Salem Broadcasting

Salem Communications  (Website) owns and operates about 66 AM and 25 FM radio stations in the United States.  The corporate headquarters are located in Camarillo, California located in Orange County.  Salem Communications has about 1000 full time employees, and 300 part time.

Salem’s radio stations are in 23 of the top 25 markets in the United States – although some of those stations are on the fringes of cities or do not have enough power to cover the entire metropolitan area.

Salem Radio Network is located in Dallas, Texas.   They also operate Salem Radio Representatives, which negotiates placing national advertising on religious broadcast stations.

Salem Radio Network operate three distinct programming services for radio stations – Salem Talk Radio, Salem’s Religious Teaching network, and Contemporary Christian music. Recently, Salem converted several of their stations to a Business news format based primarily on Bloomberg Radio.

These syndicated programs are carried on a number of stations via LMA arrangements or through syndication for a total reach of around 2,000 stations. Salem uses the principle of “Clustering”, where they will operator one of each of their formats on separate stations in a market from a single production facility.

Salem Communications is active in Internet publishing (townhall.com being the most familiar brand) and streaming, as well as publishing magazines and books.

Salem programs channel 170 on the Sirius/XM satellite radio service.

While much of Salem’s business involves Christian broadcasting, the company is a for profit corporation and is traded on the NASDAQ stock exchange under the ticker symbol SALM.

History

The history of Salem Communications revolves around two men – Stuart W Epperson and his brother-in-law Edward Atsinger (Nancy Epperson is Ed Atsinger’s sister).

Stuart W. Epperson has served as Chairman of the Board and Mr Atsinger has been the CEO and President since the founding of the company in 1986.

At 10 years old, Stu Epperson had the dream of running a Christian radio station.  In 1969, Mr Epperson (at age 26) and Mr. Atsinger acquired a low power AM radio station (WKPQ) playing country music in Garner, North Carolina, a suburb of Raleigh.
(That station is now WRTG, a Spanish language radio station)

In 1973, Stu Epperson started WRBX a Jazz radio station, which he owned until 1979.

By 1999, Mr Epperson and Mr. Atsinger had acquired 45 radio stations. They combined their vision and resources and formed Salem Communications and launched an IPO in 1999 to acquire additional resources to expand the network further. Following the pattern of other large radio station owners, they used IPOs and borrowed money to acquire a large number of radio stations to build up critical mass for justify a nationwide programming network and achieve cost savings by upgrading the radio stations and increasing national revenue.

In 2004, the company did a secondary offering of its Class A stock, which raised $65 million in cash for the company, and allowed Mr Epperson and Atsinger to sell about $22 million of the class A stock they owned.

Another important face in the history of  Salem was George C. Toulas.  Mr. Toulas had run Chancelor Media, which was merged with Capstar to create AMFM, which was then acquired by Clear Channel.

In 2000, Mr. Toulas joined Salem as Senior Vice President at a time when Salem was purchasing 8 stations from Clear Channel. Mr. Toulas contributed his experience in the purchase, trading and upgrading of radio stations to the company.  George Toulas has since returned to working for Clear Channel and now works in Miami.

Salem has been very aggressive about trading stations, moving stations, swapping frequencies and call signs in order to make their licenses more valuable and maximizing audience reach.

Revenue generated from improving and upgrading radio stations was then used to fund further expansion. Significant effort and money has been put into upgrading WNYM to make it a 50kw day time AM station covering the New York City metro area.

Major Stations – top 25 markets

(From Salem’s 10-k)

Market Rank Call Sign Year
Acquired
Format

New York, NY

1, 18

WMCA-AM

1989

Christian Teaching

WNYM-AM

1994

News Talk

Los Angeles, CA

2

KKLA-FM

1985

Christian Teaching

KRLA-AM

1998

News Talk

KFSH-FM

2000

Christian Music

KXMX-AM

2000

Brokered

Chicago, IL

3

WYLL-AM

2001

Christian Teaching

WIND-AM

2005

News Talk

San Francisco, CA

4, 34

KFAX-AM

1984

Christian Teaching

KDOW-AM

2001

Financial News

Dallas-Ft Worth, TX

5

KLTY-FM

1996

Christian Music

KWRD-FM

2000

Christian Teaching

KSKY-AM

2000

News Talk

Houston, TX

6

KNTH-AM

1995

News Talk

KKHT-FM

2005

Christian Teaching

Atlanta, GA

7

WNIV-AM

2000

Christian Teaching

WLTA-AM

2000

Christian Teaching

WAFS-AM

2000

Spanish Christian

WFSH-FM

2000

Christian Music

WGKA-AM

2004

News Talk

Philadelphia, PA

8

WFIL-AM

1993

Christian Teaching

WNTP-AM

1994

News Talk

Washington, D.C.

