<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
<TABLE>
<CAPTION>
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
<S> <C>
For the quarterly period ended September 30, 1997
_____________________________________________________
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________________ to _________________________________
COMMISSION FILE NUMBER 33-98436
33-98434
SULLIVAN BROADCASTING COMPANY, INC.
-----------------------------------
and
---
SULLIVAN BROADCAST HOLDINGS, INC.
---------------------------------
(Exact name of registrant as specified in its charter)
58-1719496
Delaware 04-3289279
- - - ------------------------------------------------ ---------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
18 Newbury Street, Boston, MA 02116
- - - ---------------------------------------- -----
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (617) 369-7755
--------------
</TABLE>
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 [_].
As of September 30, 1997, Sullivan Broadcasting Company, Inc. had 520,105 shares
of Common Stock outstanding, all of which is owned by Sullivan Broadcast
Holdings, Inc. Sullivan Broadcasting Company, Inc.'s Common Stock is not
publicly traded and does not have a quantifiable market value.
As of September 30, 1997, Sullivan Broadcast Holdings, Inc. had the following
outstanding shares of common stock: 1,201,577 shares of Class B-1 Common Stock,
6,158,211 shares of Class B-2 Common Stock, and 853,854 shares of Class C Common
Stock. Sullivan Broadcast Holdings, Inc.'s Common Stock is not publicly traded
and does not have a quantifiable market value.
IMPORTANT EXPLANATORY NOTE
This integrated Form 10-Q is filed pursuant to the Securities Exchange
Act of 1934, as amended, for each of Sullivan Broadcast Holdings, Inc., a
Delaware corporation, and its wholly owned subsidiary, Sullivan Broadcasting
Company, Inc., a Delaware corporation. Unless the context requires otherwise,
references to the "Company" refer to both Sullivan Broadcast Holdings, Inc. and
Sullivan Broadcasting Company, Inc. Sullivan Broadcast Holdings, Inc. is a
holding company with minimal separate operations from its operating subsidiary,
Sullivan Broadcasting Company, Inc. Separate financial information has been
provided for each entity, and, where appropriate, separate disclosures.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (SEE NOTE 1)
SULLIVAN BROADCAST HOLDINGS, INC. AND ITS WHOLLY-OWNED SUBSIDIARY
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
December 31, 1996 September 30, 1997
------------------------------------ -------------------------------------
Sullivan Sullivan Sullivan Sullivan
Broadcasting Broadcast Broadcasting Broadcast
Company, Inc. Holdings, Inc. Company, Inc. Holdings, Inc.
------------- -------------- ------------- --------------
(Unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,443 $ 6,469 $ 5,270 $ 5,284
Accounts receivable, net of
allowance for doubtful
accounts of $1,297 and
$1,498 31,686 31,686 26,737 26,737
Current portion of
programming rights 23,360 23,360 27,747 27,747
Current deferred tax asset 3,968 4,535 3,968 4,535
Prepaid expenses and other
current assets 733 733 834 854
-------- -------- -------- --------
Total current assets 66,190 66,783 64,556 65,157
Property and equipment, net 44,454 44,454 41,524 41,524
Programming rights, net of
current portion 21,319 21,319 25,712 25,712
Deferred loan costs, net of
accumulated amortization of
$793, $1,238, $1,439
and $2,370 12,292 14,016 11,646 12,883
Intangible assets, net 591,085 590,972 565,446 565,333
-------- -------- -------- --------
Total assets $735,340 $737,544 $708,884 $710,609
======== ======== ======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
2
<PAGE>
SULLIVAN BROADCAST HOLDINGS, INC. AND ITS WHOLLY-OWNED SUBSIDIARY
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONT.)
(dollars in thousands)
<TABLE>
<CAPTION>
December 31, 1996 September 30, 1997
------------------------------------ -------------------------------------
Sullivan Sullivan Sullivan Sullivan
Broadcasting Broadcast Broadcasting Broadcast
Company, Inc. Holdings, Inc. Company, Inc. Holdings, Inc.
------------- -------------- ------------- --------------
(Unaudited)
<S> <C> <C> <C> <C>
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of program-
ming contracts payable $ 24,281 $ 24,281 $ 29,103 $ 29,103
Current portion of senior
debt 18,583 18,583 18,482 18,482
Current income taxes
payable 2,910 2,865 18 --
Current interest payable 4,362 4,362 7,252 7,572
Due to related parties 7,080 -- 6,234 --
Accounts payable 1,925 1,925 1,908 1,909
Accrued expenses 3,650 3,771 3,067 3,164
-------- -------- -------- --------
Total current liabilities 62,791 55,787 66,064 60,230
Senior debt, net of current
portion 195,917 195,917 180,595 180,595
Borrowings under revolving
line of credit 56,500 56,500 58,500 58,500
Subordinated debt 125,185 155,326 125,185 155,714
Interest payable -- 4,942 -- 8,854
Programming contracts
payable, net of current
portion 20,392 20,392 25,471 25,471
Deferred taxes and other liabilities 86,705 84,124 80,235 75,220
-------- -------- -------- --------
Total liabilities 547,490 572,988 536,050 564,584
15% Cumulative redeemable
preferred stock, non-voting,
$.001 par value - authorized
1,500,000 shares; 1,150,000
shares issued and outstanding -- 111,483 -- 129,129
-------- -------- -------- --------
Commitments and
contingencies
Shareholders' equity (deficit):
Common stock, $.01 par
value; 800,000 shares
authorized; 520,105
shares issued and
outstanding 5 -- 5 --
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Class B-1 common stock,
$.001 par value; 5,000,000
shares authorized; 1,204,077
and 1,201,577 shares issued
and outstanding at
December 31, 1996 and
