Sinclair Broadcast Group Inc. shares fell 5.2 percent yesterday after the company said a weak advertising market and expensive programming will cause a decline in its third-quarter cash flow.
The Baltimore company's disclosure came as it reported a second-quarter increase of 31.8 percent in broadcast cash flow, the industry's key earnings measure.
"The second quarter was fine," said William Meyers, a New York-based analyst with BancAmerica Robertson Stephens. "The issue relates more to the third-quarter outlook."
Investors sent shares down $1.25 to $22.8125, Sinclair's lowest closing price since Jan. 12. About 1.4 million shares changed hands, more than twice its average daily volume over a three-month period.
For the second quarter, which ended June 30, Sinclair reported broadcast cash flow of $82.8 million, up from $62.8 million in the year-ago period. Cash flow per share was 43 cents, up 30.3 percent from 33 cents.
Revenue jumped 27.6 percent, to $167.5 million from $131.3 million in the year-ago period. The company reported a net loss to common shareholders of $3.46 million, or 4 cents a share, after payment of preferred stock dividends.
During the second quarter, Sinclair, which owns or programs 56 television stations and 55 radio stations, took an $11.1 million charge to eliminate debt under its old credit line. The company also recorded an after-tax gain of $5.24 million from the sale of assets.
Sinclair attributed the increases in revenue and cash flow to strong acquisitions since the year-ago period. "The company's station group achieved solid revenue and broadcast cash-flow growth in the second quarter on a pro forma basis," David Amy, Sinclair's chief financial officer, said in a statement.
He said the company was helped by local revenue growth, an affiliation agreement with the WB network and cost containment. "Our radio division exceeded our expectations again this quarter with 5.8 percent net broadcast revenue growth and 11.5 percent broadcast cash-flow growth, both on a pro forma basis," Amy said.
But he added that the General Motors Corp. strike and a weak national advertising market have hurt the company in the third quarter.
"The slower-than-anticipated growth in revenues and continued investment in more expensive, higher-quality programming such as 'Frasier' will likely cause broadcast cash flow on a pro forma basis to be slightly lower than third-quarter 1997 results," Amy said.
Sinclair has buying up properties at a fast rate. Sinclair completed three deals this month in a growth spurt that included the acquisition of Max Media Properties LLC of Virginia Beach, Va., owner of nine television stations and eight radio stations, for $252 million in cash.
David Smith, Sinclair's president and chief executive officer, said the acquisitions present opportunities on an "intermediate and long-term" basis, despite the difficult third-quarter advertising market.
"We are just starting to assimilate the recently acquired Max Media and Sullivan stations acquired earlier this month," Smith said.
He added that Sinclair can "cross-sell and cross-promote television and radio stations in six markets where we now have interests in both media."
Pub Date: 7/29/98