Business and Basis of Presentation
|3 Months Ended|
Mar. 31, 2021
|Organization, Consolidation and Presentation of Financial Statements [Abstract]|
|Business and Basis of Presentation||
NOTE 1. BUSINESS AND BASIS OF PRESENTATION
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-19global pandemic that began in March 2020 continues to impact our business. Measures taken by federal, state and local governments to prevent the spread of
COVID-19have adversely affected workforces, certain economies, and financial markets resulting in a significant economic downturn. 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
orders that effectively shut many businesses down. The revenue decline impacted our broadcast segment, which derives substantial revenue from local advertisers who have been 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 the disruption is expected to be temporary, there remains to be considerable uncertainty around the duration. Advertising revenue continues to improve over the lowest levels that were experienced during April and May of 2020, but remain significantly below prior years. The exact timing and pace of the economic recovery has not been determinable as certain markets have reopened, some of which have since experienced a resurgence of
COVID-19cases, resulting in varying degrees of reinstated
orders. Due to continuing uncertainties regarding the ultimate scope and trajectory of
COVID-19’sspread and evolution, it is impossible to predict the total impact that the pandemic will have on our business. If public and private entities continue to enforce restrictive measures, the material adverse effect on our business, results of operations, financial condition and cash flows could persist. Our businesses could also continue to be impacted by the disruptions from
COVID-19and resulting adverse changes in advertising and consumer behavior.
Lower revenue and longer days to collect receivables negatively impacts future availability under our credit facility. Availability under our Asset Based Loan (“ABL Facility”) is subject to a borrowing base consisting of (a) 90% of the eligible accounts receivable plus (b) a calculated amount based on the value of certain real property. The maximum amount available under our ABL Facility was $26.1 million at March 31, 2021 compared to $24.8 million at December 31, 2020, of which none was outstanding at March 31, 2021 compared to $5.0 million outstanding at December 31, 2020.
We implemented several measures during 2020 to reduce costs and conserve cash to ensure that we have adequate cash to meet our debt servicing requirements, including:
As the economy begins to show signs of recovery, many of these cost reduction initiatives have or will be reversed during 2021. We continue to operate with lower staffing levels, have not reinstated the company 401(k) match and have not paid equity distributions on our common stock.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law. The CARES Act provides opportunities for additional liquidity, loan guarantees, and other government programs to support companies affected by the
COVID-19pandemic and their employees. On December 27, 2020, Congress passed the Consolidated Appropriations Act (“CAA”) that includes a second relief package, which, among other things, provides for an extension of the Payroll Support Program established by the CARES Act. We have utilized certain benefits of the CARES Act, and we may be entitled to benefits under the CAA based on our individual locations, including:
We believe that our customers have benefited from the enhanced benefits provided by the CARES Act, and that they will also benefit from the CAA. The CAA provides for another round of direct payments, enhanced unemployment benefits, education funding, and aid to sectors still reeling from the economic fallout of the pandemic. While these measures may benefit many of our customers, we cannot assure you that the implementation of these measures will offset the negative impact of
COVID-19on our customers. If the CAA or any additional stimulus measures are not sufficient to remediate the financial stress on our customers as a result of the pandemic, we may experience ongoing challenges in growing and maintaining revenue and we may experience an increase in delinquencies that could materially and adversely impact our results of operations and financial condition in future periods.
We continue to review and consider any available potential benefit under the CARES Act and the CAA for which we qualify. We cannot predict the manner in which such benefits or any of the other benefits described herein will be allocated or administered and we cannot assure you that we will be able to access such benefits in a timely manner or at all. If the U.S. government or any other governmental authority agrees to provide such aid under the CARES Act, the CAA, or any other crisis relief assistance it may impose certain requirements on the recipients of the aid, including restrictions on executive officer compensation, dividends, prepayment of debt, limitations on debt and other similar restrictions that may apply for a period of time after the aid is repaid or redeemed in full.
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 months ended March 31, 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-Qand 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-Kfor the year ended December 31, 2020. Our results are subject to seasonal fluctuations. Therefore, the results of operations for the interim periods presented are not necessarily indicative of the results of operations for the 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.
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:
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.
COVID-19pandemic 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.
The entire disclosure for organization, consolidation and basis of presentation of financial statements disclosure.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef