UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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(Mark One) |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the quarterly period ended March 31, 2008 |
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OR |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from to . |
COMMISSION FILE NUMBER: 000-26076
SINCLAIR BROADCAST GROUP, INC.
(Exact name of Registrant as specified in its charter)
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Maryland |
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52-1494660 |
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10706 Beaver Dam Road |
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(410) 568-1500
(Registrant’s telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer x |
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Accelerated filer o |
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Non-accelerated filer o |
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Smaller reporting company o |
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.
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Title of each class |
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Number of shares outstanding as of |
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Class A Common Stock |
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53,154,513 |
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Class B Common Stock |
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34,453,859 |
SINCLAIR BROADCAST GROUP, INC.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2008
TABLE OF CONTENTS
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND |
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
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2
SINCLAIR BROADCAST GROUP, INC.
(In thousands, except share and per share data)
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As of March 31, |
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As of December 31, |
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(Unaudited) |
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ASSETS |
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CURRENT ASSETS: |
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Cash and cash equivalents |
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$ |
12,594 |
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$ |
20,980 |
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Accounts receivable, net of allowance for doubtful accounts of $3,782 and $3,882, respectively |
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117,634 |
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127,891 |
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Affiliate receivable |
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129 |
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15 |
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Current portion of program contract costs |
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44,380 |
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50,276 |
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Income taxes receivable |
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13,039 |
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16,228 |
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Prepaid expenses and other current assets |
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9,489 |
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13,448 |
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Deferred barter costs |
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2,568 |
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2,026 |
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Deferred tax assets |
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7,752 |
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7,752 |
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Total current assets |
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207,585 |
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238,616 |
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PROGRAM CONTRACT COSTS, less current portion |
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32,733 |
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32,683 |
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PROPERTY AND EQUIPMENT, net |
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343,776 |
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284,551 |
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GOODWILL, net |
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1,023,428 |
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1,010,594 |
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BROADCAST LICENSES, net |
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401,130 |
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401,130 |
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DEFINITE-LIVED INTANGIBLE ASSETS, net |
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189,126 |
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192,733 |
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OTHER ASSETS |
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61,184 |
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64,348 |
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Total assets |
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$ |
2,258,962 |
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$ |
2,224,655 |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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CURRENT LIABILITIES: |
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Accounts payable |
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$ |
3,817 |
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$ |
3,732 |
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Accrued liabilities |
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71,614 |
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82,374 |
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Current portion of notes payable, capital leases and commercial bank financing |
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45,043 |
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42,950 |
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Current portion of notes and capital leases payable to affiliates |
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2,808 |
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3,839 |
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Current portion of program contracts payable |
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84,086 |
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90,208 |
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Deferred barter revenues |
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2,813 |
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2,143 |
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Total current liabilities |
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210,181 |
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225,246 |
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LONG-TERM LIABILITIES: |
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Notes payable, capital leases and commercial bank financing, less current portion |
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1,289,402 |
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1,274,386 |
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Notes payable and capital leases to affiliates, less current portion |
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32,870 |
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23,174 |
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Program contracts payable, less current portion |
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79,032 |
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79,985 |
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Deferred tax liabilities |
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321,297 |
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313,364 |
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Other long-term liabilities |
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54,323 |
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52,659 |
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Total liabilities |
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1,987,105 |
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1,968,814 |
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MINORITY INTEREST IN CONSOLIDATED ENTITIES |
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17,721 |
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3,067 |
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SHAREHOLDERS’ EQUITY: |
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Class A Common Stock, $.01 par value, 500,000,000 shares authorized, 53,035,294 and 52,830,025 shares issued and outstanding, respectively |
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530 |
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528 |
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Class B Common Stock, $.01 par value, 140,000,000 shares authorized, 34,453,859 shares issued and outstanding, respectively, convertible into Class A Common Stock |
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345 |
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345 |
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Additional paid-in capital |
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616,295 |
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614,156 |
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Accumulated deficit |
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(361,254 |
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(360,324 |
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Accumulated other comprehensive loss |
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(1,780 |
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(1,931 |
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Total shareholders’ equity |
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254,136 |
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252,774 |
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Total liabilities and shareholders’ equity |
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$ |
2,258,962 |
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$ |
2,224,655 |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
3
SINCLAIR BROADCAST GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data) (Unaudited)
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Three Months Ended March 31, |
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2008 |
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2007 |
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REVENUES: |
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Station broadcast revenues, net of agency commissions |
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$ |
160,892 |
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$ |
148,334 |
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Revenues realized from station barter arrangements |
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14,638 |
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13,715 |
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Other operating divisions’ revenues |
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11,127 |
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2,887 |
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Total revenues |
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186,657 |
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164,936 |
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OPERATING EXPENSES: |
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Station production expenses |
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38,855 |
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35,547 |
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Station selling, general and administrative expenses |
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34,611 |
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33,653 |
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Expenses recognized from station barter arrangements |
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13,517 |
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12,430 |
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Amortization of program contract costs and net realizable value adjustments |
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19,709 |
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21,316 |
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Other operating divisions’ expenses |
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11,934 |
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3,546 |
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Depreciation of property and equipment |
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10,553 |
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10,650 |
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Corporate general and administrative expenses |
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6,721 |
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5,964 |
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Amortization of definite-lived intangible assets and other assets |
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4,539 |
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4,244 |
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Total operating expenses |
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140,439 |
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127,350 |
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Operating income |
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46,218 |
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37,586 |
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OTHER INCOME (EXPENSE): |
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Interest expense and amortization of debt discount and deferred financing costs |
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(20,202 |
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(26,382 |
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Interest income |
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181 |
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388 |
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Gain (loss) from sale of assets |
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38 |
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(12 |
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Loss from extinguishment of debt |
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(286 |
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(15,681 |
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Gain from derivative instruments |
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999 |
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1,057 |
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Income (loss) from equity and cost method investments |
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695 |
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(12 |
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Other income, net |
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367 |
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222 |
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Total other expense |
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(18,208 |
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(40,420 |
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Income (loss) from continuing operations before income taxes |
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28,010 |
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(2,834 |
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INCOME TAX (PROVISION) BENEFIT |
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(11,466 |
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721 |
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Income (loss) from continuing operations |
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16,544 |
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(2,113 |
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DISCONTINUED OPERATIONS: |
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Loss from discontinued operations, net of related income tax provision of $139 and $17, respectively |
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(131 |
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(276 |
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NET INCOME (LOSS) |
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$ |
16,413 |
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$ |
(2,389 |
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BASIC AND DILUTED EARNINGS PER COMMON SHARE: |
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Earnings (loss) per share from continuing operations |
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$ |
0.19 |
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$ |
(0.03 |
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Earnings per share from discontinued operations |
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$ |
— |
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$ |
— |
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Earnings (loss) per share |
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$ |
0.19 |
