The Liberty Corporation
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K/A
(Amendment No. 2)
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the fiscal year ended December 31, 2003
or
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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
THE LIBERTY CORPORATION
(Exact name of Registrant as specified in its charter)
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South Carolina
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57-0507055 |
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.) |
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Post Office Box 502, 135 South Main Street, Greenville, S. C. 29602 |
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(Address of principal executive offices) (Zip Code) |
Registrants
telephone number, including area code (864) 241-5400
Securities registered pursuant to Section 12(b) of the Act:
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Name of Each Exchange on |
Title of Each Class
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Which Registered |
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Common Stock, no par value per share
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New York Stock Exchange |
Rights to Purchase Series A Participating Cumulative Preferred Stock
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New York Stock Exchange |
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 the filing requirements for the past 90 days. Yes þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein and will not be contained, to the best of Registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Act). Yes þ No o
The aggregate market value of the voting stock held by non-affiliates of the Registrant as of February 13, 2004:
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Common Stock, No Par Value
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$933,941,333 |
The number of shares outstanding of each of Registrants classes of common stock as of February 13, 2004:
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Common Stock, No Par Value
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18,905,695 |
DOCUMENTS INCORPORATED BY REFERENCE
Portions of The Liberty Corporation Proxy Statement for the Annual Meeting of Shareholders on
May 4, 2004 are incorporated into Part III, Items 10, 11, 12, and 13 by reference.
This report is comprised of pages 1 through 43. The exhibit index is on page 38.
Explanatory Note:
The purpose of this Amendment No. 2 to The Liberty Corporations Annual Report on Form 10-K for
the fiscal year ended December 31, 2003, initially filed with the Securities and Exchange
Commission on March 3, 2004, is to revise the disclosure set forth in Item 9A, Controls and
Procedures, and to file amended certifications of The Liberty Corporations Chief Executive Officer
and Chief Financial Officer included as Exhibits 31.1 and 31.2. These certifications replace the
original certifications entirely and solely relate to the fiscal year ended December 31, 2003. All
other provisions of the annual Report on Form 10-K, including the financial statements and
financial data set forth herein, have not been modified or updated and are as originally filed.
Part I
Item 1. Business
General
The Registrant, The Liberty Corporation (Liberty or the Company) is a holding company with
operations primarily in the television broadcasting industry. The Companys television broadcasting
subsidiary, Cosmos Broadcasting, consists of fifteen network-affiliated television stations (the
stations) principally located in the South and Midwest, a cable advertising company, and a
professional broadcast equipment dealership. Eight of the Companys television stations are
affiliated with NBC, five with ABC, and two with CBS. The Companys principal executive offices are
in Greenville, South Carolina.
Additional information concerning Libertys subsidiaries and divisions is included in
Managements Discussion and Analysis included in Item 7 of this report and incorporated herein by
reference.
Television Broadcasting and Related Operations
The following table shows data on the stations owned by the Company as of December 31, 2003:
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Percentage |
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Network |
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of U.S. |
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Market |
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Contract |
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Station |
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television |
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Rank |
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Network |
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Expiration |
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Rank |
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households |
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Date |
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Date |
Market |
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Station |
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(1) |
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Channel |
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Affiliation |
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(2) |
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(3) |
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(4) |
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Formed |
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Acquired |
Louisville, KY |
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WAVE-TV |
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50 |
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3 |
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NBC |
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2011 |
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3 |
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0.57 |
% |
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1948 |
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1981 |
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Toledo, OH |
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WTOL-TV |
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69 |
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11 |
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CBS |
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2014 |
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1 |
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0.40 |
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1958 |
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1965 |
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Columbia, SC |
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WIS-TV |
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84 |
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10 |
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NBC |
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2011 |
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1 |
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0.33 |
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1953 |
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1953 |
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Jackson, MS |
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WLBT-TV |
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90 |
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3 |
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NBC |
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2011 |
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1 |
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0.30 |
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1953 |
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2000 |
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Harlingen, TX |
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KGBT-TV |
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97 |
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4 |
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CBS |
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2014 |
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3 |
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0.27 |
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1955 |
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1998 |
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Evansville, IN |
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WFIE-TV |
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99 |
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14 |
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NBC |
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2011 |
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1 |
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0.26 |
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1953 |
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1981 |
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Tyler, TX |
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KLTV-TV |
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107 |
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7 |
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ABC |
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2002 |
* |
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1 |
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0.24 |
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1954 |
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2000 |
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Lufkin, TX
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KTRE-TV |
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107 |
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9 |
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ABC |
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2002 |
* |
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1 |
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0.24 |
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1955 |
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2000 |
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(satellite of KLTV) |
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Montgomery, AL |
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WSFA-TV |
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115 |
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12 |
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NBC |
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2011 |
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1 |
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0.23 |
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1959 |
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1959 |
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Wilmington, NC |
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WWAY-TV |
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142 |
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3 |
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ABC |
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2005 |
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2 |
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0.14 |
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1964 |
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1998 |
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Albany, GA |
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WALB-TV |
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145 |
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10 |
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NBC |
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2011 |
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1 |
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0.14 |
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1954 |
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1998 |
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Lubbock, TX |
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KCBD-TV |
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147 |
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11 |
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NBC |
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2011 |
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1 |
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0.14 |
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1953 |
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2000 |
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Biloxi, MS |
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WLOX-TV |
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156 |
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13 |
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ABC |
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2004 |
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1 |
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0.12 |
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1962 |
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1995 |
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Lake Charles, LA |
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KPLC-TV |
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175 |
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7 |
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NBC |
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2011 |
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1 |
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0.09 |
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1954 |
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1986 |
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Jonesboro, AR |
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KAIT-TV |
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179 |
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8 |
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ABC |
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2004 |
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1 |
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0.08 |
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1963 |
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1986 |
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KLTV-TV and KTRE-TV have been operating under short term renewals of their existing ABC
affiliation contracts since their original expiration date in 2002. It is anticipated that new
affiliation contract negotiations will be completed and the Company will enter into long term
contracts for these stations sometime during 2004. |
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Market rank is based on the relative size of the designated market areas among the 212
generally recognized designated market areas in the U.S. |
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Contracts may be subject to renewal provisions that effectively extend the expiration date. |
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Station rank in its market area based on Nielsen Media Research average 3 book estimates
(February, May, and November) 2003 ratings (Sun. Sat.; 6:00A-2:00A). |
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Based on Nielsen Media Research estimates. |
2
The Company currently owns and operates fifteen network-affiliated television stations in the
South and Midwest, thirteen of which were ranked No. 1 or No. 2 in their markets based on Nielsen
Media Research average 3 book estimates (February, May, and November) 2003 ratings (Sun. Sat.;
6:00A-2:00A). Eight of its stations are affiliated with NBC, five with ABC, and two with CBS. The
fifteen stations cover approximately 3.56% of U.S. households.
The fifteen stations operate in designated market areas ranked 50 to 179. All of the
Companys stations are located in geographically diverse and growing markets. Eleven of the
fifteen stations are located in university centers. Many of the stations are also located in
markets that are home to a mixture of large manufacturing plants, state capitals, transportation
hubs, and United States military bases. None of the TV markets represented more than 11% of the
revenues or 16% of operating income for the fiscal year ending December 31, 2003.
Since the sale of its insurance operations in 2000, the Company has embarked on a program to
leverage its scale as a group broadcaster through the centralization of certain sales, business
office and other operational functions. It has installed new technology for accounting, traffic
and billing, and sales management, and created new centralized positions in accounting, sales, and
engineering, which allow it to perform certain functions on an aggregated basis. In addition to
the operational efficiencies gained, the Company uses its leverage as an owner of fifteen
television stations to negotiate contracts for certain of the products and services used by its
stations on a group basis, rather than on an individual station-by-station basis. The Company
believes that it is able to negotiate more favorable terms for the group as a whole for these
products and services than it would on an individual station-by-station basis. The Company
continues to examine other methods of realizing the benefits of the station group as a whole, and
will continue to further refine its operational structure and procedures as additional
opportunities are identified.
The Company also operates a cable advertising company, CableVantage, Inc. (Cable Vantage),
through which it represents eleven independent cable operators in 20 locations that, in
combination, reach nearly one half million subscribers.
Network Affiliations
Each of the stations is affiliated with a major network. The NBC affiliation contracts with
each of the NBC affiliated stations have been continuously in effect for over forty years. The CBS
and ABC affiliation contracts have each been continuously in effect for over thirty years.
The affiliation contracts provide that the network will offer to the affiliated station a
variety of network programs, for which the station has the right of first refusal against any other
television station located in its community. The network typically retains the rights to sell a
substantial majority of the advertising time during such broadcasts. The major networks typically
provide programming for approximately 90 hours of the average 135 hours per week broadcast by their
affiliated stations.
Historically, the networks have paid local stations, in accordance with the terms of their
network affiliation contracts, for airing network programming. This is called network compensation.
During 2001, the Company completed negotiations with NBC regarding its network affiliation
contracts, and entered into a ten year agreement that calls for compensation payments from NBC for
the first five years and is compensation neutral thereafter. The Company renegotiated its CBS
network affiliation contracts during 2003, and entered into a compensation neutral eleven year
agreement. While the Company is currently operating under the terms of its existing ABC network
affiliation contacts, it is anticipated that new affiliation contract negotiations will be
completed during 2004. At this time, it is not known what the exact outcome of these negotiations
will be; however, the Company does anticipate continuing its relationship with the network.
Each network has the right to terminate its affiliation contract in the event of a material
breach of such agreement by a station and in certain other circumstances.
3
Sources of Television Operating Revenues
The following table shows the approximate percentage of the Companys gross television station
revenues by source for the three years ended December 31, 2003:
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2003 |
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2002 |
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2001 |
Local and regional advertising |
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59 |
% |
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55 |
% |
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61 |
% |
National spot advertising |
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31 |
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29 |
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32 |
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Network compensation |
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2 |
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2 |
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4 |
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Political advertising |
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5 |
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12 |
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1 |
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Other |
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3 |
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2 |
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2 |
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Local and regional advertising is sold by each stations own sales representatives to local
and other non-national advertisers or agencies. Generally, these contracts are short-term,
although occasionally, longer-term packages will be sold. National spot advertising (generally a
series of spot announcements between programs or within the stations own programs) is sold by the
station or its sales representatives directly to agencies representing national advertisers. Most
of these national sales contracts are also short-term, often covering spot campaigns running for
thirteen weeks or less. Network compensation is the amount paid by the network to its affiliated
stations for broadcasting network programs. Political advertising is generated by national and
local elections, which can vary greatly from both market to market and year to year.
A television stations rates are primarily determined by the estimated number of television
homes it can provide for an advertisers message. The estimates of the total number of television
homes in a market and of the stations share of those homes are based on the Nielsen Media Research
industry-wide television rating service. The demographic make-up of the viewing audience is
equally important to advertisers. A stations rate card for national and local advertisers takes
into account, in addition to audience delivered, such variables as the length of the commercial
announcements and the quantity purchased. Because television stations rely on advertising
revenues, they are sensitive to cyclical changes in the national and local economy. The size of
advertisers budgets, which are affected by broad economic trends, affect the broadcast industry in
general. The strength of the local economy in each stations market also significantly impacts
revenues. The advertising revenues of the stations are generally highest in the second and fourth
quarters of each year, due in part to increases in consumer advertising in the spring and retail
advertising in the period leading up to and including the holiday season. Additionally,
advertising revenues in even-numbered years can benefit from demand for advertising time in Olympic
broadcasts and advertising placed by candidates for political offices. A stations local market
strength, especially in local news ratings, is the primary factor that buyers use when placing
political advertising. From time to time, proposals have been advanced in Congress to require
television broadcast stations to provide some advertising time to political candidates at no
charge, which would potentially reduce advertising revenues from political candidates.
The Company also has ancillary operations in cable advertising sales. Revenues from these
operations amount to $15.6 million, $16.2 million and $13.2 million for calendar years 2003, 2002,
and 2001, respectively. The cable advertising sales are generated by CableVantage, a marketing
company designed to assist local cable operators in the sale of commercial time available in cable
network programs. CableVantage was formed in 1994 to create business opportunities with cable
operators and build revenues from programs and services specifically produced for cable.
Competition
The television broadcasting industry competes with other leisure time activities for the time
of viewers and with all other advertising media for advertising dollars. Within its coverage area,
a television station competes with other stations and with other advertising media serving the same
area. The outcome of the competition among stations for advertising dollars in a market depends
principally on share of audience, advertising rates, and the effectiveness of the sales effort.
The stations compete for television viewers against other local network affiliated and
independent stations, as well as against cable and alternate methods of television transmission.
The primary basis of this competition is program popularity. A majority of daily programming is
supplied by the network with which each station is affiliated. In time periods in which the network
provides programming, stations are primarily dependent upon the performance of the network programs
in attracting viewers. Stations compete in non-network time periods based on the performance of
their programming during such time periods, using a combination of self-produced news, public
affairs, and other entertainment programming, including syndicated programs, which the
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stations
believe will be attractive to viewers. The Company believes that its stations have strong
competitive positions in their local markets, enabling them to deliver a high percentage of the
local television audience to advertisers. The Companys commitment to local news programming is an
important element in maintaining its current market positions.
The competition includes cable television, which brings additional television programming,
including pay cable (HBO, Showtime, Movie Channel, etc.), into subscribers homes in a television
stations service area. Other sources of competition include home entertainment systems (including
video cassette recorders and playback systems, videodiscs, and television game devices), the
Internet, multichannel multipoint distribution systems, wireless cable, satellite master antenna
television systems, and some low power in-home satellite services. Stations also face competition
from high-powered direct broadcast satellite services, such as Echostar and Direct-TV, which
transmit programming directly to homes equipped with special receiving antennas. Stations compete
with these services both on the basis of service and product performance (quality of reception and
number of channels that may be offered) and price (the relative cost to utilize these systems
compared to broadcast television viewing). The direct broadcast satellite companies have begun to
extend their services to those size markets in which Libertys stations operate. Liberty has
negotiated retransmission consents, including fee payments based on the number of subscribers, with
both Echostar and Direct-TV for a number of its markets. By the end of 2004, Liberty expects that
it will have five stations receiving compensation from the direct broadcast satellite companies in
exchange for the right to use their signals.
Further advances in technology and further consolidation in the broadcast industry may
increase competition for household audiences and advertisers. Video compression techniques, now in
use with direct broadcast satellites and in development for cable and wireless cable, are expected
to permit greater numbers of channels to be carried within existing bandwidth. These technological
developments, which are applicable to all video delivery systems including over-the-air
broadcasting, have the potential to allow additional programming to highly targeted audiences. The
ability to reach narrowly defined audiences may further fragment viewers and influence advertiser
spending. The television broadcasting industry is continually faced with such technological change
and innovation. The Company is unable to predict the effect that technological changes will have on
the broadcast television industry in general, or more specifically to its own operations.
Consolidation in the broadcast television industry introduces new, large competitors. Many of the
current and potential competitors have greater financial, marketing, programming, and broadcasting
resources than Liberty. The Company plans to meet the challenge of a consolidating industry by
continuing its growth strategy and pursuing new synergistic opportunities.
Mandated Conversion to Digital Technology
Unless exempted by a specific FCC extension, all station affiliates of ABC, CBS, NBC, FOX, and
other non-affiliated commercially licensed stations were required to transmit a digital signal on
their approved channels by May 1, 2002. Many television stations, including some of the Companys,
were granted two six-month extensions for tower construction delays or equipment unavailability.
These extensions granted a delay in the deadline to May 1, 2003. Eleven of Libertys 15 stations
were broadcasting their digital signals by May 1, 2003. Four others received extensions because of
FCC administrative delays in processing requests for channel changes. One of the four remaining
stations is expected to be broadcasting a digital signal by May 1, 2004. One other station is
expected to be broadcasting its digital signal by the end of 2004. The remaining two stations may
receive FCC approval of their channel change request during 2004, and begin broadcasting their
digital signal in early 2005. Liberty expects no FCC penalties as a result of these administrative
delays.
As the Company develops its digital technology, given its dominant presence in its markets,
the Company believes it will be attractively positioned as a potential partner for new digital or
data stream businesses that wish to develop in its markets. The Company has thus far invested $28
million in preparation for the transition to digital television, and estimates that an additional
$7 million may be required over the next 18 months for towers, antenna systems, transmitters,
transmitter buildings, and other related equipment. This investment will establish basic full
power digital television pass through at our fifteen stations, including simulcasting existing
analog programming.
Federal Regulation of Broadcasting
The following is a brief discussion of certain provisions of the Communications Act of 1934,
as amended (the Communications Act), and of FCC regulations and policies that affect the business
operations of the Company. Reference should be made to the Communications Act, FCC rules and the
public notices and rulings of the FCC, on which this discussion is based, for further information
concerning the nature and extent of FCC regulation of television broadcasting stations.
