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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
JULY 1, 1998
-----------------------
(Date of earliest event reported)
SINCLAIR BROADCAST GROUP, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
MARYLAND 33-69482 52-1494660
(State of incorporation) (Commission File Number) (IRS Employer
Identification Number)
</TABLE>
2000 W. 41st Street, Baltimore, Maryland 21211-1420
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (410) 467-5005
--------------
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<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
As previously reported, Sinclair Broadcast Group, Inc. (the "Company")
entered into an agreement on December 2, 1997 to acquire, directly or
indirectly, all of the equity interests of Max Media Properties LLC ("Max
Media"), pursuant to which the Company will acquire, or acquire the right to
program pursuant to LMA's, nine television stations and eight radio stations in
eight markets (the "Max Media Acquisition"). On February 23, 1998 the Company
entered into an agreement to acquire 100% of the stock of Sullivan Broadcast
Holdings, Inc. and Subsidiaries ("Sullivan"), pursuant to which the Company will
acquire or provide programming services to 12 television stations in 10 separate
markets (the "Sullivan Acquisition"). The Company completed the Sullivan
Acquisition on July 1, 1998 and completed the Max Media Acquisition on July
6,1998. The Company is filing with this Current Report on Form 8-K/A certain
financial information.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
The Company has previously filed audited financial statements for
Sullivan and Max Media required by this item on a Current Report on Form 8-K/A
filed April 8, 1998. The following financial statements are filed as exhibits to
this report and are incorporated herein by reference.
SINCLAIR COMMUNICATIONS II, INC. AND SINCLAIR TELEVISION, INC.
(successors to Sullivan Broadcast Holdings, Inc
and Sullivan Broadcasting Company, Inc.) (Exhibit 99.1)
Unaudited Financial Statements
Consolidated Balance Sheet as of June 30, 1998
Consolidated Statements of Operations for the six months ended June 30, 1998
and 1997
Consolidated Statements of Cash Flows for the six months ended June 30, 1998
and 1997
Notes to Consolidated Financial Statements
MAX MEDIA PROPERTIES LLC (EXHIBIT 99.2)
Unaudited Financial Statements
Consolidated Balance Sheet as of June 30, 1998
Consolidated Statements of Operations for the six months ended June 30, 1998
and 1997
Consolidated Statements of Cash Flows for the six months ended June 30, 1998
and 1997
Notes to Consolidated Financial Statements
1
<PAGE>
(B) PRO FORMA CONSOLIDATED FINANCIAL INFORMATION OF SINCLAIR
Pro Forma financial statements of the Company as of and for the year
ended December 31, 1997 were filed on a Current Report on Form 8-K/A filed April
8, 1998. Pro Forma financial statements of the Company as of and for the six
months ended June 30, 1998 are filed as exhibit 99.3 to this report and are
incorporated herein by reference.
(C) EXHIBITS
Exhibit No. Description
- ----------- -----------
99.1 Financial Statements of Sinclair Communications II, Inc. and
Sinclair Television, Inc. for the six months ended June 30, 1998
and 1997 (unaudited)
99.2 Financial Statements of Max Media Properties LLC for the six
months ended June 30, 1998 and 1997 (unaudited)
99.3 Pro Forma financial statements of Sinclair Broadcast Group, Inc.
as of and for the six months ended June 30, 1998
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SINCLAIR BROADCAST GROUP, INC.
By: /s/ David B. Amy
--------------------------
Name: David B. Amy
TItle: Chief Financial Officer
Dated: September 14, 1998
EXHIBIT 99.1
SINCLAIR COMMUNICATIONS II, INC. AND ITS WHOLLY-OWNED SUBSIDIARY
SINCLAIR TELEVISION COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
December 31, 1997 June 30, 1998
----------------------------- -------------------------------
Sinclair Sinclair Sinclair Sinclair
Television Communications Television Communications
Company, Inc. II, Inc. Company, Inc. II, Inc.
------------ -------------- ------------- --------------
(Unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,837 $ 3,840 $ 3,294 $ 3,345
Accounts receivable, net 34,990 34,990 31,494 31,494
Current portion of
programming rights 22,850 22,850 16,197 16,197
Current deferred tax asset 3,588 4,310 3,589 4,309
Prepaid expenses and other
current assets 941 941 2,014 2,082
----------- ----------- ---------- -----------
Total current assets 66,206 66,931 56,588 57,427
Property and equipment, net 39,723 39,723 45,595 45,595
Programming rights, net of
current portion 23,432 23,432 17,465 17,465
Deferred loan costs, net of
accumulated amortization of
$1,655, $2,120 $2,134
and $2,676 11,430 13,134 10,951 12,578
Intangible assets, net 567,209 567,096 570,077 569,964
----------- ----------- ---------- --------
Total assets $ 708,000 $ 710,316 $ 700,676 $ 703,029
=========== =========== ========== ===========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
1
<PAGE>
SINCLAIR COMMUNICATIONS II, INC. AND ITS WHOLLY-OWNED SUBSIDIARY
SINCLAIR TELEVISION COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONT.)
(dollars in thousands)
<TABLE>
<CAPTION>
December 31, 1997 June 30, 1998
----------------------------- -------------------------------
Sinclair Sinclair Sinclair Sinclair
Television Communications Television Communications
Company, Inc. II, Inc. Company, Inc. II, Inc.
------------ -------------- ------------- --------------
(Unaudited)
<S> <C> <C> <C> <C>
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of program-
ming contracts payable $ 24,944 $ 24,944 $ 20,020 $ 20,020
Current portion of senior
debt 23,562 23,562 26,333 26,333
Current income taxes
payable 194 195 -- --
Current interest payable 3,882 3,882 563 563
Due to related parties 6,036 -- 80,377 75,000
Accounts payable 2,262 2,262 1,230 1,230
Accrued expenses 4,297 4,367 3,058 3,164
----------- ---------- ----------- ----------
Total current liabilities 65,177 59,212 131,581 126,310
Senior debt, net of current
portion 171,820 171,820 88,566 88,566
Borrowings under revolving
line of credit 59,500 59,500 85,500 85,500
Subordinated debt 125,185 155,508 125,185 155,649
Interest payable -- 10,394 -- 13,385
Programming contracts
payable, net of current
portion 22,710 22,710 15,181 15,181
Deferred taxes and other liabilities 87,676 82,132 85,560 79,171
----------- ---------- ----------- ----------
Total liabilities 532,068 561,276 531,573 563,762
15% Cumulative redeemable
preferred stock, non-voting,
$.001 par value - authorized
1,500,000 shares; 1,150,000
shares issued and outstanding -- 133,185 -- 145,708
----------- -------- ----------- ----------
Commitments and
contingencies
Shareholders' equity (deficit):
Common stock, $.01 par
value; 800,000 shares
authorized; 520,105
shares issued and
outstanding 5 -- 5 --
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
December 31, 1997 June 30, 1998
----------------------------- -------------------------------
Sinclair Sinclair Sinclair Sinclair
Television Communications Television Communications
Company, Inc. II, Inc. Company, Inc. II, Inc.
