SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended Commission file number:
June 30, 1997 333-02302
ALLBRITTON COMMUNICATIONS COMPANY
(Exact name of registrant as specified in its charter)
Delaware 78-180-3105
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
808 Seventeenth Street, N.W.
Suite 300
Washington, D.C. 20006-3903
(Address of principal executive offices)
Registrant's telephone number, including area code: 202-789-2130
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Number of shares of Common Stock outstanding as of August 14, 1997: 20,000
shares.
This Form 10-Q, including the section entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations" contains certain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended, that are not historical facts. Such forward-looking
information may include, without limitation, statements that the Company does
not expect that lawsuits, environmental costs, commitments, contingent
liabilities, labor negotiations or other matters will have a material adverse
effect on its consolidated financial condition, results of operations or
liquidity and other similar expressions concerning matters that are not
historical facts, and projections as to the Company's financial results. Such
statements are subject to certain risks and uncertainties which could cause
actual results to differ materially from those anticipated in the
forward-looking statements. Important factors that could cause such
differences include but are not limited to contractual relationships, industry
competition, regulatory developments, the effects of adverse general economic
conditions, and the ultimate outcome of environmental investigations or
proceedings and other types of claims and litigation.
As a result of these and other factors, the Company may experience material
fluctuations in future operating results on a quarterly or annual basis, which
could materially and adversely affect its business, financial condition, and
operating results. An investment in the Company involves various risks,
including those mentioned above and elsewhere in this report and those which
are detailed from time-to-time in the Company's other filings with the
Securities and Exchange Commission.
Readers should not place undue reliance on forward-looking statements, which
reflect management's view only as of the date hereof. The Company undertakes
no obligation to publicly release the result of any revisions to these
forward-looking statements which may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
ALLBRITTON COMMUNICATIONS COMPANY
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION PAGE
Item 1. Financial Statements:
Consolidated Statements of Operations and
Retained Earnings for the Three and Nine
Months Ended June 30, 1996 and 1997 1
Consolidated Balance Sheets as of
September 30, 1996 and June 30, 1997 2
Consolidated Statements of Cash Flows for
the Nine Months Ended June 30, 1996 and
1997 3
Notes to Interim Consolidated Financial
Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 6
PART II OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
Exhibit Index 15
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
ALLBRITTON COMMUNICATIONS COMPANY
(an indirectly wholly-owned subsidiary of Perpetual Corporation)
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(Dollars in thousands)
(unaudited)
Three Months Ended Nine Months Ended
June 30, June 30,
1996 1997 1996 1997
Operating revenues, net $ 44,857 $ 46,543 $ 117,051 $ 131,359
Television operating expenses, excluding
depreciation and amortization 22,956 25,007 65,411 78,594
Depreciation and amortization 3,509 4,883 6,657 13,932
Corporate expenses 1,629 935 3,816 3,126
------- ------- ------ ------
28,094 30,825 75,884 95,652
------- ------- ------ ------
Operating income 16,763 15,718 41,167 35,707
------- ------- ------ ------
Nonoperating income (expense)
Interest income
Related party 553 553 1,659 1,659
Other 213 42 918 166
Interest expense (10,323) (10,775) (24,664) 31,913)
Other, net (190) (372) (861) (954)
------- ------- ------ ------
(9,747) (10,552) (22,948) (31,042)
------- ------- ------ ------
Income before income taxes and
extraordinary item 7,016 5,166 18,219 4,665
Provision for income taxes 2,726 2,254 7,221 3,180
------- ------- ------ ------
Income before extraordinary item 4,290 2,912 10,998 1,485
Extraordinary loss on early repayment of debt,
net of related income tax benefit of $5,387 (7,750)
------- ------- ------ ------
Net income 4,290 2,912 3,248 1,485
Retained earnings, beginning of period 43,517 43,675 62,940 45,102
Dividend from WSET and WCIV to Westfield (18,371)
Tax benefit distributed (10)
------- ------- ------ ------
Retained earnings, end of period $ 47,807 $ 46,587 $ 47,807 $ 46,587
========= ========= ======== ========
See accompanying notes to interim consolidated financial statements.
