Spanish Broadcasting System, Inc. Reports Results for the Second Quarter 2014

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| Source: Spanish Broadcasting System, Inc.

MIAMI, Aug. 14, 2014 (GLOBE NEWSWIRE) -- Spanish Broadcasting System, Inc. (the "Company" or "SBS") (Nasdaq:SBSA) today reported financial results for the three- and six-months ended June 30, 2014.

Financial Highlights            
  Quarter Ended   Six-Months Ended  
(in thousands) June 30, % June 30, %
  2014 2013 Change 2014 2013 Change
     
Net revenue:            
Radio  $ 36,019  32,247 12%  $ 65,464  65,206 0%
Television  4,868  3,820 27%  8,202  9,964  (18%)
Consolidated  $ 40,887  36,067 13%  $ 73,666  75,170  (2%)
             
OIBDA, a non-GAAP measure*:            
Radio  $ 13,658  15,189  (10%)  $ 23,943  27,458  (13%)
Television  (49)  130  (138%)  (821)  (49)  (1576%)
Corporate  (3,744)  (2,612) 43%  (5,448)  (5,042) 8%
Consolidated  $ 9,865  12,707  (22%)  $ 17,674  22,367  (21%)
             
* Please refer to the Non-GAAP Financial Measures section for a definition of OIBDA and a reconciliation from a non-GAAP to GAAP financial measure.

Discussion and Results

"During the second quarter, we continued to execute our plan to expand our audiences and strengthen our multi-media platform to position our company for growth," commented Raul Alarcón, Jr., Chairman and CEO. "Our radio station clusters continue to rank among the most successful media properties serving the Spanish-speaking population in the nation's largest Hispanic media markets. Our consistent success in building and maintaining strong audience shares was only confirmed by our New York radio franchise, WSKQ-FM, capturing the number one position among all radio stations for adults 18-49, regardless of language, in the New York market, according to the June Nielsen book. Building on our success, we are continuing to invest in our radio network and digital assets, in an effort to capitalize on our loyal following, close ties to the music community and recent ratings gains. Looking ahead, we remain focused on increasing our share of advertising budgets across our markets and converting our investments into returns to the benefit of our shareholders."

Quarter Results

For the quarter-ended June 30, 2014, consolidated net revenues totaled $40.9 million compared to $36.1 million for the same prior year period, resulting in an increase of $4.8 million or 13%. Our radio segment net revenues increased $3.8 million or 12%, due to an increase in special events revenue and network sales, which were offset by a decrease in national sales. The special events revenue increase occurred in our Miami, Los Angeles and New York markets. Our network sales increase is directly related to our new "AIRE Radio Networks" advertising platform, which we launched on January 1, 2014. The decrease in national sales occurred throughout all of our markets. Our television segment net revenues increased $1.0 million or 27%, due to the increases in special events revenue and local spot sales, which were offset by decreases in paid-programming and national spot sales.

Consolidated OIBDA, a non-GAAP measure, totaled $9.9 million compared to $12.7 million for the same prior year period, representing a decrease of $2.8 million or 22%. Our radio segment OIBDA decreased $1.5 million or 10%, primarily due to the increase in station operating expenses of $5.3 million, partially offset by the increase of net revenues of $3.8 million. Radio station operating expenses increased mainly due to special event expenses, music license fees, and expenses related to our new AIRE Radio Networks such as network-affiliate station compensation and employee compensation and benefits. Our television segment OIBDA decreased $0.2 million, due to the increase in station operating expenses of $1.2 million, offset by the increase of net revenues of $1.0 million. Television station operating expenses increased primarily due to increases in the production of programming cost, special event expenses and professional fees related to a lawsuit, which was offset by a decrease in rating services. Our corporate expenses increased $1.1 million or 43%, mostly due to an increase in compensation related to a retention bonus granted to the CEO per his new employment contract, which was offset by a decrease in professional fees.

Operating income totaled $9.9 million compared to $11.4 million for the same prior year period, representing a decrease of 13%.  This decrease in operating income was primarily due to the increase in operating expenses.

