ITEM 1. FINANCIAL STATEMENTS
Introductory Comments:
The Financial Statements included herein have been prepared by Benedek
Broadcasting Corporation ('Benedek Broadcasting'), without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to such rules and regulations. It is suggested that these
Financial Statements be read in conjunction with the financial information set
forth in Benedek Broadcasting's Annual Report for the fiscal year ended December
31, 1995.
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BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, MARCH 31,
1995 1996
------------ ------------
(UNAUDITED)
ASSETS
Current Assets
Cash and cash equivalents................................................ $ 9,668,331 $ 7,381,555
Accounts receivable, net................................................. 12,529,696 7,890,745
Current portion of program broadcast rights.............................. 1,575,325 1,204,839
Prepaid expenses......................................................... 576,697 871,637
------------ ------------
Total current assets........................................... 24,350,049 17,348,776
------------ ------------
Property and Equipment........................................................ 20,035,715 19,797,949
------------ ------------
Intangible Assets............................................................. 60,420,617 59,952,607
------------ ------------
Other Assets.................................................................. 9,646,940 10,833,916
------------ ------------
$114,453,321 $107,933,248
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current Liabilities
Current maturities of notes and leases payable........................... $ 318,077 $ 304,712
Current maturities of program broadcast rights payable................... 2,042,643 1,753,982
Accounts payable and accrued expenses.................................... 7,824,296 3,643,758
Deferred revenue......................................................... 500,000 500,000
------------ ------------
Total current liabilities...................................... 10,685,016 6,202,452
------------ ------------
Long-Term Obligations
Notes and capital leases payable......................................... 135,448,948 135,377,037
Program broadcast rights payable......................................... 632,444 479,296
Deferred revenue......................................................... 4,250,000 4,180,123
------------ ------------
140,331,392 140,036,456
------------ ------------
Stockholder's Deficit
Common stock, no par, authorized 200 shares;
issued 178.09 shares................................................... 1,046,500 1,046,500
Additional paid-in capital............................................... 2,758,178 2,758,178
Accumulated deficit...................................................... (38,886,616) (40,629,189)
------------ ------------
(35,081,938) (36,824,511)
Less 30.24 shares held in treasury....................................... 1,481,149 1,481,149
------------ ------------
(36,563,087) (38,305,660)
------------ ------------
$114,453,321 $107,933,248
------------ ------------
------------ ------------
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BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
MARCH 31,
--------------------------
1995 1996
----------- -----------
(UNAUDITED)
Net revenues..................................................................... $10,149,581 $11,682,871
----------- -----------
Operating expenses:
Selling, technical and program expenses..................................... 4,413,684 5,537,572
General and administrative.................................................. 1,893,658 2,010,695
Depreciation and amortization............................................... 856,107 1,360,430
Corporate................................................................... 343,256 495,892
----------- -----------
7,506,705 9,404,589
----------- -----------
Operating income....................................................... 2,642,876 2,278,282
Financial income (expense):
Interest expense
Cash interest.......................................................... (2,410,691) (4,026,253)
Other interest......................................................... (752,658) (100,457)
----------- -----------
(3,163,349) (4,126,710)
Interest income............................................................. 136,906 105,855
----------- -----------
(3,026,443) (4,020,855)
----------- -----------
Income (loss) before extraordinary item................................ (383,567) (1,742,573)
Extraordinary item, gain on early extinguishment of debt......................... 6,863,762 --
----------- -----------
Net income (loss)...................................................... $ 6,480,195 $(1,742,573)
----------- -----------
----------- -----------
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BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S DEFICIT
THREE MONTHS ENDED MARCH 31, 1996
ADDITIONAL
COMMON PAID-IN ACCUMULATED TREASURY
STOCK CAPITAL DEFICIT STOCK TOTAL
---------- ---------- ------------ ----------- ------------
Balance at December 31, 1995..................... $1,046,500 $2,758,178 $(38,886,616) $(1,481,149) $(36,563,087)
Net (loss) (unaudited)...................... -- -- (1,742,573) -- (1,742,573)
---------- ---------- ------------ ----------- ------------
Balance at March 31, 1996 (unaudited)............ $1,046,500 $2,758,178 $(40,629,189) $(1,481,149) $(38,305,660)
