<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
COMMISSION FILE NO. 0-25206
- - --------------------------------------------------------------------------------
LIN TELEVISION CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3581627
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
FOUR RICHMOND SQUARE, SUITE 200
PROVIDENCE, RHODE ISLAND 02906
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICERS) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(401) 454-2880
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS)
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The number of shares outstanding of the registrant's Common Stock was
29,764,091 as of March 17, 1996. The aggregate market value of the voting stock
held by non-affiliates of the registrant was $561,198,368 as of March 17, 1996.
(The term "affiliates" is deemed, for this purpose only, to refer only to the
directors of the registrant, Cook Inlet Communications, Inc. and to AT&T Corp.)
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement relating to its 1996 annual
meeting of stockholders are incorporated by reference into Part III hereof. Such
Proxy Statement will be filed with the Securities and Exchange Commission no
later than 120 days after the registrant's fiscal year ended December 31, 1996.
<PAGE> 2
This Amendment No. 1 on Form 10-K/A to Form 10-K for the fiscal year ended
December 31, 1996 (as amended, the "Report"), is being filed to amend and
restate Item 8 and Exhibit 23.1 to the Report. Item 8 and Exhibit 23.1 are
hereby amended and restated in their entirety. The other items and exhibits are
not being amended and have been previously filed with the Securities and
Exchange Commission with the Report.
<PAGE> 3
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements and supplementary data,
together with the report of Ernst & Young LLP, independent auditors, are
included elsewhere herein. Reference is made to the "Index to Financial
Statements" immediately preceding page F-1.
<PAGE> 4
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in Providence, Rhode
Island, on the 18th day of November, 1997.
LIN TELEVISION CORPORATION
By: /s/ Gary R. Chapman
-------------------------------------
Gary R. Chapman
President and Chief Executive Officer
<PAGE> 5
<TABLE>
INDEX TO FINANCIAL STATEMENTS
<S> <C>
Report of Ernst & Young LLP, Independent Auditors....................... F-1
Consolidated Balance Sheets............................................. F-2
Consolidated Statements of Income....................................... F-3
Consolidated Statements of Stockholders' Equity ........................ F-4
Consolidated Statements of Cash Flows................................... F-5
Notes to the Consolidated Financial Statements.......................... F-6
Financial Statement Schedules
I -Condensed Financial Information of Registrant...................... S-1
II -Valuation and Qualifying Accounts for the Years Ended
December 31, 1996, 1995, and 1994.................................. S-5
</TABLE>
<PAGE> 6
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
LIN Television Corporation
We have audited the accompanying consolidated balance sheets of LIN Television
Corporation as of December 31, 1996 and 1995, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the three
years in the period ended December 31, 1996. Our audits also included the
financial statement schedules listed in the index at Item 14 (a) (2). These
financial statements and schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of LIN
Television Corporation at December 31, 1996 and 1995, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedules,
when considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
/s/ Ernst & Young, LLP
----------------------
Fort Worth, Texas
January 17, 1997
F-1
<PAGE> 7
LIN TELEVISION CORPORATION
<TABLE>
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
ASSETS December 31,
1996 1995
------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 27,952 $ 18,025
Accounts receivable, less allowance for
doubtful accounts (1996-$1,960; 1995-$1,964) 52,666 50,732
Program rights 10,133 10,218
Other current assets 6,675 7,076
------------------------
Total current assets 97,426 86,051
Property and equipment, less accumulated
depreciation 106,441 95,570
Program rights and other noncurrent assets 10,427 12,433
Equity in joint venture 505 500
Intangible assets, less accumulated
amortization (1996-$59,348; 1995-$47,791) 381,145 392,702
------------------------
Total assets $ 595,944 $ 587,256
========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 7,593 $ 9,198
Program obligations 10,724 12,651
Accrued income taxes 2,518 8,461
Other accruals 20,023 21,725
------------------------
Total current liabilities 40,858 52,035
Long-term debt 350,000 387,000
Deferred income taxes 64,211 57,811
Other noncurrent liabilities 2,427 3,976
Stockholders' equity:
Preferred stock, $.01 par value:
Authorized shares - 15,000,000
Issued and outstanding shares - none -- --
Common stock, $0.01 par value:
Authorized shares - 90,000,000
Issued and outstanding shares -
1996-29,717,000;1995-29,489,000 297 295
Additional paid-in capital 276,997 271,446
Accumulated deficit (138,846) (185,307)
------------------------
Total stockholders' equity 138,448 86,434
------------------------
Total liabilities and stockholders' equity $ 595,944 $ 587,256
========================
</TABLE>
See accompanying notes.
F-2
<PAGE> 8
LIN TELEVISION CORPORATION
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
<CAPTION>
Year Ended December 31,
1996 1995 1994
------------------------------------
<S> <C> <C> <C>
Net revenues $273,367 $217,247 $150,523
Operating costs and expenses:
Direct operating 68,954 49,342 33,859
Selling, general & administrative 59,974 47,646 32,142
Corporate 6,998 5,747 4,330
Amortization of program rights 14,464 12,357 7,274
Depreciation and amortization
of intangible assets 23,817 17,127 8,849
------------------------------------
Total operating costs and expenses 174,207 132,219 86,454
------------------------------------
Operating income 99,160 85,028 64,069
Other (income) expense:
Interest expense 26,582 26,262 13,451
Investment income (1,354) (1,258) (813)
Other expense -- 320 520
Equity in loss of joint venture 995 -- --
------------------------------------
Total other expense 26,223 25,324 13,158
------------------------------------
Income before provision for
income taxes and extraordinary item 72,937 59,704 50,911
Provision for income taxes 26,476 21,674 19,726
------------------------------------
Income before extraordinary item 46,461 38,030 31,185
Extraordinary item: loss on
extinguishment of debt, net of
income tax benefit of $1,575 -- -- (2,925)
------------------------------------
Net income $ 46,461 $ 38,030 $ 28,260
====================================
Net income per share:
Income before extraordinary item $ 1.54 $ 1.28 $ 1.19
Extraordinary loss, net of income
tax benefit -- -- (0.11)
------------------------------------
Net income $ 1.54 $ 1.28 $ 1.08
====================================
Weighted average shares outstanding 30,120 29,757 26,136
====================================
</TABLE>
See accompanying notes.
