Salem Communications Announces Fourth Quarter 2007 Total Revenue of $59.1 Million

CAMARILLO, Calif.--(BUSINESS WIRE)--

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 and year ended December 31, 2007.

Fourth Quarter 2007 Results

For the quarter ended December 31, 2007 compared to the quarter ended December 31, 2006:

    --  Total revenue decreased 0.2% to $59.1 million from $59.2
        million;

    --  Operating income decreased 28.8% to $7.1 million from $10.0
        million;

    --  Net income decreased to $0.2 million, or $0.01 net income per
        diluted share, from $3.3 million, or $0.14 net income per
        diluted share;

    --  EBITDA decreased 29.3% to $10.9 million from $15.4 million;

    --  Adjusted EBITDA decreased 8.7% to $13.8 million from $15.1
        million;

    Broadcasting

    --  Net broadcasting revenue decreased 1.8% to $52.2 million from
        $53.2 million;

    --  Station operating income ("SOI") decreased 7.7% to $18.0
        million from $19.5 million;

    --  Same station net broadcasting revenue decreased 2.1% to $50.8
        million from $51.9 million;

    --  Same station SOI decreased 7.2% to $18.2 million from $19.6
        million;

    --  Same station SOI margin decreased to 35.7% from 37.7%;

    Non-broadcast Media

    --  Non-broadcast revenue increased 14.1% to $6.9 million from
        $6.0 million; and

    --  Non-broadcast operating income increased 23.5% to $0.5 million
        from $0.4 million.
Included in the results for the quarter ended December 31, 2007 are:
    -- A $0.1 million loss on the disposal of assets;
    -- A $1.9 million impairment charge ($1.0 million, net of tax or
     $0.08 per share) resulting from our decision to discontinue the
     printing of CCM Magazine; and
    -- A $0.9 million non-cash compensation charge ($0.5 million, net
     of tax, or $0.02 per share) related to the expensing of stock
     options consisting of:
      -- $0.6 million non-cash compensation included in corporate
       expenses; and
      -- $0.3 million non-cash compensation included in broadcasting
       operating expenses.

On February 7, 2007, we sold WKNR (850 AM) in Cleveland, Ohio. We discontinued operating this radio station under a local marketing agreement effective December 1, 2006. For the quarter ended December 31, 2007, this station did not generate any revenue or profit. For the comparable 2006 period, the station generated net broadcasting revenue of $0.4 million and generated no profit.

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 both the quarters ended December 31, 2007 and December 31, 2006.

Other comprehensive loss of $1.6 million, net of tax, for the quarter ended December 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 December 31, 2007, and 23,852,840 diluted weighted average shares for the comparable 2006 period.

Full Year 2007 Results

For the year ended December 31, 2007 compared to the year ended December 31, 2006:


    --  Total revenue increased 2.7% to $231.7 million from $225.7
        million;

    --  Operating income decreased 31.1% to $39.8 million from $57.7
        million;

    --  Net income decreased to $8.2 million, or $0.34 net income per
        diluted share, from $19.0 million, or $0.78 net income per
        diluted share;

    --  EBITDA decreased 22.6% to $55.2 million from $71.3 million;

    --  Adjusted EBITDA increased 0.1% to $58.1 million from $58.0
        million;

    Broadcasting

    --  Net broadcasting revenue increased 0.1% to $206.6 million from
        $206.4 million;

    --  SOI decreased 2.8% to $74.8 million from $76.9 million;

    --  Same station net broadcasting revenue increased 0.5% to $202.3
        million from $201.3 million;

    --  Same station SOI decreased 3.0% to $75.2 million from $77.5
        million;

    --  Same station SOI margin decreased to 37.2% from 38.5%;

    Non-broadcast Media

    --  Non-broadcast revenue increased 29.7% to $25.1 million from
        $19.4 million; and

    --  Non-broadcast operating income increased 70.2% to $2.0 million
        from $1.2 million.

