<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________________
FORM 10-Q
___________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
========================================================
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED COMMISSION FILE NUMBER:
MARCH 31, 1996 0-25042
YOUNG BROADCASTING INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3339681
(State of other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
599 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 754-7070
____________________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
____________________________
Number of shares of Common Stock outstanding as of April 30, 1996:
4,877,327 shares of Class A Common Stock, 2,029,620 shares of Class B Common
Stock, and 3,563,473 shares of Class C Common Stock.
<PAGE>
YOUNG BROADCASTING INC.
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Part I Page
----
Item 1. Financial Statements.
Consolidated Balance Sheets as of December 31, 1995 and March 31, 1996 ........................ 2
Consolidated Statements of Operations for the Three Months Ended March 31,
1995 and 1996................................................................................... 4
Consolidated Statements of Stockholders' Equity (Deficit) for the Three Months
Ended March 31, 1996............................................................................ 5
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 1995 and 1996......................................................................... 6
Notes to Consolidated Financial Statements...................................................... 7
Item 2. Management's Discussion and Analysis of Financial Conditions and Results
of Operations...................................................................................... 9
Part II.
Item 6. Exhibits and Reports on Form 8-K................................................................... 15
Signatures...................................................................................................... 16
</TABLE>
<PAGE>
ITEM 1. FINANCIAL STATEMENTS.
YOUNG BROADCASTING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
December 31, MARCH 31,
1995 1996
-----------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,425,633 $ 81,260,630
Trade accounts receivable, less allowance for doubtful accounts of
$785,000 in 1995 and $809,000 in 1996 27,431,914 21,489,401
Current portion of loans receivable - officers 808,783 793,831
Current portion of program license rights 6,426,198 4,966,821
Prepaid expenses 956,052 945,601
-----------------------------
Total current assets 39,048,580 109,456,284
-----------------------------
Property and equipment
Land and land improvements 5,165,489 5,165,489
Buildings and building improvements 23,094,346 23,094,346
Broadcast equipment 87,023,341 87,395,227
Office furniture, fixtures and other equipment 5,306,416 5,335,719
Vehicles 1,385,790 1,611,035
-----------------------------
121,975,382 122,601,816
Less accumulated depreciation and amortization (62,844,245) (66,126,468)
-----------------------------
Net property and equipment 59,131,137 56,475,348
Program license rights, excluding current portion 3,180,397 2,698,582
Deposits and other assets 1,545,285 1,465,069
Loans receivable - officers, excluding current portion 1,194,175 1,194,175
Broadcasting licenses and other intangibles, less accumulated amortization
of $63,852,304 in 1995 and $66,068,887 in 1996 180,722,385 178,494,359
Deferred charges less accumulated amortization of $1,536,057 in 1995 and 11,275,993 14,709,970
$2,128,281 in 1996
-----------------------------
TOTAL ASSETS $296,097,952 $364,493,787
=============================
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
YOUNG BROADCASTING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
December 31, MARCH 31,
1995 1996
-------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Trade accounts payable $ 4,482,852 $ 3,711,976
Accrued expenses:
Interest 6,920,874 9,689,880
Other 3,391,684 1,750,855
-------------------------------
Total accrued expenses 10,312,558 11,440,735
Current installments of program license
liability 5,817,936 4,666,347
Current installments of long-term debt 907,834 934,834
Current installments of
obligations under capital leases 48,335 43,728
-------------------------------
Total current liabilities 21,569,515 20,797,620
Program license liability, excluding
current installments 3,035,951 2,445,425
Long-term debt, excluding current
installments 51,949,014 2,249,196
11.75% Senior Subordinated Notes 120,000,000 120,000,000
10.125% Senior Subordinated Notes 125,000,000 125,000,000
9% Senior Subordinated Notes - 125,000,000
Obligations under capital leases,
excluding current installments 87,589 79,244
-------------------------------
Total liabilities 321,642,069 395,571,485
-------------------------------
Stockholders' deficit:
Class A Common Stock, $.001 par
value. Authorized 20,000,000
shares; issued and outstanding
4,955,088 shares at 1995 and
4,871,390 at 1996 4,955 4,872
Class B Common Stock, $.001 par
value. Authorized 20,000,000
shares; issued and outstanding
2,029,620 shares at 1995 and 1996 2,029 2,029
Class C Common Stock, $.001 par
value. Authorized 20,000,000
shares; issued and outstanding
3,563,473 at 1995 and 1996 3,564 3,564
Additional paid-in capital 128,051,024 125,855,972
