EX-99.1 2 g06033exv99w1.htm EX-99.1 PRESS RELEASE EX-99.1 Press Release
 

Exhibit 99.1
(SBS LOGO)
For Immediate Release
SPANISH BROADCASTING SYSTEM, INC. REPORTS
RESULTS FOR THE FOURTH QUARTER AND FISCAL YEAR 2006
COCONUT GROVE, FLORIDA, March 13, 2007 — Spanish Broadcasting System, Inc. (the “Company” or “SBS”) (NASDAQ: SBSA) today reported financial results for the quarter- and fiscal year ended December 31, 2006.
Results and Discussions
For the quarter ended December 31, 2006, Consolidated Net Revenue totaled $44.4 million compared to $46.9 million for the same prior year period, resulting in a decrease of 5%. Radio net revenue was $42.7 million compared to $46.9 million for the same prior year period, resulting in a decrease of 9%, primarily from promotional events, and, to a lesser extent, local and national revenues, and other revenues related to the Local Marketing Agreement (LMA) fees received for the previously sold Los Angeles stations (KZAB-FM and KZBA-FM). This radio net revenue decrease was primarily in our Los Angeles, New York, and Miami markets. In addition, our new television segment, “MEGA TV”, which debuted on March 1, 2006, generated net revenue of $1.7 million, primarily from local revenues.
For the quarter ended December 31, 2006, Operating Income totaled $5.9 million compared to $10.8 million for the same prior year period, resulting in a decrease of 46%. Operating Income before Depreciation and Amortization and Gain on the Sale of Assets, net, a non-GAAP measure, totaled $7.0 million compared to $12.4 million for the same prior year period, resulting in a decrease of 43%. Excluding our television segment’s operating losses of $5.2 million and $2.3 million for the current and prior period, respectively, and SFAS No. 123(R) non-cash stock-based compensation expense of $0.4 million, Adjusted Operating Income before Depreciation and Amortization and Gain on the Sale of Assets, net, a non-GAAP measure, totaled $12.7 million compared to $14.7 million for the same prior year period, resulting in a decrease of 14%. The decrease was primarily attributed to the decrease 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 $7.6 million compared to $12.1 million for the same prior year period, resulting in a decrease of 37%. Please refer to the Non-GAAP Financial Measures section for a reconciliation of GAAP to non-GAAP financial measures.
For the quarter ended December 31, 2006, Income before Income Taxes and Discontinued Operations totaled $0.9 million compared to $4.0 million for the same prior year period. The decrease resulted mainly from the decrease in Operating Income, offset by a decrease in Interest Expense, net.
For the fiscal year ended December 31, 2006, Net Revenue totaled $176.9 million compared to $169.8 million for the same prior year period, resulting in growth of 4%. Radio net revenue totaled $172.1 million compared to $169.8 million for the same prior year period, resulting in growth of 1%, primarily from local revenue. This radio net revenue growth was offset by decreases in promotional events revenue, national revenues and other revenues mainly related to LMA fees received for the previously sold Los Angeles stations (KZAB-FM and KZBA-FM). The radio net revenue growth of 1% was primarily in our San Francisco and Puerto Rico markets, offset by decreases in our New York, Los Angeles, Chicago and Miami markets. Our new television segment, “MEGA TV”, which debuted on March 1, 2006, generated start-up net revenue of $4.8 million, primarily from local revenues.
For the fiscal year ended December 31, 2006, Operating Income totaled $84.2 million compared to $48.2 million for the same prior year period, resulting in an increase of 75%. Operating Income before Depreciation and Amortization and Gain on the Sale of Assets, net, a non-GAAP measure, totaled $37.4 million compared to $52.3 million for the same prior year period, resulting in a decrease of 29%. Excluding our television segment’s operating losses of $20.0

 

 

