--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
FORM 10-Q
---------
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended Commission file number:
June 30, 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
---------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
---------
Number of shares of Common Stock outstanding as of August 9, 2000: 20,000
shares.
--------------------------------------------------------------------------------
<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 JUNE 30, 2000
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION PAGE
Item 1. Financial Statements:
Consolidated Statements of Operations and Retained Earnings
for the Three and Nine Months Ended June 30, 1999 and
2000........................................................ 1
Consolidated Balance Sheets as of September 30, 1999 and
June 30, 2000............................................... 2
Consolidated Statements of Cash Flows for the Nine Months
Ended June 30, 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 Nine Months Ended
June 30, June 30,
------------------ ------------------
1999 2000 1999 2000
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating revenues, net ................ $ 49,026 $ 54,544 $143,377 $157,395
-------- -------- -------- --------
Television operating expenses, excluding
depreciation and amortization ....... 27,282 27,627 82,010 85,521
Depreciation and amortization .......... 4,217 3,813 12,783 11,702
Corporate expenses ..................... 1,119 1,085 3,328 3,285
-------- -------- -------- --------
32,618 32,525 98,121 100,508
-------- -------- -------- --------
Operating income ....................... 16,408 22,019 45,256 56,887
-------- -------- -------- --------
Nonoperating income (expense)
Interest income
Related party .................... 609 637 1,870 1,925
Other ............................ 53 101 209 246
Interest expense .................... (10,570) (10,224) (31,415) (32,007)
Other, net .......................... (285) (292) (908) (943)
-------- -------- -------- --------
(10,193) (9,778) (30,244) (30,779)
-------- -------- -------- --------
Income before income taxes ............. 6,215 12,241 15,012 26,108
Provision for income taxes ............. 2,736 5,174 6,540 10,944
-------- -------- -------- --------
Net income ............................. 3,479 7,067 8,472 15,164
Retained earnings, beginning of period . 50,419 62,151 45,426 54,054
-------- -------- -------- --------
Retained earnings, end of period ....... $ 53,898 $ 69,218 $ 53,898 $ 69,218
======== ======== ======== ========
</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)
June 30,
September 30, 2000
1999 (unaudited)
------------- -----------
Assets
Current assets
<S> <C> <C>
Cash and cash equivalents ...................... $ 14,437 $ 3,232
Accounts receivable, net ....................... 35,093 44,894
Program rights ................................. 18,057 3,924
Deferred income taxes .......................... 1,262 1,262
Interest receivable from related party ......... 492 1,045
Other .......................................... 2,434 3,699
--------- ---------
Total current assets ...................... 71,775 58,056
Property, plant and equipment, net ................. 47,098 44,082
Intangible assets, net ............................. 139,134 137,677
Deferred financing costs and other ................. 9,661 8,712
Cash surrender value of life insurance ............. 7,015 8,092
Program rights ..................................... 1,185 831
--------- ---------
$ 275,868 $ 257,450
========= =========
Liabilities and Stockholder's Investment
Current liabilities
Current portion of long-term debt .............. $ 1,921 $ 1,964
Accounts payable ............................... 3,699 3,064
Accrued interest payable ....................... 11,156 7,781
Program rights payable ......................... 22,721 9,153
Accrued employee benefit expenses .............. 4,470 3,784
Other accrued expenses ......................... 3,570 4,434
--------- ---------
Total current liabilities ................. 47,537 30,180
Long-term debt ..................................... 427,708 426,221
Program rights payable ............................. 1,672 1,107
Deferred rent and other ............................ 3,048 2,477
Accrued employee benefit expenses .................. 2,112 1,639
Deferred income taxes .............................. 5,138 6,903
--------- ---------
Total liabilities ......................... 487,215 468,527
--------- ---------
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 69,218
Distributions to owners, net ................... (272,357) (287,251)
--------- ---------
Total stockholder's investment ............... (211,347) (211,077)
--------- ---------
$ 275,868 $ 257,450
========= =========
</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)
Nine Months Ended
June 30,
-----------------
1999 2000
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income ....................................... $ 8,472 $ 15,164
-------- --------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization .................. 12,783 11,702
Other noncash charges .......................... 942 942
Provision for doubtful accounts ................ 330 348
(Gain) loss on disposal of assets .............. (1) 17
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable ........................ (6,434) (10,149)
