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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

     
(Mark One)    
[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
     
[   ]   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)
     
South Carolina   57-0507055
(State or other jurisdiction of
incorporation or organization)
  (IRS Employer
identification No.)

135 South Main Street, Greenville, SC 29601


(Address of principal executive offices)

Registrant’s telephone number, including area code: 864/241-5400

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X]       No [   ]

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock as of the latest practicable date.

         
    Number of shares Outstanding
Title of each class   as of June 30, 2002

 
Common Stock     19,787,217  

 


 

PART I, ITEM 1
THE LIBERTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED AND CONDENSED BALANCE SHEETS

                       
(In 000's)   June 30,   December 31,
    2002   2001
         
 
          (Unaudited)        
ASSETS
               
Current assets:
               
 
Cash and cash equivalents
  $ 50,494     $ 35,489  
 
Receivables (net of allowance for doubtful accounts)
    39,226       40,035  
 
Program rights
    1,679       4,678  
 
Prepaid and other current assets
    2,681       4,638  
 
Income taxes receivable
    6,719       6,719  
 
Deferred income taxes
    12,850       20,272  
 
   
     
 
     
Total current assets
    113,649       111,831  
Property, plant, and equipment
               
 
Land
    5,639       5,639  
 
Buildings and improvements
    43,744       37,819  
 
Furniture and equipment
    157,137       153,092  
 
Less: Accumulated depreciation
    (116,388 )     (108,241 )
 
   
     
 
 
    90,132       88,309  
Intangible assets subject to amortization (net of $637 and $6,018 accumulated amortization in 2002 and 2001, respectively)
    467       903  
FCC licenses and network affiliations
    304,285       380,718  
Goodwill
    101,387       101,387  
Investments and other assets
    51,658       54,190  
 
   
     
 
     
Total assets
  $ 661,578     $ 737,338  
 
   
     
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
Current liabilities:
               
 
Accounts payable and accrued expenses
  $ 19,790     $ 16,919  
 
Program contract obligations
    1,675       4,949  
 
Accrued income taxes
    300       663  
 
   
     
 
   
Total current liabilities
    21,765       22,531  
Deferred income taxes
    89,974       123,556  
Other liabilities
    8,498       9,580  
 
   
     
 
     
Total liabilities
    120,237       155,667  
 
   
     
 
Shareholders’ equity
               
 
Common stock
    106,814       104,865  
Unearned stock compensation
    (3,249 )     (3,687 )
Retained earnings
    437,420       480,556  
Unrealized investment gains (losses)
    356       (63 )
 
   
     
 
   
Total shareholders’ equity
    541,341       581,671  
 
   
     
 
     
Total liabilities and shareholders’ equity
  $ 661,578     $ 737,338  
 
   
     
 

See Notes to Consolidated and Condensed Financial Statements.

2


 

THE LIBERTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED AND CONDENSED STATEMENTS OF OPERATIONS

                                       
          Three Months Ended   Six Months Ended
          June 30,   June 30,
         
 
(In 000's, except per share data)   2002   2001   2002   2001
   
 
 
 
          (Unaudited)
REVENUES
                               
Station revenues (net of commissions)
  $ 47,586     $ 44,665     $ 87,096     $ 83,731  
Cable advertising and other revenues
    4,219       3,473       7,535       6,348  
 
   
     
     
     
 
 
Net revenues
    51,805       48,138       94,631       90,079  
EXPENSES
                               
Operating expenses
    28,897       26,289       55,754       51,888  
Amortization of program rights
    1,864       1,972       3,716       3,936  
Depreciation and amortization of intangibles
    4,190       7,448       8,910       15,320  
Corporate, general, and administrative expenses
    2,795       3,221       5,600       6,151  
 
   
     
     
     
 
 
Total operating expenses
    37,746       38,930       73,980       77,295  
     
Operating income
    14,059       9,208       20,651       12,784  
Net investment income
    198       2,534       200       5,882  
 
   
     
     
     
 
     
