- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
-----------
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended Commission file number:
March 31, 2000 333-02302
ALLBRITTON COMMUNICATIONS COMPANY
(Exact name of registrant as specified in its charter)
Delaware 74-180-3105
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
808 Seventeenth Street, N.W.
Suite 300
Washington, D.C. 20006-3903
(Address of principal executive offices)
Registrant's telephone number, including area code: 202-789-2130
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
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Number of shares of Common Stock outstanding as of May 10, 2000: 20,000
shares.
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<PAGE>
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
THIS QUARTERLY REPORT ON FORM 10-Q, INCLUDING ITEM 2 "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 1934, 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 REGULATIONS; AND THE VARIABILITY OF THE COMPANY'S QUARTERLY RESULTS
AND THE COMPANY'S SEASONALITY.
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.
<PAGE>
ALLBRITTON COMMUNICATIONS COMPANY
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION PAGE
Item 1. Financial Statements:
Consolidated Statements of Operations and Retained Earnings
for the Three and Six Months Ended March 31, 1999 and
2000........................................................ 1
Consolidated Balance Sheets as of September 30, 1999 and
March 31, 2000.............................................. 2
Consolidated Statements of Cash Flows for the Six Months
Ended March 31, 1999 and 2000............................... 3
Notes to Interim Consolidated Financial Statements.......... 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 6
Item 3. Quantitative and Qualitative Disclosures About Market Risk.. 12
PART II OTHER INFORMATION
Item 1. Legal Proceedings........................................... 13
Item 6. Exhibits and Reports on Form 8-K............................ 13
Signatures............................................................ 14
Exhibit Index......................................................... 15
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
ALLBRITTON COMMUNICATIONS COMPANY
(an indirectly wholly-owned subsidiary of Perpetual Corporation)
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(Dollars in thousands)
(unaudited)
Three Months Ended Six Months Ended
March 31, March 31,
------------------ ----------------
1999 2000 1999 2000
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating revenues, net ................. $ 41,609 $ 46,670 $ 94,351 $ 102,851
-------- -------- -------- ---------
Television operating expenses, excluding
depreciation and amortization ........ 26,775 27,942 54,728 57,894
Depreciation and amortization ........... 4,325 4,026 8,566 7,889
Corporate expenses ...................... 1,163 1,101 2,209 2,200
-------- -------- -------- ---------
32,263 33,069 65,503 67,983
-------- -------- -------- ---------
Operating income ........................ 9,346 13,601 28,848 34,868
-------- -------- -------- ---------
Nonoperating income (expense)
Interest income
Related party ..................... 631 644 1,261 1,288
Other ............................. 72 80 156 146
Interest expense ..................... (10,508) (10,936) (20,845) (21,784)
Other, net ........................... (296) (353) (623) (651)
-------- -------- -------- ---------
(10,101) (10,565) (20,051) (21,001)
-------- -------- -------- ---------
(Loss) income before income taxes ....... (755) 3,036 8,797 13,867
(Benefit from) provision for income taxes (361) 1,275 3,804 5,770
-------- -------- -------- ---------
Net (loss) income ....................... (394) 1,761 4,993 8,097
Retained earnings, beginning of period .. 50,813 60,390 45,426 54,054
-------- -------- -------- ---------
Retained earnings, end of period ........ $ 50,419 $ 62,151 $ 50,419 $ 62,151
======== ======== ======== =========
</TABLE>
See accompanying notes to interim consolidated financial statements.
