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 7, 2009

 

 

SALEM COMMUNICATIONS CORPORATION

 

 

(Exact Name of Registrant as Specified in its Charter)


 

[f8kreq1earnings05072009ed001.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 7, 2009, Salem Communications Corporation issued a press release regarding its results of operations for the quarter ended March 31, 2009.

 

 

ITEM 7.01     REGULATION FD DISCLOSURE

 

 

On May 7, 2009, Salem Communications Corporation issued a press release regarding its results of operations for the quarter ended March 31, 2009.

 

 

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 7, 2009, of Salem Communications Corporation regarding its results of operations for the quarter ended March 31, 2009.









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 7, 2009

 

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 7, 2009, of Salem Communications Corporation regarding its results of operations for the quarter ended March 31, 2009.
















 EXHIBIT 99.1

[f8kreq1earnings05072009ed002.jpg]



SALEM COMMUNICATIONS ANNOUNCES FIRST QUARTER 2009 TOTAL REVENUE OF $48.3 MILLION  


CAMARILLO, CA May 7, 2009– 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 months ended March 31, 2009.


First Quarter 2009 Results


For the quarter ended March 31, 2009 compared to the quarter ended March 31, 2008:

·

Total revenue decreased 10.7% to $48.3 million from $54.1 million;

·

Operating expenses decreased 4.2% to $39.5 million from $41.2 million;

·

Operating income from continued operations decreased 31.3% to $8.8 million from $12.8 million;

·

Net income was $2.9 million, or $0.12 net income per diluted share, compared to $5.0 million, or $0.21 net income per diluted share;

·

EBITDA decreased 29.3% to $12.8 million from $18.1 million; and

·

Adjusted EBITDA increased 12.5% to $12.9 million from $11.4 million.


Broadcast

·

Net broadcast revenue decreased 12.3% to $42.0 million from $47.9 million;

·

Station operating income (“SOI”) decreased 2.7% to $15.7 million from $16.1 million;

·

Same station net broadcast revenue decreased 12.5% to $40.3 million from $46.0 million;

·

Same station SOI decreased 0.9% to $15.4 million from $15.6 million; and

·

Same station SOI margin increased to 38.3% from 33.8%.


Non-broadcast

·

Non-broadcast revenue increased 2.1% to $6.3 million from $6.1 million; and

·

Non-broadcast operating income was $0.5 million compared to an operating loss of $0.1 million in the prior year.


Included in the results for the quarter ended March 31, 2009 are:

·

A $0.1 million benefit related to the change in fair value of our interest rate swaps; and

·

A $0.1 million non-cash compensation charge related to the expensing of stock options.


Included in the results for the quarter ended March 31, 2008 are:

·

A $6.0 million gain ($3.2 million, net of tax, or $0.14 per diluted share) primarily from the disposal of the assets of KTEK-AM in Houston, Texas;

·

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 WRRD-AM and WFZH-FM in Milwaukee, Wisconsin and WRFD-AM in Columbus, Ohio; and

o

The operating results of CCM Magazine; 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:

o

$0.6 million non-cash compensation included in corporate expenses; and

o

$0.1 million non-cash compensation included in broadcasting operating expenses.


These results reflect the reclassification of the operations of our Columbus, Ohio and Milwaukee, Wisconsin radio stations to discontinued operations for all periods presented. These stations had net broadcast revenue of approximately $0.8 million and generated no profit for the quarter ended March 31, 2008 and net broadcast revenue of approximately $0.4 million and generated a profit of $0.1 million for the quarter ended March 31, 2009.  


Additionally, these results reflect the reclassification of the operations of CCM Magazine to discontinued operations. The magazine had non-broadcast revenue of $0.2 million and generated a profit of $0.1 million for the quarter ended March 31, 2008.


The company had no other comprehensive income or loss for the quarter ended March 31, 2009 due to the interest rate swaps becoming ineffective during the fourth quarter of 2008.  This is compared to other comprehensive loss of $2.1 million, net of tax, for the quarter ended March 31, 2008 due to the change in fair market value of the company’s interest rate swaps.


Per share numbers are calculated based on 23,673,788 diluted weighted average shares for both of the quarters ended March 31, 2009 and March 31, 2008.


Balance Sheet


As of March 31, 2009, the company had net debt of $308.9 million and was in compliance with the covenants of its credit facilities and bond indentures.  The company’s bank leverage ratio was 5.19 versus a compliance covenant of 5.75 and its bond leverage ratio was 5.51 versus a compliance covenant of 7.0.


Effective March 11, 2009, the company amended its bank credit facility.  Among other things, the amendment modified language in the calculation of the pro-forma debt service covenant, restricted its ability to pay dividends and buyback stock and terminated the company’s revolving line of credit.  The company paid an amendment fee of 50 basis points, or approximately $1.2 million.


