UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------- EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 2001
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 Number: 333-44177
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BRILL MEDIA COMPANY, LLC
------------------------
(Exact name of registrant as specified in its charter)
Virginia 52-2071822
------------------------------------
(State of Formation) (I.R.S. Employer Identification No.)
420 N.W. Fifth Street
Evansville, Indiana 47708
(address of principal executive offices)
(812) 423-6200
--------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act: None
----
Securities registered pursuant to Section 12 (g) of the Act: None
----
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.
X YES NO
- ------ -------
TABLE OF CONTENTS
PART NO. ITEM NO. Page No.
- --------------------------------------------------------------------------------
I 1 FINANCIAL STATEMENTS
Consolidated Statements of Financial Position
as of November 30, 2001 and February 28, 2001 3
Consolidated Statements of Operations and
Members' Deficiency for the Three Months
and Nine Months Ended November 30, 2001
and 2000 4
Consolidated Statements of Cash Flows for the
Nine Months Ended November 30, 2001 and 2000 5
Notes to Consolidated Financial Statements 6
2 MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS 8
3 QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK 13
II 6 EXHIBITS AND REPORTS ON
FORM 8-K 14
2
PART I
ITEM 1. FINANCIAL STATEMENTS
Brill Media Company, LLC
(A Limited Liability Company)
Consolidated Statements of Financial Position
November 30 February 28
2001 2001
--------------------------------------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 526,941 $ 6,123,340
Accounts receivable, net 6,630,178 5,735,542
Inventories 424,035 533,546
Other current assets 580,903 660,059
--------------------------------------------
Total current assets 8,162,057 13,052,487
Notes receivable from managed affiliates 8,879,526 8,302,167
Property and equipment 31,493,743 31,150,125
Less: Accumulated depreciation (12,345,434) (10,580,030)
--------------------------------------------
Net property and equipment 19,148,309 20,570,095
Goodwill and FCC licenses, net 20,373,455 20,796,324
Covenants not to compete, net 1,400,356 2,136,170
Other assets, net 4,231,944 4,864,591
Amounts due from related parties 4,765,003 4,466,268
--------------------------------------------
$ 66,960,650 $ 74,188,102
============================================
Liabilities and members' deficiency
Current liabilities:
Amounts payable to related parties $ 3,175,271 $ 3,372,480
Accounts payable 1,081,192 1,017,897
Accrued payroll and related expenses 1,058,934 961,041
Accrued interest 5,874,711 2,753,111
Other accrued expenses 185,918 80,896
Current maturities of long-term obligations 121,344,278 1,332,628
--------------------------------------------
Total current liabilities 132,720,304 9,518,053
Long-term notes and other obligations 14,893,729 134,923,297
Members' deficiency (80,653,383) (70,253,248)
--------------------------------------------
$ 66,960,650 $ 74,188,102
============================================
See accompanying notes to the consolidated financial statements.
3
Brill Media Company, LLC
(A Limited Liability Company)
Consolidated Statements of Operations and Members' Deficiency
(Unaudited)
Three Months Ended November 30 Nine Months Ended November 30
2001 2000 2001 2000
----------------------------------------------------------------------------
Revenues $ 10,939,583 $ 11,889,006 $ 33,794,623 $ 35,621,586
Operating expenses:
Operating departments 9,236,256 9,328,759 26,940,843 27,046,437
Management fees 694,334 756,181 2,164,223 2,262,437
Time brokerage agreement fees, net 3,000 -- 9,000 --
Depreciation 571,318 521,127 1,815,087 1,496,066
Amortization 384,142 386,905 1,164,002 1,168,503
----------------------------------------------------------------------------
10,889,050 10,992,972 32,093,155 31,973,443
----------------------------------------------------------------------------
Operating income 50,533 896,034 1,701,468 3,648,143
Other income (expense):
Interest - managed affiliates 256,909 228,993 802,599 698,929
Interest - advances from/loans to
related parties, net 56,918 (78,572) 244,148 12,671
Interest - other 1,168 104,456 55,684 459,710
Interest - long-term notes and
other obligations (4,089,232) (4,058,239) (12,162,986) (11,967,710)
Amortization of deferred financing
costs (227,578) (238,047) (682,561) (684,661)
Loss on sale of assets, net (18,264) (2,134) (17,664) (132,971)
Other, net (39,656) (42,118) (119,270) (122,231)
----------------------------------------------------------------------------
(4,059,735) (4,085,661) (11,880,050) (11,736,263)
----------------------------------------------------------------------------
Loss before income taxes (4,009,202) (3,189,627) (10,178,582) (8,088,120)
Income tax provision 81,657 49,046 221,553 143,923
----------------------------------------------------------------------------
Net loss (4,090,859) (3,238,673) (10,400,135) (8,232,043)
Members' deficiency, beginning of
period (76,562,524) (63,758,378) (70,253,248) (58,769,008)
Capital contributions -- 2,000 -- 6,000
----------------------------------------------------------------------------
Members' deficiency, end of period $ (80,653,383) $ (66,995,051) $ (80,653,383) $ (66,995,051)
============================================================================
See accompanying notes to the consolidated financial statements.
