Salem Communications Announces Record Fourth Quarter 2002 Results

Salem Communications Corporation (Nasdaq:SALM), the leading radio broadcaster focused on religious and family themed programming, today announced results for the fourth quarter and year ended December 31, 2002.

Commenting on these results, Edward G. Atsinger III, President and CEO, said: "Despite what continues to be a challenging and uncertain economic environment, we have once again reported double digit growth in both revenue and EBITDA. Our block programming business continues to provide a very stable revenue base, which is complemented by the continued growth in our developing contemporary Christian music radio stations."

Fourth Quarter Results

For the quarter ended December 31, 2002, net broadcasting revenue increased 10.9% to $40.6 million from $36.6 million in the same period a year ago. Broadcast cash flow increased 12.7% to $14.2 million from $12.6 million in the corresponding quarter in 2001. Broadcast cash flow as a percentage of net revenues increased to 35.0% in the fourth quarter of 2002 from 34.5% in the fourth quarter of 2001. The company expects this percentage to continue to improve as its developing radio stations continue to mature.

On a same station basis, net broadcasting revenue and broadcast cash flow increased 10.8% and 19.4%, respectively, for the fourth quarter of 2002, as compared to the fourth quarter of 2001.

The company's non-broadcast media businesses generated EBITDA of $0.4 million, compared to breakeven for the same period in 2001.

EBITDA increased 23.7% to $11.5 million in the fourth quarter of 2002, compared to $9.3 million in fourth quarter of 2001.

The company reported a net loss of $0.7 million for the fourth quarter of 2002, or $0.03 per diluted share, compared with a net income of $1.0 million, or $0.04 per diluted share, in the fourth quarter of 2001.

Excluding discontinued operations, the company reported income of $1.2 million for the quarter, or $0.05 per diluted share, compared with income of $1.3 million, or $0.05 per diluted share, in the same period last year.

Excluding gain on sale of assets and adjusting for the impact of SFAS 142, the company would have been breakeven in the fourth quarter of 2001.

Per share numbers were calculated based on 23,483,854 weighted average diluted shares for the quarter ended December 31, 2002, and 23,527,586 weighted average diluted shares for the comparable 2001 period.

BCF Margin Composition Analysis

The following analysis of the company's radio station portfolio separates each station into one of four categories based upon fourth quarter 2002 performance, for analytical purposes only. The company believes this analysis is helpful in assessing the portfolio's financial and operational development.

                  Three Months ended December 31, 2002                      (Revenue and BCF in millions)  BCF Margin %     No. of Stations   Revenue      BCF      Average BCF %  50% and greater        15           $11.0      $7.0         63.6% 30% to 49%             38           $18.1      $6.9         38.0% 0% to 29%              20            $6.2      $1.2         19.8% Less than 0%           12            $2.1     ($1.3)       (37.5%)  Subtotal               85           $37.4     $13.8         36.9% Other                   0            $3.2      $0.4         13.3%  Total                  85           $40.6     $14.2         35.0% 

Full Year 2002 Results

For the year ended December 31, 2002, net broadcasting revenue increased 14.8% to $156.2 million from $136.1 million for the year ended December 31, 2001. Broadcast cash flow increased 8.5% to $52.4 million in 2002 from $48.3 million in 2001. Broadcast cash flow as a percentage of net revenue decreased to 33.5% for 2002 from 35.5% in 2001.

For full year 2002, same station net broadcasting revenue and broadcast cash flow increased 13.0% and 20.5%, respectively, as compared to full year 2001.

The company's non-broadcast media businesses generated EBITDA of $0.3 million, compared to a loss of $1.3 million in 2001.

EBITDA increased by 15.3% to $38.4 million in 2002, compared to $33.3 million in 2001.

The company reported net income of $14.0 million for 2002, or $0.59 per diluted share, compared with a net income of $4.4 million, or $0.19 per diluted share, in 2001.

Excluding discontinued operations, the company reported a loss of $2.0 million for the year, or $0.08 loss per diluted share, compared with income of $5.5 million, or $0.23 income per diluted share, for the prior year.

Excluding gain on sale of assets and adjusting for SFAS 142, the company would have reported a net loss of $0.8 million, or $0.03 loss per share, in the same period last year.

Per share numbers were calculated based on 23,582,906 weighted average diluted shares for the twelve months ended December 31, 2002, and 23,518,747 weighted average diluted shares for the comparable 2001 period.

Accounting Policy Change

The company has, in response to a routine Securities and Exchange Commission comment letter, changed its accounting policy with respect to barter transactions, where the company exchanges advertising time for goods and services. Barter transactions, under this changed accounting policy, are reported at the estimated fair value of the product or service received. The company's previous accounting policy was to report all barter transactions at zero value, as the company normally only accepts barter transactions for otherwise unsold airtime.

The impact of this accounting policy change is to increase both net broadcast revenues and broadcast operating expenses by $1.2 million in the fourth quarter of 2002, compared to $1.1 million in the corresponding year earlier period, and by $4.6 million for the year ended December 31, 2002, compared to $4.1 million in the prior year. The accounting policy change has no impact on broadcast cash flow, EBITDA, net income or earnings per share. The company has restated its historical financial statements to reflect, in all periods, the impact of this change in accounting policy.

Station Acquisitions

Since September 30, 2002, Salem announced or completed several acquisitions:

-- The completion of the acquisition of Crosswalk.com for $4.1 million.

-- The completion of the acquisition of WRLG-FM and WYYB-FM, in Nashville, Tennessee, from Tuned In Broadcasting Inc. for $5.6 million.

-- The pending acquisition of WJGR-AM, WZNZ-AM, WZAZ-AM and WBGB-FM, in Jacksonville, Florida, from Concord Media Group Inc. for $9.3 million.

First Quarter Outlook

Salem achieved same station revenue growth of 9% for January 2003 and expects to achieve approximately 9% for February 2003. Based on its most recent pacings, Salem expects first quarter same station revenue growth in the high single digits.

For the first quarter of 2003, Salem is projecting net broadcast revenues of between $38.2 and $38.7 million and broadcast cash flow of between $11.5 and $12.0 million. EBITDA is projected to be between $7.5 and $8.0 million in the first quarter of 2003.

Salem will also report a one-time loss of $6.4 million, resulting from the early retirement and refinancing of its 9.5% senior subordinated notes due 2007, which were redeemed on January 23, 2003.

Loss per share for the first quarter of 2003 is projected to be between $0.22 and $0.20 per share. Excluding the one-time loss on the redemption of senior subordinated notes, loss per share is projected to be between $0.06 and $0.04 per share.

First quarter 2003 guidance reflects the following:

-- Continued economic uncertainty due to the situation in the Middle East.

-- Increased competition faced by our Salem Radio Network business.

-- The successful renewal of Salem's national block programming contracts.

-- Continued growth from Salem's contemporary Christian music radio stations.

-- The impact of refinancing $100.0 million of high yield notes from a 9.5% interest rate down to 7.75%.

Additionally, for 2003 as a whole, the company expects corporate expenses of approximately $16.0 million. Salem also expects acquisition- and improvement-related capital expenditures of approximately $7.0 million, and maintenance capital expenditures of approximately $3.0 million.

Mr. Atsinger continued: "We expect 2003 to be a year of continued growth for the company. We successfully renewed over 95% of our block programming contracts for 2003 at an average rate increase of 5%. In addition, our developing contemporary Christian music stations are experiencing strong revenue and cash flow growth. As a whole, Salem continues to be well positioned for strong growth and we look forward to another record year."

