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Arbitron Inc. Reports 2012 Third Quarter Financial Results

Company reports earnings per share (diluted) of $0.59, an increase of 7.3 percent;

Third quarter revenue increases 8.3 percent;

Non-cash impairment charge impacted third quarter EPS by $0.02;

Reiterates 2012 full year guidance for revenue and earnings per share.

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COLUMBIA, Md., Oct. 24, 2012 /PRNewswire/ -- Arbitron Inc. (NYSE: ARB) today announced results for the third quarter ended September 30, 2012.

Net income for the third quarter 2012 increased to $15.8 million, or $0.59 per share (diluted), compared with $15.4 million, or $0.55 per share (diluted), for the third quarter of 2011, an increase in earnings per share (diluted) of 7.3 percent.

Reported results for the third quarter included a pre-tax, non-cash charge of $0.9 million or $0.02 per share (diluted), related to certain internal-use software deemed impaired as a result of enhancements to our cross-platform methodologies.

The Company reported revenue of $114.3 million, an increase of 8.3 percent over revenue of $105.6 million in the third quarter of 2011. Contributing to the third quarter revenue increase: the nearly completed phase-in of contracted price increases for the Portable People Meter (PPM®) service as well as annual escalators in the Company's multi-year radio ratings contracts.

Costs and expenses for the third quarter increased by 11.4 percent to $86.1 million in 2012 from $77.2 million in 2011. Factors contributing to the growth of third quarter costs include the previously announced incremental costs associated with in-person recruitment, address-based sampling and cell-phone household sampling as well as increased investments in Arbitron Mobile and the previously noted impairment charge.

Earnings before interest, income tax expense, depreciation and amortization (EBITDA) for the quarter was $33.5 million, a decrease of 0.2 percent compared with EBITDA of $33.6 million for the third quarter of 2011.  The impairment charge reduced third quarter EBITDA by $0.9 million.

For the nine months ended September 30, 2012, net income increased 11.2 percent to $43.6 million compared with $39.2 million in 2011. Earnings per share (diluted) for the first nine months of 2012 increased 13.4 percent to $1.61 compared with $1.42 for the first nine months of 2011.

Revenue for the first nine months of 2012 was $325.1 million, an increase of 7.6 percent compared to revenue of $302.2 million for the same period in 2011.

Costs and expenses for the nine months ended September 30, 2012 increased by 7.3 percent to $255.0 million from $237.7 million.

EBITDA increased 7.5 percent to $93.7 million in the first nine months of 2012 from $87.2 million for the same period in 2011, with EBITDA margins of 28.8 percent in both periods. The third quarter impairment charge reduced EBITDA in the first nine months of 2012 by $0.9 million.

Management Comment on Third Quarter 2012 Results

Said William T. Kerr, President and Chief Executive Officer:

"In the third quarter, we announced that Arbitron and comScore will work together on a groundbreaking cross-platform initiative for ESPN.

"We are working to integrate census-level data from PCs, mobile devices, and television set-top boxes with the personal, passive and single-source measurement capabilities of our PPM technology. We plan to track and report the consumption of video, audio and display content across radio, television, PCs, smartphones, and tablets.  Our goal is a new methodology that the media and marketing industry can embrace as the template for the future of cross-platform measurement.

"This initiative is a strong validation of our strategy for cross-platform, and is a direct outcome of the pioneering work Arbitron delivered in our cross-platform pilot for the Coalition for Innovative Media Measurement (CIMM).

"Also in the third quarter, we continued to grow our revenue and earnings as we maintained our investments in the value and utility of our core services and continued to invest in the opportunities presented by the emerging markets of mobile and cross-platform."

2012 Full-Year Guidance

Arbitron is reiterating its revenue and earnings per share guidance for 2012.

Arbitron expects 2012 revenue to increase between 5 percent and 7 percent over its 2011 revenue of $422.3 million.

