10-Q 1 0001.txt FORM 10-Q 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, 2000 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: 333-80523 SUSQUEHANNA MEDIA CO. (Exact name of registrant as specified in its charter) DELAWARE 23-2722964 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 140 East Market Street York, Pennsylvania 17401 (717) 848-5500 (Address, including zip code and telephone number, including area code, of registrant's principal executive offices) (Not Applicable) (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 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 ---------- --------- As of August 10, 2000, there were 1,100,000 total shares of common stock, $1.00 par value outstanding. SUSQUEHANNA MEDIA CO. FORM 10-Q TABLE OF CONTENTS PART I - FINANCIAL INFORMATION...............................................1 ITEM 1. FINANCIAL STATEMENTS................................................1 CONDENSED CONSOLIDATED BALANCE SHEETS.....................................1 CONDENSED CONSOLIDATED INCOME STATEMENTS..................................2 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS...........................3 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS......................4 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................................7 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK........11 PART II - OTHER INFORMATION...................................................12 ITEM 1. LEGAL PROCEEDINGS..................................................12 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K...................................12 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except share data)
June 30, December 31, 2000 1999 ---- ---- (unaudited) ASSETS Current Assets Cash and cash equivalents $ 1,182 $ 639 Accounts receivable, net 46,049 43,017 Other current assets 5,249 4,400 Interest receivable from Parent 3,349 - -------- -------- Total Current Assets 55,829 48,056 Property, Plant and Equipment, net 130,657 124,088 Intangible Assets, net 211,979 215,125 Note Receivable from Parent 111,329 111,329 Investments and Other Assets 30,105 27,544 -------- -------- $ 539,899 $ 526,142 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $ 17,058 $ 15,350 Current portion of long-term debt 63 59 Accrued interest 3,564 3,108 Accrued income taxes 2,794 227 Deferred income taxes 386 815 Accrued ESOP benefits costs 3,839 1,370 Other accrued expenses 13,707 11,919 -------- -------- Total Current Liabilities 41,411 32,848 -------- -------- Long-term Debt 394,329 405,562 -------- -------- Other Liabilities 745 832 -------- -------- Deferred Income Taxes 38,185 37,166 -------- -------- Minority Interests 22,910 18,453 -------- -------- Stockholders' Equity Preferred stock - voting, 7% cumulative with par value of $100, authorized 110,000 shares, 70,499.21 issued and outstanding 7,050 7,050 Common stock - voting, $1 par value, authorized 1,100,000 shares, 1,100,000 shares issued and outstanding 1,100 1,100 Retained earnings 34,169 23,131 -------- -------- Total Stockholders' Equity 42,319 31,281 -------- -------- $ 539,899 $ 526,142 ======= =======
The accompanying notes are an integral part of these condensed consolidated financial statements. 1 SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES CONDENSED CONSOLIDATED INCOME STATEMENTS (Dollars in thousands, except per share data) (unaudited)
For the Three Months For the Six Months Ended June 30, Ended June 30, 2000 1999 2000 1999 ---- ---- ---- ---- Revenues Radio $ 60,732 $ 47,839 $ 102,414 $ 82,230 Cable 23,107 20,332 45,252 39,520 Other 1,457 767 2,727 1,400 ------- -------- --------- --------- Total revenues 85,296 68,938 150,393 123,150 ------- -------- --------- --------- Operating Expenses Operating and programming 29,259 24,659 52,997 44,836 Selling 9,624 7,959 17,668 14,501 General and administrative 13,989 11,904 26,448 22,890 Depreciation and amortization 7,720 7,091 14,959 13,763 ------- -------- --------- --------- Total operating expenses 60,592 51,613 112,072 95,990 ------- -------- --------- --------- Operating Income 24,704 17,325 38,321 27,160 Other Income (Expense) Interest expense (8,103) (7,054) (16,160) (12,006) Interest income from loan to Parent 1,666 941 3,330 941 Replacement of cable distribution system (1,261) - (1,261) - Pension curtailment gain - 2,299 - 2,299 Other (1) (48) (3) (76) ------- -------- --------- --------- Income Before Income Taxes, Extraordinary Loss and Minority Interests 17,005 13,463 24,227 18,318 Income Taxes 6,990 5,540 9,876 7,616 ------- -------- --------- --------- Income Before Extraordinary Loss and Minority Interests 10,015 7,923 14,351 10,702 Extraordinary Loss (related to early retirement of debt, net of tax benefit) - (3,316) - (3,316) ------- -------- --------- --------- Income Before Minority Interest 10,015 4,607 14,351 7,386 