Table of Contents
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Table of Contents
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
FORM
10-Q
 
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2021
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________________ TO __________________
COMMISSION FILE NUMBER
000-26497
 
 
SALEM MEDIA GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
LOGO
 
 
 
DELAWARE
 
77-0121400
(STATE OR OTHER JURISDICTION
OF INCORPORATION OR ORGANIZATION)
 
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
   
6400 NORTH BELT LINE ROAD
IRVING, TEXAS
 
75063
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
 
(ZIP CODE)
REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE: (469)
586-0080
 
 
 
Title of each Class
 
Trading
Symbol(s)
 
Name of each exchange
on which registered
Class A Common Stock, $0.01 par value per share
 
SALM
 
NASDAQ Global Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.)    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
 
Large accelerated filer      Accelerated filer  
       
Non-accelerated filer      Smaller Reporting Company  
       
         Emerging Growth Company  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).    Yes  ☐    No  
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
Class A
 
Outstanding at November 2, 2021
Common Stock, $0.01 par value per share   21,431,824 shares
 
Class B
 
Outstanding at November 2, 2021
Common Stock, $0.01 par value per share   5,553,696 shares
 
 
 

Table of Contents
SALEM MEDIA GROUP, INC.
INDEX
 
     PAGE NO.  
  
     2  
     3  
  
     4  
     34  
     61  
     62  
  
     62  
     62  
     62  
     62  
     62  
     62  
     62  
     63  
     64  
 
2

Table of Contents
CERTAIN DEFINITIONS
Unless the context requires otherwise, all references in this report to “Salem” or the “company,” including references to Salem by “we” “us” “our” and “its” refer to Salem Media Group, Inc. and our subsidiaries.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Salem makes “forward-looking statements” from time to time in both written reports (including this annual report) and oral statements, within the meaning of federal and state securities laws. Disclosures that use words such as the company “believes,” “anticipates,” “estimates,” “expects,” “intends,” “will,” “may,” “intends,” “could,” “would,” “should,” “seeks,” “predicts,” or “plans” and similar expressions are intended to identify forward-looking statements, as defined under the Private Securities Litigation Reform Act of 1995.
You should not place undue reliance on these forward-looking statements, which reflect our expectations based upon data available to the company as of the date of this annual report. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from expectations. Except as required by law, the company undertakes no obligation to update or revise any forward-looking statements made in this annual report. Any such forward-looking statements, whether made in this annual report or elsewhere, should be considered in context with the various disclosures made by Salem about its business. These projections and other forward-looking statements fall under the safe harbors of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
 
3

Table of Contents
PART I – FINANCIAL INFORMATION
SALEM MEDIA GROUP, INC.
 
ITEM 1.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 
4

Table of Contents
SALEM MEDIA GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share and per share data)
 
 
     December 31, 2020
(Note 1)
   
September 30, 2021

(Unaudited)
 
ASSETS
                
Current assets:
                
Cash and cash equivalents
   $ 6,325    
$
23,781
 
Trade accounts receivable (net of allowances of $14,069 in 2020 and $11,680 in 2021)
     24,469    
 
24,429
 
Unbilled revenue
     3,192    
 
3,300
 
Other receivables (net of allowances of $124 in 2020 and $455 in 2021)
     1,122    
 
1,589
 
Inventories
     495    
 
907
 
Prepaid expenses
     6,847    
 
7,970
 
Assets held for sale
     3,346    
 
1,875
 
    
 
 
   
 
 
 
Total current assets
     45,796    
 
63,851
 
    
 
 
   
 
 
 
Notes receivable (net of allowance of $461 in 2020 and $996 in 2021)
     721    
 
364
 
Property and equipment (net of accumulated depreciation of $180,336 in 2020 and $185,127 in 2021)
     79,122    
 
78,425
 
Operating lease
right-of-use
assets
     48,203    
 
44,100
 
Financing lease
right-of-use
assets
     152    
 
121
 
Broadcast licenses
     319,773    
 
320,008
 
Goodwill
     23,757    
 
23,986
 
Amortizable intangible assets (net of accumulated amortization of $58,897 in 2020 and $57,769 in 2021)
     4,017    
 
2,785
 
Deferred financing costs
     213    
 
895
 
Other assets
     2,817    
 
3,678
 
    
 
 
   
 
 
 
Total assets
   $ 524,571    
$
538,213
 
    
 
 
   
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
Current liabilities:
                
Accounts payable
   $ 2,006    
$
2,180
 
Accrued expenses
     11,002    
 
11,740
 
Accrued compensation and related expenses
     10,242    
 
10,752
 
Accrued interest
     1,225    
 
2,750
 
Contract liabilities
     11,652    
 
11,561
 
Deferred rent income
     147    
 
114
 
Income taxes payable
     563    
 
626
 
Current portion of operating lease liabilities
     8,963    
 
8,604
 
Current portion of financing lease liabilities
     60    
 
59
 
Current portion of long-term debt
     5,000    
 
  
 
    
 
 
   
 
 
 
Total current liabilities
     50,860    
 
48,386
 
    
 
 
   
 
 
 
Long-term debt, less current portion
     213,764    
 
208,559
 
Operating lease liabilities, less current portion
     47,740    
 
43,180
 
Financing (capital) lease liabilities, less current portion
     107    
 
79
 
Deferred income taxes
     68,883    
 
69,287
 
Contract liabilities, long-term
     1,869    
 
2,081
 
Deferred rent income, less current portion
     3,864    
 
3,795
 
Other long-term liabilities
     2,205    
 
2,248
 
    
 
 
   
 
 
 
Total liabilities
     389,292    
 
377,615
 
    
 
 
   
 
 
 
Commitments and contingencies (Note 14)
           
Stockholders’ Equity:
 
Class A common stock, $0.01 par value; authorized 80,000,000 shares; 23,447,317 and 23,639,824 issued and 21,129,667 and 21,322,174 outstanding at December 31, 2020 and September 30, 2021, respectively
     227    
 
229
 
Class B common stock, $0.01 par value; authorized 20,000,000 shares; 5,553,696 issued and outstanding at December 31, 2020 and September 30, 2021, respectively
     56    
 
