PART I — FINANCIAL INFORMATION

Item 1.Financial Statements

SAGA COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30, December 31,
2017 2016
(Unaudited) (Note)
(In thousands)
Assets
Current assets:
Cash and cash equivalents $ 81,035 $ 26,697
Accounts receivable, net 18,880 17,735
Prepaid expenses and other current assets 2,026 2,397
Barter transactions 1,721 1,318
Current assets of discontinued operations — 4,625
Total current assets 103,662 52,772
Property and equipment 135,644 134,680
Less accumulated depreciation 79,299 85,506
Net property and equipment 56,345 49,174
Other assets:
Broadcast licenses, net 94,708 86,622
Goodwill 15,417 7,407
Other intangibles, deferred costs and investments, net 7,822 5,975
Assets of discontinued operations — 18,048
$ 277,954 $ 219,998

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 2,211 $ 1,618
Payroll and payroll taxes 6,836 6,954
Other accrued expenses 26,348 3,198
Barter transactions 1,394 1,304
Current portion of long term debt 10,287 —
Current liabilities of discontinued operations 292 2,971
Total current liabilities 47,368 16,045
Deferred income taxes 31,762 29,741
Long-term debt 25,000 35,287
Other liabilities 2,269 2,885
Liabilities of discontinued operations — 1,058
Total liabilities 106,399 85,016
Commitments and contingencies — —
Stockholders’ equity:
Common stock 75 74
Additional paid-in capital 62,157 59,557
Retained earnings 143,308 108,733
Treasury stock (33,985 ) (33,382 )
Total stockholders’ equity 171,555 134,982
$ 277,954 $ 219,998


	September 30,		December 31,
	2020		2019
	(Unaudited)		(Note)

	(In thousands)
Assets
Current assets:
Cash and cash equivalents	$	48,279	$	44,034
Accounts receivable, net		13,668		18,962
Prepaid expenses and other current assets		3,278		2,478
Barter transactions		1,227		1,246
Total current assets		66,452		66,720
Property and equipment		142,648		142,403
Less accumulated depreciation		86,771		83,692
Net property and equipment		55,877		58,711
Other assets:
Broadcast licenses, net		90,208		95,311
Goodwill		19,106		18,963
Other intangibles, deferred costs and investments, net		11,521		12,689
	$	243,164	$	252,394

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	2,226	$	2,117
Payroll and payroll taxes		6,446		7,439
Dividend payable		0		1,797
Other accrued expenses		4,910		4,996
Barter transactions		1,080		1,152
Total current liabilities		14,662		17,501
Deferred income taxes		23,227		25,152
Long-term debt		10,000		10,000
Other liabilities		7,036		7,389
Total liabilities		54,925		60,042
Commitments and contingencies		—		—
Stockholders’ equity:
Common stock		77		77
Additional paid-in capital		68,479		66,811
Retained earnings		156,722		162,822
Treasury stock		(37,039)		(37,358)
Total stockholders’ equity		188,239		192,352
	$	243,164	$	252,394

Note: The balance sheet at December 31, ~~2016~~2019 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. ~~Certain prior period amounts have been reclassified to conform to the current year presentation.~~

~~See notes to unaudited condensed consolidated financial statements.~~

3

~~SAGA COMMUNICATIONS, INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF INCOME~~

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
(Unaudited)
(In thousands, except per share data)

Net operating revenue $ 30,269 $ 29,878 $ 86,685 $ 88,208
Station operating expense 21,755 21,775 64,521 64,757
Corporate general and administrative 3,132 2,728 8,875 8,065
Other operating expense (127 ) (1,393 ) (69 ) (1,388 )
Operating income from continuing operations 5,509 6,768 13,358 16,774
Interest expense 254 187 691 548
Income from continuing operations before tax 5,255 6,581 12,667 16,226
Income tax expense 2,290 2,678 5,280 6,665
Income from continuing operations, net of tax 2,965 3,903 7,387 9,561
Income from discontinued operations, net of tax (Note 5) 30,451 1,511 32,501 3,688
Net income $ 33,416 $ 5,414 $ 39,888 $ 13,249
Basic Earnings per share:
From continuing operations $ .50 $ .66 $ 1.25 $ 1.63
From discontinued operations 5.16 .26 5.51 .63
Basic earnings per share $ 5.66 $ .92 $ 6.76 $ 2.26

Weighted average common shares 5,807 5,755 5,800 5,753

Diluted Earnings per share:
From continuing operations $ .50 $ .66 $ 1.25 $ 1.62
From discontinued operations 5.16 .26 5.51 .63
Diluted earnings per share $ 5.66 $ .92 $ 6.76 $ 2.25

Weighted average common and common equivalent shares 5,807 5,764 5,804 5,762

Dividends declared per share $ .30 $ .30 $ .90 $ .80

See notes to unaudited condensed consolidated financial statements.

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Table of Contents

SAGA COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~OPERATIONS

Nine Months Ended
September 30,
2017 2016
(Unaudited)
(In thousands)
Cash flows from operating activities:
Cash provided by operating activities $ 18,677 $ 21,020
Cash flows from investing activities:
Acquisition of property and equipment (4,850 ) (4,149 )
Acquisition of broadcast properties (25,856 ) (12,733 )
Proceeds from sale of television stations 69,528 —
Proceeds from disposals of fixed assets 417 1,644
Other investing activities — 11
Net cash provided by (used in) investing activities 39,239 (15,227 )
Cash flows from financing activities:
Cash dividends paid (3,541 ) (4,688 )
Purchase of treasury shares (37 ) (5 )
Other financing activities — —
Net cash used in financing activities (3,578 ) (4,693 )
Net increase in cash and cash equivalents 54,338 1,100
Cash and cash equivalents, beginning of period 26,697 21,614
Cash and cash equivalents, end of period $ 81,035 $ 22,714


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019

	(Unaudited)
	(In thousands, except per share data)
Net operating revenue	$	24,143	$	31,274	$	67,060	$	91,281
Station operating expenses		19,616		23,600		60,467		69,642
Corporate general and administrative		2,838		2,788		8,923		8,179
Other operating expense (income), net		50		85		(1,234)		86
Impairment of broadcast licenses		1,392		0		5,149		0
Operating income (loss)		247		4,801		(6,245)		13,374
Interest expense		75		180		265		572
Interest income		(8)		(162)		(141)		(485)
Other income		0		(11)		(213)		(11)
Income (loss) before income tax (benefit) expense		180		4,794		(6,156)		13,298
Income tax (benefit) expense		1,130		1,460		(1,975)		3,860
Net income (loss)	$	(950)	$	3,334	$	(4,181)	$	9,438

Earnings (loss) per share:
Basic	$	(0.16)	$	.56	$	(0.70)	$	1.59
Diluted	$	(0.16)	$	.56	$	(0.70)	$	1.59

Weighted average common shares		5,869		5,834		5,867		5,840
Weighted average common and common equivalent shares		5,869		5,834		5,867		5,840

Dividends declared per share	$	0	$	.30	$	.32	$	.90

See notes to unaudited condensed consolidated financial statements.

Table of Contents

SAGA COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

September 30,


2020

2019


(Unaudited)

(In thousands)

Cash flows from operating activities:



Net cash provided by operating activities

$
8,206

$
18,968

Cash flows from investing activities:

Acquisition of property and equipment

(1,880)

(4,667)

Acquisition of broadcast properties

(190)

(763)

Proceeds from sale and disposal of assets

1,675

250

Proceeds from insurance claims

213

0

Other investing activities

0

0

Net cash provided by (used in) investing activities

(182)

(5,180)

Cash flows from financing activities:

Cash dividends paid

(3,716)

(6,842)

Payments on long-term debt

0

(10,000)

Purchase of treasury shares

(63)

(603)

Net cash used in financing activities

(3,779)

(17,445)

Net increase (decrease) in cash and cash equivalents

4,245

(3,657)

Cash and cash equivalents, beginning of period

44,034

44,729

Cash and cash equivalents, end of period

$
48,279

$
41,072

See notes to unaudited condensed consolidated financial statements.

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Table of Contents

SAGA COMMUNICATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States 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 of the information and footnotes required by accounting principles generally accepted in the United States for annual financial statements.
In our opinion, the accompanying financial statements include all adjustments of a normal, recurring nature considered necessary for a fair presentation of our financial position as of September 30, ~~2017~~2020 and the results of operations for the three and nine months ended September 30, ~~2017~~2020 and ~~2016.~~2019. Results of operations for the three and nine months ended September 30, ~~2017~~2020 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017.~~
2020.
We own or operate broadcast properties in 2627 markets, including 7579 FM and 3334 AM radio ~~stations.~~
~~On May 9, 2017 the Company entered into an agreement to sell the Joplin, Missouri~~stations and Victoria, Texas television stations. The disposition closed on September 1, 2017. The historical results of operations for the television stations are presented in discontinued operations for all periods presented (see Note 5). Unless indicated otherwise, the information in the notes to the accompanying unaudited condensed consolidated financial statements relates to the Company’s continuing operations. As a result of the Company’s television stations sale, the Company only has one reportable segment at September 30, 2017.
78 metro signals.
For further information, refer to the consolidated financial statements and footnotes thereto included in the Saga Communications, Inc. Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019.
~~The Company has~~We have evaluated events and transactions occurring subsequent to the balance sheet date of September 30, ~~2017,~~2020, for items that should potentially be recognized in these financial statements or discussed within the notes to the financial statements.
6
~~SAGA COMMUNICATIONS, INC.~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL~~
~~STATEMENTS — (Continued)~~
Earnings Per Share Information
Earnings per share is calculated using the two-class method. The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock and participating security. The Company has participating securities related to restricted stock units, granted under the Company’s Second Amended and Restated 2005 Incentive Compensation Plan, that earn dividends on an equal basis with common shares. In applying the two-class method, earnings are allocated to both common shares and participating securities.

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SAGA COMMUNICATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following table sets forth the computation of basic and diluted earnings (loss) per share:

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
(In thousands, except per share data)
Numerator:
Income from continuing operations $ 2,965 $ 3,903 $ 7,387 $ 9,561
Less: Income allocated to unvested participating securities 51 72 126 176
Income from continuing operations available to common stockholders $ 2,914 $ 3,831 $ 7,261 $ 9,385

Income from discontinued operations $ 30,451 $ 1,511 $ 32,501 $ 3,688
Less: Income allocated to unvested participating securities 520 28 556 68
Income from discontinued operations available to common stockholders $ 29,931 $ 1,483 $ 31,945 $ 3,620

Net income available to common stockholders $ 32,845 $ 5,314 $ 39,206 $ 13,005

Denominator:
Denominator for basic earnings per share — weighted average shares 5,807 5,755 5,800 5,753
Effect of dilutive securities:
Common stock equivalents — 9 4 9
Denominator for diluted earnings per share — adjusted weighted-average shares and assumed conversions 5,807 5,764 5,804 5,762

Basic earnings per share:
From continuing operations $ .50 $ .66 $ 1.25 $ 1.63
From discontinued operations 5.16 .26 5.51 .63
Basic earnings per share $ 5.66 $ .92 $ 6.76 $ 2.26

Diluted earnings per share
From continuing operations $ .50 $ .66 $ 1.25 $ 1.62
From discontinued operations 5.16 .26 5.51 .63
Diluted earnings per share $ 5.66 $ .92 $ 6.76 $ 2.25

Three Months Ended

Nine Months Ended

September 30,

September 30,


2020

2019

2020

2019


(In thousands, except per share data)

Numerator:









Net income (loss)

$
(950)

$
3,334

$
(4,181)

$
9,438

Less: Income (loss) allocated to unvested participating securities

(20)

61

(86)

173

Net income (loss) available to common stockholders

$
(930)

$
3,273

$
(4,095)

$
9,265

Denominator:

Denominator for basic earnings (loss) per share — weighted average shares

5,869

5,834

5,867

5,840

Effect of dilutive securities:

Common stock equivalents

0

0

0

0

Denominator for diluted earnings (loss) per share — adjusted weighted-average shares and assumed conversions

5,869

5,834

5,867

5,840

Earnings (loss) per share:

Basic

$
(.16)

$
.56

$
(.70)

$
1.59

Diluted

$
(.16)

$
.56

$
(.70)

$
1.59

~~The number of~~There were no stock options outstanding that had an antidilutive effect on our earnings per share calculation ~~and therefore have been excluded from diluted earnings per share calculation, was 0~~ for the three and nine months ended September 30, ~~2017~~2020 and ~~0 for~~2019, respectively. The actual effect of these shares, if any, on the ~~three and nine months ended September 30, 2016, respectively. All~~diluted earnings per share calculation will vary significantly depending on the fluctuation in the stock ~~options were exercised during the second quarter of 2017 and there were no stock options outstanding at September 30, 2017.~~price.
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~~SAGA COMMUNICATIONS, INC.~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL~~
~~STATEMENTS — (Continued)~~
Financial Instruments
Our financial instruments are comprised of cash and cash equivalents, accounts receivable, accounts payable and long-term debt. The carrying value of cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to their short maturities. The carrying value of long-term debt approximates fair value as it carries interest rates that either fluctuate with the euro-dollar rate, prime rate or have been reset at the prevailing market rate at September 30, ~~2017.~~2020.
Allowance for Doubtful Accounts
A provision for doubtful accounts is recorded based on our judgment of collectability of receivables. Amounts are written off when determined to be fully uncollectible. Delinquent accounts are based on contractual terms. We have included in our calculation of our allowance for doubtful accounts, the potential impact of the COVID-19 pandemic on our customers’ businesses and their ability to pay their accounts receivable. We maintain a specific allowance for estimated losses resulting from the inability of certain customers to make required payments. We also consider factors external to the specific customer, including current conditions and forecasts of economic conditions, including the potential impact of the COVID-19 pandemic. In the event we recover amounts previously written off, we will reduce the specific allowance for credit loss.

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Table of Contents

SAGA COMMUNICATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Income Taxes

Our effective tax rate is higher than the federal statutory rate as a result of the inclusion of state taxes in the income tax amount. We have historically calculated the provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate for the full fiscal year to “ordinary” income or loss (pretax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period.

Segments

We serve NaN radio markets (reporting units) that aggregate into 1 operating segment (Radio), which also qualifies as a reportable segment. We operate under 1 reportable business segment for which segment disclosure is consistent with the management decision-making process that determines the allocation of resources and the measuring of performance. The Chief Operating Decision Maker (“CODM”) evaluates the results of the radio operating segment and makes operating and capital investment decisions based at the Company level. Furthermore, technological enhancements and system integration decisions are reached at the Company level and applied to all markets rather than to specific or individual markets to ensure that each market has the same tools and opportunities as every other market. Managers at the market level do not report to the CODM and instead report to other senior management, who are responsible for the operational oversight of radio markets and for communication of results to the CODM. We continually review our operating segment classification to align with operational changes in our business and may make changes as necessary.

Time Brokerage Agreements/Local Marketing Agreements

We have entered into Time Brokerage Agreements (“~~TBA’s”~~TBAs”) or Local Marketing Agreements (“~~LMA’s”~~LMAs”) in certain markets. In a typical TBA/LMA, the FCC licensee of a station makes available, for a fee, blocks of air time on its station to another party that supplies programming to be broadcast during that air time and sells their own commercial advertising announcements during the time periods specified. Revenue and expenses related to ~~TBA’s/LMA’s~~TBAs/LMAs are included in the accompanying unaudited Condensed Consolidated Statements of Income. ~~At September 30, 2017 we had no TBA’s/LMA’s~~Assets and liabilities related to the TBAs/LMAs are included in ~~place.~~the accompanying unaudited Condensed Consolidated Balance Sheets.

2. Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

~~In November 2015, the FASB issued Accounting Standards Update No. 2015-17,~~~~“Income Taxes (Topic 740), Balance Sheet Classification of Deferred Taxes”~~ (“ASU 2015-17”), which requires companies to classify all deferred tax assets and liabilities as noncurrent on the balance sheet instead of separating deferred taxes into current and noncurrent amounts. This amendment was adopted on January 1, 2017 on a retrospective basis. As a result we have reclassified approximately $1,022,000 of current deferred tax assets into the noncurrent deferred tax liability line item within the Condensed Consolidated Balance Sheet for the period ended December 31, 2016.

~~In March 2016, the FASB issued ASU No. 2016-09,~~~~"Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting"~~ ("ASU 2016-09"), which includes multiple amendments intended to simplify aspects of share-based payment accounting. Amendments to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, and forfeitures will be applied using a modified retrospective transition method through a cumulative-effect adjustment to equity as of the beginning of the period of adoption. Amendments to the presentation of employee taxes paid on the statement of cash flows when an employer withholds shares to meet the minimum statutory withholding requirement will be applied retrospectively, and amendments requiring the recognition of excess tax benefits and tax deficiencies in the income statement are to be applied prospectively. This amendment was adopted on January 1, 2017 and did not have a material impact on our consolidated financial statements.

