<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 JUNE 30, 1998
COMMISSION FILE NUMBERS:
BENEDEK BROADCASTING CORPORATION 33-78792
BENEDEK COMMUNICATIONS CORPORATION 333-09529
----------
BENEDEK BROADCASTING CORPORATION
AND
BENEDEK COMMUNICATIONS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------
DELAWARE BENEDEK BROADCASTING CORPORATION 13-2982954
DELAWARE BENEDEK COMMUNICATIONS CORPORATION 36-4076007
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
----------
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>
----------
100 PARK AVENUE 61101
ROCKFORD, ILLINOIS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
----------
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 815-987-5350
----------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS: ON WHICH REGISTERED:
-------------------- ----------------------
NONE NONE
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
August 14, 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
August 14, 1998, there were outstanding 7,400,000 shares of 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 Page
- ------ ----
<S> <C> <C>
PART I - FINANCIAL STATEMENTS
Item 1. FINANCIAL STATEMENTS
Introductory Comments.............................................. 1
Benedek Communications Corporation and Subsidiaries and Benedek
Broadcasting Corporation and Subsidiary
Consolidated Balance Sheets as of December 31, 1997 and June 30,
1998 ......................................................... 2
Consolidated Statements of Operations for the Three Months Ended
June 30, 1997 and 1998 ....................................... 3
Consolidated Statements of Operations for the Six Months Ended
June 30, 1997 and 1998 ...................................... 4
Consolidated Statement of Stockholders' Equity (Deficit) for the
Six Months Ended June 30, 1998 .............................. 5
Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 1997 and 1998 ...................................... 6
Notes to Consolidated Financial Statements ..................... 8
Benedek License Corporation
Balance Sheets as of December 31, 1997 and June 30, 1998 ....... 11
Statements of Operations for the Three Months and Six Months
Ended June 30, 1997 and 1998 ................................ 12
Statement of Stockholder's Equity for the Six Months Ended June
30, 1998 .................................................... 13
Statements of Cash Flows for the Six Months ended June 30, 1997
and 1998 .................................................... 14
Notes to Financial Statements .................................. 15
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS .......................................... 16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings .............................................. 27
Item 6. Exhibits and Reports on Form 8-K ............................... 27
SIGNATURES ................................................................ 29
</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 and its wholly owned subsidiary, Benedek Broadcasting Corporation.
Unless the context requires otherwise, references to the "Company" refers to
Benedek Communications Corporation and Benedek Broadcasting Corporation and
its wholly-owned subsidiary, Benedek License Corporation. The Company is a
holding company with minimal separate operations from its operating
subsidiary, Benedek Broadcasting Corporation. 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 Corporation and Benedek Broadcasting Corporation 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 June 30, 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 $ 4,825 $ 4,826
Receivables
Trade, net ................................ 25,004 25,004 25,947 25,947
Other ..................................... 1,729 1,729 1,345 1,345
Current portion of program broadcast rights .. 4,869 4,869 2,344 2,344
Prepaid expenses ............................. 1,659 1,659 2,243 2,243
Deferred income taxes ........................ 1,004 1,004 1,021 1,021
--------- --------- --------- ---------
TOTAL CURRENT ASSETS .......... 36,912 36,913 37,725 37,726
--------- --------- --------- ---------
Property and equipment .......................... 73,811 73,811 68,475 68,475
--------- --------- --------- ---------
Intangible assets ............................... 345,588 345,588 340,463 340,463
--------- --------- --------- ---------
Other Assets
Program broadcast rights, less current portion 1,796 1,796 1,177 1,177
Deferred loan costs .......................... 7,245 10,216 6,599 9,266
Land held for sale ........................... 109 109 109 109
Other ........................................ 62 62 93 93
--------- --------- --------- ---------
9,212 12,183 7,978 10,645
--------- --------- --------- ---------
$ 465,523 $ 468,495 $ 454,641 $ 457,309
========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current Liabilities
Current maturities of notes payable .......... $ 13,480 $ 13,480 $ 16,021 $ 16,021
Current program broadcast rights payable ..... 6,762 6,762 3,960 3,960
Accounts payable and accrued expenses ........ 13,476 13,477 12,272 12,272
Deferred revenue ............................. 683 683 679 679
--------- --------- --------- ---------
TOTAL CURRENT LIABILITIES ..... 34,401 34,402 32,932 32,932
--------- --------- --------- ---------
Long-Term Obligations
Notes and leases payable ..................... 247,114 357,437 242,096 359,660
Program broadcast rights payable ............. 1,353 1,353 804 804
