Costs Push Down Q4 Arbitron Profits

Michael P. Skarzynski made his debut as Arbitron’s new president and CEO before investors during the company’s quarterly conference call Wednesday morning (Feb. 17).  

The next day, shares of Arbitron ticked up more than 2 percent or 28 cents to $13.48 just during lunchtime trading Wednesday (Feb. 18) after the Columbia, Md., radio research firm reported fourth quarter net income of $3.4 million or 13 cents a share compared with $3.7 million and 13 cents a share a year before.

The company attributed the slight income falloff to a combination of expected costs associated with implementing its portable people meter service in new markets and “legal costs due primarily to actions undertaken by the New York and New Jersey attorneys general.” Arbitron reported that share-based compensation was $2 million compared to $1.5 million in 2007.

But the company also credited the 14-market rollout in 2008 for its 16.8 percent increase in revenues during the fourth quarter to $93.6 million from $80.1 million during Q4 2007. Costs and expenses for the fourth quarter increased by 18.2 percent to $94.5 million, from $79.9 million in 2007, due “primarily to planned expenditures,” Arbitron said.

Arbitron’s full-year revenue jumped 9 percent to $368.8 million compared to $338.5 million for the same period in 2007 and costs, again primarily due to the roll out of the PPM service, increased nearly 12 percent to $312.4 million from $279.2 million. Share-based compensation in 2008 was $8.4 million as compared to $6.5 million in 2007. Full year earnings were $1.36, a penny higher than in 2007, and within the mid-range of Arbitron’s adjusted full year guidance of $1.30 to $1.44 a share.

Earnings per share (diluted) for the full-year 2008 were $1.36 compared with $1.35 per share (diluted) last year

Earnings before interest and income tax expense (EBIT) decreased 0.3 percent from $63.3 million in the full-year 2007 to $63.1 million for the same period in 2008. Net income for the full-year 2008 decreased 7.5 percent to $37.2 million compared with $40.2 million in 2007. Income from continuing operations for the full-year 2008 decreased to $37.2 million or $1.37 per share (diluted) from $40.5 million or $1.37 per share (diluted), in 2007.

Skarzynski characterized Arbitron’s beefing up of PPM research and panels that followed settlements with the attorneys general in New York and New Jersey as a “PPM restart” that helped propel last quarter revenues. In 2008, PPM was launched in the nation’s largest three radio markets – New York, Los Angeles and Chicago, and others, including San Francisco, Dallas, Atlanta, Detroit and Washington, D.C. “Radio ad revenues for these 14 markets represent nearly 50 percent of all the radio ad revenue in all the top markets where we plan to commercialize the PPM service,” noted Skarzynski. ”We are very proud of this significant accomplishment and important milestone.”

He added that the company “worked very hard in 2008 to strengthen the quality and value of our diary based radio ratings services” and that launched a number of diary market initiatives “designed to add to cell phone only households into our diary market samples, improve the representation of 18 to 34-year-olds, and accelerate work on electronic and online alternative to the paper and pencil diary.”

Skarzynski was particularly clear on his and Arbitron’s new mission to win back lost business from Cumulus and Clear Channel, which in November shifted a block of their markets to Nielsen’s new United States radio research service. “Arbitron takes extremely seriously the entry by Nielsen into our core business of radio ratings. Nielsen is a formidable competitor with significant resources,” said Skarzynski, who replaced Steve Morris after 16 years as the company’s new executive to run the day-to-day operation. (Morris continues to serve as Arbitron’s chairman.) “Arbitron has faced marketplace challenges in the past and we are working to maintain our leadership role in the radio ratings marketplace. I want to assure our shareholders that Arbitron is taking appropriate actions to compete against Nielsen. We intend to win back the Cumulus and Clear Channel business lost to Nielsen in the sticker diary market,” vowed Skarzynski.

The Nielsen Co. is the parent company of Radio & Records, Inc. and Mediaweek.