Accumulated deficit (153,605,689) (156,944,135)
-------------------------------
Total stockholders' deficit (25,544,117) (31,077,698)
-------------------------------
-------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT $ 296,097,952 $ 364,493,787
===============================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
YOUNG BROADCASTING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months ended March 31,
1995 1996
--------------------------
Net operating revenue $26,973,463 27,699,023
--------------------------
Operating expenses 6,817,503 6,802,347
Amortization of program license rights 1,554,601 1,754,416
Selling, general and administrative 5,931,798 6,431,305
expenses
Depreciation and amortization 6,191,644 6,164,052
Corporate overhead 751,510 1,084,510
Non-cash compensation paid in Common Stock 437,982 -
Operating income 5,288,425 5,462,393
-----------------------------
Interest income 90,783 924,936
Interest expense (7,987,460) (9,697,839)
Other expense, net (56,526) (27,936)
-----------------------------
(7,953,203) (8,800,839)
Net loss $ (2,664,778) $(3,338,446)
=============================
Net loss per common share $ (0.25) $ (0.32)
=============================
Weighted average shares 10,823,147 10,466,634
=============================
See accompanying notes to consolidated financial statements.
4
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity (Deficit)
(Unaudited)
<TABLE>
<S>
COMMON STOCK ADDITIONAL TOTAL
-------------- PAID-IN ACCUMULATED STOCKHOLDERS'
CLASS A CLASS B CLASS C CAPITAL DEFICIT EQUITY (DEFICIT)
--------------- ------------ ------------- -------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995............ $4,955 $2,029 $3,564 $128,051,024 ($153,605,689) ($25,544,117)
Repurchase and retirement of Class A
Common Stock...................... (111) - - (2,923,693) - (2,923,804)
Contribution of shares into
Company's
defined contribution plan......... 28 - - 728,641 - 728,669
Net loss for March 31, 1996......... - - - - (3,338,446) (3,338,446)
--------------- ------------ ------------- -------------- ----------------- ----------------
Balance at March 31, 1996............... $4,872 $2,029 $3,564 $125,855,972 ($156,944,135) ($31,077,698)
=============== ============ ============= ============== ================= ================
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
YOUNG BROADCASTING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months ended March 31,
1995 1996
-----------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (2,664,778) $ (3,338,446)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization of property and equipment 3,434,291 3,369,717
Amortization of program license rights 1,554,601 1,754,416
Amortization of broadcasting licenses, other intangibles and deferred
charges 2,757,353 2,794,335
Non-cash compensation paid in Common Stock 437,982 -
Non-cash interest expense on outstanding indebtedness 107,508 91,980
Decrease in trade accounts receivable 3,253,517 5,957,465
Increase in prepaid expenses (215,633) (1,335)
Increase (decrease) in trade accounts payable 1,101,293 (468,538)
Increase in accrued expenses 2,560,092 1,856,848
-----------------------------------
Net cash provided by operating activities 12,326,226 12,016,442
-----------------------------------
INVESTING ACTIVITIES
Capital expenditures (1,812,571) (718,460)
(Increase) decrease in deposits and other assets (64,255) 80,216
Increase in broadcast licenses and other intangibles (18,978) -
-----------------------------------
Net cash used in investing activities (1,895,804) (638,244)
-----------------------------------
FINANCING ACTIVITIES
Proceeds from issuance of public subordinated debt - 125,000,000
Principal payments on long-term debt (3,000,000) (49,764,798)
Deferred acquisition and debt refinancing costs incurred (292,364) (3,986,522)
Repurchase of Class A Common Stock - (2,923,804)
Principal payments under capital lease obligations (132,858) (12,952)
Payments on programming license liabilities (1,798,611) (1,855,125)
-----------------------------------
Net cash (used in) provided by financing activities (5,223,833) 66,456,799
-----------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 5,206,589 77,834,997
Cash and cash equivalents at beginning of year 6,304,402 3,425,633
-----------------------------------
CASH AND CASH EQUIVALENTS AT MARCH 31 $11,510,991 $ 81,260,630
===================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ 4,592,916 $ 6,804,156
Income taxes paid $ - $ -
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
YOUNG BROADCASTING INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include those of Young
Broadcasting Inc. and subsidiaries (the "Company"), consisting of nine network
affiliated (three with CBS, and Six with ABC) commercial television broadcasting
stations in the states of Michigan, Wisconsin, Louisiana, Illinois, Tennessee,
New York and Virginia. Significant intercompany transactions and accounts have
been eliminated. The accompanying condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial statements and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. The interim financial statements are unaudited but
include all adjustments, which are of a normal recurring nature, that the
Company considers necessary for a fair presentation of results for such period.
