FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2001
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[ ] 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 1-5846
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THE LIBERTY CORPORATION
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(Exact name of registrant as specified in its charter)
South Carolina 57-0507055
(State or other jurisdiction of (IRS Employer
incorporation or organization) identification No.)
135 South Main Street, Greenville, SC 29601
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(Address of principal executive offices)
Registrant's telephone number, including area code: 864/241-5400
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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 the number of shares outstanding of each of the Registrant's classes of
common stock as of the latest practicable date.
Number of shares Outstanding
Title of each class as of September 30, 2001
------------------- ----------------------------
Common Stock 19,682,502
PART I, ITEM 1
THE LIBERTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED AND CONDENSED BALANCE SHEETS
(In 000's) SEPTEMBER 30, December 31,
2001 2000
------------ -----------
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 37,845 $ 149,003
Receivables (net of allowance for doubtful accounts) 34,271 40,561
Program rights 6,788 5,561
Prepaid and other current assets 5,094 46,194
Income taxes receivable 6,161 --
Deferred income taxes 4,007 15,109
--------- ---------
Total current assets 94,166 256,428
Property Plant and Equipment
Land 5,494 5,494
Buildings and improvements 35,455 33,152
Furniture and equipment 155,402 149,784
Less: Accumulated depreciation (111,856) (99,389)
--------- ---------
84,495 89,041
Intangibles (net of accumulated amortization) 491,243 501,693
Other assets 47,362 48,845
--------- ---------
Total assets $ 717,266 $ 896,007
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 17,703 $ 68,517
Program contract obligations 6,809 5,578
Accrued income taxes -- 138,297
--------- ---------
Total current liabilities 24,512 212,392
Deferred income taxes 105,670 92,797
Other liabilities 9,338 9,825
--------- ---------
Total liabilities 139,520 315,014
--------- ---------
Shareholders' equity
Common stock 102,837 99,033
Unearned stock compensation (3,911) --
Retained earnings 478,930 481,270
Unrealized investment gains (losses) (110) 690
--------- ---------
Total shareholders' equity 577,746 580,993
--------- ---------
Total liabilities and shareholders' equity $ 717,266 $ 896,007
========= =========
See Notes to Consolidated and Condensed Financial Statements.
2
THE LIBERTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED AND CONDENSED STATEMENTS OF OPERATIONS
Three Months ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
(In 000's, except per share data) 2001 2000 2001 2000
-------- ------- -------- --------
(Unaudited)
REVENUES
Station revenues (net of commissions) $ 37,170 $40,058 $121,407 $114,737
Cable advertising and other revenues 3,003 3,234 8,885 9,539
-------- ------- -------- --------
NET REVENUES 40,173 43,292 130,292 124,276
EXPENSES
Operating expenses 25,645 23,187 77,518 68,166
Amortization of program rights 2,021 1,704 5,957 4,792
Depreciation and amortization of intangibles 8,434 5,272 23,717 14,864
Corporate, general, and administrative expenses 3,685 2,661 9,783 8,025
-------- ------- -------- --------
TOTAL OPERATING EXPENSES 39,785 32,824 116,975 95,847
OPERATING INCOME 388 10,468 13,317 28,429
Net investment income (loss) (1,938) 724 3,799 12,016
Interest expense -- 4,314 -- 12,705
-------- ------- -------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (1,550) 6,878 17,116 27,740
Provision for (benefit from) income taxes (589) 2,885 6,504 11,448
-------- ------- -------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS (961) 3,993 10,612 16,292
Income from discontinued operations (net of income taxes) -- 7,573 -- 26,061
-------- ------- -------- --------
NET INCOME (LOSS) $ (961) $11,566 $ 10,612 $ 42,353
======== ======= ======== ========
EARNINGS (LOSS) PER SHARE:
Basic earnings (loss) per common share from continuing operations $ (0.05) $ 0.21 $ 0.54 $ 0.83
Basic earnings per common share from discontinued operations -- 0.39 -- 1.35
-------- ------- -------- --------
Basic earnings (loss) per common share $ (0.05) $ 0.60 $ 0.54 $ 2.18
======== ======= ======== ========
Diluted earnings (loss) per common share from continuing operations $ (0.05) $ 0.20 $ 0.54 $ 0.83
Diluted earnings per common share from discontinued operations -- 0.38 -- 1.32
-------- ------- -------- --------
Diluted earnings (loss) per common share $ (0.05) $ 0.58 $ 0.54 $ 2.15
======== ======= ======== ========
Dividends Per Common Share $ 0.22 $ 0.22 $ 0.66 $ 0.66
See Notes to Consolidated and Condensed Financial Statements.
