Sinclair Reports Third Quarter 2008 Results

Sinclair Reports Third Quarter 2008 Results

BALTIMORE, Nov. 5 /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, 2008.

Commenting on the quarter, David Smith, President and CEO of Sinclair, stated, "The economic recession and financial crisis have clearly impacted advertising budgets, as indicated by the number of industry sectors that advertised less in the third quarter 2008 as compared to a year ago. Despite the decline in the core advertising business, our net broadcast revenues grew $0.7 million, of which advertising time sales were down only $0.2 million on the strength of political advertising in the quarter. Furthermore, on both a political included and excluded basis, our stations grew their local market share on average, a sales effort of which we are very proud, especially considering that we did not have the benefit of the Olympics due to having only one NBC affiliate.

"It is unclear how long the economic recession will last or how deep it will be. We are, therefore, managing as though 2009 will continue to be a difficult advertising climate. In this regard, we have already begun the process of reviewing our cost structures and initiating cost reduction measures. In addition, we recently announced that we have scaled back our expectations for additional investments in non-television ventures in 2009. While our focus continues to be on maintaining our common stock dividend, a worsening of the economy or an unfavorable change in dividend tax rates could affect the dividend rate we pay."

Financial Results:

Net broadcast revenues from continuing operations were $150.1 million for the three months ended September 30, 2008, an increase of 0.5% versus the prior year period result of $149.4 million. Operating income was $37.4 million in the three-month period which included a $2.2 million non-cash gain on asset exchange, as compared to operating income of $32.9 million in the prior year period, an increase of 13.6%. The Company had net income available to common shareholders of $11.7 million in the three-month period versus net income available to common shareholders of $9.9 million in the prior year period. The Company reported diluted earnings per common share of $0.14 for the three-month period versus diluted earnings per common share of $0.11 in the prior year period.

Net broadcast revenues from continuing operations were $474.8 million for the nine months ended September 30, 2008, an increase of 3.9% versus the prior year period result of $457.0 million. Operating income was $126.9 million in the nine-month period, an increase of 13.2% versus the prior year period result of $112.2 million. The Company had net income available to common shareholders of $41.3 million in the nine-month period versus net income available to common shareholders of $9.7 million in the nine-month period ended September 30, 2007. Diluted earnings per common share were $0.48 in the nine-month period versus diluted earnings per common share of $0.11 in the prior year period.

Operating Statistics and Income Statement Highlights:
-- Political revenues were $8.7 million in the third quarter 2008 versus
$1.1 million in the third quarter 2007.
-- Local advertising revenues were down 0.4% in the third quarter while
national advertising revenues were up 0.4% versus the third quarter
2007. Excluding political revenues, local advertising revenues were
down 1.7% and national advertising revenues were down 13.8% in the
third quarter. Advertising spending by the automotive, retail, movies,
paid programming, home products and restaurants categories were down
while fast food was up. Automotive, which represented approximately
18.2% of time sales, was down 15.4% in the quarter due to crowding out
from political advertisers and the economy. Local revenues, excluding
political revenues, represented 68.6% of advertising revenues in the
quarter.
-- Time sales on our ABC and CBS stations were up 1.4% and 10.9% in the
third quarter, respectively. Our NBC station was up 28.6% due to the
Olympics and our FOX stations were flat. Stations affiliated with
MyNetworkTV and CW were down 5.1% and 3.8%, respectively. Excluding
political revenues, our ABC, FOX, CBS, CW and MyNetworkTV stations were
down 11.0%, 4.5%, 18.2%, 5.3% and 6.5%, respectively, while our NBC
station was up 11.1%.
-- With all but three markets reporting, our stations, on average, grew
their local time sales in the quarter on both an including and
excluding political basis. In addition, our stations' average total
market share excluding political increased from 17.8% to 18.3%, while
their average total market share including political was approximately
flat going from 17.6% to 17.5%.
-- During the third quarter 2008, the Company invested $11.4 million, net
of cash distributions, in various ventures. For the first nine months
of 2008, we have invested, net of cash distributions received, $91.2
million and another $42.6 million in 2007, for a total of $133.7
million in non-television assets. The Company expects to invest
approximately $25 million in various ventures in the fourth quarter
2008.
-- During the quarter, the Company received digital equipment at five
stations in exchange for comparable analog equipment as a result of
vacating certain analog spectrum to be used for public safety. As a
result, the Company recorded a $2.2 million non-cash gain on the
exchange of the equipment.

