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 SEPTEMBER 30, 2017

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, smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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 November 3, 2017
Common Stock, $0.01 par value per share	20,609,551 shares

Class B	Outstanding at November 3, 2017
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	3
Item 1.   Condensed Consolidated Financial Statements.	3
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations.	29
Item 3.   Quantitative and Qualitative Disclosures About Market Risk.	61
Item 4.   Controls and Procedures.	62
PART II - OTHER INFORMATION	62
Item 1.    Legal Proceedings.	62
Item 1A. Risk Factors.	62
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds.	63
Item 3.   Defaults Upon Senior Securities.	63
Item 4.   Mine Safety Disclosures.	63
Item 5.   Other Information.	63
Item 6.   Exhibits.	63
SIGNATURES	64
EXHIBIT INDEX	65

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,” “intends,” “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, 2016 (Note 1)			September 30, 2017 (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	130		$	4
Trade accounts receivable (net of allowances of $10,420 in 2016 and $10,627 in 2017)		37,260			35,862
Other receivables (net of allowances of $260 in 2016 and $145 in 2017 )		751			990
Inventories (net of reserves of $2,226 in 2016 and $1,611 in 2017)		670			809
Prepaid expenses		6,287			7,288
Deferred income taxes - current		9,411			—
Total current assets		54,509			44,953
Notes receivable (net of allowance of $564 in 2016 and $794 in 2017)		65			92
Land held for sale		1,000			1,000
Property and equipment (net of accumulated depreciation of $156,024 in 2016 and $161,848 in 2017)		102,790			102,203
Broadcast licenses		388,517			388,720
Goodwill		25,613			26,436
Other indefinite-lived intangible assets		332			313
Amortizable intangible assets (net of accumulated amortization of $44,488 in 2016 and $46,007 in 2017)		14,408			14,276
Deferred financing costs		82			549
Deferred income taxes – non-current		—			1,877
Other assets		2,952			3,205
Total assets	$	590,268		$	583,624
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	4,968		$	3,721
Accrued expenses		15,658			12,427
Accrued compensation and related expenses		8,133			9,865
Accrued interest		77			6,481
Current portion of deferred revenue		9,491			10,835
Income taxes payable		223			174
Current portion of long-term debt and capital lease obligations		590			6,741
Total current liabilities		39,140			50,244
Long-term debt and capital lease obligations less unamortized debt issuance costs, net of current portion		261,084			249,375
Fair value of interest rate swap		514			—
Deferred income taxes		60,769			54,644
Deferred rent expense		9,596			9,633
Deferred revenue less current portion		5,252			6,427
Other long-term liabilities		67			64
Total liabilities		376,422			370,387
Commitments and contingencies (Note 18)
Stockholders’ Equity:
Class A common stock, $0.01 par value; authorized 80,000,000 shares; 22,593,130 and 22,927,201 issued and 20,275,480 and 20,609,551 outstanding at December 31, 2016 and September 30, 2017, respectively		226			227
Class B common stock, $0.01 par value; authorized 20,000,000 shares; 5,553,696 issued and outstanding at December 31, 2016 and September 30, 2017		56			56
Additional paid-in capital		243,607			245,800
Accumulated earnings		3,963			1,160
Treasury stock, at cost (2,317,650 shares at December 31, 2016 and September 30, 2017)		(34,006	)		(34,006	)
Total stockholders’ equity		213,846			213,237
Total liabilities and stockholders’ equity	$	590,268		$	583,624

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						Nine Months Ended
	September 30,						September 30,
	2016			2017			2016			2017
Net broadcast revenue	$	51,052		$	48,424		$	149,768		$	145,479
Net digital media revenue		11,999			10,446			34,056			31,998
Net publishing revenue		8,221			6,563			19,802			19,048
Total net revenue		71,272			65,433			203,626			196,525
Operating expenses:
Broadcast operating expenses, exclusive of depreciation and amortization shown below (including $412 and $431 for the three months ended September 30, 2016 and 2017, respectively, and $1,231 and $1,284 for the nine months ended September 30, 2016 and 2017, respectively, paid to related parties)		37,434			37,040			109,455			108,807
Digital media operating expenses, exclusive of depreciation and amortization shown below		9,172			8,169			26,815			25,241
Publishing operating expenses, exclusive of depreciation and amortization shown below		8,020			6,686			19,951			18,705
Unallocated corporate expenses exclusive of depreciation and amortization shown below (including $147 and $98 for the three months ended September 30, 2016 and 2017, respectively, and $254 and $218 for the nine months ended September 30, 2016 and 2017, respectively, paid to related parties)		4,147			4,233			11,928			13,183
Depreciation		2,976			3,082			8,950			9,171
Amortization		1,341			1,135			3,673			3,420
Change in the estimated fair value of contingent earn-out consideration		(196	)		(12	)		(458	)		(54	)
Impairment of long-lived assets		—			—			700			—
Impairment of indefinite-lived long-term assets other than goodwill		—			—			—			19
Net (gain) loss on the sale or disposal of assets		(457	)		95			(2,008	)		(410	)
Total operating expenses		62,437			60,428			179,006			178,082
Operating income		8,835			5,005			24,620			18,443
Other income (expense):
Interest income		1			1			4			3
Interest expense		(3,726	)		(4,802	)		(11,252	)		(12,156	)
Change in the fair value of interest rate swap		856			—			(1,325	)		357
Loss on early retirement of long-term debt		(18	)		—			(32	)		(2,775	)
Net miscellaneous income and (expenses)		7			(80	)		7			(80	)
Net income before income taxes		5,955			124			12,022			3,792
Provision for income taxes		3,763			170			6,121			1,506
Net income (loss)	$	2,192		$	(46	)	$	5,901		$	2,286
Basic earnings (loss) per share data:
Basic earnings (loss) per share	$	0.08		$	—		$	0.23		$	0.09
Diluted earnings (loss) per share data:
Diluted earnings (loss) per share	$	0.08		$	—		$	0.23		$	0.09
Distributions per share	$	0.07		$	0.07		$	0.20		$	0.20
Basic weighted average shares outstanding		25,815,242			26,144,796			25,617,307			26,036,333
Diluted weighted average shares outstanding		26,183,182			26,144,796			26,012,930			26,454,923

See accompanying notes

4

SALEM MEDIA GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

	Nine Months Ended September 30,
	2016			2017
OPERATING ACTIVITIES
Net income	$	5,901		$	2,286
Adjustments to reconcile net income to net cash provided by operating activities:
Non-cash stock-based compensation		458			1,693
Tax benefit related to stock options exercised		264			—
Depreciation and amortization		12,623			12,591
Amortization of deferred financing costs		475			645
Accretion of financing items		155			74
Accretion of acquisition-related deferred payments and contingent consideration		55			32
Provision for bad debts		688			1,548
Deferred income taxes		5,684			1,409
Change in the fair value of interest rate swap		1,325			(357	)
Change in the estimated fair value of contingent earn-out consideration		(458	)		(54	)
Impairment of long-lived assets		700			—
Impairment of indefinite-lived long-term assets other than goodwill		—			19
Loss on early retirement of long-term debt		32			2,775
Net gain on the sale or disposal of assets		(2,008	)		(410	)
Changes in operating assets and liabilities:
Accounts receivable		4,380			(463	)
Inventories		147			(139	)
Prepaid expenses and other current assets		(718	)		(1,001	)
Accounts payable and accrued expenses		(39	)		4,879
Deferred rent		1,183			3
Deferred revenue		(4,444	)		(310	)
Other liabilities		—			(3	)
Income taxes payable		106			(49	)
Net cash provided by operating activities		26,509			25,168
INVESTING ACTIVITIES
Cash paid for capital expenditures net of tenant improvement allowances		(7,240	)		(6,800	)
Capital expenditures reimbursable under tenant improvement allowances and trade agreements		(486	)		(50	)
Escrow deposits related to acquisitions		(228	)		(30	)
Purchases of broadcast assets and radio stations		(718	)		(1,662	)
Purchases of digital media businesses and assets		(3,153	)		(1,690	)
Purchases of publishing businesses assets		(3,318	)		—
Proceeds from sale of broadcast assets		3,147			602
Other		(398	)		(224	)
Net cash used in investing activities		(12,394	)		(9,854	)
FINANCING ACTIVITIES
Payments under Term Loan B		(5,000	)		(263,000	)
Proceeds from borrowings under Revolver and ABL Facility		35,601			60,133
Payments on Revolver and ABL Facility		(37,837	)		(53,980	)
Payment of interest rate swap		—			(783	)
Proceeds from bond offering		—			255,000
Payment of debt issuance costs		—			(6,837	)
Payments of acquisition-related contingent earn-out consideration		(99	)		(14	)
Payments of deferred installments due from acquisition activity		(3,421	)		(225	)
Proceeds from the exercise of stock options		969			501
Payments of capital lease obligations		(80	)		(93	)
Payment of cash distributions on common stock		(5,000	)		(5,089	)
Book overdraft		734			(1,053	)
Net cash used in financing activities		(14,133	)		(15,440	)
Net decrease in cash and cash equivalents		(18	)		(126	)
Cash and cash equivalents at beginning of year		98			130
Cash and cash equivalents at end of period	$	80		$	4

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	$	10,644	$	4,962
Cash paid for income taxes	$	67	$	128
Other supplemental disclosures of cash flow information:
Barter revenue	$	3,886	$	4,152
Barter expense	$	3,734	$	4,012
Non-cash investing and financing activities:
Capital expenditures reimbursable under tenant improvement allowances	$	486	$	50
Current value of deferred cash payments (short-term)	$	1,566	$	—
Net assets and liabilities assumed non-cash acquisition		—		2,852
Assets acquired under capital leases	$	—	$	16
Debt issuance costs accrued	$	—	$	132

See accompanying notes

6

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

(Unaudited)

NOTE 1. BASIS OF PRESENTATION

The accompanying consolidated financial statements of Salem Media Group, Inc. (“Salem” “we,” “us,” “our” or the “company”) include the company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated. Effective February 19, 2015, we changed our name from Salem Communications Corporation to Salem Media Group, Inc. 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.

Information with respect to the three and nine months ended September 30, 2017 and 2016 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, 2016. 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, 2016 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 multimedia company specializing in Christian and conservative content. Our media properties are comprised of radio broadcasting, digital media, and publishing entities. We have three operating segments: (1) Broadcast, (2) Digital Media, and (3) Publishing, which are discussed in Note 19 – Segment Data. Our foundational business is radio broadcasting, which includes the ownership and operation of radio stations in large metropolitan markets. We also own and operate Salem Radio Network® (“SRN”), SRN News Network (“SNN”), Today’s Christian Music (“TCM”), Singing News Network (formerly Solid Gospel Network) and Salem Media Representatives^TM (“SMR”). SRN, SNN, TCM 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 format commercial radio stations. Each of our radio stations has a website specifically designed for that station from which our audience can access our entire library of digital content and online publications.

Our digital media based businesses provide Christian, conservative, investing and health-themed content, e-commerce, audio and video streaming, and other resources digitally through the web. Salem Web Network™ (“SWN”) websites include Christian content websites; OnePlace.com, Christianity.com, Crosswalk.com®, GodVine.com, GodTube.com, CrossCards.com, LightSource.com, Jesus.org, BibleStudyTools.com, iBelieve.com, CCMmagazine.com and ChristianHeadlines.com, and our conservative opinion websites; collectively known as Townhall Media, include Townhall.com™, HotAir.com, Twitchy.com, HumanEvents.com, RedState.com, and BearingArms.com. We also publish digital newsletters through Eagle Financial Publications, which provide market analysis and non-individualized investment strategies from financial commentators on a subscription basis.

Our church e-commerce websites, including WorshipHouseMedia.com, SermonSpice.com, SermonSearch.com, ChurchStaffing.com, and ChristianJobs.com, offer a variety of digital resources including videos, song tracks, sermon archives and job listings to pastors and Church leaders. E-commerce also includes Eagle Wellness, which sells nutritional supplements.

Our web content is accessible through all of our radio station websites that feature content of interest to local audiences throughout the United States.

Our publishing operating segment is comprised of three businesses: (1) Regnery Publishing, 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; (2) Salem Author Services, our self-publishing service for authors through Xulon Press and Mill City Press; and (3) Singing News^® magazine, previously Salem Publishing™ which produced and distributed print magazines.

7

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 believe that the requirements of FASB ASC Topic 810 do not apply to these entities because the lease arrangements do not contain explicit guarantees of the residual value of the real estate, do not contain purchase options or similar provisions and the leases are at terms that do not vary materially from leases that would have been available with unaffiliated parties. Additionally, we do not have an equity interest in the entities controlled by our principal stockholders or other related parties and we do not guarantee debt of the entities controlled by our principal stockholders or other related parties.

We also 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 September 30, 2017, 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 include the reclassification of land held for sale from current assets to long term assets based on the APA term that exceeds twelve months and the reclassification of Salem Consumer Products (“SCP”) from our digital media segment to our broadcast segment. SCP sells books, DVD’s and editorial content developed by our on-air personalities. SCP was reclassed to include revenue from all network sources, in broadcast to assess the overall performance of each network program. Refer to Note 19 – Segment Data for an explanation of this reclassification.

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 not be applicable to our financial position, results of operations, cash flows, or presentation thereof.  

8

In September 2017, the FASB issued ASU 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842). ASU 2017-13 provides additional clarification including the addition of SEC paragraphs to the new revenue and leases sections of the Codification. We do not expect these clarifications to have a material impact on our financial position, results of operations, cash flows, or presentation thereof.

In August 2017, the FASB issued ASU 2017-12, "Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities," which improves the financial reporting of hedging relationships to better align risk management activities in financial statements and make certain targeted improvements to simplify the application of the hedge accounting guidance in current GAAP. The standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted for any interim and annual financial statements that have not yet been issued. We do not expect the adoption of this accounting standard to have a material impact on our financial position, results of operations, cash flows, or presentation thereof.

In May 2017, the FASB issued ASU 2017-09, “Compensation – Stock Compensation (Topic 718) Scope of Modification Accounting,” which clarifies when to account for a change in the terms or conditions of a share-based payment award as a modification. ASU 2017-09 requires modification accounting only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. ASU 2017-09 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. We do not expect the adoption of this accounting standard to have a material impact on our financial position, results of operations, cash flows, or presentation thereof.

In March 2017, the FASB issued ASU 2017-08, “Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium on Purchased Callable Debt Securities,” which amends the amortization period for certain purchased callable debt securities held at a premium to a shorter period based on the earliest call date. ASU 2017-08 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. We do not expect the adoption of this accounting standard to have a material impact on our financial position, results of operations, cash flows, or presentation thereof.

In February 2017, the FASB issued ASU 2017-05, “Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Topic 610-20),” which clarifies the scope and application of ASC Topic 610-20 on accounting for the sale or transfer of nonfinancial assets, that is an asset with physical value such as real estate, equipment, intangibles or similar property. ASU 2017-05 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. 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 January 2017, the FASB issued ASU 2017-04, “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” which eliminates the requirement to calculate the implied fair value of goodwill in Step 2 of the goodwill impairment test. Under ASU 2017-04, goodwill impairment charges will be based on the excess of a reporting unit’s carrying amount over its fair value as determined in Step 1 of the testing. ASU 2017-04 is effective for interim and annual testing dates after January 1, 2019, with early adoption permitted for interim and annual goodwill impairment testing dates after January 1, 2017. 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 January 2017, the FASB issued ASU 2017-01, “Business Combinations – Clarifying the Definition of a Business,” which clarifies the definition of a business for determining whether transactions should be accounted for as acquisitions or disposals of assets or businesses. ASU 2017-01 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. We expect the adoption of ASU 2017-01 to impact the purchase price allocation of any future radio station acquisitions that will be considered asset acquisitions under the new guidance rather than business acquisitions. We do not expect the change to have a material impact on our financial position, results of operations, cash flows, or presentation thereof.

In November 2016, the FASB issued ASU 2016-18, “Statements of Cash Flows (Topic 230): Restricted Cash,” which provides guidance on the presentation of restricted cash or restricted cash equivalents in the statement of cash flows. ASU 2016-18 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. We do not expect the adoption of ASU 2016-18 to have a material impact on our cash flows or presentation thereof.

In October 2016, the FASB issued ASU 2016-16 “Intra-Entity Transfers of Assets Other Than Inventory,” which modifies existing guidance for the accounting for income tax consequences of intra-entity transfers of assets. This ASU requires entities to immediately recognize the tax consequences on intercompany asset transfers (excluding inventory) at the transaction date, rather than deferring the tax consequences under current GAAP. The guidance is effective for fiscal years beginning after December 15, 2018, and interim reports within those fiscal years, with early adoption permitted only as of the first quarter of a fiscal year. We do not expect the adoption of ASU 2016-16 to have a material impact on our financial position, results of operations, cash flows, or presentation thereof.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which clarifies how entities should classify certain cash receipts and cash payments on the statement of cash flows with the objective of reducing diversity in practice related to eight specific types of transactions. The guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. We do not expect the adoption of ASU 2016-15 to have a material impact on our financial cash flows or presentation thereof.

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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 for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption 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 guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, 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 guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. With the exception of the early application guidance applicable to certain entities, 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 May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” and issued subsequent amendments to the initial guidance in August 2015, March 2016, April 2016, May 2016 and December 2016, within ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12, ASU 2016-20 and ASU 2017-13 respectively (ASU 2014-09, ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12, ASU 2016-20, and ASU 2017-13, collectively, “Topic 606”). Topic 606 supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of Topic 606 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. Topic 606 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP. These estimates include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation, among others. The guidance is effective for us as of January 2018, the first interim period within fiscal years beginning on or after December 15, 2017, using either of two methods: (1) retrospective application of Topic 606 to each prior reporting period presented with the option to elect certain practical expedients as defined within Topic 606 or (2) retrospective application of Topic 606 with the cumulative effect of initially applying Topic 606 recognized at the date of initial application and providing certain additional disclosures as defined per Topic 606. We have developed a project plan for the implementation of ASC 606 and all related ASU’s as of the effective date with further analysis planned during the remainder of 2017 to complete the implementation plan. Based on our evaluation of a sample of revenue contracts with customers against the requirements of the standard, we believe that the reporting of revenue as principal (gross) or agent (net) will impact our consolidated financial statements. We may sell advertising that includes placement on third party websites that we currently report on a gross basis as principal due to having latitude in establishing the sales price and bearing credit risk. Under new guidance, we will report this revenue net as agent because the third party is primarily responsible for fulfilling the service. Preliminarily, we plan to adopt Topic 606 pursuant to the modified retrospective application method of Topic 606. We do not believe that there will be a material impact to our revenues upon adoption as the practice of selling advertising on third party websites has not been widely used. We expect this type of sale to grow in popularity in future periods with the net incremental revenue reported in our financials. We continue to evaluate the impact of our pending adoption of Topic 606 and our preliminary assessments are subject to change.

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

Approximately 71% of our total assets as of September 30, 2017 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 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.

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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 operating results are less favorable than the assumptions and estimates we used, or if we reduce our estimates of future operating results, 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 16.

Throughout 2017, we continued to evaluate our print magazine business due to declines in operating results and projected revenues. We ceased publishing Preaching Magazine^™, YouthWorker Journal^™, FaithTalk Magazine^™ and Homecoming® The Magazine upon delivery of the May 2017 print publications. We tested print magazines for impairment as of March 31, 2017 based on our decision to cease publications and recorded an impairment charge of $19,000 associated with mastheads. There were no changes in depreciable lives of any property or equipment associated with these magazines as each individually identifiable asset had been fully depreciated.

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. We reviewed long-lived assets associated with Preaching Magazine^™, YouthWorker Journal^™, FaithTalk Magazine^™ and Homecoming® The Magazine as of March 31, 2017, due to our decision to cease publishing these magazines as of the May 2017 issue. We recorded a $1.9 million decrease in the cost and a $1.9 million decrease in the accumulated amortization for fully amortized assets, including subscriber lists and domain names associated with these magazines. There was no impairment loss or adjustment required to the previously estimated useful lives of these assets. There were no further indications of impairment present as of September 30, 2017.

NOTE 4. ACQUISITIONS AND RECENT TRANSACTIONS

During the nine month period ended September 30, 2017, we completed or entered into the following transactions:

Debt

On May 19, 2017, we closed on a private offering of $255.0 million aggregate principal amount of 6.75% senior secured notes due 2024 (the “Notes”) and concurrently entered into a five-year $30.0 million senior secured asset-based revolving credit facility, which includes a $5.0 million subfacility for standby letters of credit and a $7.5 million subfacility for swingline loans (“ABL Facility”) due May 19, 2022. The net proceeds from the offering of the Notes, together with borrowings under the ABL Facility, were used to repay outstanding borrowings, including accrued and unpaid interest, on our previously existing senior credit facilities consisting of a term loan (“Term Loan B”) and a revolving credit facility of $25.0 million (“Revolver”), and to pay fees and expenses incurred in connection with the Notes offering and the ABL Facility (collectively, the “Refinancing”).

In connection with the Refinancing, on May 19, 2017, we repaid $258.0 million in principal on the Term Loan B and paid interest due as of that date. We recorded a $0.6 million pre-tax loss on the early retirement of long-term debt related to the unamortized discount and a $1.5 million pre-tax loss on the early retirement of long-term debt related to unamortized debt issuance costs associated with the Term Loan B. We also terminated the Revolver as of May 19, 2017. We repaid $4.1 million in outstanding principal on the Revolver and paid interest due as of that date. We recorded a $56,000 pre-tax loss on the early retirement of long-term debt related to unamortized debt issuance costs associated with the Revolver.

On February 28, 2017, we repaid $3.0 million principal on the Term Loan B of $300.0 million, and paid interest due as of that date. We recorded a $6,200 pre-tax loss on the early retirement of long-term debt related to the unamortized discount and $18,000 in unamortized debt issuance costs associated with the principal repayment.

On January 30, 2017, we repaid $2.0 million in principal on the Term Loan B and paid interest due as of that date. We recorded a $4,500 pre-tax loss on the early retirement of long-term debt related to the unamortized discount and $12,000 in unamortized debt issuance costs associated with the principal repayment.

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Equity

On September 12, 2017, 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 September 29, 2017 to all Class A and Class B common stockholders of record as of September 22, 2017.

On August 9, 2017, a restricted stock award of 33,066 shares was granted to an executive that vested immediately. The fair value of the restricted stock award was measured based on the grant date market price of our common shares and expensed as of the vesting date. The restricted stock award contains transfer restrictions under which they cannot be sold, pledged, transferred or assigned until three months from vesting date. The recipient of this restricted stock award is entitled to all of the rights of absolute ownership of the restricted stock from the date of grant, including the right to vote the shares and to receive dividends. Restricted stock awards are independent of option grants and are granted at no cost to the recipient other than applicable taxes owed by the recipient. The award is considered issued and outstanding from the vest date of grant.

On June 1, 2017, 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 June 30, 2017 to all Class A and Class B common stockholders of record as of June 16, 2017.

On March 9, 2017, 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 March 30, 2017 to all Class A and Class B common stockholders of record as of March 20, 2017.

On March 24, 2017, a restricted stock award of 178,592 shares was granted to certain members of management that vested immediately. The fair value of each restricted stock award was measured based on the grant date market price of our common shares and expensed as of the vesting date. These restricted stock awards contained transfer restrictions under which they could not be sold, pledged, transferred or assigned until three months from vesting date. Recipients of these restricted stock awards were entitled to all the rights of absolute ownership of the restricted stock from the date of grant, including the right to vote the shares and to receive dividends. Restricted stock awards are independent of option grants and are granted at no cost to the recipient other than applicable taxes owed by the recipient. The awards were considered issued and outstanding from the vest date of grant.

Acquisitions – Broadcast

On September 15, 2017, we closed on the acquisition of real property, including the land, tower and broadcasting facilities, of radio station WSPZ-AM in Bethesda, Maryland for $1.5 million in cash. We recognized goodwill of approximately $13,000 associated with the going concern value of the existing income generating leases acquired with the broadcast tower.

On July 24, 2017, we closed on the acquisition of the FM translator construction permit in Eaglemount, Washington, for $40,000 in cash. The FM translator will be relocated to the Portland, Oregon market for use by our KDZR-AM radio station.

On June 28, 2017, we closed on the acquisition of an FM translator construction permit in Festus, Missouri for $40,000 in cash. The FM translator will be relocated to the St. Louis, Missouri market for use by our KXFN-FM radio station.

On March 14, 2017, we closed on the acquisition of an FM translator construction permit in Quartz Site, Arizona for $20,000 in cash. The FM translator will be relocated to the San Diego, California market for use by our KPRZ-AM radio station.

On March 1, 2017, we closed on the acquisition of an FM translator construction permit in Roseburg, Oregon for $45,000 in cash. The FM translator will be relocated to the Portland, Oregon market for use by our KPDQ-AM radio station.

On January 16, 2017, we closed on the acquisition of an FM translator in Astoria, Oregon for $33,000 in cash. The FM translator will be relocated to the Seattle, Washington market for use by our KGNW-AM radio station.

On January 6, 2017, we closed on the acquisition of an FM translator construction permit in Mohave Valley, Arizona for $20,000 in cash. The FM translator will be relocated to the San Diego, California market for use by our KCBQ-AM radio.

Acquisitions − Digital Media

On August 31, 2017, we acquired the TeacherTube.com website and related assets for $1.1 million in cash. TeacherTube.com is an online instructional video sharing community for teachers, students and parents. We recorded goodwill of approximately $0.4 million associated with the expected synergies to be realized from combining this website and related assets into our existing digital media platform. The accompanying Condensed Consolidated Statement of Operations reflects the operating results as of the closing date within our digital media operating segment.

On August 31, 2017, we acquired the Intelligence Report newsletter and related assets valued at $2.5 million and we assumed deferred subscription liabilities of $2.9 million. We paid no cash to the seller upon closing. We recorded goodwill of approximately $0.4 million associated with the expected synergies to be realized from combining this financial publication and related assets into our existing digital media platform. The accompanying Condensed Consolidated Statement of Operations reflects the operating results as of the closing date within our digital media operating segment.

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On July 6, 2017, we acquired the TradersCrux.com website and related assets for $0.3 million in cash. As part of the purchase agreement, we may pay up to an additional $0.1 million in contingent earn-out consideration within one year upon the achievement of income benchmarks. Using a probability-weighted discounted cash flow model based on our own assumptions as to the ability of TradersCrux.com to achieve the income targets at the time of closing, we estimated the fair value of the contingent earn-out consideration to be $18,750, which approximates the discounted present value due to the earn-out period of less than one year. We recorded goodwill of approximately $900 associated with the expected synergies to be realized from combining this website and related assets into our existing digital media platform.

On June 8, 2017, we acquired a Portuguese Bible mobile application and related assets for $65,000 in cash. As part of the purchase agreement, we may pay up to an additional $20,000 in contingent earn-out consideration over the next twelve months based on the achievement of certain revenue benchmarks. Using a probability-weighted discounted cash flow model based on our own assumptions as to the ability of the Portuguese Bible mobile’s applications to achieve the revenue targets at the time of closing, we estimated the fair value of the contingent earn-out consideration to be $16,500, which approximated the discounted present value due to the earn-out period of less than one year.

On March 15, 2017, we acquired the website prayers-for-special-help.com and related assets for $0.2 million in cash. We recorded goodwill of approximately $15,000 with the expected synergies to be realized from combining these applications into our existing digital media platform. The accompanying Condensed Consolidated Statement of Operations reflects the operating results as of the closing date within our digital media operating segment.

A summary of our business acquisitions and asset purchases during the nine month period ended September 30, 2017, 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)
September 15, 2017	Real property of radio station WSPZ-AM in Bethesda, Maryland (business acquisition)	$	1,500
August 31, 2017	TeacherTube.com (business acquisition)		1,100
August 31, 2017	Intelligence Reporter newsletter (business acquisition)		—
July 24, 2017	FM Translator construction permit, Eaglemount, Washington (asset acquisition)		40
July 6, 2017	TradersCrux.com (business acquisition)		298
June 28, 2017	FM Translator construction permit, Festus, Missouri (asset acquisition)		40
June 8, 2017	Portuguese Bible Mobile Applications (business acquisition)		82
March 15, 2017	Prayers for Special Help (business acquisition)		245
March 14, 2017	FM Translator construction permit, Quartz Site, Arizona (asset purchase)		20
March 1, 2017	FM Translator construction permit, Roseburg, Oregon (asset purchase)		45
January 16, 2017	FM Translator, Astoria, Oregon (asset purchase)		33
January 1, 2017	FM Translator construction permit, Mohave Valley, Arizona (asset purchase)		20
		$	3,423

The operating results of our business acquisitions and asset purchases are included in our 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 assets acquired. 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 Condensed Consolidated Statements of Operations. To date, we have not recorded adjustments to the 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. We recognized costs associated with acquisitions of $0.1 million during the nine month period ended September 30, 2017 compared to $0.3 million during the same period of the prior year, which are included in unallocated corporate expenses in the accompanying Condensed Consolidated Statements of Operations.

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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 16 - Fair Value Measurements.

The following table summarizes the total acquisition consideration for the nine month period ended September 30, 2017:

Description	Total Consideration
	(Dollars in thousands)
Cash payments made upon closing	$	3,352
Escrow deposits paid in prior years		35
Present value of estimated fair value of contingent earn-out consideration		36
Total purchase price consideration	$	3,423

The fair value of the net assets acquired was allocated as follows:

	Net Broadcast		Net Digital Media			Total Net
	Assets Acquired		Assets Acquired			Assets Acquired
	(Dollars in thousands)
Assets
Property and equipment	$	1,487	$	479		$	1,966
Broadcast licenses		198		—			198
Goodwill		13		810			823
Customer lists and contracts		—		314			314
Domain and brand names		—		647			647
Subscriber base and lists		—		2,316			2,316
Non-compete agreements		—		11			11
	$	1,698	$	4,577		$	6,275
Liabilities
Deferred revenue	$	—		(2,852	)		(2,852	)
	$	1,698	$	1,725		$	3,423

Pending Transactions

On September 15, 2017, we entered an APA to acquire radio station WSPZ-AM in Bethesda, Maryland for $0.6 million in cash from a related party. We began programming the station under an LMA within our Washington DC broadcast market on the same date. The accompanying Condensed Consolidated Statement of Operations reflects the operating results of this station as of the LMA date within our broadcast segment. The acquisition is subject to the approval of the FCC and is expected to close in the fourth quarter of 2017.

In August 2017, we received an escrow deposit under an agreement to sell land in Covina, California for $1.0 million dollars. The land is recorded in assets held for sale and has not been used in operations. The sale is subject to the buyer’s ability to complete due diligence on their expected use of the land and is currently expected to close in the latter half of 2020.

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 within our broadcast segment.

Divestitures

On June 1, 2017, we received $0.6 million in cash for a former transmitter site in our Dallas, Texas market that had been leased to a third-party.

Due to operating results during the three month period ended March 31, 2017 that did not meet management’s expectations, we ceased publishing Preaching Magazine^™, YouthWorker Journal^™, FaithTalk Magazine^™ and Homecoming® The Magazine upon delivery of the May 2017 print publications. On May 30, 2017, we received $10,000 for Preaching Magazine^™ and YouthWorker Journal^™. The purchaser assumed all deferred subscription liabilities for these publications resulting in a pre-tax gain on the sale or disposal of assets of approximately $56,000.

On January 3, 2017, Word Broadcasting began operating our Louisville radio stations (WFIA-AM; WFIA-FM; WGTK-AM) under a twenty-four month TBA.

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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 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 16.

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.

TradersCrux.com

We acquired the TradersCrux.com website and related assets for $0.3 million in cash on July 6, 2017. We paid $0.3 million in cash upon closing and may pay up to an additional $0.1 million in contingent earn-out consideration within one year upon the achievement of income benchmarks. Using a probability-weighted discounted cash flow model based on our own assumptions as to the ability of TradersCrux.com to achieve the income targets at the time of closing, we estimated the fair value of the contingent earn-out consideration to be $18,750, which approximates the discounted present value due to the earn-out of less than one year.

We review the fair value of the contingent earn-out consideration quarterly over the earn-out period to compare actual revenues achieved and projected to the estimated revenues used in our forecasts. Any changes in the estimated fair value of the contingent earn-out consideration will be reflected in our results of operations in the period they are identified, up to the maximum future value outstanding under the contract of $0.1 million. There were no changes in our estimates of the fair value of the contingent earn-out consideration as of the three month period ended September 30, 2017.

Portuguese Bible Mobile Application

We acquired a Portuguese Bible mobile application and related assets on June 8, 2017. We paid $65,000 in cash upon closing and may pay up to an additional $20,000 in contingent earn-out consideration during the twelve month period ending June 8, 2018 based on the achievement of certain revenue benchmarks. Using a probability-weighted discounted cash flow model based on our own assumptions as to the ability of the Portuguese Bible mobile applications to achieve the revenue targets at the time of closing, we estimated the fair value of the contingent earn-out consideration to be $16,500, which approximated the discounted present value due to the earn-out of less than one year.

We review the fair value of the contingent earn-out consideration quarterly over the earn-out period to compare actual revenues achieved and projected to the estimated revenues used in our forecasts. Any changes in the estimated fair value of the contingent earn-out consideration will be reflected in our results of operations in the period they are identified, up to the maximum future value outstanding under the contract of $20,000. We recorded an increase of $1,700 in the estimated fair value of the contingent earn-out consideration that is reflected in our results of operations for the three month period ended September 30, 2017. The increase is due to a higher likelihood of achieving the revenue targets based on actual results to date that exceed our original estimates.

Turner Investment Products

We acquired Mike Turner’s line of investment products, including TurnerTrends.com and other domain names and related assets on September 13, 2016. We paid $0.4 million in cash upon closing and may pay up to an additional $0.1 million in contingent earn-out consideration during the twelve month period ended September 13, 2017 based on the achievement of certain revenue benchmarks. Using a probability-weighted discounted cash flow model based on our own assumptions as to the ability of Turner’s investment products to achieve the revenue targets at the time of closing, we estimated the fair value of the contingent earn-out consideration to be $74,000, which was recorded at the discounted present value of $66,000. The discount is being accreted to interest expense over the twelve month earn-out period. We believe that our experience with digital subscriptions and websites provides a reasonable basis for our estimates.

We review the fair value of the contingent earn-out consideration quarterly over the earn-out period to compare actual subscriber revenues achieved and projected to the estimated subscriber revenues used in our forecasts. Any changes in the estimated fair value of the contingent earn-out consideration will be reflected in our results of operations in the period they are identified, up to the maximum future value outstanding under the contract of $74,000. During the three and nine month period ended September 30, 2017, we recorded a net decrease of $14,000 and $53,000, respectively, in the estimated fair value of the contingent earn-out consideration that is reflected in our results of operations. These decreases were based on the likelihood of achieving the revenue targets based on actual results to date that were lower than our original estimates. We made no additional cash payments to the seller during the earn-out period ended September 13, 2017.

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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 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 reviewed 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 were reflected in our results of operations in the period they were identified, up to the maximum amount due under the contract of $165,000 less any amounts paid to date. As of the six month period ended June 30, 2017, the end of the earn-out period, we recorded a net decrease of $4,000 in the estimated fair value of the contingent earn-out consideration based on actual session results at the end of the earn-out period. We paid a total of $75,000 in cash for amounts due under the contingent earn-out as of the end of the term on May 6, 2017. Over the total two-year earn out period, we paid a total of $75,000 to the seller with no payments made during the nine month period ended September 30, 2017.

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 was based upon 50% of the net subscriber revenues achieved over the two-year period from date of close with 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 was accreted to interest expense over the two-year earn-out period. We paid a total of $91,000 to the seller over the two year earn out period, of which approximately $14,000 was paid during the six month period ended June 30, 2017, which concluded the earn-out 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. The purchase agreement included contingent earn-out consideration of up to $8.5 million 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. The discount was accreted to interest expense over the three-year earn-out period. We paid a total of $0.9 million in cash for amounts due under the contingent earn-out as of the end of the term on December 31, 2016.

The following table reflects the changes in the present value of our acquisition-related estimated contingent earn-out consideration during the three and nine month periods ended September 30, 2017 and 2016:

	Three Months Ended September 30, 2017
	Short-Term			Long-Term
	Accrued Expenses			Other Liabilities		Total
	(Dollars in thousands)
Beginning Balance as of July 1, 2017	$	31		$	—	$	31
Acquisitions		19			—		19
Accretion of acquisition-related contingent earn-out consideration		—			—		—
Change in the estimated fair value of contingent earn-out consideration		(12	)		—		(12	)
Reclassification of payments due in next 12 months to short-term		—			—		—
Payments		—			—		—
Ending Balance as of September 30, 2017	$	38		$	—	$	38

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	Three Months Ended September 30, 2016
	Short-Term			Long-Term
	Accrued Expenses			Other Liabilities		Total
	(Dollars in thousands)
Beginning Balance as of July 1, 2016	$	441		$	—	$	441
Acquisitions		66			—		66
Accretion of acquisition-related contingent earn-out consideration		5			—		5
Change in the estimated fair value of contingent earn-out consideration		(196	)		—		(196	)
Reclassification of payments due in next 12 months to short-term		—			—		—
Payments		(11	)		—		(11	)
Ending Balance as of September 30, 2016	$	305		$	—	$	305

	Nine Months Ended September 30, 2017
	Short-Term			Long-Term
	Accrued Expenses			Other Liabilities		Total
	(Dollars in thousands)
Beginning Balance as of January 1, 2017	$	66		$	—	$	66
Acquisitions		36			—		36
Accretion of acquisition-related contingent earn-out consideration		4			—		4
Change in the estimated fair value of contingent earn-out consideration		(54	)		—		(54	)
Reclassification of payments due in next 12 months to short-term		—			—		—
Payments		(14	)		—		(14	)
Ending Balance as of September 30, 2017	$	38		$	—	$	38

	Nine Months Ended September 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		66			—			66
Accretion of acquisition-related contingent earn-out consideration		13			8			21
Change in the estimated fair value of contingent earn-out consideration		(404	)		(54	)		(458	)
Reclassification of payments due in next 12 months to short-term		556			(556	)		—
Payments		(99	)		—			(99	)
Ending Balance as of September 30, 2016	$	305		$	—		$	305

NOTE 6. INVENTORIES

Inventories consist of finished goods that include books printed for sale by Regnery Publishing and wellness products for sale on our e-commerce sites. 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:

	As of December 31, 2016			As of September 30, 2017
	(Dollars in thousands)
Regnery Publishing book inventories	$	2,473		$	2,026
Reserve for obsolescence – Regnery Publishing		(2,104	)		(1,544	)
Inventory, net - Regnery Publishing		369			482
Wellness products	$	423		$	394
Reserve for obsolescence – Wellness products		(122	)		(67	)
Inventory, net - Wellness products		301			327
Consolidated inventories, net	$	670		$	809

NOTE 7. BROADCAST LICENSES

The following table presents the changes in broadcasting licenses that include capital projects and acquisitions of radio stations and FM translators as discussed in Note 4 of our Condensed Consolidated financial statements.