3
THE LIBERTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED AND CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30,
----------------------------------
(In 000's) 2001 2000
--------- ------------
(Unaudited)
OPERATING ACTIVITIES
Income from continuing operations $ 10,612 $ 16,292
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Gain on sale of operating assets (29) (631)
Realized investment (gains) losses 1,720 (9,208)
Depreciation 13,078 9,708
Amortization of intangibles 10,639 5,156
Amortization of program rights 5,957 4,792
Cash paid for program rights (5,951) (4,698)
Provision for deferred income taxes 10,209 545
Changes in operating assets and liabilities:
Receivables 6,290 (677)
Other assets 41,688 (4,976)
Accounts payable and accrued expenses (50,814) 3,255
Accrued income taxes (130,692) 13,469
Other liabilities (487) (9,453)
All other operating activities, net 408 (421)
Net cash used in operating activities of discontinued operations -- (14,999)
--------- ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (87,372) 8,154
INVESTMENT ACTIVITIES
Purchase of property and equipment (8,532) (7,439)
Net cash paid for purchase of television stations -- (59,782)
Investment securities sold 2,755 13,686
Investment securities acquired (4,000) (1,138)
Purchase of investment properties -- (2,000)
Proceeds from sale of investment properties 877 14,343
Other (net) 29 --
Net cash provided by investing activities of discontinued operations -- 53,216
--------- ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (8,871) 10,886
FINANCING ACTIVITIES
Proceeds from borrowings -- 2,426,500
Principal payments on debt -- (2,402,500)
Dividends paid (12,952) (13,303)
Stock issued for employee benefit and compensation programs 7,679 158
Repurchase of common stock (9,642) (10,428)
Net cash provided by financing activities of discontinued operations -- 24,012
--------- ------------
NET CASH PROVIDED BY(USED IN) FINANCING ACTIVITIES (14,915) 24,439
(DECREASE) INCREASE IN CASH (111,158) 43,479
Cash at beginning of period 149,003 11,891
--------- ------------
CASH AT END OF PERIOD $ 37,845 $ 55,370
========= ============
See Notes to Consolidated and Condensed Financial Statements.
4
Notes to Consolidated and Condensed
Financial Statements -- continued
THE LIBERTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated and condensed financial
statements of The Liberty Corporation and Subsidiaries have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The
information included is not necessarily indicative of the annual
results that may be expected for the year ended December 31, 2001, but
it does reflect all adjustments (which are of a normal and recurring
nature) considered, in the opinion of management, necessary for a fair
presentation of the results for the interim periods presented. The
December 31, 2000 financial information was derived from the Company's
previously filed 2000 Form 10-K. For further information, refer to the
consolidated financial statements and footnotes thereto included in The
Liberty Corporation annual report on Form 10-K for the year ended
December 31, 2000.
Prior to September 29, 2000, the Company was engaged in the insurance
industry. On September 29, 2000, the Company's shareholders approved
the sale of the Company's insurance operations to the Royal Bank of
Canada for $648 million. The sale closed on November 1, 2000.
Accordingly, these entities have been treated as discontinued
operations in the accompanying financial statements (see Note 5 below).
2. STATION ACQUISITIONS
On February 29, 2000, the Company completed the acquisition of KCBD,
the NBC affiliate in Lubbock, TX in a cash transaction for $59.8
million. The transaction was accounted for as a purchase, and
accordingly, its results of operations are included in the accompanying
financial statements since the date of acquisition. This purchase was
funded using proceeds from the Company's credit facility.
