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Executives

David Amy – Executive Vice President and CFO

David Smith – President and CEO

Steven Marks – Chief Operating Officer/Television

Lucy Rutishauser – Vice President of Corporate Finance and Treasurer

Analysts

John Blackledge – JP Morgan

Victor Miller – Bear Stearns

Marci Ryvicker - Wachovia Securities

Ken Silver – Royal Bank of Scotland

Aaron Watts – Deutsche Bank

Edward Atorino – The Benchmark Company

Sinclair Broadcast Group, Inc. (SBGI) Q4 2007 Earnings Call February 6, 2008 8:30 AM ET

Operator

Greetings ladies and gentleman and welcome to the Sinclair Broadcast Group, Inc fourth quarter 2007 earnings release conference. (Operator instructions.) It is now my please to introduce your host Mr. David Amy, Executive Vice President and CFO of Sinclair Broadcast Group, Inc. Thank you, you may begin.

David Amy

Thank you Operator and good morning everyone. In the room with me today are David Smith, President, and CEO, Steve Marks, Chief Operating Officer of our Television group, and Lucy Rutishauser, Vice President of Finance and Treasurer.

Before we begin, Lucy will make our forward looking statement disclaimer.

Lucy Rutishauser

Thank you David and good morning everyone.

Certain matters discussed on this call 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 diversely from those described in the forward looking statements. As a result of various important factors set forth in the companies most recent reports on forms 10-Q and 10-K as filed with the SEC and included in our fourth quarter earnings release which we publish to the SEC on an 8-K earlier this morning. The company undertakes no obligation to update these forward looking statements. In accordance with Reg. FD this call is being made available to the public. A webcast replay will be available on our website later today and will remain available until our next quarterly earnings release. Redistribution of this call is prohibited without the express written consent of the company. Included on the call will be a discussion of non-GAAP metrics, specifically television broadcast cash flow, EBITDA, pre-cash flow, and leverage. These metrics are not meant to replace GAAP measurements, but are provided as supplemental details to assist the public in their analysis and valuation of our company. A reconciliation of the non-GAAP metrics to the GAAP measures in our financial statements is provided on our website, www.sbgi.net under Investor Information reports and filings.

David Amy

Thanks Lucy. Before we go through the financial and operating results, we wanted to share a few highlights that have occurred since our last earnings call.

In November 2007, we closed a sale of WGTB-TV, our Springfield, MA television station, which we had previously announced. The station was sold for $21.2 million.

On February 1 of this year, in a defensive move, we purchased the non-licensed assets of KFXA-TV, the FOX affiliates in Cedar Rapids, IA for 17.1 million. Since ’02, KFXA, pursuant to a joint sales agreement has provided sales and non-programming related services to KGAM, our CBS affiliates in Cedar Rapids. We were unable to come to economic terms in regards to extending that agreement, with Kagan now providing those services to KFXA, and based upon these economic terms and incentives we believe this transaction will be accretive to our shareholders.

In December, we added a one hour 4:00 pm newscast on our ABC affiliate in Pensacola, FL, and since our last reported earnings and through February 1, we have invested 12.4 million in various real estate ventures, acquired Alarm Funding for 6 million, and invested $3 million in the Patriot Capital II fund, which provides financing to small businesses.

Finally, our board of directors approved two actions yesterday to continue to create shareholder value. The first was to once again increase the annual dividend by $0.10 per share. This brings the annual dividend rate to $0.80 per share based on a current $8.90 stock price; a forward dividend yield is an exceedingly attractive 9%

The second action taken by our board was to renew our share re-purchase authorization. The authorization is for up to $150 million worth of shares that can be purchased in the open market or in a private negotiated transaction.

For those who have followed us over the years, you will recall that we had repurchased $142 million worth of shares, representing 28% of the float just a few years back.

Whether we’ve repurchased shares, how much, and when we will, will be dependent on a variety of considerations including market and business conditions and other uses of the free cash flow.

