##### Table of Contents



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 SECURITIESAND EXCHANGE ACT OF 1934
| |  | --- | ------------------------------------------------------------------------------------------------

FOR QUARTERLY PERIOD ENDED MARCH 31, 2001

OR



| |  | [   ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR
      15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
| |  | ----- | --------------------------------------------------------------------------------------------------

FOR THE TRANSITION PERIOD FROM __________________ TO __________________

COMMISSION FILE NUMBER 333-76649

SALEM COMMUNICATIONS CORPORATION
(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, SUITE 300
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 registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [   ]

As of May 14, 2001 there were 17,902,392 shares of Class A common stock
and 5,553,696 shares of Class B common stock of Salem Communications
Corporation outstanding.



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TABLE OF CONTENTS



|                               |                                                                                               |  |  |  |  |  |  | 
|------------------------------ | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION
|                               | ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)                                                     
|                               | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
|                               | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|PART II  OTHER INFORMATION   
|                               | ITEM 1. LEGAL PROCEEDINGS                                                                    
|                               | ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS                                            
|                               | ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                                      
|                               | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                               | ITEM 5. OTHER INFORMATION                                                                    
|                               | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                    
|EXHIBIT 3.03                  
|EXHIBIT 3.04                  
|EXHIBIT 3.05                  
|EXHIBIT 3.06                  
|EXHIBIT 3.07                  
|EXHIBIT 3.08                  
|EXHIBIT 3.09                  
|EXHIBIT 3.10                  
|EXHIBIT 3.11                  
|EXHIBIT 3.12                  
|EXHIBIT 3.13                  
|EXHIBIT 3.14                  
|EXHIBIT 3.15                  
|EXHIBIT 3.16                  
|EXHIBIT 3.17                  
|EXHIBIT 3.18                  
|EXHIBIT 3.19                  
|EXHIBIT 4.10.02               
|EXHIBIT 4.19.01               
|EXHIBIT 4.19.02               
|EXHIBIT 10.01.01              
|EXHIBIT 10.03.06              
|EXHIBIT 10.11                 
|EXHIBIT 99.1                  



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##### Table of Contents



SALEM COMMUNICATIONS CORPORATION
INDEX

|                               |                                                                                               |  |          |    | 
|------------------------------ | --------------------------------------------------------------------------------------------- |  | -------- | -- | 
|                               |                                                                                               |  | PAGE NO.
|                               |                                                                                               |  |         
|COVER PAGE                     |                                                                                               |  | 1        |   
|                              
|                              
|                              
|                              
|INDEX                          |                                                                                               |  | 2        |   
|                              
|                              
|                              
|                              
|PART I  FINANCIAL INFORMATION |                                                                                               |  | 4        |   
|                              
|                              
|                              
|                              
|                               | Item 1. Financial Statements (Unaudited)                                                      |  |          | 4  | 
|                              
|                              
|                              
|                              
|                               | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |  |          | 8  | 
|                              
|                              
|                              
|                              
|                               | Item 3. Quantitative and Qualitative Disclosures About Market Risk                            |  |          | 12 | 
|                              
|                              
|                              
|                              
|PART II  OTHER INFORMATION    |                                                                                               |  | 12       |   
|                              
|                              
|                              
|                              
|                               | Item 1. Legal Proceedings                                                                     |  |          | 12 | 
|                              
|                              
|                              
|                              
|                               | Item 2. Changes in Securities and Use of Proceeds                                             |  |          | 12 | 
|                              
|                              
|                              
|                              
|                               | Item 3. Defaults upon Senior Securities                                                       |  |          | 12 | 
|                              
|                              
|                              
|                              
|                               | Item 4. Submission of Matters to a Vote of Security Holders                                   |  |          | 12 | 
|                              
|                              
|                              
|                              
|                               | Item 5. Other Information                                                                     |  |          | 12 | 
|                              
|                              
|                              
|                              
|                               | Item 6. Exhibits and Reports on Form 8-K                                                      |  |          | 12 | 
|                              
|                              
|                              
|                              
|SIGNATURES                     |                                                                                               |  | 18       |   

2



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SPECIAL CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS

From time to time, in both written reports (such as this report) and oral
statements, Salem Communications Corporation (Salem or the company,
including references to Salem by we, us and our) makes forward-looking
statements within the meaning of Federal and state securities laws.
Disclosures that use words such as the company believes, anticipates,
expects, may or plans and similar expressions are intended to identify
forward-looking statements, as defined under the Private Securities Litigation
Reform Act of 1995. These forward-looking statements reflect the companys
current expectations and are based upon data available to the company at the
time of the statements. Such statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from
expectations including, but not limited to, Salems ability to
close and integrate announced transactions, competition in the radio
broadcast, publishing and Internet industries and from new
technologies, market acceptance of recently launched music formats
and adverse economic conditions. These risks as well as other risks and uncertainties are detailed
from time to time in Salems
periodic reports on Forms 10-K, 10-Q and 8-K filed with the Securities and
Exchange Commission. Forward-looking statements made in this report speak as of
the date hereof. The company undertakes no obligation to update or revise any
forward-looking statements made in this report. Any such forward-looking
statements, whether made in this report or elsewhere, should be considered in
context with the various disclosures made by Salem about its business. These
projections or forward-looking statements fall under the safe harbors of
Section 27A of the Securities Act of 1933, as amended and Section 21E of the
Securities Exchange Act of 1934, as amended (the Securities Exchange Act).

3



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##### Table of Contents









PART I  FINANCIAL INFORMATION

SALEM COMMUNICATIONS CORPORATION







ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

SALEM COMMUNICATIONS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

|                                           |                                                                                                 |                                                                                                              |         |              |     |           |         |             |     | 
|------------------------------------------ | ----------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------ | ------- | ------------ | --- | --------- | ------- | ----------- | --- | 
|                                           |                                                                                                 |                                                                                                              |         | December 31, |     | March 31,
|                                           |                                                                                                 |                                                                                                              |         | 2000         |     | 2001     
|                                           |                                                                                                 |                                                                                                              |         |              |     |          
|                                           |                                                                                                 |                                                                                                              |         |              |     |           |         | (Unaudited)
|                                           |                                                                                                 | ASSETS                                                                                                      
|                                          
|                                          
|                                          
|                                          
|Current assets:                           
|                                          
|                                          
|                                          
|                                          
|                                           | Cash and cash equivalents                                                                       |                                                                                                              | $       | 3,928        |     |           | $       | 65,108      |    
|                                          
|                                          
|                                          
|                                          
|                                           | Accounts receivable (less allowance
for doubtful accounts of $3,550 in
2000 and $3,151 in 2001) |                                                                                                              |         | 25,129       |     |           |         | 21,981      |    
|                                          
|                                          
|                                          
|                                          
|                                           | Other receivables                                                                               |                                                                                                              |         | 1,230        |     |           |         | 1,033       |    
|                                          
|                                          
|                                          
|                                          
|                                           | Prepaid expenses                                                                                |                                                                                                              |         | 1,558        |     |           |         | 2,104       |    
|                                          
|                                          
|                                          
|                                          
|                                           | Due from stockholders                                                                           |                                                                                                              |         | 450          |     |           |         | 450         |    
|                                          
|                                          
|                                          
|                                          
|                                           | Deferred income taxes                                                                           |                                                                                                              |         | 2,250        |     |           |         | 187         |    
|                                           |                                                                                                 |                                                                                                              |         |              |     |           |         |            
|Total current assets                       |                                                                                                 |                                                                                                              | 34,545  |              |     |           | 90,863  |            
|                                          
|                                          
|                                          
|                                          
|Property, plant and equipment, net         |                                                                                                 |                                                                                                              | 69,004  |              |     |           | 76,294  |            
|                                          
|                                          
|                                          
|                                          
|Intangible assets, net                     |                                                                                                 |                                                                                                              | 358,482 |              |     |           | 291,745 |            
|                                          
|                                          
|                                          
|                                          
|Bond issue costs                           |                                                                                                 |                                                                                                              | 2,396   |              |     |           | 2,307   |            
|                                          
|                                          
|                                          
|                                          
|Other assets                               |                                                                                                 |                                                                                                              | 6,241   |              |     |           | 5,552   |            
|                                           |                                                                                                 |                                                                                                              |         |              |     |           |         |            
|Total assets                               |                                                                                                 | $                                                                                                            | 470,668 |              |     | $         | 466,761 |            
|                                           |                                                                                                 |                                                                                                              |         |              |     |           |         |            
|                                           | LIABILITIES AND STOCKHOLDERS EQUITY                                                           
|                                          
|                                          
|                                          
|                                          
|Current liabilities:                      
|                                          
|                                          
|                                          
|                                          
|                                           | Accounts payable and accrued expenses                                                           |                                                                                                              | $       | 6,031        |     |           | $       | 5,961       |    
|                                          
|                                          
|                                          
|                                          
|                                           | Accrued compensation and related                                                                |                                                                                                              |         | 3,361        |     |           |         | 3,727       |    
|                                          
|                                          
|                                          
|                                          
|                                           | Accrued interest                                                                                |                                                                                                              |         | 3,299        |     |           |         | 7,847       |    
|                                          
|                                          
|                                          
|                                          
|                                           | Deferred subscription revenue                                                                   |                                                                                                              |         | 1,509        |     |           |         | 1,529       |    
|                                          
|                                          
|                                          
|                                          
|                                           | Income taxes                                                                                    |                                                                                                              |         | 300          |     |           |         | 273         |    
|                                          
|                                          
|                                          
|                                          
|                                           | Capital lease obligations                                                                       |                                                                                                              |         | 93           |     |           |         | 74          |    
|                                           |                                                                                                 |                                                                                                              |         |              |     |           |         |            
|Total current liabilities                  |                                                                                                 |                                                                                                              | 14,593  |              |     |           | 19,411  |            
|                                          
|                                          
|                                          
|                                          
|Long-term debt                             |                                                                                                 |                                                                                                              | 286,050 |              |     |           | 287,050 |            
|                                          
|                                          
|                                          
|                                          
|Deferred income taxes                      |                                                                                                 |                                                                                                              | 15,279  |              |     |           | 10,653  |            
|                                          
|                                          
|                                          
|                                          
|Other liabilities                          |                                                                                                 |                                                                                                              | 1,798   |              |     |           | 1,361   |            
|                                          
|                                          
|                                          
|                                          
|Stockholders equity:                     
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                                                 | Class A common stock, $.01 par value;
authorized 80,000,000 shares; issued
and outstanding 17,902,392 shares |         |              | 179 |           |         |             | 179 | 
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                                                 | Class B common stock, $.01 par value;
authorized 20,000,000 shares; issued
and outstanding 5,553,696 shares  |         |              | 56  |           |         |             | 56  | 
|                                          
|                                          
|                                          
|                                          
|                                           | Additional paid-in capital                                                                      |                                                                                                              |         | 147,380      |     |           |         | 147,380     |    
|                                          
|                                          
|                                          
|                                          
|                                           | Retained earnings                                                                               |                                                                                                              |         | 5,333        |     |           |         | 671         |    
|                                           |                                                                                                 |                                                                                                              |         |              |     |           |         |            
|Total stockholders equity                 |                                                                                                 |                                                                                                              | 152,948 |              |     |           | 148,286 |            
|                                           |                                                                                                 |                                                                                                              |         |              |     |           |         |            
|Total liabilities and stockholders equity |                                                                                                 | $                                                                                                            | 470,668 |              |     | $         | 466,761 |            
|                                           |                                                                                                 |                                                                                                              |         |              |     |           |         |            