Included in the results for the year ended December 31, 2007 are:
    -- A $2.2 million gain primarily from the disposal of assets in
     the Cleveland and Nashville markets ($1.2 million gain, net of
     tax, or $0.05 gain per diluted share);
    -- A $1.9 million impairment charge ($1.0 million, net of tax or
     $0.08 per share) resulting from our decision to discontinue the
     printing of CCM Magazine;
    -- A $0.2 million gain ($0.01 per diluted share) from discontinued
     operations, net of tax related to the disposition of assets in
     the Milwaukee markets; and
    -- A $3.4 million non-cash compensation charge ($1.9 million, net
     of tax, or $0.08 per share) related to the expensing of stock
     options consisting of:
         -- $2.4 million non-cash compensation included in corporate
          expenses;
         -- $0.8 million non-cash compensation included in
          broadcasting operating expenses; and
         -- $0.2 million non-cash compensation included in other media
          operating expenses
Included in the results for the year ended December 31, 2006 are:
    -- An $18.7 million gain primarily from the disposal and exchange
     of assets in the in the Sacramento, Cleveland and Dallas markets
     ($11.1 million gain, net of tax, or $0.46 gain per diluted
     share);
    -- A $3.6 million loss ($2.2 million loss, net of tax, or $0.09
     loss per share) from the early redemption of $94.0 million of
     9.0% senior subordinated notes due 2011;
    -- A $2.6 million gain ($0.11 per diluted share) from discontinued
     operations, net of tax related to the disposition of assets in
     the Baltimore, Jacksonville, Richmond and Milwaukee markets; and
    -- A $4.3 million non-cash compensation charge ($2.6 million, net
     of tax, or $0.11 per share) related to the expensing of stock
     options consisting of:
        -- $3.4 million non-cash compensation included in corporate
         expenses;
        -- $0.8 million non-cash compensation included in broadcasting
         operating expenses; and
        -- $0.1 million non-cash compensation included in non-
         broadcast operating expenses.

For the twelve months ended December 31, 2007, WKNR (850 AM) in Cleveland, Ohio, which was sold on February 7, 2007, did not generate any revenue or profit. For the comparable 2006 period, the station generated net broadcasting revenue of $2.3 million and generated no profit.

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 $2.1 million and generated a profit of $0.5 million for the year ended December 31, 2007 as compared to net broadcasting revenue of approximately $2.0 million and profit of $0.4 million in the same period of the prior year.

Other comprehensive loss of $2.3 million, net of tax, for the year ended December 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 23,788,568 diluted weighted average shares for the year ended December 31, 2007, and 24,223,751 diluted weighted average shares for the comparable 2006 period.

Balance Sheet

As of December 31, 2007, the company had net debt of $353.8 million and was in compliance with the covenants of its credit facilities and bond indentures. The company's bank leverage ratio was 6.0 versus a compliance covenant of 6.25 and its bond leverage ratio was 5.1 versus a compliance covenant of 7.0.

    Acquisitions and Divestitures

    The following transactions are currently pending:

    --  KKSN (910 AM) in Portland, Oregon will be acquired for
        approximately $4.5 million (this station is operated by Salem
        under a local marketing agreement that began on February 1,
        2007 with the call letters KTRO);

    --  WTPS (1080 AM) in Miami, Florida will be acquired for
        approximately $12.3 million (this station is operated by Salem
        under a local marketing agreement that began on October 18,
        2007 with the call letters WMCU);

    --  KTEK (1110 AM) in Houston, Texas will be sold for
        approximately $7.8 million (this station is operated by the
        buyer under a time brokerage agreement that began on November
        29, 2007)

    --  WHKZ (1440 AM) in Warren, Ohio will be sold for approximately
        $0.6 million;

    --  WRRD (540 AM) in Milwaukee, Wisconsin, will be sold for
        approximately $3.8 million (this station is operated by the
        buyer under a local marketing agreement that began on February
        14, 2008); and

    --  WFZH (105.3 FM) in Milwaukee, Wisconsin, will be sold for
        approximately $8.1 million (this station is operated by the
        buyer under a local marketing agreement that began on February
        15, 2008).

    First Quarter 2008 Outlook

We have elected to discontinue the practice of providing specific quarterly revenue, SOI and earnings per share guidance. Going forward, Salem will provide a quarterly range for total revenue and operating expenses. Accordingly, for the first quarter of 2008, Salem is projecting total revenue to decrease in the low-single digit range over first quarter 2007 total revenue of $55.2 million. Salem is also projecting operating expenses before gain or loss on disposal of assets to increase in the low-to-mid-single digit range over first quarter of 2007 operating expenses of $46.7 million. This increase is primarily the result of increased investment in our non-broadcast business.

Conference Call Information

Salem will host a teleconference to discuss its results today, on March 4, 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 March 18, 2008 and can be heard by dialing 706-645-9291, pass code 33528493 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(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 96 radio stations, including 59 stations in 23 of the top 25 markets. Additional information about Salem may be accessed at the company's website, www.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 loss on early redemption of long-term debt, impairment of goodwill and intangible assets, 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        Twelve Months Ended
                         December 31,              December 31,
                       2006         2007         2006         2007
                   ------------------------- -------------------------
                                       (unaudited)

