<PAGE>
<PAGE>
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
[x]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1998
COMMISSION FILE NUMBERS:
<TABLE>
<S> <C>
BENEDEK BROADCASTING CORPORATION 33-78792
BENEDEK COMMUNICATIONS CORPORATION 333-09529
</TABLE>
------------------------
BENEDEK BROADCASTING CORPORATION
AND
BENEDEK COMMUNICATIONS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE BENEDEK BROADCASTING CORPORATION 13-2982954
DELAWARE BENEDEK COMMUNICATIONS CORPORATION 36-4076007
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
</TABLE>
------------------------
SUBSIDIARY GUARANTOR REGISTRANT
<TABLE>
<S> <C> <C>
BENEDEK LICENSE CORPORATION DELAWARE 36-4081877
(EXACT NAME OF SUBSIDIARY GUARANTOR (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
AS SPECIFIED IN ITS CHARTER) INCORPORATION OR ORGANIZATION)
</TABLE>
------------------------
<TABLE>
<S> <C>
100 PARK AVENUE 61101
ROCKFORD, ILLINOIS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 815-987-5350
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<S> <C>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS: ON WHICH REGISTERED:
None None
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
------------------------
Indicate by check mark whether the registrants (1) have 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, and (2) have been subject to such filing
requirements for the past 90 days. Yes [x] No [ ]
100% of the voting common stock of Benedek Communications Corporation is
owned by affiliates thereof. 100% of the voting common stock of Benedek
Broadcasting Corporation is owned by Benedek Communications Corporation.
Indicate the number of shares outstanding of each of Benedek Broadcasting
Corporation's classes of common stock as of the latest practicable date: At
April 28, 1998, there were outstanding 148.85 shares of common stock, without
par value.
Indicate the number of shares outstanding of each of Benedek Communications
Corporation's classes of common stock, as of the latest practicable date: At
April 28, 1998, there were outstanding 7,400,000 shares of Class B common stock,
$0.01 par value.
________________________________________________________________________________
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
FORM 10-Q TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM
NUMBER PART I -- FINANCIAL STATEMENTS PAGE
- ------- ----
<S> <C> <C>
Item 1. Financial Statements
1
Introductory Comments.............................................................................
Benedek Communications Corporation and Subsidiaries and Benedek Broadcasting Corporation and
Subsidiary
2
Consolidated Balance Sheets as of December 31, 1997 and March 31, 1998.......................
3
Consolidated Statements of Operations for the Three Months Ended March 31, 1997 and 1998.....
4
Consolidated Statement of Stockholders' Equity (Deficit) for the Three Months Ended March 31,
1998........................................................................................
5
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1997 and 1998.....
6
Notes to Consolidated Financial Statements...................................................
Benedek License Corporation
8
Balance Sheets as of December 31, 1997 and March 31, 1998....................................
9
Statements of Operations for the Three Months Ended March 31, 1997 and 1998..................
10
Statement of Stockholder's Equity for the Three Months Ended March 31, 1998..................
11
Statements of Cash Flows for the Three Months Ended March 31, 1997 and 1998..................
12
Notes to Financial Statements................................................................
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............. 13
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings................................................................................. 20
Item 6. Exhibits and Reports on Form 8-K.................................................................. 21
Signatures.................................................................................................. 22
</TABLE>
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
IMPORTANT EXPLANATORY NOTE:
The integrated Form 10-Q is filed, without audit, pursuant to the
Securities Exchange Act of 1934, as amended, for each of Benedek Communications
Corporation ('Benedek Communications') and its wholly owned subsidiary, Benedek
Broadcasting Corporation ('Benedek Broadcasting'). Unless the context otherwise
requires, references to the 'Company' refer to both Benedek Communications and
Benedek Broadcasting, and financial information with respect to the Company
refers to the consolidated financial information of Benedek Communications,
which includes Benedek Broadcasting and its wholly-owned subsidiary, Benedek
License Corporation ('BLC'). The Company is a holding company with minimal
separate operations from its operating subsidiary, Benedek Broadcasting.
Separate financial information has been provided for each entity and, where
appropriate, separate disclosures. 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. It is suggested that these Financial Statements be read in
conjunction with the financial information set forth in the Annual Reports on
Form 10-K of each of Benedek Communications and Benedek Broadcasting for the
fiscal year ended December 31, 1997.
1
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, 1997 MARCH 31, 1998
------------------------------ ------------------------------
BENEDEK BENEDEK BENEDEK BENEDEK
BROADCASTING COMMUNICATIONS BROADCASTING COMMUNICATIONS
CORPORATION CORPORATION CORPORATION CORPORATION
------------ -------------- ------------ --------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ 2,647 $ 2,648 $ 3,094 $ 3,095
Receivables
Trade, net....................................... 25,004 25,004 21,705 21,705
Other............................................ 1,729 1,729 875 875
Current portion of program broadcast rights.......... 4,869 4,869 3,644 3,644
Prepaid expenses..................................... 1,659 1,659 2,199 2,199
Deferred income taxes................................ 1,004 1,004 1,000 1,000
------------ -------------- ------------ --------------
Total current assets............................. 36,912 36,913 32,517 32,518
------------ -------------- ------------ --------------
Property and equipment................................... 73,811 73,811 71,200 71,200
------------ -------------- ------------ --------------
Intangible assets........................................ 345,588 345,588 342,893 342,893
------------ -------------- ------------ --------------
Other assets
Program broadcast rights, less current portion....... 1,796 1,796 1,477 1,477
Deferred loan costs.................................. 7,245 10,216 6,951 9,772
Land held for sale................................... 109 109 109 109
Other................................................ 62 62 78 78
------------ -------------- ------------ --------------
9,212 12,183 8,615 11,436
------------ -------------- ------------ --------------
$465,523 $468,495 $455,225 $458,047
------------ -------------- ------------ --------------
------------ -------------- ------------ --------------
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Current maturities of notes payable.................. $ 13,480 $ 13,480 $ 18,888 $ 18,888
Current program broadcast rights payable............. 6,762 6,762 5,419 5,419
Accounts payable and accrued expenses................ 13,476 13,477 8,141 8,141
Deferred revenue..................................... 683 683 681 681
------------ -------------- ------------ --------------
Total current liabilities........................ 34,401 34,402 33,129 33,129
