UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
| |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 |
For the Quarterly Period ended SeptemberJune 30, 20172022
orOR
| |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 |
For the transition period fromto
Commission file number 1-11588
Saga Communications, Inc.Inc.
(Exact name of registrant as specified in its charter)
Florida | 38-3042953 | |
(State or other jurisdiction of | ||
incorporation or organization) | (I.R.S. Employer | |
73 Kercheval Avenue | ||
(Address of principal executive offices) | 48236 |
(313) (313) 886-7070
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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 Global Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesþNo¨◻.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YesþNo¨◻.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | Accelerated filer þ | Non-accelerated filer | ||
Smaller Reporting Company | Emerging growth company | |||
☐ | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨◻
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes¨☐Noþ
The number of shares of the registrant’s Class A Common Stock, $.01 par value, and Class B Common Stock, $.01 par value, outstanding as of November 2, 2017August 5, 2022 was 5,024,8625,087,693 and 882,141,965,149, respectively.
INDEX
29 | |
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EX-31.1 | |
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EX-31.2 | |
| |
EX-32 | |
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EX-101 INSTANCE DOCUMENT | |
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EX-101 SCHEMA DOCUMENT | |
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EX-101 CALCULATION LINKBASE DOCUMENT | |
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EX-101 LABELS LINKBASE DOCUMENT | |
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EX-101 PRESENTATION LINKBASE DOCUMENT | |
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EX-101 DEFINITION LINKBASE DOCUMENT | |
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2
PART I — FINANCIAL INFORMATION
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 |
| | | | | | | |
|
| June 30, |
| December 31, | | ||
| | 2022 | | 2021 |
| ||
|
| (Unaudited) |
| (Note) | | ||
| | (In thousands) | | ||||
Assets | | | |
| | | |
Current assets: | | | | | | | |
Cash and cash equivalents | | $ | 42,321 | | $ | 54,760 | |
Short-term investments | | | 10,019 | | | — | |
Accounts receivable, net | |
| 16,288 | |
| 16,269 | |
Prepaid expenses and other current assets | |
| 4,351 | |
| 2,449 | |
Barter transactions | |
| 1,156 | |
| 971 | |
Total current assets | |
| 74,135 | |
| 74,449 | |
Property and equipment | |
| 147,012 | |
| 144,719 | |
Less accumulated depreciation | |
| 92,661 | |
| 91,375 | |
Net property and equipment | |
| 54,351 | |
| 53,344 | |
Other assets: | | | | | | | |
Broadcast licenses, net | |
| 90,307 | |
| 90,277 | |
Goodwill | |
| 19,236 | |
| 19,209 | |
Other intangibles, right of use assets, deferred costs and investments, net | |
| 9,944 | |
| 10,653 | |
Total assets | | $ | 247,973 | | $ | 247,932 | |
| | | | | | | |
Liabilities and stockholders’ equity | | | | |
| | |
Current liabilities: | | | | |
| | |
Accounts payable | | $ | 2,204 | | $ | 2,347 | |
Accrued payroll and payroll taxes | |
| 6,960 | |
| 6,202 | |
Dividend payable | |
| 0 | |
| 3,988 | |
Other accrued expenses | |
| 5,652 | |
| 5,758 | |
Barter transactions | |
| 1,027 | |
| 901 | |
Total current liabilities | |
| 15,843 | |
| 19,196 | |
Deferred income taxes | |
| 25,197 | |
| 24,802 | |
Other liabilities | |
| 6,240 | |
| 7,015 | |
Total liabilities | |
| 47,280 | |
| 51,013 | |
Commitments and contingencies | |
| — | |
| — | |
Stockholders’ equity: | | | | | | | |
Common stock | |
| 77 | |
| 77 | |
Additional paid-in capital | |
| 70,483 | |
| 70,035 | |
Retained earnings | |
| 167,095 | |
| 164,246 | |
Treasury stock | |
| (36,962) | |
| (37,439) | |
Total stockholders’ equity | |
| 200,693 | |
| 196,919 | |
Total liabilities and stockholders' equity | | $ | 247,973 | | $ | 247,932 | |
Note: The balance sheet at December 31, 20162021 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.
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 |
Seeaccompanying notes to unaudited condensed consolidated financial statements.
3
SAGA COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSOPERATIONS
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 |
| Six Months Ended | ||||||||
| | June 30, |
| June 30, | ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
| | (Unaudited) | ||||||||||
| | (In thousands, except per share data) | ||||||||||
Net operating revenue | | $ | 29,821 |
| $ | 28,046 |
| $ | 54,788 |
| $ | 50,347 |
Station operating expenses | |
| 21,786 | |
| 21,017 |
|
| 42,354 | |
| 39,940 |
Corporate general and administrative | |
| 2,609 | |
| 2,494 |
|
| 5,303 | |
| 4,932 |
Other operating (income) expense, net | | | 45 | | | (80) | | | 40 | | | (23) |
Operating income | |
| 5,381 | |
| 4,615 |
|
| 7,091 | |
| 5,498 |
Interest expense | |
| 32 | |
| 72 |
|
| 64 | |
| 145 |
Interest income | |
| (49) | |
| (4) |
|
| (53) | |
| (10) |
Other income | | | — | | | (31) | | | (2) | | | (303) |
Income before income tax expense | |
| 5,398 | |
| 4,578 |
|
| 7,082 | |
| 5,666 |
Income tax expense | |
| 1,575 | |
| 1,325 |
|
| 2,055 | |
| 1,655 |
Net income | | $ | 3,823 | | $ | 3,253 |
| $ | 5,027 | | $ | 4,011 |
| | | | | | |
| | | | | |
Earnings per share: | | | | | | |
| | | | | |
Basic | | $ | 0.63 | | $ | 0.54 |
| $ | 0.83 | | $ | 0.67 |
Diluted | | $ | 0.63 | | $ | 0.54 |
| $ | 0.83 | | $ | 0.67 |
| | | | | | |
| | | | | |
Weighted average common shares | |
| 5,952 | |
| 5,917 |
|
| 5,950 | |
| 5,915 |
Weighted average common and common equivalent shares | |
| 5,952 | |
| 5,917 |
|
| 5,950 | |
| 5,915 |
| | | | | | |
| | | | | |
Dividends declared per share | | $ | 0.20 | | $ | 0.16 |
| $ | 0.36 | | $ | 0.16 |
See accompanying notes to unaudited condensed consolidated financial statements.
