10-Q

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller Reporting Company

Emerging Growth Company

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, 2022

☐	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)


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.

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 1, 2022
Common Stock, $0.01 par value per share		21,663,091 shares


Class B		Outstanding at November 1, 2022
Common Stock, $0.01 par value per share		5,553,696 shares

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”).

PART I – FINANCIAL INFORMATION

SALEM MEDIA GROUP, INC.

ITEM 1.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

SALEM MEDIA GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands except per share data)


	December 31, 2021 (Note 1)			September 30, 2022 (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	1,785		$	838
Accounts receivable (net of allowances of $13,022 in 2021 and $7,517 in 2022)		25,663			30,420
Unbilled revenue		3,406			3,139
Other receivables (net of allowances of $455 in 2021 and $586 in 2022)		1,377			2,403
Inventories		960			1,457
Prepaid expenses		6,772			8,436
Assets held for sale		1,551			267

Total current assets		41,514			46,960

Notes receivable (net of allowance of $938 in 2021 and $580 in 2022)		274			927
Property and equipment (net of accumulated depreciation of $186,053 in 2021 and $188,975 in 2022)		79,339			80,017
Operating lease right-of-use assets		43,560			43,756
Financing lease right-of-use assets		105			78
Broadcast licenses		320,008			305,775
Goodwill		23,986			23,861
Amortizable intangible assets (net of accumulated amortization of $58,110 in 2021and $59,074 in 2022)		2,444			1,502
Deferred financing costs		843			722
Other assets		4,039			3,492

Total assets	$	516,112		$	507,090

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,661		$	2,312
Accrued expenses		12,006			22,261
Accrued compensation and related expenses		13,054			10,856
Accrued interest		1,030			3,740
Contract liabilities		12,294			11,743
Deferred rent income		157			142
Income taxes payable		1,544			140
Current portion of operating lease liabilities		8,651			8,564
Current portion of financing lease liabilities		58			50
Current portion of long-term debt		—			—

Total current liabilities		51,455			59,808

Long-term debt, less current portion		170,581			155,778
Operating lease liabilities, less current portion		42,208			42,480
Financing (capital) lease liabilities, less current portion		65			47
Deferred income taxes		67,012			65,752
Contract liabilities, long-term		2,222			1,970
Deferred rent income, less current portion		3,772			3,682
Other long-term liabilities		586			65

Total liabilities		337,901			329,582

Commitments and contingencies (Note 14)
Stockholders’ Equity:
Class A common stock, $0.01 par value; authorized 80,000,000 shares; 23,922,974 and 23,980,741 issued and 21,605,324 and 21,663,091 outstanding at December 31, 2021 and September 30, 2022, respectively		232			232
Class B common stock, $0.01 par value; authorized 20,000,000 shares; 5,553,696 issued and outstanding at December 31, 2021 and September 30, 2022, respectively		56			56
Additional paid-in capital		248,438			248,764
Accumulated deficit		(36,509	)		(37,538	)
Treasury stock, at cost (2,317,650 shares at December 31, 2021 and September 30, 2022)		(34,006	)		(34,006	)

Total stockholders’ equity		178,211			177,508

Total liabilities and stockholders’ equity	$	516,112		$	507,090

See accompanying notes

Table of Contents

SALEM MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands except per share data)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2022			2021			2022
Net broadcast revenue	$	49,591		$	51,136		$	140,422		$	152,020
Net digital media revenue		10,645			10,189			30,603			31,293
Net publishing revenue		5,747			5,537			18,093			14,840

