Hearst-Argyle Hits Targets

The second quarter sees a sharp rise in earnings fed by a pair of tax issues.
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Hearst-Argyle Television


posted a second quarter Thursday that was largely in line with expectations.

Earnings per share jumped to 68 cents from 37 cents a year ago, thanks to the favorable impact of two tax issues. Excluding those benefits, earnings would have been about 30 cents per share.

The company said revenue for the period was $188.5 million, compared with $198 million during the same period a year before.

Analysts polled by Thompson were expecting 30 cents per share on $189 million in revenue.

"As expected, the combination of a relative absence of political spending in Q2, and a decrease in network compensation, contributed to a revenue decrease during the period," said Chief Executive David Barrett. "While we did achieve revenue growth in some of our ad categories, it was not enough to offset these declines."

The $9.5 million revenue drop was attributable to a $9.7 million decrease in net political ad revenue and a $2.6 million decrease in network compensation.

Barrett cited modest declines in some key ad categories including telcos, movies and political during the quarter, though he also mentioned gains in housewares, retail and fianancial services advertising.

"Our stations continue to be very well-positioned with generally leading ratings in key newscast time periods and syndicated-program day parts, and we expect to benefit from ABC's improved prime-time performance when the new season begins in mid-September," Barrett added. "This will be offset to some degree by NBC's weakened position in Prime Time. We continue to develop new, non-traditional revenue at all our stations, emphasizing the importance of the local business component. And we are poised to capture the significant sales opportunities that await us in 2006."

The company said revenue in the third quarter, when compared with last year's third quarter, will reflect the normal cyclical absence of political and Olympics revenue that contributed $22.1 million and $19 million, respectively, to the results reported in third quarter 2004. In addition, network compensation is projected to decrease an estimated $3 million in the quarter compared with that from a year earlier.

The company expects third-quarter revenue in the range of $163 million to $172 million, with earnings per share of between 15 and 18 cents.

"Looking ahead to 2006," said Barrett, "we anticipate stronger ad spending when, in the first quarter, the Super Bowl will air on our 13 ABC stations, and the winter Olympics on our 10 NBC stations. During 2006, we also expect to again benefit from significant political ad-spending, with 15 Senate races and 18 gubernatorial races to be contested in states and markets where we own and operate leading TV stations."

On Thursday morning Hearst-Argyle was set to open the day's trading at $24.84