Cox Radio revenues fell 13.1% in Q4


CEO Bob Neil told analysts that the company’s stations outperformed their markets, which were down 16%, but that’s not much consolation in this depressed ad market. Cox Radio is, like just about everyone, looking to cut expenses, but Neil said he will not be issuing any companywide edict for local managers to make layoffs.

By the numbers, Cox Radio reported that Q4 revenues fell 13.1% to $99.3 million, Local was down 14% and national 10%. Wachovia analyst Marci Ryvicker notes that if you subtract $2.6 million of political, national was down 21% for the quarter. The “other” category was down 9%, although the Internet portion was up 1%. Asked about the decline in “other” revenues, Neil told analysts that the company has been assessing whether special events are likely to have good profit margins and, if not, they do not take place.

Neil noted rating success for Cox stations in Birmingham, Jacksonville and Orlando in particular. The goal now is to convert those ratings to dollars.

Station operating income declined 36.4% to $29.6 million. Free cash flow declined 39.6% to $16.7 million. But that’s still plenty of cushion compared to some of the company’s peers. “It’s good to be under-leveraged,” Ryvicker noted in a report to clients. Cox Radio’s debt-to-EBITDA ratio was 3.14 times at the end of 2008, well below the company’s debt covenant of five times.

Cox Radio declined to project what its operating expenses would be for 2009, prompting Ryvicker to ask if that signaled a plan to restructure the company, perhaps with significant staff cuts. “Marci, we do things a little bit different from our competitors. We’re really decentralized, so we don’t make broad sweeping statements about how we’re going to layoff some ‘X’ percentage of our workforce or stuff like that. We let the individual GMs in the markets determine what kind of staffing they to deal with the economic environment, to deal with the product and revenues. So, no, I really don’t expect that. I suspect that, as we have done over the last two or three years, when  we see an opportunity to take some efficiencies to restructure things, we’ve done that. But if you’re asking me, do we have some kind of grand plan that we’re going to lay out in front of you, the answer to that is no,” Neil replied. As for groups who have been cutting sales staffs, Neil said that seemed counterintuitive at a time when companies need to be working to build revenues. Demand, he said, is “pretty decent,” but average unit rates are way down, with advertisers and agencies also looking to hold down costs.

Neil was also asked to look into his crystal ball by another analyst, who noted that some TV operators have already ended up in bankruptcy court, and predict how the radio industry will be changed if there’s a bankruptcy shake-out. Will that restore pricing discipline to radio? “It depends on who buys it, who buys those assets that are out there,” Neil replied. He noted rumors that there are some former radio operators sitting on the sidelines waiting for the opportunity to get back in. “If they’re the buyers, that’s a good thing. If the buyers are purely financial players, I think that could be not such a good thing.” 

RBR/TVBR observation: Wall Street seems surprised that Bob Neil doesn’t subscribe to cookie cutter management. Maybe that’s because he’s a radio guy who didn’t go to business school. Also notable from his conference call – no harangue directed at Arbitron. Neil noted that PPM is now currency in Atlanta and the results have been positive for the Cox cluster.