4
Brill Media Company, LLC
(A Limited Liability Company)
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended November 30
2001 2000
--------------------------------------
Operating activities
Net loss $ (10,400,135) $ (8,232,043)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 2,979,089 2,664,569
Amortization of deferred financing costs and original
issue discount 875,956 896,948
Management fees accrual 527,625 243,724
Related parties interest accrual 37,724 (166,587)
Loss on sale of assets, net 17,664 132,971
Changes in operating assets and liabilities, net of the
effect of acquisitions:
Accounts receivable (894,636) (1,272,812)
Other current assets 188,667 (324,513)
Accounts payable 63,295 259,380
Other accrued expenses 3,324,515 3,303,207
--------------------------------------
Net cash used in operating activities (3,280,237) (2,495,156)
Investing activities
Purchase of property and equipment (411,096) (1,380,822)
Purchase of radio stations and FCC licenses -- (1,248,800)
Proceeds from sale of assets 6,810 248,396
(Loans to) repayments from managed affiliates (577,359) 379,999
Repayment from related parties, net (367,000) 1,054,000
(Increase) decrease in other assets (55,232) 31,371
--------------------------------------
Net cash used in investing activities (1,403,877) (915,856)
Financing activities
Increase (decrease) in amounts payable to related
parties (694,290) 99,772
Principal payments on long-term obligations (962,765) (1,146,937)
Proceeds from long-term borrowings 744,770 151,693
Capital contributions -- 6,000
--------------------------------------
Net cash used in financing activities (912,285) (889,472)
--------------------------------------
Net decrease in cash and cash equivalents (5,596,399) (4,300,484)
Cash and cash equivalents at beginning of period 6,123,340 17,100,867
--------------------------------------
Cash and cash equivalents at end of period $ 526,941 $ 12,800,383
======================================
See accompanying notes to the consolidated financial statements.
5
Brill Media Company, LLC
Notes to the Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements include
the accounts of Brill Media Company, LLC (BMC) and its subsidiaries, all of
which are wholly owned (collectively the Company). BMC's members are directly
owned by Alan R. Brill (Mr. Brill). These statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments, consisting
of normal recurring accruals, considered necessary for a fair presentation have
been included along with the elimination of all intercompany balances and
transactions. Operating results for the three-month period and nine month period
ended November 30, 2001 are not necessarily indicative of the results that may
be expected for the year ending February 28, 2002. For further information,
refer to the consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended February 28, 2001.
2. Dispositions and Acquisitions
In November 2000, certain wholly-owned subsidiaries of the Company paid
$1,099 in cash to acquire 100% of the membership interest of TSB IV, LLC (T4L),
a Virginia limited liability company, pursuant to an Agreement for Transfer of
Membership Interest. Simultaneously, Mr. Brill made a capital contribution of
$1,099 in cash to the Company. Prior to the transaction, T4L had been a "managed
affiliate" of the Company as described in Note 9 to the consolidated financial
statements included in the Annual Report on Form 10-K of the Company for the
fiscal year ended February 28, 2001 and was indirectly owned by Mr. Brill.
