Spanish Broadcasting System, Inc. Reports Results for the Third Quarter 2006
Spanish Broadcasting System, Inc. Reports Results for the Third Quarter 2006
- Q3 Radio Net Revenues increase 3% year-over-year -
COCONUT GROVE, Fla., Nov. 7 /PRNewswire-FirstCall/ -- Spanish Broadcasting System, Inc. (the "Company" or "SBS") (NASDAQ:SBSA) today reported financial results for the three- and nine-month periods ended September 30, 2006.
Results and Discussions
For the three-months ended September 30, 2006, Consolidated Net Revenue totaled $45.9 million compared to $43.0 million for the same prior year period, resulting in growth of 7%. Radio net revenue totaled $44.6 million compared to $43.0 million for the same prior year period, resulting in growth of 3%, primarily from local and barter revenues, offset by a decrease in national sales. This radio net revenue growth was primarily in our San Francisco and Los Angeles markets. In addition, our new television segment, "MEGA TV", which debuted on March 1, 2006, generated net revenue of $1.3 million, primarily from local revenues.
For the three-months ended September 30, 2006, Operating Income totaled $11.2 million compared to $15.1 million for the same prior year period, resulting in a decrease of 26%. Operating Income before Depreciation and Amortization and Gain on the Sale of Assets, net, a non-GAAP measure, totaled $12.1 million compared to $15.9 million for the same prior year period, resulting in a decrease of 24%. Excluding our television segment's operating losses of $4.5 million and $0.9 million for the current and prior period, respectively, and SFAS No. 123(R) non-cash stock option expense of $0.5 million, Adjusted Operating Income before Depreciation and Amortization and Gain on the Sale of Assets, net, a non-GAAP measure, totaled $17.1 million compared to $16.8 million for the same prior year period, resulting in an increase of 2%. The increase was primarily attributed to the increase in our radio net revenue. Same Station Operating Income before Depreciation and Amortization and Gain on the Sale of Assets, net, a non-GAAP measure, totaled $12.7 million compared to $15.6 million for the same prior year period, resulting in a decrease of 19%. Please refer to the Non-GAAP Financial Measures section for a reconciliation of GAAP to non-GAAP financial measures.
For the three-months ended September 30, 2006, Income before Income Taxes and Discontinued Operations totaled $6.4 million compared to a loss of $(22.4) million for the same prior year period. The increase resulted mainly from the decrease in Interest Expense, net, of $3.2 million due to our 2005 long-term debt refinancing and the repayment of our $100.0 million second lien credit facility in 2006, as well as the Loss on Early Extinguishment of Debt of $29.4 million, which occurred in the prior year.
For the nine-months ended September 30, 2006, Net Revenue totaled $132.5 million compared to $123.0 million for the same prior year period, resulting in growth of 8%. Radio net revenue totaled $129.3 million compared to $123.0 million for the same prior year period, resulting in growth of 5%, primarily from local revenue. This radio net revenue growth was primarily in our San Francisco, Puerto Rico and Los Angeles markets, offset by a decrease in our Chicago market. Our new television segment, "MEGA TV", which debuted on March 1, 2006, generated start-up net revenue of $3.2 million, primarily from local revenues.
For the nine-months ended September 30, 2006, Operating Income totaled $78.3 million compared to $37.4 million for the same prior year period, resulting in an increase of 110%. Operating Income before Depreciation and Amortization and Gain on the Sale of Assets, net, a non-GAAP measure, totaled $30.3 million compared to $39.9 million for the same prior year period, resulting in a decrease of 24%. Excluding our television segment's operating losses of $14.8 million and $0.9 million for the current and prior period, respectively, and SFAS No. 123(R) non-cash stock option expense of $1.5 million, Adjusted Operating Income before Depreciation and Amortization and Gain on the Sale of Assets, net, a non-GAAP measure, totaled $46.7 million compared to $40.8 million for the same prior year period, resulting in an increase of 14%. The increase was primarily attributed to the increase in our radio net revenue. Same Station Operating Income before Depreciation and Amortization and Gain on the Sale of Assets, net, a non-GAAP measure, totaled $42.3 million compared to $38.9 million for the same prior year period, resulting in an increase of 9%. Please refer to the Non-GAAP Financial Measures section for a reconciliation of GAAP to non-GAAP financial measures.
