BALTIMORE, Feb. 14 -- Sinclair Broadcast Group,
Inc. (Nasdaq: SBGI), the "Company" or "Sinclair," today reported financial
results for the three months and twelve months ended December 31, 2006.
Commenting on the quarter, David Smith, President and CEO of Sinclair,
stated, "We are pleased at the performance of our television group, which
recorded a record $32.0 million of political advertising revenues in a non-
presidential election year and reduced operating expenses for the second
consecutive year.
"In the first quarter of 2007, we have made significant strides on the
retransmission front, securing retransmission consent agreements with multi-
channel video programming distributors (MVPD), such as Time Warner Cable and
Mediacom Communications. Currently, we have approximately 25% of the MVPD
subscribers in our markets for which we need to secure retransmission
agreements. We now expect revenues generated in 2007 from our retransmission
consent agreements to approach $48.0 million, an almost 90% increase from the
$25.4 million we generated in 2006.
"In January 2007, we redeemed our 8.75% bonds with less expensive bank
debt, which is expected to generate $6.0 million in pre-tax cash flow in 2007.
In recognition of our operational and financial performance, we are pleased to
announce that our Board of Directors approved a $0.10 per share increase to
our annual dividend rate, bringing the annual dividend rate to $0.60 per
share."
Financial Results:
Net broadcast revenues from continuing operations were $171.8 million for
the three months ended December 31, 2006, an increase of 8.8% versus the prior
year period result of $157.9 million. Operating income was $38.6 million in
the three-month period as compared to $44.2 million in the prior year period,
a decrease of 12.8%, which includes a $15.6 million non-cash impairment of
intangible assets charge related to one of our stations. The Company had net
income available to common shareholders of $11.1 million in the three-month
period versus a net loss available to common shareholders of $1.8 million in
the prior year period. The Company reported diluted earnings per common share
of $0.13 for the quarter versus a diluted loss per common share of $0.02 in
the prior year period. Diluted earnings per common share from continuing
operations were $0.09 as compared to a $0.03 loss in the same period last
year.
Net broadcast revenues from continuing operations were $635.8 million for
the twelve months ended December 31, 2006, an increase of 3.5% versus the
prior year period result of $614.4 million. Operating income was $159.2
million in the twelve-month period, a decrease of 6.1% versus the prior year
period result of $169.5 million, which includes a $15.6 million non-cash
impairment of intangible assets charge related to one of our stations. Net
income available to common shareholders was $54.0 million in the twelve-month
period versus the prior year period net income available to common
shareholders of $207.1 million, which included $146.0 million related to the
gain, net of taxes, on the sale of broadcast assets. Diluted earnings per
common share were $0.63 in the twelve-month period versus diluted earnings per
common share of $2.43 in the prior year period. Diluted earnings per common
share from continuing operations were $0.57 in the twelve-month period as
compared to $0.65 in the same period last year.
Operating Statistics and Income Statement Highlights:
-- Political revenues were $21.6 million in the quarter versus $1.4
million in the fourth quarter last year. For the year, political
revenues were $32.0 million, which is equal to the amount we booked
in the 2004 presidential election year.
-- Local advertising revenues increased 2.2% in the quarter versus the
fourth quarter 2005, while national advertising revenues increased
18.1%. Excluding political revenues, local advertising revenues were
down 4.0%, while national advertising revenues were down 8.7% due to
the strength of political spending that displaced traditional
advertisers. Local revenues, excluding political revenues,
represented 65% of advertising revenues.
-- Time sales on our FOX stations were up 10.0% in the quarter, while
our ABC stations were up 25.0%. Stations affiliated with MyNetworkTV
were down 9.4%, while stations affiliated with The CW were down 1.1%.
Our CBS and NBC stations were up a combined 42.8%.
-- With all but one market reported, market share survey results reflect
that our stations' share of the television advertising market in the
fourth quarter 2006 held relatively flat at an 18.0% share, on an
excluding political basis, versus the same period last year.
-- The Company entered into a news share arrangement in which our CBS
affiliate, WGME-TV in Portland, ME, will produce a 10:00pm newscast
for Portland's FOX affiliate, WPFO-TV, beginning February 2007.
-- The Company's FOX affiliate, WDKY-TV in Lexington, KY, entered into a
news share arrangement with WKYT-TV, the CBS affiliate in that
market, to add a one-hour morning newscast beginning at 7:00am,
effective March 2007.
