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Sinclair Broadcast Group Corporate Presentation


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Sinclair Broadcast Group Corporate Presentation

  1. 1. March 26, 2012Barclays High Yield Conference
  2. 2. Safe HarborThis presentation may include forward-looking statements regarding, amongother things, future operating results. Such statements are subject to a number ofrisks and uncertainties. Actual results in the future could differ materially andadversely from those described in the forward-looking statements as a result ofvarious important factors. Such factors have been set forth in the Company’smost recent reports on Forms 10-Q, 10-K and 8-K, as filed with the SEC. Norepresentations or warranties are made by the Company or any of its affiliates asto the accuracy of any such statements or projections. Whether or not any suchforward looking statements or projections are in fact achieved will depend uponfuture events, some of which are not within the control of the Company.Accordingly, actual results may vary from the projected results and suchvariations may be material. The Company undertakes no obligation to updatethese forward-looking statements.
  3. 3. Sinclair Portfolio HighlightsThe 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. 4. Sinclair Portfolio HighlightsDominant middle market broadcasterFootprint brings buying power, negotiating leverage, syndicatorprogram clearanceAffiliation diversification insulates us from network downturnsGeographic diversification minimizes downturns in localeconomies 4
  5. 5. Sinclair Portfolio HighlightsThe 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. 6. Sinclair Operating StrategyOffer high-quality programming and local news contentGrow market share and audience share 19.3% local revenue share for 2011 (ex-political)Receive fair value in retransmission compensationMaintain balance sheet flexibility Opportunity to acquire TV stations Free cash flow accretive 6
  7. 7. Sinclair Operating StrategyGrow free cash flow Reinvestment in operations (capex, new acquisitions) Debt repayment Shareholder dividendsMonetize spectrum Standard change Mobile television 7
  8. 8. Sinclair Investment HighlightsHighest free cash flow metrics (2011) $144.8 million of FCF generated 16% FCF yield on equity value 54% of EBITDA converted into FCFAmong most credit worthy with strong balance sheet 4.18x net leverage through parent No imminent maturities until 2016 8
  9. 9. Sinclair Investment HighlightsConsistent dividend strategy $0.48 annual dividend per share 26% dividend payout ratio 4.9% dividend yieldHidden value of $2 per share Approx. $190M cost basis in non-broadcast entities:Enhance footprint and free cash flow through television acquisitions 9
  10. 10. Acquisition EnvironmentRecovery has strengthened balance sheets and reduced leverageM&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. 11. Acquisition HighlightsAcquired 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 strengthFree 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. 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. 13. Spectrum Auction - ExampleBaltimore, 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
  14. 14. Financial Highlights
  15. 15. 2011 Revenue Highlights2011 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. 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. 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. 18. 2011 Balance Sheet 12/31/11 Acquisitions PF 12/31/11Cash 13 13Revolver 12 16 28Term Loans 337 530 8672nd Lien Notes 500 500Unsecured Notes 238 238Other OpCo Debt 33 33HoldCo Debt 21 21VIE Debt 65 65Debt on B/S, net of Cash 1,193 546 1,739EBITDA 270 89 3591st Lien Net Leverage 1.5x 2.7xOpCo Net Leverage 4.2x 4.7xHoldCo 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. 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 increase19
  20. 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. 21. Sinclair Investment HighlightsLargest pure-play television broadcasterAmong most credit worthy with strong balance sheet, including impactof Four Points and Freedom acquisitionsGenerating some of the best shareholder returnsDriving long-term revenues 21