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: NOT APPLICABLE |
COMMISSION FILE NUMBER: 1-14776
HEARST-ARGYLE TELEVISION, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 74-2717523 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
888 Seventh Avenue New York, NY 10106
(Address of principal executive offices)
(212) 887-6800
(Registrant’s telephone number, including area code)
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 twelve 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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
As of July 29, 2003, the registrant had 92,600,469 shares of common stock outstanding, consisting of 51,301,821 shares of Series A Common Stock, and 41,298,648 shares of Series B Common Stock.
HEARST-ARGYLE TELEVISION, INC.
| Page No. | ||||
| Part I Financial Information | ||||
| Item 1. | Financial Statements |
|||
| Condensed Consolidated Balance Sheets as of June 30, 2003 (unaudited) and December 31, 2002 |
1 | |||
| 3 | ||||
| 4 | ||||
| 5 | ||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
11 | ||
| Item 3. | 16 | |||
| Item 4. | 16 | |||
| Part II Other Information |
||||
| Item 4. | 17 | |||
| Item 6. | 17 | |||
| Signatures | 19 | |||
| Exhibit Index | 20 | |||
| Certifications | ||||
PART I
FINANCIAL INFORMATION
| Item 1. | Financial Statements |
HEARST-ARGYLE TELEVISION, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, 2003 (Unaudited) |
December 31, 2002 | |||||
| (In thousands) | ||||||
| Assets |
||||||
| Current assets: | ||||||
| Cash and cash equivalents |
$ | 7,071 | $ | 4,442 | ||
| Accounts receivable, net |
142,587 | 143,347 | ||||
| Program and barter rights |
18,965 | 58,510 | ||||
| Deferred income taxes |
2,873 | 2,873 | ||||
| Other |
6,277 | 7,024 | ||||
| Total current assets |
177,773 | 216,196 | ||||
| Property, plant and equipment, net | 301,954 | 310,138 | ||||
| Intangible assets, net | 2,353,425 | 2,354,658 | ||||
| Goodwill, net | 799,160 | 799,160 | ||||
| Other noncurrent assets: | ||||||
| Deferred financing and acquisition costs, net |
16,089 | 17,306 | ||||
| Investments |
27,136 | 26,925 | ||||
| Program and barter rights |
3,994 | 6,096 | ||||
| Other |
31,553 | 32,446 | ||||
| Total other noncurrent assets |
78,772 | 82,773 | ||||
| Total assets |
$ | 3,711,084 | $ | 3,762,925 | ||
See notes to condensed consolidated financial statements.
1
HEARST-ARGYLE TELEVISION, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS—(Continued)
| June 30, 2003 (Unaudited) |
December 31, 2002 |
|||||||
| (In thousands) | ||||||||
| Liabilities and Stockholders’ Equity |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 9,075 | $ | 14,085 | ||||
| Accrued liabilities |
49,685 | 54,127 | ||||||
| Program and barter rights payable |
19,411 | 57,672 | ||||||
| Payable to The Hearst Corporation |
— | 533 | ||||||
| Current portion of long-term debt |
43,165 | 121 | ||||||
| Other |
4,331 | 4,141 | ||||||
| Total current liabilities |
125,667 | 130,679 | ||||||
| Noncurrent liabilities: |
||||||||
| Program and barter rights payable |
6,097 | 8,723 | ||||||
| Long-term debt, less current portion |
882,501 | 973,378 | ||||||
| Deferred income taxes |
853,392 | 844,781 | ||||||
| Other liabilities |
24,879 | 26,102 | ||||||
| Total noncurrent liabilities |
1,766,869 | 1,852,984 | ||||||
| Company obligated redeemable convertible preferred securities of subsidiary trust holding solely parent company debentures |
200,000 | 200,000 | ||||||
| Stockholders’ equity: |
||||||||
| Series A preferred stock |
1 | 1 | ||||||
| Series B preferred stock |
1 | 1 | ||||||
| Series A common stock |
545 | 543 | ||||||
| Series B common stock |
413 | 413 | ||||||
| Additional paid-in capital |
1,283,852 | 1,281,288 | ||||||
| Retained earnings |
418,813 | 382,093 | ||||||
| Accumulated other comprehensive loss, net |
(4,378 | ) | (4,378 | ) | ||||
| Treasury stock, at cost |
(80,699 | ) | (80,699 | ) | ||||
| Total stockholders’ equity |
1,618,548 | 1,579,262 | ||||||
| Total liabilities and stockholders’ equity |
$ | 3,711,084 | $ | 3,762,925 | ||||
See notes to condensed consolidated financial statements.
