10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2016

OR

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

FOR THE TRANSITION PERIOD FROM __________________ TO __________________

COMMISSION FILE NUMBER 000-26497

SALEM MEDIA GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)	77-0121400 (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
4880 SANTA ROSA ROAD CAMARILLO, CALIFORNIA (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)	93012 (ZIP CODE)

REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE: (805) 987-0400

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x          No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)

Yes x          No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨	Smaller Reporting Company	¨
(Do not check if a Smaller Reporting Company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨          No x

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

Class A	Outstanding at August 1, 2016
Common Stock, $0.01 par value per share	20,255,855 shares

Class B	Outstanding at August 1, 2016
Common Stock, $0.01 par value per share	5,553,696 shares

SALEM MEDIA GROUP, INC.
INDEX

		PAGE NO.
COVER PAGE
INDEX		1
FORWARD LOOKING STATEMENTS		2
PART I - FINANCIAL INFORMATION
	Item 1.   Condensed Consolidated Financial Statements.	3
	Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations.	26
	Item 3.   Quantitative and Qualitative Disclosures About Market Risk.	54
	Item 4.   Controls and Procedures.	55
PART II - OTHER INFORMATION		55
	Item 1.    Legal Proceedings.	55
	Item 1A. Risk Factors.	55
	Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds.	55
	Item 3.   Defaults Upon Senior Securities.	55
	Item 4.   Mine Safety Disclosures.	55
	Item 5.   Other Information.	55
	Item 6.   Exhibits.	55
SIGNATURES		56
EXHIBIT INDEX		57

1

CERTAIN DEFINITIONS

Unless the context requires otherwise, all references in this report to “Salem,” or the “company,” including references to Salem by “we” “us” “our” and “its” refer to Salem Media Group, Inc. and our subsidiaries.

NOTE REGARDING FORWARD-LOOKING STATEMENTS

Salem Media Group, Inc. (“Salem” or the “company,” including references to Salem by “we,” “us” and “our”) makes “forward-looking statements” from time to time in both written reports (including this report) and oral statements, within the meaning of federal and state securities laws. Disclosures that use words such as the company “believes,” “anticipates,” “estimates,” “expects,” “intends,” “will,” “may,” “could,” “would,” “should” “seeks” “predicts,” or “plans” and similar expressions are intended to identify forward-looking statements, as defined under the Private Securities Litigation Reform Act of 1995.

You should not place undue reliance on these forward-looking statements, which reflect our expectations based upon data available to the company as of the date of this report. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from expectations. These risks, as well as other risks and uncertainties, are detailed in Salem’s reports on Forms 10-K, 10-Q and 8-K filed with or furnished to the Securities and Exchange Commission. Except as required by law, the company undertakes no obligation to update or revise any forward-looking statements made in this report. Any such forward-looking statements, whether made in this report or elsewhere, should be considered in context with the various disclosures made by Salem about its business. These projections and other forward-looking statements fall under the safe harbors of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

2

PART I – FINANCIAL INFORMATION

SALEM MEDIA GROUP, INC.

ITEM 1.      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

SALEM MEDIA GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

	December 31, 2015  (Note 1)			June 30, 2016 (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	98		$	44
Trade accounts receivable (net of allowances of $13,479 in 2015 and $11,287 in 2016)		36,029			33,091
Other receivables (net of allowances of $217 in 2015 and $110 in 2016)		1,981			830
Inventories (net of reserves of $1,855 in 2015 and $2,161 in 2016)		893			903
Prepaid expenses		6,285			6,315
Deferred income taxes		9,813			9,813
Assets held for sale		1,700			1,000
Total current assets		56,799			51,996
Notes receivable (net of allowances of $528 in 2015 and $607 in 2016)		173			154
Property and equipment (net of accumulated depreciation of $162,382 in 2015 and $160,604 in 2016)		105,483			104,559
Broadcast licenses		393,031			393,566
Goodwill		24,563			24,793
Other indefinite-lived intangible assets		833			833
Amortizable intangible assets (net of accumulated amortization of $39,454 in 2015 and $41,785 in 2016)		11,481			13,220
Deferred financing costs		151			116
Other assets		2,500			3,104
Total assets	$	595,014		$	592,341
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	5,177		$	3,612
Accrued expenses		11,301			10,687
Accrued compensation and related expenses		8,297			8,272
Accrued interest		16			47
Current portion of deferred revenue		13,128			10,667
Income taxes payable		73			128
Current portion of long-term debt and capital lease obligations		5,662			4,439
Total current liabilities		43,654			37,852
Long-term debt and capital lease obligations, less unamortized discount and debt issuance costs, net of current portion		269,093			266,378
Fair value of interest rate swap		798			2,979
Deferred income taxes		57,082			59,258
Deferred revenue, less current portion		13,930			14,903
Other long-term liabilities		636			35
Total liabilities		385,193			381,405
Commitments and contingencies (Note 16)
Stockholders’ Equity:
Class A common stock, $0.01 par value; authorized 80,000,000 shares; 22,246,134 and 22,373,577 issued and 19,928,484 and 20,055,927 outstanding at December 31, 2015 and June 30, 2016, respectively		223			224
Class B common stock, $0.01 par value; authorized 20,000,000 shares; 5,553,696 issued and outstanding at December 31, 2015 and June 30, 2016, respectively		56			56
Additional paid-in capital		241,780			242,506
Accumulated earnings		1,768			2,156
Treasury stock, at cost (2,317,650 shares at December 31, 2015 and June 30, 2016)		(34,006	)		(34,006	)
Total stockholders’ equity		209,821			210,936
Total liabilities and stockholders’ equity	$	595,014		$	592,341

See accompanying notes

3

SALEM MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2016			2015			2016
Net broadcast revenue	$	49,060		$	49,707		$	95,599		$	98,178
Net digital media revenue		11,499			11,311			22,290			22,595
Net publishing revenue		6,734			6,761			11,260			11,581
Total net revenue		67,293			67,779			129,149			132,354
Operating expenses:
Broadcast operating expenses, exclusive of depreciation and amortization shown below (including $365 and $402 for the three months ended June 30, 2015 and 2016, respectively, and $730 and $810 for the six months ended June 30, 2015 and 2016, respectively, paid to related parties)		35,187			35,709			69,104			71,697
Digital media operating expenses, exclusive of depreciation and amortization shown below		8,767			8,781			17,767			17,967
Publishing operating expenses, exclusive of depreciation and amortization shown below		6,469			6,983			10,966			11,931
Unallocated corporate expenses exclusive of depreciation and amortization shown below (including $36 and $9 for the three months ended June 30, 2015 and 2016, respectively, and $69 and $107 for the six months ended June 30, 2015 and 2016, respectively, paid to related parties)		3,518			3,568			7,509			7,781
Depreciation		3,060			2,982			6,232			5,974
Amortization		1,315			1,189			2,644			2,332
Change in the estimated fair value of contingent earn-out consideration		(307	)		(134	)		(189	)		(262	)
Impairment of long-lived assets		—			700			—			700
(Gain) loss on the sale or disposal of assets		30			(1,701	)		159			(1,551	)
Total operating expenses		58,039			58,077			114,192			116,569
Operating income		9,254			9,702			14,957			15,785
Other income (expense):
Interest income		2			2			3			3
Interest expense		(3,874	)		(3,730	)		(7,678	)		(7,526	)
Change in the fair value of interest rate swap		444			(423	)		(976	)		(2,181	)
Loss on early retirement of long-term debt		—			(5	)		(41	)		(14	)
Net miscellaneous income and expenses		—			—			7			—
Income from operations before income taxes		5,826			5,546			6,272			6,067
Provision for income taxes		2,303			2,190			2,454			2,358
Net income	$	3,523		$	3,356		$	3,818		$	3,709
Basic earnings per share data:
Basic earnings per share	$	0.14		$	0.13		$	0.15		$	0.14
Diluted earnings per share data:
Diluted earnings per share	$	0.14		$	0.13		$	0.15		$	0.14
Distributions per share	$	0.07		$	0.13		$	0.13		$	0.13
Basic weighted average shares outstanding		25,429,127			25,551,445			25,387,813			25,518,339
Diluted weighted average shares outstanding		25,829,493			26,052,649			25,875,306			25,927,804

See accompanying notes

4

SALEM MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

	Six Months Ended June 30,
	2015			2016
OPERATING ACTIVITIES
Net income	$	3,818		$	3,709
Adjustments to reconcile net income to net cash provided by operating activities:
Non-cash stock-based compensation		487			324
Tax benefit related to stock options exercised		112			67
Depreciation and amortization		8,876			8,306
Amortization of debt issuance costs		314			318
Accretion of discount on Term Loan B		93			103
Accretion of acquisition-related deferred payments and contingent consideration		160			38
Provision for bad debts		911			268
Deferred income taxes		2,197			2,176
Change in the fair value of interest rate swap		976			2,181
Change in the estimated fair value of contingent earn-out consideration		(189	)		(262	)
Loss on early retirement of long-term debt		41			14
Impairment of long-lived assets		—			700
(Gain) loss on the sale or disposal of assets		159			(1,551	)
Changes in operating assets and liabilities:
Accounts receivable		6,315			7,081
Inventories		(272	)		(10	)
Prepaid expenses and other current assets		(1,191	)		(30	)
Accounts payable and accrued expenses		(2,674	)		1,440
Deferred revenue		(4,359	)		(5,209	)
Other liabilities		327			—
Income taxes payable		(154	)		55
Net cash provided by operating activities		15,947			19,718
INVESTING ACTIVITIES
Cash paid for capital expenditures net of tenant improvement allowances and non-cash transactions from trade agreements		(4,207	)		(5,055	)
Capital expenditures reimbursable under tenant improvement allowances and non-cash transactions from trade agreements		(947	)		(448	)
Escrow deposits related to acquisitions		(225	)		(19	)
Purchases of broadcast assets and radio stations		(5,186	)		(718	)
Purchases of digital media businesses and assets		(1,322	)		(2,803	)
Purchases of publishing businesses assets		—			(3	)
Proceeds from sale of broadcast assets		—			2,471
Other		(390	)		(547	)
Net cash used in investing activities		(12,277	)		(7,122	)
FINANCING ACTIVITIES
Payments under Term Loan B		(2,000	)		(2,750	)
Proceeds from borrowings under Revolver		27,222			32,898
Payments under Revolver		(24,538	)		(34,433	)
Payments of acquisition-related contingent earn-out consideration		(1,177	)		(88	)
Payments of deferred installments on acquisitions		(935	)		(3,071	)
Proceeds from the exercise of stock options		298			336
Payments of capital lease obligations		(58	)		(53	)
Payment of cash distributions on common stock		(3,301	)		(3,321	)
Book overdraft		978			(2,168	)
Net cash used in financing activities		(3,511	)		(12,650	)
Net increase (decrease) in cash and cash equivalents		159			(54	)
Cash and cash equivalents at the beginning of year		33			98
Cash and cash equivalents at end of period	$	192		$	44

See accompanying notes

5

SALEM MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(Dollars in thousands)

(Unaudited)

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Cash paid for interest, net of capitalized interest	$	7,071	$	7,099
Cash paid for income taxes	$	316	$	60
Other supplemental disclosures of cash flow information:
Barter revenue	$	3,189	$	2,475
Barter expense	$	2,960	$	2,441
Non-cash investing and financing activities:
Capital expenditures reimbursable under tenant improvement allowances	$	947	$	448
Non-cash capital expenditures for property & equipment acquired under trade agreements	$	11	$	—
Estimated present value of contingent earn-out consideration	$	300	$	—
Current value of deferred cash payments (short-term)	$	—	$	1,300

See accompanying notes

6

SALEM MEDIA GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. BASIS OF PRESENTATION

The accompanying Condensed Consolidated Financial Statements of Salem Media Group, Inc. (“Salem,” “we,” “us,” “our” or the “company”) includes the company and all wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated.

Information with respect to the three and six months ended June 30, 2016 and 2015 is unaudited. The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the unaudited interim financial statements contain all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the financial position, results of operations and cash flows of the company. The unaudited interim financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Annual Report for Salem filed on Form 10-K for the year ended December 31, 2015. Our results are subject to seasonal fluctuations. Therefore, the results of operations for the interim periods presented are not necessarily indicative of the results of operations for the full year.

The balance sheet at December 31, 2015 included in this report has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by GAAP.

Description of Business

Salem is a domestic multi-media company with integrated operations including radio broadcasting, digital media, and publishing. Effective as of February 19, 2015, we changed our name from Salem Communications Corporation to Salem Media Group, Inc. to more accurately reflect our multi-media business. Salem was formed in 1986 as a California corporation and was reincorporated in Delaware in 1999. Our content is intended for audiences interested in Christian and family-themed programming and conservative news talk. We maintain a website at www.salemmedia.com.

We have three operating segments, (1) Broadcast, (2) Digital Media, and (3) Publishing, which are discussed in Note 17 – Segment Data. Our foundational business is the ownership and operation of radio stations in large metropolitan markets. We also own and operate Salem Radio Network® (“SRN”), SRN News Network (“SNN”), Salem Music Network (“SMN”), Today’s Christian Music (“TCM”), Singing News Network (formerly Solid Gospel Network) and Salem Media Representatives^TM (“SMR”). SRN, SNN, SMN and Singing News Network are networks that develop, produce and syndicate a broad range of programming specifically targeted to Christian and family-themed talk stations, music stations and general News Talk stations throughout the United States, including Salem-owned and operated stations. SMR, a national advertising sales firm with offices in ten U.S. cities, specializes in placing national advertising on religious and other commercial radio stations.

Web-based and digital content has been an area of growth for Salem and continues to be a focus of future development. Salem Web Network™ (“SWN”) and our other web-based businesses provide Christian and conservative-themed content, audio and video streaming, and other resources digitally through the web. SWN’s web portals include Christian content websites: OnePlace.com, Christianity.com, Crosswalk.com®, GodVine.com, Jesus.org and BibleStudyTools.com. Our conservative opinion websites, collectively known as Townhall Media, include Townhall.com™, HotAir.com, Twitchy.com, HumanEvents.com and RedState.com. We also issue digital newsletters, including Eagle Financial Publications, which provide general market analysis and non-individualized investment strategies from financial commentators on a subscription basis. Church product websites including WorshipHouseMedia.com, SermonSpice.com, and ChurchStaffing.com offer downloads and service platforms to pastors and other educators. Our web content is accessible through all of our radio station websites that feature content of interest to local listeners throughout the United States.

Digital media also includes our e-commerce sites, Eagle Wellness and Gene Smart Wellness. These e-commerce sites offer health advice and nutritional products.

Our publishing operating segment is comprised of three businesses. Regnery Publishing is a traditional book publisher that has published dozens of bestselling books by leading conservative authors and personalities, including Ann Coulter, Newt Gingrich, David Limbaugh, Ed Klein, Mark Steyn and Dinesh D'Souza. Xulon Press provides self-publishing services to authors. Salem Publishing™ produces and distributes five print magazines and one digital magazine.

Variable Interest Entities

We may enter into agreements or investments with other entities that could qualify as variable interest entities (“VIEs”) in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810 “Consolidation.” A VIE is consolidated in the financial statements if we are deemed to be the primary beneficiary. The primary beneficiary is the entity that holds the majority of the beneficial interests in the VIE, either explicitly or implicitly. A VIE is an entity for which the primary beneficiary’s interest in the entity can change with variations in factors other than the amount of investment in the entity. We perform our evaluation for VIE’s upon entry into the agreement or investment. We re-evaluate the VIE when or if events occur that could change the status of the VIE.

7

We may enter into lease arrangements with entities controlled by our principal stockholders or other related parties. We also may enter into Local Marketing Agreements (“LMAs”) or Time Brokerage Agreements (“TBAs”) contemporaneously with entering into an Asset Purchase Agreement (“APA”) to acquire or sell a radio station. Typically, both LMAs and TBAs are contractual agreements under which the station owner/licensee makes airtime available to a programmer/licensee in exchange for a fee and reimbursement of certain expenses. LMAs and TBAs are subject to compliance with the antitrust laws and the communications laws, including the requirement that the licensee must maintain independent control over the station and, in particular, its personnel, programming, and finances. The FCC has held that such agreements do not violate the communications laws as long as the licensee of the station receiving programming from another station maintains ultimate responsibility for, and control over, station operations and otherwise ensures compliance with the communications laws.

The requirements of FASB ASC Topic 810 may apply to entities under LMAs or TBAs, depending on the facts and circumstances related to each transaction. As of June 30, 2016, we did not have implicit or explicit arrangements that required consolidation under the guidance in FASB ASC Topic 810.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Significant areas for which management uses estimates include:

· asset impairments, including goodwill, broadcasting licenses, other indefinite-lived intangible assets, and assets held for sale;

· probabilities associated with the potential for contingent earn-out consideration;

· fair value measurements;

· contingency reserves;

· allowance for doubtful accounts;

· sales returns and allowances;

· barter transactions;

· inventory reserves;

· reserves for royalty advances;

· fair value of equity awards;

· self-insurance reserves;

· estimated lives for tangible and intangible assets;

· income tax valuation allowances; and

· uncertain tax positions.

These estimates require the use of judgment as future events and the effect of these events cannot be predicted with certainty. The estimates will change as new events occur, as more experience is acquired and as more information is obtained. We evaluate and update our assumptions and estimates on an ongoing basis and we may consult outside experts to assist as considered necessary.

Reclassifications

Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation. These reclassifications include the adoption of FASB Accounting Standards Update (“ASU”) 2015-03 and ASU 2015-15, which require that debt issuance costs, with the exception of costs associated with obtaining line-of-credit arrangements, be reported as a reduction of the debt liability rather than as a deferred cost asset. The adoption of ASU 2015-03 and ASU 2015-15 is reported as a change in accounting principle and discussed in detail in Note 9 – Notes Payable and Long-Term Debt.

Recent Accounting Pronouncements

Changes to accounting principles are established by the FASB in the form of ASUs to the FASB’s Codification. We consider the applicability and impact of all ASUs on our financial position, results of operations, cash flows, or presentation thereof. Described below are ASUs that are not yet effective, but may be applicable to our financial position, results of operations, cash flows, or presentation thereof. ASUs not listed below were assessed and determined to be not applicable to our financial position, results of operations, cash flows, or presentation thereof.  

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses,” which changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model that will replace today’s “incurred loss” model and generally will result in the earlier recognition of allowances for losses. For available-for-sale debt securities with unrealized losses, entities will measure credit losses in a manner similar to current practice, except that the losses will be recognized as an allowance. The guidance is effective in 2020 with early adoption permitted in 2019. We have not yet evaluated the impact of the adoption of this accounting standard on our financial position, results of operations, cash flows, or presentation thereof.

8

In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting.” This ASU simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted. We have not yet evaluated the impact of the adoption of this accounting standard on our financial position, results of operations, cash flows, or presentation thereof.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” which requires that lessees recognize a right-of-use asset and a lease liability for all leases with lease terms greater than twelve months in the balance sheet. ASU 2016-02 requires additional disclosures including the significant judgments made by management to provide insight into the revenue and expense to be recognized from existing contracts and the timing and uncertainty of cash flows arising from leases. The standard is effective for annual reporting periods beginning after December 15, 2018, with early adoption permitted. We have not yet determined the dollar impact of recording operating leases on our statement of financial position. The adoption of ASU 2016-02 will have a material impact on our financial position and the presentation thereof. Our existing credit facility stipulates that our covenants are based on GAAP as of the agreement date. Therefore, the material impact of recording right-to-use assets and lease liabilities on our statement of financial position is not expected to impact the compliance status for any covenant.

In January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities,” which provides updated guidance that enhances the reporting model for financial instruments, including amendments, to address aspects of recognition, measurement, presentation and disclosure. The standard is effective for annual reporting periods beginning after December 15, 2017. With the exception of the early application guidance, early adoption of the amendments is not permitted. We have not yet evaluated the impact of the adoption of this accounting standard on our financial position, results of operations, cash flows, or presentation thereof.

In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes,” to simplify the presentation of deferred taxes in the statement of financial position. The updated guidance requires that deferred tax assets and liabilities be classified as noncurrent in a classified balance sheet. The standard is effective for annual reporting periods beginning after December 15, 2016. Early adoption is permitted. We have not yet evaluated the impact of the adoption of this accounting standard on our financial position or presentation thereof.

In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory,” to reduce the complexity in accounting for inventory. This ASU requires entities to measure inventory at the lower of cost or net realizable value, replacing the market value approach that required floor and ceiling considerations. This guidance for public entities is effective for fiscal years beginning after December 15, 2016, with early adoption permitted. We are in the process of evaluating the adoption of this ASU, but do not expect this to have a material effect on our financial position, results of operations or cash flows.

In August 2014, the FASB issued ASU 2014-15, “Disclosure of Uncertainties About an Entities Ability to Continue as a Going Concern,” which requires management to assess a company’s ability to continue as a going concern and to provide related footnote disclosures. The new standard provides management with specific guidance on the assessments and related disclosures as well as provides a longer look-forward period as one year from the financial statement issuance date. The new standard is effective for the annual period ending after December 15, 2016, with early adoption permitted. The adoption of ASU 2014-15 is not expected to have a material impact on our financial position, results of operations, cash flows, or presentation thereof.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers,” which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. In August 2015, the FASB issued ASU 2015-14 “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date” that deferred the effective date of the new standard by one year. The new standard is now effective as of the first interim period within annual reporting periods beginning on or after December 15, 2017, and will replace most existing revenue recognition guidance in U.S. GAAP. Early adoption is permitted for annual reporting periods beginning after December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method and requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. The FASB and the International Accounting Standards Board (“IASB”) formed a Transition Resource Group (TRG”) to discuss implementation issues and inform the IASB and the FASB of interpretive issues arising during implementation of the revenue recognition standard. The TRG does not issue guidance. The FASB has issued additional ASUs to amend or clarify select items in the original guidance. In March 2016, the FASB issued ASU 2016-08 “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)” that clarifies principal versus agent reporting of revenue. In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing” that provides clarification and guidance on separately identifiable performance obligations and licenses of intellectual property. In May 2016, the FASB issued ASU 2016-12 “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients” that provides guidance on collectability, non-cash consideration and completed contracts as of the transition date and provides a practical expedient for contract modifications at transition and an accounting policy election related to the presentation of sales taxes and other similar taxes collected from customers. In May 2016, the FASB issued ASU 2016-11, “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting” that rescinds guidance issued by the Securities Exchange Commission. These rescissions include changes to topics pertaining to accounting for shipping and handling fees and costs and accounting for consideration given by a vendor to a customer that are codified in ASC 605. We continue to evaluate the effect that this revenue guidance will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method, nor have we determined the effect of ASU 2014-09 on our financial position, results of operations, cash flows, or presentation thereof.

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NOTE 2. IMPAIRMENT OF GOODWILL AND OTHER INDEFINITE-LIVED INTANGIBLE ASSETS

Approximately 71% of our total assets as of June 30, 2016 consist of indefinite-lived intangible assets, such as broadcast licenses, goodwill and mastheads, the value of which depends significantly upon the operating results of our businesses. In the case of our radio stations, we would not be able to operate the properties without the related FCC license for each property. Broadcast licenses are renewed with the FCC every eight years for a nominal cost that is expensed as incurred. We continually monitor our stations’ compliance with the various regulatory requirements. Historically, all of our broadcast licenses have been renewed at the end of their respective periods, and we expect that all broadcast licenses will continue to be renewed in the future. Accordingly, we consider our broadcast licenses to be indefinite-lived intangible assets in accordance with FASB ASC Topic 350, “Intangibles – Goodwill and Other.” Broadcast licenses account for approximately 94% of our indefinite-lived intangible assets. Goodwill and mastheads account for the remaining 6%. We do not amortize broadcast licenses, goodwill or other indefinite-lived intangible assets, but rather test for impairment at least annually or more frequently if events or circumstances indicate that an asset may be impaired.

We complete our annual impairment tests in the fourth quarter of each year. We believe that our estimate of the value of our broadcast licenses, mastheads, and goodwill is a critical accounting estimate as the value is significant in relation to our total assets, and our estimates incorporate variables and assumptions that are based on past experiences and judgment about future operating performance of our markets and business segments. If actual future results are less favorable than the assumptions and estimates we used, we are subject to future impairment charges, the amount of which may be material. The fair value measurements for our indefinite-lived intangible assets use significant unobservable inputs that reflect our own assumptions about the estimates that market participants would use in measuring fair value including assumptions about risk. The unobservable inputs are defined in FASB ASC Topic 820, “Fair Value Measurements and Disclosures,” as Level 3 inputs discussed in detail in Note 14. There were no indications of impairment present as of the period ending June 30, 2016.

NOTE 3. IMPAIRMENT OF LONG-LIVED ASSETS

We account for property and equipment in accordance with FASB ASC Topic 360-10, “Property, Plant and Equipment.” We periodically review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. Our review requires us to estimate the fair value of assets when events or circumstances indicate that they may be impaired. The fair value measurements for our long-lived assets use significant observable inputs that reflect our own assumptions about the estimates that market participants would use in measuring fair value including assumptions about risk. If actual future results are less favorable than the assumptions and estimates we used, we are subject to future impairment charges, the amount of which may be material.

Based on changes in management’s planned usage, we classified land in Covina, California as held for sale as of June 2012. At that time we evaluated the land for impairment in accordance with guidance for impairment of long-lived assets held for sale. We determined that the carrying value of the land exceeded the estimated fair value less costs to sell and recorded an impairment charge of $5.6 million associated with the land based on our estimated sale price at that time. In December 2012, after several purchase offers for the land were terminated, we obtained a third-party valuation for the land. Based on the fair value determined by the third-party, we recorded an additional impairment charge of $1.2 million associated with the land. While we continue to market the land for sale and have no intention to use the land in our operations, we have not received successful offers. Based on the amount of time that the land has been held for sale, we obtained a third-party valuation for the land as of June 2016. Based on this fair value appraisal, we recorded an additional $0.7 million impairment charge associated with the land during the three months ended June 30, 2016.

The table below presents the fair value measurements used to value this asset.

			Fair Value Measurements Using:
			(Dollars in thousands)
Description	As of June 30, 2016		Quoted prices in active markets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)		Total Gains (Losses)
Long-Lived Asset Held for Sale	$	1,000			$	1,000	$	(700	)

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NOTE 4. ACQUISITIONS AND RECENT TRANSACTIONS

During the six month period ending June 30, 2016, we completed or entered into the following transactions:

Debt

On June 30, 2016, we paid $1.2 million in principal on our term loan of $300.0 million (“Term Loan B”), of which $0.4 million was an early prepayment of principal, and paid interest due as of that date. We recorded a $1,300 pre-tax loss on the early retirement of long-term debt related to the unamortized discount and $3,400 in bank loan fees associated with this principal prepayment.

On March 31, 2016, we paid the quarterly installment due of $0.8 million in principal on our Term Loan B and paid interest due as of that date.

On March 17, 2016, we paid $0.8 million in principal on our Term Loan B and paid interest due as of that date. We recorded a $2,500 pre-tax loss on the early retirement of long-term debt related to the unamortized discount and $6,700 in bank loan fees associated with this principal repayment.

Equity

On June 2, 2016, we announced a quarterly equity distribution in the amount of $0.0650 per share on Class A and Class B common stock. The equity distribution of $1.6 million was paid on June 30, 2016 to all Class A and Class B common stockholders of record as of June 16, 2016.

On March 10, 2016, we announced a quarterly equity distribution in the amount of $0.0650 per share on Class A and Class B common stock. The equity distribution of $1.7 million was paid on April 5, 2016 to all Class A and Class B common stockholders of record as of March 22, 2016.

Related Party Transactions

On March 2, 2016, we entered into a related party lease with trusts created for the benefit of Edward G. Atsinger III, Chief Executive Officer, and Stuart W. Epperson, Chairman of the Board. The lease is for real property used to operate radio station KNUS-AM in Denver, Colorado. Our Nominating and Corporate Governance Committee reviewed the lease and lease terms and determined that the terms of the transaction were no less favorable to Salem than those that would be available in a comparable transaction in arm’s length dealings with an unrelated third party.  

Acquisitions – Broadcast

The FCC permits AM and FM radio stations to operate FM Translators, or low power secondary stations that retransmit the programming of a radio station to portions of the station’s service area that the primary signal does not reach because of distance or terrain barriers. The FCC began an AM Revitalization program, or “AMR,” that included several initiatives intended to benefit AM broadcasters. One of these benefits, intended to promote the use of FM Translators by AM broadcasters, allows an AM station to relocate one FM translator up to 250 miles from its authorized site and operate the translator on any non-reserved band FM channel in the AM station’s market, subject to coverage and interference rules.

On January 29, 2016, the FCC opened a one-time only filing window during which only Class C and Class D AM broadcast stations could participate. This window closed on July 28, 2016. A second window opened on July 29, 2016, allowing Class A and Class B AM broadcast stations to participate. The second window will close on October 31, 2016. During these filing windows, qualifying AM licensees may apply for one new FM translator station, in the non-reserved FM band to be used solely to re-broadcast the AM licensee’s AM signal to provide fill-in and/or nighttime service. The FM translator must rebroadcast the related AM station for at least four years, not counting any periods of silence.

We entered into several agreements to acquire FM Translators or FM Translators construction permits during this first window. Construction permits provide the station the authority to construct a new FM Translator or make changes in the existing facilities. We believe that securing these FM Translators allows us to increase our audience by providing enhanced coverage and reach of our existing AM broadcasts.

Our acquisitions include the following:

On June 20, 2016, we closed on the acquisition of an FM Translator used in our Columbus, Ohio market for $0.3 million in cash.

On June 10, 2016, we closed on the acquisition of an FM Translator in Amherst, New York for $60,000 in cash. The translator is used in our Pittsburgh, Pennsylvania market.

On June 8, 2016, we closed on the acquisition of a construction permit for an FM Translator construction permit in Charlotte, Michigan for $50,000 in cash. The translator will be used in our Detroit, Michigan market and is reflected in projects-in-process at June 30, 2016.

On June 3, 2016, we closed on the acquisition of a construction permit for an FM Translator in Atwood, Kentucky for $88,000 in cash. The translator will be used in our Columbus, Ohio market and is reflected in projects-in-process at June 30, 2016.

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On May 13, 2016, we closed on the acquisition of a construction permit for an FM Translator in Kerrville, Texas for $50,000 in

cash. The translator will be used in our Houston, Texas market and is reflected in projects-in-process at June 30, 2016.

On May 2, 2016, we closed on the acquisition of an FM Translator in Lincoln, Maine for $100,000 in cash. The translator is used in our Boston, Massachusetts market.

On April 29, 2016, we closed on the acquisition of a construction permit for an FM Translator in Emporia, Kansas for $25,000 in cash. The translator will be relocated to Omaha, Nebraska, for use by our KCRO-AM radio station and is reflected in projects-in-process at June 30, 2016.

Acquisitions – Digital Media

On April 1, 2016, we acquired the Retirement Watch newsletter and websites for $0.1 million in cash and the assumption of $0.6 million in deferred subscription liabilities. Retirement Watch offers research and strategies associated with retirement planning. We recorded goodwill of approximately $8,600 associated with the expected synergies to be realized upon combining the operations of Retirement Watch into our digital media platform and brand loyalty from its existing subscriber base that is not a separately identifiable intangible asset.

On March 8, 2016, we acquired King James Bible mobile applications for $4.0 million, of which $2.7 million was paid in cash upon close and $1.3 million is due in deferred installments within one year from the closing date. The deferred installments were amended on May 17, 2016 to include the $0.3 million that was due upon finalization of banking arrangements with the deferred installments. The amended deferred payments of $1.3 million now consist of $0.6 million due within 90 days, $0.3 million due within 180 days and two deferred payments of $0.2 million each due 270 and 360 days from the closing date, respectively. As of the date of this filing, we have paid the first installment of $0.6 million. We recorded goodwill of $0.2 million associated with the expected synergies to be realized from combining the operations of these applications into our existing digital media platform. The accompanying condensed consolidated statement of operations reflects the operating results of King James Bible mobile applications as of the closing date within our digital media operating segment.

Acquisitions – Publishing

Throughout the six month period ending June 30, 2016, we acquired domain names and other assets associated within our publishing operating segment for approximately $6,000 in cash.

A summary of our business acquisitions and asset purchases during the six month period ended June 30, 2016, none of which were individually or in the aggregate material to our Condensed Consolidated financial position as of the respective date of acquisition, is as follows:

Acquisition Date	Description	Total Cost
		(Dollars in thousands)
June 20, 2016	FM Translator, Columbus, Ohio (asset purchase)	$	345
June 10, 2016	FM Translator, Amherst, New York (asset purchase)		60
June 8, 2016	FM Translator construction permit, Charlotte, Michigan (asset purchase)		50
June 3, 2016	FM Translator construction permit, Atwood, Kentucky (asset purchase)		88
May 13, 2016	FM Translator construction permit, Kerrville, Texas (asset purchase)		50
May 2, 2016	FM Translator, Lincoln, Maine (asset purchase)		100
April 29, 2016	FM Translator construction permit, Emporia, Kansas (asset purchase)		25
April 1, 2016	Retirement Watch (business acquisition)		100
March 8, 2016	King James Bible mobile applications (business acquisition)		4,000
Various	Purchase of domain names and assets for use in publishing business (asset purchases)		6
		$	4,824

The operating results of our business acquisitions and asset purchases are included in our condensed consolidated results of operations from their respective closing date or the date that we began operating them under an LMA or TBA. Under the acquisition method of accounting as specified in FASB ASC Topic 805, “Business Combinations,” the total acquisition consideration is allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the date of the transaction.

Estimates of the fair value include discounted estimated cash flows to be generated by the assets and their expected useful lives based on historical experience, market trends and any synergies believed to be achieved from the acquisition. Acquisitions may include contingent consideration, the fair value of which is estimated as of the acquisition date as the present value of the expected contingent payments as determined using weighted probabilities of the payment amounts. We may retain a third-party appraiser to estimate the fair value of the acquired net assets as of the acquisition date. As part of the valuation and appraisal process, the third-party appraiser prepares a report assigning estimated fair values to the various asset categories in our financial statements. These fair value estimates are subjective in nature and require careful consideration and judgment. Management reviews the third party reports for reasonableness of the assigned values.

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We believe that these valuations and analysis provide appropriate estimates of the fair value for the net assets acquired as of the acquisition date. These initial valuations are subject to refinement during the measurement period, which may be up to one year from the acquisition date. During this measurement period we may retroactively record adjustments to the net assets acquired based on additional information obtained for items that existed as of the acquisition date. Upon the conclusion of the measurement period any adjustments are reflected in our consolidated statements of operations. We have not to date recorded adjustments to our estimated fair values used in our acquisition consideration during or after the measurement period.

Property and equipment are recorded at the estimated fair value and depreciated on a straight-line basis over their estimated useful lives. Finite-lived intangible assets are recorded at their estimated fair value and amortized on a straight-line basis over their estimated useful lives. Goodwill, which represents the organizational systems and procedures in place to ensure the effective operation of the entity, may also be recorded and tested for impairment. Costs associated with acquisitions, such as consulting and legal fees, are expensed as incurred in corporate operating expenses. We recognized total costs associated with acquisitions of $0.1 million during the six month period ending June 30, 2016 compared to $0.2 million during the same period of the prior year, which are included in unallocated corporate expenses in the accompanying condensed consolidated statements of operations.

The total acquisition consideration is equal to the sum of all cash payments, the fair value of any deferred payments and promissory notes, and the present value of any estimated contingent earn-out consideration. We estimate the fair value of contingent earn-out consideration using a probability-weighted discounted cash flow model. The fair value measurement is based on significant inputs that are not observable in the market and thus represent a Level 3 measurement as defined in Note 14 - Fair Value Measurements.

The following table summarizes the total acquisition consideration for the six month period ending June 30, 2016:

Description	Total Consideration
	(Dollars in thousands)
Cash payments made upon closing	$	3,524
Deferred payments		1,300
Total purchase price consideration	$	4,824

The total acquisition consideration was allocated to the net assets acquired as follows:

	Net Broadcast		Net Digital Media			Net Publishing		Net Total
	Assets Acquired		Assets Acquired			Assets Acquired		Assets Acquired
	(Dollars in thousands)
Assets
Property and equipment	$	13	$	371		$	—	$	384
Projects in process		213		—					213
Broadcast licenses		492		—			—		492
Goodwill		—		230			—		230
Domain and brand names		—		908			6		914
Customer lists and contracts		—		2,867			—		2,867
Non-compete agreements		—		289			—		289
Liabilities
Deferred revenue		—		(565	)		—		(565	)
	$	718	$	4,100		$	6	$	4,824

Divestitures

On June 10, 2016, we received $2.5 million in cash from the National Park Service in exchange for its claim under eminent domain for our tower site in Miami, Florida. We recognized a pre-tax gain of $1.9 million from this sale. We entered into a limited terms of use agreement with the National Park Service to broadcast from the tower site for the next twenty years for a nominal fee.

Pending Transaction

On June 24, 2016, we entered into an LMA to operate radio station KTRB-AM in San Francisco, California beginning on July 1, 2016. We paid a security deposit of $55,000 in cash on June 27, 2016.

On June 15, 2016, we entered into an APA to acquire an FM Translator in Sebring, Florida for $77,000 in cash. This translator will be used by our WKAT-AM radio station in Miami, Florida. The transaction is expected to close in the third quarter of 2016.

On June 2, 2016, we entered into an APA to acquire an FM Translator in Lake Placid, Florida for $35,000 in cash. This translator will be used by our WTLN-AM radio station in Orlando, Florida. The transaction is expected to close in the third quarter of 2016.

On May 25, 2016, we entered into an APA to acquire an FM Translator in Lake City, Florida for $65,000 in cash from a related party. This translator will be used by our WBZQ-AM radio station in Orlando, Florida. The transaction is expected to close in the third quarter of 2016.

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On May 18, 2016, we entered into an APA to acquire a construction permit for an FM Translator in Palm Coast, Florida for $65,000 in cash from a related party. This translator will be used by our WTWD-AM radio station in Tampa, Florida. The transaction is expected to close in the third quarter of 2016.

We are programming radio station KHTE-FM, Little Rock, Arkansas, under a 36 month TBA that began on April 1, 2015. The TBA is extendable for up to 48 months. We have the option to acquire the station for $1.2 million in cash during the TBA period. The accompanying condensed consolidated statements of operations included in this quarterly report on Form 10-Q reflect the operating results of this entity as of the TBA date.

NOTE 5. CONTINGENT EARN-OUT CONSIDERATION

Our acquisitions may include contingent earn-out consideration as part of the purchase price under which we will make future payments to the seller upon the achievement of certain benchmarks. The fair value of the contingent earn-out consideration is estimated as of the acquisition date at the present value of the expected contingent payments to be made using a probability-weighted discounted cash flow model for probabilities of possible future payments. The present value of the expected future payouts is accreted to interest expense over the earn-out period. The fair value estimates use significant unobservable inputs that reflect our own assumptions as to the ability of the acquired business to meet the targeted benchmarks and discount rates used in the calculations. The unobservable inputs are defined in FASB ASC Topic 820, “Fair Value Measurements and Disclosures,” as Level 3 inputs discussed in detail in Note 14.

We review the probabilities of possible future payments to the estimated fair value of any contingent earn-out consideration on a quarterly basis over the earn-out period. Actual results are compared to the estimates and probabilities of achievement used in our forecasts. Should actual results of the acquired business increase or decrease as compared to our estimates and assumptions, the estimated fair value of the contingent earn-out consideration liability will increase or decrease, up to the contracted limit, as applicable. Changes in the estimated fair value of the contingent earn-out consideration are reflected in our results of operations in the period in which they are identified. Changes in the estimated fair value of the contingent earn-out consideration may materially impact and cause volatility in our operating results.

Daily Bible Devotion

We acquired Daily Bible Devotion mobile applications on May 6, 2015. We paid $1.1 million in cash upon closing and may pay up to an additional $0.3 million in contingent earn-out consideration payable over the next two years based upon on the achievement of cumulative session benchmarks for each mobile application. Using a probability-weighted discounted cash flow model based on our own assumptions as to the ability of Bible Devotional Applications to achieve the session benchmarks at the time of closing, we estimated the fair value of the contingent earn-out consideration to be $165,000, which was recorded at the discounted present value of $142,000. The discount is being accreted to interest expense over the two-year earn-out period. We believe that our experience with digital mobile applications and websites provides a reasonable basis for our estimates.

We review the fair value of the contingent earn-out consideration quarterly over the two-year earn-out period to compare actual cumulative sessions achieved to the estimated cumulative sessions used in our forecasts. Any changes in the estimated fair value of the contingent earn-out consideration are reflected in our results of operations in the period they are identified, up to the maximum future value outstanding under the contract, or $0.3 million less amounts paid or expired to date. Changes in the fair value of the contingent earn-out consideration may materially impact and cause volatility in our future operating results. During the six month period ending June 30, 2016, we paid a total of $75,000 to the seller as contingent earn-out consideration for achieving benchmarks during the earn-out period to date, which was less than our original estimates. Due to declines in the cumulative sessions achieved during the six month period ending June 30, 2016, we recorded a net decrease of $93,000 in the estimated fair value of the contingent earn-out consideration that is reflected in our results of operations for this period.

Bryan Perry Newsletters

On February 6, 2015, we acquired the assets and assumed the deferred subscription liabilities for Bryan Perry Newsletters, paying no cash to the seller upon closing. Future contingent earn-out consideration due to the seller is based upon net subscriber revenues achieved over a two-year period from date of close, of which we will pay the seller 50%. There is no minimum or maximum contractual amount due. Using a probability-weighted discounted cash flow model based on our revenue projections at the time of closing, we estimated the fair value of the contingent earn-out consideration to be $171,000, which we recorded at the discounted present value of $158,000. The discount is being accreted to interest expense over the two-year earn-out period. We believe that our experience with digital publications and renewals provides a reasonable basis for our estimates.

We review the fair value of the contingent earn-out consideration quarterly over the two year earn-out period to compare actual subscription revenue earned to the estimated subscription revenue used in our forecasts. Any changes in the estimated fair value of the contingent earn-out consideration are reflected in our results of operations in the period they are identified. Changes in the fair value of the contingent earn-out consideration may materially impact and cause volatility in our future operating results. During the six month period ending June 30, 2016, we paid a total of $13,000 to the seller as contingent earn-out consideration for amounts earned, which was less than our original estimates. Due to declines in the number of subscriptions renewed during the six month period ending June 30, 2016, we recorded a net decrease of $13,000 in the estimated fair value of the contingent earn-out consideration that is reflected in our results of operations for this period.

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Eagle Publishing

On January 10, 2014, we acquired the entities of Eagle Publishing, including Regnery Publishing, HumanEvents.com, RedState.com, Eagle Financial Publications and Eagle Wellness. The base purchase price was $8.5 million, with $3.5 million paid in cash upon closing, and deferred payments of $2.5 million each due January 2015 and January 2016. As part of the purchase agreement, we may pay up to an additional $8.5 million of contingent earn-out consideration during the three year period from the closing date based upon the achievement of certain revenue benchmarks established for calendar years 2014, 2015 and 2016 for each of the Eagle entities. Using a probability-weighted discounted cash flow model based on the likelihood of achievement of the benchmarks at the time of closing, we estimated the fair value of the contingent earn-out consideration to be $2.4 million, which was recorded at the discounted present value of $2.0 million. We have paid $0.6 million to date and have one contingent earn-out period remaining through January 10, 2017. The discount is being accreted to interest expense over the three-year earn-out period. We believe that our experience with publications, renewal rates and websites provide a reasonable basis for our estimates.

We review the fair value of the contingent earn-out consideration quarterly over the three year earn-out period to compare actual operating revenues earned to the estimated revenue used in our forecasts. Any changes in the estimated fair value of the contingent earn-out consideration are reflected in our results of operations in the period they are identified, up to the maximum future value outstanding under the contract, or $8.5 million less amounts paid or expired to date. Changes in the fair value of the contingent earn-out consideration may materially impact and cause volatility in our future operating results. During the six month period ending June 30, 2016, no payments were made to the seller for amounts earned under the contingent earn-out consideration, which was less than our original estimates. Based on actual revenues for the period ending June 30, 2016 that were below those used in our prior estimates, we recorded a net decrease in the estimated fair value of the contingent earn-out consideration of $156,000 that is reflected in our results of operations for this period.

The following table reflects the changes in the present value of our acquisition-related estimated contingent earn-out consideration during the three and six month period ending June 30, 2016 and 2015:

	Three Months Ending June 30, 2016
	Short-Term			Long-Term
	Accrued Expenses			Other Liabilities			Total
	(Dollars in thousands)
Beginning Balance as of April 1, 2016	$	541		$	33		$	574
Acquisitions		—			—			—
Accretion of acquisition-related contingent earn-out consideration		5			1			6
Change in the estimated fair value of contingent earn-out consideration		(134	)		—			(134	)
Reclassification of payments due in next 12 months to short-term		34			(34	)		—
Payments		(5	)		—			(5	)
Ending Balance as of June 30, 2016	$	441		$	—		$	441

	Three Months Ending June 30, 2015
	Short-Term Accrued Expenses			Long-Term Other Liabilities			Total
	(Dollars in thousands)
Beginning Balance as of April 1, 2015	$	2,251		$	1,035		$	3,286
Acquisitions		88			54			142
Accretion of acquisition-related contingent earn-out consideration		21			11			32
Change in the estimated fair value of contingent earn-out consideration		(293	)		(14	)		(307	)
Reclassification of payments due in next 12 months to short-term		—			—			—
Payments		(877	)		—			(877	)
Ending Balance as of June 30, 2015	$	1,190		$	1,086		$	2,276

	Six Months Ending June 30, 2016
	Short-Term			Long-Term
	Accrued Expenses			Other Liabilities			Total
	(Dollars in thousands)
Beginning Balance as of January 1, 2016	$	173		$	602		$	775
Acquisitions		—			—			—
Accretion of acquisition-related contingent earn-out consideration		8			8			16
Change in the estimated fair value of contingent earn-out consideration		(208	)		(54	)		(262	)
Reclassification of payments due in next 12 months to short-term		556			(556	)		—
Payments		(88	)		—			(88	)
Ending Balance as of June 30, 2016	$	441		$	—		$	441

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	Six Months Ending June 30, 2015
	Short-Term Accrued Expenses			Long-Term Other Liabilities			Total
	(Dollars in thousands)
Beginning Balance as of January 1, 2015	$	1,575		$	1,710		$	3,285
Acquisitions		176			124			300
Accretion of acquisition-related contingent earn-out consideration		31			26			57
Change in the estimated fair value of contingent earn-out consideration		(213	)		24			(189	)
Reclassification of payments due in next 12 months to short-term		798			(798	)		—
Payments		(1,177	)		—			(1,177	)
Ending Balance as of June 30, 2015	$	1,190		$	1,086		$	2,276

NOTE 6. INVENTORIES

Inventories consist of finished goods including books from Regnery Publishing and wellness products. All inventories are valued at the lower of cost or market as determined on a First-In First-Out (“FIFO”) cost method and reported net of estimated reserves for obsolescence.

The following table provides details of inventory on hand by segment:

	December 31, 2015			June 30, 2016
	(Dollars in thousands)
Regnery Publishing book inventories	$	2,186		$	2,612
Reserve for obsolescence – Regnery Publishing		(1,798	)		(2,097	)
Inventory net, Regnery Publishing		388			515
Wellness products	$	562		$	452
Reserve for obsolescence – Wellness products		(57	)		(64	)
Inventory, net Wellness products		505			388
Consolidated inventories, net	$	893		$	903

NOTE 7. PROPERTY AND EQUIPMENT

The following is a summary of the categories of our property and equipment:

	December 31, 2015			June 30, 2016
	(Dollars in thousands)
Land	$	31,565		$	31,180
Buildings		25,448			25,362
Office furnishings and equipment		38,812			36,798
Office furnishings and equipment under capital lease obligations		228			228
Antennae, towers and transmitting equipment		83,501			83,120
Antennae, towers and transmitting equipment under capital lease obligations		795			795
Studio, production and mobile equipment		30,598			28,277
Computer software and website development costs		28,134			28,423
Record and tape libraries		55			28
Automobiles		1,298			1,326
Leasehold improvements		20,799			19,713
Construction-in-progress		6,632			9,913
	$	267,865		$	265,163
Less accumulated depreciation		(162,382	)		(160,604	)
	$	105,483		$	104,559

Depreciation expense was approximately $3.0 million for each of the three month periods ending June 30, 2015 and 2016, and $6.2 million and $6.0 million for the six month period ending June 30, 2015 and 2016, respectively. Included in these amounts is depreciation of $24,000 for each of the three month periods and $48,000 for each of the six month periods related to assets held under capital lease obligations. Accumulated depreciation associated with assets under capital lease obligations was $615,000 and $566,000 at June 30, 2016 and December 31, 2015, respectively.

