Net Broadcast Revenues Grow 2.8% BALTIMORE, Aug. 6
BALTIMORE, Aug. 6 /PRNewswire-FirstCall/ -- Sinclair Broadcast Group, Inc.
(Nasdaq: SBGI), the "Company" or "Sinclair," today reported financial results
for the three months and six months ended June 30, 2008.
Commenting on the quarter, David Smith, President and CEO of Sinclair,
stated, "During the second quarter, we grew our net broadcast revenues 2.8%.
We believe that this growth is among the highest reported by television
broadcasters and is due primarily to revenues from our retransmission consent
agreements and political advertising revenues, both of which we expect to
reach record levels this year. While our revenues came in below our May 6,
2008 guidance of 3.6% to 4.9% growth, this was due to the current economic
conditions and their impact on advertising spending levels. In particular, we
experienced a decline in automotive ad spending beginning about halfway
through May, largely due to the record-high oil prices and a decline in SUV
and truck sales.
"We are anticipating continued economic weakness for the remainder of 2008
and into 2009, which we expect to result in a slowdown in advertising spending
levels. In response, we are reviewing our operating expenses and capital
expenditures for potential savings or deferrals, as well as evaluating our
sales incentive plans to increase the top line."
Mr. Smith continued, "The economic challenges, while impacting advertising
revenues, also give rise to opportunities for us to put our cash flow and
balance sheet to work in alternative ways. We believe that the depressed real
estate market and tight credit markets allow us to invest in what we believe
to be under-valued non-television assets to drive future cash flows. In
addition to the continuation of our dividend given current capital gains tax
rates and assuming the economy does not slip further into recession, we expect
to pursue opportunities to strengthen our television portfolio's competitive
position, and evaluate opportunistic repurchases of our debt and common
stock."
Financial Results:
Net broadcast revenues from continuing operations were $163.7 million for
the three months ended June 30, 2008, an increase of 2.8% versus the prior
year period result of $159.2 million. Operating income was $43.3 million in
the three-month period as compared to $41.6 million in the prior year period,
an increase of 4.0%. The Company had net income available to common
shareholders of $13.3 million in the three-month period versus net income
available to common shareholders of $2.2 million in the prior year period.
The Company reported diluted earnings per common share of $0.15 for the
three-month period versus diluted earnings per common share of $0.03 in the
prior year period.
Net broadcast revenues from continuing operations were $324.6 million for
the six months ended June 30, 2008, an increase of 5.6% versus the prior year
period result of $307.5 million. Operating income was $89.5 million in the
six-month period, an increase of 13.0% versus the prior year period result of
$79.2 million. The Company had net income available to common shareholders of
$29.7 million in the six-month period versus a net loss to common shareholders
of $0.2 million in the six-month period ended June 30, 2007. Diluted earnings
per common share were $0.34 in the six-month period versus diluted earnings
per common share of $0.00 in the prior year period.
Operating Statistics and Income Statement Highlights:
-- Political revenues were $3.6 million in the second quarter 2008 versus
$1.1 million in the second quarter 2007.
-- Local advertising revenues were up 3.3% in the quarter while national
advertising revenues declined 2.9% versus the second quarter 2007. Excluding
political revenues, local advertising revenues were up 2.0% and national
advertising revenues were down 5.6%. Advertising spending by the automotive,
retail, movies, schools, and medical categories were down while fast food,
services, media spending, home products, and pharmacy/cosmetics were up.
Automotive, which represented approximately 20.6% of time sales, was down 3.7%
in the quarter. Local revenues, excluding political revenues, represented
68.1% of advertising revenues in the quarter.
-- Time sales on our ABC and CW stations were down 5.2% and 0.4% in the
quarter, respectively. Stations affiliated with FOX, MyNetworkTV, CBS and NBC
were up 2.7%, 0.7%, 34.2% and 1.0%, respectively. Excluding political
revenues, our ABC and CW stations were down 10.6% and 1.1%, respectively,
while our FOX, MyNetworkTV, CBS and NBC stations were up 1.8%, 0.3%, 31.0%,
and 0.2%, respectively.
