Salem Communications Announces Increase in Second Quarter 2013 Total Revenue of 4.4% to $60.1 Million

Marketwired

CAMARILLO, CA--(Marketwired - Aug 6, 2013) - Salem Communications Corporation (NASDAQ: SALM) released its results for the three and six months ended June 30, 2013.

Second Quarter 2013 Highlights

  • Total revenue increased 4.4%
  • Internet revenue increased 23.3%
  • Total debt excluding capital leases decreased $8.5 million during the quarter to $298.4 million
  • Leverage ratio decreased to 5.46 from 5.64 in the first quarter

Second Quarter 2013 Results

For the quarter ended June 30, 2013 compared to the quarter ended June 30, 2012:

Consolidated

  • Total revenue increased 4.4% to $60.1 million from $57.6 million;
  • Total operating expenses decreased 5.4% to $50.8 million from $53.8 million;
  • Operating expenses, excluding gains or losses on disposals, stock-based compensation expense and impairment charges increased 4.3% to $49.7 million from $47.6 million;
  • Operating income increased 140.5% to $9.3 million from $3.9 million;
  • Net income increased 390.2% to $5.2 million, or $0.20 net income per diluted share, from a $1.8 million loss, or $0.07 net loss per share, in the prior year;
  • EBITDA increased 99.2% to $13.0 million from $6.5 million; and
  • Adjusted EBITDA increased 4.8% to $14.2 million from $13.6 million.

Broadcast

  • Net broadcast revenue increased 1.4% to $47.0 million from $46.4 million;
  • Station operating income ("SOI") increased 2.1% to $16.2 million from $15.9 million;
  • Same station net broadcast revenue increased 0.2% to $46.4 million from $46.3 million;
  • Same station SOI increased 1.9% to $16.2 million from $15.9 million; and
  • Same station SOI margin increased to 34.8% from 34.3%.

Internet

  • Internet revenue increased 23.3% to $9.9 million from $8.0 million; and
  • Internet operating income increased 56.7% to $3.0 million from $1.9 million.

Publishing

  • Publishing revenue was unchanged at $3.2 million; and
  • Publishing operating income decreased to a $0.2 million loss from $0.2 million income.

Included in the results for the quarter ended June 30, 2013 are:

  • A $0.8 million impairment loss ($0.5 million, net of tax, or $0.02 per share) associated with the goodwill and mastheads of our publishing businesses; and
  • A $0.4 million non-cash compensation charge ($0.2 million, net of tax, or $0.01 per share) related to the expensing of stock options consisting of:
    • $0.2 million non-cash compensation included in corporate expenses;
    • $0.1 million non-cash compensation included in broadcast operating expenses; and
    • $0.1 million non-cash compensation included in Internet operating expenses.

Included in the results for the quarter ended June 30, 2012 are:

  • A $0.9 million loss ($0.5 million, net of tax, or $0.02 per share) on the early retirement of long-term debt due to the repurchase of $17.5 million of our 9 5/8% senior secured second lien notes due in 2016;
  • A $0.1 million loss ($0.1 million, net of tax) on disposal of assets;
  • A $5.6 million impairment loss ($3.4 million, net of tax, or $0.14 per share) on land in Covina, California; and
  • A $0.4 million non-cash compensation charge ($0.2 million, net of tax, or $0.01 per share) related to the expensing of stock options consisting of:
    • $0.3 million non-cash compensation included in corporate expenses; and
    • $0.1 million non-cash compensation included in broadcast operating expenses.

Per share numbers are calculated based on 25,624,350 diluted weighted average shares for the quarter ended June 30, 2013, and 24,356,298 diluted weighted average shares for the quarter ended June 30, 2012.

Year to Date 2013 Results

For the six months ended June 30, 2013 compared to the six months ended June 30, 2012:

Consolidated

  • Total revenue increased 3.4% to $115.8 million from $111.9 million;
  • Operating expenses decreased 0.2% to $99.9 million from $100.1 million;
  • Operating expenses excluding gains or losses on disposals, stock-based compensation expense and impairment charges increased 4.4% to $97.9 million from $93.8 million;
  • Operating income increased 34.6% to $15.9 million from $11.8 million;
  • Net loss increased to $13.4 million, or $0.54 net loss per share, from $0.9 million, or $0.04 net loss per share, in the prior year;
  • EBITDA decreased 123.9% to a loss of $4.3 million from income of $18.1 million; and
  • Adjusted EBITDA increased 0.6% to $25.4 from $25.3 million. 

Broadcast

  • Net broadcast revenue was unchanged at $90.3 million;
  • SOI decreased 2.6% to $29.9 million from $30.7 million;
  • Same station net broadcast revenue decreased 1.1% to $89.3 million from $90.3 million;
  • Same station SOI decreased 2.6% to $29.9 million from $30.8 million; and
  • Same station SOI margin decreased to 33.5% from 34.1%.