The consolidated financial statements give retroactive effect to the
acquisition of T4L, which was accounted for similar to a pooling-of-interests
due to the related party nature of the transaction. Accordingly, the net assets
acquired from T4L were recorded at T4L's book value and the results of
operations of the Company include the historical results of operations of T4L.
T4L assets, at book value, included current assets of $394,000,
broadcasting equipment of $1,501,000 and intangibles of $5,770,000. T4L
liabilities totaled approximately $14 million at November 17, 2000 and included
accounts payable, other accrued expenses, a promissory note payable of
$12,906,000 to the Company, as well as other purchase money and
capital lease obligations including a capitalized lease to a related party.
6
3. Long Term Debt
Long-term obligations include the Company's 12% senior notes due 2007
(the Senior Notes). The Senior Notes are senior unsecured obligations of BMC and
a subsidiary of BMC, Brill Media Management, Inc. (Media). The Senior Notes are
unconditionally guaranteed, fully, jointly, and severally, by each of the direct
and indirect subsidiaries of BMC, all of which are wholly owned. BMC is a
holding company and has no operations, assets, or cash flows separate from its
investments in its subsidiaries. Accordingly, separate financial statements
concerning the subsidiaries have not been presented because management has
determined that they would not be material to investors.
Media has minimal assets and liabilities ($100 cash and $100 capital at
November 30, 2001 and February 28, 2001) and no income or expenses since its
formation in October 1997.
In October 1999, as permitted under the Indenture governing the Senior
Notes (the Indenture), the Company borrowed $15 million under a secured credit
facility with a senior lender (the Senior Secured Facility), which matures
October 2004. The Senior Secured Facility bears interest, payable monthly, at
the prime rate plus 1% (effectively 8.0% at November 30, 2001) with a minimum
interest rate of 8% per annum and restricts the Company from essentially the
same defined limitations as contained in the Indenture and includes certain
financial covenants with respect to earnings and asset coverage. The Senior
Secured Facility is secured by substantially all assets of the restricted
subsidiaries, as defined in the Indenture.
Due to weakened economic conditions, the contraction of the financial
markets and the general state of affairs following the terrorist attacks of
September 11, 2001, the Company did not have sufficient cash available to make
its semi-annual interest payment on the Senior Notes of $6.3 million on December
17, 2001. The Company was notified by the Trustee of the Senior Notes that
continued failure to make the interest payment would constitute an event of
default under the terms of the Indenture. Following an event of default, the
Indenture permits the Trustee or the Holders of 25% in aggregate principal
amount of the Senior Notes to declare the entire principal amount of the Senior
Notes plus accrued interest, due and payable immediately. In addition, as of
January 14, 2002, the Company failed to comply with certain covenants related
to earnings coverage contained in the Senior Secured Facility. As a result,
the Senior Secured Facility and certain other debt obligations would be in
default and may be accelerated under the terms of their respective loan
agreements.
The Company and Mr. Brill have been exploring, and continue to explore,
possible remedies to cure the defaults. These remedies include the sale of
strategic assets and financing options that would allow related parties to
repay amounts owed to the Company.
7
4. Affiliate Transactions
In November 2001, the Company loaned $1,270,000 to related parties.
Interest accrues on the notes at the prime rate and is payable annually until
maturity in December 2003 and November 2004.
5. Recently Issued Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards No. 141, "Business Combinations"
("SFAS 141") and No 142, "Goodwill and Other Intangible Assets" ("SFAS 142").
SFAS 141, which became effective on July 1, 2001, eliminated the use of pooling
of interests for all business combinations initiated after June 29, 2001 and
also established specific criteria for the recognition of intangible assets
separate from goodwill. SFAS 142 requires that a company no longer amortize the
goodwill and intangible assets determined to have an indefinite life and also
requires an annual impairment testing of those assets. The Company is required
to adopt SFAS 142 on March 1, 2002 and is currently evaluating the full impact
this standard will have on the consolidated financial statements. SFAS 142 could
have a material impact on the financial statements as amortization of goodwill
and certain other intangible assets represent a significant expense for the
Company.
