Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 Or 15(d) of the

Securities Exchange Act Of 1934

Date of Report (Date of earliest event reported): March 12, 2020

 

 

SALEM MEDIA GROUP, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

 

Delaware   000-26497   77-0121400

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

4880 Santa Rosa Road, Camarillo, California   93012
(Address of Principal Executive Offices)   (Zip Code)

Registrant’s telephone number, including area code: (805) 987-0400

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

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    The NASDAQ Global Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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.  ☐

 

 

 


Table of Contents

TABLE OF CONTENTS

 

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

ITEM 7.01 REGULATION FD DISCLOSURE

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

EXHIBITS

SIGNATURE

EXHIBIT 99.1


Table of Contents
ITEM 2.02

RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On March 12, 2020, Salem Media Group, Inc. issued a press release regarding its results of operations for the quarter ended December 31, 2019.

 

ITEM 7.01

REGULATION FD DISCLOSURE

On March 12, 2020, Salem Media Group, Inc. issued a press release regarding its results of operations for the quarter ended December 31, 2019.

 

ITEM 9.01

FINANCIAL STATEMENTS AND EXHIBITS

 

(d)

Exhibits. The following exhibit is furnished with this report on Form 8-K:

 

Exhibit No.

  

Description

99.1

   Press release, dated March 12, 2020, of Salem Media Group, Inc. regarding its results of operations for the quarter ended December 31, 2019.


Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

      SALEM MEDIA GROUP, INC.
Date: March 12, 2020      

/s/ Evan D. Masyr

      Evan D. Masyr
      Executive Vice President and Chief Financial Officer
EX-99.1

Exhibit 99.1

 

SALEM MEDIA GROUP, INC. ANNOUNCES FOURTH QUARTER 2019

TOTAL REVENUE OF $64.6 MILLION

CAMARILLO, CA March 12, 2020 – Salem Media Group, Inc. (Nasdaq: SALM) released its results for the three and twelve months ended December 31, 2019.

Fourth Quarter 2019 Results

For the quarter ended December 31, 2019 compared to the quarter ended December 31, 2018:

Consolidated

 

   

Total revenue decreased 3.8% to $64.6 million from $67.2 million;

 

   

Total operating expenses decreased 0.9% to $63.0 million from $63.5 million;

 

   

Operating expenses, excluding gains or losses on the disposition of assets, stock-based compensation expense, changes in the estimated fair value of contingent earn-out consideration, impairments, depreciation expense and amortization expense (1) decreased 2.2% to $54.4 million from $55.6 million;

 

   

Operating income decreased 54.6% to $1.7 million from $3.7 million;

 

   

Net loss increased 47.5% to $4.5 million, or $0.17 net loss per share from $3.1 million, or $0.12 net loss per share;

 

   

EBITDA (1) decreased 20.6% to $6.9 million from $8.7 million;

 

   

Adjusted EBITDA (1) decreased 11.6% to $10.2 million from $11.6 million; and

 

   

Net cash used by operating activities decreased 8.1% to $2.5 million from $2.8 million.

Broadcast

 

   

Net broadcast revenue decreased 1.2% to $50.5 million from $51.1 million;

 

   

Station Operating Income (“SOI”) (1) decreased 0.8% to $12.5 million from $12.6 million;

 

   

Same Station (1) net broadcast revenue increased 1.2% to $49.4 million from $48.8 million; and

 

   

Same Station SOI (1) decreased 0.5% to $12.8 million from $12.9 million.

Digital Media

 

   

Digital media revenue decreased 15.0% to $9.8 million from $11.5 million; and

 

   

Digital Media Operating Income (1) decreased 34.1% to $2.0 million from $3.0 million.

Publishing

 

   

Publishing revenue decreased 5.1% to $4.3 million from $4.6 million; and

 

   

Publishing Operating Loss (1) increased 77.3% to $0.9 million from $0.5 million.

Included in the results for the quarter ended December 31, 2019 are:

 

   

A $2.4 million impairment charge ($1.8 million, net of tax, or $0.07 per share) related to the goodwill in both the company’s digital media and publishing reporting segments;

 

   

A $1.0 million impairment charge ($0.7 million, net of tax, or $0.03 per share), of which $17,000 related to impairment of mastheads, and the remainder to broadcast licenses. Impairments were recorded in the company’s Tampa, Florida market;


   

A $1.1 million ($0.8 million, net of tax, or $0.03 per share) net loss on the disposition of assets which includes a $1.5 million estimated pre-tax loss for the pending sale of radio station WBZW-AM in Orlando, Florida, offset by a $0.5 million reduction of the loss recorded for the sale of nine radio stations based on the actual closing costs incurred and a reconciliation of total station assets to assets included in the sale;

 

   

A $1.2 million gain ($0.9 million, net of tax, or $0.03 per diluted share) on early redemption of long-term debt due to the repurchase of the company’s 6.75% senior secured notes due 2024; and

 

   

A $0.2 million non-cash compensation charge ($0.1 million, net of tax) related to the expensing of stock options primarily consisting of:

 

     

$0.1 million non-cash compensation charge included in corporate expenses; and

 

     

the remaining $0.1 million non-cash compensation charge included in broadcast and digital media.

Included in the results for the quarter ended December 31, 2018 are:

 

   

A $2.9 million ($2.1 million, net of tax, or $0.08 per share) impairment, of which $36,000 related to impairment of mastheads and the reminder to broadcast licenses;

 

   

A $0.3 million ($0.2 million, net of tax, or $0.01 per share) net loss reflects the impact of the sale of radio stations KOTK-AM and KCRO-AM in Omaha, Nebraska that was adjusted as of the closing date based on the actual assets sold and various other fixed asset disposals;

 

   

A $0.4 million gain ($0.3 million, net of tax, or $0.01 per diluted share) on early redemption of long-term debt due to the repurchase of the company’s 6.75% senior secured notes due 2024; and

 

   

A $0.2 million non-cash compensation charge ($0.1 million, net of tax, or $0.01 per share) related to the expensing of stock options consisting of:

 

     

$0.1 million non-cash compensation charge included in corporate expenses; and

 

     

the remaining $0.1 million non-cash compensation charge included in broadcast, digital media and publishing operating expenses.