Operating results of interim periods are not necessarily indicative of results
for a full year.
2. NEW SENIOR SUBORDINATED NOTES
On January 16, 1996, the Company sold $125.0 million aggregate principal amount
of 9% Senior Subordinated Notes (the "January 1996 Notes") due 2006 to Merrill
Lynch & Co. and J.P. Morgan Securities Inc. (the "Initial Purchasers") pursuant
to a purchase agreement dated January 9, 1996. The Initial Purchasers
subsequently resold the January 1996 Notes to qualified institutional buyers in
reliance upon Rule 144A under the Securities Act of 1933.
The net proceeds of the January 1996 Notes, approximately $121.9 million after
deducting the Initial Purchasers' discounts, was used to repay all outstanding
indebtedness including accrued interest under the Senior Credit Facility of
approximately $50.0 million. The Company invested the remaining net proceeds,
approximately $71.9 million, in low risk commercial paper. The Company used
approximately $56.2 million of the remaining net proceeds to finance the Quad
Cities acquisition and the balance will be used to partially finance the
Midcontinent acquisition (see Note 3 regarding pending acquisitions).
3. ACQUISITIONS
On April 15, 1996, the Company acquired from Broad Street Television, L.P.
("Quad Cities") the assets of KWQC-TV, Channel 6, in Davenport, Iowa, for
approximately $55 million. This acquisition will be accounted for as a purchase.
A substantial portion of the purchase price was allocated to intangible assets.
Such intangibles will be amortized over their estimated lives which will not
exceed 40 years.
On January 11, 1996, the Company entered into an agreement with Midcontinent
Television of South Dakota, a wholly owned subsidiary of Midcontinent Media,
Inc. of Minneapolis,
7
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YOUNG BROADCASTING INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Minnesota, ("Midcontinent") to acquire from Midcontinent the assets of KELO-TV,
Channel 11, in Sioux Falls, South Dakota and its satellite stations for
approximately $50 million plus outstanding receivables of the stations. The
acquisition will be accounted for as a purchase. It is anticipated that a
substantial portion of the purchase price will be allocated to intangible
assets. Such intangibles will be amortized over their estimated lives which will
not exceed 40 years. The Midcontinent acquisition has received FCC approval and
it is anticipated that the closing will occur in the second quarter of 1996.
On May 10, 1996, the Company entered into an agreement with The Walt Disney
Company ("Disney") to acquire from Disney the assets of KCAL-TV, Channel 9, in
Los Angeles, California for $368 million plus $17 million for net working
capital. This acquisition will be accounted for as a purchase. It is anticipated
that a substantial portion of the purchase price will be allocated to intangible
assets. Such intangibles will be amortized over their estimated lives which will
not exceed 40 years. The Disney acquisition is subject to, among other things,
FCC approval.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
INTRODUCTION
The operating revenues of the Company's stations are derived primarily
from advertising revenues and, to a much lesser extent, from compensation paid
by the networks to the stations for broadcasting network programming. The
stations' primary operating expenses are for employee compensation, news
gathering, production, programming and promotion costs. A high proportion of
the operating expenses of the stations are fixed.
