CEO Farid Suleman spelled out how changing formats and national reps will boost cash flow at Citadel Broadcasting in the future, but for Q2 it was another tough quarter with pro forma revenues down 8.5% to $229.7 million, including ABC Radio. $15.8 million of that $21.3 million decline was blamed on soft ad sales at the radio stations and $5.5 million at ABC Radio Networks, primarily due to declining revenues from Paul Harvey and the company’s unprofitable deal with Reach Media, which Suleman said will not be renewed after it runs out in one more year.
Pro forma operating income, excluding depreciation and amortization, was down 13.6% to $87.8 million. $10.4 million of the $13.8 million decline was attributed to the radio stations and $3.4 million to ABCRN. The company has already reduced costs by cutting its headcount, but Suleman said more layoffs are possible.
Like so many other broadcasters, Citadel took a non-cash impairment charge in the quarter for the value of its FCC licenses and other intangible assets. The impairment charge of $285.6 million resulted in a net loss for the quarter of $251.6 million, or 96 cents per share.
The CEO admitted that Citadel has underperformed the radio industry, particularly in its largest markets. He noted that recent format changes in Atlanta, Dallas and Washington, DC have been working successfully and that he expects those stations to account for $7.5-10 million in additional cash flow in 2009. Add in the benefits of adding Don Imus and other programming changes in various markets and Suleman said the total grows to around $20 million. In addition to that, he noted the company’s change in national reps to Katz Radio Group is expected to improve national billings. If Citadel is able to get its proper proportional share of national business, that should add another $10 million in cash flow, he said.
Q3, to no one’s surprise, is pacing down. July was down single digits and the situation is similar this month. Suleman said September is currently pacing down in the high single digits, but he noted that could change because business is breaking later and later. Also, political should begin to be placed in September.
In answer to an analyst’s question, Suleman said he is not aware of any advertisers holding back on buying because of the pending rollout of PPM in several major markets. He is also supportive of PPM as not perfect, but “a good thing.” He noted that advertisers are demanding more accountability and that posting is something radio is going to have to live with, so the industry had better have accurate numbers that are available quickly. So, while he doesn’t like the cost of PPM, “it is something we have to do.”
With Clear Channel and CBS both looking to sell some radio stations, Suleman is cautious about prospects for selling more stations. “If people have to sell, I think that prices will go down,” he said. He also disclosed that Citadel had put together deals to sell more of its stations, but that the sales collapsed because the buyers were unable to get financing in the current tough borrowing market.