SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934
For the fiscal year ended September 30, 1999
OR
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to _______________
Commission File No. 333-02302
ALLBRITTON COMMUNICATIONS COMPANY
(Exact name of registrant as specified in its charter)
Delaware 74-1803105
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
808 Seventeenth Street, N.W., Suite 300
Washington, D.C. 20006-3903
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (202) 789-2130
Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark if the disclosure of delinquent filers pursuant to item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy of information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
[X]
Indicate by check mark whether this 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 [ ]
The aggregate market value of the registrant's Common Stock held by
non-affiliates is zero.
As of December 28, 1999, there were 20,000 shares of Common Stock, par value
$.05 per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
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AS USED HEREIN, UNLESS THE CONTEXT OTHERWISE REQUIRES, THE TERM "ACC" OR THE
"COMPANY" REFERS TO ALLBRITTON COMMUNICATIONS COMPANY. DEPENDING ON THE CONTEXT
IN WHICH THEY ARE USED, THE FOLLOWING "CALL LETTERS" REFER EITHER TO THE
CORPORATE OWNER OF THE STATION INDICATED OR TO THE STATION ITSELF: "WJLA" REFERS
TO WJLA-TV, A DIVISION OF ACC (OPERATOR OF WJLA-TV, WASHINGTON, D.C.); "WHTM"
REFERS TO HARRISBURG TELEVISION, INC. (LICENSEE OF WHTM-TV, HARRISBURG,
PENNSYLVANIA); "KATV" REFERS TO KATV, LLC (LICENSEE OF KATV, LITTLE ROCK,
ARKANSAS); "KTUL" REFERS TO KTUL, LLC (LICENSEE OF KTUL, TULSA, OKLAHOMA);
"WCIV" REFERS TO WCIV, LLC (LICENSEE OF WCIV, CHARLESTON, SOUTH CAROLINA);
"WSET" REFERS TO WSET, INCORPORATED (LICENSEE OF WSET-TV, LYNCHBURG, VIRGINIA);
"WCFT" REFERS TO WCFT-TV, TUSCALOOSA, ALABAMA; "WBMA" REFERS TO WBMA-LP,
BIRMINGHAM, ALABAMA; AND "WJSU" REFERS TO WJSU-TV, ANNISTON, ALABAMA). THE TERM
"ATP" REFERS TO ALLBRITTON TELEVISION PRODUCTIONS, INC., THE TERM "ANB" REFERS
TO ALLBRITTON NEWS BUREAU, INC. AND THE TERM "PERPETUAL" REFERS TO PERPETUAL
CORPORATION, WHICH IS CONTROLLED BY JOE L. ALLBRITTON, CHAIRMAN OF ACC. "AGI"
REFERS TO ALLBRITTON GROUP, INC., WHICH IS CONTROLLED BY PERPETUAL AND IS ACC'S
PARENT. "WESTFIELD" REFERS TO WESTFIELD NEWS ADVERTISER, INC., AN AFFILIATE OF
ACC THAT IS WHOLLY-OWNED BY JOE L. ALLBRITTON. "ALLFINCO" REFERS TO ALLFINCO,
INC., A WHOLLY-OWNED SUBSIDIARY OF ACC. "HARRISBURG TELEVISION" REFERS TO
HARRISBURG TELEVISION, INC., AN 80%-OWNED SUBSIDIARY OF ALLFINCO. "TV ALABAMA"
REFERS TO TV ALABAMA, INC., AN 80%-OWNED SUBSIDIARY OF ALLFINCO THAT PROGRAMS
WJSU AND OWNS WCFT AND WBMA. "ALLNEWSCO" REFERS TO ALLNEWSCO, INC., AN AFFILIATE
OF ACC THAT IS AN 80%-OWNED SUBSIDIARY OF PERPETUAL. "RLA TRUST" REFERS TO THE
ROBERT LEWIS ALLBRITTON 1984 TRUST FOR THE BENEFIT OF ROBERT L. ALLBRITTON,
PRESIDENT AND A DIRECTOR OF ACC, THAT OWNS 20% OF ALLNEWSCO. "RLA REVOCABLE
TRUST" REFERS TO THE TRUST OF THE SAME NAME THAT OWNS 20% OF EACH OF HARRISBURG
TELEVISION AND TV ALABAMA.
<PAGE>
TABLE OF CONTENTS
PAGE
Part I
Item 1. Business...........................................................1
Item 2. Properties........................................................15
Item 3. Legal Proceedings.................................................17
Item 4. Submission of Matters to a Vote of Security Holders...............17
Part II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters...............................17
Item 6. Selected Consolidated Financial Data..............................18
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................20
Item 7A. Quantitative and Qualitative Disclosures About Market Risk........36
Item 8. Consolidated Financial Statements and Supplementary Data..........36
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure....................36
Part III
Item 10. Directors and Executive Officers of the Registrant................37
Item 11. Executive Compensation............................................40
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................41
Item 13. Certain Relationships and Related Transactions....................42
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K...............................................45
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THIS ANNUAL REPORT ON FORM 10-K, INCLUDING ITEM 7 "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS," CONTAINS
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1994, AS AMENDED, THAT ARE NOT HISTORICAL FACTS AND INVOLVE A
NUMBER OF RISKS AND UNCERTAINTIES. THERE ARE A NUMBER OF FACTORS THAT COULD
CAUSE THE COMPANY'S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED IN
SUCH FORWARD-LOOKING STATEMENTS. THESE FACTORS INCLUDE, WITHOUT LIMITATION, THE
COMPANY'S OUTSTANDING INDEBTEDNESS AND ITS HIGH DEGREE OF LEVERAGE; THE
RESTRICTIONS IMPOSED ON THE COMPANY BY THE TERMS OF THE COMPANY'S INDEBTEDNESS;
THE HIGH DEGREE OF COMPETITION FROM BOTH OVER-THE-AIR BROADCAST STATIONS AND
PROGRAMMING ALTERNATIVES SUCH AS CABLE TELEVISION, WIRELESS CABLE, IN-HOME
SATELLITE DISTRIBUTION SERVICE AND PAY-PER-VIEW AND HOME VIDEO AND ENTERTAINMENT
SERVICES; THE IMPACT OF NEW TECHNOLOGIES; CHANGES IN FEDERAL COMMUNICATIONS
COMMISSION ("FCC") REGULATIONS; THE VARIABILITY OF THE COMPANY'S QUARTERLY
RESULTS AND THE COMPANY'S SEASONALITY; AND THE UNCERTAINTY ASSOCIATED WITH THE
IMPACT OF YEAR 2000 ISSUES ON THE COMPANY, ITS CUSTOMERS, ITS VENDORS AND OTHERS
WITH WHOM IT DOES BUSINESS.
ALL WRITTEN OR ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANY ARE
EXPRESSLY QUALIFIED BY THE FOREGOING CAUTIONARY STATEMENTS.
READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING
STATEMENTS WHICH REFLECT MANAGEMENT'S VIEW ONLY AS OF THE DATE HEREOF. THE
COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY RELEASE THE RESULT OF ANY REVISIONS
TO THESE FORWARD-LOOKING STATEMENTS WHICH MAY BE MADE TO REFLECT EVENTS OR
CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF
UNANTICIPATED EVENTS.
PART I
ITEM 1. BUSINESS
The Company
Allbritton Communications Company ("ACC" or the "Company") itself and through
subsidiaries owns and operates ABC network-affiliated television stations
serving seven diverse geographic markets: WJLA in Washington, D.C.; WCFT in
Tuscaloosa (Birmingham), Alabama; WHTM in Harrisburg, Pennsylvania; KATV in
Little Rock, Arkansas; KTUL in Tulsa, Oklahoma; WSET in Lynchburg, Virginia; and
WCIV in Charleston, South Carolina. The Company's owned and operated stations
broadcast to the 8th, 39th, 46th, 57th, 58th, 68th and 104th largest national
media markets in the United States, respectively, as defined by the A.C. Nielsen
Co. ("Nielsen"). The Company also owns a low power television station (WBMA)
licensed to Birmingham, Alabama and programs a station in Anniston (Birmingham),
Alabama.
WJLA is owned and operated by ACC, while the Company's remaining owned and
operated stations are owned by Harrisburg Television, Inc. (WHTM), KATV, LLC
(KATV), KTUL, LLC (KTUL), WSET, Incorporated (WSET), WCIV, LLC (WCIV) and TV
Alabama, Inc. (WCFT and WBMA). Each of these is a wholly-owned subsidiary of
ACC, except Harrisburg Television and TV Alabama, each of which is an indirect
80%-owned subsidiary of ACC. TV Alabama began
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programming WJSU, licensed to Anniston (Birmingham), Alabama, under a ten-year
Time Brokerage Agreement (referred to herein as a Local Marketing Agreement
("LMA")) effective December 29, 1995 (the "Anniston LMA"). TV Alabama exercised
its option to acquire WJSU on September 14, 1999 by entering into an asset
purchase agreement for the purchase of WJSU, subject to regulatory approval and
customary closing conditions. See "Owned and/or Programmed Stations -
WBMA/WCFT/WJSU: Birmingham (Anniston and Tuscaloosa, Alabama) ". The Company
also engages in other activities relating to the production and distribution of
television programming through Allbritton Television Productions, Inc. ("ATP"),
a wholly-owned subsidiary of ACC. ACC was founded in 1974 and is a subsidiary of
Allbritton Group, Inc. ("AGI"), which is controlled by Perpetual Corporation,
which in turn is controlled by Joe L. Allbritton, ACC's Chairman. ACC and its
subsidiaries are Delaware corporations or limited liability companies. ACC's
corporate headquarters is located at 808 Seventeenth Street, N.W., Suite 300,
Washington, D.C. 20006-3903, and its telephone number at that address is (202)
789-2130.
Television Industry Background
Commercial television broadcasting began in the United States on a regular basis
in the 1940s. Currently, there is a limited number of channels available for
broadcasting in any one geographic area, and the license to operate a broadcast
television station is granted by the FCC. Television stations that broadcast
over the VHF band (channels 2-13) of the spectrum generally have some
competitive advantage over television stations that broadcast over the UHF band
(channels 14-69) of the spectrum because VHF channels usually have better signal
coverage and operate at a lower transmission cost. However, the improvement of
UHF transmitters and receivers, the complete elimination from the marketplace of
VHF-only receivers and the expansion of cable television systems have reduced
the competitive advantage of television stations broadcasting over the VHF band.
Television station revenues are primarily derived from local, regional and
national advertising and, to a much lesser extent, from network compensation,
revenues from studio rental and commercial production activities. Advertising
rates are set based upon a variety of factors, including a program's popularity
among viewers whom an advertiser wishes to attract, the number of advertisers
competing for the available time, the size and demographic makeup of the market
served by the station and the availability of alternative advertising media in
the market area. Advertising rates are also determined by a station's overall
ability to attract viewers in its market area, as well as the station's ability
to attract viewers among particular demographic groups that an advertiser may be
targeting. Because broadcast television stations rely on advertising revenues,
they are sensitive to cyclical changes in the economy. The size of advertisers'
budgets, which are affected by broad economic trends, affect both the broadcast
industry in general and the revenues of individual broadcast television
stations.
United States television stations are grouped by Nielsen into 210 generally
recognized television market areas that are ranked in size according to various
formulae based upon actual or potential audience. Each market area is designated
as an exclusive geographic area consisting of all counties in which the
home-market commercial stations receive the greatest percentage of total viewing
hours. The specific geographic markets are called Designated Market Areas or
DMAs.
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Nielsen, which provides audience-measuring services, periodically publishes data
on estimated audiences for television stations in the various DMAs throughout
the country. These estimates are expressed in terms of both the percentage of
the total potential audience in the DMA viewing a station (the station's
"rating") and the percentage of the audience actually watching television (the
station's "share"). Nielsen provides such data on the basis of total television
households and selected demographic groupings in the DMA. Nielsen uses two
methods of determining a station's ratings and share. In larger DMAs, ratings
are determined by a combination of meters connected directly to selected
household television sets and weekly viewer-completed diaries of television
viewing, while in smaller markets ratings are determined by weekly diaries only.
Of the market areas in which the Company conducts business, Washington, D.C. and
Birmingham, Alabama are metered markets while the remaining markets are weekly
diary markets.
Historically, three major broadcast networks--ABC, NBC and CBS--dominated
broadcast television. In recent years, FOX has evolved into the fourth major
network, although the hours of network programming produced by FOX for its
affiliates are fewer than those produced by the other three major networks. In
addition, UPN, WB and recently PAX TV have been launched as new television
networks.
The affiliation by a station with one of the four major networks has a
significant impact on the composition of the station's programming, revenues,
expenses and operations. A typical affiliate station receives approximately 9 to
13 hours of each day's programming from the network. This programming, along
with cash payments ("network compensation"), is provided to the affiliate by the
network in exchange for a substantial majority of the advertising time sold
during the airing of network programs. The network then sells this advertising
time for its own account. The affiliate retains the revenues from time sold
during breaks in and between network programs and during programs produced by
the affiliate or purchased from non-network sources. In acquiring programming to
supplement network programming, network affiliates compete primarily with
affiliates of other networks and independent stations in their market areas.
Cable systems generally do not compete with local stations for programming,
although various national cable networks from time to time have acquired
programs that would have otherwise been offered to local television stations. In
addition, a television station may acquire programming through barter
arrangements. Under barter arrangements, which have become increasingly popular
with both network affiliates and independents, a national program distributor
can receive advertising time in exchange for the programming it supplies, with
the station paying no fee or a reduced fee for such programming.
An affiliate of UPN, WB or PAX TV receives a smaller portion of each day's
programming from its network compared to an affiliate of ABC, CBS, NBC or FOX.
As a result, affiliates of UPN, WB or PAX TV must purchase or produce a greater
amount of their programming, resulting in generally higher programming costs.
These stations, however, retain a larger portion of the inventory of advertising
time and the revenues obtained therefrom compared to stations affiliated with
the major networks, which may partially offset their higher programming costs.
In contrast to a network affiliated station, an independent station purchases or
produces all of the programming that it broadcasts, generally resulting in
higher programming costs, although the independent station is, in theory, able
to retain its entire inventory of advertising time and all of the
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revenue obtained from the sale of such time. Barter and cash-plus-barter
arrangements, however, have become increasingly popular among all stations.
Public broadcasting outlets in most communities compete with commercial
broadcasters for viewers but not for advertising dollars.
Broadcast television stations compete for advertising revenues primarily with
other broadcast television stations and, to a lesser extent, with radio
stations, cable system operators and programmers and newspapers serving the same
market. Traditional network programming, and recently FOX programming, generally
achieve higher audience levels than syndicated programs aired by independent
stations. However, as greater amounts of advertising time become available for
sale by independent stations and FOX affiliates in syndicated programs, those
stations typically achieve a share of the television market advertising revenues
greater than their share of the market area's audience.
Through the 1970s, network television broadcasting enjoyed virtual dominance in
viewership and television advertising revenues because network-affiliated
stations only competed with each other in local markets. Beginning in the 1980s,
this level of dominance began to change as the FCC authorized more local
stations and marketplace choices expanded with the growth of independent
stations and cable television services.
Cable television systems were first constructed in significant numbers in the
1970s and were initially used to retransmit broadcast television programming to
paying subscribers in areas with poor broadcast signal reception. In the
aggregate, cable-originated programming has emerged as a significant competitor
for viewers of broadcast television programming, although no single cable
programming network regularly attains audience levels amounting to more than a
small fraction of any of the major broadcast networks. The advertising share of
cable networks increased during the 1970s and 1980s as a result of the growth in
cable penetration (the percentage of television households that are connected to
a cable system). Notwithstanding such increases in cable viewership and
advertising, over-the-air broadcasting remains the dominant distribution system
for mass market television advertising.
Direct Broadcast Satellite ("DBS") service has recently been introduced as a new
competitive distribution method. Home users purchase or lease satellite dish
receiving equipment and subscribe to a monthly service of programming options.
Legislation was enacted in November 1999 that permits local stations, under
specified conditions, to be carried on satellite which will retransmit those
signals back to the originating market. At present, the nature of DBS service
includes primarily national programming and, except in limited circumstances,
does not offer locally originated programs or advertising. Initially, it is
expected that only affiliates of the four largest networks will be transmitted
locally in approximately the 25 largest DMAs. Of the Company's stations, only
WJLA is currently carried on DBS systems, transmitting to the Washington, D.C.
market.
The Company believes that the market shares of television stations affiliated
with ABC, NBC and CBS declined during the 1980s and 1990s because of the
emergence of FOX and certain strong
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independent stations and because of increased cable penetration. Independent
stations have emerged as viable competitors for television viewership share,
particularly as a result of the availability of first-run, network-quality and
regional sports programming. In addition, there has been substantial growth in
the number of home satellite dish receivers and video cassette recorders, which
has further expanded the number of programming alternatives available to
household audiences.
Terrestrially-distributed television broadcast stations use analog transmission
technology. Recent advances in digital transmission technology formats have
enabled some broadcasters to begin migration from analog to digital
broadcasting. Digital technologies provide cleaner video and audio signals as
well as the ability to transmit "high definition television" with theatre screen
aspect ratios, higher resolution video and "noise-free" sound. Digital
transmission also permits dividing the transmission frequency into multiple
discrete channels of standard definition television. The FCC has authorized a
transition plan to convert existing analog stations to digital by temporarily
offering a second channel to transmit programming digitally with the return of
the analog channel after the transition period. Of the Company's stations, only
WJLA in Washington, D.C. broadcasts with both an analog and digital signal at
this time.
Station Information
The following table sets forth general information for each of the Company's
owned and/or programmed stations as of November 1999:
<TABLE>
<CAPTION>
Total
Market Commercial Station Rank
Designated Network Channel Rank or Competitors Audience in Acquisition
Market Area Station Affiliation Frequency DMA (1) in Market(2) Share(3) Market(4) Date
----------- ------- ----------- --------- ------- ------------ -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Washington, D.C. (5) WJLA ABC 7/VHF 8 6 23% 2 01/29/76
Birmingham (Anniston and
Tuscaloosa), AL (7) WBMA/WCFT/WJSU ABC - 39 6 20% 3 -
Birmingham (5) (7) WBMA ABC 58/UHF - - - - 08/01/97
Anniston (8) WJSU ABC 40/UHF - - - - -
Tuscaloosa (5) WCFT ABC 33/UHF - - - - 03/15/96
Harrisburg-Lancaster-
York-Lebanon,PA (5) WHTM ABC 27/UHF 46 4 28% 2 03/01/96
Little Rock, AR (5) KATV ABC 7/VHF 57 5 36% 1 04/06/83
Tulsa, OK (5) KTUL ABC 8/VHF 58 6 33% 1 04/06/83
Roanoke-Lynchburg, VA (5) WSET ABC 13/VHF 68 4 25% 2 01/29/76 (6)
Charleston, SC (5) WCIV ABC 4/VHF 104 5 20% 3 01/29/76 (6)
- ---------
<FN>
(1) Represents market rank based on the Nielsen Station Index for November 1999.
(2) Represents the total number of commercial broadcast television stations
in the DMA with an audience share of at least 1% in the 6:00 a.m. to
2:00 a.m., Sunday through Saturday, time period.
(3) Represents the station's share of total viewing of commercial broadcast
television stations in the DMA for the time period of 6:00 a.m. to 2:00
a.m., Sunday through Saturday.
(4) Represents the station's rank in the DMA based on its share of total
viewing of commercial broadcast television stations in the DMA for the
time period of 6:00 a.m. to 2:00 a.m., Sunday through Saturday.
(5) Owned Station.
(6) WSET and WCIV have been indirectly owned and operated by Joe L.
Allbritton since 1976. On March 1, 1996, WSET and WCIV became
wholly-owned subsidiaries of ACC.
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(7) TV Alabama serves the Birmingham market by simultaneously broadcasting
identical programming over WBMA, WCFT and WJSU (which TV Alabama
programs pursuant to the Anniston LMA). The stations are listed on a
combined basis by Nielsen as WBMA, the call sign of the low power
television station.
(8) Programmed Station. The Company has entered into an asset purchase
agreement for the acquisition of WJSU. See "Owned and/or
Programmed Stations - WBMA/WCFT/WJSU: Birmingham (Anniston and
Tuscaloosa, Alabama)".
</FN>
</TABLE>
Business and Operating Strategy
The Company's business strategy is to focus on building net operating revenues
and net cash provided by operating activities. The Company intends to pursue
selective acquisition opportunities as they arise. The Company's acquisition
strategy is to target network-affiliated television stations where it believes
it can successfully apply its operating strategy and where such stations can be
acquired on attractive terms. Targets include midsized growth markets with what
the Company believes to be advantageous business climates. Although the Company
continues to review strategic investment and acquisition opportunities, no
agreements or understandings are currently in place regarding any material
investments or acquisitions except for the acquisition of WJSU.
In addition, the Company constantly seeks to enhance net operating revenues at a
marginal incremental cost through its use of existing personnel and programming
capabilities. For example, KATV operates the Arkansas Razorback Sports Network
("ARSN"), which provides University of Arkansas sports programming to a network
of 74 radio stations in four states and pay-per-view cable viewing to selected
Arkansas cable system viewers.
The Company's operating strategy focuses on four key elements:
Local News and Community Leadership. The Company's stations strive to be local
news leaders to exploit the revenue potential associated with local news
leadership. Since the acquisition of each station, the Company has focused on
building that station's local news programming franchise as the foundation for
building significant audience share. In each of its market areas, the Company
develops additional information-oriented programming designed to expand the
stations' hours of commercially valuable local news and other programming with
relatively small incremental increases in operating expenses. Local news
programming is commercially valuable because of its high viewership level, the
attractiveness to advertisers of the demographic characteristics of the typical
news audience (allowing stations to charge higher rates for advertising time)
and the enhanced ratings of other programming in time periods adjacent to the
news. In addition, management believes strong local news product has helped
differentiate local broadcast stations from the increasing number of cable
programming competitors that generally do not provide this material.
High Quality Non-Network Programming. The Company's stations are committed to
attracting viewers through an array of syndicated and locally-produced
programming to fill those periods of the broadcast day not programmed by the
network. This programming is selected by the Company on its ability to attract
audiences highly valued in terms of demographic makeup on a cost-effective
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basis and reflects a focused strategy to migrate and hold audiences from program
to program throughout dayparts. Audiences highly valued in terms of demographic
makeup include women aged 18-49 and all adults aged 25-54. These demographic
groups are perceived by advertisers as the groups with the majority of buying
authority and decision-making in product selection.
Local Sales Development Efforts. The Company believes that television stations
with a strong local presence and active community relations can realize
additional revenue from advertisers through the development and promotion of
special programming and marketing events. Each of the Company's stations has
developed such additional products, including high quality programming of local
interest (such as University of Arkansas football and basketball games) and
sponsored community events. These sponsored events have included health fairs,
contests, job fairs, parades and athletic events and have provided advertisers,
who are offered participation in such events, an opportunity to direct a
marketing program to targeted audiences. These additional products have proven
successful in attracting incremental advertising revenues. The stations also
seek to maximize their local sales efforts through the use of extensive research
and targeted demographic studies.
Cost Control. Management believes that controlling costs is an essential factor
in achieving and maintaining the profitability of its stations. The Company
believes that by delivering highly targeted audience levels and controlling
programming and operating costs, the Company's stations can achieve increased
levels of revenue and operating cash flow. Each station rigorously manages its
expenses through a budgetary control process and project accounting, which
includes an analysis of revenue by daypart. Moreover, each of the stations
closely monitors its staffing levels.
Owned and/or Programmed Stations
WJLA: Washington, D.C.
Acquired by the Company in 1976, WJLA is an ABC network affiliate pursuant to an
affiliation agreement that expires on October 1, 2005. The Station's FCC license
expires on October 1, 2004. Washington, D.C. is the eighth largest DMA, with
approximately 2,000,000 television households. The Company believes that
stations in this market generally earn higher advertising rates than stations in
smaller markets because many national advertising campaigns concentrate their
spending in the top ten media markets and on issue-oriented advertising in
Washington, D.C. The Washington, D.C. market is served by six commercial
television stations.
WBMA/WCFT/WJSU: Birmingham (Anniston and Tuscaloosa), Alabama
The Company acquired WCFT in March 1996 and commenced programming WJSU pursuant
to the Anniston LMA in December 1995. The LMA provides for the Company to supply
program services to WJSU and to retain all revenues from advertising sales. In
exchange, the Company pays all station operating expenses and certain management
fees to the station's owner. The Anniston LMA expires on December 29, 2005. The
ABC network affiliation is based upon carriage on both stations and expires on
September 1, 2006. The FCC licenses for both stations expire on April 1,
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2005. The Company also owns a low power television station licensed to
Birmingham, Alabama (WBMA). In October 1998, Nielsen collapsed the Tuscaloosa
DMA and the Anniston DMA into the Birmingham DMA creating the 39th largest DMA
with approximately 668,000 television households. The Birmingham DMA is served
by six commercial television stations.
In connection with the Anniston LMA, the Company entered into an option to
purchase the assets of WJSU (the "Anniston Option"). The cost of the Anniston
Option was $15,348,000 and it is exercisable for additional consideration of
$3,337,000. The Company exercised its option to acquire WJSU on September 14,
1999 by entering into an asset purchase agreement for the purchase of WJSU,
subject to regulatory approval and customary closing conditions. TV Alabama
applied to the FCC on November 16, 1999 for consent to the assignment of the
WJSU licenses to TV Alabama. Subject to FCC approval, the Company would expect
closing to occur in the second quarter of Fiscal 2000.
The Company serves the Birmingham market by simultaneously transmitting
identical programming from its studio in Birmingham over WCFT, WJSU and WBMA.
The stations are listed on a combined basis by Nielsen as WBMA. TV Alabama
maintains studio facilities in Birmingham for the operation of the stations. The
Company has retained a news and sales presence in both Tuscaloosa and Anniston,
while at the same time maintaining its primary news and sales presence in
Birmingham.
WHTM: Harrisburg-Lancaster-York-Lebanon, Pennsylvania
Acquired by the Company in 1996, WHTM is an ABC network affiliate pursuant to an
affiliation agreement that expires on January 1, 2005. The Station's FCC license
expires August 1, 2007. Harrisburg, Pennsylvania, which consists of nine
contiguous counties located in central Pennsylvania, is the 46th largest DMA,
reaching approximately 600,000 television households. Harrisburg is the capital
of Pennsylvania, and the government represents the area's largest employer. The
Harrisburg market is served by four commercial television stations, one of which
is a VHF station.
KATV: Little Rock, Arkansas
Acquired by the Company in 1983, KATV is an ABC network affiliate pursuant to an
affiliation agreement that expires on July 31, 2005. The Station's FCC license
expires on June 1, 2005. The Little Rock market is the 57th largest DMA, with
approximately 488,000 television households. The Little Rock market has a
diversified economy, both serving as the seat of state and local government and
housing a significant concentration of businesses. The Little Rock market is
served by five commercial television stations.
Capitalizing on its exclusive rights to the University of Arkansas basketball
and football schedules through the year 2003, KATV launched ARSN in Fiscal 1994
by entering into programming sublicense agreements with a network of 74 radio
stations in four states. Pay-per-view and home video rights are also controlled
by ARSN.
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KTUL: Tulsa, Oklahoma
Acquired by the Company in 1983, KTUL is an ABC network affiliate pursuant to an
affiliation agreement that expires on July 31, 2005. The Station's FCC license
expires on June 1, 2006. Tulsa, Oklahoma is the 58th largest DMA, with
approximately 483,000 television households. The Tulsa market is served by six
commercial television stations.
WSET: Roanoke-Lynchburg, Virginia
Acquired by the Company in 1996, WSET has been indirectly owned and operated by
Joe L. Allbritton since 1976. The Station is an ABC network affiliate pursuant
to an affiliation agreement that expires on July 31, 2005. WSET's FCC license
expires on October 1, 2004. The hyphenated central Virginia market comprised of
Lynchburg, Roanoke and Danville is the 68th largest DMA, with approximately
403,000 television households. The Lynchburg DMA is served by four commercial
television stations.
WCIV: Charleston, South Carolina
Acquired by the Company in 1996, WCIV has been indirectly owned and operated by
Joe L. Allbritton since 1976. The Station is an ABC affiliate pursuant to an
affiliation agreement that expires on August 20, 2006. WCIV's FCC license
expires on December 1, 2004. Charleston, South Carolina is the 104th largest
DMA, with approximately 243,000 television households. The Charleston DMA is
served by five commercial television stations.
Network Affiliation Agreements and Relationship
WJLA, WBMA/WCFT/WJSU, WHTM, KATV, KTUL, WSET and WCIV are ABC network
affiliates: their current affiliation agreements expire September 1, 2006,
January 1, 2005, October 1, 2005, July 31, 2005, July 31, 2005 and August 20,
2006, respectively. ABC has routinely renewed the affiliation agreements with
these stations; however, there can be no assurance that these affiliation
agreements will be renewed in the future. Continuation of the ABC's affiliation
agreement with WCFT and WJSU is conditional on WJSU's continuing to be
programmed by ACC for the duration of the affiliation agreement. As one of the
largest group owners of ABC network affiliates in the nation, ACC believes it
enjoys excellent relations with the ABC network.