56
 
Additional
paid-in
capital
     247,025    
 
247,668
 
Accumulated deficit
     (78,023  
 
(53,349
Treasury stock, at cost (2,317,650 shares at December 31, 2020 and September 30, 2021)
     (34,006  
 
(34,006
    
 
 
   
 
 
 
Total stockholders’ equity
     135,279    
 
160,598
 
    
 
 
   
 
 
 
Total liabilities and stockholders’ equity
   $ 524,571    
$
538,213
 
    
 
 
   
 
 
 
See accompanying notes
 
5

Table of Contents
SALEM MEDIA GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share and per share data)
(Unaudited)
 
    
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
     2020    
2021
    2020    
2021
 
Net broadcast revenue
   $ 45,391    
$
49,591
 
  $ 130,041    
$
140,422
 
Net digital media revenue
     9,808    
 
10,645
 
    28,355    
 
30,603
 
Net publishing revenue
     5,442    
 
5,747
 
    13,366    
 
18,093
 
    
 
 
   
 
 
   
 
 
   
 
 
 
Total net revenue
     60,641    
 
65,983
 
    171,762    
 
189,118
 
    
 
 
   
 
 
   
 
 
   
 
 
 
Operating expenses:
                                
Broadcast operating expenses, exclusive of depreciation and amortization shown below (including $447 and $480 for the three months ended September 30, 2020 and 2021, respectively, and $1,313 and $1,369 for the nine months ended September 30, 2020 and 2021, respectively, paid to related parties)
     34,283    
 
37,463
 
    104,704    
 
106,968
 
Digital media operating expenses, exclusive of depreciation and amortization shown below
     7,144    
 
8,269
 
    23,123    
 
25,280
 
Publishing operating expenses, exclusive of depreciation and amortization shown below
     5,814    
 
5,213
 
    16,443    
 
16,844
 
Unallocated corporate expenses exclusive of depreciation and amortization shown below (including $18 and $0 for the three months ended September 30, 2020 and 2021, respectively, and $198 and $5 for the nine months ended September 30, 2020 and 2021, respectively, paid to related parties)
     3,849    
 
4,284
 
    11,909    
 
12,764
 
Debt modification costs
     —      
 
2,347
 
    —      
 
2,347
 
Depreciation
     2,677    
 
2,788
 
    8,108    
 
8,118
 
Amortization
     751    
 
427
 
    2,578    
 
1,553
 
Change in the estimated fair value of contingent
earn-out
consideration
     (10  
 
—  
 
    (12  
 
—  
 
Impairment of indefinite-lived long-term assets other than goodwill
     —      
 
—  
 
    17,254    
 
—  
 
Impairment of goodwill
     —      
 
—  
 
    307    
 
—  
 
Net (gain) loss on the disposition of assets
     1,381    
 
(10,607
    1,494    
 
(10,552
    
 
 
   
 
 
   
 
 
   
 
 
 
Total operating expenses
     55,889    
 
50,184
 
    185,908    
 
163,322
 
    
 
 
   
 
 
   
 
 
   
 
 
 
Operating income (loss)
     4,752    
 
15,799
 
    (14,146  
 
25,796
 
Other income (expense):
                                
Interest income
     1    
 
—  
 
    1    
 
1
 
Interest expense
     (4,024  
 
(4,026
    (12,069  
 
(11,887
Gain on the forgiveness of PPP loans
     —      
 
11,212
 
    —      
 
11,212
 
Gain (loss) on the early retirement of long-term debt
     —      
 
(56
    49    
 
(56
Net miscellaneous income and (expenses)
     1    
 
2
 
    (45  
 
87
 
    
 
 
   
 
 
   
 
 
   
 
 
 
Net income (loss) before income taxes
     730    
 
22,931
 
    (26,210  
 
25,153
 
Provision for income taxes
     401    
 
837
 
    31,180    
 
479
 
    
 
 
   
 
 
   
 
 
   
 
 
 
Net income (loss)
   $ 329    
$
22,094
 
  $ (57,390  
$
24,674
 
    
 
 
   
 
 
   
 
 
   
 
 
 
Basic income (loss) per share data:
                                
Basic income (loss) per share
   $ 0.01    
$
0.82
 
  $ (2.15  
$
0.92
 
Diluted income (loss) per share data:
                                
Diluted income (loss) per share
   $ 0.01    
$
0.81
 
  $ (2.15  
$
0.91
 
Basic weighted average shares outstanding
     26,683,363    
 
26,870,664
 
    26,683,363    
 
26,825,483
 
    
 
 
   
 
 
   
 
 
   
 
 
 
Diluted weighted average shares outstanding
     27,791,353    
 
27,280,949
 
    26,683,363    
 
27,217,382
 
    
 
 
   
 
 
   
 
 
   
 
 
 
 
See accompanying notes
 
 
6

Table of Contents
SALEM MEDIA GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Dollars in thousands, except share and per share data
)
 
    
Class A
    
Class B
                           
    
Common Stock
    
Common Stock
    
Additional
                    
                                
Paid-In
    
Accumulated
   
Treasury
       
    
Shares
    
Amount
    
Shares
    
Amount
    
Capital
    
Deficit
   
Stock
   
Total
 
Stockholders’ equity, December 31, 2019
     23,447,317      $ 227        5,553,696      $ 56      $ 246,680      $ (23,294   $ (34,006   $ 189,663  
Stock-based compensation
     —          —          —          —          103        —         —         103  
Cash distributions
     —          —          —          —          —          (667     —         (667
Net loss
     —          —          —          —          —          (55,204     —         (55,204
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Stockholders’ equity, March 31, 2020
     23,447,317      $ 227        5,553,696      $ 56      $ 246,783      $ (79,165   $ (34,006   $ 133,895  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Distributions per share
   $ 0.025               $ 0.025                                             
    
 
 
             
 
 
                                            
Stock-based compensation
     —          —          —          —          96        —         —         96  
Net loss
     —          —          —          —          —          (2,515     —         (2,515
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Stockholders’ equity, June 30, 2020
     23,447,317      $ 227        5,553,696      $ 56      $ 246,879      $ (81,680   $ (34,006   $ 131,476  
Stock-based compensation
     —          —          —          —          74        —         —         74  
Net income
     —          —          —          —          —          329       —         329  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Stockholders’ equity, September 30, 2020
  
