Sinclair Reports Earnings Gains, Eyes Acquisitions

Retransmission-consent fees boost Sinclair Broadcast Group in Q2.

Sinclair Broadcast Group unveiled sharply improved second-quarter earnings Wednesday, buoyed by retransmission fees, and it opened the door for acquisitions despite falling values in the media landscape.

“We expect to pursue opportunities to strengthen our television portfolio's competitive position and evaluate opportunistic repurchases of our debt and common stock,” president and CEO David Smith said in a statement. The Baltimore-based company owns or operates 58 TV stations in 35 markets.

“We see this as a real opportunity today, as values have come way down,” Sinclair executive vice president and chief financial officer David Amy told an analysts' conference call after results were announced. “Now is a great time to be a contrarian.”

Net income available to common shareholders soared to $13.3 million, or 15 cents per diluted common share, from $2.2 million (3 cents) in the same quarter a year earlier.

Net broadcast revenue from continuing operations climbed 2.8% to $163.7 million. Although that was below 3.6%-4.9% guidance, it was one of the better revenue gains reported by a group TV broadcaster for the quarter ended June 30.

Political advertising was $3.6 million in the quarter versus $1.1 million a year ago.

“Although we expect the weakness in the economy to continue to impact advertising-spending levels for the remainder of 2008, we still expect to grow net broadcast revenues on the strength of political advertising levels,” Amy said in a statement.

“Our cable, satellite and telecom retransmission-consent agreements are expected to result in approximately $68 million in revenues this year as compared to $59 million in 2007,” Amy added. “On the expense side, we are evaluating cost-cutting measures.”

Sinclair expects third-quarter-2008 station net broadcast revenues from continuing operations, before barter, to come in at $152.5 million-$154.5 million, for an increase of 2%-3.4%. A year ago, this revenue figure was $149.4 million. The Sinclair forecast assumes $9.7 million in political revenues for the third quarter versus $1.1 million a year earlier.

During the analysts' conference call, Sinclair said its gains came despite weak advertising because its stations increased their average share of market advertising to 19.3% from 18.5%.

Also, Sinclair predicted that automotive advertising will fall 14%-15% in the third quarter versus a 4% decline in the second quarter and 7.7% decline four years ago in the prior presidential-election/Olympic Games cycle.

Still, most other segments of advertising are holding up well, such as the telecommunications category, which is growing despite the weak economy.