0000059498-95-000012.txt : 19950817
0000059498-95-000012.hdr.sgml : 19950817
ACCESSION NUMBER: 0000059498-95-000012
CONFORMED SUBMISSION TYPE: 10-K/A
PUBLIC DOCUMENT COUNT: 2
CONFORMED PERIOD OF REPORT: 19941231
FILED AS OF DATE: 19950816
SROS: NASD
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: LIN BROADCASTING CORP
CENTRAL INDEX KEY: 0000059498
STANDARD INDUSTRIAL CLASSIFICATION: TELEVISION BROADCASTING STATIONS [4833]
IRS NUMBER: 620673800
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K/A
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-02481
FILM NUMBER: 95564765
BUSINESS ADDRESS:
STREET 1: 5295 CARILLON POINT
CITY: KIRLAND
STATE: WA
ZIP: 98033
BUSINESS PHONE: 2068281902
MAIL ADDRESS:
STREET 1: 5295 CARILLONPOINT
CITY: KIRLAND
STATE: WA
ZIP: 98033
10-K/A
1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K/A
(Amendment No. 2)
[X] Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1994
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _____________ to _____________
Commission File No. 0-2481
_________________________________________________________________
LIN BROADCASTING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 62-0673800
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5295 Carillon Point
Kirkland, Washington 98033
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(206) 828-1902
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The number of shares outstanding of the registrant's Common
Stock was 51,695,750 as of March 31, 1995, excluding 3,630,268
treasury shares. The aggregate market value of the voting stock
held by non-affiliates of the registrant was $3,194,381,565 as of
March 31, 1995. (The term "affiliates" is deemed, for this
purpose only, to refer only to the directors of the registrant,
to McCaw Cellular Communications, Inc. and to AT&T Corp.)
DOCUMENTS INCORPORATED BY REFERENCE
None.
1
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The FCC has allocated additional spectrum for mobile
communication services and recently concluded auctions for
licenses to a significant portion of this spectrum. Federal and
state authorities are also considering proposals that may result
in the modification of rights held by providers of mobile
communications services and the modification of relationships
between facilities-based cellular carriers and resellers of
cellular services. See "Business - The Company's Cellular
Operations-Cellular Competition" and "Governmental Regulation".
The Company believes these initiatives will result in additional
competition for the Company. The FCC has already authorized one
entity to provide a cellular-like mobile service in certain
markets of the Company (in addition to the B Block cellular
competition). Other entities have submitted winning bids in
recent auctions for personal communication services licenses and
are expected to launch service within the next few years. The
Company also intends to pursue rights to offer additional mobile
communications services. In light of the uncertainty as to the
eventual outcome of any of these specific initiatives, including
the nature and timing of the additional competitive services
covered thereby, it is impossible to quantify at this time the
impact of these legislative and regulatory initiatives or such
competition on the Company at this time.
1994 COMPARED TO 1993
LIN completed two transactions during 1994 which, together,
had a significant effect on the Company's results of operations
for the year and financial position as of December 31, 1994. On
June 24, 1994, LCH Communications, Inc. ("LCH"), a wholly-owned
subsidiary of the Company, redeemed all of its outstanding
Redeemable Preferred Stock (the "LCH Preferred Stock") held by
Comcast Cellular Communications Inc. in exchange for all of the
capital stock of a subsidiary of LCH, whose assets consisted
primarily of a 49.99% interest in the Philadelphia cellular
system and the GuestInformant specialty publishing business, plus
$12.3 million cash (which represented 15% of the fair market
value of the WOOD-TV business). The Company recognized a non-cash
tax-free gain of $468.7 million in connection with this
transaction. The Company's results of operations include the
results of the consolidated publishing business and the equity
investment in the Philadelphia operations through June 24, 1994.
On December 28, 1994, the Company distributed all of the issued
and outstanding shares of common stock of its previously wholly-owned
subsidiary LIN TV. The LIN TV operations comprised
substantially all of the Company's former television broadcasting
operations. The distribution was made in the form of a dividend
2
payable to holders of record of the Company's common stock at the
close of business on December 9, 1994. The Company's shareholders
of record on that date received one share of LIN TV common stock
for each two shares of the Company's common stock owned. The
consolidated financial statements reflect an increase in the
Company's additional paid-in capital of $41.25 million,
representing the negative net book value of the assets and
liabilities distributed. The results of operations of LIN TV are
included through December 28, 1994.
LIN reported consolidated net revenues of $876.5 million for
1994, an increase of 27% over 1993 net revenues of $688.6
million, primarily due to continued strong growth in cellular
subscribers. The Company recorded consolidated net income for
1994 of $564.2 million, or $10.84 per share, compared to a
consolidated net loss of $60.7 million, or $1.18 per share, for
1993. The 1994 results include a non-recurring gain of $468.7
million and a cessation of the preferred stock dividends in the
second quarter as a result of the redemption of the LCH Preferred
Stock.
Revenues
Net revenues in 1994 for LIN's consolidated cellular
operations (principally New York and Dallas-Fort Worth) increased
33% from 1993. This increase was primarily the result of a 38%
increase in average subscribers, offset, in part, by a 3% decline
in average revenue per subscriber, a trend that the Company
expects will continue for at least the next several years. The
decrease in average revenue per subscriber is primarily the
result of a lower average rate per minute, a decline in long
distance revenues per subscriber and a slight decline in average
minutes of use per subscriber. The average rate decreased due to
a number of factors, including promotional activities and pricing
changes, which were offset in part by a change in the mix of
customers. Long distance revenues per subscriber have declined
primarily due to the October 1993 implementation of equal access
at the Company's Los Angeles and Houston cellular operations,
where the cellular long distance service operations are wholly-owned
by the Company.
The overall demand for wireless services continued to expand
during 1994 and the Company expects to benefit from the
anticipated continuation of this trend in the future, although
there can be no assurance that this trend will continue at the
same rate as it has historically. The Company is actively working
toward improving the accessibility and value of cellular service
in the future by participating in the development and deployment
of important new services to complement the basic services now
offered. During 1994, the Company continued to market enhanced
cellular services in various of its markets including enhanced
directory assistance, voice recognition, and data transmission
3
services. The Company also introduced digital cellular service in
New York during the first half of 1994 and continued to increase
the market penetration of digital service in Los Angeles. The
Company plans to introduce commercial digital service in its
Dallas and Houston operations during 1995. During 1995 and
beyond, the Company currently plans to implement such additional
service improvements as digital messaging service, Caller ID and
cellular digital packet data service. The expansion of digital
service generally will increase the capacity of the Company's
systems, while providing benefits to customers such as the
enhanced services available only through the digital network and
the longer battery life of digital phones. Continued growth in
demand for basic cellular service, as well as demand for new
services such as those discussed above should contribute to
continued cellular revenue growth for the Company as well as
mitigate the trend of declining revenue per subscriber.
Media revenues increased 9% from 1993, due to continued
improvement in both the national economy and the local economies
where the Company operated, which stimulated growth in
advertising spending. Due to the transactions discussed above,
results of media operations in 1994 are not directly comparable
to results of prior years, and media revenues are not expected to
constitute a significant portion of the Company's revenues in the
future.
Operating Costs and Expenses
Direct operating expenses increased 13% from 1993 and
represented 16% of net revenues versus 18% in 1993. This increase
reflects increased cellular network operating expenses due to the
subscriber growth and increased network size, an increase in
television news and programming expenses and an increase in
direct cellular fraud costs. The decline in direct operating
expenses as a percentage of net revenues was primarily due to
efficiencies in cellular network operations as well as a decline,
as a percentage of revenues, in amounts paid to long distance
carriers for long distance service that was resold by the Company
to its subscribers. Selling, general and administrative expenses
increased 45% from 1993 and increased to 43% of net revenues in
1994 versus 38% in 1993. The most significant reason for this
increase was an increase in marketing expenses associated with
the increase in new cellular subscribers. The Company added 59%
more new subscribers in 1994 than in 1993. The cost per new
subscriber added increased slightly and is expected to continue
to increase for at least the next several years. The Company also
had a large increase in costs related to cellular customer
service and support. This reflects increases in customer support,
billing, administration and other general expenses, including an
increase in personnel necessary to administer cellular fraud
related issues. The Company expects that operating expenses will
continue to grow in the future as the subscriber base expands and
additional services are provided.
4
However, the Company continues to invest in equipment and
personnel to improve the efficiency and effectiveness of customer
support and administration.
Depreciation increased principally due to the addition of
property and equipment to expand and improve the Company's
cellular systems. The Company anticipates continued growth in
depreciation expense in the future as additional capital
expenditures will be required to support growth in the cellular
subscriber base and to provide enhanced cellular services,
including digital cellular. Amortization expense increased due to
the effect of acquisitions as discussed in "Liquidity and Capital
Resources" below. Absent any new acquisitions, annual
amortization expense should decrease by approximately $15 million
during 1995 as certain intangible assets became fully amortized
in December 1994. During 1994, the Company completed the
replacement of substantially all of the switching and cell site
equipment in its Dallas operations (see further discussion in
"Liquidity and Capital Resources"). The loss realized upon sale
of the old cellular equipment at an amount less than its carrying
value was provided for in 1993.
Other Income and Expenses
Equity in income of unconsolidated affiliates rose 12% due
to improved results at the affiliates, offset, in part, by the
effect of the disposition of the Philadelphia affiliate in June
1994 as discussed earlier. Net revenues of these ventures
increased 12 due primarily to an increase in subscribers offset,
in part, by a decrease in average revenue per subscriber as well
as the disposition of the Philadelphia affiliate. The trend of
declining revenue per subscriber was consistent with that of
LIN's consolidated cellular operations. Direct operating expenses
of these ventures increased 28% and represented 12% of revenues
versus 11% in the prior year. The increase was attributable
primarily to increased network operations, long distance and
roamer fraud expenses, offset in part by the effect of the
Philadelphia disposition. Selling, general and administrative
expenses of the ventures increased 18% and represented 41% of
revenues versus 39% in the prior year. Selling expenses increased
17%, driven by an increase in new customer additions. General and
administrative expenses also continued to increase as a result of
the growth in subscribers. Depreciation and amortization expense
of these ventures increased 1%, reflecting additional capital
expenditures for cellular network capacity and coverage
expansion, digital equipment conversion, offset in part by the
Philadelphia disposition. Net other expense declined due to the
Philadelphia disposition and as a result of litigation
settlements in 1993.
5
Interest expense (which includes the amortization of the
financing and commitment fees) increased $16.2 million from 1993
due primarily to higher interest rates. The Company's weighted
average interest rate on its borrowings was 5.79% during 1994 and
4.94% during 1993. As required under its Bank Credit Facilities
(as defined below), the Company has entered into interest rate
cap agreements. See Note 6 to the consolidated financial
statements contained elsewhere in this Form 10-K.
Minority interests in net income of consolidated
subsidiaries increased $23.0 million primarily due to an increase
in the net income of the Dallas and New York cellular operations,
offset in part by a decrease in the minority interest accrual for
the New York operation in 1994 as a result of the Company's
acquisition of additional interests in that market in May 1994
(see Liquidity and Capital Resources). The increase in the net
income of the Dallas operation was due in part to a $42.2 million
loss incurred in 1993 as a result of the write-down and
subsequent disposition of a substantial portion of cellular
equipment.
As discussed previously, the LCH Preferred Stock was
redeemed in the second quarter of 1994. See further discussion in
Note 7 to the consolidated financial statements. As a result, the
Company is no longer required to accrue preferred stock
dividends, which accrued at the rate of 15.8% annually, thereby
reducing provisions for preferred stock dividends by
approximately $100 million from 1993.
The Company's effective tax rate of 31.5% in 1994 was
substantially lower than the 47.2% in 1993 primarily due to the
additional tax expense of $15.3 million recorded during 1993 as a
result of the increase in the corporate tax rate from 34% to 35%.
Pursuant to SFAS No. 109, the Company was required to record this
one-time additional tax expense, and corresponding increase in
deferred tax liability, as a result of the increase in the
statutory tax rate.
Recently Issued Accounting Standards
In October 1994, the Company adopted the Statement of Financial
Accounting Standards No. 119, Disclosures about Derivative Financial
Instruments and Fair Value of Financial Instruments, (SFAS 119) which
requires additional disclosure regarding the nature and purpose
of derivative financial instruments. As further discussed in
Note 6 to the Company's consolidated financial statements
included herein, the Company utilizes interest rate caps to
comply with certain debt covenants and to provide protection
against rising interest rates.
6
In March 1995, the Financial Accounting Standards Board
issued Statement No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of,
(SFAS 121) effective for fiscal years beginning after
December 15, 1995. This statement requires the separation of
long-lived assets and certain identifiable intangible assets into
two categories for purposes of accounting for an impairment of
assets: those to be held and used and those to be disposed of.
An impairment loss is indicated if the sum of the expected cash
flows, undiscounted and without interest charges, is less than
the carrying amount of the assets. The carrying value of
intangible assets will be reviewed if the facts and circumstances
indicate they may be impaired. If this review indicates that the
intangible assets will not be recoverable based on the sum of
expected cash flows, undiscounted and without interest charges,
the Company's carrying value of the intangible assets will be
reduced by an impairment loss equal to the excess of the carrying
amount over the fair value of the assets. Management believes
the adoption of SFAS 121 will not have a material impact
on the financial position or the results of operations of the
Company.
1993 COMPARED TO 1992
LIN reported net revenues of $688.6 million for 1993, an
increase of 20% over 1992 net revenues of $572.5 million.
Consolidated cellular revenues increased 28% as strong cellular
subscriber growth continued. Media revenues were up 2% from 1992.
The Company recorded a consolidated net loss for 1993 of
$60.7 million, or $1.18 per share, compared to a consolidated net
loss of $69.0 million, or $1.34 per share, for 1992.
7
Revenues
Net revenues for LIN's consolidated cellular operations
(principally New York and Dallas) increased 28% from 1992. This
increase was primarily the result of a 29% increase in average
subscribers, offset, in part, by an 1% decline in average revenue
per subscriber. The decrease in average revenue per subscriber is
primarily the result of a lower average rate per minute offset by
an increase in average minutes of use per subscriber. The
average rate has decreased due principally to pricing actions
such as actual rate decreases and/or including more minutes for a
fixed price.
Net revenues from the media segment increased 2% from 1992.
However, excluding cyclical political and Olympics revenues from
both years, the increase was 6%.
Operating Costs and Expenses
Direct operating expenses increased 11% from 1992 and
represented 18% of net revenues versus 19% in 1992. This increase
reflects increased cellular network operating expenses due to the
subscriber growth and increased network size, as well as
increased television news and programming expenses. Selling,
general and administrative expenses increased 27% from 1992 and
increased to 38% of net revenues in 1993 versus 36% in 1992.
Among the factors contributing to the increase are additional
marketing expenses associated with the increase in new cellular
subscribers. The Company added 20% more new subscribers in 1993
than in 1992. The Company also had a large increase in costs
related to cellular customer service and support. Depreciation
increased principally due to the addition of property and
equipment to expand and improve the Company's cellular systems.
The loss on disposal of cellular equipment in 1993 reflects the
loss realized on the replacement of cellular network equipment in
Dallas-Fort Worth as discussed earlier.
