan is
intended to advance the interests of the Company by encouraging stock ownership
on the part of certain employees, officers, directors and consultants by
enabling the Company (and its Affiliates) to secure and retain the services of
highly qualified persons, and by providing such individuals with an additional
incentive to advance the success of the Company (and its Affiliates). For
purposes of this Plan, Affiliate shall mean any parent or subsidiary of the
Company or any entity controlled by, or in control of, the Company. With respect
to Incentive Stock Options, grants shall only be made to employees of the
Company and any "parent corporation" or "subsidiary corporation" of the Company.
The term "parent corporation" shall have the meaning set forth in Section 424(e)
of the Code and the term "subsidiary corporation" shall have the meaning set
forth in Section 424(f) of the Code. Affiliation shall refer to a group of
Affiliates.
2. Stock Subject to Option. Subject to adjustment as provided in Sections
-----------------------
4(i), options may be granted by the Company from time to time to purchase up to
an aggregate of 4,000,000 shares of the Company's authorized but unissued Common
Stock (nonvoting), par value $0.01 per share (the "Common Stock") or Common
Stock reacquired in any manner; provided, that, no more than 4,000,000 shares
shall be used for grant of Incentive Stock Options; provided, further, that, no
employee shall be granted in any calendar year Options to purchase more than
4,000,000 shares. Shares that by reason of the expiration of an Option or
otherwise are no longer subject to purchase pursuant to an Option granted under
the Plan may be again available for issuance pursuant to Options under the Plan.
Shares tendered by an Optionee (as defined below) to pay all or part of the
Option Price (as defined below) of an Option and shares that are withheld to pay
taxes associated with the exercise of an Option may be again available for
issuance pursuant to Nonqualified Stock Options under the Plan.
3. Participants. Persons eligible to be granted Options under the Plan
------------
shall be limited to employees (including future and prospective employees),
officers, directors and consultants of the Company (or its Affiliates) who are
selected to participate, as indicated by the action of the Committee (as defined
below) in granting an Option to such individual.
4. Terms and Conditions of Options. The Committee (as defined below) may
-------------------------------
grant Options from time to time pursuant to the Plan. Such Options shall be
evidenced by written stock option agreements signed by the Optionee and by a
duly authorized officer of the Company or by any member of the Committee (the
"Agreements"). The Agreements shall be
<PAGE>
subject to the terms and conditions of the Plan, shall specify whether the
Options are Incentive Stock Options or Nonqualified Stock Options and shall
contain such other provisions as the Committee in its discretion shall deem
appropriate. Shares of Common Stock that may be purchased under an Option
granted pursuant to this Plan shall sometimes hereinafter be referred to as
"Option Shares," and a recipient to whom Options are granted shall sometimes
hereinafter be referred to as an "Optionee."
(a) Option Price. The Option Price for each Incentive Stock Option per
------------
share shall not be less than the Fair Market Value (as defined below) of a
share of the Common Stock on the date the Option is granted (the "Option
Price"). The Option Price for each Nonqualified Stock Option per share
shall be specified by the Committee at the time such Option is granted, and
may be less than, equal to or greater than the Fair Market Value of the
shares of Common Stock on the date such Option is granted. The Option Price
for Incentive Stock Options granted to any employee owning stock (including
any attribution of stock ownership under Section 424(d) of the Code)
possessing more than 10% of the total combined voting power of all classes
of stock of the Company or any of its Affiliates on the date such Option is
granted (hereinafter a "10% Shareholder"), shall be at least 110% of the
Fair Market Value of the Common Stock on the date the Option is granted.
For purposes of the Plan, "Fair Market Value" as of a particular date means
the last reported sale price of the Common Stock on the New York Stock
Exchange or such other exchange or national quotation system that the
Common Stock is then trading on the last trading date immediately prior to
such date.
(b) Term of Option. Each Option granted under this Plan shall expire
--------------
no later than ten years after the date the Option is granted. If an
Incentive Stock Option is granted to an employee who is a 10% Shareholder,
then, for purposes of such Incentive Stock Option the word "five" shall be
substituted for the word "ten" in the immediately preceding sentence.