Income before income taxes and cumulative effect of a change in accounting principle
    14,257       11,742       20,851       18,666  
Provision for income taxes
    5,417       4,462       7,923       7,093  
 
   
     
     
     
 
     
Income before the cumulative effect of a change in accounting principle
    8,840       7,280       12,928       11,573  
Cumulative effect of a change in accounting principle (net of income taxes of $29,045)
                (47,388 )      
   
NET INCOME (LOSS)
  $ 8,840     $ 7,280     $ (34,460 )   $ 11,573  
 
   
     
     
     
 
EARNINGS (LOSS) PER SHARE:
                               
Basic earnings per common share from income before the cumulative effect of a change in accounting principle
  $ 0.45     $ 0.37     $ 0.65     $ 0.59  
Cumulative effect of a change in accounting principle
                (2.39 )      
 
   
     
     
     
 
Basic earnings (loss) per common share
  $ 0.45     $ 0.37     $ (1.74 )   $ 0.59  
 
   
     
     
     
 
Diluted earnings per common share from income before the cumulative effect of a change in accounting principle
  $ 0.44     $ 0.37     $ 0.65     $ 0.59  
Cumulative effect of a change in accounting principle
                (2.38 )      
 
   
     
     
     
 
Diluted earnings (loss) per common share
  $ 0.44     $ 0.37     $ (1.73 )   $ 0.59  
 
   
     
     
     
 
Dividends per common share
  $ 0.22     $ 0.22     $ 0.22     $ 0.22  

See Notes to Consolidated and Condensed Financial Statements.

3


 

THE LIBERTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED AND CONDENSED STATEMENTS OF CASH FLOWS

                   
      Six Months Ended June 30,
     
(In 000's)   2002   2001
   
 
      (Unaudited)
OPERATING ACTIVITIES
               
Net income (loss)
  $ (34,460 )   $ 11,573  
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
               
 
Cumulative effect of a change in accounting principle
    76,433        
 
Gain on sale of operating assets
          62  
 
Realized investment (gains) losses
    3,042       (1,459 )
 
Depreciation
    8,325       8,827  
 
Amortization of intangibles
    585       6,456  
 
Amortization of program rights
    3,716       3,936  
 
Cash paid for program rights
    (3,991 )     (3,979 )
 
Provision for deferred income taxes
    (26,160 )     5,154  
Changes in operating assets and liabilities:
               
 
Receivables
    809       2,190  
 
Other assets
    9,596       45,461  
 
Accounts payable and accrued expenses
    2,871       (51,308 )
 
Accrued income taxes
    (363 )     (135,829 )
 
Other liabilities
    (1,082 )     (463 )
 
All other operating activities
    561       (605 )
 
   
     
 
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
    39,882       (109,984 )
INVESTMENT ACTIVITIES
               
Purchase of property, plant, and equipment
    (10,148 )     (5,699 )
Investments acquired
    (8,000 )      
Proceeds from sale of investments
    96       1,245  
Proceeds from sale of investment properties
    1,203       843  
Other
          16  
 
   
     
 
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
    (16,849 )     (3,595 )
FINANCING ACTIVITIES
               
Dividends paid
    (8,676 )     (8,649 )
Stock issued for employee benefit and compensation programs
    648       4,475  
Repurchase of common stock
          (9,642 )
 
   
     
 
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
    (8,028 )     (13,816 )
INCREASE (DECREASE) IN CASH
    15,005       (127,395 )
Cash at beginning of period
    35,489       149,003  
 
   
     
 
CASH AT END OF PERIOD
  $ 50,494     $ 21,608  
 
   
     
 

See Notes to Consolidated and Condensed Financial Statements.

4


 

THE LIBERTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND CONDENSED FINANCIAL STATEMENTS
June 30, 2002
(Unaudited)

1.   BASIS OF PRESENTATION
 
    The accompanying unaudited consolidated and condensed financial statements of The Liberty Corporation and Subsidiaries have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The information included is not necessarily indicative of the annual results that may be expected for the year ended December 31, 2002, but it does reflect all adjustments (which are of a normal and recurring nature) considered, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. The December 31, 2001 financial information was derived from the Company’s previously filed 2001 Form 10-K. For further information, refer to the consolidated financial statements and footnotes thereto included in The Liberty Corporation annual report on Form 10-K for the year ended December 31, 2001.
 