Advertising is sold for placement within and adjoining a station's
network and locally originated programming. Advertising is sold in time
increments and is priced primarily on the basis of a program's popularity among
the specific audience an advertiser desires to reach, as measured principally by
periodic audience surveys. In addition, advertising rates are affected by the
number of advertisers competing for the available time, the size and demographic
makeup of the market served by the station and the availability of alternative
advertising media in the market area. Rates are highest during the most
desirable viewing hours, with corresponding reductions during other hours. The
ratings of a local station affiliated with a national television network can be
affected by ratings of network programming.
Most advertising contracts are short-term, and generally run only for
a few weeks. The Company estimates that approximately 54% of the annual gross
revenue of the Company's stations is generated from local advertising, which is
sold by a station's sales staff directly to local accounts, and the remainder of
the advertising revenue primarily represents national advertising, which is sold
by a national advertising sales representative. The stations generally pay
commissions to advertising agencies on local, regional and national advertising,
and, on national advertising, the stations also pay commissions to the national
sales representative.
The advertising revenues of the Company's stations are generally
highest in the second and fourth quarters of each year, due in part to increases
in consumer advertising in the spring and retail advertising in the period
leading up to and including the holiday season. In addition, advertising
revenues are generally higher during even numbered election years due to
spending by political candidates, which spending typically is heaviest during
the fourth quarter.
"Broadcast cash flow" is defined as operating income before income
taxes and interest expense, plus depreciation and amortization (including
amortization of program license rights), non-cash compensation and corporate
overhead, less payments for program license liabilities. The Company has
included broadcast cash flow data because such data are commonly used as a
measure of performance for broadcast companies and are also used by investors to
measure a company's ability to service debt. Broadcast cash flow is not, and
should not be used as, an indicator or alternative to operating income, net
income or cash flow as reflected in the Consolidated Financial Statements, is
not intended to represent funds available for debt service, dividends,
reinvestment or other discretionary uses, 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 following table sets forth certain operating data for the quarters
ended March 31, 1995 and 1996:
9
<PAGE>
<TABLE>
<CAPTION>
Quarter Ended March 31
-----------------------
1995 1996
---- ----
<S> <C> <C>
(dollars in thousands)
Operating Income................................... $ 5,288 $ 5,462
Add:
Amortization of Program License Rights............ 1,555 1,754
Depreciation and Amortization..................... 6,192 6,164
Corporate Overhead................................ 751 1,085
Non-Cash Compensation Paid in Common Stock........ 438 -
Less:
Payments for Program License Liabilities.......... (1,799) (1,855)
----------------------
Broadcast Cash Flow................................ $12,425 $12,610
======================
</TABLE>
TELEVISION REVENUES
Set forth below are the principal types of television revenues
received by the Company's stations for the periods indicated and the percentage
contribution of each to the Company's total revenues, as well as agency and
national sales representative commissions:
Quarter Ended March 31,
1995 1996
---- ----
Amount % Amount %
------ -- ------ --
(dollars in thousands)
Revenues
Local................... $16,770 53.4 $17,295 53.7
National................ 10,935 34.8 10,867 33.7
Network................. 2,472 7.9 2,601 8.1
Political............... 156 0.5 399 1.2
Production/Other........ 1,075 3.4 1,080 3.3
---------- --------------------------
Total.................. 31,408 100.0 32,242 100.0
Commissions.............. (4,435) (14.1) (4,543) (14.1)
---------- --------------------------
Net Revenue.............. $26,973 85.9 $27,699 85.9
========== ==========================
RESULTS OF OPERATIONS
Quarter Ended March 31, 1996 Compared to Quarter Ended March 31, 1995
Net revenues for the quarter ended March 31, 1996 were $27.7 million,
an increase of $726,000, or 2.7%, compared to $27.0 million for the quarter
ended March 31, 1995. Improvement in various local market economies led to an
increase in the Company's gross local revenue of 3.1%, while gross national was
down slightly for 1996 compared to the same quarter in 1995. Network
compensation in 1996 increased $129,000, or 5.2%, with $103,000 of such increase
attributable to the network affiliation switch and new compensation arrangement
at the Company's Rockford, Illinois station (WTVO-TV).
