earningsrelease.htm
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): August 7, 2007
 
 
SALEM COMMUNICATIONS CORPORATION
 
 
(Exact Name of Registrant as Specified in its Charter)
 
 
 
Delaware
 
000-26497
 
77-0121400
(State or Other Jurisdiction
 
(Commission
 
(IRS Employer
of Incorporation)
 
File Number)
 
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))
 
 


 
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 INDEX
Exhibit 99.1




ITEM 2.02     RESULTS OF OPERATIONS AND FINANCIAL CONDITION
 
On August 7, 2007, Salem Communications Corporation issued a press release regarding its results of operations for the quarter ended June 30, 2007.
 
 
ITEM 7.01     REGULATION FD DISCLOSURE
 
 
On August 7, 2007, Salem Communications Corporation issued a press release regarding its results of operations for the quarter ended June 30, 2007.
 
 
ITEM 9.01     FINANCIAL STATEMENTS AND EXHIBITS
 
 
(c)     Exhibits. The following exhibit is furnished with this report on Form 8-K:
 
Exhibit No.
 
Description
99.1
 
Press release, dated August 7, 2007, of Salem Communications Corporation regarding its results of operations for the quarter ended June 30, 2007.



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 COMMUNICATIONS CORPORATION
 
 
 
Date: August 7, 2007
 
By: /s/ EVAN D. MASYR
 
 
Evan D. Masyr
 
 
Senior Vice President and
Chief Financial Officer



EXHIBIT INDEX


Exhibit No.
 
Description
99.1
 
Press release, dated August 7, 2007, of Salem Communications Corporation regarding its results of operations for the quarter ended June 30, 2007.



 EXHIBIT 99.1



 
SALEM COMMUNICATIONS ANNOUNCES A 3.4% INCREASE IN SECOND QUARTER 2007 TOTAL REVENUE

CAMARILLO, Calif. August, 7, 2007 – Salem Communications Corporation (Nasdaq: SALM), a leading U.S. radio broadcaster, Internet content provider, magazine and book publisher targeting audiences interested in content related to faith, family and conservative values, today announced results for the three month period ended June 30, 2007.

Commenting on the company’s results, Edward G. Atsinger III, Chief Executive Officer of Salem, said, “Our results for the quarter underscore the stability and resiliency of our business model.  While local spot advertising experienced some challenges this quarter and declined 5.1% on a same station basis, we achieved total revenue growth of 3.4% in the second quarter of 2007.  Our programming revenue increased 4.8% and our Internet and publishing businesses grew revenue 36.4% to $6.4 million. We continue to see solid growth in our non-broadcast media as we invest in new media businesses that take advantage of the content and promotional abilities of our radio stations.”


Second Quarter 2007 Results

For the quarter ended June 30, 2007 compared to the quarter ended June 30, 2006:
·  
Total revenue increased 3.4% to $60.0 million from $58.1 million;
·  
Operating income decreased 58.2% to $10.9 million from $26.1 million;
·  
Net income decreased 74.7% to $2.9 million, or $0.12 per diluted share, from $11.6 million, or $0.47 per diluted share;
·  
EBITDA decreased 50.3% to $14.8 million from $29.8 million;
·  
Adjusted EBITDA increased 4.5% to $16.3 million from $15.6 million;

Broadcasting
·  
Net broadcasting revenue increased 0.5% to $53.7 from $53.4 million;
·  
Station operating income (“SOI”) increased 0.7% to $20.0 million from $19.9 million;
·  
Same station net broadcasting revenue increased 1.5% to $52.9 million from $52.1 million;
·  
Same station SOI increased 0.8% to $20.2 million from $20.0 million;
·  
Same station SOI margin decreased to 38.1% from 38.4%;
 

 
Non-broadcast Media
·  
Non-broadcast revenue increased 36.4% to $6.4 million from $4.7 million; and
·  
Non-broadcast operating income decreased to $0.7 million from $0.9 million.

