BALTIMORE, Feb. 10 /PRNewswire-FirstCall/ -- Sinclair Broadcast Group,
Inc. (Nasdaq: SBGI), the "Company" or "Sinclair," today reported financial
results for the three months and twelve months ended December 31, 2004.
Financial Results:
Net broadcast revenues from continuing operations were $171.3 million for
the three months ended December 31, 2004, an increase of 6.9% versus the prior
year period result of $160.3 million. Operating income was $50.9 million as
compared to $40.3 million in the prior year period, an increase of 26.2%. The
Company had a net loss available to common shareholders of $5.1 million in the
three-month period versus net income available to common shareholders of $16.0
million in the prior year period. $44.1 million of the 2004 loss was related
to the write-down of goodwill in accordance with SFAS No. 142. Diluted loss
per share was $0.06 versus diluted income per share of $0.19 in the prior year
period.
Net broadcast revenues were $637.2 million for the twelve months ended
December 31, 2004, an increase of 3.7% versus the prior year period result of
$614.7 million. Operating income was $157.2 million in the twelve-month
period, an increase of 1.9% versus the prior year period result of $154.3
million. Net income available to common shareholders was $13.8 million in the
twelve-month period versus the prior year period net income available to
common shareholders of $14.0 million. Diluted income per share was $0.16
versus diluted income per share of $0.16 in the prior year period.
"2004 was a year marked by record levels of political advertising
spending," commented David Smith, President and CEO of Sinclair. "The $32
million we booked represented a 31% increase over 2002's political spending
and a 43% increase over the amount booked in 2000. $1.4 million of the
political came from stations where we recently added the news. While
political was the main driver of our 2004 performance, it represented only
4.5% of our total advertising revenue.
"Recently, we announced several significant dispositions and transactions
that should strengthen our competitive position and portfolio of assets.
First, we agreed to sell television stations in the Sacramento and Kansas City
markets. Both transactions were at prices significantly higher than current
public valuations and, in the case of Kansas City, allowed us to exit a market
where we were at a competitive disadvantage. In anticipation of the
Sacramento sale proceeds, our Board of Directors increased the annual dividend
on our common stock from $0.10 per share to $0.20 per share. Last week we
announced that we reached an agreement in principle with Comcast, allowing us
to provide the digital television signals of our owned and operated television
stations to their high definition subscribers, which enabled many of those
viewers who receive Sinclair FOX affiliated stations to watch the Super Bowl
in high definition. We hope to conclude our negotiations toward a long-term
agreement with Comcast, shortly."
Operating Statistics and Income Statement Highlights:
-- The quarter's revenues were positively impacted by political revenues
which totaled $18.7 million in the quarter versus $2.1 million in the
same period last year and by increased advertising spending primarily
in the schools and medical categories. Primary categories that were
down were automotive, services, movies, and restaurants. Revenues
generated from our direct mail initiatives totaled $8.1 million versus
$6.0 million in the same period last year. For the year, our direct
mail efforts generated $27.2 million, of which $16.3 million came from
new advertisers.
-- Local advertising revenues increased 3.4% in the quarter versus the
fourth quarter 2003, while national advertising revenues increased
13.1%. Excluding political revenues, local advertising revenues were
down 1.8% and national advertising revenues were down 7.2%. Local
revenues, excluding political revenues, represented 62.9% of
advertising revenues.
-- All affiliate groups increased their advertising revenues on the
strength of political revenues, with the exception of our WB stations,
which were flat due to ratings declines.
-- Results of the November ratings book for the combined six networks
indicated that ratings in prime-time were down 0.5% in the 18 to 49
demographic and down 3.6% in households on a national basis, as
compared to the November 2003 sweeps. Weighted average ratings on our
stations from 5pm to 10pm were down an average of 7.1% and 5.6% in the
demo and households, respectively. Our FOX affiliates outperformed
the network in both the demo and household, increasing ratings by 6.0%
and 3.5%, respectively while the FOX network was down 6.3% and 6.4%,
respectively.
-- On November 12, 2004, we announced the sale of KSMO-TV, our WB
affiliate in Kansas City to Meredith Corporation for $33.5 million, of
which we have closed on $26.8 million representing the non-license
assets. Application to transfer the license is subject to FCC
approval. We are operating under a joint sales agreement.
-- On December 2, 2004, we announced the sale of KOVR-TV, our CBS
affiliate in Sacramento to Viacom for $285.0 million. Closing is
expected to occur in the second quarter 2005, if the FCC approves the
ownership waiver requests.