Operating expenses, including selling, general and administrative
expenses, for the quarter ended March 31, 1996 were $13.2 million, compared to
$12.7 million for the quarter ended March 31, 1995, an increase of $484,000, or
3.8%. The increase was primarily attributable to higher local sales commissions
resulting from higher sales volume and a Company wide sales incentive program to
increase revenues and new business at the stations.
10
<PAGE>
Amortization of program license rights for the quarter ended March 31,
1996 was $1.8 million, compared to $1.6 million for the quarter ended March 31,
1995, an increase of $200,000, or 12.9%.
Depreciation of property and equipment and amortization of intangible
assets was $6.2 million for the quarters ended March 31, 1996 and March 31,
1995.
The Company made payments for program license liabilities of $1.9
million during the quarter ended March 31, 1996, compared to $1.8 million for
the quarter ended March 31, 1995, an increase of $56,000, or 3.1%.
Corporate overhead for the quarter ended March 31, 1996 was $1.1
million, compared to $751,000 for the comparable period in 1995, an increase of
$334,000, or 45%. This increase was the result of additional personnel costs in
1996.
Non-cash compensation paid in Common Stock was $438,000 for the
quarter ended March 31, 1995. These amounts represented non-cash charges for
the issuance in 1995 of Common Stock options to a key employee as part of his
employment agreement.
Interest income for the quarter ended March 31, 1996 was $873,000.
This amount is primarily attributable to the higher cash levels resulting from
the Company's $125 million 9% Senior Subordinated Notes Offering in January 1996
(the "January 1996 Notes Offering"). Approximately $71.9 million remained after
the repayment of approximately $50.0 million under the Senior Credit Facility
which was invested in low risk commercial paper.
Interest expense for the quarter ended March 31, 1996 was $9.7
million, compared with $8.0 million for the comparable period in 1995, an
increase of $1.7 million, or 21.3%. The increase is primarily attributable to
the Company's higher debt level following the January 1996 Notes Offering.
At March 31, 1996 the Company had a $25 million interest rate swap
agreement which expired on April 18, 1996. The interest expense resulting from
this swap agreement amounted to $231,000 in the first quarter of 1995 and
$262,000 in the first quarter of 1996. This interest rate swap agreement was the
only derivative instrument held by the Company at March 31, 1996. At March 31,
1996, fixed rate debt and interest rate swap agreements comprised all of the
Company's total debt.
As a result of the factors discussed above, the net loss for the
Company was $3.3 million for the quarter ended March 31, 1996, compared with a
loss of $2.7 million for the same period in 1995, an increase of $674,000, or
25.3%.
Broadcast cash flow for the quarter ended March 31, 1996 was $12.6
million, compared with $12.4 million for the quarter ended March 31, 1995, an
increase of $185,000, or 2%. As a result, the broadcast cash flow margin
(broadcast cash flow divided by net revenues) for the quarter ended March 31,
1996 was 46% as it was for the same period in 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash flow from
operations and the funds available under its Senior Credit Facility.
11
<PAGE>
The indentures relating to the Company's Senior Subordinated Notes
(the "Indentures") impose certain limitations on the ability of the Company and
certain of its subsidiaries to, among other things, pay dividends or make
certain other restricted payments, consummate certain asset sales, enter into
certain transactions with affiliates, incur indebtedness that is subordinate in
right of payment to any senior debt and senior in right of payment to such
notes, incur liens, impose restrictions on the ability of a subsidiary to pay
dividends or make certain payments to the Company, merge or consolidate with any
other person or sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of the assets of the Company.
Prior to the Company's $125 million 10 1/8% Senior Subordinated Notes
Offering in June 1995 (the "June 1995 Notes Offering"), the Senior Credit
Facility provided for borrowings of up to an aggregate of $200.0 million in the
form of (i) a six and one-quarter year amortizing term loan facility in the
amount of $120.0 million ("Facility A"), (ii) a seven and one-quarter year
amortizing term loan facility in the amount of $55.0 million ("Facility B"), and
(iii) a revolving credit facility in the amount of $25.0 million which matures
after six and one-quarter years ("Facility C").