Other Income and Expenses
Equity in income of unconsolidated affiliates rose 6%.
Revenues of these ventures increased 16% due primarily to an
increase in subscribers offset, in part, by a decrease in average
revenue per subscriber. Direct operating expenses of these
ventures increased 24% and represented 11% of revenues versus 10%
in the prior year. This increase is due primarily to increased
network operations, toll and roamer expenses at those cellular
operations. Selling, general and administrative expenses of the
ventures increased 17% and represented 39% of revenues in 1993
and in 1992. The majority of this increase was due to increased
marketing and sales expenditures associated with a 28% increase
in the number of new customers. Depreciation expenses of these
8
ventures increased 33%, reflecting additional capital
expenditures for capacity expansion and increased coverage in all
the ventures, and digital service equipment in Los Angeles. Other
expenses also grew significantly due to settlement of certain
lawsuits and equity in losses of a cable affiliate absorbed by
Philadelphia.
Interest expense (which includes the amortization of the
financing and commitment fees) decreased $29.8 million from the
1992 amount due to lower interest rates and debt levels. The
Company's weighted average interest rate on its borrowings was
4.94% during 1993 and 6.43% during 1992. This decrease was due
both to reductions in the base borrowing rates as well as the
applicable margin the Company pays. The reduction in borrowings
was the result of scheduled principal repayments on the Bank
Credit Facilities.
Minority interests in net income of consolidated
subsidiaries decreased $14.9 million primarily due to the
equipment write-down incurred at the Dallas cellular operations
as discussed above.
As mentioned above, the Omnibus Budget Reconciliation Act of
1993 increased the corporate tax rate to 35% from 34%, effective
as of January 1, 1993. Pursuant to SFAS No. 109, the Company
recorded an additional tax expense of $15.3 million, with a
corresponding increase in deferred tax liability.
LIQUIDITY AND CAPITAL RESOURCES
The Company utilizes capital primarily to expand and improve
its cellular systems, to make acquisitions of cellular interests
and to make interest and principal payments on its indebtedness.
The Company's cellular operations continue to require substantial
capital to increase system capacity and coverage areas, to enable
provision of new services, and to expand and improve
administrative support systems. During 1994, the Company
completed the replacement of the existing cellular system in
Dallas with a new system provided by L.M. Ericsson, the system
vendor in all of the Company's markets. The capitalized costs for
this project were approximately $100 million, of which
approximately $45 million and $55 million was expended during
1994 and 1993, respectively. Additionally, the Company continued
to invest in the conversion to digital cellular equipment and now
has introduced commercial digital service in both New York and
Los Angeles. The Company expects to begin providing digital
service in Dallas and Houston in 1995. Although the conversion to
digital services requires significant initial capital and
marketing expenditures, there are several advantages such as an
immediate three-fold capacity expansion and the establishment of
a platform for future service enhancements, including short
message transmission caller ID, improved data transmission and
9
longer phone battery life. The Company's share of expenditures
in connection with the expansion of digital cellular service
totaled approximately $30 million during 1994. Because of the
large number of current customers with analog cellular phones
that are not able to utilize the digital cellular service, the
Company expects that the conversion from analog to digital
service will be phased in over a number of years, during which
time the Company will maintain both analog and digital
transmitting equipment. During 1995, the Company expects that it
will continue to invest capital to support the growth of its
businesses, including implementation of digital networks and
microcells, at levels similar to or in excess of its 1994 capital
expenditure levels.
In May 1994, the Company completed the acquisition of an
additional 5.2% interest in the New York cellular market for
approximately $145 million cash and a 100% interest in the
Connecticut RSA-1 adjacent to the New York market for
approximately $30 million cash.
The Company's principal sources of funds are provided by
operations and two bank credit facilities, a senior secured
facility and a senior unsecured facility (together, the "Bank
Credit Facilities"). The $200 million senior unsecured financing
was established in June 1994. Under the Bank Credit Facilities,
the Company had $1.6 billion outstanding and $220 million
available as of December 31, 1994. The Company anticipates
drawing on the available funds in 1995.
All of the Company's cellular operations are owned by its
wholly-owned subsidiary LIN Cellular Network, Inc. and are
subject to the restrictions of the Bank Credit Facilities. With
limited exceptions, none of the cash flows, proceeds of
borrowings or proceeds from sales of assets from these operations
are available to meet the cash needs of the Company for
operations other than cellular operations. The Company's other
assets not described above (principally its remaining television
broadcasting interests and an interest in a mobile satellite
corporation and some of its cash) are held free of any
restriction. Under its Bank Credit Facilities, the Company must
remain in compliance with a series of financial covenants which
compare the levels of the Company's indebtedness to its cash
flows as of the end of each quarter. As of December 31, 1994, the
Company was in compliance with all covenants under the Bank
Credit Facilities. However, if the Company fails to service its
indebtedness, or satisfy or obtain waivers from the covenants
contained in the Bank Credit Facilities, the Company will be in
default. In such an event, holders of the Company's indebtedness
will be able to exercise their rights including the right to
declare all the borrowed funds and interest thereon immediately
due and payable. If the Company were unable to repay such
indebtedness, the holders of such indebtedness could proceed
10
against their collateral, if any. The ability of the Company to
comply with these provisions may be affected by events beyond its
control. Substantially all of the Company's assets, including its
stock in subsidiaries and its ownership interests in entities
holding cellular licenses, are pledged or encumbered as security
for indebtedness. Further details with respect to the Company's
Bank Credit Facilities are contained in Note 6 to the
consolidated financial statements contained elsewhere in this
Form 10-K.
The Company's indebtedness is due and payable over several
years, with the amortization increasing significantly during the
next few years. While the Company expects to have sufficient
funds from operations and available under the Bank Credit
Facilities to fund its operations and repay its indebtedness when
due, there can be no assurance that this will occur as the
Company continues to have substantial debt service and other
operating and capital requirements. If cash generated from
operations is not sufficient to fund those requirements, the
Company will have to modify its operations or borrow additional
amounts under its Bank Credit Facilities. There are conditions
which must be satisfied before the banks will be required to lend
those additional amounts. If these conditions are not satisfied,
the banks may conclude it is not in their best interest to lend
additional amounts to the Company. If the Company were unable to
borrow the required amounts from the banks, it may seek to
refinance the Bank Credit Facilities, issue additional debt
through a private or public offering, sell equity or sell certain
cellular interests or other assets. There can be no assurance
that the Company will be able to obtain such refinancings,
additional financing or asset sales when needed, or if carried
out, that the terms will be favorable to the Company or its
stockholders.
Cash provided by operating activities totaled $211.3 million
in 1994, compared to $221.0 million in 1993. The decrease was
primarily due to an increase in income tax payments, interest
expense and deferred commitment/financing fees, and a reduction
of cash received from equity affiliates. The reduction in cash
received from equity affiliates was due primarily to significant
additional capital expenditures of both the Los Angeles and
Houston cellular affiliates as those operations expand their
digital cellular networks.
As of December 31, 1994, the Company had a deficit in
working capital of $171.9 million, compared to a deficit of $69.3
million as of December 31, 1993. Among the factors contributing
to the increased deficit are higher capital expenditures to
support cellular subscriber growth and digital implementation and
an increase in cellular marketing and operating costs in
connection with the accelerated cellular subscriber growth. The
11
Company expects that additional borrowings on its Bank Credit
Facilities may be required to meet short-term liquidity needs,
particularly if the rapid growth in cellular subscribers
continues.
The Company used $327.5 and $168.5 million of cash and cash
equivalents for investing activities during 1994 and 1993,
respectively, primarily as a result of capital expenditures and
cellular acquisitions. As of December 31, 1994, the Company did
not have any commitments that, in the aggregate or individually,
were material to the Company, other than lease commitments
discussed in Note 11 to the consolidated financial statements.
During 1994, the Company made scheduled principal repayments
of $135.5 million on its Bank Credit Facilities compared to $71.4
million during 1993. Scheduled principal payments on the Bank
Credit Facilities increase to $151.9 million during 1995.
It is the Company's policy to carefully monitor the state of
its business, cash requirements and capital structure. From time
to time, the Company may enter into transactions pursuant to
which debt is extinguished, including sales of assets or equity,
joint ventures, reorganizations or recapitalizations. There can
be no assurance that any further such transactions will be
undertaken or, if undertaken, will be favorable to stockholders.
Inflation
The Company believes that its businesses are affected by
inflation to an extent no greater than other businesses are
generally affected.
12
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a)(1) Financial Statements Filed
Report of Ernst & Young LLP, Independent Auditors
Consolidated Financial Statements of the Company
- Consolidated Balance Sheets at December 31, 1994
and 1993
- Consolidated Statements of Operations for the
Years Ended December 31, 1994, 1993 and 1992
- Consolidated Statements of Stockholders' Equity
(Deficit) for the Years Ended December 31, 1994,
1993 and 1992
- Consolidated Statements of Cash Flows for the
Years Ended December 31, 1994, 1993 and 1992
- Notes to Consolidated Financial Statements
Report of Ernst & Young LLP, Independent Auditors
Independent Auditors' Report
Report of Independent Public Accountants
Combined Financial Statements of the Company's
Unconsolidated Affiliates
- Combined Balance Sheets at December 31, 1994 and
1993
- Combined Statements of Income for the Years Ended
December 31, 1994, 1993 and 1992
- Combined Statements of Ventures' Equity for the
Years Ended December 31, 1994, 1993 and 1992
- Combined Statements of Cash Flows for the Years
Ended December 31, 1994, 1993 and 1992
- Notes to the Combined Financial Statements
(a)(2) Financial Statement Schedules Filed
Financial Statement Schedules of the Company
I - Condensed Financial Information of Registrant
II - Valuation and Qualifying Accounts and Reserves for
the Years Ended December 31, 1994, 1993 and 1992
Financial Statement Schedule of the Company's
Unconsolidated Affiliates
II - Valuation and Qualifying Accounts and Reserves for
the Years Ended December 31, 1994, 1993 and 1992
13
All other schedules have been omitted because the
information is not required or is not applicable, or because the
information required is included in the financial statements or
the notes thereto.
(a)(3) Exhibits **
3.1 Restated Certificate of Incorporation of LIN
Broadcasting Corporation (incorporated by
reference to Exhibit 3.1 to the Company's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1992)
3.2 Amended and Restated By Laws.
10.1* Amended and Restated 1969 Stock Option Plan
(incorporated by reference to Appendix A to
the Company's Proxy Statement for the Annual
Meeting of Stockholders held on June 2, 1994)
10.2(a)* Profit Sharing Plan, as amended and restated
effective January 1, 1989 (the "Profit Sharing
Plan") (incorporated by reference to Exhibit
10.2 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31,
1992)
10.2(b)* Amendment, adopted November 22, 1994, to the
Profit Sharing Plan
10.3* Deferred Compensation Plan, as amended
(incorporated by reference to Exhibit 10(d) to
the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1989)
10.4 Partnership Agreement, dated as of March 18,
1983, among LIN Cellular Communications
Corporation, Metromedia, Inc., and Cellular
Systems, Inc. (incorporated by reference to
Exhibit 10.11 to the Company's Annual Report
on Form 10-K for the fiscal year ended
December 31, 1992)
10.5 Partnership Agreement, dated as of June 22,
1983, between Los Angeles Cellular Corporation
and LIN Cellular Communications Corporation
(incorporated by reference to Exhibit 10.12 to
the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1992)
10.6 Stock Agreement, dated June 5, 1982, by and
among Radio Broadcasting Company, LIN
Broadcasting Corporation, LIN Cellular
Communications Corporation, Metromedia, Inc.,
and AWACS, Inc. (incorporated by reference to
Exhibit 10.13 to the Company's Annual Report
on Form 10-K for the fiscal year ended
December 31, 1992)
---------------------------
* Previously filed, except as noted.
14
10.7 Amended and Restated Partnership Agreement,
dated as of November 9, 1984, among LIN
Cellular Communications Corporation, D/FW
Signal, Inc., MCI Cellular Telephone Company,
Cellular Mobile Systems, Inc., and Mid-America
Cellular Systems, Inc. (incorporated by
reference to Exhibit 10.14 to the Company's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1992)
10.8 Amended and Restated Partnership Agreement,
dated as of December 12, 1984, among Metro
Mobile CTS, Cellular Systems, Inc., and
Houston Mobile Cellular Communications Company
(incorporated by reference to Exhibit 10.15 to
the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1992)
10.9 Partnership Agreement, dated as of December
12, 1984, among American Mobile Communications
of Houston and the Gulf, Houston Cellular
Corporation, LIN Cellular Communications
Corporation, MCI Cellular Telephone Company,
Charisma Communications Corp. of the
Southwest, and Cellular Mobile Systems of
Texas, Inc. (incorporated by reference to
Exhibit 10.16 to the Company's Annual Report
on Form 10-K for the fiscal year ended
December 31, 1992)
10.10 Partnership Agreement, dated as of September
1991, by and between Galveston Mobile
Corporation and LIN Cellular Communications
Corporation (incorporated by reference to
Exhibit 10.17 to the Company's Annual Report
on Form 10-K for the fiscal year ended
December 31, 1992)
10.11 Agreement, dated December 11, 1989, between
the Company, MMM Holdings, Inc. and McCaw
Cellular Communications, Inc. (incorporated by
reference to Exhibit (c)(6) to Amendment No.
24 to Schedule 14D-1 and Amendment No. 30 to
Schedule 13D relating to the Offer filed by
MMM Holdings, Inc. and McCaw with the
Securities and Exchange Commission on December
12, 1989)
10.12(a) Private Market Value Guarantee, dated December
11, 1989, between the Company and McCaw
Cellular Communications, Inc. (the "Private
Market Value Guarantee") (incorporated by
reference to Exhibit (c)(7) to Amendment No.
24 to Schedule 14D-1 and Amendment No. 30 to
Schedule 13D relating to the Offer filed by
MMM Holdings, Inc. and McCaw with the
Securities and Exchange Commission on December
12, 1989)
15
10.12(b) First Amendment, dated June 7, 1994, to the
Private Market Value Guarantee (incorporated
by reference to Exhibit 99.1 to the Company's
Report on Form 8-K dated May 25, 1994)
10.13 Exercise, dated October 27, 1989, of the
Company's Rights of First Refusal to Acquire
the Interests of Metromedia Company in Metro
One Cellular Telephone Company, and Agreement
of Purchase and Sale, dated October 3, 1989,
by and between McCaw Cellular Communications,
Inc. and Metromedia Company (incorporated by
reference to Exhibit 10(u) to the Company's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1989)
10.14(a) Credit Agreement, dated as of August 1, 1990,
among LIN Cellular Network, Inc., Morgan
Guaranty Trust Company of New York and the
Lenders Named therein (the "1990 Credit
Agreement") (incorporated by reference to
Exhibit 10.21 to the Company's Annual Report
on Form 10-K for the fiscal year ended
December 31, 1990)
10.14(b) Amendment No. 1, dated as of June 15, 1993, to
the 1990 Credit Agreement
10.14(c) Amendment No. 2, dated as of May 31, 1994, to
the 1990 Credit Agreement
10.15 Stock Acquisition Agreement, dated as of May
7, 1990, between LCH Cellular, Inc. and
Metromedia Company (incorporated by reference
to Exhibit (b)(i) to the Company's Quarterly
Report on Form 10-Q for the quarter ended June
30, 1990)
10.16 Restated Certificate of Incorporation of LCH
Communications, Inc. (formerly LCH Cellular,
Inc.) (incorporated by reference to Exhibit
(b)(ii) to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1990)
10.17 Stockholders Agreement, dated as of August 10,
1990, among Metromedia Company, LCH Holdings,
Inc. and LCH Communications, Inc.
