-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OUTlxsZvSfgg4OM/EAvpZ2Vn1zxdOoZWi0cHl4B0nq51EAfCjteA7yM1I1AFIAdI tG6hX1FiaJD+P43i7bm/7A== 0001005150-97-000902.txt : 19971111 0001005150-97-000902.hdr.sgml : 19971111 ACCESSION NUMBER: 0001005150-97-000902 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971110 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SINCLAIR BROADCAST GROUP INC CENTRAL INDEX KEY: 0000912752 STANDARD INDUSTRIAL CLASSIFICATION: TELEVISION BROADCASTING STATIONS [4833] IRS NUMBER: 521494660 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-26076 FILM NUMBER: 97711190 BUSINESS ADDRESS: STREET 1: 2000 WEST 41ST ST CITY: BALTIMORE STATE: MD ZIP: 21211 BUSINESS PHONE: 4104675005 MAIL ADDRESS: STREET 1: 2000 W 41ST ST CITY: BALTIMORE STATE: MD ZIP: 21211 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________. Commission File Number: 000-26076 SINCLAIR BROADCAST GROUP, INC. (Exact name of Registrant as specified in its charter) --------------------------- MARYLAND 52-1494660 (State or other jurisdiction of (I.R.S. Employer Identification No.) Incorporation or organization) 2000 WEST 41ST STREET BALTIMORE, MARYLAND 21211 (Address of principal executive offices) (410) 467-5005 (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[ ] As of November 5, 1997, there are 13,419,781 shares of Class A Common Stock, $.01 par value; 25,750,081 shares of Class B Common Stock, $.01 par value; 1,071,381 shares of Series B Preferred Stock, $.01 par value, convertible into 3,895,937 shares of Class A Common Stock; and 3,450,000 shares of Series D Preferred Stock, $.01 par value, convertible into 3,780,822 shares of Class A Common Stock; of the Registrant issued and outstanding. In addition, 2,000,000 shares of $200 million aggregate liquidation value of 11 5/8% High Yield Trust Offered Preferred Securities of Sinclair Capital, a subsidiary trust of Sinclair Broadcast Group, Inc., are issued and outstanding. SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES Form 10-Q For the Quarter Ended September 30, 1997 TABLE OF CONTENTS PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements PAGE Consolidated Balance Sheets as of December 31, 1996 and September 30, 1997...................................................... 3 Consolidated Statements of Operations for the Three Months and Nine Months Ended September 30, 1996 and 1997....................................... 4 Consolidated Statements of Stockholders' Equity for the Nine Months Ended September 30, 1997................................................ 5 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1996 and 1997....................................... 6 Notes to Unaudited Consolidated Financial Statements......................... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................................... 14 PART II. OTHER INFORMATION Item 1. Legal Proceedings................................................... 19 Item 5. Other Information................................................... 19 Item 6. Exhibits and Reports on Form 8-K ................................... 21 Signature................................................................ 23 2 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
DECEMBER 31, SEPTEMBER 30, ASSETS 1996 1997 --------------- ---------------- CURRENT ASSETS: Cash and cash equivalents....................................................... $ 2,341 $ 10,336 Accounts receivable, net of allowance for doubtful accounts..................... 112,313 96,492 Current portion of program contract costs....................................... 44,526 54,186 Prepaid expenses and other current assets....................................... 3,704 5,790 Deferred barter costs........................................................... 3,641 4,474 Deferred tax asset.............................................................. 1,245 5,533 ------------- -------------- Total current assets..................................................... 167,770 176,811 PROGRAM CONTRACT COSTS, less current portion........................................ 43,037 49,607 LOANS TO OFFICERS AND AFFILIATES.................................................... 11,426 11,210 PROPERTY AND EQUIPMENT, net......................................................... 154,333 161,301 NON-COMPETE AND CONSULTING AGREEMENTS, net.......................................... 10,193 1,225 OTHER ASSETS........................................................................ 64,235 145,302 ACQUIRED INTANGIBLE BROADCASTING ASSETS, net........................................ 1,256,303 1,335,320 ------------- -------------- Total Assets.................................................................... $ 1,707,297 $ 1,880,776 ============= ============== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable................................................................ $ 11,886 $ 4,191 Income taxes payable............................................................ 730 - Accrued liabilities............................................................. 35,030 33,575 Current portion of long-term liabilities- Notes payable and commercial bank financing................................. 62,144 35,344 Notes and capital leases payable to affiliates.............................. 1,818 2,481 Program contracts payable................................................... 58,461 62,993 Deferred barter revenues........................................................ 3,576 5,124 ------------- -------------- Total current liabilities................................................ 173,645 143,708 LONG-TERM LIABILITIES: Notes payable and commercial bank financing..................................... 1,212,000 880,719 Notes and capital leases payable to affiliates.................................. 12,185 20,635 Program contracts payable....................................................... 56,194 75,688 Deferred tax liability.......................................................... 463 - Other long-term liabilities..................................................... 2,739 4,640 ------------- -------------- Total liabilities............................................................. 1,457,226 1,125,390 ------------- -------------- MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES...................................... 3,880 3,837 ------------- -------------- EQUITY PUT OPTIONS..... 8,938 - ------------- -------------- COMPANY OBLIGATED MANDATORILY REDEEMABLE SECURITIES OF SUBSIDIARY TRUST HOLDING SOLELY KDSM SENIOR DEBENTURES (Note 7)............................ - 200,000 ------------- -------------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Series B Preferred Stock, $.01 par value, 1,150,000 shares authorized and 1,138,138 and 1,085,983 shares issued and outstanding, respectively................... 11 11 Series D Preferred Stock, $.01 par value, 3,450,000 shares authorized and -0- and 3,450,000 shares issued and outstanding, respectively....................... - 35 Class A Common Stock, $.01 par value, 100,000,000 shares authorized and 6,911,880 and 13,351,183 shares issued and outstanding, respectively.... 70 134 Class B Common Stock, $.01 par value, 35,000,000 shares authorized and 27,850,581 and 25,760,581 shares issued and outstanding, respectively... 279 258 Additional paid-in capital...................................................... 256,954 553,801 Additional paid-in capital - deferred compensation.............................. (1,129) (779) Additional paid-in capital - equity put options................................. - 23,117 Accumulated deficit............................................................. (18,932) (25,028) ------------- -------------- Total stockholders' equity............................................... 237,253 551,549 ------------- -------------- Total Liabilities and Stockholders' Equity............................... $ 1,707,297 $ 1,880,776 ============= ==============
The accompanying notes are an integral part of these unaudited consolidated statements. 3 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 1996 1997 1996 1997 ----------- ----------- ----------- ----------- REVENUES: Station broadcast revenues, net of agency commissions........ $ 102,013 $ 113,327 $ 219,352 $ 333,028 Revenues realized from station barter arrangements........... 8,266 11,419 17,837 31,289 ----------- ----------- ----------- ----------- Total revenues........................................... 110,279 124,746 237,189 364,317 ----------- ----------- ----------- ----------- OPERATING EXPENSES: Program and production....................................... 22,303 22,016 43,002 68,776 Selling, general and administrative.......................... 25,345 27,003 49,613 78,637 Expenses realized from station barter arrangements........... 5,594 9,976 13,453 26,279 Amortization of program contract costs and net realizable value adjustments............................. 16,793 16,151 34,350 47,069 Amortization of deferred compensation........................ 117 117 623 350 Depreciation and amortization of property and equipment...... 3,432 4,446 6,976 12,786 Amortization of acquired intangible broadcasting assets, non-compete and consulting agreements and other assets... 16,174 14,325 40,566 51,717 ----------- ----------- ----------- ----------- Total operating expenses.............................. 89,758 94,034 188,583 285,614 ----------- ----------- ----------- ----------- Broadcast operating income............................ 20,521 30,712 48,606 78,703 ----------- ----------- ----------- ----------- OTHER INCOME (EXPENSE): Interest and amortization of debt discount expense........... (29,001) (25,349) (56,647) (77,342) Subsidiary trust minority interest expense................... - (5,845) - (12,852) Interest income.............................................. 317 324 2,838 1,364 Other income (expense)....................................... 335 (11) 986 36 ----------- ----------- ----------- ----------- Loss before income tax benefit........................ (7,828) (169) (4,217) (10,091) INCOME TAX BENEFIT............................................... 4,500 70 2,400 4,170 ----------- ----------- ----------- ----------- NET LOSS ...................................................... $ (3,328) $ (99) $ (1,817) $ (5,921) =========== =========== =========== =========== NET LOSS AVAILABLE TO COMMON STOCKHOLDERS........................ $ (3,328) $ (274) $ (1,817) $ (6,096) =========== =========== =========== =========== Net loss per common share........................................ $ (0.10) $ (0.01) $ (0.05) $ (0.17) =========== =========== =========== =========== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING ...................... 34,750 35,025 34,750 34,868 =========== =========== =========== =========== WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING ................................................. 39,361 39,269 36,840 38,929 =========== =========== =========== ===========
The accompanying notes are an integral part of these unaudited consolidated statements. 4 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (IN THOUSANDS) ADDITIONAL SERIES B SERIES D CLASS A CLASS B ADDITIONAL PAID-IN PREFERRED PREFERRED COMMON COMMON PAID-IN CAPITAL - STOCK STOCK STOCK STOCK CAPITAL EQUITY PUT OPTIONS --------------- -------------- ------------ ----------- -------------- --------------- BALANCE, December 31, 1996............. $ 11 $ - $ 70 $ 279 $ 256,954 $ - Repurchase of 186,000 shares of Class A Common Stock........... - - (2) - (4,597) - Class B Common Stock converted - into Class A Common Stock...... - 21 (21) - - Series B Preferred Stock converted into Class A Common Stock...... - - 2 - (2) - Issuance of Class A Common Stock, net of related issuance costs of $6,997......................... - - 43 - 151,552 - Issuance of Series D Preferred Stock, net of related issuance costs of $5,028................ - 35 - - 167,438 - Dividends payable on Series D Preferred Stock................ - - - - - - Equity put options................. - - - (14,179) 23,117 Equity put options premium......... - - - - (3,365) - Amortization of deferred - compensation................... - - - - - Net loss........................... - - - - - - =============== ============== ============ =========== ============== =============== BALANCE, September 30, 1997............ $ 11 $ 35 $ 134 $ 258 $ 553,801 $ 23,117 =============== ============== ============ =========== ============== ===============
ADDITIONAL PAID-IN TOTAL CAPITAL - ACCUMULATED STOCKHOLDERS' DEFERRED DEFICIT EQUITY COMPENSATION --------------- -------------- ----------------- BALANCE, December 31, 1996............. $ (1,129) $ (18,932) $ 237,253 Repurchase of 186,000 shares of Class A Common Stock........... - - (4,599) Class B Common Stock converted into Class A Common Stock...... - - - Series B Preferred Stock converted into Class A Common Stock...... - - - Issuance of Class A Common Stock, net of related issuance costs of $6,997......................... - - 151,595 Issuance of Series D Preferred Stock, net of related issuance costs of $5,028................ - - 167,473 Dividends payable on Series D Preferred Stock................ - (175) (175) Equity put options................. - - 8,938 Equity put options premium......... - - (3,365) Amortization of deferred compensation................... 350 - 350 Net loss........................... - (5,921) (5,921) =============== ============== ================= BALANCE, September 30, 1997............ $ (779) $ (25,028) $ 551,549 =============== ============== =================
