Outlook cloudy for SBS


Citing limited visibility from the economic environment and industry-wide ad decline, Spanish Broadcasting System has suspended offering quarterly guidance to Wall Street. Despite the lack of formal guidance, company officials said SBS’ radio division is pacing in line with its peers and that TV is continuing to enjoy significant growth.

SBS reported that Q2 revenues were down 6% to $45.2 million. Radio declined 9% to $41 million, while the much smaller TV segment grew revenues by 60% to $4.2 million. Radio operating income before depreciation and amortization was down 9% to $16.1 million while the loss for TV was reduced by 68% to $4 million. CEO Raul Alarcon told analysts he is sticking with his projection that Mega TV will hit break even by the end of this year.

As for the tough advertising environment for radio, Alarcon said “We have been through these periods before.” He said the company is positioned to recapture ad revenues when the economy improves. In Q2, both local and national sales were off. Local radio sales actually increased in Puerto Rico, but that was more than offset by declines in Miami, LA, Chicago and New York. National was up in LA and San Francisco, but down in New York and Miami.

Like many other broadcasters, SBS took a non-cash write-off in Q2 for impairment of the value of its FCC licenses. That charge of $389.3 million produced a net loss for the quarter of $394.6 million.

Noting that Radio One had recently sold a Los Angeles station to improve its balance sheet, one investment manager wanted to know if SBS might do likewise, selling a station or cluster to raise cash. Alarcon said he would always consider all alternatives, but that no such sales were currently anticipated. In answer to another question, Garcia noted that SBS is not in danger of violating any of its loan covenants.