September 30, 1997, respectively -- 1 -- 1
Class B-2 common stock,
$.001 par value; 7,000,000
shares authorized; 6,158,211
shares issued and outstanding
at December 31, 1996 and
September 30, 1997, respectively -- 6 -- 6
Class C common stock, $.001
par value; 2,000,000 shares
authorized; 896,229 and
853,854 shares issued and
outstanding at December 31,
1996 and September 30, 1997,
respectively -- 1 -- 1
Additional paid-in capital 206,797 76,861 206,797 59,175
Accumulated deficit (18,952) (23,796) (33,968) (42,287)
-------- -------- -------- --------
Total shareholders'
equity 187,850 53,073 172,834 16,896
-------- -------- -------- --------
Total liabilities and
shareholders' equity $735,340 $737,544 $708,884 $710,609
======== ======== ======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
4
<PAGE>
SULLIVAN BROADCAST HOLDINGS, INC. AND ITS WHOLLY-OWNED SUBSIDIARY
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited - dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended September 30,
-----------------------------------------------------------
1996 1997
-----------------------------------------------------------
Sullivan Sullivan Sullivan Sullivan
Broadcasting Broadcast Broadcasting Broadcast
Company, Inc. Holdings, Inc. Company, Inc. Holdings, Inc
-------------- ----------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues (excluding barter) $ 29,643 $ 29,643 $33,256 $33,256
Less - commissions (4,929) (4,929) (5,475) (5,475)
-------- -------- ------- -------
Net revenues (excluding
barter) 24,714 24,714 27,781 27,781
Barter revenues 3,765 3,765 4,598 4,598
-------- -------- ------- -------
Total net revenues 28,479 28,479 32,379 32,379
-------- -------- ------- -------
Expenses
Operating expenses 3,875 3,875 3,889 3,889
Selling, general and
administrative 5,266 5,393 6,943 7,086
Amortization of programming
rights 7,004 7,004 7,641 7,641
Depreciation and amortization 14,266 14,266 11,979 11,979
-------- -------- ------- -------
30,411 30,538 30,452 30,595
-------- -------- ------- -------
Operating income (loss) (1,932) (2,059) 1,927 1,784
Interest expense, including
amortization of debt discount
and deferred loan costs 9,505 10,820 8,888 10,739
Other expense (income) 100 100 11 11
-------- -------- ------- -------
Loss before benefit
for income taxes (11,537) (12,979) (6,972) (8,966)
Benefit for income taxes 4,380 5,961 2,052 2,850
-------- -------- ------- -------
Net loss $ (7,157) $ (7,018) $(4,920) $(6,116)
======== ======== ======= =======
Nine Months Ended September 30,
-----------------------------------------------------------
1996 1997
-----------------------------------------------------------
Sullivan Sullivan Sullivan Sullivan
Broadcasting Broadcast Broadcasting Broadcast
Company, Inc. Holdings, Inc. Company, Inc. Holdings, Inc
-------------- ----------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues (excluding barter) $ 87,513 $ 87,513 $ 99,972 $ 99,972
Less - commissions (14,588) (14,588) (16,464) (16,464)
-------- -------- -------- --------
Net revenues (excluding
barter) 72,925 72,925 83,508 83,508
Barter revenues 10,798 10,798 13,240 13,240
-------- -------- -------- --------
Total net revenues 83,723 83,723 96,748 96,748
-------- -------- -------- --------
Expenses
Operating expenses 11,774 11,774 12,880 12,880
Selling, general and
administrative 16,392 16,656 20,164 20,851
Amortization of programming
rights 19,020 19,020 22,256 22,256
Depreciation and amortization 36,337 36,337 35,970 35,970
-------- -------- -------- --------
83,523 83,787 91,270 91,957
-------- -------- -------- --------
Operating income (loss) 200 (64) 5,478 4,791
Interest expense, including
amortization of debt discount
and deferred loan costs 26,088 30,022 26,802 31,908
Other expense (income) 100 100 20 19
-------- -------- -------- --------
Loss before benefit
for income taxes (25,988) (30,186) (21,344) (27,136)
Benefit for income taxes 9,818 11,399 6,328 8,645
-------- -------- -------- --------
Net loss $(16,170) $(18,787) $(15,016) $(18,491)
======== ======== ======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
5
<PAGE>
SULLIVAN BROADCAST HOLDINGS, INC. AND ITS WHOLLY-OWNED SUBSIDIARY
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited - dollars in thousands)
<TABLE>
<CAPTION>
Class B-1 Class B-2 Class C
Common Stock Common Stock Common Stock
------------------------ ------------------------ ------------------------
Shares Amount Shares Amount Shares Amount
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Sullivan Broadcasting
Company, Inc.
Balance at
December 31, 1996 -- $ -- 520,105 $ 5 -- $ --
Net loss -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance at
September 30, 1997 -- $ -- 520,105 $ 5 -- $ --
=========== =========== =========== =========== =========== ===========
Sullivan Broadcast
Holdings, Inc.
Balance at
December 31, 1996 1,204,077 $ 1 6,158,211 $ 6 896,229 $ 1
Repurchase of Class
B-1 Common Stock (2,500) -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Repurchase of Class
C Common Stock -- -- -- -- (47,375) --
Issuance of Class
Common Stock -- -- -- -- 5,000 --
Accretion of Preferred Stock -- -- -- -- --- --
Net loss -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance at
September 30, 1997 1,201,577 $ 1 6,158,211 $ 6 853,854 $ 1
=========== =========== =========== =========== =========== ===========
Additional Total
Paid-in Accumulated Shareholders'
Capital Deficit Equity
----------- ----------- -----------
Sullivan Broadcasting
Company, Inc.
Balance at
December 31, 1996 $ 206,797 $ (18,952) $ 187,850
Net loss -- (15,016) (15,016)
----------- ----------- -----------
Balance at
September 30, 1997 $ 206,797 $ (33,968) $ 172,834
=========== =========== ===========
Sullivan Broadcast
Holdings, Inc.
