Sinclair Shareholders Share In Political Haul

After reporting record-breaking political revenues in the third quarter this morning, Sinclair Broadcast Group is expecting the five weeks of October and November leading up to Election Day to bring in more political ad dollars than the entire 2008 election year. A big chunk of that cash is going to be paid right back out in a $1-per-share special dividend to shareholders, in addition to the 60 cents per year the company already pays in quarterly installments.

“In a show of confidence for our free cash flow generation and reflecting a belief that the government will let the Bush tax cuts expire, leading to an increase in the dividend tax rate and ordinary income tax rates next year, our board of directors acted to return meaningful value to our shareholders this year,” said EVP-CFO David Amy in the company’s quarterly conference call today with Wall Street analysts. The $81.2 million will be paid out before 2012 ends to escape any tax increases for shareholders in 2013.

Finding the cash for the payout will be no problem, since Sinclair is projecting that it will generate $205.8 million in free cash flow for full year 2012.

Fourth quarter net broadcast revenues are expected to be up 48.3% to 49.4% from a year ago to a range of $268.1 million to $270.1 million.

“This assumes $54 million to $56 million of political versus $4.1 million in the same time period last year,” Sinclair Television Group VP-COO Steve Marks told analysts. “The amount of political we expect to book in the fourth quarter is as much, if not more, than our pro forma 2008 full year political,” he added. That will take full year 2012 political revenues to about $100 million, up 82% from $54.9 million pro forma in 2008, the previous presidential election year.

Excluding acquisitions, revenues are expected to be up 20.4% to 21.5% in 4Q, with core non-political revenues flat.

That flat performance in core is due to a lot of crowding out by political in the first five weeks of the quarter. Marks was optimistic looking past Election Day.

“What’s critical is a couple of key categories for us, which are the automotive category and telecommunications, which continue to show strength. Once we get out of the political window, interestingly enough, we’re seeing our core business, especially for December, looking pretty positive right now, which is a very good indication,” Marks said.

Some categories that were soft in 33 are looking stronger in 4Q, he said. “Fast foods and restaurants were down for the third, but they’re going to be up for the fourth. We’re seeing continued growth in telecommunications for fourth quarter and the automotive category continues to be pretty strong,” Marks said in the Q&A session with analysts.

Having recently added several CBS stations to the Sinclair portfolio, Marks thinks the Super Bowl on Feb. 3 will provide a “push” to start the year. “So we’re very optimistic,” he said of 2013.

Having already dramatically expanded the company in 2012, it’s not surprising that Sinclair President-CEO David Smith was asked about his appetite for even more acquisitions.

“We’ve always said, as a matter of fact for the past 15 years, that if we find something that fits our profile and kind of bolts onto what we’ve got, we’re certainly a candidate for it,” Smith responded. “But again, if we can’t buy it at the right price, then we’re not a buyer.”