<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:
September 30, 1999 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 October 29, 1999:
11,145,152 shares of Class A Common Stock, and 2,348,571 shares of Class B
Common Stock.
================================================================================
<PAGE>
YOUNG BROADCASTING INC.
FORM 10-Q
Table of Contents
<TABLE>
<CAPTION>
Part I. Page
----
<S> <C>
Item 1. Financial Statements.
Consolidated Balance Sheets as of December 31, 1998 and September 30, 1999.... 2
Consolidated Statements of Operations for the Three and Nine Months Ended
September 30, 1998 and 1999................................................... 3
Consolidated Statements of Stockholders' Equity for the Nine Months
Ended September 30, 1999...................................................... 4
Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 1998 and 1999................................................... 5
Notes to Consolidated Financial Statements.................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations................................................................. 7
Item 3. Quantitative and Qualitative Disclosure About Market Risk..................... 14
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
<TABLE>
<CAPTION>
December 31, September 30,
1998* 1999
-----------------------------------------
Assets (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 663,298 $ 2,402,771
Trade accounts receivable, less allowance for doubtful accounts of
$2,012,000 in 1998 and $1,880,000 in 1999 53,835,994 52,457,188
Current portion of program license rights 15,250,015 19,607,009
Prepaid expenses 11,375,957 9,909,449
-----------------------------------------
Total current assets 81,125,264 84,376,417
-----------------------------------------
Property and equipment, less accumulated depreciation and amortization of
$122,757,235 in 1998 and $139,550,569 in 1999 96,736,970 91,151,525
Program license rights, excluding current portion 1,987,123 1,595,698
Deposits and other assets 28,213,931 28,468,426
Broadcasting licenses and other intangibles, less accumulated amortization of
$118,831,102 in 1998 and $134,283,922 in 1999 604,576,679 589,136,441
Deferred charges less accumulated amortization of $10,508,840 in 1998 and
$12,830,787 in 1999 13,027,559 10,550,862
-----------------------------------------
Total Assets $825,667,526 $805,279,369
=========================================
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable $ 14,571,552 $ 17,913,492
Accrued expenses 19,948,169 21,036,610
Current installments of program license liability 12,412,040 15,990,038
Current installments of long-term debt 914,171 994,487
Current installments of obligations under capital leases 491,666 1,016,054
-----------------------------------------
Total current liabilities 48,337,598 56,950,681
Program license liability, excluding current installments 2,196,256 2,053,427
Long-term debt, excluding current installments 655,000,000 644,000,000
Deferred taxes and other liabilities 73,268,546 76,846,631
-----------------------------------------
Total liabilities 778,802,400 779,850,739
-----------------------------------------
Stockholders' equity:
Class A Common Stock, $.001 par value. Authorized 20,000,000 shares; issued and
outstanding 11,401,823 shares at 1998 and 11,134,466 at 1999 11,402 11,134
Class B Common Stock, $.001 par value. Authorized 20,000,000 shares; issued and
outstanding 2,408,447 shares at 1998 and 2,354,751 at 1999 2,408 2,355
Additional paid-in capital 205,523,080 210,831,588
Accumulated deficit (158,671,764) (185,416,447)
-----------------------------------------
Total stockholders' equity 46,865,126 25,428,630
-----------------------------------------
Total liabilities and stockholders' equity $ 825,667,526 $ 805,279,369
=========================================
</TABLE>
*Derived from the audited financial statements for the year ended December 31,
1998
See accompanying notes to consolidated financial statements.