For the nine-months ended September 30, 2006, Income before Income Taxes and Discontinued Operations totaled $60.1 million compared to a loss of $(22.3) million for the same prior year period. The increase resulted mainly from the Gain on the Sale of Assets, net, of $50.8 million related to the sale of our radio stations KZAB-FM and KZBA-FM and a decrease in Interest Expense, net, of $13.6 million due to our 2005 long-term debt refinancing and the repayment of our $100.0 million second lien credit facility in 2006, as well as the Loss on Early Extinguishment of Debt that occurred in 2005.
"We continue to capitalize on the strength of our top-ranked Hispanic content and the prime positioning of our diversified media assets to strengthen our value proposition in a transitioning media environment," commented Raul Alarcon, Jr., Chairman and CEO. "Once again, our radio division posted revenue growth ahead of the industry, reflecting our consistently strong ratings in the nation's top markets and our focus on monetizing our audience shares. In addition, our TV and Internet assets continued to gain traction with consumers and advertisers. While fourth quarter trends are soft, we believe the steps we are taking to expand our connection with the audiences we serve through our multi-media portfolio will strengthen our competitive profile and improve our long-term growth potential. As the Hispanic population continues to grow and advertisers increasingly take notice, we remain very well-positioned to benefit over the long-term."
Non-GAAP Financial Measures
Included below are tables that reconcile the three- and nine-month ended reported results in accordance with Generally Accepted Accounting Principles (GAAP) to Non-GAAP results. The tables reconcile Net Revenue to Same Station Net Revenue and also reconciles Operating Income to Operating Income before Depreciation and Amortization and Gain on the Sale of Assets, net, Adjusted Operating Income before Depreciation and Amortization and Gain on the Sale of Assets, net, and Same Station Operating Income before Deprecation and Amortization and Gain on the Sale of Assets, net.
UNAUDITED GAAP REPORTED RESULTS RECONCILED TO NON-GAAP RESULTS
Three Months Ended
(Amounts in thousands) September 30, %
2006 2005 Change
Radio Net Revenue $44,552 43,047 3%
TV Net Revenue 1,339 -
Consolidated Net Revenue $45,891 43,047 7%
less: Non Same Station Net Revenue (1) (74) (610)
Same Station Net Revenue (1) $45,817 42,437 8%
Operating Income $11,174 15,051 -26%
add back: Depreciation & Amortization 968 867
add back: Gain on the Sale of Assets, net 6 -
Operating Income before Depreciation
& Amortization and Gain on the Sale
of Assets, net $12,148 15,918 -24%
add back: Non-cash stock option
expense (2) 462 -
add back: New TV Segment Loss (2) 4,511 904
Adjusted Operating Income before
Depreciation & Amortization and
Gain on the Sale of Assets, net, (2) $17,121 16,822 2%
Operating Income $11,174 15,051 -26%
add back: Depreciation & Amortization 968 867
add back: Gain on the Sale of Assets, net 6 -
add back: Non-cash stock option expense 462 -
add back: Non Same Station Operating
Results (1) 56 (358)
Same Station Operating Income before
Depreciation & Amortization and Gain
on the Sale of Assets, net (1) $12,666 15,560 -19%
UNAUDITED GAAP REPORTED RESULTS RECONCILED TO NON-GAAP RESULTS
Nine Months Ended
(Amounts in thousands) September 30, %
2006 2005 Change
Radio Net Revenue $129,339 122,961 5%
TV Net Revenue 3,168 -
Consolidated Net Revenue $132,507 122,961 8%
less: Non Same Station Net Revenue (1) (2,159) (1,807)
Same Station Net Revenue (1) $130,348 121,154 8%
Operating Income $78,331 37,384 110%
add back: Depreciation & Amortization 2,800 2,521
add back: Gain on the Sale of Assets,
net (50,787) -
Operating Income before Depreciation
& Amortization and Gain on the Sale
of Assets, net $30,344 39,905 -24%
add back: Non-cash stock option
expense (2) 1,542 -
add back: New TV Segment Loss (2) 14,782 904
Adjusted Operating Income before
Depreciation & Amortization and
Gain on the Sale of Assets, net, (2) $46,668 40,809 14%
Operating Income $78,331 37,384 110%
add back: Depreciation & Amortization 2,800 2,521
add back: Gain on the Sale of Assets,
net (50,787) -
add back: Non-cash stock option expense 1,542 -
add back: Non Same Station Operating
Results (1) 10,424 (966)
