Sinclair Reports Third Quarter 2005 Results

Sinclair Reports Third Quarter 2005 Results

Increases Annual Common Stock Dividend to $0.40 Per Share

Operating Income up 17.3%

BALTIMORE, Nov. 2 /PRNewswire-FirstCall/ -- Sinclair Broadcast Group, Inc. (NASDAQ:SBGI), the "Company" or "Sinclair," today reported financial results for the three months and nine months ended September 30, 2005.

Financial Results:

Net broadcast revenues from continuing operations were $149.0 million for the three months ended September 30, 2005, a decrease of 1.7% versus the prior year period result of $151.6 million. Operating income was $40.3 million as compared to $34.3 million in the prior year period, an increase of 17.3%. The Company had net income available to common shareholders of $31.6 million in the three-month period versus net income available to common shareholders of $1.0 million in the prior year period. Diluted earnings per common share were $0.37 versus diluted earnings per common share of $0.01 in the prior year period. Diluted earnings per common share from continuing operations were $0.16 as compared to a diluted loss of $0.01 in the same period last year.

Net broadcast revenues from continuing operations were $456.6 million for the nine months ended September 30, 2005, a decrease of 1.6% versus the prior year period result of $463.9 million. Operating income was $125.2 million in the nine-month period, an increase of 16.9% versus the prior year period result of $107.1 million. Net income available to common shareholders was $183.0 million in the nine-month period versus the prior year period net income available to common shareholders of $18.9 million. Diluted earnings per common share were $2.14 versus diluted earnings per common share of $0.22 in the prior year period. Diluted earnings per common share on continuing operations were $0.38 as compared to $0.15 in the same period last year.

"The quarter was driven primarily by better than expected revenue performance on our ABC affiliates, the positive impact of our retransmission fee negotiations on revenue and by continued diligent cost reviews by our employees," commented David Smith, President and CEO of Sinclair. "Third quarter market reports reflect that, on average, our stations grew market share at both the local and national level. Our Company's operational focus on growing the top and bottom lines and our ability to begin monetizing our retransmission consents enabled us to grow our margins and deleverage the Company in a quarter when we had almost $7 million of political advertising revenues in the same period last year to replace."

"We are also pleased to announce that our Board of Directors approved a $0.10 per share increase to our annual common stock dividend, beginning with the dividend payable in January 2006, bringing our total annual common stock dividend per share to $0.40, or an approximate 4.8% dividend yield at our current stock price."

Operating Statistics and Income Statement Highlights:

-- The quarter's revenues were positively impacted by increased
advertising spending primarily in the schools, services, fast food,
retail and travel/leisure categories. Primary categories that were
down were soft drinks, movies, and restaurants. Automotive, our
largest category, representing approximately 23% of our time sales,
was down 7.5%.

-- Local advertising revenues increased 0.9% in the quarter versus the
third quarter 2004, while national advertising revenues decreased
15.5% due to the absence of political advertising spending. Excluding
political revenues, local advertising revenues were up 2.5% and
national advertising revenues were down 7.2%. Local revenues,
excluding political revenues, represented 64% of advertising revenues.

-- Excluding political revenues, our ABC stations were up 7.4%, our FOX
stations were down 2.9%, our UPN stations were down 0.8% and our WB
stations were down 5.7%.

-- With the majority of our markets reported, market share survey results
reflect that our stations grew their share of the television
advertising market in the third quarter 2005 from a 17.2% to an 18.3%
share over the same period last year.

-- Under the terms of recently renegotiated retransmission agreements,
the Company recorded approximately $2.9 million in additional net
broadcast revenues, reflecting a one-time adjustment to previously
estimated retransmission revenue.

-- The Company recorded a deferred tax benefit of $5.0 million for
continuing operations during the third quarter to reflect an
adjustment to net deferred tax liabilities as a result of a change in
Ohio tax law that replaced the income and franchise tax with a
commercial activity tax.

-- On September 1, 2005, the Company entered into a joint sales and
shared services agreement with Nexstar Broadcasting, whereby Nexstar's
CBS affiliate, WROC-TV in Rochester, New York is providing sales and
non-programming related services to WUHF-TV, the Company's FOX
affiliate in Rochester.