(c) Exercise of Option. Except as otherwise specifically provided in
------------------
this Plan, each Option will be exercisable according to the provisions of
an Optionee's Agreement. Unless otherwise provided in an Agreement, all
Options of an Optionee shall become immediately exercisable upon the (i)
death or disability (as determined by the Committee) of such Optionee and
(ii) the occurrence of a Change of Control (as defined below). A "Change of
Control" shall occur on the date on which W. Don Cornwell no longer owns,
beneficially, in excess of 50% of the issued and outstanding Class A Common
Stock of the Company.
(d) Manner of Exercise. Shares of Common Stock purchased upon exercise
------------------
of Options shall at the time of purchase be paid for in full. To the extent
that an Option is exercisable, Options may be exercised from time to time
by written notice to the Company stating the full number of shares with
respect to which the Option is being exercised, accompanied by full payment
of the Option Price, for the shares being purchased, by certified or
official bank check or the equivalent thereof acceptable to the Company. At
the discretion of the Committee, the payment of the Option Price may be (i)
in the form of Common Stock (or the attestation of ownership thereof), the
value of which shall be deemed to be the closing price on the last trading
date prior to date on
2
<PAGE>
which the shares are tendered for payment of the exercise price; provided,
that, if such shares have been acquired from the Company, they have been
held for at least six (6) months (or such longer or shorter period as may
be required to avoid recording an expense for accounting purposes), or (ii)
pursuant to a "cashless" exercise method established by the Committee with
a broker-dealer as permitted under Regulation T of the Federal Reserve
Board, or (iii) through such other means as established by the Committee or
(iv) by any combination of the foregoing. An Optionee's subsequent transfer
or disposition of any Common Stock acquired upon exercise of an Option
shall be subject to any federal or state laws then applicable, specifically
securities law.
(e) Limitation on Amount. Any options intended to be Incentive Stock
--------------------
Options which, when first exercisable during any calendar year (combined
with all other incentive stock option plans of the Company and its
Affiliates), will permit such employee to purchase stock that has an
aggregate fair market value (determined as of the time the option is
granted) of more than $100,000, will automatically be deemed to be
Nonqualified Stock Options to the extent required under Section 422(d) of
the Code.
(f) Non-Assignability of Option Rights. Options under the Plan will
----------------------------------
not be transferable by an Optionee except by will or the laws of descent
and distribution. During the lifetime of the Optionee, the Option is
exercisable only by the Optionee or, in the event of the Optionee's
incapacity, by his duly authorized legal representative. Notwithstanding
the foregoing, the Committee may, in its discretion, authorize all or a
portion of the Option (other than Incentive Stock Options) granted to a
Optionee to be on terms which permit transfer by such Optionee to (i)
except as otherwise determined by the Committee, the spouse, children,
grandchildren, stepchildren, parents, stepparents, siblings, in-laws and
persons related by reason of legal adoption, of such Optionee ("Immediate
Family Members"), (ii) a trust or trusts for exclusive benefit of such
Immediate Family Members, or (iii) a partnership or limited liability
company in which such Immediate Family Members are the only partners or
members, as applicable; provided, that (x) there may be no consideration
for any such transfer, (y) the Agreement pursuant to which such options are
granted must be approved by the Committee and must expressly provide for
transferability in a manner consistent with this Section, and (z)
subsequent transfers of transferred Options shall be prohibited except
those occurring by laws of descent and distribution. Following transfer,
any such Options shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer; provided,
that, for purposes of the Plan, the term Optionee shall be deemed to refer
to the transferee; provided, however, that, the Option shall continue to be
exercisable and shall terminate in accordance with its terms as if the
transferor remained the holder of the Option. Options under the Plan may
not be pledged, mortgaged, hypothecated or otherwise encumbered, and shall
not be subject to the claims of creditors.
(g) Termination of Continuous Service. Each Agreement shall provide
---------------------------------
what effect, if any, a termination of Continuous Service will have with
respect to outstanding Options, whether or not then vested. For purposes of
the Plan, Continuous Service means that an Optionee's service with the
Company or an Affiliate, whether as an employee, officer, director or
consultant, is not interrupted or terminated. The
3
<PAGE>
Optionee's Continuous Service shall not be deemed to have terminated merely
because of a change in the capacity in which the Optionee renders service
to the Company or an Affiliate as an employee, officer, consultant or
director or a change in the entity for which the Optionee renders such
service, provided that there is no interruption or termination of the
Optionee's Continuous Service. For example, a change in status from an
employee of the Company to a consultant of an Affiliate or a director will
not constitute an interruption of Continuous Service. The Committee, in its
sole discretion, may determine whether Continuous Service shall be
considered interrupted.