5
FCC Regulation. The ownership, operation, and sale of television stations are subject to the
jurisdiction of the FCC by authority granted it under the Communications Act. The FCC has the
power to impose penalties, including fines or license revocations, upon a licensee of a television
station for violations of the FCCs rules and regulations. Matters subject to FCC oversight
include, but are not limited to:
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the assignment of frequency bands of broadcast television; |
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the approval of a television stations frequency, location, and operating power; |
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the issuance, renewal, revocation or modification of a television stations FCC license; |
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the approval of changes in the ownership or control of a television stations license; |
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the regulation of equipment used by television stations; and |
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the adoption and implementation of regulations and policies concerning the ownership
and operation of television stations. |
License Renewals, Assignments and Transfers. Television broadcast licenses are granted for a
maximum term of eight years (five years prior to 1996) and are subject to renewal upon application
to the FCC. The FCC prohibits the assignment of a license or the transfer of control of a
broadcasting licensee without prior FCC approval. In determining whether to grant or renew a
broadcasting license, the FCC considers a number of factors pertaining to the applicant, including
compliance with a variety of ownership limitations and compliance with character and technical
standards. During certain limited periods when a renewal application is pending, petitions to deny
a license renewal may be filed by interested parties, including members of the public. Such
petitions may raise various issues before the FCC. The FCC is required to hold evidentiary,
trial-type hearings on renewal applications if a petition to deny renewal of such license raises a
substantial and material question of fact as to whether the grant of the renewal application
would be inconsistent with public interest, convenience and necessity. The FCC must grant the
renewal application if, after notice and opportunity for a hearing, it finds that the incumbent has
served the public interest and has not committed any serious violation of FCC requirements. If the
incumbent fails to meet that standard, and if it does not show other mitigating factors warranting
a lesser sanction, the FCC has authority to deny the renewal application and consider a competing
application. The Companys renewal applications have always been granted without hearing for the
full term.
Multiple and Cross-Ownership Rules. On a national level, the FCC rules generally prevent an
entity or individual from having an attributable interest in television stations with an aggregate
audience reach in excess of 39% of all U.S. households. On a local level, the duopoly rule
prohibits or restricts attributable interests in two or more television stations with overlapping
service areas and the one-to-a-market rule restricts such interests in television and radio
stations serving the same market.
In 2003, the FCC released its bi-annual review of media ownership rules. Under the new rules,
the duopoly, one-to-a-market, and newspaper-television cross-ownership prohibition rules were
relaxed to allow broadcasters to own, under certain circumstances, more than one television
station, or certain combinations of television stations, radio stations, and daily newspapers, in
the same local area.
Most broadcasters and many in Congress felt that the new rules were not deregulatory enough,
while consumer groups and others in Congress felt the regulations had been liberalized too much.
The result was that the new rules were stayed while various interested parties asked the courts to
intervene. The Federal Appeals Court in Philadelphia won custody of the proceeding and is expected
to rule on the FCCs media ownership regulatory changes sometime in 2004.
The FCC generally applies its ownership limits only to attributable interests held by an
individual, corporation, partnership or other association. In the case of corporations holding
broadcast licenses, the interest of officers, directors and those who, directly or indirectly, have
the right to vote 5% or more of the corporations voting stock (or 10% or more of such stock in the
case of insurance companies, mutual funds, bank trust departments, and certain other passive
investors that are holding stock for investment purposes only) are generally deemed to be
attributable, as are positions as an officer or director of a corporate parent of a broadcast
licensee.
In January of 2004, Congress passed an Omnibus Bill, which, among other things, directed the
FCC to set the national TV media ownership cap at 39%. Specifically, a single entity may hold
attributable interests in an unlimited number of U.S. television stations, provided that those
stations operate in markets containing cumulatively no more than 39% of the
6
television homes in the U.S. For this purpose, generally only 50% of the television households
in a market are counted towards the 39% national restriction if the owned station is a UHF station.
The television homes that the Companys stations reach is well below the 39% national limit.
Because of these multiple and cross-ownership rules, a purchaser of the common stock who
acquires an attributable interest in the Company may violate the FCCs rules if that purchaser also
has an attributable interest in other television stations, radio stations, daily newspapers, or
cable systems, depending on the number and location of those radio or television stations or daily
newspapers or cable systems. Such a purchaser also may be restricted in the companies in which it
may invest to the extent that those investments give rise to an attributable interest. If an
attributable stockholder of the Company violates any of these ownership rules or if a proposed
acquisition by the Company would cause such a violation, the Company may be unable to obtain from
the FCC one or more authorizations needed to conduct its television station business and may be
unable to obtain FCC consents for certain future acquisitions.
Alien Ownership. Under the Communications Act, broadcast licenses may not be granted to or
held by any corporation having more than one-fifth of its capital stock owned of record or voted by
non-U.S. citizens (including a non-U.S. corporation), foreign governments or their representatives
(collectively, Aliens) or having an Alien as an officer or director. The Communications Act also
prohibits a corporation, without an FCC public interest finding, from holding a broadcast license
if that corporation is controlled, directly or indirectly, by another corporation, any officer of
which is an Alien, or more than one-fourth of the directors of which are Aliens, or more than
one-fourth of the capital stock of which is owned of record or voted by Aliens, unless the FCC
finds that such ownership would be in the public interest. The FCC has issued interpretations of
existing law under which these restrictions in modified form apply to other forms of business
organizations, including general and limited partnerships. As a result of these provisions, since
the Company serves as a holding company for the various television station licensee subsidiaries,
it cannot have more than 25% of the capital stock owned of record or voted by Aliens, cannot have
an officer who is an Alien, and cannot have more than one fourth of its Board of Directors
consisting of Aliens.
Restrictions on Broadcast Advertising. The advertising of cigarettes on broadcast stations
has been banned for many years. The broadcast advertising of smokeless tobacco products has also
been banned by Congress. Certain Congressional committees have, in the past, examined legislative
proposals to eliminate or severely restrict the advertising of beer and wine. The Company cannot
predict whether any or all of the present proposals will be enacted into law and, if so, what the
final form of such a law might be. The elimination of all beer and wine advertising could have a
material adverse effect on the Companys revenues and operating profits as well as the revenues and
operating profits of other stations that carry beer and wine advertising. In recent years, some
television stations, including Liberty stations in selected markets, have experimented with
advertising for hard liquor products. In 2002, NBC reversed a decision made a year earlier to take
advertising for hard liquor. Pressure from key members of Congress and various social activist
groups played a major role in NBCs decision. It is not possible for the Company to predict how
Congress might act legislatively in response to the airing of hard liquor advertising.
The FCC has recently lifted its prohibition of broadcast advertising by casinos in markets
where the state does not have its own prohibition. The Company has several stations in states
where casino gambling is legal and no such state prohibition exists.
In 2003, the United States Supreme Court reviewed and upheld a majority of the portions of the
Bipartisan Campaign Reform Act of 2002 that affected broadcasters. The law mandates specific
changes which could impact political advertising. The new law will restrict the availability of
soft money in election campaigns; prevent organizations from using general revenues to fund issue
ads before elections; and require significant additional record-keeping for television stations.
The Company cannot say with certainty if or how the volume of political spending will be impacted
by the Courts ruling.
Cable and Satellite Must-Carry or Retransmission Consent Rights. The 1992 Cable Act,
enacted in October 1992, requires television broadcasters to make an election to exercise either
certain must-carry or retransmission consent rights in connection with their carriage by cable
television systems in the stations local market. If a broadcaster chooses to exercise its
must-carry rights, it may demand carriage on a specified channel on cable systems within its
designated market area. Must-carry rights are not absolute, and their exercise is dependent on
variables such as the number of activated channels on, and the location and size of, the cable
system, and the amount of duplicative programming on a broadcast station. Under certain
circumstances, a cable system may decline to carry a given station. If a broadcaster chooses to
exercise its retransmission consent rights, it may prohibit cable systems from carrying its signal,
or permit carriage under
7
a negotiated compensation arrangement. Generally, the stations have requested must-carry status
from the cable operators in their outlying coverage areas and have negotiated retransmission
consent agreements with the cable operators in their metro coverage areas. Certain of the
Companys stations are currently in negotiation with various cable television systems to extend
their retransmission agreements. At this time, it is not known what the exact outcome of these
negotiations will be. However, the Company does not anticipate encountering any significant
difficulties during this process.
Cable operators are not currently required to carry both a stations analog and digital signal
at the same time. However, it is anticipated that the Company will eventually be able to negotiate
the retransmission of both its analog and digital signals with the cable television systems in its
markets.
Under the Satellite Home Improvement Act, satellite carriers are permitted to retransmit a
local television stations signal into its local market with the consent of the local television
station. If a satellite carrier elects to carry one local station in a market, the satellite
carrier must carry the signals of all local television stations that also request carriage.
Advanced Television Technology. At present, U.S. television stations broadcast signals using
the NTSC system, an analog transmission system named for the National Television Systems
Committee, an industry group established in 1940 to develop the first U.S. television technical
broadcast standards. In late 1996, the FCC approved a new digital television (DTV) technical
standard to be used by television broadcasters, television set manufacturers, the computer
industry, and the motion picture industry. This DTV standard will allow the simultaneous
transmission of multiple streams of video programming and data on the bandwidth presently used by a
single normal analog channel.
The FCC presently plans for the DTV transition period to end by 2006, or upon 85% market
penetration of DTV sets. At that time, broadcasters will be required to discontinue analog
operations and to return their present channels to the FCC. Given that the penetration of DTV sets
in 2006 will likely be below the threshold Congress has set for returning the analog spectrum, it
is probable that broadcasters will continue to utilize both analog and digital spectrum beyond
2006.
The FCC is expected to apply to DTV certain of the rules applicable to analogous services in
other contexts, including certain rules that require broadcasters to serve the public interest, and
may seek to impose additional programming or other requirements on DTV service. The Telecom Act
requires the FCC to impose fees upon broadcasters if they choose to use the DTV channel to provide
paid subscription services to the public. The FCC has determined that broadcasters should pay a
fee of 5% of gross revenues received for such subscription services should the broadcaster provide
subscription services on their DTV channels.
In some cases, conversion to DTV operations may reduce a stations geographical coverage area.
In addition, the FCCs current implementation plan would maintain the secondary status of low-power
stations in connection with its allotment of DTV channels. The DTV channel allotment will result in
displacement of a substantial number of existing low-power stations, particularly in major
television markets. Accordingly, the low-power broadcast stations may be materially adversely
affected. The Company does not currently own any low-power stations.
Recent Developments, Proposed Legislation, and Regulation. Congress and the FCC currently
have under consideration, and may in the future adopt, new laws, regulations, and policies
regarding a wide variety of matters that could affect, directly or indirectly, the operation and
ownership of the Companys broadcast properties. In addition to the changes and proposed changes
noted above, these matters include, for example, additional spectrum use fees, political
advertising rates, potential restrictions on the advertising of certain products like hard liquor,
beer and wine, and revised rules and policies governing equal employment opportunity. Other matters
that could affect its broadcast properties include technological innovations and development
generally affecting competition in the mass communications industry.
The foregoing does not purport to be a complete summary of all the provisions of the
Communications Act, the Telecom Act, or the regulations and policies of the FCC under either act.
Proposals for additional or revised regulations and requirements are pending before and are being
considered by Congress and federal regulatory agencies from time-to-time. Management is unable at
this time to predict the outcome of any of the pending FCC rulemaking proceedings referenced above,
the outcome of any reconsideration or appellate proceedings concerning any changes in FCC rules or
policies noted above, the possible outcome of any proposed or pending Congressional legislation, or
the impact of any of those changes on its broadcast operations.
Other Business. In addition to the operating subsidiaries, the Company has other minor
organizations. These include the Companys administrative staff, a property development and
management company, and transportation operations.
8
Industry Segment Data. Information concerning the Companys industry segments is contained in
the Notes to the Consolidated Financial Statements on page 30 of this report and is incorporated in
this Item 1 by reference.
Employees. At December 31, 2003 the Company had approximately 1,500 employees.
Internet
Address. The Company maintains its Internet website
at www.libertycorp.com. The
Company makes available free of charge through its Internet website, or upon written request, its
annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, amendments
to those reports, its Code of Ethics, any amendments or waivers to its Code of Ethics, its
Corporate Governance Policy, and all Board Committee charters.
Item 2. Properties
The Company leases the space for its main office, which is located at 135 South Main
Street, Greenville, SC.
The Company owns its television broadcast studios, office buildings and transmitter sites in
Columbia, SC; Montgomery, AL; Toledo, OH; Louisville, KY; Evansville, IN; Jonesboro, AR; Lake
Charles, LA; Biloxi, MS; Albany, GA; Harlingen, TX; Lubbock, TX; Wilmington, NC; Jackson, MS;
Tyler, TX; and Lufkin, TX.
Item 3. Legal Proceedings
The Company is not currently engaged in legal proceedings of material consequence other
than ordinary routine litigation incidental to its business. Any proceedings reported in prior
filings have been settled or otherwise satisfied.
Item 4. Submission of Matters to a Vote of Shareholders
None during the fourth quarter of 2003.
9
PART II
Item 5. Market for the Registrants Common Stock and Related Security Stockholder Matters
The Liberty Corporations Common Stock is listed on the New York Stock Exchange under the
symbol LC. As of December 31, 2003, 878 shareholders of record in 39 states, the District of
Columbia, Australia, and Canada held the 18,930,500 Common Stock shares outstanding. Quarterly high
and low stock prices and dividends per share as reported by New York Stock Exchange Composite Price
History were:
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2003 |
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2002 |
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2001 |
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Quarterly |
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Quarterly |
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Quarterly |
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Market Price Per Share |
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Dividend |
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Market Price Per Share |
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Dividend |
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Market Price Per Share |
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Dividend |
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High |
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Low |
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Per Share |
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High |
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Low |
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Per Share |
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High |
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Low |
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Per Share |
Fourth Quarter |
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$ |
47.25 |
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$ |
41.89 |
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$ |
0.24 |
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$ |
40.50 |
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$ |
32.10 |
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$ |
0.22 |
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$ |
44.25 |
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$ |
39.00 |
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$ |
0.22 |
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Third Quarter |
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45.00 |
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40.91 |
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|
0.24 |
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40.08 |
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28.50 |
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0.22 |
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42.00 |
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38.45 |
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0.22 |
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Second Quarter |
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45.30 |
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|
40.46 |
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0.24 |
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45.00 |
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39.00 |
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0.22 |
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40.00 |
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33.80 |
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0.22 |
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First Quarter |
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43.60 |
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|
|
37.85 |
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0.24 |
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|
|
42.51 |
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39.20 |
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0.22 |
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|
42.32 |
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33.25 |
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|
0.22 |
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The Company expects to continue its policy of paying regular cash dividends, although
there is no assurance as to future dividends, as they are dependent on future earnings, capital
requirements and the Companys financial condition.
Registrar and Transfer Agent
American Stock Transfer & Trust Company
59 Maiden Lane
New York, NY 10038
Telephone (800) 937-5449, extension 6820
For a free copy of the 10-K or other information, contact:
The Liberty Corporation Shareholder Relations
Box 502
Greenville, SC 29602
Telephone (864) 241-5400
Written shareholder correspondence and requests for transfer should be sent to:
American Stock Transfer & Trust Company
Attn: Shareholder Relations
6201 15th Avenue, Floor 3L
Brooklyn, NY 11219
Dividend Reinvestment and Direct Stock Purchase and Sale Plan
A brochure describing this service may be obtained by writing or calling:
American Stock Transfer & Trust Company
P.O. Box 922
New York, NY 10269-0560
Telephone: (877) 322-4926 (toll free)
Internet: WWW.investpower.com
Direct Deposit of Cash Dividends
For information on this service, call American Stock Transfer & Trust Company toll free at
800-937-5449, extension 6820
Equity Compensation Plan Information
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Number of Securities |
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Remaining Available For |
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Number of Securities To Be |
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Weighted-Average |
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Future Issuance Under |
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Issued Upon Exercise of |
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Exercise Price of |
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Equity Compensation Plans |
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Outstanding Options, |
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Outstanding Options, |
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( Excluding Securities |
|
Plan Category |
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Warrants and Rights |
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Warrants, and Rights |
|
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Reflected in Column(a)) |
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(a) |
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(b) |
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(c) |
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Equity compensation
plans approved by
security holders |
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1,034,210 |
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$ |
35.09 |
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669,138 |
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Equity compensation
plans not approved
by security holders |
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N/A |
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N/A |
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Total |
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1,034,210 |
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$ |
35.09 |
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669,138 |
|
10
Item 6. Selected Financial Data
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Years Ended December 31, |
(In $000s, except per share data) |
|
2003 |
|
2002 |
|
2001 |
|
2000 |
|
1999 |
|
Net revenues * |
|
$ |
200,284 |
|
|
$ |
206,678 |
|
|
$ |
178,431 |
|
|
$ |
173,672 |
|
|
$ |
154,000 |
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Income from continuing operations |
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$ |
23,897 |
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$ |
32,995 |
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$ |
16,576 |
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$ |
24,995 |
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|
$ |
18,630 |
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Income from discontinued operations** |
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28,563 |
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25,939 |
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Cumulative effect of a change in accounting
principle*** |
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(47,388 |
) |
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Net income (loss) |
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$ |
23,897 |
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$ |
(14,393 |
) |
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$ |
16,576 |
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$ |
53,558 |
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$ |
44,569 |
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|
Adjusted net income (loss)**** |
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$ |
23,897 |
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$ |
32,995 |
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$ |
25,947 |
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$ |
57,715 |
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$ |
46,842 |
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|
Income from continuing operations per diluted share |
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$ |
1.24 |
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$ |
1.68 |
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$ |
0.84 |
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$ |
1.27 |
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$ |
0.91 |
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Income from discontinued operations per diluted share |
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|
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|
|
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|
|
1.45 |
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|
1.34 |
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Cumulative effect of a change in accounting
principle per diluted share*** |
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(2.41 |
) |
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|
Net income (loss) per diluted share |
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$ |
1.24 |
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$ |
(0.73 |
) |
|
$ |
0.84 |
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|
$ |
2.72 |
|
|
$ |
2.25 |
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|
|
Adjusted net income per diluted share**** |
|
$ |
1.24 |
|
|
$ |
1.68 |
|
|
$ |
1.32 |
|
|
$ |
2.93 |
|
|
$ |
2.42 |
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|
Dividends per common share |
|
$ |
0.96 |
|
|
$ |
0.88 |
|
|
$ |
0.88 |
|
|
$ |
0.88 |
|
|
$ |
0.88 |
|
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|
Assets |
|
$ |
662,265 |
|
|
$ |
670,751 |
|
|
$ |
730,195 |
|
|
$ |
896,007 |
|
|
$ |
858,302 |
|
Notes, mortgages and other debts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
234,000 |
|
Shareholders equity |
|
$ |
522,000 |
|
|
$ |
538,236 |
|
|
$ |
581,671 |
|
|
$ |
580,993 |
|
|
$ |
554,224 |
|
|
|
|
* |
|
During 2000, the Company acquired four television stations located in Texas and
Mississippi. |
|
** |
|
In November of 2000, the Company sold it insurance operations. |
|
*** |
|
See Note 4 of the Consolidated Financial Statements regarding the cumulative effect of a change
in accounting principle related to the adoption of Statement of Financial Accounting Standards No.