Six-Months Ended Results

For the six-months ended June 30, 2014, consolidated net revenues totaled $73.7 million compared to $75.2 million for the same prior year period, resulting in a decrease of $1.5 million or 2%. Our television segment net revenues decreased $1.8 million or 18%, due to the decreases in special events revenue, paid-programming and national spot sales. Our radio segment net revenues increased $0.3 million, due to the increases in local and network sales, which were offset by decreases in national sales and special event revenue. The increase in local sales occurred throughout most of our markets, with the exception of our Miami market. Our network sales increase is directly related to our new "AIRE Radio Networks" advertising platform, which we launched on January 1, 2014. Our national sales decrease occurred throughout most of our markets, with the exception of our San Francisco market, and our special event revenue decreased in our Puerto Rico, New York and Chicago markets.  

Consolidated OIBDA, a non-GAAP measure, totaled $17.7 million compared to $22.4 million for the same prior year period, representing a decrease of $4.7 million or 21%. Our radio segment OIBDA decreased $3.5 million or 13%, primarily due to the increase in station operating expenses of $3.8 million, offset by the increase of net revenues of $0.3 million.  Radio station operating expenses increased mainly due to special event expenses, music license fees, and expenses related to our new AIRE Radio Networks such as network-affiliate station compensation and employee compensation and benefits.  Our television segment OIBDA decreased $0.8 million, due to the decrease in net revenues of $1.8 million, which were offset by the decrease in station operating expenses of $1.0 million. Television station operating expenses decreased primarily due to decreases in special event expenses and rating services, which were offset by increases in the production of programming cost and professional fees. Our corporate expenses increased by $0.4 million or 8%, mostly due to an increase in compensation related to a retention bonus granted to the CEO per his new employment contract, which was offset by a decrease in professional fees. 

Operating income totaled $16.4 million compared to $18.7 million for the same prior year period, representing a decrease of $2.3 million or 12%. This decrease in operating income was primarily due to the increase in operating expenses and decrease in net revenues.

Second Quarter 2014 Conference Call

We will host a conference call to discuss our second quarter 2014 financial results on Friday, August 15, 2014 at 11:00 a.m. Eastern Time.  To access the teleconference, please dial 412-317-6789 ten minutes prior to the start time.

If you cannot listen to the teleconference at its scheduled time, there will be a replay available through Friday, August 29, 2014, which can be accessed by dialing 877-344-7529 (U.S.) or 412-317-0088 (Int'l), passcode: 10050886.

There will also be a live webcast of the teleconference, located on the investor portion of our corporate Web site, at www.spanishbroadcasting.com/webcasts.shtml . A seven day archived replay of the webcast will also be available at that link. 

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 U.S. Hispanic markets of New York, Los Angeles, Miami, Chicago, San Francisco and Puerto Rico, airing the Tropical, Mexican Regional, Spanish Adult Contemporary and Hurban format genres. The Company also owns and operates MegaTV, a television operation with over-the-air, cable and satellite distribution and affiliates throughout the U.S. and Puerto Rico. SBS also produces live concerts and events and owns 21 bilingual websites, including www.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 www.spanishbroadcasting.com.

This press release contains certain forward-looking statements. These forward-looking statements, which are included in accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, may involve known and unknown risks, uncertainties and other factors that may cause the Company's actual results and performance in future periods to be materially different from any future results or performance suggested by the forward-looking statements in this press release. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that actual results will not differ materially from these expectations. Forward-looking statements, which are based upon certain assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words "may," "will," "expect," "believe," "anticipate," "intend," "could," "estimate," "might," or "continue" or the negative or other variations thereof or comparable terminology. Factors that could cause actual results, events and developments to differ are included from time to time in the Company's public reports filed with the Securities and Exchange Commission. All forward-looking statements made herein are qualified by these cautionary statements and there can be no assurance that the actual results, events or developments referenced herein will occur or be realized. The Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results.

(Financial Table Follows)

Contacts:  
Analysts and Investors Analysts, Investors or Media
José I. Molina  Brad Edwards 
Vice President of Finance  Brainerd Communicators, Inc.
(305) 441-6901 (212) 986-6667

Below are the Unaudited Condensed Consolidated Statements of Operations for the three- and six-months ended June 30, 2014 and 2013.

