SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended Commission file number:
March 31, 1998 333-02302
ALLBRITTON COMMUNICATIONS COMPANY
[Exact name of registrant as specified in its charter]
Delaware 74-180-3105
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
808 Seventeenth Street, N.W.
Suite 300
Washington, D.C. 20006-3903
(Address of principal executive offices)
Registrant's telephone number, including area code: 202-789-2130
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
Number of shares of Common Stock outstanding as of May 13, 1998: 20,000 shares.
<PAGE>
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
CERTAIN OF THE MATTERS DISCUSSED IN THIS FORM 10-Q MAY CONSTITUTE
FORWARD-LOOKING STATEMENTS FOR PURPOSES OF THE SECURITIES ACT AND THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED. SUCH FORWARD-LOOKING STATEMENTS MAY INVOLVE
UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE THE ACTUAL RESULTS AND
PERFORMANCE OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM FUTURE RESULTS OR
PERFORMANCE EXPRESSED OR IMPLIED BY SUCH STATEMENTS. CAUTIONARY STATEMENTS
REGARDING THE RISKS ASSOCIATED WITH SUCH FORWARD-LOOKING STATEMENTS INCLUDE,
WITHOUT LIMITATION, THOSE STATEMENTS INCLUDED UNDER "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." CERTAIN OF SUCH
RISKS AND UNCERTAINTIES RELATE TO THE HIGHLY LEVERAGED NATURE OF THE COMPANY,
THE RESTRICTIONS IMPOSED ON THE COMPANY BY CERTAIN INDEBTEDNESS, THE SENSITIVITY
OF THE COMPANY TO ADVERSE TRENDS IN THE GENERAL ECONOMY, THE HIGH DEGREE OF
COMPETITION IN THE COMPANY'S INDUSTRY, THE IMPACT OF NEW TECHNOLOGIES AND
CHANGES IN FEDERAL COMMUNICATIONS COMMISSION REGULATIONS, THE VARIABILITY OF THE
COMPANY'S QUARTERLY RESULTS AND THE COMPANY'S SEASONALITY, AMONG OTHERS.
ALL WRITTEN OR ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANY ARE
EXPRESSLY QUALIFIED BY THE FOREGOING CAUTIONARY STATEMENTS.
<PAGE>
ALLBRITTON COMMUNICATIONS COMPANY
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
TABLE OF CONTENTS
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements: PAGE
Consolidated Statements of
Operations and Retained Earnings for the Three and Six
Months Ended March 31, 1997 and 1998 1
Consolidated Balance Sheets as of September 30, 1997 and
March 31, 1998 2
Consolidated Statements of Cash Flows for the Six Months
Ended March 31, 1997 and 1998 3
Notes to Interim Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 5
Item 3. Quantitative and Qualitative Disclosures About Market Risk 11
PART II OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
Exhibit Index 14
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
ALLBRITTON COMMUNICATIONS COMPANY
(an indirectly wholly-owned subsidiary of Perpetual Corporation)
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(Dollars in thousands)
(unaudited)
Three Months Ended Six Months Ended
March 31, March 31,
------------------ ------------------
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating revenues, net $ 37,024 $ 39,073 $ 84,816 $ 90,393
------ ------ ------ ------
Television operating expenses, excluding
depreciation and amortization 27,183 25,760 53,587 53,349
Depreciation and amortization 4,755 4,304 9,049 9,106
Corporate expenses 1,217 1,035 2,191 2,097
------- ------- ------- -------
33,155 31,099 64,827 64,552
------ ------ ------ ------
Operating income 3,869 7,974 19,989 25,841
------- ------- ------ ------
Nonoperating income (expense)
Interest income
Related party 553 553 1,106 1,106
Other 66 867 124 942
Interest expense (10,479) (11,943) (21,138) (23,001)
Other, net (191) (274) (582) (571)
-------- -------- -------- --------
(10,051) (10,797) (20,490) (21,524)
-------- -------- -------- --------
(Loss) income before income taxes and
extraordinary item (6,182) (2,823) (501) 4,317
(Benefit from) provision for income taxes (1,561) (984) 926 2,133
-------- --------- -------- --------
(Loss) income before extraordinary item (4,621) (1,839) (1,427) 2,184
Extraordinary loss on early repayment of debt,
net of income tax benefit of $3,176 -- (5,155) -- (5,155)
-------- -------- -------- --------
Net loss (4,621) (6,994) (1,427) (2,971)
Retained earnings, beginning of period 48,296 48,858 45,102 44,835
------ ------ ------ ------
Retained earnings, end of period $ 43,675 $ 41,864 $ 43,675 $ 41,864
====== ====== ====== ======
See accompanying notes to interim consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLBRITTON COMMUNICATIONS COMPANY
(an indirectly wholly-owned subsidiary of Perpetual Corporation)
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
March 31,
September 30, 1998
Assets 1997 (unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 7,421 $ 17,903
Accounts receivable, net 34,569 32,798
Program rights 15,244 7,461
Deferred income taxes 2,617 2,619
Interest receivable from related party 492 492
Other 2,405 3,091
------- -------
Total current assets 62,748 64,364
Property, plant and equipment, net 51,921 50,595
Intangible assets, net 150,493 147,652
Deferred financing costs and other 10,477 11,893
Cash surrender value of life insurance 4,674 5,099
Program rights 664 304
------- -------
$ 280,977 $ 279,907
======= =======
Liabilities and Stockholder's Investment
Current liabilities
Current portion of long-term debt $ 1,320 $ 1,304
Accounts payable 3,620 3,448
Accrued interest payable 10,765 11,156
Program rights payable 19,718 11,646
Accrued employee benefit expenses 3,728 3,518
Other accrued expenses 5,079 5,203
Total current liabilities ------- -------
44,230 36,275
Long-term debt 414,402 428,841
Program rights payable 966 684
Deferred rent and other 3,067 3,042
Accrued employee benefit expenses 1,836 1,905
Deferred income taxes 2,039 2,777
------- -------
466,540 473,524
------- -------
Stockholder's investment
Preferred stock, $1 par value, 800 shares authorized,
none issued - -
Common stock, $.05 par value, 20,000 shares authorized,
issued and outstanding 1 1
Capital in excess of par value 6,955 6,955
Retained earnings 44,835 41,864
Distributions to owners, net (237,354) (242,437)
------- -------
Total stockholder's investment (185,563) (193,617)
------- -------
$ 280,977 $ 279,907
======= =======
See accompanying notes to interim consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLBRITTON COMMUNICATIONS COMPANY
(an indirectly wholly-owned subsidiary of Perpetual Corporation)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited) Six Months Ended
March 31,
1997 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,427) $ (2,971)
------- -------
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 9,049 9,106
Other noncash charges 589 637
Extraordinary loss on early repayment of debt -- 5,155
Provision for doubtful accounts 247 288
Loss on disposal of assets 54 3
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable (1,524) 1,483
Program rights 8,731 8,143
Other current assets 292 (495)
Other noncurrent assets 536 (228)
Increase (decrease) in liabilities:
Accounts payable (3,801) (172)
Accrued interest payable 65 391
Program rights payable (8,653) (8,354)
Accrued employee benefit expenses (616) (141)
Other accrued expenses 2,234 448
Deferred rent and other liabilities (405) (25)
Deferred income taxes 476 736
------- -------
Total adjustments 7,274 16,975
------- -------
Net cash provided by operating activities 5,847 14,004
------- -------
Cash flows from investing activities:
Capital expenditures (7,629) (4,770)
Purchase of option (5,348) --
Proceeds from disposal of assets 19 169
------ ------
Net cash used in investing activities (12,958) (4,601)
------- -------
Cash flows from financing activities:
Proceeds from issuance of debt -- 150,000
Deferred financing costs -- (4,440)
Call premium on early repayment of debt -- (5,842)
Draws (repayments) under lines of credit, net 13,800 (12,700)
Principal payments on long-term debt and capital lease obligations (122) (123,517)
Distributions to owners, net of certain charges (27,469) (42,055)
Repayments of distributions to owners 14,939 39,633
------ -------
Net cash provided by financing activities 1,148 1,079
------ -------
Net (decrease) increase in cash and cash equivalents (5,963) 10,482
Cash and cash equivalents, beginning of period 12,108 7,421
------ -------
Cash and cash equivalents, end of period $ 6,145 $ 17,903
====== ======
See accompanying notes to interim consolidated financial statements.
</TABLE>
<PAGE>
ALLBRITTON COMMUNICATIONS COMPANY
(an indirectly wholly-owned subsidiary of Perpetual Corporation)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(unaudited)
NOTE 1 - The accompanying unaudited interim consolidated financial statements of
Allbritton Communications Company (an indirectly wholly-owned subsidiary of
Perpetual Corporation) and its subsidiaries (collectively, the "Company") have
been prepared pursuant to instructions for Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in conformity with generally
accepted accounting principles have been omitted or condensed where permitted by
regulation. In management's opinion, the accompanying financial statements
reflect all adjustments, which were of a normal recurring nature, and
disclosures necessary for a fair presentation of the consolidated financial
statements for the interim periods presented. The results of operations for the
three and six months ended March 31, 1998 are not necessarily indicative of the
results that can be expected for the entire fiscal year ending September 30,
1998. The interim consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes thereto
for the year ended September 30, 1997 which are contained in the Company's Form
10-K.