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$ |
(0.03 |
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Weighted average common shares outstanding |
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87,246 |
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86,140 |
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Weighted average common and common equivalent shares outstanding |
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93,958 |
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86,140 |
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Dividends declared per share |
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$ |
0.20 |
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$ |
0.15 |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
4
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2008
(In thousands) (Unaudited)
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Class A |
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Class B |
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Additional |
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Accumulated |
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Accumulated |
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Total |
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BALANCE, December 31, 2007 |
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$ |
528 |
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$ |
345 |
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$ |
614,156 |
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$ |
(360,324 |
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$ |
(1,931 |
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$ |
252,774 |
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Dividends declared on Class A and Class B Common Stock |
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— |
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— |
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— |
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(17,343 |
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— |
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(17,343 |
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Class A Common Stock issued pursuant to employee benefit plans |
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2 |
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— |
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2,121 |
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— |
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— |
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2,123 |
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Tax benefit on employee stock awards |
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— |
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— |
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18 |
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— |
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— |
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18 |
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Amortization of net periodic pension benefit costs |
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— |
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— |
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— |
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— |
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151 |
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151 |
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Net income |
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— |
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— |
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— |
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16,413 |
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— |
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16,413 |
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BALANCE, March 31, 2008 |
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$ |
530 |
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$ |
345 |
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$ |
616,295 |
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$ |
(361,254 |
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$ |
(1,780 |
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$ |
254,136 |
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Other comprehensive income: |
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Net income |
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$ |
— |
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$ |
— |
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$ |
— |
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$ |
16,413 |
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$ |
— |
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$ |
16,413 |
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Amortization of net periodic pension benefit costs |
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— |
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— |
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— |
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— |
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151 |
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151 |
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Comprehensive income |
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$ |
— |
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$ |
— |
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$ |
— |
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$ |
16,413 |
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$ |
151 |
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$ |
16,564 |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
5
SINCLAIR BROADCAST GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Unaudited)
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Three Months Ended March 31, |
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2008 |
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2007 |
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CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES: |
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Net income (loss) |
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$ |
16,413 |
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$ |
(2,389 |
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Adjustments to reconcile net income to net cash flows from operating activities: |
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Amortization of debt discount, net of debt premium |
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787 |
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702 |
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Depreciation of property and equipment |
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10,615 |
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10,897 |
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Recognition of deferred revenue |
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(8,312 |
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(1,384 |
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Accretion of capital leases |
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222 |
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231 |
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(Income) loss from equity and cost method investments |
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(695 |
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180 |
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Gain (loss) on sale of property |
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(38 |
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12 |
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Gain from derivative instruments |
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(999 |
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(1,057 |
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Amortization of definite-lived intangible assets and other assets |
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4,539 |
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4,367 |
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Amortization of program contract costs and net realizable value adjustments |
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19,709 |
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21,384 |
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Amortization of deferred financing costs |
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1,048 |
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539 |
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Stock-based compensation |
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1,979 |
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698 |
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Excess tax benefits on employee stock awards |
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18 |
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(1,574 |
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Loss on extinguishment of debt, non-cash portion |
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41 |
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2,232 |
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Amortization of derivative instruments |
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39 |
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134 |
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Amortization of net periodic pension benefit costs |
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48 |
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60 |
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Deferred tax provision related to operations |
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8,036 |
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877 |
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Net effect of change in deferred barter revenues and deferred barter costs |
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128 |
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(48 |
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Changes in assets and liabilities, net of effects of acquisitions and dispositions: |
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Decrease in accounts receivable, net |
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11,237 |
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10,370 |
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Decrease (increase) in income taxes receivable |
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3,189 |
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(2,012 |
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Decrease in prepaid expenses and other current assets |
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4,169 |
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6,729 |
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Decrease (increase) in other assets |
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2,702 |
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(964 |
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Decrease in accounts payable and accrued liabilities |
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(6,213 |
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(6,170 |
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Decrease in other long-term liabilities |
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(150 |
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(146 |
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Increase in minority interest |
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5 |
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39 |
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Dividends and distributions from equity and cost method investees |
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401 |
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88 |
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Payments on program contracts payable |
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(20,878 |
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(20,553 |
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Net cash flows from operating activities |
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48,040 |
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23,242 |
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CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES: |
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Acquisition of property and equipment |
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(5,905 |
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(6,535 |
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Consolidation of variable interest entity |
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2,186 |
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— |
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Purchase of alarm monitoring contracts |
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(914 |
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— |
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Payments for acquisition of television stations |
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(17,033 |
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— |
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Payments for acquisitions of other operating divisions’ companies |
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(34,433 |
) |
— |
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Dividends and distributions from cost method investees |
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860 |
|
435 |
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Investments in equity and cost method investees |
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(8,200 |
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— |
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Proceeds from the sale of assets |
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129 |
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11 |
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Loans to affiliates |
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(112 |
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(37 |
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Proceeds from loans to affiliates |
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41 |
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35 |
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Net cash flows used in investing activities |
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(63,381 |
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(6,091 |
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CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES: |
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Proceeds from notes payable, commercial bank financing and capital leases |
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79,511 |
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276,500 |
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Repayments of notes payable, commercial bank financing and capital leases |
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(64,481 |
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(345,232 |
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Proceeds from exercise of stock options, including excess tax benefits of $0 million and $1,574 million, respectively |
|
— |
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11,357 |
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Dividends paid on Class A and Class B Common Stock |
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(15,139 |
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(10,624 |
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Payments for deferred financing costs |
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(7 |
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— |
|
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Proceeds from derivative terminations |
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8,001 |
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— |
|
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Repayments of notes and capital leases to affiliates |
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(930 |
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(1,110 |
) |
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Net cash flows from (used in) financing activities |
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6,955 |
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(69,109 |
) |
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NET DECREASE IN CASH AND CASH EQUIVALENTS |
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(8,386 |
) |
(51,958 |
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CASH AND CASH EQUIVALENTS, beginning of period |
|
20,980 |
|
67,408 |
|
||
|
CASH AND CASH EQUIVALENTS, end of period |
|
$ |
12,594 |
|
$ |
15,450 |
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
6
SINCLAIR BROADCAST GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation
The consolidated financial statements include our accounts and those of our wholly-owned and majority-owned subsidiaries and variable interest entities for which we are the primary beneficiary. Minority interest represents a minority owner’s proportionate share of the equity in certain of our consolidated entities. All significant intercompany transactions and account balances have been eliminated in consolidation.
