EXHIBIT 99.1
SINCLAIR COMMUNICATIONS II, INC. AND ITS WHOLLY-OWNED SUBSIDIARY
SINCLAIR TELEVISION COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
December 31, 1997 June 30, 1998
----------------------------- -------------------------------
Sinclair Sinclair Sinclair Sinclair
Television Communications Television Communications
Company, Inc. II, Inc. Company, Inc. II, Inc.
------------ -------------- ------------- --------------
(Unaudited)
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
=========== =========== ========== ===========
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
1
SINCLAIR COMMUNICATIONS II, INC. AND ITS WHOLLY-OWNED SUBSIDIARY
SINCLAIR TELEVISION COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONT.)
(dollars in thousands)
December 31, 1997 June 30, 1998
----------------------------- -------------------------------
Sinclair Sinclair Sinclair Sinclair
Television Communications Television Communications
Company, Inc. II, Inc. Company, Inc. II, Inc.
------------ -------------- ------------- --------------
(Unaudited)
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 --
2
December 31, 1997 June 30, 1998
----------------------------- -------------------------------
Sinclair Sinclair Sinclair Sinclair
Television Communications Television Communications
Company, Inc. II, Inc. Company, Inc. II, Inc.
------------ -------------- ------------- --------------
(Unaudited)
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
============ =========== =========== ===========
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
3
SINCLAIR COMMUNICATIONS II, INC. AND ITS WHOLLY-OWNED SUBSIDIARY
SINCLAIR TELEVISION COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited - dollars in thousands)
Three Months Ended June 30
---------------------------------------------------------
1997 1998
------------------------------ ---------------------------
Sinclair Sinclair Sinclair Sinclair
Television Communi- Television Communi-
Company, Inc. cations II, Inc. Company, Inc. cations II,
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)
======== ======== ======== ========
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.
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)
======== ======== ======== ========
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
4
SINCLAIR COMMUNICATIONS II, INC. AND ITS WHOLLY-OWNED SUBSIDIARY
SINCLAIR TELEVISION COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited - dollars in thousands)
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.
------------- ---------------- ------------- ----------------
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
======== ======== ======== ========
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
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
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