Arbitron Q4 Revenues Rise But PPM Expenses Hit Net Income

Q4 Revs Rise

ARBITRON fourth quarter 2006 revenues rose 5.2% to $79.3 million, with net income falling from $11.2 million to $4.9 million (36 to 17 cents/diluted share). Expenses rose 17.9% to $75.2 million, blamed in part on planned expenditures for the 2007 rollout of the Portable People Meter.

The company has discontinued issuing quarterly guidance but will instead maintain its annual guidance practice; for 2007, revenue is projected to increase 5.5%-7.5%, and earnings per share are projected to drop from 2006's $1.68 to between $1.30 and $1.50.

CFO SEAN CREAMER says, "The anticipated year-over-year decline in earnings per share is a result of the increased operational spending for PPM initiatives required as we aggressively move to commercialize PHILADELPHIA, HOUSTON, and NEW YORK in 2007 and begin preparing for the markets scheduled to commercialize in early 2008.

"Commercializing the Portable People Meter will require that we invest incremental dollars to recruit, equip and maintain the large, long-term panels of consumers for the PPM local market ratings services. For each new PPM market, the period of investment and recognition of the related expense precedes, by six to nine months, the recognition of incremental revenue we expect to earn in electronically measured markets. Since we are in the first year of PPM commercialization, the impact of this lag to our financial results is particularly pronounced in 2007. We continue to believe that 2007 represents the trough year from an earnings perspective for our ratings business.

"In addition, we plan to maintain our spending to lay the groundwork and define the market potential for Project Apollo, an additional avenue of growth for ARBITRON that's based on our patented Portable People Meter system.

"I should also note that, as our 2006 results indicated, our core business remains solid. However, the continued stagnation of radio advertising revenue and the additional dollars that we are asking of our radio customers for PPM measurement are putting more and more pressure on our ability to generate new, non-ratings revenue from our core customer base."

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