Discontinued Operations
In accordance with Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, we have reported the financial position and results of operations of WGGB-TV in Springfield, Massachusetts as assets and liabilities held for sale in the accompanying consolidated balance sheets and consolidated statements of operations. Discontinued operations have not been segregated in the consolidated statements of cash flows and, therefore, amounts for certain captions will not agree with the accompanying consolidated balance sheets and consolidated statements of operations. The operating results of WGGB-TV are not included in our consolidated results from continuing operations for the quarters ended March 31, 2008 and 2007. See Note 8. Discontinued Operations, for additional information.
Interim Financial Statements
The consolidated financial statements for the three months ended March 31, 2008 and 2007 are unaudited. In the opinion of management, such financial statements have been presented on the same basis as the audited consolidated financial statements and include all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of the consolidated balance sheets, consolidated statements of operations and consolidated statements of cash flows for these periods.
As permitted under the applicable rules and regulations of the Securities and Exchange Commission, the consolidated financial statements do not include all disclosures normally included with audited consolidated financial statements and, accordingly, should be read together with the audited consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2007 filed with the Securities and Exchange Commission. The consolidated statements of operations presented in the accompanying consolidated financial statements are not necessarily representative of operations for an entire year.
Recent Accounting Pronouncements
In March 2008, the Emerging Issues Task Force (EITF) issued a consensus for exposure on Issue No. 08-4, Transition Guidance for Conforming Changes to Issue No. 98-5, “Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios.” The Issue provides transition guidance for changes made to Issue 98-5 resulting from the issuance of EITF Issue No. 00-27, “Application of EITF Issue No. 98-5, ‘Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios,’ to Certain Convertible Instruments,” and FASB Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. The consensus-for-exposure requires that an entity: (a) apply the guidance in this issue to its first fiscal year beginning after December 15, 2008; (b) recognize the effect of the change retrospectively, with the cumulative effect of the change recognized as an adjustment to the opening balance of retained earnings for the earliest period presented; and (c) include disclosures as required for a change in accounting principle by Statement 154. We do not expect the impact of this issue to have a material effect on our consolidated financial statements.
Use of Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses in the consolidated financial statements and in the disclosures of contingent assets and liabilities. Actual results could differ from those estimates.
Acquisitions
In February 2008, we acquired the non-licensed assets of KFXA-TV in Cedar Rapids, Iowa for $17.0 million, net of cash acquired and the right to purchase licensed assets, pending FCC approval, for $1.9 million. Our CBS affiliate in Cedar Rapids,
7
KGAN-TV, provides sales and other non-programming related services to KFXA-TV pursuant to a joint sales agreement. We have determined that the outsourcing agreement is considered a variable interest in KFXA-TV. We have determined that the KFXA-TV licensed asset entity is a variable interest entity and that we are the primary beneficiary of variable interests. As a result, we consolidate the assets and liabilities of the non-licensed and licensed assets of KFXA-TV.
In March 2008, we acquired a 50% equity interest in Bay Creek South, LLC (Bay Creek). Bay Creek is a land development venture that primarily includes residential and commercial unimproved and improved land surrounding two golf courses on Virginia’s eastern shore. In conjunction with the equity investment, we purchased certain of Bay Creek’s outstanding debt that was used to finance improvements to and the development of land in the venture. Our total cash debt and equity investment in Bay Creek, including transaction costs, was $35.2 million, net of cash acquired. Approximately $0.8 million of the $35.2 million investment was funded through the conversion of an existing bridge loan to a portion of the 50% equity interest. Based on our role as the day-to-day manager and our ability to control all major decisions of the venture, the accounts of Bay Creek are included in our consolidated balance sheet. Approximately $11.8 million of debt was assumed by us through the consolidation of Bay Creek; however this debt was subsequently paid down to a zero balance at March 31, 2008. As of March 31, 2008, approximately $49.0 million of property, equipment, land inventory and intangibles were included in property and equipment, net in our consolidated balance sheet. Bay Creek is not material to our consolidated financial statements and we expect to finalize the purchase price allocation during 2008. Our cash investment is shown in the statement of cash flows as payments for acquisitions of other operating divisions’ companies.
Investments
From time to time, we transact equity and debt investments in non-broadcast assets. During first quarter 2008, we made a $6.0 million cash investment in Patriot Capital II, LP (Patriot Capital). Patriot Capital provides structured debt and mezzanine financing to small businesses. After the $6.0 million cash investment, our remaining unfunded commitment to Patriot Capital is $14.0 million. During first quarter 2008, we made an investment of $2.0 million and an add-on cash investment of $0.2 million in two real estate ventures. As of the filing date, in second quarter 2008, we made new investments of $9.8 million and an add-on cash investment of $0.6 million in various real estate ventures.
Reclassifications
Certain reclassifications have been made to prior years’ consolidated financial statements to conform to the current year’s presentation.
2. STOCK–BASED COMPENSATION:
From time to time, we grant subsidiary stock awards to employees. The subsidiary stock is typically in the form of a membership interest in a consolidated limited liability company, not traded on a public exchange and valued based on the estimated fair value of the subsidiary. Fair value is typically estimated using discounted cash flow models and appraisals. These stock awards vest immediately. For the three months ended March 31, 2008, we recorded compensation expense of $1.1 million related to these awards. This expense reduced our consolidated income, but had no effect on our consolidated cash flows. These awards have no effect on the shares used in our basic and diluted earnings per share.
On April 1, 2008, 350,000 stock-settled appreciation rights (SARs) were granted to David Smith, our President and Chief Executive Officer, pursuant to the 1996 Long-Term Incentive Plan. The SARs have a 10-year term and vest immediately. The SARs had a grant date fair value of $0.5 million. We valued the SARs using the Black-Scholes model and the following assumptions:
|
Risk-free interest rate |
|
4.25 |
% |
|
Expected life |
|
10 years |
|
|
Expected volatility |
|
46.10 |
% |
|
Annual dividend yield |
|
9.23 |
% |
We will record compensation expense of $0.5 million related to this grant in second quarter 2008. This expense will reduce our consolidated income, but have no effect on our consolidated cash flows.