-- In December 2006, the Company entered into an agreement with McLeod
USA for the carriage of KGAN-TV's broadcast signal in Cedar Rapids,
IA.
-- In January 2007, the Company entered into a retransmission agreement
with Time Warner Cable for the carriage of the analog and digital
signals of 35 stations in 22 markets, representing almost 6 million
of Time Warner's cable subscribers.
-- In January 2007, the Company entered into a retransmission agreement
with Mediacom Communications for the carriage of the analog and
digital signals of 24 stations in 16 markets, representing 700,000
subscribers.
-- In February 2007, the Company granted a retransmission consent
extension to Comcast until February 28, 2007 while the parties
continue to negotiate the contract renewal.
Balance Sheet and Cash Flow Highlights:
-- Debt on the balance sheet, net of $67.4 million in cash, was $1,346.2
million at December 31, 2006 versus net debt of $1,375.2 million at
September 30, 2006.
-- During the quarter, the Company amended and refinanced its Bank
Credit Agreement, relaxing covenants and adding a $225.0 million Term
Loan A-1 facility, the proceeds of which were used to redeem the
Company's 8.75% senior subordinated notes in January 2007. The new
Term Loan is priced based on a leverage pricing grid, with the
current pricing at LIBOR plus 1.00%.
-- In December 2006, the Company called for redemption its 8.75% senior
subordinated notes due 2011, which it repaid in January 2007 through
a combination of cash on-hand and senior bank debt.
-- As of December 31, 2006, 47.6 million Class A common shares and 38.3
million Class B common shares were outstanding, for a total of 85.9
million common shares outstanding.
-- Capital expenditures in the quarter were $3.4 million.
-- Common stock dividends paid in cash in the quarter were $10.6
million.
-- Program contract payments for continuing operations were $19.8
million in the quarter.
Forward-Looking Statements:
The matters discussed in this press release, particularly those in the
section labeled "Outlook," include forward-looking statements regarding, among
other things, future operating results. When used in this press release, the
words "outlook," "intends to," "believes," "anticipates," "expects,"
"achieves," and similar expressions are intended to identify forward-looking
statements. Such statements are subject to a number of risks and
uncertainties. Actual results in the future could differ materially and
adversely from those described in the forward-looking statements as a result
of various important factors, including and in addition to the assumptions
identified herein this release, the impact of changes in national and regional
economies, successful execution of outsourcing agreements, pricing and demand
fluctuations in local and national advertising, volatility in programming
costs, the market acceptance of new programming, the CW Television Network and
MyNetworkTV programming, our news share strategy, our local sales initiatives,
the execution of retransmission consent agreements and the other risk factors
set forth in the Company's most recent reports on Form 10-Q and Form 10-K, as
filed with the Securities and Exchange Commission. There can be no assurances
that the assumptions and other factors referred to in this release will occur.
The Company undertakes no obligation to publicly release the result of any
revisions to these forward-looking statements.
Outlook:
In accordance with Regulation FD, Sinclair is providing public
dissemination through this press release of its expectations for certain of
its first quarter 2007 and full year 2007 financial performance. The Company
assumes no obligation to update its expectations. All matters discussed in
the "Outlook" section are forward-looking and, as such, persons relying on
this information should refer to the "Forward-Looking Statements" section
above.
"For the first quarter, our expectation is to grow net broadcast revenues
and cash flow, despite not having $2.8 million of revenues generated from the
Super Bowl and political, which we recorded in this period last year,"
commented David Amy, EVP and CFO. "Our growth is forecasted to come from
several fronts including increased revenues from retransmission consent
agreements and declining film payments."
-- The Company expects first quarter 2007 station net broadcast
revenues, before barter, to be up approximately 0.7% to 1.0% from
first quarter 2006 station net broadcast revenues, before barter, of
$147.9 million, which included $2.1 million in revenues generated
from the Super Bowl when it was on ABC and $0.7 million of political
advertising revenues.
-- The Company expects barter revenue and barter expense each to be
approximately $14.2 million in the first quarter.
