Clear Channel Posts Profit on Flat Sales

Radio conglomerate Clear Channel Communications Inc. posted a second-quarter profit of $238 million after an accounting change on flat revenue, and said it initiated a shake-up in management at the company’s radio division to improve operations at its 1,200-station empire.

The San Antonio-based media giant, which is the nation’s biggest radio station owner and concert promoter, said sales for the quarter ended June 30 were $2.17 billion, compared with $2.18 billion for the period a year earlier. Clear Channel’s quarterly profit turnaround compared with a loss of $237 million last year, owing in part to a change in accounting rules that reduced acquisition-related expenses.

Clear Channel also warned that its full-year EBITDA, or earnings before interest, taxes, depreciation and amortization, were expected to be in the range of $570 million to $585 million, below some analysts’ expectations.

After the release of the results, Clear Channel’s shares closed at $25.38 on Wednesday, up 38 cents, on the New York Stock Exchange. Clear Channel shares have plunged about 50% in the last two months amid criticism of the company’s business practices and concerns about its debt load.

On Monday, Clear Channel said the chief of its radio division, Randy Michaels, would step down to run the company’s new unit on emerging technologies such as broadband and wireless broadcasting.

Clear Channel President Mark Mays will run the radio division until the company finds a successor for Michaels--a process it expects will take six to eight weeks. Among the candidates is John Hogan, who was Michaels’ second-in-command.

Michaels’ exit stunned radio and music executives, who had viewed the rough-edged 50-year-old radio veteran as the embodiment of Clear Channel’s aggressive business tactics. Michaels also was surprised when the subject of leaving his post was broached at a meeting Monday with Mays, according to people close to him.

Mays, in an interview Wednesday said, “We’ve been contemplating this [change] for a long time. Randy has done an incredibly good job at assimilating assets from disparate companies into a great radio company.”

Clear Channel sources said Mays and other family members were concerned about Michaels’ flamboyance as congressional critics raised questions about the radio division’s “joint sales agreements” to grab market share in cities where it owns the legal maximum number of stations, and its deals with independent record promoters who seek to influence radio programmers.

Sources said that Mays was uncomfortable with some aspects of Michaels’ stewardship of Clear Channel’s programming. The company’s executives had been generally pleased with his push to create radio “brands,” such as the “Kiss” pop format, across dozens of markets. But they had asked Michaels to tone down some of the company’s rock station Web sites, which feature photos or graphics of scantily clad women.

And Clear Channel on Wednesday tried to fend off rumors that it improperly booked “nontraditional revenue” from station-affiliated concert ticket sales and other non-advertising sales as radio revenue. Clear Channel said the nontraditional sources accounted for only 4% of its radio division revenue and that it accounted for them properly.

“You can bank on the 100% integrity of this management team,” said company founder Lowry Mays on a conference call with analysts.