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 March 31, 1999
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 : 333-26427-01
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)
<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 May 12, 1999, 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 115/8% High Yield Trust Offered Preferred
Securities of Sinclair Capital, a subsidiary trust of KDSM, Inc., issued and
outstanding.
2
<PAGE>
KDSM, INC. AND SUBSIDIARIES
Form 10-Q
For the Quarter Ended March 31, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 1998 and
March 31, 1999........................................................................... 4
Consolidated Statements of Operations for the Three Months
Ended March 31, 1998 and 1999............................................................ 5
Consolidated Statement of Stockholder's Equity for the Three Months
March 31, 1999........................................................................... 6
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1998 and 1999............................................................ 7
Notes to Unaudited Consolidated Financial Statements............................................ 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................................... 9
Item 3. Quantitative and Qualitative Disclosure About Market Risk................................ 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K......................................................... 12
Signature....................................................................................... 13
</TABLE>
3
<PAGE>
KDSM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1998 1999
--------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash............................................................................ $ 7 $ 2
Accounts receivable, net of allowance for doubtful accounts..................... 2,107 1,844
Dividends receivable from parent................................................ 1,085 1,085
Current portion of program contract costs....................................... 910 608
Prepaid expenses and other current assets....................................... 25 13
Deferred barter costs .......................................................... 28 26
-------------- --------------
Total current assets..................................................... 4,162 3,578
PROPERTY AND EQUIPMENT, net......................................................... 3,062 2,981
PROGRAM CONTRACT COSTS, less current portion........................................ 534 427
INVESTMENT IN PARENT PREFERRED SECURITIES........................................... 206,200 206,200
DUE FROM PARENT .................................................................... 6,652 7,820
OTHER ASSETS 6,532 6,371
ACQUIRED INTANGIBLE BROADCASTING ASSETS, net........................................ 32,377 32,119
-------------- --------------
Total Assets ............................................................ $ 259,519 $ 259,496
============== ==============
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable................................................................ $ 17 $ 27
Accrued liabilities............................................................. 386 356
Current portion of program contracts payable.................................... 1,920 1,389
Deferred barter revenues........................................................ 102 86
Subsidiary trust minority interest expense payable.............................. 969 969
-------------- --------------
Total current liabilities................................................ 3,394 2,827
PROGRAM CONTRACTS PAYABLE........................................................... 801 835
DEFERRED STATE TAXES 846 960
-------------- --------------
Total liabilities........................................................ 5,041 4,622
-------------- --------------
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................................................................. 3,329 3,725
-------------- --------------
Total stockholder's equity............................................... 54,478 54,874
-------------- --------------
Total Liabilities and Stockholder's Equity............................... $ 259,519 $ 259,496
============== ==============
</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, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1998 1999
---- ----
<S> <C> <C>
REVENUES:
Station broadcast revenues, net of agency commissions............... $ 2,133 $ 2,193
Revenues realized from station barter arrangements.................. 146 121
------------- -------------
Total revenues............................................... 2,279 2,314
------------- -------------
OPERATING EXPENSES:
Program and production.............................................. 293 330
Selling, general and administrative................................. 734 758
Expenses realized from station barter arrangements.................. 100 73
Amortization of program contract costs and net
realizable value adjustments.................................... 551 441
Depreciation and amortization of property and equipment............. 92 99
Amortization of acquired intangible broadcasting assets
and other assets................................................ 443 418
------------- -------------
Total operating expenses..................................... 2,213 2,119
------------- -------------
Broadcast operating income................................... 66 195
------------- -------------
OTHER INCOME (EXPENSE):
Dividend and interest income........................................ 6,611 6,618
Subsidiary trust minority interest expense.......................... (5,812) (5,812)
-------------- --------------
Income before allocation of consolidated federal income taxes
and state income taxes....................................... 865 1,001
ALLOCATION OF CONSOLIDATED FEDERAL INCOME TAXES......................... 297 491
STATE INCOME TAXES...................................................... 68 114
------------- -------------
NET INCOME ............................................................. $ 500 $ 396
============= =============