ALLBRITTON COMMUNICATIONS COMPANY
(an indirectly wholly-owned subsidiary of Perpetual Corporation)
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
June 30,
September 30, 1997
Assets 1996 (unaudited)
Current assets
Cash and cash equivalents $ 12,108 $ 12,925
Accounts receivable, net 29,219 37,430
Program rights 16,298 3,467
Deferred income taxes 1,473 1,721
Receivable from related party 1,578 -
Interest receivable from related party 492 1,045
Other 1,795 2,527
------ ------
Total current assets 62,963 59,115
Property, plant and equipment, net 52,333 54,266
Intangible assets, net 150,187 151,240
Deferred financing costs and other 11,856 10,719
Cash surrender value of life insurance 3,787 4,235
Program rights 652 341
------- --------
$ 281,778 $ 279,916
======= ========
Liabilities and Stockholder's Investment
Current liabilities
Current portion of long-term debt $ 806 $ 1,542
Accounts payable 6,091 4,172
Accrued interest payable 10,724 7,714
Program rights payable 20,199 5,704
Accrued employee benefit expenses 3,043 2,755
Other accrued expenses 4,822 5,257
------- -------
Total current liabilities 45,685 27,144
Long-term debt 402,187 425,718
Program rights payable 1,391 1,534
Deferred rent and other 3,201 2,731
Accrued employee benefit expenses 1,706 1,798
Deferred income taxes - 2,300
------- -------
454,170 461,225
------- -------
Stockholder's investment
Preferred stock, $1 par value, 800 shares authorized,
none issued - -
Common stock, $.05 par value, 20,000 shares authorized,
issued and outstanding 1 1
Capital in excess of par value 6,955 6,955
Retained earnings 45,102 46,587
Distributions to owners, net (224,450) (234,852)
------- -------
Total stockholder's investment (172,392) (181,309)
------- -------
$ 281,778 $ 279,916
======= ========
See accompanying notes to interim consolidated financial statements.
ALLBRITTON COMMUNICATIONS COMPANY
(an indirectly wholly-owned subsidiary of Perpetual Corporation)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
Nine Months Ended
June 30,
1996 1997
------ ------
Cash flows from operating activities:
Net income $ 3,248 $ 1,485
------ ------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 6,657 13,932
Other noncash charges 724 883
Extraordinary loss on early repayment of debt 7,750 -
Provision for doubtful accounts 389 373
Loss on disposal of assets 91 90
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable (6,741) (8,584)
Program rights 11,244 13,142
Other current assets (2,641) 45
Other noncurrent assets 25 (22)
Increase (decrease) in liabilities:
Accounts payable 103 (1,919)
Accrued interest payable 3,156 (3,010)
Program rights payable (11,605) (14,352)
Accrued employee benefit expenses 352 (196)
Other accrued expenses 1,479 435
Deferred rent and other liabilities 338 1,830
------ ------
Total adjustments 11,321 2,647
------ ------
Net cash provided by operating activities 14,569 4,132
------ ------
Cash flows from investing activities:
Capital expenditures (9,553) (9,467)
Purchase of option (10,000) (5,348)
Proceeds from disposal of assets 68 21
Acquisitions, net of cash acquired (135,603) -
Minority interest investment in consolidated subsidiaries
1,300 -
------ ------
Net cash used in investing activities (153,788) (14,794)
------ ------
Cash flows from financing activities:
Proceeds from issuance of debt 285,725 -
Deferred financing costs (8,004) -
Prepayment penalty on early repayment of debt (12,934) -
(Repayments) draws under lines of credit, net (5,000) 22,200
Principal payments on long-term debt and capital lease obligations (80,352) (319)
Distributions to owners, net of certain charges (40,189) (38,141)
Repayments of distributions to owners 8,280 27,739
Other 25 -
------- ------
Net cash provided by financing activities 147,551 11,479
------- ------
Net increase in cash and cash equivalents 8,332 817
Cash and cash equivalents, beginning of period 3,816 12,108
------- ------
Cash and cash equivalents, end of period $ 12,148 $ 12,925
======= =======
See accompanying notes to interim consolidated financial statements.
ALLBRITTON COMMUNICATIONS COMPANY
(an indirectly wholly-owned subsidiary of Perpetual Corporation)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(unaudited)
NOTE 1 - The accompanying unaudited interim consolidated financial statements
of Allbritton Communications Company (an indirectly wholly-owned subsidiary of
Perpetual Corporation) and its subsidiaries (collectively, the "Company") have
been prepared pursuant to instructions for Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in conformity with
generally accepted accounting principles have been omitted or condensed where
permitted by regulation. In management's opinion, the accompanying financial
statements reflect all adjustments, which were of a normal recurring nature,
and disclosures necessary for a fair presentation of the consolidated
financial statements for the interim periods presented. The results of
operatio
ns for the three and nine months ended June 30, 1997 are not necessarily
indicative of the results that can be expected for the entire fiscal year
ending September 30, 1997. The interim consolidated financial statements
should be read in conjunction with the audited consolidated financial
statements and notes thereto for the year ended September 30, 1996 which are
contained in the Company's Form 10-K.