Per share numbers are calculated based on 26,683,363 diluted weighted average shares for the quarter ended December 31, 2019, and 26,186,112 diluted weighted average shares for the quarter ended December 31, 2018.

Year to Date 2019 Results

For the twelve months ended December 31, 2019 compared to the twelve months ended December 31, 2018:

Consolidated

 

   

Total revenue decreased 3.4% to $253.9 million from $262.8 million;

 

   

Total operating expenses increased 6.6% to $262.1 million from $245.8 million;

 

   

Operating expenses, excluding gains or losses on the disposition of assets, stock-based compensation expense, changes in the estimated fair value of contingent earn-out consideration, impairments, depreciation expense and amortization expense (1) decreased 1.1% to $217.1 million from $219.4 million;

 

   

The company had an operating loss of $8.2 million compared to operating income of $17.0 million;


   

The company’s net loss increased to $27.8 million, or $1.05 net loss per share from $3.2 million, or $0.12 net loss per share;

 

   

EBITDA (1) decreased 73.3% to $9.6 million from $35.8 million;

 

   

Adjusted EBITDA (1) decreased 14.6% to $37.0 million from $43.3 million; and

 

   

Net cash provided by operating activities decreased 25.9% to $17.0 million from $23.0 million.

Broadcast

 

   

Net broadcast revenue decreased 2.6% to $193.3 million from $198.5 million;

 

   

SOI (1) decreased 12.0% to $43.9 million from $49.9 million;

 

   

Same station (1) net broadcast revenue decreased 1.2% to $190.2 million from $192.6 million; and

 

   

Same station SOI (1) decreased 12.1% to $44.8 million from $51.0 million.

Digital media

 

   

Digital media revenue decreased 8.1% to $39.2 million from $42.6 million; and

 

   

Digital Media Operating Income (1) decreased 10.1% to $8.4 million from $9.3 million.

Publishing

 

   

Publishing revenue decreased 1.3% to $21.4 million from $21.7 million; and

 

   

Publishing Operating Loss (1) increased 34.4% to $1.0 million from $0.7 million.

Included in the results for the twelve months ended December 31, 2019 are:

 

   

A $22.3 million ($16.5 million, net of tax, or $0.62 per share) net loss on the disposition of assets which includes:

 

     

a $9.4 million pre-tax loss for the sale of nine radio stations WAFS-AM in Atlanta, Georgia, WWDJ-AM in Boston, Massachusetts, WHKZ-AM in Cleveland, Ohio, KEXB-AM (formerly KTNO-AM) in Dallas, Texas, KDMT-AM in Denver, Colorado, KTEK-AM in Houston, Texas, KRDY-AM in San Antonio, Texas and KXFN-AM and WSDZ-AM in St. Louis, Missouri;

 

     

a $4.7 million pre-tax loss from the sale of four radio stations WWMI-AM and WLCC-AM in Tampa, Florida and WZAB-AM and WOCN-AM (formerly WKAT-AM) in Miami, Florida;

 

     

a $3.8 million pre-tax loss on the sale of radio station WSPZ-AM in Washington, D.C.,

 

     

a $1.5 million estimated pre-tax loss for the pending sale of radio station WBZW-AM in Orlando, Florida;

 

     

a $1.6 million pre-tax loss from the sale of radio station WDYZ-AM (formerly WORL-AM) in Orlando, Florida;

 

     

a $1.3 million pre-tax loss on the exchange of radio station KKOL-AM in Seattle, Washington for KPAM-AM in Portland, Oregon;

 

     

a $0.2 million pre-tax loss on the sale Mike Turner’s line of investment products;

 

     

a $0.2 million pre-tax loss on the sale of HumanEvents.com;

 

     

a $0.4 million pre-tax gain on the sale of a portion of land on the company’s transmitter site in Miami, Florida; and

 

     

a $0.1 million pre-tax gain on the sale of Newport Natural Health;

 

   

A $2.9 million impairment charge ($2.2 million, net of tax, and $0.08 per share) of which $17,000 related to impairment of mastheads and the remainder to broadcast licenses. Impairments were recorded in the company’s Louisville, Philadelphia, Portland, San Francisco and Tampa markets;


   

A $2.4 million impairment charge ($1.8 million, net of tax, or $0.07 per share) related to the goodwill in both the company’s digital media and publishing reporting segments;

 

   

A $1.7 million gain ($1.2 million, net of tax, or $0.05 per diluted share) on early redemption of long-term debt due to the repurchase of the company’s 6.75% senior secured notes due 2024;

 

   

A $0.2 million one-time expense ($0.1 million, net of tax) associated with the adoption of ASC 842 and

 

   

A $1.5 million non-cash compensation charge ($1.1 million, net of tax, or $0.04 per share) related to the expensing of stock options and restricted stock primarily consisting of:

 

     

$0.9 million non-cash compensation charge included in corporate expenses; and

 

     

$0.5 million non-cash compensation charge included in broadcast operating expenses; and

 

     

the remaining $0.1 million non-cash compensation charge included in digital media and publishing operating expenses.

