Sinclair Reports First Quarter 2010 Results

Sinclair Reports First Quarter 2010 Results

BALTIMORE, May 5 /PRNewswire-FirstCall/ -- Sinclair Broadcast Group, Inc. (NASDAQ:SBGI), the "Company" or "Sinclair," today reported financial results for the three months ended March 31, 2010.

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"Television advertising continues to improve with many categories growing year-over-year," commented David Smith, President and CEO of Sinclair. "The automotive category showed the largest growth, increasing 35.6% in the first quarter as compared to the same period last year. This was a stronger performance than the approximate 20% growth we estimated. Of our top ten categories, which represented approximately 77% of our time sales, only telecommunications and paid programming were down. For the second quarter, we continue to see strong growth as both the majority of our advertising categories pace positive and the number of new advertisers increases."

Mr. Smith continued, "We recognize that credit is once again flowing and yields are improving for issuers in our industry, a reflection, in part, on the market's optimism for broadcast television. As such, we believe there could be some opportunities for us to further strengthen our balance sheet. In addition to the improvement in the short-term fundamentals, we are encouraged that broadcasters and the networks are working together towards a marketable mobile DTV solution. We believe the financial impact could be significant for our industry longer term."

Financial Results:

Net broadcast revenues from continuing operations were $147.9 million for the three months ended March 31, 2010, an increase of 12.7% versus the prior year period result of $131.3 million. The Company had operating income of $46.2 million in the three-month period, as compared to an operating loss of $106.7 million in the prior year period, which included $130.1 million non-cash impairment of goodwill and other intangible assets. The Company had net income attributable to the parent company of $11.5 million in the three-month period versus a net loss attributable to the parent company of $85.7 million in the prior year period. The Company reported diluted earnings per common share of $0.14 for the three-month period versus a diluted loss per common share of $1.06 in the prior year period.

Operating Statistics and Income Statement Highlights:

-- Political revenues were $1.5 million in the first quarter 2010 versus
$0.3 million in first quarter 2009.
-- Local net broadcast revenues, which include local time sales,
retransmission revenues, and other local broadcast revenues, were up
14.1% in the first quarter 2010 while national net broadcast revenues,
which include national time sales and other national broadcast
revenues, were up 8.2% versus the first quarter 2009. Excluding
political revenues, local net broadcast revenues were up 13.9% and
national net broadcast revenues were up 5.2% in the first quarter.
-- Eight of our top ten advertising revenue categories were up in the
quarter, including schools, medical, grocery and home products. Paid
programming and telecommunications advertising revenues were down for
the quarter. Automotive, our largest category, was up 35.6%, while
services, our second largest category, was up 10.1% in the quarter.
-- The Company's outsourcing agreements on WYZZ-TV in Peoria, IL and
WUHF-TV in Rochester, NY with Nexstar Broadcasting, which were
scheduled to terminate April 1, 2010, were renewed until December 31,
2013.
-- The Company entered into an agreement to multicast THECOOLTV, a
24-hour music television network, in 34 of Sinclair's markets.
-- The Company entered into a one-year extension of its retransmission
agreement with Mediacom Communications, Inc. to expire on December 31,
2010.
-- The Company's affiliation agreements for its nine ABC stations were
renewed to August 31, 2015.

Balance Sheet and Cash Flow Highlights:

-- Debt on the balance sheet, net of $90.2 million in cash and restricted
cash, was $1,247.9 million at March 31, 2010 versus net debt of
$1,278.7 million at December 31, 2009. Included in the March 31, 2010
cash balance is approximately $37.8 million held in a collateral
account to redeem the remainder of the 3% and 4.875% senior
convertible notes.
-- On February 23, 2010, cash par tender offers for the 3% and 4.875%
senior convertible notes expired. The Company purchased $12.3 million
of the 3% notes and $14.3 million of the 4.875% notes, leaving $15.4
million principal amount of the 3.0% Notes and $22.7 million principal
amount of the 4.875% Notes outstanding.
-- As of March 31, 2010, 48.8 million Class A common shares and 31.5
million Class B common shares were outstanding, for a total of 80.3
million common shares outstanding.
-- Capital expenditures in the first quarter were $1.8 million.
-- Program contract payments for continuing operations were $27.4 million
in the first quarter.
-- During the first quarter, the Company invested $3.2 million, net of
cash distributions, in various ventures.

Notes:

Prior year presentation have been reclassified to conform to the presentation of current year generally accepted accounting principles.