NOTE 2 - On December 29, 1995, the Company, through an 80% owned subsidiary,
entered into a ten-year local marketing agreement ("LMA") with RKZ Television,
Inc., which owns WJSU, an ABC affiliated television station serving Anniston,
Alabama. In connection with the LMA, the Company also entered into an option
("Option") to acquire WJSU. The cost of the Option totalled $15,348, of which
$10,000 was paid in December 1995 and $5,348 was paid in January 1997. The
cost of the Option is included in intangible assets and is being amortized
over the ten-year life of the Option. The Option is exercisable for
additional consideration of $3,337. The consolidated results of operations
includes operating revenues and operating expenses of WJSU since December 29,
1995, pursuant to the terms of the LMA.
In March 1996, the Company acquired an 80% interest in the assets and certain
liabilities of WHTM, an ABC affiliated television station serving
Harrisburg-York-Lancaster-Lebanon, Pennsylvania, and WCFT, an ABC affiliated
television station serving Tuscaloosa, Alabama, for approximately $135,600
(collectively, the "Acquisitions"). The Acquisitions were accounted for as
purchases and, accordingly, the cost of the entities was assigned to the
identifiable tangible and intangible assets and liabilities assumed based on
their fair market values at the respective dates of the purchases. The
results of operations of WHTM and WCFT are included for the periods subsequent
to the acquisitions.
The acquisitions of WHTM and WCFT and the purchase of the Option were financed
using a portion of the proceeds of an offering of $275,000 9.75% Senior
Subordinated Debentures due 2007 (the "Offering") which were issued in
February 1996 at a discount of $1,375. The Company also used a portion of the
proceeds of the Offering to repay approximately $74,704 of debt and to pay a
related prepayment penalty of $12,934, which resulted in an extraordinary
loss, net of income tax benefit, of $7,750 on the early repayment of debt.
The following pro forma summary presents the unaudited consolidated results of
operations of the Company for the nine months ended June 30, 1996 as if the
Offering and the application of the net proceeds thereof (including the
Acquisitions and LMA) had occurred at the beginning of the nine-month period.
The results presented in the pro forma summary do not necessarily reflect the
results that would have been obtained if the Offering, Acquisitions and LMA
had occurred at the beginning of the nine-month period.
Operating revenues, net $126,411
Income before extraordinary item 7,432
Net loss (318)
NOTE 3 - For the nine months ended June 30, 1996 and 1997, distributions to
owners were as follows:
1996 1997
Distributions to owners, beginning of period $203,775 $224,450
Cash advances 45,882 38,502
Repayment of cash advances (8,280) (27,739)
Charge for Federal income taxes (1,684) (361)
Other, net (45) -
Dividends declared by WSET and WCIV (18,371) -
------- -------
Distributions to owners, end of period $221,277 $234,852
======= =======
Weighted average amount of non-interest bearing
advances outstanding during the period $194,584 $215,998
======= =======
NOTE 4 - During 1997, the Financial Accounting Standards Board has issued
Statements of Financial Accounting Standards No. 128, "Earnings per Share";
No. 129, "Disclosure of Information about Capital Structure"; No. 130,
"Reporting Comprehensive Income"; and No. 131, "Disclosures about Segments of
an Enterprise and Related Information." These statements address presentation
and disclosure matters and will have no impact on the Company's financial
position or results of operations. These statements become effective during
the Company's fiscal years 1998 and 1999 and will be adopted as applicable.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Dollars in thousands)
Overview
Allbritton Communications Company and its subsidiaries (on a consolidated
basis, the "Company") own and operate seven network-affiliated television
stations: WJLA in Washington, D.C.; WHTM in Harrisburg, Pennsylvania; KATV in
Little Rock, Arkansas; KTUL in Tulsa, Oklahoma; WSET in Lynchburg, Virginia;
WCIV in Charleston, South Carolina; and WCFT in Tuscaloosa, Alabama (west of
Birmingham, Alabama). The consolidated financial information presented herein
includes the amounts for the television stations listed above, with the
amounts for WHTM and WCFT included only since March 1, 1996 and March 15,
1996, respectively, the dates on which the acquisitions of those entities were
completed. The consolidated financial information also includes operating
revenues and certain operating expenses of WJSU in Anniston, Alabama (east of
Birmingham) since December 29, 1995, pursuant to the terms of the local
marketing agreement ("LMA"). The Company operates both WCFT and WJSU in
tandem serving the viewers of Birmingham, Tuscaloosa and Anniston. WHTM, WCFT
and WJSU, collectively, are referred to throughout as the "New Stations."