Generally, each affiliation agreement provides the Company's stations with the
right to broadcast programs transmitted by the network that includes designated
advertising time the revenue from which the network retains. For every hour or
fraction thereof that the station elects to broadcast network programming, the
network pays the station compensation, as specified in each affiliation
agreement, or as agreed upon by the network and the stations. Typically,
prime-time programming generates the highest hourly rates. Under specified
conditions, rates are subject to increase or decrease by the network during the
term of each affiliation agreement, with provisions for advance notice and right
of termination on behalf of the station in the event of a reduction in rates.
-9-
<PAGE>
Effective August 11, 1999, the Company's network affiliation agreements with ABC
were amended. Under the amendments, ABC will, during the next three years,
provide the Company's stations with additional prime-time inventory, limited
participation rights in a new cable television "soap" channel, and enhanced
program exclusivity and commercial inventory guarantees in exchange for reduced
annual network compensation, the return of certain Saturday morning inventory
from the stations, and more flexibility in repurposing of ABC programming.
Competition
Competition in the television industry, including each of the market areas in
which the Company's stations compete, takes place on several levels: competition
for audience, competition for programming (including news) and competition for
advertisers. Additional factors material to a television station's competitive
position include signal coverage and assigned frequency. The television
broadcasting industry is continually faced with technological change and
innovation, the possible rise or fall in popularity of competing entertainment
and communications media and actions of federal regulatory bodies, including the
FCC, any of which could possibly have a material adverse effect on the Company's
operations.
Audience: Stations compete for audience on the basis of program popularity,
which has a direct effect on advertising rates. A majority of the Company's
daily programming is supplied by ABC. In those periods, the stations are totally
dependent upon the performance of the ABC network programs in attracting
viewers. Non-network time periods are programmed by the station with a
combination of self-produced news, public affairs and other entertainment
programming, including news and syndicated programs purchased for cash, cash and
barter or barter-only. Independent stations, the number of which has increased
significantly over the past decade, have also emerged as viable competitors for
television viewership share, particularly as the result of the availability of
first-run network-quality programming from FOX.
The development of methods of television transmission other than over-the-air
broadcasting and, in particular, the growth of cable television has
significantly altered competition for audience share in the television industry.
These alternative transmission methods can increase competition for a
broadcasting station both by bringing into its market area distant broadcasting
signals not otherwise available to the station's audience and by serving as a
distribution system for programming originated on the cable system.
Historically, cable operators have not sought to compete with broadcast stations
for a share of the local news audience. To the extent cable operators elect to
do so, increased competition for local news audiences could have an adverse
effect on the Company's advertising revenues.
Other sources of competition include home entertainment systems (including video
cassette recorder and playback systems, videodiscs and television game devices),
multipoint distribution systems, multichannel multipoint distribution systems,
wireless cable, satellite master antenna television systems and some low-power
and in-home satellite services. The Company's television stations also face
competition from high-powered direct broadcast satellite services, such as
-10-
<PAGE>
DirecTV and Echostar, which transmit programming directly to homes equipped with
special receiving antennas or to cable television systems for transmission to
their subscribers.
Further advances in technology may increase competition for household audiences
and advertisers. Video compression techniques, now under development for use
with current cable channels, internet-relayed video and direct broadcast
satellites are expected to reduce the bandwidth required for television signal
transmission. These compression techniques, as well as other technological
developments, are applicable to all video delivery systems, including
over-the-air broadcasting, and have the potential to provide vastly expanded
programming to highly targeted audiences. Reduction in the cost of creating
additional channel capacity could lower entry barriers for new channels and
encourage the development of increasingly specialized niche programming. This
ability to reach very defined audiences is expected to alter the competitive
dynamics for advertising expenditures. The Company is unable to predict the
effect that technological changes will have on the broadcast television industry
or the future results of the Company's operations.
Programming: Competition for programming involves negotiating with national
program distributors or syndicators which sell first-run and rerun packages of
programming. The Company's stations compete against in-market broadcast station
competitors for off-network reruns (such as "Home Improvement") and first-run
product (such as "The Oprah Winfrey Show") for exclusive access to those
programs. Cable systems generally do not compete with local stations for
programming, although various national cable networks from time to time have
acquired programs that would have otherwise been offered to local television
stations. Competition for exclusive news stories and features is also endemic to
the television industry.
Advertising: Advertising rates are based upon the size of the market area in
which a station operates, the program's popularity among the viewers an
advertiser wishes to attract, the number of advertisers competing for the
available time, the demographic makeup of the market area served by the station,
the availability of alternative advertising media in the market area, an
aggressive and knowledgeable sales force and the development of projects,
features and programs that tie advertiser messages to programming. The Company's
television stations compete for advertising revenues with other television
stations in their respective markets as well as with other advertising media,
such as newspapers, radio, magazines, outdoor advertising, transit advertising,
yellow page directories, direct mail and local cable systems. Competition for
advertising dollars in the broadcasting industry occurs primarily in individual
market areas. Generally, a television broadcasting station in the market does
not compete with stations in other market areas. The Company's television
stations are located in highly competitive market areas.
Legislation and Regulation
The ownership, operation and sale of television stations are subject to the
jurisdiction of the FCC under the Communications Act of 1934 (the
"Communications Act"). Matters subject to FCC oversight include, but are not
limited to, the assignment of frequency bands for broadcast television; the
approval of a television station's frequency, location and operating power; the
issuance, renewal, revocation or modification of a television station's FCC
license; the approval of changes in the ownership or control of a television
station's licensee; the regulation of equipment
-11-
<PAGE>
used by television stations and the adoption and implementation of regulations
and policies concerning the ownership, operation, programming and employment
practices of television stations. The FCC has the power to impose penalties,
including fines or license revocations, upon a licensee of a television station
for violations of the FCC's rules and regulations.
The following is a brief summary of certain provisions of the Communications Act
and of specific FCC regulations and policies affecting broadcast television.
Reference should be made to the Communications Act, FCC rules and the public
notices and rulings of the FCC for further information concerning the nature and
extent of FCC regulation of broadcast television stations.
License Renewal: Broadcast television licenses are generally granted for maximum
terms of eight years. License terms are subject to renewal upon application to
the FCC, but they may be renewed for a shorter period upon a finding by the FCC
that the "public interest, convenience and necessity" would be served thereby.
Under the Telecommunications Act of 1996 (the "Telecommunications Act"), the FCC
must grant a renewal application if it finds that the station has served the
public interest, there have been no serious violations of the Communications Act
or FCC rules, and there have been no other violations of the Communications Act
or FCC rules by the licensee that, taken together, would constitute a pattern of
abuse. If the licensee fails to meet these requirements, the FCC may either deny
the license or grant it on terms and conditions as are appropriate after notice
and opportunity for hearing.
In the vast majority of cases, television broadcast licenses are renewed by the
FCC even when petitions to deny or competing applications are filed against
broadcast license renewal applications. However, there can be no assurance that
each of the Company's broadcast licenses will be renewed in the future. All of
the stations' existing licenses were renewed for full terms and are currently in
effect.
Programming and Operation: The Communications Act requires broadcasters to serve
the "public interest." Since the late 1970s, the FCC gradually has relaxed or
eliminated many of the more formalized procedures it had developed to promote
the broadcast of certain types of programming responsive to the needs of a
station's community of license. However, broadcast station licensees must
continue to present programming that is responsive to local community problems,
needs and interests and to maintain certain records demonstrating such
responsiveness. Complaints from viewers concerning a station's programming often
will be considered by the FCC when it evaluates license renewal applications,
although such complaints may be filed at any time and generally may be
considered by the FCC at any time. Stations also must follow various FCC rules
that regulate, among other things, political advertising, sponsorship
identifications, the advertisements of contests and lotteries, obscene and
indecent broadcasts and technical operations, including limits on radio
frequency radiation. The FCC also has adopted rules that place additional
obligations on television station operators for maximum amounts of advertising
and minimum amounts of programming specifically targeted for children, as well
as additional public information and reporting requirements.
Digital Television: The FCC has adopted rules for implementing digital
(including high-definition) television ("DTV") service in the United States.
Implementation of DTV is intended to improve the
-12-
<PAGE>
technical quality of television. Under certain circumstances, however,
conversion to DTV operations may reduce a station's geographical coverage area.
The FCC has allotted a second broadcast channel to each full-power commercial
television station for DTV operation. Under the FCC's rules, stations will be
required to phase-in their DTV operations on the second channel over a
transition period and to surrender their non-DTV channel later. Implementation
of advanced television service may impose additional costs on television
stations providing the new service, due to increased equipment costs, and may
affect the competitive nature of the market areas in which the Company operates
if competing stations adopt and implement the new technology before the
Company's stations. The FCC has adopted standards for the transmission of
advanced television signals. These standards will serve as the basis for the
phased conversion to digital transmission. Of the Company's stations, only WJLA
in Washington, D.C. currently operates a DTV channel in concert with its analog
signal. While each of the Company's other stations has filed its application
with the FCC for the second DTV channel, there are currently no DTV operations
in the markets of these stations.
Ownership Matters: The Communications Act contains a number of restrictions on
the ownership and control of broadcast licenses. Together with the FCC's rules,
it places limitations on alien ownership; common ownership of broadcast, cable
and newspaper properties; and ownership by those persons not having the
requisite "character" qualifications and those persons holding "attributable"
interests in the license.
The FCC's television national multiple ownership rules limit the audience reach
of television stations in which any entity may hold an attributable interest to
35 percent of total United States audience reach. The FCC's local television
multiple ownership rule, the "Duopoly" rule, was revised in September 1999 and
now generally permits ownership of attributable interests by a single entity in
no more than two television stations which serve the same DMA unless both
stations are among the top four rated in the market or there are fewer than
eight, full power, independently owned television stations remaining in the
market.
The FCC generally applies its ownership limits to "attributable" interests held
by an individual, corporation, partnership or other association. When applying
its multiple ownership or cross-ownership rules, the FCC generally attributes
the interests of corporate licensees to the holders of corporate interests as
follows: (i) any voting interest amounting to five percent or more of the
outstanding voting power of the corporate broadcast licensee generally will be
attributable; (ii) in general, no minority voting stock interests will be
attributable if there is a single holder of more than fifty percent of the
outstanding voting power of a corporate broadcast licensee; (iii) in general,
certain investment companies, insurance companies and banks holding stock
through their trust departments in trust accounts will be considered to have an
attributable interest only if they hold twenty percent or more of the
outstanding voting power of a corporate broadcast licensee; and (iv) certain
local media competitors (including broadcasters, cable operators and newspapers)
and programmers that supply more than 15 percent of a station's weekly broadcast
hours will also be attributed with ownership of the station if that entity also
has a combination of debt and equity holdings of the station exceeding 33
percent of the total asset value of the station. Furthermore, corporate officers
and directors and general partners and uninsulated limited partners of
partnerships are personally attributed with the media interests of the
corporations or partnerships of
-13-
<PAGE>
which they are officers, directors or partners. In the case of corporations
controlling broadcast licenses through one or more intermediate entities,
similar attribution standards generally apply to stockholders, officers and
directors of such corporations.
In light of the FCC's multiple ownership and cross-ownership rules, an
individual or entity that acquires an attributable interest in the Company may
violate the FCC's rules if that acquirer also has an attributable interest in
other television or radio stations, or in cable television systems or daily
newspapers, depending on the number and location of those radio or television
stations, cable television systems or daily newspapers. Such an acquirer also
may be restricted in the companies in which it may invest, to the extent that
those investments give rise to an attributable interest. If an individual or
entity with an attributable interest in the Company violates any of these
ownership rules, the Company may be unable to obtain from the FCC the
authorizations needed to conduct its television station business, may be unable
to obtain FCC consents for certain future acquisitions, may be unable to obtain
renewals of its licenses and may be subject to other material adverse
consequences.
Additional Competition in the Video Services Industry: The Telecommunications
Act also eliminates the overall ban on telephone companies offering video
services and permits the ownership of cable television companies by telephone
companies in their service areas (or vice versa) in certain circumstances.
Telephone companies providing such video services will be regulated according to
the transmission technology they use. The Telecommunications Act also permits
telephone companies to hold an ownership interest in the programming carried
over such systems. Although the Company cannot predict the effect of the removal
of these barriers to telephone company participation in the video services
industry, it may have the effect of increasing competition in the television
broadcast industry in which the Company operates.
Other Legislation: Finally, Congress and the FCC have under consideration, and
in the future may consider and adopt, (i) other changes to existing laws,
regulations and policies or (ii) new laws, regulations and policies regarding a
wide variety of matters that could affect, directly or indirectly, the
operation, ownership and profitability of the Company's broadcast stations,
result in the loss or gain of audience share and advertising revenues for the
Company's stations and/or affect the ability of the Company to acquire or
finance additional broadcast stations.
Employees
As of September 30, 1999, the Company employed in full and part-time positions
890 persons, including 189 at WJLA, 136 at KATV, 127 at KTUL, 108 at WHTM, 125
at WBMA/WCFT/WJSU, 108 at WSET, 84 at WCIV and 13 in its corporate office. Of
the employees at WJLA, 95 are represented by three unions: the American
Federation of Television and Radio Artists ("AFTRA"), the Directors Guild of
America ("DGA") or the National Association of Broadcast Employees and
Technicians/Communications Workers of America ("NABET/CWA"). The AFTRA
collective bargaining agreement expired September 30, 1999; however, the parties
have agreed, pending negotiation of a successor collective bargaining agreement,
to extend the existing agreement to January 31, 2000. The DGA collective
bargaining agreement was renegotiated effective July 16, 1996 through January
16, 2000. The NABET/CWA
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<PAGE>
collective bargaining agreement expired June 1, 1995. Members of this union have
been working under a contract implemented by WJLA after impasse in its
negotiations, effective February 1, 1999. No employees of the Company's other
owned and/or programmed stations are represented by unions. The Company believes
its relations with its employees are satisfactory.
ITEM 2. PROPERTIES
The Company maintains its corporate headquarters in Washington, D.C., occupying
leased office space of approximately 9,300 square feet.
The types of properties required to support each of the stations include
offices, studios, transmitter sites and antenna sites. The stations' studios are
co-located with their office space while transmitter sites and antenna sites are
generally located away from the studios in locations determined to provide
maximum market signal coverage.
The following table describes the general characteristics of the Company's
principal real property:
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<PAGE>
<TABLE>
<CAPTION>
Approximate Lease Expiration
Facility Market/Use Ownership Size Date
<S> <C> <C> <C> <C>
WJLA Washington, D.C.
Office/Studio Leased 88,828 sq. ft. 11/31/03
Tower/Transmitter Joint Venture 108,000 sq. ft. N/A
WHTM Harrisburg, PA
Office/Studio Owned 14,000 sq. ft. N/A
Tower/Transmitter Owned 2,801 sq. ft. N/A
Adjacent Land Leased 6,808 sq. ft. 10/31/00
KATV Little Rock, AR
Office/Studio Owned 20,500 sq. ft. N/A
Tower/Transmitter Owned 188 Acres N/A
Annex/Garage Owned 67,400 sq. ft. N/A
KTUL Tulsa, OK
Office/Studio Owned 13,520 sq. ft. N/A
Tower/Transmitter Owned 160 acres N/A
Tower Leased 1 acre 5/30/05
WSET Lynchburg, VA
Office/Studio Owned 15,500 sq. ft. N/A
Tower/Transmitter Owned 2,700 sq. ft. N/A
WCIV Mt. Pleasant, SC
Office/Studio Owned 21,700 sq. ft. N/A
Tower/Transmitter Leased 2,000 sq. ft. 8/31/06
WCFT/WJSU (1) Birmingham, AL
Office/Studio Leased 26,357 sq.ft 9/30/06
Satellite Dish Farm Leased 0.5 acres 9/30/06
Tower/Relay-Pelham Leased .08 acres 10/31/01
Tower/Relay-Red Mtn. Owned .21 acres N/A
Tuscaloosa, AL
Office/Studio Owned 9,475 sq. ft. N/A
Tower-Tuscaloosa Owned 10.5 acres N/A
Tower-AmSouth Leased 134.3 acres 4/30/06
Anniston, AL (2)
Office/Studio Leased 7,273 sq. ft. 6 months notice
Tower-Blue Mtn. Owned 1.7 acres N/A
Gadsden Office Leased 1,000 sq. ft. Monthly
Tower-Bald Rock Leased 1 acre 8/29/16
- ----------
<FN>
(1) TV Alabama uses the pre-existing facilities of WCFT and WJSU to operate
news and sales bureaus in the Tuscaloosa and Anniston market areas.
(2) Although TV Alabama is currently operating these properties under the
Anniston LMA, Flagship is the owner and lessee; however, TV Alabama has
entered into an asset purchase agreement for the acquisition of WJSU
including these properties. See " Business - Owned and/or Programmed
Stations - WBMA/WCFT/WJSU:
Birmingham (Anniston and Tuscaloosa, Alabama)".
</FN>
</TABLE>
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<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Company currently and from time to time is involved in litigation incidental
to the conduct of its business, including suits based on defamation. 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
material adverse effect on the Company's consolidated financial condition,
results of operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS
Not Applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Not Applicable.
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<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands)
The selected consolidated financial data below should be read in conjunction
with the Company's Consolidated Financial Statements and notes thereto included
elsewhere in this Report. The selected consolidated financial data for the
fiscal years ended September 30, 1995, 1996, 1997, 1998 and 1999 are derived
from the Company's audited Consolidated Financial Statements.
<TABLE>
<CAPTION>
Fiscal Year Ended September 30,
-------------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Statement of Operations Data (1):
Operating revenues, net $138,151 $155,573 $172,828 $182,484 $187,288
Television operating expenses,
excluding depreciation and
amortization 75,199 92,320 105,630 106,147 109,549
Depreciation and amortization 4,752 10,257 19,652 18,922 17,471
Corporate expenses 3,753 5,112 4,382 4,568 4,339
Operating income 54,447 47,884 43,164 52,847 55,929
Interest expense 22,708 35,222 42,870 44,340 42,154
Interest income 2,338 3,244 2,433 3,339 2,760
Income before extraordinary
items 19,909 8,293 424 5,746 8,628
Extraordinary loss (2) -- (7,750) -- (5,155) --
Net income 19,909 543 424 591 8,628
As of September 30,
-------------------
1995 1996 1997 1998 1999
----- ---- ----- ---- ----
Balance Sheet Data (1):
Total assets $99,605 $281,778 $280,977 $279,521 $275,868
Total debt (3) 198,919 402,993 415,722 429,691 429,629
Redeemable preferred stock (4) 168 -- -- -- --
Stockholder's investment (133,879) (172,392) (185,563) (203,776) (211,347)
Fiscal Year Ended September 30,
-------------------------------
1995 1996 1997 1998 1999
----- ---- ----- ---- ----
Cash Flow Data (1) (5):
Cash flow from operating
activities $22,145 $28,370 $15,551 $28,022 $28,302
Cash flow from investing activities (2,543) (165,109) (17,363) (8,190) (9,809)
Cash flow from financing activities (18,549) 145,031 (2,875) (13,404) (17,905)
Fiscal Year Ended September 30,
-------------------------------
1995 1996 1997 1998 1999
----- ---- ----- ---- ----
Financial Ratios and Other Data (1):
Operating Cash Flow (6) $59,199 $58,141 $62,816 $71,769 $73,400
Operating Cash Flow Margin (7) 42.9% 37.4% 36.3% 39.3% 39.2%
Capital expenditures 2,777 20,838 12,140 8,557 9,849
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<PAGE>
<FN>
(1) The consolidated statement of operations data, balance sheet data, cash
flow data and financial ratios and other data as of and for the year
ended September 30, 1996 include the effects of significant
transactions consummated by the Company during the year that impact the
comparability of Fiscal 1996 data to the previous year. Such
transactions include the effects of a $275,000 offering of 9.75% Senior
Subordinated Debentures due 2007, the asset acquisitions of WHTM and
WCFT, the acquisition of the Anniston LMA and Anniston Option, the
early repayment of approximately $74,704 in debt and payment of a
prepayment penalty on such debt of $12,934. In addition, the
comparability of Fiscal 1997, 1998 and 1999 data to Fiscal 1996 data is
impacted by the fact that that the results of operations of WHTM, WCFT
and WJSU are included for the full year in Fiscal 1997, 1998 and 1999
as compared to the period from the date of acquisition and the
effective date of the Anniston LMA in Fiscal 1996.
(2) The extraordinary losses during Fiscal 1996 and Fiscal 1998 resulted
from the early repayment of long-term debt (see Note 5 of Notes to
Consolidated Financial Statements).
(3) Total debt is defined as long-term debt (including the current portion
thereof, and net of discount), short-term debt and capital lease
obligations.
(4) In September 1996, the Company purchased for cash the Series A
redeemable preferred stock at its redemption value of $168.
(5) Cash flows from operating, investing and financing activities were
determined in accordance with generally accepted accounting principles.
See Consolidated Financial Statements-Consolidated Statements of Cash
Flows.
(6) "Operating Cash Flow" is defined as operating income plus depreciation
and amortization. Programming expenses are included in television
operating expenses. The Company has included Operating Cash Flow data
because it understands that such data are used by investors to measure
a company's ability to fund its operations and service debt. Operating
Cash Flow does not purport to represent cash flows from operating
activities determined in accordance with generally accepted accounting
principles as reflected in the Consolidated Financial Statements, is
not a measure of financial performance under generally accepted
accounting principles, should not be considered in isolation or as a
substitute for net income or cash flows from operating activities and
may not be comparable to similar measures reported by other companies.
(7) "Operating Cash Flow Margin" is defined as Operating Cash Flow as a
percentage of operating revenues, net.
</FN>
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands)
General Factors Affecting the Company's Business
The Company owns and/or programs ABC network-affiliated television stations
serving seven diverse geographic markets: WJLA in Washington, D.C.; WHTM in
Harrisburg, Pennsylvania; KATV in Little Rock, Arkansas; KTUL in Tulsa,
Oklahoma; WSET in Lynchburg, Virginia; WCIV in Charleston, South Carolina; and
WCFT in Tuscaloosa, Alabama (west of Birmingham, Alabama). The Company also
programs the ABC network affiliate WJSU in Anniston, Alabama (east of
Birmingham, Alabama) under the Anniston LMA, and owns a low power television
station licensed to Birmingham, Alabama (WBMA). The Company operates WCFT and
programs WJSU in tandem with WBMA serving the viewers of Birmingham, Tuscaloosa
and Anniston. Under the Anniston LMA, the operating revenues and expenses of
WJSU are included in the Company's consolidated financial statements. The
Company has entered into an asset purchase agreement for the acquisition of
WJSU. See " Business - Owned and/or Programmed Stations - WBMA/WCFT/WJSU:
Birmingham (Anniston and Tuscaloosa, Alabama) ".
The operating revenues of the Company are derived from local and national
advertisers and, to a much lesser extent, from the networks and program
syndicators for the broadcast of programming and from commercial production and
tower rental activities. The primary operating expenses involved in owning and
operating television stations are employee compensation, programming, news
gathering, production, promotion and the solicitation of advertising.
Television stations receive revenues for advertising sold for placement within
and adjoining locally originated programming and adjoining their network
programming. Advertising is sold in time increments and is priced primarily on
the basis of a program's popularity among the specific audience an advertiser
desires to reach, as measured principally by quarterly audience surveys. In
addition, advertising rates are affected by the number of advertisers competing
for the available time, the size and demographic makeup of the market areas
served and the availability of alternative advertising media in the market
areas. Rates are highest during the most desirable viewing hours (generally
during local news programming and prime time), with corresponding reductions
during other hours.
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 fluctuation
in operating results depending on which television network is carrying Olympic
coverage.
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<PAGE>
The broadcast television industry is cyclical in nature, being affected by
prevailing economic conditions. Because the Company relies on sales of
advertising time for substantially all of its revenues, its operating results
are sensitive to general economic conditions and regional conditions in each of
the local market areas in which the Company's stations operate. For Fiscal 1997,
1998 and 1999, WJLA accounted for approximately one-half of the Company's total
revenues. As a result, the Company's results of operations are highly dependent
on WJLA and, in turn, the Washington, D.C. economy and, to a lesser extent, on
each of the other local economies in which the Company's stations operate. The
Company is also dependent on automotive-related advertising. Approximately 26%,
25% and 25% of the Company's total broadcast revenues for the years ended
September 30, 1997, 1998 and 1999, respectively, consisted of automotive-related
advertising. A significant decrease in such advertising could materially and
adversely affect the Company's operating results.
Operating Revenues
The following table depicts the principal types of operating revenues, net of
agency commissions, earned by the Company for each of the last three fiscal
years and the percentage contribution of each to the total broadcast revenues of
the Company, before fees.
<TABLE>
<CAPTION>
Fiscal Year Ended September 30,
-------------------------------
1997 1998 1999
---- ---- ----
Dollars Percent Dollars Percent Dollars Percent
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Local/regional (1) $ 85,954 48.1% $ 92,398 49.0% $ 94,393 48.8%
National (2) 71,324 40.0% 75,530 40.0% 77,077 39.9%
Network compensation (3) 6,223 3.5% 6,237 3.3% 5,668 2.9%
Political (4) 4,273 2.4% 3,291 1.8% 4,191 2.2%
Trade and barter (5) 7,868 4.4% 8,192 4.3% 8,181 4.2%
Other revenues (6) 3,002 1.6% 3,065 1.6% 3,844 2.1%
------- ------ ------- ------ ------- ------
Broadcast revenues 178,644 100.0% 188,713 100.0% 193,354 100.0%
====== ====== ======
Fees (7) (6,068) (6,202) (6,101)
------- ------- -------
Broadcast revenue,
net of fees 172,576 182,511 187,253
Non-broadcast revenue (8) 252 (27) 35
------- ------- -------
Total net operating revenues $172,828 $182,484 $187,288
======= ======= =======
- ----------
<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>
-21-
<PAGE>
Local/regional and national advertising constitute the Company's largest
categories of operating revenues, collectively representing almost 90% of the
Company's total broadcast revenues in each of the last three fiscal years.
Although the total percentage contribution of local/regional and national
advertising has been relatively constant over such period, the growth rate of
local/regional and national advertising revenues varies annually based upon the
demand and rates for local/regional advertising time versus national advertising
time in each of the Company's markets. Local/regional advertising revenues
increased 11.3%, 7.5% and 2.2% in Fiscal 1997, 1998 and 1999, respectively; and
national advertising revenues increased 11.0%, 5.9% and 2.0% during the same
respective periods. Each other individual category of revenues represented less
than 5.0% of the Company's total revenues for each of the last three fiscal
years.
Results of Operations - Fiscal 1999 Compared to Fiscal 1998
As compared to Fiscal 1998, the Company's results of operations for Fiscal 1999
principally reflect continued audience and market share gains in the Birmingham
market, increased demand by advertisers in the Little Rock market and increased
political advertising revenues in a majority of the Company's markets. The
comparative results are also impacted by the effect of the Company's $150,000
offering of its 8.875% Senior Subordinated Notes due 2008 (the " 8.875% Notes")
during the second quarter of Fiscal 1998. The cash proceeds of the offering, net
of offering expenses, of approximately $146,000 were used to redeem the
Company's 11.5% Senior Subordinated Debentures due 2004 (the " 11.5%
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 11.5% Debentures resulting primarily from the payment of a
call premium and write-off of remaining deferred financing costs.
Set forth below are selected consolidated financial data for Fiscal 1998 and
1999, respectively, and the percentage change between the years.
<TABLE>
<CAPTION>
Fiscal Year Ended September 30,
-------------------------------
Percentage
1998 1999 Change
---- ---- ------
<S> <C> <C> <C>
Operating revenues, net $182,484 $187,288 2.6%
Total operating expenses 129,637 131,359 1.3%
------- -------
Operating income 52,847 55,929 5.8%
Nonoperating expenses, net 41,514 40,584 (2.2)%
Income tax provision 5,587 6,717 20.2%
------- -------
Income before extraordinary loss 5,746 8,628 50.2%
Extraordinary loss, net of income
tax benefit (5,155) -- (100.0)%
------- -------
Net income $ 591 $ 8,628 1,359.9%
======= =======
Operating cash flow $ 71,769 $ 73,400 2.3%
======= =======
</TABLE>
-22-
<PAGE>
Net Operating Revenues
Net operating revenues for Fiscal 1999 totaled $187,288, an increase of $4,804,
or 2.6%, as compared to Fiscal 1998. This increase resulted principally from
increased local/regional and national advertising revenue in the Company's
Birmingham and Little Rock markets, increased political advertising demand in a
majority of the Company's markets and increased revenue related to University of
Arkansas sports programming in Little Rock. The revenue growth in Birmingham was
achieved through continued audience and market share gains.
Local/regional advertising revenues increased $1,995, or 2.2%, over Fiscal 1998.
The increase was primarily attributable to market share gains in Birmingham as
well as an improvement in the Harrisburg and Little Rock local/regional
advertising markets, partially offset by a weakening in the Washington, D.C.
market for local/regional advertisers.
