Sinclair takes flight on political spending


SBG / Sinclair Broadcast GroupEven without political income Sinclair Broadcast Group had an excellent Q3 2012, given the current economic climate. Add in political, however, and the increases enjoyed by the company were stratospheric.

Net broadcast revenue soared to $226.4M, a 49% increase YOY. Operating income increased by a similar percentage, rising 50% to $78.6M.

Sinclair has many stations entering its portfolio and a few exiting. It said that on a same station basis, excluding political income, it gained 7.3% in local (including retransmission consent income) and picked up 2.4% in national.

“We are very pleased with our results for the third quarter, which were driven by increased advertising spending by the political and automotive categories, as well as higher retransmission revenues,” commented David Smith, President and CEO of Sinclair.  “Despite increased demand for air-time by politicians and political action groups, the core business showed solid growth.  On a same station basis, excluding political, net broadcast revenues grew 6.9% in the third quarter.”

“We continue to reinvest in the Company’s long term growth, having recently entered into an agreement to buy the non-license assets of KBTV, the FOX affiliate in the Beaumont/Port Arthur, Texas market, where we also own the CBS station. We also entered into an agreement to sell our ABC station, WLAJ, in Lansing, Michigan as part of our on-going portfolio evaluation in which we identify pockets of opportunity as well as non-strategic markets.”

Smith continued, “In an extraordinary, value-creation action and in anticipation of a potential increase in dividend tax rates in 2013, the Board of Directors decided to return approximately $81.2 million of value to our shareholders in the form of a $1.00 per share special cash dividend, in addition to our regular $0.15 per share quarterly dividend.”

The gains in non-political were impressive given that political was squeezing many such advertisers off the air. A 12.2% gain in automotive was a primary driver. The trend is expected to continue right up to Election Day 11/6/12.

Summing up, EVP/CFO David Amy said, “We have many reasons to be very excited about the state of our Company. Among them, political ad spending on our stations for this year is expected to reach a historic $98.2 million. On a pro forma basis, compared to 2008, that would represent an 82% increase. In addition, sales of new autos in the U.S. continue to increase, which is leading to higher advertising revenues in this, our largest category. For the fall season, our solid syndicated programs such as ‘Family Feud’ and ‘Big Bang Theory,’ as wells as newly added shows such as ‘Wheel of Fortune’ and ‘Jeopardy’ are expected to help drive key dayparts in the back half of 2012 and for 2013. We believe the strength of our fundamentals and the contributions from our acquisitions will add to our strong competitive position as we enter next year.”