6. Operating Segments
The Company has two operating segments: operation of AM and FM radio
stations and publication of daily and weekly newspapers and shoppers.
Information for the three month period and nine month period ended November 30,
2001 and 2000 regarding the Company's major operating segments is presented in
the following table:
Three Months Ended November 30 Nine Months Ended November 30
2001 2000 2001 2000
------------------------------------------------------------------------
Revenues:
Radio $ 4,171,354 $ 4,633,138 $ 12,965,346 $ 13,793,795
News 6,768,229 7,255,868 20,829,277 21,827,791
------------------------------------------------------------------------
Total 10,939,583 11,889,006 33,794,623 35,621,586
Operating income (loss):
Radio (79,298) 370,456 716,567 1,508,168
News 129,831 525,578 984,901 2,139,975
------------------------------------------------------------------------
Total 50,533 896,034 1,701,468 3,648,143
Total assets:
Radio 39,450,762 48,489,096 39,450,762 48,489,096
News 27,014,888 33,196,257 27,014,888 33,196,257
------------------------------------------------------------------------
Total 66,465,650 81,685,353 66,465,650 81,685,353
8
Depreciation and amortization expense:
Radio 459,564 462,249 1,391,703 1,391,437
News 495,896 445,783 1,587,386 1,273,132
------------------------------------------------------------------------
Total 955,460 908,032 2,979,089 2,664,569
Capital expenditures:
Radio 54,028 125,074 144,795 484,211
News 95,564 290,100 266,301 896,611
------------------------------------------------------------------------
Total 149,592 415,174 411,096 1,380,822
7. Subsequent Events
Effective December 20, 2001, a corporate subsidiary revoked its
"S" corporation status under the Internal Revenue Code and reverted to
"C" corporation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General Information and Basis of Presentation
The Company is a diversified media enterprise that acquires, develops,
manages and operates radio stations, newspapers and related businesses in middle
markets. As of November 30, 2001, the Company owns, operates or manages thirteen
radio stations (the Stations) serving four markets located in Pennsylvania,
Kentucky/Indiana, Colorado and Minnesota/Wisconsin. The Company's newspaper
businesses (the Newspapers) operate integrated newspaper publishing, printing
and print advertising distribution operations, providing total-market print
advertising coverage throughout a thirty-six-county area in the central and
northern portions of the lower peninsula of Michigan. This operation offers a
two-edition daily newspaper, twenty-three weekly publications, two monthly real
estate guides, two web offset printing operations for Newspapers' publications
and outside customers and three private distribution systems. Mr. Brill founded
the business and began its operations in 1981. The Company's overall operations,
including its sales and marketing strategy, long-range planning and management
support services are managed by Brill Media Company, L.P., a limited partnership
indirectly owned by Mr. Brill.
Recent Developments
The Company failed to make a cash interest payment of $6.3 million
on its Senior Notes on December 17, 2001. The Company and Mr. Brill are
actively exploring alternatives to restructure the capital of the Company. See
"Liquidity and Capital Resources."
Results of Operations
The Company's unaudited consolidated financial statements tend not to
be directly comparable from period to period due to both completed and pending
acquisitions and dispositions. These activities are identified in the notes to
the audited and unaudited consolidated financial statements of the Company.
9
Three Months Ended November 30, 2001 Compared to Three Months Ended
November 30, 2000
Revenues for the three months ended November 30, 2001 were $10.9
million, a $.9 million or 8% decrease from the prior comparative period. For the
current quarter, Stations' revenues represented $4.2 million and Newspapers'
revenues represented $6.7 million.
Stations' revenues decreased $.4 million or 10% from the prior
comparative period and the Newspapers' revenues decreased $.5 million or 7%
from the prior comparative period. Both decreases were due to general economic
conditions in the Company's markets, including weaker demand for advertising
and the general state of affairs following the terrorist attacks of
September 11, 2001.
Operating expenses for the three months ended November 30, 2001 were
$10.9 million, which remained relatively unchanged from the prior comparative
period.
As a result of the above, operating income for the three months ended
November 30, 2001 was $.1 million, a decrease of $.8 million or 94% from the
prior comparative period.