Included in the results for the quarter ended June 30, 2007 are:
·  
A $0.6 million gain ($0.4 million gain, net of tax, or $0.02 per diluted share) on the disposal of assets;
·  
A $0.9 million non-cash compensation charge ($0.5 million, net of tax, or $0.02 per share) related to the expensing of stock options consisting primarily of:
o  
$0.6 million non-cash compensation included in corporate expenses; and
o  
$0.2 million non-cash compensation included in broadcasting operating expenses.
 
Included in the results for the quarter ended June 30, 2006 are:
·  
A $15.5 million gain ($9.4 million gain, net of tax, or $0.38 per diluted share) on the disposal of assets; and
·  
A $1.3 million non-cash compensation charge ($0.8 million, net of tax, or $0.03 per share) related to the expensing of stock options consisting primarily of:
o  
$1.1 million non-cash compensation included in corporate expenses; and
o  
$0.2 million non-cash compensation included in broadcasting operating expenses.

On February 7, 2007, we sold WKNR (850 AM) in Cleveland, Ohio. We discontinued operating this radio station under a local marketing agreement effective December 1, 2006. For the quarter ended June 30, 2007, this station did not generate any revenue or profit. For the comparable 2006 period, the station generated net broadcasting revenue of $0.6 million and generated no profit.

Other comprehensive income of $1.1 million, net of tax, for the quarter ended June 30, 2007 and $0.9 million, net of tax, for the quarter ended June 30, 2006 is due to the change in fair market value of the company's interest rate swaps.

Per share numbers are calculated based on 23,855,967 diluted weighted average shares for the quarter ended June 30, 2007 and 24,356,275 diluted weighted average shares for the comparable 2006 period.


Year to Date 2007 Results

For the six month period ended June 30, 2007 compared to the six month period ended June 30, 2006:
·  
Total revenue increased 5.5% to $116.1 million from $110.1 million;
·  
Operating income decreased 38.0% to $22.8 million from $36.8 million;
·  
Net income decreased 58.8% to $5.9 million, or $0.25 net income per diluted share, from net income of $14.3 million or $0.58 net income per diluted share;
·  
EBITDA decreased 30.4% to $30.6 million from $43.9 million;
·  
Adjusted EBITDA increased 8.6% to $29.6 million from $27.2 million

Broadcasting
·  
Net broadcasting revenue increased 1.9% to $104.1 million from $102.2 million;
·  
SOI increased 2.7% to $38.0 million from $37.0 million;
·  
Same station net broadcasting revenue increased 2.5% to $102.3 million from $99.8 million;
·  
Same station SOI increased 1.8% to $38.1 million from $37.4 million;
·  
Same station SOI margin decreased to 37.2% from 37.5%;
 
Non-broadcast Media
·  
Non-broadcast revenue increased 51.7% to $12.0 million from $7.9 million; and
·  
Non-broadcast operating income increased 65.3% to $1.1 million from $0.7 million

Included in the results for the six month period ended June 30, 2007 are:
·  
A $2.6 million gain ($1.5 million gain, net of tax or $0.06 gain per diluted share) from the disposal of assets; and
·  
A $1.6 million non-cash compensation charge ($0.9 million, net of tax, or $0.4 per share) related to the expensing of stock options consisting of:
o  
$1.1 million non-cash compensation included in corporate expenses;
o  
$0.4 million non-cash compensation included in broadcasting operating expenses; and
o  
$0.1 million non-cash compensation included in non-broadcast operating expenses.
 
Included in the results for the six month period ended June 30, 2006 are:
·  
A $19.0 million gain ($11.5 million gain, net of tax, or $0.47 per diluted share) on the disposal of assets;
·  
A $0.3 million loss from discontinued operations, net of tax or $0.01 per diluted share; and
·  
A $2.6 million non-cash compensation charge ($1.6 million, net of tax, or $0.06 per share) related to the expensing of stock options consisting of:
o  
$2.2 million non-cash compensation included in corporate expenses; and
o  
$0.4 million non-cash compensation included in broadcasting operating expenses.

