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Original Source: FD (FAIR DISCLOSURE) WIRE
. David Amy, Sinclair Broadcast Group, Inc., EVP & CFO . Lucy Rutishauser, Sinclair Broadcast Group, Inc., VP/Corporate Finance & Treasurer
. Steve Marks, Sinclair Broadcast Group, Inc., COO/Television
Management reported 1Q05 net broadcast revenues of $145.2m, and diluted income per share available to common shareholders of $0.10 vs. diluted loss per share of $0.03 in 1Q04. For 2Q05, the Co. is forecasting net broadcast revenues to decline by approx. 1-2%, off of the base of $167.1m in 2Q04. Q&A Focus: Expenses, direct mail business, and retransmission.
A. Key Data From Call 1. 1Q05 net broadcast revenues = $145.2m. 2. 1Q05 operating income = $32.5m. 3. 1Q05 diluted EPS = $0.10.
4. 1Q05 CapEx = $3.6m. 5. 1Q05 cash = $21.3m. 6. Annual dividend per share = $0.30.
S1. Financial Performance (D.A.) 1. Announcements & Activities:
1. Use of discontinued operations accounting treatment has been
applied to all periods discussed as a result of the sales of
the Co.'s Kansas City and Sacramento stations. 2. Last week, SBGI closed on its previously announced sale of KOVR, its CBS affiliate in Sacramento. 1. The gross proceeds of $285m were used to repay bank debt, saving the Co. an estimated $12m in annualized interest costs. 3. On 05/04/05, the Co. announced that the Board of Directors approved a $0.10 per share increase to its common stock dividend, bringing the annual dividend per share to $0.30.
1. Since instituting the dividend a year ago, the Co. has tripled it, which is a reflection of its free cash flow story. 4. In the past two months, SBGI has entered into multi-year retransmission agreements with Comcast and DIRECTV, both of which include the Co.'s digital channels and multitasking rights. 1. Although there are non-disclosure agreements in place regarding the terms, the Co.'s position has always been that it won't allow carriage of its digital signals without some form of consideration. 5. In April 2005, the Board of Directors approved accelerating the vesting of 400,000 shares of the Co.'s stock options, which are now exercisable. 1. This action was done in anticipation of Financial Accounting Statement No. 123R titled 'share base payment', which requires companies, beginning 01/01/06, to value their options and incur compensation expense. 2. By accelerating the vesting, the Co. does not expect to incur any material compensation expense in 2Q05 regarding the aforementioned options. 3. Had the Co. not vested the options, it would have incurred $800,000 of compensation expense from 2006 through 2008. 4. Going forward, the Co. will use restricted shares to issue stock to employees rather than using options. 2. 1Q05 Financial Results: 1. Net broadcast revenues were $145.2m, down only 0.8% or $1.2m vs. 1Q04. 1. This represents a $1.6m overachievement of the prior guidance, which called for net broadcast revenues to be down 2%. 2. The better-than-expected performance was primarily due to higher national and other revenues.
2. Television OpEx (defined as station production and station
SG&A expenses before barter) was $73.1m, a decrease of 0.9% or
$700,000 over 1Q04 expenses of $73.8m, and coming in lower
than the prior guidance, which called for TV expenses to
increase by 1.2% or $900,000. 1. This was $1.6m better than expected. 2. OpEx was lower due primarily to lower news and promotion
costs. 3. Operating income was $32.5m, an increase of 28.7% over $25.3m in 1Q04, due primarily to lower film amortization.
4. Interest expense, net of interest income was down $1.9m due to
lower debt levels from station sales, higher free cash flow,
and lower borrowing spreads. 5. Net income from discontinued operations was $2.9m. 6. Diluted income per share available to common shareholders was $0.10 vs. diluted loss per share of $0.03 in 1Q04. 1. The improvement was due primarily to the higher operating income, lower interest expense, and unrealized gain on
derivative instruments, and offset by higher taxes on the income.
7. Television broadcast cash flow (BCF) (defined as net broadcast
revenue plus barter revenues minus station production expenses, station SG&A, barter expenses, and program payments)
was $46.5m, a decrease of only $1.2m or 2.4% lower than 1Q04
BCF of $47.7m, 1. This was $4.3m higher than the …