NOTE 2 - For the six months ended March 31, 1997 and 1998, distributions to
owners were as follows:
1997 1998
---- ----
Distributions to owners, beginning of period $224,450 $237,354
Cash advances 27,469 43,191
Repayment of cash advances (14,939) (39,633)
Benefit from federal income taxes -- 1,525
-------- -------
Distributions to owners, end of period $236,980 $242,437
======= =======
Weighted average amount of non-interest bearing
advances outstanding during the period $214,061 $228,096
======= =======
NOTE 3 - On January 22, 1998, the Company completed a $150,000 offering of its 8
7/8% Senior Subordinated Notes due 2008. The cash proceeds of the offering, net
of offering expenses, of approximately $146,000 were used to redeem the
Company's 11 1/2% Senior Subordinated Debentures due 2004 (the "11 1/2 %
Debentures") on March 3, 1998 with the balance used to repay certain amounts
outstanding under the Company's revolving credit facility. The Company incurred
a loss, net of the related income tax effect, of $5,155 on the early
extinguishment of the 11 1/2% Debentures resulting primarily from the payment of
a call premium and write-off of remaining deferred financing costs.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
(Dollars in thousands)
Overview
Allbritton Communications Company and its subsidiaries (on a consolidated basis,
the "Company") own and/or program ABC network-affiliated television stations
serving seven diverse geographic markets: WJLA-TV in Washington, D.C.; WHTM-TV
in Harrisburg, Pennsylvania; KATV in Little Rock, Arkansas; KTUL in Tulsa,
Oklahoma; WSET-TV in Lynchburg, Virginia; WCIV in Charleston, South Carolina;
and WCFT-TV in Tuscaloosa, Alabama (west of Birmingham, Alabama). The Company
also programs the ABC network affiliate WJSU-TV in Anniston, Alabama (east of
Birmingham, Alabama) pursuant to the terms of a local marketing agreement, and
owns a low power television station licensed to Birmingham, Alabama (WBMA-LP).
The Company operates WCFT-TV and programs WJSU-TV in tandem with WBMA-LP serving
the viewers of Birmingham, Tuscaloosa and Anniston.
The Company's advertising revenues are generally highest in the first and third
quarters of each fiscal year, due in part to increases in retail advertising in
the period leading up to and including the holiday season and active advertising
in the spring. The fluctuation in the Company's operating results is generally
related to fluctuations in the revenue cycle. In addition, advertising revenues
are generally higher during election years due to spending by political
candidates, which is typically heaviest during the Company's first fiscal
quarter. Years in which Olympic Games are held also cause cyclical fluctuations
in operating results depending on which television network is carrying Olympic
coverage.
As compared to the same period in the prior fiscal year, the Company's results
of operations for the three months ended March 31, 1998 principally reflect
increased demand by advertisers in the Washington, D.C. market as well as
increased audience share and advertising revenues in the Birmingham market. The
comparative results are also impacted by the non-recurring program expense of
approximately $2,000 incurred during the second quarter of the prior fiscal
year. In addition, the Company completed a $150,000 offering of its 8 7/8%
Senior Subordinated Notes due 2008 (the "8 7/8% Notes") on January 22, 1998. The
cash proceeds of the offering, net of offering expenses, of approximately
$146,000 were used to redeem the Company's 11 1/2% Senior Subordinated
Debentures due 2004 (the "11 1/2 % Debentures") on March 3, 1998 with the
balance used to repay certain amounts outstanding under the Company's revolving
credit facility. The Company incurred a loss, net of the related income tax
effect, of $5,155 on the early extinguishment of the 11 1/2% Debentures
resulting primarily from the payment of a call premium and write-off of
remaining deferred financing costs.