(incorporated by reference to Exhibit (b)(iii)
to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1990)
10.18(a)* Employee Stock Purchase Plan (the "ESPP")
(incorporated by reference to Exhibit 4.3 to
the Company's Registration Statement on Form
S-8 dated March 13, 1991 (Registration No. 33-39282))
10.18(b)* Amendment, adopted November 2, 1994, to the
ESPP
16
10.19* Employment Agreement, dated as of October 17,
1990 of Gary Chapman (incorporated by
reference to Exhibit 10.28 to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1991)
10.20* Employment Agreement, dated as of April 16,
1991, of Donald Guthrie (incorporated by
reference to Exhibit 10.30 to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1991)
10.21(a)* LIN Broadcasting Corporation Retirement Plan
(the "Retirement Plan"), as amended and
restated as of January 1, 1989 (incorporated
by reference to Exhibit 10.31 to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1991).
10.21(b)* Amendment to the Retirement Plan dated January
1, 1993 (incorporated by reference to Exhibit
10.32 to the Company's Annual Report on Form
10-K for the year ended December 31, 1992)
10.21(c)* Amendment, adopted November 22, 1994, to the
Retirement Plan
10.22(a)* LIN Broadcasting Corporation Supplemental
Benefit Retirement Plan dated January 1, 1990
(the "Supplemental Plan") (incorporated by
reference to Exhibit 10.33 to the Company's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1992)
10.22(b)* Amendment, adopted November 22, 1994, to the
Supplemental Plan
10.23* LIN Employee Plans, established in connection
with the McCaw-AT&T Merger Agreement
(incorporated by reference to Exhibit 10.34 to
the Company's Annual Report on Form 10-K for
the year ended December 31, 1993)
10.24* LIN Broadcasting Deferred Compensation Plan,
dated December 15, 1993 (incorporated by
reference to Exhibit 10.35 to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1993)
10.25 Distribution Agreement, dated as of December
28, 1994, between the Company and LIN
Television Corporation ("LIN TV")
(incorporated by reference to Exhibit 2.4 to
the Report on Form 8-K dated December 28, 1994
filed by LIN Television Corporation)
10.26 Tax Allocation Agreement, dated as of December
28, 1994, between the Company and LIN TV
(incorporated by reference to Exhibit 99.1 to
the Report on Form 8-K dated December 28, 1994
filed by LIN Television Corporation)
17
10.27 Management Services Agreement, dated as of
December 28, 1994, between the Company and LIN
TV (incorporated by reference to Exhibit 99.2
to the Report on Form 8-K dated December 28,
1994 filed by LIN Television Corporation)
10.28 Employee Benefits Allocation Agreement, dated
as of December 28, 1994, between the Company
and LIN TV (incorporated by reference to
Exhibit 99.3 to the Report on Form 8-K dated
December 28, 1994 filed by LIN Television
Corporation)
10.29 Consulting Agreement, dated as of December 28,
1994, between LIN TV, LCH Communications, Inc.
and LIN Michigan Broadcasting Corporation
(incorporated by reference to Exhibit 99.4 to
the Report on Form 8-K dated December 28, 1994
filed by LIN Television Corporation)
10.30 Right of First Refusal Agreement, dated as of
December 28, 1994, between the Company and LIN
TV (incorporated by reference to Exhibit 99.5
to the Report on Form 8-K dated December 28,
1994 filed by LIN Television Corporation)
10.31(a) Asset Purchase Agreement, dated June 7, 1994
among the Company, LIN TV, Cook Inlet
Communications Corp. and Cook Inlet
Communications, Inc. (the "Asset Purchase
Agreement") (incorporated by reference to
Exhibit 99.1 to the Company's Report on Form
8-K dated December 28, 1994)
10.31(b) First Amendment, dated September 26, 1994. to
the Asset Purchase Agreement (incorporated by
reference to Exhibit 99.2 to the Company's
Report on Form 8-K dated December 28, 1994)
10.31(c) Second Amendment, dated December 6, 1994. to
the Asset Purchase Agreement (incorporated by
reference to Exhibit 99.3 to the Company's
Report on Form 8-K dated December 28, 1994)
10.32 Credit Agreement, dated as of June 15, 1994,
among LIN Cellular Network, Inc., Toronto
Dominion (Texas), Inc. and the Lenders named
therein
11 Statement regarding computation of earnings
per share
21 Subsidiaries of the Registrant
23.1 Consent of Ernst & Young LLP (filed herewith)
23.2 Consent of Deloitte & Touche LLP
23.3 Consent of Arthur Andersen LLP
24 Powers of Attorney with respect to Certain
Signatures
27 Financial Data Schedule
* Management contract or compensatory plan or arrangement.
18
(b) Reports on Form 8-K
A report on Form 8-K dated December 28, 1994 relating to
the completion of the spin-off of LIN Television
Corporation, as well as the selection of appraisers
under the Private Market Value Guarantee process by the
Independent Directors of the Company and AT&T, was filed
dated December 28, 1994.
19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this amendment to be signed on its behalf by the undersigned,
thereunto duly authorized.
LIN BROADCASTING CORPORATION
By: DONALD GUTHRIE
-----------------------
Donald Guthrie
Senior Vice President-Finance
August 16, 1995
INDEX TO FINANCIAL STATEMENTS
Page
Report of Ernst & Young LLP, Independent Auditors . . . . . . . . .F-1
Consolidated Financial Statements of the Company
Consolidated Balance Sheets at
December 31, 1994 and 1993 . . . . . . . . . . . . . . . . .F-2
Consolidated Statements of Operations for
the Years Ended December 31, 1994,
1993 and 1992. . . . . . . . . . . . . . . . . . . . . . . .F-4
Consolidated Statements of Stockholders'
Equity (Deficit) for the Years Ended
December 31, 1994, 1993 and 1992 . . . . . . . . . . . . . .F-6
Consolidated Statements of Cash Flows for
the Years Ended December 31, 1994,
1993 and 1992. . . . . . . . . . . . . . . . . . . . . . . .F-7
Notes to Consolidated Financial Statements . . . . . . . . . . F-12
Report of Ernst & Young LLP, Independent Auditors . . . . . . . . F-32
Independent Auditors' Report. . . . . . . . . . . . . . . . . . . F-33
Report of Independent Public Accountants. . . . . . . . . . . . . F-34
Combined Financial Statements of the
Company's Unconsolidated Affiliates
Combined Balance Sheets at December 31, 1994
and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . F-35
Combined Statements of Income for the Years Ended
December 31, 1994, 1993 and 1992 . . . . . . . . . . . . . F-37
Combined Statements of Ventures' Equity for
the Years Ended December 31, 1994, 1993
and 1992 . . . . . . . . . . . . . . . . . . . . . . . . . F-38
Combined Statements of Cash Flows for the
Years Ended December 31, 1994, 1993 and 1992 . . . . . . . F-39
Notes to Combined Financial Statements . . . . . . . . . . . . F-42
Financial Statement Schedules of the Company
I - Condensed Financial Information of Registrant. . . . . . . . F-48
II - Valuation and Qualifying Accounts and
Reserves for the Years Ended
December 31, 1994, 1993 and 1992 . . . . . . . . . . . . . F-53
Financial Statement Schedule of the Company's
Unconsolidated Affiliates
II - Valuation and Qualifying Accounts and Reserves
for the Years Ended December 31, 1994,
1993 and 1992. . . . . . . . . . . . . . . . . . . . . . . F-54
F-1
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors and Stockholders of
LIN Broadcasting Corporation
We have audited the accompanying consolidated balance sheets of
LIN Broadcasting Corporation and subsidiaries as of December 31,
1994 and 1993, and the related consolidated statements of
operations, stockholders' equity (deficit), and cash flows for
each of the three years in the period ended December 31, 1994.
Our audits also included the financial statement schedules listed
in the Index at Item 14(a). These financial statements and
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform our audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of LIN Broadcasting Corporation and
subsidiaries at December 31, 1994 and 1993, and the consolidated
results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedules, when
considered in relation to the basic financial statements taken as
a whole, present fairly, in all material respects, the
information set forth therein.
ERNST & YOUNG LLP
Seattle, Washington
January 20, 1995
F-2
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
(Dollars in thousands)
ASSETS 1994 1993
--------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $47,467 $86,366
Marketable securities -- 16,465
Accounts receivable, less allowance
for doubtful accounts (1994-$17,395;
1993-$18,138) 136,279 156,784
Inventory 16,848 5,640
Prepaid expenses and other
current assets 9,907 16,320
---------------------------------------------------------------------------
Total current assets 210,501 281,575
---------------------------------------------------------------------------
Property and equipment, at cost, less
accumulated depreciation 450,698 405,762
Other noncurrent assets 47,150 61,807
Investments in and advances to
unconsolidated affiliates 274,830 264,172
Cellular FCC licenses, less
accumulated amortization
(1994-$194,997; 1993-$148,672) 1,727,546 1,627,371
Other intangible assets, less
accumulated amortization
(1994-$141,195; 1993-$145,853) 213,148 268,836
---------------------------------------------------------------------------
Total Assets $2,923,873 $2,909,523
===========================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------
Current Liabilities:
Current portion of long-term debt $151,875 $146,891
Accrued income taxes 34,875 34,241
Accounts payable 67,880 37,975
Unearned revenues 13,165 25,880
Accrued interest payable 5,399 2,685
Payable to McCaw and AT&T 21,069 16,064
Other accruals 88,186 87,108
--------------------------------------------------------------------------
Total current liabilities 382,449 350,844
--------------------------------------------------------------------------
(continued)
F-3
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
DECEMBER 31, 1994 AND 1993
(Dollars in thousands)
LIABILITIES AND STOCKHOLDERS'
EQUITY (Continued) 1994 1993
----------------------------------------------------------------------------
Long-term debt 1,443,125 1,551,447
Deferred income taxes 735,313 735,049
Other noncurrent liabilities 6,741 13,091
Minority interests in equity of
consolidated subsidiaries 58,507 56,209
Redeemable preferred stock of a subsidiary -- 1,305,248
Stockholders' Equity (Deficit):
Common stock, $.01 par value,
150,000,000 shares authorized,
55,329,000 shares issued 553 553
Paid-in capital 1,055,169 224,689
Deficit (586,055) (1,150,205)
---------------------------------------------------------------------------
469,667 (924,963)
---------------------------------------------------------------------------
Less common stock in treasury,
at cost (1994-3,678,000 shares;
1993-3,826,000 shares) 171,929 177,402
---------------------------------------------------------------------------
Total stockholders' equity (deficit) 297,738 (1,102,365)
---------------------------------------------------------------------------
Total Liabilities and
Stockholders' Equity $2,923,873 $2,909,523
==========================================================================
See accompanying notes.
F-4
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(Dollars in thousands, except per share amounts)
1994 1993 1992
------------------------------------------------------------------------------------------------
Net Revenues $876,469 $688,557 $572,521
Operating Costs and Expenses:
Direct operating 138,579 123,081 110,966
Selling, general and administrative 378,797 261,549 205,365
Corporate expenses 11,831 8,340 7,571
Depreciation 58,066 45,940 39,676
Amortization of intangible assets 83,086 79,190 78,928
Loss on disposal of cellular equipment -- 42,152 --
-----------------------------------------------------------------------------------------------
670,359 560,252 442,506
-----------------------------------------------------------------------------------------------
Operating Income 206,110 128,305 130,015
-----------------------------------------------------------------------------------------------
Other Income (Expenses):
Equity in income of unconsolidated affiliates 115,010 103,125 96,977
Investment income and other 5,717 7,015 9,295
Litigation settlement -- -- 7,032
Interest expense (111,638) (95,407) (125,218)
Gain on redemption of preferred stock 468,689 -- --
------------------------------------------------------------------------------------------------
477,778 14,733 (11,914)
-----------------------------------------------------------------------------------------------
Income Before Income Tax Expense and
Minority Interests 683,888 143,038 118,101
Income Tax Expense 59,289 65,569 33,897
------------------------------------------------------------------------------------------------
Income Before Minority Interests 624,599 77,469 84,204
(continued)
F-5
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 (Continued)
(Dollars in thousands, except per share amounts)
1994 1993 1992
-----------------------------------------------------------------------------------------
Minority Interests:
In net income of consolidated subsidiaries 26,874 3,896 18,856
Provision for preferred stock
dividends of a subsidiary 33,575 134,300 134,300
-----------------------------------------------------------------------------------------
Net Income (Loss) $564,150 $(60,727) $(68,952)
=========================================================================================
Net Income (Loss) Per Share $10.84 $(1.18) $(1.34)
=========================================================================================
See accompanying notes.
F-6
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(Dollars in thousands)
Total
Common Paid-in Treasury Stockholders'
Stock Capital Deficit Stock Deficit
----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1991 $553 $221,766 $(1,020,526) $(180,366) $(978,573)
Net loss -- -- (68,952) -- (68,952)
17,911 shares purchased for treasury -- -- -- (1,429) (1,429)
39,192 shares issued from treasury for
employee stock purchase plan, stock option
exercises and tax benefits -- 315 -- 1,903 2,218
----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1992 553 222,081 (1,089,478) (179,892) (1,046,736)
Net loss -- -- (60,727) -- (60,727)
19,218 shares purchased for treasury -- -- -- (1,798) (1,798)
97,040 shares issued from treasury for
employee stock purchase plan, stock option
exercises and tax benefits -- 2,608 -- 4,288 6,896
----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993 553 224,689 (1,150,205) (177,402) (1,102,365)
Net income -- -- 564,150 -- 564,150
9,275 shares purchased for treasury -- -- -- (1,094) (1,094)
155,702 shares issued from treasury for
employee stock purchase plan, stock option
exercises and tax benefits -- 5,404 -- 6,567 11,971
Redemption of preferred stock of a subsidiary -- 783,823 -- -- 783,823
Spin-off of LIN Television Corporation -- 41,253 -- -- 41,253
----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 $553 $1,055,169 $(586,055) $(171,929) $297,738
======================================================================================================================
See accompanying notes.