F-3
<PAGE> 9
LIN TELEVISION CORPORATION
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
<CAPTION>
Total
Additional Stockholders'
Common Stock Paid-in Accumulated Equity
Shares Amount Capital Deficit (Deficit)
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994 25,816 $258 $152,177 $(251,550) $(99,115)
Net income -- -- 28,260 28,260
LIN Broadcasting corporate service
charges contributed to capital -- 3,752 -- 3,752
Forgiveness of intercompany taxes
payable to LIN Broadcasting -- 24,796 -- 24,796
Proceeds from exercises of stock options 9 -- 116 -- 116
Contribution of capital -- 547 (47) 500
Acquisition of station WTNH-TV 3,358 34 81,817 -- 81,851
-----------------------------------------------------------------
Balance at December 31, 1994 29,183 292 263,205 (223,337) 40,160
Net income -- -- 38,030 38,030
Proceeds from exercises of stock options
and issuance of Employee Stock
Purchase Plan shares 306 3 5,144 -- 5,147
Adjustment of prior year LIN
Broadcasting corporate service charges -- (365) -- (365)
Tax benefit from exercises of stock
options -- 3,462 -- 3,462
-----------------------------------------------------------------
Balance at December 31, 1995 29,489 $295 $271,446 $(185,307) $ 86,434
Net income -- -- 46,461 46,461
Proceeds from exercises of stock options
and issuance of Employee Stock
Purchase Plan shares 228 2 4,800 -- 4,802
Tax benefit from exercises of stock
options -- 751 -- 751
-----------------------------------------------------------------
Balance at December 31, 1996 29,717 $297 $276,997 $(138,846) $138,448
=================================================================
</TABLE>
See accompanying notes.
F-4
<PAGE> 10
LIN TELEVISION CORPORATION
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<CAPTION>
Year Ended December 31,
1996 1995 1994
--------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 46,461 38,030 $ 28,260
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization (includes amortization of
financing costs) 24,818 18,242 10,041
Extraordinary loss on extinguishment of debt -- -- 2,925
LIN Broadcasting corporate service charges forgiven -- (365) 4,252
Federal income taxes forgiven -- -- 24,796
Tax benefit from exercises of stock options 751 3,462 --
Deferred income taxes 3,127 2,719 (9,769)
Amortization of program rights 14,464 12,357 7,274
Program payments (15,536) (14,311) (8,387)
Equity in joint venture (5) (500)
Changes in operating assets and liabilities:
Accounts receivable (1,934) (4,954) (5,106)
Other assets (377) (3,148) (3,729)
Liabilities (5,703) 3,676 (903)
--------------------------------------
Total adjustments 19,605 17,178 21,394
--------------------------------------
Net cash provided by operating activities 66,066 55,208 49,654
INVESTING ACTIVITIES
Capital expenditures (27,557) (27,715) (20,406)
Acquisitions -- (97,563) (120,234)
Local Marketing Agreement expenditures -- (2,001) (1,619)
Asset dispositions 4,426 388 91
--------------------------------------
Net cash used in investing activities (23,131) (126,891) (142,168)
FINANCING ACTIVITIES
Proceeds from exercise of stock options and sale
of Employee Stock Purchase Plan shares 4,802 5,147 116
Principal payments on long-term debt (37,000) (25,000) (222,088)
Proceeds from long-term debt -- 92,000 320,000
Purchase of interest rate caps -- (346) --
Loan fees incurred on long-term debt (810) -- (7,068)
--------------------------------------
Net cash provided by (used in) financing activities (33,008) 71,801 90,960
--------------------------------------
Net increase (decrease) in cash and cash equivalents 9,927 118 (1,554)
Cash and cash equivalents at beginning of the year 18,025 17,907 19,461
--------------------------------------
Cash and cash equivalents at end of the year $ 27,952 $ 18,025 $ 17,907
======================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for:
Interest $ 28,866 $ 21,733 $ 12,073
Income taxes $ 25,285 $ 14,175 $ 4,605
Noncash investing and financing activity:
Common stock issued to purchase WTNH-TV $ -- $ -- $ 81,851
</TABLE>
See accompanying notes.
F-5
<PAGE> 11
LIN TELEVISION CORPORATION, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The Company owns and operates eight network-affiliated television stations,
including five in the forty largest domestic television markets. Additional
programming outlets are served through programming and marketing services
provided to four other stations pursuant to local marketing agreements and
through operation of low-power television stations and satellite broadcasting
facilities. The Company, with its predecessors, has been engaged in commercial
television broadcasting since 1966.
Stations in larger markets traditionally command higher revenues than stations
in smaller markets due to a larger audience. Station KXAS-TV, in the Dallas-Fort
Worth market, generates a substantial portion of the Company's net revenues.
Approximately 34%, 36% and 45% of the Company's 1996, 1995, and 1994 net
revenues, respectively, were attributable to KXAS-TV. A significant downturn in
the economy of that station's market could substantially affect the operating
results of the Company. The Company is also dependent on automotive-related
advertising. Approximately 24% of the Company's gross advertising revenues for
the years ended December 31, 1996 and 1995, and 21% for the year ended December
31, 1994, consisted of automotive advertising. A significant decrease in such
advertising could materially effect the Company's operating results.
<TABLE>
The Company currently owns the following network-affiliated television
broadcasting stations:
<CAPTION>
Station and Location Channel Network Affiliation
- - ----------------------------------------------------------------------------------------------
<S> <C> <C>
KXAS-TV, Fort Worth-Dallas, TX 5 (VHF) NBC
WISH-TV, Indianapolis, IN 8 (VHF) CBS
WTNH-TV, New Haven-Hartford, CT 8 (VHF) ABC
WIVB-TV, Buffalo, NY 4 (VHF) CBS
WAVY-TV, Portsmouth-Norfolk, VA 10 (VHF) NBC
KXAN-TV, Austin, TX 36 (UHF) NBC
WAND-TV, Decatur, IL 17 (UHF) ABC
WANE-TV, Fort Wayne, IN 15 (UHF) CBS
</TABLE>
<TABLE>
The Company also provides programming and marketing services to the following
stations pursuant to Local Marketing Agreements ("LMAs"):
<CAPTION>
Station and Location Channel Network Affiliation
- - ----------------------------------------------------------------------------------------------
<S> <C> <C>
KXTX-TV, Fort Worth-Dallas, TX 39 (UHF) Ind.
WBNE-TV, New Haven-Hartford, CT 59 (UHF) WB
WVBT-TV, Portsmouth-Norfolk, VA 43 (UHF) WB/Fox
KNVA-TV, Austin, TX 54 (UHF) WB
</TABLE>
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries, all of which are wholly-owned. All significant intercompany
accounts and transactions have been eliminated.
F-6
<PAGE> 12
LIN TELEVISION CORPORATION, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The management of the Company is required, in certain instances, to use
estimates and assumptions that affect the amounts reported in the financial
statements, and the notes thereto, in order to conform with generally accepted
accounting principles. The Company's actual results could differ from these
estimates.
