<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, 2000 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, 2000:
11,229,529 shares of Class A Common Stock, and 2,292,637 shares of Class B
Common Stock.
=============================================================================
1
<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, 1999 and March 31, 2000..... 2
Consolidated Statements of Operations for the Three Months Ended
March 31, 1999 and 2000.................................................... 3
Consolidated Statements of Stockholders' Equity for the Ended
Months Ended March 31, 2000................................................ 4
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 1999 and 2000.................................................... 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.................. 13
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,
1999* 2000
-----------------------------------------
Assets (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,952,144 $ 1,607,404
Trade accounts receivable, less allowance for doubtful accounts of
$1,761,000 in 1999 and $1,750,000 in 2000 65,438,176 55,733,689
Current portion of program license rights 28,268,497 12,171,163
Prepaid expenses 5,618,444 5,746,746
-----------------------------------------
Total current assets 102,277,261 75,259,002
-----------------------------------------
Property and equipment, less accumulated depreciation and amortization of
$144,394,626 in 1999 and $139,304,720 in 2000 88,102,344 83,162,654
Program license rights, excluding current portion 1,171,438 971,582
Deposits and other assets 32,806,064 33,773,186
Broadcasting licenses and other intangibles, less accumulated amortization of
$139,260,326 in 1999 and $135,611,919 in 2000 584,101,367 573,044,628
Deferred charges less accumulated amortization of $13,659,344 in 1999 and
$14,489,733 in 2000 10,211,507 10,014,378
-----------------------------------------
Total Assets $ 818,669,981 $ 776,225,430
=========================================
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable $ 20,545,231 $ 15,924,211
Accrued expenses 19,526,849 21,637,936
Current installments of program license liability 24,440,679 10,263,531
Current installments of obligations under capital leases 923,567 909,910
-----------------------------------------
Total current liabilities 65,436,326 48,735,588
Program license liability, excluding current installments 1,538,100 1,232,255
Long-term debt 644,000,000 608,408,000
Deferred taxes and other liabilities 77,036,273 76,886,815
-----------------------------------------
Total liabilities 788,010,699 735,262,658
-----------------------------------------
Stockholders' equity:
Class A Common Stock, $.001 par value. Authorized 20,000,000 shares; issued
and outstanding 11,142,472 shares at 1999 and 11,211,699 at 2000 11,143 11,212
Class B Common Stock, $.001 par value. Authorized 20,000,000 shares; issued
and outstanding 2,351,251 shares at 1999 and 2,292,637 at 2000 2,351 2,292
Additional paid-in capital 210,859,627 211,277,980
Accumulated deficit (180,213,839) (170,328,712)
-----------------------------------------
Total stockholders' equity 30,659,282 40,962,772
-----------------------------------------
Total liabilities and stockholders' equity $ 818,669,981 $ 776,225,430
=========================================
*Derived from the audited financial statements for the year ended December 31, 1999
See accompanying notes to consolidated financial statements.
</TABLE>
2
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months ended March 31,
1999 2000
-------------------------------------
<S> <C> <C>
Net operating revenue $ 63,246,731 $ 72,163,890
-------------------------------------
Operating expenses 15,942,019 16,558,206
Amortization of program license rights 12,196,918 16,359,207
Selling, general and administrative expenses 12,667,354 13,881,892
Depreciation and amortization 11,874,681 10,865,820
Corporate overhead 2,062,707 2,494,084
Non-cash compensation 310,817 338,770
-------------------------------------
Operating income 8,192,235 11,665,911
-------------------------------------
Interest income 26,838 47,140
Interest expense (15,673,596) (15,567,366)
Gain on the sale of station - 15,650,704
Other expense, net (288,373) (411,262)
-------------------------------------
(15,935,131) (280,784)
-------------------------------------
Income (loss) before provision for income taxes $ (7,742,896) $ 11,385,127
Provision for income taxes - 1,500,000
-------------------------------------
Net (loss) income $ (7,742,896) $ 9,885,127
=====================================
Net (loss) income per common share-basic $ (0.56) $ 0.73
=====================================
Net (loss) income per common share-diluted $ (0.56) $ 0.71
=====================================
Weighted average shares-basic 13,746,338 13,501,943
=====================================
Weighted average shares-diluted 13,746,338 13,881,133