Minority Interests (1,679) (690) (2,578) (1,362) -------- -------- ---------- --------- Net Income and Comprehensive Income 8,336 3,917 11,773 6,024 Preferred Dividends Declared (124) (124) (247) (247) ------- -------- --------- --------- Net Income Available for Common Shares $ 8,212 $ 3,793 $ 11,526 $ 5,777 ======= ======== ========= ========= Basic Net Income Per Common Share Income Before Extraordinary Loss $ 7.47 $ 6.46 $ 10.48 $ 8.26 Extraordinary Loss - (3.01) - (3.01) ------- -------- --------- --------- $ 7.47 $ 3.45 $ 10.48 $ 5.25 ======= ======== ========= ========= Diluted Net Income Per Common Share Income Before Extraordinary Loss $ 7.47 $ 6.00 $ 10.48 $ 7.66 Extraordinary Loss - (2.96) - (2.96) ------- ------- --------- --------- $ 7.47 $ 3.04 $ 10.48 $ 4.70 ======= ======== ========= =========
The accompanying notes are an integral part of these condensed consolidated financial statements. 2 SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (unaudited)
Six Months Ended June 30, -------------------------- 2000 1999 ---- ---- Cash Flows from Operating Activities Income before minority interests $ 14,351 $ 7,386 Adjustments to reconcile net income to net cash: Depreciation and amortization 14,959 13,763 Deferred income taxes 590 1,978 Equity in earnings of investees (479) (54) Loss on replacement of cable distribution system 1,261 - Deferred financing amortization 515 381 Imputed deferred compensation - 53 Deferred financing expense write-off - 2,556 Curtailment gain - (2,299) Changes in assets and liabilities: Increase in accounts receivable, net (3,032) (6,501) Increase in other current assets (869) (742) Increase in interest receivable from parent (3,329) (941) Increase in accounts payable 1,708 774 Increase in accrued interest 456 1,791 Increase in accrued income taxes 2,567 684 Increase in accrued ESOP benefits cost 2,469 2,353 Increase in other accrued expenses 2,177 2,039 Increase in other liabilities 355 - --------- --------- Net cash provided by operating activities 33,699 23,221 --------- --------- Cash Flows from Investing Activities Purchase of property, plant and equipment, net (17,121) (12,788) Purchase of other assets (1,251) - Increase in investments, other assets and intangible assets (2,596) (219) Purchase of cable assets (1,300) (32,400) Loan to Susquehanna Pfaltzgraff Co. - (116,850) Partnership capital contribution - (1,400) ---------- ---------- Net cash used by investing activities (22,268) (163,657) ---------- ---------- Cash Flows from Financing Activities Increase (decrease) in revolving credit borrowing (11,200) 70,300 Payments of preferred dividends (247) (247) Non-voting subsidiary common stock transactions 559 14 Proceeds from long-term debt - 350,000 Repayment of refinanced debt - (272,600) Payment of deferred financing costs - (7,560) ---------- ---------- Net cash provided by (used in) financing activities (10,888) 139,907 ---------- ---------- Net Increase (Decrease) in Cash and Cash Equivalents 543 (529) Cash and Cash Equivalents, beginning 639 1,942 ---------- ---------- Cash and Cash Equivalents, ending $ 1,182 $ 1,413 ========== ==========
The accompanying notes are an integral part of these condensed consolidated financial statements. 3 SUSQUEHANNA MEDIA CO. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation Pursuant to the rules and regulations of the Securities and Exchange Commission, the condensed consolidated interim financial statements included herein have been prepared, without audit, by Susquehanna Media Co. (the "Company"). The financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to the Form 10-Q and Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted; however, the Company believes that the disclosures are adequate to make the information presented not misleading. The consolidated financial statements included herein should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's December 31, 1999 Annual Report on Form 10-K filed with the Securities and Exchange Commission. The condensed consolidated financial statements (the "financial statements") include the accounts of Susquehanna Media Co. and all its subsidiaries. All significant intercompany accounts and transactions have been eliminated. In the opinion of management, the accompanying condensed consolidated interim financial statements contain all material adjustments (consisting only of normal recurring adjustments), necessary to present fairly the consolidated financial position of the Company at June 30, 2000 and the results of its operations for the three and six months ended June 30, 2000 and 1999 and its cash flows for the six months ended June 30, 2000 and 1999. Interim results are not necessarily indicative of results for the full year or future periods. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. Recent Developments On July 20, 2000, pursuant to an Asset Purchase Agreement among Susquehanna Radio Corp., a majority owned subsidiary of the registrant, as Purchaser and Entercom Communications Corp., Entercom Kansas City, LLC and Entercom Kansas City License, LLC as Sellers, the registrant acquired, in consideration of the payment of $113.2 million, the assets of Kansas City radio stations KCMO-AM, KCMO-FM and KCFX-FM. Radio broadcast rights for the Kansas City Chiefs NFL franchise through the 2002 football season were included in the purchase. The registrant's existing credit facilities were used to finance the acquisition. On April 28, 2000, the Federal Communications Commission (FCC) issued a Report and Order which approved the Company's Petition for Rule Making to create a new FM signal, in College Park, GA which would permit WHMA-FM to relocate and serve the Atlanta Metro Area. The Company submitted an application for a construction permit on July 14, 2000. As described in the 4 original purchase agreement, the Company must pay WHMA-FM's former owners $10 million within six months after the construction permit becomes a final order or on the FCC's granting of program test authority, whichever first occurs. The Company expects to use its existing senior credit facility to fund this payment. On June 16, 2000, a Petition for Reconsideration was filed with the FCC by another applicant. The outcome of, or delay or impact resulting from, such Petition for Reconsideration cannot be determined at this time. On April 10, 2000, Susquehanna Pfaltzgraff Co.'s (the Company's parent) Board of Directors changed the method of determining the repurchase value for Susquehanna Radio Co.'s Employee Stock Plan and Susquehanna Cable Co.'s (SCC's) Performance Share Plan. Over a period beginning July 1, 2000 through April 1, 2002, repurchase values for both plans will transition to values based upon Susquehanna Pfaltzgraff Co.'s annual independent ESOP valuation. SCC's Performance Share Plan is a non-qualified deferred compensation plan. Based on values used in the December 31, 1999 ESOP valuation, compensation expense of $3.0 million will be recognized in July 2000 for the increase in performance share value. 3. Segment Information The Company's business units have separate management teams and infrastructures that offer different products and services. The business units have been aggregated into three reportable segments; Radio, Cable and Other. These business segments are consistent with the Company's management of these businesses and its financial reporting structure. Accounting policies, as described in the Company's most recent audited financial statements, are applied consistently across all segments. Segment information (in thousands of dollars) follows:
Radio Cable Other Consolidated ----- ----- ----- ------------- For the Three Months Ended June 30, 2000 Operating income $ 20,927 $ 3,046 $ 731 $ 24,704 Interest expense, net 1,091 3,507 3,505 8,103 Depreciation and amortization 2,013 5,554 153 7,720 Income (loss) before income taxes 19,834 (1,720) (1,109) 17,005 Provision (benefit) for income taxes 7,817 (595) (232) 6,990 Identifiable assets 226,465 181,719 131,715 539,899 Capital expenditures 1,074 7,984 58 9,116 For the Three Months Ended June 30, 1999 Operating income 13,567 3,681 77 17,325 Interest expense, net 1,570 3,186 2,298 7,054 Depreciation and amortization 2,035 4,887 169 7,091 Income (loss) before income taxes 13,767 920 (1,224) 13,463 Provision (benefit) for income taxes 5,520 430 (410) 5,540 Identifiable assets 217,697 171,944 129,913 519,554 Capital expenditures 404 4,854 937 6,195
5
For the Six Months Ended June 30, 2000 Operating income $ 31,052 $ 6,066 $ 1,203 $ 38,321 Interest expense, net 2,330 6,753 7,077 16,160 Depreciation and amortization 3,883 10,817 259 14,959 Income (loss) before income taxes 28,719 (1,947) (2,545) 24,227 Provision (benefit) for income taxes 11,287 (670) (741) 9,876 Identifiable assets 226,465 181,719 131,715 539,899 Capital expenditures 1,700 15,217 203 17,120 For the Six Months Ended June 30, 1999 Operating income 19,709 7,164 287 27,160 Interest expense, net 3,342 5,572 3,092 12,006 Depreciation and amortization 4,044 9,376 343 13,763 Income (loss) before income taxes 18,107 2,017 (1,806) 18,318 Provision (benefit) for income taxes 7,254 1,352 (990) 7,616 Identifiable assets 217,697 171,944 129,913 519,554 Capital expenditures 1,377 10,177 1,234 12,788