The accompanying notes are an integral part of these unaudited consolidated statements SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
NINE MONTHS ENDED SEPTEMBER 30, CASH FLOWS FROM OPERATING ACTIVITIES: 1996 1997 --------------- ------------ Net loss ..................................................................................... $ (1,817) $ (5,921) Adjustments to reconcile net income loss to net cash flows from operating activities- Depreciation and amortization of property and equipment .................................. 6,976 12,786 Amortization of acquired intangible broadcasting assets, non-compete and consulting agreements and other assets ................................ 40,566 51,717 Amortization of program contract costs and net realizable value adjustments............... 34,350 47,069 Amortization of deferred compensation .................................................... 623 350 Deferred tax benefit ..................................................................... (5,253) (4,751) Changes in assets and liabilities, net of effects of acquisitions and dispositions- (Increase) decrease in accounts receivable, net .......................................... (18,507) 15,421 Increase in prepaid expenses and other current assets .................................... (656) (2,107) Increase (decrease) in accounts payable and accrued liabilities .......................... 1,571 (10,814) Decrease in income taxes payable ......................................................... (3,944) (730) Net effect of change in deferred barter revenues and deferred barter costs ............................................................. (643) 695 Increase (decrease) in other long-term liabilities ....................................... 454 (169) Decrease in minority interest ............................................................ -- (43) Payments on program contracts payable ........................................................ (19,301) (38,134) --------- --------- Net cash flows from operating activities ................................................. 34,419 65,369 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property and equipment ........................................................ (3,949) (13,240) Payments for acquisition of television and radio stations .................................... (74,593) (90,563) Payments related to the acquisition of the non-license assets of River City Broadcasting...... (816,413) -- Broadcasting Payment for acquisition of certain other non-license assets .................................. (29,532) -- Payments to exercise options to acquire certain FCC licenses ................................. (6,894) (11,079) Proceeds from assignment of FCC license purchase option ...................................... -- 2,000 Payment for the purchase of outstanding stock of Superior Communications, Inc. ............... (63,504) -- Payments for consulting and non-compete agreements ........................................... (50) -- Purchase option extension payments relating to WSYX .......................................... -- (11,717) Loans to officers and affiliates ............................................................. -- (832) Repayments of loans to officers and affiliates ............................................... 320 1,110 Distribution from (investment in) joint venture .............................................. (380) 380 Payments relating to future acquisitions ..................................................... (693) (70,081) --------- --------- Net cash flows used in investing activities ........................................... (995,688) (194,022) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from notes payable, commercial bank financing and capital leases .................... 958,500 126,500 Repayments of notes payable, commercial bank financing and capital leases ................... (85,524) (684,632) Payments of costs relating to financing ...................................................... (20,009) (4,705) Payments for interest rate derivative agreements ............................................. (851) -- Payment of equity put options premium ........................................................ -- (251) Repurchases of the Company's Class A Company Stock ........................................... -- (4,599) Net proceeds from subsidiary trust securities offering (see Note 7) .......................... -- 192,849 Net proceeds from the issuance of Class A Common Stock (see Note 11) ......................... -- 151,596 Net proceeds from the issuance of Series D Preferred Stock (see Note 12) ..................... -- 167,472 Net proceeds from issuance of 1997 Notes (see Note 9) ........................................ -- 195,600 Prepayments of excess syndicated program contract liabilities ................................ -- (1,373) Repayments of notes and capital leases to affiliates ......................................... (1,632) (1,809) --------- --------- Net cash flows from financing activities .............................................. 850,484 136,648 --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ............................................. (110,785) 7,995 CASH AND CASH EQUIVALENTS, beginning of period ................................................... 112,450 2,341 --------- --------- CASH AND CASH EQUIVALENTS, end of period.......................................................... $ 1,665 $ 10,336 ========= =========
The accompanying notes are an integral part of these unaudited consolidated statements. 6 SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: BASIS OF PRESENTATION The accompanying consolidated financial statements include the accounts of Sinclair Broadcast Group, Inc., Sinclair Communications, Inc. and all other consolidated subsidiaries, which are collectively referred to hereafter as "the Company, Companies or SBG." The Company owns and operates television and radio stations throughout the United States. Additionally, included in the accompanying consolidated financial statements are the results of operations of certain television stations pursuant to local marketing agreements (LMAs) and radio stations pursuant to joint sales agreements (JSAs). INTERIM FINANCIAL STATEMENTS The consolidated financial statements for the nine months ended September 30, 1996 and 1997 are unaudited, but 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 financial position and results of operations, and cash flows for these periods. As permitted under the applicable rules and regulations of the Securities and Exchange Commission, these financial statements do not include all disclosures normally included with audited consolidated financial statements, and, accordingly, should be read in conjunction with the consolidated financial statements and notes thereto as of December 31, 1995, and 1996 and for the years then ended. The results of operations presented in the accompanying financial statements are not necessarily representative of operations for an entire year. PROGRAMMING The Companies have agreements with distributors for the rights to television programming over contract periods which generally run from one to seven years. Contract payments are made in installments over terms that are generally shorter than the contract period. Each contract is recorded as an asset and a liability when the license period begins and the program is available for its first showing. The portion of the program contracts payable within one year is reflected as a current liability in the accompanying consolidated balance sheets. The rights to program materials are reflected in the accompanying consolidated balance sheets at the lower of unamortized cost or estimated net realizable value. Estimated net realizable values are based upon management's expectation of future advertising revenues net of sales commissions to be generated by the program material. Amortization of program contract costs is generally computed under either a four year accelerated method or based on usage, whichever yields the greater amortization for each program. Program contract costs, estimated by management to be amortized in the succeeding year, are classified as current assets. Payments of program contract liabilities are typically paid on a scheduled basis and are not affected by adjustments for amortization or estimated net realizable value. 2. CONTINGENCIES AND OTHER COMMITMENTS: Lawsuits and claims are filed against the Company from time to time in the ordinary course of business. These actions are in various preliminary stages, and no judgments or decisions have been rendered by hearing boards or courts. Management, after reviewing developments to date with legal counsel, is of the opinion that the outcome of such matters will not have a material adverse effect on the Company's financial position or results of operations. 7 3. FINANCIAL INFORMATION BY SEGMENT (IN THOUSANDS): In June 1997, the Financial Accounting Standards Board (FASB) released Statement of Financial Accounting Standards (SFAS) 131 "Disclosures about Segments of an Enterprise and Related Information." SFAS 131 establishes standards for reporting information about operating segments in annual financial statements and requires selected information about operating segments in interim financial statements. SFAS 131 supercedes SFAS 14, "Financial Reporting for Segments of a Business Enterprise"and is effective for financial statements for periods beginning after December 15, 1997. The Company has elected early adoption of the statement for the September 30, 1997 consolidated financial statements. The Company's reportable operating segments have not changed as a result of the adoption of SFAS 131. As of September 30, 1997, the Company consisted of two principal business segments - television broadcasting and radio broadcasting. Prior to the acquisition of River City Broadcasting, L.P. in May 1996, the Company did not own, operate or program radio stations. The Company owns or provides programming services pursuant to LMAs to 29 television stations located in 21 geographically diverse markets in the continental United States. The Company owns 27 radio stations in seven geographically diverse markets. Substantially all revenues represent income from unaffiliated companies.
TELEVISION TELEVISION THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 1996 1997 1996 1997 ---- ---- ---- ---- Total revenues.................................................... $ 93,466 $ 107,087 $ 215,510 $ 317,238 Station operating expenses........................................ 42,192 47,915 91,788 140,562 Depreciation, program amortization and deferred compensation...... 18,993 19,151 40,471 57,518 Amortization of intangibles and other assets...................... 15,428 13,461 39,302 44,362 ----------- ----------- ---------- ----------- Station broadcast operating income................................ $ 16,853 $ 26,560 $ 43,949 $ 74,796 =========== =========== ========== =========== Total assets...................................................... $ 1,400,103 $ 1,578,813 $1,400,103 $ 1,578,813 =========== =========== ========== =========== Capital expenditures.............................................. $ 1,609 $ 4,596 $ 3,701 $ 10,790 =========== =========== ========== ===========
RADIO RADIO THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 1996 1997 1996 1997 ---- ---- ---- ---- Total revenues.................................................... $ 16,813 $ 17,659 $ 21,679 $ 47,079 Station operating expenses........................................ 11,050 11,080 14,280 33,130 Depreciation, program amortization and deferred compensation...... 1,349 1,563 1,478 2,687 Amortization of intangibles and other assets...................... 746 864 1,264 7,355 ------------ ---------- ---------- ----------- Station broadcast operating income................................ $ 3,668 $ 4,152 $ 4,657 $ 3,907 ============ ========== ========== =========== Total assets...................................................... $ 309,583 $ 301,963 $ 309,583 $ 301,963 ============ ========== ========== =========== Capital expenditures.............................................. $ 226 $ 405 $ 248 $ 2,450 ============ ========== ========== ===========
8 4. SUPPLEMENTAL CASH FLOW INFORMATION (IN THOUSANDS): During the nine months ended September 30, 1996 and 1997, the Company made cash payments and consummated certain non-cash transactions of the following:
NINE MONTHS ENDED SEPTEMBER 30, 1996 1997 ---- ---- Interest payments............................................................... $ 62,599 $ 83,279 ============ =========== Subsidiary trust minority interest payments..................................... $ - $ 11,819 ============ =========== Income tax payments............................................................. $ 6,786 $ 5,798 ============ =========== Issuance of 1,150,000 shares of Series A Preferred Stock........................ $ 125,079 $ - ============ =========== Capital lease obligations incurred.............................................. $ - $ 10,973 ============ ===========
5. EARNINGS PER SHARE: In February 1997, the FASB released SFAS 128 "Earnings per Share." The new statement is effective December 15, 1997 and early adoption is not permitted. When adopted, SFAS 128 will require the restatement of prior periods and disclosure of basic and diluted earnings per share and related computations. As of September 30, 1997, the adoption of SFAS 128 would have resulted in the following disclosure:
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 1996 1997 1996 1997 ---- ---- ---- ---- Weighted-average number of common shares................... 34,750 35,025 34,750 34,868 Dilutive effect of outstanding stock options .............. 429 202 199 17 Dilutive effect of conversion of preferred shares.......... 4,182 4,042 1,891 4,044 ------------- ----------- ---------- ----------- Weighted-average number of common and equivalent shares outstanding.......................... 39,361 39,269 36,840 38,929 =========== ========== ========= =========== Net loss................................................... $ (3,328) $ (99) $ (1,817) $ (5,921) Preferred stock dividends payable.......................... - (175) - (175) ----------- ----------- ---------- ------------ Net loss available to common stockholders.................. $ (3,328) $ (274) $ (1,817) $ (6,096) ============ =========== =========== ============ Basic earnings per share................................... $ (0.10) $ (0.01) $ (0.05) $ (0.17) ============= ============ =========== ============ Diluted earnings per share................................. $ (0.10) $ (0.01) $ (0.05) $ (0.17) ============= ============ =========== ============
6. EQUITY PUT AND CALL OPTIONS: During December 1996, the Company entered into physically settled in cash put and call option contracts related to the Company's common stock. These option contracts were entered into for the purpose of hedging the dilution of the Company's common stock upon the exercise of stock options granted. The Company entered into 250,000 call options for common stock and 320,600 put options for common stock, with a strike price of $37.75 and $27.88 per common share, respectively. To the extent that the Company entered into put option contracts, the additional paid-in capital amounts were adjusted accordingly and reflected as Equity Put Options in the accompanying balance sheet as of December 31, 1996. In March 1997, the Company amended its put option contracts from physically settled in cash to physically or net physically settled in shares, at the election of the Company, and reclassified amounts reflected as Equity Put Options to "Additional paid in capital - equity put options" as reflected in the accompanying balance sheet as of September 30, 1997. 9 In April 1997, the Company entered into put and call option contracts related to its common stock for the purpose of hedging the dilution of the common stock upon the exercise of stock options granted. The Company entered into 550,000 European style (that is, exercisable on the expiration date only) put options for common stock with a strike price of $25.78 per share which provide for settlement in cash or in shares, at the election of the Company. The Company entered into 550,000 American style (that is, exercisable any time on or before the expiration date) call options for common stock with a strike price of $25.78 per share which provide for settlement in cash or in shares, at the election of the Company. The option premium amount of $3.4 million for these contracts, which was recorded as a reduction of additional paid in capital, is payable in quarterly installments of 8.1% per annum through the maturity date, July 13, 2000. 7. COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF SUBSIDIARY TRUST: In March 1997, the Company completed a private placement of $200 million aggregate liquidation value of 11 5/8% High Yield Trust Offered Preferred Securities (the "HYTOPS") of Sinclair Capital, a subsidiary trust of the Company. The HYTOPS were issued March 12, 1997, mature March 15, 2009, and provide for quarterly distributions to be paid in arrears beginning June 15, 1997. The HYTOPS were sold to "qualified institutional buyers" (as defined in Rule 144A under the Securities Act of 1933, as amended) and a limited number of institutional "accredited investors" and the offering was exempt from registration under the Securities Act of 1933, as amended ("the Securities Act"), pursuant to Section 4(2) of the Securities Act and Rule 144A thereunder. The Company utilized $135 million of the approximately $192.8 million net proceeds of the private placement to repay outstanding debt and retained the remainder for general corporate purposes, which included the acquisition of KUPN-TV in Las Vegas, Nevada. Pursuant to a Registration Rights Agreement entered into in connection with the private placement of the HYTOPS, the Company offered holders of the HYTOPS the right to exchange the HYTOPS for new HYTOPS having the same terms as the existing securities, except that the exchange of the new HYTOPS for the existing HYTOPS has been registered under the Securities Act. On May 2, 1997, the Company filed a registration statement on Form S-4 with the Securities and Exchange Commission (the "Commission") for the purpose of registering the new HYTOPS to be offered in exchange for the aforementioned existing HYTOPS issued by the Company in March 1997 (the "Exchange Offer"). The Company's Exchange Offer was closed and became effective August 11, 1997, at which time all of the existing HYTOPS were exchanged for new HYTOPS. 8. ACQUISITIONS: 1997 ACQUISITIONS In January 1997, the Company entered into a purchase agreement to acquire the license and non-license assets of KUPN-TV, the UPN affiliate in Las Vegas, Nevada, for a purchase price of $87 million. Under the terms of this agreement, the Company made cash deposit payments of $9.0 million and in May 1997, the Company closed on the acquisition making a cash payment of $78 million for the remaining balance of the purchase price. The Company financed the transaction by utilizing proceeds from the HYTOPS offering combined with indebtedness under the Third Amended and Restated Credit Agreement ("the Bank Credit Agreement"). In 1997, the Company exercised options to acquire the license and non-license assets of the following radio stations: WGR-AM and WWWS-AM (Buffalo, New York) and WWFH-FM, WILP-AM, WWSH-FM and WKRF-FM (Wilkes-Barre/Scranton, Pennsylvania). During the nine months ended September 30, 1997, the Company made payments totaling approximately $3.1 million to acquire the license and non-license assets of these radio stations. EXERCISE OF OPTIONS TO ACQUIRE RIVER CITY LICENSE ASSETS Since March 31, 1997, the FCC has granted approval for transfer of FCC licenses with respect to the following television stations: KDNL-TV (St. Louis, Missouri), KOVR-TV (Sacramento, California), WLOS-TV (Asheville, North Carolina), KABB-TV (San Antonio, Texas) and KDSM-TV (Des Moines, Iowa). The Company exercised options to acquire the License Assets (the television and radio assets essential for broadcasting a television or radio signal in compliance with regulatory guidelines) of each of these stations from River City Broadcasting, L.P. ("River City") for aggregate option exercise payments of $9.3 million. In July 1997, the Company made an option exercise payment of $.5 million to River City related to the license assets of WFBC-TV (Greenville, South Carolina) and 10 simultaneously assigned its option to acquire the License Assets of WFBC-TV to Glencairn, Ltd. ("Glencairn") for an option assignment fee of $2.0 million. The Company entered into a local marketing agreement ("LMA") with Glencairn whereby the Company, in exchange for an hourly fee, obtained the right to program and sell advertising on substantially all of the station's inventory of broadcast time. The Company also received FCC approval for the transfer of the FCC licenses of KPNT-FM and WVRV-FM in St. Louis, Missouri, and exercised its option to acquire the License Assets of these radio stations for an option exercise price of $1.2 million. As a result of these license approvals and option exercises, the Company now owns the License Assets of (or has entered into an LMA with Glencairn with respect to) all of the television and radio stations with respect to which it acquired Non-License Assets (assets involved in the operation of radio and television stations other than License Assets) from River City, other than WTTV-TV and WTTK-TV in Indianapolis, Indiana. AGREEMENT TO ACQUIRE HERITAGE On July 16, 1997, the Company entered into agreements (the "Heritage Acquisition Agreements") with The News Corporation Limited, Heritage Media Group, Inc. and certain subsidiaries of Heritage Media Corporation (collectively, "Heritage"), pursuant to which the Company agreed to acquire certain television and radio station assets. Under the Heritage Acquisition Agreements, the Company will acquire the assets of, or the right to program pursuant to LMAs, six television stations in three markets and the assets of 24 radio stations in seven markets (the "Heritage Acquisition"). The aggregate purchase price for the assets is $630 million payable in cash at closing, less a deposit of $63 million paid at the time of signing the Heritage Acquisition Agreements. The Heritage Acquisition Agreements also provide for the acquisition of the assets of a television station in Oklahoma City, Oklahoma; the Company is required by the agreements to dispose of its interest in that station, and the Company has entered into a letter of intent to sell that station for $60 million in cash. The Company intends to finance the purchase by utilizing funds available under the Company's Bank Credit Agreement and the anticipated $60 million in proceeds from the sale of the Company's interest in the Oklahoma City station. Closing of the Heritage Acquisition is conditioned on, among other things, FCC approval. 9. 9% SENIOR SUBORDINATED NOTES DUE 2007: In July 1997, the Company completed an issuance of $200 million aggregate principal amount of 9% Senior Subordinated Notes (the "1997 Notes"). The 1997 Notes were issued July 2, 1997, mature July 15, 2007, and provide for interest payments payable semi-annually on January 15 and July 15 of each year, commencing January 15, 1998. The 1997 Notes were sold to "qualified institutional buyers" (as defined in Rule 144A under the Securities Act) and a limited number of institutional "accredited investors" and the offering was exempt from registration under the Securities Act, pursuant to Section 4(2) of the Securities Act and Rule 144A thereunder. The Company utilized $162.5 million of the approximately $195.6 million net proceeds of the private issuance to repay outstanding revolving credit indebtedness under the Bank Credit Agreement and utilized the remainder to pay a portion of the $63 million cash down payment relating to the Heritage Acquisition. Pursuant to a Registration Rights Agreement entered into in connection with the private placement of the 1997 Notes, the Company is obligated to offer to holders of the 1997 Notes the right to exchange the 1997 Notes with new 1997 Notes (the "1997 Notes Exchange Offer") having the same terms as the existing notes, except that the exchange of the new 1997 Notes for the existing 1997 Notes will be registered under the Securities Act. The Company filed a registration statement on October 8, 1997 which became effective on October 10, 1997. The 1997 Notes Exchange Offer is scheduled to expire on November 7, 1997. 10. SHELF REGISTRATION STATEMENT: In October 1996, the Company filed a registration statement on Form S-3 with the Commission for the purpose of offering additional shares of its Class A Common Stock to the public. In August 1997, the Company amended this registration statement to reflect the registration of $1 billion of securities to be offered to the public, covering Class A Common Stock, Preferred Stock and debt securities (the "Shelf Registration"). In September 1997, the Company completed offerings of its Class A Common Stock and Series D Preferred Stock pursuant to the Shelf Registration. 11 11. PUBLIC OFFERING OF CLASS A COMMON STOCK: In September 1997, the Company and certain stockholders of the Company completed a public offering of 4,345,000 and 1,750,000 shares, respectively of Class A Common Stock (the "Common Stock Offering"). The shares were sold pursuant to the Shelf Registration for an offering price of $36.50 per share and generated proceeds to the Company of $151.6 million, net of underwriters' discount and other offering costs of $7.0 million. The Company utilized a significant portion of the Common Stock Offering proceeds to repay indebtedness under the Bank Credit Agreement (see Note 12). 