Deferred revenue ............................. 3,760 3,760 3,418 3,418
Deferred income taxes ........................ 50,345 41,895 48,207 36,868
--------- --------- --------- ---------
302,572 404,445 294,525 400,750
--------- --------- --------- ---------
Exchangeable redeemable senior preferred stock .. -- 73,660 -- 100,735
--------- --------- --------- ---------
Seller junior discount preferred stock .......... -- 50,896 -- 52,932
--------- --------- --------- ---------
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 .................................. -- 70 -- 74
Additional paid-in capital ................... 149,592 (40,192) 153,023 (57,799)
Accumulated (deficit) ........................ (20,608) (54,786) (25,405) (71,744)
Stockholder's note receivable (Note C) ....... -- -- -- (571)
--------- --------- --------- ---------
130,031 (94,908) 128,665 (130,040)
Less 30.24 shares of common stock held in
treasury ................................... (1,481) -- (1,481) --
--------- --------- --------- ---------
128,550 (94,908) 127,184 (130,040)
--------- --------- --------- ---------
$ 465,523 $ 468,495 $ 454,641 $ 457,309
========= ========= ========= =========
</TABLE>
-2-
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended June 30,
-------------------------------------------------------------------------------
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 ................................... $ 33,115 $ 33,115 $ 36,312 $ 36,312
----------- ----------- ----------- -----------
Operating expenses:
Selling, technical and program expenses ..... 14,940 14,940 15,992 15,992
General and administrative .................. 4,706 4,106 5,069 5,069
Depreciation and amortization ............... 7,797 7,797 7,645 7,645
Corporate ................................... 1,125 1,125 1,214 1,214
----------- ----------- ----------- -----------
28,568 28,568 29,920 29,920
----------- ----------- ----------- -----------
OPERATING INCOME ......................... 4,547 4,547 6,392 6,392
----------- ----------- ----------- -----------
Financial income (expense):
Interest expense:
Cash interest ............................ (7,097) (7,097) (6,826) (6,826)
Other interest ........................... (361) (3,967) (383) (4,235)
----------- ----------- ----------- -----------
(7,458) (11,064) (7,209) (11,061)
Interest income ............................. 30 30 65 389
----------- ----------- ----------- -----------
(7,428) (11,034) (7,144) (10,672)
----------- ----------- ----------- -----------
(LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT) (2,881) (6,487) (752) (4,280)
Income tax (expense) benefit ................... 641 2,084 (131) 1,281
----------- ----------- ----------- -----------
NET (LOSS) ............................ $ (2,240) (4,403) $ (883) (2,999)
=========== ===========
Preferred stock dividends and accretion ........ (4,505) (16,668)
----------- -----------
Net (loss) applicable to common stock .......... $ (8,908) $ (19,667)
=========== ===========
Basic and diluted (loss) per common share:
(Loss) per common share ..................... $ (1.27) $ (2.66)
=========== ===========
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 OPERATIONS
<TABLE>
<CAPTION>
Six Months Ended June 30,
-----------------------------------------------------------------------------
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 ............................. $ 61,193 $ 61,193 $ 67,007 $ 67,007
----------- ----------- ----------- -----------
Operating expenses:
Selling, technical and program expenses 29,631 29,631 31,392 31,392
General and administrative ............ 9,421 9,421 10,302 10,302
Depreciation and amortization ......... 15,543 15,543 15,433 15,433
Corporate ............................. 1,822 1,822 2,591 2,591
----------- ----------- ----------- -----------
56,417 56,417 59,718 59,718
----------- ----------- ----------- -----------
OPERATING INCOME ................... 4,776 4,776 7,289 7,289
----------- ----------- ----------- -----------
Financial income (expense):
Interest expense:
Cash interest ...................... (14,174) (14,173) (13,677) (13,677)
Other interest ..................... (737) (7,574) (710) (8,256)
----------- ----------- ----------- -----------
(14,911) (21,748) (14,387) (21,933)
Interest income ....................... 70 70 99 423
----------- ----------- ----------- -----------
(14,841) (21,678) (14,288) (21,510)
----------- ----------- ----------- -----------
(LOSS) BEFORE INCOME TAX BENEFIT ... (10,064) (16,902) (6,999) (14,221)
Income tax benefit ....................... 3,098 5,860 2,202 5,091
----------- ----------- ----------- -----------
NET (LOSS) ...................... $ (6,966) (11,042) $ (4,797) (9,130)
=========== ===========
Preferred stock dividends and accretion .. (8,881) (21,877)
----------- -----------
Net (loss) applicable to common stock .... $ (19,923) $ (31,007)
============ ===========
Basic and diluted (loss) per common share:
(Loss) per common share ............... $ (2.83) $ (4.19)
============ ===========
Weighted-average common shares outstanding 7,030,000 7,400,000
============ ===========
</TABLE>
-4-
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
SIX MONTHS ENDED JUNE 30, 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
Contribution of additional paid-in capital
by parent .................................. -- 3,431 -- -- 3,431
Net (loss) ................................. -- -- (4,797) -- (4,797)
--------- --------- --------- --------- ---------