142 Goodwill and Other Intangible Assets |
|
**** |
|
Includes adjustments to reflect the effect of Statement of Financial
Accounting Standards No. 142 had it been effective as of January 1, 1999. |
Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
The Liberty Corporation is a holding company with operations primarily in the television
broadcasting industry. The Companys television broadcasting subsidiary, Cosmos Broadcasting,
consists of fifteen network-affiliated television stations principally located in the Southeast and
Midwest, a cable advertising company, and a professional broadcast equipment dealership. Eight of
the Companys television stations are affiliated with NBC, five with ABC, and two with CBS.
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, are 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,
including the performance of financial markets and interest rates; competitive, regulatory, or tax
changes that affect the cost of or demand for the Companys services; and adverse litigation
results. 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.
11
EXECUTIVE SUMMARY
While net revenues were down approximately $6.4 million on a year-over-year basis, a decrease
in net revenues was expected for 2003. There were record amounts of political spending during
2002, with the Company realizing $27.3 million of revenue from political spending in that year.
The year 2003 was an off-cycle year for national elections, and as such, lower political revenues
were to be expected. Increases in national and local revenue helped offset the impact of the lower
level of political revenue in 2003. Operating expenses increased, due mainly to planned employee
costs and the training and expenses associated with the installation of new traffic and billing
software at the Companys television stations, coupled with a change in the accounting estimate of
the useful lives used to account for certain equipment.
During 2003, the Company had capital expenditures of approximately $22.0 million and
repurchased $26.6 million of its common stock. At December 31, 2003, the Company had cash and cash
equivalents of approximately $62.2 million and no debt outstanding. No amounts were drawn on the
Companys $100 million credit facility during 2003.
Subsequent to December 31, 2003, the Company renewed the credit facility extending its
maturity date to May 18, 2005. Also subsequent to December 31, 2003, the Companys Board of
Directors declared a special dividend of $4.00 per share, or approximately $75.7 million. The
Company may use a portion of its $100 million credit facility to fund a portion of the special
dividend.
SIGNIFICANT ACCOUNTING POLICIES AND ASSUMPTIONS
Financial statements prepared in accordance with accounting principles generally accepted
in the United States require management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying notes to the consolidated
financial statements. Actual results could differ from those estimates and assumptions.
Some of the more significant, and the most sensitive, of the Companys accounting policies and
assumptions relate to the consolidation of variable interest entities, as governed by Financial
Accounting Standards Board Interpretation 46 (FIN 46), the procedures the Company uses to value
its FCC licenses and Goodwill in accordance with Statement of Financial Accounting Standards No.
142 Goodwill and Other Intangible Assets (SFAS No. 142), the procedures to evaluate certain of
its investments for impairment, and the assumptions used to determine the recoverability of
deferred tax assets.
FIN 46 requires the Company to use estimates and assumptions to determine if an investment or
other relationship with a third party qualifies as a variable interest entity, and if it does
qualify, to determine if that entity should be consolidated into the Companys financial
statements. The estimates include, among other things, the future cash flows of the third party,
terminal multiples for assumed liquidation values, and discount rates to be used in present value
calculations.
SFAS No. 142 requires the Company to use estimates and assumptions to determine the estimated
fair value of its individual stations and its station group as a whole. The estimates and
assumptions include, among other things, the future cash flows to be generated by its stations,
terminal multiples for assumed station sales, discount rates to be used in present value
calculations, assumed values for fixed assets and network affiliation contracts, and future capital
expenditure levels.
The Company establishes impairments on specific assets at the time the company determines the
assets to have been impaired. In performing this determination, management utilizes mathematical
models, market information, and valuation information supplied by investee companies to determine
if an impairment exists. Changes in market conditions or the valuations of the investee companies
could change the outcome of the Companys judgments regarding the future impairment of its
investments.
Deferred tax assets and liabilities are based on estimated timing differences between the book
and tax basis of certain assets and liabilities. These estimates may be affected by future changes
in enacted tax legislation and the results of regulatory review. Realization of deferred tax
assets is principally dependent upon the achievement of projected future taxable income. The
Companys judgments regarding future profitability may change due to future market conditions,
among other factors.
Please see Note 2 to the Consolidated Financial Statements for information relating to other
less sensitive accounting policies and estimates used by the Company.
12
SEASONALITY OF TELEVISION REVENUES
The Companys revenues are usually subject to seasonal fluctuations. The advertising
revenues of the stations are generally highest in the second and fourth quarter of each year, due
in part to increases in consumer advertising in the spring and retail advertising in the period
leading up to and including the holiday season. Additionally, advertising revenues in even-numbered
years tend to be higher, as they benefit from advertising placed by candidates for political
offices and demand for advertising time in Olympic broadcasts.
From time to time, proposals have been advanced in the U.S. Congress and at the FCC to require
television broadcast stations to provide advertising time to political candidates at no or reduced
charge, which would eliminate, in whole or in part, advertising revenues from political candidates.
SUMMARY OF CONSOLIDATED RESULTS
The Year 2003 Compared With 2002
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|
|
|
|
|
|
|
|
|
(In $000s) |
|
2003 |
|
|
2002 |
|
|
Change |
|
|
|
|
|
|
|
|
|
|
|
National |
|
$ |
67,045 |
|
|
$ |
64,174 |
|
|
$ |
2,871 |
|
Local and regional |
|
|
127,233 |
|
|
|
122,542 |
|
|
|
4,691 |
|
Political |
|
|
10,657 |
|
|
|
27,299 |
|
|
|
(16,642 |
) |
Network |
|
|
4,229 |
|
|
|
4,324 |
|
|
|
(95 |
) |
Other broadcasting |
|
|
7,097 |
|
|
|
6,260 |
|
|
|
837 |
|
|
|
|
|
|
|
|
|
|
|
Gross station revenues |
|
|
216,261 |
|
|
|
224,599 |
|
|
|
(8,338 |
) |
Agency commissions |
|
|
(31,625 |
) |
|
|
(34,147 |
) |
|
|
2,522 |
|
|
|
|
|
|
|
|
|
|
|
Station revenues (net of commissions) |
|
|
184,636 |
|
|
|
190,452 |
|
|
|
(5,816 |
) |
Cable and other (net of commissions) |
|
|
15,648 |
|
|
|
16,226 |
|
|
|
(578 |
) |
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
$ |
200,284 |
|
|
$ |
206,678 |
|
|
$ |
(6,394 |
) |
|
|
|
|
|
|
|
|
|
|
Net revenues for the year ended December 31, 2003 were $200.3 million, a decrease of $6.4
million from the $206.7 million reported for 2002. Net station revenues were $184.6 million for
2003, a decrease of $5.8 million from the $190.5 million reported for 2002. The most significant
component of the decrease in revenues is related to the lower levels of political revenue in 2003
as compared to 2002, as discussed below.
National revenue increased $2.9 million on a year-over-year basis due mainly to increases in
automotive advertising by the auto manufacturers. Local and regional advertising was up $4.7
million, due mainly to increases in automotive advertising by local auto dealerships and increases
in healthcare and retail advertising. Political revenue for 2003 was $10.7 million as compared to
$27.3 million in 2002. The year 2002 was a national election year and had record political
revenues, as soft money was expected to be banned following that election cycle, and political
support groups employed a use it or lose it philosophy.
Operating expenses (including the amortization of program rights) increased $5.6 million from
2002, or five percent. The broadcasting segments operating expenses were $115.8 million for 2003,
an increase of $6.1 million over the $109.7 million reported for 2002. The increase in operating
expenses is mainly attributable to increases in medical costs, planned annual increases in employee
compensation, training and travel related to the installation of new traffic and billing software,
and net losses on the disposal of fixed assets. During the year, a significant portion of the
Companys DTV equipment came on line, and significant amounts of other equipment were upgraded to
digital. The new equipment and upgrades necessitated the retirement of a number of assets that
were not yet fully depreciated. In addition, during the fourth quarter of 2003 the Company
recorded a charge of $0.7 million related to a change in the estimates of the useful lives used to
account for back-up and redundant equipment. The new estimates resulted in the retirement of all
assets that had not been utilized in the last twelve to twenty-four months. This early retirement
of assets and the changes in accounting estimates resulted in $2.2 million of net losses on
disposal during 2003.
Depreciation and amortization was $18.5 million for the year ended December 31, 2003, an
increase of $0.7 million from the $17.8 million reported for 2002. The increase in depreciation
expense is partially attributable to the depreciation recorded on the DTV equipment that came on
line during 2002 and 2003.
13
Corporate, general, and administrative expenses were $14.4 million for the year ended December
31, 2003, an increase of $0.9 million over the $13.5 million reported for 2002. Reductions in
workers compensation expenses and legal and other professional fees were offset by higher
directors and officers insurance premiums and onetime charges related to the wind up of contract
obligations with the Companys previous traffic and billing software vendor. During the fourth
quarter of 2003, the Company negotiated an exit from the contract with its previous software
vendor, making a payment of approximately $0.4 million in satisfaction of a portion of the
remaining term of the contract.
Net investment income for 2003 was a loss of $0.3 million, as compared to a gain of $0.6
million in 2002. Interest earned on cash balances and notes receivable was offset by impairments
in the Companys venture capital, and strategic investment portfolios. During the year the Company
reduced the carrying amounts of certain investments in its venture capital portfolio based on fair
value information provided by the investment funds managers, and in its strategic investment
portfolio based on an investee company receiving a going concern opinion on its 2002 audited
financial statements.
The effective tax rate was 37.5% for both 2003 and 2002.
The Year 2002 Compared With 2001
|
|
|
|
|
|
|
|
|
|
|
|
|
(In $000s) |
|
2002 |
|
|
2001 |
|
|
Change |
|
|
|
|
|
|
|
|
|
|
|
National |
|
$ |
64,174 |
|
|
$ |
61,476 |
|
|
$ |
2,698 |
|
Local and regional |
|
|
122,542 |
|
|
|
118,034 |
|
|
|
4,508 |
|
Political |
|
|
27,299 |
|
|
|
1,957 |
|
|
|
25,342 |
|
Network |
|
|
4,324 |
|
|
|
7,894 |
|
|
|
(3,570 |
) |
Other broadcasting |
|
|
6,260 |
|
|
|
3,172 |
|
|
|
3,088 |
|
|
|
|
|
|
|
|
|
|
|
Gross station revenues |
|
|
224,599 |
|
|
|
192,533 |
|
|
|
32,066 |
|
Agency commissions |
|
|
(34,147 |
) |
|
|
(27,322 |
) |
|
|
(6,825 |
) |
|
|
|
|
|
|
|
|
|
|
Station revenues (net of commissions) |
|
|
190,452 |
|
|
|
165,211 |
|
|
|
25,241 |
|
Cable and other (net of commissions) |
|
|
16,226 |
|
|
|
13,220 |
|
|
|
3,006 |
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
$ |
206,678 |
|
|
$ |
178,431 |
|
|
$ |
28,247 |
|
|
|
|
|
|
|
|
|
|
|
Net revenues were $206.7 million for the year ended December 31, 2002, an increase of $28.2
million over the $178.4 million reported for 2001. Net station revenues were $190.5 million for
2002, an increase of $25.2 million over the $165.2 million reported for 2001.
National revenue was up four percent on a year-over-year basis due mainly to increases in
automotive advertising by the large auto manufacturers. Local and regional advertising was up four
percent on a year-over-year basis due mainly to increases in automotive advertising by local auto
dealerships and increases in the fast food category. Political revenue was $27.3 million in 2002
versus $2.0 million in 2001. Political revenue was up in 2002, as it was a Congressional election
year and a majority of the Companys stations are the leading news providers in their markets. Due
to their ability to deliver significant numbers of viewers, they are attractive vehicles for
political candidates to use to inform the public of their campaign messages. Network revenues were
down 45 percent on a year-over-year basis, as a majority of the Companys stations began operating
under new network contracts during the second half of 2001.
Cable and other revenues were $16.2 million for the year ended December 31, 2002, an increase
of $3.0 million over the $13.2 million reported for 2001. The increase in cable and other revenues
is due to political revenue in 2002 that was not present in 2001, generally stronger advertising
environments in several markets, and startup operations at certain locations in the previous year
being fully operational during 2002.
Operating expenses (including the amortization of program rights) were $123.3 million for the
year ended December 31, 2002, an increase of $11.3 million over the $112.0 million reported for
2001. The broadcasting segments operating expenses were $109.7 million for 2002, an increase of
$9.3 million over the $100.4 million reported for 2001. The increase in operating expenses is
mainly attributable to higher levels of sales commissions as a result of the increased revenue
base, accruals for performance based compensation in 2002 that were not present during 2001, and
increased personnel costs related to the addition of nightly and weekend news casts at one of the
Companys stations, along with
14
annual salary increases across the Company. Cable operating
expenses were $12.9 million for 2002, an increase of $1.5 million over the $11.4 million reported
for 2001. The increase in cable advertising operating expenses is attributable mainly to increased
commissions as a result of the increased revenue base, along with the addition of personnel during
the year as start up operations at certain locations in the previous year became fully operational
during 2002.
Depreciation and amortization was $17.8 million for the year ended December 31, 2002, a
decrease of $14.2 million from the $32.0 million reported for 2001. During the first quarter of
2002, the Company adopted SFAS No. 142 Goodwill and Other Intangible Assets. SFAS No. 142
requires that goodwill and certain other identified intangibles no longer be amortized to earnings,
but instead be reviewed for impairment. Had SFAS No. 142 been effective as of the beginning of the
first quarter of 2001, reported depreciation and amortization expenses would have been
approximately $16.9 million. (See Note 4 of the accompanying Notes to Consolidated Financial
Statements for further details.)
Corporate, general, and administrative expenses were $13.5 million for the year ended December
31, 2002, an increase of $1.7 million over the $11.8 million reported for 2001. The increase in
corporate, general, and administrative expenses is due to accruals for performance based
compensation in 2002 that were not present during 2001, and the non-capitalizable portion of
expenses related to the implementation of new accounting systems.
Net investment income was $0.6 million for the year ended December 31, 2002, a decrease of
$3.5 million from the $4.1 million reported for 2001. Net investment income during 2002 was
comprised mainly of interest earned on cash balances and venture capital distributions, offset by
non-cash impairment charges in the Companys venture capital portfolio. Net investment income
during 2001 was comprised of significantly higher interest income (due to the interest earned
during the first quarter of that year on the large cash balance related to the then as yet unpaid
income taxes on the sale of the insurance operations), along with venture capital distributions and
gains on the sale of stock in the Companys equity portfolio, offset by impairments taken in the
Companys venture capital portfolio.
The effective tax rate was 37.5% and 38.0% for 2002 and 2001, respectively.
INVESTMENTS
During the year ended December 31, 2003, the Company had net investment losses of $0.3
million. Interest earned on cash balances and notes receivable was offset by impairments in the
Companys venture capital, and strategic investment portfolios. During 2003, the Company reduced
the carrying amounts of certain investments in its venture capital portfolio based on fair value
information provided by the investment funds managers, and in its strategic investment portfolio
based on an investee company receiving a going concern opinion on its 2002 audited financial
statements. At December 31, 2003, other long-term investments, included in the caption
investments and other assets on the balance sheet, was comprised of approximately 26% private
equity securities, 37% private debt securities, 6% real estate related investments, 13% venture
capital limited partnerships, and 18% low income housing tax credits and other investments.