F-7
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(Dollars in thousands)
1994 1993 1992
--------------------------------------------------------------------------------------
OPERATING ACTIVITIES:
Net income (loss) $564,150 $(60,727) $(68,952)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 141,152 125,130 118,604
Amortization of cost associated
with long-term debt 9,866 9,793 10,477
Gain on redemption of preferred stock (468,689) -- --
Provision for loss on cellular equipment -- 42,152 --
Litigation settlement -- -- (5,900)
Minority interests in net income of
consolidated subsidiaries 26,874 3,896 18,856
Provision for preferred stock dividends 33,575 134,300 134,300
Provision for losses on accounts receivable 18,200 14,359 14,930
Equity in income of unconsolidated
affiliates (115,010) (103,125) (96,977)
(continued)
F-8
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(Dollars in thousands)
1994 1993 1992
--------------------------------------------------------------------------------------
OPERATING ACTIVITIES (continued):
Changes in operating assets and liabilities:
Increase in accounts receivable (49,129) (48,394) (34,554)
Increase in inventories and other
current assets (17,529) (3,626) (2,580)
Increase in deferred commitment/
financing fees (5,467) -- --
Cash received from equity investees 54,986 67,447 70,927
Increase (decrease) in accounts payable 41,265 (1,194) 4,396
Increase (decrease) in accrued
income taxes 18,242 (8,587) 8,359
Increase (decrease) in other
current liabilities (861) 25,235 (6,742)
Increase (decrease) in deferred
income taxes (25,437) 26,647 (6,563)
Decrease in minority interests (11,158) (1,568) (9,268)
Tax benefits from stock option exercises 4,119 1,428 282
Other (7,865) (2,184) (6,017)
--------------------------------------------------------------------------------------
Total adjustments (352,866) 281,709 212,530
--------------------------------------------------------------------------------------
Net cash provided by operating activities 211,284 220,982 143,578
--------------------------------------------------------------------------------------
(Continued)
F-9
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(Dollars in thousands)
1994 1993 1992
--------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Proceeds from sales of marketable securities 16,368 46,677 34,780
Purchases of marketable securities -- (43,705) (22,260)
Proceeds from sale of property and equipment 8,016 -- --
Capital expenditures (164,330) (150,475) (71,505)
Cellular and television acquisitions (174,993) (36,879) --
Investments in and advances to
unconsolidated affiliates, net (3,494) 15,854 (26,709)
Cash divested in LIN Television spin-off (9,113) -- --
--------------------------------------------------------------------------------------
Net cash used for investing activities $(327,546) $(168,528) $(85,694)
--------------------------------------------------------------------------------------
(Continued)
F-10
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(Dollars in thousands)
1994 1993 1992
--------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Proceeds from long-term bank loans $350,000 $-- $--
Repayment of long-term bank loans (265,480) (71,344) (31,818)
Redemption of preferred stock (13,167) -- --
Proceeds from common stock issued for stock
purchase plan and stock options 7,104 4,145 1,641
Purchase of common stock for treasury (1,094) (1,798) (1,429)
--------------------------------------------------------------------------------------
Net cash provided (used) for
financing activities 77,363 (68,997) (31,606)
--------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and
Cash Equivalents (38,899) (16,543) 26,278
Cash and Cash Equivalents at Beginning of Year 86,366 102,909 76,631
--------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $47,467 $86,366 $102,909
=======================================================================================
(Continued)
F-11
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(Dollars in thousands)
1994 1993 1992
--------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for:
Interest $99,023 $88,373 $119,823
Income taxes $81,997 $47,612 $34,384
Significant non-cash investing and financing activities:
On June 24, 1994, LCH Communications, Inc. ("LCH"), a wholly-owned subsidiary of the
Company, redeemed all of its outstanding Redeemable Preferred Stock held by Comcast Cellular
Communications Inc., in exchange for all of the capital stock of a subsidiary of LCH, whose
assets consisted primarily of a 49.99% interest in the Philadelphia cellular system and the
GuestInformant specialty publishing business, plus $12.3 million cash (which represented 15%
of the fair market value of the WOOD-TV business). The additional $0.9 million cash
reflected in the cash flow statement above represented cash held by GuestInformant.
On December 28, 1994, the Company distributed all of the issued and outstanding shares of
common stock of its previously wholly-owned subsidiary LIN Television Corporation ("LIN
TV"). The Company's stockholders of record on December 9, 1994 received one share of LIN TV
common stock for each two shares of the Company's common stock owned. The $9.1 million cash
reflected in the cash flow statement represented cash held by LIN TV.
See accompanying notes.
F-12
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - Organization and Operations
The Company is engaged in the ownership and operation of cellular
telephone systems and one television station. On December 28,
1994, the Company spun-off its LIN Television Corporation
subsidiary which owned six television stations (see Note 3).
McCaw Cellular Communications, Inc. ("McCaw"), a wholly-owned
subsidiary of AT&T Corp. ("AT&T"), currently owns approximately
52% of the outstanding shares of the Company.
NOTE 2 - Significant Accounting Policies
PRINCIPLES OF CONSOLIDATION: The consolidated financial
statements include the accounts of the Company, its majority-owned
subsidiaries and cellular ventures in which the Company has
voting control. The Company's investments in cellular ventures in
which it has voting interests of at least 20% but not more than
50% (Los Angeles, Houston and Galveston) are accounted for on the
equity method. All significant intercompany accounts and
transactions have been eliminated.
CELLULAR FCC LICENSES AND OTHER INTANGIBLE ASSETS: Cellular FCC
licenses represent costs to acquire cellular licenses authorized
by the Federal Communications Commission. Other intangible assets
primarily represent costs allocated in acquisitions to customer
lists, goodwill and other intangibles. Intangible assets acquired
subsequent to October 31, 1970 are being amortized over the
lesser of their useful lives or forty years, in accordance with
Accounting Principles Board Opinion No. 17. The carrying value of
intangible assets will be reviewed if the facts and circumstances
suggest that they may be impaired. If this review indicates that
intangible assets will not be recoverable, the Company's carrying
value of the intangible assets will be reduced by the estimated
shortfall of cash flows.
CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES: Certain highly
liquid, short-term investments which have a maturity of three
months or less when purchased are considered cash equivalents.
The Company's excess cash is invested in US Government
obligations and money market instruments. Investments which do
not meet the definition of a cash equivalent are classified as
marketable securities. Marketable securities are carried at
aggregate cost which approximates market value. Net realized
gains and losses on security transactions are determined on a
specific cost basis.
INVENTORY: Inventories are stated at the lower of cost (first-in,
first-out) or market.
F-13
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - Significant Accounting Policies (continued)
PROPERTY AND EQUIPMENT: Property and equipment, including
renewals and betterments to existing facilities, are recorded at
cost. Depreciation is computed on a straight-line basis over the
estimated useful lives of the assets.
INCOME TAXES: Accelerated depreciation methods are used for tax
purposes. The Company provides deferred taxes relating to these
and other timing differences.
REVENUE RECOGNITION: Cellular airtime is recorded as revenue
when earned. Access fees that are billed in advance to cellular
customers are recognized as revenue in the period when the
cellular services are provided. Broadcast revenue is billed when
contracted and recognized during the period the advertising is
aired.
NET INCOME (LOSS) PER SHARE: Net income (loss) per share is
based upon the weighted average common and equivalent shares
outstanding during the year. Common stock equivalents are
excluded from the calculation when their effect is antidilutive.
Average common and equivalent shares outstanding for the years
ended December 31, 1994, 1993 and 1992 totaled 52,040,000,
51,445,000 and 51,417,000, respectively.
For 1994, a separate earnings per share calculation for the
excess of carrying amount of preferred stock over the fair value
of consideration transferred to the holder of the preferred stock
added to primary net income is shown below:
Amount Per Share
------- ---------
Net income $564,150 $10.84
Excess carrying value of
preferred stock over fair
value of consideration transferred 783,823 15.06
-------- --------
Total $1,347,973 $25.90
========== ========
F-14
ECENTLY ISSUED ACCOUNTING STANDARDS: In October 1994, the
Company adopted the Statement of Financial Accounting Standards
No. 119, Disclosures about Derivative Financial Instruments and
Fair Value of Financial Instruments, (SFAS 119) which
requires additional disclosure regarding the nature and purpose
of derivative financial instruments. As further discussed in
Note 6, the Company utilizes interest rate caps to
comply with certain debt covenants and to provide protection
against rising interest rates.
In March 1995, the Financial Accounting Standards Board issued
Statement No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of, (SFAS
121) effective for fiscal years beginning after December 15,
1995. This statement requires the separation of long-lived
assets and certain identifiable intangible assets into two
categories for purposes of accounting for an impairment of
assets: those to be held and used and those to be disposed of.
An impairment loss is indicated if the sum of the expected cash
flows, undiscounted and without interest charges, is less than
the carrying amount of the assets. The carrying value of
intangible assets will be reviewed if the facts and circumstances
indicate they may be impaired. If this review indicates that the
intangible assets will not be recoverable based on the sum of
expected cash flows, undiscounted and without interest charges,
the Company's carrying value of the intangible assets will be
reduced by an impairment loss equal to the excess of the carrying
amount over the fair value of the assets. Management believes
the adoption of SFAS 121 will not have a material impact
on the financial position or the results of operations of the
Company.
RECLASSIFICATIONS: Certain reclassifications have been made to
the prior years' financial statements in order to conform to the
1994 presentation.
F-15
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - Business Divestiture and Acquisitions
Distribution of LIN Television Corporation: On December 28,
1994, the Company distributed all of the issued and outstanding
shares of common stock of its previously wholly-owned subsidiary
LIN Television Corporation ("LIN TV"). LIN TV operations
comprised substantially all of the Company's former broadcast
media operations. The distribution was made in the form of a
dividend payable to holders of record of the LIN Broadcasting
common stock at the close of business on December 9, 1994. The
Company's stockholders of record on that date received one share
of LIN TV common stock for each two shares of the Company's
common stock owned. The consolidated financial statements reflect
an increase in the Company's additional paid-in capital of $41.25
million, representing the negative net book value of the assets
and liabilities distributed. The results of operations of LIN TV
have been included in the Company's consolidated financial
statements through December 28, 1994. The table below summarizes
the assets and liabilities distributed:
(in thousands) Amount
----------------------------------------------------
Current assets $56,085
Noncurrent assets 154,296
Current liabilities 66,062
Noncurrent liabilities 185,572
Deficit 41,253
The Company entered into a tax allocation agreement with LIN TV
that provides for the allocation between the Company and LIN TV
of responsibilities, liabilities and benefits relating to or
affecting taxes paid or payable by either of them or their
respective subsidiaries for all taxable periods before and after
the distribution. Generally, the tax allocation agreement
provides that the Company will prepare, file and pay taxes
associated with all tax returns for periods beginning before the
distribution date that are required to be filed on a
consolidated, combined or similar group basis unless none of the
Company or its subsidiaries (other than LIN TV and its
subsidiaries) is included in such return. Other tax returns will
be filed by LIN TV if they relate to television businesses (as
defined) or by the Company if they relate to LIN businesses. The
agreement also provides that each of the Company and LIN TV will
pay all taxes that are payable as a result of the distribution
and the failure after the distribution of such party to act in
conformity with statements (insofar as such statements are
applicable to such party) set forth in the Internal Revenue
Service ("IRS") letter ruling regarding the distribution and in
filings with the IRS made in connection with the IRS letter
ruling.
F-16
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - Business Divestitures and Acquisitions (continued)
Certain subsidiaries of the Company also entered into a
consulting agreement with LIN TV, pursuant to which LIN TV will
provide management and operational consulting for WOOD-TV and
WOTV-TV, and a right of first refusal agreement, pursuant to
which, in the event the Company receives and wishes to accept an
offer to purchase assets associated with WOOD-TV or WOTV-TV, LIN
TV has the right to purchase such assets at the offered price.
During 1994, the Company divested its interests in the
Philadelphia cellular operation and the GuestInformant specialty
publishing business. See further discussion in Note 7.
Acquisitions: On May 31, 1994, the Company acquired an additional
5.2% interest in the New York City cellular licensee for
approximately $145 million in cash, bringing the Company's total
interest in the New York City licensee to 98.3%. The New York
City acquisition was funded through proceeds from the Company's
senior unsecured bank credit facility (see Note 6).
On May 25, 1994, the Company acquired a 100% interest in the
Litchfield County, Connecticut (Connecticut RSA-1) cellular
licensee for aggregate consideration of approximately $30 million
cash.
On October 6, 1993, the Company acquired a 100% interest in the
Newton, Texas (Texas RSA-17) cellular licensee for approximately
$36 million cash.
All of the above acquisitions have been accounted for using the
purchase method, and the excess of the costs over fair market
values of the tangible assets acquired has been assigned to
Cellular FCC licenses, customer lists, goodwill and other
intangible assets.
F-17
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - Property and Equipment
The major classifications of property and equipment are as
follows:
December 31,
(in thousands) 1994 1993
-----------------------------------------------------------------
Land $867 $5,860
Buildings and improvements 39,524 48,307
Broadcasting and publishing equipment 11,976 70,001
Cellular equipment 416,344 412,824
Construction in progress and other 122,993 154,061
-------- --------
591,704 691,053
Less accumulated depreciation 141,006 285,291
-------- --------
$450,698 $405,762
======== ========
NOTE 5 - Investments in and Advances to Unconsolidated Affiliates
As indicated in Note 2, the Company's investments in cellular
partnerships or corporations in which it has voting interests of
at least 20% but not more than 50% (Los Angeles, Houston and
Galveston) are accounted for on the equity method. In June 1994,
the Company disposed of its interest in the Philadelphia cellular
venture in connection with the redemption of preferred stock (see
Note 7).
The Company controlled approximately 1.86 million shares of the
common stock of American Mobile Satellite Corporation ("AMSC") as
of December 31, 1994 and 1993. This investment is accounted for
at cost and amounted to $27.3 million as of December 31, 1994 and
1993. As of December 31, 1994, the market value of AMSC common
stock controlled by the Company was $23.7 million based on the
closing price on that date.
The Company also had loans and advances totaling $13.6 and $10.2
million outstanding as of December 31, 1994 and 1993,
respectively, to certain of its unconsolidated affiliates. The
loans carry interest at prime (8.5% and 6.0% of December 31, 1994
and 1993, respectively) plus 1% and mature in 1995.
F-18
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - Investments in and Advances to Unconsolidated Affiliates
(continued)
The following is a summary of combined results of operations, assets, liabilities and
equity of significant investments accounted for on the equity method:
At 100% (in thousands) 1994 1993 1992
------------------------------------------------------------------------------------------
Net revenues $788,932 $704,550 $606,277
Net income $270,800 $255,685 $238,084
LIN's equity in income $115,010 $103,125 $96,977
Current assets $184,699 $183,577 $137,553
Noncurrent assets 501,928 488,052 423,676
---------- ---------- ----------
Total assets $686,627 $671,629 $561,229
========== ========== ==========
Current liabilities $159,160 $127,976 $83,152
Noncurrent liabilities -- 100,950 130,932
---------- ---------- ----------
Total liabilities 159,160 228,926 214,084
Equity 527,467 442,703 347,145
---------- ---------- ----------
Total liabilities and equity $686,627 $671,629 $561,229
========== ========== ==========
F-19
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - Long-Term Debt
Long-term debt consists of the following:
December 31,
(in thousands) 1994 1993
-----------------------------------------------------------------
Bank Credit Facilities
LIN Cellular Network, Inc.:
Term credit facilities $1,315,000 $1,316,250
Revolving credit facilities 280,000 160,000
---------- ----------
1,595,000 1,476,250
LIN Television Corporation:
Term credit facility -- 159,088
Revolving credit facility -- 63,000
---------- ----------
-- 222,088
---------- ----------
1,595,000 1,698,338
Less current portion of
long-term debt 151,875 146,891
---------- ----------
$1,443,125 $1,551,447
========== ==========
The Company's wholly-owned subsidiary, LIN Cellular Network, Inc.
