Sinclair Reports Third Quarter 2004 Results
BALTIMORE, Nov. 4, 2004 -- Sinclair Broadcast Group, Inc. , the "Company" or "Sinclair," today reported financial results for the three months and nine months ended September 30, 2004.
Financial Results:
Net broadcast revenues were $164.2 million for the three months ended September 30, 2004, an increase of 1.8% versus the prior year period result of $161.3 million and slightly higher than our October 4, 2004 preliminary estimate of approximately $163.7 million. Operating income was $39.1 million as compared to $41.7 million in the prior year period, a decrease of 6.2%. Net income available to common shareholders was $1.0 million in the three- month period versus net income available to common shareholders of $3.9 million in the prior year period. Diluted income per share was $0.01 versus diluted income per share of $0.05 in the prior year period.
Net broadcast revenues were $502.4 million for the nine months ended September 30, 2004, an increase of 2.8% versus the prior year period result of $488.7 million. Operating income was $122.6 million in the nine-month period, a decrease of 3.7% versus the prior year period result of $127.3 million. Net income available to common shareholders was $18.9 million in the nine-month period versus the prior year period net loss available to common shareholders of $2.0 million. Diluted income per share was $0.22 versus a diluted loss per share of $0.02 in the prior year period.
"We thank our many advertisers, investors and viewers who stood with Sinclair during the past several weeks and who did not rush to pre-judge our news special, `A POW Story,'" commented David Smith, President and CEO of Sinclair. "Sinclair and its news operations can only be characterized as the poster child for a free and independent press. It is unfortunate that our news special became the means by which certain political groups tried to stifle the First Amendment rights of others. We are gratified that in the final analysis, the public made its own determination and responded positively to our program. We are committed to presenting the issues of the day in a truthful manner that earns the trust of all our viewers."
Operating Statistics and Income Statement Highlights:
-- The quarter's revenues were positively impacted by political revenues
which totaled $8.0 million in the quarter versus $1.3 million in the
same period last year and by increased advertising spending in the
schools, paid programming, soft drinks, religious and services
categories. Categories that were down were automotive, fast food,
retail, and beer/wine. Eight of our stations in the Southeastern
States were impacted by the hurricane season. Revenues generated from
our new business initiatives totaled $7.5 million versus $5.9 million
in the same period last year.
-- Local advertising revenues decreased 0.8% in the quarter versus the
third quarter 2003, while national advertising revenues increased
5.2%. Excluding political revenues, local advertising revenues were
down 2.3% and national advertising revenues were down 3.6%. Local
revenues, excluding political revenues, represented 60.4% of
advertising revenues.
-- All affiliate groups increased their advertising revenues, with the
exception of our WB and FOX stations, which were down 2.2% and 2.9%,
respectively, on weaker network ratings.
-- Effective August 30, 2004, following the Olympics, WKEF-TV (channel
22), our television station in Dayton, Ohio, switched its network
affiliation from NBC to ABC.
-- The Company and UPN extended the affiliation agreements for WABM-TV,
WMMP-TV, WCGV-TV, WUXP-TV, WUPN-TV and WRDC-TV, which expired on
September 15, 2004, until December 31, 2004, while both parties
continue good faith negotiations regarding the affiliation
agreements.
-- On August 16, 2004, we launched a 10:00pm News Central newscast on
WNYO-TV (WB 49) in Buffalo, New York.
Balance Sheet and Cash Flow Highlights:
-- Debt on the balance sheet, net of $9.1 million in cash, was $1,692.1
million at September 30, 2004 versus net debt of $1,690.7 million at
June 30, 2004.
-- During the third quarter, we repurchased 516 thousand shares of our
Class A common shares at an average price of $8.93 per share or $4.6
million.
-- During the third quarter, we repurchased 50 thousand shares of our
Series D Exchangeable Convertible Preferred Stock at an average price
of $40.79 per share or $2.0 million.