National advertising revenues increased $1,547, or 2.0%, in Fiscal 1999 over the
prior fiscal year. The increase was principally attributable to market share
gains in Birmingham as well as an improvement in the Washington, D.C. national
advertising market, partially offset by a weakening in the Harrisburg market for
national advertisers.
Network compensation revenue decreased $569, or 9.1%, from Fiscal 1998. Of this
decrease, approximately $400 was due to the effect of the amendment of the
Company's network affiliation agreements with ABC in August 1999, and was
largely offset by local/regional and national advertising revenues generated
from the sale of additional prime-time inventory obtained as part of the
amendment. See " Business - Network Affiliation Agreements and Relationship".
Political advertising revenues increased by $900, or 27.3%, in Fiscal 1999 from
Fiscal 1998. This increase was primarily due to various high-profile local
political elections in many of the Company's markets that took place during
Fiscal 1999 with no comparable political elections occurring during Fiscal 1998.
The increase was partially offset by Fiscal 1998 political advertising leading
up to the Fiscal 1999 elections.
No individual advertiser accounted for more than 5% of the Company's broadcast
revenues during Fiscal 1999 or 1998.
Total Operating Expenses
Total operating expenses in Fiscal 1999 were $131,359, an increase of $1,722, or
1.3%, compared to total operating expenses of $129,637 in Fiscal 1998.
Television operating expenses, excluding depreciation and amortization, totaled
$109,549 in Fiscal 1999, an increase of $3,402, or 3.2%, when compared to
television operating expenses of $106,147 in Fiscal 1998. This television
operating expense increase was primarily attributable to increased news and
related promotional expenses at the Company's Washington, D.C. station,
increased expenses related to University of Arkansas sports programming in
Little Rock and
-23-
<PAGE>
increased programming expenses across a majority of the Company's stations. The
overall increase in programming expenses was mitigated due to the fact that WJLA
did not purchase the rights to broadcast the preseason Washington Redskins
football games in Fiscal 1999 as it had done in Fiscal 1998.
Assuming completion of the acquisition of WJSU, the Company will no longer be
required to pay fees under the Anniston LMA. Such fees were $360 in both Fiscal
1998 and 1999.
Depreciation and amortization expense of $17,471 in Fiscal 1999 decreased
$1,451, or 7.7%, from $18,922 in Fiscal 1998. The decrease was primarily
attributable to decreased depreciation from the facility construction and
equipment purchases in Birmingham during Fiscal 1996.
Corporate expenses in Fiscal 1999 decreased $229, or 5.0%, from Fiscal 1998. The
decrease was due to decreases in various expenses, including life insurance,
compensation and travel.
Operating Income
Operating income of $55,929 in Fiscal 1999 increased $3,082, or 5.8%, compared
to operating income of $52,847 in Fiscal 1998. The operating profit margin in
Fiscal 1999 increased to 29.9% from 29.0% for the prior fiscal year. The
increases in operating income and margin were the result of net operating
revenues increasing more than total operating expenses as discussed above.
Operating Cash Flow
Operating cash flow increased to $73,400 in Fiscal 1999 from $71,769 in Fiscal
1998, an increase of $1,631, or 2.3%. This increase was a result of net
operating revenues increasing more than television operating expenses as
discussed above. The Company believes that operating cash flow, defined as
operating income plus depreciation and amortization, is important in measuring
the Company's financial results and its ability to pay principal and interest on
its debt because of the Company's level of non-cash expenses attributable to
depreciation and amortization of intangible assets. Operating cash flow does not
purport to represent cash flows from operating activities determined in
accordance with generally accepted accounting principles as reflected in the
Company's consolidated financial statements, is not a measure of financial
performance under generally accepted accounting principles, should not be
considered in isolation or as a substitute for net income or cash flows from
operating activities and may not be comparable to similar measures reported by
other companies.
Nonoperating Expenses, Net
Interest expense of $42,154 for Fiscal 1999 decreased by $2,186, or 4.9%, from
$44,340 in Fiscal 1998. This decrease was principally due to the incremental
interest expense in the prior fiscal year associated with carrying both the
newly-issued 8.875% Notes and the 11.5% Debentures from January 22, 1998 until
the redemption of the 11.5% Debentures on March 3, 1998 after the redemption
notice period was completed as well as the reduced weighted average interest
rate on
-24-
<PAGE>
debt during Fiscal 1999 as a result of the Company's refinancing of its 11.5%
Debentures.
The average amount of debt outstanding and the weighted average interest rate on
such debt for Fiscal 1998 and 1999 approximated $449,431 and 9.7%, and $436,546
and 9.4%, respectively. The decreased average debt balance during Fiscal 1999
was primarily due to carrying both the newly-issued 8.875% Notes and the 11.5%
Debentures from January 22, 1998 until the redemption of the 11.5% Debentures on
March 3, 1998 after the redemption notice period was completed. Had the Company
redeemed the 11.5% Debentures on January 22, 1998, the average balance of debt
would have been $430,507 for Fiscal 1998.
Interest income of $2,760 in Fiscal 1999 decreased $579, or 17.3%, as compared
to interest income of $3,339 in Fiscal 1998. The decrease was primarily due to
interest earned in the prior fiscal year from temporarily investing the majority
of the proceeds from the issuance of the 8.875% Notes for the period from
January 22, 1998 until March 3, 1998 at which time the Company redeemed the
11.5% Debentures.
Income Taxes
The provision for income taxes in Fiscal 1999 of $6,717 increased by $1,130, or
20.2%, when compared to the provision for income taxes of $5,587 in Fiscal 1998.
The increase was directly related to the $4,012, or 35.4%, increase in income
before income taxes and extraordinary loss, partially offset by a reduction in
the Company's overall effective income tax rate in Fiscal 1999.
Income Before Extraordinary Loss
Income before extraordinary loss in Fiscal 1999 increased by $2,882 from $5,746
in Fiscal 1998. This increase was the result of increased operating income and
reduced nonoperating expenses, partially offset by increased income taxes as
discussed above.
Net Income
Net income for Fiscal 1999 of $8,628 increased $8,037, or 1,359.9%, when
compared to net income of $591 in Fiscal 1998. The increase in net income was
attributable to the improved operating results for Fiscal 1999 as discussed
above as well as the effect of the Fiscal 1998 extraordinary loss on early
repayment of debt of $5,155.
Results of Operations - Fiscal 1998 Compared to Fiscal 1997
As compared to Fiscal 1997, the Company's results of operations for Fiscal 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 effect of
the Company's $150,000 offering of its 8.875% Notes completed 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 11.5% Debentures on
March 3, 1998 with the balance used to repay certain amounts outstanding under
the Company's revolving credit facility.
-25-
<PAGE>
The Company incurred a loss, net of the related income tax effect, of $5,155 on
the early extinguishment of the 11.5% Debentures resulting primarily from the
payment of a call premium and write-off of remaining deferred financing costs.
Set forth below are selected consolidated financial data for Fiscal 1997 and
1998, respectively, and the percentage change between the years.
<TABLE>
<CAPTION>
Fiscal Year Ended September 30,
-------------------------------
Percentage
1997 1998 Change
---- ---- ------
<S> <C> <C> <C>
Operating revenues, net $172,828 $182,484 5.6%
Total operating expenses 129,664 129,637 0.0%
------- -------
Operating income 43,164 52,847 22.4%
Nonoperating expenses, net 41,630 41,514 (0.3)%
Income tax provision 1,110 5,587 403.3%
------- -------
Income before extraordinary loss 424 5,746 1,255.2%
Extraordinary loss, net of income
tax benefit -- (5,155) --
------- -------
Net income $ 424 $ 591 39.4%
======= =======
Operating cash flow $ 62,816 $ 71,769 14.3%
======= =======
</TABLE>
Net Operating Revenues
Net operating revenues for Fiscal 1998 totaled $182,484, an increase of $9,656,
or 5.6%, as compared to Fiscal 1997. This increase resulted principally from
increased local/regional and national advertising demand in the Company's
Birmingham and Washington, D.C. markets, partially offset by a decline in the
Tulsa market as well as decreased political advertising in the majority of the
Company's markets. The revenue growth in Birmingham was achieved through
increased audience and market share. The expansion in audience and market share
was the result of the Company's development of the Birmingham operation.
Local/regional advertising revenues increased $6,444, or 7.5%, over Fiscal 1997.
The increase was primarily attributable to an improvement in the Washington,
D.C. and Little Rock local/regional advertising markets as well as market share
gains by the Birmingham stations, offset by a weakening in the Harrisburg market
for local/regional advertisers.
National advertising revenues increased $4,206, or 5.9%, in Fiscal 1998 over the
prior fiscal year. The increase was principally attributable to improvements in
the Washington, D.C. and Harrisburg national advertising markets and market
share gains by the Birmingham stations, offset by a weakening in the Tulsa
market for national advertisers.
Political advertising revenues decreased by $982, or 23.0%, in Fiscal 1998 from
Fiscal 1997. This decrease was primarily due to the national presidential
election as well as various high-profile local elections in several of the
Company's markets that took place during Fiscal 1997
-26-
<PAGE>
with no comparable political elections occurring during Fiscal 1998. The
decrease was partially offset by Fiscal 1998 political advertising leading up to
various high-profile local political elections that took place during Fiscal
1999.
No individual advertiser accounted for more than 5% of the Company's broadcast
revenues during Fiscal 1998 or 1997.
Total Operating Expenses
Total operating expenses in Fiscal 1998 were $129,637, a decrease of $27
compared to total operating expenses of $129,664 in Fiscal 1997.
Television operating expenses, excluding depreciation and amortization, totaled
$106,147 in Fiscal 1998, an increase of $517, or 0.5%, when compared to
television operating expenses of $105,630 in Fiscal 1997. The increase in such
expenses was reduced by a non-recurring programming expense of approximately
$2,000 related to the Company's early termination of a program contract incurred
during Fiscal 1997. Excluding this charge from Fiscal 1997 television operating
expenses, such expenses increased 2.4% in Fiscal 1998 from Fiscal 1997. This
television operating expense increase was primarily attributable to increased
news expenses across a majority of the Company's stations, partially offset by
an overall reduction in television operating expenses in Birmingham, Little Rock
and Charleston.
Depreciation and amortization expense of $18,922 in Fiscal 1998 decreased $730,
or 3.7%, from $19,652 in Fiscal 1997. The decrease was primarily attributable to
the reduced level of capital expenditures from Fiscal 1996 to Fiscal 1997 and
Fiscal 1998.
Corporate expenses in Fiscal 1998 increased $186, or 4.2%, from Fiscal 1997. The
increase was due to increases in various expenses, including compensation,
travel and entertainment.
Operating Income
Operating income of $52,847 in Fiscal 1998 increased $9,683, or 22.4%, compared
to operating income of $43,164 in Fiscal 1997. The operating profit margin in
Fiscal 1998 increased to 29.0% from 25.0% for the prior fiscal year.
The increase in operating income and margin was due primarily to operating
revenues increasing more than operating expenses 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 depreciation arising
from 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.
-27-
<PAGE>
Operating Cash Flow
Operating cash flow increased to $71,769 in Fiscal 1998 from $62,816 in Fiscal
1997, an increase of $8,953, or 14.3%. This increase was a result of the growth
in net operating revenues together with relatively stable television operating
expenses and corporate expenses as discussed above. The Company believes that
operating cash flow, defined as operating income plus depreciation and
amortization, is important in measuring the Company's financial results and its
ability to pay principal and interest on its debt because of the Company's level
of non-cash expenses attributable to depreciation and amortization of intangible
assets. Operating cash flow does not purport to represent cash flows from
operating activities determined in accordance with generally accepted accounting
principles as reflected in the Company's consolidated financial statements, is
not a measure of financial performance under generally accepted accounting
principles, should not be considered in isolation or as a substitute for net
income or cash flows from operating activities and may not be comparable to
similar measures reported by other companies.
Nonoperating Expenses, Net
Interest expense of $44,340 for Fiscal 1998 increased by $1,470, or 3.4%, from
$42,870 in Fiscal 1997. This increase was principally due to the incremental
interest expense associated with carrying both the newly-issued 8.875% Notes and
the 11.5% Debentures from January 22, 1998 until the redemption of the 11.5%
Debentures on March 3, 1998 after the redemption notice period was completed.
Had the Company redeemed the 11.5% Debentures on January 22, 1998, interest
expense for Fiscal 1998 would have been $42,729, a decrease of $141, or 0.3%, as
compared to Fiscal 1997. This decrease was related to a reduced average interest
rate on debt as a result of the Company's refinancing on January 22, 1998,
partially offset by higher average outstanding debt balances during Fiscal 1998.
The average amount of debt outstanding and the weighted average interest rate on
such debt for Fiscal 1998 and 1997 approximated $449,431 and 9.7%, and $413,723
and 10.2%, respectively. The increased weighted average debt balance during
Fiscal 1998 was primarily due to carrying both the newly-issued 8.875% Notes and
the 11.5% Debentures from January 22, 1998 until the redemption of the 11.5%
Debentures on March 3, 1998 after the redemption notice period was completed.
Had the Company redeemed the 11.5% Debentures on January 22, 1998, the average
balance of debt would have been $430,507 for Fiscal 1998.
Interest income of $3,339 in Fiscal 1998 increased $906, or 37.2%, as compared
to interest income of $2,433 in Fiscal 1997. The increase was primarily due to
interest earned from temporarily investing the majority of the proceeds from the
issuance of the 8.875% Notes for the period from January 22, 1998 until March 3,
1998 at which time the Company redeemed the 11.5% Debentures.
Income Taxes
The provision for income taxes in Fiscal 1998 of $5,587 increased by $4,477, or
403.3%, when compared to the provision for income taxes of $1,110 in Fiscal
1997. The increase was directly
-28-
<PAGE>
related to the $9,799, or 638.8%, increase in income before income taxes and
extraordinary loss. This increase was a result of the increased Operating Income
and reduced Nonoperating Expenses as discussed above.
Income Before Extraordinary Loss
Income before extraordinary loss in Fiscal 1998 increased by $5,322 from $424 in
Fiscal 1997. As discussed previously, the start-up nature of the Birmingham
operation and the non-recurring program expense adversely impacted Fiscal 1997
results.
Net Income
Net income for Fiscal 1998 of $591 increased $167, or 39.4%, when compared to
net income of $424 in Fiscal 1997. The increase in net income was attributable
to the improved operating results for Fiscal 1998 as discussed above,
substantially offset by 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.
Balance Sheet
Significant balance sheet fluctuations from September 30, 1997 to September 30,
1998 consisted of increased cash and cash equivalents and long-term debt. These
increases reflect the Company's refinancing transaction in January 1998.
Liquidity and Capital Resources
Cash Provided by Operations
The Company's principal source of working capital is cash flow from operations
and borrowings under its revolving credit facility. As reported in the
consolidated statements of cash flows, the Company's net cash provided by
operating activities was $28,022 and $28,302 for Fiscal 1998 and 1999,
respectively.
Distributions to Related Parties
The Company periodically makes advances in the form of distributions to
Perpetual. For Fiscal 1997, 1998 and 1999, the Company made cash advances net of
repayments to Perpetual of $12,904, $18,804 and $16,199, respectively. The
advances to Perpetual are non-interest bearing and, as such, do not reflect
market rates of interest-bearing loans to unaffiliated third parties. In
addition, during Fiscal 1998 and 1999, the Company was charged by Perpetual and
made payments to Perpetual for federal and state income taxes totaling $433 and
$4,328, respectively. During Fiscal 1997, the Company generated a benefit from
federal income taxes of $691. This benefit was effectively distributed to
Perpetual as such benefit will not be recognized in future years pursuant to the
terms of the tax sharing agreement between the companies.
-29-
<PAGE>
At present, the primary sources of repayment of net advances is through the
ability of the Company to pay dividends or make other distributions, and there
is no immediate intent for the amounts to be repaid. Accordingly, these advances
have been treated as a reduction of stockholder's investment and are described
as "distributions" in the Company's Consolidated Financial Statements.
During Fiscal 1991, the Company made a $20,000 11.06% loan to Allnewsco. This
amount has been reflected in the Company's Consolidated Financial Statements on
a consistent basis with other distributions to owners. The loan had stated
repayment terms consisting of annual principal installments of approximately
$2,220 commencing January 1997 through January 2005 and payments of interest
semi-annually. During Fiscal 1997 and 1998, the Company deferred the first two
annual principal installment payments pending renegotiation of the repayment
terms. Effective July 1, 1998, the note was amended to extend the maturity date
to January 2008 and defer all principal installments until maturity, with the
principal balance also due upon demand. In exchange for the amendment, Allnewsco
paid to the Company the amount of $650. Interest payments on the loan
approximate $2,200 annually and have been made in accordance with the terms of
the note. The Company expects it will continue to receive such payments on a
current basis. To date, interest payments from Allnewsco have been funded by
advances from Perpetual to Allnewsco. The Company anticipates that at least a
portion of such payments will be funded in a similar manner for the foreseeable
future. However, there can be no assurance that Allnewsco will have the ability
to make such interest payments in the future.
Under the terms of the Company's borrowing agreements, future advances,
distributions and dividends to related parties are subject to certain
restrictions. The Company anticipates that, subject to such restrictions, ACC
will make distributions and loans to related parties in the future. Subsequent
to September 30, 1999 and through November 15, 1999, the Company made additional
net distributions to owners of $8,966.
Indebtedness
The Company's total debt, including the current portion of long-term debt,
decreased from $429,691 at September 30, 1998 to $429,629 at September 30, 1999.
This debt, net of applicable discounts, consists of $274,051 of the 9.75%
Debentures, $150,000 of the 8.875% Notes and $5,578 of capital lease
obligations. The decrease of $62 in total debt from September 30, 1998 to
September 30, 1999 was primarily due to a net decrease in capital lease
obligations. As of September 30, 1999, there were no amounts outstanding under
the Company's $40,000 revolving credit facility. The revolving credit facility
is secured by the pledge of the stock of the Company and its subsidiaries and
matures April 16, 2001.
Under the existing borrowing agreements, the Company is subject to restrictive
covenants which 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. Compliance with the financial covenants is measured at the
end of each quarter, and as of September 30, 1999, the Company was in compliance
with those financial
-30-
<PAGE>
covenants. The Company is also required to pay a commitment fee of .375% per
annum based on any unused portion of the revolving credit facility.
Other Uses of Cash
During Fiscal 1997, 1998 and 1999, the Company made $14,689, $9,191 and $11,377,
respectively, of capital expenditures, of which $2,549, $634 and $1,528,
respectively, were financed through capital lease transactions. The decrease in
capital expenditures from Fiscal 1997 to Fiscal 1998 was principally
attributable to completion of the facility construction and equipment purchases
in Alabama associated with the consolidation of the operations of WCFT and WJSU
and the purchase of a corporate aircraft in Fiscal 1997. The increase in capital
expenditures from Fiscal 1998 to Fiscal 1999 related primarily to completion of
the project enabling WJLA to simultaneously broadcast its programming over its
second channel authorized to transmit a digital television signal as well as an
expansion to the Company's Tulsa office and studio facility. The Company
anticipates that capital expenditures for Fiscal 2000 will approximate $6,000
and will be primarily for the acquisition of technical equipment and vehicles to
support operations. Management expects that the source of funds for these
anticipated capital expenditures will be cash provided by operations and capital
lease transactions. The Company has a $15,000 annually renewable lease credit
facility for the purpose of financing capital expenditures. Interest rates under
the lease credit facility are based upon the lessor's cost of funds and are
fixed over the five-year term of each respective lease. This facility expires on
March 1, 2000 and is renewable annually on mutually satisfactory terms. The
Company currently intends to renew this facility. At September 30, 1999, $5,578
was outstanding under this lease credit facility.
The Company regularly enters into program contracts for the right to broadcast
television programs produced by others and program commitments for the right to
broadcast programs in the future. Such programming commitments are generally
made to replace expiring or canceled program rights. During Fiscal 1997, 1998
and 1999, the Company made cash payments of approximately $19,500, $17,600 and
$17,200, respectively, for rights to television programs. The Fiscal 1997 amount
includes the approximate $2,000 non-recurring program expense resulting from the
Company's early termination of a program contract. As of September 30, 1999, the
Company had commitments to acquire further program rights through September 30,
2005 totaling $69,795 and anticipates cash payments for program rights will
approximate $20,000 per year for the foreseeable future. The Company currently
intends to fund these commitments with cash provided by operations.
The Company has entered into an asset purchase agreement for the acquisition of
WJSU. See "Owned and/or Programmed Stations - WBMA/WCFT/WJSU: Birmingham
(Anniston and Tuscaloosa, Alabama) ". The Company currently intends to fund the
purchase price of $3,337 with cash provided by operations.
Based upon the Company's current level of operations, management believes that
available cash, together with available borrowings under the revolving credit
facility and lease credit facility, will be adequate to meet the Company's
anticipated future requirements for working capital, capital expenditures and
scheduled payments of interest on its debt for the next twelve months.
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<PAGE>
ACC's cash flow from operations and consequent ability to service its debt is,
in part, dependent upon the earnings of its subsidiaries and the distribution
(through dividends or otherwise) of those earnings to ACC, or upon loans,
advances or other payments of funds by those subsidiaries to ACC. As of
September 30, 1999, 74% of the assets of ACC were held by operating subsidiaries
and for Fiscal 1999, approximately 50% of ACC's net operating revenues were
derived from the operations of ACC's subsidiaries.
Income Taxes
The operations of the Company are included in a consolidated federal income tax
return filed by Perpetual. In accordance with the terms of a tax sharing
agreement between the Company and Perpetual, the Company is required to pay to
Perpetual its federal income tax liability, computed based upon statutory
federal income tax rates applied to the Company's consolidated taxable income.
The Company files separate state income tax returns with the exception of
Virginia which is included in a combined state income tax return filed by
Perpetual. In accordance with the terms of the tax sharing agreement, the
Company is required to pay to Perpetual its combined Virginia income tax
liability, computed based upon statutory Virginia income tax rates applied to
the Company's combined Virginia net taxable income. Taxes payable to Perpetual
are not reduced by losses generated in prior years by the Company. In addition,
the amounts payable by the Company to Perpetual under the tax sharing agreement
are not reduced if losses of other members of the Perpetual group are utilized
to offset taxable income of the Company for purposes of the Perpetual
consolidated federal or Virginia state income tax returns.
The provision for income taxes is determined in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes,"
which requires that the consolidated amount of current and deferred income tax
expense for a group that files a consolidated income tax return be allocated
among members of the group when those members issue separate financial
statements. Perpetual allocates a portion of its consolidated current and
deferred income tax expense to the Company as if the Company and its
subsidiaries were separate taxpayers. The Company records deferred tax assets,
to the extent it is considered more likely than not that such assets will be
realized in future periods, and deferred tax liabilities for the tax effects of
the differences between the bases of its assets and liabilities for tax and
financial reporting purposes. To the extent a deferred tax asset would be
recorded due to the incurrence of losses for federal or Virginia state income
tax purposes, any such benefit recognized is effectively distributed to
Perpetual as such benefit will not be recognized in future years pursuant to the
tax sharing agreement.
Inflation
The impact of inflation on the Company's consolidated financial condition and
consolidated results of operations for each of the periods presented was not
material.
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<PAGE>
Year 2000 Compliance
The Year 2000 issue, common to most companies, results from computer programs,
computer equipment and embedded microprocessors using two digits rather than
four to define the applicable year. Computer applications and equipment that use
date-sensitive software or date-sensitive embedded microprocessors may recognize
a date of "00" as the year 1900 rather than the year 2000. As the Company relies
on various technologies throughout its business operations, the Year 2000 issue
could result in a system failure or miscalculations causing disruption of
operations.
The Company has undertaken various initiatives to ensure that its operational
and financial reporting systems and equipment with embedded technology will
function properly with respect to dates in the Year 2000 and thereafter. The
Company is progressing through a comprehensive plan which includes the following
phases: (i) identification of mission-critical operating systems and
applications; (ii) inventory of all applications and equipment at risk of being
date sensitive to the Year 2000; (iii) assessment and evaluation of Year 2000
issues; (iv) system modification, upgrade or replacement; (v) testing; and (vi)
development of contingency plans in the event that modifications, upgrades and
replacements are not completed timely or do not fully remediate the Year 2000
issues.
To implement the plan, the Company established Year 2000 teams from each of its
television stations that are responsible for analyzing the Year 2000 impact on
operations and for formulating appropriate strategies to resolve the Year 2000
issues. The Company has generally completed all phases of the Year 2000 plan.
The Company's assessment phase of the plan also included contacting significant
third party vendors and service providers in an effort to determine the state of
their Year 2000 readiness as all computer software utilized by the Company as
well as the majority of the Company's programming are obtained from third
parties. The Company has undertaken formal communications with its significant
vendors and service providers and has monitored responses and implemented
additional follow-up measures as necessary.
The Company's plan of remediation included a combination of installing new
applications and equipment, upgrading existing applications and equipment,
retiring obsolete systems and equipment and confirming significant third party
compliance. A summary of certain of the Company's mission-critical systems
follows:
The Company receives network and first-run syndicated programming via satellite.
The Company's receipt of that programming is dependent upon the ABC television
network and program syndicators resolving their Year 2000 issues. Based upon
communications from the ABC television network and program syndicators, the
Company does not currently anticipate any disruptions in receiving programming.
In the event of any programming disruptions, the Company has certain alternative
programming options that it will consider.
The Company uses advertising inventory management software to manage, schedule
and bill advertising at each of the Company's television stations. This software
is licensed from a single vendor that has warranted the system for Year 2000
compliance and advised the Company of the satisfactory completion of a Year 2000
test of the software by other users.
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<PAGE>
The Company utilizes equipment and software to automate the insertion of
advertising into program breaks. This equipment and software at certain of the
Company's television stations required upgrades in order to be Year 2000
compliant. These upgrades have been completed; however, failure of this software
or equipment would not materially disrupt the Company's business operations as
this process can also be performed manually.
The Company uses various broadcast and studio equipment to produce and transmit
its broadcast signals. The Company has communicated with third party vendors and
tested the equipment with respect to embedded technology. The results of the
procedures have given the Company no reason to believe that the equipment will
not continue to function after 1999.
As of September 30, 1999, costs toward achieving Year 2000 compliance, including
capital expenditures, have not been material to the Company's results of
operations, its cash flow or its financial position, and such costs are not
expected to be material in Fiscal 2000. Based on the Company's assessment, costs
of the Company's Year 2000 plan, including those incurred to date, are currently
expected not to exceed $2,000. Such costs have been principally for capital
expenditures for replacement systems. These systems generally provide enhanced
capabilities and functionality as well as Year 2000 compliance. The costs have
been funded with cash provided by operations. This estimate assumes that third
party vendors have accurately assessed the compliance of their products and that
they have successfully corrected issues in non-compliant products. The Company
does not separately track internal costs associated with the Year 2000 issue;
however, such costs are not considered to be significant and principally relate
to payroll costs of existing engineering personnel. The Company believes that
none of its other significant information technology projects has been delayed
as a result of the Year 2000 compliance efforts.
In the event that the Company experiences a failure in any of its
mission-critical systems, contingency plans have been developed at the
individual project level as highlighted above. The framework of the plans has
been structured to reflect each station's internal operating procedures. Key
personnel at each station will be on duty or available during the critical time
period from December 31, 1999 to early January 2000.
On or subsequent to January 1, 2000, the Company may discover additional Year
2000 issues, including that remediation or contingency plans are not feasible or
that the costs of such plans exceed current expectations. In many cases, the
Company is relying on assurances from third parties that their systems or that
new or upgraded systems acquired by the Company will be Year 2000 compliant. The
failure of systems of the Company or third parties could cause a material
disruption in the Company's business operations. In addition, disruptions in the
general economy as a result of the Year 2000 issue could lead to a reduction of
advertising spending which could adversely affect the Company. The Company will
continue to evaluate the nature of these risks, but at this time management is
unable to determine the probability that any such risk will occur, or if it does
occur, what the nature, length or other effects, if any, it may have on the
Company.
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<PAGE>
In general, the Company has fulfilled the elements of its Year 2000 plan in
order to mitigate the impact that any Year 2000 issues may have on the Company.
While there can be no assurance that the Company's systems or equipment or those
of third parties on which the Company relies will be Year 2000 compliant in a
timely manner or that the Company's or third parties' contingency plans will
mitigate the effects of any noncompliance, management believes that it has an
effective program to resolve any remaining Year 2000 issues in a timely manner
and that its internal Year 2000 issues have been substantially remediated.
