Sinclair Reports First Quarter 2007 Results
BALTIMORE, Sinclair Broadcast Group, Inc.
(Nasdaq: SBGI), the "Company" or "Sinclair," today reported financial results
for the three months ended March 31, 2007.
Commenting on the quarter, David Smith, President and CEO of Sinclair,
stated, "We have made significant progress on our retransmission consent
agreements and now have over 80% of the multi-channel video programming
distributor subscribers in our markets under long-term contracts. For 2007,
we are now estimating revenues from our retransmission consent agreements to
be approximately $59 million as compared to $25.4 million last year, a 132%
increase. This new revenue stream has helped to offset weakness in automotive
ad spending, national agency buys for the MyNetworkTV programming and softness
in the Ohio market. As we look forward to the remainder of this year, we are
encouraged by the already large amount of funds raised by the Presidential
candidates. With no incumbent running for the Presidency, we expect political
ad spending to be more than the 2006 and 2004 levels with a portion of the
spending occurring in the fourth quarter 2007 due to the many primaries that
have been moved into early 2008."
Net broadcast revenues from continuing operations were $150.2 million for
the three months ended March 31, 2007, an increase of 1.5% versus the prior
year period result of $147.9 million. Operating income was $37.3 million in
the three-month period as compared to $35.4 million in the prior year period,
an increase of 5.6%. The Company had a net loss available to common
shareholders of $2.4 million in the three-month period versus net income
available to common shareholders of $10.0 million in the prior year period.
Included in this year's net loss was $15.7 million related to early debt
extinguishment costs incurred as a result of the Company redeeming its 8.75%
senior subordinated notes, a transaction expected to reduce the Company's
future interest costs. The Company reported a diluted loss per common share
of $0.03 for the quarter versus diluted income per common share of $0.11 in
the prior year period. Diluted loss per common share from continuing
operations was $0.03 as compared to an $0.08 per share income in the same
period last year.
Operating Statistics and Income Statement Highlights:
-- Political revenues were $0.6 million in the quarter versus $0.7 million
in the first quarter last year.
-- Local advertising revenues were flat in the quarter versus the first
quarter 2006, while national advertising revenues decreased 5.0%, in
part due to fewer Super Bowl dollars, a sluggish Columbus market, and
few agency buys for the MyNetworkTV programming. Primary categories
that were down were automotive, services, retail and fast food, while
telecommunications advertising spending was up. Local revenues,
excluding political revenues, represented 67% of advertising revenues.
-- Time sales on our FOX stations were up 8.5% in the quarter, while our
CW stations were up 2.0%. Stations affiliated with MyNetworkTV were
down 14.3%, while stations affiliated with ABC were down 9.0% due to
not having the Super Bowl this year. Our CBS and NBC stations were up
a combined 4.5%.
-- With all but 4 markets reported, market share survey results reflect
that our stations' share of the television advertising market in the
first quarter 2007 grew from 18.1% to 18.5%, versus the same period
-- In March 2007, the Company entered into a 4-year renewal of its
retransmission agreement with Comcast Corp. for the carriage of the
analog and digital signals of 37 stations in 23 markets, representing
approximately 3.4 million of Comcast's cable subscribers.
-- In April 2007, the Company entered into a retransmission agreement with
Charter Communications, Inc. for the carriage of the analog and digital
signals of 28 stations in 19 markets, representing 1.9 million
-- The Company's FOX affiliate, KOKH-TV in Oklahoma City, Oklahoma
expanded its news offerings through the addition of a 3-hour morning
newscast, effective April 9, 2007.
Balance Sheet and Cash Flow Highlights:
-- Debt on the balance sheet, net of $15.5 million in cash, was $1,331.8
million at March 31, 2007 versus net debt of $1,346.2 million at
December 31, 2006.
-- As of March 31, 2007, 50.8 million Class A common shares and 36.2
million Class B common shares were outstanding, for a total of 87.0
million common shares outstanding.
-- Capital expenditures in the quarter were $6.5 million.
-- Common stock dividends paid in cash in the quarter were $10.6 million.
-- Program contract payments for continuing operations were $20.6 million
in the quarter.
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.
In accordance with Regulation FD, Sinclair is providing public
dissemination through this press release of its expectations for certain of
its second 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
"We are entering the second quarter with generally improved ratings in the
key dayparts on our FOX and ABC stations," commented David Amy, EVP and CFO.
"We expect to see improvement in the net broadcast revenues of both affiliate
groups during the second quarter. Weakness of the MyNetworkTV programming and
regional softness in Ohio will more than offset these gains, along with $1.0
million less in political ad spending and $2.6 million less in network
compensation. Our retransmission revenues will add more than $8.0 million to
our net broadcast revenues for the second quarter and should approach
approximately $59.0 million for the year. It remains unclear at this point
how much of the 2008 political cycle spending may add to our 2007 results, but
we anticipate we will be adding dollars by the fourth quarter."
-- The Company expects second quarter 2007 station net broadcast revenues,
before barter, to be up 0.3% to down 1.5% from second quarter 2006
station net broadcast revenues, before barter, of $163.8 million. Last
year included $1.7 million in political revenues.
