salm-10q_20190930.htm

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.

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.)

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).

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

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.

Salem Media Group, Inc. (“Salem” or the “company,” including references to Salem by “we,” “us” and “our”) makes “forward-looking statements” from time to time in both written reports (including this 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 report. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from expectations. These risks, as well as other risks and uncertainties, are detailed in Salem’s reports on Forms 10-K, 10-Q and 8-K filed with or furnished to the Securities and Exchange Commission. Except as required by law, the company undertakes no obligation to update or revise any forward-looking statements made in this report. Any such forward-looking statements, whether made in this 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”).

	December 31, 2018 (Note 1)			September 30, 2019 (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	117		$	7
Trade accounts receivable (net of allowances of $9,732 in 2018 and $10,547 in 2019)		33,020			33,465
Unbilled revenue		2,513			2,273
Other receivables (net of allowances of $158 in 2018 and $0 in 2019)		806			9,224
Inventories (net of reserves of $994 in 2018 and $1,263 in 2019)		677			649
Prepaid expenses		6,504			6,165
Assets held for sale		—			8,731
Total current assets		43,637			60,514
Notes receivable (net of allowance of $733 in 2018 and $978 in 2019)		218			797
Property and equipment (net of accumulated depreciation of $170,756 in 2018 and $170,478 in 2019)		96,344			88,317
Operating lease right-of-use assets		—			56,800
Financing lease right-of-use assets		164			189
Broadcast licenses		376,316			340,354
Goodwill		26,789			26,425
Other indefinite-lived intangible assets		277			277
Amortizable intangible assets (net of accumulated amortization of $53,180 in 2018 and $54,547 in 2019)		11,264			8,170
Deferred financing costs		381			268
Other assets		3,638			4,134
Total assets	$	559,028		$	586,245
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,187		$	4,305
Accrued expenses		10,104			9,449
Accrued compensation and related expenses		7,582			9,767
Accrued interest		1,375			5,231
Contract liabilities		11,537			9,377
Deferred rent income		108			108
Income taxes payable		267			354
Current portion of operating lease liabilities		—			8,191
Current portion of financing (capital) lease liabilities		58			69
Current portion of long-term debt		19,660			18,065
Total current liabilities		52,878			64,916
Long-term debt, less current portion		234,030			228,091
Operating lease liabilities, less current portion		—			56,343
Financing (capital) lease liabilities, less current portion		105			133
Deferred income taxes		35,272			35,759
Deferred rent expense, long term		9,382			—
Contract liabilities, long-term		1,379			1,807
Deferred rent income, less current portion		4,049			3,979
Other long-term liabilities		64			546
Total liabilities		337,159			391,574
Commitments and contingencies (Note 17)
Stockholders’ Equity:
Class A common stock, $0.01 par value; authorized 80,000,000 shares; 22,950,066 and 23,380,650 issued and 20,632,416 and 21,063,000 outstanding at December 31, 2018 and September 30, 2019, respectively		227			227
Class B common stock, $0.01 par value; authorized 20,000,000 shares; 5,553,696 issued and outstanding at December 31, 2018 and September 30, 2019		56			56
Additional paid-in capital		245,220			246,509
Accumulated earnings		10,372			(18,115	)
Treasury stock, at cost (2,317,650 shares at December 31, 2018 and September 30, 2019)		(34,006	)		(34,006	)
Total stockholders’ equity		221,869			194,671
Total liabilities and stockholders’ equity	$	559,028		$	586,245

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2019			2018			2019
Net broadcast revenue	$	48,812		$	47,679		$	147,425		$	142,854
Net digital media revenue		10,397			9,149			31,051			29,349
Net publishing revenue		6,319			7,288			17,119			17,062
Total net revenue		65,528			64,116			195,595			189,265
Operating expenses:
Broadcast operating expenses, exclusive of depreciation and amortization shown below (including $564 and $454 for the three months ended September 30, 2018 and 2019, respectively, and $1,699 and $1,426 for the nine months ended September 30, 2018 and 2019, respectively, paid to related parties)		37,158			37,310			110,151			111,466
Digital media operating expenses, exclusive of depreciation and amortization shown below		8,021			7,282			24,792			22,988
Publishing operating expenses, exclusive of depreciation and amortization shown below		6,210			6,517			17,319			17,112
Unallocated corporate expenses, exclusive of depreciation and amortization shown below (including $41 and $27 for the three months ended September 30, 2018 and 2019, respectively, and $198 and $94 for the nine months ended September 30, 2018 and 2019, respectively, paid to related parties)		3,987			4,183			11,938			12,386
Depreciation		3,032			2,744			9,076			8,529
Amortization		1,604			1,147			4,558			3,567
Change in the estimated fair value of contingent earn-out consideration		—			(40	)		72			(40	)
Impairment of indefinite-lived long-term assets other than goodwill		—			1,915			—			1,915
Net (gain) loss on the disposition of assets		(759	)		17,545			4,400			21,212
Total operating expenses		59,253			78,603			182,306			199,135
Operating income		6,275			(14,487	)		13,289			(9,870	)
Other income (expense):
Interest income		2			—			4			1
Interest expense		(4,507	)		(4,410	)		(13,779	)		(13,206	)
Gain on early retirement of long-term debt		—			—			234			426
Net miscellaneous income and (expenses)		1			—			(12	)		19
Net income (loss) before income taxes		1,771			(18,897	)		(264	)		(22,630	)
Provision for (benefit from) income taxes		564			1,108			(132	)		697
Net income (loss)	$	1,207		$	(20,005	)	$	(132	)	$	(23,327	)