Acquisitions and Divestitures

The following transactions were completed during the quarter:

·

WAMD (970 AM) in Aberdeen, Maryland was purchased for approximately $2.7 million on March 31, 2009.  We paid the seller the $2.7 million in July of 2008.

The following transactions are currently pending:

·

WRFD (880 AM) in Columbus, Ohio will be sold for approximately $4.0 million.


Second Quarter 2009 Outlook


For the second quarter of 2009, Salem is projecting total revenue to decrease 14% to 17% over second quarter 2008 total revenue of $57.5 million.  Salem is also projecting operating expenses before gain or loss on disposal of assets and impairments to decline 10% to 13% as compared to the second quarter of 2008 operating expenses of $47.1 million.


In addition to its radio properties, Salem owns Salem Radio Network(R), which syndicates talk, news and music programming to approximately 2,000 affiliates; Salem Radio Representatives(TM), a national radio advertising sales force; Salem Web Network(TM), an Internet provider of Christian content and online streaming; and Salem Publishing(TM), a publisher of Christian-themed magazines. Upon the close of all announced transactions, the company will own 93 radio stations, including 58 stations in 22 of the top 25 markets. Additional information about Salem may be accessed at the company's website, www.salem.cc.


Company Contact:

Tomasita Solis

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 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 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 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 companiest. 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,

 

 2008

 

 2009

 

 (unaudited)

 

Net broadcast revenue

 $       47,917

 

 $       42,031

Non-broadcast revenue

            6,133

 

            6,261

Total revenue

          54,050

 

          48,292

Operating expenses:

 

 

   

  Broadcast operating expenses

          31,787

 

          26,344

  Non-broadcast operating expenses

            6,240

 

            5,798

  Corporate expenses

            5,277

 

            3,343

  Depreciation and amortization

            3,915

 

            3,981

  (Gain) loss on disposal of assets

           (6,014)

 

                   1

Total operating expenses

          41,205

 

          39,467

Operating income

          12,845

 

            8,825

Other income (expense):

 

 

 

  Interest income

                 21

 

                 74

  Interest expense

           (6,074)

 

           (4,359)

  Change in fair value of interest rate swaps

                  -   

 

              80

  Other expense, net

                (51)

 

                (21)

Income from continuing operations before income taxes

            6,741

 

            4,599

Provision for income taxes

            3,139

 

            1,744

Income from continuing operations

            3,602

 

            2,855

Income from discontinued operations, net of tax

            1,421

 

                 34

Net income

 $         5,023

 

 $         2,889

Other comprehensive loss, net of tax

           (2,144)

 

                    -

Comprehensive income

 $         2,879

 

 $         2,889

 

 

 

 

Basic income per share before discontinued operations

 $           0.15

 

 $           0.12

Income from discontinued operations, net of tax

 $           0.06

 

 $              -   

Basic income per share after discontinued operations

 $           0.21

 

 $           0.12

 

 

 

 

Diluted income per share before discontinued operations

 $           0.15

 

 $           0.12

Income from discontinued operations, net of tax

 $           0.06

 

 $              -   

Diluted income per share after discontinued operations

 $           0.21

 

 $           0.12

 

 

 

 

Basic weighted average shares outstanding

   23,668,788

 

   23,673,788

Diluted weighted average shares outstanding

   23,668,788

 

   23,673,788

 

   

 

   

Other Data:

   

 

   

Station operating income

 $       16,130

 

 $       15,687

Station operating margin

33.7%

 

37.3%





Salem Communications Corporation

 

 

 

 

Condensed Consolidated Balance Sheets

 

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 December 31,

 

 March 31,

 

 

 2008

 

 2009

 

 

 

 

 (unaudited)

Assets

 

 

 

 

Cash

 

 $              1,892

 

 $           16,421

Trade accounts receivable, net

 

               28,530

 

              26,664

Deferred income taxes

 

                 5,670

 

                5,554

Other current assets

 

                 2,844

 

                1,640

Assets of discontinued operations

 

                    204

 

                   204

Property, plant and equipment, net

 

             133,706

 

            129,431

Intangible assets, net

 

             423,709

 

            425,670

Bond issue costs

 

                    268

 

                   231

Bank loan fees

 

                    981

 

                2,017

Other assets

 

                 9,914

 

                6,466

Total assets

 

 $          607,718

 

 $         614,298

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

Current liabilities

 

 $            22,897

 

 $           96,423

Long-term debt and capital lease obligations

 

             329,507

 

            258,544

Deferred income taxes

 

               43,106

 

              44,693

Other liabilities

 

                 9,092

 