Salem will host a teleconference to discuss its results on March 5th at 1:30 p.m. Eastern Time. To access the teleconference, please dial 973-582-2741 ten minutes prior to the start time. The teleconference will also be available via archived webcast on the investor relations portion of the Company's website, located at www.salem.cc. If you are unable to listen to the live teleconference at its scheduled time, there will be a replay available through March 14, 2003, and can be accessed by dialing 973-341-3080, passcode 3767903, or on the Company's website.

Salem Communications Corporation, headquartered in Camarillo, California, is the leading U.S. radio broadcaster focused on religious and family themes programming. Upon the close of all announced transactions, the company will own and operate 89 radio stations, including 55 stations in the top 25 markets. In addition to its radio properties, Salem owns the Salem Radio Network, which syndicates talk, news and music programming to over 1,600 affiliated radio stations; Salem Radio Representatives, a national sales force; Salem Web Network, the leading Internet provider of Christian content and online streaming; and Salem Publishing, a leading publisher of contemporary Christian music trade and consumer magazines.

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 recently launched music formats, competition in the radio broadcast, Internet and publishing industries and from new technologies, adverse economic conditions, and other risks and uncertainties detailed from time to time in Salem's periodic reports on Forms 10-K, 10-Q, 8-K and other filings filed with 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.