         
                       Spanish Broadcasting System, Inc.             Page 2
         
million and $3.2 million for the current and prior period, respectively, and SFAS No. 123(R) non-cash stock-based compensation expense of $2.0 million, Adjusted Operating Income before Depreciation and Amortization and Gain on the Sale of Assets, net, a non-GAAP measure, totaled $59.4 million compared to $55.5 million for the same prior year period, resulting in an increase of 7%. This increase was primarily attributed to the increase in radio’s operating income. Same Station Operating Income before Depreciation and Amortization and Gain on the Sale of Assets, net, a non-GAAP measure, totaled $50.0 million compared to $51.0 million for the same prior year period, resulting in a decrease of 2%. Please refer to the Non-GAAP Financial Measures section for a reconciliation of GAAP to non-GAAP financial measures.
For the fiscal year ended December 31, 2006, Income before Income Taxes and Discontinued Operations totaled $61.0 million compared to a loss of $(18.2) 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 $15.4 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 decrease in the Loss on Early Extinguishment of Debt that occurred in 2005.
“During 2006, we continued to build our brands and strengthen our Hispanic multi-media platform,” commented Raúl Alarcón, Jr., Chairman and CEO. “Despite solid audience shares, our fourth quarter radio revenues were below our expectations due to a soft advertising environment in some of our larger markets, primarily New York and Los Angeles. As in prior periods of market volatility, we are confronting short-term market challenges with a long-term emphasis on consistently delivering Hispanic listeners to our advertisers. We are encouraged with Arbitron’s Fall ratings book, which showed solid audience share gains in our key markets. Furthermore, Mega TV in Miami, while still in an early stage of development, continues to build a dynamic audience base in South Florida. Our Internet properties have also garnered an impressive user base, and we remain focused on monetizing our attractive user demographics. Overall, we are pleased with the progress we are making in positioning our assets to excel in a dynamic media marketplace. We believe the investments we are making in our business today will lead to enhanced value for our shareholders.”
Non-GAAP Financial Measures
Included below are tables that reconcile the quarter- and year-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.

 

 

         
                       Spanish Broadcasting System, Inc.             Page 3
         
UNAUDITED GAAP REPORTED RESULTS RECONCILED TO NON- GAAP RESULTS
                         
    Quarter Ended December 31,        
                    %  
    2006     2005     Change  
(Amounts in thousands)                        
 
                        
Radio Net Revenue
   $ 42,742       46,871       -9 %
TV Net Revenue
     1,682       —          
 
                    
Consolidated Net Revenue
   $ 44,424       46,871       -5 %
less: Non Same Station Net Revenue (1)
     (55 )     (610 )        
 
                    
Same Station Net Revenue (1)
   $ 44,369       46,261       -4 %
 
                    
 
                        
Operating Income
   $ 5,860       10,835       -46 %
add back: Depreciation & Amortization
     1,191       926          
add back: (Gain) Loss on the Sale of Assets, net
     (8 )     645          
 
                    
Operating Income before Depreciation & Amortization and Gain on the Sale of Assets, net
   $ 7,043       12,406       -43 %
add back: Non-cash stock-based compensation expense (2)
     437       —          
add back: New TV Segment Loss (2)
     5,222       2,285          
 
                    
Adjusted Operating Income before Depreciation & Amortization and Gain on the Sale of Assets, net, (2)
   $ 12,702       14,691       -14 %
 
                    
 
                        
Operating Income
   $ 5,860       10,835       -46 %
add back: Depreciation & Amortization
     1,191       926          
add back: (Gain) Loss on the Sale of Assets, net
     (8 )     645          
add back: Non-cash stock-based compensation expense
     437       —          
add back: Non Same Station Operating Results (1)
     161       (341 )        
Same Station Operating Income before Depreciation & Amortization and Gain on the Sale of Assets, net (1)
   $ 7,641       12,065       -37 %
 
                    
UNAUDITED GAAP REPORTED RESULTS RECONCILED TO NON-GAAP RESULTS
                         
    Fiscal Year Ended December 31,        
                    %  
    2006     2005     Change  
(Amounts in thousands)                        
 
                        
Radio Net Revenue
   $ 172,081       169,832       1 %
TV Net Revenue
     4,850       —          
 
                    
Consolidated Net Revenue
   $ 176,931       169,832       4 %
less: Non Same Station Net Revenue (1)
     (2,214 )     (2,417 )        
 
                    
Same Station Net Revenue (1)
   $ 174,717       167,415       4 %
 
                    
 
                        
Operating Income
   $ 84,191       48,219       75 %
add back: Depreciation & Amortization
     3,991       3,447          
add back: (Gain) Loss on the Sale of Assets, net
     (50,795 )     645          
 
                    
Operating Income before Depreciation & Amortization and Gain on the Sale of Assets, net
   $ 37,387       52,311       -29 %
add back: Non-cash stock-based compensation expense (2)
     1,979       —          
add back: New TV Segment Loss (2)
     20,004       3,189          
 
                    
Adjusted Operating Income before Depreciation & Amortization and Gain on the Sale of Assets, net, (2)
   $ 59,370       55,500       7 %
 
                    
 
                        
Operating Income
   $ 84,191       48,219       75 %
add back: Depreciation & Amortization
     3,991       3,447          
add back: (Gain) Loss on the Sale of Assets, net
     (50,795 )     645          
add back: Non-cash stock-based compensation expense
     1,979       —          
add back: Non Same Station Operating Results (1)
     10,585       (1,306 )        
 
                    
Same Station Operating Income before Depreciation & Amortization and Gain on the Sale of Assets, net (1)
   $ 49,951       51,005       -2 %
 
                    

 

 

         
                    
  Spanish Broadcasting System, Inc.             Page 4
         
 
(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 quarters and fiscal years ended December 31, 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-based compensation expense related to SFAS No. 123(R).
 
(2)   Adjusted Operating Income before Depreciation and Amortization and Gain on the Sale of Assets, net, excludes the new television segment and non-cash stock-based compensation expense related to SFAS No. 123(R), which provides a basis for comparability of our operating performance for the quarter and fiscal year ended December 31, 2006 compared to prior periods.
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, since these measures of performance 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 Compensation”
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 quarter- and fiscal year ended December 31, 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 quarter- and fiscal year ended December 31, 2006 was as follows (in thousands):
                 
    Quarter Ended     Fiscal Year Ended  
    December 31, 2006     December 31, 2006  
(in thousands)                
Engineering and programming expenses
   $ 229       762  
Selling, general and administrative expenses
     9       275  
Corporate expenses
     199       942  
 
            
Total
   $ 437       1,979  
 
            
First Quarter 2007 Outlook
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 first quarter ending March 31, 2007, we expect our radio net revenue to decrease in the mid single digit range over the comparable prior year period. Also, we expect our television segment in the first quarter to generate operating losses before depreciation and amortization of approximately $4.0 million. Our total first quarter capital expenditures are projected to be in the range of $1.5 to $2.5 million.

 

 

         
                    
  Spanish Broadcasting System, Inc.             Page 5
         
Fourth Quarter 2006 Conference Call
We will host a conference call to discuss our fourth quarter and fiscal-year 2006 financial results on Tuesday, March 13th at 2:00 p.m. Eastern Standard Time. To access the teleconference, please dial 973-935-8754 ten minutes prior to the start time. There will also be a live webcast of the teleconference, located on the investor portion of our corporate website, at www.spanishbroadcasting.com/webcasts.shtml.
If you cannot listen to the teleconference at its scheduled time, there will be a replay available through March 20, 2007, which can be accessed by dialing 877-519-4471 (U.S) or 973-341-3080 (Int’l), passcode: 8357429. 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 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 www.spanishbroadcasting.com.
(Financial Table Follows)
     
Contacts:
    
Analysts and Investors
  Analysts, Investors or Media
Joseph A. García
  Chris Plunkett
Executive Vice President, Chief Financial Officer
  Brainerd Communicators, Inc.
and Secretary
  (212) 986-6667
(305) 441-6901
    

 

 

         
                       Spanish Broadcasting System, Inc.             Page 6
         
Below are the Unaudited Condensed Consolidated Statements of Operations and other information as of and for the quarter- and fiscal year ended December 31, 2006 and 2005.
                                 
    Quarter Ended     Fiscal Year Ended  
    December 31,     December 31,  
    2006     2005     2006     2005  
Amounts in thousands (except per share data)   (Unaudited)     (Unaudited)  
 
                                
Net revenue
   $ 44,424       46,871     $ 176,931       169,832  
Station operating expenses (1)
     33,255       30,694       125,104       103,162  
Corporate expenses (1)
     4,126       3,771       14,440       14,359  
Depreciation and amortization
     1,191       926       3,991       3,447  
(Gain) loss on the sale of assets, net of disposal costs
     (8 )     645       (50,795 )     645  
 
                        
Operating income
     5,860       10,835       84,191       48,219  
Interest expense, net
     (4,981 )     (6,782 )     (20,176 )     (35,619 )
Loss on early extinguishment of debt
     —       —       (2,997 )     (32,597 )
Other income (expense), net
     4       (23 )     (3 )     1,769  
 