Program rights ............................. 13,822 14,487
Interest receivable from related party ..... (553) (553)
Other current assets ....................... (525) (1,124)
Other noncurrent assets .................... (956) (983)
Increase (decrease) in liabilities:
Accounts payable ........................... 654 (635)
Accrued interest payable ................... (3,375) (3,375)
Program rights payable ..................... (12,032) (14,133)
Accrued employee benefit expenses .......... (532) (1,159)
Other accrued expenses ..................... 628 864
Deferred rent and other liabilities ........ (89) (571)
Deferred income taxes ...................... 1,674 1,765
-------- --------
6,336 (2,557)
-------- --------
Net cash provided by operating activities 14,808 12,607
-------- --------
Cash flows from investing activities:
Capital expenditures ............................. (6,950) (4,081)
Proceeds from disposal of assets ................. 36 66
Exercise of option to acquire assets of WJSU ..... -- (3,372)
-------- --------
Net cash used in investing activities .... (6,914) (7,387)
-------- --------
Cash flows from financing activities:
Principal payments on capital lease obligations .. (1,253) (1,531)
Distributions to owners, net of certain charges .. (182,868) (261,285)
Repayments of distributions to owners ............ 171,191 246,391
-------- --------
Net cash used in financing activities .... (12,930) (16,425)
-------- --------
Net decrease in cash and cash equivalents ........ (5,036) (11,205)
Cash and cash equivalents, beginning of period ... 13,849 14,437
-------- --------
Cash and cash equivalents, end of period ......... $ 8,813 $ 3,232
======== ========
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 nine months ended June 30, 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 nine months ended June 30, 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 .................................... 187,636 268,899
Repayment of cash advances ....................... (171,191) (246,391)
Charge for Federal and state income taxes ........ (4,768) (7,614)
--------- ---------
Distributions to owners, end of period ............. $ 267,835 $ 287,251
========= =========
Weighted average amount of non-interest bearing
advances outstanding during the period .......... $ 257,804 $ 282,487
========= =========
</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. The 2000 Summer Olympic Games will be broadcast by NBC in September
2000.
As compared to the same periods in the prior fiscal year, the Company's results
of operations for the three and nine months ended June 30, 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.
6
<PAGE>
Results of Operations
Set forth below are selected consolidated financial data for the three and nine
months ended June 30, 1999 and 2000 and the percentage change between the
periods:
<TABLE>
<CAPTION>
Three Months Ended June 30, Nine Months Ended June 30,
--------------------------- --------------------------
Percent Percent
1999 2000 Change 1999 2000 Change
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues, net .. $ 49,026 $ 54,544 11.3% $143,377 $157,395 9.8%
Total operating expenses . 32,618 32,525 -0.3% 98,121 100,508 2.4%
-------- -------- -------- --------
Operating income ......... 16,408 22,019 34.2% 45,256 56,887 25.7%
Nonoperating expenses, net 10,193 9,778 -4.1% 30,244 30,779 1.8%
Income tax provision ..... 2,736 5,174 89.1% 6,540 10,944 67.3%
-------- -------- -------- --------
Net income ............... $ 3,479 $ 7,067 103.1% $ 8,472 $ 15,164 79.0%
======== ======== ======== ========
</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 nine months
ended June 30, 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 June 30, Nine Months Ended June 30,
--------------------------- --------------------------
1999 2000 1999 2000
---- ---- ---- ----
Dollars Percent Dollars Percent Dollars Percent Dollars Percent
------- ------- ------- ------- ------- ------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Local/regional <F1> ..... $ 25,220 49.8 $ 28,323 50.2 $ 71,504 48.3 $ 78,698 48.4
National <F2> ........... 21,272 42.0 24,228 43.0 58,763 39.7 70,487 43.3
Network compensation <F3> 1,645 3.2 836 1.5 4,534 3.1 2,191 1.3
Political <F4> .......... 83 0.2 512 0.9 4,010 2.7 1,426 0.9
Trade & barter <F5> ..... 2,072 4.1 2,133 3.8 6,116 4.1 6,648 4.1
Other revenue <F6> ...... 386 0.7 337 0.6 3,189 2.1 3,267 2.0
-------- ----- -------- ----- -------- ----- -------- -----
Broadcast revenues ...... 50,678 100.0 56,369 100.0 148,116 100.0 162,717 100.0
===== ===== ===== =====
Fees <F7>............... (1,652) (1,825) (4,739) (5,322)
-------- -------- -------- --------
Operating revenues, net $ 49,026 $ 54,544 $143,377 $157,395
======== ======== ======== ========
<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 sales 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 June 30, 2000 totaled $54,544,
an increase of $5,518, or 11.3% when compared to net operating revenues of
$49,026 for the three months ended June 30, 1999. Net operating revenues
increased $14,018, or 9.8%, to $157,395 for the nine months ended June 30, 2000
as compared to $143,377 for the same period in the prior fiscal year. These
increases resulted principally from increased national and local/regional
advertising revenue in the Company's Washington, D.C. market.