2.   ADOPTION OF FASB STATEMENT NO. 142 GOODWILL AND OTHER INTANGIBLE ASSETS
 
    During the second quarter of 2001, the Financial Accounting Standards Board (FASB) issued Statement No. 142 “Goodwill and Other Intangible Assets”. Statement No. 142 requires that goodwill and certain other identified intangibles no longer be amortized to earnings, but instead be reviewed for impairment. The amortization of goodwill and certain other identified intangibles ceases upon adoption of the Statement, which for the Company was January 1, 2002. The Company recorded $3.8 million ($2.4 million net of income taxes) and $7.4 million ($4.6 million net of income taxes) of amortization expense related to intangibles that are no longer required to be amortized for the three and six month periods ending June 30, 2001, respectively. In connection with the adoption of Statement No. 142, the Company reduced the carrying value of its FCC licenses by $76.4 million ($47.4 million after-tax) as a cumulative effect of a change in accounting principle.
 
    The following table reconciles net income for the three and six month periods ended June 30, 2001 as reported to the adjusted June 30, 2001 net income, had Statement No. 142 been in effect as of January 1, 2001.

                                 
    Three Months   Six Months
(in 000's)   Ended June 30,   Ended June 30,
   
 
    2002   2001   2002   2001
   
 
 
 
Reported income before cumulative effect of a change in accounting principle
  $ 8,840     $ 7,280     $ 12,928     $ 11,573  
Add back : Goodwill and indefinite lived intangible amortization (net of income taxes)
          2,381             4,581  
 
   
     
     
     
 
Adjusted income before cumulative effect of a change in accounting principle
    8,840       9,661       12,928       16,154  
Cumulative effect of a change in accounting principle (net of income taxes)
                (47,388 )      
 
   
     
     
     
 
Adjusted net income (loss)
  $ 8,840     $ 9,661     $ (34,460 )   $ 16,154  
 
   
     
     
     
 

5


 

    The following tables reconcile basic and diluted earnings per share as reported at June 30, 2001 to the adjusted June 30, 2001 basic and diluted earnings per share, had Statement No. 142 been in effect as of January 1, 2001.

                                 
    Three Months Ended   Six Months Ended
    June 30,   June 30,
   
 
    2002   2001   2002   2001
   
 
 
 
Basic earnings per share:
                               
Reported basic earnings before the cumulative effect of a change in accounting principle per share
  $ 0.45     $ 0.37     $ 0.65     $ 0.59  
Add back : Goodwill and indefinite lived intangible amortization (net of income taxes)
          0.12             0.23  
 
   
     
     
     
 
Adjusted basic earnings before the cumulative effect of a change in accounting principle per share
    0.45       0.49       0.65       0.82  
Cumulative effect of a change in accounting principle (net of income taxes)
                (2.39 )      
 
   
     
     
     
 
Adjusted basic earnings (loss) per share
  $ 0.45     $ 0.49     $ (1.74 )   $ 0.82  
 
   
     
     
     
 
Diluted earnings per share:
                               
Reported diluted earnings before the cumulative effect of a change in accounting principle per share
  $ 0.44     $ 0.37     $ 0.65     $ 0.59  
Add back : Goodwill and indefinite lived intangible amortization (net of income taxes)
          0.12             0.23  
 
   
     
     
     
 
Adjusted diluted earnings before the cumulative effect of a change in accounting principle per share
    0.44       0.49       0.65       0.82  
Cumulative effect of a change in accounting principle (net of income taxes)
                (2.38 )      
 
   
     
     
     
 
Adjusted diluted earnings (loss) per share
  $ 0.44     $ 0.49     $ (1.73 )   $ 0.82  
 
   
     
     
     
 

6


 