2
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1999 1998 1999
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net operating revenue $ 62,944,230 $ 64,190,044 $204,771,379 $201,141,235
-------------------------------------------------------------------------
Operating expenses 16,936,699 16,642,046 50,045,766 48,500,768
Amortization of program license rights 6,598,403 7,885,365 26,956,689 32,189,688
Selling, general and administrative expenses 12,039,672 12,495,541 37,577,831 37,947,697
Depreciation and amortization 12,350,787 12,209,028 37,310,229 36,061,184
Corporate overhead 1,914,084 2,020,150 6,006,985 6,241,675
Non-cash compensation (Note 3) 282,275 18,318,627 878,024 18,876,497
Merger-related costs - - 1,444,588 -
-------------------------------------------------------------------------
Operating income (loss) 12,822,310 (5,380,713) 44,551,267 21,323,726
-------------------------------------------------------------------------
Interest income 50,969 36,994 163,313 69,545
Interest expense (15,765,517) (15,861,315) (46,696,920) (47,190,874)
Other expense, net (559,366) (402,436) (996,132) (947,080)
-------------------------------------------------------------------------
(16,273,914) (16,226,757) (47,529,739) (48,068,409)
-------------------------------------------------------------------------
Net loss $ (3,451,604) $(21,607,470) $ (2,978,472) $(26,744,683)
=========================================================================
Loss per common share - Basic $ (0.24) $ (1.60) $ (0.21) $ (1.96)
=========================================================================
Weighted average shares - Basic 14,307,781 13,492,988 14,261,841 13,620,146
=========================================================================
</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 Capital Deficit Equity
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1998..................... $11,402 $2,408 $205,523,080 $(158,671,764) $ 46,865,126
Contribution of shares into Company's
Defined contribution plan....................... 16 - 826,166 - 826,182
Conversion of Class B Common Stock
to Class A Common Stock......................... 53 (53) - - -
Exercise of stock options........................ 12 - 223,000 - 223,012
Repurchase and retirement of Class A Common
Stock........................................... (349) - (14,031,241) - (14,031,590)
Non-cash compensation............................ - - 18,290,583 - 18,290,583
Net loss for the nine months ended September
30, 1999........................................ - - - (26,744,683) (26,744,683)
--------------------------------------------------------------------------
Balance at September 30, 1999.................... $11,134 $2,355 $210,831,588 $(185,416,447) $ 25,428,630
==========================================================================
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1998 1999
---------------------------------------
<S> <C> <C>
Operating activities
Net loss $ (2,978,472) $(26,744,683)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization of property and equipment 18,158,501 18,068,164
Amortization of program license rights 26,956,689 32,189,688
Amortization of broadcasting licenses, other intangibles and deferred
charges 19,151,728 17,993,020
Non-cash compensation 878,024 18,876,497
Non-cash interest expense on outstanding indebtedness 151,536 80,316
Loss on sale of fixed assets 48,523 7,634
Payments on programming license liabilities (27,376,186) (31,805,688)
Decrease in trade accounts receivable 12,569,277 2,000,954
Increase in prepaid expenses (6,640,477) (515,771)
(Decrease) increase in trade accounts payable (3,983,119) 2,310,013
Increase in accrued expenses and other liabilities 3,099,470 1,328,709
---------------------------------------
Net cash provided by operating activities 40,035,494 33,788,853
---------------------------------------
Investing activities
Capital expenditures (4,463,487) (6,366,553)
Increase in deposits and other assets (26,418,633) (254,495)
Increase in broadcast licenses and other intangibles (268,226) (11,514)
---------------------------------------
Net cash used in investing activities (31,150,346) (6,632,562)
---------------------------------------
Financing activities
Repurchase of public subordinated debt - (5,000,000)
Borrowings from working capital facility 36,527,000 6,327,000
Principal payments on long-term debt (28,260,000) (12,327,000)
Deferred acquisition and debt refinancing costs incurred (64,871) (63,503)
Repurchase of Class A Common Stock (17,881,413) (14,031,590)
Proceeds from exercise of Common Stock options 315,269 223,012
Principal payments under capital lease obligations (418,881) (544,737)
---------------------------------------
Net cash used in financing activities (9,782,896) (25,416,818)
---------------------------------------
Net (decrease) increase in cash and cash equivalents (897,748) 1,739,473
Cash and cash equivalents at beginning of year 1,652,428 663,298
---------------------------------------
Cash and cash equivalents at September 30 $ 754,680 $ 2,402,771
=======================================
Supplemental disclosure of cash flow information
Interest paid $ 44,758,963 $ 45,046,920
</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, and a national television sales representation firm.