For the six months ended June 30, 2007, WKNR (850 AM) in Cleveland, Ohio, which was sold on February 7, 2007, did not generate any revenue or profit.  For the comparable 2006 period, the station generated net broadcasting revenue of $1.2 million and lost $0.1 million.

Other comprehensive income of $0.8 million, net of tax, for the six months ended June 30, 2007 and $1.9 million, net of tax, for the six months ended June 30, 2006 is due to the change in fair market value of the company's interest rate swaps.

Per share numbers are calculated based on 23,854,518 diluted weighted average shares for the six months ended June 30, 2007 and 24,525,718 diluted weighted average shares for the comparable 2006 period.

 
SOI Margin Composition Analysis

The following table, which is for analytical purposes only, has been created by assigning each station in the company’s radio station portfolio to one of four categories based upon the station’s first quarter SOI margin. The company believes this table is helpful in assessing the portfolio’s financial and operational development.

Three Months Ended June 30,
(Net Broadcasting Revenue and SOI in millions)

   
2006
   
2007
 
                     
Average
                     
Average
 
SOI Margin %
 
Stations
   
Revenue
   
SOI
   
SOI %
   
Stations
   
Revenue
   
SOI
   
SOI %
 
50% or greater
   
27
    $
23.6
    $
14.7
      62.1 %    
21
    $
21.7
    $
13.3
      61.5 %
30% to 49%
   
22
     
11.8
     
4.7
      40.1 %    
25
     
13.6
     
5.4
      39.6 %
0% to 29%
   
31
     
10.8
     
1.8
      16.9 %    
30
     
10.4
     
2.1
      19.5 %
Less than 0%
   
19
     
3.0
      (1.0 )     (33.8 %)    
22
     
3.7
      (0.9 )     (23.9 %)
Subtotal
   
99
     
49.2
     
20.2
      41.0 %    
98
     
49.4
     
19.9
      40.2 %
Other
   
-
     
4.2
      (0.3 )     (7.0 %)    
-
     
4.3
     
0.1
      3.5 %
Total
   
99
    $
53.4
    $
19.9
      37.2 %    
98
     
53.7
     
20.0
      37.3 %


Balance Sheet

As of June 30, 2007, the company had net debt of $347.9 million and was in compliance with the covenants of its credit facilities and bond indentures. The company’s bank leverage ratio was 5.6 versus a compliance covenant of 6.75 and its bond leverage ratio was 4.9 versus a compliance covenant of 7.0.

Stock Repurchases

During the quarter ended June 30 2007, the company did not repurchase shares of its Class A common stock and had 23,850,020 shares of its Class A and Class B common stock outstanding.

Acquisitions and Divestitures

During the quarter ended June 30, 2007, Salem completed the following transaction:
·  
WVRY (105.1 FM) in Waverly, Tennessee was sold on May 29, 2007 for $0.9 million.

The following transaction was pending as of June 30, 2007:
·  
KKSN (910 AM) in Portland, Oregon will be acquired for approximately $4.5 million (this station is operated by Salem under a local marketing agreement beginning February 1, 2007 with call letters KTRO).

Third Quarter 2007 Outlook

For the third quarter of 2007, Salem is projecting:
 
·  
Total revenue to be between $58.0 million and $58.5 million compared to third quarter 2006 total revenue of $57.9 million;
 
·  
Adjusted EBITDA to be between $13.8 million and $14.3 million compared to third quarter 2006 Adjusted EBITDA of $15.9 million; and
 
·  
Net income per diluted share to be between $0.08 and $0.09.
 
