SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-5846
THE LIBERTY CORPORATION
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(Exact name of Registrant as specified in its charter)
South Carolina 57-0507055
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Post Office Box 502, 135 South Main Street, Greenville, S. C. 29602
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (864) 2415400
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on Which
Title of Each Class Registered
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Common Stock, no par value per share New York Stock Exchange
Rights to Purchase Series A Participating Cumulative Preferred Stock 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 [X] No
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 Registrant's 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. [X]
The aggregate market value of the voting stock held by non-affiliates
of the Registrant as of March 15, 2002:
Common Stock, No Par Value $818,861,561
The number of shares outstanding of each of Registrant's classes of
common stock as of March 15, 2002:
Common Stock, No Par Value 19,745,878
DOCUMENTS INCORPORATED BY REFERENCE
Portions of The Liberty Corporation Annual Report to Shareholders for
the year ended December 31, 2001 are incorporated into Part II, Items 5, 6, 7,
and 8 by reference.
Portions of The Liberty Corporation Proxy Statement for the Annual
Meeting of Shareholders on May 7, 2002 are incorporated into Part III, Items 10,
11, 12, and 13 by reference.
This report is comprised of pages 1 through 41. The exhibit index is on
page 18.
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 Company's television broadcasting subsidiary, Cosmos Broadcasting,
consists of fifteen network-affiliated stations principally located in the
Southeast and Midwest, a cable advertising company, a video production company
and a professional broadcast equipment dealership. Eight of the Company's
television stations are affiliated with NBC, five with ABC, and two with CBS.
The Company's principal executive offices are in Greenville, South Carolina.
Prior to September 29, 2000 the Company was also engaged in the
insurance industry. On September 29, 2000 the Company's shareholders approved
the sale of the Company's insurance operations to the Royal Bank of Canada for
$648 million. The sale closed on November 1, 2000. Accordingly, these entities
have been treated as discontinued operations in the accompanying financial
statements.
Additional information concerning Liberty's subsidiaries and divisions
is included in "Management's Discussion and Analysis" in the Company's 2001
Annual Report to Shareholders, which is incorporated herein by reference.
RECENT DEVELOPMENTS
On February 29, 2000 the Company completed the acquisition of KCBD, the
NBC affiliate in Lubbock, TX in a cash transaction for $59.8 million. This
purchase was funded using proceeds from the Company's credit facility.
On June 19, 2000, the Company entered into a purchase agreement with
Royal Bank of Canada ("RBC"), a Canadian-chartered bank, pursuant to which RBC
was to acquire from the Company all of the issued and outstanding shares of
capital stock of the companies comprising its insurance operations, for a total
of approximately $648 million, consisting of a dividend from Liberty Life
Insurance Company of up to $70.0 million and the balance in cash from Royal Bank
of Canada. On September 29, 2000 the Company's shareholders approved the
purchase agreement, and on November 1, 2000 the Company completed the sale to
RBC. Accordingly, these entities have been treated as discontinued operations in
the financial statements filed as Exhibit 13 of this report.
On August 25, 2000 the Company completed the redemption of all of the
outstanding shares of its Series 1995-A Cumulative Convertible Preferred Stock.
Shares were called for redemption at $35.00 per share plus accrued dividends for
the period from July 1, 2000 through the Series 1995-A redemption date
(September 5, 2000). Prior to the redemption date, all shares of the 1995-A
Series were converted into common stock.
On November 1, 2000, using proceeds from the sale of its insurance
operations, the Company repaid its revolving credit facility in full.
On December 1, 2000 the Company, completed its acquisition of Civic
Communications. The agreed upon purchase price for all of the outstanding common
stock of Civic Communications was $204 million. The Company used proceeds from
the sale of its insurance operations to fund the transaction. Civic
Communications owned and operated WLBT-TV, the NBC affiliate in Jackson, MS,
KLTV-TV, the ABC affiliate in Tyler, TX, and KTRE-TV, the satellite affiliate of
KLTV in Lufkin, TX.
2
TELEVISION BROADCASTING AND RELATED OPERATIONS
The following table shows data on the stations owned by the Company as
of December 31, 2001:
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NETWORK PERCENTAGE
CONTRACT OF U.S.