Total net revenue		65,983			66,862			189,118			198,153

Operating expenses:
Broadcast operating expenses, exclusive of depreciation and amortization shown below (including $486 and $449 for the three months ended September 30, 2021 and 2022, respectively, and $1,375 and $1,350 for the nine months ended September 30, 2021 and 2022, respectively, paid to related parties)		37,463			41,178			106,968			120,837
Legal settlement		—			3,825			—			4,776
Digital media operating expenses, exclusive of depreciation and amortization shown below		8,269			8,333			25,280			25,079
Publishing operating expenses, exclusive of depreciation and amortization shown below		5,213			6,542			16,844			16,441
Unallocated corporate expenses exclusive of depreciation and amortization shown below (including $0 and $82 for the three months ended September 30, 2021 and 2022, respectively, and $5 and $250 for the nine months ended September 30, 2021 and 2022, respectively, paid to related parties)		4,284			4,840			12,764			14,431
Debt modification costs		2,347			2			2,347			250
Depreciation		2,788			2,737			8,118			8,537
Amortization		427			297			1,553			963
Change in the estimated fair value of contingent earn-out consideration		—			—			—			(5	)
Impairment of indefinite-lived long-term assets other than goodwill		—			7,725			—			11,660
Impairment of goodwill		—			—			—			127
Net (gain) loss on the disposition of assets		(10,607	)		167			(10,552	)		(8,461	)

Total operating expenses		50,184			75,646			163,322			194,635

Operating income (loss)		15,799			(8,784	)		25,796			3,518
Other income (expense):
Interest income		—			17			1			166
Interest expense		(4,026	)		(3,142	)		(11,887	)		(9,925	)
Gain on the forgiveness of PPP loans		11,212			—			11,212			—
Gain (loss) on the early retirement of long-term debt		(56	)		—			(56	)		(18	)
Earnings from equity method investment		—			102			—			4,015
Net miscellaneous income and (expenses)		2			(19	)		87			(19	)

Net income (loss) before income taxes		22,931			(11,826	)		25,153			(2,263	)
Provision for (benefit from) income taxes		837			59			479			(1,234	)

Net income (loss)	$	22,094		$	(11,885	)	$	24,674		$	(1,029	)

Basic income (loss) per share data:
Basic income (loss) per share	$	0.82		$	(0.44	)	$	0.92		$	(0.04	)
Diluted income (loss) per share data:
Diluted income (loss) per share	$	0.81		$	(0.44	)	$	0.91		$	(0.04	)
Basic weighted average shares outstanding		26,870,664			27,216,787			26,825,483			27,202,983

Diluted weighted average shares outstanding		27,280,949			27,216,787			27,217,382			27,202,983

See accompanying notes

Table of Contents

SALEM MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Dollars in thousands except 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, 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


	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, 2021		23,922,974	$	232		5,553,696	$	56	$	248,438	$	(36,509	)	$	(34,006	)	$	178,211
Stock-based compensation		—		—		—		—		106		—			—			106
Options exercised		40,913		—		—		—		94		—			—			94
Lapse of restricted shares		14,854		—		—		—		—		—			—			—
Net income		—		—		—		—		—		1,739			—			1,739

Stockholders’ equity, March 31, 2022		23,978,741	$	232		5,553,696	$	56	$	248,638	$	(34,770	)	$	(34,006	)	$	180,150

Stock-based compensation		—		—		—		—		68		—			—			68
Net income		—		—		—		—		—		9,117			—			9,117

Stockholders’ equity, June 30, 2022		23,978,741	$	232		5,553,696	$	56	$	248,706	$	(25,653	)	$	(34,006	)	$	189,335

Stock-based compensation		—		—		—		—		54		—			—			54
Options exercised		2,000		—		—		—		4		—			—			4
Net loss		—		—		—		—		—		(11,885	)		—			(11,885	)

Stockholders’ equity, September 30, 2022		23,980,741	$	232		5,553,696	$	56	$	248,764	$	(37,538	)	$	(34,006	)	$	177,508

See accompanying notes

Table of Contents

SALEM MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)


	Nine Months Ended September 30,
	2021			2022
OPERATING ACTIVITIES
Net income	$	24,674		$	(1,029	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Non-cash stock-based compensation		240			228
Depreciation and amortization		9,671			9,500
Amortization of deferred financing costs		690			732
Non-cash lease expense		6,527			6,631
Provision for bad debts		(248	)		(437	)
Deferred income taxes		404			(1,260	)
Change in the estimated fair value of contingent earn-out consideration		—			(5	)
Impairment of indefinite-lived long-term assets other than goodwill		—			11,660
Impairment of goodwill		—			127
Gain on the forgiveness of PPP loans		(11,212	)		—
Gain (loss) on the early retirement of long-term debt		56			18
Net (gain) loss on the disposition of assets		(10,552	)		(8,461	)
Changes in operating assets and liabilities:
Accounts receivable and unbilled revenue		(67	)		(5,806	)
Inventories		(412	)		(497	)
Prepaid expenses and other current assets		(1,218	)		(1,664	)
Accounts payable and accrued expenses		2,596			9,742
Operating lease liabilities		(7,317	)		(6,626	)
Contract liabilities		782			(803	)
Deferred rent income		28			(116	)
Other liabilities		41			(518	)
Income taxes payable		63			(1,404	)