See accompanying notes

4



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##### Table of Contents



SALEM COMMUNICATIONS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)

|                                                      |                                                                                                    |   |                    |        |      |   |            |        |  
|----------------------------------------------------- | -------------------------------------------------------------------------------------------------- | - | ------------------ | ------ | ---- | - | ---------- | ------ | -
|                                                      |                                                                                                    |   | Three Months Ended
|                                                      |                                                                                                    |   | March 31,         
|                                                      |                                                                                                    |   |                   
|                                                      |                                                                                                    |   | 2000               |        | 2001
|                                                      |                                                                                                    |   |                    |        |     
|Gross broadcasting revenue                            |                                                                                                    | $ | 24,662             |        |      | $ | 32,904     |       
|                                                     
|                                                     
|                                                     
|                                                     
|Less agency commissions                               |                                                                                                    |   | 2,053              |        |      |   | 2,818      |       
|                                                      |                                                                                                    |   |                    |        |      |   |            |       
|Net broadcasting revenue                              |                                                                                                    |   | 22,609             |        |      |   | 30,086     |       
|                                                     
|                                                     
|                                                     
|                                                     
|Other media revenue                                   |                                                                                                    |   | 1,791              |        |      |   | 1,965      |       
|                                                      |                                                                                                    |   |                    |        |      |   |            |       
|Total revenue                                         |                                                                                                    |   | 24,400             |        |      |   | 32,051     |       
|                                                     
|                                                     
|                                                     
|                                                     
|Operating expenses:                                  
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Broadcasting operating expenses                                                                    |   |                    | 12,705 |      |   |            | 19,850 |  
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Other media operating expenses                                                                     |   |                    | 4,144  |      |   |            | 2,536  |  
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Corporate expenses                                                                                 |   |                    | 2,454  |      |   |            | 3,868  |  
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Depreciation and amortization (including
$494 in 2000 and $572 in 2001 for
other media businesses) |   |                    | 4,939  |      |   |            | 7,273  |  
|                                                      |                                                                                                    |   |                    |        |      |   |            |       
|                                                     
|                                                     
|                                                     
|                                                     
|Total operating expenses                              |                                                                                                    |   | 24,242             |        |      |   | 33,527     |       
|                                                      |                                                                                                    |   |                    |        |      |   |            |       
|Net operating income (loss)                           |                                                                                                    |   | 158                |        |      |   | (1,476     | )     
|                                                     
|                                                     
|                                                     
|                                                     
|Other income (expense):                              
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Interest income                                                                                    |   |                    | 288    |      |   |            | 795    |  
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Interest expense                                                                                   |   |                    | (2,520 | )    |   |            | (6,467 | )
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Loss on sale of assets                                                                             |   |                    |       |      |   |            | (8     | )
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Other expense                                                                                      |   |                    | (287   | )    |   |            | (55    | )
|                                                      |                                                                                                    |   |                    |        |      |   |            |       
|Loss before income taxes                              |                                                                                                    |   | (2,361             | )      |      |   | (7,211     | )     
|                                                     
|                                                     
|                                                     
|                                                     
|Benefit for income taxes                              |                                                                                                    |   | (704               | )      |      |   | (2,549     | )     
|                                                      |                                                                                                    |   |                    |        |      |   |            |       
|Net loss                                              |                                                                                                    | $ | (1,657             | )      |      | $ | (4,662     | )     
|                                                      |                                                                                                    |   |                    |        |      |   |            |       
|Basic and diluted loss per share                      |                                                                                                    | $ | (0.07              | )      |      | $ | (0.20      | )     
|                                                      |                                                                                                    |   |                    |        |      |   |            |       
|Basic and diluted weighted average shares
outstanding |                                                                                                    |   | 23,456,088         |        |      |   | 23,456,088 |       
|                                                      |                                                                                                    |   |                    |        |      |   |            |       

See accompanying notes

5



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##### Table of Contents



SALEM COMMUNICATIONS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

|                                                                                |                                                     |                                           |         |                    |        |      |         |        |       |  
|------------------------------------------------------------------------------- | --------------------------------------------------- | ----------------------------------------- | ------- | ------------------ | ------ | ---- | ------- | ------ | ----- | -
|                                                                                |                                                     |                                           |         | Three Months Ended
|                                                                                |                                                     |                                           |         | March 31,         
|                                                                                |                                                     |                                           |         |                   
|                                                                                |                                                     |                                           |         | 2000               |        | 2001
|                                                                                |                                                     |                                           |         |                    |        |     
|OPERATING ACTIVITIES                                                           
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Net loss                                                                        |                                                     | $                                         | (1,657  | )                  |        | $    | (4,662  | )     
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Adjustments to reconcile net loss to net cash provided by
operating activities:
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Depreciation and amortization                       |                                           |         | 4,939              |        |      |         | 7,273  |      
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Amortization of bond issue costs and bank loan fees |                                           |         | 121                |        |      |         | 183    |      
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Deferred income taxes                               |                                           |         | (158               | )      |      |         | (2,563 | )    
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Loss on sale of assets                              |                                           |         |                   |        |      |         | 8      |      
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Changes in operating assets and liabilities:       
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                |                                                     | Accounts receivable                       |         |                    | 1,198  |      |         |        | 3,345 |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                |                                                     | Prepaid expenses and other current assets |         |                    | 45     |      |         |        | (546  | )
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                |                                                     | Accounts payable and accrued expenses     |         |                    | (2,748 | )    |         |        | 4,843 |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                |                                                     | Deferred subscription revenue             |         |                    | 128    |      |         |        | 21    |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                |                                                     | Other liabilities                         |         |                    | 5      |      |         |        | (160  | )
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                |                                                     | Income taxes                              |         |                    | 157    |      |         |        | (27   | )
|                                                                                |                                                     |                                           |         |                    |        |      |         |       
|Net cash provided by operating activities                                       |                                                     |                                           | 2,030   |                    |        |      | 7,715   |       
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|INVESTING ACTIVITIES                                                           
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Capital expenditures                                                            |                                                     |                                           | (3,527  | )                  |        |      | (7,743  | )     
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Deposits on radio station acquisitions                                          |                                                     |                                           | (445    | )                  |        |      | --      |       
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Purchases of radio stations                                                     |                                                     |                                           | (26,465 | )                  |        |      | (38,214 | )     
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Proceeds from sale of property, plant and equipment and
intangible assets       |                                                     |                                           |        |                    |        |      | 98,358  |       
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Other assets                                                                    |                                                     |                                           | 264     |                    |        |      | 399     |       
|                                                                                |                                                     |                                           |         |                    |        |      |         |       
|Net cash (used) provided in investing activities                                |                                                     |                                           | (30,173 | )                  |        |      | 52,800  |       
|                                                                               
|FINANCING ACTIVITIES                                                           
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Proceeds from issuance of long-term debt and notes payable
to stockholders      |                                                     |                                           | 1,000   |                    |        |      | 1,000   |       
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Payments of long-term debt and notes payable to stockholders                    |                                                     |                                           | (2,811  | )                  |        |      | --      |       
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Payments on capital lease obligations                                           |                                                     |                                           | (61     | )                  |        |      | (19     | )     
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Payments of costs related to debt refinancing                                   |                                                     |                                           |        |                    |        |      | (316    | )     
|                                                                                |                                                     |                                           |         |                    |        |      |         |       
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Net cash provided by (used in) financing activities                             |                                                     |                                           | (1,872  | )                  |        |      | 665     |       
|                                                                                |                                                     |                                           |         |                    |        |      |         |       
|Net increase (decrease) in cash and cash equivalents                            |                                                     |                                           | (30,015 | )                  |        |      | 61,180  |       
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Cash and cash equivalents at beginning of period                                |                                                     |                                           | 34,124  |                    |        |      | 3,928   |       
|                                                                                |                                                     |                                           |         |                    |        |      |         |       
|Cash and cash equivalents at end of period                                      |                                                     | $                                         | 4,109   |                    |        | $    | 65,108  |       
|                                                                                |                                                     |                                           |         |                    |        |      |         |       
|Supplemental disclosures of cash flow information:                             
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                | Cash paid during the period for:                   
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                |                                                     | Interest                                  |         | $                  | 4,970  |      |         | $      | 1,746 |  
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                |                                                     | Income taxes                              |         |                    | 37     |      |         |        | 42    |  

See accompanying notes

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SALEM COMMUNICATIONS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1. BASIS OF PRESENTATION

Information with respect to the three months ended March 31, 2001 and 2000
is unaudited. The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles 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 generally accepted accounting
principles 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 Salem
Communications Corporation and Subsidiaries (Salem, or the Company), for
the periods presented. The results of operations for the interim periods are
not necessarily indicative of the results of operations for the full year. For
further information, refer to the consolidated financial statements and
footnotes thereto included in our annual report on Form 10-K for the year ended
December 31, 2000.