4
SAGA COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the three and six months ended June 30, 2022 and 2021
| | | | | | | | | | | | | | | | | | | | | | |
| | 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, 2020 | | 6,785 | | $ | 68 | | 938 | | $ | 9 | | $ | 68,900 | | $ | 158,990 | | $ | (37,425) | | $ | 190,542 |
Net income, three months ended March 31, 2021 |
| 0 | | | 0 |
| 0 | |
| 0 | |
| 0 | |
| 758 | |
| 0 | |
| 758 |
Compensation expense related to restricted stock awards |
| 0 | |
| 0 |
| 0 | |
| 0 | |
| 343 | | | 0 | |
| 0 | |
| 343 |
401(k) plan contribution |
| 0 | |
| 0 |
| 0 | |
| 0 | |
| (200) | |
| 0 | |
| 421 | |
| 221 |
Balance at March 31, 2021 |
| 6,785 | | $ | 68 |
| 938 | | $ | 9 | | $ | 69,043 | | $ | 159,748 | | $ | (37,004) | | $ | 191,864 |
Net income, three months ended June 30, 2021 |
| 0 | |
| 0 |
| 0 | |
| 0 | |
| 0 | |
| 3,253 | |
| 0 | |
| 3,253 |
Dividends declared per common share |
| 0 | |
| 0 |
| 0 | |
| 0 | |
| 0 | |
| (956) | |
| 0 | |
| (956) |
Compensation expense related to restricted stock awards |
| 0 | |
| 0 |
| 0 | |
| 0 | |
| 357 | |
| 0 | |
| 0 | |
| 357 |
Balance at June 30, 2021 |
| 6,785 | | $ | 68 |
| 938 | | $ | 9 | | $ | 69,400 | | $ | 162,045 | | $ | (37,004) | | $ | 194,518 |
| | | | | | | | | | | | | | | | | | | | | | |
| | 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, 2021 | | 6,835 | | $ | 68 | | 965 | | $ | 9 | | $ | 70,035 | | $ | 164,246 | | $ | (37,439) | | $ | 196,919 |
Net income, three months ended March 31, 2022 |
| 0 | |
| 0 |
| 0 | |
| 0 | |
| 0 | |
| 1,204 | |
| 0 | |
| 1,204 |
Dividends declared per common share |
| 0 | |
| 0 |
| 0 | |
| 0 | |
| 0 | |
| (968) | |
| 0 | |
| (968) |
Compensation expense related to restricted stock awards |
| 0 | |
| 0 |
| 0 | |
| 0 | |
| 339 | |
| 0 | |
| 0 | |
| 339 |
401(k) plan contribution |
| 0 | |
| 0 |
| 0 | |
| 0 | |
| (229) | |
| 0 | |
| 477 | |
| 248 |
Balance at March 31, 2022 | | 6,835 | | $ | 68 |
| 965 | | $ | 9 | | $ | 70,145 | | $ | 164,482 | | $ | (36,962) | | $ | 197,742 |
Net income, three months ended June 30, 2022 |
| 0 | |
| 0 |
| 0 | |
| 0 | |
| 0 | |
| 3,823 | |
| 0 | |
| 3,823 |
Dividends declared per common share |
| 0 | |
| 0 |
| 0 | |
| 0 | |
| 0 | | | (1,210) | |
| 0 | |
| (1,210) |
Compensation expense related to restricted stock awards |
| 0 | |
| 0 |
| 0 | |
| 0 | |
| 338 | |
| 0 | |
| 0 | |
| 338 |
Balance at June 30, 2022 |
| 6,835 | | $ | 68 |
| 965 | | $ | 9 | | $ | 70,483 | | $ | 167,095 | | $ | (36,962) | | $ | 200,693 |
See accompanying notes to unaudited condensed consolidated financial statements.
5
SAGA COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | | |
| | Six Months Ended |
| | ||||
| | June 30, |
| | ||||
|
| 2022 |
| 2021 |
| | ||
| | (Unaudited) |
| | ||||
| | (In thousands) | | | ||||
Cash flows from operating activities: | | | |
| | | | |
Net cash provided by operating activities | | $ | 7,340 | | $ | 9,203 | | |
Cash flows from investing activities: | | | | | | | | |
Purchase of Short-term investments | | | (9,999) | | | — | | |
Acquisition of property and equipment | |
| (3,563) | |
| (1,455) | | |
Acquisition of broadcast properties | |
| (57) | |
| (150) | | |
Proceeds from sale and disposal of assets | | | 7 | | | 130 | | |
Proceeds from insurance claims | |
| — | | | 272 | | |
Other investing activities | |
| — | |
| 31 | | |
Net cash used in investing activities | |
| (13,612) | |
| (1,172) | | |
Cash flows from financing activities: | | | | | | | | |
Cash dividends paid | |
| (6,167) | |
| — | | |
Net cash used in financing activities | |
| (6,167) | |
| — | | |
Net increase (decrease) in cash and cash equivalents | |
| (12,439) | |
| 8,031 | | |
Cash and cash equivalents, beginning of period | |
| 54,760 | |
| 51,353 | | |
Cash and cash equivalents, end of period | | $ | 42,321 | | $ | 59,384 | | |
See accompanying notes to unaudited condensed consolidated financial statements.
6
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 SeptemberJune 30, 20172022 and the results of operations for the three and ninesix months ended SeptemberJune 30, 20172022 and 2016.2021. Results of operations for the three and ninesix months ended SeptemberJune 30, 20172022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.
2022.
We own or operate broadcast properties in 2627 markets, including 7579 FM and 3335 AM radio stations.
On May 9, 2017 the Company entered into an agreement to sell the Joplin, Missouristations 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.
80 metro signals.
For further information, refer to the consolidated financial statements and footnotes thereto included in the Saga Communications, Inc. Annual Reportannual report on Form 10-K for the year ended December 31, 2016.2021.
The Company hasWe have evaluated events and transactions occurring subsequent to the balance sheet date of SeptemberJune 30, 2017,2022, for items that should potentially be recognized in these financial statements or discussed within the notes to thethese financial statements.
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.
7
SAGA COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following table sets forth the computation of basic and diluted earnings 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 |
| Six Months Ended |
| ||||||||
| | June 30, |
| June 30, |
| ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| ||||
| | (In thousands, except per share data) |
| ||||||||||
Numerator: |
| |
|
| |
| | |
|
| |
| |
Net income | | $ | 3,823 | | $ | 3,253 | | $ | 5,027 | | $ | 4,011 | |
Less: Income allocated to unvested participating securities | |
| 65 | |
| 35 | |
| 85 | |
| 43 | |
Net income available to common stockholders | | $ | 3,758 | | $ | 3,218 | | $ | 4,942 | | $ | 3,968 | |
| | | | | | | | | | | | | |
Denominator: | |
| | |
| | |
| | |
| | |
Denominator for basic earnings per share — weighted average shares | |
| 5,952 | |
| 5,917 | |
| 5,950 | |
| 5,915 | |
Effect of dilutive securities: | |
| | |
| | |
| | |
| | |
Common stock equivalents | |
| 0 | |
| 0 | |
| 0 | |
| 0 | |
Denominator for diluted earnings per share — adjusted weighted-average shares and assumed conversions | |
| 5,952 | |
| 5,917 | |
| 5,950 | |
| 5,915 | |
| | | | | | | | | | | | | |
Earnings per share: | |
| | |
| | |
| | |
| | |
Basic | | $ | 0.63 | | $ | 0.54 | | $ | 0.83 | | $ | 0.67 | |
Diluted | | $ | 0.63 | | $ | 0.54 | | $ | 0.83 | | $ | 0.67 | |
| | | | | | | | | | | | | |
The number ofThere were 0 stock options outstanding that had an antidilutive effect on our earnings per share calculation for the three months ended June 30, 2022 and therefore have been excluded from2021, respectively. The actual effect of these shares, if any, on the diluted earnings per share calculation was 0 forwill vary significantly depending on the three and nine months ended September 30, 2017 and 0 forfluctuation in the three and nine months ended September 30, 2016, respectively. All stock options were exercised during the second quarter of 2017 and there were no stock options outstanding at September 30, 2017.price.
SAGA COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Financial Instruments
We account for marketable securities in accordance with ASC 320, “Investments – Debt Securities”, which require that certain debt securities be classified into one of three categories: held-to-maturity, available-for-sale, or trading securities, and depending upon the classification, value the security at amortized cost or fair market value. At June 30, 2022, we have recorded $10 million of held-to-maturity United States’ Treasury Bills at amortized cost basis, that has a fair market value of $10 million. Our held-to-maturity United States’ Treasury Bills all have original maturity dates ranging from July 2022 to February 2023. We had 0 marketable securities at December 31, 2021.
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 SeptemberJune 30, 2017.2022.
8
SAGA COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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 uncertain economic conditions. In the event we recover amounts previously written off, we will reduce the specific allowance for credit loss. Our allowance for doubtful accounts was $359,000 and $469,000 at June 30, 2022 and December 31, 2021, respectively.
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’sTBAs/LMAs are included in the accompanying unaudited Condensed Consolidated Statements of Income. At September 30, 2017 we had no TBA’s/LMA’sAssets 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 classifyManagement has considered 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 forfeituresrecent accounting pronouncements issued. The Company’s management believes that these recent pronouncements 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 impacteffect on our consolidatedthe Company’s financial statements.