Net cash provided by operating activities		14,746			10,012

INVESTING ACTIVITIES
Cash paid for capital expenditures net of tenant improvement allowances		(6,952	)		(9,241	)
Capital expenditures reimbursable under tenant improvement allowances and trade agreements		(138	)		(58	)
Deposit on broadcast assets and radio station acquisitions		(100	)		(750	)
Purchases of broadcast assets and radio stations		(600	)		(548	)
Purchases of digital media businesses and assets		(3,980	)		(190	)
Return of equity investment in OnePartyAmerica LLC		—			4,500
Equity investment in OnePartyAmerica LLC		(1,000	)		(3,500	)
Proceeds from sale of long-lived assets		15,771			14,151
Other		(227	)		62

Net cash provided by investing activities		2,774			4,426

FINANCING ACTIVITIES
Proceeds from 2028 Notes		114,731			—
Payments to repurchase or exchange 2024 Notes		(119,443	)		(15,394	)
Proceeds from borrowings under ABL Facility		16			26,231
Payments on ABL Facility		(5,016	)		(26,231	)
Proceeds from borrowings under PPP Loans		11,195			—
Payments under PPP loans		17			—
Payments of debt issuance costs		(1,921	)		(38	)
Payments of acquisition-related contingent earn-out consideration		—			(4	)
Proceeds from the exercise of stock options		405			98
Payments on financing lease liabilities		(48	)		(47	)

Net cash used in financing activities		(64	)		(15,385	)

Net increase (decrease) in cash and cash equivalents		17,456			(947	)
Cash and cash equivalents at beginning of year		6,325			1,785

Cash and cash equivalents at end of period	$	23,781		$	838

See accompanying notes

Table of Contents

SALEM MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(Dollars in thousands)

(Unaudited)


	Nine Months Ended September 30,
	2021		2022
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Cash paid for interest, net of capitalized interest	$	9,628	$	6,209
Cash paid for interest on finance lease liabilities	$	6	$	5
Net cash paid for (received from) income taxes	$	13	$	1,429
Other supplemental disclosures of cash flow information:
Barter revenue	$	1,647	$	2,118
Barter expense	$	1,699	$	2,104
Non-cash investing and financing activities:
Capital expenditures reimbursable under tenant improvement allowances	$	138	$	58
Right-of-use assets acquired through operating leases	$	3,466	$	7,522
Right-of-use assets acquired through financing leases	$	17	$	20
Non-cash capital expenditures for property & equipment acquired under trade agreements	$	27	$	—
Net assets and liabilities assumed in a non-cash acquisition	$	311	$	—
Estimated present value of contingent-earn out consideration	$	11	$	2

See accompanying notes

Table of Contents

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.

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. Investments in entities for which we have a significant influence, but less than a controlling financial interest, are accounted for using the equity method.

Information with respect to the three and nine months ended September 30, 2022 and 2021 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, 2021. 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, 2021 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.

Impact of the

COVID-19

Pandemic

During 2020 we implemented several measures to reduce costs and conserve cash to ensure that we had adequate liquidity to meet our debt servicing requirements. As the economy began to show signs of recovery, we reversed several of these cost reduction initiatives during 2021. We continue to operate with lower staffing levels where appropriate, we have not declared or paid equity distributions on our common stock, and the company 401(k) match was not reinstated until January 2022.

The Coronavirus Aid, Relief, and Economic Security Act (“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. The Consolidated Appropriations Act (“CAA”) 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, of which 50% was paid in December 2021 and the remaining 50% is payable in December 2022;

•

A 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.