-- On June 3, 2008, the Company entered into an economic three-year
extension of the analog and digital carriage agreement with Insight
Communications, Inc. covering four stations in three markets.
-- On June 24, 2008, the Company agreed to buy the assets of WTVR-TV
(CBS 6) in the Richmond-Petersburg, Virginia market from Raycom Media, Inc.
for $85.0 million and simultaneously sell the license assets of WRLH-TV
(FOX 35) to Carma Broadcasting, LLC. The transactions are subject to approval
by the Federal Communications Commission and the Justice Department. The
agreement allows for up to twelve months to close on the transactions.
-- The Company's FOX affiliate in Des Moines, Iowa, KDSM-TV, entered into
a news share arrangement with WHO-TV, the NBC affiliate in that market, in
which WHO-TV will produce a 9:00 pm newscast for KDSM-TV. The newscast is
expected to begin airing in September, 2008.
-- During the second quarter 2008, the Company invested $35.1 million, net
of cash distributions, in various ventures, of which $19.0 million related to
developmental land in Frederick County, Maryland, a suburb of Washington D.C.
For the first six months of 2008, we have invested, net of cash distributions
received, $79.7 million and another $42.6 million in 2007, for a total of
$122.3 million in non-television assets.
-- The Company reported a $1.6 million non-cash impairment of goodwill
charge related to Acrodyne Communications, Inc., a broadcast equipment and
transmitter company.
Balance Sheet and Cash Flow Highlights:
-- Debt on the balance sheet, net of $10.9 million in cash, was $1,376.0
million at June 30, 2008 versus net debt of $1,357.5 million at March 31,
2008.
-- As of June 30, 2008, 53.2 million Class A common shares and 34.4
million Class B common shares were outstanding, for a total of 87.6 million
common shares outstanding.
-- Capital expenditures in the second quarter were $8.7 million.
-- Common stock dividends paid in cash in the second quarter were $17.4
million.
-- Program contract payments for continuing operations were $20.5 million
in the second 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 in 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, our ability to identify
and consummate investments in attractive non-television assets and to achieve
anticipated returns on those investments once consummated, 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 except as required
by law.
Outlook:
In accordance with Regulation FD, Sinclair is providing public
dissemination through this press release of its expectations for certain of
its third quarter 2008 and full year 2008 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.
All assumptions and historical periods have been adjusted to exclude
WGGB-TV in Springfield, MA, which was sold November 1, 2007, and which was
accounted for as discontinued operations. The forward looking assumptions and
the February through June 2008 historical results include the Cedar Rapids
station of KGAN-TV, which was accounted for under a Joint Sales Agreement, and
KFXA-TV, both of which are now consolidated.
"Although we expect the weakness in the economy to continue to impact
advertising spending levels for the remainder of 2008, we still expect to grow
net broadcast revenues on the strength of political advertising levels,"
commented David Amy, EVP and CFO. "Our cable, satellite and telecom
retransmission consent agreements are expected to result in approximately $68
million in revenues this year as compared to $59 million in 2007. On the
expense side, we are evaluating cost cutting measures, the savings from which
are not included in the expense guidance provided below."
-- The Company expects third quarter 2008 station net broadcast revenues
from continuing operations, before barter, to be approximately $152.5 to
$154.5 million, an increase of 2.0% to 3.4%, as compared to third quarter 2007
station net broadcast revenues, before barter, of $149.4 million. This
assumes $9.7 million in political revenues versus $1.1 million received in the
third quarter last year.
-- The Company expects barter revenue and barter expense each to be
approximately $14.5 million in the third quarter.
