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SALEM MEDIA GROUP, INC. ANNOUNCES SECOND QUARTER 2016

TOTAL REVENUE OF $67.8 MILLION  


CAMARILLO, CA August 4, 2016 – Salem Media Group, Inc. (Nasdaq: SALM) released its results for the three and six months ended June 30, 2016.

Second Quarter 2016 Results

For the quarter ended June 30, 2016 compared to the quarter ended June 30, 2015:

Consolidated

·

Total revenue increased 1% to $67.8 million from $67.3 million;

·

Total operating expenses increased to $58.1 million from $58.0 million;

·

Operating expenses, excluding gains or losses on the sale or disposal of assets, stock-based compensation expense, changes in the estimated fair value of contingent earn-out consideration, impairment of long-lived assets, depreciation expense and amortization expense (1) increased 2% to $54.9 million from $53.8 million;

·

Operating income increased 5% to $9.7 million from $9.3 million;

·

Net income decreased 5% to $3.4 million, or $0.13 net income per diluted share from $3.5 million, or $0.14 net income per diluted share;

·

EBITDA (1) increased 2% to $13.9 million from $13.6 million;

·

Adjusted EBITDA (1) decreased 5% to $12.9 million from $13.5 million; and

·

Free cash flow (1) decreased 13.0% to $6.5 million from $7.5 million.



Broadcast

·

Net broadcast revenue increased 1% to $49.7 million from $49.1 million;

·

Station Operating Income (“SOI”) (1) increased 1% to $14.0 million from $13.9 million;

·

Same station (1) net broadcast revenue increased to $49.0 million from $48.9 million; and

·

Same station SOI (1) increased 1% to $14.0 million from $13.9 million.

Digital media

·

Digital media revenue decreased 2% to $11.3 million from $11.5 million; and

·

Digital media operating income (1) decreased 7% to $2.5 million from $2.7 million.

Publishing

·

Publishing revenue increased to $6.8 million from $6.7 million; and

·

Publishing operating results (1) decreased to a loss of $0.2 million from income of $0.3 million.  


Included in the results for the quarter ended June 30, 2016 are:

·

A $0.7 million impairment loss ($0.4 million, net of tax, or $0.02 per share) on land held for sale in Covina, California;

·

A $1.7 million ($1.0 million, net of tax, or $0.04 per share) net gain on the sale or disposal of assets primarily associated with the $1.9 million gain on the sale of the Miami tower site offset by a $0.2 million charge for leasehold improvements incurred upon the relocation of the offices in Washington D.C. market in addition to various insignificant fixed asset disposals;

·

A $0.1 million net decrease in the estimated fair value of the contingent earn-out consideration associated with the Eagle, Bryan Perry Newsletters and Daily Devotional acquisitions; and

·

A $0.1 million non-cash compensation charge related to the expensing of stock options primarily consisting of corporate expenses.


Included in the results for the quarter ended June 30, 2015 are:

·

A $0.3 million net decrease ($0.2 million, net of tax, or $0.01 per share) in the estimated fair value of the contingent earn-out consideration associated with the Twitchy.com and Eagle entities acquisitions; and

·

A $0.2 million non-cash compensation charge ($0.1 million, net of tax) related to the expensing of stock options primarily consisting of corporate expenses.

Per share numbers are calculated based on 26,052,649 diluted weighted average shares for the quarter ended June 30, 2016, and 25,829,493 diluted weighted average shares for the quarter ended June 30, 2015.

Year to Date 2016 Results

For the six months ended June 30, 2016 compared to the six months ended June 30, 2015:

Consolidated

·

Total revenue increased 3% to $132.4 million from $129.1 million;

·

Total operating expenses increased 2% to $116.6 million from $114.2 million;

·

Operating expenses, excluding gains or losses on the sale or disposal of assets, stock-based compensation expense, changes in the estimated fair value of contingent earn-out consideration, impairment of long-lived assets, depreciation expense and amortization expense (1) increased 4% to $109.1 million from $104.9 million;

·

Operating income increased 6% to $15.8 million from $15.0 million;

·

Net income decreased 3% to $3.7 million, or $0.14 net income per diluted share from $3.8 million, or $0.15 net income per diluted share;

·

EBITDA (1) increased 1% to $24.1 million from $23.8 million;

·

Adjusted EBITDA (1) decreased 4% to $23.3 million from $24.3 million; and

·

Free cash flow (1) decreased 13% to $11.1 million from $12.7 million.

