Salem posts good numbers for 3q 2002
Salem Communications Announces Industry-Leading Same Station Results
Thursday November 7, 8:15 am ET
Third Quarter Same Station Revenues and Broadcast Cash Flow Increase 15.0% and 25.5%, Respectively
CAMARILLO, Calif., Nov. 7 /PRNewswire-FirstCall/ -- Salem Communications Corporation (Nasdaq: SALM - News), the leading radio broadcaster focused on religious and family themes programming, announced today results for the third quarter ended September 30, 2002.
Commenting on these results, Edward G. Atsinger III, President and CEO said, "We continue to report what we believe are some of the strongest same station revenue and cash flow growth rates in the industry. Through the combination of focused operations, strong, stable programming and the continued growth of our music stations, we have delivered strong financial performance. In addition, with a large percentage of our radio station portfolio in a launch or early development stage, we believe Salem is very well positioned to continue delivering some of the strongest revenue and cash flow growth in the radio industry, as these stations develop to maturity."
Third Quarter 2002 Results
For the quarter ended September 30, 2002, net broadcasting revenue increased 15.9% to $38.7 million from $33.3 million in the same period a year ago. Broadcast cash flow (BCF) increased 12.8% to $14.0 million from $12.4 million in the corresponding 2001 period.
On a same station basis, revenue and broadcast cash flow increased 15.0% and 25.5% respectively, for the third quarter of 2002 as compared to the third quarter of 2001. Same station results have been positively impacted by revenue and BCF growth from our underdeveloped radio stations.
Broadcast cash flow as a percentage of net revenues decreased to 36.2% in the third quarter of 2002 from 37.1% in the third quarter of 2001, and has increased from 34.1% in the second quarter, as adjusted for the sale of WYGY-FM.
The company's non-broadcast media businesses, OnePlace.com and CCM Communications, generated profit of $0.2 million for the quarter, compared to a loss of $0.3 million for the same period in 2001.
EBITDA increased 17.0% to $10.3 million in the third quarter of 2002 compared to $8.8 million in the third quarter of 2001.
The company reported net income of $18.1 million for the quarter, or $0.77 income per diluted share, compared with net income of $9.4 million, or $0.40 income per diluted share, in the same period last year.
After-tax cash flow increased 26.9% to $6.6 million, or $0.28 per diluted share, for the third quarter of 2002 compared to $5.2 million, or $0.22 per diluted share, for the comparable 2001 period.
Free cash flow increased 48.6% to $5.5 million, or $0.23 per diluted share, for the third quarter of 2002, compared to $3.7 million, or $0.16 per diluted share, for the comparable 2001 period.
On September 30th, the company closed the sale of WYGY-FM in Cincinnati, to Susquehanna Radio Corp., for $45 million. The company reported a gain on the sale of this radio station of $27.9 million during the quarter. The after-tax gain of $17.7 million has been reported in discontinued operations, as required by SFAS No. 144.
Per share numbers were calculated based on 23,564,626 weighted average diluted shares for the quarter ended September 30, 2002, and 23,548,673 weighted average diluted shares for the comparable 2001 period.
BCF Margin Composition Analysis
The following analysis of the company's radio station portfolio separates each station into one of four categories based upon third quarter performance, for analytical purposes only. The company believes this analysis is helpful in assessing the portfolio's financial and operational development.
Three Months ended September 30, 2002
(Revenue and BCF in millions)
BCF Margin % # of Stations Revenue BCF Average BCF%
50% and greater 14 $10.6 $6.7 63.2%
30% to 49% 36 $15.8 $6.3 40.0%
0% to 29% 24 $7.4 $1.6 21.6%
Less than 0% 11 $1.5 $1.1 73.3%
Subtotal 85 $35.3 $13.5 38.2%
Network & other 0 $3.4 $0.5 14.7%
Total 85 $38.7 $14.0 36.2%
Year to Date 2002 Results
For the nine months ended September 30, 2002, net broadcasting revenue increased 16.1% to $112.2 million from $96.6 million for the same period last year. Broadcast cash flow increased 7.0% to $38.2 million from $35.7 million for the comparable nine months of 2001. Broadcast cash flow as a percentage of net revenue decreased to 34.0% for the nine months ended September 30, 2002 from 37.0% in the same period one year ago.