Included in the results for the twelve months ended December 31, 2018 are:

 

   

A $2.9 million ($2.1 million, net of tax, or $0.08 per share) impairment, of which $36,000 related to impairment of mastheads and the reminder to broadcast licenses. Impairments were recorded in the company’s Cleveland, Louisville and Portland markets;

 

   

A $4.7 million ($3.4 million, net of tax, or $0.13 per share) net loss on the disposition of assets includes:

 

     

a $2.4 million pre-tax loss on the sale of KGBI-FM in Omaha, Nebraska;

 

     

a $1.8 million pre-tax loss on the sale of radio stations KOTK-AM and KCRO-AM in Omaha, Nebraska;

 

     

a $0.3 million pre-tax loss on the sale of land in Lakeside, California;

 

     

a $0.2 million pre-tax loss on the sale of land in Covina, California; and

 

     

offset by a $0.2 million pre-tax gain on the sale of WBIX-AM in Boston, Massachusetts;

 

   

A $0.6 million gain ($0.5 million, net of tax, or $0.02 per diluted share) on early redemption of long-term debt due to the repurchase of the company’s 6.75% senior secured notes due 2024; and

 

   

A $0.5 million non-cash compensation charge ($0.4 million, net of tax, or $0.02 per share) related to the expensing of stock options consisting of:

 

     

$0.3 million non-cash compensation charge included in corporate expenses;

 

     

$0.1 million non-cash compensation charge included in broadcast operating expenses; and

 

     

the remaining $0.1 million non-cash compensation charge included in the digital media and publishing operating expenses.

Per share numbers are calculated based on 26,502,934 diluted weighted average shares for the twelve months ended December 31, 2019, and 26,179,702 diluted weighted average shares for the twelve months ended December 31, 2018.


Balance Sheet

As of December 31, 2019, the company had $219.8 million outstanding on the 6.75% senior secured notes due 2024 (the “Notes”) and $12.4 million outstanding on the Asset Based Revolving Credit Facility (“ABL Facility”).

Acquisitions and Divestitures

The following transactions were completed since October 1, 2019:

 

   

On November 4, 2019, the company sold nine radio stations WAFS-AM in Atlanta, Georgia, WWDJ-AM in Boston, Massachusetts, WHKZ-AM in Cleveland, Ohio, KEXB-AM (formerly KTNO-AM) in Dallas, Texas, KDMT-AM in Denver, Colorado, KTEK-AM in Houston, Texas, KRDY-AM in San Antonio, Texas and KXFN-AM and WSDZ-AM in St. Louis, Missouri for $8.7 million in cash. The company recognized an estimated pre-tax loss of $9.9 million in the third quarter of 2019, which reflects the sales price as compared to the carrying value of the assets of the radio stations and the estimated closing costs. The company reduced the loss in the fourth quarter by $0.5 million to $9.4 million based on the actual closing costs incurred and a reconciliation of total station assets to assets included in the sale.

Pending transactions:

 

   

On October 31, 2019, the company entered into an agreement to sell radio station WBZW-AM and an FM translator construction permit in Orlando, Florida, for $0.2 million in cash. The company recognized an estimated pre-tax loss of $1.5 million in the fourth quarter of 2019, which reflects the sale price as compared to the carrying value of the assets less the estimated closing costs. The transaction is subject to the approval of the Federal Communications Commission (“FCC”) and is expected to close in mid-2020.

 

   

On January 3, 2017, Word Broadcasting began operating the company’s Louisville radio stations (WFIA-AM; WFIA-FM; WGTK-AM) under a twenty-four month Time Brokerage Agreement (“TBA”). The company received $0.5 million in cash associated with an option for Word Broadcasting Network to acquire the radio stations during the term. In December 2018, Word Broadcasting notified the company of their intent to purchase its Louisville radio stations. The TBA contained an extension clause that allowed Word Broadcasting to continue operating the station until the purchase agreement was executed and the transaction closed. On June 28, 2019, the TBA was amended to include an additional 24 months under which Word Broadcasting will program the radio stations with the option to acquire the stations extended to December 31, 2020. On February 5, 2020 the company entered into an Asset Purchase Agreement “APA” with Word Broadcasting to sell radio stations WFIA-AM, WFIA-FM and WGTK-AM in Louisville, Kentucky for $4.0 million with a $250,000 credit applied to the sale price if closing occurs before March 31, 2020. Additionally, the buyer will receive a credit toward the purchase price of a sum equal to the monthly fees paid under the TBA that began in January 2017 for months 4-29 of the TBA and a sum equal to $2,000 per month for each monthly fee payment for months 30 and thereafter of the TBA; and a credit of the $450,000 option payment. The company estimates the loss on sale to be approximately $0.5 million net of tax if the sale closes by March 31, 2020 and $0.3 million net of tax if the sale closes later. The actual loss will be recorded in the period ending March 31, 2020.


Conference Call Information

Salem will host a teleconference to discuss its results on March 12, 2020 at 2:00 p.m. Pacific Time. To access the teleconference, please dial (877) 524-8416, and then ask to be joined into the Salem Media Group Fourth Quarter 2019 call or listen via the investor relations portion of the company’s website, located at investor.salemmedia.com. A replay of the teleconference will be available through March 26, 2020 and can be heard by dialing (877) 660-6853, passcode 13697766 or on the investor relations portion of the company’s website, located at investor.salemmedia.com.

Follow us on Twitter @SalemMediaGrp.

First Quarter 2020 Outlook

For the first quarter of 2020, the company is projecting total revenue to be between flat and a decrease of 2% from first quarter 2019 total revenue of $60.5 million. Excluding the impact of recent acquisitions and dispositions, the company is projecting total revenue to be between flat and an increase of 2%. The company is also projecting operating expenses before gains or losses on disposition of assets, stock-based compensation expense, changes in the estimated fair value of contingent earn-out consideration, impairments, depreciation expense and amortization expense to be between flat and an increase of 3% compared to the first quarter of 2019 non-GAAP operating expenses of $53.0 million.