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NOTE 8. AMORTIZABLE INTANGIBLE ASSETS

The following tables provide details, by major category, of the significant classes of amortizable intangible assets:

	June 30, 2016
			Accumulated
	Cost		Amortization			Net
	(Dollars in thousands)
Customer lists and contracts	$	22,403	$	(19,522	)	$	2,881
Domain and brand names		17,533		(11,993	)		5,540
Favorable and assigned leases		2,379		(1,932	)		447
Subscriber base and lists		7,786		(4,540	)		3,246
Author relationships		2,245		(1,595	)		650
Non-compete agreements		1,323		(867	)		456
Other amortizable intangible assets		1,336		(1,336	)		—
	$	55,005	$	(41,785	)	$	13,220

	December 31, 2015
			Accumulated
	Cost		Amortization			Net
	(Dollars in thousands)
Customer lists and contracts	$	20,009	$	(18,914	)	$	1,095
Domain and brand names		16,619		(11,200	)		5,419
Favorable and assigned leases		2,379		(1,887	)		492
Subscriber base and lists		7,313		(3,808	)		3,505
Author relationships		2,245		(1,523	)		722
Non-compete agreements		1,034		(786	)		248
Other amortizable intangible assets		1,336		(1,336	)		—
	$	50,935	$	(39,454	)	$	11,481

Based on the amortizable intangible assets as of June 30, 2016, we estimate amortization expense for the next five years to be as follows:

Year Ending December 31,	Amortization Expense
	(Dollars in thousands)
2016 (July – Dec)	$	2,314
2017		3,414
2018		3,171
2019		2,659
2020		1,359
Thereafter		303
Total	$	13,220

NOTE 9. NOTES PAYABLE AND LONG-TERM DEBT

Salem Media Group, Inc. has no independent assets or operations, the subsidiary guarantees are full and unconditional and joint and several, and any subsidiaries of Salem Media Group, Inc. other than the subsidiary guarantors are minor.

Term Loan B and Revolving Credit Facility

On March 14, 2013, we entered into a senior secured credit facility, consisting of the Term Loan B of $300.0 million and $25.0 million Revolver. The Term Loan B was issued at a discount for total net proceeds of $298.5 million. The discount is being amortized to non-cash interest expense over the life of the loan using the effective interest method. For each of the three and six months ended June 30, 2015 and 2016, approximately $47,000 and $93,000, respectively, and $52,000 and $104,000, respectively, of the discount has been recognized as interest expense.

The Term Loan B has a term of seven years, maturing in March 2020. During this term, the principal amount may be increased by up to an additional $60.0 million, subject to the terms and conditions of the credit agreement. We are required to make principal payments of $750,000 per quarter as of September 30, 2013. Prepayments may be made against the outstanding balance of our Term Loan B with each prepayment applied ratably to each of the next four principal installments due within 12 months of the prepayment date in the direct order of maturity and thereafter to the remaining principal balance in reverse order of maturity.

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We made the following payments or prepayments of our Term Loan B during the year ended December 31, 2015 and six month period ending June 30, 2016, including interest through the payment date as follows:

Date	Principal Paid		Unamortized Discount
	(Dollars in thousands)
June 30, 2016	$	441	$	1
June 30, 2016		750		—
March 31, 2016		750		—
March 17, 2016		809		2
January 30, 2015		2,000		15

In April 2015, the FASB issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs,” that requires the cost of issuing debt to be recorded as a reduction of the debt proceeds or a reduction of the debt liability, similar to the presentation of debt discounts. Prior to this ASU, debt issue costs were recorded as deferred costs, or long-term intangible assets. In August 2015, the FASB issued ASU 2015-15, “Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements - Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting” that amended ASU 2015-03 to reflect the SEC staff’s position that it would not object to an entity deferring and presenting debt issuance costs related to line-of-credit arrangements as an asset and subsequently amortizing deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are outstanding borrowings under that line-of-credit arrangement.

We adopted ASU 2015-03, as amended by ASU 2015-15, as of the effective date, or fiscal years beginning after December 31, 2015. We chose to continue presentation of debt issue costs associated with our Revolver as an asset in accordance with ASU 2015-15. We have retrospectively accounted for the implementation of ASU 2015-03 and ASU 2015-15 as a change in accounting principle. We have reclassified debt issue costs reported on our December 31, 2015 consolidated balance sheet as follows:

	December 31, 2015
	(Dollars in thousands)
	As Reported			As Updated ASU 2015-03
Balance Sheet Line Items:
Term Loan B	$	273,136		$	274,000
Less:  Unamortized discount based on imputed interest rate of 4.78%		—			(864	)
Less:  Unamortized debt issuance costs based on imputed interest rate of 4.78%		—			(2,361	)
Term Loan B net carrying value		273,136			270,775
Revolver		3,306			3,306
Capital leases and other loans		674			674
	$	277,116		$	274,755
Less current portion		(5,662	)		(5,662	)
Long-term debt and capital lease obligations less unamortized discount and debt issuance costs, net of current portion	$	271,454		$	269,093
Deferred financing costs	$	2,512		$	151

Debt issue costs are being amortized to non-cash interest expense over the life of the Term Loan B using the effective interest method. For each of the three months ended June 30, 2015 and 2016, approximately $139,000 and $141,000, respectively, of the debt issue costs associated with the Term Loan B were recognized as interest expense. For each of the six months ended June 30, 2015 and 2016, approximately $279,000 and $283,000, respectively, of the debt issue costs associated with the Term Loan B were recognized as interest expense.

We chose to continue the presentation of debt issue costs associated with our Revolver as an asset in accordance with ASU 2015-15. These costs are being amortized to non-cash interest expense over the five year life of the Revolver using the effective interest method based on an imputed interest rate of 4.58%. During each of the three and six month periods ending June 30, 2015 and 2016, we recorded amortization of deferred financing costs of approximately $17,000 each and $35,000 each.

The Revolver has a term of five years, maturing in March 2018. We report outstanding balances on our Revolver as short-term based on use of the Revolver to fund ordinary and customary operating cash needs with repayments made frequently. We believe that the borrowing capacity under our Term Loan B and Revolver allows us to meet our ongoing operating requirements, fund capital expenditures and satisfy our debt service requirements for at least the next twelve months.

Borrowings under the Term Loan B may be made at LIBOR (subject to a floor of 1.00%) plus a spread of 3.50% or Wells Fargo Bank, National Association’s (“Wells Fargo”) base rate plus a spread of 2.50%. Borrowings under the Revolver may be made at LIBOR or Wells Fargo’s base rate plus a spread determined by reference to our leverage ratio, as set forth in the pricing grid below.  If an event of default occurs under the credit agreement, the applicable interest rate may increase by 2.00% per annum. At June 30, 2016, the blended interest rate on amounts outstanding under the Term Loan B and Revolver was 4.51%.

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		Revolver Pricing
Pricing Level	Consolidated Leverage Ratio	Base Rate Loans			LIBOR Loans
1	Less than 3.00 to 1.00		1.250	%		2.250	%
2	Greater than or equal to 3.00 to 1.00 but less than 4.00 to 1.00		1.500	%		2.500	%
3	Greater than or equal to 4.00 to 1.00 but less than 5.00 to 1.00		1.750	%		2.750	%
4	Greater than or equal to 5.00 to 1.00 but less than 6.00 to 1.00		2.000	%		3.000	%
5	Greater than or equal to 6.00 to 1.00		2.500	%		3.500	%

The obligations under the credit agreement and the related loan documents are secured by liens on substantially all of the assets of Salem and its subsidiaries, other than certain exceptions set forth in the Security Agreement, dated as of March 14, 2013, among Salem, the subsidiary guarantors party thereto, and Wells Fargo, as Administrative Agent (the “Security Agreement”) and such other related loan documents.

With respect to financial covenants, the credit agreement includes a minimum interest coverage ratio, which started at 1.50 to 1.0 and stepped up to 2.50 to 1.0 and a maximum leverage ratio, which started at 6.75 to 1.0 and steps down to 5.75 to 1.0 by 2017.  The credit agreement also includes other negative covenants that are customary for credit facilities of this type, including covenants that, subject to exceptions described in the credit agreement, restrict the ability of Salem and its subsidiary guarantors: (i) to incur additional indebtedness; (ii) to make investments; (iii) to make distributions, loans or transfers of assets; (iv) to enter into, create, incur, assume or suffer to exist any liens; (v) to sell assets; (vi) to enter into transactions with affiliates; or (vii) to merge or consolidate with, or dispose of all or substantially all assets to, a third party.  As of June 30, 2016, our leverage ratio was 5.39 to 1 compared to our compliance covenant of 6.00 and our interest coverage ratio was 3.33 compared to our compliance ratio of 2.50. We were in compliance with our debt covenants under the credit facility at June 30, 2016.

Other Debt

We have several capital leases related to office equipment. The obligation recorded at December 31, 2015 and June 30, 2016 represents the present value of future commitments under the capital lease agreements.

Summary of long-term debt obligations

Long-term debt consisted of the following:

	December 31, 2015			June 30, 2016
	(Dollars in thousands)
Term Loan B principal amount	$	274,000		$	271,250
Less unamortized discount and debt issuance costs based on imputed interest rate of 4.78%		(3,225	)		(2,825	)
Term Loan B net carrying value		270,775			268,425
Revolver		3,306			1,770
Capital leases and other loans		674			622
		274,755			270,817
Less current portion		(5,662	)		(4,439	)
	$	269,093		$	266,378

In addition to the outstanding amounts listed above, we also have interest payments related to our long-term debt as follows as of June 30, 2016:

· Outstanding borrowings of $271.2 million under the Term Loan B with interest payments due at LIBOR (subject to a floor of 1.00%) plus 3.50% or prime rate plus 2.50%; and

· Outstanding borrowings of $1.8 million under the Revolver, with interest payments due at LIBOR plus 3.00% or at prime rate plus 2.00%.

· Commitment fees of 0.50% on any unused portion of the revolver.

Maturities of Long-Term Debt and Capital Lease Obligations

Principal repayment requirements under all long-term debt agreements and capital lease obligations outstanding at June 30, 2016 for each of the next five years and thereafter are as follows:

	Amount
For the Twelve Months Ended June 30,	(Dollars in thousands)
2017	$	4,439
2018		3,112
2019		3,102
2020		259,969
2021		113
Thereafter		82
	$	270,817

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NOTE 10. STOCK INCENTIVE PLAN

The company has one stock incentive plan. The Amended and Restated 1999 Stock Incentive Plan (the “Plan”) allows the company to grant stock options and restricted stock to employees, directors, officers and advisors of the company. A maximum of 5,000,000 shares are authorized under the Plan. Options generally vest over a four-year period and have a maximum term of five years from the vesting date. The Plan provides that vesting may be accelerated upon the occurrence of certain corporate transactions of the company. The Plan provides that the Board of Directors, or a committee appointed by the Board, has discretion, subject to certain limits, to modify the terms of outstanding options. We recognize non-cash stock-based compensation expense related to the estimated fair value of stock options granted in accordance with FASB ASC Topic 718 “Compensation—Stock Compensation.”

The following table reflects the components of stock-based compensation expense recognized in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2015 and 2016:

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2016			2015			2016
	(Dollars in thousands)
Stock option compensation expense included in corporate expenses	$	88		$	81		$	316		$	202
Restricted stock awards compensation expense included in corporate expenses		14			—			15			24
Stock option compensation expense included in broadcast operating expenses		25			20			77			48
Stock option compensation expense included in digital media operating expenses		19			14			55			39
Stock option compensation expense included in publishing operating expenses		10			10			24			11
Total stock-based compensation expense, pre-tax	$	156		$	125		$	487		$	324
Tax provision for stock-based compensation expense		(63	)		(50	)		(195	)		(130	)
Total stock-based compensation expense, net of tax	$	93		$	75		$	292		$	194

Stock option and restricted stock grants

The Plan allows the company to grant stock options and shares of restricted stock to employees, directors, officers and advisors of the company. For grants of stock options, the option exercise price is set at the closing price of the company’s common stock on the date of grant, and the related number of shares underlying the stock option is fixed at that point in time. The Plan also provides for grants of restricted stock. Eligible employees may receive stock options annually with the number of shares and type of instrument generally determined by the employee’s salary grade and performance level. In addition, certain management and professional level employees typically receive a stock option grant upon commencement of employment. The Plan does not allow key employees and directors (restricted persons) to exercise options during pre-defined blackout periods. Employees may participate in plans established pursuant to Rule 10b5-1 under the Exchange Act that allow them to exercise options according to pre-established criteria.

We use the Black-Scholes valuation model to estimate the grant date fair value of stock options and restricted stock. The expected volatility reflects the consideration of the historical volatility of our stock as determined by the closing price over a six to ten year term that is generally commensurate with the expected term of the award. Expected dividends reflect the quarterly distributions authorized and declared on our Class A and Class B common stock as of the grant date. The expected term of the awards are based on evaluations of historical and expected future employee exercise behavior. The risk-free interest rates for periods within the expected term of the award are based on the U.S. Treasury yield curve in effect during the period the options were granted. We use historical data to estimate future forfeiture rates to apply against the gross amount of compensation expense determined using the valuation model.

The weighted-average assumptions used to estimate the fair value of the stock options and restricted stock awards using the Black-Scholes valuation model were as follows for the three and six months ended June 30, 2015 and 2016:

	Three Months Ended June 30,					Six Months Ended June 30,
	2015		2016			2015			2016
Expected volatility		n/a		46.77	%		52.37	%		47.03	%
Expected dividends		n/a		4.08	%		4.28	%		5.36	%
Expected term (in years)		n/a		6.0			3.0			7.5
Risk-free interest rate		n/a		1.38	%		0.85	%		1.66	%

Stock option information with respect to the company’s stock-based equity plans during the six months ended June 30, 2016 is as follows:

Options	Shares			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
	(Dollars in thousands, except weighted average exercise price and weighted average grant date fair value)
Outstanding at January 1, 2016		1,581,123		$	4.87	$	3.39	4.3 years	$	1,738
Granted		549,500			4.85		1.33
Exercised		(117,443	)		2.85		1.85
Forfeited or expired		(70,377	)		8.01		5.91
Outstanding at June 30, 2016		1,942,803		$	4.88	$	2.81	4.9 years	$	4,585
Exercisable at June 30, 2016		1,062,178		$	5.03	$	3.56	3.4 years	$	2,342
Expected to Vest		836,164		$	4.69	$	1.89	6.6 years	$	2,130

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Non-employee directors of the company have been awarded restricted stock awards that vest one year from the date of issuance. These restricted stock awards contained transfer restrictions under which they could not be sold, pledged, transferred or assigned until the sooner of the fifth anniversary from the grant date or the day after the non-employee director is no longer a member of the company’s board. The restricted stock awards are independent of option grants and were granted at no cost to the recipient other than applicable taxes owed by the recipient. The awards were considered issued and outstanding from the date of grant.

The fair values of shares of restricted stock awards are determined based on the closing price of the company common stock on the grant dates. Information regarding the company’s restricted stock awards during the six months ended June 30, 2016 is as follows:

Restricted Stock Awards	Shares			Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
	(Dollars in thousands, except weighted average exercise price and weighted average grant date fair value)
Outstanding at January 1, 2016		8,000		$	5.83		0.2 years	$	40
Granted		—			—		—		—
Lapsed		(8,000	)		5.83		—		52
Forfeited		—			—		—		—
Unvested outstanding at June 30, 2016		—		$	—		—	$	—

The aggregate intrinsic value represents the difference between the company’s closing stock price on June 30, 2016 of $7.22 and the option exercise price of the shares for stock options that were in the money, multiplied by the number of shares underlying such options. The total fair value of options vested during the six months ended June 30, 2015 and 2016 was $1.3 million and $1.1 million, respectively.

As of June 30, 2016, there was $0.7 million of total unrecognized compensation cost related to non-vested stock option awards. This cost is expected to be recognized over a weighted-average period of 2.07 years.

NOTE 11. EQUITY TRANSACTIONS

We account for stock-based compensation expense in accordance with FASB ASC Topic 718, “Compensation-Stock Compensation.” As a result, $0.1 million and $0.3 million of non-cash stock-based compensation expense has been recorded to additional paid-in capital for the three and six months ended June 30, 2016, respectively, in comparison to $0.2 million and $0.5 million for the three and six months ended June 30, 2015.

While we intend to pay regular quarterly distributions, the actual declaration of such future distributions and the establishment of the per share amount, record dates, and payment dates are subject to final determination by our Board of Directors and dependent upon future earnings, cash flows, financial requirements, and other factors. The current policy of the Board of Directors is to review each of these factors on a quarterly basis to determine the appropriate amount, if any, to allocate toward a cash distribution with the general principle of using approximately 20% of free cash flow. Free cash flow is a non-GAAP measure defined in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations included with this quarterly report.

The following table shows distributions that have been declared and paid since January 1, 2015:

Announcement Date	Payment Date	Amount Per Share		Cash Distributed (in thousands)
June 2, 2016	June 30, 2016	$	0.0650	$	1,664
March 10, 2016	April 5, 2016	$	0.0650	$	1,657
December 1, 2015	December 29, 2015	$	0.0650	$	1,656
September 1, 2015	September 30, 2015	$	0.0650	$	1,655
June 2, 2015	June 30, 2015	$	0.0650	$	1,654
March 5, 2015	March 31, 2015	$	0.0650	$	1,647

Based on the number of shares of Class A and Class B currently outstanding, and the currently approved distribution amount, we expect to declare and pay total annual distributions of approximately $6.7 million during the year ending December 31, 2016.

NOTE 12. BASIC AND DILUTED NET EARNINGS PER SHARE

Basic net earnings per share has been computed using the weighted average number of Class A and Class B shares of common stock outstanding during the period. Diluted net earnings per share is computed using the weighted average number of shares of Class A and Class B common stock outstanding during the period plus the dilutive effects of stock options.

Options to purchase 1,634,034 and 1,942,803 shares of Class A common stock were outstanding at June 30, 2015 and 2016, respectively. Diluted weighted average shares outstanding exclude outstanding stock options whose exercise price is in excess of the average price of the company’s stock price. These options are excluded from the respective computations of diluted net income or loss per share because their effect would be anti-dilutive. As of June 30, 2015 and 2016 there were 400,366 and 501,204 dilutive shares, respectively.

NOTE 13. DERIVATIVE INSTRUMENTS

We are exposed to fluctuations in interest rates. We actively monitor these fluctuations and use derivative instruments from time to time to manage the related risk. In accordance with our risk management strategy, we may use derivative instruments only for the purpose of managing risk associated with an asset, liability, committed transaction, or probable forecasted transaction that is identified by management. Our use of derivative instruments may result in short-term gains or losses that may increase the volatility of our earnings.

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Under FASB ASC Topic 815, “Derivatives and Hedging,” the effective portion of the gain or loss on a derivative instrument designated and qualifying as a cash flow hedging instrument shall be reported as a component of other comprehensive income (outside earnings) and reclassified into earnings in the same period or periods during which the hedged forecasted transaction affects earnings. The remaining gain or loss on the derivative instrument, if any, shall be recognized currently in earnings.

On March 27, 2013, we entered into an interest rate swap agreement with Wells Fargo that began on March 28, 2014 with a notional principal amount of $150.0 million. The agreement was entered to offset risks associated with the variable interest rate on our Term Loan B. Payments on the swap are due on a quarterly basis with a LIBOR floor of 0.625%. The swap expires on March 28, 2019 at a fixed rate of 1.645%. The interest rate swap agreement was not designated as a cash flow hedge, and as a result, all changes in the fair value are recognized in the current period statement of operations rather than through other comprehensive income. We recorded a long-term liability of $3.0 million as of June 30, 2016, representing the fair value of the interest rate swap agreement. The swap was valued based on observable inputs for similar assets and liabilities and other observable inputs for interest rates and yield curves, which are classified within Level 2 inputs in the fair value hierarchy described below and in Note 14.

	December 31, 2015		June 30, 2016
	(Dollars in thousands)
Fair value of interest rate swap liability	$	798	$	2,979

NOTE 14. FAIR VALUE MEASUREMENTS

FASB ASC Topic 820 “Fair Value Measurements and Disclosures,” established a hierarchal disclosure framework associated with the level of pricing observability utilized in measuring fair value. This framework defines three levels of inputs to the fair value measurement process and requires that each fair value measurement be assigned to a level corresponding to the lowest level input that is significant to the fair value measurement in its entirety. The three broad levels of inputs defined by the FASB ASC Topic 820 hierarchy are as follows:

• Level 1 Inputs—quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date;

• Level 2 Inputs—inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability; and

• Level 3 Inputs—unobservable inputs for the asset or liability. These unobservable inputs reflect the entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances (which might include the reporting entity’s own data).

As of June 30, 2016, the carrying value of cash and cash equivalents, trade accounts receivables, accounts payable, accrued expenses and accrued interest approximates fair value due to the short-term nature of such instruments.  The carrying value of long-term liabilities and long-term debt and capital lease obligations approximates the fair value as the related interest rates approximate rates currently available to the company. The following table summarizes the fair value of our financial assets that are measured at fair value:

	June 30, 2016
	Total Fair Value and Carrying Value on		Fair Value Measurement Category
	Balance Sheet		Level 1		Level 2		Level 3
	(Dollars in thousands)
Assets:
Cash and cash equivalents	$	44	$	44	$	—	$	—
Trade accounts receivable, net		33,091		33,091		—		—
Liabilities:
Accounts payable		3,612		3,612		—		—
Accrued expenses including estimated fair value of contingent earn-out consideration		10,687		10,246		—		441
Accrued interest		47		47		—		—
Long term liabilities		35		35		—		—
Long-term debt and capital lease obligations less unamortized discount and debt issuance costs		270,817		—		270,817		—
Fair value of interest rate swap		2,979		—		2,979		—

NOTE 15. INCOME TAXES

We account for income taxes in accordance with FASB ASC Topic 740, “Income Taxes.”  We did not record adjustments to the balance of our unrecognized tax benefits as of June 30, 2016 and 2015.  At December 31, 2015, we had $0.1 million in liabilities for unrecognized tax benefits.  Included in this liability amount is approximately $20,000 of accrued interest, net of federal income tax benefits, and $6,000 for the related penalties recorded in income tax expense on our Condensed Consolidated Statements of Operations.  We expect to reduce the reserve balance to zero over the next twelve months due to statute expirations.  

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Valuation Allowance (Deferred Taxes)

For financial reporting purposes, we recorded a valuation allowance of $2.8 million as of June 30, 2016 and December 31, 2015 to offset a portion of the deferred tax assets related to the state net operating loss carryforwards.  We regularly review our financial forecasts in an effort to determine our ability to utilize the net operating loss carryforwards for tax purposes.  Accordingly, the valuation allowance is adjusted periodically based on our estimate of the benefit the company will receive from such carryforwards.

NOTE 16. COMMITMENTS AND CONTINGENCIES

The company enters into various agreements in the normal course of business that contain minimum guarantees. These minimum guarantees are often tied to future events, such as future revenue earned in excess of the contractual level. Accordingly, the fair value of these arrangements is zero.

The company also records contingent earn-out consideration representing the estimated fair value of future liabilities associated with acquisitions that may have additional payments due upon the achievement of certain performance targets. The fair value of the contingent earn-out consideration is estimated as of the acquisition date as the present value of the expected contingent payments as determined using weighted probabilities of the expected payment amounts. We review the probabilities of possible future payments to estimate the fair value of any contingent earn-out consideration on a quarterly basis over the earn-out period. Actual results are compared to the estimates and probabilities of achievement used in our forecasts.  Should actual results of the acquired business increase or decrease as compared to our estimates and assumptions, the estimated fair value of the contingent earn-out consideration liability will increase or decrease, up to the contracted limit, as applicable. Changes in the estimated fair value of the contingent earn-out consideration are reflected in our results of operations in the period in which they are identified. Changes in the estimated fair value of the contingent earn-out consideration may materially impact and cause volatility in our operating results.

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. We evaluate claims based on what we believe to be both probable and reasonably estimable. With the exception of the matter described below, we are unable to ascertain the ultimate aggregate amount of monetary liability or the financial impact with respect to these matters. The company maintains insurance that may provide coverage for such matters.

In April 2016, pursuant to a counterclaim to a collection suit initiated by Salem, an award was issued against Salem for breach of contract and attorney fees. While we have filed an appeal against the award as well as a malpractice lawsuit against the lawyer that represented Salem in the suit, we recorded a legal reserve of $0.5 million as of March 31, 2016.

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 condensed consolidated financial position, results of operations or cash flows.

NOTE 17. SEGMENT DATA

FASB ASC Topic 280, “Segment Reporting,” requires companies to provide certain information about their operating segments. We have three operating segments: (1) Broadcast, (2) Digital Media and (3) Publishing.

Our operating segments reflect how our chief operating decision makers, which we define as a collective group of senior executives, assesses the performance of each operating segment and determines the appropriate allocations of resources to each segment. Our operating segments now meet the quantitative thresholds to qualify as reportable segments. We continually review our operating segment classifications to align with operational changes in our business and may make future changes as necessary.

We measure and evaluate our operating segments based on operating income and operating expenses that do not include allocations of costs related to corporate functions, such as accounting and finance, human resources, legal, tax and treasury; nor do they include costs such as amortization, depreciation, taxes or interest expense. Segment performance, as defined by Salem, is not necessarily comparable to other similarly titled captions of other companies.

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The table below presents financial information for each operating segment as of June 30, 2016 and 2015 based on the composition of our operating segments:

	Broadcast			Digital Media			Publishing			Unallocated Corporate			Consolidated
	(Dollars in thousands)
Three Months Ended June 30, 2016
Net revenue	$	49,707		$	11,311		$	6,761		$	—		$	67,779
Operating expenses		35,709			8,781			6,983			3,568			55,041
Operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration, impairment of long-lived assets and (gain) loss on the sale or disposal of assets	$	13,998		$	2,530		$	(222	)	$	(3,568	)	$	12,738
Depreciation		1,802			798			165			217			2,982
Amortization		23			1,093			72			1			1,189
Change in the estimated fair value of  contingent earn-out consideration		—			(36	)		(98	)		—			(134	)
Impairment of long-lived assets		700			—			—			—			700
(Gain) loss on the sale or disposal of assets		(1,721	)		20			(3	)		3			(1,701	)
Operating income (loss)	$	13,194		$	655		$	(358	)	$	(3,789	)	$	9,702
Three Months Ended June 30, 2015
Net revenue	$	49,060		$	11,499		$	6,734		$	—		$	67,293
Operating expenses		35,187			8,767			6,469			3,518			53,941
Operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration and loss on disposal of assets	$	13,873		$	2,732		$	265		$	(3,518	)	$	13,352
Depreciation		1,889			782			167			222			3,060
Amortization		23			1,156			135			1			1,315
Change in the estimated fair value of  contingent earn-out consideration		—			(244	)		(63	)		—			(307	)
Loss on disposal of assets		30			—			—			—			30
Operating income (loss)	$	11,931		$	1,038		$	26		$	(3,741	)	$	9,254
Six Months Ended June 30, 2016
Net revenue	$	98,178		$	22,595		$	11,581		$	—		$	132,354
Operating expenses		71,697			17,967			11,931			7,781			109,376
Operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration, impairment of long-lived assets and (gain) loss on the sale or disposal of assets	$	26,481		$	4,628		$	(350	)	$	(7,781	)	$	22,978
Depreciation		3,650			1,580			315			429			5,974
Amortization		45			2,142			144			1			2,332
Change in the estimated fair value of  contingent earn-out consideration		—			(106	)		(156	)		—			(262	)
Impairment of long-lived assets		700			—			—			—			700
(Gain) loss on the sale or disposal of assets		(1,542	)		6			(21	)		6			(1,551	)
Operating income (loss)	$	23,628		$	1,006		$	(632	)	$	(8,217	)	$	15,785
Six Months Ended June 30, 2015
Net revenue	$	95,599		$	22,290		$	11,260		$	—		$	129,149
Operating expenses		69,104			17,767			10,966			7,509			105,346
Operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration and (gain) loss on the sale or disposal of assets	$	26,495		$	4,523		$	294		$	(7,509	)	$	23,803
Depreciation		3,840			1,558			335			499			6,232
Amortization		46			2,326			271			1			2,644
Change in the estimated fair value of  contingent earn-out consideration		—			(211	)		22			—			(189	)
(Gain) loss on the sale or disposal of assets		159			—			(1	)		1			159
Operating income (loss)	$	22,450		$	850		$	(333	)	$	(8,010	)	$	14,957

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	Broadcast		Digital Media		Publishing		Unallocated Corporate		Consolidated
	(Dollars in thousands)
As of June 30, 2016
Inventories, net	$	—	$	388	$	515	$	—	$	903
Property and equipment, net		88,155		7,131		1,625		7,648		104,559
Broadcast licenses		393,566		—		—		—		393,566
Goodwill		3,581		20,160		1,044		8		24,793
Other indefinite-lived intangible assets		—		—		833		—		833
Amortizable intangible assets, net		447		11,522		1,244		7		13,220
As of December 31, 2015
Inventories, net	$	—	$	505	$	388	$	—	$	893
Property and equipment, net		88,788		7,033		1,742		7,920		105,483
Broadcast licenses		393,031		—		—		—		393,031
Goodwill		3,581		19,930		1,044		8		24,563
Other indefinite-lived intangible assets		—		—		833		—		833
Amortizable intangible assets, net		492		9,599		1,385		5		11,481

NOTE 18. SUBSEQUENT EVENTS

On August 1, 2016, we acquired the assets of Hillcrest Media Group, Inc., a provider of self-publishing services for general market authors, for $3.5 million in cash.

On July 21, 2016, we entered into an APA to acquire KXFN-AM in St. Louis, Missouri for $0.2 million. We expect the transaction to close in the latter half of 2016.

We have continued to acquire FM Translators or FM Translator Construction permits during the first FCC AMR window, which expired July 28, 2016. These transactions include the following:

Date APA Entered	Permit or ID	Authorized Site - Current	Purchase Price		Escrow Deposits		Market
			(Dollars in thousands)
7/25/2016	K296AL	Crested Butte, Colorado	$	39	$	8	Colorado Springs, Colorado
7/25/2016	K283CA	Festus, Missouri *		40		8	St. Louis, Missouri
7/26/2016	W263BS	Rhinelander, Wisconsin		50		25	Minneapolis, Minnesota
7/26/2016	K294CP	Roseburg, Oregon *		45		9	Portland, Oregon
7/26/2016	W279BK	Carbondale, Pennsylvania		75		15	Pittsburgh, Pennsylvania
7/26/2016	W283BR	Dansville, New York		75		15	New York, New York
7/26/2016	K228FC	Kingsville, Texas *		50		10	Houston, Texas
7/26/2016	K245AR	Little Fish Lake Valley, California		44		20	Sacramento, California
7/26/2016	K276FZ	Eaglemount, Washington *		40		8	Portland, Oregon
7/27/2016	W256CO	Angola, Indiana *		50		15	Cleveland, Ohio
7/27/2016	W249CQ	Cofax, Indiana *		45		14	St. Louis, Missouri
7/27/2016	W263CS	Battle Creek, Michigan *		50		15	Cleveland, Ohio
7/27/2016	W227BT	Port St Lucie, Florida		100		10	Tampa, Florida
	W298AM	Aurora, Florida					TBD
7/28/2016	K239CD	Lahaina, Hawaii *		110		11	Honolulu, Hawaii
	K241BZ	Kihei, Hawaii					Honolulu, Hawaii

 * Indicates that the purchase is for a FM Translator Construction Permit.

Subsequent events reflect all applicable transactions through the date of the filing.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

GENERAL

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the Condensed Consolidated Financial Statements and related notes included elsewhere in this report. Our Condensed Consolidated Financial Statements are not directly comparable from period to period due to acquisitions and dispositions of selected assets of radio stations and acquisitions of various Internet and publishing businesses. See Note 4 of our Condensed Consolidated Financial Statements for additional information.

Salem Media Group, Inc. (“Salem”) is a domestic multi-media company with integrated operations including radio broadcasting, digital media, and publishing. Effective as of February 19, 2015, we changed our name from Salem Communications Corporation to Salem Media Group, Inc. to more accurately reflect our multi-media business. Salem was formed in 1986 as a California corporation and was reincorporated in Delaware in 1999. Our content is intended for audiences interested in Christian and family-themed programming and conservative news talk. We maintain a website at www.salemmedia.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to these reports are available free of charge through our website as soon as reasonably practicable after those reports are electronically filed with or furnished to the Securities and Exchange Commission (“SEC”). Any information found on our website is not a part of or incorporated by reference into, this or any other report of the company filed with, or furnished to, the SEC.

OVERVIEW

We have three operating segments, (1) Broadcast, (2) Digital Media, and (3) Publishing, which reflect how our chief operating decision makers, which we define as a collective group of senior executives, assesses the performance of each operating segment and determines the appropriate allocations of resources to each segment. Our operating segments now meet the quantitative thresholds to qualify as reportable segments. We continually review our operating segment classifications to align with operational changes in our business and may make changes in the future as necessary.

We measure and evaluate our operating segments based on operating income and operating expenses that exclude costs related to corporate functions, such as accounting and finance, human resources, legal, tax and treasury. We also exclude costs such as amortization, depreciation, taxes and interest expense when evaluating the performance of our operating segments.

Our principal sources of broadcast revenues include:

· the sale of block program time to national and local program producers;

· the sale of advertising time on our radio stations to national and local advertisers;

· the sale of advertising time on our national network;

· the syndication of programming on our national network;

· product sales and royalties for on-air host materials;

· the sale of banner advertisements on our station websites;

· the sale of digital streaming on our station websites;

· revenue derived from station events, including ticket sales and sponsorships; and

· listener purchase programs, often called non-traditional revenue, where revenue is generated from special discounts and incentives offered to our listeners from advertisers.

The rates we are able to charge for broadcast time and advertising time are dependent upon several factors, including:

· audience share;

· how well our stations perform for our clients;

· the size of the market;

· the number of impressions delivered;

· the number of page views achieved;

· the number of events held, the number of sponsorships sold, and the attendance for each event;

· the general economic conditions in each market; and

· supply and demand on both a local and national level.

Our principal sources of digital media revenue include:

· the sale of web-based or digital banner advertising;

· the sale of digital streaming advertising;

· the support and promotion to stream third-party content on our websites;

· the demand for digital delivery of our newsletters and host materials;

· the number of video and graphic downloads; and

· the demand for our wellness products.

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Our principal sources of publishing revenue include:

· the sale of books and e-books;

· subscription fees for our magazines;

· the sale of print magazine advertising; and

· publishing fees from authors.

Broadcasting

Our foundational business is the ownership and operation of radio stations in large metropolitan markets. We own and/or operate a national portfolio of 118 radio stations in 40 markets, consisting of 34 FM stations and 84 AM Stations. We also own and operate Salem Radio Network® (“SRN”), SRN News Network (“SNN”), Salem Music Network (“SMN”), Today’s Christian Music (“TCM”), Singing News Network (formerly Solid Gospel Network), and Salem Media Representatives^TM (“SMR”). SRN, SNN, SMN and Singing News Network are networks that develop, produce and syndicate a broad range of programming specifically targeted to Christian and family-themed talk stations, music stations and general News Talk stations throughout the United States, including Salem-owned and operated stations. SMR, a national advertising sales firm with offices in ten U.S. cities, specializes in placing national advertising on religious and other commercial radio stations.

Station Formats:

Christian Teaching and Talk. We currently program 42 of our radio stations in our foundational format, Christian Teaching and Talk, which is talk programming emphasizing Christian and family themes. Through this format, a listener can hear Bible teachings and sermons, as well as gain insight to questions related to daily life, such as raising children or religious legal rights in education and in the workplace. This format uses block programming time to offer a learning resource and a source of personal support for listeners. Listeners often contact our programmers to ask questions, obtain materials on a subject matter or receive study guides based on what they have learned on the radio.

Block Programming. We sell blocks of airtime on our Christian Teaching and Talk format stations to a variety of national and local religious and charitable organizations that we believe create compelling radio programs. Historically, more than 95% of these religious and charitable organizations renew their annual programming relationships with us. Based on our historical renewal rates, we believe that block programming provides a steady and consistent source of revenue and cash flows. Our top ten programmers have remained relatively constant and average nearly 25 years on-air. Over the last five years, block-programming revenue has comprised from 40% to 41% of our total net broadcast revenue.

Satellite Radio. We program SiriusXM Channel 131, the exclusive Christian Teaching and Talk channel on SiriusXM, reaching the entire nation 24 hours a day, seven days a week.

News Talk. We currently program 33 of our radio stations in a News Talk format. Our research shows that our News Talk format is highly complementary to our core Christian Teaching and Talk format. As programmed by Salem, both of these formats express conservative views and family values. Our News Talk format also provides for the opportunity to leverage syndicated talk programming produced by our network SRN.

Contemporary Christian Music. We currently program 13 radio stations in a Contemporary Christian Music (“CCM”) format, branded The FISH® in most markets. Through the CCM format, we are able to bring listeners the words of inspirational recording artists, set to upbeat contemporary music. Our music format, branded “Safe for the Whole Family®”, features sounds that listeners of all ages can enjoy and lyrics that can be appreciated. The CCM genre continues to be popular. We believe that this listener base is underserved in terms of radio coverage, particularly in larger markets, and that our stations fill an otherwise void area in listener choices.

Spanish Language Christian Teaching and Talk. We currently program eight of our radio stations in a Spanish Language Christian Teaching and Talk format. This format is similar to our core Christian Teaching and Talk format in that it broadcasts biblical and family-themed programming, but the programming is specifically tailored for Spanish-speaking audiences. Additionally, block programming on our Spanish Language Christian Teaching and Talk stations is primarily local rather than national.

Business. We currently program 14 of our radio stations in a business format. Our business format features financial commentators, business talk, and nationally recognized Bloomberg programming. The business format operates similar to our Christian Teaching and Talk format in that it features long-form block programming.

Each of our radio stations has a website specifically designed for that station. The station websites have digital banner advertisements, streaming, links to purchase goods featured by on-air advertisers, and links to our other digital media sites.

Revenues generated from our radio stations are reported as broadcast revenue in our condensed consolidated financial statements included in Part 1 of this quarterly report on Form 10-Q. Broadcast revenues are impacted by the rates radio stations can charge for programming and advertising time, the level of airtime sold to programmers and advertisers, the number of impressions delivered or downloads made, and the number of events held, including the size of the event and the number of attendees. Block programming rates are based upon our stations’ ability to attract audiences that will support the program producers through contributions and purchases of their products. Advertising rates are based upon the demand for advertising time, which in turn is based on our stations and networks’ ability to produce results for their advertisers. We market ourselves to advertisers based on the responsiveness of our audiences. We do not subscribe to traditional audience measuring services for most of our radio stations. In select markets, we subscribe to Nielsen Audio, which develops quarterly reports measuring a radio station’s audience share in the demographic groups targeted by advertisers. Each of our radio stations and our networks has a pre-determined level of time available for block programming and/or advertising, which may vary at different times of the day.

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Nielsen uses its own technology to collect data for its ratings service. The Portable People Meter ^TM (“PPM^”) is a small device that does not require active manipulation by the end user and is capable of automatically measuring radio, television, Internet, satellite radio and satellite television signals that are encoded for the service by the broadcaster. The PPM offers a number of advantages over the traditional diary ratings collection system including ease of use, more reliable ratings data and shorter time periods between when advertising runs and when audience listening or viewing habits can be reported. In markets where we subscribe to Nielsen under the PPM, our ratings tend to fluctuate even when there are no significant programming or competitive changes in the market. PPM data can fluctuate when changes are made to the “panel” (a group of individuals holding PPM devices). This makes all stations susceptible to inconsistencies in ratings that may or may not accurately reflect the actual number of listeners at any given time.

As is typical in the radio broadcasting industry, our second and fourth quarter advertising revenue generally exceeds our first and third quarter advertising revenue. This seasonal fluctuation in advertising revenue corresponds with quarterly fluctuations in the retail advertising industry. Additionally, we experience increased demand for advertising during election years by way of political advertisements. Quarterly revenue from the sale of block programming time does not tend to vary significantly because program rates are generally set annually and are recognized on a per program basis.

Our cash flows from broadcasting are affected by transitional periods experienced by radio stations when, based on the nature of the radio station, our plans for the market and other circumstances, we find it beneficial to change the station format. During this transitional period, when we develop a radio station’s listener and customer base, the station may generate negative or insignificant cash flow.

Trade or barter agreements are common in the broadcast industry. Our radio stations utilize barter agreements to exchange airtime for goods or services in lieu of cash. We enter barter agreements if the goods or services to be received can be used in our business or can be sold to our audience through Listener Purchase Programs. We limit the use of barter agreements with our general policy being not to preempt airtime sold for cash for airtime sold under a barter agreement. In each of the six months ending June 30, 2015 and 2016, we sold 97% and 98%, respectively, of our broadcast revenue for cash.

Broadcast operating expenses include: (i) employee salaries, commissions and related employee benefits and taxes, (ii) facility expenses such as rent and utilities, (iii) marketing and promotional expenses, (iv) production and programming expenses, and (v) music license fees. In addition to these expenses, our broadcast networks incur programming costs and lease expenses for satellite communication facilities.

Digital Media

Web-based and digital content has been a growth area for Salem and continues to be a focus of future development. Salem Web Network™ (“SWN”) and our other web-based businesses provide Christian and conservative-themed content, audio and video streaming, and other resources digitally through the web. SWN’s web portals include Christian content websites: OnePlace.com, Christianity.com, Crosswalk.com®, GodVine.com, Jesus.org and BibleStudyTools.com. Our conservative opinion websites, collectively known as Townhall Media, include Townhall.com™, HotAir.com, Twitchy.com, HumanEvents.com and RedState.com. We also issue digital newsletters, including Eagle Financial Publications, that provide market analysis and investment strategies for individual subscribers from financial commentators. Church product websites including WorshipHouseMedia.com, SermonSpice.com, and ChurchStaffing.com offer downloads and service platforms to pastors and other educators. Our web content is accessible through all of our radio station websites that feature content of interest to local listeners throughout the United States.

E-commerce includes Eagle Wellness and Gene Smart, which are online e-commerce sites offering complimentary health advice and sales of nutritional products.

The revenues generated from this segment are reported as digital media revenue in our condensed consolidated statements of operations included in Part 1 of this quarterly report on Form 10-Q. Digital media revenues are impacted by the rates our sites can charge for advertising time, the level of advertisements sold, the number of impressions delivered or the number of downloads made, and the number digital subscriptions sold. Like our broadcasting segment, our second and fourth quarter advertising revenue generally exceeds our first and third quarter advertising revenue. This seasonal fluctuation in advertising revenue corresponds with quarterly fluctuations in the retail advertising industry. We also experience fluctuations in quarter over quarter comparisons based on the date in which the Easter holiday is observed, as this holiday generates a higher volume of video downloads from our church product sites. Additionally, we experience increased demand for advertising time and placement during election years for political advertisements.

The primary operating expenses incurred in the ownership and operation of our Internet businesses include: (i) employee salaries, commissions and related employee benefits and taxes, (ii) facility expenses such as rent and utilities, (iii) marketing and promotional expenses, (iv) royalties, (v) streaming costs, and (vi) cost of goods sold associated with SCP and Wellness products.

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Publishing

Our publishing operations include book publishing through Regnery Publishing, print magazines and our self-publishing service. Regnery Publishing has published dozens of bestselling books by leading conservative authors and personalities, including Ann Coulter, Newt Gingrich, David Limbaugh, Ed Klein, Mark Steyn and Dinesh D'Souza. Books are sold in traditional printed form and as eBooks.

Salem Publishing™ produces and distributes numerous Christian and conservative opinion print magazines, including: Homecoming^® The Magazine, YouthWorker Journal^™, Singing News^®, FaithTalk Magazine^™, and Preaching Magazine^™. Xulon Press™ is a print-on-demand self-publishing service for Christian authors.

Revenues generated from these entities are reported as publishing revenue in our condensed consolidated financial statements included in Part 1 of this quarterly report on Form 10-Q. Publishing revenue is impacted by the retail price of books and e-books, the number of books sold, the number and retail price of e-books sold, the number and rate of print magazine subscriptions sold, the rate and number of pages of advertisements sold in each print magazine, and the number and rate at which self-published books are made. Regnery Publishing revenue has been impacted by elections as they generate higher levels of interest and demand for publications containing conservative and political based opinions.

Operating expenses incurred by Salem Publishing™ include: (i) employee salaries, commissions and related employee benefits and taxes, (ii) facility expenses such as rent and utilities, (iii) marketing and promotional expenses, (iv) printing and production costs, including paper costs, (v) cost of goods sold, and (vi) inventory reserves.

KNOWN TRENDS AND UNCERTAINTIES

We are particularly dependent on broadcast revenue from our Los Angeles and Dallas markets, which generated 11.9% and 11.6%, respectively, of our net broadcasting revenue for the six month period ending June 30, 2016. Revenues from print magazines, including advertising revenue and subscription revenues, are challenged both economically and by the increasing use of other mediums that deliver comparable information. Book sales are contingent upon overall economic conditions and our ability to attract and retain authors. Because digital media is a concentrated growth area for us, decreases in revenue streams from these areas could affect our operating results, financial condition and results of operations. To minimize the impact that any one of these areas could have, we continue to explore opportunities to cross-promote our brands and our content, and to strategically monitor costs.

Key Financial Performance Indicators – Same Station Definition

In the discussion of our results of operations below, we compare our broadcast operating results between periods on an as-reported basis, which includes the operating results of all radio stations and networks owned or operated at any time during either period and on a “same-station” basis. We define same station net broadcast revenue as net broadcast revenue from our radio stations and networks that we own or operate in the same format on the first and last day of each quarter, as well as the corresponding quarter of the prior year.  We define same station broadcast operating expenses as broadcast operating expenses from our radio stations and networks that we own or operate 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 include those stations we own or operate 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.  We use same station operating results, a non-GAAP financial measure, both in presenting our results to stockholders and the investment community, and in our internal evaluations and management of the business.  We believe that same station operating results provide a meaningful comparison of period over period performance of our core broadcast operations as this measure excludes the impact of new stations, the impact of stations we no longer own or operate, and the impact of stations operating under a new programming format.  Our presentation of same station operating results are not intended to be considered in isolation or as a substitute for the most directly comparable financial measures reported in accordance with GAAP.  Our definition of same station operating results is not necessarily comparable to similarly titled measures reported by other companies.

Refer to “NON-GAAP FINANCIAL MEASURES” presented after our results of operation for a reconciliation of these non-GAAP performance measures to the most comparable GAAP measure.

RESULTS OF OPERATIONS

Three months ended June 30, 2016 compared to the three months ended June 30, 2015

The following factors affected our results of operations and cash flows for the three months ended June 30, 2016 as compared to the same period of the prior year:

Financing

· On June 30, 2016, we paid $1.2 million in principal on our term loan of $300.0 million (“Term Loan B”), of which $0.4 million was an early repayment of principal, and paid interest due as of that date. We recorded a $1,300 pre-tax loss on the early retirement of long-term debt related to the unamortized discount and $3,400 in bank loan fees associated with this principal repayment.

Acquisitions

· On June 20, 2016, we closed on the acquisition of an FM Translator used in our Columbus, Ohio market for $0.3 million in cash.

· On June 10, 2016, we closed on the acquisition of an FM Translator in Amherst, New York for $60,000 in cash. The translator is used in our Pittsburgh, Pennsylvania market.

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· On June 8, 2016, we closed on the acquisition of an FM Translator construction permit in Charlotte, Michigan for $50,000 in cash. The translator will be used in our Detroit, Michigan market and is reflected in projects-in-process at June 30, 2016.

· On June 3, 2016, we closed on the acquisition of an FM Translator construction permit in Atwood, Kentucky for $88,000 in cash. The translator will be used in our Columbus, Ohio market and is reflected in projects-in-process at June 30, 2016.