Third quarter 2007 outlook reflects the following:
 
·  
Same station net broadcasting revenue to be between $51.3 million to $51.8  million compared to $51.3 million in third quarter 2006;
 
·  
Non-broadcast revenue increasing to approximately $5.9 million from $5.4 million in third quarter 2006;
 

 
·  
Same station SOI declining to between $18.7 million and $19.2 million from $20.7 million in third quarter 2006;
 
·  
Non-cash compensation expense of $0.6 million compared to third quarter 2006 non-cash compensation expense of $0.9 million;
 
·  
Increased marketing and programming costs of $0.9 million primarily on News Talk stations in Chicago, Denver, Louisville and Phoenix, and on Contemporary Christian Music stations in Dallas, Atlanta and Sacramento;
 
·  
Continued growth from our core block programming business and our underdeveloped radio stations, particularly our News Talk stations;
 
·  
Ongoing softness in the radio advertising market; and
 
·  
The impact of recent acquisition and divestiture transactions.
 
Conference Call Information
Salem will host a teleconference to discuss its results today, on August 7, 2007 at 5:00 p.m. Eastern Time. To access the teleconference, please dial 973-935-8511 ten minutes prior to the start time or listen via the investor relations portion of the company’s website, located at www.salem.cc.  A replay of the teleconference will be available through August 24, 2007 and can be heard by dialing 973-341-3080, pass code 9051778 or on the investor relations portion of the company’s website, located at www.salem.cc.

Salem Communications Corporation (Nasdaq: SALM) is a leading U.S. radio broadcaster, Internet content provider, and magazine and book publisher targeting audiences interested in Christian and family-themed content and conservative values. In addition to its radio properties, Salem owns Salem Radio Network®, which syndicates talk, news and music programming to approximately 2,000 affiliates; Salem Radio Representatives™, a national radio advertising sales force; Salem Web Network™, an Internet provider of Christian content and online streaming; and Salem Publishing™, a publisher of Christian-themed magazines. Upon the close of all announced transactions, the company will own 97 radio stations, including 61 stations in 23 of the top 25 markets. Additional information about Salem may be accessed at the company’s website, www.salem.cc.

Media Contact:                                                      Investor / Analyst Contact:
Denise Davis                                                         Elizabeth Stewart
Director of Communications                                 Investor Relations
Salem Communications                                         Salem Communications
(805) 987-0400 ext. 1081                                      (805) 987-0400 ext. 1065
denised@salem.cc                                                 Elizabeth.Stewart@salem.cc

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.
 
Regulation G
Station operating income, non-broadcast operating income, EBITDA and Adjusted EBITDA are financial measures not prepared in accordance with generally accepted accounting principles (“GAAP”). Station operating income is defined as net broadcasting revenues minus broadcasting operating expenses. Non-broadcast operating income is defined as non-broadcast revenue minus non-broadcast operating expenses.  EBITDA is defined as net income before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA before loss on early redemption of long-term debt, discontinued operations (net of tax), litigation costs, gain or loss on the disposal of assets and non-cash compensation expense.  In addition, Salem has provided supplemental information as an attachment to this press release, reconciling these non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with GAAP. The company believes these non-GAAP financial measures, when considered in conjunction with the most directly comparable GAAP financial measures, provide useful measures of the company’s operating performance.

Station operating income, non-broadcast operating income, EBITDA and Adjusted EBITDA are generally recognized by the broadcasting industry as important measures of performance and are used by investors as well as analysts who report on the industry to provide meaningful comparisons between broadcasting. Station operating income, non-broadcast operating income, EBITDA and Adjusted EBITDA are not a measure 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, the company’s results of operations presented on a GAAP basis such as operating income and net income. In addition, Salem’s definitions of station operating income, non-broadcast operating income, EBITDA and Adjusted EBITDA are not necessarily comparable to similarly titled measures reported by other companies.
 