The Company's advertising revenues are generally highest in the first and
third quarters of each fiscal year, due in part to increases in retail
advertising in the period leading up to and including the holiday season and
active advertising in the spring. The Company's operating expenses are spread
evenly throughout the year so that the fluctuation in operating results is
generally related to fluctuations in the revenue cycle. In addition,
advertising revenues are generally higher during election years due to
spending by political candidates, which is typically heaviest during the
Company's first fiscal quarter. Years in which Olympic Games are held also
cause cyclical fluctuations in operating results depending on which television
network is carrying Olympic coverage.
As compared to the same period in the prior fiscal year, the Company's results
of operations for the three months ended June 30, 1997 principally reflect
increased demand by advertisers in the Washington, D.C. market, offset by a
significant increase in spending in Birmingham. As part of the Company's
planned development of the Birmingham operation, the Company has continued to
make enhancements in its local news and has increased its marketing activities
to promote WCFT and WJSU as the new ABC affiliates for the Birmingham market.
Management believes that these activities will lead to a significant expansion
in audience share, which will result in increasingly higher advertising
revenues.
Results of Operations
Set forth below are selected consolidated financial data for the three and
nine months ended June 30, 1996 and 1997 in actual dollars (in thousands) and
the percentage change between the periods:
Three Months Ended June 30, Nine Months Ended June 30,
1996 1997 % Change 1996 1997 % Change
Operating revenues, net $44,857 $46,543 3.8% $117,051 $131,359 12.2%
Total operating expenses 28,094 30,825 9.7% 75,884 95,652 26.1%
Operating Income 16,763 15,718 (6.2)% 41,167 35,707 (13.3)%
Nonoperating expenses, net 9,747 10,552 8.3% 22,948 31,042 35.3%
Income tax provision 2,726 2,254 (17.3)% 7,221 3,180 (56.0)%
Income before
extraordinary item 4,290 2,912 (32.1)% 10,998 1,485 (86.5)%
Extraordinary loss, net
of income tax benefit - - - (7,750) - (100.0)%
Net income $ 4,290 $ 2,912 (32.1)% $ 3,248 $ 1,485 (54.3)%
Net Operating Revenues
The following table depicts the principal types of operating revenues, net of
agency commissions, earned by the Company for each of the three and nine
months ended June 30, 1996 and 1997, and the percentage contribution of each
to the total broadcast revenues earned by the Company, before fees:
Three Months Ended June 30, Nine Months Ended June 30,
1996 1997 1996 1997
Dollars % Dollars % Dollars % Dollars %
(Dollars in thousands)
Local/regional <1> 22,311 48.1 $23,231 48.2 $57,634 47.7 $64,767 47.7
National <2> 19,430 41.9 20,555 42.6 49,630 41.0 53,978 39.8
Network compensation <3> 1,537 3.3 1,660 3.4 4,109 3.4 4,699 3.5
Political <4> 909 1.9 435 0.9 1,629 1.4 3,880 2.9
Trade & barter <5> 1,912 4.1 2,020 4.2 5,222 4.3 5,842 4.3
Other revenue <6> 305 0.7 295 0.7 2,705 2.2 2,485 1.8
Broadcast revenues 46,404 100.0 48,196 100.0 120,929 100.0 135,651 100.0
Fees <7> (1,615) (1,701) (4,176) (4,571)
Broadcast revenue,
net of fees 44,789 46,495 116,753 131,080
Non-Broadcast revenue <8> 68 48 298 279
Total net operating revenues $44,857 $46,543 $117,051 $131,359
<FN>
<F1> Represents sale of advertising time to local and regional advertisers or agencies
representing such advertisers.
<F2> Represents sale of advertising time to agencies representing national advertisers.
<F3> Represents payment by networks for broadcasting or promoting network programming.
<F4> Represents sale of advertising time to political advertisers.
<F5> Represents value of commercial time exchanged for goods and services (trade) or
syndicated programs (barter).
<F6> Represents miscellaneous revenue, principally receipts from tower rental, production
of commercials and revenue from the sales of University of Arkansas sports
programming to advertisers and radio stations.
<F7> Represents fees paid to national sales representatives and fees paid for music
licenses.
<F8> Represents revenues from program syndication sales and other miscellaneous
non-broadcast revenues.
</FN>
Net operating revenues for the three months ended June 30, 1997 totaled
$46,543, an increase of $1,686, or 3.8% when compared to net operating
revenues of $44,857 for the three months ended June 30, 1996. This increase
results principally from increased local and national advertising demand in
the majority of the Company's markets. A substantial portion of the quarterly
revenue growth was generated by WJLA, the Company's Washington, D.C. station.