· On May 13, 2016, we closed on the acquisition of an FM Translator construction permit in Kerrville, Texas for $50,000 in cash. The translator will be used in our Houston, Texas market and is reflected in projects-in-process at June 30, 2016.

· On May 2, 2016, we closed on the acquisition of an FM Translator in Lincoln, Maine for $100,000 in cash. The translator is used in our Boston, Massachusetts market.

· On April 29, 2016, we closed on the acquisition of a construction permit for an FM Translator in Emporia, Kansas for $25,000 in cash. The translator will be relocated to Omaha, Nebraska, for use by our KCRO-AM radio station and is reflected in projects-in-process at June 30, 2016.

· On April 1, 2016, we acquired the Retirement Watch newsletter and websites for $0.1 million in cash and the assumption of $0.6 million in deferred subscription liabilities. Retirement Watch offers research and strategies associated with retirement planning. We recorded goodwill of approximately $8,600 associated with the expected synergies to be realized upon combining the operations of Retirement Watch into our digital media platform and brand loyalty from its existing subscriber base that is not a separately identifiable intangible asset.

Divestitures

· On June 10, 2016, we received $2.5 million in cash from the National Park Service in exchange for its claim under eminent domain for our tower site in Miami, Florida. We recognized a pre-tax gain of $1.9 million from this sale. We entered into a limited terms of use agreement with the National Park Service to broadcast from the tower site for the next twenty years for a nominal fee.

Net Broadcast Revenue

	Three Months Ended June 30,
	2015		2016		Change $		Change %			2015			2016
	(Dollars in thousands)									% of Total Net Revenue
Net Broadcast Revenue	$	49,060	$	49,707	$	647		1.3	%		72.9	%		73.3	%
Same Station Net Broadcast Revenue	$	48,920	$	48,970	$	50		0.1	%

The following table shows the dollar amount and percentage of net broadcast revenue for each broadcast revenue source.

	Three Months Ended June 30,
	2015				2016
	(Dollars in thousands)
Block program time:
National	$	11,396	23.2	%	$	12,374	24.9	%
Local		8,644	17.6	%		8,896	17.9	%
		20,040	40.8	%		21,270	42.8	%
Broadcast Advertising:
National		3,719	7.6	%		2,974	6.0	%
Local		16,403	33.4	%		16,371	32.9	%
		20,122	41.0	%		19,345	38.9	%
Station Digital		1,382	2.8	%		1,431	2.9	%
Infomercials		681	1.4	%		593	1.2	%
Network		3,465	7.1	%		3,945	7.9	%
Other		3,370	6.9	%		3,123	6.3	%
Net broadcast revenue	$	49,060	100.0	%	$	49,707	100.0	%

Block programming revenue increased $1.2 million including $0.5 million generated from stations that were acquired during the year ended December 31, 2015. In existing markets, we saw increases in the number of national and local programmers featured on our stations. The increase in the number of programmers creates a higher demand for time slots, which can also result in the realization of higher rates. Revenue from National Ministry programmers increased $0.4 million while revenue from local programmers increased $0.1 million on our Christian Teaching & Talk format stations. Block programming revenue also increased $0.2 million on our News Talk stations.

Advertising revenue, net of agency commissions, decreased by $0.8 million. Excluding political revenue, which increased $0.3 million, advertising revenue declined by $1.1 million. The decline includes a $1.4 million reduction in national advertising sales on our CCM format stations due to higher competition for advertising sales from agencies that was offset by a $0.3 million increase in local advertising sales on our News Talk format stations. Local advertising sales reflect a higher demand for air-time, particularly on our News Talk format stations that benefit from political advertising and news content from presidential debates. The higher demand for air time results in higher spot rates for premium air time.

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Digital revenues from our radio station websites were consistent in both the number of advertisers and the rates charged as compared to the same period of the prior year.

Declines in infomercial revenues of $0.1 million reflect our efforts to feature programming that is tailored to our listeners and consistent with our company values. We continue to seek alternatives to infomercial programs that we believe are not of interest to our listeners.

The growth in network revenues of $0.5 million includes an increase of $0.6 million in network affiliation fees from a higher level of stations syndicating our programs offset by a $0.1 million decline in political advertisements.

Other revenues declined by $0.2 million due to a lower demand from listeners to participate in sales incentives and discounts offered under listener purchase programs. This lower demand resulted in a $0.2 million decline in listener purchase program revenue and a $0.1 million decrease in event revenues that were partially offset by a $33,000 increase real estate and tower rents.

On a same station basis, net broadcast revenue increased $0.1 million, which reflects these items net of the impact of revenue generated from newly-acquired stations.

Net Digital Media Revenue

	Three Months Ended June 30,
	2015		2016		Change $			Change %			2015			2016
	(Dollars in thousands)										% of Total Net Revenue
Net Digital Media Revenue	$	11,499	$	11,311	$	(188	)		(1.6	)%		17.1	%		16.7	%

	Three Months Ended June 30,
	2015				2016
	(Dollars in thousands)
Digital Advertising, Net	$	5,999	52.2	%	$	6,106	54.0	%
Digital Streaming		1,100	9.5			1,137	10.0
Digital Subscriptions		1,331	11.6			1,293	11.4
Digital Downloads		2,134	18.5			1,910	16.9
e-commerce		869	7.6			811	7.2
Other		66	0.6			54	0.5
Net Digital Media Revenue	$	11,499	100.0	%	$	11,311	100.0	%

On a consolidated basis, digital advertising revenue, net of agency commissions, increased by $0.1 million. Salem Web Network digital advertising revenue increased $0.2 million due to growth in the number of page views generated from the use of mobile applications which was offset by declines in digital revenue generated from Red State, a conservative news blog site. While changes in the Facebook newsfeed algorithm have negatively impacted our page views, we are beginning to see an increase in the monetization of page views from mobile applications. The number of page views generated directly impacts the amount of digital advertising revenue generated for each site. Mobile page views typically carry lower advertising inventory and lower rates as compared to desktop page views.

Digital streaming revenues of content available on our Christian websites were consistent with that of the same period of the prior year both in sales volume and in rates charged.

The decline in digital subscription revenue reflects lower distribution levels of Eagle Financial Publications. The stock market performance during the six month period ending June 30, 2016, specifically the drop in the market during January 2016, negatively impacted the demand for these products. There were no changes in subscriber fee rates during this period.

The $0.2 million decrease in digital download revenue reflects a lower volume of downloads during the three month period ending June 30, 2016 as compared to the same period of the prior year. Of this decrease, $0.2 million was generated from WorshipHouseMedia.com and $0.1 million from SermonSpice.com, which benefited from the Easter holiday falling in the first quarter of 2016 as compared to the second quarter of 2015. The decrease was offset by a $0.1million increase generated from job posting fees for ChristianStaffing.com. There were no changes in fee rates charged to our customers for digital downloads.

E-commerce revenue includes sales of wellness products from Eagle Wellness and Gene Smart, which was acquired on June 4, 2015. Sales of Eagle Wellness products declined by $68,000 and were partially offset with products sold under Gene Smart of $28,000. The net decline reflects a 6.3% reduction in the number of products sold offset by a 1.3% increase in the average retail price.

Net Publishing Revenue

	Three Months Ended June 30,
	2015		2016		Change $		Change %			2015			2016
	(Dollars in thousands)									% of Total Net Revenue
Net Publishing Revenue	$	6,734	$	6,761	$	27		0.4	%		10.0	%		10.0	%

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	Three Months Ended June 30,
	2015					2016
	(Dollars in thousands)
Book Sales	$	4,511		67.0	%	$	5,130		75.9	%
Estimated Sales Returns & Allowances		(1,369	)	(20.3	)		(1,742	)	(25.8	)
e-Book Sales		802		11.9			550		8.1
Self-Publishing Fees		1,477		21.9			1,613		23.9
Print Magazine Subscriptions		490		7.3			430		6.4
Print Magazine Advertisements		448		6.6			375		5.5
Other		375		5.6			405		6.0
Net Publishing Revenue	$	6,734		100.0	%	$	6,761		100.0	%

Consolidated book sales include a $0.7 million increase in print book sales from Regnery Publishing. The volume of book sales generated from Regnery is directly attributable to the composite mix of titles available in each period. Revenues from book sales increase based on the number of available titles that achieve the New York Times bestseller list as this increases awareness and demand for the publication(s). The increase in estimated sales returns and allowances for Regnery Publishing of $0.4 million includes returns processed for lower than expected book sales primarily associated with one release. Overall, the increase is consistent with the higher volume of print book sales during the three months ending June 30, 2016 as compared to the prior year. Xulon Press books sales decreased $0.1 million due to a decrease in the number of author submissions. There were no changes in rates.

E-book sales from Regnery Publishing decreased $0.3 million based on the number of units sold as compared to the prior year. The decline is attributable to the composite mix of titles available in each of the years and the number of titles that achieve the New York bestseller list.

Xulon Press self-publishing fees increased $0.1 million due to growth in the number of authors that utilized the services. There were no changes in fees as compared to the same period of the prior year. We believe that our ability to cross-promote Xulon’s self-publishing services to authors interested in Regnery Publishing provides us with ongoing growth potential.

Print magazine revenue continues to decline with a $0.1 million reduction in subscription revenue based on the number of subscribers and a corresponding $0.1 million decline in advertising revenues based on reduced demand and reduced rates due to lower distribution levels. We continue to explore cost reductions in this segment to offset the eroding revenue base.

Broadcast Operating Expenses

	Three Months Ended June 30,
	2015		2016		Change $			Change %			2015			2016
	(Dollars in thousands)										% of Total Net Revenue
Broadcast Operating Expenses	$	35,187	$	35,709	$	522			1.5	%		52.3	%		52.7	%
Same Station Broadcast Operating Expenses	$	35,039	$	34,958	$	(81	)		(0.2	)%

Increases in broadcast operating expenses include $0.7 million in expenses associated with stations that were acquired during 2015 that are included in all 2016 reporting periods. These stations, as well as our existing markets, show a $0.6 million increase in personnel-related costs due to an increase in staffing associated with acquisitions. These increases were offset by a $0.3 million decline in bad debt expense due to successful collection efforts. On a same station basis, broadcast operating expenses decreased by $0.1 million, which reflects these items net of the impact of costs generated from newly-acquired stations.

Digital Media Operating Expenses

	Three Months Ended June 30,
	2015		2016		Change $		Change %			2015			2016
	(Dollars in thousands)									% of Total Net Revenue
Digital Media Operating Expenses	$	8,767	$	8,781	$	14		0.2	%		13.0	%		13.0	%

Operating expenses for Salem Web Network and Townhall decreased by $0.1 million including a $0.1 million decline in royalties and $0.1 million decrease in facility-related expenses offset by an increase in hosting and streaming expenses of $0.1 million.

Operating expenses associated with Eagle Financial Publications increased by $0.1 million, including a $0.1 million increase in advertising and promotions and an increase of $27,000 in personnel-related expenses that were offset by a $30,000 decline in royalties’ expenses.

There were no changes in operating costs associated with our E-commerce businesses. All changes noted in royalty expenses were consistent with changes in digital media revenues.

Publishing Operating Expenses

	Three Months Ended June 30,
	2015		2016		Change $		Change %			2015			2016
	(Dollars in thousands)									% of Total Net Revenue
Publishing Operating Expenses	$	6,469	$	6,983	$	514		7.9	%		9.6	%		10.3	%

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Publishing operating expenses include cost of goods sold associated with book sales on Regnery Publishing of $0.6 million for the three months ended June 30, 2016 compared to $0.5 million for the same period of the prior year. There were no significant changes in the operating margins for Regnery Publishing. Higher variable costs include a $0.5 million increase in royalties and a $0.1 million increase in personnel-related expenses that were offset by a $0.2 million decline in advertising and promotion expenses.

Operating expenses associated with our print magazines declined $77,000 consistent with lower print magazine subscription and advertising revenue. This was partially offset by a $34,000 increase in variable costs including bad debt expense and computer supplies.

Operating expenses associated with Xulon Press book sales decreased $6,000 consistent with the lower level of book sales. We incurred higher variable costs of $15,000 including $35,000 in advertising expenses and $28,000 in professional services that were offset by a decrease of $40,000 in bad debt expense.

Unallocated Corporate Expenses

	Three Months Ended June 30,
	2015		2016		Change $		Change %			2015			2016
	(Dollars in thousands)									% of Total Net Revenue
Unallocated Corporate Expenses	$	3,518	$	3,568	$	50		1.4	%		5.2	%		5.3	%

Unallocated corporate expenses include shared services, such as accounting and finance, human resources, legal, tax and treasury that are not directly attributable to any one of our operating segments. Increases in these costs over the prior year primarily relate to personnel-related expenses.

Depreciation Expense

	Three Months Ended June 30,
	2015		2016		Change $			Change %			2015			2016
	(Dollars in thousands)										% of Total Net Revenue
Depreciation Expense	$	3,060	$	2,982	$	(78	)		(2.5	)%		4.5	%		4.4	%

There were no changes in our depreciation methods or in the estimated useful lives of our asset groups. The decline in depreciation of $0.1 million reflects the impact of computer software capitalized with acquisitions during 2012 that were fully depreciated as of the three month period ending June 30, 2016, compared to depreciation expense of $0.1 million for the same period of the prior year as well as the composite mix of other capital expenditures that were also fully depreciated. Capital expenditures and acquisitions from the second, third and fourth quarter of 2015 are expected to increase depreciation expense over the remainder of 2016.

Amortization Expense

	Three Months Ended June 30,
	2015		2016		Change $			Change %			2015			2016
	(Dollars in thousands)										% of Total Net Revenue
Amortization Expense	$	1,315	$	1,189	$	(126	)		(9.6	)%		2.0	%		1.8	%

There were no changes in our amortization methods or in the estimated useful lives of our intangible asset groups. The decline in amortization expense of $0.1 million reflects the impact of customer lists and contracts acquired with Eagle Publishing that were fully amortized as of the three month period ending June 30, 2016, compared to amortization expense of $0.5 million during the same period of the prior year. This decline was partially offset by a $0.2 million increase in amortization of intangible assets that were acquired in the third and fourth quarters of 2015.

Change in the Estimated Fair Value of Contingent Earn-Out Consideration

	Three Months Ended June 30,
	2015			2016			Change $		Change %			2015			2016
	(Dollars in thousands)											% of Total Net Revenue
Change in the estimated fair value of contingent earn-out consideration	$	(307	)	$	(134	)	$	173		(56.4	)%		(0.5	)%		(0.2	)%

Our acquisitions may include contingent earn-out consideration as part of the purchase price under which we will make future payments to the seller upon the achievement of certain benchmarks. We review the probabilities of possible future payments to estimate the fair value of any contingent earn-out consideration on a quarterly basis over the earn-out period. Actual results are compared to the estimates and probabilities of achievement used in our forecasts. Should actual results of the acquired business increase or decrease as compared to our estimates and assumptions, the estimated fair value of the contingent earn-out consideration liability will increase or decrease, up to the contracted limit, as applicable.

During the three month period ending June 30, 2016, we reduced the estimated fair value of our contingent earn-out liabilities by $36,000 compared to a net decrease of $0.3 million during the same period of the prior year. These changes are based on actual results as compared to the estimates used in our probability analysis for each contingency. Refer to Note 5 of our condensed consolidated financial statements for a detailed analysis of the changes in our assumptions and the impact for each contingency.

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Changes in the estimated fair value of the contingent earn-out consideration are reflected in our results of operations in the period in which they are identified. Changes in the estimated fair value of the contingent earn-out consideration may materially impact and cause volatility in our operating results.

Impairment of Long-Lived Assets

	Three Months Ended June 30,
	2015		2016		Change $		Change %			2015			2016
	(Dollars in thousands)									% of Total Net Revenue
Impairment of long-lived assets	$	—	$	700	$	700		100.0	%		—	%		1.0	%

Based on changes in management’s planned usage, we classified land in Covina, California as held for sale as of June 2012. At that time we evaluated the land for impairment in accordance with guidance for impairment of long-lived assets held for sale. We determined that the carrying value of the land exceeded the estimated fair value less costs to sell and recorded an impairment charge of $5.6 million associated with the land based on our estimated sale price at that time. In December 2012, after several purchase offers for the land were terminated, we obtained a third-party valuation for the land. Based on the fair value determined by the third-party, we recorded an additional impairment charge of $1.2 million associated with the land. While we continue to market the land for sale and have no intention to use the land in our operations, we have not received successful offers. Based on the amount of time that the land has been held for sale, we obtained a third-party valuation for the land as of June 2016. Based on this fair value appraisal, we recorded an additional $0.7 million impairment charge associated with the land during the three months ended June 30, 2016.

(Gain) Loss on the Sale or Disposal of Assets

	Three Months Ended June 30,
	2015		2016			Change $			Change %			2015			2016
	(Dollars in thousands)											% of Total Net Revenue
(Gain) loss on the sale or disposal of assets	$	30	$	(1,701	)	$	(1,731	)		(5,770.0	)%		—	%		(2.5	)%

The net gain on the sale or disposal of assets of $1.6 million for the three month period ending June 30, 2016 includes a $1.9 million gain on the sale of our Miami tower site offset by a $0.2 million charge for leasehold improvements written off upon the relocation of our offices in Washington D.C. market in addition to various insignificant fixed asset disposals.

Other Income (Expense)

	Three Months Ended June 30,
	2015			2016			Change $			Change %			2015			2016
	(Dollars in thousands)												% of Total Net Revenue
Interest income	$	2		$	2		$	—			—	%		—	%		—	%
Interest expense		(3,874	)		(3,730	)		144			(3.7	)%		(5.8	)%		(5.6	)%
Change in the fair value of interest rate swap		444			(423	)		(867	)		(195.3	)%		0.7	%		(0.6	)%
Loss on early retirement of long-term debt		—			(5	)		(5	)		—	%		—	%		—	%

Interest income represents earnings on excess cash and interest due under promissory notes.

Interest expense includes interest due on outstanding debt balances, interest due on our swap agreement and non-cash interest accretion related to deferred payments related to our acquisition activity and from our contingent earn-out consideration.

The change in the fair value of interest rate swap reflects the mark-to-market fair value adjustment of the interest rate swap agreement that was entered into on March 28, 2013.

The loss on early retirement of long-term debt reflects the unamortized discount and bank loan fees associated with principal repayments on our Term Loan B.

Provision for Income Taxes

	Three Months Ended June 30,
	2015		2016		Change $			Change %			2015			2016
	(Dollars in thousands)										% of Total Net Revenue
Provision for income taxes	$	2,303	$	2,190	$	(113	)		(4.9	)%		3.4	%		3.2	%

In accordance with FASB ASC Topic 740, “Income Taxes,” our tax provision for income taxes decreased $0.1 million for the three months ending June 30, 2016 to $2.2 million compared to $2.3 million for the same period of the prior year. The provision for income taxes as a percentage of income before income taxes, or the effective tax rate, was 39.5% for the three months ended June 30, 2016 and 2015. The effective tax rate for each period differs from the federal statutory income rate of 35.0% due to the effect of state income taxes, certain expenses that are not deductible for tax purposes, and changes in the valuation allowance from the utilization of certain state net operating loss carryforwards.

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Net Income

	Three Months Ended June 30,
	2015		2016		Change $			Change %			2015			2016
	(Dollars in thousands)										% of Total Net Revenue
Net Income	$	3,523	$	3,356	$	(167	)		(4.7	)%		5.2	%		5.0	%

We recognized net income of $3.4 million for the three month period ending June 30, 2016 compared to $3.5 million in the same period of the prior year. During this period, our operating income increased by $0.4 million due to a $0.5 million increase in net revenue that was offset by a $0.1 million increase in operating expenses. Included in operating expenses are a $1.9 million gain from the sale of our Miami tower site and a $0.7 million impairment charge. We also recognized a $0.8 million increase in other expenses based on the change in the fair value of our interest rate swap agreement.

Six months ended June 30, 2016 compared to the six months ended June 30, 2015

The following factors affected our results of operations and cash flows for the six months ended June 30, 2016 as compared to the same period of the prior year:

Financing

· On June 30, 2016, we paid $1.2 million in principal on our term loan of $300.0 million (“Term Loan B”), of which $0.4 million was an early repayment of principal. We recorded a $1,300 pre-tax loss on the early retirement of long-term debt related to the unamortized discount and $3,400 in bank loan fees associated with this principal repayment.

· On March 17, 2016, we paid $0.8 million in principal on our Term Loan B and paid interest due as of that date. We recorded a $2,500 pre-tax loss on the early retirement of long-term debt related to the unamortized discount and $6,700 in bank loan fees associated with this principal repayment.

Acquisitions

· On June 20, 2016, we closed on the acquisition of an FM Translator used in our Columbus, Ohio market for $0.3 million in cash.

· On June 10, 2016, we closed on the acquisition of an FM Translator in Amherst, New York for $60,000 in cash. The translator is used in our Pittsburgh, Pennsylvania market.

· On June 8, 2016, we closed on the acquisition of an FM Translator construction permit in Charlotte, Michigan for $50,000 in cash. The translator will be used in our Detroit, Michigan market and is reflected in projects-in-process at June 30, 2016.

· On June 3, 2016, we closed on the acquisition of an FM Translator construction permit in Atwood, Kentucky for $88,000 in cash. The translator will be used in our Columbus, Ohio market and is reflected in projects-in-process at June 30, 2016.

· On May 13, 2016, we closed on the acquisition of an FM Translator in construction permit Kerrville, Texas for $50,000 in cash. The translator will be used in our Houston, Texas market and is reflected in projects-in-process at June 30, 2016.

· On May 2, 2016, we closed on the acquisition of an FM Translator in Lincoln, Maine for $100,000 in cash. The translator is used in our Boston, Massachusetts market.

· On April 29, 2016, we closed on the acquisition of a construction permit for an FM Translator in Emporia, Kansas for $25,000 in cash. The translator will be relocated to Omaha, Nebraska, for use by our KCRO-AM radio station and is reflected in projects-in-process at June 30, 2016.

· On April 1, 2016, we acquired the Retirement Watch newsletter and websites for $0.1 million in cash and the assumption of $0.6 million in deferred subscription liabilities.

· On March 8, 2016, we acquired King James Bible mobile applications for $4.0 million of which $2.7 million was paid in cash upon close and $1.3 million is due in deferred installments within one year from the closing date.

Divestitures

· On June 10, 2016, we received $2.5 million in cash from the National Park Service in exchange for its claim under eminent domain for our tower site in Miami, Florida. We recognized a pre-tax gain of $1.9 million from this sale. We entered a limited terms of use agreement with the National Park Service to broadcast from the tower site for the next twenty years for a nominal fee.

Net Broadcast Revenue

	Six Months Ended June 30,
	2015		2016		Change $		Change %			2015			2016
	(Dollars in thousands)									% of Total Net Revenue
Net Broadcast Revenue	$	95,599	$	98,178	$	2,579		2.7	%		74.0	%		74.2	%
Same Station Net Broadcast Revenue	$	95,459	$	96,661	$	1,202		1.3	%

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The following table shows the dollar amount and percentage of net broadcast revenue for each broadcast revenue source.

	Six Months Ended June 30,
	2015				2016
	(Dollars in thousands)
Block program time:
National	$	22,445	23.5	%	$	24,456	24.9	%
Local		17,384	18.2	%		18,014	18.4	%
		39,829	41.7	%		42,470	43.3	%
Broadcast Advertising:
National		7,211	7.5	%		6,424	6.5	%
Local		31,159	32.6	%		31,659	32.3	%
		38,370	40.1	%		38,083	38.8	%
Station Digital		2,706	2.8	%		2,765	2.8	%
Infomercials		1,394	1.5	%		1,216	1.2	%
Network		7,118	7.4	%		8,207	8.4	%
Other		6,182	6.5	%		5,437	5.5	%
Net broadcast revenue	$	95,599	100.0	%	$	98,178	100.0	%

Block programming revenue increased by $2.6 million of which $1.0 million was generated from stations that were acquired during the year ended December 31, 2015. In existing markets, we saw increases in the number of both national and local programmers featured on our stations. The increase in the number of programmers creates a higher demand for time slots, which can result in the realization of higher rates. On our Christian Teaching & Talk station, revenue from National Ministry programmers increased $0.9 million while revenue from local programmers increased $0.2 million. Revenue from our News Talk stations increased $0.4 million while revenue from our Spanish Christian Teaching and Talk stations increased $0.1 million.

Advertising revenue, net of agency commissions, decreased by $0.3 million. Excluding political revenue, which increased $0.9 million, advertising revenue declined by $1.2 million. This decline includes a $2.1 million decrease in local and national advertising sales on our CCM format stations due to higher competition for advertising sales from agencies that was partially offset by a $0.8 million increase in local advertising sales. The increase in local advertising resulted from a higher demand for air-time, particularly on our News Talk, Business Talk and Spanish Christian Teaching and Talk format stations that benefit from political advertising and news content from presidential debates.

Digital revenues generated from our radio station websites were consistent with both the number of advertisers and the rates charged as compared to the same period of the prior year.

Declines in infomercial revenues of $0.2 million reflect our efforts to feature programming that is tailored to our listeners and consistent with our company values. We continue to seek alternatives to infomercial programs which we believe are not of interest to our listeners.

The growth in network revenues of $1.1 million include political advertisements of $0.2 million and an increase of $0.8 million in network affiliation fees from increases in the number of stations syndicating our programs.

Other revenues declined by $0.7 million due to a lower demand from listeners to participate in sales incentives and discounts offered under listener purchase programs. This lower demand resulted in a $0.8 million decline in listener purchase program revenue that was partially offset by a $54,000 increase in real estate and tower rents.

On a same station basis, net broadcast revenue increased $1.2 million, which reflects these items net of the impact of start-up costs associated with format changes and station acquisitions.

Net Digital Media Revenue

	Six Months Ended June 30,
	2015		2016		Change $		Change %			2015			2016
	(Dollars in thousands)									% of Total Net Revenue
Net Digital Media Revenue	$	22,290	$	22,595	$	305		1.4	%		17.3	%		17.1	%

	Six Months Ended June 30,
	2015				2016
	(Dollars in thousands)
Digital Advertising, Net	$	11,599	52.0	%	$	12,221	54.1	%
Digital Streaming		2,179	9.8			2,257	10.0
Digital Subscriptions		2,634	11.8			2,360	10.4
Digital Downloads		4,024	18.0			3,989	17.7
e-commerce		1,752	7.9			1,652	7.3
Other		102	0.5			116	0.5
Net Digital Media Revenue	$	22,290	100.0	%	$	22,595	100.0	%

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On a consolidated basis, digital advertising revenue, net of agency commissions, increased by $0.6 million. Included in this amount is a $0.1 million increase in revenue generated from Townhall.com based on a higher volume of page views driven by the current year political elections. Digital advertising revenue generated from Salem Web Network increased $0.5 million due to growth in the number of page views generated from the use of mobile applications. While changes in the Facebook newsfeed algorithm have negatively impacted our page views, we are beginning to see an increase in monetization of page views from mobile applications. The number of page views generated directly impacts the amount of digital advertising revenue generated for each site. Mobile page views typically carry lower advertising inventory and lower rates as compared to desktop page views.

Digital streaming revenues of content available on our Christian websites increased $0.1 million as compared to the same period of the prior due to an increase in volume of streaming content from our Christian content websites.

The $0.3 million decline in digital subscription revenue reflects lower distribution levels of Eagle Financial Publications. The stock market performance during the six month period ending June 30, 2016, specifically the drop in the market during January 2016, negatively impacted the demand for these products. There were no changes in subscriber fee rates during this period.

The $35,000 decrease in digital download revenue reflects a lower volume of downloads from our Church Products division websites, including a $0.1 million decline of video downloads on our SermonSpice.com offset by a $0.1 million increase in fees generated from ChurchStaffing.com. There were no changes in fee rates charged to our customers for digital downloads.

E-commerce revenue includes sales of wellness products from Eagle Wellness and Gene Smart, which was acquired on June 4, 2015. Sales of Eagle Wellness products declined by $0.1 million due to a lower number of products sold. The decline was partially offset with sales of products under Gene Smart of $64,000. The net decline reflects a 6.0% reduction in the number of products sold and a discount on retail prices of less than 0.1%.

Net Publishing Revenue

	Six Months Ended June 30,
	2015		2016		Change $		Change %			2015			2016
	(Dollars in thousands)									% of Total Net Revenue
Net Publishing Revenue	$	11,260	$	11,581	$	321		2.9	%		8.7	%		8.8	%

	Six Months Ended June 30,
	2015					2016
	(Dollars in thousands)
Book Sales	$	6,849		60.8	%	$	7,825		67.6	%
Estimated Sales Returns & Allowances		(1,944	)	(17.2	)		(2,437	)	(21.0	)
e-Book Sales		1,222		10.9			957		8.2
Self-Publishing Fees		2,768		24.6			3,046		26.3
Print Magazine Subscriptions		849		7.5			767		6.6
Print Magazine Advertisements		849		7.5			721		6.2
Other		667		5.9			702		6.1
Net Publishing Revenue	$	11,260		100.0	%	$	11,581		100.0	%

Consolidated book sale revenues include a $1.2 million increase in print book sales from Regnery Publishing. The increase is directly attributable to the composite mix of titles available in each of the periods. Revenues from book sales increase based on the number of available titles that achieve the New York Times bestseller list as this increases awareness and demand for the publication(s). The increase in estimated sales returns and allowances for Regnery Publishing of $0.5 million is consistent with the higher volume of print book sales during the three months ending June 30, 2016 as compared to the prior year. Xulon Press books sales decreased $0.2 million due to a decrease in the number of author submissions.

E-book sales from Regnery Publishing decreased $0.3 million due to the number of units sold as compared to the prior year. The decline is directly attributable to the composite mix of titles available in each of the years and the number of titles that achieve the New York Times bestsellers list.

Xulon Press self-publishing fees increased $0.3 million due to growth in the number of authors that utilize the services. There were no changes in fees as compared to the same period of the prior year. We believe that our ability to cross-promote Xulon’s self-publishing services to authors interested in Regnery Publishing provides us with ongoing growth potential.

Print magazine revenue continues to decline with a $0.1 million reduction in subscription revenue based on the number of subscribers and a corresponding $0.1 million decline in advertising revenues based on reduced demand and reduced rates due to lower distribution levels. We continue to explore cost reductions in this segment to offset the eroding revenue base.

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Broadcast Operating Expenses

	Six Months Ended March 31,
	2015		2016		Change $		Change %			2015			2016
	(Dollars in thousands)									% of Total Net Revenue
Broadcast Operating Expenses	$	69,104	$	71,697	$	2,593		3.8	%		53.5	%		54.2	%
Same Station Broadcast Operating Expenses	$	68,945	$	70,098	$	1,153		1.7	%

Broadcast operating expenses increased by $2.6 million including a $1.9 million in increase in personnel-related costs that include sales-based commissions consistent with the increase in revenues, a $0.9 million increase in facility-related expenses a $0.5 million charge associated with a contract litigation matter, and $0.2 million of costs associated with a corporate-sponsored conference, The conference was held in January 2016 and featured our local and national talk show hosts to focus on opportunities with the upcoming political elections. These higher costs were offset with a $0.6 million decline in bad debt expense due to successful collection efforts and a $0.3 million decline in discretionary advertising costs. The increase in broadcast operating expenses on a same station basis reflects these items net of the impact of start-up costs associated with format changes and station launches.

Digital Media Operating Expenses

	Six Months Ended June 30,
	2015		2016		Change $		Change %			2015			2016
	(Dollars in thousands)									% of Total Net Revenue
Digital Media Operating Expenses	$	17,767	$	17,967	$	200		1..1	%		13.8	%		13.6	%

Operating expenses associated with Salem Web Network and Townhall increased $28,000. The change includes a $0.3 million increase in hosting and streaming expenses that was offset by a $0.1 million decline in bad debt expenses from successful collection efforts, a $0.1 million decrease in facility-related expenses and a $49,000 decline in personnel-related expenses.

Operating expenses associated with Eagle Financial Publications increased $0.1 million, including a $0.2 million increase in advertising costs and a $35,000 increase in personnel-related costs that were offset with a decline of $45,000 in royalties based on the lower volume of digital subscriptions sold.

Variable expenses associated with Eagle Wellness increased $0.1 million, including a $45,000 increase in royalties and a $29,000 increase in professional services based on higher sales volumes.

Publishing Operating Expenses

	Six Months Ended June 30,
	2015		2016		Change $		Change %			2015			2016
	(Dollars in thousands)									% of Total Net Revenue
Publishing Operating Expenses	$	10,966	$	11,931	$	935		8.8	%		8.5	%		9.0	%

Publishing operating expenses include cost of goods sold associated with Regnery Publishing of $0.9 million for the six months ended June 30, 2016 compared to $0.8 million for the same period of the prior year. There were no significant changes in our margins. Higher variable costs include $0.9 million in royalties and $0.2 million in personnel-related expenses that were offset by a $0.1 million decrease in advertising and promotion expenses and a $0.1 million decrease in fulfillment costs.

Operating expenses associated with our print magazines declined $0.1 million consistent with reductions in the number of subscribers and lower advertising revenue.

Xulon Press operating expenses include cost of goods sold from book sales of $1.4 million, which declined slightly from the same period of the prior year based on lower sales volumes. Other operating expenses increased by $40,000 including a $60,000 increase in professional service fees that were offset by $15,000 in savings from bad debt expense.

Unallocated Corporate Expenses

	Six Months Ended June 30,
	2015		2016		Change $		Change %			2015			2016
	(Dollars in thousands)									% of Total Net Revenue
Unallocated Corporate Expenses	$	7,509	$	7,781	$	272		3.6	%		5.8	%		5.9	%

Unallocated corporate expenses include shared services, such as accounting and finance, human resources, legal, tax and treasury that are not directly attributable to any one of our operating segments. Increases in these costs over the prior year include a $0.3 million increase in personnel-related costs and a $0.2 million increase in professional services offset by a $0.1 million decline in acquisition-related costs.

Depreciation Expense

	Six Months Ended June 30,
	2015		2016		Change $			Change %			2015			2016
	(Dollars in thousands)										% of Total Net Revenue
Depreciation Expense	$	6,232	$	5,974	$	(258	)		(4.1	)%		4.8	%		4.5	%

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There were no changes in our depreciation methods or in the estimated useful lives of our asset groups. The decline in depreciation of $0.3 million reflects the impact of computer software capitalized with acquisitions during 2012 that were fully depreciated as of the six month period ending June 30, 2016, compared to depreciation expense of $0.2 million for the same period of the prior year as well as the composite mix of other capital expenditures that were also fully depreciated. Capital expenditures and acquisitions from the third and fourth quarter of 2015 are expected to increase depreciation expense over the remainder of 2016.

Amortization Expense

	Six Months Ended June 30,
	2015		2016		Change $			Change %			2015			2016
	(Dollars in thousands)										% of Total Net Revenue
Amortization Expense	$	2,644	$	2,332	$	(312	)		(11.8	)%		2.0	%		1.8	%

There were no changes in our amortization methods or in the estimated useful lives of our intangible asset groups. The decline in amortization expense reflects the impact of customer lists and contracts acquired with Eagle Publishing that were fully amortized as of the six month period ending June 30, 2016, compared to amortization expense of $0.6 million during the same period of the prior year. This decline was partially offset by a $0.2 million increase in amortization of intangible assets that were acquired in the third and fourth quarters of 2015.

Change in the Estimated Fair Value of Contingent Earn-Out Consideration

	Six Months Ended June 30,
	2015			2016			Change $			Change %			2015			2016
	(Dollars in thousands)												% of Total Net Revenue
Change in the estimated fair value of contingent earn-out consideration	$	(189	)	$	(262	)	$	(73	)		38.6	%		(0.1	)%		(0.2	)%

Our acquisitions may include contingent earn-out consideration as part of the purchase price under which we will make future payments to the seller upon the achievement of certain benchmarks. We review the probabilities of possible future payments to estimate the fair value of any contingent earn-out consideration on a quarterly basis over the earn-out period. Actual results are compared to the estimates and probabilities of achievement used in our forecasts. Should actual results of the acquired business increase or decrease as compared to our estimates and assumptions, the estimated fair value of the contingent earn-out consideration liability will increase or decrease, up to the contracted limit, as applicable.

During the six month period ending June 30, 2016 and 2015, we reduced the estimated fair value of our contingent earn-out liabilities by $0.2 million. These changes are based on actual results as compared to the estimates used in our probability analysis for each contingency. Refer to Note 5 of our condensed consolidated financial statements for a detailed analysis of the changes in our assumptions and the impact for each contingency.

Changes in the estimated fair value of the contingent earn-out consideration are reflected in our results of operations in the period in which they are identified. Changes in the estimated fair value of the contingent earn-out consideration may materially impact and cause volatility in our operating results.

Impairment of Long-Lived Assets

	Six Months Ended June 30,
	2015		2016		Change $		Change %			2015			2016
	(Dollars in thousands)									% of Total Net Revenue
Impairment of long-lived assets	$	—	$	700	$	700		100.0	%		—	%		0.5	%

Based on changes in management’s planned usage, we classified land in Covina, California as held for sale as of June 2012. At that time we evaluated the land for impairment in accordance with guidance for impairment of long-lived assets held for sale. We determined that the carrying value of the land exceeded the estimated fair value less costs to sell and recorded an impairment charge of $5.6 million associated with the land based on our estimated sale price at that time. In December 2012, after several purchase offers for the land were terminated, we obtained a third-party valuation for the land. Based on the fair value determined by the third-party, we recorded an additional impairment charge of $1.2 million associated with the land. While we continue to market the land for sale and have no intention to use the land in our operations, we have not received successful offers. Based on the amount of time that the land has been held for sale, we obtained a third-party valuation for the land as of June 2016. Based on this fair value appraisal, we recorded an additional $0.7 million impairment charge associated with the land during the three months ended June 30, 2016.

(Gain) Loss on the Sale or Disposal of Assets

	Six Months Ended June 30,
	2015		2016			Change $			Change %			2015			2016
	(Dollars in thousands)											% of Total Net Revenue
(Gain) loss on the sale or disposal of assets	$	159	$	(1,551	)	$	(1,710	)		(1,075.5	)%		0.1	%		(1.2	)%

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The net gain on the sale or disposal of assets of $1.6 million for the six month period ending June 30, 2016 includes a $1.9 million gain on the sale of our Miami tower site offset by a $0.4 million charge associated with the relocation of our offices in the Washington D.C. market and various fixed asset disposals.

The net loss on the sale or disposal of assets for the same period of the prior year includes a $0.2 million charge associated with the relocation of our office and studio in the Seattle, Washington market offset by various fixed asset disposals.

Other Income (Expense)

	Six Months Ended June 30,
	2015			2016			Change $			Change %			2015			2016
	(Dollars in thousands)												% of Total Net Revenue
Interest income	$	3		$	3		$	—			—	%		—	%		—	%
Interest expense		(7,678	)		(7,526	)		152			(2.0	)%		(5.9	)%		(5.7	)%
Change in the fair value of interest rate swap		(976	)		(2,181	)		(1,205	)		123.5	%		(0.8	)%		(1.6	)%
Loss on early retirement of long-term debt		(41	)		(14	)		27			(65.9	)%		—	%		—	%
Net miscellaneous income and (expenses)		7			—			(7	)		(100.0	)%		—	%		—	%

Interest income represents earnings on excess cash and interest due under promissory notes.

Interest expense includes interest due on outstanding debt balances, interest due on our swap agreement and non-cash interest accretion related to deferred payments related to our acquisition activity and from our contingent earn-out consideration.

The change in the fair value of interest rate swap reflects the mark-to-market fair value adjustment of the interest rate swap agreement that was entered into on March 28, 2013.

The loss on early retirement of long-term debt reflects the unamortized discount and bank loan fees associated with principal redemptions of our Term Loan B.

Net miscellaneous income and expenses includes royalty income, usage fees for our real estate properties and insurance proceeds.

Provision for Income Taxes

	Six Months Ended June 30,
	2015		2016		Change $			Change %			2015			2016
	(Dollars in thousands)										% of Total Net Revenue
Provision for income taxes	$	2,454	$	2,358	$	(96	)		(3.9	)%		1.9	%		1.8	%

In accordance with FASB ASC Topic 740, “Income Taxes,” our tax provision for income taxes decreased $0.1 million for the six months ending June 30, 2016 to $2.4 million compared to $2.5 million for the same period of the prior year. The provision for income taxes as a percentage of income before income taxes, or the effective tax rate was 38.9% for the six months ended June 30, 2016 compared to 39.1% for the same period of the prior year. The effective tax rate for each period differs from the federal statutory income rate of 35.0% due to the effect of state income taxes, certain expenses that are not deductible for tax purposes, and changes in the valuation allowance from the utilization of certain state net operating loss carryforwards.

Net Income

	Six Months Ended June 30,
	2015		2016		Change $			Change %			2015			2016
	(Dollars in thousands)										% of Total Net Revenue
Net Income	$	3,818	$	3,709	$	(109	)		(2.9	)%		3.0	%		2.8	%

We recognized net income of $3.7 million for the six month period ending June 30, 2016 compared to $3.8 million in the same period of the prior year. During this period, our operating income increased by $0.8 million due to a $3.2 million increase in net revenue that was offset with $2.4 million increase in operating expenses. Included in operating expenses are a $1.9 million gain from the sale of our Miami tower site and a $0.7 million impairment charge. We also recognized a $1.2 million increase in other expenses based on the change in the fair value of our interest rate swap agreement.

NON-GAAP FINANCIAL MEASURES

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 our financial statements. We use these non-GAAP financial measures to evaluate financial results, develop budgets, manage expenditures and as a measure of performance under compensation programs.

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

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Item 10(e) of Regulation S-K defines and prescribes the conditions under which certain non-GAAP financial information may be presented in this report. We closely monitor EBITDA, Adjusted EBITDA, Station Operating Income (“SOI”), Digital media operating income, Publishing operating income, and free cash flow, all of which are non-GAAP financial measures. We believe that these non-GAAP financial measures provide useful information about our core operating results, and thus, are appropriate to enhance the overall understanding of our financial performance. These non-GAAP measures are intended to provide management and investors a more complete understanding of our underlying operational results, trends and performance.

The performance of a radio broadcasting company is customarily measured by the ability of its stations to generate SOI. We define SOI as net broadcast revenue less broadcast operating expenses. Accordingly, changes in net broadcast revenue and broadcast operating expenses, as explained above, have a direct impact on changes in SOI. SOI is not a measure of performance calculated in accordance with GAAP. SOI should be viewed as a supplement to and not a substitute for our results of operations presented on the basis of GAAP. We believe that SOI is a useful non-GAAP financial measure to investors when considered in conjunction with operating income (the most directly comparable GAAP financial measure to SOI), because it is generally recognized by the radio broadcasting industry as a tool in measuring performance and in applying valuation methodologies for companies in the media, entertainment and communications industries. SOI is commonly used by investors and analysts who report on the industry to provide comparisons between broadcasting groups. We use SOI as one of the key measures of operating efficiency and profitability, including our internal reviews associated with impairment analysis of our indefinite-lived intangible assets. SOI does not purport to represent cash provided by operating activities. Our statement of cash flows presents our cash activity in accordance with GAAP and our income statement presents our financial performance prepared in accordance with GAAP. Our definition of SOI is not necessarily comparable to similarly titled measures reported by other companies.

We define same station net broadcast revenue as net broadcast revenue from our radio stations and networks that we own or operate in the same format on the first and last day of each quarter, as well as the corresponding quarter of the prior year.  We define same station broadcast operating expenses as broadcast operating expenses from our radio stations and networks that we own or operate 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 include those stations we own or operate 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.  We use same station operating results, a non-GAAP financial measure, both in presenting our results to stockholders and the investment community, and in our internal evaluations and management of the business.  We believe that same station operating results provide a meaningful comparison of period over period performance of our core broadcast operations as this measure excludes the impact of new stations, the impact of stations we no longer own or operate, and the impact of stations operating under a new programming format.  Our presentation of same station operating results are not intended to be considered in isolation or as a substitute for the most directly comparable financial measures reported in accordance with GAAP.  Our definition of same station operating results is not necessarily comparable to similarly titled measures reported by other companies.

We apply a similar methodology to our digital media and publishing group. Digital Media Operating Income is defined as net digital media revenue minus digital media operating expenses. Publishing Operating Income is defined as net publishing revenue minus publishing operating expenses. Digital Media Operating Income and Publishing Operating Income are not measures of performance in accordance with GAAP. Our presentations of these non-GAAP performance measures are not to be considered a substitute for or superior to our operating results reported in accordance with GAAP. We believe that Digital Media Operating Income and Publishing Media Operating Income are useful non-GAAP financial measures to investors, when considered in conjunction with operating income (the most directly comparable GAAP financial measure), because they are comparable to those used to measure performance of our broadcasting entities. We use this analysis as one of the key measures of operating efficiency, profitability and in our internal review. This measurement does not purport to represent cash provided by operating activities. Our statement of cash flows presents our cash activity in accordance with GAAP and our income statement presents our financial performance in accordance with GAAP. Our definitions of digital media operating income and publishing operating income are not necessarily comparable to similarly titled measures reported by other companies.

We define EBITDA as net income before interest, taxes, depreciation, amortization and change in fair value of interest rate swaps. We define Adjusted EBITDA as EBITDA before gains or losses on the sale or disposal of assets, changes in the estimated fair value of contingent earn-out consideration, impairment of long-lived assets, net miscellaneous income and expenses, and non-cash compensation expense. 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. 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 our results of operations and financial condition presented in accordance with GAAP. Our definitions of EBITDA and Adjusted EBITDA are not necessarily comparable to similarly titled measures reported by other companies.

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We define free cash flow as Adjusted EBITDA less cash paid for capital expenditures, less cash paid for income taxes, and less cash paid for interest. We consider free cash flow to be a performance measure that provides useful information to management and investors about the amount of cash generated by our operations after cash paid for capital expenditures, income taxes and interest. A limitation of free cash flow as a measure of financial performance is that it does not represent the total increase or decrease in our cash balance for the period. We use free cash flow, a non-GAAP financial measure, both in presenting our results to stockholders and the investment community, and in our internal evaluation and management of the business. Our presentation of 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. Our definition of free cash flow is not necessarily comparable to similarly titled measures reported by other companies.

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

The tables below show the GAAP and non-GAAP performance indicators that we believe provide useful information to management and investors. We use non-GAAP measures to evaluate financial performance, develop budgets, manage expenditures, and determine employee compensation. Our presentation of this additional information is not to be considered as a substitute for or superior to the directly comparable measures reported in accordance with GAAP.

	Three Months Ended					Six Months Ended
	June 30,					June 30,
GAAP and Non-GAAP Financial Measures	2015		2016			2015		2016
	(Dollars in thousands)
Net Income	$	3,523	$	3,356		$	3,818	$	3,709
Station Operating Income		13,873		13,998			26,495		26,481
Same Station Operating Income		13,881		14,012			26,514		26,563
Digital Media Operating Income		2,732		2,530			4,523		4,628
Publishing Operating Income (loss)		265		(222	)		294		(350	)
EBITDA		13,629		13,868			23,799		24,077
Adjusted EBITDA		13,508		12,863			24,290		23,302
Free Cash Flow		7,470		6,492			12,696		11,088

In the table below, we present a reconciliation of same station net broadcast revenue to net broadcast revenue, the most comparable GAAP measure and same station broadcast operating expenses to broadcast operating expense, the most comparable GAAP measure. Our presentation of these non-GAAP performance indicators are not to be considered a substitute for or superior to the directly comparable measures reported in accordance with GAAP.