=====================================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Additional Total
Common Stock Paid-In Accumulated Stockholders'
--------------------
Class A Class B Capital Deficit Equity
---------- ----------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1999................... $11,143 $2,351 $210,859,627 $(180,213,839) $30,659,282
Contribution of shares into Company's
Defined contribution plan................ 4 - 225,059 - 225,063
Conversion of Class B Common Stock
to Class A Common Stock................. 59 (59) - - -
Exercise of stock options.................. 6 - 193,294 - 193,300
Net income for the three months ended March
31, 2000................................ - - - 9,885,127 9,885,127
------- ------ ------------ ------------- -------------
Balance at March 31, 2000..................... $11,212 $2,292 $211,277,980 $(170,328,712) $40,962,772
======= ====== ============ ============= ===========
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months ended March 31,
1999 2000
-----------------------------------------
<S> <C> <C>
Operating activities
Net (loss) income $ (7,742,896) $ 9,885,127
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization of property and equipment 5,910,148 5,105,128
Amortization of program license rights 12,196,918 16,359,207
Amortization of broadcasting licenses, other intangibles and deferred
charges 5,964,533 5,760,692
Non-cash compensation 310,817 338,770
Non-cash interest expense on outstanding indebtedness 26,772 -
Gain on sale of station - (15,650,704)
Loss (gain) on disposal of fixed assets 4,370 (2,586)
Payments on programming license liabilities (12,140,397) (15,433,308)
Decrease in trade accounts receivable 713,342 9,158,756
Decrease (increase) in prepaid expenses 929,046 (199,564)
Increase (decrease) in trade accounts payable 5,315,827 (3,986,415)
(Decrease) increase in accrued expenses (189,390) 1,802,007
-----------------------------------------
Net cash provided by operating activities 11,299,090 13,137,110
-----------------------------------------
Investing activities
Capital expenditures (734,404) (1,302,298)
Proceeds from the sale of station - 23,983,758
Increase in deposits and other assets (262,823) (967,122)
-----------------------------------------
Net cash (used in) provided by investing activities (997,227) 21,714,338
-----------------------------------------
Financing activities
Principal payments on long-term debt (4,000,000) (38,802,000)
Borrowings from working capital facility 1,145,000 3,210,000
Deferred acquisition and debt refinancing costs incurred - (634,373)
Proceeds from exercise of options 92,186 193,300
Repurchase of Class A Common Stock (7,543,131) -
Principal payments under capital lease obligations (27,085) (163,115)
-----------------------------------------
Net cash used in financing activities (10,333,030) (36,196,188)
-----------------------------------------
Net decrease in cash and cash equivalents (31,167) (1,344,740)
Cash and cash equivalents at beginning of year 663,298 2,952,144
-----------------------------------------
Cash and cash equivalents at March 31 $ 632,131 $ 1,607,404
=========================================
Supplemental disclosure of cash flow information
Interest paid $ 13,710,067 $ 13,566,679
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
(Unaudited)
1. Principles of Consolidation
The accompanying consolidated financial statements include those of Young
Broadcasting Inc. and subsidiaries (the "Company"), consisting of ten network
affiliated (three 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. Sale of WKBT-TV
On February 29, 2000, the Company completed the sale of WKBT-TV, in La
Crosse, Wisconsin to Television Wisconsin, Inc. of Madison, Wisconsin for
approximately $24.0 million. The Company recorded a gain on the sale of
approximately $15.7 million, and a provision for income taxes of $1.5 million in
connection with the sale in the first quarter of 2000. The proceeds from the
sale were used to pay down debt under the Senior Credit facility.
3. Pending Acquisition
On November 16, 1999, the Company entered into an agreement to acquire
KRON-TV ("KRON") and a 51% interest in the San Francisco cable channel BayTV
("BayTV") from The Chronicle Publishing Company ("CPC"). Under the terms of the
agreement, the Company will pay CPC $650 million in cash plus up to
approximately 3.9 million shares of the Company's Class A Common Stock, subject
to adjustment. This acquisition will be accounted for as a purchase and is
expected to close sometime in the second quarter of 2000.
The following unaudited pro forma information gives effect to the
acquisition of KRON and BayTV as if it had been effected January 1, 2000. The
pro forma information for the quarter ended March 31, 2000 does not purport to
represent what the Company's results of operations would have been if such
transactions had been effected at such dates and do not purport to project
results of operations of the Company in any future period.