Internet

  • Internet revenue increased 26.8% to $19.6 million from $15.5 million; and
  • Internet operating income increased 71.5% to $5.9 million from $3.4 million.

Publishing

  • Publishing revenue decreased 4.0% to $5.9 million from $6.1 million; and
  • Publishing operating income decreased 529.1% to a loss of $0.6 million from income of $0.1 million.

Included in the results for the six months ended June 30, 2013 are:

  • A $27.8 million loss ($16.7 million, net of tax, or $0.68 per share) on the early retirement of long-term debt due to the repurchase of $212.6 million of our 9 5/8% senior secured second lien notes due in 2016 and the termination of then existing bank debt;
  • A $0.8 million impairment loss ($0.5 million, net of tax, or $0.02 per share) associated with the goodwill and mastheads of our publishing businesses; and
  • A $1.2 million non-cash compensation charge ($0.7 million, net of tax, or $0.03 per share) related to the expensing of stock options primarily consisting of:
    • $0.8 million non-cash compensation included in corporate expenses;
    • $0.2 million non-cash compensation included in broadcast operating expenses;
    • $0.1 million non-cash compensation included in Internet operating expenses; and
    • the remainder included in publishing operating expenses.

Included in the results for the six months ended June 30, 2012 are:

  • A $0.9 million loss ($0.5 million, net of tax, or $0.02 per share) on early retirement of long-term debt due to the repurchase $17.5 million of our 9 5/8% senior secured second lien notes due in 2016;
  • A $5.6 million impairment loss ($3.4 million, net of tax, or $0.14 per share) on land in Covina, California; and
  • A $0.7 million non-cash compensation charge ($0.4 million, net of tax, or $0.02 per share) related to the expensing of stock options consisting of:
    • $0.4 million non-cash compensation included in corporate expenses;
    • $0.2 million non-cash compensation included in broadcast operating expenses; and
    • $0.1 million non-cash compensation included in Internet operating expenses. 

Per share numbers are calculated based on 24,684,781 diluted weighted average shares for the six months ended June 30, 2013, and 24,460,623 diluted weighted average shares for the six months ended June 30, 2012.

Balance Sheet

As of June 30, 2013, the company had $0.4 million outstanding on its revolver and $296.0 million outstanding on the Term Loan B. The company was in compliance with the covenants of its credit facility. The company's bank leverage ratio was 5.46 versus a compliance covenant of 6.75.

Cash Distribution

Salem paid a quarterly cash distribution of $0.05 per share on its Class A and Class B common stock on June 28, 2013 to shareholders of record as of June 14, 2013. The distributions totaled approximately $1.2 million.

Conference Call Information

Salem will host a teleconference to discuss its results on August 6, 2013 at 2:00 p.m. Pacific Time. To access the teleconference, please dial (913) 312-1278, passcode 2605161 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 August 20, 2013 and can be heard by dialing (719) 457-0820, passcode 2605161 or on the investor relations portion of the company's website, located at www.salem.cc.

Third Quarter 2013 Outlook

For the third quarter of 2013, we are projecting total revenue to increase 0% to 2% over third quarter 2012 total revenue of $56.7 million. The growth is impacted by strong political revenue of $1.5 million in the third quarter of 2012. Excluding that revenue, we would project revenue to increase 3% to 5%. We are also projecting operating expenses before gains or losses on disposal of assets, impairment losses and stock-based compensation expense to increase 1% to 4% as compared to the third quarter of 2012 operating expenses of $47.4 million.

About Salem Communications

Salem Communications Corporation is the largest commercial U.S. radio broadcasting company that provides programming targeted at audiences interested in Christian and conservative opinion 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 99 radio stations in 38 markets, including 61 stations in 22 of the top 25 markets. Salem also programs the Family Talk™ Christian-themed talk format on Sirius XM Radio, channel 131. Additionally the company operates Christianradio.com.

