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]

 

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

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. 

 

 

 

 

SALEM COMMUNICATIONS CORPORATION

 

 

 

Date: May 8, 2008

 

By: /s/ EVAN D. MASYR

 

 

Evan D. Masyr

 

 

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]




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

 

 

Condensed Consolidated Statements of Operations

 

 

(in thousands, except share, per share and margin data)

 

 

 

 

 

 

 Three Months Ended

 

 March 31,

 

 2007

 2008

 

 (unaudited)

 

 

 

Net broadcasting revenue

 $       49,942

 $       48,359

Non-broadcast revenue

            5,288

            6,135

Total revenue

          55,230

          54,494

Operating expenses:

 

   

  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):

 

 

  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

 

 

 

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

 

 

 

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

 

 

 

Basic weighted average shares outstanding

   23,848,603

   23,668,788

Diluted weighted average shares outstanding

   23,853,068

   23,668,788

 

 

 

 

   

   

Other Data:

   

   

Station operating income

 $       17,856

 $       16,231

Station operating margin

35.8%

33.6%






Salem Communications Corporation

 

 

 

 

Condensed Consolidated Balance Sheets

 

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 December 31,

 

 March 31,

 

 

 2007

 

 2008

 

 

(unaudited)

Assets

 

 

 

 

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

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

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

 

 

Supplemental Information

 

 

(in thousands)

 

 

 

 

 

 

 Three Months Ended

 

 March 31,

 

 2007

 2008

 

 (unaudited)

Capital expenditures

 

 

Acquisition related / income producing

 $         2,534

 $         1,374

Maintenance

            2,650

            1,557

 

 

 

Total capital expenditures

 $         5,184

 $         2,931

 

 

 

 

 

 

Tax information

 

 

Cash tax expense

 $            168

 $             (62)

Deferred tax expense

            2,277

            3,236

 

 

 

Provision for income taxes

 $         2,445

 $         3,174

 

 

 

Tax benefit of non-book amortization

 $         4,176

 $         4,126

 

 

 

 

 

 

Reconciliation of Same Station Net Broadcasting Revenue to

 

 

  Total Net Broadcasting Revenue

 

 

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

 

 

 

Total net broadcasting revenue

 $       49,942

 $       48,359

 

 

 

 

 

 

Reconciliation of Same Station Broadcasting Operating Expenses to

 

 

  Total Broadcasting Operating Expenses

 

 

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

 

 

 

Total broadcasting operating expenses

 $       32,086

 $       32,128

 

 

 

 

 

 

Reconciliation of Same Station Station Operating Income to

 

 

  Total Station Operating Income

 

 

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)

 

 

 

Total station operating income

 $       17,856

 $       16,231






Salem Communications Corporation

 

 

 

 

 

 

Supplemental Information

 

 

 

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Three Months Ended

 

 

 

 

 

 March 31,

 

 

 

 

 

 2007

 2008

 

 

 

 

 

 (unaudited)

 

 

 

 

Reconciliation of Station Operating Income and Non-Broadcast

 

 

 

 

 

 

  Operating Income to Operating Income

 

 

 

 

 

 

Station operating income

 $       17,856

 $       16,231

 

 

 

 

Non-broadcast operating income

               330

              (104)

 

 

 

 

Less:

 

 

 

 

 

 

  Corporate expenses

           (5,814)

           (5,277)

 

 

 

 

  Depreciation and amortization

           (3,868)

           (3,931)

 

 

 

 

  Gain on disposal of assets

            3,269

            6,014

 

 

 

 

 

 

 

 

 

 

 

Operating income

 $       11,773

 $       12,933

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Adjusted EBITDA to EBITDA to Net Income

 

 

 

 

 

 

Adjusted EBITDA

 $       13,091

 $       11,545

 

 

 

 

Less:

 

 

 

 

 

 

  Stock-based compensation

              (754)

              (746)

 

 

 

 

  Discontinued operations, net of tax

                 66

            1,368

 

 

 

 

  Gain on disposal of assets

            3,269

            6,014

 

 

 

 

 

 

 

 

 

 

 

EBITDA

          15,672

          18,181

 

 

   

 

Plus:

 

 

 

 

 

 

  Interest income

                 60

                 21

 

 

 

 

Less:

 

 

 

 

 

 

  Depreciation and amortization

           (3,868)

           (3,931)

 

 

 

 

  Interest expense

           (6,454)

           (6,074)

 

 

 

 

  Provision for income taxes

           (2,445)

           (3,174)

 

 

 

 

 

 

 

 

 

 

 

Net income

 $         2,965

 $         5,023

 

 

 

 

 

   

    

   

 

 

 

 

 

 Applicable

 

 

 

 

 

 Outstanding

 Interest

 

 

 

 

 

 at 3/31/2008

 Rate

 

 

 

 

Selected Debt and Swap Data

 

 

 

 

 

 

  7 3/4% senior subordinated notes

 $     100,000

7.75%

 

 

 

 

  Senior bank term loan B debt (1)

          72,375

4.50%

 

 

 

 

  Senior bank term loan C debt (swap matures 7/1/2012) (2)

          30,000

6.74%

 

 

 

 

  Senior bank term loan C debt (swap matures 7/1/2012) (2)

          30,000

6.45%

 

 

 

 

  Senior bank term loan C debt (swap matures 7/1/2012) (2)

          30,000

6.28%

 

 

 

 

  Senior bank term C debt (at variable rates) (1)

          72,525

4.84%

 

 

 

 

  Swingline credit facility (3)

            1,394

5.00%

 

 

 

 

 

   

 

 

 

 

 

(1)  Subject to rolling LIBOR plus a spread currently at 1.75% and incorporated into the rate set forth above.

 

 

 

 

 

 

 

 

 

 

 

(2)  Under its swap agreements, the Company pays a fixed rate plus a spread based on the Company's leverage, as defined in its

 

 

      credit agreement. As of March 31, 2007, that spread was 1.75% and is incorporated into the applicable interest rates set

 

 

      forth above.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3)  Subject to prime interest rate less 0.25%.