4. Contingencies and Commitments An unrelated cable television Multiple System Operator (MSO) purchased a 14.9% interest in Susquehanna Cable Co. and a 17.75% interest in each of Susquehanna Cable Co.'s cable television operating subsidiaries in 1993. On January 18, 2000, the MSO was acquired by an unrelated company. Cable programming formerly acquired through the MSO will cost approximately $1.9 million more in 2000 due to the ownership change. The MSO may offer to purchase the Company's interest in its cable television operations. The Company must either accept or reject an offer within sixty days. If the Company rejects the offer, the MSO may require the Company to repurchase the MSO's holdings at the offer price plus a fee equal to 3% of the MSO's $25,000,000 investment, compounded annually from 1993. If the MSO does not offer to purchase the Company's cable television operations by December 1, 2000, the Company may elect to pay the MSO a fee equal to 1.5% of the MSO's $25,000,000 investment compounded annually from 1993 and avoid any further fee obligation. No liability has been recorded due to the uncertainty of future events. On April 22, 1999, the MSO was granted a three year "Put Right." After an eighteen-month holding period beginning May 12, 1999, the MSO may require the Company to repurchase its ownership interest at a price to be determined by independent appraisers. The "Put Right" may not be exercised if exercise would create default under certain debt agreements. If the "Put Right" is exercised, the Company may, at its sole discretion and in lieu of acquiring the MSO's ownership interests, sell Cable and pay the MSO its pro rata share of net proceeds. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cautionary Note Regarding Forward-Looking Statements Some of the statements in this Form 10-Q, as well as statements made by the Company in filings with government regulatory bodies, including the Securities and Exchange Commission, and in periodic press releases and other public comments and communications, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Certain, but not necessarily all, of such forward-looking statements can be identified by the use of forward-looking terminology, such as "believes," "expects," "may," "will," "should," "approximately," or "anticipates" or the negative thereof or other variations thereof or comparable terminology, or by discussion of strategies, each of which involves risks and uncertainties. All statements other than of historical facts included herein or therein, including those regarding market trends, the Company's financial position, business strategy, projected plans and objectives of management for future operations, are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results or performance of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, but are not limited to, general economic and business conditions (both nationally and in the Company's markets), acquisition opportunities, expectations and estimates concerning future financial performance, financing plans and access to adequate capital on favorable terms, the Company's ability to service its outstanding indebtedness, the impact of competition, existing and future regulations affecting the Company's business, nonrenewal of cable franchises, advances in technology and the ability of the Company to adapt to such advances, decreases in the Company's customers advertising and entertainment expenditures and other factors over which the Company may have little or no control. 7 Results of Operations The following table summarizes the Company's consolidated historical results of operations and consolidated historical results of operations as a percentage of revenues for the three and six months ended June 30, 2000 and 1999.
Three months ended June 30, Six months ended June 30, 2000 1999 2000 1999 ---- ---- ---- ---- Revenues Radio $ 60.7 71.2% $ 47.8 69.4% $ 102.4 68.1% $ 82.2 66.8% Cable 23.2 27.2% 20.3 29.5% 45.3 30.1% 39.5 32.1% Other 1.4 1.6% 0.8 1.1% 2.7 1.8% 1.4 1.1% ------ ------ ------ ------ ------ ------ ------ ------ Total revenues 85.3 100.0% 68.9 100.0% 150.4 100.0% 123.1 100.0% ------ ------ ------ ------ ------ ------ ------ ------ Operating expenses Operating and programming 29.2 34.2% 24.6 35.7% 53.0 35.2% 44.8 36.4% Selling, general and administrative 23.6 27.7% 19.9 28.9% 44.1 29.3% 37.4 30.4% Depreciation and amortization 7.8 9.1% 7.1 10.3% 15.0 10.0% 13.8 11.2% ------ ------ ------ ------ ------ ------ ------ ------ Total operating expenses 60.6 71.0% 51.6 74.9% 112.1 74.5% 96.0 78.0% ------ ------ ------ ------ ------ ------ ------ ------ Operating income $ 24.7 29.0% $ 17.3 25.1% $ 38.3 25.5% $ 27.1 22.0% ====== ====== ====== ====== ====== ====== ====== ===== Net income $ 8.3 9.7% $ 3.9 5.7% $ 11.8 7.8% $ 6.0 4.9% ====== ====== ====== ====== ====== ====== ====== ===== Adjusted EBITDA $ 34.4 40.3% $ 25.7 37.3% $ 57.1 38.0% $ 43.3 35.2% ====== ====== ====== ====== ====== ====== ====== =====