<PAGE>
Results of Operations
Set forth below are selected consolidated financial data for the three and
six months ended March 31, 1997 and 1998 and the percentage change between
the periods:
<TABLE>
<CAPTION>
Three Months Ended March 31, Six Months Ended March 31,
Percent Percent
1997 1998 Change 1997 1998 Change
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues, net $37,024 $39,073 5.5% $84,816 $90,393 6.6%
Total operating expenses 33,155 31,099 -6.2% 64,827 64,552 -0.4%
------ ------ ------ ------
Operating income 3,869 7,974 106.1% 19,989 25,841 29.3%
Nonoperating expenses, net 10,051 10,797 7.4% 20,490 21,524 5.0%
Income tax (benefit) provision (1,561) (984) 37.0% 926 2,133 130.3%
------- ------- ------ ------
(Loss) income before
extraordinary item (4,621) (1,839) 60.2% (1,427) 2,184 253.1%
Extraordinary loss, net of
income tax benefit -- 5,155 n/a -- 5,155 n/a
------ ------ ------ ------
Net loss $ (4,621) $ (6,994) 51.4% $ (1,427) $ (2,971) 108.2%
======= ======= ======== =======
Net Operating Revenues
The following table depicts the principal types of operating revenues, net of
agency commissions, earned by the Company for each of the three and six months
ended March 31, 1997 and 1998, and the percentage contribution of each to the
total broadcast revenues earned by the Company, before fees:
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended March 31, Six Months Ended March 31,
---------------------------- ---------------------------
1997 1998 1997 1998
---- ---- ---- ----
Dollars Percent Dollars Percent Dollars Percent Dollars Percent
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Local/regional <F1> $19,011 49.8 $20,214 50.0 $41,536 47.5 $45,800 49.0
National <F2> 14,784 38.7 15,843 39.2 33,423 38.2 37,462 40.0
Network compensation <F3> 1,619 4.2 1,590 3.9 3,039 3.5 3,057 3.3
Political <F4> 69 0.2 53 0.1 3,445 3.9 970 1.0
Trade and barter <F5> 1,907 5.0 1,936 4.8 3,822 4.4 4,080 4.4
Other revenue <F6> 814 2.1 810 2.0 2,190 2.5 2,160 2.3
-------- ----- -------- ----- ------- ----- ------- -----
Broadcast revenues 38,204 100.0 40,446 100.0 87,455 100.0 93,529 100.0
===== ===== ===== =====
Fees <F7> (1,290) (1,375) (2,870) (3,143)
------- ------- ------ ------
Broadcast revenue, net of fees 36,914 39,071 84,585 90,386
Non-broadcast revenue <F8> 110 2 231 7
------- ------- ------ ------
Total net operating revenues $37,024 $39,073 $84,816 $90,393
====== ====== ====== ======
<PAGE>
<FN>
(1) Represents sale of advertising time to local and regional advertisers or
agencies representing such advertisers.
(2) Represents sale of advertising time to agencies representing national
advertisers.
(3) Represents payment by networks for broadcasting or promoting network
programming.
(4) Represents sale of advertising time to political advertisers.
(5) Represents value of commercial time exchanged for goods and services (trade)
or syndicated programs (barter).
(6) Represents miscellaneous revenue, principally receipts from tower
rental, production of commercials and revenue from the sales of University
of Arkansas sports programming to advertisers and radio stations.
(7) Represents fees paid to national sales representatives and fees paid for
music licenses.
(8) Represents revenues from program syndication sales and other miscellaneous
non-broadcast revenues.
</FN>
</TABLE>
<PAGE>
Net operating revenues for the three months ended March 31, 1998 totaled
$39,073, an increase of $2,049, or 5.5%, when compared to net operating revenues
of $37,024 for the three months ended March 31, 1997. This increase resulted
principally from increased local and national advertising demand in the
Company's Washington, D.C. and Birmingham markets partially offset by declines
in the Company's Little Rock and Tulsa markets. The revenue growth in Birmingham
was achieved through increased audience and market share. This expansion in
audience and market share was the result of the Company's development of the
Birmingham operation.
Net operating revenues increased $5,577, or 6.6%, to $90,393 for the six months
ended March 31, 1998 as compared to $84,816 for the same period in the prior
year. This year-to-date increase also principally resulted from increased local
and national advertising demand in the Company's Washington, D.C. and Birmingham
markets partially offset by declines in the Company's Little Rock and Tulsa
markets as well as decreased political advertising revenues in the majority of
the Company's markets.
Local/regional advertising revenues increased 6.3% and 10.3% during the three
and six months ended March 31, 1998, respectively, versus the comparable periods
in Fiscal 1997. The increase for the three months ended March 31, 1998 of $1,203
over the three months ended March 31, 1997 was primarily attributable to an
improvement in the Washington, D.C. local/regional advertising market and market
share gains by the Birmingham stations, offset by a weakening in the Harrisburg,
Tulsa and Little Rock markets for local/regional advertisers. The $4,264
increase in local/regional advertising revenues for the six-month period ended
March 31, 1998 over the comparable period in the prior fiscal year was primarily
attributable to an improvement in the Washington, D.C. local/regional
advertising market and market share gains by the Birmingham stations offset by a
weakening in the Tulsa market for local/regional advertisers.
National advertising revenues increased $1,059 and $4,039, or 7.2% and 12.1%,
for the three and six months ended March 31, 1998, respectively, over the
comparable periods in Fiscal 1997. The increase for the three months ended March
31, 1998 was primarily attributable to an improvement in the Washington, D.C.
and Harrisburg national advertising markets combined with market share gains by
the Birmingham stations, offset by a weakening in the Little Rock and Tulsa
markets for national advertisers. The increase for the six-month period ended
March 31, 1998 was principally attributable to an improvement in the Washington,
D.C. national advertising market and market share gains by the Birmingham
stations.
Political advertising revenues, which comprised 3.9% of the Company's total net
operating revenues for the six months ended March 31, 1997, decreased by $2,475,
or 71.8%, for the six months ended March 31, 1998. The decrease was due
primarily to the national presidential election as well as various high-profile
local political races in several of the Company's markets that took place during
Fiscal 1997 with no comparable political elections occurring during the same
period in Fiscal 1998.