 
23,447,317
 
  
$
227
 
  
 
5,553,696
 
  
$
56
 
  
$
246,953
 
  
$
(81,351
 
$
(34,006
 
$
131,879
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
 
    
Class A
    
Class B
                           
    
Common Stock
    
Common Stock
    
Additional
                    
                                
Paid-In
    
Accumulated
   
Treasury
       
    
Shares
    
Amount
    
Shares
    
Amount
    
Capital
    
Deficit
   
Stock
   
Total
 
Stockholders’ equity, December 31, 2020
     23,447,317      $ 227        5,553,696      $ 56      $ 247,025      $ (78,023   $ (34,006   $ 135,279   
Stock-based compensation
     —          —          —          —          78        —         —         78  
Options exercised
     185,782        2        —          —          390        —         —         392  
Net income
     —          —          —          —          —          323       —         323  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Stockholders’ equity, March 31, 2021
     23,633,099      $ 229        5,553,696      $ 56      $ 247,493      $ (77,700   $ (34,006   $ 136,072  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Stock-based compensation
     —          —          —          —          84        —         —         84  
Net income
     —          —          —          —          —          2,257       —         2,257  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Stockholders’ equity, June 30, 2021
     23,633,099      $ 229        5,553,696      $ 56      $ 247,577      $ (75,443   $ (34,006   $ 138,413  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Stock-based compensation
     —          —          —          —          78        —         —         78  
Options exercised
     6,725        —          —          —          13        —         —         13  
Net income
     —          —          —          —          —          22,094       —         22,094  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
Stockholders’ equity, September 30, 2021
  
 
23,639,824
 
  
$
229
 
  
 
5,553,696
 
  
$
56
 
  
$
247,668
 
  
$
(53,349
 
$
(34,006
 
$
160,598
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
See accompanying notes
 
7

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SALEM MEDIA GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
 
    
Nine Months Ended

September 30,
 
    
2020
   
2021
 
OPERATING ACTIVITIES
                
Net income (loss)
   $ (57,390  
$
24,674
 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
                
Non-cash
stock-based compensation
     273    
 
240
 
Depreciation and amortization
     10,686    
 
9,671
 
Amortization of deferred financing costs
     675    
 
690
 
Non-cash
lease expense
     6,745    
 
6,527
 
Provision for bad debts
     4,122    
 
(248
Deferred income taxes
     30,954    
 
404
 
Change in the estimated fair value of contingent
earn-out
consideration
     (12  
 
—  
 
Impairment of indefinite-lived long-term assets other than goodwill
     17,254    
 
—  
 
Impairment of goodwill
     307    
 
—  
 
Gain on the forgiveness of PPP loans
     —      
 
(11,212
Gain (loss) on the early retirement of long-term debt
     (49  
 
56
 
Net (gain) loss on the disposition of assets
     1,494    
 
(10,552
Changes in operating assets and liabilities:
                
Accounts receivable and unbilled revenue
     2,565    
 
(67
Inventories
     99    
 
(412
Prepaid expenses and other current assets
     (1,343  
 
(1,218
Accounts payable and accrued expenses
     5,871    
 
2,596
 
Operating lease liabilities
     (6,396  
 
(7,317
Contract liabilities
     5,274    
 
782
 
Deferred rent income
     (268  
 
28
 
Other liabilities
     2,254    
 
41
 
Income taxes payable
     30    
 
63
 
    
 
 
   
 
 
 
Net cash provided by operating activities
     23,145    
 
14,746
 
    
 
 
   
 
 
 
INVESTING ACTIVITIES
                
Cash paid for capital expenditures net of tenant improvement allowances
     (3,565  
 
(6,952
Capital expenditures reimbursable under tenant improvement allowances and trade agreements
     (140  
 
(138
Deposit on broadcast assets and radio station acquisitions
     —      
 
(100
Purchases of broadcast assets and radio stations
     —      
 
(600
Purchases of digital media businesses and assets
     (400  
 
(3,980
Proceeds from sale of long-lived assets
     188    
 
15,771
 
Proceeds from the cash surrender value of life insurance policies
     2,363    
 
—  
 
Other
     (353  
 
(1,227
    
 
 
   
 
 
 
Net cash provided by (used in) investing activities
     (1,907  
 
2,774
 
    
 
 
   
 
 
 
FINANCING ACTIVITIES
                
Proceeds from 2028 Notes
     —      
 
114,731
 
Payments to repurchase or exchange 2024 Notes
     (3,392  
 
(119,443
Proceeds from borrowings under ABL Facility
     38,626    
 
16
 
Payments on ABL Facility
     (34,452  
 
(5,016
Proceeds from borrowings under PPP Loans
     —      
 
11,195
 
Payments under PPP loans
     —      
 
17
 
Payments of debt issuance costs
     (124  
 
(1,921
Proceeds from the exercise of stock options
     —      
 
405
 
Payments on financing lease liabilities
     (52  
 
(48
Payment of cash distribution on common stock
     (667  
 
—  
 
Book overdraft
     (1,885  
 
—  
 
    
 
 
   
 
 
 
Net cash used in financing activities
     (1,946  
 
(64
    
 
 
   
 
 
 
Net increase in cash and cash equivalents
     19,292    
 
17,456
 
Cash and cash equivalents at beginning of year
     6    
 
6,325
 
    
 
 
   
 
 
 
Cash and cash equivalents at end of period
   $ 19,298    
$
23,781
 
    
 
 
   
 
 
 
   
 
See accompanying notes
 
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SALEM MEDIA GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Dollars in thousands)
(Unaudited)
 
    
Nine Months Ended

September 30,
 
    
2020
    
2021
 
Supplemental disclosures of cash flow information:
                 
Cash paid during the period for:
                 
Cash paid for interest, net of capitalized interest
   $   7,731     
$
  9,628
 
Cash paid for interest on finance lease liabilities
   $ 6     
$
6
 
Net cash paid for (received from) income taxes
   $ 196     
$
13
 
Other supplemental disclosures of cash flow information:
                 
Barter revenue
   $ 2,152     
$
1,647
 
Barter expense
   $ 1,971     
$
1,699
 
Non-cash
investing and financing activities:
                 
Capital expenditures reimbursable under tenant improvement allowances
   $ 140     
$
138
 
