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.
<PAGE>
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
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
ASSETS 1996 1997
--------------- ----------------
<S> <C> <C>
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
============= ==============
</TABLE>
The accompanying notes are an integral part of these unaudited
consolidated statements.
3
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1996 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
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
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these unaudited
consolidated statements.
4
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
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
--------------- -------------- ------------ ----------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
=============== ============== ============ =========== ============== ===============
</TABLE>
<TABLE>
<CAPTION>
ADDITIONAL
PAID-IN TOTAL
CAPITAL - ACCUMULATED STOCKHOLDERS'
DEFERRED DEFICIT EQUITY
COMPENSATION
--------------- -------------- -----------------
<S> <C> <C> <C> <C> <C>
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
=============== ============== =================
</TABLE>
The accompanying notes are an integral part of these unaudited
consolidated statements
<PAGE>
SINCLAIR BROADCAST GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
CASH FLOWS FROM OPERATING ACTIVITIES: 1996 1997
--------------- ------------
<S> <C> <C>
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
========= =========
</TABLE>
The accompanying notes are an integral part of these unaudited
consolidated statements.
6
<PAGE>
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
<PAGE>
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.
<TABLE>
<CAPTION>
TELEVISION TELEVISION
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
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
=========== =========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
RADIO RADIO
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
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
============ ========== ========== ===========
</TABLE>
8
<PAGE>
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:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1996 1997
---- ----
<S> <C> <C>
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
============ ===========
</TABLE>
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:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
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)
============= ============ =========== ============
</TABLE>
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
<PAGE>
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
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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.
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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
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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.
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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):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1996 1997 1996 1997
<S> <C> <C> <C> <C>
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
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
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.
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<PAGE>
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.
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<PAGE>
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.
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<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
18
Annex 1
<TABLE>
<CAPTION>
New Revolving New Tranche A
Lender Credit Commitments Term Loans
- ------ ------------------ -------------
<S> <C> <C>
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
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US DOLLAR
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 10,336
<SECURITIES> 0
<RECEIVABLES> 96,492
<ALLOWANCES> 2,772
<INVENTORY> 0
<CURRENT-ASSETS> 176,811
<PP&E> 161,301
<DEPRECIATION> 12,786
<TOTAL-ASSETS> 1,880,776
<CURRENT-LIABILITIES> 143,708
<BONDS> 600,000
200,000
46
<COMMON> 392
<OTHER-SE> 232,279
<TOTAL-LIABILITY-AND-EQUITY> 1,880,776
<SALES> 0
<TOTAL-REVENUES> 364,317
<CGS> 0
<TOTAL-COSTS> 285,614
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 77,342
<INCOME-PRETAX> (10,091)
<INCOME-TAX> 4,170
<INCOME-CONTINUING> (5,921)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,921)
<EPS-PRIMARY> (0.17)
<EPS-DILUTED> 0
</TABLE>