WJLA's revenue growth was achieved through a combination of increased audience
share, particularly in news, and an overall improvement in the Washington,
D.C. advertising market.
The $14,308, or 12.2% increase in net operating revenues for the nine months
ended June 30, 1997 as compared to the same period in the prior year is
primarily attributable to $10,452 in net operating revenue generated by the
New Stations. The majority of the significantly increased contribution by the
New Stations is due to the fact that the results of the New Stations are
included for the entire period in fiscal 1997 as compared to the period from
the date of acquisition in fiscal 1996.
Local/regional advertising revenues increased 4.1% and 12.4% during the three
and nine months ended June 30, 1997, respectively, versus the comparable
periods in fiscal 1996. The increase for the three months ended June 30, 1997
of $920 over the three months ended June 30, 1996 is largely attributable to
an improvement in the Washington, D.C. and Harrisburg local/regional
advertising markets and market share gains by the Company's Little Rock
station. The $7,133 increase in local/regional advertising revenues for the
nine-month period ended June 30, 1997 over the comparable period in the prior
year is attributable to $5,506 in revenues generated by the New Stations and
revenue increases generated by the Company's stations located in the
Washington, D.C. and Little Rock markets, offset by a weakening in the Tulsa
and Charleston markets for local/regional advertisers.
National advertising revenues increased $1,125 and $4,348 or 5.8% and 8.8%,
for the three and nine months ended June 30, 1997, respectively, over the
comparable periods in the prior year. The increase for the three months ended
June 30, 1997 is a result of improvement in the Washington, D.C., Tulsa,
Little Rock and Birmingham national advertising markets, offset by a weakening
of the Harrisburg and Charleston markets for national advertisers. The
increase for the nine months ended June 30, 1997 over the same period in the
prior year is principally attributable to the New Stations and the Washington,
D.C. market.
No individual advertiser accounted for more than 5% of the Company's broadcast
revenues during the three or nine months ended June 30, 1996 or 1997.
Total Operating Expenses
Total operating expenses for the three months ended June 30, 1997 totaled
$30,825, an increase of $2,731, or 9.7%, compared to total operating expenses
of $28,094 for the three month period ended June 30, 1996. This increase
principally consists of $2,922 of increased total operating expenses incurred
in Birmingham, offset by a decrease in corporate expenses of $694 or 42.6%.
The decrease in corporate expenses is primarily due to a decrease in
charitable contributions. Excluding corporate expenses and Birmingham,
total operating expenses for the three months ended June 30, 1997 increased
$503, or 2.4% over the same period in the prior fiscal year.
Total operating expenses for the nine months ended June 30, 1997 totaled
$95,652, an increase of $19,769,
or 26.1%, compared to $75,884 for the nine months ended June 30, 1996.
The New Stations accounted for $17,708, or 89.6% of the increase in
total operating expenses. The remaining increase in total operating
expenses for the nine-month period is largely attributable to the
approximate $2,000 non-recurring program expense in the second fiscal quarter
resulting from the Company's early termination of a program contract, offset
by a $690 decrease in corporate expenses as discussed above. Excluding
corporate expenses, the New Stations and the non-recurring program expense,
total operating expenses for the nine months ended June 30, 1997 increased
approximately $751, or 1.1% over the same period in the prior fiscal year.
Operating Income
For the three months ended June 30, 1997, operating income of $15,718
decreased $1,045, or 6.2%, when compared to operating income of $16,763 for
the three months ended June 30, 1996. For the three months ended June 30,
1997, the operating margin decreased to 33.8% from 37.4% for the comparable
period in the prior year. Operating income of $35,707 for the nine months
ended June 30, 1997 decreased $5,460, or 13.3%, when compared to operating
income of $41,167 for the same period in the prior year. For the nine months
ended June 30, 1997 the operating margin decreased to 27.2% from 35.2% for the
comparable period in the prior year. The decreases in operating profit and
margin were due primarily to operating expenses increasing at a greater rate
than operating revenue as discussed above.
The operating results of the New Stations have impacted the Company's
consolidated performance trends for the nine months ended June 30, 1997 as
compared to the same period in the prior year. In addition, the operating
results of the Birmingham operation have had a continuing impact on the
Company's consolidated performance trends for the three months ended June 30,
1997 as compared to the same period in fiscal 1996. The operating margins
generated by the Company in the aggregate were adversely impacted primarily
due to the Company's continuing investment in the start-up operations in
Birmingham, (e.g., programming and staffing changes, marketing and promotion
activities, etc.) as well as the impact of the intangible amortization expense
arising from the Acquisitions and increased depreciation expense from capital
improvements made to the New Stations. The nine-month comparison is impacted
to a greater extent by the results of the New Stations as they are included
for the entire period in fiscal 1997 as compared to the period from the date
of acquisition in the prior year.
