UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 8, 2008
SALEM COMMUNICATIONS CORPORATION
(Exact Name of Registrant as Specified in its Charter)
![[f8k5808001.jpg]](f8k5808001.jpg)
Delaware |
| 000-26497 |
| 77-0121400 |
(State or Other Jurisdiction |
| (Commission |
| (IRS Employer |
of Incorporation) |
| File Number) |
| Identification No.) |
4880 Santa Rosa Road, Camarillo, California |
| 93012 |
(Address of Principal Executive Offices) |
| (Zip Code) |
Registrant's telephone number, including area code: (805) 987-0400
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ]Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ]Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ]Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ]Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
TABLE OF CONTENTS
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
ITEM 7.01 REGULATION FD DISCLOSURE
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
SIGNATURE
EXHIBIT INDEX
Exhibit 99.1
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On May 8, 2008, Salem Communications Corporation issued a press release regarding its results of operations for the quarter ended March 31, 2008.
ITEM 7.01 REGULATION FD DISCLOSURE
On May 8, 2008, Salem Communications Corporation issued a press release regarding its results of operations for the quarter ended March 31, 2008.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits. The following exhibit is furnished with this report on Form 8-K:
Exhibit No. |
| Description |
99.1 |
| Press release, dated May 8, 2008, of Salem Communications Corporation regarding its results of operations for the quarter ended March 31, 2008. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| SALEM COMMUNICATIONS CORPORATION |
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Date: May 8, 2008 |
| By: /s/ EVAN D. MASYR |
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| Evan D. Masyr |
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| Senior Vice President and Chief Financial Officer |
EXHIBIT INDEX
Exhibit No. |
| Description |
99.1 |
| Press release, dated May 8, 2008, of Salem Communications Corporation regarding its results of operations for the quarter ended March 31, 2008. |
EXHIBIT 99.1
![[f8k5808002.jpg]](f8k5808002.jpg)
SALEM COMMUNICATIONS ANNOUNCES FIRST QUARTER 2008 TOTAL REVENUE OF $54.5 MILLION
CAMARILLO, CA May 8, 2008 – 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, today announced results for the three months ended March 31, 2008.
First Quarter 2008 Results
For the quarter ended March 31, 2008 compared to the quarter ended March 31, 2007:
·
Total revenue decreased 1.3% to $54.5 million from $55.2 million;
·
Operating income increased 9.9% to $12.9 million from $11.8 million;
·
Net income increased to $5.0 million, or $0.21 net income per diluted share, from $3.0 million, or $0.12 net income per diluted share;
·
EBITDA increased 16.0% to $18.2 million from $15.7 million;
·
Adjusted EBITDA decreased 11.8% to $11.5 million from $13.1 million;
Broadcasting
·
Net broadcasting revenue decreased 3.2% to $48.4 million from $49.9 million;
·
Station operating income (“SOI”) decreased 9.1% to $16.2 million from $17.9 million;
·
Same station net broadcasting revenue decreased 3.9% to $46.5 million from $48.4 million;
·
Same station SOI decreased 7.6% to $16.2 million from $17.5 million;
·
Same station SOI margin decreased to 34.7% from 36.1%;
Non-broadcast Media
·
Non-broadcast revenue increased 16.0% to $6.1 million from $5.3 million; and
·
Non-broadcast operating income decreased to a loss of $0.1 million from income of $0.3 million.
Included in the results for the quarter ended March 31, 2008 are:
·
A $6.0 million gain primarily from the disposal of the assets of KTEK-AM in Houston, Texas ($3.2 million gain, net of tax, or $0.14 per diluted share);
·
A $1.4 million income ($0.06 gain per diluted share), net of tax, from discontinued operations consisting of:
o
A pretax gain of $2.2 million from the sale of WRRD-AM in Milwaukee, Wisconsin;
o
The operating results of both WRRD-AM and WFZH-FM in Milwaukee, Wisconsin; and
o
The operating results of CCM Magazine;
·
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:
o
$0.6 million non-cash compensation included in corporate expenses; and
o
$0.1 million non-cash compensation included in broadcasting operating expenses.