---------- ---------- ------------ ----------- ------------
---------- ---------- ------------ ----------- ------------
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6
BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH
31,
--------------------------
1995 1996
------------ -----------
(UNAUDITED)
Cash Flows From Operating Activities
Net income (loss)........................................................... $ 6,480,195 $(1,742,573)
Adjustments to reconcile net income (loss) to net cash (used in) operating
activities:
Amortization of program broadcast rights............................... 510,967 597,308
Depreciation and amortization.......................................... 529,889 892,420
(Gain) on early extinguishment of debt................................. (6,863,762) --
Amortization of intangibles and deferred loan costs.................... 482,505 568,467
(Gain) loss on sale of property and equipment.......................... (2,853) --
Payment of deferred and contingent interest............................ (4,405,746) --
Payment of prepayment premiums......................................... (2,748,896) --
Other.................................................................. 31,691 --
Change in assets and liabilities, net of effects of acquisition:
Receivables............................................................ 539,518 4,638,951
Prepaid expenses....................................................... (204,128) (294,940)
Payments on program broadcast rights payable........................... (429,021) (522,121)
Accounts payable and accrued expenses.................................. 593,679 (4,222,411)
Deferred income........................................................ -- (69,877)
Contingent and deferred interest payable............................... 567,533 --
------------ -----------
Net cash (used in) operating activities........................... (4,918,429) (154,776)
------------ -----------
Cash Flows From Investing Activities
Purchase of property and equipment.......................................... (359,996) (612,766)
Proceeds from sale of equipment............................................. 9,173 --
Payment for acquisition of station.......................................... (26,558,152) --
Deposit on acquisition...................................................... -- (1,000,000)
Payment of acquisition costs................................................ -- (334,569)
Other....................................................................... -- (15)
------------ -----------
Net cash (used in) investing activities........................... (26,908,975) (1,947,350)
------------ -----------
Cash Flows From Financing Activities
Principal payments on notes, including capital lease payables............... (96,075,529) (85,276)
Proceeds from senior secured debt issue..................................... 135,000,000 --
Payment of debt acquisition costs........................................... (5,085,944) (99,374)
------------ -----------
Net cash provided by (used in) financing activities............... 33,838,527 (184,650)
------------ -----------
Increase (decrease) in cash and cash equivalents.................. 2,011,123 (2,286,776)
Cash and cash equivalents:
Beginning................................................................... 4,617,242 9,668,331
------------ -----------
Ending...................................................................... $ 6,628,365 $ 7,381,555
------------ -----------
------------ -----------
Supplemental Disclosure of Cash Flow Information
Cash payments for interest.................................................. $ 5,894,091 $ 8,034,064
------------ -----------
------------ -----------
Supplemental Schedule of Non-Cash Investing and Financing Activities
Acquisition of program broadcast rights..................................... $ 318,442 $ 80,312
Note payable and capital lease obligation incurred for purchase of
equipment................................................................. 107,672 --
Equipment acquired by barter transactions................................... 84,676 41,888
------------ -----------
------------ -----------
Acquisition of WTVY-TV:
Cash purchase price.................................................... $ 26,558,152 $ --
------------ -----------
------------ -----------
Property and equipment acquired at fair market value................... 7,533,196 --
Intangible assets acquired............................................. 21,306,181 --
Other, net............................................................. (281,225) --
------------ -----------
28,558,152 --
Less: Application of advance to affiliate.............................. 2,000,000 --
------------ -----------
$ 26,558,152 $ --
------------ -----------
------------ -----------
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BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NOTE A) -- NATURE OF BUSINESS AND BASIS OF PRESENTATION
NATURE OF BUSINESS: Benedek Broadcasting Corporation ('Benedek
Broadcasting') owns and operates nine television stations located throughout the
United States which operate under network affiliation contracts. The networks
provide programs to the affiliated stations and the stations sell commercial
time during the programs to national, regional, and local advertisers. The
networks also sell commercial time during the programs to national advertisers.
Credit arrangements are determined on an individual customer basis.