                        
Income (loss) before income taxes and discontinued operations
   $ 883       4,030     $ 61,015       (18,228 )
 
                        
 
                                
Supplemental information:
                                
(1) Stock-based compensation expenses:
                                
Station operating expenses
   $ 238       —     $ 1,037       —  
Corporate expenses
     199       —       942       —  
 
                        
Total stock-based compensation expenses
   $ 437       —     $ 1,979       —  
 
                        

 

 

         
                    
  Spanish Broadcasting System, Inc.             Page 7
         
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):
                                                                 
    Quarter Ended                     Fiscal Year Ended        
    December 31,     Change     December 31,     Change  
    2006     2005     $     %     2006     2005     $     %  
    (In thousands)             (In thousands)          
Net revenue:
                                                                
Radio
   $ 42,742       46,871       (4,129 )     -9 %   $ 172,081       169,832       2,249       1 %
Television
     1,682       —       1,682       100 %     4,850       —       4,850       100 %
 
                                                    
Consolidated
   $ 44,424       46,871       (2,447 )     -5 %   $ 176,931       169,832       7,099       4 %
 
                                                    
 
                                                                
Operating income (loss) before depreciation and amortization and gain on sales of assets, net:
                                                                
Radio
   $ 16,410       18,462       (2,052 )     -11 %   $ 71,900       69,859       2,041       3 %
Television
     (5,241 )     (2,285 )     (2,956 )     129 %     (20,073 )     (3,189 )     (16,884 )     529 %
Corporate
     (4,126 )     (3,771 )     (355 )     9 %     (14,440 )     (14,359 )     (81 )     1 %
 
                                                    
Consolidated
   $ 7,043     $ 12,406       (5,363 )     -43 %   $ 37,387     $ 52,311       (14,924 )     -29 %
 
                                                    
Depreciation and amortization:
                                                                
Radio
   $ 771       585       186       32 %   $ 2,637       2,343       294       13 %
Television
     149       80       69       86 %     355       81       274       338 %
Corporate
     271       261       10       4 %     999       1,023       (24 )     -2 %
 
                                                    
Consolidated
   $ 1,191       926       265       29 %   $ 3,991       3,447       544       16 %
 
                                                    
Operating income (loss):
                                                                
Radio
   $ 15,647       17,232       (1,585 )     -9 %   $ 120,058       66,871       53,187       80 %
Television
     (5,390 )     (2,365 )     (3,025 )     128 %     (20,428 )     (3,270 )     (17,158 )     525 %
Corporate
     (4,397 )     (4,032 )     (365 )     9 %     (15,439 )     (15,382 )     (57 )     0 %
 
                                                    
Consolidated
   $ 5,860     $ 10,835       (4,975 )     -46 %   $ 84,191     $ 48,219       35,972       75 %
 
                                                    
Capital expenditures:
                                                                
Radio
   $ 748       547       201       37 %   $ 4,387       2,562       1,825       71 %
Television
     406       1,277       (871 )     -68 %     2,948       1,326       1,622       122 %
Corporate
     757       70       687       981 %     1,246       596       650       109 %
 
                                                    
Consolidated
   $ 1,911       1,894       17       1 %   $ 8,581       4,484       4,097       91 %
 
                                                    
                 
    As of December 31,  
    2006     2005  
Total Assets:
                
Radio
   $ 880,364       1,010,020  
Television
     49,376       3,197  
 
            
Consolidated
   $ 929,740       1,013,217  
 
            

 

 

         
                    
  Spanish Broadcasting System, Inc.             Page 8
         
Selected Unaudited Balance Sheet Information and Other Data:
         
    As of December 31,  
    2006  
Amounts in thousands        
 
        
Cash and cash equivalents
   $ 66,815  
 
      
 
        
Total assets
   $ 929,740  
 
      
 
        
Senior credit facilities term loan due 2012
   $ 319,313  
Non-interest bearing note due 2009, net
     15,787  
Other debt
     492  
 
      
Total debt
   $ 335,592  
 
      
 
        
Series B preferred stock
   $ 89,932  
 
      
                 
    Fiscal Year Ended December 31,  
    2006     2005  
Amounts in thousands                
 
                
Capital expenditures
   $ 8,581       4,484  
 
            
Cash paid for income taxes, net
   $ 15       1,189