Balance at June 30, 1998 ...................... $ 1,047 $ 153,023 $ (25,405) $ (1,481) $ 127,184
========= ========= ========= ========= =========
</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 ................... -- (14,049) -- -- (14,049)
Dividends on preferred stock ............... -- -- (7,828) -- (7,828)
Financial costs related to the sale of
preferred stock .......................... -- (4,125) -- -- (4,125)
Stock options exercised in exchange
for note (Note C) ......................... 4 567 -- (571) --
Net (loss) ................................. -- -- (9,130) -- (9,130)
--------- --------- --------- --------- ---------
Balance at June 30, 1998 ...................... $ 74 $ (57,799) $ (71,744) $ (571) $(130,040)
========= ========= ========= ========== =========
</TABLE>
-5-
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------------------------------------------------
1997 1998
--------------------------------- ----------------------------------
Benedek Benedek Benedek Benedek
Broadcasting Communications Broadcasting Communications
Corporation Corporation Corporatin Corporation
-------------- ---------------- -------------- ----------------
(Unaudited)
(In thousands)
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net (loss) ......................................... $ (6,966) $ (11,042) $ (4,797) $ (9,130)
Adjustments to reconcile net (loss)
to net cash provided by operating activities:
Amortization of program broadcast rights ....... 3,042 3,042 3,320 3,320
Depreciation and amortization .................. 10,632 10,632 10,622 10,622
Amortization and write-off of intangibles
and deferred loan costs ...................... 5,666 6,133 5,539 5,843
Amortization of note discount .................. -- 6,370 -- 7,242
Deferred income taxes .......................... 8 8 (2,155) (5,044)
Other .......................................... (3,417) (6,178) (553) (553)
Changes in operating assets and liabilities:
Receivables .................................... (113) (113) (559) (559)
Due to sellers ................................. 97 97 -- --
Prepaid expenses and other ..................... (658) (658) (583) (583)
Payments on program broadcast rights
payable ...................................... (2,821) (2,821) (3,527) (3,527)
Accounts payable and accrued expenses .......... (1,757) (1,757) (1,003) (1,003)
Deferred revenue ............................... (371) (371) (346) (346)
--------- --------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES .... 3,342 3,342 5,958 6,282
--------- --------- --------- ---------
Cash flows from investing activities
Purchase of property and equipment ................. (1,535) (1,535) (3,609) (3,609)
Proceeds from sale of equipment .................... 10 10 97 97
Purchase of other assets .......................... -- -- (31) (31)
Other .............................................. (3) (3) -- --
--------- --------- --------- ---------
NET CASH (USED IN) INVESTING ACTIVITIES ........ (1,528) (1,528) (3,543) (3,543)
--------- --------- --------- ---------
Cash flows from financing activities
Principal payments on notes payable ................ (15,944) (15,944) (648) (648)
Proceeds (payments) from long-term borrowing ....... 9,983 9,983 (3,000) (3,000)
Contribution of paid-in capital by parent .......... -- -- 3,431 --
Proceeds from senior preferred stock .............. -- -- -- 100,000
Payoff of senior preferred stock .................. -- -- -- (92,769)
Payment of debt and preferred stock
acquisition costs ................................ (620) (620) (20) (4,144)
--------- --------- --------- ---------
NET CASH (USED IN) FINANCING
ACTIVITIES ................................... (6,581) (6,581) (237) (561)
--------- --------- --------- ---------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS .................................. (4,768) (4,768) 2,178 2,178
Cash and cash equivalents:
Beginning .................................... 8,090 8,090 2,647 2,648
--------- --------- --------- ---------
Ending ....................................... $ 3,322 $ 3,323 $ 4,825 $ 4,826
========= ========= ========= =========
</TABLE>
-6-
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------------------------------------------
1997 1998
----------------------------- ----------------------------
Benedek Benedek Benedek Benedek
Broadcasting Communications Broadcasting Communications
Corporation Corporation Corporation Corporation
------------- -------------- ------------- ---------------
(Unaudited)
(In thousands)
<S> <C> <C> <C> <C>
Supplemental disclosure of cash flow
information:
Cash payments for interest .............. $14,032 $14,032 $13,667 $13,667
Cash payments for income taxes .......... 419 419 146 146
======= ======= ======= =======
Supplemental schedule of noncash investing
and financing activities:
Acquisition of program broadcast rights . $ 348 $ 348 $ 176 $ 176
Notes payable incurred for purchase of
equipment ............................. 1,627 1,627 1,171 1,171
Equipment acquired by barter transactions 81 81 603 603
Dividends accrued on redeemable preferred
stock ................................. -- 6,868 -- 7,828
Accretion to exchange redeemable senior
preferred stock ....................... -- 2,013 -- 14,049
Stock options exercised in exchange for
note receivable ....................... -- -- -- 571
======= ======= ======= =======
</TABLE>
-7-
<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 June 30, 1998 and the results of operations for the
three months and the six months ended June 30, 1998 have been included.