Equity Method Investment

We invested in OnePartyAmerica LLC (“OPA”), an entity formed for the purpose of developing, producing, and distributing a documentary motion picture. We analyzed our investment to determine the degree to which we influenced OPA. The determination of the degree to which we can influence an investee requires extensive analysis depending on the terms and nature of each investment.

We reviewed OPA in accordance with the guidance within Accounting Standards Codification (“ASC”) 810

, Consolidation

. Based on our analysis using the variable interest model, we determined that OPA was a Variable Interest Entity (“VIE”), but because we did not have a controlling financial interest, we were not the primary beneficiary of OPA. Accordingly, we accounted for our investment in OPA in accordance with ASC

323-30

, Investments – Equity Method and Joint Ventures

We recorded our equity method investment at cost with subsequent adjustments to the carrying value for our share of the earnings or losses of OPA. Distributions received from the equity method investment were recorded as reductions in the carrying value of such investment and are classified on the unaudited condensed consolidated interim statements of cash flows pursuant to the cumulative earnings approach. Under the cumulative earnings approach, distributions received are accounted for as a return on investment in cash inflows from operating activities unless the cumulative distributions received exceed the cumulative equity in earnings recognized from the investment. When such an excess occurs, the current period distributions up to this excess are considered returns of investment and are classified as cash inflows from investing activities.

Table of Contents

The documentary motion picture,

2000 Mules

, was released in May 2022. We recorded $0.1 million and $4.1 million of earnings from our equity investment in OPA during the three- and nine-month period ended September 30, 2022, respectively. At September 30, 2022, $0.7 million is included in other receivables in our Condensed Consolidated Balance sheet representing our share of profit from the documentary motion picture due from OPA.

Use of Estimates

Our consolidated financial statements are prepared in accordance with GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. These estimates require the use of judgment as future events, and the effect of these events cannot be predicted with certainty. The

COVID-19

pandemic created 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. We evaluate and update our assumptions and estimates on an ongoing basis and we may consult outside experts to assist as considered necessary.

Significant areas for which management uses estimates include:

•

revenue recognition;

•

asset impairments, including broadcasting licenses and goodwill;

•

contingency reserves;

•

allowance for doubtful accounts;

•

barter transactions;

•

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,

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Except for our accounting policies for investments, 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, 2021, filed with the SEC on March 4, 2022, that have had a material impact on our Condensed Consolidated Financial Statements and related notes.

Accounting for Investments

We may make strategic investments in entities that share similar interests in Christian and conservative content. The accounting for these investments depends on the degree to which we influence the investee. The determination of the degree to which we can influence the investee requires extensive analysis depending on the terms and nature of each investment. For material investments that we directly or indirectly hold a controlling financial interest, we apply the guidance within Accounting Standards Codification (“ASC”) 810

, Consolidation

. For material investments that we do not hold a controlling interest, but for which we have significant influence, we apply the equity method of accounting under ASC

323-30,

Investments – Equity Method and Joint Ventures

. For investments in which we do not have significant influence, we apply the accounting guidance in ASC 321

– Investments Equity Securities

We monitor equity method investments for impairment and record a reduction in the carrying value if the carrying value exceeds the estimated fair value. An impairment charge is recorded when such impairment is deemed to be other than temporary. To determine whether an impairment is other than temporary, we consider our ability and intent to hold the investment until the carrying amount is fully recovered. Circumstances that indicate an impairment may have occurred include factors such as decreases in quoted market prices or declines in the operations of the investee. The evaluation of the investment for potential impairment requires us to exercise significant judgment and to make certain assumptions. The use of different judgments and assumptions could result in different conclusions. There were no indications of impairment at September 30, 2022.

Recent Accounting Pronouncements

Changes to accounting principles are established by the Financial Accounting Standards Board (“FASB”) in the form of Accounting Standards Update (“ASUs”) to the FASB’s Codification. We consider the applicability and impact of all ASUs on our financial position, results of operations, cash flows, or presentation thereof. Described below are ASUs that may be applicable to our financial position, results of operations, cash flows, or presentation thereof. ASUs not listed below were assessed and determined to not be applicable to our financial position, results of operations, cash flows, or presentation thereof.