Now turning to the financial results, net broadcast revenues for the fourth quarter were 165.7 million, driven by increases in both our local and national core businesses of 5.2 million combined. And increases in revenues from our retransmission consent agreements of 9 million, with an 18.8 million decline in political revenues compared to fourth quarter of ’06. Our fourth quarter ’07 net broadcast revenues were down only 2.1% for 3.5 million, and higher than our prior guidance of 160.4 to 162.0 million.

Television operating expenses in the quarter to on to station production and station SG&A expenses before barter, and including soft based compensation were 77.8 million, up 7.8% from fourth quarter last year. The increase is primarily due to additional news programming, higher L&A profits both into actual negotiations related to our rate and service costs, and recognition in the fourth quarter of super sales commission expense.

As we discussed on last quarter’s call, in ’07 we put in place a special suminous program to incentivize the local sales force to aggressively exceed the total ’06 non-political local revenues.

Excluding political revenues, our local revenues grew 8% in the fourth quarter and 2.6% for the year.

Corporate overhead in the quarter was 5.4 million, a $300,000 decline as compared to the fourth quarter last year. The decrease was due primarily to lower legal fees.

Operating income in the quarter was 47 million, an increase of 8.9 million from last year’s results of 38.2 million. In ’06 there was a 15.6 million impairment of goodwill charge which we did not have in ’07.

Our program amortization costs were also favorable by 2.3 million in the fourth quarter ’07. Offsetting these benefits were the previously mentioned $3.5 million in lower net broadcast revenues and 5.6 million in higher TV operating costs.

Some payments for the quarter were 18.9 million for ’07 and were 77.7 million, a $10 million decline from ’06.

Net interest expense for the quarter decreased $6 million, or 21.8% from fourth quarter last year due to the refinancing of the 8.75 and 8% notes that lower cost bank debt and convertible bonds, as well as higher free cash flow generation and a lower interest rate environment.

We had diluted earnings per common share in the fourth quarter of $0.15 as compared to diluted earnings per share of $0.16 in the fourth quarter last year.

The decline is due primarily to a $14.8 million higher income tax provision, offset by the higher operating income and interest savings. We reported a $1.1 million gain relating to the sale of WTGB-TV in the quarter, television broadcast cash flow in the quarter, the non-GAAP metric was 71.3 million, 8.1 million lower than last years BCF, but higher than the 65.5 to 67.1 million range implied by our prior guidance.

EBITDA, also a non-GAAP metric, was 66.7 million in the quarter, 7.8 million lower than the same period last year, but again also higher than the 61.4 to $63 million range implied by our prior guidance.

The BCF margin on net broadcast revenues was 43.1%, and the EBTIDA margin on total revenues was 33.7% in the quarter.

For ’07, a non-political year, we achieved a BCF margin of 42.4%, slightly higher than ‘06, and a 33.7% EBITDA margin, which was slightly lower than ’06, and that was due primarily to the slowdown in Acrodyne, our high energy transmitter subsidiary.

During the quarter, we generated 42.2 million of free cash flow, a non-GAAP metric.

For the year, we generated 155.7 million, which is 12.5 million more than we generated in’06, a political year. And for those of you with a sense of humor, at our year ending stock price of $8.21, our trailing 12 month free cash flow yield on our Market Cap was a staggering 21.7% with another 8.5% in the form of the dividend yield. And did I mention that we raised our annual dividend another $0.10 per share, to $0.80, bringing the current dividend yield to approximately 9%.

With that, Lucy will take you through the balance sheet and cash flow highlights.

Lucy Rutishauser

Thank you, David.

We had $21 million of cash on hand at December 31, up $30 million, but ended up spending 23.2 million for the year. The $6.8 million shortfall from 2007, which will roll into 2008, is primarily related to timing of building projects and taking additional time to evaluate available technologies as they relate to building out high definition newscasts.

Our full year 2008 CapEx is estimated to be $33 million, consisting of the $6.8 million carry forward from 2007, and $26 million for new items. The 26 million includes costs associated with high definition master control upgrades and costs to provide high definition newscasts in four of our key competitive news markets.

In addition, the current plan is to convert an additional four markets for high definition news in each of 2009 and 2010. The CapEx forecast does not include items from Nobel TV applications, since the technology and business plan are still being decided upon. However, indications are that Nobel TV could be available to the public as early as the first half of 2009.