 

Salem Communications Corporation
Condensed Consolidated Statements of Operations
                   
(in thousands, except share, per share and margin data)
                       
                         
   
Three Months Ended
   
Six Months Ended
 
   
June 30,
   
June 30,
 
   
2006
   
2007
   
2006
   
2007
 
   
  (unaudited)       
                         
Net broadcasting revenue
  $
53,381
    $
53,650
    $
102,155
    $
104,090
 
Non-broadcast revenue
   
4,684
     
6,388
     
7,936
     
12,042
 
Total revenue
   
58,065
     
60,038
     
110,091
     
116,132
 
Operating expenses:
                               
  Broadcasting operating expenses
   
33,498
     
33,629
     
65,192
     
66,112
 
  Non-broadcast operating expenses
   
3,827
     
5,652
     
7,259
     
10,923
 
  Corporate expenses
   
6,256
     
5,496
     
12,696
     
11,310
 
  Depreciation and amortization
   
3,866
     
3,699
     
7,161
     
7,600
 
  (Gain) loss on disposal of assets
    (15,510 )    
634
      (19,039 )     (2,635 )
Total operating expenses
   
31,937
     
49,110
     
73,269
     
93,310
 
Operating income
   
26,128
     
10,928
     
36,822
     
22,822
 
Other income (expense):
                               
  Interest income
   
-
     
48
     
46
     
108
 
  Interest expense
    (6,779 )     (6,308 )     (13,367 )     (12,762 )
  Other income (expense), net
    (174 )    
182
      (346 )    
147
 
Income from continuing operations before income taxes
   
19,175
     
4,850
     
23,155
     
10,315
 
Provision for income taxes
   
7,584
     
1,926
     
9,178
     
4,426
 
Income from continuing operations
   
11,591
     
2,924
     
13,977
     
5,889
 
Discontinued operations, net of tax
    (25 )    
-
     
304
     
-
 
Net income
  $
11,566
    $
2,924
    $
14,281
    $
5,889
 
Other comprehensive income, net of tax
   
894
     
1,112
     
1,930
     
824
 
Comprehensive income
  $
12,460
    $
4,036
    $
16,211
    $
6,713
 
                                 
Basic income per share before discontinued operations
  $
0.48
    $
0.12
    $
0.57
    $
0.25
 
Discontinued operations, net of tax
  $
-
    $
-
    $
0.01
    $
-
 
Basic income per share after discontinued operations
  $
0.48
    $
0.12
    $
0.58
    $
0.25
 
                                 
Diluted income per share before discontinued operations
  $
0.48
    $
0.12
    $
0.57
    $
0.25
 
Discontinued operations, net of tax
  $
-
    $
-
    $
0.01
    $
-
 
Diluted income per share after discontinued operations
  $
0.47
    $
0.12
    $
0.58
    $
0.25
 
                                 
Basic weighted average shares outstanding
   
24,347,520
     
23,850,020
     
24,516,432
     
23,849,312
 
Diluted weighted average shares outstanding
   
24,356,275
     
23,855,967
     
24,525,718
     
23,854,518
 
                                 
                                 
Other Data:
                               
Station operating income
  $
19,883
    $
20,021
    $
36,963
    $
37,978
 
Station operating margin
    37.2 %     37.3 %     36.2 %     36.5 %


Salem Communications Corporation
           
Condensed Consolidated Balance Sheets
           
(in thousands)
           
             
             
   
December 31, 
 
June 30,
 
   
2006
   
2007
 
         
(unaudited)
 
Assets
           
Cash
  $
710
    $
752
 
Trade accounts receivable, net
   
31,984
     
31,335
 
Deferred income taxes
   
5,020
     
5,009
 
Other current assets
   
2,881
     
3,036
 
Property, plant and equipment, net
   
128,713
     
130,808
 
Intangible assets, net
   
508,410
     
502,916
 
Bond issue costs
   
593
     
518
 
Bank loan fees
   
2,996
     
2,488
 
Fair value of interest rate swaps
   
1,290
     
2,663
 
Other assets
   
3,667
     
4,449
 
Total assets
  $
686,264
    $
683,974
 
                 
Liabilities and Stockholders' Equity
               
Current liabilities
  $
27,295
    $
25,672
 
Long-term debt and capital lease obligations
   
358,978
     
344,951
 
Deferred income taxes
   
53,935
     
60,810
 
Other liabilities
   
8,340
     
8,507
 
Stockholders' equity
   
237,716
     
244,034
 
Total liabilities and stockholders' equity
  $
686,264
    $
683,974
 


 
Salem Communications Corporation
                       
Supplemental Information
                       
(in thousands)
                       