12. PUBLIC OFFERING OF SERIES D PREFERRED STOCK: Concurrent with the Common Stock Offering, the Company completed a public offering of 3,450,000 shares of Series D Convertible Exchangeable Preferred Stock (the "Preferred Stock Offering"). The shares were sold pursuant to the Shelf Registration at an offering price of $50 per share and generated proceeds to the Company of $167.5 million, net of underwriters' discount and other offering costs of $5.0 million. The Convertible Exchangeable Preferred Stock have a liquidation preference of $50 per share and a stated annual dividend of $3.00 per share payable quarterly out of legally available funds and are convertible into shares of Class A Common Stock at the option of the holders thereof at a conversion price of $45.625 per share, subject to adjustment. The shares of Convertible Exchangeable Preferred Stock are exchangeable at the option of the Company, for 6% Convertible Subordinated Debentures of the Company, due 2012, and are redeemable at the option of the Company on or after September 20, 2000 at specified prices plus accrued dividends. The Company received total net proceeds of $319.1 million from the Preferred Stock Offering and the Common Stock Offering. The Company utilized $285.7 million of the net proceeds from the Common Stock Offering and the Preferred Stock Offering to repay outstanding borrowings under the revolving credit facility, $8.9 million to repay outstanding amounts under the Tranche A term loan and the remaining net proceeds of approximately $24.5 million for general corporate purposes. 13. INTEREST RATE DERIVATIVE AGREEMENTS: The Company has entered into interest rate derivative agreements to reduce the impact of changing interest rates on its floating rate debt, primarily relating to the Bank Credit Agreement. In May 1996, the Company amended its Bank Credit Agreement. The agreement requires the Company to enter into Interest Rate Protection Agreements at rates not to exceed 9.5% per annum as to a notional principal amount at least equal to 66% of the Tranche A term loans scheduled to be outstanding from time to time and 9.75% per annum as to a notional principal amount of 66% of the aggregate amount of Tranche B term loans scheduled to be outstanding from time to time. At September 30, 1997, the Company had several interest rate swap agreements relating to the Bank Credit Agreement which expire from June 30, 1998 to July 15, 2007. The swap agreements set rates in the range of 5.55% to 9.00%. The notional amounts related to these agreements were $1.2 billion at September 30, 1997, and decrease to $100.0 million through the expiration dates. The Company has no intentions of terminating these instruments prior to their expiration dates unless it were to prepay a portion of its bank debt. The floating interest rates are based upon the three month London Interbank Offered Rate (LIBOR) rate, and the measurement and settlement is performed quarterly. Settlements of these agreements are recorded as adjustments to interest expense in the relevant periods. The Company estimates the aggregate cost to retire these instruments at September 30, 1997 to be $2.5 million. 14. AMENDMENT TO BANK CREDIT AGREEMENT: Contemporaneously with the Preferred Stock Offering and the Common Stock Offering, the Company amended its Bank Credit Agreement. The Bank Credit Agreement currently consists of two classes: Tranche A Term Loan and a Revolving Credit Commitment. The Tranche A Term Loan is a term loan in a principal amount not to exceed $325 million and is scheduled to be paid in quarterly installments through December 31, 2004. The Revolving Credit Commitment is a revolving credit facility in a principal amount not to exceed $675 million and is scheduled to have 12 reduced availability quarterly through December 31, 2004. As of September 30, 1997, outstanding indebtedness under the Tranche A Term Loan and the Revolving Credit Commitment were $316.1 million and $0, respectively. The applicable interest rate for the Tranche A Term Loan and the Revolving Credit Tranche is either LIBOR plus 0.5% to 1.875% or the base rate plus zero to 0.625%. The applicable interest rate for the Tranche A Term Loan and the Revolving Credit is adjusted based on the ratio of total debt to four quarters' trailing earnings before interest, taxes, depreciation and amortization. The Company also amended its Bank Credit Agreement in May 1997 and incurred amendment acquisition costs of approximately $4.7 million, which are being amortized over the life of the debt. 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following information should be read in conjunction with the unaudited consolidated financial statements and notes thereto included in this Quarterly Report and the audited financial statements and Management's Discussion and Analysis contained in the Company's Form 10-K, as amended, for the fiscal year ended December 31, 1996. The matters discussed below include forward-looking statements. Such statements are subject to a number of risks and uncertainties, such as the impact of changes in national and regional economies, successful integration of acquired television and radio stations (including achievement of synergies and cost reductions), pricing fluctuations in local and national advertising, availability of capital and volatility in programming costs. Additional risk factors regarding the Company are set forth in the Company's registration statement on Form S-4 filed with the Securities and Exchange Commission on October 10, 1997. The following table sets forth certain operating data for comparison of the three months and nine months ended September 30, 1996 and 1997: OPERATING DATA (dollars in thousands):
- -------------------------------------------------------------------------------------------------------------------- THREE MONTHS NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, 1996 1997 1996 1997 Net broadcast revenues $ 102,013 $ 113,327 $ 219,352 $ 333,028 Barter revenues 8,266 11,419 17,837 31,289 --------------- --------------- --------------- --------------- Total revenues 110,279 124,746 237,189 364,317 --------------- --------------- -------------- --------------- Operating expenses 47,648 49,019 92,615 147,413 Expenses from barter arrangements 5,594 9,976 13,453 26,279 Depreciation and amortization 36,399 34,922 81,892 111,572 Amortization of deferred compensation 117 117 623 350 --------------- --------------- --------------- --------------- Broadcast operating income 20,521 30,712 48,606 78,703 Interest expense (29,001) (25,349) (56,647) (77,342) Subsidiary trust minority interest expense - (5,845) - (12,852) Interest and other income 652 313 3,824 1,400 --------------- --------------- --------------- --------------- Net loss before income tax benefit (7,828) (169) (4,217) (10,091) Income tax benefit 4,500 70 2,400 4,170 --------------- --------------- --------------- --------------- Net loss $ (3,328) $ (99) $ (1,817) $ (5,921) =============== ================ =============== =============== BROADCAST CASH FLOW (BCF) DATA: Television BCF (a) $ 46,721 $ 50,508 $ 110,030 $ 148,540 Radio BCF (a) 6,055 6,829 7,825 14,397 --------------- --------------- --------------- --------------- Consolidated BCF (a) $ 52,776 $ 57,337 $ 117,855 $ 162,937 =============== ================ =============== =============== Television BCF margin (b) 54.0% 52.5% 55.3% 51.6% Radio BCF margin (b) 38.9% 40.0% 38.3% 31.7% Consolidated BCF margin (b) 51.7% 50.6% 53.7% 48.9% OTHER DATA: Adjusted EBITDA (c) $ 49,807 $ 53,876 $ 111,820 $ 152,491 Adjusted EBITDA margin (b) 48.8% 47.5% 51.0% 45.8% After tax cash flow (d) $ 10,654 $ 21,269 $ 41,095 $ 54,006 Program contract payments $ 7,230 $ 11,875 $ 19,301 $ 38,134 Corporate expenses $ 2,969 $ 3,461 $ 6,035 $ 10,446 - --------------------------------------------------------------------------------------------------------------------
a) "Broadcast cash flow" is defined as broadcast operating income plus corporate expenses, depreciation and amortization (including film amortization and amortization of deferred compensation), less cash payments for program rights. Cash program payments represent cash payments made for current programs payable and do not necessarily correspond to program usage. The Company has presented broadcast cash flow data, which the Company believes is comparable to the data provided by other companies in the industry, because such data are commonly used as a measure of performance for broadcast companies. However, broadcast cash flow does not purport to represent cash provided by operating activities as reflected in the Company's consolidated statements of cash flows, is not a measure of financial performance under generally accepted accounting principles and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. 14 b) "BCF margin" is defined as broadcast cash flow divided by net broadcast revenues. "Adjust EBITDA margin" is defined as adjusted EBITDA divided by net broadcast revenues. c) "Adjusted EBITDA" is defined as broadcast cash flow less corporate expenses and is a commonly used measure of performance for broadcast companies. Adjusted EBITDA does not purport to represent cash provided by operating activities as reflected in the Company's consolidated statements of cash flows, is not a measure of financial performance under generally accepted accounting principles and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. d) "After tax cash flow" is defined as net income (loss) plus depreciation and amortization (excluding film amortization), non-cash deferred compensation expense, and the deferred tax provision (or minus the deferred tax benefit). After tax cash flow is presented here not as a measure of operating results and does not purport to represent cash provided by operating activities. After tax cash flow should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. Net broadcast revenue increased to $113.3 million for the three months ended September 30, 1997 from $102.0 million for the three months ended September 30, 1996, or 11.1%. This increase in net broadcast revenue for the three months ended September 30, 1997 as compared to the three months ended September 30, 1996 was primarily due to growth in television broadcast revenue for television stations owned, operated or programmed for the three months ended September 30, 1996 and the three months ended September 30, 1997 (70.8% of increase), the acquisition of KUPN in May 1997 (19.5% of increase), and net broadcast revenues associated with WSTR which was owned for only a portion of the three month period ended September 30, 1996 (9.7% of increase). Net broadcast revenue increased to $333.0 million for the nine months ended September 30, 1997 from $219.4 million for the nine months ended September 30, 1996, or 51.8%. This increase in net broadcast revenue for the nine months ended September 30, 1997 as compared to the nine months ended September 30, 1996 was primarily the result of acquisitions consummated during 1996 and 1997 and LMA transactions consummated in 1996 (the "Acquisitions") which reflect partial periods of operations (94.6% of increase) and to a lesser extent, an increase in net broadcast revenues for television stations owned, operated or programmed for the nine months ended September 30, 1996 and the nine months ended September 30, 1997 (5.4% of increase) which had revenue growth of 4.4%. Total operating expenses excluding expenses from barter arrangements, depreciation and amortization (including film amortization and amortization of deferred compensation) (operating costs) increased to $49.0 million for the three months ended September 30, 1997 from $47.6 million for the three months ended September 30, 1996 or 2.9%. This increase in operating costs for the three months ended September 30, 1997 as compared to the three months ended September 30, 1996 is primarily attributable to the acquisition of KUPN in May 1997 (45.0% of increase), operating costs associated with WSTR which was owned for only a portion of the three month period ended September 30, 1996 (16.7% of increase), an increase in corporate overhead expenses (35.9% of increase), and an increase in operating costs for television and radio stations owned, operated or programmed for the three months ended September 30,1997 and the three months ended September 30, 1996 (2.4% of increase). The television and radio stations owned for these periods had an increase in operating costs of 1.0%. Operating costs increased to $147.4 million for the nine months ended September 30, 1997 from $92.6 million for the nine months ended September 30, 1996 or 59.2%. This increase in operating costs for the nine months ended September 30, 1997 as compared to the nine months ended September 30, 1996 was primarily the result of the Acquisitions (89.3% of increase), an increase in corporate overhead expenses (4.4% of increase), and an increase in operating