At June 30, 2002 and December 31, 2001, the Company’s intangible assets not subject to amortization were comprised of FCC licenses and network affiliations. At June 30, 2002 and December 31, 2001, the Company’s 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 Company’s unused line of credit. Estimated amortization expense resulting from intangible assets subject to amortization for the five year period ending 2006 is expected to be as follows:

         
(in 000's)   Estimated Amortization
   
2002   $ 700  
2003     205  
2004     125  
2005     125  
2006     125  

3.   COMPREHENSIVE INCOME
 
    The components of comprehensive income, net of related income taxes, for the three and six month periods ended June 30, 2002 and 2001, respectively, are as follows:

                                 
    Three Months Ended   Six Months Ended
    June 30,   June 30,
   
 
(In 000's)   2002   2001   2002   2001
   
 
 
 
Net income (loss)
  $ 8,840     $ 7,280     $ (34,460 )   $ 11,573  
Unrealized gains / (losses) on securities
    (85 )     (369 )     419       (742 )
 
   
     
     
     
 
Comprehensive income (loss)
  $ 8,755     $ 6,911     $ (34,041 )   $ 10,831  
 
   
     
     
     
 

7


 

4.   SEGMENT REPORTING
 
    The Company operates primarily in the television broadcasting and cable advertising businesses. The Company currently owns and operates fifteen television stations, primarily in the Southeast and Midwest. Each of the stations is affiliated with a major network, with eight NBC affiliates, five ABC affiliates, and two CBS affiliates. The Company evaluates segment performance based on income before income taxes, excluding unusual, or non-operating items.
 
    The following table summarizes financial information by segment for the three and six month periods ended June 30, 2002 and 2001:

                                   
      Three Months Ended   Six Months Ended
(In 000's)   June 30,   June 30,
   
 
      2002   2001   2002   2001
     
 
 
 
Revenues
                               
 
Broadcasting
  $ 47,586     $ 44,665     $ 87,096     $ 83,731  
 
Cable advertising
    4,184       3,290       7,364       5,701  
 
Other
    35       183       171       647  
 
   
     
     
     
 
Total revenues
  $ 51,805     $ 48,138     $ 94,631     $ 90,079  
 
   
     
     
     
 
Income before income taxes and cumulative effect of a change in accounting principle
                               
 
Broadcasting
  $ 16,478     $ 12,459       26,247     $ 19,349  
 
Cable advertising
    766       414       782       70  
 
Corporate and other
    (2,987 )     (1,131 )     (6,178 )     (753 )
 
   
     
     
     
 
Total income before income taxes and cumulative effect of a change in accounting principle
  $ 14,257     $ 11,742     $ 20,851     $ 18,666  
 
   
     
     
     
 

    There were no material changes in assets by segment from those disclosed in the Company’s 2001 annual report other than the impact of the adoption of FASB Statement No. 142 “Goodwill and Other Intangible Assets” as described in Note 2 to the Consolidated and Condensed Financial Statements. The goodwill that appears on the face of the balance sheet arose through the acquisition of certain television stations, and therefore has been assigned in its entirety to the Broadcasting segment.

8


 

5.   EARNINGS PER SHARE
 
    The calculation of basic and diluted earnings per common share from continuing operations is as follows:

                                   
      Three Months Ended   Six Months Ended
(In 000's except per share data)   June 30,   June 30,
   
 
      2002   2001   2002   2001
     
 
 
 
      (Unaudited)
Numerator — Earnings:
                               
Income before the cumulative effect of change in accounting principle
  $ 8,840     $ 7,280     $ 12,928     $ 11,573  
Effect of dilutive securities
                       
 
   
     
     
     
 
Numerator for basic and diluted earnings per common share
  $ 8,840     $ 7,280     $ 12,928     $ 11,573  
 
   
     
     
     
 
Denominator – Average Shares Outstanding:
                               
Denominator for basic earnings before the cumulative effect of a change in accounting principle per common share – weighted average shares
    19,785       19,607       19,766       19,590  
Effect of dilutive securities:
                               
 
Stock options
    117       95       116       75  
 
   
     
     
     