(h) Changes to Capital Structure; Need for Adjustment. The existence
-------------------------------------------------
of outstanding Options shall not affect in any way the right or power of
the Company or its stockholders to make or authorize any or all
adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation
of the Company, or any issue of bonds, debentures, preferred or prior
preference stock ahead of or affecting the stock or the rights thereof, or
the dissolution or liquidation of the Company, or any sale or transfer of
all or any part of its assets or business, or any other corporate act or
proceeding, whether of a similar character or otherwise.
Except as otherwise expressly provided in Section 4(i), the issuance
by the Company of shares of stock of any class, or securities convertible
into shares of stock of any class, for cash or property, or for labor or
services either upon direct sale or upon the exercise of rights or warrants
to subscribe therefor, or upon conversion of shares or obligations of the
Company convertible into such shares or other securities, shall not affect
or necessitate any adjustment to the number, class or price of shares of
stock then subject to outstanding options.
(i) Adjustments. Subject to Section 4(h), in the event of any change
-----------
in the outstanding Common Stock by reason of any share dividend or split,
recapitalization, merger, consolidation, spin-off, combination or exchange
of shares or other corporate change, or any distribution to holders of the
Common Stock other than regular cash dividends, the number or kind of
shares available for Options under the Plan may be adjusted by the
Committee as it shall in its sole discretion deem equitable and the number
and kind of shares subject to any outstanding Options granted under the
Plan and the purchase price thereof may be adjusted by the Committee as it
shall in its sole discretion deem equitable to preserve the value of such
Option; provided, that, in the case of Incentive Stock Options, such
adjustment shall be made in a manner consistent with the manner set forth
in Section 424(a) of the Code.
(j) Time of Granting Options. The grant of an option shall occur only
------------------------
when an Agreement shall have been duly executed and delivered by or on
behalf of the Company and the individual to whom such option shall be
granted.
(k) Reloads. The Committee may provide, at the date of grant of an
-------
Option, that in the event an Optionee pays the Option Price of such Option
(in whole or in part) by tendering Common Stock owned by the Optionee, such
Optionee shall automatically be granted a reload option for the number of
shares of Common Stock used to pay the
4
<PAGE>
Option Price plus the number of shares withheld to pay for federal, state
or local taxes associated with the exercise of the Option (the "Reload
Option"). The Reload Option shall be subject to the terms and conditions
that the Committee will in its discretion provide, consistent with the
terms of the Plan at the time the original Option is granted. Unless the
Committee explicitly provides otherwise, if a Reload Option is granted as
set forth above, one or more successive Reload Options will be
automatically granted to an Optionee who pays all or part of the Option
Price of any such Reload Option by tendering Common Stock owned by the
Optionee.
5. Administration.
--------------
(a) The Plan shall be administered by the Company's Stock Option
Committee and its Compensation Committee (sometimes collectively referred
to as the "Committee"), as provided below. The Stock Option Committee shall
consist of at least three (3) members to be appointed by the Board of
Directors, or such lesser or greater number of members as the Board of
Directors shall determine. The Stock Option Committee is only authorized to
grant Options to eligible persons who are either (i) not then "covered
employees" within the meaning of Section 162(m) of the Code and are not
expected to be covered employees at the time of recognition of income
resulting from such Option or not persons with respect to whom the Company
wishes to comply with Section 162(m) of the Code or (ii) not then subject
to Section 16 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The Compensation Committee shall consist of not less than
two (2) members of the Board of Directors, to be appointed by the Board of
Directors of the Company and who are "non-employee directors" within the
meaning of Rule 16b-3 as promulgated under Section 16 of the Exchange Act
and who are also "outside directors" within the meaning of Section 162(m)
of the Code. The Compensation Committee shall make all determinations and
Option awards to all other individuals not covered under clause (i) through
(ii) above. The foregoing notwithstanding, with respect to Options that:
(A) are intended to qualify as "performance-based" under Section 162(m) of
the Code, and/or (B) are granted to individuals who qualify as "insiders"
under Section 16 of the Exchange Act, (1) any Compensation Committee
members who do not qualify as "outside directors" and/or "non-employee
directors," as the case may be, shall have no authority to act and shall
automatically be recused from any action with respect to Options, and (2)
the remaining qualifying directors shall be authorized to act independently
without further approval. The Board of Directors may, from time to time,
remove members from or add members to the Committee. Vacancies in the
Committee, however caused, shall be filled by the Board of Directors.
