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Salem Communications Announces Third Quarter 2011 Total Revenue of $54.9 Million

(November 03, 2011)

CAMARILLO, CA -- (Marketwire) -- 11/03/11 -- 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 and nine months ended September 30, 2011.

Third Quarter 2011 Results

For the quarter ended September 30, 2011 compared to the quarter ended September 30, 2010:

Consolidated


  • Total revenue increased 6.8% to $54.9 million from $51.4 million;
  • Operating expenses increased 6.2% to $45.9 million from $43.2 million;
  • Operating expenses excluding gain or loss on disposal of assets increased 6.2% to $45.9 million from $43.2 million;
  • Operating income increased 10.0% to $9.0 million from $8.2 million;
  • Net income increased to $1.5 million, or $0.06 net income per diluted share, from $0.3 million, $0.01 net income per diluted share in the prior year;
  • EBITDA increased 4.8% to $12.5 million from $11.9 million; and
  • Adjusted EBITDA increased 5.5% to $13.0 million from $12.3 million.

Broadcast

  • Net broadcast revenue increased 3.0% to $44.8 million from $43.5 million;
  • Station operating income ("SOI") remained consistent at $15.6 million;
  • Same station net broadcast revenue increased 4.2% to $44.3 million from $42.5 million;
  • Same station SOI increased 1.7% to $15.6 million from $15.3 million; and
  • Same station SOI margin decreased to 35.2% from 36.0%.

Internet

  • Internet revenue increased 40.1% to $7.1 million from $5.1 million; and
  • Internet operating income increased 118.7% to $1.4 million from $0.6 million.

Publishing

  • Publishing revenue increased 6.8% to $3.0 million from $2.8 million; and
  • Publishing operating income increased to $0.1 million from an operating loss of $0.1 million in the prior year.

Included in the results for the quarter ended September 30, 2011 are:

  • A $0.3 million loss ($0.2 million, net of tax, or $0.01 per share) on early retirement of long-term debt due to the repurchase of $5.0 million of our 9 5/8% senior secured second lien notes due in 2016; and
  • A $0.2 million non-cash compensation charge ($0.1 million, net of tax) related to the expensing of stock options primarily consisting of:
    • $0.1 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 September 30, 2010 are:

  • 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 primarily consisting of:
    • $0.2 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 24,746,164 diluted weighted average shares for the quarter ended September 30, 2011, and 24,822,412 diluted weighted average shares for the quarter ended September 30, 2010.

Year to Date 2011 Results

For the nine months ended September 30, 2011 compared to the nine months ended September 30, 2010:

Consolidated

  • Total revenue increased 6.5% to $162.8 million from $152.8 million;
  • Operating expenses increased 4.3% to $131.9 million from $126.5 million;
  • Operating expenses excluding gain or loss on disposal of assets increased 7.7% to $136.3 million from $126.5 million;
  • Operating income increased 17.2% to $30.9 million from $26.4 million;
  • Net income increased to $5.2 million, or $0.21 net income per diluted share, from $1.2 million, or $0.05 net income per diluted share in the prior year;
  • EBITDA increased 12.9% to $40.9 million from $36.2 million; and
  • Adjusted EBITDA increased 0.5% to $38.6 million from $38.4 million.

Broadcast

  • Net broadcast revenue increased 2.0% to $132.9 million from $130.4 million;
  • SOI decreased 1.2% to $46.9 million from $47.5 million;
  • Same station net broadcast revenue increased 2.8% to $130.8 million from $127.3 million;
  • Same station SOI decreased 0.7% to $46.5 million from $46.8 million; and
  • Same station SOI margin decreased to 35.6% from 36.8%.

Internet

  • Internet revenue increased 46.4% to $20.9 million from $14.3 million; and
  • Internet operating income increased 80.8% to $3.6 million from $2.0 million.

Publishing

  • Publishing revenue increased 9.9% to $9.0 million from $8.2 million; and
  • Publishing operating income increased to $0.5 million from an operating loss of $0.1 million in the prior year.

Included in the results for the nine months ended September 30, 2011 are:

  • A $4.3 million gain ($2.6 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, partially offset by losses from various fixed asset and equipment disposals;
  • A $1.4 million loss ($0.8 million, net of tax, or $0.03 per share) on early retirement of long-term debt due to the repurchase and redemption of $22.5 million of our 9 5/8% senior secured second lien notes due in 2016; and
  • A $0.6 million non-cash compensation charge ($0.4 million, net of tax, or $0.02 per share) related to the expensing of stock options primarily consisting of:
    • $0.4 million non-cash compensation included in corporate expenses; and
    • $0.2 million non-cash compensation included in broadcast operating expenses.