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Broadcast Licenses	Twelve Months Ended December 31, 2016			Nine Months Ended September 30, 2017
	(Dollars in thousands)
Balance, beginning of period before cumulative loss on impairment	$	492,032		$	494,058
Accumulated loss on impairment		(99,001	)		(105,541	)
Balance, beginning of period after cumulative loss on impairment		393,031			388,517
Acquisitions of radio stations		74			—
Acquisitions of FM translators and construction permits		1,645			198
Capital projects to improve broadcast signal and strength		307			5
Impairments based on estimated fair value of broadcast licenses		(6,540	)		—
Balance, end of period before cumulative loss on impairment		494,058			494,261
Accumulated loss on impairment		(105,541	)		(105,541	)
Balance, end of period after cumulative loss on impairment	$	388,517		$	388,720

NOTE 8. GOODWILL

The following table presents the changes in goodwill including acquisitions as discussed in Note 4 of our Condensed Consolidated financial statements.

Goodwill	Twelve Months Ended December 31, 2016			Nine Months Ended September 30, 2017
	(Dollars in thousands)
Balance, beginning of period before cumulative loss on impairment	$	26,560		$	27,642
Accumulated loss on impairment		(1,997	)		(2,029	)
Balance, beginning of period after cumulative loss on impairment		24,563			25,613
Acquisitions of radio stations and broadcast businesses		—			13
Acquisitions of digital media entities		237			810
Acquisitions of publishing entities		845			—
Impairment charge during year		(32	)		—
Balance, end of period before cumulative loss on impairment		27,642			28,465
Accumulated loss on impairment		(2,029	)		(2,029	)
Ending period balance	$	25,613		$	26,436

NOTE 9. PROPERTY AND EQUIPMENT

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

	As of December 31, 2016			As of September 30, 2017
	(Dollars in thousands)
Land	$	32,402		$	33,008
Buildings		29,070			29,018
Office furnishings and equipment		37,386			37,135
Office furnishings and equipment under capital lease obligations		228			244
Antennae, towers and transmitting equipment		84,144			85,450
Antennae, towers and transmitting equipment under capital lease obligations		795			795
Studio, production and mobile equipment		28,668			29,322
Computer software and website development costs		20,042			22,756
Record and tape libraries		27			27
Automobiles		1,373			1,342
Leasehold improvements		14,696			18,626
Construction-in-progress		9,983			6,328
	$	258,814		$	264,051
Less accumulated depreciation		(156,024	)		(161,848	)
	$	102,790		$	102,203

Depreciation expense was approximately $3.1 million and $3.0 million, for the three month periods ended September 30, 2017 and 2016, respectively, and $9.2 million and $9.0 million for the nine month periods ended September 30, 2017 and 2016, respectively. Included in this amount is $10,000 and $30,000 for the three and nine month periods ended September 30, 2017 and $11,000 and $32,000 for the three and nine month periods ended September 30, 2016, on assets acquired under capital lease obligations. Accumulated depreciation of assets acquired under capital leases was $176,000 and $146,000 at September 30, 2017 and December 31, 2016, respectively.

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NOTE 10. AMORTIZABLE INTANGIBLE ASSETS

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

	As of September 30, 2017
			Accumulated
	Cost		Amortization			Net
	(Dollars in thousands)
Customer lists and contracts	$	22,865	$	(20,681	)	$	2,184
Domain and brand names		20,109		(14,139	)		5,970
Favorable and assigned leases		2,379		(2,018	)		361
Subscriber base and lists		8,797		(4,402	)		4,395
Author relationships		2,771		(2,171	)		600
Non-compete agreements		2,029		(1,263	)		766
Other amortizable intangible assets		1,333		(1,333	)		—
	$	60,283	$	(46,007	)	$	14,276

	As of December 31, 2016
			Accumulated
	Cost		Amortization			Net
	(Dollars in thousands)
Customer lists and contracts	$	22,599	$	(20,070	)	$	2,529
Domain and brand names		19,821		(12,970	)		6,851
Favorable and assigned leases		2,379		(1,972	)		407
Subscriber base and lists		7,972		(5,304	)		2,668
Author relationships		2,771		(1,824	)		947
Non-compete agreements		2,018		(1,012	)		1,006
Other amortizable intangible assets		1,336		(1,336	)		—
	$	58,896	$	(44,488	)	$	14,408

Amortization expense was approximately $1.1 million and $1.4 million for the three month period ended September 30, 2017 and 2016, respectively, and $3.4 million and $3.7 million for the nine month period ended September 30, 2017 and 2016, respectively. Based on the amortizable intangible assets as of September 30, 2017, we estimate amortization expense for the next five years to be as follows:

Year Ended December 31,	Amortization Expense
	(Dollars in thousands)
2017 (Oct – Dec)	$	1,173
2018		4,576
2019		4,006
2020		2,714
2021		1,159
Thereafter		648
Total	$	14,276

NOTE 11. LONG-TERM DEBT

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

6.75% Senior Secured Notes

On May 19, 2017, we issued in a private placement the Notes, which were guaranteed on a senior secured basis by our existing subsidiaries (the “Subsidiary Guarantors”). The Notes bear interest at a rate of 6.75% per year and mature on June 1, 2024, unless earlier redeemed or repurchased. Interest initially accrues on the Notes from May 19, 2017 and is payable semi-annually, in cash in arrears, on June 1 and December 1 of each year, commencing December 1, 2017.

The Notes and the ABL Facility are secured by liens on substantially all of our and the Subsidiary Guarantors’ assets, other than certain excluded assets. The ABL Facility has a first-priority lien on our and the Subsidiary Guarantor’s accounts receivable, inventory, deposit and securities accounts, certain real estate and related assets (the “ABL Priority Collateral”). The Notes are secured by a first-priority lien on substantially all other assets of ours and the Subsidiary Guarantors (the “Notes Priority Collateral”). There is no direct lien on our Federal Communications Commission (“FCC”) licenses to the extent prohibited by law or regulation.

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We may redeem the Notes, in whole or in part, at any time on or after June 1, 2020 at a price equal to 100% of the principal amount of the Notes plus a “make-whole” premium as of, and accrued and unpaid interest, if any, to, but not including, the redemption date. At any time on or after June 1, 2020, we may redeem some or all of the Notes at the redemption prices (expressed as percentages of the principal amount to be redeemed) set forth in the Notes, plus accrued and unpaid interest, if any, to, but not including, the redemption date. In addition, we may redeem up to 35% of the aggregate principal amount of the Notes before June 1, 2020 with the net cash proceeds from certain equity offerings at a redemption price of 106.75% of the principal amount plus accrued and unpaid interest, if any, to, but not including, the redemption date. We may also redeem up to 10% of the aggregate original principal amount of the Notes per twelve month period before June 1, 2020 at a redemption price of 103% of the principal amount plus accrued and unpaid interest to, but not including, the redemption date.

The indenture relating to the Notes (the “Indenture”) contains covenants that, among other things and subject in each case to certain specified exceptions, limit our ability and the ability of our restricted subsidiaries to: (i) incur additional debt; (ii) declare or pay dividends, redeem stock or make other distributions to stockholders; (iii) make investments; (iv) create liens or use assets as security in other transactions; (v) merge or consolidate, or sell, transfer, lease or dispose of substantially all of our assets; (vi) engage in transactions with affiliates; and (vii) sell or transfer assets.

The Indenture provides for the following events of default (each, an “Event of Default”): (i) default in payment of principal or premium on the Notes at maturity, upon repurchase, acceleration, optional redemption or otherwise; (ii) default for 30 days in payment of interest on the Notes; (iii) the failure by us or certain restricted subsidiaries to comply with other agreements in the Indenture or the Notes, in certain cases subject to notice and lapse of time; (iv) the failure of any guarantee by certain significant Subsidiary Guarantors to be in full force and effect and enforceable in accordance with its terms, subject to notice and lapse of time; (v) certain accelerations (including failure to pay within any grace period) of other indebtedness of ours or any restricted subsidiary if the amount accelerated (or so unpaid) is at least $15 million; (vi) certain judgments for the payment of money in excess of $15 million; (vii) certain events of bankruptcy or insolvency with respect to us or any significant subsidiary; and (vii) certain defaults with respect to any collateral having a fair market value in excess of $15 million. If an Event of Default occurs and is continuing, the Trustee or the holders of at least 25% in principal amount of the outstanding Notes may declare the principal of the Notes and any accrued interest on the Notes to be due and payable immediately, subject to remedy or cure in certain cases. Certain events of bankruptcy or insolvency are Events of Default which will result in the Notes being due and payable immediately upon the occurrence of such Events of Default.

We are required to pay $17.2 million per year in interest on the Notes. As of September 30, 2017, accrued interest on the Notes was $6.4 million.

We incurred debt issuance costs of $6.3 million that were recorded as a reduction of the debt proceeds that are being amortized to non-cash interest expense over the life of the Notes using the effective interest method. During the three and nine month periods ended September 30, 2017, $0.2 million and $0.3 million, respectively, of debt issuance costs associated with the Notes were recognized as interest expense.

Asset-Based Revolving Credit Facility

On May 19, 2017, the Company also entered into the ABL Facility pursuant to a Credit Agreement (the “Credit Agreement”) by and among us, as a borrower, our subsidiaries party thereto, as borrowers, Wells Fargo Bank, National Association, as administrative agent and lead arranger, and the lenders that are parties thereto. We used the proceeds of the ABL Facility, together with the net proceeds from the Notes offering, to repay outstanding borrowings under our previously existing senior credit facilities, and related fees and expenses. Going forward, the proceeds of the ABL Facility will be used to provide ongoing working capital and for other general corporate purposes (including permitted acquisitions).

The ABL Facility is a five-year $30.0 million revolving credit facility due May 19, 2022, which includes a $5.0 million subfacility for standby letters of credit and a $7.5 million subfacility for swingline loans. All borrowings under the ABL Facility accrue at a rate equal to a base rate or LIBOR rate plus a spread. The spread, which is based on an availability-based measure, ranges from 0.50% to 1.00% for base rate borrowings and 1.50% to 2.00% for LIBOR rate borrowings. If an event of default occurs, the interest rate may increase by 2.00% per annum. Amounts outstanding under the ABL Facility may be paid and then reborrowed at our discretion without penalty or premium. Additionally, we pay a commitment fee on the unused balance of 0.25% to 0.375% per year.

The ABL Facility is secured by a first-priority lien on the ABL Priority Collateral and by a second-priority lien on the Notes Priority Collateral. There is no direct lien on the Company’s FCC licenses to the extent prohibited by law or regulation (other than the economic value and proceeds thereof).

The Credit Agreement includes a springing fixed charge coverage ratio of 1.0 to 1.0, which is tested during the period commencing on the last day of the fiscal month most recently ended prior to the date on which Availability (as defined in the Credit Agreement) is less than the greater of 15% of the Maximum Revolver Amount (as defined in the Credit Agreement) and $4.5 million and continuing for a period of 60 consecutive days after the first day on which Availability exceeds such threshold amount. 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 the borrowers and their subsidiaries (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; (vii) to merge or consolidate with, or dispose of all assets to a third party, except as permitted thereby; (viii) to prepay indebtedness; and (ix) to pay dividends.

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The Credit Agreement provides for the following events of default: (i) default for non-payment of any principal or letter of credit reimbursement when due or any interest, fees or other amounts within five days of the due date; (ii) the failure by any borrower or any subsidiary to comply with any covenant or agreement contained in the Credit Agreement or any other loan document, in certain cases subject to applicable notice and lapse of time; (iii) any representation or warranty made pursuant to the Credit Agreement or any other loan document is incorrect in any material respect when made; (iv) certain defaults of other indebtedness of any borrower or any subsidiary of indebtedness of at least $10 million; (v) certain events of bankruptcy or insolvency with respect to any borrower or any subsidiary; (vi) certain judgments for the payment of money of $10 million or more; (vii) a change of control; and (viii) certain defaults relating to the loss of FCC licenses, cessation of broadcasting and termination of material station contracts. If an event of default occurs and is continuing, the Administrative Agent and the Lenders may accelerate the amounts outstanding under the ABL Facility and may exercise remedies in respect of the collateral.

We incurred debt issue costs of $0.6 million that were recorded as an asset and are being amortized to non-cash interest expense over the term of the ABL Facility using the effective interest method. During the three and nine month periods ended September 30, 2017, $63,000 and $86,000, respectively, of debt issue costs associated with the Notes were recognized as interest expense. At September 30, 2017, the blended interest rate on amounts outstanding under the ABL Facility was 2.98%.

We report outstanding balances on the ABL Facility as short-term regardless of the maturity date based on use of the ABL Facility to fund ordinary and customary operating cash needs with frequent repayments. We believe that our borrowing capacity under the ABL Facility allows us to meet our ongoing operating requirements, fund capital expenditures and satisfy our debt service requirements for at least the next twelve months.

Prior Term Loan B and Revolving Credit Facility

Our prior credit facility consisted of a term loan of $300.0 million (“Term Loan B”) and a revolving credit facility of $25.0 million (“Revolver”). The Term Loan B was issued at a discount for total net proceeds of $298.5 million. The discount was amortized to non-cash interest expense over the life of the loan using the effective interest method. For each of the three months ended September 30, 2017 and 2016, approximately $0 and $51,000, respectively, of the discount associated with the Term Loan B was recognized as interest expense. For each of the nine months ended September 30, 2017 and 2016, approximately $74,000 and $155,000, respectively, of the discount associated with the Term Loan B was recognized as interest expense.

The Term Loan B had a term of seven years, maturing in March 2020. On May 19, 2017, we used the net proceeds of the Notes and a portion of the ABL Facility to fully repay amounts outstanding under the Term Loan B of $258.0 million and under the Revolver of $4.1 million. We recorded a loss on the early retirement of long-term debt of $2.1 million, which included $1.5 million of unamortized debt issuance costs on the Term Loan B and the Revolver and $0.6 million of unamortized discount on the Term Loan B.

The following payments or prepayments of the Term Loan B were made during the year ended December 31, 2016 and through the date of the termination, including interest through the payment date as follows:

Date	Principal Paid		Unamortized Discount
	(Dollars in Thousands)
May 19, 2017	$	258,000	$	550
February 28, 2017		3,000		6
January 30, 2017		2,000		5
December 30, 2016		5,000		12
November 30, 2016		1,000		3
September 30, 2016		1,500		4
September 30, 2016		750		—
June 30, 2016		441		1
June 30, 2016		750		—
March 31, 2016		750		—
March 17, 2016		809		2

Debt issuance costs were 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 September 30, 2017 and 2016, approximately $0 and $140,000, respectively, of the debt issuance costs associated with the Term Loan B were recognized as interest expense. For each of the nine months ended September 30, 2017 and 2016, approximately $203,000 and $423,000 respectively, of the debt issuance costs associated with the Term Loan B were recognized as interest expense.

Debt issuance costs associated with the Revolver were recorded as an asset in accordance with ASU 2015-15. The costs were 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%. For each of the three month periods ended September 30, 2017 and 2016, we recorded amortization of deferred financing costs of approximately $0 and $17,000. For each of the nine month periods ended September 30, 2017 and 2016, we recorded amortization of deferred financing costs of approximately $26,000 and $52,000.

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Summary of long-term debt obligations

Long-term debt consisted of the following:

	As of December 31, 2016			As of September 30, 2017
	(Dollars in thousands)
6.75% Senior Secured Notes	$	—		$	255,000
Less unamortized debt issuance costs based on imputed interest rate of 7.08%		—			(6,004	)
6.75% Senior Secured Notes net carrying value		—			248,996
Asset-Based Revolving Credit Facility principal outstanding		—			6,629
Term Loan B principal amount		263,000			—
Less unamortized discount and debt issuance costs based on imputed interest rate of 4.78%		(2,371	)		—
Term Loan B net carrying value		260,629			—
Revolver principal outstanding		477			—
Capital leases and other loans		568			491
Long-term debt and capital lease obligations less unamortized debt issuance costs		261,674			256,116
Less current portion		(590	)		(6,741	)
Long-term debt and capital lease obligations less unamortized debt issuance costs, net of current portion	$	261,084		$	249,375

In addition to the outstanding amounts listed above, we also have interest payments related to our long-term debt as follows as of September 30, 2017:

· Outstanding borrowings of $6.6 million under the ABL Facility, with interest payments due at LIBOR plus 1.5% to 2.0% per annum;

· $255.0 million aggregate principal amount of Notes with semi-annual interest payments at an annual rate of 6.75%; and

· Commitment fee of 0.25% to 0.375% on the unused portion of the ABL Facility.

Other Debt

We have several capital leases related to office equipment. The obligation recorded at December 31, 2016 and September 30, 2017 represents the present value of future commitments under the capital lease agreements.

Maturities of Long-Term Debt and Capital Lease Obligations

Principal repayment requirements under all long-term debt agreements outstanding at September 30, 2017 for each of the next five years and thereafter are as follows:

	Amount
For the Twelve Months Ended September 30,	(Dollars in thousands)
2018	$	6,741
2019		108
2020		107
2021		121
2022		43
Thereafter		255,000
	$	262,120

NOTE 12. STOCK INCENTIVE PLAN

Our Amended and Restated 1999 Stock Incentive Plan (the “Plan”) provides for grants of equity-based awards to employees, non-employee directors and officers, and advisors of the company (“Eligible Persons”). The Plan is designed to promote the interests of the company using equity investment interests to attract, motivate, and retain individuals.

A maximum of 5,000,000 shares of common stock are authorized under the Plan. All awards have restriction periods tied primarily to employment and/or service. The Plan allows for accelerated or continued vesting in certain circumstances as defined in the Plan including death, disability, a change in control, and termination or retirement. The Board of Directors, or a committee appointed by the Board, has discretion subject to limits defined in the Plan, to modify the terms of any outstanding award.

Under the Plan, the Board, or a committee appointed by the Board, may impose restrictions on the exercise of awards during pre-defined blackout periods. Insiders may participate in plans established pursuant to Rule 10b5-1 under the Exchange Act that allow them to exercise awards subject to pre-established criteria.

We recognize non-cash stock-based compensation expense based on the estimated fair value of awards in accordance with FASB ASC Topic 718 “Compensation—Stock Compensation.” Stock-based compensation expense fluctuates over time as a result of the vesting periods for outstanding awards and the number of awards that actually vest. We adopted ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting” as of January 1, 2017. The adoption of this ASU did not materially impact our financial position, results of operations, or cash flows.

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The following table reflects the components of stock-based compensation expense recognized in the Condensed Consolidated Statements of Operations for the three and nine month periods ended September 30, 2017 and 2016:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2017			2016			2017
	(Dollars in thousands)
Stock option compensation expense included in corporate expenses	$	94		$	27		$	296		$	126
Restricted stock shares compensation expense included in corporate expenses		—			225			24			1,100
Stock option compensation expense included in broadcast operating expenses		19			7			67			41
Restricted stock shares compensation expense included in broadcast operating expenses		—			—			—			224
Stock option compensation expense included in digital media operating expenses		12			6			51			25
Restricted stock shares compensation expense included in digital media operating expenses		—			—			—			124
Stock option compensation expense included in publishing operating expenses		9			3			20			17
Restricted stock shares compensation expense included in publishing operating expenses		—			—			—			36
Total stock-based compensation expense, pre-tax	$	134		$	268		$	458		$	1,693
Tax benefit (expense) for stock-based compensation expense		(54	)		(107	)		(183	)		(677	)
Total stock-based compensation expense, net of tax	$	80		$	161		$	275		$	1,016

Stock Option and Restricted Stock Grants

Eligible employees may receive stock option awards annually with the number of shares and type of instrument generally determined by the employee’s salary grade and performance level. Incentive and non-qualified stock option awards allow the recipient to purchase shares of our common stock at a set price, not to be less than the closing market price on the date of award, for no consideration payable by the recipient. The related number of shares underlying the stock option is fixed at the time of the grant. Options generally vest over a four-year period with a maximum term of five years from the vesting date. In addition, certain management and professional level employees may receive stock option awards upon the commencement of employment.

The Plan also allows for awards of restricted stock, which have been granted periodically to non-employee directors of the company. Awards granted to non-employee directors are made in exchange for their services to the company as directors and therefore, the guidance in FASB ASC Topic 505-50 “Equity Based Payments to Non Employees” is not applicable. Restricted stock awards contain transfer restrictions under which they cannot be sold, pledged, transferred or assigned until the period specified in the award, generally from one to five years. Restricted stock awards are independent of option grants and are granted at no cost to the recipient other than applicable taxes owed by the recipient. The awards are considered issued and outstanding from the vest date of grant.

The fair value of each award is estimated as of the date of the grant using the Black-Scholes valuation model. The expected volatility reflects the consideration of the historical volatility of our common stock as determined by the closing price over a six to ten year term commensurate with the expected term of the award. Expected dividends reflect the amount of 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 have used historical data to estimate future forfeiture rates to apply against the gross amount of compensation expense determined using the valuation model. These estimates have approximated our actual forfeiture rates.

There were no stock options granted during the nine month period ended September 30, 2017. The weighted-average assumptions used to estimate the fair value of the stock options using the Black-Scholes valuation model were as follows for the three and nine month periods ended September 30, 2016:

	Three Months Ended	Nine Months Ended
	September 30, 2016	September 30, 2016
Expected volatility	n/a		47.03	%
Expected dividends	n/a		5.36	%
Expected term (in years)	n/a		7.4
Risk-free interest rate	n/a		1.64	%

Activity with respect to the company’s option awards during the nine month period ended September 30, 2017 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, 2017		1,720,000		$	5.12	$	2.89	4.5 years	$	2,428
Granted		—			—		—
Exercised		(122,413	)		4.09		2.04
Forfeited or expired		(143,125	)		5.85		2.99
Outstanding at September 30, 2017		1,454,462		$	5.18	$	2.95	3.9 years	$	2,292
Exercisable at September 30, 2017		954,959		$	5.63	$	3.76	2.9 years	$	1,146
Expected to Vest		474,278		$	5.19	$	2.97	3.9 years	$	1,115

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The aggregate intrinsic value represents the difference between the company’s closing stock price on September 30, 2017 of $6.60 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 nine month periods ended September 30, 2017 and 2016 was $0.9 million and $1.1 million, respectively.

As of September 30, 2017, there was $0.2 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 1.6 years.

On August 9, 2017, a restricted stock award of 33,066 shares was granted to an executive that vested immediately. The fair value of the restricted stock award was measured based on the grant date market price of our common shares and expensed as of the vesting date. The restricted stock award contains transfer restrictions under which they cannot be sold, pledged, transferred or assigned until three months from vesting date. The recipient of this restricted stock award is entitled to all of the rights of absolute ownership of the restricted stock from the date of grant, including the right to vote the shares and to receive dividends. Restricted stock awards are independent of option grants and are granted at no cost to the recipient other than applicable taxes owed by the recipient. The award is considered issued and outstanding from the vest date of grant.

On February 24, 2017, a restricted stock award of 178,592 shares was granted to certain members of management that vested immediately. The fair value of each restricted stock award was measured based on the grant date market price of our common shares and expensed as of the vesting date. These restricted stock awards contained transfer restrictions under which they could not be sold, pledged, transferred or assigned until three months from vesting date. Recipients of these restricted stock awards were entitled to all of the rights of absolute ownership of the restricted stock from the date of grant including the right to vote the shares and to receive dividends. Restricted stock awards are independent of option grants and are granted at no cost to the recipient other than applicable taxes owed by the recipient. The awards were considered issued and outstanding from the vest date of grant.

Activity with respect to the company’s restricted stock awards during the nine month period ended September 30, 2017 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, 2017		—		$	—	—	$	—
Granted		211,658			7.01	0.2 years		1,484
Lapse of restrictions		(178,592	)		7.05	—		1,259
Forfeited		—			—	—		—
Outstanding at September 30, 2017		33,066		$	6.80	0.2 years	$	225

NOTE 13. EQUITY TRANSACTIONS

We account for stock-based compensation expense in accordance with FASB ASC Topic 718, “Compensation-Stock Compensation.” As a result, $0.3 million and $1.7 million of non-cash stock-based compensation expense has been recorded to additional paid-in capital for the three and nine month periods ended September 30, 2017, respectively, in comparison to $0.1 million and $0.5 million for the three and nine month periods ended September 30, 2016, respectively.

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 and legal 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. In recent years, distributions have been approximately 20% of Adjusted EBITDA less cash paid for capital expenditures, less cash paid for income taxes, and less cash paid for interest. Adjusted EBITDA is a non-GAAP financial measure defined in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations included with this quarterly report on Form 10-Q. Future distributions, if any, are likely to be approximately 30% of Adjusted EBITDA less cash paid for capital expenditures, less cash paid for income taxes, and less cash paid for interest.

The following table shows distributions that have been declared and paid since January 1, 2016:

Announcement Date	Payment Date	Amount Per Share		Cash Distributed (in thousands)
September 12, 2017	September 29, 2017	$	0.0650	$	1,701
June 1, 2017	June 30, 2017	$	0.0650	$	1,697
March 9, 2017	March 30, 2017	$	0.0650	$	1,691
December 7, 2016	December 31, 2016	$	0.0650	$	1,678
September 9, 2016	September 30, 2016	$	0.0650	$	1,679
June 2, 2016	June 30, 2016	$	0.0650	$	1,664
March 10, 2016	April 5, 2016	$	0.0650	$	1,657

Based on the number of shares of Class A and Class B currently outstanding, we expect to pay total annual distributions of approximately $6.8 million during the year ended December 31, 2017.

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NOTE 14. 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. Restricted stock awards that vested immediately during the three month period ended March 31, 2017, were included in the weighted average number of common shares used to compute basic earnings per share because these restricted stock awards contained dividend participation and voting rights. 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 1,454,462 and 1,729,000 shares of Class A common stock were outstanding at September 30, 2017 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 September 30, 2017 and 2016 there were 335,682 and 367,940 dilutive shares, respectively.

NOTE 15. 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 the Term Loan B. Payments on the swap are due on a quarterly basis with a LIBOR floor of 0.625%. Pursuant to the terms, the swap was set to expire 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 were recognized in the current period statement of operations rather than through other comprehensive income. On May 19, 2017, in connection with our Refinancing, we paid $0.8 million to terminate the interest rate swap.

The following table summarizes the fair value of our derivative instruments that are measured at fair value:

	As of December 31, 2016		As of September 30, 2017
	(Dollars in thousands)
Fair value of interest rate swap	$	514	$	—

NOTE 16. 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 September 30, 2017, 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.

We have certain assets that are measured at fair value on a non-recurring basis that are adjusted to fair value only when the carrying values exceed the fair values. The categorization of the framework used to price the assets is considered Level 3 due to the subjective nature of the unobservable inputs used when estimating the fair value.

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The following table summarizes the fair value of our financial assets and liabilities that are measured at fair value:

	September 30, 2017
	Total Fair Value and Carrying Value on Balance		Fair Value Measurement Category
	Sheet		Level 1		Level 2		Level 3
	(Dollars in thousands)
Assets
Estimated fair value of other indefinite-lived intangible assets	$	313		—		—	$	313
Liabilities:
Estimated fair value of contingent earn-out consideration included in accrued expenses		38		—		—		38
Long-term debt and capital lease obligations less unamortized debt issuance costs		256,116		—		256,116		—

NOTE 17. INCOME TAXES

We recognize deferred tax assets and liabilities for future tax consequences attributable to differences between our consolidated financial statement carrying amount of assets and liabilities and their respective tax bases. We measure these deferred tax assets and liabilities using enacted tax rates expected to apply in the years in which these temporary differences are expected to reverse. We recognize the effect on deferred tax assets and liabilities resulting from a change in tax rates in income in the period that includes the date of the change. We recorded no adjustments to our unrecognized tax benefits as of September 30, 2017 and 2016.

We prospectively adopted ASU 2015-17, “Income Taxes, Balance Sheet Classification of Deferred Taxes” as of January 1, 2017. ASU 2015-17 requires that deferred tax assets and liabilities be classified as non-current on the balance sheet instead of separating the deferred tax assets and liabilities into current and non-current amounts. Our Condensed Consolidated Balance Sheet as of March 31, 2017 reflects the adoption of this guidance with a $9.4 million reduction in current deferred income tax assets, a $1.9 million increase in non-current deferred income tax assets and a $7.5 million reduction in non-current deferred income tax liabilities. Other than this revised presentation, the adoption of this ASU had no impact on our financial position, results of operations, or cash flows.

At December 31, 2016, we had net operating loss carryforwards for federal income tax purposes of approximately $150.7 million that expire in 2020 through 2034 and for state income tax purposes of approximately $1,021.2 million that expire in years 2017 through 2036. For financial reporting purposes at December 31, 2016 we had a valuation allowance of $4.5 million, net of federal benefit, to offset $4.2 million of the deferred tax assets related to the state net operating loss carryforwards and $0.3 million associated with asset impairments. Our evaluation was performed for tax years that remain subject to examination by major tax jurisdictions, which range from 2013 through 2016.

The amortization of our indefinite-lived intangible assets for tax purposes but not for book purposes creates deferred tax liabilities. A reversal of deferred tax liabilities may occur when indefinite-lived intangibles: (1) become impaired; or (2) are sold, which would typically only occur in connection with the sale of the assets of a station or groups of stations or the entire company in a taxable transaction. Due to the amortization for tax purposes and not book purposes of our indefinite-lived intangible assets, we expect to continue to generate deferred tax liabilities in future periods exclusive of any impairment losses in future periods. These deferred tax liabilities and net operating loss carryforwards result in differences between our provision for income tax and cash paid for taxes.

Valuation Allowance (Deferred Taxes)

For financial reporting purposes, we recorded a valuation allowance of $4.5 million as of September 30, 2017 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 18. 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.

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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. We filed an appeal against the award as well as a malpractice lawsuit against the lawyer that represented Salem in the collection lawsuit. A legal reserve of $0.5 million was recorded representing the total possible loss contingency without third party recoveries from our appeal, malpractice lawsuit or insurance claims. In March 2017, the case and all counterclaims were settled for a net amount of $0.3 million.

NOTE 19. 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. 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.

During the third quarter of 2016, we reclassed Salem Consumer Products, our e-commerce business that sells books, DVD’s and editorial content developed by our on-air personalities, from our Digital Media segment to our Broadcast segment. With this reclassification, all revenue and expenses generated by on-air hosts, including broadcast programs and e-commerce product sales are consolidated to assess the financial performance of each network program.

Our operating segments reflect how our chief operating decision makers, which we define as a collective group of senior executives, assess the performance of each operating segment and determine the appropriate allocations of resources to each segment. We continue to 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. Changes to our operating segments did not impact the reporting units used to test non-amortizable assets for impairment. All prior periods presented are updated to reflect the new composition of our operating segments. 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 September 30, 2017 and 2016 based on the new composition of our operating segments:

	Broadcast			Digital Media			Publishing			Unallocated Corporate Expenses			Consolidated
	(Dollars in thousands)
Three Months Ended September 30, 2017
Net revenue	$	48,424		$	10,446		$	6,563		$	—		$	65,433
Operating expenses		37,040			8,169			6,686			4,233			56,128
Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration and net (gain) loss on the sale or disposal of assets	$	11,384		$	2,277		$	(123	)	$	(4,233	)	$	9,305
Depreciation		1,920			792			159			211			3,082
Amortization		11			860			264			—			1,135
Change in the estimated fair value of contingent earn-out consideration		—			(12	)		—			—			(12	)
Net (gain) loss on the sale or disposal of assets		97			—			—			(2	)		95
Net operating income (loss)	$	9,356		$	637		$	(546	)	$	(4,442	)	$	5,005
Three Months Ended September 30, 2016
Net revenue	$	51,052		$	11,999		$	8,221		$	—		$	71,272
Operating expenses		37,434			9,172			8,020			4,147			58,773
Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration and net (gain) loss on the sale or disposal of assets	$	13,618		$	2,827		$	201		$	(4,147	)	$	12,499
Depreciation		1,753			840			174			209			2,976
Amortization		22			1,091			228			—			1,341
Change in the estimated fair value of contingent earn-out consideration		—			(13	)		(183	)		—			(196	)
Net (gain) loss on the sale or disposal of assets		(633	)		176			—			—			(457	)
Net operating income (loss)	$	12,476		$	733		$	(18	)	$	(4,356	)	$	8,835

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	Broadcast			Digital Media			Publishing			Unallocated Corporate Expenses			Consolidated
	(Dollars in thousands)
Nine Months Ended September 30, 2017
Net revenue	$	145,479		$	31,998		$	19,048		$	—		$	196,525
Operating expenses		108,807			25,241			18,705			13,183			165,936
Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration, impairments and net (gain) loss on the sale or disposal of assets	$	36,672			6,757		$	343		$	(13,183	)	$	30,589
Depreciation		5,668			2,389			515			599			9,171
Amortization		46			2,494			879			1			3,420
Change in the estimated fair value of contingent earn-out consideration		—			(54	)		—			—			(54	)
Impairment of indefinite-lived long-term assets other than goodwill		—			—			19			—			19
Net (gain) loss on the sale or disposal of assets		(399	)		—			(9	)		(2	)		(410	)
Net operating income (loss)	$	31,357		$	1,928		$	(1,061	)	$	(13,781	)	$	18,443
Nine Months Ended September 30, 2016
Net revenue	$	149,768		$	34,056		$	19,802		$	—		$	203,626
Operating expenses		109,455			26,815			19,951			11,928			168,149
Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration, impairments and net (gain) loss on the sale or disposal of assets	$	40,313		$	7,241		$	(149	)	$	(11,928	)	$	35,477
Depreciation		5,431			2,392			489			638			8,950
Amortization		67			3,233			372			1			3,673
Change in the estimated fair value of contingent earn-out consideration		—			(119	)		(339	)		—			(458	)
Impairment of long-lived assets		700			—			—			—			700
Net (gain) loss on the sale or disposal of assets		(2,175	)		182			(21	)		6			(2,008	)
Net operating income (loss)	$	36,290		$	1,553		$	(650	)	$	(12,573	)	$	24,620

	Broadcast		Digital Media		Publishing		Unallocated Corporate		Consolidated
	(Dollars in thousands)
As of September 30, 2017
Inventories, net	$	—	$	327	$	482	$	—	$	809
Property and equipment, net		86,187		6,603		1,326		8,087		102,203
Broadcast licenses		388,720		—		—		—		388,720
Goodwill		3,594		20,946		1,888		8		26,436
Other indefinite-lived intangible assets		—		—		313		—		313
Amortizable intangible assets, net		361		10,720		3,190		5		14,276
As of December 31, 2016
Inventories, net	$	—	$	300	$	370	$	—	$	670
Property and equipment, net		86,976		6,634		1,779		7,401		102,790
Broadcast licenses		388,517		—		—		—		388,517
Goodwill		3,581		20,136		1,888		8		25,613
Other indefinite-lived intangible assets		—		—		332		—		332
Amortizable intangible assets, net		407		9,927		4,069		5		14,408

NOTE 20. SUBSEQUENT EVENTS

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 on Form 10-Q and our audited Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2016. This discussion, as well as various other sections of this quarterly report, contains and refers to statements that constitute forward-looking statements, as defined under the Private Securities Litigation Reform Act of 1995. Such statements relate to our intent, belief or current expectations with respect to our future operating, financial and strategic performance that involve risks and uncertainties and are not guarantees of future performance.

Historical operating results are not necessarily indicative of future operating results. Actual future results may differ from those contained in or implied by the forward-looking statements as a result of various factors. These factors include, but are not limited to, risks and uncertainties relating to the need for additional funds to service our debt and to execute our business strategy, our ability to access borrowings under our ABL, reductions in revenue forecasts, our ability to renew our broadcast licenses, changes in interest rates, the timing of, our ability to complete any acquisitions or dispositions, costs and synergies resulting from the integration of any completed acquisitions, our ability to effectively manage costs, our ability to drive and manage growth, the popularity of radio as a broadcasting and advertising medium, changes in consumer tastes, the impact of general economic conditions in the United States or in specific markets in which we do business, industry conditions, including existing competition and future competitive technologies and cancellation, disruptions or postponements of advertising schedules in response to national or world events, our ability to generate revenues from new sources, including local commerce and technology-based initiatives, the impact of regulatory rules or proceedings that may affect our business from time to time, the future write off of any material portion of the fair value of our FCC broadcast licenses and goodwill, and other risk factors described from time to time in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2016 and any subsequently filed Forms 10-Q and Forms 8-K. Many of these risks and uncertainties are beyond our control, and the unexpected occurrence or failure to occur of any such events or matters could significantly alter our actual results of operations or financial condition.

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. Refer to Note 4 of our Condensed Consolidated Financial Statements for details of each of these transactions.

Salem Media Group, Inc. (“Salem”) is a domestic multimedia company specializing in Christian and conservative content, with media properties comprising radio broadcasting, digital media, and publishing. Effective February 19, 2015, we changed our name from Salem Communications Corporation to Salem Media Group, Inc. 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 SEC. The information 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 also qualify as reportable segments. Our operating segments reflect how our chief operating decision makers, which we define as a collective group of senior executives, assess the performance of each operating segment and determine the appropriate allocations of resources to each segment. We continually review our operating segment classifications to align with operational changes in our business and may make changes as necessary.

During the third quarter of 2016, we reclassed Salem Consumer Products, our e-commerce business that sells books, DVD’s and editorial content developed by our on-air personalities, from Digital Media to Broadcast to assess the performance of each network program based on all revenue sources. Changes to our operating segments did not impact the reporting units used to test non-amortizable assets for impairment. All prior periods presented are updated to reflect the new composition of our operating segments. Refer to Note 19 – Segment Data in the notes to our Condensed Consolidated financial statements contained in Item 1 of this quarterly report on Form 10-Q for additional information.

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 revenue 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, including podcasts and programs;

· the sale of banner advertisements on our station websites or on our mobile applications;

· the sale of digital streaming advertisements on our station websites or on our mobile applications;

· the sale of advertisements included in digital newsletters;

· fees earned for creating custom web pages or social media promotions on behalf of our advertisers;

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

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

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

· audience share;

· how well our stations and digital platform perform for our clients;

· the size of the market and audience reached;

· the number of impressions delivered;

· the number of page views achieved;

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

· the general economic conditions in each market; and

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

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Our principal sources of digital media revenue include:

· the sale of digital banner advertisements on our websites and mobile applications;

· the sale of digital streaming advertisements on websites and mobile applications;

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

· the sale of advertisements included in digital newsletters;

· the digital delivery of newsletters to subscribers;

· the number of video and graphic downloads; and

· the sale and delivery of wellness products.

Our principal sources of publishing revenue include:

· the sale of books and e-books;

· subscription fees for our print magazine;

· the sale of print magazine advertising;

· the sale of digital advertising on our magazine websites and digital newsletters; and

· publishing fees from authors.

Broadcasting

Our foundational business is radio broadcasting, which includes the ownership and operation of radio stations in large metropolitan markets. We also own and operate Salem Radio Network® (“SRN”), SRN News Network (“SNN”), Today’s Christian Music (“TCM”), Singing News Network (formerly Solid Gospel Network), and Salem Media Representatives^TM (“SMR”). SRN, SNN, TCM 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 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 format commercial radio stations.

Our five main formats are (1) Christian Teaching and Talk, (2) News Talk, (3) Contemporary Christian Music, (4) Spanish Language Christian Teaching and Talk and (5) Business.