-- As of September 30, 2004, 45.5 million Class A common shares and 39.6
million Class B common shares were outstanding, for a total of 85.1
million common shares outstanding.
-- Capital expenditures in the quarter were $10.8 million.
-- Program contract payments were $26.7 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 above and below, the impact of changes in national and regional economies, successful integration of acquired television stations (including achievement of synergies and cost reductions), successful execution of outsourcing agreements, pricing and demand fluctuations in local and national advertising, volatility in programming costs, the market acceptance of new programming and our news central strategy, our local sales initiatives, 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 its fourth quarter and full year 2004 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.
"As discussed last quarter, we continue to see weakness in auto, our largest advertising category, as well as continued ratings softness on the FOX and WB networks, our two largest affiliate groups," commented David Amy, EVP and CFO. "We are encouraged, however, by ABC's Fall Season line-up, which is showing early ratings improvements and by the record levels of political advertising spending on our stations in the fourth quarter."
-- The Company expects fourth quarter station net broadcast revenues,
before barter, to be approximately $181.0 million to $181.5 million,
an increase of approximately 4.6% to 4.9% from fourth quarter 2003
station net broadcast revenue, before barter, of $173.1 million.
Included in this assumption is approximately $21 million of political
revenues as compared to $2.4 million in the fourth quarter 2003. For
the full year, our expected net broadcast revenue growth is expected
to be approximately 3.3%.
-- The Company expects fourth quarter barter revenue to be approximately
$16.9 million.
-- The Company expects station production expenses and station selling,
general and administrative expenses (together, television expenses),
before barter expense, in the fourth quarter to be approximately
$83.8 million, up approximately 5.9% from fourth quarter 2003
television expenses of $79.2 million. Included in this assumption
are higher sales costs related to our new business initiatives, costs
associated with News Central and higher Neilsen rating fees. On a
full year basis, television expenses are expected to increase
approximately 7.4% from 2003 television expenses of $299.3 million
for the same reasons stated above.
-- The Company expects fourth quarter barter expense to be approximately
$16.9 million.
-- The Company expects fourth quarter program contract amortization
expense to be approximately $22 million and $96 million for the year.
-- The Company expects fourth quarter program contract payments to be
approximately $26.8 million and $110 million for the year.
-- The Company expects fourth quarter corporate overhead to be
approximately $5 million and $20.6 million for the year.
-- The Company expects fourth quarter depreciation on property and
equipment to be approximately $12 million and $50 million for the
year, assuming the capital expenditure assumptions below.
-- The Company expects fourth quarter amortization of acquired
intangibles to be approximately $5 million and $19 million for the
year.
-- The Company expects fourth quarter net interest expense to be
approximately $32 million and $129 million for the year, 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 dividends paid on the Series D preferred stock to
be approximately $2.5 million in the fourth quarter and $10.2 million
for the year and dividends paid on the Class A and Class B common
shares to be approximately $2.1 million in the fourth quarter and
$4.3 million for the year, assuming current shares outstanding.
-- The Company expects to incur either an unrealized gain or loss on its
derivatives throughout the year, but is unable to reasonably predict
what the mark-to-market valuations of the instruments will be.
-- The Company expects the fourth quarter and full year effective tax
rate for continuing operations to be approximately 40%, assuming the
assumptions discussed in this "Outlook" section, including a current
tax provision from continuing operations of approximately $0.1
million in the fourth quarter and $0.8 million for the year.
-- The Company expects to spend approximately $10.2 million in capital
expenditures in the fourth quarter and approximately $47 million for
the year.
Sinclair Conference Call:
The senior management of Sinclair will hold a conference call to discuss its third quarter results on Thursday, November 4, 2004, at 8:45 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 62 television stations in 39 markets. Sinclair's television group reaches approximately 24% of U.S. television households and includes ABC, CBS, FOX, NBC, WB, and UPN affiliates. Sinclair owns a majority equity interest in G1440, Inc., an Internet consulting and development company, and Acrodyne Communications, Inc., a manufacturer of transmitters and other television broadcast equipment.