Included in the results for the nine months ended September 30, 2010 are:

  • A $1.1 million loss ($0.6 million, net of tax, or $0.03 per share) on 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; and
  • A $1.1 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:
    • $0.7 million non-cash compensation included in corporate expenses;
    • $0.3 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 24,665,649 diluted weighted average shares for the nine months ended September 30, 2011, and 24,602,258 diluted weighted average shares for the nine months ended September 30, 2010.

Balance Sheet

As of September 30, 2011, the company had $247.5 million of 9 5/8% senior secured second lien notes outstanding and had $30.5 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 5.25 versus a compliance covenant of 7.0.

Acquisitions and Divestitures

The following transaction was completed since July 1, 2011:

  • On September 6, 2011, we repurchased $5.0 million of our 9 5/8% Notes for $5.1 million, or at a price equal to 102 7/8% of the face value. This transaction resulted in a $0.3 million pre-tax loss on the early retirement of debt.

The following transactions are currently pending:

  • On October 17, 2011, we entered into an agreement to acquire KTNO-AM, Dallas, Texas for $2.2 million. We began programming the station pursuant to a Time Brokerage Agreement ("TBA") with the current owner on November 1, 2011; and
  • 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 TBA with the current owner on March 8, 2010.

Conference Call Information

Salem will host a teleconference to discuss its results on November 3, 2011 at 2:00 p.m. Pacific Time. To access the teleconference, please dial (913) 312-0718, passcode 2454258 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 November 17, 2011 and can be heard by dialing (719) 457-0820, passcode 2454258 or on the investor relations portion on the company's website, located at www.salem.cc.

Fourth Quarter 2011 Outlook

For the fourth quarter of 2011, Salem is projecting total revenue to increase 2% to 4% over fourth quarter 2010 total revenue of $54.1 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 3% to 6% as compared to the fourth quarter of 2010 operating expenses of $43.6 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 96 radio stations in 37 markets, including 60 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 data and margin data) Three Months Ended Nine months Ended September 30, September 30, ------------------------ ------------------------ 2010 2011 2010 2011 ----------- ----------- ----------- ----------- (Unaudited) Net broadcast revenue $ 43,507 $ 44,793 $ 130,386 $ 132,929 Internet revenue 5,052 7,079 14,254 20,873 Publishing revenue 2,832 3,024 8,198 9,009 ----------- ----------- ----------- ----------- Total revenue 51,391 54,896 152,838 162,811 Operating expenses: Broadcast operating expenses 27,940 29,198 82,921 86,054 Internet operating expenses 4,432 5,724 12,246 17,243 Publishing operating expenses 2,962 2,890 8,270 8,541 Corporate expenses 4,154 4,285 12,140 13,040 Depreciation and amortization 3,713 3,782 10,890 11,385 (Gain) loss on disposal of assets 18 32 13 (4,343) ----------- ----------- ----------- ----------- Total operating expenses 43,219 45,911 126,480 131,920 ----------- ----------- ----------- ----------- Operating income (loss) 8,172 8,985 26,358 30,891 Other income (expense): Interest income 48 57 142 154 Interest expense (7,435) (6,826) (22,903) (21,125) Loss on early retirement of long- term debt - (305) (1,050) (1,395) Other income (expense), net 13 3 (18) (20) ----------- ----------- ----------- ----------- Income (loss) before income taxes 798 1,914 2,529 8,505 Provision for income taxes 455 429 1,284 3,333 ----------- ----------- ----------- ----------- Net income $ 343 $ 1,485 $ 1,245 $ 5,172 =========== =========== =========== =========== Basic income per share $ 0.01 $ 0.06 $ 0.05 $ 0.21 Diluted income per share $ 0.01 $ 0.06 $ 0.05 $ 0.21 Basic weighted average shares outstanding 24,357,042 24,546,056 23,966,797 24,448,722 =========== =========== =========== =========== Diluted weighted average shares outstanding 24,822,412 24,746,164 24,602,258 24,665,649 =========== =========== =========== =========== Other Data: Station operating income $ 15,567 $ 15,595 $ 47,465 $ 46,875 Station operating margin 35.8% 34.8% 36.4% 35.3%



Salem Communications Corporation Condensed Consolidated Balance Sheets (in thousands) December 31, September 30, 2010 2011 ------------- ------------- (Unaudited) Assets Cash $ 828 $ 19 Restricted cash 100 - Trade accounts receivable, net 29,363 30,748 Deferred income taxes 5,974 5,842 Other current assets 3,943 5,672 Property, plant and equipment, net 115,867 112,382 Intangible assets, net 404,212 398,950 Deferred financing costs 7,349 5,584 Other assets 6,850 4,014 ------------- ------------- Total assets $ 574,486 $ 563,211 ============= ============= Liabilities and Stockholders' equity Current liabilities 22,809 29,782 Long-term debt and capital lease obligations 304,416 277,586 Deferred income taxes 42,296 45,451 Other liabilities 8,561 8,122 Stockholders' equity 196,404 202,270 ------------- ------------- Total liabilities and stockholders' equity $ 574,486 $ 563,211 ============= =============



