UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
[X] SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
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: ________________
KDSM, INC.
(Exact name of Registrant as specified in its charter)
---------------------------
MARYLAND 52-1975792
(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)
SINCLAIR CAPITAL
(Exact name of Registrant as specified in its charter)
---------------------------
DELAWARE 52-2026076
(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)
---------------------------
1
<PAGE>
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 16, 1998, there were 100 shares of Common Stock, $.01 par value
of KDSM, Inc., issued and outstanding and 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 KDSM, Inc., issued and
outstanding.
THE REGISTRANTS EACH MEET THE CONDITIONS FOR REDUCED DISCLOSURE SET FORTH IN
GENERAL INSTRUCTION H (1)(A) AND (B) OF FORM 10-Q AND ARE THEREFORE FILING THIS
FORM WITH THE REDUCED DISCLOSURE FORMAT.
2
<PAGE>
KDSM, INC. AND SUBSIDIARIES
Form 10-Q
For the Quarter Ended September 30, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 1997 and
September 30, 1998............................................................. 4
Consolidated Statements of Operations for the Three Months and Nine Months
Ended September 30, 1997 and 1998.............................................. 5
Consolidated Statement of Stockholder's Equity for the Nine Months
Ended September 30, 1998....................................................... 6
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1997 and 1998.............................................. 7
Notes to Unaudited Consolidated Financial Statements.................................. 8
Item 2. Management's Discussion and Analysis of Results of Operations.................. 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................................... 13
Signature............................................................................. 14
</TABLE>
3
<PAGE>
KDSM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
--------------- -------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash............................................................................ $ 11 $ 14
Accounts receivable, net of allowance for doubtful accounts..................... 2,150 1,599
Dividends receivable from parent................................................ 1,085 1,085
Current portion of program contract costs....................................... 988 1,244
Prepaid expenses and other current assets....................................... 33 34
Deferred barter costs .......................................................... 100 36
------------ ----------
Total current assets..................................................... 4,367 4,012
PROPERTY AND EQUIPMENT, net......................................................... 3,208 3,106
PROGRAM CONTRACT COSTS, less current portion........................................ 925 664
INVESTMENT IN PARENT PREFERRED SECURITIES........................................... 206,200 206,200
DUE FROM PARENT .................................................................... 2,673 6,556
OTHER ASSETS 7,757 6,692
ACQUIRED INTANGIBLE BROADCASTING ASSETS, net........................................ 33,410 32,635
------------ ----------
Total Assets ............................................................ $ 258,540 $ 259,865
============ ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable................................................................ $ 30 $ 21
Accrued liabilities............................................................. 396 266
Current portion of program contracts payable.................................... 1,612 1,687
Deferred barter revenues........................................................ 209 133
Subsidiary trust minority interest expense payable.............................. 969 969
------------ ----------
Total current liabilities................................................ 3,216 3,076
PROGRAM CONTRACTS PAYABLE........................................................... 1,241 1,260
DEFERRED STATE TAXES 334 507
------------ ----------
Total liabilities........................................................ 4,791 4,843
------------ ----------
COMMITMENTS AND CONTINGENCIES
COMPANY OBLIGATED MANDATORILY REDEEMABLE SECURITIES OF SUBSIDIARY
TRUST HOLDING SOLELY KDSM SENIOR DEBENTURES .................................. 200,000 200,000
------------ ----------
STOCKHOLDER'S EQUITY:
Common stock, $.01 par value, 1,000 shares authorized
and 100 shares issued and outstanding....................................... - -
Additional paid-in capital...................................................... 51,149 51,149
Retained earnings............................................................... 2,600 3,873
------------ ----------
Total stockholder's equity............................................... 53,749 55,022
------------ ----------
Total Liabilities and Stockholder's Equity............................... $ 258,540 $ 259,865
============ ==========
</TABLE>
The accompanying notes are an integral part of these
unaudited consolidated statements.