6
<PAGE>
Young Broadcasting Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Actual Pro forma
March 31, 2000 March 31, 2000
-------------- --------------
(dollars in thousands, except per share data)
<S> <C> <C>
Net operating revenue $72,164 $107,867
Operating income 11,666 19,858
Net income 9,885 3,322
Basic income per common share $ 0.73 $ 0.19
</TABLE>
The Company did not include estimated cost savings relating to, among other
things, labor, benefits, programming costs, national representation fees,
advertising, promotion and other costs of approximately $4.1 million in the
table above (approximately $16.0 million annualized). If such cost savings had
been included, the adjusted pro forma operating income for the three months
ended March 31, 2000 would have been approximately $24.0 million.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
FORWARD-LOOKING STATEMENTS
THE 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." FORWARD LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES, AND ARE
SUBJECT TO CHANGE BASED ON VARIOUS IMPORTANT FACTORS, INCLUDING THE IMPACT OF
CHANGES IN NATIONAL AND REGIONAL ECONOMIES, 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 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.
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, and
corporate overhead, less payments for
8
<PAGE>
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 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, 1999 and 2000:
<TABLE>
<CAPTION>
Quarter Ended March 31,
-----------------------
1999 2000
---- ----
(in thousands)
<S> <C> <C>
Operating income............................................. $ 8,192 $ 11,666
Add:
Amortization of program license rights..................... 12,196 16,359
Depreciation and amortization.............................. 11,875 10,866
Corporate overhead......................................... 2,063 2,494
Non-cash compensation...................................... 311 339
Less:
Payments for program license liabilities................... (12,140) (15,433)
-----------------------------
Broadcast cash flow.......................................... $ 22,497 $ 26,291
=============================
</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,
-----------------------
1999 2000
---- ----
Amount % Amount %
------- - ------ -
(in thousands)
<S> <C> <C> <C> <C>
Revenues
Local....................................... $ 48,497 65.9 $ 53,177 62.9
National.................................... 19,973 27.1 23,484 27.8
Network..................................... 3,235 4.4 2,826 3.4
Political................................... 137 0.2 3,243 3.8
Production/Other............................ 1,748 2.4 1,819 2.1
-------- ----- -------- -----
Total............................... 73,590 100.0 84,549 100.0
Commissions.................................... (10,343) (14.1) (12,385) (14.6)
-------- ----- -------- -----
Net Revenue.................................... $ 63,247 85.9 $ 72,164 85.4
======== ===== ======== =====
</TABLE>
9
<PAGE>
Results of Operations
Quarter Ended March 31, 2000 Compared to Quarter Ended March 31, 1999
Net revenues for the quarter ended March 31, 2000 were $72.2 million, an
increase of $8.9 million, or 14.1%, compared to $63.3 million for the quarter
ended March 31, 1999. Improvement in various local market economies and the
national economy led to an increase in the Company's gross local and national
revenues of 9.7% and 17.6%, respectively. Political revenue for the quarter
ended March 31, 2000 was $3.2 million, an increase of $3.1 million from the
quarter ended March 31, 1999. The increase in political revenues is primarily
attributable to 2000 being a national election year with presidential primaries
(most importantly in California and Iowa) and many state and local elections,
while 1999 had limited state and local elections.
Operating expenses, including selling, general and administrative expenses,
for the quarter ended March 31, 2000 were $30.4 million, compared to $28.6
million for the quarter ended March 31, 1999, an increase of $1.8 million, or
6.3%. The increase is primarily attributable to higher local sales commissions
resulting from the increased sales, and increased news and production costs from
coverage of the Tennessee Titans in the Super Bowl.
Amortization of program license rights for the quarter ended March 31, 2000
was $16.4 million, compared to $12.2 million for the quarter ended March 31,
1999, an increase of $4.2 million. The Los Angeles Lakers and Clippers, two
professional basketball teams which played for only a portion of the first
quarter of 1999 due to the National Basketball Association ("NBA") lockout,
played for the entire quarter ended March 31, 2000. The increase in
the number of games televised during the quarter ended March 31, 2000 accounted
for all of this increase.