8
3. COMMITMENTS AND CONTINGENCIES:
Litigation
We are a party to lawsuits and claims from time to time in the ordinary course of business. Actions currently pending are in various preliminary stages and no judgments or decisions have been rendered by hearing boards or courts in connection with such actions. After reviewing developments to date with legal counsel, our management is of the opinion that the outcome of our pending and threatened matters will not have a material adverse effect on our consolidated balance sheets, consolidated statements of operations or consolidated statements of cash flows.
FCC License Renewals
In April 2008, the FCC granted the license renewal application of WUXP-TV in Nashville, Tennessee.
Other FCC Adjudicatory Proceedings
On October 12, 2004, the FCC issued a Notice of Apparent Liability for Forfeiture (NAL) in the amount of $7,000 per station to virtually every FOX station, including the 15 FOX affiliates presently licensed to us, the four FOX affiliates programmed by us and one FOX affiliate we sold in 2005. The NAL alleged that the stations broadcast indecent material contained in an episode of a FOX network program that aired on April 7, 2003. We, as well as other parties including the FOX network, filed oppositions to the NAL. On February 22, 2008, the FCC released an order assessing a $7,000 per station forfeiture against thirteen FOX stations, including KDSM-TV in Des Moines, Iowa, WZTV-TV in Nashville, Tennessee and WVAH-TV in Charleston, West Virginia, which we program pursuant to an LMA. We did not pay the forfeiture for our stations. On March 24, 2008, we joined the FOX network and other FOX affiliates in filing a petition for reconsideration of the forfeiture order. On April 4, 2008, the FCC returned the petition without consideration based on the alleged failure to comply with a procedural rule. On April 21, 2008, we joined the FOX network and other FOX affiliates in seeking reconsideration of the FCC’s April 4, 2008 decision to return the petition for reconsideration. On April 4, 2008, the Department of Justice, on behalf of the FCC, sued several of the stations that had not paid the forfeiture amounts assessed by the FCC, including the two stations we own and WVAH-TV. Our stations and WVAH-TV paid the forfeiture assessments in April 2008. The proceedings initiated by the Department of Justice have been dismissed. The FOX network has agreed to indemnify its affiliates for the full amount of the forfeiture assessment paid.
4. SUPPLEMENTAL CASH FLOW INFORMATION:
During the three months ended March 31, 2008 and 2007, our supplemental cash flow information was as follows (in thousands):
|
|
|
Three Months Ended March 31, |
|
||||
|
|
|
2008 |
|
2007 |
|
||
|
|
|
|
|
|
|
||
|
Income taxes paid related to continuing operations |
|
$ |
40 |
|
$ |
— |
|
|
Income tax refunds received related to continuing operations |
|
$ |
44 |
|
$ |
25 |
|
|
Income tax refunds received related to sale of discontinued operations |
|
$ |
— |
|
$ |
134 |
|
|
Interest paid |
|
$ |
22,881 |
|
$ |
39,517 |
|
|
Payments related to extinguishment of debt |
|
$ |
245 |
|
$ |
13,449 |
|
Non-cash barter and trade expense are presented in the consolidated statements of operations. Non-cash transactions related to capital lease obligations were $10.0 million and less than $0.1 million for the three months ended March 31, 2008 and 2007, respectively.
5. DERIVATIVE INSTRUMENTS:
We enter into derivative instruments primarily to reduce the impact of changing interest rates on our floating rate debt and to reduce the impact of changing fair market values on our fixed rate debt.
As of December 31, 2007, we had two remaining derivative instruments. Both of these instruments are interest rate swap agreements. One of these swap agreements, with a notional amount of $180.0 million and an expiration date of March 15, 2012, was accounted for as a fair value hedge in accordance with SFAS 133, Accounting for Derivative Instruments and Hedging Activities;
9
therefore, any changes in its fair market value are reflected as an adjustment to the carrying value of our 8.0% Senior Subordinated Notes, due 2012, which is the underlying debt being hedged. The interest we pay on the $180.0 million swap is variable based on the three-month LIBOR plus 2.28% and the interest we receive is fixed at 8.0%. The other interest rate swap, with a notional amount of $120.0 million and an expiration date of March 15, 2012, was undesignated as a fair value hedge in 2006 due to a reassignment of the counterparty; therefore, any subsequent changes in the fair market value are reflected as an adjustment to income. The interest we pay on the $120.0 million swap is variable based on the three-month LIBOR plus 2.35% and the interest we receive is fixed at 8.0%.
In February 2008, the counterparty to our swap agreements, elected to change the termination dates of the $180.0 million and $120.0 million swaps to March 25, 2008 and March 26, 2008, respectively. We received a termination fee of $3.2 million from the counterparty for the early termination of the $120.0 million swap. After the removal of the related $2.4 million derivative asset from our consolidated balance sheet, the resulting $0.8 million, along with $0.2 million of interest was recorded in gain from derivative instruments. We received a termination fee of $4.8 million from the counterparty for the early termination of the $180.0 million swap. In accordance with SFAS 133, the carrying value of the underlying debt was adjusted to reflect the $4.8 million termination fee and that amount will be treated as a premium on the underlying debt that was being hedged and will be amortized over its remaining life as a reduction to interest expense. The total termination fees received of $8.0 million are included in the cash flows from financing activities section of the consolidated statement of cash flows for the quarter ended March 31, 2008.
As of March 31, 2008, we had no derivative instruments other than embedded derivatives related to contingent cash interest features in our 4.875% Convertible Senior Notes, due 2018 and 3.0% Convertible Senior Notes, due 2027, which had negligible fair values.
