<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, 1997 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.
X
Yes____ No____
____________________________
Number of shares of Common Stock outstanding as of April 30, 1997:
12,133,608 shares of Class A Common Stock, and 2,017,230 shares of Class B
Common Stock.
<PAGE>
YOUNG BROADCASTING INC.
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Part I Page
----
Item 1. Financial Statements.
<S> <C>
Consolidated Balance Sheets as of December 31, 1996
and March 31, 1997................................... 2
Consolidated Statements of Operations for the Three
Months Ended March 31,
1996 and 1997......................................... 3
Consolidated Statements of Stockholders' Equity for
the Three Months Ended
March 31, 1997.............................. 4
Consolidated Statements of Cash Flows for the Three
Months Ended
March 31, 1996 and 1997............................... 5
Notes to Consolidated Financial Statements............ 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............... 7
Part II.
Item 6. Exhibits and Reports on Form 8-K................... 14
Signatures................................................. 15
</TABLE>
<PAGE>
ITEM 1. FINANCIAL STATEMENTS.
YOUNG BROADCASTING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, MARCH 31,
1996* 1997
-------------------------------
ASSETS (UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,004,744 $ 2,177,605
Trade accounts receivable, less
allowance for doubtful accounts of
$2,210,000 in 1996 and $2,028,000
in 1997 60,152,494 50,910,491
Current portion of program license
rights 21,678,077 14,665,232
Prepaid expenses 2,244,590 3,517,442
-----------------------------
Total current assets 91,079,905 71,270,770
-----------------------------
Property and equipment, net 147,301,955 141,586,059
Program license rights, excluding
current portion 2,436,121 2,198,857
Deposits and other assets 1,497,799 1,518,563
Broadcasting licenses and other
intangibles, less accumulated
amortization of $73,462,193 in 1996 and
$78,108,345 in 1997 624,074,518 619,629,238
Deferred charges less accumulated
amortization of $4,338,888 in 1996 and
$5,285,506 in 1997 26,760,865 26,072,828
-----------------------------
TOTAL ASSETS $ 893,151,163 $ 862,276,315
=============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 23,392,064 $ 16,700,528
Accrued expenses 19,162,107 15,575,630
Current installments of program
license liability 17,312,771 12,475,543
Current installments of long-term debt 10,870,873 2,897,460
Current installments of obligations
under capital leases 802,851 598,016
-----------------------------
Total current liabilities 71,540,666 48,247,177
Program license liability, excluding
current installments 2,403,121 1,516,233
Long-term debt, excluding current
installments 666,578,324 664,623,463
Deferred taxes and other liabilities 72,124,829 72,118,191
-----------------------------
Total liabilities 812,646,940 786,505,064
-----------------------------
Stockholders' equity:
Class A Common Stock, $.001 par value.
Authorized 20,000,000 shares; issued
and outstanding 12,208,127 shares at
1996 and 12,241,608 at 1997 12,209 12,242
Class B Common Stock, $.001 par value.
Authorized 20,000,000 shares; issued
and outstanding 2,022,230 shares at
1996 and 2,017,230 at 1997 2,022 2,017
Additional paid-in capital 233,190,382 234,023,424
Accumulated deficit (152,700,390) (158,266,432)
-----------------------------
Total stockholders' equity 80,504,223 75,771,251
-----------------------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 893,151,163 $ 862,276,315
=============================
</TABLE>
*Derived from the audited Financial Statements for the year ended December 31,
1996
See accompanying notes to consolidated financial statements.