-- The Company expects barter revenue and barter expense each to be
approximately $14.7 million in the second 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 $74.5 million, a 4.0% increase from
second quarter 2006 television expenses of $71.6 million. On a full
year basis, television expenses are expected to be approximately $294.4
million, or up a nominal 2.0%, as compared to 2006 television expenses
of $288.8 million. The 2007 television expense forecast includes $0.6
million of stock-based compensation expense for the quarter and $1.8
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 $23.2 million in the quarter and $91.2 million for the
-- The Company expects program contract payments to be approximately $20.4
million in the quarter and $79.5 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 $6.5 million in the quarter
and $24.4 million for the year. The 2007 corporate overhead forecast
includes $0.2 million of stock-based compensation expense for the
quarter and $0.8 million for the year.
-- The Company expects depreciation on property and equipment to be
approximately $11.4 million in the quarter and $43.7 million for the
year, assuming the capital expenditure assumptions below.
-- The Company expects amortization of acquired intangibles to be
approximately $4.3 million in the quarter and $17.4 million for the
-- The Company expects net interest expense to be approximately $25.4
million in the quarter and $100.2 million for the year, as compared to
2006 net interest expense of $113.2 million. This forecast assumes 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 dividends paid on the Class A and Class B common
shares to be approximately $13.1 million in the second quarter and
$49.8 million for the year, assuming current shares outstanding and a
$0.60 per share annual dividend rate.
-- The Company expects the second quarter effective tax rate for
continuing operations to be approximately 44.5%, including a current
tax benefit from continuing operations of approximately $1.8 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 46%, including a current tax benefit of
-- The Company expects to spend approximately $9.4 million in capital
expenditures in the quarter and approximately $25.0 to $28.0 million
for the year.
Sinclair Conference Call:
The senior management of Sinclair will hold a conference call to discuss
its first quarter results on Wednesday, May 2, 2007, at 8:30 a.m. ET. After
the call, an audio replay will be available at 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.
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.
"Discontinued Operations" accounting has been adopted in the financial
statements for all periods presented in this press release. 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
Prior year amounts have been reclassified to conform to current year GAAP
Sinclair Broadcast Group, Inc. and Subsidiaries
Unaudited Consolidated Statements of Operations
(in thousands, except per share data)
Three Months Ended March 31,
Station broadcast revenues, net of agency
commissions $150,169 $147,925
Revenues realized from station barter
arrangements 13,799 11,805
Other operating divisions' revenues 2,887 3,737
Total revenues 166,855 163,467
Station production expenses 36,626 38,109
Station selling, general and administrative
expenses 34,278 34,146
Expenses recognized from station barter
arrangements 12,465 10,825
Amortization of program contract costs and
net realizable value adjustments 21,384 18,623
Other operating divisions' expenses 3,546 3,989
Depreciation of property and equipment 10,897 12,288
Corporate general and administrative expenses 5,964 5,806
Amortization of definite-lived intangible
assets and other assets 4,367 4,325
Total operating expenses 129,527 128,111
Operating income 37,328 35,356
OTHER INCOME (EXPENSE):
Interest expense and amortization of debt
discount and deferred financing costs (26,382) (29,710)
Interest income 388 46
Loss from sale of assets (12) (287)
Loss from extinguishment of debt (15,681) (623)
Unrealized gain from derivative instruments 1,057 2,881
(Loss) income from equity and cost investees (12) 6,099
Other income (expense), net 221 (125)
Total other expense (40,421) (21,719)
(Loss) income from continuing operations
before income taxes (3,093) 13,637
INCOME TAX BENEFIT (PROVISION ) 843 (6,561)
(Loss) income from continuing operations (2,250) 7,076
(Loss) income from discontinued operations,
net of related income tax provision of $139
and tax benefit of $1,114, respectively (139) 1,168
Gain from discontinued operations, net of
related income tax provision of $885 - 1,774
NET (LOSS) INCOME AVAILABLE TO COMMON
SHAREHOLDERS $(2,389) $10,018
BASIC AND DILUTED (LOSS) EARNINGS PER
(Loss) earnings per common share from
continuing operations $(0.03) $0.08
Earnings per common share from discontinued
operations $- $0.03
(Loss) earnings per common share $(0.03) $0.11
Weighted average common shares outstanding 86,140 85,533
Weighted average common and common equivalent
shares outstanding 86,140 85,535
Dividends declared per common share $0.15 $0.10
Unaudited Consolidated Historical Selected Balance Sheet Data:
March 31, December 31,
Cash and cash equivalents $15,450 $67,408
Total current assets 216,121 290,347
Total long term assets 1,970,685 1,981,233
Total assets 2,186,806 2,271,580
Current portion of debt 42,608 102,250
Total current liabilities 191,174 284,928
Long term portion of debt 1,304,663 1,311,373
Total long term liabilities 1,730,342 1,719,322
Total liabilities 1,921,516 2,004,250
Minority interest in consolidated subsidiaries 724 685
Total shareholders' equity 264,566 266,645
Total liabilities and shareholders' equity 2,186,806 2,271,580
Unaudited Consolidated Historical Selected Statement of Cash Flows Data:
Net cash flow from operating activities $ 23,242
Net cash flow used in investing activities (6,091)
Net cash flow used in financing activities (69,109)
Net decrease in cash and cash
Cash and cash equivalents, beginning of period 67,408
Cash and cash equivalents, end of period $15,450