------------ -------------- ------------ --------------
Long-term obligations
Notes and leases payable............................. 247,114 357,437 244,774 358,640
Program broadcast rights payable..................... 1,353 1,353 1,099 1,099
Deferred revenue..................................... 3,760 3,760 3,586 3,586
Deferred income taxes................................ 50,345 41,895 48,001 38,074
------------ -------------- ------------ --------------
302,572 404,445 297,460 401,399
------------ -------------- ------------ --------------
Exchangeable redeemable senior preferred stock........... -- 73,660 -- 77,863
------------ -------------- ------------ --------------
Seller junior discount preferred stock................... -- 50,896 -- 51,904
------------ -------------- ------------ --------------
Stockholders' equity (deficit):
Common stock, no par, authorized 200 shares, issued
179.09 shares...................................... 1,047 -- 1,047 --
Common stock, Class A $0.01 par value, 25,000,000
authorized none issued or outstanding.............. -- -- -- --
Common stock, Class B $0.01 par value, 25,000,000
authorized, 7,030,000 and 7,400,000 issued and
outstanding for 1997 and 1998, respectively........ -- 70 -- 74
Additional paid-in capital........................... 149,592 (40,192) 149,592 (40,999)
Accumulated deficit.................................. (20,608) (54,786) (24,522) (64,760)
Stockholder's note receivable (Note B)............... -- -- -- (563)
------------ -------------- ------------ --------------
130,031 (94,908) 126,117 (106,248)
Less 30.24 shares of common stock held in treasury... (1,481) -- (1,481) --
------------ -------------- ------------ --------------
128,550 (94,908) 124,636 (106,248)
------------ -------------- ------------ --------------
$465,523 $468,495 $455,225 $458,047
------------ -------------- ------------ --------------
------------ -------------- ------------ --------------
</TABLE>
2
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------------------------------------------
1997 1998
------------------------------- -------------------------------
BENEDEK BENEDEK BENEDEK BENEDEK
BROADCASTING COMMUNICATIONS BROADCASTING COMMUNICATIONS
CORPORATION CORPORATION CORPORATION CORPORATION
------------ -------------- ------------ --------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
Net revenues.................................... $ 28,078 $ 28,078 $ 30,695 $ 30,695
------------ -------------- ------------ --------------
Operating expenses:
Selling, technical and program expenses.... 14,690 14,690 15,400 15,400
General and administrative................. 4,716 4,716 5,233 5,233
Depreciation and amortization.............. 7,747 7,747 7,788 7,788
Corporate.................................. 696 696 1,377 1,377
------------ -------------- ------------ --------------
27,849 27,849 29,798 29,798
------------ -------------- ------------ --------------
Operating income...................... 229 229 897 897
------------ -------------- ------------ --------------
Financial income (expense):
Interest expense:
Cash interest......................... (7,076) (7,076) (6,851) (6,851)
Other interest........................ (377) (3,608) (327) (4,021)
------------ -------------- ------------ --------------
(7,453) (10,684) (7,178) (10,872)
Interest income............................ 40 40 34 34
------------ -------------- ------------ --------------
(7,413) (10,644) (7,144) (10,838)
------------ -------------- ------------ --------------
(Loss) before income tax benefit...... (7,184) (10,415) (6,247) (9,941)
Income tax benefit.............................. 2,458 3,776 2,333 3,810
------------ -------------- ------------ --------------
Net (loss)....................... $ (4,726) (6,639) $ (3,914) (6,131)
------------ ------------
------------ ------------
Preferred stock dividends and accretion......... (4,376) (5,210)
-------------- --------------
Net (loss) applicable to common stock........... $(11,015) $(11,341)
-------------- --------------
-------------- --------------
Basic and diluted (loss) per common share:
(Loss) per common share.................... $(1.57) $(1.53)
--------- ---------
--------- ---------
Weighted-average common shares outstanding...... 7,030,000 7,400,000
-------------- --------------
-------------- --------------
</TABLE>
3
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
THREE MONTHS ENDED MARCH 31, 1998
BENEDEK BROADCASTING CORPORATION
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN ACCUMULATED TREASURY
STOCK CAPITAL DEFICIT STOCK TOTAL
------ ---------- ----------- -------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997......................... $1,047 $149,592 $ (20,608) $ (1,481) $128,550
Net (loss)...................................... -- -- (3,914) -- (3,914)
------ ---------- ----------- -------- --------
Balance at March 31, 1998............................ $1,047 $149,592 $ (24,522) $ (1,481) $124,636
------ ---------- ----------- -------- --------
------ ---------- ----------- -------- --------
</TABLE>
BENEDEK COMMUNICATIONS CORPORATION
<TABLE>
<CAPTION>
ADDITIONAL STOCKHOLDER'S
COMMON PAID-IN ACCUMULATED NOTE
STOCK CAPITAL DEFICIT RECEIVABLE TOTAL
------ ---------- ----------- ------------- ---------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997.................... $ 70 $(40,192) $ (54,786) $-- $ (94,908)
Accretion to exchangeable redeemable senior
preferred stock.......................... -- (1,366) -- -- (1,366)
Dividends on preferred stock............... -- -- (3,843) -- (3,843)
Stock options exercised in exchange for
note (Note B)............................ 4 559 -- (563) --
Net (loss)................................. -- -- (6,131) -- (6,131)
------ ---------- ----------- ------------- ---------
Balance at March 31, 1998....................... $ 74 $(40,999) $ (64,760) $ (563) $(106,248)
------ ---------- ----------- ------------- ---------
------ ---------- ----------- ------------- ---------
</TABLE>
4
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------------------------------------------
1997 1998
------------------------------ ------------------------------
BENEDEK BENEDEK BENEDEK BENEDEK
BROADCASTING COMMUNICATIONS BROADCASTING COMMUNICATIONS
CORPORATION CORPORATION CORPORATION CORPORATION
------------ -------------- ------------ --------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net (loss)........................................... $ (4,726) $ (6,639) $ (3,914) $ (6,131)
Adjustments to reconcile net (loss) to net cash
provided by (used in) operating activities:
Amortization of program broadcast rights..... 1,559 1,559 1,698 1,698
Depreciation and amortization................ 5,290 5,290 5,357 5,357
Amortization and write-off of intangibles and
deferred loan costs........................ 2,834 2,948 2,773 2,924
Amortization of note discount................ -- 3,117 -- 3,543
Deferred income taxes........................ (2,687) (4,005) (2,340) (3,817)
Other........................................ (18) (18) (83) (83)
Changes in operating assets and liabilities:
Receivables.................................. 3,558 3,558 4,153 4,153
Due to sellers............................... (52) (52) -- --
Prepaid expenses and other................... (620) (620) (540) (540)
Payments on program broadcast rights
payable.................................... (1,422) (1,422) (1,752) (1,752)
Accounts payable and accrued expenses........ (5,597) (5,597) (5,081) (5,081)
Deferred revenue............................. (189) (189) (175) (175)
------------ ------- ------------ -------
Net cash provided by (used in) operating
activities............................. (2,070) (2,070) 96 96