1
<PAGE>
<TABLE>
<CAPTION>
ALLBRITTON COMMUNICATIONS COMPANY
(an indirectly wholly-owned subsidiary of Perpetual Corporation)
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
March 31,
September 30, 2000
1999 (unaudited)
------------- -----------
Assets
Current assets
<S> <C> <C>
Cash and cash equivalents .................... $ 14,437 $ 6,976
Accounts receivable, net ..................... 35,093 37,364
Program rights ............................... 18,057 8,651
Deferred income taxes ........................ 1,262 1,262
Interest receivable from related party ....... 492 492
Other ........................................ 2,434 4,334
--------- ---------
Total current assets .................... 71,775 59,079
Property, plant and equipment, net ............... 47,098 45,623
Intangible assets, net ........................... 139,134 138,851
Deferred financing costs and other ............... 9,661 9,017
Cash surrender value of life insurance ........... 7,015 7,705
Program rights ................................... 1,185 1,017
--------- ---------
$ 275,868 $ 261,292
========= =========
Liabilities and Stockholder's Investment
Current liabilities
Current portion of long-term debt ............ $ 1,921 $ 1,943
Accounts payable ............................. 3,699 2,902
Accrued interest payable ..................... 11,156 11,156
Program rights payable ....................... 22,721 13,953
Accrued employee benefit expenses ............ 4,470 3,932
Other accrued expenses ....................... 3,570 4,105
--------- ---------
Total current liabilities ............... 47,537 37,991
Long-term debt ................................... 427,708 426,698
Program rights payable ........................... 1,672 1,354
Deferred rent and other .......................... 3,048 2,669
Accrued employee benefit expenses ................ 2,112 1,628
Deferred income taxes ............................ 5,138 6,103
--------- ---------
Total liabilities ....................... 487,215 476,443
--------- ---------
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 ............................ 54,054 62,151
Distributions to owners, net ................. (272,357) (284,258)
--------- ---------
Total stockholder's investment ............. (211,347) (215,151)
--------- ---------
$ 275,868 $ 261,292
========= =========
</TABLE>
See accompanying notes to interim consolidated financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
ALLBRITTON COMMUNICATIONS COMPANY
(an indirectly wholly-owned subsidiary of Perpetual Corporation)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
Six Months Ended
March 31,
----------------
1999 2000
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income ........................................ $ 4,993 $ 8,097
-------- ---------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ................... 8,566 7,889
Other noncash charges ........................... 628 628
Provision for doubtful accounts ................. 224 219
Loss on disposal of assets ...................... -- 12
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable ........................ (1,097) (2,490)
Program rights ............................. 9,179 9,574
Other current assets ....................... (836) (1,759)
Other noncurrent assets .................... (628) (616)
Increase (decrease) in liabilities:
Accounts payable ........................... 904 (797)
Program rights payable ..................... (8,862) (9,086)
Accrued employee benefit expenses .......... (474) (1,022)
Other accrued expenses ..................... 680 535
Deferred rent and other liabilities ........ 230 (379)
Deferred income taxes ...................... 851 965
-------- ---------
9,365 3,673
-------- ---------
Net cash provided by operating activities .. 14,358 11,770
-------- ---------
Cash flows from investing activities:
Capital expenditures .............................. (4,699) (2,978)
Proceeds from disposal of assets .................. 11 66
Exercise of option to acquire assets of WJSU ...... -- (3,372)
-------- ---------
Net cash used in investing activities ...... (4,688) (6,284)
-------- ---------
Cash flows from financing activities:
Principal payments on capital lease obligations ... (807) (1,046)
Distributions to owners, net of certain charges ... (97,697) (256,212)
Repayments of distributions to owners ............. 89,380 244,311
-------- ---------
Net cash used in financing activities ...... (9,124) (12,947)
-------- ---------
Net increase (decrease) in cash and cash equivalents .. 546 (7,461)
Cash and cash equivalents, beginning of period ........ 13,849 14,437
-------- ---------
Cash and cash equivalents, end of period .............. $ 14,395 $ 6,976
======== =========
Non-cash investing and financing activities:
Equipment acquired under capital leases ........... $ 1,528 $ --
======== =========
</TABLE>
See accompanying notes to interim consolidated financial statements.