For the nine months ended September 30, 2002, same station net broadcasting revenue and broadcast cash flow increased 13.8% and 20.5%, respectively, as compared to the same 2001 period.
The company's non-broadcast media businesses were breakeven for the nine months ended September 30, 2002, compared to a loss of $1.3 million for the comparable 2001 period.
EBITDA, excluding a one-time legal settlement in the second quarter, increased 12.0% to $26.9 million in the nine months ended September 30, 2002, compared to $24.0 million for the comparable nine months of 2001.
The company reported a net income of $14.7 million for the nine months ended September 30, 2002, or $0.62 income per diluted share, compared with net income of $3.4 million, or $0.14 per diluted share for the comparable 2001 period.
After-tax cash flow increased 27.1% to $16.9 million, or $0.72 per diluted share, for the nine months ended September 30, 2002, compared to $13.3 million, or $0.56 per diluted share, for the comparable 2001 period.
Free cash flow increased 64.2% to $13.3 million, or $0.56 per share for the nine months of 2002 from $8.1 million, or $0.35 per share, for the comparable 2001 period.
Per share numbers were calculated based on 23,573,149 weighted average diluted shares for the nine months ended September 30, 2002, and 23,515,801 weighted average diluted shares for the comparable 2001 period.
Station Acquisitions and Sales
Since June 30, 2002, Salem announced that it has entered into and/or completed a number of acquisitions and sales including:
-- The completion of the sale of WYGY-FM in Cincinnati, OH to Susquehanna
Radio Corp. for $45.0 million;
-- The completion of the acquisition of Crosswalk.com for $4.1 million;
-- The completion of the acquisition of KHCM-AM (formerly KJPN-AM) in
Honolulu, HI from International Communications Corp. for
$0.65 million; and
-- The pending acquisition of WRLG-FM and WYYB-FM, in Nashville, TN from
Tuned In Broadcasting Inc. for $5.6 million. The properties are
currently being operated under a local marketing agreement.
Fourth Quarter 2002 Outlook
Salem achieved same station revenue growth of 14.0% for October 2002. Based on the most recent pacings, Salem expects fourth quarter same station revenue growth in the mid teens.
For the fourth quarter of 2002, Salem is projecting net broadcast revenues between $40.0 and $40.5 million and broadcast cash flow between $15.0 and $15.5 million.
EBITDA is projected to be between $11.5 and $12.0 million in the fourth quarter of 2002. After tax cash flow per share is projected to be between $0.30 and $0.32.
Free cash flow per share is projected to be between $0.25 and $0.27. Also, earnings per share for the fourth quarter of 2002 is projected to be between $0.05 and $0.06.
Additionally, the company is projecting corporate expenses of $3.8 million, maintenance capital expenditures of $1.3 million and acquisition related/income producing capital expenditures of $1.7 million for the fourth quarter of 2002.
Fourth quarter 2002 guidance reflects the following:
-- Continued revenue and cash flow growth at Salem's contemporary
Christian music formatted stations, particularly in Dallas, Atlanta
and Orange County;
-- Start-up costs associated with the recent launch of radio stations in
Nashville and Hawaii; and
-- Soft ratings and listenership at WZFS-FM in Chicago, resulting in
lower than projected revenue and cash flow. The company has recently
appointed a new program director and has made changes to its on-air
line-up. The company expects to see strong revenue and cash flow
growth at WZFS-FM in Chicago in 2003.
Commenting further on results, Mr. Atsinger continued, "We continue to be encouraged by the improving advertising environment and the continued growth of our contemporary Christian music formatted stations. We are particularly pleased about the ratings growth we have seen at our flagship contemporary Christian music station, KLTY-FM in Dallas, where in the Arbitron summer book we achieved a 3.9 overall ratings share and ranked number two in the market for our key demographic of women aged 25-54, with a 6.7 ratings share. We believe the success at KLTY-FM is a very positive indicator of future growth for our contemporary Christian music stations in other markets."