CASH AND CASH EQUIVALENTS
Cash equivalents consist of highly liquid, short-term investments which have a
maturity of three months or less when purchased. The Company's excess cash is
invested primarily in commercial paper.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost and is depreciated by the
straight-line method over the estimated useful lives of the assets. The Company
recorded depreciation expense of $12.3 million, $8.2 million, and $6.1 million
during 1996, 1995, and 1994, respectively.
REVENUE RECOGNITION
Broadcast revenue is recognized during the period in which the advertising is
aired. Barter revenue is recognized based on the estimated fair value of the
product or service received.
ADVERTISING EXPENSE
The cost of advertising is expensed as incurred. The Company incurred $4.8
million, $4.1 million, and $2.3 million in advertising costs during 1996, 1995,
and 1994, respectively.
INTANGIBLE ASSETS
Intangible assets represent the excess of the purchase price over the estimated
fair value of identifiable assets acquired in business acquisitions, and is
attributable to FCC licenses, network affiliations, and goodwill. Intangible
assets acquired subsequent to October 31, 1970, the effective date of Accounting
Principles Board Opinion No. 17, are being amortized over 40 years. Intangible
assets of $5.8 million acquired prior to October 31, 1970 are not being
amortized. The carrying value of intangible assets will be evaluated, in terms
of undiscounted cash flows, if the facts and circumstances suggest that they may
be impaired. If this review indicates that intangible assets will not be
recoverable, the Company's carrying value of the intangible assets will be
reduced to their fair value.
PROGRAM RIGHTS
Program rights are recorded as assets when the license period begins and the
programs are available for broadcasting. Costs incurred in connection with the
purchase of programs to be broadcast within one year are classified as current
assets, while costs of those programs to be broadcast subsequently are
considered noncurrent. The program costs are charged to expense over their
estimated broadcast periods using the straight-line method. Program obligations
are classified as current or noncurrent in accordance with the payment terms of
the license agreement.
F-7
<PAGE> 13
LIN TELEVISION CORPORATION, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET INCOME PER SHARE
Net income per share is based on the average number of shares of common stock
outstanding during each year, assuming the shares issued in the Spin-Off (see
Note 2) were issued on January 1, 1994, and the dilutive effect of common stock
equivalents.
RECLASSIFICATION
Certain reclassifications have been made to the prior period financial
statements to conform to the current period financial statement presentation.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board (the "FASB") issued
Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of (Statement 121), which requires impairment
losses to be recorded on long-lived assets used in operations when indicators of
impairments are present and the undiscounted cash flows estimated to be
generated by those assets are less than the asset's carrying value. Statement
121 also addresses the accounting for long-lived assets that are expected to be
disposed of. The Company adopted Statement 121 in the first quarter of 1996 with
no material impact on the Company's financial results.
In October 1995, the FASB issued Statement No. 123, Accounting for Stock-Based
Compensation (Statement 123), which provides an alternative to Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees
(Opinion 25), in accounting for stock-based compensation issued to employees.
Statement 123 allows for a fair value based method of accounting for employee
stock options and similar equity instruments. However, for companies that
continue to account for stock-based compensation arrangements under Opinion 25,
Statement 123 requires disclosure of the pro forma effect on net income and
earnings per share of its fair value based accounting for those arrangements.
These disclosure requirements are effective for fiscal years beginning after
December 15, 1995, or upon initial adoption of the Statement, if earlier. The
Company has elected to continue accounting for stock options under the
provisions of Opinion 25 and the required pro forma disclosures are included in
Note 6.
2. SPIN-OFF AND ACQUISITIONS
On December 28, 1994, the Company became an independent public company when its
common stock was distributed to LIN Broadcasting shareholders on a tax-free
basis (the "Spin-Off"). The Company's common stock was distributed to the LIN
Broadcasting shareholders on the basis of one share of the Company's common
stock for every two shares of LIN Broadcasting common stock held of record as of
December 9, 1994. The shares issued in the Spin-Off have been accounted for as a
stock split and reflected in the consolidated financial statements as if they
were outstanding for all periods presented. In addition, the Company and LIN
Broadcasting simultaneously entered into an Asset Purchase Agreement with Cook
Inlet Communications, Inc. and Cook Inlet Communications Corp. (together, "Cook
Inlet"), pursuant to which the Company acquired substantially all of the assets
and assumed
F-8
<PAGE> 14
LIN TELEVISION CORPORATION, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
2. SPIN-OFF AND ACQUISITIONS (CONTINUED)
certain liabilities of station WTNH-TV, New Haven-Hartford, Connecticut, from
Cook Inlet (the "WTNH-TV Acquisition"). The acquisition was accounted for as a
purchase. The purchase price was $120.2 million in cash, subject to adjustments
as set forth in the Asset Purchase Agreement, and approximately 3.4 million
shares of the Company's common stock. On October 2, 1995, the Company purchased
100% of the issued and outstanding capital stock of Buffalo Management
Enterprises Co., Inc. ("Buffalo"), a wholly-owned subsidiary of King World,
which indirectly owns television station WIVB-TV, the CBS affiliate in Buffalo,
New York, in exchange for approximately $100.7 million in cash, subject to
adjustments as set forth in the Stock Purchase Agreement ("WIVB-TV Acquisition).
Buffalo owns 100% of the issued and outstanding stock of Buffalo Broadcasting
Co., Inc. ("Buffalo Broadcasting"), and holds the FCC license for station
WIVB-TV. Buffalo Broadcasting holds all of the operating assets of station
WIVB-TV.
The summarized unaudited pro forma results of operations set forth below for the
year ended December 31, 1995, assume the WIVB-TV Acquisition had taken place on
January 1, 1995. The pro forma financial information presented below does not
include results of Buffalo (the Parent), as such results were immaterial (in
thousands, except per share amounts).
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
<S> <C>
Net revenues $233,507
Net income 36,780
Net income per share $ 1.24
Weighted average shares outstanding 29,757
</TABLE>
The pro forma results do not necessarily represent results which would have
occurred if the acquisitions had taken place on the dates indicated nor are they
necessarily indicative of the results of future operations.
3. PROPERTY AND EQUIPMENT
The major classifications of property and equipment at December 31 were as
follows:
<TABLE>
<CAPTION>
1996 1995
(In thousands)
<S> <C> <C>
Land $ 11,533 $ 11,623
Buildings 34,677 32,723
Broadcasting equipment 122,807 103,834
----------------------------
169,017 148,180
Less accumulated depreciation 62,576 52,610
----------------------------
$106,441 $ 95,570
============================
</TABLE>
4. LONG-TERM DEBT
Long-term debt consisted of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
(In thousands)
<S> <C> <C>
Term credit facility $ - $175,000
Revolving credit facility 350,000 212,000
---------------------------
$350,000 $387,000
===========================
</TABLE>
F-9
<PAGE> 15
LIN TELEVISION CORPORATION, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
4. LONG-TERM DEBT (CONTINUED)
In August 1996, the Company renegotiated the terms of its Bank Credit Facility
primarily to reduce the interest attributable to outstanding debt. The Bank
Credit Facility, as amended, permits the Company to borrow up to $600 million of
an eight-year, reducing revolving credit facility (the "Facility"). The Company
has indebtedness outstanding of $350 million and funds of $250 million available
under the Facility as of December 31, 1996.