Net broadcasting
 revenue           $    53,209  $    52,248  $   206,367  $   206,596
Non-broadcast
 revenue                 6,031        6,880       19,369       25,130
                   ------------ ------------ ------------ ------------
Total revenue           59,240       59,128      225,736      231,726
Operating
 expenses:
  Broadcasting
   operating
   expenses             33,703       34,243      129,438      131,796
  Non-broadcast
   operating
   expenses              5,602        6,350       18,172       23,093
  Impairment of
   goodwill                  -        1,862            -        1,862
  Corporate
   expenses              5,710        5,579       24,043       22,314
  Depreciation and
   amortization          4,035        3,861       15,026       15,082
  (Gain) loss on
   disposal of
   assets                  220          136      (18,653)      (2,190)
                   ------------ ------------ ------------ ------------
Total operating
 expenses               49,270       52,031      168,026      191,957
                   ------------ ------------ ------------ ------------
Operating income         9,970        7,097       57,710       39,769
Other income
 (expense):
  Interest income           96           23          210          183
  Interest expense      (6,485)      (6,351)     (26,342)     (25,488)
  Loss on early
   redemption of
   long-term debt            -            -       (3,625)           -
  Other income
   (expense), net           46          (66)        (420)         164
                   ------------ ------------ ------------ ------------
Income from
 continuing
 operations before
 income taxes            3,627          703       27,533       14,628
Provision for
 income taxes            1,757          540       11,096        6,620
                   ------------ ------------ ------------ ------------
Income from
 continuing
 operations              1,870          163       16,437        8,008
Discontinued
 operations, net
 of tax                  1,395           25        2,562          167
                   ------------ ------------ ------------ ------------
Net income         $     3,265  $       188  $    18,999  $     8,175
                   ============ ============ ============ ============
Other
 comprehensive
 income (loss),
 net of tax                 (5)      (1,593)         457       (2,267)
                   ------------ ------------ ------------ ------------
Comprehensive
 income (loss)     $     3,260  $    (1,405) $    19,456  $     5,908
                   ============ ============ ============ ============

Basic income per
 share before
 discontinued
 operations        $      0.08  $      0.01  $      0.68  $      0.34
Discontinued
 operations, net
 of tax            $      0.06  $         -  $      0.11  $      0.01
Basic income per
 share after
 discontinued
 operations        $      0.14  $      0.01  $      0.78  $      0.34

Diluted income per
 share before
 discontinued
 operations        $      0.08  $      0.01  $      0.68  $      0.34
Discontinued
 operations, net
 of tax            $      0.06  $         -  $      0.11  $      0.01
Diluted income per
 share after
 discontinued
 operations        $      0.14  $      0.01  $      0.78  $      0.34

Basic weighted
 average shares
 outstanding        23,847,520   23,668,788   24,215,867   23,785,015
                   ============ ============ ============ ============
Diluted weighted
 average shares
 outstanding        23,852,840   23,668,788   24,223,751   23,788,568
                   ============ ============ ============ ============


Other Data:
Station operating
 income            $    19,506  $    18,005  $    76,929  $    74,800
Station operating
 margin                   36.7%        34.5%        37.3%        36.2%
Salem Communications Corporation
Condensed Consolidated Balance Sheets
(in thousands)


                                                    December  December
                                                       31,       31,
                                                      2006      2007
                                                    --------  --------
                                                       (unaudited)
Assets
Cash                                                $    710  $    447
Trade accounts receivable, net                        31,984    30,030
Deferred income taxes                                  5,020     5,567
Other current assets                                   2,881     3,256
Assets of discontinued operations                      8,671     8,599
Property, plant and equipment, net                   127,956   131,087
Intangible assets, net                               500,496   492,156
Bond issue costs                                         593       444
Bank loan fees                                         2,996     1,994
Fair value of interest rate swaps                      1,290         -
Other assets                                           3,667     6,218
                                                    --------  --------
Total assets                                        $686,264  $679,798
                                                    ========  ========

Liabilities and Stockholders' Equity
Current liabilities                                 $ 27,295  $ 26,290
Long-term debt and capital lease obligations         358,978   350,106
Deferred income taxes                                 53,935    61,381
Other liabilities                                      8,340     8,843
Stockholders' equity                                 237,716   233,178
                                                    --------  --------
Total liabilities and stockholders' equity          $686,264  $679,798
                                                    ========  ========
Salem Communications Corporation
Supplemental Information
(in thousands)

                                  Three Months
                                      Ended        Twelve Months Ended
                                  December 31,        December 31,
                                  2006     2007      2006      2007
                                -------- --------  --------- ---------
                                             (unaudited)
Capital expenditures
Acquisition related / income
 producing                      $ 2,813  $ 1,877   $ 14,594  $  7,280
Maintenance                       2,177    2,155      6,476     8,616
                                -------- --------  --------- ---------