Balance at
December 31, 1996 $ 76,861 $ (23,796) $ 53,073
Repurchase of Class
B-1 Common Stock (25) -- (25)
Repurchase of Class
C Common Stock (27) -- (27)
Issuance of Class
Common Stock 12 -- 12
Accretion of Preferred Stock (17,646) -- (17,646)
Net loss -- (18,491) (18,491)
----------- ----------- -----------
Balance at
September 30, 1997 $ 59,175 $ (42,287) $ 16,896
=========== =========== ===========
</TABLE>
The accompanying notes to Consolidated Financial Statements are an integral part
of these financial statements.
6
<PAGE>
SULLIVAN BROADCAST HOLDINGS, INC. AND ITS WHOLLY-OWNED SUBSIDIARY
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited - dollars in thousands)
Nine Months Ended September 30,
---------------------------------------------------------------
1996 1997
------------------------------- ------------------------------
Sullivan Sullivan Sullivan Sullivan
Broadcasting Broadcast Broadcasting Broadcast
Company, Inc. Holdings, Inc. Company, Inc. Holdings, Inc.
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Cash Flows from operating activities:
Net Loss $ (16,170) $ (18,787) $ (15,016) $ (18,491)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Deferred income taxes (9,818) (11,399) (6,328) (8,645)
Depreciation of property, plant
and equipment 5,612 5,612 6,375 6,375
Amortization of intangible assets 30,725 30,725 29,595 29,595
Amortization of programming rights 8,861 8,861 9,769 9,769
Payments for programming rights (6,583) (6,583) (8,648) (8,648)
Amortization of debt discount and
deferred loan costs 1,197 1,662 646 1,521
Changes in assets and liabilities:
Decrease in accounts receivable 7,442 7,442 5,205 5,205
Decrease in prepaid expenses
and other assets (1,118) (1,118) (24) (44)
Increase (decrease) is due to related parties 5,966 (2,717) (846) --
Decrease in income taxes payable (962) (962) (2,892) (2,982)
Increase in interest payable 7,028 10,506 2,890 7,122
Decrease in accounts payable, accrued
expenses and other liabilities (5,010) (6,680) (900) (923)
--------- --------- --------- ----------
Net cash provided by operating activities 27,170 16,562 19,826 19,854
--------- --------- --------- ----------
Cash Flow from investing activities:
Decrease in restricted cash 126,916 162,599 --- ---
Increase in other assets --- --- --- ---
Acquisition of Cascom stock --- --- (4,371) (4,371)
Acquisition of Act III Broadcasting, Inc.
net of cash acquired (550,045) (550,045) --- ---
Payment for purchase options (2,800) (2,800) --- ---
Acquisition of WFXV assets (650) (650) --- ---
Acquisition of WMSN (26,500) (26,500) --- ---
Acquisition of WUXP (26,950) (26,950) --- ---
Capital expenditures (2,228) (2,228) (3,205) (3,205)
--------- --------- --------- ----------
Net cash used for investing activities (482,257) (446,574) (7,576) (7,576)
--------- --------- --------- ----------
Cash flows from financing activities:
Payment of principal amounts --- --- (15,423) (15,423)
Proceeds from term debt 220,000 220,000 --- ---
Proceeds from revolver borrowings, net 51,500 51,500 2,000 2,000
Proceeds from stockholder contribution 201,601 --- --- ---
Proceeds from issuance of common stock --- 61,603 --- 12
Repurchase of common stock --- --- --- (52)
Proceeds from issuance of preferred
stock, net --- 115,000 --- ---
Advance buydown of programming rights (4,396) (4,396) --- ---
Payment of debt issuance costs (5,572) (5,649) --- ---
--------- --------- --------- ----------
Net cash provided by (used for) financing
activities 463,133 438,058 (13,423) (13,463)
Net increase (decrease) in cash
and cash equivalents 8,046 8,046 (1,173) (1,185)
Cash and cash equivalents, beginning
of period --- --- 6,443 6,469
--------- --------- --------- ----------
Cash and cash equivalents, end of period $ 8,046 $ 8,046 $ 5,270 $ 5,284
========= ========= ========= ==========
</TABLE>
For supplemental disclosures of cash flow information see Note 5 to Consolidated
Financial Statements (unaudited).
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
7
<PAGE>
SULLIVAN BROADCAST HOLDINGS, INC. AND
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
On January 4, 1996, all of the outstanding capital stock of Act III
Broadcasting, Inc. ("Act III" or the "Predecessor") was purchased by and Act III
was merged with and into A-3 Acquisition, Inc. ("A-3"), with Act III surviving
such merger (the "Acquisition"). Act III then changed its name to Sullivan
Broadcasting Company, Inc. The Acquisition was accounted for by the purchase
method of accounting. The results of operations of Act III for the period from
January 1, 1996 through January 4, 1996 have been included in the results of
operations of the Company for the nine months ended September 30, 1996 due to
the immateriality of such results in relation to the Company's financial
statements taken as a whole for that period.
The accompanying consolidated financial statements as of and for the nine months
ended September 30, 1997 have been prepared by the Company, without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted pursuant to such rules and regulations. However, the Company
believes that the disclosures herein are adequate and that the information
presented is not misleading. It is suggested that these consolidated financial
statements be read in conjunction with the financial statements and the notes
thereto included in the Companys' latest annual reports on Form 10-K for the
year ended December 31, 1996 and the Company's quarterly report on Form 10-Q for
the quarters ended March 31, 1997 and June 30, 1997. The information furnished
reflects all adjustments (consisting only of normal, recurring adjustments)
which are, in the opinion of management, necessary to make a fair statement of
the results for the interim period. The results for these interim periods are
not necessarily indicative of results to be expected for the full fiscal year,
due to seasonal factors, among others.
2. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
December 31, September 30,
1996 1997
------------ -------------
(in thousands)
<S> <C> <C>
Land $ 1,385 $ 1,426
Broadcasting equipment 39,978 41,735
Buildings and improvements 6,262 6,386
Furniture and other equipment 3,070 5,152
Construction in progress 1,624 801
------- --------
52,319 55,500
Less: Accumulated depreciation
and amortization (7,865) (13,976)
------- --------
$44,454 $ 41,524
======= ========
</TABLE>
8
<PAGE>
SULLIVAN BROADCAST HOLDINGS, INC. AND
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
3. INTANGIBLE ASSETS
Intangible assets consisted of the following:
<TABLE>
<CAPTION>
Amortization December 31, September 30,
Period 1996 1997
------------ ------------------------------ ----------------- ------------
(in thousands)
Sullivan Sullivan Sullivan Sullivan
Broadcasting Broadcast Broadcasting Broadcast
Company, Inc. Holdings, Inc. Company, Inc. Holdings, Inc.
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Goodwill 40 Years $231,607 $231,494 $233,014 $232,901
Affiliation agreements 10 Years 98,445 98,445 98,445 98,445
Canadian cable rights 10 Years 59,000 59,000 59,000 59,000
Commercial advertising
contracts 15 years 148,986 148,986 150,750 150,750
FCC licenses 15 years 81,297 81,297 81,297 81,297
Other intangible assets 5 - 15 years 11,936 11,936 12,721 12,721
-------- -------- -------- --------
631,271 631,158 635,227 635,114
Less: Accumulated amortization (40,186) (40,186) (69,781) (69,781)
-------- -------- -------- --------
$591,085 $590,972 $565,446 $565,333
======== ======== ======== ========
</TABLE>
4. LONG TERM DEBT
On January 4, 1996, concurrent with the Acquisition, the Company borrowed
$220,000,000 under a term loan and $4,000,000 under a revolving credit facility
to finance the Acquisition. Both the term loan and the revolving credit
facility bear interest at LIBOR plus an applicable margin determined quarterly
based upon the Company's leverage ratio for the preceding quarter.
The revolving credit facility provides for borrowings up to $30,000,000 for
working capital purposes, and is due on December 31, 2003 or upon repayment of
the term loan. At September 30, 1997, $5,000,000 in borrowings were outstanding
on the revolving credit facility.
In connection with the term loan and the revolving credit facility, the Company
also has a $75,000,000 line of credit available for future acquisitions
(collectively, the "Senior Credit Facility"). At September 30, 1997,
$53,500,000 in borrowings were outstanding on the acquisition line of credit.
The term loan is payable in varying quarterly installments beginning December
31, 1997 through 2003. The repayments of the term loan as of September 30,
1997, are as follows:
(in thousands)
1997 $ 3,161
1998 20,428
1999 32,086
2000 42,781
2001 43,744
Thereafter 56,877
In addition, certain mandatory prepayments of the term loan are required if the
Company achieves certain financial results at the end of the fiscal year.
9
<PAGE>
SULLIVAN BROADCAST HOLDINGS, INC. AND
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
In January 1996, the Company entered into various interest rate protection
agreements based upon LIBOR rates and a notional value equal to the anticipated
outstanding term debt levels through the year 2000.
The Senior Credit Facility requires the Company to comply with certain
covenants. At September 30, 1997, the Company was in compliance with all
covenants.
5. INCOME TAXES
The provisions for taxes for the interim periods were based on projections of
total year pre-tax income.
As discussed in Note 1, the Acquisition was accounted for by the purchase method
of accounting which requires that all assets acquired and liabilities assumed be
recorded at their fair value. For tax purposes, the assets acquired and
liabilities assumed retain their historical basis resulting in a basis
differential. The resulting basis differential and acquired net operating loss
carryforwards together with changes in deferred tax assets and liabilities for
the period give rise to the net deferred tax asset and liability recorded at
September 30, 1997.
At December 31, 1996, Sullivan Broadcasting Company, Inc. and Sullivan Broadcast
Holdings, Inc. had net operating loss carryforwards of approximately $93,977,000
and $99,700,000, respectively, for federal income tax purposes, available to
reduce future taxable income. To the extent not used, federal net operating
loss carryforwards expire in varying amounts beginning in 2003. In addition, at
December 31, 1996 Sullivan Broadcasting Company, Inc. and Sullivan Broadcast
Holdings, Inc. had net operating loss carryforwards of approximately $85,810,000
and $91,533,000, respectively, for state and local income tax purposes in
various jurisdictions.
An entity that undergoes a "change in ownership" pursuant to Section 382 of the
Internal Revenue Code is subject to limitations on the amount of its net
operating loss carryforwards which may be used in the future. The Acquisition
resulted in a change in ownership pursuant to Section 382. Management has
estimated that the limitation on the net operating loss carryforwards will not
have a material adverse impact on the Company's consolidated financial position
or results of operation.
6. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
The Company paid interest of $17,863,000 and $23,121,000 during the periods
ending September 30, 1996 and September 30, 1997.
During the periods ended September 30, 1996 and September 30, 1997, programming
rights increased $11,715,000 and $8,780,000 respectively, due to the assumption
of cash programming liabilities.
During the periods ended September 30, 1996 and September 30, 1997, the Company
paid approximately $1,209,000 and $2,892,000 respectively, for state and local
income taxes.
7. COMMITMENTS AND CONTINGENCIES
The Company has executed contracts for programming rights totaling approximately
$18,004,000 and $14,199,000 at December 31, 1996 and September 30, 1997,
respectively, for which the broadcast period has not begun. Accordingly, the
asset and related liability are not recorded at such dates.
The Company has operating lease agreements for land, office space, office
equipment and other property which expire on various dates through 2005. Rental
expense was $289,000 and $559,000 for the periods ending September 30, 1996 and
September 30, 1997, respectively.