4
<PAGE>
KDSM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- ----------------------
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Station broadcast revenues, net of agency commissions........... $ 1,765 $ 1,820 $ 5,684 $ 5,891
Revenues realized from station barter arrangements.............. 82 93 224 367
------- --------- --------- ---------
Total revenues........................................... 1,847 1,913 5,908 6,258
------- --------- --------- ---------
OPERATING EXPENSES:
Program and production.......................................... 221 235 889 815
Selling, general and administrative............................. 622 667 1,862 2,008
Expenses realized from station barter arrangements.............. 60 52 146 262
Amortization of program contract costs and net
realizable value adjustments................................ 324 387 1,036 1,241
Depreciation and amortization of property and equipment......... 92 96 262 282
Amortization of acquired intangible broadcasting assets
and other assets............................................ 464 418 1,141 1,840
------- --------- --------- ---------
Total operating expenses................................. 1,783 1,855 5,336 6,448
------- --------- --------- ---------
Broadcast operating income (loss)........................ 64 58 572 (190)
------- --------- --------- ----------
OTHER INCOME (EXPENSE):
Dividend and interest income.................................... 6,513 6,603 14,390 19,819
Subsidiary trust minority interest expense...................... (5,813) (5,813) (12,852) (17,438)
-------- ---------- ---------- ----------
Income before allocation of consolidated federal income
taxes and state income taxes........................................ 764 848 2,110 2,191
ALLOCATION OF CONSOLIDATED FEDERAL INCOME TAXES..................... 258 284 667 745
STATE INCOME TAXES.................................................. 91 67 253 173
-------- --------- --------- ---------
NET INCOME.......................................................... $ 415 $ 497 $ 1,190 $ 1,273
======== ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
unaudited consolidated statements.
5
<PAGE>
KDSM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED STOCKHOLDER'S
STOCK CAPITAL EARNINGS EQUITY
----- ------- -------- ------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1997 ............. $ - $ 51,149 $ 2,600 $53,749
Net income.......................... - - 1,273 1,273
------- -------- --------- -------
BALANCE, September 30, 1998............. $ - $ 51,149 $ 3,873 $55,022
======= ======== ======== ======
</TABLE>
The accompanying notes are an integral part of this
unaudited consolidated statement.
6
<PAGE>
KDSM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1997 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................ $ 1,190 $ 1,273
Adjustments to reconcile net income to net cash flows from
operating activities -
Depreciation and amortization of property and equipment....... 262 282
Amortization of acquired intangible broadcasting assets and
other assets.............................................. 1,141 1,840
Amortization of program contract costs and net realizable
value adjustments.......................................... 1,036 1,241
Changes in assets and liabilities, net of effects of acquisitions
and dispositions-
Decrease in accounts receivable, net.......................... 607 551
Increase in dividend receivable from parent................... (1,157) -
(Increase) decrease in prepaid expenses and other current
assets................................................... 60 (1)
Decrease in accounts payable and accrued liabilities ......... (377) (139)
Increase in state deferred taxes ............................. 253 173
Net effect of change in deferred barter revenues
and deferred barter costs.................................. 15 (12)
Increase in subsidiary trust minority interest expense payable 1,033 -
Payments on program contracts payable............................. (1,036) (1,142)
---------- ------------
Net cash flows from operating activities............................ 3,027 4,066
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in Parent Preferred Securities .......................... (206,200) -
Payment for exercise of purchase option............................. (1,576) -
Acquisition of property and equipment............................... (180) (180)
----------- ------------
Net cash flows used in investing activities......................... (207,956) (180)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributions of capital............................................ 13,776 -
Net change in due from parent..................................... (1,696) (3,883)
Net proceeds from subsidiary trust securities offering ............ 192,849 -
----------- -----------
Net cash flows from/(used in) financing activities.............. 204,929 (3,883)
----------- -----------
NET INCREASE IN CASH .................................................... - 3
CASH, beginning of period............................................... 3 11
----------- -----------
CASH, end of period..................................................... $ 3 $ 14
=========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Parent preferred stock dividend payments............................ $ 13,233 $19,525
=========== ==========
Subsidiary trust minority interest payments......................... $ 11,819 $17,438
=========== ==========
</TABLE>
The accompanying notes are an integral part of these
unaudited consolidated statements.