NOTE 2. ACQUISITIONS AND OTHER SIGNIFICANT TRANSACTIONS

We purchased the assets (principally intangibles) of the following radio
stations during the quarter ended March 31, 2001:

|                  |  |                       |  |                       |  |                |        | 
|----------------- |  | --------------------- |  | --------------------- |  | -------------- | ------ | 
|                  |  |                       |  |                       |  | Allocated     
|                  |  |                       |  |                       |  | Purchase      
|Acquisition Date  |  | Station               |  | Market Served         |  | Price         
|                  |  |                       |  |                       |  |               
|                  |  |                       |  |                       |  | (in
thousands)
|February 2, 2001  |  | WXRT-AM (now WYLL-AM) |  | Chicago, IL           |  | $              | 29,000 | 
|                 
|                 
|                 
|                 
|February 16, 2001 |  | WWTC-AM               |  | Minneapolis, MN       |  |                | 4,882  | 
|                 
|                 
|                 
|                 
|February 16, 2001 |  | WZER-AM (now WYLO-AM) |  | Milwaukee, WI         |  |                | 2,018  | 
|                 
|                 
|                 
|                 
|March 9, 2001     |  | WRBP-AM (now WHKW-AM) |  | Youngstown-Warren, OH |  |                | 500    | 
|                 
|                 
|                 
|                 
|March 16, 2001    |  | WFIA-AM               |  | Louisville, KY        |  |                | 1,750  | 
|                  |  |                       |  |                       |  |                |        | 
|                  |  |                       |  |                       |  | $              | 38,150 | 
|                  |  |                       |  |                       |  |                |        | 

On January 22, 2001, the company sold the assets of radio station KALC-FM,
Denver, CO for approximately $100 million. The net proceeds have been placed in an account
with a qualified intermediary under a like-kind exchange agreement in order to
preserve our ability to effect a tax-deferred exchange. As of March 31, 2001,
we have invested $38.2 million of the proceeds. The balance of $61.1 million
is reflected in cash and cash equivalents at March 31, 2001.

NOTE 3. RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities. SFAS No.
133 establishes accounting and reporting standards requiring that all
derivatives be recorded in the balance sheet as either an asset or liability
measured at fair value and that changes in fair value be recognized currently
in earnings, unless specific hedge accounting criteria are met. Certain
provisions of SFAS No. 133, including its required implementation date, were
subsequently amended. We adopted SFAS No. 133, as amended, in the first quarter
of 2001 and its adoption did not have a material effect on our results of
operations or our financial position.

NOTE 4. BASIC AND DILUTED NET LOSS PER SHARE

Basic net loss per share is computed by dividing net loss by the weighted
average number of common stock shares outstanding. Diluted net loss per share
is computed by dividing net loss by the weighted average number of common stock
shares and when dilutive, common stock share equivalents outstanding. Options
to purchase 342,500 and 473,200 shares of common stock were outstanding as of
March 31, 2000 and 2001, respectively. These options were excluded from the
respective computations of diluted net loss per share because their effect
would be anti-dilutive and, as such, basic and diluted net loss per share are
the same.

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The following table sets forth the computation of basic and diluted net
loss per share for the periods indicated:

|                                              |                                                          |   |                              |            |      |   |       |            |  
|--------------------------------------------- | -------------------------------------------------------- | - | ---------------------------- | ---------- | ---- | - | ----- | ---------- | -
|                                              |                                                          |   | Three Months Ended March 31,
|                                              |                                                          |   |                             
|                                              |                                                          |   | 2000                         |            | 2001
|                                              |                                                          |   |                              |            |     
|Numerator:                                   
|                                             
|                                             
|                                             
|                                             
|                                              | Net loss                                                 |   | $                            | (1,657,000 | )    |   | $     | (4,662,000 | )
|                                             
|                                             
|                                             
|                                             
|Denominator for basic loss per share:        
|                                             
|                                             
|                                             
|                                             
|                                              | Weighted average shares                                  |   |                              | 23,456,088 |      |   |       | 23,456,088 |  
|                                             
|                                             
|                                             
|                                             
|                                             
|Effect of dilutive securities  stock options |                                                          |   |                             |            |      |   | --    |           
|                                              |                                                          |   |                              |            |      |   |       |           
|Denominator for diluted loss per share       
|                                              | Weighted average shares adjusted for dilutive securities |   |                              | 23,456,088 |      |   |       | 23,456,088 |  
|                                              |                                                          |   |                              |            |      |   |       |           
|Basic and diluted loss per share              |                                                          | $ | (0.07                        | )          |      | $ | (0.20 | )         
|                                              |                                                          |   |                              |            |      |   |       |           

NOTE 5. CONTINGENCIES

The company and our subsidiaries, incident to our business activities, are
parties to a number of legal proceedings, lawsuits, arbitration and other
claims, including the Gospel Communications International, Inc. (GCI) matter
described in more detail below. Such matters are subject to many uncertainties
and outcomes are not predictable with assurance. Also, we maintain insurance
which 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 as of March 31, 2001. However, 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 the our
financial position, results of operations or cash flows.

On December 6, 2000, GCI made a demand for arbitration upon Salem. The
demand, pending before an arbitration panel of the American Arbitration
Association, alleges Salem and its subsidiary OnePlace, failed to provide
certain e-commerce software to GCI pursuant to a written contract between GCI
and OnePlace, for which GCI seeks $5.0 million in damages. We have filed an
answer to the demand, denying the factual basis for certain elements of GCIs
claims and has asserted counterclaims against GCI for breach of contract.
Although there can be no assurance that the GCI matter will be resolved in
favor of the Company, we will vigorously defend the action and pursue its
counterclaims against GCI.

NOTE 6. SUBSEQUENT EVENTS

On April 1, 2001, we purchased the assets of radio station WROL-AM,
Boston, MA, for $11.0 million.







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 our condensed
consolidated financial statements and related notes included elsewhere in this
report. Our condensed consolidated financial statements are not directly
comparable from period to period because of our acquisition and disposition of
radio stations and our acquisitions of other media businesses. See Note 2 to
our condensed consolidated financial statements.

We are the largest U.S. radio broadcasting company, measured by number of
stations and audience coverage, providing programming targeted at audiences
interested in religious and family issues. Our core business, developed over
the last 25 years, is the ownership and operation of radio stations in large
metropolitan markets. After completing our pending transactions, we will own
or operate 79 radio stations, including 54 stations which broadcast to 22 of
the top 25 U.S. markets. We also operate Salem Radio Network®, a national radio
network offering syndicated talk, news and music programming to over
1,600
affiliated radio stations, after giving effect to a pending
transaction.

Historically, the principal sources of our revenue are:



| |  |  | the sale of block program time, both to national and local program
producers,                  
| | - |  | -----------------------------------------------------------------------------------------------
|
| |  |  | the sale of advertising time on our radio stations, both to national and
local advertisers, and

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| |  |  | the sale of advertising time on our national radio network.
| | - |  | -----------------------------------------------------------

Our broadcasting revenue is affected primarily by the program rates our
radio stations charge and by the advertising rates our radio stations and
network charge. The rates for block program time 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 networks ability to produce results for its advertisers. Historically we
have not subscribed to traditional audience measuring services. Instead, we
have marketed ourselves to advertisers based upon the responsiveness of our
audience. With the launch of the contemporary Christian music format, called
The Fish, in several markets, we have started to subscribe to
Arbitron Inc., which develops quarterly reports to measure a radio stations
audience share in the demographic groups targeted by advertisers. Each of our
radio stations and our network have a general pre-determined level of time that
they make available for block programs and/or advertising, which may vary at
different times of the day.

In recent years, we have begun to place greater emphasis on the
development of local advertising in all of our markets. We encourage general
managers and sales managers to increase advertising revenue. We can create
additional advertising revenue in a variety of ways, such as removing block
programming that generates marginal audience response, adjusting the start time
of programs to add advertising in more desirable time slots and increasing
advertising rates.

As is typical in the radio broadcasting industry, our second and fourth
quarter advertising revenue generally exceeds our first and third quarter
advertising revenue. Quarterly revenue from the sale of block program time
does not tend to vary, however, since program rates are generally set annually.

Our cash flow is affected by a transition period experienced by radio
stations when, due to the nature of the radio station, our plans for the market
and other circumstances, we find it beneficial or advisable to change its
format. This transition period is when we develop the radio stations program
customer and listener base. During this period, a station will typically
generate negative or insignificant cash flow.

In the broadcasting industry, radio stations often utilize trade or barter
agreements to exchange advertising time for goods or services (such as other
media advertising, travel or lodging), in lieu of cash. In order to preserve
the sale of our advertising time for cash, we generally enter into trade
agreements only if the goods or services bartered to us will be used in our
business. We have minimized our use of trade agreements and have generally
sold most of our advertising time for cash. In 2000, we sold 94% of our
advertising time for cash. In addition, it is our general policy not to
preempt advertising paid for in cash with advertising paid for in trade.

The primary operating expenses incurred in the ownership and operation of
our radio stations include employee salaries and commissions, and facility
expenses (for example, rent and utilities). Beginning in 2000, in connection
with the launch of our contemporary Christian music format in several markets,
we incurred increased amounts for promotional expenses and music license fees.
In addition to these expenses, our network incurs programming costs and lease
expenses for satellite communication facilities. We also incur and will
continue to incur significant depreciation, amortization and interest expense
as a result of completed and future acquisitions of radio stations and existing
and future borrowings.

OnePlace earns its revenue from the (1) sales of banner advertising
and sponsorships on the Internet, (2) sales of streaming services, and (2)
sales of software and software support contracts. CCM Communications, Inc.
earns its revenue by selling advertising in and subscriptions to its
publications. The revenue and related operating expenses of these businesses
are reported as other media on our condensed consolidated statements of
operations.

The performance of a radio broadcasting company, such as Salem, is
customarily measured by the ability of its stations to generate broadcast cash
flow, EBITDA and after-tax cash flow. We define broadcast cash flow as net
operating income, excluding other media revenue and other media operating
expenses, before depreciation and amortization and corporate expenses. We
define EBITDA as net operating income before depreciation and amortization. We
define after-tax cash flow as income (loss) before extraordinary items minus
gain (loss) on disposal of assets (net of income tax) plus depreciation and
amortization.

Although broadcast cash flow, EBITDA and after-tax cash flow are not
measures of performance calculated in accordance with generally accepted
accounting principles, and should be viewed as a supplement to and not a
substitute for our results of operations presented on the basis of generally
accepted accounting principles, we believe that broadcast cash flow, EBITDA and
after-tax cash flow are useful because they are generally recognized by the
radio broadcasting industry as measures of performance and are used by analysts
who report on the performance of broadcast companies. These measures are not
necessarily comparable to similarly titled measures employed by other
companies.