</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 THREE MONTHS ENDED MARCH 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED STOCKHOLDER'S
STOCK CAPITAL EARNINGS EQUITY
---------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1998 ............. $ - $ 51,149 $ 3,329 $ 54,478
Net income.......................... - - 396 396
---------- ------------ ------------- -------------
BALANCE, March 31, 1999................. $ - $ 51,149 $ 3,725 $ 54,874
========== ============ ============ ============
</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>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1998 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................ $ 500 $ 396
Adjustments to reconcile net income to net cash flows from
operating r activities -
Depreciation and amortization of property and equipment....... 92 99
Amortization of acquired intangible broadcasting assets and
other assets................................................ 443 418
Amortization of program contract costs and net realizable
value adjustments.......................................... 551 441
Changes in assets and liabilities, net of effects of acquisitions
and dispositions-
Decrease in accounts receivable, net.......................... 490 263
Decrease in prepaid expenses and other current assets......... 16 12
Decrease in accounts payable and
accrued liabilities......................................... (13) (20)
Increase in state deferred taxes.............................. 68 114
Net effect of change in deferred barter revenues
and deferred barter costs................................... (11) (14)
Payments on program contracts payable............................. (516) (529)
------------- -------------
Net cash flows from operating activities.......................... 1,620 1,180
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment............................. (66) (17)
------------- -------------
Net cash flows used in investing activities....................... (66) (17)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in due from parent..................................... (1,398) (1,168)
------------- -------------
Net cash flows used in financing activities................... (1,398) (1,168)
------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 156 (5)
CASH AND CASH EQUIVALENTS, beginning of period........................ 11 7
------------ ------------
CASH AND CASH EQUIVALENTS, end of period.............................. $ 167 $ 2
============ ============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Parent preferred stock dividends.................................. $ 6,508 $ 6,508
============ ============
Subsidiary trust minority interest payments....................... $ 5,812 $ 5,812
============ ============
</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 three months ended March 31, 1999
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 31,1998 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, 1998
consolidated balance sheet and related statements of operations and cash flows
for the year ended December 31, 1998 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.
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.
3. COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF TRUST:
In March 1997, the Company completed an offering of $200 million aggregate
liquidation value of 115/8% 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
beginning June 15, 1997. The Company utilized the proceeds of the offering
combined with other capital contributions to acquire $206.2 million of 125/8%
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 125/8% 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 beginning June 15,
1997.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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, for
the fiscal year ended December 31, 1998.
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 three months ended
March 31, 1998 and 1999:
<TABLE>
<CAPTION>
OPERATING DATA (dollars in thousands):
- --------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED
MARCH 31,
1998 1999
---- ----
<S> <C> <C>
Net broadcast revenues (a) $ 2,133 $ 2,193
Barter revenues 146 121
------- -------
Total revenues 2,279 2,314
------- -------
Operating Costs (b) 1,027 1,088
Expenses from barter arrangements 100 73
Depreciation and amortization 1,086 958
------- -------
Broadcast operating income 66 195
Dividend and interest income (d) 6,611 6,618
Subsidiary trust minority interest expense (e) (5,812) (5,812)
------- -------
Net income before income taxes 865 1,001
Income taxes 365 605
------- -------
Net income $ 500 $ 396
======= =======
OTHER DATA:
Broadcast cash flow (BCF) (f) $ 717 $ 692
BCF margin (g) 33.6% 31.6%
Adjusted EBITDA (h) $ 644 $ 629
Adjusted EBITDA margin (g) 30.2% 28.7%
Program contract payments $ 516 $ 529
Corporate management fees $ 73 $ 63
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
a) "Net broadcast revenue" is defined as broadcast revenue net of agency
commissions.
b) "Operating costs" include programming 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.
d) Dividend and interest income primarily results from dividends on the Parent
Preferred Securities.
e) Subsidiary trust minority interest expense represents distributions on the
HYTOPS.
f) "Broadcast cash flow" is defined as broadcast operating income plus
corporate overhead expense, depreciation and amortization (including film
amortization and excess syndicated programming), less cash payments for
program rights. Cash program payments represent cash payments made
9
<PAGE>
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.
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.
Net broadcast revenues increased to $2.2 million for the three months ended
March 31, 1999 from $2.1 million for the three months ended March 31, 1998, or
2.8%. When comparing the three months ended March 31, 1999 to the three months
ended March 31, 1998, revenues from local advertisers increased $63,000 or 4.6%,
revenues from national advertisers increased $15,000 or 2.6% and other revenues
decreased $18,000 or 9.9%. The increase in revenues from local and national
advertisers primarily resulted from an increase in overall advertiser spending
in the Des Moines market, partially offset by a slight decrease in market share.