BASIS OF PRESENTATION: The unaudited consolidated financial statements
include the accounts of Benedek Broadcasting and Benedek Broadcasting Company,
L.L.C. (the 'LLC'), a 99% owned subsidiary. All significant intercompany items
and transactions have been eliminated in the unaudited consolidated financial
statements. The financial statements include all adjustments, consisting of
normal and recurring adjustments, which are considered necessary in the opinion
of management for the fair presentation of the financial position as of March
31, 1996 and the results of operations and cash flows for the three months ended
March 31, 1995 and 1996. These financial statements do not include all the
information and footnotes required by generally accepted accounting principles.
Operating results for the three month period ended March 31, 1996 are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 1996.
(NOTE B) -- BUSINESS COMBINATION AND ACQUISITION
(1) BUSINESS COMBINATION:
On March 10, 1995, two affiliates of Benedek Broadcasting, Blue Grass
Television, Inc. ('Blue Grass') and Youngstown Broadcasting Co., Inc.
('Youngstown'), were merged into Benedek Broadcasting. Since these entities had
identical stockholder ownership, this was accounted for in a manner similar to
that in pooling-of-interests accounting.
Benedek Broadcasting issued 92.85 shares of its common stock for all the
outstanding common shares of Blue Grass and Youngstown, and such shares are
treated as if they were outstanding for all periods presented.
On March 10, 1995, the FCC (as defined) licenses for all the television
stations owned by Benedek Broadcasting were transferred to the newly formed LLC.
Benedek Broadcasting owns 99% of the membership interest in the LLC and its
principal stockholder owns the remaining 1% minority membership interest. The
assets, liabilities and results of operations of the LLC are included in these
consolidated financial statements. The minority membership interest in the LLC
is not significant.
(2) ACQUISITION:
On March 31, 1995, Benedek Broadcasting acquired substantially all of the
assets of WTVY-TV which serves Dothan, Alabama and Panama City, Florida for an
aggregate purchase price of approximately $28,699,000. The acquired assets
include property and equipment with a fair market value of approximately
$7,533,000 and program broadcast rights of approximately $93,000, offset by
liabilities under program broadcast rights of approximately $79,000 and net
liabilities under trade and barter contracts of approximately $155,000. Benedek
Broadcasting also assumed commitments of approximately $214,000 related to
programming. The excess of the purchase price over the net assets acquired
totaled approximately $21,306,000 and has been allocated to intangible assets
which will be amortized over 40 years. This transaction has been accounted for
under the purchase method of accounting. Accordingly, the results of operations
for WTVY-TV have been included in the results of operations of these
consolidated financial statements since the date of acquisition.
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BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The results of operations for the three months ended March 31, 1995 and
1996, assuming the acquisition of WTVY-TV had taken place on January 1, 1995,
are as follows:
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1995 1996
------------ ------------
(PRO FORMA) (ACTUAL)
Net revenue.................................................. $ 11,793,367 $ 11,682,871
Operating expenses........................................... 9,346,343 9,404,589
Financial expense............................................ 3,952,089 4,020,855
------------ ------------
(Loss) before extraordinary item........................ (1,505,065) (1,742,573)
Extraordinary item........................................... 6,863,762 --
------------ ------------
Net income (loss)....................................... $ 5,358,697 $ (1,742,573)
------------ ------------
------------ ------------
(NOTE C) -- NOTES PAYABLE AND CAPITAL LEASES PAYABLE
During 1995, Benedek Broadcasting issued $135,000,000 of 11 7/8% Senior
Secured Notes due 2005 (the 'Senior Secured Notes'). The net proceeds of the
Senior Secured Notes were used, together with available cash, to (i) refinance
certain indebtedness, (ii) finance the acquisition of WTVY-TV and (iii) pay fees
and expenses in connection with the offering. The Senior Secured Notes have been
registered with the Securities and Exchange Commission in a registration
statement declared effective in November 1995.
The Senior Secured Notes bear interest at the rate of 11 7/8%, payable
semiannually on March 1 and September 1 of each year and mature in March 2005.