-- The Company expects continuing operations station production expenses
and station selling, general and administrative expenses (together,
"television expenses"), before barter expense, and including stock-based
compensation expense, in the quarter to be approximately $72.6 million, a 4.5%
increase from third quarter 2007 television expenses of $69.5 million. On a
full year basis, television expenses are expected to be approximately $298.1
million, or up 3.2%, as compared to 2007 television expenses of $288.7
million. The 2008 television expense forecast includes $0.4 million of stock-
based compensation expense for the quarter and $1.6 million for the year, as
compared to the 2007 actuals of $0.3 million and $1.5 million for the quarter
and year, respectively.
-- The Company expects program contract amortization expense to be
approximately $23.7 million in the quarter and $86.5 million for the year, as
compared to the 2007 actuals of $29.2 million and $96.4 million for the
quarter and year, respectively.
-- The Company expects program contract payments to be approximately $19.8
million in the quarter and $82.3 million for the year, as compared to the 2007
actuals of $18.2 million and $77.7 million for the quarter and year,
respectively.
-- The Company expects corporate overhead, including stock-based
compensation expense, to be approximately $6.6 million in the quarter and
$27.3 million for the year, as compared to the 2007 actuals of $5.5 million
and $24.3 million for the quarter and year, respectively. The 2008 corporate
overhead forecast includes $0.2 million of stock-based compensation expense
for the quarter and $1.8 million for the year, as compared to the 2007 actuals
of $0.1 million and $2.2 million for the quarter and year, respectively.
-- The Company expects other operating division revenues less other
operating division expenses to be approximately $1.8 million in the third
quarter and $1.9 million for the year, assuming current equity interests.
-- The Company expects depreciation on property and equipment to be
approximately $12.2 million in the third quarter and $46.4 million for the
year, assuming the capital expenditure assumptions below, and as compared to
the 2007 actuals of $10.6 million and $43.1 million for the third quarter and
year, respectively.
-- The Company expects amortization of acquired intangibles to be
approximately $4.6 million in the third quarter and $18.3 million for the
year, as compared to the 2007 actuals of $4.5 million and $17.6 million for
the third quarter and year, respectively.
-- The Company expects net interest expense to be approximately $19.9
million in the quarter and $79.2 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. This is compared to the 2007
actuals of $21.8 million and $93.6 million for the quarter and year,
respectively.
-- The Company expects the third quarter effective tax rate for continuing
operations to be approximately 44.7%, including a current tax benefit from
continuing operations of approximately $1.3 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
42.5%, including a current tax provision of $5.3 million.
-- The Company expects dividends paid on the Class A and Class B common
shares to be approximately $17.5 million in the third quarter and $67.5
million for the year, assuming current shares outstanding and an $0.80 per
share annual dividend rate. This is compared to total dividends paid in 2007
of $49.5 million.
-- The Company expects to spend approximately $9.7 million in capital
expenditures in the quarter and approximately $27.0 million for the year,
which is down from the previous outlook of $33.0 million. Of the 2008 full
year amount, approximately $6.8 million represents timing of 2007 budgeted
projects.
Sinclair Conference Call:
The senior management of Sinclair will hold a conference call to discuss
its second quarter 2008 results on Wednesday, August 6, 2008, at 8:30 a.m. ET.
After the call, an audio replay will be available at http://www.sbgi.net under
"Investor Information/Earnings Webcast." 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, owns and operates, programs or provides
sales services to 58 television stations in 35 markets. Sinclair's television
group reaches approximately 22% of U.S. television households and is
affiliated with all major networks. Sinclair owns equity interests in various
non-broadcast related companies.