------------ -------------- ------------- --------------
(Unaudited)
<S> <C> <C> <C> <C>
Class B-1 common stock,
$.001 par value; 5,000,000
shares authorized; 1,201,577
shares issued and outstanding -- 1 -- 1
Class B-2 common stock,
$.001 par value; 7,000,000
shares authorized; 6,158,211
shares issued and outstanding -- 6 -- 6
Class C common stock, $.001
par value; 2,000,000 shares
authorized; 853,854 and
1,021,872 shares issued and
outstanding at December 31,
1997 and June 30, 1998,
respectively -- 1 -- 1
Additional paid-in capital 206,797 55,117 206,797 48,289
Accumulated deficit (30,870) (39,270) (37,699) (54,738)
------------ ----------- ------------ -----------
Total shareholders'
equity 175,932 15,855 169,103 (6,441)
------------ ----------- ----------- -----------
Total liabilities and
shareholders' equity $ 708,000 $ 710,316 $ 700,676 $ 703,029
============ =========== =========== ===========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
3
<PAGE>
SINCLAIR COMMUNICATIONS II, INC. AND ITS WHOLLY-OWNED SUBSIDIARY
SINCLAIR TELEVISION COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited - dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended June 30
---------------------------------------------------------
1997 1998
------------------------------ ---------------------------
Sinclair Sinclair Sinclair Sinclair
Television Communi- Television Communi-
Company, Inc. cations II, Inc. Company, Inc. cations II,
<S> <C> <C> <C> <C>
Revenues (excluding barter) $ 36,319 $ 36,319 $ 41,294 $ 41,294
Less - commissions (5,863) (5,863) (6,678) (6,678)
-------- -------- -------- --------
Net revenues (excluding
barter) 30,456 30,456 34,616 34,616
Barter revenues 4,480 4,480 4,520 4,520
-------- -------- -------- --------
Total net revenues 34,936 34,936 39,136 39,136
-------- -------- -------- --------
Expenses
Operating expenses 4,323 4,323 5,472 5,472
Selling, general and
administrative 6,826 7,258 7,786 8,808
Amortization of programming
rights 7,607 7,607 7,194 7,194
Depreciation and amortization 11,736 11,736 11,650 11,650
-------- -------- -------- --------
30,492 30,924 32,102 33,124
-------- -------- -------- --------
Operating income 4,444 4,012 7,034 6,012
Interest expense, including
amortization of debt
discount
and deferred loan costs 9,046 10,694 7,513 9,114
Gain on sale of assets -- -- 466 466
Other expense (income) 48 47 (84) (85)
-------- -------- -------- --------
Loss before benefit
for income taxes (4,650) (6,729) 71 (2,551)
Benefit for income taxes 1,123 1,955 (1) (1)
-------- -------- -------- --------
Net loss $ (3,527) $ (4,774) $ 70 $ (2,552)
======== ======== ======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended June 30
--------------------------------------------------------------
1997 1998
----------------------------- -------------------------------
Sinclair Sinclair Sinclair Sinclair
Television Communi- Television Communi-
Company, Inc. cations II,Inc Company, Inc. cations II, Inc.
<S> <C> <C> <C> <C>
Revenues (excluding barter) $ 66,716 $ 66,716 $ 74,378 $ 74,378
Less - commissions (10,989) (10,989) (11,987) (11,987)
-------- -------- -------- --------
Net revenues (excluding
barter) 55,727 55,727 62,391 62,391
Barter revenues 8,642 8,642 9,017 9,017
-------- -------- -------- --------
Total net revenues 64,369 64,369 71,408 71,408
-------- -------- -------- --------
Expenses
Operating expenses 8,991 8,991 10,656 10,656
Selling, general and
administrative 13,221 13,765 15,616 21,698
Amortization of programming
rights 14,615 14,615 15,106 15,106
Depreciation and amortization 23,991 23,991 23,032 23,032
-------- -------- -------- --------
60,818 61,362 64,410 70,492
-------- -------- -------- --------
Operating income 3,551 3,007 6,998 916
Interest expense, including
amortization of debt
discount
and deferred loan costs 17,914 21,169 16,022 19,220
Gain on sale of assets -- -- 466 466
Other expense (income) 9 8 52 52
-------- -------- -------- --------
Loss before benefit
for income taxes (14,372) (18,170) (8,610) (17,890)
Benefit for income taxes 4,276 5,795 1,781 2,422
-------- -------- -------- --------
Net loss $(10,096) $(12,375) $ (6,829) $(15,468)
======== ======== ======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
4
<PAGE>
SINCLAIR COMMUNICATIONS II, INC. AND ITS WHOLLY-OWNED SUBSIDIARY
SINCLAIR TELEVISION COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited - dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------------------
1997 1998
Sinclair Sinclair Sinclair Sinclair
Television Communi- Television Communi-
Company, Inc. cations II, Inc. Company, Inc. cations II, Inc.