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. Pending Sale of WKBT-TV
On September 22, 1999, the Company signed a definitive purchase agreement with
Television Wisconsin, Inc. of Madison, Wisconsin to sell WKBT-TV in
LaCrosse/EauClaire, Wisconsin to Television Wisconsin for 14 times trailing
broadcast cash flow. The sale is subject to, among other things, FCC approval
and is expected to close in the first quarter of 2000. The Company's September
30, 1999 Financial Statements include the operating results for WKBT-TV.
3. Stock Options
On August 3, 1999, the Board of Directors extended the expiration date of
596,188 stock options issued in 1994 and 1995 to directors, officers and
employees. The original option agreements were to expire in 1999 and 2000. The
new option agreements are extended by ten years until 2009. As a result of
this modification to these stock option agreements, the Company has recorded a
non-cash compensation charge of $18.3 million in the third quarter of 1999.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
FORWARD-LOOKING STATEMENTS
FORWARD LOOKING STATEMENTS ARE ALL STATEMENTS, OTHER THAN STATEMENTS OF
HISTORICAL FACTS, INCLUDED IN THIS DOCUMENT. THE FORWARD-LOOKING STATEMENTS
CONTAINED IN THIS REPORT, CONCERN, AMONG OTHER THINGS, CERTAIN STATEMENTS UNDER
"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 and national
representation fees. 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 Adam Young Inc. ("AYI"), a national advertising
sales representative which was merged with the Company in 1998. The stations
generally pay commissions to advertising agencies on local and regional
advertising; on national advertising, the stations also pay commissions to AYI.
Effective January 1, 1998, the commissions paid to AYI have been eliminated for
consolidation purposes.
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.
The Company defines "broadcast cash flow" as operating income before income
taxes and interest income and expense, plus depreciation and amortization
(including amortization of program license rights), non-cash compensation,
merger related costs and corporate overhead, less payments for program license
liabilities. Other television broadcasting companies may measure broadcast cash
flow in a different manner. The Company has included broadcast cash flow data
because such data are commonly used as a measure of performance for broadcast
7
<PAGE>
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 three and nine
months ended September 30, 1998 and 1999:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
September 30, September 30,
1998 1999 1998 1999
---- ---- ---- ----
(dollars in thousands) (dollars in thousands)
<S> <C> <C> <C> <C>
Operating income (loss)...................... $12,822 $(5,381) $ 44,551 $ 21,324
Add:
Amortization of program license rights.... 6,599 7,886 26,957 32,190
Depreciation and amortization............. 12,351 12,209 37,310 36,061
Corporate overhead........................ 1,914 2,020 6,007 6,242
Merger-related costs...................... - - 1,444 -
Non-cash compensation..................... 282 18,319 878 18,876
Less:
Payments for program license liabilities (6,705) (7,640) (27,376) (31,806)
--------------------------- ------------------------------
Broadcast cash flow.......................... $27,263 $27,413 $ 89,771 $ 82,887
=========================== ==============================
</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>
Three Months Ended Nine Months Ended
------------------ -----------------
September 30, September 30,
1998 1999 1998 1999
------ ------ ------ ------
Amount % Amount % Amount % Amount %
(dollars in thousands) (dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Local............ $44,364 60.9 $ 47,918 64.2 $148,647 62.8 $152,457 65.1
National......... 21,422 29.4 21,918 29.3 68,569 29.0 67,052 28.6
Network.......... 3,152 4.3 3,113 4.2 9,602 4.1 9,632 4.1
Political........ 2,947 4.1 657 0.9 6,032 2.5 1,163 0.5
Production/Other 926 1.3 1,072 1.4 3,728 1.6 3,952 1.7
------------------------------------------------- --------------------------------------------------
Total........... 72,811 100.0 74,678 100.0 236,578 100.0 234,256 100.0
Commissions........ (9,867) (13.5) (10,488) (14.0) (31,807) (13.4) (33,115) (14.1)
------------------------------------------------- --------------------------------------------------
Net Revenue........ $62,944 86.5 $ 64,190 86.0 $204,771 86.6 $201,141 85.9
================================================= ==================================================
</TABLE>
8
<PAGE>
Results of Operations
Three Months ended September 30, 1999 Compared to Three Months Ended September
30, 1998
Net revenue for the three months ended September 30, 1999 was $64.2
million, an increase of $1.3 million, or 2.1%, compared to $62.9 million for the
three months ended September 30, 1998. Improvement in various local market
economies led to an increase in the Company's gross local revenue of 7.9%, while
gross national increased 2.3% in 1999 compared to the third quarter of 1998.