On December 1, 2000, the Company completed its acquisition of Civic
Communications. The agreed upon purchase price for all of the
outstanding common stock of Civic Communications was $204 million. At
the time of the closing, the Company agreed to pay a portion of the
purchase price at a future date. During the first quarter of 2001, the
Company remitted the $43.2 million of unpaid purchase price to the
Civic Communications stockholders. The Company used proceeds from the
sale of its insurance operations to fund the transaction. Civic
Communications owned and operated WLBT-TV, the NBC affiliate in
Jackson, MS, KLTV-TV, the ABC affiliate in Tyler, TX, and KTRE-TV, the
satellite affiliate of KLTV in Lufkin, TX.
3. REDEMPTION OF 1995-A SERIES PREFERRED STOCK
On August 25, 2000, the Company completed the redemption of all of the
outstanding shares of its Series 1995-A Cumulative Convertible
Preferred Stock. Shares were called for redemption at $35.00 per share
plus accrued dividends for the period from July 1, 2000 through the
redemption date (September 5, 2000). Prior to the redemption date, all
shares of the 1995-A Series were converted in to common stock.
5
Notes to Consolidated and Condensed
Financial Statements -- continued
4. COMPREHENSIVE INCOME
The components of comprehensive income, net of related income taxes,
for the three-month and nine-month periods ended September 30, 2001 and
2000, respectively, are as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
2001 2000 2001 2000
--------- --------- --------- ---------
(In 000's)
Net Income (loss) $ (961) $ 11,566 $ 10,612 $ 42,353
Unrealized gains/(losses) on securities (58) 6,178 (800) 2,037
--------- --------- --------- ---------
Comprehensive income (loss) $ (1,019) $ 17,744 $ 9,812 $ 44,390
========= ========= ========= =========
5. DISCONTINUED OPERATIONS
On June 19, 2000, the Company entered into a Purchase Agreement (the
"Purchase Agreement") with Royal Bank of Canada ("RBC"), a
Canadian-chartered bank, pursuant to which RBC was to acquire from the
Company all of the issued and outstanding shares of capital stock of
Liberty Life Insurance Company, Liberty Insurance Services Corporation,
The Liberty Marketing Corporation, LC Insurance Limited and Liberty
Capital Advisors, Inc., for a total of approximately $648 million,
consisting of a dividend from Liberty Life Insurance Company of up to
$70 million and the balance in cash from Royal Bank of Canada. On
September 29, 2000 the shareholders of the Company approved the
purchase agreement described above. Accordingly, these entities have
been treated as discontinued operations in the accompanying financial
statements. The transaction closed on November 1, 2000 with Liberty
receiving $567.6 million in net cash proceeds and approximately $16
million in non-cash assets.
Summarized disclosure of the Company's discontinued operations is as
follows:
THREE
MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
2000 2000
------------- -------------
Revenues $ 86,527 $ 278,796
Expenses 76,060 241,884
--------- ---------
Income before taxes from discontinued operations 10,467 36,912
Income taxes 2,894 10,851
--------- ---------
Income from discontinued operations $ 7,573 $ 26,061
========= =========
6
Notes to Consolidated and Condensed
Financial Statements -- continued
6. SEGMENT REPORTING
The Company operates primarily in the television broadcasting and cable
advertising businesses. The Company currently owns and operates fifteen
television stations, primarily in the Southeast and Midwest. Each of
the stations is affiliated with a major network, with eight NBC
affiliates, five ABC affiliates, and two CBS affiliates. The Company
evaluates segment performance based on income before income taxes,
excluding unusual, or non-operating items.