8

~~SAGA COMMUNICATIONS, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL~~

~~STATEMENTS — (Continued)~~

~~Recent Accounting Pronouncements – Not Yet Adopted~~

~~In May 2017, the FASB issued ASU 2017-09,~~~~“Compensation – Stock Compensation (Topic 718), Scope of Modification Accounting)”~~ (“ASU 2017-09”) which clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. The new guidance will reduce diversity in practice and result in fewer changes to the terms of an award being accounted for as modifications. ASU 2017-09 will be applied prospectively to awards modified on or after the adoption date. The guidance is effective for annual periods, and interim periods within those annual periods beginning after December 15, 2017, with early adoption permitted. The Company is currently evaluating the impact that this standard will have on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, “Intangibles – Goodwill and Other (Topic 350)”(“ASU 2017-04”) which removes step 2 from the goodwill impairment test. Under the new guidance, if a reporting unit’s carrying amount exceeds itits fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. ASU 2017-04 will be applied prospectively and is effective for fiscal years and interim impairment tests performed in periods beginning after December 15, 2019 with early adoption permitted. The Company ~~is currently evaluating the impact of adopting~~adopted this standard ~~on our consolidated financial statements.~~

~~In August 2016, the FASB issued ASU No. 2016-15, “~~~~Classification of Certain Cash Receipts~~January 1, 2020 and ~~Cash Payments (Topic 230): Statement of Cash Flows”~~(“ASU 2016-15”), which clarifies how entities should classify certain cash receipts and cash payments on the statement of cash flows. ASU 2016-15 also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. ASU 2016-15 is effective for fiscal years and interim periods beginning after December 15, 2017. The Company is currently evaluating the impact that this standard will have on our consolidated financial statements.

there was no material impact.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”(“ (“ASU 2016-13”), which amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. The guidance requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires the consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for fiscal years and interim periods beginning after December 15, 2019. The Company ~~is currently evaluating the impact that~~adopted this standard ~~will have on our consolidated financial statements.~~January 1, 2020 and there was no material impact.

Recent Accounting Pronouncements – Not Yet Adopted

In ~~February 2016,~~December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting ~~Standards Update No. 2016-02,~~~~“Leases (Topic 842)”~~for Incomes Taxes” (“ASU ~~2016-02”~~2019-02”)¸which ~~requires that all leases with a term~~is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing

10

Table of ~~more than one year, covering leased assets such as real estate, broadcasting towers~~Contents

SAGA COMMUNICATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

guidance regarding the tax treatment of certain franchise taxes, goodwill and ~~equipment, be reflected on the balance sheet as assets and liabilities for the rights and obligations created by these leases.~~nontaxable entities, among other items to improve consistent application. ASU ~~2016-02~~2019-12 is effective for fiscal years ~~fiscal years~~beginning after December 15, 2021 and interim periods beginning after December 15, ~~2018.~~While the Company is currently reviewing the effects of this guidance, the Company believes that this would result in an increase in the assets and liabilities reflected on the Company’s consolidated balance sheets.2022. We are ~~still~~currently evaluating the ~~impact on our consolidated statements of operations.~~

~~In May 2014, the FASB issued Accounting Standards Update No. 2014-09,~~~~“Revenue from Contracts with Customers”~~(“ASU 2014-09”), which provides guidance for the recognition, measurement and disclosure of revenue resulting from contracts with customers and will supersede virtually all of the current revenue recognition guidance under GAAP. The FASB has also issued a number of updates to this standard. This standard is effective for the fiscal and interim periods beginning January 1, 2018. The Company has completed our preliminary analysis of the standard, our evaluation of contracts and the potential impact of this standard on our consolidated financial statements. ~~Based~~

3. Revenue
Nature of goods and services
The following is a description of principal activities from which we generate our revenue:
Broadcast Advertising Revenue
Our primary source of revenue is from the sale of advertising for broadcast on our ~~preliminary assessment, which~~stations. We recognize revenue from the sale of advertising as performance obligations are satisfied upon airing of the advertising; therefore, revenue is ~~subject~~recognized at a point in time when each advertising spot is transmitted. Agency commissions are calculated based on a stated percentage applied to ~~change,~~gross billing revenue for our advertising inventory placed by an agency and are reported as a reduction of advertising revenue.
Digital Advertising Revenue
We recognize revenue from our digital initiatives across multiple platforms such as targeted digital advertising, online promotions, advertising on our websites, mobile messaging, email marketing and other e-commerce. Revenue is recorded when each specific performance obligation in the ~~impact~~digital advertising campaign takes place, typically within a one month period.
Other Revenue
Other revenue includes revenue from concerts, promotional events, tower rent and other miscellaneous items. Revenue is generally recognized when the event is completed, as the promotional events are completed or as each performance obligation is satisfied.
Disaggregation of ~~this guidance should~~Revenue
Revenues from contracts with customers comprised the following for the three and nine months ended September 30, 2020 and 2019:

Three Months Ended

Nine Months Ended

September 30,

September 30,


2020

2019

2020

2019


(in thousands)

(in thousands)

Types of Revenue




Broadcast Advertising Revenue, net

$
22,124

$
28,562

$
61,119

$
83,245

Digital Advertising Revenue

845

879

2,412

2,769

Other Revenue

1,174

1,833

3,529

5,267

Net Revenue

$
24,143

$
31,274

$
67,060

$
91,281

Contract Liabilities
Payments from our advertisers are generally due within 30 days although certain advertisers are required to pay in advance. When an advertiser pays for the services in advance of the performance obligations these prepayments are recorded as contract liabilities. Typical contract liabilities relate to prepayments for advertising spots not yet run; prepayments from sponsors for events that have not yet been held; and gift cards sold on our websites used to finance a broadcast advertising campaign. Generally all contract liabilities are expected to be ~~material to~~recognized within one year and are included in accounts payable in the Company’s ~~financial position, results~~Condensed Consolidated Financial Statements and are immaterial.

11

Table of ~~operations or cash flows. We plan to adopt the new guidance using the modified retrospective method.~~ Contents

9

SAGA COMMUNICATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

~~STATEMENTS — (Continued)~~

Transaction Price Allocated to the Remaining Performance Obligations

As the majority of our sales contracts are one year or less, we have utilized the optional exemption under ASC 606-10-50-14 and will not disclose information about the remaining performance obligations for sales contracts which have original expected durations of one year or less.

3.

4. Broadcast License, Goodwill and Other Intangible Assets
We evaluate our FCC licenses ~~and goodwill~~ for impairment annually, ~~as of October 1~~^st or more frequently if events or changes in circumstances indicate that the asset might be impaired. ~~FCC~~We operate our broadcast licenses in each market as a single asset and determine the fair value by relying on a discounted cash flow approach assuming a start-up scenario in which the only assets held by an investor are ~~evaluated~~broadcast licenses. The fair value calculation contains assumptions incorporating variables that are based on past experiences and judgments about future operating performance using industry normalized information for ~~impairment at~~an average station within a market. These variables include, but are not limited to: (1) the forecasted growth rate of each radio market, including population, household income, retail sales and other expenditures that would influence advertising expenditures; (2) the estimated available advertising revenue within the market ~~level using~~and the related market share and profit margin of an average station within a ~~direct method.~~market; (3) estimated capital start-up costs and losses incurred during the early years; (4) risk-adjusted discount rate; (5) the likely media competition within the market area; and (6) terminal values. If the carrying amount of FCC licenses is greater than their estimated fair value in a given market, the carrying amount of FCC licenses in that market is reduced to its estimated fair value.

We also evaluate goodwill for impairment annually, or more frequently if certain circumstances are present. If the carrying amount of goodwill ~~in a reporting unit~~ is greater than the implied value of goodwill determined by completing a hypothetical purchase price allocation using estimated fair value, ~~of the reporting unit,~~ the carrying amount of goodwill ~~in that reporting unit~~ is reduced to its implied value.

We evaluate amortizable intangible assets for recoverability when circumstances indicate impairment may have occurred, using an undiscounted cash flow methodology. If the future undiscounted cash flows for the intangible asset are less than net book value, then the net book value is reduced to the estimated fair value. Amortizable intangible assets are included in other intangibles, deferred costs and investments in the consolidated balance sheets.

2020 Impairment Test

Due to the impact of the COVID-19 pandemic on the U.S. economy and the related significant negative impact on our revenue for the second and third quarter of 2020, and the significant decline in our revenue pacing information for the fourth quarter of 2020 (excluding political advertising) and beyond in the majority of our markets, the Company tested its FCC License for impairment during the second quarter and again in the third quarter of 2020. We also reviewed our value of goodwill and other long-lived assets during the second quarter of 2020 as of June 30, 2020 and again in the third quarter of 2020 as of September 30, 2020, noting 0 impairment in goodwill or other long-lived assets. Our broadcast revenue has been significantly negatively impacted in the majority of the states where we operate, due to economic shutdowns and the related decline in advertising spending nationwide as most companies were making massive payroll cuts out of a necessity to survive with their revenues also significantly impacted. We have experienced a significant number of cancellations of advertising on our stations, with the greatest decreases in the following industries/categories: Automotive, Entertainment, Home Improvement, Professional Services, Restaurants, and Retail. The only category where we saw an increase over the prior quarter and year to date were political advertising and government/public service/issue. We also saw significant declines in our revenue related to events, venues, travel and sports as these types of businesses have been virtually shut down. We are starting to see increased revenues from our low point in Q2 2020, however, they are not at the previously expected recovery rate. Many areas of advertising and markets are slower to recover than we had expected during our Q2 2020 impairment analysis.

As a result of the quantitative impairment test performed as of June 30, 2020, the Company determined that the fair value of the broadcast licenses were less than the carrying amount on the balance sheet and recorded non-cash impairment charges totaling $3.8 million related to the FCC licenses in our Bucyrus, Ohio; Champaign, Illinois; Charleston, South Carolina; Columbus, Ohio; Harrisonburg, Virginia; Hilton Head, South Carolina; Mitchell, South Dakota; and Ocala, Florida markets. The impairment charges were primarily due to a decrease in projected revenue in

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SAGA COMMUNICATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

these markets due to the impact of the COVID-19 pandemic, an increase in the discount rate used in the discounted cash flow analyses to estimate the fair value of our FCC licenses due to certain risks specifically associated with the Company and the radio broadcasting industry, and a decrease in mature operating margins in small markets due to the cost of operations in a small market.

��

As a result of the quantitative impairment test performed as of September 30, 2020, the Company determined that the fair value of the broadcast licenses were less than the carrying amount on the balance sheet and recorded non-cash impairment charges totaling $1.4 million for the quarter ended September 30, 2020 related to the FCC licenses in our Bellingham, Washington; Champaign, Illinois; Charleston, South Carolina; Columbus, Ohio; Harrisonburg, Virginia; Mitchell, South Dakota; Spencer, Iowa and Springfield, Illinois. The impairment charges were primarily due to a decrease in projected revenue in these markets due to the impact of the COVID-19 pandemic, an increase in the discount rate used in 2019 but slightly less than in the second quarter of 2020, in the discounted cash flow analyses to estimate the fair value of our FCC licenses due to certain risks specifically associated with the Company and the radio broadcasting industry, and a decrease in mature operating margins in small markets due to the cost of operations in a small market. If actual market conditions are less favorable than those estimated by us or if events occur or circumstances change that would reduce the fair value of our broadcast licenses below the carrying value, we may be required to recognize additional impairment charges in future periods. Such a charge could have a material effect on our consolidated financial statements.

The following table reflects certain key estimates and assumptions used in the impairment test in the second and third quarter of 2020 and the fourth quarter of 2019, and 2018. The ranges for operating profit margin and market long-term revenue growth rates vary by market. In general, when comparing among 2020, 2019 and 2018: (1) the market specific operating profit margin range remained relatively consistent with some decreases to our smaller markets due to the cost of operations in a small market ; (2) the market long-term revenue growth rates were relatively consistent; (3) the discount rate increased a small percentage due to the COVID-19 pandemic; and (4) current year revenue projections were 10.4% - 21.4% lower than previously projected for 2020 and revenue projections for 2021 were 7.6% - 10.7% lower than previously projected.



	Second and Third Quarter 2020	Fourth Quarter 2019	Fourth Quarter 2018
Discount Rates	12.6% - 13.0%	12.2% - 12.2%	12.0% - 12.0%
Operating profit margin ranges	17.8% - 36.4%	19.0% - 36.4%	19.0% - 36.4%
Market long-term revenue growth rates	0.2% - 2.9%	0.0% - 2.9%	0.5% - 2.9%

If actual market conditions are less favorable than those estimated by us or if events occur or circumstances change that would reduce the fair value of our broadcast licenses below the carrying value, we may be required to recognize additional impairment charges in future periods. Such a charge could have a material effect on our consolidated financial statements.

Intangible assets that have finite lives are amortized over their useful lives using the straight-line method. Favorable lease agreements are amortized over the lives of the leases ranging from ~~four~~five to twenty-six years. Other intangibles are amortized over one to fifteen years. Customer relationships are amortized over three years.

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4.SAGA COMMUNICATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

5. Common Stock and Treasury Stock
The following summarizes information relating to the number of shares of our common stock issued in connection with stock transactions through September 30, ~~2017:~~2020:

Common Stock Issued

Class A

Class B
Common Stock Issued
Class A Class B
(Shares in thousands)
Balance, January 1, 2016 6,603 865

(Shares in thousands)
Balance, January 1, 2019

6,732

923
Conversion of shares 12 (12 )

13

(13)
Issuance of restricted stock 23 25

29

44
Balance, December 31, 2016 6,638 878
Exercise of stock options 21 8
Conversion of shares 4 (4 )
Forfeiture of restricted stock (1 ) —

(3)

0
Balance, September 30, 2017 6,662 882
Balance, December 31, 2019

6,771

954
Forfeiture of restricted stock

(2)

0
Balance, September 30, 2020

6,769

954

We have a Stock Buy-Back Program to allow us to purchase up to $75.8 million of our Class A Common Stock. As of September 30, ~~2017,~~2020, we have remaining authorization of ~~$23.3~~$19.2 million for future repurchases of our Class A Common Stock. On September 14, 2017, the Board of Directors authorized the repurchase of ~~its~~our Class A Common Stock under ~~its~~our trading plan adopted pursuant to Securities and Exchange Commission Rule 10b5-1.The Rule 10b5-1 repurchase plan allows ~~the Company~~us to repurchase ~~its~~our shares during periods when itwe would normally not be active in the market due to ~~its~~our internal trading blackout periods. Under the plan, ~~the Company~~we may repurchase ~~its~~our Class A Common Stock in any combination of open market, block transactions and privately negotiated transactions subject to market conditions, legal requirements including applicable SEC regulations (which include certain price, market, volume and timing constraints), specific repurchase instructions and other corporate considerations. Purchases under the plan ~~will be~~are funded by cash on ~~the Company's~~our balance sheet. The plan does not obligate ~~Saga~~us to acquire any particular amount of Class A Common Stock. ~~The~~Our original purchase authorization iswas effective until September 1, 2018 ~~but may be suspended,~~and has been extended several times, with the most recent extension being through May 28, 2020. During the three and nine months ended September 30, 2020 and 2019, approximately 1,000, 2,600, 9,600 and 20,700 shares, respectively were repurchased for $22,000, $63,000, $276,000 and $603,000 respectively, related to the Stock Buy-Back Program. Given the unprecedented uncertainty surrounding the COVID-19 virus and the resulting economic issues we have halted the directions for any additional buybacks under our plan.

6. Leases
We lease certain land, buildings and equipment for use in our operations. We recognize lease expense for these leases on a straight-line basis over the lease term and combine lease and non-lease components for all leases. Right-of-use (“ROU”) assets and lease liabilities are recorded on the balance sheet for all leases with an expected term of at least one year. Some leases include one or ~~amended~~more options to renew. The exercise of lease renewal options is generally at our discretion. The depreciable lives of ROU assets are limited to the expected lease term. Our lease agreements do not contain any ~~time~~residual value guarantees or material restrictive covenants. As of September 30, 2020, we do not have any non-cancellable operating lease commitments that have not yet commenced.
ROU assets are classified within other intangibles, deferred costs and investments, net on the condensed consolidated balance sheet while current lease liabilities are classified within other accrued expenses and long-term lease liabilities are classified within other liabilities. Leases with an initial term of 12 months or less are not recorded on the balance sheet. ROU assets and lease liabilities were $6.3 million and $6.6 million at September 30, 2020 and $6.9 million and $7.0 million at December 31, 2019, respectively. During the ~~Company's discretion.~~three and nine months ended September 30, 2020, we recorded an additional $168,000 and $762,000 of lease liabilities under operating leases. Payments on lease liabilities during the three and nine months ended September 30, 2020 and 2019 totaled $444,000, $1,302,000, $442,000 and $1,258,000, respectively.