No individual advertiser accounted for more than 5% of the Company's broadcast
revenues during the three or six months ended March 31, 1997 or 1998.
<PAGE>
Total Operating Expenses
Total operating expenses for the three months ended March 31, 1998 totaled
$31,099, a decrease of $2,056, or 6.2%, compared to total operating expenses of
$33,155 for the three-month period ended March 31, 1997. This decrease was
primarily the result of a decrease in television operating expenses, excluding
depreciation and amortization, of $1,423.
Total operating expenses for the six months ended March 31, 1998 totaled
$64,552, a decrease of $275, or 0.4%, compared to total operating expenses of
$64,827 for the six-month period ended March 31, 1997. This decrease was
primarily the result of a decrease in television operating expenses, excluding
depreciation and amortization, of $238.
Television operating expenses, excluding depreciation and amortization,
decreased $1,423 and $238, or 5.2% and 0.4%, for the three and six months ended
March 31, 1998, respectively, as compared to the comparable periods in Fiscal
1997. The expense decreases in Fiscal 1998 were the result of the approximate
$2,000 non-recurring programming expense related to the Company's early
termination of a program contract incurred during the second quarter of Fiscal
1997. Excluding this charge from Fiscal 1997 television operating expenses, such
expenses have increased 2.3% and 3.4% for the three and six months ended March
31, 1998, respectively, versus the comparable periods in Fiscal 1997. These
increases were primarily attributable to increased news and sales expenses
across the majority of the Company's stations partially offset by reduced
operating expenses in Birmingham.
Operating Income
For the three months ended March 31, 1998, operating income of $7,974 increased
$4,105, or 106.1%, when compared to operating income of $3,869 for the three
months ended March 31, 1997. For the three months ended March 31, 1998, the
operating margin increased to 20.4% from 10.4% for the comparable period in
Fiscal 1997. Operating income of $25,841 for the six months ended March 31, 1998
increased $5,852, or 29.3%, when compared to operating income of $19,989 for the
same period in the prior fiscal year. For the six months ended March 31, 1998,
the operating margin increased to 28.6% from 23.6% for the comparable period in
the prior fiscal year. The increases in operating income and margin were the
result of increased operating revenues combined with decreased operating
expenses in Fiscal 1998 versus Fiscal 1997 as discussed above. The Company's
Fiscal 1997 operating margins were adversely impacted due to the investment in
the start-up operations in Birmingham (e.g., programming and staffing changes,
marketing and promotion activities, and capital expenditures for facility
construction and equipment purchases to integrate the operation) during the
initial phase of Birmingham's audience share development as well as the
non-recurring program termination expense.
Nonoperating Expenses, Net
Interest expense of $11,943 and $23,001 for three and six months ended March 31,
1998, respectively, increased $1,464 and $1,863, or 14.0% and 8.8%, as compared
to $10,479 and $21,138 for the three and six-month periods ended March 31, 1997,
respectively. These increases were principally due to the incremental interest
expense associated with carrying both the newly-issued 8 7/8% Notes and the 11
1/2% Debentures from January 22, 1998 until the redemption of the 11 1/2%
Debentures on March 3, 1998 after the redemption notice period was completed.
Had the Company redeemed the 11 1/2% Debentures on January 22, 1998,
interest expense for the three months ended March 31, 1998 would have been
$10,332, a decrease of $147, or 1.4%, as compared to the same period in Fiscal
1997.
<PAGE>
The weighted average balance of debt was $408,657 and $462,443 for the six
months ended March 31, 1997 and 1998, respectively, and the weighted average
interest rate on debt was 10.2% and 10.0% for the six months ended March 31,
1997 and 1998, respectively. The increased weighted average debt balance during
Fiscal 1998 was primarily due to carrying both the newly-issued 8 7/8% Notes and
the 11 1/2% Debentures from January 22, 1998 until the redemption of the 11 1/2%
Debentures on March 3, 1998 after the redemption notice period was completed.
Had the Company redeemed the 11 1/2% Debentures on January 22,1998, the
weighted average balance of debt would have been $427,300 for the six months
ended March 31, 1998.
Interest income of $1,420 for the three months ended March 31, 1998 increased
$801, or 129.4%, as compared to interest income of $619 for the three months
ended March 31, 1997. Interest income for the six months ended March 31, 1998
was $2,048, an increase of $818, or 66.5%, as compared to $1,230 for the
six-month period ended March 31, 1997. The increase in interest income for both
the three and six-month periods was due to interest earned from temporarily
investing the majority of the proceeds from the issuance of the 8 7/8% Notes for
the period from January 22, 1998 until March 3, 1998 at which time the Company
redeemed the 11 1/2% Debentures.
Income Taxes
For the three months ended March 31, 1998, the Company recorded a benefit from
income taxes of $984 as compared to a benefit of $1,561 for the three months
ended March 31, 1997, a decrease of 37.0%. The decrease was directly related to
the $3,359, or 54.3%, decrease in the Company's loss before income taxes and
extraordinary item as well as the effect of state level income tax
considerations in the prior fiscal year.
For the six months ended March 31, 1998, the Company recorded a provision for
income taxes of $2,133 as compared to a provision of $926 for the six months
ended March 31, 1997, an increase of 130.3%. The increase was directly related
to the $4,818 increase in the Company's income before income taxes and
extraordinary item from a loss of $501 for the six months ended March 31, 1997
as well as the effect of state level income tax considerations in the prior
fiscal year.
Income Before Extraordinary Item
For the three months ended March 31, 1998, the Company recorded a loss before
extraordinary item of $1,839, a $2,782, or 60.2%, improvement over the loss
before extraordinary item of $4,621 for the three months ended March 31, 1997.
For the six months ended March 31, 1998, the Company recorded income before
extraordinary item of $2,184 as compared to a loss before extraordinary item of
$1,427 for the comparable period in Fiscal 1997. The improved results for Fiscal
1998 as compared to Fiscal 1997 reflect the growth in operating revenues and
reduced operating expenses as discussed above.
Net Income
For the three and six months ended March 31, 1998, the Company recorded net
losses of $6,994 and $2,971, respectively, as compared to net losses of $4,621
and $1,427 for the three and six months ended March 31, 1997, respectively. The
net losses for the three and six-month periods ended March 31, 1998 reflect the
$5,155 extraordinary loss on early repayment of debt resulting primarily from
the payment of a call premium and write-off of remaining deferred financing
costs.
<PAGE>
Balance Sheet
Significant balance sheet fluctuations from September 30, 1997 to March 31, 1998
consisted of increased cash and cash equivalents and long-term debt, offset by
decreases in program rights and program rights payable. In addition,
distribution to owners increased as a result of net cash advances made during
the six months ended March 31, 1998. The increases in cash and cash equivalents
and long-term debt were the result of the Company's refinancing transaction in
January 1998, while the decreases in program rights and program rights payable
reflect the annual cycle of the underlying program contracts.
Liquidity and Capital Resources
As of March 31, 1998, the Company's cash and cash equivalents aggregated
$17,903, and the Company had an excess of current assets over current
liabilities of $28,089.
Cash Provided by Operations. The Company's principal source of working capital
is cash flow from operations and borrowings under its revolving credit facility.
Cash and cash equivalents increased $10,482 from September 30, 1997 to March 31,
1998, principally resulting from net cash provided by operations of $14,004
offset by net capital expenditures of $4,770.
Transactions with Owners. For the six months ended March 31, 1997 and 1998, the
Company made cash advances to owners, net of repayments and certain charges,
totaling $12,530 and $5,083, respectively. The Company periodically makes
advances in the form of distributions to its parent. At present, the primary
source of repayment of the net advances is through the ability of the Company to
pay dividends or make other distributions to its parent, and there is no
immediate intent for the advances to be repaid. Accordingly, these advances have
been treated as a reduction of Stockholder's Investment and described as
"distributions" in the Company's consolidated financial statements.
Stockholder's deficit amounted to $193,617 at March 31, 1998, an increase of
$8,054, or 4.3%, from the September 30, 1997 deficit of $185,563. The increase
was due to a net increase in distributions to owners of $5,083 and a net loss
for the period of $2,971.
Indebtedness. On January 22, 1998, the Company completed a $150,000 offering of
its 8 7/8% Senior Subordinated Notes due 2008. The cash proceeds of the
offering, net of offering expenses, of approximately $146,000 were used to
redeem the Company's 11 1/2% Debentures on March 3, 1998 with the balance used
to repay certain amounts outstanding under the Company's revolving credit
facility.
The Company's total debt, including the current portion of long-term debt,
increased from $415,722 at September 30, 1997 to $430,145 at March 31, 1998.
This debt, net of applicable discounts, consisted of $273,877 of 9 3/4%
Debentures, $150,000 of 8 7/8% Notes and $6,268 of capital lease obligations.
The increase of $14,423 in total debt from September 30, 1997 to March 31, 1998
was primarily due to the net increase of $27,000 in principal of the
newly-issued 8 7/8% Notes as compared to the 11 1/2% Debentures, offset by a
$12,700 decrease in amounts outstanding under the revolving credit facility. The
Company's revolving credit facility is secured by the pledge of stock of the
Company and its subsidiaries and matures April 16, 2001.