10
<PAGE>
SULLIVAN BROADCAST HOLDINGS, INC. AND
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
8. RELATED PARTY TRANSACTIONS
The Company reimburses ABRY Partners, Inc. ("ABRY"), an entity related through
common ownership, approximately $6,100 per month, representing the Company's
allocated share of rent paid by ABRY under its lease and other general expenses
including utilities, property insurance and supplies. In addition, the Company
has a management agreement with ABRY whereby the Company pays ABRY a management
fee of $250,000 annually. Such amounts have been included in "Selling, general
and administrative" expenses in the Company's consolidated statements of
operations. In addition, certain liabilities were paid during the first quarter
of 1996 by Sullivan Broadcast Holdings, Inc.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company's revenues are derived principally from local and national
advertisers. Additional revenues are derived from commercial production and
rental of broadcast towers. Increased ratings and strong advertiser demand have
contributed to the Company's successful revenue growth. Also, the Company has
developed sales marketing programs, implemented to enhance the image of the
Company's television stations (the "Stations"), conducts local "Kids Expos" and
live remote broadcasts, publishes promotional advertising print supplements and
participates in joint marketing events with local businesses and radio stations.
The Company's operating revenues are generally highest in the fourth
quarter of each year. This seasonality is primarily attributable to increased
expenditures by advertisers in anticipation of holiday retail spending and an
increase in viewership during the Fall/Winter season. Accordingly, accounts
receivable balances as of the end of each of the first three calendar quarters
are generally substantially less than the balances as of the end of the year.
Each of the Company's Stations generates positive Broadcast Cash Flow, defined
as operating income plus depreciation, amortization, barter expenses and
corporate expenses less payments for programming rights and barter revenue.
The Company's principal costs of operations are employee salaries and
commissions, programming, production, promotion and other expenses (such as
maintenance, supplies, insurance, rent and utilities). The Company has
historically experienced net losses primarily as a result of non-cash charges
attributable to amortization of intangibles that were recorded at the time of
the purchase of the Stations. The Company's amortization of programming rights
has historically exceeded the Company's payments for programming rights due to
the write-up of programming assets which occurred upon the respective
acquisitions of the Stations. This historic trend will continue with the write-
up of such assets in conjunction with the January 4, 1996 Acquisition. In
addition, the Company has paid in advance of scheduled programming liabilities
certain excess programming rights acquired as a result of the aforementioned
Acquisition.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1996 (THE "1996 THREE MONTHS") COMPARED TO
THREE MONTHS ENDED SEPTEMBER 30, 1997 OF THE COMPANY (THE "1997 THREE MONTHS")
Set forth below are selected consolidated financial data of the Company for the
three months ended September 30, 1996 and September 30, 1997 and the percentage
changes between the periods.
11
<PAGE>
SULLIVAN BROADCAST HOLDINGS, INC. AND
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------------------------------------
1996 1997 Percentage Change
------------------------------ ----------------------------- ------------------------------
Sullivan Sullivan Sullivan Sullivan Sullivan Sullivan
Broadcasting Broadcast Broadcasting Broadcast Broadcasting Broadcast
Company, Inc. Holdings, Inc. Company, Inc. Holdings, Inc. Company, Inc. Holdings, Inc.
------------- -------------- ------------- -------------- ------------- --------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Net revenues (excluding
barter) $24,714 $24,714 $27,781 27,781 12.4% 12.4%
Barter revenues 3,765 3,765 4,598 4,598 22.1 22.1
Total net revenues 28,479 28,479 32,379 32,379 13.7 13.7
Operating expenses 3,875 3,875 3,889 3,889 0.4 0.4
Selling, general
and administrative
expenses 5,266 5,393 6,943 7,086 31.8 31.4
Depreciation and
amortization 21,270 21,270 19,620 19,620 (7.8) (7.8)
Operating income (loss) (1,932) (2,059) 1,927 1,784 199.7 186.6
Interest expense 9,505 10,820 8,888 10,739 (6.5) (0.7)
Net loss 7,157 7,018 4,920 6,116 (31.3) (12.9)
Payments for programming
rights 2,314 2,314 2,961 2,961 28.0 28.0
Broadcast Cash Flow 13,984 13,984 15,096 15,096 8.0 8.0
</TABLE>
Net revenues (excluding barter) are net of commissions and primarily include
local/Canadian and national spot advertising sales. Net revenues (excluding
barter) increased to $27,781,000 in the 1997 Three Months from $24,714,000 in
the 1996 Three Months, an increase of $3,067,000 or 12.4%. This increase was
primarily due to higher local sales revenue resulting from the Company's
commitment to expand local sales. Additionally, net revenues were further
increased by higher advertising spot rates which were positively impacted by the
improving economy, resulting in greater advertising spending, along with higher
key demographic ratings from additional Fox programming and other syndicated and
first run programming. Advertising revenues for the 1997 Three Months were
comprised of 58.4% from local/Canadian advertising sales and 41.6% from national
advertising sales.
Local revenues include gross revenues before commissions from local or
regional advertisers or their representative agencies. Local and regional areas
encompass a station's designated market area and its outlying areas. Local
revenues increased to $18,907,000 in the 1997 Three Months from $16,183,000 in
the 1996 Three Months, an increase of $2,724,000 or 16.8%. The increase was
primarily due to increased ratings as well as stronger advertising demand along
with additional revenues resulting from an expanded local sales effort.
National revenues include gross revenues before commissions from national
advertisers or their representative agencies. National advertisers are
advertisers outside of a station's local market or region. National revenues
increased to $13,450,000 in the 1997 Three Months from $13,063,000 in the 1996
Three Months, an increase of $387,000 or 3.0%. As with local revenues, national
revenues increased primarily due to improved ratings and stronger advertising
demand.
Barter revenues increased to $4,598,000 in the 1997 Three Months from
$3,765,000 in the 1996 Three Months, an increase of $833,000, or 22.1%. This
increase was primarily due to the increased value of barter advertising spots
as a result of stronger advertising demand and ratings in 1997 compared to 1996.
Operating expenses include engineering, promotion, production and
programming operations. Operating expenses increased to $3,889,000 in the 1997
Three Months from $3,875,000 in the 1996 Three Months, an increase of $14,000.
This increase was the result of higher salaries paid to employees in the 1997
Three Months as compared to the 1996 Three Months.
