COCONUT GROVE, Fla., Nov. 6 /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, 2008.
Discussion and Results
Raul Alarcon Jr., Chairman and CEO, commented, 'Our third quarter
financial performance reflects the impact of a slowing economy and an
industry-wide weakness in advertising demand, offset in part by strong growth
at MegaTV. During the quarter we aggressively lowered expenses, streamlined
personnel and eliminated any unnecessary discretionary spending in order to
stabilize operating performance in anticipation of what is expected to be a
prolonged economic downturn. We fully expect to realize the benefits of these
savings in the coming quarters as we continue to strengthen the leadership
position of our heritage radio brands in the nation's top Hispanic markets.
At MegaTV, we continue to gain traction among Hispanic audiences, as well as
blue-chip advertising partners, as a result of our unique programming and
expanded distribution footprint. Looking ahead, we remain committed to
capitalizing on our assets to expand on our presence among the millions of
Hispanic households we serve, while exploring all avenues to monetize our
audience shares for the benefit of our shareholders.'
Quarter Results
For the quarter ended September 30, 2008, consolidated net revenue totaled
$41.3 million compared to $46.8 million for the same prior year period,
resulting in a decrease of $5.5 million or 12%. This consolidated decrease
was attributable to our radio segment which had a net revenue decrease of $7.9
million or 18%, offset by an increase in our television segment net revenue of
$2.4 million or 99%. Our radio segment had a decrease in net revenue
primarily due to lower local and national sales. The decrease in local sales
occurred in our Miami, Los Angeles, New York and Chicago markets, offset by an
increase in our Puerto Rico market. The decrease in national sales occurred
throughout all of our markets. Our television segment net revenue growth was
primarily due to increases in local spot sales, subscriber revenue related to
the DIRECTV affiliation agreements, barter sales, and local integrated sales.
Operating income totaled $4.0 million compared to $11.9 million for the
same prior year period. The decrease in operating income was mainly due to
the decrease in consolidated net revenue and restructuring costs of $2.2
million, offset by a decrease in corporate expenses. Please refer to the
Restructuring Costs section for a detailed discussion.
Operating income before depreciation and amortization, gain on the
disposal of assets, net, and impairment of FCC broadcasting licenses and
restructuring costs, a non-GAAP measure, totaled $8.0 million compared to
$13.1 million for the same prior year period, resulting in a decrease of $5.1
million. This decrease was primarily attributed to the decrease of $6.6
million in our radio segment, offset by a decrease of $1.2 million in
corporate expenses. Please refer to the Segment Data and Non-GAAP Financial
Measures section for definitions and a reconciliation of GAAP to non-GAAP
financial measures.
Income before income taxes totaled $1.9 million compared to $7.1 million
for the same prior year period.
Nine-month Results
For the nine-months ended September 30, 2008, consolidated net revenue
totaled $122.9 million compared to $133.6 million for the same prior year
period, resulting in a decrease of $10.7 million or 8%. This consolidated
decrease was attributable to our radio segment which had a net revenue
decrease of $16.0 million or 13%, offset by an increase in our television
segment net revenue of $5.3 million or 74%. Our radio segment had a decrease
in net revenue primarily due to lower local and national sales. The decrease
in local sales occurred primarily in our Miami, Los Angeles, Chicago and New
York markets, offset by increases in our Puerto Rico and San Francisco
markets. The decrease in national sales occurred in our Miami, Chicago, and
New York markets, offset by an increase in our Los Angeles market. Our
television segment net revenue growth was primarily due to increases in
subscriber revenue related to the DIRECTV affiliation agreements, local spot
sales, barter sales, and local integrated sales.
Operating (loss) income totaled $(388.1) million compared to $29.0 million
for the same prior year period. The decrease was primarily related to the
impairment of FCC broadcasting licenses and restructuring costs. Also
contributing to the decrease in operating (loss) income was an increase in our
television segment's operating expenses and a decrease in our radio segment's
net revenue. Please refer to the Restructuring Costs and Impairment of FCC
Broadcasting Licenses sections for detailed discussions.
Operating income before depreciation and amortization, gain on the
disposal of assets, net, and impairment of FCC broadcasting licenses and
restructuring costs, a non-GAAP measure, totaled $15.0 million compared to
$32.4 million for the same prior year period, resulting in a decrease of $17.4
million. This decrease was primarily attributed to the decrease of $16.1
million in our radio segment, an increased loss of $2.0 million in our
television segment, offset by a decrease of $0.6 million in corporate
expenses. Please refer to the Segment Data and Non-GAAP Financial Measures
section for definitions and a reconciliation of GAAP to non-GAAP financial
measures.
(Loss) income before income taxes totaled $(398.6) million compared to
$16.7 million for the same prior year period.
Restructuring Costs
Under a restructuring plan to reduce expenses throughout the Company, we
incurred costs totaling $2.2 million related to the termination of various
programming contracts and personnel. We believe that the restructuring plan
and other cost-cutting measures will likely result in cost savings of
approximately $11.0 to $13.0 million over the next twelve-months. This range
excludes savings from our significant reduction of cash advertising and
marketing expenses. In addition, we will review other cost-cutting measures,
on an as-needed basis, as we continue to evaluate the scope and duration of
the current economic slowdown and its continued impact on our operations.
Impairment of FCC Broadcasting Licenses
During the three-months ended June 30, 2008, we recorded an impairment
loss of approximately $396.3 million related to the FCC broadcasting licenses
for certain individual stations in our Los Angeles, San Francisco, Puerto
Rico, Miami and New York markets, as a result of our SFAS No. 142 impairment
testing. The primary contributing factors that caused the impairment loss were
a decrease in advertising revenue growth projections for the broadcasting
industry, an increase in the discount rate and a decline in cash flow
multiples for recent station sales.
Recent Developments
Draw Down of Revolving Credit Facility
On October 3, 2008, we requested to draw down $25.0 million from our $25.0
million revolver facility under the senior secured credit facility agreement,
dated as of June 10, 2005, among us, Merrill Lynch, Pierce Fenner & Smith,
Incorporated, as syndication agent, Wachovia Bank, National Association, as
documentation agent, Lehman Commercial Paper Inc. ('Lehman'), as
administrative agent, and various lenders from time to time.
