SOURCE: Salem Communications Corporation

Salem Communications Corporation

May 09, 2011 16:11 ET

Salem Communications Announces First Quarter 2011 Total Revenue of $51.8 Million

CAMARILLO, CA--(Marketwire - May 9, 2011) - Salem Communications Corporation (NASDAQ: SALM), a leading U.S. radio broadcaster, Internet content provider, and magazine and book publisher targeting audiences interested in Christian and family-themed content and conservative values, released its results for the three months ended March 31, 2011.

First Quarter 2011 Results

For the quarter ended March 31, 2011 compared to the quarter ended March 31, 2010:

Consolidated

--  Total revenue increased 7.2% to $51.8 million from $48.3 million;
--  Operating expenses decreased 1.0% to $39.8 million from $40.2 million;
--  Operating expenses excluding gain or loss on disposal of assets
    increased 10.3% to $44.3 million from $40.2 million;
--  Operating income increased 47.7% to $12.0 million from $8.1 million;
--  Net income increased to $2.6 million, or $0.10 net income per diluted
    share, from $0.2 million, or $0.01 net income per diluted share in the
    prior year;
--  EBITDA increased 35.1% to $15.7 million from $11.6 million; and
--  Adjusted EBITDA decreased 4.0% to $11.5 million from $12.0 million.

Broadcast

--  Net broadcast revenue increased 3.2% to $42.7 million from
    $41.4 million;
--  Station operating income ("SOI") decreased 3.1% to $14.9 million from
    $15.4 million;
--  Same station net broadcast revenue increased 3.7% to $41.8 million from
    $40.3 million;
--  Same station SOI decreased 3.7% to $14.6 million from $15.2 million;
    and
--  Same station SOI margin decreased to 35.0% from 37.7%.

Internet

--  Internet revenue increased 38.4% to $6.2 million from $4.5 million; and
--  Internet operating income increased 36.8% to $0.9 million from
    $0.6 million.

Publishing

--  Publishing revenue increased 17.1% to $2.8 million from $2.4 million;
    and
--  Publishing operating loss was $39,000 compared to a loss of $97,000 in
    the prior year.

Included in the results for the quarter ended March 31, 2011 are:

--  A $4.5 million gain ($2.7 million, net of tax, or $0.11 per diluted
    share) on disposal of assets comprised of a $2.4 million pre-tax gain
    from the sale of KKMO-AM in Seattle, Washington and a $2.1 million
    pre-tax gain from the sale of KXMX-AM in Los Angeles, California,
    offset by losses from various fixed asset and equipment disposals; and
--  A $0.3 million non-cash compensation charge ($0.2 million, net of tax)
    related to the expensing of stock options consisting of:
    --  $0.2 million non-cash compensation included in corporate expenses;
        and
    --  $0.1 million non-cash compensation included in broadcast operating
        expenses.

Included in the results for the quarter ended March 31, 2010 are:

--  A $0.3 million non-cash compensation charge ($0.2 million, net of tax)
    related to the expensing of stock options primarily included in
    corporate expenses.

Per share numbers are calculated based on 24,759,253 diluted weighted average shares for the quarter ended March 31, 2011, and 24,441,944 diluted weighted average shares for the quarter ended March 31, 2010.

Balance Sheet

As of March 31, 2011, the company had $270.0 million of 9 5/8% senior secured second lien notes outstanding and had $19.0 million drawn on its revolver. The company was in compliance with the covenants of its credit facility and bond indenture. The company's bank leverage ratio was 5.55 versus a compliance covenant of 7.0.

Acquisitions and Divestitures

The following transactions were completed since January 1, 2011:

--  On January 6, 2011, we sold radio station KKMO-AM, Seattle, Washington
    for $2.7 million;
--  On February 25, 2011, we sold radio station KXMX-AM, Los Angeles,
    California, for $12.0 million;
--  On March 1, 2011, we sold radio station, WAMD-AM, Aberdeen, Maryland,
    for $1;
--  On March 14, 2011, we acquired WDDZ-AM (now WBZS-AM), Pawtucket, Rhode
    Island, for $0.6 million; and
--  On March 28, 2011, we acquired WorshipHouse Media, an on-line church
    media and video ministry website, for $6.0 million.