<PAGE>
Under the existing borrowing agreements, the Company is subject to restrictive
covenants that place limitations upon payments of cash dividends, issuance of
capital stock, investment transactions, incurrence of additional obligations and
transactions with affiliates. In addition, the Company must maintain specified
levels of operating cash flow and working capital and comply with other
financial covenants. As of March 31, 1998, the Company was in compliance
with these financial covenants.
Other Uses of Cash. The Company anticipates that capital expenditures for Fiscal
1998 will approximate $12,000, including approximately $3,000 to enable WJLA to
simultaneously broadcast its programming over its second channel authorized to
transmit a digital television signal. The amount may increase or decrease
depending upon changes in channel allocation or changes to the digital
television implementation strategy. Other Fiscal 1998 capital expenditures
include facility construction and technical equipment improvements across the
Company's television stations. Capital expenditures during the six months ended
March 31, 1998 totaled $4,770.
The Company anticipates that its existing cash position, together with cash
flows generated by operating activities and amounts available under its
revolving credit facility will be sufficient to finance the operating cash flow
requirements of its stations, debt service requirements and anticipated capital
expenditures.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
<PAGE>
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company currently and from time to time is involved in litigation incidental
to the conduct of its business. The Company is not currently a party to any
lawsuit or proceeding which, in the opinion of management, if decided adverse to
the Company, would be likely to have a materially adverse effect on the
Company's consolidated financial condition, results of operations or cash flows.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
See Exhibit Index on pages 14-16.
b. Reports on Form 8-K
No reports on Form 8-K were filed during the quarter.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALLBRITTON COMMUNICATIONS COMPANY
(Registrant)
May 13, 1998 /s/ Lawrence I. Hebert
Date Name: Lawrence I. Hebert
Title: Chairman and Chief Executive
Officer
May 13, 1998 /s/ Henry D. Morneault
Date Name: Henry D. Morneault
Title: Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit Page No.
- ----------- ---------------------- --------
3.1 Certificate of Incorporation of ACC. (Incorporated by reference to *
Exhibit 3.1 of Company's Registration Statement on Form S-4, No.
333-02302, dated March 12, 1996.)
3.2 Bylaws of ACC. (Incorporated by reference to Exhibit 3.2 of *
Registrant's Registration Statement on Form S-4, No.
333-02302, dated March 12, 1996.)
4.1 Indenture dated as of February 6, 1996 between ACC and State Street *
Bank and Trust Company, as Trustee, relating to the Debentures.
(Incorporated by reference to Exhibit 4.1 of Company's Registration
Statement on Form S-4, No. 333-02302, dated March 12, 1996.)
4.2 Indenture dated as of January 22, 1998 between ACC and State Street *
Bank and Trust Company, as Trustee, relating to the Notes.
(Incorporated by reference to Exhibit 4.1 of Company's Registration
Statement on Form S-4, No. 333-45933, dated February 9, 1998.)
4.3 Form of 9.75% Series B Senior Subordinated Debentures due 2007. *
(Incorporated by reference to Exhibit 4.3 of Company's Registration
Statement on Form S-4, No. 333-02302, dated March 12, 1996.)
4.4 Revolving Credit Agreement dated as of April 16, 1996 by and among *
Allbritton Communications Company certain Banks, and The First
National Bank of Boston, as agent. (Incorporated by reference to
Exhibit 4.4 of Company's Quarterly Report on Form 10-Q, No. 333-02302,
dated August 14, 1996.)
4.5 Modification No. 1 dated as of June 19, 1996 to Revolving Credit *
Agreement (Incorporated by reference to Exhibit 4.5 of Company's
Quarterly Report on Form 10-Q, No. 333-02302, dated May 15, 1997).
4.6 Modification No. 2 dated as of December 20, 1996 to Revolving Credit *
Agreement (Incorporated by reference to Exhibit 4.6 of Company's
Quarterly Report on Form 10-Q, No. 333-02302, dated May 15, 1997).
4.7 Modification No. 3 dated as of May 14, 1997 to Revolving Credit *
Agreement (Incorporated by reference to Exhibit 4.7 of Company's
Quarterly Report on Form 10-Q, No. 333-02302, dated May 15, 1997).
4.8 Modification No. 4 dated as of September 30, 1997 to Revolving Credit *
Agreement (Incorporated by reference to Exhibit 4.8 of Company's Form
10-K, No. 333-02302, dated December 22, 1997).
10.1 Network Affiliation Agreement (Harrisburg Television, Inc.). *
(Incorporated by reference to Exhibit 10.3 of Company's
Pre-effective Amendment No. 1 to Registration Statement on Form S-4,
dated April 22, 1996.)
10.2 Network Affiliation Agreement (First Charleston Corp.). (Incorporated *
by reference to Exhibit 10.4 of Company's Pre-effective Amendment
No. 1 to Registration Statement on Form S-4, dated April 22, 1996.)