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10

SAGA COMMUNICATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

~~STATEMENTS — (Continued)~~

Lease expense includes cost for leases with terms in excess of one year. For the three and nine months ended September 30, 2020 and 2019, our total lease expense was $444,000, $1,310,000, $420,000 and $1,272,000, respectively. Short-term lease costs are de minimus.
~~5. Discontinued Operations~~
~~On May 9, 2017 we entered into a definitive agreement to sell our Joplin, Missouri~~We have no financing leases and Victoria, Texas television stations (“Television Sale”) for approximately $66.6 million, subject to certain adjustments, to Evening Telegram Company d/b/a Morgan Murphy Media. The Television Sale was completed on September 1, 2017 and the Company received net proceeds of $69.5 million which included the sales price of $66.6 million, and the proceeds from sale of related accounts receivable of approximately $3.4 million, offset by certain closing adjustments and transactional costs of $500 thousand. The Company recognized a pretax gain of $50.8 million as a resultminimum annual rental commitments under non-cancellable operating leases consisted of the ~~Television Sale in the third quarter of 2017. The gain net of tax for the Television Sale was $29.9 million. Effective~~following at September 1, 2017, the Company used $24.2 million of the proceeds from the Television Sale to finance the acquisition of radio stations in South Carolina, which included the purchase price of $23 million, the purchase of $1.3 million in accounts receivable offset by certain closing adjustments and transactional costs of approximately $50,000 (as described in Note 6). On October 5, 2017 and November 3, 2017, the Company used $5,287,000 and $5,000,000 respectively of the proceeds from the Television Sale to pay down a portion of its Revolving Credit Facility (as defined and described in Note 8).
In accordance with authoritative guidance we have reported the results of operations of the Joplin, Missouri and Victoria, Texas television stations as discontinued operations in the accompanying consolidated financial statements. For all previously reported periods, certain amounts in the consolidated financial statements have been reclassified. All of the assets and liabilities of the Joplin, Missouri and Victoria, Texas television stations have been classified as discontinued operations and the net results of operations have been reclassified from continuing operations to discontinued operations. These were previously included in the Company’s television segment.
The following table shows the components of the results from discontinued operations associated with the Television Sale as reflected in the Company’s unaudited Condensed Consolidated Statements of Operations30, 2020 (in thousands):

Three Months Ended
September 30, Nine Months Ended
September 30,
2017⁽⁴⁾ 2016 2017⁽⁴⁾ 2016

Net operating revenue $ 3,296 $ 6,241 $ 14,238 $ 17,094
Station operating expense⁽¹⁾ 2,372 3,684 9,727 10,807
Other operating (income) expense — — 31 3
Operating income 924 2,557 4,480 6,284
Interest Expense⁽²⁾ 5 9 21 26
Income before income taxes 919 2,548 4,459 6,258
Pretax gain on the disposal of discontinued operations 50,842 — 50,842 —
Total pretax gain on discontinued operations 51,761 2,548 55,301 6,258
Income tax expense⁽³⁾ 21,310 1,037 22,800 2,570
Income from discontinued operations, net of tax $ 30,451 $ 1,511 $ 32,501 $ 3,688

Years Ending December 31,

2020 (a)

$
438
2021

1,710
2022

1,552
2023

1,226
2024

892
Thereafter

1,911
Total lease payments (b)

7,729
Less: Interest (c)

1,134
Present value of lease liabilities (d)

$
6,595

(a) ⁽¹⁾ ~~No depreciation expense was recorded by~~Remaining payments are for the ~~Company beginning May 9, 2017, the date the Television segment assets’ were held for sale.~~three-months ending December 31, 2020
(b) ⁽²⁾ ~~Interest expense related~~Lease payments include options to ~~Surtsey Media, LLC debt~~extend lease terms that ~~is guaranteed by the Television stations. Our affiliate repaid this loan when the television stations~~are reasonably certain of being exercised. There were ~~sold on~~no legally binding minimum lease payments for leases signed but not yet commenced at September ~~1, 2017.~~30, 2020.
(c) ⁽³⁾ ~~The effective tax rates on pretax income from discontinued operations were 41%.~~Our leases do not provide a readily determinable implicit rate. Therefore, we must estimate our discount rate for such leases to determine the present value of lease payments at the lease commencement date.
(d) ⁽⁴⁾ ~~Results of operations for the Television stations are reflected through August 31, 2017.~~ The ~~effective date of the sale was~~weighted average remaining lease term and weighted average discount rate used in calculating our lease liabilities were 6.5 years and 4.5%, respectively, at September ~~1, 2017.~~30, 2020.
11

~~SAGA COMMUNICATIONS, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL~~
~~STATEMENTS — (Continued)~~
~~The following table is a summary of the assets and liabilities of discontinued operations (in thousands):~~
September 30,
2017 December 31,
2016
Major Classes of Current Assets of Discontinued Operations
Accounts receivable $ — $ 3,868
Prepaid expenses and other current assets — 625
Barter transactions — 132
Total of current assets of discontinued operations $ — $ 4,625

Major Classes of Non-Current Assets of Discontinued Operations
Property and equipment, net⁽¹⁾ $ — $ 7,388
Broadcast licenses, net⁽¹⁾ — 9,607
Other intangibles, deferred costs and investments, net⁽¹⁾ — 1,053
Total of non-current assets of discontinued operations $ — $ 18,048
Total Assets Classified as Part of Discontinued Operations in the Condensed Consolidated Balance Sheets $ — $ 22,673

Major Classes of Current Liabilities of Discontinued Operations
Accounts payable $ 84 $ 759
Barter transactions — 163
Current portion of long term debt — 1,078
Other liabilities⁽¹⁾ 208 971
Total of current liabilities of discontinued operations $ 292 $ 2,971

Major Classes of Current Liabilities of Discontinued Operations
Other liabilities⁽¹⁾ $ — $ 1,058
Total of non-current liabilities of discontinued operations $ — $ 1,058
Total Liabilities Classified as Part of Discontinued Operations in the Condensed Consolidated Balance Sheets $ 292 $ 4,029
Net Assets Classified as Part of Discontinued Operations in the Condensed Consolidated Balance Sheets $ (292 ) $ 18,644
~~(1)~~ For prior periods, the current and long-term classification of assets and liabilities does not change as they did not meet the held-for-sale criteria the prior periods. We closed the disposition on September 1, 2017, therefore all amounts in the current year are considered current assets or liabilities of discontinued operations.
12
~~SAGA COMMUNICATIONS, INC.~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL~~
~~STATEMENTS — (Continued)~~
The following table represents the components of the results from discontinued operations associated with the Television Sale as reflected in the Company’s unaudited Condensed Consolidated Statements of Cash Flows (in thousands):
September 30,
2017 September 30,
2016
Significant operating non-cash items
Depreciation and amortization⁽¹⁾ $ 445 $ 1,023
Broadcast program rights amortization 418 467
Barter revenue, net 18 58
Loss on sale of assets 31 3

Significant investing items
Acquisition of property and equipment $ 125 $ 717
Proceeds from sale and disposal of assets — 13
Net proceeds from sale of television stations⁽²⁾ 69,528 —
⁽¹⁾ ~~No depreciation expense was recorded by the Company beginning May 9, 2017, the date the Television segment’s assets were held for sale.~~
⁽²⁾ Net proceeds from the sale of the television stations reflect the sale price of $66.6 million, and the proceeds from sale of accounts receivable of approximately $3.4 million, offset by certain closing adjustments and transactional costs of approximately $500 thousand.
6.7. Acquisitions and Dispositions
We actively seek and explore opportunities for expansion through the acquisition of additional broadcast properties. The consolidated statements of income include the operating results of the acquired stations from their respective dates of acquisition. All acquisitions were accounted for as purchases and, accordingly, the total purchase consideration was allocated to the acquired assets and assumed liabilities based on their estimated fair values as of the acquisition dates. The excess of the consideration paid over the estimated fair value of net assets acquired have been recorded as goodwill. The Company accounts for ~~acquisition~~acquisitions under the provisions of FASB ASC Topic 805,Business Combinations.
Management assigned fair values to the acquired property and equipment through a combination of cost and market approaches based upon each specific asset’s replacement cost, with a provision for depreciation, and to the acquired intangibles, primarily an FCC license, based on the Greenfield valuation methodology, a discounted cash flow approach.
2020 Acquisitions
~~2017 Acquisitions and Disposals~~
On ~~May 9, 2017 we entered into a definitive~~January 2, 2020, the Company closed on an agreement to ~~sell our Joplin, Missouri and Victoria, Texas television stations~~purchase W295BL from Basic Holdings, LLC, for approximately $66.6 million, subject to certain adjustments, to Evening Telegram Company d/b/a Morgan Murphy Media. The Television Sale was completed on September 1, 2017 and the Company received net proceeds of $69.5 million which included the sales price of $66.6 million, and the proceeds from sale of related accounts receivable of approximately $3.4 million, offset by certain closing adjustments and transactional costs of approximately $500 thousand.
~~On May 9, 2017, the Company entered into~~ an Asset Purchase Agreement with Apex Media Corporation and Pearce Development, LLC f/k/a Apex Real Property, LLC, both Companies of which a member of our Board of directors, G. Dean Pearce, is President of, to purchase radio stations principally serving the South Carolina area for approximately $23 million (subject to certain purchase price adjustments) plus the right to air certain radio commercials, substantially all the assets related to the operation of the following radio stations: WCKN(FM), WMXF(FM), WXST(FM), WAVF(FM), WSPO(AM), W261DG, W257BQ, WVSC(FM), WLHH(FM), WOEZ(FM), W256CB, W293BZ. The Company closed this transaction effective September 1, 2017, simultaneously with the closing of the Television Sale using funds generated from the Television Sale for $24.2 million, which included theaggregate purchase price of ~~$23 million,~~$200 thousand, of which $10 thousand was paid in 2019 and the ~~purchase of $1.3 million~~remaining $190 thousand paid in ~~related accounts receivable offset by certain closing adjustments and transactional costs of approximately $50,000.~~2020. Management attributes the goodwill recognized in the acquisition to the power of the existing brands in the ~~Charleston, South Carolina and Hilton Head, South Carolina~~Manchester, New Hampshire market as well as synergies and growth opportunities expected through the combination with the Company’s existing stations. The translators are start-up stations and therefore, have no pro forma revenue and expenses.

13
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SAGA COMMUNICATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

~~STATEMENTS — (Continued)~~

2019 Acquisitions
On January ~~16, 2017, we entered into~~9, 2019, the Company closed on an ~~asset purchase~~ agreement to purchase WPVQ-AM and W222CH from County Broadcasting Company, LLC for an FM radio station (WCVL) from WUVA, Incorporated, serving the Charlottesville, Virginia market for approximately $1,658,000, which included $8,000 in transactional costs. Simultaneously, we entered into a TBA to begin operating the station on February 1, 2017. We completed this acquisition on April 18, 2017. This acquisition was financed through funds generated from operations. Unaudited proforma resultsaggregate purchase price of ~~operations for this acquisition are not required, as such information is not material to our financial statements and therefore is not presented in the pro forma tables in the following pages.~~
~~2016 Acquisitions~~
On November 2, 2015, we entered into an agreement to acquire an FM radio station (WLVQ) from Wilks Broadcast - Columbus, LLC, serving the Columbus, Ohio market for approximately $13,791,000, which included $734,000 in accounts receivable and $57,000 in transactional costs. We completed this acquisition on February 3, 2016. We operated this station under an LMA from November 16, 2015 through our completion of the acquisition. This acquisition was financed through funds generated from operations.$210 thousand. Management attributes the goodwill recognized in the acquisition to the power of the existing brands in the ~~Columbus, Ohio~~Greenfield, Massachusetts market as well as ~~the~~ synergies and growth opportunities expected through the combination with the Company’s existing stations. The pro forma results for this acquisition are not deemed material and therefore are not presented in the footnotes.
~~On March 16, 2016 we acquired an FM translator serving the Portland, Maine market for approximately $50,000.~~
~~On March 25, 2016 we acquired an FM translator serving the Milwaukee, Wisconsin market for approximately $50,000.~~
~~On April 8, 2016 we acquired an FM translator serving the Charlottesville, Virginia market for approximately $100,000.~~
~~On April 11, 2016 we acquired an FM translator serving the Clarksville, Tennessee market for approximately $30,000.~~
~~On June 3, 2016 we acquired an FM translator serving the Spencer, Iowa market for approximately $35,000.~~
~~On August 11, 2016 we acquired two FM translators serving the Bellingham, Washington market for approximately $50,000.~~
~~On September 12, 2016 we acquired an FM translator serving the Portland, Maine market for approximately $45,000.~~
~~On October 11, 2016 we acquired a FM Translator serving the Bellingham, Washington market for approximately $25,000.~~
~~On November 8, 2016 we acquired a FM Translator serving the Des Moines, Iowa market for approximately $25,000.~~
~~On November 14, 2016 we acquired a FM Translator serving the Springfield, Illinois market for approximately $23,000.~~
~~On December 2, 2016 we acquired a FM Translator serving the Ithaca, New York market for approximately $35,000.~~
14
~~SAGA COMMUNICATIONS, INC.~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL~~
~~STATEMENTS — (Continued)~~
Condensed Consolidated Balance Sheet of ~~2017~~2020 and ~~2016~~2019 Acquisitions:
The following unaudited condensed balance sheets represent the estimated fair value assigned to the related assets and liabilities of the ~~2017~~2020 and ~~2016 acquisitions at their respective acquisition dates. The allocation of the purchase price for the 2017 and 2016 acquisitions is preliminary at September 30, 2017.~~
2019 acquisitions.
Saga Communications, Inc.
Condensed Consolidated Balance Sheet of ~~2017~~2020 and ~~2016~~2019 Acquisitions

Acquisitions in

2020

2019
Acquisitions in
2017 2016
(In thousands)

(In thousands)
Assets Acquired:

Current assets $ 1,440 $ 814

$
0

$
0
Property and equipment 6,678 375

11

25
Other assets:

Broadcast licenses 8,086 8,123

46

61
Goodwill 8,011 4,533

143

124
Other intangibles, deferred costs and investments 2,019 398

0

0
Total other assets 18,116 13,054

189

185
Total assets acquired 26,234 14,243

200

210
Liabilities Assumed:

Current liabilities 378 41

0

0
Total liabilities assumed 378 41

0

0
Net assets acquired $ 25,856 $ 14,202

$
200

$
210

15

8. Income taxes
On March 18, 2020, the Families First Coronavirus Response Act ("FFCR Act"), and on March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") were each enacted in response to the COVID-19 pandemic. The FFCR Act and the CARES Act contain numerous tax provisions, such as deferring payroll payments, establishing a credit for the retention of certain employees, relaxing limitations on the deductibility of interest, and updating the definition of qualified improvement property. This legislation currently has no material impact to the Company’s financial statements.
An income tax expense of $1.1 million was recorded for the three months ended September 30, 2020 compared to income tax expense of $1.5 million for the three months ended September 30, 2019. The effective tax rate was approximately 628% for the three months ended September 30, 2020 compared to 30.5% for the three months ended September 30, 2019. An income tax benefit of $2.0 million was recorded for the nine months ended September 30, 2020 compared to income tax expense of $3.9 million for the nine months ended September 30, 2019. The effective tax rate was approximately 32.1% for the nine months ended September 30, 2020 compared to 29.0% for the nine months ended September 30, 2019. Income tax provisions for interim (quarterly) periods are based on estimated annual income tax rates and are adjusted for the effects of significant, infrequent or unusual items (i.e. discrete items) occurring during the interim period. The current quarter and year to date tax rate was impacted by the broadcast license impairment charge which was a discrete item and contributed approximately $400 thousand of tax benefit for the three months ended September 30, 2020 and $1.5 million of tax benefit for the nine month period ended September 30, 2020.
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SAGA COMMUNICATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS —– (Continued)

~~Pro Forma Results of Operations for Acquisitions (Unaudited)~~

The following unaudited pro forma results of our operations for the three and nine months ended September 30, 2017 and 2016 assume the 2017 and 2016 acquisitions occurred as of January 1, 2016. The translators are start-up stations and therefore, have no pro forma revenue and expenses. The pro forma results give effect to certain adjustments, including depreciation, amortization of intangible assets, increased interest expense on acquisition debt and related income tax effects. The pro forma results have been prepared for comparative purposes only and do not purport to indicate the results of operations which would actually have occurred had the combinations been in effect on the dates indicated or which may occur in the future.

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016

ProForma Results of Operation
Net operating revenue $ 31,546 $ 31,888 $ 92,187 $ 93,993
Station operating expense 23,000 23,478 69,325 69,874
Corporate general and administrative 3,132 2,728 8,875 8,065
Other operating (income) expense, net (127 ) (1,393 ) (69 ) (1,388 )
Operating income 5,541 7,075 14,056 17,442
Interest expense 254 187 691 548
Income from continuing operations, before tax 5,287 6,888 13,365 16,894
Income tax expense 2,430 2,804 5,566 6,939
Income from continuing operations, net of tax 2,857 4,084 7,799 9,955
Income from discontinued operations, net of tax 30,451 1,511 32,501 3,688
Net income $ 33,308 $ 5,595 $ 40,300 $ 13,643

Basic earnings per share:
From continuing operations $ .47 $ .70 $ 1.32 $ 1.70
From discontinued operations 5.16 .26 5.51 .63
Basic earnings per share $ 5.63 $ .96 $ 6.83 $ 2.33

Diluted earnings per share:
From continuing operations $ .47 $ .70 $ 1.32 $ 1.70
From discontinued operations 5.16 .26 5.51 .63
Diluted earnings per share $ 5.63 $ .96 $ 6.83 $ 2.33
16

~~SAGA COMMUNICATIONS, INC.~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL~~
~~STATEMENTS — (Continued)~~
7.9. Stock-Based Compensation
2005 Incentive Compensation Plan
On October 16, 2013 our stockholders approved the Second Amended and Restated Saga Communications, Inc. 2005 Incentive Compensation Plan, ~~(the~~which was amended in 2018 after approval of the amendment by our stockholders at our 2018 annual meeting (as amended, the “Second Restated 2005 Plan”). The 2005 Incentive Compensation Plan, which replaced our 2003 Stock Option Plan, was first approved by stockholders in 2005 and ~~replaced our 2003 Stock Option Plan (the “2003 Plan”). The 2005 Incentive Compensation Plan~~subsequently this plan was re-approved by stockholders in 2010. The changes made in 2013 in the Second Restated 2005 Plan (i) ~~increases~~increased the number of authorized shares by 233,334 shares of Common Stock, (ii) ~~extends~~extended the date for making awards to September 6, 2018, (iii) ~~includes~~included directors as participants, (iv) ~~targets~~targeted awards according to groupings of participants based on ranges of base salary of employees and/or retainers of directors, (v) ~~requires~~required participants to retain ~~50%~~50 % of their net annual restricted stock awards during their employment or service as a director, and (vi) ~~includes~~included a clawback provision. The 2018 amendment to the Second Restated 2005 Plan (i) extended the date for making awards to September 6, 2023 and (ii) increased the number of authorized shares under the Plan by 90,000 shares of Class B Common Stock. The Second Restated 2005 Plan allows for the granting of restricted stock, restricted stock units, incentive stock options, nonqualified stock options, and performance awards to eligible employees and non-employee directors.
The number of shares of Common Stock that may be issued under the Second Restated 2005 Plan may not exceed ~~280,000~~370,000 shares of Class B Common Stock, ~~900,000~~990,000 shares of Class A Common Stock of which up to 620,000 shares of Class A Common Stock may be issued pursuant to incentive stock options and ~~280,000~~370,000 Class A Common Stock issuable upon conversion of Class B Common Stock. Awards denominated in Class A Common Stock may be granted to any employee or director under the Second Restated 2005 Plan. However, awards denominated in Class B Common Stock may only be granted to Edward K. Christian, President, Chief Executive Officer, Chairman of the Board of Directors, and the holder of 100% of the outstanding Class B Common Stock of the Company. Stock options granted under the Second Restated 2005 Plan may be for terms not exceeding ten years from the date of grant and may not be exercised at a price which is less than 100% of the fair market value of shares at the date of grant.
Stock-Based Compensation
All stock options granted were fully vested and expensed at December 31, 2012, therefore there was no0 compensation expense related to stock options for the three and nine months ended September 30, ~~2017~~2020 and ~~the three~~2019, respectively.
There were 0 options granted during 2020 and ~~nine months ended~~2019 and there were 0 stock options outstanding as of September 30, ~~2016, respectively.~~
~~The following summarizes the~~2020. All outstanding stock ~~option transactions for the Second Restated 2005 Plan and 2003 Plan for the nine months ended September 30, 2017:~~
Weighted Average
Weighted Remaining Aggregate
Number of Average Contractual Term Intrinsic
Options Exercise Price (Years) Value
Outstanding at January 1, 2017 29,035 $ 28.47 0.4 $ 633,834
Exercised (29,035 ) 28.47
Outstanding at September 30, 2017 — $ — — $ —
Exercisable at September 30, 2017 — $ — — $ —
17
~~SAGA COMMUNICATIONS, INC.~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL~~
~~STATEMENTS — (Continued)~~
options were exercised in 2017.
The following summarizes the restricted stock transactions for the nine months ended September 30, ~~2017:~~2020:

Weighted
Average
Grant Date
Fair
Shares Value
Outstanding at January 1, 2017 103,262 $ 43.73

Weighted

Average

Grant Date

Fair


Shares

Value
Outstanding at January 1, 2020

128,224

$
34.66
Vested (3,434 ) 43.10

5,376

34.83
Forfeited (594 ) 45.39

1,802

33.67
Non-vested and outstanding at September 30, 2017 99,234 $ 43.75
Non-vested and outstanding at September 30, 2020

121,046

$
34.67

For the three and nine months ended September 30, ~~2017~~2020 and ~~the three and nine months ended September 30, 2016,~~2019, we had ~~$629,000, $1,761,000, $536,000~~$618,000, $1,799,000, $532,000 and ~~$1,594,000,~~$1,656,000, respectively, of total compensation expense related to restricted stock-based compensation arrangements. This expense is included in corporate general and administrative expenses in our results of operations. The associated tax

17

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SAGA COMMUNICATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

benefit recognized for the three and nine months ended September 30, ~~2017~~2020 and ~~the three~~2019 was $71,000, $198,000, $51,000 and ~~nine months ended September 30, 2016, was $252,000, $704,000, $214,000 and $638,000,~~$176,000, respectively.

8.10. Long-Term Debt
Long-term debt consisted of the following:

September 30,

December 31,

2020

2019
September 30, December 31,
2017 2016
(In thousands)

(In thousands)
Revolving credit facility $ 35,287 $ 35,287

$
10,000

$
10,000
Secured debt of affiliate — 1,078
35,287 36,365
Amounts payable within one year 10,287 —

0

0
$ 25,000 $ 36,365

$
10,000

$
10,000

On August 18, 2015, we entered into a new credit facility (the “Credit Facility”) with JPMorgan Chase Bank, N.A., The Huntington National Bank, Citizens Bank, National Association and J.P. Morgan Securities LLC. ~~In connection with the execution of the Credit Facility, the credit agreement in place at June 30, 2015 (the “Old Credit Agreement”) was terminated, and all outstanding amounts were paid in full.~~ The Credit Facility consists of a $100 million five-year revolving facility (the “Revolving Credit Facility”) and ~~matures~~originally matured on August 18, 2020.
On June 27, 2018, the Company entered into a Second Amendment to its Credit Facility, (the “Second Amendment”), which had first been amended on September 1, 2017, extending the revolving credit maturity date under the Credit Agreement for five years after the date of the amendment to June 27, 2023. On July 1, 2019, we elected to reduce our Revolving Credit Facility to $70 million. On May 11, 2020 we entered into an assumption agreement and amendment of loan documents as part of our reincorporation as a Florida corporation. The amendment also includes an alternative benchmark rate as a replacement to LIBOR. A copy of this assumption agreement and amendment is was filed as Exhibit 10(v) to our Form 10-Q for the quarter ended June 30, 2020.
We have pledged substantially all of our assets (excluding our FCC licenses and certain other assets) in support of the Credit Facility and each of our subsidiaries has guaranteed the Credit Facility and has pledged substantially all of their assets (excluding their FCC licenses and certain other assets) in support of the Credit Facility.
Approximately $266,000 of ~~transaction fees~~debt issuance costs related to the Credit Facility were capitalized and are being amortized over the life of the Credit Facility. ~~Those deferred~~These debt issuance costs are included in other assets, net in the ~~condensed~~ consolidated balance sheets.
As a result of the Second Amendment, the Company incurred an additional $120,000 of transaction fees related to the Credit Facility that were capitalized. The cumulative transaction fees are being amortized over the remaining life of the Credit Facility.
Interest rates under the Credit Facility are payable, at our option, at alternatives equal to LIBOR ~~(1.25%~~(0.1875% at September 30, ~~2017)~~2020), plus 1% to 2% or the base rate plus 0% to 1%1%. The spread over LIBOR and the base rate vary from time to time, depending upon our financial leverage. As previously noted, the May 11, 2020 amendment to the Credit Facility includes an alternative benchmark to LIBOR in the event LIBOR is no longer available. Letters of credit issued under the Credit Facility will be subject to a participation fee (which is equal to the interest rate applicable to Eurocurrency Loans, as defined in the Credit Agreement) payable to each of the Lenders and a fronting fee equal to 0.25% per annum payable to the issuing bank. We also pay quarterly commitment fees of 0.2% to 0.3% per annum on the unused portion of the Revolving Credit Facility.
18
~~SAGA COMMUNICATIONS, INC.~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL~~
~~STATEMENTS — (Continued)~~
The Credit Facility contains a number of financial covenants (all of which we were in compliance with at September 30, ~~2017)~~2020) which, among other things, require us to maintain specified financial ratios and impose certain limitations on us with respect to investments, additional indebtedness, dividends, distributions, guarantees, liens and encumbrances.
On June 7, 2019, we used $5 million from funds generated by operations to voluntarily pay down a portion of our Revolving Credit Facility.
On February 4, 2019, we used $5 million from funds generated by operations to voluntarily pay down a portion of our Revolving Credit Facility which was presented in current portion of long-term debt on our balance sheet at December 31, 2018.

18

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SAGA COMMUNICATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

We had approximately ~~$65~~$60 million of unused borrowing capacity under the Revolving Credit Facility at September 30, ~~2017.~~2020.

On October 5, 2017 and November 3, 2017, the Company used $5,287,000 and $5,000,000, respectively of the proceeds from the Television Sale to pay down a portion of its Revolving Credit Facility. Those amounts were classified as current portion of long term debt at September 30, 2017.

The loan agreement of approximately $1.1 million of secured debt of affiliate was amended in April, 2017 to extend the due date of the loan for three years to mature on May 1, 2020. Our affiliate repaid this loan when the television stations were sold on September 1, 2017.

9.11. Litigation

The Company is subject to various outstanding claims which arise in the ordinary course of business and to other legal proceedings. Management anticipates that any potential liability of the Company, which may arise out of or with respect to these matters, will not materially affect the Company’s financial statements.

~~10.~~12. Dividends

On June 18, 2020, the Company’s Board of Directors announced that it was temporarily suspending the quarterly cash dividend in response to the continued uncertainty of the ongoing impact of COVID-19.

On ~~September 13, 2017,~~March 4, 2020, the Company’s Board of Directors declared a regular ~~quarterly~~ cash dividend of ~~$0.30~~$0.32 per share on its Classes A and B Common Stock. This dividend, totaling ~~$1.8 million, which is recorded within Other accrued expenses as of September 30, 2017 was paid on October 13, 2017 to shareholders of record on September 25, 2017.~~

On May 3, 2017, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.30 per share on its Classes A and B Common Stock. This dividend, totaling $1.8 million was paid on June 9, 2017 to shareholders of record on May 22, 2017.

~~On March 3, 2017, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.30 per share on its Classes A and B Common Stock. This dividend, totaling $1.8~~approximately $1.9 million, was paid on April ~~14, 2017~~10, 2020 to shareholders of record on March ~~28, 2017.~~

16, 2020.

On ~~November 21, 2016~~December 11, 2019, the Company’s Board of Directors declared a quarterly cash dividend of $0.30 per share ~~and a special cash dividend of $0.20 per share~~ on its Classes A and B shares. This dividend totaling ~~$2.9~~approximately $1.8 million was paid on ~~December 23, 2016~~January 17, 2020 to shareholders of record on December ~~5, 2016.~~

27, 2019 and funded by cash on the Company’s balance sheet.

On ~~August 30, 2016,~~September 12, 2019, the Company’s Board of Directors declared a regular cash dividend of $0.30 per share on its Classes A and B Common Stock. This dividend, totaling approximately $1.8 million was paid on ~~September 30, 2016~~October 11, 2019 to shareholders of record on September ~~14, 2016.~~

23, 2019 and funded by cash on the Company’s balance sheet.

On ~~June 1, 2016,~~May 30, 2019, the Company’s Board of Directors declared a regular cash dividend of ~~$0.25~~$0.30 per share on its Classes A and B Common Stock. This dividend, totaling ~~$1.5~~approximately $1.8 million, was paid on July ~~8, 2016~~5, 2019 to shareholders of record on June ~~15, 2016.~~

14, 2019 and funded by cash on the Company’s balance sheet.

On ~~March 2, 2016,~~February 26, 2019, the Company’s Board of Directors declared a regular ~~quarterly~~ cash dividend of ~~$0.25~~$0.30 per share on its Classes A and B Common Stock. This dividend, totaling ~~$1.5~~approximately $1.8 million, was paid on ~~April 15, 2016~~March 29, 2019 to shareholders of record on March ~~28, 2016.~~12, 2019.

19

13. Other Income

During the first quarter of 2020, the Company sold land and a building on one of its tower sites in its Bellingham, Washington market for approximately $1.7 million to Talbot Real Estate, LLC. The cash was received on April 1, 2020. The Company recognized a gain on the sale of assets of approximately $1.4 million as of June 30, 2020. The gain is recorded in the other operating (income) expense, net in the Company’s Condensed Consolidated Statements of Income.

During the first quarter of 2020, there was weather related damage to an antenna in our Keene, New Hampshire market. The Company’s insurance policy provided coverage for removal and replacement of the antenna and related equipment. The insurance settlement was finalized during the first quarter and the Company received cash proceeds of $208 thousand, resulting in a gain of $208 thousand. The gain is recorded in other (income) expense, net, in the Company’s Condensed Consolidated Statements of Income.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
COVID-19 Impact and Response
On March 11, 2020 the World Health Organization declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide. Throughout the third quarter of 2020 the COVID-19 pandemic has continued to spread. During the second quarter of 2020, numerous state and local governments issued or extended “shelter-in-place” orders, materially impacting and restricting various aspects of our business. While these “shelter-in-place” orders have been lifted, there have been varying degrees to which the economy has reopened in each state. Our broadcast revenue has been significantly negatively impacted in the majority of states where we operate. We have continued to experience a number of cancellations of advertising on our stations, especially regarding events, venues, sports, high ticket items, healthcare and automotive sales during the third quarter of 2020. Our sales teams are focused on how to meet changing needs of our customers in this environment. We are investing in training our salespeople using a variety of different programs. We have been successful at creating fresh, innovative and effective new advertising which has helped generate business for a number of our customers so that they are better positioned to remain open. Our operations are functioning, subject to regulated restrictions and safety constraints we have enacted in order to protect our employees and customers.
In response to the pandemic, we instituted the following actions in March which remained in place for some portion of the third quarter:
·
Placed restrictions on business travel for our employees and imposed mandatory quarantine periods for employees who traveled to areas impacted by the pandemic;
·
Closed our stations to the general public and shifted to appointment-only interactions with our customers where permitted, following recommended distancing and other health and safety protocols when meeting in person with a customer;
·
Modified our corporate and station office functions in order to allow all of our employees to work remotely except for essential minimum basic operations which could only be done in an office or studio setting;
The severity of governmental restrictions and the date we resumed more normal operations varied by market during the second quarter and third quarter based on the reduction in restrictions under “shelter-in-place” orders and improved public health conditions. While all of the above-referenced steps were, and some remain, necessary and appropriate in light of the COVID-19 pandemic, they impacted our ability to operate our business in its ordinary and traditional course. Those restrictions, combined with a reduction in the advertising abilities of our customers, which in each case has varied by market depending on the scope of the restrictions local authorities have established, have tempered our sales pace in the latter part of March and through the date of this report. The potential magnitude or duration of the business and economic impacts from the unprecedented public health effort to contain and combat the spread of COVID-19 are uncertain and include, among other things, significant volatility in financial markets. In addition, we can provide no assurance as to whether the COVID-19 public health effort will be intensified to such an extent that we will not be able to conduct any business operations in certain of our served markets or at all for an indefinite period.
As a result of the current challenging economic conditions, our reported results for the nine months ended September 30, 2020 are not reflective of current market conditions. We began the year under positive conditions however our operating income for the three and nine months ended September 30, 2020 decreased by $4,554,000 and $19,619,000, over the comparable prior year period. Advertising spending has significantly declined as a result of the disruptions to business activity in the markets where we operate due to the pandemic. This decline in advertising spending is causing our revenue and related net income to significantly decline. We have however seen some increase in revenue from a low point in the second quarter of 2020, although not to levels expected prior to the pandemic. We anticipate our revenue for the fourth quarter of 2020 to be lower than 2019 by 5% to 10%. Although we have undertaken a number of steps to reduce costs, such cost control measures will not completely offset the declines in revenue. The extent to which these revenue conditions will persist is difficult to predict, given the uncertainty around further restrictive measures by governmental authorities and the duration of those actions. As the pandemic spread and government and business responses expanded, we focused on protecting our liquidity and closely managing our cash flows, including taking the following actions:
·
Delaying capital expenditures where practical,
·
Suspending the repurchase of shares under our share repurchase program,
·
Temporarily suspending our quarterly dividend beginning in the second quarter,

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Table of Contents

·

Implementing a series of initiatives to control or reduce costs,

·

Consistently monitoring, following up and managing accounts receivable and collections,

·

Providing innovative new sales strategies to help the businesses in the communities we serve,

·

Providing many existing clients and other local businesses with free advertising to assist in their survival and to help them prepare for an eventual turnaround.

While we cannot reasonably estimate the length or severity of this pandemic, an extended economic slowdown in the U.S. could materially impact our consolidated financial position, consolidated results of operations, and consolidated cash flows in fiscal 2020 or beyond.

Results of Operations

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto of Saga Communications, Inc. and its subsidiaries contained elsewhere herein and the audited financial statements and Management Discussion and Analysis contained in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019. The following discussion is presented on a consolidated basis. On May 9, 2017 the Company entered into an agreement to sell its Joplin, Missouri and Victoria, Texas television stations and subsequently closed on this transaction on September 1, 2017. The historical results of operations for the television stations are presented in discontinued operations for all periods presented (see Note 5). As a result of the Company’s television stations being reported as discontinued operations the Company only has one reportable segment at September 30, 2017. Unless indicated otherwise, the information in the notes to the accompanying unaudited condensed consolidated financial statements relates to the Company’s continuing operations.

We use certain financial measures that are not calculated in accordance with generally accepted accounting principles in the United States of America (GAAP) to assess our financial performance. For example, we evaluate the performance of our markets based on “station operating income” (operating income plus corporate general and administrative expenses, depreciation and amortization, other operating (income) expenses, and impairment of intangible assets). Station operating income is generally recognized by the broadcasting industry as a measure of performance, is used by analysts who report on the performance of the broadcasting industry and it serves as an indicator of the market value of a group of stations. In addition, we use it to evaluate individual stations, market-level performance, overall operations and as a primary measure for incentive based compensation of executives and other members of management. Station operating income is not necessarily indicative of amounts that may be available to us for debt service requirements, other commitments, reinvestment or other discretionary uses. Station operating income is not a measure of liquidity or of performance in accordance with GAAP, and should be viewed as a supplement to, and not a substitute for our results of operations presented on a GAAP basis.

General

We are a broadcast company primarily engaged in acquiring, developing and operating broadcast properties. We actively seek and explore opportunities for expansion through the acquisition of additional broadcast properties. We review acquisition opportunities on an ongoing basis. For additional information with respect to acquisitions, see “Liquidity and Capital Resources” below. We own or operate broadcast properties in 2627 markets, including 7579 FM and 3334 AM radio ~~stations.~~stations and 78 metro signals.

~~Continuing Operations -~~ Radio Stations

Our radio ~~station’s~~stations’ primary source of revenue is from the sale of advertising for broadcast on our stations. Depending on the format of a particular radio station, there are a predetermined number of advertisements available to be broadcast each hour. We have ~~twenty-six~~twenty-seven radio station markets, which include all ~~108~~113 of our radio stations. The discussion of our operating performance focuses on operating income because we manage our stations primarily on operating income. Operating performance is evaluated for each individual market.

