Exhibit 99.1
New Vision Television, LLC
and Subsidiaries
Consolidated Financial Statements
Nine Months Ended September 30, 2012 and 2011
New Vision Television, LLC and Subsidiaries
Index
September 30, 2012 and 2011
| Page(s) |
|
|
Unaudited Consolidated Financial Statements |
|
|
|
Balance Sheets | 1 |
|
|
Statements of Operations | 2 |
|
|
Statements of Cash Flows | 3 |
|
|
Notes to Financial Statements | 4–9 |
New Vision Television, LLC and Subsidiaries
Unaudited Consolidated Balance Sheets
September 30, 2012 and 2011
|
| September 30, |
| December 31, |
| ||
(in thousands of dollars) (unaudited) |
| 2012 |
| 2011 |
| ||
|
|
|
|
|
| ||
Assets |
|
|
|
|
| ||
Current assets |
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 9,170 |
| $ | 9,680 |
|
Accounts receivable, less allowance for doubtful accounts of $489 and $665 |
| 23,607 |
| 25,092 |
| ||
Current portion of program broadcast rights |
| 574 |
| 4,302 |
| ||
Prepaid expenses and other current assets |
| 2,070 |
| 2,272 |
| ||
Total current assets |
| 35,421 |
| 41,346 |
| ||
Property and equipment, net |
| 46,908 |
| 54,525 |
| ||
FCC licenses and other intangibles, net |
| 43,859 |
| 46,023 |
| ||
Other assets |
| 4,232 |
| 4,708 |
| ||
Total assets |
| $ | 130,420 |
| $ | 146,602 |
|
Liabilities and Members’ Equity |
|
|
|
|
| ||
Current liabilities |
|
|
|
|
| ||
Accounts payable |
| $ | 2,316 |
| $ | 2,573 |
|
Accrued payroll and vacation |
| 3,276 |
| 2,462 |
| ||
Current portion of program broadcast rights payable |
| 1,111 |
| 4,753 |
| ||
Accrued interest |
| 277 |
| 775 |
| ||
Other current liabilities |
| 5,869 |
| 3,130 |
| ||
Current portion of capital lease obligations |
| 204 |
| 164 |
| ||
Current portion of long-term debt |
| 2,438 |
| 3,938 |
| ||
Total current liabilities |
| 15,491 |
| 17,795 |
| ||
Long-term debt and capital lease obligations, less current portion |
| 58,552 |
| 81,997 |
| ||
Other long-term liabilities |
| 1,818 |
| 1,534 |
| ||
|
| 75,861 |
| 101,326 |
| ||
Members’ equity |
| 54,559 |
| 45,276 |
| ||
Total liabilities and members’ equity |
| $ | 130,420 |
| $ | 146,602 |
|
The accompanying notes are an integral part of these financial statements.
New Vision Television, LLC and Subsidiaries
Unaudited Consolidated Statements of Operations
Nine Months Ended September 30, 2012 and 2011
|
| Nine Months Ended September 30, |
| ||||
(in thousands of dollars) (unaudited) |
| 2012 |
| 2011 |
| ||
|
|
|
|
|
| ||
Net revenues |
| 99,112 |
| 80,777 |
| ||
Operating expenses |
|
|
|
|
| ||
Direct operating expense |
| 39,754 |
| 38,451 |
| ||
General, selling and administrative expense |
| 30,716 |
| 26,269 |
| ||
Depreciation and amortization expense |
| 10,843 |
| 11,990 |
| ||
Barter expense |
| 3,999 |
| 4,323 |
| ||
Acquisition expense |
| — |
| 547 |
| ||
|
| 85,312 |
| 81,580 |
| ||
Total operating income (loss) |
| 13,800 |
| (803 | ) | ||
Other income (expense) |
|
|
|
|
| ||
Interest expense |
| (4,828 | ) | (6,034 | ) | ||
Loss on extinguishment of debt |
| — |
| (2,690 | ) | ||
Other |
| 311 |
| — |
| ||
Total other expense |
| (4,517 | ) | (8,724 | ) | ||
Net income (loss) |
| $ | 9,283 |
| $ | (9,527 | ) |
The accompanying notes are an integral part of these financial statements.