The Senior Secured Notes may be redeemed by Benedek Broadcasting in whole or in
part after March 1, 2000 subject to certain prepayment premiums. The Senior
Secured Notes contain various restrictive covenants relating to limitations on
dividends, transactions with affiliates, further issuance of debt, and sales of
assets, among others. As of March 31, 1996, Benedek Broadcasting was in
compliance with these covenants.
The Senior Secured Notes are collateralized by Benedek Broadcasting's 99%
interest in the LLC, certain agreements and contract rights related to the
stations which includes network affiliation agreements and certain general
intangibles. The minority membership interest holder has also entered into a
pledge and security agreement providing for the pledge of his 1% interest in the
LLC.
Notes payable consist of the following:
DECEMBER 31, MARCH 31,
1995 1996
------------ --------------
Senior Secured Notes...................................... $135,000,000 $ 135,000,000
Capital leases and other.................................. 767,025 681,749
------------ --------------
135,767,025 135,681,749
Less current maturities................................... 318,077 304,712
------------ --------------
$135,448,948 $ 135,377,037
------------ --------------
------------ --------------
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BENEDEK BROADCASTING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1995, the notes provide for annual reductions as follows:
YEAR ENDING DECEMBER 31,
------------------------
1996.......................................... $ 318,077
1997.......................................... 256,980
1998.......................................... 144,882
1999.......................................... 45,778
2000.......................................... 1,308
Thereafter.................................... 135,000,000
------------
$135,767,025
------------
------------
(NOTE D) -- ACQUISITIONS AND SUBSEQUENT EVENTS
(1) ACQUISITIONS:
On November 22, 1995, Benedek Broadcasting entered into an agreement,
subject to regulatory approvals, to acquire the assets of five television
stations (and four satellite stations) for a total purchase price of
$54,500,000.
On December 15, 1995, Benedek Broadcasting entered into a stock purchase
agreement to acquire all the issued and outstanding shares of capital stock of a
corporation which owns and operates eight television stations for a purchase
price of $270,000,000.
(2) SUBSEQUENT EVENTS:
On April 10, 1996, the sole stockholder of Benedek Broadcasting formed
Benedek Communications Corporation ('BCC') in contemplation of the above
acquisitions. At the closing of the acquisitions and related financing plans,
the sole stockholder of Benedek Broadcasting will contribute all of the
outstanding shares of common stock of Benedek Broadcasting to BCC in exchange
for the issuance to him of all of the outstanding shares of common stock of BCC.
The financing plan for the acquisitions contemplates that (i) BCC issue (a)
senior subordinated discount notes, (b) units, consisting of exchangeable
preferred stock and warrants to acquire common stock of BCC, and (c) seller
junior discount preferred stock and (ii) Benedek Broadcasting enter into a new
credit agreement. The new credit agreement is planned to include $120,000,000
term loan facilities and a $15,000,000 revolving credit facility. These
financing arrangements are currently being negotiated and have not been
finalized.
On April 18, 1996, Benedek Broadcasting formed Benedek License Corporation
('BLC') in contemplation of the aforementioned acquisitions. Upon consummation
of the acquisitions and the related financing plans, the LLC will be merged with
BLC and all of the licenses and authorizations issued by the FCC for the
operation of the Stations (as defined) will be held by BLC.
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BENEDEK BROADCASTING COMPANY, L.L.C.
(A LIMITED LIABILITY COMPANY)
BALANCE SHEET
MARCH 31,
1996
DECEMBER 31, -----------
1995
------------ (UNAUDITED)
ASSETS
Federal Communication Commission (FCC)
Licenses, at cost, less accumulated amortization of $326,312 and $435,083
for 1995 and 1996, respectively........................................... $ 15,304,138 $15,195,367
------------ -----------
$ 15,304,138 $15,195,367
------------ -----------
------------ -----------
MEMBERS' EQUITY
Members' Equity (Note C)
Members' capital............................................................ $ 16,211,650 $16,211,650
Deduct notes receivable arising from the issuance of membership certificates
(Note B).................................................................. 581,200 15,630,450
------------ -----------
15,630,450 581,200
Accumulated deficit......................................................... (326,312) (435,083)
------------ -----------
$ 15,304,138 $15,195,367
------------ -----------
------------ -----------
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BENEDEK BROADCASTING COMPANY, L.L.C.