------------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C>
Cash Flows from operating activities:
Net Loss $(10,096) $(12,375) $ (6,829) $(15,468)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Compensation of stock issuance -- -- -- 4,878
Deferred income taxes (4,276) (5,795) (2,116) (3,961)
Depreciation of property, plant
And equipment 4,203 4,203 5,638 5,638
Amortization of intangible assets 19,788 19,788 17,394 17,394
Amortization of programming rights 6,669 6,669 6,702 6,702
Payments for programming rights (5,687) (5,687) (6,290) (6,290)
Amortization of debt discount and
Deferred loan costs 431 1,014 479 556
Changes in assets and liabilities:
Decrease in accounts receivable 4,139 4,139 3,496 3,496
Decrease in prepaid expenses
And other assets (414) (452) (1,073) (1,141)
Increase (decrease) is due to related parties (630) -- 74,341 75,000
Decrease in income taxes payable (1,133) (1,133) (194) (195)
Increase (decrease) in interest payable (2,262) 410 (3,319) (328)
Decrease in accounts payable, accrued
expenses and other liabilities (230) (257) (2,271) (1,091)
-------- -------- -------- --------
Net cash provided by operating activities 10,502 10,524 85,958 85,190
Cash Flow from investing activities:
Acquisition of Cascom stock (4,371) (4,371) -- --
Acquisition of KOKH -- -- (15,067) (15,067)
Payment for purchase option -- -- (15,000) (15,000)
Capital expenditures (1,645) (1,645) (1,706) (1,706)
-------- -------- -------- --------
Net cash used for investing activities (6,016) (6,016) (31,773) (31,773)
-------- -------- -------- --------
Cash flows from investing activities:
Payment of principal amounts (12,262) (12,262) (80,483) (80,483)
Proceeds from revolver borrowings 7,000 7,000 26,000 26,000
Proceeds from issuance of common stock -- 12 -- 816
Programming buydowns -- -- (245) (245)
Repurchase of common stock -- (52) -- --
-------- -------- -------- --------
Net cash provided by (used for) financing
activities (5,262) (5,302) (54,728) (53,912)
Net increase (decrease ) in cash
and cash equivalents (776) (794) (543) (495)
Cash and cash equivalents, beginning
of period 6,443 6,469 3,837 3,840
-------- -------- -------- --------
Cash and cash equivalents, end of Period $ 5,667 $ 5,675 $ 3,294 $ 3,345
======== ======== ======== ========
</TABLE>
For supplemental disclosures of cash flow information see Note 5 to
Consolidated Financial Statements (unaudited).
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
5
<PAGE>
SINCLAIR COMMUNICATIONS II, INC. AND
SINCLAIR TELEVISION COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
On January 4, 1996, all of the outstanding capital stock of Act III
Broadcasting, Inc. ("Act III" or the "Predecessor") was purchased by and Act III
was merged with and into A-3 Acquisition, Inc. ("A-3"), with Act III surviving
such merger (the "Acquisition"). Act III then changed its name to Sullivan
Broadcasting Company, Inc. (Sullivan). The Acquisition was accounted for by the
purchase method of accounting. On July 1, 1998, all of the outstanding capital
stock of Sullivan and Sullivan Broadcast Holdings, Inc. was acquired by Sinclair
Broadcast Group, Inc. through a Plan of Merger. In connection with the Plan of
Merger, Sullivan and Sullivan Broadcast Holdings, Inc. were the surviving
entities and their names were changed to Sinclair Communications II, Inc. and
Sinclair Television Company, Inc., respectively.
The accompanying consolidated financial statements as of and for the six months
ended June 30, 1998 have been prepared by the Company, without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to such rules and regulations. However, the Company believes
that the disclosures herein are adequate and that the information presented is
not misleading. It is suggested that these consolidated financial statements be
read in conjunction with the financial statements and the notes thereto included
in the Companys' latest annual reports on Form 10-K for the year ended December
31, 1997 and the Company's quarterly report on Form 10-Q for the quarter ended
March 31, 1998. The information furnished reflects all adjustments (consisting
only of normal, recurring adjustments) which are, in the opinion of management,
necessary to make a fair statement of the results for the interim period. The
results for these interim periods are not necessarily indicative of results to
be expected for the full fiscal year, due to seasonal factors, among others.
2. LONG TERM DEBT
On January 4, 1996, concurrent with the Acquisition, the Company borrowed
$220,000,000 under a term loan and $4,000,000 under a revolving credit facility
to finance the Acquisition. Both the term loan and the revolving credit facility
bear interest at LIBOR plus an applicable margin determined quarterly based upon
the Company's leverage ratio for the preceding quarter.
The revolving credit facility provides for borrowings up to $30,000,000 for
working capital purposes, and is due on December 31, 2003 or upon repayment of
the term loan.
In connection with the term loan and the revolving credit facility, the Company
also has a $75,000,000 line of credit available for future acquisitions
(collectively, the "Senior Credit Facility"). At June 30, 1998, $53,500,000 in
borrowings were outstanding on the acquisition line of credit.
The term loan is payable in varying quarterly installments beginning December
31, 1997 through 2003. The repayments of the term loan are as follows:
(in thousands)
1998 $ 15,050
1999 31,518
2000 42,024
2001 42,970
2002 42,970
Thereafter 12,367
In addition, certain mandatory prepayments of the term loan are required if the
Company achieves certain financial results at the end of the fiscal year.
6
<PAGE>
SINCLAIR COMMUNICATIONS II, INC. AND
SINCLAIR TELEVISION COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
In January 1996, the Company entered into various interest rate protection
agreements based upon LIBOR rates and a notional value equal to the anticipated
outstanding term debt levels through the year 2000.
The Senior Credit Facility requires the Company to comply with certain
covenants. At June 30, 1998, the Company was in compliance with all covenants.
In connection with the Plan of Merger (described in Note 6), Sinclair Broadcast
Group, Inc. completed a tender offer of all subordinated debt of Sinclair
Television Company, Inc. and Sinclair Communications II, Inc.
3. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
The Company paid interest of $19,745,000 and $ 18,613,000 during the periods
ending June 30, 1997 and June 30, 1998.
During the periods ended June 30, 1997 and June 30, 1998, the Company paid
approximately $1,134,000 and $974,000 respectively, for state and local income
taxes.
4. RELATED PARTY TRANSACTIONS
The Company reimburses ABRY Partners, Inc. ("ABRY"), an entity related through
common ownership, approximately $6,300 per month, representing the Company's
allocated share of rent paid by ABRY under its lease and other general expenses
including utilities, property insurance and supplies. In addition, the Company
has a management agreement with ABRY whereby the Company pays ABRY a management
fee of $262,000 annually. Such amounts have been included in "Selling, general
and administrative" expenses in the Company's consolidated statements of
operations. In addition, certain liabilities were paid during the first six
months of 1998 by Sinclair Communications II, Inc.
5. ACQUISITION OF KOKH
On January 6, 1998, the Company executed a definitive purchase agreement to
acquire certain assets of Channel 25 ("KOKH")in Oklahoma City, Oklahoma for a
total purchase price of $60,000,000. Subsequent to FCC approval, this
acquisition was consummated on February 1, 1998. Contemporaneously, the Company
sold and option to acquire certain assets of KOKH to the seller for $45,000,000
and acquired an option to acquire certain assets of another television station
for $15,000,000.
