Station acquisitions, political ads boost Sinclair Broadcast earnings

Shares of Sinclair Broadcast Group leapt nearly 5 percent after the company announced Wednesday that TV station acquisitions and strong political advertising boosted its sales and earnings in the fourth quarter.

The Hunt Valley-based TV station owner's stock closed up $1.26 at $28.05 a share in Nasdaq trading.


Sinclair's income soared to $95.4 million in the three months that ended Dec. 31, from $2.3 million in the final three months of 2013, the company said. Earnings per share were 98 cents, up from 2 cents.

Sales rose nearly 44 percent to $613.8 million in the October-to-December period, compared with sales of $427.7 million in the last quarter of 2013. Annual sales reached nearly $2 billion in 2014, a 45 percent gain.

"We are excited to report record-breaking results for our key financial metrics for 2014," David Smith, Sinclair president and CEO, said in the company's announcement.

Sinclair said it would have earned 84 cents per share in the fourth quarter without a loss from debt extinguishment that was more than offset by a net gain on asset dispositions.

The broadcaster closed on $1.3 billion worth of acquisitions last year, including the $1 billion purchase of Allbritton Communications. The company has grown into one of the nation's largest broadcasters, with stations reaching more than a third of U.S. television households through affiliates such as FOX, ABC, MyTV, CW, CBS and NBC.

"We think this will be the first full year these acquisition will pay off," said Tuna Amobi, director of equity research with S&P Capital IQ in New York.

Besides ad sales, the additional stations are giving Sinclair the scale to negotiate more favorable contracts with cable and satellite TV providers, who pay broadcaster to include their signals in channel lineups.

Amobi said growing revenue from the so-called "retransmission fees" should help offset an advertising slowdown, although a more pronounced slowdown might hurt the company's ability to generate enough cash to repay the debt incurred for acquisitions.

In the current quarter, Sinclair's core advertising has been flat to slightly up from a year ago, as it has been for much of the broadcast industry. Analysts said networks and stations have struggled to deliver audiences advertisers expect.

The slow advertising growth in part reflects increased competition with digital competitors, said Steven M. Marks, a Sinclair chief operating officer.

But "we're following those dollars," Marks said during a Wednesday conference call with analysts. "Our biggest growth now is in the digital end."

The company saw sales from digital offerings, including Web and mobile platforms, grow more than 70 percent in the fourth quarter.

Political ad revenues contributed $80.3 million to fourth-quarter revenue, up from just $6.7 million a year earlier, which was not an election year. But even without political ads, net broadcast revenues jumped nearly 27 percent.

This year the company will focus on expanding original content, developing new distribution channels and increasing audience share, just as it did last year with the launch of American Sports Network, which covers live high school and college sports.


The network has agreements with 11 NCAA Division I conferences and has begun providing national coverage of Atlantic 10 Conference basketball games. It now ranks third in size and reach among domestic sports networks, behind ESPN and Fox Sports, the company said.

Sinclair also launched One Media, a joint investment between the broadcaster and Coherent Logix, to develop high-definition TV viewing for all mobile and portable devices. From a facility in Austin, Texas, One Media has been testing an over-the-air system to transmit fixed, mobile and data services to set-top and tablet devices and is working with vendors and service providers to develop products and services.

During a Wednesday morning conference call with analysts, Smith described the system as a multi-faceted future business platform for broadcasters.

"The broadcasting industry is at this point and time moving in the right direction to establish itself as the pre-eminent deliverer of content, not just to devices in the home, but mobile devices, portable devices, automobiles," Smith said.

And as Sinclair expands its digital business, he said, "we're the ultimate delivery medium in terms of eyeballs, on the Internet and on television. It's a new business for us. It's a huge growth business for us."