Broadcast

·

Net broadcast revenue increased 3% to $98.2 million from $95.6 million;

·

SOI (1) was consistent with the same period of the prior year at $26.5 million;

·

Same station (1) net broadcast revenue increased 1% to $96.7 million from $95.5 million; and

·

Same station SOI (1) increased to $26.6 million from $26.5 million.

Digital media

·

Digital media revenue increased 1% to $22.6 million from $22.3 million; and

·

Digital media operating income (1) increased 2% to $4.6 million from $4.5 million.

Publishing

·

Publishing revenue increased 3% to $11.6 million from $11.3 million; and

·

Publishing operating results (1) decreased to a loss of $0.4 million from income of $0.3 million.  

Included in the results for the six months ended June 30, 2016 are:

·

A $0.7 million impairment loss ($0.4 million, net of tax, or $0.02 per share) on land held for sale in Covina, California;

·

A $1.6 million ($0.9 million, net of tax, or $0.04 per share) net gain on the sale or disposal of assets primarily associated with the $1.9 million gain on the sale of the Miami tower site offset by a $0.4 million charge for leasehold improvements incurred upon the relocation of the offices in Washington D.C. market in addition to various insignificant fixed asset disposals;

·

A $0.5 million ($0.3 million, net of tax, or $0.01 per share) reserve for a litigation matter;

·

A $0.3 million ($0.2 million, net of tax, or $0.01 per share) net decrease in the estimated fair value of the contingent earn-out consideration associated with the Eagle entities, Bryan Perry Newsletters and Daily Devotional acquisitions; and

·

A $0.3 million non-cash compensation charge ($0.2 million, net of tax, or $0.01 per share) related to the expensing of stock options primarily consisting of corporate expenses.

 

Included in the results for the six months ended June 30, 2015 are:

·

A $0.2 million net decrease ($0.1 million, net of tax) in the estimated fair value of the contingent earn-out consideration associated with the Twitchy.com and Eagle entities acquisitions;

·

A $0.2 million loss ($0.01 million, net of tax) on disposal of assets primarily associated with the relocation of the office and studio in the company’s Seattle market; and

·

A $0.5 million non-cash compensation charge ($0.3 million, net of tax, or $0.01 per share) related to the expensing of stock options consisting of:

o

$0.3 million non-cash compensation included in corporate expenses;

o

$0.1 million non-cash compensation included in broadcast operating expenses; and

o

$0.1 million non-cash compensation included in Digital media operating expenses.

Per share numbers are calculated based on 25,927,804 diluted weighted average shares for the quarter ended June 30, 2016, and 25,875,306 diluted weighted average shares for the quarter ended June 30, 2015.

Balance Sheet

As of June 30, 2016, the company had $271.2 million outstanding on the Term Loan B and $1.8 million outstanding under the revolver.  The company was in compliance with the covenants of its credit facility.  The company’s bank leverage ratio was 5.39 versus a compliance covenant ratio of 6.00.

Acquisitions and Divestitures

The following transactions were completed since April 1, 2016:



·

On April 1, 2016, the company acquired the Retirement Watch newsletter and related website for $0.1 million in cash and the assumption of $0.6 million in deferred subscription liabilities;

·

On April 29, 2016, the company closed on the acquisition of a construction permit for an FM Translator in Emporia, Kansas for $25,000 in cash.  The translator will be relocated to Omaha, Nebraska, for use by the company’s KCRO-AM radio station;

·

On May 2, 2016, the company closed on the acquisition of an FM Translator in Lincoln, Maine for $100,000 in cash.  The translator is used in the company’s Boston, Massachusetts market;

·

On May 13, 2016, the company closed on the acquisition of a construction permit for an FM Translator in Kerrville, Texas for $50,000 in cash.  The translator will be used in the company’s Houston, Texas market and is reflected in projects-in-process at June 30, 2016;

·

On June 3, 2016, the company closed on the acquisition of construction permit for an FM Translator in Atwood, Kentucky for $88,000 in cash.  The translator will be used in the company’s Columbus, Ohio market and is reflected in projects-in-process at June 30, 2016;