New Vision Television, LLC and Subsidiaries
Unaudited Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2012 and 2011
|
| Nine Months Ended September 30, |
| ||||
(in thousands of dollars) (unaudited) |
| 2012 |
| 2011 |
| ||
|
|
|
|
|
| ||
Cash flows from operating activities |
|
|
|
|
| ||
Net income (loss) |
| $ | 9,283 |
| $ | (9,527 | ) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
| ||
Depreciation and amortization |
| 11,263 |
| 12,156 |
| ||
Amortization of deferred financing costs and debt discount |
| 829 |
| 679 |
| ||
Other |
| 776 |
| 99 |
| ||
Loss on extinguishment of debt |
| — |
| 2,690 |
| ||
Changes in assets and liabilities: |
|
|
|
|
| ||
Accounts receivable |
| 1,485 |
| 2,195 |
| ||
Prepaids, other assets and program broadcast rights |
| 3,867 |
| (2,099 | ) | ||
Accounts payable, accrued expenses and program broadcast rights payable |
| (644 | ) | (30 | ) | ||
Accrued interest |
| (499 | ) | 17 |
| ||
Other liabilities |
| (211 | ) | 113 |
| ||
Net cash provided by operating activities |
| 26,149 |
| 6,293 |
| ||
Cash flows from investing activities |
|
|
|
|
| ||
Capital expenditures |
| (1,480 | ) | (8,436 | ) | ||
Acquisitions, net of cash acquired |
| — |
| (1,548 | ) | ||
Net cash used in investing activities |
| (1,480 | ) | (9,984 | ) | ||
Cash flows from financing activities |
|
|
|
|
| ||
Proceeds from the issuance of long-term debt, net of debt discount |
| — |
| 74,015 |
| ||
Principal payments on long term-debt and capital lease financing |
| (25,179 | ) | (68,860 | ) | ||
Payments of deferred financing costs |
| — |
| (2,902 | ) | ||
Net cash (used in) provided by financing activities |
| (25,179 | ) | 2,253 |
| ||
Net increase (decrease) in cash and cash equivalents |
| (510 | ) | (1,438 | ) | ||
Cash and cash equivalents |
|
|
|
|
| ||
Beginning of period |
| 9,680 |
| 9,434 |
| ||
End of period |
| $ | 9,170 |
| $ | 7,996 |
|
|
|
|
|
|
| ||
Supplemental Disclosures: |
|
|
|
|
| ||
Cash paid for interest |
| $ | 4,495 |
| $ | 5,333 |
|
Capital expenditure funded by capital lease borrowings |
| 80 |
| — |
| ||
The accompanying notes are an integral part of these financial statements.
New Vision Television, LLC and Subsidiaries
Notes to Consolidated Financial Statements
Nine Months Ended September 30, 2012
(in thousands of dollars, except unit data)
1. Description of the Business
New Vision Television, LLC, the ultimate parent company of NVT Networks, LLC, was formed on August 5, 2009 and commenced operations on September 30, 2009. New Vision Television, LLC and its wholly owned subsidiaries (“New Vision” or the “Company”) operates or services thirteen major network affiliated stations, all of which are affiliated with NBC, ABC, CBS or FOX. In addition, the Company also has agreements to broadcast the CW or MyNetwork TV affiliated programs at four of the thirteen stations. New Vision has operations and/or receives revenue in Oregon, Hawaii, Georgia, Kansas, Ohio, Pennsylvania, Iowa, Minnesota, Alabama, South Carolina and California.
On May 4, 2012, the Company entered into agreement to sell substantially all of its station assets to LIN Television Corporation, a wholly-owned subsidiary of LIN TV Corp. (“LIN Media”; NYSE: TVL) for approximately $334.9 million. In conjunction with the sale, LIN Television Corporation is assuming approximately $12 million in long-term debt. The remaining debt will be paid out of the proceeds to the Company. The closing of the transaction occurred on October 12, 2012.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of our Company, New Vision’s wholly-owned and majority-owned and controlled subsidiaries, and variable interest entities (“VIEs”) for which the Company is the primary beneficiary. New Vision reviews all local marketing agreements (“LMAs”), shared services agreements (“SSAs”), or joint sales agreements (“JSAs”), to evaluate whether consolidation of such arrangements is required. All intercompany accounts and transactions have been eliminated.