Depreciation of property and equipment and amortization of intangible
assets was $10.9 million, compared to $11.9 million for the same quarter in
1999, a decrease of $1.0 million, or 8.4%. The decrease is primarily
attributable to equipment at the three stations acquired in 1994, that had five
year depreciable lives, thus becoming fully depreciated.
The Company made payments for program license liabilities of $15.4 million
during the quarter ended March 31, 2000, compared to $12.1 million for the
quarter ended March 31, 1999, an increase of $3.3 million, with the
discontinuation of the NBA lockout, as stated above, accounting for all of this
increase.
Corporate overhead was $2.5 million for the three months ended March 31,
2000, compared to $2.1 million for the three months ended March 31, 1999, an
increase of $431,000, or 20.9%.
Non-cash compensation was $339,000 for the quarter ended March 31, 2000,
compared to $311,000 for the comparable period in 1999.
Interest income for the quarter ended March 31, 2000 was $47,000, compared
to $27,000 for the same period in 1999, an increase of $20,000.
Interest expense for the quarter ended March 31, 2000 was $15.6 million,
compared with $15.7 million for the comparable period in 1999, a decrease of
$106,000, or 0.7%.
On February 29, 2000, the Company sold WKBT-TV for approximately $24.0
million and recorded a gain on the sale of approximately $15.7 million. A state
tax provision of $1.5 million was recorded in the first quarter of 2000, as a
result of this gain.
10
<PAGE>
As a result of the factors discussed above, the net income for the Company
was $9.9 million for the quarter ended March 31, 2000, compared with a net loss
of $7.7 million for the same period in 1999.
Broadcast cash flow for the quarter ended March 31, 2000 was $26.3 million,
compared with $22.5 million for the quarter ended March 31, 1999, an increase of
$3.8 million, or 16.9%. As a result, the broadcast cash flow margin (broadcast
cash flow divided by net revenues) for the quarters ended March 31, 2000 and
1999 was 36% for both quarters.
Liquidity and Capital Resources
Cash provided by operations for the three months ended March 31, 2000 was
$13.1 million as compared to cash provided by operations of $11.3 million for
the same period in 1999. Changes in the Company's net cash flows from operating
activities are primarily the result of an increase in net revenues and a
decrease in accounts payable during the three months ended March 31, 2000 as
compared to the three months ended March 31, 1999.
Cash provided by investing activities for the three months ended March 31,
2000 was $21.7 million and cash used in investing activities for the same period
in 1999 was $1.0 million. The increase in 2000 was primarily attributable to the
$24.0 million of proceeds from the sale of WKBT-TV, net of increased spending
for property and equipment.
Cash used in financing activities for the quarter ended March 31, 2000 and
1999 was $36.2 million and $10.3 million, respectively. Financing activities for
the three months ended March 31, 2000 and 1999 include principal payments under
the Senior Credit Facility of $38.8 million and $4.0 million, respectively. In
addition, on February 26, 1999, the Company repurchased 187,000 shares of Class
A Common Stock for $7.5 million.
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 credit facility. As of March 31, 2000, there was
$43.4 million outstanding under the Senior Credit Facility.
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,
1999, the Company had $210.0 million of net operating loss ("NOL") carryforwards
which were subject to annual limitations imposed by Internal Revenue Code
Section 382.
Pending Acquisition
KRON-TV RESULTS OF OPERATIONS
Actual
------
THE RESULTS OF OPERATIONS BELOW ARE THE ACTUAL COMBINED RESULTS OF KRON-TV
AND BAYTV, AS PROVIDED BY THE MANAGEMENT OF THE CHRONICLE PUBLISHING COMPANY.
THESE RESULTS ARE THE SOLE RESPONSIBILITY OF THE MANAGEMENT OF THE CHRONICLE
PUBLISHING COMPANY.
Net revenue for the quarter ended March 31, 2000 was $35.7 million, an
increase of $9.3 million, or 35.2%, compared to $26.4 million for the quarter
ended March 31, 1999. Improvement in the local and national advertising markets
led to increases in KRON's gross
11
<PAGE>
local and national revenues of 18.3% and 37.5%, respectively. Political revenue
for the quarter ended March 31, 2000 was $3.2 million, compared to zero for the
same period in 1999.
Operating expenses, including selling, general and administrative expenses,
for the quarter ended March 31, 2000 were $18.8 million, compared to $17.6
million for the quarter ended March 31, 1999, an increase of $1.2 million, or
6.8%. There has been no allocation of corporate overhead to KRON or BayTV's
results of operations.