Nonoperating Expenses, Net
Interest expense of $10,775 for three months ended June 30, 1997 increased
$452, or 4.4%, as compared to $10,323 for the three-month period ended June
30, 1996. This increase is due to the incremental interest expense associated
with additional borrowings under the Company's revolving credit and capital
lease facilities.
Interest expense for the nine months ended June 30, 1997 was $31,913, an
increase of $7,249, or 29.4%, as compared to $24,664 for the nine-month period
ended June 30, 1996. The increase is attributable to increased interest
expense from the issuance of the Company's $275,000 9.75% Senior Subordinated
Debentures due 2007 (the "Debentures"), together with higher average debt
balances in the first three quarters of fiscal 1997 compared to the same
period in the prior year. The weighted average balance of debt was $310,791
and $412,310 for the nine months ended June 30, 1996 and 1997, respectively,
and the weighted average interest rate on debt was 10.6% and 10.2% for the
nine months ended June 30, 1996 and 1997, respectively.
Interest income of $595 for the three months ended June 30, 1997 decreased
$171, or 22.3%, as compared to interest income of $766 for the three months
ended June 30, 1996. Interest income for the nine months ended June 30, 1997
was $1,825, a decrease of $752, or 29.2%, as compared to $2,577 for the
nine-month period ended June 30, 1996. The variance in interest income for
both the three and nine-month periods is due to interest earned from
temporarily investing certain proceeds from the sale of the Debentures during
the prior fiscal year.
Income Taxes
The provision for income taxes for the three months ended June 30, 1997
totaled $2,254, a decrease of $472, or 17.3%, when compared to the provision
for income taxes of $2,726 for the three months ended June 30, 1996. The
decrease is directly related to the $1,850, or 26.4% decrease in the Company's
income before income taxes and extraordinary item (as previously discussed),
offset by the effect of certain state-level income tax considerations.
For the nine months ended June 30, 1997, the provision for income taxes
decreased $4,041, or 56.0% when compared to the same period in the prior
fiscal year due to a $13,554, or 74.4% decrease in income before income taxes
and extraordinary item, also offset by the effect of certain state-level
income tax considerations.
Income Before Extraordinary Item
For the three and nine-month periods ended June 30, 1997 the Company had
income before extraordinary item of $2,912 and $1,485, respectively, compared
to income before extraordinary item of $4,290 and $10,998 for the same periods
in the prior year. As discussed previously, the start-up nature of the
Birmingham operation, the increased interest expense and depreciation and
amortization associated with the Acquisitions and the non-recurring program
expense have adversely impacted the results during fiscal 1997.
Net Income
The net income for the three months ended June 30, 1997 was $2,912 as compared
to net income of $4,290 for the three months ended June 30, 1996 due to the
factors discussed above.
For the nine months ended June 30, 1997, the Company recorded net income of
$1,485 as compared to net income of $3,248 for the nine-month period ended
June 30, 1996. This decrease in net income is attributed to the factors
discussed above. Additionally, net income for the nine-month period ending
June 30, 1996 reflects the $7,750 extraordinary loss on early repayment of debt.
Liquidity and Capital Resources
As of June 30, 1997, the Company's cash and cash equivalents aggregated
$12,925, and the Company had an excess of current assets over current
liabilities of $31,971.
Cash Provided by Operations. The Company's principal source of working
capital is cash flow from operations and borrowings under its revolving credit
facility. As reported in the consolidated statements of cash flows, the
Company generated net cash from operations of $14,569 and $4,132 during the
nine months ended June 30, 1996 and 1997, respectively. The decrease is
primarily due to a $1,763 decrease in net income, offset by an increase in
depreciation and amortization of $7,275, a
decrease in accounts receivable of $1,843, a decrease in accounts
payable and accrued interest payable of $8,188 and the $7,750
extraordinary loss incurred during the nine months ended June
30, 1996.
Transactions with Owners. For the nine months ended June 30, 1996 and 1997
the Company made cash advances to owners net of repayments and certain charges
totaling $35,873 and $10,402, respectively. The Company periodically makes
advances in the form of distributions to its parent. At present, the primary
source of repayment of the net advances is through the ability of the Company
to pay dividends or make other distributions to its parent, and there is no
immediate intent for the advances to be repaid. Accordingly, these advances
have been treated as a reduction of Stockholder's Investment and described as
"distributions" in the Company's consolidated financial statements.