Other expense for the three months ended November 30, 2001 was $4.1
million, which remained unchanged from the prior comparative period.
Net loss for the three months ended November 30, 2001 was $4.1 million,
an increase in loss of $0.9 million or 26% over the prior comparative period.
This was primarily due to a reduction in revenue while maintaining adequate
operational resources.
Nine Months Ended November 30, 2001 Compared to Nine Months Ended
November 30, 2000
Revenues for the nine months ended November 30, 2001 were $33.8
million, a $1.8 million or 5% decrease from the prior comparative period. For
the year to date, Stations' revenues represented $13.0 million and Newspapers'
revenues represented $20.8 million.
Stations' revenues decreased $.8 million or 6% from the prior
comparative period and the Newspapers' revenues decreased $1.0 million or 5%
from the prior comparative period. Both decreases were again due to general
economic conditions in the Company's markets, including weaker demand for
advertising and the general state of affairs following the terrorist attacks
of September 11, 2001.
10
Operating expenses for the nine months ended November 30, 2001 were
$32.1 million, which remained relatively unchanged from the prior comparative
period.
As a result of the above, operating income for the nine months ended
November 30, 2001 was $1.7 million, a decrease of $1.9 million or 53% from the
prior comparative period.
Other expense for the nine months ended November 30, 2001 was $11.9
million, a $.1 million or 1% increase from the prior comparative period.
Net loss for the nine months ended November 30, 2001 was $10.4 million,
an increase in loss of $2.2 million or 26% over the prior comparative period.
This difference is primarily due to a decrease in revenues and interest income
reflective of reduced cash levels.
Liquidity and Capital Resources
Generally, the Company's operating expenses are paid before its
advertising revenues are collected. As a result, working capital requirements
have increased as the Company has grown and will likely increase in the future.
Net cash used in operating activities was $3.3 million for the nine
months ended November 30, 2001. The increase of $.8 million from the comparative
fiscal 2001 period is primarily attributable to the increased net loss offset by
the timing related to the collection of receivables and the payment of operating
expenses, management fees and related party interest.
Net cash used in investing activities was $1.4 million for the nine
months ended November 30, 2001. The cash used in investing activities for the
current reporting period is primarily attributable to purchase of property and
equipment and additional loans to related parties including the managed
affiliate. The cash used in investing activities increased by $.5 million. The
largest components during the prior comparative reporting period related to the
final payment made to the FCC for the Wellington, Colorado license and the
purchase of property and equipment offset by decrease in loans from related
parties.
Net cash used in financing activities was $0.9 million for the nine
months ended November 30, 2001. The cash used by financing activities for the
current reporting period is attributable primarily to a decrease in amounts
payable to related parties and the principal payment of long-term obligations.
Overall the cash used in financing activities remained the same as the prior
comparative period, however, the composition of the activities was different.
The largest component used in financing activities during the prior comparative
reporting period was related to the principal payment of long-term obligations.
Media Cashflow was $7.7 million and $9.3 million for the nine-month
periods ended November 30, 2001 and 2000, respectively. Media Cashflow
represents EBITDA plus incentive plan expense, management fees, time brokerage
fees paid, acquisition related consulting expense, and interest income from
loans made by the Company to the Managed Affiliate. EBITDA represents operating
11
income plus depreciation and amortization expense. Media Cashflow and EBITDA as
used above include the results of unrestricted subsidiaries and therefore differ
from the same terms as defined in the Indenture.
Although Media Cashflow and EBITDA are not measures of performance
calculated in accordance with GAAP, management believes that they are useful
measures in evaluating the Company and that measurements of cash flow are widely
used in the media industry to evaluate a media company's performance. However,
Media Cashflow and EBITDA should not be considered in isolation or as a
substitute for net income, cash flows from operating activities and other income
or cash flow statements prepared in accordance with GAAP as a measure of
liquidity or profitability. In addition, the terms Media Cashflow and EBITDA as
determined by the Company may not be comparable to related or similar measures
as reported by other companies and do not represent funds available for
discretionary use.