Debt on the balance sheet at December 31 with $1,344.4 million, which includes 49.3 million of non-recourse and VIE debt that we are required to consolidate on our book, and that you’ll need to exclude for leverage calculation purposes.

In January of this year we repurchased 6.9 million par value of our 8% senior subordinated notes in view of the market. We continue to evaluate refinancing alternatives, and the timing of such decisions as they relate to the 8% notes.

Our weighted average cost of debt is currently 6.4%. Leverage at the operating company was 2.58 time at quarter end, and as you know we do not have a leverage covenant requirement at the holding company level, but if we did, it would be estimated at 5.26 times, and that is derived from total debt, net of cash on the balance sheet, excluding the 49.3 million of VIE and non-recourse debt, and then divided by the trailing fourth quarter total EBITDA of $242.3 million. At 5.26 times, this is one of the lowest leverage levels in the industry.

Now Steve Marks will take you through our operating performance.

Steve Marks

Thank you Lucy, and good morning everyone. We are pleased with our results this quarter and for the year. Despite having to replace 21.1 million of political revenues, we ended the quarter down only 2.1%, with local time sales up 8% and national time sales up 2.5% on an excluding political basis. This was driven by increased spending from such categories as medical services and telecommunications, offset in part by lower spending by retail and movies.

Automotives, which was up 1.2% in December, finished the quarter up 1.9%, and is pacing just slightly down from first quarter. So a very encouraging sign that perhaps this category has hit the bottom. The increase in the fourth quarter came primarily from foreign dealership with lesser increases in domestic dealership and domestic factory, offset in part by declines in foreign factory and repair.

Excluding political revenues, our ABC stations were up 12.1%; our FOX stations were up10.8%; and our CWs were up 2.2%. The only significant network affiliated group that was down was our MyNetwork TV group, declining only 7%, which was an improvement over the prior quarter’s performances and better than we had anticipated.

Political revenues were 2.2 million in the quarter versus 21.1 million in the same period last year. Political revenues received by our Cedar Rapids, IA station are not reflected due to the nature of the JSA. However our station received $750,000 in fourth quarter, leading into the Iowa caucuses.

For the year, even though we had to replace 31.1 million of political revenues, we were able to finish the year with net broadcast revenues down by only 7/10 of a point. This was due primarily to revenues from retransmission agreements, 58.9 million, versus 25.1 million in the prior year, the 1.6 million retransmission revenue difference to our prior guidance of 60.5 million. It’s simply timing that will benefit us as it rolls into 2008.

As Dave Amy pointed out, our purchase of KFXA in Cedar Rapids was a defensive move, which underscores our commitment to providing local news, and expanding the number of hours we currently produce. We believe we can gain market share with the strength of the viewing that we have on both television stations.

In 2007 we also did a very good job in controlling our costs. Our television operating expenses were up a minimal 2.3% for the year, including our super commission incentive charge of approximately $3 million. We do not have this plan in place for 2008, as we expect local and national demand to significantly increase.

Turning to our first quarter outlook, we are seeing strength in most of our advertising categories, driven by services and telecommunications categories.

Automotive, which is projected to see a 6% decline in units sold in 2008, is currently pacing only slightly down in the first quarter, with some dealers shifting their spending from new cars to used car advertisements.

Excluding political revenues, our FOX stations are pacing up on the strength of prime-time programming and the Super Bowl. Our CW’s and even our MyNetwork TV are also pacing up. Unfortunately the writer’s strike is affecting our ABC stations, which are pacing just slightly down, as the number of shows that were showing viewer momentum are now on hiatus.

First quarter 2008 political revenues are estimated to be 2.2 million, versus 600,000 in the same period last year. Retransmission revenues are expected to add about 5.8 million in the quarter. And the Super Bowl, going from CBS to FOX, added $4.9 million.

For the year, we are estimating our retransmission revenues, including the same time sales portion, to be about 67.3 million, which would be an 8.4 million increase or 14.2% over 2007.

