May 3, 2017 |
Date of Report (Date of earliest event reported) |
Maryland | 000-26076 | 52-1494660 | ||
(State of organization) | (Commission File Number) | (I.R.S. Employer Identification Number) |
• | REPORTS $0.61 DILUTED EARNINGS PER SHARE |
• | DECLARES $0.18 QUARTERLY DIVIDEND PER SHARE |
• | Total revenues increased 12.3% to $649.9 million, versus $578.9 million in the prior year period. |
• | Operating income was $157.6 million, including a gain of $53.0 million on the sale of Alarm Funding Associates (Alarm), an increase of 82.6%, versus operating income of $86.3 million in the prior year period. |
• | Net income attributable to the Company was $57.2 million, versus net income of $24.1 million in the prior year period. Excluding the gain on the sale of Alarm, net income attributable to the Company would have been $30.0 million. |
• | Diluted earnings per common share were $0.61, $0.32 excluding the gain on the sale of Alarm, as compared to $0.25 in the prior year period. |
• | Media revenues, before barter, increased 13.4% to $602.5 million versus $531.3 million in the first quarter of 2016. |
• | Political revenues were $2.1 million versus $24.4 million in the first quarter of 2016. |
• | Revenues from our digital offerings increased 25% in the first quarter as compared to the first quarter of 2016. |
• | In April, the Company announced that it entered into a definitive agreement to purchase the stock of Bonten Media Group Holdings, Inc. (“Bonten”) and Cunningham Broadcasting Corporation entered into a definitive agreement to purchase the membership interest of Esteem Broadcasting for an aggregate purchase price of $240 million. Bonten owns 14 television stations in 8 markets which reach approximately 1% of U.S. television households and provides services to 4 stations pursuant to joint sales agreements with Esteem Broadcasting. The Company anticipates that the transaction will close and fund in the third quarter of 2017, subject to the satisfaction of closing conditions. |
• | In March, the Company acquired the assets of Tennis Media Company, the owner of Tennis Magazine and Tennis.com for $8 million plus an additional $6 million earn-out potential based on certain contingencies. The transaction was funded with cash on hand. |
• | In April, the Company announced that it entered into an agreement with Silver Chalice and 120 Sports as equity partners on a new multi-platform sports network, featuring linear broadcast and comprehensive digital offerings, through the merging of 120 Sports’ live studio operations, Silver Chalice’s Campus Insiders’ live collegiate games and Sinclair’s American Sports Network’s (ASN) distribution and live collegiate games. |
• | The Company recently received 33 Edward R. Murrow awards including awards for “Overall Excellence” to WJLA in Washington, D.C., and WGME in Portland, ME. |
• | In March, the Company sold Alarm Funding Associates (Alarm) for $200 million. Alarm was purchased in November 2007 with invested capital of approximately $10.5 million. After repayment of debt and other costs, the Company realized an annualized return of 25% on investment. |
• | In March, ONE Media 3.0, a wholly owned subsidiary of the Company, announced an agreement with Saankhya Labs, a leader in the development of Cognitive Software Defined Radio chips, to accelerate the development of ATSC 3.0 chipsets that will enable various types of consumer devices to receive the Next Generation Broadcast Standard. |
• | In March, the Company announced a Memorandum of Understanding with Nexstar Media Group for a consortium to promote innovation, and develop and explore products and services associated with ATSC 3.0 and monetization opportunities such as spectrum utilization, virtual MVPD platforms, multicast channels, automotive applications, single frequency networks and wireless data applications, among others. |
• | Debt on the balance sheet, net of $816 million in cash and cash equivalents, was $3.268 billion at March 31, 2017 versus net debt of $3.944 billion at December 31, 2016. |
• | In March, the Company completed an offering of 12.0 million Class A common shares at a price of $42.00 per share. The net proceeds from the offering were approximately $487.9 million and are intended to fund future potential acquisitions and for general corporate purposes. |
• | As of March 31, 2017, 76.9 million Class A common shares and 25.7 million Class B common shares were outstanding, for a total of 102.6 million common shares outstanding. |
• | In March 2017, the Company paid a $0.18 per share quarterly cash dividend to its shareholders. |
• | Capital expenditures in the first quarter of 2017 were $21 million. |
• | Program contract payments were $29 million in the first quarter of 2017. |
• | Media revenues, before barter, are expected to be approximately $627.3 million to $633.3 million, up 3.5% to 4.5% year-over-year. Embedded in these anticipated results are: |
• | $2.4 million in political revenues as compared to $16.7 million in the second quarter of 2016. |
• | Barter and trade revenue are expected to be approximately $33 million in the second quarter of 2017. |
• | Barter expense is expected to be approximately $29 million. $4 million of trade expense is included in media expenses (defined below). |