Balance Sheet and Cash Flow Highlights:
-- Debt on the balance sheet, net of $11.6 million in cash, was $1,384.7
million at September 30, 2008 versus net debt of $1,376.0 million at
June 30, 2008.
-- As of September 30, 2008, 50.5 million Class A common shares and 34.4
million Class B common shares were outstanding, for a total of 84.9
million common shares outstanding.
-- The Company repurchased 2.7 million shares of it class A common stock
in the open market during the third quarter and another 3.8 million
shares in October 2008.
-- The Company repurchased $22.3 million of it 8% senior subordinated
notes in the open market during the third quarter and another $1.0
million in October 2008.
-- The Company repurchased $12.0 million of it 6% subordinated convertible
bonds in the open market during the third quarter.
-- Capital expenditures in the third quarter were $7.1 million.
-- Common stock dividends paid in cash in the third quarter were $17.4
million.
-- Program contract payments for continuing operations were $19.8 million
in the third quarter.
-- In October 2008, the Company received a $17.2 million federal income
tax cash refund.

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, 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, 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 components of its fourth 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 September 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.

"On October 13, 2008, we issued public guidance for our fourth quarter net broadcast revenues to be down mid to high single digit percents, based on our time sales pacings at that time," commented David Amy, EVP and CFO. "On October 27, 2008, we revised that outlook guiding for net broadcast revenues to be down low to mid single digit percents on the strength of political advertising which was pacing higher than expected. Our current guidance is for the fourth quarter net broadcast revenues to be down low single digit percents. For the fourth quarter, we expect political advertising to be approximately $25.6 million or $41 million for the year, a record level for us, and more than the approximate $32 million reported in the 2004 election year. Offsetting the political gains, however, are core advertising sales, which continue to pace down on the recessed economy and crowding out from political. On the retransmission revenue front, we continue to work with the cable, satellite and telecom companies whose contracts are coming up for renewal at the end of this year. For 2008, we are estimating our retransmission revenues to be approximately $72 million. On the expense side, we are initiating cost cutting measures now to address any prolonged economic recovery. We are guiding for our television expenses to be down approximately 2.5% in the fourth quarter."

-- The Company expects fourth quarter 2008 station net broadcast revenues
from continuing operations, before barter, to be down approximately low
single digit percents, as compared to fourth quarter 2007 station net
broadcast revenues, before barter, of $165.7 million. This assumes
$25.6 million in political revenues versus $2.2 million received in the
fourth quarter last year.
-- The Company expects barter revenue and barter expense each to be
approximately $12.8 million in the fourth 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 fourth quarter to be approximately
$75.9 million, a 2.5% decrease from fourth quarter 2007 television
expenses of $77.8 million. On a full year basis, television expenses
are expected to be approximately $296.6 million, or up 2.7%, 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 $1.8 million for the year, as
compared to the 2007 actuals of $0.5 million and $1.5 million for the
quarter and year, respectively.
-- The Company expects program contract amortization expense to be
approximately $23.0 million in the quarter and $86.2 million for the
year, as compared to the 2007 actuals of $22.9 million and $96.4
million for the quarter and year, respectively.
-- The Company expects program contract payments to be approximately $21.6
million in the quarter and $82.7 million for the year, as compared to
the 2007 actuals of $18.9 million and $77.7 million for the quarter and
year, respectively.
-- The Company expects corporate overhead, including stock-based
compensation expense, to be approximately $6.4 million in the quarter
and $26.6 million for the year, as compared to the 2007 actuals of $5.4
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 $0.9 million and $2.9 million for the
quarter and year, respectively.
-- The Company expects other operating division revenues less other
operating division expenses to be approximately $1.1 million income in
the fourth quarter and $0.3 million loss for the year, assuming current
equity interests.
-- The Company expects depreciation on property and equipment to be
approximately $12.5 million in the fourth quarter and $46.3 million for
the year, assuming the capital expenditure assumptions below, and as
compared to the 2007 actuals of $10.5 million and $43.1 million for the
quarter and year, respectively.
-- The Company expects amortization of acquired intangibles to be
approximately $4.6 million in the fourth quarter and $18.3 million for
the year, as compared to the 2007 actuals of $4.6 million and $17.6
million for the fourth quarter and year, respectively.
-- The Company expects net interest expense to be approximately $19.8
million in the quarter and $78.0 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 $21.7 million and $93.6 million
for the quarter and year, respectively.
-- The Company expects the fourth quarter effective tax rate for
continuing operations to be approximately 44.0%, including a current
tax provision from continuing operations of approximately $0.2 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 43.2%, including a current tax
provision of $0.6 million.
-- The Company paid dividends on the Class A and Class B common shares of
$17.0 million in the fourth quarter and $66.9 million for the year.
This is compared to total dividends paid in 2007 of $49.5 million.
-- The Company expects to spend approximately $5.8 million in capital
expenditures in the quarter and approximately $27.5 million for the
year. 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 third quarter 2008 results on Wednesday, November 5, 2008, 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.