3
<PAGE>
ALLBRITTON COMMUNICATIONS COMPANY
(an indirectly wholly-owned subsidiary of Perpetual Corporation)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(unaudited)
NOTE 1 - The accompanying unaudited interim consolidated financial statements of
Allbritton Communications Company (an indirectly wholly-owned subsidiary of
Perpetual Corporation) and its subsidiaries (collectively, the "Company") have
been prepared pursuant to instructions for Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in conformity with generally
accepted accounting principles have been omitted or condensed where permitted by
regulation. In management's opinion, the accompanying financial statements
reflect all adjustments, which were of a normal recurring nature, and
disclosures necessary for a fair presentation of the consolidated financial
statements for the interim periods presented. The results of operations for the
three and six months ended March 31, 2000 are not necessarily indicative of the
results that can be expected for the entire fiscal year ending September 30,
2000. The interim consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes thereto
for the year ended September 30, 1999 which are contained in the Company's Form
10-K.
NOTE 2 - On December 29, 1995, the Company, through an 80%-owned subsidiary,
entered into a local marketing agreement to program WJSU-TV in Anniston,
Alabama. In connection with the local marketing agreement, the Company also
entered into an option to purchase the assets of WJSU-TV at a cost of $15,348.
The Company exercised its option to acquire WJSU-TV on September 14, 1999 by
entering into an asset purchase agreement for the purchase of WJSU-TV, subject
to regulatory approval and customary closing conditions. The Company received
such approval and completed its acquisition of WJSU-TV on March 22, 2000 for
additional consideration of $3,372. The total cost to acquire and exercise the
option was $18,720. The acquisition was accounted for as a purchase and
accordingly, the cost of the acquired entity was assigned to the identifiable
tangible and intangible assets acquired based on their fair values at the date
of purchase. The consolidated results of operations of the Company include
operating revenues and operating expenses of WJSU-TV from December 29, 1995 to
March 21, 2000 pursuant to the terms of the local marketing agreement, and since
March 22, 2000 as an owned station.
4
<PAGE>
NOTE 3 - For the six months ended March 31, 1999 and 2000, distributions to
owners were as follows:
<TABLE>
<CAPTION>
1999 2000
---- ----
<S> <C> <C>
Distributions to owners, beginning of period ....... $ 256,158 $ 272,357
Cash advances ................................... 100,785 260,274
Repayment of cash advances ...................... (89,380) (244,311)
Charge for Federal and state income taxes ....... (3,088) (4,062)
--------- ---------
Distributions to owners, end of period ............. $ 264,475 $ 284,258
========= =========
Weighted average amount of non-interest bearing
advances outstanding during the period .......... $ 252,260 $ 291,354
========= =========
</TABLE>
5
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
(Dollars in thousands)
Overview
Allbritton Communications Company and its subsidiaries (on a consolidated basis,
the "Company") own ABC network-affiliated television stations serving seven
diverse geographic markets: WJLA-TV in Washington, D.C.; WCFT-TV in Tuscaloosa,
Alabama, WJSU-TV in Anniston, Alabama and WBMA-LP, a low power television
station licensed to Birmingham, Alabama (the Company operates WCFT-TV and
WJSU-TV in tandem with WBMA-LP serving the viewers of the Birmingham, Tuscaloosa
and Anniston market); WHTM-TV in Harrisburg, Pennsylvania; KATV in Little Rock,
Arkansas; KTUL in Tulsa, Oklahoma; WSET-TV in Lynchburg, Virginia; and WCIV in
Charleston, South Carolina.
The Company previously programmed WJSU-TV pursuant to a local marketing
agreement. In connection with its local marketing agreement, the Company entered
into an option to purchase the assets of WJSU-TV. The Company exercised its
option to acquire WJSU-TV on September 14, 1999 by entering into an asset
purchase agreement for the purchase of WJSU-TV, subject to regulatory approval
and customary closing conditions. The Company received such approval and
completed its acquisition of WJSU-TV on March 22, 2000. The consolidated results
of operations of the Company include operating revenues and operating expenses
of WJSU-TV from December 29, 1995 to March 21, 2000 pursuant to the terms of the
local marketing agreement, and since March 22, 2000 as an owned station. Upon
acquisition of WJSU-TV, the Company is no longer required to pay fees
approximating $360 annually that were paid in connection with the previously
existing local marketing agreement.