Operating results for the three month and the six month periods ended June 30,
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) - REDEEMABLE EQUITY SECURITIES
On May 8, 1998, the Company issued 100,000 shares of 11 1/2% Senior
Exchangeable Preferred Stock due 2008, $0.01 per value per share of (the
"Exchangeable Preferred Stock") with an initial liquidation preference equal to
the proceeds of $100,000,000. Subject to certain conditions, the Exchangeable
Preferred Stock are exchangeable for exchange debentures at the option of
the Company on any dividend date. The Exchangeable Preferred Stock ranks senior
to all classes of common stock.
-8-
<PAGE>
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The Company has the option to pay dividends quarterly at 11 1/2% of the
then effective liquidation preference on any payment date occurring on or before
May 15, 2003 either in cash or by adding such dividends to the then effective
liquidation preference. The Company also has the option to redeem these shares,
in whole or in part, at predetermined redemption prices after May 15, 2003.
On June 8, 1998 the Company redeemed its 15% Exchangeable Redeemable
Preferred Stock due 2007 (the "Existing Preferred Stock") at a redemption price
of 115.0% of the effective liquidation preference together with accumulated and
unpaid dividends for a total of approximately $92,800,000. The redemption was
funded by the proceeds of the issuance of the Exchangeable Preferred Stock, net
of fees and expenses of the issuance which totaled approximately $4,100,000.
(NOTE C) - STOCK OPTION AGREEMENTS
In 1988 and 1995, the Company granted options whereby a key employee could
exercise these options to purchase 239,216 shares and 130,784 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.
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.
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. 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 the rate of 5.93% per annum and is payable in the event of the sale of the
shares to the extent of the net proceeds thereof, but in no event later than
December 31, 2007.
(NOTE D) - 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
-9-
<PAGE>
<PAGE>
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.
-10-
<PAGE>
<PAGE>
BENEDEK LICENSE CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, June 30,
ASSETS 1997 1998
---- ----
(Unaudited)
(In thousands except share and
per share data)
<S> <C> <C>
Federal Communication Commission (FCC)
Licenses, at cost, less accumulated amortization of $5,514
and $7,112 for 1997 and 1998, respectively ..................... $ 120,526 $ 118,928
Goodwill, less accumulated amortization of $1,322 and $1,762 for 1997
and 1998, respectively ............................................ 33,915 33,475
--------- ---------
$ 154,441 $ 152,403
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Deferred tax liability .............................................. $ 33,017 $ 32,377
--------- ---------
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) (6,014)
--------- ---------
121,424 120,026
--------- ---------
$ 154,441 $ 152,403
========= =========
</TABLE>
-11-
<PAGE>
<PAGE>
BENEDEK LICENSE CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1997 1998 1997 1998
---- ---- ---- ----
(Unaudited)
(In thousands)
<S> <C> <C> <C> <C>
Operating expense, amortization ... $(1,018) $(1,019) $(2,044) $(2,037)
------- ------- ------- -------
(Loss) before income tax benefit $(1,018) $(1,019) $(2,044) $(2,037)
Income tax benefit ................ 319 319 851 639
------- ------- ------- -------
NET (LOSS) ................... $ (699) $ (700) $(1,193) $(1,398)
======= ======= ======= =======
</TABLE>
-12-
<PAGE>
<PAGE>
BENEDEK LICENSE CORPORATION
STATEMENTS OF STOCKHOLDER'S EQUITY
SIX MONTHS ENDED JUNE 30, 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) ............ -- -- (1,398) (1,398)
------- --------- --------- ---------
Balance at June 30, 1998 ... $ -- $ 126,040 $ (6,014) $ 120,026
======= ========= ========= =========
</TABLE>
-13-
<PAGE>
<PAGE>
BENEDEK LICENSE CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------
1997 1998
---- ----
(Unaudited)
(In thousands)
<S> <C> <C>
Cash flows from operating activities:
Net (loss) ............................................. $(1,193) $(1,398)
Adjustments to reconcile net (loss) to net cash provided
by operating activities:
Amortization ........................................ 2,044 2,037
Deferred income tax ................................. (851) (639)
------- -------
Net cash provided by operating activities ......... -- --
Cash:
Beginning .............................................. -- --
------- -------
Ending ................................................. $ -- $ --
======= =======
</TABLE>
-14-
<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 ("FCC") 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 June 30, 1998 and the results of operations for the
three months and six months ended June 30, 1998 have been included. Operating
results for the three month and six month periods ended June 30, 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.
