SALM

Salem Communications Corporation (SALM)

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Salem Communications (SALM)

Q4 2007 Earnings Call

March 4, 2008 5:00 pm ET

Executives

Edward G. Atsinger, III – Chief Executive Officer & Director

Evan D. Masyr – Chief Financial Officer & Senior Vice President

Eric H. Halvorson – President, Chief Operating Officer & Director

Analysts

Victor Miller – Bear Stearns

Leland Westerfield – BMO Capital Markets

Bishop [Chien] from Wachovia

Jack [Cane] – Barrington Research

Presentation

Operator

Good evening my name is Mary and I’ll be your conference operator today. At this time I would like to welcome everyone to the Salem Communications fourth quarter 2007 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks there will be a question and answer period. (Operator Instructions) It is now my pleasure to turn the floor over to your host, Chief Financial Officer Evan Masyr. Sir, you may begin.

Evan D. Masyr

Welcome and thank you for joining us today for Salem Communications fourth quarter 2007 earnings call. As a reminder, if you get disconnected at any time you can dial in to 973-582-2717 or listen from our website at www.Salem.cc. I’m joined today by our Chief Executive Officer Edward Atsinger and our President and Chief Operating Officer Eric Halvorson. We will begin in just a moment with opening comments from Edward and Eric. I will then provide a brief financial overview. After our prepared remarks our conference call operator will come back on the line 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 on 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 format, competition in the radio broadcast, Internet and publishing industries and new technologies adverse economic conditions and other risks and uncertainties detailed from time-to-time in Salem’s reports on Form 10K, 10Q, 8K and other filings filed with or furnished to the Securities & Exchange Commission. Listeners are cautioned not to replace 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 results.

This conference call also contains non-GAAP financial measures within the meaning of Regulation G, specifically station operating income, EBTIDA and adjusted EBTIDA. In conformity with Regulation 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 the most directly comparable financial measures prepared in accordance with generally accepted accounting principles is available on the investor relations portion of the company’s website at www.Salem.cc as part of the current report on Form 8K and the earnings release issued by Salem earlier today.

I will now turn the conference call over to Ed Atsinger.

Edward G. Atsinger, III

Thank you all for joining us for the fourth quarter 2007 earnings call. Before we get into the specifics of our 4Q financial performance I want to comment on a few broader issues. On our last call I mentioned that I had been spending a good deal of my time analyzing our radio properties. Our portfolio consists of a large number of assets in major markets and we obviously have the ongoing challenge to determine how to best monetize these assets consistent with our business strategy. In some cases we have determined that selling the assets best serves shareholder value. Consistent with that conclusion, since we last spoke we have announced the sale of the following stations: WHKZ AM in Warren, Ohio for $600,000; KTEK AM in Houston for $7.8 million; WFZH FM and WRRD AM in Milwaukee for $11.8 million. We feel good about these prices. Our Milwaukee cluster generated approximately $500,000 annual cash flow and while it was growing this sale price represents a 24 multiple of cash flow. We will continue to monitor the performance of our broadcast stations generally and we are actively engaged in negotiations, I can say at this time, for the sale of some additional properties.

On our last call I reported on the development of a fourth strategic format Spanish language, Christian teaching and talk. With the addition of stations in Boston and Sacramento which we launched last month, we now have four stations in this format and while we’re still in a startup stage the early results are encouraging both in terms of revenue and station operating income. I expect that we will launch additional stations in this format in coming months.

At this point I’ll turn the call over to Eric Halvorson for a specific discussion of our fourth quarter operating results.

Eric H. Halvorson

For the fourth quarter our total revenue decreased slightly by 2/10 of 1%. This was comprised of a 2% decrease in net broadcasting revenue and a 14% increase in non-broadcast revenue. Impacting these results is political revenue. We had $100,000 of political revenue in the fourth quarter of 2007 compared with $1.5 million of political revenue in the fourth quarter 2006. 45 of our stations are programmed in our foundational Christian teaching and talk format. These stations contributed 44% of our total revenue. A key component to this format is our block programming revenue which increased 6%. Despite this growth net broadcasting revenue for these stations was up only 3/10 of 1% over the prior year principally due to an 11% decline in advertising revenue. This decline is primarily due to softness in local spot revenue in a few key markets, most notably New York and Los Angeles and a loss of revenue from the financial services and related categories. Block programming contributed 62% of the revenue on our Christian teaching and talk stations.

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