Notes:
"Discontinued Operations" accounting has been adopted in the financial
statements for all periods presented in this press release for the sale of
WGGB-TV, our ABC affiliate in Springfield, MA, which was sold November 1,
2007. As such, the results from operations, net of related income taxes, have
been reclassified from income from continuing 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 Six Months Ended
June 30, June 30,
2008 2007 2008 2007
REVENUES:
Station broadcast revenues, net
of agency commissions $163,747 $159,213 $324,639 $307,547
Revenues realized from station
barter arrangements 15,84815,71730,48629,432
Other operating divisions' revenues 14,020 3,46625,147 6,353
Total revenues193,615 178,396 380,272 343,332
OPERATING EXPENSES:
Station production expenses 40,41238,26879,26773,815
Station selling, general and
administrative expenses 34,02033,99368,63167,646
Expenses recognized from station
barter arrangements 14,11714,24827,63426,678
Amortization of program contract
costs and net realizable value
adjustments 21,79423,04041,50344,356
Other operating divisions' expenses 14,745 4,07926,679 7,625
Depreciation of property and
equipment 11,55911,45622,11222,106
Corporate general and administrative
expenses 7,483 7,42714,20413,391
Amortization of definite-lived
intangible assets and other assets 4,547 4,242 9,086 8,486
Impairment of goodwill1,626- 1,626-
Total operating expenses 150,303 136,753 290,742 264,103
Operating income 43,31241,64389,53079,229
OTHER INCOME (EXPENSE):
Interest expense and amortization
of debt discount and deferred
financing costs(19,482) (25,887) (39,684) (52,269)
Interest income 194 1,701 3752,089
Gain (loss) from sale of assets 13 451 (8)
Loss from extinguishment of debt -(14,967) (286) (30,648)
(Loss) gain from derivative instruments - (1,654) 999 (597)
Loss from equity and cost method
investments (1,471) (880) (776)(892)
Other income, net 1,024 454 1,391 676
Total other expense (19,722) (41,229) (37,930) (81,649)
Income (loss) from continuing
operations before income taxes23,590 41451,600 (2,420)
INCOME TAX (PROVISION ) BENEFIT (10,490)1,289 (21,956) 2,010
Income (loss) from continuing
operations13,100 1,70329,644 (410)
DISCONTINUED OPERATIONS:
Income from discontinued operations,
net of related income tax benefit
(provision)of $94, $278, ($45)
and $261, respectively 178 494 47 218
NET INCOME (LOSS)$13,278$2,197$29,691 $(192)
BASIC AND DILUTED EARNINGS
PER COMMON SHARE:
Earnings per share from continuing
operations $0.15 $0.02 $0.34 $-
Earnings per share from discontinued
operations $-$0.01 $- $-
Earnings per share$0.15 $0.03 $0.34 $-
Weighted average common shares
outstanding 87,45987,122 87,353 86,634
Weighted average common and common
equivalent shares outstanding 87,46387,282 94,063 86,634
Dividends declared per share $0.20 $0.15 $0.40 $0.30
Unaudited Consolidated Historical Selected Balance Sheet Data:
(In thousands)
June 30, March 31,
2008 2008
Cash & cash equivalents $ 10,911 $ 12,594
Total current assets 195,176207,585
Total long term assets 2,068,851 2,051,377
Total assets 2,264,027 2,258,962
Current portion of debt 55,105 47,851
Total current liabilities213,460210,181
Long term portion of debt 1,331,805 1,322,272
Total long term liabilities1,781,165 1,776,924
Total liabilities 1,994,625 1,987,105
Minority interest in consolidated subsidiaries18,200 17,721
Total stockholders' equity 251,202254,136
Total liabilities & stockholders' equity $2,264,027 $2,258,962
Unaudited Consolidated Historical Selected Statement of Cash Flows Data:
(In thousands)
Three Months Six Months
Ended Ended
June 30, June 30,
2008 2008
Net cash flow from operating activities $ 41,725$89,765
Net cash flow used in investing activities (41,685) (105,066)
Net cash flow (used in) from financing
activities (1,723) 5,232
Net decrease in cash & cash equivalents (1,683) (10,069)
Cash & cash equivalents, beginning of period 12,594 20,980
Cash & cash equivalents, end of period $10,911$10,911
SOURCE Sinclair Broadcast Group, Inc.