Local/regional advertising revenues increased 12.3% and 10.1% during the three
and nine months ended June 30, 2000, respectively, versus the comparable periods
in Fiscal 1999. The increases for the three and nine months ended June 30, 2000
of $3,103 and $7,194, respectively, over the three and nine months ended June
30, 1999 were primarily attributable to an improvement in the Washington, D.C.
local/regional advertising market.
National advertising revenues increased $2,956 and $11,724, or 13.9% and 20.0%,
for the three and nine months ended June 30, 2000, respectively, over the
comparable periods in Fiscal 1999. All of the Company's stations experienced an
increase in national advertising revenues during the three and nine months ended
June 30, 2000, with the overall increases being primarily attributable to an
improvement in the Washington, D.C. national advertising market. Strong
internet-related advertising, particularly during the first quarter of Fiscal
2000, contributed to the improvement in the Washington, D.C. national
advertising market.
Network compensation revenue decreased $809 and $2,343, or 49.2% and 51.7%, for
the three and nine months ended June 30, 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 $429 to $512 for the three months ended
June 30, 2000 versus $83 for the three months ended June 30, 1999. The increase
was primarily due to advertising related to various local political races in
several of the Company's markets with no comparable advertising in the third
quarter of Fiscal 1999. Political advertising revenues decreased $2,584, or
64.4%, during the nine months ended June 30, 2000 from the nine months ended
June 30, 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, partially offset by increased political
advertising in the second and third quarters of Fiscal 2000.
No individual advertiser accounted for more than 5% of the Company's broadcast
revenues during the three or nine months ended June 30, 1999 or 2000.
Total Operating Expenses
Total operating expenses for the three months ended June 30, 2000 totaled
$32,525, a decrease of $93, or 0.3%, compared to total operating expenses of
$32,618 for the three-month period ended June 30, 1999. This net decrease
consisted of an increase in television operating expenses, excluding
depreciation and amortization, of $345, a decrease in depreciation and
amortization of $404 and a decrease in corporate expenses of $34.
8
<PAGE>
Total operating expenses for the nine-month period ended June 30, 2000 totaled
$100,508, an increase of $2,387, or 2.4%, compared to $98,121 for the nine
months ended June 30, 1999. This increase consisted of an increase in television
operating expenses, excluding depreciation and amortization, of $3,511, a
decrease in depreciation and amortization of $1,081 and a decrease in corporate
expenses of $43.
Television operating expenses, excluding depreciation and amortization,
increased $345 and $3,511, or 1.3% and 4.3%, for the three and nine months ended
June 30, 2000, respectively, as compared to the same periods in Fiscal 1999. The
increase in television operating expenses during the three months ended June 30,
2000 was primarily attributable to increased programming and news expenses
across a majority of the Company's stations, partially offset by a decrease in
news-related promotional expenses at the Company's Washington, D.C. station. The
increase in television operating expenses during the nine months ended June 30,
2000 was principally attributable to increased programming and news expenses
across a majority of the Company's stations. The increased programming expenses
during the nine months ended June 30, 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 3.5% for
the nine months ended June 30, 2000 as compared to the nine months ended June
30, 1999.
Depreciation and amortization expenses decreased $404 and $1,081, or 9.6% and
8.5%, for the three and nine months ended June 30, 2000, respectively, as
compared to the same periods in Fiscal 1999. These decreases were principally
the result of decreased depreciation on the assets acquired in Birmingham and
Harrisburg during Fiscal 1996. Additionally, amortization expense decreased
during the three and nine months ended June 30, 2000 as a result of the
completion of the acquisition of WJSU-TV on March 22, 2000. Prior to March 22,
2000, the costs to acquire the option to purchase WJSU-TV were amortized over
the ten-year term of the option. Upon completion of the acquisition, the portion
of the purchase price assigned to the broadcast license and network affiliation
of WJSU-TV is being amortized over its estimated useful life of 40 years.
Operating Income
For the three months ended June 30, 2000, operating income of $22,019 increased
$5,611, or 34.2%, when compared to operating income of $16,408 for the three
months ended June 30, 1999. For the three months ended June 30, 2000, the
operating margin increased to 40.4% from 33.5% for the comparable period in
Fiscal 1999. The increases in operating income and margin were the result of
increased net operating revenues and decreased total operating expenses as
discussed above.
Operating income of $56,887 for the nine months ended June 30, 2000 increased
$11,631, or 25.7%, when compared to operating income of $45,256 for the same
period in the prior fiscal year. For the nine months ended June 30, 2000, the
operating margin increased to 36.1% from 31.6% for the comparable period in 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.