Salem Communications Corporation Supplemental Information (in thousands) Three Months Ended Nine months Ended September 30, September 30, ------------------- -------------------- 2010 2011 2010 2011 --------- --------- --------- --------- (Unaudited) Capital expenditures Acquisition related / income producing $ 218 $ 308 $ 659 $ 1,712 Maintenance 1,862 1,313 5,207 4,320 --------- --------- --------- --------- Total capital expenditures $ 2,080 $ 1,621 $ 5,866 $ 6,032 ========= ========= ========= ========= Tax information Cash tax expense $ 18 $ 16 $ 270 $ 250 Deferred tax expense 437 413 1,014 3,083 --------- --------- --------- --------- Provision for income taxes $ 455 $ 429 $ 1,284 $ 3,333 ========= ========= ========= ========= Tax benefit of non-book amortization $ 2,616 $ 2,520 $ 7,863 $ 7,589 ========= ========= ========= ========= Reconciliation of Same Station Net Broadcast Revenue to Total Net Broadcast Revenue Net broadcast revenue - same station $ 42,497 $ 44,267 $ 127,259 $ 130,805 Net broadcast revenue - acquisitions - 141 17 657 Net broadcast revenue - dispositions 621 - 1,772 232 Net broadcast revenue - format changes 389 385 1,338 1,235 --------- --------- --------- --------- Total net broadcast revenue $ 43,507 $ 44,793 $ 130,386 $ 132,929 ========= ========= ========= ========= Reconciliation of Same Station Broadcast Operating Expenses to Total Broadcast Operating Expenses Broadcast operating expenses - same station $ 27,185 $ 28,693 $ 80,425 $ 84,294 Broadcast operating expenses - acquisitions - 157 61 672 Broadcast operating expenses - dispositions 439 15 1,235 (55) Broadcast operating expenses - format changes 316 333 1,200 1,143 --------- --------- --------- --------- Total broadcast operating expenses $ 27,940 $ 29,198 $ 82,921 $ 86,054 ========= ========= ========= ========= Reconciliation of Same Station Operating Income to Total Station Operating Income Station operating income - same station $ 15,312 $ 15,574 $ 46,834 $ 46,511 Station operating income - acquisitions - (16) (44) (15) Station operating income - dispositions 182 (15) 537 287 Station operating income - format changes 73 52 138 92 --------- --------- --------- --------- Total station operating income $ 15,567 $ 15,595 $ 47,465 $ 46,875 ========= ========= ========= =========



Salem Communications Corporation Supplement Information (in thousands) Three Months Ended Nine months Ended September 30, September 30, ------------------------- ---------------------- 2010 2011 2010 2011 ------------ ----------- ---------- ---------- (Unaudited) Reconciliation of SOI and Internet Operating Income and Publishing Operating Income (Loss) to Operating Income Station operating income $ 15,567 $ 15,595 $ 47,465 $ 46,875 Internet operating income 620 1,355 2,008 3,630 Publishing operating income (loss) (130) 134 (72) 468 Less: Corporate expenses (4,154) (4,285) (12,140) (13,040) Depreciation and amortization (3,713) (3,782) (10,890) (11,385) (Gain) loss on disposal of assets (18) (32) (13) 4,343 ------------ ----------- ---------- ---------- Operating income $ 8,172 $ 8,985 $ 26,358 $ 30,891 ============ =========== ========== ========== Reconciliation of Adjusted EBITDA to EBITDA to Net Income Adjusted EBITDA $ 12,289 $ 12,967 $ 38,352 $ 38,559 Less: Stock-based compensation (373) (165) (1,109) (646) Loss on early retirement of long- term debt - (305) (1,050) (1,395) (Gain) loss on disposal of assets (18) (32) (13) 4,343 ------------ ----------- ---------- ---------- EBITDA 11,898 12,465 36,180 40,861 Plus: Interest income 48 57 142 154 Less: Depreciation and amortization (3,713) (3,782) (10,890) (11,385) Interest expense (7,435) (6,826) (22,903) (21,125) Provision for income taxes (455) (429) (1,284) (3,333) ------------ ----------- ---------- ---------- Net income $ 343 $ 1,485 $ 1,245 $ 5,172 ============ =========== ========== ========== Outstanding at Applicable September Interest 30, 2011 Rate ------------ ----------- Selected Debt Data 9 5/8% senior subordinated notes $ 247,500 9.63% Revolving credit facility 30,500 3.73%

Company Contact:
Evan D. Masyr
Salem Communications
(805) 384-4512
Email Contact


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