The information set forth above is deemed by the Company to constitute "Year
2000 Statements" and to contain "Year 2000 Readiness Disclosure" within the
meaning of the "Year 2000 Information and Readiness Act. "
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<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
At September 30, 1999, the Company had other financial instruments consisting of
long-term fixed interest rate debt. Such debt, with future principal payments of
$425,000, matures during the year ending September 30, 2008. At September 30,
1999, the carrying value of debt was $429,629, the fair value was $416,000 and
the weighted average interest rate on debt was 9.4%. The fair market value of
long-term fixed interest rate debt is subject to interest rate risk. Generally,
the fair market value of fixed interest rate debt will increase as interest
rates fall and decrease as interest rates rise. The Company estimates the fair
value of its long-term debt using either quoted market prices or by discounting
the required future cash flows under its debt using borrowing rates currently
available to the Company, as applicable. The Company actively monitors the
capital markets in analyzing its capital raising decisions.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA
See Index on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
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<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT
Executive officers and directors of ACC are as follows:
Name Age Title
Joe L. Allbritton 74 Chairman of the Executive Committee and Director
Barbara B. Allbritton 62 Vice President and Director
Lawrence I. Hebert 53 Chairman, Chief Executive Officer and Director
Robert L. Allbritton 30 President and Director
Frederick J. Ryan, Jr. 44 Vice Chairman, Executive Vice President, Chief
Operating Officer and Director
W.E. Tige Savage 31 Director
Jerald N. Fritz 48 Vice President, Legal and Strategic Affairs,
General Counsel
Stephen P. Gibson 34 Vice President and Chief Financial Officer
JOE L. ALLBRITTON is the founder of ACC and was Chairman of the Board of
Directors from its inception until 1998. In April 1998, Mr. Allbritton became
Chairman of the Executive Committee of the Board of Directors of ACC. In
addition to his position with ACC, Mr. Allbritton has served as Chairman of the
Board of Riggs National Corporation ("Riggs") (owner of banking operations in
Washington, D.C., Maryland, Virginia, Florida and internationally) from 1981 to
the present; Chairman of the Board of Riggs Bank N.A. ("Riggs Bank") since 1983
and its Chief Executive Officer since 1982; Director of Riggs Bank Europe Ltd.
since 1984 and its Chairman of the Board since 1992; Chairman of the Board and
owner since 1958 of Perpetual (indirect owner of ACC and 80% owner through
Allnewsco of NewsChannel 8, a Virginia-based cable programming service);
Chairman of Allnewsco since its inception in 1990; Chairman of the Board and
owner since 1988 of Westfield; Chairman of the Board of Houston Financial
Services Ltd. Since 1977; Chairman of the Board of WSET since 1974; a Manager of
KATV, KTUL and WCIV since 1997; Chairman of the Board of Allfinco, Harrisburg
Television and TV Alabama since 1995; Chairman of the Board of AGI and
Allbritton Jacksonville, Inc. ("AJI") since 1996; a Director of Allbritton New
Media, Inc. ("ANMI") since 1999; and a Trustee and President of The Allbritton
Foundation since 1971. Mr. Allbritton is the husband of Barbara B. Allbritton
and the father of Robert L. Allbritton. See "Certain Relationships and Related
Transactions".
BARBARA B. ALLBRITTON has been a Director of ACC since its inception and one of
its Vice Presidents since 1980. In addition to her position with ACC, Mrs.
Allbritton has been a Director of Riggs since 1991; a Director and Vice
President of WSET since 1976; a Vice President and Director of Perpetual since
1978; a Director of Houston Financial Services since 1977; a Director of
Allnewsco since 1990; a Trustee and Vice President of The Allbritton Foundation
since 1971; a Director of Allfinco, Harrisburg Television and TV Alabama since
1995; a Manager of KATV, KTUL and WCIV since 1997; a Director of ANMI since
1999; and a Director of AGI and AJI since 1996. Mrs. Allbritton is the wife of
Joe L. Allbritton and the mother of Robert L. Allbritton. See "Certain
Relationships and Related Transactions".
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<PAGE>
LAWRENCE I. HEBERT has been Chairman of the Board and Chief Executive Officer of
ACC since April 1998 and a Director of ACC since 1981. He also serves as a
member of the Executive Committee of the Board of Directors of ACC. He served as
Vice Chairman of the Board of ACC from 1983 to 1998, and was its President from
1984 to 1998. He has been a Director of Perpetual since 1980 and its President
since 1981; President of Westfield since 1988; President and a Director of
Westfield News Publishing, Inc. since 1991; a Director of WSET since 1982; a
Manager of KATV, KTUL and WCIV since 1997; Vice Chairman of the Board of Houston
Financial Services since 1977; a Director of Allnewsco since 1989; President and
a Director of ATP since 1989; a Vice President and a Director of Allfinco since
1995; a Director of Harrisburg Television and TV Alabama since 1995; President
and a Director of AGI since 1996; a Director of AJI since 1996; and a Director
and Vice President of ANMI since 1999. In addition, Mr. Hebert was Vice Chairman
of the Board of Riggs from 1988 to 1993, and has been a Director of Riggs since
1988; a Director of Riggs Bank Europe Ltd. since 1987; a Director of Riggs Bank
from 1981 to 1988; a Director of Allied Capital Corporation (venture capital
fund) since 1989; and a Trustee of The Allbritton Foundation since 1997.
ROBERT L. ALLBRITTON has been President of ACC since April 1998 and a Director
of ACC since 1993. He also serves as a member of the Executive Committee of the
Board of Directors of ACC. He served as Executive Vice President and Chief
Operating Officer of ACC from 1994 to 1998. He has been President and a Director
of ANMI since 1999; President and a Manager of Irides, LLC ("Irides") since
1999; a Director of Allnewsco since 1992; a Director of Riggs Bank from 1994 to
1997 and Riggs Bank Europe Ltd. since 1994; a Director of Riggs since 1994; a
Director of American Capital Strategies Ltd since 1997; and a Trustee and Vice
President of The Allbritton Foundation since 1992. He has been a Director of
Perpetual since 1993; President and Director of Allfinco and Harrisburg
Television since 1995; Vice President and a Director of TV Alabama since 1995;
Vice President and a Director of AGI since 1996; Vice President and a Director
of AJI since 1996 and President of KTUL since 1997. He has been a Manager of
KATV, KTUL and WCIV since 1997. He is the son of Joe L. and Barbara B.
Allbritton. See "Certain Relationships and Related Transactions".
FREDERICK J. RYAN, JR. has been Executive Vice President and Chief Operating
Officer of ACC since April 1998 and a Director and Vice Chairman of ACC since
1995. He served as Senior Vice President of ACC from 1995 to 1998. He is also
Executive Vice President of KATV, KTUL, WSET, WCIV, Harrisburg Television, TV
Alabama, AJI and Allnewsco as well as Vice President of ANMI. He previously
served as Chief of Staff to former President Ronald Reagan (1989-95) and
Assistant to the President in the White House (1982-89). Prior to his government
service, Mr. Ryan was an attorney with the Los Angeles firm of Hill, Farrer and
Burrill. Mr. Ryan presently serves as Chairman of the Ronald Reagan Presidential
Library Foundation, a Director of Ford's Theatre and Trustee of Ronald Reagan
Institute of Emergency Medicine at George Washington University. Mr. Ryan is a
member of the Board of Consultants for Riggs Bank and a Director of Riggs Bank
Europe Ltd. in London since 1996.
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<PAGE>
W.E. TIGE SAVAGE has been a Director of ACC since April 1999. In addition to his
position with ACC, Mr. Savage has served as Executive Vice President of Riggs
Bank from 1998 to the present and Vice President of Irides since 1999. Prior to
serving in this capacity, he served as Vice President and Special Assistant to
the Chairman of Riggs (1993-96); Group Manager, Credit Underwriting Group, Riggs
Bank (1992-93); and Associate, Corporate Banking, Riggs Bank (1991). Mr. Savage
also previously served as Associate, Corporate Finance at Dillon Read and Co. in
1997.
JERALD N. FRITZ has been a Vice President of ACC since 1987, serving as its
General Counsel and overseeing strategic planning and governmental affairs. He
also has served as a Vice President of Westfield and ATP since 1988, a Vice
President of Allnewsco since 1989 and a Vice President of Allfinco since 1995.
He has been a Vice President of AGI since 1996 and a Vice President of ANMI and
Irides since 1999. From 1981 to 1987, Mr. Fritz held several positions with the
FCC, including Chief of Staff, Legal Counsel to the Chairman and Chief of the
Common Carrier Bureau's Tariff Division. Mr. Fritz practiced law with the
Washington, D.C. firm of Pierson, Ball & Dowd, specializing in communications
law from 1978 to 1981 and from 1980 to 1983 was on the adjunct faculty of George
Mason University Law School teaching communications law and policy. Mr. Fritz
began his legal career with the FCC in 1976 and began his career in broadcasting
in 1973 with WGN-TV, Chicago. He currently serves as an elected director of the
National Association of Broadcasters ("NAB") and a member of the Governing
Committee of the Communications Forum of the American Bar Association. He serves
on the Futures and Copyright Committees of the NAB and the Legislative Committee
of the ABC Affiliates Association.
STEPHEN P. GIBSON has been a Vice President of ACC since 1997 when he joined the
Company. He served as Vice President and Controller and was named Chief
Financial Officer in November 1998. He is also Vice President of AGI, KATV,
KTUL, WSET, WCIV, Allfinco, Harrisburg Television, TV Alabama, ATP, ANB, AJI,
Allnewsco, ANMI and Irides. Prior to joining ACC, Mr. Gibson served as
Controller for COMSAT RSI Plexsys Wireless Systems, a provider of wireless
telecommunications equipment and services, from 1994 to 1997. From 1987 to 1994,
Mr. Gibson held various positions with the accounting firm of Price Waterhouse
LLP, the latest as Audit Manager.
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<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth compensation paid to the Company's Chief
Executive Officer and the four most highly compensated Company executive
officers for Fiscal 1999, 1998 and 1997:
<TABLE>
<CAPTION>
Summary Compensation Table (1)
-----------------------------
Name and Fiscal Other Annual All Other
Principal Position Year Salary Bonus Compensation Compensation
----------------- ------ ------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Joe L. Allbritton 1999 $550,000 $112,500 (2)
Chairman of the Executive 1998 550,000 106,300 (2)
Committee 1997 550,000 115,500 (2)
Lawrence I. Hebert (1)
Chairman and Chief 1999 200,000 $55,000
Executive Officer 1998 150,000 50,000
Robert L. Allbritton (1)
President 1999 200,000 55,000
Frederick J. Ryan, Jr. (3) 1999 200,000 55,000 5,900 (4)
Chief Operating Officer 1998 150,000 55,000 4,700 (4)
1997 150,000 4,000 (4)
Jerald N. Fritz (5) 1999 170,000 55,000 5,000 (4)
Vice President, Legal 1998 160,000 55,000 5,200 (4)
and Strategic Affairs 1997 150,000 50,000 4,800 (4)
- ----------
<FN>
(1) Lawrence I. Hebert, Chairman and Chief Executive Officer of ACC, and
Robert L. Allbritton, President of ACC, are paid cash compensation by
Perpetual for services to Perpetual and other interests of Joe L.
Allbritton, including ACC. Except for Mr. Hebert for Fiscal 1999 and
1998 and for Mr. Robert L. Allbritton for Fiscal 1999, the allocated
portion of such compensation to ACC was less than $100,000, and is,
therefore, not included herein. In addition, Mr. Robert L. Allbritton
is paid management fees directly by ACC which are also included as
compensation above.
(2) Represents the imputed premium cost related to certain split dollar
life insurance policies on the life of Mr. Joe L. Allbritton. The
annual premiums on such policies are paid by ACC. Upon the death of the
insured, ACC will receive the cash value of the policies up to the
amount of its investments, and the remaining proceeds will be paid to
the insured's beneficiary. The imputed premium cost is calculated on
the difference between the face value of the policy and the cash
surrender value.
(3) Frederick J. Ryan, Jr. receives additional compensation from Perpetual
for services to Perpetual and other interests of Joe L. Allbritton,
including the Company. This additional compensation is not allocated
among these interests, and the Company does not reimburse Perpetual for
any portion of this additional compensation to Mr. Ryan. The portion of
the additional compensation paid by Perpetual to Mr. Ryan that may be
attributable to his services to the Company has not been quantified.
Such portion is not material to the consolidated financial condition or
results of operations of the Company.
(4) These amounts reflect annual contributions by ACC to the Company's 401(k) Plan.
(5) Jerald N. Fritz is paid compensation by ACC for services to the Company
and Perpetual. Perpetual has reimbursed ACC for $4,400, $4,600 and
$22,000 of the compensation shown in the table for Mr. Fritz in Fiscal
1997, 1998 and 1999, respectively.
</FN>
</TABLE>
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<PAGE>
The Company does not have a Compensation Committee of its Board of Directors.
Compensation of executive officers is determined by Joe L. Allbritton, Lawrence
I. Hebert and Robert L. Allbritton. Directors of the Company are not separately
compensated for membership on the Board of Directors.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The authorized capital stock of ACC consists of 20,000 shares of common stock,
par value $0.05 per share (the "ACC Common Stock"), all of which is outstanding,
and 1,000 shares of preferred stock, 200 shares of which have been designated
for issue as Series A Redeemable Preferred Stock, par value $1.00 per share (the
"Series A Preferred Stock"), no shares of which are issued and outstanding.
ACC Common Stock
Joe L. Allbritton controls Perpetual. Perpetual owns 100% of the outstanding
common stock of AGI, and AGI owns 100% of the outstanding ACC Common Stock.
There is no established public trading market for ACC Common Stock.
Each share of ACC Common Stock has an equal and ratable right to receive
dividends when and as declared by the Board of Directors of ACC out of assets
legally available therefor.
In the event of a liquidation, dissolution or winding up of ACC, holders of ACC
Common Stock are entitled to share ratably in assets available for distribution
after payments to creditors and to holders of any preferred stock of ACC that
may at the time be outstanding. The holders of ACC Common Stock have no
preemptive rights to subscribe to additional shares of capital stock of ACC.
Each share of ACC Common Stock is entitled to one vote in elections of directors
and all other matters submitted to a vote of ACC's stockholder.
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<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(Dollars in thousands)
Distributions to Related Parties
The Company periodically makes advances in the form of distributions to
Perpetual. For Fiscal 1999, the Company made cash advances to Perpetual of
$282,090 and Perpetual made repayments on these cash advances of $265,891.
Accordingly, the net change in distributions to related parties during Fiscal
1999 was an increase of $16,199. The advances to Perpetual are non-interest
bearing and, as such, do not reflect market rates of interest-bearing loans to
unaffiliated third parties. In addition, the Company was charged by Perpetual
and made payments to Perpetual for federal and state income taxes in the amount
of $4,328. As a result of making advances of tax payments in accordance with the
terms of the tax sharing agreement between the Company and Perpetual, the
Company earned interest income from Perpetual in the amount of $227.
At present, the primary source of repayment of net advances is through the
ability of the Company to pay dividends or make other distributions, and there
is no immediate intent for the amounts to be repaid. Accordingly, these advances
have been treated as a reduction of stockholder's investment and are described
as "distributions" in the Company's Consolidated Financial Statements.
During Fiscal 1991, the Company made a $20,000 11.06% loan to Allnewsco. This
amount has been reflected in the Company's Consolidated Financial Statements on
a consistent basis with other distributions to owners. The loan had stated
repayment terms consisting of annual principal installments of approximately
$2,220 commencing January 1997 through January 2005 and payments of interest
semi-annually. During Fiscal 1997 and 1998, the Company deferred the first two
annual principal installment payments pending renegotiation of the repayment
terms. Effective July 1, 1998, the note was amended to extend the maturity date
to January 2008 and defer all principal installments until maturity, with the
principal balance also due upon demand. In exchange for the amendment, Allnewsco
paid to the Company the amount of $650. Interest payments on the loan
approximate $2,200 annually and have been made in accordance with the terms of
the note. The Company expects it will continue to receive such payments on a
current basis. To date, interest payments from Allnewsco have been funded by
advances from Perpetual to Allnewsco. The Company anticipates that at least a
portion of such payments will be funded in a similar manner for the foreseeable
future. However, there can be no assurance that Allnewsco will have the ability
to make such interest payments in the future.
Under the terms of the Company's borrowing agreements, future advances,
distributions and dividends to related parties are subject to certain
restrictions. The Company anticipates that, subject to such restrictions, ACC
will make distributions and loans to related parties in the future. Subsequent
to September 30, 1999 and through November 15, 1999, the Company made additional
net distributions to owners of $8,966.
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<PAGE>
Management Fees
Management fees of $504 were paid to Perpetual by the Company for Fiscal 1999.
The Company also paid executive compensation in the form of management fees to
Joe L. Allbritton and Robert L. Allbritton for Fiscal 1999 in the amount of $550
and $140, respectively. The Company expects to pay management fees to Perpetual,
Mr. Joe L. Allbritton and Mr. Robert L. Allbritton during Fiscal 2000 of
approximately $500, $550 and $185, respectively. The Company believes that
payments to Perpetual, Mr. Joe L. Allbritton and Mr. Robert L. Allbritton will
continue in the future and that the amount of the management fees is at least as
favorable to the Company as those prevailing for comparable transactions with or
involving unaffiliated parties.
Income Taxes
The operations of the Company are included in a consolidated federal income tax
return filed by Perpetual. In accordance with the terms of a tax sharing
agreement between the Company and Perpetual, the Company is required to pay to
Perpetual its federal income tax liability, computed based upon statutory
federal income tax rates applied to the Company's consolidated taxable income.
The Company files separate state income tax returns with the exception of
Virginia which is included in a combined state income tax return filed by
Perpetual. In accordance with the terms of the tax sharing agreement, the
Company is required to pay to Perpetual its combined Virginia income tax
liability, computed based upon statutory Virginia income tax rates applied to
the Company's combined Virginia net taxable income. Taxes payable to Perpetual
are not reduced by losses generated in prior years by the Company. In addition,
the amounts payable by the Company to Perpetual under the tax sharing agreement
are not reduced if losses of other members of the Perpetual group are utilized
to offset taxable income of the Company for purposes of the Perpetual
consolidated federal or Virginia state income tax returns.
The provision for income taxes is determined in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes,"
which requires that the consolidated amount of current and deferred income tax
expense for a group that files a consolidated income tax return be allocated
among members of the group when those members issue separate financial
statements. Perpetual allocates a portion of its consolidated current and
deferred income tax expense to the Company as if the Company and its
subsidiaries were separate taxpayers. The Company records deferred tax assets,
to the extent it is considered more likely than not that such assets will be
realized in future periods, and deferred tax liabilities for the tax effects of
the differences between the bases of its assets and liabilities for tax and
financial reporting purposes. To the extent a deferred tax asset would be
recorded due to the incurrence of losses for federal or Virginia state income
tax purposes, any such benefit recognized is effectively distributed to
Perpetual as such benefit will not be recognized in future years pursuant to the
tax sharing agreement.
Office Space
ACC leases corporate headquarters space from Riggs Bank which owns office
buildings in Washington, D.C. Riggs Bank is a wholly-owned subsidiary of Riggs,
approximately 42.6% of the
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<PAGE>
common stock of which is deemed to be beneficially owned by Riggs' Chairman, Joe
L. Allbritton, and 7.7% of the common stock of which is deemed to be
beneficially owned by Riggs' director, Barbara B. Allbritton, including in each
case 7.2% of the common stock of which Mr. and Mrs. Allbritton share beneficial
ownership. During Fiscal 1999, ACC incurred expenses to Riggs Bank of $275 for
this space. ACC expects to pay approximately $280 for such space during Fiscal
2000. Management believes the same terms and conditions would have prevailed had
they been negotiated with a nonaffiliated company.
Local Advertising Revenues
Although WJLA did not receive any local advertising revenues from Riggs Bank
during Fiscal 1999, Riggs Bank has placed orders for advertising on WJLA during
Fiscal 2000 approximating $60. The amount of total advertising it may purchase
for Fiscal 2000 is unknown. Management believes that the terms of the
transactions would be substantially the same or at least as favorable to ACC as
those prevailing for comparable transactions with or involving nonaffiliated
companies.
Internet Services
The Company has entered into various agreements with Irides, LLC ("Irides") to
provide certain of the Company's stations with web site design, hosting and
maintenance services. Irides is a wholly-owned subsidiary of Allbritton New
Media, Inc. ("ANMI") which in turn is an 80%-owned subsidiary of Perpetual. The
remaining 20% of ANMI is owned by Mr. Robert L. Allbritton who has an option to
acquire up to a total of 49% ownership of ANMI. The Company expects to pay fees
to Irides during Fiscal 2000 for services performed of approximately $150.
Management believes that the terms and conditions of the agreements would be
substantially the same or at least as favorable to the Company as those
prevailing for comparable transactions with or involving nonaffiliated
companies.
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<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Consolidated Financial Statements
See Index on p. F-1 hereof.
(2) Financial Statement Schedule II - Valuation and Qualifying Accounts
and Reserves
See Index on p. F-1 hereof.
(3) Exhibits
See Index on p. A-1 hereof.
(b) No reports on Form 8-K were filed during the fourth quarter of Fiscal 1999.
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<PAGE>
ALLBRITTON COMMUNICATIONS COMPANY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Accountants..................................... F-2
Consolidated Balance Sheets as of September 30, 1998 and 1999......... F-3
Consolidated Statements of Operations and Retained Earnings
for the Years Ended September 30, 1997, 1998 and 1999.............. F-4
Consolidated Statements of Cash Flows for the Years Ended
September 30, 1997, 1998 and 1999.................................. F-5
Notes to Consolidated Financial Statements............................ F-6
Financial Statement Schedule for the Years Ended
September 30, 1997, 1998 and 1999
II- Valuation and Qualifying Accounts and Reserves................. F-18
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder
Allbritton Communications Company
In our opinion, the consolidated financial statements listed in the index on
page F-1 present fairly, in all material respects, the financial position of
Allbritton Communications Company (an indirectly wholly-owned subsidiary of
Perpetual Corporation) and its subsidiaries at September 30, 1998 and 1999, and
the results of their operations and their cash flows for each of the three years
in the period ended September 30, 1999, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Washington, D.C.
November 15, 1999
F-2
<PAGE>
<TABLE>
<CAPTION>
ALLBRITTON COMMUNICATIONS COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except share information)
September 30,
-------------
1998 1999
---- ----
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents.............................................. $ 13,849 $ 14,437
Accounts receivable, less allowance for doubtful
accounts of $1,371 and $1,424....................................... 33,568 35,093
Program rights......................................................... 17,199 18,057
Deferred income taxes.................................................. 1,706 1,262
Interest receivable from related party................................. 492 492
Other.................................................................. 2,003 2,434
-------- --------
Total current assets................................................ 68,817 71,775
Property, plant and equipment, net.......................................... 47,559 47,098
Intangible assets, net...................................................... 144,804 139,134
Deferred financing costs and other.......................................... 10,856 9,661
Cash surrender value of life insurance...................................... 5,648 7,015
Program rights ............................................................. 1,837 1,185
-------- --------
$ 279,521 $ 275,868
======== ========
LIABILITIES AND STOCKHOLDER'S INVESTMENT
Current liabilities
Current portion of long-term debt...................................... $ 1,436 $ 1,921
Accounts payable....................................................... 2,648 3,699
Accrued interest payable............................................... 11,156 11,156
Program rights payable................................................. 20,249 22,721
Accrued employee benefit expenses...................................... 4,860 4,470
Other accrued expenses................................................. 4,257 3,570
-------- --------
Total current liabilities........................................... 44,606 47,537
Long-term debt ............................................................. 428,255 427,708
Program rights payable...................................................... 1,722 1,672
Deferred rent and other..................................................... 3,436 3,048
Accrued employee benefit expenses........................................... 1,977 2,112
Deferred income taxes....................................................... 3,301 5,138
-------- --------
Total liabilities................................................... 483,297 487,215
-------- --------
Commitments and contingent liabilities (Note 9)
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...................................................... 45,426 54,054
Distributions to owners, net (Note 7).................................. (256,158) (272,357)
-------- -------
Total stockholder's investment...................................... (203,776) (211,347)
-------- -------
$ 279,521 $ 275,868
======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
ALLBRITTON COMMUNICATIONS COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(Dollars in thousands)
Years Ended September 30,
-------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Operating revenues, net................................... $172,828 $182,484 $187,288
------- ------- -------
Television operating expenses, excluding
depreciation and amortization......................... 105,630 106,147 109,549
Depreciation and amortization............................. 19,652 18,922 17,471
Corporate expenses........................................ 4,382 4,568 4,339
------- ------- -------
129,664 129,637 131,359
------- ------- -------
Operating income.......................................... 43,164 52,847 55,929
Nonoperating income (expense)
Interest income
Related party...................................... 2,212 2,222 2,480
Other ............................................ 221 1,117 280
Interest expense...................................... (42,870) (44,340) (42,154)
Other, net............................................ (1,193) (513) (1,190)
------- ------- -------
Income before income taxes and extraordinary loss......... 1,534 11,333 15,345
Provision for income taxes................................ 1,110 5,587 6,717
------- ------- -------
Income before extraordinary loss.......................... 424 5,746 8,628
Extraordinary loss on early repayment of debt,
net of income tax benefit of $3,176................... -- (5,155) --
------- ------- -------
Net income................................................ 424 591 8,628
Retained earnings, beginning of year...................... 45,102 44,835 45,426
Tax benefit distributed................................... (691) -- --
------- ------- -------
Retained earnings, end of year............................ $ 44,835 $ 45,426 $ 54,054
======= ======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
ALLBRITTON COMMUNICATIONS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Years Ended September 30,
-------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................. $ 424 $ 591 $ 8,628
-------- -------- --------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization......................... 19,652 18,922 17,471
Other noncash charges................................. 1,182 1,267 1,257
Noncash tax benefit distributed....................... (691) -- --
Extraordinary loss on early repayment of debt......... -- 5,155 --
Provision for doubtful accounts....................... 576 268 519
Loss (gain) on disposal of assets..................... 28 (53) (3)
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable............................... (5,926) 733 (2,044)
Program rights.................................... 1,042 (3,128) (206)
Receivable from related party..................... 1,578 -- --
Other current assets.............................. (342) 525 (431)
Other noncurrent assets........................... (545) (270) (1,313)
Deferred income taxes............................. 971 -- 444
Increase (decrease) in liabilities:
Accounts payable.................................. (2,471) (972) 1,051
Accrued interest payable.......................... 41 391 --
Program rights payable............................ (906) 1,287 2,422
Accrued employee benefit expenses................. 815 1,273 (255)
Other accrued expenses............................ 257 (682) (687)
Deferred rent and other liabilities............... (134) 369 (388)
Deferred income taxes............................. -- 2,346 1,837
-------- -------- --------
Total adjustments .............................. 15,127 27,431 19,674
-------- -------- --------
Net cash provided by operating activities....... 15,551 28,022 28,302
-------- -------- --------
Cash flows from investing activities:
Capital expenditures ................................. (12,140) (8,557) (9,849)
Purchase of option to acquire assets of WJSU.......... (5,348) -- --
Proceeds from disposal of assets...................... 125 367 40
-------- -------- --------
Net cash used in investing activities........... (17,363) (8,190) (9,809)
-------- -------- --------
Cash flows from financing activities:
Proceeds from issuance of debt........................ -- 150,000 --
Deferred financing costs.............................. -- (4,481) --
Prepayment penalty on early repayment
of debt............................................ -- (5,842) --
Draws (repayments) under lines of credit, net......... 10,600 (12,700) --
Principal payments on long-term debt and
capital leases..................................... (571) (124,322) (1,706)
Distributions to owners, net of certain charges....... (52,597) (134,814) (282,090)
Repayments of distributions to owners................. 39,693 118,755 265,891
-------- -------- --------
Net cash used in financing activities........... (2,875) (13,404) (17,905)
-------- -------- --------
Net (decrease) increase in cash and cash equivalents...... (4,687) 6,428 588
Cash and cash equivalents, beginning of year.............. 12,108 7,421 13,849
-------- -------- --------
Cash and cash equivalents, end of year.................... $ 7,421 $ 13,849 $ 14,437
======== ======== ========
Supplemental disclosure of cash flow information:
Cash paid for interest............................. $ 42,829 $ 43,949 $ 41,926
======== ======== ========
Cash paid for state income taxes................... $ 792 $ 105 $ 48
======== ======== ========
Non-cash investing and financing activities:
Equipment acquired under capital leases............ $ 2,549 $ 634 $ 1,528
======== ======== ========
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
</TABLE>
ALLBRITTON COMMUNICATIONS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
NOTE 1 - THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
Allbritton Communications Company (the Company) is an indirectly wholly-owned
subsidiary of Perpetual Corporation (Perpetual), a Delaware corporation, which
is controlled by Mr. Joe L. Allbritton. The Company owns and/or programs ABC
network-affiliated television stations serving seven diverse geographic markets:
Station Market
------- ------
WJLA Washington, D.C.
WBMA/WCFT/WJSU Birmingham (Anniston and Tuscaloosa), Alabama
WHTM Harrisburg-Lancaster-York-Lebanon, Pennsylvania
KATV Little Rock, Arkansas
KTUL Tulsa, Oklahoma
WSET Roanoke-Lynchburg, Virginia
WCIV Charleston, South Carolina
The Company also engages in various activities relating to the production and
distribution of television programming.
Consolidation-The consolidated financial statements include the accounts of the
Company and its wholly and majority-owned subsidiaries after elimination of all
significant intercompany accounts and transactions.
Use of estimates and assumptions-The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those estimates
and assumptions.