Most advertising contracts are short-term and generally run for a few weeks only. The majority of our revenue is generated from local advertising, which is sold primarily by each radio markets’ sales staff. For the nine months ended September 30, ~~2017~~2020 and ~~2016,~~2019, approximately ~~89%~~86% and 89%, respectively, of our radio ~~segment’s~~station’s gross revenue was from local advertising. To generate national advertising sales, we engage independent advertising sales representative firms that specialize in national sales for each of our broadcast markets.
Our revenue varies throughout the year. Advertising expenditures, our primary source of revenue, generally have been lowest during the winter months, which include the first quarter of each year. We expect ~~a decrease~~an increase in political advertising for ~~2017~~2020 due to the ~~decreased~~increased number of national, state and local elections in most of our markets as compared to the prior year.

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Table of Contents

Our net operating revenue, station operating expense and operating income varies from market to market based upon the market’s rank or size which is based upon population and the available radio advertising revenue in that particular market.

The broadcasting industry and advertising in general, ~~are~~is influenced by the state of the overall economy, including unemployment rates, inflation, energy prices and consumer interest rates. Our stations primarily broadcast in small to midsize markets. Historically, these markets have been more stable than major metropolitan markets during downturns in advertising spending, but may not experience increases in such spending as significant as those in major metropolitan markets in periods of economic improvement.

20

Our financial results are dependent on a number of factors, the most significant of which is our ability to generate advertising revenue through rates charged to advertisers. The rates a station is able to charge are, in large part, based on a station’s ability to attract audiences in the demographic groups targeted by its advertisers. In a number of our markets this is measured by periodic reports generated by independent national rating services. In the remainder of our markets it is measured by the results advertisers obtain through the actual running of an advertising schedule. Advertisers measure these results based on increased demand for their goods or services and/or actual revenues generated from such demand. Various factors affect the rate a station can charge, including the general strength of the local and national economies, population growth, ability to provide popular programming, local market competition, target marketing capability of radio compared to other advertising media and signal strength.

When we acquire and/or begin to operate a station or group of stations we generally increase programming and advertising and promotion expenses to increase our share of our target demographic audience. Our strategy sometimes requires levels of spending commensurate with the revenue levels we plan on achieving in two to five years. During periods of economic downturns, or when the level of advertising spending is flat or down across the industry, this strategy may result in the appearance that our cost of operations ~~are~~is increasing at a faster rate than our growth in revenues, until such time as we achieve our targeted levels of revenue for the acquired station or group of stations.

The number of advertisements that can be broadcast without jeopardizing listening levels (and the resulting ratings) is limited in part by the format of a particular radio station. Our stations strive to maximize revenue by constantly managing the number of commercials available for sale and adjusting prices based upon local market conditions and ratings. While there may be shifts from time to time in the number of advertisements broadcast during a particular time of day, the total number of advertisements broadcast on a particular station generally does not vary significantly from year to year. Any change in our revenue, with the exception of those instances where stations are acquired or sold, is generally the result of inventory sell out ratios and pricing adjustments, which are made to ensure that the station efficiently utilizes available inventory.

Our radio stations employ a variety of programming formats. We periodically perform market research, including music evaluations, focus groups and strategic vulnerability studies. Because reaching a large and demographically attractive audience is crucial to a station’s financial success, we endeavor to develop strong listener loyalty. Our stations also employ audience promotions to further develop and secure a loyal following. We believe that the diversification of formats on our radio stations helps to insulate us from the effects of changes in musical tastes of the public on any particular format.

The primary operating expenses involved in owning and operating radio stations are employee salaries, sales commissions, programming expenses, depreciation, and advertising and promotion expenses.

The radio broadcasting industry is subject to rapid technological change, evolving industry standards and the emergence of new media technologies and services. These new technologies and media are gaining advertising share against radio and other traditional media.

We are continuing to expand our digital initiative to provide a seamless experience across ~~numerous platforms~~multiple platforms. Our goal is to allow our listeners ~~and viewers~~ to connect with our ~~products where~~brands on demand, wherever, however and ~~when~~whenever they ~~want.~~choose. We continue to create opportunities through targeted digital advertising and an array of digital services that include online promotions, mobile messaging, and email marketing.

In addition, we continue the rollout of HD radio™. HD radio™ utilizes digital technology that provides improved sound quality over standard analog broadcasts and also allows for the delivery of additional channels of diversified programming or data streaming in each radio market.

21

During the nine months ended September 30, ~~2017~~2020 and ~~2016~~2019 and the years ended December 31, ~~2016~~2019 and ~~2015,~~2018, our Charleston, South Carolina; Columbus, Ohio; Des Moines, Iowa; ~~Manchester, New Hampshire;~~ Milwaukee, ~~Wisconsin;~~Wisconsin and Norfolk, Virginia markets, when combined, represented approximately ~~43%~~38%, ~~43%~~38%, ~~43%~~39% and 41%, respectively, of our consolidated net operating

22

Table of Contents

revenue. An adverse change in any of these radio markets or our relative market position in those markets could have a significant impact on our operating results as a whole.

The following tables describe the percentage of our consolidated net operating revenue represented by each of these markets:

Percentage of Consolidated

Percentage of Consolidated

Net Operating Revenue for

Net Operating Revenue

the Nine Months Ended

for the Years Ended

September 30,

December 31,


2020

2019

2019

2018


Market:


Charleston, South Carolina

5
%
5
%
5
%
5
%

Columbus, Ohio

10
%
10
%
11
%
11
%

Des Moines, Iowa

6
%
6
%
6
%
7
%

Milwaukee, Wisconsin

11
%
11
%
11
%
12
%

Norfolk, Virginia

6
%
6
%
6
%
6
%

Percentage of Consolidated Percentage of Consolidated
Net Operating Revenue for Net Operating Revenue
the Nine Months Ended for the Years Ended
September 30, December 31,
2017 2016 2016 2015
Market:
Columbus, Ohio 12 % 12 % 12 % 9 %
Des Moines, Iowa 8 % 8 % 8 % 8 %
Manchester, New Hampshire 5 % 6 % 6 % 6 %
Milwaukee, Wisconsin 12 % 12 % 12 % 12 %
Norfolk, Virginia 6 % 5 % 5 % 6 %
During the nine months ended September 30, ~~2017~~2020 and ~~2016~~2019 and the years ended December 31, ~~2016~~2019 and ~~2015,~~2018, the radio stations in our five largest markets, when combined, represented approximately ~~48%~~52%, ~~48%~~42%, ~~49%~~43% and ~~44%~~46%, respectively, of our consolidated station operating income. We note that the percent of consolidated station operating income at September 30, 2020 is higher than normal due to the impact of the COVID-19 pandemic on our markets. If the pandemic is resolved, we would anticipate results by market to be back to normalized amounts in future years. The following tables describe the percentage of our consolidated station operating income represented by each of these markets:

Percentage of Consolidated

Percentage of Consolidated

Station Operating Income (*)

Station Operating Income(*)

for the Nine Months Ended

for the Years Ended

September 30,

December 31,


2020

2019

2019

2018


Market:

Charleston, South Carolina

4
%
3
%
4
%
4
%

Columbus, Ohio

19
%
15
%
15
%
16
%

Des Moines, Iowa

6
%
6
%
6
%
6
%

Milwaukee, Wisconsin

16
%
12
%
12
%
14
%

Norfolk, Virginia

7
%
6
%
6
%
6
%

Percentage of Consolidated Percentage of Consolidated
Station Operating Income (*) Station Operating Income (*)
for the Nine Months Ended for the Years Ended
September 30, December 31,
2017 2016 2016 2015
Market:
Columbus, Ohio 15 % 15 % 15 % 10 %
Des Moines, Iowa 7 % 7 % 7 % 8 %
Manchester, New Hampshire 6 % 8 % 9 % 8 %
Milwaukee, Wisconsin 14 % 14 % 14 % 13 %
Norfolk, Virginia 6 % 4 % 4 % 5 %

*
Operating income ~~plus~~adjusted for corporate general and administrative expenses, depreciation and amortization, other operating (income) expenses, and impairment of intangible assets.

22

23

~~Discontinued Operations - Television Stations~~

~~Our television station’s primary source~~Table of revenue is from the sale of advertising for broadcast on our stations. The number of advertisements available for broadcast on our television stations is limited by network affiliation and syndicated programming agreements and, with respect to children’s programs, federal regulation. Our television stations’ local market managers determine the number of advertisements to be broadcast in locally produced programs only, which are primarily news programming and occasionally local sports or information shows.Contents

Our net operating revenue, station operating expense and operating income vary from market to market based upon the market’s rank or size, which is based upon population, available television advertising revenue in that particular market, and the popularity of programming being broadcast.

Our financial results are dependent on a number of factors, the most significant of which is our ability to generate advertising revenue through rates charged to advertisers. The rates a station is able to charge are, in large part, based on a station’s ability to attract audiences in the demographic groups targeted by its advertisers, as measured principally by periodic reports by independent national rating services. Various factors affect the rate a station can charge, including the general strength of the local and national economies, population growth, ability to provide popular programming through locally produced news, sports and weather and as a result of syndication and network affiliation agreements, local market competition, the ability of television broadcasting to reach a mass appeal market compared to other advertising media, and signal strength including cable/satellite coverage, and government regulation and policies.

Our stations strive to maximize revenue by constantly adjusting prices for our commercial spots based upon local market conditions, advertising demands and ratings. While there may be shifts from time to time in the number of advertisements broadcast during a particular time of day, the total number of advertisements broadcast on a particular station generally does not vary significantly from year to year. Any change in our revenue, with the exception of those instances where stations are acquired or sold, is generally the result of pricing adjustments, which are made to ensure that the station efficiently utilizes available inventory.

Because audience ratings in the local market are crucial to a station’s financial success, we endeavor to develop strong viewer loyalty by providing locally produced news, weather and sports programming. We believe that this emphasis on the local market provides us with the viewer loyalty we are trying to achieve.

Most of our revenue is generated from local advertising, which is sold primarily by each television markets’ sales staff. For the eight months ended August 31, 2017 and the nine months ended September 30, 2016, approximately 83% and 85%, respectively, of our television segment’s gross revenue was from local advertising. To generate national advertising sales, we engage independent advertising sales representatives that specialize in national sales for each of our television markets.

Our revenue varies throughout the year. Advertising expenditures, our primary source of revenue, generally have been lowest during the winter months, which include the first quarter of each year. We had a decrease in political advertising for 2017 due to the decreased number of national, state and local elections in most of our markets as compared to prior year.

The primary operating expenses involved in owning and operating television stations are employee salaries, sales commissions, programming expenses, including news production and the cost of acquiring certain syndicated programming, depreciation and advertising and promotion expenses.

23

Three Months Ended September 30, ~~2017~~2020 Compared to Three Months Ended September 30, ~~2016~~2019
Results of Operations
The following tables summarize our results of operations for the three months ended September 30, ~~2017~~2020 and ~~2016.~~
2019.
Consolidated Results of Operations

Three Months Ended

September 30,

$ Increase

% Increase


2020

2019

(Decrease)

(Decrease)

(In thousands, except percentages and per share information)

Net operating revenue

$
24,143

$
31,274

$
(7,131)

(22.8)
%
Station operating expense

19,616

23,600

(3,984)

(16.9)
%
Corporate general and administrative

2,838

2,788

50

1.8
%
Other operating (income) expense, net

50

85

(35)

N/M

Impairment of broadcast licenses

1,392

—

1,392

N/M

Operating income (loss)

247

4,801

(4,554)

(94.9)
%
Interest expense

75

180

(105)

(58.3)
%
Interest income

(8)

(162)

154

(95.1)
%
Other income

—

(11)

11

N/M

Income (loss) before income tax (benefit) expense

180

4,794

(4,614)

(96.2)
%
Income tax (benefit) expense

1,130

1,460

(330)

(22.6)
%
Net income (loss)

$
(950)

$
3,334

$
(4,284)

(128.5)
%
Earnings (loss) per share (diluted)

$
(.16)

$
.56

(.72)

(128.6)
%
Three Months Ended
September 30, $ Increase % Increase
2017 2016 (Decrease) (Decrease)
(In thousands, except percentages and per share information)
Net operating revenue $ 30,269 $ 29,878 $ 391 1.3 %
Station operating expense 21,755 21,775 (20 ) (0.1 )%
Corporate general and administrative 3,132 2,728 404 14.8 %
Other operating expense (127 ) (1,393 ) 1,266 N/M
Operating income from continuing operations 5,509 6,768 (1,259 ) (18.6 )%
Interest expense 254 187 67 35.8 %
Income from continuing operations before taxes 5,255 6,581 (1,326 ) (20.1 )%
Income tax expense 2,290 2,678 (388 ) (14.5 )%
Income from continuing operations, net of tax 2,965 3,903 (938 ) (24.0 )%
Income from discontinued operations, net of tax 30,451 1,511 28,940 N/M
Net income $ 33,416 $ 5,414 $ 28,002 N/M

Earnings per share:
From continuing operations $ .50 $ .66 $ (.16 ) (24.2 )%
From discontinued operations 5.16 .26 4.90 N/M
Earnings per share (diluted) $ 5.66 $ .92 $ 4.74 N/M
~~Results of Discontinued Operations~~
Three Months Ended
September 30, $ Increase % Increase
2017⁽¹⁾ 2016 (Decrease) (Decrease)
(In thousands, except percentages)
Net operating revenue $ 3,296 $ 6,241 $ (2,945 ) (47.2 )%
Station operating expense 2,372 3,684 (1,312 ) (35.6 )%
Operating income from discontinued operations 924 2,557 (1,633 ) (63.9 )%
Interest expense 5 9 (4 ) (44.4 )%
Income before income taxes from discontinued operations 919 2,548 (1,629 ) (63.9 )%
Pretax gain on the disposal of discontinued operations 50,842 — 50,842 N/M
Total pretax gain on discontinued operations 51,761 2,548 49,213 N/M
Income tax expense 21,310 1,037 20,273 N/M
Income from discontinued operations $ 30,451 $ 1,511 $ 28,940 N/M
~~(1)~~ ~~Results of operations for the Television stations are reflected through August 31, 2017. The effective date of the sale was September 1, 2017.~~

N/M =      Not Meaningful
24
For the three months ended September 30, ~~2017,~~2020, consolidated net operating revenue was ~~$30,269,000~~$24,143,000 compared with ~~$29,878,000~~$31,274,000 for the three months ended September 30, 2016, an increase of $391,000 or 1.3%. We had an increase of approximately $717,000 that was attributable to stations that we did not own or operate for the entire comparable period, partially offset by2019, a decrease of ~~$326,000 generated by stations we owned~~$7,131,000 or ~~operated for the comparable period in 2016 (“same station”)~~22.8%. The decrease in ~~same station~~ revenue was ~~primarily~~attributable to the ~~result of~~COVID-19 pandemic and various governmental shutdowns within the markets we operate. We had decreases in gross local revenue of ~~$311,000,~~$6,995,000, gross national revenue of $1,130,000, non-spot revenue of $645,000, and gross barter revenue of $509,000 partially offset by an increase in gross political revenue of ~~$197,000 partially offset by~~$1,692,000 and a decrease in agency commissions of ~~approximately $123,000~~$547,000, from the third quarter of ~~2016.~~2019. The decrease in gross local, national and barter revenue was at the majority of our markets as a result of the impact of the COVID-19 pandemic and the disruption to our advertisers’ businesses. The decrease in non-spot gross revenue is primarily due to decreases in ~~our Bellingham, Washington and Springfield, Illinois markets.~~the number of events being held due to the COVID-19 pandemic. The ~~decrease~~increase in gross political revenue was ~~due~~attributable to ~~a lower number of~~more national, ~~state~~local and ~~local~~state elections in ~~most of our markets.~~2020 versus 2019. The decrease in agency commissions is due to ~~lower~~the decrease in gross ~~local agency and political~~ revenue.
Station operating expense was ~~$21,755,000~~$19,616,000 for the three months ended September 30, ~~2017,~~2020, compared with ~~$21,775,000~~$23,600,000 for the three months ended September 30, ~~2016,~~2019, a decrease of ~~$20,000~~$3,984,000 or ~~0.1%~~16.9%. We had an increase of approximately $581,000 that was attributable to stations that we did not own or operate for the entire comparable period, offset by a decrease of approximately $601,000 generated by stations we owned or operated for the comparable period in 2016. The decrease isin operating expense was primarily ~~attributable to~~ a ~~decrease~~result of ~~$203,000~~decreases in compensation ~~costs, a decrease of $191,000 in licensing agreements and a decrease in~~related expenses, sales rating survey expenses, commission expense, barter expenses, music licensing fees, and advertising and promotional expenses, of ~~$128,000 due to a credit received in~~$1,039,000, $680,000, $656,000, $488,000, $205,000 and $178,000 respectively from the 3^rdthird quarter of ~~2017 resulting from SESAC arbitration partially offset by an increase in other music licensing fees.~~2019.
~~Operating~~We had operating income for the three months ended September 30, ~~2017 was $5,509,000~~2020 of $247,000 compared to ~~$6,768,000~~$4,801,000 for the three months ended September 30, ~~2016,~~2019, a decrease of ~~$1,259,000 or 18.6%.~~$4,554,000. The decrease was a result of the ~~increase~~decrease in net operating revenue partially offset by athe decrease in station operating expense, ~~described~~noted above, and a non cash impairment charge related to our broadcast licenses of $1,392,000, an increase in ~~our~~ corporate general and administrative expenses of ~~$404,000 or 14.8%,~~$50,000 and a decrease in other operating ~~income~~expense of ~~$1,266,000 from the third quarter of 2016.~~$35,000. The increase in corporate general and administrative expenses ~~is due~~was primarily attributable to ~~an increase~~increases in ~~key man life~~non cash compensation expenses, legal expenses and insurance expenses of ~~$103,000, an increase in non-cash compensation related to the amortization of restricted stock grants of $93,000, an increase of $80,000 in legal~~$87,000, $87,000, and other fees due to the Charleston/Hilton Head South Carolina acquisition, an increase of $42,000 in compensation costs, an increase in transportation costs of $35,000 and an increase in healthcare costs of $24,000. In 2016, we had other operating income of $1,393,000 due to the gain of $1,415,000 received from the sale of a tower in Norfolk, Virginia.
Income from continuing operations, net of tax for the three months ended September 30, 2017 was $2,965,000 compared to $3,903,000 for the three months ended September 30, 2016, a decrease of $938,000 or 24.0%. The decrease in income from continuing operations, net of tax is due to the decrease of operating income, described above, an increase in interest expense of $67,000 due to an increase in our interest rates$52,000, respectively, partially offset by ~~a decrease~~decreases in ~~income taxes~~travel related expenses of ~~$388,000.~~
~~Income~~$109,000 and compensation related expenses of $63,000, from ~~discontinued operations, net~~third quarter of tax for the two months ended August 31, 2017 was $30,451,000 compared to $1,511,000 for the three months ended September 30, 2016 an increase of $28,940,000. The increase was a direct result of the pretax gain on the disposal of the Television stations of $50,842,000, a decrease in station operating expense of $1,312,000 or 35.6%, partially offset by a decrease in net operating revenue of $2,945,000 or $47.2% and an increase in income tax related to the gain on the sale of $20,273,000. For the two months ended August 31, 2017, net operating revenue of our television stations was $3,296,000 compared with $6,241,000 for the three months ended September 30, 2016, a decrease of $2,945,000 or 47.2% primarily due to only operating the television stations for two months in 2017 and a decrease in gross political revenue in our Joplin, Missouri market. Station operating expense of the television stations for the two months ended August 31, 2017 was $2,372,000, compared with $3,684,000 for the three months ended September 30, 2016, a decrease of $1,312,000 or 35.6%. The decrease is primarily due to only operating the television stations for two months in 2017 compared to the whole quarter in 2016.2019.
We generated a net ~~income~~loss of ~~$33,416,000~~$950,000 ($~~5.66~~(0.16) per share on a fully diluted basis) during the three months ended September 30, ~~2017,~~2020, compared to ~~$5,414,000~~net income of $3,334,000 ($~~.92~~0.56 per share on a fully diluted basis) for the three months ended September 30, ~~2016, an increase~~2019, a decrease of ~~$28,002,000. This~~$4,284,000. The decrease in net income is primarily due to the decrease in operating income, described above, a ~~direct result~~decrease in interest income of ~~the increase of $28,940,000 from discontinued operations~~$154,000 partially offset by a decrease

