Business News

LBI Media, Inc. Reports Third Quarter 2008 Results

Monday 17. November 2008 - Third Quarter 2008 Net Revenues Increase 2% to $30.8 million

LBI Media, Inc. today reported its financial results for the three and nine months ended September 30, 2008.

“We delivered solid results during the third quarter, despite a very challenging advertising market,” said Lenard Liberman, the company’s Executive Vice President and Secretary. “Our third quarter revenue growth was primarily driven by our radio operations, which outperformed our peers and the industry. We saw strength across all of our radio markets during the quarter, as we converted our strong audience shares into advertising dollars. At our Texas stations, we continue to benefit from the changes we made to our programming, which have led to audience growth and a strong advertiser response, despite very difficult comparisons to last year and the negative impact of Hurricane Ike during the period. We own nine radio stations and one television station in Houston, and estimate that lost air-time and ad cancellations caused by the hurricane negatively affected our third quarter net revenues by about 100 basis points. In Los Angeles, revenue growth from our radio cluster continues to outpace the market, as we capitalize on the programming success of our flagship television station, KRCA-TV, and offer creative advertising solutions for our clients.

“While net revenues declined at our television group, we are encouraged by strong sequential improvement at KRCA-TV in Los Angeles. Similar to our peers, the station has been impacted by softness in infomercial advertising and weakness in the mortgage and auto categories. However, during the quarter, we demonstrated success in leveraging our improved programming and increased audience shares to drive strong results in our national and agency driven business.

“Looking ahead, I am encouraged by LBI’s performance during these very challenging times. Despite difficult near-term economic conditions, we are committed to executing our strategy and investing in our content with the goal of further increasing our market share. Our programming investments are leading to audience growth and we remain on track in our plans to launch a new Spanish language television network, Estrella TV, in early 2009. Our station portfolio has never been stronger and we believe the steps we are taking will strengthen our strategic position and ability to serve the rapidly growing and vibrant Hispanic community.”

Results for the Three Months Ended September 30, 2008

Net revenues increased 1.7% to $30.8 million for the three months ended September 30, 2008, as compared to $30.3 million for the same period in 2007. The increase was primarily attributable to increased advertising revenue in the company’s radio segment and incremental revenue in the company’s Utah television market. These gains were partially offset by (i) declines in net revenues in the company’s California and Texas television markets, primarily resulting from lower infomercial advertising and (ii) lost advertising revenue associated with Hurricane Ike, which caused substantial damage and power outages throughout Houston in September 2008.

Total operating expenses increased by $46.0 million, or 210.2%, to $67.9 million for the three months ended September 30, 2008, as compared to $21.9 million for the same period in 2007. This increase was primarily attributable to a $43.6 million increase in non-cash broadcast license impairment charges as a result of a decrease in advertising revenue growth projections for the broadcast industry, an increase in discount rates, and a decline in cash flow multiples for recent station sales. The increase was also attributable to a $1.0 million increase in program and technical expenses primarily related to (i) higher music license fees, including charges associated with the settlement of a royalty dispute with ASCAP, (ii) an increase in the production of new television programs and (iii) incremental expenses related to the company’s Salt Lake City television station, which the company acquired in November 2007. The increase in total operating expenses also resulted from (a) a $0.4 million increase in depreciation and amortization, primarily due to incremental expenses relating to the company’s 2007 asset acquisitions and the completion of construction on two radio tower sites in Texas in the fourth quarter of 2007, (b) a $0.8 million increase in loss on disposal of property and equipment, primarily reflecting damage caused by Hurricane Ike in September 2008, (c) a $0.1 million increase in selling, general and administrative expense, primarily related to expenses incurred to restore power and repair several tower sites damaged by Hurricane Ike, and (d) a $0.1 million increase in promotional expenses.

Adjusted EBITDA(1) increased by $6.9 million, or 113.0%, to $13.0 million for the three months ended September 30, 2008, as compared to $6.1 million for the same period in 2007. The change primarily resulted from the absence of a $7.6 million early redemption premium paid to redeem the company’s former 10 1/8% senior subordinated notes in the third quarter of 2007 and a modest increase in net revenues. These increases were partially offset by incremental expenses incurred for KPNZ-TV, the company’s Utah television station acquired in November 2007, and the increase in program and technical expenses, as previously discussed. Excluding the $7.6 million early redemption premium incurred in the third quarter of 2007, Adjusted EBITDA decreased 5.0% during the three months ended September 30, 2008, as compared to the same period in 2007.

The company reported a net loss of $29.4 million for the three months ended September 30, 2008, as compared to a net loss of $11.1 million for the same period of 2007, an increase of $18.3 million. This change was primarily attributable to the $43.6 million increase in non-cash broadcast license impairment charges, partially offset by the $16.7 million net tax benefit primarily resulting from this increase in impairment losses, the absence of the loss on note redemption during the third quarter of 2008, and a decrease in net interest and interest rate swap expenses.

Results for the Nine Months Ended September 30, 2008

Net revenues increased by $3.3 million, or 3.7% to $91.3 million for the nine months ended September 30, 2008, as compared to $88.0 million for the same period in 2007. The increase was primarily attributable to increased advertising revenue in the company’s radio markets and incremental revenue in the company’s Utah television market. These gains were partially offset by declines in the company’s California and Texas television markets, primarily resulting from lower infomercial advertising.

Total operating expenses increased by $53.1 million, or 96.6%, to $108.0 million for the nine months ended September 30, 2008 as compared to $54.9 million for the same period in 2007. This increase was primarily attributable to a $43.6 million increase in non-cash broadcast license impairment charges, based on the factors previously discussed. The increase was also attributable to (a) a $4.0 million decrease in deferred compensation benefit, reflecting the impact of the accrual reduction that the company recorded in the first nine months of 2007, (b) a $2.1 million increase in program and technical expenses, (c) a $1.6 million increase in selling, general and administrative expenses, (d) a $0.8 million increase in loss on disposal of property and equipment, primarily reflecting damage caused by Hurricane Ike in September 2008, (e) a $0.7 million increase in depreciation and amortization, primarily attributable to the incremental expenses relating to the company’s 2007 asset acquisitions and the completion of construction on two radio tower sites in Texas in the fourth quarter of 2007 and (f) a $0.3 million increase in promotional expenses, primarily reflecting new events conducted by the company’s radio stations in 2008.

Adjusted EBITDA increased by $2.9 million, or 8.4%, to $38.2 million for the nine months ended September 30, 2008, as compared to $35.3 million for the same period in 2007. The change primarily resulted from the absence of a $7.6 million early redemption premium paid to redeem the company’s former 10 1/8% senior subordinated notes in the third quarter of 2007 and a modest increase in net revenues. These increases were partially offset by the $4.0 million decrease in deferred compensation benefit, and an increase in programming and technical and selling, general and administrative expenses, as previously discussed. However, excluding the $7.6 million early redemption premium and $4.0 million deferred compensation benefit, each incurred during the first nine months of 2007, Adjusted EBITDA decreased 1.8% during the nine months ended September 30, 2008, as compared to the same period in 2007.

The company reported a net loss of $28.9 million for the nine months ended September 30, 2008, as compared to a net loss of $49.0 million for the same period in 2007, a decrease of $20.1 million. This change partially reflects the $61.1 million decrease in the company’s income tax provision and the absence of the $8.8 million loss on note redemption, partially offset by the $43.6 million increase in non-cash impairment of broadcast license charges, the $4.0 million decrease in deferred compensation benefit and higher net interest expense. In March 2007, the company’s indirect parent, Liberman Broadcasting, Inc., issued shares of Class A common stock to certain investors, and as a result, the company lost its status as an S corporation. As a result of the conversion to a C corporation, the company recorded a non-cash charge of $46.8 million to adjust its deferred tax accounts during the nine months ended September 30, 2007. The change in the company’s income tax benefit (provision) during the nine months ended September 30, 2008, as compared to the same period in 2007, also resulted from the impact of the $43.6 million increase in broadcast license charges, as previously discussed.