 Salem Communications Corporation Condensed Consolidated Statements of Operations For the Period Ended December 31, (in thousands, except share, per share and other data)                              Three Months Ended        Year Ended                                  December              December                                 2001       2002       2001       2002                           --------------------------------------------  Gross broadcasting revenue   $39,766    $44,302   $148,062   $170,310 Less agency commissions        3,147      3,718     11,956     14,094                           -------------------------------------------- Net broadcasting revenue      36,619     40,584    136,106    156,216 Other media revenue            1,975      2,468      8,016      8,054                           -------------------------------------------- Total revenue                 38,594     43,052    144,122    164,270 Operating expenses:   Broadcasting operating    expenses                   23,984     26,372     87,772    103,809   Other media operating    expenses                    1,992      2,096      9,282      7,709   Corporate expenses           3,290      3,087     13,774     14,387   Legal settlement                 -          -          -      2,300   Depreciation and    amortization                7,881      2,847     30,026     11,447                           -------------------------------------------- Total operating expenses      37,147     34,402    140,854    139,652                           -------------------------------------------- Operating income               1,447      8,650      3,268     24,618 Other income (expense):   Interest income                150        141      1,994        255   Gain (loss) on disposal    of assets                   6,764        (19)    29,836       (567)   Interest expense            (6,823)    (6,869)   (26,542)   (27,162)   Other expense, net            (309)       (60)      (573)      (458)                           -------------------------------------------- Income (loss) before  income taxes                  1,229      1,843      7,983     (3,314) Provision (benefit) for  income taxes                    (36)       642      2,472     (1,323)                           -------------------------------------------- Income (loss) before  discontinued operations       1,265      1,201      5,511     (1,991) Discontinued operations,  net of tax                     (229)    (1,876)    (1,124)    15,995                           -------------------------------------------- Net income (loss)             $1,036      $(675)    $4,387    $14,004                           ============================================  Basic earnings (loss) per  share before discontinued  operations                    $0.05      $0.05      $0.23     $(0.08) Discontinued operations        (0.01)     (0.08)     (0.05)      0.68 Basic earnings (loss) per  share after discontinued  operations                     0.04      (0.03)      0.19       0.60  Diluted earnings (loss)  per share before  discontinued operations       $0.05      $0.05      $0.23     $(0.08) Discontinued operations        (0.01)     (0.08)     (0.05)      0.68 Diluted earnings (loss)  per share after  discontinued operations        0.04      (0.03)      0.19       0.59  Basic weighted average  shares outstanding       23,458,638 23,483,854 23,456,828 23,473,821                           ============================================ Diluted weighted average  shares outstanding       23,527,586 23,483,854 23,518,747 23,582,906                           ============================================   Other Data (in thousands,  except margin and per  share data): Broadcast cash flow          $12,635    $14,212    $48,334    $52,407 Broadcast cash flow margin      34.5%      35.0%      35.5%      33.5%  EBITDA                        $9,328    $11,497    $33,294    $38,365    Salem Communications Corporation Condensed Consolidated Balance Sheets (in thousands)                                                      December  December                                                        31,       31,                                                      2001      2002                                                    --------- --------- Assets Cash                                                $23,921   $26,325 Restricted cash                                           -   107,661 Other current assets                                 32,094    36,837 Property, plant and equipment, net                   93,087    99,194 Intangible assets, net                              344,059   380,508 Bond issue costs                                      7,685     7,854 Other assets                                          6,408    13,830                                                    --------- --------- Total assets                                       $507,254  $672,209                                                    ========= =========  Liabilities and Stockholders' Equity Current liabilities                                 $20,604   $21,378 Long-term debt and capital lease obligations        311,621   450,908 Deferred income taxes                                15,914    26,447 Other liabilities                                     1,745     1,548 Stockholders' equity                                157,370   171,928                                                    --------- --------- Total liabilities and stockholders' equity         $507,254  $672,209                                                    ========= =========   Salem Communications Corporation Supplemental Information For the Period Ended December 31,                                        Three Months      Year Ended                                           Ended                                         December         December                                        2001    2002     2001     2002                                     ---------------------------------- Capital expenditures Acquisition related / income  producing                           $3,520  $1,645  $21,037  $11,361 Maintenance                           1,855   2,099    6,976    3,671                                     ---------------------------------- Total capital expenditures           $5,375  $3,744  $28,013  $15,032                                     ==================================  Tax information Cash tax expense                       $183    $117     $629     $293 Deferred tax expense                   (219)    525    1,843   (1,616)                                     ---------------------------------- Provision (benefit) for   income taxes                          $(36)   $642   $2,472  $(1,323)                                     ==================================  Tax benefit of non-book amortization      -  $2,890        -  $11,500                                     ==================================  Reconciliation to Broadcast Cash  Flow Net broadcasting revenue            $36,619 $40,584 $136,106 $156,216 Less broadcasting operating  expenses                           (23,984)(26,372) (87,772)(103,809)                                     ---------------------------------- Broadcast Cash Flow                 $12,635 $14,212  $48,334  $52,407                                     ==================================  Reconciliation to EBITDA Operating income                     $1,447  $8,650   $3,268  $24,618 Plus depreciation and amortization    7,881   2,847   30,026   11,447 Plus legal settlement                     -       -        -    2,300                                     ---------------------------------- EBITDA                               $9,328 $11,497  $33,294  $38,365                                     ==================================   Reconciliation to Non-Broadcast  Media EBITDA Other media revenue                  $1,975  $2,468   $8,016   $8,054 Less other media operating expenses  (1,992) (2,096)  (9,282)  (7,709)                                     ---------------------------------- Non-Broadcast Media EBITDA             $(17)   $372  $(1,266)    $345                                     ==================================  Reconciliation to income excluding   gain on sale of assets and adjusted   for SFAS 142 Net income                           $1,036           $4,387 Gain on sale of assets, net of tax  effect                              (4,058)         (17,902) Addback of goodwill and broadcast  licenses amortization, net of tax    2,988           12,702                                     --------        --------- Income excluding gain on sale of  assets and adjusted for SFAS 142      $(34)           $(813)                                     ========        ========= 

Although broadcast cash flow and EBITDA are not measures of performance calculated in accordance with generally accepted accounting principles, each measure should be viewed as a supplement to and not a substitute for our results of operations presented on the basis of generally accepted accounting principles. We believe that broadcast cash flow and EBITDA are useful because they are generally recognized by the radio broadcasting industry as measures of performance and are used by analysts who report on the performance of broadcast companies. These measures are not necessarily comparable to similarly titled measures employed by other companies.

Released March 5, 2003