-15-
<PAGE>
<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.
Unless the context otherwise requires, references to the "Company" refer to
both Benedek Communications and its wholly-owned operating subsidiary, 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.
For the three months ended June 30, 1998, the Company reported net revenues
of $36.3 million compared to net revenues of $33.1 million for the three months
ended June 30, 1997. Benedek Communications had a net loss of $3.0 million for
the three months ended June 30, 1998 as compared to $4.4 million for the three
months ended June 30, 1997. Benedek Broadcasting had a net loss of $0.9 million
for the three months ended June 30, 1998 compared to a net loss of $2.2 million
for the three months ended June 30, 1997. Adjusted EBITDA for the three months
ended June 30, 1998 was $13.9 million compared to $12.4 million for the three
months ended June 30, 1997.
For the six months ended June 30, 1998, the Company reported net revenues
of $67.0 million compared to net revenues of $61.2 million for the six months
ended June 30, 1997. Benedek Communications had a net loss of $9.1 million for
the six months ended June 30, 1998 compared to a net loss of $11.0 million for
the six months ended June 30, 1997. Benedek Broadcasting had a net loss of $4.8
million for the six months ended June 30, 1998 compared to a net loss of $7.0
million for the six months ended June 30, 1997. Adjusted EBITDA for the six
months ended June 30, 1998 was $22.5 million as compared to $20.5 million for
the six months ended June 30, 1997.
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
-16-
<PAGE>
<PAGE>
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.
Time sales to local/regional advertisers and national advertisers
constitute the largest concentration of the Company's operating revenues and
represent approximately 87% of gross revenues for the six months ended June
30, 1998 as compared to 86% for the six months ended June 30, 1997.
Approximately 56% of the gross revenues of the Company for the six months
ended June 30, 1998 was generated from local and regional advertising, which is
sold primarily by the 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 decreased
as assets purchased in the 1996 acquisitions have depreciated. Barter 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 66% of net revenues for the six months
ended June 30, 1998 as compared to 67% for the six months ended June 30, 1997.
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.
-17-
<PAGE>
<PAGE>
The following table sets forth certain historical results of the operations
and operating data for the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
---------------------------- ---------------------------
1997 1998 1997 1998
---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Operating income .................... $ 4,547 $ 6,392 $ 4,776 $ 7,289
Add:
Amortization of program broadcast 1,483 1,622 3,042 3,320
rights.........................
Depreciation and amortization ... 7,796 7,645 15,543 15,433
Corporate expenses .............. 1,126 1,214 1,822 2,591
Less:
Payment for program broadcast (1,399) (1,774) (2,821) (3,526)
liabilities....................
-------- -------- -------- --------
Broadcast cash flow ............. 13,553 15,099 22,362 25,107
Corporate ..................... 1,126 1,214 1,822 2,591
-------- -------- -------- --------
Adjusted EBITDA .................. $ 12,427 $ 13,885 $ 20,540 $ 22,516
======== ======== ======== ========
</TABLE>
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
The following table provides historical information.
<TABLE>
<CAPTION>
Historical
Three Months Ended June 30,
--------------------------------------------
1997 1998 % Change
---- ---- --------
(Dollars in Thousands)
<S> <C> <C> <C>
Net revenues .................. $33,115 $36,312 9.7%
------- ------- ----
Operating expenses:
Selling, technical and
program expenses .......... 14,940 15,992 7.0
General and administrative .. 4,706 5,069 7.7
Depreciation and amortization 7,797 7,645 (1.9)
Corporate ................... 1,125 1,214 7.9
------- ------- -----
28,568 29,920 4.7
------- ------- -----
OPERATING INCOME ..... $ 4,547 $ 6,392 40.6%
======= ======= =====
Broadcast cash flow ........... $13,553 $15,099 11.4%
Broadcast cash flow margin .... 40.9% 41.6%
Adjusted EBITDA ............... $12,427 $13,885 11.7%
Adjusted EBITDA margin ........ 37.5% 38.2%
</TABLE>
Net revenues for the three months ended June 30, 1998 increased $3.2
million or 9.7% to $36.3 million from $33.1 million for the three months ended
June 30, 1997. Gross revenues excluding political advertising revenue increased
$2.4 million or 6.4% from the three months ended June 30, 1997. Net revenues
during the three months ended June 30, 1998 showed an improvement in advertising
revenue for the Company due in part to political spending and a continued
improvement in local advertising.