Christian Teaching and Talk. We currently program 43 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 more than 30 years on-air. Over the last five years, block-programming revenue has generated 40% to 43% 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 SRN to radio stations throughout the United States. Syndication of our programs allows Salem to reach audiences in markets in which we do not own or operate radio stations.

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 the listener base for CCM 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 while Christian Teaching and Talk stations are primarily national.

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Business. We currently program 13 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.

Nielsen Audio uses the Portable People Meter ^TM (“PPM^”) technology to collect data for its ratings service. PPM is a small device that is capable of automatically measuring radio, television, Internet, satellite radio and satellite television signals encoded by the broadcaster. The PPM offers a number of advantages over traditional diary ratings collection systems, including ease of use, more reliable ratings data, shorter time periods between when advertising runs and actual listening data, and little manipulation of data by users. A disadvantage of the PPM includes data fluctuations from changes to the “panel” (a group of individuals holding PPM devices). This makes all stations susceptible to some 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 under listener purchase programs. We minimize the use of barter agreements with our general policy being not to preempt airtime paid for in cash for airtime sold under a barter agreement. During the nine month period ended September 30, 2017, 98% of our broadcast revenue was sold for cash compared to 97% during the same period of the prior year.

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 network incurs 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. Our digital media-based businesses provide Christian, conservative, investing and health-themed content, e-commerce, audio and video streaming, and other resources digitally through the web. Salem Web Network™ (“SWN”) websites include Christian content websites: OnePlace.com, Christianity.com, Crosswalk.com®, GodVine.com, GodTube.com, CrossCards.com, LightSource.com, Jesus.org, BibleStudyTools.com, iBelieve.com, CCMmagazine.com and ChristianHeadlines.com. Our conservative opinion websites, collectively known as Townhall Media, include Townhall.com™, HotAir.com, Twitchy.com, HumanEvents.com, RedState.com, and BearingArms.com. We also publish digital newsletters through Eagle Financial Publications, which provide market analysis and non-individualized investment strategies from financial commentators on a subscription basis.

Our church e-commerce websites, including WorshipHouseMedia.com, SermonSpice.com, SermonSearch.com, ChurchStaffing.com, and ChristianJobs.com, offer a variety of digital resources including videos, song tracks, sermon archives and job listings to pastors and Church leaders.

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E-commerce also includes Eagle Wellness, which is a seller of nutritional supplements.

The revenues generated from this segment are reported as digital media revenue in our Condensed Consolidated Statements of Operations included in 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 products sold and the number of 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 on which the Easter holiday is observed, as this holiday generates a higher volume of product 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 by our digital media 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 e-commerce sites.

Publishing

Our publishing operations include book publishing through Regnery Publishing, print magazines and our self-publishing services. 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 the Singing News^® magazine and operates a website specifically designed for this print magazine. The website has digital banner advertisements, streaming, links to purchase goods featured by advertisers, and links to our other digital media sites. Salem Author Services includes Xulon Press™ and Mill City Press which offer print-on-demand self-publishing services for authors. We acquired Mill City Press from Hillcrest Publishing Group, Inc., on August 1, 2016. Xulon Press™ publishes books for Christian authors while Mill City Press publishes books for all general market publications.

The revenues generated from this segment are reported as publishing revenue in our Condensed Consolidated Statements of Operations included in 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 published. Regnery Publishing revenue is impacted by elections as it generates higher levels of interest and demand for publications containing conservative and political based opinions.

The primary operating expenses incurred by our Publishing 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; and (iv) cost of goods sold that includes printing and production costs, fulfillment costs, author royalties and inventory reserves.

KNOWN TRENDS AND UNCERTAINTIES

Broadcast revenue growth remains challenged, which we believe is due to several factors, including increasing competition from other forms of content distribution and time spent listening by audio streaming services, podcasts and satellite radio. This increase in competition and mix of radio listening time may lead advertisers to conclude that the effectiveness of radio has diminished. To minimize the impact of these factors, we continue to enhance our digital assets to complement our broadcast content. We also support industry initiatives to increase the number of smartphones and other wireless devices that contain an enabled FM tuner as well as provide initiatives for wireless carriers in the United States to permit these FM tuners to receive the free over-the-air local radio stations.

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Our broadcast revenues are particularly dependent on advertising from our Los Angeles and Dallas markets, which generated 15.3% and 19.3%, respectively, of our net broadcast advertising revenue for the nine month period ended September 30, 2017.

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 has been a growth area for us, decreases in digital revenue streams could adversely affect our operating results, financial condition and results of operations. Digital revenue is impacted by the nature and delivery of page views. We have experienced a shift in the number of page views from desktop devices to mobile devices. While mobile page views have increased dramatically, they carry a lower number of advertisements per page which are generally sold at lower rates. Digital media revenue is impacted by page views and the number of advertisements per page. Declines in desktop page views impact revenue as mobile devices carry lower rates and less advertisement per page. 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. Same Station is a Non-GAAP financial measure used both in presenting our results to stockholders and the investment community as well as in our internal evaluations and management of the business. We believe that Same Station Operating Income provides 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 Income is 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 Income is not necessarily comparable to similarly titled measures reported by other companies. Refer to “NON-GAAP FINANCIAL MEASURES” presented after our results of operations for a reconciliation of these non-GAAP performance measures to the most comparable GAAP measures.

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 Income includes 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 Income for a full calendar year is calculated as the sum of the Same Station results for each of the four quarters of that year.

Reclassifications

During the three months ended September 30, 2017, we reclassified certain revenue streams within our digital media operating segment and certain revenue streams within our publishing operating segment to conform to the current period presentation.

RESULTS OF OPERATIONS

Three months ended September 30, 2017 compared to the three months ended September 30, 2016

The following factors affected our results of operations and cash flows for the three months ended September 30, 2017 as compared to the same period of the prior year:

Financing

· On May 19, 2017, we closed on a private offering of $255.0 million aggregate principal amount of 6.75% senior secured notes due 2024 (the “Notes”) and concurrently entered into a five-year $30.0 million senior secured asset-based revolving credit facility. The net proceeds from the offering of the Notes, together with borrowings under the ABL Facility, were used to repay outstanding borrowings, including accrued and unpaid interest, on our previously existing senior credit facilities consisting of a term loan (“Term Loan B”) and a revolving credit facility of $25.0 million (“Revolver”), and to pay fees and expenses incurred in connection with the Notes offering and the ABL Facility (collectively, the “Refinancing”). As a result of this refinancing, we made no prepayments of principal during the three month period ended September 30, 2017, as compared to the same period of the prior year.

Acquisitions

· On September 15, 2017, we closed on the acquisition of real property, including the land, towers and facilities, of radio station WSPZ-AM in Bethesda, Maryland for $1.5 million in cash.

· On August 31, 2017, we acquired the TeacherTube.com website and related assets for $1.1 million in cash.

· On August 31, 2017, we acquired the Intelligence Report newsletter and related assets valued at $2.5 million and we assumed deferred subscription liabilities of $2.9 million. We paid no cash to the seller upon closing.

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· On July 24, 2017, we closed on the acquisition of the FM translator construction permit in Eaglemount, Washington, for $40,000 in cash. The FM translator will be relocated to the Portland, Oregon market for use by our KDZR-AM radio station.

· On July 6, 2017, we acquired the TradersCrux.com website and related assets for $0.3 million in cash. As part of the purchase agreement, we may pay up to an additional $0.1 million in contingent earn-out consideration within one year upon the achievement of income benchmarks. Using a probability-weighted discounted cash flow model based on our own assumptions as to the ability of TradersCrux.com to achieve the income targets at the time of closing, we estimated the fair value of the contingent earn-out consideration to be $18,750, which approximates the discounted present value due to the earn-out of less than one year.

Net Broadcast Revenue

	Three Months Ended September 30,
	2016		2017		Change $			Change %			2016			2017
	(Dollars in thousands)										% of Total Net Revenue
Net Broadcast Revenue	$	51,052	$	48,424	$	(2,628	)		(5.1	)%		71.6	%		74.0	%
Same Station Net Broadcast Revenue	$	50,670	$	48,321	$	(2,349	)		(4.6	)%

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

	Three Months Ended September 30,
	2016				2017
	(Dollars in thousands)
Block program time:
National	$	12,425	24.3	%	$	12,014	24.8	%
Local		9,137	17.9			8,640	17.8
		21,562	42.2			20,654	42.6
Broadcast Advertising:
National		3,300	6.5			3,325	6.9
Local		16,098	31.5			14,341	29.6
		19,398	38.0			17,666	36.5
Station Digital		1,734	3.4			1,639	3.4
Infomercials		741	1.5			605	1.2
Network		4,723	9.2			4,558	9.4
Other Revenue		2,894	5.7			3,302	6.8
Net Broadcast Revenue	$	51,052	100.0	%	$	48,424	100.0	%

In late August 2017, our Houston broadcast market was impacted by Hurricane Harvey followed by Hurricane Irma in early September that impacted our Miami, Tampa and Orlando broadcast markets. We estimate total lost revenues from both storms to be approximately $0.1 million across all broadcast markets impacted, which includes orders that were cancelled in anticipation of the storms and losses for programs and advertisements that could not broadcast due to the loss of power.

The net decline in block programming revenue of $0.9 million includes a $0.6 million decline in programming on our Christian Teaching stations, a $0.3 million decline in programming on our Business format stations, and a decline of $0.2 million decline in programming previously generated from our Louisville market, that was partially offset by a $0.2 million increase in programming on our News Talk format stations. Declines in programming, particularly at the local level, resulted from program cancellations that we believe are due to increased competition from other broadcasters. Declines in national programming revenue reflect the non-renewal of a program that was featured on 19 of our Christian Teaching and Talk stations and declines in business programs as they pursue content that remains in compliance with securities rules and regulations. There were no changes in programming rates as compared to the same period of the prior year, however our programming rates may be impacted in the future due to this increased competition.

Advertising revenue, net of agency commissions, declined by $1.7 million, of which $0.6 million was due to political advertising that was recognized during the third quarter of 2016 based on the elections cycle. The remaining $1.1 million decline includes a $1.0 million decline in local advertising on our CCM stations, particularly in our Dallas market, due to lower ratings and an increase in competition from other advertisers and a $0.2 million decline in local advertising on our Christian Teaching and Talk format stations. These declines resulted from increased competition from other broadcasters and agencies that reduce the number of advertisements placed. This can, in turn, create lower demand and lower rates. We have undertaken efforts to retool our music, image and promotions to capture a younger demographic that we believe will improve the ratings for our CCM stations in the Dallas market. We are beginning to see some improved ratings but it will take additional time to turn the improved ratings into improved revenue.

Digital revenue generated from our radio station and network websites declined by $0.1 million due to the number of political related digital campaigns during the third quarter of 2016 based on the elections cycle. Rates charged were consistent with those during the same period of the prior year.

Declines in infomercial revenue reflect our effort to feature programming that is tailored to our audience and consistent with our company values. We continue to seek alternatives to infomercial programs that we believe are not of interest to our audience.

Network revenue decreased $0.2 million due to due to the number of political related campaigns during the third quarter of 2016 based on the elections cycle. Rates charged were consistent with those during the same period of the prior year.

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Other revenue increased $0.4 million due to a $0.2 million increase in event revenue due to higher attendance and ticket sales for local events such as concerts and speaking events, a $0.1 million increase in listener purchase program revenue from a higher audience demand with respect to participation in sales incentives and discount programs and $0.1 million increase in broadcast tower rental fees.

On a Same Station basis, net broadcast revenue decreased $2.3 million, which reflects these items net of the impact of stations that were acquired or are operating under different formats.

Net Digital Media Revenue 

	Three Months Ended September 30,
	2016		2017		Change $			Change %			2016			2017
	(Dollars in thousands)										% of Total Net Revenue
Net Digital Media Revenue	$	11,999	$	10,446	$	(1,553	)		(12.9	)%		16.8	%		16.0	%

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

	Three Months Ended September 30,
	2016				2017
	(Dollars in thousands)
Digital Advertising, net	$	7,305	60.9	%	$	6,111	58.5	%
Digital Streaming		1,103	9.2			1,107	10.6
Digital Subscriptions		1,561	13.0			1,646	15.8
Digital Downloads		1,111	9.2			950	9.1
e-commerce		600	5.0			545	5.2
Other Revenues		319	2.7			87	0.8
Net Digital Media Revenue	$	11,999	100.0	%	$	10,446	100.0	%

Digital advertising revenue, net of agency commissions, declined by $1.2 million on a consolidated basis. This decline was attributable to lower page views on our conservative opinion websites, primarily Townhall Media, as compared to the same period of the prior year due to the timing of the 2016 election and a reduction in political advertisements. Page views for conservative opinion websites are typically higher during election years due to higher level of interest in content, for both desktop and mobile devices. Changes in the Facebook newsfeed algorithm have negatively impacted the volume of our desktop page views. Page views from Facebook declined 22.0% as compared to the same period of the prior year. To offset declines in page views generated from Facebook, we have continued to develop and promote the use of mobile applications, particularly for our Christian mobile applications. As mobile page views carry fewer advertisements and typically have shorter site visits, our growth in mobile application generated traffic is larger than our growth in revenue.

Digital streaming revenue was consistent with that of the same period of the prior year with no changes in sales volume or rates.

Digital subscription revenue increased $0.1 million due to higher distribution levels including additional subscriptions from acquisitions including Turner Investment Products in September of 2016 and Intelligence Reporter in August of 2017 that were partially offset by declines in the number of subscribers to Skousen’s Five Star Trader and Fast Money Alert newsletters. There were no changes in subscription rates as compared to the same period of the prior year.

Digital download revenue decreased $0.2 million due to a lower volume of downloads as compared to the same period of the prior year due in part to content featured during 2016 that covered the 15^th anniversary of the September 11^th terrorist attacks. There were no changes in rates charged to our customers for digital downloads as compared to the same period of the prior year.

E-commerce revenue declined by $0.1 million due to discounts offered on products sold through our wellness website. The average price per unit declined 17% while the number of products sold increased 10.0%. The discounts result from increased competition in the online market place that is driving prices down.

Other revenue includes miscellaneous sources such as event revenue, revenue sharing arrangements for purchases made from applications, and mail list rentals. The decrease of $0.2 million reflects the impact of a Townhall and Red State Gathering event held during third quarter of 2016 leading up to the presidential election.

Net Publishing Revenue

	Three Months Ended September 30,
	2016		2017		Change $			Change %			2016			2017
	(Dollars in thousands)										% of Total Net Revenue
Net Publishing Revenue	$	8,221	$	6,563	$	(1,658	)		(20.2	)%		11.5	%		10.0	%

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

	Three Months Ended September 30,
	2016					2017
	(Dollars in thousands)
Book Sales	$	6,410		78.0	%	$	5,633		85.8	%
Estimated Sales Returns & Allowances		(1,645	)	(20.0	)		(1,595	)	(24.3	)
E-Book Sales		755		9.2			621		9.5
Self-Publishing Fees		1,634		19.9			1,096		16.7
Print Magazine Subscriptions		327		4.0			287		4.4
Print Magazine Advertisements		272		3.3			183		2.8
Digital Advertising		217		2.6			106		1.6
Other Revenue		251		3.0			232		3.5
Net Publishing Revenue	$	8,221		100.0	%	$	6,563		100.0	%

On a consolidated basis, book sales declined by $0.8 million due to a reduction in the number of print books sold by Regnery Publishing based on a lower number of release dates within the period. Book sales from Salem Author Services, our self-publishing operations of Xulon Press and Mill City Press, were consistent with the same period of the prior year. The decrease in sales from Regnery Publishing reflects a 17% reduction in sales volume that was partially offset by a 4% increase in the average price per unit sold. Within Salem Author Services, consolidated sales includes a $0.2 million increase in sales from Mill City Press offset by a $0.2 million decline in sales from Xulon Press™. These results include the impact of Hurricane Irma, which resulted in delays in production due to the loss of power in the Orlando area. We estimate the impact to be approximately $0.2 million of revenue for the three months ended September 30, 2017. There were no changes in rates charged as compared to the same period of the prior year. Sales of Regnery Publishing books are directly attributable to the composite mix of titles released and available in each period. Revenues can vary significantly based on the book release date and the number of titles that achieve bestseller lists, which can increase awareness and demand for a book.

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The $0.1 million decrease in estimated sales returns and allowances resulted from lower sales of Regnery Publishing print books, a reduction in the historical average return rate for Regnery Political books, and a reduction to the reserve for backlist titles.

Regnery Publishing e-book sales decreased $0.1 million due to a 30% decrease in the average sales price per unit in addition to a 33% decrease in the number of books sold. E-book sales can also vary based on the composite mix of titles released and available in each period. Revenues vary significantly based on the book release date and the number of titles that achieve bestseller lists, which can increase awareness and demand for the book.

Self-publishing fees decreased overall by $0.5 million due to a decline of $0.6 million from a lower sales volume for Xulon Press™ that was offset by a $0.1 million increase in volume from Mill City Press, which was acquired on August 1, 2016. There were no changes in fees charged to our customers as compared to the same period of the prior year. We believe that our ability to cross-promote our self-publishing services to authors interested in Regnery Publishing provides us with ongoing growth potential.

Declines in print magazine subscription and print magazine advertising revenue are due to the continual decline within this business and our planned reduction in the number of print publications produced. We ceased publishing Preaching Magazine^™, YouthWorker Journal^™, FaithTalk Magazine^™ and Homecoming® The Magazine as of the May 2017 publication due to continual declines in the number of subscribers. Lower demand and distribution levels resulted in corresponding declines in advertising revenues.

Digital adverting revenue decreased $0.1 million due to the closure of the Salem Publishing Homecoming website and transfer of the Preaching.com and Youthworker.com websites to our Salem Web Network division with the ceasing of publications of these print magazines. There were no changes in sales volume or rates.

Broadcast Operating Expenses

	Three Months Ended September 30,
	2016		2017		Change $			Change %			2016			2017
	(Dollars in thousands)										% of Total Net Revenue
Broadcast Operating Expenses	$	37,434	$	37,040	$	(394	)		(1.1	)%		52.5	%		56.6	%
Same Station Broadcast Operating Expenses	$	37,013	$	36,938	$	(75	)		(0.2	)%

Broadcast operating expenses declined by $0.4 million including a $0.7 million reduction in employee related expenses including sales-based commissions and incentives consistent with lower revenues that was offset by a $0.3 million increase in bad debt expense.

On a same-station basis, broadcast operating expenses decreased by $0.1 million. The decrease in broadcast operating expenses on a same station basis reflects these items net of the impact of start-up costs associated with acquisitions of $0.1 million and $0.4 million associated with the Louisville market.

Digital Media Operating Expenses

	Three Months Ended September 30,
	2016		2017		Change $			Change %			2016			2017
	(Dollars in thousands)										% of Total Net Revenue
Digital Media Operating Expenses	$	9,172	$	8,169	$	(1,003	)		(10.9	)%		12.9	%		12.5	%

Digital media operating expense declined by $1.0 million due to a $0.3 million reduction in sales-based commissions and incentives consistent with lower revenues, a $0.2 million decline royalty fees, a $0.2 million reduction in travel and entertainment costs, a $0.1 million decrease in professional services, and a $0.1 million combined reduction in facility related expenses and advertising costs.

Publishing Operating Expenses

	Three Months Ended September 30,
	2016		2017		Change $			Change %			2016			2017
	(Dollars in thousands)										% of Total Net Revenue
Publishing Operating Expenses	$	8,020	$	6,686	$	(1,334	)		(16.6	)%		11.3	%		10.2	%

Publishing operating expenses declined by $1.3 million of which $0.6 million was due to lower payroll related expenses and $0.6 million related to a lower consolidated cost of goods sold. Cost of goods sold includes a $0.7 million decline for Regnery Publishing based on a reduction in the number of books sold and a $0.1 million decline for Salem Publishing, which reduced the number of print publications produced, offset by a $0.2 million increase from a higher sales volume for Salem Author Services. The gross profit margin for Regnery Publishing was 55% for the three months ended September 30, 2017 as compared to 49% for the same period of the prior year as declines in sales volume resulted in comparable savings in material costs. Regnery Publishing margins are impacted by the volume of e-book sales, which have higher margins due to the nature of delivery and lack of sales returns and allowances. The gross profit margin for our self-publishing entities was 20% for the three months ended September 30, 2017, as compared to 36% for the same period of the prior year due to higher material costs, including paper costs associated with sales of print-on-demand books.

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Unallocated Corporate Expenses

	Three Months Ended September 30,
	2016		2017		Change $		Change %			2016			2017
	(Dollars in thousands)									% of Total Net Revenue
Unallocated Corporate Expenses	$	4,147	$	4,233	$	86		2.1	%		5.8	%		6.5	%

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. The increase of $0.1 million reflects the non-cash stock-based compensation charge associated with a restricted stock award and a $0.1 million increase in net payroll related costs associated with higher staffing levels and annual pay increases that were offset by a $0.1 million decline in legal fees.

Depreciation Expense

	Three Months Ended September 30,
	2016		2017		Change $		Change %			2016			2017
	(Dollars in thousands)									% of Total Net Revenue
Depreciation Expense	$	2,976	$	3,082	$	106		3.6	%		4.2	%		4.7	%

Depreciation expense increased $0.1 million compared to the same period of the prior year. The increase reflects the impact of recent capital expenditures associated with computer software and office equipment that have shorter estimated useful lives than towers and broadcast assets. There were no changes in our depreciation methods or in the estimated useful lives of our asset groups.

Amortization Expense

	Three Months Ended September 30,
	2016		2017		Change $			Change %			2016			2017
	(Dollars in thousands)										% of Total Net Revenue
Amortization Expense	$	1,341	$	1,135	$	(206	)		(15.4	)%		1.9	%		1.7	%

Amortization expense decreased by $0.2 million compared to the same period of the prior year. Increases in amortization associated with acquisitions, including Cycle Prophet and Mill City Press in September 2016, were offset with a reductions due to intangible assets acquired with Eagle Publishing and WorshipHouseMedia.com that were fully amortized as of June 30, 2017. There were no changes in our amortization methods or the estimated useful lives of our intangible asset groups.

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

	Three Months Ended September 30,
	2016			2017			Change $		Change %			2016			2017
	(Dollars in thousands)											% of Total Net Revenue
Change in the Estimated Fair Value of Contingent Earn-Out Consideration	$	(196	)	$	(12	)	$	184		(93.9	)%		(0.3	)%		—	%

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 ended September 30, 2017, we decreased the estimated fair value of our contingent earn-out liabilities by $12,000 compared to a net decrease of $196,000 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.

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.

Net (Gain) Loss on the Sale or Disposal of Assets

	Three Months Ended September 30,
	2016			2017		Change $		Change %			2016			2017
	(Dollars in thousands)										% of Total Net Revenue
Net (Gain) Loss on the Sale or Disposal of Assets	$	(457	)	$	95	$	552		(120.8	)%		(0.6	)%		0.1	%

The net loss on the sale or disposal of assets of $0.1 million for the three month period ended September 30, 2017 includes $77,000 related to transmitter equipment in Dallas, Texas that is no longer in use and in addition to various other fixed asset disposals. We recorded a net loss of $2,000 for equipment damaged in our Tampa, Florida market as a result of hurricane Irma in September 2017.

The net gain on the sale or disposal of assets of $0.5 million for the three month period ended September 30, 2016 includes a $0.7 million gain from a land easement in our South Carolina market offset by $0.2 million in various fixed asset disposals.

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Other Income (Expense)

	Three Months Ended September 30,
	2016			2017			Change $			Change %			2016			2017
	(Dollars in thousands)												% of Total Net Revenue
Interest Income	$	1		$	1		$	—			—	%		—	%		—	%
Interest Expense		(3,726	)		(4,802	)		(1,076	)		28.9	%		(5.2	)%		(7.3	)%
Change in the Fair Value of Interest Rate Swap		856			—			(856	)		(100.0	)%		1.2	%		—	%
Loss on Early Retirement of Long-Term Debt		(18	)		—			18			(100.0	)%		—	%		—	%
Net Miscellaneous Income and (Expenses)		7			(80	)		(87	)		(1,242.9	)%		—	%		(0.1	)%

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 prior to termination, and non-cash accretion associated with deferred installments and contingent earn-out consideration associated with our acquisition activity. The increase of $1.1 million reflects the Notes and ABL outstanding as of the period ending September 30, 2017 with interest payable in December 2017, as compared to the Term Loan B and Revolver during the same period of the prior year.

The $0.9 million decline in the fair value of interest rate swap reflects the termination of our swap agreement on May 19, 2017, as comparted to the mark-to-market fair value adjustment during the same period of the prior year.

There was no loss on early retirement of long-term debt as compared to the same period of the prior year when a repayment was made on our then outstanding Term Loan B.

Net miscellaneous income and expenses includes royalty income and usage fees for real estate properties. During the three months ending September 30, 2017, we recorded a non-recurring loss of $78,000 on an investment.

Provision for Income Taxes

	Three Months Ended September 30,
	2016		2017		Change $			Change %			2016			2017
	(Dollars in thousands)										% of Total Net Revenue
Provision for Income Taxes	$	3,763	$	170	$	(3,593	)		(95.5	)%		5.3	%		0.3	%

Our provision for income taxes decreased $3.6 million to $0.2 million from $3.8 million for the same period of the prior year due to the $1.6 million out-of-period adjustment recognized at September 30, 2016 and the impact of our current period tax analysis that reflects pre-tax operating income of $0.1 million. The provision for income taxes as a percentage of income before income taxes, or the effective tax rate was 137.9% for the three months ended September 30, 2017 compared to 63.2% 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. The effective tax rate for the current period of 137.9% is based on the operating results and the impact of non-deductible expenses, changes in the valuation allowance and discrete tax items. Net income before income taxes for the three months ended September 30, 2017 was $0.1 million; the tax adjustments (excluding discrete tax items) amounted to $117,000; and discrete items including incentive stock options, non-qualified stock options, and restricted stock, amounted to $53,000.

Net Income (Loss)

	Three Months Ended September 30,
	2016		2017			Change $			Change %			2016			2017
	(Dollars in thousands)											% of Total Net Revenue
Net Income (Loss)	$	2,192	$	(46	)	$	(2,238	)		(102.1	)%		3.1	%		(0.1	)%

We recognized a net loss of $46,000 for the three month period ended September 30, 2017 compared to net income $2.2 million during the same period of the prior year. Net operating income decreased by $3.8 million due to a $5.8 million decline in net revenue that was offset by a $2.0 million decline in operating expenses. The impact of our operating results resulted in a $3.6 million decrease in our provision for income taxes that was offset by a $1.1 million increase in interest expense and the $0.8 million favorable impact of our interest rate swap on the prior year.

Nine months ended September 30, 2017 compared to the nine months ended September 30, 2016

The following factors affected our results of operations and cash flows for the nine months ended September 30, 2017 as compared to the same period of the prior year:

Financing

· On May 19, 2017, we closed on a private offering of Notes and concurrently entered into the ABL Facility. The net proceeds from the offering of the Notes, together with borrowings under the ABL Facility, were used to repay outstanding borrowings, including accrued and unpaid interest, on our previously existing senior credit facilities consisting of the Term Loan B Revolver, and to pay fees and expenses incurred in connection with the Notes offering and the ABL Facility.

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· On February 28, 2017, we repaid $3.0 million in principal on the Term Loan B and paid interest due as of that date. We recorded a $6,200 pre-tax loss on the early retirement of long-term debt related to the unamortized discount and $18,000 in unamortized debt issuance costs associated with the principal repayment.

· On January 30, 2017, we repaid $2.0 million in principal on the Term Loan B and paid interest due as of that date. We recorded a $4,500 pre-tax loss on the early retirement of long-term debt related to the unamortized discount and $12,000 in unamortized debt issuance costs associated with the principal repayment.

Acquisitions

· On September 15, 2017, we closed on the acquisition of real property, including the land, towers and facilities, of radio station WSPZ-AM in Bethesda, Maryland for $1.5 million in cash.

· On August 31, 2017, we acquired the TeacherTube.com website and related assets for $1.1 million in cash.

· On August 31, 2017, we acquired the Intelligence Report newsletter and related assets valued at $2.5 million and we assumed deferred subscription liabilities of $2.9 million. We paid no cash to the seller upon closing.

· On July 24, 2017, we closed on the acquisition of the FM translator construction permit in Eaglemount, Washington, for $40,000 in cash. The FM translator will be relocated to the Portland, Oregon market for use by our KDZR-AM radio station.

· On July 6, 2017, we acquired the TradersCrux.com website and related assets for $0.3 million in cash. As part of the purchase agreement, we may pay up to an additional $0.1 million in contingent earn-out consideration within one year upon the achievement of income benchmarks. Using a probability-weighted discounted cash flow model based on our own assumptions as to the ability of TradersCrux.com to achieve the income targets at the time of closing, we estimated the fair value of the contingent earn-out consideration to be $18,750, which approximates the discounted present value due to the earn-out of less than one year.

· On June 28, 2017, we closed on the acquisition of an FM translator construction permit in Festus, Missouri for $40,000 in cash. The FM translator will be relocated to the St. Louis, Missouri market for use by our KXFN-FM radio station.

· On June 8, 2017, we acquired a Portuguese Bible mobile application for $85,000 in cash. We may pay up to an additional $20,000 in contingent earn-out consideration over the next twelve months based on the achievement of certain revenue benchmarks.

· On March 15, 2017, we acquired the website prayers-for-special-help.com for $0.2 million in cash.

· On March 14, 2017, we closed on the acquisition of an FM translator construction permit in Quartz Site, Arizona for $20,000 in cash. The FM translator will be relocated to the San Diego, California market for use by our KPRZ-AM radio station.

· On March 1, 2017, we closed on the acquisition of an FM translator construction permit in Roseburg, Oregon for $45,000 in cash. The FM translator will be relocated to the Portland, Oregon market for use by our KPDQ-AM radio station.

· On January 16, 2017, we closed on the acquisition of an FM translator in Astoria, Oregon for $33,000 in cash. The FM translator will be relocated to the Seattle, Washington market for use by our KGNW-AM radio station.

· On January 6, 2017, we closed on the acquisition of an FM translator construction permit in Mohave Valley, Arizona for $20,000 in cash. The FM translator will be relocated to the San Diego, California market for use by our KCBQ-AM radio.

Net Broadcast Revenue

	Nine Months Ended September 30,
	2016		2017		Change $			Change %			2016			2017
	(Dollars in thousands)										% of Total Net Revenue
Net Broadcast Revenue	$	149,768	$	145,479	$	(4,289	)		(2.9	)%		73.6	%		74.0	%
Same Station Net Broadcast Revenue	$	148,523	$	144,848	$	(3,675	)		(2.5	)%

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

	Nine Months Ended September 30,
	2016				2017
	(Dollars in thousands)
Block program time:
National	$	36,881	24.6	%	$	36,439	25.0	%
Local		27,151	18.1			25,852	17.8
		64,032	42.7			62,291	42.8
Broadcast Advertising:
National		9,724	6.5			9,961	6.8
Local		47,792	31.9			43,365	29.8
		57,516	38.4			53,326	36.6
Station Digital		5,036	3.4			5,239	3.6
Infomercials		1,957	1.3			1,821	1.3
Network		12,930	8.6			13,198	9.1
Other Revenue		8,297	5.6			9,604	6.6
Net Broadcast Revenue	$	149,768	100.0	%	$	145,479	100.0	%

In late August 2017, our Houston broadcast market was impacted by Hurricane Harvey followed by Hurricane Irma in early September that impacted our Miami, Tampa and Orlando broadcast markets. We estimate total lost revenues from both storms to be approximately $0.1 million across all broadcast markets impacted, which includes orders cancelled in anticipation of the storms and losses for programs and advertisements that could not broadcast due to the loss of power.

The net decline in block programming revenue of $1.7 million includes a $1.3 million decline in programming on our Christian Teaching and Talk stations, a $0.5 million decline in programming on our Business stations and a $0.6 million decline programming previously generated from our Louisville market, which was offset by a $0.8 million increase programming on our News Talk stations. Declines, particularly from local programming, resulted from cancellations that we believe are due to increased competition from other broadcasters. Declines in national programming revenue reflect the non-renewal of a program that was featured on 19 of our Christian Teaching and Talk stations and declines in business programs as they pursue content that remains in compliance with securities rules and regulations. There were no changes in programming rates as compared to the same period of the prior year, however rates may be impacted in the future due to this increased competition for programming dollars.

Advertising revenue, net of agency commissions, decreased by $4.2 million of which $1.5 million was due to political advertising that was recognized during 2016 based on the elections cycle. The remaining $2.7 million decrease includes a $2.2 million decline in local advertising on our CCM stations, particularly in our Dallas market due to lower ratings and from higher competition from other broadcasters and a $0.6 million decrease in local advertising on our Christian Teaching and Talk stations. Higher competition from other broadcasters and agencies reduce the number of advertisements placed that in turns creates lower demand and lower rates, particularly for unsold spots. We have undertaken efforts to retool our music, image and promotions to capture a younger demographic that we believe will improve the ratings for our CCM stations in the Dallas market. We are beginning to see some improved ratings but it will take additional time to turn the improved ratings into improved revenue.

Digital revenue generated from our radio station and network websites increased $0.2 million, which reflects an increase in sales of licensed products through Salem Consumer Products. There were no changes in rates as compared to the same period of the prior year.

Declines in infomercial revenue reflect our effort to feature programming that is tailored to our audience and consistent with our company values. We continue to seek alternatives to infomercial programs that we believe are not of interest to our audience.

Network revenue increased by $0.3 million, including a $0.6 million increase from a revenue share agreement and a $0.2 million increase in advertising sales with our national talk shows that we believe is attributable to our increased exposure and media presence during the 2016 presidential debates that were offset by a $0.5 million decline in political advertising revenue based on the 2016 election cycle.

Other revenue increased $1.3 million due to a $0.7 million increase in listener purchase program revenue from a higher audience demand with respect to participation in sales incentives and discount programs, a $0.5 million increase in event revenue due to higher attendance and ticket sales for local events such as concerts and speaking events, and a $0.1 million increase in broadcast tower rental fees.

On a Same Station basis, net broadcast revenue decreased $3.7 million, which reflects these items net of the impact of stations that were acquired or are operating under different formats.

Net Digital Media Revenue

	Nine Months Ended September 30,
	2016		2017		Change $			Change %			2016			2017
	(Dollars in thousands)										% of Total Net Revenue
Net Digital Media Revenue	$	34,056	$	31,998	$	(2,058	)		(6.0	)%		16.7	%		16.3	%

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

	Nine Months Ended September 30,
	2016				2017
	(Dollars in thousands)
Digital Advertising, Net	$	19,727	57.9	%	$	18,391	57.5	%
Digital Streaming		3,360	9.9			3,371	10.5
Digital Subscriptions		4,550	13.3			4,766	14.9
Digital Downloads		4,118	12.1			3,644	11.4
e-commerce		1,799	5.3			1,558	4.9
Other Revenue		502	1.5			268	0.8
Net Digital Media Revenue	$	34,056	100.0	%	$	31,998	100.0	%

Digital advertising revenue, net of agency commissions, declined by $1.3 million on a consolidated basis. This decline was attributable to lower page views on our conservative opinion websites, primarily Townhall Media, as compared to the same period of the prior year due to the timing of the 2016 election. Page views for conservative opinion websites are typically higher during election years due to higher level of interest in content, both desktop and mobile. Changes in the Facebook newsfeed algorithm have negatively impacted the volume of our desktop page views. Page views from Facebook declined 25.4% as compared to the same period of the prior year. To offset declines in page views generated from Facebook, we have continued to develop and promote the use of mobile applications, particularly for our Christian mobile applications. As mobile page views carry fewer advertisements and typically have shorter site visits, our growth in mobile application generated traffic is larger than our growth in revenue.

Digital streaming revenue was consistent with the prior year with no changes in sales volume or rates.

Digital subscription revenue increased by $0.2 million due to higher distribution levels from acquisitions including Retirement Watch and Turner Investment Products in 2016 and Intelligence Reporter in August of 2017, that were partially offset by a decline in the number of subscribers to Skousen’s Five Star Trader and Fast Money Alert newsletters. There were no changes in subscriber rates as compared to the same period of the prior year.

Digital download revenue declined by $0.5 million due to a lower volume of downloads generated as compared to the same period of the prior year. Of this decline, $0.3 million was attributable to WorshipHouseMedia.com and $0.2 million was attributable to SermonSpice.com. Declines in downloads of third-party produced videos are common throughout the industry as users become more adept at creating their own content. We believe that our content is unique and valuable and that the number of downloads of our content will not be impacted as severely by user created content. In addition, there was a lower volume of downloads as compared to the same period of the prior year due in part to content in 2016 that covered the 15^th anniversary of the September 11^th terrorist attacks. There were no changes in rates charged to our customers for digital downloads as compared to the same period of the prior year.

E-commerce revenue declined by $0.2 million due to discounts offered on products sold through our wellness website. The average price per unit declined 15% with a 2% decline in the number of products sold. The discounts result from increased competition in the online market place that is driving prices down.

Other revenue includes event revenue, revenue sharing arrangements for purchases made from applications, and mail list rentals. The decrease of $0.2 million reflects the impact of a Townhall and Red State Gathering event held during third quarter of 2016 leading up to the presidential election.

Net Publishing Revenue

	Nine Months Ended September 30,
	2016		2017		Change $			Change %			2016			2017
	(Dollars in thousands)										% of Total Net Revenue
Net Publishing Revenue	$	19,802	$	19,048	$	(754	)		(3.8	)%		9.7	%		9.7	%

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

	Nine Months Ended September 30,
	2016					2017
	(Dollars in thousands)
Book Sales	$	14,242		71.9	%	$	13,594		71.4	%
Estimated Sales Returns & Allowances		(4,082	)	(20.6	)		(2,969	)	(15.6	)
E-Book Sales		1,712		8.7			1,463		7.7
Self-Publishing Fees		4,680		23.6			3,972		20.8
Print Magazine Subscriptions		1,087		5.5			892		4.7
Print Magazine Advertisements		726		3.7			605		3.2
Digital Advertising		583		2.9			545		2.8
Other Revenue		854		4.3			946		5.0
Net Publishing Revenue	$	19,802		100.0	%	$	19,048		100.0	%

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On a consolidated basis, book sales declined by $0.6 million due to a $1.9 million decline in book sales from Regnery Publishing that were offset by a $1.2 million increase in book sales from Salem Author Services, our self-publishing operations of Xulon Press and Mill City Press. Regnery Publishing book sales declined 16% in volume with a 1% reduction in the average price per unit sold. The $1.2 million increase in book sales generated from Salem Author Services included a $1.1 million increase from Mill City Press, which we acquired on August 1, 2016, and a $0.1 million increase in book sales from Xulon Press™. These results include the impact of Hurricane Irma, which resulted in delays in production due to the loss of power in the Orlando area. We estimate the impact to be approximately $0.2 million of revenue for the three months ended September 30, 2017. There were no changes in rates charged as compared to the same period of the prior year. Sales of books through Regnery Publishing are directly attributable to the number of titles released each period and the composite mix of titles. Revenues can vary significantly based on the book release date and the number of titles that achieve bestseller lists, which can increase awareness and demand for the book.