costs for television stations owned, operated or programmed for the nine months ended September 30,1997 and the nine months ended September 30, 1996 (1.5% of increase). The television stations owned for these periods had an increase in operating costs of 3.3%. Broadcast operating income increased to $30.7 million for the three months ended September 30, 1997, from $20.5 million for the three months ended September 30, 1996, or 49.8%. Broadcast operating income increased to $78.7 million for the nine months ended September 30, 1997 from $48.6 million for the nine months ended September 30, 1996 or 61.9%. The increase in broadcast operating income for the three months and nine months ended September 30, 1997 as compared to the three months and nine months ended September 30, 1996 was primarily attributable to the Acquisitions. Interest expense decreased to $25.3 million for the three months ended September 30, 1997 from $29.0 million for the three months ended September 30, 1996, or 12.8 %. Interest expense increased to $77.3 million for the nine months ended September 30, 1997 from $56.6 million for the nine months ended September 30, 1996 or 36.6 %. The decrease in interest expense for the three months ended September 30, 1997 primarily related to the repayment and indebtedness under the Bank Credit agreement with the net proceeds of the private placement of the $200 million aggregate liquidation value of 11 5/8% High Yield Trust Offered Preferred Securities (the "HYTOPS") completed March 12, 1997. The increase in interest expense for the nine months ended September 30, 1997 primarily related to indebtedness incurred by the Company to finance the Acquisitions. Subsidiary trust minority interest expense of $5.8 million for the three months ended September 30, 1997 and $12.9 million for the nine months ended September 30, 1997 is related to the private placement of the HYTOPS completed March 12, 1997. Subsidiary trust minority interest expense was partially offset by reductions in interest expense because a portion of the proceeds of the sale of the HYTOPS was used to reduce indebtedness under the Company's Bank Credit Agreement. 15 Interest and other income decreased to $ .3 million for the three months ended September 30, 1997 from $ .7 million for the three months ended September 30, 1996 or 57.1%. Interest and other income decreased to $1.4 million for the nine months ended September 30, 1997 from $3.8 million for the nine months ended September 30, 1996 or 63.2%. These decreases were primarily due to lower average cash balances during these periods. Income tax benefit decreased to $70,000 for the three months ended September 30, 1997 from $4.5 million for the three months ended September 30, 1996. Income tax benefit increased to $4.2 million for the three months ended September 30, 1997 from $2.4 million for the nine months ended September 30, 1996. The decrease in income tax benefit for the three months ended September 30, 1997 as compared to the three months ended September 30, 1996 primarily related to the decrease in pre-tax loss. The Company's effective tax rate decreased to a benefit of 41.3 % for the nine months ended September 30, 1997 from a benefit of 57.0% for the nine months ended September 30, 1996. The net deferred tax asset increased to $5.5 million as of September 30, 1997 from $ .8 million at December 31, 1996. The increase in the Company's net deferred tax asset as of September 30, 1997 as compared to December 31, 1996 primarily results from the anticipation that the pre-tax losses incurred during the first nine months of 1997 will be used to offset future taxable income. Net loss for the three months ended September 30, 1997 was $99,000 or $(0.01) per share compared to net loss of $3.3 million or $(0.10) per share for the three months ended September 30, 1996. Net loss for the nine months ended September 30, 1997 was $5.9 million or $(0.17) per share compared to $1.8 million or $(0.05) per share. Broadcast cash flow increased to $57.3 million for the three months ended September 30, 1997 from $52.8 million for the three months ended September 30, 1996, or 8.5%. Broadcast cash flow increased to $162.9 million for the nine months ended September 30, 1997 from $117.9 million for the nine months ended September 30, 1996 or 38.2%. These increases in broadcast cash flow primarily resulted from the 1996 and 1997 Acquisitions and to a lesser extent, increases in net broadcast revenues on a same station basis. Adjusted EBITDA represents broadcast cash flow less corporate expenses. Adjusted EBITDA increased to $53.9 million for the three months ended September 30, 1997 from $49.8 million for the three months ended September 30, 1996, or 8.2%. Adjusted EBITDA increased to $152.5 million for the nine months ended September 30, 1997 from $111.8 million for the nine months ended September 30, 1996, or 36.4%. These increases in adjusted EBITDA for the three and nine months ended September 30, 1997 as compared to the three and nine months ended September 30, 1996 resulted from the Acquisitions. The Company's broadcast cash flow margin decreased to 50.6% for the three months ended September 30, 1997 from 51.7% for the three months ended September 30, 1996. The Company's broadcast cash flow margin decreased to 48.9% for the nine months ended September 30, 1997 from 53.7% for the nine months ended September 30, 1996. The decrease in broadcast cash flow margins for the three and nine months ended September 30, 1997 as compared to the three and nine months ended September 30, 1996 primarily resulted from the lower margins of the acquired radio broadcasting assets, lower margins of certain television stations acquired during 1996 and a non-recurring $4.7 million timing lag of program contract payments during the third quarter of 1996 which primarily related to the River City Acquisition and certain other acquisitions. For television and radio stations owned, operated or programmed for the three months ended September 30, 1996 and the three months ended September 30, 1997, broadcast cash flow margin increased from 46.4% to 50.4%, respectively. For television stations owned, operated or programmed for the nine months ended September 30, 1996 and the nine months ended September 30, 1997, broadcast cash flow margins increased from 55.1% to 56.7%, respectively. These increases primarily resulted from expense savings that were realized as stations acquired in the Acquisitions were integrated into the existing operations, combined with increases in net broadcast revenue that did not involve increased costs. 16 The Company's adjusted EBITDA margin decreased to 47.5% for the three months ended September 30, 1997 from 48.8% for the three months ended September 30, 1996. The Company's adjusted EBITDA margin decreased to 45.8% for the nine months ended September 30, 1997 from 51.0% for the nine months ended September 30, 1996. Decreases in adjusted EBITDA margins for these periods resulted primarily from the circumstances affecting broadcast cash flow margins as noted above combined with an increase in corporate expenses. Corporate expenses increased to $3.5 million for the three months ended September 30, 1997 from $3.0 million for the three months ended September 30, 1996, or 16.7%. Corporate expenses increased to $10.4 million for the nine months ended September 30, 1997 from $6.0 million for the nine months ended September 30, 1996, or 73.3%. These increases in corporate expenses primarily result from costs associated with managing a larger base of operations. After tax cash flow increased to $21.3 million for the three months ended September 30, 1997 from $10.7 million for the three months ended September 30, 1996, or 99.1%. After tax cash flow increased to $54.0 million for the nine months ended September 30, 1997 from $41.1 million for the nine months ended September 30, 1996 or 31.4%. The increase in after tax cash flow for the three and nine months ended September 30, 1997 as compared to the three and nine months ended September 30, 1996 primarily resulted from the Acquisitions and an increase in revenues on a same station basis, offset by interest expense on the debt incurred to consummate the 1996 and 1997 Acquisitions and subsidiary trust minority interest expense related to the private placement of the HYTOPS issued during March 1997. LIQUIDITY AND CAPITAL RESOURCES As of September 30, 1997, the Company had $10.3 million in cash balances and net working capital of approximately $33.1 million. Excluding the effect of current program contract costs and current program contract liabilities, the Company's working capital at September 30, 1997, would have been $41.9 million. The Company's primary source of liquidity is cash provided by operations and availability under the Bank Credit Agreement. As of November 4, 1997, the Company's cash balances were approximately $26.2 million with approximately $542 million available for borrowing under the Bank Credit Agreement. An additional $125 million is available to the Company under its Revolving Credit Commitment to the extent future acquisitions provide incremental EBITDA. In addition, the Bank Credit Agreement provides for a Tranche C term loan in the amount of up to $400 million which can be utilized upon approval by the Agent bank, banks holding a majority of the commitments and the raising of sufficient commitments to fund the additional loans. In July 1997, the Company entered into a purchase agreement to acquire the license and non-license assets of the radio and television stations of Heritage Media Group, Inc. ("Heritage") for $630 million and made a cash down payment of $63.0 million. The Company has entered into a letter of intent to sell one of the Heritage television stations for $60 million (the sale of which is required pursuant to the acquisition agreement relating to the remaining Heritage television and radio properties). The Company has sufficient availability under its Bank Credit Agreement to finance the Heritage Acquisition. The Company anticipates that it will finance the Heritage Acquisition through available bank financing or through a combination of available bank financing and proceeds from an offering of securities. Net cash flows from operating activities increased to $65.4 million for the nine months ended September 30, 1997 from $34.4 million for the nine months ended September 30, 1996. The Company made income tax payments of $5.8 million for the nine months ended September 30, 1997 as compared to $6.8 million for the nine months ended September 30, 1996. The Company made interest payments on outstanding indebtedness of $83.3 million during the nine months ended September 30, 1997 as compared to $62.6 million for the nine months ended September 30, 1996. Additional interest payments for the nine months ended September 30, 1997 as compared to the nine months ended September 30, 1996 primarily related to additional interest costs on indebtedness incurred to finance the 1996 Acquisitions. The Company made subsidiary trust minority interest expense payments of $11.8 million for the nine months ended September 30, 1997 related to the private placement of HYTOPS completed in March 1997. Program rights payments increased to $38.1 million for the nine months ended September 30, 1997 from $19.3 million for the nine months ended September 30, 1996, primarily as a result of the 1996 Acquisitions. Net cash flows used in investing activities decreased to $194.0 million for the nine months ended September 30, 1997 from $995.7 million for the nine months ended September 30, 1996. The Company made payments of approximately $3.1 million during the nine months ended September 30, 1997, utilizing indebtedness under the Bank Credit Agreement and existing cash balances, to acquire the license and non-license assets of the following radio stations: WGR-AM and WWWS-AM (Buffalo, New York) and WWFH-FM, WILP-AM, WWSH-FM and WKRF-FM (Wilkes-Barre/Scranton, Pennsylvania). During the nine months ended September 30, 1997, the Company made cash payments of $87.5 million to acquire the license and non-license assets of KUPN-TV in Las Vegas, Nevada, utilizing indebtedness under the Bank Credit Agreement and existing cash balances. During the nine months ended September 30, 1997, the Company made purchase option extension payments of $11.7 million relating to WSYX-TV in Columbus, Ohio. The Company made purchase option exercise payments of $11.1 million during the nine months ended September 30, 1997 exercising options to acquire certain FCC licenses related to the River City Acquisition. In July 1997, the Company assigned its option to acquire the license assets of WFBC-TV in Greenville, South Carolina, to Glencairn, Ltd for an option assignment fee of $2.0 million. The Company made payments for property and equipment of $13.2 million for the nine months ended September 30, 1997. Other than the Heritage Acquisition, the Company has no outstanding commitments for capital expenditures. The Company anticipates that future requirements for capital expenditures will include other acquisitions if suitable acquisitions can be identified on acceptable terms and capital expenditures incurred during the ordinary course of business. 