-18-
<PAGE>
<PAGE>
Operating expenses for the three months ended June 30, 1998 increased $1.3
million or 4.7% to $29.9 million from $28.6 million for the three months ended
June 30, 1997. As a percentage of net revenues, operating expenses decreased to
82.4% from 86.3% for the three months ended June 30, 1998. The increase in
expenses was due to increased compensation expense and increased programming
expenses as the Company revamped programming schedules at certain of its 1996
acquired stations.
Operating income for the three months ended June 30, 1998 increased $1.9
million or 40.6% to $6.4 million from $4.5 million for the three months ended
June 30, 1997.
Financial (expenses), net for Benedek Broadcasting decreased $0.3 million
or 3.8% to $7.1 million from $7.4 million for the three months ended June 30,
1998 due to the lower interest rates on its Term Loan Facilities. Benedek
Communications' financial expenses (net) for the three months ended June 30,
1998 decreased $0.3 million or 3.3% to $10.7 million from $11.0 million for the
three months ended June 30, 1997. Benedek Communications has higher financial
expenses than Benedek Broadcasting as a result of the interest on its Senior
Subordinated Discount Notes.
Income tax expense for Benedek Broadcasting for the three months ended June
30, 1998 was $0.1 million compared to $(0.6) million for the three months ended
June 30, 1997. For the three months ended June 30, 1998, Benedek Communications
had a $1.3 million income tax benefit compared to $2.1 million for the three
months ended June 30, 1997. Benedek Communications has a greater income tax
benefit than Benedek Broadcasting due to the net tax affect on the difference in
financial expenses.
Net loss for Benedek Broadcasting for the three months ended June 30, 1998
was $0.9 million as compared to $2.2 million net loss for the three months ended
June 30, 1997. Benedek Communications had a net loss of $3.0 million for the
three months ended June 30, 1998 as compared to a net loss of $4.4 million for
the three months ended June 30, 1997.
Broadcast cash flow for the three months ended June 30, 1998 increased $1.5
million or 11.4% to $15.1 million from $13.6 million for the three months ended
June 30, 1997. As a percentage of net revenues, broadcast cash flow margin
increased to 41.6% for the three months ended June 30, 1998 from 40.9% for the
three months ended June 30, 1997.
-19-
<PAGE>
<PAGE>
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1997
The following table provides historical information.
<TABLE>
<CAPTION>
Historical
Six Months Ended June 30,
--------------------------------------------
1997 1998 % Change
---- ---- --------
(Dollars in Thousands)
<S> <C> <C> <C>
Net revenues .................. $61,193 $67,007 9.5%
------- ------- ----
Operating expenses:
Selling, technical and
program expenses .......... 29,631 31,392 5.9
General and administrative .. 9,421 10,302 9.4
Depreciation and amortization 15,543 15,433 (0.7)
Corporate ................... 1,822 2,591 4.2
------- ------- -----
56,417 59,718 5.9
------- ------- -----
OPERATING INCOME ..... $ 4,776 $ 7,289 52.6%
======= ======= =====
Broadcast cash flow ........... $22,362 $25,107 12.3%
Broadcast cash flow margin .... 36.5% 37.5%
Adjusted EBITDA ............... $20,540 $22,516 9.6%
Adjusted EBITDA margin ........ 33.6% 33.6%
</TABLE>
Net revenues for the six months ended June 30, 1998 increased $5.8 million
or 9.5% to $67.0 million from $61.2 million for the six months ended June 30,
1997. Gross revenues for the six months ended June 30, 1998 increased $6.7
million to $77.0 million from $70.3 million from the six months ended June 30,
1997. Gross revenues excluding political advertising revenue increased $5.1
million or 7.3% from the six months ended June 30, 1997. Net revenues for the
six months ended June 30, 1998 were positively affected by political spending
and the Winter Olympics shown on the Company's 12 CBS stations.
Operating expenses for the six months ended June 30, 1998 increased $3.3
million or 5.9% to $59.7 million from $56.4 million for the six months ended
June 30, 1997. As a percentage of net revenues, operating expenses decreased to
89.1% from 92.2% for the six months ended June 30, 1998. The increases in
expenses was due to increased compensation expense as the Company expanded the
news operations of the 1996 acquired stations, increased programming expense as
the Company revamped programming schedules at certain of the 1996 acquired
stations, an expansion of corporate management effective after the first quarter
of 1997 and to a lessor extent an increase in medical insurance costs.
Operating income for the six months ended June 30, 1998 increased $2.5
million or 52.6% to $7.3 million from $4.8 million for the six months ended June
30, 1997.
