[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

 

 

 

 

[   ]

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

 

 

 

 

 

 

 

 

NOTE 13. COMMITMENTS AND CONTINGENCIES 

 

 

The Company and its subsidiaries, incident to its business activities, are parties to a number of legal proceedings, lawsuits, arbitration and other claims. Such matters are subject to many uncertainties and outcomes that are not predictable with assurance. Also, the Company maintains insurance which may provide coverage for such matters. Consequently, the Company is unable to ascertain the ultimate aggregate amount of monetary liability or the financial impact with respect to these matters. The Company believes, at this time, that the final resolution of these matters, individually and in the aggregate, will not have a material adverse effect upon the Company’s annual consolidated financial position, results of operations or cash flows. 

 

 

NOTE 14. SEGMENT DATA

 

 

      SFAS No. 131, “Disclosures About Segments of An Enterprise and Related Information” requires companies to provide certain information about their operating segments. The Company has one reportable operating segment - radio broadcasting. The remaining non-reportable segments consist of our Internet businesses, SWN and Townhall.com, and our publishing businesses, Salem Publishing and Xulon Press, which do not meet the reportable segment quantitative thresholds and accordingly are aggregated in the following tables as non-broadcast. The radio broadcasting segment also operates various radio networks. 

 

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 NOTE 14. SEGMENT DATA (CONTINUED)

 

   Management uses operating income before depreciation, amortization and gain on disposal of assets as its measure of profitability for purposes of assessing performance and allocating resources. 

 

		Three Months Ended
		March 31,
		2006				2007
		(Dollars in thousands)
Net revenue
	Radio broadcasting	$	48,774			$	50,440
	Non-broadcast		3,252				5,654
Consolidated net revenue		$	52,026			$	56,094
Operating expenses before depreciation, amortization and gain on disposal of assets
	Radio broadcasting	$	31,694			$	32,483
	Non-broadcast		3,432				5,271
	Corporate		6,440				5,814
Consolidated operating expenses before depreciation, amortization and gain on disposal of assets		$	41,566			$	43,568
Operating income from continuing operations before depreciation, amortization and gain on disposal of assets
	Radio broadcasting	$	17,080			$	17,957
	Non-broadcast		(180)				383
	Corporate		(6,440)				(5,814)
Consolidated operating income from continuing operations before depreciation, amortization and gain on disposal of assets		$	10,460			$	12,526
Depreciation
	Radio broadcasting	$	2,374			$	2,665
	Non-broadcast		87				139
	Corporate		284				287
Consolidated depreciation expense		$	2,745			$	3,091
Amortization
	Radio broadcasting	$	228			$	67
	Non-broadcast		317				738
	Corporate		5				5
Consolidated amortization expense		$	550			$	810
Operating income from continuing operations before gain on disposal of assets
	Radio broadcasting	$	14,478			$	15,225
	Non-broadcast		(584)				(494)
	Corporate		(6,729)				(6,106)
Consolidated operating income from continuing operations before gain on disposal of assets		$	7,165			$	8,625
Total property, plant and equipment, net
	Radio broadcasting	$	115,604			$	115,616
	Non-broadcast		2,830				3,516
	Corporate		10,279				10,488
Consolidated property, plant and equipment, net		$	128,713			$	129,620

 

 

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NOTE 14. SEGMENT DATA (CONTINUED)

 

				Three months ended
				March 31,
				2006									2007
Goodwill
		Radio broadcasting	$	5,011							$		5,011
		Non-broadcast		15,587									15,587
		Corporate		8									8
Consolidated goodwill			$	20,606							$		20,606
Reconciliation of operating income from continuing operations before depreciation, amortization and gain on disposal of assets to income from continuing operations before income taxes
						Three Months Ended
						March 31,
						2006						2007
						(Dollars in thousands)
	Operating income from continuing operations before depreciation, amortization and gain (loss) on disposal of assets					$	10,460					$		12,526
	Depreciation expense						(2,745)							(3,091)
	Amortization expense						(550)							(810)
	Interest income						46							60
	Gain on disposal of assets						3,529							3,269
	Interest expense						(6,588)							(6,454)
	Other expense, net						(172)							(35)
	Income from continuing operations before income taxes					$	3,980					$		5,465

 

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NOTE 15. CONSOLIDATING FINANCIAL INFORMATION

 

      The following is the consolidating information of Salem Communications Corporation for purposes of presenting the financial position and operating results of HoldCo as the issuer of the 7¾% Notes and its guarantor subsidiaries on a consolidated basis and the financial position and operating results of the other guarantors, which are consolidated within the Company. Separate financial information of HoldCo on an unconsolidated basis is not presented because HoldCo has substantially no assets, operations or cash other than its investments in subsidiaries. Each guarantor has given its full and unconditional guarantee, on a joint and several basis, of indebtedness under the 7¾% Notes. HoldCo and AcquisitionCo are 100% owned by Salem and HoldCo owns 100% of all of its subsidiaries. All subsidiaries of HoldCo are guarantors. The net assets of HoldCo are subject to certain restrictions which, among other things, require HoldCo to maintain certain financial covenant ratios, and restrict HoldCo and its subsidiaries from transferring funds in the form of dividends, loans or advances without the consent of the holders of the 7¾% Notes. The restricted net assets of HoldCo as of March 31, 2007, amounted to $200.3 million. Included in intercompany receivables of HoldCo presented in the consolidating balance sheet below is $65.3 million of amounts due from Salem and AcquisitionCo as of March 31, 2007. 