7
<PAGE>
KDSM, 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 KDSM,
Inc., Sinclair Capital (a subsidiary trust), and KDSM Licensee Inc., which are
collectively referred to hereafter as "the Company or KDSM." KDSM, Inc. is a
television broadcaster serving the Des Moines, Iowa area through station KDSM on
Channel 17, a Fox affiliate. KDSM, Inc. is a wholly owned subsidiary of Sinclair
Broadcast Group, Inc. (the "Parent" or "Sinclair"). In addition, KDSM, Inc. owns
all of the issued and outstanding common stock of KDSM Licensee, Inc. and all of
the common trust interests of Sinclair Capital. All intercompany amounts are
eliminated in consolidation.
INTERIM FINANCIAL STATEMENTS
The consolidated financial statements for the nine months ended September 30,
1998 are unaudited, but in the opinion of management, such financial statements
have been presented on the same basis as the audited consolidated financial
statements as of December 31, 1997 and for the year then ended 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 December 31, 1997
consolidated balance sheet and related statements of operations and cash flows
for the year ended December 31, 1997 and the related notes thereto. The results
of operations presented in the accompanying financial statements are not
necessarily representative of operations for an entire year.
PROGRAMMING
The Company has 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
at an amount equal to its gross contractual commitment 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.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior period financial
statements to conform with the current period presentation.
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.
8
<PAGE>
3. COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED
SECURITIES OF TRUST:
In March 1997, the Company completed an offering 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, are mandatorily redeemable at
maturity, and provide for quarterly distributions to be paid in arrears that
began June 15, 1997. The Company utilized the proceeds of the offering combined
with other capital contributions to acquire $206.2 million of 12 5/8% Series C
Preferred Stock (the "Parent Preferred Securities") of Sinclair.
4. PARENT PREFERRED SECURITIES:
In March 1997, the Company utilized the proceeds of the HYTOPS combined with
other capital contributions to acquire $206.2 million of 12 5/8% Parent
Preferred Securities, issued by Sinclair. The Parent Preferred Securities were
issued March 12, 1997, mature March 15, 2009, are mandatorily redeemable at
maturity, and provide for quarterly distributions to be paid in arrears that
began June 15, 1997.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
unaudited financial statements of KDSM, Inc. and related notes included
elsewhere in this Quarterly report and the audited financial statements and
Management's Discussion and Analysis contained in the Company's Form 10-K/A, for
the fiscal year ended December 31, 1997.
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, 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 May 2, 1997.
The following table sets forth certain operating data for the three months and
nine months ended September 30, 1997 and 1998:
OPERATING DATA (dollars in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------- -------------------
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net broadcast revenues (a)................................... $ 1,765 $ 1,820 $ 5,684 $ 5,891
Barter revenues............................................... 82 93 224 367
------- --------- --------- --------
Total revenues................................................ 1,847 1,913 5,908 6,258
------- --------- --------- --------
Operating Costs (b)........................................... 843 902 2,751 2,823
Expenses from barter arrangements............................. 60 52 146 262
Depreciation and amortization (c)............................. 880 901 2,439 3,363
------- --------- --------- --------
Broadcast operating income (loss)............................. 64 58 572 (190)
Dividend and interest income (d).............................. 6,513 6,603 14,390 19,819
Subsidiary trust minority interest expense (e)................ (5,813) (5,813) (12,852) (17,438)
-------- ---------- ---------- ---------
Net income before income taxes................................ 764 848 2,110 2,191
Income taxes.................................................. (349) (351) (920) (918)
-------- ---------- ---------- ---------
Net income................................................... $ 415 $ 497 $ 1,190 $ 1,273
======== ========= ========= ========
OTHER DATA:
Broadcast cash flow (BCF) (f)............................ $ 860 $ 879 $ 2,253 $ 2,318
BCF margin (g) 48.7% 48.3% 39.6% 39.3%
Adjusted EBITDA (h)...................................... $ 734 $ 730 $ 1,975 $ 2,049
Adjusted EBITDA margin (g)................................ 41.6% 40.1% 34.7% 34.8%
Program contract payments................................ $ 210 $ 234 $ 1,036 $ 1,142
Corporate management fees................................. 126 149 278 269
Capital expenditures...................................... 16 91 180 180
Cash flows from operating activities...................... 1,909 1,070 3,027 4,066
Cash flows from investing activities...................... (16) (91) (207,956) (180)
Cash flows from financing activities...................... (1,896) (969) 204,929 (3,883)
</TABLE>
- -----------------
a) "Net broadcast revenue" is defined as broadcast revenue net of agency
commissions.
b) "Operating costs" include program and production expenses, selling, general
and administrative expenses and stock-based compensation.
c) Depreciation and amortization includes amortization of program contract
costs and net realizable value adjustments, depreciation and amortization
of property and equipment, and amortization of acquired intangible
broadcasting assets and other assets including amortization of deferred
financing costs and costs related to excess syndicated programming.
d) Dividend and interest income primarily results from dividends on the Parent
Preferred Securities.