Political revenue for the three months ended September 30, 1999 was $657,000 a
decrease of $2.3 million from the same period in 1998. The decrease was
attributable to 1998 being a national election year with many state and local
elections, while 1999 had only limited state and local elections.
Operating expenses, including selling, general and administrative expenses,
for the three months ended September 30, 1999 were $29.1 million, compared to
$29.0 million for the three months ended September 30, 1998, an increase of
$162,000, or 0.6%.
Amortization of program license rights for the three months ended September
30, 1999 was $7.9 million, compared to $6.6 million for the three months ended
September 30, 1998, an increase of $1.3 million. Amortization in connection with
the increased rights fees for the Anaheim Angels baseball contract accounted for
approximately $435,000 of such increase. Various syndicated programming
accounted for the remaining portion of the increase.
Depreciation of property and equipment and amortization of intangible
assets was $12.2 million for the three months ended September 30, 1999, compared
to $12.4 million for the three months ended September 30, 1998, a decrease of
$142,000 or 1.1%. This decrease is primarily attributable to fixed assets and
intangibles becoming fully depreciated and amortized.
The Company made payments for program license liabilities of $7.6 million
during the three months ended September 30, 1999, compared to $6.7 million for
the three months ended September 30, 1998, an increase of $935,000, or 13.9%,
with the Anaheim Angels baseball contract accounting for $435,000 of such
increase.
Corporate overhead for the three months ended September 30, 1999 was $2.0
million, compared to $1.9 million for the three months ended September 30, 1998,
an increase of $106,000, or 5.5%.
Non-cash compensation was $18.3 million for the three months ended
September 30, 1999, compared to $282,000 for the comparable period in 1998. The
Company recorded a non-cash compensation charge of $18.3 million in 1999 for
extending the expiration date of stock options granted in 1994 and 1995.
Interest income for the three months ended September 30, 1999 was $37,000
compared to $51,000 for the three months ended September 30, 1998, a decrease of
$14,000, or 27.5%.
Interest expense was $15.9 million for the three months ended September 30,
1999, compared to $15.8 million for the three months ended September 30, 1998,
an increase of $96,000, or 0.6%.
9
<PAGE>
As a result of the factors discussed above, the Company's net loss was
$21.6 million for the three months ended September 30, 1999, compared to a net
loss of $3.5 million for the three months ended September 30, 1998.
Broadcast cash flow was $27.4 million for the three months ended September
30, 1999, compared to $27.3 million for the three months ended September 30,
1998, an increase of $151,000, or 0.6%. Broadcast cash flow margins (broadcast
cash flow divided by net revenues) were 42.7% for the three months ended
September 30, 1999, compared to 43.3% for the three months ended September 30,
1998.
Nine Months Ended September 30, 1999 Compared to Nine Months Ended September 30,
1998
Net revenue for the nine months ended September 30, 1999 was $201.1
million, a decrease of $3.7 million, or 1.8%, compared to $204.8 million for the
nine months ended September 30, 1998. Improvement in various local market
economies led to an increase in the Company's gross local revenues of 2.6%,
while gross national was down 2.2% in 1999 compared to the same period in 1998.
