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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended Commission file number:
December 31, 1999 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 February 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 ANALSIS 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 DECEMBER 31, 1999
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION PAGE
Item 1. Financial Statements:
Consolidated Statements of Operations and Retained Earnings
for the Three Months Ended December 31, 1998 and
1999 ....................................................... 1
Consolidated Balance Sheets as of September 30, 1999 and
December 31, 1999 .......................................... 2
Consolidated Statements of Cash Flows for the Three Months
Ended December 31, 1998 and 1999 ........................... 3
Notes to Interim Consolidated Financial Statements ......... 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations .................................. 5
Item 3. Quantitative and Qualitative Disclosures About Market Risk.. 11
PART II OTHER INFORMATION
Item 1. Legal Proceedings .......................................... 12
Item 4. Submission of Matters to a Vote of Security Holders......... 12
Item 6. Exhibits and Reports on Form 8-K ........................... 12
Signatures ........................................................... 13
Exhibit Index ........................................................ 14
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
ALLBRITTON COMMUNICATIONS COMPANY
(an indirectly wholly-owned subsidiary of Perpetual Corporation)
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(Dollars in thousands)
(unaudited)
Three Months Ended
December 31,
---------------------
1998 1999
---- ----
<S> <C> <C>
Operating revenues, net $ 52,742 $ 56,181
-------- --------
Television operating expenses, excluding
depreciation and amortization 27,954 29,951
Depreciation and amortization 4,240 3,863
Corporate expenses 1,046 1,100
-------- --------
33,240 34,914
-------- --------
Operating income 19,502 21,267
-------- --------
Nonoperating income (expense)
Interest income
Related party 630 643
Other 84 66
Interest expense (10,337) (10,847)
Other, net (327) (298)
-------- --------
(9,950) (10,436)
-------- --------
Income before income taxes 9,552 10,831
Provision for income taxes 4,165 4,495
-------- --------
Net income 5,387 6,336
Retained earnings, beginning of period 45,426 54,054
-------- --------
Retained earnings, end of period $ 50,813 $ 60,390
======== ========
</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)
December 31,
September 30, 1999
Assets 1999 (unaudited)
------------- ------------
Current assets
<S> <C> <C>
Cash and cash equivalents $ 14,437 $ 12,286
Accounts receivable, net 35,093 47,234
Program rights 18,057 13,275
Deferred income taxes 1,262 1,262
Interest receivable from related party 492 1,045
Other 2,434 3,656
--------- ---------
Total current assets 71,775 78,758
Property, plant and equipment, net 47,098 46,498
Intangible assets, net 139,134 137,716
Deferred financing costs and other 9,661 9,360
Cash surrender value of life insurance 7,015 7,318
Program rights 1,185 1,048
--------- ---------
$ 275,868 $ 280,698
========= =========
Liabilities and Stockholder's Investment
Current liabilities
Current portion of long-term debt $ 1,921 $ 1,923
Accounts payable 3,699 5,456
Accrued interest payable 11,156 7,781
Program rights payable 22,721 20,324
Accrued employee benefit expenses 4,470 3,040
Other accrued expenses 3,570 4,992
--------- ---------
Total current liabilities 47,537 43,516
Long-term debt 427,708 432,166
Program rights payable 1,672 1,428
Deferred rent and other 3,048 2,858
Accrued employee benefit expenses 2,112 2,133
Deferred income taxes 5,138 5,896
--------- ---------
Total liabilities 487,215 487,997
--------- ---------
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 60,390
Distributions to owners, net (272,357) (274,645)
--------- ---------
Total stockholder's investment (211,347) (207,299)
--------- ---------
$ 275,868 $ 280,698
========= =========
</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)
Three Months Ended
December 31,
------------------------
1998 1999
-------- --------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 5,387 $ 6,336
--------- ---------
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Depreciation and amortization 4,240 3,863
Other noncash charges 314 314
Provision for doubtful accounts 110 77
Loss (gain) on disposal of assets 1 (14)
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable (7,227) (12,218)
Program rights 4,589 4,919
Interest receivable from related party (553) (553)
Other current assets (85) (1,222)
Other noncurrent assets (302) (287)
Increase (decrease) in liabilities:
Accounts payable 175 1,757
Accrued interest payable (3,375) (3,375)
Program rights payable (4,016) (2,641)
Accrued employee benefit expenses (1,620) (1,409)
Other accrued expenses 1,668 1,422
Deferred rent and other liabilities 317 (190)
Deferred income taxes 871 758
--------- ---------
(4,893) (8,799)
--------- ---------
Net cash provided by (used in) operating activities 494 (2,463)
--------- ---------
Cash flows from investing activities:
Capital expenditures (2,284) (1,868)
Proceeds from disposal of assets 3 37
--------- ---------
Net cash used in investing activities (2,281) (1,831)
--------- ---------
Cash flows from financing activities:
Draws under revolving credit facility, net 2,500 5,000
Principal payments on capital lease obligations (346) (569)
Distributions to owners, net of certain charges (39,269) (147,788)
Repayments of distributions to owners 40,380 145,500
--------- ---------
Net cash provided by financing activities 3,265 2,143
--------- ---------
Net increase (decrease) in cash and cash equivalents 1,478 (2,151)
Cash and cash equivalents, beginning of period 13,849 14,437
--------- ---------
Cash and cash equivalents, end of period $ 15,327 $ 12,286
========= =========
Non-cash investing and financing activities:
Equipment acquired under capital leases $ 620 $ --
========= =========
See accompanying notes to interim consolidated financial statements.