·

On June 8, 2016, the company closed on the acquisition of a construction permit for an FM Translator in Charlotte, Michigan for $50,000 in cash.  The translator will be used in the company’s Detroit, Michigan market and is reflected in projects-in-process at June 30, 2016;  

·

On June 10, 2016, the company received $2.5 million in cash from the National Park Service in exchange for their claim under eminent domain for its tower site in Miami, Florida;

·

On June 10, 2016, the company closed on the acquisition of an FM Translator in Amherst, New York for $60,000 in cash.  The translator is used in the company’s Pittsburgh, Pennsylvania market;  

·

On June 20, 2016, the company closed on the acquisition of an FM Translator used in its Columbus, Ohio market for $0.3 million in cash; and

·

On August 1, 2016, the company acquired the assets of Hillcrest Media Group, Inc., a provider of self-publishing services for general market authors, for $3.5 million in cash.    

Conference Call Information

Salem will host a teleconference to discuss its results on August 4, 2016 at 2:00 p.m. Pacific Time. To access the teleconference, please dial (877) 241-1527, and then ask to be joined into the Salem Media Group call or listen via the investor relations portion of the company’s website, located at investor.salemmedia.com.  A replay of the teleconference will be available through August 11, 2016 and can be heard by dialing (877) 344-7529, passcode 10088445 or on the investor relations portion of the company’s website, located at investor.salemmedia.com.

Third Quarter 2016 Outlook

For the third quarter of 2016, the company is projecting total revenue to increase between 1% and 3% over third quarter 2015 total revenue of $67.5 million.  The company is also projecting operating expenses, excluding gains or losses on the sale or disposal of assets, stock-based compensation expense, changes in the estimated fair value of contingent earn-out consideration, impairment of long-lived assets, depreciation expense and amortization expense to increase between 2% and 5% compared to the third quarter of 2015 operating expenses excluding gains or losses on the sale or disposal of assets, stock-based compensation expense, changes in the estimated fair value of contingent earn-out consideration, impairment of long-lived assets, depreciation expense and amortization expense of $54.7 million.  This guidance is impacted by the recent acquisition of Hillcrest Media and contemplates increased expenses associated with its integration into Xulon Press.



A reconciliation of non-GAAP operating expenses, excluding gains or losses on the sale or disposal of assets, stock-based compensation expense, changes in the estimated fair value of contingent earn-out consideration, impairment of long-lived assets, depreciation expense and amortization expense to the most directly comparable GAAP measure is not available without unreasonable efforts on a forward-looking basis due to the potential high variability, complexity and low visibility with respect to the charges excluded from this non-GAAP measure, in particular, the change in the estimated fair value of earn-out consideration, impairment of long-lived assets and gains or losses from the sale or disposal of fixed assets. We expect the variability of the above charges may have a significant, and potentially unpredictable, impact on our future GAAP financial results.

About Salem Media Group, Inc.

Salem Media Group is America’s leading multimedia company specializing in Christian and conservative content, with media properties comprising radio, digital media and book, magazine and newsletter publishing.  Each day Salem serves a loyal and dedicated audience of listeners and readers numbering in the millions nationally.  With its unique programming focus, Salem provides compelling content, fresh commentary and relevant information from some of the most respected figures across the media landscape.


The company, through its Salem Radio Group, is the largest commercial U.S. radio broadcasting company providing Christian and conservative programming.  Salem owns and operates 118 local radio stations, with 73 stations in the top 25 media markets.  Salem Radio Network (“SRN”) is a full-service national radio network, with nationally syndicated programs comprising Christian teaching and talk, conservative talk, news, and music.  SRN is home to many industry-leading hosts including: Bill Bennett, Mike Gallagher, Hugh Hewitt, Michael Medved, Dennis Prager and Eric Metaxas.


Salem New Media is a powerful source of Christian and conservative themed news, analysis, and commentary.  Salem’s Christian sites include: Christianity.com®, BibleStudyTools.com, GodTube.com, GodVine.com, WorshipHouseMedia.com and OnePlace.com. Considered by many to be a consolidation of the conservative news and opinion sector’s most influential brands, Salem’s conservative sites include RedState.com, Townhall.com®, HotAir.com, Twitchy.com, BearingArms.com and HumanEvents.com.