6. SUBSEQUENT EVENTS
On February 23, 1998, Holdings entered into a Plan of Merger with Sinclair
Broadcast Group, Inc. On July 1, 1998, under the terms of the Sinclair Merger,
100% of the issued and outstanding common stock of Holdings was acquired by
Sinclair Broadcast Group, Inc. by means of a merger.
7
MAX MEDIA PROPERTIES LLC
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(unaudited)
December 31 June 30
1997 1998
------------- -------------
<S> <C> <C>
Assets (note 4)
Current assets:
Cash and cash equivalents $ 1,789,194 $ 2,277,935
Restricted cash (note 3) 512,856 --
Accounts receivable, net 11,484,849 11,230,969
Program contract rights, current portion 2,325,431 2,276,647
Deferred charges, primarily barter agreements 640,145 727,246
Prepaid expenses and other current assets 851,502 1,188,430
------------- -------------
Total current assets 17,603,977 17,701,227
Property and equipment, net 25,709,048 23,330,692
Program contract rights, long-term portion 2,182,349 1,291,568
Intangible assets, net 82,137,183 78,402,585
Due from related party 1,800,370 1,951,758
Notes receivable 457,445 461,181
Other assets 92,667 75,297
------------- -------------
$ 129,983,039 $ 123,214,308
============= =============
Liabilities and Members' Capital Current liabilities:
Current portion of long-term debt (note 4) $ 4,751,520 $ 5,251,704
Program contract rights payable, current portion 2,430,572 1,718,669
Accounts payable 717,748 301,756
Accrued compensation and benefits 2,043,859 6,981,339
Other accrued expenses 979,409 714,706
Deferred revenue, primarily barter agreements 1,026,238 1,063,250
------------- -------------
Total current liabilities 11,949,346 16,031,424
Long-term debt, excluding current portion (note 4) 68,927,774 66,138,251
Program contract rights payable, long-term portion 1,736,102 983,680
------------- -------------
Total liabilities 82,613,222 83,153,355
------------- -------------
Members' capital (notes 4 and 5):
Class A - 3,069,000 member units 21,346,430 21,346,430
Class B - 5,140,500 member units 6,738,406 6,738,406
Class C - 3,421,931member units 21,893,829 21,893,830
Accumulated deficit (2,608,848) (9,917,713)
Total members' capital 47,369,817 40,060,953
------------- -------------
$ 129,983,039 $ 123,214,308
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
MAX MEDIA PROPERTIES LLC
Consolidated Statements of Operations (unaudited)
<TABLE>
<CAPTION>
Six months
ended June 30,
1997 1998
---- ----
<S> <C> <C>
Gross revenues $ 29,425,665 $ 33,452,910
Less agency commissions 3,534,017 3,961,790
------------ ------------
Net revenues 25,891,648 29,491,120
Operating expenses:
General and administrative 5,176,700 10,530,713
Sales 5,315,190 5,863,769
News 1,285,073 1,599,496
Programming and production:
Program amortization 2,636,652 2,754,930
Operations 2,405,736 2,425,703
Promotions 1,647,228 1,685,829
Engineering 1,519,111 1,695,085
Depreciation and amortization of property and equipment 2,046,230 2,565,851
Amortization of intangible assets 3,739,586 4,131,524
Total operating expenses 25,771,506 33,252,900
------------ ------------
Income (loss) from operations 120,142 (3,761,780)
------------ ------------
Other income (expenses):
Interest expense (2,942,922) (3,003,458)
Gain on station sale, net (note 3) 8,511,109 --
Other income (expense) (26,179) 140,751
------------ ------------
Total other income (expenses), net 5,542,008 (2,862,707)
------------ ------------
Income (loss) $ 5,662,150 $ (6,624,487)
============ ============
Pro forma income data:
Income (loss) $ 5,662,150 $ (6,624,487)
Pro forma income tax expense (benefit) (note 6) 2,208,239 (2,583,550)
------------ ------------
Pro forma net income (loss) $ 3,453,911 $ (4,040,937)
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
MAX MEDIA PROPERTIES LLC
Consolidated Statements of Cash Flows (unaudited)
<TABLE>
<CAPTION>
Six months
ended June 30,
1997 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Income (loss) $ 5,662,150 $ (6,624,487)
------------ ------------
Reconciliation of income (loss) to net cash
provided by operating activities:
Depreciation and amortization of property
and equipment 2,046,230 2,565,851
Amortization of intangible assets 3,739,586 4,131,524
Amortization of program contract rights 1,300,108 1,013,390
Barter program amortization 1,336,546 1,741,540
Barter program revenue (1,336,546) (1,741,540)
Gain on station sale, net (8,511,109) --
(Gain) loss on disposal of equipment 44,609 27,745
Changes in assets and liabilities, net
of effect of station acquisitions:
Accounts receivable, net (1,235,182) 253,880
Deferred charges, primarily barter agreements (116,970) (87,101)
Prepaid expenses and other current assets (121,891) (336,492)
Accounts payable 167,200 (415,992)
Accrued compensation and benefits (46,171) 4,937,480
Other accrued expenses (76,710) (264,703)
Deferred revenue, primarily barter agreements 105,951 37,012
------------ ------------
Net cash provided by operating activities 2,957,801 5,238,107
------------ ------------
Cash flows from investing activities:
Acquisition of stations, net of cash deposits (34,108,599) --
Payments for program contract rights (1,184,839) (1,538,150)
Purchases of property and equipment (5,191,783) (606,864)
Payment of organizational and start-up costs (452,749) (8,614)
Restricted cash (deposited in) released from escrow (505,162) 512,856
Proceeds from sale of station 12,506,743 --
Proceeds from sale of property and equipment 510,000 845
Issuance of notes receivable -- (18,176)
Other (3,700) (117,546)
------------ ------------
Net cash used in investing activities (28,430,089) (1,775,649)
------------ ------------
</TABLE>
<PAGE>
MAX MEDIA PROPERTIES LLC
Consolidated Statements of Cash Flows, Continued
<TABLE>
<CAPTION>
Six months
ended June 30,
1997 1998
---- ----
<S> <C> <C>
Cash flows from financing activities:
Proceeds from issuance of long-term debt $ 38,100,000 $ --
Proceeds from issuance of Class C member
units, net of expenses 21,200,000 --
Payment to cancel Class B member units (11,200,000) --
Repayment of long-term debt:
Credit Facility (21,710,000) (2,220,000)
Other (134,091) (69,339)
Payments of loan, financing and equity issuance costs (336,232) --
Member distributions (89,750) (684,378)
------------ ------------
Net cash provided by (used in) financing activities 25,829,927 (2,973,717)
------------ ------------
Net increase in cash and cash equivalents 357,639 488,741
Cash and cash equivalents at beginning of period 1,175,542 1,789,194
------------ ------------
Cash and cash equivalents at end of period $ 1,533,181 $ 2,277,935
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 3,100,685 $ 3,002,839
============ ============
Supplemental disclosure of noncash investing and financing activities:
Noncash additions to program contract rights and
program contract rights payable $ 206,638 $ 73,825
============ ============
Noncash additions to long-term debt
obligations (note 5) $ 829,071 $ --
============ ============
</TABLE>
The Company assumed liabilities in 1997 in connection with station
acquisitions as more fully described in note 3.