2
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YOUNG BROADCASTING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months ended March 31,
1996 1997
----------------------------
<S> <C> <C>
Net operating revenue $27,699,023 $ 61,278,958
----------------------------
Operating expenses 6,802,347 15,768,630
Amortization of program license rights 1,754,416 10,448,451
Selling, general and administrative 6,431,305 11,109,098
expenses
Depreciation and amortization 6,164,052 12,139,886
Corporate overhead 1,084,510 1,534,861
Non-cash compensation - 240,030
----------------------------
Operating income 5,462,393 10,038,002
----------------------------
Interest income 924,936 103,337
Interest expense (9,697,839) (15,557,012)
Other expense, net (27,936) (150,369)
----------------------------
(8,800,839) (15,604,044)
----------------------------
Net loss $(3,338,446) $ (5,566,042)
============================
Net loss per common share $(0.32) $(0.39)
============================
Weighted average shares 10,466,634 14,255,673
============================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
----------------------------------------- PAID-IN ACCUMULATED STOCKHOLDERS'
CLASS A CLASS B CLASS C CAPITAL DEFICIT EQUITY
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996............ $12,209 $2,022 - $233,190,382 ($152,700,390) $80,504,223
Contribution of shares into
Company's
defined contribution plan......... 28 - - 833,042 - 833,070
Conversion of Class B Common Stock
to Class A Common Stock.......... 5 (5) - - -
Net loss for March 31, 1997......... - - - - (5,566,042) (5,566,042)
------------------------------------------------------------------------------------
Balance at March 31, 1997............... $12,242 $2,017 $- $234,023,424 ($158,266,432) $75,771,251
====================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
4
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YOUNG BROADCASTING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months ended March 31,
1996 1997
-------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (3,338,446) $ (5,566,042)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization of
property and equipment 3,369,717 6,547,116
Amortization of program license rights 1,754,416 10,448,451
Amortization of broadcasting licenses,
other intangibles and deferred charges 2,794,335 5,592,770
Non-cash compensation - 240,030
Non-cash interest expense on
outstanding indebtedness 91,980 71,726
Deferred acquisition and debt
refinancing costs incurred (3,125,000) -
Decrease in trade accounts receivable 5,957,465 9,377,925
Increase in prepaid expenses (1,335) (1,409,396)
Decrease in trade accounts payable (468,538) (4,946,851)
Increase (decrease) in accrued expenses 1,856,848 (2,993,437)
Net cash provided by operating -------------------------------
activities 8,891,442 17,362,292
-------------------------------
INVESTING ACTIVITIES
Capital expenditures (718,460) (831,220)
Decrease (increase) in deposits and
other assets 80,216 (20,764)
Increase in broadcast licenses and
other intangibles - (200,249)
-------------------------------
Net cash used in investing activities (638,244) (1,052,233)
-------------------------------
FINANCING ACTIVITIES
Proceeds from issuance of public
subordinated debt 125,000,000 -
Principal payments on long-term debt (49,764,798) (10,000,000)
Deferred acquisition and debt
refinancing costs incurred (861,522) (258,582)
Repurchase of Class A Common Stock (2,923,804) -
Principal payments under capital lease
obligations (12,952) (211,473)
Payments on programming license
liabilities (1,855,125) (10,667,143)
Net cash provided by (used in) -------------------------------
financing activities 69,581,799 (21,137,198)
-------------------------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 77,834,997 (4,827,139)
Cash and cash equivalents at beginning
of year 3,425,633 7,004,744
-------------------------------
CASH AND CASH EQUIVALENTS AT MARCH 31 $ 81,260,630 $ 2,177,605
===============================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Interest paid $ 6,804,156 $ 18,200,882
Income taxes paid $ - $ -
</TABLE>
See accompanying notes to consolidated financial statements.
5
<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 eleven network
affiliated (four with CBS, six with ABC, and one with NBC) and one independent
commercial television broadcasting stations in the states of Michigan,
Wisconsin, Louisiana, Illinois, Tennessee, New York, Virginia, Iowa, South
Dakota and California. 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 the consolidated
financial position and the consolidated results of operations and cash flows for
such period. Operating results of interim periods are not necessarily indicative
of results for a full year.
2. ADOPTION OF NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement No.
128 (SFAS 128), "Earnings Per Share," which establishes new standards for
computing and presenting earnings per share. SFAS 128 is effective for financial
statements issued for periods ending after December 15, 1997, including interim
periods. The Company does not anticipate the effect of adopting this new
standard to have a material effect on the Company's consolidated financial
position or results of operations.