So with that, and despite all of the recession fears, for the first quarter, we are forecasting net broadcast revenues to be up between 8 and 9.6% from last year’s 148.3 million. This equates to an increase of 11.9 to 14.2 million.

Turning to expenses, TV production and SG&A expenses are forecasted to be approximately 75 million in the quarter, versus 69.2 million last year, with the increases coming from higher promotional and news costs and salary increases.

For the year we are estimating TV operating expenses to be up a nominal 3.8%, for 299.8 million. For 2008 we are estimating full payments to be 82 million, up slightly due to the addition of Two and a Half Men and Family Guy. These two programs, which began airing in the fall, have performed far better than we have anticipated.

As Lucy pointed out, our 2008 capital-spending budget includes providing high definition news broadcasts at four of our key competitive markets, namely Baltimore, Columbus, Pensacola, and Asheville. We believe that investing in the station’s success and strong competitive position by providing local news in HD. We believe that our stations will be able to enhance viewership and market share.

For other expense guidance for the first quarter and full year, please refer to our earnings release which we issued this morning, and with that I would like to open it up to questions.

Question and Answer Session

Operator

Ladies and gentlemen, we will now be conducting a question and answer session. (Operator Instructions). Our first question comes from John Blackledge with JP Morgan. Please state your question.

John Blackledge – JP Morgan

Thanks for taking the questions, just a couple of items. Just wondering if you could provide a range of expected political ad dollars in 2008, I know you gave first quarter, but if you could give some kind of a range for 2008, that would be great. Also, just two other items, I was wondering if you guys would lever up to buy back shares or just use existing cash flow after dividend payment in your CapEx. And then, on your private equity investments, if you could just provide how much you’ve invested already, what you look to invest in per investment, return expectations and exit expectations for those investments. Thank you.

Steve Marks

Thanks John. I think in terms of the political number, we’re not prepared to put out a number for the entire year. Obviously with everything that we’ve been reading along the political front there’s still every reason to believe that it’s just going to be obviously a banner year. First quarter, and from what everybody has been reading up to date, the political spending is probably a little bit behind what everybody had anticipated going into the year. But if we take a look at 2006 as a comparison, we started off that year a little bit slower in the first six months and then maintained just a tremendous amount of momentum in the back half of the year, in 2006. We’re not going to back off. We believe it’s going to be an extraordinary year in political. I’m not going to put a dollar figure towards it, but it will clearly be better than anything this company has ever seen before.

John Blackledge – JP Morgan

Thank you.

David Amy

And as far as the question regarding levering up for stock buy back. We recognize that our approval process as far as from the board had grown stale over the last few years since the last time we’re in the market buying back our shares, and certainly as you can tell from the tone, we recognize and believe our stock is significantly undervalued. So it’s very important for us to be in position and authorized by the board to take advantage of any opportunities as we see them arise. As far as being specific as to how we’ll approach and what we’ll do, we’ll keep that to ourselves for now.

John Blackledge – JP Morgan

Thank you.

Operator

Our next question comes from Victor Miller with Bear Stearns. Please state your question.

Victor Miller – Bear Stearns

Good morning. I’ve got a couple. On the expense growth, you have 8.5% for the first quarter, 3.8% for the year. Could you just mention, you’d think the second half would actually pick up because of the political and the sales commission associated with that. You talked about what you’re expecting in the last two quarters that will decelerate that growth rate. And then I have a couple of related follow-ups. Thanks.

David Amy

Sure. It’s really not so much deceleration in the second half, as much as some of the investments we were making in the first half in terms and comparison to the last year, Victor. We have the MyNetwork, for example, in regards to promotion we last year opted to not promote our MyNetwork in the first quarter primarily because of the earnings and the programming that was on the air at that time was the telenovelas. So there’s been quite an improvement in regards to the MyNetwork programming and we think it’s important that we put money behind those shows as we go into the first quarter this year. The other piece that’s kind of hidden to you in regards to the description that you heard there was the investments that we’ve been making throughout ’07 in regards to expanding our news in a lot of our key markets. We’ve added a number of day parts, hired additional staff in for example Dayton, OH, Oklahoma City, Pensacola, FL. We’ve just simply added day parts and expanded our local news presence there and that’s really driving a lot of the increase in news costs in the first half of the year. And then finally, I guess, you make a good point in regards to higher expected revenues from a political standpoint versus last year, and as Steve mentioned the cost that we had incurred in our super commission was really based on overachieving ’06, so the recognition of those expenses relating to super commission really didn’t take place until late in the fourth quarter. So it’s the primary portion of that. That’s really being offset by, so you’re seeing the offset of that super commission expense goes away it’s being picked up and replaced by the point that you’re making the higher commissions relating to the expected higher political revenues.