The Company's advertising revenues are generally highest in the first and third
quarters of each fiscal year, due in part to increases in retail advertising in
the period leading up to and including the holiday season and active advertising
in the spring. The fluctuation in the Company's operating results is generally
related to fluctuations in the revenue cycle. In addition, advertising revenues
are generally higher during election years due to spending by political
candidates, which is typically heaviest during the Company's first fiscal
quarter. Years in which Olympic Games are held also cause cyclical fluctuations
in operating results depending on which television network is carrying Olympic
coverage.
As compared to the same periods in the prior fiscal year, the Company's results
of operations for the three and six months ended March 31, 2000 principally
reflect an increase in national and local/regional advertising revenues in the
Washington, D.C. market, partially offset by increased programming and news
expenses in a majority of the Company's markets. The Company's results of
operations for the six months ended March 31, 2000 also reflect decreased
political advertising revenues due to various high-profile local political races
that took place during the first quarter of Fiscal 1999 with no comparable
political elections occurring during the same period in Fiscal 2000.
6
<PAGE>
Results of Operations
Set forth below are selected consolidated financial data for the three and six
months ended March 31, 1999 and 2000 and the percentage change between the
periods:
<TABLE>
<CAPTION>
Three Months Ended March 31, Six Months Ended March 31,
---------------------------- --------------------------
Percent Percent
1999 2000 Change 1999 2000 Change
---- ---- ------- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues, net ...... $41,609 $46,670 12.2% $94,351 $102,851 9.0%
Total operating expenses ..... 32,263 33,069 2.5% 65,503 67,983 3.8%
------- ------- ------- --------
Operating income ............. 9,346 13,601 45.5% 28,848 34,868 20.9%
Nonoperating expenses, net ... 10,101 10,565 4.6% 20,051 21,001 4.7%
Income tax (benefit) provision (361) 1,275 453.2% 3,804 5,770 51.7%
------- ------- ------- --------
Net (loss) income ............ $ (394) $ 1,761 547.0% $ 4,993 $ 8,097 62.2%
======= ======= ======= ========
</TABLE>
Net Operating Revenues
The following table depicts the principal types of operating revenues, net of
agency commissions, earned by the Company for each of the three and six months
ended March 31, 1999 and 2000, and the percentage contribution of each to the
total broadcast revenues earned by the Company, before fees:
<TABLE>
<CAPTION>
Three Months Ended March 31, Six Months Ended March 31,
---------------------------- --------------------------
1999 2000 1999 2000
---- ---- ---- ----
Dollars Percent Dollars Percent Dollars Percent Dollars Percent
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Local/regional <F1>...... $ 21,490 50.0 $ 22,785 47.1 $ 46,284 47.5 $ 50,375 47.4
National <F2>............ 17,113 39.8 20,973 43.4 37,492 38.5 46,259 43.5
Network compensation <F3> 1,503 3.5 730 1.5 2,889 3.0 1,355 1.3
Political <F4>........... 17 0.1 537 1.1 3,926 4.0 913 0.9
Trade and barter <F5>.... 1,932 4.5 2,243 4.7 4,044 4.1 4,515 4.2
Other revenue <F6>....... 926 2.1 1,083 2.2 2,803 2.9 2,931 2.7
-------- ----- -------- ----- -------- ----- --------- -----
Broadcast revenues....... 42,981 100.0 48,351 100.0 97,438 100.0 106,348 100.0
===== ===== ===== =====
Fees <F7>................ (1,372) (1,681) (3,087) (3,497)
-------- -------- -------- ---------
Operating revenues, net.. $ 41,609 $ 46,670 $ 94,351 $ 102,851
======== ======== ======== =========
<FN>
<F1> Represents sale of advertising time to local and regional advertisers or
agencies representing such advertisers.
<F2> Represents sale of advertising time to agencies representing national
advertisers.
<F3> Represents payment by networks for broadcasting or promoting network
programming.
<F4> Represents sale of advertising time to political advertisers.