------------ ------- ------------ -------
Cash flows from investing activities
Purchase of property and equipment..................... (572) (572) (2,015) (2,015)
Proceeds from sale of equipment...................... 4 4 54 54
Other................................................ (2) (2) -- --
------------ ------- ------------ -------
Net cash (used in) investing activities.............. (570) (570) (1,961) (1,961)
------------ ------- ------------ -------
Cash flows from financing activities
Principal payments on notes payable.................. (108) (108) (2,255) (2,255)
Net financing fees incurred by parent................ (90) -- -- --
Proceeds from long-term borrowing.................... -- -- 4,601 4,601
Contribution of paid-in capital by parent............ -- -- -- --
Payment of debt and preferred stock acquisition
costs.............................................. (389) (479) (34) (34)
------------ ------- ------------ -------
Net cash provided by (used in) financing
activities............................. (587) (587) 2,312 2,312
------------ ------- ------------ -------
Increase (decrease) in cash and cash
equivalents............................ (3,227) (3,227) 447 447
Cash and cash equivalents:
Beginning.................................... 8,090 8,091 2,647 2,648
------------ ------- ------------ -------
Ending....................................... $ 4,863 $ 4,864 $ 3,094 $ 3,095
------------ ------- ------------ -------
------------ ------- ------------ -------
Supplemental disclosure of cash flow information:
Cash payments for interest........................... $ 11,373 $ 11,373 $ 10,785 $ 10,785
Cash payments for income taxes....................... 254 254 15 15
------------ ------- ------------ -------
------------ ------- ------------ -------
Supplemental schedule of noncash investing and financing
activities:
Acquisition of program broadcast rights.............. $ 219 $ 219 $ 155 $ 155
Notes payable incurred for purchase of equipment..... 759 759 722 722
Equipment acquired by barter transactions............ 24 24 80 80
Dividends accrued on redeemable preferred stock...... -- 3,379 -- 3,843
Accretion to exchange redeemable senior preferred
stock.............................................. -- 997 -- 1,366
Stock options exercised in exchange for note
receivable......................................... -- -- -- 563
------------ ------- ------------ -------
------------ ------- ------------ -------
</TABLE>
5
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(NOTE A) -- NATURE OF BUSINESS AND BASIS OF PRESENTATION
NATURE OF BUSINESS:
Benedek Communications Corporation (the 'Company') is a holding company
with minimal operations other than from its wholly-owned subsidiary, Benedek
Broadcasting Corporation ('Benedek Broadcasting'). Benedek Broadcasting owns and
operates twenty-three television stations (the 'Stations') located throughout
the United States. The operating revenues of the Stations are derived primarily
from the sale of advertising time and, to a lesser extent, from compensation
paid by the networks for broadcasting network programming and barter
transactions for goods and services. The Stations sell commercial time during
the programs to national, regional and local advertisers. The networks also sell
commercial time during the programs to national advertisers. Credit arrangements
are determined on an individual customer basis.
BASIS OF PRESENTATION:
The consolidated financial statements of the Company include the accounts
of the Company and its wholly-owned subsidiary, Benedek Broadcasting and its
wholly-owned subsidiary, Benedek License Corporation ('BLC'). The consolidated
financial statements of Benedek Broadcasting include the accounts of Benedek
Broadcasting and BLC. Separate financial statements have been provided for each
reporting entity and, where there are differences, separate disclosures. All
significant intercompany items and transactions have been eliminated in each of
the sets of consolidated financial statements.
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions for Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for the fair presentation of the
financial position as of March 31, 1998 and the results of operations for the
three months ended March 31, 1998 have been included. Operating results for the
three months ended March 31, 1998 are not necessarily indicative of the results
that may be expected for the fiscal year ending December 31, 1998. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Annual Report on Form 10-K of the Company for the year
ended December 31, 1997.
(NOTE B) -- STOCK OPTION AGREEMENTS
In 1988 and 1995, the Company granted options whereby a key employee could
exercise these options to purchase 130,784 shares and 239,216 shares of common
stock, Class B, at exercise prices of $1.58 per share and $4.12 per share,
respectively, which was the fair market values on the respective grant dates.
These options entitled the key employee to shares representing 5% of the
outstanding common stock, Class B, of the Company after giving effect to the
issuance thereof and before the conversion of the initial or the contingent
warrants. The 1988 and 1995 options were exercisable at any time and expire in
1998 and 2004, respectively. As permitted under generally accepted accounting
principles, the Company accounts for the options under the provisions of APB
Option No. 25 and its related interpretations. Accordingly, no compensation cost
has been recognized for the grant of the options.
On January 1, 1998, the Company changed the exercise price for the options
to $1.50 per share based upon a method of valuation chosen by the Company.
Additionally, on January 1, 1998, the key employee exercised options to purchase
370,000 shares of common stock, Class B, of the Company for an aggregate
exercise price of $555,000. The key employee borrowed the funds necessary to pay
the exercise price from the Company, which loan is evidenced by a promissory
note which bears interest at
6
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
the rate of 5.93% per annum, is payable as and when such shares are sold and in
any event no later than December 31, 2007, and is included as an addition to
paid-in capital.
(NOTE C) -- PENDING ADOPTION OF ACCOUNTING STANDARDS
The FASB (Financial Accounting Standards Board) has issued two new
pronouncements that the Company will be required to adopt for its year ending
December 31, 1998. These pronouncements are not expected to have a significant
impact on the Company's financial statements.
FASB Statement No. 130 'Reporting Comprehensive Income' establishes
standards for reporting and display of comprehensive income and its components
in the financial statements. This statement requires that all items that are
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. This statement requires that
a company (a) classify terms of other comprehensive income by their nature in a
financial statement, and (b) display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-in
capital in the equity section of a statement of financial position. The Company
currently has no items of comprehensive income.
FASB Statement No. 131 'Disclosures about Segments of an Enterprise and
Related Information' establishes standards for reporting information about
operating segments in annual financial statements and requires reporting of
selected information about operating segments in interim financial reports
issued to stockholders. Operating segments are components of an enterprise about
which separate financial information is available and evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and in
assessing performance.