Revenue recognition-Revenues are generated principally from sales of commercial
advertising and are recorded as the advertisements are broadcast net of agency
and national representative commissions and music license fees. For certain
program contracts which provide for the exchange of advertising time in lieu of
cash payments for the rights to such programming, revenue is recorded as
advertisements are broadcast at the estimated fair value of the advertising time
given in exchange for the program rights.
Cash and cash equivalents-The Company considers all highly liquid investments
purchased with original maturities of three months or less to be cash
equivalents.
F-6
<PAGE>
ALLBRITTON COMMUNICATIONS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands)
Program rights-The Company has entered into contracts for the rights to
television programming. Payments related to such contracts are generally made in
installments over the contract period. Program rights which are currently
available and the liability for future payments under such contracts are
reflected in the consolidated balance sheets. Program rights are amortized
primarily using the straight-line method over the twelve month rental period.
Certain program rights with lives greater than one year are amortized using
accelerated methods. Program rights expected to be amortized in the succeeding
year and amounts payable within one year are classified as current assets and
liabilities, respectively. The program rights are reflected in the consolidated
balance sheets at the lower of unamortized cost or estimated net realizable
value based on management's expectation of the net future cash flows to be
generated by the programming.
Property, plant and equipment-Property, plant and equipment are recorded at cost
and depreciated over the estimated useful lives of the assets. Maintenance and
repair expenditures are charged to expense as incurred and expenditures for
modifications and improvements which increase the expected useful lives of the
assets are capitalized. Depreciation expense is computed using the straight-line
method for buildings and straight-line and accelerated methods for furniture,
machinery and equipment. Leasehold improvements are amortized using the
straight-line method over the lesser of the term of the related lease or the
estimated useful lives of the assets. The useful lives of property, plant and
equipment for purposes of computing depreciation and amortization expense are:
Buildings................................................. 15-40 years
Leasehold improvements.................................... 5-32 years
Furniture, machinery and equipment
and equipment under capital leases................. 3-20 years
Intangible assets-Intangible assets consist of values assigned to broadcast
licenses and network affiliations, favorable terms on contracts and leases and
the option to acquire the assets of WJSU (the Option) (see Note 2). The amounts
assigned to intangible assets were based on the results of independent
valuations and are amortized on a straight-line basis over their estimated
useful lives. Broadcast licenses and network affiliations are amortized over 40
years, the premiums for favorable terms on contracts and leases are amortized
over the terms of the related contracts and leases (19 to 25 years), and the
Option is amortized over the term of the Option and the associated local
marketing agreement (10 years). The Company assesses the recoverability of
intangible assets on an ongoing basis by evaluating whether amounts can be
recovered through undiscounted cash flows over the remaining amortization
period.
Deferred financing costs-Costs incurred in connection with the issuance of
long-term debt are deferred and amortized to other nonoperating expense on a
straight-line basis over the term of the underlying financing agreement. This
method does not differ significantly from the effective interest rate method.
F-7
<PAGE>
ALLBRITTON COMMUNICATIONS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands)
Deferred rent-Rent concessions and scheduled rent increases in connection with
operating leases are recognized as adjustments to rental expense on a
straight-line basis over the associated lease term.
Concentration of credit risk-Financial instruments that potentially subject the
Company to concentrations of credit risk consist principally of certain cash and
cash equivalents and receivables from advertisers. The Company invests its
excess cash with high-credit quality financial institutions and at September 30,
1999 had an overnight repurchase agreement with a financial institution for
$14,046. Concentrations of credit risk with respect to receivables from
advertisers are limited as the Company's advertising base consists of large
national advertising agencies and high-credit quality local advertisers. As is
customary in the broadcasting industry, the Company does not require collateral
for its credit sales which are typically due within thirty days.
Income taxes-The operations of the Company are included in a consolidated
federal income tax return filed by Perpetual. In accordance with the terms of a
tax sharing agreement between the Company and Perpetual, the Company is required
to pay to Perpetual its federal income tax liability, computed based upon
statutory federal income tax rates applied to the Company's consolidated taxable
income. The Company files separate state income tax returns with the exception
of Virginia which is included in a combined state income tax return filed by
Perpetual. In accordance with the terms of the tax sharing agreement, the
Company is required to pay to Perpetual its combined Virginia income tax
liability, computed based upon statutory Virginia income tax rates applied to
the Company's combined Virginia net taxable income. Taxes payable to Perpetual
are not reduced by losses generated in prior years by the Company. In addition,
the amounts payable by the Company to Perpetual under the tax sharing agreement
are not reduced if losses of other members of the Perpetual group are utilized
to offset taxable income of the Company for purposes of the Perpetual
consolidated federal or Virginia income tax returns.
The provision for income taxes is determined in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes,"
which requires that the consolidated amount of current and deferred income tax
expense for a group that files a consolidated income tax return be allocated
among members of the group when those members issue separate financial
statements. Perpetual allocates a portion of its consolidated current and
deferred income tax expense to the Company as if the Company and its
subsidiaries were separate taxpayers. The Company records deferred tax assets,
to the extent it is more likely than not that such assets will be realized in
future periods, and deferred tax liabilities for the tax effects of the
differences between the bases of its assets and liabilities for tax and
financial reporting purposes. To the extent a deferred tax asset would be
recorded due to the incurrence of net losses for federal or Virginia state
income tax purposes, any such benefit recognized is effectively distributed to
Perpetual as such benefit will not be recognized in future years pursuant to the
tax sharing agreement.
F-8
<PAGE>
ALLBRITTON COMMUNICATIONS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands)
Fair value of financial instruments-The carrying amount of the Company's cash
and cash equivalents, accounts receivable, accounts payable, accrued expenses
and program rights payable approximate fair value due to the short maturity of
those instruments. The Company estimates the fair value of its long-term debt
using either quoted market prices or by discounting the required future cash
flows under its debt using borrowing rates currently available to the Company,
as applicable.
Earnings per share-Earnings per share data are not presented since the Company
has only one shareholder.
NOTE 2 - LOCAL MARKETING AGREEMENT AND ASSOCIATED OPTION
In December 1995, the Company, through an 80%-owned subsidiary, entered into a
ten-year local marketing agreement (LMA) with the owner of WJSU, a television
station operating in Anniston, Alabama. The LMA provides for the Company to
supply program services to WJSU and to retain all revenues from advertising
sales. In exchange, the Company pays all station operating expenses and certain
management fees to the station's owner. The operating revenues and expenses of
WJSU are therefore included in the Company's consolidated financial statements
since December 1995. In connection with the LMA, the Company entered into the
Option to acquire the assets of WJSU. The cost of the Option totaled $15,348, of
which $10,000 was paid in December 1995 and $5,348 was paid in January 1997. The
Option is exercisable through December 2005, subject to certain conditions, for
additional consideration of $3,337. The Company exercised its option to acquire
WJSU on September 14, 1999 by entering into an asset purchase agreement for the
purchase of WJSU, subject to regulatory approval and customary closing
conditions.
F-9
<PAGE>
ALLBRITTON COMMUNICATIONS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands)
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
September 30,
-------------
1998 1999
--------- ---------
<S> <C> <C>
Buildings and leasehold improvements..................... $ 20,537 $ 21,207
Furniture, machinery and equipment....................... 103,498 106,581
Equipment under capital leases........................... 7,864 9,392
------- -------
131,899 137,180
Less accumulated depreciation............................ (89,075) (97,932)
------- -------
42,824 39,248
Land..................................................... 2,880 2,880
Construction-in-progress................................. 1,855 4,970
------- -------
$ 47,559 $ 47,098
======= =======
</TABLE>
Depreciation and amortization expense was $14,155, $13,233 and $11,801 for the
years ended September 30, 1997, 1998 and 1999, respectively, which includes
amortization of equipment under capital leases.
NOTE 4 - INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
September 30,
-------------
1998 1999
--------- ---------
<S> <C> <C>
Broadcast licenses and network affiliations.............. $150,243 $150,243
Option to purchase the assets of WJSU.................... 15,348 15,348
Other intangibles........................................ 7,648 7,648
------- -------
173,239 173,239
Less accumulated amortization............................ (28,435) (34,105)
------- -------
$144,804 $139,134
======= =======
</TABLE>
Amortization expense was $5,497, $5,689 and $5,670 for the years ended September
30, 1997, 1998 and 1999, respectively. The Company does not separately allocate
amounts between broadcast licenses and network affiliations.
F-10
<PAGE>
ALLBRITTON COMMUNICATIONS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands)
NOTE 5 - LONG-TERM DEBT
Outstanding debt consists of the following:
<TABLE>
September 30,
-------------
1998 1999
--------- ---------
<S> <C> <C>
Senior Subordinated Debentures, due November 30, 2007
with interest payable semi-annually at 9.75%........................... $275,000 $275,000
Senior Subordinated Notes, due February 1, 2008
with interest payable semi-annually at 8.875%.......................... 150,000 150,000
Revolving Credit Agreement, maximum amount of $40,000,
expiring April 16, 2001, secured by the outstanding stock of the Company and
its subsidiaries, interest payable quarterly at various rates from prime or
LIBOR plus 1% to 2%, depending
on certain financial operating tests................................... -- --
Master Lease Finance Agreement, maximum amount of $15,000, secured by the assets
acquired, interest payable monthly at variable rates as determined on the
acquisition date for each asset purchased (7.34%-8.93% at
September 30, 1999) (See Note 9)....................................... 5,756 5,578
------- -------
430,756 430,578
Less unamortized discount ................................................. (1,065) (949)
------- -------
429,691 429,629
Less current maturities.................................................... (1,436) (1,921)
------- -------
$428,255 $427,708
======= =======
</TABLE>
On January 22, 1998, the Company completed a $150,000 offering of its 8.875%
Senior Subordinated Notes due 2008 (the Notes). The cash proceeds of the
offering, net of offering expenses, were used to redeem the Company's 11.5%
Senior Subordinated Debentures due 2004 (the 11.5% Debentures) on March 3, 1998
with the balance used to repay certain amounts outstanding under the Company's
Revolving Credit Agreement. A prepayment penalty on the early repayment of the
11.5% Debentures and the accelerated amortization of the related unamortized
deferred financing costs totaled approximately $8,331 before applicable income
tax benefit of approximately $3,176. This loss was reflected as an extraordinary
loss of $5,155 in the consolidated statement of operations for the year ended
September 30, 1998.
Unamortized deferred financing costs of $10,018 and $8,877 at September 30, 1998
and 1999, respectively, are included in deferred financing costs and other
noncurrent assets in the accompanying consolidated balance sheets. Amortization
of the deferred financing costs for the years ended September 30, 1997, 1998 and
1999 was $1,031, $1,136 and $1,141 respectively, which is included in other
nonoperating expenses.
F-11
<PAGE>
ALLBRITTON COMMUNICATIONS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands)
Under the existing financing agreements, the Company is subject to restrictive
covenants which 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. The Company is also required to pay a commitment fee of
.375% per annum based on any unused portion of the Revolving Credit Agreement.
The Company estimates the fair value of its Senior Subordinated Debentures and
Senior Subordinated Notes to be approximately $428,200 and $416,000 at September
30, 1998 and 1999, respectively.
NOTE 6 - INCOME TAXES
The provision (benefit) for income taxes consists of the following:
Years ended September 30,
-------------------------
1997 1998 1999
------- ------- ------
Current
Federal.................... $ (691) $3,178 $3,879
State...................... 830 63 557
----- ----- -----
139 3,241 4,436
----- ----- -----
Deferred
Federal.................... 1,443 1,185 1,577
State...................... (472) 1,161 704
----- ----- -----
971 2,346 2,281
----- ----- -----
$1,110 $5,587 $6,717
===== ===== =====
The prepayment penalty on the early repayment of certain debt during the year
ended September 30, 1998 resulted in an extraordinary loss (see Note 5). The
extraordinary loss of $5,155 is presented net of the applicable income tax
benefit in the accompanying consolidated statement of operations. The $3,176
benefit for income taxes arising from the extraordinary loss consisted of a
$2,745 benefit for federal income tax purposes, a $258 benefit for local income
tax purposes and a $173 deferred tax benefit.
F-12
<PAGE>
ALLBRITTON COMMUNICATIONS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands)
The components of deferred income tax assets (liabilities) are as follows:
<TABLE>
<CAPTION>
September 30,
-------------
1998 1999
--------- ---------
<S> <C> <C>
Deferred income tax assets:
State and local operating loss carryforwards............. $ 2,716 $ 2,537
Deferred rent............................................ 1,091 926
Accrued employee benefits................................ 1,326 1,288
Allowance for accounts receivable........................ 545 565
Other.................................................... 346 283
------ ------
6,024 5,599
Less: valuation allowance................................ (2,013) (2,238)
------ ------
4,011 3,361
------ ------
Deferred income tax liabilities:
Depreciation and amortization ........................... (5,606) (7,237)
------ ------
Net deferred income tax liabilities........................... $(1,595) $(3,876)
====== ======
</TABLE>
The Company has approximately $52,194 in state and local operating loss
carryforwards in certain jurisdictions available for future use for state and
local income tax purposes which expire in various years from 2004 through 2014.
The change in the valuation allowance for deferred tax assets of $(233), $338
and $225 during the years ended September 30, 1997, 1998 and 1999, respectively,
principally resulted from management's evaluation of the recoverability of the
loss carryforwards.
The following table reconciles the statutory federal income tax rate to the
Company's effective income tax rate for income before extraordinary loss:
.........
<TABLE>
<CAPTION>
Years ended September 30,
------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate................................ 34.0% 34.0% 34.0%
State income taxes, net of federal income tax benefit............ 20.2 7.6 5.5
Non-deductible expenses, principally amortization of
certain intangible assets, insurance premiums and
meals and entertainment........................................ 33.2 4.7 2.7
Change in valuation allowance.................................... (15.2) 3.0 1.5
Other, net....................................................... 0.2 -- 0.1
---- ---- ----
Effective income tax rate........................................ 72.4% 49.3% 43.8%
==== ==== ====
</TABLE>
F-13
<PAGE>
ALLBRITTON COMMUNICATIONS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands)
NOTE 7 - TRANSACTIONS WITH OWNERS AND RELATED PARTIES
In the ordinary course of business, the Company makes cash advances in the form
of distributions to Perpetual. At present, the primary source of repayment of
the net advances from the Company is through the ability of the Company to pay
dividends or make other distributions. There is no immediate intent for these
amounts to be repaid. Accordingly, such amounts have been treated as a reduction
of stockholder's investment and described as "distributions" in the accompanying
consolidated balance sheets.
The following summarizes these and certain other transactions with related
parties:
<TABLE>
<CAPTION>
Years ended September 30,
-------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Distributions to owners, beginning of
year............................................. $224,450 $237,354 $256,158
Cash advances........................................ 52,597 137,992 286,418
Repayment of cash advances........................... (39,693) (118,755) (265,891)
Benefit (charge) for federal and state
income taxes..................................... 691 (433) (4,328)
Tax benefit distributed.............................. (691) -- --
------- ------- -------
Distributions to owners, end of year................. $237,354 $256,158 $272,357
======= ======= =======
Weighted average amount of non-interest
bearing advances outstanding during
the year......................................... $218,026 $230,642 $263,320
======= ======= =======
</TABLE>
Subsequent to September 30, 1999 and through November 15, 1999, the Company made
additional net distributions to owners of $8,966.
Included in distributions to owners is a $20,000 loan made in 1991 by the
Company to ALLNEWSCO, Inc. (Allnewsco), an affiliate of the Company which is
controlled by Mr. Joe L. Allbritton. This amount has been included in the
consolidated financial statements on a consistent basis with other cash advances
to related parties. The $20,000 note receivable from Allnewsco had stated
repayment terms consisting of annual principal installments approximating $2,220
commencing January 1997 through January 2005. During the years ended September
30, 1997 and 1998, the Company deferred the first two annual principal
installment payments pending renegotiation of the repayment terms. Effective
July 1, 1998, the note was amended to extend the maturity to January 2008 and
defer all principal installments until maturity, with the principal balance also
due upon demand. In exchange for the amendment, Allnewsco paid to the Company
the amount of $650. This amount is included in other noncurrent liabilities in
the accompanying consolidated balance sheets and is being amortized as an
adjustment of interest income over the remaining term of the amended note using
the interest method. The note has a stated interest rate
F-14
<PAGE>
ALLBRITTON COMMUNICATIONS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands)
of 11.06% and interest is payable semi-annually. During each of the years ended
September 30, 1997, 1998 and 1999, the Company earned interest income from this
note of approximately $2,200. At September 30, 1998 and 1999, interest
receivable from Allnewsco under this note totaled $492. Allnewsco is current on
its interest payments.
During the year ended September 30, 1999, the Company earned interest income
from Perpetual in the amount of $227 as a result of making advances of tax
payments in accordance with the terms of the tax sharing agreement between the
Company and Perpetual.
Management fees of $343, $344 and $504 were paid to Perpetual by the Company for
the years ended September 30, 1997, 1998 and 1999, respectively. The Company
also paid management fees to Mr. Joe L. Allbritton in the amount of $550 for
each of the years ended September 30, 1997, 1998 and 1999 and to Mr. Robert L.
Allbritton in the amount of $60 and $140 for the years ended September 30, 1998
and 1999, respectively. Management fees are included in corporate expenses in
the consolidated statements of operations.
The Company maintains banking relationships with and leases certain office space
from Riggs Bank N.A. (Riggs). Riggs is a wholly-owned subsidiary of Riggs
National Corporation, of which Mr. Joe L. Allbritton is the Chairman of the
Board of Directors and a significant stockholder. The majority of the Company's
cash and cash equivalents was on deposit with Riggs at September 30, 1998 and
1999. Additionally, the Company incurred $220, $263 and $275 in rental expense
related to office space leased from Riggs for the years ended September 30,
1997, 1998 and 1999, respectively.
NOTE 8 - RETIREMENT PLANS
A defined contribution savings plan is maintained for eligible employees of the
Company and certain of its affiliates. Under the plan, employees may contribute
a portion of their compensation subject to Internal Revenue Service limitations
and the Company contributes an amount equal to 50% of the contribution of the
employee not to exceed 6% of the compensation of the employee. The amounts
contributed to the plan by the Company on behalf of its employees totaled
approximately $691, $825 and $882 for the years ended September 30, 1997, 1998
and 1999, respectively.
The Company also contributes to certain other multi-employer union pension plans
on behalf of certain of its union employees. The amounts contributed to such
plans totaled approximately $316, $392 and $373 for the years ended September
30, 1997, 1998 and 1999, respectively.
F-15
<PAGE>
ALLBRITTON COMMUNICATIONS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands)
NOTE 9 - COMMITMENTS AND CONTINGENT LIABILITIES
The Company leases office and studio facilities and machinery and equipment
under operating and capital leases expiring in various years through 2007.
Certain leases contain provisions for renewal and extension. Future minimum
lease payments under operating and capital leases which have remaining
noncancelable lease terms in excess of one year as of September 30, 1999 are as
follows:
Operating Capital
Year ending September 30, Leases Leases
--------- -------
2000.............................. $ 3,670 $2,310
2001.............................. 3,403 1,988
2002.............................. 3,144 1,522
2003.............................. 3,116 458
2004.............................. 994 87
2005 and thereafter............... 919 --
------ -----
$15,246 6,365
======
Less: amounts representing imputed interest................. (787)
-----
5,578
Less: current portion........................................ (1,921)
-----
Long-term portion of capital lease obligations............... $3,657
=====
Rental expense under operating leases aggregated approximately $2,900 for each
of the years ended September 30, 1997, 1998 and 1999.
The Company has entered into contractual commitments in the ordinary course of
business for the rights to television programming which is not yet available for
broadcast as of September 30, 1999. Under these agreements, the Company must
make specific minimum payments approximating the following:
Year ending September 30,
2000................................................. $ 2,755
2001................................................. 20,622
2002................................................. 19,250
2003................................................. 9,745
2004................................................. 9,856
2005 and thereafter.................................. 7,567
------
$69,795
======
F-16
<PAGE>
ALLBRITTON COMMUNICATIONS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands)
The Company has entered into various employment contracts. Future payments
under such contracts as of September 30, 1999 approximate the following:
Year ending September 30,
2000................................................. $ 6,600
2001................................................. 1,995
2002................................................. 908
2003................................................. 458
2004................................................. 321
2005 and thereafter.................................. 415
------
$10,697
======
The Company has entered into various deferred compensation agreements with
certain employees. Under these agreements, the Company is required to make
payments aggregating approximately $3,242 during the years 2005 through 2013. At
September 30, 1998 and 1999, the Company has recorded a deferred compensation
liability of approximately $1,177 and $1,337, respectively, which is included as
a component of noncurrent accrued employee benefit expenses in the accompanying
consolidated balance sheets.
The Company currently and from time to time is involved in litigation incidental
to the conduct of its business, including suits based on defamation. 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
material adverse effect on the Company's consolidated financial condition,
results of operations or cash flows.
F-17
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
ALLBRITTON COMMUNICATIONS COMPANY
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(Dollars in thousands)
Balance at Charged Balance at
beginning to costs Charged to end of
Classification of year and expenses other accounts Deductions year
- -------------- ------- ------------ -------------- ---------- ----
<S> <C> <C> <C> <C> <C>
Year ended September 30, 1997:
Allowance for doubtful
accounts.................. $1,385 $576 -- $(343)(2) $1,618
===== === ==== === =====
Valuation allowance
for deferred income
tax assets................ $1,908 $574(1) -- $(807)(3) $1,675
===== === ==== === =====
Year ended September 30,1998:
Allowance for doubtful
accounts.................. $1,618 $268 -- $(515)(2) $1,371
===== === ==== === =====
Valuation allowance
for deferred income
tax assets................ $1,675 $338(1) -- $ -- $2,013
===== === ==== === =====
Year ended September 30,1999:
Allowance for doubtful
accounts.................. $1,371 $519 -- $(466)(2) $1,424
===== === ==== === =====
Valuation allowance
for deferred income
tax assets................ $2,013 $225(1) -- $ -- $2,238
===== === ==== === =====
- ----------
<FN>
(1) Represents valuation allowance established related to certain net
operating loss carryforwards and other deferred tax assets for state
income tax purposes.
(2) Write-off of uncollectible accounts, net of recoveries and collection fees.
(3) Represents net reduction of valuation allowance relating to certain net
operating loss carryforwards.
</FN>
</TABLE>
F-18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By: /s/ Lawrence I. Hebert
---------------------------
Lawrence I. Hebert
Chairman and Chief Executive Officer
Date: December 28, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
/s/ Joe L. Allbritton Chairman of the Executive December 28, 1999
- ------------------------
Joe L. Allbritton * Committee and Director
/s/ Barbara B. Allbritton Vice President and December 28, 1999
- -------------------------
Barbara B. Allbritton * Director
/s/ Lawrence I. Hebert Chairman, Chief Executive December 28, 1999
- -------------------------
Lawrence I. Hebert Officer and Director
(principal executive
officer)
/s/ Robert L. Allbritton President and Director December 28, 1999
- --------------------------
Robert L. Allbritton *
/s/ Frederick J. Ryan, Jr. Vice Chairman, Executive December 28, 1999
- --------------------------
Frederick J. Ryan, Jr.* Vice President, Chief
Operating Officer and
Director
/s/ W.E. Tige Savage Director December 28, 1999
- --------------------------
W.E. Tige Savage *
/s/ Stephen P. Gibson Vice President and December 28, 1999
- --------------------------
Stephen P. Gibson Chief Financial Officer
(principal financial
officer)
/s/ Elizabeth A. Haley Controller (principal December 28, 1999
- -------------------------- accounting officer)
Elizabeth A. Haley
*By Attorney-in-Fact
/s/ Jerald N. Fritz
Jerald N. Fritz
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit No. Description of Exhibit Page No.
<S> <C> <C>
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)
A-1
<PAGE>
Exhibit No. Description of Exhibit Page No.
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 Side Letter Amendment to Network Affiliation Agreement (Harrisburg *
Television, Inc.) dated August 10, 1999. (Incorporated by reference to
Exhibit 10.2 of Company's Quarterly Report on Form 10-Q, No. 333-02302,
dated August 16, 1999)
10.3 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)
10.4 Side Letter Amendment to Network Affiliation Agreement (First Charleston *
Corp.) dated August 10, 1999. (Incorporated by reference to Exhibit 10.4 of
Company's Quarterly Report on Form 10-Q, No. 333-02302, dated August 16,
1999)
10.5 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)
10.6 Side Letter Amendment to Network Affiliation Agreement (WSET, Incorporated) *
dated August 10, 1999. (Incorporated by reference to Exhibit 10.6 of
Company's Quarterly Report on Form 10-Q, No. 333-02302, dated August 16,
1999)
10.7 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)
10.8 Side Letter Amendment to Network Affiliation Agreement (WJLA-TV) dated *
August 10, 1999. (Incorporated by reference to Exhibit 10.8 of Company's
Quarterly Report on Form 10-Q, No. 333-02302, dated August 16, 1999)
A-2
<PAGE>
Exhibit No. Description of Exhibit Page No.
10.9 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)
10.10 Side Letter Amendment to Network Affiliation Agreement (KATV Television, *
Inc.) dated August 10, 1999. (Incorporated by reference to Exhibit 10.10 of
Company's Quarterly Report on Form 10-Q, No. 333-02302, dated August 16,
1999)
10.11 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)
10.12 Side Letter Amendment to Network Affiliation Agreement (KTUL Television, *
Inc.) dated August 10, 1999. (Incorporated by reference to Exhibit 10.12 of
Company's Quarterly Report on Form 10-Q, No. 333-02302, dated August 16,
1999)
10.13 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)
10.14 Amendment to Network Affiliation Agreement (TV Alabama, Inc.) dated January *
23, 1997. (Incorporated by reference to Exhibit 10.15 to the Company's
Quarterly Report on Form 10-Q, No. 333-02302, dated February 14, 1997)
10.15 Side Letter Amendment to Network Affiliation Agreement (TV Alabama, Inc.) *
dated August 10, 1999. (Incorporated by reference to Exhibit 10.15 of
Company's Quarterly Report on Form 10-Q, No. 333-02302, dated August 16,
1999)
10.16 Tax Sharing Agreement effective as of September 30, 1991 by and among *
Perpetual Corporation, ACC and ALLNEWSCO, Inc., amended as of October 29,
1993. (Incorporated by reference to Exhibit 10.11 of Company's Registration
Statement on Form S-4, No. 333-02302, dated March 12, 1996)
10.17 Second Amendment to Tax Sharing Agreement effective as of October 1, 1995 by *
and among Perpetual Corporation, ACC and ALLNEWSCO, Inc. (Incorporated by
reference to Exhibit 10.9 of the Company's Form 10-K, No. 333-02302, dated
December 22, 1998)
A-3
<PAGE>
Exhibit No. Description of Exhibit Page No.
10.18 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)
10.19 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)
10.20 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)
Master Lease Finance Agreement dated as of August 10, 1994 between
10.21 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)
10.22 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)
10.23 $20,000,000 Promissory Note of ALLNEWSCO, Inc. payable to KTUL, LLC. *
(Incorporated by reference to Exhibit 10.16 of Company's Form 10-K, No.
333-02302, dated December 22, 1998)
10.24 Asset Purchase Agreement dated as of September 14, 1999 by and between TV
Alabama, Inc. and Flagship Broadcasting Corporation.