10
<PAGE>
e) Subsidiary trust minority interest expense represents distributions on the
HYTOPS.
f) "Broadcast cash flow" is defined as broadcast operating income plus
corporate management fees, depreciation and amortization (including film
amortization), stock-based 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
are 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. Management believes the presentation of broadcast cash flow
(BCF) is relevant and useful because 1) BCF is a measurement utilized by
lenders to measure the Company's ability to service its debt, 2) BCF is a
measurement utilized by industry analysts to determine a private market
value of the Company's television and radio stations and 3) BCF is a
measurement industry analysts utilize when determining the operating
performance of the Company. The Company's measurement of BCF may not be
comparable to similarly titled measures reported by other companies within
the broadcast industry.
g) "Broadcast cash flow margin" is defined as broadcast cash flow divided by
net broadcast revenues. "Adjusted EBITDA margin" is defined as Adjusted
EBITDA divided by net broadcast revenues.
h) "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. Management believes the
presentation of Adjusted EBITDA is relevant and useful because 1) Adjusted
EBITDA is a measurement utilized by lenders to measure the Company's
ability to service its debt, 2) Adjusted EBITDA is a measurement utilized
by industry analysts to determine a private market value of the Company's
television and radio stations and 3) Adjusted EBITDA is a measurement
industry analysts utilize when determining the operating performance of the
Company. The Company's measurement of Adjusted EBITDA may not be comparable
to similarly titled measures reported by other companies within the
broadcast industry.
Net broadcast revenues for the three months ended September 30, 1998 remained
consistent compared to the three months ended September 30, 1997. Net broadcast
revenues increased to $5.9 million for the nine months ended September 30, 1998
from $5.7 million for the nine months ended September 30, 1997, or 3.5%. The
increase in net broadcast revenues for the nine months ended September 30, 1998
compared to the nine months ended September 30, 1997 was primarily due to an
increase in local revenues of approximately $284,000, or 7.8% offset by a
decrease in national revenues of approximately $158,000, or 8.7%.
Operating costs increased to $902,000 for the three months ended September 30,
1998 from $843,000 for the three months ended September 30, 1997, or 7.0%.
Operating costs for the nine months ended September 30, 1998 remained consistent
compared to the nine months ended September 30, 1997. The increase in operating
costs for the three months ended September 30, 1998 as compared to the three
months ended September 30, 1997 was primarily due to incremental expenses
associated with an increase in local revenues and an increase in corporate
management fees of approximately $23,000, or 18.3%.
Broadcast operating income for the three months ended September 30, 1998
remained consistent compared to the three months ended September 30, 1997.
Broadcast operating loss for the nine months ended September 30, 1998 increased
to $190,000 from broadcast operating income of $572,000 for the nine months
ended September 30, 1997. The increase in broadcast operating loss for the nine
months ended September 30, 1998 compared to the nine months ended September 30,
1997 was primarily attributable to an increase in amortization of intangible
assets related to the HYTOPS issuance completed March 12, 1997, an increase in
the amortization of program contract costs from the addition of syndicated
programs and the writeoff of certain intangible assets.
Dividend and interest income for the three months ended September 30, 1998
remained consistent compared to the three months ended September 30, 1997.
Dividend and interest income increased to $19.8 million for the nine months
ended September 30, 1998 from $14.4 million for the nine months ended September
30, 1997, or 37.5%. The increase in dividend and interest income for the nine
months ended September 30, 1998 as compared to the nine months ended September
30, 1997 was primarily attributable to the Parent Preferred Securities being
outstanding for a partial period during 1997.