A reconciliation of non-GAAP operating expenses, excluding gains or losses on the disposition of assets, stock-based compensation expense, changes in the estimated fair value of contingent earn-out consideration, impairments, depreciation expense and amortization expense to the most directly comparable GAAP measure is not available without unreasonable efforts on a forward-looking basis due to the potential high variability, complexity and low visibility with respect to the charges excluded from this non-GAAP financial measure, in particular, the change in the estimated fair value of earn-out consideration, impairments and gains or losses from the disposition of fixed assets. The company expects the variability of the above charges may have a significant, and potentially unpredictable, impact on its future GAAP financial results.


About Salem Media Group, Inc.

Salem Media Group is America’s leading multimedia company specializing in Christian and conservative content, with media properties comprising radio, digital media and book and newsletter publishing. Each day Salem serves a loyal and dedicated audience of listeners and readers numbering in the millions nationally. With its unique programming focus, Salem provides compelling content, fresh commentary and relevant information from some of the most respected figures across the Christian and conservative media landscape. Learn more about Salem Media Group, Inc., at www.salemmedia.com, Facebook and Twitter (@SalemMediaGrp).

Company Contact:

Evan D. Masyr

Executive Vice President and Chief

Financial Officer

(805) 384-4512

evan@salemmedia.com

Forward-Looking Statements

Statements used in this press release that relate to future plans, events, financial results, prospects or performance are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those anticipated as a result of certain risks and uncertainties, including but not limited to the ability of Salem to close and integrate announced transactions, market acceptance of Salem’s radio station formats, competition from new technologies, adverse economic conditions, and other risks and uncertainties detailed from time to time in Salem’s reports on Forms 10-K, 10-Q, 8-K and other filings filed with or furnished to the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Salem undertakes no obligation to update or revise any forward-looking statements to reflect new information, changed circumstances or unanticipated events.

 

(1)

Regulation G

Management uses certain non-GAAP financial measures defined below in communications with investors, analysts, rating agencies, banks and others to assist such parties in understanding the impact of various items on its financial statements. The company uses these non-GAAP financial measures to evaluate financial results, develop budgets, manage expenditures and as a measure of performance under compensation programs.

The company’s presentation of these non-GAAP financial measures should not be considered as a substitute for or superior to the most directly comparable financial measures as reported in accordance with GAAP.

Regulation G defines and prescribes the conditions under which certain non-GAAP financial information may be presented in this earnings release. The company closely monitors EBITDA, Adjusted EBITDA, Station Operating Income (“SOI”), Same Station net broadcast revenue, Same Station broadcast operating expenses, Same Station Operating Income, Digital Media Operating Income, Publishing Operating Income (Loss), and operating expenses excluding gains or losses on the disposition of assets, stock-based compensation, changes in the estimated fair value of contingent earn-out consideration, impairments, depreciation and amortization, all of which are non-GAAP financial measures. The company believes that these non-GAAP financial measures provide useful information about its core operating results, and thus, are appropriate to enhance the overall understanding of its financial performance. These non-GAAP financial measures are intended to provide management and investors a more complete understanding of its underlying operational results, trends and performance.


The company defines Station Operating Income (“SOI”) as net broadcast revenue minus broadcast operating expenses. The company defines Digital Media Operating Income as net Digital Media Revenue minus Digital Media Operating Expenses. The company defines Publishing Operating Income (Loss) as net Publishing Revenue minus Publishing Operating Expenses. The company defines EBITDA as net income before interest, taxes, depreciation, and amortization. The company defines Adjusted EBITDA as EBITDA before gains or losses on the disposition of assets, before changes in the estimated fair value of contingent earn-out consideration, before impairments, before net miscellaneous income and expenses, before gain on bargain purchase, before (gain) loss on early retirement of long-term debt and before non-cash compensation expense. SOI, Digital Media Operating Income, Publishing Operating Income (Loss), EBITDA and Adjusted EBITDA are commonly used by the broadcast and media industry as important measures of performance and are used by investors and analysts who report on the industry to provide meaningful comparisons between broadcasters. SOI, Digital Media Operating Income, Publishing Operating Income (Loss), EBITDA and Adjusted EBITDA are not measures of liquidity or of performance in accordance with GAAP and should be viewed as a supplement to and not a substitute for or superior to its results of operations and financial condition presented in accordance with GAAP. The company’s definitions of SOI, Digital Media Operating Income, Publishing Operating Income (Loss), EBITDA and Adjusted EBITDA are not necessarily comparable to similarly titled measures reported by other companies.

The company defines Adjusted Free Cash Flow as Adjusted EBITDA less cash paid for capital expenditures, less cash paid for income taxes, and less cash paid for interest. The company considers Adjusted Free Cash Flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by its operations after cash paid for capital expenditures, cash paid for income taxes and cash paid for interest. A limitation of Adjusted Free Cash Flow as a measure of liquidity is that it does not represent the total increase or decrease in its cash balance for the period. The company uses Adjusted Free Cash Flow, a non-GAAP liquidity measure, both in presenting its results to stockholders and the investment community, and in its internal evaluation and management of the business. The company’s presentation of Adjusted Free Cash Flow is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. The company’s definition of Adjusted Free Cash Flow is not necessarily comparable to similarly titled measures reported by other companies.

