Sinclair Broadcast Group Corporate Presentation
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This document summarizes Sinclair Broadcast Group's presentation at a Barclays High Yield Conference. It discusses Sinclair's portfolio as the largest and most diversified pure-play television broadcaster. It also outlines Sinclair's operating strategy, recent acquisitions, financial highlights for 2011 including revenue, expenses, cash flow, and balance sheet. The presentation concludes with Sinclair's outlook for 2012 operations.
Sinclair Broadcast Group Corporate Presentation
- 1. March 26, 2012 Barclays High Yield Conference
- 2. Safe Harbor This presentation may include forward-looking statements regarding, among other things, future operating results. Such statements are subject to a number of risks and uncertainties. Actual results in the future could differ materially and adversely from those described in the forward-looking statements as a result of various important factors. Such factors have been set forth in the Company’s most recent reports on Forms 10-Q, 10-K and 8-K, as filed with the SEC. No representations or warranties are made by the Company or any of its affiliates as to the accuracy of any such statements or projections. Whether or not any such forward looking statements or projections are in fact achieved will depend upon future events, some of which are not within the control of the Company. Accordingly, actual results may vary from the projected results and such variations may be material. The Company undertakes no obligation to update these forward-looking statements.
- 3. Sinclair Portfolio Highlights The largest & one of the most diversified pure-play television broadcasters 74 TV stations 45 markets 20 FOX, 18 MNT, 14 CW, 11 ABC, 9 CBS, 1 NBC, 1 Azteca 26.3% U.S. coverage (30.1 million households) 24 two-station markets 34 markets airing news 82 Sub-channels 3
- 4. Sinclair Portfolio Highlights Dominant middle market broadcaster Footprint brings buying power, negotiating leverage, syndicator program clearance Affiliation diversification insulates us from network downturns Geographic diversification minimizes downturns in local economies 4
- 5. Sinclair Portfolio Highlights The largest and one of the most diversified PF 2011 Revenues by Affiliation CW 12% ABC 18% MNT 13% NBC/SP 2% FOX CBS 36% 19% PF for Four Points and Freedom stations
- 6. Sinclair Operating Strategy Offer high-quality programming and local news content Grow market share and audience share 19.3% local revenue share for 2011 (ex-political) Receive fair value in retransmission compensation Maintain balance sheet flexibility Opportunity to acquire TV stations Free cash flow accretive 6
- 7. Sinclair Operating Strategy Grow free cash flow Reinvestment in operations (capex, new acquisitions) Debt repayment Shareholder dividends Monetize spectrum Standard change Mobile television 7
- 8. Sinclair Investment Highlights Highest free cash flow metrics (2011) $144.8 million of FCF generated 16% FCF yield on equity value 54% of EBITDA converted into FCF Among most credit worthy with strong balance sheet 4.18x net leverage through parent No imminent maturities until 2016 8
- 9. Sinclair Investment Highlights Consistent dividend strategy $0.48 annual dividend per share 26% dividend payout ratio 4.9% dividend yield Hidden value of $2 per share Approx. $190M cost basis in non-broadcast entities: Enhance footprint and free cash flow through television acquisitions 9
- 10. Acquisition Environment Recovery has strengthened balance sheets and reduced leverage M&A activity heating up with the announcements of Four Points, Freedom and McGraw Hill Valuations are inviting Buyer synergies can be significant Strategic operators, not private equity, are the primary buyers 10
- 11. Acquisition Highlights Acquired 15 stations at attractive purchase prices/multiples: Four Points – 6.5x on $200M price (closed Jan 2012) Freedom – 6.6x on $385M price (estimated April closing) Result in minimal leverage and continued balance sheet strength Free cash flow accretive FCF contribution estimated at $59M, on average ($65M in the even years, $53M in the odd years) 40% FCF growth rate on 2010 11 Buyer’s multiples based on 2012/2013 estimated EBITDA, after synergies
- 12. Spectrum Auction What if broadcasters bought the spectrum? Assumptions: 120MHz of TV spectrum at auction $25BN gross value from auction 125M U.S. TV households $200/TVHH valuation ($25BN / 125M TVHH) 12
- 13. Spectrum Auction - Example Baltimore, MD – market 27 1.025M TVHH $205M market’s auction value (1.025M TVHH x $200/TVHH) 6 broadcasters in the market and 120MHz of spectrum auctioned $34M per 20MHz per broadcaster 20MHz is equivalent to 3+ broadcast channels or $11.3M per channel 13
- 15. 2011 Revenue Highlights 2011 core net broadcast revenues up 2.9% (-2.4 ex-political) (1) $6.2M from Super Bowl in Q1 2011 Automotive up 9.7% Retrans renewals with Time Warner, Comcast, COX, Mediacom (Telecom renewed at year end 2011, Dish to renew in 2012) Political of $8.3M (+18% over 2009) vs. $42M of political in 2010 (1) Excludes $7.7M of LMA reimbursement revenue 15
- 16. 2011 Expense & Cash Flow Highlights Program payments declined $22M TV operating expenses up 4.8% (1) Includes addition of FOX network programming license fee Interest expense declined $10M Capital expenditures of $35.8M (bonus depreciation benefit) EBITDA of $269.5M, down only 2.5% in non-political year (35% margin) Free cash flow of $145M ($1.80 per share) 16 (1) Excludes $7.7M of LMA expenses
- 17. 2011 Uses of Free Cash Flow $59M in TV acquisition purchase price deposits: $20M paid in third quarter for Four Points $38.5M paid in fourth quarter for Freedom $6M debt repayment Next maturity is 2016 $38M dividend ($0.48 per share) 17
- 18. 2011 Balance Sheet 12/31/11 Acquisitions PF 12/31/11 Cash 13 13 Revolver 12 16 28 Term Loans 337 530 867 2nd Lien Notes 500 500 Unsecured Notes 238 238 Other OpCo Debt 33 33 HoldCo Debt 21 21 VIE Debt 65 65 Debt on B/S, net of Cash 1,193 546 1,739 EBITDA 270 89 359 1st Lien Net Leverage 1.5x 2.7x OpCo Net Leverage 4.2x 4.7x HoldCo Net Leverage 4.2x 4.7x Based on bank covenant calculations 18 Four Points/Freedom EBITDA is blended odd/even full year average, after synergies
- 19. Sinclair 2012 Operating Outlook Political ad spend could be the highest in our history NADA expects new car sales of 13.9M units or growth of 9.4% Retrans revenues to continue to grow (DISH and telecom renewals) Economy and industry still in recovery Closing Four Points and Freedom acquisitions Buyer’s multiples imply $89M of blended EBITDA Super Bowl on NBC results in $6M less of Super Bowl revenues Program payments expected to decline $5.5M on same station basis; reverse retrans expected to increase 19
- 20. Sinclair Q1-2012 Operating Outlook Net broadcast revenues expected to be +20.3% to +22.2% +5.2% to +7.1% on same station basis Includes $4M of political and $0.1M from Super Bowl Same station core expected to be +3.1% to +5.0% +7.4% to +9.4% ex-Super Bowl Auto growth of low single digit percents (absence of Super Bowl revenues) EBITDA expected to be $70.8M to $73.8M +4.2% to +9.1% same station basis growth ($63.8M to $66.8M) 2/8/12 public guidance (not updating or reconfirming estimates for purposes of this slide) 20
- 21. Sinclair Investment Highlights Largest pure-play television broadcaster Among most credit worthy with strong balance sheet, including impact of Four Points and Freedom acquisitions Generating some of the best shareholder returns Driving long-term revenues 21