The increase in revenues was partially offset by a decrease in other revenues.
This decrease in other revenue primarily resulted from a decrease in network
compensation.
Operating costs increased to $1.1 million for the three months ended March 31,
1999 from $1.0 million for the three months ended March 31, 1998, or 5.9%. The
increase in operating costs for the three months ended March 31, 1999 as
compared to the three months ended March 31, 1998 was primarily related to an
increase in sales commissions as a result of an increase in broadcast revenues
and an increase in promotion and programming costs.
Broadcast operating income increased to $195,000 for the three months ended
March 31, 1999 from $66,000 for the three months ended March 31, 1998, or
195.5%. The increase in broadcast operating income for the three months ended
March 31, 1999 as compared to the three months ended March 31, 1998 was
primarily attributable to the decrease in amortization of program contracts.
Amortization of program contracts decreased to $441,000 for the three months
ended March 3, 1999 from $551,000 for the three months ended March 31, 1998
primarily as a result of a decrease in program additions to $1.2 million for the
year ended December 31, 1998 from $1.9 million for the year ended December 31,
1997. The majority of these program contracts were added at the end of the third
quarter of 1998 and are amortized on an accelerated basis.
The income tax provision increased to $605,000 for the three months ended March
31, 1999 from $365,000 for the three months ended March 31, 1998. The increase
for the three months ended March 31, 1999 as compared to the three months ended
March 31, 1998 is attributable to deferred tax liabilities associated with the
HYTOPS. The Company's effective tax rate for the three months ended March 31,
1999 and March 31, 1998 was 60.5% and 42.3%, respectively. The increase in the
Company's effective tax rate primarily resulted from the deferred tax liability
associated with the HYTOPS.
Net deferred state tax liability increased to $960,000 as of March 31, 1999 from
$846,000 as of December 31, 1998. The increase in the Company's deferred tax
liability as of March 31, 1999 as compared to December 31, 1998 is primarily due
to pre-tax income for the three months ended March 31, 1999. 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 balance sheet.
Net Income decreased to $396,000 for the three months ended March 31, 1999 from
$500,000 for the three months ended March 31, 1998. The decrease for the three
months ended March 31, 1999 as compared to the three months ended March 31, 1998
primarily resulted from the increase in the income tax provision offset by a
slight decrease in operating expenses and a slight increase in total revenues.
10
<PAGE>
Broadcast cash flow decreased to $692,000 for the three months ended March 31,
1999 from $717,000 for the three months ended March 31, 1998, or 3.5%. The
decrease in broadcast cash flow for the three months ended March 31, 1999 as
compared to the three months ended March 31, 1998 primarily resulted from an
increase in operating expenses offset by increase in net broadcast revenues as
noted above.
The Company's broadcast cash flow margin decreased to 31.6% for the three months
ended March 31, 1999 from 33.6% for the three months ended March 31, 1998. The
decrease in broadcast cash flow margin for the three months ended March 31, 1999
as compared to the three months ended March 31, 1998 resulted primarily from an
increase in operating costs partially offset by an increase in net broadcast
revenues as noted above.
Adjusted EBITDA decreased to $629,000 for the three months ended March 31, 1999
from $644,000 for the three months ended March 31, 1998, or 2.3%. The decrease
in adjusted EBITDA for the three months ended March 31, 1999 as compared to the
three months ended March 31, 1998 resulted from the circumstances affecting the
broadcast cash flow as noted above. The Company's adjusted EBITDA margin
decreased to 28.7% for the three months ended March 31, 1999 from 30.2% for the
three months ended March 31, 1998. The decrease in adjusted EBITDA margin for
the three months ended March 31, 1999 as compared to the three months ended
March 31, 1998 resulted primarily from the circumstances affecting broadcast
cash flow margins as noted above.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1999, the Company had cash balances of approximately $2,000 and
working capital of approximately $751,000. The Company's primary source of
liquidity is cash from operations which management believes to be sufficient to
meet operating cash requirements. Cash requirements or excess cash from
operations are funded by or deposited into Sinclair's centralized banking system
utilized by all of its wholly owned subsidiaries.
