Looking into the future of broadcast television
Growth of Young Broadcasting in millions Net Revenue Broadcast Cash Flow
$400 $350 $300 $250 $200
YOUNG BROADCASTING INC.
$150
(NASDAQ:YBTVA) was founded in 1986
by Vincent and Adam Young to acquire it first two broadcast television stations. Through an emphasis on targeted marketing, strong local presence in its communities, aggressive cost controls, and a disciplined acquisition strategy, The Company has grown rapidly. Today, The Company owns and operates twelve broadcast television stations operating in important Eastern, Midwestern and Western growth regions of the United States and now reaches approximately 11.3% of the nation. Six of these stations are affiliated with the ABC Television Network, three are affiliated with the CBS Television Network, two are affiliated with the NBC Television Network, and one is an independent. The largest of these is KRON-TV in San Francisco. Currently, the only unaffiliated station, KCAL-TV in Los Angeles, CA, is the largest independent broadcast television station in America and the only independent VHF station operating in the Los Angeles market. Young Broadcasting currently achieves broadcast cash flow margins that are among the highest in the country.
$ 10 0 $50 0 ‘96
‘97
‘98
‘99
Market Prices of Common Stock High Fiscal 2000
1Q
$
50.00
$
2Q
$
25.69
$
18.38
3Q
$
37.19
$
26.06
4Q
$
35.94
$
24.75
High Fiscal 1999
Low
19.00
Low
1Q
$45.63
$39.50
2Q
$44.38
$37.75
3Q
$65.00
$40.00
4Q
$52.06
$38.63
‘00
Chairman’s Letter Letter to Shareholders
2
KRON-TV Overview We saw opportunity and seized it
Contents
6
Station Profiles Stations Report
10
Board of Directors
12
Financial Data Selected Financial Data Management’s Discussion Consolidated Statements Notes to Financial Statements Report of Independent Accountants
Corporate Information
1
13 14 26 32 48
inside back cover
SHAREHOLDERS LETTER Dear Shareholders:
O
n your behalf, the following interview was conducted with Vincent J.Young, Chairman of the Board and Chief Executive Officer.
Now that Young Broadcasting Inc. is entering its third decade, how do you view the television industry? My attitude towards broadcast television is as positive as ever. We started Young Broadcasting Inc. (YBI) because we believed in the significant growth potential of television
Vincent J. Young
Adam Young
Chairman & Chief Executive Officer
Treasurer
broadcasting in America. That belief has been confirmed by the dramatic increase in the value of broadcast television stations over the years. Why do you believe broadcast television stations marketplace?
Broadcast Cash Flow Composition
Broadcast television remains the strongest existing medium
Year ended 12/31/00 by affiliation
are so strongly positioned in today’s multimedia
for both advertisers and programmers to reach the largest audience. This remains true even given the progressive
14.1 % CBS
erosion in total household viewership. Local stations tend to be the community’s strongest marketing platform — one that constantly grows more creative and more effective in
34.5 % NBC
the ability to connect local programming and advertising with their desired audiences. Our local news programs
29.3 % ABC
continue to show strong positive rating trends in contrast to the erosion of the network audience that prime time
22.1 % Independent
programming is experiencing.
2
Prepared for what’s ahead.
Shareholders Letter continued...
What role does local advertising play in your overall strategy? As a company, we have devoted our energies to localism in programming and localism in terms of our outreach to the advertising community. We have been very successful in following this strategy. We are also confident that local stations still remain the most efficient and effective vehicle to reaching target audiences for the marketers of products and services. How important is a station’s brand? We have devoted significant time and resources to the development and strengthening of the brands in the markets we serve. Although we have a number of network affiliations, the call letters of a station, its brand, resonates very strongly in the community. Brand identity is particularly important in Los Angeles and San Francisco where KCAL-TV and KRON-TV enjoy a high degree of loyalty and awareness. Do you expect digital television to be a positive change for stations and will it be costly? Although still largely in the formative stage, many stations are developing plans for utilizing digital bandwidth and launching an impressive range of e-commerce business applications. The potential returns on these projects are considerable. Yes, the initial expenditures may be steep, but we have good reason to believe the effort will pay off. We are simply looking to leverage cross-platform media opportunities through one of the strongest assets stations already possess: longstanding, strong ties to local advertisers and viewers. 4
“We can make our opinions heard and participate in rewriting the rules for the next century of broadcasting”
Are you concerned that KRON-TV’s network affiliation
research. These contributions are valuable to viewers, and
agreement ends December 31, 2001?
stations should be proud of their desirability and freedom
No. It has been stated from the beginning that YBI has always been prepared to operate the station as an independent. We have every intention of maintaining and growing the audience that has been very loyal to KRON-TV. We do recognize that in order to achieve that, we must
to pursue such worthwhile goals. How does the current state of relations between the networks and their affiliates influence your enthusiasm for the business?
