BLOCK COMMUNICATIONS INC - 10-Q Quarterly Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark one)


x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended March 31, 2003.

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to .

Commission File Number 333-96619

Block Communications, Inc.

(Exact name of registrant as specified in its charter)


Ohio		34-4374555

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

541 N. Superior Street, Toledo, Ohio 43660

(Address of principal executive offices)
(Zip code)

(419) 724-6257

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year,
if changed since last report)

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 shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for past 90 days. YES x NO o

Indicate by checkmark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES o NO x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.


Voting Common Stock , (par value $.10)		Non-voting Common Stock, (par value $.10)

29,400 shares as of May 14, 2003		428,722 shares as of May 14, 2003

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
	Financial Statements
		Condensed Consolidated Balance Sheets
		Condensed Consolidated Statements of Income (unaudited)
		Condensed Consolidated Statement of Stockholders’ Equity (unaudited)
		Condensed Consolidated Statements of Cash Flows (unaudited)
		NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
	Management’s Discussion and Analysis of Financial Position and Results of Operations
	Item 4. Controls and Procedures
PART II. OTHER INFORMATION
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
Certification of the Managing Director
Certification of the Chief Financial Officer
CEO Certification
CEO Certification

PART I. FINANCIAL INFORMATION

Financial Statements

Block Communications, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets


		March 31		December 31
		2003		2002

		*(unaudited)*		*(note 1)*
Assets
Current assets:
	Cash and cash equivalents	$	10,991,312	$	9,781,645
	Receivables, less allowances for doubtful accounts and discounts of $3,891,000 and $3,552,000, respectively		40,283,803		45,454,639
	Recoverable income taxes		8,862,291		9,029,371
	Inventories		7,172,536		7,032,626
	Prepaid expenses		4,312,533		4,498,401
	Broadcast rights		6,008,090		6,546,678
	Deferred income taxes		9,271,000		9,271,000

Total current assets			86,901,565		91,614,360
Property, plant and equipment:
	Land and land improvements		12,284,119		12,255,696
	Buildings and leasehold improvements		41,453,371		41,483,466
	Machinery and equipment		215,985,936		215,180,502
	Cable television distribution systems and equipment		198,773,310		195,399,291
	Security alarm and video systems installation costs		6,739,848		6,591,940
	Construction in progress		17,742,064		13,777,267

			492,978,648		484,688,162
	Less allowances for depreciation and amortization		247,402,265		235,410,950

			245,576,383		249,277,212
Other assets:
	Goodwill		51,987,021		51,987,021
	Other intangibles, net of accumulated amortization		39,091,470		39,471,513
	Cash value of life insurance		26,029,039		25,594,543
	Deferred income taxes		18,859,043		16,659,000
	Pension intangibles		11,931,764		11,931,764
	Prepaid pension costs		2,460,151		2,437,798
	Deferred financing costs		11,607,638		12,099,099
	Broadcast rights, less current portion		5,342,302		6,676,317
	Other		3,400,807		3,976,050

			170,709,235		170,833,105

		$	503,187,183	$	511,724,677

PART I. FINANCIAL INFORMATION
Financial Statements


			March 31			December 31
			2003			2002

			*(unaudited)*			*(note 1)*
Liabilities and stockholders’ equity
Current liabilities:
	Accounts payable		$	10,636,374		$	13,831,059
	Salaries, wages and payroll taxes			15,912,085			19,046,005
	Workers’ compensation and medical reserves			9,008,455			8,863,918
	Other accrued liabilities			38,683,641			32,846,215
	Current maturities of long-term debt			1,085,462			4,649,871

Total current liabilities				75,326,017			79,237,068

Long-term debt, less current maturities				255,969,515			255,786,939
Other long-term obligations				143,419,103			144,113,551
Minority interest				11,901,527			11,941,238
Stockholders’ equity:
	5% Non-cumulative, non-voting Class A Stock, par value $100 a share (entitled in liquidation to $100 per share in priority over Common Stock)— 15,680 shares authorized; 12,620 shares issued and outstanding			1,262,000			1,262,000
	Common Stock, par value $.10 a share:
		Voting Common Stock—29,400 shares authorized, issued and outstanding		2,940			2,940
		Non-voting Common Stock—588,000 shares authorized; 427,786 shares issued and outstanding		42,779			42,779
	Accumulated other comprehensive loss			(22,746,874	)		(22,860,033	)
	Additional paid-in capital			771,274			771,274
	Retained earnings			37,238,902			41,426,921

				16,571,021			20,645,881

			$	503,187,183		$	511,724,677

See accompanying notes.