Salem’s Regnery Publishing unit, with a 65-year history, remains the nation’s leading publisher of conservative books.  Having published many of the seminal works of the early conservative movement, Regnery today continues as the dominant publisher in the conservative space, with leading authors including: Ann Coulter, Dinesh D’Souza, Newt Gingrich, David Limbaugh, Ed Klein and Mark Steyn.  Salem’s book publishing business also includes Xulon Press™, a leading provider of self-publishing services for Christian and conservative authors.


Salem Publishing™ publishes Christian and conservative magazines including Homecoming®, YouthWorker Journal™, The Singing News, and Preaching.


Salem's Eagle Financial Publications provides general market analysis and non-individualized investment strategies from financial commentators Mark Skousen, Nicholas Vardy, Doug Fabian, Bryan Perry and Bob Carlson, as well as a stock screening website for dividend investors (DividendInvestor.com). The business unit's other financial websites include EagleDailyInvestor.com, DividendYieldHunter and ETFU.com. 


Eagle Wellness provides insightful health advice and is a trusted source of high quality nutritional supplements from some of the country's leading health experts.  Leigh Erin Connealy MD, at NewportNaturalHealth.com, is the medical director of one of the largest medical practices in the country where she practices integrative medicine. Ski Chilton PhD, at GeneSmart.com, is a scientist and full professor at Wake Forest Medical School. He is a leading authority on the impact of diet and nutrition on health.




Company Contact:


Evan D. Masyr

Executive Vice President & Chief Financial Officer


(805) 384-4512

evan@SalemMedia.com




Forward-Looking Statements

 

Statements used in this press release that relate to future plans, events, financial results, prospects or performance are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995.  Actual results may differ materially from those anticipated as a result of certain risks and uncertainties, including but not limited to the ability of Salem to close and integrate announced transactions, market acceptance of Salem’s radio station formats, competition from new technologies, adverse economic conditions, and other risks and uncertainties detailed from time to time in Salem's reports on Forms 10-K, 10-Q, 8-K and other filings filed with or furnished to the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.  Salem undertakes no obligation to update or revise any forward-looking statements to reflect new information, changed circumstances or unanticipated events.


(1)

 Regulation G

Management uses certain non-GAAP financial measures defined below in communications with investors, analysts, rating agencies, banks and others to assist such parties in understanding the impact of various items on its financial statements.  The company uses these non-GAAP financial measures to evaluate financial results, develop budgets, manage expenditures and as a measure of performance under compensation programs.  

The company’s presentation of these non-GAAP measures should not be considered as a substitute for or superior to the most directly comparable financial measures as reported in accordance with GAAP.  

Regulation G defines and prescribes the conditions under which certain non-GAAP financial information may be presented in this earnings release.  The company closely monitors EBITDA, Adjusted EBITDA, Station Operating Income (“SOI”), Digital Media Operating Income, Publishing Operating Income, same station net broadcast revenue, same station SOI, operating expenses, excluding gains or losses on the sale or disposal of assets, stock-based compensation expense, changes in the estimated fair value of contingent earn-out consideration, impairment of long-lived assets, depreciation expense and amortization expense  and free cash flow, all of which are non-GAAP financial measures.  The company believes that these non-GAAP financial measures provide useful information about its core operating results, and thus, are appropriate to enhance the overall understanding of its financial performance.  These non-GAAP measures are intended to provide management and investors a more complete understanding of its underlying operational results, trends and performance.  

The company defines Station Operating Income (“SOI”) as net broadcast revenue minus broadcast operating expenses. The company defines Digital media operating income as net Digital media revenue minus Digital media operating expenses.  The company defines Publishing Operating Income as net publishing revenue minus publishing operating expenses.  The company defines EBITDA as net income before interest, taxes, depreciation, amortization and change in fair value of interest rate swaps.  The company defines Adjusted EBITDA as EBITDA before gains or losses on the sale or disposal of assets, changes in the estimated fair value of contingent earn-out consideration, impairment of long-lived assets, net miscellaneous income and expenses, and non-cash compensation expense.  SOI, Digital Media Operating Income, Publishing Operating Income, EBITDA and Adjusted EBITDA are commonly used by the broadcast and media industry as important measures of performance and are used by investors and analysts who report on the industry to provide meaningful comparisons between broadcasters.  SOI, Digital Media Operating Income, Publishing Operating Income, EBITDA and Adjusted EBITDA are not measures of liquidity or of performance in accordance with GAAP and should be viewed as a supplement to and not a substitute for or superior to its results of operations and financial condition presented in accordance with GAAP.  The company’s definitions of SOI, Digital Media Operating Income, Publishing Operating Income, EBITDA and Adjusted EBITDA are not necessarily comparable to similarly titled measures reported by other companies.  