continue to offer our viewers compelling programming
Well, my unwavering optimism comes from the realization
which is of the greatest interest to them. This may result in
that while the networks would like to change the rules of
some increase in operating cost, but our goal is to offset
the game, we don’t need to passively stand by and have the
that occurrence with both traditional and innovative new
new playbook handed to us. We can make our opinions
means in which to increase revenue flow. We have been
heard and participate in rewriting the rules for the next
successful in this strategy with out Los Angeles station,
century of broadcasting — if we as station owners can rise
KCAL-TV, the largest independent in America.
to this challenge. The process certainly won’t be smooth. Networks in general seem to have forgotten both their
Is community outreach still an important component
need for us and their need to work with us. But, they have
of a station’s success?
to be reminded that the broadcasting industry’s business
Our station franchises — a phrase that I use to refer to the brand each of us has worked diligently to create in our respective markets — are more in sync with our local
culture is still deeply embedded in localism. The future for broadcasting?
communities than ever before. We have increased spending
We believe that the premiere position commercial broad-
to expand local news, weather and sports coverage, and we
casting stations hold today will increase further — so we see
have never done a better job. Our neighborhood philan-
an even brighter picture for the future.
thropic involvement has deepened. In many cities, stations are community leaders and terrific corporate citizens. They
Sincerely,
serve their areas through a variety of activities ranging from public service announcements or a televised town hall meetings, to running aggressive outreach programs for
Vincent J. Young
needy families or sponsoring fund raisers for cancer
Chairman and Chief Executive Officer 5
KRON-TV Acquisition We saw opportunity. We seized it. Our station franchises are more in tune with our local communities than ever before.
Y
oung Broadcasting is committed to serving local communities with news, information, original programming and support of charitable endeavors.
This spirit of ‘localism’ is embraced at KRON-TV in San Francisco, which was acquired by Young Broadcasting from
Paul Dinovitz General Manager of KRON-TV San Francisco, CA
The Chronicle Publishing Company on June 26, 2000. KRON-TV is a perfect addition to the company’s family of stations. KRON-TV has successfully served the needs of the Bay area community for over 50 years. With the acquisition came certain key developments to make the station even stronger and prepare it for growth in the years ahead.
Paul ‘Dino’ Dinovitz was hired as President and General Manager
KRON-TV’s original, locally produced programming also
to oversee KRON-TV and Bay-TV
continued to resonate strongly with Bay area viewers.
operations. Dino joined KRON-TV
These series include: Bay Area Backroads, the top-rated
from Hearst-Argyle stations
locally produced entertainment program in the Bay Area;
KCRA-TV (NBC) and KQCA-TV (WB)
Bay Cafe, the area’s popular food magazine show; and the
in Sacramento, where he was
High School Sports Show.
President and General Manager
In addition to these programs, KRON-TV sponsors approxi-
of both outlets. Dino has more than
mately 40 community and performing arts events every
20 years of station management
year, including festivals, runs to benefit charities, performing
experience running leading
arts series, and many more. Along with the Rubber Ducky
affiliated and independent stations
Derby fund raiser for the Children’s Hospital Oakland, the
in major markets.
San Francisco Jazz Festival, and the National Multiple Sclerosis Society Read-a-thon, these activities include:
6
Landing the big one.
To compliment Dino, a strong management team has been put in place, which includes:
KRON-TV Acquisition continued... Craig Marrs
KRON-TV and The San Francisco Chronicle — in support of
Vice President and Station Manager
the Season of Sharing Fund — feature stories about people in need. Collectively they encourage area residents to donate to the Fund that helps area families and individuals. Typically, these are low-income people
Mark Berryhill Vice President of News
who have one-time emergency needs that can’t be met through other resources. Through a network of 120 community agencies, assistance to alleviate financial stress on a short-term basis is provided. Beating the Odds, hosted by KRON-TV anchor/reporter Wendy Tokuda, is a special on extraordinary high school
Karen Orofino
students who are rising above tough circumstances to
General Sales Manager
succeed in school and life. KRON-TV and the Peninsula Community Foundation established the Beating the Odds Fund to help low-income, high-risk Bay Area high school students pay for college.