The $1.1 million decrease in estimated sales returns and allowances resulted from lower sales of Regnery Publishing print books, a reduction in the historical average return rate for Regnery Political books and a reduction to the reserve associated with backlist titles.

Regnery Publishing e-book sales decreased $0.2 million due to a decrease in sales volume of 6% and a decrease of 18% in the average price per unit sold. E-book sales can also vary based on the composite mix of titles released and available in each period. Revenues can vary significantly based on the book release date and the number of titles that achieve bestseller lists, which can increase awareness and demand for the book.

Self-publishing fees decreased $0.7 million which includes a $1.3 million decline in sales volume from Xulon Press™ that was offset by a $0.6 million increase in sales volume from Mill City Press, which was acquired in August 2016. There were no changes in self-publishing fees charged to authors as compared to the same period of the prior year. We believe that our ability to cross-promote our self-publishing services to authors interested in Regnery Publishing provides us with ongoing growth potential.

Declines in print magazine subscription and print magazine advertising revenue are due to the continual decline within this business and our planned reduction in the number of print publications produced. We ceased publishing Preaching Magazine^™, YouthWorker Journal^™, FaithTalk Magazine^™ and Homecoming® The Magazine as of the May 2017 publication due to continual declines in the number of subscribers. Lower demand and distribution levels resulted in corresponding declines in advertising revenues.

Digital adverting revenue decreased $38,000 due to the closure of the Salem Publishing Homecoming website and transfer of the Preaching.com and Youthworker.com websites to our Salem Web Network division with the ceasing of publications of these print magazines. There were no changes in sales volume or rates.

Other revenue consists of miscellaneous sources such as change fees, trailers and website revenues. The increase of $0.1 million was generated by Mill City Press that was acquired on August 1, 2016.

Broadcast Operating Expenses

	Nine Months Ended September 30,
	2016		2017		Change $			Change %			2016			2017
	(Dollars in thousands)										% of Total Net Revenue
Broadcast Operating Expenses	$	109,455	$	108,807	$	(648	)		(0.6	)%		53.8	%		55.4	%
Same Station Broadcast Operating Expenses	$	108,144	$	107,964	$	(180	)		(0.2	)%

Broadcast operating expenses declined by $0.6 million including a $0.9 million reduction in sales-based commissions and incentives consistent with lower revenues, a $0.7 million favorable litigation matter, and a $0.3 million decline in music license fees, that were offset by a $0.7 million increase in bad debt expense, a $0.4 million increase in payroll related costs associated with higher personnel levels and annual rate increases, and a $0.2 million increase in non-cash stock-based compensation expense.

On a same-station basis, broadcast operating expenses decreased by $0.2 million. The decrease in broadcast operating expenses on a same station basis reflects these items net of the impact of start-up costs associated with acquisitions and format changes and the impact of the Louisville market LMA.

Digital Media Operating Expenses

	Nine Months Ended September 30,
	2016		2017		Change $			Change %			2016			2017
	(Dollars in thousands)										% of Total Net Revenue
Digital Media Operating Expenses	$	26,815	$	25,241	$	(1,574	)		(5.9	)%		13.2	%		12.8	%

Digital media operating expenses declined by $1.6 million due to a $0.6 million reduction in sales-based commissions and incentives, a $0.4 million reduction in advertising and promotion costs, a $0.4 million reduction in royalties and a $0.3 million decrease in travel and entertainment costs that were offset by a $0.1 million increase in bad debt expenses.

Publishing Operating Expenses

	Nine Months Ended September 30,
	2016		2017		Change $			Change %			2016			2017
	(Dollars in thousands)										% of Total Net Revenue
Publishing Operating Expenses	$	19,951	$	18,705	$	(1,246	)		(6.2	)%		9.8	%		9.5	%

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Publishing operating expenses declined by $1.2 million of which $0.6 million was due to a reduction in the consolidated cost of goods sold. Cost of goods sold reflects a $1.4 million decline for Regnery Publishing based on a reduction in the number of books sold and a $0.2 million decline for Salem Publishing, which reduced the number of print publications produced, offset by a $1.0 million increase in the cost of goods sold for Salem Author Services. The gross profit margin for Regnery Publishing was 52% for the nine months ended September 30, 2017 as compared to 48% for the same period of the prior year. Regnery Publishing margins are impacted by the volume of e-book sales, which have higher margins due to the nature of delivery and lack of sales returns and allowances. The gross profit margin for our self-publishing entities was 27% for the nine months ended September 30, 2017 as compared to 31% for the same period of the prior year due to higher paper costs. In addition, there was a $0.7 million decline in payroll related expenses and a $0.2 million decline in travel and entertainment expenses that were offset by a $0.3 million increase in advertising and promotion expenses.

Unallocated Corporate Expenses

	Nine Months Ended September 30,
	2016		2017		Change $		Change %			2016			2017
	(Dollars in thousands)									% of Total Net Revenue
Unallocated Corporate Expenses	$	11,928	$	13,183	$	1,255		10.5	%		5.9	%		6.7	%

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. The net increase of $1.3 million includes a $0.9 million non-cash stock-based compensation charge associated with restricted stock awards and a $0.5 million increase in net payroll related costs due to higher staffing levels and annual rate increases that were offset by a $0.2 million decrease professional fees.

Impairment of Long-Lived Assets

	Nine Months Ended September 30,
	2016		2017		Change $			Change %			2016			2017
	(Dollars in thousands)										% of Total Net Revenue
Impairment of Long-Lived Assets	$	700	$	—	$	(700	)		(100.0	)%		0.3	%		—	%

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 continued to market the land for sale and had no intention to use the land in our operations, we had not received successful offers. Based on the amount of time that the land had 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. In August 2017, we received an escrow deposit under an agreement to sell the land in Covina, California for $1.0 million dollars. The land is recorded in assets held for sale and has not been used in operations. The sale is subject to the buyer’s ability complete due diligence on their expected use of the land and is currently expected to close in the latter half of 2020.

Impairment of Indefinite-Lived Long-Term Assets Other Than Goodwill

	Nine Months Ended September 30,
	2016		2017		Change $		Change %			2016			2017
	(Dollars in thousands)									% of Total Net Revenue
Impairment of Indefinite-Lived Long-Term Assets Other Than Goodwill	$	—	$	19	$	19		100.0	%		—	%		—	%

We reviewed magazine mastheads for impairment at June 30, 2017 based on management’s plan to cease publishing Preaching Magazine^™, YouthWorker Journal^™, FaithTalk Magazine^™ and Homecoming® The Magazine upon issuance of the May 2017 issues. We have received purchase offers from third parties interested in acquiring the rights to continue publishing Preaching Magazine^™, but we have not closed on or agreed to final terms. Because of the likelihood that these print magazines would be sold or otherwise disposed of before the end of their previously estimated life, we performed impairment tests as of March 31, 2017. Due to reductions in forecasted operating cash flows and indications of interest from potential buyers, we then recorded an impairment charge of $19,000 associated with mastheads.

Depreciation Expense

	Nine Months Ended September 30,
	2016		2017		Change $		Change %			2016			2017
	(Dollars in thousands)									% of Total Net Revenue
Depreciation Expense	$	8,950	$	9,171	$	221		2.5	%		4.4	%		4.7	%

Depreciation expense increased $0.2 million compared to the same period of the prior year. The increase reflects the impact of recent capital expenditures associated with computer software and office equipment that have shorter estimated useful lives than towers and broadcast assets. There were no changes in our depreciation methods or in the estimated useful lives of our asset groups.

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Amortization Expense

	Nine Months Ended September 30,
	2016		2017		Change $			Change %			2016			2017
	(Dollars in thousands)										% of Total Net Revenue
Amortization Expense	$	3,673	$	3,420	$	(253	)		(6.9	)%		1.8	%		1.7	%

The decline in amortization expense reflects the impact of the intangible assets acquired with Eagle Publishing and WorshipHouseMedia.com that were fully amortized as during 2017, compared to generating amortization expense of $0.9 million during the prior year that were offset with the $0.6 million amortization of intangible assets acquired related to 2016 acquisitions of Cycle Prophet in September 2016 and Mill City Press in September 2016. There were no changes in our amortization methods or in the estimated useful lives of our intangible asset groups.

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

	Nine Months Ended September 30,
	2016			2017			Change $		Change %			2016			2017
	(Dollars in thousands)											% of Total Net Revenue
Change in the Estimated Fair Value of Contingent Earn-Out Consideration	$	(458	)	$	(54	)	$	404		(88.2	)%		(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 nine month period ended September 30, 2017, we decreased the estimated fair value of our contingent earn-out liabilities by $54,000 compared to a net decrease of $458,000 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.

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.

Net Gain on the Sale or Disposal of Assets

	Nine Months Ended September 30,
	2016			2017			Change $		Change %			2016			2017
	(Dollars in thousands)											% of Total Net Revenue
Net Gain on the Sale or Disposal of assets	$	(2,008	)	$	(410	)	$	1,598		(79.6	)%		(1.0	)%		(0.2	)%

The net gain on the sale or disposal of assets of $0.4 million for the nine month period ended September 30, 2017 includes a $0.5 million gain from the sale of a former transmitter site in our Dallas, Texas market and a $16,000 net gain from disposals within our print magazine segment that was offset a $77,000 loss related to transmitter equipment in Dallas, Texas that is no longer in use in addition to various other fixed asset disposals. We recorded a net loss of $2,000 for equipment damaged in our Tampa, Florida market as a result of hurricane Irma in September 2017.

The net gain on the sale or disposal of assets of $2.0 million for the nine month period ended September 30, 2016 includes a $1.9 million gain on the sale of our Miami tower site and $0.7 million gain from a land easement in our South Carolina market offset by a $0.4 million charge associated with the relocation of our offices in the Washington D.C. market and various losses from fixed asset disposals.

Other Income (Expense)

	Nine Months Ended September 30,
	2016			2017			Change $			Change %			2016			2017
	(Dollars in thousands)												% of Total Net Revenue
Interest Income	$	4		$	3		$	(1	)		(25.0	)%		—	%		—	%
Interest Expense		(11,252	)		(12,156	)		(904	)		8.0	%		(5.5	)%		(6.2	)%
Change in the Fair Value of Interest Rate Swap		(1,325	)		357			1,682			(126.9	)%		(0.7	)%		0.2	%
Loss on Early Retirement of Long-Term Debt		(32	)		(2,775	)		(2,743	)		8,571.9	%		—	%		(1.4	)%
Net Miscellaneous Income and (Expenses)		7			(80	)		(87	)		(1,242.9	)%		—	%		—	%

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

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Interest expense includes interest due on outstanding debt balances, interest due on our swap agreement prior to termination, and non-cash accretion associated with deferred installments and contingent earn-out consideration associated with our acquisition activity. The increase of $0.9 million reflects the Notes outstanding as of the period ending September 30, 2017 with interest payable in December 2017, as compared to the Term Loan B during the same period of the prior year.

The $1.7 million favorable impact of change in the fair value of interest rate swap reflects the mark-to-market impact prior to the termination of our swap agreement on May 19, 2017. There was no loss on early retirement of long-term debt as compared to the same period of the prior year when a repayment was made on our then outstanding Term Loan B.

Loss on early retirement of long-term debt reflects $0.6 million of the unamortized discount and $1.5 million of unamortized debt issuance costs associated with the payoff and termination of the Term Loan B on May 19, 2017, $0.1 million of unamortized debt issuance costs associated with the Revolver terminated on May 19, 2017, and a $0.6 million loss to exit and terminate our swap agreement on May 19, 2017, as well as $41,000 of the unamortized discount and unamortized debt issuance costs associated with prior principal redemptions of the Term Loan B.

Net miscellaneous income and expenses includes royalty income and usage fees for real estate properties. During the nine months ending September 30, 2017, we recorded a non-recurring loss of $78,000 on an investment.

Provision for Income Taxes

	Nine Months Ended September 30,
	2016		2017		Change $			Change %			2016			2017
	(Dollars in thousands)										% of Total Net Revenue
Provision for Income Taxes	$	6,121	$	1,506	$	(4,615	)		(75.4	)%		3.0	%		0.08	%

Our provision for income taxes decreased $4.6 million to $1.5 million for the nine months ended September 30, 2017 compared to $6.1 million for the same period of the prior year due to the $1.6 million out-of-period adjustment recognized at September 30, 2016 and the impact of our current period tax analysis that reflects pre-tax operating income of $0.1 million with no changes in our annualized tax adjustments. The provision for income taxes as a percentage of income before income taxes, or the effective tax rate was 39.7% for the nine months ended September 30, 2017 compared to 50.9% 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 (Loss)

	Nine Months Ended September 30,
	2016		2017		Change $			Change %			2016			2017
	(Dollars in thousands)										% of Total Net Revenue
Net Income (Loss)	$	5,901	$	2,286	$	(3,615	)		(61.3	)%		2.9	%		1.2	%

We recognized net income of $2.3 million for the nine month period ended September 30, 2017 compared to $5.9 million in the same period of the prior year. The $3.6 million decline includes a $6.2 million decline in net operating income, a $2.7 million increase in loss on the early retirement of long-term debt, and a $0.9 million increase in interest expense offset by a $4.6 million decrease in our provision for income taxes and a $1.7 million favorable impact of the change in fair value of our interest rate swap.

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 financial measures should not be considered as a substitute for or superior to the most directly comparable financial measures as reported in accordance with GAAP.

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”), Same Station net broadcast revenue, Same Station broadcast operating expenses, Same Station Operating Income, Digital Media Operating Income, and Publishing Operating Income (Loss), 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 financial measures are intended to provide management and investors a more complete understanding of our underlying operational results, trends and performance.

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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 measures 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 Income includes 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 Income for a full calendar year is calculated as the sum of the Same Station-results for each of the four quarters of that year. We use Same Station Operating Income, 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 Income provides 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 Income is 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 net broadcast revenue, Same Station broadcast operating expenses and Same Station Operating Income 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 less digital media operating expenses. Publishing Operating Income (Loss) is defined as net publishing revenue less publishing operating expenses. Digital Media Operating Income and Publishing Operating Income (Loss) are not measures of performance in accordance with GAAP. Our presentations of these non-GAAP financial 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 Operating Income (Loss) 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 (Loss) are not necessarily comparable to similarly titled measures reported by other companies.

We define EBITDA as net income before interest, taxes, depreciation, and amortization. We define Adjusted EBITDA as EBITDA before net gains or losses on the sale or disposal of assets, before changes in the estimated fair value of contingent earn-out consideration, before gains on bargain purchases, before the change in fair value of interest rate swaps, before impairments, before net miscellaneous income and expenses, before loss on early retirement of long-term debt, before (gain) loss from discontinued operations and before 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.

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

We use non-GAAP financial 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 most directly comparable measures reported in accordance with GAAP.

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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

In the tables below, we present a reconciliation of net broadcast revenue, the most comparable GAAP measure, to Same Station net broadcast revenue, and broadcast operating expenses, the most comparable GAAP measure to Same Station broadcast operating expense. We show our calculation of Station Operating Income and Same Station Operating Income, which is reconciled from net income, the most comparable GAAP measure and our calculation of Digital Media Operating Income and Publishing Operating Income (Loss). Our presentation of these non-GAAP measures are not to be considered a substitute for or superior to the most directly comparable measures reported in accordance with GAAP.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2017			2016			2017
	(Dollars in thousands)
Reconciliation of Net Broadcast Revenue to Same Station Net Broadcast Revenue
Net broadcast revenue	$	51,052		$	48,424		$	149,768		$	145,479
Net broadcast revenue – acquisitions		―			(58	)		—			(398	)
Net broadcast revenue – dispositions		(382	)		(45	)		(1,187	)		(131	)
Net broadcast revenue – format change		―			―			(58	)		(102	)
Same Station net broadcast revenue	$	50,670		$	48,321		$	148,523		$	144,848
Reconciliation of Broadcast Operating Expenses To Same Station Broadcast Operating Expenses
Broadcast operating expenses	$	37,434		$	37,040		$	109,455		$	108,807
Broadcast operating expenses – acquisitions		(9	)		(102	)		(9	)		(635	)
Broadcast operating expenses – dispositions		(412	)		―			(1,214	)		(102	)
Broadcast operating expenses – format change		―			―			(88	)		(106	)
Same Station broadcast operating expenses	$	37,013		$	36,938		$	108,144		$	107,964
Reconciliation of Station Operating Income to Same Station Operating Income
Station Operating Income	$	13,618		$	11,384		$	40,313		$	36,672
Station operating (income) loss –acquisitions		9			44			9			237
Station operating (income) loss – dispositions		30			(45	)		27			(29	)
Station operating (income) loss – format change		―			―			30			4
Same Station – Station Operating Income	$	13,657		$	11,383		$	40,379		$	36,884

In the table below, we present our calculations of Station Operating Income, Digital Media Operating Income and Publishing Operating Income (Loss). 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						Nine Months Ended
	September 30,						September 30,
	2016			2017			2016			2017
	(Dollars in thousands)
Calculation of Station Operating Income, Digital Media Operating Income and Publishing Operating Income (Loss)
Net broadcast revenue	$	51,052		$	48,424		$	149,768		$	145,479
Less broadcast operating expenses		(37,434	)		(37,040	)		(109,455	)		(108,807	)
Station Operating Income	$	13,618		$	11,384		$	40,313		$	36,672
Net digital media revenue	$	11,999		$	10,446		$	34,056		$	31,998
Less digital media operating expenses		(9,172	)		(8,169	)		(26,815	)		(25,241	)
Digital Media Operating Income	$	2,827		$	2,277		$	7,241		$	6,757
Net publishing revenue	$	8,221		$	6,563		$	19,802		$	19,048
Less publishing operating expenses		(8,020	)		(6,686	)		(19,951	)		(18,705	)
Publishing Operating Income (Loss)	$	201		$	(123	)	$	(149	)	$	343

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In the table below, we present a reconciliation of net income, the most directly comparable GAAP measure to Station Operating Income, Digital Media Operating Income and Publishing Operating Income (Loss). Our presentation of these non-GAAP performance indicators are not to be considered a substitute for or superior to the most directly comparable measures reported in accordance with GAAP.

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2016			2017			2016			2017
	(Dollars in thousands)
Reconciliation of Net Income (Loss) to Operating Income and Station Operating Income, Digital Media Operating Income and Publishing Operating Income (Loss)
Net income (Loss)	$	2,192		$	(46	)	$	5,901		$	2,286
Plus provision for income taxes		3,763			170			6,121			1,506
Plus loss on early retirement of long-term debt		18			―			32			2,775
Plus change in fair value of interest rate swap		(856	)		―			1,325			(357	)
Plus interest expense, net of capitalized interest		3,726			4,802			11,252			12,156
Less interest income		(1	)		(1	)		(4	)		(3	)
Less net miscellaneous (income) and expenses		(7	)		80			(7	)		80
Net operating income	$	8,835		$	5,005		$	24,620		$	18,443
Less net (gain) loss on the sale or disposal of assets		(457	)		95			(2,008	)		(410	)
Less change in the estimated fair value of contingent earn-out consideration		(196	)		(12	)		(458	)		(54	)
Plus impairment of long-lived assets		―			―			700			―
Plus impairment of indefinite-lived long-term assets other than goodwill		―			―			―			19
Plus depreciation and amortization		4,317			4,217			12,623			12,591
Plus unallocated corporate expenses		4,147			4,233			11,928			13,183
Combined Station Operating Income, Digital Media Operating Income and Publishing Operating Income (Loss)	$	16,646		$	13,538		$	47,405		$	43,772
Station Operating Income	$	13,618		$	11,384		$	40,313		$	36,672
Digital Media Operating Income		2,827			2,277			7,241			6,757
Publishing Operating Income (Loss)		201			(123	)		(149	)		343
	$	16,646		$	13,538		$	47,405		$	43,772

In the table below, we present a reconciliation of Adjusted EBITDA to EBITDA to Net Income, the most directly comparable GAAP measure. EBITDA and Adjusted EBITDA are non-GAAP financial performance measures that are not to be considered a substitute for or superior to the most directly comparable measures reported in accordance with GAAP.

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2016			2017			2016			2017
	(Dollars in thousands)
Reconciliation of Adjusted EBITDA to EBITDA to Net Income (Loss)
Net income (loss)	$	2,192		$	(46	)	$	5,901		$	2,286
Plus interest expense, net of capitalized interest		3,726			4,802			11,252			12,156
Plus provision for income taxes		3,763			170			6,121			1,506
Plus depreciation and amortization		4,317			4,217			12,623			12,591
Less interest income		(1	)		(1	)		(4	)		(3	)
EBITDA	$	13,997		$	9,142		$	35,893		$	28,536
Less net (gain) loss on the sale or disposal of assets		(457	)		95			(2,008	)		(410	)
Less change in the estimated fair value of contingent earn-out consideration		(196	)		(12	)		(458	)		(54	)
Plus impairment of long-lived assets		―			―			700			―
Plus impairment of indefinite-lived long-term assets other than goodwill		―			―			―			19
Plus changes the fair value of interest rate swap		(856	)		―			1,325			(357	)
Plus net miscellaneous (income) and expenses		(7	)		80			(7	)		80
Plus loss on early retirement of long-term debt		18			―			32			2,775
Plus non-cash stock-based compensation		134			268			458			1,693
Adjusted EBITDA	$	12,633		$	9,573		$	35,935		$	32,282

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.

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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.

Goodwill, Broadcast Licenses and Other Indefinite-Lived Intangible Assets

We have accounted for acquisitions for which a significant amount of the purchase price was allocated to broadcast licenses and goodwill. Approximately 71% of our total assets at September 30, 2017, consisted 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 perform our annual impairment testing during the fourth quarter of each year, which coincides with our budget and planning process for the upcoming 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 experiences and judgment about future operating performance of our markets and business segments. We did not find reconciliation to our current market capitalization meaningful in the determination of our enterprise value given current factors that impact our market capitalization, including but not limited to: limited trading volume, the impact of our publishing segment operating losses and the significant voting control of our Chairman and Chief Executive Officer.

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. 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 16.

We are permitted to perform a qualitative assessment as to whether it is more likely than not that an indefinite-lived intangible asset is impaired. This qualitative assessment requires significant judgment in considering events and circumstances that may affect the estimated fair value of our indefinite-lived intangible assets and requires that we weigh these events and circumstances by what we believe to be the strongest to weakest indicator of potential impairment. If it is more likely than not that an impairment exists, we are required to perform a quantitative analysis to estimate the fair value of the assets.

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Our analysis includes the following events and circumstances that could affect the estimated fair value of indefinite-lived intangible assets, presented in the order of what we believe to be the strongest to weakest indicators of impairment:

(1) the difference between any recent fair value calculations and the carrying value;

(2) financial performance, such as station operating income, including performance as compared to projected results used in prior estimates of fair value;

(3) macroeconomic economic conditions, including limitations on accessing capital that could affect the discount rates used in prior estimates of fair value;

(4) industry and market considerations such as a declines in market-dependent multiples or metrics, a change in demand, competition, or other economic factors;

(5) operating cost factors, such as increases in labor, that could have a negative effect on future expected earnings and cash flows;

(6) legal, regulatory, contractual, political, business, or other factors;

(7) other relevant entity-specific events such as changes in management or customers; and

(8) any changes to the carrying amount of the indefinite-lived intangible asset.

The primary assumptions used in the Greenfield Method are:

(1) gross operating revenue in the station’s designated market area;

(2) normalized market share;

(3) normalized profit margin;

(4) duration of the “ramp-up” period to reach normalized operations, (which was assumed to be three years),

(5) estimated start-up costs (based on market size);

(6) ongoing replacement costs of fixed assets and working capital;

(7) the calculations of yearly net free cash flows to invested capital; and

(8) amortization of the intangible asset, or the broadcast license.

When we are required to perform a quantitative analysis to estimate the fair value of mastheads, the Relief from Royalty method is used. The Relief from Royalty method estimates the fair value of mastheads through use of a discounted cash flow model that incorporates a hypothetical “royalty rate” that a third-party owner would be willing to pay in lieu of owning the asset. The royalty rate is based on observed royalty rates for comparable assets as of the measurement date. We adjust the selected royalty rate to account for a percentage of the royalty fee that could be attributed to the use of other intangibles, such as goodwill, time in existence, trade secrets and industry expertise. The adjusted royalty rate represents the royalty fee remaining that could be attributed to the use of the masthead only.

When performing Step 1 of our annual impairment testing for goodwill, the fair value of each applicable reporting unit is estimated using a discounted cash flow analysis, which is a form of the income approach. The discounted cash flow analysis utilizes a five to seven year projection period to derive operating cash flow projections from a market participant view. We make certain assumptions regarding future revenue growth based on industry market data, historical performance and expected future performance. We also make assumptions regarding working capital requirements and ongoing capital expenditures for fixed assets.

If the results of Step 1 indicate that the fair value of a reporting unit is less than its carrying value, Step 2 is required. Under Step 2, the implied fair value of the reporting unit, including goodwill, is calculated to determine the amount of the impairment.

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 are highly judgmental in nature. Actual results can be materially different from estimates and assumptions. 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.

Sensitivity of Key Broadcasting Licenses and Goodwill Assumptions

When estimating the fair value of our broadcasting licenses and goodwill, we make assumptions regarding revenue growth rates, operating cash flow margins and discount rates. These assumptions require substantial judgment, and actual rates and margins may differ materially. We prepare a sensitivity analysis of these assumptions and the hypothetical non-cash impairment charge that would have resulted if our estimated long-term revenue growth rates and estimated discount rates were increased.

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 are highly judgmental in nature. Actual results can be materially different from estimates and assumptions. 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.

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Business 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. To date, 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 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 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 16.

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.

We recorded a net decrease to our estimated contingent earn-out liabilities of $54,000 for the nine months ended September 30, 2017 and net decrease of $458,000 during the same period of the prior year. 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.

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.

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The fair value provisions include guidance on how to estimate the fair value of assets and liabilities in the current economic environment and reemphasize 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 16.

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 18, Commitments and Contingencies, contained in our Condensed Consolidated financial statements.

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 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 collection efforts have been exhausted, 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. 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.

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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 nine month periods ended September 30, 2017 was approximately $1.6 million and $4.1 million, respectively, and $1.4 million and $3.8 million for the three and nine month periods ended September 30, 2016, respectively. Barter expenses included in broadcast operating expense for the three and nine month periods ended September 30, 2017 was approximately $1.6 million and $3.9 million, respectively, and $1.3 million and $3.7 million for the three and nine month periods ended September 30, 2016, respectively. Barter advertising revenue included in digital media revenue for the three and nine month periods ended September 30, 2017 was approximately $7,000 and $47,000, respectively, and $14,000 and $36,000 for the three and nine month periods ended September 30, 2016, respectively. Barter expenses included in digital media operating expense for the three and nine month periods ended September 30, 2017 was approximately $1,000 and $84,000, respectively, and $18,000 and $24,500 for the three and nine month periods ended September 30, 2016, respectively.

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.

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 each award using the Black-Scholes valuation model that requires the input of highly subjective assumptions, including the expected stock price volatility and expected term of the award granted. The exercise price for each award is equal to or greater than the closing market price of Salem Media Group, Inc. common stock as of the date of the award. 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 the award, deferred tax assets for 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 used in our valuation model. We believe that our estimates and assumptions are reasonable and that our stock based compensation is accurately reflected in our results of operations.

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Partial Self-Insurance on Employee Health Plan

We provide health insurance benefits to eligible employees under a self-insured plan whereby we pay 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 $0.8 million at September 30, 2017 and December 31, 2016. We have not modified our estimate methodology and we have not historically recognized significant losses from changes in our estimates.

Income Tax Valuation Allowances (Deferred Taxes)

In preparing our Condensed Consolidated financial statements, we estimate our income tax liability in each of the jurisdictions in which we operate by estimating our actual current tax exposure and assessing temporary differences resulting from differing treatment of items for tax and financial statement purposes. Our judgments, assumptions and estimates relative to the current provision for income tax take into account current tax laws, our interpretation of current tax laws and possible outcomes of audits conducted by tax authorities. Reserves for income taxes to address potential exposures involving tax positions that could be challenged by tax authorities are established if necessary. Although we believe our judgments, assumptions and estimates are reasonable, changes in tax laws or our interpretation of tax laws and the resolution of any future tax audits could significantly impact the amounts provided for income taxes in our Condensed Consolidated financial statements.

We calculate our current and deferred tax provisions based on estimates and assumptions that could differ from the actual results reflected in income tax returns filed during the subsequent year. Adjustments based on filed returns are generally recorded in the period when the tax returns are filed and the tax implications are known. Tax law and rate changes are reflected in the income tax provision in the period in which such changes are enacted.

We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. We consider all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance. In the event we were to determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to earnings in the period in which we make such a determination. Likewise, if we later determine that it is more likely than not that the net deferred tax assets would be realized, we would reverse the applicable portion of the previously provided valuation allowance.

For financial reporting purposes, we recorded a valuation allowance of $4.5 million as of September 30, 2017 and December 31, 2016 to offset $4.2 million of the deferred tax assets related to the state net operating loss carryforwards and $0.3 million associated with asset impairments.

Income Taxes and Uncertain Tax Positions

We are subject to audit and review by various taxing jurisdictions. We may recognize liabilities on our financial statements for positions taken on uncertain tax positions. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others may be subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. Such positions are deemed to be unrecognized tax benefits and a corresponding liability is established on the balance sheet. It is inherently difficult and subjective to estimate such amounts, as this requires us to make estimates based on the various possible outcomes. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, we believe it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any.

We review and reevaluate uncertain tax positions on a quarterly basis. Changes in assumptions may result in the recognition of a tax benefit or an additional charge to the tax provision. During the nine month period ended September 30, 2017, we did not recognize liabilities associated with uncertain tax positions. Accordingly, we have no liabilities for uncertain tax positions recorded at September 30, 2017. Our evaluation was performed for all tax years that remain subject to examination, which range from 2013 through 2016. There is currently one tax examination in process. The City of New York began their audit of Salem’s 2013 and 2014 tax filings. We do not anticipate any material or significant results from the audit.

LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of funds have been operating cash flow, borrowings under credit facilities and proceeds from the sale of selected assets or businesses. We have historically funded, and will continue to fund, expenditures for operations, administrative expenses, and capital expenditures from these sources. 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 have assessed the current and expected economic outlook and our current and expected needs for funds and 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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Our cash and cash equivalents decreased to $4,000 as of September 30, 2017 as compared to $130,000 at December 31, 2016. Working capital decreased $20.7 million to ($5.3) million at September 30, 2017 compared to $15.4 million at December 31, 2016 due to a $9.4 million reclass of current deferred income tax assets upon adoption of ASU 2015-17, a $6.4 million increase in accrued interest on the Notes and a $6.1 million increase in Revolver debt on the ABL.

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 receipts from customers for digital downloads and streaming, book sales, subscriptions, self-publishing fees, 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. Our operating cash flows are subject to factors such as fluctuations in preferred advertising media and changes in demand caused by shifts in population, station listenership, demographics, and audience tastes. In addition, our operating cash flows may be affected if our customers are unable to pay, delay payment of amounts owed to us, or if we experience reductions in revenue, or increases in costs and expenses.

Net cash provided by operating activities during the nine month period ended September 30, 2017 decreased by $1.4 million to $25.2 million compared to $26.5 million during the same period of the prior year. The decrease in cash provided by operating activities includes the impact of the following items:

· Net operating income decreased to $2.3 million compared to $5.9 million for the same period of the prior year;

· Net accounts receivable decreased $1.4 million;

· Our Day’s Sales Outstanding, or the average number of days to collect cash from the date of sale, increased to 66 days at September 30, 2017 compared to 65 days for the same period of the prior year;

· Net accounts payable and accrued expenses increased $4.5 million to $16.1 million for the nine month period ended September 30, 2017 compared to a decrease of $2.7 million to $19.2 million for the same period of the prior year; and

· Net inventories on hand increased $0.1 million to $0.8 million at September 30, 2017 compared to a decrease of $0.1 million to $0.7 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.

We plan to fund future purchases and any acquisitions from cash on hand, operating cash flow or our credit facilities. These transactions include the acquisition of WSPZ-AM in our Washington DC market for $0.6 million and an option to acquire radio station KHTE-FM, Little Rock, Arkansas, for $1.2 million in cash during the TBA period under which we are programming the station. The 36 month TBA began on April 1, 2015, and contains an option to extend to 48 months.

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 $8.4 million during the remainder of 2017.

Net cash used in investing activities during the nine month period ended September 30, 2017 decreased $2.5 million to $9.9 million compared to $12.4 million during the same period of the prior year. The decrease in cash used for investing activities includes:

· Cash paid for acquisitions decreased $3.8 million to $3.4 million compared to $7.2 million during the same period of the prior year;

· Cash paid for capital expenditures decreased $0.4 million to $6.8 million compared to $7.2 million during the same period of the prior year; and

· Cash paid for capital expenditures reimbursable under tenant improvement allowances decreased $0.4 million to $0.1 million compared to $0.5 million during the same period of the prior year; and

· Proceeds from the sale of assets decreased $2.5 million to $0.6 million compared to $3.1 million during the same period of the prior year.

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.

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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. This is consistent with the guidance in FASB ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which clarifies how entities should classify certain cash receipts and cash payments on the statement of cash flows issued in August 2016. During the nine month period ended September 30, 2017, we paid $14,000 in cash for contingent earn-out consideration due under acquisition agreements and $0.2 million in cash for deferred installments.

On May 19, 2017, we closed on a private offering of the Notes and concurrently entered into the ABL Facility. The net proceeds from the offering of the Notes, together with borrowings under the ABL Facility, were used to repay outstanding borrowings, including accrued and unpaid interest, on our previously existing senior credit facilities consisting of the Term Loan B and the Revolver, and to pay fees and expenses incurred in connection with the Notes offering and the ABL Facility.

During the six month period ended June 30, 2017, the principal balances outstanding under our previous credit facilities ranged from $258.0 million to $263.5 million. During the nine month period ended September 30, 2017, the principal balances outstanding under the Notes and ABL Facility ranged from $258.0 million to $268.6 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 $6.8 million in 2017. However, 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 depend upon future earnings, cash flows, financial and legal 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. In recent years, distributions have been approximately 20% of Adjusted EBITDA less cash paid for capital expenditures, less cash paid for income taxes, and less cash paid for interest. Adjusted EBITDA is a non-GAAP financial measure defined in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this quarterly report on Form 10-Q. Future distributions, if any, are likely to be approximately 30% of Adjusted EBITDA less cash paid for capital expenditures, less cash paid for income taxes, and less cash paid for interest.

Our sole source of cash available for making any future equity distributions is our operating cash flow, subject to our credit facilities and Notes, 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 nine month period ended September 30, 2017 increased by $1.3 million to $15.4 million from $14.1 million during the same period of the prior year. The decrease in cash used for financing activities includes:

· We paid the remaining principal balance outstanding on the Term Loan B of $258.0 million and terminated the Term Loan B;

· We paid the remaining principal outstanding on the Revolver and terminated the related credit agreement;

· We issued the 6.75% Senior Secured Notes and received gross proceeds of $255.0 million upon issuance;

· We entered into the ABL Facility for $30.0 million and borrowed $39.8 million of proceeds thereunder;

· We subsequently repaid $33.2 million on the ABL Facility;

· We paid $0.2 million of cash against deferred installments due under our purchase agreements during the nine month period ended September 30, 2017 compared to $3.4 million during the same period of the prior year;

· We paid $14,000 of cash due for amounts earned under the contingent earn-out provision of our purchase agreements during the nine month period ended September 30, 2017 compared to $0.1 million during the same period of the prior year;

· The book overdraft use increased $1.8 million to $1.1 million use as of the period ended September 30, 2017 compared to a $0.7 million source for the same period of the prior year; and

· We paid cash equity distributions of $5.1 million on our Class A and Class B common stock compared to $5.0 million for the same period of the prior year.

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.

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6.75% Senior Secured Notes

On May 19, 2017, we issued in a private placement the Notes, which were guaranteed on a senior secured basis by our existing subsidiaries (the “Subsidiary Guarantors”). The Notes bear interest at a rate of 6.75% per year and mature on June 1, 2024, unless earlier redeemed or repurchased. Interest initially accrues on the Notes from May 19, 2017 and is payable semi-annually, in cash in arrears, on June 1 and December 1 of each year, commencing December 1, 2017.

The Notes and the ABL Facility are secured by liens on substantially all of our and the Subsidiary Guarantors’ assets, other than certain excluded assets. The ABL Facility has a first-priority lien on our and the Subsidiary Guarantor’s accounts receivable, inventory, deposit and securities accounts, certain real estate and related assets (the “ABL Priority Collateral”). The Notes are secured by a first-priority lien on substantially all other assets of ours and the Subsidiary Guarantors (the “Notes Priority Collateral”). There is no direct lien on our Federal Communications Commission (“FCC”) licenses to the extent prohibited by law or regulation.

We may redeem the Notes, in whole or in part, at any time on or after June 1, 2020 at a price equal to 100% of the principal amount of the Notes plus a “make-whole” premium as of, and accrued and unpaid interest, if any, to, but not including, the redemption date. At any time on or after June 1, 2020, we may redeem some or all of the Notes at the redemption prices (expressed as percentages of the principal amount to be redeemed) set forth in the Notes, plus accrued and unpaid interest, if any, to, but not including, the redemption date. In addition, we may redeem up to 35% of the aggregate principal amount of the Notes before June 1, 2020 with the net cash proceeds from certain equity offerings at a redemption price of 106.75% of the principal amount plus accrued and unpaid interest, if any, to, but not including, the redemption date. We may also redeem up to 10% of the aggregate original principal amount of the Notes per twelve month period before June 1, 2020 at a redemption price of 103% of the principal amount plus accrued and unpaid interest to, but not including, the redemption date.

The indenture relating to the Notes (the “Indenture”) contains covenants that, among other things and subject in each case to certain specified exceptions, limit our ability and the ability of our restricted subsidiaries to: (i) incur additional debt; (ii) declare or pay dividends, redeem stock or make other distributions to stockholders; (iii) make investments; (iv) create liens or use assets as security in other transactions; (v) merge or consolidate, or sell, transfer, lease or dispose of substantially all of our assets; (vi) engage in transactions with affiliates; and (vii) sell or transfer assets.

The Indenture provides for the following events of default (each, an “Event of Default”): (i) default in payment of principal or premium on the Notes at maturity, upon repurchase, acceleration, optional redemption or otherwise; (ii) default for 30 days in payment of interest on the Notes; (iii) the failure by us or certain restricted subsidiaries to comply with other agreements in the Indenture or the Notes, in certain cases subject to notice and lapse of time; (iv) the failure of any guarantee by certain significant Subsidiary Guarantors to be in full force and effect and enforceable in accordance with its terms, subject to notice and lapse of time; (v) certain accelerations (including failure to pay within any grace period) of other indebtedness of ours or any restricted subsidiary if the amount accelerated (or so unpaid) is at least $15 million; (vi) certain judgments for the payment of money in excess of $15 million; (vii) certain events of bankruptcy or insolvency with respect to us or any significant subsidiary; and (vii) certain defaults with respect to any collateral having a fair market value in excess of $15 million. If an Event of Default occurs and is continuing, the Trustee or the holders of at least 25% in principal amount of the outstanding Notes may declare the principal of the Notes and any accrued interest on the Notes to be due and payable immediately, subject to remedy or cure in certain cases. Certain events of bankruptcy or insolvency are Events of Default which will result in the Notes being due and payable immediately upon the occurrence of such Events of Default.

We are required to pay $17.2 million per year in interest on the Notes. As of September 30, 2017, accrued interest on the Notes was $6.4 million.

We incurred debt issuance costs of $6.3 million that were recorded as a reduction of the debt proceeds that are being amortized to non-cash interest expense over the life of the Notes using the effective interest method. During the three and nine month periods ended September 30, 2017, $0.2 million and $0.3 million, respectively, of debt issuance costs associated with the Notes were recognized as interest expense.

Asset-Based Revolving Credit Facility

On May 19, 2017, the Company also entered into the ABL Facility pursuant to a Credit Agreement (the “Credit Agreement”) by and among us, as a borrower, our subsidiaries party thereto, as borrowers, Wells Fargo Bank, National Association, as administrative agent and lead arranger, and the lenders that are parties thereto. We used the proceeds of the ABL Facility, together with the net proceeds from the Notes offering, to repay the Prior Facility and related fees and expenses. Going forward, the proceeds of the ABL Facility will be used to provide ongoing working capital and for other general corporate purposes (including permitted acquisitions).

The ABL Facility is a five-year $30.0 million revolving credit facility due May 19, 2022, which includes a $5.0 million subfacility for standby letters of credit and a $7.5 million subfacility for swingline loans. All borrowings under the ABL Facility accrue at a rate equal to a base rate or LIBOR rate plus a spread. The spread, which is based on an availability-based measure, ranges from 0.50% to 1.00% for base rate borrowings and 1.50% to 2.00% for LIBOR rate borrowings. If an event of default occurs, the interest rate may increase by 2.00% per annum. Amounts outstanding under the ABL Facility may be paid and then reborrowed at our discretion without penalty or premium. Additionally, we pay a commitment fee on the unused balance of 0.25% to 0.375% per year.

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The ABL Facility is secured by a first-priority lien on the ABL Priority Collateral and by a second-priority lien on the Notes Priority Collateral. There is no direct lien on the Company’s FCC licenses to the extent prohibited by law or regulation (other than the economic value and proceeds thereof).

The Credit Agreement includes a springing fixed charge coverage ratio of 1.0 to 1.0, which is tested during the period commencing on the last day of the fiscal month most recently ended prior to the date on which Availability (as defined in the Credit Agreement) is less than the greater of 15% of the Maximum Revolver Amount (as defined in the Credit Agreement) and $4.5 million and continuing for a period of 60 consecutive days after the first day on which Availability exceeds such threshold amount. 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 the borrowers and their subsidiaries (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; (vii) to merge or consolidate with, or dispose of all assets to a third party, except as permitted thereby; (viii) to prepay indebtedness; and (ix) to pay dividends.

The Credit Agreement provides for the following events of default: (i) default for non-payment of any principal or letter of credit reimbursement when due or any interest, fees or other amounts within five days of the due date; (ii) the failure by any borrower or any subsidiary to comply with any covenant or agreement contained in the Credit Agreement or any other loan document, in certain cases subject to applicable notice and lapse of time; (iii) any representation or warranty made pursuant to the Credit Agreement or any other loan document is incorrect in any material respect when made; (iv) certain defaults of other indebtedness of any borrower or any subsidiary of indebtedness of at least $10 million; (v) certain events of bankruptcy or insolvency with respect to any borrower or any subsidiary; (vi) certain judgments for the payment of money of $10 million or more; (vii) a change of control; and (viii) certain defaults relating to the loss of FCC licenses, cessation of broadcasting and termination of material station contracts. If an event of default occurs and is continuing, the Administrative Agent and the Lenders may accelerate the amounts outstanding under the ABL Facility and may exercise remedies in respect of the collateral.

We incurred debt issue costs of $0.6 million that were recorded as an asset and are being amortized to non-cash interest expense over the term of the ABL Facility using the effective interest method. During the three and nine month periods ended September 30, 2017, $63,000 and $86,000, respectively, of debt issue costs associated with the Notes were recognized as interest expense. At September 30, 2017, the blended interest rate on amounts outstanding under the ABL Facility was 2.98%.

We report outstanding balances on the ABL Facility as short-term regardless of the maturity date based on use of the ABL Facility to fund ordinary and customary operating cash needs with frequent repayments. We believe that our borrowing capacity under the ABL Facility allows us to meet our ongoing operating requirements, fund capital expenditures and satisfy our debt service requirements for at least the next twelve months.

Prior Term Loan B and Revolving Credit Facility

Our prior credit facility consisted of a term loan of $300.0 million (“Term Loan B”) and a revolving credit facility of $25.0 million (“Revolver”). The Term Loan B was issued at a discount for total net proceeds of $298.5 million. The discount was amortized to non-cash interest expense over the life of the loan using the effective interest method. For each of the three months ended September 30, 2017 and 2016, approximately $0 and $51,000, respectively, of the discount associated with the Term Loan B was recognized as interest expense. For each of the nine months ended September 30, 2017 and 2016, approximately $74,000 and $155,000, respectively, of the discount associated with the Term Loan B was recognized as interest expense.

The Term Loan B had a term of seven years, maturing in March 2020. On May 19, 2017, we used the net proceeds of the Notes and a portion of the ABL Facility to fully repay amounts outstanding under the Term Loan B of $258.0 million and under the Revolver of $4.1 million. We recorded a loss on the early retirement of long-term debt of $2.1 million, which included $1.5 million of unamortized debt issuance costs on the Term Loan B and the Revolver and $0.6 million of unamortized discount on the Term Loan B.

The following payments or prepayments of the Term Loan B were made during the year ended December 31, 2016 and through the date of the termination, including interest through the payment date as follows:

Date	Principal Paid		Unamortized Discount
	(Dollars in Thousands)
May 19, 2017	$	258,000	$	550
February 28, 2017		3,000		6
January 30, 2017		2,000		5
December 30, 2016		5,000		12
November 30, 2016		1,000		3
September 30, 2016		1,500		4
September 30, 2016		750		—
June 30, 2016		441		1
June 30, 2016		750		—
March 31, 2016		750		—
March 17, 2016		809		2

Debt issuance costs were 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 September 30, 2017 and 2016, approximately $0 and $140,000, respectively, of the debt issuance costs associated with the Term Loan B were recognized as interest expense. For each of the nine months ended September 30, 2017 and 2016, approximately $203,000 and $423,000 respectively, of the debt issuance costs associated with the Term Loan B were recognized as interest expense.

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Debt issuance costs associated with the Revolver were recorded as an asset in accordance with ASU 2015-15. The costs were 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%. For each of the three month periods ended September 30, 2017 and 2016, we recorded amortization of deferred financing costs of approximately $0 and $17,000. For each of the nine month periods ended September 30, 2017 and 2016, we recorded amortization of deferred financing costs of approximately $26,000 and $52,000.

Summary of long-term debt obligations

Long-term debt consisted of the following:

	As of December 31, 2016			As of September 30, 2017
	(Dollars in thousands)
6.75% Senior Secured Notes	$	—		$	255,000
Less unamortized debt issuance costs based on imputed interest rate of 7.08%		—			(6,004	)
6.75% Senior Secured Notes net carrying value		—			248,996
Asset-Based Revolving Credit Facility principal outstanding		—			6,629
Term Loan B principal amount		263,000			—
Less unamortized discount and debt issuance costs based on imputed interest rate of 4.78%		(2,371	)		—
Term Loan B net carrying value		260,629			—
Revolver principal outstanding		477			—
Capital leases and other loans		568			491
Long-term debt and capital lease obligations less unamortized debt issuance costs		261,674			256,116
Less current portion		(590	)		(6,741	)
Long-term debt and capital lease obligations less unamortized debt issuance costs, net of current portion	$	261,084		$	249,375

In addition to the outstanding amounts listed above, we also have interest payments related to our long-term debt as follows as of September 30, 2017:

· Outstanding borrowings of $6.6 million under the ABL Facility, with interest payments due at LIBOR plus 1.5% to 2.0% per annum;

· $255.0 million aggregate principal amount of Notes with semi-annual interest payments at an annual rate of 6.75% ; and

· Commitment fee of 0.25% to 0.375% on the unused portion of the ABL Facility.

Other Debt

We have several capital leases related to office equipment. The obligation recorded at December 31, 2016 and September 30, 2017 represents the present value of future commitments under the capital lease agreements.

Maturities of Long-Term Debt and Capital Lease Obligations

Principal repayment requirements under all long-term debt agreements outstanding at September 30, 2017 for each of the next five years and thereafter are as follows:

	Amount
For the Twelve Months Ended September 30,	(Dollars in thousands)
2018	$	6,741
2019		108
2020		107
2021		121
2022		43
Thereafter		255,000
	$	262,120

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.

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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 2016, we recognized impairment charges of $7.0 million including a $6.5 million impairment of broadcast licenses and $0.5 million impairment of mastheads. Broadcast licenses were deemed to be impaired in four of the twenty five markets tested. Impairments were recorded in our Cleveland, Dallas, Detroit and Portland market clusters due to an increase in the risk-adjusted discount rate or Weighted Average Cost of Capital (“WACC”). Mastheads were deemed to be impaired due to further reductions in projected net revenues and increases in the WACC. We continue to evaluate our print magazine business due to recurring declines in operating results and projected revenues. Due to operating results during the three month period ended March 31, 2017 that did not meet management’s expectations, we ceased publishing Preaching Magazine^™, YouthWorker Journal^™, FaithTalk Magazine^™ and Homecoming® The Magazine upon issuance of the May 2017 publication. We have received purchase offers from third parties interested in acquiring the rights to continue publishing Preaching Magazine^™, but we have not closed on or agreed to final terms of the sale.

Because of the likelihood that these print magazines would be sold or otherwise disposed of before the end of their previously estimated life, we performed impairment tests as of March 31, 2017. Due to reductions in forecasted operating cash flows and indications of interest from potential buyers, we then recorded an impairment charge of $19,000 associated with mastheads.

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 16.

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 did not violate the covenants on the then existing 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 September 30, 2017, we 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, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we 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 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 the Term Loan B. Payments on the swap were due on a quarterly basis with a LIBOR floor of 0.625%. The swap was to expire 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 were recognized in the current period statement of operations rather than through other comprehensive income. On May 19, 2017, we paid $0.8 million to terminate the interest rate swap.

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	As of December 31, 2016		As of September 30, 2017
	(Dollars in thousands)
Fair value of interest rate swap	$	514	$	—

On May 19, 2017, we entered into a new senior credit facility, which is an asset-based revolving credit facility (“ABL Facility”). The ABL Facility is a five-year $30.0 million (subject to borrowing base) revolving credit facility maturing on May 19, 2022. Amounts outstanding under the ABL Facility bear interest at a rate based on LIBOR plus a spread of 1.50% to 2.0% per annum based on a pricing grid depending on the average available amount for the most recently ended quarter or at the Base Rate (as defined in the Credit Agreement) plus a spread of 0.50% to 1.0% per annum based on a pricing grid depending on the average available amount for the most recently ended quarter. Additionally, we pay a commitment fee on the unused balance of 0.25% to 0.38% per year. If an event of default occurs, the interest rate may increase by 2.00% per annum. Amounts outstanding under the ABL Facility may be paid and then re-borrowed at our discretion without penalty or premium.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures. Our management, including our principal executive and financial officers, have conducted an evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures,” as such term is defined under Rules 13a-15(e) and 15d-15(e) of the Exchange Act, to ensure that information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and include controls and procedures designed to ensure that information we are required to disclose in such reports is accumulated and communicated to management, including our principal executive and financial officers, as appropriate, to allow timely decisions regarding required disclosure. Based on that evaluation, our principal executive and financial officers concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

There was no change in our internal control over financial reporting during the three month period ended September 30, 2017 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, 2016 (the “2016 Annual Report”) a description of certain risks and uncertainties that could affect our business, future performance or financial condition, which was updated or supplemented by risk factors included in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 and our Quarterly report on Form 10-Q for the quarter ended June 30, 2017 (collectively, 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, as updated and supplemented, prior to making an investment decision with respect to our stock. There are no material changes from the Risk Factors disclosed in the 2016 Annual Report and the Form 10-Q for the quarter ended June 30, 2017.

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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.
November 8, 2017
	By: /s/ EDWARD G. ATSINGER III
	Edward G. Atsinger III
	Chief Executive Officer
	(Principal Executive Officer)
November 8, 2017
	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 with David A.R. Evans dated as of September 15, 2017.	8-K	000-26497	09/19/2017	99.1
10.2	Assignment and Assumption of Real Property Rights and Obligations under Asset Purchase Agreement dated September 12, 2017 between AM 570 LLC and Salem Radio Properties, Inc.	8-K	000-26497	09/20/2017	10.1
10.3	Local Programming and Marketing Agreement dated September 15, 2017 between AM 570 LLC and Salem Media of Virginia, Inc.	8-K	000-26497	09/20/2017	10.2
10.4	Asset Purchase Agreement dated September 15, 2017 between AM 570 LLC and Salem Media of Virginia, Inc.	8-K	000-26497	09/20/2017	10.3
10.5	Transmitter Site Lease Agreement dated September 15, 2017 between Salem Radio Properties, Inc. and AM 570, LLC.	8-K	000-26497	09/20/2017	10.4	-
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 nine months ended September 30, 2017, 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-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: November 8, 2017
		/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: November 8, 2017
		/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 September 30, 2017 (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: November 8, 2017
	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 September 30, 2017 (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: November 8, 2017
	By: /s/ EVAN D. MASYR
	Evan D. Masyr
	Executive Vice President and Chief Financial Officer

XML

Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Nov. 03, 2017
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3
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		20,609,551
Common Class B [Member]
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		5,553,696

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Current assets:
Cash and cash equivalents	$ 4	$ 130
Trade accounts receivable (net of allowances of $10,420 in 2016 and $10,627 in 2017)	35,862	37,260
Other receivables (net of allowances of $260 in 2016 and $145 in 2017 )	990	751
Inventories (net of reserves of $2,226 in 2016 and $1,611 in 2017)	809	670
Prepaid expenses	7,288	6,287
Deferred income taxes - current	0	9,411
Total current assets	44,953	54,509
Notes receivable (net of allowance of $564 in 2016 and $794 in 2017)	92	65
Land held for sale	1,000	1,000
Property and equipment (net of accumulated depreciation of $156,024 in 2016 and $161,848 in 2017)	102,203	102,790
Broadcast licenses	388,720	388,517
Goodwill	26,436	25,613
Other indefinite-lived intangible assets	313	332
Amortizable intangible assets (net of accumulated amortization of $44,488 in 2016 and $46,007 in 2017)	14,276	14,408
Deferred financing costs	549	82
Deferred income taxes - non-current	1,877	0
Other assets	3,205	2,952
Total assets	583,624	590,268
Current liabilities:
Accounts payable	3,721	4,968
Accrued expenses	12,427	15,658
Accrued compensation and related expenses	9,865	8,133
Accrued interest	6,481	77
Current portion of deferred revenue	10,835	9,491
Income taxes payable	174	223
Current portion of long-term debt and capital lease obligations	6,741	590
Total current liabilities	50,244	39,140
Long-term debt and capital lease obligations less unamortized debt issuance costs, net of current portion	249,375	261,084
Fair value of interest rate swap	0	514
Deferred income taxes	54,644	60,769
Deferred rent expense	9,633	9,596
Deferred revenue less current portion	6,427	5,252
Other long-term liabilities	64	67
Total liabilities	370,387	376,422
Commitments and contingencies (Note 18)
Stockholders' Equity:
Additional paid-in capital	245,800	243,607
Accumulated earnings	1,160	3,963
Treasury stock, at cost (2,317,650 shares at December 31, 2016 and September 30, 2017)	(34,006)	(34,006)
Total stockholders' equity	213,237	213,846
Total liabilities and stockholders' equity	583,624	590,268
Common Class A [Member]
Stockholders' Equity:
Common stock	227	226
Common Class B [Member]
Stockholders' Equity:
Common stock	$ 56	$ 56

XML

CONDENSED CONSOLIDATED BALANCE SHEETS [Parenthetical] - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Trade accounts receivable, allowances	$ 10,627	$ 10,420
Allowance for Doubtful Other Receivables, Current	145	260
Inventories, reserves	1,611	2,226
Notes receivable, allowance	794	564
Property and equipment, accumulated depreciation	161,848	156,024
Amortizable intangible assets, accumulated amortization	$ 46,007	$ 44,488
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	22,927,201	22,593,130
Common stock, outstanding	20,609,551	20,275,480
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

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Net broadcast revenue	$ 48,424	$ 51,052	$ 145,479	$ 149,768
Net digital media revenue	10,446	11,999	31,998	34,056
Net publishing revenue	6,563	8,221	19,048	19,802
Total net revenue	65,433	71,272	196,525	203,626
Operating expenses:
Broadcast operating expenses, exclusive of depreciation and amortization shown below (including $412 and $431 for the three months ended September 30, 2016 and 2017, respectively, and $1,231 and $1,284 for the nine months ended September 30, 2016 and 2017, respectively, paid to related parties)	37,040	37,434	108,807	109,455
Digital media operating expenses, exclusive of depreciation and amortization shown below	8,169	9,172	25,241	26,815
Publishing operating expenses, exclusive of depreciation and amortization shown below	6,686	8,020	18,705	19,951
Unallocated corporate expenses exclusive of depreciation and amortization shown below (including $147 and $98 for the three months ended September 30, 2016 and 2017, respectively, and $254 and $218 for the nine months ended September 30, 2016 and 2017, respectively, paid to related parties)	4,233	4,147	13,183	11,928
Depreciation	3,082	2,976	9,171	8,950
Amortization	1,135	1,341	3,420	3,673
Change in the estimated fair value of contingent earn-out consideration	(12)	(196)	(54)	(458)
Impairment of long-lived assets	0	0	0	700
Impairment of indefinite-lived long-term assets other than goodwill	0	0	19	0
Net (gain) loss on the sale or disposal of assets	95	(457)	(410)	(2,008)
Total operating expenses	60,428	62,437	178,082	179,006
Operating income	5,005	8,835	18,443	24,620
Other income (expense):
Interest income	1	1	3	4
Interest expense	(4,802)	(3,726)	(12,156)	(11,252)
Change in the fair value of interest rate swap	0	856	357	(1,325)
Loss on early retirement of long-term debt	0	(18)	(2,775)	(32)
Net miscellaneous income and (expenses)	(80)	7	(80)	7
Net income before income taxes	124	5,955	3,792	12,022
Provision for income taxes	170	3,763	1,506	6,121
Net income (loss)	$ (46)	$ 2,192	$ 2,286	$ 5,901
Basic earnings (loss) per share data:
Basic earnings (loss) per share	$ 0	$ 0.08	$ 0.09	$ 0.23
Diluted earnings (loss) per share data:
Diluted earnings (loss) per share	0	0.08	0.09	0.23
Distributions per share	$ 0.07	$ 0.07	$ 0.2	$ 0.2
Basic weighted average shares outstanding	26,144,796	25,815,242	26,036,333	25,617,307
Diluted weighted average shares outstanding	26,144,796	26,183,182	26,454,923	26,012,930

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS [Parenthetical] - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Broadcast operating expenses exclusive of depreciation and amortization	$ 37,040	$ 37,434	$ 108,807	$ 109,455
Unallocated corporate expenses exclusive of depreciation and amortization	4,233	4,147	13,183	11,928
Related Party [Member]
Broadcast operating expenses exclusive of depreciation and amortization	431	412	1,284	1,231
Unallocated corporate expenses exclusive of depreciation and amortization	$ 98	$ 147	$ 218	$ 254

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
OPERATING ACTIVITIES
Net income	$ 2,286	$ 5,901
Adjustments to reconcile net income to net cash provided by operating activities:
Non-cash stock-based compensation	1,693	458
Tax benefit related to stock options exercised	0	264
Depreciation and amortization	12,591	12,623
Amortization of deferred financing costs	645	475
Accretion of financing items	74	155
Accretion of acquisition-related deferred payments and contingent consideration	32	55
Provision for bad debts	1,548	688
Deferred income taxes	1,409	5,684
Change in the fair value of interest rate swap	(357)	1,325
Change in the estimated fair value of contingent earn-out consideration	(54)	(458)
Impairment of long-lived assets	0	700
Impairment of indefinite-lived long-term assets other than goodwill	19	0
Loss on early retirement of long-term debt	2,775	32
Net gain on the sale or disposal of assets	(410)	(2,008)
Changes in operating assets and liabilities:
Accounts receivable	(463)	4,380
Inventories	(139)	147
Prepaid expenses and other current assets	(1,001)	(718)
Accounts payable and accrued expenses	4,879	(39)
Deferred rent	3	1,183
Deferred revenue	(310)	(4,444)
Other liabilities	(3)	0
Income taxes payable	(49)	106
Net cash provided by operating activities	25,168	26,509
INVESTING ACTIVITIES
Cash paid for capital expenditures net of tenant improvement allowances	(6,800)	(7,240)
Capital expenditures reimbursable under tenant improvement allowances and trade agreements	(50)	(486)
Escrow deposits related to acquisitions	(30)	(228)
Purchases of broadcast assets and radio stations	(1,662)	(718)
Proceeds from sale of broadcast assets	602	3,147
Other	(224)	(398)
Net cash used in investing activities	(9,854)	(12,394)
FINANCING ACTIVITIES
Payment of interest rate swap	(783)	0
Proceeds from bond offering	255,000	0
Payment of debt issuance costs	(6,837)	0
Payments of acquisition-related contingent earn-out consideration	(14)	(99)
Payments of deferred installments due from acquisition activity	(225)	(3,421)
Proceeds from the exercise of stock options	501	969
Payments of capital lease obligations	(93)	(80)
Payment of cash distributions on common stock	(5,089)	(5,000)
Book overdraft	(1,053)	734
Net cash used in financing activities	(15,440)	(14,133)
CASH FLOWS FROM DISCONTINUED OPERATIONS
Net decrease in cash and cash equivalents	(126)	(18)
Cash and cash equivalents at beginning of year	130	98
Cash and cash equivalents at end of period	4	80
Cash paid during the period for:
Cash paid for interest, net of capitalized interest	4,962	10,644
Cash paid for income taxes	128	67
Other supplemental disclosures of cash flow information:
Barter revenue	4,152	3,886
Barter expense	4,012	3,734
Non-cash investing and financing activities:
Capital expenditures reimbursable under tenant improvement allowances	50	486
Current value of deferred cash payments (short-term)	0	1,566
Net assets and liabilities assumed non-cash acquisition	2,852	0
Assets acquired under capital leases	16	0
Debt issuance costs accrued	132	0
Term Loan B [Member]
FINANCING ACTIVITIES
Payments on Term Loan B, Revolver and ABL Facility	(263,000)	(5,000)
Revolver [Member]
FINANCING ACTIVITIES
Proceeds from borrowings under Revolver and ABL Facility	60,133	35,601
Payments on Term Loan B, Revolver and ABL Facility	(53,980)	(37,837)
Digital Media [Member]
INVESTING ACTIVITIES
Purchases of digital media businesses and assets	(1,690)	(3,153)
Publishing [Member]
INVESTING ACTIVITIES
Purchases of digital media businesses and assets	$ 0	$ (3,318)

XML

BASIS OF PRESENTATION

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

BASIS OF PRESENTATION

NOTE 1. BASIS OF PRESENTATION

The accompanying consolidated financial statements of Salem Media Group, Inc. (“Salem” “we,” “us,” “our” or the “company”) include the company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated. Effective February 19, 2015, we changed our name from Salem Communications Corporation to Salem Media Group, Inc. 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.

Information with respect to the three and nine months ended September 30, 2017 and 2016 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, 2016. 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, 2016 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 multimedia company specializing in Christian and conservative content. Our media properties are comprised of radio broadcasting, digital media, and publishing entities. We have three operating segments: (1) Broadcast, (2) Digital Media, and (3) Publishing, which are discussed in Note 19 – Segment Data. Our foundational business is radio broadcasting, which includes the ownership and operation of radio stations in large metropolitan markets. We also own and operate Salem Radio Network® (“SRN”), SRN News Network (“SNN”), Today’s Christian Music (“TCM”), Singing News Network (formerly Solid Gospel Network) and Salem Media Representatives^TM (“SMR”). SRN, SNN, TCM 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 format commercial radio stations. Each of our radio stations has a website specifically designed for that station from which our audience can access our entire library of digital content and online publications.

Our digital media based businesses provide Christian, conservative, investing and health-themed content, e-commerce, audio and video streaming, and other resources digitally through the web. Salem Web Network™ (“SWN”) websites include Christian content websites; OnePlace.com, Christianity.com, Crosswalk.com®, GodVine.com, GodTube.com, CrossCards.com, LightSource.com, Jesus.org, BibleStudyTools.com, iBelieve.com, CCMmagazine.com and ChristianHeadlines.com, and our conservative opinion websites; collectively known as Townhall Media, include Townhall.com™, HotAir.com, Twitchy.com, HumanEvents.com, RedState.com, and BearingArms.com. We also publish digital newsletters through Eagle Financial Publications, which provide market analysis and non-individualized investment strategies from financial commentators on a subscription basis.

Our church e-commerce websites, including WorshipHouseMedia.com, SermonSpice.com, SermonSearch.com, ChurchStaffing.com, and ChristianJobs.com, offer a variety of digital resources including videos, song tracks, sermon archives and job listings to pastors and Church leaders. E-commerce also includes Eagle Wellness, which sells nutritional supplements.

Our web content is accessible through all of our radio station websites that feature content of interest to local audiences throughout the United States.

Our publishing operating segment is comprised of three businesses: (1) Regnery Publishing, 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; (2) Salem Author Services, our self-publishing service for authors through Xulon Press and Mill City Press; and (3) Singing News^® magazine, previously Salem Publishing™ which produced and distributed print magazines.

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 believe that the requirements of FASB ASC Topic 810 do not apply to these entities because the lease arrangements do not contain explicit guarantees of the residual value of the real estate, do not contain purchase options or similar provisions and the leases are at terms that do not vary materially from leases that would have been available with unaffiliated parties. Additionally, we do not have an equity interest in the entities controlled by our principal stockholders or other related parties and we do not guarantee debt of the entities controlled by our principal stockholders or other related parties.

We also 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 September 30, 2017, 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 include the reclassification of land held for sale from current assets to long term assets based on the APA term that exceeds twelve months and the reclassification of Salem Consumer Products (“SCP”) from our digital media segment to our broadcast segment. SCP sells books, DVD’s and editorial content developed by our on-air personalities. SCP was reclassed to include revenue from all network sources, in broadcast to assess the overall performance of each network program. Refer to Note 19 – Segment Data for an explanation of this reclassification.

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 not be applicable to our financial position, results of operations, cash flows, or presentation thereof.  

In September 2017, the FASB issued ASU 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842). ASU 2017-13 provides additional clarification including the addition of SEC paragraphs to the new revenue and leases sections of the Codification. We do not expect these clarifications to have a material impact on our financial position, results of operations, cash flows, or presentation thereof.

In August 2017, the FASB issued ASU 2017-12, "Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities," which improves the financial reporting of hedging relationships to better align risk management activities in financial statements and make certain targeted improvements to simplify the application of the hedge accounting guidance in current GAAP. The standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted for any interim and annual financial statements that have not yet been issued. We do not expect the adoption of this accounting standard to have a material impact on our financial position, results of operations, cash flows, or presentation thereof.

In May 2017, the FASB issued ASU 2017-09, “Compensation – Stock Compensation (Topic 718) Scope of Modification Accounting,” which clarifies when to account for a change in the terms or conditions of a share-based payment award as a modification. ASU 2017-09 requires modification accounting only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. ASU 2017-09 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. We do not expect the adoption of this accounting standard to have a material impact on our financial position, results of operations, cash flows, or presentation thereof.

In March 2017, the FASB issued ASU 2017-08, “Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium on Purchased Callable Debt Securities,” which amends the amortization period for certain purchased callable debt securities held at a premium to a shorter period based on the earliest call date. ASU 2017-08 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. We do not expect the adoption of this accounting standard to have a material impact on our financial position, results of operations, cash flows, or presentation thereof.

In February 2017, the FASB issued ASU 2017-05, “Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Topic 610-20),” which clarifies the scope and application of ASC Topic 610-20 on accounting for the sale or transfer of nonfinancial assets, that is an asset with physical value such as real estate, equipment, intangibles or similar property. ASU 2017-05 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. 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 January 2017, the FASB issued ASU 2017-04, “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” which eliminates the requirement to calculate the implied fair value of goodwill in Step 2 of the goodwill impairment test. Under ASU 2017-04, goodwill impairment charges will be based on the excess of a reporting unit’s carrying amount over its fair value as determined in Step 1 of the testing. ASU 2017-04 is effective for interim and annual testing dates after January 1, 2019, with early adoption permitted for interim and annual goodwill impairment testing dates after January 1, 2017. 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 January 2017, the FASB issued ASU 2017-01, “Business Combinations – Clarifying the Definition of a Business,” which clarifies the definition of a business for determining whether transactions should be accounted for as acquisitions or disposals of assets or businesses. ASU 2017-01 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. We expect the adoption of ASU 2017-01 to impact the purchase price allocation of any future radio station acquisitions that will be considered asset acquisitions under the new guidance rather than business acquisitions. We do not expect the change to have a material impact on our financial position, results of operations, cash flows, or presentation thereof.

In November 2016, the FASB issued ASU 2016-18, “Statements of Cash Flows (Topic 230): Restricted Cash,” which provides guidance on the presentation of restricted cash or restricted cash equivalents in the statement of cash flows. ASU 2016-18 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. We do not expect the adoption of ASU 2016-18 to have a material impact on our cash flows or presentation thereof.

In October 2016, the FASB issued ASU 2016-16 “Intra-Entity Transfers of Assets Other Than Inventory,” which modifies existing guidance for the accounting for income tax consequences of intra-entity transfers of assets. This ASU requires entities to immediately recognize the tax consequences on intercompany asset transfers (excluding inventory) at the transaction date, rather than deferring the tax consequences under current GAAP. The guidance is effective for fiscal years beginning after December 15, 2018, and interim reports within those fiscal years, with early adoption permitted only as of the first quarter of a fiscal year. We do not expect the adoption of ASU 2016-16 to have a material impact on our financial position, results of operations, cash flows, or presentation thereof.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which clarifies how entities should classify certain cash receipts and cash payments on the statement of cash flows with the objective of reducing diversity in practice related to eight specific types of transactions. The guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. We do not expect the adoption of ASU 2016-15 to have a material impact on our financial 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 for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption 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 guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, 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 guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. With the exception of the early application guidance applicable to certain entities, 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 May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” and issued subsequent amendments to the initial guidance in August 2015, March 2016, April 2016, May 2016 and December 2016, within ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12, ASU 2016-20 and ASU 2017-13 respectively (ASU 2014-09, ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12, ASU 2016-20, and ASU 2017-13, collectively, “Topic 606”). Topic 606 supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of Topic 606 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. Topic 606 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP. These estimates include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation, among others. The guidance is effective for us as of January 2018, the first interim period within fiscal years beginning on or after December 15, 2017, using either of two methods: (1) retrospective application of Topic 606 to each prior reporting period presented with the option to elect certain practical expedients as defined within Topic 606 or (2) retrospective application of Topic 606 with the cumulative effect of initially applying Topic 606 recognized at the date of initial application and providing certain additional disclosures as defined per Topic 606. We have developed a project plan for the implementation of ASC 606 and all related ASU’s as of the effective date with further analysis planned during the remainder of 2017 to complete the implementation plan. Based on our evaluation of a sample of revenue contracts with customers against the requirements of the standard, we believe that the reporting of revenue as principal (gross) or agent (net) will impact our consolidated financial statements. We may sell advertising that includes placement on third party websites that we currently report on a gross basis as principal due to having latitude in establishing the sales price and bearing credit risk. Under new guidance, we will report this revenue net as agent because the third party is primarily responsible for fulfilling the service. Preliminarily, we plan to adopt Topic 606 pursuant to the modified retrospective application method of Topic 606. We do not believe that there will be a material impact to our revenues upon adoption as the practice of selling advertising on third party websites has not been widely used. We expect this type of sale to grow in popularity in future periods with the net incremental revenue reported in our financials. We continue to evaluate the impact of our pending adoption of Topic 606 and our preliminary assessments are subject to change.

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IMPAIRMENT OF GOODWILL AND OTHER INDEFINITE-LIVED INTANGIBLE ASSETS

9 Months Ended

Sep. 30, 2017

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 September 30, 2017 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 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 operating results are less favorable than the assumptions and estimates we used, or if we reduce our estimates of future operating results, 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 16.

Throughout 2017, we continued to evaluate our print magazine business due to declines in operating results and projected revenues. We ceased publishing Preaching Magazine^™, YouthWorker Journal^™, FaithTalk Magazine^™ and Homecoming® The Magazine upon delivery of the May 2017 print publications. We tested print magazines for impairment as of March 31, 2017 based on our decision to cease publications and recorded an impairment charge of $19,000 associated with mastheads. There were no changes in depreciable lives of any property or equipment associated with these magazines as each individually identifiable asset had been fully depreciated.

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IMPAIRMENT OF LONG-LIVED ASSETS

9 Months Ended

Sep. 30, 2017

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. We reviewed long-lived assets associated with Preaching Magazine^™, YouthWorker Journal^™, FaithTalk Magazine^™ and Homecoming® The Magazine as of March 31, 2017, due to our decision to cease publishing these magazines as of the May 2017 issue. We recorded a $1.9 million decrease in the cost and a $1.9 million decrease in the accumulated amortization for fully amortized assets, including subscriber lists and domain names associated with these magazines. There was no impairment loss or adjustment required to the previously estimated useful lives of these assets. There were no further indications of impairment present as of September 30, 2017.

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ACQUISITIONS AND RECENT TRANSACTIONS

9 Months Ended

Sep. 30, 2017

Business Combinations [Abstract]

ACQUISITIONS AND RECENT TRANSACTIONS

NOTE 4. ACQUISITIONS AND RECENT TRANSACTIONS

During the nine month period ended September 30, 2017, we completed or entered into the following transactions:

Debt

On May 19, 2017, we closed on a private offering of $255.0 million aggregate principal amount of 6.75% senior secured notes due 2024 (the “Notes”) and concurrently entered into a five-year $30.0 million senior secured asset-based revolving credit facility, which includes a $5.0 million subfacility for standby letters of credit and a $7.5 million subfacility for swingline loans (“ABL Facility”) due May 19, 2022. The net proceeds from the offering of the Notes, together with borrowings under the ABL Facility, were used to repay outstanding borrowings, including accrued and unpaid interest, on our previously existing senior credit facilities consisting of a term loan (“Term Loan B”) and a revolving credit facility of $25.0 million (“Revolver”), and to pay fees and expenses incurred in connection with the Notes offering and the ABL Facility (collectively, the “Refinancing”).

In connection with the Refinancing, on May 19, 2017, we repaid $258.0 million in principal on the Term Loan B and paid interest due as of that date. We recorded a $0.6 million pre-tax loss on the early retirement of long-term debt related to the unamortized discount and a $1.5 million pre-tax loss on the early retirement of long-term debt related to unamortized debt issuance costs associated with the Term Loan B. We also terminated the Revolver as of May 19, 2017. We repaid $4.1 million in outstanding principal on the Revolver and paid interest due as of that date. We recorded a $56,000 pre-tax loss on the early retirement of long-term debt related to unamortized debt issuance costs associated with the Revolver.

On February 28, 2017, we repaid $3.0 million principal on the Term Loan B of $300.0 million, and paid interest due as of that date. We recorded a $6,200 pre-tax loss on the early retirement of long-term debt related to the unamortized discount and $18,000 in unamortized debt issuance costs associated with the principal repayment.

On January 30, 2017, we repaid $2.0 million in principal on the Term Loan B and paid interest due as of that date. We recorded a $4,500 pre-tax loss on the early retirement of long-term debt related to the unamortized discount and $12,000 in unamortized debt issuance costs associated with the principal repayment.

Equity

On September 12, 2017, 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 September 29, 2017 to all Class A and Class B common stockholders of record as of September 22, 2017.

On August 9, 2017, a restricted stock award of 33,066 shares was granted to an executive that vested immediately. The fair value of the restricted stock award was measured based on the grant date market price of our common shares and expensed as of the vesting date. The restricted stock award contains transfer restrictions under which they cannot be sold, pledged, transferred or assigned until three months from vesting date. The recipient of this restricted stock award is entitled to all of the rights of absolute ownership of the restricted stock from the date of grant, including the right to vote the shares and to receive dividends. Restricted stock awards are independent of option grants and are granted at no cost to the recipient other than applicable taxes owed by the recipient. The award is considered issued and outstanding from the vest date of grant.

On June 1, 2017, 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 June 30, 2017 to all Class A and Class B common stockholders of record as of June 16, 2017.

On March 9, 2017, 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 March 30, 2017 to all Class A and Class B common stockholders of record as of March 20, 2017.

On March 24, 2017, a restricted stock award of 178,592 shares was granted to certain members of management that vested immediately. The fair value of each restricted stock award was measured based on the grant date market price of our common shares and expensed as of the vesting date. These restricted stock awards contained transfer restrictions under which they could not be sold, pledged, transferred or assigned until three months from vesting date. Recipients of these restricted stock awards were entitled to all the rights of absolute ownership of the restricted stock from the date of grant, including the right to vote the shares and to receive dividends. Restricted stock awards are independent of option grants and are granted at no cost to the recipient other than applicable taxes owed by the recipient. The awards were considered issued and outstanding from the vest date of grant.

Acquisitions – Broadcast

On September 15, 2017, we closed on the acquisition of real property, including the land, tower and broadcasting facilities, of radio station WSPZ-AM in Bethesda, Maryland for $1.5 million in cash. We recognized goodwill of approximately $13,000 associated with the going concern value of the existing income generating leases acquired with the broadcast tower.

On July 24, 2017, we closed on the acquisition of the FM translator construction permit in Eaglemount, Washington, for $40,000 in cash. The FM translator will be relocated to the Portland, Oregon market for use by our KDZR-AM radio station.

On June 28, 2017, we closed on the acquisition of an FM translator construction permit in Festus, Missouri for $40,000 in cash. The FM translator will be relocated to the St. Louis, Missouri market for use by our KXFN-FM radio station.

On March 14, 2017, we closed on the acquisition of an FM translator construction permit in Quartz Site, Arizona for $20,000 in cash. The FM translator will be relocated to the San Diego, California market for use by our KPRZ-AM radio station.

On March 1, 2017, we closed on the acquisition of an FM translator construction permit in Roseburg, Oregon for $45,000 in cash. The FM translator will be relocated to the Portland, Oregon market for use by our KPDQ-AM radio station.

On January 16, 2017, we closed on the acquisition of an FM translator in Astoria,Oregon for $33,000 in cash. The FM translator will be relocated to the Seattle, Washington market for use by our KGNW-AM radio station.

On January 6, 2017, we closed on the acquisition of an FM translator construction permit in Mohave Valley, Arizona for $20,000 in cash. The FM translator will be relocated to the San Diego, California market for use by our KCBQ-AM radio.