21. Subsidiaries of the Registrant
24. Powers of Attorney
27. Financial Data Schedule (Electronic Filing Only)
- ----------------
*Previously filed
A-4
</TABLE>
<PAGE>
ASSET PURCHASE AGREEMENT
by and between
FLAGSHIP BROADCASTING CORPORATION
and
TV ALABAMA, INC.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1....................................................................2
DEFINITIONS AND REFERENCES...................................................2
ARTICLE 2....................................................................7
SALE AND PURCHASE OF ASSETS; PURCHASE PRICE; PAYMENT OF
PURCHASE PRICE; ASSUMPTION OF LIABILITIES...................................7
2.01 Asset Sale........................................................7
2.02 Purchase Price....................................................7
2.03 Payment of Purchase Price.........................................7
2.04 Assumption of Liabilities.........................................7
ARTICLE 3....................................................................8
REPRESENTATIONS AND WARRANTIES BY SELLER.....................................8
3.01 Organization and Standing.........................................8
3.02 Authorization.....................................................8
3.03 Litigation; Compliance with Law...................................9
3.04 Financial Statements and Condition; Liabilities...................9
3.05 Assets; Consents.................................................10
3.06 Condition of Tangible Assets.....................................11
3.07 Trademarks; Licenses.............................................11
3.08 Licenses.........................................................11
3.09 Reports and Records..............................................11
3.10 Contracts........................................................12
3.11 Conflicts........................................................12
3.12 Related Parties..................................................13
3.13 Taxes............................................................13
3.14 Employee Benefit Plans...........................................14
3.15 Environmental Matters............................................15
3.16 Labor Relations..................................................16
3.17 Broadcast of Programming.........................................17
3.18 Insurance........................................................17
3.19 Disclosure.......................................................17
ARTICLE 4...................................................................18
REPRESENTATIONS AND WARRANTIES BY BUYER.....................................18
4.01 Organization and Standing........................................18
4.02 Authorization....................................................18
4.03 Qualification as Licensee........................................18
ARTICLE 5...................................................................19
APPLICATION FOR COMMISSION CONSENT..........................................19
ARTICLE 6...................................................................19
HART-SCOTT-RODINO...........................................................19
ARTICLE 7...................................................................19
COVENANTS AND AGREEMENTS OF SELLER..........................................19
7.01 Negative Covenants...............................................19
7.02 Affirmative Covenants............................................21
7.03 Removal of Materials.............................................23
7.04 Confidentiality..................................................23
7.05 Employees........................................................23
ARTICLE 8...................................................................23
COVENANTS AND AGREEMENTS OF BUYER...........................................23
8.01 Confidentiality..................................................23
8.02 Corporate Action.................................................24
ARTICLE 9...................................................................24
CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE.........................24
9.01 Representations and Covenants....................................24
9.02 Consents.........................................................24
9.03 Delivery of Documents............................................24
9.04 FCC Order........................................................24
9.05 Title Insurance Commitment and Survey............................25
9.06 Legal Proceedings................................................25
9.07 Hart-Scott-Rodino................................................25
9.08 Absence of Material Change.......................................25
ARTICLE 10..................................................................25
CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE........................25
10.01 Representations and Covenants...................................25
10.02 Delivery of Documents...........................................26
10.03 FCC Order.......................................................26
10.04 Legal Proceedings...............................................26
10.05 Hart-Scott-Rodino...............................................26
ARTICLE 11..................................................................26
THE CLOSING.................................................................26
11.01 Closing.........................................................26
11.02 Delivery by Seller..............................................26
11.03 Delivery by Buyer...............................................28
ARTICLE 12..................................................................28
ALLOCATION OF PURCHASE PRICE AMONG ASSETS...................................28
ARTICLE 13..................................................................29
POSSESSION AND CONTROL......................................................29
ARTICLE 14..................................................................29
RISK OF LOSS................................................................29
ARTICLE 15..................................................................29
SURVIVAL; INDEMNIFICATION...................................................29
15.01 Survival of Seller's Representations............................29
15.02 Indemnification by Seller.......................................30
15.03 Survival of Buyer's Representations.............................30
15.04 Indemnification by Buyer........................................30
15.05 Conditions of Indemnification...................................31
ARTICLE 16..................................................................32
TERMINATION.................................................................32
ARTICLE 17..................................................................32
REMEDIES....................................................................32
17.01 Default by Buyer................................................32
17.02 Default by Seller...............................................32
17.03 Specific Performance............................................33
ARTICLE 18..................................................................33
GUARANTEE...................................................................33
ARTICLE 19..................................................................35
ADDITIONAL ACTIONS AND DOCUMENTS............................................35
ARTICLE 20..................................................................35
BROKERS.....................................................................35
ARTICLE 21..................................................................35
EXPENSES....................................................................35
ARTICLE 22..................................................................36
NOTICES.....................................................................36
ARTICLE 23..................................................................38
WAIVER......................................................................38
ARTICLE 24..................................................................38
BENEFIT AND ASSIGNMENT......................................................38
ARTICLE 25..................................................................39
REMEDIES CUMULATIVE.........................................................39
ARTICLE 26..................................................................39
ENTIRE AGREEMENT; AMENDMENT.................................................39
ARTICLE 27..................................................................39
SEVERABILITY................................................................39
ARTICLE 28..................................................................39
PRESS RELEASES..............................................................39
ARTICLE 29..................................................................40
HEADINGS....................................................................40
ARTICLE 30..................................................................40
GOVERNING LAW...............................................................40
ARTICLE 31..................................................................40
SIGNATURE IN COUNTERPARTS...................................................40
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered
into as of this 14th day of September, 1999 by and between FLAGSHIP BROADCASTING
CORPORATION, an Ohio corporation ("Seller"), and TV ALABAMA, INC., a Delaware
corporation, ("Buyer").
WHEREAS, Seller owns and operates Television Station WJSU-TV,
Channel 40, Anniston, Alabama, together with certain auxiliary facilities
(collectively, the "Station");
WHEREAS, RKZ Television, Inc. ("RKZ") and Allbritton
Communications Company ("ACC") are parties to that certain Option Agreement
dated as of December 21, 1995 whereby RKZ granted to ACC or its designated
affiliate the option to purchase the assets of the Station (the "Option
Agreement");
WHEREAS, pursuant to that certain Assignment and Assumption
Agreement dated as of February 1, 1996, ACC assigned to Allfinco, Inc., a
Delaware corporation ("Allfinco"), and Allfinco assigned to Buyer, all of ACC's
rights and obligations under the Option Agreement;
WHEREAS, pursuant to that certain Asset Purchase Agreement
dated as of July 7, 1997, RKZ assigned the Option Agreement to Seller which
assignment was consummated on October 2, 1997;
WHEREAS, Buyer exercised the Option pursuant to written notice
dated as of September 14, 1999; and
WHEREAS, Buyer agrees to purchase from Seller all the Assets
(as hereinafter defined), and Seller desires to sell all the Assets to Buyer,
all in accordance with and subject to the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements hereinafter set forth, and intending to be
legally bound, the parties hereto hereby agree as follows:
ARTICLE 1.
DEFINITIONS AND REFERENCES
As used herein, the following terms shall have the meanings
set forth below, unless the context otherwise requires:
"Accounts Receivable" means all accounts, notes or accounts
receivable with respect to the Station.
"Additional Agreements" shall have the meaning set forth in
Section 7.01(g).
"Applications" shall have the meaning set forth in Section 5.
"Assets" means the Station and all real, personal and mixed
assets, both tangible and intangible (including the business of the Station as a
"going concern"), wherever located, owned or held by Seller and which are used
or useful in the business and operation of the Station. Subject to the
provisions of Section 7, Assets shall include all such assets existing on the
date of this Agreement and all such assets acquired between that date and the
Closing Date, and shall include, without limitation, all of Seller's right,
title and interest in and to the following assets:
(a) that certain real property set forth and described in
Schedule 1(a).
(b) the leasehold interests in that certain real property
described in Schedule 1(b).
(c) all buildings, structures, fixtures, and other
improvements now or hereafter actually or
constructively attached to the Property, and all
modifications, additions, restorations, or replacements
of the whole or any part thereof, including, without
limitation, those described in Schedules 1(a) and 1(b)
(the "Improvements").
(d) as landlord (whether named as such therein or by
assignment or otherwise) in all leases and subleases,
if any, of the Property and the Improvements now
existing or at any time hereafter made, and any and all
amendments, modifications, supplements, renewals and
extensions thereof, together with all rents, royalties,
security deposits, revenues, issues, earnings, profits,
income and other benefits of the Property or the
Improvements now due or hereafter to become due with
respect to the Property or the Improvements or any part
thereof.
(e) in and to all streets, roads and public places, opened
or proposed, and all easements and rights of way,
public and private, rights and appurtenances, now or
hereafter used in connection with, or belonging,
incident or appertaining to, the Property or the
Improvements.
(f) all furniture, fixtures, furnishings, machinery,
equipment, inventory, supplies, antenna installations,
towers and other property, including, without
limitation, those described in Schedule 1(f).
(g) all of the Licenses (as hereinafter defined) for the
Station as more fully described in Schedule 1(g).
(h) all of the copyrights, trademarks and trade names
(including any and all applications, registrations,
extensions and renewals relating thereto), and all of
the rights associated therewith, including, without
limitation, those described in Schedule 1(h) and
Seller's rights to the call letters for the Station.
(i) all contracts, agreements, leases and other intangible
assets, including, without limitation, those trade-out
agreements and other contracts, agreements and leases
described in Schedule 1(i).
(j) all deposits and prepaid expenses, including, without
limitation, those described in Schedule 1(j).
(k) all automotive equipment and motor vehicles, including,
without limitation, those described in Schedule 1(k).
(l) all engineering, business and other books, papers,
files and records, but not the articles of
incorporation, by-laws, minute books, stock transfer
records, or other corporate records of Seller.
(m) all translators, earth stations, and other auxiliary
facilities, and all applications therefor.
"Assignment of Contracts" means that certain Assignment of
Contracts, dated as of the Closing Date and executed by Seller, substantially in
the form attached hereto as Exhibit D.
"Assignment of Leases" means that certain Assignment of
Leases, dated as of the Closing Date and executed by Seller, substantially in
the form attached hereto as Exhibit A.
"Assignment of Licenses" means that certain Assignment of
Licenses, dated as of the Closing Date and executed by Seller, substantially in
the form attached hereto as Exhibit C.
"Assumption Agreement" means that certain Assumption Agreement
dated as of the Closing Date and executed by Buyer and Seller, substantially in
the form attached hereto as Exhibit G.
"Bill of Sale" means that certain Bill of Sale and Assignment
of Assets, dated as of the Closing Date and executed by Seller, substantially in
the form attached hereto as Exhibit B.
"Claims" shall have the meaning specified in Section 15.05.
"Closing" means the closing of the purchase, assignment and
sale of the Assets contemplated hereunder.
"Closing Date" means the time and date on which the Closing
takes place, as established by Section 11.01.
"Commission" means the Federal Communications Commission.
"Deed" means the general warranty deed of Seller,
substantially in the form attached hereto as Exhibit E.
"Encumbrances" mean any mortgages, pledges, liens, claims,
security interests, agreements, restrictions, defects in title, easements,
encumbrances, or charges.
"FCC Order" means an order or orders of the Commission, or of
the Chief, Mass Media Bureau, acting under delegated authority, consenting to
the assignment to Buyer of the Licenses for the Station, as proposed in the
Applications therefor, without conditions which are adverse to Buyer or which in
any way diminish the operating rights with respect to the Assets and the
Station, except any such conditions expressly accepted by Buyer in writing.
"Final Order" means the FCC Order(s) as to which the time for
filing a request for administrative or judicial review, or for instituting
administrative review sua sponte, shall have expired without any such filing
having been made or notice of such review having been issued; or, in the event
of such filing or review sua sponte, as to which such filing or review shall
have been disposed of favorably to the grant and the time for seeking further
relief with respect thereto shall have expired without any request for such
further relief having been filed.
"Indemnified Party" and "Indemnifying Party" shall have the
respective meanings specified in Section 15.05.
"Licenses" means all of the licenses and other authorizations
issued by the Commission for the operation of the Station, as set forth in
Schedule 1(g).
"Option" means the option to purchase the Station granted by
Seller to Buyer, pursuant to the exercise of which this Agreement has been
entered into.
"Option Consideration" means the amount of Ten Million Dollars
($10,000,000) which Buyer has paid Seller pursuant to the terms of the Option
Agreement and any portion of the Supplemental Amount, if any, previously paid by
Buyer to Seller.
"Property" means, collectively, that certain real property
described in Schedule 1(a) and the leasehold interests in that certain real
property described in Schedule 1(b).
"Purchase Price" means the amount of Twelve Million Dollars
($12,000,000) and up to an additional amount of Seven Million Dollars
($7,000,000) in the event that the Supplemental Amount has been paid by Buyer to
Seller as specified in Section 2.3 of the Option Agreement.
"Station Contracts" shall have the meaning set forth in
Section 3.10.
"Supplemental Amount" shall have the meaning set forth in the
Option Agreement.
"Survey" means the surveys for all parcels of real property
described on Schedule 1(a), each of which shall be prepared by a registered land
surveyor licensed in the State of Alabama (the "Surveyor"), certified by the
Surveyor to Buyer and Buyer's lender, and showing (a) the location of all lot
and street lines, (b) the location of encroachments, overhangs or projections by
buildings or improvements erected on adjacent lands or on such real property,
(c) means of ingress and egress to public roads, (d) the location of all utility
and other easements, rights of way, set-back lines and other matters of record
affecting such real property; (e) a description and the location of all existing
improvements (including parking areas), and (f) such other facts and information
as Buyer may require.
"TBA" means that certain Time Brokerage Agreement, dated as of
December 21, 1995, by and between Seller and Buyer.
"Title Insurance Commitment" means an irrevocable title
insurance commitment issued by a title insurance company acceptable to Buyer
with respect to the real property described in Schedule 1(a) for (i) a prepaid
owner's policy of title insurance (on ALTA Form B 1990 or form offering similar
coverage), showing fee simple title to the real property described in Schedule
1(a) in Buyer, with no exception as to survey matters, no standard pre-printed
exceptions, no creditors' rights exceptions, no exceptions for mechanics and
materialmen's liens, no gap exceptions, and affirmative coverage as Buyer may
reasonably request, and (ii) a prepaid full-coverage mortgagee policy of title
insurance (on the ALTA 1990 form or form offering similar coverage), naming
Buyer's lender as the insured party, with no exception as to survey matters, no
standard pre-printed exceptions, no creditors' rights exceptions, no exceptions
for mechanics and materialmen's liens, no gap exceptions, and affirmative
coverage as Buyer may reasonably request, insuring that the mortgage of Buyer's
lender constitutes a valid and recorded first lien on a good and marketable fee
simple interest in the real property described in Schedule 1(a). The dollar
amount of each policy shall be equal to the amount of consideration allocated to
the real property pursuant to Section 12.
All references to Sections, Exhibits and Schedules are to
Sections of and Exhibits and Schedules to this Agreement.
ARTICLE 2.
SALE AND PURCHASE OF ASSETS; PURCHASE PRICE; PAYMENT OF
PURCHASE PRICE; ASSUMPTION OF LIABILITIES
2.01 ASSET SALE.
On the basis of the representations, warranties and agreements
contained herein, and subject to the terms and conditions hereof, Seller agrees
to sell, assign, transfer, convey and deliver to Buyer, and Buyer agrees to
purchase from Seller, the Assets at the Closing.
2.02 PURCHASE PRICE.
For and in consideration of the conveyances and assignments
described herein and in addition to the assumption of liabilities as set forth
in Section 2.04, Buyer agrees to pay to Seller, and Seller agrees to accept from
Buyer, the Purchase Price (less the Option Consideration), subject to adjustment
for payment of expenses as provided for in Section 21. The Purchase Price shall
be payable as described in Section 2.03. The Purchase Price shall be allocated
among the Assets in accordance with Section 12.
2.03 PAYMENT OF PURCHASE PRICE.
On the Closing Date, the Buyer shall pay the adjusted Purchase
Price (as calculated in accordance with Section 2.02) to Seller by wire transfer
of immediately available funds.
2.04 ASSUMPTION OF LIABILITIES.
At the Closing, Buyer shall assume only the following
liabilities and obligations of Seller (the "Assumed Liabilities"): (a) the
liabilities and obligations of Seller to be performed after the Closing Date
under the contracts, agreements and leases set forth and described in Schedules
1(b) and 1(i) and (b) the liabilities and obligations of Seller to be performed
after the Closing Date under any contracts, agreements and leases which are
entered into after the date hereof (in compliance with Section 7) and which are
identified in the certificate referred to in Section 11.02(c). Buyer shall not
assume or be deemed to assume any debts, liabilities or obligations of Seller
except as specified in this Section 2.04. All such assumptions pursuant to this
Section 2.04 shall be subject to Buyer's confirmation with creditors of existing
unperformed obligations.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES BY SELLER
Seller represents and warrants to Buyer as follows:
3.01 ORGANIZATION AND STANDING.
Seller is a corporation duly organized, validly existing and
in good standing under the laws of the State of Ohio and authorized to conduct
business in the State of Alabama. Neither the nature of the business conducted
by Seller, nor the character of the properties owned, leased or otherwise held
by Seller makes any such qualification necessary in any other state, country,
territory or jurisdiction. Seller has the full and unrestricted power and
authority, corporate and otherwise, to own, lease and operate the Assets, to
carry on its business as now conducted, and to enter into and perform the terms
of this Agreement, the agreements, and instruments referred to herein, and the
transactions contemplated hereby and thereby.
3.02 AUTHORIZATION.
The execution, delivery and performance of this Agreement and
of the agreements and instruments called for hereunder, and the consummation of
the transactions contemplated hereby and by such agreements and instruments have
been duly and validly authorized by all necessary actions of Seller (none of
which actions has been modified or rescinded and all of which actions are in
full force and effect). This Agreement constitutes, and upon execution and
delivery each other agreement and instrument will constitute, a valid and
binding agreement and obligation of Seller, enforceable in accordance with its
respective terms. Except as specified in Section 3.05, the execution, delivery
and performance by Seller of this Agreement and the agreements and instruments
called for hereunder will not require the consent, approval or authorization of
any person, entity or governmental authority.
3.03 LITIGATION; COMPLIANCE WITH LAW.
There is no action, suit, investigation, claim, arbitration or
litigation pending or, so far as Seller knows, threatened against or involving
either Seller, the Assets, the Station or the Station's business and operations,
at law or in equity, or before or by any court, arbitrator or governmental
authority, and neither Seller nor the Station is operating under or subject to
any order, judgment, decree or injunction of any court, arbitrator or
governmental authority, except for those listed in Schedule 3.03. Seller has
complied and is in compliance in all material respects with all laws,
ordinances, regulations, awards, orders, judgments, decrees and injunctions
applicable to Seller, to the Assets, to the Station and to its business and
operations, including all federal, state and local laws, ordinances, regulations
and orders pertaining to employment or labor, safety, health, environmental
protection, zoning and other matters. Seller has obtained all material permits,
licenses and approvals (none of which has been modified or rescinded and all of
which are in full force and effect) from all governmental authorities necessary
in order to conduct the operation of the Station as presently conducted and to
own, use and maintain the Assets.
3.04 FINANCIAL STATEMENTS AND CONDITION; LIABILITIES.
3.04(a) Seller has prepared and/or furnished to Buyer the
balance sheets of Seller as of the dates specified on Schedule 3.04(a), and the
statements of income, stockholders' equity and changes in financial position for
the periods specified on Schedule 3.04(a). All of the financial statements,
including, without limitation, the notes thereto, referred to in Schedule
3.04(a) or furnished to Buyer after the date hereof pursuant to this Agreement:
(i) are in accordance with the books and records of the Seller, (ii) are true,
correct and complete in all material respects and present fairly the financial
position of Seller as of the respective dates and the results of operations and
changes in cash flow for the respective periods indicated, and (iii) have been
prepared in accordance with generally accepted accounting principles applied on
a basis consistent with prior accounting periods. All deposits and prepaid
expenses, if any, included as assets of Seller represent bona fide deposits or
payments theretofore made by Seller, the benefit and advantage of which will be
obtained and enjoyed by Seller and, after the Closing Date, by Buyer.
3.04(b) Except as reflected in the balance sheets as of July
31, 1999, including the notes thereto, there exist no liabilities of Seller,
contingent or absolute, matured or unmatured, known or unknown. Since July 31,
1999, (i) Seller has not made any contract, agreement or commitment or incurred
any obligation or liability (contingent or otherwise), except in the ordinary
course of business and consistent with past business practices, (ii) there has
not been any discharge or satisfaction of any obligation or liability owed to
Seller, which is not in the ordinary course of business or which is inconsistent
with past business practices, or (iii) there has not occurred any loss or
material injury to the Assets as the result of any fire, accident, act of God or
the public enemy, or other casualty, or any adverse material change in the
Assets.
3.05 ASSETS; CONSENTS.
3.05(a) The Assets to be acquired at the Closing constitute
all of the real, personal, and mixed assets, both tangible and intangible, that
are used, held for use or necessary for the business and operations of the
Station as presently conducted.
3.05(b) Seller is the sole and exclusive legal and equitable
owner of all right, title and interest in and has good, marketable, and
insurable title to the Assets, free and clear of any Encumbrances, except for
and subject only to (i) liens for real estate taxes not yet due and payable,
(ii) existing easements of record on real property which do not materially
impair the use of such property for the purposes contemplated hereunder, and
(iii) those encumbrances set forth in Schedule 3.05(b), which shall be removed
prior to or contemporaneously with the Closing Date.
3.05(c) On the Closing Date, Buyer shall acquire good,
marketable and insurable title to, and all right, title and interest in, the
Assets, free and clear of all Encumbrances, except for and subject only to liens
for real estate taxes not yet due and payable and existing easements of record
on real property which do not materially impair the use of such property for the
purposes contemplated hereunder.
3.05(d) All of the Assets to be transferred hereunder are
transferable by Seller by Seller's sole act and deed, and no consent on the part
of any other person is necessary to validate the transfer to Buyer, except (i)
the Licenses described in Schedule 1(g) are not assignable without the consent
of the Commission as provided by law and (ii) certain of the agreements
described in Schedules 1(b) and 1(i), as specified in Schedule 3.05(d), may be
assigned only with the consent of third parties.
3.05(e) The Property and all of the Improvements have direct
and unobstructed access to all public utilities necessary for the uses to which
the Property and all of the Improvements are presently devoted by Seller and to
a public street. No portion of the Property or any Improvement is the subject
of, or affected by, any condemnation or eminent domain proceedings currently
instituted or pending, and so far as Seller knows, no such proceedings are
threatened. The Property and the Improvements are not subject to any covenant or
other restriction preventing or limiting Seller's right to convey Seller's
right, title and interest in the Property and the Improvements or to use the
Property and the Improvements for the various purposes for which the Property
and the Improvements are being used.
3.06 CONDITION OF TANGIBLE ASSETS.
All tangible Assets are in good operating condition and
repair, and are suitable, adequate and fit for the uses for which they are
intended or are being used; and the present use of such Assets do not violate in
any material respect any applicable licenses, statutes, or building, fire,
zoning, health and safety or any other laws or regulations. Without limiting the
foregoing, such tangible assets and operations thereof do not result in exposure
of workers or the general public to levels of radio frequency radiation in
excess of the "Radio Frequency Protection Guides" recommended in "American
National Standard Safety Levels With Respect to Human Exposure to Radio
Frequency Electromagnetic Fields, 300 KHz to 100 GHz," issued by the American
National Standards Institute and which the Commission has incorporated in its
rules and regulations.
3.07 TRADEMARKS; LICENSES.
Schedule 1(h) contains a true and complete listing of all
franchises, licenses, trademarks, trade names, copyrights and applications
therefor owned or licensed by or registered in the name of Seller and used or
held for use in the business and operations of the Station, other than the
Licenses, all of which are transferable to Buyer by the sole act and deed of
Seller; and no consent on the part of any other person is necessary to validate
the transfer to Buyer. Seller pays no royalty to anyone under any of the
foregoing. Seller owns or possesses all rights to use all franchises, licenses,
service marks, trademarks, trade names, copyrights, patents and applications
therefor necessary to the conduct of the business of the Station. Seller does
not have any knowledge nor has Seller received any notice to the effect that any
service rendered by Seller relating to the business of the Station may infringe
on any trademark, service mark, trade name, copyright, patent, trade secret or
legally protectable right of another.
3.08 LICENSES.
The Licenses for the Station are valid through April 1, 2005
and there are no orders, complaints, proceedings or investigations, pending or,
so far as Seller knows, threatened, which would affect the validity of the
Licenses.
3.09 REPORTS AND RECORDS.
During the current term of the Licenses, all returns, reports
and statements relating to the Station currently required to be filed by Seller
with the Commission or any other governmental instrumentality have been filed
and complied with and are true, correct and complete in all material respects.
All such reports, returns and statements shall continue to be filed on a current
basis until the Closing Date, and will be true, correct, and complete in all
material respects. During the current term of the Licenses, all documents
required by the Commission's rules to be placed in the Station's public files
have been placed and are being held in such files. During the current term of
the Licenses, all logs and business records of every type and nature relating to
the business and operations of the Station, including but not limited to
political and public record files, program, operating and maintenance logs,
equipment performance measurements, policies or evidence of insurance, licenses,
payroll, social security and withholding tax returns, operator agreements and
other records pertaining to the business and operations of the Station have been
maintained in all material respects in accordance with good business practices
and the rules of the Commission and are, to the extent required, at the Station.
3.10 CONTRACTS.
The contracts, agreements and leases set forth and described
in Schedules 1(b), and 1(i) are all of the contracts, agreements, leases and
commitments (both written and oral) relating to the Assets, to the Station or to
the business and operations thereof, other than (i) contracts for the sale of
advertising for cash, which are not for a term longer than thirty (30) days, and
(ii) contracts or commitments which do not require payments of more than $5,000
each or $20,000 in the aggregate. Seller has delivered to Buyer prior to the
execution of this Agreement true and complete copies or descriptions of all
contracts, agreements, leases and commitments (and all amendments and
modifications thereto) relating to the Assets, the Station or to the business
and operations thereof (collectively, the "Station Contracts"). The unperformed
obligations ascertainable from the terms on the face of the Station Contracts
are the existing unperformed obligations thereunder. Each Station Contract is in
full force and effect, and constitutes a valid and binding obligation of, and is
legally enforceable in accordance with its terms against, the parties thereto.
The parties thereto have complied with all of the material provisions of the
Station Contracts and are not in default thereunder, and there has not occurred
any event which (whether with or without notice, lapse of time, or the happening
or occurrence of any other event) would constitute such a default. There has not
been (i) any failure of any party to any Station Contract to comply with all
material provisions thereof, (ii) any default by any party thereunder, (iii) any
threatened cancellation thereof, (iv) any outstanding dispute thereunder, or (v)
any basis for any claim of breach or default thereunder.
3.11 CONFLICTS.
Except as set forth in Schedule 3.11, the execution and
delivery of this Agreement and the agreements and instruments called for
hereunder, the fulfillment of and the compliance with the respective terms and
provisions of each, and the consummation of the transactions described in each,
do not and will not conflict with or violate any law, ordinance, regulation,
order, award, judgment, injunction or decree applicable to Seller, to the Assets
or to the Station, or conflict with or result in a breach of or constitute a
default under any of the terms, conditions or provisions of Seller's articles of
incorporation or bylaws, or any contract, agreement, lease, commitment, or
understanding to which Seller is a party or by which Seller is bound or to which
any of the Assets or the Station is subject, or result in the acceleration of
any indebtedness or in the creation of any Encumbrance upon the Assets.
3.12 RELATED PARTIES.
Neither Seller nor any shareholder, officer or director of
Seller has any interest whatsoever in any corporation, firm, partnership or
other business enterprise which has had any business transactions with Seller
relating to the Assets or the Station, and no shareholder of Seller has entered
into any transaction with Seller relating to the Assets or the Station, except
for those set forth in Schedule 3.12.
3.13 TAXES.
The Seller has timely filed with all appropriate governmental
agencies all federal, state, commonwealth, local, and other tax or information
returns and tax reports (including, but not limited to, all income tax,
unemployment compensation, social security, payroll, sales and use, profit,
excise, privilege, occupation, property, ad valorem, franchise, license, school
and any other tax under the laws of the United States or of any state or any
commonwealth or any municipal entity or of any political subdivision with valid
taxing authority) due for all periods ended on or before the date hereof. Seller
has paid in full all federal, state, commonwealth, foreign, local and other
governmental taxes, estimated taxes, interest, penalties, assessments and
deficiencies (collectively, "Taxes") which have become due pursuant to such
returns or without returns or pursuant to any assessments received by Seller.
Such returns and forms are true, correct and complete in all material respects,
and Seller has no liability for any Taxes in excess of the Taxes shown on such
returns. Seller is not a party to any pending action or proceeding, and, to
Seller's knowledge, there is no action or proceeding threatened by any
government or authority against Seller for assessment or collection of any
Taxes, and no unresolved claim for assessment or collection of any Taxes has
been asserted against Seller.
3.14 EMPLOYEE BENEFIT PLANS.
3.14(a) Except as described in Schedule 3.14(a), neither
Seller nor any Affiliates (as defined below) have at any time established,
sponsored, maintained, or made any contributions to, or been parties to any
contract or other arrangement or been subject to any statute or rule requiring
them to establish, maintain, sponsor, or make any contribution to, (1) any
"employee pension benefit plan" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended, and regulations thereunder
("ERISA")) ("Pension Plan"); (ii) any "employee welfare benefit plan" (as
defined in Section 3(1) of ERISA) ("Welfare Plan"); or (iii) any deferred
compensation, bonus, stock option, stock purchase, or other employee benefit
plan, agreement, commitment, or arrangement ("Other Plan"). Seller and the
Affiliates have no obligations or liabilities (whether accrued, absolute,
contingent, or unliquidated, whether or not known, and whether due or to become
due) with respect to any "employee benefit plan" (as defined in Section 3(3) of
ERISA) or Other Plan that is not listed in Schedule 3.14(a). For purposes of
this Section 3.14, the term "Affiliate" shall include all persons under common
control with Seller within the meaning of Sections 4001(a)(14) or (b)(1) of
ERISA or any regulations promulgated thereunder, or Sections 414(b), (c), (m) or
(o) of the Internal Revenue Code of 1986, as amended (the "Code").