In the following discussion of our results of operations, we compare our
results between periods on an as reported basis (that is, the results of
operations of all radio stations and network formats owned or operated at any
time during either period) and on a same station basis. We include in our
same station comparisons the results of operations of radio stations and
networks that we own or operate

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in the same format during the current period compared with the results of the
same stations and networks for the corresponding period of the prior year. We
do not include a station or network in this comparison unless it has been owned
or operated for at least an entire quarter included in each of the current and
corresponding prior year periods.

RESULTS OF OPERATIONS

NET BROADCASTING REVENUE.Net broadcasting revenue increased $7.5 million
or 33.2% to $30.1 million for the quarter ended March 31, 2001 from $22.6
million for the same quarter of the prior year. The growth is attributable to
the increase in same station revenue and the acquisitions of radio stations and
a network during 2000 and 2001, partially offset by the sales of radio stations
during 2000. On a same station basis, net broadcasting revenue improved $1.9 million or 12.2%
to $17.5 million for the quarter ended March 31, 2001 from $15.6 million for
the same quarter of the prior year. The improvement was primarily due to an
increase in network revenue due to increased network affiliations and quality
programming, an increase in net revenue at radio stations we acquired in 1998
and 1999 that previously operated with formats other than their current format,
an increase in program rates and increases in advertising time and improved
selling efforts at both the national and local level. Revenue from advertising
as a percentage of our gross broadcasting revenue increased to 41.0% for the
quarter ended March 31, 2001 from 35.2% for the same quarter of the prior year.
Revenue from block program time as a percentage of our gross broadcasting
revenue decreased to 43.5% for the quarter ended March 31, 2001 from 51.8% for
the same quarter of the prior year. This change in our revenue mix is
primarily due to our continued efforts to develop more advertising revenue in
all of our markets as well as the launch of our contemporary Christian music
format in several markets.

OTHER MEDIA REVENUE.Other media revenue increased $0.2 million or 11.1%
to $2.0 million for the quarter ended March 31, 2001 from $1.8 million for the
same quarter in the prior year. The increase is due primarily to our increased
revenue from banner advertising and streaming services, offset by the loss of
revenues from the sale of certain assets which generated revenue from the sale
of advertising in print and online catalogs and product sales.

BROADCASTING OPERATING EXPENSES.Broadcasting operating expenses
increased $7.2 million or 56.7% to $19.9 million for the quarter ended March
31, 2001 from $12.7 million for the same quarter of the prior year. The
increase is attributable to operating expenses associated with the acquisitions
of radio stations and a network during 2000 and 2001, promotional expenses
associated with the launch of the contemporary Christian music format in
several markets, and an increase in music license fees, partially offset by the
operating expenses associated with three radio stations sold during 2000. On a
same station basis, broadcasting operating expenses increased $1.1 million or
12.8% to $9.7 million for the quarter ended March 31, 2001 from $8.6 million
for the same quarter of the prior year. The increase is primarily due to
incremental selling and production expenses incurred to produce the increased
revenue in the period.

OTHER MEDIA OPERATING EXPENSES.Other media operating expenses decreased
$1.6 million or 39.0% to $2.5 million for the quarter ended March 31, 2001 from
$4.1 million for the same quarter in the prior year. The decrease is
attributable primarily to the reduction of operating expenses incurred due to
the sale of certain software products, assets and contracts.

BROADCAST CASH FLOW.Broadcast cash flow increased $0.3 million or 3.0%
to $10.2 million for the quarter ended March 31, 2001 from $9.9 million for the
same quarter of the prior year. As a percentage of net broadcasting revenue,
broadcast cash flow decreased to 33.9% for the quarter ended March 31, 2001
from 43.8% for the same quarter of the prior year. The decrease is primarily
attributable to the effect of stations acquired during 2000 and 2001 that
previously operated with formats other than their current format and the effect
of the launch of the contemporary Christian music format in several markets.
Acquired and reformatted radio stations typically produce low margins during
the first few years following conversion. Broadcast cash flow margins improve
as we implement scheduled program rate increases and increase advertising
revenue on our stations. On a same station basis, broadcast cash flow improved
$0.8 million or 11.4% to $7.8 million for the quarter ended March 31, 2001 from
$7.0 million for the same quarter of the prior year.

CORPORATE EXPENSES.Corporate expenses increased $1.4 million or 56.0% to
$3.9 million in the quarter ended March 31, 2001 from $2.5 million in the same
quarter of the prior year, primarily due to additional overhead costs
associated with the acquisitions of radio stations and a network during 2000
and 2001.

EBITDA.EBITDA increased $0.7 million or 13.7% to $5.8 million for the
quarter ended March 31, 2001 from $5.1 million for the same quarter of the
prior year. As a percentage of total revenue, EBITDA decreased to 18.1% for
the quarter ended March 31, 2001 from 20.9% for the same quarter of the prior
year. EBITDA was negatively impacted by the results of operations of our other
media businesses acquired in 1999, which generated a net loss before
depreciation and amortization of $0.6 million for the quarter ended March 31,
2001 as compared to $2.4 million for the same quarter of the prior year.
Broadcast EBITDA excluding the other media businesses decreased $1.1 million or
14.7% to $6.4 million for the quarter ended March 31, 2001 from $7.5 million
for the same quarter in the prior year. As a percentage of net broadcasting
revenue, broadcast EBITDA excluding the other media business decreased to 21.3%
for the quarter ended March 31, 2001 from 33.2% for the same quarter of the
prior year. The decrease is primarily attributable to the effect of

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stations acquired during 2000 and 2001 that previously operated with formats
other than their current format, the effect of the launch of the Contemporary
Christian music format in several markets and increased corporate expenses.

DEPRECIATION AND AMORTIZATION.Depreciation and amortization expense
increased $2.4 million or 49.0% to $7.3 million for the quarter ended March 31,
2001 from $4.9 million for the same quarter of the prior year. The increase is
primarily due to the acquisitions of radio stations and a network in 2000 and
2001.

OTHER INCOME (EXPENSE).Interest income increased $0.5 million to $0.8
million for the quarter ended March 31, 2001 from $0.3 million for the same
quarter of the prior year, primarily due to interest earned on the investment
of the proceeds from the sale of radio station KALC-FM, Denver, Colorado for
$100 million in January 2001. Interest expense increased $4.0 million or
160.0% to $6.5 million for the quarter ended March 31, 2001 from $2.5 million
for the same quarter of the prior year. The increase is due to interest
expense associated with borrowings on our credit facility to fund acquisitions
in 2000. Other expense, net decreased $0.2 million to $0.1 million for the
quarter ended March 31, 2001 from $0.3 million for the same quarter in the
prior year primarily due to decreased bank commitment fees.

BENEFIT FOR INCOME TAXES.Benefit for income taxes as a percentage of
loss before income taxes and extraordinary item (that is, the effective tax
rate) was 34.7% for the quarter ended March 31, 2001 and 29.8% for the same
quarter of the prior year. For the quarter ended March 31, 2001 and 2000 the
effective tax rate differs from the federal statutory income rate of 34.0%
primarily due to the effect of state income taxes and certain expenses that are
not deductible for tax purposes.

NET LOSS.We recognized a net loss of $4.7 million for the quarter ended
March 31, 2001 as compared to a net loss of $1.7 million for the same quarter
of the prior year.

AFTER-TAX CASH FLOW.After-tax cash flow decreased $0.7 million or 21.2%
to $2.6 million for the quarter ended March 31, 2001 from $3.3 million for the
same quarter of the prior year. After-tax cash flow was negatively impacted by
the after-tax cash flow of our other media businesses. After-tax cash flow
excluding our other media losses (net of income tax) decreased $1.7 million or
36.2% to $3.0 million for the quarter ended March 31, 2001 from $4.7 million
for the same quarter of the prior year. The decrease is primarily due to an
increase in interest expense and corporate expenses.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents was $65.1 million at March 31, 2001 including
$61.1 million held by a qualified intermediary under a like-kind exchange
agreement to preserve our ability to effect a tax-deferred exchange. Working
capital was $71.5 million at March 31, 2001. Cash and cash equivalents was $3.9
million at December 31, 2000. The increase in cash and cash equivalents is due
to cash provided by operating activities and cash provided by investing
activities primarily related to the net proceeds received from the sale of
KALC-FM, Denver, CO for approximately $100 million, offset by $38.2 million of
the proceeds used to acquire five radio stations in the first quarter of 2001
(see Note 2).

Net cash provided by operating activities increased to $7.7 million for
the quarter ended March 31, 2001 compared to $2.0 million in the same period of
the prior year. The increase is primarily due to a decrease in accounts
receivable and an increase in accounts payable.

Net cash provided by investing activities was $52.8 million for the
quarter ended March 31, 2001 compared to net cash used in investing activities
of $30.2 million for the same period of the prior year. The increase is due to
cash received for the sale of KALC-FM, Denver, CO, partially offset by cash
used for acquisitions (cash used of $38.2 million to purchase five radio
stations during the quarter ended March 31, 2001 as compared to cash used of
$26.5 million to purchase ten radio stations and a network for the same period
of the prior year) and offset by an increase in capital expenditures.

Net cash provided by financing activities was $0.7 million for the quarter
ended March 31, 2001. Net cash used in investing activities was $1.9 million
for the same period of the prior year due to a payment of long-term debt
associated with the purchase of the KRLA-AM transmitter site in February 2000.

We have historically funded, and will continue to fund, acquisitions of
radio stations through borrowings, including borrowings under bank credit
facilities and, to a lesser extent, from operating cash flow and selected asset
dispositions. We have historically funded, and will continue to fund,
expenditures for operations, administrative expenses, capital expenditures and
debt service required by our credit facility and senior subordinated notes from
operating cash flow. We believe that cash on hand, cash flow from operations,
borrowings under our credit facility and proceeds from the sale of some of our
existing radio stations will be sufficient to permit us to meet our financial
obligations, fund our pending acquisitions and fund operations for at least the
next twelve months.

At March 31, 2001 we have $100.0 million principal amount of 9 1/2% senior
subordinated notes due 2007. In August 2000, we supplemented the indenture for
our senior subordinated notes in connection with the assignment of
substantially all of the assets and liabilities to our wholly-owned subsidiary
Salem Communications Holding Corporation (HoldCo), including the obligations
as successor issuer under the indenture. The indenture for the senior
subordinated notes contains restrictive covenants that, among others, limit the
incurrence of debt by us and our subsidiaries, the payment of dividends, the
use of proceeds of specified asset sales and transactions with affiliates. The
senior subordinated notes are guaranteed by all of HoldCos subsidiaries.