Acquisitions  – Digital Media

On August 31, 2017, we acquired the TeacherTube.com website and related assets for $1.1 million in cash. TeacherTube.com is an online instructional video sharing community for teachers, students and parents. We recorded goodwill of approximately $0.4 million associated with the expected synergies to be realized from combining this website and related assets into our existing digital media platform. The accompanying Condensed Consolidated Statement of Operations reflects the operating results as of the closing date within our digital media operating segment.

On August 31, 2017, we acquired the Intelligence Report newsletter and related assets valued at $2.5 million and we assumed deferred subscription liabilities of $2.9 million. We paid no cash to the seller upon closing. We recorded goodwill of approximately $0.4 million associated with the expected synergies to be realized from combining this financial publication and related assets into our existing digital media platform. The accompanying Condensed Consolidated Statement of Operations reflects the operating results as of the closing date within our digital media operating segment.

On July 6, 2017, we acquired the TradersCrux.com website and related assets for $0.3 million in cash. As part of the purchase agreement, we may pay up to an additional $0.1 million in contingent earn-out consideration within one year upon the achievement of income benchmarks. Using a probability-weighted discounted cash flow model based on our own assumptions as to the ability of TradersCrux.com to achieve the income targets at the time of closing, we estimated the fair value of the contingent earn-out consideration to be $18,750, which approximates the discounted present value due to the earn-out period of less than one year. We recorded goodwill of approximately $900 associated with the expected synergies to be realized from combining this website and related assets into our existing digital media platform.

On June 8, 2017, we acquired a Portuguese Bible mobile application and related assets for $65,000 in cash. As part of the purchase agreement, we may pay up to an additional $20,000 in contingent earn-out consideration over the next twelve months based on the achievement of certain revenue benchmarks. Using a probability-weighted discounted cash flow model based on our own assumptions as to the ability of the Portuguese Bible mobile’s applications to achieve the revenue targets at the time of closing, we estimated the fair value of the contingent earn-out consideration to be $16,500, which approximated the discounted present value due to the earn-out period of less than one year.

On March 15, 2017, we acquired the website prayers-for-special-help.com and related assets for $0.2 million in cash. We recorded goodwill of approximately $15,000 with the expected synergies to be realized from combining these applications into our existing digital media platform. The accompanying Condensed Consolidated Statement of Operations reflects the operating results as of the closing date within our digital media operating segment.

A summary of our business acquisitions and asset purchases during the nine month period ended September 30, 2017, 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)
September 15, 2017	Real property of radio station WSPZ-AM in Bethesda, Maryland (business acquisition)	$	1,500
August 31, 2017	TeacherTube.com (business acquisition)		1,100
August 31, 2017	Intelligence Reporter newsletter (business acquisition)		—
July 24, 2017	FM Translator construction permit, Eaglemount, Washington (asset acquisition)		40
July 6, 2017	TradersCrux.com (business acquisition)		298
June 28, 2017	FM Translator construction permit, Festus, Missouri (asset acquisition)		40
June 8, 2017	Portuguese Bible Mobile Applications (business acquisition)		82
March 15, 2017	Prayers for Special Help (business acquisition)		245
March 14, 2017	FM Translator construction permit, Quartz Site, Arizona (asset purchase)		20
March 1, 2017	FM Translator construction permit, Roseburg, Oregon (asset purchase)		45
January 16, 2017	FM Translator, Astoria, Oregon (asset purchase)		33
January 1, 2017	FM Translator construction permit, Mohave Valley, Arizona (asset purchase)		20
		$	3,423

The operating results of our business acquisitions and asset purchases are included in our 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 assets acquired. 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 Condensed Consolidated Statements of Operations. To date, we have not recorded adjustments to the 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. We recognized costs associated with acquisitions of $0.1 million during the nine month period ended September 30, 2017 compared to $0.3 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 16 - Fair Value Measurements.

The following table summarizes the total acquisition consideration for the nine month period ended September 30, 2017:

Description	Total Consideration
	(Dollars in thousands)
Cash payments made upon closing	$	3,352
Escrow deposits paid in prior years		35
Present value of estimated fair value of contingent earn-out consideration		36
Total purchase price consideration	$	3,423

The fair value of the net assets acquired was allocated as follows:

	Net Broadcast		Net Digital Media		Total Net
	Assets Acquired		Assets Acquired		Assets Acquired
	(Dollars in thousands)
Assets
Property and equipment	$	1,487	$	479	$	1,966
Broadcast licenses		198		—		198
Goodwill		13		810		823
Customer lists and contracts		—		314		314
Domain and brand names		—		647		647
Subscriber base and lists		—		2,316		2,316
Non-compete agreements		—		11		11
	$	1,698	$	4,577	$	6,275
Liabilities
Deferred revenue	$	—		(2,852)		(2,852)
	$	1,698	$	1,725	$	3,423

Pending Transactions

On September 15, 2017, we entered an APA to acquire radio station WSPZ-AM in Bethesda, Maryland for $0.6 million in cash from a related party. We began programming the station under an LMA within our Washington DC broadcast market on the same date. The accompanying Condensed Consolidated Statement of Operations reflects the operating results of this station as of the LMA date within our broadcast segment. The acquisition is subject to the approval of the FCC and is expected to close in the fourth quarter of 2017. 

In August 2017, we received an escrow deposit under an agreement to sell land in Covina, California for $1.0 million dollars. The land is recorded in assets held for sale and has not been used in operations. The sale is subject to the buyer’s ability to complete due diligence on their expected use of the land and is currently expected to close in the latter half of 2020.

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 within our broadcast segment.

Divestitures

On June 1, 2017, we received $0.6 million in cash for a former transmitter site in our Dallas, Texas market that had been leased to a third-party.

Due to operating results during the three month period ended March 31, 2017 that did not meet management’s expectations, we ceased publishing Preaching Magazine^™, YouthWorker Journal^™, FaithTalk Magazine^™ and Homecoming® The Magazine upon delivery of the May 2017 print publications. On May 30, 2017, we received $10,000 for Preaching Magazine^™ and YouthWorker Journal^™. The purchaser assumed all deferred subscription liabilities for these publications resulting in a pre-tax gain on the sale or disposal of assets of approximately $56,000.

On January 3, 2017, Word Broadcasting began operating our Louisville radio stations (WFIA-AM; WFIA-FM; WGTK-AM) under a twenty-four month TBA.

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CONTINGENT EARN-OUT CONSIDERATION

9 Months Ended

Sep. 30, 2017

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 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 16.

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.

TradersCrux.com

We acquired the TradersCrux.com website and related assets for $0.3 million in cash on July 6, 2017. We paid $0.3 million in cash upon closing and may pay up to an additional $0.1 million in contingent earn-out consideration within one year upon the achievement of income benchmarks. Using a probability-weighted discounted cash flow model based on our own assumptions as to the ability of TradersCrux.com to achieve the income targets at the time of closing, we estimated the fair value of the contingent earn-out consideration to be $18,750, which approximates the discounted present value due to the earn-out of less than one year.

We review the fair value of the contingent earn-out consideration quarterly over the earn-out period to compare actual revenues achieved and projected to the estimated revenues used in our forecasts. Any changes in the estimated fair value of the contingent earn-out consideration will be reflected in our results of operations in the period they are identified, up to the maximum future value outstanding under the contract of $0.1 million. There were no changes in our estimates of the fair value of the contingent earn-out consideration as of the three month period ended September 30, 2017.

Portuguese Bible Mobile Application

We acquired a Portuguese Bible mobile application and related assets on June 8, 2017. We paid $65,000 in cash upon closing and may pay up to an additional $20,000 in contingent earn-out consideration during the twelve month period ending June 8, 2018 based on the achievement of certain revenue benchmarks. Using a probability-weighted discounted cash flow model based on our own assumptions as to the ability of the Portuguese Bible mobile applications to achieve the revenue targets at the time of closing, we estimated the fair value of the contingent earn-out consideration to be $16,500, which approximated the discounted present value due to the earn-out of less than one year.

We review the fair value of the contingent earn-out consideration quarterly over the earn-out period to compare actual revenues achieved and projected to the estimated revenues used in our forecasts. Any changes in the estimated fair value of the contingent earn-out consideration will be reflected in our results of operations in the period they are identified, up to the maximum future value outstanding under the contract of $20,000. We recorded an increase of $1,700 in the estimated fair value of the contingent earn-out consideration that is reflected in our results of operations for the three month period ended September 30, 2017. The increase is due to a higher likelihood of achieving the revenue targets based on actual results to date that exceed our original estimates.

Turner Investment Products

We acquired Mike Turner’s line of investment products, including TurnerTrends.com and other domain names and related assets on September 13, 2016. We paid $0.4 million in cash upon closing and may pay up to an additional $0.1 million in contingent earn-out consideration during the twelve month period ended September 13, 2017 based on the achievement of certain revenue benchmarks. Using a probability-weighted discounted cash flow model based on our own assumptions as to the ability of Turner’s investment products to achieve the revenue targets at the time of closing, we estimated the fair value of the contingent earn-out consideration to be $74,000, which was recorded at the discounted present value of $66,000. The discount is being accreted to interest expense over the twelve month earn-out period. We believe that our experience with digital subscriptions and websites provides a reasonable basis for our estimates.

We review the fair value of the contingent earn-out consideration quarterly over the earn-out period to compare actual subscriber revenues achieved and projected to the estimated subscriber revenues used in our forecasts. Any changes in the estimated fair value of the contingent earn-out consideration will be reflected in our results of operations in the period they are identified, up to the maximum future value outstanding under the contract of $74,000. During the three and nine month period ended September 30, 2017, we recorded a net decrease of $14,000 and $53,000, respectively, in the estimated fair value of the contingent earn-out consideration that is reflected in our results of operations. These decreases were based on the likelihood of achieving the revenue targets based on actual results to date that were lower than our original estimates. We made no additional cash payments to the seller during the earn-out period ended September 13, 2017.

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 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 reviewed 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 were reflected in our results of operations in the period they were identified, up to the maximum amount due under the contract of $165,000 less any amounts paid to date. As of the six month period ended June 30, 2017, the end of the earn-out period, we recorded a net decrease of $4,000 in the estimated fair value of the contingent earn-out consideration based on actual session results at the end of the earn-out period. We paid a total of $75,000 in cash for amounts due under the contingent earn-out as of the end of the term on May 6, 2017. Over the total two-year earn out period, we paid a total of $75,000 to the seller with no payments made during the nine month period ended September 30, 2017.

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 was based upon 50% of the net subscriber revenues achieved over the two-year period from date of close with 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 was accreted to interest expense over the two-year earn-out period. We paid a total of $91,000 to the seller over the two year earn out period, of which approximately $14,000 was paid during the six month period ended June 30, 2017, which concluded the earn-out 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. The purchase agreement included contingent earn-out consideration of up to $8.5 million 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. The discount was accreted to interest expense over the three-year earn-out period. We paid a total of $0.9 million in cash for amounts due under the contingent earn-out as of the end of the term on December 31, 2016.

The following table reflects the changes in the present value of our acquisition-related estimated contingent earn-out consideration during the three and nine month periods ended September 30, 2017 and 2016:

	Three Months Ended September 30, 2017
	Short-Term		Long-Term
	Accrued Expenses		Other Liabilities		Total
	(Dollars in thousands)
Beginning Balance as of July 1, 2017	$	31	$	—	$	31
Acquisitions		19		—		19
Accretion of acquisition-related contingent earn-out consideration		—		—		—
Change in the estimated fair value of contingent earn-out consideration		(12)		—		(12)
Reclassification of payments due in next 12 months to short-term		—		—		—
Payments		—		—		—
Ending Balance as of September 30, 2017	$	38	$	—	$	38

	Three Months Ended September 30, 2016
	Short-Term		Long-Term
	Accrued Expenses		Other Liabilities		Total
	(Dollars in thousands)
Beginning Balance as of July 1, 2016	$	441	$	—	$	441
Acquisitions		66		—		66
Accretion of acquisition-related contingent earn-out consideration		5		—		5
Change in the estimated fair value of contingent earn-out consideration		(196)		—		(196)
Reclassification of payments due in next 12 months to short-term		—		—		—
Payments		(11)		—		(11)
Ending Balance as of September 30, 2016	$	305	$	—	$	305

	Nine Months Ended September 30, 2017
	Short-Term		Long-Term
	Accrued Expenses		Other Liabilities		Total
	(Dollars in thousands)
Beginning Balance as of January 1, 2017	$	66	$	—	$	66
Acquisitions		36		—		36
Accretion of acquisition-related contingent earn-out consideration		4		—		4
Change in the estimated fair value of contingent earn-out consideration		(54)		—		(54)
Reclassification of payments due in next 12 months to short-term		—		—		—
Payments		(14)		—		(14)
Ending Balance as of September 30, 2017	$	38	$	—	$	38

	Nine Months Ended September 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		66		—		66
Accretion of acquisition-related contingent earn-out consideration		13		8		21
Change in the estimated fair value of contingent earn-out consideration		(404)		(54)		(458)
Reclassification of payments due in next 12 months to short-term		556		(556)		—
Payments		(99)		—		(99)
Ending Balance as of September 30, 2016	$	305	$	—	$	305

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INVENTORIES

9 Months Ended

Sep. 30, 2017

Inventory Disclosure [Abstract]

INVENTORIES

NOTE 6. INVENTORIES

Inventories consist of finished goods that include books printed for sale by Regnery Publishing and wellness products for sale on our e-commerce sites. 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:

	As of December 31, 2016		As of September 30, 2017
	(Dollars in thousands)
Regnery Publishing book inventories	$	2,473	$	2,026
Reserve for obsolescence – Regnery Publishing		(2,104)		(1,544)
Inventory, net - Regnery Publishing		369		482
Wellness products	$	423	$	394
Reserve for obsolescence – Wellness products		(122)		(67)
Inventory, net - Wellness products		301		327
Consolidated inventories, net	$	670	$	809

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BROADCAST LICENSES

9 Months Ended

Sep. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

BROADCAST LICENSES

NOTE 7. BROADCAST LICENSES

The following table presents the changes in broadcasting licenses that include capital projects and acquisitions of radio stations and FM translators as discussed in Note 4 of our Condensed Consolidated financial statements.

	Twelve Months Ended		Nine Months Ended
Broadcast Licenses	December 31, 2016		September 30, 2017
	(Dollars in thousands)
Balance, beginning of period before cumulative loss on impairment	$	492,032	$	494,058
Accumulated loss on impairment		(99,001)		(105,541)
Balance, beginning of period after cumulative loss on impairment		393,031		388,517
Acquisitions of radio stations		74		—
Acquisitions of FM translators and construction permits		1,645		198
Capital projects to improve broadcast signal and strength		307		5
Impairments based on estimated fair value of broadcast licenses		(6,540)		—
Balance, end of period before cumulative loss on impairment		494,058		494,261
Accumulated loss on impairment		(105,541)		(105,541)
Balance, end of period after cumulative loss on impairment	$	388,517	$	388,720

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GOODWILL

9 Months Ended

Sep. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL

NOTE 8. GOODWILL

The following table presents the changes in goodwill including acquisitions as discussed in Note 4 of our Condensed Consolidated financial statements.

	Twelve Months Ended		Nine Months Ended
Goodwill	December 31, 2016		September 30, 2017
	(Dollars in thousands)
Balance, beginning of period before cumulative loss on impairment	$	26,560	$	27,642
Accumulated loss on impairment		(1,997)		(2,029)
Balance, beginning of period after cumulative loss on impairment		24,563		25,613
Acquisitions of radio stations and broadcast businesses		—		13
Acquisitions of digital media entities		237		810
Acquisitions of publishing entities		845		—
Impairment charge during year		(32)		—
Balance, end of period before cumulative loss on impairment		27,642		28,465
Accumulated loss on impairment		(2,029)		(2,029)
Ending period balance	$	25,613	$	26,436

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PROPERTY AND EQUIPMENT

9 Months Ended

Sep. 30, 2017

Property, Plant and Equipment [Abstract]

PROPERTY AND EQUIPMENT

NOTE 9. PROPERTY AND EQUIPMENT

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

	As of December 31, 2016		As of September 30, 2017
	(Dollars in thousands)
Land	$	32,402	$	33,008
Buildings		29,070		29,018
Office furnishings and equipment		37,386		37,135
Office furnishings and equipment under capital lease obligations		228		244
Antennae, towers and transmitting equipment		84,144		85,450
Antennae, towers and transmitting equipment under capital lease obligations		795		795
Studio, production and mobile equipment		28,668		29,322
Computer software and website development costs		20,042		22,756
Record and tape libraries		27		27
Automobiles		1,373		1,342
Leasehold improvements		14,696		18,626
Construction-in-progress		9,983		6,328
	$	258,814	$	264,051
Less accumulated depreciation		(156,024)		(161,848)
	$	102,790	$	102,203

Depreciation expense was approximately $3.1 million and $3.0 million, for the three month periods ended September 30, 2017 and 2016, respectively, and $9.2 million and $9.0 million for the nine month periods ended September 30, 2017 and 2016, respectively. Included in this amount is $10,000 and $30,000 for the three and nine month periods ended September 30, 2017 and $11,000 and $32,000 for the three and nine month periods ended September 30, 2016, on assets acquired under capital lease obligations. Accumulated depreciation of assets acquired under capital leases was $176,000 and $146,000 at September 30, 2017 and December 31, 2016, respectively.

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AMORTIZABLE INTANGIBLE ASSETS

9 Months Ended

Sep. 30, 2017

Intangible Assets Disclosure [Abstract]

AMORTIZABLE INTANGIBLE ASSETS

NOTE 10. AMORTIZABLE INTANGIBLE ASSETS

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

	As of September 30, 2017
			Accumulated
	Cost		Amortization		Net
	(Dollars in thousands)
Customer lists and contracts	$	22,865	$	(20,681)	$	2,184
Domain and brand names		20,109		(14,139)		5,970
Favorable and assigned leases		2,379		(2,018)		361
Subscriber base and lists		8,797		(4,402)		4,395
Author relationships		2,771		(2,171)		600
Non-compete agreements		2,029		(1,263)		766
Other amortizable intangible assets		1,333		(1,333)		—
	$	60,283	$	(46,007)	$	14,276

	As of December 31, 2016
			Accumulated
	Cost		Amortization		Net
	(Dollars in thousands)
Customer lists and contracts	$	22,599	$	(20,070)	$	2,529
Domain and brand names		19,821		(12,970)		6,851
Favorable and assigned leases		2,379		(1,972)		407
Subscriber base and lists		7,972		(5,304)		2,668
Author relationships		2,771		(1,824)		947
Non-compete agreements		2,018		(1,012)		1,006
Other amortizable intangible assets		1,336		(1,336)		—
	$	58,896	$	(44,488)	$	14,408

Amortization expense was approximately $1.1 million and $1.4 million for the three month period ended September 30, 2017 and 2016, respectively, and $3.4 million and $3.7 million for the nine month period ended September 30, 2017 and 2016, respectively. Based on the amortizable intangible assets as of September 30, 2017, we estimate amortization expense for the next five years to be as follows:

Year Ended December 31,	Amortization Expense
	(Dollars in thousands)
2017 (Oct – Dec)	$	1,173
2018		4,576
2019		4,006
2020		2,714
2021		1,159
Thereafter		648
Total	$	14,276

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LONG-TERM DEBT

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

NOTES PAYABLE AND LONG-TERM DEBT

NOTE 11. LONG-TERM DEBT

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

6.75% Senior Secured Notes

On May 19, 2017, we issued in a private placement the Notes, which were guaranteed on a senior secured basis by our existing subsidiaries (the “Subsidiary Guarantors”). The Notes bear interest at a rate of 6.75% per year and mature on June 1, 2024, unless earlier redeemed or repurchased. Interest initially accrues on the Notes from May 19, 2017 and is payable semi-annually, in cash in arrears, on June 1 and December 1 of each year, commencing December 1, 2017.

The Notes and the ABL Facility are secured by liens on substantially all of our and the Subsidiary Guarantors’ assets, other than certain excluded assets. The ABL Facility has a first-priority lien on our and the Subsidiary Guarantor’s accounts receivable, inventory, deposit and securities accounts, certain real estate and related assets (the “ABL Priority Collateral”). The Notes are secured by a first-priority lien on substantially all other assets of ours and the Subsidiary Guarantors (the “Notes Priority Collateral”). There is no direct lien on our Federal Communications Commission (“FCC”) licenses to the extent prohibited by law or regulation.

We may redeem the Notes, in whole or in part, at any time on or after June 1, 2020 at a price equal to 100% of the principal amount of the Notes plus a “make-whole” premium as of, and accrued and unpaid interest, if any, to, but not including, the redemption date. At any time on or after June 1, 2020, we may redeem some or all of the Notes at the redemption prices (expressed as percentages of the principal amount to be redeemed) set forth in the Notes, plus accrued and unpaid interest, if any, to, but not including, the redemption date. In addition, we may redeem up to 35% of the aggregate principal amount of the Notes before June 1, 2020 with the net cash proceeds from certain equity offerings at a redemption price of 106.75% of the principal amount plus accrued and unpaid interest, if any, to, but not including, the redemption date. We may also redeem up to 10% of the aggregate original principal amount of the Notes per twelve month period before June 1, 2020 at a redemption price of 103% of the principal amount plus accrued and unpaid interest to, but not including, the redemption date.

The indenture relating to the Notes (the “Indenture”) contains covenants that, among other things and subject in each case to certain specified exceptions, limit our ability and the ability of our restricted subsidiaries to: (i) incur additional debt; (ii) declare or pay dividends, redeem stock or make other distributions to stockholders; (iii) make investments; (iv) create liens or use assets as security in other transactions; (v) merge or consolidate, or sell, transfer, lease or dispose of substantially all of our assets; (vi) engage in transactions with affiliates; and (vii) sell or transfer assets.

The Indenture provides for the following events of default (each, an “Event of Default”): (i) default in payment of principal or premium on the Notes at maturity, upon repurchase, acceleration, optional redemption or otherwise; (ii) default for 30 days in payment of interest on the Notes; (iii) the failure by us or certain restricted subsidiaries to comply with other agreements in the Indenture or the Notes, in certain cases subject to notice and lapse of time; (iv) the failure of any guarantee by certain significant Subsidiary Guarantors to be in full force and effect and enforceable in accordance with its terms, subject to notice and lapse of time; (v) certain accelerations (including failure to pay within any grace period) of other indebtedness of ours or any restricted subsidiary if the amount accelerated (or so unpaid) is at least $15 million; (vi) certain judgments for the payment of money in excess of $15 million; (vii) certain events of bankruptcy or insolvency with respect to us or any significant subsidiary; and (vii) certain defaults with respect to any collateral having a fair market value in excess of $15 million. If an Event of Default occurs and is continuing, the Trustee or the holders of at least 25% in principal amount of the outstanding Notes may declare the principal of the Notes and any accrued interest on the Notes to be due and payable immediately, subject to remedy or cure in certain cases. Certain events of bankruptcy or insolvency are Events of Default which will result in the Notes being due and payable immediately upon the occurrence of such Events of Default.

We are required to pay $17.2 million per year in interest on the Notes. As of September 30, 2017, accrued interest on the Notes was $6.4 million.

We incurred debt issuance costs of $6.3 million that were recorded as a reduction of the debt proceeds that are being amortized to non-cash interest expense over the life of the Notes using the effective interest method. During the three and nine month periods ended September 30, 2017, $0.2 million and $0.3 million, respectively, of debt issuance costs associated with the Notes were recognized as interest expense.

Asset-Based Revolving Credit Facility

On May 19, 2017, the Company also entered into the ABL Facility pursuant to a Credit Agreement (the “Credit Agreement”) by and among us, as a borrower, our subsidiaries party thereto, as borrowers, Wells Fargo Bank, National Association, as administrative agent and lead arranger, and the lenders that are parties thereto. We used the proceeds of the ABL Facility, together with the net proceeds from the Notes offering, to repay outstanding borrowings under our previously existing senior credit facilities, and related fees and expenses. Going forward, the proceeds of the ABL Facility will be used to provide ongoing working capital and for other general corporate purposes (including permitted acquisitions).

The ABL Facility is a five-year $30.0 million revolving credit facility due May 19, 2022, which includes a $5.0 million subfacility for standby letters of credit and a $7.5 million subfacility for swingline loans. All borrowings under the ABL Facility accrue at a rate equal to a base rate or LIBOR rate plus a spread. The spread, which is based on an availability-based measure, ranges from 0.50% to 1.00% for base rate borrowings and 1.50% to 2.00% for LIBOR rate borrowings. If an event of default occurs, the interest rate may increase by 2.00% per annum. Amounts outstanding under the ABL Facility may be paid and then reborrowed at our discretion without penalty or premium. Additionally, we pay a commitment fee on the unused balance of 0.25% to 0.375% per year.

The ABL Facility is secured by a first-priority lien on the ABL Priority Collateral and by a second-priority lien on the Notes Priority Collateral. There is no direct lien on the Company’s FCC licenses to the extent prohibited by law or regulation (other than the economic value and proceeds thereof).

The Credit Agreement includes a springing fixed charge coverage ratio of 1.0 to 1.0, which is tested during the period commencing on the last day of the fiscal month most recently ended prior to the date on which Availability (as defined in the Credit Agreement) is less than the greater of 15% of the Maximum Revolver Amount (as defined in the Credit Agreement) and $4.5 million and continuing for a period of 60 consecutive days after the first day on which Availability exceeds such threshold amount. 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 the borrowers and their subsidiaries (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; (vii) to merge or consolidate with, or dispose of all assets to a third party, except as permitted thereby; (viii) to prepay indebtedness; and (ix) to pay dividends.

The Credit Agreement provides for the following events of default: (i) default for non-payment of any principal or letter of credit reimbursement when due or any interest, fees or other amounts within five days of the due date; (ii) the failure by any borrower or any subsidiary to comply with any covenant or agreement contained in the Credit Agreement or any other loan document, in certain cases subject to applicable notice and lapse of time; (iii) any representation or warranty made pursuant to the Credit Agreement or any other loan document is incorrect in any material respect when made; (iv) certain defaults of other indebtedness of any borrower or any subsidiary of indebtedness of at least $10 million; (v) certain events of bankruptcy or insolvency with respect to any borrower or any subsidiary; (vi) certain judgments for the payment of money of $10 million or more; (vii) a change of control; and (viii) certain defaults relating to the loss of FCC licenses, cessation of broadcasting and termination of material station contracts. If an event of default occurs and is continuing, the Administrative Agent and the Lenders may accelerate the amounts outstanding under the ABL Facility and may exercise remedies in respect of the collateral.

We incurred debt issue costs of $0.6 million that were recorded as an asset and are being amortized to non-cash interest expense over the term of the ABL Facility using the effective interest method. During the three and nine month periods ended September 30, 2017, $63,000 and $86,000, respectively, of debt issue costs associated with the Notes were recognized as interest expense. At September 30, 2017, the blended interest rate on amounts outstanding under the ABL Facility was 2.98%.

We report outstanding balances on the ABL Facility as short-term regardless of the maturity date based on use of the ABL Facility to fund ordinary and customary operating cash needs with frequent repayments. We believe that our borrowing capacity under the ABL Facility allows us to meet our ongoing operating requirements, fund capital expenditures and satisfy our debt service requirements for at least the next twelve months.

Prior Term Loan B and Revolving Credit Facility

Our prior credit facility consisted of a term loan of $300.0 million (“Term Loan B”) and a revolving credit facility of $25.0 million (“Revolver”). The Term Loan B was issued at a discount for total net proceeds of $298.5 million. The discount was amortized to non-cash interest expense over the life of the loan using the effective interest method. For each of the three months ended September 30, 2017 and 2016, approximately $0 and $51,000, respectively, of the discount associated with the Term Loan B was recognized as interest expense. For each of the nine months ended September 30, 2017 and 2016, approximately $74,000 and $155,000, respectively, of the discount associated with the Term Loan B was recognized as interest expense.

The Term Loan B had a term of seven years, maturing in March 2020. On May 19, 2017, we used the net proceeds of the Notes and a portion of the ABL Facility to fully repay amounts outstanding under the Term Loan B of $258.0 million and under the Revolver of $4.1 million. We recorded a loss on the early retirement of long-term debt of $2.1 million, which included $1.5 million of unamortized debt issuance costs on the Term Loan B and the Revolver and $0.6 million of unamortized discount on the Term Loan B.

The following payments or prepayments of the Term Loan B were made during the year ended December 31, 2016 and through the date of the termination, including interest through the payment date as follows:

Date	Principal Paid		Unamortized Discount
	(Dollars in Thousands)
May 19, 2017	$	258,000	$	550
February 28, 2017		3,000		6
January 30, 2017		2,000		5
December 30, 2016		5,000		12
November 30, 2016		1,000		3
September 30, 2016		1,500		4
September 30, 2016		750		—
June 30, 2016		441		1
June 30, 2016		750		—
March 31, 2016		750		—
March 17, 2016		809		2

Debt issuance costs were 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 September 30, 2017 and 2016, approximately $0 and $140,000, respectively, of the debt issuance costs associated with the Term Loan B were recognized as interest expense. For each of the nine months ended September 30, 2017 and 2016, approximately $203,000 and $423,000 respectively, of the debt issuance costs associated with the Term Loan B were recognized as interest expense.

Debt issuance costs associated with the Revolver were recorded as an asset in accordance with ASU 2015-15. The costs were 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%. For each of the three month periods ended September 30, 2017 and 2016, we recorded amortization of deferred financing costs of approximately $0 and $17,000. For each of the nine month periods ended September 30, 2017 and 2016, we recorded amortization of deferred financing costs of approximately $26,000 and $52,000.

Summary of long-term debt obligations

Long-term debt consisted of the following:

	As of December 31, 2016		As of September 30, 2017
	(Dollars in thousands)
6.75% Senior Secured Notes	$	—	$	255,000
Less unamortized debt issuance costs based on imputed interest rate of 7.08%		—		(6,004)
6.75% Senior Secured Notes net carrying value		—		248,996
Asset-Based Revolving Credit Facility principal outstanding		—		6,629
Term Loan B principal amount		263,000		—
Less unamortized discount and debt issuance costs based on imputed interest rate of 4.78%		(2,371)		—
Term Loan B net carrying value		260,629		—
Revolver principal outstanding		477		—
Capital leases and other loans		568		491
Long-term debt and capital lease obligations less unamortized debt issuance costs		261,674		256,116
Less current portion		(590)		(6,741)
Long-term debt and capital lease obligations less unamortized debt issuance costs, net of current portion	$	261,084	$	249,375

In addition to the outstanding amounts listed above, we also have interest payments related to our long-term debt as follows as of September 30, 2017:

· Outstanding borrowings of $6.6 million under the ABL Facility, with interest payments due at LIBOR plus 1.5% to 2.0% per annum;

· $255.0 million aggregate principal amount of Notes with semi-annual interest payments at an annual rate of 6.75%; and

· Commitment fee of 0.25% to 0.375% on the unused portion of the ABL Facility.

Other Debt

We have several capital leases related to office equipment. The obligation recorded at December 31, 2016 and September 30, 2017 represents the present value of future commitments under the capital lease agreements.

Maturities of Long-Term Debt and Capital Lease Obligations

Principal repayment requirements under all long-term debt agreements outstanding at September 30, 2017 for each of the next five years and thereafter are as follows:

	Amount
For the Twelve Months Ended September 30,	(Dollars in thousands)
2018	$	6,741
2019		108
2020		107
2021		121
2022		43
Thereafter		255,000
	$	262,120

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STOCK INCENTIVE PLAN

9 Months Ended

Sep. 30, 2017

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

STOCK INCENTIVE PLAN

NOTE 12. STOCK INCENTIVE PLAN

Our Amended and Restated 1999 Stock Incentive Plan (the “Plan”) provides for grants of equity-based awards to employees, non-employee directors and officers, and advisors of the company (“Eligible Persons”). The Plan is designed to promote the interests of the company using equity investment interests to attract, motivate, and retain individuals.

A maximum of 5,000,000 shares of common stock are authorized under the Plan. All awards have restriction periods tied primarily to employment and/or service. The Plan allows for accelerated or continued vesting in certain circumstances as defined in the Plan including death, disability, a change in control, and termination or retirement. The Board of Directors, or a committee appointed by the Board, has discretion subject to limits defined in the Plan, to modify the terms of any outstanding award.

Under the Plan, the Board, or a committee appointed by the Board, may impose restrictions on the exercise of awards during pre-defined blackout periods. Insiders may participate in plans established pursuant to Rule 10b5-1 under the Exchange Act that allow them to exercise awards subject to pre-established criteria.

We recognize non-cash stock-based compensation expense based on the estimated fair value of awards in accordance with FASB ASC Topic 718 “Compensation—Stock Compensation.” Stock-based compensation expense fluctuates over time as a result of the vesting periods for outstanding awards and the number of awards that actually vest. We adopted ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting” as of January 1, 2017. The adoption of this ASU did not materially impact our financial position, results of operations, or cash flows.

The following table reflects the components of stock-based compensation expense recognized in the Condensed Consolidated Statements of Operations for the three and nine month periods ended September 30, 2017 and 2016:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2017		2016		2017
	(Dollars in thousands)
Stock option compensation expense included in corporate expenses	$	94	$	27	$	296	$	126
Restricted stock shares compensation expense included in corporate expenses		—		225		24		1,100
Stock option compensation expense included in broadcast operating expenses		19		7		67		41
Restricted stock shares compensation expense included in broadcast operating expenses		—		—		—		224
Stock option compensation expense included in digital media operating expenses		12		6		51		25
Restricted stock shares compensation expense included in digital media operating expenses		—		—		—		124
Stock option compensation expense included in publishing operating expenses		9		3		20		17
Restricted stock shares compensation expense included in publishing operating expenses		—		—		—		36
Total stock-based compensation expense, pre-tax	$	134	$	268	$	458	$	1,693
Tax benefit (expense) for stock-based compensation expense		(54)		(107)		(183)		(677)
Total stock-based compensation expense, net of tax	$	80	$	161	$	275	$	1,016

Stock Option and Restricted Stock Grants

Eligible employees may receive stock option awards annually with the number of shares and type of instrument generally determined by the employee’s salary grade and performance level. Incentive and non-qualified stock option awards allow the recipient to purchase shares of our common stock at a set price, not to be less than the closing market price on the date of award, for no consideration payable by the recipient. The related number of shares underlying the stock option is fixed at the time of the grant. Options generally vest over a four-year period with a maximum term of five years from the vesting date. In addition, certain management and professional level employees may receive stock option awards upon the commencement of employment.

The Plan also allows for awards of restricted stock, which have been granted periodically to non-employee directors of the company. Awards granted to non-employee directors are made in exchange for their services to the company as directors and therefore, the guidance in FASB ASC Topic 505-50 “Equity Based Payments to Non Employees” is not applicable. Restricted stock awards contain transfer restrictions under which they cannot be sold, pledged, transferred or assigned until the period specified in the award, generally from one to five years. Restricted stock awards are independent of option grants and are granted at no cost to the recipient other than applicable taxes owed by the recipient. The awards are considered issued and outstanding from the vest date of grant.

The fair value of each award is estimated as of the date of the grant using the Black-Scholes valuation model. The expected volatility reflects the consideration of the historical volatility of our common stock as determined by the closing price over a six to ten year term commensurate with the expected term of the award. Expected dividends reflect the amount of 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 have used historical data to estimate future forfeiture rates to apply against the gross amount of compensation expense determined using the valuation model. These estimates have approximated our actual forfeiture rates.

There were no stock options granted during the nine month period ended September 30, 2017. The weighted-average assumptions used to estimate the fair value of the stock options using the Black-Scholes valuation model were as follows for the three and nine month periods ended September 30, 2016:

	Three Months Ended	Nine Months Ended
	September 30, 2016	September 30, 2016
Expected volatility	n/a		47.03	%
Expected dividends	n/a		5.36	%
Expected term (in years)	n/a		7.4
Risk-free interest rate	n/a		1.64	%

Activity with respect to the company’s option awards during the nine month period ended September 30, 2017 is as follows:

							Weighted Average	Aggregate
			Weighted Average		Weighted Average		Remaining Contractual	Intrinsic
Options	Shares		Exercise Price		Grant Date Fair Value		Term	Value
	(Dollars in thousands, except weighted average exercise price and weighted average grant date fair value)
Outstanding at January 1, 2017		1,720,000	$	5.12	$	2.89	4.5 years	$	2,428
Granted		—		—		—
Exercised		(122,413)		4.09		2.04
Forfeited or expired		(143,125)		5.85		2.99
Outstanding at September 30, 2017		1,454,462	$	5.18	$	2.95	3.9 years	$	2,292
Exercisable at September 30, 2017		954,959	$	5.63	$	3.76	2.9 years	$	1,146
Expected to Vest		474,278	$	5.19	$	2.97	3.9 years	$	1,115

The aggregate intrinsic value represents the difference between the company’s closing stock price on September 30, 2017 of $6.60 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 nine month periods ended September 30, 2017 and 2016 was $0.9 million and $1.1 million, respectively.

As of September 30, 2017, there was $0.2 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 1.6 years.

On August 9, 2017, a restricted stock award of 33,066 shares was granted to an executive that vested immediately. The fair value of the restricted stock award was measured based on the grant date market price of our common shares and expensed as of the vesting date. The restricted stock award contains transfer restrictions under which they cannot be sold, pledged, transferred or assigned until three months from vesting date. The recipient of this restricted stock award is entitled to all of the rights of absolute ownership of the restricted stock from the date of grant, including the right to vote the shares and to receive dividends. Restricted stock awards are independent of option grants and are granted at no cost to the recipient other than applicable taxes owed by the recipient. The award is considered issued and outstanding from the vest date of grant.

On February 24, 2017, a restricted stock award of 178,592 shares was granted to certain members of management that vested immediately. The fair value of each restricted stock award was measured based on the grant date market price of our common shares and expensed as of the vesting date. These restricted stock awards contained transfer restrictions under which they could not be sold, pledged, transferred or assigned until three months from vesting date. Recipients of these restricted stock awards were entitled to all of the rights of absolute ownership of the restricted stock from the date of grant including the right to vote the shares and to receive dividends. Restricted stock awards are independent of option grants and are granted at no cost to the recipient other than applicable taxes owed by the recipient. The awards were considered issued and outstanding from the vest date of grant.

Activity with respect to the company’s restricted stock awards during the nine month period ended September 30, 2017 is as follows:

			Weighted Average		Weighted Average Remaining	Aggregate
Restricted Stock Awards	Shares		Grant Date Fair Value		Contractual Term	Intrinsic Value
	(Dollars in thousands, except weighted average exercise price and weighted average grant date fair value)
Outstanding at January 1, 2017		—	$	—	—	$	—
Granted		211,658		7.01	0.2 years		1,484
Lapse of restrictions		(178,592)		7.05	—		1,259
Forfeited		—		—	—		—
Outstanding at September 30, 2017		33,066	$	6.80	0.2 years	$	225

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EQUITY TRANSACTIONS

9 Months Ended

Sep. 30, 2017

Equity [Abstract]

EQUITY TRANSACTIONS

NOTE 13. EQUITY TRANSACTIONS

We account for stock-based compensation expense in accordance with FASB ASC Topic 718, “Compensation-Stock Compensation.” As a result, $0.3 million and $1.7 million of non-cash stock-based compensation expense has been recorded to additional paid-in capital for the three and nine month periods ended September 30, 2017, respectively, in comparison to $0.1 million and $0.5 million for the three and nine month periods ended September 30, 2016, respectively.