The Company has determined that it is not practicable to estimate the fair values of its
private equity, venture capital, and low income housing tax credit investments because of a lack of
primary and secondary market prices and the inability to estimate fair values without incurring
excessive costs. Fair values for private debt securities are estimated by discounting the expected
future cash flows using a current market rate applicable to the yield, credit quality, and maturity
of the investments. Further discussion of investments and valuation is contained in Notes 5 and 13
to the Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
The Companys short-term cash needs consist primarily of working capital requirements,
expenditures associated with the initial implementation of DTV broadcast operations, regular
quarterly dividends to shareholders, and special dividends to shareholders, if and when declared by
the Companys Board of Directors. Historically, Libertys operations have provided sufficient
liquidity to fund the operations of the Company and its regular quarterly dividends. While exact
costs are not presently known, the additional capital expenditures required over the next eighteen
months to comply with the FCC mandated DTV implementation are anticipated to be approximately $7
million. On February 3, 2004, the Companys Board of Directors declared a special dividend of
$4.00 per share, or approximately $75.7 million. It is anticipated that the Company will use a
portion of its $100 million credit facility to fund some or all of the special dividend.
The Companys primary long-term cash need is the possible need for capital should the Company
identify an appropriate acquisition opportunity.
15
On a consolidated basis, Libertys net cash provided by operating activities was $61.7 million
for 2003, compared to $91.8 million for 2002, and cash used in operating activities of $75.5
million in 2001. The decrease in cash provided by operating activities in 2003 is due mainly to
the lower level of revenues from political advertising in 2003 as compared to 2002 and effect of
deferred taxes in 2002. The increase in cash provided by operating activities for 2002 as compared
to 2001 relates to the payment in 2001 of approximately $132 million of income taxes related to the
sale of the Companys insurance operations. Excluding the impact of the income taxes paid related
to that sale, adjusted net cash provided by operations was $52.8 million in 2001. The increase in
cash provided by operating activities in 2002 as compared to the adjusted 2001 cash provided by
operating activities is due mainly to the increase in revenues during 2002.
Libertys net cash used in investing activities was $24.0 million in 2003 compared to $27.7
million in 2002 and $20.8 million in 2001. The decrease in net cash used in investing activities
in 2003 is due to lower levels of net investing activity. During 2003, the Company made $5.9
million of strategic investments, as compared to $13.1 million in 2002. The strategic investments
made during 2003 were mainly follow-on investments in the Companys existing strategic investment
portfolio. The increase in net cash used in investing activities from 2001 to 2002 was due mainly
to increased capital expenditures related to the Companys conversion to digital television
broadcasting.
Cash flow used in financing activities for 2003 was $43.4 million versus $31.6 million and
$17.2 million in 2002 and 2001, respectively. Cash flow used in financing activities was higher in
2003 and 2002 due mainly to increased activity in the Companys share buy-back program during those
periods. During 2003, 2002, and 2001, the Company purchased 625,600, 404,400, and 240,000 shares
of its common stock for approximately $26.6 million, $15.3 million, and $9.6 million, respectively.
On February 3, 2004, the Board of Directors of the Company extended to February 28, 2005, the
Companys authorization to purchase from time to time up to 4 million shares of stock in the open
market or through directly negotiated transactions. Also on February 3, 2004, the Companys Board
of Directors declared a special dividend of $4.00 per share, or approximately $75.7 million. The
Company may use a portion of its $100 million credit facility to fund a portion of the special
dividend.
During 2001, the Company completed negotiations with NBC regarding its network affiliation
agreements, and entered into a ten year agreement that calls for compensation payments from NBC for
the first five years and is compensation neutral thereafter. During 2003, the Company completed
negotiations with CBS regarding its network affiliation agreements and entered into a compensation
neutral ten year agreement.
The Company has committed to make certain investments in its venture capital funds when called
by the funds manager. The Company anticipates additional funding related to its venture capital
portfolio of $1.0 million over the next one to three years. The Company also anticipates the
funding of its private debt and equity holdings of approximately $0.5 million during 2004.
At December 31, 2003, and 2002, the Company had no outstanding debt. On March 21, 2001, the
Company entered into a $100 million unsecured 364-day revolving credit facility with a bank. On
May 20, 2002, and May 19, 2003, the Company renewed the facility for an additional year on
substantially similar terms. No amounts have been drawn on this facility since inception. 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. The facility provides that the funds
drawn may be used for working capital and other general corporate purposes, capital expenditures,
repurchases of common stock, acquisitions, and investments. Subsequent to December 31, 2003, the
Company renewed the facility on substantially similar terms, extending its maturity date to May 18,
2005.
The Company believes that its current level of cash, expected future cash flows from
operations, and its credit facility are sufficient to meet the needs of its businesses. If
suitable opportunities arise for additional acquisitions, the Company believes it can arrange for
additional debt financing or use Common Stock or Preferred Stock as payment for all or part of the
consideration for such acquisitions, or the Company may seek additional funds in the equity or debt
markets.
Other Company commitments are shown in Note 16 to the Consolidated Financial Statements.
Further discussion of investments and valuation is contained in Notes 2 and 13 to the Consolidated
Financial Statements.
OFF-BALANCE SHEET ARRANGEMENTS
As of December 31, 2003, the Company had no off-balance sheet arrangements.
16
TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due By Period |
|
|
|
|
|
|
|
Less |
|
|
|
|
|
|
|
|
|
|
More |
|
Contractual Obligations |
|
|
|
|
|
Than 1 |
|
|
1-3 |
|
|
3-5 |
|
|
Than 5 |
|
(In $000s) |
|
Total |
|
|
Year |
|
|
Years |
|
|
Years |
|
|
Years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term Debt |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Capital Lease Obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Lease Obligations |
|
|
1,524 |
|
|
|
694 |
|
|
|
744 |
|
|
|
68 |
|
|
|
18 |
|
Purchase Obligations |
|
|
14,350 |
|
|
|
9,628 |
|
|
|
4,720 |
|
|
|
2 |
|
|
|
|
|
Other Long-Term
Liabilities Reflected on
the Registrants Balance
Sheet
Under GAAP |
|
|
6,621 |
|
|
|
500 |
|
|
|
913 |
|
|
|
97 |
|
|
|
5,111 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
22,495 |
|
|
$ |
10,822 |
|
|
$ |
6,377 |
|
|
$ |
167 |
|
|
$ |
5,129 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The above table does not take into account the payments that would be required to service
outstanding debt should the Company draw upon its currently unused $100 million line of credit.
In addition, the table does not reflect amounts related to cash income taxes to be paid in future
years. Please see Note 10 to the Consolidated Financial Statements for additional information on
historical cash taxes paid.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Portions of the Companys investment portfolio may be exposed to equity price and
interest rate risk. While the Company held no marketable equity securities at December 31, 2003 or
2002, it may from time to time have investments in marketable equity securities acquired either
through direct purchases or as a result of distributions from its venture capital funds.
As of December 31, 2003, and 2002, real estate related investments totaled $2.7 million and
$6.3 million, respectively. These investments consist primarily of residential land and lots in
various stages of development and completion, and receivables related to prior land sales. The
Company does not plan to make any future investments in real estate, but will continue to manage
the existing portfolio to maximize the value to the Company. Substantially all of the remaining
investment real estate is located in South Carolina.
Additional disclosures concerning the fair values in relation to the carrying values of the
Companys financial instruments are included in Notes 5 and 13 to the Consolidated Financial
Statements.
17
Item 8. Financial Statements and Supplementary Information
CONSOLIDATED BALANCE SHEETS
THE LIBERTY CORPORATION AND SUBSIDIARIES
(In $000s)
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
|
|
2003 |
|
|
2002 |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
62,177 |
|
|
$ |
67,917 |
|
Receivables (net of allowance for doubtful
accounts of $1,738 and $1,963 in 2003 and
2002, respectively) |
|
|
42,364 |
|
|
|
42,069 |
|
Program rights |
|
|
4,564 |
|
|
|
4,433 |
|
Prepaid and other current assets |
|
|
3,013 |
|
|
|
2,982 |
|
Income taxes receivable |
|
|
|
|
|
|
2,370 |
|
Deferred income taxes |
|
|
2,183 |
|
|
|
5,508 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
114,301 |
|
|
|
125,279 |
|
|
|
|
|
|
|
|
|
|
Property, plant, and equipment: |
|
|
|
|
|
|
|
|
Land |
|
|
5,657 |
|
|
|
5,639 |
|
Buildings and improvements |
|
|
48,969 |
|
|
|
52,638 |
|
Furniture and equipment |
|
|
167,775 |
|
|
|
157,401 |
|
Less: Accumulated depreciation |
|
|
(125,417 |
) |
|
|
(120,409 |
) |
|
|
|
|
|
|
|
|
|
|
96,984 |
|
|
|
95,269 |
|
|
|
|
|
|
|
|
|
|
Intangible assets subject to amortization (net
of $841 and $751 accumulated amortization in
2003 and 2002, respectively) |
|
|
270 |
|
|
|
369 |
|
FCC licenses |
|
|
304,525 |
|
|
|
304,285 |
|
Goodwill |
|
|
101,387 |
|
|
|
101,387 |
|
Investments and other assets |
|
|
44,798 |
|
|
|
44,162 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
662,265 |
|
|
$ |
670,751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
23,817 |
|
|
$ |
24,433 |
|
Program contract obligations |
|
|
4,734 |
|
|
|
4,486 |
|
Accrued income taxes payable |
|
|
3,874 |
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
32,425 |
|
|
|
28,919 |
|
|
|
|
|
|
|
|
|
|
Unearned revenue |
|
|
11,802 |
|
|
|
5,637 |
|
Deferred income taxes |
|
|
89,417 |
|
|
|
91,647 |
|
Other liabilities |
|
|
6,621 |
|
|
|
6,312 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
140,265 |
|
|
|
132,515 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity: |
|
|
|
|
|
|
|
|
Common stock (authorized 50,000,000
shares, no par value, shares issued and
outstanding 18,930,500 shares in 2003,
19,423,317 shares in 2002) |
|
|
71,788 |
|
|
|
92,978 |
|
Unearned stock compensation |
|
|
(4,405 |
) |
|
|
(3,802 |
) |
Retained earnings |
|
|
454,379 |
|
|
|
448,887 |
|
Unrealized investment gains |
|
|
238 |
|
|
|
173 |
|
|
|
|
|
|
|
|
Total shareholders equity |
|
|
522,000 |
|
|
|
538,236 |
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity |
|
$ |
662,265 |
|
|
$ |
670,751 |
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
18
CONSOLIDATED STATEMENTS OF INCOME
THE LIBERTY CORPORATION AND SUBSIDIARIES
(In $000s, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31, |
|
|
|
2003 |
|
|
2002 |
|
|
2001 |
|
REVENUES |
|
|
|
|
|
|
|
|
|
|
|
|
Station revenues (net of commissions) |
|
$ |
184,636 |
|
|
$ |
190,452 |
|
|
$ |
165,211 |
|
Cable advertising (net of commissions) and other revenues |
|
|
15,648 |
|
|
|
16,226 |
|
|
|
13,220 |
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
|
200,284 |
|
|
|
206,678 |
|
|
|
178,431 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
121,642 |
|
|
|
115,979 |
|
|
|
104,054 |
|
Amortization of program rights |
|
|
7,214 |
|
|
|
7,281 |
|
|
|
7,937 |
|
Depreciation and amortization of intangibles |
|
|
18,462 |
|
|
|
17,762 |
|
|
|
31,970 |
|
Corporate, general, and administrative expenses |
|
|
14,382 |
|
|
|
13,481 |
|
|
|
11,820 |
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
161,700 |
|
|
|
154,503 |
|
|
|
155,781 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
38,584 |
|
|
|
52,175 |
|
|
|
22,650 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income (loss) |
|
|
(348 |
) |
|
|
616 |
|
|
|
4,086 |
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes and the cumulative effect of a change
in accounting principle |
|
|
38,236 |
|
|
|
52,791 |
|
|
|
26,736 |
|
Provision for income taxes |
|
|
14,339 |
|
|
|
19,796 |
|
|
|
10,160 |
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE THE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING
PRINCIPLE |
|
|
23,897 |
|
|
|
32,995 |
|
|
|
16,576 |
|
Cumulative effect of a change in accounting principle (net
of $29,045 of income taxes) |
|
|
|
|
|
|
(47,388 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) |
|
$ |
23,897 |
|
|
$ |
(14,393 |
) |
|
$ |
16,576 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC EARNINGS (LOSS) PER COMMON SHARE: |
|
|
|
|
|
|
|
|
|
|
|
|
From continuing operations |
|
$ |
1.25 |
|
|
$ |
1.68 |
|
|
$ |
0.85 |
|
From the cumulative effect of a change in accounting principle |
|
|
|
|
|
|
(2.41 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per common share |
|
$ |
1.25 |
|
|
$ |
(0.73 |
) |
|
$ |
0.85 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED EARNINGS (LOSS) PER COMMON SHARE |
|
|
|
|
|
|
|
|
|
|
|
|
From continuing operations |
|
$ |
1.24 |
|
|
$ |
1.68 |
|
|
$ |
0.84 |
|
From the cumulative effect of a change in accounting principle |
|
|
|
|
|
|
(2.41 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per common share |
|
$ |
1.24 |
|
|
$ |
(0.73 |
) |
|
$ |
0.84 |
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
19
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
THE LIBERTY CORPORATION AND SUBSIDIARIES
(In 000s, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized |
|
|
|
|
|
|
Common |
|
|
|
|
|
Unearned |
|
Investment |
|
|
|
|
|
|
Shares |
|
Common |
|
Stock |
|
Gains |
|
Retained |
|
|
|
|
Outstanding |
|
Stock |
|
Compensation |
|
(Losses) |
|
Earnings |
|
Total(1) |
|
Balance at January 1, 2001 |
|
|
19,538 |
|
|
$ |
99,033 |
|
|
$ |
|
|
|
$ |
690 |
|
|
$ |
481,270 |
|
|
$ |
580,993 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,576 |
|
|
|
16,576 |
|
Net unrealized investment gains (losses), net of taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(753 |
) |
|
|
|
|
|
|
(753 |
) |
Dividends Common Stock $0.88 per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,290 |
) |
|
|
(17,290 |
) |
Stock issued for employee benefit and performance incentive
compensation programs |
|
|
452 |
|
|
|
14,200 |
|
|
|
(3,687 |
) |
|
|
|
|
|
|
|
|
|
|
10,513 |
|
Income tax benefit resulting from employee exercise of options |
|
|
|
|
|
|
1,274 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,274 |
|
Stock repurchased |
|
|
(240 |
) |
|
|
(9,642 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,642 |
) |
|
Balance at December 31, 2001 |
|
|
19,750 |
|
|
|
104,865 |
|
|
|
(3,687 |
) |
|
|
(63 |
) |
|
|
480,556 |
|
|
|
581,671 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,393 |
) |
|
|
(14,393 |
) |
Net unrealized investment gains (losses), net of taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
236 |
|
|
|
|
|
|
|
236 |
|
Dividends Common Stock $0.88 per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,276 |
) |
|
|
(17,276 |
) |
Stock issued for employee benefit and performance incentive
compensation programs |
|
|
77 |
|
|
|
3,321 |
|
|
|
(115 |
) |
|
|
|
|
|
|
|
|
|
|
3,206 |
|
Income tax benefit resulting from employee exercise of options |
|
|
|
|
|
|
73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
73 |
|
Stock repurchased |
|
|
(404 |
) |
|
|
(15,281 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,281 |
) |
|
Balance at December 31, 2002 |
|
|
19,423 |
|
|
|
92,978 |
|
|
|
(3,802 |
) |
|
|
173 |
|
|
|
448,887 |
|
|
|
538,236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,897 |
|
|
|
23,897 |
|
Net unrealized investment gains (losses), net of taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65 |
|
|
|
|
|
|
|
65 |
|
Dividends Common Stock $0.96 per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18,405 |
) |
|
|
(18,405 |
) |
Stock issued for employee benefit and performance incentive
compensation programs |
|
|
133 |
|
|
|
5,167 |
|
|
|
(603 |
) |
|
|
|
|
|
|
|
|
|
|
4,564 |
|
Income tax benefit resulting from employee exercise of options |
|
|
|
|
|
|
226 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
226 |
|
Stock repurchased |
|
|
(625 |
) |
|
|
(26,583 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(26,583 |
) |
|
Balance at December 31, 2003 |
|
|
18,931 |
|
|
$ |
71,788 |
|
|
$ |
(4,405 |
) |
|
$ |
238 |
|
|
$ |
454,379 |
|
|
$ |
522,000 |
|
|
|
|
|
(1) |
|
Comprehensive income (loss), which includes the aggregate of net income (loss) and net unrealized investment gains (losses), was $23,962, $(14,157), and $15,823, for 2003, 2002, and 2001, respectively. |
See notes to consolidated financial statements.