Subsidiary trust minority interest expense for the three months ended September
30, 1998 remained consistent compared to the three months ended September 30,
1997. Subsidiary trust minority interest expense increased to
11
<PAGE>
$17.4 million for the nine months ended September 30, 1998 from $12.9 million
for the nine months ended September 30, 1997, or 34.9%. The increase in
subsidiary trust minority interest expense for the nine months ended September
30, 1998 as compared to the nine months ended September 30, 1997 was
attributable to the HYTOPS being outstanding for a partial period during 1997.
The income tax provision for the three and nine months ended September 30, 1998
remained consistent compared to the three and nine months ended September 30,
1997. The Company's effective tax rate for the nine months ended September 30,
1998 and September 30, 1997 was 41.9% and 43.6%, respectively.
Deferred state taxes increased to $507,000 as of September 30, 1998 from
$334,000 as of December 31, 1997. The increase in the Company's deferred tax
liability as of September 30, 1998 as compared to December 31, 1997 is due to a
net increase in temporary differences generated during the current period.
Federal income taxes are allocated to the Company by Sinclair at the statutory
rate, are considered payable currently and are reflected as an adjustment to Due
to Parent in the Company's accompanying balance sheets.
Net income increased to $497,000 for the three months ended September 30, 1998
from $415,000 for the three months ended September 30, 1997. Net income
increased to $1.3 million for the nine months ended September 30, 1998 from $1.2
million for the nine months ended September 30, 1997. Net income increased for
the three and nine months ended September 30, 1998 as compared to the three and
nine months ended September 30, 1997 due to an increase in dividend and interest
income offset by a decrease in broadcast operating income and an increase in
subsidiary trust minority interest expense.
Broadcast cash flow for the three and nine months ended September 30, 1998
remained consistent compared to the three and nine months ended September 30,
1997.
Adjusted EBITDA for the three and nine months ended September 30, 1998 remained
consistent compared to the three and nine months ended September 30, 1997.
The Company's broadcast cash flow margin decreased to 48.3% for the three months
ended September 30, 1998 from 48.7% for the three months ended September 30,
1997. The Company's broadcast cash flow margin decreased to 39.3% for the nine
months ended September 30, 1998 from 39.6% for the nine months ended September
30, 1997. The decrease in broadcast cash flow margin for the three months and
nine months ended September 30, 1998 as compared to the three and nine months
ended September 30, 1997 resulted primarily from increases in program contract
payments as a percentage of net broadcast revenues.
The Company's adjusted EBITDA margin decreased to 40.1% for the three months
ended September 30, 1998 from 41.6% for the three months ended September 30,
1997. The decrease in adjusted EBITDA margin for the three months ended
September 30, 1998 as compared to the three months ended September 30, 1997
resulted primarily from the addition of syndicated program contracts and an
increase in the corporate management fees in the current period. The Company's
adjusted EBITDA margin for the nine months ended September 30, 1998 remained
consistent compared to the nine months ended September 30, 1997.
12
<PAGE>
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
27 Financial Data Schedule
(B) REPORTS ON FORM 8-K
NONE.
13
<PAGE>
SIGNATURE
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 16th day of November, 1998.
KDSM, INC.
by: /s/ David B. Amy
----------------------------------------
David B. Amy
Chief Financial Officer
Principal Accounting Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US Dollar
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 14
<SECURITIES> 0
<RECEIVABLES> 1,619
<ALLOWANCES> 20
<INVENTORY> 0
<CURRENT-ASSETS> 4,012
<PP&E> 3,933
<DEPRECIATION> 827
<TOTAL-ASSETS> 259,865
<CURRENT-LIABILITIES> 3,076
<BONDS> 0
200,000
0
<COMMON> 0
<OTHER-SE> 55,022
<TOTAL-LIABILITY-AND-EQUITY> 259,865
<SALES> 0
<TOTAL-REVENUES> 6,258
<CGS> 0
<TOTAL-COSTS> 6,448
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,191
<INCOME-TAX> 918
<INCOME-CONTINUING> 1,273
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,273
<EPS-PRIMARY> 12,730<a>
<EPS-DILUTED> 12,730<a>
<FN>
a) This information has been prepared in accordance with SFAS No.128, Earnings
Per Share. The basic and diluted EPS calculations have been entered in place
of primary and diluted, respectively.
</FN>
</TABLE>