(A LIMITED LIABILITY COMPANY)
STATEMENT OF OPERATIONS
FOR THE PERIOD FEBRUARY 28, 1995 THROUGH MARCH 31, 1995
AND THREE MONTHS ENDED MARCH 31, 1996
1995 1996
-------- -----------
(UNAUDITED)
Operating expense, amortization........................................................ $ 18,971 $ 108,771
-------- -----------
Net (loss)........................................................................ $(18,971) $ (108,771)
-------- -----------
-------- -----------
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BENEDEK BROADCASTING COMPANY, L.L.C.
(A LIMITED LIABILITY COMPANY)
STATEMENT OF MEMBERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1996
NOTES RECEIVABLE
ARISING FROM
THE ISSUANCE OF
MEMBERS' MEMBERSHIP ACCUMULATED
CAPITAL CERTIFICATES DEFICIT TOTAL
----------- ----------------- ----------- -----------
Balance at December 31, 1995................ $16,211,650 $(581,200) $(326,312) $15,304,138
Net (loss) (unaudited)...................... -- -- (108,771) (108,771)
----------- ----------------- ----------- -----------
Balance March 31, 1996(unaudited)........... $16,211,650 $(581,200) $(435,083) $15,195,367
----------- ----------------- ----------- -----------
----------- ----------------- ----------- -----------
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BENEDEK BROADCASTING COMPANY, L.L.C.
(A LIMITED LIABILITY COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FEBRUARY 28, 1995 THROUGH MARCH 31, 1995
AND THREE MONTHS ENDED MARCH 31, 1996
1995 1996
----------- -----------
(UNAUDITED)
Cash flows from operating activities
Net (loss).................................................................... $ (18,971) $ (108,771)
Adjustment to reconcile net (loss) to net cash provided by operating
activities:
Amortization............................................................. 18,971 108,771
----------- -----------
Net cash provided by operating activities........................... -- --
----------- -----------
Net change in cash.................................................. -- --
----------- -----------
Cash:
Beginning..................................................................... -- --
----------- -----------
Ending........................................................................ $ -- $ --
----------- -----------
----------- -----------
Supplemental schedule of noncash investing and financing activities
FCC licenses acquired by issuing membership certificates...................... $15,630,450
-----------
Notes received for issuance of membership certificates........................ $ 581,200
-----------
-----------
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BENEDEK BROADCASTING COMPANY, L.L.C.
(A LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS
(NOTE A) -- NATURE OF BUSINESS AND BASIS OF PRESENTATION
NATURE OF BUSINESS: Benedek Broadcasting Company, L.L.C. (the 'LLC') is a
99% owned subsidiary of Benedek Broadcasting Corporation ('Benedek
Broadcasting'). The LLC located in Rockford, Illinois, was formed February 28,
1995 under the Delaware Limited Liability Company Act with a term of 30 years.
The LLC was formed to own and hold the Federal Communication Commission ('FCC')
licenses for the nine television stations owned by Benedek Broadcasting which
are located throughout the United States.
BASIS OF PRESENTATION: The financial statements include all adjustments,
consisting of normal and recurring adjustments, which are considered necessary
in the opinion of management for the fair presentation of the financial position
as of March 31, 1996 and the results of operations and cash flows for the period
February 28, 1995 through March 31, 1995 and the three months ended March 31,
1996. These financial statements do not include all the information and
footnotes required by generally accepted accounting principles.
Operating results for the three month period ended March 31, 1996 are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 1996.
(NOTE B) -- NOTES RECEIVABLE ARISING FROM THE ISSUANCE OF MEMBERSHIP
CERTIFICATES
The notes receivable arising from the issuance of membership certificates
are noninterest bearing and are due on demand.
(NOTE C) -- MEMBERS' EQUITY
The members have pledged their membership interests in the LLC as
collateral on the Senior Secured Notes issued by Benedek Broadcasting which had
an outstanding balance at December 31, 1995 and March 31, 1996 of $135,000,000.
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