The Company has and will continue to have significant cash interest expense
relating to the Bank Credit Facility, and a significant amount of the Company's
cash flow will be required to service its debt. The Company, on a consolidated
basis, reported interest expense of $26.6 million, $26.3 million, and $13.5
million for the three years ended December 31, 1996, 1995, and 1994,
respectively.
In connection with the retirement of the credit facility in place prior to the
Spin-Off (the "Previous Credit Facility"), the Company wrote off approximately
$4.5 million in unamortized fees and expenses in 1994. This has been reflected
as an extraordinary loss on extinguishment of debt, net of income tax benefit of
$1.6 million, in the accompanying consolidated statements of income for that
period. The Company also incurred financing and legal fees totaling
approximately $7.1 million in connection with the Bank Credit Facility, in 1994,
which are being amortized over the contractual term of the Bank Credit Facility.
Under the renegotiated terms of the Bank Credit Facility, interest is payable,
at the Company's discretion, at the higher of the prevailing prime rate or an
adjusted Federal Funds Rate, or LIBOR, plus an applicable margin that varies
from 0.4% to 1.0% based upon the ratio of the Company's consolidated total debt
to consolidated operating cash flow.
The commitment of the Facility will begin to reduce in semi-annual installments
commencing June 30, 1999 such that the annual commitment reduction will be $15
million in 1999, $60 million per year in years 2000 through 2003, and the
remaining $45 million in 2004. As of December 31, 1996, the Company would be
required, in 2001, to begin making payments to the extent that the balance
outstanding under the Facility exceeded the reduced commitment available and
continue making semi-annual installments under the revolving facility through
December 31, 2004, at which time the debt will be fully repaid. The Company is
required to apply cash proceeds from certain sales of assets which are not
reinvested in similar assets to the prepayment of loans. The Bank Credit
Facility, as amended, also permits the Company to solicit commitments for an
incremental $300 million, eight-year, reducing revolving credit facility (the
"Incremental Facility"). Aggregate commitments to the Incremental Facility, if
any, will reduce in eight equal semi-annual amounts beginning 2001 and ending
2004.
The weighted average interest rate on outstanding borrowings was 6.16%, 6.64%
and 8.50% at December 31, 1996, 1995 and 1994, respectively. The Company is also
required to pay quarterly commitment fees ranging from 0.1875% to 0.2500%, based
upon the Company's leverage ratio for that particular quarter, on any unused
portion of the Bank Credit Facility. The Company incurred commitment fees of
approximately $449,000, $811,000, and $150,000 for the three years ended
December 31, 1996, 1995, and 1994, respectively. In order to comply with
covenants under the Bank Credit Facility, prior to the renegotiated terms, and
to provide interest rate protection, the Company purchased interest rate caps at
a cost of $346,000 during the year ended December 31, 1995. The interest rate
caps cover notional amounts totaling $190.0 million, are based on three-month
LIBOR, and have strike rates of 9%. Each of these interest rate cap agreements
terminate on December 31, 1997. The costs of the interest rate caps are
capitalized and charged to interest expense over the lives of the caps. During
the past three years, the prevailing market rates have been below the rate caps
in effect; thus, the only effect on the Company's interest expense from such
transactions has been the amortization of the cost of these caps of $124,588,
$187,073 and $47,000 during the years ended December 31, 1996, 1995 and 1994,
respectively. Under the renegotiated terms of the Bank Credit Facility the
Company is no longer required to purchase interest rate caps.
F-10
<PAGE> 16
LIN TELEVISION CORPORATION, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
4. LONG-TERM DEBT (CONTINUED)
The Bank Credit Facility contains covenants restricting or limiting certain
activities, including (i) acquisitions and investments, including treasury
stock, (ii) incurrence of debt, (iii) distributions and dividends to
stockholders, (iv) mergers and sales of assets, (v) prepayments and subordinated
indebtedness, and (vi) creations of liens. The Company is required to apply cash
proceeds from certain sales of assets which are not reinvested in similar assets
and excess cash flow to the prepayment of loans. As security under the Bank
Credit Facility, the Company has given a negative pledge on the assets and
capital stock of each of its subsidiaries, which own all of the Company's
television properties. Such subsidiaries are restricted from making certain
distributions or payments to the Company. Under the Bank Credit Facility, the
Company must remain in compliance with a series of financial covenants, which
compare the levels of the Company's indebtedness to its cash flows as of the end
of each quarter. As of December 31, 1996, the Company was in compliance with all
covenants.
<TABLE>
The aggregate amounts of principal maturities under the Bank Credit Facility
subsequent to December 31, 1996 are as follows:
<CAPTION>
YEAR AMOUNT
---- ------
(In thousands)
<S> <C>
1997-2000 $ -
2001 20,000
Thereafter 330,000
--------
$350,000
========
</TABLE>
5. PRIVATE MARKET VALUE GUARANTEE
AT&T Corp. ("AT&T"), through its wholly-owned subsidiary, AT&T Wireless Services
Inc. ("AT&T Wireless"), currently owns approximately 45.4% of the outstanding
common stock of the Company. AT&T Wireless has agreed, pursuant to a Private
Market Value Guarantee ("PMVG"), to either offer to purchase the remaining
shares of the Company in 1998 for the private market value (as defined) or put
the Company up for sale. If AT&T Wireless does not agree to acquire such
remaining shares, the Company will be sold in its entirety in a manner intended
to maximize shareholder value. There is no assurance that AT&T Wireless will
agree to acquire shares of the Company's Common Stock for private market value.
If AT&T Wireless does not offer to acquire such shares, there is no assurance
that the Company will be sold in its entirety, or, if sold, that the
consideration obtained will be considered favorable to holders of shares of the
Company's Common Stock. The PMVG also provides for the selection of three
independent directors (the "Independent Directors") who serve on the Company's
Board of Directors.
On December 9, 1996 AT&T issued a press release stating that AT&T will review
its investment in the Company and will evaluate alternatives which could result
in the disposition, either through private or public sales of some or all of the
shares of the Company's Common Stock held by AT&T Wireless.