Basic earnings (loss) per share data:
Basic earnings (loss) per share	$	0.05		$	(0.75	)	$	(0.01	)	$	(0.88	)
Diluted earnings (loss) per share data:
Diluted earnings (loss) per share	$	0.05		$	(0.75	)	$	(0.01	)	$	(0.88	)
Basic weighted average shares outstanding		26,183,910			26,616,696			26,177,565			26,442,791
Diluted weighted average shares outstanding		26,312,194			26,616,696			26,177,565			26,442,791

	Class A Common Stock				Class B Common Stock				Additional Paid-In		Accumulated			Treasury
	Shares		Amount		Shares		Amount		Capital		Earnings			Stock			Total
Stockholders’ equity, December 31, 2018		22,950,066	$	227		5,553,696	$	56	$	245,220	$	10,372		$	(34,006	)	$	221,869
Stock-based compensation		—		—		—		—		176		—			—			176
Cash distributions		—		—		—		—		—		(1,702	)		—			(1,702	)
Net income		—		—		—		—		—		322			—			322
Stockholders’ equity, March 31, 2019		22,950,066	$	227		5,553,696	$	56	$	245,396	$	8,992		$	(34,006	)	$	220,665
Distributions per share	$	0.065			$	0.065

Stock-based compensation		—		—		—		—		936		—			—			936
Options exercised		200		—		—		—		—		—			—			—
Lapse of restricted shares		389,061		—		—		—		—		—			—			—
Cash distributions		—		—		—		—		—		(1,728	)		—			(1,728	)
Net (loss)		—		—		—		—		—		(3,644	)		—			(3,644	)
Stockholders’ equity, June 30, 2019		23,339,327	$	227		5,553,696	$	56	$	246,332	$	3,620		$	(34,006	)	$	216,229
Distributions per share	$	0.065			$	0.065

Stock-based compensation		—		—		—		—	177			—			—			177
Options exercised		—		—		—		—		—		—			—			—
Lapse of restricted shares		41,323		—		—		—		—		—			—			—
Cash distributions		—		—		—		—		—		(1,730	)		—			(1,730	)
Net (loss)		—		—		—		—		—		(20,005	)		—			(20,005	)
Stockholders’ equity, September 30, 2019		23,380,650	$	227		5,553,696	$	56	$	246,509	$	(18,115	)	$	(34,006	)	$	194,671
Distributions per share	$	0.065			$	0.065

	Class A Common Stock				Class B Common Stock				Additional Paid-In		Accumulated			Treasury
	Shares		Amount		Shares		Amount		Capital		Earnings			Stock			Total
Stockholders’ equity, December 31, 2017		22,932,451	$	227		5,553,696	$	56	$	244,634	$	20,370		$	(34,006	)	$	231,281
Stock-based compensation		—		—		—		—		46		—			—			46
Options exercised		8,125		—		—		—		19		—			—			19
Cash distributions		—		—		—		—		—		(1,701	)		—			(1,701	)
Net income		—		—		—		—		—		828			—			828
Stockholders’ equity, March 31, 2018		22,940,576	$	227		5,553,696	$	56	$	244,699	$	19,497		$	(34,006	)	$	230,473
Distributions per share	$	0.065			$	0.065

Stock-based compensation		—		—		—		—		126		—			—			126
Options exercised		625		—		—		—		2		—			—			2
Cash distributions		—		—		—		—		—		(1,701	)		—			(1,701	)
Net (loss)		—		—		—		—		—		(2,167	)		—			(2,167	)
Stockholders’ equity, June 30, 2018		22,941,201	$	227		5,553,696	$	56	$	244,827	$	15,629		$	(34,006	)	$	226,733
Distributions per share	$	0.065			$	0.065

Stock-based compensation		—		—		—		—		191		—			—			191
Options exercised		8,865		—		—		—		22		—			—			22
Cash distributions		—		—		—		—		—		(1,702	)		—			(1,702	)
Net income		—		—		—		—		—		1,207			—			1,207
Stockholders’ equity, September 30, 2018		22,950,066	$


Delaware		77-0121400
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)		(I.R.S. EMPLOYER IDENTIFICATION NUMBER)

4880 SANTA ROSA ROAD CAMARILLO, california (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)		93012 (ZIP CODE)


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


Large accelerated filer	☐	Accelerated filer	☒	Emerging Growth Company	☐
Non-accelerated filer	☐	Smaller Reporting Company	☒

Class A		Outstanding at November 1, 2019
Common Stock, $0.01 par value per share		21,129,667 shares

Class B		Outstanding at November 1, 2019
Common Stock, $0.01 par value per share		5,553,696 shares


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		PAGE NO.
COVER PAGE
INDEX
FORWARD LOOKING STATEMENTS		2
PART I - FINANCIAL INFORMATION		3
	Item 1. Condensed Consolidated Financial Statements.	3
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	41
	Item 3. Quantitative and Qualitative Disclosures About Market Risk.	72
	Item 4. Controls and Procedures.	72
PART II - OTHER INFORMATION		73
	Item 1. Legal Proceedings.	73
	Item 1A. Risk Factors.	73
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	73
	Item 3. Defaults Upon Senior Securities.	73
	Item 4. Mine Safety Disclosures.	73
	Item 5. Other Information.	73
	Item 6. Exhibits.	73
EXHIBIT INDEX		74
SIGNATURES		75