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Emmis Communications Corp. Message Board

  • longtimefollower longtimefollower Dec 21, 2010 1:01 PM Flag

    Annual meeting report.

    Exciting to attend. Great location in the heart of downtown Indy in a building "we" built in 1998, right on beautiful Circle Center. (One wonders what this building is worth today...although with a 20% vacancy rate in downtown Indy, maybe not as much as hoped.) I was very favorably impressed by the whole atmosphere of total openness, and a desire and willingness to answer all the questions they could reasonably answer. I can also see why this has been awarded one of the "best places to work" in Indianapolis. Despite pay cuts and hard times, everyone is down to earth, from Smulyan himself, to Susan Bayh (totally warm, approachable, genuine, and a class act), board member, and wife of the current senator of Indiana (and former governor) who sat amongst the "riff raff" in the audience seats, and spoke with a few of us afterwards, while the board patiently and without pressure waited for us to "clear out" so it could have its meeting. (The boardroom table was in the same room, behind us.)

    The story hasn't changed, as Smulyan has stated in the media, and the 10-K. The company is actively seeking to market the 2 Chicago stations, and one New York station. It emphasized "assset sales, assets sales, asset sales" as the means by which it will improve its financial position. It emphasized that the 3 assets being offered for sale generate very little cash flow, yet they are valuable because they represent the price of entry into desirable large markets. Management suggested that it would be a challenge to meet the debt covenants, when they are restored later in 2011...hence the asset sales. However, expectations for continued improvement in operations for 2011 are on tap. ($20-25 million in pay down of debt from operations alone is expected in fiscal 2011.) Most importantly, in Smulyan's script, he referred to how other companies in the biz. have gone bankrupt this past year. Then, very directly, he said, "We haven't; I'm certain we won't." When a questioner asked him why EMMS isn't going to turn out like Regent and Citadel, he emphasized the difference is in the quality and value of EMMS's assets.

    Smulyan emphasized what i would refer to as the Street's distorted view on the value of traditional radio, and what one of his board members referred to as the much longer "tail" for traditional radio than people think. (Smulyan emphasized all the money Sirius-XM has lost, and how there are only 20 M people that listen to sat. radio vs. 270 M to terrestrial.) Also noteworthy was his reference to the unfashionability of traditional radio on the Street, with 25 analysts following it, 5 years ago, vs. none today.

    I'm guessing the stock is up for these reasons (increased confidence that the company will "solve" its debt problems) and it certainly reinforced my bullishness here, if anything the risk of a "wipeout" has gone down significantly, in my mind. On the other hand, the proof will be in the pudding, and there is always the risk that management is being overly optimistic in what it thinks it can get through asset sales. (It seems hard to believe certain assets could be worth so much, if they are generating meager cash flows...but I guess in a world where CMLS is trying to buy out Citadel for $1.5 B, I guess that's a much better world to be in for EMMS, as a seller of stations. Some have also pointed out that CMLS does not own any stations in NY or Chicago, so maybe they are one of the bidders for the EMMS properties??)

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    • Great report! Thank You very much =)

    • Good info. Thanks for taking the time to post.

    • Regarding radio's "270 million terrestrial listeners", I can personally vouch for the fact that radio is "alive and well". Starting at 5:30 (CST) each morning I listen to the incredibly funny Walton & Johnson Show until 10 am. If you've never heard them, you're definitely missing out on one of the most entertaining and intelligent radio shows in the country. They are currently on ten stations and broadcast out of Houston. Check them out on one of Entercom's New Orleans' FM stations: (they're currently running "best of" shows while they're on Christmas vacation)
      Then I listen to Rush for three hours, then Hannity for another three hours. Although I don't catch him that often,Dennis Miller has a great show each night from 9 to 11. Then there's Art Bell's former overnight show, that's good about half the time.

      My point is this: if I am anywhere reflective of radio's listeners, I definitely think TALK radio is alive and well, and here to stay. Music radio is another matter, but the Classic Rock stations running Walton & Johnson seem to have three minutes of solid ads every ten minutes during their show, and would you believe, not one public service announcement.

      As for advertisers -- the life-blood of radio -- listeners can't fast-forward through radio commercials, as they can with TIVO and DVR's, making radio an extremely attractive alternative to TV, and much more cost-effective.

      And no, I'm not a radio advertising salesman, just someone who has loved radio since I was a kid, and now invests exclusively in the industry, ever since the historic buying opportunities arose near the end of 2008.

    • Oh, one other point is Smulyan's emphasis that the industry's attempt to get FM receivers in cell phones could be a "game changer" that might allow the Street, again, to see traditional radio as (my words) the cash machine it once was, and maybe even still a growth story, instead of the collective view that it is a dying industry.

      Again, Jeff seemed to emphasize the Street's distorted view on the fundamental value of radio enterprises, and their ability to generate (implicitly, in his view) significantly cash flows, far far into the future, not just from the "legacy" business, but from digital, FM receivers in cellphones, and all the other things they are trying to do.

      He emphasized that ad revenues are going back up because advertisers are realizing that traditional radio is where the AUDIENCES are, and that, ultimately, it what advertisers are willing to pay for.

      I happen to agree with him, which is why I have been a big fan of this industry for at least the last 2 years (since the stocks collapsed) and own stock in ETM, CMLS, EMMS, SALM, and ROIAK.

      I expect the stock to at least see $1.00-1.25, conservatively, some time in the next 6 months...and possibly significantly higher, if they should announce material sales of assets.

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