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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 June 30, 2003.

OR

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

Commission File Number  333-96619

Block Communications, Inc.

(Exact name of registrant as specified in its charter)
     
Ohio

(State or other jurisdiction of
incorporation or organization)		   34-4374555

(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 [  ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES[  ] 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 August 5, 2003   428,613 shares as of August 5, 2003

 

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Income
Condensed Consolidated Statement of Stockholders’ Equity
Condensed Consolidated Statements of Cash Flows
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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
Signature
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

Table of Contents

Table of Contents

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

Block Communications, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

                   
      June 30   December 31
      2003   2002
     
 
      (unaudited)   (note 1)
Assets
                
Current assets:
                
 
Cash and cash equivalents
   $ 14,387,557     $ 9,781,645  
 
Receivables, less allowances for doubtful accounts and discounts of $3,853,000 and $3,552,000, respectively
     42,207,594       45,454,639  
 
Recoverable income taxes
     7,831,271       9,029,371  
 
Inventories
     6,642,422       7,032,626  
 
Prepaid expenses
     3,419,571       4,498,401  
 
Broadcast rights
     6,173,901       6,546,678  
 
Deferred income taxes
     9,671,950       9,271,000  
 
 
    
     
 
Total current assets
     90,334,266       91,614,360  
Property, plant and equipment:
                
 
Land and land improvements
     12,402,357       12,255,696  
 
Buildings and leasehold improvements
     42,945,696       41,483,466  
 
Machinery and equipment
     220,681,636       215,180,502  
 
Cable television distribution systems and equipment
     202,304,194       195,399,291  
 
Security alarm and video systems installation costs
     6,872,480       6,591,940  
 
Construction in progress
     27,023,144       13,777,267  
 
 
    
     
 
 
     512,229,507       484,688,162  
 
Less allowances for depreciation and amortization
     264,485,911       235,410,950  
 
 
    
     
 
 
     247,743,596       249,277,212  
Other assets:
                
 
Goodwill
     51,987,021       51,987,021  
 
Other intangibles, net of accumulated amortization
     38,700,147       39,471,513  
 
Cash value of life insurance
     26,332,857       25,594,543  
 
Deferred income taxes
     18,856,209       16,659,000  
 
Pension intangibles
     11,931,764       11,931,764  
 
Prepaid pension costs
     2,460,151       2,437,798  
 
Deferred financing costs
     11,116,177       12,099,099  
 
Broadcast rights, less current portion
     3,667,732       6,676,317  
 
Other
     5,223,576       3,976,050  
 
 
    
     
 
 
     170,275,634       170,833,105  
 
 
    
     
 
 
   $ 508,353,496     $ 511,724,677  
 
 
    
     
 

1

Table of Contents

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

                     
        June 30   December 31
        2003   2002
       
 
        (unaudited)   (note 1)
Liabilities and stockholders’ equity
                
Current liabilities:
                
 
Accounts payable
   $ 8,768,974     $ 13,831,059  
 
Salaries, wages and payroll taxes
     14,916,705       19,046,005  
 
Workers’ compensation and medical reserves
     8,206,927       8,863,918  
 
Other accrued liabilities
     34,878,298       32,846,215  
 
Current maturities of long-term debt
     1,092,751       4,649,871  
 
 
    
     
 
Total current liabilities
     67,863,655       79,237,068  
Long-term debt, less current maturities
     268,702,558       255,786,939  
Other long-term obligations
     144,150,412       144,113,551  
Minority interest
     11,916,681       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; 428,613 and 427,786 shares issued and outstanding
     42,861       42,779  
 
Accumulated other comprehensive loss
     (22,633,965 )     (22,860,033 )
 
Additional paid-in capital
     1,058,687       771,274  
 
Retained earnings
     35,987,667       41,426,921  
 
 
    
     
 
 
     15,720,190       20,645,881  
 
 
    
     
 
 
   $ 508,353,496     $ 511,724,677  
 
 
    
     
 

See accompanying notes.

