Sinclair Revenue Flat in Q2

Debt ceiling squabble might spell windfall for stations
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Sinclair Broadcast Group reported net broadcast revenues of $159.3 million for the second quarter, a slight uptick from the $158.7 million it booked last year. The company had operating income of $57.6 million in the quarter, compared to $56 million in the prior year period.

"Despite the production disruptions in the auto industry as a result of the Japanese earthquake and tsunami, ad spending on our stations by the auto industry grew 2.4% in the second quarter due to increased spending by local dealers," commented David Smith, Sinclair president and CEO. "While Toyota and Honda were affected the most, other auto dealers such as Hyundai, Kia and GM increased their marketing.

"During the quarter, we also experienced growth in paid programming/direct response," he added, "categories which had been down for quite some time, but appear to have turned the corner."

Smith forecasted "robust political spending during the primaries," and a boost in issues cash too. "We further expect issue spending to increase as a result of the many heated topics facing the country, particularly as a result of the nation's debt crisis, increased government spending and continued high unemployment," he said. "We believe that political spending at the state and local levels will increase in the upcoming political season due to highly charged issues such as state and municipal employee collective bargaining, immigration and state government budgets."

Political revenues were $1.2 million in the second quarter versus $3.8 million last year.

Local net broadcast revenues were up 5% in the second quarter, while national net broadcast revenues were down 12.8%. Excluding political revenues, local net broadcast revenues were up 5.3% and national net revenues were down 7.8% in the quarter.

Sinclair said its nine CW affiliates recently extended their affiliation agreements with the network until August 2016.

Sinclair expects third quarter station revenue to be down 3.9% to 5.2% due to the absence of political, but said the ad market remains strong.

"Despite the economic concerns still plaguing the country, we continue to be on track to grow our 2011 net broadcast revenues excluding political," commented David Amy, EVP and CFO. "Leading that growth expectation is auto ad spending and retransmission revenues. We look forward to the start of the fall season with Fox's highly anticipated new show, The X Factor, ABC's returning hit, Dancing with the Stars, and a strike-averted NFL season."

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