Amortization of program license rights for the quarter ended March 31, 2000
was $2.9 million, compared to $3.2 million for the quarter ended March 31, 1999,
a decrease of $354,000, or 11.0%.
KRON made payments for program license liabilities of $2.8 million during
the quarter ended March 31, 2000, compared to $3.5 million for the same period
in 1999, a decrease of $697,000, or 20.1%.
As a result of the factors discussed above, the net income for KRON was
$15.5 million for the quarter ended March 31, 2000, compared to $7.8 million for
the same period in 1999, an increase of $7.7 million.
Broadcast cash flow for the quarter ended March 31, 2000 was $17.0 million,
an increase of $8.4 million, or 97.2%. Broadcast cash flow margin (broadcast
cash flow divided by net revenues) for the quarter ended March 31, 2000
increased to 47.8%, from 32.7% for the same period in 1999.
Pro Forma
---------
The following unaudited pro forma information gives effect to the pending
acquisition of KRON-TV and BayTV (including adjustments to amortization of
intangible assets, debt financing costs and depreciation of property and
equipment) as if it had been effected on January 1, 1999. The pro forma
information does not purport to represent what the Company's results of
operations would have been if such transaction had been effected at such date
and do not purport to project results of operations of the Company in any future
period.
<TABLE>
<CAPTION>
Unaudited Pro Forma
Quarter Ended March 31,
--------------------------------
1999/(1)/ 2000/(1)/
-------- --------
(in thousands)
<S> <C> <C>
Net revenues/(2)/ $ 89,687 $107,867
Operating expenses, including selling, general and administrative expenses 42,937 46,323
Amortization of program license rights 15,423 19,232
Depreciation and amortization of program license rights 20,279 19,621
Corporate overhead 2,063 2,494
Non-cash compensation paid in common stock 311 339
------------------------------
Operating income $ 8,674 $ 19,858
==============================
Broadcast cash flow/(3)/ $ 31,139 $ 43,337
Broadcast cash flow margin 34.7% 40.2%
Adjusted broadcast cash flow/(5)/ $ 35,250 $ 47,622
Operating cash flow/(4)/ $ 29,076 $ 40,843
Adjusted operating cash flow/(6)/ $ 32,994 $ 44,935
</TABLE>
(1) Pro forma adjustments reflect the amortization of intangible assets
associated with the KRON and BayTV merger over a 40 year period and
increased annual depreciation resulting from the newly acquired property
12
<PAGE>
and equipment depreciated over new estimated useful lives. In addition,
these adjustments reflect the amortization expense of the new debt
financing costs related to the new Senior Credit Facility.
(2) Net revenues are total revenues net of agency and national representation
commissions.
(3) "Broadcast cash flow" is defined, by the Company, 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. 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 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 substitute for measures of performance
prepared in accordance with generally accepted accounting principles.
(4) "Operating cash flow" is defined, by the Company, as operating income
before income taxes and interest expense, plus depreciation and
amortization (including amortization of program license rights) and non-
cash compensation, less payments for program license liabilities. Other
television broadcasting companies may measure operating cash flow in a
different manner. The Company has included operating cash flow data
because such data are used by investors to measure a company's ability to
service debt and are used in calculating the amount of additional
indebtedness that the Company may incur in the future under the Indentures.
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.
(5) Represents pro forma broadcast cash flow after adjustments for net expense
reductions for labor, benefits, programming, national representation fees,
advertising and promotion and other operating costs.
The following table sets forth a reconciliation of pro forma broadcast cash
flow to adjusted pro forma broadcast cash flow:
<TABLE>
<CAPTION>
For The Quarter Ended
---------------------
March 31,
--------
1999 2000
---- ----
(dollars in thousands)
<S> <C> <C>
Broadcast cash flow (pro forma) $31,139 $43,337
Labor and benefits 1,838 1,838
Programming costs 997 997
National representation fees 445 696
Advertising and promotion 488 488
Other operating costs 343 266
------- -------
Adjusted broadcast cash flow (pro forma) $35,250 $47,622
======= =======
</TABLE>
(6) Represents pro forma operating cash flow after adjustments for net expense
reductions for labor, benefits, programming, national representation fees,
advertising and promotion and other operating costs.
