Hearst-Argyle Group OKs Buy-out

 1Q revenues beat Street but still down 19 percent
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NEW YORK: Hearst-Argyle Television is a step closer to being a wholly owned division of Hearst Corp. The special committee of Hearst-Argyle (NYSE: HTV) directors yesterday recommended that shareholders accept Hearst’s offer to buy the 33 percent portion of the company it doesn’t already own. Hearst formalized the offer upon the committee’s unanimous go-ahead to HTV shareholders. Under deal terms, Hearst will pay $4.50 per outstanding A share. The offer expires June 2 at 5 p.m., unless it’s extended.

HTV filed its 1Q09 results with the Securities and Exchange Commission April 30, but didn’t publicize the event because of the pending tender offer. The 29 TV stations generated $133.8 million in revenues, down from $165 million a year ago. Net loss was $9.3 million, down from a profit of more than $10 million a year ago.

The results of 1Q09 include a $1.3 million gain recorded on broadcast auxiliary service gear replaced by Sprint Nextel. During 1Q08, HTV received an $11.5 million insurance payment related to the disruption of operations at WDSU-TV in New Orleans during Hurricane Katrina in 2005.

Retransmission revenues came to $12.4 million, double the 1Q08 figure. Network compensation was $1.5 million, down from $2.2 million the year before. Political was down from $9.6 million last year to $756,000 for 1Q09. Digital media revenues were $4 million, down from nearly $4.9 million a year ago.

Long-term debt as of March 31, 2009 was $714.1 million, up from $701.1 million at the close of 2008. Cash and equivalents was $8.3 million compared to $7 million Dec. 31, 2008.

Though HTV’s numbers were down, they came out better than Wachovia’s prognostication. Revenues were down 19 percent versus Wachovia’s expected 21 percent. Core advertising revenue was down 23 percent versus 25 percent. Retrans was $12.4 million versus Wachovia’s $9.8 million target, and earnings per share were -10 cents versus Wachovia’s -11 cents.

Based on HTV’s 1Q performance, Wachovia revised its 2Q outlook for the company.

“We are raising our 2Q and 2009 retrans estimates to $13 million and $54 million from $11 million and $45 million, respectively,” Wachovia analyst Marci Ryvicker wrote.

The expectation on 2Q core advertising was held at a decline of 20 percent from last year. Revenues are expected to fall 15 percent now rather than 17 percent. Earnings before interest, taxes, depreciation and amortization expenses are expected to remain at $40 million, a decrease of 27 percent. Earnings and free cash flow per share are expected to come in at 4 cents and 27 cents, up one and two cents respectively. -- Deborah D. McAdams