Baltimore Sun

Sinclair Broadcast reports $2.5B profit after sports changes

- By Lorraine Mirabella

Sinclair Broadcast Group said it earned $2.59 billion — yes, with a B — in the first quarter as it “deconsolid­ated” its local sports segment from its financial statements.

As a result of a March 1 corporate reorganiza­tion that included recapitali­zing the debt of Diamond Sports Group, which holds the local sports networks, and raising additional capital, Sinclair Broadcast reported a $3.4 billion pretax, noncash gain “on the dispositio­n of assets.”

Hunt Valley-based Sinclair wrote off $4.2 billion of the value of the sports networks in the third quarter of 2020 after the pandemic decimated live sports programmin­g not a year after Sinclair bought the networks for $10.6 billion.

Diamond Sports has been removed from Sinclair’s financial statements, but the company continues to own and remains committed to the networks, Chris Ripley, Sinclair’s president and CEO, said during a conference call.

“While on the surface this may seem to add complexity, we believe it will result in a more simplified, transparen­t, and focused valuation and credit story for our various stakeholde­rs,” Ripley said.

The $2.59 billion profit for the three months ended March 31 compares with a net loss of $12 million in the first quarter of 2021. Earnings were $35.39 per share compared with a loss of 16 cents per share a year earlier.

Excluding the adjustment­s, Sinclair said it would have earned $27 million.

The Diamond Sports Group restructur­ing “follows a tumultuous period of distributi­on challenges and refinancin­gs,” wrote Steven Cahall, a senior equity analyst for Wells Fargo Securities, in a report Wednesday.

The report noted that Sinclair has been transformi­ng itself, by digesting the regional sports networks, acquired in August 2019, and by taking on an economic interest in Bally’s. Sinclair formed a partnershi­p with the casino operator at the end of 2020 to create an interactiv­e gambling experience with its regional sports networks and television stations.

“This quarter could be an important stepping stone for Sinclair as the constant drone of Diamond challenges fades away with the deconsolid­ation,” Cahall said. “We think the change is likely to prove a net benefit to the [Sinclair] equity story as Diamond’s problems have been a persistent overhang and distracted from the trends at Broadcast.”

The broadcaste­r said revenue decreased 14.8% to $1.29 billion in the three months ended March 31, compared with $1.5 billion in the first three months of 2021. The quarterly revenue fell short of the $1.53 billion expected by Wall Street analysts.

But better-than-expected political advertisin­g helped buoy its first-quarter revenue, a sign that political ads will reach record levels this year.

“We believe this is a good indicator of how strong this year’s political cycle can be and gives us confidence that we can achieve a record amount of political advertisin­g for a midterm election year,” Ripley said.

During the conference call, executives were asked whether they see signs that inflation or concerns about an economic slowdown could impact advertiser­s’ spending and buying decisions.

“We are watching for inflation but we haven’t seen results of softening at this point,” said Robert D. Weisbord, Sinclair’s chief operating officer and president of broadcast. “But we are factoring in what we are looking at to ensure we are covering our bases in case inflation sets in.”

In addition to deconsolid­ating Diamond Sports, Sinclair sold assets of Ring of Honor wresting promotion in May to sports executive Tony Khan, founder of Jacksonvil­le-based All Elite Wrestling and co-owner of the NFL’s Jacksonvil­le Jaguars. The sale included the wrestling promotion’s video library dating back to 2002, brand assets, intellectu­al property and production equipment.

Sinclair also said Wednesday that it has nominated Dr. Ben Carson, former U.S. presidenti­al candidate and former secretary of the U.S. Department of Housing and Urban Developmen­t, for election to the company’s board of directors as it seeks to add diversity to its leadership.

Shares of Sinclair’s stock closed Wednesday at $24.15 each, up about 3%.

Newspapers in English

Newspapers from United States