The special committee of independent directors at Hearst-Argyle Television has recommended that shareholders accept the sweetened bid from Hearst Corporation to buy them out at $4.50 per share. Meanwhile, the company reported that Q1 revenues fell 19%.
The endorsement came after Hearst Corporation, which already owns 82% of the TV company, increased its buyout offer by a half-buck to the $4.50 level. The special committee unanimously endorsed the bit as fair to the non-Hearst shareholders. The tender offer is scheduled to run until June 2nd.
With the buyout bid pending, Hearst-Argyle Television did not conduct a conference call with analysts or issue a press release on its Q1 earnings, but did filed them with the SEC. Wachovia analyst Marci Ryvicker gave them a going over and offered this analysis:
“Q1 rev. of $134M (-19%) was slightly better than our $131M (-21%) forecast due to core advertising revenue (which was still dismal at -23% vs. our -25% est.) and retrans ($12.4M vs. $9.8M). EBITDA (excl. FAS123R) of $14M was better than our $13M est primarily due to higher rev, as opex (-9%) were in line with our forecast. EPS were -$0.10 vs. our, -$0.11 est. due to higher EBITDA and lower interest ($9.8M vs. $11.4M) offset by a lower than expected tax benefit ($2.8M vs. $6.3M). Meanwhile, FCF/share was -$0.01 vs. our -$0.03 est. due to higher EBITDA, lower interest and lower capex.”
After looking at the Q1 results, Ryvicker revised her estimates for Q2 and the rest of the year – a rare (in the current climate) upward revision, although not a dramatic one.
“Based on the significant retrans number in Q1, we are raising our Q2 and 2009 retrans ests to $13M and $54M from $11M and $45M, respectively. Given pacing data provided by other operators, we left our core advertising expectation for Q2 at -20% and slightly increased our FY advertising revenue to -15% from -17% due to the Q1 flow-through. These changes resulted in total revenue of $153M (-16%) versus $152M (-17%) for Q2 and $590M (-18%) versus $577M (-20%) for the year. Our Q2 EBITDA forecast remained at $40M (-27%) as we increased corp expenses ($8M vs. $7M). Due to a reduction in our interest exp ($10M vs. $11M), our Q2 EPS and FCF/share ests increased by $0.02 and $0.01 to $0.04 and $0.27, respectively. For ’09, we now expect EBITDA, EPS and FCF/share to be $114M (-45%), $0.02 and $0.59, respectively, vs. prior forecasts of $108M (-48%), -$0.08 and $0.49,” Ryvicker told clients.