Three Months Ended June 30, 2000 Compared to the Three Months Ended June 30, 1999 Revenues. Revenues increased $16.4 million or 24% from 1999 to 2000. Radio revenues increased $12.9 million or 27% from 1999 to 2000. Radio's revenue growth was primarily due to higher advertising rates. Cable revenues increased $2.8 million or 14% from 1999 to 2000. Cable's revenue growth was due to basic service rate increases. Operating income. Operating income increased $7.4 million or 43% from 1999 to 2000. Radio operating income for the second quarter was $20.9 million, a $7.3 million or 54% increase over second quarter 1999. Improved Radio operating income was driven by increased revenues. Cable operating income for the second quarter was $3.0 million, a $0.7 million decrease from the second quarter 1999. Increased programming costs and depreciation from completed cable system rebuilds and new equipment more than offset revenue gains. Net income. Net income for second quarter 1999 included a $3.3 million extraordinary loss and a $2.3 million pretax curtailment gain. Net income, excluding these items, increased approximately $2.5 million or 42% from 1999 to 2000, despite a $1.3 million loss on replacement of cable distribution system. Improved results were achieved from operating income gains. Depreciation and amortization. Depreciation and amortization increased $0.6 million or 9% from 1999 to 2000. Completed phases of cable system rebuilds and new equipment were responsible for the increase. 8 Adjusted EBITDA. Adjusted EBITDA is defined as net income before income taxes, extraordinary items, interest expense, interest income, depreciation and amortization, employee stock ownership plan expense, minority interest and any gain or loss on the disposition of assets. Adjusted EBITDA increased $8.7 million or 34% from 1999 to 2000. Radio's Adjusted EBITDA was $24.6 million, a $8.0 million or 48% improvement over second quarter 1999. The increase in Radio's Adjusted EBITDA was the result of higher advertising rates, which were not accompanied by relatively higher expenses. Cable's Adjusted EBITDA was $9.0 million, an increase of $0.2 million or 2% over 1999. Basic service rate increases drove Cable's improved Adjusted EBITDA. The Company believes that Adjusted EBITDA provides a meaningful comparison of operating performance because it is commonly used in the radio and cable television industries to analyze and compare radio and cable television companies on the basis of operating performance, leverage and liquidity. Although the Company believes the calculation is helpful in understanding its performance, Adjusted EBITDA should not be considered a substitute for net income or cash flow as indicators of the Company's financial performance or its ability to generate liquidity. Adjusted EBITDA as presented may not be comparable to other similarly titled measures used by other companies. Interest expense. Interest expense increased $1.0 million or 15% from 1999 to 2000, due to increased interest rates. The average interest rate on the Company's credit facility was 7.9% for the three month period ended June 30, 2000. Six Months Ended June 30, 2000 Compared to the Six Months Ended June 30, 1999 Revenues. Revenues increased $27.3 million or 22% from 1999 to 2000. Radio revenues increased $20.2 million or 25% from 1999 to 2000. Similar to the second quarter, Radio's revenue growth was primarily due to higher advertising rates. Cable revenues increased $5.8 million or 15% from 1999 to 2000. Basic service rate increases provided the Cable revenue growth for the first half. Operating income. Operating income increased $11.2 million or 41% from 1999 to 2000. Radio operating income for the six months was $31.1 million, a $11.4 million or 58% increase over same period 1999. Improved Radio operating income was driven by higher revenues. Cable operating income for the six months was $6.1 million, a $1.1 million or 15% decrease from the same period 1999. Higher depreciation, related to completed rebuild phases and equipment placed in service for new product launches and higher programming costs, caused the decrease. Net income. Net income for the six months 1999 included a $3.3 million extraordinary loss and a $2.3 million pretax curtailment gain. Net income, excluding these items, increased approximately $3.8 million or 48% from 1999 to 2000, despite a $1.3 million loss on replacement of cable distribution system. Improved results were achieved from operating income gains. Depreciation and amortization. Depreciation and amortization increased $1.2 million or 9% from 1999 to 2000. The increase was caused by completed cable plant rebuild phases and new equipment. Adjusted EBITDA. Adjusted EBITDA is defined as net income before income taxes, extraordinary items, interest expense, interest income, depreciation and amortization, employee stock ownership plan expense, minority interest and any gain or loss on the disposition of assets. Adjusted EBITDA increased $13.8 million or 32% from 1999 to 2000. Radio's Adjusted EBITDA was $38.0 million, a $12.3 million or 48% improvement over 1999. The increase in Radio's Adjusted EBITDA was the result of higher advertising rates, which were not accompanied by relatively higher expenses. Cable's Adjusted EBITDA 9 was $17.7 million, an increase of $0.7 million