<F5> Represents value of commercial time exchanged for goods and services
(trade) or syndicated programs (barter).
<F6> Represents miscellaneous revenue, principally receipts from tower rental,
production of commercials and revenue from the sale of University of
Arkansas sports programming to advertisers and radio stations.
<F7> Represents fees paid to national sales representatives and fees paid for
music licenses.
</FN>
</TABLE>
7
<PAGE>
Net operating revenues for the three months ended March 31, 2000 totaled
$46,670, an increase of $5,061, or 12.2%, when compared to net operating
revenues of $41,609 for the three months ended March 31, 1999. This increase
resulted principally from increased national and local/regional advertising
revenue in the Company's Washington, D.C. market.
Net operating revenues increased $8,500, or 9.0%, to $102,851 for the six months
ended March 31, 2000 as compared to $94,351 for the same period in the prior
year. This year-to-date increase principally resulted from increased national
and local/regional advertising revenue in the Company's Washington, D.C. market,
partially offset by decreased political advertising revenue due to significant
elections in the first quarter of Fiscal 1999 with no comparable political
elections occurring during the first quarter of Fiscal 2000.
Local/regional advertising revenues increased 6.0% and 8.8% during the three and
six months ended March 31, 2000, respectively, versus the comparable periods in
Fiscal 1999. The increases for the three and six months ended March 31, 2000 of
$1,295 and $4,091, respectively, over the three and six months ended March 31,
1999 were primarily attributable to an improvement in the Washington, D.C.
local/regional advertising market.
National advertising revenues increased $3,860 and $8,767, or 22.6% and 23.4%,
for the three and six months ended March 31, 2000, respectively, over the
comparable periods in Fiscal 1999. The increases for the three and six months
ended March 31, 2000 were primarily attributable to an improvement in the
Washington, D.C. national advertising market, including strong internet-related
advertising, particularly during the first quarter of Fiscal 2000.
Network compensation revenue decreased $773 and $1,534, or 51.4% and 53.1%, for
the three and six months ended March 31, 2000, respectively, over the comparable
periods in Fiscal 1999. The decreases were principally due to the effect of the
amendment of the Company's network affiliation agreements with ABC in August
1999. These decreases were fully offset by local/regional and national
advertising revenues generated from the sale of additional prime-time inventory
obtained as part of the amendment.
Political advertising revenues increased $520 to $537 for the three months ended
March 31, 2000 versus $17 for the three months ended March 31, 1999. The
increase was primarily due to advertising related to the presidential primaries
in several of the Company's markets with no comparable advertising in the second
quarter of Fiscal 1999. Political advertising revenues decreased $3,013, or
76.7%, during the six months ended March 31, 2000 from the six months ended
March 31, 1999. The decrease was due primarily to various high-profile local
political races in many of the Company's markets that took place during the
first quarter of Fiscal 1999 with no comparable political elections occurring
during the same period in Fiscal 2000.
No individual advertiser accounted for more than 5% of the Company's broadcast
revenues during the three or six months ended March 31, 1999 or 2000.
8
<PAGE>
Total Operating Expenses
Total operating expenses for the three months ended March 31, 2000 totaled
$33,069, an increase of $806, or 2.5%, compared to total operating expenses of
$32,263 for the three-month period ended March 31, 1999. This net increase
consisted of an increase in television operating expenses, excluding
depreciation and amortization, of $1,167, a decrease in depreciation and
amortization of $299 and a decrease in corporate expenses of $62.
Total operating expenses for the six months ended March 31, 2000 totaled
$67,983, an increase of $2,480, or 3.8%, compared to total operating expenses of
$65,503 for the six-month period ended March 31, 1999. This net increase
consisted of an increase in television operating expenses, excluding
depreciation and amortization, of $3,166, a decrease in depreciation and
amortization of $677 and a decrease in corporate expenses of $9.