Stockholder's deficit amounted to $181,309 at June 30, 1997, an increase of
$8,917, or 5.2%, from the September 30, 1996 deficit of $172,392. The
increase is due to a net increase in distributions to owners of $10,402 offset
by net income for the period of $1,485.
Indebtedness. The Company's total debt, including the current portion of
long-term debt, increased from $402,993 at September 30, 1996 to $427,260 at
June 30, 1997. This debt, net of applicable discounts, consists of $273,790
of 9.75% Debentures, $122,750 of 11.5% Debentures, $6,420 of capital lease
obligations and $24,300 under a revolving credit facility. The increase of
$24,267 in total debt from September 30, 1996 to June 30, 1997 is primarily
due to a $22,200 increase in amounts outstanding under the revolving credit
facility to fund working capital. The Company's revolving credit facility is
secured by the pledge of stock of the Company and its subsidiaries and matures
April 16, 2001.
Under the existing borrowing agreements, the Company agrees to abide by
restrictive covenants that place limitations upon payments of cash dividends,
issuance of capital stock, investment transactions, incurrence of additional
obligations and transactions with affiliates. In addition, the Company must
maintain specified levels of operating cash flow and working capital and
comply with other financial covenants. As of June 30, 1997, the Company is in
compliance with these financial covenants.
Other Uses of Cash. Management estimates that capital expenditures for fiscal
year 1997 will approximate $12,500. Capital expenditures during the nine
months ended June 30, 1997 totaled $9,467. Fiscal 1997 capital expenditures
include facility construction and equipment additions to complete the
consolidation of the operations of WCFT and WJSU and technical equipment
improvements and capital additions at the other stations.
The Company anticipates that its existing cash position, together with cash
flows generated by operating activities and amounts available under its
revolving credit facility will be sufficient to finance the operating cash
flow requirements of its stations, debt service requirements and anticipated
capital expenditures.
New Accounting Standards
During 1997, the Financial Accounting Standards Board has issued
Statements of Financial Accounting Standards No. 128,
"Earnings per Share"; No. 129, "Disclosure of Information about Capital
Structure"; No. 130, "Reporting Comprehensive Income"; and No. 131,
"Disclosures about Segments of an Enterprise and Related Information." These
statements address presentation and disclosure matters and will have no impact
on the Company's financial position or results of operations. These
statements become effective during the Company's fiscal years 1998 and 1999
and will be adopted as applicable.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company currently and from time to time is involved in litigation
incidental to the conduct of its business. The Company is not currently a
party to any lawsuit or proceeding which, in the opinion of management, if
decided adverse to the Company, would be likely to have a materially adverse
effect on the Company's consolidated financial condition, results of
operations or cash flows.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
27. Financial Data Schedule (Electronic Filing Only)
b. Reports on Form 8-K
No reports on Form 8-K were filed during the quarter.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALLBRITTON COMMUNICATIONS COMPANY
(Registrant)
August 14, 1997 /s/ Lawrence I. Hebert
----------------- ------------------------
Date Name: Lawrence I. Hebert
Title: President
August 14, 1997 /s/ Henry D. Morneault
----------------- ------------------------
Date Name: Henry D. Morneault
Title: Chief Financial Officer
EXHIBIT INDEX
Exhibit No. Description of Exhibit Page No.
3.1 Certificate of Incorporation of ACC. *
(Incorporated by reference to Exhibit 3.1
of Company's Registration Statement on
Form S-4, No. 333-02302, dated March 12,
1996.)
3.2 Bylaws of ACC. (Incorporated by reference *
to Exhibit 3.2 of Registrant's
Registration Statement on Form S-4, No.
333-02302, dated March 12, 1996.)
4.1 Indenture dated as of February 6, 1996 *
between ACC and State Street Bank and
Trust Company, as Trustee, relating to
the Debentures. (Incorporated by
reference to Exhibit 4.1 of Company's
Registration Statement on Form S-4, No.
333-02302, dated March 12, 1996.)
4.2 Indenture dated as of August 26, 1992 *
between ACC and the First National Bank of
Boston, as Trustee, relating to 112%
Senior Subordinated Debentures due 2004.
(Incorporated by reference to Exhibit 4.2
of Company's Registration Statement on
Form S-4, No. 333-02302, dated March 12,
1996.)
4.3 Form of 9.75% Series B Senior Subordinated *
Debentures due 2007. (Incorporated by
reference to Exhibit 4.3 of Company's
Registration Statement on Form S-4, No.
333-02302, dated March 12, 1996.)