17 Net cash flows provided by financing activities decreased to $136.6 million for the nine months ended September 30, 1997 from $850.5 million for the nine months ended September 30, 1996. In March 1997, the Company completed a private placement of the HYTOPS. The Company utilized $135 million of the approximately $192.8 million net proceeds of the HYTOPS to repay outstanding debt and retained the remainder for general corporate purposes, which included the acquisition of KUPN-TV in Las Vegas, Nevada. The Company made payments totaling $4.6 million to repurchase 186,000 shares of Class A Common Stock during the nine months ended September 30, 1997. In May 1997, the Company made payments of $4.7 million related to the amendment of its Bank Credit Agreement. In the fourth quarter of 1996, the Company negotiated the prepayment of syndicated program contract liabilities for excess syndicated programming assets. In the first quarter of 1997, the Company made final cash payments of $1.4 million related to these negotiations. In July 1997, the Company issued the 1997 Notes utilizing $162.5 million of the approximately $195.6 million proceeds to repay outstanding indebtedness, retaining the remainder to pay a portion of the $63 million cash down payment relating to the Heritage Acquisition. The Company received net proceeds from the Preferred Stock Offering and the Common Stock Offering of approximately $167.5 million and $151.6 million, respectively. The Company used the majority of these funds to repay existing borrowings under the Bank Credit Agreement. Contemporaneously with the Preferred Stock Offering and the Common Stock Offering, the Company and the lenders under the Bank Credit Agreement entered into an amendment to the Bank Credit Agreement, the effect of which was to recharacterize $275 million of indebtedness from the Tranche A term loan under the Bank Credit Agreement to amounts owing under the revolving credit facility under the Bank Credit Agreement. The Company used $285.7 million of the net proceeds from the Common Stock Offering and the Preferred Stock Offering to repay outstanding borrowings under the revolving credit facility, $8.9 million to repay outstanding amounts under the Tranche A term loan and the remaining net proceeds of approximately $24.5 million for general corporate purposes. The Company anticipates that funds from operations, existing cash balances and availability of the revolving credit facility under the Bank Credit Agreement will be sufficient to meet its working capital, capital expenditure commitments and debt service requirements for the foreseeable future. However, to the extent such funds are not sufficient, or if the Company commits to additional capital expenditures (including additional acquisitions), the Company may need to incur additional indebtedness, refinance existing indebtedness or raise funds from the sale of additional equity. The Bank Credit Agreement and the indentures relating to the Company's 9% Senior Subordinated Notes due 2007, 10% Senior Subordinated Notes due 2003 and 10% Senior Subordinated Notes due 2005 restrict the incurrence of additional indebtedness and the use of proceeds of an equity issuance. 18 PART II ITEM 1. LEGAL PROCEEDINGS On July 14, 1997, Sinclair publicly announced that it had reached an agreement for certain of its owned and/or programmed television stations which are currently affiliated with the United Paramount Television Network Partnership ("UPN") to become affiliated with The WB Television Network ("The WB") beginning January 16, 1997. On August 1, 1997, UPN informed Sinclair that it did not believe Sinclair or its affiliates had provided proper notice of its intention not to extend these affiliation agreements beyond January 15, 1998, and, accordingly, that these agreements had been automatically renewed through January 15, 2001. On August 5, 1997, UPN filed an action in the Los Angeles Superior Court against, inter alia, Sinclair, and certain of its affiliates. This action relates to Sinclair's owned and/or programmed stations in Baltimore, Pittsburgh, San Antonio, Oklahoma City and Cincinnati, as well as to each of the other stations indirectly owned and/or programmed by Sinclair subsidiaries which are affiliated with UPN. With respect to each of these stations, the UPN lawsuit requests a declaratory judgement that the affiliation has been renewed with a termination date of January 15, 2001 and a judgement compelling specific performance with such affiliation. Alternatively, UPN is seeking unspecified damages for breach of contract. On August 6, 1997, certain of Sinclair's subsidiaries filed an action in the Circuit Court for Baltimore City against UPN and its general partners. This action seeks a declaratory judgement that proper notice of non-renewal had been provided with respect to the above referenced stations and that the affiliation agreements with UPN for these stations will terminate on January 15, 1998. ITEM 5. OTHER INFORMATION ACQUISTION OF LICENSE ASSETS OF RADIO AND TELEVISION STATIONS In July 1997, the FCC granted approval for transfer of the FCC license for WLOS-TV in Asheville, North Carolina. The Company exercised its option to acquire the License Assets (the television assets essential for broadcasting a television signal in compliance with regulatory guidelines) of this station from River City Broadcasting, L.P. ("River City") for an option exercise payment of $2.1 million. In July 1997, the Company made an option exercise payment of $.5 million to River City related to the license assets of WFBC-TV (Greenville, South Carolina) and simultaneously assigned its option to acquire the License Assets of WFBC-TV to Glencairn, Ltd. ("Glencairn") for an option assignment fee of $2.0 million. The Company entered into a local marketing agreement ("LMA") with Glencairn whereby the Company, in exchange for an hourly fee, obtained the right to program and sell advertising on substantially all of the station's inventory of broadcast time. The Company also received FCC approval for the transfer of the FCC licenses with respect to the following television and radio stations: KDNL-TV (St. Louis, Missouri), KOVR-TV (Sacramento, California), KABB-TV (San Antonio, Texas), KDSM-TV (Des Moines, Iowa) and KPNT-FM and WVRV-FM (St. Louis, Missouri) for aggregate option exercise payments of $8.5 million. As a result of these license approvals and option exercises, the Company now owns the License Assets of (or has entered into an LMA with Glencairn with respect to) all of the television and radio stations with respect to which it acquired Non-License Assets (assets involved in the operation of radio and television stations other than License Assets) from River City, other than WTTV-TV and WTTK-TV in Indianapolis, Indiana. AMENDMENT OF BANK CREDIT AGREEMENT On September 2, 1997, the Company entered into an Amended and Restated Credit Agreement with the Chase Manhattan Bank, as Agent (as amended from time to time, "the Bank Credit Agreement"). The terms of the Bank Credit Agreement as amended and restated are summarized below. The summary set forth below does not purport to be complete and is qualified in its entirety by reference to the provisions of the Bank Credit Agreement. A copy of the Bank Credit Agreement is filed as an exhibit to this Report on Form 10-Q. The Company entered into the Bank Credit Agreement with The Chase Manhattan Bank as Agent, and certain lenders (collectively, the "Banks"). The Bank Credit Agreement is comprised of two components, consisting of (i) the $675 million Revolving Credit Facility and (ii) the $325 million Term Loan. An additional term loan in the amount of $400 million (the "Incremental Facility") is available to the Company under the Bank Credit Agreement. The Company has borrowed no funds with respect to this additional term loan. Beginning March 31, 2000, the commitment under the Revolving Credit Facility is subject to mandatory quarterly reductions beginning on September 30, 1997 with the quarterly reduction escalating annually through December 31, 2004. The Term Loan is required to be repaid by the Company in equal quarterly installments beginning on September 30, 1997 with the quarterly payment escalating annually through the final maturity date of December 31, 2004. 19 The Company is entitled to prepay the outstanding amounts under the Revolving Credit Facility and the Term Loan subject to certain prepayment conditions and certain notice provisions at any time and from time to time. Partial prepayments of the Term Loan are applied in the inverse order of maturity to the outstanding loans on a pro rata basis. Prepaid amounts of the Term Loan may not be reborrowed. In addition, the Company is required to pay an amount equal to (i) 100% of the net proceeds from the sale of assets (other than in the ordinary course of business) not used within 270 days; (ii) insurance recoveries and condemnation proceeds not used for permitted uses within 270 days; (iii) 80% of net Equity Issuance (as defined in the Bank Credit Agreement), net of prior approved uses and certain other exclusions not used within 270 days unless the Company has a contract to reinvest the proceeds within 90 days of the 270 days; and (iv) 50% of Excess Cash Flow so long as Total Debt/Adjusted EBITDA (each as defined in the Bank Credit Agreement) is greater than or equal to 5.0x, to the Banks for application first to prepay the Term Loan, pro rata in inverse order of maturity, and then to prepay outstanding amounts under the Revolving Credit Facility with a corresponding reduction in commitment. In addition to the Revolving Credit Facility and the Term Loans, the Bank Credit Agreement provides that the Banks may, but are not obligated to, loan the Company up to an additional $400 million at any time prior to September 29, 1998 pursuant to the Incremental Facility. This additional loan, if agreed to by the Agent and banks holding a majority of the commitments and funded by a group of existing or new banks, would be in the form of a senior secured standby multiple draw term loan. The Incremental Facility would be available to fund the acquisition of WSYX and certain other acquisitions and would be repayable in equal quarterly installments beginning September 30, 1998, with the quarterly payment escalating annually through the final maturity date of December 30, 2004. The Company's obligations under the Bank Credit Agreement are secured by a pledge of substantially all of the Company's assets, including the stock of all of the Company's subsidiaries other than KDSM, Inc., KDSM Licensee, Inc., Sinclair Capital and Cresap Enterprises, Inc. The subsidiaries of the Company (other than KDSM, Inc., KDSM Licensee, Inc., Cresap Enterprises, Inc. and Sinclair Capital) as well as Gerstell Development Corporation, Keyser Investment Group, Inc. and Cunningham Communications (each a "Stockholder Affiliate"), have guaranteed the obligations of the Company. In addition, all subsidiaries of the Company (other than Cresap Enterprises, Inc., KDSM, Inc., KDSM Licensee, Inc. and Sinclair Capital) have pledged, to the extent permitted by the law, all of their assets to the Banks and Gerstell Development Corporation. Keyser Investment Group, Inc., and Cunningham Communications have pledged certain real property to the Banks. The Company has caused the FCC license for each television station (to the extent such license has been transferred or acquired) or the option to acquire such licenses to be held in a single-purpose entity utilized solely for such purpose (the "TV License Subsidiaries") with the exception of the options for WTTV and WTTK in Indianapolis, both of which are held by a single entity. The TV License Subsidiaries are in all instances owned by wholly-owned indirect subsidiaries of the Company. Additionally, the Company has caused the FCC licenses of the radio stations in each local market to be held by a single purpose entity utilized solely for that purpose (the "Radio License Subsidiaries"). The Radio License Subsidiaries are in all instances owned by wholly-owned indirect subsidiaries of the Company. Interest on amounts drawn under the Bank Credit Agreement is, at the option of the Company, equal to (i) the London Interbank Offered Rate plus a margin of .50% to 1.875% for the Revolving Credit Facility and 2.75% for the Term Loan, or (ii) the Base Rate, which equals the higher of the Federal Funds Rate plus 1/2 of 1% or the Prime Rate of Chase, plus a margin of zero to .625% for the Revolving Credit Facility and the Term Loan. The Company must maintain interest rate hedging arrangements or instruments for at least 60% of the principal amount of the facilities until May 20, 1999. The Bank Credit Agreement contains a number of covenants which restrict the operations of the Company and its subsidiaries, including the ability to: (i) merge, consolidate, acquire or sell assets; (ii) create additional indebtedness or liens; (iii) pay dividends on the capital stock (including preferred stock) of the Company; (iv) enter into certain arrangements with or investments in affiliates; and (v) change the business or ownership of the Company. The Company and its subsidiaries are also prohibited under the Bank Credit Agreement from incurring obligations relating to the acquisition of programming if, as a result of such acquisition, the cash payments on such programming exceed specified amounts set forth in the Bank Credit Agreement. 