Financial (expenses), net for Benedek Broadcasting for the six months ended
June 30, 1998 decreased $0.5 million or 3.7% to $14.3 million from $14.8 million
in the six months ended June 30, 1997 due to the lower interest rates on its
Term Loan Facilities. For the six months ended June 30, 1998, Benedek
-20-
<PAGE>
<PAGE>
Communications' financial expenses (net) decreased $0.2 million or 0.8% to $21.5
million from $21.7 million for the six months ended June 30, 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 six months ended June
30, 1998 was $2.2 million compared to $3.1 for the six months ended June 30,
1997. For the six months ended June 30, 1998, Benedek Communications had a $5.1
million income tax benefit compared to $5.9 for the six months ended June 30,
1997. Benedek Communications has a greater income tax benefit than Benedek
Broadcasting due to the net income 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
June 30, 1998.
Net loss for Benedek Broadcasting for the six months ended June 30, 1998
was $4.8 million as compared to a $7.0 million net loss for the six months ended
June 30, 1997. Benedek Communications had a net loss of $9.1 million for the six
months ended June 30, 1998 as compared to a net loss of $11.0 million for the
six months ended June 30, 1997.
Broadcast cash flow for the six months ended June 30, 1998 increased $2.7
million or 12.3% to $25.1 million from $22.4 million for the six months ended
June 30, 1997. As a percentage of net revenues, broadcast cash flow margin
increased to 37.5% for the six months ended June 30, 1998 from 36.5% for the six
months ended June 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows from Operating Activities is the primary source liquidity for
the Company. Benedek Broadcasting had cash provided by operating activities of
$6.0 million for the six months ended June 30, 1998 compared to $3.3 million for
the six months ended June 30, 1997. Cash provided by operating activities for
Benedek Communications was $6.3 million for the six months ended June 30, 1998
as compared to $3.3 million for the six months ended June 30, 1997. Cash flows
from operating activities included cash payments of interest expense which
totaled $13.7 million for the six months ended June 30, 1998 as compared to
$14.0 million for the six months ended June 30, 1997.
Cash Flows from Investing Activities were $(3.5) million for the six months
ended June 30, 1998 as compared to $(1.5) million for the six months ended June
30, 1997. Cash flows provided by operating were used to fund cash used to
purchase $3.6 million of property and equipment.
Cash Flows from Financing Activities were $(0.2) million for Benedek
Broadcasting for the six months ended June 30, 1998 compared to $(6.6) million
for the six months ended June 30, 1997. For the six months ended June 30, 1998,
Benedek Communications had cash used in financing activities of $0.6 million
compared to $6.6 million for the six months ended June 30, 1997. Benedek
Broadcasting had less cash used in financing due to a $0.3 million contribution
of paid in capital from Benedek Communications generated from interest income.
For the six months ended June 30, 1998, cash flows from financing activities
included $100.0 million of proceeds from the issuances of the Company's 11 1/2%
Exchangeable Redeemable Senior Preferred Stock issued during the quarter ended
June 30, 1998. The proceeds were used to redeem Benedek Communications' Existing
Preferred Stock totaling $92.8 million and to pay fees and expenses totaling
$4.1 million associated with the offering.
-21-
<PAGE>
<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 "Existing 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 GECC 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 Dothan station.
Benedek Communications redeemed the Existing Preferred Stock on June 8,
1998 for $92.8 million (including approximately $12.1 million representing
premiums relating to the redemption) which was funded by the proceeds of the
issuance of the Exchangeable Preferred Stock of $100.0 million before fees and
expenses of the offering. The Exchangeable Preferred Stock was registered with
the Securities and Exchange Commission pursuant to an S-4 registration statement
declared effective on June 15, 1998.
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 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 Exchangeable 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 Exchangeable Preferred Stock and interest payment dates with
respect to the Exchange Debentures through and including May 15, 2003, 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
Exchangeable Preferred Stock or pay interest on the Exchange Debentures by
issuing additional Exchange Debentures.
