Net revenues were down 16.6% in Q2 for Barrington Broadcasting, taking broadcast cash flow down 20.6%. But CEO Jim Yager says cost-cutting measures have paid off and the company has reduced its interest expenses by buying back some of its bonds.
“Although we have seen positive results from both revenue and cost-saving initiatives we put in place earlier in the year, overall revenue continues to be impacted by weakness in the local and national economies. However, we will continue to benefit from our bond buybacks that occurred in the first half of the year as our annual interest payments to bondholders have been reduced by approximately $7.0 million,” said Yager.
Barrington was permitted to use up to $13 million of the $16 million that Pilot Group injected into the company early this year to buy back debt. It has nearly reached that point, so the debt buyback is pretty much over for this year.
For Q2, Barrington reported that gross revenues were down 16.2% to $28.8 million. Local dropped 15.4% to $18.1 million, national was down 35.1% to $6 million and political was halved to $500K. Other revenues, including retransmission consent payments, increased 51.8% to $4.5 million.
Broadcast cash flow was down 20.9% to $7.7 million for the quarter.
“Our primary operating objective at all of our stations is to grow truly local sales revenues, monetize our Internet initiatives and grow our retransmission consent revenues. In addition, we continue to take steps to improve operating efficiencies at all of our stations through cost reductions and are aggressively pursuing joint sales and shared service agreements similar to the ones we have with Granite Broadcasting in Peoria and Syracuse,” Yager told analysts and bondholders.
COO Chris Cornelius said retrans revenues had jumped from $480,000 in Q2 2008 to $1.4 million in Q2 2009. He noted that Yager is currently in negotiations with a major MSO whose agreement with Barrington expires later this year.
Noting what Gray Television President Bob Prather said a few days ago about saying no to sharing retrans cash with networks, one analyst posed the same question to Yager.
“We have had no real, substantive discussions with any of the networks, other than to say that we’re not interested in sharing our retrans revenues,” Yager said.
Is it realistic to expect that local stations will be able to hold onto all of the retrans cash?
“It’s going to be tough negotiations. There’s so many elements to a network contract, other than just retrans, that will come into play as we sit down and renegotiate,” Yager noted. With most of its affiliate contract renewals many years out, he said Barrington will not be the “lead pony,” but will follow suit after other groups cut their deals. “I do think the affiliate associations are going to have their work cut out for them to make the affiliates’ case. I do think its affiliate association negotiations that will occur in terms of retrans,” Yager concluded.