12
<PAGE>
SULLIVAN BROADCAST HOLDINGS, INC. AND
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
Selling, general and administrative expenses include sales, salaries,
commissions, insurance, supplies and general management salaries. Selling,
general and administrative expenses increased to $6,943,000 and $7,086,000 in
the 1997 Three Months from $5,266,000 and $5,393,000 in the 1996 Three Months,
increases of $1,677,000, and $1,693,000 or 31.8% and 31.4% for Sullivan
Broadcasting Company, Inc. and Sullivan Broadcast Holdings, Inc., respectively.
These increases were primarily the result of higher salary costs associated with
wage and commission increases and an overall headcount increase due to the
Company's commitment towards increasing local sales revenue in 1997.
Depreciation and amortization includes depreciation of property and
equipment, amortization of programming rights and amortization of intangibles.
Depreciation and amortization decreased to $19,620,000 in the 1997 Three Months
from $21,270,000 in the 1996 Three Months, a decrease of $1,650,000, or 7.8%
for the Company. This decrease was due to the retirement of certain fixed
assets during the 1997 Three Months.
Operating income increased to $1,927,000 and $1,784,000 in the 1997 Three
Months from operating losses of $1,932,000 and $2,059,000 in the 1996 Three
Months, increases of $3,859,000, and $3,843,000 or 199.7% and 186.6% for
Sullivan Broadcasting Company, Inc. and Sullivan Broadcast Holdings, Inc.,
respectively. These increases in operating income were the result of
stronger revenues offset somewhat by slightly higher operating and selling,
general and administrative expenses during this period.
Interest expense includes interest charged on all outstanding debt and the
amortization of debt issuance costs and debt discount over the life of the
underlying debt. The decreases of $617,000 and $81,000 or 6.5% and 0.7% for the
1997 Three Months as compared to the 1996 Three Months for Sullivan Broadcasting
Company, Inc. and Sullivan Broadcast Holdings, Inc., respectively, were the
result of lower principal balances offset somewhat by the compounding of
unpaid interest related to the Sullivan Broadcast Holdings, Inc. debt.
Net loss decreased to $4,920,000 and $6,116,000 in the 1997 Three Months
from $7,157,000 and $7,018,000 in the 1996 Three Months, decreases of $2,237,000
and $902,000 for Sullivan Broadcasting Company, Inc. and Sullivan Broadcast
Holdings, Inc., respectively, due to the reasons discussed above.
Payments for programming rights increased to $2,961,000 in the 1997 Three
Months from $2,314,000 in the 1996 Three Months, an increase of $647,000, or
28.0%. This increase was attributable to the higher cost of quality
programming in the 1997 Three Months compared to the 1996 Three Months.
Broadcast Cash Flow increased to $15,096,000 in the 1997 Three Months from
$13,984,000 in the 1996 Three Months, an increase of $1,112,000, primarily due
to the aforementioned increases in revenue with a larger proportional increase
in the aggregate for operating and selling, general and administrative
expenses. Barter expense was $66,000 and $170,000 for the 1997 Three Months and
the 1996 Three Months, respectively. Corporate expense was $1,042,000 and
$555,000 for the 1997 Three Months and the 1996 Three Months, respectively. The
Company believes that Broadcast Cash Flow is important in measuring the
Company's financial results and its ability to pay principal and interest on its
debt because broadcasting companies traditionally have large amounts of non-cash
expense attributable to amortization of programming rights and other
intangibles. Broadcast Cash Flow does not purport to represent cash provided by
operating activities as reflected in the Company's consolidated financial
statements, is not a measure of financial performance under generally accepted
accounting principles, and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with generally
accepted accounting principles.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996 (THE "1996 NINE MONTHS") COMPARED TO NINE
MONTHS ENDED SEPTEMBER 30, 1997 OF THE COMPANY (THE "1997 NINE MONTHS")
Set forth below are selected consolidated financial data of the Company for the
nine months ended September 30, 1996 and September 30, 1997 and the percentage
changes between the periods.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
----------------------------------------------------------------
1996 1997 Percentage Change
-------------------------------- ------------------------------- ------------------------------
Sullivan Sullivan Sullivan Sullivan Sullivan Sullivan
Broadcasting Broadcast Broadcasting Broadcast Broadcasting Broadcast
Company, Inc. Holdings, Inc. Company, Inc. Holdings, Inc. Company, Inc. Holdings, Inc.
----------------- -------------- -------------- --------------- -------------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Net revenues (excluding
barter) $72,925 $72,925 $83,508 $83,508 14.5% 14.5%
Barter revenues 10,798 10,798 13,240 13,240 22.6 22.6
Total net revenues 83,723 83,723 96,748 96,748 15.6 15.6
Operating expenses 11,774 11,774 12,880 12,880 9.4 9.4
Selling, general
and administrative expenses 16,392 16,656 20,164 20,851 23.0 25.2
Depreciation and
amortization 55,357 55,357 58,226 58,226 5.2 5.2
Operating income (loss) 200 (64) 5,478 4,791 2,639.0 7,585.9
Interest expense 26,088 30,022 26,802 31,908 2.7 6.3
Net loss 16,170 18,787 15,016 18,491 (7.1) (1.6)
Payments for programming
rights 6,583 6,583 8,648 8,648 31.4 31.4
Broadcast Cash Flow 40,524 40,524 45,416 45,416 12.1 12.1
</TABLE>
Net revenues (excluding barter) are net of commissions and primarily
include local/Canadian and national spot advertising sales. Net revenues
(excluding barter) increased to $83,508,000 in the 1997 Nine Months from
$72,925,000 in the 1996 Nine Months, an increase of $10,583,000 or 14.5%. This
increase was primarily due to additional net revenues from the WMSN station
acquisition in July of 1996 and higher local sales revenue resulting from the
Company's commitment to expand local sales. Additionally, net revenues were
further increased by higher advertising spot rates which were positively
impacted by the improving economy, resulting in greater advertising spending,
along with higher key demographic ratings from additional Fox programming and
other syndicated and first run programming. Advertising revenues for the 1997
Nine Months were comprised of 58.5% from local/Canadian advertising sales and
41.5% from national advertising sales.
