Citadel Broadcasting had already provided preliminary numbers for its Q1 performance, so it was no surprise when the company reported Tuesday that net revenues dropped 3% to $160 million. CEO Farid Suleman told analysts he wouldn’t make excuses, but did try to add some perspective.
Revenues for the radio station group were down 1.3% to $136.4 million and station operating income (SOI) fell 1.2% to $47 million. Radio network revenues declined 11.4% to $24.9 million and SOI was off 64.7% to $1.2 million. Thus, consolidated SOI was down 3.3% to $48.1 million.
“Whereas we don’t want to make any excuses for our radio station results – we were down slightly in revenues – I just wanted to point out that we need to put the 2011 first quarter results in perspective compared to the 2010 first quarter results, when our company’s radio segment was up 6% over 2009 and station operating income was up 30%. In fact, our large markets in 2010 had revenue growth of 7% and station operating income growth of 47%. So I think that puts the results in a little bit better perspective,” Suleman told analysts in his quarterly conference call.
“Our network radio segment had a disappointing quarter, as revenues were affected by lower revenues from representation contracting, including ESPN, as well as lower RADAR-rated revenues. This business has very high operating leverage and when revenues are down it all drops down to the bottom line,” Suleman said of the network business.
Excluding an LMA in Knoxville, TN, CFO Randy Taylor said core ad revenues were “essentially flat” for the radio group. “Overall local was basically flat, the other big decrease really came from political revenues, which were down approximately $1.4 million, and the remaining decline was attributable to the national revenues,” he said.
As you would expect, an analyst asked about Q2 pacings. “We have not given guidance on pacings, but pacings continue to slow down throughout the month and are difficult to predict, and therefore we will continue to not provide guidance on pacings at this time,” Taylor replied.
Suleman reported on performance by the company’s largest market clusters in Q1. Chicago, Los Angeles, Washington, Minneapolis and Providence were up, while New York, Atlanta, San Francisco and Detroit were down. “In New York the decline is predominantly due to the decline in ’PLJ, where our station is in a three-way ratings battle with a couple of new formats. The good news is that ’PLJ’s ratings have stabilized and, beginning with the second half of the year, we should have easier comps. In addition, our two Country stations in Dallas and Atlanta which had declined in ratings are back up to where they were at this time last year and therefore we would expect revenues increase again beginning with the second half of the year, particularly in Dallas we may see some revenue growth in the month of June,” the CEO said.
“Overall we believe that the large markets will be back on track for performance in the second half of the year,” Suleman said.
In the middle and smaller markets, he said Nashville, Allentown, Lafayette, Columbia and Birmingham had double-digit revenue growth in Q1, while stations in the West, including Modesto, Reno and Salt Lake City had mid-to-high-single-digit revenue declines, in addition to the decline in Knoxville where the LMA was terminated. Buffalo was also cited for a revenue drop. “So really there is no consistent trend that we can detect where revenues are up or down,” Suleman said.
He echoed other companies in reporting that ad sales activity has slowed down, with cancellations in automotive mostly from Japanese nameplates. “Obviously this is going to be more a one-time event and we expect that as soon as the production facilities in Japan are up and running you might even see a bump up as some of these car companies try to regain share,” Suleman suggested.
RBR-TVBR observation: Citadel continues to generate significant free cash flow, which is good new for Cumulus Media as it waits to close on its acquisition of Citadel. Free cash flow in Q1, adjusted for cash which will be used to pay interest on Citadel’s senior notes in June, was up 18.8% from a year ago to $29.7 million. And that cash hoard reduces the amount of Citadel debt that Cumulus will have to refinance when the merger closes.
As of March 31, Citadel reported cash on hand of approximately $145.3 million. Total debt was $746.5 million, so the net debt was $601.2 million.