Forward-Looking Statements:

The matters discussed in this news release, particularly those in the section labeled "Outlook," include forward-looking statements regarding, among other things, future operating results. When used in this news 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, but not limited to, the impact of changes in national and regional economies, the volatility in the U.S. and global economies and financial credit markets which impact our ability to forecast, 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, network license fees, 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, Form 10-K and Form 8-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 news release of its expectations for certain components of its second quarter 2010 and full year 2010 financial performance. The Company assumes no obligation to update its expectations. All matters discussed in the "Outlook" section are forward-looking and, as such, readers should not place any undue reliance on this information and should refer to the "Forward-Looking Statements" section above.

"The second quarter core business continues to strengthen with the majority of our advertising categories expected to finish up versus the same period last year, a sign that the advertising recovery is more than just an auto recovery," commented David Amy, EVP and CFO. "As consumer confidence improves and corporate profits increase, we believe they will have a positive impact on businesses marketing budgets and ultimately broadcast revenues."

-- The Company expects second quarter 2010 station net broadcast revenues
from continuing operations, before barter, to grow by approximately
20% as compared to second quarter 2009 station net broadcast revenues
of $133.0 million. This assumes $3.1 million in political revenues as
compared to $0.7 million in second quarter 2009.
-- The Company expects barter revenue to be approximately $16.6 million
in the second quarter
-- The Company expects barter expense to be approximately $16.6 million
in the second quarter.
-- The Company expects continuing operations station production expenses
and station selling, general and administrative expenses (together,
"television expenses"), before barter expense, in the second quarter
to be approximately $69.8 million, a 1.3% increase from second quarter
2009 television expenses of $68.9 million. On a full year basis,
television expenses are expected to be approximately $276.8 million,
up 4.4% as compared to 2009 television expenses of $265.2 million.
The 2010 expense forecast includes $0.3 million of stock-based
compensation expense for the quarter and $1.7 million for the year, as
compared to no stock-based compensation expense in 2009.
-- The Company expects program contract amortization expense to be
approximately $17.2 million in the second quarter and $66.3 million
for 2010, as compared to the 2009 actuals of $19.9 million and $73.1
million for the quarter and year, respectively.
-- The Company expects program contract payments to be approximately
$21.5 million in the second quarter and $88.8 million for 2010, as
compared to the 2009 actuals of $19.0 million and $82.2 million for
the quarter and year, respectively.
-- The Company expects corporate overhead to be approximately $6.9
million in the second quarter and $27.0 million for 2010, as compared
to the 2009 actuals of $6.0 million and $25.6 million for the quarter
and year, respectively. The 2010 corporate expense forecast includes
$0.4 million of stock-based compensation expense for the quarter and
$2.6 million for the year, as compared to the 2009 actuals of $0.2
million and $0.7 million for the quarter and year, respectively.
-- The Company expects other operating division revenues less other
operating division expenses to be $1.0 million of income in the second
quarter and $5.8 million of income for 2010, assuming current equity
interests, and as compared to the 2009 actuals of $0.5 million of
income in the quarter and a $1.8 million loss for the year,
respectively.
-- The Company expects depreciation on property and equipment to be
approximately $9.7 million in the second quarter and $37.8 million for
2010, assuming the capital expenditure assumptions below, and as
compared to the 2009 actuals of $10.5 million and $42.9 million for
the quarter and year, respectively.
-- The Company expects amortization of acquired intangibles to be
approximately $4.7 million in the second quarter and $18.7 million for
2010, as compared to the 2009 actuals of $6.3 million and $22.4
million for the quarter and year, respectively.
-- The Company expects net interest expense to be approximately $28.4
million in the second quarter and $113.5 million for 2010
(approximately $102.3 million on a cash basis), assuming no changes in
the current interest rate yield curve, changes in debt levels based on
the assumptions discussed in this "Outlook" section, including a $25.0
million prepayment of the Term Loan B loans on April 30, 2010, the
February 23, 2010 tender results of the 3.0% and 4.875% convertible
bonds and assuming the remaining principal amount of the 3%
convertible notes are put in May 2010 and funded with restricted cash.
This compares to the 2009 actuals of $17.6 million and $80.0 million
($64.9 million on a cash basis) for the quarter and year,
respectively.
-- The Company expects a current tax provision from continuing operations
of approximately $0.6 million and $2.1 million in the second quarter
and for the full year 2010, respectively, based on the assumptions
discussed in this "Outlook" section. The Company expects the
effective tax rate for the second quarter and the full year to be
approximately 38%.
-- The Company expects to spend approximately $8.0 million in capital
expenditures in the second quarter and approximately $19.0 million in
2010.

Sinclair Conference Call:

The senior management of Sinclair will hold a conference call to discuss its first quarter 2010 results on Wednesday, May 5, 2010, at 8:30 a.m. ET. After the call, an audio replay will be available at 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.

The Company regularly uses its website as a key source of Company information and can be accessed at www.sbgi.net.