The following transaction is currently pending:

--  On March 5, 2010, we entered into an agreement to re-acquire KTEK-AM,
    Houston, Texas for $3.7 million, which includes forgiveness of the
    promissory note that we received upon our original sale of the station.
    We began programming the station pursuant to a Time Brokerage Agreement
    with the current owner on March 8, 2010; and
--  On May 2, 2011, we instructed the trustee of our Indenture to notify
    our bondholders of our intent to complete another redemption of
    $17.5 million of our 9 5/8% Senior Secured Second Lien Notes at a price
    equal to 103% of the face value.  We expect this redemption to close on
    June 1, 2011.

Conference Call Information

Salem will host a teleconference to discuss its results on May 9, 2011 at 2:00 p.m. Pacific Time. To access the teleconference, please dial (913) 312-1434, passcode 6229861 or listen via the investor relations portion of the company's website, located at www.salem.cc. A replay of the teleconference will be available through May 23, 2011 and can be heard by dialing (719) 457-0820, passcode 6229861 or on the investor relations portion on the company's website, located at www.salem.cc.

Second Quarter 2011 Outlook

For the second quarter of 2011, Salem is projecting total revenue to increase 5% to 7% over second quarter 2010 total revenue of $53.1 million. Salem is also projecting operating expenses before gain or loss on disposal of assets, terminated transaction costs and abandoned license upgrades and impairments to increase 4% to 7% as compared to the second quarter of 2010 operating expenses of $43.1 million.

Salem Communications Corporation is the largest commercial U.S. radio broadcasting company that provides programming targeted at audiences interested in Christian and family-themed radio content, as measured by the number of stations and audience coverage. Upon completion of all announced transactions, the company will own and/or operate a national portfolio of 95 radio stations in 37 markets, including 59 stations in 22 of the top 25 markets. We also program the Family Talk ™ Christian-themed talk format on SiriusXM Channel 131.

Salem also owns Salem Radio Network, a national radio network that syndicates talk, news and music programming to approximately 2,000 affiliated radio stations and Salem Media Representatives, a national media advertising sales firm with offices across the country.

In addition to its radio broadcast business, Salem owns an Internet and a publishing division. Salem Web Network is a provider of online Christian and conservative-themed content and streaming and includes websites such as Christian faith focused Christianity.com, Questions and Answers about Jesus Christ at Jesus.org, Christian living focused Crosswalk.com®, online Bible at BibleStudyTools.com, Christian videos at GodTube.com, a leading website providing church media at WorshipHouseMedia.com and Christian radio ministries online at OnePlace.com. Additionally Salem owns conservative news leader Townhall.com® and conservative political blog HotAir.com, providing conservative commentary, news and blogging. Salem Publishing™ circulates Christian and conservative magazines such as Homecoming® The Magazine, YouthWorker Journal™, The Singing News, FaithTalk Magazine, Preaching and Townhall Magazine™. Xulon Press™ is a provider of self publishing services targeting the Christian audience.

Forward-Looking Statements

Statements used in this press release that relate to future plans, events, financial results, prospects or performance are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those anticipated as a result of certain risks and uncertainties, including but not limited to the ability of Salem to close and integrate announced transactions, market acceptance of Salem's radio station formats, competition from new technologies, adverse economic conditions, and other risks and uncertainties detailed from time to time in Salem's reports on Forms 10-K, 10-Q, 8-K and other filings filed with or furnished to the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Salem undertakes no obligation to update or revise any forward-looking statements to reflect new information, changed circumstances or unanticipated events.