The Company has loaned $8.9 million to a Managed Affiliate and received
in return a Managed Affiliate Note, which is unsecured, matures on November 15,
2003 and bears interest at the rate of 12% per annum. For the nine month period
ended November 30, 2001, the Managed Affiliate reported revenues of $1.8
million, net loss of $.9 million and Media Cashflow of $.4 million.
The Senior Notes require semi-annual cash interest payments on each
June 15 and December 15 of $6.3 million until maturity.
The Company's ability to pay interest on the Senior Notes and the
Senior Secured Facility when due, and to satisfy its other obligations, depends
upon its future operating performance, and its ability to obtain funding from
other sources, and will be affected by financial, business, market,
technological, competitive and other conditions, developments, pressures, and
factors, many of which are beyond the control of the Company. The Company is
highly leveraged, and many of its competitors are believed to operate with much
less leverage and to have significantly greater operating and financial
flexibility and resources.
Due to weakened economic conditions, the contraction of the financial
markets and the general state of affairs following the terrorist attacks of
September 11, 2001, the Company did not have sufficient cash available to make
its semi-annual interest payment on the Senior Notes of $6.3 million on December
17, 2001. The Company was notified by the Trustee of the Senior Notes that
continued failure to make the interest payment would constitute an event of
default under the terms of the Indenture. Following an event of default, the
Indenture permits the Trustee or the Holders of 25% in aggregate principal
amount of the Senior Notes to declare the entire principal amount of the Senior
Notes plus accrued interest, due and payable immediately. In addition, as of
January 14, 2002, the Company failed to comply with certain covenants related
to earnings coverage contained in the Senior Secured Facility. As a result,
the Senior Secured Facility and certain other debt obligations would be in
default and may be accelerated under the terms of their respective loan
agreements.
12
Historically, the Company has achieved significant growth through
acquisitions. In order for the Company to achieve needed future growth in
revenues and earnings and to replace the revenues and earnings of properties
that may be sold by one or more of the Subsidiaries from time to time,
additional acquisitions may be necessary. Meeting this need for acquisitions
will depend upon several factors, including the continued availability of
suitable financing. There can be no assurance that the Company can or will
successfully acquire and integrate future operations. In connection with future
acquisition opportunities, the Company, or one or more of its subsidiaries, may
need to incur additional indebtedness or issue additional equity or debt
instruments. There can be no assurance that debt or equity financing for such
acquisitions will be available on acceptable terms, or that the Company will be
able to identify or consummate any new acquisitions.
The Indenture limits the Company's ability to incur additional
indebtedness. Limitations in the Indenture on the Company's ability to incur
additional indebtedness, together with the highly leveraged nature of the
Company, could limit operating activities, including the Company's ability to
respond to market conditions, to provide for unanticipated capital investments
and to take advantage of business opportunities.
The Company's primary liquidity needs are to fund capital
expenditures, provide working capital and meet debt service requirements.
Historically, the Company's principal sources of liquidity have been cash on
hand, cashflow from operations, repayments on notes receivable, proceeds from
sales of properties and indebtedness permitted under the Indenture. The Company
has limited ability to incur additional indebtedness under the Indenture and to
meet its liquidity needs during the next 12 months, the Company may need to
receive a prepayment on its notes receivable, or to sell some of its properties.
The Company cannot give any assurance that it will be able to achieve either of
these alternatives on terms acceptable to it.
Furthermore, the Company does not have sufficient funds to pay any
indebtedness which may be accelerated as a result of the Company's
aforementioned defaults. Currently, the Company and Mr. Brill have been
exploring, and continue to explore, possible remedies to cure the aforementioned
defaults on indebtedness. These remedies include the sale of strategic
assets and financing options that would allow related parties to repay amounts
owed to the Company. In addition, the Company and Mr. Brill are actively
exploring alternatives to restructure the capital of the Company. These
alternatives may include a sale or transfer of part or all of the equity
ownership of the Company, purchases of the Senior Notes at market prices by
related or unrelated buyers, or a combination of these or other measures. The
Company cannot provide any assurance that any of these remedies or alternatives
will be consummated, and cannot provide any assurance that consummation of
these measures would benefit the holders of the Senior Notes.