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2016			2015			2016
	(Dollars in thousands)
Reconciliation of Same Station Net Broadcast Revenue to Net Broadcast Revenue
Net broadcast revenue – same station	$	48,920		$	48,970		$	95,459		$	96,661
Net broadcast revenue – acquisitions		93			711			93			1,491
Net broadcast revenue – format change		47			26			47			26
Net broadcast revenue	$	49,060		$	49,707		$	95,599		$	98,178
Reconciliation of Same Station Broadcast Operating Expenses to Broadcast Operating Expenses
Broadcast operating expenses – same station	$	35,039		$	34,958		$	68,945		$	70,098
Broadcast operating expenses – acquisitions		74			708			85			1,556
Broadcast operating expenses – format change		74			43			74			43
Broadcast operating expenses	$	35,187		$	35,709		$	69,104		$	71,697
Reconciliation of Same Station Operating Income to Station Operating Income
Station operating income – same station	$	13,881		$	14,012		$	26,514		$	26,563
Station operating income (loss) – acquisitions		19			3			8			(65	)
Station operating loss – format change		(27	)		(17	)		(27	)		(17	)
Station operating income	$	13,873		$	13,998		$	26,495		$	26,481

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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES:

Reconciliation of Station Operating Income, Digital Media Operating Income and Publishing Operating Income (Loss) to Net Income
Station operating income	$	13,873		$	13,998		$	26,495		$	26,481
Digital media operating income		2,732			2,530			4,523			4,628
Publishing operating income (loss)		265			(222	)		294			(350	)
Less unallocated corporate expenses		(3,518	)		(3,568	)		(7,509	)		(7,781	)
Less depreciation and amortization		(4,375	)		(4,171	)		(8,876	)		(8,306	)
Less change in the estimated fair value of contingent earn-out consideration		307			134			189			262
Impairment of long-lived assets		—			(700	)		—			(700	)
Less gain (loss) on the sale or disposal of assets		(30	)		1,701			(159	)		1,551
Operating income	$	9,254		$	9,702		$	14,957		$	15,785
Plus interest income		2			2			3			3
Less interest expense, net of capitalized interest		(3,874	)		(3,730	)		(7,678	)		(7,526	)
Less change in fair value of interest rate swaps		444			(423	)		(976	)		(2,181	)
Less loss on early retirement of long-term debt		—			(5	)		(41	)		(14	)
Less net miscellaneous income and expenses		—			—			7			—
Less provision for income taxes		(2,303	)		(2,190	)		(2,454	)		(2,358	)
Net income	$	3,523		$	3,356		$	3,818		$	3,709

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2016			2015			2016
	(Dollars in thousands)
Calculation of Station Operating Income, Digital Media Operating Income and Publishing Operating Income (Loss)
Net broadcast revenue	$	49,060		$	49,707		$	95,599		$	98,178
Less broadcast operating expenses		(35,187	)		(35,709	)		(69,104	)		(71,697	)
Station operating income	$	13,873		$	13,998		$	26,495		$	26,481
Net digital media revenue	$	11,499		$	11,311		$	22,290		$	22,595
Less digital media operating expenses		(8,767	)		(8,781	)		(17,767	)		(17,967	)
Digital media operating income	$	2,732		$	2,530		$	4,523		$	4,628
Net publishing revenue	$	6,734		$	6,761		$	11,260		$	11,581
Less publishing operating expenses		(6,469	)		(6,983	)		(10,966	)		(11,931	)
Publishing operating income (loss)	$	265		$	(222	)	$	294		$	(350	)
Reconciliation of Free Cash Flow to Adjusted EBITDA to EBITDA to Net Income
Free Cash Flow	$	7,470		$	6,492		$	12,696		$	11,088
Plus cash paid for interest, net of capitalized interest		3,559			3,552			7,071			7,099
Plus cash paid for taxes		312			191			316			60
Plus net cash paid for capital expenditures (1)		2,167			2,628			4,207			5,055
Adjusted EBIDTA	$	13,508		$	12,863		$	24,290		$	23,302
Less non-cash stock-based compensation		(156	)		(125	)		(487	)		(324	)
Less net miscellaneous income and expenses		—			—			7			—
Less loss on early retirement of long-term debt		—			(5	)		(41	)		(14	)
Plus change in the estimated fair value of contingent earn-out consideration		307			134			189			262
Less impairment of long-lived assets		—			(700	)		—			(700	)
Less gain (loss) on the sale or disposal of assets		(30	)		1,701			(159	)		1,551
EBITDA	$	13,629		$	13,868		$	23,799		$	24,077
Plus interest income		2			2			3			3
Less depreciation and amortization		(4,375	)		(4,171	)		(8,876	)		(8,306	)
Less interest expense, net of capitalized interest		(3,874	)		(3,730	)		(7,678	)		(7,526	)
Less change in fair value of interest rate swaps		444			(423	)		(976	)		(2,181	)
Less provision for income taxes		(2,303	)		(2,190	)		(2,454	)		(2,358	)
Net income	$	3,523		$	3,356		$	3,818		$	3,709

(1) Net cash paid for capital expenditures reflects actual cash payments net of amounts reimbursable for tenant improvements allowances.

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CRITICAL ACCOUNTING POLICIES, JUDGMENTS AND ESTIMATES

The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Significant areas for which management uses estimates include:

· asset impairments, including goodwill, broadcasting licenses and other indefinite-lived intangible assets;

· probabilities associated with the potential for contingent earn-out consideration;

· fair value measurements;

· contingency reserves;

· allowance for doubtful accounts;

· sales returns and allowances;

· barter transactions;

· inventory reserves;

· reserves for royalty advances;

· fair value of equity awards;

· self-insurance reserves;

· estimated lives for tangible and intangible assets;

· income tax valuation allowances; and

· uncertain tax positions.

These estimates require the use of judgment as future events and the effect of these events cannot be predicted with certainty. The estimates will change as new events occur, as more experience is acquired and as more information is obtained. We evaluate and update our assumptions and estimates on an ongoing basis and we may consult outside experts to assist as considered necessary.

We believe the following accounting policies and the related judgments and estimates are critical accounting policies that affect the preparation of our condensed consolidated financial statements. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably possible could materially impact the financial statements.

Goodwill, Broadcast Licenses and Other Indefinite-Lived Intangible Assets

Approximately 71% of our total assets at June 30, 2016 consist of indefinite-lived intangible assets including broadcast licenses, goodwill and mastheads. The value of these indefinite-lived intangible assets depends significantly upon the operating results of our businesses. We do not amortize goodwill or other indefinite-lived intangible assets, but rather test for impairment at least annually or more frequently if events or circumstances indicate that an asset may be impaired.

We believe that our estimate of the value of our broadcast licenses, mastheads, and goodwill is a critical accounting estimate as the value is significant in relation to our total assets, and our estimates incorporate variables and assumptions that are based on past experiences and judgment about future operating performance of our markets and business segments. If actual future results are less favorable than the assumptions and estimates we used, we are subject to future impairment charges, the amount of which may be material. The fair value measurements for our indefinite-lived intangible assets use significant unobservable inputs that reflect our own assumptions about the estimates that market participants would use in measuring fair value including assumptions about risk. The unobservable inputs are defined in FASB ASC Topic 820, “Fair Value Measurements and Disclosures,” as Level 3 inputs discussed in detail in Note 14.

We perform our annual impairment testing during the fourth quarter of each year, which coincides with our budget and planning process for the upcoming year. During our annual testing in the fourth quarter of 2015, we recognized an impairment charge of $0.4 million associated with the value of goodwill in our Singing News Network (formerly Solid Gospel Network.). The impairments were driven by reductions in the projected net revenues of the Singing News Network and of continual declines in revenues from our print magazines that were not offset with cost reductions from the decrease in the number of publications printed. The growth of digital-only publications, which are often free or significantly less than a print magazine, has hindered the ability of the publishing industry to recover from the economic recession that began in 2008. We believe that the impairments are indicative of trends in the industry as a whole and are not unique to our company or operations.

We believe we have made reasonable estimates and assumptions to calculate the estimated fair value of our indefinite-lived intangible assets, however, these estimates and assumptions could be materially different from actual results. If actual market conditions are less favorable than those projected by the industry or by us, or if events occur or circumstances change that would reduce the estimated fair value of our indefinite-lived intangible assets below the amounts reflected on our balance sheet, we may recognize future impairment charges, the amount of which may be material.

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Impairment of Long-Lived Assets

We account for property and equipment in accordance with FASB ASC Topic 360-10, “Property, Plant and Equipment.” We periodically review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. In accordance with authoritative guidance for impairment of long-lived assets, we must estimate the fair value of assets when events or circumstances indicate that they may be impaired. The fair value measurements for our long-lived assets use significant observable inputs that reflect our own assumptions about the estimates that market participants would use in measuring fair value including assumptions about risk. If actual future results are less favorable than the assumptions and estimates we used, we are subject to future impairment charges, the amount of which may be material.

We believe we have made reasonable estimates and assumptions to calculate the estimated fair value of our long-lived assets, however, these estimates and assumptions could be materially different from actual results. If actual market conditions are less favorable than those projected by the industry or by us, or if events occur or circumstances change that would reduce the estimated fair value of long-lived assets below the amounts reflected on our balance sheet, we may recognize future impairment charges, the amount of which may be material.

Accounting for Acquisitions

We account for business acquisitions in accordance with the acquisition method of accounting as specified in FASB ASC Topic 805 “Business Combinations.” The total acquisition consideration is allocated to assets acquired and liabilities assumed based on their estimated fair values as of the date of the transaction. Estimates of the fair value include discounted estimated cash flows to be generated by the assets and their expected useful lives based on historical experience, market trends and any synergies believed to be achieved from the acquisition. The excess of consideration paid over the estimated fair values of the net assets acquired is recorded as goodwill and any excess of fair value of the net assets acquired over the consideration paid is recorded as a gain on bargain purchase. Prior to recording a gain, the acquiring entity must reassess whether all acquired assets and assumed liabilities have been identified and recognized and perform re-measurements to verify that the consideration paid, assets acquired, and liabilities assumed have been properly valued.

Acquisitions may include contingent earn-out consideration, the fair value of which is estimated as of the acquisition date as the present value of the expected contingent payments as determined using weighted probabilities of the payment amounts.

A majority of our radio station acquisitions have consisted primarily of the FCC licenses to broadcast in a particular market. We often do not acquire the existing format, or we change the format upon acquisition when we find it beneficial. As a result, a substantial portion of the purchase price for the assets of a radio station is allocated to the broadcast license.

We may retain a third-party appraiser to estimate the fair value of the acquired net assets as of the acquisition date. As part of the valuation and appraisal process, the third-party appraiser prepares a report assigning estimated fair values to the various asset categories in our financial statements. These fair value estimates are subjective in nature and require careful consideration and judgment. Management reviews the third party reports for reasonableness of the assigned values. We believe that the purchase price allocations represent the appropriate estimated fair value of the assets acquired and we have not had to modify our purchase price allocations.

We estimate the economic life of each tangible and intangible asset acquired to determine the period of time in which the asset should be depreciated or amortized. A considerable amount of judgment is required in assessing the economic life of each asset. We consider our own experience with similar assets, industry trends, market conditions and the age of the property at the time of our acquisition to estimate the economic life of each asset. If the financial condition of the assets were to deteriorate, the resulting change in life or impairment of the asset could cause a material impact and volatility in our operating results. We have not experienced changes in the economic life established for each major category of our assets.

Accounting for Contingent Earn-Out Consideration

Our acquisitions often include contingent earn-out consideration as part of the purchase price. The fair value of the contingent earn-out consideration is estimated as of the acquisition date based on the present value of the contingent payments expected to be made using a weighted probability of possible payments. The unobservable inputs used in the determination of the fair value of the contingent earn-out consideration include our own assumptions about the likelihood of payment based on the established benchmarks and discount rates based on our internal rate of return analysis. The fair value measurement includes inputs that are Level 3 measurement as discussed in Note 14.

We review the probabilities of possible future payments to the estimated fair value of any contingent earn-out consideration on a quarterly basis over the earn-out period. Actual results are compared to the estimates and probabilities of achievement used in our forecasts. Should actual results increase or decrease as compared to the assumption used in our analysis, the fair value of the contingent earn-out consideration obligations will increase or decrease, up to the contracted limit, as applicable. Changes in the fair value of the contingent earn-out consideration could cause a material impact and volatility in our operating results. We recorded a net decrease to our estimated contingent earn-out liabilities of $0.2 million during the six months ending June 30, 2016 and 2015. The changes in our estimates reflect volatility from variables, such as revenue growth, page views and session time as discussed in Note 5 – Contingent Earn-Out Consideration.

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We believe that we have used reasonable estimates and assumptions to calculate the estimated fair value of all remaining contingent earn-out consideration.

Fair Value Measurements

FASB ASC Topic 820, “Fair Value Measurements and Disclosures,” established a single definition of fair value in generally accepted accounting principles and requires expanded disclosure requirements about fair value measurements. The provision applies to other accounting pronouncements that require or permit fair value measurements. This includes applying the fair value concept to (i) nonfinancial assets and liabilities initially measured at fair value in business combinations; (ii) reporting units or nonfinancial assets and liabilities measured at fair value in conjunction with goodwill impairment testing; (iii) other nonfinancial assets measured at fair value in conjunction with impairment assessments; and (iv) asset retirement obligations initially measured at fair value.

The fair value provisions include guidance on how to estimate the fair value of assets and liabilities in the current economic environment and reemphasizes that the objective of a fair value measurement remains an exit price. If we were to conclude that there has been a significant decrease in the volume and level of activity of the asset or liability in relation to normal market activities, quoted market values may not be representative of fair value and we may conclude that a change in valuation technique or the use of multiple valuation techniques may be appropriate.

The degree of judgment utilized in measuring the fair value of financial instruments generally correlates to the level of pricing observability. Pricing observability is affected by a number of factors, including the type of financial instrument, whether the financial instrument is new to the market, and the characteristics specific to the transaction. Financial instruments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of pricing observability and a lesser degree of judgment utilized in measuring fair value. Conversely, financial instruments rarely traded or not quoted will generally have less (or no) pricing observability and a higher degree of judgment utilized in measuring fair value.

FASB ASC Topic 820 established a hierarchal disclosure framework associated with the level of pricing observability utilized in measuring fair value. This framework defined three levels of inputs to the fair value measurement process and requires that each fair value measurement be assigned to a level corresponding to the lowest level input that is significant to the fair value measurement in its entirety. The three broad levels of inputs defined by the FASB ASC Topic 820 hierarchy are as follows:

• Level 1 Inputs—quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date;

• Level 2 Inputs—inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability; and

• Level 3 Inputs—unobservable inputs for the asset or liability. These unobservable inputs reflect the entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances (which might include the reporting entity’s own data).

We believe that we have used reasonable estimates and assumptions to calculate the estimated fair value of our financial assets as discussed in Note 14.

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Contingency Reserves

In the ordinary course of business, we are involved in various legal proceedings, lawsuits, arbitration and other claims that are complex in nature and have outcomes that are difficult to predict. Consequently, we are unable to ascertain the ultimate aggregate amount of monetary liability or the financial impact with respect to these matters.  Certain of these proceedings are discussed in Note 16, Commitments and Contingencies.

We record contingency reserves to the extent we conclude that it is probable that a liability has been incurred and the amount of the related loss can be reasonably estimated. The establishment of the reserve is based on a review of all relevant factors, the advice of legal counsel, and the subjective judgment of management. The reserves we have recorded to date, including $0.5 million as of the period ending June 30, 2016, have not been material to our condensed consolidated financial position, results of operations or cash flows. We believe that our estimates and assumptions are reasonable and that our reserves are accurately reflected.

While we believe that the final resolution of any known maters, individually and in the aggregate, will not have a material adverse effect upon our condensed consolidated financial position, results of operations or cash flows, it is possible that we could incur additional losses. We maintain insurance that may provide coverage for such matters. Future claims against us, whether meritorious or not, could have a material adverse effect upon our condensed consolidated financial position, results of operations or cash flows, including losses due to costly litigation and losses due to matters that require significant amounts of management time that can result in the diversion of significant operational resources.

Allowance for Doubtful Accounts

We evaluate the balance reserved in our allowance for doubtful accounts on a quarterly basis based on our historical collection experience, the age of the receivables, specific customer information and current economic conditions. Past due balances are generally not written-off until all of our collection efforts have been unsuccessful, including use of a collections agency. A considerable amount of judgment is required in assessing the likelihood of ultimate realization of these receivables, including the current creditworthiness of each customer. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. We have not modified our estimate methodology and we have not historically recognized significant losses from changes in our estimates. We believe that our estimates and assumptions are reasonable and that our reserves are accurately reflected.

Sales Returns and Allowances

We provide for estimated returns for products sold with the right of return, primarily book sales associated with Regnery Publishing and nutritional products sold through Eagle Wellness and Gene Smart. We record an estimate of these product returns as a reduction of revenue in the period of the sale. Our estimates are based upon historical sales returns, the amount of current period sales, economic trends and any changes in customer demand and acceptance of our products. We regularly monitor actual performance to estimated return rates and make adjustments as necessary. Estimated return rates utilized for establishing estimated returns reserves have approximated actual returns experience. However, actual returns may differ significantly, either favorably or unfavorably, from these estimates if factors such as the historical data we used to calculate these estimates do not properly reflect future returns or as a result of changes in economic conditions of the customer and/or the market. We have not modified our estimate methodology and we have not historically recognized significant losses from changes in our estimates. We believe that our estimates and assumptions are reasonable and that our reserves are accurately reflected.

Barter Transactions

We may provide broadcast time or digital advertising placement to customers in exchange for certain products, supplies or services. The terms of these exchanges generally permit for the preemption of such broadcast time or digital placements in favor of customers who purchase these items for cash. We include the value of such exchanges in net revenues and operating expenses. The value recorded for barter revenue and barter expense is based upon management’s estimate of the fair value of the products, supplies or services received. We believe that our estimates and assumptions are reasonable and that our barter revenue and barter expense are accurately reflected.

We record barter revenue as it is earned, typically when the broadcast time is used or the digital advertisement is delivered. We record barter expense equal to the estimated fair value of the goods or services received upon receipt or usage of the items as applicable. Barter advertising revenue included in broadcast revenue for the three and six months ended June 30, 2016 was approximately $1.4 million and $2.4 million, respectively, and $1.4 million and $3.1 million, respectively, for the same period of the prior year. Barter expenses included in broadcast operating expense for the three and six months ended June 30, 2016 was approximately $1.4 million and $2.4 million, respectively, and $1.3 million and $2.9 million, respectively, for the same period of the prior year.

Inventory Reserves

Inventories consist of finished goods, including published books and wellness products. Inventory is recorded at the lower of cost or market as determined on a First-In First-Out (“FIFO”) cost method. We reviewed historical data associated with book and wellness product inventories held by Regnery Publishing and our e-commerce wellness entities, as well as our own experiences to estimate the fair value of inventory on hand. Our analysis includes a review of actual sales returns, our allowances, royalty reserves, overall economic conditions and product demand. We record a provision to expense the balance of unsold inventory that we believe to be unrecoverable. We regularly monitor actual performance to our estimates and make adjustments as necessary. Estimated inventory reserves may be adjusted, either favorably or unfavorably, if factors such as the historical data we used to calculate these estimates do not properly reflect future returns or as a result of changes in economic conditions of the customer and/or the market. We have not modified our estimate methodology and we have not historically recognized significant losses from changes in our estimates. We believe that our estimates and assumptions are reasonable and that our reserves are accurately reflected.

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Reserves for Royalty Advances

Royalties due to book authors are paid in advance and capitalized. Royalties are expensed as the related book revenues are earned or when we determine that future recovery of the royalty is not likely. We reviewed historical data associated with royalty advances, earnings and recoverability based on actual results of Regnery Publishing. Historically, the longer the unearned portion of an advance remains outstanding, the less likely it is that we will recover the advance through the sale of the book. We apply this historical experience to outstanding royalty advances to estimate the likelihood of recovery. A provision was established to expense the balance of any unearned advance which we believe is not recoverable. Our analysis also considers other discrete factors, such as death of an author, any decision to not pursue publication of a title, poor market demand or other relevant factors. We have not modified our estimate methodology and we have not historically recognized significant losses from changes in our estimates. We believe that our estimates and assumptions are reasonable and that our reserves are accurately reflected.

Fair Value of Equity Awards

We account for stock-based compensation under the provisions of FASB ASC Topic 718, “Compensation—Stock Compensation.” We record equity awards with stock-based compensation measured at the fair value of the award as of the grant date. We determine the fair value of our options using the Black-Scholes option-pricing model that requires the input of highly subjective assumptions, including the expected stock price volatility and expected term of the options granted. The exercise price for options is equal to the closing market price of Salem Media Group Inc. common stock as of the date of grant. We use the straight-line attribution method to recognize share-based compensation costs over the expected service period of the award. Upon exercise, cancellation, forfeiture, or expiration of stock options, or upon vesting or forfeiture of restricted stock awards, deferred tax assets for options and restricted stock awards with multiple vesting dates are eliminated for each vesting period on a first-in, first-out basis as if each vesting period was a separate award. We have not modified our estimates or assumptions. We believe that our estimates and assumptions are reasonable and that our stock-based compensation is accurately reflected in our results of operations.

Partial Self-Insurance on Employee Health Plan

We provide health insurance benefits to eligible employees under a self-insured plan whereby the company pays actual medical claims subject to certain stop loss limits. We record self-insurance liabilities based on actual claims filed and an estimate of those claims incurred but not reported. Our estimates are based on historical data and probabilities. Any projection of losses concerning our liability is subject to a high degree of variability. Among the causes of this variability are unpredictable external factors such as future inflation rates, changes in severity, benefit level changes, medical costs and claim settlement patterns. Should the actual amount of claims increase or decrease beyond what was anticipated, we may adjust our future reserves. Our self-insurance liability was $0.6 million and $0.7 million at June 30, 2016 and December 31, 2015, respectively. We have not modified our estimate methodology and we have not historically recognized significant losses from changes in our estimates. We believe that our estimates and assumptions are reasonable and that our reserves are accurately reflected.

Income Tax Valuation Allowances (Deferred Taxes)

For financial reporting purposes, we recorded a valuation allowance of $2.8 million as of June 30, 2016 and December 31, 2015 to offset a portion of the deferred tax assets related to the state net operating loss carryforwards.  We regularly review our financial forecasts in an effort to determine our ability to utilize the net operating loss carryforwards for tax.

Income Taxes and Uncertain Tax Positions

We account for income taxes in accordance with FASB ASC Topic 740, “Income Taxes.”  We recorded no adjustments to our unrecognized tax benefits as of June 30, 2016 and 2015.  At December 31, 2015, we had $0.1 million in liabilities for unrecognized tax benefits.  Included in this liability amount is approximately $20,000 of accrued interest, net of federal income tax benefits, and $6,000 for the related penalties recorded in income tax expense on our Condensed Consolidated Statements of Operations.  We expect to reduce the reserve balance to zero over the next twelve months due to statute expirations.  

LIQUIDITY AND CAPITAL RESOURCES

We have historically funded, and will continue to fund, expenditures for operations, administrative expenses, and capital expenditures from operating cash flow, borrowings under credit facilities and, if necessary, proceeds from the sale of selected assets or businesses. We have historically financed acquisitions through borrowings, including borrowings under credit facilities and, to a lesser extent, from operating cash flow and from proceeds on selected asset dispositions. We expect to fund future acquisitions from cash on hand, borrowings under our credit facilities, operating cash flow and possibly through the sale of income-producing assets or proceeds from debt and equity offerings. We believe that the borrowing capacity under our current credit facilities allows us to meet our ongoing operating requirements, fund capital expenditures and satisfy our debt service requirements for at least the next twelve months.

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The balance of our cash and cash equivalents decreased to $44,000 as of June 30, 2016 as compared to $0.1 million as of December 31, 2015. Working capital increased $1.0 million to $14.1 million as of June 30, 2016 compared to $13.1 million as of December 31, 2015.

Operating Cash Flows

Our largest source of operating cash inflows are receipts from customers in exchange for advertising and programming. Other sources of operating cash inflows include cash receipts from customers for digital downloads and streaming, book sales, subscriptions, ticket sales, sponsorships, and vendor promotions. A majority of our operating cash outflows consist of payments to employees, such as salaries and benefits, and vendor payments under facility and tower leases, talent agreements, inventory purchases and recurring services such as utilities and music license fees.

Net cash provided by operating activities during the six month period ending June 30, 2016 increased by $3.8 million to $19.7 million compared to $15.9 million during the same period of the prior year. The increase in cash provided by operating activities includes the impact of the following items:

· Net income decreased to $3.7 million compared to $3.8 million for the same period of the prior year;

· Net accounts receivable decreased $2.9 million;

· Our Day’s Sales Outstanding, or the average number of days to collect cash from the date of sale, decreased to 62 days at June 30, 2016 compared to 67 days for the same period of the prior year;

· Net accounts payable and accrued expenses decreased $2.2 million to $14.3 million for the six months ended June 30, 2016 compared to an increase of $0.8 million to $16.5 million for the same period of the prior year; and

· Net inventories on hand slightly decreased to $0.9 million at June 30, 2016 compared to a $0.3 million decrease to $0.9 million for the same period of the prior year.

Investing Cash Flows

Our primary source of investing cash inflows includes proceeds from the sale or disposal of assets or businesses. Our investing cash outflows include cash payments made to acquire businesses, to acquire property and equipment and to acquire intangible assets such as domain names. While our focus continues to be on deleveraging the company, we remain committed to explore and pursue strategic acquisitions.

In recent years, our acquisition agreements have contained contingent earn-out arrangements that are payable in the future based on the achievement of predefined operating results. We believe that these contingent earn-out arrangements provide some degree of protection with regard to our cash outflows should these acquisitions not meet our operational expectations.

The following transactions have closed as of the date of this filing:

· On August 1, 2016, we acquired the assets of Hillcrest Media Group, Inc. for $3.5 million in cash.

· On June 20, 2016, we closed on the acquisition of an FM Translator used in our Columbus, Ohio market for $0.3 million in cash.

· On June 10, 2016, we closed on the acquisition of an FM Translator in Amherst, New York for $60,000 in cash. The translator is used in our Pittsburgh, Pennsylvania market.

· On June 8, 2016, we closed on the acquisition of an FM Translator construction permit in Charlotte, Michigan for $50,000 in cash. The translator will be used in our Detroit, Michigan market and is reflected in projects-in-process at June 30, 2016.

· On June 3, 2016, we closed on the acquisition of an FM Translator construction permit in Atwood, Kentucky for $88,000 in cash. The translator will be used in our Columbus, Ohio market and is reflected in projects-in-process at June 30, 2016.

· On May 13, 2016, we closed on the acquisition of an FM Translator construction permit in Kerrville, Texas for $50,000 in cash. The translator will be used in our Houston, Texas market and is reflected in projects-in-process at June 30, 2016.

· On May 2, 2016, we closed on the acquisition of an FM Translator in Lincoln, Maine for $100,000 in cash. The translator is used in our Boston, Massachusetts market.

· On April 29, 2016, we closed on the acquisition of a construction permit for an FM Translator in Emporia, Kansas for $25,000 in cash. The translator will be relocated to Omaha, Nebraska, for use by our KCRO-AM radio station and is reflected in projects-in-process at June 30, 2016.

· On April 1, 2016, we acquired the Retirement Watch newsletter and websites for $0.1 million in cash and the assumption of $0.6 million in deferred subscription liabilities. Retirement Watch offers research and strategies associated with retirement planning. We recorded goodwill of approximately $8,600 associated with the expected synergies to be realized upon combining the operations of Retirement Watch into our digital media platform and brand loyalty from its existing subscriber base that is not a separately identifiable intangible asset.

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· On March 8, 2016, we acquired King James Bible mobile applications for $4.0 million of which $2.7 million was paid in cash upon close and $1.3 million is due in deferred installments within one year from the closing date. The due dates for the deferred installments were amended on May 17, 2016 to include the $0.2 million installment that was due upon finalization of banking arrangements for revenue receipts. The amended deferred installment payments include $0.6 million due within 90 days, $0.4 million due within 180 days and two deferred payments of $0.2 million each due 270 and 360 days from the closing date, respectively. We recorded goodwill of $0.2 million associated with the expected synergies to be realized from combining the operations of these applications into our existing digital platform. The accompanying consolidated statement of operations reflects the operating results of King James Bible mobile applications as of the closing date within our digital media operating segment.

We also have the option to acquire radio station KHTE-FM, Little Rock, Arkansas, for $1.2 million in cash during our 36-month TBA that is extendable to 48 months. The TBA began on April 1, 2015, at which time we began programming the station. The accompanying condensed consolidated statements of operations included in this quarterly report on Form 10-Q reflect the operating results of this entity as of the TBA date.

We have entered the following agreements that are expected to close during 2016:

· On June 24, 2016, we entered an LMA to begin operating radio station KTRB-AM in San Francisco, California as of July 1, 2016.

We entered several agreements to acquire FM Translators or FM Translator construction permits during the first window of the FCC AM Revitalization program, or “AMR.” that included several initiatives intended to benefit AM broadcasters. We believe that securing these FM Translators will allow us to increase our audience by providing enhanced coverage and reach of our existing AM broadcasts. We have entered the following agreements that are expected to close during 2016:

Date APA Entered	Permit or ID	Authorized Site - Current	Purchase Price		Escrow Deposits		Market
			(Dollars in thousands)
5/18/2016	W222BT	Palm Coast, Florida *	$	65	$	-	Tampa, Florida
5/25/2016	W224BU	Lake City, Florida		65		4	Orlando, Florida
6/2/2016	W284BO	Lake Placid, Florida		35		-	Orlando, Florida
6/15/2016	W267BW	Sebring, Florida		77		15	Miami, Florida
7/25/2016	K296AL	Crested Butte, Colorado		39		8	Colorado Springs, Colorado
7/25/2016	K283CA	Festus, Missouri *		40		8	St. Louis, Missouri
7/26/2016	W263BS	Rhinelander, Wisconsin		50		25	Minneapolis, Minnesota
7/26/2016	K294CP	Roseburg, Oregon *		45		9	Portland, Oregon
7/26/2016	W279BK	Carbondale, Pennsylvania		75		15	Pittsburgh, Pennsylvania
7/26/2016	W283BR	Dansville, New York		75		15	New York, New York
7/26/2016	K228FC	Kingsville, Texas *		50		10	Houston, Texas
7/26/2016	K245AR	Little Fish Lake Valley, California		44		20	Sacramento, California
7/26/2016	K276FZ	Eaglemount, Washington *		40		8	Portland, Oregon
7/27/2016	W256CO	Angola, Indiana *		50		15	Cleveland, Ohio
7/27/2016	W249CQ	Cofax, Indiana *		45		14	St. Louis, Missouri
7/27/2016	W263CS	Battle Creek, Michigan *		50		15	Cleveland, Ohio
7/27/2016	W227BT	Port St Lucie, Florida		100		10	Tampa, Florida
	W298AM	Aurora, Florida					TBD
7/28/2016	K239CD	Lahaina, Hawaii *		110		11	Honolulu, Hawaii
	K241BZ	Kihei, Hawaii					Honolulu, Hawaii

* Indicates that purchase is for FM Translator Construction Permit

As of June 30, 2016, we deposited $19,000 of cash into escrow accounts associated with APA’s for the FM Translators in Lake Placid, Florida and Sebring, Florida. As of the date of this filing, we deposited an additional $0.2 million into escrow accounts for the remaining FM Translator and FM Translator construction permits. We plan to fund the remaining balances due for these acquisitions from cash on hand, borrowings under our credit facilities, and operating cash flow.

We undertake projects from time to time to upgrade our radio station technical facilities and/or FCC broadcast licenses, expand our digital and web-based offerings, improve our facilities and upgrade our computer infrastructures. The nature and timing of these upgrades and expenditures can be delayed or scaled back at the discretion of management. Based on our current plans, we expect to incur capital expenditures of approximately $11.0 million during 2016.

Net cash used in investing activities during the six month period ending June 30, 2016 decreased $5.2 million to $7.1 million compared to $12.3 million during the same period of the prior year. The decrease in cash used for investing activities includes:

· Cash paid for acquisitions decreased $3.0 million to $3.5 million compared to $6.5 million during the same period of the prior year;

· Cash paid for capital expenditures increased $0.8 million to $5.0 million compared to $4.2 million during the same period of the prior year;

· Cash received for the sale of broadcast assets increased to $2.5 million over the same period of the prior year; and

· Capital expenditures for leasehold improvements that are reimbursable as tenant improvement allowances decreased $0.5 million to $0.4 million compared to $0.9 million during the same period of the prior year.

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Financing Cash Flows

Financing cash inflows include borrowings under our credit facilities and any proceeds from the exercise of stock options issued under our stock incentive plan. Financing cash outflows include repayments of our credit facilities, the payment of equity distributions and payments of amounts due under deferred installments and contingency earn-out consideration associated with acquisition activity.

We believe that cash payments for deferred installments and contingent earn-out consideration that were entered contemporaneously with an acquisition are appropriately recorded as financing activities. These payments are similar to seller financing arrangements in that cash payments are typically due one to three years after the acquisition date. We referred to guidance in FASB ASC Topic 230-10-45-13 (c) which states that only advance payments, down payments, or other amounts paid at the time of purchase or soon before or after a purchase of property, plant and equipment and other productive assets are investing cash outflows. The guidance clarifies that incurring directly related debt to the seller is a financing transaction and that subsequent payments of that debt are financing cash outflows. During the six month period ending June 30, 2016, we paid $0.1 million of cash for contingent earn-out consideration due under acquisition agreements and $3.1 million of cash for deferred installments.

During the six month period ending June 30, 2016, the principal balances outstanding under our credit facilities ranged from $272.4 million to $278.1 million. These outstanding balances were ordinary and customary based on our operating and investing cash needs during this time.

Based on the number of shares of Class A and Class B common stock currently outstanding we expect to pay total annual equity distributions of approximately $6.7 million in 2016. The actual declaration of dividends and equity distributions, as well as the establishment of per share amounts, dates of record, and payment dates are subject to final determination by our Board of Directors and dependent upon future earnings, cash flows, financial requirements, and other factors. The current policy of the Board of Directors is to review each of these factors on a quarterly basis to determine the appropriate amount, if any, to allocate toward a cash distribution with the general principle of using approximately 20% of free cash flow. Free cash flow is a non-GAAP financial measure defined in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our quarterly report on Form 10-Q.

Our sole source of cash available for making any future equity distributions is our operating cash flow, subject to our credit facilities, which contain covenants that restrict the payment of dividends and equity distributions unless certain specified conditions are satisfied.

Net cash used in financing activities during the six month period ending June 30, 2016 increased by $9.1 million to $12.6 million from $3.5 million during the same period of the prior year. The increase in cash used for financing activities includes:

· We paid $3.1 million of cash due under purchase agreements with deferred installments during the six month period ending June 30, 2016;

· The impact of our book overdraft of a $2.2 million source as of the period ending June 30, 2016 compared to a $1.0 million use for the same period of the prior year;

· We paid $0.1 million of cash due for amounts earned under the contingent earn-out provision of our purchase agreements during the six month period ending June 30, 2016 compared to $1.2 million during the same period of the prior year,

· We repaid $2.8 million of principal outstanding on the Term Loan B compared to $2.0 million of principal during the same period of the prior year; and

· We paid cash equity distributions of $3.3 million on our Class A and Class B common stock during the six month period ending June 30, 2016 and 2015.

Credit Facilities

Salem Media Group, Inc. has no independent assets or operations, the subsidiary guarantees are full and unconditional and joint and several, and any subsidiaries of Salem Media Group, Inc. other than the subsidiary guarantors are minor.

Term Loan B and Revolving Credit Facility

On March 14, 2013, we entered into a senior secured credit facility, consisting of the Term Loan B of $300.0 million and $25.0 million Revolver. The Term Loan B was issued at a discount for total net proceeds of $298.5 million. The discount is being amortized to non-cash interest expense over the life of the loan using the effective interest method. For each of the three and six months ended June 30, 2015 and 2016, approximately $47,000 and $93,000, respectively, and $52,000 and $104,000, respectively, of the discount has been recognized as interest expense.

The Term Loan B has a term of seven years, maturing in March 2020. During this term, the principal amount may be increased by up to an additional $60.0 million, subject to the terms and conditions of the credit agreement. We are required to make principal payments of $750,000 per quarter which began on September 30, 2013. Prepayments may be made against the outstanding balance of our Term Loan B with each prepayment applied ratably to each of the next four principal installments due within 12 months of the prepayment date in the direct order of maturity and thereafter to the remaining principal balance in reverse order of maturity.

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We made the following payments or prepayments of our Term Loan B during the year ended December 31, 2015 and six month period ending June 30, 2016, including interest through the payment date as follows:

Date	Principal Paid		Unamortized Discount
	(Dollars in thousands)
June 30, 2016	$	441	$	1
June 30, 2016		750		—
March 31, 2016		750		—
March 17, 2016		809		2
January 30, 2015		2,000		15

In April 2015, the FASB issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs,” that requires the cost of issuing debt to be recorded as a reduction of the debt proceeds or a reduction of the debt liability, similar to the presentation of debt discounts. Prior to this ASU, debt issue costs were recorded as deferred costs, or long-term intangible assets. In August 2015, the FASB issued ASU 2015-15, “Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements - Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting” that amended ASU 2015-03 to reflect the SEC staff’s position that it would not object to an entity deferring and presenting debt issuance costs related to line-of-credit arrangements as an asset and subsequently amortizing deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are outstanding borrowings under that line-of-credit arrangement.

We adopted ASU 2015-03, as amended by ASU 2015-15, as of the effective date, or fiscal years beginning after December 31, 2015. We chose to continue the presentation of debt issue costs associated with our Revolver as an asset in accordance with ASU 2015-15. We have retrospectively accounted for the implementation of ASU 2015-03 and ASU 2015-15 as a change in accounting principle. We have reclassified debt issue costs reported on our December 31, 2015 consolidated balance sheet as follows:

	December 31, 2015
	(Dollars in thousands)
	As Reported			As Updated ASU 2015-03
Balance Sheet Line Items:
Term Loan B	$	273,136		$	274,000
Less:  Unamortized discount based on imputed interest rate of 4.78%		—			(864	)
Less:  Unamortized debt issuance costs based on imputed interest rate of 4.78%		—			(2,361	)
Term Loan B net carrying value		273,136			270,775
Revolver		3,306			3,306
Capital leases and other loans		674			674
	$	277,116		$	274,755
Less current portion		(5,662	)		(5,662	)
Long-term debt and capital lease obligations less unamortized discount and debt issuance costs, net of current portion	$	271,454		$	269,093
Deferred financing costs	$	2,512		$	151

Debt issue costs are being amortized to non-cash interest expense over the life of the Term Loan B using the effective interest method. For each of the three months ended June 30, 2015 and 2016, approximately $139,000 and $141,000, respectively, of the debt issue costs associated with the Term Loan B were recognized as interest expense. For each of the six months ended June 30, 2015 and 2016, approximately $279,000 and $283,000, respectively, of the debt issue costs associated with the Term Loan B were recognized as interest expense.

We chose to continue the presentation of debt issue costs associated with our Revolver as an asset in accordance with ASU 2015-15. These costs are being amortized to non-cash interest expense over the five year life of the Revolver using the effective interest method based on an imputed interest rate of 4.58%. During each of the three and six month periods ending June 30, 2015 and 2016, we recorded amortization of deferred financing costs of approximately $17,000 each and $35,000 each.

The Revolver has a term of five years, maturing in March 2018. We report outstanding balances on our Revolver as short-term based on use of the Revolver to fund ordinary and customary operating cash needs with repayments made frequently. We believe that the borrowing capacity under our Term Loan B and Revolver allows us to meet our ongoing operating requirements, fund capital expenditures and satisfy our debt service requirements for at least the next twelve months.

Borrowings under the Term Loan B may be made at LIBOR (subject to a floor of 1.00%) plus a spread of 3.50% or Wells Fargo Bank, National Association’s (“Wells Fargo”) base rate plus a spread of 2.50%. Borrowings under the Revolver may be made at LIBOR or Wells Fargo’s base rate plus a spread determined by reference to our leverage ratio, as set forth in the pricing grid below.  If an event of default occurs under the credit agreement, the applicable interest rate may increase by 2.00% per annum. At June 30, 2016, the blended interest rate on amounts outstanding under the Term Loan B and Revolver was 4.51%.

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		Revolver Pricing
Pricing Level	Consolidated Leverage Ratio	Base Rate Loans			LIBOR Loans
1	Less than 3.00 to 1.00		1.250	%		2.250	%
2	Greater than or equal to 3.00 to 1.00 but less than 4.00 to 1.00		1.500	%		2.500	%
3	Greater than or equal to 4.00 to 1.00 but less than 5.00 to 1.00		1.750	%		2.750	%
4	Greater than or equal to 5.00 to 1.00 but less than 6.00 to 1.00		2.000	%		3.000	%
5	Greater than or equal to 6.00 to 1.00		2.500	%		3.500	%

The obligations under the credit agreement and the related loan documents are secured by liens on substantially all of the assets of Salem and its subsidiaries, other than certain exceptions set forth in the Security Agreement, dated as of March 14, 2013, among Salem, the subsidiary guarantors party thereto, and Wells Fargo, as Administrative Agent (the “Security Agreement”) and such other related loan documents.

With respect to financial covenants, the credit agreement includes a minimum interest coverage ratio, which started at 1.50 to 1.0 and stepped up to 2.50 to 1.0 and a maximum leverage ratio, which started at 6.75 to 1.0 and steps down to 5.75 to 1.0 by 2017.  The credit agreement also includes other negative covenants that are customary for credit facilities of this type, including covenants that, subject to exceptions described in the credit agreement, restrict the ability of Salem and its subsidiary guarantors: (i) to incur additional indebtedness; (ii) to make investments; (iii) to make distributions, loans or transfers of assets; (iv) to enter into, create, incur, assume or suffer to exist any liens; (v) to sell assets; (vi) to enter into transactions with affiliates; or (vii) to merge or consolidate with, or dispose of all or substantially all assets to, a third party.  As of June 30, 2016, our leverage ratio was 5.39 to 1 compared to our compliance covenant of 6.00 and our interest coverage ratio was 3.33 compared to our compliance ratio of 2.50. We were in compliance with our debt covenants under the credit facility at June 30, 2016.

Other Debt

We have several capital leases related to office equipment. The obligation recorded at December 31, 2015 and June 30, 2016 represents the present value of future commitments under the capital lease agreements.

Summary of long-term debt obligations

Long-term debt consisted of the following:

	As of December 31, 2015			As of June 30, 2016
	(Dollars in thousands)
Term Loan B principal amount	$	274,000		$	271,250
Less unamortized discount and debt issuance costs based on imputed interest rate of 4.78%		(3,225	)		(2,825	)
Term Loan B net carrying value		270,775			268,425
Revolver		3,306			1,770
Capital leases and other loans		674			622
		274,755			270,817
Less current portion		(5,662	)		(4,439	)
	$	269,093		$	266,378

In addition to the outstanding amounts listed above, we also have interest payments related to our long-term debt as follows as of June 30, 2016:

· Outstanding borrowings of $271.2 million under the Term Loan B with interest payments due at LIBOR (subject to a floor of 1.00%) plus 3.50% or prime rate plus 2.50%; and

· Outstanding borrowings of $1.8 million under the Revolver, with interest payments due at LIBOR plus 3.00% or at prime rate plus 2.00%.

· Commitment fees of 0.50% on any unused portion of the revolver.

Maturities of Long-Term Debt and Capital Lease Obligations

Principal repayment requirements under all long-term debt agreements and capital lease obligations outstanding at June 30, 2016 for each of the next five years and thereafter are as follows:

	Amount
For the Twelve Months Ended June 30,	(Dollars in thousands)
2017	$	4,439
2018		3,112
2019		3,102
2020		259,969
2021		113
Thereafter		82
	$	270,817

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Impairment Losses on Goodwill and Indefinite-Lived Intangible Assets

Under FASB ASC Topic 350 “Intangibles—Goodwill and Other,” indefinite-lived intangibles, including broadcast licenses, goodwill and mastheads are not amortized but instead are tested for impairment at least annually, or more frequently if events or circumstances indicate that there may be an impairment. Impairment is measured as the excess of the carrying value of the indefinite-lived intangible asset over its fair value. Intangible assets that have finite useful lives continue to be amortized over their useful lives and are measured for impairment if events or circumstances indicate that they may be impaired. Impairment losses are recorded as operating expenses. We have incurred significant impairment losses in prior years with regard to our indefinite-lived intangible assets.

We perform our annual impairment testing during the fourth quarter of each year, which coincides with our budget and planning process for the upcoming year. During our annual testing in the fourth quarter of 2015, we recognized an impairment charge of $0.4 million associated with the value of goodwill associated with the Singing News Network (formerly Solid Gospel Network.) The impairments were driven by reductions in the projected net revenues of the Singing News Network and of continual declines in revenues from our print magazines that were not offset with cost reductions from the decrease in the number of publications printed. The growth of digital-only publications, which are often free or significantly less than a print magazine, has hindered the ability of the publishing industry to recover from the economic recession that began in 2008. We believe that the impairments are indicative of trends in the industry as a whole and are not unique to our company or operations.

We believe that our estimate of the value of our broadcast licenses, mastheads, and goodwill is a critical accounting estimate as the value is significant in relation to our total assets, and our estimates incorporate variables and assumptions that are based on past experiences and judgment about future operating performance of our markets and business segments. If actual future results are less favorable than the assumptions and estimates we used, we are subject to future impairment charges, the amount of which may be material. The fair value measurements for our indefinite-lived intangible assets use significant unobservable inputs that reflect our own assumptions about the estimates that market participants would use in measuring fair value including assumptions about risk. The unobservable inputs are defined in FASB ASC Topic 820, “Fair Value Measurements and Disclosures,” as Level 3 inputs discussed in detail in Note 14.

The valuation of intangible assets is subjective and based on estimates rather than precise calculations. The fair value measurements of our indefinite-lived intangible assets use significant unobservable inputs that reflect our own assumptions about the estimates that market participants would use in measuring fair value including assumptions about risk. If actual future results are less favorable than the assumptions and estimates we used, we are subject to future impairment charges, the amount of which may be material. Given the current economic environment and uncertainties that can negatively impact our business, there can be no assurance that our estimates and assumptions made for the purpose of our indefinite-lived intangible fair value estimates will prove to be accurate.

While the impairment charges we have recognized are non-cash in nature and do not violate the covenants on our Revolver and Term Loan B, the potential for future impairment charges can be viewed as a negative factor with regard to forecasted future performance and cash flows. We believe that we have adequately considered the potential for an economic downturn in our valuation models and do not believe that the non-cash impairments in and of themselves are a liquidity risk.

OFF-BALANCE SHEET ARRANGEMENTS

At June 30, 2016, Salem did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, Salem is not materially exposed to any financing, liquidity, market or credit risk that could arise if Salem had engaged in such relationships.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

DERIVATIVE INSTRUMENTS

We are exposed to fluctuations in interest rates. We actively monitor these fluctuations and use derivative instruments from time to time to manage the related risk. In accordance with our risk management strategy, we use derivative instruments only for the purpose of managing risk associated with an asset, liability, committed transaction, or probable forecasted transaction that is identified by management. Our use of derivative instruments may result in short-term gains or losses that may increase the volatility of our earnings.

Under FASB ASC Topic 815 “Derivatives and Hedging,” the effective portion of the gain or loss on a derivative instrument designated and qualifying as a cash flow hedging instrument shall be reported as a component of other comprehensive income (outside earnings) and reclassified into earnings in the same period or periods during which the hedged forecasted transaction affects earnings. The remaining gain or loss on the derivative instrument, if any, shall be recognized currently in earnings.

On March 27, 2013, we entered into an interest rate swap agreement with Wells Fargo Bank, National Association that began on March 28, 2014 with a notional principal amount of $150.0 million. The agreement was entered to offset risks associated with the variable interest rate on our Term Loan B. Payments on the swap are due on a quarterly basis with a LIBOR floor of 0.625%. The swap expires on March 28, 2019 at a fixed rate of 1.645%. The interest rate swap agreement was not designated as a cash flow hedge, and as a result, all changes in the fair value are recognized in the current period statement of operations rather than through other comprehensive income. We recorded a long-term liability of $3.0 million as of June 30, 2016, representing the fair value of the interest rate swap agreement. The swap was valued based on observable inputs for similar assets and liabilities and other observable inputs for interest rates and yield curves, which are classified within Level 2 inputs in the fair value hierarchy described below and in Note 14.

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	December 31, 2015		June 30, 2016
	(Dollars in thousands)
Fair value of interest rate swap liability	$	798	$	2,979

ITEM 4. CONTROLS AND PROCEDURES.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon such evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2016.

There was no change in our internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

We and our subsidiaries, incident to our 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. We maintain insurance that may provide coverage for such matters. Consequently, we are unable to ascertain the ultimate aggregate amount of monetary liability or the financial impact with respect to these matters. We believe, at this time, that the final resolution of these matters, individually and in the aggregate, will not have a material adverse effect upon our annual consolidated financial position, results of operations or cash flows.