  Three-Months Ended Six-Months Ended
  June 30, June 30,
Amounts in thousands, except per share amounts 2014 2013 2014 2013
         
  (Unaudited) (Unaudited)
Net revenue  $ 40,887  36,067  $ 73,666  75,170
Station operating expenses  27,278  20,748  50,544  47,761
Corporate expenses  3,744  2,612  5,448  5,042
Depreciation and amortization  1,259  1,316  2,534  2,674
(Gain) loss on the disposal of assets, net  (1,250)  (9)  (1,204)  (22)
Impairment charges and restructuring costs  (73)  25  (73)  1,025
Operating income  9,929  11,375  16,417  18,690
Interest expense, net  (9,942)  (9,939)  (19,870)  (19,870)
Dividends on Series B preferred stock classified as interest expense  (2,434)  --   (4,867)  -- 
         
(Loss) income before income taxes  (2,447)  1,436  (8,320)  (1,180)
Income tax expense  786  186  1,000  323
Net (loss) income  (3,233)  1,250  (9,320)  (1,503)
         
Dividends on Series B preferred stock  --   (2,482)  --   (4,964)
Net loss applicable to common stockholders  $ (3,233)  (1,232)  $ (9,320)  (6,467)
         
Net loss per common share:        
Basic & Diluted  $ (0.44)  (0.17)  $ (1.28)  (0.89)
         
Weighted average common shares outstanding:        
Basic & Diluted  7,267  7,267  7,267  7,267

Non-GAAP Financial Measures

Operating Income (Loss) before Depreciation and Amortization, (Gain) Loss on the Disposal of Assets, net, and Impairment Charges and Restructuring Costs ("OIBDA") is not a measure of performance or liquidity determined in accordance with Generally Accepted Accounting Principles ("GAAP") in the United States. However, we believe that this measure is useful in evaluating our performance because it reflects a measure of performance for our stations before considering costs and expenses related to our capital structure and dispositions. This measure is widely used in the broadcast industry to evaluate a company's operating performance and is used by us for internal budgeting purposes and to evaluate the performance of our stations, segments, management and consolidated operations. However, this measure should not be considered in isolation or as a substitute for Operating Income, Net Income, 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 OIBDA is not calculated in accordance with GAAP, it is not necessarily comparable to similarly titled measures used by other companies. 

Included below are tables that reconcile OIBDA to operating income (loss) for each segment and consolidated operating income (loss), which is the most directly comparable GAAP financial measure.

  Quarter Ended June 30, 2014
(Unaudited and in thousands) Consolidated Radio Television Corporate
         
OIBDA  $ 9,865  13,658  (49)  (3,744)
Less expenses excluded from OIBDA but included in operating income (loss):        
Depreciation and amortization  1,259  480  691  88
(Gain) loss on the disposal of assets, net  (1,250)  (1,250)  --   -- 
Impairment charges and restructuring costs  (73)  --   --   (73)
Operating Income (Loss)  $ 9,929  14,428  (740)  (3,759)
         
         
  Quarter Ended June 30, 2013
(Unaudited and in thousands) Consolidated Radio Television Corporate
         
OIBDA  $ 12,707  15,189  130  (2,612)
Less expenses excluded from OIBDA but included in operating income (loss):        
Depreciation and amortization  1,316  481  761  74
(Gain) loss on the disposal of assets, net  (9)  (9)  --   -- 
Impairment charges and restructuring costs  25  86  --   (61)
Operating Income (Loss)  $ 11,375  14,631  (631)  (2,625)
   
  Six-Months Ended June 30, 2014
(Unaudited and in thousands) Consolidated Radio Television Corporate
         
OIBDA  $ 17,674  23,943  (821)  (5,448)
Less expenses excluded from OIBDA but included in operating income (loss):        
Depreciation and amortization  2,534  981  1,382  171
(Gain) loss on the disposal of assets, net  (1,204)  (1,204)  --   -- 
Impairment charges and restructuring costs  (73)  --   --   (73)
Operating Income (Loss)  $ 16,417  24,166  (2,203)  (5,546)
         
         
  Six-Months Ended June 30, 2013
(Unaudited and in thousands) Consolidated Radio Television Corporate
         
OIBDA  $ 22,367  27,458  (49)  (5,042)
Less expenses excluded from OIBDA but included in operating income (loss):        
Depreciation and amortization  2,674  992  1,535  147
(Gain) loss on the disposal of assets, net  (22)  (9)  --   (13)
Impairment charges and restructuring costs  1,025  86  1,000  (61)
Operating Income (Loss)  $ 18,690  26,389  (2,584)  (5,115)

Non-GAAP Reporting Requirement under our Senior Secured Notes Indenture

Under our Senior Secured Notes Indenture, we are to provide our Senior Secured Noteholders a statement of our "Station Operating Income for the Television Segment," as defined by the Indenture, for the twelve-month period ended June 30, 2014 and 2013, and a reconciliation of "Station Operating Income for the Television Segment" to the most directly comparable financial measure calculated in accordance with GAAP.  In addition, we are to provide our "Secured Leverage Ratio," as defined by the Indenture, as of June 30, 2014. 