7
<PAGE>
<PAGE>
BENEDEK LICENSE CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
1998
DECEMBER 31, -----------
1997
------------ (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Federal Communication Commission (FCC) licenses, at cost, less accumulated
amortization of $5,514 and $6,313 for 1997 and 1998, respectively.................. $120,526 $ 119,727
Goodwill, less accumulated amortization of $1,322 and $1,542 for 1997 and 1998,
respectively....................................................................... 33,915 33,695
------------ -----------
$154,441 $ 153,422
------------ -----------
------------ -----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Deferred tax liability............................................................... $ 33,017 $ 32,696
------------ -----------
Stockholder's equity:
Common stock, $0.01 par authorized 3,000 shares, issued and outstanding 99
shares......................................................................... -- --
Additional paid-in capital...................................................... 126,040 126,040
Accumulated deficit............................................................. (4,616) (5,314)
------------ -----------
121,424 120,726
------------ -----------
$154,441 $ 153,422
------------ -----------
------------ -----------
</TABLE>
8
<PAGE>
<PAGE>
BENEDEK LICENSE CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1997 1998
------- -------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Operating expense, amortization........................................................... $(1,026) $(1,018)
------- -------
(Loss) before income tax benefit..................................................... $(1,026) $(1,018)
Income tax benefit........................................................................ 532 320
------- -------
Net (loss)...................................................................... $ (494) $ (698)
------- -------
------- -------
</TABLE>
9
<PAGE>
<PAGE>
BENEDEK LICENSE CORPORATION
STATEMENTS OF STOCKHOLDER'S EQUITY
THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
------------ ---------- ----------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at December 31, 1997.............................. -- $126,040 $(4,616) $121,424
Net (loss)........................................... -- -- (698) (698)
------------ ---------- ----------- --------
Balance at March 31, 1998................................. $ -- $126,040 $(5,314) $120,726
------------ ---------- ----------- --------
------------ ---------- ----------- --------
</TABLE>
10
<PAGE>
<PAGE>
BENEDEK LICENSE CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1997 1998
------ ------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net (loss)............................................................................. $ (494) $ (698)
Adjustments to reconcile net (loss) to net cash provided by operating activities:
Amortization...................................................................... 1,026 1,018
Deferred income tax............................................................... (532) (320)
------ ------
Net cash provided by operating activities.................................... -- --
Cash:
Beginning.............................................................................. -- --
------ ------
Ending................................................................................. $ -- $ --
------ ------
------ ------
</TABLE>
11
<PAGE>
<PAGE>
BENEDEK LICENSE CORPORATION
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(NOTE A) -- NATURE OF BUSINESS AND BASIS OF PRESENTATION
NATURE OF BUSINESS:
Benedek License Corporation ('BLC') is a wholly owned subsidiary of Benedek
Broadcasting Corporation ('Benedek Broadcasting'). BLC was formed on April 18,
1996 to own and hold the Federal Communications Act licenses for the
twenty-three television stations owned by Benedek Broadcasting which are located
throughout the United States.
BASIS OF PRESENTATION:
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions for Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for the fair presentation of the
financial position as of March 31, 1998 and the results of operations for the
three months ended March 31, 1998 have been included. Operating results for the
three months ended March 31, 1998 are not necessarily indicative of the results
that may be expected for the fiscal year ending December 31, 1998. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Annual Report on Form 10-K of Benedek Broadcasting for
the year ended December 31, 1997.
(NOTE B) -- STOCKHOLDER'S EQUITY
Benedek Broadcasting has pledged 100% of the outstanding common stock of
BLC as collateral for the Senior Secured Notes and the Term Loan Facilities
issued by Benedek Broadcasting.
BLC has guaranteed the obligations of Benedek Broadcasting with respect to
the Senior Secured Notes and the Term Loan Facilities.
12
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
This Quarterly Report on Form 10-Q contains forward-looking statements that
involve risks and uncertainties. Actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including changes in national and regional economies, competition in
the television business, pricing fluctuations in local and national advertising,
program ratings and changes in programming costs, among other factors.
As used herein, 'Adjusted EBITDA' is defined as operating income before
financial income as derived from the consolidated statements of operations plus
depreciation and amortization, amortization of program broadcast rights and
noncash compensation less payments for program broadcast rights. As used
herein,'broadcast cash flow' is defined as Adjusted EBITDA plus corporate
expenses. The Company has included Adjusted EBITDA and broadcast cash flow data
because such data is used by certain investors to measure a company's ability to
service debt. Adjusted EBITDA is used to pay principal and interest on long-term
debt and to fund capital expenditures. Adjusted EBITDA and broadcast cash flow
do 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.
The operating revenues of the Company are derived primarily from the sale
of local, regional and national advertising time and, to a lesser extent, from
compensation paid by the networks for broadcasting network programming and
barter transactions for goods and services. Revenues depend on the ability of
the Company to provide popular programming which attracts audiences in the
demographic groups targeted by advertisers, thereby allowing the Company to sell
advertising time at competitive rates. Revenues also depend significantly on
factors such as the national and local economy and the level of competition for
advertising revenues.
For the three months ended March 31, 1998, the Company reported net
revenues of $30.7 million compared to net revenues of $28.1 million for the
three months ended March 31, 1997. Benedek Communications had a net loss of $6.1
million for the three months ended March 31, 1998 compared to a net loss of $6.6
million for the three months ended March 31, 1997. Benedek Broadcasting had a
net loss of $3.9 million for the three months ended March 31, 1998 compared to a
net loss of $4.7 million for the three months ended March 31, 1997. Adjusted
EBITDA for the three months ended March 31, 1998 was $8.6 million as compared to
$8.1 million for the three months ended March 31, 1997.
Time sales to local/regional advertisers and national advertisers
constitute the largest concentration of the Company's operating revenues and
represent approximately 87.0% of gross revenues for the three months ended March
31, 1998 as compared to 85.9% for the three months ended March 31, 1997.
Approximately 56.0% of the gross revenues of the Company for the three months
ended March 31, 1998 was generated from local and regional advertising, which is
sold primarily by the Company's stations' sales staff, and the remainder of the
advertising revenues is comprised primarily of national advertising, which is
sold by national sales representatives retained by the Company. The Company
generally pays commissions to advertising agencies on local, regional and
national advertising and to national sales representatives on national
advertising. Net revenues reflect deductions from gross revenues for commissions
payable to advertising agencies and national sales representatives.