9
SAGA COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS —– (Continued)
Recent Accounting Pronouncements – Not Yet Adopted
3. Revenue
In May 2017,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 FASB issued ASU 2017-09,“Compensation – Stock Compensation (Topic 718), Scopesale of Modification Accounting)” (“ASU 2017-09”) which clarifies when changes to the terms or conditions of a share-based payment award must be accountedadvertising 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 havebroadcast 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 2stations. We recognize revenue from the goodwill impairment test. Undersale of advertising as performance obligations are satisfied upon airing of the new guidance, ifadvertising; therefore, revenue is recognized at a reporting unit’s carrying amount exceeds it fair value, an entity will record an impairment chargepoint in time when each advertising spot is transmitted. Agency commissions are calculated based on that difference. The impairment charge will be limiteda stated percentage applied to the amountgross billing revenue for our advertising inventory placed by an agency and are reported as a reduction 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 this standardadvertising revenue.
Digital Advertising Revenue
We recognize revenue from our digital initiatives across multiple platforms such as targeted digital advertising, online promotions, advertising on our consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15, “Classification of Certain Cash Receiptswebsites and Cash Payments (Topic 230): Statement of Cash Flows”(“ASU 2016-15”), which clarifies how entities should classify certain cash receiptsonline streams, mobile messaging, email marketing and cash payments on the statement of cash flows. ASU 2016-15 also clarifies how the predominance principle should be appliedother e-commerce. Revenue is recorded 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.
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. ASU 2016-13 is effective for fiscal years and interim periods beginning after December 15, 2019. The Company is currently evaluating the impact that this standard will have on our consolidated financial statements.
In February 2016, the FASB issued Accounting Standards Update No. 2016-02,“Leases (Topic 842)” (“ASU 2016-02”)¸which requires that all leases with a term of more than one year, covering leased assets such as real estate, broadcasting towers and equipment, be reflected on the balance sheet as assets and liabilities for the rights and obligations created by these leases. ASU 2016-02 is effective for fiscal years fiscal years 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 increaseeach specific performance obligation in the assetsdigital advertising campaign takes place, typically within a one month period.
Other Revenue
Other revenue includes revenue from concerts, promotional events, tower rent and liabilities reflected onother miscellaneous items. Revenue is generally recognized when the Company’s consolidated balance sheets. Weevent is completed, as the promotional events are still evaluating the impact on our consolidated statementscompleted or as each performance obligation is satisfied.
Disaggregation of operations.Revenue
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 resultingRevenues from contracts with customers comprised the following for three and will supersede virtually allsix months ended June 30, 2022 and 2021:
| | | | | | | | | | | | | |
| | Three Months Ended |
| Six Months Ended |
| ||||||||
| | June 30, |
| June 30, |
| ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| ||||
| | (in thousands) |
| (in thousands) |
| ||||||||
Types of Revenue | | | | | | |
| | | | | |
|
Broadcast Advertising Revenue, net | | $ | 25,436 | | $ | 24,944 | | $ | 47,023 | | $ | 44,951 | |
Digital Advertising Revenue | |
| 2,233 | |
| 1,636 | |
| 3,982 | |
| 2,636 | |
Other Revenue | |
| 2,152 | |
| 1,466 | |
| 3,783 | |
| 2,760 | |
Net Revenue | | $ | 29,821 | | $ | 28,046 | | $ | 54,788 | | $ | 50,347 | |
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 current revenue recognition guidance under GAAP. The FASB has also issued a number of updatesperformance obligations these prepayments are recorded as contract liabilities. Typical contract liabilities relate to this standard. This standard is effectiveprepayments for the fiscaladvertising spots not yet run; prepayments from sponsors for events that have not yet been held; 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 standardgift cards sold on our consolidated financial statements. Based on our preliminary assessment, which is subjectwebsites used to change, the impact of this guidance should notfinance a broadcast advertising campaign. Generally all contract liabilities are expected to be material torecognized within one year and are included in accounts payable in the Company’s financial position, resultsCondensed Consolidated Financial Statements and are immaterial.
10
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 Licenses, Goodwill and Other Intangible Assets
We evaluate our FCC licenses and goodwill for impairment annually as of October 1st or more frequently if events or changes in circumstances indicate that the asset might be impaired. FCCWe 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 evaluatedbroadcast 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 atan 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 usingand 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.
The Company considered the current and expected future economic and market conditions, and other potential indicators of impairment and determined a triggering event had not occurred which would necessitate any interim impairment tests during the six months ended June 30, 2022. We will continue to monitor changes in economic and market conditions, and if any event or circumstances indicate a triggering event has occurred, we will perform an interim impairment test of our intangible assets at the appropriate time.
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 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 fourfive to twenty-six years. Other intangibles are amortized over one to fifteen years. Customer relationships are amortized over three years.
11
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 SeptemberJune 30, 2017:2022:
Common Stock Issued | ||||||||
Class A | Class B | |||||||
(Shares in thousands) | ||||||||
Balance, January 1, 2016 | 6,603 | 865 | ||||||
Conversion of shares | 12 | (12 | ) | |||||
Issuance of restricted stock | 23 | 25 | ||||||
Balance, December 31, 2016 | 6,638 | 878 | ||||||
Exercise of stock options | 21 | 8 | ||||||
Conversion of shares | 4 | (4 | ) | |||||
Forfeiture of restricted stock | (1 | ) | — | |||||
Balance, September 30, 2017 | 6,662 | 882 |
| | | | |
| | Common Stock Issued | ||
|
| Class A |
| Class B |
| | (Shares in thousands) | ||
Balance, January 1, 2021 | | 6,785 | | 938 |
Conversion of shares |
| 12 |
| (12) |
Issuance of restricted stock |
| 38 |
| 39 |
Balance, December 31, 2021 |
| 6,835 |
| 965 |
Balance, June 30, 2022 |
| 6,835 |
| 965 |
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 SeptemberJune 30, 2017,2022, we have remaining authorization of $23.3$18.4 million for future repurchases of our Class A Common Stock. On September 14, 2017, the Board of Directors authorized the repurchase of itsour Class A Common Stock under itsour trading plan adopted pursuant to Securities and Exchange Commission Rule 10b5-1.The Rule 10b5-1 repurchase plan allows the Companyus to repurchase itsour shares during periods when itwe would normally not be active in the market due to itsour internal trading blackout periods. Under the plan, the Companywe may repurchase itsour 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 beare funded by cash on the Company'sour balance sheet. The plan does not obligate Sagaus to acquire any particular amount of Class A Common Stock. TheOur original purchase authorization iswas effective until September 1, 2018 but may be suspended,and has been extended several times, with the most recent authorization instructions extension being through May 28, 2020. 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. During the three and six months ended June 30, 2022 and 2021 0 shares were repurchased under the Stock Buy-Back Program.
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 amendedmore 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 timeresidual value guarantees or material restrictive covenants. As of June 30, 2022, 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 were $5.5 million and $6.1 million at June 30, 2022 and December 31, 2021 respectively. Lease liabilities were $5.8 million and $6.4 million at June 30, 2022 and December 31, 2021, respectively. During the Company's discretion.six months ended June 30, 2022, we recorded additional ROU assets under operating leases of $219,000. Payments on lease liabilities during the three and six months ended June 30, 2022 and 2021 totaled $428,000, $906,000, $415,000, and $884,000, respectively.
Lease expense includes cost for leases with terms in excess of one year. For the three and six months ended June 30, 2022 and 2021, our total lease expense was $449,000, $893,000, $442,000 and $882,000, respectively. Short-term lease costs are de minimus.
12
SAGA COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
STATEMENTS — (Continued)
5. Discontinued Operations
On May 9, 2017 we entered into a definitive agreement to sell our Joplin, MissouriWe 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 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 Operationsat June 30, 2022 (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, |
| | |
2022 (a) |
| $ | 885 |
2023 | |
| 1,608 |
2024 | |
| 1,293 |
2025 | |
| 906 |
2026 | |
| 700 |
Thereafter | |
| 1,321 |
Total lease payments (b) | |
| 6,713 |
Less: Interest (c) | |
| 895 |
Present value of lease liabilities (d) | | $ | 5,818 |
(a) |
(b) |
(c) |
(d) |
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 |
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 | — |
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 acquisitionacquisitions 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.
2022 Acquisitions
2017 Acquisitions and Disposals
On May 9, 2017July 12, 2021, we entered into a definitivean agreement to sell our Joplin, Missouriacquire WIZZ-AM and Victoria, Texas television stationsa translator from P. & M. Radio for approximately $66.6 million, subject to certain adjustments, to Evening Telegram Company d/b/a Morgan Murphy Media. The Television Sale$61,800 of which $5,000 was completed on September 1, 2017paid in 2021 and the Company received net proceeds of $69.5 million which includedremainder was paid on April 6, 2022 when we closed on 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 the purchase price of $23 million, and the purchase of $1.3 million in related accounts receivable offset by certain closing adjustments and transactional costs of approximately $50,000.transaction. Management attributes the goodwill recognized in the acquisition to the power of the existing brands in the Charleston, South Carolina and Hilton Head, South CarolinaGreenfield, Massachusetts 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
SAGA COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
STATEMENTS — (Continued)
2021 Acquisitions
On January 16, 2017, we entered into8, 2021, the Company closed on an asset purchase agreement to purchase WBQL and W288DQ from Consolidated Media, LLC, for an FM radio station (WCVL) from WUVA, Incorporated, servingaggregate purchase price of $175,000, of which $25,000 was paid in 2020 and the Charlottesville, Virginia market for approximately $1,658,000, which included $8,000remaining $150,000 paid 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 results 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.2021. Management attributes the goodwill recognized in the acquisition to the power of the existing brands in the Columbus, OhioClarksville, Tennessee market as well as the 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.
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.
SAGA COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Condensed Consolidated Balance Sheet of 20172022 and 20162021 Acquisitions:
The following unaudited condensed balance sheets represent the estimated fair value assigned to the related assets and liabilities of the 20172022 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.
2021 acquisitions.
Saga Communications, Inc.
Condensed Consolidated Balance Sheet of 20172022 and 20162021 Acquisitions
| | | | | | | ||||||||
| | Acquisitions in | ||||||||||||
|
| 2022 |
| 2021 | ||||||||||
Acquisitions in | ||||||||||||||
2017 | 2016 | |||||||||||||
(In thousands) | ||||||||||||||
| | (In thousands) | ||||||||||||
Assets Acquired: | | | | | | | ||||||||
Current assets | $ | 1,440 | $ | 814 | ||||||||||
Property and equipment | 6,678 | 375 | | $ | 5 |
| $ | 3 | ||||||
Other assets: | | | | | | | ||||||||
Broadcast licenses | 8,086 | 8,123 | |
| 29 |
| | 69 | ||||||
Goodwill | 8,011 | 4,533 | |
| 28 |
| | 103 | ||||||
Other intangibles, deferred costs and investments | 2,019 | 398 | ||||||||||||
Total other assets | 18,116 | 13,054 | |
| 57 |
| | 172 | ||||||
Total assets acquired | 26,234 | 14,243 | |
| 62 |
| | 175 | ||||||
Liabilities Assumed: | | | | | | | ||||||||
Current liabilities | 378 | 41 | |
| 0 |
| | 0 | ||||||
Total liabilities assumed | 378 | 41 | |
| 0 |
| | 0 | ||||||
Net assets acquired | $ | 25,856 | $ | 14,202 | | $ | 62 | | $ | 175 |
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 $1,575,000 was recorded for the three months ended June 30, 2022 compared to $1,325,000 for the three months ended June 30, 2021. The effective tax rate was approximately 29.2% for the three months ended June 30, 2022 compared to 28.9% for the three months ended June 30, 2021. An income tax expense of $2,055,000 was recorded for the six months ended June 30, 2022 compared to $1,655,000 for the three months ended June 30, 2021. The effective tax rate was approximately 29.0% for the three months ended June 30, 2022 compared to 29.2% for the three months ended June 30, 2021. 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.
14
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 |
SAGA COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
7.9. Stock-Based Compensation
2005 Incentive Compensation Plan
On October 16, 2013May 13, 2019 our stockholders approved an amendment to the Second Amended and Restated Saga Communications, Inc. 2005 Incentive Compensation Plan (the(as amended, the “Second Restated 2005 Plan”). The 2005 Incentive Compensation PlanThis plan was first approved by stockholders in 2005, and replaced our 2003 Stock Option Plan (the “2003 Plan”).subsequently re-approved in 2010 and 2013. The 2005 Incentive Compensation Plan was re-approved by stockholders in 2010. The changes made inamendment to the Second Restated 2005 Plan (i) increases the number of authorized shares by 233,334 shares of Common Stock, (ii) extendsextended the date for making awards to September 6, 2018, (iii) includes directors as participants, (iv) targets awards according to groupings2023 and (ii) increased the number of participants based on rangesauthorized shares under the Plan by 90,000 shares of base salary of employees and/or retainers of directors, (v) requires participants to retain 50% of their net annual restricted stock awards during their employment or service as a director, and (vi) includes a clawback provision.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 280,000370,000 shares of Class B Common Stock, 900,000or 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 280,000370,000 shares of Class A Common Stock may be 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 (10) 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, 2012,2012; therefore, there was no0 compensation expense related to stock options for the three and ninesix months ended SeptemberJune 30, 20172022 and the three2021, respectively.
There were 0 stock options granted during 2022 or 2021 and nine months ended Septemberthere were 0 stock options outstanding as of June 30, 2016, respectively.
The following summarizes the2022. 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 | — | $ | — | — | $ | — |
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 ninethree and six months ended SeptemberJune 30, 2017:2022:
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, 2022 | | 100,609 | | $ | 24.85 | ||||||||
Vested | (3,434 | ) | 43.10 | | 0 | | | 0 | |||||
Forfeited | (594 | ) | 45.39 | | 0 | | | 0 | |||||
Non-vested and outstanding at September 30, 2017 | 99,234 | $ | 43.75 | ||||||||||
Non-vested and outstanding at June 30, 2022 |
| 100,609 |
| $ | 24.85 |
15
SAGA COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
For the three and ninesix months ended SeptemberJune 30, 20172022 and the three and nine months ended September 30, 2016,2021, we had $629,000, $1,761,000, $536,000$338,000, $677,000, $357,000 and $1,594,000,$700,000, 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 benefit recognized for the three and ninesix months ended SeptemberJune 30, 20172022 and the three2021 was $37,000, $74,000, $33,000 and nine months ended September 30, 2016, was $252,000, $704,000, $214,000 and $638,000,$64,000, respectively.
8.10. Long-Term Debt
On October 27, 2021, we used $10 million from funds generated by operations to voluntarily pay down the remaining amounts on our Revolving Credit Facility and as such, have 0 debt outstanding at June 30, 2022.