Nonoperating Expenses, Net
Interest expense of $10,224 for three months ended June 30, 2000 decreased $346,
or 3.3%, as compared to $10,570 for the three-month period ended June 30, 1999.
The decrease was due to a decreased average balance of debt outstanding during
the three months ended June 30, 2000.
9
<PAGE>
Interest expense for the nine months ended June 30, 2000 was $32,007, an
increase of $592, or 1.9%, as compared to $31,415 for the nine-month period
ended June 30, 1999. This increase was principally due to an increased average
balance of debt outstanding during the nine-month period ended June 30, 2000.
The average balance of debt outstanding, including capital lease obligations,
was $449,408 and $430,650 for the three months ended June 30, 1999 and 2000,
respectively, and the weighted average interest rate on debt was 9.3% and 9.4%
for the three months ended June 30, 1999 and 2000, respectively.
The average balance of debt outstanding, including capital lease obligations,
was $443,438 and $450,898 for the nine months ended June 30, 1999 and 2000,
respectively, and the weighted average interest rate on debt was 9.4% for each
of the nine-month periods ended June 30, 1999 and 2000.
Income Taxes
The provision for income taxes for the three months ended June 30, 2000 totaled
$5,174, an increase of $2,438, or 89.1%, when compared to the provision for
income taxes of $2,736 for the three months ended June 30, 1999. The increase
was directly related to the $6,026, or 97.0%, 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 nine months ended June 30, 2000 totaled
$10,944, an increase of $4,404, or 67.3%, when compared to the provision for
income taxes of $6,540 for the nine months ended June 30, 1999. The increase was
directly related to the $11,096, or 73.9%, 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 nine months ended June 30, 2000, the Company recorded net
income of $7,067 and $15,164, respectively, as compared to net income of $3,479
and $8,472 for the three and nine months ended June 30, 1999, respectively. The
increases of $3,588 and $6,692 during the three and nine months ended June 30,
2000 were due to the factors discussed above.
Balance Sheet
Significant balance sheet fluctuations from September 30, 1999 to June 30, 2000
consisted of increased accounts receivable, offset by decreases in cash, program
rights and program rights payable. The increase in accounts receivable was the
result of growth in operating revenues as well as the seasonality of the
Company's revenue cycle. The decreases in program rights and program rights
payable reflect the annual cycle of the underlying program contracts.
Liquidity and Capital Resources
As of June 30, 2000, the Company's cash and cash equivalents aggregated $3,232,
and the Company had an excess of current assets over current liabilities of
$27,876.
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 $14,808 and $12,607 for the nine months
ended June 30, 1999 and 2000, respectively. The $2,201 decrease in cash flows
from operating activities was principally due to increased accounts
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receivable as well as decreased accounts payable, program rights payable and
depreciation and amortization expense, partially offset by a $6,692 increase in
net income.
Transactions with Owners. For the nine months ended June 30, 1999 and 2000, the
Company made cash advances to owners, net of repayments and certain charges,
totaling $11,677 and $14,894, respectively. The Company periodically makes
advances in the form of distributions to its parent. At present, the primary
source of repayment of the net advances is through the ability of the Company to
pay dividends or make other distributions to its parent, and there is no
immediate intent for the advances to be repaid. Accordingly, these advances have
been treated as a reduction of Stockholder's Investment and described as
"distributions" in the Company's consolidated financial statements.
Stockholder's deficit amounted to $211,077 at June 30, 2000, a decrease of $270,
or 0.1%, from the September 30, 1999 deficit of $211,347. The decrease was due
to net income for the period of $15,164, offset by a net increase in
distributions to owners of $14,894.
Indebtedness. The Company's total debt, including the current portion of
long-term debt, decreased from $429,629 at September 30, 1999 to $428,185 at
June 30, 2000. This debt, net of applicable discounts, consisted of $274,138 of
9.75% Debentures, $150,000 of 8.875% Notes and $4,047 of capital lease
obligations at June 30, 2000. The decrease of $1,444 in total debt from
September 30, 1999 to June 30, 2000 was primarily due to a net decrease in
capital lease obligations. As of September 30, 1999 and June 30, 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 June 30, 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 are 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 nine months ended June 30, 2000
totaled $4,081.
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.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
At June 30, 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 June 30, 2000, the carrying value of such debt was $424,138, the fair
value was $398,500 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.
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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.
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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)
August 9, 2000 /s/ Lawrence I. Hebert
-------------------------- ----------------------------
Date Name: Lawrence I. Hebert
Title: Chairman and Chief Executive
Officer
August 9, 2000 /s/ Stephen P. Gibson
-------------------------- ----------------------------
Date Name: Stephen P. Gibson
Title: Vice President and Chief
Financial Officer
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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)
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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)
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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)
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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
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