Deferred payments on acquisitions
   $ 708     
 
  
 
Right-of-use
assets acquired through operating leases
   $ 2,715     
$
3,466
 
Right-of-use
assets acquired through financing leases
   $ —       
$
17
 
Non-cash
capital expenditures for property & equipment acquired under trade agreements
   $ 4     
$
27
 
Net assets and liabilities assumed in a
non-cash
acquisition
   $ —       
$
311
 
Estimated present value of contingent-earn out consideration
   $ —       
$
11
 
 
See accompanying notes
 
 
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SALEM MEDIA GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. BUSINESS AND BASIS OF PRESENTATION
Business
Salem Media Group, Inc. (“Salem,” “we,” “us,” “our” or the “company”) is a domestic multimedia company specializing in Christian and conservative content. Our media properties include radio broadcasting, digital media, and publishing entities. We have three operating segments: (1) Broadcast, (2) Digital Media, and (3) Publishing, which are discussed in Note 17 – Segment Data.
Impact of the
COVID-19
Pandemic
The
COVID-19
global pandemic that began in March 2020 materially impacted our business. We experienced a rapid decline in revenue from advertising, programming, events and book sales. Several advertisers reduced or ceased advertising spending due to the outbreak and
stay-at-home
orders that effectively shut many businesses down. The revenue decline impacted our broadcast segment, which derives substantial revenue from local advertisers who were particularly hard hit due to social distancing and government interventions, and our publishing segment, which derives revenue from book sales through retail stores and live events.
While we see progress being made in revenue returning to
pre-pandemic
levels, the
COVID-19
pandemic continues to create significant uncertainty and disruption in the economy. These uncertainties could materially impact significant accounting estimates related to, but not limited to, allowances for doubtful accounts, impairments and
right-of-use assets.
As a result, many estimates and assumptions require increased judgment and carry a higher degree of variability and volatility. These estimates may change as new events occur and additional information emerges, and such changes are recognized or disclosed in its consolidated financial statements.
During 2020 we implemented several measures to reduce costs and conserve cash to ensure that we had adequate cash to meet our debt servicing requirements, including:
 
   
limiting capital expenditures;
 
   
reducing discretionary spending, including travel and entertainment;
 
   
eliminating open positions and freezing new hires;
 
   
reducing staffing levels;
 
   
implementing temporary company-wide pay cuts of 5%, 7.5% or 10% depending on salary level;
 
   
furloughing certain employees;
 
   
temporarily suspending the company 401(k) match;
 
   
requesting rent concessions from landlords;
 
   
requesting discounts from vendors;
 
   
offering early payment discounts to certain customers in exchange for advance cash payments; and
 
   
suspending the payment of distributions on our common stock indefinitely.
As the economy continues to show signs of recovery, many of these cost reduction initiatives were reversed during 2021. We continue to operate with lower staffing levels, we have not reinstated the company 401(k) match and we have not paid equity distributions on our common stock.
The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law on March 27, 2020. The CARES Act provided emergency economic assistance for individuals and businesses impacted by the
COVID-19
pandemic, including opportunities for additional liquidity, loan guarantees, and other government programs. On December 27, 2020, Congress passed the Consolidated Appropriations Act (“CAA”) that included a second relief package, which, among other things, provides for an extension of the Payroll Support Program established by the CARES Act. We utilized certain benefits of the CARES Act and the CAA, including:
 
   
we deferred $3.3 million of employer FICA taxes from April 2020 through December 2020, with 50% payable in December 2021 recorded in accrued compensation and related expenses and 50% payable in December 2022 recorded in other long-term liabilities;
 
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relaxation of interest expense deduction limitation for income tax purposes;
 
   
we received Paycheck Protection Program (“PPP”) loans of $11.2 million in total during the first quarter of 2021 through the Small Business Association (“SBA”) based on the eligibility as determined on a
per-location
basis; and
 
   
In July 2021, the SBA forgave all but $20,000 of the PPP loans, with the remaining PPP loan repaid in July 2021.
Basis of Presentation
The accompanying Condensed Consolidated Financial Statements of Salem include the company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated.
Information with respect to the three and nine months ended September 30, 2021 and 2020 is unaudited. The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial information and with the instructions to Form
10-Q
and Article 10 of Regulation
S-X.
Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the unaudited interim financial statements contain all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the financial position, results of operations and cash flows of the company. The unaudited interim financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Annual Report for Salem filed on Form
10-K
for the year ended December 31, 2020. Our results are subject to seasonal fluctuations and therefore, the results of operations for the interim periods presented are not necessarily indicative of the results of operations for a full year.
The balance sheet at December 31, 2020 included in this report has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP. Certain reclassifications have been made to the prior year financial statements to conform to the presentation in the current year, which had no impact on the previously reported financial statements.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results can be materially different from these estimates and assumptions.
Significant areas for which management uses estimates include:
 
   
revenue recognition;
 
   
asset impairments, including broadcasting licenses, goodwill and other indefinite-lived intangible assets;
 
   
probabilities associated with the potential for contingent
earn-out
consideration;
 
   
fair value measurements;
 
   
contingency reserves;
 
   
allowance for doubtful accounts;
 
   
sales returns and allowances;
 
   
barter transactions;
 
   
inventory obsolescence;
 
   
reserves for royalty advances;
 
   
fair value of equity awards;
 
   
self-insurance reserves;
 
   
estimated lives for tangible and intangible assets;
 
   
assessment of contract-based factors, asset-based factors, entity-based factors and market-based factors to determine the lease term impacting
Right-Of-Use
(“ROU”) assets and lease liabilities;
 
   
determining the Incremental Borrowing Rate (“IBR”) for calculating ROU assets and lease liabilities,
 