MARKET NETWORK EXPIRATION STATION TELEVISION DATE DATE
MARKET STATION RANK(1) CHANNEL AFFILIATION (2) RANK(3) HOUSEHOLDS(4) FORMED ACQUIRED
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Louisville, KY WAVE-TV 50 3 NBC 2011 2 0.59% 1948 1981
Toledo, OH WTOL-TV 68 11 CBS 2003 1 0.40 1958 1965
Columbia, SC WIS-TV 84 10 NBC 2011 1 0.33 1953 1953
Jackson, MS WLBT-TV 88 3 NBC 2011 1 0.30 1953 2000
Evansville, IN WFIE-TV 97 14 NBC 2011 1 0.27 1953 1981
Harlingen, TX KGBT-TV 100 4 CBS 2003 3 0.26 1955 1998
Tyler, TX KLTV-TV 103 7 ABC 2002 1 0.25 1954 2000
Lufkin, TX
(satellite of KLTV) KTRE-TV 103 9 ABC 2002 1 0.25 1955 2000
Montgomery, AL WSFA-TV 114 12 NBC 2011 1 0.22 1959 1959
Wilmington, NC WWAY-TV 146 3 ABC 2005 2 0.14 1964 1998
Albany, GA WALB-TV 147 10 NBC 2011 1 0.14 1954 1998
Lubbock, TX KCBD-TV 148 11 NBC 2011 1 0.14 1953 2000
Biloxi, MS WLOX-TV 157 13 ABC 2004 1 0.12 1962 1995
Lake Charles, LA KPLC-TV 174 7 NBC 2011 1 0.09 1954 1986
Jonesboro, AK KAIT-TV 180 8 ABC 2004 1 0.08 1963 1986
(1) Market rank is based on the relative size of the designated market
areas among the 210 generally recognized designated market areas in the
U.S., based on Nielsen estimates for the 2001-2002 season.
(2) Contracts may be subject to renewal provisions that effectively extend
the expiration date.
(3) Station rank in its market area based on Nielsen November 2001 ratings
(Sun. - Sat.; 6:00A-2:00A).
(4) Based on Nielsen estimates for the 2001-2002 season.
The Company currently owns and operates fifteen network-affiliated
television stations in the Southeast and Midwest, fourteen of which were ranked
No. 1 or No. 2 in their markets by the November 2001 Nielsen 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 3.30% of U.S.
households.
All of the Company's stations are located in geographically diverse and
growing markets. Fourteen 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.
The fifteen stations operate in designated market areas ranked 50 to
180. None of the TV markets represented more than 12% of the revenues or 13% of
broadcast cash flow for the fiscal year ending December 31, 2001. The Company
believes that it generates one of the best broadcast cash flow per households
covered ratios of any broadcast group in the industry. It also believes that
thirteen of the fifteen stations generate substantially greater broadcast cash
flow and earnings than the average station of comparable market size.
The Company also operates a cable advertising company, CableVantage
Inc., through which it represents nine independent cable operators in 20
locations that, in combination, reach nearly one half million subscribers.
3
NETWORK AFFILIATIONS
Each of the stations is affiliated with a major network. 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. For airing network programming, the
network pays the stations according to terms in its network affiliation
contract. This is called network compensation. The major networks typically
provide programming for approximately 90 hours of the average 135 hours per week
broadcast by their affiliated stations.
The NBC affiliation contracts with each of the NBC affiliated stations
have been continuously in effect with each of those stations for over forty
years. The CBS and ABC affiliation contracts have each been continuously in
effect for over thirty years.
Each network has the right to terminate its affiliation agreement in
the event of a material breach of such agreement by a station and in certain
other circumstances. During the next two years, the Company will be
renegotiating its CBS and ABC network affiliation contracts. 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 respective
networks.
SOURCES OF TELEVISION OPERATING REVENUES.
The following table shows the approximate percentage of the Company's' gross
television station revenues by source for the three years ended December 31,
2001:
2001 2000 1999
Local and regional advertising 61% 56% 57%
National spot advertising 32 29 31
Network compensation 4 5 7
Political advertising 1 8 3
Other 2 2 2
Local and regional advertising is sold by each station's 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 station's 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 station's rates are primarily determined by the estimated
number of television homes it can provide for an advertiser's message. The
estimates of the total number of television homes in a market and of the
station's share of those homes are based on the Nielsen industry-wide television
rating service. The demographic make-up of the viewing audience is equally
important to advertisers. A station's 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
station's 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 station's 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.