At March 31, 2001, we had $187.1 million outstanding under our credit
facility. Since August 2000, we amended our credit facility to increase our
borrowing capacity from $150 million to $225 million, lower the borrowing rates
and modify current financial ratio tests to provide us with additional
borrowing flexibility. The credit facility matures on June 30, 2007. Aggregate
commitments under the credit facility begin to decrease commencing March 31,
2002.

Amounts outstanding under our credit facility bear interest at a base
rate, at our option, of the banks prime rate or LIBOR, plus a spread. For
purposes of determining the interest rate under our credit facility, the prime
rate spread ranges from 0% to 1.5%, and the LIBOR spread ranges from 0.875% to
2.75%.

The maximum amount that we may borrow under our credit facility is limited
by a ratio of our existing adjusted debt to pro forma twelve-month cash flow
(the Adjusted Debt to Cash Flow Ratio). Our credit facility will allow us to
adjust our total debt as used in such calculation by the lesser of 50% of the
aggregate purchase price of acquisitions of newly acquired non-religious
formatted radio stations that we reformat to a religious talk, conservative
talk or religious music format or $30.0 million and the cash flow from such
stations will not be considered in the calculation of the ratio. The maximum
Adjusted Debt to Cash Flow Ratio allowed under our credit facility is 6.50 to 1
through December 30, 2001. Thereafter, the maximum ratio will decline
periodically until December 31, 2005, at which point it will remain at 4.00 to
1 through June 2007. The Adjusted Debt to Cash Flow Ratio at March 31, 2001 was
4.74 to 1, resulting in a borrowing availability of approximately $12.4
million.

Our credit facility contains additional restrictive covenants customary
for credit facilities of the size, type and purpose contemplated which, with
specified exceptions, limits our ability to enter into affiliate transactions,
pay dividends, consolidate, merge or effect certain asset sales, make specified
investments, acquisitions and loans and change the nature of our business. The
credit facility also requires us to satisfy specified financial covenants,
which covenants require the maintenance of specified financial ratios and
compliance with certain financial tests, including ratios for maximum leverage
as described, minimum interest coverage, minimum debt service and minimum
fixed charge coverage. The credit facility is guaranteed by the company and all
of its subsidiaries other than HoldCo, which is the borrower, and is secured by
pledges of all of the capital stock of the companys subsidiaries.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Derivative Instruments. We do not invest, and during the quarter ended
March 31, 2001 did not invest, in market risk sensitive instruments.

Market Risk. Our credit facility
is subject to market risk exposure, specifically to changes in LIBOR and in the prime rate in the United
States. As of March 31, 2001, we may borrow an additional $12.4 million under
our credit facility. At March 31, 2001, we had borrowed $187.1 million
under our credit facility. Amounts outstanding under the credit facility bear
interest at a base rate, at our option, of the banks prime rate or LIBOR, plus
a spread. For purposes of determining the interest rate under our credit
facility, the prime rate spread ranges from 0% to 1.5%, and the LIBOR spread
ranges from 0.875% to 2.75%. At March 31, 2001, the blended interest rate on
amounts outstanding under the credit facility was 8.16%. At March 31, 2001, a
hypothetical 100 basis point increase in the prime rate would result in
additional interest expense of $1.9 million on an annualized basis.







PART II  OTHER INFORMATION







ITEM 1. LEGAL PROCEEDINGS

The company and our subsidiaries, incident to our business activities, are
parties to a number of legal proceedings, lawsuits, arbitration and other
claims, including the Gospel Communications International, Inc. (GCI) matter
described in more detail below. Such matters are subject to many uncertainties
and outcomes are not predictable with assurance. Also, we maintain insurance
which 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 as of March 31, 2001. However, 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 the our
financial position, results of operations or cash flows.

On December 6, 2000, GCI made a demand for arbitration upon Salem. The
demand, pending before an arbitration panel of the American Arbitration
Association, alleges Salem and its subsidiary OnePlace failed to provide
certain e-commerce software to GCI pursuant to a written contract between GCI
and OnePlace, for which GCI seeks $5.0 million in damages. We have filed an
answer to the demand, denying the factual basis for certain elements of GCIs
claims and has asserted counterclaims against GCI for breach of contract.
Although there can be no assurance that the GCI matter will be resolved in
favor of the Company, we will vigorously defend the action and pursue its
counterclaims against GCI.







ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Not applicable.







ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not
applicable.







ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters have been submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the period covered by this report.







ITEM 5. OTHER INFORMATION

Not applicable.







ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS

Set forth below is a list of exhibits included as part of this Quarterly
Report:

12



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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                                                                   
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
|Number  |  | Description of Exhibits                                                                                                                                                                                                                                                                                                                                                           
|2.01    |  | Certificate of Incorporation of Salem Communications Holding Corporation. (9)                                                                                                                                                                                                                                                                                                     
|       
|       
|       
|       
|2.02    |  | Bylaws of Salem Communications Holding Corporation. (9)                                                                                                                                                                                                                                                                                                                           
|       
|       
|       
|       
|2.03    |  | Certificate of Incorporation of Salem Communications Acquisition Corporation. (9)                                                                                                                                                                                                                                                                                                 
|       
|       
|       
|       
|2.04    |  | Bylaws of Salem Communications Acquisition Corporation. (9)                                                                                                                                                                                                                                                                                                                       
|       
|       
|       
|       
|2.05    |  | Certificate of Incorporation of SCA License Corporation. (9)                                                                                                                                                                                                                                                                                                                      
|       
|       
|       
|       
|2.06    |  | Bylaws of SCA License Corporation. (9)                                                                                                                                                                                                                                                                                                                                            
|       
|       
|       
|       
|3.01    |  | Amended and Restated Certificate of Incorporation of Salem Communications Corporation, a Delaware
corporation. (4)                                                                                                                                                                                                                                                                
|       
|       
|       
|       
|3.02    |  | Bylaws of Salem Communications Corporation, a Delaware Corporation. (4)                                                                                                                                                                                                                                                                                                           
|       
|       
|       
|       
|3.03    |  | Certificate of Formation of Salem Radio Operations, LLC.                                                                                                                                                                                                                                                                                                                          
|       
|       
|       
|       
|3.04    |  | Operating Agreement of Salem Radio Operations, LLC.                                                                                                                                                                                                                                                                                                                               
|       
|       
|       
|       
|3.05    |  | Certificate of Formation of Salem Media of Illinois, LLC.                                                                                                                                                                                                                                                                                                                         
|       
|       
|       
|       
|3.06    |  | Operating Agreement of Salem Media of Illinois, LLC.                                                                                                                                                                                                                                                                                                                              
|       
|       
|       
|       
|3.07    |  | Certificate of Formation of Salem Media of New York, LLC.                                                                                                                                                                                                                                                                                                                         
|       
|       
|       
|       
|3.08    |  | Operating Agreement of Salem Media of New York, LLC.                                                                                                                                                                                                                                                                                                                              
|       
|       
|       
|       
|3.09    |  | Certificate of Incorporation of Salem Radio Operations  Pennsylvania, Inc.                                                                                                                                                                                                                                                                                                       
|       
|       
|       
|       
|3.10    |  | Bylaws of Salem Radio Operations  Pennsylvania, Inc.                                                                                                                                                                                                                                                                                                                             
|       
|       
|       
|       
|3.11    |  | Agreement of Limited Partnership of Inspiration Media of
Pennsylvania, LP.                                                                                                                                                                                                                                                                                                        
|       
|       
|       
|       
|3.12    |  | Certificate of Limited Partnership of Inspiration Media of
Pennsylvania, LP.                                                                                                                                                                                                                                                                                                      
|       
|       
|       
|       
|3.13    |  | Certificate of Amendment to Certificate of Limited Partnership of
Inspiration Media of Pennsylvania, LP.                                                                                                                                                                                                                                                                          
|       
|       
|       
|       
|3.14    |  | Certificate of Conversion of OnePlace, Ltd.                                                                                                                                                                                                                                                                                                                                       
|       
|       
|       
|       
|3.15    |  | Certificate of Formation of OnePlace, LLC.                                                                                                                                                                                                                                                                                                                                        
|       
|       
|       
|       
|3.16    |  | Operating Agreement of OnePlace, LLC.                                                                                                                                                                                                                                                                                                                                             
|       
|       
|       
|       
|3.17    |  | Articles of Conversion of Inspiration Media of Texas, Inc.                                                                                                                                                                                                                                                                                                                        
|       
|       
|       
|       
|3.18    |  | Articles of Organization of Inspiration Media of Texas, LLC.                                                                                                                                                                                                                                                                                                                      
|       
|       
|       
|       
|3.19    |  | Operating Agreement of Inspiration Media of Texas, LLC.                                                                                                                                                                                                                                                                                                                           
|       
|       
|       
|       
|4.01    |  | Indenture between Salem Communications Corporation, a California corporation, certain named
guarantors and The Bank of New York, as Trustee, dated as of September 25, 1997, relating to the 9
1/2% Series A and Series B Senior Subordinated Notes due 2007. (1)                                                                                                                 
|       
|       
|       
|       
|4.02    |  | Form of 9 1/2% Senior Subordinated Note (filed as part of Exhibit 4.01). (1)                                                                                                                                                                                                                                                                                                      
|       
|       
|       
|       
|4.03    |  | Form of Note Guarantee (filed as part of Exhibit 4.01). (1)                                                                                                                                                                                                                                                                                                                       
|       
|       
|       
|       
|4.04    |  | Credit Agreement, dated as of September 25, 1997, among Salem, the several Lenders from time to time
parties thereto, and The Bank of New York, as administrative agent for the Lenders (incorporated by
reference to Exhibit 4.07 of the previously filed Registration Statement on Form S-4). (1)                                                                               
|       
|       
|       
|       
|4.05    |  | Borrower Security Agreement, dated as of September 25, 1997, by and between Salem and The Bank of New
York, as Administrative Agent of the Lenders (incorporated by reference to Exhibit 4.07 of the
previously filed Registration Statement on Form S-4). (1)                                                                                                                    
|       
|       
|       
|       
|4.06    |  | Subsidiary Guaranty and Security Agreement dated as of September 25, 1997, by and between Salem,
certain named guarantors, and The Bank of New York, as Administrative Agent (incorporated by
reference to Exhibit 4.09 of the previously filed Registration Statement on Form S-4). (1)                                                                                          
|       
|       
|       
|       
|4.07    |  | Amendment No. 1 and Consent No. 1, dated as of August 5, 1998, to the Credit Agreement, dated as of
September 25, 1997, by and among Salem, The Bank of New York, as Administrative Agent for the
Lenders, Bank of America NT&SA, as documentation agent, and the several Lenders (incorporated by
reference to Exhibit 10.02 of previously filed Current Report on Form 8-K). (2)
|       
|       
|       
|       
|4.08    |  | Amendment No. 2 and Consent No. 2, dated as of January 22, 1999, to the Credit Agreement, dated as of
September 25, 1997, by and among Salem, The Bank of New York, as Administrative Agent for the
Lenders, Bank of America NT&SA, as documentation agent, and the Lenders. (5)                                                                                                  
|       
|       
|       
|       
|4.09    |  | Specimen of Class A common stock certificate. (5)                                                                                                                                                                                                                                                                                                                                 
|       
|       
|       
|       
|4.10    |  | Supplemental Indenture No. 1, dated as of March 31, 1999, to the Indenture, dated as of September 25,
1997, by and among Salem Communications Corporation, a California corporation, Salem Communications
Corporation, a Delaware corporation, The Bank of New York, as Trustee, and the Guarantors named
therein. (5)                                                            
|       
|       
|       
|       
|4.10.01 |  | Supplemental Indenture No. 2, dated as of August 24, 2000, by and among Salem Communications
Corporation, a Delaware corporation, Salem Communications Holding Corporation, a Delaware
corporation, the guarantors named therein and The Bank of New York, as Trustee (previously filed as
Exhibit 4.11). (9)                                                                     
|       
|       
|       
|       
|4.10.02 |  | Supplemental Indenture No. 2, dated as of March 9, 2001, by and
among Salem Communications Corporation, a Delaware corporation,
Salem Communications Holding Corporation, a Delaware corporation,
the guarantors named therein and The Bank of New York, as Trustee.                                                                                                              
|       
|       
|       
|       
|4.11    |  | Consent No. 3, dated as of March 31, 1999, to the Credit Agreement, dated as of September 25, 1997,
by and among Salem, The Bank of New York, as Administrative Agent for the Lenders, Bank of America
NT&SA, as Documentation Agent, and the Lenders named therein. (5)                                                                                                          
|       
|       
|       
|       
|4.12    |  | Assumption Agreement, dated as of March 31, 1999, by and between Salem Communications Corporation, a
Delaware corporation, and The Bank of New York, as Administrative Agent. (5)                                                                                                                                                                                                 
|       
|       
|       
|       
|4.13    |  | Amendment No. 1 to the Grant of Security Interest (Servicemarks) by Salem to The Bank of New York, as
Administrative Agent, under the Borrower Security Agreement, dated as of September 25, 1997, with the
Administrative Agent. (5)                                                                                                                                             
|       
|       
|       
|       
|4.14    |  | Amendment No. 3 and Consent No. 4, dated as of April 23, 1999, under the Credit Agreement, dated as
of September 25, 1997, by and among Salem, The Bank of New York, as Administrative Agent for the
Lenders, Bank of America NT&SA, as Documentation Agent, and the Lenders party thereto. (5)                                                                                   
|       
|       
|       
|       
|4.15    |  | First Amended and Restated Credit Agreement by and among Salem, The Bank of New York, as
Administrative Agent for the Lenders, Bank of America NT&SA, as Documentation Agent, and the Lenders
named therein. (5)                                                                                                                                                                  
|       
|       
|       
|       
|4.16    |  | Amendment No. 1 to First Amended and Restated Credit Agreement, by and among Salem, The Bank of New
York, as Administrative Agent for the Lenders, Bank of America, N.A., as Documentation Agent and the
Lenders party thereto. (6)                                                                                                                                               
|       
|       
|       
|       
|4.17    |  | Amendment No. 2 to First Amended and Restated Credit Agreement, by and among Salem, The Bank of New
York, as Administrative Agent for the Lenders, Bank of America, N.A., as Documentation Agent and the
Lenders party thereto. (6)                                                                                                                                               
|       
|       
|       
|       
|4.18    |  | Amendment No. 3 to First Amended and Restated Credit Agreement, dated as of August 17, 2000, by and
among the Company, The Bank of New York, as administrative Agent for the Lender, Bank of America,
N.A., and the Lenders party thereto. (9)                                                                                                                                    
|       
|       
|       
|       
|4.19    |  | Second Amended and Restated Credit Agreement, dated as of August 24, 2000, by and
among                                                                                                                                                                                                                                                                                           