The Company's primary operating expenses are employee compensation,
programming and depreciation and amortization. Changes in compensation expense
result primarily from adjustments to fixed salaries based on employee
performance and inflation and, to a lesser extent, from changes in sales
commissions paid based on levels of advertising revenues. Programming expense
consists primarily of amortization of program rights. The Company purchases
first run and off-network syndicated programming on an ongoing basis. Under its
contract with the network, a network-affiliated station receives approximately
two-thirds of its daily programming from its network and in turn is compensated,
in most cases, by its network for carrying such programming with the network's
commercial content intact. Depreciation and amortization expense has increased
as assets purchased at fair market value in connection with the Company's 1996
acquisitions have begun to depreciate. Barter
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<PAGE>
expense generally offsets barter revenue and reflects the fair market value of
goods and services received. The Company's operating expenses (excluding
depreciation and amortization) represent approximately 71.7% of net revenues for
the three months ended March 31, 1998 as compared to 71.6% for the three months
ended March 31, 1997.
The following table sets forth certain historical results of the operations
and operating data for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1997 1998
------- -------
(IN THOUSANDS)
<S> <C> <C>
Operating income................................................................... $ 229 $ 897
Add:
Amortization of program broadcast rights...................................... 1,559 1,698
Depreciation and amortization................................................. 7,747 7,788
Corporate expenses................................................................. 696 1,377
Less:
Payment for program broadcast liabilities..................................... (1,422) (1,752)
------- -------
Broadcast cash flow........................................................... $ 8,809 $10,008
------- -------
------- -------
</TABLE>
The following table provides historical information.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1997 1998 % CHANGE
------- ------- --------
(IN THOUANDS)
<S> <C> <C> <C>
Net revenues............................................................... $28,078 $30,695 9.3%
------- ------- --------
Operating expenses:
Selling, technical and program expenses............................... 14,690 15,400 4.8
General and administrative............................................ 4,716 5,233 11.0
Depreciation and amortization......................................... 7,747 7,788 0.5
Corporate............................................................. 696 1,377 97.8
------- ------- --------
27,849 29,798 7.0
------- ------- --------
Operating income................................................. $ 229 $ 897 291.7%
------- ------- --------
------- ------- --------
Broadcast cash flow........................................................ $ 8,809 $10,008 13.6%
Broadcast cash flow margin................................................. 31.4% 32.6%
Adjusted EBITDA............................................................ $ 8,113 $ 8,633 6.4%
Adjusted EBITDA margin..................................................... 28.9% 28.1%
</TABLE>
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
Net revenues for the three months ended March 31, 1998 increased $2.6
million or 9.3% to $30.7 million from $28.1 million for the three months ended
March 31, 1997. Gross revenues excluding political advertising revenue increased
$2.7 million or 8.3% from the three months ended March 31, 1997.
Net revenues during the three months ended March 31, 1998 showed an
improvement in advertising revenue for each of the Company's three affiliations.
Net revenues increased 11.2% at the Company's CBS affiliated stations, 4.7% at
the Company's ABC affiliated stations and 11.0% at the Company's NBC affiliated
stations. The increases seen at the Company's 12 CBS affiliated stations were
largely influenced by the Winter Olympics covered in February 1998. Based on
Nielsen ratings reports in November 1997 and February 1998, CBS programming
generally experienced increased ratings and shares, while ABC and NBC
programming showed slight decreases in ratings and shares. The Company expects
these higher ratings and shares for CBS to continue to have a positive impact on
net revenues.
Operating expenses for the three months ended March 31, 1998 increased $2.0
million or 7.0% to $29.8 million from $27.8 million for the three months ended
March 31, 1997. As a percentage of net
14
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<PAGE>
revenues, operating expenses decreased to 97.1% from 99.2% for the three months
ended March 31, 1998. The increase in expenses was due to increased compensation
expense as the Company expanded the news operations at the stations acquired in
1996, an increase in medical insurance costs, and an expansion of corporate
management effective after the first quarter of 1997.
Operating income for the three months ended March 31, 1998 increased $0.7
million or 291.7% to $0.9 million from $0.2 million for the three months ended
March 31, 1997.
Financial (expenses), net for Benedek Broadcasting decreased $0.3 million
or 3.6% to $7.1 million from $7.4 million for the three months ended March 31,
1997. Benedek Communications' financial expenses (net) for the three months
ended March 31, 1998 increased $0.2 million or 1.8% to $10.8 million from $10.6
million for the three months ended March 31, 1997. Benedek Communications has
higher financial expenses than Benedek Broadcasting as a result of the interest
on its Senior Subordinated Discount Notes.
Income tax benefit for Benedek Broadcasting for the three months ended
March 31, 1998 was $2.3 million compared to $2.5 million for the three months
ended March 31, 1997. For each of the three months ended March 31, 1998 and
March 31, 1997, Benedek Communications had a $3.8 million income tax benefit.
Benedek Communications has a greater income tax benefit than Benedek
Broadcasting due to the net tax affect on the difference in financial expenses.
The tax effect of the excess of book depreciation over tax depreciation and a
current period net operating loss for tax purposes were the primary factors
resulting in the income tax benefit for the three months ended March 31, 1998.
Net loss for Benedek Broadcasting for the three months ended March 31, 1998
was $3.9 million as compared to $4.7 million net loss for the three months ended
March 31, 1997. Benedek Communications had a net loss of $6.1 million for the
three months ended March 31, 1998 as compared to a net loss of $6.6 million for
the three months ended March 31, 1997.
Broadcast cash flow for the three months ended March 31, 1998 increased
$1.2 million or 13.6% to $10.0 million from $8.8 million for the three months
ended March 31, 1997. As a percentage of net revenues, broadcast cash flow
margin increased to 32.6% for the three months ended March 31, 1998 from 31.4%
for the three months ended March 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows from Operating Activities is the primary source of liquidity for
the Company and were $0.1 million for the three months ended March 31, 1998
compared to $(2.1) million for the three months ended March 31, 1997. Cash flows
from operating activities included cash payments of interest expense which
totaled $10.8 million for the three months ended March 31, 1998 as compared to
$11.4 million for the three months ended March 31, 1997.
Cash Flows from Financing Activities were $2.3 million for the three months
ended March 31, 1998 compared to $(0.6) million for the three months ended March
31, 1997. For the three months ended March 31, 1998, cash flows from financing
activities included principal payments on notes and capital leases payable of
$2.2 million funded by aggregate draw downs on Benedek Broadcasting's revolving
credit facility of $4.6 million.
Cash Flows from Investing Activities were $(2.0) million for the three
months ended March 31, 1998 as compared to $(0.6) million for the three months
ended March 31, 1997. Cash flows provided by financing activities of $2.3
million were used to fund cash used to purchase $2.0 million of property and
equipment.