3.14(b) Each plan or arrangement listed in Schedule 3.14(a)
(and any related trust or insurance contract pursuant to which benefits under
such plans or arrangements are funded or paid) has been administered in all
respects in full compliance with its terms and in both form and operation is in
compliance with applicable provisions of ERISA, the Code, the Consolidated
Omnibus Budget Reconciliation Act of 1986 and regulations thereunder, and other
applicable law. Each Pension Plan listed in Schedule 3.14(a) has been determined
by the Internal Revenue Service to be qualified under Section 401(a) and, if
applicable, Section 401(k) of the Code, and nothing has occurred or been omitted
since the date of the last such determination that resulted or could result in
the revocation of such determination. Seller and the Affiliates have made all
required contributions or payments to or under each plan or arrangement listed
in Schedule 3.14(a) on a timely basis and have made adequate provision for
reserves to meet contributions and payments under such plans or arrangements
that have not been made because they are not yet due.
3.14(c) The consummation of this Agreement (and the employment
by Buyer of former employees of Seller or any employees of an Affiliate) will
not result in any carryover liability to Buyer for taxes, penalties, interest or
any other claims resulting from any employee benefit plan (as defined in Section
3(3) of ERISA) or Other Plan. In addition, Seller and each Affiliate make the
following representations (i) as to all of their Pension Plans: (A) neither
Seller nor any Affiliate has become liable to the PBGC under ERISA under which a
lien could attach to the assets of Seller or an Affiliate; (B) Seller and each
Affiliate has not ceased operations at a facility so as to become subject to the
provisions of Section 4062(e) of ERISA; and (C) Seller and each Affiliate has
not made a complete or partial withdrawal from a multiemployer plan (as defined
in Section 3(37) of ERISA) so as to incur withdrawal liability as defined in
Section 4201 of ERISA, and (ii) all group health plans maintained by the Seller
and each Affiliate have been operated in compliance with Section 4980B(f) of the
Code.
3.14(d) The parties agree that Buyer does not and will not
assume the sponsorship of, or the responsibility for contributions to, or any
liability in connection with, any Pension Plan, any Welfare Plan, or Other Plan
maintained by Seller or an Affiliate for its employees, former employees,
retirees, their beneficiaries or any other person. In addition and not as a
limitation of the foregoing covenant, the parties agree that Seller and such
Affiliate shall be liable for any continuation coverage (including any
penalties, excise taxes or interest resulting from the failure to provide
continuation coverage) required by Section 4980B of the Code due to qualifying
events which occur on or before Closing Date.
3.15 ENVIRONMENTAL MATTERS.
3.15(a) For purposes of this section, "Hazardous Materials"
means any wastes, substances, or materials, whether solids, liquids or gases,
that are deemed hazardous, toxic, pollutants, or contaminants, including but not
limited to substances defined as "hazardous wastes," "hazardous substances,"
"toxic substances," "radioactive materials," or other similar designations in,
or otherwise subject to regulation under, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, ("CERCLA") as amended by the
Superfund Amendments and Reauthorization Act of 1986 ("SARA"), 42 U.S.C. ss.
9601 et seq.; the Toxic Substance Control Act ("TSCA"), 15 U.S.C. ss. 2601 et
seq.; the Hazardous Materials Transportation Act, 49 U.S.C. ss. 1802 et seq.;
the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. ss. 9601 et seq.;
the Clean Water Act ("CWA"), 33 U.S.C. ss. 1251 et seq.; the Safe Drinking Water
Act, 42 U.S.C. ss. 300f et seq.; the Clean Air Act ("CAA"), 42 U.S.C. ss. 7401
et seq.; or other applicable federal, state, or local laws, including any plans,
rules, regulations, orders, or ordinances adopted, or other criteria and
guidelines promulgated pursuant to the preceding laws or other similar laws,
regulations, rules, orders, or ordinances now or hereafter in effect relating to
the protection of human health and the environment (collectively "Environmental
Laws"). "Hazardous Materials" includes but is not limited to polychlorinated
biphenyls (PCBs), asbestos and lead-based paints.
3.15(b)Seller's Environmental Representations and Warranties.
Seller hereby represents and warrants that except as set forth on
Schedule 3.15(b):
(i) There are no pending or, to Seller's
knowledge threatened, actions, suits, claims, legal proceedings or any other
proceedings based on Hazardous Materials or the Environmental Laws at the
Property, or any part thereof, or otherwise arising from Seller's activities
at the Property involving Hazardous Materials;
(ii) To Seller's knowledge, there are no
conditions, facilities, procedures or any other facts
or circumstances which could give rise to claims, expenses, losses, liabilities,
or governmental action against Buyer in connection with any Hazardous Materials
present at or disposed of from the Property, including without limitation the
following conditions arising out of, resulting from, or attributable to, the
assets, business, or operations of Seller at the Property: (A) the presence of
any Hazardous Materials on the Property or the release or threatened release of
any Hazardous Materials into the environment from the Property; (B) the off-site
disposal of Hazardous Materials originating on or from the Property or the
business or operations of Seller; (C) the release or threatened release of any
Hazardous Materials into any storm drain, sewer, septic system or publicly owned
treatment works; (D) any noncompliance with federal, state or local requirements
governing occupational safety and health, or presence or release in the air and
water supply systems of the Property of any substances that pose a hazard to
human health or an impediment to working conditions; or (E) any facility
operations, procedures or designs, which do not conform to the statutory or
regulatory requirements of any Environmental Laws.
(iii) To Seller's knowledge, neither
polychlorinated biphenyls nor asbestos-containing materials are present on or in
the Property.
(iv) The Property contains no underground
storage tanks, or underground piping associated with tanks, used currently or,
to Seller's knowledge, in the past for the management of Hazardous Materials.
3.16 LABOR RELATIONS.
There are no strikes, work stoppages, grievance proceedings,
union organization efforts, or other controversies pending or threatened between
Seller and any of its employees or agents or any union or collective bargaining
unit. Seller has complied and is in compliance in all material respects with all
laws and regulations relating to the employment of labor, including without
limitation provisions relating to wages, hours, collective bargaining,
occupational safety and health, equal employment opportunity, and the
withholding of income taxes and social security contributions. Except as set
forth in Schedule 3.16 hereto, there are no collective bargaining agreements or
employment agreements between Seller and any of its employees. The consummation
of the transactions contemplated hereby will not cause Buyer to incur or suffer
any liability relating to, or obligation to pay, severance, termination, or
other payments to any person or entity. Except as set forth in Schedule 3.16
hereto, no employee of Seller has any contractual right to continued employment
by Seller following consummation of the transactions contemplated by this
Agreement. Seller has previously delivered to Buyer an accurate and complete
list, a date no more than fourteen (14) days prior to the date of this
Agreement, of all employees of Seller and the rate of compensation (including
salary, bonuses and commissions) of each such employee.
3.17 BROADCAST OF PROGRAMMING
The motion pictures, feature films, and syndicated programs
for which Seller has obtained broadcast rights have been scheduled and broadcast
in the ordinary course of business, consistent with Seller's past business
practices and with customary practices in the television broadcast industry.
3.18 INSURANCE.
Schedule 3.18 contains a list and brief description of all
policies of title, property, fire, casualty, liability, life, workmen's
compensation, business interruption and other forms of insurance of any kind
relating to the Assets or the business and operations of the Station and owned
or held by Seller. All such policies: (i) are in full force and effect; (ii) are
sufficient for compliance in all material respects by Seller with all
requirements of law and of all agreements to which Seller is a party; (iii) are
valid, outstanding, and enforceable policies; and (iv) insure against risks of
the kind customarily insured against and in amounts customarily carried by
corporations similarly situated and provide adequate insurance coverage for the
Assets and the Station (including the business and operations thereof).
3.19 DISCLOSURE.
All facts of material importance to the Assets, to the Station
and to the business of Seller have been fully and truthfully disclosed to Buyer
in this Agreement. No representation or warranty by Seller and no document,
statement, certificate, schedule or exhibit to be furnished or delivered to
Buyer pursuant to or in connection with this Agreement contains or will contain
any material untrue or misleading statement of fact or omits or will omit any
fact necessary to make the statements contained herein or therein not materially
misleading.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES BY BUYER
Buyer represents, warrants and covenants to Seller as follows:
4.01 ORGANIZATION AND STANDING.
Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and by the Closing Date
will be duly qualified to do business as a foreign corporation in Alabama. Buyer
has the full and unrestricted power and authority, corporate and otherwise, to
enter into and perform the terms of this Agreement, the agreements and
instruments referred to herein, and the transactions contemplated hereby and
thereby.
4.02 AUTHORIZATION.
The execution, delivery and performance of this Agreement and
of the agreements and instruments called for hereunder, and the consummation of
the transactions contemplated hereby and thereby, have been duly and validly
authorized by all necessary actions of Buyer (none of which actions has been
modified or rescinded and all of which actions are in full force and effect).
This Agreement constitutes, and upon execution and delivery each other agreement
and instrument will constitute, a valid and binding agreement and obligation of
Buyer, enforceable in accordance with its respective terms. Except for the
consent of the Commission to the assignment to Buyer of the Licenses described
in Schedule 1(g), the pre-merger notification clearance required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and any
consents which may be required from certain lenders of Buyer as described in
Schedule 4.02, the execution, delivery and performance by Buyer of this
Agreement and the agreements and instruments called for hereunder will not
require the consent, approval or authorization of any person, entity or
governmental authority.
4.03 QUALIFICATION AS LICENSEE.
Except for possible contour overlap with television station
WCFT-TV, Tuscaloosa, Alabama, Buyer knows of no reason why it should not be
found by the Commission to be qualified under the Communications Act of 1934, as
amended, and the Commission's rules and regulations to become the licensee of
the Station.
ARTICLE 5.
APPLICATION FOR COMMISSION CONSENT
As promptly as practicable and no later than ten (10) business
days following the execution of this Agreement, Seller and Buyer shall take all
steps reasonably necessary to file and shall participate in the filing of
applications with the Commission (the "Applications") requesting its written
consent to the assignment of the Licenses for the Station (and any extensions
and renewals thereof) from Seller to Buyer. Seller and Buyer will diligently
take all necessary and proper steps, provide any additional information
reasonably requested, and otherwise use their best efforts in order to obtain
promptly the requested consent and approval of the Applications by the
Commission; provided that neither of the parties hereto shall have any
obligation to take any unreasonable steps to satisfy complainants, if any, or to
participate in any evidentiary hearing (other than a hearing at which only oral
argument is to be presented).
ARTICLE 6.
HART-SCOTT-RODINO
As promptly as practicable and no later than thirty (30) days
following the execution of this Agreement, Seller and Buyer shall complete any
filing that may be required pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, or shall mutually agree that no such
filing is required. Seller and Buyer shall diligently take all necessary and
proper steps and provide any additional information reasonably requested in
order to comply with the requirements of such Act.
ARTICLE 7.
COVENANTS AND AGREEMENTS OF SELLER
Seller covenants and agrees with Buyer as follows:
7.01 NEGATIVE COVENANTS.
Pending and prior to the Closing, Seller will not, without the
prior written approval of Buyer, do or agree to do any of the following:
7.01(a) Dispositions; Mergers. Sell, assign, lease or
otherwise transfer or dispose of any of the Assets or merge or consolidate with
or into any other entity or enter into any negotiations or agreements relating
thereto; provided, however, Seller may sell, assign, lease or otherwise transfer
or dispose of any asset described in Schedule 1(f) if such asset is expended in
the ordinary course of business, consistent with Seller's past business
practices and with customary practices in the television broadcast industry, and
property or equipment of like kind and equivalent value is substituted therefor.
7.01(b) Accounting Principles and Practices. Change or modify
any of Seller's accounting principles or practices or any method of applying
such principles or practices.
7.01(c) Trade-Outs. Enter into any trade-out agreement, or
similar contract, commitment or understanding to provide broadcast time, except
those which are in the ordinary course of business and consistent with Seller's
past business practices and the TBA and which can be and are performed
completely prior to the Closing Date.
7.01(d) Broadcast Time Agreements. Enter into any broadcast
time sales agreement, contract, commitment or understanding except those that
are in the ordinary course of business and consistent with customary practices
in the television broadcast industry and the TBA.
7.01(e) Local Marketing Arrangements. Except for the TAB,
acquire or enter into any local marketing arrangements, time brokerage
agreements or other similar contracts.
7.01(f) Program Contracts. Acquire or enter into any new
program contracts or renew, extend, amend, alter, modify or otherwise change any
existing program contract, except that Seller may enter into new program
contracts, consistent with the terms of the TBA, which have a term of less than
six months.
7.01(g) Additional Agreements. Materially modify or amend any
of the agreements listed in Schedule 3.05(d) which are marked by an asterisk or
enter into any other agreements, contracts, leases, commitments, understandings,
or licenses (collectively, "Additional Agreements") or incur any obligation or
liability (contingent or absolute); provided, however, that Seller may enter
into trade-out agreements, broadcast time agreements and program contracts
consistent with this Section 7.01 and the terms of the TBA; and that any
Additional Agreements are entered into in the ordinary course of business
consistent with Seller's past business practices and customary practices in the
television broadcast industry, so long as such Additional Agreements do not
involve payments or obligations in excess of One Million Dollars ($1,000,000)
for all such Additional Agreements in the aggregate.
7.01(h) Breaches; Employment Contracts. Do or omit to do any
act (or permit such action or omission) which will cause a material breach of
any Station Contract; enter into or become subject to any employment, labor or
union contract, any professional service contract not terminable at will, or any
bonus, pension, insurance, profit sharing, deferred compensation, severance pay,
retirement, hospitalization, employee benefit, or other similar plan; increase
the compensation payable or to become payable to any employee; or pay or arrange
to pay any bonus payment to any employee.
7.01(i) Actions Affecting Licenses or Contracts. Take any
action which under existing law may reasonably be expected to have a material
adverse effect on the validity or enforceability of or rights under the Licenses
or any material lease or contract.
7.01(j) Programming. Program or broadcast any motion picture,
feature film or syndicated program, except in the ordinary course of business,
within the terms of the TBA and consistent with Seller's past business
practices.
7.01(k) Accounts. Accelerate the collection of or sell or
assign any accounts receivable, or decelerate the payment of accounts payable,
except in order to conform with Seller's past business practices and the terms
of the TBA.
7.02 AFFIRMATIVE COVENANTS.
Pending and prior to the Closing Date, Seller will:
7.02(a) Preserve Existence. Preserve its corporate existence
and business organization intact, maintain its existing franchises and licenses,
use its reasonable best efforts to preserve for Buyer its relationships with
suppliers, customers, employees and others having business relations with
Seller, and keep all Assets in their present condition, ordinary wear and tear
excepted.
7.02(b) Normal Operations. Subject to the terms and conditions
of this Agreement (including, without limitation, Section 7.01) and the terms
and conditions of the TBA: (i) carry on the business and activities of the
Station, including without limitation, the sale of advertising time, entering
into trade or barter arrangements, entering into other agreements, leases,
commitments or understandings, or purchasing and scheduling of programming, in
the usual and ordinary course of business consistent with Seller's past business
practices and with customary practices in the television broadcast industry;
(ii) pay or otherwise satisfy all obligations (cash and barter) of the Station
as they come due and payable; (iii) maintain all of its properties in customary
repair, order and condition; and (iv) maintain its books of account, records,
and files in substantially the same manner as heretofore.
7.02(c) Maintain Licenses. Maintain the validity of the
Licenses, and comply in all material respects with all rules and regulations of
the Commission.
7.02(d) Payables. Pay all of its obligations, including,
without limitation, obligations under the Station Contracts and under any such
contracts that shall be entered into between the date hereof and the Closing
pursuant to Section 7.01, as and when they become due and payable.
7.02(e) Corporate Action. Take all corporate action under the
law of the State of Ohio are necessary to effectuate the transactions
contemplated by this Agreement and by the agreements and instruments called for
hereunder.
7.02(f) Transfer Tax; Bulk Sales. Take all necessary action to
provide for the payment of all applicable state sales, transfer or use taxes,
and to comply with all applicable bulk transfer and similar laws, in connection
with the transactions contemplated by this Agreement and the agreements and
instruments called for hereunder.
7.02(g) Access. Give to Buyer and Buyer's authorized
representatives full and complete access upon reasonable notice during normal
business hours to Seller's properties, books, records, contracts, commitments,
facilities, premises, and equipment and to Seller's officers and employees.
7.02(h) Other Information. Provide to Buyer all such other
information and copies of documents concerning Seller, the operation of the
Station, the Assets, and Seller's customers and suppliers as Buyer may request.
7.02(i) Insurance. Maintain in full force and effect all of
its existing casualty, liability, and other insurance through the day following
the Closing Date in amounts not less than those in effect on the date hereof.
7.02(j) Financial Statements. Provide Buyer with unaudited
statements of assets and liabilities and statements of revenues and expenses
reflecting the results of the business and operations of the Station for the
preceding twelve (12) months, within thirty (30) days of the end of the fiscal
year. All of the foregoing financial statements shall comply with the
requirements concerning financial statements set forth in Section 3.04.
7.02(k) Interruption in Broadcast Operations. Promptly notify
Buyer in writing if any Station ceases to broadcast at its authorized power for
more than 48 consecutive hours.
7.02(l) Consents. Obtain third party consents to assign to
Buyer those agreements on Schedule 3.05(d) which are marked with an asterisk and
use its best efforts to obtain third party consents for assignment of all other
agreements listed on Schedule 3.05(d).
7.03 REMOVAL OF MATERIALS.
Any building materials or other items located in or around the
Property which qualify as Hazardous Wastes or Toxic Substances shall immediately
be removed from the Property at Seller's cost and expense.
7.04 CONFIDENTIALITY.
Seller will use its best efforts to maintain strict
confidentiality with respect to all documents and information furnished to
Seller by or on behalf of Buyer; provided, however, that Seller shall have no
such obligations with respect to confidential information that (i) is a matter
of public knowledge or (ii) has been or is hereafter publicly disclosed other
than by or through Seller. In the event this Agreement is terminated, Seller
will return to Buyer all documents, drafts, work papers, and other material
prepared or furnished by Buyer relating to the transactions contemplated
hereunder, whether obtained before or after the execution of this Agreement.
7.05 EMPLOYEES.
For a period commencing upon the execution of this Agreement
and ending twelve (12) months following the Closing Date, Seller and its
affiliates will not offer employment elsewhere than at the Station to any
employee of Seller currently employed at the Station without the prior written
approval of Buyer.
ARTICLE 8.
COVENANTS AND AGREEMENTS OF BUYER
Buyer covenants and agrees with Seller as follows:
8.01 CONFIDENTIALITY.
Buyer will maintain strict confidentiality with respect to all
documents and information furnished to Buyer by or on behalf of Seller;
provided, however, that Buyer shall have no such obligations with respect to
confidential information that (i) is a matter of public knowledge or (ii) has
been or is hereafter publicly disclosed other than by or through Buyer. In the
event this Agreement is terminated, Buyer will return to Seller all copies in
its possession of documents, drafts, work papers, and other material prepared or
furnished by Seller relating to the transactions contemplated hereunder, whether
obtained before or after the execution of this Agreement and the agreements and
instruments called for hereunder.
8.02 CORPORATE ACTION.
Prior to the Closing, Buyer shall take all corporate action
under the law of the State of Delaware necessary to effectuate the transactions
contemplated by this Agreement and by the agreements and instruments called for
hereunder.
ARTICLE 9.
CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
The obligations of Buyer to purchase the Assets and to proceed
with the Closing are subject to the satisfaction (or waiver by Buyer) at or
prior to the Closing of each of the following conditions:
9.01 REPRESENTATIONS AND COVENANTS.
The representations and warranties of Seller made herein or in
any agreement, instrument or document called for hereunder shall have been true
and correct when made and shall be true and correct on the Closing Date as
though such representations and warranties were made on and as of the Closing
Date, and Seller shall have performed and complied with all covenants and
agreements required by this Agreement to be performed or complied with by Seller
prior to the Closing Date.
9.02 CONSENTS.
Seller shall have obtained prior to the Closing Date all
consents necessary to effect valid assignments to Buyer of those contracts on
Schedule 3.05(d) which are marked with an asterisk and all other consents
necessary to consummate the transactions contemplated hereby (except for the FCC
Order which shall be governed by Section 9.04).
9.03 DELIVERY OF DOCUMENTS.
Seller shall have delivered to Buyer all agreements,
instruments and documents required to be delivered by Seller to Buyer pursuant
to Section 11.02.
9.04 FCC ORDER.
The FCC Order shall have become a Final Order with respect to
the Station.
9.05 TITLE INSURANCE COMMITMENT AND SURVEY.
Buyer shall have received the Title Insurance Commitment and
Survey referred to in Section 1 for the real property described in Schedule
1(a), in form and substance satisfactory to Buyer.
9.06 LEGAL PROCEEDINGS.
No action or proceeding by or before any governmental
authority shall have been instituted or threatened (and not subsequently
dismissed, settled or otherwise terminated) which might restrain, prohibit or
invalidate the transactions contemplated by this Agreement (other than an action
or proceeding instituted or threatened by Buyer).
9.07 HART-SCOTT-RODINO.
All applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, shall have expired.
9.08 ABSENCE OF MATERIAL CHANGE.
Neither the Station nor the Assets shall have suffered a
material adverse change since the date hereof, and there shall have been no
changes since the date hereof in the business, operations, prospects, condition
(financial or otherwise), properties, assets or liabilities of Seller, of the
Station or of the Assets (regardless of whether or not such events or changes
are consistent with the representations and warranties given herein by Seller),
except changes contemplated by this Agreement and changes in the ordinary course
of business which are not (either individually or in the aggregate) materially
adverse.
ARTICLE 10.
CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE.
The obligation of Seller to sell, transfer, convey and deliver
the Assets and to proceed with the Closing are subject to the satisfaction (or
waiver by Seller) at or prior to the Closing of each of the following
conditions:
10.01 REPRESENTATIONS AND COVENANTS.
The representations and warranties of Buyer made in this
Agreement or in any agreement, instrument or document called for hereunder shall
have been true and correct when made and shall be true and correct on the
Closing Date as though such representations and warranties were made on and as
of the Closing Date, and Buyer shall have performed and complied with all
covenants and agreements required to be performed or complied with by Buyer
prior to the Closing Date.
10.02 DELIVERY OF DOCUMENTS.
Buyer shall have delivered to Seller the Purchase Price and
all agreements, instruments and documents required to be delivered by Buyer to
Seller pursuant to Section 11.03.
10.03 FCC ORDER.
The FCC Order shall have been issued with respect to the
Station.
10.04 LEGAL PROCEEDINGS.
No action or proceeding by or before any governmental
authority shall have been instituted or threatened (and not subsequently
dismissed, settled, or otherwise terminated) that might restrain, prohibit or
invalidate the transactions contemplated by this Agreement, other than an action
or proceeding instituted or threatened by Seller.
10.05 HART-SCOTT-RODINO.
All applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, shall have expired.
ARTICLE 11.
THE CLOSING
11.01 CLOSING.
Unless otherwise agreed by the parties hereto, the Closing
hereunder shall be held on a date specified by Buyer within ten (10) days
following the date that the FCC Order becomes a Final Order. The Closing shall
be held at 10:00 A.M. local time at the offices of Hogan & Hartson in
Washington, D.C. or at such other time and place as the parties may agree.
11.02 DELIVERY BY SELLER.
At or before the Closing, Seller shall deliver to Buyer the
following:
11.02(a) Agreements and Instruments. The following bills of
sale, statements, assignments and other instruments of transfer, dated as of the
Closing Date, in form sufficient to transfer and convey to Buyer title (of the
quality provided for in this Agreement) to the Assets:
(i) the Assignment of Leases;
(ii) the Bill of Sale;
(iii) the Assignment of Licenses;
(iv) the Assignment of Contracts;
(v) the Deed; and
(vi) such other instruments or documents as Buyer or
Buyer's senior lender may reasonably request.
11.02(b) Consents. Copies of all consents necessary to effect
valid assignments to Buyer of all of the agreements listed on Schedule 3.05(d)
which are marked with an asterisk and any other consents Seller has been able to
obtain.
11.02(c) Certificate Concerning Interim Agreements.
A certificate of Seller describing all broadcast time sales agreements made,
all trade-out agreements entered into, and all other contracts, agreements
and leases entered into by Seller between the date hereof and the Closing Date,
and certifying that such agreements, contracts and leases were entered into in
accordance with Section 7.01.
11.02(d) Corporate Resolutions. Copies of the
resolutions of directors and shareholders of Seller, certified as being correct
and complete and then in full force and effect, authorizing the execution,
delivery and performance of this Agreement and the agreements and instruments
called for hereunder, and the consummation of the transactions contemplated
hereby and by such agreements and instruments.
11.02(e) Officers' Certificate. A certificate of
Seller signed by the President and the Secretary of Seller certifying that the
representations and warranties of Seller made herein were true and correct in
all material respects as of the date of this Agreement and are true and
correct in all material respects as of the Closing Date, and that
Seller has performed and complied with all covenants and agreements required to
be performed or complied with by Seller on or prior to the Closing Date.
11.02(f) Opinion of Counsel. An opinion of counsel
for Seller, dated the Closing Date, addressed to Buyer and to Buyer's lender,
substantially in the form attached hereto as Exhibit F.
11.02(g) Seller's IRS Form 8594. Internal Revenue
Service Form 8594 completed by Seller in connection with the acquisition of
the Assets by Buyer.
11.03 DELIVERY BY BUYER.
At or before the Closing, Buyer shall deliver to Seller the
following:
11.03(a) Purchase Price.
(i) The Purchase Price in the amount and manner set
forth in Section 2.
11.03(b) Assumption Agreement. The Assumption Agreement.
11.03(c) Corporate Resolutions. Copies of the resolutions of
the directors of Buyer, certified as being correct and complete and then in full
force and effect, authorizing the execution, delivery and performance of this
Agreement and the agreements and instruments called for hereunder, and the
consummation of the transactions contemplated by this Agreement and by such
agreements and instruments.
11.03(d) Officers' Certificate. A certificate of Buyer signed
by the President and the Secretary of Buyer certifying that the representations
and warranties of Buyer made herein were true and correct in all material
respects as of the date of this Agreement and are true and correct in all
material respects as of the Closing Date, and that Buyer has performed and
complied with all covenants and agreements required to be performed or complied
with by Buyer prior to the Closing Date.
11.03(e) Buyer's IRS Form 8594. Internal Revenue Service
Form 8594 completed by Buyer in connection with the acquisition of the Assets
by Buyer.
ARTICLE 12.
ALLOCATION OF PURCHASE PRICE AMONG ASSETS
Seller and Buyer each represent, warrant, covenant, and agree
with each other that the Purchase Price shall be allocated among the Assets, as
set forth in an appraisal of the tangible assets to be performed prior to the
Closing (at Buyer's sole expense) by Bond & Pecaro, for purposes of all federal,
state and other income tax returns filed by it or other tax payments made by it.
Notwithstanding any other provision of this Agreement, the provisions of this
Section 12 shall survive the Closing Date without limitation.
ARTICLE 13.
POSSESSION AND CONTROL
Between the date hereof and the Closing Date, Buyer shall not
directly or indirectly control, supervise or direct, or attempt to control,
supervise or direct, the business and operations of the Station, and such
operation, including complete control and supervision of all programs, shall be
the sole responsibility of Seller; provided, however, Buyer shall be entitled to
inspect the Assets as provided in Section 7.02(h) so that an uninterrupted and
efficient transfer of ownership may be effected. On and after the Closing Date,
Seller shall have no control over, or right to intervene or participate in, the
business and operations of the Station.
ARTICLE 14.
RISK OF LOSS
The risk of loss or damage by fire or other casualty or cause
to the Assets until the Closing Date shall be upon Seller. In the event of such
loss or damage prior to the Closing Date, Seller shall promptly restore, replace
or repair the damaged Assets to their previous condition at Seller's sole cost
and expense. In the event such loss or damage shall not be restored, replaced,
or repaired as of the Closing Date, Buyer shall, at its option, either (a)
proceed with the Closing and receive all insurance proceeds to which Seller
would be entitled as a result of such loss or damage (provided, however, if such
proceeds do not equal the loss, Seller shall pay the deficiency to Buyer), or
(b) defer the Closing Date until such restorations, replacements or repairs are
made (provided that no such deferral shall affect the right of Buyer to
terminate this Agreement pursuant to the provisions of Section 16).
ARTICLE 15.
SURVIVAL; INDEMNIFICATION
15.01 SURVIVAL OF SELLER'S REPRESENTATIONS.
Except as otherwise specified, the representations and
warranties made by Seller in this Agreement or pursuant hereto shall survive the
Closing Date for a period of two (2) years, provided that Sections 3.13 and 3.15
shall survive the Closing Date for a period equal to the applicable statute of
limitations and Section 3.05(b) shall survive without limitation as to time, and
the representations and warranties made by Seller shall also survive and shall
be unaffected by (and shall not be deemed waived by) any investigation, audit,
appraisal, or inspection at any time made by or on behalf of Buyer.