2

Table of Contents

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

Block Communications, Inc. and Subsidiaries

Condensed Consolidated Statements of Income (unaudited)

                                   
      Three months ended   Six months ended
      June 30   June 30
      2003   2002   2003   2002
     
 
 
 
Revenue:
                                
 
Publishing
   $ 64,172,610     $ 64,646,626     $ 123,637,832     $ 126,209,428  
 
Cable
     27,355,527       25,240,422       54,264,104       50,337,257  
 
Broadcasting
     10,214,156       9,686,810       19,282,387       18,687,463  
 
Other Communications
     6,061,378       6,488,681       11,960,358       12,718,010  
 
 
    
     
     
     
 
 
     107,803,671       106,062,539       209,144,681       207,952,158  
Expense:
                                
 
Publishing
     62,313,037       61,227,791       123,097,037       122,747,104  
 
Cable
     24,542,132       22,392,149       49,231,426       45,206,105  
 
Broadcasting
     8,936,736       8,954,146       18,281,762       18,009,185  
 
Other Communications
     5,474,888       5,899,585       10,714,397       11,848,884  
 
Corporate general and administrative
     757,363       505,795       1,836,819       1,457,075  
 
 
    
     
     
     
 
 
     102,024,156       98,979,466       203,161,441       199,268,353  
 
 
    
     
     
     
 
Operating income
     5,779,515       7,083,073       5,983,240       8,683,805  
Nonoperating income (expense):
                                
 
Interest expense
     (5,273,158 )     (5,894,078 )     (10,220,530 )     (10,642,227 )
 
Gain on disposition of Monroe Cablevision
     —       —       —       21,600,189  
 
Change in fair value of interest rate swaps
     (1,402,215 )     (1,183,769 )     (2,230,337 )     278,057  
 
Loss on extinguishment of debt
     —       (8,989,786 )     —       (8,989,786 )
 
Interest income
     69,556       22,116       99,760       30,947  
 
 
    
     
     
     
 
 
     (6,605,817 )     (16,045,517 )     (12,351,107 )     2,277,180  
 
 
    
     
     
     
 
Income (loss) from continuing operations before income taxes and minority interest
     (826,302 )     (8,962,444 )     (6,367,867 )     10,960,985  
Provision (credit) for income taxes
     (159,788 )     (2,471,245 )     (1,551,035 )     4,381,145  
 
 
    
     
     
     
 
Income (loss) from continuing operations before minority interest
     (666,514 )     (6,491,199 )     (4,816,832 )     6,579,840  
Minority interest
     (15,154 )     (79,947 )     24,557       (87,121 )
 
 
    
     
     
     
 
Income (loss) from continuing operations
     (681,668 )     (6,571,146 )     (4,792,275 )     6,492,719  
Loss from discontinued operations (including loss on disposal of $235,591 in 2003)
     (328,367 )     (572,225 )     (445,658 )     (743,248 )
Income tax benefit
     (111,645 )     (244,874 )     (151,524 )     (304,732 )
 
 
    
     
     
     
 
Loss on discontinued operations
     (216,722 )     (327,351 )     (294,134 )     (438,516 )
 
 
    
     
     
     
 
Net income (loss)
   $ (898,390 )   $ (6,898,497 )   $ (5,086,409 )   $ 6,054,203  
 
 
    
     
     
     
 

See accompanying notes.

3

Table of Contents

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

Block Communications, Inc. and Subsidiaries

Condensed Consolidated Statement of Stockholders’ Equity (unaudited)

                                                       
                          Common Stock
                         
          Class A Stock   Voting   Non-Voting
         
 
 
          Shares   Amount   Shares   Amount   Shares   Amount
         
 
 
 
 
 
Balances at January 1, 2003
     12,620     $ 1,262,000       29,400     $ 2,940       427,786     $ 42,779  
 
Net loss
                                                
 
Amortization of fair value of interest rate swaps at January 1, 2001 (net of deferred tax of $127,500)
                                                
 
Total comprehensive loss
                                                
 
Cash dividends declared:
                                                
   
Class A stock—$2.50 per share
                                                
   
Common Stock:
                                                
     
Voting—$0.70 per share
                                                
     
Non-voting—$0.70 per share
                                                
 
                                                
 
Executive stock incentives at $407.97 per share
                                     1,808       180  
 
Redemption of non-voting common shares at $458.50 per share
                                     (981 )     (98 )
 
    
     
     
     
     
     
 
Balances at June 30, 2003
     12,620     $ 1,262,000       29,400     $ 2,940       428,613     $ 42,861  
 
    
     
     
     
     
     
 
Balances at January 1, 2002
     12,620     $ 1,262,000       29,400     $ 2,940       427,786     $ 42,779  
 
Net income
                                                
 
Amortization of fair value of interest rate swaps at January 1, 2001 (net of deferred tax of $127,500)
                                                
 
                                                
 
Total comprehensive income
                                                
 
Cash dividends declared:
                                                
   
Class A stock—$2.50 per share
                                                
   
Common Stock:
                                                
     
Voting—$0.70 per share
                                                
     
Non-voting—$0.70 per share