Political revenue for the nine months ended September 30, 1999 was $1.2 million,
a decrease of $4.8 million from the same period in 1998. The decrease was
attributable to 1998 being a national election year with many state and local
elections, while 1999 had only limited state and local elections.
Operating expenses, including selling, general and administrative expenses,
were $86.4 million for the nine months ended September 30, 1999, compared to
$87.6 million for the nine months ended September 30, 1998, a decrease of $1.2
million, or 1.4%.
Amortization of program license rights for the nine months ended September
30, 1999 was $32.2 million compared to $27.0 million for the nine months ended
September 30, 1998, an increase of $5.2 million. The Lakers contract entered
into in the third quarter of 1998 accounted for $2.5 million, and the Anaheim
Angels baseball contract accounted for approximately $541,000 of this increase.
Various syndicated programming accounted for the remaining portion of the
increase.
Depreciation of property and equipment and amortization of intangible
assets was $36.1 million for the nine months ended September 30, 1999, compared
to $37.3 million for the nine months ended September 30, 1998, a decrease of
$1.2 million, or 3.2%. This decrease is primarily attributable to fixed assets
and intangibles becoming fully depreciated and amortized.
The Company made payments for program license liabilities of $31.8 million
during the nine months ended September 30, 1999, compared with payments of $27.4
million during the nine months ended September 30, 1998, an increase of $4.4
million. The new Lakers contract accounted for $2.5 million, and the Anaheim
Angels baseball contract accounted for approximately $541,000 of this increase.
Corporate overhead was $6.2 million for the nine months ended September 30,
1999, compared to $6.0 million for the period ended September 30, 1998, an
increase of $235,000.
Non-cash compensation was $18.9 million for the nine months ended September
30, 1999, compared to $878,000 for the same period in 1998. The Company recorded
a non-cash compensation charge of $18.3 million in 1999 for extending the
expiration date of stock options granted in 1994 and 1995.
10
<PAGE>
Interest income for the nine months ended September 30, 1999 was $70,000
compared to $163,000 for the same period in 1998, a decrease of $93,000. This
decrease is primarily attributable to the lower cash levels resulting from the
use of cash and cash equivalents to repurchase common stock.
Interest expense was $47.2 million for the nine months ended September 30,
1999, compared with $46.7 million for the prior year period, an increase of
$493,000, or 1.1%. The increase in interest expense is primarily attributable to
higher LIBOR and prime borrowing rates.
As a result of the factors discussed above, the Company's net loss was
$26.7 million for the nine months ended September 30, 1999, compared with a net
loss of $3.0 million for the nine months ended September 30, 1998.
Broadcast cash flow was $82.9 million for the nine months ended September
30, 1999, compared to $89.8 million for the same period in 1998, a decrease of
$6.9 million, or 7.7%. Broadcast cash flow margins (broadcast cash flow divided
by net revenues) were 41.2% for the nine months ended September 30, 1999,
compared to 43.8% for the same period in 1998.
Liquidity and Capital Resources
Cash provided by operations for the nine months ended September 30, 1999
was $33.8 million as compared to cash provided by operations of $40.0 million
for the same period in 1998. Changes in the Company's net cash flows from
operating activities are primarily the result of decreases in net revenues and
an increase of accounts payable during the nine months ended September 30, 1999
as compared to the nine months ended September 30, 1998.
The Company used cash in investing activities for the nine months ended
September 30, 1999 and 1998 of $6.6 million and $31.2 million, respectively. In
1999 the Company increased spending for property and equipment by $1.9 million
over the same period in 1998. The decrease in deposits and other assets of
$26.2 million was primarily attributable to the prepayment of programming in
1998.