-- The Company expects station production expenses and station selling,
general and administrative expenses (together, "television
expenses"), before barter expense, but including stock-based
compensation expense, in the quarter to be approximately $73.1
million, a modest 1.2% increase from first quarter 2006 television
expenses of $72.3 million. On a full year basis, television expenses
are expected to be approximately $297.0 million, or up a nominal
2.8%, as compared to 2006 television expenses of $288.8 million. The
2007 television expense forecast includes $0.4 million of stock-based
compensation expense for the quarter and $1.7 million for the year,
as compared to the 2006 actuals of $0.4 and $1.4 million for the
quarter and year, respectively.
-- The Company expects program contract amortization expense to be
approximately $24.4 million in the quarter and $90.1 million for the
year.
-- The Company expects program contract payments to be approximately
$20.3 million in the quarter and $77.7 million for the year as
compared to $87.9 million in 2006.
-- The Company expects corporate overhead, including stock-based
compensation expense, to be approximately $5.6 million in the quarter
and $23.9 million for the year. The 2007 corporate overhead forecast
includes $0.1 million of stock-based compensation expense for the
quarter and $0.6 million for the year.
-- The Company expects depreciation on property and equipment to be
approximately $11.1 million in the quarter and $43.1 million for the
year, assuming the capital expenditure assumptions below.
-- The Company expects amortization of acquired intangibles to be
approximately $4.4 million in the quarter and $17.5 million for the
year.
-- The Company expects net interest expense to be approximately $26.3
million in the quarter and $101.0 million for the year, taking into
account the redemption of the 8.75% senior subordinated notes and new
Term Loan A-1, and assuming no changes in the current interest rate
yield curve, and changes in debt levels based on the assumptions
discussed in this "Outlook" section.
-- The Company expects to record a $15.7 million loss from
extinguishment of debt in the first quarter related to the redemption
of its 8.75% senior subordinated notes.
-- The Company expects dividends paid on the Class A and Class B common
shares to be approximately $10.7 million in the first quarter and
$49.4 million for the year, assuming current shares outstanding and a
$0.60 per share annual dividend rate, beginning April 2007.
-- The Company expects the first quarter effective tax rate for
continuing operations to be approximately 44%, including a current
tax benefit from continuing operations of approximately $0.3 million
in the quarter based on the assumptions discussed in this "Outlook"
section. For the year, the effective tax rate on continuing
operations is expected to be approximately 44%, including a current
tax benefit of $4.6 million.
-- The Company expects to spend approximately $9.0 million in capital
expenditures in the quarter and approximately $25.0 to $28.0 million
for the year. This includes approximately $10.5 million of 2006
budgeted capital projects that carried over into 2007.
Sinclair Conference Call:
The senior management of Sinclair will hold a conference call to discuss
its fourth quarter results on Wednesday, February 14, 2007, at 8:30 a.m. ET.
After the call, an audio replay will be available at http://www.sbgi.net under
"Investor Information/Conference Call." The press and the public will be
welcome on the call in a listen-only mode. The dial-in number is
(877) 407-9205.
About Sinclair:
Sinclair Broadcast Group, Inc., one of the largest and most diversified
television broadcasting companies, currently owns and operates, programs or
provides sales services to 58 television stations in 36 markets. Sinclair's
television group reaches approximately 22% of U.S. television households and
is affiliated with all major networks. Sinclair owns a majority equity
interest in G1440 Holdings, Inc., an Internet consulting and development
company, and Acrodyne Communications, Inc., a manufacturer of transmitters and
other television broadcast equipment.
Notes:
"Discontinued Operations" accounting has been adopted in the financial
statements for all periods presented in this press release, as a result of the
Company's sales of its Sacramento, Kansas City and Tri-Cities television
stations. As such, the results from operations, net of related income taxes,
have been reclassified from income from operations and reflected as net income
from discontinued operations.
Prior year amounts have been reclassified to conform to current year GAAP
presentation.