The Company used approximately $53.9 million of the net proceeds of
the June 1995 Notes Offering to repay Facility B in full. The Company used the
remaining net proceeds of approximately $66.9 million to repay a portion of the
outstanding indebtedness under Facility A. The Company used approximately $50.0
million of the net proceeds of the January 1996 Notes Offering to repay in full
the outstanding principal indebtedness and accrued interest under the Senior
Credit Facility.
Concurrently with the closing of the June 1995 Notes Offering, the
Company entered into an amendment (the "June 1995 Amendment") to the Senior
Credit Facility which provides the Company with the ability to effect a
reborrowing under Facility A prior to December 12, 1996 of up to an aggregate
amount of approximately $61.9 million in connection with the acquisition of one
or more television stations (and businesses, if any, incidental thereto)
pursuant to transactions which meet the following criteria: (i) the acquisition
must be approved by a majority of the lenders under the Senior Credit Facility,
(ii) each of the acquired stations has positive cash flow, (iii) each of the
acquired stations will become a wholly-owned subsidiary of the Company and will
become a part of the lenders' security package under the Senior Credit Facility,
and (iv) the Company can demonstrate that after giving pro forma effect to each
such acquisition, the Company will be in compliance with all of the terms and
conditions of the Senior Credit Facility.
Pursuant to the June 1995 Amendment, the revolving Facility was
increased from $25.0 million to $80.0 million. The Company is permitted to
borrow at any time up to $65.0 million of such $80.0 million for acquisitions
approved by a majority of the lenders under the Senior Credit Facility and which
meet the criteria set forth in clauses (ii), (iii) and (iv) above. Undrawn
amounts under Facility C are available to the Company for working capital
requirements and general corporate purposes. At March 31, 1996, there were no
amounts outstanding under Facility C.
In December 1995, the Company entered into an amendment (the "December
1995 Amendment") to the Senior Credit Facility which permitted the Company to
effect the January 1996 Notes Offering. In addition, the December 1995
Amendment permitted the Company to utilize up to $20.0 million of its borrowing
availability under the Senior Credit Facility for the
12
<PAGE>
purpose of repurchasing shares of its Common Stock, subject to the limitations
set forth in the Indentures.
Interest under Facilities A and C is payable at the Company's option
of the LIBOR rate, "CD Rate" or "Base Rate." In addition to the index rates, the
Company pays a floating percentage tied to the Company's ratio of total debt to
operating cash flow; ranging from 0.50% based upon a ratio under 4:1 to 2.875%
based upon a 6:1 or greater ratio.
The Senior Credit Facility is secured by the pledge of all the stock
of the subsidiaries and a first priority lien on all of the assets of the
Company. Each of the subsidiaries has guaranteed the Company's obligations under
the Senior Credit Facility.
The Senior Credit Facility imposes restrictions on the Company's
ability to incur additional indebtedness. The Company is permitted to incur,
subject to the terms of the Indentures, unsecured subordinated debt, provided
that the lenders' commitments are reduced by the amount of the proceeds and such
proceeds are used to repay the outstanding balance of Facility A until the
Company's debt to operating cash flow ratio is less than 4.5x. The Company may
also incur, subject to the terms of the Indentures and subject in the case of
the acquisition of related businesses to the approval of a majority of the
lenders, unsecured debt of up to $10 million in the aggregate to acquire
television stations or related businesses which, when taken as a combined entity
with the Company, satisfy certain financial covenants. The Company is also
restricted as to the amount of its capital lease obligations and guarantees. The
Company is prohibited from making investments or advances to third parties
exceeding $6 million in the aggregate unless the third party becomes a guarantor
of the Company's obligations. The Senior Credit Facility also restricts the
ability of the Company to amend material terms of the Indentures. The Senior
Credit Facility also requires the Company to maintain certain financial ratios.
The Company regularly enters into program contracts for the right to
broadcast television programs produced by others and program commitments for the
right to broadcast programs in the future. Such programming commitments are
generally made to replace expiring or canceled program rights. Payments under
such contracts are made in cash or the concession of advertising spots to the
program provider to resell, or a combination of both.
