Outdoor outperforms for Clear Channel


Clear Channel’s Q1 revenues were up 4% to $1.56 billion, but it was all thanks to CC Outdoor, where revenues surged 12% to $775.6 million. Radio revenues were down 4% to $769.6 million, so outdoor was actually bigger than radio for the quarter. Radio is pacing down 5.3% for Q2, while outdoor is pacing up 0.3%. The company said nothing new about its court battling with banks over its pending buyout, except to note that “it is not certain that a closing will occur.”

The decline in radio revenues was across both local and national ad sales, attributed to “overall weakness in advertising as well as declines in automotive, retail and services advertising categories.” The drop was partially offset by gains in traffic, online and syndicated radio revenues.

While the US outdoor business was up, most of the gain came from overseas, including a hefty foreign exchange gain due to the weak dollar. Expenses were also up, so CC Outdoor reported a 5% decline in operating income before depreciation and amortization, non-cash compensation expense and gain or loss on disposition of assets, net (OIBDAN) to $162.1 million.

Radio OIBDAN was off 6% to $273.6 million and total corporate OIBDAN (after merger-related costs) was down 6% to $394.8 million.

“Our radio operations out-performed the majority of our markets in the quarter and we continued to invest in our content and online assets in an effort to strengthen our value proposition to both our listeners and advertisers. We believe our concerted investment strategy will position our businesses for growth over the long-term,” said CEO Mark Mays in the company’s press release.

Clear Channel’s net income for Q1 ballooned to $799.7 million from $102.2 million a year earlier, largely due to closing the sale of its TV division and some radio divestitures. That marketing of non-core assets is pretty much at an end because of the soft market. Having pulled back 173 of the 448 radio stations Clear Channel had originally planned to sell, only 20 stations were still up for sale, with another 32 under contract and awaiting closings as of March 31st. Since then, another 17 have been put under contract. By our math, that leaves only three to be sold.

Clear Channel’s Q1 income before discontinued operations, excluding a one-time gain, worked out to 19 cents per share

RBR/TVBR observation: With the drop dead date for the Clear Channel buyout a month from today, just a few days after the company’s lawsuit against six banks is set for trial in Texas, an investor…er, make that gambler…could turn a big profit if the banks come up with the financing and the deal goes to closing at $39.20 per share. Is it worth the risk? Analyst David Miller said no in a note to clients assessing the company’s Q1 results. “We are maintaining our Sell rating, as we believe the current merger agreement between CCU and the Bain/Thomas Lee consortium is locked up in litigation and is simply too risky to play on the upside. We believe downside risk in the stock is approximately $24.50, or the equivalent of 7.9 times estimated 2008 operating cash flow on an enterprise value (EV) basis,” he said.