13



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##### Table of Contents



|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                             
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|           
|           
|           
|           
|            |  | Salem Communications Holding Corporation, The Bank of New York, as Administrative Agent, Bank
of America, N.A. as Syndication Agent, Fleet National Bank as Documentation Agent, Union Bank of
California, N.A. and the Bank of Nova Scotia as Co-Agents and the Lenders party thereto. (9)                                                                                                                                                 
|           
|           
|           
|           
|4.19.01     |  | Supplement to Second Amended and Restated Subsidiary Guaranty dated
November 7, 2000 by Salem Communications Acquisition Corporation and The Bank of New
York.                                                                                                                                                                                                                                                                              
|           
|           
|           
|           
|4.19.02     |  | Supplement to Second Amended and Restated Subsidiary Guaranty dated
November 7, 2000 by SCA License Corporation and The Bank of New
York.                                                                                                                                                                                                                                                                                                   
|           
|           
|           
|           
|4.20        |  | Credit Agreement dated as of August 24, 2000, by and among the Company, ING (U.S.) Capital LLC as
Administrative Agent, The Bank of New York as Syndication Agent, Fleet National Bank as Documentation
Agent, and the Lenders party thereto. (9)                                                                                                                                                                                           
|           
|           
|           
|           
|4.21        |  | Amendment No. 1, dated as of January 15, 2001, to the Third Amended and Restated Credit Agreement,
dated as of November 7, 2000, by and among Salem Communications Corporation, a Delaware Corporation;
The Bank of New York, as Administrative Agent; Bank Of America, N.A., as Syndication Agent; Fleet
National Bank, as Documentation Agent; Union Bank of California, N.A. and The Bank of Nova Scotia, as
Co-Agents; and Lenders. (10)
|           
|           
|           
|           
|4.22        |  | Amendment No. 1, dated as of January 15, 2001, to the First Amended and Restated Parent Guaranty,
dated as of November 7, 2000, by and among Salem Communications Corporation, a Delaware corporation,
Salem Communications Holding Corporation, a Delaware corporation, and The Bank of New York, as
Administrative Agent. (10)                                                                                                            
|           
|           
|           
|           
|4.23        |  | Third Amended and Restated Credit Agreement dated as of November 7, 2000, by and among Salem
Communications Holding Corporation, a Delaware corporation, The Bank of New York, as Administrative
Agent, Bank of America, N.A., as Syndication Agent, Fleet National Bank as Documentation Agent, Union
Bank of California, N.A. and The Bank of Nova Scotia, as Co-agents
and lenders. (10)                                                 
|           
|           
|           
|           
|10.01       |  | Amended and Restated Employment Agreement, dated as of May 19, 1999, between Salem and Edward G.
Atsinger III. (5)                                                                                                                                                                                                                                                                                                                          
|           
|           
|           
|           
|10.01.01    |  | Promissory Note from Edward G. Atsinger III to Salem dated
December 31, 2000.                                                                                                                                                                                                                                                                                                                                                               
|           
|           
|           
|           
|10.02       |  | Amended and Restated Employment Agreement, dated as of May 19, 1999, between Salem and Stuart W.
Epperson. (5)                                                                                                                                                                                                                                                                                                                              
|           
|           
|           
|           
|10.03.01    |  | Employment Contract, dated November 7, 1991, between Salem and Eric H. Halvorson. (1)                                                                                                                                                                                                                                                                                                                                                       
|           
|           
|           
|           
|10.03.02    |  | First Amendment to Employment Contract, dated April 22, 1996, between Salem and Eric H. Halvorson. (1)                                                                                                                                                                                                                                                                                                                                      
|           
|           
|           
|           
|10.03.03    |  | Second Amendment to Employment Contract, dated July 8, 1997, between Salem and Eric H. Halvorson. (1)                                                                                                                                                                                                                                                                                                                                       
|           
|           
|           
|           
|10.03.04    |  | Deferred Compensation Agreement, dated November 7, 1991, between Salem and Eric H. Halvorson. (1)                                                                                                                                                                                                                                                                                                                                           
|           
|           
|           
|           
|10.03.05    |  | Third Amendment to Employment Agreement, entered into May 26, 1999, between Salem and Eric Halvorson.
(5)                                                                                                                                                                                                                                                                                                                                   
|           
|           
|           
|           
|10.03.06    |  | Consulting Agreement dated August 7, 2000, between Salem and Eric
H. Halvorson.                                                                                                                                                                                                                                                                                                                                                             
|           
|           
|           
|           
|10.05.01    |  | Antenna/tower lease between Caron Broadcasting, Inc. (WHLO-AM/Akron, Ohio) and Messrs. Atsinger and
Epperson expiring 2007. (1)                                                                                                                                                                                                                                                                                                             
|           
|           
|           
|           
|10.05.02    |  | Antenna/tower/studio lease between Caron Broadcasting, Inc. (WTSJ-AM/ Cincinnati, Ohio) and Messrs.
Atsinger and Epperson expiring 2007. (1)                                                                                                                                                                                                                                                                                                
|           
|           
|           
|           
|10.05.03    |  | Antenna/tower lease between Caron Broadcasting, Inc. (WHK-FM/Canton, Ohio) and Messrs. Atsinger and
Epperson expiring 2007. (1)                                                                                                                                                                                                                                                                                                             
|           
|           
|           
|           
|10.05.04    |  | Antenna/tower/studio lease between Common Ground Broadcasting, Inc. (KKMS-AM/Eagan, Minnesota) and
Messrs. Atsinger and Epperson expiring in 2006. (1)                                                                                                                                                                                                                                                                                      
|           
|           
|           
|           
|10.05.05    |  | Antenna/tower lease between Common Ground Broadcasting, Inc. (WHK-AM/ Cleveland, Ohio) and Messrs.
Atsinger and Epperson expiring 2008. (1)                                                                                                                                                                                                                                                                                                 
|           
|           
|           
|           
|10.05.06    |  | Antenna/tower lease (KFAX-FM/Hayward, California) and Salem Broadcasting Company, a partnership
consisting of Messrs. Atsinger and Epperson, expiring in 2003. (1)                                                                                                                                                                                                                                                                          
|           
|           
|           
|           
|10.05.07    |  | Antenna/tower/studio lease between Inland Radio, Inc. (KKLA-AM/San Bernardino, California) and
Messrs. Atsinger and Epperson expiring 2002. (1)                                                                                                                                                                                                                                                                                             
|           
|           
|           
|           
|10.05.08    |  | Antenna/tower lease between Inspiration Media, Inc. (KGNW-AM/Seattle, Washington) and Messrs.
Atsinger and Epperson expiring in 2002. (1)                                                                                                                                                                                                                                                                                                   
|           
|           
|           
|           
|10.05.09    |  | Antenna/tower lease between Inspiration Media, Inc. (KLFE-AM/Seattle, Washington) and The Atsinger
Family Trust and Stuart W. Epperson Revocable Living Trust expiring in 2004.(1)                                                                                                                                                                                                                                                          
|           
|           
|           
|           
|10.05.11.01 |  | Antenna/tower/studio lease between Pennsylvania Media Associates, Inc. (WZZD-AM/WFIL-AM/Philadelphia,
Pennsylvania) and Messrs. Atsinger and Epperson, as assigned from WEAZ-FM Radio, Inc., expiring 2004.
(1)                                                                                                                                                                                                                             
|           
|           
|           
|           
|10.05.11.02 |  | Antenna/tower/studio lease between Pennsylvania Media Associates, Inc. (WZZD-AM/WFIL-AM/Philadelphia,
Pennsylvania) and The Atsinger Family Trust and Stuart W. Epperson Revocable Living Trust expiring
2004. (1)                                                                                                                                                                                                                          
|           
|           
|           
|           
|10.05.12    |  | Antenna/tower lease between Radio 1210, Inc. (KPRZ-AM/Olivenhain, California) and The Atsinger Family
Trust expiring in 2002. (1)                                                                                                                                                                                                                                                                                                           
|           
|           
|           
|           
|10.05.13    |  | Antenna/tower lease between Salem Media of Texas, Inc. and Atsinger Family Trust/Epperson Family
Limited Partnership (KSLR-AM/San Antonio, Texas). (6)                                                                                                                                                                                                                                                                                      
|           
|           
|           
|           
|10.05.14    |  | Antenna/turner/studio leases between Salem Media Corporation (KLTX-AM/Long Beach and Paramount,
California) and Messrs. Atsinger and Epperson expiring in 2002. (1)                                                                                                                                                                                                                                                                         
|           
|           
|           
|           
|10.05.15    |  | Antenna/tower lease between Salem Media of Colorado, Inc. (KNUS-AM/Denver-Boulder, Colorado) and
Messrs. Atsinger and Epperson expiring 2006. (1)                                                                                                                                                                                                                                                                                           
|           
|           
|           
|           
|10.05.16    |  | Atenna/tower lease between Salem Media of Colorado, Inc. and Atsinger Family Trust/Epperson Family
Limited Partnership (KRKS-AM/KBJD-AM/Denver, Colorado). (6)                                                                                                                                                                                                                                                                              
|           
|           
|           
|           
|10.05.17.01 |  | Studio Lease between Salem Media of Oregon, Inc. (KPDQ-AM/FM/Portland, Oregon) and Edward G. Atsinger
III, Mona J. Atsinger, Stuart W. Epperson, and Nancy K. Epperson expiring 2002. (1)                                                                                                                                                                                                                                                   

