Post-election Sinclair wins

Net income up ninefold at broadcaster that roiled 2004 campaign


A year ago, most people who followed politics in America came to know the name Sinclair Broadcasting Group Inc.

The Hunt Valley corporation had thrust itself into the rumble of presidential politics by announcing that its 62 television stations would run a documentary attacking the Democratic nominee, U.S. Sen. John Kerry, just days before the election.

The announcement mobilized powerful Democratic lawmakers and media watchdog groups, who contended the company had overstepped regulatory bounds.

Sinclair's stock plunged by double-digits when some advertisers threatened to pull their business and a group of shareholders sued, alleging the company's politically charged news policies were hurting investors and contributing to already sagging profits.

By yesterday - the one-year anniversary of the 2004 election - the company had reclaimed a measure of its anonymity and was making the kind of headlines investors generally prefer.

Despite the absence of nearly $8 million in political ad revenue, Sinclair yesterday reported a roughly ninefold increase in third-quarter net income, largely the result of cost reductions, better-than-expected national ad revenue and proceeds from the sale of one of its underperforming stations last year.

Its stock rose 49 cents, or nearly 6 percent, yesterday to close at $8.89 a share. That was up 42 percent from the low point of $6.26 in the midst of the company's troubles last year.

"It's behind us," said Sinclair Chief Financial Officer David B. Amy, responding to a question about the attention last year.

The company reported yesterday that it earned a profit of $31.6 million, or 37 cents per share, in the third quarter. That compared with $3.5 million, or a penny per share, for the third quarter last year. Sales fell slightly to $165.8 million, compared with $168.1 million in the quarter a year ago.

In a sign of healing wounds, industry analysts and shareholders have long forgotten any preoccupation with the company's politics.

Sinclair said earlier this year that a shareholder group that had accused management of damaging the company by pursuing partisan politics had dropped its lawsuit.

There has been little fallout from a coalition of liberal groups that vowed in December to organize a nationwide protest against the company and its advertisers.

Advertisers that had pledged to pull ads if the documentary was aired seemed to forgive and forget once the company announced that it would instead air only portions of the documentary.

"It's not an issue for us anymore," said John Chartier, a spokesman for New York state Comptroller Alan G. Hevesi, who manages a state pension fund that owns 1.4 million Sinclair shares. Hevesi, a Democrat, had sent a letter to Sinclair last fall expressing concern about the company's plans to air the documentary.

"They [didn't air] parts of that documentary and that was fine. We dropped it after that," Chartier said.

Analysts say the company, which owns and operates, programs or provides sales services to 60 television stations in 37 markets, has cut costs and refocused on its business.

In the latest quarter, it pulled in $2.9 million more in fees it collects from cable and satellite providers to rebroadcast its signal. It also sharply boosted revenue in its direct-mailing business, which was aimed at drawing new advertisers to television but had previously suffered from inefficiency.

The results included $6.7 million in deferred proceeds from the sale of its WB affiliate in Kansas City and a $5 million benefit from a change in Ohio tax law.

"The numbers look quiet good," said Leland Westerfield, a media industry analyst for Harris Nesbitt in New York. Westerfield has a "neutral" rating on the stock and says the company's renewed focus has helped put it on par with its peers in the business.

The loss of political advertising was partially made up by the strength of ABC's ratings among younger viewers, which are coveted by advertisers. Sinclair owns 11 ABC affiliates, which have benefited from hit shows like Desperate Housewives and Lost.

But while the company has regained its financial footing, it has not shed a perceived conservative bias in its news operation and it remains a lighting rod for critics of media consolidation.

Some groups continue to oppose the company's efforts to buy up multiple local stations in the same market. That could affect its growth plans in places like Nashville, Tenn., where it is currently attempting to buy its third station in that metropolitan area. The deal will need the blessing of the Federal Communications Commission, which has agreed to the company's past acquisitions.

"Sinclair had been a poster child for the excesses of local media concentration for a long time before the events of last year," said Andrew J. Schwartzman, president of the Media Access Project, which opposes media concentration and is a Sinclair critic.

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