20
CONSOLIDATED STATEMENTS OF CASH FLOWS
THE LIBERTY CORPORATION AND SUBSIDIARIES
(In $000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31, |
|
|
2003 |
|
2002 |
|
2001 |
OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
23,897 |
|
|
$ |
(14,393 |
) |
|
$ |
16,576 |
|
Cumulative effect of a change in accounting principle |
|
|
|
|
|
|
47,388 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before the cumulative effect of a change in accounting principle |
|
|
23,897 |
|
|
|
32,995 |
|
|
|
16,576 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile income from continuing operations to net cash
provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Loss on disposal of operating assets |
|
|
2,160 |
|
|
|
296 |
|
|
|
147 |
|
Realized investment losses |
|
|
1,729 |
|
|
|
3,544 |
|
|
|
2,211 |
|
Depreciation |
|
|
18,223 |
|
|
|
17,063 |
|
|
|
16,049 |
|
Amortization of intangibles |
|
|
239 |
|
|
|
699 |
|
|
|
15,921 |
|
Amortization of program rights |
|
|
7,214 |
|
|
|
7,281 |
|
|
|
7,937 |
|
Cash paid for program rights |
|
|
(7,097 |
) |
|
|
(7,499 |
) |
|
|
(7,873 |
) |
Provision for deferred income taxes |
|
|
2,153 |
|
|
|
11,900 |
|
|
|
9,497 |
|
Changes in operating assets and liabilities, net of effects of acquisitions: |
|
|
|
|
|
|
|
|
|
|
|
|
Receivables |
|
|
(295 |
) |
|
|
(2,034 |
) |
|
|
526 |
|
Other assets |
|
|
4,049 |
|
|
|
17,638 |
|
|
|
42,865 |
|
Accounts payable and accrued expenses |
|
|
888 |
|
|
|
4,757 |
|
|
|
(52,479 |
) |
Accrued income taxes |
|
|
3,874 |
|
|
|
|
|
|
|
(128,254 |
) |
Unearned revenue |
|
|
6,165 |
|
|
|
4,756 |
|
|
|
881 |
|
Other liabilities |
|
|
(73 |
) |
|
|
(293 |
) |
|
|
(245 |
) |
All other operating activities, net |
|
|
(1,426 |
) |
|
|
695 |
|
|
|
743 |
|
|
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES |
|
|
61,700 |
|
|
|
91,798 |
|
|
|
(75,498 |
) |
|
INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property, plant, and equipment |
|
|
(21,971 |
) |
|
|
(24,704 |
) |
|
|
(13,853 |
) |
Proceeds from sale of property, plant, and equipment |
|
|
262 |
|
|
|
385 |
|
|
|
750 |
|
Investment securities sold |
|
|
|
|
|
|
8,083 |
|
|
|
2,755 |
|
Investment securities acquired |
|
|
(5,900 |
) |
|
|
(13,110 |
) |
|
|
(12,502 |
) |
Proceeds from sale of investment properties |
|
|
3,578 |
|
|
|
1,619 |
|
|
|
2,010 |
|
|
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES |
|
|
(24,031 |
) |
|
|
(27,727 |
) |
|
|
(20,840 |
) |
|
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid |
|
|
(18,405 |
) |
|
|
(17,276 |
) |
|
|
(17,290 |
) |
Stock issued for employee benefit and compensation programs |
|
|
1,579 |
|
|
|
914 |
|
|
|
9,756 |
|
Repurchase of common stock |
|
|
(26,583 |
) |
|
|
(15,281 |
) |
|
|
(9,642 |
) |
|
NET CASH PROVIDED BY(USED IN) FINANCING ACTIVITIES |
|
|
(43,409 |
) |
|
|
(31,643 |
) |
|
|
(17,176 |
) |
|
INCREASE (DECREASE) IN CASH |
|
|
(5,740 |
) |
|
|
32,428 |
|
|
|
(113,514 |
) |
Cash at beginning of year |
|
|
67,917 |
|
|
|
35,489 |
|
|
|
149,003 |
|
|
CASH AT END OF YEAR |
|
$ |
62,177 |
|
|
$ |
67,917 |
|
|
$ |
35,489 |
|
|
See notes to consolidated financial statements.
21
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
THE LIBERTY CORPORATION AND SUBSIDIARIES |
|
|
1. Nature of Operations
The Liberty Corporation and Subsidiaries, (Liberty or the Company), through its operating
subsidiary, Cosmos Broadcasting (Cosmos), owns fifteen network-affiliated television stations
(the stations), principally located in the South and Midwest. In addition, Cosmos owns Cable
Vantage, a cable advertising sales subsidiary, and Broadcast Merchandising Corporation, a
professional broadcast equipment dealership.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements of The Liberty Corporation and Subsidiaries
include the accounts of the Company after elimination of all significant intercompany balances and
transactions.
Variable interest entities are accounted for in accordance with Interpretation of Financial
Standards (FIN) No. 46 Consolidation of Variable Interest Entities (FIN 46). The
Interpretation requires the consolidation of entities by the party that is determined to be the
primary beneficiary (as defined in FIN 46), as a result of its ownership, contractual or other
financial interests in another entity. The Company has evaluated each of its investments to
determine if consolidation of the investee company would be required. This analysis required the
Company to use a number of estimates. These estimates include, among other things, the future cash
flows to be generated by the investee company, terminal multiples for assumed liquidation values,
and discount rates to be used in present value calculations. Based on these analyses, it was
determined that one investment meets the definition of a variable interest entity, but that the
Company is not the primary beneficiary of this entity, and as such none of the Companys
investments should be consolidated at December 31, 2003, or any time prior to that date.
Variable Interest Entities
As noted above, the Company performed an evaluation of its investments to determine if any
investee companies were variable interest entities as defined by FIN 46. One investment was
determined to be a variable interest entity. Liberty is a third party investor of the variable
interest entity and has no other relationship with it or its management. The investee company is
engaged in the development of digital entertainment to be viewed at existing movie theaters.
Liberty acquired its interests from time to time since 2002 through the purchase of convertible
notes. As of December 31, 2003, the carrying value of those notes, and the associated accrued
interest, was approximately $4.9 million. Libertys maximum exposure to loss as a result of its
involvement with this entity is limited to the value of its investment.
Use of Estimates and Assumptions
Financial statements prepared in accordance with accounting principles generally accepted in
the United States require management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying notes to the consolidated
financial statements. Actual results could differ from those estimates and assumptions.
Cash and Cash Equivalents
The Company includes with cash and cash equivalents all highly liquid investments which mature
within three months of the date of acquisition. The Company routinely enters into repurchase
agreements with banks whereby the Company makes overnight purchases of government securities using
its available cash balances. The following day, the bank is required to repurchase the investments
from the Company. The Company generally does not require collateral for these investments.
Overnight investments of $15,772,000 and $9,309,000 were included in cash and cash equivalents at
December 31, 2003 and 2002, respectively.
Receivables
Receivables, net of allowance for doubtful accounts, are carried at cost, which approximates
fair value. The Company calculates its allowance for doubtful accounts based on an estimation
process. The Company uses a mathematical calculation coupled with the specific identification of
certain accounts to estimate its allowance for doubtful accounts. Estimates of the likelihood of
collection are made based on a multi-year historical average of the actual collections experience
at each station. The Company charges accounts receivable off against its allowance for doubtful
accounts when it deems them to be uncollectible on a specific identification basis.
Program Rights
Program rights result from license agreements under which the Company has acquired rights to
broadcast certain television program material, and are stated at cost less amortization. The cost
of rights acquired is recorded as an asset and a liability when the program material has been
accepted and made available for broadcast. Amortization is determined using both straight-line and
accelerated methods over the terms of the license agreements. Carrying amounts are regularly
reviewed by management for indications of impairment and are adjusted when appropriate to estimated
amounts recoverable from future broadcasts of the applicable program material.
FCC Licenses and Goodwill
FCC licenses and goodwill are accounted for in accordance with Statement of Financial
Accounting Standards (SFAS) No. 142 Goodwill and Other Intangible Assets (SFAS No. 142).
SFAS No. 142, which the Company adopted during the first quarter of 2002, requires that intangible
assets with indefinite lives and goodwill no longer be amortized to earnings, but instead be
reviewed for impairment. This review for impairment, performed at least annually, requires
management to make certain estimates to determine the estimated fair value of its individual
stations and its station group as a whole. These estimates include, among other things, the future
cash flows to be generated by its stations, terminal multiples for assumed station sales, discount
rates to be used in present value calculations, assumed values for fixed assets and network
affiliation contracts, and assumed future capital expenditure levels. Actual results and future
market conditions could differ from the estimates and assumptions used.
22
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
THE LIBERTY CORPORATION AND SUBSIDIARIES |
|
|
Program Contract Obligations
Program contract obligations represent the gross amounts to be paid to program suppliers over
the life of the contracts. Program rights acquired through the assumption of program contract
obligations were approximately $7,345,000 and $7,036,000 for 2003 and 2002, respectively.
Commitments for license agreements that were executed but were not reported in the accompanying
balance sheets because they were not available for broadcast were $12,815,000 and $9,266,000 for
2003 and 2002, respectively.
Property, Plant, and Equipment
Property, plant, and equipment are recorded at cost. Depreciation over the estimated useful
lives of the properties is determined principally using the straight-line method with lives ranging
from 3 to 30 years. During the fourth quarter of 2003, the Company changed the estimates of the
useful lives used to account for back-up and redundant equipment. The new estimate results in the
retirement of all assets that have not been utilized in the last twelve to twenty-four months. The
changes in estimates resulted in a charge of $671,000 in the fourth quarter of 2003.
Station Revenues
Station revenues are generated primarily from the sale of television advertising time, and are
recognized in the period during which the advertising spots are aired. Station revenues are
presented net of agency commissions of $31,625,000, $34,147,000, and $27,322,000 in 2003, 2002, and
2001, respectively. Station revenues also include revenues from the sale of advertising space on
the stations internet web sites and from network affiliation contracts. Revenues from internet
advertising and network affiliation contracts are recognized as earned over the lives of the
contracts. Cash payments received in excess of revenue earned to-date on network affiliation
contracts are recorded as unearned revenue.
Cable Advertising Revenues
Cable advertising revenues are generated primarily from assisting local cable operators with
the sale of commercial time available in cable network programs. Revenues are recognized in the
period during which the advertising spots sold by the Company are aired by the local cable
operator. Cable advertising and other revenues are presented net of commissions of $2,651,000,
$2,712,000, and, $1,636,000 in 2003, 2002, and 2001, respectively.
Concentration of Credit Risk
Significant portions of the Companys accounts receivable are due from local and national
advertising agencies. Such amounts are generally unsecured.
Barter Transactions
Revenue from barter transactions is recognized when advertisements are broadcast. Barter
revenue is recognized based on the fair value of merchandise or services received by the Company.
Revenue from barter transactions was $3,576,000, $2,976,000, and $3,198,000 for the years 2003,
2002, and 2001, respectively.
Merchandise or services received are charged to cost and expense when received or used.
Expense related to barter transactions was $3,320,000, $3,079,000, and $3,113,000 for the years
2003, 2002, and 2001, respectively.
Realized and Unrealized Investment Gains and Losses
Available-for-sale securities are stated at fair value, with the unrealized gains and losses,
net of tax, reported in other comprehensive income. Realized gains and losses and declines in
value judged to be other-than-temporary on available-for-sale securities are included in net
investment income. The cost of securities sold is based on the specific identification method.
Interest and dividends on securities classified as available-for-sale are included in net
investment income.
Realized gains and losses on the sale of real estate acquired for development and resale are
included in net investment income. Realized gains and losses include write-downs for impaired
values of investment assets. The Company establishes impairments on specific assets at the time
the Company determines that the assets to have been impaired and the impairment can be estimated.
In performing this determination, management utilizes mathematical models, market information, and
valuation information supplied by investee companies to determine if an impairment exists.
Income Taxes
Income taxes are computed using the liability method as required by SFAS No. 109, Accounting
for Income Taxes (SFAS No 109). Under SFAS No. 109, deferred tax assets and liabilities are
determined based on the differences between the financial reporting and tax basis of assets and
liabilities and are measured using the enacted tax rates and law that will be in effect when the
differences are expected to reverse.
Equity Compensation
In accordance with the provisions of SFAS No. 123, Accounting for Stock-Based Compensation
(SFAS No. 123), the Company has elected to follow the intrinsic value method to account for
stock-based compensation. Under the intrinsic value method, because the exercise price of the
Companys employee stock options at least equals the market price of the underlying stock on the
date of the grant, no compensation expense is recognized.
Pro forma information regarding net income and earnings per share is required by SFAS No. 123,
and has been determined as if the Company had accounted for its employee stock options under the
fair value method of that statement. Please see Note 9 Stock Ownership and Stock Option Plans for
a tabular presentation of this information and additional important disclosures regarding the
Companys equity compensation programs.
The Company accounts for awards of restricted stock in accordance with SFAS No. 123. The
Company recognizes compensation expense equal to the grant date fair value of the restricted stock
awards as compensation expense over the vesting period of the restricted shares.
Reclassifications
Reclassifications have been made in the 2002 and 2001 Consolidated Financial Statements to
conform to the 2003 presentation.
23
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
THE LIBERTY CORPORATION AND SUBSIDIARIES |
|
|
3. Intangible Assets Subject to Amortization
At December 31, 2003, the Companys intangible assets subject to amortization were comprised
of leases acquired through station purchases for space on certain of its towers and loan costs
associated with the Companys unused line of credit. At December 31, 2002, the Companys
intangible assets subject to amortization were comprised of leases acquired through station
purchases for space on certain of its towers, non-compete agreements, and loan costs associated
with the Companys unused line of credit.
Estimated amortization expense resulting from intangible assets subject to amortization for
the five year period ending 2008 is expected to be as follows:
|
|
|
|
|
|
|
Estimated |
(In $000s) |
|
Amortization |
|
2004 |
|
$ |
171 |
|
2005 |
|
|
171 |
|
2006 |
|
|
170 |
|
2007 |
|
|
168 |
|
2008 |
|
|
167 |
|
4. FCC Licenses and Goodwill
FCC licenses, network affiliations, and goodwill are accounted for in accordance with SFAS No.
142 Goodwill and Other Intangible Assets (SFAS No. 142). SFAS No. 142, which the Company
adopted during the first quarter of 2002, requires that intangible assets with indefinite lives and
goodwill no longer be amortized to earnings, but instead be reviewed for impairment. The
Company recorded $15.1 million ($9.4 million net of income taxes) of amortization expense related
to intangibles that are no longer required to be amortized for the year ended December 31, 2001.
In connection with the adoption of SFAS No. 142, the Company reduced the carrying value of its FCC
licenses by $76.4 million ($47.4 million net of income taxes) as a cumulative effect of a change in
accounting principle.
The following table reconciles net income for the period ended December 31, 2001 as reported
to the adjusted December 31, 2001 net income, had SFAS No. 142 been in effect as of January 1,
2001:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In $000s) |
|
2003 |
|
2002 |
|
2001 |
|
Reported income from continuing
operations |
|
$ |
23,897 |
|
|
$ |
32,995 |
|
|
$ |
16,576 |
|
Add back : Goodwill and indefinite
lived intangible amortization (net of
income taxes) |
|
|
|
|
|
|
|
|
|
|
9,371 |
|
|
|
|
Adjusted income from continuing
operations |
|
$ |
23,897 |
|
|
$ |
32,995 |
|
|
$ |
25,947 |
|
|
|
|
The following tables reconcile basic and diluted earnings per share as reported at December
31, 2001, to the adjusted December 31, 2001 basic and diluted earnings per share, had SFAS No. 142
been in effect as of January 1, 2001:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 |
|
2002 |
|
2001 |
|
Basic earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
Reported basic earnings per share from
continuing operations |
|
$ |
1.25 |
|
|
$ |
1.68 |
|
|
$ |
0.85 |
|
Add back : Goodwill and indefinite lived
intangible amortization (net of income taxes) |
|
|
|
|
|
|
|
|
|
|
0.48 |
|
|
|
|
Adjusted basic earnings per share from
continuing operations |
|
$ |
1.25 |
|
|
$ |
1.68 |
|
|
$ |
1.33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 |
|
2002 |
|
2001 |
|
Diluted earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
Reported diluted earnings per share form
continuing operations |
|
$ |
1.24 |
|
|
$ |
1.68 |
|
|
$ |
0.84 |
|
Add back : Goodwill and indefinite lived
intangible amortization (net of income taxes) |
|
|
|
|
|
|
|
|
|
|
0.48 |
|
|
|
|
Adjusted diluted earnings per share from
continuing operations |
|
$ |
1.24 |
|
|
$ |
1.68 |
|
|
$ |
1.32 |
|
|
|
|
At December 31, 2003 and December 31, 2002, the Companys intangible assets not subject
to amortization were comprised of FCC licenses and Goodwill. The Company includes these assets in
the broadcasting segment in Note 15.
5. Investments and Other Assets
The Company had no sales of available-for-sale securities during 2003. The Company realized
$401,000 and $1,053,000 in gains on the sale of available-for-sale securities in 2002, and 2001,
respectively. The Company realized $147,000 and $15,000 in losses on the sale of
available-for-sale securities in 2002, and 2001, respectively. Gains and losses on the sale of
available-for-sale securities are reported in net investment income on the face of the income
statement.
The major classifications of investments and other assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31, |
(In $000s) |
|
2003 |
|
2002 |
|
Private equity investments |
|
$ |
11,629 |
|
|
$ |
10,556 |
|
Private debt securities |
|
|
16,774 |
|
|
|
11,528 |
|
Real estate related investments |
|
|
2,687 |
|
|
|
6,306 |
|
Investments in venture capital funds |
|
|
5,733 |
|
|
|
7,258 |
|
Investments in low income housing tax credits |
|
|
5,310 |
|
|
|
6,343 |
|
Other |
|
|
2,665 |
|
|
|
2,171 |
|
|
|
|
Total investments and other assets |
|
$ |
44,798 |
|
|
$ |
44,162 |
|
|
|
|
24
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
THE LIBERTY CORPORATION AND SUBSIDIARIES |
|
|
Investments in debt securities and marketable equity securities are accounted for in
accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities
(SFAS No. 115). SFAS No. 115 requires that all debt and marketable equity securities be
classified into one of three categories held to maturity, available-for-sale, or trading. The
Company currently has no securities classified as held to maturity or trading.