At March 31, 1998, Benedek Broadcasting had available to it a maximum of
$15.0 million under the revolving credit facility of the Credit Agreement (the
'Revolving Credit Facility') of which $2.4 million was unused. From time to time
throughout 1998, Benedek Broadcasting's cash needs has required the use of the
Revolving Credit Facility for general working capital purposes and to fund
capital expenditures. During the three months ended March 31, 1998, the highest
outstanding balance under the Revolving Credit Facility was $14.6 million.
15
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<PAGE>
The Company implemented a financing plan in order to finance its 1996
acquisitions and to pay fees and expenses related thereto. The financing plan
consisted of (i) the offer and sale by the Company of the Senior Subordinated
Discount Notes (the 'Discount Notes') to generate gross proceeds of $90.2
million, (ii) the sale by the Company of units consisting of Exchangeable
Redeemable Senior Preferred Stock (the 'Senior Preferred Stock') and warrants to
generate gross proceeds of $60.0 million, (iii) Benedek Broadcasting borrowing
$128.0 million pursuant to the Term Loan Facilities of the Credit Agreement and
(iv) the Company issuing an aggregate of $45.0 million initial liquidation
preference of Seller Junior Discount Preferred Stock (the 'Junior Preferred
Stock') to General Electric Capital Corporation and Mr. Paul Brissette. Benedek
Broadcasting also has outstanding $135.0 million of Senior Secured Notes due
2005 (the 'Senior Secured Notes') which were issued in 1995 to refinance
outstanding indebtedness and finance the 1995 acquisition of the station serving
Dothan, Alabama and Panama City, Florida.
The Company believes that the financing plan provides for a long-term
financing structure that allows management to concentrate its efforts on
maximizing results of operations. The Company anticipates that Adjusted EBITDA
of Benedek Broadcasting will be sufficient to finance the operating requirements
of the Company's stations, debt service requirements in respect of the Senior
Secured Notes and Term Loan Facilities and presently anticipated capital
expenditures until such time that the debt matures or requires payment in full
for at least the period until the Company is required to make cash payments in
respect of the Discount Notes, the Senior Preferred Stock and the Junior
Preferred Stock. The Company anticipates that capital expenditures of
approximately $9.0 million will be made in 1998. Such capital expenditures will
be financed either from cash provided by operations, borrowings under the
Revolving Credit Facility or purchase money financing.
The Discount Notes do not bear interest until May 15, 2001, and the Company
will not be obligated to pay cash interest on the Discount Notes until November
15, 2001. In addition, for all dividend payment dates with respect to the Senior
Preferred Stock and interest payment dates with respect to the Discount Notes
through and including July 1, 2001, the Company may, at its option, pay
dividends and/or interest, as applicable, by adding the amount thereof to the
then effective liquidation preference of the Senior Preferred Stock or pay
interest on the Discount Notes by issuing additional Discount Notes. For all
dividend payment dates with respect to the Junior Preferred Stock prior to
October 1, 2001, the Company is required to pay such dividends by adding the
amount thereof to the then effective liquidation preference of the Junior
Preferred Stock. In order for the Company to meet its debt service obligations
after May 2001 with respect to the Discount Notes and pay required dividends
after July 1, 2001 with respect to the Senior Preferred Stock and from and after
October 1, 2001 with respect to the Junior Preferred Stock, the Company will
need to substantially increase broadcast cash flow at the Stations or refinance
the Discount Notes, Senior Preferred Stock and Junior Preferred Stock.
Additionally, the Credit Agreement currently prohibits Benedek Communications
from making cash dividend payments on the Senior Preferred Stock and Junior
Preferred Stock. The Company's debt service obligations, including scheduled
principal amortization, in the 12 month period beginning May 15, 2001 would be
approximately $58.0 million (assuming that there will not have been any
mandatory or voluntary prepayments of any indebtedness prior to that time and
assuming a blended interest rate on the amounts then outstanding under the
Credit Agreement comparable to the rate the Company is currently paying). The
Company's cash dividend payments during such period on the Senior Preferred
Stock and the Junior Preferred Stock would be approximately $27.0 million.
The Senior Secured Notes are senior secured obligations of Benedek
Broadcasting and rank pari passu in right of payment with the Term Loan
Facilities and Revolving Credit Facility under the Credit Agreement. The Senior
Secured Notes are guaranteed by BLC and the Company and secured by the common
stock of BLC. The Senior Secured Notes will mature on March 1, 2005 and are
redeemable at Benedek Broadcasting's option, in whole or in part, at any time
after March 1, 2000.
In order to repay the Discount Notes and the Senior Secured Notes at
maturity, the Company will need to refinance all or a portion of such notes. The
Company's ability to refinance the Discount Notes and the Senior Secured Notes
will depend upon the Company's operating performance, as well as prevailing
economic and market conditions, levels of interest rates, refinancing costs and
other factors, many of which are beyond the Company's control.
16
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<PAGE>
Benedek Communications is a holding company that will derive all of its
operating income and Adjusted EBITDA from its sole subsidiary, Benedek
Broadcasting, the common stock of which, together with all other assets of the
Company, have been pledged to secure the Company's senior guarantee of all
indebtedness of Benedek Broadcasting outstanding under the Credit Agreement and
in respect of the Senior Secured Notes. As a holding company, the Company's
ability to pay its obligations, including its obligation to pay interest on and
principal of the Discount Notes, whether at maturity, upon a change of control
or otherwise, will be dependent primarily upon receiving dividends and other
payments or advances from Benedek Broadcasting. Benedek Broadcasting is a
separate and distinct legal entity and has no obligation, contingent or
otherwise, to pay any amounts to the Company or to make funds available to the
Company for debt service or any other obligation. Although the Credit Agreement
does not limit the ability of Benedek Broadcasting to pay dividends or make
other payments to Benedek Communications, the Senior Secured Note Indenture does
contain such limitations. However, after giving effect to the implementation of
the financing plan on June 6, 1996 (including the contribution to the common
equity of Benedek Broadcasting of net cash proceeds of approximately $187.9
million from the sale of the Discount Notes, the Senior Preferred Stock and the
Junior Preferred Stock), as of March 31, 1998, the Company could have
distributed approximately $187.9 million to the Company under such limitations.