Pat Patton
KRON-TV has every intention of maintaining and growing the audience that has been very loyal to the station during the decades it has served the San Francisco market. In order to achieve that goal, KRON-TV will continue to offer its viewers programming which is of the greatest
Program Director
Craig Marrs as VP and Station Manager. For the last 27-years he has been involved with local and cable television news and the Internet. Mark Berryhill as Vice President of News from WMEX Radio, Boston, where he was President and GM. He also served as News Director at WHDH-TV, Boston, KDKA-TV, Pittsburgh and KGAN-TV, Cedar Rapids. Karen Orofino was promoted to General Sales Manager for KRON-TV. She joined the station in 1994 as local sales manager after a career in national television spot sales. Pat Patton as Program Director. During his nearly three decades in station management, Pat served as Director of Programming at ABC affiliate KMBC and UPN affiliate KCWE. His career began with CBS’ KPIX-TV in San Francisco.
interest to them. Thanks to the experience involved in acquiring and running KCAL-TV in Los Angeles, the biggest independent station in the U.S., the company has a strong understanding of how to successfully operate and increase the revenue base of a non-affiliated station in a major West Coast market. To help KRON-TV remain the No. 1 news station in San Francisco, and also in sign-on to sign-off audience, the company is exploring the application of many of the elements that have served it well with KCAL-TV, including an emphasis on news and special community-based local programming.
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Already these appointments are paying dividends. During the important 2000 November ‘sweeps period,’ KRON-TV captured First Place finishes for its ‘NewsCenter 4’ programs at 5:00 a.m., 6:00 a.m., 11:30 a.m. and 11:00 p.m. and posted ties for #1 in audience share at 4:00 p.m., 5:00 p.m. and 6:00 p.m.
Suiting the desires of many.
Providing meaningful content.
In addition to KRON-TV, all of the stations in the Young Broadcasting group have successfully branded themselves in their markets over the years by offering award-winning newscasts, original, locallyproduced programming, and through on- and off-air support of causes important to the community and its residents.
Station Report Young Broadcasting Group WKRN-TV (Nashville, TN) rated America’s third best newscast, received the National Headliners Award and two Edward R. Murrow Awards. The WKRN produced two-hour special, Calls For Kids, which raised $200,000 for the Nashville Ronald McDonald House. WTEN-TV (Albany, NY) was recognized for it’s Children’s Hospital Telethon and recently added a weekly news segment entitled Educator of the Week to its ongoing Children First campaign. The station celebrated its 17th year sponsoring the Second Harvest Food Bank. WRIC-TV (Richmond, VA) was recognized by the Congressional Coalition on Adoption for its weekly news feature, A Child in Waiting. WRIC is also involved in Toys for Tots, where its effort included PSAs, news reports and live cut-ins from sponsor’s donation points. WBAY-TV (Green Bay, WI) was first in ratings with a market share of 33% and was number one for every newscast in 2000. The station won awards for excellence from The Associated Press and first place for Best Spot News coverage in medium size markets from the Wisconsin Broadcasters Association. Also, WBAY’s telethon for Cerebral Palsy Inc. raised $750,000. WLNS-TV (Lansing, MI) won an award from the Michigan Association of Broadcasters for the station’s coverage of the East Lansing Riots and 10 Associated Press awards. The station was also honored for being the home of the Muscular Dystrophy Telethon for the past 30 years.
perform eight hours of community service. KELO won a National PSA Emmy award for this program and eight 1st place awards from The Associated Press. WATE-TV (Knoxville, TN) received three Edward R. Murrow Awards for writing, use of video and sports reporting. Knoxville area charities were recipients over 283,000 pounds of food and $103,000 from WATE. The station also participated in the American Cancer Society’s ‘Relay For Life.’ KWOC-TV (Quad City, Iowa) won 1st place for Best Feature and 2nd Place for Best Spot News by the Illinois Associated Press Broadcasters Association. The station also participated in the Quad City Race for the Cure and the Student Hunger Drive collected over 800,000 pounds of food. WTVO-TV (Rockford, IL) received honorable mention for their sports feature entitled Cubs 2000. They were also presented with an Award of Distinction by the Communicator Awards for their locally produced half-hour health special Time to Breathe, which was the result of a community health study on chronic lung disease. KLFY-TV (Lafayette, LA) won Station of the Year in 2000 and an award for community service from the Louisiana Association of Broadcasters. The Associated Press awarded them Best Story, Best Reporter, Best Weathercast, and Best Spot News. KLFY also raised more than $11 million in donations for Food for Families, The MDA Telethon and Acadian Village. KCAL-TV (Los Angeles, CA) won nine Emmys for news and sports coverage as well as three Golden Mikes. Its public service campaign, From the Streets, provides assistance and advice to the community on various subjects. KCAL also
KELO-TV (Sioux Falls, SD) instituted a Tradition of Caring public service program where each employee helps
received several awards at the Muscular Dystrophy
produce a 30-second spot for a worthy cause as well as
Broadcast Awards. 11
Board of Directors & Executive Officers Left to right: James A. Morgan, Leif Lomo, David Lee, Vincent J. Young, Adam Young, Alfred J. Hickey, Ronald J. Kwasnick, Robert L. Winikoff, Deborah McDermott, Bernard F. Curry
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