Same Station Operating Income before
Depreciation & Amortization and Gain
on the Sale of Assets, net (1) $42,310 38,939 9%
(1) Same Station Results reflect stations operated during the same periods
on a comparable monthly basis. The following stations were excluded
fully or partially from the results for the three- and nine-months
ended September 30, 2006 and 2005: Los Angeles- KZAB-FM and KZBA-FM
(Disposed), Chicago- WDEK-FM, WKIE-FM and WKIF-FM (Disposed) and Miami
TV station- WSBS-TV (Acquired). In addition, same station results
exclude LaMusica.com Internet results, depreciation and amortization,
gain on the sale of assets, net, and non-cash stock option expense
related to SFAS No. 123(R).
(2) For greater comparability of our operating performance, our third
quarter guidance excluded anticipated start-up losses related to the
new television segment of $5.0 to $6.0 million and non-cash stock
option expense related to SFAS No. 123(R). Adjusted Operating Income
before Depreciation and Amortization and Gain on the Sale of Assets,
net, excludes start-up expenses related to the new television segment
and non-cash stock option expense related to SFAS No. 123(R), which
provides a basis for comparability on our operating performance for
the three- and nine-months ended September 30, 2006.
Operating Income before Depreciation and Amortization and Gain on the Sale of Assets, net, Adjusted Operating Income before Depreciation and Amortization and Gain on the Sale of Assets, net, and Same Station Results are not measures of performance or liquidity determined in accordance with GAAP in the United States. However, we believe that these measures are useful in evaluating our performance because they reflect a measure of performance for our stations before considering costs and expenses related to our capital structure and dispositions. In addition, we believe Same Station Results provide a useful measure of performance because they present Operating Income, excluding the impact of any acquisitions or dispositions completed during the relevant periods, allowing us to measure only the performance of stations we owned and operated during the entire relevant periods. These measures are widely used in the broadcast industry to evaluate a company's operating performance and are used by us for internal budgeting purposes and to evaluate the performance of our stations and our consolidated operations. However, these measures should not be considered in isolation or as substitutes for Operating Income, Net Income (Loss), Cash Flows from Operating Activities or any other measure used in determining our operating performance or liquidity that is calculated in accordance with GAAP. In addition, because Operating Income before Depreciation and Amortization and Gain on the Sale of Assets, net, Adjusted Operating Income before Depreciation and Amortization and Gain on the Sale of Assets, net, and Same Station Results are not calculated in accordance with GAAP, they are not necessarily comparable to similarly titled measures used by other companies.
Impact of the Adoption of SFAS No. 123(R) "Share-Based Payment"
We adopted SFAS No. 123(R) using the modified prospective transition method beginning January 1, 2006. SFAS No. 123(R) requires that stock-based compensation expense be recognized on awards that are ultimately expected to vest, as such, stock-based compensation for the three- and nine-month periods ended September 30, 2006 has been reduced for estimated forfeitures. When estimating forfeitures, we consider voluntary termination behaviors as well as trends of actual option forfeitures. The impact on our results of operations of recording stock-based compensation for the three- and nine-month periods ended September 30, 2006 was as follows (in thousands):
Three-Months Ended Nine-Months Ended
(in thousands) September 30, 2006 September 30, 2006
Engineering and programming expenses $178 533
Selling, general and administrative
expenses 92 266
Corporate expenses 192 743
Total $462 1,542
Fourth Quarter 2006 Outlook
To be more consistent with standard industry practice, beginning this quarter and going forward, our quarterly guidance will include an estimated range of the following: radio net revenue growth, television operating results before depreciation and amortization, and capital expenditures.