Salem also owns Salem Radio Network, a national radio network that syndicates talk, news and music programming to approximately 2,400 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, Internet operating income and publishing 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. Internet operating income is defined as Internet revenue minus Internet operating expenses. Publishing operating income is defined as publishing revenue minus publishing operating expenses. EBITDA is defined as net income before interest, taxes, depreciation, amortization and change in fair value of interest rate swaps. Adjusted EBITDA is defined as EBITDA before gain or loss on the disposal of assets, impairment of indefinite-lived long-term assets including goodwill, impairment of long-lived 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, Internet operating income and publishing 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, Internet operating income and publishing 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, Internet operating income and publishing 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     Six Months Ended  
  June 30,     June 30,  
  2012     2013     2012     2013  
  (Unaudited)  
Net broadcast revenue $ 46,372     $ 47,025     $ 90,329     $ 90,272  
Net Internet revenue   8,035       9,906       15,469       19,622  
Net publishing revenue   3,219       3,205       6,112       5,870  
Total revenue   57,626       60,136       111,910       115,764  
Operating expenses:                              
  Broadcast operating expenses   30,519       30,844       59,661       60,411  
  Internet operating expenses   6,109       6,887       12,033       13,728  
  Publishing operating expenses   3,000       3,452       5,971       6,475  
  Corporate expenses   4,804       5,092       9,671       10,888  
  Impairment of indefinite-lived long-term assets other than goodwill   --       345       --       345  
  Impairment of goodwill   --       438       --       438  
  Impairment of long-lived assets   5,608       --       5,608       --  
  Depreciation and amortization   3,579       3,790       7,198       7,605  
  (Gain) loss on disposal of assets   145       1       (24 )     5  
Total operating expenses   53,764       50,849       100,118       99,895  
Operating income   3,862       9,287       11,792       15,869  
Other income (expense):                              
  Interest income   28       15       59       36  
  Interest expense   (6,264 )     (3,719 )     (12,660 )     (9,442 )
  Change in fair value of interest rate swaps   --       4,007       --       3,578  
  Loss on early retirement of long-term debt   (893 )     (55 )     (893 )     (27,776 )
  Other income (expense), net   4       5       11       11  
Income (loss) from continuing operations before income taxes   (3,263 )     9,540       (1,691 )     (17,724 )
Provision (benefit from) for income taxes   (1,484 )     4,335       (797 )     (4,347 )
Income (loss) from continuing operations   (1,779 )     5,205       (894 )     (13,377 )
Loss from discontinued operations, net of tax   (13 )     (4 )     (55 )     (15 )
Net income (loss) $ (1,792 )   $ 5,201     $ (949 )   $ (13,392 )
                               
Basic income (loss) per share before discontinued operations $ (0.07 )   $ 0.20     $ (0.04 )   $ (0.54 )
Income (loss) per share from discontinued operations, net of tax   --       --       --       --  
Basic income (loss) per share after discontinued operations $ (0.07 )   $ 0.20     $ (0.04 )   $ (0.54 )
Diluted income (loss) per share before discontinued operations $ (0.07 )   $ 0.20     $ (0.04 )   $ (0.54 )
Income (loss) per share from discontinued operations, net of tax   --       --       --       --  
Diluted income (loss) per share after discontinued operations $ (0.07 )   $ 0.20     $ (0.04 )   $ (0.54 )
Dividends per share $ 0.04     $ 0.05     $ 0.07     $ 0.10  
                               
Basic weighted average shares outstanding   24,356,298       24,737,131       24,460,623       24,684,781  
Diluted weighted average shares outstanding   24,356,298       25,624,350       24,460,623       24,684,781  
                               
Other data:                              
Station operating income $ 15,853     $ 16,181     $ 30,668     $ 29,861  
Station operating margin   34.2 %     34.4 %     34.0 %     33.1 %
                               
                               
                               
Salem Communications Corporation
Condensed Consolidated Balance Sheets
(in thousands)
 
  December 31, 2012   June 30, 2013
           
Assets          
Cash $ 380   $ 73
Trade accounts receivable, net   35,009     37,133
Deferred income taxes   6,248     6,248
Other current assets   5,858     7,486
Property, plant and equipment   99,467     99,369
Intangible assets, net   406,729     413,204
Interest rate swaps   --     3,578
Deferred financing costs   4,002     4,442
Other assets   3,669     2,057
Total assets $ 561,362   $ 573,590
           
Liabilities and Stockholders' Equity          
Current liabilities $ 50,659   $ 35,563
Long-term debt and capital lease obligations   248,872     292,762
Deferred income taxes   47,593     43,015
Other liabilities   8,169     10,180
Stockholders' equity   206,069     192,070
Total liabilities and stockholders' equity $ 561,362   $ 573,590
           
           
           
Salem Communications Corporation  
Supplemental Information  
(in thousands)  
   
  Three Months Ended     Six Months Ended  
  June 30,     June 30,  
  2012     2013     2012     2013  
  (Unaudited)  
Capital Expenditures                              
Acquisition related / income producing $ 165     $ 251     $ 1,085     $ 369  
Maintenance   1,920       2,638       3,761       4,863  
Total capital expenditures $ 2,085     $ 2,889     $ 4,846     $ 5,232  
                               