Investments are generally held in the Corporate segment and are reported on the following
basis:
|
|
|
Private equity investments, all of which represent a voting
interest of less than 20%, are carried at cost, which includes
provisions for impaired value when appropriate. |
|
|
|
|
Private debt securities classified as available-for-sale are
stated at fair value with unrealized gains and losses, after
adjustment for deferred income taxes, reported directly in
shareholders equity in accumulated other comprehensive income
(loss). Fair values for private debt securities are estimated by
discounting the expected future cash flows using a current market
rate applicable to the yield, credit quality, and maturity of the
investments. |
|
|
|
|
Real estate related investments consist primarily of residential
land and lots in various stages of development and completion, and
receivables related to prior land sales. The Companys real estate
properties were held for sale at December 31, 2003 and 2002, and
accordingly are carried at the lower of cost or fair market value
less costs to sell. |
|
|
|
|
Investments in venture capital funds are generally carried at
cost, which includes provisions for impaired value where
appropriate. |
|
|
|
|
Investments in low income housing tax credits are accounted for
using the cost method, in accordance with Emerging Issues Task
Force 94-1 Accounting for Tax Benefits Resulting from Investments
in Affordable Housing Projects. Under the cost method, any
excess of the carrying amount of the investment over its estimated
residual value is amortized over the remaining period during which
the Company is to receive tax credits. |
Certain of the Companys private equity and debt securities have conversion, anti-dilution,
demand registration, and other features typical for instruments of these types. In addition,
certain of these instruments have warrants attached that, if exercised, would allow the Company to
purchase additional shares in certain of its investee companies at predetermined prices. These
securities have maturities of two years or less.
See Note 13 Fair Values of Financial Instruments for further discussion of the methods used to
estimate the fair values of the Companys financial instruments.
6. Revolving Credit Facility
In March 2001, the Company entered into a $100 million unsecured 364-day revolving credit
facility with a bank. The Company renewed the facility for an additional year on substantially
similar terms on May 20, 2002 and May 19, 2003. No amounts have been drawn on this facility since
inception. 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. The facility
provides that the funds drawn may be used for working capital and other general corporate purposes,
capital expenditures, repurchases of common stock, acquisitions, and investments. Subsequent to
December 31, 2003, the Company renewed the $100 million credit facility on substantially similar
terms, extending its maturity date to May 18, 2005.
The Company had no outstanding debt, nor interest expense, during 2003, 2002, or 2001.
7. Shareholders Equity
The Company has adopted a Shareholder Rights Plan and declared a dividend of one preferred
stock purchase right for each outstanding share of common stock. Upon becoming exercisable, each
right entitles the holder to purchase for a price of $150.00 one one-hundredth of a share of Series
A Participating Cumulative Preferred Stock. All of the rights may be redeemed by the Company at a
price of $0.01 per right until ten business days (or such later date as the Board of Directors
determines) after the public announcement that a person or group has acquired beneficial ownership
of 20 percent or more of the outstanding common shares (Acquiring Person). Upon existence of
an Acquiring Person, the Company may redeem the rights only with the concurrence of a majority of
the directors not affiliated with the Acquiring Person. The rights, which do not have voting power
and are not entitled to dividends, expire on August 7, 2010. The rights are not exercisable until
ten business days after the public announcement that a person has become an Acquiring Person or
after the commencement of a tender offer or exchange offer if, upon consummation, such person or
group would become an Acquiring Person. If, after the rights become exercisable, the Company
becomes involved in a merger or certain other major corporate transactions, each right will entitle
its holder, other than the Acquiring Person, to receive common shares with a deemed market value of
twice such exercise price. There are 10,000,000 shares of preferred stock, no par value per share
authorized for issuance. At December 31, 2003 and December 31, 2002, there were 140,000 shares of
preferred stock that were reserved for issuance in connection with the Shareholder Rights Plan.
The Company repurchased through negotiated transactions and in the open market 625,600,
404,400, and 240,000 common shares during 2003, 2002, and 2001, respectively.
The components of unrealized appreciation on fixed maturity securities available for
sale and equity securities in the balance sheet caption Unrealized Investment Gains and Losses (see
Note 14) as of December 31 are as follows:
|
|
|
|
|
|
|
|
|
(In $000s) |
|
2003 |
|
2002 |
|
Carrying value of securities |
|
$ |
16,774 |
|
|
$ |
7,279 |
|
Amortized cost of securities |
|
|
(16,390 |
) |
|
|
(7,000 |
) |
|
|
|
Net unrealized appreciation (depreciation) |
|
|
384 |
|
|
|
279 |
|
Deferred income taxes |
|
|
(146 |
) |
|
|
(106 |
) |
|
|
|
Total |
|
$ |
238 |
|
|
$ |
$173 |
|
|
8. Employee Benefits
The Company has a postretirement plan that provides medical and life insurance benefits for
qualified retired employees. The postretirement medical plan is generally contributory with retiree
contributions adjusted annually to limit employer contributions to predetermined amounts. The
postretirement life plan provides free insurance coverage for retirees and is insured with an
unaffiliated company.
The information presented in this footnote does not reflect the Medicare Prescription Drug
Improvement and Modernization Act of 2003 signed into law December 8, 2003. Specifically, the
measures of the Accumulated Postretirement Benefit Obligation
and the Net Periodic Postretirement Benefit cost shown do not
25
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
THE LIBERTY CORPORATION AND SUBSIDIARIES |
|
|
reflect this ACT. Specific
authoritative guidance on the accounting treatment of the Act is pending and upon issuance, may
require a change in previously reported information.
The information set forth in the tables below is based upon a measurement date of December 31,
of each respective year. Net periodic postretirement benefit cost included the following
components:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In $000s) |
|
2003 |
|
2002 |
|
2001 |
|
Service cost |
|
$ |
27 |
|
|
$ |
29 |
|
|
$ |
26 |
|
Amortization of prior service cost |
|
|
2 |
|
|
|
3 |
|
|
|
3 |
|
Amortization of actuarial net gain |
|
|
|
|
|
|
(3 |
) |
|
|
(3 |
) |
Interest cost |
|
|
111 |
|
|
|
137 |
|
|
|
163 |
|
|
|
|
Net periodic postretirement benefit cost |
|
$ |
140 |
|
|
$ |
166 |
|
|
$ |
189 |
|
|
|
|
The following schedule reconciles the accumulated postretirement benefit obligation included
in other liabilities on the balance sheets as of December 31:
|
|
|
|
|
|
|
|
|
(In $000s) |
|
2003 |
|
2002 |
|
Benefit obligation at beginning of year |
|
$ |
1,723 |
|
|
$ |
1,979 |
|
Service cost |
|
|
27 |
|
|
|
29 |
|
Interest cost |
|
|
111 |
|
|
|
137 |
|
Plan participants contributions |
|
|
165 |
|
|
|
156 |
|
Benefits paid |
|
|
(407 |
) |
|
|
(305 |
) |
Actuarial gain (loss ) |
|
|
640 |
|
|
|
(273 |
) |
|
|
|
Benefit obligation at end of year |
|
$ |
2,259 |
|
|
$ |
1,723 |
|
|
|
|
The following schedule reconciles the status of the Companys plan with the unfunded
postretirement benefit obligation included in its balance sheets at December 31:
|
|
|
|
|
|
|
|
|
(In $000s) |
|
2003 |
|
2002 |
|
Funded status |
|
$ |
2,259 |
|
|
$ |
1,723 |
|
Unrecognized prior service cost |
|
|
(18 |
) |
|
|
(21 |
) |
Unrecognized net gain (loss) |
|
|
(488 |
) |
|
|
152 |
|
|
|
|
Accrued postretirement benefit obligation |
|
$ |
1,753 |
|
|
$ |
1,854 |
|
|
|
|
The weighted-average discount rate is 6.25% and 6.75% for 2003 and 2002, respectively. At
December 31, 2003, a 5.5% annual rate of increase in the per capita cost of covered medical
benefits was assumed for 2004. The rate was to remain at 5.5% in 2004 and thereafter. At
December 31, 2002, a 5.5% annual rate of increase in the per capita cost of covered medical
benefits was assumed for 2003. The rate was to remain at 5.5% in 2003 and thereafter. Assumed
health care cost trend rates have a significant effect on the amounts reported for the medical
plans. The Company expects its contributions to the Plan for the year 2004 to be approximately
$226,000.
A one-percentage-point change in assumed health care cost trend rates would have the following
effects:
|
|
|
|
|
|
|
|
|
|
|
1% |
|
1% |
(In $000s) |
|
Increase |
|
Decrease |
|
Effect on total of service
and interest rate
components |
|
$ |
1 |
|
|
$ |
(1 |
) |
Effect on postretirement
benefit obligation |
|
$ |
6 |
|
|
$ |
(6 |
) |
The Company has a retirement and savings plan for substantially all of its employees. The
Plan has features of both a profit sharing plan and a voluntary thrift plan qualified under Section
401(k) of the Internal Revenue Code. The profit sharing component of the Plan allows for
contributions to be made to the Plan at the discretion of the Board of Directors, of which up to
50% may be made in the form of Company common stock. Contributions for this component of the Plan
were $2,997,000, $3,022,000, and $2,975,000 in 2003, 2002, and 2001, respectively. The 401(k)
component of the Plan allows employees to contribute to the Plan and the Company will make a
matching contribution of up to 3% of the employees compensation. The Companys matching
contribution percentage may be changed at the discretion of the Companys Board of Directors. The
Companys contributions for this component of the Plan were $1,619,000, $1,551,000, and $1,214,000
in 2003, 2002, and 2001, respectively.
9. Stock Ownership and Stock Option Plans
The Company has a Performance Incentive Compensation Program (the Program) which provides
that the Compensation Committee of the Board of Directors may grant: (a) incentive stock options
within the meaning of Section 422 of the Internal Revenue Code; (b) non-qualified stock options;
(c) performance units; (d) awards of restricted shares of the Companys common stock; (e) awards of
unrestricted shares of the Companys common stock; (f) phantom stock units; (g) or any combination
of the foregoing to outside directors, officers and key employees provided, however, that
non-employee directors are not eligible to receive incentive stock options. Only common stock, not
to exceed 5,000,000 shares, may be delivered under the Program; shares so delivered will be made
available from the authorized but unissued shares or from shares reacquired by the Company,
including shares purchased in the open market. The aggregate number of shares that may be acquired
by any participant in the Program is limited to a maximum of 400,000 stock options during a single
calendar year and a maximum of 100,000 shares of other stock-based awards during a single calendar
year. As of December 31, 2003, 51 employees, officers and outside directors were participants in
the Program.
Restricted shares awarded to participants under the Program generally vest either in equal
annual installments or as a lump sum, generally over a five-year period commencing on the date the
shares are awarded. Vesting of restricted shares may be contingent on the achievement of certain
performance goals as established by the Compensation Committee at the time of the grant.
Non-vested shares may not be assigned, transferred, pledged or otherwise encumbered or disposed of.
During the applicable restriction period, the Company retains possession of the restricted shares.
Participants are entitled to dividends and voting rights with respect to the restricted shares.
Stock options under the Program are issued at least at 100% of the market price on the date of
grant, are vested over such period of time, which generally may not be less than one year, as may
be established by the Compensation Committee, and expire no more than ten years after the grant.
Of the non-qualified options outstanding, 562,958 were exercisable at December 31, 2003;
454,259 were exercisable at December 31, 2002; and 305,278 were exercisable at December
31, 2001. The options expire on various dates beginning May 7, 2004, and ending June 13,
2012.
26
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
THE LIBERTY CORPORATION AND SUBSIDIARIES |
|
|
In accordance with the provisions of SFAS No. 123, Accounting for Stock-Based Compensation,
the Company has elected to follow Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees (APB No. 25) and related interpretations in accounting for its plans and
does not recognize compensation expense for its stock-based compensation plans other than for
awards of restricted shares. Expense is recognized over the vesting period of the restricted
shares. Expense related to restricted shares totaled $1,928,000, $990,000, and $757,000 for the
years ended December 31, 2003, 2002, and 2001 respectively.
Under APB No. 25, because the exercise price of the Companys employee stock options at least
equals the market price of the underlying stock on the date of the grant, no compensation expense
is recognized. Pro forma information regarding net income and earnings per share is required by
SFAS No. 123, and is determined as if the Company accounted for its employee stock options under
the fair value method of that statement.
The Company granted no stock options during 2003. The weighted average grant-date estimated
fair value of grants during 2002 and 2001 using a Black-Scholes option valuation model, and the
weighted average assumptions used to determine the estimated fair value were as follows:
|
|
|
|
|
|
|
|
|
|
|
2002 |
|
2001 |
|
Estimated fair value |
|
$ |
9.55 |
|
|
$ |
8.27 |
|
Underlying assumptions used to determine estimated
fair value: |
|
|
|
|
|
|
|
|
Risk free interest rate |
|
|
4.40 |
% |
|
|
4.88 |
% |
Dividend yield |
|
|
2.2 |
% |
|
|
2.6 |
% |
Expected stock price volatility |
|
|
0.23 |
|
|
|
0.23 |
|
Weighted average expected life |
|
6 years |
|
7 years |
The Black-Scholes option valuation model was developed for use in estimating the fair
value of traded options that have no vesting restrictions and are fully transferable. In addition,
option valuation models require the input of highly subjective assumptions including the expected
stock price volatility.
Because the Companys employee stock options have characteristics significantly different from
those of traded options, and because changes in the subjective input assumptions can materially
affect the fair value estimate, in managements opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the options is amortized to
expense over the options vesting periods. The Companys pro forma information is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In $000s, except per share amounts) |
|
2003 |
|
2002 |
|
2001 |
|
Stock-based compensation cost included
in net income (net of taxes) |
|
$ |
1,205 |
|
|
$ |
619 |
|
|
$ |
469 |
|
|
|
|
Net income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
As Reported |
|
$ |
23,897 |
|
|
$ |
(14,393 |
) |
|
$ |
16,576 |
|
Pro forma compensation expense (net of
taxes) |
|
|
(774 |
) |
|
|
(901 |
) |
|
|
(688 |
) |
|
|
|
Pro forma net income (loss) |
|
$ |
23,123 |
|
|
$ |
(15,294 |
) |
|
$ |
15,888 |
|
|
|
|
Basic Earnings (Loss) per Share: |
|
|
|
|
|
|
|
|
|
|
|
|
As Reported |
|
$ |
1.25 |
|
|
$ |
(0.73 |
) |
|
$ |
0.85 |
|
Pro forma |
|
|
1.21 |
|
|
|
(0.78 |
) |
|
|
0.81 |
|
Diluted Earnings (Loss) per Share: |
|
|
|
|
|
|
|
|
|
|
|
|
As Reported |
|
$ |
1.24 |
|
|
$ |
(0.73 |
) |
|
$ |
0.84 |
|
Pro forma |
|
|
1.20 |
|
|
|
(0.78 |
) |
|
|
0.81 |
|
27
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
THE LIBERTY CORPORATION AND SUBSIDIARIES |
|
|
The following table summarizes activity in the Program during the three years ending
December 31, 2003:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Qualified |
|
|
|
Restricted Shares |
|
|
Stock Options |
|
|
|
|
|
|
|
Market |
|
|
|
|
|
|
|
|
|
|
Number |
|
|
Price at |
|
|
|
|
|
|
Average |
|
|
|
of |
|
|
Date |
|
|
Number |
|
|
Exercise |
|
|
|
Shares |
|
|
Given |
|
|
of Options |
|
|
Price |
|
|
Outstanding
at January 1, 2001 |
|
|
|
|
|
|
|
|
|
|
1,005,925 |
|
|
$ |
37.86 |
|
Awarded |
|
|
125,000 |
|
|
$ |
35.55 |
|
|
|
857,000 |
|
|
$ |
33.54 |
|
Vested |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised |
|
|
|
|
|
|
|
|
|
|
(326,180 |
) |
|
$ |
29.91 |
|
Forfeited |
|
|
|
|
|
|
|
|
|
|
(392,207 |
) |
|
$ |
43.57 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at
December 31, 2001 |
|
|
125,000 |
|
|
|
|
|
|
|
1,144,538 |
|
|
$ |
34.94 |
|
Awarded |
|
|
32,500 |
|
|
$ |
34.00 |
|
|
|
35,100 |
|
|
$ |
39.50 |
|
Vested |
|
|
(25,000 |
) |
|
$ |
35.55 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
|
|
|
|
|
|
|
|
(27,344 |
) |
|
$ |
33.44 |
|
Forfeited |
|
|
|
|
|
|
|
|
|
|
(4,550 |
) |
|
$ |
45.50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at
December 31, 2002 |
|
|
132,500 |
|
|
|
|
|
|
|
1,147,744 |
|
|
$ |
35.07 |
|
Awarded |
|
|
60,300 |
|
|
$ |
42.07 |
|
|
|
|
|
|
|
|
|
Vested |
|
|
(46,300 |
) |
|
$ |
39.98 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
|
|
|
|
|
|
|
|
(45,184 |
) |
|
$ |
34.99 |
|
Forfeited |
|
|
|
|
|
|
|
|
|
|
(68,350 |
) |
|
$ |
34.83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at
December 31, 2003 |
|
|
146,500 |
|
|
|
|
|
|
|
1,034,210 |
|
|
$ |
35.09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes information concerning currently outstanding and
exercisable stock options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wtd. |
|
|
|
|
|
Wtd. |
|
|
Number |
|
Wtd. Avg. |
|
Avg. |
|
Number |
|
Avg. |
Range of |
|
Out- |
|
Remaining |
|
Exercise |
|
Exercis- |
|
Exercise |
Exercise Prices |
|
standing |
|
Life |
|
Price |
|
able |
|
Price |
|
$25.75 - $29.99 |
|
|
15,000 |
|
|
|
0.39 |
|
|
$ |
25.75 |
|
|
|
15,000 |
|
|
$ |
25.75 |
|
$30.00 - $39.99 |
|
|
853,850 |
|
|
|
6.98 |
|
|
$ |
33.81 |
|
|
|
382,598 |
|
|
$ |
33.62 |
|
$40.00 - $51.88 |
|
|
165,360 |
|
|
|
3.93 |
|
|
$ |
42.60 |
|
|
|
165,360 |
|
|
$ |
42.60 |
|
|
Total or wtd. average |
|
|
1,034,210 |
|
|
|
6.39 |
|
|
$ |
35.09 |
|
|
|
562,958 |
|
|
$ |
36.09 |
|
At December 31, 2003, there were 669,138 shares of the Companys stock reserved for future
grants under the Program.