ITEM 1A. RISK FACTORS.

We have included in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2015 (the “2015 Annual Report”), a description of certain risks and uncertainties that could affect our business, future performance or financial condition (the “Risk Factors”). The Risk Factors are hereby incorporated in Part II, Item 1A of this Form 10-Q. Investors should consider the Risk Factors prior to making an investment decision with respect to our stock. There are no material changes from the Risk Factors disclosed in the 2015 Annual Report.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULT UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not Applicable

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.

See “Exhibit Index” below.

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SIGNATURES

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

	SALEM MEDIA GROUP, INC.
August 5, 2016
	By: /s/ EDWARD G. ATSINGER III
	Edward G. Atsinger III
	Chief Executive Officer
	(Principal Executive Officer)
August 5, 2016
	By: /s/ EVAN D. MASYR
	Evan D. Masyr
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer)

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EXHIBIT INDEX

Exhibit Number	Exhibit Description	Form	File No.	Date of First Filing	Exhibit Number	Filed Herewith
10.1	Employment Agreement dated July 1, 2016 between Salem Communications Holding Corporation and Stuart W. Epperson.	-	-	-	-	X
31.1	Certification of Edward G. Atsinger III Pursuant to Rules 13a-14(a) and 15d-14(a) under the Exchange Act.	-	-	-	-	X
31.2	Certification of Evan D. Masyr Pursuant to Rules 13a-14(a) and 15d-14(a) under the Exchange Act.	-	-	-	-	X
32.1	Certification of Edward G. Atsinger III Pursuant to 18 U.S.C. Section 1350.	-	-	-	-	X
32.2	Certification of Evan D. Masyr Pursuant to 18 U.S.C. Section 1350.	-	-	-	-	X
101	The following financial information from the Quarterly Report on Form 10Q for the three and six months ended June 30, 2016, formatted in XBRL (Extensible Business Reporting Language) and furnished electronically herewith: (i) the Condensed Consolidated Balance Sheets (ii) Condensed Consolidated Statements of Operations (iii) the Condensed Consolidated Statements of Cash Flows (iv) the Notes to the Condensed Consolidated Financial Statements.	-	-	-	-	X

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EX-10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT

This Employment Agreement (the "Agreement") is entered into as of July 1, 2016, by and between Stuart W. Epperson, an individual ("Executive"), and Salem Communications Holding Corporation, a Delaware corporation (the "Company").

RECITALS

WHEREAS, the Executive and the Company are parties to an Employment Agreement, dated July 1, 2015 (the "Old Employment Agreement");

WHEREAS, the Executive and the Company wish to terminate the Old Employment Agreement, effective as of midnight on June 30, 2016;

WHEREAS, the Company desires to employ Executive in the capacity of Chairman of the Board of the Company on the terms and conditions set forth herein; and

WHEREAS, Executive desires to serve in such capacity on behalf of the Company and to provide to the Company the services described herein on the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the foregoing recitals, the terms and conditions set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Executive and the Company hereby agree as follows:

1. Employment by the Company and Term.

(a) Duties. Subject to the terms set forth herein, the Company agrees to employ Executive as Chairman of the Board and Executive hereby accepts such employment. As Chairman of the Board, Executive shall have the authority, functions, duties, powers and responsibilities for Executive's corporate office and position as set forth in the Company's Bylaws from time to time and such other authority, functions, duties, powers and responsibilities as the Board of Directors of the Company (the "Board") may from time to time prescribe or delegate to Executive, in all cases to be consistent with Executive's corporate offices and positions. Notwithstanding the foregoing, the Board may change Executive’s title, corporate office, positions, authority, functions, duties, powers and responsibilities from time to time if it, in its sole discretion, believes such change(s) to be in the best interest of the Company, provided that in no event shall Executive’s status be of lesser stature than as non-executive Vice Chairman.

(b) Full Time and Best Efforts. During the Term, Executive shall apply, on a full-time basis, all of his skill and experience to the performance of his duties hereunder and shall not, without the prior consent of the Board, devote substantial amounts of time to outside business activities. The performance of Executive's duties shall be primarily in Winston-Salem, North Carolina and Jacksonville, Florida, subject to reasonable travel as the performance of his duties in the business may require. Notwithstanding the foregoing, Executive may devote a reasonable amount of his time to civic, community, charitable or passive investment activities in a manner which is reasonably consistent with his historic practices.

Employment Agreement

Stuart W. Epperson

Page2 of 12

(c) Company Policies. The employment relationship between the parties shall be governed by the general employment policies and practices of the Company and of its parent, Salem Media Group, Inc., a Delaware corporation (“Parent”), including without limitation the policies described in Section 10 of this Agreement, except that when the terms of this Agreement differ from or are in conflict with the Company's or Parent’s general employment policies or practices, this Agreement shall control.

(d) Term. Executive’s term of employment under this Agreement shall commence as of the date hereof (the “Effective Date”) and, subject to the terms hereof, shall terminate on such date (the “Termination Date”) that is the earlier of: (1) June 30, 2017, or (2) the termination of Executive’s employment pursuant to Section 4 of this Agreement. The period from the Effective Date until the Termination Date shall be defined herein as the “Term.”

2. Compensation and Benefits.

(a) Cash Salary. Executive shall receive for services to be rendered hereunder an annual base salary (the "Base Salary"), of One Hundred Fifty Thousand Dollars ($150,000).

(b) Participation in Benefit Plans. During the Term, Executive shall be entitled to participate in any group insurance, hospitalization, medical, dental, health and accident, disability, compensation or other plan or program of the Parent or Company now existing or established hereafter to the extent that he is eligible under the general provisions thereof. The Company may, in its sole discretion and from time to time, amend, eliminate or establish additional benefit programs as it deems appropriate. The availability and terms of such benefit plans shall be set by the Board of Directors of Parent, or its designated committee, and may change from time-to-time. Executive shall be required to comply with all conditions attendant to coverage by the benefit plans hereunder and shall be entitled to benefits only in accordance with the terms and conditions of such plans as they may be enumerated from time to time.

(c) Perquisites. During the Term, the Company shall provide Executive with the perquisites and other fringe benefits generally made available to senior executives of the Company and any such other benefits as the Board of Directors of Parent, or its designated committee, may elect to grant from time-to-time including the following:

(1) Automobile Allowance. The Company shall provide Executive, at no cost to Executive, the use of a company-owned or company-leased vehicle of a cost and quality reasonably acceptable to the Company but, in any event, equal to or exceeding the cost and quality of the vehicle presently used by Executive. The Company shall pay, or reimburse Executive for, all costs associated with operating, maintaining and insuring such automobile, provided such costs are itemized and presented to the company in writing and in a form as then prescribed by the Company in its policies for the reimbursement of employee business expenses;

2 

Employment Agreement

Stuart W. Epperson

Page 3 of 12

(2) Life Insurance. The Company shall provide Executive the death benefit provided under a split-dollar life insurance policy pursuant to a separate Split Dollar Life Insurance Agreement dated January 10, 2011, and entered into by Executive and the Company;

(3) Regulatory Filings. The Company shall pay for all governmental and regulatory filings required by Executive solely as a result of his position as an officer or director of the Company or Parent, including, but not limited to, all Section 16 filings required by Executive. For avoidance of doubt, such filings would include SEC Forms 4 and 5 and Schedule 13G and FCC ownership reports and transfer applications and would not include other filings required in connection with the sale of company stock by Executive;

(4) Regulatory Filings/Fees Associated with Option Exercises. In the event Executive is required to make regulatory filings as a result of his exercise of options granted him by the Company for the purchase of stock of the Parent, the Company shall pay the cost of such filings, including any filing fee. The benefits provided in this Section 2(c)(4) shall include full reimbursement for any income and employment taxes applicable to such benefits;

(5) Travel and Entertainment Expenses. Reasonable, bona-fide Company-related entertainment and travel expenses incurred by Executive in accordance with the Employee Handbook, Code of Ethical Conduct, Financial Code of Conduct and other written policies, all as issued by the Company, relating thereto shall be reimbursed or paid by the Company; and,

(6) Health Benefit. Employer will pay the employee, spouse and dependents portions of the monthly group health care premiums on behalf of Executive.

3. Bonuses.

In addition to the other compensation of Executive as set forth herein, and subject to the provisions of Section 4 hereof, Executive shall be eligible for an annual merit bonus in an amount to be determined at the discretion of the Board of Directors of the Company, which bonus may be paid in cash, options or a combination thereof.

4. Termination of Employment.

(a) Termination For Cause.

(1) Termination; Payment of Accrued Salary. The Board may terminate Executive's employment with the Company at any time for Cause (as hereinafter defined), immediately upon notice to Executive of the circumstances leading to such termination for Cause. In the event that Executive's employment is terminated for Cause, Executive shall receive payment for all accrued salary through the Termination Date, which in this event shall be the date upon which notice of termination is given. The Company shall have no further obligation to pay severance of any kind nor to make any payment in lieu of notice.

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Employment Agreement

Stuart W. Epperson

Page 4 of 12

(2) Definition of Cause. For the purposes of this Agreement, “Cause” shall mean, without limitation, the following: (A) continued gross neglect, malfeasance or gross insubordination in performing duties assigned to Executive; (B) a conviction for a crime involving moral turpitude; (C) an egregious act of dishonesty (including without limitation theft or embezzlement) in connection with employment, or a malicious action by Executive toward Parent, Company, or their affiliates or related entities (together with Parent, collectively “Affiliates”); (D) a violation of the provisions of Section 6(a) hereof; (E) a willful breach of this Agreement; (F) disloyalty; and (G) material and repeated failure to carry out reasonably assigned duties or instructions consistent with Executive’s position.

(b) Termination by Executive. Executive shall have the right, at his election, to terminate his employment with the Company by notice to the Company to that effect: (1) if the Company shall have failed to substantially perform a material condition or covenant of this Agreement ("Company's Material Breach") or (2) if the Company materially reduces or diminishes Executive's powers and responsibilities hereunder; provided, however, that a termination under clauses (1) and (2) of this Section 4(b) shall not be effective until Executive shall have given notice to the Company specifying the claimed breach and, provided such breach is curable, Company fails to correct the claimed breach within 30 days after the receipt of the applicable notice or such longer term as may be reasonably required by the Company due to the nature of the claimed breach (but within 10 days if the failure to perform is a failure to pay monies when due under the terms of this Agreement).

(c) Termination Upon Disability. The Company may terminate Executive's employment in the event Executive suffers any mental or physical impairment which prevents Executive at any time during the Term from performing the essential functions of his full duties for a period of 180 days within any 270 day period and Executive thereafter fails to return to work within 10 days of notice by the Company of intention to terminate (“Disability”). After the Termination Date, which in the event of a Disability shall be the date upon which notice of termination is given, no further compensation shall be payable under this Agreement except that Executive shall receive the accrued portion of any salary and bonus through the Termination Date, less standard withholdings for tax and social security purposes, payable, in the case of a bonus, upon such date or over such period of time which is in accordance with the applicable bonus plan plus severance equal to 100% of his then Base Salary for 15 months without offset for any disability payments Executive may receive, payable in equal monthly installments. After the Termination Date following a Disability, any then unvested or time-vested stock options previously granted to Executive by the Company shall become immediately one hundred percent (100%) vested.

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(d) Termination Without Cause. In the event that, during the Term, Executive's employment is terminated by the Company other than pursuant to Section 4(a) or 4(c), or by Executive pursuant to Section 4(b), the Company shall pay Executive as severance an amount equal to his then Base Salary for the longer of six months or the remainder of the Term, less standard withholdings for tax and social security purposes, payable in equal installments over six consecutive months, or, if longer, the number of months remaining in the Term, commencing immediately following termination, in monthly pro rata payments commencing as of the Termination Date, plus the accrued portion of any bonus through the Termination Date, less standard withholdings for tax and social security purposes, payable, in the case of a bonus, upon such date or over such period of time which is in accordance with the applicable bonus plan.

(e) Benefits Upon Termination. All benefits provided under Section 2(b) hereof shall be extended at the Executive's cost, to the extent permitted by the Company's insurance policies and benefit plans, for six months after Executive's Termination Date, except (i) as required by law (e.g. COBRA health insurance continuation election) or (ii) in the event of a termination by the Company pursuant to Section 4(a).

(f) Termination Upon Death. If Executive dies prior to the expiration of the Term, the Company shall (1) continue coverage of Executive's dependents (if any) under all applicable benefit plans or programs of the type listed above in Section 2(b) herein for a period of 12 months, to the extent permitted by the Company’s insurance policies and benefit plans, and (2) pay to Executive's estate the accrued portion of any salary and bonus through the Termination Date, less standard withholdings for tax and social security purposes, payable, in the case of a bonus, upon such date or over such period of time which is in accordance with the applicable bonus plan. After the Termination Date, which in this event shall be the date of Executive’s death, any then unvested or time-vested stock options previously granted to Executive by the Company shall become immediately one hundred percent (100%) vested.

(g) No Offset. Executive shall have no duty to mitigate any of his damages or losses and the Company shall not be entitled to reduce or offset any payments owed to Executive hereunder for any reason.

5. Right of First Refusal on Corporate Opportunities.

During the Term, Executive agrees that he shall, prior to exploiting a Corporate Opportunity (hereafter defined) for his own account or for the benefit of an immediate family member’s account, offer the Company a right of first refusal with respect to such Corporate Opportunity. For purposes of this Section 5, “Corporate Opportunity” shall mean any business opportunity that is in the same or a related business as any of the businesses in which the Company or any of its Affiliates is involved. The determination as to whether a business opportunity constitutes a Corporate Opportunity shall be made by the Nominating and Corporate Governance Committee of Parent or a majority of the disinterested and independent members of the Board, and their determination shall be based on an evaluation of: (a) the extent to which the Corporate Opportunity is within the Company’s or any of its Affiliates’ existing lines of business or its existing plans to expand; (b) the extent to which the Corporate Opportunity supplements the Company’s or any of its Affiliates’ existing lines of activity or complements the Company’s or any of its Affiliates’ existing methods of service; (c) whether the Company has available resources that can be utilized in connection with the Corporate Opportunity; (d) whether the Company is legally or contractually barred from utilizing the Corporate Opportunity; (e) the extent to which utilization of the Corporate Opportunity by Executive would create conflicts of interest with the Company or any of its Affiliates; and (f) any other factors the Nominating and Corporate Governance Committee or such disinterested and independent Board members deem(s) appropriate under the circumstances.

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Employment Agreement

Stuart W. Epperson

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6. Executive’s Obligations.

(a) Confidential Information. Executive agrees that, during the Term or at any time thereafter:

(1) Executive shall not use for any purpose other than the duly authorized business of Company, or disclose to any third party, any information relating to Company or any of its Affiliates which is proprietary to Company or any of its Affiliates ("Confidential Information"), including any customer list, contact information, rate schedules, programming, data, plans, intellectual property, trade secret or any written (including in any electronic form) or oral communication incorporating Confidential Information in any way (except as may be required by law or in the performance of Executive’s duties under this Agreement consistent with Company's policies) regardless of whether or not such information has been labeled as “confidential”; and

(2) Executive shall comply with any and all confidentiality obligations of Company to a third party, whether arising under a written agreement or otherwise.

(b) Work For Hire.

(1) The results and proceeds of Executive’s services to Company, including, without limitation, any works of authorship resulting from Executive’s services during Executive’s employment with Company and/or any of its Affiliates and any works in progress resulting from such services, shall be works-made-for-hire and Company shall be deemed the sole owner of any and all rights of every nature in such works, whether such rights are now known or hereafter defined or discovered, with the right to use the works in perpetuity in any manner Company determines in its sole discretion without any further payment to Executive. If, for any reason, any of such results and proceeds are not legally deemed a work-made-for-hire and/or there are any rights in such results and proceeds which do not accrue to Company under the preceding sentence, then Executive hereby irrevocably assigns and agrees to assign any and all of Executive’s right, title and interest thereto, whether now known or hereafter defined or discovered, and Company shall have the right to use the work in perpetuity in any location and in any manner Company determines in its sole discretion without any further payment to Executive.

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Stuart W. Epperson

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(2) Executive shall do any and all things which Company may deem useful or desirable to establish or document Company's rights in any such results and proceeds, including, without limitation, the execution of appropriate copyright, trademark and/or patent applications, assignments or similar documents and, if Executive is unavailable or unwilling to execute such documents, Executive hereby irrevocably designates the Chairman of the Board of Directors of Parent or his designee as Executive’s attorney-in-fact with the power to execute such documents on Executive’s behalf. To the extent Executive has any rights in the results and proceeds of Executive’s services under this Agreement that cannot be assigned as described above, Executive unconditionally and irrevocably waives the enforcement of such rights.

(3) Works-made-for-hire do not include subject matter that meets all of the following criteria: (A) is conceived, developed and created by Executive on Executive’s own time without using the Company’s or any of its Affiliate’s equipment, supplies or facilities or any trade secrets or confidential information, (B) is unrelated to the actual or reasonably anticipated business or research and development of Company or any of its Affiliates of which Executive is or becomes aware; and (C) does not result from any work performed by Executive for Company or any of its Affiliates.

(c) Return of Property. All documents, data, recordings, equipment or other property, whether tangible or intangible, including all information stored in electronic form, obtained or prepared by or for Executive and utilized by Executive in the course of Executive’s employment with Company or any of its Affiliates shall remain the exclusive property of Company and shall not be removed from the premises of the Company under any circumstances whatsoever without the prior written consent of the Company, except when (and only for the period) necessary to carry out Executive's duties hereunder, and if removed shall be immediately returned to the Company upon any termination of his employment and no copies thereof shall be kept by Executive; provided, however, that Executive shall be entitled to retain documents reasonably related to his prior interest as a shareholder. Upon termination of employment, Executive shall promptly return all property of Company or any of its Affiliates.

(d) Use of Executive’s Name, Image and Likeness. Company may make use of Executive’s name, photograph, drawing or other likeness in connection with the advertising or the giving of publicity to Company, Parent or a program broadcast or content provided by Company, Parent or any Affiliates. In such regard, Company may make recordings, transcriptions, videotapes, films and other reproductions of any and all actions performed by Executive in his or her capacity as an Executive of Company, including without limitation any voice-over or announcing material provided by Executive (collectively “Executive Performances”). Company shall have the right to broadcast, display, license, assign or use any Executive Performances on a royalty-free basis without additional compensation payable to Executive.

7. Noninterference.

While employed by the Company and for a period of two years thereafter, Executive agrees not to interfere with the business of the Company by directly or indirectly soliciting, attempting to solicit, inducing, or otherwise causing any executive or material employee of the Company or any of its Affiliates to terminate his or her employment in order to become an employee, consultant or independent contractor to or for any other Company.

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8. Noncompetition.

Because of the need to protect the Company’s business interests, including confidential information known by Executive, and as consideration for Company’s offer to employ Executive for the Term, Executive agrees that during the Term and for a period of two years thereafter, he shall not, without the prior consent of the Company, directly or indirectly, be employed by, be connected with, or have an interest in, as an employee, consultant, officer, director, partner, stockholder or joint venturer, in any person or entity owning, managing, controlling, operating or otherwise participating or assisting in any business that is in competition with the business of the Company or any of its Affiliates (a) during the Term, in any location, and (b) for the two-year period following the termination of this Agreement, in any province, state or jurisdiction in the United States in which the Company or any of its Affiliates was conducting business at the date of termination of Executive's employment and continues to do so thereafter; provided, however, that the foregoing shall not prevent Executive from being a stockholder of less than one percent of the issued and outstanding securities of any class of a corporation listed on a national securities exchange or designated as national market system securities on an interdealer quotation system by the National Association of Securities Dealers, Inc. Notwithstanding the foregoing, this paragraph shall not operate to limit Executive’s ability to provide non-confidential information to, serve on the board of directors of, or be employed by any 501(c)(3) organization, including any such organization operating non-commercial radio station(s).

9. Remedies.

Executive acknowledges that a breach or threatened breach by Executive of any the provisions of Sections 5, 6, 7 or 8 will result in the Company and its stockholders suffering irreparable harm which cannot be calculated or fully or adequately compensated by recovery of monetary damages alone. Accordingly, Executive agrees that the Company shall be entitled to interim, interlocutory and permanent injunctive relief, specific performance and other equitable remedies, in addition to any other relief to which the Company may become entitled should there be such a breach or threatened breach.

10. Personal Conduct.

Executive agrees to promptly and faithfully comply with all present and future policies, requirements, directions, requests and rules and regulations of the Company in connection with the Company’s business, including without limitation the policies and requirements set forth in Parent’s Employee Handbook, Code of Ethical Conduct and Financial Code of Conduct. Executive further agrees to comply with all laws and regulations pertaining to Executive’s employment with the Company. Executive hereby agrees not to engage in any activity that is in direct conflict with the essential interests of the Company or any of its Affiliates. Executive hereby acknowledges that nothing set forth in the Employee Handbook, Code of Ethical Conduct or Financial Code of Conduct or any other policy issued by the Company or Parent shall be deemed to create a separate contractual obligation, guarantee or inducement between Executive and the Company.

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11. Indemnification.

The Company shall indemnify Executive to the fullest extent permitted by law, in effect at the time of the subject act or omission, and shall advance to Executive reasonable attorneys’ fees and expenses as such fees and expenses are incurred (subject to an undertaking from Executive to repay such advances if it shall be finally determined by a judicial decision which is not subject to further appeal that Executive was not entitled to the reimbursement of such fees and expenses). Executive shall be entitled to the protection of any insurance policies that the Company may elect to maintain generally for the benefit of its directors and officers against all costs, charges and expenses incurred or sustained by him in connection with any action, suit or proceeding (other than any action, suit or proceeding arising under or relating to this Agreement) to which Executive may be made a party by reason of his being or having been a director, officer or employee of the Company or any of its Affiliates, or his serving or having served any other enterprise as a director, officer or employee at the request of the Company. The Company covenants to maintain during Executive’s employment for the benefit of Executive (in his capacity as an officer and director of the Company) Directors’ and Officers’ Insurance providing benefits to Executive no less favorable, taken as a whole, than the benefits provided to the other senior executives of the Company by the Directors’ and Officers’ Insurance maintained by the Company on the date hereof; provided, however, that the Board may elect to terminate Directors’ and Officers’ Insurance for all officers and directors, including Executive, if the Board determines in good faith that such insurance is not available or is available only at unreasonable expense.

12. Miscellaneous.

(a) Notices. Any notices provided hereunder must be in writing and shall be deemed effective upon the earlier of (1) personal delivery (including personal delivery by e-mail or fax), (2) on the first day after mailing by overnight courier, or (3) on the third day after mailing by first class mail, to the recipient at the address indicated below:

To the Company:

Salem Communications Holding Corporation

4880 Santa Rosa Road

Camarillo, California 93012

Attention: Christopher J. Henderson, Senior Vice President

To Executive:

Stuart W. Epperson

3780 Will Scarlet Road

Winston-Salem, NC 27104

or to such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party.

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(b) Severability. If any provision of this Agreement is determined to be invalid or unenforceable by a court of competent jurisdiction from which no further appeal lies or is taken, that provision shall be deemed to be severed herefrom, and all remaining provisions of this Agreement shall not be affected thereby and shall remain valid and enforceable.

(c) Entire Agreement. This document constitutes the final, complete, and exclusive embodiment of the entire agreement and understanding between the parties related to the subject matter hereof and supersedes and preempts any prior or contemporaneous understandings, agreements, or representations by or between the parties, written or oral. Without limiting the generality of the foregoing, except as provided in this Agreement, all understandings and agreements, written or oral, relating to the employment of Executive by the Company or the payment of any compensation or the provision of any benefit in connection therewith or otherwise, are hereby terminated and shall be of no further force and effect.

(d) Counterparts. This Agreement may be executed in separate counterparts, any one of which need not contain signatures of more than one party, but all of which taken together shall constitute one and the same agreement.

(e) Successors and Assigns. This Agreement is intended to bind and inure to the benefit of and be enforceable by Executive and the Company, and their respective successors and assigns, except that Executive may not assign any of his duties hereunder and he may not assign any of his rights hereunder without the prior written consent of the Company.

(f) Amendments. No amendments or other modifications to this Agreement may be made except by a writing signed by both parties. No amendment or waiver of this Agreement requires the consent of any individual, partnership, corporation or other entity not a party to this Agreement. Nothing in this Agreement, express or implied, is intended to confer upon any third person any rights or remedies under or by reason of this Agreement.

(g) Attorneys' Fees. If any legal proceeding is necessary to enforce or interpret the terms of this Agreement, or to recover damages for breach therefore, the prevailing party shall be entitled to reasonable attorney's fees, as well as costs and disbursements, in addition to other relief to which he or it may be entitled.

(h) Choice of Law. All questions concerning the construction, validity and interpretation of this Agreement shall be governed by the internal law, and not the law of conflicts, of the State of California.

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(i) Resolution of Disputes. Company and Executive mutually agree to resolve any and all legal claims arising from or in any way relating to Executive’s employment with Company through mediation or, if mediation does not resolve the claim or dispute within ten (10) days of notice demanding mediation, by binding arbitration under the Federal Arbitration Act subject to the terms and conditions provided below. Notwithstanding the foregoing, insured workers’ compensation claims (other than wrongful discharge claims) and claims for unemployment insurance are excluded from arbitration under this Agreement. This Agreement does not prevent the filing of charges with administrative agencies such as the Equal Employment Opportunity Commission, the National Labor Relations Board, or equivalent state agencies. Arbitration shall be conducted in Ventura County, California in accordance with any of the following, at Executive’s election: (a) the JAMS^® Employment Rules of Procedure, or (b) the rules of procedure issued by another alternative dispute resolution service mutually acceptable to Executive and Company. Any award issued in accordance with this Section 12(i) shall be rendered as a judgment in any trial court having competent jurisdiction. Company shall pay the arbitration fees and expenses, less any filing fee amount the Executive would otherwise have to pay to pursue a comparable lawsuit in a United States district court in the jurisdiction where the dispute arises or state court in the jurisdiction where the dispute arises, whichever is less. All other rights, remedies, exhaustion requirements, statutes of limitations and defenses applicable to claims asserted in a court of law shall apply in the arbitration. Executive expressly waives any presumption or rule, if any, which requires this Agreement to be construed against the Company.

(j) Integration. This Agreement comprises the entire understanding of the parties with respect to the subject matter and shall supersede all other prior written or oral agreements, including without limitation the Old Employment Agreement.

{Continued on the following page.}

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(k) Survival; Modification of Terms. No change in Executive’s duties or salary shall affect, alter, or otherwise release Executive from the covenants and agreements contained herein. All post-termination covenants, agreements, representations and warranties made herein by Executive shall survive the expiration or termination of this Agreement or employment under this Agreement in accordance with their respective terms and conditions.

IN WITNESS WHEREOF, the parties have executed this agreement effective as of the date first written above.

"EXECUTIVE"
/s/STUART W. EPPERSON
Stuart W. Epperson
"COMPANY"
SALEM COMMUNICATIONS HOLDING CORPORATION
By:	/s/EDWARD G. ATSINGER III
	Edward G. Atsinger III
	Chief Executive Officer

I hereby certify that the terms and conditions of this Employment Agreement have been reviewed and approved by the Compensation Committee of Salem Media Group, Inc.

Effective Date: June 30, 2016	/s/RICHARD RIDDLE
	Richard Riddle
	Chairman of the Compensation Committee,
	Salem Media Group, Inc.

12 

EX-31.1

EXHIBIT 31.1

I, Edward G. Atsinger III, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Salem Media Group, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:
	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
	(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
		Date: August 5, 2016

/s/ EDWARD G. ATSINGER III

Edward G. Atsinger III

President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

I, Evan D. Masyr, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Salem Media Group, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:
	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
	(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
		Date: August 5, 2016

/s/ EVAN D. MASYR

Evan D. Masyr

Executive Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned hereby certifies, in his capacity as President and Chief Executive Officer of Salem Media Group, Inc. (the “Company”), for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that based on his knowledge:

· the Quarterly Report of the Company on Form 10-Q for the period ended June 30, 2016 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

· the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 5, 2016
	By: /s/ EDWARD G. ATSINGER III
	Edward G. Atsinger III
	President and Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned hereby certifies, in his capacity as Executive Vice President and Chief Financial Officer of Salem Media Group, Inc. (the “Company”), for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that based on his knowledge:

· the Quarterly report of the Company on Form 10-Q for the period ended June 30, 2016 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

· the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 5, 2016
	By: /s/ EVAN D. MASYR
	Evan D. Masyr
	Executive Vice President and Chief Financial Officer

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2016	Aug. 01, 2016
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2
Entity Registrant Name	SALEM MEDIA GROUP, INC. /DE/
Entity Central Index Key	0001050606
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Trading Symbol	SALM
Common Class A [Member]
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		20,255,855
Common Class B [Member]
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		5,553,696

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 44	$ 98
Trade accounts receivable (net of allowances of $13,479 in 2015 and $11,287 in 2016)	33,091	36,029
Other receivables (net of allowances of $217 in 2015 and $110 in 2016)	830	1,981
Inventories (net of reserves of $1,855 in 2015 and $2,161 in 2016)	903	893
Prepaid expenses	6,315	6,285
Deferred income taxes	9,813	9,813
Assets held for sale	1,000	1,700
Total current assets	51,996	56,799
Notes receivable (net of allowances of $528 in 2015 and $607 in 2016)	154	173
Property and equipment (net of accumulated depreciation of $162,382 in 2015 and $160,604 in 2016)	104,559	105,483
Broadcast licenses	393,566	393,031
Goodwill	24,793	24,563
Other indefinite-lived intangible assets	833	833
Amortizable intangible assets (net of accumulated amortization of $39,454 in 2015 and $41,785 in 2016)	13,220	11,481
Deferred financing costs	116	151
Other assets	3,104	2,500
Total assets	592,341	595,014
Current liabilities:
Accounts payable	3,612	5,177
Accrued expenses	10,687	11,301
Accrued compensation and related expenses	8,272	8,297
Accrued interest	47	16
Current portion of deferred revenue	10,667	13,128
Income taxes payable	128	73
Current portion of long-term debt and capital lease obligations	4,439	5,662
Total current liabilities	37,852	43,654
Long-term debt and capital lease obligations, less unamortized discount and debt issuance costs, net of current portion	266,378	269,093
Fair value of interest rate swap	2,979	798
Deferred income taxes	59,258	57,082
Deferred revenue, less current portion	14,903	13,930
Other long-term liabilities	35	636
Total liabilities	381,405	385,193
Commitments and contingencies (Note 16)
Stockholders’ Equity:
Additional paid-in capital	242,506	241,780
Accumulated earnings	2,156	1,768
Treasury stock, at cost (2,317,650 shares at December 31, 2015 and June 30, 2016)	(34,006)	(34,006)
Total stockholders’ equity	210,936	209,821
Total liabilities and stockholders’ equity	592,341	595,014
Common Class A [Member]
Stockholders’ Equity:
Common stock	224	223
Common Class B [Member]
Stockholders’ Equity:
Common stock	$ 56	$ 56

XML

CONDENSED CONSOLIDATED BALANCE SHEETS [Parenthetical] - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Trade accounts receivable, allowances	$ 11,287	$ 13,479
Other Receivables	110	217
Inventories, reserves	2,161	1,855
Notes receivable, allowance	607	528
Property and equipment, accumulated depreciation	160,604	162,382
Amortizable intangible assets, accumulated amortization	$ 41,785	$ 39,454
Treasury stock, shares	2,317,650	2,317,650
Common Class A [Member]
Common stock, par value	$ 0.01	$ 0.01
Common stock, authorized	80,000,000	80,000,000
Common stock, issued	22,373,577	22,246,134
Common stock, outstanding	20,055,927	19,928,484
Common Class B [Member]
Common stock, par value	$ 0.01	$ 0.01
Common stock, authorized	20,000,000	20,000,000
Common stock, issued	5,553,696	5,553,696
Common stock, outstanding	5,553,696	5,553,696

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Net broadcast revenue	$ 49,707	$ 49,060	$ 98,178	$ 95,599
Net digital media revenue	11,311	11,499	22,595	22,290
Net publishing revenue	6,761	6,734	11,581	11,260
Total net revenue	67,779	67,293	132,354	129,149
Operating expenses:
Broadcast operating expenses, exclusive of depreciation and amortization shown below (including $365 and $402 for the three months ended June 30, 2015 and 2016, respectively, and $730 and $810 for the six months ended June 30, 2015 and 2016, respectively, paid to related parties)	35,709	35,187	71,697	69,104
Digital media operating expenses, exclusive of depreciation and amortization shown below	8,781	8,767	17,967	17,767
Publishing operating expenses, exclusive of depreciation and amortization shown below	6,983	6,469	11,931	10,966
Unallocated corporate expenses exclusive of depreciation and amortization shown below (including $36 and $9 for the three months ended June 30, 2015 and 2016, respectively, and $69 and $107 for the six months ended June 30, 2015 and 2016, respectively, paid to related parties)	3,568	3,518	7,781	7,509
Depreciation	2,982	3,060	5,974	6,232
Amortization	1,189	1,315	2,332	2,644
Change in the estimated fair value of contingent earn-out consideration	(134)	(307)	(262)	(189)
Impairment of long-lived assets	700	0	700	0
(Gain) loss on the sale or disposal of assets	(1,701)	30	(1,551)	159
Total operating expenses	58,077	58,039	116,569	114,192
Operating income	9,702	9,254	15,785	14,957
Other income (expense):
Interest income	2	2	3	3
Interest expense	(3,730)	(3,874)	(7,526)	(7,678)
Change in the fair value of interest rate swap	(423)	444	(2,181)	(976)
Loss on early retirement of long-term debt	(5)	0	(14)	(41)
Net miscellaneous income and expenses	0	0	0	7
Income from operations before income taxes	5,546	5,826	6,067	6,272
Provision for income taxes	2,190	2,303	2,358	2,454
Net income	$ 3,356	$ 3,523	$ 3,709	$ 3,818
Basic earnings per share data:
Basic earnings per share	$ 0.13	$ 0.14	$ 0.14	$ 0.15
Diluted earnings per share data:
Diluted earnings per share	0.13	0.14	0.14	0.15
Distributions per share	$ 0.13	$ 0.07	$ 0.13	$ 0.13
Basic weighted average shares outstanding	25,551,445	25,429,127	25,518,339	25,387,813
Diluted weighted average shares outstanding	26,052,649	25,829,493	25,927,804	25,875,306

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS [Parenthetical] - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Broadcast operating expenses exclusive of depreciation and amortization	$ 35,709	$ 35,187	$ 71,697	$ 69,104
Unallocated corporate expenses exclusive of depreciation and amortization	3,568	3,518	7,781	7,509
Related Party [Member]
Broadcast operating expenses exclusive of depreciation and amortization	402	365	810	730
Unallocated corporate expenses exclusive of depreciation and amortization	$ 9	$ 36	$ 107	$ 69

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
OPERATING ACTIVITIES
Net income	$ 3,709	$ 3,818
Adjustments to reconcile net income to net cash provided by operating activities:
Non-cash stock-based compensation	324	487
Tax benefit related to stock options exercised	67	112
Depreciation and amortization	8,306	8,876
Amortization of debt issuance costs	318	314
Accretion of discount on Term Loan B	103	93
Accretion of acquisition-related deferred payments and contingent consideration	38	160
Provision for bad debts	268	911
Deferred income taxes	2,176	2,197
Change in the fair value of interest rate swap	2,181	976
Change in the estimated fair value of contingent earn-out consideration	(262)	(189)
Loss on early retirement of long-term debt	14	41
Impairment of long-lived assets	700	0
(Gain) loss on the sale or disposal of assets	(1,551)	159
Changes in operating assets and liabilities:
Accounts receivable	7,081	6,315
Inventories	(10)	(272)
Prepaid expenses and other current assets	(30)	(1,191)
Accounts payable and accrued expenses	1,440	(2,674)
Deferred revenue	(5,209)	(4,359)
Other liabilities	0	327
Income taxes payable	55	(154)
Net cash provided by operating activities	19,718	15,947
INVESTING ACTIVITIES
Cash paid for capital expenditures net of tenant improvement allowances and non-cash transactions from trade agreements	(5,055)	(4,207)
Capital expenditures reimbursable under tenant improvement allowances and non-cash transactions from trade agreements	(448)	(947)
Escrow deposits related to acquisitions	(19)	(225)
Purchases of broadcast assets and radio stations	(718)	(5,186)
Purchases of publishing businesses assets	(3)	0
Proceeds from sale of broadcast assets	2,471	0
Other	(547)	(390)
Net cash used in investing activities	(7,122)	(12,277)
FINANCING ACTIVITIES
Payments of acquisition related contingent earn-out consideration	(88)	(1,177)
Payments of deferred installments on acquisitions	(3,071)	(935)
Proceeds from the exercise of stock options	336	298
Payments of capital lease obligations	(53)	(58)
Payment of cash distributions on common stock	(3,321)	(3,301)
Book overdraft	(2,168)	978
Net cash used in financing activities	(12,650)	(3,511)
CASH FLOWS FROM DISCONTINUED OPERATIONS
Net increase (decrease) in cash and cash equivalents	(54)	159
Cash and cash equivalents at the beginning of year	98	33
Cash and cash equivalents at end of period	44	192
Cash paid during the period for:
Cash paid for interest, net of capitalized interest	7,099	7,071
Cash paid for income taxes	60	316
Other supplemental disclosures of cash flow information:
Barter revenue	2,475	3,189
Barter expense	2,441	2,960
Non-cash investing and financing activities:
Capital expenditures reimbursable under tenant improvement allowances	448	947
Non-cash capital expenditures for property & equipment acquired under trade agreements	0	11
Estimated present value of contingent earn-out consideration	0	300
Current value of deferred cash payments (short-term)	1,300	0
Term Loan B [Member]
FINANCING ACTIVITIES
Repayments of borrowings	(2,750)	(2,000)
Revolver [Member]
FINANCING ACTIVITIES
Repayments of borrowings	(34,433)	(24,538)
Proceeds from borrowings under Revolver	32,898	27,222
Digital Media [Member]
INVESTING ACTIVITIES
Purchases of digital media businesses and assets	$ (2,803)	$ (1,322)

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BASIS OF PRESENTATION

6 Months Ended

Jun. 30, 2016

Accounting Policies [Abstract]

BASIS OF PRESENTATION

NOTE 1. BASIS OF PRESENTATION

The accompanying Condensed Consolidated Financial Statements of Salem Media Group, Inc. (“Salem,” “we,” “us,” “our” or the “company”) includes the company and all wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated.

Information with respect to the three and six months ended June 30, 2016 and 2015 is unaudited. The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the unaudited interim financial statements contain all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the financial position, results of operations and cash flows of the company. The unaudited interim financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Annual Report for Salem filed on Form 10-K for the year ended December 31, 2015. Our results are subject to seasonal fluctuations. Therefore, the results of operations for the interim periods presented are not necessarily indicative of the results of operations for the full year.

The balance sheet at December 31, 2015 included in this report has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by GAAP.

Description of Business

Salem is a domestic multi-media company with integrated operations including radio broadcasting, digital media, and publishing. Effective as of February 19, 2015, we changed our name from Salem Communications Corporation to Salem Media Group, Inc. to more accurately reflect our multi-media business. Salem was formed in 1986 as a California corporation and was reincorporated in Delaware in 1999. Our content is intended for audiences interested in Christian and family-themed programming and conservative news talk. We maintain a website at www.salemmedia.com.

We have three operating segments, (1) Broadcast, (2) Digital Media, and (3) Publishing, which are discussed in Note 17 – Segment Data. Our foundational business is the ownership and operation of radio stations in large metropolitan markets. We also own and operate Salem Radio Network® (“SRN”), SRN News Network (“SNN”), Salem Music Network (“SMN”), Today’s Christian Music (“TCM”), Singing News Network (formerly Solid Gospel Network) and Salem Media Representatives^TM (“SMR”). SRN, SNN, SMN and Singing News Network are networks that develop, produce and syndicate a broad range of programming specifically targeted to Christian and family-themed talk stations, music stations and general News Talk stations throughout the United States, including Salem-owned and operated stations. SMR, a national advertising sales firm with offices in ten U.S. cities, specializes in placing national advertising on religious and other commercial radio stations.

Web-based and digital content has been an area of growth for Salem and continues to be a focus of future development. Salem Web Network™ (“SWN”) and our other web-based businesses provide Christian and conservative-themed content, audio and video streaming, and other resources digitally through the web. SWN’s web portals include Christian content websites: OnePlace.com, Christianity.com, Crosswalk.com®, GodVine.com, Jesus.org and BibleStudyTools.com. Our conservative opinion websites, collectively known as Townhall Media, include Townhall.com™, HotAir.com, Twitchy.com, HumanEvents.com and RedState.com. We also issue digital newsletters, including Eagle Financial Publications, which provide general market analysis and non-individualized investment strategies from financial commentators on a subscription basis. Church product websites including WorshipHouseMedia.com, SermonSpice.com, and ChurchStaffing.com offer downloads and service platforms to pastors and other educators. Our web content is accessible through all of our radio station websites that feature content of interest to local listeners throughout the United States.

Digital media also includes our e-commerce sites, Eagle Wellness and Gene Smart Wellness. These e-commerce sites offer health advice and nutritional products.

Our publishing operating segment is comprised of three businesses. Regnery Publishing is a traditional book publisher that has published dozens of bestselling books by leading conservative authors and personalities, including Ann Coulter, Newt Gingrich, David Limbaugh, Ed Klein, Mark Steyn and Dinesh D'Souza. Xulon Press provides self-publishing services to authors. Salem Publishing™ produces and distributes five print magazines and one digital magazine.

Variable Interest Entities

We may enter into agreements or investments with other entities that could qualify as variable interest entities (“VIEs”) in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810 “Consolidation.” A VIE is consolidated in the financial statements if we are deemed to be the primary beneficiary. The primary beneficiary is the entity that holds the majority of the beneficial interests in the VIE, either explicitly or implicitly. A VIE is an entity for which the primary beneficiary’s interest in the entity can change with variations in factors other than the amount of investment in the entity. We perform our evaluation for VIE’s upon entry into the agreement or investment. We re-evaluate the VIE when or if events occur that could change the status of the VIE.

We may enter into lease arrangements with entities controlled by our principal stockholders or other related parties. We also may enter into Local Marketing Agreements (“LMAs”) or Time Brokerage Agreements (“TBAs”) contemporaneously with entering into an Asset Purchase Agreement (“APA”) to acquire or sell a radio station. Typically, both LMAs and TBAs are contractual agreements under which the station owner/licensee makes airtime available to a programmer/licensee in exchange for a fee and reimbursement of certain expenses. LMAs and TBAs are subject to compliance with the antitrust laws and the communications laws, including the requirement that the licensee must maintain independent control over the station and, in particular, its personnel, programming, and finances. The FCC has held that such agreements do not violate the communications laws as long as the licensee of the station receiving programming from another station maintains ultimate responsibility for, and control over, station operations and otherwise ensures compliance with the communications laws.

The requirements of FASB ASC Topic 810 may apply to entities under LMAs or TBAs, depending on the facts and circumstances related to each transaction. As of June 30, 2016, we did not have implicit or explicit arrangements that required consolidation under the guidance in FASB ASC Topic 810.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Significant areas for which management uses estimates include:

· asset impairments, including goodwill, broadcasting licenses, other indefinite-lived intangible assets, and assets held for sale;

· probabilities associated with the potential for contingent earn-out consideration;

· fair value measurements;

· contingency reserves;

· allowance for doubtful accounts;

· sales returns and allowances;

· barter transactions;

· inventory reserves;

· reserves for royalty advances;

· fair value of equity awards;

· self-insurance reserves;

· estimated lives for tangible and intangible assets;

· income tax valuation allowances; and

· uncertain tax positions.

These estimates require the use of judgment as future events and the effect of these events cannot be predicted with certainty. The estimates will change as new events occur, as more experience is acquired and as more information is obtained. We evaluate and update our assumptions and estimates on an ongoing basis and we may consult outside experts to assist as considered necessary.

Reclassifications

Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation. These reclassifications include the adoption of FASB Accounting Standards Update (“ASU”) 2015-03 and ASU 2015-15, which require that debt issuance costs, with the exception of costs associated with obtaining line-of-credit arrangements, be reported as a reduction of the debt liability rather than as a deferred cost asset. The adoption of ASU 2015-03 and ASU 2015-15 is reported as a change in accounting principle and discussed in detail in Note 9 – Notes Payable and Long-Term Debt.

Recent Accounting Pronouncements

Changes to accounting principles are established by the FASB in the form of ASUs to the FASB’s Codification. We consider the applicability and impact of all ASUs on our financial position, results of operations, cash flows, or presentation thereof. Described below are ASUs that are not yet effective, but may be applicable to our financial position, results of operations, cash flows, or presentation thereof. ASUs not listed below were assessed and determined to be not applicable to our financial position, results of operations, cash flows, or presentation thereof.  

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses,” which changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model that will replace today’s “incurred loss” model and generally will result in the earlier recognition of allowances for losses. For available-for-sale debt securities with unrealized losses, entities will measure credit losses in a manner similar to current practice, except that the losses will be recognized as an allowance. The guidance is effective in 2020 with early adoption permitted in 2019. We have not yet evaluated the impact of the adoption of this accounting standard on our financial position, results of operations, cash flows, or presentation thereof.

In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting.” This ASU simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted. We have not yet evaluated the impact of the adoption of this accounting standard on our financial position, results of operations, cash flows, or presentation thereof.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” which requires that lessees recognize a right-of-use asset and a lease liability for all leases with lease terms greater than twelve months in the balance sheet. ASU 2016-02 requires additional disclosures including the significant judgments made by management to provide insight into the revenue and expense to be recognized from existing contracts and the timing and uncertainty of cash flows arising from leases. The standard is effective for annual reporting periods beginning after December 15, 2018, with early adoption permitted. We have not yet determined the dollar impact of recording operating leases on our statement of financial position. The adoption of ASU 2016-02 will have a material impact on our financial position and the presentation thereof. Our existing credit facility stipulates that our covenants are based on GAAP as of the agreement date. Therefore, the material impact of recording right-to-use assets and lease liabilities on our statement of financial position is not expected to impact the compliance status for any covenant.

In January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities,” which provides updated guidance that enhances the reporting model for financial instruments, including amendments, to address aspects of recognition, measurement, presentation and disclosure. The standard is effective for annual reporting periods beginning after December 15, 2017. With the exception of the early application guidance, early adoption of the amendments is not permitted. We have not yet evaluated the impact of the adoption of this accounting standard on our financial position, results of operations, cash flows, or presentation thereof.

In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes,” to simplify the presentation of deferred taxes in the statement of financial position. The updated guidance requires that deferred tax assets and liabilities be classified as noncurrent in a classified balance sheet. The standard is effective for annual reporting periods beginning after December 15, 2016. Early adoption is permitted. We have not yet evaluated the impact of the adoption of this accounting standard on our financial position or presentation thereof.

 

In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory,” to reduce the complexity in accounting for inventory. This ASU requires entities to measure inventory at the lower of cost or net realizable value, replacing the market value approach that required floor and ceiling considerations. This guidance for public entities is effective for fiscal years beginning after December 15, 2016, with early adoption permitted. We are in the process of evaluating the adoption of this ASU, but do not expect this to have a material effect on our financial position, results of operations or cash flows.