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income tax valuation allowances;
 
   
uncertain tax positions; and
 
   
estimates used in going concern analysis.
These estimates require the use of judgment as future events and the effect of these events cannot be predicted with certainty. The estimates will change as new events occur, as more experience is acquired and as more information is obtained. We evaluate and update our assumptions and estimates on an ongoing basis and we may consult outside experts to assist as considered necessary.
The
COVID-19
pandemic continues to create significant uncertainty and disruption in the global economy and financial markets. It is reasonably possible that these uncertainties could materially impact our estimates related to, but not limited to, revenue recognition, broadcast licenses, goodwill and income taxes. As a result, many of our estimates and assumptions require increased judgment and carry a higher degree of variability and volatility. Our estimates may change as new events occur and additional information emerges, and such changes are recognized or disclosed in our consolidated financial statements.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
There have been no changes to our significant accounting policies described in Note 2 to our Annual Report on Form
10-K
for the year ended December 31, 2020, filed with the SEC on March 4, 2021, that have had a material impact on our Condensed Consolidated Financial Statements and related notes.
Recent Accounting Pronouncements
All new accounting pronouncements that are in effect that may impact our financial statements have been implemented. We do not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our financial position, results of operations or cash flows
.
NOTE 3. RECENT TRANSACTIONS
During the nine-month period ended September 30, 2021, we completed or entered into the following transactions:
Debt Transactions
On September 24, 2021, we repurchased $4.7 million of the 6.75% Senior Secured Notes due 2024 (“2024 Notes”) for $4.7 million in cash, recognizing a net loss of $56,000 after adjusting for bond issuance costs.
On September 10, 2021, we exchanged $112.8 million of the 2024 Notes for $114.7 million (reflecting a call premium of 1.688%) of newly issued 7.125% Senior Secured Notes due 2028 (“2028 Notes.”) Contemporaneously with the refinancing, we obtained commitments from the holders of the 2028 Notes to purchase up to $50 million in additional 2028 Notes (“Delayed Draw 2028 Notes,”) contingent upon satisfying certain performance benchmarks, the proceeds of which are to be used exclusively to repurchase or repay the remaining balance outstanding of the 2024 Notes. The transaction was assessed on a lender-specific level and was accounted for as a debt modification in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 470, “
Debt
.” We incurred debt issuance costs of $4.2 million, of which $2.3 million of third-party debt modification costs are reflected in operating expenses for the current period, $0.8 million is deferred with the Delayed Draw 2028 Notes, and $1.1 million, along with $3.0 million from the exchanged 2024 Notes, is being amortized as part of the effective yield on the 2028 Notes.
We received $11.2 million in aggregate principal amount of PPP loans through the SBA during the first quarter of 2021 based on the eligibility of our radio stations and networks as determined on a
per-location
basis. The PPP loans were accounted for as debt in accordance with FASB ASC Topic 470. The loan balances and accrued interest were forgivable provided that the proceeds were used for eligible purposes, including payroll, benefits, rent and utilities within the covered period. We used the PPP loan proceeds according to the terms and filed timely applications for forgiveness. During July 2021, the SBA forgave all but $20,000 of the PPP loans resulting in a
pre-tax
gain on the forgiveness of $11.2 million. The remaining PPP loan was repaid in July 2021.
Shelf Registration Statement and
At-the-Market
Facility
In April 2021, we filed a prospectus supplement to our shelf registration statement on Form
S-3
with the SEC covering the offering, issuance and sale of up to $15.0 million of our Class A Common Stock pursuant to an
at-the-market
facility, with B. Riley Securities, Inc. acting as sales agent. No Common Stock transactions have taken place under the facility.
 
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Acquisitions
The operating results of our business acquisitions and asset purchases are included in our consolidated results of operations from their respective closing date or the date that we began operating them under a Local Marketing Agreement (“LMA”) or Time Brokerage Agreement (“TBA.”)
On July 2, 2021, we acquired the SeniorResource.com domain for $0.1 million in cash.
On July 1, 2021, we acquired the ShiftWorship.com domain and digital assets for $2.6 million in cash. The digital content library is operated within Salem Web Network’s church products division. We recognized goodwill of $0.2 million attributable to the expected synergies to be realized when combining the operations of this entity into our existing operations.
On June 1, 2021, we acquired radio stations
KDIA-AM
and
KDYA-AM
in San Francisco, California for $0.6 million in cash. The radio stations were acquired in formats that we operate and resulted in $4,000 of goodwill attributable to the additional audience reach obtained and the expected synergies to be realized from combining the operations of these stations into our existing market cluster.
On April 28, 2021, we acquired the Centerline New Media domain and digital assets for $1.3 million in cash. The digital content library is operated within Salem Web Network’s church products division. We recognized goodwill of $24,000 attributable to the expected synergies to be realized when combining the operations of this entity into our existing operations.
On March 8, 2021, we acquired the Triple Threat Trader newsletter. We paid no cash at the time of closing and assumed deferred subscription liabilities of $0.1 million. As part of the purchase agreement, we may pay up to an additional $11,000 in contingent
earn-out
consideration over the next two years based on the achievement of certain revenue benchmarks.
A summary of our business acquisitions and asset purchases during the nine-month period ending September 30, 2021, none of which were individually or in the aggregate material to our consolidated financial position as of the respective date of acquisition, is as follows:
 
Acquisition Date
  
Description
  
Total Consideration
 
         
(Dollars in thousands)
 
July 2, 2021
   SeniorResource.com (asset acquisition)   
$
80
 
July 1, 2021
   ShiftWorship.com (business acquisition)   
 
2,600
 
June 1, 2021
  
KDIA-AM
and
KDYA-AM
San Francisco, California (business acquisition)
  
 
600
 
April 28, 2021
   Centerline New Media (business acquisition)   
 
1,300
 
March 8, 2021
   Triple Threat Trader (asset acquisition)   
 
127
 
         
 
 
 
         
$
4,707
 
         
 
 
 
Under the acquisition method of accounting as specified in FASB ASC Topic 805, “
Business Combinations
,” the total acquisition consideration of a business is allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the date of the transaction. Transactions that do not meet the definition of a business in ASU
2017-01
Business Combinations (Topic 805) Clarifying the Definition of a Business”
are recorded as asset purchases. Asset purchases are recognized based on their cost to acquire, including transaction costs. The cost to acquire an asset group is allocated to the individual assets acquired based on their relative fair value with no goodwill recognized.
The total acquisition consideration is equal to the sum of all cash payments, the fair value of any deferred payments and promissory notes, and the present value of any estimated contingent
earn-out
consideration. We estimate the fair value of any contingent
earn-out
consideration using a probability-weighted discounted cash flow model. The fair value measurement is based on significant inputs that are not observable in the market
and
thus represent a Level 3 measurement as defined in Note 12, Fair Value Measurements and Disclosures.
The total purchase price consideration for our business acquisitions and asset purchases the nine-month period ending September 30, 2021, is as follows:
 
Description
  
Total Consideration
 
 
  
(Dollars in thousands)
 
Cash payments made upon closing
  
$
4,580
 
Deferred payments
  
 
116
 
Present value of estimated fair value of contingent
earn-out

consideration
  
 
11
 
    
 
 
 
Total purchase price consideration
  
$
4,707
 
    
 
 
 
 
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The allocations presented in the table below are based upon estimates of the fair values using valuation techniques including income, cost and market approaches. The following preliminary purchase price allocations are based upon the valuation of assets and these estimates and assumptions are subject to change as we obtain additional information during the measurement period, which may be up to one year from the acquisition date. Differences between the preliminary and final valuation could be substantially different from the initial estimate.
 