• | Media production expenses and media selling, general and administrative expenses (together, “media expenses”), excluding barter expense but including trade expense, are expected to be approximately $402 million, including $2 million in stock-based compensation expense. |
• | Program contract amortization expenses are expected to be approximately $29 million. |
• | Program contract payments are expected to be approximately $29 million. |
• | Corporate overhead is expected to be approximately $18 million, including $2 million of stock-based compensation expense. |
• | Research and development costs related to ONE Media are expected to be $2 million. |
• | Other non-media revenues less other non-media expenses are expected to be a loss of $1 million, assuming current equity interests. |
• | Depreciation on property and equipment is expected to be approximately $24 million, assuming the capital expenditure assumption below. |
• | Amortization of acquired intangibles is expected to be approximately $43 million. |
• | Net interest expense is expected to be approximately $50 million ($48 million on a cash basis), assuming no changes in the current interest rate yield curve and changes in debt levels based on the assumptions discussed in this “Outlook” section. |
• | Net cash taxes paid are expected to be approximately $91 million, including $13 million related to the gain on the sale of Alarm Funding, based on the assumptions discussed in this “Outlook” section. The Company’s effective tax rate is expected to be approximately 34%. |
• | Capital expenditures are expected to be approximately $25 million. |
• | Barter and trade revenue is expected to be approximately $120 million. |
• | Barter expense is expected to be approximately $103 million. $16 million of trade expense is included in television expenses. |
• | Media expenses, excluding barter expense but including trade expense, are expected to be approximately $1.586 billion, including $9 million of stock-based compensation expense, and $204 million related to acquisitions, revenue-generating initiative costs, and system upgrades. |
• | Program contract amortization expense is expected to be approximately $116 million. |
• | Program contract payments are expected to be approximately $112 million. |
• | Corporate overhead is expected to be approximately $72 million, including $9 million of stock-based compensation expense. |
• | Research and development costs related to ONE Media are expected to be $14 million. |
• | Other non-media revenues less other non-media expenses are expected to be $4 million, assuming current equity interests. |
• | Depreciation on property and equipment is expected to be approximately $96 million, assuming the capital expenditure assumption below. |
• | Amortization of acquired intangibles is expected to be approximately $174 million. |
• | Net interest expense is expected to be approximately $208 million (approximately $200 million on a cash basis), assuming no changes in the current interest rate yield curve, and changes in debt levels based on recent corporate developments and the assumptions discussed in this “Outlook” section. |
• | The Company’s effective tax rate is expected to be approximately 33%. |
• | Capital expenditures are expected to be $90 million, excluding capital expenditures that may be incurred for the FCC’s spectrum repack. |
Three Months Ended March 31, | ||||||
2017 | 2016 | |||||
REVENUES: | ||||||
Media revenues | $ | 602,486 | $ | 531,323 | ||
Revenues realized from station barter arrangements | 27,570 | 26,510 | ||||
Other non-media revenues | 19,879 | 21,056 | ||||
Total revenues | 649,935 | 578,889 | ||||
OPERATING EXPENSES: | ||||||
Media production expenses | 258,155 | 215,877 | ||||
Media selling, general and administrative expenses | 124,721 | 115,009 | ||||
Expenses realized from barter arrangements | 23,245 | 22,925 | ||||
Amortization of program contract costs and net realizable value adjustments | 31,019 | 33,460 | ||||
Other non-media expenses | 17,245 | 17,697 | ||||
Depreciation of property and equipment | 23,981 | 24,035 | ||||
Corporate general and administrative expenses | 20,576 | 21,341 | ||||
Amortization of definite-lived intangible and other assets | 45,554 | 43,765 | ||||
Research and development expenses | 1,157 | 1,101 | ||||
Gain on asset dispositions | (53,347) | (2,660) | ||||
Total operating expenses | 492,306 | 492,550 | ||||
Operating income | 157,629 | 86,339 | ||||
OTHER INCOME (EXPENSE): | ||||||
Interest expense and amortization of debt discount and deferred financing costs | (57,318) | (49,415) | ||||
Loss from extinguishment of debt | (1,404) | — | ||||
(Loss) income from equity investments and cost method investments | (1,321) | 423 | ||||
Other income, net | 1,696 | 462 | ||||
Total other expense, net | (58,347) | (48,530) | ||||
Income before income taxes | 99,282 | 37,809 | ||||
INCOME TAX PROVISION | (28,579) | (12,180) | ||||
NET INCOME | 70,703 | 25,629 | ||||
Net income attributable to the noncontrolling interests | (13,501) | (1,489) | ||||
NET INCOME ATTRIBUTABLE TO SINCLAIR BROADCAST GROUP | $ | 57,202 | $ | 24,140 | ||
Dividends declared per share | $ | 0.180 | $ | 0.165 | ||
BASIC AND DILUTED EARNINGS PER COMMON SHARE ATTRIBUTABLE TO SINCLAIR BROADCAST GROUP: | ||||||
Basic earnings per share | $ | 0.62 | $ | 0.25 | ||
Diluted earnings per share | $ | 0.61 | $ | 0.25 | ||
Weighted average common shares outstanding | 92,630 | 94,701 | ||||
Weighted average common and common equivalent shares outstanding | 93,692 | 95,614 |