24

Table of Contents

in income ~~from continuing operations~~tax expense of ~~$938,000.~~

25

$330,000 and a decrease in our interest expense of $105,000. The decrease in our interest expense is due to a decrease in our interest rate. The decrease in our income tax expense is due to the decrease in income before income tax.

Nine Months Ended September 30, ~~2017~~2020 Compared to Nine Months Ended September 30, ~~2016~~2019

Results of Operations

The following tables summarize our results of operations for the nine months ended September 30, ~~2017~~2020 and ~~2016.~~

2019.

Consolidated Results of Operations

Nine Months Ended

September 30,

$ Increase

% Increase


2020

2019

(Decrease)

(Decrease)

(In thousands, except percentages and per share information)

Net operating revenue

$
67,060

$
91,281

$
(24,221)

(26.5)
%
Station operating expense

60,467

69,642

(9,175)

(13.2)
%
Corporate general and administrative

8,923

8,179

744

9.1
%
Other operating (income) expense, net

(1,234)

86

(1,320)

N/M

Impairment of broadcast licenses

5,149

—

5,149

N/M

Operating income (loss)

(6,245)

13,374

(19,619)

(146.7)
%
Interest expense

265

572

(307)

(53.7)
%
Interest income

(141)

(485)

344

(70.9)
%
Other income

(213)

(11)

(202)

N/M

Income (loss) before income tax (benefit) expense

(6,156)

13,298

(19,454)

(146.3)
%
Income tax (benefit) expense

(1,975)

3,860

(5,835)

(151.2)
%
Net income (loss)

$
(4,181)

$
9,438

$
(13,619)

(144.3)
%
Earnings (loss) per share (diluted)

$
(.70)

$
1.59

(2.29)

(144.0)
%
Nine Months Ended
September 30, $ Increase % Increase
2017 2016 (Decrease) (Decrease)
(In thousands, except percentages and per share information)
Net operating revenue $ 86,685 $ 88,208 $ (1,523 ) (1.7 )%
Station operating expense 64,521 64,757 (236 ) (0.4 )%
Corporate general and administrative 8,875 8,065 810 10.0 %
Other operating expense (69 ) (1,388 ) 1,319 N/M
Operating income 13,358 16,774 (3,416 ) (20.4 )%
Interest expense 691 548 143 26.1 %
Income from continuing operations before taxes 12,667 16,226 (3,559 ) (21.9 )%
Income tax expense 5,280 6,665 (1,385 ) (20.8 )%
Income from continuing operations, net of tax 7,387 9,561 (2,174 ) (22.7 )%
Income from discontinued operations, net of tax 32,501 3,688 28,813 N/M

Net income $ 39,888 $ 13,249 $ 26,639 N/M

Earnings per share:
From continuing operations $ 1.25 $ 1.62 $ (.37 ) (22.8 )%
From discontinued operations 5.51 .63 4.88 N/M
Earnings per share (diluted) $ 6.76 $ 2.25 $ 4.50 N/M
~~Results of Discontinued Operations~~
Nine Months Ended
September 30, $ Increase % Increase
2017⁽¹⁾ 2016 (Decrease) (Decrease)
(In thousands, except percentages)
Net operating revenue $ 14,238 $ 17,094 $ (2,856 ) (16.7 )%
Station operating expense 9,727 10,807 (1,080 ) (10.0 )%
Other operating 31 3 28 N/M
Operating income from discontinued operations 4,480 6,284 (1,804 ) (28.7 )%
Interest expense 21 26 (5 ) (19.2 )%
Income before income taxes from discontinued operations 4,459 6,258 (1,799 ) (28.7 )%
Pretax gain on the disposal of discontinued operations 50,842 — 50,842 N/M
Total pretax gain on discontinued operations 55,301 6,258 49,043 N/M
Income tax expense 22,800 2,570 20,230 N/M
Income from discontinued operations $ 32,501 $ 3,688 $ 28,813 N/M

~~(1)~~ ~~Results of operations for the Television stations are reflected through August 31, 2017. The effective date of the sale was September 1, 2017.~~

N/M =      Not Meaningful
26
For the nine months ended September 30, ~~2017,~~2020, consolidated net operating revenue was ~~$86,685,000~~$67,060,000 compared with ~~$88,208,000~~$91,281,000 for the nine months ended September 30, ~~2016,~~2019, a decrease of ~~$1,523,000~~$24,221,000 or ~~1.7%~~26.5%. The decrease in revenue was primarily due to the COVID-19 pandemic and various governmental shutdowns within the markets we operate and the country as a whole. We had a decrease in gross local revenue of $22,238,000, a decrease in gross national revenue of $3,468,000, a decrease in non-spot gross revenue of $1,605,000 and a decrease in barter revenue of $1,227,000 partially offset by an increase of approximately $874,000 that was attributable to stations that we did not own or operate for the entire comparable period, offset by a decrease of approximately $2,397,000 generated by stations we owned or operated for the comparable period in ~~2016 (“same station”). On a same station basis~~ gross political revenue ~~gross local revenue~~of $2,749,000 and ~~gross national revenue decreased $1,289,000, $1,097,000 and $505,000 respectively from 2016. These decreases were partially offset by~~ a decrease in agency commissions of ~~$470,000.~~$2,125,000, for the comparable period of 2019. The decrease in gross local, national and barter revenue was at the majority of our markets. The decrease in non-spot gross revenue is primarily due to decreases in the number of events being held due to the COVID-19 pandemic. The increase in gross political revenue was ~~due~~attributable to ~~the decreased number of~~more national, ~~state~~local and ~~local~~state elections in most of our markets as compared to prior year. The decrease in gross local revenue was due to decreases in our Bellingham, Washington; Charlottesville, Virginia; Columbus, Ohio; Ithaca, New York; Springfield, Illinois and Springfield, Massachusetts markets. The decrease in gross national revenue is due to decreases in our Champaign, Illinois and Yankton, South Dakota markets.2020 versus 2019. The decrease in agency commissions is due to ~~lower local agency, national and political revenues.~~the decrease in gross revenue.
Station operating expense was ~~$64,521,000~~$60,467,000 for the nine months ended September 30, ~~2017,~~2020, compared with ~~$64,757,000~~$69,642,000 for the nine months ended September 30, ~~2016,~~2019, a decrease of ~~$236,000~~$9,175,000 or ~~0.4%~~13.2%. ~~We had an increase~~The decrease in operating expense was primarily a result of ~~approximately $696,000 that was attributable to stations that we did not own or operate for the entire comparable period, offset by a decrease~~decreases in commission expense, sales ratings survey expenses, compensation related expenses, barter expenses, music licensing fees and advertising and promotional expenses of ~~approximately $932,000 generated by stations we owned or operated~~$2,374,000, $1,927,000, $1,768,000, $1,103,000, $515,000 and $419,000 respectively for the comparable period ~~in 2016. The decrease is primarily attributable to a $568,000 decrease in licensing agreements, a $206,000 decrease in sales commission expense and a decrease in compensation costs~~ of ~~$138,000.~~2019.
~~Operating income~~We had an operating loss for the nine months ended September 30, ~~2017 was $13,358,000~~2020 of $6,245,000 compared to ~~$16,774,000~~operating income of $13,374,000 for the nine months ended September 30, ~~2016,~~2019, a decrease of ~~$3,416,000 or 20.4%.~~$19,619,000. The decrease was a result of the decrease in net operating revenue partially offset by athe decrease in station operating expense, ~~described~~noted above, and a non cash impairment charge related to our broadcast licenses of $5,149,000, an increase in ~~our~~ corporate general and administrative expenses of ~~$810,000 or 10.0%, and a decrease~~$744,000 offset by an increase in other operating income of ~~$1,319,000 from 2016. The increase in corporate expenses is~~$1,320,000 due to an increase in key man life insurance of $286,000, an increase in non-cash compensation related to the amortization of restricted stock grants of $167,000, an increase in transportation costs of $110,000, and increase in compensation costs of $91,000, an increase in legal expenses of $87,000 and an increase of $50,000 in healthcare costs. In 2016, we had other operating income of $1,393,000 due to the gain of $1,415,000 received from the sale of a ~~tower in Norfolk, Virginia.~~
Income from continuing operations, net of tax for the nine months ended September 30, 2017 was $12,667,000 compared to $16,226,000 for the nine months ended September 30, 2016, a decrease of $3,559,000 or 21.9%. The decrease in income from continuing operations, net of tax is due to the decrease of operating income, described above, an increase in interest expense of $143,000 due to an increase in our interest rates partially offset by a decrease in income taxes of $1,385,000.
Income from discontinued operations, net of tax for the eight months ended August 31, 2017 was $32,501,000 compared to $3,688,000 for the nine months ended September 30, 2016 an increase of $28,813,000. The increase was a direct result of the pretax gain on the disposal of the Television stations of $50,842,000, a decrease in station operating expense of $1,080,000 or 10%, partially offset by a decrease in net operating revenue of $2,856,000 or $16.7% and an increase in income tax related to the gain on the sale of ~~$20,230,000. For the eight months ended August 31, 2017, net operating revenue~~land and a building at one of our ~~television stations~~tower sites in Bellingham, Washington for $1.4 million. The increase in corporate general and administrative expenses was ~~$14,238,000 compared with $17,094,000~~primarily attributable to increases in legal expenses, contribution

25

Table of Contents

expenses, non cash compensation related expenses, insurance expenses and franchise tax expenses of $258,000, $153,000, $145,000, $110,000 and $80,000, respectively for the ~~nine months ended September 30, 2016, a decrease~~comparable period of $2,856,000 or 16.7% primarily due to only operating the television stations for eight months in 2017 and a decrease in gross political revenue in our Joplin, Missouri market. Station operating expense of the television stations for the eight months ended August 31, 2017 was $9,727,000, compared with $10,807,000 for the nine months ended September 30, 2016, a decrease of $1,080,000 or 10%. The decrease is primarily due to only operating the television stations for eight months in 2017 compared to the nine months in 2016.2019.

We generated a net ~~income~~loss of ~~$39,888,000~~$4,181,000 ($~~6.76~~(0.70) per share on a fully diluted basis) during the nine months ended September 30, ~~2017,~~2020, compared to ~~$13,249,000~~net income of $9,438,000 ($~~2.25~~1.59 per share on a fully diluted basis) for the nine months ended September 30, ~~2016, an increase~~2019, a decrease of ~~$26,639,000. This~~$13,619,000. The decrease in net income is primarily due to the decrease in operating income, described above, a ~~direct result~~decrease in interest income of ~~the increase in income from discontinued operations of $28,813,000 partially offset by~~$344,000, and a decrease in income ~~from continuing operations~~tax expense of ~~$2,174,000.~~
27
$5,835,000 partially offset by increase in other income of $202,000 due to insurance proceeds for weather-related damage, and a decrease in interest expense of $307,000. The decrease in our interest expense is due to a decrease in our interest rate and a decrease in our debt outstanding. The decrease in our income tax expense is due to the decrease in income before income tax.
Forward-Looking Statements
Statements contained in this Form 10-Q that are not historical facts are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In addition, words such as “believes,” “anticipates,” “estimates,” “plans,” “expects,” and similar expressions are intended to identify forward-looking statements. These statements are made as of the date of this report or as otherwise indicated, based on current expectations. We undertake no obligation to update this information. A number of important factors could cause our actual results for ~~2017~~2020 and beyond to differ materially from those expressed in any forward-looking statements made by us or on our behalf. Forward-looking statements are not guarantees of future performance as they involve a number of risks, uncertainties and assumptions that may prove to be incorrect and that may cause our actual results and experiences to differ materially from the anticipated results or other expectations expressed in such forward-looking statements. The risks, uncertainties and assumptions that may affect our performance include our financial leverage and debt service requirements, dependence on key personnel, dependence on key stations, U.S. and local economic conditions, our ability to successfully integrate acquired stations, regulatory requirements, new technologies, natural disasters, terrorist attacks, and ~~terrorist attacks.~~the effects of the ongoing COVID-19 pandemic. We cannot be sure that we will be able to anticipate or respond timely to changes in any of these factors, which could adversely affect the operating results in one or more fiscal quarters. Results of operations in any past period should not be considered, in and of itself, indicative of the results to be expected for future periods. Fluctuations in operating results may also result in fluctuations in the price of our stock.
For a more complete description of the prominent risks and uncertainties inherent in our business, see Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~
2019 and in this Report.
Liquidity and Capital Resources
Debt Arrangements and Debt Service Requirements
On August 18, 2015, we entered into a new credit facility (the “Credit Facility”) with ~~a group of banks. In connection with the execution of the Credit Facility, the credit agreement in place at June 30, 2015 (the “Old Credit Agreement”) was terminated,~~JPMorgan Chase Bank, N.A., The Huntington National Bank, Citizens Bank, National Association and ~~all outstanding amounts were paid in full.~~J.P. Morgan Securities LLC. The Credit Facility consists of a $100 million five-year revolving facility (the “Revolving Credit Facility”) and ~~matures~~originally matured on August 18, 2020.
On June 27, 2018, the Company entered into a Second Amendment to its Credit Facility, (the “Second Amendment”), which had first been amended on September 1, 2017, extending the revolving credit maturity date under the Credit Agreement for five years after the date of the amendment to June 27, 2023. On July 1, 2019, we elected to reduce our Revolving Credit Facility to $70 million. On May 11, 2020 we entered into an assumption agreement and amendment of loan documents as part of our reincorporation as a Florida corporation. The amendment also includes an alternative benchmark rate as a replacement to LIBOR. A copy of this assumption agreement and amendment is was filed as Exhibit 10(v) to our Form 10-Q for the quarter ended June 30, 2020.
We have pledged substantially all of our assets (excluding our FCC licenses and certain other assets) in support of the Credit Facility and each of our subsidiaries has guaranteed the Credit Facility and has pledged substantially all of their assets (excluding their FCC licenses and certain other assets) in support of the Credit Facility.
Approximately $266,000 of ~~transaction fees~~debt issuance costs related to the Credit Facility were capitalized and are being amortized over the life of the Credit Facility. ~~Those deferred~~These debt issuance costs are included in other assets, net in the ~~condensed~~ consolidated balance sheets. As a result of the Second Amendment, the Company incurred an additional $120,000 of transaction fees related to the Credit Facility that were capitalized. The cumulative transaction fees are being amortized over the remaining life of the Credit Facility.