The company defines free cash flow as Adjusted EBITDA less cash paid for capital expenditures, less cash paid for income taxes, and less cash paid for interest.  The company considers free cash flow to be a performance measure that provides useful information to management and investors about the amount of cash generated by its operations after cash paid for capital expenditures, income taxes and interest.  A limitation of free cash flow as a measure of financial performance is that it does not represent the total increase or decrease in its cash balance for the period.  The company uses free cash flow, a non-GAAP financial measure, both in presenting its results to stockholders and the investment community, and in its internal evaluation and management of the business.  The company’s presentation of free cash flow is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. The company’s definition of free cash flow is not necessarily comparable to similarly titled measures reported by other companies.  

The company defines same station net broadcast revenue as broadcast revenue from its radio stations and networks that the company owns or operates in the same format on the first and last day of each quarter, as well as the corresponding quarter of the prior year.  The company defines same station broadcast operating expenses as broadcast operating expenses from its radio stations and networks that the company owns or operates in the same format on the first and last day of each quarter, as well as the corresponding quarter of the prior year.  The company defines same station SOI as same station net broadcast revenue less same station broadcast operating expenses.  Same station operating results include those stations that the company owns or operates in the same format on the first and last day of each quarter, as well as the corresponding quarter of the prior year.  Same station operating results for a full calendar year are calculated as the sum of the same station-results for each of the four quarters of that year.  The company uses same station operating results, a non-GAAP financial measure, both in presenting its results to stockholders and the investment community, and in its internal evaluations and management of the business.  The company believes that same station operating results provide a meaningful comparison of period over period performance of its core broadcast operations as this measure excludes the impact of new stations, the impact of stations the company no longer owns or operates, and the impact of stations operating under a new programming format.  The company’s presentation of same station operating results are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.  The company’s definition of same station operating results is not necessarily comparable to similarly titled measures reported by other companies.  

For all non-GAAP measures, investors should consider the limitations associated with these metrics, including the potential lack of comparability of these measures from one company to another.  

The tables that follow the condensed consolidated financial statements provide reconciliations of the non-GAAP measures that the company uses in this earnings release to the most directly comparable measures calculated in accordance with GAAP.  The company uses non-GAAP measures to evaluate financial performance, develop budgets, manage expenditures, and determine employee compensation.  The company’s presentation of this additional information is not to be considered as a substitute for or superior to the directly comparable measures as reported in accordance with GAAP.  



 





Salem Media Group, Inc.

            

Condensed Consolidated Statements of Operations

            

(in thousands, except share, per share and margin data)

            
   

Three Months Ended

 

Six Months Ended

   

June 30,

 

June 30,

   

2015

 

2016

 

2015

 

2016

   

(Unaudited)

Net broadcast revenue

 

$

49,060

 

$

49,707

 

$

95,599

 

$

98,178

Net digital media revenue

  

11,499

  

11,311

  

22,290

  

22,595

Net publishing revenue

 

 

6,734

 

 

6,761

 

 

11,260

 

 

11,581

Total revenue

 

 

67,293

 

 

67,779

 

 

129,149

 

 

132,354

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 
 

Broadcast operating expenses

  

35,187

  

35,709

  

69,104

  

71,697

 

Digital media operating expenses

 

 

8,767

 

 

8,781

 

 

17,767

 

 

17,967

 

Publishing operating expenses

  

6,469

  

6,983

  

10,966

  

11,931

 

Unallocated corporate expenses

 

 

3,518

 

 

3,568

 

 

7,509

 

 

7,781

 

Change in the estimated fair value of contingent earn-out consideration

  

(307)

  