Reclassifications
During the nine-months ended September 30, 2012, the Company corrected its accounting for first run broadcasting. As of December 31, 2011 and June 30, 2012 the Company had capitalized and accrued first-run broadcasting of approximately $3.7 million and $1.1 million, respectively. The Company has not corrected any previously issued financial statements as it was considered immaterial to all prior balance sheets and there was no impact on the Statements of Operations or the Statements of Cash Flows.
PBC and NVTLH
In determining whether New Vision is the primary beneficiary of a VIE for financial reporting purposes, the Company considers whether is has the power to direct the activities of the VIE that most significantly impact the economic performance of the VIE and whether it has the obligations to absorb losses or the right to receive returns that would be significant to the VIE. New Vision consolidates VIEs when it is the primary beneficiary.
PBC and NVTLH are 100% owned by independent third parties and were formed by a nominal capital investment so there is no non-controlling interest presented in the Company’s financial statements.
New Vision has a JSA and a SSA with PBC’s Savannah, GA and Topeka, KS stations, as well as an SSA with PBC’s Youngstown, OH station. New Vision also has a Local Marketing Agreement (“LMA”) with NVTLH. The agreements permit New Vision to sell and retain a percentage of the net
New Vision Television, LLC and Subsidiaries
Notes to Consolidated Financial Statements
Nine Months Ended September 30, 2012
(in thousands of dollars, except unit data)
revenue from the stations’ advertising time in return for monthly payments to New Vision of the remaining percentage of net revenue as described in the various agreements.
The Company determined PBC and NVTLH are VIEs, and as a result of the JSA, SSA, and LMA, New Vision has a variable interest in PBC and NVTLH. New Vision is the primary beneficiary of PBC and NVTLH, and therefore, New Vision consolidates PBC and NVTLH within its unaudited interim consolidated financial statements.
The carrying amounts and classifications of the assets, liabilities and member’s interest of PBC and NVTLH, which have been included in the consolidated balance sheets as of September 30, 2012, were as follows (in thousands):
|
| September 30, |
| December 31, |
| ||
(in thousands of dollars) |
| 2012 |
| 2011 |
| ||
Assets |
|
|
|
|
| ||
Current assets |
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 308 |
| $ | 779 |
|
Accounts receivable, less allowance for doubtful accounts |
| 1,112 |
| 993 |
| ||
Current portion of program broadcast rights |
| 423 |
| 355 |
| ||
Intercompany receivables |
| 4,606 |
| — |
| ||
Prepaid expenses and other current assets |
| 37 |
| 234 |
| ||
Total current assets |
| 6,486 |
| 2,361 |
| ||
Property and equipment, net |
| 2,738 |
| 3,534 |
| ||
FCC licenses and other intangibles, net |
| 6,777 |
| 7,167 |
| ||
Other assets |
| 715 |
| 378 |
| ||
Total assets |
| $ | 16,716 |
| $ | 13,440 |
|
Liabilities and Members’ Equity |
|
|
|
|
| ||
Current liabilities |
|
|
|
|
| ||
Accounts payable and accrued expenses |
| $ | 212 |
| $ | 398 |
|
Current portion of program broadcast rights payable |
| 496 |
| 336 |
| ||
Other current liabilities |
| 198 |
| 107 |
| ||
Intercompany payables |
| — |
| 4,859 |
| ||
Current portion of long term debt |
| 276 |
| 340 |
| ||
Total current liabilities |
| 1,182 |
| 6,040 |
| ||
Long-term debt and capital lease obligations, less current portion |
| 7,969 |
| 8,139 |
| ||
Other long-term liabilities |
| 424 |
| 405 |
| ||
|
| 9,575 |
| 14,584 |
| ||
Accumulated equity(deficit) |
| 7,141 |
| (1,144 | ) | ||
Total liabilities and members’ equity |
| $ | 16,716 |
| $ | 13,440 |
|
New Vision Television, LLC and Subsidiaries
Notes to Consolidated Financial Statements
Nine Months Ended September 30, 2012
(in thousands of dollars, except unit data)
Interim Financial Statements
The Consolidated Financial Statements as of September 30, 2012 and for the nine months ended September 30, 2012 and 2011 are unaudited. However, in the opinion of management, such financial statements include all adjustments (consisting solely of normal recurring adjustments) necessary for the fair statement of the financial information included herein in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and consistent with Article 10 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). The preparation of the Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Results of operations for interim periods are not necessarily indicative of results for the full year. These Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and related Notes included in New Vision Television LLC and its Subsidiaries financial statements ended December 31, 2011. The balance sheet at December 31, 2011 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.