26

Table of Contents

Interest rates under the Credit Facility are payable, at our option, at alternatives equal to LIBOR ~~(1.25%~~(0.1875% at September 30, ~~2017)~~2020), plus 1% to 2% or the base rate plus 0% to 1%. The spread over LIBOR and the base rate vary from time to time, depending upon our financial leverage. As previously noted, the May 11, 2020 amendment to the Credit Facility includes an alternative to LIBOR in the event LIBOR is no longer available. Letters of credit issued under the Credit Facility will be subject to a participation fee (which is equal to the interest ~~rates~~rate applicable to Eurocurrency Loans, as defined in the Credit Agreement) payable to each of the Lenders and a fronting fee equal to 0.25% per annum payable to the issuing bank. We also pay quarterly commitment fees of 0.2% to 0.3% per annum on the unused portion of the Revolving Credit Facility.
The Credit Facility contains a number of financial covenants (all of which we were in compliance with at September 30, ~~2017)~~2020) which, among other things, require us to maintain specified financial ratios and impose certain limitations on us with respect to investments, additional indebtedness, dividends, distributions, guarantees, liens and encumbrances.
On June 7, 2019, we used $5 million from funds generated by operations to voluntarily pay down a portion of our Revolving Credit Facility.
On February 4, 2019, we used $5 million from funds generated by operations to voluntarily pay down a portion of our Revolving Credit Facility which was presented in current portion of long-term debt on our balance sheet at December 31, 2018.
We had approximately ~~$65~~$60 million of unused borrowing capacity under the Revolving Credit Facility at September 30, ~~2017.~~2020.
On October 5, 2017 and November 3, 2017, the Company used $5,287,000 and $5,000,000, respectively of the proceeds from the Television Sale to pay down a portion of its Revolving Credit Facility. Those amounts were classified as current portion of long term debt at September 30, 2017.
The loan agreement of approximately $1.1 million of secured debt of affiliate was amended in April, 2017 to extend the due date of the loan for three years to mature on May 1, 2020. Our affiliate repaid this loan when the television stations were sold on September 1, 2017.
28
Sources and Uses of Cash
During the nine months ended September 30, ~~2017~~2020 and ~~2016,~~2019, we had net cash flows from operating activities of ~~$18,677,000~~$8,206,000 and ~~$21,020,000,~~$18,968,000, respectively. We believe that cash flow from operations will be sufficient to meet quarterly debt service requirements for interest and payments of principal under our Credit Facility. However, if such cash flow is not sufficient we may be required to sell additional equity securities, refinance our obligations or dispose of one or more of our properties in order to make such scheduled payments. There can be no assurance that we would be able to effect any such transactions on favorable terms, if at all.
In March 2013, our board of directors authorized an increase to our Stock Buy-Back Program (the “Buy-Back Program”) to allow us to purchase up to $75.8 million of our Class A Common Stock. From its inception in 1998 through September 30, 2020, we have repurchased 2.1 million shares of our Class A Common Stock for $56.6 million. During the three and nine months ended September 30, 2020, approximately 1,000 and 2,600 shares were repurchased for $22,000 and $63,000, respectively, related to the Buy-Back Program. Given the unprecedented uncertainty surrounding the COVID-19 virus and the resulting economic issues we have halted the directions for any additional buybacks under our plan.
Our capital expenditures, exclusive of acquisitions, for the nine months ended September 30, ~~2017~~2020 were ~~$4,850,000~~$1,880,000 ($~~4,149,000~~4,667,000 in ~~2016)~~2019). We anticipate capital expenditures in ~~2017~~2020 to be approximately ~~$6.5~~$2.0 million ~~including approximately $750 thousand relating~~ to ~~our recent acquisitions in Charleston and Hilton Head,~~$2.5 million, which we expect to finance through funds generated from operations.
On January 2, 2020, the Company closed on an agreement to purchase W295BL from Basic Holdings, LLC, for an aggregate purchase price of $200 thousand, of which $10 thousand was paid in 2019 and the remaining $190 thousand paid in 2020. Management attributes the goodwill recognized in the acquisition to the power of the existing brands in the Manchester, New Hampshire market as well as synergies and growth opportunities expected through the combination with the Company’s existing stations.
On ~~September 13, 2017,~~March 4, 2020, the Company’s Board of Directors declared a regular cash dividend of $0.32 per share on its Classes A and B Common Stock. This dividend, totaling approximately $1.9 million, was paid on April 10, 2020 to shareholders of record on March 16, 2020 and was recorded in dividends payable on the Company’s Condensed Consolidated Balance sheet at June 30, 2020.
On December 11, 2019, the Company’s Board of Directors declared a quarterly cash dividend of $0.30 per share on its Classes A and B ~~Common Stock.~~shares. This dividend totaling approximately $1.8 million ~~which is recorded within Other accrued expenses as of September 30, 2017~~ was paid on ~~October 13, 2017~~January 17, 2020 to shareholders of record on ~~September 25, 2017.~~
On May 3, 2017, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.30 per share on its Classes A and B Common Stock. This dividend, totaling $1.8 million was paid on June 9, 2017 to shareholders of record on May 22, 2017and funded by cash on the Company’s balance sheet.
On March 3, 2017, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.30 per share on its Classes A and B Common Stock. This dividend, totaling $1.8 million, was paid on April 14, 2017 to shareholders of record on March 28, 2017December 27, 2019 and funded by cash on the Company’s balance sheet.

27

On January 16, 2017, we entered into an asset purchase agreement to purchase an FM radio station (WCVL) from WUVA, Incorporated, serving the Charlottesville, Virginia market for approximately $1,650,000. Simultaneously, we entered into a TBA to begin operating the station on February 1, 2017. We completed this acquisition on April 18, 2017. This acquisition was financed through funds generated from operations.

On May 9, 2017 we entered into a definitive agreement to sell our Joplin, Missouri and Victoria, Texas television stations for approximately $66.6 million, subject to certain adjustments, to Evening Telegram Company d/b/a Morgan Murphy Media. The Television Sale was completed on September 1, 2017 and the Company received net proceedsTable of $69.5 million which included the sales price of $66.6 million, and the proceeds from sales of related accounts receivable of approximately $3.4 million, offset by certain closing adjustments and transactional costs of $500 thousand. The Company recognized a pretax gain of $50.8 million as a result of the Television Sale in the third quarter of 2017. The gain net of tax for the Television Sale was $29.9 million. Effective September 1, 2017, the Company used $24.2 million of the proceeds from the Television Sale to finance the acquisition of radio stations in South Carolina (as described in Note 6). On October 5, 2017 and November 3, 2017, the Company used $5,287,000 and $5,000,000, respectively of the proceeds from the Television Sale to pay down a portion of its Revolving Credit Facility (as defined and described in Note 8).Contents

On May 9, 2017, the Company entered into an Asset Purchase Agreement with Apex Media Corporation and Pearce Development, LLC f/k/a Apex Real Property, LLC to purchase, for approximately $23 million (subject to certain purchase price adjustments) plus the right to air certain radio commercials, substantially all the assets related to the operation of the following radio stations principally serving the South Carolina area: WCKN (FM), WMXF(FM), WXST(FM), WAVF(FM), WSPO(AM), W261DG, W257BQ, WVSC(FM), WLHH(FM), WOEZ(FM), W256CB, W293BZ. The Company closed this transaction effective September 1, 2017, simultaneously with the closing of the Television Sale using funds generated from the Television Sale.

We continue to actively seek and explore opportunities for expansion through the acquisitions of additional broadcast properties.

We anticipate that any future acquisitions of radio and television stations and dividend payments will be financed through funds generated from operations, borrowings under the Credit Agreement, ~~proceeds from the Television Sale,~~ additional debt or equity financing, cash on hand, or a combination thereof. However, there can be no assurances that any such financing will be available on acceptable terms, if at all.

29

Summary Disclosures About Contractual Obligations and Commercial Commitments

We have future cash obligations under various types of contracts, including the terms of our Credit Facility, operating leases, programming contracts, employment agreements, and other operating contracts. For additional information concerning our future cash obligations see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation — Summary Disclosures About Contractual Obligations” in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~

2019.

We anticipate that our contractual cash obligations will be financed through funds generated from operations or additional borrowings under the Credit Facility, or a combination thereof.

Critical Accounting Policies and Estimates

Our consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States, which require us to make estimates, judgments and assumptions that affect the reported amounts of certain assets, liabilities, revenues, expenses and related disclosures and contingencies. We evaluate estimates used in preparation of our financial statements on a continual basis. ~~There~~Except as set forth below, there have been no significant changes to our critical accounting policies that are described in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting ~~Policies and Estimates”~~Policies” in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019.

Broadcast Licenses and Goodwill: As of September 30, 2020, we have recorded approximately $90,208,000 in broadcast licenses and $19,106,000 in goodwill, which represents 45.0% of our total assets. In assessing the recoverability of these assets, we must conduct impairment testing and charge to operations an impairment expense only in the periods in which the carrying value of these assets is more than their fair value. We perform an annual impairment test on October 1 of each year or an interim impairment test when a triggering event occurs.
During 2020, we have recognized a $5,149,000 impairment charge ($1,392,000 in the third quarter of 2020 and $3,757,000 in the second quarter of 2020) for broadcast license due to a decrease in projected revenue in these markets due to the impact of the COVID-19 pandemic , an increase in the discount rate used in the discounted cash flow analyses to estimate the fair value of our FCC licenses due to certain risks specifically associated with the Company and the radio broadcasting industry, and a decrease in mature operating margins in small markets due to the cost of operations in a small market. We are starting to see increased revenue from our low point in the second quarter of 2020, however, they are not at the previously expected recovery rate. Our third quarter 2020 impairment charge related to our Bellingham, Washington; Champaign, Illinois; Charleston, South Carolina; Columbus, Ohio; Harrisonburg, Virginia; Mitchell, North Dakota; Spencer, Iowa and Springfield, Illinois markets. Our second quarter 2020 impairment charge related to our Bucyrus, Ohio; Champaign, Illinois; Charleston, South Carolina; Columbus, Ohio; Harrisonburg, Virginia; Hilton Head, South Carolina; Mitchell, South Dakota; and Ocala, Florida markets. We also reviewed our value of goodwill and other long-lived assets as of June 30, 2020 and September 30, 2020, noting no impairment in goodwill or other long-lived assets. Please refer to Note 4 — Broadcast Licenses, Goodwill and Other Intangible Assets, in the accompanying notes to the consolidated financial statements for a discussion of several key assumptions used in the fair value estimate of our broadcast licenses during our second and third quarter impairment tests.
There was no impairment of broadcast licenses in 2019 or 2018.
We believe our estimate of the value of our broadcast licenses is a critical accounting estimate as the value is significant in relation to our total assets, and our estimate of the value uses assumptions that incorporate variables based on past experiences and judgments about future operating performance of our stations. These variables include but are not limited to: (1) the forecast growth rate of each radio and television market, including population, household income, retail sales and other expenditures that would influence advertising expenditures; (2) market share and profit margin of an average station within a market; (3) estimated capital start-up costs and losses incurred during the early years; (4)

28

Table of Contents

risk-adjusted discount rate; (5) the likely media competition within the market area; and (6) terminal values. Changes in our estimates of the fair value of these assets could result in material future period write-downs in the carrying value of our broadcast licenses. For illustrative purposes only, had the fair values of each of our broadcasting licenses been lower by 10% as of September 30, 2020, we would have recorded an additional broadcast license impairment of approximately $5.1 million; had the fair values of each of our broadcasting licenses been lower by 20% as of September 30, 2020, we would have recorded an additional broadcast license impairment of approximately $11.9 million; and had the fair value of our broadcasting licenses been lower by 30% as of September 30, 2020, we would have recorded an additional broadcast license impairment of approximately $19.4 million.
Recent Accounting Pronouncements
Recent accounting pronouncements are described in Note 2 to the accompanying financial statements.
Inflation
The impact of inflation on our operations has not been significant to date. There can be no assurance that a high rate of inflation in the future would not have an adverse effect on our operations.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Refer to “Item 7A. Quantitative and Qualitative Disclosures ~~About~~about Market Risk” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Market Risk and Risk Management Policies” in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2019 for a complete discussion of our market risk. There have been no material changes to the market risk information included in our ~~2016~~2019 Annual Report on Form ~~10-K.~~10-K except as noted below in “Part II – Other Information; Item 1A. Risk Factors”.
30
Item 4. Controls and Procedures
As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-15 of the Securities Exchange Act of 1934. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective to cause the material information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 to be recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms. There were no changes in the Company’s internal controls over financial reporting during the quarter ended September 30, ~~2017,~~2020, that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

29

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PART II — OTHER INFORMATION
Item 1. Legal Proceedings
The Company is subject to various outstanding claims which arise in the ordinary course of business and to other legal proceedings. Management anticipates that any potential liability of the Company, which ~~may~~ arise out of or with respect to these matters, will not materially affect the Company’s financial statements.
Item 1A. Risk Factors
Except as set forth below, as of the date of this report, there have been no material changes to the risk factors we previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019.
Our business, results of operations and financial condition may be adversely affected by the ongoing COVID-19 pandemic and the actions taken by governmental authorities in response to the pandemic.
The ongoing COVID-19 pandemic and the measures taken to address the public health concerns resulting from the pandemic have resulted in disruptions to business activity worldwide, volatility in the equity markets and credit markets, and uncertainty in the global economic outlook. Such measures include travel restrictions and national border closings, restrictions on the conduct of non-essential business, closures of workplaces and schools, quarantines, shelter-in-place orders and social distancing orders. These measures have impacted and may further impact our business.
Recently implemented restrictions on business activity and uncertainty in the global economic outlook has caused advertisers to adjust their purchasing plans and a deterioration in economic conditions globally and in the markets in which we operate may cause advertisers to reduce further purchases of advertising. Furthermore, this level of uncertainty may adversely affect our ability to develop information in order to prepare accurate financial forecasts.
In addition, restrictive measures imposed by federal, state and local authorities in the United States as well as health-related concerns related to working conditions, have had, and may continue to have an impact on our business operations. While we are not currently anticipating any material impact to our internal ability to operate our business as a result of the COVID-19 pandemic, we may temporarily lose the services of employees or experience interruptions in the normal conduct of businesses or operations of our systems, which could lead to inefficiencies, and disruptions of our regular operations.
Although we have undertaken a number of steps to mitigate the impact of the COVID-19 pandemic on our business, including a series of initiatives to control or reduce costs, such cost control measures are unlikely to completely offset declines in revenues. The extent to which COVID-19 impacts our business and financial position will depend on future developments, which are difficult to predict, including the severity and scope of the COVID-19 outbreak as well as the types of measures imposed by governmental authorities to contain the virus or address its impact and the duration of those actions and measures. The imposition of further restrictive measures by governmental authorities to contain the COVID-19 virus or a prolonged period during which any such measures are kept in place would have an adverse impact on our business, financial position, results of operations and cash flows.

30

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table summarizes our repurchases of our Class A Common Stock during the three months ended September 30, ~~2017. Shares repurchased during the quarter were from the retention of shares for cashless exercise of stock options and the payment of the withholding taxes related to those stock option exercises.~~2020.

Total Number

Approximate

of

Dollar

Shares

Value of

Purchased

Shares

Total

Average

as Part of

that May Yet be

Number

Price

Publicly

Purchased

of Shares

Paid per

Announced

Under the
Period

Purchased

Share

Program

Program(a)
July 1 - July 31, 2020

972

$
22.75

—

$
19,171,290
August 1 - August 31, 2020

—

$
—

—

$
19,171,290
September 1 - September 30, 2020

—

$
—

—

$
19,171,290
Total

972

$
22.75

—

$
19,171,290
Approximate
Total Number Dollar
of Value of
Shares Shares
Purchased that May Yet
as Part of be
Total Number Average Price Publicly Purchased
of Shares Paid per Announced Under the
Period Purchased Share Program Program(a)
July 1 – July 31, 2017 — $ — — $ 23,352,857
August 1 – August 31, 2017 916 $ 40.60 — $ 23,315,667
September 1 – September 30, 2017 — $ — — $ 23,315,667
Total 916 $ 40.60 — $ 23,315,667

(a)
We have a Stock Buy-Back Program which allows us to purchase our Class A Common Stock. In February 2013, our Board of Directors authorized an increase in the amount committed to the Buy-Back Program from $60 million to approximately $75.8 million.

31
Item 6. Exhibits
~~31.1~~

31.1
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and Rule15d-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

~~31.2~~
32

~~Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~
32 Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 and Rule 13-14(b) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

(104)

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

32

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

SAGA COMMUNICATIONS, INC.
Date: November 9, ~~2017~~ 2020
/s/ SAMUEL D. BUSH
Samuel D. Bush
Senior Vice President and Chief Financial Officer
~~(Principal~~ (Principal Financial Officer)
Date: November 9, ~~2017~~ 2020
/s/ CATHERINE A. BOBINSKI
Catherine A. Bobinski
Senior Vice President, Chief Accounting Officer and
Corporate Controller (Principal Accounting Officer)
33

32

~~Delaware~~		~~38-3042953~~
Florida	38-3042953
(State or other jurisdiction of		~~(I.R.S. Employer~~
incorporation or organization)		(I.R.S. Employer Identification No.)