The following tables summarize financial information for continuing
operations by segment for the three and nine-month periods ended 30,
2001 and 2000:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- ---------------------------
2001 2000 2001 2000
--------- --------- --------- ---------
REVENUE
Broadcasting $ 37,170 $ 40,058 $ 121,407 $ 114,737
Cable advertising 2,803 2,573 8,103 7,842
Other 200 661 782 1,697
--------- --------- --------- ---------
TOTAL REVENUE $ 40,173 $ 43,292 $ 130,292 $ 124,276
========= ========= ========= =========
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES
Broadcasting $ 4,496 $ 13,789 $ 24,059 $ 37,902
Cable advertising 117 175 37 512
Corporate & other (6,163) (7,086) (6,980) (10,674)
--------- --------- --------- ---------
TOTAL INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES $ (1,550) $ 6,878 $ 17,116 $ 27,740
========= ========= ========= =========
There were no material changes in assets by segment from those
disclosed in the Company's 2000 annual report, other than for the
corporate and other segment. The corporate and other segment used its
cash balances to pay approximately $135 million of income taxes during
the first quarter of 2001. It also remitted the $43.2 million of unpaid
purchase price (included in prepaid and other current assets on the
December 31, 2000 balance sheet) that had been held in trust for the
Civic Communications stockholders (see Note 2).
7
7. EARNINGS PER SHARE
The calculation of basic and diluted earnings per common share from
continuing operations is as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
(In 000's except per share data: SEPTEMBER 30, SEPTEMBER 30,
--------------------------- ---------------------------
2001 2000 2001 2000
--------- --------- --------- ---------
(Unaudited)
NUMERATOR - EARNINGS:
Income (loss) from continuing operations $ (961) $ 3,993 $ 10,612 $ 16,292
Preferred dividends -- -- -- (365)
--------- --------- --------- ---------
Numerator for basic earnings (loss) per common
share from continuing operations (961) 3,993 10,612 15,927
Effect of dilutive securities -- 365
--------- --------- --------- ---------
Numerator for diluted earnings (loss) per
common share from continuing operations $ (961) $ 3,993 $ 10,612 $ 16,292
========= ========= ========= =========
DENOMINATOR - AVERAGE SHARES OUTSTANDING:
Denominator for basic earnings (loss) per
common share from continuing operations -
weighted average shares 19,526 19,443 19,568 19,281
Effect of dilutive securities:
Preferred stock -- 228 -- 356
Stock options -- 65 90 84
--------- --------- --------- ---------
Denominator for diluted earnings (loss) per
common share from continuing operations 19,526 19,736 19,658 19,721
========= ========= ========= =========
Basic earnings (loss) per common share from
continuing operations $ (0.05) $ 0.21 $ 0.54 $ 0.83
Diluted earnings (loss) per common share from
continuing operations $ (0.05) $ 0.20 $ 0.54 $ 0.83
8. CREDIT FACILITY
On March 21, 2001, the Company entered into a $100 million unsecured
364-day revolving credit facility with a bank. At the end of the term
of the facility any outstanding principal and interest will come due,
unless the bank, in its sole discretion, otherwise extends the
facility. No draws were made on this line of credit during the first
nine months of 2001.
9. VENTURE CAPITAL INVESTMENTS
Investments in venture capital funds are generally carried at cost,
which includes provisions for impaired value where appropriate. During
the third quarter of 2001 the Company recorded an impairment of $3.2
million in its venture capital portfolio as a result of the
determination that certain of its investments had carrying values in
excess of their fair values, and that certain of those excess were
other than temporary.
8
Notes to Consolidated and Condensed
Financial Statements -- continued
10. NEW ACCOUNTING PRONOUNCEMENTS
During the second quarter of 2001, the Financial Accounting Standards
Board (FASB) issued Statement No. 141, Business Combinations, and
Statement No. 142, Goodwill and Other Intangible Assets. Statement No.
141 requires that the purchase method of accounting be used for
business combinations initiated after June 30, 2001. The Company does
not believe that Statement No. 141 will have a material effect on its
financial statements. Statement No. 142 requires that goodwill and
certain other identified intangibles no longer be amortized to
earnings, but instead be reviewed for impairments. The amortization of
goodwill and certain other identified intangibles ceases upon adoption
of the Statement, which for the Company will be January 1, 2002. The
Company has not yet determined the extent of the effect of Statement
No. 142, but believes that it will have a material impact on its
financial statements as its reported amortization expense will be
significantly reduced in future periods.
11. RECLASSIFICATIONS
Certain reclassifications have been made in the previously reported
financial statements to make the prior year amounts comparable to those
of the current year.