Included below is the table that reconciles "Station Operating Income for the Television Segment" to the most directly comparable GAAP financial measure. Also included is our "Secured Leverage Ratio" as of June 30, 2014.

  Twelve-Months Ended Quarters Ended
  June 30, June 30, March 31, Dec. 31, Sept. 30,
(Unaudited and in thousands) 2014 2014 2014 2013 2013
           
Station Operating Income for the Television Segment, as defined by the Indenture  $ 904  410  (392)  683  203
Less expenses excluded from Station Operating Income for the Television Segment, as defined by the Indenture, but included in operating income (loss):          
Depreciation and amortization  2,763  691  691  689  692
Non-cash barter (income) expense  42  (3)  55  (18)  8
Other  1,102  462  325  237  78
GAAP Operating Loss for the Television Segment  $ (3,003)  (740)  (1,463)  (225)  (575)
           
           
           
  Twelve-Months Ended Quarters Ended
  June 30, June 30, March 31, Dec. 31, Sept. 30,
(Unaudited and in thousands) 2013 2013 2013 2012 2012
           
Station Operating Income for the Television Segment, as defined by the Indenture  $ 392  251  (140)  370  (89)
Less expenses excluded from Station Operating Income for the Television Segment, as defined by the Indenture, but included in operating income (loss):          
Depreciation and amortization  3,088  761  774  777  776
Non-cash barter (income) expense  (183)  5  2  28  (218)
Other  1,160  116  1,037  7  -- 
GAAP Operating Loss for the Television Segment  $ (3,673)  (631)  (1,953)  (442)  (647)
           
           
As of June 30, 2014          
Secured Leverage Ratio, as defined by the Indenture 6.4        

Unaudited Segment Data

We have two reportable segments: radio and television. The following summary table presents separate financial data for each of our operating segments: 

 

  Quarter Ended
June 30,
Six-Months Ended
June 30,
  2014 2013 2014 2013
  (In thousands) (In thousands)
Net revenue:        
Radio $ 36,019 32,247 65,464 65,206
Television 4,868 3,820 8,202 9,964
Consolidated $ 40,887 36,067 73,666 75,170
 
Engineering and programming expenses:
       
Radio $ 5,357 4,605 10,430 9,709
Television 2,217 1,639 4,656 4,038
Consolidated $ 7,574 6,244 15,086 13,747
 
Selling, general and administrative expenses:
       
Radio $ 17,004 12,453 31,091 28,039
Television 2,700 2,051 4,367 5,975
Consolidated $ 19,704 14,504 35,458 34,014
         
Corporate expenses: $ 3,744 2,612 5,448 5,042
 
Depreciation and amortization:
       
Radio $ 480 481 981 992
Television 691 761 1,382 1,535
Corporate 88 74 171 147
Consolidated $ 1,259 1,316 2,534 2,674
 
(Gain) loss on the disposal of assets, net:
       
Radio $ (1,250) (9) (1,204) (9)
Television --  --  --  -- 
Corporate --  --  --  (13)
Consolidated $ (1,250) (9) (1,204) (22)
 
Impairment charges and restructuring costs:
       
Radio $ --  86 --  86
Television --  --  --  1,000
Corporate (73) (61) (73) (61)
Consolidated $ (73) 25 (73) 1,025
 
Operating income (loss):
       
Radio $ 14,428 14,631 24,166 26,389
Television (740) (631) (2,203) (2,584)
Corporate (3,759) (2,625) (5,546) (5,115)
Consolidated $ 9,929 11,375 16,417 18,690

Selected Unaudited Balance Sheet Information and Other Data:

  As of   
(Amounts in thousands) June 30, 2014  
     
Cash and cash equivalents  $ 24,021  
     
Total assets  $ 457,175  
     
12.5% Senior Secured Notes due 2017, net  $ 269,872  
Other debt  8,094  
Total debt  $ 277,966  
     
Series B preferred stock  $ 90,549  
Accrued Series B preferred stock dividends payable  40,964  
Total  $ 131,513  
     
Total stockholders' deficit  $ (63,693)  
     
Total capitalization  $ 345,786  
     
     
   For the Six-Months Ended June 30, 
   2014        2013         
     
Capital expenditures  $ 1,197  992
Cash paid for income taxes  $ 305  --