Television operating expenses, excluding depreciation and amortization,
increased $1,167 and $3,166, or 4.4% and 5.8%, for the three and six months
ended March 31, 2000, respectively, as compared to the comparable periods in
Fiscal 1999. These expense increases were the result of increased programming
and news expenses across a majority of the Company's stations. The increased
programming expenses during the six months ended March 31, 2000 included certain
one-time and non-recurring programming events occurring during the first quarter
of Fiscal 2000. Excluding these expenses, television operating expenses
increased 4.6% for the six months ended March 31, 2000 as compared to the six
months ended March 31, 1999.
Depreciation and amortization expense decreased $299 and $677, or 6.9% and 7.9%,
respectively, for the three and six months ended March 31, 2000 versus the
comparable periods in Fiscal 1999. These decreases were principally the result
of decreased depreciation on the assets acquired in Birmingham and Harrisburg
during Fiscal 1996.
Operating Income
For the three months ended March 31, 2000, operating income of $13,601 increased
$4,255, or 45.5%, when compared to operating income of $9,346 for the three
months ended March 31, 1999. For the three months ended March 31, 2000, the
operating margin increased to 29.1% from 22.5% for the comparable period in
Fiscal 1999. Operating income of $34,868 for the six months ended March 31, 2000
increased $6,020, or 20.9%, when compared to operating income of $28,848 for the
same period in the prior fiscal year. For the six months ended March 31, 2000,
the operating margin increased to 33.9% from 30.6% for the comparable period in
the prior fiscal year. These increases in operating income and margin were the
result of net operating revenues increasing more than total operating expenses
as discussed above.
Nonoperating Expenses, Net
Interest expense of $10,936 and $21,784 for three and six months ended March 31,
2000, respectively, increased $428 and $939, or 4.1% and 4.5%, as compared to
$10,508 and $20,845 for the three and six-month periods ended March 31, 1999,
respectively. These increases were due to an increased average balance of debt
outstanding during Fiscal 2000.
The average balance of debt outstanding, including capital lease obligations,
was $444,311 and $462,738 for the three months ended March 31, 1999 and 2000,
respectively, and the weighted average interest rate on debt was 9.4% for each
of the three months ended March 31, 1999 and 2000.
9
<PAGE>
The average balance of debt outstanding, including capital lease obligations,
was $440,495 and $461,207 for the six months ended March 31, 1999 and 2000,
respectively, and the weighted average interest rate on debt was 9.4% for each
of the six months ended March 31, 1999 and 2000.
Income Taxes
The provision for income taxes for the three months ended March 31, 2000 totaled
$1,275, an increase of $1,636, or 453.2%, when compared to the benefit from
income taxes of $361 for the three months ended March 31, 1999. The increase was
directly related to the $3,791, or 502.1% increase in the Company's income
before income taxes, partially offset by a reduction in the Company's overall
effective income tax rate in Fiscal 2000.
The provision for income taxes for the six months ended March 31, 2000 totaled
$5,770, an increase of $1,966, or 51.7%, when compared to the provision for
income taxes of $3,804 for the six months ended March 31, 1999. The increase was
directly related to the $5,070, or 57.6% increase in the Company's income before
income taxes, partially offset by a reduction in the Company's overall effective
income tax rate in Fiscal 2000.
Net Income
For the three and six months ended March 31, 2000, the Company recorded net
income of $1,761 and $8,097, respectively, as compared to a net loss of $394 and
net income of $4,993 for the three and six months ended March 31, 1999,
respectively. The increases of $2,155 and $3,104 during the three and six months
ended March 31, 2000 were due to the factors discussed above.
Balance Sheet
Significant balance sheet fluctuations from September 30, 1999 to March 31, 2000
consisted of decreases in program rights and program rights payable which
reflect the annual cycle of the underlying program contracts which generally
begins in September of each year.
Liquidity and Capital Resources
As of March 31, 2000, the Company's cash and cash equivalents aggregated $6,976,
and the Company had an excess of current assets over current liabilities of
$21,088.