Victor Miller – Bear Stearns

Thanks. And then just a follow-up on valuation, as we pencil it out, it looks like your company is trading about a multiple point below the comps right now. So as you look at the potential to make investments in a non TV related investments relative to what you can do with your repurchase, how are you going to go through that process? And secondly, another evaluation related question, it seems like TV is getting kind of thrown into the bucket along with newspapers and radio but you do have re-trends, you have internet potential, you have political dollars, you have the C3 spillover and you have the mobile website. If you could talk a little bit about the mobile, open mobile video coalition, how that is going, and then where you have been ahead of the game. Maybe talk about the Internet side where you really have not seen a commitment yet, a lot of pundits are saying it’s a billion plus dollars for the local TV station growing at 35% for the industry for the next five years so maybe you could talk about those particular parts of the valuation of the TV station. Thanks.

David Amy

Yes sir. We will have to start backing up a little in terms of your last point in regard to being thrown into the bucket with everyone else, as if there is no future for television as you point out in your question with the internet, and mobile and re-trends and the list goes on, there is so many opportunities for us. And I think you are really seeing it in regards to our performance and especially Sinclair, in regards to our make up, and Steve can certainly talk more about it in that regard, and how we are able to take advantage of a profile of our company. As far as Internet goes, there is a lot of discussion about what the real internet advertising dollar versus let’s say a true television slot purchase that is being re-characterized as internet. But in saying that, we have been very careful with regards to how we account for and keep track of our dollars that come in.

And there is opportunity out there, in regards to advertising, but its not nearly, in what we are seeing, as great or as robust as what he calls the pundits that is out there and we’ll certainly go after the dollars and take advantage of the opportunities of where we can provide our advertisers with a web site presence, where it makes sense in the markets where we have a strong news operation and a web presence, we will certainly provide that opportunity for our advertisers. We will remain competitive with the other broadcasters in the market, in that regard.

David Smith

Victor, with regard to the OMVC let me just state for the record so that everyone understands that the OMVC was formed with the express purpose of bringing together all the relevant technology companies out there such that at the end of a number of technical discussions and meetings and things of that nature that the industry, the broadcast industry, would end up with one unified standard on which to move forward. The last thing we wanted to have happen is for there to be multiple standards in the marketplace all of Blu-ray, or HD or Beta BHS kind of stuff. So for the process of working that process with the manufacturers and are hopeful that sometime prior to the NAAP we would like to see that issue resolved to the extent that you were at the CES show this year, you would have probably seen had you gone by either Samsung’s or LG’s booths or gone into their vehicles for demonstration purposes you would have seen legitimate live, over the year, portable and mobile television on just a myriad of devices.

And I think, once we get through the technology side of this thing, give it two, three, four, five months maybe, maybe even six months for the technologies to be integrated together and I think as to what David or Lucy said a few minutes ago, this is highly possible by the middle of next year to have genuine live product on the street, capable of watching over the air television on any kind of device that you like, whether it’s a small television set that you are going to put on your desk or it might be a six, eight, nine inch, depending on who invented it, a flash hard drive for recording purposes or whatever you would like. There is a whole myriad of devices that are going to hit the marketplace, you are just going to be a really provide a consumer the opportunity to take what’s only available in their house today with them every place they go. So we are kind of optimistic about it but we still have a little bit of time and some hurdles to get through, and I would like to think that we’ll get there.

Victor Miller - Bear Stearns

And, David, you still think you are going to get paid a per sub-fee for that?

David Amy

I don’t see why I won’t.

