The financially troubled station group expects “high single-digit” growth in the third quarter as political kicks in and domestic auto spending continues to be “weak.” CEO Cornwell tells Wall Street analysts to expect financial restructuring.
Granite Broadcasting Corp. reported this morning that net revenue in the second quarter grew just 1% over the same period of 2005 to $26.9 million.
The financially troubled station group said that increases in local and political revenue were offset by decreases in national revenue and network compensation. Advertising revenue grew 2.8% in the quarter.
Because Granite has decided to sell its San Francisco station, KBWB, it did not include the station’s results in its earnings report.
Operating under a heavy debt burden ($504 million) that demands stiff interest payments ($11.9 million in the quarter), the group reported a loss per share of $1.58, nearly double that of the same quarter of 2005. Broadcast cash flow in the quarter was up slightly over last year to $8.9 million.
Granite is staying just a few steps ahead of bankruptcy.
A month ago, Granite borrowed an additional $70 million that allowed it to make an overdue $20 million payment on an earlier loan and stave off bankruptcy and to close on its $45 million purchase of WBNG, the CBS affiliate in Binghamton, N.Y.
But, in a conference call with security analysts this morning, Granite CEO Don Cornwell acknowledged that the company had another $20 million interest payment due in December.
To meet that payment and terms of its latest loans, Cornwell said, Granite is developing a plan to make the company more solvent and will put it into effect before December. “At the end of the day, we are going to have to restructure the balance sheet,” he said.
In its press release and conference call, Granite chose to accentuate the positive.
“Granite performed well in a challenging operating environment,” Cornwell said.
COO John Deushane said new local business development initiatives generated more than $1.4 million of revenue during the quarter across several categories, 27% better than the second quarter of 2005.
Overall, Granite outperformed the industry in local sales, Deushane said, noting that its 7.7% growth in the quarter exceeded the 2.3% reported for the industry by the Television Bureau of Advertising.
Deushane said ad revenue was depressed by declines in the stations’ top three ad categories. Domestic auto was down, 2%; paid programming, down 10%; and restaurants, down 16%. Had the three categories been flat, he said, Granite’s reported ad revenue growth would have been 5.4% rather than 2.8%.
The good news, Deushane said, was double-digit growth in 10 of the group’s top 25 ad categories: medical, furniture, insurance, telecommunications, utilities, real estate, agriculture, general services, government and political.
In addition to these gains in local revenue, the company expects $1 million in annualized Internet-related revenue during the first half of the year, Deushane said.
The company said that it expects year-over-year percentage growth in the third quarter to be in the high single digits, excluding results from its newly acquired station in Binghamton, N.Y., WBNG.
The third quarter will benefit was from increased political spending. Granite said it expects to capture between $3 million and $3.5 million in political for the year.
Deushane declined to put a number to the auto spending in the third quarter, saying only that he expects spending by the foreign manufacturers will be strong, while domestic will generally be weak.
Granite owns and operates, or provides programming, sales and other services to 23 channels in the following 11 markets: San Francisco; Detroit; Buffalo, N.Y.; Fresno, Calif.; Syracuse, N.Y; Fort Wayne, Ind.; Peoria, Ill.; Duluth, Minn.-Superior, Wis.; Binghamton, N.Y.; Utica, N.Y. and Elmira, N.Y. The company’s channel group includes affiliates of NBC, CBS, ABC, CW and My Network TV, and reaches approximately 6% of all U.S. television households.