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 $14,358 and $11,770 for the six months
ended March 31, 1999 and 2000, respectively. The $2,588 decrease in cash flows
from operating activities was principally due to increased accounts receivable
and other current assets as well as decreased accounts payable and accrued
employee benefit expenses, partially offset by a $3,104 increase in net income.
Transactions with Owners. For the six months ended March 31, 1999 and 2000, the
Company made cash advances to owners, net of repayments and certain charges,
totaling $8,317 and $11,901, respectively. The Company periodically makes
advances in the form of distributions to its parent. At present, the primary
source of repayment of the net advances is through the ability of the Company to
pay dividends or make other distributions to its parent, and there is no
immediate intent for the advances to be repaid. Accordingly, these advances have
been treated as a reduction of Stockholder's Investment and described as
"distributions" in the Company's consolidated financial statements.
10
<PAGE>
Stockholder's deficit amounted to $215,151 at March 31, 2000, an increase of
$3,804, or 1.8%, from the September 30, 1999 deficit of $211,347. The increase
was due to a net increase in distributions to owners of $11,901, offset by net
income for the period of $8,097.
Indebtedness. The Company's total debt, including the current portion of
long-term debt, decreased from $429,629 at September 30, 1999 to $428,641 at
March 31, 2000. This debt, net of applicable discounts, consisted of $274,109 of
9.75% Debentures, $150,000 of 8.875% Notes and $4,532 of capital lease
obligations at March 31, 2000. The decrease of $988 in total debt from September
30, 1999 to March 31, 2000 was primarily due to a net decrease in capital lease
obligations. As of September 30, 1999 and March 31, 2000, there were no amounts
outstanding under the Company's $40,000 revolving credit facility. The revolving
credit facility is secured by the pledge of stock of the Company and its
subsidiaries and matures April 16, 2001.
Under the existing borrowing agreements, the Company is subject to restrictive
covenants that place limitations upon payments of cash dividends, issuance of
capital stock, investment transactions, incurrence of additional obligations and
transactions with affiliates. In addition, the Company must maintain specified
levels of operating cash flow and working capital and comply with other
financial covenants. Compliance with the financial covenants is measured at the
end of each quarter, and as of March 31, 2000, the Company was in compliance
with those 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
facility.
Other Uses of Cash. The Company anticipates that capital expenditures for Fiscal
2000 will approximate $6,000. Fiscal 2000 capital expenditures will be primarily
for the acquisition of technical equipment and vehicles to support operations as
well as the completion of the expansion to the Company's Tulsa office and studio
facility. Capital expenditures during the six months ended March 31, 2000
totaled $2,978.
On March 22, 2000, the Company completed its acquisition of WJSU-TV. The final
amount paid at closing was $3,372.
The Company anticipates that its existing cash position, together with cash
flows generated by operating activities and amounts available under its
revolving credit facility will be sufficient to finance the operating cash flow
requirements of its stations, debt service requirements and anticipated capital
expenditures.
11
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
At March 31, 2000, the Company had other financial instruments consisting
primarily 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 March 31, 2000, the carrying value of such debt was $424,109, the fair
value was $393,500 and the weighted average interest rate 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.
12
<PAGE>
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company currently and from time to time is involved in litigation incidental
to the conduct of its business, 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 6. Exhibits and Reports on Form 8-K
a. Exhibits
See Exhibit Index on pages 15-18.
b. Reports on Form 8-K
No reports on Form 8-K were filed during the quarter.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALLBRITTON COMMUNICATIONS COMPANY
(Registrant)
May 10, 2000 /s/ Lawrence I. Hebert
------------------ ----------------------------
Date Name: Lawrence I. Hebert
Title: Chairman and Chief
Executive Officer
May 10, 2000 /s/ Stephen P. Gibson
------------------ ----------------------------
Date Name: Stephen P. Gibson
Title: Chief Financial Officer
14
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit Page No.
- ----------- ---------------------- --------
3.1 Certificate of Incorporation of ACC. (Incorporated by *
reference to Exhibit 3.1 of Company's Registration Statement
on Form S-4, No. 333-02302, dated March 12, 1996)
3.2 Bylaws of ACC. (Incorporated by reference to Exhibit 3.2 of *
Registrant's Registration Statement on Form S-4, No.