 
Denominator for diluted earnings before the cumulative effect of a change in accounting principle per common share
    19,902       19,702       19,882       19,665  
 
   
     
     
     
 
Basic earnings before the cumulative effect of a change in accounting principle per common share
  $ 0.45     $ 0.37     $ 0.65     $ 0.59  
Diluted earnings before the cumulative effect of a change in accounting principle per common share
  $ 0.44     $ 0.37     $ 0.65     $ 0.59  

6.   CREDIT FACILITY
 
    On March 21, 2001, the Company entered into a $100 million unsecured 364-day revolving credit facility with a bank. On May 20, 2002, the Company renewed the facility for an additional year on substantially similar terms. No amounts have been drawn on this facility since inception.
 
7.   RECLASSIFICATIONS
 
    Certain reclassifications have been made in the previously reported financial statements to make the prior year amounts comparable to those of the current year.

9


 

PART I, ITEM 2
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Unaudited)

The Liberty Corporation is a holding company with operations primarily in the television broadcasting industry. The Company’s television broadcasting subsidiary, Cosmos Broadcasting, consists of fifteen network-affiliated stations located in the Southeast and Midwest, a cable advertising company, a video production company and a professional broadcast equipment dealership. Eight of the Company’s television stations are affiliated with NBC, five with ABC, and two with CBS.

SEASONALITY OF TELEVISION REVENUES

The Company’s 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.

RESULTS OF OPERATIONS

Three Months Ended June 30, 2002 Compared to Three Months Ended June 30, 2001

Total net revenue increased $3.7 million, on a year-over-year basis. Station net revenue increased $2.9 million for the same period. Station net revenue was up due mainly to the presence of political spending during 2002 that was absent during 2001. Political revenue for the second quarter of 2002 was $3.9 million as compared to $0.7 million in the second quarter of 2001. Local revenue was up three percent and national revenue was up one percent on a year-over-year basis. Local revenue increased primarily due to increases in the automotive, retail, and fast-food advertising categories. Network compensation was down on a year-over-year basis as a majority of the Company’s stations began operating under new network contracts during the second half of 2001. Cable and other revenue increased due to political revenue in 2002 that was not present in 2001, and generally stronger advertising environments in several of its markets.

Operating expenses, which include amortization of program rights, were $30.8 million for the second quarter of 2002, an increase of $2.5 million over the $28.3 million reported for the second quarter of 2001. The increase in operating expenses is mainly attributable to increased personnel costs related to the addition of personnel in the Company’s cable advertising business, the addition of nightly and weekend news casts at one of the Company’s stations, and annual salary increases across all of the Company’s stations.

Depreciation and amortization was $4.2 million for the second quarter of 2002, a decrease of $3.2 million over the $7.4 million reported for the second quarter of 2001. During the first quarter of 2002, the Company adopted FASB Statement No.142 “Goodwill and Other Intangible Assets”. Statement No. 142 requires that goodwill and certain other identified intangibles no longer be amortized to earnings, but instead be reviewed for impairment. Had Statement No. 142 been effective as of the beginning of the first quarter of 2001, reported depreciation and amortization expense would have been approximately $3.6 million. (See Note 2 of the accompanying Notes to Consolidated and Condensed Financial Statements for further details).

10


 

Management’s Discussion and Analysis

Net investment income for the second quarter of 2002 was $0.2 million as compared to $2.5 million for the second quarter of 2001. During the second quarter of 2002, the Company received $2.7 million of distributions from venture capital investments and interest income which were offset by a $2.5 million non-cash impairment charge taken on one of the Company’s private equity investments. The impairment charge resulted from the Company determining during the quarter that this investment had a carrying value in excess of its fair value, and that the excess was other than temporary. The net investment income of $2.5 million reported in 2001 was related to gains from the Company’s marketable equity and real estate portfolios.

Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001

Total net revenue increased $4.6 million, on a year-over-year basis. Station net revenue increased $3.4 million for the same period. Net revenue was up due mainly to the presence of political spending during 2002 that was absent during 2001. Political revenue for the first half of 2002 was $5.5 million as compared to $0.8 million in the first half of 2001. Local revenue was up four percent while national revenue was flat on a year-over-year basis. Local revenue increased primarily due to increases in the automotive and fast-food advertising categories. Network compensation was down on a year-over-year basis as a majority of the Company’s stations began operating under new network contracts during the second half of 2001. Cable and other revenue increased due to political revenue in 2002 that was not present in 2001, generally stronger advertising environments in several of its markets, and start up operations at certain locations in the previous year being fully operational during 2002.

Operating expenses, which include amortization of program rights, were $59.5 million for the first half of 2002, an increase of $3.7 million over the $55.8 million reported for the first half of 2001. The increase in operating expenses is mainly attributable to increased personnel costs related to the addition of personnel in the Company’s cable advertising business, the addition of nightly and weekend news casts at one of the Company’s stations, and annual salary increases across all of the Company’s stations.

Depreciation and amortization was $8.9 million for the first half of 2002, a decrease of $6.4 million over the $15.3 million reported for the first half of 2001. During the first quarter of 2002, the Company adopted FASB Statement No.142 “Goodwill and Other Intangible Assets”. Statement No. 142 requires that goodwill and certain other identified intangibles no longer be amortized to earnings, but instead be reviewed for impairment. Had Statement No. 142 been effective as of the beginning of the first quarter of 2001, reported depreciation and amortization expense would have been approximately $7.9 million. (See Note 2 of the accompanying Notes to Consolidated and Condensed Financial Statements for further details).

Net investment income for the first half of 2002 was $0.2 million, as approximately $3.2 million of interest income, venture capital distributions, and gains on the sale of real estate were offset by $3.0 million of impairment charges taken in the Company’s venture capital and private equity portfolios. The net investment income of $5.9 million reported for the first half of 2001 was related to the interest earned on $135 million of residual insurance operations sales proceeds and gains from the Company’s marketable equity and real estate portfolios. The residual insurance operations sales proceeds were remitted at the end of the first quarter of 2001 to the federal government to pay income taxes related to the November 2000 sale of the company’s insurance operations.

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Management’s Discussion and Analysis

Broadcast Cash Flow Information

The Company has included operating cash flow and broadcast cash flow data because management believes that such data are commonly used as measures of performance among companies in the broadcast industry. The Company also believes that these measures are frequently used by investors, analysts, valuation firms, and lenders as some of the important determinants of underlying asset value. Operating cash flow and broadcast cash flow should not be considered in isolation, or as alternatives to operating income (as determined in accordance with generally accepted accounting principles) as an indicator of the entity’s operating performance, or to cash flow from operating activities (as determined in accordance with generally accepted accounting principles) as a measure of liquidity. These measures are believed to be, but may not be, comparable to similarly titled measures used by other companies.

                                 
(In 000's)   Three Months Ended   Six Months Ended
    June 30,   June 30,
   
 
    2002   2001   2002   2001
   
 
 
 
Operating income
  $ 14,059     $ 9,208     $ 20,651     $ 12,784  
Add:
                               
Depreciation and amortization
    4,190       7,448       8,910       15,320  
Adjustment for network compensation due vs. accrued
    1,232             2,466        
Non-cash compensation
    600       233       1,215       309  
 
   
     
     
     
 
Operating cash flow
    20,081       16,889       33,242       28,413  
Corporate cash expenses
    2,550       2,962       5,106       5,795  
 
   
     
     
     
 
Broadcast cash flow
  $ 22,631     $ 19,851     $ 38,348     $ 34,208  
 
   
     
     
     
 

Broadcast cash flow was $22.6 million for the second quarter of 2002, compared with $19.9 million for the prior-year second quarter. Broadcast cash flow was $38.3 million and $34.2 million for the six months ended June 30, 2002 and 2001, respectively. The increase in broadcast cash flow for both the quarter and year-to-date periods is attributable to political spending in 2002, and to the policy the Company adopted in late 2001 to make up to 50% of the discretionary contribution to the Company’s retirement and savings plan in 2002 in stock as opposed to cash.