Reconciliation of Same Station Net Broadcast Revenue to Total Net Broadcast Revenue                              
Net broadcast revenue - same station $ 46,316     $ 46,428     $ 90,267     $ 89,303  
Net broadcast revenue - acquisitions   --       494       --       866  
Net broadcast revenue - dispositions   --       --       6       --  
Net broadcast revenue - format changes   56       103       56       103  
Total net broadcast revenue $ 46,372     $ 47,025     $ 90,329     $ 90,272  
                               
Reconciliation of Same Station Broadcast Operating Expenses to Total Broadcast Operating Expenses                              
Broadcast operating expenses - same station $ 30,437     $ 30,253     $ 59,510     $ 59,354  
Broadcast operating expenses revenue - acquisitions   18       524       18       990  
Broadcast operating expenses - dispositions   1       --       70       --  
Broadcast operating expenses - format changes   63       67       63       67  
Total broadcast operating expenses $ 30,519     $ 30,844     $ 59,661     $ 60,411  
                               
Reconciliation of Same Station Operating Income to Total Station Operating Expenses                              
Station operating income - same station $ 15,879     $ 16,175     $ 30,757     $ 29,949  
Station operating income - acquisitions   (18 )     (30 )     (18 )     (124 )
Station operating income - dispositions   (1 )     --       (64 )     --  
Station operating income - format changes   (7 )     36       (7 )     36  
Total station operating income $ 15,853     $ 16,181     $ 30,668     $ 29,861  
                               
                               
                               
Salem Communications Corporation  
Supplemental Information  
(in thousands)  
   
  Three Months Ended     Six Months Ended  
  June 30,     June 30,  
  2012     2013     2012     2013  
  (Unaudited)  
Reconciliation of SOI and Internet Operating Income and Publishing Operating Income to Operating Income                    
Station operating income $ 15,853     $ 16,181     $ 30,668     $ 29,861  
Internet operating income   1,926       3,019       3,436       5,894  
Publishing operating income (loss)   219       (247 )     141       (605 )
Less:                              
Corporate expenses   (4,804 )     (5,092 )     (9,671 )     (10,888 )
Depreciation and amortization   (3,579 )     (3,790 )     (7,198 )     (7,605 )
Impairment of indefinite-lived long-term assets other than goodwill   --       (345 )     --       (345 )
Impairment goodwill   --       (438 )     --       (438 )
Impairment of long-lived assets   (5,608 )           (5,608 )     --  
(Gain) loss on disposal of assets   (145 )     (1 )     24       (5 )
Operating income $ 3,862     $ 9,287     $ 11,792     $ 15,869  
                               
Reconciliation of Adjusted EBITDA to EBITDA to Net Income (Loss)                    
Adjusted EBITDA $ 13,567     $ 14,217     $ 25,281     $ 25,444  
Less:                              
Stock-based compensation   (369 )     (351 )     (696 )     (1,171 )
Loss on early retirement of long-term debt   (893 )     (55 )     (893 )     (27,776 )
Discontinued operations, net of tax   (13 )     (4 )     (55 )     (15 )
Impairment of indefinite-lived long-term assets other than goodwill   --       (345 )     --       (345 )
Impairment of goodwill   --       (438 )     --       (438 )
Impairment of long-lived assets   (5,608 )     --       (5,608 )     --  
(Gain) loss on disposal of assets   (145 )     (1 )     24       (5 )
EBITDA   6,539       13,023       18,053       (4,306 )
Plus:                              
Interest income   28       15       59       36  
Less:                              
Depreciation and amortization   (3,579 )     (3,790 )     (7,198 )     (7,605 )
Interest expense   (6,264 )     (3,719 )     (12,660 )     (9,442 )
Change in fair value of interest rate swaps   --       4,007       --       3,578  
Provision for (benefit from) income taxes   1,484       (4,335 )     797       4,347  
Net income (loss) $ (1,792 )   $ 5,201     $ (949 )   $ (13,392 )
                               
Reconciliation of Adjusted EBITDA to Free Cash Flow                    
Adjusted EBITDA $ 13,567     $ 14,217     $ 25,281     $ 25,444  
Less:                              
Cash interest   (11,527 )     (3,940 )     (11,937 )     (9,835 )
Cash taxes   (194 )     (222 )     (202 )     (245 )
Capital expenditures   (2,085 )     (2,889 )     (4,846 )     (5,232 )
Free Cash Flow $ (239 )   $ 7,166     $ 8,296     $ 10,132  
                               
Selected Debt Data Outstanding at
June 30, 2013
    Applicable
Interest Rate
             
Term Loan B $ 296,000       4.50 %                
Revolver   413       5.25 %                
Seller-financed note   2,000       5.00 %                
                               
Contact:
Company
Evan D. Masyr
Salem Communications
(805) 384-4512
Email Contact
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