Long-term debt consisted of the following:
September 30, | December 31, | |||||||
2017 | 2016 | |||||||
(In thousands) | ||||||||
Revolving credit facility | $ | 35,287 | $ | 35,287 | ||||
Secured debt of affiliate | — | 1,078 | ||||||
35,287 | 36,365 | |||||||
Amounts payable within one year | 10,287 | — | ||||||
$ | 25,000 | $ | 36,365 |
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 withLLC (collectively, the execution of the Credit Facility, the“Lenders”) pursuant to a credit agreement in place at June 30, 2015of even date (the “Old Credit“Credit Agreement”) was terminated, and all outstanding amounts were paid in full.. The Credit Facility consistsconsisted of a $100$100 million five-year revolving facility (the “Revolving Credit Facility”) and maturesoriginally 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, as part of our reincorporation as a Florida corporation, we entered into an assumption agreement and amendment of loan documents. The amendment also included an alternative benchmark rate as a replacement to LIBOR in the event LIBOR is no longer available. On November 2, 2021, we elected to further reduce our Revolving Credit Facility to $50 million.
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 feesdebt issuance costs related to the Credit Facility were capitalized and are being amortized over the life of the Credit Facility. Those deferredThese 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%(1.579% at SeptemberJune 30, 2017)2022), 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 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.
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 SeptemberJune 30, 2017)2022) 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.
We had approximately $65$50 million of unused borrowing capacity under the Revolving Credit Facility at SeptemberJune 30, 2017.2022.
16
SAGA COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
11. Litigation
From time to time, the Company may be involved in various legal proceedings that are incidental to the Company’s business. In management’s opinion, the Company is not a party to any current legal proceedings that are material to its financial condition, either individually or in the aggregate.
12. Dividends
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. 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. Dividends
On September 13, 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, 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 million, was paid on April 14, 2017 to shareholders of record on March 28, 2017.
On November 21, 20166, 2022, 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. Common Stock. This dividend, totaling $2.9 millionapproximately $1,200,000, was paid to our transfer agent on December 23, 2016June 29, 2022. The dividend was paid by our transfer agent on July 1, 2022 to shareholders of record on December 5, 2016.
June 13, 2022.
On August 30, 2016,March 1, 2022, the Company’s Board of Directors declared a regularquarterly cash dividend of $0.30$0.16 per share on its Classes A and B Common Stock. This dividend, totaling $1.8 millionapproximately $970,000, was paid on September 30, 2016April 8, 2022 to shareholders of record on September 14, 2016.
March 21, 2022.
On June 1, 2016,December 14, 2021, the Company’s Board of Directors declared a regularquarterly cash dividend of $0.25$0.16 per share and special cash dividend of $0.50 per share on its Classes A and B Common Stock. This dividend, totaling $1.5 million,approximately $3,990,000, was paid on July 8, 2016January 14, 2022 to shareholders of record on June 15, 2016.
December 27, 2021.
On March 2, 2016,September 28, 2021, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.25$0.16 per share on its Classes A and B Common Stock. This dividend, totaling $1.5 million,approximately $960,000, was paid on April 15, 2016October 22, 2021 to shareholders of record on March 28, 2016.October 8, 2021.
On June 18, 2021, the Company’s Board of Directors declared a quarterly cash dividend of $0.16 per share on its Classes A and B Common Stock. This dividend, totaling approximately $960,000, was paid on July 16, 2021 to shareholders of record on June 30, 2020.
13. Other Income
During the first quarter of 2021, there was weather-related damage to an antenna in our Des Moines, Iowa market. The Company’s insurance policy provided coverage for removal and replacement of the antenna and related equipment. As part of the initial insurance settlement during the first quarter of 2021, the Company received cash proceeds of $250,000, resulting in a gain of $250,000 which was recorded in other (income) expense, net in the Company’s Condensed Consolidated Statements of Income at March 31, 2021. We received additional cash proceeds of $290,000 in the third quarter of 2021, resulting in a gain of $290,000. The total gain of $540,000 was recorded in other (income) expense, net, at December 31, 2021 in the Company’s Consolidated Statements of Income in our most recent Form 10-K.
17
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
ResultsThis report contains forward-looking statements that are based on management’s beliefs, assumptions, current expectations, estimates and projections about the radio broadcasting industry, the economy, and the Company. Words such as “anticipates,” “believes,” “expects,” “intends,” “is likely,” “plans,” “projects,” and variations of Operationssuch words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions (“Future Factors”) that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed or forecasted in such forward-looking statements. We undertake no obligation to update, amend, or clarify forward-looking statements, whether as a result of new information, future events (whether anticipated or unanticipated), or otherwise.
Future Factors include, among others, adverse changes in interest rates and interest rate relationships; our financial leverage and debt service requirements; dependence on key personnel; dependence on key stations; U.S. national and local economic conditions or an economic recission; market volatility; demand for our services; the degree of competition by traditional and non-traditional competitors; our ability to successfully integrate acquired stations; regulatory requirements; governmental and regulatory policy changes; changes in tax laws; the impact of technological advances; risks associated with cyber-attacks on our computer systems and those of our vendors; the outcomes of contingencies; trends in audience behavior; damage to our reputation resulting from adverse publicity, regulatory actions, litigation, operational failures, the failure to meet client or listener expectations and other facts; changes in local real estate values; natural disasters; terrorist attacks; the war in Ukraine, the effects of the ongoing COVID-19 pandemic, inflation; increased energy costs; and risk factors described in our annual report on Form 10-K for the year ended December 31, 2021 or in this Report. These are representative of the Future Factors that could cause a difference between an ultimate actual outcome and a forward-looking statement.
Introduction
The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and accompanying notes thereto of Saga Communications, Inc. and its subsidiaries contained elsewhere herein and the audited financial statements and ManagementManagement’s Discussion and Analysis contained in our Annual Reportannual report on Form 10-K for the year ended December 31, 2016.2021. The following discussion is presented on a consolidated basis. On May 9, 2017 the Company entered into an agreement to sell its Joplin, Missouri
Critical Accounting Policies 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 condensedEstimates
Our consolidated financial statements relateshave been prepared in conformity with accounting principles generally accepted in the United States (GAAP), which require us to make estimates, judgments and assumptions that affect the Company’s continuing operations.
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 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” in our annual report on Form 10-K for the year ended December 31, 2021.
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.
18
COVID-19 Impact and Response
GeneralAs the circumstances around the COVID-19 pandemic remain fluid, we continue to actively monitor the pandemic’s impact to the Company, including our financial position, liquidity, results of operations and cash flows, while managing our response to the impacts and developments relating to the pandemic through collaboration with employees, customers, government authorities, health officials and other business partners. Please see Part I, Item 1A, Risk Factors in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for further information regarding the current and potential impact of health epidemics, including the COVID-19 pandemic on the Company.
Financial Condition and Results of Operations
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 3335 AM radio stations.stations and 80 metro signals.
Continuing Operations - Radio Stations
Our radio station’sstations’ 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 radio station markets, which include all 108 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’market’s sales staff. For the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, approximately 89%90% and 89%, respectively, of our radio segment’sstations’ 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 course of 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. WeFurthermore, we expect a decreasean increase in political advertising for 20172022 due to the decreasedincreased number of national, state and local elections in most of our markets as compared to the prior year.
Our net operating revenue, station operating expense and operating income varies from market to market based upon theeach 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, areis 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, thesesuch 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.
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.