6. EARNINGS PER SHARE:
The following table reconciles income (numerator) and shares (denominator) used in our computations of earnings per share for the three months ended March 31, 2008 and 2007 (in thousands):
|
|
|
Three Months Ended March 31, |
|
||||
|
|
|
2008 |
|
2007 |
|
||
|
Income (Numerator) |
|
|
|
|
|
||
|
Income (loss) from continuing operations |
|
$ |
16,544 |
|
$ |
(2,113 |
) |
|
Income impact of assumed conversion of 4.875% Convertible Senior Notes, due 2018, net of taxes |
|
1,097 |
|
— |
|
||
|
Numerator for diluted earnings per common share from continuing operations |
|
$ |
17,641 |
|
$ |
(2,113 |
) |
|
Loss from discontinued operations, net of taxes |
|
(131 |
) |
(276 |
) |
||
|
Numerator for diluted earnings per common share |
|
$ |
17,510 |
|
$ |
(2,389 |
) |
|
|
|
|
|
|
|
||
|
Shares (Denominator) |
|
|
|
|
|
||
|
Weighted-average common shares outstanding |
|
87,246 |
|
86,140 |
|
||
|
Dilutive effect of outstanding stock options and restricted stock |
|
7 |
|
— |
|
||
|
Dilutive effect of 4.875% Convertible Senior Notes, due 2018 |
|
6,705 |
|
— |
|
||
|
Weighted-average common and common equivalent shares outstanding |
|
93,958 |
|
86,140 |
|
||
We applied the treasury stock method to measure the dilutive effect of our outstanding stock options and restricted stock awards and include the respective common share equivalents in the denominator of the diluted EPS computation. For each of the three months ended March 31, 2008 and 2007, our 6.0% Convertible Debentures, due 2012 and for the three months ended March 31, 2007, our outstanding stock options and restricted stock and 4.875% Convertible Senior Notes, due 2018, were anti-dilutive; therefore, they were not included in the computation of diluted EPS. For the three months ended March 31, 2008, our 3.0% Convertible Senior Notes, due 2027 and issued in May 2007, were excluded from our diluted EPS computation since our average stock price was less than the conversion price. For the three months ended March 31, 2008, the outstanding SARs were excluded from our diluted EPS computation since our average stock price was less than the grant date base value of the SARs.
10
7. RELATED PERSON TRANSACTIONS:
David, Frederick, Duncan and Robert Smith (collectively, the controlling shareholders) are brothers and hold substantially all of the Class B Common Stock. During each of the periods presented in the accompanying consolidated financial statements, we engaged in transactions with them, their immediate family members and/or entities in which they have substantial interests (collectively, affiliates).
Certain assets used by us and our operating subsidiaries are leased from Cunningham Communications, Inc., Keyser Investment Group, Gerstell Development Limited Partnership and Beaver Dam, LLC (entities owned by the controlling shareholders). Lease payments made to these entities were $1.2 million and $1.3 million for the three months ended March 31, 2008 and 2007, respectively.
In January 1999, we entered into a local marketing agreement (LMA) with Bay Television, Inc. (Bay TV), which owns the television station WTTA-TV in Tampa, Florida. Our controlling shareholders own a substantial portion of the equity of Bay TV. The LMA provides that we deliver television programming to Bay TV, which broadcasts the programming in return for a monthly fee to Bay TV of $143,500. We must also make an annual payment equal to 50% of the adjusted annual broadcast cash flow of the station (as defined in the LMA) that is in excess of $1.7 million. The additional payment is reduced by 50% of the adjusted broadcast cash flow of the station that was below zero in prior calendar years until that amount is recaptured. An additional payment of $1.5 million was made during the three months ended March 31, 2008 related to the excess adjusted broadcast cash flow for the year ended December 31, 2007. Lease payments made to Bay TV were $0.4 million for each of the three months ended March 31, 2008 and 2007.
We sold advertising time to and purchased vehicles and related vehicle services from Atlantic Automotive Corporation (Atlantic Automotive), a holding company which owns automobile dealerships and an automobile leasing company. David D. Smith, our President and Chief Executive Officer, has a controlling interest in, and is a member of the Board of Directors of Atlantic Automotive. Our stations in Baltimore, Maryland and Norfolk, Virginia received payments for advertising time totaling $0.1 million and $0.2 million during the three months ended March 31, 2008 and 2007, respectively. We paid $0.3 million and $0.2 million for vehicles and related vehicle services from Atlantic Automotive during the three months ended March 31, 2008 and 2007, respectively.
Basil A. Thomas, a member of our Board of Directors, is of counsel to Thomas & Libowitz, P.A., and the father of Steven A. Thomas, a partner and founder of Thomas & Libowitz, P.A., a law firm providing legal services to us on an ongoing basis. We paid fees of $0.3 million and $0.1 million to Thomas & Libowitz during the three months ended March 31, 2008 and 2007, respectively.
In April 2008, we extended four of our LMA’s with Cunningham Broadcasting Corporation (Cunningham) pursuant to which we will continue to provide programming to Cunningham to air on WTAT-TV in Charleston, South Carolina, WVAH-TV in Charleston, West Virginia, WRGT-TV in Dayton, Ohio and WMYA-TV in Anderson, South Carolina.
8. DISCONTINUED OPERATIONS:
WGGB Disposition
On July 31, 2007, we entered into an agreement to sell WGGB-TV, including the FCC license, to an unrelated third party for $21.2 million in cash. The FCC approved the transfer of the broadcast license and the sale was completed on November 1, 2007. We recorded $1.1 million, net of $0.5 million tax provision, as gain from discontinued operations in our consolidated statements of operations for the year ended December 31, 2007. The net cash proceeds were used in the normal course of operations and for capital expenditures.
Accounts receivable related to WGGB-TV is included in the accompanying consolidated balance sheets, net of allowance for doubtful accounts, for all periods presented. This is because we continue to own the rights to collect the amounts due to us through the closing date of the non-license television broadcast assets. Such amounts were $0.2 million (net of allowance of less than $0.1 million) and $0.1 million (net of allowance of less than $0.1 million) as of March 31, 2008 and December 31, 2007, respectively.
11
9. SEGMENT DATA:
We have one reportable operating segment, “Broadcast”, that is disclosed separately from our corporate and other business activities. “Corporate and Other” primarily includes our costs to operate as a public company and to operate our corporate headquarters location, our investment activity and our other operating divisions’ activities. Currently, our other operating divisions primarily earn revenues from software development and consulting, transmitter manufacturing, sign design and fabrication and real estate ventures. Transactions between our operating segment and “Corporate and Other” are not material.