4
The Company also has ancillary operations in cable advertising sales
and video production. Revenues from these operations amount to $12.3 million,
$12.5 million and $10.0 million for calendar years 2001, 2000 and 1999,
respectively. The cable advertising sales are generated by CableVantage Inc., 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 its programming during such time periods,
using a combination of self-produced news, public affairs and other
entertainment programming, including syndicated programs, that the station
believes will be attractive to viewers. The Company believes that the stations
have strong competitive positions in their local markets, enabling them to
deliver a high percentage of the local television audience to advertisers. The
Company's 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 station's service area. Other
sources of competition include home entertainment systems (including video
cassette recorder 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 PrimeStar and DIRECTV, 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).
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
advertising 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.
5
MANDATED CONVERSION TO DIGITAL TECHNOLOGY
In accordance with FCC regulations, all station affiliates of ABC, CBS
and NBC in the top ten designated market areas were required to transmit a
digital signal by May 1, 1999. Affiliates of those networks in designated market
areas ranked eleven through thirty were required to transmit a digital signal by
November 1, 1999. All remaining commercial broadcasters will be required to
transmit a digital signal by May 1, 2002. However, Congress has approved two
six-month extensions if a station is able to show "cause", effectively
postponing the deadline to May 1, 2003. While the Company is not seeking to be
the first in its markets to offer digital television, it is making a good faith
effort to meet the May 2, 2002 deadline. It is anticipated that as many as four
stations will be broadcasting a digital signal by May 2, 2002. Another six
stations are scheduled to be transmitting a digital signal by December 31, 2002.
The remaining five stations are projected to be broadcasting a digital signal by
May 1, 2003. The FCC has provided an administrative process to apply for and
receive extensions to the May 2, 2002 deadline. The Company has filed for these
extensions where appropriate.
As it develops the 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 $5.0 million in preparation
for the transition to digital television, and estimates that an additional $25.0
to $35.0 million may be required over the next two years for towers, antenna
systems, transmitters, and transmitter buildings. This investment will establish
basic 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.
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 FCC's rules and regulations. Matters subject to FCC
oversight include, but are not limited to:
- the assignment of frequency bands of broadcast television;
- the approval of a television station's frequency, location and
operating power;
- the issuance, renewal, revocation or modification of a television
station's FCC license;
- the approval of changes in the ownership or control of a television
station's licensee;
- the regulation of equipment used by television stations; and
- the adoption and implementation of regulations and policies concerning
the ownership and operation of television stations.
LICENSE RENEWAL, 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 renewal applications have always been granted without hearing for
the full term. To date the loosening of the ownership provisions, as well as the
other provisions included in the 1996 Act, have not had any significant direct
impact on the Company's operations.
6
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 35% of all
U.S. households. However, a federal appeals court February of 2002, in response
to a plaintiff seeking to eliminate or expand the 35% limit, ruled that the FCC
had not adequately justified this policy. The court ordered the Commission to
provide it with such justification or eliminate the 35% restriction. It is not
possible for the Company to predict if the FCC will be successful in its attempt
to justify, or will even attempt to justify, the 35% policy to the court. In
addition, Congress has traditionally favored diversity of media intent
restrictions. It is not possible for the Company to predict how Congress might
act legislatively in response to any FCC action or inaction.
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. The FCC has recently
relaxed the "duopoly" rule to allow broadcasters to own, under certain
circumstances, more than one television station in the same local area. The same
appeals court which ruled on the 35% ownership limitations, disallowed the
current FCC cross-ownership policy which prohibited a cable operator from owning
a television station in the same market. The newspaper-television
cross-ownership prohibition still stands, but the FCC has indicated that it will
address the issue sometime in 2002, during a comprehensive review of its
ownership policies.
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 corporation's 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. The FCC is considering
proposals to amend the ownership attribution rules including the general
"attributable interest" threshold to 10% of the outstanding voting stock of a
broadcast licensee and increasing the threshold for passive institutional
investors to 20%.
The FCC recently relaxed its national television station multiple
ownership rules. 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 35% of the television
homes in the U.S. For this purpose, only 50% of the television households in a
market are counted towards the 35% national restriction if the owned station is
a UHF station. An FCC rulemaking is under way to address how to measure audience
reach, including the "UHF discount," as part of the FCC's biennial review of the
broadcast rules mandated by the Telecom Act. The television homes that the
Company's stations reach is well below the 35% 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 FCC's rules if that purchaser also has an attributable interest in other
television or radio stations, or in 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.