Capital, Financing and Liquidity

At June 30, 2002, the Company had cash of $50.5 million and an unused line of credit of $100 million. The Company anticipates that its primary sources of cash, those being current cash balances, operating cash flow, and the available line of credit will be sufficient to finance the operating requirements of its stations and their anticipated capital expenditures, for both the next 12 months and the foreseeable future thereafter.

Cash Flows

The Company’s net cash flow provided by operating activities was $39.9 million for the first six months of 2002 compared to cash used in operating activities of $110.0 million for the same period of 2001. The change in cash provided by operating activities is attributable primarily to the $135 million of taxes related to the sale of the Company’s insurance operations that were remitted to taxing authorities during the first quarter of 2001. Excluding these tax payments, cash provided by operations during the first half of 2001 was $25.0 million. The Company’s net cash used in investing activities was $16.8 million for the six month period ended June 30, 2002, as compared to $3.6 million for the same period of 2001. The increase in net cash used in investing activities is attributable to higher levels of fixed asset purchases and increased investing activity in 2002 as the Company deployed a portion of its cash to acquire investments in private

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Management’s Discussion and Analysis

debt and equity securities. Net cash used in financing activities for the six months ended June 30, 2002 was $8.0 million compared to $13.8 million for the first six months of 2001. The decrease in net cash used in financing activities is due mainly to the absence of stock repurchases during 2002, offset by lower levels of employee stock option exercises.

Forward Looking Information

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Certain information contained herein or in any other written or oral statements made by, or on behalf of the Company, is or may be viewed as forward-looking. The words “expect,” “believe,” “anticipate” or similar expressions identify forward-looking statements. Although the Company has used appropriate care in developing any such forward-looking information, forward-looking information involves risks and uncertainties that could significantly impact actual results. These risks and uncertainties include, but are not limited to, the following: changes in national and local markets for television advertising; changes in general economic conditions, including the performance of financial markets and interest rates; competitive, regulatory, or tax changes that affect the cost of or demand for the Company’s products; 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.

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PART II, ITEM 4. Submission of Matters to a Vote of Security Holders

  a.   The annual meeting of shareholders of the registrant was held May 7, 2002.
 
  b.   The following individuals were elected to serve for three-year terms: Benjamin F. Payton, Frank E. Melton, John H. Mullin, III, and Eugene E. Stone, IV.
 
  c.   Matters voted upon at the annual meeting were as follows:

                                 
                    Withheld/   Broker
    For   Against   Abstentions   Non-votes
   
 
 
 
To elect as director:
                               
Benjamin F. Payton
    14,424,199             3,263,164        
Frank E. Melton
    14,434,511             3,252,852        
John. H. Mullin, III
    14,434,511             3,252,852        
Eugene E. Stone, IV
    14,434,511             3,252,852        
To approve Ernst & Young as independent auditors:
    17,406,951       244,541             35,871  

  d.   There were no settlements between the registrant and any other participants.

PART II, ITEM 6. Exhibit and Reports on Form 8-K

           
  a.   A list of the exhibits filed with this report is included in the Index to Exhibits filed herewith.
           
  b.        
           
      1.   The Company filed a current report on Form 8-K dated May 7, 2002 with respect to the press release announcing its first quarter 2002 operating results.
           
      2.   The Company filed a current report on Form 8-K dated May 7, 2002 with respect to The Liberty Corp. declaring a regular quarterly dividend of 22 cents per share on its common stock, payable on July 2, 2002 to shareholders of record on June 14, 2002.

INDEX TO EXHIBITS

     
EXHIBIT 10   Third Amendment to Credit Agreement
 
EXHIBIT 11   Consolidated Earnings Per Share Computation (included in Note 5 of Notes to Consolidated and Condensed Financial Statements)

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

     
THE LIBERTY CORPORATION   Date: August 13, 2002
(Registrant)    
     
/s/ Howard L. Schrott
   
Howard L. Schrott    
Chief Financial Officer    
     
/s/ Martha G. Williams
   
Martha G. Williams    
Vice President, General Counsel and Secretary    

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