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Accounting Standards Adopted in 2022

In November 2021, the FASB issued ASU

No. 2021-10,

Disclosures by Business Entities about Government Assistance

. The ASU codifies new requirements to disclose information about the nature of certain government assistance received, the accounting policy used to account for the transactions, the location in the financial statements where such transactions were recorded, and significant terms and conditions associated with such transactions. The guidance was effective for annual periods beginning on January 1, 2022. The adoption of ASU

No. 2021-10

did not have a material impact on our consolidated financial position, results of operations, cash flows, or presentation thereof.

Recent Accounting Standards or Updates Not Yet Effective

In September 2022, the FASB issued ASU

2022-04,

abilities – Supplier Finance Programs (Subtopic

405-50):

Disclosure of Supplier Finance Program Obligations

, to enhance the transparency about the use of supplier finance programs. The ASU is effective January 1, 2023

and is to be applied retrospectively with early adoption permitted. We do not currently utilize Supplier Finance programs and therefore, we do not expect the adoption of this ASU to have a material impact on our consolidated financial position, results of operations, cash flows, or presentation thereof.

In June 2022, the FASB issued ASU

2022-03,

Fair Value Measurement (Topic 820) Fair Value Measurement of Equity Securities Subject to Contractual Sales Restrictions

. This amended guidance clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The ASU is effective January 1, 2024

and is to be applied prospectively with early adoption permitted. We do not expect the adoption of this ASU to have a material impact on our consolidated financial position, results of operations, cash flows, or presentation thereof.

In March 2022, the FASB issued ASU

2022-02,

Troubled Debt Restructurings (“TDRs”) and Vintage Disclosures

(Topic 326):

Financial Instruments – Credit Losses

. This amended guidance will eliminate the accounting designation of a loan modification as a TDR, including eliminating the measurement guidance for TDRs. The amendments also enhance existing disclosure requirements and introduce new requirements related to modifications of receivables made to borrowers experiencing financial difficulty. Additionally, this guidance requires entities to disclose gross write-offs by year of origination for financing receivables, such as loans and interest receivable. The ASU is effective January 1, 2023, and is required to be applied prospectively, except for the recognition and measurement of TDRs which can be applied on a modified retrospective basis. We do not expect the adoption of this ASU to have a material impact on our consolidated financial position, results of operations, cash flows, or presentation thereof.

In October 2021

the FASB issued ASU 2021

Business Combinations (Topic

805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers

, which requires an acquirer to recognize and measure contract assets and liabilities acquired in a business combination in accordance with Revenue from Contracts with Customers (Topic

606

) rather than adjust them to fair value at the acquisition date. The ASU is effective January 1, 2023, with early adoption permitted. The impact that this pronouncement will have will depend on the nature of any business acquisitions that we may enter in the future.

NOTE 3. RECENT TRANSACTIONS

During the nine-month period ended September 30, 2022, we completed or entered into the following transactions:

On September 26, 2022, we entered into a settlement agreement in connection with a lawsuit. While we denied the allegations made in the lawsuit, we believed that settling the matter was preferable to protracted and costly litigation. We previously estimated that we would resolve the matter for $1.5 million, and that amount was accrued at June 30, 2022. During mediation held on September 26, 2022, the parties reached a settlement whereby we will pay $5.3 million in exchange for a release by the Plaintiff of all claims. The settlement is subject to court approval.

Debt Transactions

We completed repurchases of our 2024 Notes as follows:


Date	Principal Repurchased		Cash Paid		% of Face Value			Bond Issue Costs		Net Gain (Loss)

	(Dollars in thousands)
June 13, 2022	$	5,000	$	4,947		98.95	%	$	35	$	18
June 10, 2022		3,000		2,970		99.00	%		21		9
June 7, 2022		2,464		2,446		99.25	%		17		1
May 17, 2022		2,525		2,500		99.00	%		18		7
January 12, 2022		2,500		2,531		101.26	%		22		(53	)

Acquisitions

On May 2, 2022, we acquired websites and the related assets of Retirement Media for $0.2 million in cash. We recorded goodwill of approximately $2,400 associated with the expected synergies to be realized upon combining the operations into our digital media platform within Eagle Financial Publications. The accompanying Condensed Consolidated Statement of Operations reflects the operating results of this entity as of the closing date within our digital media segment.