The Company anticipates 2012 earnings per share (diluted) between $2.15 and $2.30, an increase of 8 percent to 15 percent over comparable 2011 earnings per share (diluted) of $2.00, which excludes the impact of an impairment charge of $0.07 per share (diluted) taken in the fourth quarter 2011.

Earnings Conference Call: Schedule and Access

Arbitron will host a conference call at 10:00 a.m. Eastern Time, today, October 24, 2012.

The Company invites you to listen to the call toll-free by dialing (877) 262-6702. The conference call can be accessed from outside the United States by dialing (443) 863-7301. To participate, users will need to use the following code: 36602545. The call will also be available live on the Internet at the following sites: www.arbitron.com and www.streetevents.com.  

A replay of the call will be available from 1:00pm on October 24, 2012, through 11:59pm on October 31, 2012. To access the replay, please call (toll-free) (855) 859-2056 in the United States or (404) 537-3406 if you're calling from outside of the United States. Replay listeners will need to enter the following code: 36602545.

Presentation of Non-GAAP Information

The terms EBIT (earnings before interest and income taxes) and EBITDA (earnings before interest, income taxes, depreciation and amortization) are non-GAAP financial measures that the management of Arbitron believes are useful to investors in evaluating the Company's results. These non-GAAP financial measures should be considered in addition to, and not as a replacement for, or superior to either net income as an indicator of Arbitron's operating performance, or cash flow, as a measure of Arbitron's liquidity. In addition, because EBIT and EBITDA may not be calculated identically by all companies, the presentation here may not be comparable to other similarly titled measures of other companies. For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP equivalent, see the EBIT and EBITDA Non-GAAP Reconciliation, along with related footnotes, below.

About Arbitron

Arbitron Inc. (NYSE: ARB) is an international media and marketing research firm serving the media—radio, television, cable, and out-of-home; the mobile industry; as well as advertising agencies and advertisers around the world. Arbitron's businesses include: measuring network and local market radio audiences across the United States; surveying the retail, media, and product patterns of U.S. consumers; providing mobile audience measurement and analytics in the United States, Europe, Asia, and Australia; and developing application software used for analyzing media audience and marketing information data.

The Company has developed the Portable People Meter (PPM®) and the PPM 360, new technologies for media and marketing research.

Portable People Meter, PPM® and PPM 360 are marks of Arbitron Inc.
PPM ratings are based on audience estimates and are the opinion of Arbitron and should not be relied on for precise accuracy or precise representativeness of a demographic or radio market.

Arbitron Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The statements regarding Arbitron Inc. and its subsidiaries in this document that are not historical in nature, particularly those that utilize terminology such as "may," "will," "should," "likely," "expects," "anticipates," "estimates," "believes," "plans," or comparable terminology, are forward-looking statements based on current expectations about future events, which we have derived from information currently available to us. These forward-looking statements involve known and unknown risks and uncertainties that may cause our results to be materially different from results implied in such forward-looking statements. These risks and uncertainties include, in no particular order, whether we will be able to:

  • successfully obtain and/or maintain Media Rating Council, Inc. ("MRC") accreditation for our audience ratings services;
  • renew contracts with key customers;
  • collect, manage, and process the consumer information we utilize in our media marketing and information services in compliance with applicable data protection and privacy statutes, regulations, and other requirements;
  • develop and successfully market new products and technologies such as the joint cross-platform measurement service with comScore;
  • successfully execute and maintain our mobile measurement initiatives;
  • support our current and future services by designing, recruiting, and maintaining research samples that appropriately balance quality, size and, operational cost;
  • successfully develop, implement, and fund initiatives designed to enhance sample quality;
  • successfully manage costs associated with cell phone household recruitment, targeted in-person recruitment, and address-based sampling;
  • successfully maintain and promote industry usage of our media and marketing information services, a critical mass of broadcaster encoding, and the proper understanding of our services and methodologies in light of governmental actions, including investigation, regulation, legislation or litigation, customer or industry group activism, or adverse community or public relations efforts;
  • successfully manage the impact on our business of the current economic environment generally, and in the advertising market, including, without limitation, the insolvency of any of our customers or the impact of economic environment on our customers' ability to fulfill their payment obligations to us;
  • successfully integrate acquired operations, including differing levels of management and internal control effectiveness at the acquired entity;
  • effectively respond to rapidly changing technologies by creating proprietary systems to support our research initiatives and by developing new services that meet marketplace demands in a timely manner;
  • successfully execute our business strategies, including evaluating and, where appropriate, entering into potential acquisition, joint-venture or other material third-party agreements;
  • successfully develop and implement technology solutions to identify and report consumer use of new and existing forms of media content and delivery, and advertising in an increasingly competitive environment; and
  • compete with companies that may have financial, marketing, sales, technical or other advantages over us.