19
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 areis 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 outsell-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 platformsmultiple platforms. Our goal is to allow our listeners and viewers to connect with our products wherebrands on demand, wherever, however and whenwhenever 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 rollout20
During the ninesix months ended SeptemberJune 30, 20172022 and 20162021 and the years ended December 31, 20162021 and 2015,2020, our Columbus, Ohio; Des Moines, Iowa; Manchester, New Hampshire; Milwaukee, Wisconsin;Wisconsin, Norfolk; Virginia and Norfolk, VirginiaPortland, Maine markets, when combined, represented approximately 43%38%, 43%39%, 43%39% and 41%40%, respectively, of our consolidated net operating 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 describetable describes 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 Six Months Ended | | for the Years Ended |
| | ||||
| | June 30, | | December 31, |
| | ||||
|
| 2022 |
| 2021 |
| 2021 |
| 2020 |
|
|
Market: | | | | | | | | | |
|
Columbus, Ohio |
| 10 | % | 10 | % | 10 | % | 10 | % |
|
Des Moines, Iowa |
| 5 | % | 6 | % | 6 | % | 7 | % |
|
Milwaukee, Wisconsin |
| 12 | % | 11 | % | 11 | % | 11 | % |
|
Norfolk, Virginia |
| 6 | % | 7 | % | 6 | % | 6 | % |
|
Portland, Maine |
| 5 | % | 5 | % | 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 ninesix months ended SeptemberJune 30, 20172022 and 20162021 and the years ended December 31, 20162021 and 2015,2020, the radio stations in our five largest markets, when combined, represented approximately 48%43%, 48%41%, 49%43% and 44%52%, respectively, of our consolidated station operating income. We note that the percentage of consolidated station operating income at December 31, 2020 is higher than what would normally be expected due to the impact of the COVID-19 pandemic on our markets. The following tables describetable describes 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 Six Months Ended | | for the Years Ended |
| | ||||
| | June 30, | | December 31, |
| | ||||
|
| 2022 |
| 2021 |
| 2021 |
| 2020 |
|
|
Market: | | | | | | | | | | |
Columbus, Ohio |
| 13 | % | 13 | % | 12 | % | 16 | % | |
Des Moines, Iowa |
| 3 | % | 4 | % | 5 | % | 7 | % | |
Milwaukee, Wisconsin |
| 15 | % | 11 | % | 12 | % | 15 | % | |
Norfolk, Virginia |
| 7 | % | 7 | % | 7 | % | 6 | % | |
Portland, Maine |
| 5 | % | 6 | % | 7 | % | 8 | % | |
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 |
21
Discontinued Operations - Television Stations
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.
Three Months Ended SeptemberJune 30, 20172022 Compared to Three Months Ended SeptemberJune 30, 20162021
Results of Operations
The following tables summarizetable summarizes our results of operations for the three months ended SeptemberJune 30, 20172022 and 2016.
2021.
Consolidated Results of Operations
| | | | | | | | | | | | |
| | Three Months Ended | | | | | |
| ||||
| | June 30, | | $ Increase | | % Increase |
| |||||
|
| 2022 |
| 2021 |
| (Decrease) |
| (Decrease) |
| |||
| | (In thousands, except percentages and per share information) |
| |||||||||
Net operating revenue | | $ | 29,821 | | $ | 28,046 | | $ | 1,775 |
| 6.3 | % |
Station operating expenses | |
| 21,786 | |
| 21,017 | |
| 769 |
| 3.7 | % |
Corporate general and administrative | |
| 2,609 | |
| 2,494 | |
| 115 |
| 4.6 | % |
Other operating (income) expense, net | | | 45 | | | (80) | | | 125 |
| N/M | |
Operating income | |
| 5,381 | |
| 4,615 | |
| 766 |
| 16.6 | % |
Interest expense | |
| 32 | |
| 72 | |
| (40) |
| (55.6) | % |
Interest income | |
| (49) | |
| (4) | |
| (45) |
| N/M | |
Other income | |
| — | |
| (31) | |
| 31 |
| N/M | |
Income before income tax expense | |
| 5,398 | |
| 4,578 | |
| 820 |
| 17.9 | % |
Income tax expense | |
| 1,575 | |
| 1,325 | |
| 250 |
| 18.9 | % |
Net income | | $ | 3,823 | | $ | 3,253 | | $ | 570 |
| 17.5 | % |
Earnings per share (diluted) | | $ | 0.63 | | $ | 0.54 | | $ | 0.09 |
| 16.7 | % |
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 |
N/M = Not Meaningful
For the three months ended SeptemberJune 30, 2017,2022, consolidated net operating revenue was $30,269,000$29,821,000 compared with $29,878,000$28,046,000 for the three months ended SeptemberJune 30, 2016,2021, an increase of $391,000$1,775,000 or 1.3%6.3%. We had an increaseincreases in non-spot gross revenue of approximately $717,000 that was attributable to stations that we did not own or operate for the entire comparable period, partially offset by a decrease$623,000, gross interactive revenue of $326,000 generated by stations we owned or operated for the comparable period in 2016 (“same station”). The decrease in same station revenue was primarily the result of decreases in$597,000, gross local revenue of $311,000,$519,000, gross political revenue of $197,000$357,000, and barter revenue of $176,000, partially offset by a decrease in gross national revenue of $409,000 and an increase in agency commissions of approximately $123,000$141,000, from the thirdsecond quarter of 2016.2021. The decreaseincrease in non-spot gross revenue is primarily due to us hosting events again in 2022, whereas the number of events that were held in the second quarter of 2021 due to the COVID-19 pandemic was relatively very few. The markets with the most significant increases in the second quarter in non-spot events were Clarksville, Tennessee; Harrisonburg, Virginia; Hilton Head, South Carolina; Jonesboro, Arkansas; Milwaukee, Wisconsin; Norfolk, Virginia and Yankton, South Dakota. The increase in gross interactive revenue is primarily due to an increase in our streaming and website content revenue. The most significant increases in gross local revenue was due to decreasesand agency commissions occurred in our Bellingham, WashingtonCharleston, South Carolina; Columbus, Ohio; Ithaca, New York; Manchester, New Hampshire; Milwaukee, Wisconsin, and Springfield, IllinoisNorfolk, Virginia markets. The decrease in gross political revenue wasincreased due to a loweran increase in the number of national, state and local elections in most of our markets.elections. The decrease in agency commissions isgross national revenue was attributable to decreases at the majority of markets due to lower grossthe focus on local agencymarket advertisers offset by increases at our Bellingham, Washington; and political revenue.
Milwaukee, Wisconsin markets.
Station operating expense was $21,755,000$21,786,000 for the three months ended SeptemberJune 30, 2017,2022, compared with $21,775,000$21,017,000 for the three months ended SeptemberJune 30, 2016, a decrease of $20,000 or 0.1%. We had2021, an increase of approximately $581,000 that$769,000 or 3.7%. The increase in operating expense was attributable to stations that we did not own or operate for the entire comparable period, offset byprimarily a decreaseresult of approximately $601,000 generated by stations we owned or operated for the comparable periodincreases in 2016. The decrease is primarily attributable to a decrease of $203,000 in compensation costs, a decrease of $191,000 in licensing agreements and a decrease insales rating survey expenses, barter expenses, commission expense, music licensing fees, interactive services expenses, and promotional expenses, of $128,000 due to a credit received in$303,000, $161,000, $148,000, $95,000, $86,000, and $69,000, respectively, from the 3rdsecond quarter of 2017 resulting from SESAC arbitration partially offset by an increase in other music licensing fees.2021.
OperatingWe had operating income for the three months ended SeptemberJune 30, 2017 was $5,509,0002022 of $5,381,000 compared to $6,768,000$4,615,000 for the three months ended SeptemberJune 30, 2016, a decrease2021, an increase of $1,259,000 or 18.6%.$766,000. The decreaseincrease was a result of the increase in net operating revenue partially offset by a decreasethe increase in station operating expense, describednoted above, an increase in our corporate general and administrative expenses of $404,000 or 14.8%, and a decrease$115,000, an increase in other operating income(income) expense, net of $1,266,000 from the third quarter of 2016.$125,000. The increase in corporate general and administrative expenses is duewas primarily attributable to an increase in key man life insurance of $103,000, an increase in non-cash compensation related toexpenses from second quarter of 2021. In the amortizationsecond quarter of restricted stock grants of $93,000, an increase of $80,000 in legal 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 2016,2022 we had other operating income of $1,393,000 due to the gain of $1,415,000 received fromrecorded a loss on the sale of a tower in Norfolk, Virginia.
Income from continuing operations, netfixed assets of tax for the three months ended September 30, 2017 was $2,965,000$45,000 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 partially offset by a decrease in income taxes of $388,000.