For the fourth quarter ending December 31, 2006, we expect our radio net revenue to decrease in the low-to-mid single digit range over the comparable prior year period. Our fourth quarter radio net revenue guidance takes into consideration lower promotional events revenue, which was in excess of $2.0 million in the comparable prior year period, and softness in our national revenue. Also, we expect our television segment in the fourth quarter to generate operating losses before depreciation and amortization of approximately $5.0 to $6.0 million. Our total fourth quarter capital expenditures are projected to be in the range of $3.0 to $4.0 million.
Third Quarter 2006 Conference Call
We will host a conference call to discuss our third quarter 2006 financial results on Tuesday, November 7, 2006 at 2:00 p.m. Eastern Time. To access the teleconference, please dial 973-935-8753 ten minutes prior to the start time. There will also be a live webcast of the conference call on the investor portion of our corporate Web site, at http://www.spanishbroadcasting.com/webcasts.shtml.
If you cannot listen to the teleconference at its scheduled time, there will be a replay available through Tuesday, November 14, 2006, which can be accessed by dialing 877-519-4471 (U.S.) or 973-341-3080 (Int'l), passcode: 7985266. A seven day replay of the webcast will also be available on the Company's Web site.
About Spanish Broadcasting System, Inc.
Spanish Broadcasting System, Inc. is the largest publicly traded Hispanic- controlled media and entertainment company in the United States. SBS owns and operates 20 radio stations located in the top Hispanic markets of New York, Los Angeles, Miami, Chicago, San Francisco and Puerto Rico. The Company also owns and operates Mega TV, a television operation serving the South Florida market, and occasionally produces live concerts and events throughout the U.S. and Puerto Rico. In addition, the Company operates LaMusica.com, a bilingual Spanish-English online site providing content related to Latin music, entertainment, news and culture. The Company's corporate Web site can be accessed at http://www.spanishbroadcasting.com/ .
Below are the Unaudited Condensed Consolidated Statements of Operations and other information as of and for the three- and nine-month periods ended September 30, 2006 and 2005.
Three-Months Ended Nine-Months Ended
September 30, September 30,
2006 2005 2006 2005
Amounts in Thousands (Unaudited) (Unaudited)
(except per share data)
Net revenue $45,891 43,047 $132,507 122,961
Station operating
expenses (1) 30,618 23,975 91,849 72,468
Corporate expenses (1) 3,125 3,154 10,314 10,588
Depreciation and
amortization 968 867 2,800 2,521
Loss (gain) on the sale of
assets, net of disposal
costs 6 - (50,787) -
Operating income 11,174 15,051 78,331 37,384
Interest expense, net (4,840) (8,021) (15,195) (28,837)
Loss on early
extinguishment of debt - (29,443) (2,997) (32,597)
Other income(expense), net 16 (8) (7) 1,792
Income(loss) before income
taxes and discontinued
operations $6,350 (22,421) $60,132 (22,258)
Income tax expense 5,507 10,618 3,317 10,618
Income(loss) before
discontinued operations 843 (33,039) 56,815 (32,876)
Income from discontinued
operations, net of tax - 3 - -
Net Income (loss) $843 (33,036) $56,815 (32,876)
Dividends on Series B
preferred stock (2,417) (2,406) (7,251) (7,031)
Net (loss) income
applicable to
common stockholders $(1,574) (35,442) $49,564 (39,907)
Basic and diluted income (loss)
per common share:
Net (loss) income per common
share before discontinued
operations:
Basic and Diluted $(0.02) (0.49) $ 0.68 (0.55)
Net income per common share
for discontinued operations:
Basic and Diluted $- - $- -
Net (loss) income per
common share:
Basic and Diluted $(0.02) (0.49) $0.68 (0.55)
Weighted average common
shares outstanding:
Basic 72,381 72,381 72,381 72,381
Diluted 72,381 72,381 72,386 72,381
Supplemental Information:
(1)Stock-based compensation
expenses:
Station operating
expenses $270 - $799 -
Corporate expenses 192 - 743 -
Total stock-based
compensation expenses $462 - $1,542 -
Segment Data
Due to the commencement of our television operation, we began reporting two operating segments (radio and television). The following summary table presents separate financial data for each of our operating segments. We began evaluating the performance of our operating segments based on separate financial data for each operating segment as provided below (in thousands).