10. Provision for Income Taxes
The provision for income taxes from continuing operations consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In $000s) |
|
2003 |
|
2002 |
|
2001 |
|
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
10,614 |
|
|
$ |
7,274 |
|
|
$ |
|
|
State and local |
|
|
1,572 |
|
|
|
622 |
|
|
|
663 |
|
|
|
|
Total current |
|
|
12,186 |
|
|
|
7,896 |
|
|
|
663 |
|
Deferred: |
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
|
2,052 |
|
|
|
10,960 |
|
|
|
8,747 |
|
State and local |
|
|
101 |
|
|
|
940 |
|
|
|
750 |
|
|
|
|
Total deferred |
|
|
2,153 |
|
|
|
11,900 |
|
|
|
9,497 |
|
|
|
|
Total tax provision |
|
$ |
14,339 |
|
|
$ |
19,796 |
|
|
$ |
10,160 |
|
|
|
|
Cumulative effect of a
change in accounting
principle |
|
$ |
|
|
|
$ |
(29,045 |
) |
|
$ |
|
|
Deferred income taxes reflect the tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for income
tax purposes. In addition, accruals for potential tax exposure items are included in the deferred
income tax liabilities.
Significant components of the Companys deferred tax liabilities and assets as of December 31,
2003 and 2002 are as follows:
|
|
|
|
|
|
|
|
|
(In $000s) |
|
2003 |
|
2002 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
Basis in fixed assets |
|
$ |
12,603 |
|
|
$ |
11,837 |
|
Basis in intangible assets |
|
|
91,272 |
|
|
|
88,243 |
|
Basis in partnerships |
|
|
|
|
|
|
411 |
|
|
|
|
Total deferred tax liabilities |
|
|
103,875 |
|
|
|
100,491 |
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
Bad debts |
|
|
657 |
|
|
|
839 |
|
Net operating losses/tax credits/
capital losses |
|
|
8,097 |
|
|
|
8,607 |
|
Employee benefits |
|
|
3,936 |
|
|
|
1,582 |
|
Impairment of assets |
|
|
357 |
|
|
|
2,046 |
|
Unearned revenue |
|
|
4,458 |
|
|
|
2,178 |
|
Book over tax partnership losses |
|
|
586 |
|
|
|
|
|
Other, net |
|
|
|
|
|
|
550 |
|
Valuation reserves |
|
|
(1,450 |
) |
|
|
(1,450 |
) |
|
|
|
Total deferred tax assets |
|
|
16,641 |
|
|
|
14,352 |
|
|
|
|
Net deferred tax liability |
|
$ |
87,234 |
|
|
$ |
86,139 |
|
|
|
|
The following table reconciles income tax from continuing operations computed at the U.S.
federal statutory tax rates to income tax expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In $000s) |
|
2003 |
|
2002 |
|
2001 |
|
Federal income tax rate |
|
|
35 |
% |
|
|
35 |
% |
|
|
35 |
% |
Rate applied to pre-tax income |
|
$ |
13,383 |
|
|
$ |
18,476 |
|
|
$ |
9,358 |
|
State taxes, net of federal tax
benefit |
|
|
2,118 |
|
|
|
2,275 |
|
|
|
1,503 |
|
Tax credits |
|
|
(1,331 |
) |
|
|
(1,000 |
) |
|
|
(1,200 |
) |
Other |
|
|
169 |
|
|
|
45 |
|
|
|
499 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
$ |
14,339 |
|
|
$ |
19,796 |
|
|
$ |
10,160 |
|
|
|
|
As of December 31, 2003, the Company has federal operating loss carryforwards of approximately
$1,277,000. These were acquired by the Company through the purchase of WWAY-TV in December, 1998,
and expire in 2015. They will be utilized against future earnings, but are limited to $1,600,000
per year. The Company also has state operating loss carryforwards of approximately $122,883,000
expiring from 2004 to 2017. The Company utilized state operating loss carryforwards of
approximately $21,460,000 and $27,000,000 in 2003 and 2002, respectively. Income taxes paid were
approximately $8,176,000, $8,954,000, and $663,000 in 2003, 2002, and 2001, respectively.
11. Quarterly Results of Operations (Unaudited)
During the fourth quarter of 2003, the Company changed the estimates of the useful lives
used to account for back-up and redundant equipment. The new estimate results in the retirement of
all assets that have not been utilized in the last twelve to twenty-four months. The change in
estimate resulted in a charge of $671,000 in the fourth quarter of 2003.
28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE LIBERTY CORPORATION AND SUBSIDIARIES
Quarterly results of operations for each of the years ended December 31, 2003 and 2002 are as
follows:
(In $000s, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended 2003 |
|
|
March 31 |
|
June 30 |
|
Sept. 30 |
|
Dec. 31 |
|
|
|
Net revenues |
|
$ |
43,929 |
|
|
$ |
51,666 |
|
|
$ |
49,075 |
|
|
$ |
55,614 |
|
Operating income |
|
$ |
5,472 |
|
|
$ |
11,512 |
|
|
$ |
9,116 |
|
|
$ |
12,484 |
|
Net income |
|
$ |
3,355 |
|
|
$ |
6,792 |
|
|
$ |
6,119 |
|
|
$ |
7,631 |
|
Basic earnings
per share |
|
$ |
0.17 |
|
|
$ |
0.36 |
|
|
$ |
0.32 |
|
|
$ |
0.40 |
|
Diluted earnings
per share |
|
$ |
0.17 |
|
|
$ |
0.35 |
|
|
$ |
0.32 |
|
|
$ |
0.40 |
|
(In $000s, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended 2002 |
|
|
March 31 |
|
June 30 |
|
Sept. 30 |
|
Dec. 31 |
|
|
|
Net revenues |
|
$ |
42,826 |
|
|
$ |
51,805 |
|
|
$ |
50,166 |
|
|
$ |
61,881 |
|
Operating income |
|
$ |
6,592 |
|
|
$ |
14,059 |
|
|
$ |
11,596 |
|
|
$ |
19,928 |
|
Income before the
cumulative effect of
a change in
accounting principle |
|
$ |
4,088 |
|
|
$ |
8,840 |
|
|
$ |
7,177 |
|
|
$ |
12,890 |
|
Cumulative effect of
a change in
accounting principle |
|
$ |
(47,388 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(43,300 |
) |
|
$ |
8,840 |
|
|
$ |
7,177 |
|
|
$ |
12,890 |
|
Basic earnings (loss)
per share |
|
$ |
(2.21 |
) |
|
$ |
0.45 |
|
|
$ |
0.37 |
|
|
$ |
0.66 |
|
Diluted earnings
(loss) per share |
|
$ |
(2.19 |
) |
|
$ |
0.44 |
|
|
$ |
0.36 |
|
|
$ |
0.66 |
|
12. Earnings Per Share
The following tables reconcile the numerators and denominators for the basic and diluted
earnings from continuing operations per share calculations for the years ended December 31, 2003,
2002, and 2001:
(In $000s, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
Per |
|
|
|
Income |
|
|
(Denom- |
|
|
Share |
|
For the Year Ended 2003 |
|
(Numerator) |
|
|
inator) |
|
|
Amount |
|
|
Basic EPS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before the cumulative
effect of a change in accounting
principle available to common
shareholders |
|
|
23,898 |
|
|
|
19,123 |
|
|
$ |
1.25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Dilutive Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options |
|
|
|
|
|
|
125 |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before the cumulative
effect of a change in accounting
principle available to common
shareholders plus assumed
conversions |
|
$ |
23,898 |
|
|
|
19,248 |
|
|
$ |
1.24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(In $000s, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
Per |
|
|
|
Income |
|
|
(Denom- |
|
|
Share |
|
For the Year Ended 2002 |
|
(Numerator) |
|
|
inator) |
|
|
Amount |
|
|
Basic EPS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before the
cumulative effect of a change in
accounting principle available
to common shareholders |
|
|
32,995 |
|
|
|
19,610 |
|
|
$ |
1.68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Dilutive Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options |
|
|
|
|
|
|
84 |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before the
cumulative effect of a change in
accounting principle available
to common shareholders plus
assumed conversions |
|
$ |
32,995 |
|
|
|
19,694 |
|
|
$ |
1.68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(In $000s, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
Per |
|
|
|
Income |
|
|
(Denom- |
|
|
Share |
|
For the Year Ended 2001 |
|
(Numerator) |
|
|
inator) |
|
|
Amount |
|
|
Basic EPS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before the
cumulative effect of a change
in accounting principle
available to common
shareholders |
|
|
16,576 |
|
|
|
19,581 |
|
|
$ |
0.85 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Dilutive Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options |
|
|
|
|
|
|
99 |
|
|
|
|
|
Diluted EPS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before the
cumulative effect of a change
in accounting principle
available to common
shareholders plus assumed
conversions |
|
$ |
16,576 |
|
|
|
19,680 |
|
|
$ |
0.84 |
|
|
|
|
|
|
|
|
|
|
|
|
|
The diluted income from continuing operations per common share calculation excludes the
effect of potentially dilutive shares when the inclusion of those shares in the calculation would
have an anti-dilutive effect.
13. Fair Values of Financial Instruments
SFAS No. 107, Disclosures about Fair Value of Financial Instruments requires the disclosure
of the estimated fair value of all financial instruments, including both assets and liabilities,
unless specifically exempted. The following methods were used to estimate the fair values of the
Companys financial instruments.
|
|
Cash and cash equivalents: The carrying amounts reported in the
balance sheet for these instruments approximate their fair values. |
|
|
Receivables, income taxes receivable, and accounts payable: The
carrying amounts reported in the balance sheet for these
instruments approximate their fair value due to the short maturity
of these items. |
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE LIBERTY CORPORATION AND SUBSIDIARIES
|
|
Program contract obligations: Fair values on program contract obligations are
estimated to approximate their carrying value as a result of their short term
nature. |
|
|
Private debt securities: The carrying amounts
reported in the balance sheet for these securities
approximate their fair value. Fair values are
estimated by discounting the expected future cash
flows using a current market rate applicable to the
yield, credit quality, and maturity of the
investments. |
|
|
Marketable equity securities: The fair values for the
available-for-sale marketable equity securities are
based on quoted market prices. |
|
|
Investments in private equity securities, venture
capital funds, and low income housing tax credits:
The Company determined that it was not practicable to
estimate the fair values of its private equity,
venture capital and low income housing tax credit
investments because of a lack of primary and
secondary market prices and the inability to estimate
fair values without incurring excessive costs. |
14. Comprehensive Income
The components of other comprehensive income (loss) and the related tax effects, for the
years 2003, 2002, and 2001 are as follows:
(In $000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income |
|
|
|
|
Amount |
|
Tax |
|
Amount |
For the Year Ended |
|
Before |
|
(Expense) |
|
Net of |
December 31, 2003 |
|
Taxes |
|
Benefit |
|
Taxes |
|
Unrealized gain on available for
sale securities |
|
$ |
384 |
|
|
$ |
(146 |
) |
|
$ |
238 |
|
Less: reclassification adjustment for
losses realized in net income |
|
|
|
|
|
|
|
|
|
|
-- |
|
|
Net unrealized income (loss) |
|
$ |
384 |
|
|
$ |
(146 |
) |
|
$ |
238 |
|
|
Total comprehensive income (loss) |
|
$ |
384 |
|
|
$ |
(146 |
) |
|
$ |
238 |
|
|
(In $000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income |
|
|
|
|
Amount |
|
Tax |
|
Amount |
For the Year Ended |
|
Before |
|
(Expense) |
|
Net of |
December 31, 2002 |
|
Taxes |
|
Benefit |
|
Taxes |
|
Unrealized gain on available for
sale securities |
|
$ |
380 |
|
|
$ |
(144 |
) |
|
$ |
236 |
|
Less: reclassification adjustment for
losses realized in net income |
|
|
(101 |
) |
|
|
38 |
|
|
|
(63 |
) |
|
Net unrealized income (loss) |
|
$ |
279 |
|
|
$ |
(106 |
) |
|
$ |
173 |
|
|
Total comprehensive income (loss) |
|
$ |
279 |
|
|
$ |
(106 |
) |
|
$ |
173 |
|
|
(In $000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income |
|
|
|
|
Amount |
|
Tax |
|
Amount |
For the Year Ended |
|
Before |
|
(Expense) |
|
Net of |
December 31, 2001 |
|
Taxes |
|
Benefit |
|
Taxes |
|
Unrealized gain on available
for sale securities |
|
$ |
1,029 |
|
|
$ |
(391 |
) |
|
$ |
638 |
|
Less: reclassification adjustment
for gains realized in net income |
|
|
(1,130 |
) |
|
|
429 |
|
|
|
(701 |
) |
|
Net unrealized income |
|
$ |
(101 |
) |
|
$ |
38 |
|
|
$ |
(63 |
) |
|
Total comprehensive income (loss) |
|
$ |
(101 |
) |
|
$ |
38 |
|
|
$ |
(63 |
) |
|
15. Segment Information
The Company operates primarily in the television broadcasting and cable advertising
businesses. The Company currently owns and operates fifteen television stations, located
principally 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 operating income, excluding unusual or non-operating items.
The following tables summarize financial information by segment for the periods ended December
31, 2003, 2002, and 2001, respectively:
(In $000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and For the Year |
|
|
|
|
|
|
|
|
|
Corporate |
|
|
|
|
Ended December 31, 2003 |
|
Broadcasting |
|
|
Cable |
|
|
& Other |
|
|
Total |
|
|
Revenues (net of commissions) |
|
$ |
184,636 |
|
|
$ |
15,334 |
|
|
$ |
314 |
|
|
$ |
200,284 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
|
115,799 |
|
|
|
12,800 |
|
|
|
14,639 |
|
|
|
143,238 |
|
Depreciation and
amortization |
|
|
16,170 |
|
|
|
544 |
|
|
|
1,748 |
|
|
|
18,462 |
|
|
|
|
Total operating expenses |
|
|
131,969 |
|
|
|
13,344 |
|
|
|
16,387 |
|
|
|
161,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
52,667 |
|
|
|
1,990 |
|
|
|
(16,073 |
) |
|
|
38,584 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
(loss) |
|
|
|
|
|
|
|
|
|
|
(348 |
) |
|
|
(348 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income
taxes and the cumulative
effect of a change in
accounting principle |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
38,236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
|
$ |
599,089 |
|
|
$ |
4,489 |
|
|
$ |
58,687 |
|
|
$ |
662,265 |
|
Expenditures for property,
plant, and equipment |
|
$ |
20,755 |
|
|
$ |
289 |
|
|
$ |
927 |
|
|
$ |
21,971 |
|
(In $000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and For the Year |
|
|
|
|
|
|
|
|
|
Corporate |
|
|
|
|
Ended December 31, 2002 |
|
Broadcasting |
|
|
Cable |
|
|
& Other |
|
|
Total |
|
|
Revenues (net of
commissions) |
|
$ |
190,452 |
|
|
$ |
15,816 |
|
|
$ |
410 |
|
|
$ |
206,678 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
|
109,655 |
|
|
|
12,916 |
|
|
|
14,170 |
|
|
|
136,741 |
|
Depreciation and
amortization |
|
|
15,813 |
|
|
|
623 |
|
|
|
1,326 |
|
|
|
17,762 |
|
|
|
|
Total operating expenses |
|
|
125,468 |
|
|
|
13,539 |
|
|
|
15,496 |
|
|
|
154,503 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
64,984 |
|
|
|
2,277 |
|
|
|
(15,086 |
) |
|
|
52,175 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
(loss) |
|
|
|
|
|
|
|
|
|
|
616 |
|
|
|
616 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income
taxes and the cumulative
effect of a change in
accounting principle |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
52,791 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
|
$ |
600,419 |
|
|
$ |
4,683 |
|
|
$ |
65,649 |
|
|
$ |
670,751 |
|
Expenditures for property,
plant, and equipment |
|
$ |
21,472 |
|
|
$ |
253 |
|
|
$ |
2,979 |
|
|
$ |
24,704 |
|
(In $000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and For the Year |
|
|
|
|
|
|
|
|
|
Corporate |
|
|
|
|
Ended December 31, 2001 |
|
Broadcasting |
|
|
Cable |
|
|
& Other |
|
|
Total |
|
|
Revenues (net of
commissions) |
|
$ |
165,211 |
|
|
$ |
12,144 |
|
|
$ |
1,076 |
|
|
$ |
178,431 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
|
100,403 |
|
|
|
11,434 |
|
|
|
11,974 |
|
|
|
123,811 |
|
Depreciation and
amortization |
|
|
29,453 |
|
|
|
635 |
|
|
|
1,882 |
|
|
|
31,970 |
|
|
|
|
Total operating expenses |
|
|
129,856 |
|
|
|
12,069 |
|
|
|
13,856 |
|
|
|
155,781 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
35,355 |
|
|
|
75 |
|
|
|
(12,780 |
) |
|
|
22,650 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
(loss) |
|
|
|
|
|
|
|
|
|
|
4,086 |
|
|
|
4,086 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
and the cumulative effect
of a change in
accounting principle |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
26,736 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
|
$ |
597,251 |
|
|
$ |
5,006 |
|
|
$ |
127,938 |
|
|
$ |
730,195 |
|
Expenditures for property,
plant, and equipment |
|
$ |
10,734 |
|
|
$ |
643 |
|
|
$ |
2,476 |
|
|
$ |
13,853 |
|
30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE LIBERTY CORPORATION AND SUBSIDIARIES
16. Commitments and Contingencies
The Company and its subsidiaries are defendants in various lawsuits arising in the ordinary
course of business. It is the opinion of management and legal counsel that these actions will not
have a material effect on the financial position or results of operations of the Company. The
Company has lease agreements for broadcast, data processing, and telephone equipment, along with
rent for certain office space. Most of these agreements have optional renewal provisions covering
additional periods of one to ten years. All leases were made in the ordinary course of business
and contain no significant restrictions or obligations. Annual rental expense amounted to
approximately $1,343,000 $1,023,000 and $871,000 in 2003, 2002, and 2001, respectively.
