Quarterly radio revenues gained for Emmis, but trailed markets


With a proposed going private buyout by CEO Jeff Smulyan pending, Emmis Communications is not conducting quarterly conference calls. In its quarterly financial filing with the Securities and Exchange Commission (SEC), Emmis reports that radio revenues were up, but publishing down in the three month period of March-May 2010.

Net revenues for radio were up 1.9% to $44.4 million, but that includes the company’s foreign radio operations as well as domestic. Publishing net revenues declined 1.7% to $16 million. Total net revenues for the company in its fiscal first quarter were up 0.9% to $60.3 million.

“Radio net revenues increased in the three-month period ended May 31, 2010 as compared to the same period of the prior year principally due to the continued improvement in the general pace of business. We typically monitor the performance of our domestic stations against the aggregate performance of the markets in which we operate based on reports for the periods prepared by Miller Kaplan. Miller Kaplan reports are generally prepared on a gross revenues basis and exclude revenues from barter arrangements. Miller Kaplan reported gross revenues for our domestic radio markets increased 5.7% for the three-month period ended May 31, 2010 as compared to the same period of the prior year. Our gross revenues as reported to Miller Kaplan fell short of the performance of the markets in which we operate, posting an increase of 3.1% compared to the prior year. Our gross revenues grew more than the market average in three markets (New York, Indianapolis and Austin) and trailed the market average in three markets (Los Angeles, Chicago and St. Louis). Revenue declines at KPWR in Los Angeles and in our Chicago radio cluster caused us to fall short of the performance of the markets in which we operate. Miller Kaplan does not report gross revenue market data for our Terre Haute market. For the three-month period ended May 31, 2010 as compared to the same period of the prior year, our average rate per minute for our domestic radio stations was unchanged and our inventory utilization was up 2%,” Emmis said in the company’s analysis included in the SEC filing.

Operating income for the radio division improved dramatically in fiscal Q1 to $9.4 million from $325K a year earlier. The operating loss for the publishing division improved to only $23K from $1.4 million.

Supplemental pro forma data posted on Emmis’ investor website offered more detail on the quarterly station operating numbers. The SOI and percentages have been calculated by RBR-TVBR.

Domestic radio net revenues rose 2.05% to $40.99 million, while foreign radio net revenues declined 0.15% to $3.37 million, for a total radio gain of 1.88% to $44.36 million.

But operating expense reductions from a year earlier, added to the revenue gains, gave a big boost to station operating income (SOI). For domestic radio SOI rose 49.62% in the quarter to $10.87 million and foreign radio SOI jumped 80.56% to $455K, boosting total radio SOI by 50.66% to $11.33 million. For publishing, the equivalent of SOI was still negative but a smaller number than a year earlier.

The quarterly SEC filing included, of course, details of the proposed buyout by CEO Jeff Smulyan, backed by Alden Global Capital and the status of multiple shareholder lawsuits claiming that the offer of $2.40 per share shortchanges them. However, the only new detail since our recent report is that a hearing on the plaintiffs’ motion for a preliminary injunction to block the going private transaction has been set for July 19th.

Not mentioned at all in the filing is the lock-up agreement by preferred shareholders opposed to the deal, which only became known in the past few days.

RBR-TVBR observation:  The stock price of Emmis is now being driven by the buyout offer and the likelihood of it being consummated, rather than the performance of the company’s radio stations and magazines. There’s still work to be done in LA and Chicago to get on pace with the recovery pace of other big market radio companies, but Jeff Smulyan meanwhile has to figure out how to rescue his buyout bid. It can’t be completed if holders of more than one third of the preferred shares refuse to go along, so he has to find a way to placate them. But if he boosts the offer on the preferred side the folks on the common side are also going to want a bigger piece of pie.