7
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 more recently been banned by Congress. Certain
Congressional committees have 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 law might be. The elimination of all beer and wine
advertising could have a material adverse effect on the stations' 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. The NBC television network announced in
late 2001 that it intended to begin taking hard liquor ads while enforcing
specific content and time period restrictions. NBC's announcement triggered a
negative reaction by some key members of Congress. 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.
CABLE "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
station's 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 a negotiated compensation arrangement.
Generally, the stations have negotiated retransmission consent agreements with
cable television systems in their markets, with terms generally ranging from
three to ten years, which provide for carriage of the station's signal.
Cable operators are not currently required to carry both a station's
analog and digital signal at the same time. However, it is anticipated that the
Company will be able to negotiate the retransmission of both its analog and
digital signals with the cable television systems in its markets.
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. The FCC in late 1996 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.
At that time, broadcasters will be required to discontinue analog operations and
to return their present channels to the FCC. However, 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 has recently issued regulations with respect to DTV allocations
and interference criteria which are not yet final, and other aspects of the DTV
regulatory framework have not yet been established. 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 recently 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. The FCC has also recently
initiated a rulemaking proceeding to determine whether and to what extent cable
systems will be required to carry broadcast DTV signals.
In some cases, conversion to DTV operations may reduce a station's
geographical coverage area. In addition, the FCC's 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
8
of existing low-power stations, particularly in major television markets.
Accordingly, the low-power broadcast stations may be materially adversely
affected.
RECENT DEVELOPMENT, 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 Company's 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 of 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 Company's administrative staff, a property
development & management company and transportation operations.
INDUSTRY SEGMENT DATA
Information concerning the Company's industry segments is contained in
the Notes to the Consolidated Financial Statements on page 16 of The Liberty
Corporation Annual Report to Shareholders and is filed as Exhibit 13 on page 37
of this report and is incorporated in this Item 1 by reference.
EMPLOYEES
At December 31, 2001 the Company had approximately 1,300 employees.
9
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 62
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 47
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 59
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 59
Vice President, General Counsel & Secretary of Liberty since January, 1982
Secretary and Counsel of Cosmos since February, 1982
JONATHAN W. NORWOOD, Age 33
Controller of Liberty since April, 2001
CFO, TeamVest, a provider of investment management, recordkeeping, and plan
administration services for 401(k) plans, from January 2000 to March, 2001
Director of Finance, TeamVest from March, 1996 to December, 1999
ITEM 2. PROPERTIES
The main office of the Company 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; 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.
10
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
STOCKHOLDER MATTERS
Information concerning the market for the Company's Common Stock and
related stockholder matters is contained on the inside back cover of The Liberty
Corporation Annual Report to Shareholders and is filed as Exhibit 13 on page 19
of this report and is incorporated in this Item 5 by reference.
ITEM 6. SELECTED FINANCIAL DATA
Selected Financial Data for the Company is contained on page 18 of The
Liberty Corporation Annual Report to Shareholders and is filed as Exhibit 13 on
page 20 of this report and is incorporated in this Item 6 by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results
of Operations is contained on pages 19-23 of The Liberty Corporation Annual
Report to Shareholders and is filed as Exhibit 13 on pages 21-25 of this report
and is incorporated in this Item 7 by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information related to quantitative and qualitative disclosures about
market risk is contained on page 23 of The Liberty Corporation Annual Report to
Shareholders and is included in Exhibit 13 on page 25 of this report and is
incorporated in this Item 7A by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
The Company's Consolidated Financial Statements and Report of
Independent Auditors are contained on pages 2-17 of The Liberty Corporation
Annual Report to Shareholders and is filed as Exhibit 13 on pages 26-38 of this
report and are incorporated in this Item 8 by reference. Quarterly Results of
Operations are contained on pages 13-14 of The Liberty Corporation Annual Report
to Shareholders and is included in Exhibit 13 on page 35 of this report and are
incorporated in this Item 8 by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
11
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 7, 2002 Annual Meeting of
Shareholders and is incorporated in this Item 10 by reference.
Information concerning Executive Officers of the Company is submitted
in a separate section of this report in Part I, Item 1 on page 9 and is
incorporated in this Item 10 by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning Executive Compensation and transactions is
contained in The Liberty Corporation Proxy Statement for the May 7, 2002 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 7, 2002 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 7, 2002
Annual Meeting of Shareholders and is incorporated in this Item 13 by reference.