6. STOCKHOLDERS' EQUITY
Pursuant to the Company's 1994 Adjustment Stock Incentive Plan, nonqualified
options have been granted to officers and key employees of the Company and LIN
Broadcasting who held options to purchase LIN Broadcasting stock at the date of
the Spin-Off. On December 28, 1994, one option to purchase stock of the Company
was granted for every two LIN Broadcasting options held, resulting in 701,175
options to purchase common stock of the Company being granted at exercise prices
ranging from $2.74 to $20.02.
F-11
<PAGE> 17
LIN TELEVISION CORPORATION, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
6. STOCKHOLDERS' EQUITY (CONTINUED)
The Company and LIN Broadcasting have agreed to divide the income tax benefits
of such stock option exercises between the two companies with such benefits
accruing to the company whose employee exercises an option. A total of
3,701,175 options to purchase common stock are authorized to be granted under
the Company's 1994 Adjustment Stock Incentive Plan, 1994 Amended and Restated
Stock Incentive Plan and the 1994 Nonemployee Director Stock Incentive Plan.
Options are generally not exercisable until one year after grant, have vesting
terms of four years or less, and expire ten years from date of grant.
Pursuant to the Company's stock option plans, in the event of a "change in
control" (as defined in the plans) of the Company, vested options at the time of
the change in control may be surrendered by officers of the Company, subject to
Section 16 of the Securities Exchange Act of 1934, as amended, in exchange for a
cash payment per share by the Company equal to the difference between the
exercise price for the option and the greater of the highest amount paid to any
holder of common stock by the acquirer in connection with the resulting change
in control or the highest selling price of the common stock during the 90-day
period prior to the date of surrender of the option. Notwithstanding the
foregoing, if a change in control results in the consolidation or merger of the
Company with AT&T or a successor to AT&T under the PMVG and AT&T or any
successor is the surviving company, or if AT&T becomes the beneficial owner of
80% or more of the Company's stock (other than pursuant to a private market
sale, as defined in the Company's PMVG with AT&T), each outstanding option shall
be converted into an option to purchase AT&T's Class A Common Stock. If a change
in control results from a private market sale, upon a vote by a majority of the
Company's Independent Directors, each outstanding option will be converted into
an option to purchase the common stock of the acquirer. If the Independent
Directors do not approve the conversion, the Company may (but is not required
to) cancel each such option in exchange for a payment per share in cash equal to
the excess of the purchase price per share in the private market sale over the
exercise price of such option.
The Company's Employee Stock Purchase Plan (the "ESPP") allows eligible
employees to purchase shares of the Company's common stock, through regular
payroll deductions, at 85% of the closing market price of the stock as of the
last trading day of each month. The ESPP restricts a participant to purchase no
more than $25,000 of stock in any calendar year. A total of 300,000 shares have
been authorized under the ESPP. Common shares of 48,280 and 48,823 were
purchased and distributed to employees participating in the plan during 1996 and
1995, respectively, at prices ranging from $26.56 to $35.38 per share in 1996
and $21.89 to $31.98 per share in 1995. No common stock was purchased and
distributed to employees during 1994 as part of this plan.
The Company has elected to follow Opinion 25 and the related Interpretations in
accounting for these plans. There has been no compensation expense associated
with these fixed-option plans recognized under Opinion 25 because the exercise
price of the Company's employee stock options equals the market price of the
underlying stock on the date of grant.
Pro forma information regarding net income and earnings per share is required by
Statement 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions for grants in 1996 and 1995: risk-free interest rates of 5.48% and
7.63% for 1996 and 1995, respectively; volatility factors of the expected market
price of the Company's Common Stock of 0.30; and a weighted-average expected
life of the option of seven years.
F-12
<PAGE> 18
LIN TELEVISION CORPORATION, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
6. STOCKHOLDERS' EQUITY (CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. Because the rules for
pro forma disclosure under Statement 123 expressly prohibit retroactive
recognition of compensation expense, the following disclosures will not be
indicative of future compensation expense until the new rules are applied to all
outstanding nonvested awards. The Company's pro forma information follows (in
thousands except for earnings per share information):
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Pro forma net income $43,611 $36,447
Pro forma earnings per share:
Primary $ 1.45 $ 1.22
Fully diluted $ 1.44 $ 1.23
</TABLE>
A summary of the Company's stock option activity, and related information for
the years ended December 31 follows:
<TABLE>
<CAPTION>
1996 1995
Weighted Price Weighted Price
Average Per Average Per
Options Exercise Price Share Options Exercise Price Share
---------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding-beginning
of year 1,621,305 $24.43 $ 4.05 - 37.50 1,282,169 $20.23 $ 2.74 - 26.63
Granted 581,311 $30.44 30.25 - 40.25 714,600 $28.05 26.63 - 37.50
Exercised (179,604) $18.61 4.05 - 30.25 (257,257) $16.37 2.74 - 20.02
Canceled or Expired (163,214) $25.93 12.95 - 26.63 (118,207) $21.68 4.05 - 33.63
--------- ---------
Outstanding-end of year 1,859,798 $26.75 $ 4.05 - 40.25 1,621,305 $24.43 $ 4.05 - 37.50
========= =========
Exercisable at end of year 722,833 $23.44 552,195 $19.95
Weighted-average fair value of
options granted during the year $13.49 $13.85
</TABLE>
Exercise prices for options outstanding as of December 31, 1996 range from $4.05
to $40.25 with approximately 90% of those options ranging in exercise price from
$26.63 to $40.25. The weighted-average remaining contractual life of those
options is eight years. There were 722,833, 552,195, and 342,697 exercisable
options to purchase shares as of December 31, 1996, 1995, and 1994,
respectively. As of December 31, 1996, there were 1,328,266 options available
for future grants.
7. INCOME TAXES
Deferred taxes are determined based on the estimated future tax effects of
differences between the financial statement and the tax basis of assets and
liabilities given the provisions of enacted tax laws.
The components of the deferred tax liability are as follows at December 31 (in
thousands):
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Intangible assets $50,353 $48,183
Property and equipment 12,164 10,990
Other 1,694 (1,362)
-----------------------
$64,211 $57,811
=======================
</TABLE>
F-13
<PAGE> 19
LIN TELEVISION CORPORATION, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
7. INCOME TAXES (CONTINUED)
The Company and its subsidiaries were involved in a tax-sharing agreement with
LIN Broadcasting whereby the Company was included in the consolidated federal
income tax return filed by LIN Broadcasting through the date of the Spin-Off.
Pursuant to the tax-sharing agreement, tax liabilities and benefits were
allocated to the Company as if the Company was a separate and independent
entity, with a net operating loss carryforward of $140.5 million as of January
1, 1990. As a result of the allocated net operating loss carryforward described
above, current federal tax liabilities to LIN Broadcasting of $24.8 million for
1994 were deemed to be forgiven and were credited to paid-in capital. This
tax-sharing agreement was terminated on December 28, 1994 due to the Spin-Off.