The following table sets for the a reconciliation of pro forma operating
cash flow to adjusted pro forma operating cash flow:
<TABLE>
<CAPTION>
For The Quarter Ended
---------------------
March 31,
---------
1999 2000
---- -----
(dollars in thousands)
<S> <C> <C>
Operating cash flow (pro forma) $29,076 $40,843
Labor and benefits 1,838 1,838
Programming costs 997 997
National representation fees 445 696
Advertising and promotion 488 488
Other operating costs 150 73
------- -------
Adjusted operating cash flow (pro forma) $32,994 $44,935
======= =======
</TABLE>
13
<PAGE>
Item 3. Quantitative and Qualitative Disclosure About Market Risk
In June 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" which was amended by Statement of Financial Accounting
Standard No. 137 ("SFAS 137"), which is effective for all quarters of fiscal
years beginning after June 15, 2000. SFAS No. 137 requires that the Company
recognize any derivatives as either assets or liabilities and measure those
instruments at fair value. Unless the Company can treat the derivatives as a
hedge according to certain criteria, the Company may be required to deduct any
changes in the derivative's fair value from its operating income. The Company
does not expect SFAS No. 137 to have a material effect on the Company's
Consolidated Financial Statements.
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.
27 Financial Data Schedule
(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, 2000.
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 10, 2000 By: /s/ Vincent J. Young
-----------------------------------
Vincent J. Young
Chairman
Date: May 10, 2000 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
-------------------
MARCH 31, MARCH 31,
1999 2000
------------------------------------------
<S> <C> <C>
SHARES OF COMMON STOCK OUTSTANDING
FOR THE ENTIRE PERIOD-BASIC........................... 13,810,270 13,493,723
REPURCHASE OF 187,000 SHARES OF COMMON STOCK
UNDER BUYBACK PROGRAM IN 1999......................... (68,567) -
ISSUANCE OF 4,363 AND 6,200 SHARES OF COMMON
STOCK UPON EXERCISE OF OPTIONS........................ 1,357 4,292
ISSUANCE OF 3,734 AND 4,413 SHARES OF COMMON
STOCK TO THE COMPANY'S DEFINED CONTRIBUTION
PLAN.................................................. 3,278 3,928
WEIGHTED AVERAGE SHARES OF COMMON -----------------------------------
STOCK OUTSTANDING-BASIC............................... 13,746,338 13,501,943
DILUTED EFFECT OF 1,858,353 OPTIONS IN 2000
EXPECTED TO BE EXERCISED UNDER THE
TREASURY STOCK METHOD USING THE WEIGHED
AVERAGE MARKET PRICE OF THE COMPANY'S
SHARES OF COMMON STOCK................................ - 379,190
-----------------------------------
TOTAL DILUTED WEIGHTED AVERAGE SHARES OF
COMMON STOCK FOR THE PERIOD........................... 13,746,338 13,881,133
===================================
NET (LOSS) INCOME........................................... $(7,742,896) $ 9,885,127
===================================
NET (LOSS) INCOME PER COMMON SHARE:
BASIC
NET (LOSS) INCOME.................................... $ (0.56) $ 0.73
===================================
DILUTED
NET (LOSS) INCOME.................................... $ (0.56) $ 0.71
===================================
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,607
<SECURITIES> 0
<RECEIVABLES> 55,734
<ALLOWANCES> 1,750
<INVENTORY> 0
<CURRENT-ASSETS> 75,259
<PP&E> 222,467
<DEPRECIATION> 139,305
<TOTAL-ASSETS> 776,225
<CURRENT-LIABILITIES> 48,736
<BONDS> 565,000
0
0
<COMMON> 14
<OTHER-SE> 40,949
<TOTAL-LIABILITY-AND-EQUITY> 776,225
<SALES> 0
<TOTAL-REVENUES> 72,164
<CGS> 0
<TOTAL-COSTS> 60,498
<OTHER-EXPENSES> 411
<LOSS-PROVISION> 15,651
<INTEREST-EXPENSE> 15,520
<INCOME-PRETAX> 11,385
<INCOME-TAX> 1,500
<INCOME-CONTINUING> 9,885
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,885
<EPS-BASIC> 0.73
<EPS-DILUTED> 0.71
</TABLE>
