Emmis focused on balance sheet


Jeff Smulyan no longer does quarterly conference calls, but did congratulate employees for hitting budget in the company’s fiscal Q1 (March-May) as Emmis dealt with a 26.9% revenue decline by managing costs and reducing debt. Smulyan praised the Emmis sales force for “hustling for every available revenue dollar.”

“The headline, I suppose, is what you would expect: We continue to fight against the impact of a remarkably difficult economy. While I believe we have seen the bottom of this downturn, what no one can say is how long it will take to climb out of the trough. Therefore, we continue to do what’s necessary to survive and prepare for better times,” Smulyan said in his email to employees, which was also made available to RBR/TVBR. “The good news is that our strategy is working. By focusing on debt reduction, maintaining compliance with our banking agreements and reducing expenses, Emmis is protecting itself from the financial failure that threatens so many others these days,” he continued.

For the quarter, Emmis’ net revenues were down 26.9% to $62.4 million. Radio revenues declined 27.4% to $46.2 million and publishing revenues were down 25.6% to $16.3 million. But Emmis was able to cut costs in the radio operation much more than for its magazine division. RBR/TVBR calculates that radio cash flow dropped 61.7% from $21.6 million to $8.3 million, while publishing moved from positive CF of $1.7 million a year ago to negative $371K in the most recent quarter. Consolidated CF was down 66.1% to $7.9 million.

Within radio, domestic net revenues fell 26.8% to $40.2 million, while foreign radio declined 31.1% to just over $6 million. Domestic radio CF decined 60.7% to $7.3 million.

Emmis reported an operating loss of $6 million, vs. an operating profit of $13.9 million a year ago. But the past quarer was boosted significantly by a $31.9 million gain on debt extinguishment. Net income for the company (before preferred stock dividends) grew to $9.7 million from $1.2 million a year ago. Diluted net ncome per common share from continuing operations was 22 cents, compared to a loss of two cents a year ago.

Smulyan sought to reassure employees that the company is dealing with the tough economy and he thanked staffers for their contributions. 

“Specifically, in the first quarter we hit our budget – or, rather, you hit our budget. You did what we asked, aggressively managing costs and hustling for every available revenue dollar. At the same time, we reduced our debt by nearly 20 percent, continued making interest payments, sold our unprofitable Belgium radio operation and made the difficult decisions to cut positions and reduce salaries. While I can’t point to any big shifts in the outlook, I do see encouraging, incremental improvements in pacings and ratings in radio,” he told employees.

“One point I would like to make emphatically: While some of you have voiced concern over Emmis’ being downgraded by rating agencies, or by talk of bankruptcies in our sectors, I can tell you this: We are putting ourselves in a position to survive. Even in these difficult times, for example, our cash flow is considerably greater than our interest payments and we are meeting all of our debt obligations – a key variable in times like these,” Smulyan said. “The fight isn’t over, so I ask you to focus on what Emmis will be when this downturn passes: an organization with the resources to regain its position as a world-class media company. I thank you for the work you do every day to make that possible, and for your patience in these hard times,” the CEO said.

RBR/TVBR observation: Only the strong survive. In the current economic environment, what’s most important is a strong balance sheet. Only those companies which have one, or are able to improve on a weak balance sheet, will come out of the other end of this tunnel.