Notwithstanding the foregoing, if the Committee does not exist, or for any
other reason determined by the Board of Directors, the Board of Directors
may take any action under the Plan that would otherwise be the
responsibility of the Committee; provided, however, that if any members of
-------- -------
the Board of Directors do not qualify as "outside directors", only the
Compensation Committee appointed above may grant Options that are intended
to be performance-based under Section 162(m) of the Code.
(b) Subject to clause (a) above, the Committee shall (i) approve the
selection of participants, (ii) determine the type of Options to be made to
participants, (iii)
5
<PAGE>
determine the number of shares of Common Stock subject to Options, (iv)
determine the terms and conditions of any Option granted hereunder
(including, but not limited to, any restriction and forfeiture conditions
on such award) and (v) have the authority to interpret the Plan, to
establish, amend, and rescind any rules and regulations relating to the
Plan, to determine the terms and provisions of any Agreements entered into
hereunder, and to make all other determinations necessary or advisable for
the administration of the Plan. The Committee may correct any defect,
supply any omission or reconcile any inconsistency in the Plan or in any
Option in the manner and to the extent it shall deem desirable to carry it
into effect.
(c) Any action of the Committee shall be final, conclusive and binding
on all persons, including the Company and its Affiliates and shareholders,
Optionees and persons claiming rights from or through an Optionee.
(d) The Committee may delegate to officers or employees of the Company
or any Affiliate, and to service providers, the authority, subject to such
terms as the Committee shall determine, to perform administrative functions
with respect to the Plan and Agreements.
(e) Members of the Committee and any officer or employee of the
Company or any Affiliate acting at the direction of, or on behalf of, the
Committee shall not be personally liable for any action or determination
taken or made in good faith with respect to the Plan, and shall, to the
extent permitted by law, be fully indemnified by the Company with respect
to any such action or determination
6. Requirements of Law. Each Option under the Plan shall be subject to
-------------------
the requirement that if at any time the Committee shall determine that the
listing, registration or qualification of any shares issuable or deliverable
thereunder upon any securities exchange or under any Federal or state law, or
the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition thereof, or in connection therewith, no such grant or
award may be exercised or shares issued or delivered unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Committee.
7. Intention of Plan. Incentive Stock Options granted pursuant to this
-----------------
Plan are intended to qualify as Incentive Stock Options within the meaning of
Section 422 of the Code, and the terms of this Plan and Options granted
hereunder shall be so construed; provided, however, that nothing in this Plan
-------- -------
shall be interpreted as a representation, guarantee or other undertaking on the
part of the Company that any Options granted pursuant to this Plan are, or will
be, determined to be Incentive Stock Options, within the meaning of the Code.
8. General Provisions.
------------------
(a) The Committee may require each participant purchasing or acquiring
shares pursuant to an option under the Plan to represent to and agree with
the Company in writing that such participant is acquiring the shares for
investment and without a view to distribution thereof.
6
<PAGE>
(b) All certificates for Common Stock delivered under the Plan
pursuant to any Option shall be subject to such stock-transfer orders and
other restrictions as the Committee may deem advisable under the rules,
regulations, and other requirements of the Securities and Exchange
Commission, any stock exchange upon which the Common Stock is then listed,
and any applicable Federal or state securities law, and the Committee may
cause a legend or legends to be put on any such certificates to make
appropriate reference to such restrictions. If the Committee determines
that the issuance of Common Stock hereunder is not in compliance with, or
subject to an exemption from, any applicable Federal or state securities
laws, such shares shall not be issued until such time as the Committee
determines that the issuance is permissible.
(c) It is the intent of the Company that the Plan satisfy, and be
interpreted in a manner that satisfies, the applicable requirements of Rule
16b-3 as promulgated under Section 16 of the Exchange Act so that Optionees
will be entitled to the benefit of Rule 16b-3, or any other rule
promulgated under Section 16 of the Exchange Act, and will not be subject
to short-swing liability under Section 16. Accordingly, if the operation of
any provision of the Plan would conflict with the intent expressed in this
Section 8(c), such provision to the extent possible shall be interpreted
and/or deemed amended so as to avoid such conflict.