3. SUBSEQUENT EVENTS
On April 14, 1997, the Company announced that its Board of Directors had
approved the initiation of an ongoing stock buyback program for up to $20
million of the Company's Class A Common Stock. As of April 30, 1997, the Company
had repurchased and retired 108,000 shares at an approximate cost of $2.8
million.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
THE FORWARD-LOOKING STATEMENTS CONTAINED IN THIS REPORT, CONCERNING, AMONG
OTHER THINGS, INCREASES IN NET REVENUES AND BROADCAST CASH FLOW (AS DEFINED) AND
REDUCTIONS IN OPERATING EXPENSES, INVOLVE RISKS AND UNCERTAINTIES, AND ARE
SUBJECT TO CHANGE BASED ON VARIOUS IMPORTANT FACTORS, INCLUDING THE IMPACT OF
CHANGES IN NATIONAL AND REGIONAL ECONOMIES, SUCCESSFUL INTEGRATION OF ACQUIRED
TELEVISION STATIONS (INCLUDING ACHIEVEMENT OF SYNERGIES AND COST REDUCTIONS),
PRICING FLUCTUATIONS IN LOCAL AND NATIONAL ADVERTISING AND VOLATILITY IN
PROGRAMMING COSTS.
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. Most of the company's annual gross revenue is generated from local
advertising, which is sold by a station's sales staff directly to local
accounts. 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 income and 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
7
<PAGE>
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, 1996 and 1997:
<TABLE>
<CAPTION>
Quarter Ended March 31
1996 1997
------------ -----------
(dollars in thousands)
<S> <C> <C>
Operating Income........................ $ 5,462 $ 10,038
Add:
Amortization of Program License Rights. 1,754 10,448
Depreciation and Amortization.......... 6,164 12,140
Corporate Overhead..................... 1,085 1,535
Non-Cash Compensation.................. - 240
Less:
Payments for Program License
Liabilities........................... (1,855) (10,667)
--------------------------
Broadcast Cash Flow..................... $12,610 $ 23,734
==========================
</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:
<TABLE>
<CAPTION>
Quarter Ended March 31,
1996 1997
------------------------ ---------------------
Amount % Amount %
----------- ---------- ------ ----------
(dollars in thousands)
<S> <C> <C> <C> <C>
Revenues
Local............. $17,295 53.7 $ 46,065 64.1
National.......... 10,867 33.7 20,947 29.2
Network........... 2,601 8.1 3,120 4.3
Political......... 399 1.2 396 0.6
Production/Other.. 1,080 3.3 1,283 1.8
------- ----- --------- -----
Total........... 32,242 100.0 71,811 100.0
Commissions.......... (4,543) (14.1) ( 10,532) (14.7)
------- ----- --------- -----
Net Revenue.......... $27,699 85.9 $ 61,279 85.3
======= ===== ========= =====
</TABLE>
RESULTS OF OPERATIONS
Quarter Ended March 31, 1997 Compared to Quarter Ended March 31, 1996
The following historical financial information for the quarter ended March
31, 1997 includes the results of KCAL-TV, Los Angeles, California (acquired on
November 23, 1996),
8
<PAGE>
KWQC-TV, Davenport, Iowa (acquired on April 15, 1996), and KELO-TV, Sioux Falls,
South Dakota (acquired on May 31, 1996). The operating results for the quarter
ended March 31, 1996 do not include the acquired stations.
Net revenues for the quarter ended March 31, 1997 were $61.3 million, an
increase of $33.6 million, or 121.3%, compared to $27.7 million for the quarter
ended March 31, 1996, with the acquired stations accounting for $33.1 million
of such increase. Improvement in various local market economies led to an
increase in the Company's gross local revenue at the nine original stations of
4.4%, while gross national was slightly up for 1997 compared to the same quarter
in 1996.
Operating expenses, including selling, general and administrative expenses,
for the quarter ended March 31, 1997 were $26.9 million, compared to $13.2
million for the quarter ended March 31, 1996, an increase of $13.7 million, or
103.8%, with the acquired stations accounting for approximately all of such
increase.
