Morningstar® Document Research ℠ FORM 10-K SALEM COMMUNICATIONS CORP /DE/ - SALM Filed: March 01, 2013 (period: December 31, 2012) Annual report with a comprehensive overview of the company The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2012 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 000-26497 SALEM COMMUNICATIONS CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 77-0121400 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) 4880 SANTA ROSA ROAD 93012 ( ZIP CODE) CAMARILLO, CALIFORNIA (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE: (805) 987-0400 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of the Exchange on which registered Class A Common Stock, $0.01 par value per share The NASDAQ Global Market Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ¨ No x 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 (§ 232.405 of this chapter) 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨ 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 ¨ Non-accelerated filer ¨ (Do not check if Smaller Reporting Company) Smaller Reporting Company x Source: SALEM COMMUNICATIONS CORP /DE/, 10-K, March 01, 2013 Powered by Morningstar® Document Research℠ The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ¨ x Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x As of June 30, 2012, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $26,005,840 based on the closing sale price as reported on the NASDAQ Global Market. 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 February 20, 2013 Common Stock, $0.01 par value per share 19,004,901 shares Class B Outstanding at February 20, 2013 Common Stock, $0.01 par value per share 5,553,696 shares DOCUMENTS INCORPORATED BY REFERENCE Document Parts Into Which Incorporated Proxy Statement for the Annual Meeting of Stockholders to be held May 22, 2013 Part III, Items 10, 11, 12, 13 and 14 Source: SALEM COMMUNICATIONS CORP /DE/, 10-K, March 01, 2013 Powered by Morningstar® Document Research℠ The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents TABLE OF CONTENTS PAGE PART I Item 1. Business 2 Item 1A. Risk Factors 16 Item 1B. Unresolved Staff Comments 30 Item 2. Properties 30 Item 3. Legal Proceedings 30 Item 4. Mine Safety Disclosures 30 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 31 Item 6. Selected Financial Data 31 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 34 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 61 Item 8. Financial Statements and Supplementary Data 62 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 104 Item 9A. Controls and Procedures 104 Item 9B. Other Information 105 PART III Item 10. Directors, Executive Officers and Corporate Governance 105 Item 11. Executive Compensation 105 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 105 Item 13. Certain Relationships and Related Transactions and Director Independence 105 Item 14. Principal Accounting Fees and Services 105 PART IV Item 15. Exhibits and Financial Statement Schedules 105 Signatures 117 Exhibit Index 119 Source: SALEM COMMUNICATIONS CORP /DE/, 10-K, March 01, 2013 Powered by Morningstar® Document Research℠ The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents FORWARD-LOOKING STATEMENTS From time to time, in both written reports (such as this report) and oral statements, Salem Communications Corporation (“Salem” or the “company,” including references to Salem by “we,” “us” and “our”) makes “forward-looking 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” or “plans” and similar expressions are intended to identify forward-looking statements, as defined under the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect the company’s current expectations and are based upon data available to the company at the time the statements are made. 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. Forward- looking statements made in this report speak as of the date hereof. 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 or 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”). All metropolitan statistical area (“MSA”) rank information used in this report, excluding information concerning The Commonwealth of Puerto Rico, is from the Fall 2012 Radio Market Survey Schedule & Population Rankings published by The Arbitron Company (“Arbitron”). According to the Radio Market Survey, the population estimates used are based upon the 2010 U.S. Bureau Census estimates updated and projected to January 1, 2013 by Nielsen Claritas, Inc. 1 Source: SALEM COMMUNICATIONS CORP /DE/, 10-K, March 01, 2013 Powered by Morningstar® Document Research℠ The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Table of Contents PART I ITEM 1. BUSINESS. CORPORATE INFORMATION Salem Communications Corporation (“Salem”) was formed in 1986 as a California corporation and reincorporated in Delaware in 1999. Salem is a domestic multi-media company with integrated business operations covering radio broadcasting, publishing and the Internet. Our programming is intended for audiences interested in Christian and conservative opinion content.