14



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##### Table of Contents



|            |  |                                                                                                                                                                                                                                                                                                                                        
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|           
|           
|           
|           
|10.05.17.02 |  | Antenna/tower lease between Salem Media of Oregon, Inc. (KPDQ-AM/FM/Raleigh Hills, Oregon and Messrs.
Atsinger and Epperson expiring 2002. (1)                                                                                                                                                                                         
|           
|           
|           
|           
|10.05.18    |  | Antenna/tower lease between Salem Media of Pennsylvania, Inc. (WORD-FM/WPIT-AM/Pittsburgh,
Pennsylvania) and The Atsinger Family Trust and Stuart W. Epperson Revocable Living Trust expiring
2003. (1)                                                                                                                                
|           
|           
|           
|           
|10.05.19    |  | Antenna/tower lease between Salem Media of Texas, Inc. (KSLR-AM/San Antonio, Texas) and
Epperson-Atsinger 1983 Family Trust expiring 2007. (1)                                                                                                                                                                                         
|           
|           
|           
|           
|10.05.20    |  | Antenna/tower lease between South Texas Broadcasting, Inc. (KENR-AM/Houston-Galveston, Texas) and
Atsinger Family Trust and Stuart W. Epperson Revocable Living Trust expiring 2005.(1)                                                                                                                                                
|           
|           
|           
|           
|10.05.21    |  | Antenna/tower lease between Vista Broadcasting, Inc. (KFIA-AM/Sacramento, California) and The
Atsinger Family Trust and Stuart W. Epperson Revocable Living Trust expiring 2006.(1)                                                                                                                                                    
|           
|           
|           
|           
|10.05.22    |  | Antenna/tower lease between South Texas Broadcasting, Inc. (KKHT-FM/Houston-Galveston, Texas) and
Sonsinger Broadcasting Company of Houston, LP expiring 2008. (3)                                                                                                                                                                     
|           
|           
|           
|           
|10.05.23    |  | Antenna/tower lease between Inspiration Media of Texas, Inc. (KTEK-AM/Alvin, Texas) and the Atsinger
Family Trust and The Stuart W. Epperson Revocable Living Trust expiring 2009. (3)                                                                                                                                                 
|           
|           
|           
|           
|10.06.05    |  | Asset Purchase Agreement dated as of September 30, 1996 by and between Infinity Broadcasting
Corporation of Dallas and Inspiration Media of Texas, Inc. (KEWS, Arlington, Texas; KDFX, Dallas,
Texas). (1)                                                                                                                             
|           
|           
|           
|           
|10.06.07    |  | Asset Purchase Agreement dated June 2, 1997 by and between New England Continental Media, Inc. and
Hibernia Communications, Inc. (WPZE-AM, Boston, Massachusetts). (1)                                                                                                                                                                 
|           
|           
|           
|           
|10.06.08    |  | Option to Purchase dated as of August 18, 1997 by and between Sonsinger, Inc. and Inspiration Media,
Inc. (KKOL-AM, Seattle, Washington). (1)                                                                                                                                                                                          
|           
|           
|           
|           
|10.06.09    |  | Asset Purchase Agreement dated as of April 13, 1998 by and between New Inspiration Broadcasting
Company and First Scientific Equity Devices Trust (KIEV-AM, Glendale, California) (incorporated by
reference to Exhibit 2.01 of the previously filed Current Report on Form 8-K). (3)                                                  
|           
|           
|           
|           
|10.06.10    |  | Asset Purchase Agreement dated as of April 1, 1999 by and between Inspiration Media, Inc. and
Sonsinger, Inc. (KKOL-AM, Seattle, Washington). (5)                                                                                                                                                                                      
|           
|           
|           
|           
|10.07.01    |  | Tower Purchase Agreement dated August 22, 1997 by and between Salem and Sonsinger Broadcasting
Company of Houston, L.P. (1)                                                                                                                                                                                                            
|           
|           
|           
|           
|10.07.02    |  | Amendment to the Tower Purchase Agreement dated November 10, 1997 by and between Salem and Sonsinger
Broadcasting Company of Houston, L.P. (1)                                                                                                                                                                                         
|           
|           
|           
|           
|10.07.03    |  | Promissory Note dated November 11, 1997 made by Sonsinger Broadcasting Company of Houston, L.P.
payable to Salem. (1)                                                                                                                                                                                                                  
|           
|           
|           
|           
|10.07.04    |  | Promissory Note dated December 24, 1997 made by Salem payable to Edward G. Atsinger III. (1)                                                                                                                                                                                                                                           
|           
|           
|           
|           
|10.07.05    |  | Promissory Note dated December 24, 1997 made by Salem payable to Stuart W. Epperson. (1)                                                                                                                                                                                                                                               
|           
|           
|           
|           
|10.08.01    |  | Local Marketing Agreement dated August 13, 1999 between Concord Media Group, Inc. and Radio 1210,
Inc. (6)                                                                                                                                                                                                                             
|           
|           
|           
|           
|10.08.02    |  | Asset Purchase Agreement dated as of August 18, 1999, by and between Salem Media of Georgia, Inc. and
Genesis Communications, Inc. (WNIV-FM, Atlanta, Georgia and WLTA-FM, Alpharetta, Georgia.) (6)                                                                                                                                   
|           
|           
|           
|           
|10.08.03    |  | Asset Purchase Agreement dated as of November 29, 1999, by and among JW Broadcasting, Inc., Salem
Media of Georgia, Inc. and Salem Communications Corporation (WGKA-AM, Atlanta, Georgia.) (6)                                                                                                                                         
|           
|           
|           
|           
|10.08.04    |  | Asset Exchange Agreement dated as of January 19, 2000 by and among Bison Media, Inc.; AMFM Texas
Broadcasting, LP and AMFM Texas Licenses, LP (KSKY-AM, Balch Springs, TX; KPRZ-FM, Colorado Springs,
CO). (7)                                                                                                                         
|           
|           
|           
|           
|10.08.05    |  | Asset Purchase Agreement dated as of March 6, 2000 by and among Salem, Citicasters Co., AMFM Texas
Broadcasting, LP; AMFM Texas Licenses LP; AMFM Ohio, Inc.; AMFM Radio Licenses LLC; Capstar Radio
Operating Company and Capstar TX Limited Partnership (WBOB-AM, KEZY-AM, KXMX-FM, KDGE-FM, WKNR-AM,
WRMR-AM, KALC-FM, WYGY-FM). (7)
|           
|           
|           
|           
|10.08.06    |  | Asset Exchange Agreement dated as of May 31, 2000 by and among Salem; South Texas Broadcasting, Inc.;
Cox Radio, Inc.; and CXR Holdings, Inc. (WALR-FM, Athens, GA; WSUN-AM, Plant City, FL, KLUP-AM,
Terrell Hills, TX, KKHT-FM, Conroe, TX). (8)                                                                                     
|           
|           
|           
|           
|10.08.07    |  | Asset Purchase Agreement dated as of July 2000, by and among Salem Media of California and Hi-Favor
Broadcasting, LLC (KLTX-AM Long Beach, CA). (8)                                                                                                                                                                                    
|           
|           
|           
|           
|10.08.08    |  | Asset Purchase Agreement, dated September 2000, by and between Salem Communications Acquisition
Corporation, a Delaware corporation and Emmis Communications Corporation, an Indiana corporation
(KALC-FM Denver, CO). (10)                                                                                                            
|           
|           
|           
|           
|10.08.09    |  | Asset Purchase Agreement, dated as of July 2000, by and between Truth Broadcasting Corporation, a
North Carolina corporation, and Salem Media Of Kentucky, Inc., a Kentucky corporation (WLKY-AM
Louisville, KY). (10)                                                                                                                 
|           
|           
|           
|           
|10.08.10    |  | Asset Purchase Agreement, dated December 2000, by and between Carter Broadcasting, Inc. and SCA
License Corporation, a Delaware corporation (WROL-AM Boston, MA). (10)                                                                                                                                                                 
|           
|           
|           
|           
|10.08.11    |  | Asset Purchase Agreement, dated as of November 6, 2000, by and among Infinity Broadcasting
Corporation of Illinois, a Delaware corporation, Infinity Broadcasting Corporation, a Delaware
corporation, and Salem Communications Corporation, a Delaware
corporation (WXRT-AM Chicago, IL). (10)                                        
|           
|           
|           
|           
|10.08.12    |  | Promissory Note dated November 7, 2000 made by Salem Communications Corporation payable to Salem                                                                                                                                                                                                                                       