There are a number of additional important factors that could cause actual events or our actual results to differ materially from those indicated by such forward-looking statements, including, without limitation, the risk factors set forth in the caption "ITEM 1A. — RISK FACTORS" in our Annual Report on Form 10-K for the year ended December 31, 2011, and elsewhere, and any subsequent periodic or current reports filed by us with the Securities and Exchange Commission.

In addition, any forward-looking statements contained in this document represent our estimates only as of the date hereof, and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change.

(Tables to follow)

 

Arbitron Inc.

Consolidated Statements of Income

Three Months Ended September 30, 2012 and 2011

(In thousands, except per share data)

(Unaudited)






Three Months Ended




September 30,


%


2012

2011

Change

Change






Revenue

$114,341

$105,563

$8,778

8.3%

Costs and expenses





Cost of revenue

53,840

49,388

4,452

9.0%

Selling, general and administrative

22,321

18,401

3,920

21.3%

Research and development

9,913

9,444

469

5.0%

Total costs and expenses

86,074

77,233

8,841

11.4%






Operating income

28,267

28,330

(63)

(0.2%)






Equity in net loss of affiliate

(2,364)

(2,290)

(74)

3.2%






Earnings before interest and income taxes  (1)

25,903

26,040

(137)

(0.5%)

Interest income

15

6

9

150.0%

Interest expense

133

109

24

22.0%






Earnings before income taxes

25,785

25,937

(152)

(0.6%)

Income tax expense

9,998

10,586

(588)

(5.6%)






Net Income

15,787

15,351

436

2.8%






Income per weighted-average common share





Basic

$0.60

$0.56

$0.04

7.1%

Diluted

$0.59

$0.55

$0.04

7.3%











Weighted-average shares used in calculations





Basic

26,133

27,222

(1,089)

(4.0%)

Diluted

26,662

27,683

(1,021)

(3.7%)











Dividends per common share

$0.10

$0.10

-

-
















Other data:





EBITDA   (1)

$33,482

$33,562

$(80)

(0.2%)

Non-cash share-based compensation

$2,402

$2,029

$373

18.4%






(1) The terms EBIT (earnings before interest and income taxes) and EBITDA (earnings before interest, income taxes, depreciation and amortization) are non-GAAP financial measures that the management of Arbitron believes are useful to investors in evaluating the Company's results. For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measure, see the EBIT and EBITDA Non-GAAP Reconciliation, along with related footnotes, below.

 

 

Arbitron Inc.

Consolidated Statements of Income

Nine months Ended September 30, 2012 and 2011

(In thousands, except per share data)

(Unaudited)






Nine months Ended




September 30,


%


2012

2011

Change

Change






Revenue

$325,142

$302,169

$22,973

7.6%

Costs and expenses





Cost of revenue

164,493

156,092

8,401

5.4%

Selling, general and administrative

61,025

54,166

6,859

12.7%

Research and development

29,527

27,456

2,071

7.5%

Total costs and expenses

255,045

237,714

17,331

7.3%






Operating income

70,097

64,455

5,642

8.8%






Equity in net income of affiliate

671

631

40

6.3%






Earnings before interest and income taxes (1)