-- On December 29, 2004, Communications Corporation of America (CCA)
exercised and closed on their option to purchase the license assets of
KETK-TV in Tyler, Texas for $1.75 million. CCA purchased the non-
licensed assets in 1999 and had been operating the station pursuant to
a time brokerage agreement.
-- The Company and UPN extended the affiliation agreements for WABM-TV,
WMMP-TV, WCGV-TV, WUXP-TV, WUPN-TV and WRDC-TV, through July 31, 2007.
The Company and CBS extended the affiliation agreements on WGME-TV,
KGAN-TV and KOVR-TV until December 31, 2007.
-- During the quarter and in accordance with SFAS No. 142, we tested
goodwill for impairment based on estimated fair values. Our testing
reflected that one market had become impaired by $44.1 million, on a
pre-tax basis.
Balance Sheet and Cash Flow Highlights:
-- Debt on the balance sheet, net of $10.5 million in cash, was $1,629.1
million at December 31, 2004 versus net debt of $1,689.6 million at
September 30, 2004. $26.8 million of the decrease was due to the sale
of the non-license assets of our Kansas City station.
-- As of December 31, 2004, 46.0 million Class A common shares and 39.2
million Class B common shares were outstanding, for a total of 85.2
million common shares outstanding.
-- The Board of Directors increased the annual per share dividend paid on
the class A and class B common shares from $0.10 to $0.20.
-- Capital expenditures in the quarter were $8.4 million.
-- Program contract payments were $25.6 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), FCC approval of pending license
transfers, 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 certain of
its first quarter and full year 2005 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 expected, 2005 will be a challenging year due to the non-election
cycle and absence of political revenues," commented David Amy, EVP and CFO.
"As we enter the year, we continue to see softness in auto, our largest
advertising category, as well as declines in telecommunications and movie
advertising. Ratings on the FOX and WB networks, our two largest affiliate
groups, while down in the November sweeps, are expected to show some
improvements. For the first quarter, we expect to benefit from higher ratings
on our ABC stations, the FOX network's highly rated program, 'American Idol',
and from advertising revenues generated from the Super Bowl, which aired on 20
of our stations. Given the political revenue hurdles for the year, we intend
on being diligent in controlling our operating costs."
-- The Company expects first quarter 2005 station net broadcast revenues,
before barter, to be down approximately 2% from first quarter 2004
station net broadcast revenue, before barter, of $146.5 million.
Included in this assumption is approximately $4.0 million of revenues
generated from the Super Bowl. Political revenues in the first
quarter last year were approximately $2.7 million.
-- The Company expects first quarter barter revenue to be approximately
$13.6 million.
-- The Company expects station production expenses and station selling,
general and administrative expenses (together, television expenses),
before barter expense, in the first quarter to be approximately $74.7
million, up approximately 1.2% from first quarter 2004 television
expenses of $73.8 million. On a full year basis, television expenses
are expected to be flat as compared to 2004 television expenses of
$302.8 million.
-- The Company expects first quarter barter expense to be approximately
$13.6 million.
-- The Company expects first quarter program contract amortization expense
to be approximately $19 million and $74 million for the year.
-- The Company expects first quarter program contract payments to be
approximately $26.5 million and $102 million for the year.
-- The Company expects first quarter corporate overhead to be
approximately $6 million and $22.5 million for the year.
-- The Company expects first quarter depreciation on property and
equipment to be approximately $12.7 million and $51 million for the
year, assuming the capital expenditure assumptions below.
-- The Company expects first quarter amortization of acquired intangibles
to be approximately $4.5 million and $18 million for the year.
-- The Company expects first quarter net interest expense to be
approximately $29.5 million and $115 million for the year, assuming no
changes in the current interest rate yield curve, changes in debt
levels based on the assumptions discussed in this "Outlook" section
and assuming the sale of KOVR-TV in April 2005.
-- The Company expects dividends paid on the Series D preferred stock to
be approximately $2.5 million in the first quarter and $10.0 million
for the year and dividends paid on the Class A and Class B common
shares to be approximately $2.1 million in the first quarter and $14.9
million for the year, assuming current shares outstanding and a $0.20
per share annual dividend beginning with the April 2005 dividend
payment.
-- 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 first 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 $0.2 million
in the first quarter and $0.8 million for the year.
-- The Company expects to close on the sale of KOVR-TV in April 2005 for
$285.0 million gross proceeds or approximately $254.0 million, net of
taxes and closing costs.
-- The Company expects to spend approximately $7.5 million in capital
expenditures in the first quarter and approximately $30 million for
the year.