The Company from time to time investigates alternatives for replacing
or refinancing its existing Senior Credit Facility. Any such replacement or
refinancing may or may not have terms and conditions, including restrictive
covenants and maintenance tests, similar to those in the Senior Credit Facility.
The Company anticipates that its operating cash flow, together with
the amounts available under the Senior Credit Facility, will be sufficient to
finance the operating requirements of its stations, debt service requirements
and anticipated capital expenditures.
The Company financed the Quad Cities acquisition with approximately
$56.2 million from the proceeds of the January 1996 Notes Offering and $1
million which had been deposited by the Company in escrow. The Company intends
to use its available cash on hand, including the remaining net proceeds of the
January 1996 Notes Offering, borrowings under the Senior Credit Facility and a
$3.0 million purchase note for the financing of the Midcontinent acquisition
(having an expected purchase price of approximately $52.0 million). Prior to the
application of the remaining net proceeds of the January 1996 Notes Offering
(after repayment of the Senior Credit Facility in full and the consummation of
the Quad Cities acquisition, approximately $15.7
13
<PAGE>
million), the Company will maintain such net proceeds in an interest-bearing
account or invested in United States government securities or other interest-
bearing investment grade securities.
The Company is regularly presented with opportunities to acquire
television stations which it evaluates on the basis of its acquisition strategy.
Certain of these opportunities may result in extensive negotiations with the
prospective seller. Other than the Midcontinent acquisition, the Company does
not presently have any agreements to acquire or sell any television stations.
The Midcontinent acquisition will be accounted for as a purchase. It is
anticipated that a substantial portion of the purchase price will be allocated
to intangible assets. Such intangible assets will be amortized over their
estimated lives which will not exceed 40 years.
INCOME TAXES
The Company and its subsidiaries file a consolidated federal income
tax return and such state or local tax returns as are required. The Company
anticipates making use of its net operating loss carry forward to the maximum
extent possible to reduce its future tax liabilities. Future utilization of a
significant portion of the Company's net operating losses for federal income tax
purposes will be subject to an annual limitation.
14
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Exhibit
Number Exhibit Description
- - ------ -------------------
11 Statement Re Computation of Per Share Earnings.
(b) Reports on Form 8-K. The Company filed the following reports on
Form 8-K during the first quarter of the year ending December 31, 1996:
1. Current Report on Form 8-K filed January 22, 1996 reporting the
Midcontinent acquisition.
2. Current Report on Form 8-K filed February 14, 1996
reporting the release of the Company's financial results as of and
for the year ended December 31, 1995.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
YOUNG BROADCASTING INC.
Date: May 8, 1996 By: /s/ Vincent J. Young
---------------------
Vincent J. Young
Chairman
Date: May 8, 1996 By: /s/ James A. Morgan
---------------------
James A. Morgan
Executive Vice President
and Chief Financial
Officer
(principal financial
officer)
16
<PAGE>
EXHIBIT II
YOUNG BROADCASTING INC. AND SUBSIDIARIES
RE COMPUTATION OF PER SHARE EARNINGS
THREE MONTHS ENDED
---------------------------
MARCH 31, MARCH 31,
1995 1996
---------------------------
SHARES OF COMMON STOCK OUTSTANDING
FOR THE ENTIRE PERIOD......................... 10,819,049 10,548,181
ISSUANCE OF 21,696 SHARES OF COMMON STOCK
TO THE COMPANY'S DEFINED CONTRIBUTION PLAN.... 4,098 -
ISSUANCE OF 27,685 SHARES OF COMMON STOCK
TO THE COMPANY'S DEFINED CONTRIBUTION PLAN - 26,164
REPURCHASE OF 111,383 SHARES OF COMMON STOCK
FROM J.P. MORGAN CAPITAL CORPORATION IN 1996.. - (107,711)
------------ ---------------
WEIGHTED AVERAGE SHARES OF COMMON
STOCK OUTSTANDING............................. 10,823,147 10,466,634
------------ ---------------
NET INCOME (LOSS)............................... ($2,664,778) ($3,338,446)
============ ===============
NET LOSS PER COMMON SHARE
NET INCOME (LOSS)............................... ($0.25) ($0.32)
============ ===============
1
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