Sinclair Broadcast reports second-quarter drop in profits in 'defining year'

Sinclair Broadcast Group Inc. reported a decrease in profit for the second quarter but met Wall Street’s expectations during what the company called a defining year.

Sinclair Broadcast Group Inc. reported a decrease in profit for the second quarter but met Wall Street's expectations during what the company called "a defining year" for the Hunt Valley-based TV station owner.

Net income decreased to $44.6 million, or 43 cents per share, for the three months that ended June 30, compared with net income of $49.4 million, or 52 cents per share, during the second quarter of 2016. Earnings met analysts' expectations of 43 cents per share. The stock price was down slightly more than 5 percent Wednesday, closing at $34.90 per share.


"2017 continues to be a defining year for Sinclair as our strategic acquisitions, partnerships and technological leadership drive the growth of the company," David Smith, executive chairman, said in an announcement.

He said Sinclair's planned acquisition of Tribune Media Co. for $3.9 billion "would create a leading media platform that ensures a free and local television model can thrive."

During a morning conference call with analysts, Sinclair President and CEO Chris Ripley said the Tribune Media acquisition is on track.

"We have no reason to believe it won't close around year end," Ripley said. "The FCC [Federal Communications Commission] has been very constructive in terms of its review."

Sinclair announced plans in May to acquire Tribune Media, which would cement its position as the nation's largest broadcaster. The deal is possible because of a recent FCC decision to relax station ownership rules. Tribune Media was formed in 2014 when Tribune Co., then the parent of The Baltimore Sun, split its broadcasting and publishing divisions into separate, independent companies. The broadcast division became Tribune Media, while the publishing division, including The Sun, became Tribune Publishing, renamed tronc Inc. last year.

Sinclair's pending purchase of Tribune Media has sparked criticism from media watchdogs who are concerned about the concentration of ownership. But others say it will trigger consolidation as traditional broadcasters compete for viewers and advertisers in a digital age.

Consolidation of large broadcasters and small owners of TV stations is inevitable and necessary for a healthy broadcasting industry, Ripley said during the call. Such consolidation will result in significant savings and efficiencies, he said.

"After that you've got stronger local content, and producers can spread that content across multiple platforms," he said.

He said Sinclair is pursuing selling some stations that will help pave the way for the transaction to close. The deal would put together Sinclair, which has grown by acquiring station ownership groups, mostly in smaller markets, with Tribune Media, which has 42 stations, some of them in the nation's largest markets, including New York City, Los Angeles, Chicago, Dallas and Houston.

The greater scale is expected to give Sinclair advantages as the broadcasting industry moves to a new transmission standard, which Sinclair helped invent. It will enable high-definition broadcasting to mobile devices and allow a flow of data that will be used for hyper-local zoned advertising, more mobile news and entertainment and other applications, such as weather emergency alerts.

"We like [Sinclair's] long-term focus, innovative distribution and content strategies," Marci Ryvicker, a senior analyst with Wells Fargo Securities, said in a research note Wednesday.

During the second quarter, the broadcaster's sales rose nearly 2 percent to $679.3 million, compared with $666.5 million in the second quarter of last year, beating expectations. Analysts had expected sales of $670.3 million. Political ad revenues were $5.4 million, compared with $16.7 million in the second quarter of 2016.

The company said it expects core advertising sales to be flat in the third quarter, partly because of the absence of $11 million in Olympic ad revenue that came in the third quarter of 2016.

But digital business is faring better than expected, with growth in the mid- to- high-20 percent range expected in the third quarter, Ripley said.

The Baltimore-based Sinclair Broadcast Group has been getting a lot of notice in recent months as it awaits government approval to take over Tribune Media. (Baltimore Sun video)