9
PART I, ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Unaudited)
The Liberty Corporation is a holding company with operations primarily in the
television broadcasting industry. The Company's television broadcasting
subsidiary, Cosmos Broadcasting, consists of fifteen network-affiliated stations
located in the Southeast and Midwest, a cable advertising company, a video
production company and a professional broadcast equipment dealership. Eight of
the Company's television stations are affiliated with NBC, five with ABC, and
two with CBS.
Prior to September 29, 2000, the Company was also engaged in the insurance
industry. On September 29, 2000, the Company's shareholders approved the sale of
the Company's insurance operations to the Royal Bank of Canada for $648 million.
The sale closed on November 1, 2000. Accordingly, these entities have been
treated as discontinued operations in the accompanying financial statements (see
Note 5 of the Consolidated and Condensed Financial Statements).
SIGNIFICANT TRANSACTIONS AFFECTING COMPARABILITY BETWEEN PERIODS
On February 29, 2000, the Company completed the acquisition of KCBD, the NBC
affiliate in Lubbock, TX in a cash transaction for $59.8 million. The
transaction was accounted for as a purchase, and accordingly, its results of
operations are included in the accompanying financial statements since the date
of acquisition. This purchase was funded using proceeds from the Company's
credit facility.
On August 25, 2000, the Company completed the redemption of all of the
outstanding shares of its Series 1995-A Cumulative Convertible Preferred Stock.
Shares were called for redemption at $35.00 per share plus accrued dividends for
the period from July 1, 2000 through the Series 1995-A redemption date
(September 5, 2000). Prior to the redemption date, all shares of the 1995-A
Series were converted into common stock.
On November 1, 2000, using proceeds from the sale of its insurance operations,
the Company repaid its revolving credit facility in full.
On December 1, 2000, the Company completed its acquisition of Civic
Communications. The agreed upon purchase price for all of the outstanding common
stock of Civic Communications was $204 million. The Company used proceeds from
the sale of its insurance operations to fund the transaction. Civic
Communications owned and operated WLBT-TV, the NBC affiliate in Jackson, MS,
KLTV-TV, the ABC affiliate in Tyler, TX, and KTRE-TV, the satellite affiliate of
KLTV in Lufkin, TX.
10
Management's Discussions and Analysis continued
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 2000
Net revenue was $40.2 million for the third quarter of 2001, a decrease of $3.1
million from the $43.3 million reported for the third quarter of 2000. On a pro
forma basis, as if the Company operated all stations owned at the end of the
quarter for all periods presented, net revenue decreased twenty-one percent. The
decline in net revenue is due to general weakness in the United States economy,
in the advertising industry in particular, losses in revenue related to the
events of September 11th, and that the same period of the prior year benefited
from revenue related to the Olympics and political activity.
Operating expenses, which included amortization of program rights, were $27.7
million for the third quarter of 2001, an increase of $2.8million over the $24.9
million reported for the third quarter of 2000. The increase in operating
expenses is attributable to the station acquisitions made during 2000. On a pro
forma basis, operating expenses decreased five percent.
Depreciation and amortization was $8.4 million for the third quarter of 2001, an
increase of $3.1 million over the $5.3 million reported for the third quarter of
2000. The increase in depreciation and amortization expense is directly
attributable to the station acquisitions made during 2000.
Corporate, general, and administrative expenses were $3.7 million for the third
quarter of 2001, an increase of $1.0 million over the $2.7 million reported for
the third quarter of 2000. The increase in corporate general and administrative
expenses is attributable to costs incurred associated the corporate office's
relocation, and increases in professional fees.
Net investment income (loss) for the quarter was a loss of $1.9 million, as
compared to net investment income of $0.7 million reported for the third quarter
of 2000. The decrease in net investment income was due to a $3.2 million charge
taken in the Company's venture capital portfolio during the third quarter of
2001. During the quarter the Company determined that certain of its investments
had carrying values in excess of their fair values, and that certain of those
excesses were other than temporary.
The Company incurred no interest expense during the third quarter of 2001 as it
repaid its credit facility in full during the fourth quarter of 2000 using the
proceeds from the sale of its insurance operations. The Company reported $4.3
million of interest expense during the third quarter of 2000.
NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
SEPTEMBER 30, 2000
With the exception of net investment income, changes in income statement line
items on a year-to-date basis were substantially the same as those on a
quarterly basis. Please see the discussion of the three-month periods ended
September 30, 2001 and 2000 above for details.
Net revenues were $130.3 million for the nine-month period ended September 30,
2001, an increase of $6.0 million over the $124.3 million reported for the
nine-month period ended September 30, 2000. On a pro forma basis, as if the
Company operated all stations owned at September 30, 2001 for the entire period,
net revenue decreased 21 percent.
Operating expenses, which include amortization of program rights, were $83.5
million for the nine-month period ended September 30, 2001, an increase of $10.5
million over the $73.0 million reported for the nine-month period
11
Management's Discussions and Analysis continued
ended September 30, 2000. On a pro forma basis, operating expenses were down
three percent as compared to the prior-year period.
Depreciation and amortization was $23.7 million for the nine-month period ended
September 30, 2001, an increase of $8.8 million over the $14.9 million reported
for the nine-month period ended September 30, 2000.
Corporate, general, and administrative expenses were $9.8 million for the
nine-month period ended September 30, 2001, an increase of $1.8 million over the
$8.0 million reported for the nine-month period ended September 30, 2000.
Net investment income was $3.8 million for the nine-month period ended September
30, 2001 a decrease of $8.2 million from the $12.0 million reported for the
nine-month period ended September 30 2000. The decrease in net investment income
was due mainly to realized gains from the Company's equity portfolio recognized
during the first quarter of 2000 that were not present to the same extent during
2001.
The Company incurred no interest expenses during the first nine months of 2001
as it repaid its credit facility in full during the fourth quarter of 2000 using
the proceeds from the sale of its insurance operations. The Company reported
$12.7 million of interest expense during the nine-month period ended September
30, 2000.
BROADCAST CASH FLOW INFORMATION
The Company has included operating cash flow and broadcast cash flow data
because management believes that such data are commonly used as measures of
performance among companies in the broadcast industry. The Company also believes
that these measures are frequently used by investors, analysts, valuation firms,
and lenders as some of the important determinants of underlying asset value.
Operating cash flow and broadcast cash flow should not be considered in
isolation, or as alternatives to operating income (as determined in accordance
with generally accepted accounting principles) as an indicator of the entity's
operating performance, or to cash flow from operating activities (as determined
in accordance with generally accepted accounting principles) as a measure of
liquidity. These measures are believed to be, but may not be, comparable to
similarly titled measures used by other companies.
THREE MONTHS ENDED NINE MONTHS ENDED
(In 000's except per share data: SEPTEMBER 30, SEPTEMBER 30,
-------------------------- --------------------------
2001 2000 2001 2000
--------- --------- --------- ---------
Operating income $ 388 $ 10,468 $ 13,317 $ 28,429
One time charges(1) -- 461 -- 863
--------- --------- --------- ---------
ADJUSTED OPERATING INCOME 388 10,929 13,317 29,292
Add:
Depreciation and amortization 8,434 5,272 23,717 14,864
Adj. for network compensation
due vs. accrued 248 -- 248 --
Non-cash compensation 224 648 533 1,210
--------- --------- --------- ---------
OPERATING CASH FLOW 9,294 16,849 37,815 45,366
Corporate cash expenses 3,461 2,011 9,250 6,813
--------- --------- --------- ---------
BROADCAST CASH FLOW $ 12,755 $ 18,860 $ 47,065 $ 52,179
========= ========= ========= =========
(1) Adjusted to exclude charges in 2000 related to the phase-out and
winding up of the Company's direct mail operations
12
Management's Discussions and Analysis continued
Broadcast cash flow was $12.8 million for the third quarter of 2001, compared
with $18.9 million for the prior-year third quarter. Broadcast cash flow was
$47.1 million for the first nine months of 2001, compared with $52.2 million for
the prior-year period. The decrease in broadcast cash flow for both the current
quarter and the year-to-date period is attributable to those factors affecting
net revenue discussed above.