20 In addition, the Company must comply with certain other financial covenants in the Bank Credit Agreement which include: (i) Fixed Charges Ratio (as defined in the Bank Credit Agreement) of no less than 1.05 to 1 at any time; (ii) Interest Coverage Ratio (as defined in the Bank Credit Agreement) of no less than 1.8 to 1 from the Restatement Effective Date (as defined in the Bank Credit Agreement) to December 30, 1998 and increasing each fiscal year to 2.20 to 1 from December 31, 2000 and thereafter; and (iii) a Senior Indebtedness Ratio (as defined in the Bank Credit Agreement) of no greater than 5.0x from the Restatement Effective Date declining to 4.0x by December 31, 2001 and at all times thereafter and (iv) a Total Indebtedness Ratio (as defined in the Bank Credit Agreement) of no greater than 6.75 to 1 from the Restatement Effective Date declining to 4.00 to 1 by December 31, 2001 and at all times thereafter. The Events of Default under the Bank Credit Agreement include, among others: (i) the failure to pay principal, interest or other amounts when due; (ii) the making of untrue representations and warranties in connection with the Bank Credit Agreement; (iii) a default by the Company or the subsidiaries in the performance of its obligations under the Bank Credit Agreement or certain related security documents; (iv) certain events of insolvency or bankruptcy; (v) the rendering of certain money judgements against the Company or its subsidiaries; (vi) the incurrence of certain liabilities to certain plans governed by the Employee Retirement Income Security Act of 1974; (vii) a change of control or ownership of the Company or its subsidiaries; (viii) the security documents being terminated and ceasing to be in full force and effect; (ix) any broadcast license (other than a non-material license) being terminated, forfeited or revoked or failing to be renewed for any reason whatsoever or for any reason a subsidiary shall at any time cease to be a licensee under any broadcast license (other than a non-material broadcast license); (x) any LMA or options to acquire License Assets being terminated for any reason whatsoever; (xi) any amendment, modification, supplement or waiver of the provisions of the Indenture without the prior written consent of the majority lenders; and (xii) a payment default on any other indebtedness of the Company if the principal amount of such indebtedness exceeds $5 million. RESIGNATION OF MEMBER OF BOARD OF DIRECTORS On July 30, 1997, William F. Brock resigned his position on the Company's Board of Directors. The Company has yet to fill this vacancy on the Board of Directors. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) EXHIBITS EXHIBIT NUMBER DESCRIPTION 10.6 Amendment No. 1 dated as of September 2, 1997 to the Third Amended and Restated Credit Agreement dated as of May 20, 1997 by and among Sinclair Broadcast Group, Inc., Certain Subsidiary Guarantors, Certain Lenders and The Chase Manhattan Bank as Agent. 27 Financial Data Schedule B) REPORTS ON FORM 8-K The Company filed a Current Report on Form 8-K/A dated October 8, 1997 reporting on item 5 to reflect an updated discussion and analysis of financial condition and results of operations and an updated description of its business and management and to set forth pro forma financial statements reflecting recent financing and pending acquisition activities for the purpose of incorporating the information herein by reference into future securities filings. The Company filed a Current Report on Form 8-K dated September 22, 1997 reporting on items 5 and 7 with respect to the Shelf Registration and the Common Stock Offering and Preferred Stock Offering. The Company filed a Current Report on Form 8-K dated September 3, 1997 reporting on item 5 with respect to an asset purchase agreement entered into with SFX Broadcasting, Inc. ("SFX"), pursuant to which the Company will sell to SFX the assets relating to the operation of Nashville radio stations WJZC-FM, WLAC-FM and WLAC-AM. 21 The Company filed a Current Report on Form 8-K dated August 29, 1997 reporting on item 5 to reflect an updated discussion and analysis of financial condition and results of operations and an updated description of its business and management and to set forth pro forma financial statements reflecting recent and pending financing and acquisition activities for the purpose of incorporating the information herein by reference into future securities filings. The Company filed a Current Report on Form 8-K dated August 26, 1997 reporting on items 5 and 7 with respect to pro forma financial information for the Company showing the effect of the Heritage Acquisition and certain other transactions since January 1, 1996 and including the audited financial statements of Heritage Media Services, Inc. - Broadcasting Segment, which includes all of the assets to be acquired by the Company pursuant to the Heritage Acquisition Agreements. The Company filed a current report on Form 8-K dated August 13, 1997 reporting on item 7 with respect to certain financial information about itself relating to a $200 million private offering of 9% Senior Subordinated Notes due 2007. The Company filed a Current Report on Form 8-K dated July 29, 1997 reporting on items 5 and 7 as an update on the acquisition of the license and non-license assets of the television and radio stations of Heritage Media Group, Inc. ("the Heritage Acquisition") The Company filed a Current Report on Form 8-K dated July 17, 1997 reporting on items 5 and 7 with respect to the Heritage Acquisition. The Company filed a Current Report on Form 8-K dated July 14, 1997 reporting on items 5 and 7 with respect to the change in network affiliations for certain television stations. The Company filed a Current Report on Form 8-K dated July 2, 1997 reporting on items 5 and 7 in connection with its $200 million private offering of 9% Senior Subordinated Notes due 2007. 22 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized in the city of Baltimore, Maryland on the 10th day of November, 1997. SINCLAIR BROADCAST GROUP, INC. by: /s/ David B. Amy David B. Amy Chief Financial Officer Principal Accounting Officer 23 EX-10.6 2 EXHIBIT 10.6 Execution Counterpart AMENDMENT NO. 1 AMENDMENT NO. 1 dated as of September 2, 1997, between SINCLAIR BROADCAST GROUP, INC., a corporation duly organized and validly existing under the laws of the State of Maryland (the "Borrower"); each of the Subsidiaries of the Borrower identified under the caption "SUBSIDIARY GUARANTORS" on the signature pages hereto (individually, a "Subsidiary Guarantor" and, collectively, the "Subsidiary Guarantors" and, together with the Borrower, the "Obligors"); each of the lenders that is a signatory hereto (individually, a "Lender" and, collectively, the "Lenders"); and THE CHASE MANHATTAN BANK as agent for the Lenders (in such capacity, together with its successors in such capacity, the "Agent"). The Borrower, the Subsidiary Guarantors, the Lenders and the Agent are parties to a Third Amended and Restated Credit Agreement dated as of May 20, 1997 (as heretofore modified and supplemented and in effect on the date hereof, the "Credit Agreement"), providing, subject to the terms and conditions thereof, for extensions of credit (by making of loans and issuing letters of credit) to be made by said Lenders to the Borrower in an aggregate principal or face amount not exceeding $1,400,000,000. The Borrower, the Subsidiary Guarantors, the Lenders and the Agent wish to amend the Credit Agreement in certain respects, and accordingly, the parties hereto hereby agree as follows: Section 1. Definitions. Except as otherwise defined in this Amendment No. 1, terms defined in the Credit Agreement are used herein as defined therein. Section 2. Amendments. A. Subject to the satisfaction of the conditions precedent specified in Section 4.A below, but effective as of the date hereof, the Credit Agreement shall be amended as follows: 2.01. References in the Credit Agreement (including references to the Credit Agreement as amended hereby) to "this Agreement" (and indirect references such as "hereunder", "hereby", "herein" and "hereof") shall be deemed to be references to the Credit Agreement as amended by this Subsection A. AMENDMENT NO. 1 2 2.02. The definition of "Other Preferred Stock" in Section 1.01 of the Credit Agreement is hereby amended by deleting clauses (a), (b) and (c) thereof and inserting in place thereof the following: (a) Preferred Stock issued by the Borrower after July 1, 1997, all of the material terms of which are set forth in the Prospectus Supplement dated August 26, 1997, subject to completion, of the Borrower for 3,000,000 shares of Convertible Exchangeable Preferred Stock; and (b) New PPI Preferred Stock. B. Subject to the satisfaction of the conditions precedent specified in Section 4.B below, and effective as of the date such conditions precedent are so satisfied, the Credit Agreement shall be amended as follows: 2.03. References in the Credit Agreement (including references to the Credit Agreement as amended hereby) to "this Agreement" (and indirect references such as "hereunder", "hereby", "herein" and "hereof") shall be deemed to be references to the Credit Agreement as amended by this Subsection B. 2.04. The definition of "Revolving Credit Commitment" in Section 1.01 of the Credit Agreement is hereby amended to read as follows: "'Revolving Credit Commitment' shall mean, as to each Revolving Credit Lender, the obligation of such Lender to make Revolving Credit Loans, and to issue or participate in Letters of Credit pursuant to Section 2.10 hereof, in an aggregate principal or face amount at any one time outstanding up to but not exceeding the amount set opposite such Lender's name on Annex 1 to Amendment No. 1 dated as of September 2, 1997 to this Agreement or, in the case of a Person that becomes a Revolving Credit Lender pursuant to an assignment permitted by Section 12.06 hereof, as specified in the respective instrument of assignment pursuant to which such assignment is effected (in each case as the same may be reduced at any time or from time to time pursuant to Section 2.03 hereof)." AMENDMENT NO. 1 3 2.05. The table in Section 2.03(a) of the Credit Agreement is hereby amended to read as follows: (A) (B) Revolving Credit Commitment Revolving Credit Commitment Reduction Date Falling on or Reduced to the Following Nearest to: Amounts ($): September 30, 1997 667,437,500.00 December 31, 1997 659,875,000.00 March 31, 1998 652,427,083.00 June 30, 1998 644,979,166.00 September 30, 1998 637,531,249.00 December 31, 1998 630,083,332.00 March 31, 1999 622,062,499.00 June 30, 1999 614,041,666.00 September 30, 1999 606,020,833.00 December 31, 1999 598,000,000.00 March 31, 2000 577,687,500.00 June 30, 2000 557,375,000.00 September 30, 2000 537,062,500.00 December 31, 2000 516,750,000.00 March 31, 2001 485,687,500.00 June 30, 2001 454,625,000.00 September 30, 2001 423,562,500.00 December 31, 2001 392,500,000.00 March 31, 2002 361,437,500.00 June 30, 2002 330,375,000.00 September 30, 2002 299,312,500.00 December 31, 2002 268,250,000.00 March 31, 2003 237,187,500.00 June 30, 2003 206,125,000.00 September 30, 2003 175,062,500.00 December 31, 2003 144,000,000.00 March 31, 2004 108,000,000.00 June 30, 2004 72,000,000.00 September 30, 2004 36,000,000.00 December 31, 2004 0.00 2.06. The table in Section 3.01(b) of the Credit Agreement is hereby amended to read as follows: (A) (B) Tranche A Principal Payment Date Amount of Falling on or Nearest to: Installment ($): ------------------------ --------------- September 30, 1997 8,937,500.00 December 31, 1997 8,937,500.00 AMENDMENT NO. 1 4 March 31, 1998 8,802,083.00 June 30, 1998 8,802,083.00 September 30, 1998 8,802,083.00 December 31, 1998 8,802,083.00 March 31, 1999 9,479,167.00 June 30, 1999 9,479,167.00 September 30, 1999 9,479,167.00 December 31, 1999 9,479,167.00 March 31, 2000 12,187,500.00 June 30, 2000 12,187,500.00 September 30, 2000 12,187,500.00 December 31, 2000 12,187,500.00 March 31, 2001 12,187,500.00 June 30, 2001 12,187,500.00 September 30, 2001 12,187,500.00 December 31, 2001 12,187,500.00 March 31, 2002 12,187,500.00 June 30, 2002 12,187,500.00 September 30, 2002 12,187,500.00 December 31, 2002 12,187,500.00 March 31, 2003 12,187,500.00 June 30, 2003 12,187,500.00 September 30, 2003 12,187,500.00 December 31, 2003 12,187,500.00 March 31, 2004 9,750,000.00 June 30, 2004 9,750,000.00 September 30, 2004 9,750,000.00 December 31, 2004 9,750,000.00 Section 3. Representations and Warranties. The Borrower represents and warrants to the Lenders that the representations and warranties set forth in Section 8 of the Credit Agreement are true and