Cash used in financing activities for the nine months ended September 30,
1999 and 1998 was $25.4 million and $9.8 million, respectively. Financing
activities for the nine months ended September 30, 1999 and 1998 include
principal payments under the Company's senior credit facility (the "Senior
Credit Facility") of $12.3 million and $28.3 million, respectively. In the third
quarter of 1998, the Company borrowed $36.5 million under the working capital
facility to prepay certain programming contracts. In addition, in 1999 and 1998,
the Company repurchased 348,400 shares for $14.0 million and 502,800 shares for
$17.9 million, respectively, in Class A Common Stock. In the third quarter of
1999, the Company repurchased $5.0 million of its 10 1/8 % Notes due 2006 at a
price of 103.5.
It is anticipated that the Company will be able to meet the working capital
needs of the stations, principal and interest payments under the Senior Credit
Facility and the Company's senior subordinated notes (the "Senior Subordinated
Notes"), and to a lesser extent, capital expenditures from cash on hand, cash
flows from operations and funds available under the Senior Credit Facility.
On November 25, 1997, the Senior Credit Facility was amended and restated
to provide the Company with the ability to borrow up to $300.0 million in the
form of a five-year revolving
11
<PAGE>
credit facility. As of September 30, 1999, there was $79.0 million outstanding
under the Senior Credit Facility.
Impact of Year 2000
State of Readiness
The Company is evaluating the impact of the Year 2000 problem on its
business and its ability to deliver its product to its viewers. The Year 2000
problem is the result of computer programs being written using two digits
(rather than four) to define the applicable year. Various computer programs that
have time-sensitive software may recognize a date using "00" as the Year 1900
rather than the Year 2000, which could result in miscalculations or system
failures.
The evaluation includes a review of its Year 2000 preparedness relative to
its products and systems, accounting software and computer hardware. The Company
is also evaluating the potential Year 2000 impact as a result of its reliance on
third parties that may have the Year 2000 problem embedded in software and
hardware.
The Company has developed a plan to assess and handle the Year 2000
problem. The plan is as follows:
1. Inventorying and assessing the impact on affected technology and
systems;
2. Developing solutions for affected technology and systems;
3. Modifying or replacing affected technology and systems;
4. Testing and verifying solutions; and
5. Developing contingency plans.
As of October 29, 1999, all of the Items in the Company's Year 2000 Plan
have been completed.
Costs
Costs incurred to date directly related to addressing the Year 2000 problem
have not been material. Since the Company is not utilizing outside consulting
firms and is utilizing the employment resources within the Company to address
the Year 2000 problem, the Company believes that it will not incur material
costs in connection with becoming Year 2000 compliant. However, the total costs
cannot be known with certainty until the Year 2000 actually arrives.
Risks
All of the Company's computer software is purchased or leased from third
party vendors, and the Company does not currently employ or contract computer
programmers to write Company specific software. The Company has received
communications from its significant third party vendors and service providers
stating that they are generally on target to become Year 2000 compliant in 1999
if they have not already done so. There can be no assurance that these third
party vendors and service providers will complete their own Year 2000 compliant
projects in a timely manner and that failure to do so would not have an adverse
impact on the Company's business. If significant third party revenue sources,
such as a national advertising agency, experience a Year 2000 problem, the
Company could lose revenues for which there is no
12
<PAGE>
immediate replacement and these losses could have a material adverse effect on
the Company's business, financial condition or results of operation.
The Company or a third party's failure to become Year 2000 ready, or its
inability to become compatible with third parties with which it has a material
relationship, may have a material adverse effect on the Company, including
significant signal interruption. However, the Company cannot currently estimate
the extent of any such adverse effects or any at all.
System failures or miscalculations could result in an inability of the
Company to process commercial logs, remit invoices to advertisers, accept an
agency's order or provide viewers with its broadcasts. The Company has developed
a contingency plan to help reduce the impact of any unforeseen system failures
which may take place.
Contingency Plan
The Company has developed contingency plans to minimize the effect of any
potential Year 2000 related disruptions. Virtually all of its stations have
plans in effect for natural disasters in the event a station is not able to
broadcast in the usual manner. The Company expanded these plans to include
additional systems, software and equipment deemed to be critical to its
broadcasts and business operations.