Income Taxes
The Company is a multi-member limited liability company (“LLC”) that is treated as a partnership for income tax purposes. Given this ownership structure, the Company does not provide for income taxes in these financial statements. Also, as described above, the Company consolidates PBC and NVTLH pursuant to ASC 810, Consolidation. These entities are also multi-member LLCs that are treated as partnerships for income tax purposes. Given this structure, the Company also does not provide income taxes relative to these entities.
The New Vision operating agreement provides that tax distributions are required to be made on a quarterly basis to its members for payment of taxes to the extent funds are available for distribution and to the extent that a tax liability is generated. The tax distributions for each member are calculated, in general, as the taxable income allocated to such member for the fiscal quarter multiplied by the applicable tax rate less the amount of nontax distributions received by the member for that fiscal quarter. At the current time, no tax distribution is determined to be necessary.
Fair Value of Financial Instruments
Due to their short maturities, the carrying amounts of accounts receivable, accounts payable and accrued expenses approximated their fair values at September 30, 2012 and December 31, 2011. The interest rates on the Company’s long-term debt and capital lease obligations reflect current market rates. Accordingly, the carrying amounts of these instruments approximate fair value The fair values of our long-term debt are estimated based on Level 2 inputs of the three-level fair value hierarchy, including quoted market prices for the same issues, or based on the current rates offered to us for our debt.
3. Intangible Assets
The following table summarizes the carrying amounts of intangible assets:
New Vision Television, LLC and Subsidiaries
Notes to Consolidated Financial Statements
Nine Months Ended September 30, 2012
(in thousands of dollars, except unit data)
|
| September 30, 2012 |
| December 31, 2011 |
| ||||||||
|
| Gross Carrying |
| Accumulated |
| Gross Carrying |
| Accumulated |
| ||||
|
| Amount |
| Amortization |
| Amount |
| Amortization |
| ||||
FCC licenses, network affiliation agreements and JSA agreements |
| $ | 36,709 |
| $ | — |
| $ | 36,709 |
| $ | — |
|
Satellite retransmission agreements |
| 11,568 |
| (10,688 | ) | 11,787 |
| (9,251 | ) | ||||
Favorable leases |
| 4,528 |
| (1,071 | ) | 4,528 |
| (803 | ) | ||||
Advertiser base |
| 2,425 |
| (456 | ) | 2,425 |
| (341 | ) | ||||
Other definite-lived intangible assets |
| 2,420 |
| (1,576 | ) | 2,219 |
| (1,250 | ) | ||||
Intangibles, net |
| $ | 57,650 |
| $ | (13,791 | ) | $ | 57,668 |
| $ | (11,645 | ) |
4. Long-term Debt and Capital Lease Obligation
Long-term debt and capital lease obligations consist of the following:
|
| September 30, 2012 |
| December 31, 2011 |
| ||
Term loan credit agreement ($49,750 and $74,813, net of $691 and $894, as of September 30, 2012 and December 31, 2011) |
| $ | 49,060 |
| $ | 73,919 |
|
Capital lease obligations |
| 12,134 |
| 12,180 |
| ||
Total debt and capital lease obligations |
| 61,194 |
| 86,099 |
| ||
Less: Current portion of debt and capital lease obligations |
| (2,642 | ) | (4,102 | ) | ||
Total long-term debt and capital lease obligations |
| $ | 58,552 |
| $ | 81,997 |
|
5. Other Legal Matters
The Company is involved in certain legal actions and claims arising in the normal course of business. It is the opinion of management, based on consultation with the Company’s outside legal counsel, that resolution of these matters will not have a material adverse effect on the Company’s financial position, results of operations or liquidity.
6. Subsequent Events
The Company evaluated all events or transactions that occurred after the balance sheet date of September 30, 2012 through March 14, 2013, when these financial statements were available for issuance.
On October 12, 2012, the Company sold substantially all of its station assets to LIN Television Corporation, as further discussed with Note 1.