Sinclair: Auto Buys Drive South, Broadcast Revs Up 2.8%

David Smith of Sinclair Broadcasting GroupWhile the company forecast that the auto category would fall by 14%-15% during the current third quarter, Sinclair Broadcast Group's CEO said Wednesday he has little doubt the business will eventually recover. Just when remains an open question.

It's "proven time and time again that the best way to improve auto sales is through television," said David Smith, adding: "There's no question in any of our minds" that spending will return. Whether in mid-2009 or 2010 is anyone's guess, Smith said on a conference call to discuss second-quarter results.

In the second quarter, the auto business fell some 4%, the company said. But with General Motors accelerating its spending drops, Sinclair said the auto business--which accounts for some 20% of its ad sales--began to fall off in mid-May, as truck and SUV sales declined.



Part of Smith's faith that auto spending will bounce back, he said, is based on the belief that domestic automakers will reconfigure their product lines to fit the changing preferences of consumers.

Even with the bumpy ad economy, Sinclair grew net broadcast revenues by 2.8% (to $163.7 million) in the second quarter--but one driver was retransmission consent dollars, which is not subject to the current economic conditions. Still, the performance was below the company's forecast of an increase between 3.6% and 4.9%. Sinclair's stock price was trading down some 13% in midday trading to about $6.40.

Operating income was up 4% to $43.3 million.

Political ad dollars helped the second-quarter performance, Sinclair said. But in the current third quarter as the November elections approach, it expects to pull in $9.7 million in political dollars, up from $1.1 million in a non-federal-election year in 2007.

In order to diversify, Sinclair has been investing in non-TV businesses--notably real estate--and that included $72.1 million over the first six months of 2008.

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