In Q4 2013, net revenues totaled $37.5 million compared to $36.9 million for the same prior year period—an increase of $0.6 million or 2%. SBS’ radio segment net revenues increased $0.7 million or 2%, on local ad sales, special events revenue and digital sales. The television segment net revenues decreased $0.2 million or 3%, largely due to a decrease in paid-programming.
The increase in local sales was primarily in the NYC, LA and San Francisco markets. The special events revenue increase took place mainly in the NYC market. The increase in interactive sales occurred throughout most SBS markets.
“We generated improved financial and operating results in the past year, reflecting our efforts to build our multimedia brands, while carefully managing our costs,” commented CEO Raul Alarcón, Jr. “Our radio revenue growth exceeded the industry, as we continued to deliver impressive audience shares, while making further inroads in attracting advertisers to our platform. Throughout our history, we have consistently displayed our expertise in launching new formats and growing and sustaining top ranked radio station franchises in the nation’s largest Hispanic markets. At our television operations, we are very pleased to have recorded profitable results for the year. We remain focused on leveraging our diversified media platform to grow our audience shares and garner a greater share of advertising budgets across our markets.”
Radio station operating expenses increased mainly due to compensation and benefits, special events expenses, legal settlements, music research cost and music license fees. Our television segment OIBDA increased $0.1 million or 39%, primarily due to lower operating expenses. The decrease in television station operating expenses was primarily due to a decrease in rating services cost and barter expense. Corporate expenses decreased $0.1 million or 3%, mostly due to a decrease in compensation.
Operating income totaled $9.5 million compared to $12.4 million for the same prior year period, representing a decrease of $2.9 million or 24%. This decrease in operating income was primarily due to the increase in operating expenses.
For FY, consolidated net revenues totaled $153.8 million compared to $139.5 million for the same prior year period, resulting in an increase of $14.3 million or 10%. The radio segment net revenues increased $12.1 million or 10%, primarily due to special events revenue, and local, national, barter and interactive sales. The increases in special events revenue, and barter and interactive sales occurred throughout most of SBS’s markets. The increase in local sales was primarily in their New York, Los Angeles, Puerto Rico and Miami markets. The increase in national sales took place in the Los Angeles, San Francisco and New York markets. Television segment net revenues increased $2.1 million or 12%, largely due to the increase in special events revenue, offset by the decreases in local, paid-programming and national spot sales and integrated sales.
Operating income totaled $38.4 million compared to $37.3 million for the same prior year period, representing an increase of $1.1 million or 3%. This increase in operating income was primarily due to the increase in net revenue.
Voting Rights Triggering Event
Pursuant to the Certificate of Designations, each holder of shares of SBS Series B preferred stock had the right, on October 15, 2013, to request that we repurchase (subject to the legal availability of funds under Delaware General Corporate Law) all or a portion of such holder’s shares of Series B preferred stock at a purchase price equal to 100% of the liquidation preference of such shares, plus all accumulated and unpaid dividends (as described in more detail below) on those shares to the date of repurchase.
On October 15, 2013, holders of shares of our Series B preferred stock requested that SBS repurchase 92,223 shares of Series B preferred stock for an aggregate repurchase price of $126.9 million, which included accumulated and unpaid dividends on these shares as of October 15, 2013. “We did not have sufficient funds legally available to repurchase all of the Series B preferred stock for which we received requests and instead used the limited funds legally available to us to repurchase 1,800 shares for a purchase price of approximately $2.5 million, which included accrued and unpaid dividends. Consequently, a voting rights triggering event occurred. Following the occurrence, and during the continuation of the Voting Rights Triggering Event, holders of the outstanding Series B preferred stock will be entitled to elect two directors to newly created positions on our Board of Directors, and we will be subject to more restrictive operating covenants, including a prohibition on our ability to incur any additional indebtedness and restrictions on our ability to pay dividends or make distributions, redeem or repurchase securities, make investments, enter into transactions with affiliates or merge or consolidate with (or sell substantially all of our assets to) any other person. The right to elect the two new directors may be exercised initially either at a special meeting of the holders of Series B preferred stock or at any annual meeting of the stockholders held for the purpose of electing directors. On March 11, 2014, we received a request from LBHI, stating that it held more than 10% of the Series B preferred stock, and requesting that we call a special meeting of the Series B preferred stockholders, for the purpose of electing two directors.”
The Voting Rights Triggering Event will continue until (i) all dividends in arrears shall have been paid in full and (ii) all other failures, breaches or defaults giving rise to such Voting Rights Triggering Event are remedied or waived by the holders of at least a majority of the shares of the then outstanding Series B preferred stock. Said SBS: “We do not currently have sufficient funds legally available to be able to satisfy the conditions for terminating the Voting Rights Triggering Event. The indenture governing our Notes currently prohibits us from paying dividends or from repurchasing the Series B preferred stock. See Item 1A. Risk Factors of this Form 10-K for a further discussion of our Series B preferred stock, including the consequences of the occurrence of the Voting Rights Triggering Event.”
Under the terms of the Series B preferred stock, the holders of the outstanding shares of the Series B preferred stock are entitled to receive, when, as and if declared by the Board out of funds of the company legally available therefor, dividends on the Series B preferred stock at a rate of 10 3/4% per year, of the $1,000 liquidation preference per share. All dividends are cumulative, whether or not earned or declared, and are payable quarterly in arrears on specified dividend payment dates. “While the Voting Rights Triggering Event continues, we cannot pay dividends on the Series B preferred stock without causing a breach of covenants under the indenture governing the Notes,” said SBS.
RBR-TVBR observation: SBS is under some pressure here, since losing El Mandril—who is now in a syndication deal with Premiere Networks and Grupo Radio Centro. SBS had a good day in the market Tuesday (up 5.2%) on the preface of these good Q4 numbers and was up Wednesday as well. We thought with the news of insufficient funds to do the buyback and the ensuing Voting Rights Triggering Event would put a dent in things, but not so far. While earnings growth last year was down -181.48%, the YTD stock price is up 97.83%.