Victor Miller - Bear Stearns

And, back to the other question on the evaluation of your stock relative to doing the non-TV investments relative to your share re-purchase, and how you would go about and which one you’d chose?

David Amy

I’m sorry could you do that again, will you please?

Victor Miller - Bear Stearns

The question is, you could invest in non-TV assets or your stock is trading about a one local point below the comps and you know the percentage that your trading with a free cash flow yield and a dividend yield and all that and you’ve got your $150 million share repurchase, so how will you go about the decision tree of picking either a new non-TV investment or repurchasing your shares of that money instead?

David Amy

I think it’s as much a time an issue as anything else, Victor. I think that when we reach a conclusion that we are prepared to make an invest in anything in particular we kind of look at the broadcast business and ask ourselves the obvious question of can we buy it at the right price and its going to be an accretive transaction to what we do today, and if it is than that certainly goes on the table as a possibility. Alongside that, we may be simultaneously looking at half a dozen other types of transactions that have anywhere from 15 to one, two, three, four, aspects of returns associated with them and we will hopefully make, do the evaluation in a rational and prudent way and make great calls.

I think we are fortunate in that we have an enormous capacity on our balance sheet so we don’t feel constrained to do either or, we can do both if we need to under most circumstances, it’s just about the returns, and the returns and the returns.

Victor Miller - Bear Stearns

Thank you.

David Amy

We just purchased the non-licensed assets in Cedar Rapids of television operations, so it’s not like we are not in the game of looking at TV assets and making the investment, where it’s going to be an accretive to our shareholders

Operator

You’re next call comes from Marci Ryvicker with Wachovia Securities. Please state your question.

Marci Ryvicker - Wachovia Securities

Thanks. I just want to clarify your comment on the share repurchase. Is there just $8 million available and if so any sense on whether or not the board would implement a second authorization once this once in complete. And then secondly, can you, David, just go over the taxes in the fourth quarter, I think you had said your effective tax rate was going to be 44% it was 60%, so can you just walk me through that a little bit.

Lucy Rutishauser

Marci, let me take the first one. The 8 million, I am not sure what that’s relating to?

Marci Ryvicker - Wachovia Securities

You had said that you are renewing your $150 million repurchase agreement and you had previously repurchased $142 million if, I heard you correctly.

Lucy Rutishauser

Well we’re renewing, that authorization was initially for about $300 million. We had used about 142 million of that, so right now the board is saying that they were going to renew around $150 million of that.

David Amy

Marci, I know that the original authorization never expired and the view of outside counsel just went stale and they thought kind of an abundance of caution we ought to just re-notify the street that it is being renewed again because it’s kind of been off the table for a while, in terms of discussion but it was never really off the table, and we just wanted to make everyone aware that it really is there and we are considering it again. Not that we haven’t been, but we just kind of wanted everyone to know it went stale and just renewed it for the record.

Marci Ryvicker - Wachovia Securities

Got it, okay, and on the taxes?

David Amy

On the taxes there is the reconciliation we had pick up in the states and when we roll that back into the actual purchase, the estimates from the prior year, and there is quite a few different pieces here that made up about 11% of that variance to get to 60 from the 35 and then the other major item there was the first state tax NOL that was about 6% and that was just some recognition of the benefits of the NOLs and the cost of the flip in terms of how these are booked.

Marci Ryvicker – Wachovia Securities

Thank you.

Operator

Thank you (Operator Instructions). Our next question comes from Ken Silver with Royal Bank of Scotland. Please state your question.

Ken Silver – Royal Bank of Scotland

Good morning, thanks for taking the call. Lucy, I had a question for you about the leverage numbers that you gave during the prepared remarks. Are you going to have a reconciliation of those numbers on the website like you usually do?

Lucy Rutishauser

Yeah, we do and if you have as always, any questions you can give me a call and we can walk through those.

Ken Silver – Royal Bank of Scotland

Okay, so we won't do it now. And then I had a few questions on the CW and MyNetwork stations. When these stations were WB and UPN in 2006, do you know how much political revenue they had?