The company defines Same Station net broadcast revenue as broadcast revenue from its radio stations and networks that the company owns or operates in the same format on the first and last day of each quarter, as well as the corresponding quarter of the prior year. The company defines Same Station broadcast operating expenses as broadcast operating expenses from its radio stations and networks that the company owns or operates in the same format on the first and last day of each quarter, as well as the corresponding quarter of the prior year. The company defines Same Station SOI as Same Station net broadcast revenue less Same Station broadcast operating expenses. Same Station operating results include those stations that the company owns or operates in the same format on the first and last day of each quarter, as well as the corresponding quarter of the prior year. Same Station operating results for a full calendar year are calculated as the sum of the Same


Station-results for each of the four quarters of that year. The company uses Same Station operating results, a non-GAAP financial measure, both in presenting its results to stockholders and the investment community, and in its internal evaluations and management of the business. The company believes that Same Station operating results provide a meaningful comparison of period over period performance of its core broadcast operations as this measure excludes the impact of new stations, the impact of stations the company no longer owns or operates, and the impact of stations operating under a new programming format. The company’s presentation of Same Station operating results are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. The company’s definition of Same Station operating results is not necessarily comparable to similarly titled measures reported by other companies.

For all non-GAAP financial measures, investors should consider the limitations associated with these metrics, including the potential lack of comparability of these measures from one company to another.

The Supplemental Information tables that follow the condensed consolidated financial statements provide reconciliations of the non-GAAP financial measures that the company uses in this earnings release to the most directly comparable measures calculated in accordance with GAAP. The company uses non-GAAP financial measures to evaluate financial performance, develop budgets, manage expenditures, and determine employee compensation. The company’s presentation of this additional information is not to be considered as a substitute for or superior to the directly comparable measures as reported in accordance with GAAP.


Salem Media Group, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

 

     Three Months Ended     Twelve Months Ended  
     December 31,     December 31,  
     2018     2019     2018     2019  
     (Unaudited)  

Net broadcast revenue

   $ 51,077     $ 50,485     $ 198,502     $ 193,339  

Net digital media revenue

     11,544       9,816       42,595       39,165  

Net publishing revenue

     4,567       4,332       21,686       21,394  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     67,188       64,633       262,783       253,898  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Broadcast operating expenses

     38,463       37,973       148,614       149,439  

Digital media operating expenses

     8,504       7,813       33,296       30,801  

Publishing operating expenses

     5,077       5,236       22,396       22,348  

Unallocated corporate expenses

     3,748       3,554       15,686       15,940  

Change in the estimated fair value of contingent earn-out consideration

     4       (1     76       (41

Impairment of indefinite-lived long-term assets other than goodwill

     2,870       1,010       2,870       2,925  

Impairment of goodwill

     —         2,427       —         2,427  

Depreciation and amortization

     4,592       3,838       18,226       15,934  

Net (gain) loss on the disposition of assets

     253       1,114       4,653       22,326  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     63,511       62,964       245,817       262,099  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     3,677       1,669       16,966       (8,201

Other income (expense):

        

Interest income

     1       1       5       2  

Interest expense

     (4,549     (4,290     (18,328     (17,496

Gain on early retirement of long-term debt

     414       1,244       648       1,670  

Net miscellaneous income and (expenses)

     2       144       (10     163  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss before income taxes

     (455     (1,232     (719     (23,862

Provision for income taxes

     2,605       3,280       2,473       3,977  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (3,060   $ (4,512   $ (3,192   $ (27,839
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic loss per share Class A and Class B common stock

   $ (0.12   $ (0.17   $ (0.12   $ (1.05

Diluted loss per share Class A and Class B common stock

   $ (0.12   $ (0.17   $ (0.12   $ (1.05

Basic weighted average Class A and Class B common stock shares outstanding

     26,186,112       26,683,363       26,179,702       26,502,934  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted weighted average Class A and Class B common stock shares outstanding

     26,186,112       26,683,363       26,179,702       26,502,934  
  

 

 

   

 

 

   

 

 

   

 

 

 


Salem Media Group, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

 

     December 31,
2018
     December 31,
2019
 
            (Unaudited)  

Assets

     

Cash

   $ 117      $ 6  

Trade accounts receivable, net

     33,020        30,824  

Other current assets

     10,500        10,893  

Property and equipment, net

     96,344        87,673  

Operating and financing lease right-of-use assets

     164        54,730  

Intangible assets, net

     414,646        369,216  

Deferred financing costs

     381        224  

Other assets

     3,856        4,864  
  

 

 

    

 

 

 

Total assets

   $ 559,028      $ 558,430  
  

 

 

    

 

 

 

Liabilities and Stockholders’ Equity

     

Current liabilities

   $ 52,878      $ 53,134  

Long-term debt

     234,030        216,468  

Operating and financing lease liabilities, less current portion

     105        54,174  

Deferred income taxes

     35,272        38,778  

Other liabilities

     14,874        6,213  
  

 

 

    

 

 

 

Stockholders’ Equity

     221,869        189,663  
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 559,028      $ 558,430  
  

 

 

    

 

 

 


SALEM MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Dollars in thousands, except share and per share data)

 

    Class A
Common Stock
    Class B
Common Stock
    Additional
Paid-In
Capital
    Accumulated
Earnings
(Deficit)
    Treasury
Stock
    Total  
    Shares     Amount     Shares     Amount  

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            
 

 

 

     

 

 

           

Stock-based compensation

    —         —         —         —         171       —         —         171  

Options exercised

    —         —         —         —         —         —         —         —    

Lapse of restricted shares

    66,667       —         —         —         —         —         —         —    

Cash distributions

    —         —         —         —         —         (667     —         (667

Net loss

    —         —         —         —         —         (4,512     —         (4,512
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Stockholders’ equity, December 31, 2019

    23,447,317     $ 227       5,553,696     $ 56     $ 246,680     $ (23,294   $ (34,006   $ 189,663  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Distributions per share

  $ 0.025       $ 0.025            
 

 

 

     

 

 

           