4.4 Revolving Credit Agreement dated as of *
April 16, 1996 by and among Allbritton
Communications Company certain Banks, and
The First National Bank of Boston, as
agent. (Incorporated by reference to
Exhibit 4.4 of Company's Quarterly Report
on Form 10-Q, No. 333-02302, dated August
14, 1996.)
4.5 Modification No. 1 dated as of June 19, *
1996 to Revolving Credit Agreement
4.6 Modification No. 2 dated as of December
20, 1996 to Revolving Credit Agreement
4.7 Registration Rights Agreement by and among *
ACC, Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated and
Salomon Brothers, Inc., dated February 6,
1996. (Incorporated by reference to
Exhibit 10.1 of Company's Registration
Statement on Form S-4, No. 333-02302,
dated March 12, 1996.)
Exhibit No. Description of Exhibit Page No.
10.2 Network Affiliation Agreement (Harrisburg *
Television, Inc.). (Incorporated by
reference to Exhibit 10.3 of Company's
Pre-effective Amendment No. 1 to
Registration Statement on Form S-4, dated
April 22, 1996.)
10.3 Network Affiliation Agreement (First *
Charleston Corp.). (Incorporated by
reference to Exhibit 10.4 of Company's
Pre-effective Amendment No. 1 to
Registration Statement on Form S-4, dated
April 22, 1996.)
10.4 Network Affiliation Agreement (WSET, *
Incorporated). (Incorporated by reference
to Exhibit 10.5 of Company's Pre-effective
Amendment No. 1 to Registration Statement
on Form S-4, dated April 22, 1996.)
10.5 Network Affiliation Agreement (WJLA-TV). *
(Incorporated by reference to Exhibit 10.6
of Company's Pre-effective Amendment No. 1
to Registration Statement on Form S-4,
dated April 22, 1996.)
10.6 Network Affiliation Agreement (KATV *
Television, Inc.). (Incorporated by
reference to Exhibit 10.7 of Company's
Pre-effective Amendment No. 1 to
Registration Statement on Form S-4, dated
April 22, 1996.)
10.7 Network Affiliation Agreement (KTUL *
Television, Inc.). (Incorporated by
reference to Exhibit 10.8 of Company's
Pre-effective Amendment No. 1 to
Registration Statement on Form S-4, dated
April 22, 1996.)
10.8 Network Affiliation Agreement (TV Alabama, *
Inc.). (Incorporated by reference to
Exhibit 10.9 of Company's Pre-effective
Amendment No. 1 to Registration Statement
on Form S-4, dated April 22, 1996.)
10.9 Tax Sharing Agreement effective as of *
September 30, 1991 by and among Perpetual
Corporation, Inc., ACC and Allnewsco,
Inc., as amended. (Incorporated by
reference to Exhibit 10.11 of Company's
Registration Statement on Form S-4, No.
333-02302, dated March 12, 1996.)
10.10 Time Brokerage Agreement dated as of *
December 21, 1995 by and between RKZ
Television, Inc. and ACC. (Incorporated
by reference to Exhibit 10.11 of Company's
Registration Statement on Form S-4, No.
333-02302, dated March 12, 1996.)
10.11 Option Agreement dated December 21, 1995 *
by and between ACC and RKZ Television,
Inc. (Incorporated by reference to
Exhibit 10.12 of Company's Registration
Statement on Form S-4, No. 333-02302,
dated March 12, 1996.)
Exhibit No. Description of Exhibit Page No.
10.12 Amendment dated May 2, 1996 by and among *
TV Alabama, Inc., RKZ Television, Inc. and
Osborn Communications Corporation to
Option Agreement dated December 21, 1995
by and between ACC and RKZ Television,
Inc. (Incorporated by reference to
exhibit 10.13 of Company's Form 10-K, No.
333-02302, dated December 30, 1996.)
10.13 Master Lease Finance Agreement dated as of *
August 10, 1994 between BancBoston
Leasing, Inc. and ACC, as amended.
(Incorporated by reference to Exhibit
10.16 of Company's Registration Statement
on Form S-4, No. 333-02302, dated March
12, 1996.)
10.14 Representation Agreement dated as of July *
1, 1995 by and between 78 inc. and
WJLA-TV. (Incorporated by reference to
Exhibit 10.17 of Company's Registration
Statement on Form S-4, No. 333-02302,
dated March 12, 1996.)
10.15 Amendment to Network Affiliation Agreement *
(TV Alabama, Inc.) dated January 23, 1997
(Incorporated by reference to Exhibit
10.15 to the Company's Form 10-Q, No.
333-02302, dated February 14, 1997).
27. Financial Data Schedule (Electronic Filing Only)
*Previously filed