Lucy Rutishauser

Well let me just say Ken, they're not going to be big drivers of our overall political numbers. Typically, for instance in – typically we get, maybe about 80-90% of our revenue comes from a handful of states which are really where we have our big network affiliates. So, you know, you're looking at Portland, Florida, West Virginia, North Carolina, Ohio is a big one, Illinois, Missouri, so I'm not sure what your question is getting at.

Ken Silver – Royal Bank of Scotland

That was my next question, I'll wait. And then in terms of what's going on with these stations now, when did the writers' strike start to impact the ratings and the revenue of the CW and MyNetwork affiliates?

Steven Marks

Let me just dovetail on this political question, one more comment. Specifically the Obama campaign is buying our MyNetwork and CW television stations, much more so than other candidates have to date. And we are getting purchase in 2008 on those network affiliates and the early indication is, is that Obama is clearly going after a younger audience. Part of our resume obviously is significant with MyNetwork affiliates and CW affiliates. And we are taking a look at dollars that we had not anticipated for those network affiliates.

In terms of CW and MyNetwork as it pertains to the writers' strike, because of the competitiveness of those two networks, we see more of a hit on ABC than you will see on those two networks. And the interesting thing about those two networks, both CW and MyNetwork, both of those networks as we suggested in our comments are pacing positive for the first quarter. It's not so much based on the strength of the network as it is on the syndicated programs that surround the network. As we said in our comments, Two and a Half Men and Family Guy which were purchased to begin airing in the fall are legitimate syndication hits, so much so, to the point that I would liken Two and a Half Men to the debut of Everybody Loves Raymond about eight or nine years ago. Those are the type of numbers that we're getting company-wide, that we had no reason to believe that that would take place.

So, specifically, those two networks, which a lot of our stations have those two shows on those networks, are driving our shares and our revenues in first quarter. And we have every reason to believe that that will continue throughout the year. So, we are in very good shape. MyNetwork's stuff only has one way to go and that's up. And when you consider surrounding it with these type of shows that are performing at very high expectations, it bodes very well for this company which has a significant number of both MyNetwork and CW affiliates.

Ken Silver – Royal Bank of Scotland

And let me ask one last question. If the national primetime ratings for MyNetwork and CW, if they don’t improve a lot over the next few years, do you think there's any material risk of these networks being closed down?

Steven Marks

We usually leave that up to the networks. I don’t see that right now and I think it's way too early in the game to even contemplate that. MyNetwork is just starting up and clearly they're much better today that they were a year ago at this time, and we're excited about that and certainly going to see the benefits of it in 2008. And as far as CW is concerned, they're a year into the game as well, going on two years and they're clearly sureing up and they are a better operation than they were previously as well.

David Amy

The other thing you have to be thoughtful about is, appreciate is, that the CBS organization has an enormous number of television stations that would be left with no affiliation, no content primetime whatsoever. And that also applies to the Fox networks, so there is a clearer line with an interest in the standpoint of them having to create content for their own television stations. So, I think they're less likely to go away today than they might appear to be, given their not overly successful formats as yet. So I think you just got to hang in there and appreciate that they're motivated to make these things successful in the long-term because it simply provides the value to their television stations.

Ken Silver – Royal Bank of Scotland

Okay, thanks a lot.

Operator

Our next question comes from Aaron Watts with Deutsche Bank. Please state your question.

Aaron Watts – Deutsche Bank

Good morning everyone. I was just curious, given your comments on where you're placing your money in terms of acquisitions within and outside of the broadcasting space. Approximately what type of cash flow multiple did you pay for this station you bought in earlier this month?

David Amy

It's not that simple Aaron, and I appreciate your question. But here we characterize it as being defensive and that's because we couldn’t reach an agreement on the extension of the (inaudible). So the numbers really don’t – it's very accretive to us.

Aaron Watts – Deutsche Bank

And then, the second question, more of a big picture type question for you David. If penetration of digital video recorders increases and a larger number of viewers had the capability at least to fast forward through commercials, I'm curious how you think your advertisers might react to this, and perhaps what threat that poses a year or two down the road and beyond, to the value proposition of advertising on broadcast TV.