SALEM MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (CONT’D)

(Dollars in thousands, except share and per share data)

 

    Class A
Common Stock
     Class B
Common Stock
     Additional
Paid-In
Capital
     Accumulated
Earnings
    Treasury
Stock
    Total  
    Shares      Amount      Shares      Amount  

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      $ 227        5,553,696      $ 56      $ 245,040      $ 15,134     $ (34,006   $ 226,451  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Distributions per share

  $ 0.065         $ 0.065               
 

 

 

       

 

 

              

Stock-based compensation

    —          —          —          —          180        —         —         180  

Options exercised

    —          —          —          —          —          —         —         —    

Cash distributions

    —          —          —          —          —          (1,702     —         (1,702

Net loss

    —          —          —          —          —          (3,060     —         (3,060
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Stockholders’ equity,

December 31, 2018

    22,950,066      $ 227        5,553,696      $ 56      $ 245,220      $ 10,372     $ (34,006   $ 221,869  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Distributions per share

  $ 0.065         $ 0.065               
 

 

 

       

 

 

              


SALEM MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

 

     Three Months Ended
December 31,
    Twelve Months Ended
December 31,
 
     2018     2019     2018     2019  

OPERATING ACTIVITIES

        

Net loss

   $ (3,060   $ (4,512   $ (3,192   $ (27,839

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

        

Non-cash stock-based compensation

     180       171       543       1,460  

Depreciation and amortization

     4,592       3,838       18,226       15,934  

Amortization of deferred financing costs

     259       294       1,114       1,060  

Non-cash lease expense

     —         2,291       —         9,026  

Accretion of acquisition-related deferred payments and contingent consideration

     —         3       24       5  

Provision for bad debts

     600       659       2,098       2,066  

Deferred income taxes

     2,492       3,019       2,191       3,506  

Impairment of indefinite-lived long-term assets other than goodwill

     2,870       1,010       2,870       2,925  

Impairment of goodwill

     —         2,427       —         2,427  

Change in the estimated fair value of contingent earn-out consideration

     4       (1     76       (41

Net (gain) loss on the disposition of assets

     253       1,114       4,653       22,326  

Gain on early retirement of long-term debt

     (414     (1,244     (648     (1,670

Changes in operating assets and liabilities:

        

Accounts receivable and unbilled revenue

     1,015       1,768       (2,814     (595

Inventories

     214       (68     53       (440

Prepaid expenses and other current assets

     868       279       308       617  

Accounts payable and accrued expenses

     (6,193     (6,513     1,031       (2,009

Deferred rent expense

     83       —         (152     —    

Operating lease liabilities

     —         (2,129     —         (10,112

Contract liabilities

     (985     53       (3,365     (1,657

Deferred rent income

     (66     (79     (135     (209

Other liabilities

     25       (18     (15     (34

Income taxes payable

     26       177       95       264  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

   $ 2,763     $ 2,539     $ 22,961     $ 17,010  
  

 

 

   

 

 

   

 

 

   

 

 

 

INVESTING ACTIVITIES

        

Cash paid for capital expenditures net of tenant improvement allowances

     (2,754     (1,693     (9,267     (7,757

Capital expenditures reimbursable under tenant improvement allowances and trade agreements

     —         (25     (77     (28

Purchases of broadcast assets and radio stations

     —         —         (6,534     (35

Purchases of digital media businesses and assets

     —         —         (4,320     (1,250

Proceeds from sale of assets

     1,376       16,539       9,894       20,741  

Other

     (22     (13     (420     (738
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) investing activities

   $ (1,400   $ 14,808     $ (10,724   $ 10,933  
  

 

 

   

 

 

   

 

 

   

 

 

 

FINANCING ACTIVITIES

        

Payments to repurchase 6.75% Senior Secured Notes

     (5,893     (10,628     (15,443     (16,751

Proceeds from borrowings under ABL Facility

     42,313       25,423       153,650       111,790  

Payments on ABL Facility

     (32,853     (31,062     (142,990     (119,024

Refund (payments) of debt issuance costs

     (39     (1     (50     (44

Proceeds from the exercise of stock options

     —         —         43       —    

Payments of acquisition-related contingent earn-out consideration

     —         —         (140     —    

Payments on financing lease liabilities

     (12     (18     (85     (83

Payment of cash distribution on common stock

     (1,702     (667     (6,806     (5,827

Book overdraft

     (3,077     (395     (302     1,885  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in financing activities

   $ (1,263   $ (17,348   $ (12,123   $ (28,054
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

   $ 100     $ (1   $ 114     $ (111

Cash and cash equivalents at beginning of year

     17       7       3       117  
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 117     $ 6     $ 117     $ 6  
  

 

 

   

 

 

   

 

 

   

 

 

 


Salem Media Group, Inc.

Supplemental Information

(in thousands)

 

     Three Months Ended     Twelve Months Ended  
     December 31,     December 31,  
     2018     2019     2018     2019  
     (Unaudited)  

Reconciliation of Total Operating Expenses to Operating Expenses excluding Gains or Losses on the Disposition of Assets, Stock-based Compensation Expense, Changes in the Estimated Fair Value of Contingent Earn-out Consideration, Impairments and Depreciation and Amortization Expense (Recurring Operating Expenses)

        

Operating Expenses

   $ 63,511     $ 62,964     $ 245,817     $ 262,099  

Less depreciation and amortization expense

     (4,592     (3,838     (18,226     (15,934

Less change in estimated fair value of contingent earn-out consideration

     (4     1       (76     41  

Less impairment of indefinite-lived long-term assets other than goodwill

     (2,870     (1,010     (2,870     (2,925

Less impairment of goodwill

     —         (2,427     —         (2,427

Less net gain (loss) on the disposition of assets

     (253     (1,114     (4,653     (22,326

Less stock-based compensation expense

     (180     (171     (543     (1,460
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Recurring Operating Expenses