Financial information for our operating segment is included in the following tables for the three months ended March 31, 2008 and 2007 (in thousands):
|
For the three months ended March 31, 2008 |
|
Broadcast |
|
Corporate and |
|
Consolidated |
|
|||
|
Revenue |
|
$ |
175,530 |
|
$ |
11,127 |
|
$ |
186,657 |
|
|
Depreciation of property and equipment |
|
9,885 |
|
668 |
|
10,553 |
|
|||
|
Amortization of definite-lived intangible assets and other assets |
|
4,211 |
|
328 |
|
4,539 |
|
|||
|
Amortization of program contract costs and net realizable value adjustments |
|
19,709 |
|
— |
|
19,709 |
|
|||
|
General and administrative overhead expenses |
|
1,985 |
|
4,736 |
|
6,721 |
|
|||
|
Operating income (loss) |
|
52,902 |
|
(6,684 |
) |
46,218 |
|
|||
|
Income from equity and cost method investments |
|
— |
|
695 |
|
695 |
|
|||
|
For the three months ended March 31, 2007 |
|
Broadcast |
|
Corporate and |
|
Consolidated |
|
|||
|
Revenue |
|
$ |
162,049 |
|
$ |
2,887 |
|
$ |
164,936 |
|
|
Depreciation of property and equipment |
|
10,109 |
|
541 |
|
10,650 |
|
|||
|
Amortization of definite-lived intangible assets and other assets |
|
4,244 |
|
— |
|
4,244 |
|
|||
|
Amortization of program contract costs and net realizable value adjustments |
|
21,316 |
|
— |
|
21,316 |
|
|||
|
General and administrative overhead expenses |
|
1,903 |
|
4,061 |
|
5,964 |
|
|||
|
Operating income (loss) |
|
42,943 |
|
(5,357 |
) |
37,586 |
|
|||
|
Loss from equity and cost method investments |
|
— |
|
(12 |
) |
(12 |
) |
|||
10. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS:
Sinclair Television Group, Inc. (STG), a wholly owned subsidiary of Sinclair Broadcast Group, Inc. (SBG), is the primary obligor under our existing Bank Credit Agreement, as amended and the 8.0% Senior Subordinated Notes, due 2012. Our Class A Common Stock, Class B Common Stock, the 6.0% Convertible Debentures, due 2012, the 4.875% Convertible Senior Notes, due 2018 and the 3.0% Convertible Senior Notes, due 2027 remain obligations or securities of SBG and are not obligations or securities of STG.
SBG, KDSM, LLC, a wholly-owned subsidiary of SBG, and STG’s wholly-owned subsidiaries (guarantor subsidiaries), have fully and unconditionally guaranteed all of STG’s obligations. Those guarantees are joint and several. There are certain contractual restrictions on the ability of SBG, STG or KDSM, LLC to obtain funds from their subsidiaries in the form of dividends or loans.
The following condensed consolidating financial statements present the consolidated balance sheets, consolidated statements of operations and consolidated statements of cash flows of SBG, STG, KDSM, LLC and the guarantor subsidiaries, the direct and indirect non-guarantor subsidiaries of SBG and the eliminations necessary to arrive at our information on a consolidated basis. These statements are presented in accordance with the disclosure requirements under Securities and Exchange Commission Regulation S-X, Rule 3-10.
12
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF MARCH 31, 2008
(in thousands) (unaudited)
|
|
|
Sinclair |
|
Sinclair |
|
Guarantor |
|
Non- |
|
Eliminations |
|
Sinclair |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Cash |
|
$ |
— |
|
$ |
3,134 |
|
$ |
2,635 |
|
$ |
6,825 |
|
$ |
— |
|
$ |
12,594 |
|
|
Accounts and other receivables |
|
3,816 |
|
247 |
|
122,164 |
|
8,839 |
|
(4,264 |
) |
130,802 |
|
||||||
|
Other current assets |
|
1,145 |
|
2,759 |
|
55,236 |
|
5,773 |
|
(724 |
) |
64,189 |
|
||||||
|
Total current assets |
|
4,961 |
|
6,140 |
|
180,035 |
|
21,437 |
|
(4,988 |
) |
207,585 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Property and equipment, net |
|
15,150 |
|
1,528 |
|
247,009 |
|
103,766 |
|
(23,677 |
) |
343,776 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Investment in consolidated subsidiaries |
|
869,084 |
|
1,343,789 |
|
— |
|
— |
|
(2,212,873 |
) |
— |
|
||||||
|
Other long-term assets |
|
59,823 |
|
118,830 |
|
34,720 |
|
29,936 |
|
(149,392 |
) |
93,917 |
|
||||||
|
Total other long-term assets |
|
928,907 |
|
1,462,619 |
|
34,720 |
|
29,936 |
|
(2,362,265 |
) |
93,917 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Acquired intangible assets |
|
— |
|
— |
|
1,542,598 |
|
63,507 |
|
7,579 |
|
1,613,684 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Total assets |
|
$ |
949,018 |
|
$ |
1,470,287 |
|
$ |
2,004,362 |
|
$ |
218,646 |
|
$ |
(2,383,351 |
) |
$ |
2,258,962 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Accounts payable and accrued liabilities |
|
$ |
24,898 |
|
$ |
6,752 |
|
$ |
36,310 |
|
$ |
54,978 |
|
$ |
(47,507 |
) |
$ |
75,431 |
|
|
Current portion of long-term debt |
|
812 |
|
10,313 |
|
2,466 |
|
35,146 |
|
(886 |
) |
47,851 |
|
||||||
|
Other current liabilities |
|
— |
|
— |
|
86,492 |
|
407 |
|
— |
|
86,899 |
|
||||||
|
Total current liabilities |
|
25,710 |
|
17,065 |
|
125,268 |
|
90,531 |
|
(48,393 |
) |
210,181 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Long-term debt |
|
641,385 |
|
596,884 |
|
69,365 |
|
101,044 |
|
(86,406 |
) |
1,322,272 |
|
||||||
|
Other liabilities |
|
13,499 |
|
23,764 |
|
464,548 |
|
3,563 |
|
(33,001 |
) |
472,373 |
|
||||||
|
Total liabilities |
|
680,594 |
|
637,713 |