See accompanying notes to consolidated financial statements.
<PAGE>
MAX MEDIA PROPERTIES LLC
Notes to Consolidated Financial Statements
(unaudited)
(1) Basis of Presentation
The accompanying interim financial statements of Max Media Properties LLC
(the "Company") are unaudited. In the opinion of the Company's management,
the accompanying unaudited consolidated financial statements contain all
adjustments (consisting only of normal recurring adjustments) which the
Company considers necessary for the fair presentation of the Company's
consolidated financial position as of June 30, 1998 and the consolidated
results of its operations and its cash flows for the six-month periods
ended June 30, 1997 and 1998.
The consolidated interim financial statements included herein have been
prepared in accordance with generally accepted accounting principles and
Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to SEC rules and regulations.
These consolidated interim financial statements should be read in
conjunction with the Company's audited consolidated financial statements
for the year ended December 31, 1997. Certain 1997 amounts have been
reclassified for comparability with the 1998 financial statement
presentation.
Results for interim periods presented are not necessarily indicative of
results that may be expected for the entire year.
(2) Sale of the Company
On December 2, 1997, the Class A member and one of the Class C members
entered into agreements to sell all the issued and outstanding shares of
each member to one buyer. Simultaneously, the Class B member and one of the
other Class C members entered into agreements to sell their respective
member units, equity interests in other members and limited partnership
interests to this buyer. The Company is also a party to each of these
purchase agreements. The aggregate purchase price is $255,000,000 plus the
assumption of certain liabilities consisting primarily of program contract
rights payable. A portion of this purchase price will be used to repay all
long-term debt and make certain payments contingent on the closing of the
transaction. Cash, accounts receivable, notes receivable and certain other
immaterial assets are excluded from this transaction. The transaction
closed July 3, 1998.
(3) Acquisitions and Dispositions
(a) Acquisitions
On January 3, 1997, the Company acquired the assets of WMMP-TV,
Charleston, South Carolina for approximately $3.4 million plus the
assumption of approximately $612,000 of liabilities and paid $850,000
for a three-year agreement not to compete.
On January 31, 1997, the Company acquired the assets of WFOG AM/FM and
WPTE-FM, Norfolk, Virginia for approximately $15.2 million.
<PAGE>
MAX MEDIA PROPERTIES LLC
Notes to Consolidated Financial Statements
(unaudited)
On March 14, 1997, the Company acquired the assets of KETK-TV, Tyler,
Texas and substantially all the assets of KLSB-TV, Nacogdoches, Texas
(other than FCC licenses and certain related assets) for approximately
$16.9 million plus the assumption of certain immaterial liabilities.
Simultaneously, the Company entered into a 10-year time brokerage
agreement to operate KLSB-TV.
The following is a summary of the assets acquired, liabilities assumed
and consideration given for the above-stated acquisitions:
<TABLE>
<S> <C>
Deferred charges, primarily barter agreements $ 225,177
Program contract rights 737,652
Property and equipment 7,023,608
FCC licenses 20,105,728
Goodwill 249,553
Other intangible assets 9,119,698
-----------
Total assets acquired 37,461,416
-----------
Less:
Deferred revenue assumed, primarily
barter agreements 225,177
Program contract rights payable assumed 510,858
Other liabilities assumed 32,714
-----------
Cash paid for acquisitions $36,692,667
===========
</TABLE>
The Company allocated the aggregate consideration to the tangible and
intangible assets based on their respective fair values. Goodwill was
recorded as the excess of the purchase price over the assets acquired.
(b) Dispositions
On January 28, 1997, the Company sold the assets of KKLZ-FM, Las
Vegas, Nevada for approximately $12.5 million, net of commissions and
other selling expenses, including a two-year agreement not to compete,
which resulted in a gain of approximately $8.5 million. The Company
agreed to indemnify and hold harmless the purchaser from certain
losses, liabilities, damages, costs and expenses. The Company placed
$500,000 in escrow for a period of one year to serve as security for
the performance of the Company's indemnification obligations. The
escrow fund is included in restricted cash in the accompanying
consolidated financial statements at December 31, 1997.
(4) Long-term Debt
The Company maintains a $100 million Credit Facility consisting of a $36
million term facility, an $11.2 million term facility, a $47.8 million
reducing revolving credit facility and a $5 million non-reducing revolving
credit facility. Amounts outstanding under the $11.2 million term facility
are guaranteed by the Class B member.
<PAGE>
MAX MEDIA PROPERTIES LLC
Notes to Consolidated Financial Statements
(unaudited)
The Credit Facility is secured by all of the member units and assets of the
Company. Outstanding principal under the Credit Facility bears interest at
a floating rate based in part on the Company achieving certain operating
cash flow ratios. Interest on outstanding borrowings was 7.66% and 8.16% at
June 30, 1998 and December 31, 1997, respectively. The Company is obligated
to pay a quarterly commitment fee on the average daily unused portion of
the reducing and non-reducing revolving credit facilities at an annual rate
of 0.375% to 0.50% depending on certain operating cash flow ratios and an
annual agency fee of $30,000.
Amounts outstanding under the term loans must be repaid over an eight-year
period in quarterly installments beginning in 1997 with final payment
required no later than June 30, 2004. The non-reducing revolving credit
facility must be paid in full by June 30, 2004.
The Credit Facility contains substantial restrictive covenants, including
restrictions on the Company's ability to incur additional debt, acquire
interests in other business entities, sell, mortgage, pledge or otherwise
encumber any of its assets, make capital expenditures or make distributions
to the members (other than distributions used to pay taxes attributable to
the operations of the Company), without the prior written consent of the
lenders. In addition, the Company is required, among other things, to
maintain certain operating ratios.
To reduce the impact of changes in interest rates, the Company is required
to maintain interest rate protection on a minimum of 50% of the aggregate
amount outstanding under the Credit Facility. At June 30, 1998, the Company
has two outstanding interest rate cap agreements which expire on September
30, 1999 and October 1, 1999 and which limit the rate of interest to 8.50%
and 7.50%, respectively. The principal amounts related to these agreements
aggregate $40,512,500 at June 30, 1998.
(5) Members' Capital
The Company was organized under the Virginia Limited Liability Company Act
and the members are generally not liable for any debts or other obligations
of the Company. Under the terms of its January 1, 1996 Operating Agreement,
the Company will cease to exist on December 31, 2045 unless earlier
terminated. The Company has three classes of member units. With the
exception of the right to elect the Company's Board of Managers, all units
are identical. Holders of a majority of the Class A and Class B member
units each have the right to elect four of the eight members of the
Company's Board of Managers. Holders of Class C member units are not
entitled to vote for members of the Board. Net profits and losses are
allocated in proportion to the members' respective percentage interests.
On February 14, 1997, the Operating Agreement was amended to admit
additional members. The Company issued 3,321,931 Class C member units to
the new members for net proceeds of approximately $21.2 million. On March
13, 1997, the Company paid $11.2 million and incurred transactions costs of
approximately $455,000 and other long-term obligations of approximately
$818,000 in connection with the cancellation of 1,690,500 Class B member
units.
<PAGE>
MAX MEDIA PROPERTIES LLC
Notes to Consolidated Financial Statements
(unaudited)
(6) Income Taxes
The pro forma income tax expense (benefit) presented on the consolidated
statements of operations represents the estimated taxes that would have
been recorded had the Company been a C corporation for income tax purposes
for each of the periods presented. The pro forma income tax expense
(benefit) is as follows:
<TABLE>
<CAPTION>
Pro forma
Six months
ended June 30,
1997 1998
----------- -----------
<S> <C> <C>
Federal $ 1,925,131 $(2,252,326)
State 283,108 (331,224)
----------- -----------
Total pro forma $ 2,208,239 $(2,583,550)
=========== ===========
</TABLE>
A reconciliation of the statutory federal income tax rate and the pro
forma effective rate is as follows:
<TABLE>
<CAPTION>
1997 1998
---- ----
<S> <C> <C>
Statutory tax rate 34% 34%
Effect of state income taxes,
net of federal tax benefit 5% 5%
-- --
Pro forma effective tax rate 39% 39%
== ==
</TABLE>
EXHIBIT 99.3
Consolidated Pro Forma Financial Statements
of Sinclair Broadcast Group, Inc.
The following Pro Forma Consolidated Financial Data include the unaudited
Pro Forma consolidated balance sheet as of June 30, 1998 (the Pro Forma
Consolidated Balance Sheet) and the unaudited Pro Forma consolidated statement
of operations for the six months ended June 30, 1998 (the Pro Forma Consolidated
Statement of Operations). The unaudited Pro Forma Consolidated Balance Sheet and
the unaudited Pro Forma Consolidated Statement of Operations for the six months
ended June 30, 1998 are adjusted to give effect to the Max Media Acquisition and
the Sullivan Acquisition (collectively, the "Significant Acquisitions"). The Pro
Forma Consolidated Balance Sheet included herein reflects the application of the
Significant Acquisitions as if such transactions occurred at June 30, 1998. The
Pro Forma Consolidated Statement of Operations reflects the application of the
Significant Acquisitions as if such transactions occurred on January 1, 1998.
The Significant Acquisitions were completed utilizing existing cash balances and
available indebtedness under the Company's Bank Credit Agreement. The Pro Forma
adjustments are based upon available information and certain assumptions that
the Company believes are reasonable. The Pro Forma Consolidated Financial
Information included herein should be read in conjunction with the Company's
Consolidated Financial Statements as of and for the year ended December 31, 1997
and related notes thereto, the Company's unaudited consolidated financial
statements as of and for the six months ended June 30, 1998 and related notes
thereto and the historical financial data of Max Media Properties LLC, Sullivan
Broadcast Company, Inc., and subsidiaries (Formerly Act III Broadcasting, Inc.
successor by merger with A-3 Acquisitions, Inc. and Sullivan Broadcast Holdings,
Inc. and Subsidiaries, and Sinclair Communications II, Inc. and its wholly-owned
subsidiaries (successor to Sullivan Broadcast Holdings, Inc.) and Sinclair
Television Company, Inc. (successor to Sullivan Broadcasting Company, Inc.) all
of which have been filed with the Securities and Exchange Commission as part of
either (i) the Company's Annual Report on Form 10-K/A for the year ended
December 31, 1997 together with the report of Arthur Andersen LLP, independent
certified public accountants; (ii) the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1998, (iii) the Current Report on Form 8-K filed
April 8, 1998 or (iv) as a separate exhibit to the report on Form 8-K/A of which
this exhibit is a apart. The unaudited Pro Forma Consolidated Financial Data do
not purport to represent what the Company's results of operations or financial
position would have been had any of above events occurred on the dates specified
or to project the Company's results of operations or financial positions for or
at any period or date.