12
PART IV
ITEM 14. 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 are included in the Company's Annual Report to
Shareholders for the year ended December 31, 2001, filed as Exhibit 13 to this
report and incorporated in Item 8 by reference:
Consolidated Balance Sheets - December 31, 2001 and 2000
Consolidated Statements of Income - For the three years ended December
31, 2001
Consolidated Statements of Shareholders' Equity - For the
three years ended December 31, 2001
Consolidated Statements of Cash Flows - For the three years ended
December 31, 2001
Notes to Consolidated Financial Statements - December 31, 2001
Report of Independent Auditors
The following consolidated financial statement schedules of The Liberty
Corporation and Subsidiaries are included in Item 14(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.
(A)(3). LIST OF EXHIBITS
3.1 Restated Articles of Incorporation, as amended through May 6,
1997 (filed with the Registrant's Quarterly Report on Form
10Q/A for the period ended March 31, 1997 and incorporated
herein by reference)
3.2 Bylaws, as amended through August 3, 1999, filed as Exhibit
3.2 to the Registrant's 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 Company's Restated Articles
of Incorporation (filed as Exhibit 3.1) and Articles I, II and
VI of the Company's 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
Registrant's 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
Registrant's 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 Registrant's Quarterly Report on Form 10Q for the
quarter ended June 30, 2001 and incorporated herein by
reference).
10.1 See Credit Agreement dated March 21, 2001 (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 Registrant's Form 10-Q for the quarter
ended March 31, 2000, and incorporated herein by reference.
13
11. The Liberty Corporation and Subsidiaries Consolidated Earnings
Per Share Computation (incorporated herein by reference to
Note 13 of the "Notes to Consolidated Financial Statements" on
page 14 of The Liberty Corporation Annual Report to
Shareholders for the year ended December 31, 2001) filed on
page 36 of this report.
13. Portions of The Liberty Corporation Annual Report to
Shareholders for the year ended December 31, 2001:
Market for the Registrant's Common Stock and Related Security
Stockholder Matters
Selected Financial Data
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Information:
Consolidated Balance Sheets - December 31, 2001 and 2000
Consolidated Statements of Income - For the three years ended
December 31, 2001
Consolidated Statements of Shareholders' Equity - For the
three years ended December 31, 2001
Consolidated Statements of Cash Flows - For the three years
ended December 31, 2001
Notes to Consolidated Financial Statements - December 31, 2001
Report of Independent Auditors
21. The Liberty Corporation and Subsidiaries, List of Subsidiaries
23. Consent of Independent Auditors
24. Powers of Attorney applicable for certain signatures of
members of the Board of Directors in Registrant's 10-K filed
for the years ended December 31, 1983, 1985, 1989, 1994, 1995,
1996, 1997 1998, 1999, 2000 and 2001.
(B). REPORTS ON FORM 8-K
The Company filed a current report on Form 8-K dated November
6, 2001 with respect to the press release announcing its third
quarter 2001 operating results.
The Company filed a current report on Form 8-K dated November
6, 2001 with respect to The Liberty Corp. declaring a regular
quarterly dividend of 22 cents per share on its common stock,
payable on January 3, 2002 to shareholders of record on
December 14, 2001.
14
(C). EXHIBITS FILED WITH THIS REPORT
11. The Liberty Corporation and Subsidiaries Consolidated Earnings
Per Share Computation (incorporated herein by reference to
Note 13 of the "Notes to Consolidated Financial Statements" on
page 14 of The Liberty Corporation Annual Report to
Shareholders for the year ended December 31, 2001) filed on
page 36 of this report.