-- On September 29, 2005, the Company closed on the remaining $6.7
million of the $33.5 million sale of KSMO-TV, its WB affiliate in
Kansas City, to Meredith Corporation.

-- The Company's WB affiliate, WTTO-TV in Birmingham, Alabama, entered
into a news share arrangement with WIAT-TV, the CBS affiliate in
Birmingham, effective October 3, 2005.

Balance Sheet and Cash Flow Highlights:

-- Debt on the balance sheet, net of $18.1 million in cash, was $1,463.8
million at September 30, 2005 versus net debt of $1,487.0 million at
June 30, 2005.

-- As of September 30, 2005, 46.9 million Class A common shares and 38.5
million Class B common shares were outstanding, for a total of 85.4
million common shares outstanding.

-- Capital expenditures in the quarter were $3.6 million.

-- Program contract payments for continuing operations were $25.3 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 fourth 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.

"We remain positive for the television business going into the fourth quarter, forecasting net broadcast revenues to be up a couple percentage points excluding political, despite the continued softness of automotive advertising spending," commented David Amy, EVP and CFO. "We believe that the strength of our ABC stations, changes we have made on our WB news programming, improvements in national advertising and our local new business initiatives will continue to drive our top line in the fourth quarter. Likewise, we are expecting another quarter of expense declines."

-- The Company expects fourth quarter 2005 station net broadcast
revenues, before barter, to be down approximately 8.0% to 9.0% (an
increase of 1.7% to 2.7% excluding political) from fourth quarter 2004
station net broadcast revenue, before barter, of $170.7 million due to
the absence of political advertising revenues. Political revenues in
the fourth quarter last year were approximately $18.7 million and are
expected to be approximately $1.0 million in the fourth quarter this
year.

-- The Company expects barter revenue to be approximately $14.7 million
in the quarter.

-- The Company expects station production expenses and station selling,
general and administrative expenses (together, "television expenses"),
before barter expense, in the quarter to be approximately $73.3
million, a 7.3% decrease from fourth quarter 2004 television expenses
of $79.1 million. On a full year basis, television expenses are
expected to be down about 3.9% as compared to 2004 television expenses
of $300.4 million.

-- The Company expects barter expense to be approximately $14.7 million
in the quarter.

-- The Company expects program contract amortization expense to be
approximately $20 million in the quarter and $72 million for the year.

-- The Company expects program contract payments to be approximately
$25.4 million in the quarter and $104 million for the year.

-- The Company expects corporate overhead to be approximately $5.6
million in the quarter and $20.8 million for the year.

-- The Company expects depreciation on property and equipment to be
approximately $12.3 million in the quarter and $50.6 million for the
year, assuming the capital expenditure assumptions below.

-- The Company expects amortization of acquired intangibles to be
approximately $4.6 million in the quarter and $18 million for the
year.

-- The Company expects net interest expense to be approximately $30.2
million in the quarter and $118 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 Class A and Class B common
shares to be approximately $6.4 million in the quarter and $19.2
million for the year, assuming current shares outstanding and a $0.30
per share annual dividend. The $0.40 per share annual dividend
becomes effective in 2006.

-- 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 full year effective tax rate for continuing
operations to be approximately 32%, including a current tax benefit
from continuing operations of approximately $0.4 million in the
quarter and $8.7 million for the year based on the assumptions
discussed in this "Outlook" section.

-- The Company expects to spend approximately $9 million in capital
expenditures in the quarter and approximately $21.5 million for the
year.

Sinclair Conference Call:

The senior management of Sinclair will hold a conference call to discuss its third quarter results on Wednesday, November 2, 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 60 television stations in 37 markets. Sinclair's television group reaches approximately 22% of U.S. television households and includes ABC, CBS, FOX, NBC, WB, and UPN affiliates. 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.