(134)

  

(189)

  

(262)

 

Depreciation and amortization

 

 

4,375

 

 

4,171

 

 

8,876

 

 

8,306

 

Impairment of long-lived assets

  

  

700

  

  

700

 

(Gain) loss on the sale or disposal of assets

 

 

30

 

 

(1,701)

 

 

159

 

 

(1,551)

Total operating expenses

 

 

58,039

 

 

58,077

 

 

114,192

 

 

116,569

Operating income

  

9,254

  

9,702

  

14,957

  

15,785

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 
 

Interest income

  

2

  

2

  

3

  

3

 

Interest expense

 

 

(3,874)

 

 

(3,730)

 

 

(7,678)

 

 

(7,526)

 

Change in the fair value of interest rate swaps

  

444

  

(423)

  

(976)

  

(2,181)

 

Loss on early retirement of long-term debt

 

 

 

 

(5)

 

 

(41)

 

 

(14)

 

Net miscellaneous income and expense

 

 

 

 

 

 

7

 

 

Income from operations before income taxes

 

 

5,826

 

 

5,546

 

 

6,272

 

 

6,067

Provision for income taxes

 

 

2,303

 

 

2,190

 

 

2,454

 

 

2,358

Net income

 

$

3,523

 

$

3,356

 

$

3,818

 

$

3,709

              

Basic income per share

 

$

0.14

 

$

0.13

 

$

0.15

 

$

0.14

Diluted income per share

 

$

0.14

 

$

0.13

 

$

0.15

 

$

0.14

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distributions per share

 

$

0.07

 

$

0.13

 

$

0.13

 

$

0.13 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average shares outstanding

 

 

25,429,127

 

 

25,551,445

 

 

25,387,813

 

 

25,518,339

Diluted weighted average shares outstanding

 

 

25,829,493

 

 

26,052,649

 

 

25,875,306

 

 

25,927,804






Salem Media Group, Inc.

       

Condensed Consolidated Balance Sheets

       

(in thousands)

       
  

 

December 31, 2015

 

 

June 30, 2016

 

 

 

 

 

 

(Unaudited)

 

Assets

       

Cash

 

$

98

 

$

44

 

Trade accounts receivable, net

  

36,029

  

33,091

 

Deferred income taxes

 

 

9,813

 

 

9,813

 

Other current assets

  

10,859

  

9,048

 

Property and equipment, net

 

 

105,483

 

 

104,559

 

Intangibles assets, net

  

429,908

  

432,412

 

Deferred financing costs

 

 

151

 

 

116

 

Other assets

 

 

2,673

 

 

3,258

 

Total assets

 

$

595,014

 

$

592,341

 
        

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

Current liabilities

 

$

43,654

 

$

37,852

 

Long-term debt and capital lease obligations

 

 

269,093

 

 

266,378

 

Fair value of interest rate swap

  

798

  

2,979

 

Deferred income taxes

 

 

57,082

 

 

59,258

 

Other liabilities

  

14,566

  

14,938

 

Stockholders'  equity

 

 

209,821

 

 

210,936

 

Total liabilities and stockholders' equity

 

$

595,014

 

$

592,341

 
        


 
 
 
 
 
 
 
 
 
 
 
 
 





Salem Media Group, Inc.

            

Supplemental Information

            

(in thousands)

            
   

Three Months Ended

  

Six Months Ended

   

June 30,

  

June 30,

   

2015

  

2016

  

2015

  

2016

  

(Unaudited)

Reconciliation of Operating Expenses, excluding Gains or Losses on the Sale or Disposal of Assets, Stock-based Compensation Expense, Changes in the Estimated Fair Value of Contingent Earn-out Consideration, Impairment of Long-lived Assets, Depreciation Expense and Amortization Expense to Total Operating Expenses

 

 

 

 

 

 

 

 

 

 

Operating expenses, excluding gains or losses on the sale or disposal of assets, stock-based compensation expense, changes in the estimated fair value of contingent earn-out consideration, impairment of long-lived assets, depreciation expense and amortization expense

 

$

 53,785

 

$

 54,916

 

$

104,859

 

$

 109,052

Plus depreciation and amortization expense

 

 

4,375

 

 

 4,171

 

 

8,876

 

 