Regulation G

Station operating income, non-broadcast operating income, EBITDA and Adjusted EBITDA are financial measures not prepared in accordance with generally accepted accounting principles ("GAAP"). Station operating income is defined as net broadcast revenues minus broadcast operating expenses. Non-broadcast operating income is defined as non-broadcast revenue minus non-broadcast operating expenses. EBITDA is defined as net income before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA before gain or loss on the disposal of assets and non-cash compensation expense. In addition, Salem has provided supplemental information as an attachment to this press release, reconciling these non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with GAAP. The company believes these non- GAAP financial measures, when considered in conjunction with the most directly comparable GAAP financial measures, provide useful measures of the company's operating performance.

Station operating income, non-broadcast operating income, EBITDA and Adjusted EBITDA are generally recognized by the broadcast industry as important measures of performance and are used by investors as well as analysts who report on the industry to provide meaningful comparisons between broadcast. Station operating income, non-broadcast operating income, EBITDA and Adjusted EBITDA are not a measure of liquidity or of performance in accordance with GAAP, and should be viewed as a supplement to and not a substitute for, or superior to, the company's results of operations presented on a GAAP basis such as operating income and net income. In addition, Salem's definitions of station operating income, non-broadcast operating income, EBITDA and Adjusted EBITDA are not necessarily comparable to similarly titled measures reported by other companies.

Salem Communications Corporation
Condensed Consolidated Statements of Operations
(in thousands, except share, per share and margin data)


                                                     Three Months Ended
                                                          March 31,
                                                     2010         2011
                                                  -----------  -----------
                                                        (Unaudited)

Net broadcast revenue                             $    41,408  $    42,730
Internet revenue                                        4,490        6,212
Publishing revenue                                      2,426        2,841
                                                  -----------  -----------
Total revenue                                          48,324       51,783
Operating expenses:
  Broadcast operating expenses                         25,997       27,802
  Internet operating expenses                           3,868        5,361
  Publishing operating expenses                         2,523        2,880
  Corporate expenses                                    4,269        4,551
  Depreciation and amortization                         3,556        3,752
  (Gain) loss on disposal of assets                        13       (4,525)
                                                  -----------  -----------
Total operating expenses                               40,226       39,821
                                                  -----------  -----------
Operating income                                        8,098       11,962
Other income (expense):
  Interest income                                          48           43
  Interest expense                                     (7,692)      (7,235)
  Other expense, net                                      (31)         (11)
                                                  -----------  -----------
Income before income taxes                                423        4,759
Provision for income taxes                                219        2,172
                                                  -----------  -----------
Net income                                        $       204  $     2,587
                                                  ===========  ===========

Basic income per share                            $      0.01  $      0.11

Diluted income per share                          $      0.01  $      0.10

Basic weighted average shares outstanding          23,724,192   24,520,858
                                                  ===========  ===========
Diluted weighted average shares outstanding        24,441,944   24,759,253
                                                  ===========  ===========

Other Data:
Station operating income                          $    15,411  $    14,928
Station operating margin                                 37.2%        34.9%











Salem Communications Corporation
Condensed Consolidated Balance Sheets
(in thousands)


                                                  December 31,   March 31,
                                                      2010         2011
                                                  ------------ ------------
                                                               (Unaudited)

Assets
Cash                                              $        828 $        263
Restricted cash                                            100          100
Trade accounts receivable, net                          29,363       28,316
Deferred income taxes                                    5,974        5,338
Other current assets                                     3,943        4,656
Property, plant and equipment, net                     115,867      115,225
Intangible assets, net                                 404,212      400,336
Bond issue costs                                         6,084        5,869
Bank loan fees                                           1,265        1,146
Other assets                                             6,850        7,211
                                                  ------------ ------------
Total assets                                      $    574,486 $    568,460
                                                  ============ ============

Liabilities and Stockholders' equity
Current liabilities                                     22,809       29,226
Long-term debt and capital lease obligations           304,416      288,434
Deferred income taxes                                   42,296       43,521
Other liabilities                                        8,561        7,933
Stockholders' equity                                   196,404      199,346
                                                  ------------ ------------