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 and legal 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. In recent years, distributions have been approximately 20% of Adjusted EBITDA less cash paid for capital expenditures, less cash paid for income taxes, and less cash paid for interest. Adjusted EBITDA is a non-GAAP financial measure defined in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations included with this quarterly report on Form 10-Q. Future distributions, if any, are likely to be approximately 30% of Adjusted EBITDA less cash paid for capital expenditures, less cash paid for income taxes, and less cash paid for interest.

The following table shows distributions that have been declared and paid since January 1, 2016:

				Cash Distributed
Announcement Date	Payment Date	Amount Per Share		(in thousands)
September 12, 2017	September 29, 2017	$	0.0650	$	1,701
June 1, 2017	June 30, 2017	$	0.0650	$	1,697
March 9, 2017	March 30, 2017	$	0.0650	$	1,691
December 7, 2016	December 31, 2016	$	0.0650	$	1,678
September 9, 2016	September 30, 2016	$	0.0650	$	1,679
June 2, 2016	June 30, 2016	$	0.0650	$	1,664
March 10, 2016	April 5, 2016	$	0.0650	$	1,657

Based on the number of shares of Class A and Class B currently outstanding, we expect to pay total annual distributions of approximately $6.8 million during the year ended December 31, 2017.

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BASIC AND DILUTED NET EARNINGS PER SHARE

9 Months Ended

Sep. 30, 2017

Earnings Per Share [Abstract]

Earnings Per Share

NOTE 14. 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. Restricted stock awards that vested immediately during the three month period ended March 31, 2017, were included in the weighted average number of common shares used to compute basic earnings per share because these restricted stock awards contained dividend participation and voting rights. 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 1,454,462 and 1,729,000 shares of Class A common stock were outstanding at September 30, 2017 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 September 30, 2017 and 2016 there were 335,682 and 367,940 dilutive shares, respectively.

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DERIVATIVE INSTRUMENTS

9 Months Ended

Sep. 30, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure

NOTE 15. 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 the Term Loan B. Payments on the swap are due on a quarterly basis with a LIBOR floor of 0.625%. Pursuant to the terms, the swap was set to expire 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 were recognized in the current period statement of operations rather than through other comprehensive income. On May 19, 2017, in connection with our Refinancing, we paid $0.8 million to terminate the interest rate swap.

The following table summarizes the fair value of our derivative instruments that are measured at fair value:

	As of December 31, 2016		As of September 30, 2017
	(Dollars in thousands)
Fair value of interest rate swap	$	514	$	—

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FAIR VALUE MEASUREMENTS

9 Months Ended

Sep. 30, 2017

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

NOTE 16. 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 September 30, 2017, 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.

We have certain assets that are measured at fair value on a non-recurring basis that are adjusted to fair value only when the carrying values exceed the fair values. The categorization of the framework used to price the assets is considered Level 3 due to the subjective nature of the unobservable inputs used when estimating the fair value.

The following table summarizes the fair value of our financial assets and liabilities that are measured at fair value:

	September 30, 2017
	Total Fair Value
	and Carrying
	Value on Balance		Fair Value Measurement Category
	Sheet		Level 1		Level 2		Level 3
	(Dollars in thousands)
Assets
Estimated fair value of other indefinite-lived intangible assets	$	313		—		—	$	313
Liabilities:
Estimated fair value of contingent earn-out consideration included in accrued expenses		38		—		—		38
Long-term debt and capital lease obligations less unamortized debt issuance costs		256,116		—		256,116		—

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INCOME TAXES

9 Months Ended

Sep. 30, 2017

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 17. INCOME TAXES

We recognize deferred tax assets and liabilities for future tax consequences attributable to differences between our consolidated financial statement carrying amount of assets and liabilities and their respective tax bases. We measure these deferred tax assets and liabilities using enacted tax rates expected to apply in the years in which these temporary differences are expected to reverse. We recognize the effect on deferred tax assets and liabilities resulting from a change in tax rates in income in the period that includes the date of the change. We recorded no adjustments to our unrecognized tax benefits as of September 30, 2017 and 2016.

We prospectively adopted ASU 2015-17, “Income Taxes, Balance Sheet Classification of Deferred Taxes” as of January 1, 2017. ASU 2015-17 requires that deferred tax assets and liabilities be classified as non-current on the balance sheet instead of separating the deferred tax assets and liabilities into current and non-current amounts. Our Condensed Consolidated Balance Sheet as of March 31, 2017 reflects the adoption of this guidance with a $9.4 million reduction in current deferred income tax assets, a $1.9 million increase in non-current deferred income tax assets and a $7.5 million reduction in non-current deferred income tax liabilities. Other than this revised presentation, the adoption of this ASU had no impact on our financial position, results of operations, or cash flows.

At December 31, 2016, we had net operating loss carryforwards for federal income tax purposes of approximately $150.7 million that expire in 2020 through 2034 and for state income tax purposes of approximately $1,021.2 million that expire in years 2017 through 2036. For financial reporting purposes at December 31, 2016 we had a valuation allowance of $4.5 million, net of federal benefit, to offset $4.2 million of the deferred tax assets related to the state net operating loss carryforwards and $0.3 million associated with asset impairments. Our evaluation was performed for tax years that remain subject to examination by major tax jurisdictions, which range from 2013 through 2016.

The amortization of our indefinite-lived intangible assets for tax purposes but not for book purposes creates deferred tax liabilities. A reversal of deferred tax liabilities may occur when indefinite-lived intangibles: (1) become impaired; or (2) are sold, which would typically only occur in connection with the sale of the assets of a station or groups of stations or the entire company in a taxable transaction. Due to the amortization for tax purposes and not book purposes of our indefinite-lived intangible assets, we expect to continue to generate deferred tax liabilities in future periods exclusive of any impairment losses in future periods. These deferred tax liabilities and net operating loss carryforwards result in differences between our provision for income tax and cash paid for taxes.

Valuation Allowance (Deferred Taxes)

For financial reporting purposes, we recorded a valuation allowance of $4.5 million as of September 30, 2017 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

9 Months Ended

Sep. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 18. 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. We filed an appeal against the award as well as a malpractice lawsuit against the lawyer that represented Salem in the collection lawsuit. A legal reserve of $0.5 million was recorded representing the total possible loss contingency without third party recoveries from our appeal, malpractice lawsuit or insurance claims. In March 2017, the case and all counterclaims were settled for a net amount of $0.3 million.

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SEGMENT DATA

9 Months Ended

Sep. 30, 2017

Segment Reporting [Abstract]

SEGMENT DATA

NOTE 19. 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. 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.

During the third quarter of 2016, we reclassed Salem Consumer Products, our e-commerce business that sells books, DVD’s and editorial content developed by our on-air personalities, from our Digital Media segment to our Broadcast segment. With this reclassification, all revenue and expenses generated by on-air hosts, including broadcast programs and e-commerce product sales are consolidated to assess the financial performance of each network program.

Our operating segments reflect how our chief operating decision makers, which we define as a collective group of senior executives, assess the performance of each operating segment and determine the appropriate allocations of resources to each segment. We continue to 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. Changes to our operating segments did not impact the reporting units used to test non-amortizable assets for impairment. All prior periods presented are updated to reflect the new composition of our operating segments. 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 September 30, 2017 and 2016 based on the new composition of our operating segments:

							Unallocated
			Digital				Corporate
	Broadcast		Media		Publishing		Expenses		Consolidated
	(Dollars in thousands)
Three Months Ended September 30, 2017
Net revenue	$	48,424	$	10,446	$	6,563	$	—	$	65,433
Operating expenses		37,040		8,169		6,686		4,233		56,128
Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration and net (gain) loss on the sale or disposal of assets	$	11,384	$	2,277	$	(123)	$	(4,233)	$	9,305
Depreciation		1,920		792		159		211		3,082
Amortization		11		860		264		—		1,135
Change in the estimated fair value of contingent earn-out consideration		—		(12)		—		—		(12)
Net (gain) loss on the sale or disposal of assets		97		—		—		(2)		95
Net operating income (loss)	$	9,356	$	637	$	(546)	$	(4,442)	$	5,005
Three Months Ended September 30, 2016
Net revenue	$	51,052	$	11,999	$	8,221	$	—	$	71,272
Operating expenses		37,434		9,172		8,020		4,147		58,773
Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration and net (gain) loss on the sale or disposal of assets	$	13,618	$	2,827	$	201	$	(4,147)	$	12,499
Depreciation		1,753		840		174		209		2,976
Amortization		22		1,091		228		—		1,341
Change in the estimated fair value of contingent earn-out consideration		—		(13)		(183)		—		(196)
Net (gain) loss on the sale or disposal of assets		(633)		176		—		—		(457)
Net operating income (loss)	$	12,476	$	733	$	(18)	$	(4,356)	$	8,835

							Unallocated
			Digital				Corporate
	Broadcast		Media		Publishing		Expenses		Consolidated
	(Dollars in thousands)
Nine Months Ended September 30, 2017
Net revenue	$	145,479	$	31,998	$	19,048	$	—	$	196,525
Operating expenses		108,807		25,241		18,705		13,183		165,936
Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration, impairments and net (gain) loss on the sale or disposal of assets	$	36,672		6,757	$	343	$	(13,183)	$	30,589
Depreciation		5,668		2,389		515		599		9,171
Amortization		46		2,494		879		1		3,420
Change in the estimated fair value of contingent earn-out consideration		—		(54)		—		—		(54)
Impairment of indefinite-lived long-term assets other than goodwill		—		—		19		—		19
Net (gain) loss on the sale or disposal of assets		(399)		—		(9)		(2)		(410)
Net operating income (loss)	$	31,357	$	1,928	$	(1,061)	$	(13,781)	$	18,443
Nine Months Ended September 30, 2016
Net revenue	$	149,768	$	34,056	$	19,802	$	—	$	203,626
Operating expenses		109,455		26,815		19,951		11,928		168,149
Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration, impairments and net (gain) loss on the sale or disposal of assets	$	40,313	$	7,241	$	(149)	$	(11,928)	$	35,477
Depreciation		5,431		2,392		489		638		8,950
Amortization		67		3,233		372		1		3,673
Change in the estimated fair value of contingent earn-out consideration		—		(119)		(339)		—		(458)
Impairment of long-lived assets		700		—		—		—		700
Net (gain) loss on the sale or disposal of assets		(2,175)		182		(21)		6		(2,008)
Net operating income (loss)	$	36,290	$	1,553	$	(650)	$	(12,573)	$	24,620

			Digital				Unallocated
	Broadcast		Media		Publishing		Corporate		Consolidated
	(Dollars in thousands)
As of September 30, 2017
Inventories, net	$	—	$	327	$	482	$	—	$	809
Property and equipment, net		86,187		6,603		1,326		8,087		102,203
Broadcast licenses		388,720		—		—		—		388,720
Goodwill		3,594		20,946		1,888		8		26,436
Other indefinite-lived intangible assets		—		—		313		—		313
Amortizable intangible assets, net		361		10,720		3,190		5		14,276
As of December 31, 2016
Inventories, net	$	—	$	300	$	370	$	—	$	670
Property and equipment, net		86,976		6,634		1,779		7,401		102,790
Broadcast licenses		388,517		—		—		—		388,517
Goodwill		3,581		20,136		1,888		8		25,613
Other indefinite-lived intangible assets		—		—		332		—		332
Amortizable intangible assets, net		407		9,927		4,069		5		14,408

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SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2017

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 20. SUBSEQUENT EVENTS

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

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ACQUISITIONS AND RECENT TRANSACTIONS (Tables)

9 Months Ended

Sep. 30, 2017

Business Combinations [Abstract]

Summary of Business Acquisitions and Asset Purchased

A summary of our business acquisitions and asset purchases during the nine month period ended September 30, 2017, 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)
September 15, 2017	Real property of radio station WSPZ-AM in Bethesda, Maryland (business acquisition)	$	1,500
August 31, 2017	TeacherTube.com (business acquisition)		1,100
August 31, 2017	Intelligence Reporter newsletter (business acquisition)		—
July 24, 2017	FM Translator construction permit, Eaglemount, Washington (asset acquisition)		40
July 6, 2017	TradersCrux.com (business acquisition)		298
June 28, 2017	FM Translator construction permit, Festus, Missouri (asset acquisition)		40
June 8, 2017	Portuguese Bible Mobile Applications (business acquisition)		82
March 15, 2017	Prayers for Special Help (business acquisition)		245
March 14, 2017	FM Translator construction permit, Quartz Site, Arizona (asset purchase)		20
March 1, 2017	FM Translator construction permit, Roseburg, Oregon (asset purchase)		45
January 16, 2017	FM Translator, Astoria, Oregon (asset purchase)		33
January 1, 2017	FM Translator construction permit, Mohave Valley, Arizona (asset purchase)		20
		$	3,423

Summary of Total Acquisition Consideration

The following table summarizes the total acquisition consideration for the nine month period ended September 30, 2017:

Description	Total Consideration
	(Dollars in thousands)
Cash payments made upon closing	$	3,352
Escrow deposits paid in prior years		35
Present value of estimated fair value of contingent earn-out consideration		36
Total purchase price consideration	$	3,423

Total Acquisition Consideration Allocated

The fair value of the net assets acquired was allocated as follows:

	Net Broadcast		Net Digital Media		Total Net
	Assets Acquired		Assets Acquired		Assets Acquired
	(Dollars in thousands)
Assets
Property and equipment	$	1,487	$	479	$	1,966
Broadcast licenses		198		—		198
Goodwill		13		810		823
Customer lists and contracts		—		314		314
Domain and brand names		—		647		647
Subscriber base and lists		—		2,316		2,316
Non-compete agreements		—		11		11
	$	1,698	$	4,577	$	6,275
Liabilities
Deferred revenue	$	—		(2,852)		(2,852)
	$	1,698	$	1,725	$	3,423

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CONTINGENT EARN-OUT CONSIDERATION (Tables)

9 Months Ended

Sep. 30, 2017

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 nine month periods ended September 30, 2017 and 2016:

	Three Months Ended September 30, 2017
	Short-Term		Long-Term
	Accrued Expenses		Other Liabilities		Total
	(Dollars in thousands)
Beginning Balance as of July 1, 2017	$	31	$	—	$	31
Acquisitions		19		—		19
Accretion of acquisition-related contingent earn-out consideration		—		—		—
Change in the estimated fair value of contingent earn-out consideration		(12)		—		(12)
Reclassification of payments due in next 12 months to short-term		—		—		—
Payments		—		—		—
Ending Balance as of September 30, 2017	$	38	$	—	$	38

	Three Months Ended September 30, 2016
	Short-Term		Long-Term
	Accrued Expenses		Other Liabilities		Total
	(Dollars in thousands)
Beginning Balance as of July 1, 2016	$	441	$	—	$	441
Acquisitions		66		—		66
Accretion of acquisition-related contingent earn-out consideration		5		—		5
Change in the estimated fair value of contingent earn-out consideration		(196)		—		(196)
Reclassification of payments due in next 12 months to short-term		—		—		—
Payments		(11)		—		(11)
Ending Balance as of September 30, 2016	$	305	$	—	$	305

	Nine Months Ended September 30, 2017
	Short-Term		Long-Term
	Accrued Expenses		Other Liabilities		Total
	(Dollars in thousands)
Beginning Balance as of January 1, 2017	$	66	$	—	$	66
Acquisitions		36		—		36
Accretion of acquisition-related contingent earn-out consideration		4		—		4
Change in the estimated fair value of contingent earn-out consideration		(54)		—		(54)
Reclassification of payments due in next 12 months to short-term		—		—		—
Payments		(14)		—		(14)
Ending Balance as of September 30, 2017	$	38	$	—	$	38

	Nine Months Ended September 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		66		—		66
Accretion of acquisition-related contingent earn-out consideration		13		8		21
Change in the estimated fair value of contingent earn-out consideration		(404)		(54)		(458)
Reclassification of payments due in next 12 months to short-term		556		(556)		—
Payments		(99)		—		(99)
Ending Balance as of September 30, 2016	$	305	$	—	$	305

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INVENTORIES (Tables)

9 Months Ended

Sep. 30, 2017

Inventory Disclosure [Abstract]

Schedule of inventory on hand by segment

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

	As of December 31, 2016		As of September 30, 2017
	(Dollars in thousands)
Regnery Publishing book inventories	$	2,473	$	2,026
Reserve for obsolescence – Regnery Publishing		(2,104)		(1,544)
Inventory, net - Regnery Publishing		369		482
Wellness products	$	423	$	394
Reserve for obsolescence – Wellness products		(122)		(67)
Inventory, net - Wellness products		301		327
Consolidated inventories, net	$	670	$	809

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BROADCAST LICENSES (Tables)

9 Months Ended

Sep. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of changes in broadcasting licenses

The following table presents the changes in broadcasting licenses that include capital projects and acquisitions of radio stations and FM translators as discussed in Note 4 of our Condensed Consolidated financial statements.

	Twelve Months Ended		Nine Months Ended
Broadcast Licenses	December 31, 2016		September 30, 2017
	(Dollars in thousands)
Balance, beginning of period before cumulative loss on impairment	$	492,032	$	494,058
Accumulated loss on impairment		(99,001)		(105,541)
Balance, beginning of period after cumulative loss on impairment		393,031		388,517
Acquisitions of radio stations		74		—
Acquisitions of FM translators and construction permits		1,645		198
Capital projects to improve broadcast signal and strength		307		5
Impairments based on estimated fair value of broadcast licenses		(6,540)		—
Balance, end of period before cumulative loss on impairment		494,058		494,261
Accumulated loss on impairment		(105,541)		(105,541)
Balance, end of period after cumulative loss on impairment	$	388,517	$	388,720

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GOODWILL (Tables)

9 Months Ended

Sep. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of changes in goodwill

The following table presents the changes in goodwill including acquisitions as discussed in Note 4 of our Condensed Consolidated financial statements.

	Twelve Months Ended		Nine Months Ended
Goodwill	December 31, 2016		September 30, 2017
	(Dollars in thousands)
Balance, beginning of period before cumulative loss on impairment	$	26,560	$	27,642
Accumulated loss on impairment		(1,997)		(2,029)
Balance, beginning of period after cumulative loss on impairment		24,563		25,613
Acquisitions of radio stations and broadcast businesses		—		13
Acquisitions of digital media entities		237		810
Acquisitions of publishing entities		845		—
Impairment charge during year		(32)		—
Balance, end of period before cumulative loss on impairment		27,642		28,465
Accumulated loss on impairment		(2,029)		(2,029)
Ending period balance	$	25,613	$	26,436

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PROPERTY AND EQUIPMENT (Tables)

9 Months Ended

Sep. 30, 2017

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:

	As of December 31, 2016		As of September 30, 2017
	(Dollars in thousands)
Land	$	32,402	$	33,008
Buildings		29,070		29,018
Office furnishings and equipment		37,386		37,135
Office furnishings and equipment under capital lease obligations		228		244
Antennae, towers and transmitting equipment		84,144		85,450
Antennae, towers and transmitting equipment under capital lease obligations		795		795
Studio, production and mobile equipment		28,668		29,322
Computer software and website development costs		20,042		22,756
Record and tape libraries		27		27
Automobiles		1,373		1,342
Leasehold improvements		14,696		18,626
Construction-in-progress		9,983		6,328
	$	258,814	$	264,051
Less accumulated depreciation		(156,024)		(161,848)
	$	102,790	$	102,203

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AMORTIZABLE INTANGIBLE ASSETS (Tables)

9 Months Ended

Sep. 30, 2017

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:

	As of September 30, 2017
			Accumulated
	Cost		Amortization		Net
	(Dollars in thousands)
Customer lists and contracts	$	22,865	$	(20,681)	$	2,184
Domain and brand names		20,109		(14,139)		5,970
Favorable and assigned leases		2,379		(2,018)		361
Subscriber base and lists		8,797		(4,402)		4,395
Author relationships		2,771		(2,171)		600
Non-compete agreements		2,029		(1,263)		766
Other amortizable intangible assets		1,333		(1,333)		—
	$	60,283	$	(46,007)	$	14,276

	As of December 31, 2016
			Accumulated
	Cost		Amortization		Net
	(Dollars in thousands)
Customer lists and contracts	$	22,599	$	(20,070)	$	2,529
Domain and brand names		19,821		(12,970)		6,851
Favorable and assigned leases		2,379		(1,972)		407
Subscriber base and lists		7,972		(5,304)		2,668
Author relationships		2,771		(1,824)		947
Non-compete agreements		2,018		(1,012)		1,006
Other amortizable intangible assets		1,336		(1,336)		—
	$	58,896	$	(44,488)	$	14,408

Amortizable Intangible Assets, Estimate Amortization Expense

Amortization expense was approximately $1.1 million and $1.4 million for the three month period ended September 30, 2017 and 2016, respectively, and $3.4 million and $3.7 million for the nine month period ended September 30, 2017 and 2016, respectively. Based on the amortizable intangible assets as of September 30, 2017, we estimate amortization expense for the next five years to be as follows:

Year Ended December 31,	Amortization Expense
	(Dollars in thousands)
2017 (Oct – Dec)	$	1,173
2018		4,576
2019		4,006
2020		2,714
2021		1,159
Thereafter		648
Total	$	14,276

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LONG-TERM DEBT (Tables)

9 Months Ended

Sep. 30, 2017

Long-Term Debt

Long-term debt consisted of the following:

	As of December 31, 2016		As of September 30, 2017
	(Dollars in thousands)
6.75% Senior Secured Notes	$	—	$	255,000
Less unamortized debt issuance costs based on imputed interest rate of 7.08%		—		(6,004)
6.75% Senior Secured Notes net carrying value		—		248,996
Asset-Based Revolving Credit Facility principal outstanding		—		6,629
Term Loan B principal amount		263,000		—
Less unamortized discount and debt issuance costs based on imputed interest rate of 4.78%		(2,371)		—
Term Loan B net carrying value		260,629		—
Revolver principal outstanding		477		—
Capital leases and other loans		568		491
Long-term debt and capital lease obligations less unamortized debt issuance costs		261,674		256,116
Less current portion		(590)		(6,741)
Long-term debt and capital lease obligations less unamortized debt issuance costs, net of current portion	$	261,084	$	249,375

Principle Repayment Requirements Under Long Term Agreements Outstanding

Principal repayment requirements under all long-term debt agreements outstanding at September 30, 2017 for each of the next five years and thereafter are as follows:

	Amount
For the Twelve Months Ended September 30,	(Dollars in thousands)
2018	$	6,741
2019		108
2020		107
2021		121
2022		43
Thereafter		255,000
	$	262,120

Term B Loan [Member]

Repayments of Term Loan B

The following payments or prepayments of the Term Loan B were made during the year ended December 31, 2016 and through the date of the termination, including interest through the payment date as follows:

Date	Principal Paid		Unamortized Discount
	(Dollars in Thousands)
May 19, 2017	$	258,000	$	550
February 28, 2017		3,000		6
January 30, 2017		2,000		5
December 30, 2016		5,000		12
November 30, 2016		1,000		3
September 30, 2016		1,500		4
September 30, 2016		750		—
June 30, 2016		441		1
June 30, 2016		750		—
March 31, 2016		750		—
March 17, 2016		809		2

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STOCK INCENTIVE PLAN (Tables)

9 Months Ended

Sep. 30, 2017

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 nine month periods ended September 30, 2017 and 2016:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2017		2016		2017
	(Dollars in thousands)
Stock option compensation expense included in corporate expenses	$	94	$	27	$	296	$	126
Restricted stock shares compensation expense included in corporate expenses		—		225		24		1,100
Stock option compensation expense included in broadcast operating expenses		19		7		67		41
Restricted stock shares compensation expense included in broadcast operating expenses		—		—		—		224
Stock option compensation expense included in digital media operating expenses		12		6		51		25
Restricted stock shares compensation expense included in digital media operating expenses		—		—		—		124
Stock option compensation expense included in publishing operating expenses		9		3		20		17
Restricted stock shares compensation expense included in publishing operating expenses		—		—		—		36
Total stock-based compensation expense, pre-tax	$	134	$	268	$	458	$	1,693
Tax benefit (expense) for stock-based compensation expense		(54)		(107)		(183)		(677)
Total stock-based compensation expense, net of tax	$	80	$	161	$	275	$	1,016

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 using the Black-Scholes valuation model were as follows for the three and nine month periods ended September 30, 2016:

	Three Months Ended	Nine Months Ended
	September 30, 2016	September 30, 2016
Expected volatility	n/a		47.03	%
Expected dividends	n/a		5.36	%
Expected term (in years)	n/a		7.4
Risk-free interest rate	n/a		1.64	%

Schedule of Stock Option Activity

Activity with respect to the company’s option awards during the nine month period ended September 30, 2017 is as follows:

							Weighted Average	Aggregate
			Weighted Average		Weighted Average		Remaining Contractual	Intrinsic
Options	Shares		Exercise Price		Grant Date Fair Value		Term	Value
	(Dollars in thousands, except weighted average exercise price and weighted average grant date fair value)
Outstanding at January 1, 2017		1,720,000	$	5.12	$	2.89	4.5 years	$	2,428
Granted		—		—		—
Exercised		(122,413)		4.09		2.04
Forfeited or expired		(143,125)		5.85		2.99
Outstanding at September 30, 2017		1,454,462	$	5.18	$	2.95	3.9 years	$	2,292
Exercisable at September 30, 2017		954,959	$	5.63	$	3.76	2.9 years	$	1,146
Expected to Vest		474,278	$	5.19	$	2.97	3.9 years	$	1,115

Schedule of Information Regarding Restricted Stock Activity

Activity with respect to the company’s restricted stock awards during the nine month period ended September 30, 2017 is as follows:

			Weighted Average		Weighted Average Remaining	Aggregate
Restricted Stock Awards	Shares		Grant Date Fair Value		Contractual Term	Intrinsic Value
	(Dollars in thousands, except weighted average exercise price and weighted average grant date fair value)
Outstanding at January 1, 2017		—	$	—	—	$	—
Granted		211,658		7.01	0.2 years		1,484
Lapse of restrictions		(178,592)		7.05	—		1,259
Forfeited		—		—	—		—
Outstanding at September 30, 2017		33,066	$	6.80	0.2 years	$	225

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EQUITY TRANSACTIONS (Tables)

9 Months Ended

Sep. 30, 2017

Equity [Abstract]

Schedule of Cash Distributions Declared and Paid

The following table shows distributions that have been declared and paid since January 1, 2016:

				Cash Distributed
Announcement Date	Payment Date	Amount Per Share		(in thousands)
September 12, 2017	September 29, 2017	$	0.0650	$	1,701
June 1, 2017	June 30, 2017	$	0.0650	$	1,697
March 9, 2017	March 30, 2017	$	0.0650	$	1,691
December 7, 2016	December 31, 2016	$	0.0650	$	1,678
September 9, 2016	September 30, 2016	$	0.0650	$	1,679
June 2, 2016	June 30, 2016	$	0.0650	$	1,664
March 10, 2016	April 5, 2016	$	0.0650	$	1,657

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DERIVATIVE INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value

	As of December 31, 2016		As of September 30, 2017
	(Dollars in thousands)
Fair value of interest rate swap	$	514	$	—

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FAIR VALUE MEASUREMENTS (Tables)

9 Months Ended

Sep. 30, 2017

Fair Value Disclosures [Abstract]

Fair Value of Financial Assets and Liabilities Measured at Fair Value

The following table summarizes the fair value of our financial assets and liabilities that are measured at fair value:

	September 30, 2017
	Total Fair Value
	and Carrying
	Value on Balance		Fair Value Measurement Category
	Sheet		Level 1		Level 2		Level 3
	(Dollars in thousands)
Assets
Estimated fair value of other indefinite-lived intangible assets	$	313		—		—	$	313
Liabilities:
Estimated fair value of contingent earn-out consideration included in accrued expenses		38		—		—		38
Long-term debt and capital lease obligations less unamortized debt issuance costs		256,116		—		256,116		—

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SEGMENT DATA (Tables)

9 Months Ended

Sep. 30, 2017

Segment Reporting [Abstract]

Schedule of Segment Data

The table below presents financial information for each operating segment as of September 30, 2017 and 2016 based on the new composition of our operating segments:

							Unallocated
			Digital				Corporate
	Broadcast		Media		Publishing		Expenses		Consolidated
	(Dollars in thousands)
Three Months Ended September 30, 2017
Net revenue	$	48,424	$	10,446	$	6,563	$	—	$	65,433
Operating expenses		37,040		8,169		6,686		4,233		56,128
Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration and net (gain) loss on the sale or disposal of assets	$	11,384	$	2,277	$	(123)	$	(4,233)	$	9,305
Depreciation		1,920		792		159		211		3,082
Amortization		11		860		264		—		1,135
Change in the estimated fair value of contingent earn-out consideration		—		(12)		—		—		(12)
Net (gain) loss on the sale or disposal of assets		97		—		—		(2)		95
Net operating income (loss)	$	9,356	$	637	$	(546)	$	(4,442)	$	5,005
Three Months Ended September 30, 2016
Net revenue	$	51,052	$	11,999	$	8,221	$	—	$	71,272
Operating expenses		37,434		9,172		8,020		4,147		58,773
Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration and net (gain) loss on the sale or disposal of assets	$	13,618	$	2,827	$	201	$	(4,147)	$	12,499
Depreciation		1,753		840		174		209		2,976
Amortization		22		1,091		228		—		1,341
Change in the estimated fair value of contingent earn-out consideration		—		(13)		(183)		—		(196)
Net (gain) loss on the sale or disposal of assets		(633)		176		—		—		(457)
Net operating income (loss)	$	12,476	$	733	$	(18)	$	(4,356)	$	8,835

							Unallocated
			Digital				Corporate
	Broadcast		Media		Publishing		Expenses		Consolidated
	(Dollars in thousands)
Nine Months Ended September 30, 2017
Net revenue	$	145,479	$	31,998	$	19,048	$	—	$	196,525
Operating expenses		108,807		25,241		18,705		13,183		165,936
Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration, impairments and net (gain) loss on the sale or disposal of assets	$	36,672		6,757	$	343	$	(13,183)	$	30,589
Depreciation		5,668		2,389		515		599		9,171
Amortization		46		2,494		879		1		3,420
Change in the estimated fair value of contingent earn-out consideration		—		(54)		—		—		(54)
Impairment of indefinite-lived long-term assets other than goodwill		—		—		19		—		19
Net (gain) loss on the sale or disposal of assets		(399)		—		(9)		(2)		(410)
Net operating income (loss)	$	31,357	$	1,928	$	(1,061)	$	(13,781)	$	18,443
Nine Months Ended September 30, 2016
Net revenue	$	149,768	$	34,056	$	19,802	$	—	$	203,626
Operating expenses		109,455		26,815		19,951		11,928		168,149
Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration, impairments and net (gain) loss on the sale or disposal of assets	$	40,313	$	7,241	$	(149)	$	(11,928)	$	35,477
Depreciation		5,431		2,392		489		638		8,950
Amortization		67		3,233		372		1		3,673
Change in the estimated fair value of contingent earn-out consideration		—		(119)		(339)		—		(458)
Impairment of long-lived assets		700		—		—		—		700
Net (gain) loss on the sale or disposal of assets		(2,175)		182		(21)		6		(2,008)
Net operating income (loss)	$	36,290	$	1,553	$	(650)	$	(12,573)	$	24,620

			Digital				Unallocated
	Broadcast		Media		Publishing		Corporate		Consolidated
	(Dollars in thousands)
As of September 30, 2017
Inventories, net	$	—	$	327	$	482	$	—	$	809
Property and equipment, net		86,187		6,603		1,326		8,087		102,203
Broadcast licenses		388,720		—		—		—		388,720
Goodwill		3,594		20,946		1,888		8		26,436
Other indefinite-lived intangible assets		—		—		313		—		313
Amortizable intangible assets, net		361		10,720		3,190		5		14,276
As of December 31, 2016
Inventories, net	$	—	$	300	$	370	$	—	$	670
Property and equipment, net		86,976		6,634		1,779		7,401		102,790
Broadcast licenses		388,517		—		—		—		388,517
Goodwill		3,581		20,136		1,888		8		25,613
Other indefinite-lived intangible assets		—		—		332		—		332
Amortizable intangible assets, net		407		9,927		4,069		5		14,408

XML

IMPAIRMENT OF GOODWILL AND OTHER INDEFINITE-LIVED INTANGIBLE ASSETS (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Goodwill And Other Intangible Assets [Line Items]
Percentage Of Intangible Assets			71.00%
Impairment of Intangible Assets, Indefinite-lived (Excluding Goodwill)	$ 0	$ 0	$ 19,000	$ 0
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%
Media Content [Member]
Goodwill And Other Intangible Assets [Line Items]
Impairment of Intangible Assets, Indefinite-lived (Excluding Goodwill)			$ 19,000

XML

IMPAIRMENT OF LONG-LIVED ASSETS (Details Textual) - USD ($)	1 Months Ended	9 Months Ended
	May 30, 2017	Sep. 30, 2017
Impairment Of Long Lived Assets [Line Items]
Proceeds from Sale of Intangible Assets	$ 10,000	$ 1,900,000

XML

ACQUISITIONS AND RECENT TRANSACTIONS (Details) - USD ($)					1 Months Ended	9 Months Ended
	Jun. 08, 2017	Mar. 14, 2017	Mar. 01, 2017	Jan. 06, 2017	Jan. 16, 2017	Sep. 30, 2017
Business Acquisition [Line Items]
Business Combination, Consideration Transferred, Total	$ 65,000					$ 3,423,000
FM Translator construction permit, Festus, Missouri (asset acquisition) [Member]
Business Acquisition [Line Items]
Business Combination, Consideration Transferred, Total						$ 40,000
Business Acquisition, Effective Date of Acquisition						Jun. 28, 2017
Portuguese Bible Mobile Applications (business acquisition) [Member]
Business Acquisition [Line Items]
Business Combination, Consideration Transferred, Total						$ 82,000
Business Acquisition, Effective Date of Acquisition						Jun. 08, 2017
Prayers for Special Help (business acquisition) [Member]
Business Acquisition [Line Items]
Business Combination, Consideration Transferred, Total						$ 245,000
Business Acquisition, Effective Date of Acquisition						Mar. 15, 2017
FM Translator construction permit, Quartz Site, Arizona (asset purchase) [Member]
Business Acquisition [Line Items]
Business Combination, Consideration Transferred, Total		$ 20,000				$ 20,000
Business Acquisition, Effective Date of Acquisition						Mar. 14, 2017
FM Translator construction permit, Roseburg, Oregon (asset purchase) [Member]
Business Acquisition [Line Items]
Business Combination, Consideration Transferred, Total			$ 45,000			$ 45,000
Business Acquisition, Effective Date of Acquisition						Mar. 01, 2017
FM Translator, Astoria, Oregon (asset purchase) [Member]
Business Acquisition [Line Items]
Business Combination, Consideration Transferred, Total					$ 33,000	$ 33,000
Business Acquisition, Effective Date of Acquisition						Jan. 16, 2017
FM Translator construction permit, Mohave Valley, Arizona (asset purchase) [Member]
Business Acquisition [Line Items]
Business Combination, Consideration Transferred, Total				$ 20,000		$ 20,000
Business Acquisition, Effective Date of Acquisition						Jan. 01, 2017
Real property of radio station WSPZ-AM in Bethesda, Maryland (business acquisition) [Member]
Business Acquisition [Line Items]
Business Combination, Consideration Transferred, Total						$ 1,500,000
Business Acquisition, Effective Date of Acquisition						Sep. 15, 2017
TeacherTube.com (business acquisition) [Member]
Business Acquisition [Line Items]
Business Combination, Consideration Transferred, Total						$ 1,100,000
Business Acquisition, Effective Date of Acquisition						Aug. 31, 2017
Intelligence Reporter newsletter (business acquisition) [Member]
Business Acquisition [Line Items]
Business Combination, Consideration Transferred, Total						$ 0
Business Acquisition, Effective Date of Acquisition						Aug. 31, 2017
FM Translator construction permit, Eaglemount, Washington (asset acquisition) [Member]
Business Acquisition [Line Items]
Business Combination, Consideration Transferred, Total						$ 40,000
Business Acquisition, Effective Date of Acquisition						Jul. 24, 2017
TradersCrux.com (business acquisition) [Member]
Business Acquisition [Line Items]
Business Combination, Consideration Transferred, Total						$ 298,000
Business Acquisition, Effective Date of Acquisition						Jul. 06, 2017

XML

ACQUISITIONS AND RECENT TRANSACTIONS (Details 1) $ in Thousands	Sep. 30, 2017 USD ($)
Business Acquisition [Line Items]
Cash payments made upon closing	$ 3,352
Escrow deposits paid in prior years	35
Present value of estimated fair value of contingent earn-out consideration	36
Total purchase price consideration	$ 3,423

XML

ACQUISITIONS AND RECENT TRANSACTIONS (Details 2) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016	Dec. 31, 2015
Assets
Goodwill	$ 26,436	$ 25,613	$ 24,563
Broadcast And Digital Media Total Assets Acquired [Member]
Assets
Property and equipment	1,966
Broadcast licenses	198
Goodwill	823
Customer lists and contracts	314
Domain and brand names	647
Subscriber base and lists	2,316
Non-compete agreements	11
Total purchase price consideration	6,275
Liabilities
Deferred revenue	(2,852)
Total	3,423
Broadcast [Member]
Assets
Property and equipment	1,487
Broadcast licenses	198
Goodwill	13
Customer lists and contracts	0
Domain and brand names	0
Subscriber base and lists	0
Non-compete agreements	0
Total purchase price consideration	1,698
Liabilities
Deferred revenue	0
Total	1,698
Digital Media [Member]
Assets
Property and equipment	479
Broadcast licenses	0
Goodwill	810
Customer lists and contracts	314
Domain and brand names	647
Subscriber base and lists	2,316
Non-compete agreements	11
Total purchase price consideration	4,577
Liabilities
Deferred revenue	(2,852)
Total	$ 1,725