         
Net Broadcast
Assets Acquired
    
Net Digital
Assets Acquired
    
Total
Net Assets
 
                           
         
(Dollars in thousands)
 
Assets
                               
     Property and equipment    $ 361      $ 3,221      $ 3,582  
     Broadcast licenses      235                  235  
     Goodwill      4        225        229  
     Customer lists and contracts                789        789  
     Domain and brand names                66        66  
         
 
 
    
 
 
    
 
 
 
         
$
600
 
  
$
4,301
 
  
$
4,901
 
         
 
 
    
 
 
    
 
 
 
Liabilities
                               
     Contract liabilities, short-term                (194      (194
         
 
 
    
 
 
    
 
 
 
         
$
600
 
  
$
4,107
 
  
$
4,707
 
         
 
 
    
 
 
    
 
 
 
Divestitures
The operating results of business and asset divestitures are excluded from our consolidated results of operations from their respective closing date or the date that a third-party began operating them under an LMA or TBA.
On July 27, 2021, we sold the Hilary Kramer Financial Newsletter and related assets for $0.2 million to be collected in quarterly installments over the
two-year
period ending September 30, 2023. We recognized a
pre-tax
gain on the sale of $0.1 million.
On July 23, 2021, we sold approximately 34 acres of land in Lewisville, Texas, for $12.1 million in cash. The land was being used for as the transmitter site for company owned radio station
KSKY-AM.
We retained a portion of the land in the southwest corner of the site to continue operating the radio station. We recognized a
pre-tax
gain on the sale of $10.5 million.
On May 25, 2021, we sold Singing News Magazine and Singing News Radio for $0.1 million in cash. In addition to the assets sold, the buyer assumed deferred subscription liabilities of $0.4 million resulting in a
pre-tax
gain on the sale of $0.5 million.
On March 18, 2021, we sold radio station
WKAT-AM
and an FM translator in Miami, Florida for $3.5 million. We collected $3.2 million in cash upon closing and received a promissory note for $0.3 million due one year from the closing date. The buyer began operating the station under an LMA in November 2020. We recognized an estimated
pre-tax
loss of $1.4 million during the three-month period ended September 30, 2020, the date we entered into an Asset Purchase Agreement (“APA”) with the buyer, which reflected the sale price as compared to the carrying value of the assets to be sold, estimated closing costs, and the
write-off
of the remaining Miami assets as a result of exiting this market. We adjusted the
pre-tax
loss by $0.4 million to $1.8 million upon closing based on the actual closing costs incurred and a reconciliation of total station assets to the assets included in the sale.
Pending Transactions
On August 31, 2021, we entered an agreement to sell 9.3 acres of land in the Denver area for $8.2 million.
We expect to close this sale early in 2022 and plan to continue broadcasting both
KRKS-AM
and
KBJD-AM
from this site.
On August 23, 2021, we entered an agreement to sell approximately 77 acres of land in Tampa, Florida for $13.5 million. We will move the transmitter for
WTBN-AM
and diplex it at our owned and operated
WGUL-AM
facility. We expect to close on this transaction by the end of the year.
On June 2, 2021, we entered into an APA to acquire radio station
KKOL-AM
in Seattle, Washington for $0.5 million. We paid $0.1 million in cash into an escrow account and we began operating the station under an LMA on June 7, 2021.
On February 5, 2020, we entered into an APA with Word Broadcasting to sell radio stations
WFIA-AM,
WFIA-FM
and
WGTK-AM
in Louisville, Kentucky for $4.0 million with credits applied from amounts previously paid, including a portion of the monthly fees paid under a TBA. Due to changes in debt markets, the transaction was not funded, and it is uncertain when, or if, the transaction will close. Word Broadcasting continues to program the stations under a TBA that began in January 2017.
 
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NOTE 4. REVENUE RECOGNITION
We recognize revenue in accordance with FASB ASC Topic 606, “
Revenue from Contracts with Customers,”
a comprehensive revenue recognition model that requires revenue to be recognized when control of the promised goods or services are transferred to customers at an amount that reflects the consideration expected to be received. The application of FASB ASC Topic 606 requires us to use significant judgment and estimates when applying a five-step model applicable to all revenue streams.
The following table presents our revenues disaggregated by revenue source for each of our operating segments:
 
    
Nine Months Ended September 30, 2021
 
    
Broadcast
    
Digital Media
    
Publishing
    
Consolidated
 
                             
    
(Dollars in thousands)
 
By Source of Revenue:
                                   
Block Programming – National
   $ 35,824      $ —        $ —        $ 35,824  
Block Programming – Local
     18,072        —          —          18,072  
Spot Advertising – National
     10,565        —          —          10,565  
Spot Advertising – Local
     30,123        —          —          30,123  
Infomercials
     682        —          —          682  
Network
     14,729        —          —          14,729  
Digital Advertising
     18,415        13,859        132        32,406  
Digital Streaming
     3,559        2,579        —          6,138  
Digital Downloads and eBooks
     509        4,637        1,294        6,440  
Subscriptions
     828        9,227        262        10,317  
Book Sales and
e-commerce,
net of estimated sales returns and allowances
     289        163        10,851        11,303  
Self-Publishing Fees
     —          —          4,730        4,730  
Print Advertising
     2        —          123        125  
Other Revenues
     6,825        138        701        7,664  
    
 
 
    
 
 
    
 
 
    
 
 
 
