Sinclair reports 3rd-quarter net income up 47%

Sinclair Broadcast Group Inc. reported Wednesday a 47 percent jump in third-quarter net income as revenue fell and said it had successfully restructured its balance sheet.

The Hunt Valley-based owner of 58 television stations said net income for the quarter that ended Sept. 30 rose to $14.9 million, or 19 cents per diluted share, compared with net income of $10.2 million, or 12 cents per diluted share, during the third quarter of 2008. Net broadcast revenues from continuing operations fell 9.1 percent, to $136.4 million, from $150.1 million during the third quarter of 2008.

The broadcaster, which owns Baltimore's Fox 45, has faced declining advertising revenue amid the recession but is seeing hints of improvement in the economy, executives said.

"We have started to see signs that perhaps the worst of the recession is over," said David Amy, Sinclair's chief financial officer. "While we still do not expect to see an immediate robust recovery, improvements in the business are occurring as advertisers are beginning to buy with longer lead times and declines in the core business are getting smaller."

The company also raised its outlook for net broadcast revenues in the fourth quarter. Sinclair expects station net revenues in the range of $143.3 million to $146.3 million - still a drop of 11 percent to 12.8 percent compared with fourth-quarter net broadcast revenues, but better than the previously expected $135.5 million.

During the quarter, the broadcaster was able to restructure its balance sheet and improve cash flow, said David Smith, Sinclair's president and chief executive.

He said the company would use the proceeds of its new $500 million senior secured note offering, announced last week, to repurchase outstanding debt from note holders and repay a portion of the company's bank debt. The company was also able to restructure its bank credit facility, extending $75.4 million of its $135.9 million loan to 2013.

Smith said the balance sheet restructuring was a necessary step to provide the liquidity to compete and take advantage of opportunities in digital television broadcasting. In July, the company had said it might consider filing for bankruptcy protection if it failed to restructure its debt.

The company also said Wednesday a potential cross-default with Sinclair's partner, Cunningham Broadcasting, had been resolved after Cunningham renegotiated its bank credit facility.

Sinclair's third-quarter operating income fell to $35.7 million from $37.4 million in the same period a year earlier. But operating expenses decreased to $124 million from $141 million in the year-earlier period.

Local advertising revenues decreased nearly 14 percent in the third quarter, while national advertising revenues slid 26.7 percent, the company reported. Advertising spending categories that saw the biggest decreases were automotive, services, paid programming, movies and telecommunications.

Sinclair, which depends heavily on the automotive sector for advertising, had said last month it expected third-quarter net broadcast revenue to be better than anticipated because of higher automotive advertising spending after the government extended the "cash for clunkers" program, higher spending on political advertising for health care and state-related issues, higher retransmission revenues and increased advertising spending across many categories in August and September.