Income from discontinued operations, net 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. Forfixed assets of $80,000 in the two months ended August 31, 2017, netsecond quarter of 2021 in other operating revenue(income) expense, net.
22
We generated net income of $33,416,000$3,823,000 ($5.660.63 per share on a fully diluted basis) during the three months ended SeptemberJune 30, 2017,2022, compared to $5,414,000$3,253,000 ($.920.54 per share on a fully diluted basis) for the three months ended SeptemberJune 30, 2016,2021, an increase of $28,002,000. This$570,000. The increase in net income is a direct result ofprimarily due to the increase in operating income, described above a decrease in interest expense of $28,940,000 from discontinued operations$40,000, an increase in interest income of $45,000, partially offset by a decrease in other income from continuing operations of $938,000. $31,000 and an increase in income tax expense of $250,000. The decrease in interest expense is due to no longer having any debt outstanding, after paying off the remaining balance in the fourth quarter of 2021. The increase in interest income is related to our short-term investments described in footnote 1 (Summary of Significant Accounting Policies). The increase in our income tax expense is due to the increase in income before income tax.
NineSix Months Ended SeptemberJune 30, 20172022 Compared to NineSix Months Ended SeptemberJune 30, 20162021
Results of Operations
The following tables summarizetable summarizes our results of operations for the ninesix months ended SeptemberJune 30, 20172022 and 2016.2021.
| | | | | | | | | | | | |
| | Six Months Ended | | | | | |
| ||||
| | June 30, | | $ Increase | | % Increase |
| |||||
|
| 2022 |
| 2021 |
| (Decrease) |
| (Decrease) |
| |||
| | (In thousands, except percentages and per share information) |
| |||||||||
Net operating revenue | | $ | 54,788 | | $ | 50,347 | | $ | 4,441 |
| 8.8 | % |
Station operating expenses | |
| 42,354 | |
| 39,940 | |
| 2,414 |
| 6.0 | % |
Corporate general and administrative | |
| 5,303 | |
| 4,932 | |
| 371 |
| 7.5 | % |
Other operating (income) expense, net | | | 40 | | | (23) | | | 63 |
| N/M | |
Operating income | |
| 7,091 | |
| 5,498 | |
| 1,593 |
| 29.0 | % |
Interest expense | |
| 64 | |
| 145 | |
| (81) |
| (55.9) | % |
Interest income | |
| (53) | |
| (10) | |
| (43) |
| 430.0 | % |
Other income | |
| (2) | |
| (303) | |
| 301 |
| N/M | |
Income before income tax expense | |
| 7,082 | |
| 5,666 | |
| 1,416 |
| 25.0 | % |
Income tax expense | |
| 2,055 | |
| 1,655 | |
| 400 |
| 24.2 | % |
Net income | | $ | 5,027 | | $ | 4,011 | | $ | 1,016 |
| 25.3 | % |
Earnings per share (diluted) | | $ | .83 | | $ | .67 | | $ | .16 |
| 23.9 | % |
Consolidated Results of Operations
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 | |||||||||
N/M = Not Meaningful
For the ninesix months ended SeptemberJune 30, 2017,2022, consolidated net operating revenue was $86,685,000$54,788,000 compared with $88,208,000$50,347,000 for the ninesix months ended SeptemberJune 30, 2016, a decrease2021, an increase of $1,523,000$4,441,000 or 1.7%8.8%. We had an increaseincreases in gross local revenue 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$2,347,000, gross interactive revenue 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$1,345,000, non-spot gross revenue of $962,000, gross political revenue gross localof $267,000, and barter revenue and gross national revenue decreased $1,289,000, $1,097,000 and $505,000 respectively from 2016. These decreases wereof $262,000 partially offset by a decrease in gross national revenue of $588,000, and an increase in agency commissions of $470,000.$219,000 for the comparable period of 2021. The decreasemost significant increases in gross local revenue and agency commissions occurred in our Charleston, South Carolina; Columbus, Ohio; Ithaca, New York; Manchester, New Hampshire; Milwaukee, Wisconsin; Norfolk, Virginia; and Portland, Maine markets. The increase in gross interactive revenue is primarily due to an increase in our streaming and website content revenue. The increase in non-spot gross revenue is primarily due to us hosting events again in 2022, whereas the number of events that were held in 2021 due to the COVID-19 pandemic was relatively very few. The markets with the most significant increases in 2022 in non-spot events were Clarksville, Tennessee; Harrisonburg, Virginia; Hilton Head, South Carolina; Jonesboro, Arkansas; Milwaukee, Wisconsin; Norfolk, Virginia; Portland, Maine and Yankton, South Dakota. The gross political revenue wasincreased due to an increase in the decreased number of national, state and local 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.elections. The decrease in gross national revenue iswas attributable to decreases at the majority of markets due to decreases inthe focus on local market advertisers offset by increases at our Champaign, IllinoisColumbus, Ohio; Manchester, New Hampshire; and Yankton, South DakotaMilwaukee, Wisconsin markets. The decrease in agency commissions is due to lower local agency, national and political revenues.
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Station operating expense was $64,521,000$42,354,0000 for the ninesix months ended SeptemberJune 30, 2017,2022, compared with $64,757,000$39,940,000 for the ninesix months ended SeptemberJune 30, 2016, a decrease of $236,000 or 0.4%. We had2021, an increase of approximately $696,000 that$2,414,000 or 6.0%. The increase in operating expense was attributable to stations that we did not own or operate forprimarily the entire comparable period, offset by a decreaseresult of approximately $932,000 generated by stations we owned or operatedincreases in sales survey expenses, commission expenses, barter expenses, interactive services expenses, music licensing fees; bad debt expense, compensation related expenses and promotional expenses of $818,000, $403,000, $294,000, $220,000, $193,000, $186,000, $131,000 and $90,000, 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 $138,000.2021.
OperatingWe had operating income for the ninesix months ended SeptemberJune 30, 2017 was $13,358,0002022 of $7,091,000 compared to $16,774,000$5,498,000 for the ninesix months ended SeptemberJune 30, 2016, a decrease2021, an increase of $3,416,000 or 20.4%.$1,593,000. The decreaseincrease was a result of the decreaseincrease in net operating revenue and partially offset by a decreasean increase in station operating expense, describednoted above, partially offset by an increase in our corporate general and administrative expenses of $810,000 or 10.0%,$371,000 and a decreasean increase in other operating income(income) expense of $1,319,000 from 2016.$63,000. The increase in corporate general and administrative expenses is duewas primarily attributable to an increaseincreases in key man life insurancecompensation-related expenses 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$136,000, legal expenses of $87,000$99,000, travel and an increasetransportation expenses of $50,000 in healthcare costs.$77,000, insurance-related expenses of $63,000, respectively, from the comparable period of 2021. In 2016,2022 we had other operating income of $1,393,000 due to the gain of $1,415,000 received fromrecorded a loss on the sale of a tower in Norfolk, Virginia.
Income from continuing operations, netfixed assets of tax for the nine months ended September 30, 2017 was $12,667,000$40,000 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, netfixed assets of $23,000 in 2021 in other operating revenue of our television stations was $14,238,000 compared with $17,094,000 for the nine months ended September 30, 2016, a decrease 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(income) 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.
net.
We generated net income of $39,888,000$5,027,000 ($6.760.83 per share on a fully diluted basis) during the ninesix months ended SeptemberJune 30, 2017,2022, compared to $13,249,000$4,011,000 ($2.250.67 per share on a fully diluted basis) for the ninesix months ended SeptemberJune 30, 2016,2021, an increase of $26,639,000. This$1,016,000. The increase in net income is a direct result ofprimarily due to the increase in operating income, from discontinued operationsdescribed above a decrease in interest expense of $28,813,000$81,000, an increase in interest income of $43,000, partially offset by a decrease in other income from continuing operations of $2,174,000.