("LCNI"), which owns all of the Company's cellular operations,
has a senior secured and a senior unsecured bank credit facility
(the "Bank Credit Facilities"). As of December 31, 1994, the
aggregate additional borrowing capacity available to the Company
under these two facilities totaled $220 million. Fees incurred in
connection with the Bank Credit Facilities are classified as
noncurrent assets and are being amortized over the contractual
terms of the facilities.
The aggregate amounts of principal maturities on the utilized
portions of the Bank Credit Facilities subsequent to December 31,
1994 are as follows:
(in thousands) Amount
-----------------------------------------------------
1995 $151,875
1996 208,625
1997 253,875
1998 299,125
1999 327,500
Thereafter 354,000
---------
$1,595,000
==========
F-20
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - Long-Term Debt (continued)
Under the Bank Credit Facilities, interest is payable, at the
Company's discretion, at the prevailing prime rate, LIBOR or CD
rates, plus an applicable margin. Interest is fixed for a period
ranging from one month to twelve months, depending on
availability of the interest basis selected, although if the
Company selects a prime-based loan, the interest rate will
fluctuate during the period as the prime rate fluctuates. The
applicable margin for each loan will be determined each quarter
based on LCNI's ratio of adjusted senior debt (as determined
under the appropriate Bank Credit Facility) to cash flow, as
defined. Due to the frequent repricing of the borrowings under
the Bank Credit Facilities, the book values at December 31, 1994
approximate fair values.
The Bank Credit Facilities contain covenants restricting certain
activities by LCNI and its subsidiaries, including, without
limitation, restrictions on (i) acquisitions and investments,
(ii) the incurrence of debt, (iii) distributions and dividends to
stockholders, (iv) mergers and sales of assets, (v) prepayments
of subordinated indebtedness, (vi) the creation of liens and
(vii) the issuance of preferred stock. In addition, LCNI will be
required to apply cash proceeds from certain sales of assets that
are not reinvested in similar assets and excess cash flow, as
defined, to the prepayment of loans. The Company has not
guaranteed the repayment of amounts under the Bank Credit
Facilities.
LCNI is required to maintain compliance with certain financial
covenants set forth in the Bank Credit Facilities, including
ratios of senior debt and combined debt to cash flow and cash
flow to debt service or fixed charges. LCNI pledged as security
the capital stock of certain of its subsidiaries, including those
owning the Company's interests in the New York, Dallas-Fort Worth
and Houston cellular partnerships. The Company also pledged as
security the capital stock of LCNI under the Bank Credit
Facilities.
The Bank Credit Facilities contain customary provisions
concerning events of default, including (i) failure to make
principal or interest payments when due, (ii) failure to comply
with covenants, (iii) misrepresentations, (iv) defaults on other
indebtedness, (v) material adverse change in the business,
condition, operations, performance or properties of the borrower,
(vi) unpaid judgments and (vii) standard ERISA and bankruptcy
defaults. In addition, it shall be an event of default if AT&T or
McCaw fails to have the right to cause the election of its
F-21
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - Long-Term Debt (continued)
nominees to a majority of the directorships of the Board of
Directors of the Company or of McCaw or if AT&T fails to have
economic ownership of at least 51% of the combined voting power
of all voting stock of McCaw.
The weighted average interest rate was 7.04% for the term and
revolving credit facilities at December 31, 1994. The Bank Credit
Facilities provide for annual fees of .5% of the unused
commitments.
In order to comply with covenants under its Bank Credit
Facilities and to provide protection against rising interest
rates, the Company entered into interest rate cap agreements with
notional amounts, based on contracted amount of interest rate
protection purchased from counterparty to interest rate cap, of
$850 million, $840 million and $1.35 billion as of December 31,
1994, 1993 and 1992. The rate cap agreements in effect as of
December 31, 1994 have expiration dates ranging from July 1995 to
September 1997. All of the interest rate caps are based on three
month LIBOR and have strike rates (the rate at which a
counterparty to an interest rate cap is required to fulfill its
obligation) ranging from 8% to 8.5%. During the past three years,
the prevailing market rates have been below the rate caps in
effect, thus the only effect on the Company's interest expense
has been the amortization of the cost of the caps of $860,
$1,951, and $2,669 during the years ended December 31, 1994, 1993
and 1992, respectively. In the event that a counterparty to an
interest rate cap fails to fulfill its obligation, the Company
would be required to pay the interest rate on the underlying debt
without the benefit of the hedge. The Company has not entered
into any other financial derivitative activities.
NOTE 7 - Redeemable Preferred Stock of a Subsidiary
On June 24, 1994, LCH redeemed all of its outstanding Redeemable
Preferred Stock held by Comcast Cellular Communications Inc., in
exchange for all of the capital stock of a subsidiary of LCH,
whose assets consisted primarily of a 49.99% interest in the
Philadelphia cellular system and the GuestInformant specialty
publishing business, plus $12.3 million cash (which represented
15% of the fair market value of the WOOD-TV business).
The Company has accounted for this transaction as a nonmonetary
exchange. Accordingly, the Company recognized a gain of $468.7
million, which represented the excess of the estimated fair
market values over the book values of the assets exchanged. The
$783.8 million difference between the book value of the Preferred
Stock and the fair values of the assets exchanged was credited to
additional paid-in capital. The Company has reported the
redemption to the IRS as a tax-free transaction.
F-22
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - Stockholders' Equity
McCaw currently owns approximately 52% of the outstanding Common
Stock of the Company. Pursuant to the Private Market Value
Guarantee ("PMVG") between the Company and McCaw, a process began
on January 1, 1995 to determine the private market price per
share of the Company. The private market value is being
determined by Lehman Brothers Inc. and Bear, Stearns & Co,
designated jointly as the Company's independent directors'
appraiser, and by Morgan Stanley & Co. Incorporated, designated
as McCaw's appraiser, and if necessary by a third party
appraiser. After the price is determined, McCaw will have 45
days to decide whether to proceed with the acquisition of all the
public shares of the Company at that price, subject to the
approval of the Company's public shareholders, or to put the
Company in its entirety up for sale under the direction of the
Company's independent directors. Such a sale would also be
subject to approval by the Company's public shareholders.
The Company is authorized to issue 2,000,000 shares of preferred
stock, without par value, none of which is outstanding. The
Company's board of directors is empowered to set the dividend,
redemption and liquidation rights pertaining to any series of
preferred stock that may be issued from time to time, to
designate whether preferred shares of any series shall be
convertible and the terms of such convertibility, and to
establish the voting rights and any special rights or
restrictions that are to apply to preferred shares of any series.
The Company has never paid or declared a cash dividend on its
common stock. Its dividend policy is subject to future earnings,
financial conditions and other relevant factors (including,
without limitation, dividend restrictions in credit and loan
agreements between the Company and banks).
Pursuant to the Company's 1969 stock option plan, as amended,
incentive and nonqualified options have been granted or are
available for grant to officers and key employees at prices not
less than the fair market value at date of grant. The exercise
price of each outstanding option granted prior to December 28,
1994 to purchase Company stock was adjusted to give effect to the
LIN TV spin-off by reducing the exercise price based on the
relative fair market values of the corresponding common stocks
after the spin-off. As a result, each exercise price was adjusted
to approximately 90% of its original amount and all options
outstanding at December 31, 1994 pertain only to the Company's
common stock.
F-23
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - Stockholders' Equity (continued)
Options are generally not exercisable until one year after grant,
have vesting terms ranging from two to five years, and expire ten
years from date of grant. Changes in incentive and nonqualified
stock options granted and outstanding are as follows:
Shares Prices Per Share
-----------------------------------------------------------------
Options outstanding at
December 31, 1991 818,356 $6.28 - $82.70
Granted 521,350 69.57 - 70.48
Exercised (25,101) 6.28 - 45.30
Canceled or expired (51,410) 39.56 - 82.70
----------
Options outstanding at
December 31, 1992 1,263,195 7.30 - 82.70
Granted 473,300 80.48 - 100.49
Exercised (84,911) 8.47 - 70.48
Canceled or expired (52,335) 20.33 - 69.57
----------
Options outstanding at
December 31, 1993 1,599,249 7.30 - 100.49
Granted 301,550 100.26 - 133.50
Exercised (145,120) 7.30 - 101.83
Canceled or expired (71,605) 39.56 - 100.49
----------
Options outstanding at
December 31, 1994 1,684,074 $13.78 - $133.50
==========
As of December 31, 1994, there were 691,045 exercisable options
to purchase shares and there were 724,895 options available for
future grants. Pursuant to the Company's stock option plan, in
the event of a "change in control" (as defined in the plan) of
the Company, vested options at the time of the change in control
may be surrendered by officers of the Company, subject to Section
16 of the Securities Exchange Act of 1934, as amended, in
exchange for a cash payment per share by the Company equal to the
difference between the exercise price for the option and the
greater of the highest amount paid to any holder of common stock
by the acquiror in connection with the resulting change in
control or the highest selling price of the common stock during
the 90-day period prior to the date of surrender of the option.
F-24
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - Stockholders' Equity (continued)
Notwithstanding the foregoing, if a change in control results in
the consolidation or merger of the Company with McCaw or a
successor to McCaw under the PMVG, and McCaw or any such
successor is the surviving company or if McCaw becomes the
beneficial owner of 80% or more of the Company's stock (other
than pursuant to a private market sale, as defined in the
Company's PMVG with McCaw), each outstanding option shall be
converted into an option to purchase McCaw's Class A Common Stock
or the common stock of any such successor (or in the event that
McCaw or any such successor is not publicly traded, the ultimate
parent thereof). If a change in control results from a private
market sale, upon a vote by a majority of the Company's
independent directors, each outstanding option will be converted
into an option to purchase the common stock of the acquirer. If
the independent directors do not approve the conversion, the
Company may (but is not required to) cancel each such option in
exchange for a payment per share in cash equal to the excess of
the purchase price per share in the private market sale over the
exercise price of such option.
The Company's Employee Stock Purchase Plan ("ESPP") allows
eligible employees to purchase shares of the Company's common
stock, through regular payroll deductions, at 85% of the closing
market price of the stock as of the last trading day of each
month. The ESPP restricts participant purchases to no more than
$25,000 of stock in any calendar year. A total of 300,000 shares
have been authorized under the ESPP. There are no charges or
credits to income in connection with the ESPP. During 1994,
common stock was purchased and distributed to employees at prices
ranging from $90.31 to $122.40 per share.
The Company has a Stockholder Rights Plan ("Rights Plan")
designed to strengthen its bargaining position on behalf of its
stockholders in the event of coercive stock accumulation
programs, inadequate offers or other tactics that may be used to
gain control of the Company without offering a fair and adequate
price to all stockholders. Under the Rights Plan, each
stockholder has one right for each share of the Company's
outstanding common stock that entitles the holder to purchase one
one-thousandth (1/1000th) of a share of a participating preferred
stock. At the present time, the rights are attached to the common
stock and are not exercisable, and they do not represent any
significant value to stockholders. The rights become valuable, as
a result of becoming exercisable into capital stock at a
substantial discount price, if any person acquires 15% or more of
the Company's outstanding common stock or upon the occurrence of
certain other events, including a merger or other business
combination involving the Company. The Rights Plan, as amended,
F-25
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - Stockholders' Equity (continued)
provides that the acquisition of McCaw by AT&T and the
consummation of the transactions contemplated or permitted by the
PMVG will not constitute a Triggering Event or cause AT&T or
McCaw or any of their affiliates to become an Acquiring Person
(each as defined) under the Rights Plan.
NOTE 9 - Income Taxes
Deferred taxes are determined based on the estimated future tax
effects of differences between the financial statement and the
tax basis of assets and liabilities given the provisions of the
enacted tax laws. The components of the net deferred tax
liability are as follows:
Deferred Income Taxes
(in thousands) Assets Liabilities
--------------------------------------------------------------------------
December 31, 1994
Intangible assets $-- $642,926
Property and equipment -- 90,288
Other -- 2,099
-------- --------
Total $-- $735,313
======== ========
December 31, 1993
Intangible assets $-- $628,822
Property and equipment -- 82,813
Other 2,365 25,779
-------- --------
Total $2,365 $737,414
======== ========
The components of income tax expense are as follows:
(in thousands) 1994 1993 1992
------------------------------------------------------------------------
Current:
Federal $54,482 $33,984 $29,753
State 7,459 4,938 14,216
-------- -------- --------
61,941 38,922 43,969
Deferred:
Federal (93) 26,800 (5,828)
State (2,559) (153) (4,244)
-------- -------- --------
(2,652) 26,647 (10,072)
-------- -------- --------
$59,289 $65,569 $33,897
======== ======== =========
F-26
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - Income Taxes (continued)
The deferred tax benefit results largely from the amortization of
intangible assets, offset in part by the excess of tax over
financial statement depreciation.
The Omnibus Budget Reconciliation Act of 1993 increased the
corporate tax rate to 35% from 34% effective as of January 1,
1993. Pursuant to Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes," the Company recorded an
additional tax expense of $15.3 million in the third quarter of
1993, with a corresponding increase in deferred tax liability.
The following table reconciles the amount which would be provided
by applying the 35% federal statutory rate to income before
income tax expense to the federal income taxes actually provided.
(in thousands) 1994 1993 1992
----------------------------------------------------------------
Expense assuming federal
statutory rate $239,361 $50,064 $40,154
Nontaxable gain on redemption
of preferred stock (164,041) -- --
Equity investments (4,572) (5,672) (4,169)
State and local taxes, net
of federal benefit 3,185 3,110 6,582
Tax expense not provided on
minority partners' share
of income (8,147) 1,027 (4,734)
Change in statutory tax
rate from 34% to 35% -- 15,335 --
Other (6,497) 1,705 (3,936)
-------- -------- --------
Total income tax expense $59,289 $65,569 $33,897
======== ======== ========
NOTE 10 - Retirement Plans
On December 28, 1994, the Company transferred sponsorship of the
contributory retirement plan to LIN TV in connection with the
spin-off of those operations (see Note 3). LIN TV assumed all
rights and responsibilities associated with the Plan. The
transfer was made at book value and no significant gain or loss
was recognized. No funding of the Plan was required for the
period January 1, 1994 through December 28, 1994 or for the years
ended December 31, 1993 and 1992.
Employees of the Company's consolidated cellular operations are
covered by 401(k) plans that provide matching contributions from
the Company. Matching employer contributions were $1.3 million,
$0.8 million and $0.4 million for the years ended December 31,
1994, 1993 and 1992, respectively
F-27
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - Commitments and Contingencies
The Company leases various property, equipment and cellular sites
under noncancellable operating leases. Rent expense relating to
such leases amounted to $19.1 million, $15.9 million and $13.2
million in 1994, 1993 and 1992, respectively. Annual commitments
for rental payments, principally on real property operating
leases, after December 31, 1994 are as follows: 1995-$19.0
million; 1996-$17.5 million; 1997-$16.7 million; 1998-$16.1
million; 1999-$15.4 million and thereafter-$98.0 million.
The Company and its subsidiaries are from time to time defendants
in and are threatened with various legal proceedings arising from
their regular business activities. In particular, certain of the
Company's unconsolidated cellular affiliates have been named as
defendants in various legal proceedings:
The Los Angeles cellular partnership and several related parties
have been named as defendants in various actions brought in
California state court by dealers, resellers and equipment
sellers for the partnership. The lawsuits variously allege a
variety of torts and statutory violations, including price-fixing
regarding cellular equipment and service, below-cost sales of
equipment, fraud, interference with economic relationship, unfair
competition, discrimination among agents, and conspiracy.