Sinclair Conference Call:
The senior management of Sinclair will hold a conference call to discuss
its first quarter results on Thursday, February 10, 2005, 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:
"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 sale of its Kansas City and Sacramento 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,
2004 2003 2004 2003
REVENUES:
Station broadcast revenues,
net of agency
commissions $171,343 $160,252 $637,186 $614,682
Revenues realized from
barter arrangements 14,506 15,379 58,039 59,155
Other operating division
revenues 2,275 3,595 13,054 14,568
Total revenues 188,124 179,226 708,279 688,405
OPERATING EXPENSES:
Station production
expenses 38,888 38,303 148,408 142,469
Station selling, general
and administrative
expenses 40,914 35,916 154,352 138,284
Expenses realized from
barter arrangements 13,243 13,509 53,494 54,315
Amortization of program
contract costs and net
realizable value
adjustments 19,105 24,839 89,938 98,966
Other operating division
expenses 2,276 4,316 14,932 16,375
Depreciation of property
and equipment 12,248 11,790 48,617 44,004
Corporate general and
administrative expenses 5,665 5,579 21,160 19,532
Amortization of acquired
intangible broadcast
assets and other assets 4,542 4,685 18,544 18,797
Stock based compensation
expense 391 (15) 1,603 1,397
Total operating
expenses 137,272 138,922 551,048 534,139
Operating income 50,852 40,304 157,231 154,266
OTHER INCOME (EXPENSE):
Interest expense (28,826) (31,713) (120,400) (121,165)
Subsidiary trust
minority interest
expense - - - (11,246)
Interest income 50 91 191 560
Gain from equity
investments 845 612 1,100 1,193
Loss on asset sales (7) (63) (52) (452)
Gain on derivative
instrument 8,811 9,260 29,388 17,354
Loss from extinguishment
of securities - - (2,453) (15,187)
Gain on insurance
proceeds 3,341 - 3,341 -
Impairment of
goodwill (44,056) - (44,056) -
Other income 326 209 896 1,187
Total other expense,
net (59,516) (21,604) (132,045) (127,756)
Income (loss) before
(provision) benefit
for income taxes (8,664) 18,700 25,186 26,510
Benefit (provision)
for income taxes 2,564 (4,035) (11,182) (10,676)
Net income (loss) from
continuing operations (6,100) 14,665 14,004 15,834
Income (loss) from
discontinued operations,
net of taxes 3,513 3,942 10,018 8,558
Net income (loss) $(2,587) $18,607 $24,022 $24,392
Preferred stock
dividends 2,502 2,587 10,180 10,350
Net income (loss)
available to common
shareholders $(5,089) $16,020 $13,842 $14,042
Basic (loss) income
per share from continuing
operations $(0.10) $0.14 $0.04 $0.06
Basic earnings per share
from discontinued
operations $0.04 $ 0.05 $0.12 $0.10
Basic income (loss) per
share available to common
shareholders $(0.06) $0.19 $0.16 $0.16
Diluted income (loss)
per share from continuing
operations $(0.10) $0.14 $0.04 $0.06
Diluted earnings per
share from discontinued
operations $0.04 $0.05 $0.12 $0.10
Diluted (loss) income
per share available to common
shareholders $(0.06) $0.19 $0.16 $0.16
Weighted average shares
outstanding- no
dilution 85,169 85,733 85,590 85,651
Weighted average shares
outstanding- assuming
dilution 85,170 85,943 85,741 85,793
Unaudited Consolidated Historical Selected Balance Sheet Data:
(Dollars in thousands)
December 31, September 30,
2004 2004
Cash & cash equivalents $ 10,491 $9,096
Total current assets 330,150 317,673
Total long term assets 2,135,513 2,196,565
Total assets 2,465,663 2,514,238
Current portion of debt 48,946 44,916
Total current liabilities 288,661 253,190
Long term portion of debt 1,590,669 1,653,733
Total long term liabilities 1,949,184 2,026,235
Total liabilities 2,237,845 2,279,425
Minority interest in consolidated subsidiaries 1,267 1,443
Total stockholders' equity 226,551 233,370
Total liabilities & stockholders' equity 2,465,663 2,514,238
Unaudited Consolidated Historical Selected Statement of Cash Flows Data:
(Dollars in thousands)
Three Months Twelve Months
Ended Ended
December 31, December 31,
2004 2004
Net cash flow from operating activities $43,052 $122,424
Net cash flow from investing activities 19,310 (20,223)
Net cash flow from financing activities (60,967) (120,440)
Net increase in cash and cash
equivalents 1,395 (18,239)
Cash & Cash Equivalents, beginning of period 9,096 28,730
Cash & Cash Equivalents, end of period $10,491 $10,491
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