Amortization of program license rights for the quarter ended March 31, 1997
was $10.5 million, compared to $1.8 million for the quarter ended March 31,
1996, an increase of $8.7 million, with the acquired stations accounting for
approximately all of such increase.
Depreciation of property and equipment and amortization of intangible
assets was $12.1 million, compared to $6.2 million for the same quarter in 1996,
an increase of $5.9 million, or 95.2%, with the acquired stations accounting for
approximately all of such increase.
The Company made payments for program license liabilities of $10.7 million
during the quarter ended March 31, 1997, compared to $1.9 million for the
quarter ended March 31, 1996, an increase of $8.8 million, with the acquired
stations accounting for approximately all of such increase.
Corporate overhead for the quarter ended March 31, 1997 was $1.5 million,
compared to $1.1 million for the comparable period in 1996, an increase of
$450,000, or 41.5%. This increase was the result of additional personnel costs
in 1997.
Non-cash compensation was $240,000 for the quarter ended March 31, 1997.
This amount represented non-cash charges for an employer-matching stock plan
established January 1, 1997, included in the Company's defined contribution
plan.
Interest income for the quarter ended March 31, 1997 was $103,000, compared
to $925,000 for the same period in 1996, a decrease of $822,000. This decrease
is primarily attributable to the lower cash levels resulting from the use of
cash and cash equivalents to finance a portion of the acquisition cost of new
stations.
Interest expense for the quarter ended March 31, 1997 was $15.6 million,
compared with $9.7 million for the comparable period in 1996, an increase of
$5.9 million, or 60.8%. The increase is primarily attributable to the Company's
higher debt level following three station acquisitions in the second and fourth
quarters of 1996.
As a result of the factors discussed above, the net loss for the Company
was $5.6 million for the quarter ended March 31, 1997, compared with a net loss
of $3.3 million for the same period in 1996.
9
<PAGE>
Broadcast cash flow for the quarter ended March 31, 1997 was $23.7
million, compared with $12.6 million for the quarter ended March 31, 1996, an
increase of $11.1 million, or 88.1%, with the acquired stations accounting for
$10.6 million of such increase. As a result, the broadcast cash flow margin
(broadcast cash flow divided by net revenues) for the quarters ended March 31,
1997 and 1996 was 39% and 46%, respectively. The decrease in broadcast cash
flow margins is attributable to the purchase of KCAL. Independent stations
generally operate at lower margins than those affiliated with networks.
Pro Forma Financial Data
The following unaudited pro forma information gives effect to the
acquisitions of KWQC, KELO and KCAL (including annualized net expense
reductions) as if they had been effected on January 1, 1996. The pro forma
information does not purport to represent what the Company's results of
operations would have been if such transactions had been effected at such date
and do not purport to project results of operations of the Company in any future
period.
<TABLE>
<CAPTION>
Three Months
Ended
-----------------
March 31,
1996/(1)/ 1997
-------- -------
(dollars in thousands)
<S> <C> <C>
Net Revenues (2)........................................... 61,751 61,279
Operating Expenses, Including Selling,
General and Administrative Expenses........................ 26,621 26,878
Amortization of Program License Rights .................... 9,721 10,448
Depreciation and Amortization ............................. 12,607 12,140
Corporate Overhead......................................... 1,160 1,535
Non-Cash Compensation Paid in Common Stock................. - 240
---------------------------
Operating Income........................................... $11,642 $10,038
===========================
Broadcast Cash Flow(3)..................................... 25,244 23,734
Broadcast Cash Flow Margin................................. 40.9% 38.7%
Operating Cash Flow (4).................................... 24,084 22,199
Capital Expenditures....................................... 1,666 831
</TABLE>
(1) Pro forma adjustments to net revenues include additional annualized network
compensation payable to the Company under the new KELO affiliation
agreement and a programming change at KWQC in the aggregate amount of
$110,000 for the quarter ended March 31, 1996. Pro forma adjustments to net
revenues also include a decrease of $143,000 for the quarter ended March
31, 1996, relating to seven sitcoms not being purchased in connection with
the KCAL acquisition. Pro forma adjustments include expense reductions
relating to the KWQC, KELO and KCAL acquisitions of approximately $6.6
million for the quarter ended March 31, 1996.
