Hampered by debt and deleted from an equity investment index, Salem Communications Corp. has watched its stock price drop to the point where shares are nearing $1. The 52-week range for the Camarillo-based Christian-oriented broadcast, Internet and publishing company fluctuated between a low of $1.20 on June 30 and a high of $12.07. Salem owns nearly 100 radio stations across the nation, including four in the Los Angeles region. It has nationally syndicated hosts including Dennis Prager and Hugh Hewitt and is the fourth largest station owner in the Top 25 markets. The company also owns a website, Townhall.com, and publishes an accompanying magazine. Evan Masyr, the company’s chief financial officer, said he was taken by surprise when the stock price dropped to $1.20. The downturn in the economy hurts the overall radio industry but Salem’s troubles are partly due to its deletion on June 27 from the Russell 3000 Index used by mutual funds to decide which stocks to invest in. “Certainly that has been a drive behind the higher volume and more selling,” Masyr said. Not helping matters is the amount of debt the company carries, putting it in the top five among all broadcasters. Salem had net debt of $338.4 million at the end of the first quarter. Net income in that period was $5 million, or $0.21 per diluted share. For the second quarter, however, the company projects revenues to decrease compared to the same period in 2007 when it had $59.2 million in revenues. In a year-end letter sent to shareholders, company CEO Edward Atsinger and board Chairman Stuart Epperson stated that industry revenues had dropped 2.3 percent and warned of a 3 percent drop in 2008. “Radio performs poorly in recessionary times,” Masyr said. That is especially true of the larger broadcast companies experiencing a drop in advertising revenues that then lead to a drop in stock price. Radio stations are extremely profitable and have excellent cash flow, said Mary Beth Garber, president of the Southern California Broadcasters Association. With revenue growth in the double digits it’s little wonder that publicly-owned broadcasting companies became the darlings of Wall Street. “When you have a medium so well established and run into bad economic times sustaining that growth is difficult,” Garber said. Salem is not alone in watching its stock price fall. Shares of Emmis Communications, owner of local stations Power 106 and Movin’ 93 based in Burbank, ranged between $2.02 and $9.49 during the 52-week period. Other high-rated radio stations are either under private ownership, KSCA-FM and KBUE-FM, for example, or are about to go that route. Clear Channel Communications operates multiple stations in Burbank, including KIIS-FM, home of Ryan Seacrest. Later this month shareholders will vote on a buyout by Bain Capital and Thomas H. Lee Partners. Garber would not be surprised if more publicly-traded broadcasters follow. “The way Wall Street works and the way radio works are not good for one another,” Garber said. Salem remains committed to its core product of radio. While selling off underperforming stations the company has in turn bought others, such as in Miami, Portland, Ore. and Baltimore earlier this year. Masyr’s predecessor as CFO, David A. R. Evans, was made president of New Business Development, Interactive and Publishing to enhance the other divisions of the company. Improving online properties and redesigning the radio station websites have been among those efforts, Masyr said. As a niche broadcaster, the online and print products target the same demographic as the radio stations. “We’re taking that same audience and meeting them in other places,” Masyr said.