Several of these cases are scheduled for trial in 1995. The
partnership intends to defend each lawsuit vigorously and
believes that it has meritorious defenses to the allegations
contained in the complaints.
The Los Angeles cellular partnership, in some cases along with
other cellular carriers, also has been named as a defendant in
several class actions filed in California state court by current
and former customers alleging violations of federal and state
antitrust law as a result of price-fixing of cellular service.
Trial dates have not been set for the pending cases. The
partnership intends to defend each lawsuit vigorously and
believes that is has meritorious defenses to the allegations
contained in the complaints.
A class action lawsuit, originally filed in August 1993, has been
instituted on behalf of Texas cellular subscribers in Texas state
court against the Houston cellular partnership and several
related parties, including the Company. As amended, the petition
alleges that the liquidated damages and automatic renewal
F-28
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - Commitments and Contingencies (continued)
provisions in annual cellular subscriber contracts violate or are
contrary to state law in several respects. Plaintiffs seek
declaratory relief, damages, fees, costs and interest. Neither
the class nor any of the subclasses alleged by the plaintiffs
have been certified. Discovery is underway, but no trial date
has been set. The partnership intends to defend the lawsuit
vigorously and believes that it has meritorious defenses to the
allegations contained in the petition.
The Company does not expect that the ultimate results of any of
the foregoing legal proceedings will have a material adverse
effect on its financial position, results of operations or cash
flows.
NOTE 12 - Segment Data
As explained in Note 3, the Company divested substantially all
its media operations through the spin-off of LIN TV and the
preferred stock redemption (see Note 7). Accordingly, 1994 media
operating data includes LIN TV operations through December 28,
1994 and specialty publishing operations through June 24, 1994.
Cellular revenues primarily represent fees charged for providing
cellular telephone service to subscribers. Media revenues are
principally from the sale of television time to advertisers and
also include revenues from the Company's specialty publishing
operation. The cellular business segment data reflects the
consolidation of the Company's controlling interests (principally
New York and Dallas). Cellular interests in Los Angeles,
Galveston and Houston are accounted for by the equity method of
accounting, and thus are not included in the cellular business
segment data which follows:
F-29
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - Segment Data (continued)
(in thousands) Cellular Media Corporate Total
-------------------------------------------------------------------------------------------------
1994
Net revenues $692,798 $183,671 $-- $876,469
Depreciation and amortization 130,255 10,707 190 141,152
Income (loss) from operations 148,153 69,414 (11,457) 206,110
Capital expenditures 145,678 18,652 -- 164,330
Identifiable assets 2,850,001 32,713 41,159 2,923,873
1993
Net revenues $520,131 $168,426 $-- $688,557
Depreciation and amortization 114,894 10,061 175 125,130
Income (loss) from operations 77,993 58,828 (8,516) 128,305
Capital expenditures 136,662 8,599 92 145,353
Identifiable assets 2,589,995 257,839 61,689 2,909,523
1992
Net revenues $407,721 $164,800 $-- $572,521
Depreciation and amortization 109,263 9,149 192 118,604
Income (loss) from operations 77,273 60,516 (7,774) 130,015
Capital expenditures 89,254 4,489 95 93,838
Identifiable assets 2,554,972 250,259 57,679 2,862,910
F-30
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 - Related Party Transactions
Under an inter-company services arrangement negotiated between
the Company and McCaw, McCaw provides management and other
services to the Company. LIN also provided certain services to
McCaw during the same time periods. The Company incurred $8.5
million, $9.2 million and $6.8 million for the value of
management and other services provided by McCaw and charged
$2.2 million, $1.9 million and $1.5 million for the value of
certain services rendered to McCaw under the inter-company
services agreement during 1994, 1993 and 1992, respectively.
In addition to the transactions described above, the Company or
its affiliates routinely enter into transactions with AT&T, McCaw
or their affiliates in the ordinary course of business. During
1994, the Company purchased equipment, consisting primarily of
cellular telephones and accessories, from AT&T for an aggregate
purchase price of approximately $13.4 million. The Company also
paid AT&T approximately $3.3 million to provide customer support
services in situations in which the volume of such requests
exceeded the Company's handling capacity. In addition, the
Company purchased approximately $16.8 million of long distance
services from AT&T which were primarily resold to cellular
customers. The Company's cellular affiliates pay McCaw for
providing cellular service to the Company's subscribers under
roaming agreements, and McCaw pays the Company for similar
services provided by the Company to McCaw's subscribers. During
1994, the Company paid McCaw approximately $18.3 million and
McCaw paid the Company approximately $13.0 million for roaming
services. The Company provided certain switching and billing
services to an affiliate of McCaw for approximately $0.2 million
during 1994. In addition, the Company maintains a regional
office that supports certain of the Company's operations in Texas
in addition to supporting McCaw's Southwest cellular markets.
The regional office primarily provides technical and
administrative support to McCaw. Costs to provide technical
support are charged to McCaw based on McCaw's Southwest markets'
cell sites in relation to the total cell sites serviced by the
regional office. Administrative costs are charged to McCaw based
on the population serviced by McCaw's Southwest markets in
relation to the total population serviced by the regional office.
Amounts charged to McCaw during 1994 for such services were
approximately $3.9 million. The Company's cellular operations
also participate in certain programs managed by McCaw, such as
national advertising campaigns, national accounts marketing, and
the North American Cellular Network. The Company was charged
approximately $1.3 million for services provided by these
programs during 1994. Such transactions are not separately
disclosed in the financial statements as they are carried out in
the normal course of business.
F-31
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 - Related Party Transactions (continued)
All of such agreements and arrangements between the Company and
McCaw are on terms that the Company believes are as favorable to
it as would have been obtained with an unrelated third party.
Under the Company's PMVG with McCaw, approval of the majority of
LIN's independent directors is required before the Company enters
into any material transactions with McCaw or its affiliates.
NOTE 14 - Loss on Disposal of Cellular Equipment
In February 1994, the Company's Dallas cellular operations
completed the installation of a new cellular system. As a result,
the Company recorded in 1993 a non-cash pre-tax charge of $42.2
million to reflect the loss on the disposal of the previous
system. The loss amounted to approximately $14.8 million, or
$0.29 per share, after taxes and minority interests.
F-32
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 - Other Income and Expenses
In June 1992, the Company settled a lawsuit relating to the McCaw
acquisition. Under the terms of the settlement, the Company
received from the defendants a payment of $3 million and certain
other considerations in July 1992 and payments of $2 million in
July 1993 and June 1994. In addition, the Company will receive a
final payment of $2 million from McCaw on June 30, 1995. After
payment of legal fees and other related costs, this settlement
resulted in a net gain to the Company of approximately $7
million.
F-33
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16 - Quarterly Results of Operations (Unaudited)
The financial information presented below reflects all adjustments (consisting of normal
recurring adjustments) which are, in the opinion of management, necessary to a fair
presentation of the results for the interim periods. Summarized quarterly financial data
for 1994 and 1993 is as follows:
First Second Third Fourth
(in thousands) Quarter Quarter Quarter Quarter
--------------------------------------------------------------------------------------------------
1994
Net revenues $191,627 $219,588 $225,027 $240,227
Operating income 27,716 57,364 61,738 59,292
Equity in income of
unconsolidated affiliates 31,848 32,353 28,616 22,193
Net income (loss) (15,095) 506,761 37,893 34,521
Net income (loss) per share (0.29) 9.75 0.73 0.66
1993
Net revenues $151,233 $171,198 $175,145 $190,981
Operating income 32,707 553 44,593 50,452
Equity in income of
unconsolidated affiliates 24,729 24,580 26,906 26,910
Net loss (14,592) (16,614) (26,483) (3,038)
Net loss per share (0.29) (0.32) (0.51) (0.06)
F-34
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders of
LIN Broadcasting Corporation
We have audited the accompanying combined balance sheets of LIN
Broadcasting Corporation's Unconsolidated Affiliates listed in
Note 1 (the Ventures) as of December 31, 1994 and 1993, and the
related combined statements of income, Ventures' equity, and cash
flows for each of the three years in the period ended December
31, 1994. Our audits also included the financial statement
schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits. We did not
audit the 1993 and 1992 consolidated financial statements of
AWACS, Inc. and subsidiaries, which statements reflect total
assets constituting 24% as of December 31, 1993 and net revenues
constituting 19% and 17% for each of the two years in the period
ended December 31, 1993 of the related combined totals. Those
1993 and 1992 statements were audited by other auditors whose
report, which also places reliance on other auditors, has been
furnished to us, and our opinion, insofar as it relates to data
included for AWACS, Inc. and subsidiaries, is based solely on the
reports of the other auditors.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform our audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits and the reports of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the reports of other
auditors, the combined financial statements referred to above
present fairly, in all material respects, the combined financial
position of the Ventures at December 31, 1994 and 1993, and the
combined results of their operations and their cash flows for
each of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles. Also,
in our opinion, based on our audits and the reports of other
auditors, the related financial statement schedule, when
considered in relation to the basic financial statements taken as
a whole, presents fairly, in all material respects, the
information set forth therein.
ERNST & YOUNG LLP
Seattle, Washington
January 20, 1995
F-35
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
AWACS, Inc.
Wayne, Pennsylvania
We have audited the consolidated balance sheet of AWACS, Inc. and
subsidiaries as of December 31, 1993, and the related
consolidated statements of operations and retained earnings and
of cash flows for the years ended December 31, 1993 and 1992 (not
presented separately herein). These financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our
audits. We did not audit the financial statements of Garden State
Cablevision L.P. ("Garden State"), the Company's investment in
which is accounted for by use of the equity method. The
Company's equity of $32,302,000 and $22,369,000 in that entity's
net losses for the years then ended are included in the
accompanying consolidated financial statements. The financial
statements of Garden State were audited by other auditors whose
report has been furnished to us, and our opinion, insofar as it
relates to the amounts included for Garden State, is based solely
on the report of such other auditors.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other
auditors, such consolidated financial statements present fairly,
in all material respects, the financial position of AWACS, Inc.
and subsidiaries as of December 31, 1993 and the results of their
operations and their cash flows for the years ended December 31,
1993 and 1992, in conformity with generally accepted accounting
principles.
As discussed in the notes to the consolidated financial
statements, the Company changed its method of accounting for
income taxes effective January 1, 1993 to conform with Statement
of Financial Accounting Standards No. 109 "Accounting for Income
Taxes".
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
February 18, 1994
F-36
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Garden State Cablevision L.P.:
We have audited the accompanying balance sheets of Garden State
Cablevision L.P. (a Delaware Limited Partnership) as of December
31, 1993 and 1992, and the related statements of operations,
partners' (deficit) capital and cash flows for the years then
ended (not presented herein). These financial statements are the
responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion the financial statements referred to above present
fairly, in all material respects, the financial position of
Garden State Cablevision L.P. as of December 31, 1993 and 1992,
and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Philadelphia, Pa.,
February 23, 1994
F-37
LIN BROADCASTING CORPORATION'S UNCONSOLIDATED AFFILIATES
COMBINED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
(Dollars in thousands)
ASSETS 1994 1993
----------------------------------------------------------------
Current Assets:
Cash and cash equivalents $12,905 $28,675
Short-term investments -- 25,682
Accounts receivable, less allowance
for doubtful accounts (1994-$27,262,
1993-$9,829) 123,926 111,723
Inventories 36,183 6,079
Prepaid expenses and other 11,685 11,418
-----------------------------------------------------------------
Total current assets 184,699 183,577
-----------------------------------------------------------------
Property and equipment, at cost,
less accumulated depreciation 483,269 452,447
Other assets 3,185 2,108
Cellular FCC licenses, less
accumulated amortization
(1994-$856; 1993-$506) 13,214 13,564
Organization costs, less
accumulated amortization
(1994-$7,790; 1993-$6,785) 2,260 3,265
Due from affiliate -- 16,387
Notes receivable, less allowance
for doubtful accounts of $150 -- 281
-----------------------------------------------------------------
Total Assets $686,627 $671,629
=================================================================
LIABILITIES AND EQUITY
-----------------------------------------------------------------
Current Liabilities:
Accounts payable $62,245 $37,801
Accrued expenses 30,075 39,180
Unearned revenues 32,848 27,610
Commissions payable 11,973 14,439
Notes payable to affiliates 14,917 2,946
Other current liabilities 7,102 6,000
-----------------------------------------------------------------
Total current liabilities 159,160 127,976
-----------------------------------------------------------------
Notes payable to affiliates -- 63,126
Investment in affiliate -- 32,302
Deferred income taxes -- 4,236
Other long-term liabilities -- 1,286
(continued)
F-38
LIN BROADCASTING CORPORATION'S UNCONSOLIDATED AFFILIATES
COMBINED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
(Dollars in thousands)
LIABILITIES AND EQUITY (continued) 1994 1993
-----------------------------------------------------------------
Equity:
Contributed capital 47,184 78,690
Excess cost of limited
partnership interest -- (70,384)
Retained earnings 480,283 434,397
-----------------------------------------------------------------
Total equity 527,467 442,703
-----------------------------------------------------------------
Total Liabilities and Equity $686,627 $671,629
=================================================================
See accompanying notes.
F-39
LIN BROADCASTING CORPORATION'S UNCONSOLIDATED AFFILIATES
COMBINED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(Dollars in thousands)
1994 1993 1992
---------------------------------------------------------------------------------------
Net Revenues $788,932 $704,550 $606,277
Operating Costs and Expenses:
Direct operating 96,272 75,140 60,732
Selling, general and administrative 326,824 277,040 236,597
Depreciation and amortization 70,440 69,833 52,595
---------------------------------------------------------------------------------------
493,536 422,013 349,924
---------------------------------------------------------------------------------------
Operating Income 295,396 282,537 256,353
---------------------------------------------------------------------------------------
Other Income (Expense):
Interest expense - affiliates (3,213) (7,515) (3,882)
Interest expense (315) (623) (19)
Equity in loss of affiliate (5,000) (9,933) (2,985)
Litigation settlements -- (12,254) --
Provision for loss on cellular equipment -- -- (4,604)
Other (3,302) 2,578 1,685
---------------------------------------------------------------------------------------
(11,830) (27,747) (9,805)
Income Before Provision for Income
Taxes and Cumulative Effect
of Accounting Changes 283,566 254,790 246,548
Provision for Income Taxes 12,766 11,247 8,464
---------------------------------------------------------------------------------------
Income Before Cumulative Effect of
Accounting Changes 270,800 243,543 238,084
Cumulative Effect of Accounting Changes -- 12,142 --
---------------------------------------------------------------------------------------
Net Income $270,800 $255,685 $238,084
=======================================================================================
See accompanying notes.