15.02 INDEMNIFICATION BY SELLER.
Subject to the conditions and provisions of Section 15.05,
Seller agrees to indemnify, defend and hold harmless Buyer, Buyer's employees,
managers and directors ("Buyer Indemnified Parties") from and against and in
respect of any and all demands, claims, complaints, actions or causes of action,
suits, proceedings, investigations, arbitrations, assessments, losses, damages,
liabilities, costs and expenses, including, but not limited to, interest,
penalties and attorneys' fees and disbursements, asserted against, imposed upon
or incurred by Buyer Indemnified Parties, directly or indirectly, by reason of
or resulting from (a) any liability, obligation, or claim against Seller
(whether absolute, accrued, contingent or otherwise and whether a contractual,
tax or any other type of liability or obligation or claim) not expressly assumed
by Buyer pursuant to Section 2.04, arising out of, relating to or resulting from
the business of Seller, or relating to or resulting from the Assets or the
business and operations of the Station during the period prior to the Closing
Date; (b) any misrepresentation or breach of the representations and warranties
of Seller contained in or made pursuant to this Agreement; or (c) any
noncompliance by Seller with any covenants, agreements or undertakings of Seller
contained in or made pursuant to this Agreement.
15.03 SURVIVAL OF BUYER'S REPRESENTATIONS.
The representations and warranties made by Buyer in this
Agreement or pursuant hereto shall survive the Closing Date for a period of two
(2) years, and shall also survive and shall be unaffected by (and shall not be
deemed waived by) any investigation, audit, appraisal or inspection at any time
made by or on behalf of Seller.
15.04 INDEMNIFICATION BY BUYER.
Subject to the conditions and provisions of Section 15.05,
Buyer hereby agrees to indemnify, defend and hold harmless Seller, Seller's
employees, managers and directors ("Seller Indemnified Parties") from and
against all demands, claims, actions or causes of action, assessments, losses,
damages, liabilities, costs and expenses, including, but not limited to,
interest, penalties and attorneys' fees and disbursements, asserted against,
imposed upon or incurred by Seller Indemnified Parties, directly or indirectly,
by reason of or resulting from (a) any liability, obligation, or claims against
Seller Indemnified Parties (whether absolute, accrued, contingent or otherwise
and whether contractual, tax or any other type of liability or obligation or
claim) expressly assumed by Buyer hereunder; (b) any misrepresentation or breach
of the representations and warranties of Buyer contained in or made pursuant to
this Agreement; or (c) any noncompliance by Buyer with any covenants, agreements
or undertakings of Buyer contained in or made pursuant to this Agreement.
15.05 CONDITIONS OF INDEMNIFICATION.
The obligations and liabilities of Seller and of Buyer
hereunder with respect to their respective indemnities pursuant to this Section
15, resulting from any claim or other assertion of liability by third parties
(hereinafter called collectively, "Claims"), shall be subject to the following
terms and conditions:
15.05(a) The party seeking indemnification (the "Indemnified
Party") must give the other party or parties, as the case may be (the
"Indemnifying Party"), notice of any such Claim promptly after the Indemnified
Party receives notice thereof.
15.05(b) The Indemnifying Party shall have the right to
undertake, by counsel or other representatives of its own choosing, the defense
of such claim.
15.05(c) In the event that the Indemnifying Party shall elect
not to undertake such defense, or within a reasonable time after notice of any
such Claim from the Indemnified Party shall fail to defend, the Indemnified
Party (upon further written notice to the Indemnifying Party) shall have the
right to undertake the defense, compromise or settlement of such Claim, by
counsel or other representatives of its own choosing, on behalf of and for the
account and risk of the Indemnifying Party (subject to the right of the
Indemnifying Party to assume defense of such Claim at any time prior to
settlement, compromise or final determination thereof).
15.05(d) Anything in this Section 15.05 to the contrary
notwithstanding, (i) if there is a reasonable probability that a Claim may
materially and adversely affect the Indemnified Party other than as a result of
money damages or other money payments, the Indemnified Party shall have the
right, at its own cost and expense, to participate in the defense, compromise or
settlement of the Claim, (ii) the Indemnifying Party shall not, without the
Indemnified Party's written consent, settle or compromise any Claim or consent
to entry of any judgment which does not include as an unconditional term thereof
the giving by the claimant or the plaintiff to the Indemnified Party of a
release from all liability in respect of such Claim, and (iii) in the event that
the Indemnifying Party undertakes defense of any Claim, the Indemnified Party,
by counsel or other representative of its own choosing and at its sole cost and
expense, shall have the right to consult with the Indemnifying Party and its
counsel or other representatives concerning such Claim and the Indemnifying
Party and the Indemnified Party and their respective counsel or other
representatives shall cooperate with respect to such Claim.
ARTICLE 16.
TERMINATION
If (i) an FCC Order has not become a Final Order and/or the
Closing has not occurred on or before the tenth anniversary of the date of the
Option Agreement, (ii) the Commission designates the Application contemplated by
Section 5 for an evidentiary hearing, or (iii) the Commission issues an order in
connection with such application with conditions which are adverse to Buyer or
which in any way diminish the operating rights with respect to the Assets and
the Station (except any such conditions expressly accepted by Buyer in writing),
then in any such event Buyer may, upon written notice to the Seller, terminate
this Agreement without any further obligation to the Seller hereunder, provided,
that such notice of termination is given prior to the date of the Closing or the
date on which such FCC Order shall have become a Final Order. If the Closing has
not occurred on or before the tenth anniversary of the date of the Option
Agreement, then in such event Seller may, upon written to the Buyer, terminate
this Agreement without any further obligation to the Buyer hereunder, provided,
that, such notice of termination is given prior to the date of the Closing and
the Seller is not in material default at such time. Upon termination of this
Agreement pursuant to this Section 16, this Agreement shall be deemed null,
void, and of no further force and effect (except for the provisions of Sections
7.04, 8.01, and 21, which shall survive such termination).
ARTICLE 17.
REMEDIES
17.01 DEFAULT BY BUYER.
If Buyer shall default in the performance of its obligations
under this Agreement in any material respect or if, as a result of Buyer's
action or failure to act, the conditions precedent to Seller's obligation to
close specified in Section 10 are not satisfied, and for such reason or reasons
this Agreement is not consummated, and provided that Seller shall not then be in
default in the performance of Seller's obligations hereunder, Seller shall be
entitled, by written notice to Buyer, to terminate this Agreement and to pursue
any other remedies Seller has at law or in equity or otherwise.
17.02 DEFAULT BY SELLER.
If Seller shall default in the performance of Seller's
obligations under this Agreement in any material respect, or if, as a result of
Seller's action or failure to act, the conditions precedent to Buyer's
obligation to close specified in Section 9 are not satisfied and for such reason
or reasons this Agreement is not consummated, or if Seller fails to operate the
Station at its authorized power for longer than 48 consecutive hours, and
provided that Buyer shall not then be in default in any material respect in the
performance of Buyer's obligations hereunder, Buyer shall be entitled, at
Buyer's sole option:
(i) To require Seller to consummate and specifically
perform the sale in accordance with the terms of this Agreement,
if necessary through injunction or other court order or process;
or
(ii) By written notice to Seller, to terminate this
Agreement and to pursue any other remedies Buyer has at law or
in equity or otherwise.
17.03 SPECIFIC PERFORMANCE.
Seller acknowledges that the Assets to be sold and delivered
to Buyer pursuant to this Agreement are unique and that Buyer has no adequate
remedy at law if Seller shall fail to perform any of their obligations
hereunder, and Seller therefore confirms and agrees that Buyer's right to
specific performance is essential to protect the rights and interests of Buyer.
Accordingly, in addition to any other remedies which Buyer may have hereunder or
at law or in equity or otherwise, Seller hereby agrees that Buyer shall have the
right to have all obligations, undertakings, agreements and other provisions of
this Agreement specifically performed by Seller and that Buyer shall have the
right to obtain an order or decree of such specific performance in any of the
courts of the United States or of any state or other political subdivision
thereof.
ARTICLE 18.
GUARANTEE
18.01 Osborn Communications Corp. ("Guarantor") hereby irrevocably and
unconditionally guarantees to Buyer the prompt and complete performance and
payment of each and every obligation of Seller to Buyer, direct or indirect, now
existing or hereafter arising under this Agreement, including the due and
punctual performance and observance by Seller of all of the terms and conditions
of this Agreement.
18.02 The obligations of Guarantor hereunder shall be absolute and
unconditional and shall continue in full force and effect until the performance
and payment of all of the obligations of Seller under this Agreement, and are in
no way conditioned upon any event or contingency, or upon any attempt to enforce
Seller's performance under this Agreement or any other right or remedy against
Seller or to collect from Seller through the commencement of legal proceedings
or otherwise.
18.03 The obligations of Guarantor hereunder shall not be affected,
reduced, impaired, modified, changed, released, limited or discharged in any
manner whatsoever by reason of any impairment, modification, change, release, or
limitation of the liability of Seller or its estate in bankruptcy, resulting
from the operation of any present or future provision of the bankruptcy laws or
other similar statute, or from the decision of any court.
18.04 Guarantor unconditionally waives diligence, presentment, protest,
notice of dishonor, demand, extension of time for payment, notice of nonpayment
at maturity, and indulgences and notices of every kind, and consents to any and
all changes in terms, covenants, and conditions hereof.
18.05 Guarantor agrees that the obligations of Guarantor hereunder are
irrevocable and are independent of the obligations of Seller under this
Agreement; that a separate action or actions may be brought and prosecuted
against Guarantor regardless of whether any action is brought against Seller or
whether Grantor is joined in any such action or actions.
18.06 Guarantor agrees that Guarantor shall not exercise any rights
that it may acquire by way of subrogation hereunder or otherwise until the
performance in full of all obligations guaranteed pursuant hereto.
18.07 Guarantor represents and warrants to Buyer that (a) it is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, (b) it has the full corporate power and corporate
authority to enter into this Agreement, and this Agreement has been duly
authorized, executed and delivered by Guarantor and is a legal, valid and
binding agreement and obligation of Guarantor enforceable against Guarantor in
accordance with its terms, except to the extent limited by applicable
bankruptcy, insolvency, moratorium and other similar laws of general application
relating to or affecting the enforcement of creditors' rights and general equity
principles, (c) neither the execution and delivery of this Agreement, the
consummation of any of the transactions contemplated herein, nor compliance with
the terms hereof, will conflict with or result in a breach of any provision of
any law or regulation applicable to Guarantor, or any indenture, contract or
other agreement to which Guarantor is a party or by which Guarantor is bound, or
any statute, rule, regulation, judgment, decree or order binding upon Guarantor,
and (d) Guarantor indirectly owns all of the issued and outstanding stock of
Seller.
18.08 The provisions of this Section shall inure to the benefit of and
may be enforced by Buyer and its successors and assigns, and shall be binding
upon and enforceable against Guarantor and Guarantor's successors or assigns.
ARTICLE 19.
ADDITIONAL ACTIONS AND DOCUMENTS
Each of the parties hereto agrees that it will, at any time,
prior to, at or after the Closing Date, take or cause to be taken such further
actions, and execute, deliver and file or cause to be executed, delivered and
filed such further documents and instruments, and obtain such consents, as may
be necessary or reasonably requested in connection with the consummation of the
purchase and sale contemplated by this Agreement or in order to fully effectuate
the purposes, terms and conditions of this Agreement.
ARTICLE 20.
BROKERS
Except for Alex Brown & Co., Seller represents to Buyer that
Seller has not engaged, or incurred any unpaid liability (for any brokerage
fees, finders' fees, commissions or otherwise) to, any broker, finder or agent
in connection with the transactions contemplated by this Agreement; Buyer
represents to Seller that Buyer has not engaged, or incurred any unpaid
liability (for any brokerage fees, finders' fees, commissions or otherwise) to,
any broker, finder or agent in connection with the transactions contemplated by
this Agreement; and Seller agrees to indemnify Buyer, and Buyer agrees to
indemnify Seller, against any claims asserted against the other parties for any
such fees or commissions by any person purporting to act or to have acted for or
on behalf of the indemnifying party. Notwithstanding any other provision of this
Agreement, this representation and warranty shall survive the Closing Date
without limitation as to time.
ARTICLE 21.
EXPENSES
Each party hereto shall pay its own expenses incurred in
connection with this Agreement and in the preparation for and consummation of
the transactions provided for herein. Notwithstanding the foregoing, (a) Seller
and Buyer shall share equally in all sales, use, transfer, stamp, documentary,
and recording taxes and fees, all costs of conveyances, all notary fees, all
filing and application fees to any federal, state or local agency, all filing
fees to the Commission in connection with the Applications, all sales, stamp,
documentary, transfer, and recording taxes and fees applicable to the
transactions contemplated by this Agreement and the instruments and documents
called for hereunder, including, without limitation, any Alabama sales, use,
stamp, documentary, transfer or similar taxes imposed with respect to the sale
of any motor vehicle or with respect to the transfer of any real property, (b)
Buyer shall pay all fees and expenses of the appraiser referred to in Section 12
and the Title Insurance Commitment, and all filing fees in connection with any
filing under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and (c) Seller shall pay all fees and expenses for the Survey.
ARTICLE 22.
NOTICES
All notices, demands, requests, or other communications which
may be or are required to be given or made by any party to any other party
pursuant to this Agreement shall be in writing and shall be hand delivered
(including delivery by overnight courier), mailed by first-class registered or
certified mail, return receipt requested, postage prepaid, delivered by
overnight air courier, or transmitted by telegram, telex or facsimile
transmission addressed as follows:
(i) If to Buyer:
<PAGE>
TV Alabama, Inc.
c/o Allbritton Communications Company
808 17th Street, N.W.
Suite 300
Washington, D.C. 20006
Attn.: Jerald N. Fritz, Esq.
with a copy (which shall not constitute notice) to:
Hogan & Hartson
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Attn.: Mace J. Rosenstein, Esq.
(ii) If to Seller:
Flagship Broadcasting Corporation
P.O. Box 90406
San Antonio, Texas 78209
Attn: Bridget Hubbard
with a copy (which shall not constitute notice) to:
Haley, Bader & Potts P.L.C.
4350 North Fairfax Drive
Suite 900
Arlington, VA 22203-1633
Attn: Theodore D. Kramer
or such other address as the addressee may indicate by written notice.
Each notice, demand, request, or communication which shall be
given or made in the manner described above shall be deemed sufficiently given
or made for all purposes at such time as it is delivered to the addressee (with
the return receipt, the delivery receipt, the affidavit of messenger or (with
respect to a telex or facsimile) the answer back being deemed conclusive but not
exclusive evidence of such delivery) or at such time as delivery is refused by
the addressee upon presentation.
ARTICLE 23.
WAIVER
No delay or failure on the part of any party hereto in
exercising any right, power or privilege under this Agreement or under any other
instrument or document given in connection with or pursuant to this Agreement
shall impair any such right, power or privilege or be construed as a waiver of
any default or any acquiescence therein. No single or partial exercise of any
such right, power or privilege shall preclude the further exercise of such
right, power or privilege, or the exercise of any other right, power or
privilege. No waiver shall be valid against any party hereto unless made in
writing and signed by the party against whom enforcement of such waiver is
sought and then only to the extent expressly specified therein.
ARTICLE 24.
BENEFIT AND ASSIGNMENT
Except as hereinafter specifically provided in this Section
24, no party hereto shall assign this Agreement, in whole or in part, whether by
operation of law or otherwise without the prior written consent of Seller (if
the assignor is Buyer) or Buyer (if the assignor is Seller), and any purported
assignment contrary to the terms hereof shall be null, void and of no force and
effect. In no event shall any assignment by Seller of its rights and obligations
under this Agreement, whether before or after the Closing, release Seller from
its liabilities hereunder. Notwithstanding the foregoing, Buyer or any permitted
assignee of Buyer may assign this Agreement and any and all rights hereunder, in
whole or in part, to any subsidiary of Buyer or to any entity in which the
controlling shareholders of Buyer maintain control. Subject to the foregoing,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns. No person or entity
other than the parties hereto is or shall be entitled to bring any action to
enforce any provision of this Agreement against any of the parties hereto, and
the covenants and agreements set forth in this Agreement shall be solely for the
benefit of, and shall be enforceable only by, the parties hereto or their
respective successors and assigns as permitted hereunder.
ARTICLE 25.
REMEDIES CUMULATIVE
Except as specifically provided herein, the remedies provided
herein shall be cumulative and shall not preclude the assertion by Seller or by
Buyer of any other rights or the seeking of any other remedies against the
other.
ARTICLE 26.
ENTIRE AGREEMENT; AMENDMENT
This Agreement, together with all Exhibits and Schedules
hereto, constitutes the entire agreement among the parties pertaining to the
subject matter hereof and supersedes all prior agreements, understandings,
negotiations and discussions, whether oral or written, of the parties. No
supplement, modification or waiver of this Agreement shall be binding unless
executed in writing by the party to be bound thereby.
ARTICLE 27.
SEVERABILITY
If any part of any provision of this Agreement or any other
agreement, document or writing given pursuant to or in connection with this
Agreement shall be invalid or unenforceable under applicable law, such part
shall be ineffective to the extent of such invalidity or unenforceability only,
without in any way affecting the remaining parts of such provisions or the
remaining provisions hereof or of said agreement, document or writing.
ARTICLE 28.
PRESS RELEASES
All notices to third parties and other publicity relating to
the transactions contemplated by this Agreement shall be jointly planned,
coordinated and agreed to by Buyer and Seller. Prior to the Closing Date neither
of the parties hereto shall act unilaterally in this regard without the prior
written approval of the other, except as required by law and/or the rules and
regulations of the Commission.
ARTICLE 29.
HEADINGS
The headings of the sections and subsections contained in this
Agreement are inserted for convenience only and do not form a part or affect the
meaning, construction or scope thereof.
ARTICLE 30.
GOVERNING LAW
This Agreement, the rights and obligations of the parties
hereto, and any claims or disputes relating thereto, shall be governed by and
construed under and in accordance with the laws of the State of New York,
excluding the choice of law rules thereof.
ARTICLE 31.
SIGNATURE IN COUNTERPARTS
This Agreement may be executed in separate counterparts,
neither of which need contain the signatures of both parties, each of which
shall be deemed to be an original, and both of which taken together constitute
one and the same instrument. It shall not be necessary in making proof of this
Agreement to produce or account for more than the number of counterparts
containing the respective signatures of, or on behalf of, all of the parties
hereto.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed
this Asset Purchase Agreement, or has caused this Asset Purchase Agreement to be
duly executed and delivered in its name on its behalf, all as of the day and
year first above written.
SELLER
FLAGSHIP BROADCASTING CORPORATION
By: /s/ Bridget Hubbard
Bridget Hubbard
President
BUYER
TV ALABAMA, INC.
By: /s/ Robert L. Allbritton
Robert L. Allbritton
President
For purposes of Article 18 of
this Asset Purchase Agreement
OSBORN COMMUNICATIONS CORP.
By:
Frank D. Osborn
President
<PAGE>
ACQUISITION OF WJSU-TV
LIST OF EXHIBITS
Exhibit A Assignment of Leases
Exhibit B Bill of Sale
Exhibit C Assignment of Licenses
Exhibit D Assignment of Contracts
Exhibit E Warranty Deed
Exhibit F Opinion of Seller's Counsel
Exhibit G Assumption Agreement
<PAGE>
ACQUISITION OF WJSU-TV
LIST OF SCHEDULES
Schedule 1(a) Real Property
Schedule 1(b) Leasehold Interests
Schedule 1(f) Tangible Personal Property
Schedule 1(g) FCC Licenses
Schedule 1(h) Copyrights, Trademarks and Trade Names
Schedule 1(i) Trade-out Agreements and other Contracts, Agreements, and
Leases
Schedule 1(j) Deposits and Prepaid Expenses
Schedule 1(k) Motor Vehicles
Schedule 3.03 Litigation
Schedule 3.04(a) Financial Statements
Schedule 3.05(b) Encumbrances
Schedule 3.05(d) Consents Required to Transfer Assets
Schedule 3.11 Conflicts
Schedule 3.12 Transactions with Related Parties
Schedule 3.14(a) Employee Benefit Plans
Schedule 3.15(b) Environmental Matters
Schedule 3.16 Employment Agreements and Collective Bargaining Agreements
Schedule 3.18 Insurance
Schedule 4.02 Consents Required from Buyer's Lenders
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF
ALLBRITTON COMMUNICATIONS COMPANY
KATV, LLC
KTUL, LLC
WSET, Incorporated
Allfinco, Inc.
Harrisburg Television, Inc.
TV Alabama, Inc.
WCIV, LLC
Allbritton Television Productions, Inc.
Allbritton News Bureau, Inc.
<PAGE>
POWER OF ATTORNEY
ANNUAL REPORT ON FORM 10-K
OF ALLBRITTON COMMUNICATIONS COMPANY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director or
officer, or both, of Allbritton Communications Company (the "Company")
constitutes and appoints Jerald N. Fritz and Stephen P. Gibson his true and
lawful attorneys-in-fact and agents with full power of substitution and
resubstitution, and each of them with full power to act without the other for
him and in his name, place and stead, in any and all capacities, to execute and
file, or cause to be filed, with the Securities and Exchange Commission (the
"Commission") an Annual Report on Form 10-K for the Company's fiscal year ended
September 30, 1999 and any and all amendments thereto, and all matters required
by the Commission in connection with such Annual Report on Form 10-K under the
Securities Exchange Act of 1934, as amended, granting unto said
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing requisite and necessary to be done as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents may lawfully do or cause
to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his name and seal
the 6th day of December 1999.
/s/ Joe L. Allbritton
---------------------
Joe L. Allbritton
<PAGE>
POWER OF ATTORNEY
ANNUAL REPORT ON FORM 10-K
OF ALLBRITTON COMMUNICATIONS COMPANY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director or
officer, or both, of Allbritton Communications Company (the "Company")
constitutes and appoints Jerald N. Fritz and Stephen P. Gibson his true and
lawful attorneys-in-fact and agents with full power of substitution and
resubstitution, and each of them with full power to act without the other for
him and in his name, place and stead, in any and all capacities, to execute and
file, or cause to be filed, with the Securities and Exchange Commission (the
"Commission") an Annual Report on Form 10-K for the Company's fiscal year ended
September 30, 1999 and any and all amendments thereto, and all matters required
by the Commission in connection with such Annual Report on Form 10-K under the
Securities Exchange Act of 1934, as amended, granting unto said
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing requisite and necessary to be done as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents may lawfully do or cause
to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his name and seal
the 6th day of December 1999.
/s/ Barbara B. Allbritton
-------------------------
Barbara B. Allbritton
<PAGE>
POWER OF ATTORNEY
ANNUAL REPORT ON FORM 10-K
OF ALLBRITTON COMMUNICATIONS COMPANY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director or
officer, or both, of Allbritton Communications Company (the "Company")
constitutes and appoints Jerald N. Fritz and Stephen P. Gibson his true and
lawful attorneys-in-fact and agents with full power of substitution and
resubstitution, and each of them with full power to act without the other for
him and in his name, place and stead, in any and all capacities, to execute and
file, or cause to be filed, with the Securities and Exchange Commission (the
"Commission") an Annual Report on Form 10-K for the Company's fiscal year ended
September 30, 1999 and any and all amendments thereto, and all matters required
by the Commission in connection with such Annual Report on Form 10-K under the
Securities Exchange Act of 1934, as amended, granting unto said
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing requisite and necessary to be done as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents may lawfully do or cause
to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his name and seal
the 6th day of December 1999.
/s/ Robert L. Allbritton
------------------------
Robert L. Allbritton
<PAGE>
POWER OF ATTORNEY
ANNUAL REPORT ON FORM 10-K
OF ALLBRITTON COMMUNICATIONS COMPANY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director or
officer, or both, of Allbritton Communications Company (the "Company")
constitutes and appoints Jerald N. Fritz and Stephen P. Gibson his true and
lawful attorneys-in-fact and agents with full power of substitution and
resubstitution, and each of them with full power to act without the other for
him and in his name, place and stead, in any and all capacities, to execute and
file, or cause to be filed, with the Securities and Exchange Commission (the
"Commission") an Annual Report on Form 10-K for the Company's fiscal year ended
September 30, 1999 and any and all amendments thereto, and all matters required
by the Commission in connection with such Annual Report on Form 10-K under the
Securities Exchange Act of 1934, as amended, granting unto said
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing requisite and necessary to be done as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents may lawfully do or cause
to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his name and seal
the 6th day of December 1999.
/s/ Lawrence I. Hebert
-----------------------
Lawrence I. Hebert
<PAGE>
POWER OF ATTORNEY
ANNUAL REPORT ON FORM 10-K
OF ALLBRITTON COMMUNICATIONS COMPANY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director or
officer, or both, of Allbritton Communications Company (the "Company")
constitutes and appoints Jerald N. Fritz and Stephen P. Gibson his true and
lawful attorneys-in-fact and agents with full power of substitution and
resubstitution, and each of them with full power to act without the other for
him and in his name, place and stead, in any and all capacities, to execute and
file, or cause to be filed, with the Securities and Exchange Commission (the
"Commission") an Annual Report on Form 10-K for the Company's fiscal year ended
September 30, 1999 and any and all amendments thereto, and all matters required
by the Commission in connection with such Annual Report on Form 10-K under the
Securities Exchange Act of 1934, as amended, granting unto said
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing requisite and necessary to be done as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents may lawfully do or cause
to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his name and seal
the 6th day of December 1999.
/s/ Frederick J. Ryan, Jr.
----------------------
Frederick J. Ryan, Jr.
<PAGE>
POWER OF ATTORNEY
ANNUAL REPORT ON FORM 10-K
OF ALLBRITTON COMMUNICATIONS COMPANY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director or
officer, or both, of Allbritton Communications Company (the "Company")
constitutes and appoints Jerald N. Fritz and Stephen P. Gibson his true and
lawful attorneys-in-fact and agents with full power of substitution and
resubstitution, and each of them with full power to act without the other for
him and in his name, place and stead, in any and all capacities, to execute and
file, or cause to be filed, with the Securities and Exchange Commission (the
"Commission") an Annual Report on Form 10-K for the Company's fiscal year ended
September 30, 1999 and any and all amendments thereto, and all matters required
by the Commission in connection with such Annual Report on Form 10-K under the
Securities Exchange Act of 1934, as amended, granting unto said
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing requisite and necessary to be done as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents may lawfully do or cause
to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his name and seal
the 6th day of December 1999.
/s/ W.E. Tige Savage
--------------------
W.E. Tige Savage
<PAGE>
POWER OF ATTORNEY
ANNUAL REPORT ON FORM 10-K
OF ALLBRITTON COMMUNICATIONS COMPANY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director or
officer, or both, of Allbritton Communications Company (the "Company")
constitutes and appoints Jerald N. Fritz his true and lawful attorney-in-fact
and agent with full power of substitution and resubstitution, and with full
power to act for him and in his name, place and stead, in any and all
capacities, to execute and file, or cause to be filed, with the Securities and
Exchange Commission (the "Commission") an Annual Report on Form 10-K for the
Company's fiscal year ended September 30, 1999 and any and all amendments
thereto, and all matters required by the Commission in connection with such
Annual Report on Form 10-K under the Securities Exchange Act of 1934, as
amended, granting unto said attorney-in-fact and agent, full power and authority
to do and perform each and every act and thing requisite and necessary to be
done as fully to all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agent may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his name and seal
the 6th day of December 1999.
/s/ Stephen P. Gibson
---------------------
Stephen P. Gibson
<PAGE>
POWER OF ATTORNEY
ANNUAL REPORT ON FORM 10-K
OF ALLBRITTON COMMUNICATIONS COMPANY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director or
officer, or both, of Allbritton Communications Company (the "Company")
constitutes and appoints Jerald N. Fritz and Stephen P. Gibson his true and
lawful attorneys-in-fact and agents with full power of substitution and
resubstitution, and each of them with full power to act without the other for
him and in his name, place and stead, in any and all capacities, to execute and
file, or cause to be filed, with the Securities and Exchange Commission (the
"Commission") an Annual Report on Form 10-K for the Company's fiscal year ended
September 30, 1999 and any and all amendments thereto, and all matters required
by the Commission in connection with such Annual Report on Form 10-K under the
Securities Exchange Act of 1934, as amended, granting unto said
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing requisite and necessary to be done as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents may lawfully do or cause
to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his name and seal
the 6th day of December 1999.
/s/ Elizabeth A. Haley
----------------------
Elizabeth A. Haley
<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 year ended
September 30, 1999 and the Consolidated Balance Sheet as of September 30, 1999
and is qualified in its entirety by reference to such consolidated financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> SEP-30-1999
<CASH> 14,437
<SECURITIES> 0
<RECEIVABLES> 36,517
<ALLOWANCES> 1,424
<INVENTORY> 0
<CURRENT-ASSETS> 71,775
<PP&E> 145,030
<DEPRECIATION> 97,932
<TOTAL-ASSETS> 275,868
<CURRENT-LIABILITIES> 47,537
<BONDS> 424,051
<COMMON> 1
0
0
<OTHER-SE> (211,348)
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<TOTAL-REVENUES> 187,288
<CGS> 0
<TOTAL-COSTS> 131,359
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<LOSS-PROVISION> 519
<INTEREST-EXPENSE> 42,154
<INCOME-PRETAX> 15,345
<INCOME-TAX> 6,717
<INCOME-CONTINUING> 8,628
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,628
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