                         
   
Three Months Ended
   
Six Months Ended
 
   
June 30,
   
June 30,
 
   
2006
   
2007
   
2006
   
2007
 
   
(unaudited)          
Capital expenditures
                       
Acquisition related / income producing
  $
4,520
    $
2,047
    $
7,793
    $
3,771
 
Maintenance
   
1,708
     
2,342
     
3,465
     
5,017
 
                                 
Total capital expenditures
  $
6,228
    $
4,389
    $
11,258
    $
8,788
 
                                 
                                 
Tax information
                               
Cash tax expense
  $
76
    $
47
    $
76
    $
215
 
Deferred tax expense
   
7,508
     
1,879
     
9,102
     
4,211
 
                                 
Provision for income taxes
  $
7,584
    $
1,926
    $
9,178
    $
4,426
 
                                 
Tax benefit of non-book amortization
  $
3,685
    $
3,936
    $
7,262
    $
8,112
 
                                 
                                 
Reconciliation of Same Station Net Broadcasting Revenue to
                               
  Total Net Broadcasting Revenue
                               
Net broadcasting revenue - same station
  $
52,096
    $
52,901
    $
99,785
    $
102,300
 
Net broadcasting revenue - acquisitions
   
-
     
146
     
172
     
623
 
Net broadcasting revenue - dispositions
   
840
     
66
     
1,427
     
66
 
Net broadcasting revenue - format changes
   
445
     
537
     
771
     
1,101
 
                                 
Total net broadcasting revenue
  $
53,381
    $
53,650
    $
102,155
    $
104,090
 
                                 
                                 
Reconciliation of Same Station Broadcasting Operating Expenses to
                               
  Total Broadcasting Operating Expenses
                               
Broadcasting operating expenses - same station
  $
32,103
    $
32,745
    $
62,377
    $
64,216
 
Broadcasting operating expenses - acquisitions
   
-
     
228
     
176
     
657
 
Broadcasting operating expenses - dispositions
   
844
     
64
     
1,511
     
106
 
Broadcasting operating expenses - format changes
   
551
     
592
     
1,128
     
1,133
 
                                 
Total broadcasting operating expenses
  $
33,498
    $
33,629
    $
65,192
    $
66,112
 
                                 
                                 
Reconciliation of Same Station Station Operating Income to
                               
  Total Station Operating Income
                               
Station operating income - same station
  $
19,993
    $
20,156
    $
37,408
    $
38,084
 
Station operating income - acquisitions
   
-
      (82 )     (4 )     (34 )
Station operating income - dispositions
    (4 )    
2
      (84 )     (40 )
Station operating income - format changes
    (106 )     (55 )     (357 )     (32 )
                                 
Total station operating income
  $
19,883
    $
20,021
    $
36,963
    $
37,978
 

 

Salem Communications Corporation
                       
Supplemental Information
                       
(in thousands)
                       
                         
   
Three Months Ended
   
Six Months Ended
 
   
June 30,
   
June 30,
 
   
2006
   
2007
   
2006
   
2007
 
   
(unaudited)          
Reconciliation of Station Operating Income and Non-Broadcast
                       
  Operating Income to Operating Income
                       
Station operating income
  $
19,883
    $
20,021
    $
36,963
    $
37,978
 
Non-broadcast operating income
   
857
     
736
     
677
     
1,119
 
Less:
                               
  Corporate expenses
    (6,256 )     (5,496 )     (12,696 )     (11,310 )
  Depreciation and amortization
    (3,866 )     (3,699 )     (7,161 )     (7,600 )
  Gain (loss) on disposal of assets
   
15,510
      (634 )    
19,039
     
2,635
 
                                 
Operating income
  $
26,128
    $
10,928
    $
36,822
    $
22,822
 
                                 
                                 