F-40
LIN BROADCASTING CORPORATION'S UNCONSOLIDATED AFFILIATES
COMBINED STATEMENTS OF VENTURES' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(Dollars in thousands)
Excess Cost
of Limited
Contributed Partnership Retained Total
Capital Interest Earnings Equity
------------------------------------------------------------------------------------------
Balance at December 31, 1991 $61,137 $-- $306,503 $367,640
Net income -- -- 238,084 238,084
Distributions to partners -- -- (185,945) (185,945)
Acquisition of interest in
Garden State Cablevision L.P. -- (70,384) -- (70,384)
Acquisition of interest in
Galveston Cellular
Telephone Company 2,680 -- (4,930) (2,250)
------------------------------------------------------------------------------------------
Balance at December 31, 1992 63,817 (70,384) 353,712 347,145
Net income -- -- 255,685 255,685
Distributions to partners -- -- (175,000) (175,000)
Contributions 809 -- -- 809
In-kind contribution of cellular
FCC license 14,064 -- -- 14,064
------------------------------------------------------------------------------------------
Balance at December 31, 1993 78,690 (70,384) 434,397 442,703
Net income -- -- 270,800 270,800
Distributions to partners -- -- (142,000) (142,000)
Divestiture of AWACS, Inc. (31,506) 70,384 (82,914) (44,036)
------------------------------------------------------------------------------------------
Balance at December 31, 1994 $47,184 $-- $480,283 $527,467
==========================================================================================
See accompanying notes.
F-41
LIN BROADCASTING CORPORATION'S UNCONSOLIDATED AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(Dollars in thousands)
1994 1993 1992
--------------------------------------------------------------------------------------
OPERATING ACTIVITIES:
Net income $270,800 $255,685 $238,084
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 70,440 69,833 52,595
Equity in loss of affiliate 5,000 9,933 2,985
Non-cash interest expense 2,237 6,006 1,403
Provision for losses on accounts receivable 24,110 20,945 21,127
Loss on disposal of cellular equipment 130 -- 4,604
Cumulative effect of accounting changes -- (12,142) --
Changes in operating assets and liabilities
Increase in accounts receivable (65,555) (47,742) (29,300)
Increase in inventory (30,151) (1,051) (3,563)
Increase (decrease) in accounts payable 23,573 15,423 (6,129)
Increase in accrued expenses 15,671 11,295 5,467
Increase in unearned revenues 9,388 10,792 3,445
Increase in commissions payable 2,709 3,571 2,553
Increase in deferred income taxes 629 3,319 3,244
Other, net 2,317 (4,042) 2,494
----------------------------------------------------------------------------------------
Total adjustments 60,498 86,140 60,925
----------------------------------------------------------------------------------------
Net cash provided by operating activities 331,298 341,825 299,099
----------------------------------------------------------------------------------------
(continued)
F-42
LIN BROADCASTING CORPORATION'S UNCONSOLIDATED AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(Dollars in thousands)
1994 1993 1992
--------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Advances (to) from majority
stockholder of AWACS (12,236) (16,387) 9,259
Capital expenditures (196,133) (103,944) (112,573)
Purchase of short-term investments, net (3,953) (13,065) (12,617)
----------------------------------------------------------------------------------------
Net cash used for investing activities (212,322) (120,331) (103,314)
----------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Repayment of revolving credit notes -- -- (3,800)
Proceeds from (repayment of)
notes payable to partners 7,254 (33,761) 10,478
Contributions from partners, net -- 809 --
Distributions paid to partners (142,000) (175,000) (185,945)
----------------------------------------------------------------------------------------
Net cash used for financing activities (134,746) (207,952) (179,267)
----------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and
Cash Equivalents (15,770) 477 3,811
Cash and Cash Equivalents at Beginning of Year 28,675 28,198 24,387
----------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $12,905 $28,675 $28,198
========================================================================================
(continued)
F-43
LIN BROADCASTING CORPORATION'S UNCONSOLIDATED AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(Dollars in thousands)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
1994 1993 1992
--------------------------------------------------------------------------------------
Cash paid for:
Income taxes $8,195 $4,900 $6,600
Interest
Partners 17 1,478 3,422
Others 181 242 540
Noncash investing and financing activities:
On September 30, 1992, an indirect subsidiary of AWACS, Inc. issued a note for $51 million
to purchase from the majority stockholder of AWACS, Inc. a 40% limited partnership
interest in Garden State Cablevision L.P. (see Note 5 to the combined financial
statements).
In October 1992, a subsidiary of the Company, together with a third party, acquired an
approximate 56% interest in the parent company of Galveston Cellular Telephone Company. In
1993, the cost basis of this acquisition was pushed-down to the books of Galveston
Cellular Telephone Company.
See accompanying notes.
F-44
LIN BROADCASTING CORPORATION'S UNCONSOLIDATED AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 1 - Basis of Presentation
These combined financial statements have been prepared to comply
with the Securities and Exchange Commission's Regulation S-X
requirement, in connection with LIN Broadcasting Corporation's
("LIN") consolidated financial statements, which requires
separate or combined financial statements of significant
subsidiaries in which LIN has a 50% or less controlling interest.
These combined financial statements include 100% of the accounts
of the operating ventures listed in the table below in which LIN
has voting interests of 50% or less (the "Ventures"). These
Ventures are included in LIN's consolidated financial statements
on the equity accounting method.
On June 24, 1994, LCH Communications, Inc. ("LCH"), a
wholly-owned subsidiary of LIN, redeemed all of its outstanding
Redeemable Preferred Stock held by Comcast Cellular
Communications Inc., in exchange for all of the capital stock of
a subsidiary of LCH, whose assets consisted of a 49.99% interest
in the Philadelphia cellular system.
Voting/
Name and Location Equity Management
-----------------------------------------------------------------
AWACS, Inc., d/b/a
Comcast Metrophone Corporation 49.99% 49.99%
Philadelphia
Los Angeles Cellular
Telephone Co., Partnership 39.97% 50.00%
Los Angeles
Houston Cellular
Telephone Co., Partnership 56.25% 50.00%
Houston
Galveston Cellular
Telephone Co., Corporation 34.60% 50.00%
Galveston
NOTE 2 - Significant Accounting Policies
The following are the Ventures' significant accounting policies:
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS: Certain highly
liquid, short-term investments which have a maturity of three
months or less when purchased are considered cash equivalents.
Excess cash is primarily invested in US Government obligations.
Short-term investments consist principally of U.S. Government
obligations with a maturity of greater than three months when
purchased.
F-45
LIN BROADCASTING CORPORATION'S UNCONSOLIDATED AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 2 - Significant Accounting Policies (continued)
INVENTORIES: Inventories consist primarily of cellular phones,
related parts and accessories and are stated at the lower of cost
(FIFO) or fair market value.
PROPERTY AND EQUIPMENT: Cellular system equipment is recorded at
cost and is depreciated on a straight-line basis over an 8 or 10
year period. All other property and equipment, including
betterments to existing facilities, are recorded at cost and
depreciated on a straight-line basis over their estimated useful
lives of three to twenty years.
CELLULAR FCC LICENSES AND ORGANIZATION COSTS: Cellular FCC
Licenses represent costs to acquire cellular licenses authorized
by the Federal Communications Commission and are amortized using
the straight line method over 40 years. Organization costs,
consisting principally of legal fees, feasibility studies and
other costs related to obtaining required licenses and regulatory
approvals, are amortized using the straight-line method over a 10
year period.
INCOME TAXES: Accelerated depreciation methods are used for tax
purposes. AWACS, Inc., which is a corporation, provides deferred
taxes related to this and other timing differences. Effective
January 1, 1993, AWACS, Inc. adopted the provisions of Statement
of Financial Accounting Standards ("SFAS") No. 109, "Accounting
for Income Taxes" (see Note 7). No provision is made for income
taxes for either the Los Angeles, Houston or Galveston ventures
as the income or loss is included in the tax returns of the
respective partners of these partnerships.
REVENUE RECOGNITION: Cellular airtime is recorded as revenue
when earned. Unearned revenues consist principally of amounts
billed to customers for access fees which are payable one month
in advance.
RECLASSIFICATIONS: Certain reclassifications have been made to
the prior years' combined financial statements in order to
conform to the 1994 presentation.
F-46
LIN BROADCASTING CORPORATION'S UNCONSOLIDATED AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 3 - Property and Equipment
The major classifications of property and equipment were as
follows:
December 31,
(in thousands) 1994 1993
-----------------------------------------------------------------
Land $1,549 $1,379
Buildings and improvements 8,207 6,583
Cellular equipment 658,559 576,655
Other 42,597 70,997
--------- ---------
710,912 655,614
Less accumulated depreciation (227,643) (203,167)
--------- ---------
$483,269 $452,447
========= =========
NOTE 4 - Notes Payable to Affiliates
The Houston venture has entered into agreements with the partners
under which it has borrowed $11,000 as of December 31, 1994. The
note matures in December 1995 and bears interest at the prime
rate plus 1%.
The Galveston venture also entered into an agreement with an
affiliate under which it has borrowed $3,917 as of December 31,
1994. This note matures beginning in 1995 and bears interest at
prime plus 2%.
NOTE 5 - Equity
In accordance with the various partnership agreements, income of
the partnerships is allocated to each owner's respective capital
account in accordance with its respective equity interest.
Additional capital contributions may be called based on annual
construction and operating budgets submitted by the partnerships
and agreed upon by the operating committees of each partnership.
NOTE 6 - Income Taxes
Effective January 1, 1993, AWACS, Inc. adopted SFAS No. 109,
"Accounting for Income Taxes." As a result, AWACS, Inc. recorded
a cumulative effect of accounting change of $12,517. The adoption
of SFAS No. 109 did not have a significant impact on the amount
of income tax expense recorded by AWACS, Inc. during 1993.
F-47
LIN BROADCASTING CORPORATION'S UNCONSOLIDATED AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 6 - Income Taxes (continued)
The income tax expense relates to the income of AWACS, Inc. and
consists of the following:
Year Ended December 31,
(in thousands) 1994 1993 1992
----------------------------------------------------------------
Current:
Federal $8,375 $3,543 $3,179
State 3,762 4,653 2,041
------ ------ ------
12,137 8,196 5,220
Deferred:
Federal 476 4,381 2,509
State 153 (1,330) 735
------ ------ ------
629 3,051 3,244
------ ------ ------
$12,766 $11,247 $8,464
======= ======= ======
No provision is made for income taxes for either the Los Angeles,
Houston or Galveston ventures as the income or loss is included
in the tax returns of the respective partners of these
partnerships.
Deferred taxes are attributable primarily to excess tax over book
depreciation and certain expenses not deductible for tax purposes
until paid.
NOTE 7 - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Effective January 1, 1993, AWACS, Inc. adopted SFAS No. 106.
This statement requires AWACS, Inc. to accrue the estimated cost
of retiree benefits earned during the years the employee provides
services. The cumulative effect as of January 1, 1993 of the
adoption of SFAS No. 106 was to reduce the AWACS, Inc. net income
by approximately $375 (net of tax).
NOTE 8 - Related-Party Transactions
For each of the years ended December 31, 1994, 1993 and 1992, two
partnerships recorded management fees payable to affiliates of
their partners of $4,200, for management consultation, legal
services and various other professional services.
F-48
LIN BROADCASTING CORPORATION'S UNCONSOLIDATED AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 8 - Related-Party Transactions (continued)
In addition to the transactions described above, the Ventures
routinely enter into transactions with the Company or other
affiliates of the Company (including AT&T), or other affiliates
of the partners. Such transactions include roaming agreements and
participation in the North American Cellular Network, among other
things. Such transactions are not separately disclosed in the
financial statements as they are carried out in the normal course
of business.
NOTE 9 - Commitments
The Ventures lease office space, land and buildings for cell
sites and vehicles under operating leases which expire through
the year 2010. Total rent expense for the years ended December
31, 1994, 1993 and 1992 was $14,902, $13,945 and $11,909,
respectively. Some of the leases include escalation clauses based
on increases in the Consumer Price Index. Several of the leases
include options to extend the lease term.
Future minimum payments under noncancellable operating leases
with initial or remaining terms of one year or more at December
31, 1994 are:
(in thousands) Amount
-------------------------------------------
1995 $13,769
1996 12,618
1997 11,148
1998 8,782
1999 5,153
2000 and beyond 8,255
-------
$59,725
=======
NOTE 10 - Contingencies
The Ventures are from time to time defendants in and are
threatened with various legal proceedings arising from their
regular business activities. The Ventures are also party to
routine filings with the FCC and state regulatory authorities and
customary regulatory proceedings pending in connection with
interconnection, rates, and practices and proceedings concerning
the telecommunications industry in general and other proceedings
which management does not expect to have a material adverse
effect on the financial position or results of operations of the
Ventures.
F-49
LIN BROADCASTING CORPORATION'S UNCONSOLIDATED AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 10 - Contingencies (continued)
The Los Angeles cellular partnership and several related parties
have been named as defendants in various actions brought in
California state court by dealers, resellers and equipment
sellers for the partnership. The lawsuits variously allege a
variety of torts and statutory violations, including price-fixing
regarding cellular equipment and service, below-cost sales of
equipment, fraud, interference with economic relationship, unfair
competition, discrimination among agents, and conspiracy.
Several of these cases are scheduled for trial in 1995. The
partnership intends to defend each lawsuit vigorously and
believes that it has meritorious defenses to the allegations
contained in the complaints.
The Los Angeles cellular partnership, in some cases along with
other cellular carriers, also has been named as a defendant in
several class actions filed in California state court by current
and former customers alleging violations of federal and state
antitrust law as a result of price-fixing of cellular service.
Trial dates have not been set for the pending cases. The
partnership intends to defend each lawsuit vigorously and
believes that it has meritorious defenses to the allegations
contained in the complaints.
A class action lawsuit originally filed in August 1993, has been
instituted on behalf of Texas cellular subscribers in Texas state
court against the Houston cellular partnership and several
related parties, including the Company. As amended, the petition
alleges that the liquidated damages and automatic renewal
provisions in annual cellular subscriber contracts violate are or
contrary to state law in several respects. Plaintiffs seek
declaratory relief, damages, fees, costs and interest. Neither
the class nor any of the subclasses alleged by the plaintiffs
have been certified. Discovery is underway, but no trial date
has been set. The partnership intends to defend the lawsuit
vigorously and believes that it has meritorious defenses to the
allegations contained in the petition.
Each of the partnerships, subject to the above-described
proceedings, does not expect that the ultimate results of any of
such proceedings will have a material adverse effect on its
financial position or results of operations.