9

WAVA-FM

1992

Christian Teaching

WAVA-AM

2000

Christian Teaching

Boston, MA

10

WEZE-AM

1997

Christian Teaching

WROL-AM

2001

Christian Teaching

WWDJ-AM

2003

Spanish Christian

Detroit, MI

11

WDTK-AM

2004

News Talk

WLQV-AM

2006

Christian Teaching

Miami, FL

12

WKAT-AM

2004

Spanish Christian

WMCU-AM

2007

Christian Teaching

WZAB-AM

Pending

Business

Seattle, WA

13

KGNW-AM

1986

Christian Teaching

KLFE-AM

1994

Christian Teaching

KNTS-AM

1997

Spanish Christian

KKMO-AM

1998

Other

KKOL-AM

1999

News Talk

Phoenix, AZ

14

KKNT-AM

1996

News Talk

KPXQ-AM

1999

Christian Teaching

Minn-StPaul, MN

15

KKMS-AM

1996

Christian Teaching

KYCR-AM

1998

News Talk

WWTC-AM

2001

News Talk

San Diego, CA

16

KPRZ-AM

1987

Christian Teaching

KCBQ-AM

2000

News Talk

Tampa, FL

17

WTWD-AM

2000

Christian Teaching

WTBN-AM

2001

Christian Teaching

WGUL-AM

2005

News Talk

Denver, CO

20

KRKS-FM

1993

Christian Teaching

KRKS-AM

1994

Christian Teaching

KNUS-AM

1996

News Talk

KBJD-AM (7)

1999

Spanish Christian

Baltimore, MD

21

WAMD-AM

Pending

To be determined

Portland, OR

22

KPDQ-FM

1986

Christian Teaching

KPDQ-AM

1986

Christian Teaching

KFIS-FM

2002

Christian Music

KRYP-FM

2005

Regional Mexican

Pittsburgh, PA

23

WORD-FM

1993

Christian Teaching

WPIT-AM

1993

Christian Teaching

Riverside, CA

25

KTIE-AM

2001

News Talk

Syndicated Radio Programming

Salem Talk Radio

Salem Talk radio is a Conservative Talk programming service, mainly carried by 11 of Salem’s own radio stations. Mr Epperson is a very strong financial supporter of the Republican Party and Conservative political causes. While the hosts on the talk network talk about Conservative politics which often have a religious aspect, the Talk network is not overtly trying to convert people to become Christians. Michael Medved is not a Christian, for instance – but he is a strongly religious person rooted in Conservative principles.

The hosts syndicated on this network include:

  • Bill Bennett (6-9 AM Eastern)
  • Mike Gallagher (9-Noon)
  • Dennis Prager (Noon-3PM)
  • Michael Medved (3-6 PM)
  • Hugh Hewitt (6-9 PM)

In addition to their own programming, most of the Salem Talk stations carry the Michael Savage show, which is produced and syndicated by Talk Radio Network.

Christian Teaching Network

Salem’s Christian Teaching Network carries a variety of programs related to spreading the word of the Gospel.  Most of theprograms are recorded, and some of the hosts have been dead for many years – but the value of their message is timeless. The Teaching Network is carried on about 40 of Salem’s own stations. Janet Parshall is a Talk host carried mostly on the Christian teaching stations as her approach to today’s issue is strongly based on her understanding of Biblical principles and would not be appeal  to Secular Conservatives.

Contemporary Christian Music – The Fish

Contemporary Christian music is music of a religious theme written recently and using current musical instruments and production techniques. It is distinctly different from Traditional Music (Hymns) or Gospel Music (Black or Southern). The religious messages in the music also tend to be non-denominational and deliberate vague, typically “I love Jesus” and “Jesus loves me and you” as opposed to “Onward Christian Soldiers, Marching as to war”. 11 of Salem’s stations carry this programming.

Spanish Christian Teaching

The Hispanic audience has traditionally been strongly Roman Catholic tracing back its roots to the Spanish conquest of the New World. However, recently Evangelical Christianity has been sweeping Central and South America. 7 of Salem’s stations are Spanish language – worth keeping in mind when the topic of immigration is discussed on the Talk networks.

Salem News Network

Salem produces a “Top of the Hour” News feed carried on its stations, and made available to other stations that wouldn’t be offended by an occasional reference to Christianity – the 1,500-2000 “affiliates” mentioned in connection with Salem include those stations that only carry the news feed.

Ownership

Salem has two classes of stock ownership.

Class A stock is voting stock publicly traded on NASDAQ (SALM) that has 1 vote/share.   As of March 2009, there are 18 million shares of class stock outstanding, owned by 66 individuals (other than stock held in street name in brokerage accounts).

Class B stock is not publicly traded and gets 10 votes/share.  There are 5.5 million shares of Class B stock (55 million votes) owned by two individuals.  Mr Epperson and Atsinger have majority ccontrol of about 70% of the company’s votes while only owning 21% of the company.