Income Taxes
The Company and its Subsidiaries file a consolidated federal income tax
return and such state or local tax returns as are required. As of December 31,
1998, the Company had $188.5 million of net operating loss ("NOL") carryforwards
which were subject to annual limitations imposed by Internal Revenue Code
Section 382.
13
<PAGE>
Item 3. Quantitative and Qualitative Disclosure About Market Risk
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("FAS 133"). FAS 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. The Company
is required to adopt the provisions of the standard during the first quarter of
2000. Because the Company does not use derivatives, the Company does not expect
that the adoption of the new standard will have a material impact on the results
of operations or financial condition.
14
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit
Number Exhibit Description
- ------ -------------------
11 Statement Re Computation of Per Share Earnings.
27 Financial Data Schedule
(b) Reports on Form 8-K. The Company filed no reports on Form 8-K during
the third quarter of the year ending December 31, 1999.
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: November 9, 1999 By: /s/ Vincent J. Young
------------------------
Vincent J. Young
Chairman
Date: November 9, 1999 By: /s/ James A. Morgan
------------------------
James A. Morgan
Executive Vice President and
Chief Financial Officer
(principal financial officer)
16
<PAGE>
EXHIBIT 11
YOUNG BROADCASTING INC. AND SUBSIDIARIES
RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1998 1999 1998 1999
------------------------------ ---------------------------------
<S> <C> <C> <C> <C>
SHARES OF COMMON STOCK OUTSTANDING
FOR THE ENTIRE PERIOD................................. 14,338,401 13,538,480 13,847,844 13,810,270
ISSUANCE OF 13,866 AND 16,360 SHARES OF COMMON STOCK
TO THE COMPANY'S DEFINED CONTRIBUTION PLAN IN
1998 AND 1999......................................... 3,863 5,308 8,081 9,739
ISSUANCE OF 14,550 AND 10,987 SHARES OF COMMON STOCK
UPON EXERCISE OF OPTIONS IN 1998 AND 1999............. 9,239 1,255 7,152 5,711
REPURCHASE OF 502,800 AND 348,400 SHARES OF COMMON
STOCK UNDER BUYBACK PROGRAM IN 1998 AND 1999.......... (43,722) (52,055) (14,734) (205,574)
ISSUANCE OF 526,757 SHARES OF COMMON STOCK FOR THE
MERGER OF ADAM YOUNG INC.............................. - - 457,295 -
RETIREMENT OF 50,450 SHARES OF COMMON STOCK FOR THE
MERGER OF ADAM YOUNG INC.............................. - - (43,797) -
-------------- -------------- ------------- --------------
WEIGHTED AVERAGE SHARES OF COMMON STOCK
OUTSTANDING........................................... 14,307,781 13,492,988 14,261,841 13,620,146
-------------- -------------- ------------- --------------
NET LOSS.................................................. $(3,451,604) $(21,607,470) $(2,978,472) $(26,744,683)
============== ============== ============= ==============
LOSS PER COMMON SHARE
BASIC
NET LOSS.............................................. $(0.24) $(1.60) $(0.21) $(1.96)
============== ============== ============= ==============
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 2,403
<SECURITIES> 0
<RECEIVABLES> 52,457
<ALLOWANCES> 1,880
<INVENTORY> 0
<CURRENT-ASSETS> 84,376
<PP&E> 230,702
<DEPRECIATION> 139,551
<TOTAL-ASSETS> 805,279
<CURRENT-LIABILITIES> 56,951
<BONDS> 565,000
0
0
<COMMON> 13
<OTHER-SE> 25,416
<TOTAL-LIABILITY-AND-EQUITY> 805,279
<SALES> 0
<TOTAL-REVENUES> 201,141
<CGS> 0
<TOTAL-COSTS> 179,818
<OTHER-EXPENSES> 947
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47,121
<INCOME-PRETAX> (26,745)
<INCOME-TAX> 0
<INCOME-CONTINUING> (26,745)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (26,745)
<EPS-BASIC> (1.96)
<EPS-DILUTED> (1.96)
</TABLE>