Sinclair Broadcast Group, Inc. and Subsidiaries
Unaudited Consolidated Statements of Operations
(in thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
2006 2005 2006 2005
REVENUES:
Station broadcast revenues,
net of agency commissions $171,784 $157,864 $635,842 $614,436
Revenues realized from
station barter arrangements 16,480 13,483 54,686 55,034
Other operating divisions'
revenues 9,857 7,437 24,610 22,597
Total revenues 198,121 178,784 715,138 692,067
OPERATING EXPENSES:
Station production expenses 36,934 40,175 148,276 152,771
Station selling, general and
administrative expenses 36,946 34,613 140,579 138,304
Expenses recognized from
station barter arrangements 14,729 12,013 49,508 50,460
Amortization of program
contract costs and net
realizable value
adjustments 25,318 18,535 90,746 70,666
Other operating divisions'
expenses 9,085 6,944 24,193 20,944
Depreciation of property
and equipment 10,367 11,939 46,248 50,275
Corporate general and
administrative expenses 5,736 5,875 22,795 21,220
Amortization of definite-lived
intangible assets and
other assets 4,826 4,443 18,021 17,972
Impairment of intangible
assets 15,589 - 15,589 -
Total operating expenses 159,530 134,537 555,955 522,612
Operating income 38,591 44,247 159,183 169,455
OTHER INCOME (EXPENSE):
Interest expense and
amortization of debt
discount and deferred
financing costs (28,434) (31,052) (115,217) (120,002)
Interest income 745 234 2,008 650
Gain (loss) from sale of assets 408 (11) 143 (80)
Loss from extinguishment of
debt - (306) (904) (1,937)
Unrealized gain from
derivative instruments - 4,291 2,907 21,778
Income (loss) from equity
and cost investees 146 (1,037) 6,338 (1,426)
Gain on insurance settlement - 792 - 1,193
Other income, net 711 367 1,159 721
Total other expense (26,424) (26,722) (103,566) (99,103)
Income from continuing
operations before income
taxes 12,167 17,525 55,617 70,352
INCOME TAX PROVISION (4,229) (20,107) (6,970) (36,115)
Income (loss) from
continuing operations 7,938 (2,582) 48,647 34,237
DISCONTINUED OPERATIONS:
Income from discontinued
operations, net of related
income tax (provision)
benefit of $3,173, ($47),
$3,502 and ($1,644),
respectively 3,173 830 3,556 5,671
Gain from discontinued
operations, net of related
income tax (provision)
benefit of $0, $0, $259
and ($80,002), respectively - - 1,774 146,024
NET INCOME (LOSS) 11,111 (1,752) 53,977 185,932
PREFERRED STOCK DIVIDENDS - - - (5,004)
EXCESS OF PREFERRED STOCK
CARRYING VALUE OVER
REDEMPTION VALUE - - - 26,201
NET INCOME (LOSS) AVAILABLE
TO COMMON SHAREHOLDERS $11,111 $(1,752) $53,977 $207,129
BASIC AND DILUTED EARNINGS
(LOSS) PER COMMON SHARE:
Earnings (Loss) per common
share from continuing
operations $0.09 $(0.03) $0.57 $0.65
Earnings per common share
from discontinued operations $0.04 $0.01 $0.06 $1.78
Earnings (Loss) per common
share $0.13 $(0.02) $0.63 $2.43
Weighted average shares
outstanding 85,770 85,460 85,680 85,380
Weighted average shares and
equivalent shares outstanding 85,810 85,460 85,694 85,389
Dividends declared per share $0.125 $0.100 $0.450 $0.300
Unaudited Consolidated Historical Selected Balance Sheet Data:
(In thousands)
December 31, December 31,
2006 2005
Cash & cash equivalents $67,408 $9,655
Total current assets 291,365 223,022
Total long term assets 1,981,233 2,060,283
Total assets 2,272,598 2,283,305
Current portion of debt 102,250 37,937
Total current liabilities 285,946 224,688
Long term portion of debt 1,311,373 1,412,801
Total long term liabilities 1,719,322 1,807,929
Total liabilities 2,005,268 2,032,617
Minority interest in consolidated
subsidiaries 685 966
Total stockholders' equity 266,645 249,722
Total liabilities & stockholders'
equity 2,272,598 2,283,305
Unaudited Consolidated Historical Selected Statement of Cash Flows Data:
(In thousands)
Three Months Twelve Months
Ended Ended
December 31, December 31,
2006 2006
Net cash flow from operating
activities $48,192 $155,333
Net cash flow used in investing
activities (2,581) (15,144)
Net cash flow used in financing
activities (10,698) (82,436)
Net increase in cash and cash
equivalents 34,913 57,753
Cash & cash Equivalents,
beginning of period 32,495 9,655
Cash & cash Equivalents,
end of period $67,408 $67,408