or 4% over 1999. Basic service rate increases drove Cable's improved Adjusted EBITDA. The Company believes that Adjusted EBITDA provides a meaningful comparison of operating performance because it is commonly used in the radio and cable television industries to analyze and compare radio and cable television companies on the basis of operating performance, leverage and liquidity. Although the Company believes the calculation is helpful in understanding its performance, Adjusted EBITDA should not be considered a substitute for net income or cash flow as indicators of the Company's financial performance or its ability to generate liquidity. Adjusted EBITDA as presented may not be comparable to other similarly titled measures used by other companies. Interest expense. Interest expense increased $4.2 million or 35% from 1999 to 2000. In May 1999, the Company borrowed $116.9 million under its existing credit facilities and loaned the proceeds to its Parent. The six months ended June 30, 2000 includes interest on this borrowing over the entire period. The average interest rate on the Company's senior credit facility was 8.1% for the six month period ended June 30, 2000. Liquidity and Capital Resources The Company's primary sources of liquidity are cash flow from operations and borrowings under its senior credit facilities. The Company's future needs for liquidity arise primarily from capital expenditures, potential acquisitions of radio stations and cable systems, potential repurchases of its common stock, and interest payable on outstanding indebtedness and its senior credit facilities. Net cash provided by operating activities was $33.7 million for the six months ended June 30, 2000. The Company's net cash provided by operating activities was generated by normal operations. Net cash used by investing activities was $22.3 million for the six months ended June 30, 2000. Capital expenditures, excluding acquisitions, were $17.1 million and $12.8 million for the six months ended June 30, 2000 and 1999, respectively. Capital expenditures were made to upgrade and maintain cable systems and to purchase equipment necessary to launch new Cable product lines. The Company expects to make capital expenditures of $35.0 million in 2000, of which $17.1 million has been spent through June 30, 2000, primarily for cable systems upgrades. We expect to use existing credit facilities to fund the cable systems upgrades. Net cash used by financing activities was $10.9 million for the six months ended June 30, 2000, including a reduction in the revolving credit facility of $11.2 million. At June 30, 2000, the Company had $199.3 million borrowing availability under its new senior credit facility, of which approximately $113.2 million was used on July 20, 2000 to purchase the Kansas City radio stations as discussed in Note 2 to the Condensed Consolidated Financial Statements. The Company believes that funds generated from operations and the borrowing availability under its new senior credit facility will be sufficient to finance its current operations, its debt service obligations, and its planned capital expenditures. From time to time, the Company evaluates potential acquisitions of radio stations and cable television systems. In connection with future acquisition opportunities, the Company may incur additional debt or issue additional equity or debt securities depending on market conditions and other factors. Except as noted in this Form 10-Q, the Company has no current commitments or agreements with respect to any material acquisitions. 10 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We monitor and evaluate changes in market conditions on a regular basis. Based upon the most recent review, management has determined that there have been no material developments affecting market risk since the filing of the Company's December 31, 1999 Annual Report on Form 10-K filed with the Securities and Exchange Commission. 11 PART II - OTHER INFORMATION Item 1. LEGAL PROCEEDINGS The Company is a party to various legal proceedings arising in the ordinary course of business. In the opinion of management of the Company, however, there are no legal proceedings pending against the Company likely to have a material adverse effect on the Company. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) See Exhibit Index (b) The Company did not file any reports on Form 8-K during the quarter ended June 30, 2000. However, the Company filed a Form 8-K on August 2, 2000 concerning the acquisition of three Kansas City radio stations. 12 SIGNATURE --------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized. August 10, 2000 SUSQUEHANNA MEDIA CO. By: /s/ John L. Finlayson ----------------------------------- John L. Finlayson Vice President and Principal Financial and Accounting Officer 13 EXHIBIT INDEX Exhibit Number Description 27 Financial Data Schedule (for SEC use only) 14