Total liabilities and stockholders' equity        $    574,486 $    568,460
                                                  ============ ============











Salem Communications Corporation
Supplemental Information
(in thousands)


                                                     Three Months Ended
                                                          March 31,
                                                      2010         2011
                                                  ------------ -----------
                                                        (Unaudited)
Capital expenditures
Acquisition related / income producing            $         29 $       962
Maintenance                                              1,355       1,487
                                                  ------------ -----------
Total capital expenditures                        $      1,384 $     2,449
                                                  ============ ===========

Tax information
Cash tax expense                                  $         17 $        13
Deferred tax expense                                       202       2,159
                                                  ------------ -----------
Provision for income taxes                        $        219 $     2,172
                                                  ============ ===========

Tax benefit of non-book amortization              $      2,632 $     2,541
                                                  ============ ===========

Reconciliation of Same Station Net Broadcast
 Revenue to Total Net Broadcast Revenue
Net broadcast revenue - same station              $     40,302 $    41,787
Net broadcast revenue - acquisitions                        14         315
Net broadcast revenue - dispositions                       546         217
Net broadcast revenue - format changes                     546         411
                                                  ------------ -----------
Total net broadcast revenue                       $     41,408 $    42,730
                                                  ============ ===========

Reconciliation of Same Station Broadcast
 Operating Expenses to Total Broadcast Operating
 Expenses
Broadcast operating expenses - same station       $     25,109 $    27,154
Broadcast operating expenses - acquisitions                 14         280
Broadcast operating expenses - dispositions                388         (68)
Broadcast operating expenses - format changes              486         436
                                                  ------------ -----------
Total broadcast operating expenses                $     25,997 $    27,802
                                                  ============ ===========

Reconciliation of Same Station Operating Income
 to Total Station Operating Income
Station operating income - same station           $     15,193 $    14,633
Station operating income - acquisitions                      -          35
Station operating income - dispositions                    158         285
Station operating income - format changes                   60         (25)
                                                  ------------ -----------
Total station operating income                    $     15,411 $    14,928
                                                  ============ ===========









Salem Communications Corporation
Supplemental Information
(in thousands)


                                                   Three Months Ended
                                                        March 31,
                                                  2010           2011
                                              -------------  -------------
                                                       (Unaudited)
Reconciliation of Station Operating Income,
 Internet Operating Income and Publishing
 Operating Loss to Operating Income

Station operating income                      $      15,411  $      14,928
Internet operating income                               622            851
Publishing operating loss                               (97)           (39)
Less:
  Corporate expenses                                 (4,269)        (4,551)
  Depreciation and amortization                      (3,556)        (3,752)
  Gain (loss) on disposal of assets                     (13)         4,525
                                              -------------  -------------
Operating income                              $       8,098  $      11,962
                                              =============  =============

Reconciliation of Adjusted EBITDA to EBITDA
 to Net Income
Adjusted EBITDA                               $      11,968  $      11,484
Less:
  Stock-based compensation                             (332)          (306)
  Gain (loss) on disposal of assets                     (13)         4,525
                                              -------------  -------------

EBITDA                                               11,623         15,703
Plus:
  Interest income                                        48             43
Less:
  Depreciation and amortization                      (3,556)        (3,752)
  Interest expense                                   (7,692)        (7,235)
  Provision for income taxes                           (219)        (2,172)
                                              -------------  -------------
Net income                                    $         204  $       2,587
                                              =============  =============

                                              Outstanding at   Applicable
                                              March 31, 2011 Interest Rate
                                              -------------  -------------
Selected Debt Data
  9 5/8% senior subordinated notes            $     270,000           9.63%
  Revolving credit facility                          19,000           4.40%

Contact Information

  • Company Contact:
    Evan D. Masyr
    Salem Communications
    (805) 987-0400 ext. 1053
    Email Contact