In August 2014, the FASB issued ASU 2014-15, “Disclosure of Uncertainties About an Entities Ability to Continue as a Going Concern,” which requires management to assess a company’s ability to continue as a going concern and to provide related footnote disclosures. The new standard provides management with specific guidance on the assessments and related disclosures as well as provides a longer look-forward period as one year from the financial statement issuance date. The new standard is effective for the annual period ending after December 15, 2016, with early adoption permitted. The adoption of ASU 2014-15 is not expected to have a material impact on our financial position, results of operations, cash flows, or presentation thereof.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers,” which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. In August 2015, the FASB issued ASU 2015-14 “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date” that deferred the effective date of the new standard by one year. The new standard is now effective as of the first interim period within annual reporting periods beginning on or after December 15, 2017, and will replace most existing revenue recognition guidance in U.S. GAAP. Early adoption is permitted for annual reporting periods beginning after December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method and requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. The FASB and the International Accounting Standards Board (“IASB”) formed a Transition Resource Group (TRG”) to discuss implementation issues and inform the IASB and the FASB of interpretive issues arising during implementation of the revenue recognition standard. The TRG does not issue guidance. The FASB has issued additional ASUs to amend or clarify select items in the original guidance. In March 2016, the FASB issued ASU 2016-08 “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)” that clarifies principal versus agent reporting of revenue. In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing” that provides clarification and guidance on separately identifiable performance obligations and licenses of intellectual property. In May 2016, the FASB issued ASU 2016-12 “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients” that provides guidance on collectability, non-cash consideration and completed contracts as of the transition date and provides a practical expedient for contract modifications at transition and an accounting policy election related to the presentation of sales taxes and other similar taxes collected from customers. In May 2016, the FASB issued ASU 2016-11, “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting” that rescinds guidance issued by the Securities Exchange Commission. These rescissions include changes to topics pertaining to accounting for shipping and handling fees and costs and accounting for consideration given by a vendor to a customer that are codified in ASC 605. We continue to evaluate the effect that this revenue guidance will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method, nor have we determined the effect of ASU 2014-09 on our financial position, results of operations, cash flows, or presentation thereof.

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IMPAIRMENT OF GOODWILL AND OTHER INDEFINITE-LIVED INTANGIBLE ASSETS

6 Months Ended

Jun. 30, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

IMPAIRMENT OF GOODWILL AND OTHER INDEFINITE-LIVED INTANGIBLE ASSETS

NOTE 2. IMPAIRMENT OF GOODWILL AND OTHER INDEFINITE-LIVED INTANGIBLE ASSETS

Approximately 71% of our total assets as of June 30, 2016 consist of indefinite-lived intangible assets, such as broadcast licenses, goodwill and mastheads, the value of which depends significantly upon the operating results of our businesses. In the case of our radio stations, we would not be able to operate the properties without the related FCC license for each property. Broadcast licenses are renewed with the FCC every eight years for a nominal cost that is expensed as incurred. We continually monitor our stations’ compliance with the various regulatory requirements. Historically, all of our broadcast licenses have been renewed at the end of their respective periods, and we expect that all broadcast licenses will continue to be renewed in the future. Accordingly, we consider our broadcast licenses to be indefinite-lived intangible assets in accordance with FASB ASC Topic 350, “Intangibles – Goodwill and Other.” Broadcast licenses account for approximately 94% of our indefinite-lived intangible assets. Goodwill and mastheads account for the remaining 6%. We do not amortize broadcast licenses, goodwill or other indefinite-lived intangible assets, but rather test for impairment at least annually or more frequently if events or circumstances indicate that an asset may be impaired.

We complete our annual impairment tests in the fourth quarter of each year. We believe that our estimate of the value of our broadcast licenses, mastheads, and goodwill is a critical accounting estimate as the value is significant in relation to our total assets, and our estimates incorporate variables and assumptions that are based on past experiences and judgment about future operating performance of our markets and business segments. If actual future results are less favorable than the assumptions and estimates we used, we are subject to future impairment charges, the amount of which may be material. The fair value measurements for our indefinite-lived intangible assets use significant unobservable inputs that reflect our own assumptions about the estimates that market participants would use in measuring fair value including assumptions about risk. The unobservable inputs are defined in FASB ASC Topic 820, “Fair Value Measurements and Disclosures,” as Level 3 inputs discussed in detail in Note 14. There were no indications of impairment present as of the period ending June 30, 2016.

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IMPAIRMENT OF LONG-LIVED ASSETS

6 Months Ended

Jun. 30, 2016

Impairment Of Long Lived Assets Disclosure [Abstract]

IMPAIRMENT OF LONG-LIVED ASSETS

NOTE 3. IMPAIRMENT OF LONG-LIVED ASSETS

We account for property and equipment in accordance with FASB ASC Topic 360-10, “Property, Plant and Equipment.” We periodically review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. Our review requires us to estimate the fair value of assets when events or circumstances indicate that they may be impaired. The fair value measurements for our long-lived assets use significant observable inputs that reflect our own assumptions about the estimates that market participants would use in measuring fair value including assumptions about risk. If actual future results are less favorable than the assumptions and estimates we used, we are subject to future impairment charges, the amount of which may be material.

Based on changes in management’s planned usage, we classified land in Covina, California as held for sale as of June 2012. At that time we evaluated the land for impairment in accordance with guidance for impairment of long-lived assets held for sale. We determined that the carrying value of the land exceeded the estimated fair value less costs to sell and recorded an impairment charge of $5.6 million associated with the land based on our estimated sale price at that time. In December 2012, after several purchase offers for the land were terminated, we obtained a third-party valuation for the land. Based on the fair value determined by the third-party, we recorded an additional impairment charge of $1.2 million associated with the land. While we continue to market the land for sale and have no intention to use the land in our operations, we have not received successful offers. Based on the amount of time that the land has been held for sale, we obtained a third-party valuation for the land as of June 2016. Based on this fair value appraisal, we recorded an additional $0.7 million impairment charge associated with the land during the three months ended June 30, 2016.

The table below presents the fair value measurements used to value this asset.

			Fair Value Measurements Using:
			(Dollars in thousands)
Description	As of June 30, 2016		Quoted prices in active markets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)		Total Gains (Losses)
Long-Lived Asset Held for Sale	$	1,000			$	1,000	$	(700)

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ACQUISITIONS AND RECENT TRANSACTIONS

6 Months Ended

Jun. 30, 2016

Business Combinations [Abstract]

ACQUISITIONS AND RECENT TRANSACTIONS

NOTE 4. ACQUISITIONS AND RECENT TRANSACTIONS

During the six month period ending June 30, 2016, we completed or entered into the following transactions:

Debt

On June 30, 2016, we paid $1.2 million in principal on our term loan of $300.0 million (“Term Loan B”), of which $0.4 million was an early prepayment of principal, and paid interest due as of that date. We recorded a $1,300 pre-tax loss on the early retirement of long-term debt related to the unamortized discount and $3,400 in bank loan fees associated with this principal prepayment.

On March 31, 2016, we paid the quarterly installment due of $0.8 million in principal on our Term Loan B and paid interest due as of that date.

On March 17, 2016, we paid $0.8 million in principal on our Term Loan B and paid interest due as of that date. We recorded a $2,500 pre-tax loss on the early retirement of long-term debt related to the unamortized discount and $6,700 in bank loan fees associated with this principal repayment.

 

Equity

On June 2, 2016, we announced a quarterly equity distribution in the amount of $0.0650 per share on Class A and Class B common stock. The equity distribution of $1.6 million was paid on June 30, 2016 to all Class A and Class B common stockholders of record as of June 16, 2016.

On March 10, 2016, we announced a quarterly equity distribution in the amount of $0.0650 per share on Class A and Class B common stock. The equity distribution of $1.7 million was paid on April 5, 2016 to all Class A and Class B common stockholders of record as of March 22, 2016.

Related Party Transactions

On March 2, 2016, we entered into a related party lease with trusts created for the benefit of Edward G. Atsinger III, Chief Executive Officer, and Stuart W. Epperson, Chairman of the Board. The lease is for real property used to operate radio station KNUS-AM in Denver, Colorado. Our Nominating and Corporate Governance Committee reviewed the lease and lease terms and determined that the terms of the transaction were no less favorable to Salem than those that would be available in a comparable transaction in arm’s length dealings with an unrelated third party.  

Acquisitions – Broadcast

The FCC permits AM and FM radio stations to operate FM Translators, or low power secondary stations that retransmit the programming of a radio station to portions of the station’s service area that the primary signal does not reach because of distance or terrain barriers. The FCC began an AM Revitalization program, or “AMR,” that included several initiatives intended to benefit AM broadcasters. One of these benefits, intended to promote the use of FM Translators by AM broadcasters, allows an AM station to relocate one FM translator up to 250 miles from its authorized site and operate the translator on any non-reserved band FM channel in the AM station’s market, subject to coverage and interference rules.

On January 29, 2016, the FCC opened a one-time only filing window during which only Class C and Class D AM broadcast stations could participate. This window closed on July 28, 2016. A second window opened on July 29, 2016, allowing Class A and Class B AM broadcast stations to participate. The second window will close on October 31, 2016. During these filing windows, qualifying AM licensees may apply for one new FM translator station, in the non-reserved FM band to be used solely to re-broadcast the AM licensee’s AM signal to provide fill-in and/or nighttime service. The FM translator must rebroadcast the related AM station for at least four years, not counting any periods of silence.

We entered into several agreements to acquire FM Translators or FM Translators construction permits during this first window. Construction permits provide the station the authority to construct a new FM Translator or make changes in the existing facilities. We believe that securing these FM Translators allows us to increase our audience by providing enhanced coverage and reach of our existing AM broadcasts.

Our acquisitions include the following:

On June 20, 2016, we closed on the acquisition of an FM Translator used in our Columbus, Ohio market for $0.3 million in cash.

On June 10, 2016, we closed on the acquisition of an FM Translator in Amherst, New York for $60,000 in cash. The translator is used in our Pittsburgh, Pennsylvania market.

On June 8, 2016, we closed on the acquisition of a construction permit for an FM Translator construction permit in Charlotte, Michigan for $50,000 in cash. The translator will be used in our Detroit, Michigan market and is reflected in projects-in-process at June 30, 2016.

On June 3, 2016, we closed on the acquisition of a construction permit for an FM Translator in Atwood, Kentucky for $88,000 in cash. The translator will be used in our Columbus, Ohio market and is reflected in projects-in-process at June 30, 2016.

On May 13, 2016, we closed on the acquisition of a construction permit for an FM Translator in Kerrville, Texas for $50,000 in

cash. The translator will be used in our Houston, Texas market and is reflected in projects-in-process at June 30, 2016.

On May 2, 2016, we closed on the acquisition of an FM Translator in Lincoln, Maine for $100,000 in cash. The translator is used in our Boston, Massachusetts market.

On April 29, 2016, we closed on the acquisition of a construction permit for an FM Translator in Emporia, Kansas for $25,000 in cash. The translator will be relocated to Omaha, Nebraska, for use by our KCRO-AM radio station and is reflected in projects-in-process at June 30, 2016.

Acquisitions – Digital Media

On April 1, 2016, we acquired the Retirement Watch newsletter and websites for $0.1 million in cash and the assumption of $0.6 million in deferred subscription liabilities. Retirement Watch offers research and strategies associated with retirement planning. We recorded goodwill of approximately $8,600 associated with the expected synergies to be realized upon combining the operations of Retirement Watch into our digital media platform and brand loyalty from its existing subscriber base that is not a separately identifiable intangible asset.

On March 8, 2016, we acquired King James Bible mobile applications for $4.0 million, of which $2.7 million was paid in cash upon close and $1.3 million is due in deferred installments within one year from the closing date. The deferred installments were amended on May 17, 2016 to include the $0.3 million that was due upon finalization of banking arrangements with the deferred installments. The amended deferred payments of $1.3 million now consist of  $0.6 million due within 90 days, $0.3 million due within 180 days and two deferred payments of $0.2 million each due 270 and 360 days from the closing date, respectively. As of the date of this filing, we have paid the first installment of $0.6 million. We recorded goodwill of $0.2 million associated with the expected synergies to be realized from combining the operations of these applications into our existing digital media platform. The accompanying condensed consolidated statement of operations reflects the operating results of King James Bible mobile applications as of the closing date within our digital media operating segment.

Acquisitions – Publishing

Throughout the six month period ending June 30, 2016, we acquired domain names and other assets associated within our publishing operating segment for approximately $6,000 in cash.

A summary of our business acquisitions and asset purchases during the six month period ended June 30, 2016, none of which were individually or in the aggregate material to our Condensed Consolidated financial position as of the respective date of acquisition, is as follows:

Acquisition Date	Description	Total Cost
		(Dollars in thousands)
June 20, 2016	FM Translator, Columbus, Ohio (asset purchase)	$	345
June 10, 2016	FM Translator, Amherst, New York (asset purchase)		60
June 8, 2016	FM Translator construction permit, Charlotte, Michigan (asset purchase)		50
June 3, 2016	FM Translator construction permit, Atwood, Kentucky (asset purchase)		88
May 13, 2016	FM Translator construction permit, Kerrville, Texas (asset purchase)		50
May 2, 2016	FM Translator, Lincoln, Maine (asset purchase)		100
April 29, 2016	FM Translator construction permit, Emporia, Kansas (asset purchase)		25
April 1, 2016	Retirement Watch (business acquisition)		100
March 8, 2016	King James Bible mobile applications (business acquisition)		4,000
Various	Purchase of domain names and assets for use in publishing business (asset purchases)		6
		$	4,824

The operating results of our business acquisitions and asset purchases are included in our condensed consolidated results of operations from their respective closing date or the date that we began operating them under an LMA or TBA. Under the acquisition method of accounting as specified in FASB ASC Topic 805, “Business Combinations,” the total acquisition consideration is allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the date of the transaction.

Estimates of the fair value include discounted estimated cash flows to be generated by the assets and their expected useful lives based on historical experience, market trends and any synergies believed to be achieved from the acquisition. Acquisitions may include contingent consideration, the fair value of which is estimated as of the acquisition date as the present value of the expected contingent payments as determined using weighted probabilities of the payment amounts. We may retain a third-party appraiser to estimate the fair value of the acquired net assets as of the acquisition date. As part of the valuation and appraisal process, the third-party appraiser prepares a report assigning estimated fair values to the various asset categories in our financial statements. These fair value estimates are subjective in nature and require careful consideration and judgment. Management reviews the third party reports for reasonableness of the assigned values.

We believe that these valuations and analysis provide appropriate estimates of the fair value for the net assets acquired as of the acquisition date. These initial valuations are subject to refinement during the measurement period, which may be up to one year from the acquisition date. During this measurement period we may retroactively record adjustments to the net assets acquired based on additional information obtained for items that existed as of the acquisition date. Upon the conclusion of the measurement period any adjustments are reflected in our consolidated statements of operations. We have not to date recorded adjustments to our estimated fair values used in our acquisition consideration during or after the measurement period.

Property and equipment are recorded at the estimated fair value and depreciated on a straight-line basis over their estimated useful lives. Finite-lived intangible assets are recorded at their estimated fair value and amortized on a straight-line basis over their estimated useful lives. Goodwill, which represents the organizational systems and procedures in place to ensure the effective operation of the entity, may also be recorded and tested for impairment. Costs associated with acquisitions, such as consulting and legal fees, are expensed as incurred in corporate operating expenses. We recognized total costs associated with acquisitions of $0.1 million during the six month period ending June 30, 2016 compared to $0.2 million during the same period of the prior year, which are included in unallocated corporate expenses in the accompanying condensed consolidated statements of operations.

 

The total acquisition consideration is equal to the sum of all cash payments, the fair value of any deferred payments and promissory notes, and the present value of any estimated contingent earn-out consideration. We estimate the fair value of contingent earn-out consideration using a probability-weighted discounted cash flow model. The fair value measurement is based on significant inputs that are not observable in the market and thus represent a Level 3 measurement as defined in Note 14 - Fair Value Measurements.

The following table summarizes the total acquisition consideration for the six month period ending June 30, 2016:

Description	Total Consideration
	(Dollars in thousands)
Cash payments made upon closing	$	3,524
Deferred payments		1,300
Total purchase price consideration	$	4,824

The total acquisition consideration was allocated to the net assets acquired as follows:

	Net Broadcast		Net Digital Media		Net Publishing		Net Total
	Assets Acquired		Assets Acquired		Assets Acquired		Assets Acquired
	(Dollars in thousands)
Assets
Property and equipment	$	13	$	371	$	—	$	384
Projects in process		213		—				213
Broadcast licenses		492		—		—		492
Goodwill		—		230		—		230
Domain and brand names		—		908		6		914
Customer lists and contracts		—		2,867		—		2,867
Non-compete agreements		—		289		—		289
Liabilities
Deferred revenue		—		(565)		—		(565)
	$	718	$	4,100	$	6	$	4,824

Divestitures

On June 10, 2016, we received $2.5 million in cash from the National Park Service in exchange for its claim under eminent domain for our tower site in Miami, Florida. We recognized a pre-tax gain of $1.9 million from this sale. We entered into a limited terms of use agreement with the National Park Service to broadcast from the tower site for the next twenty years for a nominal fee.

Pending Transaction

On June 24, 2016, we entered into an LMA to operate radio station KTRB-AM in San Francisco, California beginning on July 1, 2016. We paid a security deposit of $55,000 in cash on June 27, 2016.

On June 15, 2016, we entered into an APA to acquire an FM Translator in Sebring, Florida for $77,000 in cash. This translator will be used by our WKAT-AM radio station in Miami, Florida. The transaction is expected to close in the third quarter of 2016.

On June 2, 2016, we entered into an APA to acquire an FM Translator in Lake Placid, Florida for $35,000 in cash. This translator will be used by our WTLN-AM radio station in Orlando, Florida. The transaction is expected to close in the third quarter of 2016.

On May 25, 2016, we entered into an APA to acquire an FM Translator in Lake City, Florida for $65,000 in cash from a related party. This translator will be used by our WBZQ-AM radio station in Orlando, Florida. The transaction is expected to close in the third quarter of 2016.

On May 18, 2016, we entered into an APA to acquire a construction permit for an FM Translator in Palm Coast, Florida for $65,000 in cash from a related party. This translator will be used by our WTWD-AM radio station in Tampa, Florida. The transaction is expected to close in the third quarter of 2016.

We are programming radio station KHTE-FM, Little Rock, Arkansas, under a 36 month TBA that began on April 1, 2015. The TBA is extendable for up to 48 months. We have the option to acquire the station for $1.2 million in cash during the TBA period. The accompanying condensed consolidated statements of operations included in this quarterly report on Form 10-Q reflect the operating results of this entity as of the TBA date.

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CONTINGENT EARN-OUT CONSIDERATION

6 Months Ended

Jun. 30, 2016

Business Combination, Contingent Consideration, Liability [Abstract]

CONTINGENT EARN-OUT CONSIDERATION

NOTE 5. CONTINGENT EARN-OUT CONSIDERATION

Our acquisitions may include contingent earn-out consideration as part of the purchase price under which we will make future payments to the seller upon the achievement of certain benchmarks. The fair value of the contingent earn-out consideration is estimated as of the acquisition date at the present value of the expected contingent payments to be made using a probability-weighted discounted cash flow model for probabilities of possible future payments. The present value of the expected future payouts is accreted to interest expense over the earn-out period. The fair value estimates use significant unobservable inputs that reflect our own assumptions as to the ability of the acquired business to meet the targeted benchmarks and discount rates used in the calculations. The unobservable inputs are defined in FASB ASC Topic 820, “Fair Value Measurements and Disclosures,” as Level 3 inputs discussed in detail in Note 14.

We review the probabilities of possible future payments to the estimated fair value of any contingent earn-out consideration on a quarterly basis over the earn-out period. Actual results are compared to the estimates and probabilities of achievement used in our forecasts. Should actual results of the acquired business increase or decrease as compared to our estimates and assumptions, the estimated fair value of the contingent earn-out consideration liability will increase or decrease, up to the contracted limit, as applicable. Changes in the estimated fair value of the contingent earn-out consideration are reflected in our results of operations in the period in which they are identified. Changes in the estimated fair value of the contingent earn-out consideration may materially impact and cause volatility in our operating results.

Daily Bible Devotion

We acquired Daily Bible Devotion mobile applications on May 6, 2015. We paid $1.1 million in cash upon closing and may pay up to an additional $0.3 million in contingent earn-out consideration payable over the next two years based upon on the achievement of cumulative session benchmarks for each mobile application. Using a probability-weighted discounted cash flow model based on our own assumptions as to the ability of Bible Devotional Applications to achieve the session benchmarks at the time of closing, we estimated the fair value of the contingent earn-out consideration to be $165,000, which was recorded at the discounted present value of $142,000. The discount is being accreted to interest expense over the two-year earn-out period. We believe that our experience with digital mobile applications and websites provides a reasonable basis for our estimates.

We review the fair value of the contingent earn-out consideration quarterly over the two-year earn-out period to compare actual cumulative sessions achieved to the estimated cumulative sessions used in our forecasts. Any changes in the estimated fair value of the contingent earn-out consideration are reflected in our results of operations in the period they are identified, up to the maximum future value outstanding under the contract, or $0.3 million less amounts paid or expired to date. Changes in the fair value of the contingent earn-out consideration may materially impact and cause volatility in our future operating results. During the six month period ending June 30, 2016, we paid a total of $75,000 to the seller as contingent earn-out consideration for achieving benchmarks during the earn-out period to date, which was less than our original estimates. Due to declines in the cumulative sessions achieved during the six month period ending June 30, 2016, we recorded a net decrease of $93,000 in the estimated fair value of the contingent earn-out consideration that is reflected in our results of operations for this period.

Bryan Perry Newsletters

On February 6, 2015, we acquired the assets and assumed the deferred subscription liabilities for Bryan Perry Newsletters, paying no cash to the seller upon closing. Future contingent earn-out consideration due to the seller is based upon net subscriber revenues achieved over a two-year period from date of close, of which we will pay the seller 50%. There is no minimum or maximum contractual amount due. Using a probability-weighted discounted cash flow model based on our revenue projections at the time of closing, we estimated the fair value of the contingent earn-out consideration to be $171,000, which we recorded at the discounted present value of $158,000. The discount is being accreted to interest expense over the two-year earn-out period. We believe that our experience with digital publications and renewals provides a reasonable basis for our estimates.

We review the fair value of the contingent earn-out consideration quarterly over the two year earn-out period to compare actual subscription revenue earned to the estimated subscription revenue used in our forecasts. Any changes in the estimated fair value of the contingent earn-out consideration are reflected in our results of operations in the period they are identified. Changes in the fair value of the contingent earn-out consideration may materially impact and cause volatility in our future operating results. During the six month period ending June 30, 2016, we paid a total of $13,000 to the seller as contingent earn-out consideration for amounts earned, which was less than our original estimates. Due to declines in the number of subscriptions renewed during the six month period ending June 30, 2016, we recorded a net decrease of $13,000 in the estimated fair value of the contingent earn-out consideration that is reflected in our results of operations for this period.

 

Eagle Publishing

On January 10, 2014, we acquired the entities of Eagle Publishing, including Regnery Publishing, HumanEvents.com, RedState.com, Eagle Financial Publications and Eagle Wellness. The base purchase price was $8.5 million, with $3.5 million paid in cash upon closing, and deferred payments of $2.5 million each due January 2015 and January 2016. As part of the purchase agreement, we may pay up to an additional $8.5 million of contingent earn-out consideration during the three year period from the closing date based upon the achievement of certain revenue benchmarks established for calendar years 2014, 2015 and 2016 for each of the Eagle entities. Using a probability-weighted discounted cash flow model based on the likelihood of achievement of the benchmarks at the time of closing, we estimated the fair value of the contingent earn-out consideration to be $2.4 million, which was recorded at the discounted present value of $2.0 million. We have paid $0.6 million to date and have one contingent earn-out period remaining through January 10, 2017. The discount is being accreted to interest expense over the three-year earn-out period. We believe that our experience with publications, renewal rates and websites provide a reasonable basis for our estimates.

We review the fair value of the contingent earn-out consideration quarterly over the three year earn-out period to compare actual operating revenues earned to the estimated revenue used in our forecasts. Any changes in the estimated fair value of the contingent earn-out consideration are reflected in our results of operations in the period they are identified, up to the maximum future value outstanding under the contract, or $8.5 million less amounts paid or expired to date. Changes in the fair value of the contingent earn-out consideration may materially impact and cause volatility in our future operating results. During the six month period ending June 30, 2016, no payments were made to the seller for amounts earned under the contingent earn-out consideration, which was less than our original estimates. Based on actual revenues for the period ending June 30, 2016 that were below those used in our prior estimates, we recorded a net decrease in the estimated fair value of the contingent earn-out consideration of $156,000 that is reflected in our results of operations for this period.

The following table reflects the changes in the present value of our acquisition-related estimated contingent earn-out consideration during the three and six month period ending June 30, 2016 and 2015:

	Three Months Ending June 30, 2016
	Short-Term		Long-Term
	Accrued Expenses		Other Liabilities		Total
	(Dollars in thousands)
Beginning Balance as of April 1, 2016	$	541	$	33	$	574
Acquisitions		—		—		—
Accretion of acquisition-related contingent earn-out consideration		5		1		6
Change in the estimated fair value of contingent earn-out consideration		(134)		—		(134)
Reclassification of payments due in next 12 months to short-term		34		(34)		—
Payments		(5)		—		(5)
Ending Balance as of June 30, 2016	$	441	$	—	$	441

	Three Months Ending June 30, 2015
	Short-Term Accrued Expenses		Long-Term Other Liabilities		Total
	(Dollars in thousands)
Beginning Balance as of April 1, 2015	$	2,251	$	1,035	$	3,286
Acquisitions		88		54		142
Accretion of acquisition-related contingent earn-out consideration		21		11		32
Change in the estimated fair value of contingent earn-out consideration		(293)		(14)		(307)
Reclassification of payments due in next 12 months to short-term		—		—		—
Payments		(877)		—		(877)
Ending Balance as of June 30, 2015	$	1,190	$	1,086	$	2,276

	Six Months Ending June 30, 2016
	Short-Term		Long-Term
	Accrued Expenses		Other Liabilities		Total
	(Dollars in thousands)
Beginning Balance as of January 1, 2016	$	173	$	602	$	775
Acquisitions		—		—		—
Accretion of acquisition-related contingent earn-out consideration		8		8		16
Change in the estimated fair value of contingent earn-out consideration		(208)		(54)		(262)
Reclassification of payments due in next 12 months to short-term		556		(556)		—
Payments		(88)		—		(88)
Ending Balance as of June 30, 2016	$	441	$	—	$	441

	Six Months Ending June 30, 2015
	Short-Term Accrued Expenses		Long-Term Other Liabilities		Total
	(Dollars in thousands)
Beginning Balance as of January 1, 2015	$	1,575	$	1,710	$	3,285
Acquisitions		176		124		300
Accretion of acquisition-related contingent earn-out consideration		31		26		57
Change in the estimated fair value of contingent earn-out consideration		(213)		24		(189)
Reclassification of payments due in next 12 months to short-term		798		(798)		—
Payments		(1,177)		—		(1,177)
Ending Balance as of June 30, 2015	$	1,190	$	1,086	$	2,276

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INVENTORIES

6 Months Ended

Jun. 30, 2016

Inventory Disclosure [Abstract]

INVENTORIES

NOTE 6. INVENTORIES

 

Inventories consist of finished goods including books from Regnery Publishing and wellness products. All inventories are valued at the lower of cost or market as determined on a First-In First-Out (“FIFO”) cost method and reported net of estimated reserves for obsolescence.

The following table provides details of inventory on hand by segment:

	December 31, 2015		June 30, 2016
	(Dollars in thousands)
Regnery Publishing book inventories	$	2,186	$	2,612
Reserve for obsolescence – Regnery Publishing		(1,798)		(2,097)
Inventory net, Regnery Publishing		388		515
Wellness products	$	562	$	452
Reserve for obsolescence – Wellness products		(57)		(64)
Inventory, net Wellness products		505		388
Consolidated inventories, net	$	893	$	903

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PROPERTY AND EQUIPMENT

6 Months Ended

Jun. 30, 2016

Property, Plant and Equipment [Abstract]

PROPERTY AND EQUIPMENT

NOTE 7. PROPERTY AND EQUIPMENT

The following is a summary of the categories of our property and equipment:

	December 31, 2015		June 30, 2016
	(Dollars in thousands)
Land	$	31,565	$	31,180
Buildings		25,448		25,362
Office furnishings and equipment		38,812		36,798
Office furnishings and equipment under capital lease obligations		228		228
Antennae, towers and transmitting equipment		83,501		83,120
Antennae, towers and transmitting equipment under capital lease obligations		795		795
Studio, production and mobile equipment		30,598		28,277
Computer software and website development costs		28,134		28,423
Record and tape libraries		55		28
Automobiles		1,298		1,326
Leasehold improvements		20,799		19,713
Construction-in-progress		6,632		9,913
	$	267,865	$	265,163
Less accumulated depreciation		(162,382)		(160,604)
	$	105,483	$	104,559

Depreciation expense was approximately $3.0 million for each of the three month periods ending June 30, 2015 and 2016, and $6.2 million and $6.0 million for the six month period ending June 30, 2015 and 2016, respectively. Included in these amounts is depreciation of $24,000 for each of the three month periods and $48,000 for each of the six month periods related to assets held under capital lease obligations. Accumulated depreciation associated with assets under capital lease obligations was $615,000 and $566,000 at June 30, 2016 and December 31, 2015, respectively.

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AMORTIZABLE INTANGIBLE ASSETS

6 Months Ended

Jun. 30, 2016

Intangible Assets Disclosure [Abstract]

AMORTIZABLE INTANGIBLE ASSETS

NOTE 8. AMORTIZABLE INTANGIBLE ASSETS

The following tables provide details, by major category, of the significant classes of amortizable intangible assets:

	June 30, 2016
			Accumulated
	Cost		Amortization		Net
	(Dollars in thousands)
Customer lists and contracts	$	22,403	$	(19,522)	$	2,881
Domain and brand names		17,533		(11,993)		5,540
Favorable and assigned leases		2,379		(1,932)		447
Subscriber base and lists		7,786		(4,540)		3,246
Author relationships		2,245		(1,595)		650
Non-compete agreements		1,323		(867)		456
Other amortizable intangible assets		1,336		(1,336)		—
	$	55,005	$	(41,785)	$	13,220

	December 31, 2015
	Accumulated
	Cost		Amortization		Net
	(Dollars in thousands)
Customer lists and contracts	$	20,009	$	(18,914)	$	1,095
Domain and brand names		16,619		(11,200)		5,419
Favorable and assigned leases		2,379		(1,887)		492
Subscriber base and lists		7,313		(3,808)		3,505
Author relationships		2,245		(1,523)		722
Non-compete agreements		1,034		(786)		248
Other amortizable intangible assets		1,336		(1,336)		—
	$	50,935	$	(39,454)	$	11,481

Based on the amortizable intangible assets as of June 30, 2016, we estimate amortization expense for the next five years to be as follows:

Year Ending December 31,	Amortization Expense
	(Dollars in thousands)
2016 (July – Dec)	$	2,314
2017		3,414
2018		3,171
2019		2,659
2020		1,359
Thereafter		303
Total	$	13,220

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NOTES PAYABLE AND LONG-TERM DEBT

6 Months Ended

Jun. 30, 2016

Debt Disclosure [Abstract]

NOTES PAYABLE AND LONG-TERM DEBT

NOTE 9. NOTES PAYABLE AND LONG-TERM DEBT

Salem Media Group, Inc. has no independent assets or operations, the subsidiary guarantees are full and unconditional and joint and several, and any subsidiaries of Salem Media Group, Inc. other than the subsidiary guarantors are minor.

Term Loan B and Revolving Credit Facility

On March 14, 2013, we entered into a senior secured credit facility, consisting of the Term Loan B of $300.0 million and $25.0 million Revolver. The Term Loan B was issued at a discount for total net proceeds of $298.5 million. The discount is being amortized to non-cash interest expense over the life of the loan using the effective interest method. For each of the three and six months ended June 30, 2015 and 2016, approximately $47,000 and $93,000, respectively, and $52,000 and $104,000, respectively, of the discount has been recognized as interest expense.

The Term Loan B has a term of seven years, maturing in March 2020. During this term, the principal amount may be increased by up to an additional $60.0 million, subject to the terms and conditions of the credit agreement. We are required to make principal payments of $750,000 per quarter as of September 30, 2013. Prepayments may be made against the outstanding balance of our Term Loan B with each prepayment applied ratably to each of the next four principal installments due within 12 months of the prepayment date in the direct order of maturity and thereafter to the remaining principal balance in reverse order of maturity.

 

We made the following payments or prepayments of our Term Loan B during the year ended December 31, 2015 and six month period ending June 30, 2016, including interest through the payment date as follows:

Date	Principal Paid		Unamortized Discount
	(Dollars in thousands)
June 30, 2016	$	441	$	1
June 30, 2016		750		—
March 31, 2016		750		—
March 17, 2016		809		2
January 30, 2015		2,000		15

In April 2015, the FASB issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs,” that requires the cost of issuing debt to be recorded as a reduction of the debt proceeds or a reduction of the debt liability, similar to the presentation of debt discounts. Prior to this ASU, debt issue costs were recorded as deferred costs, or long-term intangible assets. In August 2015, the FASB issued ASU 2015-15, “Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements - Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting” that amended ASU 2015-03 to reflect the SEC staff’s position that it would not object to an entity deferring and presenting debt issuance costs related to line-of-credit arrangements as an asset and subsequently amortizing deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are outstanding borrowings under that line-of-credit arrangement.

We adopted ASU 2015-03, as amended by ASU 2015-15, as of the effective date, or fiscal years beginning after December 31, 2015. We chose to continue presentation of debt issue costs associated with our Revolver as an asset in accordance with ASU 2015-15. We have retrospectively accounted for the implementation of ASU 2015-03 and ASU 2015-15 as a change in accounting principle. We have reclassified debt issue costs reported on our December 31, 2015 consolidated balance sheet as follows:

	December 31, 2015
	(Dollars in thousands)
	As Reported		As Updated ASU 2015-03
Balance Sheet Line Items:
Term Loan B	$	273,136	$	274,000
Less: Unamortized discount based on imputed interest rate of 4.78%		—		(864)
Less: Unamortized debt issuance costs based on imputed interest rate of 4.78%		—		(2,361)
Term Loan B net carrying value		273,136		270,775
Revolver		3,306		3,306
Capital leases and other loans		674		674
	$	277,116	$	274,755
Less current portion		(5,662)		(5,662)
Long-term debt and capital lease obligations less unamortized discount and debt issuance costs, net of current portion	$	271,454	$	269,093
Deferred financing costs	$	2,512	$	151

Debt issue costs are being amortized to non-cash interest expense over the life of the Term Loan B using the effective interest method. For each of the three months ended June 30, 2015 and 2016, approximately $139,000 and $141,000, respectively, of the debt issue costs associated with the Term Loan B were recognized as interest expense. For each of the six months ended June 30, 2015 and 2016, approximately $279,000 and $283,000, respectively, of the debt issue costs associated with the Term Loan B were recognized as interest expense.

We chose to continue the presentation of debt issue costs associated with our Revolver as an asset in accordance with ASU 2015-15. These costs are being amortized to non-cash interest expense over the five year life of the Revolver using the effective interest method based on an imputed interest rate of 4.58%. During each of the three and six month periods ending June 30, 2015 and 2016, we recorded amortization of deferred financing costs of approximately $17,000 each and $35,000 each.

The Revolver has a term of five years, maturing in March 2018. We report outstanding balances on our Revolver as short-term based on use of the Revolver to fund ordinary and customary operating cash needs with repayments made frequently. We believe that the borrowing capacity under our Term Loan B and Revolver allows us to meet our ongoing operating requirements, fund capital expenditures and satisfy our debt service requirements for at least the next twelve months.

Borrowings under the Term Loan B may be made at LIBOR (subject to a floor of 1.00%) plus a spread of 3.50% or Wells Fargo Bank, National Association’s (“Wells Fargo”) base rate plus a spread of 2.50%. Borrowings under the Revolver may be made at LIBOR or Wells Fargo’s base rate plus a spread determined by reference to our leverage ratio, as set forth in the pricing grid below.  If an event of default occurs under the credit agreement, the applicable interest rate may increase by 2.00% per annum. At June 30, 2016, the blended interest rate on amounts outstanding under the Term Loan B and Revolver was 4.51%.

 

		Revolver Pricing
Pricing Level	Consolidated Leverage Ratio	Base Rate Loans			LIBOR Loans
1	Less than 3.00 to 1.00		1.250	%		2.250	%
2	Greater than or equal to 3.00 to 1.00 but less than 4.00 to 1.00		1.500	%		2.500	%
3	Greater than or equal to 4.00 to 1.00 but less than 5.00 to 1.00		1.750	%		2.750	%
4	Greater than or equal to 5.00 to 1.00 but less than 6.00 to 1.00		2.000	%		3.000	%
5	Greater than or equal to 6.00 to 1.00		2.500	%		3.500	%

The obligations under the credit agreement and the related loan documents are secured by liens on substantially all of the assets of Salem and its subsidiaries, other than certain exceptions set forth in the Security Agreement, dated as of March 14, 2013, among Salem, the subsidiary guarantors party thereto, and Wells Fargo, as Administrative Agent (the “Security Agreement”) and such other related loan documents.

With respect to financial covenants, the credit agreement includes a minimum interest coverage ratio, which started at 1.50 to 1.0 and stepped up to 2.50 to 1.0 and a maximum leverage ratio, which started at 6.75 to 1.0 and steps down to 5.75 to 1.0 by 2017. The credit agreement also includes other negative covenants that are customary for credit facilities of this type, including covenants that, subject to exceptions described in the credit agreement, restrict the ability of Salem and its subsidiary guarantors: (i) to incur additional indebtedness; (ii) to make investments; (iii) to make distributions, loans or transfers of assets; (iv) to enter into, create, incur, assume or suffer to exist any liens; (v) to sell assets; (vi) to enter into transactions with affiliates; or (vii) to merge or consolidate with, or dispose of all or substantially all assets to, a third party.  As of June 30, 2016, our leverage ratio was 5.39 to 1 compared to our compliance covenant of 6.00 and our interest coverage ratio was 3.33 compared to our compliance ratio of 2.50. We were in compliance with our debt covenants under the credit facility at June 30, 2016.

 

Other Debt

We have several capital leases related to office equipment. The obligation recorded at December 31, 2015 and June 30, 2016 represents the present value of future commitments under the capital lease agreements.

Summary of long-term debt obligations

Long-term debt consisted of the following:

	December 31, 2015		June 30, 2016
	(Dollars in thousands)
Term Loan B principal amount	$	274,000	$	271,250
Less unamortized discount and debt issuance costs based on imputed interest rate of 4.78%		(3,225)		(2,825)
Term Loan B net carrying value		270,775		268,425
Revolver		3,306		1,770
Capital leases and other loans		674		622
		274,755		270,817
Less current portion		(5,662)		(4,439)
	$	269,093	$	266,378

 

In addition to the outstanding amounts listed above, we also have interest payments related to our long-term debt as follows as of June 30, 2016:

⋅ Outstanding borrowings of $271.2 million under the Term Loan B with interest payments due at LIBOR (subject to a floor of 1.00%) plus 3.50% or prime rate plus 2.50%; and

⋅ Outstanding borrowings of $1.8 million under the Revolver, with interest payments due at LIBOR plus 3.00% or at prime rate plus 2.00%.

⋅ Commitment fees of 0.50% on any unused portion of the revolver.

Maturities of Long-Term Debt and Capital Lease Obligations

Principal repayment requirements under all long-term debt agreements and capital lease obligations outstanding at June 30, 2016 for each of the next five years and thereafter are as follows:

	Amount
For the Twelve Months Ended June 30,	(Dollars in thousands)
2017	$	4,439
2018		3,112
2019		3,102
2020		259,969
2021		113
Thereafter		82
	$	270,817

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STOCK INCENTIVE PLAN

6 Months Ended

Jun. 30, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

STOCK INCENTIVE PLAN

NOTE 10. STOCK INCENTIVE PLAN

 

The company has one stock incentive plan. The Amended and Restated 1999 Stock Incentive Plan (the “Plan”) allows the company to grant stock options and restricted stock to employees, directors, officers and advisors of the company. A maximum of 5,000,000 shares are authorized under the Plan. Options generally vest over a four-year period and have a maximum term of five years from the vesting date. The Plan provides that vesting may be accelerated upon the occurrence of certain corporate transactions of the company. The Plan provides that the Board of Directors, or a committee appointed by the Board, has discretion, subject to certain limits, to modify the terms of outstanding options. We recognize non-cash stock-based compensation expense related to the estimated fair value of stock options granted in accordance with FASB ASC Topic 718 “Compensation—Stock Compensation.”

The following table reflects the components of stock-based compensation expense recognized in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2015 and 2016: 

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2016		2015		2016
	(Dollars in thousands)
Stock option compensation expense included in corporate expenses	$	88	$	81	$	316	$	202
Restricted stock awards compensation expense included in corporate expenses		14		—		15		24
Stock option compensation expense included in broadcast operating expenses		25		20		77		48
Stock option compensation expense included in digital media operating expenses		19		14		55		39
Stock option compensation expense included in publishing operating expenses		10		10		24		11
Total stock-based compensation expense, pre-tax	$	156	$	125	$	487	$	324
Tax provision for stock-based compensation expense		(63)		(50)		(195)		(130)
Total stock-based compensation expense, net of tax	$	93	$	75	$	292	$	194

Stock option and restricted stock grants

The Plan allows the company to grant stock options and shares of restricted stock to employees, directors, officers and advisors of the company. For grants of stock options, the option exercise price is set at the closing price of the company’s common stock on the date of grant, and the related number of shares underlying the stock option is fixed at that point in time. The Plan also provides for grants of restricted stock. Eligible employees may receive stock options annually with the number of shares and type of instrument generally determined by the employee’s salary grade and performance level. In addition, certain management and professional level employees typically receive a stock option grant upon commencement of employment. The Plan does not allow key employees and directors (restricted persons) to exercise options during pre-defined blackout periods. Employees may participate in plans established pursuant to Rule 10b5-1 under the Exchange Act that allow them to exercise options according to pre-established criteria.

We use the Black-Scholes valuation model to estimate the grant date fair value of stock options and restricted stock. The expected volatility reflects the consideration of the historical volatility of our stock as determined by the closing price over a six to ten year term that is generally commensurate with the expected term of the award. Expected dividends reflect the quarterly distributions authorized and declared on our Class A and Class B common stock as of the grant date. The expected term of the awards are based on evaluations of historical and expected future employee exercise behavior. The risk-free interest rates for periods within the expected term of the award are based on the U.S. Treasury yield curve in effect during the period the options were granted. We use historical data to estimate future forfeiture rates to apply against the gross amount of compensation expense determined using the valuation model.

The weighted-average assumptions used to estimate the fair value of the stock options and restricted stock awards using the Black-Scholes valuation model were as follows for the three and six months ended June 30, 2015 and 2016: 

	Three Months Ended June 30,					Six Months Ended June 30,
	2015		2016			2015			2016
Expected volatility		n/a		46.77	%		52.37	%		47.03	%
Expected dividends		n/a		4.08	%		4.28	%		5.36	%
Expected term (in years)		n/a		6.0			3.0			7.5
Risk-free interest rate		n/a		1.38	%		0.85	%		1.66	%

Stock option information with respect to the company’s stock-based equity plans during the six months ended June 30, 2016 is as follows:

Options	Shares		Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
	(Dollars in thousands, except weighted average exercise price and weighted average grant date fair value)
Outstanding at January 1, 2016		1,581,123	$	4.87	$	3.39	4.3 years	$	1,738
Granted		549,500		4.85		1.33
Exercised		(117,443)		2.85		1.85
Forfeited or expired		(70,377)		8.01		5.91
Outstanding at June 30, 2016		1,942,803	$	4.88	$	2.81	4.9 years	$	4,585
Exercisable at June 30, 2016		1,062,178	$	5.03	$	3.56	3.4 years	$	2,342
Expected to Vest		836,164	$	4.69	$	1.89	6.6 years	$	2,130

Non-employee directors of the company have been awarded restricted stock awards that vest one year from the date of issuance. These restricted stock awards contained transfer restrictions under which they could not be sold, pledged, transferred or assigned until the sooner of the fifth anniversary from the grant date or the day after the non-employee director is no longer a member of the company’s board. The restricted stock awards are independent of option grants and were granted at no cost to the recipient other than applicable taxes owed by the recipient. The awards were considered issued and outstanding from the date of grant.

The fair values of shares of restricted stock awards are determined based on the closing price of the company common stock on the grant dates. Information regarding the company’s restricted stock awards during the six months ended June 30, 2016 is as follows: 

Restricted Stock Awards	Shares		Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
	(Dollars in thousands, except weighted average exercise price and weighted average grant date fair value)
Outstanding at January 1, 2016		8,000	$	5.83		0.2 years	$	40
Granted		—		—		—		—
Lapsed		(8,000)		5.83		—		52
Forfeited		—		—		—		—
Unvested outstanding at June 30, 2016		—	$	—		—	$	—

The aggregate intrinsic value represents the difference between the company’s closing stock price on June 30, 2016 of $7.22 and the option exercise price of the shares for stock options that were in the money, multiplied by the number of shares underlying such options. The total fair value of options vested during the six months ended June 30, 2015 and 2016 was $1.3 million and $1.1 million, respectively.

As of June 30, 2016, there was $0.7 million of total unrecognized compensation cost related to non-vested stock option awards. This cost is expected to be recognized over a weighted-average period of 2.07 years.

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EQUITY TRANSACTIONS

6 Months Ended

Jun. 30, 2016

Equity [Abstract]

EQUITY TRANSACTIONS

NOTE 11. EQUITY TRANSACTIONS

We account for stock-based compensation expense in accordance with FASB ASC Topic 718, “Compensation-Stock Compensation.” As a result, $0.1 million and $0.3 million of non-cash stock-based compensation expense has been recorded to additional paid-in capital for the three and six months ended June 30, 2016, respectively, in comparison to $0.2 million and $0.5 million for the three and six months ended June 30, 2015.

 

While we intend to pay regular quarterly distributions, the actual declaration of such future distributions and the establishment of the per share amount, record dates, and payment dates are subject to final determination by our Board of Directors and dependent upon future earnings, cash flows, financial requirements, and other factors. The current policy of the Board of Directors is to review each of these factors on a quarterly basis to determine the appropriate amount, if any, to allocate toward a cash distribution with the general principle of using approximately 20% of free cash flow. Free cash flow is a non-GAAP measure defined in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations included with this quarterly report.

The following table shows distributions that have been declared and paid since January 1, 2015:

				Cash Distributed
Announcement Date	Payment Date	Amount Per Share		(in thousands)
June 2, 2016	June 30, 2016	$	0.0650	$	1,664
March 10, 2016	April 5, 2016	$	0.0650	$	1,657
December 1, 2015	December 29, 2015	$	0.0650	$	1,656
September 1, 2015	September 30, 2015	$	0.0650	$	1,655
June 2, 2015	June 30, 2015	$	0.0650	$	1,654
March 5, 2015	March 31, 2015	$	0.0650	$	1,647

Based on the number of shares of Class A and Class B currently outstanding, and the currently approved distribution amount, we expect to declare and pay total annual distributions of approximately $6.7 million during the year ending December 31, 2016.

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BASIC AND DILUTED NET EARNINGS PER SHARE

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

BASIC AND DILUTED NET EARNINGS PER SHARE

NOTE 12. BASIC AND DILUTED NET EARNINGS PER SHARE

Basic net earnings per share has been computed using the weighted average number of Class A and Class B shares of common stock outstanding during the period. Diluted net earnings per share is computed using the weighted average number of shares of Class A and Class B common stock outstanding during the period plus the dilutive effects of stock options.

Options to purchase 1,634,034 and 1,942,803 shares of Class A common stock were outstanding at June 30, 2015 and 2016, respectively. Diluted weighted average shares outstanding exclude outstanding stock options whose exercise price is in excess of the average price of the company’s stock price. These options are excluded from the respective computations of diluted net income or loss per share because their effect would be anti-dilutive. As of June 30, 2015 and 2016 there were 400,366 and 501,204 dilutive shares, respectively.

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DERIVATIVE INSTRUMENTS

6 Months Ended

Jun. 30, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS

NOTE 13. DERIVATIVE INSTRUMENTS

 

We are exposed to fluctuations in interest rates. We actively monitor these fluctuations and use derivative instruments from time to time to manage the related risk. In accordance with our risk management strategy, we may use derivative instruments only for the purpose of managing risk associated with an asset, liability, committed transaction, or probable forecasted transaction that is identified by management. Our use of derivative instruments may result in short-term gains or losses that may increase the volatility of our earnings.

Under FASB ASC Topic 815, “Derivatives and Hedging,” the effective portion of the gain or loss on a derivative instrument designated and qualifying as a cash flow hedging instrument shall be reported as a component of other comprehensive income (outside earnings) and reclassified into earnings in the same period or periods during which the hedged forecasted transaction affects earnings. The remaining gain or loss on the derivative instrument, if any, shall be recognized currently in earnings.