</TABLE>
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 months ended December 31, 1999 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 - For the three months ended December 31, 1998 and 1999, distributions to
owners were as follows:
<TABLE>
<CAPTION>
1998 1999
---- ----
<S> <C> <C>
Distributions to owners, beginning of period $ 256,158 $ 272,357
Cash advances 42,650 150,954
Repayment of cash advances (40,380) (145,500)
Charge for Federal and state income taxes (3,381) (3,166)
--------- ---------
Distributions to owners, end of period $ 255,047 $ 274,645
========= =========
Weighted average amount of non-interest bearing
advances outstanding during the period $ 247,957 $ 289,524
========= =========
</TABLE>
4
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
(Dollars in thousands)
Overview
Allbritton Communications Company and its subsidiaries (on a consolidated basis,
the "Company") own and/or program ABC network-affiliated television stations
serving seven diverse geographic markets: WJLA-TV in Washington, D.C.; WHTM-TV
in Harrisburg, Pennsylvania; KATV in Little Rock, Arkansas; KTUL in Tulsa,
Oklahoma; WSET-TV in Lynchburg, Virginia; WCIV in Charleston, South Carolina;
and WCFT-TV in Tuscaloosa, Alabama (west of Birmingham, Alabama). The Company
also programs the ABC network affiliate WJSU-TV in Anniston, Alabama (east of
Birmingham, Alabama) pursuant to the terms of a local marketing agreement, and
owns a low power television station licensed to Birmingham, Alabama (WBMA-LP).
The Company operates WCFT-TV and programs WJSU-TV in tandem with WBMA-LP serving
the viewers of Birmingham, Tuscaloosa and Anniston.
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 expects closing to occur in the second
quarter of Fiscal 2000.
The Company's advertising revenues are generally highest in the first and third
quarters of each fiscal year, due in part to increases in retail advertising in
the period leading up to and including the holiday season and active advertising
in the spring. The fluctuation in the Company's operating results is generally
related to fluctuations in the revenue cycle. In addition, advertising revenues
are generally higher during election years due to spending by political
candidates, which is typically heaviest during the Company's first fiscal
quarter. Years in which Olympic Games are held also cause cyclical fluctuations
in operating results depending on which television network is carrying Olympic
coverage.
As compared to the same period in the prior fiscal year, the Company's results
of operations for the three months ended December 31, 1999 principally reflect
an increase in national and local/regional advertising revenues in the
Washington, D.C. market, partially offset by decreased political advertising
revenues and increased programming and news expenses in a majority of the
Company's markets.
5
<PAGE>
Results of Operations
Set forth below are selected consolidated financial data for the three months
ended December 31, 1998 and 1999 and the percentage change between the periods:
<TABLE>
<CAPTION>
Three Months Ended December 31,
-------------------------------
Percent
1998 1999 Change
------ ------ -------
<S> <C> <C> <C>
Operating revenues, net $52,742 $56,181 6.5%
Total operating expenses 33,240 34,914 5.0%
------- -------
Operating income 19,502 21,267 9.1%
Nonoperating expenses, net 9,950 10,436 4.9%
Income tax provision 4,165 4,495 7.9%
------- -------
Net income $ 5,387 $ 6,336 17.6%
======= =======
</TABLE>
Net Operating Revenues
The following table depicts the principal types of operating revenues, net of
agency commissions, earned by the Company for the three months ended December
31, 1998 and 1999, and the percentage contribution of each to the total
broadcast revenues earned by the Company, before fees:
<TABLE>
<CAPTION>
Three Months Ended December 31,
-------------------------------
1998 1999
---- ----
Dollars Percent Dollars Percent
------- ------- ------- -------
<S> <C> <C> <C> <C>
Local/regional <F1> $ 24,793 45.5 $ 27,591 47.6
National <F2> 20,379 37.4 25,286 43.6
Network compensation <F3> 1,386 2.6 624 1.1
Political <F4> 3,910 7.2 376 0.6
Trade and barter <F5> 2,112 3.9 2,272 3.9
Other revenue <F6> 1,878 3.4 1,848 3.2
-------- ----- -------- -----
Broadcast revenues 54,458 100.0 57,997 100.0
===== =====
Fees <F7> (1,716) (1,816)
-------- --------
Operating revenues, net $ 52,742 $ 56,181
======== ========
<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>
6
<PAGE>
Net operating revenues for the three months ended December 31, 1999 totaled
$56,181, an increase of $3,439, or 6.5%, when compared to net operating revenues
of $52,742 for the three months ended December 31, 1998. The increase resulted
principally from increased national and local/regional advertising revenues in
the Washington, D.C. market, partially offset by decreased political advertising
revenues 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 11.3% during the three months
ended December 31, 1999 versus the comparable period in Fiscal 1999. The
increase for the three months ended December 31, 1999 of $2,798 from the three
months ended December 31, 1998 was primarily attributable to an improvement in
the Washington, D.C. and Tulsa local/regional advertising markets.