(2) Net revenues are total revenues net of agency and national representation
commissions.
(3) "Broadcast cash flow" is defined as operating income before income taxes
and interest income and 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, reimbursement 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
10
<PAGE>
substitute for measures of performance prepared in accordance with
generally accepted accounting principles.
(4) "Operating cash flow" is defined as operating income before income taxes
and interest income and expense, plus depreciation and amortization
(including amortization of program license rights) and non-cash
compensation, less payments for program license liabilities. The Company
has included operating cash flow data because such data are commonly used
by investors to measure a company's ability to service debt and will be
used in calculating the amount of additional indebtedness that the Company
may incur in the future under the Indentures relating to the Notes.
Operating cash flow does not purport to represent cash provided by
operating activities as reflected in the 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.
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. (the "Senior Credit
Facility").
On November 15, 1996, the Senior Credit Facility was amended and restated
to provide the Company with the ability to borrow up to $500.0 million in the
form of (i) a seven year reducing revolving credit facility in the amount of
$200.0 million (the "Revolver Facility") and (ii) a seven year amortizing term
loan facility in the amount of $300.0 million (the "Term Facility").
The Revolver Facility has a $185.0 million sublimit (the "Sublimit") for
borrowings in connection with the acquisition of additional television stations
(and businesses, if any, incidental thereto) pursuant to transactions which meet
the following criteria: (i) 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 (ii) the Company can demonstrate
that after giving pro forma effect to each such acquisition (based upon
assumptions, including identified cost savings, that the agents for the lenders
find reasonable), the Company will be in compliance with all of the terms and
conditions of the Senior Credit Facility and have a total debt/operating cash
flow ratio of less than 6.0x. As of March 31, 1997 there was $292.0 million
outstanding under the Senior Credit Facility, with $185.0 million available,
subject to certain conditions, for borrowing for the purpose of financing
acquisitions.
Pursuant to the Senior Credit Facility, the Company is prohibited from
making investments or advances to third parties exceeding $7.5 million in the
aggregate unless the third party becomes a guarantor of the Company's
obligations. However, the Company may utilize up to $20.0 million of its
borrowing availability under the Sublimit for the purpose of repurchasing shares
of Common Stock and for paying dividends, subject to the limitations set forth
in the Indentures relating to its senior subordinated notes (the "Indentures"),
provided that the total debt/operating cash flow ratio is less than 5.5x. In
addition, the Company may utilize the undrawn amounts under the Sublimit to
retire or prepay subordinated debt, subject to the limitations set forth in the
Indentures, provided that the total debt/operating cash flow ratio is less than
5.0x, or 4.5x after June 30, 2000; if the ratio exceeds such amounts, the
Company will be permitted to utilize only up to $20.0 million of availability
under the Sublimit. Undrawn amounts under the Revolver Facility are available to
the Company for working capital requirements and general corporate purposes.
11
<PAGE>
Interest under the Senior Credit Facility is payable at 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, in the case of LIBOR rate loans, from 0.25% based upon a ratio
under 4:1 to 2.625% based upon a 6.5:1 or greater ratio.
Each of the Company's subsidiaries (the "Subsidiaries") has guaranteed the
Company's obligations under the Senior Credit Facility. 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 and its Subsidiaries.
The Senior Credit Facility requires the Company to maintain certain
financial ratios. The Senior Credit Facility also imposes restrictions on the
Company's ability to incur additional indebtedness. The Company will be
permitted to incur, subject to the terms of the Indentures and satisfaction of
the financial covenants of the Senior Credit Facility, unsecured subordinated
debt, provided that the subordination and mandatory redemption provisions and
the maturity of such indebtedness are comparable to the Company's existing
senior subordinated notes and that the proceeds are used to repay the
outstanding balance of the Term Facility until the Company's debt to operating
cash flow ratio is less than 4.5x. The Company is also restricted as to the
amount of its capital lease obligations and guarantees. The Senior Credit
Facility also restricts the ability of the Company to amend material terms of
the Indentures.