The Credit Agreement entered into by the Company as part of the financing
plan included Term Loan Facilities totaling $128.0 million and a revolving
credit facility. The Company did not meet certain financial ratios contained in
the Credit Agreement at September 30 and December 31, 1996 due to lower than
expected Adjusted EBITDA (as defined in the Credit Agreement). The lenders under
the Credit Agreement agreed to waive such noncompliance and during February
1997, amended certain covenants applicable to 1997 and the first half of 1998.
The amendment provided that for so long as the ratio of debt to Adjusted EBITDA
(as defined in the Credit Agreement) exceeded certain levels, the Term Loan
Facilities would bear interest at varying additional spreads from that
originally provided for in the Credit Agreement. The amendment further reduced
the revolving credit facility from $15.0 million to $10.0 million and increased
the percentage of excess cash flow to be applied as prepayments of the Term Loan
Facilities from 50% to 75% until Benedek Broadcasting's ratio of debt to
Adjusted EBITDA (as defined in the Credit Agreement) was at 6.75 to 1.0 or
lower.
The Credit Agreement was amended and restated as of December 17, 1997 to
convert existing Term Loans to new term loans, to modify certain financial
covenants and ratios, to increase the Revolving Credit Facility to $15.0 million
and to replace certain parties to the agreement. As of December 17, 1997, the
outstanding principal balance of the existing term loans which totaled $100.8
million were converted to (1) Term Loan Series A of $77.0 million and (2) Term
Loan Series B of $33.8 million. The Term Loan Facilities generally provide for
quarterly amortization until final maturity on December 31, 2004. The Company is
required to make scheduled amortization payments on the Term Loan Facilities, on
an aggregate basis for Series A and Series B Facilities, as follows: during
1998, $2.5 million; during 1999, $11.0 million; during 2000, $13.0 million;
during 2001, $13.0 million; during 2002, $14.0 million; during 2003, $15.0
million; and during 2004, $42.3 million.
In addition, the Company will be required to make prepayments on the Term
Loan Facilities under certain circumstances, including upon certain asset sales
and the issuance of certain debt or equity securities. The Company will also be
required to make prepayments on the Term Loan Facilities in an amount equal to
50% of excess cash flow (as defined). These mandatory prepayments will be
applied to prepay, on a pro rata basis, the Term Loan Series A and Term Loan
Series B.
The Term Loan Series A bears interest, at the Company's option, at a base
rate plus a spread or at a Eurodollar rate plus a spread. The Term Loan Series B
bears interest, at the Company's option, at a base rate plus a spread or at a
Eurodollar rate plus a spread. The margins above the base rate and the
Eurodollar rate at which the Term Loans and Revolving Credit Facility will bear
interest are subject to reductions at such times as certain leverage ratio
performance tests are satisfied.
Benedek Broadcasting has the ability, subject to a borrowing base and
compliance with certain covenants and conditions, to borrow up to an additional
$15.0 million for general corporate purposes pursuant to the Revolving Credit
Facility. The Revolving Credit Facility has a term expiring in 2004 and
17
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<PAGE>
is fully revolving until final maturity. The Revolving Credit Facility bears
interest, at Benedek Broadcasting's option, at a base rate plus a spread or at a
Eurodollar rate plus a spread.
The Term Loans and the Revolving Credit Facility are secured by certain of
Benedek Broadcasting's present and future property and assets. The Term Loans
are also guaranteed by BLC, a wholly-owned subsidiary of Benedek Broadcasting
that holds the FCC licenses and authorizations for the Company's stations, and
is secured by all of the common stock of BLC.
The Term Loans and the Revolving Credit Facility contain certain financial
covenants, including, but not limited to, covenants related to cash interest
coverage, maximum leverage ratio and minimum Consolidated Adjusted EBITDA (as
defined in the Credit Agreement). In addition, the Term Loans and the Revolving
Credit Facility contain other affirmative and negative covenants relating to,
among other things, liens, payments on other debt, restricted junior payments
(excluding distributions from Benedek Broadcasting to the Company) transactions
with affiliates, mergers and acquisitions, sales of assets, guarantees and
investments. The Term Loans and the Revolving Credit Facility contain customary
events of default for highly-leveraged financings, including certain changes in
ownership or control of Benedek Broadcasting or the Company.
The Company entered into an interest rate cap agreement which matures in
May 1998 to reduce the impact of changes in interest rates on its floating-rate
long-term debt. That agreement effectively entitles the Company to receive from
a financial institution the amount, if any, by which the London Interbank Offer
Rate (LIBOR) exceeds 7.36% on a notional amount totaling $125.0 million subject
to an amortization schedule. Although Benedek Broadcasting is exposed to credit
loss in the event of nonperformance by the counterparty on the interest rate
cap, management does not expect nonperformance by the counterparty.
RECENT DEVELOPMENTS
In connection with its 1996 acquisitions, the Company obtained a temporary
waiver of the FCC's duopoly rules which would otherwise have precluded the
Company from acquiring the television station in Madison, Wisconsin due to the
Grade A broadcast signal overlap between that station and the Company's station
in Rockford, Illinois. Under the FCC's current duopoly rules, the Company will
be required to dispose of one of such stations. In addition, the FCC has advised
it will not extend the Company's temporary waiver of such rules and as a result
the Company has filed an application to transfer WMTV, Madison, Wisconsin to a
trust. The Company may be required to dispose of one of the two stations to a
third party within six months after the processing and the grant of the
application. The Company will seek to comply with the FCC requirements by
exchanging one of the stations for another broadcast station.
INCOME TAXES
Under the provisions of the Internal Revenue Code, Benedek Broadcasting has
approximately $20.9 million of actual net operating loss carryforwards available
to offset future tax liabilities whereas Benedek Communications has
approximately $22.0 million available to it. These net operating loss
carryforwards expire between 2007 through 2011.
SEASONALITY
Net revenues and operating cash flow of the Company are generally the
lowest during the first quarter of each year followed in rank by the third
quarter. The fourth quarter of each year is generally the highest quarter for
net revenue and operating cash flow due to increased expenditures by advertisers
in anticipation of holiday season consumer spending and an increase in
viewership during this period.
RECENTLY PROMULGATED ACCOUNTING STANDARDS
The Financial Accounting Standards Board ('FASB') has issued two new
pronouncements that the Company will be required to adopt by December 31, 1998.
These pronouncements are not expected to have a significant impact on the
Company's financial statements.
18
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FASB Statement No. 130 'Reporting Comprehensive Income' establishes
standards for reporting and display of comprehensive income and its components
in the financial statements. This statement requires that all items that are
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. This statement requires that
a company (a) classify terms of other comprehensive income by their nature in a
financial statement and (b) display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-in
capital in the equity section of a statement of financial position. The Company
currently has no items of comprehensive income.
