SALM

Salem Communications Corporation (SALM)

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Salem Communications Corp. (SALM)

Q3 2008 Earnings Call

November 7, 2008 5:00 pm ET

Executives

Evan D. Masyr – Chief Financial Officer

Edward G. Atsinger III – Chief Executive Officer

David Evans – President of Non-Broadcast Media

Analysts

Lee Westerfield – BMO Capital Markets

Bishop Sheen – Wachovia

James Goss – Barrington Research

Aaron Watkins – Deutsche Bank

Presentation

Operator

Welcome everyone to the Salem Communications third quarter 2008 earnings conference call. (Operator Instructions) Mr. Masyr you may begin your conference.

Evan Masyr

Welcome and thank you for joining us today for Salem Communications third quarter 2008 earnings call. As a reminder if you get disconnected at any time, you can dial into 973-582-2717 or listen from our web site at www.salem.cc. I’m joined today by our Chief Executive Officer Edward Atsinger and our Division President of Non-Broadcast Media, David Evans.

We’ll begin in just a moment with our prepared remarks. Once we are done the conference call the operator will come back online to instruct you on how to submit questions. Please be advised that statements made on this call that relate to future plans, events, financial results, prospects or performance are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995.


Actual results may differ materially from those anticipated as a result of certain risks and uncertainties including but not limited to, market acceptance of Salem’s radio formats, competition in the radio broadcast internet publishing industries, and new technologies. Adverse economic conditions and other risks and uncertainties detailed from time to time in Salem’s reports on Forms 10-K, 10-Q, 8-K and other filings filed with or furnished to the Securities and Exchange Commission. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Salem undertakes no obligation to update or revise any forward-looking statements to reflect new information, changed circumstances or unanticipated events.

This conference call also contains non-GAAP financial measures within the meaning of Regulation G, specifically station operating income, EBITDA and adjusted EBITDA. In conformity with Reg. G information required to accompany the disclosure of non-GAAP financial measures, including a reconciliation of such non-GAAP financial measures included in this conference call to most directly comparable financial measures prepared in accordance with GAAP is available on the investor relations portion of the company’s web site at www.salem.cc as part of the current report on Form 8K and earnings release issued by Salem earlier today.

I would now like to turn the call over to Edward Atsinger.

Edward Atsinger

Thank you all for joining our third quarter 2008 earnings call. Let me start by focusing on the current economic situation in terms of the challenges it faces, it presents to the radio industry in general and to Salem specifically. As you know for the third quarter it was very difficult for the radio business. According to the RAB total industry spot revenue fell more than 9% for Q3. In comparison Salem’s total revenue decreased 4%.

We face the same challenges as our general market radio counterparts for the advertising dollars and that business declined 11% for us, but our block programming business again demonstrated its resiliency with a decline of only 2% and our non-broadcast businesses grew 17%. Our major energy has been directed toward minimizing the impact of these revenue declines on our EBITDA by identifying and implementing appropriate cost cutting measures as well as pursuing a number of asset sales.

Since our last call we signed an agreement to sell WRBI-FM in Louisville, Kentucky for $3 million to WAY-FM, an organization which operates non-commercial contemporary Christian music stations around the country. We expect this transaction as well as the sale of WRFE-AM in Columbus, Ohio which we announced earlier for $4 million, to close in the fourth quarter. Both of those should close some time in the fourth quarter.

We are actively engaged in pursuing opportunities to sell additional assets in our portfolio and we expect to announce further asset sales in the coming weeks. In the area of cost containment, a number of things have taken place. These included eliminating the President and COO position.

We brought Eric Halvorson back to join the company in July of 2007. He had been with the company off and on since 1985 including serving on our board. He was brought back to develop a plan to downsize and implement some strategic restructuring consistent with the new economic environment. He accomplished much of what we brought him in to do. Ultimately he identified his own position as one that could be eliminated including his board position as further cost reduction measures and we have implemented those.

Last week we eliminated four senior management positions and reorganized their responsibilities among remaining management team members. Given the current economic realities we believe that these responsibilities will be managed as effectively as they were in the past and without any negative impact.

These senior management reductions are in addition to other staff layoffs that have been made over the past year. We have now reduced our annual payroll by more than $7 million. We’ve also instituted decreases in hiring in salary increased, the elimination of all non-essential capital expenditures and further reductions in marketing expenses, and there are other areas of reduction that we will continue to pursue.

The major purpose of these expense reductions and asset sales has been to position the company to avoid having to seek an amendment to our bank credit agreement. Our bank leverage ratio will decrease from 6.75 to 5.75 on March 31, 2009. It is our intention to reach that date with our actual leverage ratio adequately beneath this covenant requirement.

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