    
$
 140,422
 
  
$
 30,603
 
  
$
 18,093
 
  
$
 189,118
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Timing of Revenue Recognition
                                   
Point in Time
   $  138,540      $  30,603      $  18,093      $  187,236  
Rental Income (1)
     1,882        —          —          1,882  
    
 
 
    
 
 
    
 
 
    
 
 
 
    
$
140,422
 
  
$
30,603
 
  
$
18,093
 
  
$
189,118
 
    
 
 
    
 
 
    
 
 
    
 
 
 
 
    
Nine Months Ended September 30, 2020
 
    
Broadcast
    
Digital Media
    
Publishing
    
Consolidated
 
                             
    
(Dollars in thousands)
 
By Source of Revenue:
                                   
Block Programming – National
   $ 35,536      $ —        $ —        $ 35,536  
Block Programming – Local
     18,211        —          —          18,211  
Spot Advertising – National
     10,179        —          —          10,179  
Spot Advertising – Local
     28,630        —          —          28,630  
Infomercials
     750        —          —          750  
Network
     13,505        —          —          13,505  
Digital Advertising
     10,676        14,473        216        25,365  
Digital Streaming
     1,981        2,611        —          4,592  
Digital Downloads and eBooks
     3,049        4,291        960        8,300  
Subscriptions
     868        6,679        519        8,066  
Book Sales and
e-commerce,
net of estimated sales returns and allowances
     1,128        108        6,849        8,085  
Self-Publishing Fees
     —          —          3,860        3,860  
Print Advertising
     1        —          278        279  
Other Revenues
     5,527        193        684        6,404  
    
 
 
    
 
 
    
 
 
    
 
 
 
    
$
 130,041
 
  
$
 28,355
 
  
$
 13,366
 
  
$
 171,762
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Timing of Revenue Recognition
                                   
Point in Time
   $  128,157      $  28,319      $  13,366      $  169,842  
Rental Income (1)
     1,884        36        —          1,920  
    
 
 
    
 
 
    
 
 
    
 
 
 
    
$
130,041
 
  
$
28,355
 
  
$
13,366
 
  
$
171,762
 
    
 
 
    
 
 
    
 
 
    
 
 
 
 
(1)
Rental income is not applicable to FASB ASC Topic 606, but shown for the purpose of identifying each revenue source presented in total revenue on our Condensed Consolidated Financial Statements within this report on Form
10-Q.
 
15

Table of Contents
A summary of our principal sources of revenue is as follows:
Block Programming
.
We recognize revenue from the sale of blocks of airtime to program producers that typically range from 12
1
/
2
, 25 or
50-minutes
of time. We separate block program revenue into
three
categories, National, Local and Infomercial revenue. Our stations are classified by format, including our three main formats Christian Teaching and Talk, News Talk, and Contemporary Christian Music. National and local programming content is complementary to our station format while infomercials are closely associated with long-form advertisements. Block programming revenue is recognized at the time of broadcast, which represents the point in time that control is transferred to the customer thereby completing our performance obligation. Programming revenue is recorded on a gross basis unless an agency represents the programmer, in which case, revenue is reported net of the commission retained by the agency. Block Programming revenue may also include variable consideration for charities and programmers that purchase blocks of airtime to generate donations and contributions from our audience.
Spot Advertising
. We recognize revenue from the sale of airtime to local and national advertisers who purchase spot commercials of varying lengths. Spot Advertising may include variable consideration for charities and programmers that purchase spots to generate donations and contributions from our audience. Advertising revenue is recognized at the time of broadcast, which represents the point in time that control is transferred to the customer thereby completing our performance obligation. Advertising revenue is recorded on a gross basis unless an agency represents the advertiser, in which case, revenue is reported net of the commission retained by the agency.
Network Revenue
.
Network revenue includes the sale of advertising time on our national network and fees earned from the syndication of programming on our national network. Network revenue is recognized at the time of broadcast, which represents the point in time that control is transferred to the customer thereby completing our performance obligation. Network revenue is recorded on a gross basis unless an agency represents the customer, in which case, revenue is reported net of the commission retained by the agency.
Digital Advertising.
We recognize revenue from the sale of advertising on our owned and operated websites, the sale of advertisements on our own and operated mobile applications, the sale of advertisements in digital newsletters that we produce, the sale of advertising in streaming and podcasts, and the sale of custom digital advertising solutions, such as web pages and social media campaigns that we offer to our customers. Digital advertising revenue is recognized at the time that the advertisement is delivered, or when the number of impressions delivered meets the previously agreed-upon performance criteria, which represents the point in time that control is transferred to the customer thereby completing our performance obligation. Digital advertising revenue is reported on a gross basis unless an agency represents the customer, in which case, revenue is reported net of the commission retained by the agency.
Salem Surround, our multimedia advertising agency, offers a comprehensive suite of digital marketing services to develop and execute audience-based marketing strategies for clients on both the national and local level. Salem Surround specializes in digital marketing services for each of our radio stations and websites as well as provides a full-service digital marketing strategy for each of our clients. In our role as a digital agency, our sales team provides our customers with integrated digital advertising solutions that optimize the performance of their campaign, which we view as one performance obligation. Our advertising campaigns are designed to be “white label” agreements between Salem and our advertiser, meaning we provide special care and attention to the details of the campaign. We provide custom digital product offerings, including tools for metasearch, retargeting, website design, reputation management, online listing services, and social media marketing. Digital advertising solutions may include third-party websites, such as Google or Facebook, which can be included in a digital advertising social media campaign. We manage all aspects of the digital campaign, including social media placements, review and approval of target audiences, and the monitoring of actual results to make modifications as needed. We may contract directly with a third-party, however, we are responsible for delivering the campaign results to our customer with or without the third-party. We are responsible for any payments due to the third-party regardless of the campaign results and without regard to the status of payment from our customer. We have discretion in setting the price to our customer without input or approval from the third-party. Accordingly, revenue is reported gross, as principal, as the performance obligation is delivered, which represents the point in time that control is transferred to the customer thereby completing our performance obligation.
 