(d) Except as otherwise provided by the Committee in the applicable
Agreement, a participant shall have no rights as a shareholder with respect
to any shares of Common Stocks subject to an Option until a certificate or
certificates evidencing shares of Common Stock shall have been issued to
the participant and, subject to Section 4(i), no adjustment shall be made
for dividends or distributions or other rights in respect of any share for
which the record date is prior to the date on which participant shall
become the holder of record thereof.
(e) The law of the State of New York shall apply to interpretations
under the Plan regardless of the effect of such state's conflict of laws
principles.
(f) Where the context requires, words in any gender shall include any
other gender.
(g) Headings of Sections are inserted for convenience and reference;
they do not constitute any part of this Plan.
7
<PAGE>
9. Withholding. To the extent provided by the terms of an Agreement, the
-----------
Optionee may satisfy any federal, state or local tax withholding obligation
relating to the exercise or acquisition of Common Stock under an Option by any
of the following means (in addition to the Company's right to withhold from any
compensation paid to the Optionee by the Company) or by a combination of such
means: (i) tendering a cash payment; (ii) authorizing the Company to withhold
shares of Common Stock from the shares of Common Stock otherwise issuable to the
participant as a result of the exercise or acquisition of Common Stock under the
option; provided, however, that no shares of Common Stock are withheld with a
value exceeding the minimum amount of tax required to be withheld by law; or
(iii) delivering to the Company owned and unencumbered shares of Common Stock
not acquired from the Company.
10. No Obligation of Employment. Nothing in this Plan or contained in an
---------------------------
Option granted hereunder or in any Agreement shall govern the employment or
service rights and duties between the Optionee and the Company or any Affiliate.
Neither this Plan, nor any grant or exercise pursuant thereto, shall constitute
an employment or service agreement among such parties. The granting of any
Option hereunder shall not impose upon the Company or an Affiliate any
obligation to employ or continue to employ any Optionee as an employee or
service provider. The right of the Company to terminate the employment or
service of any Optionee shall not be diminished or affected by reason of a grant
or the existence of an Option hereunder.
11. Amendment. The Board may amend, suspend or terminate the Plan or any
---------
portion thereof at any time, provided that (a) no amendment shall be made
without shareholder approval if such approval is necessary to comply with any
applicable law, regulation or stock exchange rule and (b) except as provided in
Sections 4(h) or 4(i), no amendment shall be made that would adversely affect
the rights of an Optionee under an option theretofore granted, without such
Optionee's written consent.
12. Term of Plan. Subject to earlier termination pursuant to Section 11,
------------
the Plan shall have a term of 10 years from its Effective Date.
13. Effective Date; Approval of Shareholders. The Plan is effective as of
----------------------------------------
April 25, 2000 (the "Effective Date"). The Plan is conditioned upon the approval
of the shareholders of the Company, and failure to receive their approval shall
render the Plan and all outstanding options issued thereunder void and of no
effect.
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GRANITE
BROADCASTING CORPORATION'S 1ST QUARTER 2000 10-Q AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 3,688,128
<SECURITIES> 0
<RECEIVABLES> 27,461,953
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 56,951,927
<PP&E> 39,765,519
<DEPRECIATION> 0
<TOTAL-ASSETS> 711,942,213
<CURRENT-LIABILITIES> 47,312,702
<BONDS> 292,595,927
217,486,896
0
<COMMON> 184,379
<OTHER-SE> 35,327,850
<TOTAL-LIABILITY-AND-EQUITY> 711,942,213
<SALES> 0
<TOTAL-REVENUES> 33,339,280
<CGS> 0
<TOTAL-COSTS> 36,949,368
<OTHER-EXPENSES> 928,604
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,456,519
<INCOME-PRETAX> (11,995,211)
<INCOME-TAX> (3,183,920)
<INCOME-CONTINUING> (8,811,291)
<DISCONTINUED> 0
<EXTRAORDINARY> 1,783,468
<CHANGES> 0
<NET-INCOME> (7,027,823)
<EPS-BASIC> (0.75)
<EPS-DILUTED> 0
</TABLE>