The Company is responsible for filing its own consolidated income tax returns
subsequent to that date.
Income tax expense included in the accompanying consolidated statements of
income consisted of the following:
<TABLE>
<CAPTION>
1996 1995 1994
(In thousands)
<S> <C> <C> <C>
Current:
Federal $22,439 $18,816 $24,871
State 910 139 4,624
----------------------------------------
23,349 18,955 29,495
Deferred:
Federal 3,258 2,220 (9,738)
State (131) 499 (31)
----------------------------------------
3,127 2,719 (9,769)
----------------------------------------
$26,476 $21,674 $19,726
========================================
</TABLE>
The following table reconciles the amount that would be provided by applying the
35% federal statutory rate to income before income tax expense to the actual
income tax expense:
<TABLE>
<CAPTION>
1996 1995 1994
(In thousands)
<S> <C> <C> <C>
Expense assuming federal statutory rate $25,528 $20,896 $17,819
State taxes, net of federal tax benefit 962 793 1,226
Amortization 1,077 740 628
Other (1,091) (755) 53
-------------------------------------
$26,476 $21,674 $19,726
=====================================
</TABLE>
8. MUSIC LICENSE SETTLEMENTS
During 1994, the Company's pretax income was increased by $1.3 million due to
the reversal of reserves which were provided with respect to music license fees.
These reserves were no longer required as a result of a court decision resolving
litigation between the broadcasting industry and ASCAP as to the appropriate
level of music license fee payments and a similar settlement with BMI. These
amounts were credited to direct operating expense in the accompanying
consolidated statements of income.
9. RELATED-PARTY TRANSACTIONS
LIN Broadcasting provided certain managerial and administrative services to the
Company and funded certain general and administrative costs incurred by the
Company totaling $4.3 million during 1994. Under the terms of the Previous
Credit Facility, the Company was prohibited from entering into any agreement or
directly or indirectly
F-14
<PAGE> 20
LIN TELEVISION CORPORATION, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
9. RELATED-PARTY TRANSACTIONS (CONTINUED)
paying or becoming liable to any person other than employees for corporate
services rendered in excess of 3/4 of one percent of consolidated operating cash
flow (as defined in the Previous Credit Facility) for the previous quarter.
Pursuant to these terms, the Company was charged $580,000 by LIN Broadcasting
for corporate services during 1994. The balance of those charges of $3.7 million
was contributed to the Company's capital in 1994. LIN Broadcasting also paid, on
behalf of the Company, $850,000 during 1994 for insurance coverage.
Allocations through the date of the Spin-Off for managerial and administrative
services were based on the proportion of LIN Broadcasting's revenues, wages, and
properties allocable to the Company, which management believes provides a
reasonable basis for allocation. Subsequent to the Spin-Off, the Company is
responsible for all of its administrative charges.
The Company provided management services to station WOOD-TV in Grand Rapids,
Michigan, and indirectly to station WOTV-TV in Kalamazoo, Michigan. WOOD-TV is
owned by a subsidiary of LIN Broadcasting and WOTV-TV is party to a Local
Marketing Agreement with a subsidiary of LIN Broadcasting. Services provided to
these stations included administration, finance, and centralized programming and
services purchasing. The Company allocated expense of $490,000 during the year
ended December 31, 1994 to WOOD-TV for such services. After the Spin-Off, the
Company entered into a consulting agreement with LIN Broadcasting pursuant to
which the Company is providing management and operations consulting for WOOD-TV
and WOTV-TV. The Company received $250,000 for these services during each of the
years ended December 31, 1996 and 1995, respectively. In addition, WOOD-TV
participates in the Company's programming joint ventures. Costs are allocated to
WOOD-TV based on relative market size. Programming and service purchases are
directly charged to WOOD-TV and WOTV-TV based on the actual contract or a
relative-market-size allocation.
10. RETIREMENT PLANS
At the date of the Spin-Off, the Company and LIN Broadcasting entered into an
Employee Benefits Allocation Agreement (the "Employee Benefits Agreement")
pursuant to which the Company assumed sponsorship of the LIN Broadcasting
Corporation Profit Sharing Plan (the "Profit Sharing Plan"), the LIN
Broadcasting Corporation 401(k) Plan (the "401(k) Plan"), the LIN Broadcasting
Corporation Retirement Plan (the "Retirement Plan"), and the LIN Broadcasting
Corporation Supplemental Benefit Retirement Plan (the "Supplemental Plan")
(collectively, the "Plans"). The Employee Benefits Agreement provides that the
Company will generally be responsible for all contributions required to be made
to the Plans and any benefits payable or other obligations of LIN Broadcasting
under the Plans, including any responsibilities related to current or former
employees of LIN Broadcasting. The assets held in trust for the Profit Sharing,
401(k), and Retirement plans, all of which are funded plans, shall remain in
those plans. The Employee Benefits Agreement specifies that service with LIN
Broadcasting after the Spin-Off date is considered to be service with the
Company for purposes of vesting and eligibility for benefits, but not for
accrual of additional benefits. The Retirement Plan is a defined benefit
retirement plan covering employees of the Company who meet certain requirements,
including length of service and age. Pension benefits vest on completion of five
years of service and are computed, subject to certain adjustments, by
multiplying 1.25% of the employee's last three years' average annual
compensation by the number of years of credited service. The assets of the
pension plan are invested primarily in long-term fixed income securities, large
and small cap U.S. equities, and international equities. The Company's policy is
to fund at least the minimum requirement and is further based on legal
requirements and tax considerations. No funding was required for the Retirement
Plan during 1996.
F-15
<PAGE> 21
LIN TELEVISION CORPORATION, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
10. RETIREMENT PLANS (CONTINUED)
As a result of the WIVB-TV Acquisition, LIN Television Corporation assumed
sponsorship of the Buffalo Broadcasting Company Retirement Plan. On January 1,
1996, the Buffalo Broadcasting Company Retirement Plan was merged into the LIN
Television Retirement Plan.