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Table of Contents
Digital Streaming
. We recognize revenue from the sale of advertisements and from the placement of ministry content that is streamed on our owned and operated websites and on our owned and operated mobile applications. Each of our radio stations, our digital media entities and certain publishing entities have custom websites and mobile applications that generate streaming revenue. Digital streaming revenue is recognized at the time that the content is delivered, or when the number of impressions delivered meets the previously agreed-upon performance criteria. Delivery of the content represents the point in time that control is transferred to the customer thereby completing our performance obligation. Streaming revenue is reported on a gross basis unless an agency represents the customer, in which case, revenue is reported net of the commission retained by the agency.
Digital Downloads and
e-books
. We recognize revenue from sale of downloaded materials, including videos, song tracks, sermons, content archives and
e-books.
Payments for downloaded materials are due in advance of the download, however, the download is often instant upon confirmation of payment. Digital download revenue is recognized at the time of download, which represents the point in time that control is transferred to the customer thereby completing our performance obligation. Revenue is recorded at the gross amount due from the customer. All sales are final with no allowances made for returns.
Subscriptions
. We recognize revenue from the sale of subscriptions for financial publication digital newsletters, digital magazines, podcast subscriptions for
on-air
content, and subscriptions to our print magazine. Subscription terms typically range from
three months
to
two years
, with a money-back guarantee for the first 30 days. Refunds after the first
30-day
period are considered on a
pro-rata
basis based on the number of publications issued and delivered. Payments are due in advance of delivery and can be made in full upon subscribing or in quarterly installments. Cash received in advance of the subscription term, including amounts that are refundable, is recorded in contract labilities. Revenue is recognized ratably over the subscription term at the point in time that each publication is transmitted or shipped, which represents the point in time that control is transferred to the customer thereby completing our performance obligation. Revenue is reported net of estimated cancellations, which are based on our experience and historical cancellation rates during the cancellable period.
Book Sales
. We recognize revenue from the sale of books upon shipment, which represents the point in time that control is transferred to the customer thereby completing the performance obligation. Revenue is recorded at the gross amount due from the customer, net of estimated sales returns and allowances based on our historical experience. Major new title releases represent a significant portion of the revenue in the current period. Print-based consumer books are sold on a fully returnable basis. We do not record assets or inventory for the value of returned books as they are considered used regardless of the condition returned. Our experience with unsold or returned books is that their resale value is insignificant and they are often destroyed or disposed of.
e-Commerce
. We recognize revenue from the sale of products sold through our digital platform. Payments for products are due in advance shipping. We record a contract liability when we receive customer payments in advance of shipment. The time frame from receipt of payment to shipment is typically one business day based on the time that an order is placed as compared to fulfillment.
E-Commerce
revenue is recognized at the time of shipment, which represents the point in time that control is transferred to the customer thereby completing our performance obligation. Revenue is reported net of estimated returns, which are based on our experience and historical return rates. Returned products are recorded in inventory if they are unopened and
re-saleable
with a corresponding reduction in the cost of goods sold.
Self-Publishing Fees
. We recognize revenue from self-publishing services through Salem Author Services (“SAS”), including book publishing and support services to independent authors. Services include book cover design, interior layout, printing, distribution, marketing services and editing for print books and
e-Books.
As each book and related support services are unique to each author, authors must make payments in advance of the performance. Payments are typically made in installments over the expected production timeline for each publication. We record contract liabilities equal to the amount of payments received, including those amounts that are fully or partially refundable. Contract liabilities were historically recorded under the caption “deferred revenue” and are reported as current liabilities or long-term liabilities on our consolidated financial statements based on the time to fulfill the performance obligations under terms of the contract. Refunds are limited based on the percentage completion of each publishing project.
Revenue is recognized upon completion of each performance obligation, which represents the point in time that control of the product is transferred to the author, thereby completing our performance obligation. Revenue is recorded at the net amount due from the author, including discounts based on the service package.
Advertising – Print
. We recognized revenue from the sale of print magazine advertisements. Revenue was recognized upon delivery of the print magazine which represents the point in time that control is transferred to the customer thereby completing the performance obligation. Revenue was reported on a gross basis unless an agency represents the customer, in which case, revenue is reported net of the commission retained by the agency.
 
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Table of Contents
Other Revenues
.
Other revenues include various sources, such as event revenue, listener purchase programs, talent fees for
on-air
hosts, rental income for studios and towers, production services, and shipping and handling fees. We recognize event revenue, including fees earned for ticket sales and sponsorships, when the event occurs, which represents the point in time that control is transferred to the customer thereby completing our performance obligation. Revenue for all other products and services is recorded as the products or services are delivered or performed, which represents the point in time that control is transferred to the customer thereby completing our performance obligation. Other revenue is reported on a gross basis unless an agency represents the customer, in which case, revenue is reported net of the commission retained by the agency.
Trade and Barter Transactions
In broadcasting, trade or barter agreements are commonly used to reduce cash expenses by exchanging advertising time for goods or services. We may enter barter agreements to exchange airtime or digital advertising for goods or services that can be used in our business or that can be sold to our audience under Listener Purchase Programs. The terms of these barter agreements permit us to preempt the barter airtime or digital campaign in favor of customers who purchase the airtime or digital campaign for cash. The value of these
non-cash
exchanges is included in revenue in an amount equal to the fair value of the goods or services we receive. Each transaction must be reviewed to determine that the products, supplies and/or services we receive have economic substance, or value to us. We record barter operating expenses upon receipt and usage of the products, supplies and services, as applicable. We record barter revenue as advertising spots or digital campaigns are delivered, which represents the point in time that control is transferred to the customer thereby completing our performance obligation. Barter revenue is recorded on a gross basis unless an agency represents the programmer, in which case, revenue is reported net of the commission retained by the agency
.
Trade and barter revenues and expenses were as follows:
    
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
 
               
     2020     
2021
     2020     
2021
 
                             
    
(Dollars in thousands)
 
Net broadcast barter revenue
   $ 444     
$
582
 
   $ 2,118     
$
1,647
 
Net digital media barter revenue
     —       
 
—  
 
     —       
 
—  
 
Net publishing barter revenue
     3     
 
—  
 
     34     
 
—  
 
Net broadcast barter expense
   $ 413     
$
619
 
   $ 1,971     
$
1,704
 
Net digital media barter expense
     —       
 
—  
 
     —       
 
—  
 
Net publishing barter expense
     —       
 
(2