Salem will host a teleconference to discuss its results today at 1:00 PM Eastern Time. To access the teleconference, please dial 973-582-2741 ten minutes prior to the start time or via webcast on the investor relations portion of the company's website, located at www.salem.cc. If you are unable to listen to the live teleconference at its scheduled time, there will be a replay available through November 12, 2002, which can be accessed by dialing 973-341-3080, passcode 3539674, or via archived webcast on the company's website.
Salem Communications Corporation, headquartered in Camarillo, California, is the leading U.S. radio broadcaster focused on religious and family themes programming. Upon the close of all announced transactions, the company will own and/or operate 85 radio stations, including 55 stations in the top 25 markets. In addition to its radio properties, Salem owns the Salem Radio Network, which syndicates talk, news and music programming to over 1,600 affiliated radio stations; Salem Radio Representatives, a national sales force; OnePlace.com and Crosswalk.com, the leading Internet providers of Christian content; and CCM Communications, a leading publisher of contemporary Christian music trade and consumer magazines.
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 recently launched station formats, competition in the radio broadcast, Internet and publishing industries and from new technologies, adverse economic conditions, and other risks and uncertainties detailed from time to time in Salem's periodic reports on Forms 10-K, 10-Q, 8-K and other filings filed with 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.
Salem Communications Corporation
Condensed Consolidated Statements of Operations
For the Period Ended September 30,
(in thousands, except share, per share and other data)
Three Months Ended Nine Months Ended
September September
2001 2002 2001 2002
Gross broadcasting revenue $36,304 $42,238 $105,379 $122,554
Less agency commissions 2,956 3,574 8,809 10,376
Net broadcasting revenue 33,348 38,664 96,570 112,178
Other media revenue 1,973 2,035 6,041 5,586
Total revenue 35,321 40,699 102,611 117,764
Operating expenses:
Broadcasting operating
expenses 20,991 24,682 60,871 73,983
Other media operating
expenses 2,274 1,878 7,290 5,613
Corporate expenses 3,249 3,882 10,484 11,300
Legal settlement -- -- -- 2,300
Depreciation and
amortization 7,545 2,843 22,145 8,600
Total operating expenses 34,059 33,285 100,790 101,796
Operating income 1,262 7,414 1,821 15,968
Other income (expense):
Interest income 290 52 1,844 114
Gain (loss) on disposal
of assets 20,554 (97) 23,072 (548)
Interest expense (6,970) (6,868) (19,719) (20,293)
Other expense, net (102) (122) (264) (398)
Income before income taxes 15,034 379 6,754 (5,157)
Provision for income taxes 5,434 131 2,508 (1,965)
Income before discontinued
operations 9,600 248 4,246 (3,192)
Discontinued operations,
net of tax (240) 17,858 (895) 17,871
Net income $9,360 $18,106 $3,351 $14,679
Basic earnings per share
before discontinued
operations $0.41 $0.01 $ 0.18 $(0.14)
Discontinued operations (0.01) 0.76 (0.04) 0.76
Basic earnings per
share before
discontinued operations $0.40 $0.77 $0.14 $0.63
Diluted earnings
per share before
discontinued operations $0.41 $0.01 $0.18 $(0.14)
Discontinued operations (0.01) 0.76 (0.04) 0.76
Diluted earnings per
share before
discontinued operations $0.40 $0.77 $0.14 $0.62
Basic weighted
average shares
outstanding 23,456,499 23,483,663 23,456,225 23,470,477
Diluted weighted average
shares outstanding 23,548,673 23,564,626 23,515,801 23,573,149
Other Data (in thousands,
except margin and
per share data):
Broadcast cash flow $12,357 $13,982 $35,699 $38,195