David Amy

I think, if you go back a few years ago, and I don’t know whether it was two, three, four or five years ago, there were hundreds at that point in time in history were telling us that the over-the-air advertising business was going to go away because people weren’t going to watch ads anymore. I think the fact of the matter is that this just is not the case, as is evidenced by the most recent Super Bowl. I mean there was more conversation about the damn commercials than there was about the football game.

So, I don’t see people, and I've seen some studies in the recent past that talk about how people in some cases fast forward commercials and in some cases they watch the commercials. So I don’t know that it's that big an issue. We never thought it was going to be that big an issue in the grand scheme of things. So, I think the whole purpose of having a DVR is really for the convenience of the consumer to be able to sit down and record something and watch it when they want, as much as it is anything else. So I'm not overly concerned about the long-term effects of that particular technology.

Steven Marks

In fact, we even, from a ratings standpoint have been receiving benefits for DVR viewing. I think the line now is plus three days, to that extent. So when we count our viewing and count our measurements, the advertising community as well as the broadcasting community have come together and compromised, saying that its people really do sit and watch their shows, they really do sit in, watch there at the advertising and we get credit for that in spite of the late viewing schedule.

David Amy

I honestly think its really nothing more than that industry attempting to position itself as the eight hundred pound gorilla but it turns out its nothing but a baby chimp’s all it is. That’s the grand scheme of things.

Aaron Watts – Deutsche Bank

Okay, thanks a lot.

Operator

Our next question comes from Victor Miller with Bear Sterns. Please state your question.

Victor Miller – Bear Sterns

Just across in New York, we were busy watching the football game.

Steven Mark

Go Giants!

David Amy

Victor, are you going to tell me you didn’t see any of those commercials?

Victor Miller – Bear Sterns

Okay, I saw those too. Two things, David. Will we see you monetize any one of the investments you've made already in 2008? And secondly, when you talk about the average interest rate, just penciling it through, Lucy, did you average around 7% in '07 and penciling in more like 5.75% in '06 just from the decline we've seen in LIBOR?

Lucy Rutishauser

I'd have to pull out the year '07 and year '06 numbers Victor and I can pull those up. But if you think about it, a big driver isn’t just the lower interest rate environment, but it's the fact that we refinanced it, the 8.75% bonds with bank debt, which is at LIBOR plus one. And then we took out a good portion of the 8% bonds with the 3% convert. So those are two of the real big drivers that are bringing the cost of debt down. In fact, I would even say that it was probably even higher than 7%. I can pull those if you want to talk afterwards.

Victor Miller – Bear Sterns

Bank debt you said is price of LIBOR plus one right now?

Lucy Rutishauser

Well, the term, the revolver, is at LIBOR plus 75 basis points and the term debt is at L plus one.

David Amy

With regard to the asset strategy on assets this year, there's none I would say that every asset that we have as non-broadcast is for sale at any minute. We're shameful opportunists in that regard and when the thing hits our threshold, we're gone.

Victor Miller – Bear Sterns

Thank you.

Operator

Our next question comes from Edward Atorino with Benchmark.

Edward Atorino – The Benchmark Company

Hi, could you go over that tax answer again or maybe I should call Lucy later and go over the numbers on that. I still don’t understand the analysis of the tax item.

David Amy

Well, that's because it’s a complex question that's being asked and I try not to…

Edward Atorino – The Benchmark Company

I'll talk to Lucy later maybe we can break it down to a couple of pieces. Thanks very much.

David Amy

Yeah, I don’t want to get everybody hung up on that. But we'd just say primarily we have a true-up there that relates to our estimated tax payments and then what you do in the fourth quarter, we true-up to actual. But that's a small number but from a percentage wise, since it’s a quarterly amount that we're looking at in terms of the reconciliation, it turns into a large percentage and part of what was driving that is just state tax laws that had changed from the way we report legal entities.

Operator

There are no further questions at this time. I will turn the conference back over to management to conclude.

David Amy

All right, well thank you again everyone for your time and we'll talk to you next quarter.

Operator

That concludes today's conference. All parties may disconnect now.

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Source: Sinclair Broadcast Group, Inc. Q4 2007 Earnings Call Transcript
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