Emmis charts weak Q4 on slow radio

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NEW YORK -- Broadcaster Emmis Communications reported weaker fiscal fourth-quarter financials as its radio stations in New York and Los Angeles continued to face challenges, with management predicting that they will remain a drag on results for the foreseeable future.

Meanwhile, president, chairman and CEO Jeff Smulyan, who controls Emmis and failed with an offer to take it private in a buyout last year, didn't show his cards Friday. In a conference call, he acknowledged continued market chatter about a possible further buyout attempt but said he wouldn't comment on it beyond what he said in a regulatory filing in the fall.

The filing said Smulyan might revisit his offer to take Emmis private down the line.

The company swung to a loss of $10.5 million from a profit of $138.9 million in the year-ago fiscal fourth-quarter.

Operating income of $4.3 million compared with a year-ago operating loss of $35.5 million, which included bonus and severance payments as well as impairment losses charges. Excluding these items, operating income amounted to $6.3 million last year.

Emmis' revenue fell 4.6% to $78.6 million in the latest period.

"Weakness in our two key radio operations, New York and Los Angeles, presented us difficulties throughout the year, and the fourth quarter was no exception," Smulyan said. "Unfortunately, we will continue to face difficulties in these markets in the foreseeable future."

During the call, management said its New York stations were down 20% in the latest quarter in a flat overall market. In Los Angeles, the firm was down 16% in a virtually unchanged market, they added.

Smulyan also said Friday that the U.S. radio market is "still challenging" despite some positive signals.

Indianapolis-based Emmis said it expects its radio revenue for the fiscal first quarter ending May 31 to decline in the mid- to high-single-digit percentage range. Station operating expenses will increase in the mid- to high-single-digit range.

Smulyan also told analysts during the call Friday that Emmis and Google Inc. have had early contacts that could lead to talks about a companywide deal similar to one the Internet giant recently announced with Clear Channel Communications, the largest radio group. Those two entered an exclusive paid search ad deal.

"There is an increased probability that shareholders are positioned to receive either a tender offer or share in an equity distribution if any one or two of the stations in New York, Los Angeles or Chicago are sold potentially soon, as that would be consistent with the previous two tender offers, made in May 2005 and May 2006," Goldman Sachs analyst Mark Wienkes said in a report. "Given Mr. Smulyan's voting control (67%) and the now-smaller equity base, the economics of a go-private transaction are increasingly viable, particularly upon asset sales or with an equity partner."

Emmis shares closed down 4.1% at $9.83.
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