   $ 55,612     $ 54,405     $ 219,449     $ 217,068  
  

 

 

   

 

 

   

 

 

   

 

 

 
        

Reconciliation of Net Broadcast Revenue to Same Station Net Broadcast Revenue

 

Net broadcast revenue

   $ 51,077     $ 50,485     $ 198,502     $ 193,339  

Net broadcast revenue – acquisitions

     —         —         (257     (274

Net broadcast revenue – dispositions

     (1,608     (125     (3,943     (731

Net broadcast revenue – format change

     (654     (983     (1,653     (2,085
  

 

 

   

 

 

   

 

 

   

 

 

 

Same Station net broadcast revenue

   $ 48,815     $ 49,377     $ 192,649     $ 190,249  
  

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of Broadcast Operating Expenses to Same Station Broadcast Operating Expenses

        

Broadcast operating expenses

   $ 38,463     $ 37,973     $ 148,614     $ 149,439  

Broadcast operating expenses – acquisitions

     —         (1     (382     (399

Broadcast operating expenses – dispositions

     (1,920     (330     (4,640     (1,129

Broadcast operating expenses – format change

     (601     (1,071     (1,932     (2,483
  

 

 

   

 

 

   

 

 

   

 

 

 

Same Station broadcast operating expenses

   $ 35,942     $ 36,571     $ 141,660     $ 145,428  
  

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of SOI to Same Station SOI

        

Station Operating Income

   $ 12,614     $ 12,512     $ 49,888     $ 43,900  

Station operating loss – acquisitions

     —         1       125       125  

Station operating loss – dispositions

     312       205       697       398  

Station operating (income) loss – format change

     (53     88       279       398  
  

 

 

   

 

 

   

 

 

   

 

 

 

Same Station – Station Operating Income

   $ 12,873     $ 12,806     $ 50,989     $ 44,821  
  

 

 

   

 

 

   

 

 

   

 

 

 

Salem Media Group, Inc.

Supplemental Information

(in thousands)

 

     Three Months Ended     Twelve Months Ended  
     December 31,     December 31,  
     2018     2019     2018     2019  
     (Unaudited)  

Calculation of Station Operating Income, Digital Media Operating Income and Publishing Operating Loss

        

Net broadcast revenue

   $ 51,077     $ 50,485     $ 198,502     $ 193,339  

Less broadcast operating expenses

     (38,463     (37,973     (148,614     (149,439
  

 

 

   

 

 

   

 

 

   

 

 

 

Station Operating Income

   $ 12,614     $ 12,512     $ 49,888     $ 43,900  
  

 

 

   

 

 

   

 

 

   

 

 

 
        

Net digital media revenue

   $ 11,544     $ 9,816     $ 42,595     $ 39,165  

Less digital media operating expenses

     (8,504     (7,813     (33,296     (30,801
  

 

 

   

 

 

   

 

 

   

 

 

 

Digital Media Operating Income

   $ 3,040     $ 2,003     $ 9,299     $ 8,364  
  

 

 

   

 

 

   

 

 

   

 

 

 
        

Net publishing revenue

   $ 4,567     $ 4,332     $ 21,686     $ 21,394  

Less publishing operating expenses

     (5,077     (5,236     (22,396     (22,348
  

 

 

   

 

 

   

 

 

   

 

 

 

Publishing Operating Loss

   $ (510   $ (904   $ (710   $ (954
  

 

 

   

 

 

   

 

 

   

 

 

 


The company defines EBITDA (1) as net income before interest, taxes, depreciation, and amortization. The table below presents a reconciliation of EBITDA (1) to Net Income (Loss), the most directly comparable GAAP measure. EBITDA (1) is a non-GAAP financial performance measure that is not to be considered a substitute for or superior to the directly comparable measures reported in accordance with GAAP. The company defines Adjusted EBITDA (1) as EBITDA (1) before gains or losses on the disposition of assets, before changes in the estimated fair value of contingent earn-out consideration, before impairments, before net miscellaneous income and expenses, before (gain) loss on early retirement of long-term debt and before non-cash compensation expense. The table below presents a reconciliation of Adjusted EBITDA (1) to Net Income (Loss), the most directly comparable GAAP measure. Adjusted EBITDA (1) is a non-GAAP financial performance measure that is not to be considered a substitute for or superior to the directly comparable measures reported in accordance with GAAP.

 

     Three Months Ended
December 31,
    Twelve Months Ended
December 31,
 
     2018     2019     2018     2019  
     (Unaudited)  

Net loss

   $ (3,060   $ (4,512   $ (3,192   $ (27,839

Plus interest expense, net of capitalized interest

     4,549       4,290       18,328       17,496  

Plus provision for income taxes

     2,605       3,280       2,473       3,977  

Plus depreciation and amortization

     4,592       3,838       18,226       15,934  

Less interest income

     (1     (1     (5     (2
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

   $ 8,685     $ 6,895     $ 35,830     $ 9,566  
  

 

 

   

 

 

   

 

 

   

 

 

 

Less net (gain) loss on the disposition of assets

     253       1,114       4,653       22,326  

Less change in the estimated fair value of contingent earn-out consideration

     4       (1     76       (41

Plus impairment of indefinite-lived long-term assets other than goodwill

     2,870       1,010       2,870       2,925  

Plus impairment of goodwill

     —         2,427       —         2,427  

Plus (gain) on early retirement of long-term debt

     (414     (1,244     (648     (1,670

Plus net miscellaneous (income) and expenses

     (2     (144     10       (163

Plus non-cash stock-based compensation

     180       171       543       1,460  

Plus ASC 842 lease adoption

     —         —         —         171  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 11,576     $ 10,228     $ 43,334     $ 37,001  
  