During the nine month period ended November 30, 2001, the Company has
expended $.4 million to purchase property and equipment and projects
approximately $.2 million will be required during the remainder of fiscal 2001.
Seasonality
Seasonal revenue fluctuations are common in the newspaper and radio
broadcasting industries, caused by localized fluctuations in advertising
expenditures. Accordingly, the
13
Stations' and Newspapers' quarterly operating results have fluctuated in the
past and will fluctuate in the future as a result of various factors,
including seasonal demands of retailers and the timing and size of
advertising purchases. Generally, in each calendar year the lowest level
of advertising revenues occurs in the first quarter and the highest levels occur
in the second and fourth quarters.
Forward-Looking Statements
Certain items in this Form 10-Q constitute "forward-looking statements"
within the meaning of the Federal Private Securities Litigation Reform Act of
1995. Forward-looking statements are typically identified by the words
"believe," "expect," "anticipate," "intend," "estimate" and similar expressions.
Readers are cautioned that any such forward-looking statements are not
guarantees of future performance and that matters referred to in such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause actual results, performance or achievements of the
Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, but are not limited to, risks and uncertainties relating to
leverage, the need for additional funds, the ability of the Company to sell
properties or restructure its capital, the ability of the Company to achieve
certain cost savings, the management of growth, the introduction of new
technology, changes in the regulatory environment, the popularity of radio and
newsprint as a communication/advertising medium and changing consumer tastes.
The Company undertakes no obligation to publicly release the results of any
revisions to these forward-looking statements that may be made to reflect any
future events or circumstances.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's market risk sensitive instruments do not subject the
Company to material risk exposures, except for such risks related to interest
rate fluctuations. As of November 30, 2001, the Company has debt outstanding of
approximately $136.2 million. Senior Notes with a carrying value of
$103.6 million have an estimated fair value of approximately $34.7 million.
The fair value of the Senior Notes is estimated based on market trading
activity in the Senior Notes and price estimates used by national brokerage
firms, however, as there are few holders of the Senior Notes and minimal
trading activity has occurred and as a result of the Company's default in
payment of its interest on the Senior Notes, the fair value, if any, of the
Senior Notes may vary significantly from the estimate. The fair market value of
the Company's remaining debt of $32.7 million approximates its carrying value.
Fixed interest rate debt totals approximately $119.9 million as of November 30,
2001 and includes: the Senior Notes which bear cash interest, payable
semiannually, at a rate of 12% until maturity on December 15, 2007; other debt
with stated rates of 7% to 10%; and capital leases with effective rates of 12%.
The remainder of the debt totaling $16.3 million, or 12% of the total, is
variable rate debt. The majority of such debt is the Senior Secured Facility,
14
which currently bears interest at 8.0% (all of which are described in the notes
to the consolidated financial statements included in the Company's Annual Report
on Form 10-K for the year ended February 28, 2001).
At November 30, 2001 long-term debt matures as follows:
(in Millions)
- -------------------------------------------------------------------------------------------------------------
Fiscal Year 2002 2003 2004 2005 2006 Thereafter Total
- -------------------------------------------------------------------------------------------------------------
Senior Notes, net
of unamortized
discount of $1.5 $103.6 $ - $ - $ - $ - $ - $103.6
Senior Secured
Facility 15.0 - 15.0
Other 2.7 1.3 3.3 1.2 .6 8.5 17.6
------------------------------------------------------------------------------------
$121.3 $1.3 $3.3 $1.2 $ .6 $ 8.5 $136.2
------------------------------------------------------------------------------------
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PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None.
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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.
BRILL MEDIA COMPANY, LLC
By: BRILL MEDIA MANAGEMENT, INC.,
Manager
January 14, 2002 By /s/ Alan R. Brill
----------------------------------
Alan R. Brill
DIRECTOR, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
January 14, 2002 By /s/ Donald C. TenBarge
----------------------------------
Donald C. TenBarge
VICE PRESIDENT, CHIEF FINANCIAL
OFFICER, SECRETARY AND TREASURER
(PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
17