PART I. FINANCIAL INFORMATION
Financial Statements

Block Communications, Inc. and Subsidiaries

Condensed Consolidated Statements of Income (unaudited)


		Three months ended
		March 31

		2003			2002

Revenue:
	Publishing	$	59,465,222		$	61,562,804
	Cable		26,908,577			25,096,835
	Broadcasting		9,068,231			9,000,653
	Other Communications		5,982,188			6,352,744

			101,424,218			102,013,036
Expense:
	Publishing		60,784,000			61,519,313
	Cable		24,689,294			22,813,956
	Broadcasting		9,345,026			9,055,039
	Other Communications		5,440,008			6,243,737
	Corporate general and administrative		1,079,456			951,280

			101,337,784			100,583,325

Operating income			86,434			1,429,711
Nonoperating income (expense):
	Interest expense		(4,947,372	)		(4,748,149	)
	Gain on disposition of Monroe Cablevision		—			21,600,189
	Change in fair value of interest rate swaps		(828,122	)		1,461,826
	Interest income		30,204			8,831

			(5,745,290	)		18,322,697

Income (loss) before income taxes and minority interest			(5,658,856	)		19,752,408
Provision (credit) for income taxes			(1,431,126	)		6,792,532

Income (loss) before minority interest			(4,227,730	)		12,959,876
Minority interest			39,711			(7,174	)

Net income (loss)		$	(4,188,019	)	$	12,952,702

See accompanying notes.

PART I. FINANCIAL INFORMATION
Financial Statements

Block Communications, Inc. and Subsidiaries

Condensed Consolidated Statement of Stockholders’ Equity (unaudited)


								Common Stock
														Accumulated
		Class A Stock				Voting				Non-Voting				Other			Additional
														Comprehensive			Paid-in		Retained
		Shares		Amount		Shares		Amount		Shares		Amount		Loss			Capital		Earnings			Total

Balances at January 1, 2003			12,620	$	1,262,000		29,400	$	2,940		427,786	$	42,779	$	(22,860,033	)	$	771,274	$	41,426,921		$	20,645,881
	Net loss																			(4,188,019	)		(4,188,019	)
	Amortization of fair value of interest rate swaps at January 1, 2001 (net of deferred tax of $63,500)														113,159								113,159

	Total comprehensive loss																						(4,074,860	)

Balances at March 31, 2003			12,620	$	1,262,000		29,400	$	2,940		427,786	$	42,779	$	(22,746,874	)	$	771,274	$	37,238,902		$	16,571,021


Balances at January 1, 2002			12,620	$	1,262,000		29,400	$	2,940		427,786	$	42,779	$	(4,725,589	)	$	771,274	$	40,229,696		$	37,583,100
	Net income																			12,952,702			12,952,702
	Amortization of fair value of interest rate swaps at January 1, 2001 (net of deferred tax of $63,500)														113,159								113,159

	Total comprehensive income																						13,065,861

Balances at March 31, 2002			12,620	$	1,262,000		29,400	$	2,940		427,786	$	42,779	$	(4,612,430	)	$	771,274	$	53,182,398		$	50,648,961

See accompanying notes.

PART I. FINANCIAL INFORMATION
Financial Statements

Block Communications, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (unaudited)


			Three months ended
			March 31

			2003			2002

Operating activities
Net income (loss)			$	(4,188,019	)	$	12,952,702
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
	Depreciation			12,461,153			11,323,191
	Amortization of intangibles and deferred charges			764,629			372,526
	Amortization of broadcast rights			1,723,413			1,573,871
	Payments for broadcast rights			(1,758,892	)		(1,179,886	)
	Gain on sale of Monroe Cablevision			—			(21,600,189	)
	Deferred income taxes (credit)			(2,263,543	)		3,260,301
	Provision for bad debts			138,738			220,876
	Minority interest			(39,711	)		7,174
	Change in fair value of interest rate swaps			828,122			(1,461,826	)
	Loss on disposal of property and equipment			39,462			396,866
	Changes in operating assets and liabilities:
		Receivables		5,032,098			5,093,222
		Inventories		(139,910	)		(891,359	)
		Prepaid expenses		185,868			(71,640	)
		Accounts payable		(3,194,685	)		(1,862,245	)
		Salaries, wages, payroll taxes and other accrued liabilities		1,465,153			(4,261,833	)
		Other assets		1,301,960			4,023,251
		Postretirement benefits and other long-term obligations		1,942,396			2,457,531

Net cash provided by operating activities				14,298,232			10,352,533

Investing activities
Additions to property, plant and equipment				(8,812,985	)		(5,862,022	)
Change in cash value of life insurance				(434,496	)		(413,886	)
Proceeds from sale of Monroe Cablevision				—			12,059,115

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents