RBR-TVBR analysis: A look at the slimmer Emmis


RBR-TVBR Analysis

Transferring three big market FMs to Merlin Media cleaned up the balance sheet for Emmis Communications, but it also removed Emmis from one of the nation’s three largest markets, Chicago. So what does Emmis look like now?

The Merlin deal also trimmed Emmis by one station in New York, the nation’s largest radio market. But it still has two of the market’s top FMs: WQHT “Hot 97” and WRKS “98.7 Kiss FM.”

Even before the Merlin deal Emmis had given up on efforts to program KMVN-FM Los Angeles and cut a deal in 2009 to LMA the station to Mexican giant Grupo Radio Centro. Emmis gets paid $7 million per year under the seven-year deal and Radio Centro eventually gets to buy the station if it can come up with a way to comply with US foreign ownership limits. So Emmis remains active in the LA market as a programmer and operator with a single FM, “Power 106” KPWR.

So, having owned and operated seven stations in the top three markets just a couple of years ago, Emmis is down to three.

But outside those top markets Emmis is still a major player in three mid-sized markets where it has sizeable clusters. Those are in its home base of Indianapolis, plus St. Louis and majority ownership of a cluster in Austin. It also owns two FMs in Terre Haute, IN, which came into the company back when it owned TV stations.

And then there’s international. Emmis owns stations in Bulgaria and Slovakia. (But don’t bring up what happened in Hungary.)

Even after downsizing Emmis is still primarily a radio company. Radio revenues for its last fiscal year (through February 28, 2011) were $185.2 million. If you subtract the $25.3 million from the three stations now with Merlin (of which Emmis is a part owner) the tally is still $159.9 million. The other business unit at Emmis – its local/regional magazines – had only $66.1 million in revenues for the year.

Those regional magazines, by the way, are in Indiana, Texas, California, Ohio and Georgia. The publishing division also includes Country Sampler, a national crafts magazine.

Divesting the three radio stations didn’t change the broadcast cash flow (BCF) situation much at Emmis. The trio had only $2.5 million of BCF to deduct from the $49.1 million for the entire radio operation. Publishing had only $2.3 million of operating cash flow.

Emmis CEO Jeff Smulyan has made refinancing the company’s debt his next priority, now that he has a better balance sheet to show bankers. The radio operation should be improving its cash flow margin, not only from divesting three BCF-challenged stations, but also from the improving economy. And that upturn, however, slow to develop, might help the publishing side as well.