Q4 2006 CITADEL BROADCASTING CORP Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Welcome to Citadel Broadcasting's 2006 fourth-quarter earnings release conference call. Today's conference is being recorded. At this time, I would like to turn the call over to Patricia Stratford.

PATRICIA STRATFORD, VP FINANCE, CITADEL BROADCASTING CORP.: Good morning and thank you for joining us for our fourth-quarter earnings call. Joining me for today's discussion are Farid Suleman, Chairman and CEO; Judy Ellis, COO and Robert Freedline, CFO. Bob will review the financial results followed by Farid and Judy. We will then take questions.

Let me note that statements on this conference call relating to matters which are not historical facts are forward-looking statements. Forward-looking statements involve risks and uncertainties which could cause actual results to differ. Risks and uncertainties are disclosed in Citadel Broadcasting's securities filings and at the end of our press release. This earnings release and other information related to the presentation can be found on Citadel's corporate website on the Internet under the address of CitadelBroadcasting.com. I will now turn the call over to Bob.

ROBERT FREEDLINE, CFO, CITADEL BROADCASTING CORP.: Thank you, Patty and now I will review our 2006 fourth-quarter results and then I will turn the call over to Farid. Net revenues for the fourth quarter of 2006 were $114 million compared with $108.3 million in the fourth quarter of 2005, an increase of $5.7 million or 5.3%. The increase in revenues was primarily attributable to expansion in 80% of our markets with the strongest performance coming from Albuquerque, New Orleans, Boise, Salt Lake City and Modesto.

Operating income for the fourth quarter of 2006 was $10.8 million compared to $35 million in the corresponding 2005 period, a decrease of $24.2 million. The decrease was primarily due to a non-cash asset impairment charge and an increase in corporate general and administrative expense offset by a decrease in depreciation and amortization.

The Company conducted its annual impairment test for indefinite live intangibles and goodwill in the fourth quarter of 2006 which resulted in a non-cash impairment charge of $24.3 million on a pretax basis or $0.13 per basic share to reduce the carrying amount of its indefinite lived intangible assets for certain of its markets to their respective estimated fair values.

The increase in corporate general and administrative expense includes approximately $2.5 million in expenses related to the FCC's investigation of sponsorship identification practices and an increase in $1.5 million in non-cash compensation.

Station operating income, which is defined as operating income plus depreciation and amortization, local marketing agreement fees, corporate general and administrative expenses, other net and other non-cash expenses, was $49 million for the fourth quarter of 2006 compared to $45.9 million for the fourth quarter of 2005, an increase of $3.1 million or 6.8%.

Net interest expense increased to $8 million for the fourth quarter of -- December 31, 2006 from $5.6 million for the quarter ended December 31, 2005, an increase of $2.4 million or 42.9%. The increase in net interest expense was due to an increase in outstanding borrowings primarily as a result of the repurchase of shares of outstanding common stock of the Company and higher interest rate under the Company's senior credit facility for the quarter ended December 31, 2006 as compared to the same period in 2005.

Income tax expense for the quarter ended December 31, 2006 was $2.9 million, substantially all non-cash compared to $13 million, again, substantially all non-cash for the quarter ended December 31, 2005, a decrease of $10.1 million.

The deferred tax benefit related to the asset impairment recognized in the fourth quarter of 2006 was approximately $9.5 million. Net loss for the quarter ended December 31, 2006 was $1.1 million or $0.01 per basic share as compared to net income of $15.8 million or $0.14 per basic share for the same period in 2005.

Included in the net loss for the quarter ended December 31, 2006 was a non-cash asset impairment of $14.8 million net of tax or $0.13 per basic share related to the valuation of intangible assets, approximately $4.1 million of non-cash stock-based compensation expense net of tax or $0.04 per basic share and costs related to the FCC's investigation of sponsorship identification practices, a $2.2 million net of tax or $0.02 per basic share.

Included in net income for the quarter ended December 31, 2005 was approximately $1.6 million of non-cash stock-based compensation expense net of tax or $0.01 per basic share. Free cash flow, which is defined as operating income plus depreciation and amortization, other net and non-cash expenses less interest expense, capital expenditures and cash taxes, was $29.4 million for the three months ended December 31, 2006 compared to $34.5 million for the three months ended December 31, 2005, a decrease of $5.1 million or 14.8%. The decrease in free cash flow is attributable to higher interest costs and increase in capital expenditures and expenses related to FCC's investigation of sponsorship identification practices.

For the three months ended December 31, 2006, the weighted average basic common shares outstanding was 111.2 million compared to 114.7 million for the three months ended December 31, 2005. As of December 31, 2006, our gross debt was $731 million. Cash was $3.7 million and cash flow from operating activities for the year ended December 31, 2006 was $136 million approximately. I will now turn the call over to Farid.

FARID SULEMAN, CHAIRMAN & CEO, CITADEL BROADCASTING CORP.: Thank you, Bob. We finally had our best quarter of the year with net revenues up about 5% and station operating income up about 7%. Overall local revenues were up about 2.7% and national was up almost 17%. About half the growth was political and Judy will discuss some of the revenue categories in more detail, but other than political, retail telecommunications and finances were up. Auto, entertainment, travel and beverages were down.

For the full year, our revenues were up about 2.7% and we are really proud that in spite of last year when a number of companies had lower years, our revenues were record last year and we have increased over record years from last year.

We also continue to make investments and programming changes to …