CAPITAL, FINANCING AND LIQUIDITY
At September 30, 2001, the Company had cash of $37.8 million and an unused line
of credit of $100 million. The Company anticipates that its primary sources of
cash, those being current cash balances, operating cash flow, and the available
line of credit will be sufficient to finance the operating requirements of its
stations and their anticipated capital expenditures, for both the next 12 months
and the foreseeable future thereafter.
CASH FLOWS
The Company's net cash flow used in operating activities was $87.4 million for
the first nine months of 2001 compared to cash provided of $8.2 million for the
same period of 2000. The decrease in cash provided by operating activities is
attributable to the $135 million of taxes related to the sale of the Company's
insurance operations that were remitted to taxing authorities during the first
quarter of 2001. The Company's net cash used in investing activities was $8.9
million for the nine month period ended September 30, 2001, as compared to cash
provided by investing activities of $10.9 million for the same period of 2000.
The decrease in net cash provided by investing activities is attributable to the
absence of net cash provided by discontinued operations, as the company sold its
insurance subsidiaries in November of 2000 and the absence of acquisitions
during 2001. Net cash used in financing activities for the nine months ended
September 30, 2001 was $14.9 million compared to net cash provided by financing
activities of $24.4 million for the first nine months of 2000. The decrease in
net cash provided by financing activities is due mainly to the absence of net
cash provided by discontinued operations.
NEW ACCOUNTING PRONOUNCEMENTS
During the second quarter of 2001, the Financial Accounting Standards Board
(FASB) issued Statement No. 141, Business Combinations, and Statement No. 142,
Goodwill and Other Intangible Assets. Statement No. 141 requires that the
purchase method of accounting be used for business combinations initiated after
June 30, 2001. The Company does not believe that Statement No. 141 will have a
material effect on its financial statements. Statement No. 142 requires that
goodwill and certain other identified intangibles no longer be amortized to
earnings, but instead be reviewed for impairments. The amortization of goodwill
and certain other identified intangibles ceases upon adoption of the Statement,
which for the Company will be January 1, 2002. The Company has not yet
determined the extent of the effect of Statement No. 142, but believes that it
will have a material impact on its financial statements as its reported
amortization expense will be significantly reduced in future periods.
FORWARD LOOKING INFORMATION
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. Certain information contained herein or in any
other written or oral statements made by, or on behalf of the Company, is or may
be viewed as forward looking. The words "expect," "believe," "anticipate" or
similar expressions identify forward-looking statements. Although the Company
has used appropriate care in developing any such forward looking information,
forward looking information involves risks and uncertainties that could
significantly impact actual results. These risks and uncertainties include, but
are not limited to, the following: changes in national and local markets for
television advertising; changes in general economic conditions, increasing
competition in the Company's markets; and future regulatory actions or
conditions, effecting either the television broadcasting industry as whole or
specific to the markets the Company serves. The Company undertakes no obligation
to publicly update or revise any forward looking statements, whether as a result
of new information, future developments, or otherwise.
13
PART II, ITEM 6. EXHIBIT AND REPORTS ON FORM 8-K
a. A list of the exhibits filed with this report is included in
the Index to Exhibits filed herewith.
b.
1. The Company filed a current report on Form 8-K dated
August 7, 2001 with respect to the press release
announcing its second quarter 2001 operating results.
2. The Company filed a current report on Form 8-K dated
August 7, 2001 with respect to The Liberty Corp.
declaring a regular quarterly dividend of 22 cents
per share on its common stock, payable on October 2,
2001 to shareholders of record on September 14, 2001.
INDEX TO EXHIBITS
EXHIBIT 11 Consolidated Earnings Per Share Computation (included in
Note 7 of Notes to Consolidated and Condensed Financial
Statements)
14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
THE LIBERTY CORPORATION
--------------------------------------------- Date: November 14, 2001
(Registrant)
/s/ Howard L. Schrott
---------------------------------------------
Howard L. Schrott
Chief Financial Officer
/s/ Martha G. Williams
---------------------------------------------
Martha G. Williams
Vice President, General Counsel and Secretary
15