The Company's share of net pension expense is based on actuarial valuations of
the Company's employees participating in the Retirement Plan. The components of
net pension expense were as follows for the years ended December 31 (in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Service cost of current period $ 891 $ 573 $ 584
Interest cost on projected
benefit obligation 3,312 2,887 2,741
Actual return on plan assets (5,960) (9,609) 479
Net amortization of unrecognized net transition assets
and deferral of variance from actual return on assets 3,253 7,017 (2,546)
---------------------------------
Net pension expense 1,496 868 1,258
Net pension expense allocated to LIN Broadcasting -- 16 178
---------------------------------
Net pension expense allocated to the Company $ 1,496 $ 852 $ 1,080
=================================
</TABLE>
The following table sets forth the Retirement Plans' funded status and amounts
recognized in the Company's balance sheet at December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995
FUNDED UNFUNDED FUNDED UNFUNDED
-----------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of accumulated plan
benefits, including vested benefits of $44,948
and $42,401 in 1996 and 1995, respectively $45,222 $ 651 $42,928 $ 449
=====================================================
Plan assets at fair value, primarily
publicly traded stocks and bonds $50,631 $ - $45,935 $ -
Less projected benefit obligation for service
rendered to date 47,338 1,167 45,038 909
-----------------------------------------------------
Plan assets in excess of (less than)
projected benefit obligation 3,293 (1,167) 897 (909)
Unrecognized prior service cost 2,435 14 3,631 16
Unrecognized net (gain) loss (6,641) 330 (3,831) 284
Unrecognized net transition asset
being recognized over 15 years (1,567) (81) (1,880) (97)
-----------------------------------------------------
Accrued pension cost included in balance sheet $(2,480) $ (904) $(1,183) $(706)
=====================================================
</TABLE>
The assumptions used in accounting for the Retirement Plan are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Weighted average assumed discount rate 7.25% 7.0% 8.0%
Assumed rate of increases in future compensation
levels 5.0% 5.0% 5.5%
Expected long-term rate of return on plan assets 8.0% 8.0% 8.0%
</TABLE>
F-16
<PAGE> 22
LIN TELEVISION CORPORATION, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
11. COMMITMENTS
The Company leases land, buildings, vehicles, and equipment under operating
lease agreements which expire at various dates through the year 2007.
Commitments for these noncancelable operating lease payments subsequent to
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
-----------------------------------------------------------
(In thousands)
<S> <C>
1997 $1,021
1998 679
1999 547
2000 335
2001 208
Thereafter 456
------
$3,246
======
</TABLE>
Rent expense included in the consolidated statements of income was $2.7 million,
$2.4 million and $1.2 million for the years ended December 31, 1996, 1995 and
1994, respectively.
The Company has also entered into commitments for future syndicated news,
entertainment, and sports programming. Future payments associated with these
commitments subsequent to December 31, 1996 are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
-----------------------------------------------------------
(In thousands)
<S> <C>
1997 $12,313
1998 19,402
1999 16,975
2000 13,166
2001 95
Thereafter -
-------
$61,951
=======
</TABLE>
12. CONTINGENCIES
The Company currently and from time to time is involved in litigation incidental
to the conduct of its business. The Company is not a party to any lawsuit or
proceeding that, in management's opinion, is likely to have a material adverse
effect on the Company's financial condition, results of operations, or cash
flows.
13. FINANCIAL INSTRUMENTS
Concentrations of credit risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and
unsecured trade accounts receivable.
The Company maintains cash and cash equivalents at various financial
institutions. These financial institutions are located throughout the country.
The Company's cash equivalents consist of investments in the commercial paper of
various Companies. The Company performs periodic evaluations of the relative
credit standing of these entities.
F-17
<PAGE> 23
LIN TELEVISION CORPORATION, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
13. FINANCIAL INSTRUMENTS (CONTINUED)
Concentrations of credit risk with respect to trade accounts receivable are
limited due to the large number of agencies comprising the Company's accounts
receivable.
14. FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash and cash equivalents
The carrying amount of cash and cash equivalents reported in the Company's
Balance Sheet approximates fair value.
Accounts receivable and accounts payable
The carrying amounts reported in the Company's Balance Sheet for accounts
receivable and accounts payable approximates their fair value.
Long-term debt
Interest rates associated with the Company's long-term debt are, at the
discretion of the Company, based on the prevailing prime rate or LIBOR rates
plus an applicable margin. Interest is fixed for a period ranging from one month
to 12 months, depending on availability of the interest basis selected, except
if the Company selects a prime-based loan, in which case the interest rate will
fluctuate during the period as the prime rate fluctuates. Due to the frequent
repricing of the borrowings, the book values of the liabilities at December 31,
1996 approximate market values.
15. LOCAL MARKETING AGREEMENTS
The Company entered into Local Marketing Agreements ("LMAs") with the owners of
KXTX-TV in Dallas-Fort Worth, Texas in June 1994, KNVA-TV in Austin, Texas in
August 1994, WBNE-TV in New Haven-Hartford, Connecticut in December 1994 and
WVBT-TV in Norfolk-Portsmouth, Virginia in December 1994. Under the LMAs, the
Company is required to pay fixed periodic fees and incur programming and
operating costs relating to the LMA stations, but retains all advertising
revenues. All of the LMAs have 10-year terms.
In connection with the KXTX-TV and KNVA-TV LMAs, the Company purchased 4.49%
ownership interests in some of the licensees of the stations and entered into
option and put agreements that would enable or require the Company to purchase
the stations for a fixed amount under certain conditions, including a change by
the FCC in its "duopoly" rules to permit such acquisitions. The aggregate
purchase price for these interests and the purchase options was approximately
$1.6 million. The "duopoly" rules currently prevent the Company from acquiring
its LMA stations, thereby preventing the Company from directly fulfilling its
obligations under put options that such LMAs have with the Company. Should
future legislation amend the current single-market ownership limits, the
Company, at the option of the parties involved in the LMA contracts, could be
required to purchase certain of the LMA stations. Potential commitments for
fulfilling these put options totaled a maximum of $14.0 million, subject to
adjustments for monthly rental payments, at December 31, 1996.
Future minimum payments required under all four of these LMAs for the years
ending December 31 are as follows:
F-18
<PAGE> 24
LIN TELEVISION CORPORATION, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
15. LOCAL MARKETING AGREEMENTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR AMOUNT
-------------------------------------------------------------
(In thousands)
<S> <C>
1997 $ 1,451
1998 1,421
1999 1,379
2000 1,404
2001 1,404
Thereafter 3,785
-------
$10,844
=======
</TABLE>
16. UNAUDITED QUARTERLY DATA
<TABLE>
<CAPTION>
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
1996
- - ----
Net revenues $57,539 $75,576 $68,780 $71,472
Operating income 15,990 28,274 22,378 32,518
Net income 5,952 13,841 9,745 16,923
Net income per share $ 0.20 $ 0.46 $ 0.32 $ 0.56
1995
- - ----
Net revenues $48,417 $55,861 $49,066 $63,903
Operating income 14,912 24,601 18,502 27,013
Net income 5,312 11,157 7,913 13,648
Net income per share $ 0.18 $ 0.37 $ 0.26 $ 0.47
1994
- - ----
Net revenues $30,981 $37,774 $36,440 $45,328
Operating income 10,411 18,289 13,769 21,600
Income before extraordinary item 5,906 7,579 6,553 11,147
Net income 5,906 7,579 6,553 8,222
Per Share:
Income before extraordinary item $ 0.23 $ 0.29 $ 0.25 $ 0.42
Net income $ 0.23 $ 0.29 $ 0.25 $ 0.31
</TABLE>
F-19
<PAGE> 25
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
LIN TELEVISION CORPORATION
CONDENSED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
ASSETS December 31,
1996 1995
-----------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 16 $ 16
Other current assets 402 465
-----------------------
Total current assets 418 481
Property and equipment, less accumulated
depreciation 430 563
Program rights and other noncurrent assets 428 10
Investments in wholly-owned subsidiaries 137,925 86,679
-----------------------
Total assets $139,201 $87,733
=======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other current liabilities $ 817 $ 1,299
Deferred income taxes (64) --
Stockholders' equity:
Common stock 297 295
Other stockholders' equity 138,151 86,139
-----------------------
Total stockholders' equity 138,448 86,434
-----------------------
Total liabilities and stockholders' equity $139,201 $87,733
=======================
</TABLE>
See accompanying notes.