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On February 15, 2022, we closed on the acquisition of radio station

WLCC-AM

and an FM translator in the Tampa, Florida market for $0.6 million of cash. The WLCC transmitter site will be used to diplex radio station

WTBN-AM

due to the sale of the

WTBN-AM

transmitter site.

The total purchase price consideration for our business acquisitions and asset purchases during the nine-month period ending September 30, 2022, is as follows:


Description	Total Consideration
	(Dollars in thousands)
Cash payments made upon closing	$	738
Escrow deposits paid in prior years		60

Total purchase price consideration	$	798

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		Net Digital Media Assets		Total Net Assets
		(Dollars in thousands)
Assets
	Property and equipment	$	418		166		584
	Broadcast licenses		190		—		190
	Goodwill		—		2		2
	Domain and brand names		—		11		11
	Non-Compete agreement		—		11		11

		$	608	$	190	$	798

Divestitures

On June 27, 2022, we sold 9.3 acres of land in the Denver area for $8.2 million in cash resulting in a

pre-tax

gain of $6.5 million. The land was being used as the transmitter site for radio stations

KRKS-AM

and

KBJD-AM

and was an integral part of our broadcast operations for these stations. We will continue broadcasting both

KRKS-AM

and

KBJD-AM

from this

site via a perpetual agreement with the buyer.

On May 25, 2022, we sold 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 Time Brokerage Agreement (“TBA”). We recorded a

pre-tax

gain of $0.5 million.

On January 10, 2022, we closed on the sale of 4.5 acres of land in Phoenix, Arizona for $2.0 million in cash. The land was being used as the transmitter site for radio station

KXXT-AM

and was an integral part of our broadcast operations for that station. We recorded a

pre-tax

gain of $1.8 million on the sale and had access to the land for

90-days

to relocate our transmitter equipment for

KXXT-AM.

We continue to operate radio station

KXXT-AM

with a similar broadcast signal.

Pending Transactions

On September 29, 2022, we entered into an Asset Purchase Agreement (“APA”) to acquire radio station

WMYM-AM

and an FM translator in Miami, Florida for $5.0 million. We paid $0.3 million of cash into an escrow account and plan to operate the radio stations under a TBA beginning on November 16, 2022. The transaction is subject to the approval of the FCC and is expected to close in the fourth quarter of 2022.

On September 22, 2022, we entered into an APA to acquire radio stations

WWFE-AM,

WRHC-AM

and two FM translators in Miami, Florida for $5.0 million. The transaction is subject to the approval of the FCC and is expected to close later in the fourth quarter of 2022.

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 a Local Marketing Agreement (“LMA”) on June 7, 2021. The transaction is subject to the approval of the FCC and is expected to close in the fourth quarter of 2022.

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.

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The following table presents our revenues disaggregated by revenue source for each of our operating segments:


	Nine Months Ended September 30, 2022
	Broadcast		Digital Media		Publishing		Consolidated

	(Dollars in thousands)
By Source of Revenue:
Block Programming – National	$	39,998	$	—	$	—	$	39,998
Block Programming – Local		18,183		—		—		18,183

Broadcast Programming Revenue		58,181		—		—		58,181

Spot Advertising – National		11,344		—		—		11,344
Spot Advertising – Local		31,915		—		—		31,915
Network Advertising		15,961		—		—		15,961

Broadcast Advertising Revenue


	PAGE NO.
COVER PAGE

INDEX

FORWARD LOOKING STATEMENTS		2

PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements.		3

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.		33

Item 3. Quantitative and Qualitative Disclosures About Market Risk.		57

Item 4. Controls and Procedures.		57

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.		58

Item 1A. Risk Factors.		58

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.		58

Item 3. Defaults Upon Senior Securities.		58

Item 4. Mine Safety Disclosures.		58

Item 5. Other Information.		58

Item 6. Exhibits.		58

EXHIBIT INDEX		58

SIGNATURES		59