 

 

   

 

 

   

 

 

   

 

 

 

The company defines Adjusted Free Cash Flow (1) as Adjusted EBITDA (1) less cash paid for capital expenditures, less cash paid for income taxes, and less cash paid for interest. The company considers Adjusted Free Cash Flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by its operations after cash paid for capital expenditures, cash paid for income taxes and cash paid for interest. A limitation of Adjusted Free Cash Flow as a measure of liquidity is that it does not represent the total increase or decrease in its cash balance for the period. The company uses Adjusted Free Cash Flow, a non-GAAP liquidity measure, both in presenting its results to stockholders and the investment community, and in its internal evaluation and management of the business. The company’s presentation of Adjusted Free Cash Flow is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. The company’s definition of Adjusted Free Cash Flow is not necessarily comparable to similarly titled measures reported by other companies.


The table below presents a reconciliation of Adjusted Free Cash Flow to net cash provided by operating activities, the most directly comparable GAAP measure. Adjusted Free Cash Flow is a non-GAAP liquidity measure that is not to be considered a substitute for or superior to the directly comparable measures reported in accordance with GAAP.

Salem Media Group, Inc.

Supplemental Information

(in thousands)

 

    Three Months Ended      Twelve Months Ended  
    December 31,      December 31,  
    2018      2019      2018      2019  
    (Unaudited)  

Net cash provided (used) by operating activities

  $ 2,763      $ 2,539      $ 22,961      $ 17,010  

Non-cash stock-based compensation

    (180      (171      (543      (1,460

Depreciation and amortization

    (4,592      (3,838      (18,226      (15,934

Amortization of deferred financing costs

    (259      (294      (1,114      (1,060

Non-cash lease expense

    —          (2,291      —          (9,026

Accretion of acquisition-related deferred payments and contingent earn-out consideration

    —          (3      (24      (5

Provision for bad debts

    (600      (659      (2,098      (2,066

Deferred income taxes

    (2,492      (3,019      (2,191      (3,506

Change in the estimated fair value of contingent earn-out consideration

    (4      1        (76      41  

Impairment of indefinite-lived long-term assets other than goodwill

    (2,870      (1,010      (2,870      (2,925

Impairment of goodwill

    —          (2,427      —          (2,427

Gain (loss) on the disposition of assets

    (253      (1,114      (4,653      (22,326

Gain (loss) on early retirement of debt

    414        1,244        648        1,670  

Changes in operating assets and liabilities:

          

Accounts receivable and unbilled revenue

    (1,015      (1,768      2,814        595  

Inventories

    (214      68        (53      440  

Prepaid expenses and other current assets

    (868      (279      (308      (617

Accounts payable and accrued expenses

    6,193        6,513        (1,031      2,009  

Contract liabilities

    985        (53      3,365        1,657  

Operating lease liabilities (deferred rent)

    (83      2,129        152        10,112  

Deferred rent income

    66        79        135        209  

Other liabilities

    (25      18        15        34  

Income taxes payable

    (26      (177      (95      (264
 

 

 

    

 

 

    

 

 

    

 

 

 

Net loss

  $ (3,060    $ (4,512    $ (3,192    $ (27,839
 

 

 

    

 

 

    

 

 

    

 

 

 

Plus interest expense, net of capitalized interest

    4,549        4,290        18,328        17,496  

Plus provision for income taxes

    2,605        3,280        2,473        3,977  

Plus depreciation and amortization

    4,592        3,838        18,226        15,934  

Less interest income

    (1      (1      (5      (2
 

 

 

    

 

 

    

 

 

    

 

 

 

EBITDA

  $ 8,685      $ 6,895      $ 35,830      $ 9,566  
 

 

 

    

 

 

    

 

 

    

 

 

 

Plus (gain) loss on the disposition of assets

    253        1,114        4,653        22,326  

Plus change in the estimated fair value of contingent earn-out consideration

    4        (1      76        (41

Plus impairment of indefinite-lived long-term assets other than goodwill

    2,870        1,010        2,870        2,925  

Plus impairment of goodwill

    —          2,427        —          2,427  

Plus (gain) loss on the early retirement of long-term debt

    (414      (1,244      (648      (1,670

Plus net miscellaneous (income) and expenses

    (2      (144      10        (163

Plus non-cash stock-based compensation

    180        171        543        1,460  

Plus ASC 842 lease adoption

    —          —          —          171  
 

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

  $ 11,576      $ 10,228      $ 43,334      $ 37,001  
 

 

 

    

 

 

    

 

 

    

 

 

 

Less net cash paid for capital expenditures (1)

    (2,754      (1,693      (9,267      (7,757

Plus cash (paid) received for taxes

    (87      (85      (186      (207

Less cash paid for interest, net of capitalized interest

    (8,437      (7,964      (17,231      (16,539
 

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted Free Cash Flow

  $ 298      $ 486      $ 16,650      $ 12,498  
 

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

Net cash paid for capital expenditures reflects actual cash payments net of cash reimbursements under tenant improvement allowances and net of property and equipment acquired in trade transactions.


Selected Debt Data

   Outstanding at
December 31, 2019
     Applicable
Interest Rate
 

Senior Secured Notes due 2024 (1)

   $ 219,836,000        6.75%  

Asset-based revolving credit facility (2)

     12,426,024        3.98%  

 

(1)

$219.8 million notes with semi-annual interest payments at an annual rate of 6.75%.

(2)

Outstanding borrowings under the ABL Facility, with interest payments due at LIBOR plus 1.5% to 2.0% per annum or prime rate plus 0.5% to 1.0% per annum.