Total capital expenditures      $ 4,990  $ 4,032   $ 21,070  $ 15,896
                                ======== ========  ========= =========


Tax information
Cash tax expense                $    57  $    75   $    256  $    368
Deferred tax expense              1,700      465     10,840     6,252
                                -------- --------  --------- ---------

Provision for income taxes      $ 1,757  $   540   $ 11,096  $  6,620
                                ======== ========  ========= =========

Tax benefit of non-book
 amortization                   $ 3,499  $ 4,180   $ 10,620  $ 16,120
                                ======== ========  ========= =========


Reconciliation of Same Station
 Net Broadcasting Revenue to
 Total Net Broadcasting Revenue
Net broadcasting revenue - same
 station                        $51,899  $50,815   $201,333  $202,280
Net broadcasting revenue -
 acquisitions                        43      447        215     1,241
Net broadcasting revenue -
 dispositions                       616       86      2,911       234
Net broadcasting revenue -
 format changes                     651      900      1,908     2,841
                                -------- --------  --------- ---------

Total net broadcasting revenue  $53,209  $52,248   $206,367  $206,596
                                ======== ========  ========= =========


Reconciliation of Same Station
 Broadcasting Operating
 Expenses to Total Broadcasting
 Operating Expenses
Broadcasting operating expenses
 - same station                 $32,322  $32,651   $123,878  $127,119
Broadcasting operating expenses
 - acquisitions                      39      440        215     1,355
Broadcasting operating expenses
 - dispositions                     648      101      2,918       314
Broadcasting operating expenses
 - format changes                   694    1,051      2,427     3,008
                                -------- --------  --------- ---------

Total broadcasting operating
 expenses                       $33,703  $34,243   $129,438  $131,796
                                ======== ========  ========= =========


Reconciliation of Same Station
 Station Operating Income to
 Total Station Operating Income
Station operating income - same
 station                        $19,577  $18,164   $ 77,455  $ 75,161
Station operating income -
 acquisitions                         4        7          -      (114)
Station operating income -
 dispositions                       (32)     (15)        (7)      (80)
Station operating income -
 format changes                     (43)    (151)      (519)     (167)
                                -------- --------  --------- ---------

Total station operating income  $19,506  $18,005   $ 76,929  $ 74,800
                                ======== ========  ========= =========
Salem Communications Corporation
Supplemental Information
(in thousands)

                              Three Months Ended   Twelve Months Ended
                                 December 31,         December 31,
                                2006        2007     2006      2007
                            ----------- ---------- --------- ---------
                                 (unaudited)
Reconciliation of Station
 Operating Income and Non-
 Broadcast Operating Income
 to Operating Income
Station operating income      $ 19,506    $18,005  $ 76,929  $ 74,800
Non-broadcast operating
 income                            429        530     1,197     2,037
Less:
  Corporate expenses            (5,710)    (5,579)  (24,043)  (22,314)
  Impairment of goodwill             -     (1,862)        -    (1,862)
  Depreciation and
   amortization                 (4,035)    (3,861)  (15,026)  (15,082)
  Gain (loss) on disposal
   of assets                      (220)      (136)   18,653     2,190
                            ----------- ---------- --------- ---------

Operating income              $  9,970    $ 7,097  $ 57,710  $ 39,769
                            =========== ========== ========= =========


Reconciliation of Adjusted
 EBITDA to EBITDA to Net
 Income
Adjusted EBITDA               $ 15,059    $13,756  $ 57,997  $ 58,068
Less:
  Stock-based compensation        (788)      (866)   (4,334)   (3,381)
  Discontinued operations,
   net of tax                    1,395         25     2,562       167
  Gain (loss) on disposal
   of assets                      (220)      (136)   18,653     2,190
  Impairment of goodwill             -     (1,862)        -    (1,862)
  Loss on early redemption
   of long-term debt                 -          -    (3,625)        -
                            ----------- -------------------- ---------

EBITDA                          15,446     10,917    71,253    55,182
Plus:
  Interest income                   96         23       210       183
Less:
  Depreciation and
   amortization                 (4,035)    (3,861)  (15,026)  (15,082)
  Interest expense              (6,485)    (6,351)  (26,342)  (25,488)
  Provision for income
   taxes                        (1,757)      (540)  (11,096)   (6,620)
                            ----------- ---------- --------- ---------

Net income                    $  3,265    $   188  $ 18,999  $  8,175
                            =========== ========== ========= =========


                            Outstanding Applicable
                                at       Interest
                             12/31/2007    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       6.63%
  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       6.80%
  Senior bank revolving
   debt (at variable rates)
   (1)                          13,000       6.66%
  Swingline credit facility
   (3)                           2,952       7.00%

(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 December 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%.


Source: Salem Communications Corporation