On March 27, 2013, we entered into an interest rate swap agreement with Wells Fargo that began on March 28, 2014 with a notional principal amount of $150.0 million. The agreement was entered to offset risks associated with the variable interest rate on our Term Loan B. Payments on the swap are due on a quarterly basis with a LIBOR floor of 0.625%. The swap expires on March 28, 2019 at a fixed rate of 1.645%. The interest rate swap agreement was not designated as a cash flow hedge, and as a result, all changes in the fair value are recognized in the current period statement of operations rather than through other comprehensive income. We recorded a long-term liability of $3.0 million as of June 30, 2016, representing the fair value of the interest rate swap agreement. The swap was valued based on observable inputs for similar assets and liabilities and other observable inputs for interest rates and yield curves, which are classified within Level 2 inputs in the fair value hierarchy described below and in Note 14.

 

	December 31, 2015		June 30, 2016
	(Dollars in thousands)
Fair value of interest rate swap liability	$	798	$	2,979

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FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2016

Fair Value Disclosures [Abstract]

FAIR VALUE ACCOUNTING

NOTE 14. FAIR VALUE MEASUREMENTS

 

FASB ASC Topic 820 “Fair Value Measurements and Disclosures,” established a hierarchal disclosure framework associated with the level of pricing observability utilized in measuring fair value. This framework defines three levels of inputs to the fair value measurement process and requires that each fair value measurement be assigned to a level corresponding to the lowest level input that is significant to the fair value measurement in its entirety. The three broad levels of inputs defined by the FASB ASC Topic 820 hierarchy are as follows:

• Level 1 Inputs—quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date;

• Level 2 Inputs—inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability; and

• Level 3 Inputs—unobservable inputs for the asset or liability. These unobservable inputs reflect the entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances (which might include the reporting entity’s own data).

As of June 30, 2016, the carrying value of cash and cash equivalents, trade accounts receivables, accounts payable, accrued expenses and accrued interest approximates fair value due to the short-term nature of such instruments.  The carrying value of long-term liabilities and long-term debt and capital lease obligations approximates the fair value as the related interest rates approximate rates currently available to the company. The following table summarizes the fair value of our financial assets that are measured at fair value:

	June 30, 2016
	Total Fair Value and Carrying Value on		Fair Value Measurement Category
	Balance Sheet		Level 1		Level 2		Level 3
	(Dollars in thousands)
Assets:
Cash and cash equivalents	$	44	$	44	$	—	$	—
Trade accounts receivable, net		33,091		33,091		—		—
Liabilities:
Accounts payable		3,612		3,612		—		—
Accrued expenses including estimated fair value of contingent earn-out consideration		10,687		10,246		—		441
Accrued interest		47		47		—		—
Long term liabilities		35		35		—		—
Long-term debt and capital lease obligations less unamortized discount and debt issuance costs		270,817		—		270,817		—
Fair value of interest rate swap		2,979		—		2,979		—

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INCOME TAXES

6 Months Ended

Jun. 30, 2016

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 15. INCOME TAXES

 

We account for income taxes in accordance with FASB ASC Topic 740, “Income Taxes.”  We did not record adjustments to the balance of our unrecognized tax benefits as of June 30, 2016 and 2015.  At December 31, 2015, we had $0.1 million in liabilities for unrecognized tax benefits.  Included in this liability amount is approximately $20,000 of accrued interest, net of federal income tax benefits, and $6,000 for the related penalties recorded in income tax expense on our Condensed Consolidated Statements of Operations.  We expect to reduce the reserve balance to zero over the next twelve months due to statute expirations. 

Valuation Allowance (Deferred Taxes)

For financial reporting purposes, we recorded a valuation allowance of $2.8 million as of June 30, 2016 and December 31, 2015 to offset a portion of the deferred tax assets related to the state net operating loss carryforwards.  We regularly review our financial forecasts in an effort to determine our ability to utilize the net operating loss carryforwards for tax purposes.  Accordingly, the valuation allowance is adjusted periodically based on our estimate of the benefit the company will receive from such carryforwards.

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2016

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 16. COMMITMENTS AND CONTINGENCIES

The company enters into various agreements in the normal course of business that contain minimum guarantees. These minimum guarantees are often tied to future events, such as future revenue earned in excess of the contractual level. Accordingly, the fair value of these arrangements is zero.

The company also records contingent earn-out consideration representing the estimated fair value of future liabilities associated with acquisitions that may have additional payments due upon the achievement of certain performance targets. The fair value of the contingent earn-out consideration is estimated as of the acquisition date as the present value of the expected contingent payments as determined using weighted probabilities of the expected payment amounts. We review the probabilities of possible future payments to estimate the fair value of any contingent earn-out consideration on a quarterly basis over the earn-out period. Actual results are compared to the estimates and probabilities of achievement used in our forecasts.  Should actual results of the acquired business increase or decrease as compared to our estimates and assumptions, the estimated fair value of the contingent earn-out consideration liability will increase or decrease, up to the contracted limit, as applicable. Changes in the estimated fair value of the contingent earn-out consideration are reflected in our results of operations in the period in which they are identified. Changes in the estimated fair value of the contingent earn-out consideration may materially impact and cause volatility in our operating results.

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. We evaluate claims based on what we believe to be both probable and reasonably estimable. With the exception of the matter described below, we are unable to ascertain the ultimate aggregate amount of monetary liability or the financial impact with respect to these matters. The company maintains insurance that may provide coverage for such matters.

In April 2016, pursuant to a counterclaim to a collection suit initiated by Salem, an award was issued against Salem for breach of contract and attorney fees. While we have filed an appeal against the award as well as a malpractice lawsuit against the lawyer that represented Salem in the suit, we recorded a legal reserve of $0.5 million as of March 31, 2016.

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 condensed consolidated financial position, results of operations or cash flows.

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SEGMENT DATA

6 Months Ended

Jun. 30, 2016

Segment Reporting [Abstract]

SEGMENT DATA

NOTE 17. SEGMENT DATA

FASB ASC Topic 280, “Segment Reporting,” requires companies to provide certain information about their operating segments. We have three operating segments: (1) Broadcast, (2) Digital Media and (3) Publishing.

Our operating segments reflect how our chief operating decision makers, which we define as a collective group of senior executives, assesses the performance of each operating segment and determines the appropriate allocations of resources to each segment. Our operating segments now meet the quantitative thresholds to qualify as reportable segments. We continually review our operating segment classifications to align with operational changes in our business and may make future changes as necessary.

 

We measure and evaluate our operating segments based on operating income and operating expenses that do not include allocations of costs related to corporate functions, such as accounting and finance, human resources, legal, tax and treasury; nor do they include costs such as amortization, depreciation, taxes or interest expense. Segment performance, as defined by Salem, is not necessarily comparable to other similarly titled captions of other companies.

The table below presents financial information for each operating segment as of June 30, 2016 and 2015 based on the composition of our operating segments:

	Broadcast		Digital Media		Publishing		Unallocated Corporate		Consolidated
	(Dollars in thousands)
Three Months Ended June 30, 2016
Net revenue	$	49,707	$	11,311	$	6,761	$	—	$	67,779
Operating expenses		35,709		8,781		6,983		3,568		55,041
Operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration, impairment of long-lived assets and (gain) loss on the sale or disposal of assets	$	13,998	$	2,530	$	(222)	$	(3,568)	$	12,738
Depreciation		1,802		798		165		217		2,982
Amortization		23		1,093		72		1		1,189
Change in the estimated fair value of contingent earn-out consideration		—		(36)		(98)		—		(134)
Impairment of long-lived assets		700		—		—		—		700
(Gain) loss on the sale or disposal of assets		(1,721)		20		(3)		3		(1,701)
Operating income (loss)	$	13,194	$	655	$	(358)	$	(3,789)	$	9,702
Three Months Ended June 30, 2015
Net revenue	$	49,060	$	11,499	$	6,734	$	—	$	67,293
Operating expenses		35,187		8,767		6,469		3,518		53,941
Operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration and loss on disposal of assets	$	13,873	$	2,732	$	265	$	(3,518)	$	13,352
Depreciation		1,889		782		167		222		3,060
Amortization		23		1,156		135		1		1,315
Change in the estimated fair value of contingent earn-out consideration		—		(244)		(63)		—		(307)
Loss on disposal of assets		30		—		—		—		30
Operating income (loss)	$	11,931	$	1,038	$	26	$	(3,741)	$	9,254
Six Months Ended June 30, 2016
Net revenue	$	98,178	$	22,595	$	11,581	$	—	$	132,354
Operating expenses		71,697		17,967		11,931		7,781		109,376
Operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration, impairment of long-lived assets and (gain) loss on the sale or disposal of assets	$	26,481	$	4,628	$	(350)	$	(7,781)	$	22,978
Depreciation		3,650		1,580		315		429		5,974
Amortization		45		2,142		144		1		2,332
Change in the estimated fair value of contingent earn-out consideration		—		(106)		(156)		—		(262)
Impairment of long-lived assets		700		—		—		—		700
(Gain) loss on the sale or disposal of assets		(1,542)		6		(21)		6		(1,551)
Operating income (loss)	$	23,628	$	1,006	$	(632)	$	(8,217)	$	15,785
Six Months Ended June 30, 2015
Net revenue	$	95,599	$	22,290	$	11,260	$	—	$	129,149
Operating expenses		69,104		17,767		10,966		7,509		105,346
Operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration and (gain) loss on the sale or disposal of assets	$	26,495	$	4,523	$	294	$	(7,509)	$	23,803
Depreciation		3,840		1,558		335		499		6,232
Amortization		46		2,326		271		1		2,644
Change in the estimated fair value of contingent earn-out consideration		—		(211)		22		—		(189)
(Gain) loss on the sale or disposal of assets		159		—		(1)		1		159
Operating income (loss)	$	22,450	$	850	$	(333)	$	(8,010)	$	14,957

	Broadcast		Digital Media		Publishing		Unallocated Corporate		Consolidated
	(Dollars in thousands)
As of June 30, 2016
Inventories, net	$	—	$	388	$	515	$	—	$	903
Property and equipment, net		88,155		7,131		1,625		7,648		104,559
Broadcast licenses		393,566		—		—		—		393,566
Goodwill		3,581		20,160		1,044		8		24,793
Other indefinite-lived intangible assets		—		—		833		—		833
Amortizable intangible assets, net		447		11,522		1,244		7		13,220
As of December 31, 2015
Inventories, net	$	—	$	505	$	388	$	—	$	893
Property and equipment, net		88,788		7,033		1,742		7,920		105,483
Broadcast licenses		393,031		—		—		—		393,031
Goodwill		3,581		19,930		1,044		8		24,563
Other indefinite-lived intangible assets		—		—		833		—		833
Amortizable intangible assets, net		492		9,599		1,385		5		11,481

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SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2016

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 18. SUBSEQUENT EVENTS

On August 1, 2016, we acquired the assets of Hillcrest Media Group, Inc., a provider of self-publishing services for general market authors, for $3.5 million in cash.

On July 21, 2016, we entered into an APA to acquire KXFN-AM in St. Louis, Missouri for $0.2 million. We expect the transaction to close in the latter half of 2016.

We have continued to acquire FM Translators or FM Translator Construction permits during the first FCC AMR window, which expired July 28, 2016. These transactions include the following:

Date APA Entered	Permit or ID	Authorized Site - Current	Purchase Price		Escrow Deposits		Market
			(Dollars in thousands)
7/25/2016	K296AL	Crested Butte, Colorado	$	39	$	8	Colorado Springs, Colorado
7/25/2016	K283CA	Festus, Missouri *		40		8	St. Louis, Missouri
7/26/2016	W263BS	Rhinelander, Wisconsin		50		25	Minneapolis, Minnesota
7/26/2016	K294CP	Roseburg, Oregon *		45		9	Portland, Oregon
7/26/2016	W279BK	Carbondale, Pennsylvania		75		15	Pittsburgh, Pennsylvania
7/26/2016	W283BR	Dansville, New York		75		15	New York, New York
7/26/2016	K228FC	Kingsville, Texas *		50		10	Houston, Texas
7/26/2016	K245AR	Little Fish Lake Valley, California		44		20	Sacramento, California
7/26/2016	K276FZ	Eaglemount, Washington *		40		8	Portland, Oregon
7/27/2016	W256CO	Angola, Indiana *		50		15	Cleveland, Ohio
7/27/2016	W249CQ	Cofax, Indiana *		45		14	St. Louis, Missouri
7/27/2016	W263CS	Battle Creek, Michigan *		50		15	Cleveland, Ohio
7/27/2016	W227BT	Port St Lucie, Florida		100		10	Tampa, Florida
	W298AM	Aurora, Florida					TBD
7/28/2016	K239CD	Lahaina, Hawaii *		110		11	Honolulu, Hawaii
	K241BZ	Kihei, Hawaii					Honolulu, Hawaii

 * Indicates that the purchase is for a FM Translator Construction Permit.

Subsequent events reflect all applicable transactions through the date of the filing.

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BASIS OF PRESENTATION (Policies)

6 Months Ended

Jun. 30, 2016

Accounting Policies [Abstract]

Description of Business

Description of Business

Salem is a domestic multi-media company with integrated operations including radio broadcasting, digital media, and publishing. Effective as of February 19, 2015, we changed our name from Salem Communications Corporation to Salem Media Group, Inc. to more accurately reflect our multi-media business. Salem was formed in 1986 as a California corporation and was reincorporated in Delaware in 1999. Our content is intended for audiences interested in Christian and family-themed programming and conservative news talk. We maintain a website at www.salemmedia.com.

We have three operating segments, (1) Broadcast, (2) Digital Media, and (3) Publishing, which are discussed in Note 17 – Segment Data. Our foundational business is the ownership and operation of radio stations in large metropolitan markets. We also own and operate Salem Radio Network® (“SRN”), SRN News Network (“SNN”), Salem Music Network (“SMN”), Today’s Christian Music (“TCM”), Singing News Network (formerly Solid Gospel Network) and Salem Media Representatives^TM (“SMR”). SRN, SNN, SMN and Singing News Network are networks that develop, produce and syndicate a broad range of programming specifically targeted to Christian and family-themed talk stations, music stations and general News Talk stations throughout the United States, including Salem-owned and operated stations. SMR, a national advertising sales firm with offices in ten U.S. cities, specializes in placing national advertising on religious and other commercial radio stations.

Web-based and digital content has been an area of growth for Salem and continues to be a focus of future development. Salem Web Network™ (“SWN”) and our other web-based businesses provide Christian and conservative-themed content, audio and video streaming, and other resources digitally through the web. SWN’s web portals include Christian content websites: OnePlace.com, Christianity.com, Crosswalk.com®, GodVine.com, Jesus.org and BibleStudyTools.com. Our conservative opinion websites, collectively known as Townhall Media, include Townhall.com™, HotAir.com, Twitchy.com, HumanEvents.com and RedState.com. We also issue digital newsletters, including Eagle Financial Publications, which provide general market analysis and non-individualized investment strategies from financial commentators on a subscription basis. Church product websites including WorshipHouseMedia.com, SermonSpice.com, and ChurchStaffing.com offer downloads and service platforms to pastors and other educators. Our web content is accessible through all of our radio station websites that feature content of interest to local listeners throughout the United States.

Digital media also includes our e-commerce sites, Eagle Wellness and Gene Smart Wellness. These e-commerce sites offer health advice and nutritional products.

Our publishing operating segment is comprised of three businesses. Regnery Publishing is a traditional book publisher that has published dozens of bestselling books by leading conservative authors and personalities, including Ann Coulter, Newt Gingrich, David Limbaugh, Ed Klein, Mark Steyn and Dinesh D'Souza. Xulon Press provides self-publishing services to authors. Salem Publishing™ produces and distributes five print magazines and one digital magazine.

Variable Interest Entities

Variable Interest Entities

We may enter into agreements or investments with other entities that could qualify as variable interest entities (“VIEs”) in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810 “Consolidation.” A VIE is consolidated in the financial statements if we are deemed to be the primary beneficiary. The primary beneficiary is the entity that holds the majority of the beneficial interests in the VIE, either explicitly or implicitly. A VIE is an entity for which the primary beneficiary’s interest in the entity can change with variations in factors other than the amount of investment in the entity. We perform our evaluation for VIE’s upon entry into the agreement or investment. We re-evaluate the VIE when or if events occur that could change the status of the VIE.

We may enter into lease arrangements with entities controlled by our principal stockholders or other related parties. We also may enter into Local Marketing Agreements (“LMAs”) or Time Brokerage Agreements (“TBAs”) contemporaneously with entering into an Asset Purchase Agreement (“APA”) to acquire or sell a radio station. Typically, both LMAs and TBAs are contractual agreements under which the station owner/licensee makes airtime available to a programmer/licensee in exchange for a fee and reimbursement of certain expenses. LMAs and TBAs are subject to compliance with the antitrust laws and the communications laws, including the requirement that the licensee must maintain independent control over the station and, in particular, its personnel, programming, and finances. The FCC has held that such agreements do not violate the communications laws as long as the licensee of the station receiving programming from another station maintains ultimate responsibility for, and control over, station operations and otherwise ensures compliance with the communications laws.

The requirements of FASB ASC Topic 810 may apply to entities under LMAs or TBAs, depending on the facts and circumstances related to each transaction. As of June 30, 2016, we did not have implicit or explicit arrangements that required consolidation under the guidance in FASB ASC Topic 810.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Significant areas for which management uses estimates include:

· asset impairments, including goodwill, broadcasting licenses, other indefinite-lived intangible assets, and assets held for sale;

· probabilities associated with the potential for contingent earn-out consideration;

· fair value measurements;

· contingency reserves;

· allowance for doubtful accounts;

· sales returns and allowances;

· barter transactions;

· inventory reserves;

· reserves for royalty advances;

· fair value of equity awards;

· self-insurance reserves;

· estimated lives for tangible and intangible assets;

· income tax valuation allowances; and

· uncertain tax positions.

These estimates require the use of judgment as future events and the effect of these events cannot be predicted with certainty. The estimates will change as new events occur, as more experience is acquired and as more information is obtained. We evaluate and update our assumptions and estimates on an ongoing basis and we may consult outside experts to assist as considered necessary.

Reclassifications

Reclassifications

Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation. These reclassifications include the adoption of FASB Accounting Standards Update (“ASU”) 2015-03 and ASU 2015-15, which require that debt issuance costs, with the exception of costs associated with obtaining line-of-credit arrangements, be reported as a reduction of the debt liability rather than as a deferred cost asset. The adoption of ASU 2015-03 and ASU 2015-15 is reported as a change in accounting principle and discussed in detail in Note 9 – Notes Payable and Long-Term Debt.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Changes to accounting principles are established by the FASB in the form of ASUs to the FASB’s Codification. We consider the applicability and impact of all ASUs on our financial position, results of operations, cash flows, or presentation thereof. Described below are ASUs that are not yet effective, but may be applicable to our financial position, results of operations, cash flows, or presentation thereof. ASUs not listed below were assessed and determined to be not applicable to our financial position, results of operations, cash flows, or presentation thereof.  

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses,” which changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model that will replace today’s “incurred loss” model and generally will result in the earlier recognition of allowances for losses. For available-for-sale debt securities with unrealized losses, entities will measure credit losses in a manner similar to current practice, except that the losses will be recognized as an allowance. The guidance is effective in 2020 with early adoption permitted in 2019. We have not yet evaluated the impact of the adoption of this accounting standard on our financial position, results of operations, cash flows, or presentation thereof.

In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting.” This ASU simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted. We have not yet evaluated the impact of the adoption of this accounting standard on our financial position, results of operations, cash flows, or presentation thereof.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” which requires that lessees recognize a right-of-use asset and a lease liability for all leases with lease terms greater than twelve months in the balance sheet. ASU 2016-02 requires additional disclosures including the significant judgments made by management to provide insight into the revenue and expense to be recognized from existing contracts and the timing and uncertainty of cash flows arising from leases. The standard is effective for annual reporting periods beginning after December 15, 2018, with early adoption permitted. We have not yet determined the dollar impact of recording operating leases on our statement of financial position. The adoption of ASU 2016-02 will have a material impact on our financial position and the presentation thereof. Our existing credit facility stipulates that our covenants are based on GAAP as of the agreement date. Therefore, the material impact of recording right-to-use assets and lease liabilities on our statement of financial position is not expected to impact the compliance status for any covenant.

In January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities,” which provides updated guidance that enhances the reporting model for financial instruments, including amendments, to address aspects of recognition, measurement, presentation and disclosure. The standard is effective for annual reporting periods beginning after December 15, 2017. With the exception of the early application guidance, early adoption of the amendments is not permitted. We have not yet evaluated the impact of the adoption of this accounting standard on our financial position, results of operations, cash flows, or presentation thereof.

In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes,” to simplify the presentation of deferred taxes in the statement of financial position. The updated guidance requires that deferred tax assets and liabilities be classified as noncurrent in a classified balance sheet. The standard is effective for annual reporting periods beginning after December 15, 2016. Early adoption is permitted. We have not yet evaluated the impact of the adoption of this accounting standard on our financial position or presentation thereof.

 

In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory,” to reduce the complexity in accounting for inventory. This ASU requires entities to measure inventory at the lower of cost or net realizable value, replacing the market value approach that required floor and ceiling considerations. This guidance for public entities is effective for fiscal years beginning after December 15, 2016, with early adoption permitted. We are in the process of evaluating the adoption of this ASU, but do not expect this to have a material effect on our financial position, results of operations or cash flows.

In August 2014, the FASB issued ASU 2014-15, “Disclosure of Uncertainties About an Entities Ability to Continue as a Going Concern,” which requires management to assess a company’s ability to continue as a going concern and to provide related footnote disclosures. The new standard provides management with specific guidance on the assessments and related disclosures as well as provides a longer look-forward period as one year from the financial statement issuance date. The new standard is effective for the annual period ending after December 15, 2016, with early adoption permitted. The adoption of ASU 2014-15 is not expected to have a material impact on our financial position, results of operations, cash flows, or presentation thereof.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers,” which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. In August 2015, the FASB issued ASU 2015-14 “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date” that deferred the effective date of the new standard by one year. The new standard is now effective as of the first interim period within annual reporting periods beginning on or after December 15, 2017, and will replace most existing revenue recognition guidance in U.S. GAAP. Early adoption is permitted for annual reporting periods beginning after December 15, 2016. The standard permits the use of either the retrospective or cumulative effect transition method and requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. The FASB and the International Accounting Standards Board (“IASB”) formed a Transition Resource Group (TRG”) to discuss implementation issues and inform the IASB and the FASB of interpretive issues arising during implementation of the revenue recognition standard. The TRG does not issue guidance. The FASB has issued additional ASUs to amend or clarify select items in the original guidance. In March 2016, the FASB issued ASU 2016-08 “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)” that clarifies principal versus agent reporting of revenue. In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing” that provides clarification and guidance on separately identifiable performance obligations and licenses of intellectual property. In May 2016, the FASB issued ASU 2016-12 “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients” that provides guidance on collectability, non-cash consideration and completed contracts as of the transition date and provides a practical expedient for contract modifications at transition and an accounting policy election related to the presentation of sales taxes and other similar taxes collected from customers. In May 2016, the FASB issued ASU 2016-11, “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting” that rescinds guidance issued by the Securities Exchange Commission. These rescissions include changes to topics pertaining to accounting for shipping and handling fees and costs and accounting for consideration given by a vendor to a customer that are codified in ASC 605. We continue to evaluate the effect that this revenue guidance will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method, nor have we determined the effect of ASU 2014-09 on our financial position, results of operations, cash flows, or presentation thereof.

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IMPAIRMENT OF LONG-LIVED ASSETS (Tables)

6 Months Ended

Jun. 30, 2016

Impairment Of Long Lived Assets Disclosure [Abstract]

Disclosure of Long Lived Assets Held-for-sale

The table below presents the fair value measurements used to value this asset.

			Fair Value Measurements Using:
			(Dollars in thousands)
Description	As of June 30, 2016		Quoted prices in active markets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)		Total Gains (Losses)
Long-Lived Asset Held for Sale	$	1,000			$	1,000	$	(700)

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ACQUISITIONS AND RECENT TRANSACTIONS (Tables)

6 Months Ended

Jun. 30, 2016

Business Combinations [Abstract]

Summary of Business Acquisitions and Asset Purchased

A summary of our business acquisitions and asset purchases during the six month period ended June 30, 2016, none of which were individually or in the aggregate material to our Condensed Consolidated financial position as of the respective date of acquisition, is as follows:

Acquisition Date	Description	Total Cost
		(Dollars in thousands)
June 20, 2016	FM Translator, Columbus, Ohio (asset purchase)	$	345
June 10, 2016	FM Translator, Amherst, New York (asset purchase)		60
June 8, 2016	FM Translator construction permit, Charlotte, Michigan (asset purchase)		50
June 3, 2016	FM Translator construction permit, Atwood, Kentucky (asset purchase)		88
May 13, 2016	FM Translator construction permit, Kerrville, Texas (asset purchase)		50
May 2, 2016	FM Translator, Lincoln, Maine (asset purchase)		100
April 29, 2016	FM Translator construction permit, Emporia, Kansas (asset purchase)		25
April 1, 2016	Retirement Watch (business acquisition)		100
March 8, 2016	King James Bible mobile applications (business acquisition)		4,000
Various	Purchase of domain names and assets for use in publishing business (asset purchases)		6
		$	4,824

Summary of Total Acquisition Consideration

The following table summarizes the total acquisition consideration for the six month period ending June 30, 2016:

Description	Total Consideration
	(Dollars in thousands)
Cash payments made upon closing	$	3,524
Deferred payments		1,300
Total purchase price consideration	$	4,824

Total Acquisition Consideration Allocated

The total acquisition consideration was allocated to the net assets acquired as follows:

	Net Broadcast		Net Digital Media		Net Publishing		Net Total
	Assets Acquired		Assets Acquired		Assets Acquired		Assets Acquired
	(Dollars in thousands)
Assets
Property and equipment	$	13	$	371	$	—	$	384
Projects in process		213		—				213
Broadcast licenses		492		—		—		492
Goodwill		—		230		—		230
Domain and brand names		—		908		6		914
Customer lists and contracts		—		2,867		—		2,867
Non-compete agreements		—		289		—		289
Liabilities
Deferred revenue		—		(565)		—		(565)
	$	718	$	4,100	$	6	$	4,824

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CONTINGENT EARN-OUT CONSIDERATION (Tables)

6 Months Ended

Jun. 30, 2016

Business Combination, Contingent Consideration, Liability [Abstract]

Schedule of changes in present value of acquisition related contingent earn-out consideration

The following table reflects the changes in the present value of our acquisition-related estimated contingent earn-out consideration during the three and six month period ending June 30, 2016 and 2015:

	Three Months Ending June 30, 2016
	Short-Term		Long-Term
	Accrued Expenses		Other Liabilities		Total
	(Dollars in thousands)
Beginning Balance as of April 1, 2016	$	541	$	33	$	574
Acquisitions		—		—		—
Accretion of acquisition-related contingent earn-out consideration		5		1		6
Change in the estimated fair value of contingent earn-out consideration		(134)		—		(134)
Reclassification of payments due in next 12 months to short-term		34		(34)		—
Payments		(5)		—		(5)
Ending Balance as of June 30, 2016	$	441	$	—	$	441

	Three Months Ending June 30, 2015
	Short-Term Accrued Expenses		Long-Term Other Liabilities		Total
	(Dollars in thousands)
Beginning Balance as of April 1, 2015	$	2,251	$	1,035	$	3,286
Acquisitions		88		54		142
Accretion of acquisition-related contingent earn-out consideration		21		11		32
Change in the estimated fair value of contingent earn-out consideration		(293)		(14)		(307)
Reclassification of payments due in next 12 months to short-term		—		—		—
Payments		(877)		—		(877)
Ending Balance as of June 30, 2015	$	1,190	$	1,086	$	2,276

	Six Months Ending June 30, 2016
	Short-Term		Long-Term
	Accrued Expenses		Other Liabilities		Total
	(Dollars in thousands)
Beginning Balance as of January 1, 2016	$	173	$	602	$	775
Acquisitions		—		—		—
Accretion of acquisition-related contingent earn-out consideration		8		8		16
Change in the estimated fair value of contingent earn-out consideration		(208)		(54)		(262)
Reclassification of payments due in next 12 months to short-term		556		(556)		—
Payments		(88)		—		(88)
Ending Balance as of June 30, 2016	$	441	$	—	$	441

	Six Months Ending June 30, 2015
	Short-Term Accrued Expenses		Long-Term Other Liabilities		Total
	(Dollars in thousands)
Beginning Balance as of January 1, 2015	$	1,575	$	1,710	$	3,285
Acquisitions		176		124		300
Accretion of acquisition-related contingent earn-out consideration		31		26		57
Change in the estimated fair value of contingent earn-out consideration		(213)		24		(189)
Reclassification of payments due in next 12 months to short-term		798		(798)		—
Payments		(1,177)		—		(1,177)
Ending Balance as of June 30, 2015	$	1,190	$	1,086	$	2,276

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INVENTORIES (Tables)

6 Months Ended

Jun. 30, 2016

Inventory Disclosure [Abstract]

Schedule of inventory on hand by segment

The following table provides details of inventory on hand by segment:

	December 31, 2015		June 30, 2016
	(Dollars in thousands)
Regnery Publishing book inventories	$	2,186	$	2,612
Reserve for obsolescence – Regnery Publishing		(1,798)		(2,097)
Inventory net, Regnery Publishing		388		515
Wellness products	$	562	$	452
Reserve for obsolescence – Wellness products		(57)		(64)
Inventory, net Wellness products		505		388
Consolidated inventories, net	$	893	$	903

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PROPERTY AND EQUIPMENT (Tables)

6 Months Ended

Jun. 30, 2016

Property, Plant and Equipment [Abstract]

Summary of categories of property and equipment

The following is a summary of the categories of our property and equipment:

	December 31, 2015		June 30, 2016
	(Dollars in thousands)
Land	$	31,565	$	31,180
Buildings		25,448		25,362
Office furnishings and equipment		38,812		36,798
Office furnishings and equipment under capital lease obligations		228		228
Antennae, towers and transmitting equipment		83,501		83,120
Antennae, towers and transmitting equipment under capital lease obligations		795		795
Studio, production and mobile equipment		30,598		28,277
Computer software and website development costs		28,134		28,423
Record and tape libraries		55		28
Automobiles		1,298		1,326
Leasehold improvements		20,799		19,713
Construction-in-progress		6,632		9,913
	$	267,865	$	265,163
Less accumulated depreciation		(162,382)		(160,604)
	$	105,483	$	104,559

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AMORTIZABLE INTANGIBLE ASSETS (Tables)

6 Months Ended

Jun. 30, 2016

Intangible Assets Disclosure [Abstract]

Summary of Significant Classes of Amortizable Intangible Assets

The following tables provide details, by major category, of the significant classes of amortizable intangible assets:

	June 30, 2016
			Accumulated
	Cost		Amortization		Net
	(Dollars in thousands)
Customer lists and contracts	$	22,403	$	(19,522)	$	2,881
Domain and brand names		17,533		(11,993)		5,540
Favorable and assigned leases		2,379		(1,932)		447
Subscriber base and lists		7,786		(4,540)		3,246
Author relationships		2,245		(1,595)		650
Non-compete agreements		1,323		(867)		456
Other amortizable intangible assets		1,336		(1,336)		—
	$	55,005	$	(41,785)	$	13,220

	December 31, 2015
	Accumulated
	Cost		Amortization		Net
	(Dollars in thousands)
Customer lists and contracts	$	20,009	$	(18,914)	$	1,095
Domain and brand names		16,619		(11,200)		5,419
Favorable and assigned leases		2,379		(1,887)		492
Subscriber base and lists		7,313		(3,808)		3,505
Author relationships		2,245		(1,523)		722
Non-compete agreements		1,034		(786)		248
Other amortizable intangible assets		1,336		(1,336)		—
	$	50,935	$	(39,454)	$	11,481

Amortizable Intangible Assets, Estimate Amortization Expense

Based on the amortizable intangible assets as of June 30, 2016, we estimate amortization expense for the next five years to be as follows:

Year Ending December 31,	Amortization Expense
	(Dollars in thousands)
2016 (July – Dec)	$	2,314
2017		3,414
2018		3,171
2019		2,659
2020		1,359
Thereafter		303
Total	$	13,220

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NOTES PAYABLE AND LONG-TERM DEBT (Tables)

6 Months Ended

Jun. 30, 2016

New Accounting Pronouncements and Changes in Accounting Principles

We have reclassified debt issue costs reported on our December 31, 2015 consolidated balance sheet as follows:

	December 31, 2015
	(Dollars in thousands)
	As Reported		As Updated ASU 2015-03
Balance Sheet Line Items:
Term Loan B	$	273,136	$	274,000
Less: Unamortized discount based on imputed interest rate of 4.78%		—		(864)
Less: Unamortized debt issuance costs based on imputed interest rate of 4.78%		—		(2,361)
Term Loan B net carrying value		273,136		270,775
Revolver		3,306		3,306
Capital leases and other loans		674		674
	$	277,116	$	274,755
Less current portion		(5,662)		(5,662)
Long-term debt and capital lease obligations less unamortized discount and debt issuance costs, net of current portion	$	271,454	$	269,093
Deferred financing costs	$	2,512	$	151

Long-Term Debt

Long-term debt consisted of the following:

	December 31, 2015		June 30, 2016
	(Dollars in thousands)
Term Loan B principal amount	$	274,000	$	271,250
Less unamortized discount and debt issuance costs based on imputed interest rate of 4.78%		(3,225)		(2,825)
Term Loan B net carrying value		270,775		268,425
Revolver		3,306		1,770
Capital leases and other loans		674		622
		274,755		270,817
Less current portion		(5,662)		(4,439)
	$	269,093	$	266,378

Principle Repayment Requirements Under Long Term Agreements Outstanding

Principal repayment requirements under all long-term debt agreements and capital lease obligations outstanding at June 30, 2016 for each of the next five years and thereafter are as follows:

	Amount
For the Twelve Months Ended June 30,	(Dollars in thousands)
2017	$	4,439
2018		3,112
2019		3,102
2020		259,969
2021		113
Thereafter		82
	$	270,817

Term Loan B And Revolving Credit Facility [Member]

Change in Rate Based on Leverage Ratio

		Revolver Pricing
Pricing Level	Consolidated Leverage Ratio	Base Rate Loans			LIBOR Loans
1	Less than 3.00 to 1.00		1.250	%		2.250	%
2	Greater than or equal to 3.00 to 1.00 but less than 4.00 to 1.00		1.500	%		2.500	%
3	Greater than or equal to 4.00 to 1.00 but less than 5.00 to 1.00		1.750	%		2.750	%
4	Greater than or equal to 5.00 to 1.00 but less than 6.00 to 1.00		2.000	%		3.000	%
5	Greater than or equal to 6.00 to 1.00		2.500	%		3.500	%

Term B Loan [Member]

Repayments of Term Loan B

We made the following payments or prepayments of our Term Loan B during the year ended December 31, 2015 and six month period ending June 30, 2016, including interest through the payment date as follows:

Date	Principal Paid		Unamortized Discount
	(Dollars in thousands)
June 30, 2016	$	441	$	1
June 30, 2016		750		—
March 31, 2016		750		—
March 17, 2016		809		2
January 30, 2015		2,000		15

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STOCK INCENTIVE PLAN (Tables)

6 Months Ended

Jun. 30, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Stock-Based Compensation Expense Recognized

The following table reflects the components of stock-based compensation expense recognized in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2015 and 2016: 

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2016		2015		2016
	(Dollars in thousands)
Stock option compensation expense included in corporate expenses	$	88	$	81	$	316	$	202
Restricted stock awards compensation expense included in corporate expenses		14		—		15		24
Stock option compensation expense included in broadcast operating expenses		25		20		77		48
Stock option compensation expense included in digital media operating expenses		19		14		55		39
Stock option compensation expense included in publishing operating expenses		10		10		24		11
Total stock-based compensation expense, pre-tax	$	156	$	125	$	487	$	324
Tax provision for stock-based compensation expense		(63)		(50)		(195)		(130)
Total stock-based compensation expense, net of tax	$	93	$	75	$	292	$	194

Schedule of Weighted-Average Assumptions Used to Estimate Fair Value of Stock Options and Restricted Stock Awards using Black-Scholes Option Valuation Model

The weighted-average assumptions used to estimate the fair value of the stock options and restricted stock awards using the Black-Scholes valuation model were as follows for the three and six months ended June 30, 2015 and 2016: 

	Three Months Ended June 30,					Six Months Ended June 30,
	2015		2016			2015			2016
Expected volatility		n/a		46.77	%		52.37	%		47.03	%
Expected dividends		n/a		4.08	%		4.28	%		5.36	%
Expected term (in years)		n/a		6.0			3.0			7.5
Risk-free interest rate		n/a		1.38	%		0.85	%		1.66	%

Schedule of Stock Option Activity

Stock option information with respect to the company’s stock-based equity plans during the six months ended June 30, 2016 is as follows:

Options	Shares		Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
	(Dollars in thousands, except weighted average exercise price and weighted average grant date fair value)
Outstanding at January 1, 2016		1,581,123	$	4.87	$	3.39	4.3 years	$	1,738
Granted		549,500		4.85		1.33
Exercised		(117,443)		2.85		1.85
Forfeited or expired		(70,377)		8.01		5.91
Outstanding at June 30, 2016		1,942,803	$	4.88	$	2.81	4.9 years	$	4,585
Exercisable at June 30, 2016		1,062,178	$	5.03	$	3.56	3.4 years	$	2,342
Expected to Vest		836,164	$	4.69	$	1.89	6.6 years	$	2,130

Schedule of Information Regarding Restricted Stock Activity

The fair values of shares of restricted stock awards are determined based on the closing price of the company common stock on the grant dates. Information regarding the company’s restricted stock awards during the six months ended June 30, 2016 is as follows: 

Restricted Stock Awards	Shares		Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
	(Dollars in thousands, except weighted average exercise price and weighted average grant date fair value)
Outstanding at January 1, 2016		8,000	$	5.83		0.2 years	$	40
Granted		—		—		—		—
Lapsed		(8,000)		5.83		—		52
Forfeited		—		—		—		—
Unvested outstanding at June 30, 2016		—	$	—		—	$	—

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EQUITY TRANSACTIONS (Tables)

6 Months Ended

Jun. 30, 2016

Equity [Abstract]

Schedule of Cash Distributions Declared and Paid

The following table shows distributions that have been declared and paid since January 1, 2015:

				Cash Distributed
Announcement Date	Payment Date	Amount Per Share		(in thousands)
June 2, 2016	June 30, 2016	$	0.0650	$	1,664
March 10, 2016	April 5, 2016	$	0.0650	$	1,657
December 1, 2015	December 29, 2015	$	0.0650	$	1,656
September 1, 2015	September 30, 2015	$	0.0650	$	1,655
June 2, 2015	June 30, 2015	$	0.0650	$	1,654
March 5, 2015	March 31, 2015	$	0.0650	$	1,647

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DERIVATIVE INSTRUMENTS (Tables)

6 Months Ended

Jun. 30, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments in Statement of Financial Position Fair Value

	December 31, 2015		June 30, 2016
	(Dollars in thousands)
Fair value of interest rate swap liability	$	798	$	2,979

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FAIR VALUE MEASUREMENTS (Tables)

6 Months Ended

Jun. 30, 2016

Fair Value Disclosures [Abstract]

Fair Value of Financial Assets Measured at Fair Value

The following table summarizes the fair value of our financial assets that are measured at fair value:

	June 30, 2016
	Total Fair Value and Carrying Value on		Fair Value Measurement Category
	Balance Sheet		Level 1		Level 2		Level 3
	(Dollars in thousands)
Assets:
Cash and cash equivalents	$	44	$	44	$	—	$	—
Trade accounts receivable, net		33,091		33,091		—		—
Liabilities:
Accounts payable		3,612		3,612		—		—
Accrued expenses including estimated fair value of contingent earn-out consideration		10,687		10,246		—		441
Accrued interest		47		47		—		—
Long term liabilities		35		35		—		—
Long-term debt and capital lease obligations less unamortized discount and debt issuance costs		270,817		—		270,817		—
Fair value of interest rate swap		2,979		—		2,979		—

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SEGMENT DATA (Tables)

6 Months Ended

Jun. 30, 2016

Segment Reporting [Abstract]

Schedule of Segment Data

The table below presents financial information for each operating segment as of June 30, 2016 and 2015 based on the composition of our operating segments:

	Broadcast		Digital Media		Publishing		Unallocated Corporate		Consolidated
	(Dollars in thousands)
Three Months Ended June 30, 2016
Net revenue	$	49,707	$	11,311	$	6,761	$	—	$	67,779
Operating expenses		35,709		8,781		6,983		3,568		55,041
Operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration, impairment of long-lived assets and (gain) loss on the sale or disposal of assets	$	13,998	$	2,530	$	(222)	$	(3,568)	$	12,738
Depreciation		1,802		798		165		217		2,982
Amortization		23		1,093		72		1		1,189
Change in the estimated fair value of contingent earn-out consideration		—		(36)		(98)		—		(134)
Impairment of long-lived assets		700		—		—		—		700
(Gain) loss on the sale or disposal of assets		(1,721)		20		(3)		3		(1,701)
Operating income (loss)	$	13,194	$	655	$	(358)	$	(3,789)	$	9,702
Three Months Ended June 30, 2015
Net revenue	$	49,060	$	11,499	$	6,734	$	—	$	67,293
Operating expenses		35,187		8,767		6,469		3,518		53,941
Operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration and loss on disposal of assets	$	13,873	$	2,732	$	265	$	(3,518)	$	13,352
Depreciation		1,889		782		167		222		3,060
Amortization		23		1,156		135		1		1,315
Change in the estimated fair value of contingent earn-out consideration		—		(244)		(63)		—		(307)
Loss on disposal of assets		30		—		—		—		30
Operating income (loss)	$	11,931	$	1,038	$	26	$	(3,741)	$	9,254
Six Months Ended June 30, 2016
Net revenue	$	98,178	$	22,595	$	11,581	$	—	$	132,354
Operating expenses		71,697		17,967		11,931		7,781		109,376
Operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration, impairment of long-lived assets and (gain) loss on the sale or disposal of assets	$	26,481	$	4,628	$	(350)	$	(7,781)	$	22,978
Depreciation		3,650		1,580		315		429		5,974
Amortization		45		2,142		144		1		2,332
Change in the estimated fair value of contingent earn-out consideration		—		(106)		(156)		—		(262)
Impairment of long-lived assets		700		—		—		—		700
(Gain) loss on the sale or disposal of assets		(1,542)		6		(21)		6		(1,551)
Operating income (loss)	$	23,628	$	1,006	$	(632)	$	(8,217)	$	15,785
Six Months Ended June 30, 2015
Net revenue	$	95,599	$	22,290	$	11,260	$	—	$	129,149
Operating expenses		69,104		17,767		10,966		7,509		105,346
Operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration and (gain) loss on the sale or disposal of assets	$	26,495	$	4,523	$	294	$	(7,509)	$	23,803
Depreciation		3,840		1,558		335		499		6,232
Amortization		46		2,326		271		1		2,644
Change in the estimated fair value of contingent earn-out consideration		—		(211)		22		—		(189)
(Gain) loss on the sale or disposal of assets		159		—		(1)		1		159
Operating income (loss)	$	22,450	$	850	$	(333)	$	(8,010)	$	14,957

	Broadcast		Digital Media		Publishing		Unallocated Corporate		Consolidated
	(Dollars in thousands)
As of June 30, 2016
Inventories, net	$	—	$	388	$	515	$	—	$	903
Property and equipment, net		88,155		7,131		1,625		7,648		104,559
Broadcast licenses		393,566		—		—		—		393,566
Goodwill		3,581		20,160		1,044		8		24,793
Other indefinite-lived intangible assets		—		—		833		—		833
Amortizable intangible assets, net		447		11,522		1,244		7		13,220
As of December 31, 2015
Inventories, net	$	—	$	505	$	388	$	—	$	893
Property and equipment, net		88,788		7,033		1,742		7,920		105,483
Broadcast licenses		393,031		—		—		—		393,031
Goodwill		3,581		19,930		1,044		8		24,563
Other indefinite-lived intangible assets		—		—		833		—		833
Amortizable intangible assets, net		492		9,599		1,385		5		11,481

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SUBSEQUENT EVENTS (Tables)

6 Months Ended

Jun. 30, 2016

Subsequent Events [Abstract]

Business Combination, Separately Recognized Transactions

We have continued to acquire FM Translators or FM Translator Construction permits during the first FCC AMR window, which expired July 28, 2016. These transactions include the following:

Date APA Entered	Permit or ID	Authorized Site - Current	Purchase Price		Escrow Deposits		Market
			(Dollars in thousands)
7/25/2016	K296AL	Crested Butte, Colorado	$	39	$	8	Colorado Springs, Colorado
7/25/2016	K283CA	Festus, Missouri *		40		8	St. Louis, Missouri
7/26/2016	W263BS	Rhinelander, Wisconsin		50		25	Minneapolis, Minnesota
7/26/2016	K294CP	Roseburg, Oregon *		45		9	Portland, Oregon
7/26/2016	W279BK	Carbondale, Pennsylvania		75		15	Pittsburgh, Pennsylvania
7/26/2016	W283BR	Dansville, New York		75		15	New York, New York
7/26/2016	K228FC	Kingsville, Texas *		50		10	Houston, Texas
7/26/2016	K245AR	Little Fish Lake Valley, California		44		20	Sacramento, California
7/26/2016	K276FZ	Eaglemount, Washington *		40		8	Portland, Oregon
7/27/2016	W256CO	Angola, Indiana *		50		15	Cleveland, Ohio
7/27/2016	W249CQ	Cofax, Indiana *		45		14	St. Louis, Missouri
7/27/2016	W263CS	Battle Creek, Michigan *		50		15	Cleveland, Ohio
7/27/2016	W227BT	Port St Lucie, Florida		100		10	Tampa, Florida
	W298AM	Aurora, Florida					TBD
7/28/2016	K239CD	Lahaina, Hawaii *		110		11	Honolulu, Hawaii
	K241BZ	Kihei, Hawaii					Honolulu, Hawaii

 * Indicates that the purchase is for a FM Translator Construction Permit.