FASB Statement No. 131 'Disclosures about Segments of an Enterprise and
Related Information' establishes standards for reporting information about
operating segments in annual financial statements and requires reporting of
selected information about operating segments in interim financial reports
issued to stockholders. Operating segments are components of an enterprise about
which separate financial information is available and evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and in
assessing performance. The Company does not divide its business into operating
segments.
19
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PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company currently and from time to time is involved in litigation
incidental to the conduct of its business. The Company (including in its
capacity as successor of Brissette) is not currently a party to any lawsuit or
proceeding which, in the opinion of management, is likely to have a material
adverse effect on the Company.
20
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a)(3) Exhibits.
<TABLE>
<C> <S>
3.1 -- Certificate of Incorporation of Benedek Communications Corporation, as amended, incorporated by
reference to Exhibit 3.1 to Benedek Communications Corporation's Registration Statement on Form S-4,
File No. 333-09529, filed on August 2, 1996 (the 'S-4 Registration Statement').
3.2 -- By-Laws of Benedek Communications Corporation, incorporated by reference to Exhibit 3.2 to the S-4
Registration Statement.
3.3 -- Certificate of Designation of the Powers, Preferences and Relative, Participating, Optional and Other
Special Rights of 15.0% Exchangeable Redeemable Senior Preferred Stock due 2007 and Qualifications,
Limitations and Restrictions thereof of Benedek Communications Corporation, incorporated by reference to
Exhibit 3.3 to the S-4 Registration Statement.
3.4 -- Certificate of Designation, Preferences and Relative, Participating, Optional and Other Special Rights
of Series C Junior Discount Preferred Stock and Qualifications, Limitations and Restrictions thereof of
Benedek Communications Corporation, incorporated by reference to Exhibit 3.4 to the S-4 Registration
Statement.
3.5 -- Certificate of Incorporation of Benedek Broadcasting Corporation, as amended, incorporated by reference
to Exhibit 3.1 to Benedek Broadcasting Corporation's Registration Statement on Form S-1, File No.
33-91412, filed on April 20, 1995 (the 'S-1 Registration Statement').
3.6 -- By-Laws of Benedek Broadcasting Corporation, as amended, incorporated by reference to Exhibit 3.2 to
the S-1 Registration Statement.
3.7 -- Certificate of Incorporation of Benedek License Corporation, incorporated by reference to Exhibit 3.3
to Benedek Broadcasting Corporation's Quarterly Report on From 10-Q for the quarter ended June 30, 1996
(the 'Second Quarter 1996 10-Q').
3.8 -- By-Laws of Benedek License Corporation, incorporated by reference to Exhibit 3.4 to the Second Quarter
1996 10-Q.
4.1 -- Indenture dated as of May 15, 1996 between Benedek Communications Corporation and United States Trust
Company of New York, relating to the 13 1/4% Senior Subordinated Discount Notes due 2006 of Benedek
Communications Corporation, incorporated by reference to Exhibit 4.1 to the S-4 Registration Statement.
4.2 -- Form of 13 1/4% Senior Subordinated Discount Note due 2006 of Benedek Communications Corporation
(included in Exhibit 4.1 hereof), incorporated by reference to Exhibit 4.2 to the S-4 Registration
Statement.
4.3 -- Indenture dated as of March 1, 1995 between Benedek Broadcasting Corporation and The Bank of New York,
relating to the 11 7/8% Senior Secured Notes due 2005 of Benedek Broadcasting Corporation, incorporated
by reference to Exhibit 4.3 to the S-4 Registration Statement.
4.4 -- Form of 11 7/8% Senior Secured Note due 2005 of Benedek Broadcasting Corporation (included in Exhibit
4.3 hereof), incorporated by reference to Exhibit 4.4 to the S-4 Registration Statement.
4.5 -- First Supplemental Indenture dated as of June 6, 1996 among Benedek Broadcasting Corporation, Benedek
License Corporation and The Bank of New York, incorporated by reference to Exhibit 4.3 to the Second
Quarter 1996 10-Q.
4.6 -- Certificate of Designation of the Powers, Preferences and Relative, Participating, Optional and Other
Special Rights of 15.0% Exchangeable Redeemable Senior Preferred Stock due 2007 and Qualifications,
Limitations and Restrictions thereof of Benedek Communications Corporation (filed as Exhibit 3.3
hereof), incorporated by reference to Exhibit 4.5 to the S-4 Registration Statement.
4.7 -- Certificate of Designation, Preferences and Relative, Participating, Optional and Other Special Rights
of Series C Junior Discount Preferred Stock and Qualifications, Limitations and Restrictions thereof of
Benedek Communications Corporation (filed as Exhibit 3.4 hereof), incorporated by reference to Exhibit
4.6 to the S-4 Registration Statement.
4.8 -- Warrant Agreement dated as of June 5, 1996 between Benedek Communications Corporation and IBJ Schroder
Bank & Trust Company with respect to Class A Common Stock of Benedek Communications Corporation,
incorporated by reference to Exhibit 4.7 to the S-4 Registration Statement.
*27.1 -- Financial Data Schedule pursuant to Article 5 of Regulation S-X with respect to Benedek Communications
Corporation.
*27.2 -- Financial Data Schedule pursuant to Article 5 of Regulation S-X with respect to Benedek Broadcasting
Corporation.
</TABLE>
- ------------
* Filed herewith
(b) Reports on Form 8-K
None.
21
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
BENEDEK COMMUNICATIONS CORPORATION
(Registrant)
By: /S/ RONALD L. LINDWALL
.................................
RONALD L. LINDWALL
SENIOR VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER
(AUTHORIZED OFFICER AND PRINCIPAL
ACCOUNTING OFFICER)
Date: April 28, 1998
22
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
BENEDEK BROADCASTING CORPORATION
(Registrant)
By: /S/ RONALD L. LINDWALL
.................................
RONALD L. LINDWALL
SENIOR VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER
(AUTHORIZED OFFICER AND PRINCIPAL
ACCOUNTING OFFICER)
Date: April 28, 1998
23
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
BENEDEK LICENSE CORPORATION
(Subsidiary Guarantor Registrant)
By: /S/ RONALD L. LINDWALL
.................................
RONALD L. LINDWALL
SENIOR VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER
(AUTHORIZED OFFICER AND PRINCIPAL
ACCOUNTING OFFICER)
Date: April 28, 1998
24
<PAGE>
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