National advertising revenues increased $4,907, or 24.1%, for the three months
ended December 31, 1999 over the comparable period in Fiscal 1999. The increase
for the three months ended December 31, 1999 was primarily attributable to an
improvement in the Washington, D.C. national advertising market, including
strong internet-related advertising.
Network compensation revenue decreased $762, or 55.0%, during the three months
ended December 31, 1999 principally due to the effect of the amendment of the
Company's network affiliation agreements with ABC in August 1999. This decrease
was 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 decreased $3,534, or 90.4%, during the three
months ended December 31, 1999 versus the comparable period in Fiscal 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 three months ended December
31, 1998 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 months ended December 31, 1998 or 1999.
Total Operating Expenses
Total operating expenses for the three months ended December 31, 1999 totaled
$34,914, an increase of $1,674, or 5.0%, compared to total operating expenses of
$33,240 for the three-month period ended December 31, 1998. This net increase
consisted of an increase in television operating expenses, excluding
depreciation and amortization, of $1,997, a decrease in depreciation and
amortization of $377 and an increase in corporate expenses of $54.
Television operating expenses, excluding depreciation and amortization,
increased $1,997, or 7.1%, to $29,951 for the three months ended December 31,
1999 as compared to $27,954 for the three months ended December 31, 1998. The
increase in Fiscal 2000 was primarily attributable to increased programming and
news expenses across a majority of the Company's stations. The increased
programming expenses were largely attributable to one-time and non-recurring
programming events occurring during the first quarter of Fiscal 2000. Excluding
these expenses, television operating expenses increased 4.8% for the three
months ended December 31, 1999 as compared to the three months ended December
31, 1998.
7
<PAGE>
Depreciation and amortization expense of $3,863 for the first three months of
Fiscal 2000 decreased $377, or 8.9%, versus the comparable period in Fiscal
1999. The decrease for the three months ended December 31, 1999 was principally
the result of decreased depreciation on the assets acquired in Birmingham and
Harrisburg during Fiscal 1996.
Operating Income
For the three months ended December 31, 1999, operating income of $21,267
increased $1,765, or 9.1%, when compared to operating income of $19,502 for the
three months ended December 31, 1998. For the three months ended December 31,
1999, the operating margin increased to 37.9% from 37.0% for the comparable
period in Fiscal 1999. 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 $10,847 for three months ended December 31, 1999 increased
$510, or 4.9%, as compared to $10,337 for the three-month period ended December
31, 1998. This increase was due to an increased average debt balance during the
first three months of Fiscal 2000. The average balance of debt outstanding,
including capital lease obligations, was $436,733 and $459,693 for the three
months ended December 31, 1998 and 1999, respectively, and the weighted average
interest rate on debt was 9.4% for each of the three months ended December 31,
1998 and 1999.
Income Taxes
The provision for income taxes for the three months ended December 31, 1999
totaled $4,495, an increase of $330, or 7.9%, when compared to the provision for
income taxes of $4,165 for the three months ended December 31, 1998. The
increase was directly related to the $1,279, or 13.4%, 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
Net income for the three months ended December 31, 1999 was $6,336 as compared
to net income of $5,387 for the three months ended December 31, 1998. The
increase of $949, or 17.6%, was due to the factors discussed above.
Balance Sheet
Significant balance sheet fluctuations from September 30, 1999 to December 31,
1999 consisted of increased accounts receivable, offset by decreases in program
rights, accrued interest payable and program rights payable. The increase in
accounts receivable was the result of the seasonality of the Company's revenue
cycle as well as continued revenue growth. The decrease in program rights and
program rights payable reflects the annual cycle of the underlying program
contracts which generally begins in September of each year. The decrease in
accrued interest payable reflects the timing of the Company's interest payments
under its debt obligations.