Three-Months Ended
September 30, Change
2006 2005 $ %
(in thousands)
Net Revenue:
Radio $44,552 43,047 1,505 3%
Television 1,339 - 1,339 100%
Consolidated $45,891 43,047 2,844 7%
Operating income (loss)
before depreciation and
amortization and gain
on sales of assets, net:
Radio $19,801 19,976 (175) -1%
Television (4,528) (904) (3,624) 401%
Corporate (3,125) (3,154) 29 -1%
Consolidated $12,148 15,918 (3,770) -24%
Depreciation and
amortization:
Radio $643 621 22 4%
Television 76 1 75 7500%
Corporate 249 245 4 2%
Consolidated $968 867 101 12%
Operating income (loss):
Radio $19,152 19,355 (203) -1%
Television (4,604) (905) (3,699) 409%
Corporate (3,374) (3,399) 25 -1%
Consolidated $11,174 15,051 (3,877) -26%
Capital expenditures:
Radio $2,116 500 1,616 323%
Television 101 49 52 106%
Corporate 148 54 94 174%
Consolidated $2,365 603 1,762 292%
September 30, December 31,
2006 2005
Total Assets:
Radio $ 882,154 1,010,020
Television 47,470 3,197
Consolidated $ 929,624 1,013,217
Nine-Months Ended
September 30, Change
2006 2005 $ %
(in thousands)
Net Revenue:
Radio $129,339 122,961 6,378 5%
Television 3,168 - 3,168 100%
Consolidated $132,507 122,961 9,546 8%
Operating income (loss) before
depreciation and amortization
and gain on sales of
assets, net:
Radio $55,490 51,397 4,093 8%
Television (14,832) (904) (13,928) 1541%
Corporate (10,314) (10,588) 274 -3%
Consolidated $30,344 39,905 (9,561) -24%
Depreciation and
amortization:
Radio $1,866 1,758 108 6%
Television 206 1 205 20500%
Corporate 728 762 (34) -4%
Consolidated $2,800 2,521 279 11%
Operating income(loss):
Radio $104,411 49,639 54,772 110%
Television (15,038) (905) (14,133) 1562%
Corporate (11,042) (11,350) 308 -3%
Consolidated $78,331 37,384 40,947 110%
Capital expenditures:
Radio $3,639 2,015 1,624 81%
Television 2,542 49 2,493 5088%
Corporate 489 526 (37) -7%
Consolidated $6,670 2,590 4,080 158%
Selected Unaudited Balance Sheet Information and Other Data:
Amounts in thousands As of September 30,
2006
Cash and cash equivalents $66,788
Total assets $929,624
Senior credit facilities term
loan due 2012 $320,125
Non-interest bearing note due 2009, net 15,478
Other debt 511
Total debt $336,114
Series B preferred stock $89,932
Total stockholders' equity $326,840
Total capitalization $752,886
Amounts in thousands Nine-Months Ended September 30,
2006 2005
Capital expenditures $ 6,670 2,590
Cash paid for income taxes, net $ 313 1,613
Source: Spanish Broadcasting System, Inc.
CONTACT: Analysts and Investors: Joseph A. Garcia, Executive Vice
President, Chief Financial Officer and Secretary of Spanish Broadcasting
System, Inc., +1-305-441-6901; or Analysts, Investors or Media: Chris Plunkett
of Brainerd Communicators, Inc., +1-212-986-6667, for Spanish Broadcasting
System, Inc.
Web site: http://www.spanishbroadcasting.com/
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