Sinclair Broadcast Group announced net broadcast revenues of $151.7 million in the third quarter, a decrease of 4.5% over the same quarter a year ago. A lack of political advertising led to the decrease.
Sinclair also announced a major acquisition, in the form of the eight station Freedom Broadcasting group for $385 million.
"We are pleased to announce this morning that we entered into a purchase agreement to buy the assets of Freedom Communications' eight television stations for $385 million," commented David Smith, president and CEO of Sinclair. "We expect to fund and close on the transaction late in the first quarter or early second quarter of 2012, pending Freedom shareholder, antitrust and FCC approvals. Until that time and after receiving antitrust approval, we will operate the stations pursuant to a local marketing agreement."
The combination of the Freedom stations with the Four Points stations give Sinclair two full power stations in the West Palm Beach market.
"It is our intent to continue evaluating television station transactions which are accretive and where we can use our expertise and presence to improve profitability and competitive position," added Smith.
Political revenues were $2.4 million in the third quarter, compared to $9.8 million in third quarter of 2010. Local net broadcast revenues were up 1.2% in the third quarter while national net broadcast revenues were down 19.2%.
Sinclair had operating income of $52.2 million in the three-month period, as compared to operating income of $56.1 million in the prior year period.
Smith said the revenue picture looks brighter for the fourth quarter. "Core broadcast revenues are expected to continue to grow. Automotive advertising spending is on the upswing with the Japanese auto manufacturers back to near full production and political ad spending heating up," he said. "For the fourth quarter, we expect our stations to benefit from a low-teen percent growth rate in ad spending by the automotive industry, as compared to fourth quarter 2010, and approximately $3.5 million in political revenues."
In September, Sinclair agreed to purchase the seven Four Points Media television stations for $200 million. The company began operating the stations on Oct. 1 with a local marketing agreement and expects to close on the stations early in the first quarter of 2012.
"We are pleased that advertising spending on our stations continues to grow despite the volatility in the financial markets and economic concerns in the U.S. and abroad," said David Amy, EVP and CFO. "While there is an underlying sense of caution by advertisers, this is more than offset by the growth in key advertising categories such as automotive, our largest advertising category. The upcoming presidential election and the economic issues facing our country are also driving increased political spending."
Once the Freedom and Four Points stations are factored in, Sinclair will own and operate, program or provide sales services to 73 television stations in 46 markets, reaching 26.3% of the U.S. television households. Sinclair's television portfolio will consist of 20 Fox, 18 MyNetworkTV, 13 CW, 11 ABC, 9 CBS, 1 NBC, and 1 Azteca station, in addition to 79 sub-channels.