Liquidity and Capital Resources
As of December 31, 1999, the Company's cash and cash equivalents aggregated
$12,286, and the Company had an excess of current assets over current
liabilities of $35,242.
8
<PAGE>
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 $494 for the three months ended December
31, 1998. For the three months ended December 31, 1999, the Company's net cash
used in operating activities was $2,463. The $2,957 decrease in cash flows from
operating activities was primarily due to increased accounts receivable.
Transactions with Owners. For the three months ended December 31, 1998, the
Company received net repayments from owners of $1,111. For the three months
ended December 31, 1999, the Company made cash advances to owners, net of
repayments and certain charges, totaling $2,288. 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 $207,299 at December 31, 1999, a decrease of
$4,048, or 1.9%, from the September 30, 1999 deficit of $211,347. The decrease
was due to net income for the period of $6,336, partially offset by a net
increase in distributions to owners of $2,288.
Indebtedness. The Company's total debt, including the current portion of
long-term debt, increased from $429,629 at September 30, 1999 to $434,089 at
December 31, 1999. This debt, net of applicable discounts, consists of $274,080
of 9.75% Debentures, $150,000 of 8.875% Notes, $5,009 of capital lease
obligations and $5,000 under a revolving credit facility. The increase of $4,460
in total debt from September 30, 1999 to December 31, 1999 was primarily due to
a $5,000 increase in amounts outstanding under the revolving credit facility to
fund working capital. The Company's 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 December 31, 1999, 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 three months ended December 31, 1999
totaled $1,868.
The Company has entered into an asset purchase agreement for the acquisition of
WJSU-TV with a purchase price of $3,337.
9
<PAGE>
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, anticipated capital
expenditures and the acquisition of WJSU-TV.
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 implemented a plan of remediation which 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. The Company has not experienced any disruptions in its
business operations as a result of the date change to the year 2000.
Based on the Company's assessment, costs incurred to date related to the
Company's Year 2000 plan, which is considered complete, did not exceed $2,000.
Such costs were principally for capital expenditures for replacement systems.
These systems generally provide enhanced capabilities and functionality as well
as Year 2000 compliance. The costs were funded with cash provided by operations.
The Company has not separately tracked internal costs associated with the Year
2000 issue; however, such costs are not considered to be significant and
principally related 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.
The Company may subsequently discover Year 2000 issues, but at this time
management is unable to determine the probability that any such issue will
occur, or if it does occur, what the nature, length or other effects, if any, it
may have on the Company. 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.
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. "
10
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
At December 31, 1999, 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 December 31, 1999, the carrying value of such debt was $424,080, the
fair value was $417,500 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.
11
<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 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of stockholders of the Company held on November 22, 1999,
each of the directors of the Company was re-elected to serve until the next
annual meeting and until his or her successor is elected and qualified.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
See Exhibit Index on pages 14-17.
b. Reports on Form 8-K
No reports on Form 8-K were filed during the quarter.
12
<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)
February 10, 2000 /s/ Lawrence I. Hebert
- ------------------------------- -------------------------
Date Name: Lawrence I. Hebert
Title: Chairman and Chief
Executive Officer
February 10, 2000 /s/ Stephen P. Gibson
- ------------------------------- ------------------------
Date Name: Stephen P. Gibson
Title: Chief Financial Officer
13
<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)
14
<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)
15
<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)
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)
16
<PAGE>
Exhibit No. Description of Exhibit Page No.
- ----------- ---------------------- --------
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)
10.21 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)
10.22 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. (Incorporated by reference to Exhibit 10.24 of
Company's Form 10-K, No. 333-02302, dated December 28, 1999)
27. Financial Data Schedule (Electronic Filing Only)
- -----------------
*Previously filed
17
<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 three months
ended December 31, 1999 and the Consolidated Balance Sheet as of December 31,
1999 and is qualified in its entirety by reference to such consolidated
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> DEC-31-1999
<CASH> 12,286
<SECURITIES> 0
<RECEIVABLES> 48,808
<ALLOWANCES> 1,574
<INVENTORY> 0
<CURRENT-ASSETS> 78,758
<PP&E> 146,704
<DEPRECIATION> 100,206
<TOTAL-ASSETS> 280,698
<CURRENT-LIABILITIES> 43,516
<BONDS> 424,080
0
0
<COMMON> 1
<OTHER-SE> (207,300)
<TOTAL-LIABILITY-AND-EQUITY> 280,698
<SALES> 0
<TOTAL-REVENUES> 56,181
<CGS> 0
<TOTAL-COSTS> 34,914
<OTHER-EXPENSES> 298
<LOSS-PROVISION> 77
<INTEREST-EXPENSE> 10,847
<INCOME-PRETAX> 10,831
<INCOME-TAX> 4,495
<INCOME-CONTINUING> 6,336
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,336
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