complete on the date hereof as if made on and as of the date hereof and as if each reference in said Section 8 to "this Agreement" included reference to this Amendment No. 1. Section 4. Conditions Precedent. A. The amendments to the Credit Agreement set forth in Section 2.A hereof shall become effective, as of the date hereof, upon the execution and delivery of this Amendment No. 1 by the Obligors, the Majority Lenders and the Agent. B. The amendments to the Credit Agreement set forth in Section 2.B hereof, and the consent set forth in Section 5 hereof, shall become effective upon the satisfaction of the following conditions precedent: AMENDMENT NO. 1 5 (i) the Obligors, all of the Lenders and the Agent shall have executed and delivered this Amendment No. 1; (ii) the Agent shall have received an opinion of Thomas & Libowitz, P.A., counsel to the Obligors, satisfactory to it in form and substance (and each Obligor hereby instructs such counsel to deliver such opinion to the Lenders and the Agent), and such supporting corporate documents from the Obligors as it shall have requested, relating to this Amendment No. 1; (iii) the Agent shall have received duly completed and executed Notes for each Lender requesting such Notes to reflect the prepayment of the Tranche A Term Loan held by such Lender or the increase of the Revolving Credit Commitment of such Lender, as the case may be, pursuant to Section 4.B(iv) hereof; (iv) the Borrower shall, subject to Section 5.05 of the Credit Agreement, have made a prepayment of the Tranche A Term Loans under Section 2.08(a) of the Credit Agreement in such amounts, of such Types, having such Interest Periods and held by such Tranche A Lenders so that, after giving effect thereto, (a) the Tranche A Term Loans shall be held by the Tranche A Term Lenders pro rata (as to principal amount, Type and Interest Period) in accordance with their respective amounts set forth on Annex 1 hereto and (b) the aggregate principal amount of the Tranche A Term Loans shall be equal to $325,000,000; and (v) the Borrower shall, subject to Section 5.05 of the Credit Agreement, have made prepayments of Revolving Credit Loans under Section 2.08(a) of the Credit Agreement and borrowings of Revolving Credit Loans under Section 2.01(a) of the Credit Agreement in such amounts, of such Types, having such Interest Periods and held by such Revolving Credit Lenders so that, after giving effect thereto, the Revolving Credit Loans shall be held by the Revolving Credit Lenders pro rata (as to principal amount, Type and Interest Period) in accordance with their respective amounts set forth on Annex 1 hereto. Section 5. Consent. Subject to the satisfaction of the conditions precedent specified in Section 4.B above, the parties hereto consent to the prepayments and borrowings referred to in paragraphs (iv) and (v) of Section 4.B notwithstanding Section 4.02 of the Credit Agreement. AMENDMENT NO. 1 6 Section 6. Miscellaneous. Except as herein provided, the Credit Agreement shall remain unchanged and in full force and effect. This Amendment No. 1 may be executed in any number of counterparts, all of which taken together shall constitute one and the same amendatory instrument and any of the parties hereto may execute this Amendment No. 1 by signing any such counterpart. This Amendment No. 1 shall be governed by, and construed in accordance with, the law of the State of New York. IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to be duly executed and delivered as of the day and year first above written. SINCLAIR BROADCAST GROUP, INC. By ---------------------------- Title: SUBSIDIARY GUARANTORS CHESAPEAKE TELEVISION, INC. KSMO, INC. KUPN LICENSEE, INC. SINCLAIR RADIO OF ALBUQUERQUE, INC. SINCLAIR RADIO OF BUFFALO, INC. SINCLAIR RADIO OF GREENVILLE, INC. SINCLAIR RADIO OF LOS ANGELES, INC. SINCLAIR RADIO OF MEMPHIS, INC. SINCLAIR RADIO OF NASHVILLE, INC. SINCLAIR RADIO OF NEW ORLEANS, INC. SINCLAIR RADIO OF ST. LOUIS, INC. SINCLAIR RADIO OF WILKES-BARRE, INC. TUSCALOOSA BROADCASTING, INC. WCGV, INC. WDBB, INC. WLFL, INC. WPGH, INC. WPGH LICENSEE, INC. WSMH, INC. WSTR, INC. WSTR LICENSEE, INC. WSYX, INC. WTTE, CHANNEL 28, INC. WTTE, CHANNEL 28 LICENSEE, INC. WTTO, INC. AMENDMENT NO. 1 7 WTVZ, INC. WTVZ LICENSEE, INC. WYZZ, INC. SUPERIOR COMMUNICATIONS OF OKLAHOMA, INC. CHESAPEAKE TELEVISION LICENSEE, INC. FSF TV, INC. KABB LICENSEE, INC. KDNL LICENSEE, INC. KSMO LICENSEE, INC. SCI - INDIANA LICENSEE, INC. SCI - SACRAMENTO LICENSEE, INC. SINCLAIR RADIO OF ALBUQUERQUE LICENSEE, INC. SINCLAIR RADIO OF BUFFALO LICENSEE, INC. SINCLAIR RADIO OF GREENVILLE LICENSEE, INC. SINCLAIR RADIO OF LOS ANGELES LICENSEE, INC. SINCLAIR RADIO OF MEMPHIS LICENSEE, INC. SINCLAIR RADIO OF NASHVILLE LICENSEE, INC. SINCLAIR RADIO OF NEW ORLEANS LICENSEE, INC. SINCLAIR RADIO OF ST. LOUIS LICENSEE, INC. SINCLAIR RADIO OF WILKES-BARRE LICENSEE, INC. SUPERIOR COMMUNICATIONS OF KENTUCKY, INC. SUPERIOR KY LICENSE CORP. SUPERIOR OK LICENSE CORP. WCGV LICENSEE, INC. WLFL LICENSEE, INC. WLOS LICENSEE, INC. WSMH LICENSEE, INC. WTTO LICENSEE, INC. WYZZ LICENSEE, INC. By Name: Title: SINCLAIR COMMUNICATIONS, INC. By Name: Title: AMENDMENT NO. 1 8 AGENT AND LENDERS THE CHASE MANHATTAN BANK, individually and as Agent By --------------------------------- Name: Title: ABN AMRO BANK N.V., New York Branch By --------------------------------- Name: Title: By --------------------------------- Name: Title: BANK OF AMERICA ILLINOIS By --------------------------------- Name: Title: BANK OF HAWAII By --------------------------------- Name: Title: BANKBOSTON, N.A. By --------------------------------- Name: Title: AMENDMENT NO. 1 9 BANKERS TRUST COMPANY By --------------------------------- Name: Title: BANQUE FRANCAISE DU COMMERCE EXTERIEUR By --------------------------------- Name: Title: By --------------------------------- Name: Title: BANQUE NATIONALE DE PARIS By --------------------------------- Name: Title: By --------------------------------- Name: Title: BANQUE PARIBAS By --------------------------------- Name: Title: By --------------------------------- Name: Title: AMENDMENT NO. 1 10 CAISSE NATIONALE DE CREDIT AGRICOLE By --------------------------------- Name: Title: CIBC INC. By --------------------------------- Name: Title: COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE By --------------------------------- Name: Title: By --------------------------------- Name: Title: CORESTATES BANK, N.A. By --------------------------------- Name: Title: CREDIT SUISSE FIRST BOSTON By --------------------------------- Name: Title: By --------------------------------- Name: Title: AMENDMENT NO. 1 11 CRESTAR BANK By --------------------------------- Name: Title: THE DAI-ICHI KANGYO BANK, LTD. By --------------------------------- Name: Title: DRESDNER BANK AG NEW YORK & GRAND CAYMAN BRANCHES By --------------------------------- Name: Title: By --------------------------------- Name: Title: THE FIRST NATIONAL BANK OF MARYLAND By --------------------------------- Name: Title: FIRST UNION NATIONAL BANK By --------------------------------- Name: Title: AMENDMENT NO. 1 12 FIRSTRUST BANK By --------------------------------- Name: Title: FLEET NATIONAL BANK By --------------------------------- Name: Title: THE FUJI BANK, LIMITED, NEW YORK BRANCH By --------------------------------- Name: Title: GIROCREDIT BANK By --------------------------------- Name: Title: LTCB TRUST COMPANY By --------------------------------- Name: Title: MELLON BANK, N.A. By --------------------------------- Name: Title: AMENDMENT NO. 1 13 MERCANTILE BANK, NATIONAL ASSOCIATION By --------------------------------- Name: Title: MICHIGAN NATIONAL BANK By --------------------------------- Name: Title: THE MITSUBISHI TRUST AND BANKING CORPORATION By --------------------------------- Name: Title: NATIONSBANK, N.A. By --------------------------------- Name: Title: PNC BANK, NATIONAL ASSOCIATION By --------------------------------- Name: Title: AMENDMENT NO. 1 14 COOPERATIEVE CENTRALE RAIFFEISEN - BOERENLEENBANK B.A., "RABOBANK NEDERLAND," NEW YORK BRANCH By --------------------------------- Name: Title: By --------------------------------- Name: Title: THE SAKURA BANK, LTD. By --------------------------------- Name: Title: THE SANWA BANK LTD. By --------------------------------- Name: Title: THE SUMITOMO BANK, LIMITED By --------------------------------- Name: Title: By --------------------------------- Name: Title: AMENDMENT NO. 1 15 SUNTRUST BANK, CENTRAL FLORIDA, N.A. By --------------------------------- Name: Title: TOYO TRUST AND BANKING CO., LIMITED By --------------------------------- Name: Title: UNION BANK OF CALIFORNIA, N.A. By --------------------------------- Name: Title: UNION BANK OF SWITZERLAND, NEW YORK BRANCH By --------------------------------- Name: Title: By --------------------------------- Name: Title: AMENDMENT NO. 1 16 ALLIED SIGNAL INC. By --------------------------------- Name: Title: AMARA-1 FINANCE LTD. By --------------------------------- Name: Title: AMARA-2 FINANCE LTD. By --------------------------------- Name: Title: CAPTIVA FINANCE LTD. By --------------------------------- Name: Title: CAPTIVA II FINANCE LTD. By --------------------------------- Name: Title: MEDICAL LIABILITY MUTUAL INSURANCE CO. By --------------------------------- Name: Title: AMENDMENT NO. 1 17 MERRILL LYNCH PRIME RATE PORTFOLIO By Merrill Lynch Asset Management L.P. as Investment Advisor By --------------------------------- Name: Title: MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. By --------------------------------- Name: Title: SENIOR DEBT PORTFOLIO By --------------------------------- Name: Title: SENIOR HIGH INCOME PORTFOLIO, INC. By --------------------------------- Name: Title: VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST By --------------------------------- Name: Title: AMENDMENT NO. 1 18 Annex 1
New Revolving New Tranche A Lender Credit Commitments Term Loans - ------ ------------------ ------------- The Chase Manhattan Bank $ 27,742,188.37 $ 14,482,811.63 ABN AMRO Bank N.V., New York Branch $ 23,567,877.86 $ 5,932,122.14 Bank of America Illinois $ 23,567,877.86 $ 5,932,122.14 Bank of Hawaii $ 7,989,111.14 $ 2,010,888.86 BankBoston, N.A. $ 23,567,877.86 $ 5,932,122.14 Bankers Trust Company $ 11,983,666.71 $ 3,016,333.29 Banque Francaise du Commerce Exterieur $ 11,983,666.71 $ 3,016,333.29 Banque Nationale de Paris $ 27,562,433.42 $ 6,937,566.58 Banque Paribas $ 23,567,877.86 $ 5,932,122.14 Caisse Nationale de Credit Agricole $ 11,983,666.71 $ 3,016,333.29 CIBC Inc. $ 27,562,433.42 $ 6,937,566.58 Companie Financiere de CIC et de $ 27,562,433.42 $ 6,937,566.58 l'Union Europeenne Corestates Bank, N.A. $ 15,079,447.27 $ 3,795,552.73 Credit Suisse First Boston $ 11,983,666.71 $ 3,016,333.29 Crestar Bank $ 7,989,111.14 $ 2,010,888.86 The Dai-Ichi Kangyo Bank, Ltd. $ 11,983,666.71 $ 3,016,333.29 Dresdner Bank AG New York & $ 19,972,777.84 $ 5,027,222.16 Grand Cayman Branches The First National Bank of Maryland $ 19,972,777.84 $ 5,027,222.16 First Union National Bank $ 19,972,777.84 $ 5,027,222.16 Firstrust Bank $ 3,994,555.57 $ 1,005,444.43 Fleet National Bank $ 23,567,877.86 $ 5,932,122.14 The Fuji Bank, Limited, New York Branch $ 19,972,777.84 $ 5,027,222.16 Girocredit Bank $ 3,994,555.57 $ 1,005,444.43 LTCB Trust Company $ 19,573,322.29 $ 4,926,677.71 Mellon Bank, N.A. $ 13,821,162.27 $ 3,478,837.73 Mercantile Bank, National Association $ 11,983,666.71 $ 3,016,333.29 Michigan National Bank $ 11,983,666.71 $ 3,016,333.29 The Mitsubishi Trust and Banking Corporation $ 23,567,877.86 $ 5,932,122.14 NationsBank, N.A. $ 25,964,611.20 $ 6,535,388.80 PNC Bank, National Association $ 14,380,400.05 $ 3,619,599.95 Cooperatieve Centrale Raiffeisen - $ 19,972,777.84 $ 5,027,222.16 Boerenleenbank B.A., "Rabobank Nederland," New York Branch The Sakura Bank, Ltd. $ 11,983,666.71 $ 3,016,333.29 The Sanwa Bank, Ltd. $ 23,567,877.86 $ 5,932,122.14 The Sumitomo Bank, Limited $ 15,978,222.27 $ 4,021,777.73 Suntrust Bank, Central Florida, N.A. $ 15,978,222.27 $ 4,021,777.73 Toyo Trust and Banking Co., Limited $ 11,983,666.71 $ 3,016,333.29 Union Bank of California, N.A. $ 23,567,877.86 $ 5,932,122.14 Union Bank of Switzerland, New York Branch $ 23,567,877.86 $ 5,932,122.14 Allied Signal Inc. 0 $ 5,000,000.00 Amara-1 Finance Ltd. 0 $ 3,000,000.00 Amara-2 Finance Ltd. 0 $ 7,500,000.00 Captiva Finance Ltd. 0 $ 5,000,000.00 Captiva II Finance Ltd. 0 $ 7,000,000.00 Medical Liability Mutual Insurance Co. 0 $ 7,500,000.00 Merrill Lynch Prime Rate Portfolio 0 $ 10,000,000.00 Merrill Lynch Senior Floating 0 $ 10,000,000.00 Rate Fund, Inc. Senior Debt Portfolio 0 $ 42,400,000.00 Senior High Income Portfolio, Inc. 0 $ 5,000,000.00 Van Kampen American Capital Prime 0 $ 45,200,000.00 Rate Income Trust TOTAL COMMITMENTS $675,000,000.00 $325,000,000.00
EX-27 3 FDS
5 1,000 US DOLLAR 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 1 10,336 0 96,492 2,772 0 176,811 161,301 12,786 1,880,776 143,708 600,000 200,000 46 392 232,279 1,880,776 0 364,317 0 285,614 0 0 77,342 (10,091) 4,170 (5,921) 0 0 0 (5,921) (0.17) 0
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