|
659,181 |
|
195,138 |
|
(167,800 |
) |
2,004,826 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Common stock |
|
875 |
|
— |
|
11 |
|
761 |
|
(772 |
) |
875 |
|
||||||
|
Additional paid-in capital |
|
616,295 |
|
496,379 |
|
970,591 |
|
122,469 |
|
(1,589,439 |
) |
616,295 |
|
||||||
|
(Accumulated deficit) retained earnings |
|
(348,746 |
) |
337,444 |
|
375,110 |
|
(99,222 |
) |
(625,840 |
) |
(361,254 |
) |
||||||
|
Accumulated other comprehensive (loss) income |
|
— |
|
(1,249 |
) |
(531 |
) |
(500 |
) |
500 |
|
(1,780 |
) |
||||||
|
Total shareholders’ equity |
|
268,424 |
|
832,574 |
|
1,345,181 |
|
23,508 |
|
(2,215,551 |
) |
254,136 |
|
||||||
|
Total liabilities and shareholders’ equity |
|
$ |
949,018 |
|
$ |
1,470,287 |
|
$ |
2,004,362 |
|
$ |
218,646 |
|
$ |
(2,383,351 |
) |
$ |
2,258,962 |
|
13
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 2007
(in thousands)
|
|
|
Sinclair |
|
Sinclair |
|
Guarantor |
|
Non- |
|
Eliminations |
|
Sinclair |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Cash |
|
$ |
— |
|
$ |
14,478 |
|
$ |
2,599 |
|
$ |
3,903 |
|
$ |
— |
|
$ |
20,980 |
|
|
Accounts and other receivables |
|
3,258 |
|
21 |
|
133,429 |
|
10,969 |
|
(3,543 |
) |
144,134 |
|
||||||
|
Other current assets |
|
2,005 |
|
6,508 |
|
60,621 |
|
5,092 |
|
(724 |
) |
73,502 |
|
||||||
|
Total current assets |
|
5,263 |
|
21,007 |
|
196,649 |
|
19,964 |
|
(4,267 |
) |
238,616 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Property and equipment, net |
|
5,979 |
|
1,462 |
|
247,403 |
|
53,777 |
|
(24,070 |
) |
284,551 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Investment in consolidated subsidiaries |
|
872,910 |
|
1,349,054 |
|
— |
|
— |
|
(2,221,964 |
) |
— |
|
||||||
|
Other long-term assets |
|
48,899 |
|
101,721 |
|
35,682 |
|
27,519 |
|
(116,790 |
) |
97,031 |
|
||||||
|
Total other long-term assets |
|
921,809 |
|
1,450,775 |
|
35,682 |
|
27,519 |
|
(2,338,754 |
) |
97,031 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Acquired intangible assets |
|
— |
|
— |
|
1,533,038 |
|
62,857 |
|
8,562 |
|
1,604,457 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Total assets |
|
$ |
933,051 |
|
$ |
1,473,244 |
|
$ |
2,012,772 |
|
$ |
164,117 |
|
$ |
(2,358,529 |
) |
$ |
2,224,655 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Accounts payable and accrued liabilities |
|
$ |
21,968 |
|
$ |
10,039 |
|
$ |
46,516 |
|
$ |
52,152 |
|
$ |
(44,569 |
) |
$ |
86,106 |
|
|
Current portion of long-term debt |
|
1,462 |
|
5,000 |
|
2,798 |
|
38,022 |
|
(493 |
) |
46,789 |
|
||||||
|
Other current liabilities |
|
— |
|
— |
|
92,144 |
|
207 |
|
— |
|
92,351 |
|
||||||
|
Total current liabilities |
|
23,430 |
|
15,039 |
|
141,458 |
|
90,381 |
|
(45,062 |
) |
225,246 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Long-term debt |
|
630,747 |
|
583,301 |
|
68,969 |
|
79,782 |
|
(65,239 |
) |
1,297,560 |
|
||||||
|
Other liabilities |
|
11,906 |
|
22,307 |
|
451,984 |
|
2,267 |
|
(39,389 |
) |
449,075 |
|
||||||
|
Total liabilities |
|
666,083 |
|
620,647 |
|
662,411 |
|
172,430 |
|
(149,690 |
) |
1,971,881 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Common stock |
|
873 |
|
— |
|
10 |
|
762 |
|
(772 |
) |
873 |
|
||||||
|
Additional paid-in capital |
|
614,155 |
|
543,295 |
|
1,005,266 |
|
88,370 |
|
(1,636,930 |
) |
614,156 |
|
||||||
|
(Accumulated deficit) retained earnings |
|
(348,060 |
) |
310,673 |
|
345,645 |
|
(96,612 |
) |
(571,970 |
) |
(360,324 |
) |
||||||
|
Accumulated other comprehensive (loss) income |
|
— |
|
(1,371 |
) |
(560 |
) |
(833 |
) |
833 |
|
(1,931 |
) |
||||||
|
Total shareholders’ equity |
|
266,968 |
|
852,597 |
|
1,350,361 |
|
(8,313 |
) |
(2,208,839 |
) |
252,774 |
|
||||||
|
Total liabilities and shareholders’ equity |
|
$ |
933,051 |
|
$ |
1,473,244 |
|
$ |
2,012,772 |
|
$ |
164,117 |
|
$ |
(2,358,529 |
) |
$ |
2,224,655 |
|
14
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2008
(in thousands) (unaudited)
|
|
|
Sinclair |
|
Sinclair |
|
Guarantor |
|
Non- |
|
Eliminations |
|
Sinclair |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Net revenue |
|
$ |
— |
|
$ |
— |
|
$ |
176,165 |
|
$ |
13,314 |
|
$ |
(2,822 |
) |
$ |
186,657 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Program and production |
|
— |
|
248 |
|
40,753 |
|
29 |
|
(2,175 |
) |
38,855 |
|
||||||
|
Selling, general and administrative |
|
4,566 |
|
1,805 |
|
33,909 |
|
1,103 |
|
(51 |
) |
41,332 |
|
||||||
|
Depreciation, amortization and other operating expenses |
|
482 |
|
110 |
|
46,937 |
|
13,091 |
|
(368 |
) |
60,252 |
|
||||||
|
Total operating expenses |
|
5,048 |
|
2,163 |
|
121,599 |
|
14,223 |
|
(2,594 |
) |
140,439 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Operating (loss) income |
|
(5,048 |
) |
(2,163 |
) |
54,566 |
|
(909 |
) |
(228 |
) |
46,218 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Equity in earnings of subsidiaries |
|
24,451 |
|
28,718 |
|
— |
|
— |
|
(53,169 |
) |
— |
|
||||||
|
Interest income |
|
286 |
|
1,324 |
|
6 |
|
27 |
|
(1,462 |
) |
181 |
|
||||||
|
Interest expense |
|
(8,387 |
) |
(9,294 |
) |
(1,714 |
) |
(2,796 |
) |
1,989 |
|
(20,202 |
) |
||||||
|
Other income (expense) |
|
1,413 |
|
5,868 |
|
(4,997 |
) |
(155 |
) |
(316 |
) |