 

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SALEM COMMUNICATIONS CORPORATION

CONDENSED CONSOLIDATING BALANCE SHEET

(UNAUDITED)

(Dollars in thousands) 

			As of March 31, 2007
									Issuer and
									Guarantor
			Guarantors						Subsidiaries
							Other						Salem
			Parent		AcquisitionCo		Media		HoldCo		Adjustments		Consolidated
Current assets:
	Cash and cash equivalents		$ —		$ 117		$ 161		$ 320		$ —		$ 598
	Accounts receivable		—		2,924		929		26,445		(84)		30,214
	Other receivables		—		14		3		490		—		507
	Prepaid expenses		—		108		280		2,018		—		2,406
	Income tax receivable		—		(9)		(8)		47		—		30
	Deferred income taxes		—		263		176		4,504		—		4,943
Total current assets			—		3,417		1,541		33,824		(84)		38,698
Investment in subsidiaries			211,063		—		—		—		(211,063)		—
Property, plant and equipment, net			—		6,911		374		122,335		—		129,620
Broadcast licenses			—		94,473		—		379,098		—		473,571
Goodwill			—		10,256		2,554		7,796		—		20,606
Other indefinite-lived intangible assets			—		—		2,892		—		—		2,892
Amortizable intangible assets, net			—		5,044		1,131		1,703		—		7,878
Bond issue costs			—		—		—		556		—		556
Bank loan fees			—		—		—		2,741		—		2,741
Fair value of interest rate swap			—		—		—		913		—		913
Intercompany receivables			104,920		9,918		—		176,980		(291,818)		—
Other assets			—		60		27		3,683		—		3,770
Total assets			$ 315,983		$ 130,079		$ 8,519		$ 729,629		$ (502,965)		$ 681,245

 

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NOTE 15. CONSOLIDATING FINANCIAL INFORMATION (CONTINUED) 

 

SALEM COMMUNICATIONS CORPORATION

CONDENSED CONSOLIDATING BALANCE SHEET

(UNAUDITED)

(Dollars in thousands)

			As of March 31, 2007
									Issuer and
									Guarantor
			Guarantors						Subsidiaries
							Other						Salem
			Parent		AcquisitionCo		Media		HoldCo		Adjustments		Consolidated
Current liabilities:
	Accounts payable		$ —		$37		$ 123		$ 2,344		$ —		$ 2,504
	Accrued expenses		—		484		330		4,966		(203)		5,577
	Accrued compensation and related expenses		—		656		161		7,118		—		7,935
	Accrued interest		—		—		—		5,866		—		5,866
	Deferred revenue		—		—		4,057		553		—		4,610
	Current maturities of long-term debt		—		—		—		2,431		—		2,431
Total current liabilities			—		1,177		4,671		23,278		(203)		28,923
Intercompany payables			74,946		101,222		13,734		101,797		(291,699)		—
Long-term debt			—		2,523		—		344,298		—		346,821
Deferred income taxes			1,919		14,756		(9,346)		50,785		—		58,114
Deferred revenue			—		515		(1,373)		7,981		—		7,123
Other liabilities			—		—		—		1,146		—		1,146
Total stockholders’ equity			239,118		9,886		833		200,344		(211,063)		239,118
Total liabilities and stockholders’ equity			$ 315,983		$ 130,079		$ 8,519		$729,629		$ (502,965)		$ 681,245

 

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NOTE 15. CONSOLIDATING FINANCIAL INFORMATION (CONTINUED) 

 

SALEM COMMUNICATIONS CORPORATION

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(UNAUDITED)

(Dollars in thousands) 

			Three Months Ended March 31, 2007
									Issuer and
									Guarantor
			Guarantors						Subsidiaries
							Other						Salem
			Parent		AcquisitionCo		Media		HoldCo		Adjustments		Consolidated
Net broadcasting revenue			$ —		$ 2,778		$ —		$ 48,290		$ (628)		$ 50,440
Non-broadcast revenue			—		3,076		1,604		1,134		(160)		5,654
Total revenue			—		5,854		1,604		49,424		(788)		56,094
Operating expenses:
	Broadcasting operating expenses		—		1,889		—		30,527		67		32,483
	Non-broadcast operating expenses		—		3,013		1,957		916		(615)		5,271
	Corporate expenses		—		336		—		5,718		(240)		5,814
	Amortization		—		425		101		284		—		810
	Depreciation		—		246		40		2,805		—		3,091
	Gain on disposal of assets		—		—		—		(3,269)		—		(3,269)
Total operating expenses			—		5,909		2,098		36,981		(788)		44,200
Operating income (loss)			—		(55)		(494)		12,443		—		11,894
Other income (expense):
	Equity in earnings of consolidated subsidiaries, net		5,111		—		—		—		(5,111)		—
	Interest income		1,916		—		—		3,070		(4,926)		60
	Interest expense		(2,143)		(2,337)		(326)		(6,574)		4,926		(6,454)
	Other income (expense)		—		—		—		(35)		—		(35)
Income (loss) before income taxes			4,884		(2,392)		(820)		8,904		(5,111)		5,465
Provision (benefit) for income taxes			1,919		(580)		(395)		1,556		—		2,500
Net income (loss)			$- 2,965		$ (1,812)		$ (425)		$ 7,348		$ (5,111)		$ 2,965
Other comprehensive income (loss)			(288)		—		—		(288)		288		(288)
Comprehensive income (loss)			$ 2,677		$ (1,812)		$ (425)		$ 7,060		$ (4,823)		$ 2,677

 

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