F-50
LIN BROADCASTING CORPORATION
(PARENT COMPANY ONLY)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION
BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
(Dollars in thousands, except share amounts)
ASSETS 1994 1993
----------------------------------------------------------------
Current Assets:
Cash and cash equivalents $7,811 $3,551
Marketable securities -- 16,465
Other receivables 1,487 2,744
-----------------------------------------------------------------
Total current assets 9,298 22,760
-----------------------------------------------------------------
Investment in consolidated subsidiaries 346,216 --
Property and equipment, at cost, less
accumulated depreciation 380 471
Other noncurrent assets 520 2,949
-----------------------------------------------------------------
Total Assets $356,414 $26,180
=================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
-----------------------------------------------------------------
Current Liabilities:
Accounts payable $201 $--
Payable to affiliates, net 49,610 57,435
Deficiency of investment in
consolidated subsidiaries -- 1,061,401
Accrued expenses 6,733 1,321
-----------------------------------------------------------------
Total current liabilities 56,544 1,120,157
-----------------------------------------------------------------
Other noncurrent liabilities 2,132 8,388
Stockholders' Equity (Deficit):
Common stock, $.01 par value,
150,000,000 shares authorized,
55,329,000 shares issued 553 553
Paid-in capital 1,055,169 224,689
Deficit (586,055) (1,150,205)
-----------------------------------------------------------------
469,667 (924,963)
-----------------------------------------------------------------
(Continued)
F-51
LIN BROADCASTING CORPORATION
(PARENT COMPANY ONLY)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION
BALANCE SHEETS (Continued)
DECEMBER 31, 1994 AND 1993
(Dollars in thousands, except share amounts)
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) (Continued) 1994 1993
----------------------------------------------------------------
Less common stock in treasury,
at cost (1994-3,678,000 shares;
1993-3,826,000 shares) 171,929 177,402
-----------------------------------------------------------------
Total stockholders' equity
(deficit) 297,738 (1,102,365)
Total Liabilities and Stockholders'
Equity $356,414 $26,180
=================================================================
This Schedule I should be read in conjunction with the LIN
Broadcasting Corporation and Subsidiaries Consolidated Financial
Statements and Notes thereto.
F-52
LIN BROADCASTING CORPORATION
(PARENT COMPANY ONLY)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION (Continued)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(Dollars in thousands)
1994 1993 1992
---------------------------------------------------------------------------------------
Net Revenues $-- $-- $--
Other Income (Expenses):
Fees charged to subsidiaries and
affiliates, net of corporate expenses 2,266 693 1,424
Depreciation (160) (149) (164)
Litigation settlement -- -- 7,032
Other (249) 1,595 2,131
---------------------------------------------------------------------------------------
Income Before Income Tax Expense and
Equity in Income (Loss) of Subsidiaries 1,857 2,139 10,423
Income Tax Expense 650 749 3,648
---------------------------------------------------------------------------------------
Income Before Equity in Income (Loss)
of Subsidiaries 1,207 1,390 6,775
Equity in Income (Loss) of Subsidiaries 562,943 (62,117) (75,727)
---------------------------------------------------------------------------------------
Net Income (Loss) $564,150 $(60,727) $(68,952)
=======================================================================================
This Schedule I should be read in conjunction with the LIN Broadcasting Corporation and
Subsidiaries Consolidated Financial Statements and Notes thereto.
F-53
LIN BROADCASTING CORPORATION
(PARENT COMPANY ONLY)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION (Continued)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(Dollars in thousands)
1994 1993 1992
---------------------------------------------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES $(18,146) $(5,196) $(16,580)
---------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Proceeds from sales of marketable securities 16,368 46,677 34,780
Purchases of marketable securities -- (43,705) (22,260)
Proceeds from sale of equipment 28 92 --
---------------------------------------------------------------------------------------
Net cash provided by investing activities 16,396 3,064 12,520
---------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Proceeds from common stock issued for stock
purchase plan and stock options 7,104 4,145 1,641
Purchase of common stock for treasury (1,094) (1,798) (1,429)
---------------------------------------------------------------------------------------
Net cash provided by financing activities 6,010 2,347 212
---------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and
Cash Equivalents 4,260 215 (3,848)
Cash and Cash Equivalents at Beginning of Year 3,551 3,336 7,184
---------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $7,811 $3,551 $3,336
=======================================================================================
This Schedule I should be read in conjunction with the LIN Broadcasting Corporation and
Subsidiaries Consolidated Financial Statements and Notes thereto.
F-54
NOTES TO CONDENSED FINANCIAL INFORMATION
NOTE A - Basis of Presentation
In the parent company-only financial statements, the Company's
investment in consolidated subsidiaries is stated at cost plus
equity in undistributed earnings of consolidated subsidiaries
since the date of acquisition.
NOTE B - Dividends
There have been no dividends paid by the Company's subsidiaries
to the Company during the years ended December 31, 1994, 1993 and
1992.
F-55
LIN BROADCASTING CORPORATION AND SUBSIDIARIES
SCHEDULE II -VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(Dollars in thousands)
1994 1993 1992
---------------------------------------------------------------------------------------
Balance at Beginning of Year $18,138 $13,398 $11,869
Additions:
Charged to income 18,200 14,359 14,930
Recoveries 8,088 7,939 4,911
Deductions:
Accounts written off 23,547 17,558 18,312
Spin-off of LIN TV and divestiture
of GuestInformant 3,484 -- --
---------------------------------------------------------------------------------------
Balance at End of Year $17,395 $18,138 $13,398
=======================================================================================
F-56
LIN BROADCASTING CORPORATION'S UNCONSOLIDATED AFFILIATES
SCHEDULE II -VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(Dollars in thousands)
1994 1993 1992
---------------------------------------------------------------------------------------
Balance at Beginning of Year $9,979 $14,638 $11,309
Additions:
Charged to income 24,110 20,945 21,127
Deductions:
Accounts written off 6,827 25,604 17,798
---------------------------------------------------------------------------------------
Balance at End of Year $27,262 $9,979 (1) $14,638 (2)
(1) Includes $150 classified as long-term.
(2) Includes $198 classified as long-term.
INDEX TO EXHIBITS
Exhibit No.
2.1 Agreement and Plan of Merger By and Among McCaw Cellular Communications, Inc.,
MMM Holdings, Inc., MMM Acquisition Corp. and LIN Broadcasting Corporation dated
April 28, 1995 (filed herewith).
3.1 Restated Certificate of Incorporation of LIN Broadcasting Corporation
(incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1992)
3.2 Amended and Restated By Laws.
10.1* Amended and Restated 1969 Stock Option Plan (incorporated by reference to
Appendix A to the Company's Proxy Statement for the Annual Meeting of
Stockholders held on June 2, 1994)
10.2(a)* Profit Sharing Plan, as amended and restated effective January 1, 1989 (the
"Profit Sharing Plan") (incorporated by reference to Exhibit 10.2 to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1992)
10.2(b)* Amendment, adopted November 22, 1994, to the Profit Sharing Plan
10.3* Deferred Compensation Plan, as amended (incorporated by reference to Exhibit
10(d) to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1989)
10.4 Partnership Agreement, dated as of March 18, 1983, among LIN Cellular
Communications Corporation, Metromedia, Inc., and Cellular Systems, Inc.
(incorporated by reference to Exhibit 10.11 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1992)
10.5 Partnership Agreement, dated as of June 22, 1983, between Los Angeles Cellular
Corporation and LIN Cellular Communications Corporation (incorporated by
reference to Exhibit 10.12 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992)
10.6 Stock Agreement, dated June 5, 1982, by and among Radio Broadcasting Company,
LIN Broadcasting Corporation, LIN Cellular Communications Corporation,
Metromedia, Inc., and AWACS, Inc. (incorporated by reference to Exhibit 10.13 to
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1992)
10.7 Amended and Restated Partnership Agreement, dated as of November 9, 1984, among
LIN Cellular Communications Corporation, D/FW Signal, Inc., MCI Cellular
Telephone Company, Cellular Mobile Systems, Inc., and Mid-America Cellular
Systems, Inc. (incorporated by reference to Exhibit 10.14 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1992)
10.8 Amended and Restated Partnership Agreement, dated as of December 12, 1984, among
Metro Mobile CTS, Cellular Systems, Inc., and Houston Mobile Cellular
Communications Company (incorporated by reference to Exhibit 10.15 to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1992)
10.9 Partnership Agreement, dated as of December 12, 1984, among American Mobile
Communications of Houston and the Gulf, Houston Cellular Corporation, LIN
Cellular Communications Corporation, MCI Cellular Telephone Company, Charisma
Communications Corp. of the Southwest, and Cellular Mobile Systems of Texas,
Inc. (incorporated by reference to Exhibit 10.16 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1992)
10.10 Partnership Agreement, dated as of September 1991, by and between Galveston
Mobile Corporation and LIN Cellular Communications Corporation (incorporated by
reference to Exhibit 10.17 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992)
10.11 Agreement, dated December 11, 1989, between the Company, MMM Holdings, Inc. and
McCaw Cellular Communications, Inc. (incorporated by reference to Exhibit (c)(6)
to Amendment No. 24 to Schedule 14D-1 and Amendment No. 30 to Schedule 13D
relating to the Offer filed by MMM Holdings, Inc. and McCaw with the Securities
and Exchange Commission on December 12, 1989)
10.12(a) Private Market Value Guarantee, dated December 11, 1989, between the Company and
McCaw Cellular Communications, Inc. (the "Private Market Value Guarantee")
(incorporated by reference to Exhibit (c)(7) to Amendment No. 24 to Schedule
14D-1 and Amendment No. 30 to Schedule 13D relating to the Offer filed by MMM
Holdings, Inc. and McCaw with the Securities and Exchange Commission on December
12, 1989)
10.12(b) First Amendment, dated June 7, 1994, to the Private Market Value Guarantee
(incorporated by reference to Exhibit 99.1 to the Company's Report on Form 8-K
dated May 25, 1994)
10.13 Exercise, dated October 27, 1989, of the Company's Rights of First Refusal to
Acquire the Interests of Metromedia Company in Metro One Cellular Telephone
Company, and Agreement of Purchase and Sale, dated October 3, 1989, by and
between McCaw Cellular Communications, Inc. and Metromedia Company (incorporated
by reference to Exhibit 10(u) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1989)
10.14(a) Credit Agreement, dated as of August 1, 1990, among LIN Cellular Network, Inc.,
Morgan Guaranty Trust Company of New York and the Lenders Named therein (the
"1990 Credit Agreement") (incorporated by reference to Exhibit 10.21 to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1990)
10.14(b) Amendment No. 1, dated as of June 15, 1993, to the 1990 Credit Agreement
10.14(c) Amendment No. 2, dated as of May 31, 1994, to the 1990 Credit Agreement
10.15 Stock Acquisition Agreement, dated as of May 7, 1990, between LCH Cellular, Inc.
and Metromedia Company (incorporated by reference to Exhibit (b)(i) to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1990)
10.16 Restated Certificate of Incorporation of LCH Communications, Inc. (formerly LCH
Cellular, Inc.) (incorporated by reference to Exhibit (b)(ii) to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1990)
10.17 Stockholders Agreement, dated as of August 10, 1990, among Metromedia Company,
LCH Holdings, Inc. and LCH Communications, Inc. (incorporated by reference to
Exhibit (b)(iii) to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1990)
10.18(a)* Employee Stock Purchase Plan (the "ESPP") (incorporated by reference to Exhibit
4.3 to the Company's Registration Statement on Form S-8 dated March 13, 1991
(Registration No. 33-39282))
10.18(b)* Amendment, adopted November 2, 1994, to the ESPP
10.19* Employment Agreement, dated as of October 17, 1990 of Gary Chapman (incorporated
by reference to Exhibit 10.28 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1991)
10.20* Employment Agreement, dated as of April 16, 1991, of Donald Guthrie
(incorporated by reference to Exhibit 10.30 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1991)
10.21(a)* LIN Broadcasting Corporation Retirement Plan (the "Retirement Plan"), as amended
and restated as of January 1, 1989 (incorporated by reference to Exhibit 10.31
to the Company's Annual Report on Form 10-K for the year ended December 31,
1991).
10.21(b)* Amendment to the Retirement Plan dated January 1, 1993 (incorporated by
reference to Exhibit 10.32 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1992)
10.21(c)* Amendment, adopted November 22, 1994, to the Retirement Plan
10.22(a)* LIN Broadcasting Corporation Supplemental Benefit Retirement Plan dated January
1, 1990 (the "Supplemental Plan") (incorporated by reference to Exhibit 10.33 to
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1992)
10.22(b)* Amendment, adopted November 22, 1994, to the Supplemental Plan
10.23* LIN Employee Plans, established in connection with the McCaw-AT&T Merger
Agreement (incorporated by reference to Exhibit 10.34 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993)
10.24* LIN Broadcasting Deferred Compensation Plan, dated December 15, 1993
(incorporated by reference to Exhibit 10.35 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1993)
10.25 Distribution Agreement, dated as of December 28, 1994, between the Company and
LIN Television Corporation ("LIN TV") (incorporated by reference to Exhibit 2.4
to the Report on Form 8-K dated December 28, 1994 filed by LIN Television
Corporation)
10.26 Tax Allocation Agreement, dated as of December 28, 1994, between the Company and
LIN TV (incorporated by reference to Exhibit 99.1 to the Report on Form 8-K
dated December 28, 1994 filed by LIN Television Corporation)
10.27 Management Services Agreement, dated as of December 28, 1994, between the
Company and LIN TV (incorporated by reference to Exhibit 99.2 to the Report on
Form 8-K dated December 28, 1994 filed by LIN Television Corporation)
10.28 Employee Benefits Allocation Agreement, dated as of December 28, 1994, between
the Company and LIN TV (incorporated by reference to Exhibit 99.3 to the Report
on Form 8-K dated December 28, 1994 filed by LIN Television Corporation)
10.29 Consulting Agreement, dated as of December 28, 1994, between LIN TV, LCH
Communications, Inc. and LIN Michigan Broadcasting Corporation (incorporated by
reference to Exhibit 99.4 to the Report on Form 8-K dated December 28, 1994
filed by LIN Television Corporation)
10.30 Right of First Refusal Agreement, dated as of December 28, 1994, between the
Company and LIN TV (incorporated by reference to Exhibit 99.5 to the Report on
Form 8-K dated December 28, 1994 filed by LIN Television Corporation)
10.31(a) Asset Purchase Agreement, dated June 7, 1994 among the Company, LIN TV, Cook
Inlet Communications Corp. and Cook Inlet Communications, Inc. (the "Asset
Purchase Agreement") (incorporated by reference to Exhibit 99.1 to the Company's
Report on Form 8-K dated December 28, 1994)
10.31(b) First Amendment, dated September 26, 1994. to the Asset Purchase Agreement
(incorporated by reference to Exhibit 99.2 to the Company's Report on Form 8-K
dated December 28, 1994)
10.31(c) Second Amendment, dated December 6, 1994. to the Asset Purchase Agreement
(incorporated by reference to Exhibit 99.3 to the Company's Report on Form 8-K
dated December 28, 1994)
10.32 Credit Agreement, dated as of June 15, 1994, among LIN Cellular Network, Inc.,
Toronto Dominion (Texas), Inc. and the Lenders named therein
11 Statement regarding computation of earnings per share
21 Subsidiaries of the Registrant
23.1** Consent of Ernst & Young LLP
23.2 Consent of Deloitte & Touche LLP
23.3 Consent of Arthur Andersen LLP
24 Powers of Attorney with respect to Certain Signatures
27 Financial Data Schedule
-----------------------
** Filed herewith.
EX-23
2
EXHIBIT 23.1
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in the Registration
Statements (Form S-8 Nos. 33-39282 and 2-82944) of LIN
Broadcasting Corporation and in the related Prospectus of our
report dated January 20, 1995, with respect to the consolidated
financial statements and schedules of LIN Broadcasting
Corporation, and our report dated January 20, 1995, with respect
to the combined financial statements and schedule of LIN
Broadcasting Corporation's Unconsolidated Affiliates, included in
the Annual Report (Form 10-K/A, Amendment No. 2) for the year
ended December 31, 1994.
ERNST & YOUNG LLP
Seattle, Washington
August 15, 1995