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Sluggish Political Quells Sinclair’s 3Q10 Forecast

BALTIMORE: Sinclair Broadcast Group today said third-quarter net broadcast revenues were likely to come in at the low end of its previously forecasted range. The results were revised on weaker than expected political revenue and a decline in paid and religious programming. Sinclair said revenues likely would come in at the low end of its Aug. 4, 2010 guidance, which anticipated growth in the high teens to low 20 percent range compared to 3Q09.

“Paid and religious programming, which has been down all year, has yet to pick up as expected,” said Sinclair’s executive vice president and chief financial officer, David Amy. “We also expect political revenues to be approximately $9 million for the third quarter as compared to $9.5 million as provided in our prior guidance. Political advertising, which is difficult to forecast because such advertising is generally purchased close to the air date, is currently pacing at approximately $7.7 million with two weeks remaining in the quarter.”

Wells Fargo analysts were “not surprised by the announcement,” according to a note from Marci Ryvicker.

“From the television companies--both public and private--that we have spoken with over the past few weeks, it sounds like political started the quarter off slower than anticipated,” she wrote. “Political is still expected to be strong but below expectations.”

Ryvicker said Sinclair might have been too aggressive with expectations for national advertising as well.

“We believe that national advertising may be a little weaker than SBGI had originally expected--although auto is still extremely strong, pacing [up] 46 percent in Q3 despite the $1.5 million incremental revenue related to Cash for Clunkers that came in last year,” she wrote.

Wells Fargo had Sinclair’s third-quarter net broadcast revenues coming in 19.5 percent higher than a year ago. Ryvicker said analysts there were “not overly concerned about the guidance update.”

Sinclair’s David Amy said that “even at the lower end of our guidance, third-quarter net broadcast revenues will outperform third-quarter 2008, both including and excluding political revenues. In addition, our general and administrative, sales and engineering expenses are running less than our prior expense estimates.”

Shares of Sinclair (NASDAQ: SBGI) dropped briefly this morning below $7 before rebounding to around $7.10 mid-day. Year-to-date, shares have gained around 76 percent. The company will provide more detailed 2010 guidance when it releases its final third quarter results on Nov.3, 2010.

SBGI also announced its intention to offer $250 million in senior unsecured notes due 2018. The proceeds will be used to repurchase up to $60 million in 6 percent convertible subordinated debt due 2012, and all of its 8 percent senior subordinated notes due 2012.
-- Deborah D. McAdams

August 4, 2010
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