The Senior Credit Facility requires the Company to apply on April 30 of
each year 50% or 75% (depending upon the level of the Company's total debt to
operating cash flow ratio at the end of such year) of its "Excess Cash Flow" for
the preceding completed fiscal year to reduce outstanding debt under the Term
Facility. In addition, the Company is required to apply from the proceeds of any
permitted equity issuance and certain subordinated debt issuances an amount
sufficient to reduce the Company's debt ratio to specified levels. The Senior
Credit Facility also contains a number of customary covenants including, among
others, limitations on investments and advances, mergers and sales of assets,
liens on assets, affiliate transactions and changes in business. The Company
may, subject to the financial covenants of the Senior Credit Facility, sell
assets constituting less than 15% of its operating cash flow.
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 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 its senior
subordinated 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.
A $5.0 million portion of the purchase price in connection with the
November 1994 acquisitions has been deferred (having a net present value as of
March 31, 1997, discounted at 11.9%, of $2.5 million) and is payable over the
remaining three-year period, without interest, in equal annual installments,
with the first such installment having been paid on November 14,
12
<PAGE>
1995. The Company paid a $3.0 million portion of the purchase price in
connection with the KELO acquisition by delivery of a promissory note, the
principal amount of which will be payable in full on May 31, 1998, and which
requires quarterly payments of interest accruing at the prime rate.
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 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 is regularly presented with opportunities to acquire television
stations which it evaluates on the basis of its acquisition strategy. The
Company does not presently have any agreements to acquire any television
stations.
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.
13
<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 no reports on Form 8-K during
the first quarter of the year ending December 31, 1997.
14
<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 12, 1997 By: /s/ Vincent J. Young
---------------------
Vincent J. Young
Chairman
Date: May 12, 1997 By: /s/ James A. Morgan
--------------------
James A. Morgan
Executive Vice President and
Chief Financial Officer
(principal financial officer)
15
<PAGE>
EXHIBIT 11
YOUNG BROADCASTING INC. AND SUBSIDIARIES
RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------
MARCH 31, MARCH 31,
1996 1997
---------------------------
<S> <C> <C>
SHARES OF COMMON STOCK OUTSTANDING
FOR THE ENTIRE PERIOD................ 10,548,181 14,230,357
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.......................... (107,711) -
ISSUANCE OF 28,481 SHARES OF COMMON
STOCK TO THE COMPANY'S DEFINED
CONTRIBUTION PLAN.................... - 25,316
---------------------------
WEIGHTED AVERAGE SHARES OF COMMON
STOCK OUTSTANDING.................... 10,466,634 14,255,673
---------------------------
NET INCOME (LOSS)..................... ($3,338,446) ($5,566,042)
===========================
NET LOSS PER COMMON SHARE
NET INCOME (LOSS).............. ($0.32) ($0.39)
===========================
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 2178
<SECURITIES> 0
<RECEIVABLES> 50910
<ALLOWANCES> 2028
<INVENTORY> 0
<CURRENT-ASSETS> 71271
<PP&E> 141586
<DEPRECIATION> 86037
<TOTAL-ASSETS> 862276
<CURRENT-LIABILITIES> 48247
<BONDS> 370000
0
0
<COMMON> 14
<OTHER-SE> 75757
<TOTAL-LIABILITY-AND-EQUITY> 862276
<SALES> 0
<TOTAL-REVENUES> 61279
<CGS> 0
<TOTAL-COSTS> 51241
<OTHER-EXPENSES> 150
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15454
<INCOME-PRETAX> (5566)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5566)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5566)
<EPS-PRIMARY> (.39)
<EPS-DILUTED> (.39)
</TABLE>