70,768

65,086

5,682

8.7%

Interest income

46

20

26

130.0%

Interest expense

394

377

17

4.5%






Earnings before income taxes

70,420

64,729

5,691

8.8%

Income tax expense

26,863

25,547

1,316

5.2%






Net Income

43,557

39,182

4,375

11.2%






Income per weighted average common share





Basic

$1.64

$1.44

$0.20

13.9%

Diluted

$1.61

$1.42

$0.19

13.4%











Weighted average shares used in calculations





Basic

26,564

27,154

(590)

(2.2%)

Diluted

27,067

27,629

(562)

(2.0%)











Dividends per common share

$0.30

$0.30

-

-
















Other data:





EBITDA (1)

$93,704

$87,162

$6,542

7.5%

Non-cash share-based compensation

$6,779

$5,860

$919

15.7%






(1) The terms EBIT (earnings before interest and income taxes) and EBITDA (earnings before interest, income taxes, depreciation and amortization) are non-GAAP financial measures that the management of Arbitron believes are useful to investors in evaluating the Company's results. For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measure, see the EBIT and EBITDA Non-GAAP Reconciliation, along with related footnotes, below.

 

Arbitron Inc.

EBIT and EBITDA Non-GAAP Reconciliation

Three Months and Nine months Ended September 30, 2012 and 2011

(In thousands)

(Unaudited)





Three Months Ended

Nine months Ended


September 30,

September 30,


2012

2011

2012

2011






Net income

$15,787

$15,351

$43,557

$39,182

Income tax expense

9,998

10,586

26,863

25,547

Net interest expense

118

103

348

357






EBIT (2)

$25,903

$26,040

$70,768

$65,086






Depreciation and amortization

7,579

7,522

22,936

22,076






EBITDA (2)

$33,482

$33,562

$93,704

$87,162






EBIT Margin (2)

22.7%

24.7%

21.8%

21.5%

EBITDA Margin (2)

29.3%

31.8%

28.8%

28.8%






(2) Arbitron's management believes that presenting EBIT (earnings before interest and income taxes) and EBITDA (earnings before interest, income taxes, depreciation and amortization), both non-GAAP financial measures, as supplemental information helps investors, analysts, and others, if they so choose, in understanding and evaluating Arbitron's operating performance in some of the same manners that management does because EBIT and EBITDA exclude certain items that are not directly related to Arbitron's core operating performance. Arbitron's management references these non-GAAP financial measures in assessing current performance and making decisions about internal budgets, resource allocation and financial goals.

EBIT is calculated by adding back net interest expense and income tax expense to net income. EBITDA is calculated by adding back net interest expense, income tax expense, and depreciation and amortization to net income.

EBIT and EBITDA should not be considered substitutes either for net income as indicators of Arbitron's operating performance, or for cash flow as measures of Arbitron's liquidity. In addition, because EBIT and EBITDA may not be calculated identically by all companies, the presentation here may not be comparable to other similarly titled measures of other companies.

 

Arbitron Inc.

Condensed Consolidated Balance Sheets

September 30, 2012 and December 31, 2011

(In thousands)





September 30,

December 31,


2012

2011


(Unaudited)

(Audited)

Assets:



Cash and cash equivalents

$37,051

$19,715

Trade receivables

60,509

62,886

Property and equipment, net

63,784

70,651

Goodwill, net

45,359

45,430

Other assets

32,262

40,286




Total assets

$238,965

$238,968




Liabilities and Stockholders' Equity:



Deferred revenue

$49,280

$37,080

Other liabilities

64,963

75,072

Stockholders' equity

124,722

126,816




Total liabilities and stockholders' equity

$238,965

$238,968




Note: The December 31, 2011 Condensed Consolidated Balance Sheet is derived from the audited Balance Sheet included in the Company's Form 10-K for the fiscal year ended December 31, 2011.

 

SOURCE Arbitron Inc.



RELATED LINKS
http://www.arbitron.com

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