Sin­clair’s CEO Smith steps aside

Broad­caster re­ports jump of 17 per­cent in quar­terly net

Baltimore Sun - - NATION - By Natalie Sher­man nsh­er­man@balt­sun.com

Sin­clair Broad­cast Group said Wed­nes­day its long­time CEO will step back from the com­pany’s day-to-day op­er­a­tion, in a reshuf­fling of the ex­ec­u­tive suite de­signed to po­si­tion the broad­caster to weather changes in the in­dus­try.

The news came as Hunt Val­ley-based Sin­clair re­ported a profit of $50.8 mil­lion in the third quar­ter, up about 17 per­cent from the same pe­riod in 2015. The firm’s rev­enue in­creased more than 26 per­cent to $693.8 mil­lion, ver­sus $548.4 mil­lion a year ear­lier.

The firm earned 54 cents per share in the quar­ter ended Sept. 30, up from 45 cents last year.

But the gain was not as strong as many had an­tic­i­pated dur­ing a pres­i­den­tial elec­tion year, per­for­mance Sin­clair lead­ers at­trib­uted to lim­ited tele­vi­sion spend­ing for Repub­li­can nom­i­nee Don­ald Trump, as well as in­creased com­pe­ti­tion from NBC af­fil­i­ates for ads dur­ing the Olympics.

The firm’s stock closed at $24.85, down 18 cents, in Wed­nes­day trad­ing.

An­a­lysts said the firm’s stock price al­ready re­flects the re­duced rev­enue, hav­ing dropped af­ter the com­pany told in­vestors in Septem­ber that it would not reach the $649.2 mil­lion-plus pre­dicted in Au­gust.

But many an­a­lysts are wor­ried about how lo­cal broad­cast­ers will be af­fected by the shake-up in the ad­ver­tis­ing world wrought by the growth of dig­i­tal plat­forms such as Google and Face­book. Sin­clair, which owns, op­er­ates or pro­vides ser­vices to 173 tele­vi­sion sta­tions in 81 mar­kets, in­clud­ing some pend­ing trans­ac­tions, is one of the lead­ing play­ers in that space.

“Cer­tainly from in­vestors you get ques­tions about the sus­tain­abil­ity of earn­ings, how is their core busi­ness do­ing, is it un­der some sec­u­lar threat?” said James Dix, a se­nior an­a­lyst at Wed­bush Se­cu­ri­ties. “I think some of the con­cern is war­ranted.”

Sin­clair CEO David D. Smith, whose fa­ther founded the com­pany, ac­knowl­edged the changes fac­ing the in­dus­try in ex­plain­ing the re­or­ga­ni­za­tion, say­ing they are de­signed to help the firm grow in a “chang­ing me­dia land­scape.”

Smith, who has served as chair­man, pres­i­dent and CEO for more than 20 years, will be­come ex­ec­u­tive chair­man, ef­fec­tive Jan. 1, fo­cus­ing on a new broad­cast plat­form, public pol­icy and ex­pan­sion of Sin­clair’s news fran­chise.

“The or­ga­ni­za­tional changes pro­vide greater fo­cus and over­sight in those crit­i­cal ar­eas that strengthen our longer term strate­gies to be multi-plat­formed, ver­ti­cally in­te­grated and com­pete in the broader me­dia ecosys­tem, ul­ti­mately driv­ing value,” he said in a state­ment.

Sin­clair’s Chief Fi­nan­cial Of­fi­cer Christo­pher Ri­p­ley — who will be­come CEO and pres­i­dent — said 2016 has been an un­usual year, with a unique elec­tion and pres­sure on ad­ver­tis­ers such as for-profit col­leges.

“When we project for­ward into 2017, we don’t think that the mar­ket has re­ally changed,” he told an­a­lysts dur­ing a call Wed­nes­day.

At the same time, Sin­clair pointed to a 25 per­cent in­crease in dig­i­tal rev­enue this quar­ter, as well as an on­line site, Circa, which it hopes will break even in 2018. (Circa, which went live this sum­mer, is re­spon­si­ble for a roughly $10 mil­lion loss this year, Ri­p­ley said.)

The firm also has in­vested in live sports through the Tennis Chan­nel and is us­ing drones to aid its news cov­er­age, among its other in­vest­ments

Sin­clair also said Lucy Rutishauser, its se­nior vice pres­i­dent of cor­po­rate fi­nance and trea­surer, would take on the ti­tle of chief fi­nan­cial of­fi­cer.

De­spite the change in Smith’s ti­tle, an­a­lysts said they ex­pect him to re­main in­volved, not­ing that day-to- day op­er­a­tions have long been a “group ef­fort.” He and his fam­ily re­main Sin­clair’s con­trol­ling share­hold­ers.

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