1,813 |
|
||||||
|
Total other income (expense) |
|
17,763 |
|
26,616 |
|
(6,705 |
) |
(2,924 |
) |
(52,958 |
) |
(18,208 |
) |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Income tax benefit (provision) |
|
3,950 |
|
1,946 |
|
(18,608 |
) |
1,246 |
|
— |
|
(11,466 |
) |
||||||
|
Income from discontinued operations, net of taxes |
|
— |
|
— |
|
(131 |
) |
— |
|
— |
|
(131 |
) |
||||||
|
Net income (loss) |
|
$ |
16,665 |
|
$ |
26,399 |
|
$ |
29,122 |
|
$ |
(2,587 |
) |
$ |
(53,186 |
) |
$ |
16,413 |
|
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2007
(in thousands) (unaudited)
|
|
|
Sinclair |
|
Sinclair |
|
Guarantor |
|
Non- |
|
Eliminations |
|
Sinclair |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Net revenue |
|
$ |
— |
|
$ |
— |
|
$ |
162,659 |
|
$ |
5,078 |
|
$ |
(2,801 |
) |
$ |
164,936 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Program and production |
|
— |
|
354 |
|
37,347 |
|
— |
|
(2,154 |
) |
35,547 |
|
||||||
|
Selling, general and administrative |
|
4,005 |
|
1,749 |
|
32,917 |
|
1,009 |
|
(63 |
) |
39,617 |
|
||||||
|
Depreciation, amortization and other operating expenses |
|
514 |
|
83 |
|
47,826 |
|
4,284 |
|
(521 |
) |
52,186 |
|
||||||
|
Total operating expenses |
|
4,519 |
|
2,186 |
|
118,090 |
|
5,293 |
|
(2,738 |
) |
127,350 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Operating (loss) income |
|
(4,519 |
) |
(2,186 |
) |
44,569 |
|
(215 |
) |
(63 |
) |
37,586 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Equity in earnings of subsidiaries |
|
5,010 |
|
17,780 |
|
— |
|
— |
|
(22,790 |
) |
— |
|
||||||
|
Interest income |
|
212 |
|
383 |
|
3 |
|
2 |
|
(212 |
) |
388 |
|
||||||
|
Interest expense |
|
(5,149 |
) |
(19,124 |
) |
(1,533 |
) |
(1,349 |
) |
773 |
|
(26,382 |
) |
||||||
|
Other income (expense) |
|
609 |
|
(3,814 |
) |
(10,693 |
) |
(226 |
) |
(302 |
) |
(14,426 |
) |
||||||
|
Total other income (expense) |
|
682 |
|
(4,775 |
) |
(12,223 |
) |
(1,573 |
) |
(22,531 |
) |
(40,420 |
) |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Income tax benefit (provision) |
|
1,751 |
|
12,562 |
|
(14,065 |
) |
473 |
|
— |
|
721 |
|
||||||
|
Loss from discontinued operations, net of taxes |
|
— |
|
— |
|
(276 |
) |
— |
|
— |
|
(276 |
) |
||||||
|
Net (loss) income |
|
$ |
(2,086 |
) |
$ |
5,601 |
|
$ |
18,005 |
|
$ |
(1,315 |
) |
$ |
(22,594 |
) |
$ |
(2,389 |
) |
15
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2008
(in thousands) (unaudited)
|
|
|
Sinclair |
|
Sinclair |
|
Guarantor |
|
Non- |
|
Eliminations |
|
Sinclair |
|
||||||
|
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES |
|
$ |
(7,217 |
) |
$ |
(3,406 |
) |
$ |
57,144 |
|
$ |
34 |
|
$ |
1,485 |
|
$ |
48,040 |
|
|
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Acquisition of property and equipment |
|
(38 |
) |
(177 |
) |
(5,317 |
) |
(373 |
) |
— |
|
(5,905 |
) |
||||||
|
Consolidation of variable interest entity |
|
— |
|
— |
|
— |
|
2,186 |
|
— |
|
2,186 |
|
||||||
|
Purchase of alarm monitoring contracts |
|
— |
|
— |
|
— |
|
(914 |
) |
— |
|
(914 |
) |
||||||
|
Payments for acquisition of television stations |
|
— |
|
(17,033 |
) |
— |
|
— |
|
— |
|
(17,033 |
) |
||||||
|
Payment for acquisition of other operating divisions’ companies |
|
— |
|
— |
|
— |
|
(34,433 |
) |
— |
|
(34,433 |
) |
||||||
|
Investments in equity and cost method investees |
|
(6,000 |
) |
— |
|
— |
|
(2,200 |
) |
— |
|
(8,200 |
) |
||||||
|
Distributions from investments |
|
860 |
|
— |
|
— |
|
— |
|
— |
|
860 |
|
||||||
|
Proceeds from sale of assets |
|
3 |
|
— |
|
126 |
|
— |
|
— |
|
129 |
|
||||||
|
Loans to affiliates |
|
(112 |
) |
— |
|
— |
|
— |
|
— |
|
(112 |
) |
||||||
|
Proceeds from loans to affiliates |
|
41 |
|
— |
|
— |
|
— |
|
— |
|
41 |
|
||||||
|
Net cash flows used in investing activities |
|
(5,246 |
) |
(17,210 |
) |
(5,191 |
) |
(35,734 |
) |
— |
|
(63,381 |
) |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Proceeds from notes payable, commercial bank financing and capital leases |
|
— |
|
78,000 |
|
— |
|
1,511 |
|
— |
|
79,511 |
|
||||||
|
Repayments of notes payable, commercial bank financing and capital leases |
|
(54 |
) |
(59,674 |
) |
(49 |
) |
(4,704 |
) |
— |
|
(64,481 |
) |
||||||
|
Dividends paid on Class A and Class B Common Stock |
|
(15,294 |
) |
— |
|
— |
|
— |
|
155 |
|
(15,139 |
) |
||||||
|
Payments for deferred financing costs |
|
— |
|
— |
|
— |
|
(7 |
) |
— |
|
(7 |
) |
||||||
|
Proceeds from derivative terminations |
|
— |
|
8,001 |
|
— |
|
— |
|
— |
|
8,001 |
|
||||||
|
Repayments of notes and capital leases to affiliates |
|
(303 |
) |
— |
|
(627 |
) |
— |
|
— |
|
(930 |
) |
||||||
|
Increase (decrease) in intercompany payables |
|
28,114 |
|
(17,055 |
) |
(51,241 |
) |
41,822 |
|
(1,640 |
) |
— |
|
||||||
|
Net cash flows (used in) from financing activities |
|
12,463 |
|
9,272 |
|
(51,917 |
) |
38,622 |
|
(1,485 |
) |
6,955 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS |
|
— |
|
(11,344 |
) |
36 |
|
2,922 |
|
— |
|
(8,386 |
) |
||||||
|
CASH AND CASH EQUIVALENTS, beginning of period |
|
— |
|
14,478 |
|
2,599 |
|
3,903 |
|
— |
|
20,980 |
|
||||||
|
CASH AND CASH EQUIVALENTS, end of period |
|
$ |
— |
|
$ |
3,134 |
|
$ |
2,635 |
|
$ |
6,825 |
|
$ |
|||||