Included in the results for the quarter ended March 31, 2007 are:
·
A $3.3 million gain primarily from the disposal of the assets of WKNR-AM in Cleveland, Ohio ($1.8 million gain, net of tax, or $0.07 per diluted share);
·
A $0.1 million income, net of tax, from discontinued operations includes the operating results of WRRD-AM and WFZH-FM in Milwaukee, Wisconsin and CCM Magazine; and
·
A $0.8 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:
o
$0.5 million non-cash compensation included in corporate expenses; and
o
$0.2 million non-cash compensation included in broadcasting operating expenses.
These results reflect the reclassification of the operations of our Milwaukee stations to discontinued operations for all periods presented. These stations had net broadcasting revenue of approximately $0.5 million and generated a profit of $0.1 million for the quarter ended March 31, 2007 and net broadcasting revenue of approximately $0.3 million and generated a loss of $0.1 million for the quarter ended March 31, 2008.
Additionally, these results reflect the reclassification of the operations of CCM Magazine to discontinued operations for all periods presented. The magazine had non-broadcasting revenue of approximately $0.2 million and generated a profit of $0.1 million for the quarter ended March 31, 2008 and non-broadcasting revenue of $0.4 million and generated a profit of $0.1 million for the quarter ended March 31, 2007.
Other comprehensive loss of $2.1 million, net of tax, for the quarter ended March 31, 2008 and $0.3 million, net of tax, for the quarter ended March 31, 2007 is due to the change in fair market value of the company’s interest rate swaps.
Per share numbers are calculated based on 23,668,788 diluted weighted average shares for the quarter ended March 31, 2008, and 23,853,068 diluted weighted average shares for the comparable 2007 period.
Balance Sheet
As of March 31, 2008, the company had net debt of $338.4 million and was in compliance with the covenants of its credit facilities and bond indentures. The company’s bank leverage ratio was 5.89 versus a compliance covenant of 6.25 and its bond leverage ratio was 4.92 versus a compliance covenant of 7.0.
Acquisitions and Divestitures
The following transactions were completed since January 1, 2008:
·
KTEK (1110 AM) in Houston, Texas was sold for $7.8 million on March 28, 2008 which resulted in a pre-tax gain of $6.1 million;
·
WRRD (540 AM) in Milwaukee, Wisconsin, was sold for $3.8 million on March 28, 2008 which resulted in a pre-tax gain of $2.2 million; and
·
WMCU (formerly WTPS) in Miami, Florida was acquired for approximately $12.3 million on April 11, 2008 (Salem began operating the station under a local marketing agreement on October 18, 2007).
The following transactions are currently pending:
·
KKSN (910 AM) in Portland, Oregon will be acquired for approximately $4.5 million (Salem began operating this station under a local marketing agreement on February 1, 2007 with the call letters KTRO);
·
WAMD (970 AM) in Baltimore, Maryland will be acquired for approximately $3.0 million;
·
WHKZ (1440 AM) in Warren, Ohio will be sold for approximately $0.6 million;
·
WFZH (105.3 FM) in Milwaukee, Wisconsin, will be sold for approximately $8.1 million (the buyer began operating this station under a local marketing agreement on February 15, 2008); and
·
KKMO (1360 AM) in Seattle, Washington will be sold for approximately $3.7 million.
Second Quarter 2008 Outlook
For the second quarter of 2008, Salem is projecting total revenue to decrease in the low-single digit range over second quarter 2007 total revenue of $59.2 million. Salem is also projecting operating expenses before gain or loss on disposal of assets to increase in the low-single digit range over second quarter of 2007 operating expenses of $47.7 million. This increase is impacted by our continued investment in our non-broadcast business. Broadcasting operating expenses are projected to be flat as compared to second quarter 2007 broadcasting operating expenses of $33.2 million.
Conference Call Information
Salem will host a teleconference to discuss its results today, on May 8, 2008 at 5:00 p.m. Eastern Time. To access the teleconference, please dial 973-582-2717 ten minutes prior to the start time 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 22, 2008 and can be heard by dialing 706-645-9291, pass code 43492140 or on the investor relations portion of the company’s website, located at www.salem.cc.
In addition to its radio properties, Salem owns Salem Radio Network®, which syndicates talk, news and music programming to approximately 2,000 affiliates; Salem Radio Representatives™, a national radio advertising sales force; Salem Web Network™, an Internet provider of Christian content and online streaming; and Salem Publishing™, a publisher of Christian-themed magazines. Upon the close of all announced transactions, the company will own 95 radio stations, including 58 stations in 23 of the top 25 markets. Additional information about Salem may be accessed at the company’s website, www.salem.cc.