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 announced sale of its Kansas City, Sacramento and Tri-Cities 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 Nine Months Ended
September 30, September 30,
REVENUES: 2005 2004 2005 2004
Station broadcast
revenues, net of
agency commissions $149,027 $151,648 $456,572 $463,874
Revenues realized from
station barter
arrangements 12,039 13,617 41,551 43,388
Other operating
divisions' revenues 4,724 2,845 15,160 10,779
Total revenues 165,790 168,110 513,283 518,041
OPERATING EXPENSES:
Station production
expenses 35,486 37,147 112,170 114,551
Station selling, general
and administrative
expenses 34,218 35,319 103,123 106,691
Expenses recognized from
station barter
arrangements 11,158 12,619 38,447 40,147
Amortization of program
contract costs and net
realizable value
adjustments 18,587 23,840 52,131 70,217
Stock-based compensation
expense 502 293 1,160 1,207
Other operating
divisions' expenses 3,699 3,506 14,000 12,656
Depreciation and
amortization of
property and equipment 12,175 11,859 38,337 36,038
Corporate general and
administrative expenses 5,199 4,559 15,180 15,494
Amortization of
definite-lived intangible
assets and other assets 4,475 4,621 13,529 13,955
Total operating
expenses 125,499 133,763 388,077 410,956
Operating income 40,291 34,347 125,206 107,085
OTHER INCOME (EXPENSE):
Interest expense and
amortization of debt
discount and deferred
financing costs (30,446) (29,889) (88,159) (91,575)
Interest income 187 23 416 140
Loss from sale of assets (69) (12) (69) (45)
Loss from extinguishment
of debt - - (1,631) (2,453)
Unrealized gain from
derivative instruments 5,761 1,602 17,487 20,576
Income (loss) from equity
and cost investees 24 (3,124) (389) 255
Gain from insurance
settlement 3 - 404 -
Other income 203 183 351 572
Total other expense (24,337) (31,217) (71,590) (72,530)
Income from continuing
operations before
income taxes 15,954 3,130 53,616 34,555
INCOME TAX PROVISION (2,585) (1,196) (16,454) (13,914)
Net income from
continuing operations 13,369 1,934 37,162 20,641
DISCONTINUED OPERATIONS:
Income from discontinued
operations, net of
related income tax
provision of $344,
$1,133, $2,555 and
$3,893, respectively 701 1,574 4,841 5,967
Gain from sale of
discontinued operations,
net of related income
tax provision of
$10,320 and $79,829,
respectively 17,508 - 146,024 -
NET INCOME 31,578 3,508 188,027 26,608
PREFERRED STOCK DIVIDENDS - 2,503 5,004 7,678
NET INCOME AVAILABLE TO
COMMON SHAREHOLDERS $31,578 $1,005 $183,023 $18,930

BASIC AND DILUTED EARNINGS
(LOSS) PER SHARE:
Earnings (loss) per share
from continuing
operations $0.16 $(0.01) $0.38 $0.15
Earnings per share
from discontinued
operations $0.21 $0.02 $1.76 $0.07
Earnings per common share $0.37 $0.01 $2.14 $0.22
Weighted average common
shares outstanding 85,427 85,311 85,353 85,733
Weighted average common
and common equivalent
shares outstanding 85,447 85,311 85,360 85,883
Dividends per
common share $0.075 $0.025 $0.200 $0.050

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

September 30, June 30,
2005 2005
Cash & cash equivalents $ 18,126 $ 4,646
Total current assets 217,833 222,184
Total long term assets 2,094,708 2,106,977
Total assets 2,312,541 2,329,161

Current portion of debt 37,993 39,178
Total current liabilities 239,364 305,003
Long term portion of debt 1,443,930 1,452,456
Total long term liabilities 1,836,393 1,812,537
Total liabilities 2,075,757 2,117,540

Minority interest in consolidated
subsidiaries 5,782 6,152

Total stockholders' equity 231,002 205,469
Total liabilities & stockholders' equity 2,312,541 2,329,161

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

Three Months Ended Nine Months Ended
September 30, September 30,
2005 2005
Net cash flow from operating activities $ 2,024 $ 49,951
Net cash flow from investing activities (1,067) 271,500
Net cash flow from financing activities 12,523 (313,816)

Net increase in cash and cash
Equivalents 13,480 7,635
Cash & Cash Equivalents,
beginning of period 4,646 10,491
Cash & Cash Equivalents, end of period $ 18,126 $ 18,126

Source: Sinclair Broadcast Group, Inc.

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

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

Company News On-Call: http://www.prnewswire.com/comp/110203.html

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