                8,418

Stockholders' equity

 

             203,116

 

            206,220

Total liabilities and stockholders' equity

 

 $          607,718

 

 $         614,298






Salem Communications Corporation

 

 

 

Supplemental Information

 

 

 

(in thousands)

 

 

 

 

 Three Months Ended

 

 March 31,

 

 2008

 

 2009

 

 (unaudited)

Capital expenditures

 

 

 

Acquisition related / income producing

 $         1,374

 

 $            187

Maintenance

            1,557

 

               435

 

 

 

 

Total capital expenditures

 $         2,931

 

 $            622

 

 

 

 

Tax information

 

 

 

Cash tax expense (benefit)

 $            (62)

 

 $                8

Deferred tax expense

            3,201

 

            1,736

 

 

 

 

Provision for income taxes

 $         3,139

 

 $         1,744

 

 

 

 

Tax benefit of non-book amortization

 $         4,126

 

 $         3,357

 

 

 

 

Reconciliation of Same Station Net Broadcast Revenue to

 

 

 

  Total Net Broadcast Revenue

 

 

 

Net broadcast revenue - same station

 $       45,975

 

 $       40,251

Net broadcast revenue - acquisitions

                    -

 

166

Net broadcast revenue - dispositions

293

 

                   2

Net broadcast revenue - format changes

1,649

 

1,612

 

 

 

 

Total net broadcast revenue

 $       47,917

 

 $       42,031

 

 

 

 

Reconciliation of Same Station Broadcast Operating Expenses to

 

 

 

  Total Broadcast Operating Expenses

 

 

 

Broadcast operating expenses - same station

 $       30,421

 

 $       24,844

Broadcast operating expenses - acquisitions

                  -   

 

               144

Broadcast operating expenses - dispositions

               180

 

                 11

Broadcast operating expenses - format changes

            1,186

 

            1,345

 

 

 

 

Total broadcast operating expenses

 $       31,787

 

 $       26,344

 

 

 

 

Reconciliation of Same Station Operating Income to

 

 

 

  Total Station Operating Income

 

 

 

Station operating income - same station

 $       15,554

 

 $       15,407

Station operating income - acquisitions

                  -   

 

                 22

Station operating income - dispositions

               113

 

                  (9)

Station operating income - format changes

               463

 

               267

 

 

 

 

Total station operating income

 $       16,130

 

 $       15,687







Salem Communications Corporation

 

 

 

Supplemental Information

 

 

 

(in thousands)

 

 

 

 

 

 Three Months Ended

 

 

 March 31,

 

 

 2008

 

 2009

 

 

 (unaudited)

Reconciliation of Station Operating Income and Non-Broadcast

 

 

 

 

  Operating Income to Operating Income

 

 

 

 

Station operating income

 

 $                      16,130

 

 $                      15,687

Non-broadcast operating income (loss)

 

                             (107)

 

                              463

Less:

 

 

 

 

  Corporate expenses

 

                          (5,277)

 

(3,343)

  Depreciation and amortization

 

(3,915)

 

(3,981)

  Gain (loss) on disposal of assets

 

                           6,014

 

(1)

 

 

 

 

 

Operating income

 

 $                      12,845

 

 $                        8,825

 

 

 

 

 

Reconciliation of Adjusted EBITDA to EBITDA to Net Income

 

 

 

 

Adjusted EBITDA

 

 $                      11,441

 

 $                      12,870

Less:

 

 

 

 

  Stock-based compensation

 

                             (746)

 

                                   (84)

  Discontinued operations, net of tax

 

                           1,421

 

                                34

  Gain (loss) on disposal of assets

 

                           6,014

 

                                (1)

 

 

 

 

 

EBITDA

 

                         18,130

 

                         12,819

Plus:

 

 

 

 

  Interest income

 

                                21

 

                                74

Less:

 

 

 

 

  Depreciation and amortization

 

                          (3,915)

 

                         (3,981)

  Interest expense

 

                          (6,074)

 

                         (4,359)

  Change in fair value of interest rate swaps

 

                                 -   

 

                            80

  Provision for income taxes

 

                          (3,139)

 

                         (1,744)

 

 

 

 

 

Net income

 

 $                        5,023

 

 $                        2,889

 

 

   

 

    

 

 

 Outstanding at

 

 Applicable

Selected Debt and Swap Data

 

 March 31, 2009

 

 Interest Rate

  7 3/4% senior subordinated notes

 

 $                   90,605

 

7.75%

  Senior bank term loan B debt (1)

 

                         71,615

 

2.25%

  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)

 

                         70,852

 

2.31%

 

 

   

 

 

(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, 2009, that spread was 1.75% and its incorporated into the applicable interest rate set forth above.