Local revenues include gross revenues before commissions from local or
regional advertisers or their representative agencies. Local and regional areas
encompass a station's designated market area and its outlying areas. Local
revenues increased to $56,962,000 in the 1997 Nine Months from $47,502,000 in
the 1996 Nine Months, an increase of $9,460,000, or 19.9%. The increase was
primarily due to increased ratings as well as stronger advertising demand along
with additional revenues resulting from an expanded local sales effort and
added revenues from the WMSN station acquisition in July of 1996.
National revenues include gross revenues before commissions from national
advertisers or their representative agencies. National advertisers are
advertisers outside of a station's local market or region. National revenues
increased to $40,380,000 in the 1997 Nine Months from $38,617,000 in the 1996
Nine Months, an increase of $1,763,000, or 4.6%. As with local revenues,
national revenues increased primarily due to improved ratings and stronger
advertising demand along with additional revenues from the WMSN station
acquisition in July of 1996.
Barter revenues increased to $13,240,000 in the 1997 Nine Months from
$10,798,000 in the 1996 Nine Months, an increase of $2,442,000, or 22.6%. This
increase was primarily due to the increased value of barter advertising spots
along with additional barter revenue relating to the WMSN station acquisition
and the operation of the WUXP LMA and WFXV station for the full 1997 Nine Months
compared to only a portion of the 1996 Nine Months.
Operating expenses include engineering, promotion, production and
programming operations. Operating expenses increased to $12,880,000 in the 1997
Nine Months from $11,774,000 in the 1996 Nine Months, an increase of $1,106,000.
This increase was the result of additional expenses associated with the WMSN
station and operating the WUXP LMA and WFXV station for the full 1997 Nine
Months compared to only a portion of the 1996 Nine Months along with higher
salaries paid to employees in 1997 compared to 1996.
14
<PAGE>
SULLIVAN BROADCAST HOLDINGS, INC. AND
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
Selling, general and administrative expenses include sales, salaries,
commissions, insurance, supplies and general management salaries. Selling,
general and administrative expenses increased to $20,164,000 and $20,851,000 in
the 1997 Nine Months from $16,392,000 and $16,656,000 in the 1996 Nine Months,
increases of $3,772,000, and $4,195,000 or 23.0% and 25.2% for Sullivan
Broadcasting Company, Inc. and Sullivan Broadcast Holdings, Inc., respectively.
These increases were primarily the result of higher salary costs associated with
wage and commission increases and an overall headcount increase due to the WUXP
LMA and station acquisitions in the second half of 1996 and the Company's
commitment towards increasing local sales revenue in 1997.
Depreciation and amortization includes depreciation of property and
equipment, amortization of programming rights and amortization of intangibles.
Depreciation and amortization increased to $58,226,000 in the 1997 Nine Months
from $55,357,000 in the 1996 Nine Months, an increase of $2,869,000 or 5.2%.
This increase was due to the addition of fixed assets, programming rights and
intangible assets in conjunction with the WMSN and Cascom acquisitions made
during 1996 and 1997, respectively.
Operating income increased to $5,478,000 and $4,791,000 in the 1997 Nine
Months from $200,000 and an operating loss of $64,000 in the 1996 Nine Months,
increases of $5,278,000, and $4,855,000 for Sullivan Broadcasting Company, Inc.
and Sullivan Broadcast Holdings, Inc., respectively. These increases were the
result of stronger revenues offset somewhat by increases in operating,
depreciation, amortization and selling, general and administrative expenses in
the 1997 Nine Months from the 1996 Nine Months.
Interest expense includes interest charged on all outstanding debt and the
amortization of debt issuance costs and debt discount over the life of the
underlying debt. The increases of $714,000 and $1,886,000 or 2.7% and 6.3% for
the 1997 Nine Months as compared to the 1996 Nine Months for Sullivan
Broadcasting Company, Inc. and Sullivan Broadcast Holdings, Inc., respectively,
were the result of interest costs incurred on the additional borrowings utilized
to fund the WUXP LMA and the WFXV, WMSN and Cascom acquisitions, further
increased by the compounding of unpaid interest related to the Sullivan
Broadcast Holdings, Inc. debt. These increases were slightly offset by the
paydown of principal amount during the 1997 Nine Months.
Net loss decreased to $15,016,000 and $18,491,000 in the 1997 Nine Months
from $16,170,000 and $18,787,000 in the 1996 Nine Months, decreases of
$1,154,000 and $296,000 for Sullivan Broadcasting Company, Inc. and Sullivan
Broadcast Holdings, Inc., respectively, due to the reasons discussed above.
Payments for programming rights increased to $8,648,000 in the 1997 Nine
Months from $6,583,000 in the 1996 Nine Months, an increase of $2,065,000, or
31.4%. This increase was attributable to increased programming requirements
related to programming the WUXP LMA and the WMSN and WFXV stations for the full
1997 Nine Months compared to only a portion of the 1996 Nine Months.
Additionally, payments for programming rights were further increased by the
higher cost of quality programming in the 1997 Nine Months as compared to the
1996 Nine Months.
Broadcast Cash Flow increased to $45,416,000 in the 1997 Nine Months from
$40,524,000 in the 1996 Nine Months, an increase of $4,892,000, primarily due to
the aforementioned increases in revenue with a larger proportional increase in
the aggregate for operating and selling, general and administrative expenses.
Barter expense was $773,000 and $683,000 for the 1997 Nine Months and the 1996
Nine Months respectively. Corporate expense was $2,827,000 and $1,665,000 for
the 1997 Nine Months and the 1996 Nine Months, respectively. The Company
believes that Broadcast Cash Flow is important in measuring the Company's
financial results and its ability to pay principal and interest on its debt
because broadcasting companies traditionally have large amounts of non-cash
expense attributable to amortization of programming rights and other
intangibles. Broadcast Cash Flow does not purport to represent cash provided by
operating activities as reflected in the Company's consolidated financial
statements, is not a measure of financial performance under generally accepted
accounting principles, and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with generally
accepted accounting principles.
