Sinclair Reports Second Quarter 2006 Results

Sinclair Reports Second Quarter 2006 Results

Increases Annual Common Stock Dividend by 25% to $0.50 Per Share

BALTIMORE, Aug. 2 /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, 2006.

Financial Results:

Net broadcast revenues from continuing operations were $163.8 million for the three months ended June 30, 2006, an increase of 0.4% versus the prior year period result of $163.1 million. Operating income was $47.2 million in the three-month period as compared to $52.3 million in the prior year period, a decrease of 9.9%. The Company had net income available to common shareholders of $10.7 million in the three-month period versus net income available to common shareholders of $142.6 million in the prior year period, of which $128.5 million related to the gain, net of taxes, on the sale of KOVR-TV in Sacramento. The Company reported diluted earnings per common share of $0.12 for the quarter versus diluted earnings per common share of $1.67 in the prior year period. Diluted earnings per common share from continuing operations were $0.13 as compared to $0.15 in the same period last year.

Net broadcast revenues from continuing operations were $311.7 million for the six months ended June 30, 2006, an increase of 1.3% versus the prior year period result of $307.5 million. Operating income was $82.5 million in the six-month period, a decrease of 2.8% versus the prior year period result of $84.9 million. Net income available to common shareholders was $21.9 million in the six-month period versus the prior year period net income available to common shareholders of $151.4 million. Diluted earnings per common share were $0.26 in the six-month period versus diluted earnings per common share of $1.78 in the prior year period. Diluted earnings per common share from continuing operations were $0.23 in the six-month period as compared to $0.22 in the same period last year.

"For the sixth consecutive quarter, we have reduced our year-over-year television operating expenses," commented David Smith, President and CEO of Sinclair. "The cash flow generated by our Company-wide cost controls combined with our aggressive local new business sales initiatives have allowed us to accomplish two milestones at Sinclair that speak to our performance, value creation, and balance sheet strength.

"First, we are pleased to announce that our Board of Directors once again approved an increase to our common stock dividend. Since making our first quarterly dividend payment in July 2004, we have increased the rate four times including today's announcement which increases the quarterly dividend rate from $0.10 to $0.125 per share, a 25% increase beginning with the dividend payable in October 2006. The annualized common stock dividend rate per share is $0.50, returning a 6.0% annual dividend yield at our current stock price.

"In addition to returning cash flow to shareholders, we repurchased approximately $14 million of our bonds in the open market thereby deleveraging through our operating company to a level not experienced by Sinclair in the past 8.5 years and demonstrating the strength and flexibility of our balance sheet."

Operating Statistics and Income Statement Highlights:

-- The quarter's revenues were positively impacted by increased
advertising spending primarily in the services, telecommunications,
retail, schools, and restaurant categories, offset by softness in the
fast food, travel/leisure, Internet, paid programming and
entertainment categories. Automotive, which represents 24% of our
revenues, was down 3% in the quarter. Political revenues were $1.7
million in the quarter versus $0.3 million in the second quarter last
year.

-- Local advertising revenues increased 3.6% in the quarter versus the
second quarter 2005, while national advertising revenues decreased
9.6%. Excluding political revenues, local advertising revenues were
up 3.2% while national advertising revenues were down 11.2%. Local
revenues, excluding political revenues, represented 64% of
advertising revenues.

-- Time sales on our FOX stations on a same station basis excluding our
Rochester station, which started operating under a Joint Sales
Agreement in October 2005, were up 2.0%, our ABC stations were up
2.6% excluding the Joint Sales Agreement with WTXL which terminated
in February 2006, our UPN stations were up 1.5%, and our WB stations
were down 2.7%.

-- With all but five markets reported, market share survey results
reflect that our stations' share of the television advertising market
in the second quarter 2006 decreased only slightly to an 18.9% share
from a 19.2% share of the market in the same period last year.

-- In June 2006, the Company launched a 5:00am to 7:00am morning news on
WKEF-TV (ABC 22) in Dayton, Ohio and a 7:00am to 9:00am morning news
on its sister station, WRGT-TV (FOX 45). These morning newscasts are
an expansion of the stations' already successful evening newscasts.

-- The Company's FOX affiliate, KBSI-TV in Cape
Girardeau/Paducah/Harrisburg, entered into a news share arrangement
with WPSD-TV, the NBC affiliate in that market, to be provided a
9:00pm news effective October 2006.

-- The Company entered into a news share arrangement in which its ABC
affiliates WICS/WICD-TV in Springfield/Champaign, IL will produce a
9:00pm news for the FOX affiliates, WRSP-TV in Springfield, IL and
WCCU-TV in Urbana, IL, beginning September 2006.