~~73 Kercheval Avenue~~
73 Kercheval Avenue Grosse Pointe Farms, Michigan		~~48236~~
(Address of principal executive offices)		48236 (Zip Code)


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $.01 per share	SGA	NASDAQ

Large accelerated filer¨◻	Accelerated filer þ	Non-accelerated filer¨◻	Smaller Reporting Company¨☐	Emerging growth company¨
		~~(Do not check if a smaller~~ ~~reporting company)~~		☐

		Page
PART I. FINANCIAL INFORMATION		3

Item 1. Financial Statements (Unaudited)		3

Condensed consolidated balance sheets — September 30, ~~2017~~2020 and December 31, ~~2016~~2019		3

Condensed consolidated statements of ~~income~~operations — Three and nine months ended September 30, ~~2017~~2020 and ~~2016~~2019		4

Condensed consolidated statements of stockholders’ equity – Three and nine months ended September 30, 2020 and 2019	5

Condensed consolidated statements of cash flows — Nine months ended September 30, ~~2017~~2020 and ~~2016~~2019		5 7

Notes to unaudited condensed consolidated financial statements		6 8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		20

Item 3. Quantitative and Qualitative Disclosures about Market Risk		30 29

Item 4. Controls and Procedures		31 29

PART II OTHER INFORMATION		31 30

Item 1. Legal Proceedings		31 30

Item 1a. Risk Factors	30

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		31

Item 6. Exhibits		32 31
~~Signatures~~		33

~~EX-31.1~~
~~EX-31.2~~ Signatures	32
~~EX-32~~
EX-31.1

EX-31.2

EX-32

EX-101 INSTANCE DOCUMENT

EX-101 SCHEMA DOCUMENT

EX-101 CALCULATION LINKBASE DOCUMENT

EX-101 LABELS LINKBASE DOCUMENT

EX-101 PRESENTATION LINKBASE DOCUMENT

EX-101 DEFINITION LINKBASE DOCUMENT
~~EX-101 LABELS LINKBASE DOCUMENT~~
~~EX-101 PRESENTATION LINKBASE DOCUMENT~~

	þ
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	¨
☐	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	September 30,			December 31,
	2017			2016
	(Unaudited)			(Note)
	(In thousands)
Assets
Current assets:
Cash and cash equivalents	$	81,035		$	26,697
Accounts receivable, net		18,880			17,735
Prepaid expenses and other current assets		2,026			2,397
Barter transactions		1,721			1,318
Current assets of discontinued operations		—			4,625
Total current assets		103,662			52,772
Property and equipment		135,644			134,680
Less accumulated depreciation		79,299			85,506
Net property and equipment		56,345			49,174
Other assets:
Broadcast licenses, net		94,708			86,622
Goodwill		15,417			7,407
Other intangibles, deferred costs and investments, net		7,822			5,975
Assets of discontinued operations		—			18,048
	$	277,954		$	219,998

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	2,211		$	1,618
Payroll and payroll taxes		6,836			6,954
Other accrued expenses		26,348			3,198
Barter transactions		1,394			1,304
Current portion of long term debt		10,287			—
Current liabilities of discontinued operations		292			2,971
Total current liabilities		47,368			16,045
Deferred income taxes		31,762			29,741
Long-term debt		25,000			35,287
Other liabilities		2,269			2,885
Liabilities of discontinued operations		—			1,058
Total liabilities		106,399			85,016
Commitments and contingencies		—			—
Stockholders’ equity:
Common stock		75			74
Additional paid-in capital		62,157			59,557
Retained earnings		143,308			108,733
Treasury stock		(33,985	)		(33,382	)
Total stockholders’ equity		171,555			134,982
	$	277,954		$	219,998

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
	(Unaudited)
	(In thousands, except per share data)

Net operating revenue	$	30,269		$	29,878		$	86,685		$	88,208
Station operating expense		21,755			21,775			64,521			64,757
Corporate general and administrative		3,132			2,728			8,875			8,065
Other operating expense		(127	)		(1,393	)		(69	)		(1,388	)
Operating income from continuing operations		5,509			6,768			13,358			16,774
Interest expense		254			187			691			548
Income from continuing operations before tax		5,255			6,581			12,667			16,226
Income tax expense		2,290			2,678			5,280			6,665
Income from continuing operations, net of tax		2,965			3,903			7,387			9,561
Income from discontinued operations, net of tax (Note 5)		30,451			1,511			32,501			3,688
Net income	$	33,416		$	5,414		$	39,888		$	13,249
Basic Earnings per share:
From continuing operations	$	.50		$	.66		$	1.25		$	1.63
From discontinued operations		5.16			.26			5.51			.63
Basic earnings per share	$	5.66		$	.92		$	6.76		$	2.26

Weighted average common shares		5,807			5,755			5,800			5,753

Diluted Earnings per share:
From continuing operations	$	.50		$	.66		$	1.25		$	1.62
From discontinued operations		5.16			.26			5.51			.63
Diluted earnings per share	$	5.66		$	.92		$	6.76		$	2.25

Weighted average common and common equivalent shares		5,807			5,764			5,804			5,762

Dividends declared per share	$	.30		$	.30		$	.90		$	.80


	Class A			Class B			Additional						Total
	Common Stock			Common Stock			Paid-In		Retained		Treasury		Stockholders’
	Shares	Amount		Shares	Amount		Capital		Earnings		Stock		Equity

	(unaudited) (In thousands)

Balance at December 31, 2018	6,732	$	67	923	$	9	$	64,795	$	156,689	$	(36,561)	$	184,999
Net income, Three months ended March 31, 2019	0		0	0		0		0		1,370		0		1,370
Dividends declared per common share	0		0	0		0		0		(1,784)		0		(1,784)
Compensation expense related to restricted stock awards	0		0	0		0		559		0		0		559
Purchase of shares held in treasury	0		0	0		0		0		0		(80)		(80)
401(k) plan contribution	0		0	0		0		(113)		0		375		262
Balance at March 31, 2019	6,732	$	67	923	$	9	$	65,241	$	156,275	$	(36,266)	$	185,326
Net income, Three months ended June 30, 2019	0		0	0		0		0		4,734		0		4,734
Dividends declared per common share	0		0	0		0		0		(1,784)		0		(1,784)
Compensation expense related to restricted stock awards	0		0	0		0		565		0		0		565
Purchase of shares held in treasury	0		0	0		0		0		0		(247)		(247)
Balance at June 30, 2019	6,732	$	67	923	$	9	$	65,806	$	159,225	$	(36,513)	$	188,594
Net income, Three months ended September 30, 2019	0		0	0		0		0		3,334		0		3,334
Forfeiture of restricted stock	(2)		0	0		0		0		0		0		0
Dividends declared per common share	0		0	0		0		0		(1,781)		0		(1,781)
Compensation expense related to restricted stock awards	0		0	0		0		532		0		0		532
Purchase of shares held in treasury	0		0	0		0		0		—		(276)		(276)
Balance at September 30, 2019	6,730	$	67	923	$	9	$	66,338	$	160,778	$	(36,789)	$	190,403

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
	(In thousands, except per share data)
Numerator:
Income from continuing operations	$	2,965	$	3,903	$	7,387	$	9,561
Less: Income allocated to unvested participating securities		51		72		126		176
Income from continuing operations available to common stockholders	$	2,914	$	3,831	$	7,261	$	9,385

Income from discontinued operations	$	30,451	$	1,511	$	32,501	$	3,688
Less: Income allocated to unvested participating securities		520		28		556		68
Income from discontinued operations available to common stockholders	$	29,931	$	1,483	$	31,945	$	3,620

Net income available to common stockholders	$	32,845	$	5,314	$	39,206	$	13,005

Denominator:
Denominator for basic earnings per share — weighted average shares		5,807		5,755		5,800		5,753
Effect of dilutive securities:
Common stock equivalents		—		9		4		9
Denominator for diluted earnings per share — adjusted weighted-average shares and assumed conversions		5,807		5,764		5,804		5,762

Basic earnings per share:
From continuing operations	$	.50	$	.66	$	1.25	$	1.63
From discontinued operations		5.16		.26		5.51		.63
Basic earnings per share	$	5.66	$	.92	$	6.76	$	2.26

Diluted earnings per share
From continuing operations	$	.50	$	.66	$	1.25	$	1.62
From discontinued operations		5.16		.26		5.51		.63
Diluted earnings per share	$	5.66	$	.92	$	6.76	$	2.25


							Common Stock Issued
							Class A	Class B
	Common Stock Issued
	Class A			Class B
	(Shares in thousands)
Balance, January 1, 2016		6,603			865
							(Shares in thousands)
Balance, January 1, 2019							6,732	923
Conversion of shares		12			(12	)	13	(13)
Issuance of restricted stock		23			25		29	44
Balance, December 31, 2016		6,638			878
Exercise of stock options		21			8
Conversion of shares		4			(4	)
Forfeiture of restricted stock		(1	)		—		(3)	0
Balance, September 30, 2017		6,662			882
Balance, December 31, 2019							6,771	954
Forfeiture of restricted stock							(2)	0
Balance, September 30, 2020							6,769	954

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017⁽⁴⁾		2016		2017⁽⁴⁾		2016

Net operating revenue	$	3,296	$	6,241	$	14,238	$	17,094
Station operating expense⁽¹⁾		2,372		3,684		9,727		10,807
Other operating (income) expense		—		—		31		3
Operating income		924		2,557		4,480		6,284
Interest Expense⁽²⁾		5		9		21		26
Income before income taxes		919		2,548		4,459		6,258
Pretax gain on the disposal of discontinued operations		50,842		—		50,842		—
Total pretax gain on discontinued operations		51,761		2,548		55,301		6,258
Income tax expense⁽³⁾		21,310		1,037		22,800		2,570
Income from discontinued operations, net of tax	$	30,451	$	1,511	$	32,501	$	3,688


Years Ending December 31,
2020 (a)	$	438
2021		1,710
2022		1,552
2023		1,226
2024		892
Thereafter		1,911
Total lease payments (b)		7,729
Less: Interest (c)		1,134
Present value of lease liabilities (d)	$	6,595

	September 30, 2017			December 31, 2016
Major Classes of Current Assets of Discontinued Operations
Accounts receivable	$	—		$	3,868
Prepaid expenses and other current assets		—			625
Barter transactions		—			132
Total of current assets of discontinued operations	$	—		$	4,625

Major Classes of Non-Current Assets of Discontinued Operations
Property and equipment, net⁽¹⁾	$	—		$	7,388
Broadcast licenses, net⁽¹⁾		—			9,607
Other intangibles, deferred costs and investments, net⁽¹⁾		—			1,053
Total of non-current assets of discontinued operations	$	—		$	18,048
Total Assets Classified as Part of Discontinued Operations in the Condensed Consolidated Balance Sheets	$	—		$	22,673

Major Classes of Current Liabilities of Discontinued Operations
Accounts payable	$	84		$	759
Barter transactions		—			163
Current portion of long term debt		—			1,078
Other liabilities⁽¹⁾		208			971
Total of current liabilities of discontinued operations	$	292		$	2,971

Major Classes of Current Liabilities of Discontinued Operations
Other liabilities⁽¹⁾	$	—		$	1,058
Total of non-current liabilities of discontinued operations	$	—		$	1,058
Total Liabilities Classified as Part of Discontinued Operations in the Condensed Consolidated Balance Sheets	$	292		$	4,029
Net Assets Classified as Part of Discontinued Operations in the Condensed Consolidated Balance Sheets	$	(292	)	$	18,644

	September 30, 2017		September 30, 2016
Significant operating non-cash items
Depreciation and amortization⁽¹⁾	$	445	$	1,023
Broadcast program rights amortization		418		467
Barter revenue, net		18		58
Loss on sale of assets		31		3

Significant investing items
Acquisition of property and equipment	$	125	$	717
Proceeds from sale and disposal of assets		—		13
Net proceeds from sale of television stations⁽²⁾		69,528		—


					Acquisitions in
					2020		2019
	Acquisitions in
	2017		2016
	(In thousands)
					(In thousands)
Assets Acquired:
Current assets	$	1,440	$	814	$	0	$	0
Property and equipment		6,678		375		11		25
Other assets:
Broadcast licenses		8,086		8,123		46		61
Goodwill		8,011		4,533		143		124
Other intangibles, deferred costs and investments		2,019		398		0		0
Total other assets		18,116		13,054		189		185
Total assets acquired		26,234		14,243		200		210
Liabilities Assumed:
Current liabilities		378		41		0		0
Total liabilities assumed		378		41		0		0
Net assets acquired	$	25,856	$	14,202	$	200	$	210

						Weighted Average
				Weighted		Remaining		Aggregate
	Number of			Average		Contractual Term		Intrinsic
	Options			Exercise Price		(Years)		Value
Outstanding at January 1, 2017		29,035		$	28.47		0.4	$	633,834
Exercised		(29,035	)		28.47
Outstanding at September 30, 2017		—		$	—		—	$	—
Exercisable at September 30, 2017		—		$	—		—	$	—

				Weighted Average
				Grant Date Fair
	Shares			Value
Outstanding at January 1, 2017		103,262		$	43.73

							Weighted
							Average
							Grant Date
							Fair
						Shares	Value
Outstanding at January 1, 2020						128,224	$	34.66
Vested		(3,434	)		43.10	5,376		34.83
Forfeited		(594	)		45.39	1,802		33.67
Non-vested and outstanding at September 30, 2017		99,234		$	43.75
Non-vested and outstanding at September 30, 2020						121,046	$	34.67


	Percentage of Consolidated				Percentage of Consolidated
	Net Operating Revenue for				Net Operating Revenue
	the Nine Months Ended				for the Years Ended
	September 30,				December 31,
	2020		2019		2019		2018
Market:
Charleston, South Carolina	5	%	5	%	5	%	5	%
Columbus, Ohio	10	%	10	%	11	%	11	%
Des Moines, Iowa	6	%	6	%	6	%	7	%
Milwaukee, Wisconsin	11	%	11	%	11	%	12	%
Norfolk, Virginia	6	%	6	%	6	%	6	%

	Percentage of Consolidated						Percentage of Consolidated
	Net Operating Revenue for						Net Operating Revenue
	the Nine Months Ended						for the Years Ended
	September 30,						December 31,
	2017			2016			2016			2015
Market:
Columbus, Ohio		12	%		12	%		12	%		9	%
Des Moines, Iowa		8	%		8	%		8	%		8	%
Manchester, New Hampshire		5	%		6	%		6	%		6	%
Milwaukee, Wisconsin		12	%		12	%		12	%		12	%
Norfolk, Virginia		6	%		5	%		5	%		6	%


	Percentage of Consolidated				Percentage of Consolidated
	*Station Operating Income ()**				*Station Operating Income()**
	for the Nine Months Ended				for the Years Ended
	September 30,				December 31,
	2020		2019		2019		2018
Market:
Charleston, South Carolina	4	%	3	%	4	%	4	%
Columbus, Ohio	19	%	15	%	15	%	16	%
Des Moines, Iowa	6	%	6	%	6	%	6	%
Milwaukee, Wisconsin	16	%	12	%	12	%	14	%
Norfolk, Virginia	7	%	6	%	6	%	6	%

	Percentage of Consolidated						Percentage of Consolidated
	Station Operating Income (*)						Station Operating Income (*)
	for the Nine Months Ended						for the Years Ended
	September 30,						December 31,
	2017			2016			2016			2015
Market:
Columbus, Ohio		15	%		15	%		15	%		10	%
Des Moines, Iowa		7	%		7	%		7	%		8	%
Manchester, New Hampshire		6	%		8	%		9	%		8	%
Milwaukee, Wisconsin		14	%		14	%		14	%		13	%
Norfolk, Virginia		6	%		4	%		4	%		5	%


	Three Months Ended
	September 30,				$ Increase		% Increase
	2020		2019		(Decrease)		(Decrease)

	(In thousands, except percentages and per share information)
Net operating revenue	$	24,143	$	31,274	$	(7,131)	(22.8)	%
Station operating expense		19,616		23,600		(3,984)	(16.9)	%
Corporate general and administrative		2,838		2,788		50	1.8	%
Other operating (income) expense, net		50		85		(35)	N/M
Impairment of broadcast licenses		1,392		—		1,392	N/M
Operating income (loss)		247		4,801		(4,554)	(94.9)	%
Interest expense		75		180		(105)	(58.3)	%
Interest income		(8)		(162)		154	(95.1)	%
Other income		—		(11)		11	N/M
Income (loss) before income tax (benefit) expense		180		4,794		(4,614)	(96.2)	%
Income tax (benefit) expense		1,130		1,460		(330)	(22.6)	%
Net income (loss)	$	(950)	$	3,334	$	(4,284)	(128.5)	%
Earnings (loss) per share (diluted)	$	(.16)	$	.56		(.72)	(128.6)	%

	Three Months Ended
	September 30,						$ Increase			% Increase
	2017			2016			(Decrease)			(Decrease)
	(In thousands, except percentages and per share information)
Net operating revenue	$	30,269		$	29,878		$	391			1.3	%
Station operating expense		21,755			21,775			(20	)		(0.1	)%
Corporate general and administrative		3,132			2,728			404			14.8	%
Other operating expense		(127	)		(1,393	)		1,266			N/M
Operating income from continuing operations		5,509			6,768			(1,259	)		(18.6	)%
Interest expense		254			187			67			35.8	%
Income from continuing operations before taxes		5,255			6,581			(1,326	)		(20.1	)%
Income tax expense		2,290			2,678			(388	)		(14.5	)%
Income from continuing operations, net of tax		2,965			3,903			(938	)		(24.0	)%
Income from discontinued operations, net of tax		30,451			1,511			28,940			N/M
Net income	$	33,416		$	5,414		$	28,002			N/M

Earnings per share:
From continuing operations	$	.50		$	.66		$	(.16	)		(24.2	)%
From discontinued operations		5.16			.26			4.90			N/M
Earnings per share (diluted)	$	5.66		$	.92		$	4.74			N/M


				Total Number	Approximate
				of	Dollar
				Shares	Value of
				Purchased	Shares
	Total	Average		as Part of	that May Yet be
	Number	Price		Publicly	Purchased
	of Shares	Paid per		Announced	Under the
Period	Purchased	Share		Program	Program(a)
July 1 - July 31, 2020	972	$	22.75	—	$	19,171,290
August 1 - August 31, 2020	—	$	—	—	$	19,171,290
September 1 - September 30, 2020	—	$	—	—	$	19,171,290
Total	972	$	22.75	—	$	19,171,290

							Approximate
					Total Number		Dollar
					of		Value of
					Shares		Shares
					Purchased		that May Yet
					as Part of		be
	Total Number		Average Price		Publicly		Purchased
	of Shares		Paid per		Announced		Under the
Period	Purchased		Share		Program		Program(a)
July 1 – July 31, 2017		—	$	—		—	$	23,352,857
August 1 – August 31, 2017		916	$	40.60		—	$	23,315,667
September 1 – September 30, 2017		—	$	—		—	$	23,315,667
Total		916	$	40.60		—	$	23,315,667

~~31.1~~


31.1		Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and Rule15d-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

~~31.2~~ 32		~~Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

32		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 and Rule 13-14(b) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

(104)		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)