Company Contact:
Tomasita Aranda
Salem Communications
(805) 987-0400 ext. 1067
tomasitaa@salem.cc
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 broadcasting revenues minus broadcasting 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 discontinued operations (net of tax), 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 broadcasting 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 broadcasting. 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 |
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Condensed Consolidated Statements of Operations |
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(in thousands, except share, per share and margin data) |
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| Three Months Ended | |
| March 31, | |
| 2007 | 2008 |
| (unaudited) | |
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Net broadcasting revenue | $ 49,942 | $ 48,359 |
Non-broadcast revenue | 5,288 | 6,135 |
Total revenue | 55,230 | 54,494 |
Operating expenses: |
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Broadcasting operating expenses | 32,086 | 32,128 |
Non-broadcast operating expenses | 4,958 | 6,239 |
Corporate expenses | 5,814 | 5,277 |
Depreciation and amortization | 3,868 | 3,931 |
Gain on disposal of assets | (3,269) | (6,014) |
Total operating expenses | 43,457 | 41,561 |
Operating income | 11,773 | 12,933 |
Other income (expense): |
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Interest income | 60 | 21 |
Interest expense | (6,454) | (6,074) |
Other income (expense), net | (35) | (51) |
Income from continuing operations before income taxes | 5,344 | 6,829 |
Provision for income taxes | 2,445 | 3,174 |
Income from continuing operations | 2,899 | 3,655 |
Income from discontinued operations, net of tax | 66 | 1,368 |
Net income | $ 2,965 | $ 5,023 |
Other comprehensive loss, net of tax | (288) | (2,144) |
Comprehensive income | $ 2,677 | $ 2,879 |
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Basic income per share before discontinued operations | $ 0.12 | $ 0.15 |
Income from discontinued operations, net of tax | $ - | $ 0.06 |
Basic income per share after discontinued operations | $ 0.12 | $ 0.21 |
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Diluted income per share before discontinued operations | $ 0.12 | $ 0.15 |
Income from discontinued operations, net of tax | $ - | $ 0.06 |
Diluted income per share after discontinued operations | $ 0.12 | $ 0.21 |
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Basic weighted average shares outstanding | 23,848,603 | 23,668,788 |
Diluted weighted average shares outstanding | 23,853,068 | 23,668,788 |
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Other Data: |
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Station operating income | $ 17,856 | $ 16,231 |
Station operating margin | 35.8% | 33.6% |
Salem Communications Corporation |
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Condensed Consolidated Balance Sheets |
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(in thousands) |
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| December 31, |
| March 31, |
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| 2007 |
| 2008 |
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| (unaudited) | ||
Assets |
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Cash |
| $ 447 |
| $ 1,349 |
Trade accounts receivable, net |
| 30,030 |
| 29,138 |
Deferred income taxes |
| 5,567 |
| 5,642 |
Other current assets |
| 3,256 |
| 3,555 |
Assets held for sale |
| 8,599 |
| 7,011 |
Property, plant and equipment, net |
| 131,087 |
| 130,180 |
Intangible assets, net |
| 492,156 |
| 490,253 |
Bond issue costs |
| 444 |
| 407 |
Bank loan fees |
| 1,994 |
| 1,741 |
Other assets |
| 6,218 |
| 7,617 |
Total assets |
| $ 679,798 |
| $ 676,893 |
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Liabilities and Stockholders' Equity |
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Current liabilities |
| $ 26,290 |
| $ 26,735 |
Long-term debt and capital lease obligations |
| 350,106 |
| 340,700 |
Deferred income taxes |
| 61,381 |
| 63,786 |
Other liabilities |
| 8,843 |
| 8,871 |
Stockholders' equity |
| 233,178 |
| 236,801 |
Total liabilities and stockholders' equity |
| $ 679,798 |
| $ 676,893 |
Salem Communications Corporation |
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Supplemental Information |
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(in thousands) |
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| Three Months Ended | |
| March 31, | |
| 2007 | 2008 |
| (unaudited) | |
Capital expenditures |
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Acquisition related / income producing | $ 2,534 | $ 1,374 |
Maintenance | 2,650 | 1,557 |
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Total capital expenditures | $ 5,184 | $ 2,931 |
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Tax information |
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Cash tax expense | $ 168 | $ (62) |
Deferred tax expense | 2,277 | 3,236 |
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Provision for income taxes | $ 2,445 | $ 3,174 |
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Tax benefit of non-book amortization | $ 4,176 | $ 4,126 |
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Reconciliation of Same Station Net Broadcasting Revenue to |
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Total Net Broadcasting Revenue |
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Net broadcasting revenue - same station | $ 48,432 | $ 46,536 |
Net broadcasting revenue - acquisitions | 50 | 510 |
Net broadcasting revenue - dispositions | 296 | 253 |
Net broadcasting revenue - format changes | 1,164 | 1,060 |