Notes:
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 Nine Months Ended
September 30, September 30,
REVENUES: 2004 2003 2004 2003
Station broadcast
revenues, net of
agency commissions $164,169 $161,290 $502,413 $488,687
Revenues realized
from station barter
arrangements 14,455 15,725 45,784 46,229
Other operating
divisions revenue 2,845 2,422 10,779 10,973
Total revenues 181,469 179,437 558,976 545,889
OPERATING EXPENSES:
Station production
expenses 38,165 35,787 117,261 111,467
Station selling,
general and
administrative
expenses 39,719 36,865 120,515 108,673
Expenses recognized
from station barter
arrangements 13,375 14,844 42,353 43,121
Amortization of program
contract costs & net
realizable value
adjustments 25,367 26,470 74,406 79,019
Stock-based
compensation
expense 317 391 1,298 1,487
Other operating
divisions expenses 3,506 2,620 12,656 12,059
Depreciation and
amortization of
property and
equipment 12,574 11,767 38,073 34,374
Corporate general
and administrative
expenses 4,559 4,171 15,495 13,954
Amortization of definite-
lived intangible assets
and other assets 4,759 4,811 14,369 14,480
Total operating
expenses 142,341 137,726 436,426 418,634
Operating income 39,128 41,711 122,550 127,255
OTHER INCOME (EXPENSE):
Interest expense &
amortization of debt
discount & deferred
financing costs (31,963) (33,405) (97,180) (94,777)
Subsidiary trust minority
interest expense - - - (11,246)
Interest income 23 64 140 469
Loss on sale of assets (12) (2) (45) (389)
Unrealized gain from
derivative instrument 1,602 9,241 20,576 8,094
Loss from extinguishment
of securities - - (2,453) (15,187)
(Loss) income from
equity investees (3,124) (266) 255 581
Other income 183 190 572 978
Total other income
and expense (33,291) (24,178) (78,135) (111,477)
Income before
income taxes 5,837 17,533 44,415 15,778
INCOME TAX PROVISION (2,329) (11,070) (17,807) (9,993)
NET INCOME 3,508 6,463 26,608 5,785
LESS PREFERRED STOCK
DIVIDENDS 2,503 2,588 7,678 7,763
NET INCOME (LOSS) AVAILABLE
TO COMMON STOCKHOLDERS $1,005 $3,875 $18,930 $(1,978)
BASIC AND DILUTED EARNINGS
(LOSS) PER SHARE $0.01 $0.05 $0.22 $ (0.02)
Weighted average common
shares outstanding 85,311 85,666 85,733 85,623
Weighted average common
and common equivalent
shares outstanding 85,319 85,806 85,883 85,742
Dividends per common share $.025 $- $.050 $-
Unaudited Consolidated Historical Selected Balance Sheet Data:
(Dollars in thousands)
September 30, June 30,
2004 2004
Cash & cash equivalents $9,096 $7,379
Total current assets 220,594 217,095
Total long term assets 2,291,119 2,276,815
Total assets 2,511,713 2,493,910
Current portion of debt 44,916 43,369
Total current liabilities 244,931 234,586
Long term portion of debt 1,656,306 1,654,737
Total long term liabilities 2,030,340 2,015,063
Total liabilities 2,275,271 2,249,649
Minority interest in consolidated entities 3,071 3,339
Total stockholders' equity 233,371 240,922
Total liabilities & stockholders' equity 2,511,713 2,493,910
Unaudited Consolidated Historical Selected Statement of Cash Flows Data:
(Dollars in thousands)
Three Months Nine Months
Ended Ended
September 30, September 30,
2004 2004
Net cash flow from operating activities $36,727 $79,372
Net cash flow from investing activities (11,653) (39,533)
Net cash flow from financing activities (23,357) (59,473)
Net increase in cash and cash
equivalents 1,717 (19,634)
Cash & cash equivalents, beginning of period 7,379 28,730
Cash & cash equivalents, end of period 9,096 9,096
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