Forward-Looking Statements
Statements contained$301,000 and an increase in this Form 10-Q that are not historical facts are forward-looking statements that are made pursuantincome tax expense of $400,000. The decrease in interest expense is due to no longer having any debt outstanding, after paying off the remaining balance in the fourth quarter of 2021. The increase in interest income is related to our short-term investments described in footnote 1 (Summary of Significant Accounting Policies). The decrease in other income is due to minimal income in 2022 versus a gain on insurance proceeds in the 2021, as described in footnote 13 (Other Income). The increase in our income tax expense is due 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 and beyond to differ materially from those expressedincrease in any forward-looking statements made by 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 and terrorist attacks. 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.
income before income tax.
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 withJPMorgan Chase Bank, N.A., The Huntington National Bank, Citizens Bank, National Association and J.P. Morgan Securities LLC (collectively, the execution of the Credit Facility, the“Lenders”) pursuant to a credit agreement in place at June 30, 2015of even date (the “Old Credit“Credit Agreement”) was terminated, and all outstanding amounts were paid in full.. The Credit Facility consistsconsisted of a $100 million five-year revolving facility (the “Revolving Credit Facility”) and maturesoriginally 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, as part of our reincorporation as a Florida corporation, we entered into an assumption agreement and amendment of loan documents. This amendment also included an alternative benchmark rate as a replacement to LIBOR in the event LIBOR is no longer available. On November 2, 2021, we elected to further reduce our Revolving Credit Facility to $50 million.
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 feesdebt issuance costs related to the Credit Facility were capitalized and are being amortized over the life of the Credit Facility. Those deferredThese 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.
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Interest rates under the Credit Facility are payable, at our option, at alternatives equal to LIBOR (1.25%(1.579% at SeptemberJune 30, 2017)2022), 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 ratesrate 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 SeptemberJune 30, 2017)2022) 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 October 27, 2021, we used $10 million from funds generated by operations to voluntarily pay down the remaining amount on our Revolving Credit Facility.
We had approximately $65$50 million of unused borrowing capacity under the Revolving Credit Facility at SeptemberJune 30, 2017.2022.
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.
Sources and Uses of Cash
During the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, we had net cash flows from operating activities of $18,677,000$7,340,000 and $21,020,000,$9,203,000, respectively. We believe that cash flow from operations will be sufficient to meet quarterly debt service requirements for payments of interest and payments of principal under our Credit Facility.Facility if we borrow in the future. 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 June 30, 2022, we have repurchased 2.2 million shares of our Class A Common Stock for $57.4 million. During the three and six months ended June 30, 2022, we did not repurchase any shares related to the Buy-Back Program. Given the unprecedented uncertainty surrounding the current economic environment including interest rates, inflation and ongoing global turmoil we currently have no directions issued for any additional buybacks under our plan.
Our capital expenditures, exclusive of acquisitions, for the ninesix months ended SeptemberJune 30, 20172022 were $4,850,000$3,563,000 ($4,149,0001,455,000 in 2016)2021). We anticipate capital expenditures in 20172022 to be approximately $6.5$5.5 million including approximately $750 thousand relating to our recent acquisitions in Charleston and Hilton Head,$6.0 million, which we expect to finance through funds generated from operations.
On July 12, 2021, we entered into an agreement to acquire WIZZ-AM and a translator from P. & M. Radio for $61,800 of which $5,000 was paid in 2021 and the remaining was paid on April 6, 2022 when we closed on the transaction. Management attributes the goodwill recognized in the acquisition to the power of the existing brands in the Greenfield, Massachusetts 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.
On September 13, 2017,January 8, 2021, the Company closed on an agreement to purchase WBQL and W288DQ from Consolidated Media, LLC, for an aggregate purchase price of $175,000, of which $25,000 was paid in 2020 and the remaining $150,000 paid in 2021. Management attributes the goodwill recognized in the acquisition to the power of the existing brands in the Clarksville, Tennessee market as well as synergies and growth opportunities expected through the combination with the Company’s existing stations.
On June 6, 2022, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.30$0.20 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, 2017approximately $1,200,000, was paid to our transfer agent on October 13, 2017June 29, 2022. The dividend was paid by our transfer agent on July 1, 2022 to shareholders of record on September 25, 2017.June 13, 2022.
On May 3, 2017,March 1, 2022, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.30$0.16 per share on its Classes A and B Common Stock. This dividend, totaling $1.8 millionapproximately $970,000, was paid on June 9, 2017April 8, 2022 to shareholders of record on May 22, 2017and funded by cash on the Company’s balance sheet.March 21, 2022.
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On March 3, 2017,December 14, 2021, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.30$0.16 per share and special cash dividend of $0.50 per share on its Classes A and B Common Stock. This dividend, totaling $1.8 million,approximately $3,988,000, was paid on AprilJanuary 14, 20172022 to shareholders of record on MarchDecember 27, 2021.
On September 28, 20172021, the Company’s Board of Directors declared a quarterly cash dividend of $0.16 per share on its Classes A and funded byB Common Stock. This dividend, totaling approximately $960,000, was paid on October 22, 2021 to shareholders of record on October 8, 2021.
On June 18, 2021, the Company’s Board of Directors declared a quarterly cash dividend of $0.16 per share on its Classes A and B Common Stock. This dividend, totaling approximately $960,000, was paid on July 16, 2021 to shareholders of record on June 30, 2021 and was recorded in dividends payable on the Company’s balance sheet.
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 proceeds 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.Condensed Consolidated Balance sheet at June 30, 2021. The Company recognized a pretax gain of $50.8 million as a resulthad previously temporarily suspended the quarterly cash dividend in response to the uncertainty of the Television Sale in the third quarterongoing impact of 2017. The gain netCOVID-19 as 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).
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.
June 18, 2020.
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.
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 Reportannual report on Form 10-K for the year ended December 31, 2016.
2021.
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 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” in our Annual Report on Form 10-K for the year ended December 31, 2016.
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. We are, however, starting to see the effects of higher inflation starting to impact costs of most goods and services. 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 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 Reportannual report on Form 10-K for the year ended December 31, 20162021 for a complete discussion of our market risk. There have been no material changes to the market risk information included in our 2016 Annual Report2021 annual report on Form 10-K.
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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 itsour 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 werehave been no changes in the Company’s internal controls over financial reporting during the quarter ended SeptemberJune 30, 2017,2022, that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
TheFrom time to time, the Company may be involved in various legal proceedings that are incidental to the Company’s business. In management’s opinion, the Company is subjectnot a party to various outstanding claims which ariseany current legal proceedings that are material to its financial condition, either individually or in the ordinary courseaggregate.
Item 1A. Risk Factors
There have been no material changes to the risk factors previously disclosed in response to Part 1, “Item 1A. Risk Factors,” of business and to other legal proceedings. Management anticipates that any potential liability ofour annual report on Form 10-K for the Company, which may arise out of or with respect to these matters, will not materially affect the Company’s financial statements.year ended December 31, 2021.
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 SeptemberJune 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.2022.
| | | | | | | | | | |
| | | | | | | 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 (1) |
| Share |
| Program |
| Program(2) | ||
April 1 - April 30, 2022 | | — | | $ | — | | — | | $ | 18,350,169 |
May 1 - May 31, 2022 | | — | | $ | — | | — | | $ | 18,350,169 |
June 1 - June 30, 2022 | | — | | $ | — | | — | | $ | 18,350,169 |
Total |
| — | | $ | — |
| — | | $ | 18,350,169 |
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. |
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Item 6. Exhibits
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31.1 | ||
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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. | ||
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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) |
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101.SCH | | Inline XBRL Taxonomy Extension Schema Document |
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101.CAL | | Inline XBRL Taxonomy Calculation Linkbase Document |
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101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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(104) | | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
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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.
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