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 Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
REVENUES:
Station broadcast
revenues, net of
agency commissions $150,119 $149,425 $474,758 $456,972
Revenues realized from
station barter
arrangements 14,562 14,786 45,048 44,218
Other operating
divisions' revenues 13,510 12,488 38,657 18,841
Total revenues 178,191 176,699 558,463 520,031

OPERATING EXPENSES:
Station production
expenses 38,959 35,741 118,226 109,556
Station selling, general
and administrative
expenses 33,867 33,711 102,498 101,357
Expenses recognized from
station barter
arrangements 12,760 13,317 40,394 39,995
Amortization of program
contract costs and net
realizable value
adjustments 21,744 29,172 63,247 73,528
Other operating divisions'
expenses 13,397 11,227 40,076 18,852
Depreciation of property
and equipment 11,700 10,554 33,812 32,660
Corporate general and
administrative expenses 5,919 5,497 20,123 18,888
Amortization of
definite-lived intangible
assets and other assets 4,606 4,546 13,692 13,032
Gain on asset exchange (2,163) - (2,163) -
Impairment of goodwill - - 1,626 -
Total operating
expenses 140,789 143,765 431,531 407,868
Operating income 37,402 32,934 126,932 112,163

OTHER INCOME (EXPENSE):
Interest expense and
amortization of debt
discount and deferred
financing costs (19,075) (21,897) (58,759) (74,166)
Interest income 224 89 599 2,178
(Loss) gain from sale
of assets (3) (30) 48 (38)
Gain (loss) from
extinguishment of debt 432 (68) 146 (30,716)
Gain from derivative
instruments - 1,897 999 1,300
Gain (loss) from equity
and cost method investments 658 711 (118) (181)
Other income, net 1,441 268 2,832 944
Total other expense (16,323) (19,030) (54,253) (100,679)
Income from continuing
operations before
income taxes 21,079 13,904 72,679 11,484
INCOME TAX PROVISION (9,386) (4,327) (31,342) (2,317)
Income from continuing
operations 11,693 9,577 41,337 9,167
DISCONTINUED OPERATIONS:
(Loss) income from
discontinued operations,
net of related income
tax provision of
$187, $436, $232 and
$176, respectively (38) 324 9 542
NET INCOME $11,655 $9,901 $41,346 $9,709

BASIC AND DILUTED EARNINGS
PER COMMON SHARE:
Earnings per share from
continuing operations $0.14 $0.11 $0.48 $0.11
Earnings per share from
discontinued operations $- $- $- $0.01
Earnings per share $0.14 $0.11 $0.48 $0.11
Weighted average common
shares outstanding 86,158 87,175 86,951 86,816
Weighted average common
and common equivalent
shares outstanding 86,158 87,227 86,955 86,949
Dividends declared per share $0.20 $0.15 $0.60 $0.45

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

September 30, June 30,
2008 2008
Cash & cash equivalents $11,646 $10,911
Total current assets 222,668 195,176
Total long term assets 2,083,058 2,068,851
Total assets 2,305,726 2,264,027

Current portion of debt 60,278 55,105
Total current liabilities 243,922 213,460
Long term portion of debt 1,336,059 1,331,805
Total long term liabilities 1,814,611 1,781,165
Total liabilities 2,058,533 1,994,625

Minority interest in consolidated
subsidiaries 17,014 18,200

Total stockholders' equity 230,179 251,202
Total liabilities & stockholders' equity $2,305,726 $2,264,027

Unaudited Consolidated Historical Selected Statement of Cash Flows Data:
(In thousands)
Three Months Nine Months
Ended Ended
September 30, September 30,
2008 2008
Net cash flow from operating activities $48,331 $138,096
Net cash flow used in investing activities (21,412) (126,478)
Net cash flow used in financing activities (26,184) (20,952)

Net increase (decrease) in cash & cash
equivalents 735 (9,334)
Cash & cash equivalents, beginning of period 10,911 20,980
Cash & cash equivalents, end of period $11,646 $11,646

Source: Sinclair Broadcast Group, Inc.

CONTACT: David Amy, EVP & Chief Financial Officer, or Lucy Rutishauser,
VP-Corporate Finance & Treasurer 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

-------
Profile: intent