2
<PAGE>
SINCLAIR BROADCAST GROUP, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIGNIFICANT ACQUISITIONS CONSOLIDATED
--------------------------------- HISTORICAL
CONSOLIDATED SULLIVAN MAX MEDIA
HISTORICAL MAX MEDIA(a) BROADCASTING(b) AND SULLIVAN
-------------- --------------- ----------------- --------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash, including cash equivalents ................................ $ 320,133 $ (320,133) $ -
Accounts receivable, net of allowance for doubtful accounts ..... 129,088 129,088
Current portion of program contract costs ....................... 33,369 979 5,541 39,889
Prepaid expenses and other current assets ....................... 1,928 1,928
Deferred barter costs ........................................... 5,737 728 6,465
Refundable income taxes ......................................... 10,581 10,581
Broadcast Assets Held for Sale .................................. 30,639 30,639
Deferred tax asset .............................................. 520 520
---------- -------- --------- ----------
Total current assets .......................................... 531,995 1,707 (314,592) 219,110
PROGRAM CONTRACT COSTS, less current portion ..................... 28,228 364 5,823 34,415
LOANS TO OFFICERS AND AFFILIATES ................................. 10,645 10,645
PROPERTY AND EQUIPMENT, net ...................................... 195,100 36,983 56,450 288,533
NON-COMPETE AND CONSULTING AGREEMENTS, net........................ 150 150
DEFERRED TAX ASSET ............................................... - -
OTHER ASSETS ..................................................... 174,602 (12,750) 161,852
ACQUIRED INTANGIBLE BROADCASTING ASSETS, net...................... 1,876,770 219,686 1,018,439 3,114,895
---------- -------- --------- ----------
Total Assets .................................................. $2,817,490 245,990 766,120 $3,829,600
========== ======== ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ................................................ $ 9,858 $ 9,858
Income taxes payable ............................................ - -
Accrued liabilities ............................................. 51,069 51,069
Current portion of long-term liabilities-
Notes payable and commercial bank financing .................... 25,000 25,000
Notes and capital leases payable to affiliation ................ 2,878 2,878
Program contracts payable ...................................... 64,415 1,353 9,644 75,412
Deferred barter revenues ........................................ 6,111 1,064 7,175
---------- -------- --------- ----------
Total current liabilities ..................................... 159,331 2,417 9,644 171,392
LONG-TERM LIABILITIES: -
Notes payable and commercial bank financing .................... 1,475,972 242,250 (c) 679,867(d) 2,398,089
Notes and capital leases payable to affiliates ................. 18,495 18,495
Program contracts payable ...................................... 47,671 1,323 11,609 60,603
Deferred tax liability ......................................... 36,242 65,000 101,242
Other long-term liabilities .................................... 3,948 3,948
---------- -------- --------- ----------
Total liabilities ............................................. 1,741,659 245,990 766,120 2,753,769
---------- -------- --------- ----------
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES 3,661 - - 3,661
---------- -------- --------- ----------
COMMITMENTS AND CONTINGENCIES
COMPANY OBLIGATED MANDATORILY REDEEM-
ABLE SECURITY OF SUBSIDIARY TRUST HOLDING
SOLELY KDSM SENIOR DEBENTURES ................................... 200,000 - - 200,000
---------- -------- --------- ----------
STOCKHOLDERS' EQUITY:
Series B Preferred Stock, $.01 par value, 10,000,000 shares
authorized and 1,071,381 shares issued and outstanding ........ - -
Series D Preferred Stock, $.01 par value, 3,450,000 shares
authorized 3,450,000 shares issued and outstanding ............ 35 35
Series E Preferred Stock, $.01 par value, 3,450,000 shares
authorized 3,450,000 shares issued and outstanding ............ - -
Class A Common Stock, $.01 par value, 100,000,000 shares
authorized and 13,733,430 and 15,487,816 shares issued
and outstanding respectively .................................. 480 480
Class B Common Stock, $.01 par value, 35,000,000 shares
authorized and 25,436,432 shares issued and outstanding ....... 500 500
Additional paid-in capital ..................................... 897,048 897,048
Additional paid-in capital - equity put options ................ 23,117 23,117
Additional paid-in capital - deferred compensation ............. (7,419) (7,419)
Accumulated deficit ............................................ (41,591) (41,591)
---------- -------- --------- ----------
Total stockholders' equity .................................... 872,170 - - 872,170
---------- -------- --------- ----------
Total Liabilities and Stockholders' Equity .................... $2,817,490 $245,990 $ 766,120 $3,829,600
========== ======== ========= ==========
</TABLE>
3
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
(a) The Max Media Acquisition column reflects the assets and liabilities
acquired in connection with the $255,000 purchase of Max Media. Total
acquired intangibles are calculated as follows:
<TABLE>
<CAPTION>
MAX MEDIA
------------
<S> <C>
Purchase Price ............................................. $ 255,000
Add:
Liabilities acquired--
Current portion of program contracts payable ............ 1,353
Deferred barter revenues ................................ 1,064
Long-term portion of program contracts payable .......... 1,323
Less:
Assets acquired--
Current portion of program contract costs ............... (979)
Deferred barter costs ................................... (728)
Program contract costs, less current portion ............ (364)
Property and equipment .................................. (36,983)
---------
Acquired intangibles .................................... $ 219,686
=========
</TABLE>
The acquired intangible assets are summarized as follows:
<TABLE>
<S> <C>
Useful Life (years)
-------------------
FCC licenses ............................................... $ 65,432 25
Network affiliation agreements.............................. 62,802 25
Goodwill.................................................... 84,822 40
Other miscellaneous intangible assets ...................... 6,630 5-15
---------
Acquired intangibles .................................... $ 219,686
=========
</TABLE>
4
<PAGE>
(b) The Sullivan Broadcasting Acquisition column reflects the assets and
liabilities acquired in connection with the purchase of 100% of the
outstanding capital stock of Sullivan Broadcast Holdings, Inc. and
subsidiaries. Total acquired intangibles are calculated as follows:
<TABLE>
<CAPTION>
SULLIVAN
-------------
<S> <C>
Purchase Price (Subject to certain adjustments) .......... 1,000,000
Add:
Liabilities acquired--
Current portion of program contracts costs ............ 9,644
Long-term portion of program contract costs ........... 11,609
Deferred tax liability ................................ 65,000
Less:
Assets acquired--
Current portion of program contracts .................. (5,541)
Program contract costs, less current portion .......... (5,823)
Property and equipment ................................ (56,450)
----------
Acquired intangibles .................................. $1,018,439
==========
</TABLE>
The acquired intangible assets are summarized as follows:
<TABLE>
<S> <C>
Useful Life (years)
-------------------
FCC licenses ............................................... $ 97,228 25
Network affiliation agreement............................... 253,601 25
Goodwill.................................................... 646,327 40
Other miscellaneous intangible assets ...................... 21,283 5-15
---------
Acquired intangibles .................................... $1,018,439
=========
</TABLE>
(c) To reflect indebtedness of $242,250 incurred (net of a $12,750 deposit)
under the Company's Bank Credit Agreement in connection with the Max Media
Acquisition.
(d) To reflect $679,867 (net of utilization of $320,133 in existing cash
balances) under the Company's Bank Credit Agreement in connection with the
Sullivan Acquisition.