-- The Company recently reached an "agreement in principle" with
Suddenlink for the carriage of its analog and digital signals in
Charleston/Huntington, WV on the ABC and FOX stations. The Company
hopes to finalize the agreement within the next week.

Balance Sheet and Cash Flow Highlights:

-- Debt on the balance sheet, net of $7.6 million in cash, was $1,428.6
million at June 30, 2006 versus net debt of $1,452.6 million at
March 31, 2006.

-- During the quarter, the Company repurchased in the open market $13.9
million face value of its 8% senior subordinated notes due 2012.

-- As of June 30, 2006, 47.4 million Class A common shares and 38.3
million Class B common shares were outstanding, for a total of 85.7
million common shares outstanding.

-- Capital expenditures in the quarter were $4.8 million.

-- Common stock dividends paid in cash in the quarter were $8.5 million.

-- Program contract payments for continuing operations were $22.8
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, 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, the CW Television Network and MyNetworkTV programming, our news central and news share 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 third quarter and full year 2006 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.

"On a same station basis, we are expecting revenues to grow 3.5% to 4.2% as the political season materializes," commented David Amy, EVP and CFO. "Our expected revenue growth, along with another quarter of expected television expense and film payment reductions, should grow cash flows by even higher percent increases than those forecasted on the revenue side."

-- The Company expects third quarter 2006 station net broadcast
revenues, before barter, to be up approximately 0.8% to 1.5% from
third quarter 2005 station net broadcast revenues, before barter, of
$149.0 million, assuming approximately $4.2 million in political
revenues. On a same station basis, excluding WTXL in Tallahassee,
whose Outsourcing Agreement was terminated in February 2006 and
excluding a $2.9 million one-time adjustment to previously estimated
retransmission revenue booked in the third quarter of last year,
third quarter net broadcast revenues on a same station basis are
forecasted to increase 3.5% to 4.2%.

-- The Company expects barter revenue and barter expense each to be
approximately $13.9 million in the third quarter.

-- The Company expects station production expenses and station selling,
general and administrative expenses (together, "television
expenses"), before barter expense, but including stock-based
compensation expense, in the quarter to be approximately $69.5
million, a 0.9% decrease from third quarter 2005 television expenses
of $70.1 million. On a full year basis, television expenses are
expected to be approximately $288.0 million, or down 1.1%, as
compared to 2005 television expenses of $291.1 million. The 2006
television expense forecast includes $0.3 million of stock-based
compensation expense for the quarter and $1.3 million for the year,
as compared to the 2005 actuals of $0.4 and $1.3 million for the
quarter and year, respectively.

-- The Company expects program contract amortization expense to be
approximately $24.2 million in the quarter and $91.0 million for the
year.

-- The Company expects program contract payments to be approximately
$19.3 million in the quarter and $88.0 million for the year.

-- The Company expects corporate overhead, including stock-based
compensation expense, to be approximately $6.1 million in the quarter
and $24.1 million for the year. The 2006 corporate overhead forecast
includes $0.1 million of stock-based compensation expense for the
quarter and $0.6 million for the year.

-- The Company expects depreciation on property and equipment to be
approximately $10.9 million in the quarter and $46.9 million for the
year, assuming the capital expenditure assumptions below.

-- The Company expects amortization of acquired intangibles to be
approximately $4.4 million in the quarter and $17.5 million for the
year.

-- The Company expects net interest expense to be approximately $27.7
million in the quarter and $112.4 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,
the June 2006 maturity of interest rate hedges with notional amounts
totaling $575 million, and the April 2006 early termination of
interest rate hedges with notional amounts totaling $100 million.

-- The Company expects dividends paid on the Class A and Class B common
shares to be approximately $8.6 million in the third quarter and
$36.3 million for the year, assuming current shares outstanding and a
$0.125 per share quarterly dividend rate, beginning with the October
2006 quarterly dividend payment.

-- The Company expects the third quarter effective tax rate for
continuing operations to be approximately 42%, including a current
tax benefit from continuing operations of approximately $0.1 million
in the quarter based on the assumptions discussed in this "Outlook"
section.

-- The Company expects to spend approximately $11.0 million in capital
expenditures in the quarter and approximately $28.5 million for the
year. This includes approximately $6.5 million of 2005 budgeted
capital projects that carried over into 2006.