XML

ACQUISITIONS AND RECENT TRANSACTIONS (Details Textual) - USD ($)							1 Months Ended										3 Months Ended		9 Months Ended		36 Months Ended
	Aug. 09, 2017	Jul. 06, 2017	Jun. 08, 2017	Mar. 14, 2017	Mar. 01, 2017	Jan. 06, 2017	Sep. 15, 2017	Aug. 31, 2017	Jun. 30, 2017	May 30, 2017	May 19, 2017	Mar. 31, 2017	Mar. 24, 2017	Feb. 28, 2017	Jan. 30, 2017	Jan. 16, 2017	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Jun. 30, 2017	Jul. 24, 2017	Jun. 28, 2017	Mar. 15, 2017	Dec. 31, 2016	Dec. 31, 2015	Apr. 01, 2015
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Gains (Losses) on Extinguishment of Debt, Total											$ 600,000						$ 0	$ (18,000)	$ (2,775,000)	$ (32,000)
Amortization of Financing Costs														$ 18,000					645,000	475,000
Dividends Payable, Date Declared									Sep. 12, 2017
Common Stock, Dividends, Per Share, Declared									$ 0.0650			$ 0.0650					$ 0.0650
Payments of Ordinary Dividends, Common Stock									$ 1,700,000			$ 1,700,000					$ 1,700,000		5,089,000	5,000,000
Dividends Payable, Date to be Paid									Sep. 29, 2017
Dividends Payable, Date of Record									Sep. 22, 2017
Business Combination, Consideration Transferred, Total			$ 65,000																3,423,000
Goodwill																	$ 26,436,000		26,436,000						$ 25,613,000	$ 24,563,000
Proceeds from Sale of Intangible Assets										$ 10,000									$ 1,900,000
Gain (Loss) on Disposition of Intangible Assets										$ 56,000
Debt Instrument, Interest Rate, Stated Percentage																	4.58%		4.58%
Proceeds from Collection of Lease Receivables																					$ 600,000
Business Combination Recognized Identifiable Assets Increase or Decrease																			$ 100,000	$ 300,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period																			211,658
Proceeds of Escrow Deposit Under Agreement To Sell								$ 1,000,000
Restricted Stock [Member] | Executive [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	33,066
Restricted Stock [Member] | Management [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period													178,592
Standby Letters of Credit [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity											5,000,000
Senior Secured Debt [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Debt Instrument, Face Amount											$ 255,000,000
Debt Instrument, Interest Rate, Stated Percentage											6.75%
Debt Instrument expiration Period											2024
Asset-Based Revoloving Credit Facility [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Debt Instrument, Face Amount											$ 30,000,000
Line of Credit Facility, Maximum Borrowing Capacity											4,500,000						$ 6,600,000		$ 6,600,000
Revolver [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Payments for Loans											4,100,000
Gains (Losses) on Extinguishment of Debt, Total											56,000
Long-term Line of Credit, Noncurrent											25,000,000
Term B Loan [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Payments for Loans											258,000,000			3,000,000	$ 2,000,000
Debt Instrument, Face Amount														300,000,000
Gains (Losses) on Extinguishment of Debt, Total											1,500,000			$ 6,200	4,500
Amortization of Financing Costs															$ 12,000
Line of Credit Facility, Maximum Borrowing Capacity																	$ 300,000,000		300,000,000
Time Brokerage Agreement [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Business Combination, Liabilities Arising from Contingencies, Amount Recognized																											$ 1,200,000
Swingline Loans [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity											$ 7,500,000
FM Translator construction permit, Quartz Site, Arizona (asset purchase) [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Business Combination, Consideration Transferred, Total				$ 20,000															20,000
FM Translator construction permit, Roseburg, Oregon (asset purchase) [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Business Combination, Consideration Transferred, Total					$ 45,000														45,000
FM Translator, Astoria, Oregon (asset purchase) [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Business Combination, Consideration Transferred, Total																$ 33,000			33,000
FM Translator construction permit, Mohave Valley, Arizona (asset purchase) [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Business Combination, Consideration Transferred, Total						$ 20,000													$ 20,000
FM translator in Festus, Missouri [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Business Combination, Liabilities Arising from Contingencies, Amount Recognized																						$ 40,000	$ 40,000
Portuguese Bible mobile application Assets Purchase [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Business Combination, Consideration Transferred, Total			65,000
Business Combination, Contingent Consideration, Liability, Current			20,000
Estimated Contingent Earn-out Consideration			$ 16,500						$ 20,000												$ 20,000
Prayers-For-Special-Help.com [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Liabilities, Total																								$ 200,000
Business Acquisition Installments Payable																								$ 15,000
Radio Station WSPZ-AM [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Business Combination, Consideration Transferred, Total							$ 1,500,000
Goodwill							13,000
TeacherTube.com Website [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Business Combination, Consideration Transferred, Total								1,100,000
Goodwill								400,000
Intelligence Report Newsletter [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Goodwill								400,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Assets, Total								2,500,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Deferred Tax Liabilities, Current								$ 2,900,000
TradersCrux.com Website [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Business Combination, Consideration Transferred, Total		$ 300,000
Goodwill		900
Business Combination, Contingent Consideration, Liability, Current		100,000
Estimated Contingent Earn-out Consideration		$ 18,750
WSPZ-AM in Bethesda, Maryland Assets purchase [Member]
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Business Combination, Consideration Transferred, Total							$ 600,000

XML

CONTINGENT EARN-OUT CONSIDERATION (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Jun. 30, 2017	Sep. 30, 2017	Sep. 30, 2016
Business Acquisition, Contingent Consideration [Line Items]
Beginning Balance as of July 1, 2017	$ 31	$ 441	$ 66	$ 66	$ 775
Acquisitions	19	66		36	66
Accretion of acquisition-related contingent earn-out consideration	0	5		4	21
Change in the estimated fair value of contingent earn-out consideration	(12)	(196)		(54)	(458)
Reclassification of payments due in next 12 months to short-term	0	0		0	0
Payments	0	(11)		(14)	(99)
Ending Balance as of September 30, 2017	38	305	31	38	305
Short-Term Accrued Expenses [Member]
Business Acquisition, Contingent Consideration [Line Items]
Beginning Balance as of July 1, 2017	31	441	66	66	173
Acquisitions	19	66		36	66
Accretion of acquisition-related contingent earn-out consideration	0	5		4	13
Change in the estimated fair value of contingent earn-out consideration	(12)	(196)		(54)	(404)
Reclassification of payments due in next 12 months to short-term	0	0		0	556
Payments	0	(11)		(14)	(99)
Ending Balance as of September 30, 2017	38	305	31	38	305
Long-Term Other Liabilities [Member]
Business Acquisition, Contingent Consideration [Line Items]
Beginning Balance as of July 1, 2017	0	0	0	0	602
Acquisitions	0	0		0	0
Accretion of acquisition-related contingent earn-out consideration	0	0		0	8
Change in the estimated fair value of contingent earn-out consideration	0	0		0	(54)
Reclassification of payments due in next 12 months to short-term	0	0		0	(556)
Payments	0	0		0	0
Ending Balance as of September 30, 2017	$ 0	$ 0	$ 0	$ 0	$ 0

XML

CONTINGENT EARN-OUT CONSIDERATION (Details Textual) - USD ($)						1 Months Ended	3 Months Ended		6 Months Ended	9 Months Ended		36 Months Ended
	Jul. 06, 2017	Jun. 08, 2017	May 06, 2015	Feb. 06, 2015	Jan. 10, 2014	Sep. 13, 2017	Sep. 30, 2017	Sep. 30, 2016	Jun. 30, 2017	Sep. 30, 2017	Sep. 30, 2016	Jun. 30, 2017	Sep. 13, 2016
Business Acquisition, Contingent Consideration [Line Items]
Business Combination, Contingent Consideration Arrangements Payment							$ 0	$ (11,000)		$ (14,000)	$ (99,000)
Business Combination, Contingent Consideration Arrangements, Change in Amount of Contingent Consideration, Liability							(12,000)	$ (196,000)		(54,000)	$ (458,000)
Business Combination, Consideration Transferred, Total		$ 65,000								3,423,000
Bryan Perry Newsletters (business acquisition) [Member]
Business Acquisition, Contingent Consideration [Line Items]
Business Combination, Contingent Consideration Arrangements Payment									$ 14,000			$ 91,000
Business Combination Liabilities Arising From Contingencies Amount Recognized Discounted Present Value				$ 158,000
Business Combination, Contingent Consideration, Liability				$ 171,000
Contingent Earn Out Consideration Due To Seller Net Subscriber Revenues Percentage				50.00%
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 Payment					900,000
Business Combination Liabilities Arising From Contingencies Amount Recognized Discounted Present Value					2,000,000
Business Combination, Liabilities Arising from Contingencies, Amount Recognized									8,500,000			8,500,000
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
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			300,000							75,000
Business Combination Liabilities Arising From Contingencies Amount Recognized Discounted Present Value			142,000
Business Combination, Contingent Consideration Arrangements, Change in Amount of Contingent Consideration, Liability										4,000
Business Combination, Liabilities Arising from Contingencies, Amount Recognized			$ 165,000						165,000			165,000
Turner Investment Products [Member]
Business Acquisition, Contingent Consideration [Line Items]
Business Acquisition Cost Of Acquired Entity Cash Paid Net													$ 400,000
Business Combination, Contingent Consideration Arrangements Payment						$ 100,000				74,000
Business Combination, Contingent Consideration Arrangements, Change in Amount of Contingent Consideration, Liability							14,000			53,000
Business Combination, Liabilities Arising from Contingencies, Amount Recognized													74,000
Business Combination, Contingent Consideration, Discounted Present Value													$ 66,000
Portuguese Bible mobile application Assets Purchase [Member]
Business Acquisition, Contingent Consideration [Line Items]
Business Combination, Contingent Consideration Arrangements, Change in Amount of Contingent Consideration, Liability							1,700
Business Combination, Contingent Consideration, Liability		20,000
Business Combination, Consideration Transferred, Total		65,000
Estimated Contingent Earn-out Consideration		$ 16,500							$ 20,000			$ 20,000
TradersCrux.com [Member]
Business Acquisition, Contingent Consideration [Line Items]
Business Combination, Contingent Consideration Arrangements Payment							100,000
Business Combination, Contingent Consideration, Liability							$ 100,000			$ 100,000
Payments to Acquire Businesses, Gross	$ 300,000
Business Combination, Consideration Transferred, Total	300,000
Estimated Contingent Earn-out Consideration	$ 18,750

XML

INVENTORIES (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Inventory [Line Items]
Reserve for obsolescence	$ (1,611)	$ (2,226)
Inventories, net	809	670
Regnery Publishing [Member]
Inventory [Line Items]
Inventories, gross	2,026	2,473
Reserve for obsolescence	(1,544)	(2,104)
Inventories, net	482	369
Wellness Products [Member]
Inventory [Line Items]
Inventories, gross	394	423
Reserve for obsolescence	(67)	(122)
Inventories, net	$ 327	$ 301

XML

BROADCAST LICENSES (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning of period before cumulative loss on impairment	$ 494,058	$ 492,032
Accumulated loss on impairment	(105,541)	(99,001)
Balance, beginning of period after cumulative loss on impairment	388,517	393,031
Capital projects to improve broadcast signal and strength	5	307
Impairments based on estimated fair value of broadcast licenses	0	(6,540)
Balance, end of period before cumulative loss on impairment	494,261	494,058
Accumulated loss on impairment	(105,541)	(105,541)
Balance, end of period after cumulative loss on impairment	388,720	388,517
Radio Stations [Member]
Indefinite-lived Intangible Assets [Line Items]
Acquisitions	0	74
FM Translators [Member]
Indefinite-lived Intangible Assets [Line Items]
Acquisitions	$ 198	$ 1,645

XML

GOODWILL (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Goodwill [Line Items]
Balance, beginning of period before cumulative loss on impairment,	$ 27,642	$ 26,560
Accumulated loss on impairment	(2,029)	(1,997)
Balance, beginning of period after cumulative loss on impairment	25,613	24,563
Impairment charge during year	0	(32)
Balance, end of period before cumulative loss on impairment	28,465	27,642
Accumulated loss on impairment	(2,029)	(2,029)
Ending period balance	26,436	25,613
Radio Stations [Member]
Goodwill [Line Items]
Acquisitions	13	0
Digital Media Entities [Member]
Goodwill [Line Items]
Acquisitions	810	237
Publishing Entities [Member]
Goodwill [Line Items]
Acquisitions	$ 0	$ 845

XML

PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Property, Plant and Equipment, Gross, Total	$ 264,051	$ 258,814
Less accumulated depreciation	(161,848)	(156,024)
Property, Plant and Equipment, Net, Total	102,203	102,790
Land [Member]
Property, Plant and Equipment, Gross, Total	33,008	32,402
Building [Member]
Property, Plant and Equipment, Gross, Total	29,018	29,070
Office furnishings and equipment [Member]
Property, Plant and Equipment, Gross, Total	37,135	37,386
Office Furnishings And Equipment Under Capital Lease Obligations [Member]
Property, Plant and Equipment, Gross, Total	244	228
Antennae, towers and transmitting equipment [Member]
Property, Plant and Equipment, Gross, Total	85,450	84,144
Antennae Towers And Transmitting Equipment Under Capital Lease Obligations [Member]
Property, Plant and Equipment, Gross, Total	795	795
Studio, production and mobile equipment [Member]
Property, Plant and Equipment, Gross, Total	29,322	28,668
Computer Software [Member]
Property, Plant and Equipment, Gross, Total	22,756	20,042
Record and tape libraries [Member]
Property, Plant and Equipment, Gross, Total	27	27
Automobiles [Member]
Property, Plant and Equipment, Gross, Total	1,342	1,373
Leasehold Improvements [Member]
Property, Plant and Equipment, Gross, Total	18,626	14,696
Construction in Progress [Member]
Property, Plant and Equipment, Gross, Total	$ 6,328	$ 9,983

XML

PROPERTY AND EQUIPMENT (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Depreciation, Total	$ 3,100,000	$ 3,000,000	$ 9,200,000	$ 9,000,000
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment	161,848,000		161,848,000		$ 156,024,000
Capital Lease [Member]
Depreciation, Total	10,000	$ 11,000	30,000	$ 32,000
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment	$ 176,000		$ 176,000		$ 146,000

XML

AMORTIZABLE INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Finite-Lived Intangible Assets [Line Items]
Cost	$ 60,283	$ 58,896
Accumulated Amortization	(46,007)	(44,488)
Net	14,276	14,408
Customer lists and contracts [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	22,865	22,599
Accumulated Amortization	(20,681)	(20,070)
Net	2,184	2,529
Domain and brand names [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	20,109	19,821
Accumulated Amortization	(14,139)	(12,970)
Net	5,970	6,851
Favorable and assigned leases [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	2,379	2,379
Accumulated Amortization	(2,018)	(1,972)
Net	361	407
Subscriber base and lists [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	8,797	7,972
Accumulated Amortization	(4,402)	(5,304)
Net	4,395	2,668
Author Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	2,771	2,771
Accumulated Amortization	(2,171)	(1,824)
Net	600	947
Noncompete Agreements [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	2,029	2,018
Accumulated Amortization	(1,263)	(1,012)
Net	766	1,006
Other Intangible Assets [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	1,333	1,336
Accumulated Amortization	(1,333)	(1,336)
Net	$ 0	$ 0

XML

AMORTIZABLE INTANGIBLE ASSETS (Details 1) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Finite-Lived Intangible Assets [Line Items]
2017 (Oct - Dec)	$ 1,173
2018	4,576
2019	4,006
2020	2,714
2021	1,159
Thereafter	648
Net	$ 14,276	$ 14,408

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AMORTIZABLE INTANGIBLE ASSETS (Details Textual) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Finite-Lived Intangible Assets [Line Items]
Amortization of Intangible Assets	$ 1.1	$ 1.4	$ 3.4	$ 3.7

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LONG-TERM DEBT (Details) - USD ($) $ in Thousands	1 Months Ended
	May 19, 2017	Feb. 28, 2017	Jan. 30, 2017	Dec. 30, 2016	Nov. 30, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Mar. 17, 2016
Term Loan B Payment One [Member]
Principal Paid	$ 258,000	$ 3,000	$ 2,000	$ 5,000	$ 1,000	$ 1,500	$ 441	$ 750	$ 809
Unamortized Discount	$ 550	$ 6	$ 5	$ 12	$ 3	4	1	$ 0	$ 2
Term Loan B Payment Two [Member]
Principal Paid						750	750
Unamortized Discount						$ 0	$ 0

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LONG-TERM DEBT (Details 1) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Long Term Debt And Capital Lease Obligations Current And Noncurrent	$ 262,120
Long-term debt and capital lease obligations less unamortized debt issuance costs	256,116	$ 261,674
Less current portion	(6,741)	(590)
Long-term debt and capital lease obligations less unamortized debt issuance costs, net of current portion	249,375	261,084
Senior Secured Debt [Member]
Long Term Debt And Capital Lease Obligations Current And Noncurrent	255,000	0
Less unamortized discount and debt issuance costs based on an imputed interest rate	(6,004)	0
Long-term Debt	248,996	0
Asset-Based Revoloving Credit Facility [Member]
Long-term Debt	6,629	0
Term B Loan [Member]
Long Term Debt And Capital Lease Obligations Current And Noncurrent	0	263,000
Less unamortized discount and debt issuance costs based on an imputed interest rate	0	(2,371)
Long-term Debt	0	260,629
Revolver [Member]
Long Term Debt And Capital Lease Obligations Current And Noncurrent	0	477
Capital Lease Obligations And Other [Member]
Long Term Debt And Capital Lease Obligations Current And Noncurrent	$ 491	$ 568

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LONG-TERM DEBT (Details 2) $ in Thousands	Sep. 30, 2017 USD ($)
2018	$ 6,741
2019	108
2020	107
2021	121
2022	43
Thereafter	255,000
Long-term debt	$ 262,120

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LONG-TERM DEBT (Details Textual) - USD ($)	1 Months Ended			3 Months Ended		9 Months Ended
	May 19, 2017	Feb. 28, 2017	Jan. 30, 2017	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Interest Expense, Debt				$ 0	$ 140,000	$ 203,000	$ 423,000
Amortization of Financing Costs		$ 18,000				645,000	475,000
Gains (Losses) on Extinguishment of Debt, Total	$ 600,000			0	(18,000)	(2,775,000)	(32,000)
Interest Payable, Current				$ 6,481,000		$ 6,481,000		$ 77,000
Debt Instrument, Interest Rate, Stated Percentage				4.58%		4.58%
Debt Instrument, Redemption, Period One [Member]
Debt Instrument, Redemption Price, Percentage	100.00%
Debt Instrument, Redemption, Period Two [Member]
Debt Instrument, Redemption Price, Percentage	106.75%
Debt Instrument, Redemption Price, Percentage of Principal Amount Redeemed	35.00%
Debt Instrument, Redemption, Period Three [Member]
Debt Instrument, Redemption Price, Percentage	103.00%
Debt Instrument, Redemption Price, Percentage of Principal Amount Redeemed	10.00%
Standby Letters of Credit [Member]
Line of Credit Facility, Maximum Borrowing Capacity	$ 5,000,000
Swingline Loans [Member]
Line of Credit Facility, Maximum Borrowing Capacity	7,500,000
Revolver [Member]
Line of Credit Facility, Maximum Borrowing Capacity				$ 25,000,000		$ 25,000,000
Senior Secured Debt [Member]
Interest Expense, Debt	17,200,000
Debt Instrument, Face Amount	$ 255,000,000
Interest Payable, Current				6,400,000		6,400,000
Debt Instrument, Interest Rate, Stated Percentage	6.75%
Debt Related Commitment Fees and Debt Issuance Costs				200,000		300,000
Unamortized Debt Issuance Expense				6,004,000		6,004,000		0
Debt Instrument, Debt Default, Description of Violation or Event of Default	The Indenture provides for the following events of default (each, an Event of Default): (i) default in payment of principal or premium on the Notes at maturity, upon repurchase, acceleration, optional redemption or otherwise; (ii) default for 30 days in payment of interest on the Notes; (iii) the failure by us or certain restricted subsidiaries to comply with other agreements in the Indenture or the Notes, in certain cases subject to notice and lapse of time; (iv) the failure of any guarantee by certain significant Subsidiary Guarantors to be in full force and effect and enforceable in accordance with its terms, subject to notice and lapse of time; (v) certain accelerations (including failure to pay within any grace period) of other indebtedness of ours or any restricted subsidiary if the amount accelerated (or so unpaid) is at least $15 million; (vi) certain judgments for the payment of money in excess of $15 million; (vii) certain events of bankruptcy or insolvency with respect to us or any significant subsidiary; and (vii) certain defaults with respect to any collateral having a fair market value in excess of $15 million.
Debt Instrument, Debt Default, Percentage	25.00%
Asset-Based Revoloving Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity	$ 4,500,000			6,600,000		6,600,000
Line of Credit Facility, Covenant Terms	The Credit Agreement includes a springing fixed charge coverage ratio of 1.0 to 1.0, which is tested during the period commencing on the last day of the fiscal month most recently ended prior to the date on which Availability (as defined in the Credit Agreement) is less than the greater of 15% of the Maximum Revolver Amount (as defined in the Credit Agreement) and $4.5 million and continuing for a period of 60 consecutive days after the first day on which Availability exceeds such threshold amount.
Debt Instrument, Face Amount	$ 30,000,000
Debt Related Commitment Fees and Debt Issuance Costs				$ 63,000		$ 86,000
Debt Instrument, Interest Rate, Increase (Decrease)	2.00%
Debt Instrument Blended Interest Rate				2.98%		2.98%
Debt Instrument, Debt Default, Description of Violation or Event of Default	The Credit Agreement provides for the following events of default: (i) default for non-payment of any principal or letter of credit reimbursement when due or any interest, fees or other amounts within five days of the due date; (ii) the failure by any borrower or any subsidiary to comply with any covenant or agreement contained in the Credit Agreement or any other loan document, in certain cases subject to applicable notice and lapse of time; (iii) any representation or warranty made pursuant to the Credit Agreement or any other loan document is incorrect in any material respect when made; (iv) certain defaults of other indebtedness of any borrower or any subsidiary of indebtedness of at least $10 million; (v) certain events of bankruptcy or insolvency with respect to any borrower or any subsidiary; (vi) certain judgments for the payment of money of $10 million or more; (vii) a change of control; and (viii) certain defaults relating to the loss of FCC licenses, cessation of broadcasting and termination of material station contracts.
Asset-Based Revoloving Credit Facility [Member] | Maximum [Member]
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage						0.375%
Asset-Based Revoloving Credit Facility [Member] | Maximum [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument, Basis Spread on Variable Rate	2.00%
Asset-Based Revoloving Credit Facility [Member] | Maximum [Member] | Base Rate [Member]
Debt Instrument, Basis Spread on Variable Rate	1.00%
Asset-Based Revoloving Credit Facility [Member] | Minimum [Member]
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage						0.25%
Asset-Based Revoloving Credit Facility [Member] | Minimum [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument, Basis Spread on Variable Rate	1.50%
Asset-Based Revoloving Credit Facility [Member] | Minimum [Member] | Base Rate [Member]
Debt Instrument, Basis Spread on Variable Rate	0.50%
Term B Loan [Member]
Line of Credit Facility, Maximum Borrowing Capacity				$ 300,000,000		$ 300,000,000
Senior Notes, Noncurrent				298,500,000		298,500,000
Interest Expense, Debt				0	51,000	74,000	155,000
Amortization of Financing Costs			$ 12,000
Gains (Losses) on Extinguishment of Debt, Total	$ 1,500,000	6,200	$ 4,500
Debt Instrument, Face Amount		$ 300,000,000
Debt Instrument, Unamortized Discount	600,000
Long-term Debt, Gross	258,000,000
Unamortized Debt Issuance Expense				0		$ 0		$ 2,371,000
Term B Loan [Member] | Maximum [Member]
Debt Instrument Interest Additional Interest Above Prime Rate						2.00%
Term B Loan [Member] | Minimum [Member]
Debt Instrument Interest Additional Interest Above Base Rate						1.50%
Revolver [Member]
Amortization of Financing Costs				$ 0	$ 17,000	$ 26,000	$ 52,000
Long-term Line of Credit, Noncurrent	4,100,000
Revolver [Member] | Maximum [Member]
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage						0.375%
Revolver [Member] | Minimum [Member]
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage						0.25%
Term Loan B And Revolver [Member]
Unamortized Debt Issuance Expense	$ 1,500,000

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STOCK INCENTIVE PLAN (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense, pre-tax	$ 268	$ 134	$ 1,693	$ 458
Tax benefit (expense) from stock-based compensation expense	(107)	(54)	(677)	(183)
Total stock-based compensation expense, net of tax	161	80	1,016	275
Corporate [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock option compensation expense	27	94	126	296
Restricted stock shares compensation expense	225	0	1,100	24
Broadcast [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock option compensation expense	7	19	41	67
Restricted stock shares compensation expense	0	0	224	0
Publishing [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock option compensation expense	3	9	17	20
Restricted stock shares compensation expense	0	0	36	0
Digital Media [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock option compensation expense	6	12	25	51
Restricted stock shares compensation expense	$ 0	$ 0	$ 124	$ 0

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STOCK INCENTIVE PLAN (Details 1)	3 Months Ended	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2016
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Expected volatility		47.03%
Expected dividends		5.36%
Expected term (in years)		7 years 4 months 24 days
Risk-free interest rate		1.64%

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STOCK INCENTIVE PLAN (Details 2) - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Shares
Ending Balance	1,454,462
Employee Stock Option [Member]
Shares
Beginning Balance	1,720,000
Granted	0
Exercised	(122,413)
Forfeited or expired	(143,125)
Ending Balance	1,454,462	1,720,000
Exercisable at end of period	954,959
Expected to Vest	474,278
Weighted Average Exercise Price
Beginning Balance	$ 5.12
Granted	0
Exercised	4.09
Forfeited or expired	5.85
Ending Balance	5.18	$ 5.12
Exercisable at end of period	5.63
Expected to Vest	5.19
Weighted Average Grant Date Fair value
Beginning Balance	2.89
Granted	0
Exercised	2.04
Forfeited or expired	2.99
Ending Balance	2.95	$ 2.89
Exercisable at end of period	3.76
Expected to Vest	$ 2.97
Weighted Average Remaining Contractual Term
Outstanding	3 years 10 months 24 days	4 years 6 months
Exercisable at end of period	2 years 10 months 24 days
Expected to Vest	3 years 10 months 24 days
Aggregate Intrinsic Value
Outstanding	$ 2,292	$ 2,428
Exercisable at end of period	1,146
Expected to Vest	$ 1,115

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STOCK INCENTIVE PLAN (Details 3) $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2017 USD ($) $ / shares shares
Shares
Beginning balance | shares | shares	0
Granted | shares	211,658
Lapse of restrictions | shares	(178,592)
Forfeited | shares	0
Ending balance | shares | shares	33,066
Weighted Average Grant Date Fair Value
Beginning balance | $ / shares	$ 0
Granted | $ / shares	7.01
Lapse of restrictions | $ / shares	7.05
Forfeited | $ / shares	0
Ending balance | $ / shares	$ 6.8
Weighted Average Remaining Contractual Term
Granted	2 months 12 days
Outstanding, contractual term	2 months 12 days
Aggregate Intrinsic Value
Beginning Balance | $ | $	$ 0
Granted | $ | $	1,484
Lapse of restrictions | $	1,259
Forfeited | $	0
Ending Balance | $ | $	$ 225

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STOCK INCENTIVE PLAN (Details Textual) - USD ($) $ / shares in Units, $ in Millions		1 Months Ended		9 Months Ended
	Aug. 09, 2017	Mar. 24, 2017	Feb. 24, 2017	Sep. 30, 2017	Sep. 30, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options				$ 0.2
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition				1 year 7 months 6 days
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period				211,658
Restricted stock [Member] | Executive Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	33,066
Restricted stock [Member] | Management [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period		178,592
Restricted Stock Units (RSUs) [Member] | Management [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period			178,592
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				$ 6.60
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested in Period, Fair Value				$ 0.9	$ 1.1

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EQUITY TRANSACTIONS (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	9 Months Ended
	Jun. 30, 2017	Sep. 30, 2017
Dividends Payable [Line Items]
Announcement Date	Sep. 12, 2017
Payment Date	Sep. 29, 2017
Dividend Payment One [Member]
Dividends Payable [Line Items]
Announcement Date		Sep. 12, 2017
Payment Date		Sep. 29, 2017
Amount Per Share		$ 0.0650
Cash Distributed		$ 1,701
Dividend Payment Two [Member]
Dividends Payable [Line Items]
Announcement Date		Jun. 01, 2017
Payment Date		Jun. 30, 2017
Amount Per Share		$ 0.0650
Cash Distributed		$ 1,697
Dividend Payment Three [Member]
Dividends Payable [Line Items]
Announcement Date		Mar. 09, 2017
Payment Date		Mar. 30, 2017
Amount Per Share		$ 0.0650
Cash Distributed		$ 1,691
Dividend Payment Four [Member]
Dividends Payable [Line Items]
Announcement Date		Dec. 07, 2016
Payment Date		Dec. 31, 2016
Amount Per Share		$ 0.0650
Cash Distributed		$ 1,678
Dividend Payment Five [Member]
Dividends Payable [Line Items]
Announcement Date		Sep. 09, 2016
Payment Date		Sep. 30, 2016
Amount Per Share		$ 0.0650
Cash Distributed		$ 1,679
Dividend Payment Six [Member]
Dividends Payable [Line Items]
Announcement Date		Jun. 02, 2016
Payment Date		Jun. 30, 2016
Amount Per Share		$ 0.0650
Cash Distributed		$ 1,664
Dividend Payment Seven [Member]
Dividends Payable [Line Items]
Announcement Date		Mar. 10, 2016
Payment Date		Apr. 05, 2016
Amount Per Share		$ 0.0650
Cash Distributed		$ 1,657

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EQUITY TRANSACTIONS (Details Textual) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2017
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	$ 0.3	$ 0.1	$ 1.7	$ 0.5
Scenario, Forecast [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Expected Dividend Payments					$ 6.8

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BASIC AND DILUTED NET EARNINGS PER SHARE (Details Textual) - shares	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Earnings Per Share Basic And Diluted [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Beginning Balance	1,454,462	1,729,000
Weighted Average Number Diluted Shares Outstanding Adjustment	335,682	367,940

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DERIVATIVE INSTRUMENTS (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Interest Rate Swap [Member] | Fair Value, Inputs, Level 2 [Member]
Derivative [Line Items]
Fair value of interest rate swap	$ 0	$ 514

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DERIVATIVE INSTRUMENTS (Details Textual) - Interest Rate Swap [Member] - USD ($) $ in Millions	1 Months Ended	9 Months Ended
	May 19, 2017	Sep. 30, 2017	Mar. 28, 2014
Derivative [Line Items]
Derivative, Notional Amount			$ 150.0
Derivative, Floor Interest Rate		0.625%
Derivative, Maturity Date		Mar. 28, 2019
Derivative, Fixed Interest Rate		1.645%
Payments for Derivative Instrument, Investing Activities	$ 0.8

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FAIR VALUE MEASUREMENTS (Details) $ in Thousands	Sep. 30, 2017 USD ($)
Liabilities:
Estimated fair value of contingent earn-out consideration included in accrued expenses	$ 38
Long-term debt and capital lease obligations less unamortized discount and debt issuance costs	256,116
Other Indefinite Lived Intangible Assets [Member]
Assets:
Estimated fair value of other indefinite-lived intangible assets	313
Fair Value, Inputs, Level 1 [Member]
Liabilities:
Estimated fair value of contingent earn-out consideration included in accrued expenses	0
Long-term debt and capital lease obligations less unamortized discount and debt issuance costs	0
Fair Value, Inputs, Level 1 [Member] | Other Indefinite Lived Intangible Assets [Member]
Assets:
Estimated fair value of other indefinite-lived intangible assets	0
Fair Value, Inputs, Level 2 [Member]
Liabilities:
Estimated fair value of contingent earn-out consideration included in accrued expenses	0
Long-term debt and capital lease obligations less unamortized discount and debt issuance costs	256,116
Fair Value, Inputs, Level 2 [Member] | Other Indefinite Lived Intangible Assets [Member]
Assets:
Estimated fair value of other indefinite-lived intangible assets	0
Fair Value, Inputs, Level 3 [Member]
Liabilities:
Estimated fair value of contingent earn-out consideration included in accrued expenses	38
Long-term debt and capital lease obligations less unamortized discount and debt issuance costs	0
Fair Value, Inputs, Level 3 [Member] | Other Indefinite Lived Intangible Assets [Member]
Assets:
Estimated fair value of other indefinite-lived intangible assets	$ 313

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INCOME TAXES (Details Textual) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Sep. 30, 2017	Mar. 31, 2017
Income Tax Contingency [Line Items]
Deferred Tax Assets, Valuation Allowance		$ 4.5
Deferred Tax Assets, Operating Loss Carryforwards, State and Local	$ 4.2
Deferred Tax Assets, Tax Deferred Expense, Reserves and Accruals, Impairment Losses	0.3
Valuation Allowance, Deferred Tax Asset, Increase (Decrease), Amount	4.5
Adjustment In Current Deferred Tax Assets [Member] | Accounting Standards Update 2015-17 [Member]
Income Tax Contingency [Line Items]
New Accounting Pronouncement or Change in Accounting Principle, Cumulative Effect of Change on Equity or Net Assets			$ 9.4
Adjustment In Non-Current Deferred Tax Assets [Member] | Accounting Standards Update 2015-17 [Member]
Income Tax Contingency [Line Items]
New Accounting Pronouncement or Change in Accounting Principle, Cumulative Effect of Change on Equity or Net Assets			1.9
Adjustment In Non-Current Deferred Tax Liabilities [Member] | Accounting Standards Update 2015-17 [Member]
Income Tax Contingency [Line Items]
New Accounting Pronouncement or Change in Accounting Principle, Cumulative Effect of Change on Equity or Net Assets			$ 7.5
Domestic Tax Authority [Member]
Income Tax Contingency [Line Items]
Operating Loss Carryforwards	$ 150.7
Beginning Year of Expiry for Net Operating Loss Carry forwards	2020
Ending Year of Expiry for Net Operating Loss Carryforwards	2034
State and Local Jurisdiction [Member]
Income Tax Contingency [Line Items]
Operating Loss Carryforwards	$ 1,021.2
Beginning Year of Expiry for Net Operating Loss Carry forwards	2017
Ending Year of Expiry for Net Operating Loss Carryforwards	2036

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COMMITMENTS AND CONTINGENCIES (Details Textual) $ in Millions	9 Months Ended
	Sep. 30, 2017 USD ($)
Commitments And Contingencies [Line Items]
Loss Contingency Accrual	$ 0.5
Litigation Settlement, Expense	$ 0.3

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SEGMENT DATA (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016	Dec. 31, 2015
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Net revenue	$ 65,433	$ 71,272	$ 196,525	$ 203,626
Depreciation	3,082	2,976	9,171	8,950
Amortization	1,135	1,341	3,420	3,673
Change in the estimated fair value of contingent earn-out consideration	12	196	54	458
Impairment of indefinite-lived long-term assets other than goodwill	0	0	19	0
Net (gain) loss on the sale or disposal of assets	(95)	457	410	2,008
Net operating income (loss)	5,005	8,835	18,443	24,620
Inventories, net	809		809		$ 670
Property and equipment, net	102,203		102,203		102,790
Broadcast licenses	388,720		388,720		388,517	$ 393,031
Goodwill	26,436		26,436		25,613	$ 24,563
Other indefinite-lived intangible assets	313		313		332
Amortizable intangible assets, net	14,276		14,276		14,408
Operating Segments [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Net revenue	65,433	71,272	196,525	203,626
Operating expenses	56,128	58,773	165,936	168,149
Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration and net (gain) loss on the sale or disposal of assets	9,305	12,499	30,589	35,477
Depreciation	3,082	2,976	9,171	8,950
Amortization	1,135	1,341	3,420	3,673
Change in the estimated fair value of contingent earn-out consideration	(12)	(196)	(54)	(458)
Impairment of long-lived assets				700
Impairment of indefinite-lived long-term assets other than goodwill			19
Net (gain) loss on the sale or disposal of assets	(457)	95	(410)	(2,008)
Net operating income (loss)	5,005	8,835	18,443	24,620
Operating Segments [Member] | Broadcast [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Net revenue	48,424	51,052	145,479	149,768
Operating expenses	37,040	37,434	108,807	109,455
Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration and net (gain) loss on the sale or disposal of assets	11,384	13,618	36,672	40,313
Depreciation	1,920	1,753	5,668	5,431
Amortization	11	22	46	67
Change in the estimated fair value of contingent earn-out consideration	0	0	0	0
Impairment of long-lived assets				700
Impairment of indefinite-lived long-term assets other than goodwill			0
Net (gain) loss on the sale or disposal of assets	(633)	97	(399)	(2,175)
Net operating income (loss)	9,356	12,476	31,357	36,290
Inventories, net	0		0		0
Property and equipment, net	86,187		86,187		86,976
Broadcast licenses	388,720		388,720		388,517
Goodwill	3,594		3,594		3,581
Other indefinite-lived intangible assets	0		0		0
Amortizable intangible assets, net	361		361		407
Operating Segments [Member] | Digital Media [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Net revenue	10,446	11,999	31,998	34,056
Operating expenses	8,169	9,172	25,241	26,815
Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration and net (gain) loss on the sale or disposal of assets	2,277	2,827	6,757	7,241
Depreciation	792	840	2,389	2,392
Amortization	860	1,091	2,494	3,233
Change in the estimated fair value of contingent earn-out consideration	(12)	(13)	(54)	(119)
Impairment of long-lived assets				0
Impairment of indefinite-lived long-term assets other than goodwill			0
Net (gain) loss on the sale or disposal of assets	176	0	0	182
Net operating income (loss)	637	733	1,928	1,553
Inventories, net	327		327		300
Property and equipment, net	6,603		6,603		6,634
Broadcast licenses	0		0		0
Goodwill	20,946		20,946		20,136
Other indefinite-lived intangible assets	0		0		0
Amortizable intangible assets, net	10,720		10,720		9,927
Operating Segments [Member] | Publishing [Member]
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Net revenue	6,563	8,221	19,048	19,802
Operating expenses	6,686	8,020	18,705	19,951
Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration and net (gain) loss on the sale or disposal of assets	(123)	201	343	(149)
Depreciation	159	174	515	489
Amortization	264	228	879	372
Change in the estimated fair value of contingent earn-out consideration	0	(183)	0	(339)
Impairment of long-lived assets				0
Impairment of indefinite-lived long-term assets other than goodwill			19
Net (gain) loss on the sale or disposal of assets	0	0	(9)	(21)
Net operating income (loss)	(546)	(18)	(1,061)	(650)
Inventories, net	482		482		370
Property and equipment, net	1,326		1,326		1,779
Broadcast licenses	0		0		0
Goodwill	1,888		1,888		1,888
Other indefinite-lived intangible assets	313		313		332
Amortizable intangible assets, net	3,190		3,190		4,069
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	4,233	4,147	13,183	11,928
Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration and net (gain) loss on the sale or disposal of assets	(4,233)	(4,147)	(13,183)	(11,928)
Depreciation	211	209	599	638
Amortization	0	0	1	1
Change in the estimated fair value of contingent earn-out consideration	0	0	0	0
Impairment of long-lived assets				0
Impairment of indefinite-lived long-term assets other than goodwill			0
Net (gain) loss on the sale or disposal of assets	0	(2)	(2)	6
Net operating income (loss)	(4,442)	$ (4,356)	(13,781)	$ (12,573)
Inventories, net	0		0		0
Property and equipment, net	8,087		8,087		7,401
Broadcast licenses	0		0		0
Goodwill	8		8		8
Other indefinite-lived intangible assets	0		0		0
Amortizable intangible assets, net	$ 5		$ 5		$ 5

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SEGMENT DATA (Details Textual)	9 Months Ended
	Sep. 30, 2017
Segment Reporting Information [Line Items]
Number of Operating Segments	3