Reconciliation of Adjusted EBITDA to EBITDA to Net Income
                               
Adjusted EBITDA
  $
15,622
    $
16,323
    $
27,218
    $
29,568
 
Less:
                               
  Stock-based compensation
    (1,312 )     (880 )     (2,620 )     (1,634 )
  Discontinued operations, net of tax
    (25 )    
-
     
304
     
-
 
  Gain (loss) on disposal of assets
   
15,510
      (634 )    
19,039
     
2,635
 
                                 
EBITDA
   
29,795
     
14,809
     
43,941
     
30,569
 
Plus:
                               
  Interest income
   
-
     
48
     
46
     
108
 
Less:
                               
  Depreciation and amortization
    (3,866 )     (3,699 )     (7,161 )     (7,600 )
  Interest expense
    (6,779 )     (6,308 )     (13,367 )     (12,762 )
  Provision for income taxes
    (7,584 )     (1,926 )     (9,178 )     (4,426 )
                                 
Net income
  $
11,566
    $
2,924
    $
14,281
    $
5,889
 
                                 
           
Applicable
                 
   
Outstanding
   
Interest
                 
   
at 6/30/2007
   
Rate
                 
Selected Debt and Swap Data
                               
  7 3/4% senior subordinated notes
  $
100,000
      7.75 %                
  Senior bank term loan B debt (1)
   
73,125
      7.13 %                
  Senior bank term loan C debt (swap matures 7/1/2012) (2)
   
30,000
      6.74 %                
  Senior bank term loan C debt (swap matures 7/1/2012) (2)
   
30,000
      6.45 %                
  Senior bank term loan C debt (swap matures 7/1/2012) (2)
   
30,000
      6.28 %                
  Senior bank term C debt (at variable rates) (1)
   
73,350
      7.13 %                
  Senior bank revolving debt
 (at variable rates) (1) 
 
8,500
      7.13 %                
  Swingline credit facility (3)
   
293
      8.25 %                
                                 
(1) Subject to rolling LIBOR plus a spread currently at 1.75% and incorporated into the rate set forth above.
                 
                                 
(2) Under its swap agreements, the Company pays a fixed rate plus a spread based on the Company's leverage, as defined in its
         
credit agreement. As of June 30, 2007, that spread was 1.75% and is incorporated into the applicable interest rates set
         
      forth above.
                               
                                 
(3)  Subject to prime interest rate.
                               

Salem Communications Corporation
                 
Supplemental Information
                 
(in millions)
                 
   
Projected
 
 
   
Three Months Ending
   
Three Months
 
   
September 30, 2007
   
Ended
 
   
Low
   
High
   
September 30, 2006
 
   
(unaudited)
             
Reconciliation of Station Operating Income to Operating Income
                 
Station operating income
  $
18.8
    $
19.3
       
Plus:
                     
  Non-broadcast revenue
   
5.9
     
5.9
       
Less:
                     
  Non-broadcast operating expenses
    (5.7 )     (5.7 )      
  Corporate expenses
    (5.2 )     (5.2 )      
  Stock-based compensation (corporate expense portion)
    (0.4 )     (0.4 )      
  Depreciation and amortization
    (3.8 )     (3.8 )      
                       
Operating income
  $
9.6
    $
10.1
       
                       
                       
Reconciliation of Same Station Net Broadcasting Revenue to
                     
  Total Net Broadcasting Revenue
                     
Net broadcasting revenue - same station
  $
51.3
    $
51.8
    $
51.3
 
Net broadcasting revenue - acquisitions / dispositions / format changes
   
0.8
     
0.8
     
1.2
 
                         
Total net broadcasting revenue
  $
52.1
    $
52.6
    $
52.5
 
                         
                         
Reconciliation of Same Station Station Operating Income to
                       
  Total Station Operating Income
                       
Station operating income - same station
  $
18.7
    $
19.2
    $
20.7
 
Station operating income - acquisitions / dispositions / format changes
   
0.1
     
0.1
     
-
 
                         
Total station operating income
  $
18.8
    $
19.3
    $
20.7