8,306

Plus change in estimated fair value of contingent earn-out consideration

  

(307)

  

 (134)

  

(189)

  

(262)

Plus impairment of long-lived assets

 

 

                 -

 

 

700

 

 

     -  

 

 

700

Plus (gain) loss on the sale or disposal of assets

  

30

  

 (1,701)

  

159

  

(1,551)

Plus stock-based compensation expense

 

 

156

 

 

125

 

 

 487

 

 

324

Total operating expenses

 

$

58,039

 

$

58,077

 

$

114,192

 

$

116,569

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Same Station Net Broadcast Revenue to Net Broadcast Revenue

            
             

Net broadcast revenue – same station

 

$

48,920

 

$

48,970

 

$

95,459

 

$

96,661

Net broadcast revenue – acquisitions

  

93

  

711

  

93

  

1,491

Net broadcast revenue – format change

 

 

47

 

 

26

 

 

47

 

 

26

Net broadcast revenue

 

$

49,060

 

$

49,707

 

$

95,599

 

$

98,178

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Same Station Broadcast Operating Expenses to Broadcast Operating Expenses

          
          

Broadcast operating expenses – same station

 

$

35,039

 

$

34,958

 

$

68,945

 

$

70,098

Broadcast operating expenses – acquisitions

  

74

  

708

  

85

  

1,556

Broadcast operating expenses – format change

 

 

74

 

 

43

 

 

74

 

 

43

Broadcast operating expenses

 

$

35,187

 

$

35,709

 

$

69,104

 

$

71,697

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Same Station SOI to SOI

            

Station operating income – same station

 

$

13,881

 

$

14,012

 

$

26,514

 

$

26,563

Station operating income (loss) – acquisitions

  

19

  

3

  

8

  

(65)

Station operating loss – format change

 

 

(27)

 

 

(17)

 

 

(27)

 

 

(17)

Station operating income   

 

$

13,873

 

$

13,998

 

$

26,495

 

$

26,481

             




Salem Media Group, Inc.

            

Supplemental Information

            

(in thousands)

  

Three Months Ended

  

Six Months Ended

   

June 30,

  

June 30,

   

2015

  

2016

  

2015

  

2016

   

(Unaudited)

Reconciliation of SOI, Digital Media Operating Income and Publishing Operating Income (Loss) to Net Income

 

 

 

 

 

 

 

 

 

 

 

 

Station operating income

 

$

13,873

 

$

13,998

 

$

26,495

 

$

26,481

Digital media operating income

 

 

2,732

 

 

2,530

 

 

4,523

 

 

4,628

Publishing operating income (loss)

  

265

  

(222)

  

294

  

(350)

Less:  

 

 

 

 

 

 

 

 

 

 

 

 

Unallocated corporate expenses

  

(3,518)

  

(3,568)

  

(7,509)

  

(7,781)

Change in the estimated fair value of contingent earn-out consideration

 

 

307

 

 

134

 

 

189

 

 

262

Depreciation and amortization

  

(4,375)

  

(4,171)

  

(8,876)

  

(8,306)

Impairment of long-lived assets

 

 

 

 

(700)

 

 

 

 

(700)

(Gain) loss on the sale or disposal of assets

 

 

(30)

 

 

1,701

 

 

(159)

 

 

1,551

Operating income

 

$

9,254

 

$

9,702

 

$

14,957

 

$

15,785

Plus:

            

Interest income  

 

 

2

 

 

2

 

 

3

 

 

3

Less:

            

Interest expense

 

 

(3,874)

 

 

(3,730)

 

 

(7,678)

 

 

(7,526)

Change in the fair value of interest rate swap

  

444

  

(423)

  

(976)

  

(2,181)

Loss on early retirement of long-term debt

 

 

 

 

(5)

 

 

(41)

 

 

(14)

Net miscellaneous income and expenses

  

  

  

7

  

Provision for income taxes

 

 

(2,303)

 

 

(2,190)

 

 

(2,454)

 

 

(2,358)

Net income

 

$

3,523

 

$

3,356

 

$

3,818

 

$

3,709





Salem Media Group, Inc.

