Citadel Broadcasting has been underperforming a challenged radio industry, and Q3 revenues were down double-digits. CEO Farid Suleman told analysts that with format and management changes in four major markets, plus the impact of its rep change to Katz, Citadel will outperform the radio industry in 2009, although that will still be a negative revenue growth number. Q4, meanwhile, is pacing down double-digits.
Calling it “another tough quarter,” Suleman reported that Q3 revenues fell 10.9% to $213.9 million. That decline was the result of revenues declining $20.9 million for the radio station group and $5.4 million for the ABC Radio Networks division. Suleman cited lower revenues at the network level being mostly from the Paul Harvey show, which has been declining for some time, and the Reach Media shows, which ABC will no longer sell when the current contract runs out.
Looking forward, Suleman said there were four markets which had particularly underperformed., but that changes are in place now “so that going forward we will be able to outperform the marketplace.” Those changes were made at WPLJ-FM New York, KLOS-FM and KABC-AM Los Angeles, WLS-AM & FM Chicago and the company’s cluster in Dallas. With those changes in formats and/or management, Suleman expects those stations to add an incremental $8-10 million to top-line revenues in 2009.
The CEO noted that the company has made $20 million in annual cost cuts thus far, with more to come. Also, the ABC station group is now integrated into the Citadel Radio Networks, which is expected to add $5-7 million in annual revenue, kicking in beginning in Q4.
Citadel has been aggressively paying down its debt from cash flow, having suspended its dividend payment to shareholders. That prompted a strange question in Q&A about potential loan covenant breaches and whether the company could face legal action from its banks for fraudulent conveyance because it had been buying back junior debt? Suleman said the company had communicated with its bank lenders all along and bought back quite a bit of bank debt in tenders earlier this year. “We are real close to our banks. We have great relationships with our banks,” he insisted.
If the marketplace changes and Citadel is able to sell off some of the radio assets it had intended to sell after the ABC Radio merger, Suleman said all of those proceeds will go to paying down debt.