Sinclair profit up 27% in quarter

Broadcast group's revenue declines

May 04, 2006|By ANDREA K. WALKER | ANDREA K. WALKER,SUN REPORTER

Shares of Sinclair Broadcast Group Inc. climbed nearly 9 percent yesterday after the Hunt Valley company posted a 27 percent increase in first-quarter earnings.

Hunt Valley-based Sinclair, whose 60 television stations reach nearly a quarter of U.S. households, said net income was $11.2 million, or 13 cents a share, for the three months that ended March 31, compared with $8.8 million, or 10 cents a share, for the first quarter last year. The stock rose 70 cents to close at $8.60 on the Nasdaq stock market.

Revenue dipped slightly, but ad spending by local companies increased. Revenue was $163.5 million, a 0.2 percent decline from the $163.9 million posted for the quarter last year. Broadcasting revenue increased 2.4 percent, to $147.9 million from $144.4 million in the comparable period in 2005.

The financial picture was helped by increased advertising in the service, telecommunications, schools, fast food and retail categories. The company slipped in national advertising by 7.5 percent, as most of its stations didn't air the Winter Olympics and its Fox stations didn't have the Super Bowl this year because it moved to ABC. But gains in local advertising helped, increasing by 6.6 percent for the quarter and accounting for two-thirds of all its advertising, the company said.

"Our local effort is certainly what is driving the company today," David D. Smith, Sinclair chairman, president and CEO, said in a conference call with analysts yesterday.

Sinclair also said it expects to save $5 million in costs this year from revamping its News Central operation. Under the prior format, live anchors at Sinclair's Hunt Valley headquarters produced newscasts that were shown on many of the company's stations across the country.

The company said in March that it would discontinue live anchors sending out news feeds from Hunt Valley and instead send "content feeds," comparable to how a wire service sends stories to subscribing newspapers.

The uncertainty created this year when the WB and UPN networks said in January that they would merge into the CW television network seemed to have diminished as Sinclair said yesterday that it would probably make money from the deal.

Initially, the company thought it could lose as much as $8 million in net broadcast revenue because it had WB and UPN stations in four of its 19 markets: Raleigh-Durham, N.C.; Nashville, Tenn.; Milwaukee; and Birmingham, Ala. It was likely that only one station in each of those markets could carry the CW programming.

In 14 other markets, including Baltimore, Sinclair has WB stations but no UPN connection, meaning the owners of those stations will have to compete with Sinclair for CW programming. The losers would have to figure out how to get and pay for new programming, or become independent.

Sinclair's stock fell 15.7 percent the day the deal was announced as investors speculated that some of Sinclair's stations could be in trouble.

Now the company said revenue rose $3.5 million this year and it expects it to increase by $10 million yearly because it has entered affiliation agreements with the CW network for some of the stations. It entered agreements with Fox's My Network Television for 17 of its stations.

"I think the network affiliation switch will be a big benefit to this company," Smith said.

andrea.walker@baltsun.com

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