2
HEARST-ARGYLE TELEVISION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||
| 2003 |
2002 |
2003 |
2002 |
|||||||||||
| (Unaudited) (In thousands, except per share data) |
||||||||||||||
| Total revenues |
$ | 179,605 | $ | 182,303 | $ | 328,881 | $ | 337,225 | ||||||
| Station operating expenses: |
||||||||||||||
| Salaries, benefits and other operating costs |
81,028 | 79,826 | 160,861 | 159,103 | ||||||||||
| Amortization of program rights |
15,830 | 14,650 | 31,922 | 29,589 | ||||||||||
| Depreciation and amortization |
13,136 | 10,476 | 24,096 | 20,921 | ||||||||||
| Corporate general and administrative expenses |
4,884 | 4,394 | 9,758 | 8,239 | ||||||||||
| Operating income |
64,727 | 72,957 | 102,244 | 119,373 | ||||||||||
| Interest expense, net |
17,351 | 18,786 | 34,760 | 37,163 | ||||||||||
| Dividends on redeemable convertible preferred securities |
3,750 | 3,750 | 7,500 | 7,500 | ||||||||||
| Other income, net |
— | 299 | — | 299 | ||||||||||
| Equity in income (loss) of affiliates |
370 | (1,226 | ) | 234 | (2,276 | ) | ||||||||
| Income before income taxes |
43,996 | 49,494 | 60,218 | 72,733 | ||||||||||
| Income taxes |
16,718 | 18,715 | 22,883 | 27,639 | ||||||||||
| Net income |
27,278 | 30,779 | 37,335 | 45,094 | ||||||||||
| Less preferred stock dividends |
297 | 355 | 615 | 711 | ||||||||||
| Income applicable to common stockholders |
$ | 26,981 | $ | 30,424 | $ | 36,720 | $ | 44,383 | ||||||
| Income per common share—basic: |
$ | 0.29 | $ | 0.33 | $ | 0.40 | $ | 0.48 | ||||||
| Number of common shares used in the calculation |
92,554 | 92,099 | 92,495 | 91,985 | ||||||||||
| Income per common share—diluted: |
$ | 0.29 | $ | 0.33 | $ | 0.40 | $ | 0.48 | ||||||
| Number of common shares used in the calculation |
92,963 | 92,683 | 92,856 | 92,401 | ||||||||||
See notes to condensed consolidated financial statements.
3
HEARST-ARGYLE TELEVISION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Six Months Ended June 30, |
||||||||
| 2003 |
2002 |
|||||||
| (Unaudited) (In thousands) |
||||||||
| Operating Activities |
||||||||
| Net income |
$ | 37,335 | $ | 45,094 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation |
22,863 | 20,866 | ||||||
| Amortization of program rights |
31,922 | 29,589 | ||||||
| Program payments |
(31,161 | ) | (29,158 | ) | ||||
| Amortization of deferred financing costs |
1,455 | 1,456 | ||||||
| Amortization of intangible assets |
1,233 | 55 | ||||||
| Deferred income taxes |
8,611 | 17,349 | ||||||
| Equity in (income) loss of affiliates |
(234 | ) | 2,276 | |||||
| Provision for doubtful accounts |
144 | 2,976 | ||||||
| Loss on disposal of fixed assets |
34 | 82 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
616 | (2,668 | ) | |||||
| Other assets |
1,640 | 180 | ||||||
| Accounts payable and accrued liabilities |
(9,690 | ) | 3,537 | |||||
| Other liabilities |
(1,566 | ) | (6,786 | ) | ||||
| Net cash provided by operating activities |
||||||||