10.3 Network Affiliation Agreement (WSET, Incorporated). (Incorporated by *
reference to Exhibit 10.5 of Company's Pre-effective Amendment No. 1
to Registration Statement on Form S-4, dated April 22, 1996.)
10.4 Network Affiliation Agreement (WJLA-TV). (Incorporated by reference to *
Exhibit 10.6 of Company's Pre-effective Amendment No. 1 to
Registration Statement on Form S-4, dated April 22, 1996.)
10.5 Network Affiliation Agreement (KATV Television, Inc.). (Incorporated *
by reference to Exhibit 10.7 of Company's Pre-effective Amendment
No. 1 to Registration Statement on Form S-4, dated April 22, 1996.)
10.6 Network Affiliation Agreement (KTUL Television, Inc.). (Incorporated *
by reference to Exhibit 10.8 of Company's Pre-effective Amendment
No. 1 to Registration Statement on Form S-4, dated April 22, 1996.)
10.7 Network Affiliation Agreement (TV Alabama, Inc.). (Incorporated by *
reference to Exhibit 10.9 of Company's Pre-effective Amendment No. 1
to Registration Statement on Form S-4, dated April 22, 1996.)
10.8 Tax Sharing Agreement effective as of September 30, 1991 by and among *
Perpetual Corporation, Inc., ACC and Allnewsco, Inc., as amended.
(Incorporated by reference to Exhibit 10.11 of Company's Registration
Statement on Form S-4, No. 333-02302, dated March 12, 1996.)
10.9 Time Brokerage Agreement dated as of December 21, 1995 by and between *
RKZ Television, Inc. and ACC. (Incorporated by reference to Exhibit
10.11 of Company's Registration Statement on Form S-4, No. 333-02302,
dated March 12, 1996.)
10.10 Option Agreement dated December 21, 1995 by and between ACC and RKZ *
Television, Inc. (Incorporated by reference to Exhibit 10.12 of
Company's Registration Statement on Form S-4, No. 333-02302, dated
March 12, 1996.)
10.11 Amendment dated May 2, 1996 by and among TV Alabama, Inc., RKZ *
Television, * Inc. and Osborn Communications Corporation to Option
Agreement dated December 21, 1995 by and between ACC and RKZ
Television, Inc. (Incorporated by reference to exhibit 10.13 of
Company's Form 10-K, No. 333-02302, dated December 30, 1996.)
10.12 Master Lease Finance Agreement dated as of August 10, 1994 between *
BancBoston Leasing, Inc. and ACC, as amended. (Incorporated by
reference to Exhibit 10.16 of Company's Registration Statement on Form
S-4, No. * 333-02302, dated March 12, 1996.)
10.13 Amendment to Network Affiliation Agreement (TV Alabama, Inc.) dated *
January * 23, 1997 (Incorporated by reference to Exhibit 10.15 to the
Company's Form 10-Q, No. 333-02302, dated February 14, 1997).
10.14 Pledge of Membership Interests Agreement dated as of September 30, *
1997 by and among ACC; KTUL, LLC; KATV, LLC; WCIV, LLC; and
BankBoston, N.A. as Agent (Incorporated by reference to Exhibit 10.16
of Company's Form 10-K, No. 333-02302, dated December 22, 1997).
27. Financial Data Schedule (Electronic Filing Only)
- ----------------
*Previously filed
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
ALLBRITTON COMMUNICATIONS COMPANY
FINANCIAL DATA SCHEDULE
IN ACCORDANCE WITH ITEM 601(C)
OR REGULATIONS S-K AND S-B
(In thousands)
This schedule contains summary financial information extracted from the
Consolidated Statement of Operations and Retained Earnings for the six months
ended March 31, 1998 and the Consolidated Balance Sheet as of March 31, 1998 and
is qualified in its entirety by reference to such consolidated financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 17,903
<SECURITIES> 0
<RECEIVABLES> 34,638
<ALLOWANCES> 1,840
<INVENTORY> 0
<CURRENT-ASSETS> 64,364
<PP&E> 134,837
<DEPRECIATION> 84,242
<TOTAL-ASSETS> 279,907
<CURRENT-LIABILITIES> 36,275
<BONDS> 423,877
<COMMON> 1
0
0
<OTHER-SE> (193,618)
<TOTAL-LIABILITY-AND-EQUITY> 279,907
<SALES> 0
<TOTAL-REVENUES> 90,393
<CGS> 0
<TOTAL-COSTS> 64,552
<OTHER-EXPENSES> 571
<LOSS-PROVISION> 288
<INTEREST-EXPENSE> 23,001
<INCOME-PRETAX> 4,317
<INCOME-TAX> 2,133
<INCOME-CONTINUING> 2,184
<DISCONTINUED> 0
<EXTRAORDINARY> 5,155
<CHANGES> 0
<NET-INCOME> (2,971)
<EPS-PRIMARY> 0
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