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IMPAIRMENT OF GOODWILL AND OTHER INDEFINITE-LIVED INTANGIBLE ASSETS (Details Textual)	6 Months Ended
	Jun. 30, 2016
Goodwill And Other Intangible Assets [Line Items]
Percentage Of Intangible Assets	71.00%
Broadcast Licenses [Member]
Goodwill And Other Intangible Assets [Line Items]
Percentage Of Indefinite Lived Intangible Assets	94.00%
Mastheads [Member]
Goodwill And Other Intangible Assets [Line Items]
Percentage Of Indefinite Lived Intangible Assets	6.00%

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IMPAIRMENT OF LONG-LIVED ASSETS (Details) - USD ($) $ in Thousands	1 Months Ended		3 Months Ended	6 Months Ended
	Dec. 31, 2012	Jun. 30, 2012	Jun. 30, 2016	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Land Available-for-sale			$ 1,000	$ 1,000		$ 1,700
Impairment Charges Land Held For Sale	$ 1,200	$ 5,600	700	700	$ 0
Fair Value, Inputs, Level 1 [Member]
Land Available-for-sale
Fair Value, Inputs, Level 2 [Member]
Land Available-for-sale
Fair Value, Inputs, Level 3 [Member]
Land Available-for-sale			$ 1,000	$ 1,000

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IMPAIRMENT OF LONG-LIVED ASSETS (Details Textual) - USD ($) $ in Thousands	1 Months Ended		3 Months Ended	6 Months Ended
	Dec. 31, 2012	Jun. 30, 2012	Jun. 30, 2016	Jun. 30, 2016	Jun. 30, 2015
Impairment Of Long Lived Assets [Line Items]
Impairment Charges Land Held For Sale	$ 1,200	$ 5,600	$ 700	$ 700	$ 0

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ACQUISITIONS AND RECENT TRANSACTIONS (Details) - USD ($) $ in Thousands								1 Months Ended		6 Months Ended
	Jun. 10, 2016	Jun. 08, 2016	Jun. 03, 2016	May 13, 2016	May 02, 2016	Apr. 02, 2016	Mar. 08, 2016	Jun. 20, 2016	Apr. 29, 2016	Jun. 30, 2016
Business Acquisition [Line Items]
Business Combination, Consideration Transferred, Total										$ 4,824
King James Bible mobile applications (business acquisition)
Business Acquisition [Line Items]
Business Combination, Consideration Transferred, Total										4,000
Business Acquisition, Effective Date of Acquisition							Mar. 08, 2016
Purchase of domain names and assets for use in publishing business (asset purchases)
Business Acquisition [Line Items]
Business Combination, Consideration Transferred, Total										6
Retirement Watch Business Acquisition [Member]
Business Acquisition [Line Items]
Business Combination, Consideration Transferred, Total										$ 100
Business Acquisition, Effective Date of Acquisition						Apr. 01, 2016				Apr. 01, 2016
FM Translator construction permit, Emporia, Kansas asset purchase [Member]
Business Acquisition [Line Items]
Business Combination, Consideration Transferred, Total										$ 25
Business Acquisition, Effective Date of Acquisition									Apr. 29, 2016	Apr. 29, 2016
FM Translator, Lincoln, Maine Asset Purchase [Member]
Business Acquisition [Line Items]
Business Combination, Consideration Transferred, Total										$ 100
Business Acquisition, Effective Date of Acquisition					May 02, 2016					May 02, 2016
FM Translator construction permit, Kerrville, Texas asset purchase [Member]
Business Acquisition [Line Items]
Business Combination, Consideration Transferred, Total										$ 50
Business Acquisition, Effective Date of Acquisition				May 13, 2016						May 13, 2016
FM Translator construction permit, Atwood, Kentucky asset purchase [Member]
Business Acquisition [Line Items]
Business Combination, Consideration Transferred, Total										$ 88
Business Acquisition, Effective Date of Acquisition			Jun. 03, 2016							Jun. 03, 2016
FM Translator construction permit, Charlotte, Michigan asset purchase [Member]
Business Acquisition [Line Items]
Business Combination, Consideration Transferred, Total										$ 50
Business Acquisition, Effective Date of Acquisition		Jun. 08, 2016								Jun. 08, 2016
FM Translator, Amherst, New York Asset Purchase [Member]
Business Acquisition [Line Items]
Business Combination, Consideration Transferred, Total										$ 60
Business Acquisition, Effective Date of Acquisition	Jun. 10, 2016									Jun. 10, 2016
FM Translator, Columbus, Ohio Asset Purchase [Member]
Business Acquisition [Line Items]
Business Combination, Consideration Transferred, Total										$ 345
Business Acquisition, Effective Date of Acquisition								Jun. 20, 2016		Jun. 20, 2016

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ACQUISITIONS AND RECENT TRANSACTIONS (Details 1) $ in Thousands	Jun. 30, 2016 USD ($)
Business Acquisition [Line Items]
Cash payments made upon closing	$ 3,524
Deferred payments	1,300
Total purchase price consideration	$ 4,824

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ACQUISITIONS AND RECENT TRANSACTIONS (Details 2) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Assets
Property and equipment	$ 384
Projects in process	213
Broadcast licenses	492
Goodwill	24,793	$ 24,563
Domain and brand names	914
Customer lists and contracts	2,867
Non-compete agreements	289
Liabilities
Deferred revenue	(565)
Total purchase price consideration	4,824
Broadcast Internet [Member]
Assets
Property and equipment	13
Projects in process	213
Broadcast licenses	492
Goodwill	0
Domain and brand names	0
Customer lists and contracts	0
Non-compete agreements	0
Liabilities
Deferred revenue	0
Total purchase price consideration	718
Digital Media [Member]
Assets
Property and equipment	371
Projects in process	0
Broadcast licenses	0
Goodwill	230
Domain and brand names	908
Customer lists and contracts	2,867
Non-compete agreements	289
Liabilities
Deferred revenue	(565)
Total purchase price consideration	4,100
Publishing [Member]
Assets
Property and equipment	0
Projects in process
Broadcast licenses	0
Goodwill	0
Domain and brand names	6
Customer lists and contracts	0
Non-compete agreements	0
Liabilities
Deferred revenue	0
Total purchase price consideration	$ 6

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ACQUISITIONS AND RECENT TRANSACTIONS (Details Textual) - USD ($)								1 Months Ended						3 Months Ended		6 Months Ended
	Jun. 10, 2016	Jun. 08, 2016	Jun. 03, 2016	May 13, 2016	May 02, 2016	Apr. 02, 2016	Mar. 08, 2016	Jun. 30, 2016	Jun. 20, 2016	Apr. 29, 2016	Mar. 31, 2016	Mar. 17, 2016	Jan. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Jun. 15, 2016	Jun. 02, 2016	May 25, 2016	May 18, 2016	May 17, 2016	Dec. 31, 2015	May 06, 2015
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Payments for Loans											$ 750,000	$ 809,000	$ 2,000,000
Gains (Losses) on Extinguishment of Debt, Total														$ (5,000)	$ 0	$ (14,000)	$ (41,000)
Amortization of Financing Costs																318,000	314,000
Dividends Payable, Date Declared								Jun. 02, 2016			Mar. 10, 2016
Common Stock, Dividends, Per Share, Declared								$ 0.0650			$ 0.0650
Payments of Ordinary Dividends, Common Stock								$ 1,600,000			$ 1,700,000					3,321,000	3,301,000
Dividends Payable, Date to be Paid								Jun. 30, 2016			Apr. 05, 2016
Dividends Payable, Date of Record								Jun. 16, 2016			Mar. 22, 2016
Business Combination, Consideration Transferred, Total																4,824,000
Goodwill								$ 24,793,000						24,793,000		24,793,000							$ 24,563,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Cash and Equivalents							$ 1,300,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Assets, Other							600,000
Business Acquisition Purchase Price Allocation Deferred Revenue								565,000						565,000		565,000
Local Marketing Agreements [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Payments For Marketing Agreements Security Deposit														55,000
National Park Service [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Proceeds from Sale of Other Assets														2,500,000
Gain (Loss) on Disposition of Other Assets														1,900,000
Lessee Leasing Arrangements, Operating Leases, Term of Contract															20 years
King James Bible Mobile Applications [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Business Combination, Consideration Transferred, Total														600,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Liabilities, Total							4,000,000
Goodwill							200,000
Payments to Acquire Businesses, Gross							2,700,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Cash and Equivalents																						$ 300,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Assets, Receivables							300,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Assets, Other							$ 200,000
Term B Loan [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Payments for Loans								1,200,000			$ 800,000	800,000
Debt Instrument, Face Amount								300,000,000						300,000,000		300,000,000
Gains (Losses) on Extinguishment of Debt, Total								1,300				2,500
Amortization of Financing Costs								3,400				$ 6,700
Early Repayments of Debt, Principal Payments								400,000
Time Brokerage Agreement [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Business Combination, Assets Arising from Contingencies, Amount Recognized								1,200,000						1,200,000		1,200,000
Domain names and mobile applications for Daily Bible Devotion [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Business Combination, Consideration Transferred, Total																6,000
Business Acquisition Cost Of Acquired Entity Cash Paid Net																								$ 1,100,000
Radio station KEXB-AM in Dallas, Texas [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Business Combination, Consideration Transferred, Total																$ 100,000	$ 200,000
Asset Purchase Agreement One [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Business Acquisition Cost Of Acquired Entity Cash Paid Net																		$ 77,000
Asset Purchase Agreement Two [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Business Acquisition Cost Of Acquired Entity Cash Paid Net																			$ 35,000
Asset Purchase Agreement Three [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Business Acquisition Cost Of Acquired Entity Cash Paid Net																				$ 65,000
Asset Purchase Agreement Four [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Business Acquisition Cost Of Acquired Entity Cash Paid Net																					$ 65,000
FM Translator, Columbus, Ohio Asset Purchase [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Business Acquisition, Effective Date of Acquisition									Jun. 20, 2016							Jun. 20, 2016
Business Combination, Consideration Transferred, Total																$ 345,000
FM Translator, Amherst, New York Asset Purchase [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Business Acquisition, Effective Date of Acquisition	Jun. 10, 2016															Jun. 10, 2016
Business Combination, Consideration Transferred, Total																$ 60,000
FM Translator construction permit, Charlotte, Michigan asset purchase [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Business Acquisition, Effective Date of Acquisition		Jun. 08, 2016														Jun. 08, 2016
Business Combination, Consideration Transferred, Total																$ 50,000
FM Translator construction permit, Atwood, Kentucky asset purchase [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Business Acquisition, Effective Date of Acquisition			Jun. 03, 2016													Jun. 03, 2016
Business Combination, Consideration Transferred, Total																$ 88,000
FM Translator construction permit, Kerrville, Texas asset purchase [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Business Acquisition, Effective Date of Acquisition				May 13, 2016												May 13, 2016
Business Combination, Consideration Transferred, Total																$ 50,000
FM Translator, Lincoln, Maine Asset Purchase [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Business Acquisition, Effective Date of Acquisition					May 02, 2016											May 02, 2016
Business Combination, Consideration Transferred, Total																$ 100,000
FM Translator construction permit, Emporia, Kansas asset purchase [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Business Acquisition, Effective Date of Acquisition										Apr. 29, 2016						Apr. 29, 2016
Business Combination, Consideration Transferred, Total																$ 25,000
Retirement Watch Business Acquisition [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Business Acquisition, Effective Date of Acquisition						Apr. 01, 2016										Apr. 01, 2016
Business Combination, Consideration Transferred, Total																$ 100,000
Goodwill								8,600						8,600		8,600
Business Acquisition Purchase Price Allocation Deferred Revenue								$ 600,000						$ 600,000		$ 600,000

XML

CONTINGENT EARN-OUT CONSIDERATION (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Business Acquisition, Contingent Consideration [Line Items]
Beginning Balance	$ 574	$ 3,286	$ 775	$ 3,285
Acquisitions	0	142	0	300
Accretion of acquisition-related contingent earn-out consideration	6	32	16	57
Change in the estimated fair value of contingent earn-out consideration	(134)	(307)	(262)	(189)
Reclassification of payments due in next 12 months to short-term	0	0	0	0
Payments	(5)	(877)	(88)	(1,177)
Ending Balance	441	2,276	441	2,276
Short-Term Accrued Expenses [Member]
Business Acquisition, Contingent Consideration [Line Items]
Beginning Balance	541	2,251	173	1,575
Acquisitions	0	88	0	176
Accretion of acquisition-related contingent earn-out consideration	5	21	8	31
Change in the estimated fair value of contingent earn-out consideration	(134)	(293)	(208)	(213)
Reclassification of payments due in next 12 months to short-term	34	0	556	798
Payments	(5)	(877)	(88)	(1,177)
Ending Balance	441	1,190	441	1,190
Long-Term Other Liabilities [Member]
Business Acquisition, Contingent Consideration [Line Items]
Beginning Balance	33	1,035	602	1,710
Acquisitions	0	54	0	124
Accretion of acquisition-related contingent earn-out consideration	1	11	8	26
Change in the estimated fair value of contingent earn-out consideration	0	(14)	(54)	24
Reclassification of payments due in next 12 months to short-term	(34)	0	(556)	(798)
Payments	0	0	0	0
Ending Balance	$ 0	$ 1,086	$ 0	$ 1,086

XML

CONTINGENT EARN-OUT CONSIDERATION (Details Textual) - USD ($)		3 Months Ended		6 Months Ended
	Feb. 06, 2015	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	May 06, 2015	Jan. 10, 2014
Business Acquisition, Contingent Consideration [Line Items]
Business Combination, Contingent Consideration Arrangements Payment		$ 5,000	$ 877,000	$ 88,000	$ 1,177,000
Business Combination, Contingent Consideration Arrangements, Change in Amount of Contingent Consideration, Liability		(134,000)	$ (307,000)	(262,000)	$ (189,000)
Bryan Perry Newsletters (business acquisition) [Member]
Business Acquisition, Contingent Consideration [Line Items]
Business Combination, Contingent Consideration Arrangements Payment				13,000
Business Combination, Contingent Consideration Arrangements, Change in Amount of Contingent Consideration, Liability				13,000
Business Combination, Contingent Consideration, Liability	$ 171,000
Contingent Earn Out Consideration Due To Seller Net Subscriber Revenues Percentage	50.00%
Business Combination Liabilities A rising From Contingencies Amount Recognized Discounted Present Value	$ 158,000
Eagle Publishing (business acquisition) [Member]
Business Acquisition, Contingent Consideration [Line Items]
Business Acquisition Cost Of Acquired Entity Cash Paid Net							$ 3,500,000
Business Combination, Contingent Consideration Arrangements, Change in Amount of Contingent Consideration, Liability				156,000
Business Combination, Liabilities Arising from Contingencies, Amount Recognized		2,000,000		2,000,000
Business Combination, Contingent Consideration, Liability							2,400,000
Business Acquisition Deferred Cash Payment Due							2,500,000
Business Acquisition Contingent Earn Out Consideration Payable							$ 8,500,000
Payments to Acquire Businesses, Gross		$ 600,000
Daily Bible Devotion (business acquisition) [Member]
Business Acquisition, Contingent Consideration [Line Items]
Business Acquisition Cost Of Acquired Entity Cash Paid Net						$ 1,100,000
Business Combination, Contingent Consideration Arrangements Payment				75,000
Business Combination, Contingent Consideration Arrangements, Change in Amount of Contingent Consideration, Liability				$ 93,000
Business Combination, Liabilities Arising from Contingencies, Amount Recognized						165,000
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High						300,000
Business Acquisition Contingent Earn Out Consideration Payable						300,000
Business Combination Liabilities A rising From Contingencies Amount Recognized Discounted Present Value						$ 142,000

XML

INVENTORIES (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Inventory [Line Items]
Reserve for obsolescence	$ (2,161)	$ (1,855)
Inventories, net	903	893
Regnery Publishing [Member]
Inventory [Line Items]
Inventories, gross	2,612	2,186
Reserve for obsolescence	(2,097)	(1,798)
Inventories, net	515	388
Wellness Products [Member]
Inventory [Line Items]
Inventories, gross	452	562
Reserve for obsolescence	(64)	(57)
Inventories, net	$ 388	$ 505

XML

PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Property, Plant and Equipment, Gross, Total	$ 265,163	$ 267,865
Less accumulated depreciation	(160,604)	(162,382)
Property, Plant and Equipment, Net, Total	104,559	105,483
Land [Member]
Property, Plant and Equipment, Gross, Total	31,180	31,565
Building [Member]
Property, Plant and Equipment, Gross, Total	25,362	25,448
Office furnishings and equipment [Member]
Property, Plant and Equipment, Gross, Total	36,798	38,812
Office furnishings and equipment under capital lease obligations [Member]
Property, Plant and Equipment, Gross, Total	228	228
Antennae, towers and transmitting equipment
Property, Plant and Equipment, Gross, Total	83,120	83,501
Antennae, towers and transmitting equipment under capital lease obligations [Member]
Property, Plant and Equipment, Gross, Total	795	795
Studio, production and mobile equipment
Property, Plant and Equipment, Gross, Total	28,277	30,598
Computer Software [Member]
Property, Plant and Equipment, Gross, Total	28,423	28,134
Record and tape libraries [Member]
Property, Plant and Equipment, Gross, Total	28	55
Automobiles [Member]
Property, Plant and Equipment, Gross, Total	1,326	1,298
Leasehold Improvements [Member]
Property, Plant and Equipment, Gross, Total	19,713	20,799
Construction in Progress [Member]
Property, Plant and Equipment, Gross, Total	$ 9,913	$ 6,632

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PROPERTY AND EQUIPMENT (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Depreciation, Total	$ 3,000,000	$ 3,000,000	$ 6,000,000	$ 6,200,000
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment	160,604,000		160,604,000		$ 162,382,000
Capital Lease [Member]
Depreciation, Total	24,000	$ 24,000	48,000	$ 48,000
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment	$ 615,000		$ 615,000		$ 566,000

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AMORTIZABLE INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Finite-Lived Intangible Assets [Line Items]
Cost	$ 55,005	$ 50,935
Accumulated Amortization	(41,785)	(39,454)
Net	13,220	11,481
Customer lists and contracts [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	22,403	20,009
Accumulated Amortization	(19,522)	(18,914)
Net	2,881	1,095
Domain and brand names [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	17,533	16,619
Accumulated Amortization	(11,993)	(11,200)
Net	5,540	5,419
Favorable and assigned leases [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	2,379	2,379
Accumulated Amortization	(1,932)	(1,887)
Net	447	492
Subscriber base and lists [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	7,786	7,313
Accumulated Amortization	(4,540)	(3,808)
Net	3,246	3,505
Author Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	2,245	2,245
Accumulated Amortization	(1,595)	(1,523)
Net	650	722
Noncompete Agreements [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	1,323	1,034
Accumulated Amortization	(867)	(786)
Net	456	248
Other amortizable intangible assets [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	1,336	1,336
Accumulated Amortization	(1,336)	(1,336)
Net	$ 0	$ 0

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AMORTIZABLE INTANGIBLE ASSETS (Details 1) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Finite-Lived Intangible Assets [Line Items]
2016 (July - Dec)	$ 2,314
2017	3,414
2018	3,171
2019	2,659
2020	1,359
Thereafter	303
Amortizable intangible assets (net of accumulated amortization of $39,454 in 2015 and $41,785 in 2016)	$ 13,220	$ 11,481

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NOTES PAYABLE AND LONG-TERM DEBT (Details) - USD ($) $ in Thousands	1 Months Ended
	Jun. 30, 2016	Mar. 31, 2016	Mar. 17, 2016	Jan. 30, 2015
Principal Paid		$ 750	$ 809	$ 2,000
Unamortized Discount		$ 0	$ 2	$ 15
Term Loan B Payment One [Member]
Principal Paid	$ 441
Unamortized Discount	1
Term Loan B Payment Two [Member]
Principal Paid	750
Unamortized Discount	$ 0

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NOTES PAYABLE AND LONG-TERM DEBT (Details 1) - USD ($) $ in Thousands	Jun. 30, 2016	Mar. 31, 2016	Mar. 17, 2016	Dec. 31, 2015	Jan. 30, 2015
Debt Instrument [Line Items]
Less: Unamortized discount based on imputed interest rate of 4.78%		$ 0	$ (2)		$ (15)
Long Term Debt And Capital Lease Obligations Current And Noncurrent	$ 270,817			$ 274,755
Less current portion	4,439			5,662
Long-term debt and capital lease obligations less unamortized discount and debt issuance costs, net of current portion	266,378			269,093
Deferred financing costs	116			151
Term B Loan [Member]
Debt Instrument [Line Items]
Term Loan B				274,000
Less: Unamortized discount based on imputed interest rate of 4.78%				(864)
Less: Unamortized debt issuance costs based on imputed interest rate of 4.78%				(2,361)
Term Loan B net carrying value	268,425			270,775
Revolver [Member]
Debt Instrument [Line Items]
Long Term Debt And Capital Lease Obligations Current And Noncurrent	1,770			3,306
Capital Lease Obligations And Other [Member]
Debt Instrument [Line Items]
Long Term Debt And Capital Lease Obligations Current And Noncurrent	$ 622			674
Scenario, Previously Reported [Member]
Debt Instrument [Line Items]
Long Term Debt And Capital Lease Obligations Current And Noncurrent				277,116
Less current portion				(5,662)
Long-term debt and capital lease obligations less unamortized discount and debt issuance costs, net of current portion				271,454
Deferred financing costs				2,512
Scenario, Previously Reported [Member] | Term B Loan [Member]
Debt Instrument [Line Items]
Term Loan B				273,136
Less: Unamortized discount based on imputed interest rate of 4.78%				0
Less: Unamortized debt issuance costs based on imputed interest rate of 4.78%				0
Term Loan B net carrying value				273,136
Scenario, Previously Reported [Member] | Revolver [Member]
Debt Instrument [Line Items]
Long Term Debt And Capital Lease Obligations Current And Noncurrent				3,306
Scenario, Previously Reported [Member] | Capital Lease Obligations And Other [Member]
Debt Instrument [Line Items]
Long Term Debt And Capital Lease Obligations Current And Noncurrent				$ 674

XML

NOTES PAYABLE AND LONG-TERM DEBT (Details 1) (Parenthetical)	Jun. 30, 2016	Dec. 31, 2015
Term B Loan [Member]
Debt Instrument, Interest Rate, Stated Percentage	4.78%	4.78%

XML

NOTES PAYABLE AND LONG-TERM DEBT (Details 2)	Jun. 30, 2016
Less than 3.00 to 1.00 [Member] | Base Rate [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	1.25%
Less than 3.00 to 1.00 [Member] | LIBOR Loans [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	2.25%
Greater than or equal to 3.00 to 1.00 but less than 4.00 to 1.00 [Member] | Base Rate [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	1.50%
Greater than or equal to 3.00 to 1.00 but less than 4.00 to 1.00 [Member] | LIBOR Loans [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	2.50%
Greater than or equal to 4.00 to 1.00 but less than 5.00 to 1.00 [Member] | Base Rate [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	1.75%
Greater than or equal to 4.00 to 1.00 but less than 5.00 to 1.00 [Member] | LIBOR Loans [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	2.75%
Greater than or equal to 5.00 to 1.00 but less than 6.00 to 1.00 [Member] | Base Rate [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	2.00%
Greater than or equal to 5.00 to 1.00 but less than 6.00 to 1.00 [Member] | LIBOR Loans [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	3.00%
Greater than or equal to 6.00 to 1.00 [Member] | Base Rate [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	2.50%
Greater than or equal to 6.00 to 1.00 [Member] | LIBOR Loans [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	3.50%

XML

NOTES PAYABLE AND LONG-TERM DEBT (Details 2) (Parenthetical)	Jun. 30, 2016
Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Leverage Ratio	5.39%
Maximum [Member] | Less than 3.00 to 1.00 [Member]
Debt Instrument [Line Items]
Leverage Ratio	3.00%
Maximum [Member] | Greater than or equal to 3.00 to 1.00 but less than 4.00 to 1.00 [Member]
Debt Instrument [Line Items]
Leverage Ratio	4.00%
Maximum [Member] | Greater than or equal to 4.00 to 1.00 but less than 5.00 to 1.00 [Member]
Debt Instrument [Line Items]
Leverage Ratio	5.00%
Maximum [Member] | Greater than or equal to 5.00 to 1.00 but less than 6.00 to 1.00 [Member]
Debt Instrument [Line Items]
Leverage Ratio	6.00%
Minimum [Member] | Greater than or equal to 3.00 to 1.00 but less than 4.00 to 1.00 [Member]
Debt Instrument [Line Items]
Leverage Ratio	3.00%
Minimum [Member] | Greater than or equal to 4.00 to 1.00 but less than 5.00 to 1.00 [Member]
Debt Instrument [Line Items]
Leverage Ratio	4.00%
Minimum [Member] | Greater than or equal to 5.00 to 1.00 but less than 6.00 to 1.00 [Member]
Debt Instrument [Line Items]
Leverage Ratio	5.00%
Minimum [Member] | Greater than or equal to 6.00 to 1.00 [Member]
Debt Instrument [Line Items]
Leverage Ratio	6.00%

XML

NOTES PAYABLE AND LONG-TERM DEBT (Details 3) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Long Term Debt And Capital Lease Obligations Current And Noncurrent	$ 270,817	$ 274,755
Less current portion	(4,439)	(5,662)
Long-term Debt and Capital Lease Obligations, Total	266,378	269,093
Term B Loan [Member]
Term Loan B principal amount	271,250	274,000
Less unamortized discount and debt issuance costs based on imputed interest rate of 4.78%	(2,825)	(3,225)
Term Loan B net carrying value	268,425	270,775
Revolver [Member]
Long Term Debt And Capital Lease Obligations Current And Noncurrent	1,770	3,306
Capital Lease Obligations And Other [Member]
Long Term Debt And Capital Lease Obligations Current And Noncurrent	$ 622	$ 674

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NOTES PAYABLE AND LONG-TERM DEBT (Details 3) (Parenthetical)	Jun. 30, 2016	Dec. 31, 2015
Term B Loan [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	4.78%	4.78%

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NOTES PAYABLE AND LONG-TERM DEBT (Details 4) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
2017	$ 4,439
2018	3,112
2019	3,102
2020	259,969
2021	113
Thereafter	82
Long-term debt	$ 270,817	$ 274,755

XML

NOTES PAYABLE AND LONG-TERM DEBT (Details Textual) - USD ($)	1 Months Ended			3 Months Ended		6 Months Ended
	Jun. 30, 2016	Mar. 17, 2016	Sep. 30, 2013	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015	Dec. 31, 2014	Mar. 14, 2013
Interest Expense, Debt				$ 141,000	$ 139,000	$ 283,000	$ 279,000
Amortization of Financing Costs						$ 318,000	314,000
Revolving Credit Facility [Member]
Line of Credit Facility, Covenant Terms						With respect to financial covenants, the credit agreement includes a minimum interest coverage ratio, which started at 1.50 to 1.0 and stepped up to 2.50 to 1.0 and a maximum leverage ratio, which started at 6.75 to 1.0 and steps down to 5.75 to 1.0 by 2017. The credit agreement also includes other negative covenants that are customary for credit facilities of this type, including covenants that, subject to exceptions described in the credit agreement, restrict the ability of Salem and its subsidiary guarantors
Interest Coverage Ratio	3.33%			3.33%		3.33%			2.50%
Term B Loan [Member]
Line of Credit Facility, Maximum Borrowing Capacity	$ 271,200,000			$ 271,200,000		$ 271,200,000				$ 300,000,000
Senior Notes, Noncurrent										298,500,000
Interest Expense, Debt				$ 52,000	47,000	$ 104,000	93,000
Amortization of Financing Costs	$ 3,400	$ 6,700
Floor Rate On Term Loan						1.00%
Line Of Credit Default Rate Above Applicable Interest Rate	2.00%			2.00%		2.00%
Proceeds from Issuance of Debt						$ 60,000,000
Debt Instrument, Periodic Payment, Principal			$ 750,000
Debt Instrument, Interest Rate, Effective Percentage	4.51%			4.51%		4.51%
Line of Credit Facility, Expiration Period						7 years
Debt Instrument Interest Additional Interest Above Prime Rate						2.50%
Debt Instrument Interest Additional Interest Above London Interbank Offered Rate						3.50%
Debt Instrument, Interest Rate, Stated Percentage	4.78%			4.78%		4.78%		4.78%
Revolver [Member]
Line of Credit Facility, Maximum Borrowing Capacity	$ 1,800,000			$ 1,800,000		$ 1,800,000				$ 25,000,000
Amortization of Financing Costs				$ 35,000	$ 17,000	$ 35,000	$ 17,000
Debt Instrument Interest Additional Interest Above Base Rate						2.00%
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage						0.50%
Line of Credit Facility, Expiration Period						5 years
Debt Instrument Interest Additional Interest Above London Interbank Offered Rate						3.00%
Debt Instrument, Interest Rate, Stated Percentage	4.58%			4.58%		4.58%
Deferred Financing Cost Amortization Period						5 years

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STOCK INCENTIVE PLAN (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense, pre-tax	$ 125	$ 156	$ 324	$ 487
Tax provision for stock-based compensation expense	(50)	(63)	(130)	(195)
Total stock-based compensation expense, net of tax	75	93	194	292
Corporate [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock option compensation expense	81	88	202	316
Restricted stock shares compensation expense	0	14	24	15
Broadcast [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock option compensation expense	20	25	48	77
Publishing [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock option compensation expense	10	10	11	24
Digital Media [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock option compensation expense	$ 14	$ 19	$ 39	$ 55

XML

STOCK INCENTIVE PLAN (Details 1)	3 Months Ended	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2016	Jun. 30, 2015
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Expected volatility	46.77%	47.03%	52.37%
Expected dividends	4.08%	5.36%	4.28%
Expected term (in years)	6 years	7 years 6 months	3 years
Risk-free interest rate	1.38%	1.66%	0.85%

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STOCK INCENTIVE PLAN (Details 2) $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2016 USD ($) $ / shares shares
Shares
Outstanding | shares	1,942,803
Employee Stock Option [Member]
Shares
Outstanding | shares	1,581,123
Granted | shares	549,500
Exercised | shares	(117,443)
Forfeited or expired | shares	(70,377)
Outstanding | shares	1,942,803
Exercisable at end of period | shares	1,062,178
Expected to Vest | shares	836,164
Weighted Average Exercise Price
Outstanding	$ 4.87
Granted	4.85
Exercised	2.85
Forfeited or expired	8.01
Outstanding	4.88
Exercisable at end of period	5.03
Expected to Vest	4.69
Weighted Average Grant Date Fair value
Outstanding	3.39
Granted	1.33
Exercised	1.85
Forfeited or expired	5.91
Outstanding	2.81
Exercisable at end of period	3.56
Expected to Vest	$ 1.89
Weighted Average Remaining Contractual Term
Outstanding	4 years 3 months 18 days
Outstanding	4 years 10 months 24 days
Exercisable at end of period	3 years 4 months 24 days
Expected to Vest	6 years 7 months 6 days
Aggregate Intrinsic Value
Outstanding | $	$ 1,738
Granted | $
Exercised | $
Forfeited or expired | $
Outstanding | $	4,585
Exercisable at end of period | $	2,342
Expected to Vest | $	$ 2,130

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STOCK INCENTIVE PLAN (Details 3) $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2016 USD ($) $ / shares shares
Shares
Outstanding | shares | shares	8,000
Granted | shares	0
Lapsed | shares	(8,000)
Forfeited | shares	0
Outstanding | shares | shares	0
Weighted Average Grant Date Fair Value
Outstanding | $ / shares	$ 5.83
Granted | $ / shares	0
Lapsed | $ / shares	5.83
Forfeited | $ / shares	0
Outstanding | $ / shares	$ 0
Weighted Average Remaining Contractual Term
Outstanding, contractual term	2 months 12 days
Aggregate Intrinsic Value
Outstanding | $ | $	$ 40
Granted | $ | $	0
Lapsed | $	52
Forfeited or expired | $	0
Outstanding | $ | $	$ 0

XML

STOCK INCENTIVE PLAN (Details Textual) - USD ($) $ / shares in Units, $ in Millions	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options	$ 0.7
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	2 years 25 days
Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	5,000,000
Share Price	$ 7.22
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested in Period, Fair Value	$ 1.1	$ 1.3

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EQUITY TRANSACTIONS (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended		6 Months Ended
	Jun. 30, 2016	Mar. 31, 2016	Jun. 30, 2016
Dividends Payable [Line Items]
Announcement Date	Jun. 02, 2016	Mar. 10, 2016
Payment Date	Jun. 30, 2016	Apr. 05, 2016
Dividend Payment One [Member]
Dividends Payable [Line Items]
Announcement Date			Jun. 02, 2016
Payment Date			Jun. 30, 2016
Amount Per Share	$ 0.0650		$ 0.0650
Cash Distributed			$ 1,664
Dividend Payment Two [Member]
Dividends Payable [Line Items]
Announcement Date			Mar. 10, 2016
Payment Date			Apr. 05, 2016
Amount Per Share	0.0650		$ 0.0650
Cash Distributed			$ 1,657
Dividend Payment Three [Member]
Dividends Payable [Line Items]
Announcement Date			Dec. 01, 2015
Payment Date			Dec. 29, 2015
Amount Per Share	0.0650		$ 0.0650
Cash Distributed			$ 1,656
Dividend Payment Four [Member]
Dividends Payable [Line Items]
Announcement Date			Sep. 01, 2015
Payment Date			Sep. 30, 2015
Amount Per Share	0.0650		$ 0.0650
Cash Distributed			$ 1,655
Dividend Payment Five [Member]
Dividends Payable [Line Items]
Announcement Date			Jun. 02, 2015
Payment Date			Jun. 30, 2015
Amount Per Share	0.0650		$ 0.0650
Cash Distributed			$ 1,654
Dividend Payment Six [Member]
Dividends Payable [Line Items]
Announcement Date			Mar. 05, 2015
Payment Date			Mar. 31, 2015
Amount Per Share	$ 0.0650		$ 0.0650
Cash Distributed			$ 1,647

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EQUITY TRANSACTIONS (Details Textual) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition, Total	$ 0.1	$ 0.2	$ 0.3	$ 0.5
Scenario, Forecast [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Expected Dividend Payments					$ 6.7

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BASIC AND DILUTED NET EARNINGS PER SHARE (Details Textual) - shares	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Earnings Per Share Basic And Diluted [Line Items]
Options to purchase Class A common stock	1,942,803	1,634,034
Dilutive shares	501,204	400,366

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DERIVATIVE INSTRUMENTS (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Derivative [Line Items]
Fair value of interest rate swap liability	$ 2,979
Fair Value, Inputs, Level 2 [Member]
Derivative [Line Items]
Fair value of interest rate swap liability	2,979
Interest Rate Swap [Member] | Fair Value, Inputs, Level 2 [Member]
Derivative [Line Items]
Fair value of interest rate swap liability	$ 2,979	$ 798

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DERIVATIVE INSTRUMENTS (Details Textual) - Interest Rate Swap [Member] - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2016	Mar. 27, 2013
Derivative [Line Items]
Derivative, Notional Amount		$ 150.0
Payments swap LIBOR floor rate	0.625%
Derivative, Maturity Date	Mar. 28, 2019
Interest rate swap, fixed rate	1.645%
Liabilities, Noncurrent, Total	$ 3.0

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FAIR VALUE MEASUREMENTS (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Assets:
Cash and cash equivalents	$ 44
Trade accounts receivable, net	33,091
Liabilities:
Accounts payable	3,612
Accrued expenses including estimated fair value of contingent earn-out consideration	10,687
Accrued interest	47
Long term liabilities	35	$ 636
Long-term debt and capital lease obligations less unamortized discount and debt issuance costs	270,817
Fair value of interest rate swap	2,979
Fair Value, Inputs, Level 1 [Member]
Assets:
Cash and cash equivalents	44
Trade accounts receivable, net	33,091
Liabilities:
Accounts payable	3,612
Accrued expenses including estimated fair value of contingent earn-out consideration	10,246
Accrued interest	47
Long term liabilities	35
Long-term debt and capital lease obligations less unamortized discount and debt issuance costs	0
Fair value of interest rate swap	0
Fair Value, Inputs, Level 2 [Member]
Assets:
Cash and cash equivalents	0
Trade accounts receivable, net	0
Liabilities:
Accounts payable	0
Accrued expenses including estimated fair value of contingent earn-out consideration	0
Accrued interest	0
Long term liabilities	0
Long-term debt and capital lease obligations less unamortized discount and debt issuance costs	270,817
Fair value of interest rate swap	2,979
Fair Value, Inputs, Level 3 [Member]
Assets:
Cash and cash equivalents	0
Trade accounts receivable, net	0
Liabilities:
Accounts payable	0
Accrued expenses including estimated fair value of contingent earn-out consideration	441
Accrued interest	0
Long term liabilities	0
Long-term debt and capital lease obligations less unamortized discount and debt issuance costs	0
Fair value of interest rate swap	$ 0

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INCOME TAXES (Details Textual) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Income Tax Contingency [Line Items]
Unrecognized Tax Benefits		$ 100,000
Unrecognized Tax Benefits, Interest on Income Taxes Accrued		20,000
Unrecognized Tax Benefits, Income Tax Penalties Accrued		6,000
Deferred Tax Assets, Valuation Allowance	$ 2,800,000	$ 2,800,000

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COMMITMENTS AND CONTINGENCIES (Details Textual) $ in Millions	Mar. 31, 2016 USD ($)
Commitments And Contingencies [Line Items]
Loss Contingency Accrual, Beginning Balance	$ 0.5

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SEGMENT DATA (Details) - USD ($) $ in Thousands	1 Months Ended		3 Months Ended		6 Months Ended
	Dec. 31, 2012	Jun. 30, 2012	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Net revenue			$ 67,779	$ 67,293	$ 132,354	$ 129,149
Operating expenses			55,041	53,941	109,376	105,346
Operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration, impairment of long-lived assets and (gain) loss on the sale or disposal of assets			12,738	13,352	22,978	23,803
Depreciation			2,982	3,060	5,974	6,232
Amortization			1,189	1,315	2,332	2,644
Change in the estimated fair value of contingent earn-out consideration			(134)	(307)	(262)	(189)
Impairment of long-lived assets	$ 1,200	$ 5,600	700		700	0
(Gain) loss on the sale or disposal of assets			1,701	(30)	1,551	(159)
Operating income (loss)			9,702	9,254	15,785	14,957
Inventories, net			903		903		$ 893
Property and equipment, net			104,559		104,559		105,483
Broadcast licenses			393,566		393,566		393,031
Goodwill			24,793		24,793		24,563
Other indefinite-lived intangible assets			833		833		833
Amortizable intangible assets, net			13,220		13,220		11,481
Operating Segments [Member] | Broadcast [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Net revenue			49,707	49,060	98,178	95,599
Operating expenses			35,709	35,187	71,697	69,104
Operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration, impairment of long-lived assets and (gain) loss on the sale or disposal of assets			13,998	13,873	26,481	26,495
Depreciation			1,802	1,889	3,650	3,840
Amortization			23	23	45	46
Change in the estimated fair value of contingent earn-out consideration			0	0	0	0
Impairment of long-lived assets			700		700
(Gain) loss on the sale or disposal of assets			(1,721)	30	(1,542)	159
Operating income (loss)			13,194	11,931	23,628	22,450
Inventories, net			0		0		0
Property and equipment, net			88,155		88,155		88,788
Broadcast licenses			393,566		393,566		393,031
Goodwill			3,581		3,581		3,581
Other indefinite-lived intangible assets			0		0		0
Amortizable intangible assets, net			447		447		492
Operating Segments [Member] | Digital Media [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Net revenue			11,311	11,499	22,595	22,290
Operating expenses			8,781	8,767	17,967	17,767
Operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration, impairment of long-lived assets and (gain) loss on the sale or disposal of assets			2,530	2,732	4,628	4,523
Depreciation			798	782	1,580	1,558
Amortization			1,093	1,156	2,142	2,326
Change in the estimated fair value of contingent earn-out consideration			(36)	(244)	(106)	(211)
Impairment of long-lived assets			0		0
(Gain) loss on the sale or disposal of assets			20	0	6	0
Operating income (loss)			655	1,038	1,006	850
Inventories, net			388		388		505
Property and equipment, net			7,131		7,131		7,033
Broadcast licenses			0		0		0
Goodwill			20,160		20,160		19,930
Other indefinite-lived intangible assets			0		0		0
Amortizable intangible assets, net			11,522		11,522		9,599
Operating Segments [Member] | Publishing [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Net revenue			6,761	6,734	11,581	11,260
Operating expenses			6,983	6,469	11,931	10,966
Operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration, impairment of long-lived assets and (gain) loss on the sale or disposal of assets			(222)	265	(350)	294
Depreciation			165	167	315	335
Amortization			72	135	144	271
Change in the estimated fair value of contingent earn-out consideration			(98)	(63)	(156)	22
Impairment of long-lived assets			0		0
(Gain) loss on the sale or disposal of assets			(3)	0	(21)	(1)
Operating income (loss)			(358)	26	(632)	(333)
Inventories, net			515		515		388
Property and equipment, net			1,625		1,625		1,742
Broadcast licenses			0		0		0
Goodwill			1,044		1,044		1,044
Other indefinite-lived intangible assets			833		833		833
Amortizable intangible assets, net			1,244		1,244		1,385
Operating Segments [Member] | Unallocated Corporate [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Net revenue			0	0	0	0
Operating expenses			3,568	3,518	7,781	7,509
Operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration, impairment of long-lived assets and (gain) loss on the sale or disposal of assets			(3,568)	(3,518)	(7,781)	(7,509)
Depreciation			217	222	429	499
Amortization			1	1	1	1
Change in the estimated fair value of contingent earn-out consideration			0	0	0	0
Impairment of long-lived assets			0		0
(Gain) loss on the sale or disposal of assets			3	0	6	1
Operating income (loss)			(3,789)	$ (3,741)	(8,217)	$ (8,010)
Inventories, net			0		0		0
Property and equipment, net			7,648		7,648		7,920
Broadcast licenses			0		0		0
Goodwill			8		8		8
Other indefinite-lived intangible assets			0		0		0
Amortizable intangible assets, net			$ 7		$ 7		$ 5

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SEGMENT DATA (Details Textual)	6 Months Ended
	Jun. 30, 2016
Segment Reporting Information [Line Items]
Number of Reportable Segments	3

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SUBSEQUENT EVENTS (Details) - FM Translator Construction [Member] $ in Thousands	6 Months Ended
	Jun. 30, 2016 USD ($)
Crested Butte, Colorado [Member]
Subsequent Event [Line Items]
Business Acquisition, Date of Acquisition Agreement	Jul. 25, 2016
Business Acquisition, Permit or ID of the Acquired Translators	K296AL
Entity Address, Address Description	Crested Butte, Colorado
Business Acquisition Cost Of Acquired Entity Cash Paid Net	$ 39
Escrow Deposit	$ 8
Business Acquisition, Market Segment of the Acquired Translators	Colorado Springs, Colorado
Festus, Missouri [Member]
Subsequent Event [Line Items]
Business Acquisition, Date of Acquisition Agreement	Jul. 25, 2016
Business Acquisition, Permit or ID of the Acquired Translators	K283CA
Entity Address, Address Description	Festus, Missouri *	[1]
Business Acquisition Cost Of Acquired Entity Cash Paid Net	$ 40
Escrow Deposit	$ 8
Business Acquisition, Market Segment of the Acquired Translators	St. Louis, Missouri
Rhinelander, Wisconsin [Member]
Subsequent Event [Line Items]
Business Acquisition, Date of Acquisition Agreement	Jul. 26, 2016
Business Acquisition, Permit or ID of the Acquired Translators	W263BS
Entity Address, Address Description	Rhinelander, Wisconsin
Business Acquisition Cost Of Acquired Entity Cash Paid Net	$ 50
Escrow Deposit	$ 25
Business Acquisition, Market Segment of the Acquired Translators	Minneapolis, Minnesota
Roseburg, Oregon [Member]
Subsequent Event [Line Items]
Business Acquisition, Date of Acquisition Agreement	Jul. 26, 2016
Business Acquisition, Permit or ID of the Acquired Translators	K294CP
Entity Address, Address Description	Roseburg, Oregon *	[1]
Business Acquisition Cost Of Acquired Entity Cash Paid Net	$ 45
Escrow Deposit	$ 9
Business Acquisition, Market Segment of the Acquired Translators	Portland, Oregon
Carbondale, Pennsylvania [Member]
Subsequent Event [Line Items]
Business Acquisition, Date of Acquisition Agreement	Jul. 26, 2016
Business Acquisition, Permit or ID of the Acquired Translators	W279BK
Entity Address, Address Description	Carbondale, Pennsylvania
Business Acquisition Cost Of Acquired Entity Cash Paid Net	$ 75
Escrow Deposit	$ 15
Business Acquisition, Market Segment of the Acquired Translators	Pittsburgh, Pennsylvania
Dansville, New York [Member]
Subsequent Event [Line Items]
Business Acquisition, Date of Acquisition Agreement	Jul. 26, 2016
Business Acquisition, Permit or ID of the Acquired Translators	W283BR
Entity Address, Address Description	Dansville, New York
Business Acquisition Cost Of Acquired Entity Cash Paid Net	$ 75
Escrow Deposit	$ 15
Business Acquisition, Market Segment of the Acquired Translators	New York, New York
Kingsville, Texas [Member]
Subsequent Event [Line Items]
Business Acquisition, Date of Acquisition Agreement	Jul. 26, 2016
Business Acquisition, Permit or ID of the Acquired Translators	K228FC
Entity Address, Address Description	Kingsville, Texas *	[1]
Business Acquisition Cost Of Acquired Entity Cash Paid Net	$ 50
Escrow Deposit	$ 10
Business Acquisition, Market Segment of the Acquired Translators	Houston, Texas
Little Fish Lake Valley, California [Member]
Subsequent Event [Line Items]
Business Acquisition, Date of Acquisition Agreement	Jul. 26, 2016
Business Acquisition, Permit or ID of the Acquired Translators	K245AR
Entity Address, Address Description	Little Fish Lake Valley, California
Business Acquisition Cost Of Acquired Entity Cash Paid Net	$ 44
Escrow Deposit	$ 20
Business Acquisition, Market Segment of the Acquired Translators	Sacramento, California
Eaglemount, Washington [Member]
Subsequent Event [Line Items]
Business Acquisition, Date of Acquisition Agreement	Jul. 26, 2016
Business Acquisition, Permit or ID of the Acquired Translators	K276FZ
Entity Address, Address Description	Eaglemount, Washington *	[1]
Business Acquisition Cost Of Acquired Entity Cash Paid Net	$ 40
Escrow Deposit	$ 8
Business Acquisition, Market Segment of the Acquired Translators	Portland, Oregon
Angola, Indiana [Member]
Subsequent Event [Line Items]
Business Acquisition, Date of Acquisition Agreement	Jul. 27, 2016
Business Acquisition, Permit or ID of the Acquired Translators	W256CO
Entity Address, Address Description	Angola, Indiana *	[1]
Business Acquisition Cost Of Acquired Entity Cash Paid Net	$ 50
Escrow Deposit	$ 15
Business Acquisition, Market Segment of the Acquired Translators	Cleveland, Ohio
Cofax, Indiana [Member]
Subsequent Event [Line Items]
Business Acquisition, Date of Acquisition Agreement	Jul. 27, 2016
Business Acquisition, Permit or ID of the Acquired Translators	W249CQ
Entity Address, Address Description	Cofax, Indiana *	[1]
Business Acquisition Cost Of Acquired Entity Cash Paid Net	$ 45
Escrow Deposit	$ 14
Business Acquisition, Market Segment of the Acquired Translators	St. Louis, Missouri
Battle Creek, Michigan [Member]
Subsequent Event [Line Items]
Business Acquisition, Date of Acquisition Agreement	Jul. 27, 2016
Business Acquisition, Permit or ID of the Acquired Translators	W263CS
Entity Address, Address Description	Battle Creek, Michigan *	[1]
Business Acquisition Cost Of Acquired Entity Cash Paid Net	$ 50
Escrow Deposit	$ 15
Business Acquisition, Market Segment of the Acquired Translators	Cleveland, Ohio
Port St Lucie, Florida [Member]
Subsequent Event [Line Items]
Business Acquisition, Date of Acquisition Agreement	Jul. 27, 2016
Business Acquisition, Permit or ID of the Acquired Translators	W227BT
Entity Address, Address Description	Port St Lucie, Florida
Business Acquisition Cost Of Acquired Entity Cash Paid Net	$ 100
Escrow Deposit	$ 10
Business Acquisition, Market Segment of the Acquired Translators	Tampa, Florida
Aurora, Florida [Member]
Subsequent Event [Line Items]
Business Acquisition, Permit or ID of the Acquired Translators	W298AM
Entity Address, Address Description	Aurora, Florida
Business Acquisition, Market Segment of the Acquired Translators	TBD
Lahaina, Hawaii [Member]
Subsequent Event [Line Items]
Business Acquisition, Date of Acquisition Agreement	Jul. 28, 2016
Business Acquisition, Permit or ID of the Acquired Translators	K239CD
Entity Address, Address Description	Lahaina, Hawaii *	[1]
Business Acquisition Cost Of Acquired Entity Cash Paid Net	$ 110
Escrow Deposit	$ 11
Business Acquisition, Market Segment of the Acquired Translators	Honolulu, Hawaii
Kihei, Hawaii [Member]
Subsequent Event [Line Items]
Business Acquisition, Permit or ID of the Acquired Translators	K241BZ
Entity Address, Address Description	Kihei, Hawaii
Business Acquisition, Market Segment of the Acquired Translators	Honolulu, Hawaii

[1] Indicates that the purchase is for a FM Translator Construction Permit.

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SUBSEQUENT EVENTS (Details Textual) - Subsequent Event [Member] - USD ($) $ in Millions	Aug. 01, 2016	Jul. 21, 2016
Hillcrest Media Group, Inc [Member]
Subsequent Event [Line Items]
Business Acquisition Cost Of Acquired Entity Cash Paid Net	$ 3.5
KXFN-AM [Member]
Subsequent Event [Line Items]
Business Acquisition Cost Of Acquired Entity Cash Paid Net		$ 0.2