Broadcast cash flow margin 37.1% 36.2% 37.0% 34.0%
EBITDA $8,807 $10,257 $23,966 $26,868
Free cash flow $3,680 $5,458 $8,141 $13,275
Capital expenditures:
Acquisition related /
income producing $9,281 $2,855 $17,517 $12,994
Maintenance 1,478 1,092 5,121 3,671
Total $10,759 $3,947 $22,638 $16,665
Salem Communications Corporation
Condensed Consolidated Balance Sheets
(in thousands)
December 31, September 30,
2001 2002
Assets
Cash $23,921 $52,148
Other current assets 32,094 36,632
Property, plant and equipment, net 93,087 96,718
Intangible assets, net 344,059 372,011
Bond issue costs 7,685 7,136
Other assets 6,408 6,769
Total assets $507,254 $571,414
Liabilities and Stockholders' Equity
Current liabilities $20,604 $23,870
Long-term debt and capital
lease obligations 311,621 348,208
Deferred income taxes 15,914 25,207
Other liabilities 1,745 1,535
Stockholders' equity 157,370 172,594
Total liabilities and
stockholders' equity $507,254 $571,414
Salem Communications Corporation
Reconciliation of Supplemental Information
For the Period Ended September 30,
Three Months Ended Nine Months Ended
September September
2001 2002 2001 2002
Reconciliation to
Broadcast Cash Flow
Net broadcasting revenue $33,348 $38,664 $96,570 $112,178
Less broadcasting
operating expenses (20,991) (24,682) (60,871) (73,983)
Broadcast Cash Flow $12,357 $13,982 $35,699 $38,195
Reconciliation to EBITDA
Operating income $1,262 $7,414 $1,821 $15,968
Plus depreciation and
amortization 7,545 2,843 22,145 8,600
Plus legal settlement -- -- -- 2,300
EBITDA $8,807 $10,257 $23,966 $26,868
Reconciliation to After-Tax
Cash Flow and Free Cash Flow
Net income $9,360 $18,106 $3,351 $14,679
Less (gain) loss on
disposal of assets,
net of tax (12,332) 58 (13,843) 329
Less discontinued
operations, net of tax 240 (17,858) 895 (17,871)
Plus depreciation and
amortization 7,545 2,843 22,145 8,600
Plus tax benefit of
non-book amortization -- 2,985 -- 8,632
Plus bank and bond fee
amortization 345 416 714 1,197
Plus legal settlement,
net of tax -- -- -- 1,380
After-Tax Cash Flow 5,158 6,550 13,262 16,946
Less maintenance
capital expenditures (1,478) (1,092) (5,121) (3,671)
Free Cash Flow $3,680 $5,458 $8,141 $13,275
Free Cash Flow per
Diluted Share $0.16 $0.23 $0.35 $0.56
Reconciliation to Pro
Forma Net Income
Net income $9,360 $18,106 $3,351 $14,679
Less (gain) loss on
disposal of assets,
net of tax (12,332) 58 (13,843) 329
Less discontinued
operations, net of tax 240 (17,858) 895 (17,871)
Plus legal settlement,
net of tax -- -- -- 1,380
Reduction of amortization
expense pro forma for
SFAS No. 142, net of tax 3,372 -- 9,908 --
Pro Forma Net Income $640 $306 $311 $(1,483)
Pro Forma Net Income per
Diluted Share $0.03 $0.01 $0.01 $(0.06)
Pro forma net income is defined as net income, less gain/loss on dispoal of assets net of tax, less discontinued operations net of tax, plus the legal settlement net of tax and the reduction in amortization expense in 2001, net of tax, pro forma for SFAS No. 142.
Although broadcast cash flow, EBITDA, after-tax cash flow and free cash flow are not measures of performance calculated in accordance with generally accepted accounting principles, each measure should be viewed as a supplement to and not a substitute for our results of operations presented on the basis of generally accepted accounting principles. We believe that broadcast cash flow, EBITDA, after-tax cash flow and free cash flow are useful because they are generally recognized by the radio broadcasting industry as measures of performance and are used by analysts who report on the performance of broadcast companies. These measures are not necessarily comparable to similarly titled measures employed by other companies.
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