Institutional Owners:

(as of May 2009)

There are 32 institutional investors in Salem Class A Stock.  Because Salem’s stock is below $5 per share, most institutional investors are prohibited from owning the stock in their portfolios.

Owner Location Approx
# Shares
Columbia Wanger Asset Management Chicago 3 million
Gamco Investors Rye New York 2 million
Dimensional Fund Advisors Texas 750,000
Barclays Global Investors England 215,000
JP Morgan Chase New York 200,000

Management

Stewart Epperson is the Chairman of the Board of Salem.  He is married to Nancy Epperson (who owns 16 radio stations in her own name separate from Salem) – she is the sister of Salem CEO Ed Atsinger III.

Stu Epperson was named as one of America’s 25 top evangelicals in 2005 by [Time Magazine].

Financial Condition as of 2008 (10-K)

Key Balance Sheet Items: (end of 2008)

Total Assets: $607 Million

  • Value of Radio Station licenses:  $398 Million
  • Goodwill and other intangible Assets: $25 Million
  • Cash: $1.8 Million
  • Accounts Receivable: $28.8 Million (approx 47 days of revenue)
  • Land, Buildings, Equipment (net) $133 Million

Debt:

  • Current Liabilities: $22.8 million
  • Long Term Debt: $321 Million

Stockholder Equity: $203 Million

Credit Facility

Salem owes $232M on its credit facility (as of the end of 2008).  It also owes $90 million on long term notes paying 7 3/4% interest.   The credit facility has several parts, some of which are at Prime to Prime+1%, and LIBOR+1% to LIBOR+2%.    In the event of default, the rates increase by 2%.   The average interest rate cost for 2008 was 4.76%

Salem’s credit facility is managed by GE Capital (TARP Recipient) and Suntrust Bank.  Fleet (now part of Bank of America), ING and Bank of New York also participate in running the credit facility.

Their long term notes were issued by Bank of New York (now part of BNY Mellon).

Swap transactions

Since 2004, the company has engaged in interest rate swap transactions both to reduce the costs of its fixed rate interest on its long term notes and to protect against future increases in LIBOR rates that could increase the costs of borrowing on its variable rate credit lending facility loans.   They have also paid to receive an interest rate cap to limit upside risk if the credit facility cost (based on LIBOR) were to increase beyond 7.25%.

Transcations between company and its management

[What happens when government tries to artificially limit “CEO pay”]

These types of transactions are looked at carefully by auditors and the SEC to see if they are truly “arm’s length” transactions or a way for the Management of the company (who work for the benefit of stockholders – in theory) to direct corporate resources for their own use.  They are disclosed on the 10-K partly to avoid future claims by stockholders on the basis “But we told you in the 10-K statement” (that few people take the time to read).

  • Many of the station’s tower sites (which have uses beyond just the AM & FM radio stations) are owned by Mr Epperson and Mr Atsinger separate from Salem, and Salem pays its CEO and Chairman rent of about $1.5 million a year for using those towers.
    In 2008, Salem acquired several of the transmitter sites for approximately $5 million, however 8 of the transmitter sites are still leased from Mr Epperson and Atsinger and those leases were renewed in 2008.
  • In 2006 Salem sold 3 radio stations (WJGR, WZNZ, and WZAZ) to the radio holding company owned by Nancy Epperson.
  • The company pays life insurance premiums on its Chairman and CEO.  In the event of their death, the premiums paid to the point of their death would be returned to Salem (without interest), but the additional death benefit would go to their trusts, not the company
  • The company paid $188,000 in 2008 to rent airplanes from Mr Atsinger’s plane rental company to conduct Salem’s business. Mr Atsinger own  Atsinger Aviation, a private charter jet company and Sun Air Aviation, operator of a FBO airport in Camarillo, California – located about 4 miles from the Salem Corporate headquarters.

Profitability

About 20% of Salem’s broadcast revenue is derived from selling blocks of time on its stations (“Brokered programming”).  Religious broadcasters generally buy the time on a religious station and fund the purchase of time from their donations.  About 50% of their revenue comes from national and local advertising.  Another 5% is earned from “infomercials”

Salem is seeing significant growth in its non-broadcast income – reaching $28 million in 2008.

Net Profit/(Loss)

2004 – $7.3 million
2005 – $12.6 million
2006 – $19 million
2007 – $8.2 million
2008 – ($33 million loss) – includes $73 loss from asset write downs

Radio Related Gross Revenue

2004 – $181 million
2005 – $194 million
2006 – $205 million
2007 – $204 million
2008 – $192 million

Stock Performance

SALM began public trading on July 1st, 1999 at a price of $25 a share.   It reached a peak of $33.08 on April 23, 2004.   As of May 8th 2009, the stock closed at $.88 a share.   If you had invested at the peak price, your investment has lost 97.3% of its value.

Leave a Reply