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Total net broadcasting revenue | $ 49,942 | $ 48,359 |
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Reconciliation of Same Station Broadcasting Operating Expenses to |
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Total Broadcasting Operating Expenses |
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Broadcasting operating expenses - same station | $ 30,928 | $ 30,371 |
Broadcasting operating expenses - acquisitions | 100 | 452 |
Broadcasting operating expenses - dispositions | 227 | 126 |
Broadcasting operating expenses - format changes | 831 | 1,179 |
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Total broadcasting operating expenses | $ 32,086 | $ 32,128 |
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Reconciliation of Same Station Station Operating Income to |
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Total Station Operating Income |
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Station operating income - same station | $ 17,504 | $ 16,165 |
Station operating income - acquisitions | (50) | 58 |
Station operating income - dispositions | 69 | 127 |
Station operating income - format changes | 333 | (119) |
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Total station operating income | $ 17,856 | $ 16,231 |
Salem Communications Corporation |
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Supplemental Information |
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(in thousands) |
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| Three Months Ended |
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| March 31, |
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| 2007 | 2008 |
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| (unaudited) |
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Reconciliation of Station Operating Income and Non-Broadcast |
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Operating Income to Operating Income |
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Station operating income | $ 17,856 | $ 16,231 |
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Non-broadcast operating income | 330 | (104) |
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Less: |
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Corporate expenses | (5,814) | (5,277) |
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Depreciation and amortization | (3,868) | (3,931) |
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Gain on disposal of assets | 3,269 | 6,014 |
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Operating income | $ 11,773 | $ 12,933 |
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Reconciliation of Adjusted EBITDA to EBITDA to Net Income |
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Adjusted EBITDA | $ 13,091 | $ 11,545 |
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Less: |
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Stock-based compensation | (754) | (746) |
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Discontinued operations, net of tax | 66 | 1,368 |
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Gain on disposal of assets | 3,269 | 6,014 |
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EBITDA | 15,672 | 18,181 |
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Plus: |
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Interest income | 60 | 21 |
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Less: |
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Depreciation and amortization | (3,868) | (3,931) |
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Interest expense | (6,454) | (6,074) |
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Provision for income taxes | (2,445) | (3,174) |
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Net income | $ 2,965 | $ 5,023 |
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| Applicable |
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| Outstanding | Interest |
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| at 3/31/2008 | Rate |
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Selected Debt and Swap Data |
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7 3/4% senior subordinated notes | $ 100,000 | 7.75% |
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Senior bank term loan B debt (1) | 72,375 | 4.50% |
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Senior bank term loan C debt (swap matures 7/1/2012) (2) | 30,000 | 6.74% |
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Senior bank term loan C debt (swap matures 7/1/2012) (2) | 30,000 | 6.45% |
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Senior bank term loan C debt (swap matures 7/1/2012) (2) | 30,000 | 6.28% |
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Senior bank term C debt (at variable rates) (1) | 72,525 | 4.84% |
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Swingline credit facility (3) | 1,394 | 5.00% |
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(1) Subject to rolling LIBOR plus a spread currently at 1.75% and incorporated into the rate set forth above. |
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(2) Under its swap agreements, the Company pays a fixed rate plus a spread based on the Company's leverage, as defined in its |
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credit agreement. As of March 31, 2007, that spread was 1.75% and is incorporated into the applicable interest rates set |
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forth above. |
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(3) Subject to prime interest rate less 0.25%. |
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