Future commitments under operating leases are shown below:
|
|
|
|
|
Year |
|
(In $000s) |
|
2004 |
|
$ |
417 |
|
2005 |
|
|
352 |
|
2006 |
|
|
193 |
|
2007 |
|
|
5 |
|
2008 |
|
|
4 |
|
Thereafter |
|
|
7 |
|
|
|
|
|
Total |
|
$ |
978 |
|
|
|
|
|
The Company has also entered into commitments for various television programming rights for
which the license periods have not yet commenced. See the caption Program Contract Obligation
included in Note 2 for further details.
The Company also has committed to make certain investments in its venture capital funds when
called by the funds manager and to provide additional financing related to certain of its private
debt holdings. The Company anticipates additional funding related to its venture capital portfolio
of $1,038,000 over the next one to three years, and funding of its private debt and equity holdings
of approximately $450,000 during 2004.
31
MANAGEMENTS RESPONSIBILITY FOR FINANCIAL REPORTING
The consolidated financial statements included in this Annual Report have been prepared
by management, which is responsible for the integrity and fair presentation of the financial
data and related disclosures. The consolidated financial statements are in accordance with
accounting principles generally accepted in the United States and necessarily include amounts
that are based on managements estimates and assumptions. Management believes that the
consolidated financial statements fairly reflect the Companys financial position and results
of operations.
To gather and control financial data, the Company maintains accounting systems supported
by internal controls that provide reasonable assurance over the preparation of reliable
financial statements. Management believes that a high level of internal control is maintained
by the selection and training of qualified personnel and by the establishment and
communication of accounting and business policies.
Ernst & Young LLP, independent auditors, are engaged to audit and to render an opinion as
to whether the Companys financial statements, considered in the entirety, present the
Companys financial condition and operating results fairly. Their audit is conducted in
accordance with auditing standards generally accepted in the United States, and their report
is included on this page.
The Audit Committee of the Board of Directors, composed of three outside directors,
reviews the Companys accounting and auditing policies and meets regularly with the Companys
independent auditors.
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
The Liberty Corporation
We have audited the accompanying consolidated balance sheets of The Liberty
Corporation and Subsidiaries as of December 31, 2003 and 2002, and the related consolidated
statements of income, shareholders equity and cash flows for each of the three years in the
period ended December 31, 2003. Our audits also included the financial statement schedule
listed in the index at item 15(a). These financial statements and schedule are the
responsibility of the Companys management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the
United States. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of The Liberty Corporation and
Subsidiaries at December 31, 2003 and 2002, and the consolidated results of their operations
and their cash flows for each of the three years in the period ended December 31, 2003, in
conformity with accounting principles generally accepted in the United States. Also, in our
opinion, the related financial statement schedule, when considered in relation to the basic
financial statements and schedule taken as a whole, presents fairly in all material respects
the information set forth therein.
As discussed in Note 4 to the consolidated financial statements, the Company was required
to adopt Financial Accounting Standards Statement No. 142 Goodwill and Other Intangible
Assets as of January 1, 2002, and accordingly changed its method of accounting for goodwill
and other intangible assets.
/s/ Ernst & Young LLP
Greenville, South Carolina
February 3, 2004
32
Item 9. Changes in and Disagreements with Accountant on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
The Company carried out an evaluation, under the supervision and with the participation of the
Companys management, including the Companys Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of the Companys disclosure controls and
procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that, as of the end of the period covered by this
report, the Companys disclosure controls and procedures are effective to ensure that information
required to be disclosed in the Companys reports filed or submitted under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified in the SECs rules
and forms, and are also effective to ensure that information required to be disclosed in the
Companys reports filed or submitted under the Exchange Act is accumulated and communicated to the
Companys management, including the principal executive and principal financial officers, to allow
timely decisions regarding required disclosure. During the fourth fiscal quarter, there has been
no change in the Companys internal control over financial reporting that has materially affected,
or is reasonably likely to materially affect, the registrants internal control over financial
reporting.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information concerning Directors of the Company is contained in The Liberty Corporation
Proxy Statement for the May 4, 2004 Annual Meeting of Shareholders and is incorporated in this Item
10 by reference.
Executive Officers
The following is a list of the Executive Officers of the Registrant indicating their age and
certain biographical data.
W. HAYNE HIPP, Age 64
Chairman of the Board of Liberty since May, 1995
Chairman of the Board of Cosmos since May, 1995
Chief Executive Officer of Liberty since January, 1979
HOWARD L. SCHROTT, Age 49
Chief Financial Officer of Liberty since January, 2001
Chief Financial Officer of Wink Communications Inc., a provider of complete end-to-end systems for low-cost
electronic commerce on television, from May, 1999 to December, 2000
Chief Financial Officer of Emmis Communications Corporation, a diversified media company, from 1991, to May, 1999
JAMES M. KEELOR, Age 61
President of Liberty since February, 2002
President of Cosmos since February, 1992
Vice President, Operations, of Cosmos from December, 1989 to February, 1992
MARTHA G. WILLIAMS, Age 62
Vice President, General Counsel & Secretary of Liberty since January, 1982
Secretary and Counsel of Cosmos since February, 1982
JONATHAN W. NORWOOD, Age 35
Controller of Liberty since April, 2001
Chief Financial Officer of TeamVest, a provider of 401(k) retirement plan services, from January, 2000 to
March, 2001
Director of Finance of TeamVest from March, 1996 to December, 1999
33
Item 11. Executive Compensation
Information concerning Executive Compensation and transactions is contained in The
Liberty Corporation Proxy Statement for the May 4, 2004 Annual Meeting of Shareholders and is
incorporated in this Item 11 by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information concerning Security Ownership of Certain Beneficial Owners and Management is
contained in The Liberty Corporation Proxy Statement for the May 4, 2004 Annual Meeting of
Shareholders and is incorporated in this Item 12 by reference.
Item 13. Certain Relationships and Related Transactions
Information concerning Certain Relationships and Related Transactions is contained in The
Liberty Corporation Proxy Statement for the May 4, 2004 Annual Meeting of Shareholders and is
incorporated in this Item 13 by reference.
Item 14. Principal Accounting Fees and Services
Information concerning Principal Accounting Fees and Services is contained in The Liberty
Corporation Proxy Statement for the May 4, 2004 Annual Meeting of Shareholders and is incorporated
in this Item 14 by reference.
PART IV
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1) and (2). List of Financial Statements and Financial Statement Schedules
The following consolidated financial statements of The Liberty Corporation and
Subsidiaries for the three years ended December 31, 2003 are submitted in Part II, Item 8 of this
report:
Consolidated Balance Sheets December 31, 2003 and 2002
Consolidated Statements of Income For the three years ended December 31, 2003
Consolidated Statements of Shareholders Equity For the three years ended December 31, 2003
Consolidated Statements of Cash Flows For the three years ended December 31, 2003
Notes to Consolidated Financial Statements December 31, 2003
Report of Independent Auditors
The following consolidated financial statement schedule of The Liberty Corporation and
Subsidiaries is included in Item 15(d):
II Valuation and Qualifying Accounts and Reserves
All schedules for which provision is made in the applicable accounting regulation of the
Securities and Exchange Commission, but which are excluded from this report, are not required under
the related instructions or are inapplicable, and therefore have been omitted.
34
(a)(3). List of Exhibits
|
3.1 |
|
Restated Articles of Incorporation, as amended through May 6, 1997 (filed with the
Registrants Quarterly Report on Form 10Q/A for the period ended March 31, 1997 and
incorporated herein by reference) |
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|
3.2 |
|
Bylaws, as amended through August 3, 1999, filed as Exhibit 3.2 to the Registrants
Form 10-Q for the quarter ended June 30, 1999, and incorporated herein by reference. |
|
|
4.1 |
|
See Articles 4, 5, 7 and 9 of the Companys Restated Articles of Incorporation (filed
as Exhibit 3.1) and Articles I, II and VI of the Companys Bylaws (filed as Exhibit 3.2). |
|
|
4.2 |
|
See the Form of Rights Agreement dated as of August 7, 1990 between The Liberty
Corporation and The Bank of New York, as Rights Agent, which includes as Exhibit B thereto
the form of Right Certificate (filed as Exhibits 1 and 2 to the Registrants Form 8-A,
dated August 10, 1990, and incorporated herein by reference) with respect to the Rights to
purchase Series A Participating Cumulative Preferred Stock, and the Registrants Form 8-A,
dated October 12, 2000 amending the Form of Rights Agreement to, among other things, extend
the expiration date to August 7, 2010, also incorporated herein by reference. |
|
|
4.3 |
|
See Credit Agreement dated March 21, 2001 (filed as Exhibit 10 to the Registrants
Quarterly Report on Form 10Q for the quarter ended June 30, 2001, and incorporated herein
by reference) and the related Fourth Amendment To Credit Agreement dated May 19, 2003
(filed as Exhibit 10 to the Registrants Quarterly Report on Form 10Q for the quarter ended
June 30, 2003, and incorporated herein by reference) |
|
|
10.1 |
|
See Credit Agreement dated March 21, 2001, and the related Fourth Amendment to Credit
Agreement dated May 19, 2003, (filed as Exhibit 4.3). |
|
|
10.2 |
|
The Liberty Corporation Performance Incentive Compensation Program, as amended and
restated on February 1, 2000, filed as Exhibit 10.2 to the Registrants Form 10-Q for the
quarter ended March 31, 2000, and incorporated herein by reference. |
|
|
11. |
|
The Liberty Corporation and Subsidiaries Consolidated Earnings per Share Computation
included in Note 12 of the Notes to Consolidated Financial Statements filed on page 28 of
this report. |
|
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21. |
|
The Liberty Corporation and Subsidiaries, List of Subsidiaries |
|
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23. |
|
Consent of Independent Auditors |
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|
24. |
|
Powers of Attorney applicable for certain signatures of members of the Board of
Directors in Registrants10-K filed for the years ended December 31, 1983, 1985, 1989,
1994, 1995, 1996, 1997 1998, 1999, 2000, and 2001. |
|
|
31. |
|
Rule 13a-14(a)/15d-14(a) Certifications |
|
|
32. |
|
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 |
35
(b). Reports on Form 8-K
|
|
|
The Company furnished a current report on Form 8-K dated November 4, 2003 with
respect to the press release announcing its third quarter 2003 operating results. |
|
|
|
|
The Company furnished a current report on Form 8-K dated November 4, 2003 with respect
to The Liberty Corp. declaring a regular quarterly dividend of 24 cents per share on its
common stock, payable on January 5, 2004 to shareholders of record on December 15, 2003 |
|
|
|
|
The Company furnished a current report on Form 8-K dated November 17, 2003 announcing
its negotiation and intention to enter into certain agreements with GNS Media
Evansville, Inc. (GNS). These agreements between Liberty and GNS are contingent upon
the closing of GNS acquisition of WTVW, the FOX affiliate in Evansville, Indiana. |
(c). Exhibits Filed With This Report
|
11. |
|
The Liberty Corporation and Subsidiaries Consolidated Earnings per Share Computation
included in Note 12 of the Notes to Consolidated Financial Statements filed on pages
28-29 of this report. |
|
|
21. |
|
The Liberty Corporation and Subsidiaries, List of Subsidiaries |
|
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23. |
|
Consent of Independent Auditors |
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|
31. |
|
Rule 13a-14(a)/15d-14(a) Certifications |
|
|
32. |
|
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 |
36
(d). Consolidated Financial Statement Schedule Filed With This Report
II- Valuation and Qualifying Accounts and Reserves For the Three Years Ended December 31, 2003
THE LIBERTY CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE THREE YEARS ENDED DECEMBER 31, 2003
(In $000s)
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Additions |
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Balance at |
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Charged to |
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Charged to |
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Balance at |
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Beginning |
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Costs and |
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Other |
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End |
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Deducted From Asset Accounts |
|
of Period |
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Expenses |
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Accounts |
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Deductions |
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|
of Period |
|
Year Ended December 31, 2003
Accounts receivable
reserve for bad debts |
|
$ |
1,963 |
|
|
$ |
757 |
|
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$ |
|
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|
$ |
982 |
(a) |
|
$ |
1,738 |
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Deferred
income taxes
reserve for deferred tax assets |
|
$ |
1,450 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,450 |
|
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|
Year Ended December 31, 2002
Accounts receivable
reserve for bad debts |
|
$ |
2,250 |
|
|
$ |
1,215 |
|
|
$ |
|
|
|
$ |
1,502 |
(a) |
|
$ |
1,963 |
|
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|
|
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|
Deferred
income taxes
reserve for deferred tax assets |
|
$ |
1,450 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,450 |
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|
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|
Year Ended December 31, 2001
Accounts receivable -
reserve for bad debts |
|
$ |
2,218 |
|
|
$ |
1,127 |
|
|
$ |
|
|
|
$ |
1,095 |
(a) |
|
$ |
2,250 |
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|
Deferred
income taxes
reserve for deferred tax assets |
|
$ |
|
|
|
$ |
1,450 |
|
|
$ |
|
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|
$ |
|
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$ |
1,450 |
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Notes: |
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(a) |
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Uncollectible accounts written off, net of recoveries. |
37
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 hereunto
duly authorized, as of the 25th day of October, 2005.
|
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THE LIBERTY CORPORATION
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By:
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/s/ Hayne Hipp |
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Registrant
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Hayne Hipp |
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Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the capacities indicated,
as of the 25th day of October, 2005.
|
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By:
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/s/ Howard L. Schrott
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*By:
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/s/ Frank E. Melton |
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Howard L. Schrott
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Frank E. Melton |
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Chief Financial Officer
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Director |
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*By:
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/s/ Edward E. Crutchfield
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*By:
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/s/ John H. Mullin III |
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Edward E. Crutchfield
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John H. Mullin III |
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Director
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Director |
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*By:
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/s/ John R. Farmer
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*By:
|
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/s/ J. Thurston Roach |
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John R. Farmer
|
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J. Thurston Roach |
|
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Director
|
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Director |
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By:
|
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/s/ Hayne Hipp
|
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*By:
|
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/s/ Eugene E. Stone, IV |
|
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Hayne Hipp
|
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Eugene E. Stone, IV |
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Director
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Director |
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*By:
|
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/s/ William O. McCoy
|
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*By:
|
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/s/ William B. Timmerman |
|
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William O. McCoy
|
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William B. Timmerman |
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Director
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Director |
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*By:
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/s/ Martha G. Williams |
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*Martha G. Williams, as |
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Special Attorney in Fact |
38
Annual Report on Form 10-K
The Liberty Corporation
December 31, 2003
Index to Exhibits
|
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Page |
|
|
EXHIBITS |
|
Number |
11.
|
|
The Liberty Corporation and Subsidiaries Consolidated Earnings Per Share
Computation (incorporated herein by reference to Note 12 of the Notes to
Consolidated Financial Statements included in Part II Item 8 of this
report).
|
|
|
28-29 |
|
|
|
|
|
|
|
|
21.
|
|
The Liberty Corporation and Subsidiaries, List of Significant Subsidiaries
|
|
|
39 |
|
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|
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|
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|
23
|
|
Consent of Independent Auditors
|
|
|
40 |
|
|
|
|
|
|
|
|
31
|
|
Rule 13a-14(a)/15d-14(a) Certifications
|
|
|
41-42 |
|
|
|
|
|
|
|
|
32
|
|
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
43 |
|
39