Sinclair Conference Call:

The senior management of Sinclair will hold a conference call to discuss its second quarter results on Wednesday, August 2, 2006, at 8:30 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 58 television stations in 36 markets. Sinclair's television group reaches approximately 22% of U.S. television households and is affiliated with all major networks. 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 sales 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 Six Months Ended
June 30, June 30,
2006 2005 2006 2005
REVENUES:
Station broadcast revenues,
net of agency commissions $163,771 $163,117 $311,696 $307,545
Revenues realized from
station barter
arrangements 13,629 15,001 25,434 29,512
Other operating divisions'
revenues 7,692 5,515 11,429 10,436
Total revenues 185,092 183,633 348,559 347,493

OPERATING EXPENSES:
Station production
expenses 37,046 39,067 75,155 76,991
Station selling, general
and administrative
expenses 34,574 34,373 68,720 69,150
Expenses recognized from
station barter
arrangements 12,503 13,884 23,328 27,289
Amortization of program
contract costs and net
realizable value
adjustments 22,683 16,425 41,306 33,544
Other operating divisions'
expenses 7,773 5,248 11,762 10,301
Depreciation of property
and equipment 12,686 13,136 24,974 26,163
Corporate general and
administrative expenses 6,211 4,633 12,017 10,086
Amortization of definite-
lived intangible assets
and other assets 4,435 4,527 8,760 9,054
Total operating expenses 137,911 131,293 266,022 262,578
Operating income 47,181 52,340 82,537 84,915

OTHER INCOME (EXPENSE):
Interest expense and
amortization of debt
discount and deferred
financing costs (27,953) (28,742) (57,123) (57,713)
Interest income 304 108 350 229
Gain (loss) from sale
of assets 18 11 (269) -
(Loss) gain from
extinguishment of debt (256) (1,631) 645 (1,631)
Unrealized gain from
derivative instruments 26 2,827 2,907 11,726
Income (loss) from equity
and cost investees 36 (1,592) 6,135 (413)
Gain on insurance proceeds - 401 - 401
Other income, net 607 71 482 148
Total other expense (27,218) (28,547) (46,873) (47,253)
Income from continuing
operations before
income taxes 19,963 23,793 35,664 37,662

INCOME TAX PROVISION (8,748) (8,448) (16,226) (13,869)
Income from continuing
operations 11,215 15,345 19,438 23,793

DISCONTINUED OPERATIONS:
Income from discontinued
operations, net of related
income tax (provision)
benefit of ($510), ($550),
$599 and ($2,070),
respectively (510) 1,279 658 4,140
Gain from discontinued
operations, net of related
income tax provision of
$69,508, $885 and $69,508,
respectively - 128,516 1,774 128,516
NET INCOME 10,705 145,140 21,870 156,449
PREFERRED STOCK DIVIDENDS - 2,502 - 5,004
NET INCOME AVAILABLE TO COMMON
SHAREHOLDERS $10,705 $142,638 $21,870 $151,445

BASIC AND DILUTED EARNINGS
(LOSS) PER SHARE:
Earnings per share
from continuing
operations $0.13 $0.15 $0.23 $0.22
(Loss) Earnings per share
from discontinued
operations $(0.01) $1.52 $0.03 $1.56
Earnings per common share $0.12 $1.67 $0.26 $1.78
Weighted average common
shares outstanding 85,692 85,395 85,593 85,315
Weighted average common and
common equivalent shares
outstanding 85,734 85,399 85,634 85,318
Dividends declared per
common share $0.100 $0.075 $0.200 $0.125

Unaudited Consolidated Historical Selected Balance Sheet Data:
(In thousands)
June 30, March 31,
2006 2006
Cash & cash equivalents $7,610 $7,753
Total current assets 214,565 200,053
Total long term assets 2,045,499 2,055,532
Total assets 2,260,064 2,255,585

Current portion of debt 35,648 36,791
Total current liabilities 195,476 189,028
Long term portion of debt 1,400,555 1,423,540
Total long term liabilities 1,834,908 1,839,415
Total liabilities 2,030,384 2,028,443

Minority interest in consolidated subsidiaries 823 766

Total stockholders' equity 228,857 226,376
Total liabilities & stockholders' equity 2,260,064 2,255,585

Unaudited Consolidated Historical Selected Statement of Cash Flows Data:
(In thousands)
Three Months Six Months
Ended Ended
June 30, June 30,
2006 2006
Net cash flow from operating activities $36,325 $59,791
Net cash flow (used in) from investing
activities (4,874) (8,603)
Net cash flow (used in) from financing
activities (31,594) (53,233)

Net decrease in cash and cash
equivalents (143) (2,045)
Cash & Cash Equivalents, beginning of period 7,753 9,655
Cash & Cash Equivalents, end of period $7,610 $7,610

Source: Sinclair Broadcast Group, Inc.

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