The Credit Agreement currently prohibits the Company from making cash
payments with respect to dividends on the Exchangeable Preferred Stock and
interest on the Exchange Debentures at any time. Accordingly, the Company
currently intends not to pay cash dividends on the Exchangeable Preferred Stock
or cash interest on the Exchange Debentures, as applicable, prior to May 15,
2003. In order for the Company to pay required cash dividends with respect to
the Exchangeable Preferred Stock or cash interest on the Exchange Debentures, as
the case may be, after May 15, 2003, the Company will need to amend the Credit
Agreement or refinance the Term Loan Facilities and Revolving Credit Facility
thereunder as well as need to substantially increase broadcast cash flow at the
Stations. For all dividend payment dates with respect to the Seller Junior
Discount Preferred Stock prior to October 1, 2001, the Company will pay such
dividends by adding the amount thereof to the then effective liquidation
preference of the Seller Junior Discount Preferred Stock. In order for the
Company to meet its debt service obligations and pay required cash interest
after May 15, 2001 with respect to the Senior Subordinated Discount Notes, and
cash dividends from and
-22-
<PAGE>
<PAGE>
after October 1, 2001 with respect to the Seller Junior Discount Preferred
Stock, the Company will need to substantially increase broadcast cash flow at
the Stations. The Company's debt service obligations, including scheduled
principal amortization, in the 12 month period beginning May 15, 2001 would be
approximately $62.8 million (assuming that there will not have been any
mandatory or voluntary prepayments of any indebtedness prior to that time,
assuming no incurrence of additional indebtedness 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 with respect to the Seller Junior Discount
Preferred Stock would be approximately $10.1 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.
Benedek Communications is a holding company that derives 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, is 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, as of June 30, 1998, Benedek Broadcasting could have
distributed approximately $192.6 million to Benedek Communications under such
limitations.
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 of the agreement. As of December 17, 1997, the
outstanding principal balance of the existing term loans which totaled $110.8
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.
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<PAGE>
<PAGE>
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.
At June 30, 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 $8.0 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 six months ended June 30, 1998, the highest
outstanding balance under the Revolving Credit Facility was $14.6 million. The
Revolving Credit Facility has a term expiring in 2004 and 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 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 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.
RECENT DEVELOPMENTS
In the third quarter of 1997, the Company entered into agreements with
The Warner Bros. Television Network to develop a local cable affiliate
called the "WeB" in each of the Company's 20 markets which rank above
market 100 as measured by the A.C. Nielsen Company's surveys. The WeB is
intended to be a 24 hour, seven day a week television channel which will
broadcast The Warner Bros. Television Network prime time programming,
WB children's programming and syndicated programming of Warner Bros. and others.
The Company is currently in negotiations with cable systems in its markets for
the carriage of WeB programming. The WeB is scheduled to begin service in the
fall of 1998. The Company will be responsible for all local sales efforts for
the new channels in its markets. The Company does not anticipate a significant
effect on operations during 1998 nor does it anticipate that significant capital
expenditures will be required in connection with the development of its WeB
affiliates.
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<PAGE>
<PAGE>
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 and the FCC has approved 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 transfer to the
trust. The Company is seeking 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 $17.4 million of actual net operating loss carryforwards available
to offset future tax liabilities whereas Benedek Communications has
approximately $18.4 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 Adjusted EBITDA due to increased expenditures by advertisers in
anticipation of holiday season consumer spending and an increase in viewership
during this period.
YEAR 2000
The Company has conducted a comprehensive review of its computer systems to
identify the systems that could be affected by the Year 2000 Issue, and is
developing an implementation plan to resolve the issue. The issue is whether
computer systems will properly recognize date sensitive information when the
year changes to 2000. Systems that do not properly recognize such information
could generate erroneous data or cause a system to fail. Based on the review of
the computer systems, management does not believe the cost of remediation will
be material to the Company's financial systems.
RECENTLY PROMULGATED ACCOUNTING STANDARDS
The Financial Accounting Standards Board (the "FASB") has issued two new
pronouncements that the Company will be required to adopt 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
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<PAGE>
<PAGE>
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.
-26-
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
ITEM 2. 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.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a)(3) Exhibits.
<TABLE>
<S> <C>
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 11.1/2% Senior Exchangeable Preferred Stock
due 2008 and Qualifications, Limitations and Restrictions thereof of Benedek
Communications Corporation, incorporated by reference to Exhibit 3.3 of Benedek
Communications Corporation's Registration Statement on Form S-4, File No. 333-
09529, filed on June 9, 1998.
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.
</TABLE>
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<PAGE>
<PAGE>
<TABLE>
<S> <C>
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 11 1/2% Senior Exchangeable Preferred Stock
due 2008 and Qualifications, Limitations and Restrictions thereof of Benedek
Communications Corporation (filed as Exhibit 3.3 hereof), incorporated by
reference to Exhibit 4.6 to Benedek Communication's Registration Statement on
Form S-4, File No. 333-09529, filed on June 9, 1998.
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>
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* Filed herewith
(b) Reports on Form 8-K
The Company filed a report on Form 8-K on May 8, 1998, announcing
redemption of all of its outstanding 15.0% Exchangeable Redeemable Senior
Preferred Stock.
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<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 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: August 14, 1998
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<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: August 14, 1998
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<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: August 14, 1998
-31-
<PAGE>
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