333-02302, dated March 12, 1996)
4.1 Indenture dated as of February 6, 1996 between ACC and State *
Street Bank and Trust Company, as Trustee, relating to the
Debentures. (Incorporated by reference to Exhibit 4.1 of
Company's Registration Statement on Form S-4, No. 333-02302,
dated March 12, 1996)
4.2 Indenture dated as of January 22, 1998 between ACC and State *
Street Bank and Trust Company, as Trustee, relating to the
Notes. (Incorporated by reference to Exhibit 4.1 of Company's
Registration Statement on Form S-4, No. 333-45933, dated
February 9, 1998)
4.3 Form of 9.75% Series B Senior Subordinated Debentures due *
2007. (Incorporated by reference to Exhibit 4.3 of Company's
Registration Statement on Form S-4, No. 333-02302, dated March
12, 1996)
4.4 Revolving Credit Agreement dated as of April 16, 1996 by and *
among Allbritton Communications Company certain Banks, and The
First National Bank of Boston, as agent. (Incorporated by
reference to Exhibit 4.4 of Company's Quarterly Report on Form
10-Q, No. 333-02302, dated August 14, 1996)
4.5 Modification No. 1 dated as of June 19, 1996 to Revolving *
Credit Agreement. (Incorporated by reference to Exhibit 4.5 of
Company's Quarterly Report on Form 10-Q, No. 333-02302, dated
May 15, 1997)
4.6 Modification No. 2 dated as of December 20, 1996 to Revolving *
Credit Agreement. (Incorporated by reference to Exhibit 4.6 of
Company's Quarterly Report on Form 10-Q, No. 333-02302, dated
May 15, 1997)
4.7 Modification No. 3 dated as of May 14, 1997 to Revolving *
Credit Agreement. (Incorporated by reference to Exhibit 4.7 of
Company's Quarterly Report on Form 10-Q, No. 333-02302, dated
May 15, 1997)
15
<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)
16
<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)
17
<PAGE>
Exhibit No. Description of Exhibit Page No.
- ----------- ---------------------- --------
10.18 Master Lease Finance Agreement dated as of August 10, 1994 *
between BancBoston Leasing, Inc. and ACC, as amended.
(Incorporated by reference to Exhibit 10.16 of Company's
Registration Statement on Form S-4, No. 333-02302, dated March
12, 1996)
10.19 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)
10.20 $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)
27. Financial Data Schedule (Electronic Filing Only)
- -----------------
*Previously filed
18
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<LEGEND>
ALLBRITTON COMMUNICATIONS COMPANY
FINANCIAL DATA SCHEDULE
IN ACCORDANCE WITH ITEM 601(C)
OR REGULATIONS S-K AND S-B
(In thousands)
This schedule contains summary financial information extracted from the
Consolidated Statement of Operations and Retained Earnings for the six months
ended March 31, 2000 and the Consolidated Balance Sheet as of March 31, 2000 and
is qualified in its entirety by reference to such consolidated financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
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<PERIOD-END> MAR-31-2000
<CASH> 6,976
<SECURITIES> 0
<RECEIVABLES> 38,827
<ALLOWANCES> 1,463
<INVENTORY> 0
<CURRENT-ASSETS> 59,079
<PP&E> 147,087
<DEPRECIATION> 101,464
<TOTAL-ASSETS> 261,292
<CURRENT-LIABILITIES> 37,991
<BONDS> 424,109
0
0
<COMMON> 1
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<TOTAL-LIABILITY-AND-EQUITY> 261,292
<SALES> 0
<TOTAL-REVENUES> 102,851
<CGS> 0
<TOTAL-COSTS> 67,983
<OTHER-EXPENSES> 651
<LOSS-PROVISION> 219
<INTEREST-EXPENSE> 21,784
<INCOME-PRETAX> 13,867
<INCOME-TAX> 5,770
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<NET-INCOME> 8,097
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