15
<PAGE>
SULLIVAN BROADCAST HOLDINGS, INC. AND
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of liquidity is cash provided by operations.
Cash provided by operations during the 1997 Nine Months was $19,826,000 and
$19,854,000 compared to $27,170,000 and $16,562,000 for Sullivan Broadcasting
Company, Inc. and Sullivan Broadcast Holdings, Inc., respectively, in the 1996
Nine Months. The decrease in Sullivan Broadcasting Company Inc.'s cash flow and
the increase in Sullivan Broadcast Holdings, Inc.'s cash flow was primarily the
result of the timing of cash interest payments and the non-recurrence of a one-
time cash payment associated with the Acquisition made by Sullivan Broadcast
Holdings, Inc. for the benefit of its wholly owned subsidiary.
Cash provided by operations is after payments for programming rights, which
amounted to $8,648,000 and $6,583,000, respectively, for the 1997 Nine Months
and the 1996 Nine Months. The Company had program payment commitments
(including contracts not yet recordable as assets) of $45,748,000, which were
payable in installments of $10,464,000 in 1997, $13,552,000 in 1998, $10,616,000
in 1999, $6,852,000 in 2000, $3,501,000 in 2001 and $763,000 thereafter.
The Company's primary capital requirements have been for capital
expenditures and acquisitions. Capital expenditures totaled $3,205,000 for the
1997 Nine Months compared to $2,228,000 for the 1996 Nine Months.
As of September 30, 1997, the Company had outstanding a $199,077,000 senior
debt facility (the "Senior Credit Agreement"), with a $30,000,000 revolving
credit facility (the "Revolving Credit Facility"), of which $5,000,000 was
outstanding at September 30, 1997, and a $75,000,000 acquisition credit facility
(the "Acquisition Credit Facility") (collectively, the "Senior Credit
Facility"), of which $53,500,000 was outstanding at September 30, 1997. The
interest rate on all borrowings under the Senior Credit Agreement vary depending
upon either LIBOR or Prime rates, as selected by the Company, with a margin
ranging between 0.0% and 1.5% for Prime borrowings and 1.25% and 2.75% for LIBOR
borrowings added based upon the Company's leverage ratio for the past quarter.
The Company entered into various interest rate protection agreements based upon
LIBOR rates and a notional amount equal to the full value of the senior debt
facility to protect against significant fluctuations in interest rates through
2000. The Company also had outstanding $125,000,000 of 10-1/4% senior
subordinated notes due December 2005, and Sullivan Broadcast Holdings, Inc. had
outstanding $35,000,000 of 13-1/4% senior accrual debentures due 2006.
The Company believes that it will be able to meet its required principal
payments in the future through funds generated from its operations. If the
funds generated from the Company's operations are insufficient to meet its
required principal payments, the Company will explore other financing
alternatives.
The indenture to the senior subordinated notes and the Senior Credit
Facility of the Company contain covenants which, among other restrictions,
require the maintenance of certain financial ratios (including cash flow
ratios), restrict asset purchases and the encumbrances of existing assets,
require lender approval for proposed acquisitions, and limit the incurrence of
additional indebtedness and the payment of dividends.
Based upon current operations, the Company anticipates the cash flow from
operations combined with the cash on hand will be adequate to meet its
requirements for current and foreseeable levels of operation. There can,
however, be no assurance that future developments or economic trends will not
adversely affect the Company's operations.
16
<PAGE>
SULLIVAN BROADCAST HOLDINGS, INC. AND
SULLIVAN BROADCASTING COMPANY, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- - - -----------------------------------------
(a) No exhibits were filed as part of the Quarterly Report
on Form 10-Q.
(b) No reports on Form 8-K were filed during the period.
SIGNATURE
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.
SULLIVAN BROADCASTING COMPANY, INC. AND SULLIVAN BROADCAST HOLDINGS, INC.
(Registrant)
November 7, 1997 By: /S/ Patrick Bratton
----------------------------------
Patrick Bratton
Chief Financial Officer
(Principal Financial and
Chief Accounting Officer)
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CIK> 0000914029
<NAME> SULLIVAN BROADCASTING CO INC
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 5,270
<SECURITIES> 0
<RECEIVABLES> 28,235
<ALLOWANCES> 1,498
<INVENTORY> 0
<CURRENT-ASSETS> 64,556
<PP&E> 55,500
<DEPRECIATION> 13,976
<TOTAL-ASSETS> 708,884
<CURRENT-LIABILITIES> 66,064
<BONDS> 125,185
0
0
<COMMON> 5
<OTHER-SE> 172,829
<TOTAL-LIABILITY-AND-EQUITY> 708,884
<SALES> 113,212
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 107,734
<OTHER-EXPENSES> 20
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,802
<INCOME-PRETAX> (21,344)
<INCOME-TAX> 6,328
<INCOME-CONTINUING> (15,016)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,016)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0001002573
<NAME> SULLIVAN BROADCAST HOLDINGS INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 5,284
<SECURITIES> 0
<RECEIVABLES> 28,235
<ALLOWANCES> 1,498
<INVENTORY> 0
<CURRENT-ASSETS> 65,157
<PP&E> 55,500
<DEPRECIATION> 13,976
<TOTAL-ASSETS> 710,609
<CURRENT-LIABILITIES> 60,230
<BONDS> 155,714
129,129
0
<COMMON> 8
<OTHER-SE> 16,888
<TOTAL-LIABILITY-AND-EQUITY> 710,609
<SALES> 113,212
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 108,421
<OTHER-EXPENSES> 19
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,908
<INCOME-PRETAX> (27,136)
<INCOME-TAX> 8,645
<INCOME-CONTINUING> (18,491)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18,491)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