5
<PAGE>
SINCLAIR BROADCAST GROUP, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Consolidated
Historical,
Consolidated Acquisition Max Media and
Historical Max Media(a) Sullivan (b) Adjustments Sullivan
------------ -------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Station broadcast revenues, net of
agency commissions .............. $ 266,265 $ 26,780 $ 62,857 $ 355,902
Revenues realized from station barter
arrangements ..................... 25,099 2,711 9,017 36,827
-------- -------- ------- -------- -----------
Total revenues 291,364 29,491 71,874 --- 392,729
OPERATING EXPENSES:
Program and production ............. 56,068 4,751 10,656 71,475
Selling general and adminstrative... 59,708 16,395 12,681 (8,139)(c) 80,645
Expenses realized from barter
arrangements .................... 20,962 2,655 9,017 --- 32,634
Amortization of program contract
costs and net realiz. value adj. 30,543 2,755 15,106 48,404
Stock-based compensation 1,371 --- --- 1,371
Depreciation and amortization of
property and equipment .......... 10,266 2,566 5,638 (2,185)(d) 16,285
Amort. of acq. intangible assets,
non-compete, consult, and other 35,171 4,131 17,394 2,771 (e) 59,467
-------- ------- ------- ------- ------
Total operating expenses 214,089 33,253 70,492 (7,554) 310,280
-------- ------- ------- ------- ------
Broadcast operating income
(loss) .................... 77,275 (3,762) 1,382 7,554 82,449
-------- ------- ------- ------ -------
Interest and amortization of debt
discount expense ................. (54,901) (3,003) (19,220) (24,296)(f) (101,420)
Subsidiary trust minority interest
expense .......................... (11,625) --- --- (11,625)
Interest income .................... 3,217 --- --- --- 3,217
Net gain on sale of assets 5,238 5,238
Other income 104 141 (52) 193
------- ------- ------- -------- -------
Income (loss) before provision
(benefit) for income taxes ... 19,308 (6,624) (17,890) (16,742) (21,948)
PROVISION (BENEFIT) FOR INCOME TAXES.. (12,400) 4,254(g) 11,489(g) 10,752(g) (14,095)
------ ------- ------- ------- -------
NET INCOME (LOSS) BEFORE EXTRA-
ORDINARY ITEM .................... 6,908 (2,370) (6,401) (5,990) (7,853)
NET INCOME (LOSS) BEF.EX.ITEM AVAILABLE
TO COMMON SHAREHOLDERS ........... $ 1,733 (13,028)
BASIC EARNINGS PER SHARE: ======== ========
Net income (loss) before extra-
ordinary item per shares ...... $ 0.02 $ (0.13)
======== ========
Basic average shares outstanding .... 91,480 97,911(h)
======== ========
DILUTED EARNINGS PER SHARE: ..........
Net income (loss) before extra-
ordinary item per share ....... $ 0.02 $ (0.13)
======== ========
Diluted average shares
outstanding ............... 93,645 100,077(h)
======== ========
xx Recalculated at 40%
</TABLE>
6
<PAGE>
SINCLAIR BROADCAST GROUP, INC.
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
(a) The Max Media column reflects the results of operations for Max Media for
the period from January 1, 1998 to June 30, 1998.
(b) The Sullivan Broadcasting column reflects the results of operations for
Sullivan Broadcasting for the period from January 1, 1998 to June 30, 1998.
(c) To adjust operating expenses for corporate overhead (net of integration
costs the Company anticipates incurring as a result of the Significant
Acquisitions) which the Company does not expect to incur upon consummation
of the Max Media Acquisition and the Sullivan Acquisition on a
going-forward basis. In addition, the adjustment included stock
appreciation rights of $5,000 related to bonuses paid to Max Media
management in connection with the sale of the Company.
(d) To record depreciation expense related to acquired tangible assets and
eliminate depreciation expense recorded by Max Media, and Sullivan from
January 1, 1998 to June 30, 1998. Tangible assets are to be depreciated
over lives ranging from three to 20 years, calculated as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1998
-------------------------------------
MAX MEDIA SULLIVAN TOTAL
---------- ----------- ------------
<S> <C> <C> <C>
Depreciation expense on acquired tangible assets ....................... $ 2,329 $ 3,690 $ 6,019
Less: Depreciation expense recorded by Max Media and Sullivan (2,566) (5,638) (8,204)
-------- -------- --------
Pro Forma adjustment ................................................... $ (237) $ (1,948) $ (2,185)
======== ======== =========
(e) To record amortization expense related to acquired intangible assets and
deferred financing costs and eliminate amortization expense recorded by Max
Media and Sullivan from January 1, 1998 to June 30, 1997. Intangible assets
are to be amortized over lives ranging from one to 40 years. Goodwill is
the only intangible asset amortized over 40 years. Intangible assets are
amortized on a straight-line basis and the amortization is calculated as
follows:
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1998
---------------------------------------
MAX MEDIA SULLIVAN TOTAL
------------ ----------- ------------
<S> <C> <C> <C>
Amortization expense on acquired intangible assets ..................... $ 5,335 $ 18,961 $ 24,296
Less: Amortization expense recorded by Max Media and Sullivan (4,131) (17,394) (21,525)
-------- --------- ---------
Pro Forma adjustment ................................................... $ 1,204 $ 1,567 $ 2,771
======== ========= =========
</TABLE>
7
<PAGE>
(f) To record interest expense for the six months ended June 30, 1998 on
acquisition financing relating to Max Media and Sullivan of $242,250 and
$679,867 (under the Company's bank credit facility at 7.43%), and eliminate
interest expense recorded.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1998
----------------------------------------
MAX MEDIA SULLIVAN TOTAL
-------------- -------- --------
<S> <C> <C> <C>
Interest expense adjustment as noted above ......................... $ ( 9,000) $(37,519) $(46,519)
Less: Interest expense recorded by Max Media and Sullivan 3,003 19,220 22,223
---------- -------- ----------
Pro Forma adjustment ............................................... $ ( 5,997) $(18,299) $ (24,296)
========== ======== ==========
</TABLE>
(g) To record tax provision (benefit) at the applicable tax rates.
(h) Weighted average shares outstanding on a Pro Forma basis assumes that the
12,000,000 shares of Class A Common Stock issued by the Company on April 8,
1998 were outstanding for the entire period.
8