Sinclair Broadcast Group, Inc. and Subsidiaries
Preliminary Unaudited Consolidated Statements of Operations
(in thousands, except per share data)

Three Months Ended March
31,
2010 2009
---- ----
REVENUES:
Station broadcast revenues, net of agency
commissions $147,922 $131,305
Revenues realized from station barter
arrangements 14,776 11,898
Other operating divisions revenues 6,930 11,535
----- ------
Total revenues 169,628 154,738

OPERATING EXPENSES:
Station production expenses 35,918 34,943
Station selling, general and administrative
expenses 30,642 30,910
Expenses recognized from station barter
arrangements 13,231 10,228
Amortization of program contract costs and
net realizable value adjustments 15,914 20,758
Other operating divisions expenses 6,777 12,251
Depreciation of property and equipment 9,625 11,933
Corporate general and administrative
expenses 6,577 6,359
Amortization of definite-lived intangible
assets and other assets 4,717 5,201
Gain on asset exchange - (1,236)
Impairment of goodwill, intangible and other
assets - 130,098
--- -------
Total operating expenses 123,401 261,445
------- -------
Operating income (loss) 46,227 (106,707)

OTHER INCOME (EXPENSE):
Interest expense and amortization of debt
discount and deferred financing costs (28,974) (18,374)
Interest income 47 26
Gain from sale of assets - 27
(Loss) gain from extinguishment of debt (289) 18,986
Loss from derivative instruments (5) -
Income (loss) from equity and cost method
investments 543 (445)
Other income, net 597 648
--- ---
Total other (expense) income (28,081) 868
------- ---
Income (loss) from continuing operations
before income taxes 18,146 (105,839)
INCOME TAX (PROVISION) BENEFIT (7,086) 18,800
------ ------
Income (loss) from continuing operations 11,060 (87,039)
DISCONTINUED OPERATIONS:
Loss from discontinued operations, net of
related income tax provision of $66 and
$108 respectively (66) (108)
--- ----
NET INCOME (LOSS) 10,994 (87,147)
Net loss attributable to the noncontrolling
interest 526 1,492
--- -----
NET INCOME (LOSS) ATTRIBUTABLE TO SINCLAIR
BROADCAST GROUP $11,520 $(85,655)
======= ========

BASIC AND DILUTED EARNINGS (LOSS) PER COMMON
SHARE ATTRIBUTABLE TO SINCLAIR BROADCAST
GROUP:
Earnings (loss) per share from continuing
operations $0.14 $(1.06)
===== ======
Earnings (loss) per share $0.14 $(1.06)
===== ======
Weighted average common shares outstanding 79,957 80,815
====== ======
Weighted average common and common
equivalent shares outstanding 79,957 80,815
====== ======

AMOUNTS ATTRIBUTABLE TO SINCLAIR BROADCAST
GROUP COMMON SHAREHOLDERS:
Income (loss) from continuing operations,
net of tax $11,586 $(85,547)
Loss from discontinued operations, net of
tax (66) (108)
--- ----
Net income (loss) $11,520 $(85,655)
======= ========

Preliminary Unaudited Consolidated Historical Selected Balance Sheet
Data:
(In thousands)

March 31, December 31,
2010 2009
---- ----
Cash & cash equivalents (1) $90,177 $50,891
Total current assets 252,858 225,798
Total long term assets 1,323,696 1,371,923
Total assets 1,576,554 1,597,721

Current portion of debt 54,425 43,627
Total current liabilities 204,780 202,701
Long term portion of debt 1,283,674 1,322,681
Total long term liabilities 1,559,541 1,597,242
Total liabilities 1,764,321 1,799,943

Total stockholders' (deficit)
equity (187,767) (202,222)
Total liabilities & stockholders'
equity $1,576,554 $1,597,721

(1) March 31, 2010 includes $37.8 million of restricted cash held in
escrow for the redemption of the 3% and 4.875% Senior Convertible
Notes that will be released by May 2010 and January 2011.

Unaudited Consolidated Historical Selected Statement of Cash Flows
Data:
(In thousands)

Three Months
Ended
March 31,
2010
----
Net cash flow from operating
activities $35,950
Net cash flow from investing
activities 20,680
Net cash flow used in financing
activities (27,520)
-------

Net increase in cash & cash
equivalents 29,110
Cash & cash equivalents, beginning
of period 23,224
------
Cash & cash equivalents, end of
period $52,334

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PRN Photo Desk, photodesk@prnewswire.com
Source: Sinclair Broadcast Group, Inc.

CONTACT: David Amy, EVP & Chief Financial Officer or Lucy Rutishauser,
VP-Corporate Finance & Treasurer, +1-410-568-1500, both of Sinclair Broadcast
Group, Inc.

Web Site: http://www.sbgi.net/

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