13. Portions of The Liberty Corporation Annual Report to
Shareholders for the year ended December 31, 2001:
Market for the Registrant's Common Stock and Related Security
Stockholder Matters
Selected Financial Data
Management's Discussion and Analysis of Financial Condition
and Results of Operations Quantitative and Qualitative
Disclosures About Market Risk Financial Statements and
Supplementary Information: Consolidated Balance Sheets -
December 31, 2001 and 2000 Consolidated Statements of Income -
For the three years ended December 31, 2001
Consolidated Statements of Shareholders' Equity - For the
three years ended December 31, 2001 Consolidated Statements of
Cash Flows - For the three years ended December 31, 2001 Notes
to Consolidated Financial Statements - December 31, 2001
Report of Independent Auditors
21. The Liberty Corporation and Subsidiaries, List of Subsidiaries
23. Consent of Independent Auditors
(D). CONSOLIDATED FINANCIAL STATEMENT SCHEDULES FILED WITH THIS
REPORT
II- Valuation and Qualifying Accounts and Reserves - For
the Three Years Ended December 31, 2001
15
Schedule II
THE LIBERTY CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE THREE YEARS ENDED DECEMBER 31, 2001
(In 000's)
Additions
------------------------
Balance at Charged to Charged to Balance at
Beginning Costs and Other End
Deducted From Asset Accounts of Period Expenses Accounts Deductions of Period
---------------------------- ---------- ---------- ---------- ---------- ----------
Year Ended December 31, 2001
Accounts receivable -
reserve for bad debts $ 2,218 $ 1,127 $-- $ 1,095(a) $ 2,250
-------- -------- ----- -------- --------
Deferred income taxes -
reserve for deferred tax assets $ 0 $ 1,450 $-- $ -- $ 1,450
-------- -------- ----- -------- --------
Year Ended December 31, 2000
Accounts receivable -
reserve for bad debts $ 1,319 $ 1,255 -- $ 356(a) $ 2,218
-------- -------- ----- -------- --------
Year Ended December 31, 1999
Accounts receivable -
reserve for bad debts $ 1,163 $ 573 $-- $ 417(a) $ 1,319
-------- -------- ----- -------- --------
Notes:
(a) Uncollectible accounts written off, net of recoveries.
16
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 27th day of
March, 2002.
THE LIBERTY CORPORATION By: /s/ Hayne Hipp
----------------------- ------------------------------------
Registrant Hayne Hipp
President and 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 27th day of March, 2002.
By: /s/ Howard L. Schrott *By: /s/ John H. Mullin III
--------------------------- ----------------------------
Howard L. Schrott John H. Mullin III
Chief Financial Officer Director
*By: /s/ Edward E. Crutchfield *By: /s/ Benjamin F. Payton
--------------------------- ----------------------------
Edward E. Crutchfield Benjamin F. Payton
Director Director
*By: /s/ John R. Farmer *By: /s/ J. Thurston Roach
--------------------------- ----------------------------
John R. Farmer J. Thurston Roach
Director Director
By: /s/ Hayne Hipp *By: /s/ Eugene E. Stone, IV
--------------------------- ----------------------------
Hayne Hipp Eugene E. Stone, IV
Director Director
*By: /s/ W. W. Johnson *By: /s/ William B. Timmerman
--------------------------- ----------------------------
W. W. Johnson William B. Timmerman
Director Director
*By: /s/ William O. McCoy *By: /s/ Martha G. Williams
--------------------------- ----------------------------
William O. McCoy *Martha G. Williams, as
Director Special Attorney in Fact
*By: /s/ Frank E. Melton
---------------------------
Frank E. Melton
Director
17
Annual Report on Form 10-K
The Liberty Corporation
December 31, 2001
Index to Exhibits
PAGE
EXHIBITS NUMBER
11. The Liberty Corporation and Subsidiaries Consolidated Earnings Per Share
Computation (incorporated herein by reference to Note 13 of the "Notes to
Consolidated Financial Statements" on page 14 of The Liberty Corporation
Annual Report to Shareholders for the year ended December 31, 2001). 36
13. Portions of The Liberty Corporation Annual Report to Shareholders for the year
ended December 31, 2001:
Market for the Registrant's Common Stock and Related Security Stockholder Matters 19
Selected Financial Data 20
Management's Discussion and Analysis of Financial Condition and Results of
Operations 21-25
Quantitative and Qualitative Disclosures About Market Risk 25
Financial Statements and Supplementary Information:
Consolidated Balance Sheets - December 31, 2001 and 2000 26
Consolidated Statements of Income - For the three years ended December 31, 2001 27
Consolidated Shareholders' Equity - For the three years ended December 31, 2001 28
Consolidated Statements of Cash Flows - For the three years ended December 31, 29
2001
Notes to Consolidated Financial Statements - December 31, 2001 30-38
Report of Independent Auditors 39
21. The Liberty Corporation and Subsidiaries, List of Significant Subsidiaries 40
23. Consent of Independent Auditors 41
18