The Company does not anticipate capital expenditures in the coming year to
exceed historical capital expenditures, which were approximately $235,000 in
1998. If the Company is required to make capital expenditures to keep up with
emerging technologies, management believes it will be able to fund such
expenditures from its cash flow and from the proceeds of indebtedness or
financing that is allowed to be incurred or obtained under the Company's Senior
Debenture Indenture (provided that the Company's debt to Adjusted EBITDA ratio
is 4 to 1 or less) or from capital contributions from Sinclair to the extent
permitted under Sinclair's debt instruments. Under these instruments, Sinclair
would currently be able to make capital contributions to the Company in an
amount the Company believes is sufficient to cover such costs if it chose to do
so.
YEAR 2000 COMPLIANCE
The Company has commenced a process to assure Year 2000 compliance of all
hardware, software, broadcast equipment and ancillary equipment that are date
dependent. The process involves four phases:
Phase I - Inventory and Data Collection. This phase involves an identification
of all items that are date dependent. The Company commenced this phase in the
third quarter of 1998, and Management estimates it has completed approximately
75% of this phase as of the date hereof. The Company expects to complete this
phase by the end of the second quarter of 1999.
Phase II - Compliance Requests. This phase involves requests to information
technology systems vendors for verification that the systems identified in Phase
I are Year 2000 compliant. The Company will identify and begin to replace items
that cannot be updated or certified as compliant. Sinclair has completed the
compliance request phase of its plan as of the date hereof. In addition, the
Company has verified that its accounting, traffic, payroll, and local and wide
area network hardware and software systems are compliant. In addition, the
Company is currently in the process of ascertaining that all of its personal
computers and PC applications are compliant. The Company is currently reviewing
its news-room systems, building control systems, security systems and other
miscellaneous systems. The Company expects to complete this phase by the end of
the second quarter of 1999.
Phase III - Test, Fix and Verify. This phase involves testing all items that are
date dependent and upgrading all non-compliant devices. The Company expects to
complete this phase during the first, second and third quarters of 1999.
11
<PAGE>
Phase IV - Final Testing, New Item Compliance. This phase involves review of all
inventories for compliance and retesting as necessary. During this phase, all
new equipment will be tested for compliance. The Company expects to complete
this phase by the end of the third quarter of 1999.
The Company has developed a contingency/emergency plan to address Year 2000
worst case scenarios. The contingency plan includes, but is not limited to,
addressing (i) regional power facilities, (ii) interruption of satellite
delivered programming, (iii) replacement or repair of equipment not discovered
or fixed during the year 2000 compliance process and (iv) local security
measures that may become necessary relating to the Company's properties. The
contingency plan involves obtaining alternative sources if existing sources of
these goods and services are not available. Although the contingency plan is
designed to reduce the impact of disruptions from these sources, there is no
assurance that the plan will avoid material disruptions in the event one or more
of these events occur.
To date, the Company believes that its major systems are Year 2000 compliant.
This substantial compliance has been achieved without the need to acquire new
hardware, software or systems other than in the ordinary course of replacing
such systems. The Company is not aware of any non-compliance that would be
material to repair or replace or that would have a material effect on the
Company's business if compliance were not achieved. The Company does not believe
that non-compliance in any systems that have not yet been reviewed would result
in material costs or disruption. Neither is the Company aware of any
non-compliance by its customers or suppliers that would have a material impact
on Sinclair's business. Nevertheless, there can be no assurance that
unanticipated non-compliance will not occur, and such non-compliance could
require material costs to repair or could cause material disruptions if not
repaired.
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK
NOT APPLICABLE
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
27 Financial Data Schedule
(B) REPORTS ON FORM 8-K
NONE.
12
<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 13th day of May.
KDSM, INC.
by: /s/ David B. Amy
----------------------------
David B. Amy
Chief Financial Officer
Principal Accounting Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US DOLLAR
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 2
<SECURITIES> 0
<RECEIVABLES> 1,873
<ALLOWANCES> 29
<INVENTORY> 0
<CURRENT-ASSETS> 3,578
<PP&E> 4,004
<DEPRECIATION> 1,023
<TOTAL-ASSETS> 259,475
<CURRENT-LIABILITIES> 2,827
<BONDS> 0
200,000
0
<COMMON> 0
<OTHER-SE> 54,848
<TOTAL-LIABILITY-AND-EQUITY> 259,475
<SALES> 0
<TOTAL-REVENUES> 2,314
<CGS> 0
<TOTAL-COSTS> 2,119
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,001
<INCOME-TAX> 605
<INCOME-CONTINUING> 396
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 396
<EPS-PRIMARY> 3,695<F1>
<EPS-DILUTED> 3,960<F1>
<FN>
F1) 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>