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##### Table of Contents



|         |  |                                                                                                                             
|-------- |  | ----------------------------------------------------------------------------------------------------------------------------
|        
|        
|        
|        
|         |  | Communications Holding Corporation.(10)                                                                                     
|        
|        
|        
|        
|10.09.01 |  | Evidence of Key man life insurance policy no. 2256440M insuring Edward G. Atsinger III in the face
amount of $5,000,000. (1)
|        
|        
|        
|        
|10.09.02 |  | Evidence of Key man life insurance policy no. 2257474H insuring Edward G. Atsinger III in the face
amount of $5,000,000. (1)
|        
|        
|        
|        
|10.09.03 |  | Evidence of Key man life insurance policy no. 2257476B insuring Stuart W. Epperson in the face amount
of $5,000,000. (1)    
|        
|        
|        
|        
|10.10    |  | 1999 Stock Incentive Plan. (5)                                                                                              
|        
|        
|        
|        
|10.11    |  | Management Services Agreement by and among Salem and Salem
Communications Holding Corporation, dated August 25, 2000.       
|        
|        
|        
|        
|21.01    |  | Subsidiaries of Salem. (10)                                                                                                 
|        
|        
|        
|        
|99.1     |  | Supplemental Report of Salem Communications Holding Corporation.                                                            



---

|(1)  |  | Incorporated by reference to the exhibit of the same number, unless
otherwise noted, of Salems Registration Statement on Form S-4 (No.
333-41733), as amended, as declared effective by the Securities and
Exchange Commission on February 9, 1998.
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|    
|    
|    
|(2)  |  | Incorporated by reference to the exhibit of the same number, unless
otherwise noted, of Salems Current Report on Form 8-K, filed with the
Securities and Exchange Commission on September 4, 1998.                                                 
|    
|    
|    
|    
|(3)  |  | Incorporated by reference to the exhibit of the same number, unless
otherwise noted, of Salems Annual Report on Form 10-K, filed with the
Securities and Exchange Commission on March 31, 1999.                                                    
|    
|    
|    
|    
|(4)  |  | Incorporated by reference to the exhibit of the same number, unless
otherwise noted, of Salems Current Report on Form 8-K, filed with the
Securities and Exchange Commission on April 14, 1999.                                                    
|    
|    
|    
|    
|(5)  |  | Incorporated by reference to the exhibit of the same number to the
Companys Registration Statement on Form S-1 (No. 333-76649) as amended,
as declared, effective by the Securities and Exchange Commission on June
30, 1999.                      
|    
|    
|    
|    
|(6)  |  | Incorporated by reference to the exhibit of the same number to Salems
Annual Report on Form 10-K, filed with the Securities and Exchange
Commission on March 30, 2000.                                                                             
|    
|    
|    
|    
|(7)  |  | Incorporated by reference to the exhibit of the same number to Salems
Quarterly Report on Form 10-Q, filed with the Securities and Exchange
Commission on May 15, 2000.                                                                            
|    
|    
|    
|    
|(8)  |  | Incorporated by reference to the exhibit of the same number to Salems
Quarterly Report on Form 10-Q, filed with the Securities and Exchange
Commission on August 14, 2000.                                                                         
|    
|    
|    
|    
|(9)  |  | Incorporated by reference to the exhibit of the same number, unless
otherwise noted, to Salems Current Report on Form 8-K; filed with the
Securities and Exchange Commission on September 8, 2000.                                                 
|    
|    
|    
|    
|(10) |  | Incorporated by reference to the exhibit of the same number to Salems
Annual Report on Form 10-K, filed with the Securities and Exchange
Commission on April 2, 2001.                                                                              

16



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##### Table of Contents



(b) REPORTS ON FORM 8-K

No reports on Form 8-K were filed during the quarter ended March 31, 2001.

17



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##### Table of Contents









SIGNATURES

Pursuant to the requirements
  of the Securities Exchange Act of 1934, Salem Communications Corporation has
  duly caused this report to be signed on its behalf by the undersigned thereunto
  duly authorized.



| |              | SALEM COMMUNICATIONS CORPORATION                          | 
| | ------------ | --------------------------------------------------------- | 
| | May 15, 2001 |                                                           | 
| |              | By: /s/ EDWARD G. ATSINGER III                            | 
| |              | Edward G. Atsinger III                                    | 
| |              | President and Chief Executive
        Officer             | 
| | May 15, 2001 |                                                           | 
| |              | By: /s/ DAVID A. R. EVANS                                 | 
| |              | David A. R. Evans                                         | 
| |              | Senior Vice President and Chief
        Financial Officer | 
| |              | (Principal Financial Officer)                             | 

18



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##### Table of Contents



EXHIBIT INDEX

|         |  |                                                                                                                                                                                                                                                                     
|-------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit 
|Number   |  | Description of Exhibits                                                                                                                                                                                                                                             
|3.03     |  | Certificate of Formation of Salem Radio Operations, LLC.                                                                                                                                                                                                            
|        
|        
|        
|        
|3.04     |  | Operating Agreement of Salem Radio Operations, LLC.                                                                                                                                                                                                                 
|        
|        
|        
|        
|3.05     |  | Certificate of Formation of Salem Media of Illinois, LLC.                                                                                                                                                                                                           
|        
|        
|        
|        
|3.06     |  | Operating Agreement of Salem Media of Illinois, LLC.                                                                                                                                                                                                                
|        
|        
|        
|        
|3.07     |  | Certificate of Formation of Salem Media of New York, LLC.                                                                                                                                                                                                           
|        
|        
|        
|        
|3.08     |  | Operating Agreement of Salem Media of New York, LLC.                                                                                                                                                                                                                
|        
|        
|        
|        
|3.09     |  | Certificate of Incorporation of Salem Radio Operations  Pennsylvania, Inc.                                                                                                                                                                                         
|        
|        
|        
|        
|3.10     |  | Bylaws of Salem Radio Operations  Pennsylvania, Inc.                                                                                                                                                                                                               
|        
|        
|        
|        
|3.11     |  | Agreement of Limited Partnership of Inspiration Media of
Pennsylvania, LP.                                                                                                                                                                                          
|        
|        
|        
|        
|3.12     |  | Certificate of Limited Partnership of Inspiration Media of
Pennsylvania, LP.                                                                                                                                                                                        
|        
|        
|        
|        
|3.13     |  | Certificate of Amendment to Certificate of Limited Partnership
of Inspiration Media of Pennsylvania, LP.                                                                                                                                                            
|        
|        
|        
|        
|3.14     |  | Certificate of Conversion of OnePlace, Ltd.                                                                                                                                                                                                                         
|        
|        
|        
|        
|3.15     |  | Certificate of Formation of OnePlace, LLC.                                                                                                                                                                                                                          
|        
|        
|        
|        
|3.16     |  | Operating Agreement of OnePlace, LLC.                                                                                                                                                                                                                               
|        
|        
|        
|        
|3.17     |  | Articles of Conversion of Inspiration Media of Texas, Inc.                                                                                                                                                                                                          
|        
|        
|        
|        
|3.18     |  | Articles of Organization of Inspiration Media of Texas, LLC.                                                                                                                                                                                                        
|        
|        
|        
|        
|3.19     |  | Operating Agreement of Inspiration Media of Texas, LLC.                                                                                                                                                                                                             
|        
|        
|        
|        
|4.10.02  |  | Supplemental Indenture No. 2, dated as of March 9, 2001, by and
among Salem Communications Corporation, a Delaware corporation,
Salem Communications Holding Corporation, a Delaware
corporation, the guarantors named therein and The Bank of New
York, as Trustee.
|        
|        
|        
|        
|4.19.01  |  | Supplement to Second Amended and Restated Subsidiary Guaranty dated
November 7, 2000 by Salem Communications Acquisition Corporation and The Bank of New
York.                                                                                                      
|        
|        
|        
|        
|4.19.02  |  | Supplement to Second Amended and Restated Subsidiary Guaranty dated
November 7, 2000 by SCA License Corporation and The Bank of New
York.                                                                                                                           
|        
|        
|        
|        
|10.01.01 |  | Promissory Note from Edward G. Atsinger III to Salem dated
December 31, 2000.                                                                                                                                                                                       
|        
|        
|        
|        
|10.03.06 |  | Consulting Agreement dated August 7, 2000, between Salem and
Eric H. Halvorson.                                                                                                                                                                                     
|        
|        
|        
|        
|10.11    |  | Management Services Agreement by and among Salem and Salem
Communications Holding Corporation, dated August 25, 2000.                                                                                                                                               
|        
|        
|        
|        
|99.1     |  | Supplemental Report of Salem Communications Holding Corporation.