           

Supplemental Information

           

(in thousands)

           
  

Three Months Ended

  

Six Months Ended

  

June 30,

  

June 30,

  

2015

  

2016

  

2015

  

2016

Calculation of SOI, Digital Media Operating Income and

 

 

 

 

 

 

 

 

 

 

 

Publishing Operating Income (Loss)

 

 

 

 

 

 

 

 

 

 

 

Net broadcast revenue

$

49,060

 

$

49,707

 

$

95,599

 

$

98,178

Less broadcast operating expenses

 

(35,187)

 

 

(35,709)

 

 

(69,104)

 

 

(71,697)

Station operating income

$

13,873

 

$

13,998

 

$

26,495

 

$

26,481

 

 

 

 

 

 

 

 

 

 

 

 

Net digital media income

$

11,499

 

$

11,311

 

$

22,290

 

$

22,595

Less digital media operating expenses

 

(8,767)

 

 

(8,781)

 

 

(17,767)

 

 

(17,967)

Digital media operating income

$

2,732

 

$

2,530

 

$

4,523

 

$

4,628

 

 

 

 

 

 

 

 

 

 

 

 

Net publishing revenue

$

6,734

 

$

6,761

 

$

11,260

 

$

11,581

Less publishing operating expenses

 

(6,469)

 

 

(6,983)

 

 

(10,966)

 

 

(11,931)

Publishing operating income (loss)

$

265

 

$

(222)

 

$

294

 

$

(350)

            

Reconciliation of Free Cash Flow to Adjusted EBITDA to EBITDA to Net Income

 

 

 

 

 

 

 

 

 

 

 

Free Cash Flow  

$

7,470

 

$

6,492

 

$

12,696

 

$

11,088

Plus:

 

 

 

 

 

 

 

 

 

 

 

Cash paid for interest, net of capitalized interest

 

3,559

  

3,552

  

7,071

  

7,099

Cash paid for taxes

 

312

 

 

191

 

 

316

 

 

60

Cash paid for capital expenditures, net (1)

 

2,167

 

 

2,628

 

 

4,207

 

 

5,055

Adjusted EBITDA

$

13,508

 

$

12,863

 

$

24,290

 

$

23,302

Less:

           

Stock-based compensation

 

(156)

 

 

(125)

 

 

(487)

 

 

(324)

Loss on early retirement of long-term debt

 

  

(5)

  

(41)

  

(14)

Change in the estimated fair value of contingent earn-out consideration

 

307

 

 

134

 

 

189

 

 

262

Net miscellaneous income and expenses

 

  

  

7

  

Impairment of long-lived assets

 

 

 

(700)

 

 

 

 

(700)

(Gain) loss on the sale or disposal of assets

 

(30)

 

 

1,701

 

 

(159)

 

 

1,551

EBITDA

 $

13,629

 

 $

13,868

 

 $

23,799

 

24,077

Plus:

           

Interest income

 

2

 

 

2

 

 

3

 

 

3

Less:

           

Depreciation and amortization

 

(4,375)

 

 

(4,171)

 

 

(8,876)

 

 

(8,306)

Interest expense

 

(3,874)

  

(3,730)

  

(7,678)

  

(7,526)

Change in the fair value of interest rate swap

 

444

 

 

(423)

 

 

(976)

 

 

(2,181)

Provision for income taxes

 

(2,303)

 

 

(2,190)

 

 

(2,454)

 

 

(2,358)

Net income

$

3,523

 

$

3,356

 

$

3,818

 

$

3,709

(1)     Net cash paid for capital expenditures reflects actual cash payments net of cash reimbursements under tenant improvement

allowances and net of property and equipment acquired in trade transactions.





Selected Debt Data

 

Outstanding at

 

 

Applicable Interest Rate

 

 

 

 

 

 

June 30, 2016

 

 

Term Loan B (1)

$

121,250

  

4.50%

      

Term Loan B (2)

$

150,000

 

 

 5.52%

 

 

 

 

 

 

Revolver

$

1,770

  

5.50%

      

(1)     Subject to rolling LIBOR but no less than 1.00% plus a spread of 3.50%. 


(2)     Under its swap agreement, the company pays a fixed rate of 1.645% plus a spread of 3.50%.  The swap is subject to a LIBOR floor of 0.0625% versus the Term Loan B debt floor of 1.00%.  The swap matures on March 28, 2019.