S-1
<PAGE> 26
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)
LIN TELEVISION CORPORATION
CONDENSED STATEMENTS OF INCOME
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
----------------------------------------
<S> <C> <C> <C>
Operating revenue:
Management fees $ 7,248 $ 5,997 $ 4,330
Other operating income 16 -- --
----------------------------------------
Total operating revenue 7,264 5,997 4,330
Operating costs and expenses:
General and administrative 6,998 5,747 4,342
Depreciation expense 172 103 36
----------------------------------------
Total operating costs and expenses 7,170 5,850 4,378
----------------------------------------
Operating income (loss) 94 147 (48)
Other (income) expense:
Interest expense -- -- 13,149
Investment income -- -- (777)
Other expense -- -- 520
----------------------------------------
Total other expense -- -- 12,892
----------------------------------------
Income (loss) before provision for
income taxes and extraordinary item 94 147 (12,940)
Provision (benefit) for income taxes 150 25 (5,047)
----------------------------------------
(56) 122 (7,893)
Equity in net income of subsidiaries 46,517 37,908 39,078
----------------------------------------
Income before extraordinary item 46,461 38,030 31,185
Extraordinary item: loss on extinguishment
of debt, net of income tax benefit of $1,575 -- -- (2,925)
----------------------------------------
Net income $46,461 $38,030 $ 28,260
========================================
</TABLE>
See accompanying notes.
S-2
<PAGE> 27
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)
LIN TELEVISION CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
---------------------------------
<S> <C> <C> <C>
Net cash used in operating activities $ (731) $ (161) $ (14,290)
INVESTING ACTIVITIES
Capital expenditures (39) (610) (7)
Dividends received from subsidiaries -- -- 354,395
Acquisitions -- -- (120,234)
Contribution to subsidiary (4,032) (4,374) (16,391)
---------------------------------
Net cash provided by (used in) investing activities (4,071) (4,984) 217,763
FINANCING ACTIVITIES
Proceeds from exercise of stock options and
Employee Stock Purchase Plan shares 4,802 5,147 116
Principal payments on long-term debt -- -- (222,088)
---------------------------------
Net cash provided by (used in) financing activities 4,802 5,147 (221,972)
---------------------------------
Net increase (decrease) in cash and cash equivalents -- 2 (18,499)
Cash and cash equivalents at beginning of the year 16 14 18,513
---------------------------------
Cash and cash equivalents at end of the year $ 16 $ 16 $ 14
=================================
</TABLE>
See accompanying notes.
S-3
<PAGE> 28
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)
LIN TELEVISION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
A. BASIS OF PRESENTATION
In these parent-only financial statements, LIN Television Corporation's (the
"Company") investments in subsidiaries is stated at cost plus equity in the
undistributed earnings (losses) of subsidiaries since the date of their
acquisition. These parent-only financial statements should be read in
conjunction with the Company's consolidated financial statements and notes
thereto.
B. LONG-TERM DEBT
Immediately prior to the Spin-Off (see Note 2 to the Company's consolidated
financial statements), the Company was restructured to allow the banks in the
Bank Credit Facility to have a pledge of the stock in the borrowing entity. As a
result, LWWI Broadcasting, Inc. ("LWWI") was named the borrower under the Bank
Credit Facility and virtually all of the Company's operating assets and
liabilities were transferred to LWWI as restricted assets. The Company has
guaranteed the payment of all principle and interest under the Bank Credit
Facility.
C. DIVIDENDS FROM SUBSIDIARIES
Cash dividends paid to the Company from its subsidiaries totaled $354.4 million
in 1994.
D. INCOME TAXES
Pursuant to a tax-sharing agreement between the Company and LIN Broadcasting,
current federal tax liabilities to LIN Broadcasting of $24.8 million for 1994
were deemed to be forgiven and were credited to paid-in capital. This tax
sharing agreement was terminated on December 28, 1994 due to the Spin-Off and
the Company has filed, and will continue to file, its own consolidated income
tax returns subsequent to that date. The Company was owed amounts from its
subsidiaries for their allocated share of federal income taxes. These amounts
were contributed to the subsidiaries' capital accounts in a similar fashion.
S-4
<PAGE> 29
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
LIN TELEVISION CORPORATION
(In Thousands)
<TABLE>
<CAPTION>
Additions
-----------------------
Balance at Charged to Charged
Beginning of Costs and to Other Balance at End
Period Expenses Accounts Deductions of Period
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996:
Deducted from asset accounts:
Allowance for Doubtful Accounts: $1,964 $496 $ -- $ 500 1 $1,960
Year ended December 31, 1995:
Deducted from asset accounts:
Allowance for Doubtful Accounts: $2,301 $527 $168 3 $1,032 1 $1,964
Year ended December 31, 1994:
Deducted from asset accounts:
Allowance for Doubtful Accounts: $1,703 $318 $530 2 $ 250 1 $2,301
</TABLE>
1 Uncollected accounts written off, net of recoveries.
2 Additions charged to Other Accounts for 1994 reflects Allowances for Bad
Debts at Acquisition of $431 for WTNH-TV and $99 related to accounts
receivable purchased as part of the Local Marketing Agreement for KXTX-TV.
3 Additions charged to Other Accounts for 1995 reflects Allowances for Bad
Debts at Acquisition of $168 for WIVB-TV.
S-5
<PAGE> 1
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-3 No. 333-21471) of LIN Television Corporation and in the related Prospectus
of our report dated January 17, 1997, with respect to the consolidated financial
statements and schedules of LIN Television Corporation in this Annual Report on
Form 10-K for the year ended December 31, 1996.
/s/ Ernst & Young, LLP
----------------------
Fort Worth, Texas
March 19, 1997
