Real Estate & Retail

BEHIND THE NEWS: Call puts Smulyan on spot; fellow execs know feeling

January 23, 2006

Emmis Communications Corp. didn't have the best news to report when it rolled out fiscal third-quarter financial results Jan. 9. Expect radio revenue next quarter to increase just 1 percent to 2 percent, the company said, even as expenses climb more than 5 percent.

Then, on the investor conference call that followed, Wachovia Securities analyst Marci Ryvicker didn't think CEO Jeff Smulyan was his regular, upbeat self.

"Jeff, your tone is less optimistic than it's usually been," she said on the call. "And I'm wondering if there is something going on in the radio industry ... that would also explain the decline in growth in your radio division."

Smulyan bounced back. "Maybe I sound a little down. I am finishing the flu, and then of course there's the post-Rose Bowl doldrums for me," referring to his alma mater USC's loss in the college football championship game five days earlier.

"But listen, this has been a tough run for radio. I think we see some signs [of improvement]. One of the things that I think in my heart of hearts is that all the hoopla over satellite radio is finally starting to die down."

Welcome to the highstakes world of the company conference call, where analysts gather facts and impressions-and how a CEO performs can have market-moving implications.

Since the call, Emmis shares have been on a swoon-though probably more for the company's financial projections than for anything Smulyan said or how he said it. The stock was trading late last week at $17.55, down 15 percent since the day before Emmis released financials and staged the call.

Former Conseco Chief Financial Officer Charles Chokel knows how high the conference-call stakes can be. During a February 2002 call, he fielded analysts' questions about a spike in investment borrowing-and provided the wrong answer.

A few weeks later, then-CEO Gary Wendt fired Chokel, saying: "I did not believe he was up to the job."

Marsh Supermarkets Inc. CEO Don Marsh fielded a flurry of tough questions during a November 2001 call-which happens to be the last time the company accepted questions on one of its calls.

During the call, Marsh said the company had turned in "outstanding" quarterly results, with operating profit of $2.05 million, $652,000 higher than the same period a year earlier.

But then the analysts started slicing and dicing the numbers. One noted that profit would have been lower than a year ago were it not for accounting nuances and an unusually large gain from selling surplus real estate.

"What I want to understand is, why are you so proud of the results, then?" the analyst said.

Another chimed in: "Due to competitive pressures and competitive openings, you seem to be running on an escalator going the wrong way. How do you get from Point A to Point B in a market where seemingly supply keeps running faster than demand?"

Don Marsh kept his cool. "Your primary driver is you're in a recession," he said on the call. "People are fighting for their lives. And once that mitigates, you will see margins get back to where they should get back to."

Simon Property Group CEO David Simon showed similar restraint last April when an analyst suggested a rash of legal battles indicated the company needed to change the way it did business.

Banc of America Securities analyst Ross Nussbaum cited a "scathing ruling" in a legal fight over Mall of America, as well as legal tangles over Las Vegas' Forum Shops and over fees associated with the Simon Gift Card.

"Have you sat back, and said, 'You know, maybe we need to change our approach, in some ways?'" Nussbaum asked.

In an impassioned three-minute response, David Simon conceded nothing.

"I don't think we've done anything wrong at all in any of those cases," he said. "It's frankly a ridiculous question. But let's move on."

Marsh values portrait

The employment contract Don Marsh signed in 1999 includes this curious provision: If the company takes down the portrait of his father that hangs at headquarters, he can buy it for $500.

His father, Ermal, started the company in 1931 and opened more than two dozen locations before dying in a 1959 plane crash.

Now that the company has hired Merrill Lynch to explore a sale, Don Marsh has tidied up the language. Under an amendment dated Dec. 30, he gets the portrait free if he leaves the company for any reason.


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